DGAP-News: Ludwig Beck am Rathauseck-Textilhaus Feldmeier AG / Key word(s): Quarterly / Interim Statement
CORPORATE QUARTERLY REPORT
LUDWIG BECK - The first quarter of 2019 saw a slight growth in sales
The economic environment and the development in the retail sector
The danger of a recession seems to be averted for the time being: According to preliminary data from the German Institute for Economic Research (Deutsches Institut für Wirtschaftsforschung, DIW), the German gross domestic product (GDP) grew by just under 0.2% in the first quarter of 2019 - a very restrained growth rate, which nevertheless surpassed the two preceding quarters. Economic researchers agree that the general conditions for the German economy have increasingly deteriorated. The industry reported a declining number of orders. The automobile manufacturers in particular reported hardly any positive developments. Foreign demand also gradually declined. Last but not least, the trade disputes between the US and China had a negative impact on German exports. In contrast, the service sector and the labour market continued to perform well. Many households saw a growth in income. As reported by the Association for Consumer Research (Gesellschaft für Konsumforschung, GfK), the downturn in economic expectations at the beginning of the year stopped for the time being during the first quarter of the year. Nevertheless, after many months of optimistic assessments, GfK now speaks of a first damper on the consumer confidence. However, the consumer confidence amongst German citizens is still "extremely good". The stationary fashion trade also benefited from this. It succeeded in compensating for the poor performance of the same period last year, which averaged -2%, and closed the first quarter on at least a par (source: textile industry). This was not only due to good consumer sentiment, but also due to the mild weather conditions, which, in contrast to the winter quarter of the previous year, boosted the sales of spring fashion.
Sale of the men's fashion chain WORMLAND
In the Ad Hoc Announcement of April 15, 2019, LUDWIG BECK announced that the sale process initiated on January 31, 2019 led to the sale of all shares in Theo Wormland GmbH & Co. KG ("WORMLAND") held by LUDWIG BECK Unternehmensverwaltungs GmbH, which has led to the conclusion of a corresponding purchase agreement. The buyer is WL Erwerbs GmbH, which is owned by a team of WORMLAND managers. The seller transfers the company free of bank liabilities along with an additional seller's payment of approx. EUR 7.5m. At the same time, the buyer has committed himself to a capital injection of around EUR 0.5m.
IFRS (International Financial Reporting Standards) 5 "Long-term assets held for sale and discontinued operations" was not applicable as of March 31, 2019 because the Supervisory Board did not accept the offer until after the quarterly reporting date.
Effects of the IFRS 16 "Leases" standard on the earnings, assets and financial situation
LUDWIG BECK has applied IFRS 16 "Leases", which has become mandatory on January 1, 2019. As part of the transition, the LUDWIG BECK Group decided to apply the modified retrospective approach. Consequently, no adjustment of comparative information shall be made. When IFRS 16 was first applied, the right of use was estimated at the same value as the lease liabilities. LUDWIG BECK mainly concludes leasing contracts as operating lessee. The application of IFRS 16 will change the nature of the expenses arising from these leases, as the existing linear expenses for operating leases will be replaced by depreciation of the right of use and interest expenses for the liabilities. In addition, IFRS 16 requires the repayment portion of lease payments to be shown as a component of the cash flow from financing activities, so that the operating cash flow will improve.
The effects of the application of IFRS 16 on the key earnings figures and the balance sheet structure are shown in the following table:
Development of sales
Personnel expenses were reduced from EUR 7.2m to EUR 6.8m. In accordance with the application of IFRS 16, depreciation increased from EUR 1.0m to EUR 4.5m in the first quarter of 2019. On the other hand, other operating expenses fell from EUR 8.4m to EUR 4.6m. The effect of IFRS 16 amounted to EUR 4.0m.
This resulted in earnings before interest and taxes (EBIT) of EUR -1.7m (previous year: EUR -2.6m).
The consolidated financial result amounted to EUR -1.0m (previous year: EUR -0.2m) as a result of IFRS 16 accounting.
As in the previous year, earnings before taxes (EBT) amounted to EUR -2.8m. The first-time application of IFRS 16 in the first quarter of 2019 alone had a negative effect of EUR 0.4m on earnings before taxes (EBT).
Earnings after taxes amounted to EUR -2.5m (previous year: EUR -2.6m).
Balance sheet structure
In addition to the right of use, the property at Munich's Marienplatz continues to be of major component of the fixed assets. It is reported in the balance sheet with a value of over EUR 70m. In total, long-term assets amounted to EUR 266.5m (previous year: EUR 100.7m).
The short-term assets increased from EUR 25.8m (December 31, 2018) to EUR 29.0m. There was a seasonal increase in inventories, which amounted to EUR 23.3m as of March 31, 2019 (December 31, 2018: EUR 20.9m). At EUR 1.3m, the cash and cash equivalents were slightly below the figure of EUR 1.7m on the balance sheet date of December 31, 2018.
Balance sheet structure
The long-term liabilities increased from EUR 33.2m (December 31, 2018) to EUR 195.2m. The short-term liabilities also increased from EUR 17.5m (December 31, 2018) to EUR 27.1m. The accounting for lease liabilities in accordance with the application of IFRS 16 was the main reason for the development of the liabilities. The Group's total liabilities therefore amounted to EUR 222.2m as of March 31, 2019 (December 31, 2018: EUR 50.7m).
The global economic environment, but also industry-specific factors in Germany, have weakened the momentum of recent years. Nevertheless, the risk of a pronounced recession lasting several quarters is regarded as low - insofar as no aggravating political risks would be added. Although the employment growth will lose momentum, disposable household incomes are likely to rise at a rate similar to that of the last two years. With consumer prices rising moderately, 2019 will see a respectable increase in purchasing power of 1.5%, with consumer spending expected to rise. The GfK sees private consumption as an important pillar of the German economy in the coming months, with the uncertain Brexit and transatlantic trade conflicts quickly clouding the consumer climate. According to industry observers, the cut-throat competition in the fashion trade fired by online providers will continue and put stationary retailers under pressure. It seems that the realisation that customers expect the same opportunities from stationary retail as they are accustomed to from e-commerce is gaining ground. Whoever, as a classic retailer, understands how to adapt to this customer need, can recover lost ground. LUDWIG BECK is already optimising its services so that these requirements can be met in two ways: as a shopping convenience feature borrowed from digital commerce - and as a plus in advice and service that is not available online.
LUDWIG BECK Group 2019
Dieter Münch, member of the Management Board: "We will now effectively bundle our strengths and consolidate our position in the ongoing cut-throat competition at a new level. The future strategic focus will use the full potential which has made LUDWIG BECK one of the leading fashion department stores in Europe".
The separation from WORMLAND leads to an adjustment of the annual forecast. Management now expects consolidated sales of between EUR 114m and EUR 119m for 2019 (previously: between EUR 165m and EUR 170m) and earnings before taxes (EBT) of between EUR -12m and EUR -13m (previously: between EUR 1.5m and EUR 2.5m).
The individual financial statements are expected to show a net loss for this year of around
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25.04.2019 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
|Company:||Ludwig Beck am Rathauseck-Textilhaus Feldmeier AG|
|Phone:||+49 (0)89 2 36 91-0|
|Fax:||+49 (0)89 2 36 91-600|
|Listed:||Regulated Market in Frankfurt (Prime Standard), Munich; Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Stuttgart, Tradegate Exchange|
|EQS News ID:||803029|
|End of News||DGAP News Service|