Interim report for New Wave Group AB (publ) - JANUARY–SEPTEMBER 2013

Regulatory News:

PERIOD 1 JULY – 30 SEPTEMBER 2013

• Sales amounted to SEK 1,035 Million, which was SEK 19 million lower than last year (SEK 1,054 million).
• Operating profit amounted to SEK 92.8 (-139.9) million.
• Profit after tax amounted to SEK 57.8 (-120.0) million. Last year included restructuring costs for SEK 161.5 million.
• Acquired units contributed by SEK 16.4 million in turnover and SEK 2.5 million in profit after tax.
• Earnings per share amounted to SEK 0.87 (-1.81).
• Cash flow from operations amounted to SEK -2.5 (-112.8) million.

PERIOD 1 JANUARY – 30 SEPTEMBER 2013

• Sales amounted to SEK 2,908 million, which was SEK 196 million lower than last year (SEK 3,104 million).
• Operating profit amounted to SEK 179.1 (-78.6) million.
• Profit after tax amounted to SEK 96.8 (-94.9) million. Last year included restructuring costs for SEK 161.5 million.
• Acquired units contributed by SEK 16.4 million in turnover and SEK 2.5 million in profit after tax.
• Earnings per share amounted to SEK 1.47 (-1.43).
• Cash flow from operations amounted to SEK 145.4 (65.0) million.
• Equity ratio amounted to 46.4 (40.6) %.
• Net debt to equity ratio amounted to 73.7 (97.1) %.

CEO comments

SALES

The third quarter continued to be a tough market and we see no economic turnaround or increase in demand. Within the operating segment corporate promo, I unfortunately believe that we have also lost market shares in the Nordic countries. In our quest for cash flow, solvency, stock turnover and to reduce our net debt – we have forgotten the most important thing of all – reliable delivery and service are the most important parameters for our corporate promo clients. We have simply not been good enough at this over the last three to four years.

Low inventories, combined with delays of incoming deliveries in 2013 have led to reduced sales and dissatisfied customers. We are now doing all we can and as quickly as possible to raise our inventories so that we can provide a better delivery performance and service in the future.

Initially, this will lead to a poorer cash flow, higher inventories and thus lower key ratios in general. But within 12 to 18 months, I am convinced that it will lead to growth in terms of both sales and earnings. Even within the operating segment Sports & Leisure it has continued to be a tough market, but at least here, sales were approximately as expected.

Finally, in Gifts & Home Furnishings sales were worse than expected, nevertheless I am still positive and believe that sales growth will soon turn, now that the restructuring of Orrefors Kosta Boda is over and we can focus our efforts fully.

RESULTS

Under the circumstances , I am satisfied with the result. At the same time, I feel frustrated because I know we can perform significantly better. I am glad that the results improved in all three segments – but I would have been happier if it had been due to increased revenues rather than savings.

BALANCE SHEET

We have an extremely strong balance sheet for our type of business where current assets such as accounts receivable and inventory comprise the largest part of the balance sheet. Virtually all key figures in the balance sheet are above, on or around historic highs – since we went public 16 years ago – and even compared to the years before that. The equity ratio is at a record high, net gearing record low and net debt does not even represent the inventory value. I’m glad because the market is finally starting to understand this, but the downside is that we would have had more satisfied customers and greater profitability if we had higher inventory and good service.

THE FUTURE

I believe that the next five quarters may be a bit tough, partly because we do not see any improvement in the economy, but mostly because of the actions and investments we make to gain satisfied customers and delivering growth and increased profitability. Above all, I am at the moment concerned for the next quarter in which we will probably continue to lose sales due to low inventories but also because we can’t see any increase in demand. The warm weather so far gives us no help either and we also had very strong fourth quarter last year.

We will therefore increase inventories by a minimum of 300 million, which will increase the level of debt and impair short-term indicators. In addition, we will increase efforts in terms of sales and marketing. This together can obviously be interpreted negatively by the stock market but for those shareholders who have a perspective longer than 12 months then this should be good news. I am confident that New Wave, within 12–18 months, will deliver better results in almost all areas due to these actions and I feel that our brands are constantly strengthened. Craft should be able to continue its rapid growth and still improve profitability, Orrefors and Kosta Boda already feels much more stable. Our brands within corporate promo and work wear are standing strong – if only we can deliver and bring back satisfied customers.

Last but not least, we have a stable, hungry, and competent manage-ment in Asia, Europe and the U.S. so I look to the future with confidence and joy, even if some of the next five quarters might be tough, and I am more motivated than ever.

Torsten Jansson CEO

The information in this report is that which New Wave Group is required to disclose under the Securities Market Act and/or the Financial Trading Act. The information was released for publication at 7 am (CET) on 13 November 2013.

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