Oslo, 12 February 2019: Despite continued growth XXL delivered disappointing results in the fourth quarter 2018 driven by poor execution and campaign management which resulted in a significant drop in the gross margin. Relevant routines are improved to ensure that this will not occur again. Total operating revenues amounted to NOK 2.6 billion, a growth of 2 per cent, and the EBITDA ended at NOK 115 million.
For the full year 2018 XXL ASA generated total revenues of NOK 9.5 billion, representing a growth of 9 per cent, driven by new stores and E-commerce. EBITDA for the year ended at NOK 541 million (NOK 828 million) due to negative like-for-like growth impacting the scale benefits of the operations, lower gross margins in all markets and negative EBITDA of NOK 70 million related to establishing XXL in Austria. Liquidity reserve ended at NOK 0.7 billion due to strong cash conversion in the fourth quarter 2018. XXL has proactively agreed with its lending banks consortium on new covenants going forward.
Highlights Q4 2018
- Total revenues of NOK 2 569 million (NOK 2 525 million), up 2 per cent
- Poor campaign execution hampered gross margins significantly
- EBITDA of NOK 115 million (NOK 332 million)
- Strong cash flow generation
- Liquidity reserve of NOK 0.7 billion
Outlook
Total operating revenues for the Group in January 2019 increased by 1 per cent to NOK 762 million. The month had good winter conditions in Finland and Austria and more mixed in regions in Norway and Sweden. However the winter conditions improved also here late in the month compared to last year. Short term actions are already showing solid improvements in gross margin.
XXL has signed 5 new lease agreements for store openings in 2019 where of 2 in Sweden, 2 in Finland and 1 in Austria and aims for 6-7 new stores in total for 2019.
In line with the existing growth strategy, XXL will continue to invest in new stores, E-commerce platform, existing stores, infrastructure and IT. Total CAPEX for XXL Group in 2019 is expected to be around NOK 200 million.
The Group has the following long term objectives (on full year basis):
- Group like-for-like growth of low single digits over time including E-commerce
- Competition and E-commerce growth to put pressure on Group gross margin over time
- Group OPEX% as percentage of total operating revenues to gradually trend down towards 25 per cent in a five year period starting from 2019
- Group EBITDA-margin stable around 2017 level as a result of lower gross margin and OPEX% over time. In Norway around 20 per cent, in Sweden and Finland low double digits, in Denmark and Austria high single digits
- New market entries affect both Group gross margin and Group EBITDA-margin in the establishing period of 1-3 years
The Austria average sale per store is expected to be around EUR 10 million, while the gross margin and EBITDA-profile will be as in Sweden over time when excluding for the build up of a centralized organization for buying and support. Hence, the start-up in Austria will have higher costs than the launch in Sweden, Finland and Denmark. CAPEX per store will be in the range of EUR 1.7-1.9 million and the average pay-back per store is estimated to 4-5 years including net working capital. The average pay-back time is after being some time in the market, following an establishing period. XXL expects around 10-15 stores in total in the Austrian market.
Restricted share units program for employees
In accordance with the resolution made by the Annual General Meeting in XXL ASA on 6 June 2018, a program of restricted share units for around 60 employees will take place. The amount of the program is around NOK 8.4 million worth of restricted shares to be distributed in total. The allocation price will be equal to the volume weighted average market price the next five trading days, starting today 12 February 2019 and ending 18 February 2019. The shares will vest after three years subject to the holder at the time of exercise is employed in XXL.
As previously disclosed, the share incentive programs from 2016 expire five days after the Q4 2018 report. Consequently, the exercise windows for vesting share options and restricted share units open today 12 February 2019 and commence until 18 February 2019. For the share option program for 2016, in total 258,075 share options will lapse without any exercise for the participants. The following primary insiders have after the above mentioned reduced the number of share options with 28,675 each and holds after this the following number of shares and share options in XXL ASA:
- Tolle O. R. Grøterud, Interim CEO, holds 48,137 shares and 133,948 share options in XXL ASA including ownership of closely related parties.
- Espen Terland, IT Director, holds 145,919 shares and 133,948 share options in XXL ASA including ownership of closely related parties.
- Harald Borgen, Supply chain and Process Improvement Director, holds 48,700 shares and 133,948 share options in XXL ASA including ownership of closely related parties.
- Tom Erik Kjønø, Buying Director, holds 405,000 shares and 133,948 share options in XXL ASA including ownership of closely related parties.
For further information please find attached the quarterly report and the presentation material.
The results will be presented at 08:30 CET by interim CEO Tolle Grøterud and CFO Stein Eriksen. The presentation will take place at our headquarters in Oslo, Strømsveien 245, Alna Senter (entrance on the right side of Maxbo). The presentation will be held in English and will be webcasted at www.xxlasa.com. You may also follow the presentation live by telephone. Dial-in details: +47 21 56 33 18 (Norway) and +44(0) 20 3003 2666 (International), passcode – XXL Q4.
For further queries, please contact:
Tolle O. R. Grøterud
Interim CEO/Investor Relations
XXL ASA
Tel: +47 90 27 29 59
E-mail:ir@xxlasa.com
This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act
About XXL ASA
XXL is a leading sports retailer with stores and e-commerce in Norway, Sweden, Finland, Denmark and Austria. It is the largest among the major sports retailers in the Nordics and the fastest growing among the major sports retail chains in the World. XXL pursues a broad customer appeal, offering a one stop shop experience with a wide range of products for sports, hunting, skiing, biking and other outdoor activities. XXL’s concept is to have the largest stores with the best prices and the widest assortment of products, focusing on branded goods.