Billingstad, 19 April 2010
Varner Gruppen is a major actor within clothing and textiles and has 12 chain store concepts with a total of 1 145 stores in 9 countries. In Norway the group is the market leader with 585 retail outlets. The group has a solid foothold in the Swedish market with 381 stores. The group is also represented in Latvia, Poland, Iceland, Germany, England, Finland and Denmark. In addition the group has significant property holdings and a portfolio consisting of shares and bonds.
2009 has been a very good year for the group despite weak economic conditions and the continuing financial crisis. Strong revenues compared with previous years were combined with a heightened focus on cost levels which resulted in lower cost increases.
The annual accounts have been prepared on the basis of an on-going concern assumption.
INCOME STATEMENT
The group's sales revenues for 2009 totalled MNOK 8 173.2. This represents an increase of 5.8% compared with 2008.
The number of stores grew from 1 098 to 1 145 in 2009.
Other operating income mainly comprises rental income and fees from franchisees in the Cubus chain.
The operating profit grew from MNOK 515.4 in 2008 to MNOK 913.0 in 2009. The operating margin was 11.0% against 6.6% in 2008. Considering the current international economic downturn the operating margin is considered highly satisfactory. Continuous efforts are made to improve the quality of products, upgrade stores and to reduce cost levels continue.
The group had net financial income of MNOK 181.8 in 2009 against net financial expenses of MNOK 330.7 in 2008.
Write-downs were made for latent losses for the portfolio of shares/bonds totalling MNOK 255.7 in 2008.
In 2009 a reversal of MNOK 138.1 was recorded.
Earnings before tax were MNOK 1 094.8 compared with MNOK 184.7 in 2008.
BALANCE SHEET AND CASH FLOW
The group's liquidity requirements throughout the year are seasonal, with the spring and autumn being the periods in which such requirements are most acute. The group enjoyed a positive cash flow from operational activities of MNOK 1 246.6
Net cash flow for 2009 was MNOK 576.1 against MNOK 126.1 in 2008.
The groups liquid assets totalled MNOK 1 946.2 as at 31.12.09 compared with MNOK 1 370.1 in 2008.
An investment of MNOK 153.4 in was made in fixed assets including goodwill in 2009 against MNOK 387.8 in 2008. In 2009 investment in fixed assets comprised new outlets and the upgrading of existing stores as well as property in Sandnes. Investments in financial assets for the year totalled MNOK 123.1
As at 31.12.09 total inventories were valued at MNOK 1 798.1 compared with MNOK 1 538.1 in 2008.
Total interest-bearing liabilities represented MNOK 884.5 (of which MNOK 861.5 to shareholders) as at 31.12.09 compared with MNOK 1 226.1 (of which MNOK 1.211.4 to shareholders) at the end of 2008.
As at 31.12.09 the group's equity was MNOK 3 818.3, i.e. an equity ratio of 61.2% against MNOK 3 196.2 and 54.8% as at 31/12/08.
Financial risk
The group is exposed to exchange rate fluctuations as a significant proportion of the group's purchases are made in foreign currency.
The group's relatively high cash holdings mean that the company does not anticipate the need to take up external loans in the immediate future.
Credit risk
The group's revenues consist primarily of cash sales and credit risk is minimal.
BUSINESS AREAS:
The parent company Varner-Gruppen AS is the holding company for the subsidiaries within the group and has no other operations. The company's head office is in Billingstad in Asker.
Textiles and clothing
Norway
Retail trade in clothing in Norway in 2009 had a nominal growth of 4.0% according to statistics from HSH Mote & Fritid. Total retail sales of clothing in Norway came to MNOK 29 355 in 2009. Varner Gruppen's share represented MNOK NOK 5 005, i.e. 17.1% compared with 17.0% in 2008.
The group's Norwegian textile and clothing division which consists of the Cubus, Dressmann, Volt, Vivikes, Bik Bok, Carlings, Urban, Levis, WOW and Wearhouse chain stores, had an operating income of MNOK 5 005.3 against MNOK 4 623.2 in 2008, i.e. an increase of 8.3%. The number of stores grew from 559 in 2008 to 585 in 2009. The operating profit grew from MNOK 623.4 in 2008 to MNOK 792.5 in 2009. The operating profit represented 15.8% of operating income in 2009, compared with 13.5% in 2008.
Sweden
Total operating income for all chains was MNOK 2 258.1 compared with MNOK 2 189.7 in 2008. The number of stores grew from 363 in 2008 to 381 in 2009. The operating profit rose from approximately NOK 0 in 2008 to MNOK 162.7 in 2009. An increased focus on costs at the end of 2008 as well as increased sales resulted in a significant profit improvement in 2009.
Finland
Operating income increased from MNOK 384.2 in 2008 to MNOK 423.3 in 2009. The number of stores grew from 68 in 2008 to 72 in 2009. The operating profit was MNOK 17.9 in 2009 against MNOK 2.6 in 2008. As previously described this significant improvement in profit was due to increased sales and a focus on costs.
Poland
This market saw major profit growth from 2007 to 2008, but due to the general economic downturn sales fell in 2009. Operating income fell from MNOK 324.1 in 2008 to MNOK 282.5 in 2009. Operating profit fell from MNOK 32.7 in 2008 to MNOK 11.4 in 2009. The number of stores grew from 43 in 2008 to 44 in 2009. Major future growth is expected in this market, but due to the general economic downturn 2010 may represent a short term period of stagnation.
Other countries
Denmark, Germany, Iceland, Latvia and England had a combined operating income of MNOK 281.3 compared with MNOK 282.6 in 2008. This represents just 3.4% of the textile division's total operating income. Restructuring was undertaken in both 2009 and 2009 in some of these countries that resulted in the closing of stores.
Real estate
The group's property holdings of approximately 60 000 square metres consists of office, warehouse, industrial and commercial premises. The majority of the property holdings, approximately 49 000 square metres, is centrally located in Sandnes. The property has a market value of approximately MNOK 600. 90% of the property holdings are leased on mostly long-term contracts with solid tenants. Total external and internal rental income was MNOK 63.2 of which MNOK 9 is held in a separate company.
Investments
The group has bonds with a value of MNOK 570.5 and a short-term share portfolio with a value of MNOK 13.8 as at 31.12.09.
The group has a share portfolio of long-term shares of MNOK 202.2.
WORKING ENVIRONMENT AND PERSONELL
The parent company has 2 employees.
No serious workplace injuries or accidents occurred or were reported during the year that resulted in major material damage or personal injury. Minor injuries are handled in accordance with the group's HSE rules. The working environment in the group is considered to be good and improvement measures are put into place on a continuous basis.
EQUAL OPPORTUNITIES/DICRIMINATION
The group aims to promote equal opportunities, ensure equal rights and prevent discrimination.
In recruitment, personal qualifications are considered rather than gender or skin colour. Both the Board of Directors and management are conscious of society's expectations for action to promote equal opportunities and prevent discrimination.
No specific measures have been implemented or are planned to promote this work at the present time.
The proportion of women in the group exceeds 50% and there are a number of female managers and middle-managers.
The Board of Directors consists of 3 men.
THE WIDER ENVIRONMENT
Environmental considerations constitute an important part of Varner Gruppen's social responsibility and the company's objective is to be a responsible and environmentally-conscious actor in the Norwegian and international markets. In 2009 Varner Gruppen approved an environmental action plan which aims to reduce its own negative environmental impact. The introduction of the action plan entails the implementation of profitable and effective environmental measures in stores, at head office and in the production chain. For example last year the company carried out energy-saving measures at head office and worked to reduce the volume of waste from its activities. Environmental considerations were also given top priority in the production of paper and plastic bags.
In recent years Varner Gruppen has worked to limit the use of chemicals in clothing production. In 2008 the company revised its chemical requirements for its suppliers. This led to the stricter regulation of chemicals used in production - several chemicals were prohibited. In addition further control procedures related to environmental issues were introduced at production sites. In 2009 Varner Gruppen created a control strategy for its purchasing staff to follow up the chemical requirements in practice.
The goal for 2010 is to further strengthen the company's work with chemicals and to continue our environmental work within the focus areas of energy, waste and goods transport.
FUTURE PROSPECTS
Developments so far this year are significantly better than last year. 2010 is expected to be a good year and the group is in a strong financial position to meet challenges related to the economic downturn. Traditionally the chain stores in the low-price segment have not been so affected by these types of market fluctuations. Within textiles the goal is to continue to strengthen market positions and profitability for all chains. In Norway the opportunities for growth for the group's chains are limited. Focus in the future will continue to be on growth outside the country. The aim is to continue to concentrate on developing the existing chains. Today Varner-Gruppen is represented in 9 countries and is becoming a major international actor within textile retailing. The rate of new store openings is expected to be on the same level as 2009. The economic downturn can also provide the group with major opportunities such as the availability of attractive premises as well as reduced rental charges.
In addition to the expansion and further development of the different chains, Varner-Gruppen management wishes to continue the focus on personal development in each company. Currently there are approximately 8 500 employees in the entire group. We expect our employees to meet high standards and respect for one another is an important part of corporate culture. There will always be room for strong personalities and employees shall be motivated with good career opportunities and exciting incentives.
The property company Sandnes Eiendom Invest AS will work on the further development of the real estate in Sandnes.
ALLOCATION OF THE ANNUAL PROFIT
The Board of Directors proposes the following allocation of the annual profit of the parent company, Varner-Gruppen AS:
Transfers to other equity NOK 394 265 827
Billingstad, 19 April 2010
Petter Varner, Chairman of the Board,
Marius Varner, CEO /Board Member and
Joakim Varner, Board Member.