European Lingerie Group AB Investor Newsletter

Edition 2 – September 2018

 
 
 
 

Welcome from CEO Peter Partma
 
 
 

Welcome to the second edition of European Lingerie Group AB investor newsletter. The results for Q2 of 2018 are not satisfactory for the Group but at the same time expected. On the sales side we see an overall change in the retail concept in Southern and Central Europe where some of the small specialized retail shops disappear and department and online stores take over the market. This is also confirmed by the trend with our largest customers in these countries and our sales are growing with them. 
 
 

Despite that, in the short-term this growth does not compensate the drop of the shrinking sales channel of small boutique stores and time is needed for the market to adapt. 2018 is regarded by the Group as a year in transition. To recover the decrease in turnover and to grow, we are doing quite a lot of strategic investments and initiatives for innovations. One of such steps in our strategy is to develop the online channel as there is no doubt that e-commerce is the future of retail.

 

As part of our digital strategy, in June 2018 the Group acquired the largest online retailer of lingerie and swimwear in France – Dessus-Dessous S.A.S. These taken actions will not affect sales until 2019 due to the natural cycle of the industry, but will start bringing returns in the coming years and we still believe that 16-17% EBITDA margin over a business cycle is a good target.
 
 
 

Investor meeting follow-up
 
 

ELG organized an investor meeting on June 19, 2018 at Felina headquarters in Mannheim, Germany. The presentation from the event and replay of the live-stream video are available from here. This information includes an overview of ELG operations, performance in Q1 2018, latest developments, including Dessus-Dessous acquisition and initiatives for 2018-2019. ELG will inform investors of future events promptly via the newsletter.
 
 
 

Q2 and 6 months results
 
 
 

In Q2 2018 the Group still faced a decline in revenue, but the deficit in sales reduced in Q2 2018 compared to Q1 2018. The shortfall in sales reduced as a result of improving sales trend in Russia. In most European markets, though, the trading climate is still poor and most European suppliers suffer from this to the same extent.
 
 

The Group’s sales amounted to EUR 38.3 million in 6 months 2018 (Q2 2018: EUR 19.0 million). As part of the costs is fixed, decline in revenue caused a drop of profitability margins. Normalised EBITDA in 6 months 2018 amounted to EUR 4.0 million (Q2 2018: EUR 1.8 million). Normalised EBITDA margin in 6 months 2018 was 10.5% (Q2 2018: 9.5%).


The largest growth in sales in 6 months 2018 was in Poland and Benelux countries, where sales increased by 3.7% and 3.1% respectively. Sales in Germany stayed stable in 6 months 2018 and showed an increase by 2.0% in Q2 2018 as a result of the country’s stable economy and the Group’s strong position in this market. Spain and France had a decrease in sales in both 6 months and Q2 2018 due to the overall change in retail concept in the Southern and Central European countries, explained above. 

 

European Lingerie Group AB 6 Months and Second Quarter 2018 Report is available for viewing and download here and the presentation of the report here.
 
 
 

Update on the bond term conditions and covenants
 
 

As mentioned in the consolidated quarterly report for 6 Months 2018, the Group has met the maintenance test at 30 June 2018 and the ratio of the Net Interest Bearing Debt to EBITDA for the respective reference period was 3.7. Regardless of the weaker profitability results this year, we expect the maintenance test to be met going forward as well.

 

In addition to the maintenance test, the bond terms require from the Group to procure that during each calendar year there shall be a period of 3 consecutive days during which the amount outstanding under any working capital facility, less cash and cash equivalents of the Group, amounts to zero or less. We would like to inform that the first clean down period was carried out on 27-29 June 2018 which falls already after the execution of the payment for Dessus-Dessous S.A.S. acquisition.
 
 
 

ELG acquires Dessus - Dessous, French leader in online sales of lingerie
 
 
 

In June 2018, the Group acquired the largest online retailer of lingerie and swimwear in France – Dessus-Dessous S.A.S. The company specializes in online sales of luxury lingerie brands including Lise Charmel, Van De Velde, Simone Pérèle and ELG’s own Felina and Conturelle among many others. 
 
 

Dessus-Dessous has been leading the French online lingerie market since 2000, offering a constantly up-to-date selection of 150,000 articles from over 50 brands. The company’s sales amounted to 7.3 million euros in 2017 and it employs 34 people. The acquisition is part of the Group’s digital strategy, marking ELG’s expansion to the online retail segment of the lingerie market and reinforcing the Group’s strategic commitment to building a truly vertically integrated business. The transaction was financed from proceeds from the bonds issue of ELG, completed in February 2018. 

 

Following its acquisition, we are pleased to note that sales results of Dessus-Dessous S.A.S. in July-August 2018 show a growing trend compared to last year.
 
 
 
 
 

Initiatives and plans for 2018 - 2019
 
 
 

ELG has worked out a number of new initiatives to respond faster to changes in the market to capture the competitive positioning of the Group. ELG is constantly working on creating synergies, product portfolio upgrades and expansions by our companies Felina and Lauma Fabrics, in order to reduce costs, strengthen the product offer and innovate. This year ELG already launched both a sport and a swim collection by Felina, the sales of which will start in October 2018 and start of 2019, respectively. Additionally, Felina is launching a new Senselle collection, about which you can read next in this newsletter.
 
 

As an integrated group ELG has the possibilities to react to market trends much faster, thus the aim is to increase speed to market for ready garments in the coming 24 months. In Lauma Fabrics, focus is on added value proposition, whereby in addition to fabrics supply the company would also increasingly sell ready garments under private labels. The initiative is well perceived by Western customers.

 

ELG will continue to build and strengthen the team, this has already shown positive effects and there is more to come. The Group is also very excited of the possibilities given by the latest acquisition, Dessus-Dessous. This is a first step in transition from an offline company to embracing a true omni-channel strategy, providing a platform to expand in the e-commerce field. As a result of this ELG will introduce some exciting innovations in e-commerce already in the first half of 2019.
 
 
 
 
 

New Senselle by Felina line
 
 
 

Felina is adding a new Senselle line to its portfolio. Senselle by Felina is a fusion brand, its target markets being primarily CIS countries. First three series of Senselle classical collection will be available in retail before the New Year, whereas the full range of the Senselle collection will be available from March 2019. Product range expansion is part of ELG’s strategy execution to position itself as a one-stop supplier of all relevant product segments.
 
 
 
 
 

Investor relations contact
 
 

Silver Pukk

+372 509 7147

silver.pukk@elg-corporate.com
 
 
 

Get the latest news udpdates from our our corporate website and social media.