DGAP-News: Powerland AG: Powerland's performance in Q3 2013

DGAP-News: Powerland AG / Key word(s): 9-month figures Powerland AG: Powerland's performance in Q3 2013 negatively impacted by weakening retail market 20.01.2014 / 07:46 --------------------------------------------------------------------- Powerland's performance in Q3 2013 negatively impacted by weakening retail market - Group revenue decreased by 13.9% to EUR 121.6 million after nine months; EBIT down by 55.5% - Store expansion program on track: increase in number of stores to 202 as of 30 September 2013 (160 as of 30 September 2012); 214 stores as at the end of 2013 - Launch of 'SOTTO' as fast fashion brand targeting a younger consumer group - Publication of Annual Report 2012 still not confirmed; new share buyback program implemented - Cautious outlook for 2013 Frankfurt/Main, 20 January 2014 - Group revenues of Powerland (ISIN DE000PLD5558 / Prime Standard), the leading Chinese manufacturer of handbags, leather goods and accessories, have been further decreasing in the third quarter 2013 due to a weakening demand for luxury goods and a negative consumer sentiment especially of middle class customers in China. In addition, management capacities were tied-up addressing the 2012 audit issues. Based on preliminary and unaudited figures (please note the important notice (disclaimer) at the end of this press release), revenues decreased by 13.9% to EUR 121.6 million in the first nine months of 2013 (Q1-Q3 2012: EUR 141.2 million). Third quarter revenues dropped by 32.8% to EUR 31.2 million (Q3 2012: EUR 46.5 million). Revenues in the Luxury segment declined by 11.4% to EUR 71.9 million in the first nine months of 2013 (Q1-Q3 2012: EUR 81.1 million) and by 45.4% to EUR 15.7 million in the third quarter of 2013 (Q3 2012: EUR 28.7 million). This was mainly due to the lower demand caused by the introduction of an anti-gifting policy by the new Chinese political leaders. Furthermore, the consumer sentiment in China has been on a two-year low in Q3 2013 which affected the performance of the Luxury as well as the Casual segment. Therefore, Powerland had to accept lower unit selling prices in both business segments in the second and third quarter. Revenues in the Casual segment showed a decline of 17.3% to EUR 49.7 million in the first nine months of 2013 (Q1-Q3 2012: EUR 60.1 million) and fell by 12.5% to EUR 15.5 million in the third quarter of 2013 (Q3 2012: EUR 17.7 million). According to the sharp revenue decline and based on the additional expenditures in connection with the audit of the financial statements 2012, earnings before interest and taxes (EBIT) decreased by 55.5% to EUR 11.2 million in the first nine months of 2013 (Q1-Q3 2012: EUR 25.2 million) and net profit was down 60.8% to EUR 7.0 million in the first nine months of 2013 (Q1-Q3 2012: EUR 17.9 million). Store expansion program on track and launch of 'SOTTO' as a fast fashion brand in the Casual segment Powerland continued to expand its distribution network in mainland China and opened two new self-operated airport stores in Shenyang and Chengdu in the third quarter 2013. The number of Powerland stores reached 202 as at the end of September 2013 (thereof 164 distributor operated stores and 38 self-operated stores), thereby already reaching the target of a total number of approximately 200 stores by the end of 2013. The number of Powerland stores increased further to a total of 214 at year-end 2013; 41 of these stores are self-operated. In the third quarter Powerland successfully rolled out 'SOTTO' as a casual fashion brand targeting young consumers living in Chinese tier-2 and tier-3 cities and opened 13 'SOTTO' stores in the corresponding regions, nine of which are directly run by the Company while the remaining are operated by distributors. As a strategic move towards the casual bag market, 'SOTTO' has diversified Powerland's product mix and will generate optimal synergies with the Company's premium brand PLD. Furthermore, the Company launched online stores on China's two biggest e-commerce platforms Tmall.com and JD.com. Publication of Annual Report 2012 still not confirmed, new share buyback program implemented During the third quarter of 2013, after the regular auditor BDO notified Powerland in July that it would issue an adverse audit opinion, the Management Board responded to the notice and then worked closely with Ernst & Young, the Company's independent auditor, to address the hindering factors raised by BDO. Major management resources were allocated to address the 2012 issues and thus daily operation was negatively impacted to some extent. However, the joint efforts are progressing smoothly and the Company leaves all options open regarding the solution of the 2012 audit issue in due course. On 25 July 2013 the Company started a first share buyback program to buy back up to 1,500,000 Powerland AG shares through the stock exchange until the end of 2013. The program has been completed at the end of 2013 and the Company has bought back a total of 294,723 ordinary shares at a weighted average price of EUR 3.43. In January 2014 the management of Powerland has passed a resolution to implement a second share buyback program starting on 27 January 2014. The Company can buy back up to 1,200,000 Powerland AG shares through the stock exchange until 30 June 2014. Outlook for 2013 cautious The Chinese economy is expected to grow further in the coming years, although less dynamically. Powerland should benefit from continued urbanization and government policies designed to boost domestic consumption. In the short term, the Company remains cautious and expects the revenues in the full-year 2013 to be below what was achieved in the financial year 2012. Accordingly, and due to the cost and pricing environment as well as negative impacts caused by high management involvement in connection with the financial statements 2012, earnings for 2013 are expected to be below the previous year's level as well. Disclaimer Important notice: All financial information for the first nine months of 2013 is preliminary and unaudited. Please refer to the ad-hoc notices published by Powerland AG on 26 March, 2 July and 15 July 2013 regarding the denial of an audit opinion for the business year 2012. The factors hindering our statutory auditor from issuing an audit opinion as set out in our ad-hoc notice dated 15 July 2013 could ultimately also make it necessary to revise the financial information set out herein. Investors are therefore advised to consider the financial information contained in this report with great caution. The full reports of the first nine months 2013 as well as for the third quarter 2013 are published on the Company's website (www.powerland.ag). For more information, please contact: Powerland AG Lyoner Strasse 14 60528 Frankfurt am Main Germany Phone: +49 (0) 69 66 554 - 459 Fax: +49 (0) 69 66 554 - 276 E-mail: ir@powerland.ag Home: http://www.powerland.ag End of Corporate News --------------------------------------------------------------------- 20.01.2014 Dissemination of a Corporate News, transmitted by DGAP - a company of EQS Group AG. The issuer is solely responsible for the content of this announcement. DGAP's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- Language: English Company: Powerland AG Lyoner Stra�e 14 60528 Frankfurt am Main Germany Phone: +49 69 - 66554-459 Fax: +49 69 - 66554-276 E-mail: ir@powerland.ag Internet: www.powerland.ag ISIN: DE000PLD5558 WKN: PLD555 Listed: Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr in Berlin, Düsseldorf, Hamburg, München, Stuttgart End of News DGAP News-Service --------------------------------------------------------------------- 248569 20.01.2014