No. 255
COMPANY ANNOUNCEMENT
11 August 2015
INTERIM REPORT FOR Q2 2015
PANDORA INCREASES REVENUE WITH 41.4% DRIVEN BY A STRONG
DEVELOPMENT ACROSS ALL REGIONS
• Group revenue in Q2 2015 was DKK 3,598 million, an increase of 41.4% or 25.8% in
local currency, compared with Q2 2014:
• Americas increased by 43.8% (19.4% increase in local currency)
• Europe increased by 38.0% (32.0% increase in local currency)
• Asia Pacific increased by 44.1% (26.9% increase in local currency)
• Revenue from concept stores increased by 54.7% and corresponded to 59.3% of
the total revenue
• The gross margin increased to 71.5% in Q2 2015, compared with 70.7% in Q2 2014
•
EBITDA increased by 46.8% to DKK 1,311 million in Q2 2015, corresponding to an
EBITDA margin of 36.4%, compared with 35.1% in Q2 2014
• Net profit for the quarter was DKK 910 million, compared to a net profit of DKK 662
million in Q2 2014
• Free cash flow was DKK -268 million in Q2 2015 (or DKK 374 million excluding tax and
interest expenses of DKK 642 million relating to settlement of transfer pricing audit)
compared with DKK 547 million in Q2 2014
• During Q2 2015, PANDORA bought back 1,433,607 own shares at a total value of DKK
982 million as part of the ongoing DKK 3.9 billion share buyback programme,
corresponding to 1.2% of the total share capital.
FINANCIAL GUIDANCE FOR 2015
Based on the strong performance in the second quarter, as well as favourable exchange
rate fluctuations, PANDORA has decided to increase revenue guidance to more than DKK
16.0 billion (previously more than DKK 15.0 billion). Growth will be driven by like-for-like
growth in existing stores as well as expansion of the store network, with network
expansion contributing slightly more to growth (previously expected to contribute
equally). Assuming current exchange rates, PANDORA expects a full year tailwind effect
from currencies on revenue of around 12% compared to 2014. This compares to a tailwind
of around 10% anticipated in May 2015 in connection with the announcement of the Q1
2015 interim report. The EBITDA margin expectation is unchanged, and is expected to be
approximately 37%. All expectations are based on current exchange rates.
FY 2015
New guidance
FY 2015
Previous guidance
FY 2014
Actual
Revenue, DKK billion
>16.0
>15.0
11.9
EBITDA margin
approx. 37%
approx. 37%
36.0%
CAPEX, DKK million
approx. 900
approx. 900
455
Effective tax rate
approx. 30%
approx. 30%
20%
PANDORA plans to continue to expand the store network and now expects to add more
than 375 new concept stores in 2015 (versus previously expected more than 325).
PANDORA COMPANY ANNOUNCEMENT
11 August 2015 | COMPANY ANNOUNCEMENT No. 255 | page
2 | 30
In connection with the Q2 2015 results Anders Colding Friis, CEO of PANDORA, stated:
“We are very pleased to report yet another strong quarter, both in terms of top line
development and profitability. All major regions once again delivered double digit revenue
growth and our focus on concept stores continues to pay off, with revenue growth in the
quarter of more than 50%. Growth was driven by a combination of network expansion and
strong like-for-like growth, supported by revenue enhancing initiatives such as the
continued roll out of our eSTORE and our collaboration with Disney.”
CONFERENCE CALL
A conference call for investors and financial analysts will be held today at 10.00 CET and
can be joined online at www.pandoragroup.com. The presentation for the call will be
available on the website one hour before the call.
The following numbers can be used by investors and analysts:
DK: +45 3271 1659
UK (International): +44 (0) 2034 271 901
US: +1 212 444 0412
To help ensure that the conference begins in a timely manner, please dial in 5 minutes
prior to the scheduled starting time. Participants will have to quote confirmation code
“Pandora” when dialling into the conference.
ABOUT PANDORA
PANDORA designs, manufactures and markets hand-finished and contemporary jewellery
made from high-quality materials at affordable prices. PANDORA jewellery is sold in more
than 90 countries on six continents through approximately 9,500 points of sale, including
more than 1,500 concept stores.
Founded in 1982 and headquartered in Copenhagen, Denmark, PANDORA employs more
than 14,200 people worldwide of whom approximately 10,000 are located in Gemopolis,
Thailand, where the company manufactures its jewellery. PANDORA is publicly listed on the
NASDAQ Copenhagen stock exchange in Denmark. In 2014, PANDORA’s total revenue was
DKK 11.9 billion (approximately EUR 1.6 billion).
CONTACT
For more information, please contact:
INVESTOR RELATIONS
Morten Eismark
VP Group Investor Relations
Phone +45 3673 8213
Mobile +45 3045 6719
MEDIA RELATIONS
Kristian Lysgaard
Director, Group Communications
Phone +45 4323 1774
Mobile +45 2556 8561
Magnus Thorstholm Jensen
Investor Relations Officer
Phone +45 4323 1739
Mobile +45 3050 4402
PANDORA COMPANY ANNOUNCEMENT
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3 | 30
FINANCIAL HIGHLIGHTS
* Ratios are based on 12 months rolling EBITDA and EBIT, respectively.
Q2 2015
Q2 2014
H1 2015
H1 2014
FY 2014
3,598
2,544
7,145
5,136
11,942
2,573
1,798
5,095
3,589
8,423
1,311
893
2,616
1,830
4,294
1,235
841
2,473
1,728
4,072
-69
-13
-350
-21
-200
1,166
828
2,123
1,707
3,872
910
662
1,293
1,366
3,098
11,781
9,231
11,781
9,231
10,556
7,359
5,851
7,359
5,851
6,080
939
729
939
729
434
1,030
-440
1,030
-440
-1,121
6,097
6,274
6,097
6,274
7,032
-93
637
1,071
1,744
4,322
-330
-92
-641
-163
-632
-268
547
722
1,596
3,868
419
-662
-953
-1,814
-3,259
-4
-117
-523
-233
431
41.4%
31.7%
39.1%
30.6%
32.5%
43.1%
41.1%
42.0%
38.7%
40.4%
46.8%
68.5%
43.0%
56.0%
49.0%
46.8%
74.1%
43.1%
59.7%
51.9%
37.5%
53.6%
-5.3%
57.2%
39.5%
71.5%
70.7%
71.3%
69.9%
70.5%
36.4%
35.1%
36.6%
35.6%
36.0%
34.3%
33.1%
34.6%
33.6%
34.1%
22.0%
20.0%
39.1%
20.0%
20.0%
51.8%
68.0%
51.8%
68.0%
66.6%
0.2
-0.1
0.2
-0.1
-0.3
65.5%
56.9%
65.5%
56.9%
67.0%
239
86
406
144
455
-29.5%
82.6%
55.8%
116.8%
124.9%
-
-
-
-
9.00
-
-
-
-
112.7%
7.6
5.3
10.8
10.9
25.0
7.5
5.3
10.7
10.8
24.7
719.0
417.5
719.0
417.5
504.5
13,378
9,514
12,661
9,156
9,957
PANDORA COMPANY ANNOUNCEMENT
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4 | 30
IMPORTANT EVENTS IN Q2 2015
SHARE BUYBACK PROGRAMME FOR 2015
In connection with the Annual Report 2014, PANDORA launched a share buyback
programme under which PANDORA expects to buy back own shares to a maximum
consideration of DKK 3,900 million. The share buyback programme is implemented in
accordance with the provisions of the European Commission’s regulation no. 2273/2003 of
22 December 2003 (‘safe harbour’), which protects listed companies against violation of
insider legislation in connection with share buybacks. The programme will end no later than
31 December 2015.
As of 30 June 2015, a total of 2,377,275 shares had been bought back, corresponding to a
transaction value of DKK 1,552 million. As of 30 June 2015, PANDORA held a total of
3,056,517 treasury shares, corresponding to 2.5% of the share capital.
PANDORA may use the shares purchased under the programme to meet potential
obligations arising from employee share option programmes. As of 30 June 2015, the total
potential obligation under these programmes amounted to 838,447 shares.
US eSTORE
On 21 April 2015, PANDORA launched an e-commerce platform in the US
(estore-us.pandora.net). The launch is part of the Company's aim to offer PANDORA
jewellery online globally.
REDUCTION OF PANDORA A/S' SHARE CAPITAL
At the Company's Annual General Meeting on 18 March 2015, it was decided to reduce the
share capital by a nominal amount of DKK 5,818,651 through cancellation of a nominal
amount of DKK 5,818,651 treasury shares of DKK 1. After reduction of the share capital, the
Company’s share capital is nominally DKK 122,297,169 divided into shares of DKK 1.
Following the share capital reduction, PANDORA owns less than 5% of the total share
capital and the total voting rights in the Company.
TRANSFER PRICING TAX AUDIT CLOSED
On 7 May, PANDORA made a settlement with the Danish Tax Authorities (SKAT) regarding a
transfer pricing audit for the period 2009 to 2014. SKAT and PANDORA did not agree on the
applicable pricing methodology within the Group. Following a dialogue with SKAT,
PANDORA decided to make a settlement whereby, PANDORA will recognise a higher
proportion of the Group’s profit in Denmark for 2009-2014 as well as going forward.
According to the settlement, PANDORA will pay a sum of DKK 995 million to SKAT covering
tax payments and interest for the 6 year period. DKK 642 million has been paid in Q2 2015.
The remaining amount will be paid in Q4 2015.
PANDORA accrues for estimated tax expenses, and had as of 31 December 2014 made an
accrual for DKK 610 million related to these specific payments. The additional DKK 385
million impacted the income statement in Q1 2015, specified with 364 million as income tax
expense and 21 million as financial expenses, respectively.
PANDORA COMPANY ANNOUNCEMENT
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5 | 30
MAJOR SHAREHOLDER ANNOUNCEMENT
On 10 June, PANDORA announced that the Company had been notified by BlackRock
Investment Management (UK) Limited that BlackRock, Inc. had increased its holding of
shares in PANDORA A/S at 9 June 2015 to 6,234,764 shares, corresponding to 5.1% of the
share capital and the voting rights.
EVENTS AFTER THE REPORTING PERIOD
TAKE OVER OF DISTRIBUTION IN SINGAPORE, MACAU AND THE PHILIPPINES
On 11 August, PANDORA made an agreement with Norbreeze Group (Norbreeze), to
acquire its PANDORA store network in Singapore and Macau on 1 January 2016, when
Norbreeze’s distribution rights to PANDORA jewellery in the two countries expire. At the
same time, PANDORA will regain ownership of the distribution rights in the Philippines, also
currently owned by Norbreeze. PANDORA will pay a total amount of SGD 30 million
(approximately DKK 149 million) to Norbreeze, related to the agreement. The agreement
will be effective as of 1 January 2016 and is subject to certain conditions to be fulfilled.
PANDORA COMPANY ANNOUNCEMENT
11 August 2015 | COMPANY ANNOUNCEMENT No. 255 | page
6 | 30
REVENUE DEVELOPMENT
Total revenue for Q2 2015 was DKK 3,598 million, an increase of 41.4% (25.8% in local
currency) compared with Q2 2014.
Volumes increased by 15.8% compared with Q2 2014 and the average sales price (ASP)
recognised by PANDORA in Q2 2015 was DKK 168, compared with DKK 138 in Q2 2014. The
increase in ASP was primarily driven by currency increases, which represented around 60%
of the increase, as well as a proportionally higher share of revenue from PANDORA owned
and operated stores. Prices in local currencies for each individual product were virtually
unchanged compared with Q2 2014.
Revenue growth continued across the three major regions, with all geographies showing
double-digit growth rates. Growth was driven by a combination of like-for-like growth
across most markets, contributing with roughly 40% of the growth, as well as the
continued expansion of the store network, contributing with the remaining 60%. The like-
for-like growth was among other things driven by a continued high demand for the Spring
collection, launched in Q1 2015, as well as a positive reception of the High Summer
collection, launched in stores during Q2 2015. The Mother’s Day collection, launched in
most markets in April, was performing slightly weaker than last year, primarily due to
around 25% less design variations compared to last year’s collection. In Q2 2015, around
50% of sales were generated by products launched within the last 12 months, which is
similar to Q2 2014. Products across all categories launched more than 12 months ago
continue to support revenue growth.
Revenue from PANDORA’s owned and operated stores, including all PANDORA eSTOREs,
increased by 131% to DKK 891 million and corresponded to around 25% of total revenue
compared to around 15% in Q2 2014. The growth in retail revenue was driven by strong in-
store execution resulting in positive like-for-like growth as well as the addition of 219 new
owned and operated stores in the last 12 months, including net 51 concept stores and 16
shop-in-shops, converted from franchisee stores, to a total of 357 concept stores and 96
shop-in-shops owned and operated by PANDORA. The net effect of converting wholesale
revenue from the franchisee stores now owned and operated by PANDORA to retail
revenue is approximately DKK 80 million compared to Q2 2014. Since Q2 2014, PANDORA
has established eSTOREs in Italy, Poland, Sweden, and the US and now has eSTOREs in 9
countries in total.
At the end of Q2 2015, sales return provisions corresponded to approximately 7% of 12
months’ rolling revenue value, compared with 8% and 7% for Q1 2015 and Q2 2014,
respectively.
Based on data from concept stores, which have been operating for more than 12 months,
like-for-like sales-out in four of PANDORA’s major markets (the US, the UK, Germany and
Australia) continued to be positive. The positive development was driven by a successful
product portfolio with continuous relevant products, increased awareness through regional
marketing campaigns as well as generally better in-store execution, increasing store traffic
in most stores.
PANDORA COMPANY ANNOUNCEMENT
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7 | 30
REVENUE BREAKDOWN BY GEOGRAPHY
In Q2 2015, 43.9% of revenue was generated in Americas (43.1% in Q2 2014), 40.8% in
Europe (41.8% in Q2 2014) and 15.3% in Asia Pacific (15.1% in Q2 2014).
Distribution of revenue
DKK million
Q2 2015
Q2 2014
Growth
Growth in
local
currency
FY 2014
US
1,171
824
42.1%
13.7%
3,629
Other Americas
407
273
49.1%
36.3%
1,330
Americas
1,578
1,097
43.8%
19.4%
4,959
UK
418
285
46.7%
31.2%
1,654
Germany
110
107
2.8%
2.8%
578
Other Europe
940
672
39.9%
37.2%
3,072
Europe
1,468
1,064
38.0%
32.0%
5,304
Australia
247
183
35.0%
29.0%
806
Other Asia Pacific
305
200
52.5%
25.0%
873
Asia Pacific
552
383
44.1%
26.9%
1,679
Total
3,598
2,544
41.4%
25.8%
11,942
AMERICAS
Revenue for the second quarter in Americas was DKK 1,578 million, an increase of 43.8%
(19.4% in local currency) compared with Q2 2014. The increase was driven by a positive
development across main markets, including the US, Canada and Brazil. A high demand for
the Disney collection, which was launched in North America in November 2014, continued
to support growth. During the quarter, the distribution of the Disney collection was
expanded to include shop-in-shops and gold stores.
Revenue in the US was DKK 1,171 million, an increase of 42.1% (13.7% in local currency)
compared with Q2 2014. Growth was driven by network expansion (including the launch of
a PANDORA eSTORE) as well as regional strong like-for-like growth rates, which was
fuelled by the continued success of the PANDORA Disney products. Furthermore, the focus
on Rings in the US continues to support growth as revenue from the category increased
significantly compared to Q2 2014, and is approaching 10% of US revenue. Finally,
converting wholesale revenue to retail revenue, from the 22 concept stores acquired from
Hannoush Jewelers in September 2014, has added around DKK 30 million to revenue in the
US in Q2 2015 compared to Q2 2014.
Like-for-like sales-out in Q2 2015, based on concept stores in the US - which have been
operating for more than 12 months - increased by 8.1% compared with Q2 2014. Growth
in the Northeast region, where a process to refresh the network is on-going, remained
slightly negative for the quarter, while all other major US regions grew by high-single digit
like-for-like rates or more compared to Q2 2014.
Concept stores* sales-out growth
Q2 2015
vs. Q2 2014
Q1 2015
vs. Q1 2014
Q4 2014
vs. Q4 2013
Q3 2014
vs. Q3 2013
Q2 2014
vs. Q2 2013
US
8.1%
8.9%
4.7%
3.7%
1.7%
* Concept stores that have been operating for more than 12 months
Revenue from Other Americas was DKK 407 million in Q2 2015, an increase of 49.1%
(36.3% in local currency) compared with the same quarter last year, with growth primarily
driven by a positive development in Canada and Brazil. Revenue from Canada increased by
PANDORA COMPANY ANNOUNCEMENT
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8 | 30
35% (around 20% in local currency) and represented around 50% of revenue from Other
Americas in Q2 2015. Brazil continues to perform well, driven by double digit like-for-like
growth rates as well as an expansion of the store network. PANDORA now has 51 concept
stores in Brazil compared to 22 at the end of Q2 2014.
Store network, number of points of sale - Americas
Number of PoS
Q2 2015
Number of PoS
Q1 2015
Number of PoS
Q2 2014
Growth
Q2 2015
/Q1 2015
Growth
Q2 2015
/Q2 2014
Concept stores
447
424
369
23
78
- hereof PANDORA owned
69
59
20
10
49
Shop-in-shops
664
672
612
-8
52
- hereof PANDORA owned
2
2
2
-
-
Gold
913
874
859
39
54
Branded
2,024
1,970
1,840
54
184
Branded as % of total
63.3%
60.3%
56.0%
Silver
932
1,023
1,054
-91
-122
White and travel retail
240
274
394
-34
-154
Total
3,196
3,267
3,288
-71
-92
PANDORA continues to develop the branded store network and during Q2 2015, 23 new
concept stores were opened in Americas. In Q2 2015, the number of branded points of
sale (PoS) in the region increased by 54 stores. PANDORA owned and operated concept
stores in Americas increased by 10 to 69 at the end of Q2 2015. The increase compared to
Q2 2014 is mainly due to PANDORA’s acquisition of net 22 concept stores from Hannoush
Jewelers in Q3 2014, as well as the addition of 17 owned and operated concept stores in
Brazil. As part of the continued focus on the branded part of the network, unbranded
stores are being closed and during the quarter 125 unbranded stores, almost all located in
the US, were closed in Americas.
EUROPE
Revenue in Europe was DKK 1,468 million in Q2 2015, an increase of 38.0% (32.0% in local
currency) compared with Q2 2014. The growth was mainly driven by the UK, France and
Italy, whereas revenue from Russia declined in the quarter.
Revenue in the UK was DKK 418 million in Q2 2015, an increase of 46.7% (31.2% in local
currency) compared with the same quarter last year. Growth was driven by a positive
sales-out development, as well as the expansion of the store network, including 38 new
concept stores opened since Q2 2014, to a total of 169 concept stores. Furthermore,
growth was supported by the introduction of the PANDORA Rose collection in the UK
stores during the quarter (as the only country in Europe), following the successful launch
of the collection in the US last year. The Rings category continued to support growth with
revenue from the category increasing by more than 20% compared to Q2 2014. For the
quarter around 19% of revenue was generated by Rings. Finally, the UK eSTORE continues
to perform well and contributed with around 10% to UK revenue in Q2 2015.
Like-for-like sales-out in Q2 2015, based on concept stores in the UK - which have been
operating for more than 12 months - increased by 11.4% compared with Q2 2014. The
growth was supported by all product categories, in particular Rings, Earrings and
Necklaces, as well as the launch of PANDORA Rose.
PANDORA COMPANY ANNOUNCEMENT
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Concept stores*
sales-out growth
Q2 2015
vs. Q2 2014
Q1 2015
vs. Q1 2014
Q4 2014
vs. Q4 2013
Q3 2014
vs. Q3 2013
Q2 2014
vs. Q2 2013
UK
11.4%
20.6%
20.6%
20.6%
26.2%
*
Concept stores that have been operating for more than 12 months
Revenue in Germany was DKK 110 million corresponding to an increase of 2.8% compared
with Q2 2014. As a consequence of the planned acceleration of the network optimisation
in Germany, revenue in Q2 2015 was negatively impacted by a provision for returned
goods of DKK 53 million related to the closure of a number of multibranded accounts,
corresponding to around 275 stores. Excluding the provision, revenue in Germany
increased by 53% compared with Q2 2014. As a part of the effort to improve the store
network, PANDORA agreed in January 2015 to assume 77 commercial leaseholds in
Germany, where PANDORA will open owned and operated concept stores. Including
relocation of existing stores, the transaction is expected to add net 60 new concept stores
in 2015. During the quarter, 25 owned and operated concept stores were opened to a
total of 33 on the locations. In total, 32 owned and operated concept stores were added
during the quarter. At the end of Q2 2015, PANDORA owned and operated 110 concept
stores out of a total of 124 concept stores in Germany.
Like-for-like sales-out in Q2 2015, based on concept stores in Germany - which have been
operating for more than 12 months - increased by 9.0% compared with Q2 2014. The
growth was driven by a positive development across all product categories. The
anticipated negative impact on the like-for-like growth from the above mentioned store
openings has not materialised.
Concept stores* sales-out growth
Q2 2015
vs. Q2 2014
Q1 2015
vs. Q1 2014
Q4 2014
vs. Q4 2013
Q3 2014
vs. Q3 2013
Q2 2014
vs. Q2 2013
Germany
9.0%
3.8%
2.3%
8.5%
10.0%
* Concept stores that have been operating for more than 12 months
Revenue from Other Europe was DKK 940 million in Q2 2015, an increase of 39.9%
compared with Q2 2014. Revenue from Other Europe was primarily driven by a positive
development in Italy and France, with increasing revenue in both countries of more than
50%. Italy and France represented around 30% and 15%, respectively, of revenue from
Other Europe in Q2 2015. Revenue from Russia decreased 40% in Q2 2015 and
represented around 8% of revenue from Other Europe in Q2 2015. The decrease was
driven by low double digit negative like-for-like sales out growth in Q2 2015, impacted by
the decreasing consumer spend in Russia, and consequently a more cautious purchasing
behaviour from PANDORA’s local distributor in Russia. There is currently some uncertainty
surrounding the long-term ownership of ZAO PanClub (PanClub), PANDORA’s local
distributor in Russia. PanClub is performing relatively well in a difficult business
environment. PANDORA is monitoring the situation closely, and it is PANDORA’s
assessment that the uncertainty regarding the long-term ownership of PanClub has not had
any impact on the daily operations of the stores in Russia. Finally, revenue from Other
Europe was positively impacted by around DKK 15 million from converting third party
revenue to retail revenue in the Middle East following the acquisition of the local
distributor.
PANDORA COMPANY ANNOUNCEMENT
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10 | 30
Store network, number of points of sale - Europe
Number of PoS
Q2 2015
Number of PoS
Q1 2015
Number of PoS
Q2 2014
Growth
Q2 2015
/Q1 2015
Growth
Q2 2015
/Q2 2014
Concept stores
882
811
663
71
219
- hereof PANDORA owned
250
201
130
49
120
Shop-in-shops
715
681
651
34
64
- hereof PANDORA owned
82
76
57
6
25
Gold
1,449
1,369
1,320
80
129
Branded
3,046
2,861
2,634
185
412
Branded as % of total
53.6%
50.2%
43.1%
Silver
1,438
1,452
1,933
-14
-495
White and travel retail
1,204
1,382
1,545
-178
-341
Total
*
5,688
5,695
6,112
-7
-424
*
Includes for Q2 2015 relating to 3rd party distributors: 141 concept stores, 203 shop-in-shops, 381 gold, 262 silver and 465 white stores.
During Q2 2015, the number of branded stores in Europe increased by 185 stores to a total
of 3,046 stores, in line with PANDORA’s overall strategy to increase branded sales. Net 71
concept stores were opened in Q2, mainly in Germany (33), the UK (9), Spain (7), Italy (5),
France (4), Russia (4) and Turkey (4). During the quarter, 49 owned and operated concept
stores were added net, of which 32 were added in Germany.
In Europe, PANDORA offers eSTOREs in Austria, France, Germany, Italy, the Netherlands,
Poland, Sweden (opened in Q2 2015) and the UK.
ASIA PACIFIC
Revenue in Asia Pacific was DKK 552 million in Q2 2015, an increase of 44.1% (26.9% in
local currency) compared with Q2 2014.
Revenue in Australia was DKK 247 million in Q2 2015, an increase of 35.0% (29.0% in local
currency) compared with Q2 2014. The growth was primarily driven by a continued strong
sales-out growth, as well as 14 new concept stores opened since Q2 2014, to a total of 96
concept stores in Australia. Growth for the quarter was supported by all product
categories, with Charms and Charm bracelets doing particular well. Revenue from the
Rings category increased 23% compared to Q2 2014 and represented around 15% of
revenue for the quarter similar to Q2 2014.
Like-for-like sales-out in Q2 2015, based on concept stores in Australia - which have been
operating for more than 12 months - increased by 35.7% compared with Q2 2014, and
Australia thereby experienced the ninth quarter in a row with more than 20% like-for-like
growth rates. The positive development was a result of growth across all product
categories driven by a continued strong retail execution.
Concept stores*
sales-out growth
Q2 2015
vs. Q2 2014
Q1 2015
vs. Q1 2014
Q4 2014
vs. Q4 2013
Q3 2014
vs. Q3 2013
Q2 2014
vs. Q2 2013
Australia
35.7%
24.6%
20.0%
22.9%
33.0%
*Concept stores that have been operating for more than 12 months
Revenue from Other Asia Pacific was DKK 305 million in Q2 2015, corresponding to an
increase of 52.5% (25.0% in local currency) compared with Q2 2014. The growth was
primarily driven by a positive development in Hong Kong and China. Revenue in Hong Kong
increased around 50% in local currency, primarily driven by expansion of the store
PANDORA COMPANY ANNOUNCEMENT
11 August 2015 | COMPANY ANNOUNCEMENT No. 255 | page
11 | 30
network. Since Q2 2014, 10 new concept stores have been opened to a total of 20 concept
stores in Hong Kong. Revenue in China more than doubled compared to Q2 2014, however
from low levels.
Store network, number of points of sale – Asia Pacific
Number of PoS
Q2 2015
Number of PoS
Q1 2015
Number of PoS
Q2 2014
Growth
Q2 2015
/Q1 2015
Growth
Q2 2015
/Q2 2014
Concept stores
225
212
182
13
43
- hereof PANDORA owned
38
32
25
6
13
Shop-in-shops
196
195
180
1
16
- hereof PANDORA owned
12
11
-
1
12
Gold
135
138
144
-3
-9
Branded
556
545
506
11
50
Branded as % of total
82.0%
81.1%
78.3%
Silver
78
71
73
7
5
White and travel retail
44
56
67
-12
-23
Total
678
672
646
6
32
At the end of Q2 2015, PANDORA had 556 branded stores in Asia Pacific compared with
506 at the end of Q2 2014. During the quarter 13 new concept stores were added in the
region, including 5 in Australia and 4 in Hong Kong.
PANDORA expects to launch the first eSTOREs in the Asia Pacific region in Australia and
Hong Kong in the second half of 2015.
SALES CHANNELS
PANDORA’s focus on expanding the concept store network continues and in Q2 2015,
PANDORA opened net 107 new concept stores, including 23 in Americas, 71 in Europe and
13 in Asia Pacific. During the quarter, PANDORA added 65 owned and operated concept
stores to the network, including 32 in Germany and 7 in Brazil. Finally, 7 new owned and
operated shop-in-shops were added during the quarter. Please refer to note 10 for a
detailed overview of concept stores per country.
During the quarter, PANDORA opened eSTOREs in the US and Sweden and now offers
eSTOREs in nine countries. Revenue from the eSTOREs is recognised as concept store
revenue.
PANDORA has increased the branded store network by 646 points of sale since the end of
Q2 2014. Underperforming unbranded stores, across all regions, are being closed in order
to improve the quality of revenue and focus on branded store performance. As a
consequence the number of unbranded points of sale was reduced by 1,130 stores in the
last 12 months.
At the end of Q2 2015, the total number of points of sale was 9,562, a decrease of 484
compared with Q2 2014.
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Store network, number of points of sale – Group
Number of PoS
Q2 2015
Number of PoS
Q1 2015
Number of PoS
Q2 2014
Growth
Q2 2015
/Q1 2015
Growth
Q2 2015
/Q2 2014
Concept stores
1,554
1,447
1,214
107
340
- hereof PANDORA owned
357
292
175
65
182
Shop-in-shops
1,575
1,548
1,443
27
132
- hereof PANDORA owned
96
89
59
7
37
Gold
2,497
2,381
2,323
116
174
Branded
5,626
5,376
4,980
250
646
Branded as % of total
58.8%
55.8%
49.6%
Silver
2,448
2,546
3,060
-98
-612
White and travel retail
1,488
1,712
2,006
-224
-518
Total
*
9,562
9,634
10,046
-72
-484
*
Includes for Q2 2015 relating to 3rd party distributors: 141 concept stores, 203 shop-in-shops, 381 gold, 262 silver and 465 white stores.
Revenue from concept stores increased by 54.7% to DKK 2,132 million, and represented
59.3% of revenue in Q2 2015 compared to 54.2% in Q2 2014. Branded revenue in Q2 2015
increased by 44.8% to DKK 3,171 million and represented 88.2% of revenue compared
with 86.1% in Q2 2014. The increase in branded sales is driven by an increasing share of
branded points of sale, including owned and operated stores, as well as relative higher
revenue in existing branded stores.
Revenue per sales channel
DKK million
Q2 2015
Q2 2014
Growth
Share of
total
revenue
FY 2014
Concept stores
2,132
1,378
54.7%
59.3%
6,741
Shop-in-shops
641
454
41.2%
17.8%
2,008
Gold
398
358
11.2%
11.1%
1,471
Total branded
3,171
2,190
44.8%
88.2%
10,220
Silver
216
175
23.4%
6.0%
791
White and travel retail
102
104
-1.9%
2.8%
538
Total unbranded
318
279
14.0%
8.8%
1,329
Total direct
3,489
2,469
41.3%
97.0%
11,549
3rd party
109
75
45.3%
3.0%
393
Total revenue
3,598
2,544
41.4%
100.0%
11,942
PRODUCT OFFERING
PANDORA’s core categories Charms and Bracelets and Rings continue to perform well
driven by continued newness across the categories, as well as tailor-made promotions,
focusing on the core categories.
Product mix
DKK million
Q2 2015
Q2 2014
Growth
Share of
total
revenue
FY 2014
Charms
2,456
1,705
44.0%
68.3%
7,933
Silver and gold charm bracelets
360
262
37.4%
10.0%
1,427
Rings
382
273
39.9%
10.6%
1,192
Other jewellery
400
304
31.6%
11.1%
1,390
Total revenue
3,598
2,544
41.4%
100.0%
11,942
Revenue from Charms was DKK 2,456 million in Q2 2015, an increase of 44.0% compared
with Q2 2014, while revenue from Silver and gold charm bracelets increased by 37.4%. The
two categories represented 78.3% of total revenue in Q2 2015 compared with 77.4% in Q2
2014. Revenue from both categories was driven by a continued high demand for both new
and existing products.
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Revenue from Rings was DKK 382 million, an increase of 39.9% compared with Q2 2014.
The category continues to do well, driven by continued use of revenue generating
initiatives in most markets including more emphasis on rings in staff training, improved in-
store focus on rings, as well as tailor-made rings campaigns. The Rings category
represented 10.6% of total revenue in Q2 2015 compared with 10.7% in Q2 2014.
Revenue from Other jewellery was DKK 400 million, an increase of 31.6% compared with
Q2 2014. The growth was driven by revenue from Earrings and Necklaces, increasing by
around 70% and 80%, respectively, compared to Q2 2014. Revenue from Other bracelets
was negatively impacted by the discontinuation of a number of products in the category
and increased by 4% in Q2 2015. Other jewellery represented 11.1% of total revenue in Q2
2015 compared with 11.9% in Q2 2014.
COSTS
Total costs in Q2 2015, including depreciation and amortisation, were DKK 2,363 million,
an increase of 38.8% compared with Q2 2014. Total costs corresponded to 65.7% of
revenue in Q2 2015 compared with 66.9% in Q2 2014.
Cost development
DKK million
Q2 2015
Q2 2014
Growth
Share of
total
revenue
Q2 2015
Share of
total
revenue
Q2 2014
FY 2014
Cost of sales
1,025
746
37.4%
28.5%
29.3%
3,519
Gross profit
2,573
1,798
43.1%
71.5%
70.7%
8,423
Sales and distribution expenses
662
457
44.9%
18.4%
18.0%
1,957
Marketing expenses
319
219
45.7%
8.9%
8.6%
1,143
Administrative expenses
357
281
27.0%
9.9%
11.0%
1,251
Total costs
2,363
1,703
38.8%
65.7%
66.9%
7,870
GROSS PROFIT
Gross profit in Q2 2015 was DKK 2,573 million corresponding to a gross margin of 71.5%
compared with 70.7% in Q2 2014. The increase was mainly driven by tailwind from more
favourable raw material prices, market mix and an increase in revenue from owned and
operated stores. The increase was partially offset by unfavourable currency rates.
COMMODITY HEDGING
It is PANDORA’s policy to hedge approximately 100%, 80%, 60% and 40%, respectively, of
expected gold and silver consumption in the following four quarters. The hedged prices for
the following four quarters for gold are USD 1,214/oz, USD 1,187/oz, USD 1,204/oz and
USD 1,186/oz and for silver USD 17.81/oz, USD 16.54/oz, USD 17.00/oz and USD 16.35/oz.
However, current inventory means a delayed impact of the hedged prices on cost of sales.
The average realised purchase price in Q2 2015 was USD 1,215/oz for gold and USD
18.07/oz for silver.
Excluding hedging and the time lag effect from the inventory, the underlying gross margin
would have been approximately 73% based on the average gold (USD 1,192/oz) and silver
(USD 16.39/oz) market prices in Q2 2015. Under these assumptions, a 10% deviation in
quarterly average gold and silver prices would impact our gross margin by approximately
+/- 1 percentage points.
PANDORA COMPANY ANNOUNCEMENT
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14 | 30
OPERATING EXPENSES
Operating expenses in Q2 2015 were DKK 1,338 million compared with DKK 957 million in
Q2 2014, representing 37.2% of revenue in Q2 2015 compared with 37.6% in Q2 2014. All
operating expenses were impacted in Q2 2015 by exchange rate fluctuations compared to
Q2 2014 (primarily USD, GBP, AUD and THB), with a total negative impact of around DKK
100 million.
Sales and distribution expenses were DKK 662 million in Q2 2015, an increase of 44.9%
compared with Q2 2014, and corresponding to 18.4% of revenue compared with 18.0% in
Q2 2014. The increase in sales and distribution expenses was mainly driven by higher
revenue, as well as an increase in the number of PANDORA owned stores (from 234 in Q2
2014 to 453 in Q2 2015). The higher costs in owned and operated stores are mainly
related to property and employee expenses, having a negative impact of around 2
percentage points compared to Q2 2014. The increase in the sales and distribution ratio
(sales and distribution expenses/revenue) was partially offset by improved cost efficiency
in all store types.
Marketing expenses were DKK 319 million in Q2 2015 compared with DKK 219 million in
Q2 2014, corresponding to 8.9% of revenue, compared with 8.6% in Q2 2014. The increase
was mainly driven by higher PR and media expenses.
Administrative expenses in Q2 2015 increased by 27.0% to DKK 357 million, representing
9.9% of revenue, compared with 11.0% of Q2 2014 revenue. The absolute increase in
administrative costs was primarily due to an increase in employee expenses.
EBITDA
EBITDA for Q2 2015 increased by 46.8% to DKK 1,311 million resulting in an EBITDA margin
of 36.4% compared with 35.1% in Q2 2014. Compared to Q2 2014, the EBITDA margin for
Q2 2015 was negatively impacted by around 0.5 percentage points from to exchange rate
fluctuations. The overall improvement was mainly due to an improved gross margin.
Regional EBITDA margins
Q2 2015
Q2 2014
Q2 2015
vs. Q2 2014
(%-pts)
Americas
44.4%
46.3%
-1.9%
Europe
38.6%
39.3%
-0.7%
Asia Pacific
51.3%
46.7%
4.6%
Unallocated costs
-6.7%
-8.3%
1.6%
Group EBITDA margin
36.4%
35.1%
1.3%
The EBITDA margin for Americas in Q2 2015 decreased from 46.3% to 44.4%. The
improvement in the gross margin was more than offset by market mix, as well as an
increase in number of employees, primarily related to the increase in owned and operated
stores in the region.
The EBITDA margin for Europe decreased from 39.3% in Q2 2014 to 38.6% in Q2 2015. The
margin in Europe was negatively impacted by the decision to close down a number of
multibranded accounts in Germany and the negative revenue development in Russia,
which more than offset the improved gross margin.
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15 | 30
EBITDA margin for the Asia Pacific region increased to 51.3% compared with 46.7% in Q2
2014. The improvement was primarily driven by increasing revenue in the region as well as
the improved gross margin.
EBIT
EBIT for Q2 2015 increased to DKK 1,235 million, an increase of 46.8% compared with Q2
2014, resulting in an EBIT margin of 34.3% for Q2 2015 compared to 33.1% in Q2 2014
.
NET FINANCIALS
In Q2 2015, net financials amounted to a loss of DKK 69 million. Of the total amount, DKK
44 million is a net exchange rate gain, mainly related to unrealised gain on intercompany
loans in US dollars. Net interest expenses and other costs were DKK 113 million, including
loss on commodity and foreign exchange contracts. This compared with a net financial loss
of DKK 13 million in Q2 2014.
INCOME TAX EXPENSES
Income tax expenses were DKK 256 million in Q2 2015. The effective tax rate in Q2 2015
was 22.0% compared with 20.0% for Q2 2014. The increase was due to the settlement
made in May with the Danish Tax Authorities, according to which PANDORA will recognise a
higher proportion of the Group’s profit in Denmark.
NET PROFIT
Net profit in Q2 2015 increased to DKK 910 million from DKK 662 million in Q2 2014.
BALANCE SHEET AND CASH FLOW
In Q2 2015, PANDORA generated free cash flow of DKK -268 million compared with DKK
547 million in Q2 2014. Free cash flow for the period was negatively impacted by tax and
interest expenses of DKK 642 million related to a settlement made with the Danish Tax
Authorities regarding the period 2009 to 2014, cf. Company announcement no. 237.
Excluding the one-off impact free cash flow was DKK 374 million in Q2 2015.
Operating working capital (defined as inventory and trade receivables less trade payables)
at the end of Q2 2015 corresponded to 15.7% of the last twelve months revenue,
compared with 18.0% at the end of Q2 2014 and 16.0% at the end of Q1 2015.
Inventory was DKK 2,161 million at the end of Q2 2015, corresponding to 15.5% of
preceding 12 months revenue compared to 16.5% in Q2 2014 and 14.9% in Q1 2015. The
increase compared to Q1 2015 was mainly due to inventory build-up ahead of the launch
of the Pre-autumn and the Autumn collections. The nominal increase compared to Q2
2014 was mainly due to higher activity, acquisition of stores and currency development.
Compared with Q2 2014, gold and silver prices affected inventory value with a decrease of
approximately 14%.
Inventory development
DKK million
Q2 2015
Q1 2015
Q4 2014
Q3 2014
Q2 2014
Inventory
2,161
1,925
1,684
2,126
1,684
Share of the last 12 months’ revenue
15.5%
14.9%
14.1%
19.7%
16.5%
PANDORA COMPANY ANNOUNCEMENT
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16 | 30
Trade receivables increased to DKK 1,009 million at the end of Q2 2015 (7.2% of preceding
12 months revenue) compared with DKK 792 million at the end of Q2 2014 (7.8% of the
preceding 12 months revenue) and DKK 1,093 million at the end of Q1 2015 (8.5% of
preceding 12 months revenue). The relative decrease in trade receivables was primarily
due to a continued strong cash collection as well as the increase in revenue from owned
and operated stores, where no trade receivables are recognised.
Trade payables at the end of the quarter were DKK 979 million compared with DKK 633
million at the end of Q2 2014 and DKK 954 million at the end of Q1 2015. The increase is
primarily due to increasing activity.
Other payables were DKK 626 million at the end of the quarter compared with DKK 918
million at the end of Q1 2015. The decrease was primarily due to withholding taxes of DKK
251 million paid out in Q2 2015 related to the annual ordinary dividend paid in Q1 2015.
CAPEX was DKK 239 million in Q2 2015 compared to DKK 86 million in Q2 2014. The
increase in CAPEX was mainly related to an increase in opening of owned and operated
stores and an acceleration of investments in the production facilities in Thailand. In Q2
2015, CAPEX represented 6.6% of revenue.
During the quarter, a total of DKK 982 million was used to purchase own shares related to
the share buyback programme for 2015. As of 30 June 2015, PANDORA held a total of
3,056,517 treasury shares, corresponding to 2.5% of the share capital.
Total interest-bearing debt was DKK 1,641 million at the end of Q2 2015, compared with
DKK 17 million at the end of Q2 2014, and cash amounted to DKK 611 million compared
with DKK 457 million at the end of Q2 2014. The increase in debt was primarily due to the
ongoing share buyback programme, inventory build-up and the above mentioned payment
to the Danish Tax Authorities.
Net interest-bearing debt (NIBD) at the end of Q2 2015 was DKK 1,030 million
corresponding to a NIBD/EBITDA of 0.2x of the last twelve months EBITDA, compared with
DKK -440 million at the end of Q2 2014 corresponding to a NIBD/EBITDA of -0.1x.
PANDORA COMPANY ANNOUNCEMENT
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17 | 30
DEVELOPMENT IN FIRST HALF 2015
For detailed comments on Q1 2015 development, refer to the Q1 2015 interim report.
REVENUE
Total revenue increased by 39.1% to DKK 7,145 million in H1 2015 compared to H1 2014.
Excluding foreign exchange movements the underlying revenue growth was 24.0%.
The geographical distribution of revenue in H1 2015 was 44.1% for Americas (44.2% in H1
2014), 40.4% for Europe (41.4% in H1 2014) and 15.5% for Asia Pacific (14.4% in H1 2014).
COSTS
Gross profit was DKK 5,095 million in H1 2015 compared to DKK 3,589 million in H1 2014,
resulting in a gross margin of 71.3% in H1 2015 compared to 69.9% in H1 2014.
Sales, distribution and marketing expenses increased to DKK 1,907 million in H1 2015
compared to DKK 1,301 million in H1 2014, corresponding to 26.7% of revenue in H1 2015
and 25.3% in H1 2014. Administrative expenses amounted to DKK 715 million in H1 2015
versus DKK 560 million H1 2014, representing 10.0% compared to 10.9% of H1 2015 and
H1 2014 revenue, respectively.
EBITDA
EBITDA for H1 2015 increased by 43.0% to DKK 2,616 million resulting in an EBITDA margin
of 36.6% in H1 2015 versus 35.6% in H1 2014.
Regional EBITDA margins for H1 2015 before allocation of central costs were 43.4% in
Americas (45.3% in H1 2014), 41.0% in Europe (39.5% in H1 2014) and 50.8% in Asia Pacific
(48.4% in H1 2014). Unallocated costs were 7.0% of revenue in H1 2015 (7.7% in H1 2014).
EBIT
EBIT for H1 2015 was DKK 2,473 million – an increase of 43.1% compared to H1 2014,
resulting in an EBIT margin of 34.6% in H1 2015 versus 33.6% in H1 2014.
NET FINANCIALS
Net financials amounted to a loss of DKK 350 million in H1 2015 versus DKK 21 million in
H1 2014.
INCOME TAX EXPENSES
Income tax expenses were DKK 830 million in H1 2015, implying an effective tax rate for
the Group of 39.1% for H1 2015. Tax expenses for the first half were impacted by the
earlier mentioned settlement with the Danish Tax Authorities, which had an impact of DKK
364 million in the first quarter. Excluding the additional expense, the effective tax rate
would have been 22.0%, compared with 20.0% for H1 2014.
NET PROFIT
Net profit in H1 2015 was DKK 1,293 million compared to DKK 1,366 million in H1 2014.
CASH FLOW ITEMS
In H1 2015, PANDORA generated free cash flow of DKK 722 million corresponding to a cash
conversion of 55.8% compared to 116.8% in H1 2014.
PANDORA COMPANY ANNOUNCEMENT
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18 | 30
MANAGEMENT STATEMENT
The Board of Directors and the Executive Board have reviewed and approved the interim
report of PANDORA A/S for the period 1 January - 30 June 2015.
The interim report, which has not been audited or reviewed by the Company’s auditor, has
been prepared in accordance with IAS 34 ‘Interim Financial Reporting’, as adopted by the
EU, and additional Danish interim reporting requirements for listed companies.
In our opinion, the interim report gives a true and fair view of the PANDORA Group’s assets,
liabilities and financial position at 30 June 2015, and of the results of the PANDORA Group’s
operations and cash flow for the period 1 January - 30 June 2015.
Further, in our opinion the Management’s review p. 1-17 gives a true and fair review of the
development in the Group’s operations and financial matters, the result of the PANDORA
Group for the period and the financial position as a whole, and describes the significant
risks and uncertainties pertaining to the Group.
Copenhagen, 11 August 2015
EXECUTIVE BOARD
Anders Colding Friis Peter Vekslund
Chief Executive Officer Chief Financial Officer
BOARD OF DIRECTORS
Peder Tuborgh
Chairman
Christian Frigast Allan Leighton
Deputy Chairman Deputy Chairman
Andrea Alvey Per Bank
Anders Boyer-Søgaard Bjørn Gulden
Michael Hauge Sørensen Ronica Wang
PANDORA COMPANY ANNOUNCEMENT
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19 | 30
FINANCIAL STATEMENTS
Consolidated income statement
DKK million
Notes
Q2 2015
Q2 2014
H1 2015
H1 2014
FY 2014
Revenue
3
3,598
2,544
7,145
5,136
11,942
Cost of sales
-1,025
-746
-2,050
-1,547
-3,519
Gross profit
2,573
1,798
5,095
3,589
8,423
Sales, distribution and marketing expenses
-981
-676
-1,907
-1,301
-3,100
Administrative expenses
-357
-281
-715
-560
-1,251
Operating profit
1,235
841
2,473
1,728
4,072
Finance income
44
1
46
9
14
Finance costs
-113
-14
-396
-30
-214
Profit before tax
1,166
828
2,123
1,707
3,872
Income tax expense
-256
-166
-830
-341
-774
Net profit for the period
910
662
1,293
1,366
3,098
Earnings per share
Earnings per share, basic (DKK)
7.6
5.3
10.8
10.9
25.0
Earnings per share, diluted (DKK)
7.5
5.3
10.7
10.8
24.7
Consolidated statement of comprehensive income
DKK million
Q2 2015
Q2 2014
H1 2015
H1 2014
FY 2014
Net profit for the period
910
662
1,293
1,366
3,098
Exchange rate differences on translation of foreign
subsidiaries
-261
54
392
78
537
Value adjustment of hedging instruments
-47
37
-2
138
-18
Tax on other comprehensive income
8
5
10
1
5
Other comprehensive income, net of tax
-300
96
400
217
524
Total comprehensive income for the period
610
758
1,693
1,583
3,622
PANDORA COMPANY ANNOUNCEMENT
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20 | 30
Consolidated balance sheet
DKK million
2015
30 June
2014
30 June
2014
31 December
ASSETS
Goodwill
2,335
1,933
2,080
Brand
1,057
1,053
1,053
Distribution network
231
284
268
Distribution rights
1,069
1,042
1,047
Other intangible assets
514
335
411
Total intangible assets
5,206
4,647
4,859
Property, plant and equipment
941
556
711
Deferred tax assets
592
411
407
Other non-current financial assets
144
64
99
Total non-current assets
6,883
5,678
6,076
Inventories
2,161
1,684
1,684
Financial instruments
109
11
99
Trade receivables
1,009
792
1,110
Tax receivable
236
49
52
Other receivables
772
560
404
Cash
611
457
1,131
Total current assets
4,898
3,553
4,480
Total assets
11,781
9,231
10,556
EQUITY AND LIABILITIES
Share capital
122
128
128
Share premium
1,173
1,229
1,229
Treasury shares
-1,804
-1,255
-2,679
Reserves
1,129
422
729
Proposed dividend
-
-
1,088
Retained earnings
5,477
5,750
6,537
Total equity
6,097
6,274
7,032
Provisions
134
58
61
Loans and borrowings
1,350
-
-
Deferred tax liabilities
463
556
430
Other non-current liabilities
55
4
-
Total non-current liabilities
2,002
618
491
Provisions
663
532
678
Loans and borrowings
291
17
10
Financial instruments
285
24
268
Trade payables
979
633
804
Income tax payable
838
769
643
Other payables
626
364
630
Total current liabilities
3,682
2,339
3,033
Total liabilities
5,684
2,957
3,524
Total equity and liabilities
11,781
9,231
10,556
PANDORA COMPANY ANNOUNCEMENT
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21 | 30
Consolidated statement of changes in equity
DKK million
Share
capital
Share
Premium
Treasury
shares
Translation
reserve
Hedge
reserve
Proposed
dividend
Retained
earnings
Total
equity
Equity at 1 January 2015
128
1,229
-2,679
885
-156
1,088
6,537
7,032
Net profit for the period
-
-
-
-
-
-
1,293
1,293
Exchange rate differences on
translation of foreign
subsidiaries
-
-
-
392
-
-
-
392
Value adjustment of hedging
instruments
-
-
-
-
-2
-
-
-2
Tax on other comprehensive
income
-
-
-
-
10
-
-
10
Other comprehensive income,
net of tax
-
-
-
392
8
-
-
400
Total comprehensive income
for the period
-
-
-
392
8
-
1,293
1,693
Share-based payments
-
-
266
-
-
-
-254
12
Purchase of treasury shares
-
-
-1,552
-
-
-
-
-1,552
Reduction of share capital
-6
-56
2,161
-
-
-
-2,099
-
Dividend paid
-
-
-
-
-
-1,088
-
-1,088
Equity at 30 June 2015
122
1,173
-1,804
1,277
-148
-
5,477
6,097
Equity at 1 January 2014
130
1,248
-738
348
-143
823
4,794
6,462
Net profit for the period
-
-
-
-
-
-
1,366
1,366
Exchange rate differences on
translation of foreign
subsidiaries
-
-
-
78
-
-
-
78
Value adjustment of hedging
instruments
-
-
-
-
138
-
-
138
Tax on other comprehensive
income
-
-
-
-
1
-
-
1
Other comprehensive income,
net of tax
-
-
-
78
139
-
-
217
Total comprehensive income
for the period
-
-
-
78
139
-
1,366
1,583
Share-based payments
-
-
35
-
-
-
-11
24
Purchase of treasury shares
-
-
-975
-
-
-
-
-975
Reduction of share capital
-2
-19
423
-
-
-
-402
-
Dividend paid
-
-
-
-
-
-823
3
-820
Equity at 30 June 2014
128
1,229
-1,255
426
-4
-
5,750
6,274
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22 | 30
Consolidated cash flow statement
DKK million
Q2 2015
Q2 2014
H1 2015
H1 2014
FY 2014
Profit before tax
1,166
828
2,123
1,707
3,872
Finance income
-44
-1
-46
-9
-14
Finance costs
113
14
396
30
214
Amortisation, depreciation and impairment losses
76
52
143
102
222
Share-based payments
23
13
38
24
71
Change in inventories
-335
-91
-289
-168
91
Change in receivables
106
84
-104
279
63
Change in payables and other liabilities
-504
-205
202
-119
795
Other non-cash adjustments
117
47
-338
90
-208
Interest etc. received
-
1
1
1
7
Interest etc. paid
-77
-3
-83
-13
-30
Income tax paid
-734
-102
-972
-180
-761
Cash flows from operating activities
-93
637
1,071
1,744
4,322
Acquisitions of subsidiaries and activities, net of cash
acquired
-78
-
-239
-3
-174
Divestment of businesses
-
-
29
-
19
Purchase of intangible assets
-82
-24
-136
-47
-164
Purchase of property, plant and equipment
-157
-62
-270
-97
-291
Change in other non-current assets
-16
-7
-37
-17
-45
Proceeds from sale of property, plant and equipment
3
1
12
1
23
Cash flows from investing activities
-330
-92
-641
-163
-632
Capital increase including share premium, net
1
-
1
-
-
Dividend paid
-
-
-1,088
-820
-820
Purchase of treasury shares
-983
-658
-1,552
-975
-2,402
Proceeds from loans and borrowings
1,554
-
1,804
10
560
Repayment of loans and borrowings
-153
-4
-118
-29
-597
Cash flows from financing activities
419
-662
-953
-1,814
-3,259
Net increase (decrease) in cash
-4
-117
-523
-233
431
Cash at beginning of period
644
571
1,131
686
686
Net exchange differences
-29
3
3
4
14
Net increase (decrease) in cash
-4
-117
-523
-233
431
Cash at end of period
611
457
611
457
1,131
Cash flows from operating activities
-93
637
1,071
1,744
4,322
- Interest etc. received
-
-1
-1
-1
-7
- Interest etc. paid
77
3
83
13
30
Cash flows from investing activities
-330
-92
-641
-163
-632
- Acquisition of subsidiaries and activities, net of cash
acquired
78
-
239
3
174
- Divestment of businesses
-
-
-29
-
-19
Free cash flow
-268
547
722
1,596
3,868
Unutilised credit facilities
3,937
3,919
3,937
3,919
3,677
The above cannot be derived directly from the income statement and the balance sheet.
PANDORA COMPANY ANNOUNCEMENT
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23 | 30
NOTES
NOTE 1 – Accounting policies
The present unaudited interim financial report has been prepared in accordance with IAS 34 ‘Interim
Financial Reporting’ as endorsed by the European Union and accounting policies set out in the
Annual Report 2014 of PANDORA.
Furthermore, the interim financial report and Management’s review are prepared in accordance
with additional Danish disclosure requirements for interim reports of listed companies.
PANDORA has adopted all new or amended standards (IFRS) and interpretations (IFRIC) as endorsed
by the EU and which are effective for the financial year 2015. These IFRSs have not had any
significant impact on the Group’s interim financial report.
NOTE 2 – Significant accounting estimates and judgements
In preparing the consolidated financial statements, Management makes various accounting
estimates and assumptions, which form the basis of presentation, recognition and measurement of
PANDORA’s assets and liabilities.
All significant accounting estimates and judgements are consistent with the description in the Annual
Report 2014. See descriptions in the individual notes to the consolidated financial statement in the
Annual Report 2014.
NOTE 3 - Operating segment information
PANDORA’s segment reporting is based on geography. The three reporting segments are Americas,
Europe and Asia Pacific. Europe includes export to countries in Africa, India and the Middle East.
Each country in which PANDORA has an office is an operating segment. Based on the management
structure the operating segments have been aggregated into three reporting segments. In all
segments PANDORA sell jewellery for women crafted in the Thai facilities and use franchises and/or
distributors as appropriate. The operating segments within each reporting segment are deemed to
have similar economic characteristics i.e. are expected to have similar average gross margins in the
long term.
For information on revenue from the different products and sale channels reference is made to the
Management Review.
Management monitors the segment profit of the operating segments separately for the purpose of
making decisions about resource allocation and performance management. Segment profit is
measured consistently with the operating profit in the consolidated financial statements before non-
current assets are amortised/depreciated (EBITDA).
PANDORA COMPANY ANNOUNCEMENT
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24 | 30
NOTE 3 - Operating segment information, continued
DKK million
Americas
Europe
Asia
Pacific
Unallocated
costs
Total
Group
Q2 2015
External revenue
1,578
1,468
552
-
3,598
Segment profit (EBITDA)
701
567
283
-240
1,311
Amortisation, depreciation and impairment losses
-76
Consolidated operating profit (EBIT)
1,235
Q2 2014
External revenue
1,097
1,064
383
-
2,544
Segment profit (EBITDA)
508
418
179
-212
893
Amortisation, depreciation and impairment losses
-52
Consolidated operating profit (EBIT)
841
DKK million
Americas
Europe
Asia
Pacific
Unallocated
costs
Total
Group
Half year 2015
External revenue
3,151
2,885
1,109
-
7,145
Segment profit (EBITDA)
1,366
1,184
563
-497
2,616
Amortisation, depreciation and impairment losses
-143
Consolidated EBIT
2,473
Half year 2014
External revenue
2,267
2,128
741
-
5,136
Segment profit (EBITDA)
1,026
841
359
-396
1,830
Amortisation, depreciation and impairment losses
-102
Consolidated EBIT
1,728
DKK million
Q2 2015
Q2 2014
H1 2015
H1 2014
Revenue per product group
Charms
2,456
1,705
4,837
3,489
Silver and gold charm bracelets
360
262
782
574
Rings
382
273
787
493
Other jewellery
400
304
739
580
Total revenue
3,598
2,544
7,145
5,136
NOTE 4 – Seasonality of operations
Due to the seasonal nature of the jewellery business, higher revenue is historically realised in the
second half of the year.
NOTE 5 – Financial risks
PANDORA’s overall risk exposure and financial risks, including risks related to commodity prices,
foreign currency, credit, liquidity and interest rate, are unchanged compared to the disclosures in
note 4.4 in the consolidated financial statement in the Annual Report 2014.
NOTE 6 – Financial instruments
Financial instruments are measured at fair value and in accordance with level 2 in the fair value
PANDORA COMPANY ANNOUNCEMENT
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25 | 30
hierarchy (IFRS 7), see note 4.3 to the consolidated financial statement in the Annual Report 2014.
NOTE 7 - Business combinations
Preliminary purchase price allocation has been prepared for the business combinations since 1
January 2015 and these might change as they are being finalised within the 12 months following the
individual business combinations. No significant changes are expected.
Acquisitions in 2015
Japan
On 1 January 2015, PANDORA acquired assets related to the distribution of PANDORA jewellery in
Japan from Bluebell in a business combination. In addition to the distribution rights, assets included
1 concept store and 9 shop-in-shops. The acquisition was part of a strategic alliance with Bluebell in
Japan with the intent to jointly distribute PANDORA jewellery in Japan.
The agreement initially has a five-year term. On termination of the agreement, PANDORA will take
over the full distribution of PANDORA jewellery in Japan. The total amount to be paid to Bluebell will
depend on the realised revenue in 2019. The discounted fair value of the earn-out is DKK 58 million.
Intangible assets comprise reacquired distribution rights (with remaining lifespan of approximately
three years) of DKK 30 million. The fair value is based on comparison of peer markets similar to the
Japanese market and the EBITDA that can be expected from similar stores in these markets.
Inventories of DKK 6 million have been measured at market value based on the saleability of the
individual items. Goodwill, DKK 20 million, is attributable to the expected synergies from combining
PANDORA’s willingness and ability to invest in the Japanese market with Bluebell’s in-depth
knowledge of the Japanese retail market, Japanese consumers and insight into the Japanese real
estate market, to build a considerable presence in Japan. None of the goodwill recognised is
deductible for income tax purposes.
Middle East
On 16 January 2015, PANDORA acquired 100% of the shares in Pan Me A/S. Pan Me A/S holds the
rights to distribute PANDORA jewellery in the United Arab Emirates (UAE), Bahrain, Qatar and Oman.
PANDORA has paid the purchase price of DKK 112 million primarily related to the rights to distribute
PANDORA jewellery in the UAE, Bahrain, Qatar and Oman, as well as non-current assets and
inventories related to 11 concept stores and 3 shop-in-shops in the UAE.
Intangible assets comprise reacquired distribution rights (with a remaining lifespan of approximately
one year) of DKK 5 million. The fair value is based on comparison of peer markets and the EBITDA
that can be expected from similar stores in these markets.
Inventories of DKK 25 million have been measured at market value based on the saleability of the
individual items. Receivables mainly consist of prepayments and receivables from sales which are
recognised at the value of the expected cash inflow. Goodwill, DKK 54 million, is attributable to the
expected synergies from PANDORA’s direct involvement in the region and establishing Dubai as the
future hub for PANDORA’s activities in the Middle East and North Africa. None of the goodwill
recognised is deductible for income tax purposes.
UK
On 1 April 2015, PANDORA acquired 100% of the shares in four Evernal companies. The Evernal
companies comprise concept stores in Liverpool, Blackpool, Trafford and Arndale. PANDORA has
paid the purchase price of DKK 70 million. Assets acquired mainly consist of inventory, and other
assets and liabilities relating to the stores. Of the purchase price, DKK 74 million was allocated to
goodwill. Goodwill is attributable to the increased margins from owning these already well
performing stores. None of the goodwill recognised is deductible for income tax purposes.
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Other business combinations in 2015
PANDORA acquired concept stores in the US and Germany in 2015. These were accounted for as
business combinations. Assets acquired mainly consist of inventory and other assets relating to the
stores. Of the purchase price, DKK 34 million was allocated to goodwill. None of the goodwill
recognised is deductible for income tax purposes.
The impact on revenue and net profit for 2015 from the acquired stores was insignificant. If the
stores had been owned from the beginning of the year, the impact on PANDORA’s revenue and net
profit would have been equally insignificant.
Acquisitions 2015
DKK million
Japan
Middle East
UK
Other
Total
Other intangible assets
30
5
-
-
35
Property, plant and equipment
2
7
-
2
11
Other non-current receivables
-
3
3
-
6
Receivables
-
25
5
10
40
Inventories
6
25
5
40
76
Cash
-
21
-
-
21
Assets acquired
38
86
13
52
189
Non-current liabilities
-
1
2
1
4
Payables
-
27
9
1
37
Other non-current liabilities
-
-
6
6
12
Liabilities assumed
-
28
17
8
53
Total identifiable net assets acquired
38
58
-4
44
136
Goodwill arising from the acquisition
20
54
74
34
182
Purchase consideration
58
112
70
78
318
Cash movements on acquisition:
Purchase consideration transferred
-58
-112
-70
-78
-318
Deferred payment (earn out)
58
-
-
-
58
Cash acquired
-
21
-
-
21
Net cash flow on acquisition
-
-91
-70
-78
-239
Cash flow from sale of businesses *
-
-
-
29
29
Net cash flow from business combinations
-
-91
-70
-49
-210
* The sale of business included mainly inventories and goodwill
Acquisitions after the reporting period
China
On 1 July 2015, PANDORA initiated an agreement about joint distribution of PANDORA jewellery in
China until 31 December 2018 with Oracle investment limited (Hong Kong). At the end of the
agreement, PANDORA will take over the full distribution of PANDORA jewellery in China.
Concurrently, the transfer of the existing business commenced. Some stores are operated by Oracle
under consignment agreements until licenses and other sanctions are obtained and therefore
transferable. Meanwhile, control resides by PANDORA.
Assets acquired are mainly inventories, the re-acquired distribution right (0.5 year remaining) and
the stores, inventory and other tangible assets related to leaseholds. The total price is calculated
based on the revenue in 2018 and is expected to be DKK 186 million. Assets and inventories acquired
are paid when transferred. The remaining payment - the earn-out – will be delayed until the
distribution agreement is ended in 2018. Due to the late closing of the acquisition, it has not been
practically possible to prepare the initial accounting for the business combination. The purchase
price allocation for the acquisition will be included in the interim financial report for the third
quarter of 2015.
With the acquisition PANDORA will be able to accelerate the store roll-out, enhance the retail focus
PANDORA COMPANY ANNOUNCEMENT
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27 | 30
and make significant marketing investments in the Chinese market. Oracle will contribute with its in-
depth knowledge of the retail market and the Chinese consumer as well as their insight into the
Chinese real estate market, which will aid PANDORA in securing the most attractive locations.
Distribution in Singapore, Macau and the Philippines
In August 2015, PANDORA entered an agreement with Norbreeze Group (“Norbreeze”) to acquire its
PANDORA store network in Singapore and Macau on 1 January 2016 at the end of the current
distribution agreement. Through the addition of 15 PANDORA concept stores and 5 shop-in-shops in
the two countries, PANDORA have the opportunity to enter Singapore and Macau directly.
PANDORA will at the same time assume the distribution in the Philippines, which will continue to be
operated by a local master franchisee. The payment for the acquisition is SGD 30.1 million
(approximately DKK 149 million). The agreement is subject to certain conditions to be fulfilled. Due
to the subsequent closing date, it is not possible to prepare the accounting for the business
combination.
NOTE 8 - Contingent liabilities
See note 5.2 to the consolidated financial statements in the Annual Report 2014. Leasing
commitments increased by DKK 549 million in the first half of 2015 mainly related to new own and
operated concept stores including the new stores in Germany. Other contingent liabilities are
unchanged.
NOTE 9 – Related parties
Related parties with significant interests
As of 9 June 2015, BlackRock, Inc. has increased its holding of shares in PANDORA to 6,234,764
shares, corresponding to 5.1% of the share capital and the voting rights.
On 30 June 2015, treasury shares represented 2.5% of the share capital.
Other related parties of PANDORA with significant influence include the Boards of Directors and the
Executive Boards of these companies and their close family members. Related parties also include
companies in which the aforementioned persons have control or significant interests.
Transactions with related parties
PANDORA did not enter into any significant transactions with members of the Board of Directors or
the Executive Board, except for compensation and benefits received as a result of their membership
of the Board of Directors, employment with PANDORA or shareholdings in PANDORA.
PANDORA COMPANY ANNOUNCEMENT
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28 | 30
Note 10 – concept store development per country
*
Number of
concept
stores
Q2 2015
Number of
concept
stores
Q1 2015
Number of
concept
stores
Q2 2014
Growth
Q2 2015
/Q1 2015
Growth
Q2 2015
/Q2 2014
Number
of O&O
Q2 2015
Growth
O&O stores
Q2 2015
/Q1 2015
USA
299
290
266
9
33
36
2
Canada
66
63
59
3
7
2
1
Brazil
51
43
22
8
29
31
7
Rest of Americas
31
28
22
3
9
-
-
Americas
447
424
369
23
78
69
10
Russia
179
175
150
4
29
-
-
UK
169
160
131
9
38
9
4
Germany
124
91
72
33
52
110
32
Italy
45
40
29
5
16
16
2
France
44
40
27
4
17
21
1
Poland
37
37
37
-
-
17
1
Spain
32
25
18
7
14
-
-
Belgium
24
24
22
-
2
-
-
South Africa
23
22
17
1
6
-
-
Ireland
20
20
16
-
4
-
-
Netherlands
18
18
13
-
5
18
-
Ukraine
17
17
14
-
3
-
-
Portugal
16
15
14
1
2
-
-
United Arab Emirates
14
14
10
-
4
14
-
Israel
12
11
10
1
2
-
-
Czech Republic
11
10
10
1
1
8
1
Turkey
11
7
5
4
6
11
4
Austria
10
12
11
-2
-1
2
-
Denmark
10
9
7
1
3
10
1
Rest of Europe
66
64
50
2
16
14
3
Europe
882
811
663
71
219
250
49
Australia
96
91
82
5
14
16
1
China
30
29
28
1
2
-
-
Malaysia
21
21
17
-
4
-
-
Hong Kong
20
16
10
4
10
20
4
Singapore
15
15
11
-
4
-
-
New Zealand
10
9
9
1
1
-
-
Rest of Asia Pacific
33
31
25
2
8
2
1
Asia Pacific
225
212
182
13
43
38
6
All Markets
1,554
1,447
1,214
107
340
357
65
*
Includes countries with 10 or more concept stores as of Q2 2015.
PANDORA COMPANY ANNOUNCEMENT
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29 | 30
Quarterly overview
DKK million
Q2 2015
Q1 2015
Q4 2014
Q3 2014
Q2 2014
Consolidated income statement
Revenue
3,598
3,547
3,961
2,845
2,544
Gross profit
2,573
2,522
2,835
1,999
1,798
Earnings before interest, tax, depreciation and amortisation
(EBITDA)
1,311
1,305
1,444
1,020
893
Operating profit (EBIT)
1,235
1,238
1,381
963
841
Net financials
-69
-281
-122
-57
-13
Profit before tax
1,166
957
1,259
906
828
Net profit
910
383
1,007
725
662
Consolidated balance sheet
Total assets
11,781
11,396
10,556
10,354
9,231
Invested capital
7,359
6,235
6,080
6,558
5,851
Net working capital
939
126
434
1,106
729
Net interest-bearing debt (NIBD)
1,030
-330
-1,121
9
-440
Equity
6,097
6,433
7,032
6,361
6,274
Consolidated cash flow statement
Cash flows from operating activities
-93
1,164
1,867
711
637
Cash flows from investing activities
-330
-311
-181
-288
-92
Free cash flow
-268
990
1,705
567
547
Cash flows from financing activities
419
-1,372
-1,010
-435
-662
Net increase (decrease) in cash
-4
-519
676
-12
-117
Growth ratios
Revenue growth, %
41.4%
36.8%
40.4%
26.2%
31.7%
Gross profit growth, %
43.1%
40.8%
47.8%
33.9%
41.1%
EBITDA growth, %
46.8%
39.3%
52.6%
33.8%
68.5%
EBIT growth, %
46.8%
39.6%
55.0%
36.0%
74.1%
Net profit growth, %
37.5%
-45.6%
36.3%
18.5%
53.6%
Margins
Gross margin, %
71.5%
71.1%
71.6%
70.3%
70.7%
EBITDA margin, %
36.4%
36.8%
36.5%
35.9%
35.1%
EBIT margin, %
34.3%
34.9%
34.9%
33.8%
33.1%
Other ratios
Tax rate, %
22.0%
60.0%
20.0%
20.0%
20.0%
Equity ratio, %
51.8%
56.4%
66.6%
61.4%
68.0%
NIBD to EBITDA
*
, x
0.2
-0.1
-0.3
0.0
-0.1
Return on invested capital (ROIC)
*
, %
65.5%
70.9%
67.0%
54.6%
56.9%
Capital expenditure (CAPEX), DKK million
239
167
176
135
86
Cash conversion, %
-29.5%
258.5%
169.3%
78.2%
82.6%
Other key figures
Average number of employees
13,378
11,945
11,177
10,340
9,514
*
Ratios are based on 12 months rolling EBITDA and EBIT, respectively.
PANDORA COMPANY ANNOUNCEMENT
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30 | 30
Disclaimer
Certain statements in this company announcement constitute forward-looking statements. Forward-
looking statements are statements (other than statements of historical fact) relating to future events
and our anticipated or planned financial and operational performance. The words “targets,”
“believes,” “expects,” “aims,” “intends,” “plans,” “seeks,” “will,” “may,” “might,” “anticipates,”
“would,” “could,” “should,” “continues,” “estimate” or similar expressions or the negatives thereof,
identify certain of these forward-looking statements. Other forward-looking statements can be
identified in the context in which the statements are made. Forward-looking statements include,
among other things, statements addressing matters such as our future results of operations; our
financial condition; our working capital, cash flows and capital expenditures; and our business
strategy, plans and objectives for future operations and events, including those relating to our on-
going operational and strategic reviews, expansion into new markets, future product launches,
points of sale and production facilities; and
Although we believe that the expectations reflected in these forward-looking statements are
reasonable, such forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause our actual results, performance or achievements or
industry results, to differ materially from any future results, performance or achievements expressed
or implied by such forward-looking statements. Such risks, uncertainties and other important factors
include, among others: global and local economic conditions; changes in market trends and end-
consumer preferences; fluctuations in the prices of raw materials, currency exchange rates, and
interest rates; our plans or objectives for future operations or products, including our ability to
introduce new jewellery and non-jewellery products; our ability to expand in existing and new
markets and risks associated with doing business globally and, in particular, in emerging markets;
competition from local, national and international companies in the United States, Australia,
Germany, the United Kingdom and other markets in which we operate; the protection and
strengthening of our intellectual property, including patents and trademarks; the future adequacy of
our current warehousing, logistics and information technology operations; changes in Danish, E.U.,
Thai or other laws and regulation or any interpretation thereof, applicable to our business; increases
to our effective tax rate or other harm to our business as a result of governmental review of our
transfer pricing policies, conflicting taxation claims or changes in tax laws; and other factors
referenced in this company announcement.
Should one or more of these risks or uncertainties materialize, or should any underlying assumptions
prove to be incorrect, our actual financial condition, cash flows or results of operations could differ
materially from that described herein as anticipated, believed, estimated or expected.
We do not intend, and do not assume any obligation, to update any forward-looking statements
contained herein, except as may be required by law or the rules of NASDAQ OMX Copenhagen. All
subsequent written and oral forward-looking statements attributable to us or to persons acting on
our behalf are expressly qualified in their entirety by the cautionary statements referred to above
and contained elsewhere in this company announcement.