Charles Vögele Group significantly improves results

Clothing retailer Charles Vögele Group has achieved, and in some cases exceeded, its operational objectives for the 2003 financial year. Net debt was cut by CHF 149.8 million to CHF 282.0 million, while at the same time the equity capital base was improved from 32% to 41 %. The scaling down of inventories proceeded as planned. The operating result - EBITDA - of CHF 171.9 million was slightly above expectations. Group earnings more than doubled to CHF 37.5 million (previous year CHF 15.9 million). Owing to the satisfactory overall business performance in 2003, the Board of Directors is proposing to the General Meeting that a dividend of CHF 1.00 be paid on each share.

Slower decline in sales and better results Improving profitability continued to be Charles Vögele Group's main priority in the 2003 financial year. The operating result - EBITDA - was CHF 171.9 million (previous year CHF 165.4 million). Earnings before interest and taxes (EBIT) went up to CHF 99.7 million (previous year CHF 97.2 million). Group earnings more than doubled to reach CHF 37.5 million (previous year CHF 15.9 million).

Reflecting market development, net revenue was down 5.6% year-on-year (2002: - 8.1%) to CHF 1'415 million (2002: CHF 1'499 million). This decline was kept in bounds thanks not least to improved sales in all markets in the second half of the year. At CHF 825.7 million, gross profit was slightly lower than in 2002 (CHF 834.0 million). However, thanks to sustained efficiency gains and attractive collections, gross profit margins improved further from 55.7% in 2002 to 58.4% in the year under review.

Cash flow established at a high level, loans repaid early Concerted efforts to reduce inventories were continued during the year, resulting in a CHF 65.7 million fall in stocks of merchandise from the current and previous seasons, from CHF 314.0 million in 2002 to CHF 248.3 million in 2003. It should also be noted that that inventories at end-2003 already included new items for the 2004 spring-summer collection worth more than CHF 57.1 million, meaning that the stock of new merchandise was 72% higher than the previous year's CHF 33.2 million.

Thank to this efficient reduction of inventories and the continuing healthy level of operating earnings, cash flow remained at a high level, reaching CHF 190.5 million (previous year CHF 198.9 million). Owing to the focused expansion policy, investment volumes fell to CHF 18.5 million (previous year CHF 30.5 million). As a result, free cash flow rose to CHF 172.0 million (previous year CHF 168.4 million). Net debt was reduced by CHF 149.8 million to CHF 282.0 million. All loan tranches due in the year under review were repaid early. The capital repayments of CHF 75.0 million planned for 2004 have also already been made. The equity ratio rose from 32% in the previous year to 41%.

Profitability of sales organizations increases Despite declining net revenues in the sales organizations (apart from Austria +1.6%), EBITDA improved at the Group level. While in Switzerland this figure, at CHF 77.1 million, remained below the previous year's record level (CHF 90.4 million), all the other markets made an improvement on their 2002 results. In Germany, EBITDA improved from CHF 0.1 million to CHF 8.2 million.

Reinhard: "Solid foundations" Daniel Reinhard, CEO of the Charles Vögele Group, expressed his satisfaction with the results: "Vögele clients have appreciated our fresh image and well thought-out collection, and this in turn has had a positive impact on our overall business performance. Today's Charles Vögele Group stands on solid foundations."

Outlook Charles Vögele Group does not expect to see a marked improvement in consumer sentiment or a revival of consumption levels in the clothing sector during the 2004 financial year. An even better market performance, consistent collections and intensive marketing will help to further reduce the decline in sales. The company should be able to maintain the level of operating earnings (EBITDA) recorded in 2003. Charles Vögele Group will continue to pursue its selective expansion policy this year. In parallel with efforts to strengthen sales, the company is concentrating on the implementation of its Supply Chain Management Project, which is set to generate further improvements in earnings from the 2005 financial year onwards.