FINANCIAL INFORMATION FOR THE PERIOD ENDED December … · FINANCIERE IKKS – Financial statements...

FINANCIERE IKKS

FINANCIAL INFORMATION

FOR THE PERIOD ENDED

December 31, 2018

-€k-

Avril 30, 2019

FINANCIERE IKKS – Financial statements for the period ended December 31, 2018

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Table of content

1. FINANCIAL STATEMENTS AS OF DECEMBER 31, 2018 3

1.1. Income Statement as of December 31, 2018 3 1.2. Balance Sheet as of December 31, 2018 4 1.3. Statement of change in Equity as of December 31, 2018 5 1.4. Cashflow statement as of December 31, 2018 5

2. PRESENTATION AND SIGNIFICANT EVENTS 6

2.1. Presentation of the Group 6 2.2. Significant events of the period 6

3. BASIS OF PREPARATION OF THE FINANCIAL INFORMATION 7

3.1. Group organization as at December 31, 2018 7 3.2. Entities included in the scope of consolidation 8 3.3. Accounting principles and methods 9

4. NOTES TO THE FINANCIAL STATEMENTS 15

4.1. Sales breakdown by Brand and Channel 15 4.2. G&A, affiliates commissions, personnel expenses and other external expenses 15 4.3. Financial income / (expenses) 16 4.4. Exceptional income / (expenses) 16 4.5. Income tax 16 4.6. Capex 17 4.7. Consolidated net debt 17 4.8. Intangible assets 18 4.9. Tangible assets 18 4.10. Financial assets 19 4.11. Inventories and work in progress 19 4.12. Trade notes and accounts receivable 19 4.13. Other receivables 20 4.14. Provisions for liabilities and charges 20 4.15. Analysis of shareholder loan and financial liabilities by due date 21 4.16. Accounts payable 21 4.17. Other liabilities 21 4.18. Off-balance sheet commitments 22 4.19. Post-balance sheet events 22


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1. FINANCIAL STATEMENTS AS OF DECEMBER 31, 2018

1.1. Income Statement as of December 31, 2018

Notes Dec. 2018

YTD Dec. 2017

YTD(1)

Sales ............................................................................................................. 4.1 348 974 348 627

Cost of Sales ...................................................................................................... (113 904) (113 195) G&A, affiliates commissions, personnel expenses and other external expenses ..............................................................................................

4.2 (201 348) (194 719)

EBITDA

(2) ...................................................................................................... 33 722 40 713

Net changes in depreciation, provisions and transfers of expenses, other income and expenses .............................................................

(19 799) (28 057)

Operating profit ........................................................................................... 13 923 12 656

Financial income / (expenses) .......................................................................... 4.3 (31 033) (29 559) Exceptional income / (expenses) ....................................................................... 4.4 (8 700) (95 459) Profit before tax ........................................................................................... (25 810) (112 362)

Income tax ......................................................................................................... 4.5 (3 932) (8 751) Goodwill amortization ....................................................................................... - (93 688) Net profit / (loss) .......................................................................................... (29 742) (214 801)

Non-controlling interests .................................................................................. - - Net profit / (loss), Group Share .................................................................... (29 742) (214 801)

(1) After goodwill and trademarks impairment.

(2) EBITDA corresponds to net profit before income taxes; interest expenses and receivables fees; depreciation expenses;

amortization or impairment expenses; other non-cash charges, write-downs or items reducing Net Income and any

extraordinary, exceptional, unusual or nonrecurring items.


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1.2. Balance Sheet as of December 31, 2018

Notes 12/31/2018 12/31/2017(1)

ASSETS

Intangible assets ........................................................................................................ 4.8 248 156 251 096 Tangible assets ........................................................................................................... 4.9 22 483 29 317 Financial assets .......................................................................................................... 4.10 8 923 8 627 Total fixed assets....................................................................................................... 279 562 289 040

Inventories and work in progress .............................................................................. 4.11 80 906 82 660 Trade notes and accounts receivable ........................................................................ 4.12 11 271 12 092 Other receivables ....................................................................................................... 4.13 25 142 36 622 Cash ........................................................................................................................... 30 955 34 230 Total current assets .............................................................................................. 148 274 165 604

TOTAL ASSETS ........................................................................................................... 427 836 454 644

EQUITY AND LIABILITIES

Capital ........................................................................................................................ 123 534 123 534 Reserves ..................................................................................................................... (219 871) (4 998) Profit/ (loss) for the period – Group share ................................................................ (29 742) (214 801) Total shareholders’ equity – Group share ................................................................ (126 080) (96 264)

Equity attributable to non-controlling interests ........................................................ - -

Total shareholders’ equity ........................................................................................ (126 080) (96 264)

Shareholder loan .......................................................................................................

4.15

80 877

74 886

Provisions ..................................................................................................................

4.14

4 230

2 969

Financial liabilities ...................................................................................................... 4.15 387 370 382 062 Accounts payable ....................................................................................................... 4.16 40 749 40 491 Other liabilities .......................................................................................................... 4.17 40 690 50 500 Total liabilities ...................................................................................................... 468 809 473 053

TOTAL EQUITY AND LIABILITIES ................................................................................ 427 836 454 644

(1)

After goodwill and trademarks impairment.


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1.3. Statement of change in Equity as of December 31, 2018

Number of Shares Capital Reserves

Profit / (loss) for

the period

Shareholder’s equity –

Group share

Non-controlling interests

Total Equity

December 31, 2017(1)

................................................................................................. 12 353 390 123 534 (4 998) (214 801) (96 264) - (96 264)

Changes in share capital.............................................................................................. - - - - - Net profit allocation .................................................................................................... (214 801) 214 801 - - - Net profit/ (loss) .......................................................................................................... - (29 742) (29 742) - (29 742) Change in translation reserve ........................................................................................................................ (73) - (73) - (73)

December 31, 2018 .................................................................................................... 12 353 390 123 534 (219 871) (29 742) (126 080) - (126 080)

(1)


1.4. Cashflow statement as of December 31, 2018

12/31/2018 12/31/2017(1)

Net profit ................................................................................................................................ (29 742) (214 801) Elimination of depreciation & provisions ............................................................................... 18 828 203 763 Elimination of changes in deferred taxes ............................................................................... 994 5 995 Elimination of capital gains/losses ......................................................................................... 2 174 (282) Capitalized interests on bond & shareholder loan ................................................................. 27 975 27 147 Effect of change in working capital ........................................................................................ 3 438 (8 225) Net cash inflow / (outflow) from operating activities ....................................................... 23 667 13 597 Capex ...................................................................................................................................... (9 912) (20 465) Investments in non current financial assets .......................................................................... (297) (1 153) Net cash inflow / (outflow) from investing activities ........................................................ (10 209) (21 618) Interests on Bond ................................................................................................................... (10 800) (21 600) Others loans ........................................................................................................................... (1 185) 20 237 Changes in share capital......................................................................................................... - 8 834 Net cash inflow / (outflow) from financing activities ........................................................ (11 985) 7 471

Effect of foreign exchange rate change .................................................................................

(57)

81

Changes in cash statement ............................................................................................... 1 416 (469)

Opening cash position(2)

.........................................................................................................

25 009

25 478 Closing cash position

(2) ........................................................................................................... 26 425 25 009

(1)

After goodwill and trademarks impairment. (2)

Net of overdrafts and commercial paper.


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2. PRESENTATION AND SIGNIFICANT EVENTS

2.1. Presentation of the Group

Group holding company Financière IKKS S.A.S., a société par actions simplifiées was incorporated on June 5, 2014 with the purpose of the acquisition of equity interests in all types of companies, including commercial, industrial and financial, the holding and management of equity investments, and granting loans, advances or guarantees to any entities in which it has direct or indirect equity interest. The Group is a leading international fashion retailer offering a wide range of apparel and accessories that embody a distinct, contemporary and easy-chic aesthetic, fulfilling a broad spectrum of our customers’ lifestyle and wardrobe requirements. The brand portfolio consists of IKKS, the flagship umbrella brand of the Group that targets women, men and juniors, as well as the complementary brands One Step and I.Code that target specific customer groups. The brands appeal to all major demographic categories with a compelling value proposition combining design sophistication, high quality materials, attractive price points and strong distribution capabilities. The Group operates in the premium segment of the ready-to-wear apparel market, comprising apparel with price points between mass market retailers and luxury brands.

2.2. Significant events of the period

Following a breach of its leverage covenant under its Revolving Credit Facility (“RCF”) at the 31-Dec-2017 and 31-March-2018 testing dates, the Group initiated negotiations with its main stakeholders and lenders with a view to finding an agreement to refinance its existing RCF, other short term facilities and provide new liquidity to the Group. All parties involved in the negotiations agreed on a term sheet on December 21, 2018 (the “Term Sheet”) detailing the terms and conditions of the Transaction, including:

- a €70m new money financing, the proceeds of which are aimed at : o refinancing the Group’s existing €33m RCF and some of the bilateral facilities and

overdrafts, o providing cash collateral in relation to L/C facilities, o improving the overall liquidity of the Group;

- a reduction of the Group gross debt of around -€200m, through the restructuring of the existing €320m Senior Secured Notes (“SSNs”);

- a restoration of the Group equity. The terms of the Transaction also provides for an acquisition of the Group by a newly incorporated TopCo, ultimately held by current SSNs holders. All of the operations described above are currently in progress and expected to be fully implemented by end of May 2019.


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3. Basis of preparation of the Financial Information

3.1. Group organization as at December 31, 2018

20%

100%

100%

100%

100%

IKKS MEN SAS (France)

I CODE SAS (France)

ONE STEP SAS (France)

IKKS JUNIOR SAS (France)

IKKS WOMEN SAS (France)

FINANCIERE IKKS SAS (France)

HOLDIKKS SAS (France)

IKKS Italy Srl (Italy)

IKKS Corp. (USA)

IKKS Ltd (UK)

IKKS Belgium SA (Belgium)

IKKS Comercio de Vestuario SA

(Portugal)

IKKS Sportswear Spain (Spain)

IKKS Nederland BV (Netherlands)

IKKS Deutschland GmBH (Germany)

New Creation (Shanghai)

Commercial& Trading Co (China)

IKKS RETAIL SAS (France)

IKKS GROUP SAS (France)

100%

100%

100%

100% 100%

100%

100%

100%

100%

100%

100%

100% 100%

100%

20% 20%

20% 20%

50% 50%

33% 33% 33%

ONESIKKS SNC (France)

UTEK MOD (Ukraine)

NEW CREATION MANUFACTURER Ltd. (Hong Kong)

IKKS PRESTATIONS SNC (France)

IKKS Luxembourg SA (Luxembourg)

100% FOR MEN SA (Luxembourg)

100%

IKKS Switzerland SA (Switzerland)

100%

50% Icon & Partners Ltd (HongKong)

Icon China Retail Ltd (China) 100%


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3.2. Entities included in the scope of consolidation

(1) The Group opened four IKKS Junior stores in China in September 2018, located in Beijing, Shanghai and Tianjin. This project has been completed through the incorporation of a joint venture (with local partner, FUNG Group) established in Hong Kong and named Icon & Partners Ltd. This JV owns a 100% subsidiary established in the form of a Wholly Foreign-Owned Enterprise (WOFE) named China Retail Ltd., in charge of the retail distribution of IKKS Junior products in China.

N° Siren or country Legal form 12/31/2018 12/31/2017

Parent company

Financière IKKS .................................................................................................. 802 825 380 S.A.S. 100 100

Global method

Holdikks ............................................................................................................. 802 825 273 S.A.S. 100 100

IKKS Group ........................................................................................................ 339 899 940 S.A.S. 100 100

I Code ................................................................................................................ 487 648 891 S.A.S. 100 100

IKKS Belgium...................................................................................................... Belgium S.A. 100 100

IKKS Company Corp ........................................................................................... 134 778 013 Corporated 100 100

IKKS Deutschland .............................................................................................. Germany GmBH 100 100

IKKS Italy ............................................................................................................ Italy S.R.L. 100 100

IKKS Junior ......................................................................................................... 479 940 512 S.A.S. 100 100

IKKS Limited....................................................................................................... United Kingdom Limited 100 100

IKKS Men ........................................................................................................... 479 942 567 S.A.S. 100 100

IKKS Netherlands ............................................................................................... The Netherlands B.V. 100 100

IKKS Portugal ..................................................................................................... Portugal S.A. 100 100

IKKS Retail ......................................................................................................... 479 960 965 S.A.S. 100 100

IKKS Sportswear Spain....................................................................................... Spain S.A. 100 100

IKKS Prestations ................................................................................................ France S.N.C. 100 100

IKKS Women ...................................................................................................... 479 960 783 S.A.S. 100 100

New Creation Manufacturer ............................................................................. Hong Kong Limited 100 100

Onesikks ............................................................................................................ 798 998 670 S.N.C. 100 100

Utek Mode ........................................................................................................ Ukraine S.A R.L. 100 100

New Creation (Shanghai) Commercial&Trading Co .......................................... China Limited 100 100

One Step ............................................................................................................ 383 354 156 S.A.S. 100 100

IKKS Switzerland ................................................................................................ Switzerland S.A. 100 100

IKKS Luxembourg .............................................................................................. Luxembourg S.A. 100 100

Formen .............................................................................................................. Luxembourg S.A R.L. 100 100

Proportionate method

ICON & Partners Ltd (1)

...................................................................................... Hong Kong Limited 50 -

ICON China Retail Ltd (1)

.................................................................................... China Limited 50 -


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3.3. Accounting principles and methods

Preparation of the Financial Information

The Consolidated Financial Statements have been drawn up in accordance with the generally accepted accounting principles as applied in France (« French GAAP ») for consolidation within the meaning of CRC regulation 99-02, as amended by CRC regulation 2005-10, ANC n° 2015-07 and ANC n°2016-08. The accounts for the integrated entities, prepared according to the accounting regulations in force in their respective countries, have been re-stated in order to comply with these accounting principles.

Preparing the Financial Information involves including estimates and assumptions by the Group which might affect the accounting value of some assets and liabilities, income and expenses as well as information provided in the Notes to the accounts. Group Management reviews these estimates and assumptions on a regular basis in order to ensure that they are relevant with regard to past experience and the current economic situation. Based on the development of these assumptions, the items shown in future Financial Information may differ from current estimates.

The main estimates and main assessments made by Group Management in preparing the Financial Information relate to the impairment of goodwill and trademarks (Please see Notes D and E.1.).

A. Scope and methods of preparation

The entities included in the scope of activity are consolidated in full in the Financial Information, except for the jointly controlled entities that are consolidated using the proportionate method. (Please see Paragraph - Entities included in the scope of consolidation)

B. Conversion of financial statements and transactions expressed in foreign currencies

Financial statements in foreign currencies

Receivables and liabilities denominated in foreign currencies are converted into Euros at the exchange rate at the end of the period. Profit and loss accounts expressed in foreign currencies are converted into Euros at the average rate for the period.

Translation differences arising from changes between the previous year closing exchange rate and current year closing exchange rate, as well as translation impacts arising from differences between the average exchange rate and closing exchange rate, are booked in translation reserves of consolidated shareholder’s equity.

Foreign currency transactions

According to regulation ANC n°2015-05, transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction. At the end of the period, assets and liabilities are converted into Euros at the closing exchange rate. The difference resulting from the conversion of receivables and payables with the latter rate is recognized in the balance sheet as a translation adjustment.

In case of currency hedging, unrealized exchange gain/loss on the hedging instrument is recorded in the balance sheet and recognized in the income statement in the same period(s) in which the hedged transaction affects profit or loss.

Unrealized foreign exchange losses not offset by hedges are subject to a provision for risk.


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Restatement of accounts

The Financial Statements for the companies within the scope of preparation have, as appropriate, been adjusted or restated to ensure standardization of the company accounts which have been included, to neutralize inter-company transactions and to comply with generally accepted principles of consolidation. Restatement of deferred taxation

Deferred taxation has been measured according to the ‘Extended Concept’ and ‘Liability’ methods. Temporary differences arising from the comparison of carrying value and the taxation value of an asset or a liability and restatement in consolidation are subject to a deferred tax calculation.

Deferred Tax assets are accounted for where the probability of recovery of these assets over the following years is reasonable. They are valued at each accounting year-end.

Deferred Tax assets and liabilities within the scope of tax consolidation are offset in the Consolidated Balance Sheet. Intercompany transactions

Significant inter-company transactions including assets and liabilities between companies fully integrated are eliminated. Transactions with companies consolidated by equity accounting or proportionally consolidated have been eliminated up to the percentage of shares held by the Group in these companies.

The elimination of inter-company transactions in foreign currencies has been done on the basis of amounts converted into Euros. C. Goodwill

At the time of taking control in a new company, the identifiable assets and liabilities of the subsidiary acquired are recognized in the Balance Sheet at the fair value at that date. These assets and liabilities follow the rules relating to the Balance Sheet account to which they are allocated.

As appropriate, any residual difference between the cost of acquisition of shares and that share of the net assets as re-valued is recognized as an asset under ‘‘Goodwill’’, and amortized on a straight-line basis over 20 years.

At least once a year, an impairment test is performed to ensure that the fair value of goodwill, estimated using the discounted cash-flow method, is at least equal to its book value. If necessary, a provision is booked to reduce the book value of the goodwill to its fair value. D. Fixed assets

E.1. Intangible assets

Intangible assets, other than Goodwill, essentially represent the value of IKKS Group trademarks and attached rights, store ongoing business concerns and leasehold rights, and development costs.

The Group trademarks include “IKKS”, “Icode” and “One Step” brands. These trademarks and inherent rights have been measured at their fair value at the date of IKKS Group acquisition. An impairment test is performed annually using the royalty method.


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Ongoing business concerns, leasehold rights and entry rights are measured at their cost of acquisition, including all directly attributable cost of preparing the asset for its intended use. An impairment test is performed annually on the basis of criteria relating to sales, estimated commercial value of the investment, profitability and acquisition value according to methods generally used in the professional sector. According to the preferential method recommended by Regulation CRC 99-02, development costs are capitalized in balance sheet. Development costs of software are recognized in assets when the technical feasibility of the project and the utility for the company are demonstrated, when the necessary resources for its achievement are deployed and when the related costs are separately identified and reliably measured. Creation costs, including design staff costs, model costs and other creation expenses related to future seasons, are also capitalized in development costs and amortized on a straight-line basis over one year.

E.2. Tangible assets

Tangible assets are presented in the Consolidated Financial Statements at their cost of acquisition or their transfer value. Upon the first recognition of a fixed asset, the company determines whether it should show one or more individual components justifying a term or rate of depreciation that might be different to those for the fixed assets as a whole. Thus, major renovation work in stores is shown separately from shop-fitting and decoration and depreciated over different terms.

E.3. Financial assets

The gross value of shares held in companies that have not been integrated in the scope of preparation and other shares capitalized in the Balance Sheet are stated at their cost of acquisition. An impairment provision is made where carrying value is lower than the cost of acquisition. E. Depreciation

Charges for depreciation on fixed assets are calculated according to their useful life according to either a straight line or reducing balance method complying with rates that are acceptable for tax purposes. The lengths of depreciation are reviewed and changed in the event of material change; these changes are applied prospectively. Depreciation is on the basis of normal useful life as follows:

Trademarks and similar rights Not depreciated

Capitalized creation costs 1 year

Softwares (including IT development costs) 1 to 10 years

Buildings 20 to 40 years

Shop-fitting 5 to 10 years

Plant, machinery and tools 3 to 10 years

Motor Vehicles 4 to 5 years

Office and computer equipment 3 to 10 years

Office furniture 5 to 10 years

Depreciation may be stated on the basis of actual value of assets as assessed on the basis of their market value and their value in use within the Group.


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F. Inventories and work in progress

Raw materials and other supplies are measured on the basis of their cost of acquisition (purchase price increased by related costs), on a first in-first out (FIFO) basis. Finished products include the cost of raw materials and supplies that have been included increased by the cost of subcontract or direct labour according to the stage of production, increased by indirect general production expenses and manufacturing royalties relating to trademarked products. Raw materials and finished products are impaired on the basis of their probable selling value at the year-end date. G. Trade notes and other receivables

These are measured at their nominal value and are subject to independent assessment on a case-by-case basis on the basis of the risk of non-recovery. A factoring facility agreement has been signed since end of 2017 with CM-CIC FACTOR. The purpose of this contract is to finance receivables held by the Group on its wholesale customers by anticipation of their maturity. At the end of the period, the amount transferred under this factoring program is recorded in deduction of trade receivables. H. Deferred charges and prepayments

Premiums paid upon setting up within shopping centers are recognized in prepayments where they

relate to an addition to rents. They are then depreciated over the length of the lease.

Expenses relating to the issue costs of loans are amortized over the term of the contracts. I. Provisions for liabilities and charges

Provisions for liabilities and charges are to cover liabilities and charges that are made probable by events that have occurred or are occurring whose subject is precise but whose completion is uncertain. J. Retirement pension benefits

Commitments relating to retirement pension benefits include rights acquired by employees updated on the basis of actuarial assumptions such as: increases in employees, age at the start of retirement, mortality, staff rotation and discounting rate. These assumptions take into account special conditions in particular macro-economic situations in the various countries in which the Group operates.

Provision for these commitments are booked and updated annually to reflect the evolution of main parameters. Actuarial gains and losses are directly recognized in the Income Statement.


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K. Taxation

The total tax liability comprises total corporation tax based on the profits of the Group taxable subsidiaries for the 12-months period ended December 31, 2018.

Since end of 2016, a new tax-consolidation agreement has been signed between IKKS Invest (as the ultimate head company of the tax group) and its indirect French subsidiaries (as tax-consolidated companies), whereby tax-consolidation savings benefit to the ultimate parent company. L. Tax credit for competiveness or employment

The Group recognizes French Tax credit for competiveness and employment (Crédit d’Impôt pour la Compétitivité et l’Emploi or CICE) as a deduction of staffs costs.

It is primarily used for investments, prospecting new markets, and strengthening working capital. M. Cash

The ‘‘Cash’’ account comprises cash and bank balances, including cash collateral related to L/Cs facilities. N. Presentation of the income statement

O.1. EBITDA

EBITDA corresponds to net profit before income tax, interest expense and receivables fees, depreciation expenses, amortization or impairment expense, other non-cash charges, write-downs or items reducing net income.

EBITDA is not a measurement of performance under French GAAP or any other internationally accepted accounting principles. As a non-GAAP measure, it has limitations as an analytical tool, and it should not be considered in isolation, or as a substitute for analysis of our results of operations or financial condition as reported under French GAAP as set forth in our Financial Information. Some of these limitations related to EBITDA are:

• EBITDA does not reflect the cash expenditures or future requirements for capital commitments; • EBITDA does not reflect changes in, or cash requirements for, the working capital needs; • EBITDA does not reflect the interest expense or cash requirements necessary to service interest or

principal payments on the debt; • EBITDA does not reflect any cash income and certain other taxes that may be required to pay; • assets are depreciated or amortized over differing estimated useful lives and often have to be

replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; • other companies in the industry may calculate EBITDA differently, limiting their usefulness as

comparative measures.

Because of these limitations, EBITDA should not be considered as measures of discretionary cash available to the Group to invest in the growth of the business or as measures of cash that will be available to the Group to meet its obligations. EBITDA may be used by different companies for different purposes and are often calculated in ways that reflect the circumstances of those companies. Therefore, EBITDA as shown herein may not be comparable to similarly-titled measures used by other companies. EBITDA may not be indicative of the Group’s historical operating results, nor it is meant to be predictive of potential future results.


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O.2. Operating loss/profit

The operating profit reflects the EBITDA after the costs of operating assets.

O.3. Financial income/(expenses)

Financial income / (expenses) comprises : • the costs or income from interest on loans, other financial liabilities and loans and debtors; • profits or losses on exchange on financial transactions • charges / write-backs of financial provisions.

O.4. Exceptional income/(expenses)

Net exceptional income and expenditure comprises capital gain and losses on sales of fixed assets and any income or expenditure which by their nature, occurrence or material nature are not day-to-day activities of the Group.


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4. NOTES TO THE FINANCIAL STATEMENTS

4.1. Sales breakdown by Brand and Channel

4.1.1. Net sales by channel

12/31/2018 12/31/2017

Retail stores ...................................................................................................... 268 270 266 177 Wholesale and franchisee and licensee ............................................................ 31 041 37 860 Corners .............................................................................................................. 19 563 19 580 Outlet/destockage ............................................................................................ 30 100 25 010

Net Sales Total ............................................................................................. 348 974 348 627

4.1.2. Net sales by brand

12/31/2018 12/31/2017

IKKS (Women, Men, Junior) .............................................................................. 268 200 265 594 I CODE ............................................................................................................... 19 177 18 339 X AND O ............................................................................................................. 26 293 25 969 ONE STEP ........................................................................................................... 35 304 38 725

Net Sales Total ............................................................................................. 348 974 348 627

4.2. G&A, affiliates commissions, personnel expenses and other external expenses

This line is mainly composed of rents (branch network), and commissions for affiliations (network of affiliated boutiques), IT costs, advertising and publishing expenses. It also includes various fees and overheads.

12/31/2018 12/31/2017

General and administrative expenses ............................................................................... (66 782) (62 553) Sales forces ....................................................................................................................... (48 803) (49 940) Affiliates commissions ...................................................................................................... (42 771) (42 455) Other personnel expenses ................................................................................................ (20 377) (17 874) Logistics ............................................................................................................................ (10 435) (10 089) Transport on sales ............................................................................................................ (7 534) (7 283) I.T. ..................................................................................................................................... (4 646) (4 525)

G&A, affiliates commissions, personnel expenses and other external expenses ...........................................................................................................................

(201 348)

(194 719)


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4.3. Financial income / (expenses)

The financial income/ (expenses) mainly relates to expenses generated by the medium and long term debt for €27.9m.

4.4. Exceptional income / (expenses)

Exceptional income/ (expenses) are made up of:

• Capital losses on disposal of assets for €(2.1)m • Severance pay for €(0.9)m • Store closure costs for €(0.2)m • Other non-recurring expenses for €(5.7)m, mainly composed of restructuring fees.

4.5. Income tax

Since end of 2016, a new tax-consolidation agreement has been signed between IKKS Invest (as the ultimate head company of the tax group) and its indirect French subsidiaries (as tax-consolidated companies), whereby tax-consolidation savings benefit only to the ultimate parent company.

12/31/2018 12/31/2017

Current income tax .................................................................................................... (2 938) (2 756)

Deferred tax ............................................................................................................... (994) (5 995)

Income tax ................................................................................................................. (3 932) (8 751)


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4.6. Capex

12/31/2018 12/31/2017

Openings .................................................................................................................... 1 583 9 053 Refurbishments & maintenance ................................................................................ 1 182 3 270 E-Shop ........................................................................................................................ 1 070 883 Headquarters - IT ....................................................................................................... 2 660 2 730 Creation costs ............................................................................................................ 5 436 6 109

Total CAPEX before disposals ................................................................................... 11 931 22 045

Disposals…………………………………………………………………………………………. (2 018) (1 580)

Total CAPEX after disposals ...................................................................................... 9 913 20 465

4.7. Consolidated net debt

12/31/2018 12/31/2017

Cash ...........................................................................................................

30 955 34 230

Bank overdrafts .........................................................................................

(780) (6 471)

Commercial paper ..................................................................................... (3 750) (2 750)

Revolving credit facility ..............................................................................

(33 000) (33 000)

Bank loans ..................................................................................................

(8 579) (9 785)

Other ..........................................................................................................

(177) (156)

Operational net debt .............................................................................

(15 331) (17 932)

Bonds .........................................................................................................

(320 000) (320 000)

Accrued interests on bonds ....................................................................... (21 084) (9 900)

Other ..........................................................................................................

- -

Other debts............................................................................................

(341 084) (329 900)

Consolidated net debt ...........................................................................

(356 415) (347 832)


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4.8. Intangible assets

Goodwill

Develop. Costs

Brands and other rights

Leasehold rights and Ongoing business concerns

Total

Gross values

December 31, 2017 ................................ 106 455

18 548 261 063

82 327

468 393

Acquisitions ............................................... - 6 337 961 314 7 612

Disposals ................................................... - (2 823) - (2 740) (5 563)

Other ......................................................... - - (1) 18 17

December 31, 2018 ................................ 106 455 22 062 262 024 79 919 470 460

Amortizations and provisions


.............................. (106 455)

(12 572) (90 940)

(7 331)

(217 298)

Depreciations and amortization ................ - (6 504) (1 190) (1 579) (9 273)

Reversal on disposal .................................. - 2 824 - - 2 824

Reversal on provision ................................ - - - 1 443 1 443

Other ......................................................... - - - - -

December 31, 2018 ................................ (106 455)

(16 252) (92 130) (7 467) (222 304)

Net values


.............................. -

5 976 170 123

74 996

251 096

December 31, 2018 ................................ - 5 810 169 894 72 452 248 156

(1)


4.9. Tangible assets

Fittings, installations

and equipment

Other tangible assets Total

Gross values

December 31, 2017 ..................................................................................................... 8 298 70 654 78 952

Acquisitions ................................................................................................................. 162 2 362 2 524 Disposals ..................................................................................................................... (398) (3 483) (3 881) Other ........................................................................................................................... 13 13

December 31, 2018 ..................................................................................................... 8 062 69 545 77 607


December 31, 2017 ..................................................................................................... (5 717) (43 918) (49 635)

Depreciations and amortization .................................................................................. (741) (7 927) (8 669) Reversal on disposal .................................................................................................... 295 2 402 2 697 Reversal on provision .................................................................................................. - 489 489 Other ........................................................................................................................... - (7) (7)

December 31, 2018 ..................................................................................................... (6 163) (48 961) (55 124)

Net values December 31, 2017 ..................................................................................................... 2 581 26 736 29 317

December 31, 2018 ..................................................................................................... 1 899 20 585 22 483


19

4.10. Financial assets

Long term investment

(non current)

Loans, security and other

receivables

Total

Gross values

December 31, 2017 ............................................ 262

8 364

8 627

Acquisitions........................................................... - 705 705

Disposals ............................................................... - (409) (409)

Other ..................................................................... -

December 31, 2018 ............................................ 262 8 660 8 923


December 31, 2017 ............................................ -

-

-

Depreciations and amortization ........................... -

-

-

Reversals ............................................................... -

-

-

Other ..................................................................... -

-

-

December 31, 2018 ............................................ -

-

-

Net values

December 31, 2017 ............................................ 262

8 364

8 627

December 31, 2018 ............................................ 262 8 660 8 923

Long term loans are mainly composed of loans granted to personnel in the framework of the contribution to building work. Other financial assets are mainly composed of deposits.

4.11. Inventories and work in progress

12/31/2018 12/31/2017

Raw material and other consumables ........................................................

4 628 4 411

Work-in-progress ........................................................................................

4 834 5 420

Finished/semi-finished goods .....................................................................

89 596 90 295

Inventories and work in progress - Gross value ......................................

99 058 100 126

Depreciations ..............................................................................................

(18 152) (17 466)

Inventories and work in progress - Net value .........................................

80 906 82 660

4.12. Trade notes and accounts receivable

12/31/2018 12/31/2017

Trade receivables (1)

......................................................................................

12 685 12 672

Doubtful receivables .....................................................................................

433 485

Trade receivables - Gross value ................................................................

13 118 13 157

Allowance for doubtful .................................................................................

(1 847) (1 065)

Trade receivables - Net value ...................................................................

11 271 12 092

(1) Excluding receivables transferred under factoring program (€4.9m as at December 31, 2018), and including Bartering receivables (€3.2m).


20

4.13. Other receivables

12/31/2018 12/31/2017

Advances and down payments paid to suppliers ..........................................

2 278 3 124

Personnel and social benefits – debtors ........................................................

540 502

Tax receivables (incl. Inc. tax) ........................................................................

12 069 18 517

Deferred tax assets (1)

....................................................................................

30 1 503

Deferred charges (2)

.......................................................................................

3 295 4 776

Prepaid expenses ...........................................................................................

2 453 2 709

Exchange difference – debtors ......................................................................

394 856

Other (3)

..........................................................................................................

4 083 4 635

Other receivables - Gross amount .............................................................

25 142 36 622

Depreciations .................................................................................................

- -

Net value ..................................................................................................

25 142 36 622

(1) Analysis of net deferred tax position is presented below:

12/31/2018 12/31/2017

Deferred tax assets ................................................................................

30 1 503

Deferred tax liabilities............................................................................

(2 727) (3 204)

Net deferred tax assets ......................................................................

(2 697) (1 701)

Losses carried forward ...........................................................................

- 450

Timing difference ...................................................................................

1 306 1 215

Other restatements ...............................................................................

(4 003) (3 366)

Other restatements resulting in the recognition of deferred tax mainly comprises elimination of

internal profits and losses, valuation differences and standardization restatement of foreign

subsidiary accounts.

(2) Deferred charges correspond to the issue costs of the loans contracted in July 2014, which are

amortized over the term of the contract.

(3) Including Factor receivables: €3.2m as at December 31, 2018.

4.14. Provisions for liabilities and charges

12/31/2018 12/31/2017

Retirement indemnities .............................................................................

1 380 1 294

Provisions for litigations ............................................................................

755 929

Other provisions for charges ..................................................................... 2 095 746

Provisions for liabilities and charges ......................................................

4 230 2 969


21

4.15. Analysis of shareholder loan and financial liabilities by due date

12/31/2018

Less than 1

year Between 1 and 5 years

More than 5 years

Shareholder loan ..............................................................

80 877

-

80 877

-

Bond .....................................................................................

320 000

-

320 000

-

Accrued interests on bonds .................................................

21 084

21 084

-

-

Revolving credit facility ........................................................

33 000

33 000

-

-

Bank loans ............................................................................

8 579

4 576

4 003

Commercial paper ............................................................... 3 750 3 750

Bank overdrafts ...................................................................

780

780

-

-

Other ....................................................................................

177

177

-

-

Financial liabilities ............................................................

387 370

63 367

324 003

-

4.16. Accounts payable

12/31/2018 12/31/2017

Trade payables ............................................................................................

40 116 37 957

Fixed assets payable ...................................................................................

633 2 534

Accounts payables .................................................................................

40 749 40 491

4.17. Other liabilities

12/31/2018 12/31/2017

Advance and down payments received from clients ..................................

3 409 3 690

Personnel liabilities ......................................................................................

12 290 12 746

Tax liabilities (incl. Inc. tax) ..........................................................................

10 773 9 590

Deferred tax liabilities..................................................................................

2 727 3 204

Other liabilities ............................................................................................

10 974 20 500

Prepaid income and accruals ....................................................................... 90 92

Exchange difference – creditors ..................................................................

427 678

Other liabilities .......................................................................................

40 690 50 500


22

4.18. Off-balance sheet commitments

Off-balance sheet commitments related to the subsidiaries of Financière IKKS consist mainly in:

• Guarantees and security given in consideration for the occupation of group premises.

• Guarantees by affiliates.

In addition to the above commitments, guarantees have been given by the Group and its

subsidiaries, within the framework of the financing established in July 2014, in order to secure the

€320 million bond loan as well as the revolving credit facility amounting €33 million. These

guarantees are made of personal guarantees as well as the pledge of securities account, french bank

accounts and receivables of the following companies : Financière IKKS (personal guarantees, bank

accounts and receivables), Holdikks, IKKS Group, IKKS Retail, IKKS Men, IKKS Women et IKKS Junior.

4.19. Post-balance sheet events

Refer to § 2.2 Significant events of the period.

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