DGAP-News: Adler Modemärkte AG: Substantial Improvement of EBITDA Expected in Second Half of 2020

Press Release from Adler Modemärkte AG

COVID-19 Weighs Heavily on H1 - Demand Gradually Bounces Back

Substantial Improvement of EBITDA Expected in Second Half of 2020
Sound Liquidity of €44.4 Million - Strategic Measures Initiated

Haibach (near Aschaffenburg), 6 August 2020: After Adler Modemärkte AG secured substantial financing commitments in May, of which the Company has thus far drawn down approximately €20 million, the Group reported sound liquidity of €44.4 million as at 30 June 2020. The Group can use these funds and the more than €40 million remaining under the syndicated loan, which has been granted on the basis of guarantees issued by state governments, to take the strategic actions necessary to emerge stronger from the COVID-19 crisis. In this regard, ADLER aims to unlock substantial revenue potential by establishing a new ADLER community and thus expanding its service offering, by pursuing cooperation deals and by efficiently leveraging the wealth of the CRM data from the approximately 9 million customer loyalty cardholders. ADLER is also looking to significantly increase the revenue it generates online, to exceed the currently projected €30 million, by leveraging the available CRM data, tapping into new customer groups, introducing new business models and further expanding its internationalisation efforts. In addition, the Group's efforts to digitalise every link of the value chain are expected to result in higher revenue and greater cost efficiency. ADLER is also striving to become significantly more profitable by substantially streamlining its structures and organisation, in particular at headquarters, and by ramping up its existing store optimisation programme. The latter will include appropriate cooperation arrangements and greater flexibility in store investments. In the next quarters, the focus of the management will also be on improving cash flows and working capital.

Closure of all stores due to COVID-19 pandemic leaves a lasting mark
As expected, the official order to close all 171 stores for several weeks in response to the COVID-19 pandemic had a massive impact on the KPIs in the first half of the year. Revenue amounted to €138.1 million, more than 40% below the €236.0 million generated in the prior-year period. Although ADLER offset some of the negative cost effects by taking advantage of working time accounts and short-time working hours, the Company reported a significant drop in earnings before interest, taxes, depreciation and amortisation (EBITDA) from €25.0 million to €-19.7 million. In light of the likely performance of individual stores going forward, especially in the wake of the COVID-19 pandemic, impairment losses amounting to €5.8 million on fixed assets were recognised in the first half of the year. Accordingly, the consolidated net loss of €-49.4 million was well below the consolidated net loss of €-4.9 million generated in the prior-year period.

Financing commitments secure financial position and cash flows for the long term
The impact of the COVID-19 pandemic on operations is also reflected in the statement of financial position and cash flows. As total assets decreased significantly from €409.4 million as at 31 December 2019 to €380.7 million, equity declined from €66.1 million at the end of 2019 to €16.6 million as at 30 June 2020 and the equity ratio fell from 16.1% to 4.4% on account of the drop in earnings. The equity ratio of the ADLER Group's parent company remained significantly above 40%. The in total €69 million in financing commitments negotiated in May 2020 secured the Company's funding for the long term. After six months, free cash flow amounted to €-24.8 million, also far below the €22.5 million in the prior-year period.

Demand rises and EBITDA improves significantly in second half of the year
On 18 March 2020, due to the impact of the COVID-19 pandemic on its operating performance, ADLER retracted its original outlook for financial year 2020 (consolidated revenue roughly in line with prior year at approximately €495 million, EBITDA between €66 million and €69 million). On account of the health and safety and hygiene-related restrictions resulting from the pandemic, customer spending has not yet bounced back to prior-year levels after all stores gradually re-opened between the end of April and mid-May. Provided that the pandemic does not flare up again and no further restrictions need to be imposed, Adler Modemärkte AG's Executive Board expects revenue for the months from July to December not to be on par with the prior-year figures. Revenue is expected to increase gradually over the remainder of the year. Depending on ADLER's ability to place the inventories not sold off in the first half of the year and to remain as flexible and efficient as possible in managing its costs, EBITDA for the second half of 2020 is expected to improve significantly compared to the first half of the year. An outlook is currently not possible. From today's perspective, there should be no further losses in 2020 of the same magnitude as the impairments reported for the first half of the year in respect of fixed assets written off. After-tax earnings are projected to be significantly in the red, given the weak performance in the first six months of the year. For the remainder of the year, the management will focus on securing the Company's liquidity and cash flows, and significantly improving its equity.

The report on the first half of 2020 can be downloaded at https://www.adlermode-unternehmen.com/investor-relations/reports-and-publications/financial-reports/2020/.

ADLER Group's key performance indicators

Adler Modemärkte AG press enquiries and investor relations:
Peter Dietz
Media and Investor Relations
Tel.: +49 6021 633 1828
E-mail: [email protected]

About Adler Modemärkte AG:
Adler Modemärkte AG, headquartered in Haibach near Aschaffenburg, Germany, is one of Germany's largest and most important textile retailers. In 2019, the Group generated revenue of €495.4 million and EBITDA of €70.3 million. As at 31 December 2019, ADLER employed a workforce of around 3,600 and currently operates 171 stores, 142 of which are located in Germany, 24 in Austria, three in Luxembourg, two in Switzerland, plus an online shop. The Company focuses on large-space concepts offering in excess of 1,400 m² of retail space. With its many own brands and select external brands, ADLER offers a highly diverse product range. Thanks to more than 70 years of tradition and strong customer loyalty, ADLER considers itself to be the market leader within its target group of affluent customers aged 55 and over.
For more information: www.adlermode-unternehmen.com; www.adlermode.com