No. 65

COMPANY ANNOUNCEMENT

6 November 2012

 

 

 

Interim report for Q3 2012

 

GROUP REVENUE WAS DKK 1,794 MILLION. EBITDA MARGIN WAS 28.0%. NET PROFIT WAS DKK 380 MILLION. STOCK BALANCING CAMPAIGN LARGELY CONCLUDED. UPDATED FINANCIAL OUTLOOK

 

During Q3 2012 PANDORA continued to execute on the stock balancing campaign as planned. The stock balancing campaign is now largely concluded. The Group revenue in this interim report is slightly better than previously anticipated due principally to positive foreign exchange developments, but, as expected, adversely impacted by the effect from the stock balancing campaign launched in Q1 2012. Please see PANDORA's Annual report for 2011 for a full description of the stock balancing campaign.

 

In Q3 2012, PANDORA received returns of discontinued products with a wholesale value of DKK 86 million, and replaced DKK 127 million. In 2012 PANDORA has received returns of discontinued products of DKK 609 million, and replaced DKK 599 million. 

 

• Group revenue increased by 14.3% in Q3 2012 to DKK 1,794 million compared to DKK 1,569 million in Q3 2011:
• Americas increased by 21.9% (9.5% in local currency)
• Europe increased by 13.1% (11.0% in local currency)
• Asia Pacific decreased by 10.7% (17.3% in local currency)
• Branded revenue as percentage of total revenue increased to 81.3% (73.6% in Q3 2011)

 

• Gross margin was 64.1% in Q3 2012 (73.6% in Q3 2011)

 

• EBITDA margin was 28.0% in Q3 2012 (34.2% in Q3 2011), EBITDA decreased by 6.2% to DKK 503 million

 

• EBIT margin was 25.8% in Q3 2012 (32.2% in Q3 2011), EBIT decreased by 8.5% to DKK 463 million

 

• Net profit increased by 11.4% to DKK 380 million in Q3 2012 (DKK 341 million in Q3 2011).

 

• Free cash flow was DKK -88 million in Q3 2012 (DKK 37 million in Q3 2011)

 

updated Financial outlook for 2012

PANDORA expects revenue for 2012 to be above DKK 6.3 billion (from previously guided above DKK 6 billion), a gross margin in the mid 60's and EBITDA margin in the mid 20's (from previously guided low 20's).

 

PANDORA expects CAPEX to be around DKK 250 million (from previously guided DKK 300 million) and an effective tax rate of 18%.

 

PANDORA's revenue assumption is based on the expectation of approximately 200 new Concept stores in 2012. PANDORA expects to open approximately 100 (down from previously 135) new Concept stores and Shop-in-Shops in its key new markets (Italy, France, Russia and Asia) during the course of 2012. The main reason for the deviation is a more selective roll-out approach in Other Asia, as a consequence of our on-going business review of this region.

 

 

CEO Björn Gulden, said:

 

"I am happy to report that we continue to perform in line with our "18 months turn-around plan". Third quarter developed even a little better than we expected and we have, based on the tailwind from the currency development, decided to slightly upgrade our revenue guidance.

 

One of our major initiatives "The stock balancing campaign" was continued, mainly impacting the US and 3^rd party distribution, during Q3 2012. We have now largely concluded the campaign and it will, as communicated earlier, be finished by end of 2012.

 

The other major initiative in 2012 was the realignment of price and product architecture. We already reported that the product launched in Spring Summer performed well based on Sales in to all channels and Sales out from Concept stores. I can now report that this trend is continuing and that the replenishment of these products was much higher in Q3 than it was last year.

 

During Q3 we also launched the Autumn part of the Autumn/Winter 2012 collection, and it is encouraging to see that both sales in to all channels and sales out from Concept stores have been materially better than last year. Additionally, the Christmas drop of the Autumn/Winter 2012 collection has been very well received by our retailers.      

 

I am also happy to see that, even in a difficult retail environment, our major markets have all positive or improved like-for-like sales out in the Concept stores.

 

The year is not yet finished. We have our most important quarter to come, but we feel confident that our improved product, our lower prices and our other operational improvements will put us in the position of achieving our updated financial goals for the full year."

 

 

CONFERENCE CALL

A conference call for investors and financial analysts — hosted by CEO Björn Gulden and CFO Henrik Holmark — will be held today at 10.00 CET and can be accessed from our website: www.pandoragroup.com. The corresponding presentation will be available on the website one hour before the call.

 

The following numbers can be used by investors and analysts:

DK: +45 3272 7625

UK (International): +44 (0) 1452 555 566

US: +1 631 510 7498

 

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 50265212 when dialling into the conference.

 

ABOUT PANDORA
PANDORA designs, manufactures and markets hand-finished and modern jewellery made from genuine materials at affordable prices. PANDORA jewellery is sold in more than 65 countries on six continents through approximately 10,000 points of sale, including more than 800 Concept stores.

Founded in 1982 and headquartered in Copenhagen, Denmark, PANDORA employs over 6,000 people worldwide of whom 4,000 are located in Gemopolis, Thailand, where the Company manufactures its jewellery. PANDORA is publicly listed on the NASDAQ OMX Copenhagen stock exchange in Denmark. In 2011, PANDORA's total revenue was DKK 6.7 billion (approximately EUR 893 million). For more information, please visit www.pandoragroup.com.

 

 

CONTACT

For further queries, please contact:

 

INVESTOR RELATIONS Morten Eismark, VP Group Investor Relations Phone +45 3673 8213 Mobile +45 3045 6719

MEDIA RELATIONS Nathalie Rhode-Erb, Communications Coordinator Phone +45 3673 8212 Mobile +45 4018 2130

 

 

 

 

 

 

IMPORTANT EVENTS IN Q3 2012

 

Initiative to improve the quality of retailers' stock

 

With the aim to improve the quality of the stock mix at its key retail partners, PANDORA on 21 February 2012, initiated a one-off, time limited global stock balancing campaign. The campaign is now largely concluded.

 

During Q3 2012 PANDORA received discontinued products with a wholesale value of DKK 86 million and, products worth DKK 127 million were replaced with new bestsellers. For 9M 2012 the numbers totalled DKK 609 million and DKK 599 million, respectively.

 

From an accounting perspective the stock balancing campaign has no impact on revenue, and since the revenue recognition is based on the matching principle, only products that have been both received and subsequently replaced with new products are accounted for in revenue. The value of products accounted for in Q3 2012 was DKK 127 million with a revenue impact of zero in Q3 2012. As of 30 September 2012 the impact on inventory caused by take back from the stock balancing campaign was DKK 135 million.

 

PANDORA retailers have welcomed the stock balancing campaign initiative and the campaign has achieved a high participation rate from retailers, both in terms of number of stores and volume. The requests for returns of discontinued products show a participation rate of approximately two-thirds amongst all points of sales in PANDORA's distribution network. Participation rates for Concept stores and Shop-in-Shops were approximately 80%.

 

To help evaluate against historical figures, PANDORA will, throughout 2012, provide supplemental figures relating to the stock balancing campaign where applicable. Supplemental figures should however be treated with careful consideration, as simply adding these to the reported figures may be neither representative nor meaningful, particularly due to the phasing of returns and replacements between individual quarters.

 

 

Performance of Autumn/Winter 2012 collection

 

As mentioned in PANDORA's Q2 2012 report, feedback from presentations to the retailers of the Autumn/Winter 2012 collection was very encouraging. The Autumn/Winter 2012 collection, of which the first drop, our Autumn part was launched in August, was very well received in stores.

 

Like-for-like sales-out revenue of the Autumn part has in Q3 2012 clearly improved compared to sales of last year's Autumn collection. The reduced average retail price in the Autumn 2012 collection, due to a higher proportion of silver products, was more than offset by significantly higher volumes.

 

The next drop in the Autumn/Winter 2012 collection, our Christmas drop, will be shipped in Q4 2012. Feedback from presentations to the retailers has been encouraging.

 

 

Board of Directors evaluation of future capital structure

 

As PANDORA is coming to an end of the 18 month turn-around plan initiated in August 2011, the Board of Directors has intensified its analysis of the existing capital structure and will, in Q4 2012, continue the work to define what the Board of Directors believes would be an optimal capital structure for the Company going forward including decisions on potential ways to distribute cash to the shareholders.

 

Conclusions from this review are expected to be communicated in connection with the release of the Company's Q4 2012 financial results in February 2013.

 

 

Revenue development IN Q3 2012

Total revenue increased by 14.3% to DKK 1,794 million in Q3 2012 from DKK 1,569 million in Q3 2011, with Q3 2012 principally due to positive foreign exchange developments, which more than off-set the negative impact the stock balancing campaign initiated in February 2012 as well as a significant impact from a change in product mix influenced by the introduction of products with lower price points.

 

Excluding foreign exchange movements, revenue increased by 6.8%. The revenue development is influenced by price reductions (-3.6%), volume (15.9%), market mix (4.9%) and product mix effects

(-10.4%).

 

The geographical distribution of revenue in Q3 2012 was 51.3% for the Americas (48.1% in Q3 2011), 39.0% for Europe (39.4% in Q3 2011) and 9.7% for Asia Pacific (12.5% in Q3 2011).

 

 

REVENUE BREAKDOWN BY GEOGRAPHY

 

 

 

 

 

 

 

AMERICAS

Revenue in Americas, constituting 51.3% of total Group revenue, increased by 21.9% to DKK 920 million in Q3 2012 (DKK 755 million in Q3 2011). Excluding foreign exchange movements, revenue increased by 9.5% compared to Q3 2011.

 

In the United States revenue was up 15.8% in Q3 2012 versus Q3 2011 (2.6% in local currency). Of DKK 127 million in stock balancing replaced in Q3 2012, the United States accounted for DKK 68 million, corresponding to 9.6% of the reported revenue for Q3 2012 which may have changed retailers' purchasing patterns and thereby negatively affected the reported revenue.

 

Based on Concept stores, which have been operating for 12 months or more, like-for-like sales-out in the United States increased by 4.5% in Q3 2012 compared to Q3 2011.

 

 

 

Other Americas sales were up 48.2% in Q3 2012 versus Q3 2011 and constituted 11.6% of Group revenue, with Canada as the largest contributor growing by 58.6% in Q3 2012 compared to Q3 2011. Other markets in this region increased by 23.8% in Q3 2012 compared to the same period last year.

 

During Q3 2012 the number of branded stores in the Americas increased by 81 stores (versus 98 in Q3 2011) to a total of 1,505 branded stores. Of the 81 branded stores opened in Q3 2012, 23 were Concept stores. Branded stores accounted for 47.4% of the total number of stores compared to 42.4% at the end of Q3 2011.

 

 

 

 

 

EUROPE

Revenue in Europe, constituting 39.0% of total Group revenue, increased by 13.1% to DKK 699 million in Q3 2012 (DKK 618 million in Q3 2011) driven by the UK, Italy, Russia and France. Excluding foreign exchange movements, revenue increased by 11.0% compared to Q3 2011.

 

Revenue in the UK, PANDORAs largest single European market, accounting for 13.9% of Q3 2012 revenue, increased by 12.2% (flat in local currency).

 

Based on Concept stores, which have been operating for 12 months or more, like-for-like sales-out in the UK, increased by 0.9% in Q3 2012, compared to Q3 2011.

 

 

 

Revenue in Germany, PANDORA´s second largest market in Europe (accounting for 7.2% of Q3 2012 Group revenue), decreased by 24.9% in Q3 2012 compared to Q3 2011.

 

PANDORA continues to address the over-distribution in Germany by closing a number of sub-optimally located stores particularly in the Silver- and White category in 2012. During 2012 PANDORA has closed more than 500 primarily unbranded points-of-sale.

 

Based on Concept stores, which have been operating for 12 months or more, like-for-like sales-out in Germany increased by 2.5% in Q3 2012 compared to Q3 2011.

 

 

 

In the category Other Europe revenue increased by 43.5% in Q3 2012 compared to Q3 2011, primarily driven by significant growth from Italy, Russia and France. PANDORA's third party distributor markets Greece, Spain, Portugal and Ireland continue to suffer from harsh macroeconomic trading conditions and hence continue to destock in order to optimise local inventory levels. Additionally, revenue in these countries is negatively affected in the quarter by the stock balancing campaign.

 

During Q3 2012 the number of branded stores in Europe increased by 237 stores (113 in Q3 2011) to a total of 2,203 branded stores, accounting for 34.2% of the total number of stores (25.6% at the end of Q3 2011). Q3 2012 has been affected by the net closure of 544 unbranded stores.

 

 

ASIA PACIFIC

Revenue in Asia Pacific, constituting 9.7% of total Group revenue, decreased by 10.7% to DKK 175 million in Q3 2012 (DKK 196 million in Q3 2011). Excluding foreign exchange movements, revenue decreased by 17.3% compared to Q3 2011.

 

Reported revenue in Australia was down by 13.0% in Q3 2012 compared to the same period last year whereas revenue decreased by 24.0% in local currency.

 

Based on Concept stores, which have been operating for 12 months or more, like-for-like sales-out in Australia decreased by 5.8% in Q3 2012 compared to Q3 2011.

 

 

 

In the category Other Asia Pacific, constituting 3.1% of total Group revenue, revenue was down by 5.2% in Q3 2012 compared to the same quarter last year. The negative development is mainly explained by decreasing revenue in Other Asia.

 

 

 

 

 

pandora sales channels

 

Direct distribution accounted for 97.9% of revenue in Q3 2012 compared to 96.4% in Q3 2011. Branded sales in markets with direct distribution accounted for 83.0% in Q3 2012 (76.3% in Q3 2011). Concept stores accounted for 61.8% of the branded sales in Q3 2012 (38.1% in Q3 2011).

 

 

 

Total number of points of sale decreased by 223 in Q3 2012 to a total of 10,220 globally. At the same time, PANDORA added a net total of 325 branded points of sale. Of these, 57 were Concept stores, 114 were Shop-in-Shops and 154 Gold stores.

 

Branded stores in direct distribution markets accounted for 43.4% of the total number of stores at the end of Q3 2012 compared to 34.6% at the end of Q3 2011.

 

 

 

 

 

 

product offering

 

The stock balancing campaign has impacted the revenue distribution between product categories, particularly as the categories Rings and Other Jewellery have been significantly affected by returned SKUs. This has led to a comparably positive effect into the categories Charms and Silver and gold charms bracelets.

 

In Q3 2012 revenue from Charms increased by 28.8% compared to Q3 2011. Revenue from Silver and gold charms bracelets increased by 42.6% compared to Q3 2011. The two categories represented 87.5% of total revenue in Q3 2012 (76.6% in Q3 2011).

 

Rings increased by 37.5% and represented 7.4% of total revenue in Q3 2012 (compared to 6.1% in Q3 2011). Other Jewellery decreased by 66.4% in Q3 2012 and represented 5.1% of total revenue (17.3% in Q3 2011).

 

Rings and Other Jewellery together represented 12.5% of total revenue in Q3 2012 (23.4% in Q3 2011).

 

 

The development in average sales price (ASP) per item in Q3 2012 was virtually flat at DKK 133 from DKK 134 in Q3 2011. Note that, compared to Q3 2011, the Q3 2012 ASP is positively affected by currency and negatively affected by price reductions and the stock balancing campaign.

 

 

NeW markets

In Q3 2012, PANDORA opened net 171 Concept stores and Shop-in-Shops, globally, of which 25 have been opened in PANDORA's key new markets (Italy, France, Russia and Asia), bringing net openings to 81 in 2012 year-to-date. For the full year 2012, PANDORA expects to open approximately 100 (previously 135) Concept stores and Shop-in-Shops in new markets. The main reason for the deviation is a more selective store roll-out approach in Other Asia, as a consequence of our on-going business review of this region.

 

 

PANDORA's strategy in Russia, China and Japan is to open primarily branded stores - mainly franchised Concept stores and Shop-in-Shops.

PANDORA's strategy in Italy is to utilise the large and well-established network of multi-brand jewellery retailers.

In Italy, the Company was selling PANDORA products through 954 points of sale (6 Concept stores, 8 Shop-in-Shops, 145 Gold stores, 257 Silver stores and 538 White stores) at the end of Q3 2012.

PANDORA's strategy in France is to upgrade the quality of our distribution network, with a particular emphasis on department store Shop-in-Shops and Concept stores. In France, the Company was selling PANDORA products through 279 points of sale (8 Concept stores, 27 Shop-in-Shops, 13 Gold stores, 118 Silver stores and 113 White stores) at the end of Q3 2012.

 

 

REVENUE BY DISTRIBUTION

Direct distribution accounted for 97.9% of revenue in Q3 2012 compared to 96.4% in Q3 2011.

 

 

 

GROSS PROFIT AND GROSS MARGIN

 

 

 

Gross profit was DKK 1,150 million in Q3 2012 compared to DKK 1,155 million in Q3 2011, resulting in a gross margin of 64.1% in Q3 2012 (73.6% in Q3 2011).

 

The average realized price for gold was 1,707 USD/oz and 33.67 USD/oz for silver in Q3 2012.

 

Compared with Q3 2011 the Q3 2012 gross margin was negatively impacted by increasing raw material prices (-7.4%), price changes (-1.0%), product and market mix (-0.0%) and currencies (-1.1%).

 

Compared with Q2 2012, the Q3 2012 gross margin decline is explained by increasing raw material prices (-2.0%), price changes (0.0%), product and market mix (-2.1%) and currencies (0.3%). Product and market mix includes a one percentage point negative impact on gross margin, due to the expiration of the suspension of certain import duties of goods manufactured in Thailand under the U.S. Generalized System of Preferences program.

 

PANDORA is fully hedged for the remainder of 2012. It is PANDORA's policy to hedge 100%, 80%, 60% and 40% of expected gold and silver consumption in the following four quarters respectively. Our hedged prices for the following four quarters for gold are 1,667 USD/oz, 1,677 USD/oz, 1,617 USD/oz, 1,772 USD/oz and for silver 31.53 USD/oz, 33.19 USD/oz, 29.88 USD/oz and 32.30 USD/oz.

 

Excluding PANDORA's hedging and the time lag effect from PANDORA's inventory, the underlying gross margin would have been approximately 67% based on average gold (1,654 USD/oz) and silver (29.94 USD/oz) market prices in Q3 2012. Using the same assumptions, a 10% deviation in quarterly average gold and silver prices would have impacted PANDORA's gross margin by approximately 2 percentage points.

 

 

DISTRIBUTION EXPENSES

Distribution expenses increased to DKK 477 million in Q3 2012 (DKK 452 million in Q3 2011), representing 26.6% of revenue in Q3 2012 (28.8% in Q3 2011). Q3 2011 includes amortisation of French distribution rights of DKK 7 million.

 

Sales and distribution costs were DKK 287 million in Q3 2012 (DKK 232 million in Q3 2011), representing 16.0% of revenue in Q3 2012 (14.8% Q3 2011). The increase is mainly caused by an increase in owned and operated Concept stores and Shop-in-Shops in Q3 2012 compared to Q3 2011 (30 and 16 stores respectively) as well as entry into new markets.

 

Marketing costs were DKK 190 million in Q3 2012 (DKK 220 million in Q3 2011), corresponding to 10.6% of revenue in Q3 2012 (14.0% in Q3 2011).

 

 

ADMINISTRATIVE EXPENSES

Administrative expenses amounted to DKK 210 million in Q3 2012 (DKK 197 million in Q3 2011), representing 11.7% of revenue in Q3 2012 (12.6% in Q3 2011).

 

The increase in administrative costs is mainly related to an increased headcount in new markets and at the head office. Furthermore, PANDORA has integrated two additional markets onto its global ERP system in Q3 2012.

 

 

Cost ratios

 

 

 

Please note that the cost ratios for 2012 are affected by the negative impact on revenue from the stock balancing campaign.

 

 

EBITDA

EBITDA for Q3 2012 decreased by 6.2% to DKK 503 million resulting in an EBITDA margin of 28.0%, down from 34.2% in Q3 2011. In Q3 2012 the EBITDA margin was negatively impacted by the on-going stock balancing campaign in 2012, reduction in gross margin as well as start-up costs in connection with building up sales and distribution infrastructure in new growth markets.

 

Regional EBITDA margins for Q3 2012 before allocation of central costs were 42.7% in Americas (53.8% in Q3 2011), 34.3% in Europe (30.3% in Q3 2011) and 19.4% in Asia Pacific (36.7% in Q3 2011). Unallocated costs were 9.1% in Q3 2012 compared to 8.2% in Q3 2011.

 

The Americas region EBITDA margin remained above Group average, despite the significant impact from the on-going stock balancing campaign. The margin increase in Europe was primarily driven by increased revenue in Other Europe, particularly Russia, Italy and France, as well as the UK. The decrease in EBITDA margin in Asia Pacific was primarily due to the decrease in revenue in Australia, and start-up costs related to the development of new markets in Asia.

 

 

 

EBIT

EBIT for Q3 2012 decreased to DKK 463 million — a decrease of 8.5% compared to the same quarter in 2011, resulting in an EBIT margin of 25.8% for Q3 2012 (32.2% in Q3 2011).

 

 

NET FINANCIAL INCOME AND EXPENSES

Net financial income amounted to DKK 1 million in Q3 2012 (DKK -90 million in Q3 2011).

 

Financial expenses of DKK 4 million in Q3 2012 mainly consist of interest and other non-cash adjustments impacted by DKK 2 million in earn-out amortisation. Financial income of DKK 5 million in Q3 2012 is impacted by unrealised foreign exchange rate movements. Q3 2011 was significantly impacted by an unrealized loss of DKK 93 million on foreign exchange movements, mainly due to the strong appreciation of the USD during the quarter.

 

INCOME TAX EXPENSES

Income tax expenses were DKK 84 million in Q3 2012, implying an effective tax rate of 18.1% for Q3 2012 compared to 18.0% for Q3 2011.

 

 

net profit

Net profit in Q3 2012 increased by 11.4% to DKK 380 million (DKK 341 million in Q3 2011).

 

LIQUIDITY AND CAPITAL RESOURCES

The free cash flow, cash conversion and the operating working capital ratio for Q3 2012 is impacted by the stock balancing campaign.

 

In Q3 2012, PANDORA generated a free cash flow of DKK -88 million corresponding to a cash conversion of -23.2% compared to DKK 37million (10.9%) in Q3 2011. The decrease in free cash flow is affected by the lower EBITDA result for Q3 2012. The increase in trade receivables following the strong sales in Q3 2012 is offset by improved inventory management.

 

Operating working capital (defined as inventory and accounts receivables less accounts payables) at the end of Q3 2012 was 42.5% of the preceding twelve months revenue compared to 39.5% at the end of Q3 2011 and 36.8% at the end of Q2 2012.

 

Inventory at the end of Q3 2012 reflects improved inventory management which, however, is offset by increased commodity prices as well as a temporary increase from products returned under the stock balancing campaign, that await re-melting.

 

Inventory at the end of Q3 2012 decreased by DKK 42 million to DKK 1,922 million compared to Q3 2011, corresponding to a decrease of 2.1%. In the same period gold and silver prices increased inventory by approximately 34%. The stock balancing campaign increased inventory by DKK 135 million, awaiting re-melt. During Q3 2012, products relating to the stock balancing campaign totalling a value of DKK 65 million were re-melted.

 

Inventory at the end of Q3 2012 decreased by DKK 3 million compared to Q2 2012, corresponding to a decrease of 0.2%. In the same period gold and silver prices affected inventory with an increase of approximately 7%, whereas inventory related to the stock balancing campaign was reduced by DKK 45 million.

 

 

 

Trade receivables decreased by DKK 2 million to DKK 982 million in Q3 2012 (15.3% of preceding 12 month revenue) compared to DKK 984 million in Q3 2011 (14.1% of preceding 12 month revenue).

 

In Q3 2012, PANDORA invested a total of DKK 47 million in property, plant and equipment, corresponding to approximately 2.6% of revenue.

 

Cash and short-term deposits amounted to DKK 276 million at the end of Q3 2012 (DKK 292 million at the end of Q3 2011).

 

Total interest-bearing debt was DKK 1,105 million at the end of Q3 2012 (DKK 1,410 million at the end of Q3 2011).

 

Net interest-bearing debt at the end of Q3 2012 was DKK 829 million corresponding to 0.5 LTM EBITDA compared to DKK 1,118 million at the end of Q3 2011 corresponding to 0.4 LTM EBITDA.

 

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 September 2012.

 

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 September 2012, and of the results of the PANDORA Group's operations and cash flow for the period 1 January — 30 September 2012.

 

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, 6 November 2012

 

 

Executive BOARD

 

 

 

Björn Gulden                                                    Henrik Holmark                             Sten Daugaard

Chief Executive Officer                                Chief Financial Officer                Chief Development Officer

 

 

 

Board of directors

 

 

Allan Leighton                                                                           Marcello V. Bottoli

Chairman

 

 

Andrea Alvey                                                                             Anders Boyer-Søgaard

 

 

Christian Frigast                                                                        Torben Ballegaard Sørensen

 

 

Nikolaj Vejlsgaard                                                                    Ronica Wang

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Notes

 

NOTE 1 — 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 for 2011. We refer to the description in note 1 of the consolidated financial statement in PANDORA's Annual Report for 2011.

 

NOTE 2 — Seasonality of operations

Due to the seasonal nature of the jewellery business, higher revenue are historically realised in the second half of the year.

 

NOTE 3 - Operating segment information

PANDORA's activities are segmented on the basis of geographical areas in accordance with management's reporting structure. In determining the reporting segments, a number of operating segments have been aggregated. All segments derive their revenues from the types of products shown in the product information provided below.

 

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).

 

 

 

 

 

NOTE 4 - Contingent liabilities

PANDORA is a party to a number of minor legal proceedings, which are not expected to influence PANDORA's future earnings

 

NOTE 5 — Related party transactions

Related parties of PANDORA with a controlling interest are the principal shareholder Prometheus Invest ApS (50% interest) and the ultimate parent, Axcel III K/S (30% interest).

 

Related parties further comprise Axcel III K/S's other portfolio enterprises, as they are subject to the same controlling interests. There have not been any transactions with Axcel III K/S or these other entities during 2012 and 2011.

 

Related parties of PANDORA with significant interests include the Board of Directors and the Executive Management of the companies and their close family members. Furthermore, related parties include companies in which the aforementioned persons have control or significant interest.

Except for compensation and benefits received as a result of the membership of the Board of Directors, employment with PANDORA or shareholdings in PANDORA, PANDORA has not undertaken any significant transactions with the Board of Directors and Executive Management. We refer to the description in note 25 of the consolidated financial statement in PANDORA's Annual Report for 2011.

 

 

The table below provides other transactions which were entered into with related parties:

 

 

NOTE 6 — Accounting policies

The present unaudited interim financial report has been prepared in accordance with IAS 34 ‘Interim Financial Reporting' and accounting policies set out in the Annual Report 2011 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, amended or revised accounting standards and interpretations (IFRS) endorsed by the EU effective for the accounting period beginning on 1 January 2012. These IFRSs have not had any significant impact on the Group's interim financial report.

 

 

 

QUARTERLY OVERVIEW

 

 

 

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 ongoing operational and strategic reviews, expansion into new markets, future product launches, points of sale and production facilities.

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 jewelry and non-jewelry 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.