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Article Excerpt
OPERATOR: Good afternoon, ladies and gentlemen, and welcome to the Arcandor Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). And just to remind you all that this conference call is being recorded.
I would now like to hand over to the chairperson, Mr. Detlef Neveling. Please begin with your meeting, and I will be standing by.
DETLEF NEVELING, HEAD OF IR, ARCANDOR AG: Yes, ladies and gentlemen, a very warm welcome to the Arcandor Conference Call. Our topic today is the interim report for the first quarter 2008/2009, being the time between October 1st and December 31st, 2008.
I'm being joined by two gentlemen today, our CEO, Dr. Thomas Middelhoff, and our new CFO, Rudiger Andreas Gunther. And we will see and have two presentations. Mr. Gunther will start. And I now hand over to him. So, it's yours.
RUDIGER GUNTHER, CFO, ARCANDOR AG: Thank you, Mr. Neveling. A very warm welcome also from my side. As this is my first conference call as Arcandor's CFO, I hope that today represents the start of an open dialogue with you. This is something which I consider as very important.
Before I come to the highlights of the first quarter 2008/2009, let me mention a technical issue. Comparability with the 2007 and 2008 financial year has improved considerably in the current financial year. Nevertheless, we have to maintain the two pro forma presentation for EBITDA. The good news is the reduction refers only to these two aspects.
We added the month of October 2007 at the Thomas Cook Group to remind you Thomas Cook Group has changed its financial year. And therefore, the 2007/'08 financial year was a short one containing only 11 months. It covers the period from 1st November, 2007, to 30 September of 2008. The month of October 2007 was not included. Now in order to make the quarterly figures comparable, we have added this month.
So from now on, the original Thomas Cook figures are shown in the Arcandor Group. This is done as requested by you, by the financial community, without any reconciliation account of any form. Of course, the same goes for the previous year.
Secondly, for Primondo, we adjust the previous-year figures to reflect the changes in financial reporting at the end of the 2007/2008 financial year. This was done in accordance with IFRS and the reporting of competitors to show better comparability. Catalog costs are now immediately cost effective as the program fees for the sales of receivables are now shown in the interest line. Adjusted EBITDA in the previous year was, of course, increased accordingly.
Now to the presentation of Arcandor figures for the first quarter 2008/2009. My impression is that against the earthquake of the general economic environment, the first quarter for Arcandor was a real robust overall. However, I will not deny that we still have a lot of work ahead of us and that we have some difficult challenges to cope with.
As already shown in the trading statement at the beginning of January, Christmas trading in the retail segments of the Arcandor Group was solid. Thomas Cook [also expect] had a satisfactory quarter. Adjusted group sales increased by 1.1% to EUR4.8 billion. All operating segments achieved a solid development of sales. Adjusted group EBITDA amounted to EUR180 million. This represents an increase of 18%. Group EBIT improved by EUR16 million to minus EUR19 million.
Alongside the operating performance shown as adjusted EBITDA, I would also like to mention the effects which had an impact on the group results. In IFRS reporting, group results after minorities shows the decrease by EUR20 million to minus EUR58 million. Please note this is not a pro forma comparison. So, the one month which I mentioned before is missing.
You will rightly note that a loss has again been posted. But please bear in mind that by far the largest contribution to the Arcandor Group result comes from Thomas Cook. The first quarter was a weak quarter for Thomas Cook due to the impact of the seasonality and the one month in comparison is missing.
Now to financing. As you know, we have two different cash pools. One is the Thomas Cook cash pool and on the other hand, Arcandor Group. The entire financing discussion across Arcandor Group relates to the financial liabilities of the group, excluding Thomas Cook. You will very well know that Thomas Cook is in a good financial situation. For this reason, I would like to highlight the net financial liabilities of the Arcandor Group, excluding Thomas Cook. This refers primarily to bank debt and exchangables. Debt amounted to EUR762 million and was reduced by 19% as compared to the previous quarter.
Group working capital is negative at EUR843 million. This is, of course, due to Thomas Cook. But let me also discuss the development of the retail segment separately. Karstadt and Primondo retail segments posted a positive working capital of EUR649 million. But working capital was also reduced by 22% year-on-year.
On chart five, you can very well notice that the strong segments for Arcandor trading is in the first quarter. And the strong quarters three and four are very strong for Thomas Cook. So, you have to -- if you evaluate the figures which I present to you here, please bear this in mind that we have on several segments on our segments a very seasonal business.
The first quarter, again, was strong for Karstadt and Primondo in terms of earnings contribution. The most important part of the full-year earnings is already achieved. In contrast, Thomas Cook, the first quarter was a weak quarter in terms of earning contribution. Thomas Cook is highly profitable in the later quarter of the year, to say the third and fourth quarter.
Chart six, adjusted group sales were up to 1.1% year-on-year, reaching EUR4.8 million. Thus, the group shows the robust business development, as mentioned before, in a very difficult market environment. Group EBITDA also developed positively. Adjusted EBITDA rose to EUR180 million. This represents an increase of EUR27 million. Thomas Cook and Karstadt improved this operational performance, while Primondo was down year-on-year.
On chart seven, we see unadjusted group EBITDA and EBIT. Both figures have improved in the reporting period. Unadjusted group EBITDA amounted to EUR90 million, a year-on-year increase of EUR11 million. Some adjustments had to be made in the reporting period --...
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