We - KappAhl

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GROWTH IN NEW AND EXISTING STORES In recent years
KappAhl has focused on increasing profitability by strengthening
the gross margin. This strategy has been successful. The gross
margin is among the highest in the industry and stronger profitability
has provided a stable basis for continued growth. Another
goal has been to improve profitability by more effective use of
KappAhl’s purchasing and logistics resources. This too has gone
well.
STRONG CASH FLOW MEANS SECURE GROWTH KappAhl’s
operations generate a strong cash flow. This is partly due to a
very low capital requirement in the business. One of the main
advantages of this is that expansion via investment in new stores
can take place without tying up large amounts of capital. Consequently,
KappAhl can continue to invest in growth at the desired
rate while distributing dividends to shareholders.
EXPANSION OF STORE NETWORK Our focus on growth has
also been clear in the 2008/2009 financial year. The growth
strategy is based on two principles: increased sales via existing
stores and establishment of new stores.
KappAhl will continue to gain market share. The store network
will continue to grow, increasing the company’s market
share. The expansion of new stores will be mainly in shopping
malls and central store sites, because historically KappAhl has
been most profitable in these locations. We aim to increase the
TARGETS AND TARGET FULFILMENT
Kappahl’s Board of Directors has set up the following operational and financial targets for the Group.
Operative targets
The number of stores is to increase in
future by 20–25 per year
The operating margin is to be 12 per
cent over a business cycle and no
lower than 10 per cent
2008/2009 Kappahl
Outcome 2008/2009 Outcome 2007/2008 Outcome 2006/2007 Outcome 2005/2006
32 new stores opened
and 4 closed
22 new stores opened
and 3 closed
17 new stores opened
and 5 closed
10.8% 14.1% 13.8% 12.6%
20 new stores opened and
2 closed
Financial targets As at 31 August As at 31 August As at 31 August As at 31 August
Interest-bearing net debt is not to
exceed, other than temporarily, three
times the EBITDa.
2.8 times EBITDa 2.3 times EBITDa 1.7 times EBITDa 2.3 times EBITDa
The interest coverage ratio is to
exceed a multiple of five.
Dividend policy
Dividend is to be 70–100 per cent of
the profit after tax (in 2005/2006 the
target was 50–70 per cent)
6.3 times 8.5 times 6.6 times 4.7 times
The Board’s proposal to
the annual General Meeting
means that 29.7 per
cent of profit after tax will
be distributed, which is a
temporary departure
from the policy.
number of stores by 20–25 per year. Potential for establishing
new stores in the Nordic countries, Poland and the Czech
Republic, which is KappAhl’s new, fifth market, is deemed to be
good.
CONTINUED INVESTMENTS IN STORES KappAhl has
invested extensively in improvement and refurbishment of
stores. Renovated and refurbished stores generally attract
greater visitor flows, an increased percentage of paying customers
and improved sales per square metre. Plans for the future
include refurbishment of KappAhl’s stores on average every fifth
to seventh year. Stores in the very best locations are renovated
more frequently to retain competitiveness.
SALES INCREASE It is important to KappAhl to increase sales
in existing stores. Activities that help to boost sales include
upgrading stores, marketing, improving store layout, in-store
displays and product mix development. In addition there are
regular sales competitions and training initiatives for employees.
ECONOMIES OF SCALE INCREASE PROFITABILITY When
the store network is expanded, KappAhl benefits from economies
of scale in the existing structure. The company’s central
functions are dimensioned to cope with such expansion. This
means that the costs of running the store network do not
increase at the same rate as sales.
The Board’s proposal to
the annual General Meeting
means that 77.5 per
cent of profit after tax will
be distributed.
Redemption share equivalent
to 125.3 per cent.
The dividend was 62.1 per
cent of the profit after tax.
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