Annual report 1996 in English (2.93 Mb) - About H&M

Administration reportThe Board of Directors and Managing Director ofH & M Hennes & Mauritz AB (publ) submit herewiththeir report for the financial year 1 December 1995 to30 November 1996.SalesTotal turnover for the H&M Group rose by 18 per cent(8 per cent in the previous year) and reached SEK17,212.1 M (SEK 14,591.1 M) including VAT. Excludingchanges in exchange rates, sales rose by 28 percent.As in previous years, the European retail trade wassluggish. Nevertheless, a slight improvement wasnoted during the second half of the financial year.H&M sales grew as a result of both store and mailorderoperations. Same store sales in local currencyrose on all markets. Our net total of 52 new storesenabled the H&M Group to capture market shares inevery country of operation.Sales outside Sweden accounted for 76 per cent(73 per cent).ProfitGross profit for the year totalled SEK 2,200.7 M (SEK1,551.1 M), up 42 per cent over the previous year.This corresponds to a gross margin of 15.1 per cent(12.6 per cent).After depreciation according to plan amounting toSEK 236.4 M (SEK 195.2 M), profit totalled SEK1,964.3 M (SEK 1,355.9 M).The Group’s positive net interest income declinedto SEK 70.1 M (SEK 92.9 M) despite a higher level ofliquidity during the year. This was largely attributableto declining interest rates in general and the Swedishkrona interest rate in particular. Profit after net interestincome amounted to SEK 2,034.4 M (SEK 1,448.8 M).After deduction of the part of the investment innew premises which is treated as a cost item – the socalledstart-up costs – of SEK 129.4 M (SEK 127.1M), Group operations recorded a surplus of SEK1,905.0 M (SEK 1,321.7 M). Profits improved by 44per cent compared with the previous year.Taxes were lower than normal due to the utilizationof a loss carried forward in an Austrian company thatwas acquired during the year. (Taxes were reduced inthe 1994/95 financial year due to a revision of theSwiss tax system.) Excluding the non-recurring effectswhich reduced taxes in the two previous years, the taxrates were approximately 34.3 per cent and 32.5 percent respectively.After provisions for comprehensive tax of SEK574.0 M (SEK 348.6 M), profit for the year reachedSEK 1,331.0 M (SEK 973.1 M). Income for the yearcorresponds to earnings per share of SEK 32.17 (SEK23.52), an increase of 37 per cent.Profit for the year yielded a return on shareholders’equity of 28.3 per cent (24.3 per cent) and a return oncapital employed of 39.8 per cent (32.7 per cent).Liquidity and financingThe Group balance sheet total was SEK 7,171.7 M(SEK 5,725.6 M) at the end of the financial year, up25 per cent over the previous year. After consolidationof unchanged currency exchange rates, the balancesheet total rose by 28 per cent. This increase shouldbe viewed in relation to the change in sales, whichtotalled 28 per cent measured in unchanged currencyexchange rates. Consequently, the Group balance sheettotal kept pace with the volume of sales.In 1995, H&M Group operations generated a positivecash flow of SEK 1,372.2 M (SEK 325.9 M), ofwhich SEK 677.5 M was reinvested in the operation.Financial assets at the end of the year reached SEK2,937.5 M (SEK 2,193.5 M), up SEK 744.0 M or 34per cent from the previous year.Stock-in-trade amounted to SEK 2,235.6 M (SEK1,859.0 M) which corresponded to 31.2 per cent(32.5 per cent) of the balance sheet total and 15.4per cent (15.1 per cent) of sales. Excluding changes inexchange rates, stock-in-trade for the year accountedfor 14.4 per cent of the turnover.The debt/equity ratio, which was already low, continuedto fall to 2.5 per cent (3.0 per cent). Financialstrength, calculated as the share of risk-bearing capital,declined slightly but remained high at 76.9 percent (79.7 per cent).Group shareholders’ equity at the end of the financialyear amounted to SEK 5,154.8 M (SEK 4,256.2 M),which corresponds to SEK 124.58 (SEK 102.86) pershare.The Board of Directors have established the followingdividend policy: H&M’s financial goal is for thecompany to continue to enjoy healthy growth. We mustcontinue to expand with the same high degree of financialstrength. In view of this, the Board have determinedthat dividends should correspond to one-third ofthe profit per share after taxes. Although dividends willnormally follow the profit trend, they may deviate incertain years.The Board of Directors have decided to propose tothe Annual General Meeting of Shareholders a 5:1 splitof the company’s shares.PersonnelThe average number of employees in the Group was10,469 (9,465), of whom 2,798 (3,025) were basedin Sweden.Board fees paid according to the decision of theAnnual General Meeting of Shareholders totalled SEK500,000, of which SEK 125,000 was paid to theChairman of the Board. Members of the Board who areemployees of the company did not receive any fees.Compensation in the form of salary, company carbenefits and subsidiary Board fees to the ManagingDirector Stefan Persson totalled SEK 3,499,971. TheGroup has also acquired a pension insurance policy forthe Managing Director to supplement the Swedish ITPretirement plan. This policy, which has an annual premiumof SEK 253,400, will begin paying a pension atage 65.Group policy prohibits severance payments forH&M employees.Information concerning salaries and remunerationsis listed under Note 12