DGAP-News: Ultrasonic AG / Key word(s): Quarter Results Ultrasonic AG: Strong growth in the urban footwear segment in Q1 2014 28.05.2014 / 11:48 --------------------------------------------------------------------- Corporate News ULTRASONIC: Strong growth in the urban footwear segment in Q1 2014 - Group sales increased by 5.0% to EUR 35.4 million (3M 2013: EUR 33.7 million) - Revenue from the ULTRASONIC brand rose 49.5% year-on-year to EUR 11.1 million (3M 2013: EUR 7.4 million) - EBT margin of 26.9% (3M 2013: 28.1%) - Net profit amounted to EUR 7.1 million (3M 2013: EUR 7.1 million) - Cash inflow from operating activities of EUR 16.1 million (3M 2013: EUR 18.9 million) - Outlook for FY 2014 confirmed - Sales growth of around 10-15% at an EBT margin of approx. 24-27% expected Cologne, 28 May, 2014 - Ultrasonic AG, quoted in the Prime Standard of the Frankfurt Stock Exchange (Prime Standard, ISIN DE000A1KREX3, US5), today published its interim report for the first three months of fiscal 2014. In the first quarter, which is normally the weakest of the year, Group revenue rose 5.0% to EUR 35.4 million with pre-tax profit amounting to EUR 9.5 million. The operating cash flow was EUR 16.1 million and the equity ratio improved to 88.3%. The driving force behind the pleasing overall performance was revenue from the ULTRASONIC brand of urban footwear products which posted further strong growth in the reporting period, rising 49.5% year-on-year to EUR 11.1 million. "In the first quarter of 2014 we continued last year's successful course. With our ULTRASONIC brand becoming increasingly well established on the fast-growing market for high-quality casual shoes, our strategy of focusing on high-quality, high-margin products is paying off. However, the ramp-up of the new production and access to new distribution channels involves additional expense while the impact of these activities on revenue and earnings will only be fully visible in future years. In the short term, the costs cannot be directly offset by sales revenue. As expected, the margins therefore declined slightly in the reporting period, although it remained very high", comments Qingyong Wu, the company's founder and CEO, the development in the first quarter of 2014. Sales and earnings Group revenue grew 5.0% in the first three months of 2014 to EUR 35.4 million (3M 2013: EUR 33.7 million). Since revenue is generated entirely in renminbi, but the ULTRASONIC Group's reporting currency is the euro, the exchange rate versus the euro is of significance for both revenue and other financial data in each reporting period. In the first quarter of 2014, the average exchange rate for the renminbi versus the euro was 1.5% lower than in the first quarter of 2013, so the actual increase in revenues in local currency was correspondingly higher. Urban footwear (including accessories), which comprises the ULTRASONIC brand and production for OEM brands, remained the fastest growing segment in the first quarter of 2014. Sales revenues in this segment grew 31.5% to EUR 16.8 million in the first three months of 2014 (3M 2013: EUR 12.8 million), driven by an appreciable rise in volumes and higher selling prices. Demand for the ULTRASONIC brand increased especially fast in the reporting period. Revenue from the ULTRASONIC brand grew 49.5% to EUR 11.1 million in the first three months of 2014 (3M 2013: EUR 7.4 million), increasing its share of total segment revenue to 66.1% (3M 2013: 58.1%). Online sales amounted to EUR 1.2 million. Revenue from OEM footwear brands was up 6.4% at EUR 5.7 million (3M 2013: EUR 5.3 million). In the shoe soles segment, by contrast, revenue slipped 11.4% to EUR 8.8 million (3M 2013: EUR 9.9 million). While volumes were down 20.7%, prices rose by 11.7%. The sandals and slippers segment also posted lower revenue in the reporting period. Prices were 2.7% lower and volumes dropped 8.6%, resulting in an 11.1% drop in revenues to EUR 9.8 million in the first quarter of 2014 (3M 2013: EUR 11.0 million). The reduction in sales in both segments was mainly caused by the strong competition and seasonal reason. The company is endeavouring to halt this trend by producing more new higher quality products which command higher prices and yield better margins. Compared with the previous year, the Group's gross profit rose 5.0% to EUR 10.9 million (3M 2013: EUR 10.4 million). This was in line with the rise in revenue and shows that overall higher raw material and personnel costs could be passed on to customers. Accordingly, the Group's gross profit margin remained at 31.0% Selling and distribution expenses, especially for internet sales, were ramped up further to EUR 0.9 million in the first quarter of 2014 (3M 2013: EUR 0.4 million), whereas administrative expenses only rose slightly from EUR 0.6 million to EUR 0.7 million. The Group's financial result was EUR 65 thousand in the first three months of 2014 (3M 2013: minus EUR 6 thousand). EBITDA was EUR 9.7 million, 1.0% below adjusted EBITDA for the first three months of 2013 (EUR 9.8 million), while Group EBIT declined by 0.5% from EUR 9.5 million to EUR 9.4 million in the reporting period. The EBIT margin therefore fell from 28.1% to 26.7% but remained high. Earnings before taxes (EBT) were EUR 9.5 million in the reporting period (3M 2013: EUR 9.5 million). That was 0.3% higher than in the prior-year period. The EBT margin was 26.8% (3M 2013: 28.1%). As in the previous year, tax expense amounted to EUR 2.4 million in the reporting period, so the profit for the period was EUR 7.1 million (3M 2013: EUR 7.1 million). That was an increase of 0.3% year-on-year, giving earnings per share (basic and undiluted) of EUR 0.56 (3M 2013: EUR 0.59 (adjusted)). The net cash provided by operating activities was EUR 16.1 million in the reporting period (3M 2013: EUR 18.9 million). The slight decline compared with the previous year was mainly due to a change in working capital. Cash and cash equivalents increased to EUR 124.9 million as of 31 March 2014 (31 December 2013: EUR 108.5 million) and the equity ratio improved to 88.3% (31 December 2013: 86.2%). The Group has no non-current borrowing from banks and current liabilities to banks dropped to EUR 1.5 million as of 31 March 2014 (31 December 2013: EUR 2.8 million). ULTRASONIC therefore still has an extremely sound financial base. Outlook Following a number of delays, production at the new site is scheduled to start in June 2014. In fiscal 2014, Ultrasonic plans to produce 0.7-1.0 million pairs of children's shoes for the urban footwear segment, raise production capacity for shoe soles by 6.5% to 42.2 million pairs per year, and production capacity for sandals and slippers by 10% to 17.7 million pairs a year. Completion of further buildings and the installation of machinery will take place successively, so production capacity will be ramped up further next year. In total, ULTRASONIC intends to invest a further EUR 1.0-1.5 million to expand production in 2014. Plans include purchasing two new production lines for urban footwear and one or two sets of new injection moulding machinery to produce shoe soles, sandals and slippers. Further, in 2014 the company will be investing EUR 5.3-5.9 million to expand infrastructure (fencing, access road, buildings) at the new site. In addition, ULTRASONIC is planning to step up marketing to strengthen the ULTRASONIC brand and raise brand awareness, especially on the internet. For this, it has earmarked a budget of EUR 2-3 million for promotion expenses in 2014. The first quarter results were in line with management expectations, so the management is confirming its guidance for the full year. Assuming a further rise in consumer spending in China and at least stable export demand, together with an unchanged number of distributors and a slight rise in the number of ULTRASONIC shops, the company still expects to report further growth on a euro basis of around 10-15% in 2014 (excluding currency effects). This is likely to be accompanied by rising demands on working capital. At Group level, production start-up costs and expenses for gaining access to the new distribution channels will probably result in a slightly lower margin. Accordingly, the Management Board still expects to report a pre-tax margin (EBT) of 24-27% in 2014. The full interim report for the first three months of fiscal 2014 is available at Investor Relations/Publications on the company's website at www.ultrasonic-ag.de. About Ultrasonic The Cologne-based company Ultrasonic AG is the German holding company of the Chinese ULTRASONIC Group, an established manufacturer and supplier of high-quality branded urban footwear. The Group has around 1,400 employees and operates in three main market segments, each of which currently contributes about a third of revenue. ULTRASONIC produces sandals and slippers for the upper price segment for the local and international market. It is also a long-term supplier of shoe soles to leading manufacturers in the established Chinese sport shoe industry such as Anta, Xtep and Unisuper. Moreover, the company has developed its own very successful high-quality urban footwear collection which is marketed under the ULTRASONIC brand and targets China's young, fashion-conscious urban middle class, which has high purchasing power and expects high quality. The ULTRASONIC product line is currently marketed via more than 110 mono-label shops. For further information about the company visit: www.ultrasonic-ag.de For enquiries: Ultrasonic AG Chi Kwong Clifford Chan Member of the Management Board and CFO E-Mail: [email protected] Tel.: +86 1525 947 9902 (China), +852 966 227 40 (Hong Kong) Disclaimer: This document is no offer for the purchase of securities in the United States of America. Securities may only be sold or offered for sale with the previous registration under the U.S. Securities Act of 1933 in the actual valid version or without previous registration only pursuant to an exemption. The shares of Ultrasonic AG (the 'Shares') have not been registered under the U.S. Securities Act of 1933 in the actual valid version and may not be sold or offered in the United States. This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the 'Order') or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as 'relevant persons'). The Shares, which are referred to, are only available to relevant persons and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents. End of Corporate News --------------------------------------------------------------------- 28.05.2014 Dissemination of a Corporate News, transmitted by DGAP - a company of EQS Group AG. The issuer is solely responsible for the content of this announcement. DGAP's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- Language: English Company: Ultrasonic AG c/o BPG mbH, Graf-Adolf-Platz 12 40213 Düsseldorf Germany Phone: +86 1525 947 9902 (China); +852 966 227 40 (Hong Kong) Fax: +49 (0)211 172 9829 E-mail: [email protected] Internet: www.ultrasonic-ag.de ISIN: DE000A1KREX3 WKN: A1KREX Indices: CDAX, Classic All Share, DAXsector All Consumer, DAXsector Consumer, DAXsubsector All Clothing & Footwear, DAXsubsector Clothing & Footwear, Prime All Share Listed: Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr in Berlin, Düsseldorf, Stuttgart End of News DGAP News-Service --------------------------------------------------------------------- 270959 28.05.2014