important clarifying information ifrs · 2019. 2. 14. · important clarifying information ifrs •...

Important clarifying information IFRS

• Oriflame has implemented IFRS 15 Revenue from Contracts with Customers from 1st January 2018. An early adoption of

IFRS 16 Leases has been made to allow for all changes being implemented at the same time.

• To facilitate the comparison with the 2017 figures, the company has prepared fully adjusted 2018 figures in the first section

of the interim report (pages 1-15), excluding the impact of IFRS 15, IFRS 16 and related accounting alignments. The fully adjusted figures are comparable with the already reported 2017 figures.

• Please note that due to accounting principles and the chosen implementation options of the new IFRS standards, the

condensed consolidated financial statements on pages 16-31 in the interim report is calculated in accordance with IFRS

(following the adoption of IFRS 15 and IFRS 16). These figures are not comparable with the already reported 2017 figures.

• Where not stated differently, the figures, graphs and comments in this interim report are based on the fully adjusted 2018

figures, to facilitate the comparison with the 2017 figures.

Three months ended 31 December 2018 • Local currency sales increased by 1% and Euro sales decreased by 3% to €370.3m (€380.1m). Euro sales amounted to

€359.3m* in accordance with IFRS.

• Number of registered actives increased by 1% and amounted to 3.1m.

• Operating margin was 13.6% (14.8%), negatively impacted by 140 bps from currencies, and operating profit was €50.2m

(€56.3m). Operating margin was 14.1%* and operating profit was €50.8m* in accordance with IFRS.

• Net profit was €32.9m (€35.8m) and diluted EPS €0.58 (€0.62). Net profit was €32.4m* and diluted EPS €0.57* in

accordance with IFRS.

• Cash flow from operating activities was €60.6m (€79.0m) and €60.6m* in accordance with IFRS.

• The first quarter to date sales development is approximately -7% in local currency, negatively impacted by timing.

Twelve months ended 31 December 2018

• Local currency sales increased by 3% and Euro sales decreased by 3% to €1,318.9m (€1,363.1m). Euro sales amounted to

€1,278.8m* in accordance with IFRS.

• Euro sales in the largest market in each Global Business Area amounted to; China €206.2m (€190.4m), Russia €198.6

(€241.5m), Mexico €83.6m (€88.5m) and Poland €57.1m (€51.5m).

• Operating margin was 11.3% (11.7%), negatively impacted by 220 bps from currencies, and operating profit was €149.3m

(€159.0m). Operating margin was 12.0%* and operating profit was €153.1m* in accordance with IFRS.

• Net profit was €96.1m (€92.6m) and diluted EPS €1.69 (€1.62). Net profit was €95.4m* and diluted EPS €1.68* in


• Cash flow from operating activities was €123.9m (€122.7m) and €123.9m* in accordance with IFRS.

• The Board of Directors will propose to the 2019 AGM a total dividend of €1.60 per share for 2018 (to be compared with

2018 AGM €1.60 ordinary dividend + €1.00 extra ordinary dividend). The dividend is to be paid in equal quarterly

instalments of €0.40 respectively starting in the second quarter 2019. *Figures following the adoption of IFRS 15 and IFRS 16.

Significant events after the end of the quarter

• In accordance with the terms of the Company’s share incentive and retention plans, the Board has resolved to deliver

achievement shares totalling 280,376 shares, out of which 191,672 will be issued as new shares under the Company’s

conditional share capital and the rest from the Company’s treasury shares and/or up to 90,000 shares to be repurchased

on Nasdaq Stockholm. Following the issuance, the Company’s total number of shares will amount to 56,634,038 shares.

• The Board of Directors has resolved to continue with its long-standing practice of offering key employees of the Oriflame

Group to annually invest in a share incentive plan, and has resolved to during the first quarter 2019 implement a share

incentive plan for the investment year 2019. The main terms and conditions of the new share incentive plan are consistent

with those of the current share incentive plan.

Year-end report 1 January – 31 December 2018

+1% LC SALES

(3%) EURO SALES

13.6% OPERATING MARGIN

2

“n a

CEO Magnus Brännström comments

“2018 has been a year of mixed performance for Oriflame. On one hand we faced challenging market conditions in some of our key markets

and difficult comparables with the 50th Anniversary activities prior year. On the other hand, our strategic categories – Skin Care and Wellness –

continued to increase their share of the overall sales and online activities remained on high levels. While the slower development in Asia &

Turkey during the fourth quarter was disappointing, the improved sales momentum in most other regions demonstrates the strength of our

balanced geographical footprint. Despite currency headwinds and a changed geographical mix, we are pleased to report a stable underlying

profitability for the quarter. The sales development into the first quarter to date is negatively impacted by catalogue timing and public holidays.

However, the underlying development still reflects the challenges we continue to face in some of our key markets. We are taking measures and

remain committed to return to long-term profitable growth.”

Key financial data 3 months ended 31 December

Sales**

Registered actives

Operating profit**

Net Sales LTM**

Operating margin % LTM**

Financial summary (€m)

3 months ended 31 December


2018* 2018** 2017 Change

%** 2018* 2018** 2017

Change %**

Sales 359.3 370.3 380.1 (3%) 1,278.8 1,318.9 1,363.1 (3%)

Gross margin, % 66.6 70.9 73.7 69.2 72.6 73.0

Operating profit 50.8 50.2 56.3 (11%) 153.1 149.3 159.0 (6%)

Operating margin, % 14.1 13.6 14.8 12.0 11.3 11.7

Net profit before tax 46.3 46.7 51.3 (9%) 134.9 135.8 133.2 2%

Net profit 32.4 32.9 35.8 (8%) 95.4 96.1 92.6 4%

Diluted EPS, € 0.57 0.58 0.62 (8%) 1.68 1.69 1.62 4%

Cash flow from operating

activities

60.6 60.6 79.0 (23%) 123.9 123.9 122.7 1%

Net interest-bearing debt 154.1 72.4 23.5 208% 154.1 72.4 23.5 208%

Net interest-bearing debt at hedged values

130.0 48.4 (4.3) NA 130.0 48.4 (4.3) NA

Registered actives, ‘000 3,105 3,105 3,067 1% 3,105 3,105 3,067 1%

Sales per registered active, € 114.2 117.7 123.2 (4%) 406.2 419.1 439.9 (5%)

*Figures following the adoption of IFRS 15 and IFRS 16.

**Figures excluding the impact of IFRS 15, IFRS 16 and related accounting alignments. The numbers are fully comparable with 2017 reported figures.

12%

(11%)

27%

(24%)

25%

(25%)

36%

(40%)

10%

(9%)

25%

(26%)

31%

(28%)

34%

(37%)

6%

(7%)

28%

(20%)

18%

(20%)

48%

(53%)

0%

5%

10%

15%

20%

0

200

400

600

800

1000

1200

1400

Q416

Q117

Q217

Q317

Q417

Q118

Q218

Q318

Q418

Net Sales LTM Op Margin % LTM

Asia & Turkey Europe & Africa Latin America CIS

Oriflame Year-end report 1 January – 31 December 2018

3

-140 bps OPERATING

MARGIN IMPACT

FROM FX

WELLNESS BY

ORIFLAME PROBIOTIC

SUPPLEMENT

INTRODUCED

Three months ended 31 December 2018

Sales in local currencies increased by 1% and Euro sales decreased by 3% to €370.3m compared to

€380.1m in the same period prior year. Sales development in local currencies was driven by an

increase in the number of registered actives by 1% to 3.1m (3.1m). Euro sales amounted to


Unit sales decreased by 3% and the price/mix effect was up by 4%, driven by mix. The positive

mix effect was related to Skin Care and Wellness, while the price and geographical mix impact was

negative in the quarter.

Local currency sales increased by 6% in Latin America, by 7% in Europe & Africa, by 5% in CIS

and decreased by 8% in Asia & Turkey.

The gross margin was 70.9% (73.7%) and 66.6%* in accordance with IFRS. The gross margin was

negatively impacted by price and geographical mix as well as currency movements. The operating

margin amounted to 13.6% (14.8%), positively impacted by lower costs for the share incentive plan

and bonuses and lower selling and marketing expenses, offset by higher share of administrative

costs and currency movements of -140 bps. The favourable impact from lower costs for the share

incentive plan was offset by restructuring and other one-off costs. In addition, the margin was

negatively impacted by the ongoing measures focused on driving activity and recruitment to

enhance sales growth in CIS and Latin America.

Operating margin was 14.1%* in accordance with IFRS.

Net profit decreased to €32.9m (€35.8m) and diluted earnings per share amounted to €0.58

(€0.62). Net profit was €32.4m* and diluted EPS €0.57* in accordance with IFRS.

Cash flow from operating activities amounted to €60.6m (€79.0m) and €60.6m* in accordance

with IFRS.

The average number of full-time equivalent employees was 6,214 (6,186). *Figures following the adoption of IFRS 15 and IFRS 16.

Twelve months ended 31 December 2018 Sales in local currencies increased by 3% and Euro sales decreased by 3% to €1,318.9m compared

to €1,363.1m in the same period prior year. Sales development in local currencies was impacted by

a 3% increase in productivity and an increase in the number of registered actives by 1%. Euro sales

amounted to €1,278.8m* in accordance with IFRS.

The gross margin was 72.6% (73.0%) and 69.2%* in accordance with IFRS. The operating margin

amounted to 11.3% (11.7%), positively impacted by price/mix effects, lower costs for the share

incentive plan and bonuses, lower distribution and infrastructure expenses, offset by higher share of administrative costs and currency movements of -220 bps. Operating margin was 12.0%* in


Net profit amounted to €96.1m (€92.6m) and diluted earnings per share amounted to €1.69

(€1.62). Net profit was €95.4m* and diluted EPS €1.68* in accordance with IFRS.

Cash flow from operating activities amounted to €123.9m (€122.7m) and €123.9m* in

accordance with IFRS. *Figures following the adoption of IFRS 15 and IFRS 16.

Operational highlights

Brand and Innovation

The main initiatives within Skin Care during the quarter were the introduction of the Love Nature

face masks as well as an upgrade of the Optimals brand into New Optimals+ in China. Within

Wellness, the Wellness by Oriflame Probiotic supplement was introduced.

In Colour Cosmetics, THE ONE Make-up Pro Palette and the GIORDANI GOLD Shade Adjusting

Blend were launched.

Key launches in the Fragrance category during the quarter included Eclat Mon Parfum, Eternal

Man and Miss Giordani Intense.

In Personal and Hair Care, the Oriflame Dream Sleep Collection and the Winter Chestnut Collection

were introduced to support the gift giving season.

Product Category


2018 2017

Skin Care 29% 28%

Colour Cosmetics 19% 21%

Fragrances 18% 19%

Personal and Hair Care 16% 16%

Accessories

Wellness

5%

13%

5%

11%


4

INCREASED SHARE

OF SALES FROM

SKIN CARE AND

WELLNESS

29% (28%)

19% (21%)18% (19%)

16% (16%)

5% (5%)

13% (11%)29% (28%)

19% (21%)18% (19%)

16% (16%)

5% (5%)

13% (11%)

Five year development 2018

Online

During the fourth quarter, the Oriflame websites hosted an average of close to one million visitor

sessions per day, of which 70% came from mobile devices. 96% of the company’s global orders

were placed online, and the share of orders placed using mobile devices reached 50% for the first

time.

All apps in the Oriflame App Suite received a design upgrade and a major release of the

Business App included new tools for consultants supporting information sharing, communication

and follow-up. A new scanning feature was launched within the Oriflame app, allowing consultants

to scan pages in the printed catalogue to access content on the products for an enhanced selling

experience.

The Oriflame app* The Oriflame Business app

*Figures also include the new app tailored for the Chinese infrastructure and market preferences

Service, Manufacturing and Other

Inventory days remained stable on historically low levels while service levels remained healthy.

The unit drop in the quarter had a negative impact on the capacity utilisation in manufacturing,

but was offset by efficiency measures in the manufacturing and supply chain and higher sales to

external parties. Cetes Cosmetics AG continues to explore further organic growth opportunities

and collaborations to increase third-party sales.

23%29%

24%19%

20% 18%

18% 16%

9%5%

6%13%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015 2016 2017 2018

Wellness

Accessories

Personal and Hair

Care

Fragrances

Colour Cosmetics

Skin Care

0

100

200

300

400

500

600

700

800

900

1000

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Monthly active users (thousands)

0

100

200

300

400

500

600

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Monthly active users (thousands)


5

9.7% OPERATING

MARGIN

Latin America Key figures following the adoption of IFRS 15 and IFRS 16

Q1’18* Q2’18* Q3’18* Q4’18*

Sales, €m 34.0 35.5 37.4 44.4

Sales growth in € (4%) (13%) (7%) 8%

Sales growth in lc 5% (5%) (5%) 10%

Op profit, €m1 5.2 3.7 4.3 5.4

Op margin 15.2% 10.5% 11.4% 12.2%

Registered actives, ‘000 264 274 304 306

Sales /registered actives, € 128.9 129.9 123.0 145.2

Key figures excluding the impact of IFRS 15, IFRS 16 and related accounting alignments

Q4’17 Q1’18** Q2’18** Q3’18** Q4’18**

Sales, €m 41.0 32.5 36.8 40.5 43.1

Sales growth in € 3% (8%) (10%) 0% 5%

Sales growth in lc 8% 0% (1%) 3% 6%

Op profit, €m1 5.5 4.0 4.0 5.5 4.2

Op margin 13.5% 12.3% 10.8% 13.5% 9.7%

Registered actives, ‘000 280 264 274 304 306

Sales /registered actives, € 146.3 123.2 134.6 133.2 140.9


**Figures excluding the impact of IFRS 15, IFRS 16 and related accounting alignments. The numbers are fully comparable with 2017

reported figures.

¹Excludes costs accounted for in the segments Manufacturing and Other such as financial expenses, gain/loss on exchange rates,

market support and manufacturing overheads. This is in line with prior years.

Countries

Chile, Colombia, Ecuador, Mexico, Peru.

Development

Local currency sales in the fourth quarter increased by 6%, as a result of a 3% decrease in

productivity and a 9% increase in the number of registered actives. The sales development was

impacted by negative timing of catalogues. Euro sales increased by 5% to 43.1m (€41.0m) and

amounted to €44.4m* in accordance with IFRS. The performance in Mexico improved during the

quarter, driven by successful recruitment campaigns. Colombia and Peru continued to record solid

growth, while the situation in Chile was weak.

Operating profit amounted to €4.2m (€5.5m) and operating margin to 9.7% (13.5%). The

operating margin was negatively impacted by currency movements and ongoing sales and

recruitment driving initiatives. Operating profit was €5.4m* and operating margin was 12.2%* in



6

18.6% OPERATING

MARGIN

Europe & Africa Key figures following the adoption of IFRS 15 and IFRS 16

Q1’18* Q2’18* Q3’18* Q4’18*

Sales, €m 79.3 76.4 70.6 95.9

Sales growth in € (2%) (5%) (0%) 4%

Sales growth in lc (1%) (3%) 1% 4%

Op profit, €m1 10.3 11.5 8.8 18.2

Op margin 12.9% 15.0% 12.5% 19.0%




Q4’17 Q1’18** Q2’18** Q3’18** Q4’18**

Sales, €m 92.4 78.5 78.1 73.2 98.6

Sales growth in € (3%) (3%) (3%) 4% 7%

Sales growth in lc (0%) (2%) (2%) 3% 7%

Op profit, €m1 15.2 8.5 11.4 9.4 18.3

Op margin 16.5% 10.8% 14.6% 12.9% 18.6%





reported figures.

1Excludes costs accounted for in the segments Manufacturing and Other such as financial expenses, gain/loss on exchange rates,


Countries

Algeria, Bosnia, Bulgaria, Croatia, Czech Rep., Denmark, Egypt, Estonia, Finland, Greece, Holland,

Hungary, Kenya, Kosovo, Latvia, Lithuania, Macedonia, Montenegro, Morocco, Nigeria, Norway,

Poland, Portugal, Romania, Tanzania, Tunisia, Serbia, Slovakia, Slovenia, Spain, Sweden, UK/Ireland.

Development

Local currency sales in the fourth quarter increased by 7%, as a result of a 6% increase in

productivity and a 1% increase in the number of registered actives. Euro sales increased by 7% to

€98.6m (€92.4m) and amounted to €95.9m* in accordance with IFRS. The growth in Central

Europe was healthy during the quarter, with the performance driven by the main markets of Poland

and Romania. The development in Western Europe was weak while Africa recorded solid growth,

driven by strong productivity levels in Egypt and Nigeria.

Operating profit amounted to €18.3m (€15.2m) and operating margin was 18.6% (16.5%). The

operating margin was favourably impacted by sales leverage and lower selling and marketing

expenses. Operating profit was €18.2m* and operating margin was 19.0%* in accordance with IFRS.


7

+5% LC SALES

CIS

Key figures following the adoption of IFRS 15 and IFRS 16

Q1’18* Q2’18* Q3’18* Q4’18*

Sales, €m 82.2 71.0 62.2 87.7

Sales growth in € (17%) (24%) (11%) (7%)

Sales growth in lc (7%) (12%) (4%) (1%)

Op profit, €m1 10.1 8.1 6.6 10.9

Op margin 12.3% 11.5% 10.6% 12.4%




Q4’17 Q1’18** Q2’18** Q3’18** Q4’18**

Sales, €m 94.5 84.6 75.2 64.3 92.7

Sales growth in € 1% (15%) (19%) (8%) (2%)

Sales growth in lc 5% (5%) (8%) (2%) 5%

Op profit, €m1 14.6 10.6 8.3 5.7 11.8

Op margin 15.5% 12.5% 11.1% 8.8% 12.8%





reported figures.



Countries

Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Mongolia, Russia, Ukraine.

Development

Local currency sales in the fourth quarter increased by 5%, as a result of a 12% increase in the

number of registered actives, partly offset by a decrease in productivity of 7%. Euro sales were

down by 2% to €92.7m (€94.5m) and amounted to €87.7m* in accordance with IFRS. Local

currency sales in Russia increased by 4%, as a result of the measures implemented to drive sales

and recruitment in the market. Ukraine, Kazakhstan and Belarus continued to record healthy

growth, driven by successful recruitment.

Operating profit amounted to €11.8m (€14.6m) and the operating margin decreased to 12.8%

(15.5%). The margin was negatively impacted by currency movements and ongoing recruitment

driving initiatives impacting the pricing. Operating profit was €10.9m* and operating margin was

12.4%* in accordance with IFRS.


8

(8%) LC SALES

Asia & Turkey Key figures following the adoption of IFRS 15 and IFRS 16

Q1’18* Q2’18* Q3’18* Q4’18*

Sales, €m 128.4 123.2 106.4 126.6

Sales growth in € 9% (5%) (5%) (16%)

Sales growth in lc 21% 3% 3% (11%)

Op profit, €m1 29.4 28.5 20.5 31.0

Op margin 22.9% 23.1% 19.3% 24.5%

Registered actives, ‘000 1,184 1,012 976 1,042



Q4’17 Q1’18** Q2’18** Q3’18** Q4’18**

Sales, €m 150.0 131.6 128.7 111.7 131.2

Sales growth in € 22% 11% (1%) 0% (13%)

Sales growth in lc 34% 25% 8% 8% (8%)

Op profit, €m1 39.1 27.7 28.5 20.4 30.6

Op margin 26.0% 21.1% 22.2% 18.2% 23.3%

Registered actives, ‘000 1,145 1,184 1,012 976 1,042




reported figures.



Countries

China, India, Indonesia, Pakistan, Sri Lanka, Thailand, Turkey, Vietnam.

Development

Local currency sales in the fourth quarter decreased by 8%, as a result of a decrease in number of

registered actives of 9%, partly offset by a 1% increase in productivity. Euro sales decreased by 13%

to €131.2m (€150.0m) and amounted to €126.6m* in accordance with IFRS. Sales in the region was

negatively impacted by challenging market conditions in Turkey and Indonesia as well as weaker

development in Vietnam. China experienced a slowdown during the quarter, as lower end product

launches affected the productivity and activity in the market. Healthy growth was seen in India as a

result of solid leadership development and higher activity levels.

Operating profit was €30.6m (€39.1m) and operating margin decreased to 23.3% (26.0%). The

margin was negatively impacted by currency movements and an unfavourable geographical and

product mix. Operating profit was €31.0m* and operating margin was 24.5%* in accordance with

IFRS.

During the quarter, Oriflame took the decision to close its operations in Myanmar with

immediate effect. Oriflame has been present in Myanmar since 2013 with a limited turnover.


9

The Company’s three largest markets per Global Business Area as per the 2018 year-end sales results are presented below.

Latin America

Market Sales 2018 (2017) in €m

Change in Euro

Change in lc

% of Business Area Sales

% of Group sales

1. Mexico 83.6 (88.5) (6%) 0% 55% 6% 2. Colombia 3. Peru

Europe & Africa

Market Sales 2018

(2017) in €m

Change in

Euro

Change in

lc

% of Business

Area Sales

% of Group

sales

1. Poland 57.1 (51.5) 11% 11% 17% 4%

2. Romania

3. Morocco

CIS

Market Sales 2018

(2017) in €m

Change in

Euro

Change in

lc

% of Business

Area Sales

% of Group

sales

1. Russia 198.6 (241.5) (18%) (8%) 63% 15%

2. Kazakhstan

3. Ukraine

Asia & Turkey

Sales 2018 (2017) in €m

Change in Euro

Change in lc

% of Business Area Sales

% of Group sales

1. China 206.2 (190.4) 8% 11% 41% 16%

2. Indonesia

3. India


10

Income statements



reported figures.



€’000 2018* 2018** 2017 2018* 2018** 2017

Sales 359,324 370,293 380,085 1,278,752 1,318,891 1,363,111

Cost of sales (119,851) (107,792) (100,079) (393,624) (361,518) (368,547)

Gross profit 239,473 262,501 280,006 885,128 957,373 994,564

Other income - 10,900 11,591 - 41,515 45,311

Selling and marketing expenses (113,103) (129,985) (137,017) (428,281) (481,911) (500,577)

Distribution and infrastructure (7,858) (24,381) (25,187) (28,491) (87,666) (95,384)

Administrative expenses (67,732) (68,854) (73,120) (275,290) (280,032) (284,884)

Operating profit 50,780 50,181 56,273 153,066 149,279 159,030

Financial income 6,961 6,961 6,983 15,634 15,634 47,338

Financial expenses (11,471) (10,395) (11,971) (33,766) (29,160) (73,188)

Net financing costs (4,510) (3,434) (4,988) (18,132) (13,526) (25,850)

Net profit before income tax 46,270 46,747 51,285 134,934 135,753 133,180

Total income tax expense (13,832) (13,827) (15,535) (39,504) (39,681) (40,626)

Net profit attributable to

owners of the Company 32,438 32,920 35,750 95,430 96,072 92,554


11

Sales, operating profit and registered actives by Global Business Area

Sales (€m)


2018* 2018** 2017

Change in

Euro**

Change in

Lc**

Latin America 44.4 43.1 41.0 5% 6%

Europe & Africa 95.9 98.6 92.4 7% 7%

CIS 87.7 92.7 94.5 (2%) 5%

Asia & Turkey 126.6 131.2 150.0 (13%) (8%)

Manufacturing 2.7 2.7 0.3 758% 758%

Other 2.0 2.0 1.9 11% 17%

Total sales 359.3 370.3 380.1 (3%) 1%

Sales

(€m)


2018* 2018** 2017

Change in

Euro**

Change in

Lc**

Latin America 151.3 152.9 157.5 (3%) 2%

Europe & Africa 322.2 328.5 324.7 1% 1%

CIS 303.0 316.8 356.8 (11%) (3%)

Asia & Turkey 484.6 503.0 510.2 (1%) 7%

Manufacturing 10.3 10.3 6.9 48% 48%

Other 7.4 7.4 7.0 7% 7%

Total sales 1,278.8 1,318.9 1,363.1 (3%) 3%



reported figures.

Operating

profit (€m)

3 months ended

31 December

12 months ended

31 December

2018* 2018** 2017 Change** 2018* 2018** 2017 Change**

Latin America 5.4 4.2 5.5 (25%) 18.6 17.6 20.8 (15%)

Europe & Africa 18.2 18.3 15.2 20% 48.8 47.6 45.2 5%

CIS 10.9 11.8 14.6 (19%) 35.7 36.4 45.4 (20%) Asia & Turkey 31.0 30.6 39.1 (22%) 109.3 107.2 110.3 (3%)

Manufacturing (0.7) (0.7) (1.5) (51%) 6.5 6.5 9.2 (29%)

Other (14.0) (14.0) (16.6) (16%) (65.8) (66.0) (71.9) (8%)

Total operating profit

50.8 50.2 56.3 (11%) 153.1 149.3 159.0 (6%)



reported figures.

Registered actives

(´000)

31 December

2018 2017 Change

Latin America 306 280 9%

Europe & Africa 791 783 1%

CIS 966 859 12%

Asia & Turkey 1,042 1,145 (9%)

Total 3,105 3,067 1%


12

0.3 NET DEBT AT

HEDGED VALUES

/EBITDA

Cash flow & investments

Cash flow from operating activities in the fourth quarter amounted to €60.6m (€79.0m), driven by

lower operating profit and timing of payables. Cash flow from operating activities amounted to


Cash flow used in investing activities amounted to €-3.4m (€-6.1m) and to €-3.4m* in

accordance with IFRS. *Figures following the adoption of IFRS 15 and IFRS 16.

Financial position

Net interest-bearing debt at hedged values amounted to €48.4m (€4.3m net cash). The net debt at

hedged values/EBITDA ratio was 0.3** (negative 0.02). Net interest-bearing debt at hedged values

amounted to €130.0m* and the net debt at hedged values/EBITDA ratio was 0.7* in accordance

with IFRS.

Net interest-bearing debt amounted to €72.4m (€23.5m). The net debt/EBITDA ratio was 0.4**

(0.1). Interest cover amounted to 12.5 (20.0) in the quarter and to 8.9 (11.5) during the last twelve

months. The net interest-bearing debt amounted to €154.1m*, the net debt/EBITDA ratio was 0.8*

and interest cover amounted to 12.6* in the quarter in accordance with IFRS. *Figures following the adoption of IFRS 15 and IFRS 16.

**The EBITDA is adjusted for the impact from IFRS 15 (around €4m) and IFRS 16 (around €25m) in order to make it comparable

with the 2017 reported EBITDA.

Covenant disclosure

As per the end of the fourth quarter 2018, the financial measures as defined in the Agreements

relating to the existing Private Placement Notes were as follows:

Consolidated Net Debt to Consolidated EBITDA: 0.5* (covenant at ≤ 3.0 times)

Consolidated EBITDA to Consolidated Finance costs: 17.9* (covenant at ≥ 5.0 times)

Consolidated Net Worth: €152.1m (covenant at ≥ €120m / not applicable for 2017 and 2018 Euro

denominated private placement notes however covered by most favourable lender clause)

As per the end of the fourth quarter 2018, the financial measures as defined in the Agreements

relating to the existing Revolving Credit Facility were as follows:

Consolidated Net Debt to Consolidated EBITDA: 0.5* (covenant at ≤ 3.0 times)

Consolidated EBITDA to Consolidated Finance costs: 17.9* (covenant at ≥ 4.0 times)

Note that the definition of these measures differs from the definitions of the Net Debt to EBITDA

and Interest cover disclosed in the other sections of the report, primarily related to gains from

sales of assets and cash in non-OECD markets. *The EBITDA is adjusted for the impact from IFRS 15 (around €4m) and IFRS 16 (around €25m) in order to make it comparable

with the 2017 reported EBITDA.

Related parties

There have been no significant changes in the relationships or transactions with related parties

compared with the information given in the Annual Report 2017.

Dividend decided at the 2018 AGM The AGM held on 4 May 2018 resolved that a dividend of €2.60 per share, of which €1.60 (€1.00)

per share is to be considered as ordinary and €1.00 (€0.50) to be considered as extra dividend, be

distributed out of the capital contribution reserve and paid in four instalments as follows: €1.40 to

the shareholders of record on 9 May 2018, €0.40 to the shareholders of record on 15 August

2018, €0.40 to the shareholders of record on 15 November 2018 and €0.40 to the shareholders of

record on 15 February 2019. The dividend instalments will be distributed out of the Company’s

Capital Contribution Reserve and are thereby not subject to any Swiss withholding tax.

The fourth instalment of €0.40 per share (record date 15 February 2019) will have expected

payment date 22 February 2019.


13

Dividend proposal to the 2019 AGM

Oriflame Holding AG will hold its 2019 Annual General Meeting in Schaffhausen, Switzerland, on 9

May 2019. The Board of Directors will propose to the 2019 AGM a total dividend of €1.60 per

share for 2018 (to be compared with 2018 AGM €1.60 ordinary dividend + €1.00 extra ordinary

dividend). The dividend is to be paid in equal quarterly instalments of €0.40 respectively starting in

the second quarter 2019. The dividend instalments will be distributed out of the Company’s Capital

Contribution Reserve and are thereby not subject to any Swiss withholding tax.

Outcome of Oriflame’s 2016 Share Incentive plans and related issuance of new shares under the conditional share capital In accordance with the terms of Oriflame’s share incentive plans (the SIPs), the Board of the

Company has resolved to allocate a total of 280,376 shares as achievement shares to participants of

the 2016 SIP investment schemes. Participants will receive the achievement shares free of charge.

For further information about the Company’s share incentive programs, please see the corporate

governance section on the Company’s website.

The Board has resolved that out of the total number of shares to be delivered, 191,672 shares will

be issued as new shares under the Company’s conditional share capital. Following the issuance, the

Company’s total number of shares will amount to 56,634,038 shares, with a total nominal value of

CHF 84,951,057. The share capital increase is expected to be resolved on the 19th of February

2019 and recorded with the commercial register as soon as practicable thereafter. The remaining

achievement shares will be delivered from the Company’s treasury shares and/or shares to be

repurchased by the Company and for such purpose, the Board has resolved to repurchase up to

90,000 shares, as applicable. The Company currently holds 11,640 treasury shares. Any repurchases

of shares shall be made on one or several occasions during the period from 15th February 2019 up

until 30 June 2019. Any repurchases of shares shall be made in cash at a price within the price

interval prevailing at any given time, and in accordance with any additional repurchase restrictions

set out in Nasdaq Stockholm issuer rules applicable to the Company.

Implementation of new Share Incentive plan

The Board of Directors has resolved to continue with its long-standing practice of offering key

employees of the Oriflame group to annually invest in a Share Incentive Plan, and has resolved to

implement a new share incentive plan during the first quarter 2019 for approximately 50 key

employees of the Oriflame group (the “Participants”) for the investment year 2019 (the "2019 SIP").

The 2019 SIP main terms and conditions are consistent with those of the previous share incentive

plans covering the years 2015 to 2018. The 2019 SIP will offer Participants to designate Oriflame

shares they own or purchase as investment shares (the “Investment Shares”) during 2019. The

number of Investment Shares to be offered under the 2019 Plan has been determined by the Board

of Directors to up to 71,000 Investment Shares. Up to 8 times the shares designated as Investment

Shares will be available to be allocated to the Participants as free shares (the “Achievement

Shares”) at the end of the 3-5 year investment period as follows: The allotment of Achievement

Shares to each Participant will be between 0 and 8 Achievement Shares for each Investment Share,

depending on the development of the year-end operating profit of the Oriflame Group as from the

start of the investment year until the start of the 5th anniversary year of the dedication of each

Investment Share, with a potential partial or full vesting after 3 and 4 years respectively should any

of the operating profit thresholds have been met already at such point. The levels of operating

profit development required for each Achievement Share level will be determined by the Board of

Directors to provide a fair balance between performance and reward. The potential share capital dilution resulting from the 2019 Plan amounts to maximum 1 percent of the Company’s current

share capital. Under IFRS 2 the cost of the 2019 Plan is expensed over the vesting period. The

maximum cost, based on current value of the investment shares, to be expensed over the period

2019-2024 is estimated to amount to approximately EUR 9,200,000.00. In addition to this amount,

costs in the form of social charges will arise. However, as the social charges will depend on the

value of the Achievement Shares at the time of issuance and furthermore on where the Participants

are resident at the time of allotment of the Achievement Shares, they cannot be estimated at this

stage. The reason for continuing with the practice of an annual share incentive plan is that a long

term ownership interest of the Participants is likely to increase their interest in the business and


14

-7% FIRST QUARTER TO

DATE LC SALES

the results of the Oriflame group and that it will increase the motivation and mutual interests of the

Participants and the Company. The proposal is therefore deemed to be beneficial for the Company

and its shareholders. For the purpose of future awards of Achievement Shares under the 2019 Plan,

the Board of Directors intends to either issue new shares under the existing conditional share

capital mandate (including seeking any further conditional share capital mandate from the general

meeting if and when deemed appropriate by the Board of Directors), and/or repurchase existing

shares at market value. For further information about the terms of the active current share

incentive plans of the Company, reference is made to note 21 of the 2017 Annual Report for the

Oriflame group as well as the subsection “share incentive schemes” in our corporate governance

section on the corporate website oriflame.com.

Personnel

The average number of full-time equivalent employees was 6,214 (6,186).

First quarter update

The first quarter to date sales development is approximately -7% in local currency, negatively

impacted by timing.

Long term targets

Oriflame aims to achieve local currency sales growth of approximately 10 percent per annum and

an operating margin of 15 percent.

The business of the Group presents cyclical evolutions and is driven by a number of factors:

• Effectiveness of individual catalogues and product introductions

• Effectiveness and timing of recruitment programmes

• Timing of sales and marketing activities

• The number of effective sales days per quarter

• Currency effect on sales and results

Financial Calendar for 2019 The Annual Report will be published on the company’s website the week commensing April 15,

2019

The first quarter 2019 report will be published on 9 May 2019

The 2019 Annual General Meeting will be held on 9 May 2019

The second quarter 2019 report will be published on 8 August 2019

The third quarter 2019 report will be published on 7 November 2019


15

Other

A Swedish translation is available on www.oriflame.com.

Conference call for the financial community

The Company will host a conference call on Thursday, 14 February 2019 at 9.30 CET.

Participant access numbers:

DK: +4578150109

FI: +358981710523

NO: +4723500236

UK: +443333009274

US: 18446251570

SE: +46 856642651 PIN: 28240569#

The conference call will also be audioeb cast in “listen-only” mode through Oriflame’s website:

www.oriflame.com or through http://oriflame-ir.creo.se/190214

This report has not been audited by the Company’s auditors.

February 14, 2019

Magnus Brännström

Chief Executive Officer

For further information, please contact:

Magnus Brännström, Chief Executive Officer Tel: +41 798 263 754

Gabriel Bennet, Chief Financial Officer Tel: +41 798 263 769

Nathalie Redmo, Sr. Manager IR Tel: +41 799 220 173

This is information that Oriflame Holding AG is obliged to make public pursuant to the EU Market

Abuse Regulation. The information was submitted for publication, through the agency of the

contact person set out above, at 07:15 CET on February 14, 2019.

Oriflame Holding AG

Bleicheplatz 3, CH-8200 Schaffhausen, Switzerland www.oriflame.com

Company registration no CHE-134.446.883

http://www.oriflame.com/


16

Consolidated key figures 3 months ended

31 December

12 months ended

31 December

2018* 2018** 2017 2018* 2018** 2017

Gross margin, % 66.6 70.9 73.7 69.2 72.6 73.0


Return on:

- operating capital, % - - - 55.9 62.0 57.7

- capital employed, % - - - 33.7 35.3 34.7

Net debt at hedged values / EBITDA (LTM) 0.7 0.3*** (0.02) 0.7 0.3*** (0.02)

Net debt / EBITDA (LTM) 0.8 0.4*** 0.1 0.8 0.4*** 0.1

Interest cover 12.6 12.5 20.0 9.1 8.9 11.5

Average no. of full-time equivalent employees 6,214 6,214 6,186 6,143 6,143 6,230


**Figures excluding the impact of IFRS 15, IFRS 16 and related accounting alignments. The numbers are fully comparable with 2017 reported figures.

*** The EBITDA is adjusted for the impact from IFRS 15 (around €4m) and IFRS 16 (around €25m) in order to make it comparable with the 2017 reported EBITDA.

Definitions Operating capital

Total assets less cash and cash equivalents and non interest-bearing liabilities, including deferred tax liabilities.

Return on operating capital

Operating profit divided by average operating capital.

Capital employed

Total assets less non interest-bearing liabilities, including deferred tax liabilities.

Return on capital employed

Operating profit plus interest income divided by average capital employed.

Net interest-bearing debt

Interest-bearing debt excluding front fees less cash and cash equivalents.

Interest cover

Operating profit plus interest income divided by interest expenses and charges.

Net interest-bearing debt to EBITDA

Net interest-bearing debt divided by EBITDA.

EBITDA

Operating profit before financial items, taxes, depreciation, amortisation and share incentive plan.

Condensed consolidated financial statements 31 December 2018 Important clarifying information IFRS

Please note that due to accounting principles and the chosen implementation options of the new IFRS standards, the condensed

consolidated financial statements in the year-end report is calculated in accordance with IFRS (following the adoption of IFRS 15 and

IFRS 16). For adjusted 2018 figures that are comparable with the 2017 figures, (excluding the impact of IFRS 15, IFRS 16 and related

accounting alignments) please see pages 1-15 in the interim report.


17

Quarterly Figures following the adoption of IFRS 15 and IFRS 16 Financial summary Q1’18 Q2’18 Q3’18 Q4’18

Sales, €m 330.8 309.2 279.4 359.3

Gross margin, % 69.7 70.2 70.9 66.6

Operating profit, €m 34.8 38.1 29.4 50.8

Operating margin, % 10.5 12.3 10.5 14.1

Net profit before income tax, €m 30.3 34.3 24.1 46.3

Net profit, €m 21.0 24.5 17.5 32.4

EPS, diluted € 0.36 0.42 0.30 0.57

Cash flow from op. activities, €m 24.9 28.5 9.9 60.6

Net interest-bearing debt, €m 103.3 170.2 185.0 154.1

Registered actives, ‘000 3,034 2,768 2,659 3,105

Sales, €m Q1’18 Q2’18 Q3’18 Q4’18

Latin America 34.0 35.5 37.4 44.4

Europe & Africa 79.3 76.4 70.6 95.9

CIS 82.2 71.0 62.2 87.7

Asia & Turkey 128.4 123.2 106.4 126.6

Manufacturing 5.3 1.4 0.9 2.7

Other 1.6 1.7 1.9 2.0

Oriflame 330.8 309.2 279.4 359.3

Operating Profit, €m Q1’18 Q2’18 Q3’18 Q4’18

Latin America 5.2 3.7 4.3 5.4

Europe & Africa 10.3 11.5 8.8 18.2

CIS 10.1 8.1 6.6 10.9

Asia & Turkey 29.4 28.5 20.5 31.0

Manufacturing 3.2 2.2 1.9 (0.7)

Other (23.4) (15.9) (12.7) (14.0)

Oriflame 34.8 38.1 29.4 50.8

Registered actives, ‘000 Q1’18 Q2’18 Q3’18 Q4’18

Latin America 264 274 304 306

Europe & Africa 750 690 652 791

CIS 836 792 727 966

Asia & Turkey 1,184 1,012 976 1,042

Oriflame 3,034 2,768 2,659 3,105

Operating Margin, % Q1’18 Q2’18 Q3’18 Q4’18

Latin America 15.2 10.5 11.4 12.2

Europe & Africa 12.9 15.0 12.5 19.0

CIS 12.3 11.5 10.6 12.4

Asia & Turkey 22.9 23.1 19.3 24.5

Oriflame 10.5 12.3 10.5 14.1

€ Sales Growth in % Q1’18 Q2’18 Q3’18 Q4’18

Latin America (4) (13) (7) 8

Europa & Africa (2) (5) (0) 4

CIS (17) (24) (11) (7)

Asia & Turkey 9 (5) (5) (16)

Oriflame (3) (11) (5) (5)

Cash Flow, €m Q1’18 Q2’18 Q3’18 Q4’18

Operating cash flow 24.9 28.5 9.9 60.6

Cash flow used in investing activities (3.1) (1.9) (3.5) (3.4)


18

Quarterly Figures excluding the impact of IFRS 15, IFRS 16 and related accounting alignments

Financial summary Q3’17 Q4’17 Q1’18* Q2’18* Q3’18* Q4’18*

Sales, €m 295.3 380.1 334.1 321.9 292.5 370.3

Gross margin, % 73.8 73.7 72.5 73.4 73.9 70.9

Operating profit, €m 32.5 56.3 30.6 38.5 30.0 50.2


Net profit before income tax, €m 24.8 51.3 27.3 35.9 25.9 46.7

Net profit, €m 17.4 35.8 18.7 25.7 18.8 32.9

EPS, diluted € 0.30 0.62 0.32 0.44 0.33 0.58

Cash flow from op. activities, €m 11.2 79.0 24.9 28.5 9.9 60.6

Net interest-bearing debt, €m 85.4 23.5 16.3 84.2 101.0 72.4

Registered actives, ‘000 2,646 3,067 3,034 2,768 2,659 3,105

Sales, €m Q3’17 Q4’17 Q1’18* Q2’18* Q3’18* Q4’18*

Latin America 40.4 41.0 32.5 36.8 40.5 43.1

Europe & Africa 70.7 92.4 78.5 78.1 73.2 98.6

CIS 69.9 94.5 84.6 75.2 64.3 92.7

Asia & Turkey 111.7 150.0 131.6 128.7 111.7 131.2

Manufacturing 0.8 0.3 5.3 1.4 0.9 2.7

Other 1.8 1.9 1.6 1.7 1.9 2.0

Oriflame 295.3 380.1 334.1 321.9 292.5 370.3

Operating Profit, €m Q3’17 Q4’17 Q1’18* Q2’18* Q3’18* Q4’18*

Latin America 5.9 5.5 4.0 4.0 5.5 4.2

Europe & Africa 9.2 15.2 8.5 11.4 9.4 18.3

CIS 9.9 14.6 10.6 8.3 5.7 11.8

Asia & Turkey 22.1 39.1 27.7 28.5 20.4 30.6

Manufacturing 1.3 (1.5) 3.2 2.2 1.9 (0.7)

Other (15.9) (16.6) (23.4) (15.9) (12.9) (14.0)

Oriflame 32.5 56.3 30.6 38.5 30.0 50.2

Registered actives, ‘000 Q3’17 Q4’17 Q1’18* Q2’18* Q3’18* Q4’18*

Latin America 299 280 264 274 304 306

Europe & Africa 674 783 750 690 652 791

CIS 698 859 836 792 727 966

Asia & Turkey 975 1,145 1,184 1,012 976 1,042

Oriflame 2,646 3,067 3,034 2,768 2,659 3,105

Operating Margin, % Q3’17 Q4’17 Q1’18* Q2’18* Q3’18* Q4’18*

Latin America 14.6 13.5 12.3 10.8 13.5 9.7

Europe & Africa 13.0 16.5 10.8 14.6 12.9 18.6

CIS 14.2 15.5 12.5 11.1 8.8 12.8

Asia & Turkey 19.8 26.0 21.1 22.2 18.2 23.3

Oriflame 11.0 14.8 9.2 12.0 10.3 13.6

€ Sales Growth in % Q3’17 Q4’17 Q1’18* Q2’18* Q3’18* Q4’18*

Latin America (1) 3 (8) (10) 0 5

Europa & Africa 0 (3) (3) (3) 4 7

CIS 4 1 (15) (19) (8) (2)

Asia & Turkey 15 22 11 (1) 0 (13)

Oriflame 6 7 (2) (7) (1) (3)

Cash Flow, €m Q3’17 Q4’17 Q1’18* Q2’18* Q3’18* Q4’18*

Operating cash flow 11.2 79.0 24.9 28.5 9.9 60.6

Cash flow used in investing activities (3.8) (6.1) (3.1) (1.9) (3.5) (3.4) *Figures excluding the impact of IFRS 15, IFRS 16 and related accounting alignments. The numbers are fully comparable with 2017 reported figures.


19

Condensed consolidated income statements


Earnings per share

€



2018* 2017 2018* 2017

EPS:

- basic 0.57 0.64 1.69 1.66

- diluted 0.57 0.62 1.68 1.62

Weighted avg. number of shares outstanding:

- basic 56,430,726 55,740,805 56,335,598 55,740,805

- diluted 57,058,386 57,217,925 56,963,258 57,217,925

Total number of shares outstanding (excluding treasury shares)

56,430,726 55,740,805 56,430,726 55,740,805




€’000 2018* 2017 2018* 2017

Sales

359,324 380,085 1,278,752 1,363,111

Cost of sales

(119,851) (100,079) (393,624) (368,547)

Gross profit

239,473 280,006 885,128 994,564

Other income

- 11,591 - 45,311

Selling and marketing expenses

(113,103) (137,017) (428,281) (500,577)

Distribution and infrastructure

(7,858) (25,187) (28,491) (95,384)

Administrative expenses

(67,732) (73,120) (275,290) (284,884)

Operating profit

50,780 56,273 153,066 159,030

Financial income

6,961 6,983 15,634 47,338

Financial expenses

(11,471) (11,971) (33,766) (73,188)

Net financing costs

(4,510) (4,988) (18,132) (25,850)

Net profit before income tax

46,270 51,285 134,934 133,180

Total income tax expense

(13,832) (15,535) (39,504) (40,626)

Net profit attributable to owners of the Company

32,438 35,750 95,430 92,554


20

Condensed consolidated statements of comprehensive income

€’000



2018* 2017 2018* 2017

Net Profit 32,438 35,750 95,430 92,554

Other comprehensive income

Items that will not be reclassified subsequently to profit or loss:

Remeasurements of net defined liability, net of tax (238) (1,466) 539 (1,356)

Total items that will not be reclassified

subsequently to profit or loss (238) (1,466) 539 (1,356)

Items that are or may be reclassified subsequently to profit or loss:

Foreign currency translation differences for foreign operations

(1,247) (1,384) (14,620) (13,964)

Effective portion of changes in fair value of cash

flow hedges, net of tax 38 369 (769) 3,145

Total items that are or may be reclassified subsequently to profit or loss

(1,209) (1,015) (15,389) (10,819)

Other comprehensive income for the

period, net of tax (1,447) (2,481) (14,850) (12,175)

Total comprehensive income for the period

attributable to owners of the Company 30,991 33,269 80,580 80,379



21

Condensed consolidated statements of financial position

€’000

31 December,

2018*

31 December,

2017

Assets

Property, plant and equipment 135,232 152,919

Right of use Assets 77,345 -

Intangible assets 12,393 14,595

Investment property 542 542

Deferred tax assets 32,834 31,136

Other long-term receivables 107 105

Total non-current assets 258,453 199,297

Inventories 156,841 165,509

Trade and other receivables 72,820 79,812

Tax receivables 13,664 8,810

Prepaid expenses 15,999 27,954

Derivative financial assets 26,641 29,682

Cash and cash equivalents 178,075 221,399

Total current assets 464,040 533,166

Total assets 722,493 732,463

Equity

Share capital 80,745 79,850

Treasury shares (474) (90)

Share premium 424,870 548,474

Reserves (182,836) (164,732)

Retained earnings (187,382) (241,906)

Total equity attributable to the owners of the company 134,923 221,596

Liabilities

Interest-bearing loans 249,404 195,113

Lease Obligations 62,635 -

Other long-term liabilities 4,380 3,983

Net defined benefit liability 4,236 4,938

Deferred income 239 309

Deferred tax liabilities 2,796 2,502

Total non-current liabilities 323,690 206,845

Current portion of interest-bearing loans - 48,477

Lease Obligations 19,024 -

Trade and other payables 87,058 91,746

Dividend payables 22,729 14,049

Contract liabilities 15,155 311

Tax payables 13,307 15,669

Accrued expenses 101,472 127,811

Derivative financial liabilities 2,428 2,392

Provisions 2,707 3,567

Total current liabilities 263,880 304,022

Total liabilities 587,570 510,867

Total equity and liabilities 722,493 732,463



22

Condensed consolidated statements of changes in equity

€’000

Share capital

Treasury shares

Share Premium

Reserves

Retained earnings

Total Equity

At 1 January 2017 79,850 (90) 632,085 (167,017) (333,104) 211,724

Net profit - - - - 92,554 92,554

Other comprehensive income,

net of tax - - - (10,819) (1,356) (12,175)

Total comprehensive income for the period

- - - (10,819) 91,198 80,379

Share incentive plan - - - 13,104 - 13,104

Dividends - - (83,611) - - (83,611)

Total contributions and distributions

- - (83,611) 13,104 - (70,507)

At 31 December 2017 79,850 (90) 548,474 (164,732) (241,906) 221,596

At 1 January 2018 as previously reported

79,850 (90) 548,474 (164,732) (241,906) 221,596

Adjustment from adoption of IFRS 15, IFRS 16 (net of tax)

and accounting alignments

- - - - (25,996) (25,996)

Restated balance at 1

January 2018 79,850 (90) 548,474 (164,732) (267,902) 195,600

Net profit - - - - 95,430 95,430

Other comprehensive income,

net of tax - - - (15,389) 539 (14,850)

Total comprehensive

income for the period - - - (15,389) 95,969 80,580

Issue of ordinary shares in relation to share incentive plan

895 - 23,116 (8,860) (15,449) (298)

Purchase of treasury shares - (1,584) - - - (1,584)

Usage of treasury shares - 1,200 - - - 1,200

Share incentive plan - - - 6,145 - 6,145

Dividends - - (146,720) - - (146,720)

Total contributions and

distributions 895 (384) (123,604) (2,715) (15,449) (141,257)

At 31 December 2018 80,745 (474) 424,870 (182,836) (187,382) 134,923


23

Condensed consolidated statements of cash flows

€’000


12 months ended

31 December

2018* 2017 2018* 2017

Operating activities

Net profit before income tax 46,270 51,285 134,934 133,180

Adjustments for:

Depreciation of property, plant and equipment 9,296 4,258 36,855 17,657

Amortisation of intangible assets 587 376 2,380 1,600

Change in fair value of borrowings and derivatives financial instruments (894) (36) (985) (142)

Deferred income 2,719 (16) (1,988) (91)

Impairment 1,153 68 1,153 415

Share incentive plan (2,773) 2,516 6,145 13,104

Settlement of share incentive plan - - 902 -

Unrealised exchange rate differences (8,143) (232) (10,593) 5,896

Profit on disposal of property, plant and equipment, intangible assets (178) (20) (1,245) (920)

Financial income (2,727) (3,092) (11,219) (13,268)

Financial expenses 5,103 4,360 22,504 20,509

Operating profit before changes in working capital and provisions 50,413 59,467 178,843 177,940

(Increase)/decrease in trade and other receivables, prepaid expenses and derivative financial assets

2,184 4,895 2,939 (989)

(Increase)/decrease in inventories 18,067 8,076 20,759 (6,319)

Increase/(decrease) in trade and other payables, accrued expenses and derivatives financial liabilities

(1,459) 16,818 (23,545) 9,313

Increase/(decrease) in provisions 1,961 672 647 (1,934)

Cash generated from operations 71,166 89,928 179,643 178,011

Interest received 2,788 2,651 12,174 14,528

Interest and bank charges paid (6,337) (4,590) (23,448) (21,689)

Income taxes paid (6,985) (8,978) (44,423) (48,175)

Cash flow from operating activities 60,632 79,011 123,946 122,675

Investing activities

Proceeds on sale of property, plant and equipment, intangible assets 654 4 3,113 1,998

Purchases of property, plant, equipment (4,013) (5,538) (14,694) (15,560)

Purchases of intangible assets (40) (570) (262) (2,254)

Cash flow used in investing activities (3,399) (6,104) (11,843) (15,816)

Financing activities

Proceeds from borrowings - - 50,742 105,000

Repayments of borrowings - - (41,397) (86,471)

Acquisition of own shares - - (1,584) -

Decrease of lease liabilities (5,247) - (22,479) -

Dividends paid (22,545) (13,922) (137,961) (80,760)

Cash flow used in financing activities (27,792) (13,922) (152,679) (62,231)

Change in cash and cash equivalents 29,441 58,985 (40,576) 44,628

Cash and cash equivalents at the beginning of the period net of bank overdrafts 147,607 163,449 221,345 185,365

Effect of exchange rate fluctuations on cash held 1,027 (1,089) (2,694) (8,648)

Cash and cash equivalents at the end of the period, net of bank overdrafts 178,075 221,345 178,075 221,345



24

Notes to the condensed consolidated financial statements of Oriflame Holding AG

Note 1 • Status and principal activity

Oriflame Holding AG (“OHAG” or the “Company”) is a holding company incorporated in Switzerland and registered at Bleicheplatz 3, CH-8200 Schaffhausen. The principal activity of the Company’s subsidiaries is the direct sale of cosmetics. The condensed consolidated financial statements of the Company as at and for the twelve months ended 31 December 2018 comprise the Company and its subsidiaries (together referred to as the

“Group”).

Note 2 • Basis of preparation and summary of significant accounting policies

Statement of compliance The condensed consolidated financial statements for the twelve months period ended 31 December 2018 have been prepared by management in accordance with IAS 34 and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2017. They do not include all of the information required for a complete set of IFRS financial statements.

This is the first set of the Group’s financial statements where IFRS 15, IFRS 16 and IFRS 9 have been applied. Changes to significant accounting policies are described below. The condensed consolidated financial statements were authorised for issue by the Directors on 13 February 2019.

Change in significant accounting policies, use of judgements and estimates Except as described below, the accounting policies, significant judgements and key sources of estimation uncertainty applied by the Group in these financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2017.

The changes in accounting policies are also expected to be reflected in the Group’s consolidated financial statements as at end for the year ending 31 December 2018.

From 1st January 2018, IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with customers have become effective. In addition, the Group has decided to early adopt IFRS 16 Leases at the same time as IFRS 15. A number of other new standards are effective from 1 January 2018 but they do not have a material effect on the Group’s financial statements.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced IAS 18 Revenue, IAS

11 Construction Contracts and related interpretations.

The Group has adopted IFRS 15 using the cumulative effect method, with the effect of initially applying this standard recognised at the date of initial

application (i.e. 1 January 2018). Accordingly, the information presented for 2017 has not been restated – i.e. it is presented, as previously reported,

under IAS 18, IAS 11 and related interpretations.

The following table summarises the impact, net of tax, of transition to IFRS 15 on retained earnings at 1 January 2018.

€’000 Impact of adopting

IFRS 15 at 1 January 2018

Retained earnings

Revenue recognition based on the transfer of control (9,024)

Performance obligations (12,060)

Related tax 4,916

Impact at 1 January 2018 (16,168)


25

The following tables summarise the impacts of adopting IFRS 15 on the Group’s statement for profit or loss and OCI for the twelve months then ended

31 December 2018 for each of the line items affected. There was no material impact on the Group’s statement of cash flows for the twelve month period ended 31 December 2018.

Impact on the condensed statement of profit or loss and OCI

The details of the new significant accounting policies and the nature of the changes to previous accounting policies in relation to the Group’s revenue

are set out below.

Sales revenue under IFRS 15

i. Sale of goods

Revenue, which excludes value added tax and other applicable turnover taxes, represent sales to individual sales consultants and licensed distributors or, in the case of mail order and retail sales, to individual customers or, in case of third party suppliers, royalties income. Sales are recognised in the consolidated income statements when the control of the goods have been transferred to the buyer. No revenue is

recognised if there are significant uncertainties regarding recovery of the consideration due.

ii. Sales programmes

Revenue is allocated between the sales programmes and the other components of sale. The amount allocated to loyalty programmes is deferred, and is recognised as revenue when the Group has fulfilled its obligation to supply the free or discounted products under the terms of the programmes or when it is no longer probable that the points under the programmes will be redeemed.

Nature of change in accounting policy

i. Sale of goods

Under IAS 18 Revenue sales were recognised in the consolidated income statements when the significant risks and rewards of ownership have been transferred to the buyer. No revenue were recognised if there are significant uncertainties regarding recovery of the consideration due. The impact of these changes on items other than revenue is mainly an increase in deferred revenue and an increase in inventories.

ii. Other income

Under IAS 18 Other income comprised catalogues sales, freight income and rental income. Under IFRS 15 these amounts are booked as cost

reduction to the underlying cost stream as this is not representing a revenue stream for the group.

At 31 December 2018

€’000 As reported Adjustments

Amounts

without adoption

of IFRS 15

Sales 1,278,752 40,139 1,318,891

Cost of sales (393,624) 32,106 (361,518)

Gross profit 885,128 72,245 957,373

Other income - 41,515 41,515

Selling and marketing expenses (428,281) (58,430) (486,711)

Distribution and infrastructure (28,491) (59,175) (87,666)

Administrative expenses (275,290) (138) (275,428)

Operating profit 153,066 (3,983) 149,083

Net profit before income tax 134,934 (3,983) 130,951

Total income tax expense (39,504) 921 (38,583)

Net profit 95,430 (3,062) 92,368

Total comprehensive income for the period 80,580 (3,062) 77,518


26

IFRS 16 Leases

IFRS 16 replaces existing leases guidance, including IAS 17 leases and related interpretations. IFRS 16 introduces a single on balance sheet lease

accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments.

The Group has adopted IFRS 16 based on the modified retrospective option including the practical Expendients (grandfathering, <12 months, low values), with the effect of initially applying this standard recognised at the date of intial application (i.e. 1 January 2018). Accordingly, the information presented for 2017 has not been restated – i.e. it is presented, as previously reported under IAS 17 and related interpretations.

The following table summarises the impact net of tax of transition to IFRS 16 on retained earnings at 1 January 2018.

IFRS 9 Financial Instruments The following table below explain the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group’s financial assets as at 1 January 2018.

€’000 Impact of adopting

IFRS 16 at 1 January 2018

Right of used asset 87,709

Lease liability (93,865)

Related tax effect 1,117

Impact at 1 January 2018 at Retained earnings (5,039)

€’000

Original classification under

IAS 39

New classification

under IFRS 9

Original carrying

amount under IAS 39

New carrying

amount under IFRS 9

Financial assets

Interest rate caps used for trading Held-for-trading Mandatorily at FVTPL 8 8

Forward exchange contracts used for

hedging

Fair value – hedging

instrument

Fair value – hedging

instrument 1,585 1,585

Other forward exchange contracts Held-for-trading Mandatorily at FVTPL 171 171

Cross currency interest rate swap contracts used for hedging

Fair value – hedging instrument

Fair value – hedging instrument

10,043 10,043

Other cross currency interest rate swap contracts

Held-for-trading Mandatorily at FVTPL 17,875 17,875

Trade and other receivables Loans and receivables Amortised cost 64,822 64,822

Cash and cash equivalents Loans and receivables Amortised cost 221,399 221,399

Total financial assets 315,903 315,903


27

Note 3 • Segment reporting

Operating segments

The Group has five main reportable segments, which represent the structure of financial information reviewed by the Corporate Committee, consist of the following: Latin America, Europe & Africa, CIS, Asia & Turkey and Manufacturing.

The purpose of the Group is to sell cosmetics within the above organisation. The Group sales consist mainly of sales of Colour cosmetics, Skin care, Personal & Hair Care, Fragrances and Accessories & Wellness products. The segment Manufacturing is producing mainly for the Group. Smaller quantities are produced for third parties as well. “All other segments” includes mail order business, licensee sales and royalties income. The

performance of each market and region is measured by the operating profit. Sales presented in the segment reporting are only revenues from external customers.

Unallocated items

Some costs and capital expenditure are not identified as part of any operating segment and are therefore not allocated. Examples of such items are cost for corporate staff, IT costs and general marketing costs. Net financing costs and total income tax expense are also not allocated.

Summarised financial information concerning the reportable segments is shown in the following tables:

As per 31 December 2018

€'000 Latin

America

Europe &

Africa CIS

Asia &

Turkey

Manu-

facturing

All other

segments

Total

segments

Unallocated

items Total

Sales 151,321 322,225 302,998 484,556 10,260 7,392 1,278,752 - 1,278,752

Operating Profit 18,579 48,810 35,745 109,298 6,503 2,082 221,017 (67,951) 153,066

Net financing costs - - - - - - - - (18,132)

Net profit before income tax - - - - - - - - 134,934

Total income tax expense - - - - - - - - (39,504)

Net profit - - - - - - - - 95,430

Capital Expenditure (3,001) (4,394) (2,801) (9,340) (5,380) - (24,916) (3,792) (28,708)

Depreciation & Amortisation (2,345) (6,468) (5,944) (7,834) (9,630) - (32,221) (6,780) (39,001)

Impairment - - - - (1,153) - (1,153) - (1,153)

Goodwill - 1,053 - 4,345 - - 5,398 - 5,398

As per 31 December 2017

€'000 Latin

America Europe &

Africa CIS

Asia & Turkey

Manu-facturing

All other segments

Total segments

Unallocated items

Total

Sales 157,508 324,734 356,759 510,249 6,943 6,918 1,363,111 - 1,363,111

Operating Profit 20,805 45,222 45,355 110,276 9,155 2,066 232,879 (73,849) 159,030

Net financing costs - - - - - - - - (25,850)

Net profit before income tax - - - - - - - - 133,180

Total income tax expense - - - - - - - - (40,626)

Net profit - - - - - - - - 92,554

Capital Expenditure (892) (1,509) (1,571) (2,133) (5,665) - (11,770) (6,044) (17,814)

Depreciation & Amortisation (1,099) (1,601) (2,977) (2,068) (7,657) - (15,402) (3,855) (19,257)

Impairment - (68) - - - - (68) (347) (415)

Goodwill - 1,053 - 4,345 - - 5,398 - 5,398

Impairment €’000 During 2018, the Group recognised an impairment loss totalling €1.2 million (€0.4 million).


28

Note 4 • Financial income and expense

Recognised in the condensed consolidated income statements

€’000



2018 2017 2018 2017

Interest income on bank deposits 717 645 2,202 1,966

Interest received on finance lease receivable 5 2 24 23

Cross currency interest rate swaps interest income 2,005 2,445 8,993 11,279

Change in fair value of financial

assets and liabilities at fair value held for trading:

- Forward exchange rate contracts gain 2,175 916 47 2,363

- Interest rate swaps gain - 48 - -

- Cross currency interest rate swaps gain 2,059 - 4,324 -

Change in fair value of financial assets and

liabilities at fair value designated as such upon initial recognition:

- USD loan fair value gain - 2,927 - 31,707

- SEK collar option gain - - 44 -

Total financial income 6,961 6,983 15,634 47,338

Bank charges and interest expense on loans carried at amortised cost (2,522) (201) (11,197) (6,934)

Interest expense on loan carried at fair value (1,642) (2,691) (6,335) (7,536)

Cross currency interest rate swaps interest expense (939) (1,468) (4,847) (6,039)

Options expense paid - - (125)

Change in fair value of financial

assets and liabilities at fair value held for trading:

- Forward exchange rate contracts expense (1.508) (618) (263) (998)

- Interest rate swaps (142) - (117) (176)

- Interest rate caps expense (1) (2) (8) (14)

- Cross currency interest rate swaps expense - (3,235) - (32,740)

Change in fair value of financial assets and

liabilities at fair value designated as such upon initial recognition:

- USD loan fair value loss (1,617) - (3,041) -

- SEK collar option loss (72) - (3,041) -

Foreign exchange losses, net (3,028) (3,756) (7,833) (18,751)

Total financial expenses (11,471) (11,971) (33,766) (73,188)

Net financing costs (4,510) (4,988) (18,132) (25,850)


29

Note 5 • Dividends

Dividends declared During the 12 months period in 2018 and following the Annual General Meeting (AGM) held on 4 May 2018, a dividend of €2.60 per share was recognised against the capital contribution reserve (share premium) for an amount of €146.7m. In 2017, during the period, a dividend of €1.50 per share totalling €83.6m was recognised in the equity.

Dividends paid In February 2018, the fourth instalment from the 2017 AGM dividend resolution was paid for €13.9m (€0.25 per share). In May 2018, the first instalment from the 2018 AGM dividend resolution was paid for €79.0m (€1.40 per share).

In August 2018, the second instalment from the 2018 AGM dividend resolution was paid for €22.6m (€0.40 per share). In November 2018, the third instalment form the 2018 AGM dividend resolution was paid for €22,6m (€0.40 per share).

Note 6 • Share Incentive Plan In February 2018, a total of 729,921 achievment shares were delivered to participants of the 2014 and 2015 share incentive and retention plans (SIP).

The settlement was done through:

a. an increase of share capital for 688,401 shares with a par value of CHF 1.50 under the Company’s conditional share capital,

b. with 40,000 shares repurchased on Nasdaq Stockholm, and c. with the use of 1,520 existing treasury shares

During the first quarter 2018, the Board of Directors resolved to implement the 2018 share incentive plan (“2018 SIP”) for approximately 50 key employees of the Oriflame group (the “Participants”). This offer resulted in a grant of 71,000 investment shares at the beginning of the scheme.

Note 7 • Inventories During 2018 the Group wrote down €5.7 million (€6.1 million) inventory mainly due to obsolescence which is included in cost of sales.

Note 8 • Interest-bearing Loans

The terms and maturity schedule of loans outstanding at 31 December 2018 were as follows:

* Difference between the nominal value and the carrying amount consists of the fair value difference and the amount of amortised front-end fees.

On 3 May 2018, the Group successfully completed the issuance of € 50 million private placement notes. The notes have a final maturity in 2030 and will be linearly amortised starting from 2026. Interest is fixed and paid semi-annually.

On 13 July 2018, the first tranche in the U.S. private placement loan issued in 2011 matured and the Group repaid the aggregated principal amount of $ 58.1 million together with the interest accrued to investors.

In July 2018, the termination date of the Revolving bank facility was extended by one year, with the effect that the termination date shall be on the sixth anniversary in 2023.

€ '000 Currency Interest Year of 31 December 2018 31 December 2017

Rate maturity Face Carrying Face Carrying

value amount * value amount *

Revolving bank facility EUR Euribor + margin 2023 - (1,051) - (1,256)

Private placement loan USD Fixed rate USD 2020 51,471 61,776 51,471 60,176

Private placement loan USD Fixed rate USD 2018-2023 54,961 68,679 95,624 114,616

Private placement loan EUR Fixed rate EUR 2029 70,000 70,000 70,000 70,000

Private placement loan EUR Fixed rate EUR 2030 50,000 50,000 - -

Other short term loans TRY /DZD 0% - 16% / 9% - - - 54 54

Total interest-bearing liabilities 226,432 249,404 217,149 243,590

Non-current interest-bearing liabilities 249,404 195,113

Current interest-bearing liabilities - 48,477

Total interest-bearing liabilities 249,404 243,590


30

Note 9 • Financial instruments

Fair value estimation The fair values of financial assets and liabilities in the condensed consolidation interim statements of financial position are as follows (except for financial liabilities carried at amortised cost):

€’000 31 December 2018 31 December 2017

Carrying amount Carrying amount

Financial assets carried at fair value:

Cross currency interest rate swaps for trading 22,288 17,875

Interest rate caps for trading - 8

Option exchange rate contract for trading 44 -

Forward exchange rate contracts for trading 277 171

Total derivatives for trading 22,609 18,054

Cross currency interest rate swaps for hedging 2,988 10,043

Forward exchange rate contracts for hedging 1,044 1,585

Total derivatives for hedging 4,032 11,628

Total derivative financial assets 26,641 29,682

Total financial assets carried at fair value 26,641 29,682

Financial liabilities carried at amortised cost:

Loans (141,433) (138,607)

Total financial liabilities carried at amortised cost (141,433) (138,607)

Financial liabilities carried at fair value:

USD loan (107,971) (104,929)

Total designated as such upon initial recognition (107,971) (104,929)

Cross currency interest rate swaps for trading (498) (494)

Interest rate swaps for trading (346) (232)

Forward exchange rate contracts for trading (123) (69)

Total derivatives for trading (967) (795)

Cross currency interest rate swaps for hedging (222) (684)

Forward exchange rate contracts for hedging (1,238) (1,145)

Total derivatives for hedging (1,460) (1,829)

Total derivative financial liabilities (2,427) (2,624)

Total financial liabilities carried at fair value (110,398) (107,553)

For classification and measurement categories under IFRS 9 refer to Note 2.

The fair values for all other financial instruments such as cash and cash equivalents, short-term trade receivables and payables are not disclosed, because their carrying amounts are a reasonable approximation of fair value.

Derivative financial assets and liabilities The fair value of forward exchange contracts, interest rate swaps, cross currency interest rate swaps and options are based on their market quotes.

Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using

market interest rates for a similar instrument at the reporting date. The fair value of interest rate caps is the estimated amount which the Group would receive or pay when unwinding the caps at the reporting date.

Financial liabilities at amortised costs The fair value of loans at amortised cost as of 31 December 2018 is equivalent to € 161,897 (€ 152,596 as of 31 December 2017). Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the forward market rate of interest at the reporting date.

Financial liabilities carried at fair value designated as such upon initial recognition The fair value of the USD loans is calculated by discounting the cash flows associated to the loan schedule for the life of the loan at the market interest

rates prevailing for such type and currency of loan as of the reporting date. No changes in the credit risks were done for this calculation as there have been no changes in the financial condition of the Group since the inception of the USD loans.

Fair value hierarchy The table below shows fair value of financial assets and financial liabilities, including their levels in the fair value hierarchy, by valuation method. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation

of fair value. The different levels have been defined as follows:


31

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly

(i.e., derived from prices)

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

€'000 Level 1 Level 2 Level 3 Total

31 December 2018

Financial assets and liabilities measured at fair value

USD loans - (107,971) - (107,971)

Derivative financial assets - 26,641 - 26,641

Derivative financial liabilities - (2,427) - (2,427)

- (83,757) - (83,757)

Financial assets and liabilities not measured at fair value

Loans - (161,897) - (161,897)

- (161,897) - (161,897)

€'000 Level 1 Level 2 Level 3 Total

31 December 2017

Financial assets and liabilities measured at fair value

USD loans - (104,930) - (104,930)

Derivative financial assets - 29,682 - 29,682

Derivative financial liabilities - (2,624) -

(2,624)

- (77,872) - (77,872)

Financial assets and liabilities not measured at fair value

Loans - (152,596) - (152,596)

- (152,596) - (152,596)

There were no transfers between levels of the fair value hierarchy during 2018 and 2017.

Note 10 • Seasonality The business of the Group presents cyclical evolutions and is driven by a number of factors:

• Effectiveness of individual catalogues and product introductions

• Effectiveness and timing of recruitment programmes

• Timing of sales and marketing activities

• The number of effective sales days per quarter

Note 11 • Events subsequent to the reporting date

No significant events to be disclosed have occurred after the reporting period up to the date of the authorisation of these consolidated financial statements.

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