|EBITDA before special items||368.2||497.8||364.2||242.3||164.9|
|Result from financial items||(57.9)||(52.4)||(27.2)||(36.2)||(12.4)|
|Profit before special items, after tax1||92.7||242.5||195.7||116.7||92.7|
|Profit for the year||82.1||209.8||195.7||147.7||88.8|
|Financial position at 31 December|
|Net working capital||118.0||152.3||318.2||101.9||116.0|
|Net interest-bearing debt1||493.0||94.1||155.2||12.2||27.6|
|Equity before recognition of provisions for acquisition of non-controlling interests||466.7||720.4||605.3||377.0||232.2|
|Provisions for acquisition of non-controlling interests||490.3||850.7||704.8||363.5||234.0|
|Cash flow and investments|
|Cash flows from operating activities||261.2||490.2||65.0||139.3||74.3|
|Cash flows from investing activities||(416.2)||(396.9)||(199.8)||(148.6)||(97.6)|
|Investment in property, plant and equipment||(263.4)||(292.3)||(159.7)||(130.0)||(83.0)|
|Free cash flow||(155.0)||93.3||(134.8)||(9.3)||(23.3)|
|EBITDA margin before special items1||8.6%||13.9%||14.8%||14.2%||15.0%|
|Profit margin before special items, after tax1||2.2%||6.8%||7.9%||6.8%||8.4%|
|Comparable store sales growth1||(6.4)%||0.3%||(1.0)%||1.0%||1.6%|
|Return on invested capital1||20.4%||47.8%||49.8%||59.9%||68.4%|
|Net working capital ratio1||2.8%||4.3%||12.9%||6.0%||10.5%|
|Number of stores, including joint ventures||745||585||411||289||197|
|Adjusted EBITDA margin1||10.4%||13.9%||14.8%||14.2%||15.0%|
|Proforma consolidated financial information3|
|Proforma adjusted EBITDA||445.2||497.0||371.1||245.3||-|
|Proforma adjusted EBITDA margin||10.1%||13.3%||14.5%||14.1%||-|
1 Key figures are defned in "Defnition of key figures and ratios" on page 88.
2 Adjusted EBITDA and adjusted EBITDA margin excludes the additional write down of DKK 75m as elaborated on page 19.
3 Adjusted EBITDA and adjusted EBITDA margin excludes the additional write down of DKK 75m as elaborated on page 19.
An integral part of the Group’s strategy is to grow our market presence and make the Tiger concept as well as products available to an increasing number of customers, while at the same time continuing to develop the concept to ensure the Group’s long-term success.
Our business model builds on a variety retail concept with an attractive value proposition generating a broad costumer appeal and a partnerbased expansion model enabling rapid growth. Our scalable corporate backbone aims to simplify our operation and support future growth, which helps us deliver sustainable profits.
Brand and retail concept
Through our retail concept, we want to engage our customers, create a fun shopping experience as well as make our products accessible for everyone and increase our appeal as a destination store. Our stores offer a welcoming atmosphere and our service-minded store employees are ready to help if needed. Our concept and brand are playful, friendly and represents all that is current, relevant with a conversational and relaxed tone of voice.
Our retail concept is based on four core pillars – value proposition, assortment, store and customer experience – and has proven its worth across geographies.
We want to deliver everyday magic by providing a unique and playful experience in our stores, where customers discover a world of products that we carefully select and design. Tiger stores are designed and curated to give our customers creative, fun and useful products. Our mission is to engage with people’s lives, to help them live out their values and ideas and connect to the people that matter to them.
While our products are offered at affordable round price points, it is a key objective that the quality should meet or exceed the customer’s expectations as well as Zebra’s corporate social responsibility (“CSR”) requirements (see CSR section). The price range of the product offering is typically from 10 to 100 Danish kroner.
Our assortment consists primarily of proprietary products inspired by our Danish heritage and often with a quirky twist. Products are predominantly designed by our own design department or in close cooperation with external designers. Our Category Management team together with our in-house designers continually optimises the product portfolio by applying retail insight and monitoring new trends, striving to maintain a fresh product assortment that appeals to our customers. We want to deliver value for money across our broad product range.
Our assortment includes categories ranging from home, hobby and party over toys, electronics and gadgets, to food and accessories and has a broad appeal across age and income groups. Each month the assortment is refreshed with up to 300 new products divided in two product campaigns, typically adapted to seasonal themes and/or festive occasions, e.g. summer, Halloween, Easter or Christmas, which aids in our ambition to give our customers a new experience every time they enter a Tiger store.
This year, we added Tiger Lab to our organisation to further strengthen our assortment and store environment. Tiger Lab’s focus is to develop, test, evaluate, and roll-out designed products as well as store improvements.
Our stores are located in high footfall locations on high streets and in popular shopping malls. The typical size is between 150 and 250 m² selling space. Across markets, the Scandinavian decor is a differentiating store characteristic.
The stores are designed to create a welcoming atmosphere to make a visit to a Tiger store a fun and surprising experience. The products are mainly displayed on pallet tables with discreet price signs and warm lighting creating stylish but unpretentious product presentations. The maze floor layout guides customers through the store and all main product categories enabling them to seek inspiration and discover the full range of products as they go along.
We want to ensure a fun customer experience and we believe that our store employees play an integral role in doing so. Their dedication and commitment to our concept is key for our customers’ shopping experience as well as their perception of our brand. We owe a great part of our success to our store employees as they interact with thousands of customers on a daily basis. We prioritise the development and training of our staff, as we believe that this will help us sustain a pleasant customer experience.
Establishing new stores are generally achieved through 50/50 owned partnerships with a local partner, which ensures local entrepreneurship and significantly increases our organisational capacity for international expansion and reduces the risks when entering new markets.
A jointly owned local company is set up, and Zebra shares investments, costs and profits with the local partner. In other words, the cooperation is a business partnership, not a franchise operation. The partnership is assigned a certain territory, with the size of the territories ranging from a region to an entire country.
Zebra owns the concept and brand and supplies the products, store interior and marketing material while the local partner is responsible for store roll-outs and day-to-day operations including staffing, training and local marketing under specific guidelines set out by Zebra.
Partners are typically individuals or a small group of people with an entrepreneurial mind-set who are appointed after a thorough selection process based on their capabilities to roll-out the concept as well as their retail experience, local market knowledge, managerial and financial capacity.
With the exception of the Japanese joint venture, the partnership model has a contractually defined exit-mechanism, where the partner holds exercisable put options that grant them the right to sell their non-controlling shareholding to Zebra with redemption prices based at contractually defined EBITDA multiples. At the same time, Zebra holds call options to acquire the partner’s shareholding, which are exercisable based at contractually defined EBITDA multiples. For accounting purposes, Zebra is considered to have control over the partnerships, except for the Japanese joint venture, and they are therefore fully consolidated.
It is part of Zebra’s strategy to take full ownership of the local operating companies when this is assessed to be more beneficial than the partner model. Zebra’s operating companies in Denmark, Finland, Iceland, Scotland and USA are all wholly owned. Furthermore, Zebra took over three partners’ shares in territories pertaining to Northern Germany, Southern Sweden as well as one of our two Polish partnerships at yearend 2015.
Our rapid growth is supported by a flexible and scalable supply chain model, investments in new IT infrastructure and continued strengthening of the organisation and business processes.
Financial and operating model
We have established an operating model with a governance structure anchored around our management team who monitor and review the business units’ operational and financial performance aiming to proactively take advantage of opportunities arising in our markets as well as address potential challenges.
One area of focus is to ensure efficient supply chain operation and processes with low working capital requirements to service our stores effectively as well as to free up capital for further store expansion and future partner buyouts. Our initiatives target to improve inventory levels by lowering lead-time from purchase to sale, strengthening our forecasting process and improve payment terms with our suppliers as well as improving coordination across the organisation.
Supply chain model
While the continuous work with product selection, innovation and product development is carried out internally, production is outsourced to external suppliers who subscribe to our code of conduct and work under our supervision (see CSR section).
A large part of logistics is also handled by external operators facilitating an asset-light and highly scalable logistics operation. Transportation is provided by forwarders, and while we operate our warehouse in Greve (DK), the warehouses in Barcelona (ES), Raunds (UK) and New Jersey (US) are all operated by an external partner.
We want to simplify our business and increase transparency as we grow by implementing a common IT system. Through investments in IT infrastructure, we want to streamline our business processes and ensure a greater level of standardisation thereby ensuring scalability. In 2015, we continued to work towards establishing a common group-wide Microsoft Dynamics AX ERP platform. The first stores were converted to the new system in late 2014 and we continued the gradual roll-out to our store network in 2015. In 2016, we aim to add more stores to the new platform as well as the administrative functions.
The new ERP platform will strengthen the Group’s infrastructure, support the expected growth as well as enable optimisation of the existing stores, supply chain and category management.
People are key to the continued success and future expansion of the Tiger concept. It is important that we can continue to attract, motivate and retain highly qualified employees at all levels of the organisation to support future growth. We enjoy great diversity in our corporate body having been able to attract a wide range of nationalities and educational backgrounds.
At the head office, creative minds are working to refresh the assortment, improve the concept, marketing and brand, while administrative staff works to enable the rapid expansion. In 2015, we strengthened the creative and administrative teams by adding additional people and skills.
Zebra pursues four growth levers in order to strengthen the Group’s market position, increase revenue as well as profit:
Increasing comparable store sales growth
We aim to maintain an attractive and fresh product offering to meet customer demand by continuous evaluating our assortment and introducing and retiring products.
Each month, we introduce new products with a common theme adapted to the season. We generate a significant share of revenue from this campaign structure, and we consider this an important driver for store traffic. We also strive to increase customers’ buying frequency and the value of average basket size by continuously improving our merchandising, in-store execution, marketing as well as introducing new products.
Increase store penetration in existing markets
We have followed a partner-driven expansion model to establish new stores in multiple countries at the same time. So far, this has been a commercial success across our markets. With only limited penetration in most markets outside Denmark, there is a significant potential for store expansion in existing markets.
Stores are leased to minimise upfront investments and are located on high streets and in popular shopping malls. An experienced Retail team assists the partners in identifying and selecting locations for new stores as well as assisting in lease negotiations. We have a thorough store approval process anchored in our management team to ensure a continued high quality store portfolio.
Geographical expansion into new markets
It is part of our growth strategy to expand into new territories and markets in order to facilitate future growth once existing markets gradually mature. We are experiencing an increasing interest in partnerships from large corporations and highly qualified entrepreneurs. All potential partners go through a thorough selection process. We have developed a market entry model in which we establish proof of concept early in process before deciding on further expansion.
Increase operating margin from scale advantages
Our operating margin is impacted by investments in the corporate backbone in order to position the Group for future growth. Our operating margin is expected to improve over-time as a result of operational leverage in our cost structure.