Scandinavian Tobacco Group A/S: Interim report 1 January-31 March 2017

Net Sales Growth and EBITDA impacted By
IT Implementation in Cigars INternational
- Full year guidance revised


Highlights for the first quarter
We have guided for negative net sales and adjusted EBITDA growth in the first quarter.  

• Reported net sales were DKK 1,379 million (DKK 1,499 million) - organic growth was negative at 9.5%
• Reported EBITDA was DKK 201 million (DKK 266 million) - organic growth was negative at 22.4%
• Net profit was DKK 75 million (DKK 138 million)
• Free cash flow was DKK 48 million (DKK -204 million)

Financial Guidance 2017
As earlier communicated, the implementation of a new IT infrastructure in Cigars International has impacted our online and catalogue retailer's ability to process orders and to run campaigns and promotions to customers. Where we had expected this to be resolved by now, we conclude that the business will be further impacted in the second quarter returning to normalisation during the course of the third quarter.

In addition, we did not see the expected pick-up in net sales for machine-made cigars in April 2017.   
                                                   
Based on the above, we revise our guidance for 2017. We now expect slightly negative net sales growth (previously flat organic net sales) and negative growth in adjusted EBITDA of 4-8% (previously positive at 1-3%) for the full year.

The Board of Directors will continue to evaluate the distribution of excess cash to shareholders in relation to the third-quarter announcement in November 2017.

STATEMENT BY CEO NIELS FREDERIKSEN:

"As previously guided, we delivered negative net sales and EBITDA growth in the first quarter due to the implementation of the new IT infrastructure in Cigars International and current total market development in machine-made cigars. We work diligently to resolve our issues in Cigars International that are of a temporary nature. Despite this set-back we remain confident in our business model and we continue to focus on cost optimisation and investing in our brands and future growth opportunities."