Baltika Group's fourth quarter resulted in net profit in the amount of 620
thousand euros, which is 287 thousand euros improvement over the same period
comparative result in the previous year. The result of last year fourth quarter
was net loss of 4,641 thousand euros and comparative figure of continued
operations was a profit of 333 thousand euros.
In connection with Baltika Group's exit from the Russian retail business, which represented a major line of business of the Group, the 2015 results of the Russian companies' retail are presented as discontinued operation.
In the fourth quarter Baltika's revenue was 12,704 thousand euros, decreasing 6% compared to same period last year. Revenue growth was largest with 19% in wholesale and franchise and were 923 thousand euros. The increase in revenue is mainly attributable to Russian retail market's transition to franchise partner and Monton women's collection entrance to German department store chain Peek & Cloppenburg. Within year the number of Monton selling Peek & Cloppenburg department stores increased from 3 to 25.
In addition to wholesale channel the franchise is actively being developed as well. At the beginning of October Baltika signed a franchise agreement with Serbian enterprise Victoria Elegans d.o.o., who will open Baltika's brands representing store Monton&More in Novi Sad Serbia in March 2017. Monton&More is a Baltika's new store concept to increase international sales, in addition to Monton other Baltika's brands are represented in these stores as well. At the end of fourth quarter there were 33 franchise stores, forming 26% of total stores portfolio.
Retail revenue in fourth quarter decreased by 8% compared to same period last year and was 11,413 thousand euros. Revenue from Baltika Group's e-store Andmorefashion.com increased 12% in the fourth quarter and was 310 thousand euros. Countries with largest e-store sales were Estonia, Lithuania, Latvia, Russia and Finland. The e-commerce sales volume increased most in Lithuania where revenue increased 48% compared to same period last year.
Baltika's gross profit margin in the fourth quarter was 51.8%, which is 3.8 percentage points higher than the comparative 48.0% margin in the same period last year. Gross profit margin has increased due to better intake margin and lower mark-downs. Gross profit in the fourth quarter was 6,575 thousand euros, which is 98 thousand euros more than in same period last year.
Baltika's 2016 revenue totalled 46,993 thousand euros, which is 4% less than in the previous year.
In the year total resulted in a net profit 177 thousand euros. In the last year the net loss was 6,359 thousand euros and the comparative result from continued operations was a loss in amount of 844 thousand euros.
One of the reasons behind the improved results is the decision to leave from unprofitable high risk retail markets in Ukraine and Russia and transfer those brand stores over to franchise partner. This has allowed to increase franchise channel revenue while minimizing the risks and to keep Baltika's brands on these complicated markets.
In addition, the results have improved as well due to more effective gross profit margin management and decrease in distribution and administrative expense. The year gross profit amounted 23,497 thousand euros i.e. 421 thousand euros more than in last year and distribution, administrative and general expense has decreased almost 800 thousand euros.
In a year 2017 Baltika will continue with chosen course and strategy. Baltika's objective in home markets: in Estonia, Latvia and Lithuania is to maintain and strengthen their current position and the company's objective is also to grow outside Baltics through wholesale and franchise.
Highlights of the period until the date of release of this quarterly report
-- At the beginning of October Baltika signed a franchise agreement with Serbian enterprise Victoria Elegans d.o.o., who will open the first Monton&More multibrand store in Novi Sad Serbia in March 2017. -- On 22nd of October in Tallinn Kultuurikatel during Tallinna Fashion Week Baltman - the first men's fashion brand in Estonia - presented its special collection to celebrate the 25th anniversary of Baltman. -- At the last week of October in Riga Fashion Week, which is the most influential fashion event in Baltics, Ivo Nikkolo presented its 2017 spring-summer collection, which received a warm feedback from Estonian, Latvian and Lithuanian fashion-audience. In addition, an overview of the collection was published in Vogue Russia and Elle Italy websites. -- At the beginning of November Monton marketing team won Digitegu 2016 ("Digital deed 2016") award for the best e-mail marketing. -- In the fourth quarter one new Baltman retail store was opened in Riga Mols shopping centre. In October, two freshly renovated Baltika's brand shops: Monton and Mosaic were opened in Kaunas Mega shopping centre. Both stores were upgraded into modern and fashionable stores using some of the new brand concept store elements which will provide better costumer experience.
Consolidated statement of financial position
31 Dec 2016 31 Dec 2015 ---------------------------------------------------------- ASSETS Current assets Cash and cash equivalents 419 398 Trade and other receivables 1,956 1,607 Inventories 11,096 10,424 Total current assets 13,471 12,429 Non-current assets Deferred income tax asset 228 234 Other non-current assets 522 584 Property, plant and equipment 3,022 2,910 Intangible assets 1,676 1,944 Total non-current assets 5,448 5,672 TOTAL ASSETS 18,919 18,101 EQUITY AND LIABILITIES Current liabilities Borrowings 5,835 3,009 Trade and other payables 6,923 6,709 Total current liabilities 12,758 9,718 Non-current liabilities Borrowings 1,196 3,312 Other liabilities 0 283 Total non-current liabilities 1,196 3,595 TOTAL LIABILITIES 13,954 13,313 EQUITY Share capital at par value 8,159 8,159 Share premium 496 496 Reserves 1,182 1,182 Retained earnings -5,049 1,310 Net profit (loss) for the period 177 -6,359 TOTAL EQUITY 4,965 4,788 TOTAL LIABILITIES AND EQUITY 18,919 18,101
Consolidated statement of profit and loss
4 Q 4 Q 2016 2015 2016 2015 -------------------------------------------------------------------------------- Continuing operations Revenue 12,704 13,505 46,993 48,806 Client bonus provision 23 -70 23 -70 Revenue after client bonus provision 12,727 13,435 47,016 48,736 Cost of goods sold -6,152 -6,958 -23,519 -25,660 Gross profit 6,575 6,477 23,497 23,076 Distribution costs -5,242 -5,555 -20,336 -21,010 Administrative and general expenses -630 -683 -2,504 -2,603 Other operating income 95 282 44 242 Operating profit (loss) 798 521 701 -295 Finance costs -173 -147 -519 -508 Profit (loss) before income tax 625 374 182 -803 Income tax expense -5 -41 -5 -41 Net profit (loss) from continuing operations 620 333 177 -844 Net loss for the period from discontinued 0 -4,974 0 -5,515 operations Net profit (loss) for the period 620 -4,641 177 -6,359 Basic earnings per share from net profit 0.02 -0.11 0.00 -0.16 (loss) for the period, EUR From continuing operations 0.02 0.01 0.00 -0.02 From discontinued operations 0.00 -0.12 0.00 -0.14 Diluted earnings per share from net profit 0.02 -0.11 0.00 -0.16 (loss) for the period, EUR From continuing operations 0.02 0.01 0.00 -0.02 From discontinued operations 0.00 -0.12 0.00 -0.14
Maigi Pärnik-Pernik Member of the Management Board maigi.parnik@baltikagroup.com
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In connection with Baltika Group's exit from the Russian retail business, which represented a major line of business of the Group, the 2015 results of the Russian companies' retail are presented as discontinued operation.
In the fourth quarter Baltika's revenue was 12,704 thousand euros, decreasing 6% compared to same period last year. Revenue growth was largest with 19% in wholesale and franchise and were 923 thousand euros. The increase in revenue is mainly attributable to Russian retail market's transition to franchise partner and Monton women's collection entrance to German department store chain Peek & Cloppenburg. Within year the number of Monton selling Peek & Cloppenburg department stores increased from 3 to 25.
In addition to wholesale channel the franchise is actively being developed as well. At the beginning of October Baltika signed a franchise agreement with Serbian enterprise Victoria Elegans d.o.o., who will open Baltika's brands representing store Monton&More in Novi Sad Serbia in March 2017. Monton&More is a Baltika's new store concept to increase international sales, in addition to Monton other Baltika's brands are represented in these stores as well. At the end of fourth quarter there were 33 franchise stores, forming 26% of total stores portfolio.
Retail revenue in fourth quarter decreased by 8% compared to same period last year and was 11,413 thousand euros. Revenue from Baltika Group's e-store Andmorefashion.com increased 12% in the fourth quarter and was 310 thousand euros. Countries with largest e-store sales were Estonia, Lithuania, Latvia, Russia and Finland. The e-commerce sales volume increased most in Lithuania where revenue increased 48% compared to same period last year.
Baltika's gross profit margin in the fourth quarter was 51.8%, which is 3.8 percentage points higher than the comparative 48.0% margin in the same period last year. Gross profit margin has increased due to better intake margin and lower mark-downs. Gross profit in the fourth quarter was 6,575 thousand euros, which is 98 thousand euros more than in same period last year.
Baltika's 2016 revenue totalled 46,993 thousand euros, which is 4% less than in the previous year.
In the year total resulted in a net profit 177 thousand euros. In the last year the net loss was 6,359 thousand euros and the comparative result from continued operations was a loss in amount of 844 thousand euros.
One of the reasons behind the improved results is the decision to leave from unprofitable high risk retail markets in Ukraine and Russia and transfer those brand stores over to franchise partner. This has allowed to increase franchise channel revenue while minimizing the risks and to keep Baltika's brands on these complicated markets.
In addition, the results have improved as well due to more effective gross profit margin management and decrease in distribution and administrative expense. The year gross profit amounted 23,497 thousand euros i.e. 421 thousand euros more than in last year and distribution, administrative and general expense has decreased almost 800 thousand euros.
In a year 2017 Baltika will continue with chosen course and strategy. Baltika's objective in home markets: in Estonia, Latvia and Lithuania is to maintain and strengthen their current position and the company's objective is also to grow outside Baltics through wholesale and franchise.
Highlights of the period until the date of release of this quarterly report
-- At the beginning of October Baltika signed a franchise agreement with Serbian enterprise Victoria Elegans d.o.o., who will open the first Monton&More multibrand store in Novi Sad Serbia in March 2017. -- On 22nd of October in Tallinn Kultuurikatel during Tallinna Fashion Week Baltman - the first men's fashion brand in Estonia - presented its special collection to celebrate the 25th anniversary of Baltman. -- At the last week of October in Riga Fashion Week, which is the most influential fashion event in Baltics, Ivo Nikkolo presented its 2017 spring-summer collection, which received a warm feedback from Estonian, Latvian and Lithuanian fashion-audience. In addition, an overview of the collection was published in Vogue Russia and Elle Italy websites. -- At the beginning of November Monton marketing team won Digitegu 2016 ("Digital deed 2016") award for the best e-mail marketing. -- In the fourth quarter one new Baltman retail store was opened in Riga Mols shopping centre. In October, two freshly renovated Baltika's brand shops: Monton and Mosaic were opened in Kaunas Mega shopping centre. Both stores were upgraded into modern and fashionable stores using some of the new brand concept store elements which will provide better costumer experience.
Consolidated statement of financial position
31 Dec 2016 31 Dec 2015 ---------------------------------------------------------- ASSETS Current assets Cash and cash equivalents 419 398 Trade and other receivables 1,956 1,607 Inventories 11,096 10,424 Total current assets 13,471 12,429 Non-current assets Deferred income tax asset 228 234 Other non-current assets 522 584 Property, plant and equipment 3,022 2,910 Intangible assets 1,676 1,944 Total non-current assets 5,448 5,672 TOTAL ASSETS 18,919 18,101 EQUITY AND LIABILITIES Current liabilities Borrowings 5,835 3,009 Trade and other payables 6,923 6,709 Total current liabilities 12,758 9,718 Non-current liabilities Borrowings 1,196 3,312 Other liabilities 0 283 Total non-current liabilities 1,196 3,595 TOTAL LIABILITIES 13,954 13,313 EQUITY Share capital at par value 8,159 8,159 Share premium 496 496 Reserves 1,182 1,182 Retained earnings -5,049 1,310 Net profit (loss) for the period 177 -6,359 TOTAL EQUITY 4,965 4,788 TOTAL LIABILITIES AND EQUITY 18,919 18,101
Consolidated statement of profit and loss
4 Q 4 Q 2016 2015 2016 2015 -------------------------------------------------------------------------------- Continuing operations Revenue 12,704 13,505 46,993 48,806 Client bonus provision 23 -70 23 -70 Revenue after client bonus provision 12,727 13,435 47,016 48,736 Cost of goods sold -6,152 -6,958 -23,519 -25,660 Gross profit 6,575 6,477 23,497 23,076 Distribution costs -5,242 -5,555 -20,336 -21,010 Administrative and general expenses -630 -683 -2,504 -2,603 Other operating income 95 282 44 242 Operating profit (loss) 798 521 701 -295 Finance costs -173 -147 -519 -508 Profit (loss) before income tax 625 374 182 -803 Income tax expense -5 -41 -5 -41 Net profit (loss) from continuing operations 620 333 177 -844 Net loss for the period from discontinued 0 -4,974 0 -5,515 operations Net profit (loss) for the period 620 -4,641 177 -6,359 Basic earnings per share from net profit 0.02 -0.11 0.00 -0.16 (loss) for the period, EUR From continuing operations 0.02 0.01 0.00 -0.02 From discontinued operations 0.00 -0.12 0.00 -0.14 Diluted earnings per share from net profit 0.02 -0.11 0.00 -0.16 (loss) for the period, EUR From continuing operations 0.02 0.01 0.00 -0.02 From discontinued operations 0.00 -0.12 0.00 -0.14
Maigi Pärnik-Pernik Member of the Management Board maigi.parnik@baltikagroup.com
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