Management Report for Q2 and 6 months of 2007
In the second quarter 2007, PTA Grupp AS earned a net
profit of EEK 112.8 million (EUR 7.2 million), which
increased by EEK 110.3 million (EUR 7.0 million) compared
to the second quarter of the previous year. The net
margin of the second quarter of this year is 27.5% (Q2
2006: 8.6%). Q2 sales increased by 3.2 times yoy to EEK
410.7 million (EUR 26.2 million) and the Group's gross
margin in Q2 2007 reached 46.3% compared to 51.0% in the
second quarter of 2006. Operating margin reached 39.7%
(10.3% in Q2 2006) and operating profit was EEK 162.9
million (EUR 10.4 million) compared to EEK 3.1 million
(EUR 0.2 million) in Q2 2006.
Cumulative six month sales of PTA Grupp AS amounted to
EEK 779.2 million (EUR 49.8 million), having increased
12.8 times compared to the first six month of 2006. The
Group's gross and operating margins in the first half of
the year stood at 43.9% and 29.0% respectively (45.5% and
6.3% in the six months of 2006). Operating profit in the
first six months of 2007 amounted to EEK 226.0 million
(EUR 14.4 million) compared to EEK 3.9 million (EUR 0.2
million) in six the first six months of 2006. Net profit
for the first six months of 2007 amounted to EEK 146.3
million (EUR 9.4 million) and net margin reached 18.8%
(5.0% in the first six months of 2006).
The remarkable growth in company's results and profits is
explained by the acquisition of AS Silvano Fashion Group
in 2006 which has directly affected earnings per share.
By H1 2006 earnings per share stood at EEK 1.56 (EUR
0.10) whereas by H1 2007 earnings per share amount to EEK
3.86 (EUR 0.25) which is 2.5 times more compared to the
previous year.
Sales Revenue
Sales by Products/Services
In the first half of 2007 the sales revenue related to
sales of women's apparel increased by EEK 21.8 million
(EUR 1.4 million) compared to the first half of 2006,
forming 9.0% of the Group's sales revenue (H1 2006:
79.4%). Lingerie sales in first half of 2007 amounted to
EEK 690.1 million (EUR 44.1 million) forming 88.6% of
total Group's sales revenue. The sales of subcontracting
services and other sales increased by EEK 6.2 million
(EUR 0.4 million) compared to the same period in 2006.
Sales of subcontracting services and other sales in the
first half of 2007 amounted to EEK 18.8 million (EUR 1.2
million) forming 2.4 % of total sales revenue.
Sales by business segments
6 6 6 6 6 6
months months Change months months Change months months
2007 2006 EEK 2007 2006 EUR 2007 2006
EEK EEK mill. EUR EUR mill. perc. perc.
fromsalesfrom.sales
Women's
apparel 70.3 48.5 21.8 4.5 3.1 1.4 9.0% 79.4%
Linge-
rie 690.1 - 690.1 44.1 - 44.1 88.6% -
Subcontr
acting
services
and
other
sales 18.8 12.6 6.2 1.2 0.8 0.4 2.4% 20.6%
Total 779.2 61.1 718.1 49.8 3.9 45.9 100.0% 100.00%
Sales by Markets
Women's apparel
Women's apparel sales revenue has increased in all
markets. On the first half of 2007 sales volume in the
Estonian market increased by EEK 7.5 million (EUR 0.5
million) in comparison with the same period of the
previous year, amounting to 50.6% of the sales revenue of
women's apparel (58.8% in the first half of 2006). The
sales volume in Latvia increased by 22.1% in the first
half-year, amounting to EEK 16.0 million (EUR 1.0
million) and in Finland by 35.7%, amounting to EEK 7.6
million (EUR 0.5 million).
Lingerie
The majority of lingerie sales revenue in the first half
of 2007 was earned on the Russian market (amounting to
EEK 366.3 million (EUR 23.4 million) giving 52.9% of all
lingerie sale volume for the first half of 2007). Sales
in Russia comprise both retail sales and wholesale. The
second biggest region of lingerie sales is Belarus,
amounting to EEK 139.1 million (EUR 8.9 million) giving
20.1 % of all lingerie sales revenue (also comprising
both retail sales and wholesale). As lingerie is a new
business line for the Group, comparable figures of
previous periods are not available.
In terms of lingerie brands, sales of “Milavitsa” core
brand accounted for 75.0% of total lingerie sales revenue
in the first half of 2007 and amounted to EEK 517.5
million (EUR 33.1 million). The sales of “Lauma” brand
accounted for 7.7% of total lingerie sales and amounted
to EEK 53.1 million (EUR 3.4 million). Other brands such
as “Alisee”, “Aveline”, “Laumelle”, “Lauma Aqua”,
“Laumelle Aqua” and “Bellita” comprised 17.3 % of total
lingerie sales in the first half of 2007 amounting to EEK
119.4 million (EUR 7.6 million).
Total sales by markets
6 6 Change 6 6 Change 6 6
months months EEK months months EUR months months
2007 2006 million 2007 2007 2007 2006
EEK EEK EUR EUR million percen percen
million million millon millon tage tage
from from
sales sales
Estonia 92.4 28.5 63.9 5.9 1.8 4.1 12.2% 58.7%
Finland 25.9 5.6 20.3 1.7 0.4 1.3 3.4% 11.5%
Latvia 25.2 13.1 12.1 1.6 0.8 0.8 3.3% 27.0%
Belarus 139.1 - 139.1 8.9 - 8.9 18.3% -
Ukraine 51.0 - 51.0 3.3 - 3.3 6.7% -
Russia 366.3 - 366.3 23.4 - 23.4 48.2% -
Other 60.5 1.3 59.2 3.8 0.1 3.7 7.9% 2.8%
markets
Total 760.4 48.5 711.9 48.6 3.1 45.5 100.0% 100.0%
Retail Sales
Total retail sales of the Group in the first half of 2007
amounted to EEK 96.3 million (EUR 6.2 million),
increasing 2.7 times compared to the first six months of
2006.
Retail sales are conducted in Estonia, Latvia, Russia,
Belarus, Poland, Lithuania and Ukraine. As of the end of
June 2007, the Group operated 67 retail outlets with a
total area of 8,554 square meters. Women's apparel retail
sales are conducted in Estonia, Latvia, Lithuania and
Russia. As of the end of June 2007, women's apparel was
sold in 19 stores with a total sales area of 4,191 square
meters (30 June 2006: 2,688 square meters). Lingerie
retail sales are conducted in Russia, Belarus, Latvia and
Poland. As of the end of June 2007 there were 48 stores
with a total area of 4,363 square meters selling lingerie
products.
Within the first six months of 2007 12 new stores were
opened: six in the apparel business (operating under the
“PTA” name), including three in Russia, two in Lithuania
and one in Estonia, and six stores in the lingerie
business under the “Oblicie” name in Russia. The Group
intends to continue its retail expansion.
Number of stores
30.06.2007 31.12.2006
Estonia 8 7
Latvia 6 6
Poland 7 7
Belarus 20 20
Russia 24 15
Lithuania 2 -
Total stores 67 55
Total sales area, m2 8,554 6,705
The increase in retail sales of women's apparel of the
like-for-like spaces was 19% compared to the first half
of 2006. Overall increase in sales per square meter in
the PTA apparel stores was 6% in the first half of 2007.
In the first half of 2007 the main objective for the
women's apparel segment was the entry into the Lithuanian
retail market, preparatory work for the entry into the
Ukrainian market and the continuing expansion of the
apparel retail chain in Russia. The entry into the new
markets as well as comparatively low sales per square
meter in new stores within first months in operations
resulted in overall lower growth of sales per square
meter.
Increase in retail sales was supported by increase in
sales in the same stores and expansion of the PTA retail
chain.
The like-for-like increase in the Oblicie lingerie retail
chain is about 32% for stores operating more than one
year. In the first half of 2007 the main objective for
the Group's lingerie retail operations was the opening of
new stores in Russia. In addition to the general seasonal
marketing campaigns directed to the new markets,
marketing operations were focused on campaigns supporting
the expansion on the Russian market.
As lingerie sale is a new business line for the Group,
comparable figures of previous years cannot be presented.
Wholesale
In the first half of 2007 the wholesales amounted to EEK
663.4 million (EUR 42.4 million) giving 85.1% of the
Group's total revenue. Russia, Ukraine and Belarus were
main wholesales regions in lingerie business while
Finland and the Baltic States accounted for the vast
majority of wholesales in the apparel business of the
Group. Sales revenue from wholesale of women's apparel
increased by 34.1 % in H1 2007 compared to H1 2006. As
soon as lingerie sale is a new business line for the
Group, comparable figures of previous years cannot be
presented.
Sales of subcontracting and other services
Sales of subcontracting and other services amounted to
EEK 18.8 million (EUR 1.2 million), a 49.2% increase
compared to the first six months of 2006. Sales of
subcontracting services increased in the women's apparel
segment on account of the Finnish market. Increase in
turnover of 49.2% in comparison with the same period of
the previous year was mainly caused by the increase in
the price of sewing and the price of full services sold
to customers.
Profits
The Group's gross margin in the first half of 2007 was
43.9% (45.5% in the first six months of 2006). Gross
profit in the first six months of 2007 amounted to EEK
341.8 million (EUR 21.8 million) compared to EEK 27.8
million (EUR 1.8 million) in the first six months of
2006, increasing 12.1 times mainly due to the operations
of Silvano Fashion Group acquired in 2006.
Operating profit in the first half of 2007 amounted to
EEK 226.0 million (EUR 14.4 million), resulting in
operating profit margin of 29.0% (6.3% in the first six
months of 2006). Within the first half of 2007, the Group
increased its shareholding in its subsidiary Milavitsa
resulting in gains from business combination booked in
the second quarter of 2007 in the total amount of EEK
72.2 million (EUR 4.6 million).
The net profit of the Group (after taxes and minority
shareholding) for the first half of 2007 amounted to EEK
146.3 million (EUR 9.4 million). The net profit margin
for the first half of 2007 was 18.8% compared to 5.0% in
the same period of the previous year.
Balance sheet
The total assets on the consolidated balance sheet
amounted to EEK 927.1 million (EUR 59.3 million) as of 30
June 2007. Compared to the end of the previous year the
balance sheet total assets have increased by EEK 115.0
million (EUR 7.3 million). Both assets and liabilities
have increased in connection with rapid retail expansion.
As of the end of June the inventories of the Group
amounted to EEK 281.6 million (EUR 18.0 million)
increasing by EEK 51.3 million (EUR 3.3 million) over the
first half of the year. The increase in the balance of
inventories is related to the expansion of activities in
Russia and other retail markets.
Trade receivables have increased by EEK 61.9 million (EUR
4.0 million) amounting to EEK 173.6 million (EUR 11.1
million). Trade receivables balance is higher due to
wholesale seasonality and due to a change in the terms of
agreements with some customers made in order to retain
competitiveness, especially in the CIS markets.
Trade payables have increased by EEK 33.5 million (EUR
2.1 million) compared to the end of previous year
amounting to EEK 121.0 million (EUR 7.7 million).The
volumes of trade payables increased on account of the
increase in sales volumes and the implementation of the
store opening plan.
At the end of June 2007, the Group's borrowings amounted
to EEK 31.5 million (EUR 2.0 million), having decreased
by EEK 7.9 million (EUR 0.5 million) since the beginning
of year. In H1 2007, the overdraft limit of PTA Grupp AS
was increased by EEK 6.0 million (EUR 0.4 million)
amounting in total to EEK 11.0 million (EUR 0.7 million).
Investments
During the first six months of 2007 the Group's
investments totaled EEK 64.5 million (EUR 4.1 million). A
total of EEK 21.0 million (EUR 1.3 million) was invested
in retail operations, other investments were made in
equipment and facilities to maintain effective production
operations.
Personnel
As of the end of the first half of 2007, the Group
employed 3,290 employees, including 492 in retail
operations and 2,219 in production and the rest in
wholesale, administration and support. As the result of
the merger with Silvano Fashion Group in 2006, the staff
outside Estonia comprises 89.3% of the total workforce
(2,938 employees).
Total salaries and wages for the first half of 2007
amounted to EEK 116.1 million (EUR 7.4 million).
Remuneration paid to the members of the Management Board
and Supervisory Board totaled EEK 0.8 million (EUR 0.05
million).
Change in the format of income statement
Starting from the first half of 2007, the Group uses a
new format of income statement. The need to change format
arose from expanding retail activities. The new format of
income statement allows for a better presentation of the
Group's consolidated results as a retail group. The
income statements of the previous financial periods were
restated to make them comparable with the new format.
Selected financial data (six months 2007)
Key figures and ratios 30.06.2007 30.06.2006 Change
Net sales (EEK million) 779.2 61.1 718.1
Net income (EEK million) 146.3 3.0 143.3
Earnings before interest, 244.3 6.6 237.7
taxes and depreciation
(EBITDA) ( EEK million)
Earnings before interest 226.0 3.9 222.1
and taxes (EBIT) (EEK
million)
Net sales (EUR million) 49.8 3.9 45.9
Net income (EUR million) 9.4 0.2 9.2
Earnings before interest, 15.6 0.4 15.2
taxes and depreciation
(EBITDA) ( EUR million)
Earnings before interest 14.4 0.2 14.2
and taxes (EBIT) (EUR
million)
Operating margin, % 29.0% 6.3% -
Net margin, % 18.8% 5.0% -
ROA, % 12.9% 5.5% -
ROE, % 16.8% 17.7% -
Earnings per share (EPS), 3.86 1.56 -
in EEK
Earnings per share (EPS), 0.25 0.10 -
in EUR
Current ratio 3.1 1.2 -
Quick ratio 1.9 0.2 -
Underlying formulas:
Operating margin = operating profit / sales revenue
Net margin = net profit attributable to equity holders of
the parent / sales revenue
ROA (return on assets) = net profit attributable to
equity holders of the parent / average total assets
ROE (return on equity) = net profit attributable to
equity holders of the parent / average equity
EPS (earnings per share) = net profit attributable to
equity holders of the parent / weighted average number of
ordinary shares
Current ratio = current assets / current liabilities
Quick ratio = (current assets - inventories) / current
liabilities
Balance Sheet
Consolidated, unaudited
30.06 30.06 31.12 30.06 30.06 31.12
.2007 .2006 .2006 .2007 .2006 .2006
EEK EEK EEK EUR EUR EUR
thous thous thous thous thous thous
and and and and and and
ASSETS
Current assets
Cash and cash
equivalents 139,020 3,514 200,460 8,885 225 12,812
Trade
receivables 173,583 2,400 111,729 11,094 153 7,141
Other receivables
and prepayments 65,591 2,117 45,094 4,192 135 2,882
Prepaid taxes 22,171 206 31,568 1,417 13 2,017
Inventories 281,561 34,758 230,255 17,995 2,222 14,716
Total current
assets 681,926 42,995 619,106 43,583 2,748 39,568
Non-current assets
Investments in
equity accounted
investees 7,651 0 78 489 0 5
Available-for-sale
financial assets 1,737 0 1,772 111 0 113
Other receivables 5,101 650 2,349 326 42 150
Property, plant
and equipment 213,917 8,363 172,281 13,671 534 11,011
Intangible
assets 16,801 6,589 16,551 1,074 421 1,058
Total non-current
assets 245,207 15,602 193,031 15,671 997 12,337
TOTAL ASSETS 927,133 58,597 812,137 59,254 3,745 51,905
LIABILITIES AND
EQUITY
Current
liabilities
Loans and
borrowings 24,972 13,932 29,907 1,596 890 1,911
Trade payables 121,013 13,738 87,534 7,734 878 5,594
Corporate income
tax liability 6,916 0 5,976 442 0 382
Other tax
liabilities 21,968 4,279 19,369 1,404 273 1,238
Other payables 36,832 3,544 27,815 2,354 227 1,778
Provisions 12 12 12 1 1 1
Total current
liabilities 211,713 35,505 170,613 13,531 2,269 10,904
Non-current
liabilities
Loans and
borrowings 6,556 4,250 9,544 419 272 610
Deferred tax
liabilities 201 0 201 13 0 13
Other liabilities 0 127 0 0 8 0
Provisions 139 141 139 9 9 9
Total non-current
liabilities 6,896 4,518 9,884 441 289 632
Total
liabilities 218,609 40,023 180,497 13,972 2,558 11,536
Equity
Share capital at
par value 379,472 19,469 379,472 24,252 1,244 24,252
Share premium 83,011 40,994 83,011 5,305 2,620 5,305
Statutory capital
reserve 1,046 1,046 1,046 67 67 67
Translation
reaserve -27,867 13 -10,710 -1,781 1 -684
Retained
earnings 145,310 -42,948 -987 9,287 -2,745 -63
Total equity
attributable to
equity holders of
the parent 580,972 18,574 451,832 37,130 1,187 28,877
Minority
interest 127,552 0 179,808 8,152 0 11,492
Total equity 708,524 18,574 631,640 45,282 1,187 40,369
TOTAL LIABILITIES
AND EQUITY 927,133 58,597 812,137 59,254 3,745 51,905
Income Statement-H1
Consolidated, unaudited
2007 2006 2007 2006
H1 H1 H1 H1
EEK EEK EUR EUR
thousand thousand thousand thousand
Sales revenue 779,201 61,088 49,800 3,904
Costs of goods sold -437,369 -33,292 -27,953 -2128
Gross Profit 341,832 27,796 21,847 1,776
Distribution costs -89,968 -15,863 -5,750 -1014
Administrative expenses -77,560 -7,543 -4,957 -482
Other operating income 82,411 219 5,267 14
Other operating expenses -30,667 -740 -1,960 -47
Operating profit 226,048 3,869 14,447 247
Financial income/expenses
Interest expenses -391 -546 -25 -34
Gains/losses on conversion
of foreign currencies -1,267 0 -81 0
Other financial income /
expenses 1,596 -30 102 -2
Total financial income /
expenses -62 -576 -4 -36
Profit before corporate 225,986 3,293 14,443 211
income tax
Corporate income tax -47,487 -264 -3,035 -17
Net profit 178,499 3,029 11,408 194
Net profit attributable to
parent company 146,297 3,029 9,350 194
Net profit attributable to
minority shareholders 32,202 0 2,058 0
Earnings per share
Basic earnings per share 3.86 1.56 0.25 0.10
(EEK/EUR)
Diluted earnings per share 3.86 1.56 0.25 0.10
(EEK/EUR)
Income Statement-Q2
Consolidated, unaudited
2007 2006 2007 2006
Q2 Q2 Q2 Q2
EEK EEK EUR EUR
thousand thousand thousand thousand
Sales revenue 410,676 29,986 26,247 1,916
Costs of goods sold -220,586 -14,697 -14,098 -939
Gross Profit 190,090 15,289 12,149 977
Distribution costs -49,881 -8,042 -3,188 -514
Administrative expenses -33,933 -3,804 -2,169 -243
Other operating income 79,402 127 5,075 8
Other operating expenses -22,745 -488 -1,454 -31
Operating profit 162,933 3,082 10,413 197
Financial income/expenses
Interest expenses 0 -303 0 -19
Losses on conversion of -1,127 76 -72 5
foreign currencies
Other financial income / -1,776 -27 -113 -2
expenses
Total financial income / -2,903 -254 -185 -16
expenses
Profit before corporate 160,030 2,828 10,228 181
income tax
Corporate income tax -23,652 -264 -1,512 -17
Net profit 136,378 2,564 8,716 164
Net profit attributable to 112,824 2,564 7,211 164
parent company
Net profit attributable to 23,554 0 1,505 0
minority shareholders
Earnings per share
Basic earnings per share 2.97 1.32 0.19 0.08
(EEK/EUR)
Diluted earnings per share 2.97 1.32 0.19 0.08
(EEK/EUR)
Peeter Larin
Member of the Management Board
phone: + 372 6710 700