Consolidated interim report for Q4 and 12 months of 2013 (unaudited)

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| Source: Silvano Fashion Group
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Tallinn, 2014-02-28 20:15 CET (GLOBE NEWSWIRE) -- Selected Financial Indicators

Summarized selected financial indicators of the Group for 12 months 2013 compared to 12 months 2012 and 31.12.2013 compared to 31.12.2012 were as follows:

in thousands of EUR 12m 2013 12m 2012 Change
Revenue 121 680 123 519 -1.5%
EBITDA 19 235 22 130 -13.1%
Net profit for the period 11 866 16 093 -26.3%
Net profit attributable equity holders of the Parent company 10 945 14 151 -22.7%
Earnings per share (EUR) 0.28 0.36 -23.1%
Operating cash flow for the period 18 612 4 907 279.3% 
in thousands of EUR 31.12.2013 31.12.2012 Change
Total assets 76 629 75 837 1.0%
Total current assets 55 080 55 847 -1.4%
Total equity attributable to equity holders of the Parent company 52 370 51 396 1.9%
Loans and borrowings 79 47 68.1%
Cash and cash equivalents 19 165 16 260 17.9%
Margin analysis, % 12m 2013 12m 2012 Change
Gross profit 35.2 34.2 3.0%
EBITDA 15.8 17.9 -11.7%
Net profit 9.8 13.0 -25.0%
Net profit attributable equity holders of the Parent company 9.0 11.5 -21.8%
Financial ratios, % 31.12.2013 31.12.2012 Change
ROA 13.2 18.3 -27.6%
ROE 19.7 28.8 -31.8%
Price to earnings ratio (P/E) 9.6 7.6 26.4%
Current ratio 4.7 4.6 1.3%
Quick ratio 2.6 2.6 -1.7%

Consolidated Statement of Financial Position

in thousands of EUR 31.12.2013 31.12.2012
ASSETS    
Current assets    
Cash and cash equivalents 19 165 16 260
Prepayments 196 243
Trade and other receivables 10 846 14 746
Inventories 24 873 24 598
Total current assets 55 080 55 847
     
Non-current assets    
Long-term receivables 0 1
Investments in associates 124 164
Available-for-sale investments 497 492
Deferred tax asset 460 231
Intangible assets 719 443
Investment property 1 592 1 618
Property, plant and equipment 18 157 17 041
Total non-current assets 21 549 19 990
TOTAL ASSETS 76 629 75 837
     
LIABILITIES AND EQUITY    
Current liabilities    
Borrowings 79 47
Trade and other payables 10 837 11 171
Tax liabilities 905 1 008
Total current liabilities 11 821 12 226
     
Non-current liabilities    
Deferred tax liability 1 953 2 162
Total non-current liabilities 1 953 2 162
Total liabilities 13 774 14 388
     
Equity    
Share capital 11 820 15 760
Share premium 13 822 13 822
Treasury shares -224 -20
Statutory reserve capital 1 306 1 306
Unrealised exchange rate differences -1 214 15
Retained earnings 26 860 20 513
Total equity attributable to equity holders of the Parent company 52 844 51 396
Non-controlling interest in equity 10 011 10 053
Total equity 62 855 61 449
TOTAL EQUITY AND LIABILITIES 76 629 75 837

Consolidated Income Statement

in thousands of EUR Q4 2013 Q4 2012   12m 2013 12m 2012
Revenue 22 868 25 612   121 680 123 519
Cost of goods sold -15 183 -18 871   -78 815 -81 280
Gross Profit 7 685 6 741   42 865 42 239
           
Distribution expenses -5 076 -4 604   -17 200 -14 533
Administrative expenses -2 125 -2 144   -7 106 -7 902
Other operating income -145 1 060   351 1 556
Other operating expenses -272 -575   -2 194 -1 838
Operating profit 67 478   16 716 19 522
           
Currency exchange income/(expense) 48 21   -275 475
Other finance income/(expenses) 420 165   1 141 585
Net financial income 468 186   866 1 060
           
Profit (loss) from associates using equity method -4 25   5 34
Profit before tax and gain/(loss) on
net monetary position
531 689   17 587 20 616
           
Income tax expense 10 428   -3 894 -5 682
Profit before gain/(loss) on net monetary position 541 1 117   13 693 14 934
           
Gain on net monetary position -422 421   -1 827 1 159
Profit for the period 119 1 538   11 866 16 093
Attributable to :          
   Equity holders of the Parent company 236 1 666   10 945 14 151
   Non-controlling interest -117 -128   921 1 942
           
Earnings per share from profit attributable to equity holders of the Parent company, both basic and diluted (EUR) 0.01 0.04   0.28 0.36

 Business environment

Silvano Fashion Group with its brand portfolio is a recognized market leader in the lingerie segment in Russia, Belarus, Ukraine, has exceptionally strong foothold in other Russian-speaking countries (including Kazakhstan and Moldova) and is a recognized player in the Baltic consumer markets.

The 4th quarter of 2013 is characterized by the drop in sales of Silvano Fashion Group compared to the respective period a year ago. The sales volumes decreased in both wholesale segment as well as in the retail segment in our own stores and partner stores in our main markets. The turnover for Q4 2013 decreased by 2 744 thousand euros (-10.7%) compared to the Q4 in 2012. In addition to this, the currencies of the main markets of the Silvano Fashion Group became weaker, especially the Russia Rouble weakening against the currency basket (-8.3%) and against Euro (-2.5%) in Q4, 2013. From the beginning of 2013, Russia Rouble has depreciated by nearly 11.5% against Euro. At the same time, our production costs in Belarus (labour, rent, utilities, partially materials) have not reduced in Belarus Roubles.

In general, during 2013 the biggest drop in sales affected wholesale segment (100 259 thousand Euros vs. 102 682 thousand Euros in 2012). Sales in the retail segment, including franchise stores, rose to 20 707 thousand Euros compared to 20 167 thousand to the previous year. From the main consumer markets, the main backdrop we experienced in Russia (-3 812 thousand Euros), in Belarus (-700 thousand Euros) and in the Baltic states (-439 thousand Euros). This backdrop was unfortunately not offset by the growth in Ukraine (+2 157 thousand Euros) and in other markets (+955 thousand Euros).

According to the World Bank data, the economic growth (measured in GDP) in 2013 constitutes less than 2%. One of the factors describing the economic situation in Russia is the deterioration in consumer sentiment and business confidence, explained by the gloomy outlook of the global economy. Silvano Fashion Group was directly affected by the reduced purchasing power (weaker Russia’s Rouble) and reduced sales. Together with the wholesales segment, Russia generated annual sales of 71 326 thousand EUR, down from 75 138 thousand EUR a year ago. As of end of 2013, there are 383 Milavitsa stores in Russia.

Belarus economic growth is stalling because of cooling economic climate of its main export market – Russia. Primarily due to rapid income growth in the first half of the year, the consumption held firm. Starting from the second half of the year, the overall consumption delayed; for instance, the Group’s sales in Belarus in Q4 2013 decreased compared to previous year. Much of the near future of the market has to do with the recovery in the export markets, as well as with the competitiveness of Belarus as a sourcing country for Russian manufacturers. There are a total of 53 stores operated directly by the Group and 5 franchise stores. The Group’s sales revenue in Belarus reached 30 794 thousand EUR for 12 months of 2013 compared to 31 494 thousand EUR for the same period a year ago.

Ukraine was our stellar star for the first half of the year. The sales revenue advanced to 8 514 thousand EUR for 12 months of 2013 compared to 6 357 thousand EUR for the same period a year ago. Strength of our local franchise and wholesales partners were the driving factor for our sales. Given the political abrupt and sluggish economy, and probable weakness of Ukrainian Hryvnia (the currency managed to hold stable during 2013, but has de facto devalued by nearly 25% by the issuance of the report), 2014 sales are hard to predict. There are 101 franchise stores in total in the country as of end of 2013.

In the Baltics, the Group primarily operates via own stores and franchise partners. The Group operates 9 own stores, complemented by 34 partner stores in the region. The sales in the Baltic countries aggregated 2 733 thousand EUR for 12 months of 2013, compared to 3 172 EUR for the same period a year ago.

As referred to in our earlier quarterly reports, the other markets, with Kazakhstan in the lead, aggregated 8 313 thousand EUR in sales for 2013, compared to 7 358 thousand EUR a year before. The Group is making efforts to increase sales in other markets in 2014, as well.

On the store openings, Q4 2013 net increase (including openings and store closures primarily due to relocations) for Milavitsa stores were 29 units and 2 units under the Lauma Lingerie brand. The Group therefore operated directly and via franchise a total of 679 stores (net increase of 95 stores compared to end of 2012). Total geography of our franchise partners now covers more than 20 countries, including Milavitsa and Lauma Lingerie branded stores.  

Financial performance

The Group`s sales amounted to 121 680 thousand EUR during 12 months of 2013, representing a 1.5% decrease as compared to the same period of previous year. Overall, wholesales decreased by 2.5% and retail sales increased – by 2.7%.

The Group’s reported gross profit margin during Q4 improved year-on-year basis and stood at 33.61%, reported gross margin was 26.32% in the respective period of previous year. For 12 months of 2013, the gross margin aggregated 35.23%, compared to 34.2% a year ago. Consolidated operating profit for Q4 2013 amounted to 67 thousand EUR, compared to 478 thousand EUR in Q4 2012. For 12 months of 2013 the operating profit stood at 16 716 thousand EUR compared to 19 522 thousand EUR a year ago. The main reason for the drop is related to higher distribution expenses. The consolidated operating profit margin was 13.7% for 12 months of 2013 (15.8% in 12 months of 2012).

Consolidated net profit attributable to equity holders of the Parent company for Q4 2013 amounted to 236 thousand EUR, compared to 1 666 thousand EUR in Q4 2012. The net profit attributable to equity holders of the Parent company for 12 months of 2013 amounted to 10 945 thousand EUR, compared to 14 151 thousand EUR a year ago; net profit margin attributable to equity holders of the Parent company for 12 months of 2013 was 9.0% against 11.5% in 12 months of 2012.

Financial position

As of 31 December 2013 consolidated assets amounted to 76 629 thousand EUR representing an increase by 1.0% as compared to the position as of 31 December 2012.

Trade and other receivables decreased by 3 900 thousand EUR as compared to 31 December 2012 and amounted to 10 846 thousand EUR as of 31 December 2013. Inventory balance increased by 275 thousand EUR and amounted to 24 873 thousand EUR as of 31 December 2013. Changes in trade debtors and stock balance were in line with the seasonality trend of the business.

Equity attributable to equity holders of the Parent company increased by 974 thousand EUR and amounted to 52 370 thousand EUR as of 31 December 2013.

Current liabilities decreased by 405 thousand EUR during 12 months of 2013. Current and non-current loans and borrowings increased by 32 thousand EUR to 79 thousand EUR as of 31 December 2013.

Sales structure

Sales by markets

in thousands of EUR 12m 2013 12m 2012 Change 12m 2013
% from sales
12m 2012
% from sales
Russia 71 326 75 138 -3 812 58.6% 60.8%
Belarus 30 794 31 494 -700 25.3% 25.5%
Ukraine 8 514 6 357 2 157 7.0% 5.1%
Baltics 2 733 3 172 -439 2.2% 2.6%
Other markets 8 313 7 358 955 6.8% 6.0%
Total 121 680 123 519 -1 839 100.0% 100.0%

The majority of lingerie sales revenue during 12 months of 2013 in the amount of 71 326 thousand EUR was generated in Russia, accounting for 58.6% of total sales. The second largest market was Belarus, where sales reached 30 794 thousand EUR, contributing 25.3% of lingerie sales (both retail and wholesale). Ukraine represented a sales of 8 514 thousand EUR, contributing 7.0% of lingerie sales of the Group.

Sales by business segments

in thousands of EUR 12m 2013 12m 2012 Change 12m 2013
% from sales
12m 2012
% from sales
Wholesale 100 259 102 862 -2 603 82.4% 83.3%
Retail 20 707 20 167 540 17.0% 16.3%
Other operations 714 490 224 0.6% 0.4%
Total 121 680 123 519 -1 839 100.0% 100.0%

During 12 months of 2013 wholesale revenue amounted to 100 259 thousand EUR, representing 82.4% of the Group’s total revenue (12 months 2012: 83.3%). The main wholesale regions were Russia, Ukraine, Belarus, Kazakhstan and Moldova.

Total lingerie retail sales of the Group in 12 months of 2013 amounted to 20 707 thousand EUR, representing 17.0% of the Group’s total revenue (12 months 2012: 16.3%).

As of 31 December 2013 there were altogether 679 Milavitsa and Lauma branded shops. Own retail operations were conducted in Belarus and Latvia. As of the end of 12 months of 2013 the Group operated 62 own retail outlets. As of 31 December 2013, there were 581 Milavitsa branded shops operated by Milavitsa trading partners in Russia, Ukraine, Moldova, Kazakhstan, Uzbekistan, Kyrgyzstan, Latvia, Azerbaijan, Armenia, Germany, South Africa, Lithuania, Estonia, Georgia, United Arab Emirates, Iran, Slovenia, Belgium and Italy. Additionally, as of 31 December 2013, there were 36 Lauma Lingerie retail outlets operated by Lauma Lingerie trading partners in Lithuania, Latvia, Estonia, Belarus and Albania.

Own & franchise store locations, geography

  Own Franchise Total
Russia 0 384 384
Ukraine 0 101 101
Belarus 53 5 58
Baltics 9 34 43
Kazakhstan 0 29 29
Moldova 0 26 26
Other regions 0 38 38

 

Investments

During 12 months 2013 the Group’s investments into property, plant and equipment totalled 3 664 thousand EUR. Main investments were made into equipment and facilities to improve logistic facilities and maintain effective production for future periods.

Personnel

As of 31 December 2013, the Group employed 3 165 employees including 412 in retail. The rest were employed in production, wholesale, administration and support operations.

Total salaries and related taxes during 12 months 2013 amounted to 24 923 thousand EUR. The remuneration of key management of the Group, including the key executives of the subsidiaries, totalled 647 thousand EUR.

Decisions made by governing bodies during 12 months 2013

On 28 June 2013 Silvano Fashion Group held its regular Annual General Meeting of Shareholders. The Meeting adopted following decisions.

The Meeting approved the 2012 Annual Report.
The Meeting decided to distribute dividends in the amount 0.10 EUR per share (record date 12.07.2013, paid out on 15.07.2013).
The Meeting decided to reduce the share capital of the Company by reducing the nominal value of the shares by 0.10 EUR per share (record date 12.07.2013, paid out on 10.10.2013) and amend the Articles of Association accordingly.
The Meeting decided to adopt a share buy-back program in the following: effective period until 30.06.2014; maximum number of shares to be acquired not more than 400,000; maximum share price 2.50 EUR per share.
The Meeting decided to recall Mr Pavel Daneyko from the Supervisory Board due to the expiration of his term, and appointed Mr Mart Mutso as the new Supervisory Board member.
The Meeting decided to re-appoint AS PricewaterhouseCoopers as the Group`s auditor for financial year 2013.

In June, Silvano Fashion Group established a 100% subsidiary in Latvia (SIA Linret) for holding purposes. In December 2013, the group alienated 100% of the shares of Linret EST (Estonia).

         Aleksei Kadõrko
         CFO
         Silvano Fashion Group
         +372 6845 000
         aleksei.kadorko@silvanofashion.com