Consolidated interim report for Q1 2014 (unaudited)

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| Source: Silvano Fashion Group
multilang-release

Tallinn, 2014-05-09 07:30 CEST (GLOBE NEWSWIRE) --  

Selected Financial Indicators

Summarized selected financial indicators of the Group for Q1 2014 compared to Q1 2013 and 31.03.2014 compared to 31.12.2013 were as follows: 

in thousands of EUR Q1 2014 Q1 2013 Change
Revenue 27 095 32 059 -15.5%
EBITDA 4 547 4 832 -5.9%
Net profit for the period 2 191 3 834 -42.9%
Net profit attributable equity holders of the Parent company 1 890 3 527 -46.4%
Earnings per share (EUR) 0.05 0.09 -46.1%
Operating cash flow for the period 753 348 116.2%
in thousands of EUR 31.03.2014 31.12.2013 Change
Total assets 78 581 76 629 2.5%
Total current assets 57 214 55 080 3.9%
Total equity attributable to equity holders of the Parent company 53 487 52 370 2.1%
Loans and borrowings 86 79 8.9%
Cash and cash equivalents 15 919 19 165 -16.9%
Margin analysis, % Q1 2014 Q1 2013 Change
Gross profit 34.7 31.8 9.3%
EBITDA 16.8 15.1 11.3%
Net profit 8.1 12.0 -32.4%
Net profit attributable equity holders of the Parent company 7.0 11.0 -36.6%
Financial ratios, % 31.03.2014 31.12.2013 Change
ROA 11.7 13.4 -12.7%
ROE 17.3 19.9 -13.2%
Price to earnings ratio (P/E) 9.1 9.5 -3.6%
Current ratio 4.1 4.7 -12.5%
Quick ratio 2.2 2.6 -14.5%

Consolidated Statement of Financial Position

in thousands of EUR 31.03.14 31.12.13
ASSETS    
Current assets    
Cash and cash equivalents 15 919 19 165
Prepayments 717 196
Trade and other receivables 14 034 10 846
Inventories 26 544 24 873
Total current assets 57 214 55 080
     
Non-current assets    
Investments in associates 116 124
Available-for-sale investments 502 497
Deferred tax asset 719 460
Intangible assets 735 719
Investment property 1 599 1 592
Property, plant and equipment 17 696 18 157
Total non-current assets 21 367 21 549
TOTAL ASSETS 78 581 76 629
     
LIABILITIES AND EQUITY    
Current liabilities    
Current borrowings 86 79
Trade and other payables 11 151 10 837
Tax liabilities 4 643 905
Total current liabilities 15 880 11 821
     
Non-current liabilities    
Deferred tax liability 166 1 953
Total non-current liabilities 166 1 953
Total liabilities 16 046 13 774
     
Equity    
Share capital 11 820 11 820
Share premium 13 822 13 822
Treasury shares -749 -224
Statutory reserve capital 1 306 1 306
Unrealised exchange rate differences -2 277 -1 215
Retained earnings 29 565 26 861
Total equity attributable to equity holders of the Parent company 53 487 52 370
Non-controlling interest 9 048 10 485
Total equity 62 535 62 855
TOTAL EQUITY AND LIABILITIES 78 581 76 629 

Consolidated Income Statement

in thousands of EUR Q1 2014 Q1 2013
Revenue 27 095 32 059
Cost of goods sold -17 689 -21 873
Gross Profit 9 406 10 186
     
Distribution expenses -3 946 -4 244
Administrative expenses -1 624 -1 658
Other operating income 321 308
Other operating expenses -309 -389
Operating profit 3 848 4 203
     
Currency exchange income/(expense) -278 -4
Other finance income/(expenses) 200 257
Net financial income -78 253
     
Profit (loss) from associates using equity method 9 -8
Profit before tax and gain/(loss) on net monetary position 3 779 4 448
     
Income tax expense -1 614 -1 295
Profit before gain/(loss) on net monetary position 2 165 3 153
     
Gain on net monetary position 26 681
Profit for the period 2 191 3 834
Attributable to :    
   Equity holders of the Parent company 1 890 3 527
   Non-controlling interest 301 307
     
Earnings per share from profit attributable to equity holders of the Parent company, both basic and diluted (EUR) 0.05 0.09

 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 first quarter of 2014 turned into a challenge for Silvano Fashion Group. The primary reason to this is the continuation of the weaker consumer sentiment, fuelled by unfavourable movement of the currencies. The main sales (and accounts receivables) currencies – Russia’s Rouble (RUB), Belarus Rouble (BYR) and Ukraine Hryvnia (UAH) continued to depreciate against our reporting currency – the EUR. This affects directly the purchasing power of the customers since the income of the consumers has remained constant. To a smaller extent, the somewhat weaker BYR attributes to lower production cost for Silvano Fashion Group. 

The company has already taken countermeasures to meet the new economic reality. The main focus here is on efficiency, which primarily applies to the administrative and back-office layers of the organization. The second focus is on the overall cash management, including keeping the cash in Euros, but also improving the working capital balance of the company.

The Group’s sales in Q1 2014 were below the benchmark in Q1 2013, the net sales reached 27 095 thousand EUR, compared to 32 059 thousand EUR a year ago. The sales volumes decreased both in wholesale and retail segment (franchise) of our business. In the retail stores operated by Silvano Fashion Group, the sales increased in Latvia (an impressive growth by +31% y-o-y) and in Baltics in general, while like-for-like sales and sales per square meter in EUR terms deteriorated slightly in Belarus (-3%). Franchise stores in Russia have also stood well against the moody economic environment – like-for-like sales dropped by only -1.5% there. The most volatile part of sales there is wholesale, which attributed to the drop of aggregated sales in the region by 18.5% y-o-y.

Overall during Q1 the biggest drop in sales came from wholesale segment (21 929 thousand EUR in Q1 2014 vs. 26 937 thousand EUR in Q1 2013). Among key markets, the main backdrop we experienced in Russia (-3 629 thousand EUR), in Belarus decrease was 508 thousand EUR, in Ukraine - 716 thousand EUR, we improved our sales in the Baltic States by 210 thousand EUR.

The net profit stood at 2 191 thousand Euros in Q1 2014 compared to 3 834 thousand EUR a year ago. The Group’s EBITDA, though, remained nearly unchanged, 4 547 thousand EUR in Q1 2014 compared to 4 832 thousand EUR in the corresponding period of 2013.

The economic outlook for most of our major markets remains cloudy. According to IMF, the Russia’s economic growth (measured in GDP) in 2014 constitutes around 1%. Russia’s takeover of Crimea last month injects geopolitical tension, and the capital outflow from the country’s economy continues. Silvano Fashion Group was directly affected by the reduced purchasing power (Russia’s Rouble losing nearly 9% against Euro during Q1 2014) and reduced sales. As of end of Q1 2014 there were 385 Milavitsa stores in Russia.

Belarus economic growth is stalling because of cooling economic climate of its main export market – Russia. The country has managed targeted inflation policy rather well (CPI growth of 4.9% during Q1 2014) that also has created some stability for the currency (Belarus Rouble weakened by 3.85% against Euro during Q1 2014). Further to this, the country is literally breathing according to the World Hockey Tournament, kicking off on May 9th that may be one of the reasons for the stability. There are also signs that the country is potentially leveraging from the negotiations concerning the Eurasian Economic Union with Russia and Kazakhstan. There are a total of 53 stores operated directly by the Group and 5 franchise stores. The Group’s sales revenue in Belarus reached 6 926 thousand EUR for Q1 2014 compared to 7 434 thousand EUR for the same period a year ago.

Negative information flow regarding Ukraine is continuously on the radar of global media. Looking more detailed at the economic situation there, our buyers were negatively surprised by the drop of the local currency (-36.5% during Q1 2014 against EUR), and re-assessing focus from the general consumer goods into staples such as food etc. For the Group, the Q1 2014 net sales dropped to 1 393 thousand EUR compared to 2 109 thousand EUR for the same period a year ago. We have very vague visibility about the outlook for 2014, dependent on the stabilization of the political climate; the country is facing presidential elections at the end of May. There are 101 franchise stores in total in the country as of end of Q1 2014.

In the Baltics, the Group primarily operates via own stores and franchise partners. The Group operates 9 own stores, complemented by 33 partner stores in the region. The sales in the Baltic countries aggregated 794 thousand EUR for Q1 2014, compared to 584 thousand EUR for the same period a year ago.

On the store openings, Q1 2014 net increase (including openings and store closures primarily due to relocations) for Milavitsa stores were 3 units and a closure of one store in Lithuania under the Lauma Lingerie brand. The Group therefore operated directly and via franchise a total of 681 stores. Total geography of our franchise partners covers more than 20 countries, including Milavitsa and Lauma Lingerie branded stores.

Financial performance

The Group`s sales amounted to 27 095 thousand EUR during Q1 2014, representing a 15.5% decrease as compared to the same period of previous year. Overall, wholesales decreased by 18.6% and retail sales decreased by 2.6%.

The Group’s reported gross profit margin during Q1 improved year-on-year basis and stood at 34.71%, reported gross margin was 31.77% in the respective period of previous year. Consolidated operating profit for Q1 2014 amounted to 3 848 thousand EUR, compared to 4 203 thousand EUR in Q1 2013. The consolidated operating profit margin was 14.2% for Q1 2014 (13.1% in Q1 2013). Consolidated EBITDA for Q1 2014 was 4 547 thousand EUR, which is 16.8% in margin terms (4 832 thousand EUR and 15.1% for Q1 213). This reflects continuous strive for improvements in efficiency and cost control inside the Group.

During Q1 2014 the Group distributed profit from subsidiaries to the Parent company, which brought additional 463 thousand EUR in tax expenses. Currency exchange losses in Q1 2014 amounted to 278 thousand EUR (4 thousand EUR in Q1 2013). Gain on net monetary position, which is highly dependent on exchange rates` movements, decreased by 655 thousand EUR compared to Q1 2013. As a result consolidated net profit attributable to equity holders of the Parent company for Q1 2014 amounted to 1 890 thousand EUR, compared to 3 527 thousand EUR in Q1 2013, net profit margin attributable to equity holders of the Parent company for Q1 2014 was 8.1% against 12.0% in Q1 2013.

Financial position

As of 31 March 2014 consolidated assets amounted to 78 581 thousand EUR representing an increase by 2.6% as compared to the position as of 31 December 2013.

Trade and other receivables increased by 3 188 thousand EUR as compared to 31 December 2013 and amounted to 14 034 thousand EUR as of 31 March 2014. Inventory balance increased by 1 671 thousand EUR and amounted to 26 544 thousand EUR as of 31 March 2014. 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 1 117 thousand EUR and amounted to 53 487 thousand EUR as of 31 March 2014.

Current liabilities increased by 2 215 thousand EUR during Q1 2014. Current and non-current loans and borrowings increased by 7 thousand EUR to 86 thousand EUR as of 31 March 2014.

Sales structure

Sales by markets

in thousands of EUR Q1 2014 Q1 2013 Change Q1 2014
% from sales
Q1 2013
 % from sales
Russia 16 015 19 644 -18.5% 59.1% 61.3%
Belarus 6 926 7 434 -6.8% 25.6% 23.2%
Ukraine 1 393 2 109 -33.9% 5.1% 6.6%
Baltics 794 584 36.0% 2.9% 1.8%
Other markets 1 967 2 288 -14.0% 7.3% 7.1%
Total 27 095 32 059 -15.5% 100.0% 100.0%

The majority of lingerie sales revenue during Q1 2014 in the amount of 16 015 thousand EUR was generated in Russia, accounting for 59.1% of total sales. The second largest market was Belarus, where sales reached 6 926 thousand EUR, contributing 25.6% of lingerie sales (both retail and wholesale). Ukraine represented a sales of 1 393 thousand EUR, contributing 5.1% of lingerie sales of the Group. 

Sales by business segments

in thousands of EUR Q1 2014 Q1 2013 Change Q1 2014
% from sales
Q1 2013
 % from sales
Wholesale 21 929 26 937 -18.6% 80.9% 84.0%
Retail 4 905 5 035 -2.6% 18.1% 15.7%
Other operations 261 87 200.1% 1.0% 0.3%
Total 27 095 32 059 -15.5% 100.0% 100.0%

During Q1 2014 wholesale revenue amounted to 21 929 thousand EUR, representing 80.9% of the Group’s total revenue (Q1 2013: 84.0%). The main wholesale regions were Russia, Ukraine, Belarus, Kazakhstan and Moldova.

Total lingerie retail sales of the Group in Q1 2014 amounted to 4 905 thousand EUR, representing 18.1% of the Group’s total revenue (Q1 2013: 15,7%).

As of 31 March 2014 there were altogether 681 Milavitsa and Lauma branded shops. Own retail operations were conducted in Belarus and Latvia. As of the end of Q1 2014 the Group operated 62 own retail outlets. As of 31 March 2014, there were 584 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 March 2014, there were 35 Lauma Lingerie retail outlets operated by Lauma Lingerie trading partners in Estonia, Latvia, Lithuania, Belarus, Russia, Ukraine, Saudi Arabia and Albania.

Own & franchise store locations, geography

  Own Franchise Total
Russia 0 386 386
Ukraine 0 101 101
Belarus 53 5 58
Baltics 9 33 42
Kazakhstan 0 30 30
Moldova 0 26 26
Other regions 0 38 38

 

Investments

During Q1 2014 the Group’s investments into property, plant and equipment totalled 39 thousand EUR. Investments were made into equipment and facilities to maintain effective production for future periods.

Personnel

As of 31 March 2014, the Group employed 3 136 employees including 490 in retail. The rest were employed in production, wholesale, administration and support operations.

Total salaries and related taxes during 12 months 2013 amounted to 6 042 thousand EUR. The remuneration of key management of the Group, including the key executives of the subsidiaries, totalled 209 thousand EUR.

Changes in the distribution companies

During Q1 2014 and until the release of the report, Silvano Fashion Group has changed business names of the distribution companies belonging to the Group. The main reason for this is to change the focus of the distribution companies from being the logistics arm to the production company into contemporary sales organizations that have the responsibility for the development of the Group’s business and its whole portfolio of brands. During this process, the distribution companies in Russia, Ukraine and Belarus are renamed into “Silvano Fashion”.

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