Tallinn, 2014-08-01 19:00 CEST (GLOBE NEWSWIRE) --  

Selected Financial Indicators

Summarized selected financial indicators of the Group for 6 months 2014 compared to 6 months 2013 and 30.06.2014 compared to 31.12.2013 were as follows:  

Consolidated Statement of Financial Position

 Consolidated Income Statement

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.

When the first quarter business volumes were primarily affected by the weakness of the currencies, and the standoff in Ukraine, then the second quarter of the business can be described by a set of internal and external factors that affected lower business volume across all our main markets, with the exception of the Baltic States. First, the consumer weakness in our main consumer markets – Russia, Belarus, Ukraine, Kazakhstan – continued. Some relief was noticed through the stabilization of our main sales currency – the Russia’s Rouble (see also graph below). Secondly, the amendment of the supply terms (announced to investors on May 04, 2014) that shall allow the Company to establish unified pricing to countries in the Customs Union (Russia, Belarus and Kazakhstan) and create opportunities for existing and new customers that would drive our wholesale and franchise business in the near future.

On the currencies, one can notice the stabilization of the Russia’s Rouble (RUB) exchange rate against Euro (EUR), and stable Belarus Rouble (BYR). The devaluation of the Ukraine Hryvnia (UAH) has been absorbed on the expense of the Ukrainian consumers. The stabilization of the RUB allows us to deliver our Russian customers at more stable prices; the strength of the BYR is more controversial since the cost environment for us measured in EUR remains challenging. We do not expect the currencies being an issue for the second half of 2014.

Having spoken of the countermeasures that the Company has undertaken, we can speak of the advancements in the gross margin, significant decreases in other operating expenses, the trend that should continue also forward.

The Group’s sales in Q2 2014 were below the benchmark in Q2 2013, the net sales reached 27 565 thousand EUR, compared to 36 888 thousand EUR a year ago. The corresponding numbers for 6 months of 2014 were 54 660 thousand EUR against 68 947 thousand EUR for 6 months of 2013. The sales volumes decreased both in wholesale and retail segment (franchise) of our business.

Overall during 6 months of 2014 the biggest drop in sales came from wholesale segment (43 407 thousand EUR in 6 months of 2014 vs. 57 562 thousand EUR in 6 months of 2013). Among key markets, the main backdrop we experienced in Russia (-10 743 thousand EUR), in Belarus decrease was -1 047 thousand EUR, in Ukraine -2 494 thousand EUR, we improved our sales in the Baltic States by 299 thousand EUR.

The net profit stood at 3 442 thousand Euros in Q2 2014 compared to 4 501 thousand EUR a year ago. The corresponding net profit for 6 months of 2014 was 5 633 thousand EUR compared to 8 335 thousand EUR a year ago. The Group’s EBITDA reached 9 351 thousand EUR in 6 months of 2014 compared to 12 131 thousand EUR in the corresponding period of 2013.

The economic outlook for most of our major markets remains unchanged from what we indicated in the previous report. According to IMF, the Russia’s economic growth (measured in GDP) in 2014 constitutes around 1%. Russia’s takeover of Crimea injects geopolitical tension, and the capital outflow from the country’s economy continues. The main reason for the backdrop in sales in Russia, though, was reasoned by historic overstock accumulated by our trading partners there. The amendment of the supply terms created a temporary drop in order volumes, that we see stabilizing for the remaining part of the year. As of end of Q2 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 that also has created some stability for the currency (Belarus Rouble weakened by 5.80% against Euro during 6 months of 2014). There are a total of 54 stores operated directly by the Group and 5 franchise stores. The Group’s sales revenue in Belarus reached 15 511 thousand EUR for 6 months of 2014 compared to 16 558 thousand EUR for the same period a year ago.

Negative information flow regarding Ukraine is continuously on the radar of global media. The currency depreciated further during Q2 2014, and has stabilized after dropping 45% against Euro. For the Group, the 6 months of 2014 net sales dropped to 2 665 thousand EUR compared to 5 159 thousand EUR for the same period a year ago. We have very vague visibility about the outlook for 2014. There are 100 franchise stores in total in the country as of end of Q2 2014.

In the Baltics, the Group primarily operates via own stores and franchise partners. The Group operates 9 own stores, complemented by 31 partner stores in the region. The sales in the Baltic countries aggregated 1 591 thousand EUR for 6 months of 2014, compared to 1 292 thousand EUR for the same period a year ago.

On the store openings, during 6 months of 2014 net increase (including openings and store closures primarily due to relocations) for Milavitsa stores were 4 units and 3 openings under the Lauma Lingerie brand. The Group therefore operated directly and via franchise a total of 683 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 54 660 thousand EUR during 6 months of 2014, representing a 20.7% decrease as compared to the same period of previous year. Overall, wholesales decreased by 24.6% and retail sales decreased by 3.7%.

The Group’s reported gross profit margin during 6 months of 2014 improved year-on-year basis and stood at 35.1%, reported gross margin was 33.9% in the respective period of previous year. Consolidated operating profit for 6 months of 2014 amounted to 7 856 thousand EUR, compared to 10 870 thousand EUR in 6 months of 2013. The consolidated operating profit margin was 14.4% for 6 months of 2014 (15.8% in 6 months of 2013). Consolidated EBITDA for 6 months of 2014 was 9 351 thousand EUR, which is 17.1% in margin terms (12 131 thousand EUR and 17.6% for 6 months of 2013).

During 6 months of 2014 the Group distributed profit from subsidiaries to the Parent company, which brought additional 0.5 million EUR in tax expenses. The total tax expense stood at 2 814 thousand EUR for 6 months of 2014 compared to 2 655 thousand EUR during the corresponding period of the last year. Currency exchange losses in 6 months of 2014 amounted to 640 thousand EUR (595 thousand EUR in 6 months of 2013). Gain on net monetary position, which is highly dependent on exchange rates` movements, increased by 682 thousand EUR compared to 6 months of 2013. As a result consolidated net profit attributable to equity holders of the Parent company for 6 months of 2014 amounted to 5 025 thousand EUR, compared to 7 616 thousand EUR in 6 months of 2013, net profit margin attributable to equity holders of the Parent company for 6 months of 2014 was 9.2% against 11.0% in 6 months of 2013. 

Financial position

As of 30 June 2014 consolidated assets amounted to 82 003 thousand EUR representing an increase by 7.0% as compared to the position as of 31 December 2013.

Trade and other receivables increased by 4 379 thousand EUR as compared to 31 December 2013 and amounted to 15 225 thousand EUR as of 30 June 2014. Inventory balance increased by 2 772 thousand EUR and amounted to 27 645 thousand EUR as of 30 June 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 2 048 thousand EUR and amounted to 54 418 thousand EUR as of 30 June 2014.

Current liabilities increased by 6 267 thousand EUR during 6 months of 2014. Current and non-current loans and borrowings decreased by 7 thousand EUR to 72 thousand EUR as of 30 June 2014.

Sales structure

Sales by markets

The majority of lingerie sales revenue during 6 months of 2014 in the amount of 30 545 thousand EUR was generated in Russia, accounting for 55.9% of total sales. The second largest market was Belarus, where sales reached 15 511 thousand EUR, contributing 28.4% of lingerie sales (both retail and wholesale). Other markets overtook the 3^rd largest market position, reaching 4 348 thousand EUR, contributing 8% of lingerie sales of the Group.

Sales by business segments

During 6 months of 2014 wholesale revenue amounted to 43 407 thousand EUR, representing 79.4% of the Group’s total revenue (6 months of 2013: 83.5%). The main wholesale regions were Russia, Ukraine, Belarus, Kazakhstan and Moldova.

Total lingerie retail sales of the Group in 6 months of 2014 amounted to 10 770 thousand EUR, representing 19.7% of the Group’s total revenue (6 months of 2013: 16.2%).

As of 30 June 2014 there were altogether 683 Milavitsa and Lauma branded shops. Own retail operations were conducted in Belarus and Latvia. As of the end of 6 months of 2014 the Group operated 63 own retail outlets. As of 30 June 2014, there were 582 Milavitsa branded shops operated by Milavitsa trading partners in Russia, Ukraine, Moldova, Kazakhstan, Uzbekistan, Kyrgyzstan, Azerbaijan, Armenia, Germany, South Africa, Lithuania, Estonia, Georgia, United Arab Emirates, Iran, Slovenia, Belgium and Italy. Additionally, as of 30 June 2014, there were 37 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

Investments

During 6 months of 2014 the Group’s investments into property, plant and equipment totalled 202 thousand EUR. Investments were made into equipment and facilities to maintain effective production for future periods.

Personnel

As of 30 June 2014, the Group employed 3 002 employees including 487 in retail. The rest were employed in production, wholesale, administration and support operations.

Total salaries and related taxes during 6 months of 2014 amounted to 12 029 thousand EUR. The remuneration of key management of the Group, including the key executives of the subsidiaries, totalled 529 thousand EUR.

Changes in the distribution companies

During 6 months 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, Belarus and Latvia are renamed into “Silvano Fashion”.

Decisions made by governing bodies during 6 months 2014

On 30 June 2014 Silvano Fashion Group held its regular Annual General Meeting of Shareholders. The Meeting adopted following decisions.

- The Meeting approved the 2013 Annual Report.
- The Meeting decided to distribute dividends in the amount 0.10 EUR per share (record date 14.07.2014, paid out on 15.07.2014).
- The Meeting decided to re-appoint AS PricewaterhouseCoopers as the Group`s auditor for financial year 2014.
- The Meeting decided to cancel the 400 000 own shares acquired within the own share buy-back programme as approved by the shareholders of AS Silvano Fashion Group on 28th of June 2013;
- The Meeting decided to adopt a share buy-back program in the following: effective period until 30.06.2015; maximum number of shares to be acquired not more than 1 000 000; maximum share price 2.00 EUR per share.

         Aleksei Kadõrko
         Chief Financial Officer
         Silvano Fashion Group
         info@silvanofashion.com