Baltika's unaudited financial results, fourth quarter and 12 months of 2014


Baltika’s fourth-quarter profit before income tax was 521 thousand euros and net profit was 420 thousand euros. The result of last year comparative period continued operations profit before income tax was 1,003 thousand euros and net profit was 852 thousand euros.

Baltika’s continued operations fourth quarter sales increased by 6% and it was with 15,807 thousand euros. Strategic objective is placing greater focus on the development of other sales channels and increase sales through wholesale and franchise and also in e-store. As a result other channels sales growths are high – 85% and 103% accordingly. Sales for the year in total amounted to 55,596 thousand euros, growing 7% compared to prior year.

Retail sales grew in Baltic countries by 5%, increase of 541 thousand euros compared to same period in prior year. Economy in Baltics remained in the fourth quarter stable– economic situation is improving domestic demand, but pressure on margins increases due to stronger competition. The sales growth in Baltics was achieved due to expected good results in the first months of the quarter, despite the negative influence from smaller inbound tourism with decrease of tourists from Eastern neighbours.

Russian unstable economy, weaker rouble (rouble has weakened by ca 37% to euro during 2014) and rising prices have significantly decreased consumer confidence and hindered developments in fashion industry. Despite the complicated economic situation sales increased in fourth quarter by 6% in local currency, while the average operating area of stores decreased by 8%. Due to weaker currency the fourth quarter retail sales in euros was still down by 441 thousand euros (-21%). In total result of Russia improved both in the quarter and for the full year. With the optimisation of costs and closing of loss making stores there was savings and efficiency improvement that finalised in expected total result.

Due to the unstable economic and political situation in Russia Group continues optimising its retail network in the country and focuses on operating stores in St. Petersburg, Kaliningrad and Kazan.

Company gross profit margin in the fourth quarter was 50,2% that is 3,8% lower than in the same period last year. The decrease of gross profit margin has from one side been impacted by the lower margin in wholesale and franchise, which proportion from sales has increased from 5% to 9%. On the other hand the other reason impacting with lower margins is the weakening of Russian rouble and the client bonus reserve that lowers the gross profit. Due to the launch of new client program and full implementation in Baltic countries in the fourth quarter the client bonus earned for future discounts is recorded as client bonus reserve. Baltic quarterly gross profit margin excluding the bonus reserve remained on the same level as prior year.

Baltika Group ended the fourth quarter with 420 thousand euros net profit. Together with the discontinued operations the yearly net loss was 1,263 thousand euros, which includes the loss from allowance for assets in Ukraine of 1,095 thousand euros. Continued operations net profit for the year was 66 thousand euros. Prior year comparative result from continued operations was net profit 443 thousand euros.

Highlights of the period until the date of release of this quarterly report

  • Baltika launched in Latvia new bonus program AndMore that was previously already in use in Estonia and Lithuania. The new bonus program developed in December to cover also the e-store andmorefashion.com.
  • Ivo Nikkolo celebrated its 20th anniversary in line with Tallinn Fashion Week with a gala show “Ivo Nikkolo – since 1994”, which also showed unique samples made specifically for the show. Disainers team created a special collection “Ivo Nikkolo 1994” for the anniversary celebration, which was also available in stores. Ivo Nikkolo collection was additionally presented in Riga Fashion Week in November. 
  • Nasdaq Baltic Market exchanges awarded in January those with best investors relations and Baltika received the nomination in two categories – 5th place in the Best Investors Relations in the Baltic Market and 2-3rd place in The Best Annual Report and Corporate Governance Report.
  • Starting from January 27th, 2015 Lea Endrikson joined Baltika as Head of Wholesale and Franchise. Lea has previously launched the I.L.U chain of beauty stores in Kaubamaja Group, and led it for the past seven years, worked as Marketing Director for Stockmann in Estonia and Russia, and as an advertising manager at Sampo Bank.
  • On January 30, 2015 the Supervisory Board of AS Baltika decided to suspend Maigi Pärnik-Pernik Management Board contract for the duration of her maternity leave. The Management Board member responsible for the finance function during the leave of Maigi Pärnik-Pernik will be Meelis Milder, who will also temporarily be the one responsible for the disclosure of information on the exchange.
  • After the balance sheet date additional problem to economic situation in Russia has proved to be the situation in banking sector. Baltika Group companies have used in Russia several banks services, including one among the top largest 100 banks in Russia,  ООО Судостроительный банк. The bank has had liquidity issues since January and on 16th February 2015 the Central Bank of Russia withdrew their license. No disruption has thus far occurred with the other banks used. Baltika is working together with law firm partners on resolving the matter to know when and how much funds from what was held on the account would be returned. Baltika’s operations continue as usual and the possible maximum loss is not significant.
  • Baltika Group opened in the fourth quarter three new stores in Estonia: Bastion stores in Tallinn Ülemiste Centre and Jõhvi Shopping Centre, Blue Inc store in Ülemiste Centre. Franchise store network expanded in the quarter by 5 stores. Franchise partner Gold Button opened in October in Moscow, Russia stores of Ivo Nikkolo, Monton and Bation, franchise partner Mirworld opened in December Mosaic and Ivo Nikkolo stores in Tenerife, Spain. January came with the opening of three franchise stores – Gold Button opened outlet store and Mirworld Baltman and Bastion store.

 

Consolidated statement of financial position

  31 Dec 2014 31 Dec 2013
ASSETS    
Current assets    
Cash and cash equivalents 710 852
Trade and other receivables 1,890 1,514
Inventories 13,415 13,751
Total current assets 16,015 16,117
Non-current assets    
Deferred income tax asset 420 494
Other non-current assets 605 1,013
Property, plant and equipment 2,895 3,023
Intangible assets 3,180 3,693
Total non-current assets 7,100 8,223
TOTAL ASSETS 23,115 24,340
     
EQUITY AND LIABILITIES    
Current liabilities    
Borrowings 2,692 3,158
Trade and other payables 7,019 7,503
Total current liabilities 9,711 10,661
Non-current liabilities    
Borrowings 4,584 2,171
Other liabilities 83 0
Total non-current liabilities 4,667 2,171
TOTAL LIABILITIES 14,378 12,832
     
EQUITY    
Share capital at par value 8,159 8,159
Share premium 809 684
Reserves 1,182 1,182
Retained earnings 2,573 2,471
Net profit (loss) for the period -1,263 102
Currency translation differences -2,723 -1,090
TOTAL EQUITY 8,737 11,508
TOTAL LIABILITIES AND EQUITY 23,115 24,340

 

Consolidated statement of profit and loss

  Q4 2014 Q4 2013 2014 2013
         
Continuing operations        
Revenue 15,807 14,896 55,596 51,828
Client bonus reserve -300 0 -300 0
Revenue after client bonus provision 15,507 14,896 55,296 51,828
Cost of goods sold -7,574 -6,851 -26,934 -24,051
Gross profit 7,933 8,045 28,362 27,777
         
Distribution costs -6,419 -6,370 -24,636 -23,824
Administrative and general expenses -743 -741 -2,905 -2,869
Other operating income 20 108 54 155
Other operating expenses -106 -69 -222 -255
Operating profit 685 973 653 984
         
Finance income 0 6 0 6
Finance costs -164 24 -460 -388
         
Profit before income tax 521 1,003 193 602
         
Income tax expense -101 -151 -127 -159
         
Net profit from continuing operations 420 852 66 443
         
Net profit (-loss) for the period from discontinued operations 0 13 -1,329 -341
         
Net profit (loss) for the period 420 865 -1,263 102
         
         
Basic earnings per share, EUR 0.01 0.02 -0.03 0.00
Continuing operations 0.01 0.02 0.00 0.01
Discontinued operations 0.00 0.00 -0.03 -0.01
         
Diluted earnings per share, EUR 0.01 0.02 -0.03 0.00
Continuing operations 0.01 0.02 0.00 0.01
Discontinued operations 0.00 0.00 -0.03 -0.01

 

 

Meelis Milder

Chairman of the Management Board

meelis.milder@baltikagroup.com

 


Attachments

Baltika_Interim report 4Q 2014.pdf