Tallinn, 2015-05-29 18:00 CEST (GLOBE NEWSWIRE) --
Selected Financial Indicators
Summarized selected financial indicators of the Group for Q1 2015 compared to Q1 2014 and 31.03.2015 compared to 31.12.2014 were as follows:
| in thousands of EUR | Q1 2015 | Q1 2014 | Change |
| Revenue | 13 073 | 27 095 | -51.8% |
| EBITDA | 2 351 | 4 547 | -48.3% |
| Net profit for the period | -349 | 2 191 | -115.9% |
|
Net profit attributable equity holders of the Parent company |
-521 | 1 890 | -127.6% |
| Earnings per share (EUR) | -0.01 | 0.05 | -127.7% |
| Operating cash flow for the period | 678 | 753 | -9.9% |
| in thousands of EUR | 31.03.2015 | 31.12.2014 | Change |
| Total assets | 59 771 | 67 339 | -11.2% |
| Total current assets | 42 050 | 47 005 | -10.5% |
| Total equity attributable to equity holders of the Parent company | 42 454 | 46 753 | -9.2% |
| Loans and borrowings | 0 | 0 | NA |
| Cash and cash equivalents | 12 248 | 13 308 | -8.0% |
| Margin analysis, % | Q1 2015 | Q1 2014 | Change |
| Gross profit | 44.8 | 34.7 | 29.0% |
| EBITDA | 18.0 | 16.8 | 7.2% |
| Net profit | -2.7 | 8.1 | -133.0% |
|
Net profit attributable equity holders of the Parent company |
-4.0 | 7.0 | -157.1% |
| Financial ratios, % | 31.03.2015 | 31.12.2014 | Change |
| ROA | 9.4 | 11.9 | -21.5% |
| ROE | 13.4 | 17.2 | -22.3% |
| Price to earnings ratio (P/E) | 7.9 | 5.0 | 56.6% |
| Current ratio | 3.2 | 3.6 | -12.6% |
| Quick ratio | 1.3 | 1.6 | -14.6% |
Consolidated Statement of Financial Position
| in thousands of EUR | 31.03.2015 | 31.12.2014 |
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | 12 248 | 13 308 |
| Current loans granted | 24 | 329 |
| Trade and other receivables | 5 680 | 6 906 |
| Inventories | 24 098 | 26 462 |
| Total current assets | 42 050 | 47 005 |
| Non-current assets | ||
| Long-term receivables | 0 | 241 |
| Investments in associates | 84 | 84 |
| Available-for-sale investments | 473 | 525 |
| Deferred tax asset | 478 | 649 |
| Intangible assets | 624 | 687 |
| Investment property | 1 465 | 1 638 |
| Property, plant and equipment | 14 597 | 16 510 |
| Total non-current assets | 17 721 | 20 334 |
| TOTAL ASSETS | 59 771 | 67 339 |
| LIABILITIES AND EQUITY | ||
| Current liabilities | ||
| Trade and other payables | 9 865 | 9 703 |
| Tax liabilities | 3 480 | 3 335 |
| Total current liabilities | 13 345 | 13 038 |
| Non-current liabilities | ||
| Deferred tax liability | 0 | 283 |
| Total non-current liabilities | 0 | 283 |
| Total liabilities | 13 345 | 13 321 |
| Equity | ||
| Share capital | 11 700 | 11 700 |
| Share premium | 13 066 | 13 066 |
| Treasury shares | -1 205 | -585 |
| Statutory reserve capital | 1 306 | 1 306 |
| Unrealised exchange rate differences | -7 252 | -5 649 |
| Retained earnings | 24 839 | 26 915 |
| Total equity attributable to equity holders of the Parent company | 42 454 | 46 753 |
| Non-controlling interest | 3 972 | 7 265 |
| Total equity | 46 426 | 54 018 |
| TOTAL EQUITY AND LIABILITIES | 59 771 | 67 339 |
Consolidated Income Statement
| in thousands of EUR | Q1 2015 | Q1 2014 |
| Revenue | 13 073 | 27 095 |
| Cost of goods sold | -7 217 | -17 689 |
| Gross Profit | 5 856 | 9 406 |
| Distribution expenses | -2 323 | -3 946 |
| Administrative expenses | -1 709 | -1 624 |
| Other operating income | 123 | 321 |
| Other operating expenses | -252 | -309 |
| Operating profit | 1 695 | 3 848 |
| Currency exchange income/(expense) | -89 | -278 |
| Other finance income/(expenses) | 173 | 200 |
| Net financial income | 84 | -78 |
| Profit (loss) from associates using equity method | -2 | 9 |
| Profit before tax and gain/(loss) on net monetary position | 1 777 | 3 779 |
| Income tax expense | -2 126 | -1 614 |
| Profit before gain/(loss) on net monetary position | -349 | 2 165 |
| Gain on net monetary position | 0 | 26 |
| Profit for the period | -349 | 2 191 |
| Attributable to : | ||
| Equity holders of the Parent company | -521 | 1 890 |
| Non-controlling interest | 172 | 301 |
| Earnings per share from profit attributable to equity holders of the Parent company, both basic and diluted (EUR) | -0.01 | 0.05 |
Business environment
Before touching upon the topic of macro environment, we need to underpin the extreme weakness (and seasonally weak) quarter for apparel business on all our core markets. It is well known that retailers try to off-load as much of the unsold seasonal collections in the beginning of the first quarter, throwing in all means of sales incentives etc. To a great extent, such behaviour started already last fall, keeping the consumers stocked up and withholding their purchases for the future. As put by one of the analysts: “there are perfect storms and perfect stills, and this is a perfect still for the apparel retail” when it comes to Russia. There is no good news for the consumers to incentivize them to buy.
For Russia, our core market, in the average price segment, i.e. non-expensive brands, the market contracted by as much as by 60% y-o-y (our quarterly drop in Russia against Q1 2014 stood at -62%). The market contracted also on our other main markets, including Belarus and the Baltics where we operate also our own stores. Some retailers believe that the situation is not going to improve too soon, which leads to squeeze-out of those players whose economics would not support maintaining the market share. Silvano has played its hand relatively well as we started downsizing early and sustained our margins as much as it was feasible. Russia’s Rouble that has outperformed foreign currencies has had almost no effect on our sales and our franchise partners are reporting dropping traffics at both shopping centres and street retail.
In Belarus, our like-for-like sales in Q1 in the retail showed also slowdown in business: -4% in local currency, but -24% in Euros. Adding wholesale segment to this, the drop is somewhat bigger. The consumption in Belarus has clearly been affected by the buying spree at the end of the year drop in the export business (that has affected many local production companies, hence also the income of the workforce) and tight monetary policy conducted by the central bank. From the macroeconomic perspective, the GDP of the country contracted by 2% during the first quarter of 2015 compared to the same period last year.
In Ukraine, taking into account that the troubles started in the middle of first quarter of 2014, the drop in our sales turnover quarter-on-quarter constitutes 84%. In light of the 5th consecutive negative quarter for the national economy, reportedly -17.6% for Q1 2015, together with nearly 60% inflation, the number reflects harsh reality for the retail trade there.
In the first quarter we did not do well in the Baltic market (-48%) and the other markets (-34%), either.
Nevertheless, some optimism can be built onto stronger sales currencies (appreciation of the Russia’s Rouble, stabilisation of the exchange rate of Ukrainian Hryvnia) and the start of the busy season for the lingerie retail business. Also when it comes to our business margins, then our gross margin in the first quarter (44.8% vs. 34.7%) improved, partly due to the abolition of the hyperinflation accounting, but also due to reduction in operational business costs. Smaller business volumes affect the operating profit margin, and we are working further on the fixed cost base. For the bottom line, internal dividend transfers, and financial operations lead to higher income tax expense, which should level out during the next quarters.
The Group’s sales in Q1 2015 retreated from the benchmark in Q1 2014, the net sales reached 13 073 thousand EUR, compared to 27 095 thousand EUR a year ago. The wholesale segment contributed 9 208 thousand EUR in Q1 2015 (21 929 thousand EUR in Q1 2014). The retail segment contributed 3 857 thousand EUR for Q1 2015 (4 905 thousand EUR a year ago).
The net loss to shareholders of the Parent company stood at -521 thousand Euros in Q1 2015 compared to net profit of 1 890 thousand EUR in Q1, 2014. The Group’s EBITDA reached 2 351 thousand EUR in Q1 2015 compared to 4 547 thousand EUR in the corresponding period of 2014.
At the end of Q1 2015, the Group and its franchise partners operated 684 stores altogether, of which 66 stores where managed by the Group. 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 13 073 thousand EUR during Q1, 2015, representing a 52% decrease as compared to the same period of previous year. Overall, wholesales decreased by 58.0% and retail sales decreased by 21.4%.
The Group’s reported gross profit margin during Q1 2015 increased year-to-year to 44.8%, reported gross margin was 34.71% in the respective period of previous year. Consolidated operating profit for Q1 2015 amounted to 1 695 thousand EUR, compared to 3 848 thousand EUR in Q1 2014. The consolidated operating profit margin was 13.0% for Q1 2015 (14.2% in Q1 2014). Consolidated EBITDA for Q1 2015 was 2 351 thousand EUR, which is 18.0% in margin terms (4 547 thousand EUR and 16.8% for Q1 2014).
During Q1 2015 the Group continued with internal restructuring, which will allow us to streamline internal management and intragroup capital allocation. This brought 1.9 million EUR of additional income tax expense. As a result reported consolidated net loss attributable to equity holders of the Parent company for Q1 2015 amounted to -521 thousand EUR, compared to net profit of 1 890 thousand EUR in Q1 2014, net profit margin attributable to equity holders of the Parent company for Q1 2015 was -4.0% against 7.0% in Q1 2014.
Financial position
As of 31 March 2015 consolidated assets amounted to 59 771 thousand EUR representing decrease by 11.2% as compared to the position as of 31 December 2014.
Trade and other receivables decreased by 1 226 thousand EUR as compared to 31 December 2014 and amounted to 5 680 thousand EUR as of 31 March 2015. Inventory balance decreased by 2 364 thousand EUR and amounted to 24 098 thousand EUR as of 31 March 2015.
Equity attributable to equity holders of the Parent company decreased by 4 299 thousand EUR and amounted to 42 454 thousand EUR as of 31 March 2015. Current liabilities increased by 307 thousand EUR during Q1 2015.
Sales structure
Sales by markets
| in thousands of EUR | Q1 2015 | Q1 2014 | Change |
Q1 2015 % from sales |
Q1 2014 % from sales |
| Russia | 6 077 | 16 015 | -62.1% | 46.5% | 59.1% |
| Belarus | 5 076 | 6 926 | -26.7% | 38.8% | 25.6% |
| Ukraine | 220 | 1 393 | -84.2% | 1.7% | 5.1% |
| Kazakhstan | 639 | 977 | -34.6% | 4.9% | 3.6% |
| Baltics | 409 | 794 | -48.5% | 3.1% | 2.9% |
| Moldova | 219 | 384 | -43.0% | 1.7% | 1.4% |
| Other markets | 434 | 606 | -28.4% | 3.3% | 2.2% |
| Total | 13 073 | 27 095 | -51.8% | 100.0% | 100.0% |
The majority of lingerie sales revenue during Q1 2015 in the amount of 6 077 thousand EUR was generated in Russia, accounting for 46.5% of total sales. The second largest market was Belarus, where sales reached 5 076 thousand EUR, contributing 38.8% of lingerie sales (both retail and wholesale). Volumes in Ukraine decreased significantly to 220 thousand EUR, and none of the regions remained untouched from the drop in sales.
Sales by business segments
| in thousands of EUR | Q1 2015 | Q1 2014 | Change, % | Q1 2015, % from sales | Q1 2014, % from sales |
| Wholesale | 9 208 | 21 929 | -58.0% | 70.4% | 80.9% |
| Retail | 3 857 | 4 905 | -21.4% | 29.5% | 18.1% |
| Other operations | 8 | 261 | -97.0% | 0.1% | 1.0% |
| Total | 13 073 | 27 095 | -51.8% | 100.0% | 100.0% |
During Q1 2015 wholesale revenue amounted to 9 208 thousand EUR, representing 70.4% of the Group’s total revenue (Q1 2014: 80.9%). The main wholesale regions were Russia, Ukraine, Belarus, Kazakhstan and Moldova.
Total lingerie retail sales of the Group in Q1 2015 amounted to 3 857 thousand EUR, representing 29.5% of the Group’s total revenue.
As of 31 March 2015 there were altogether 684 Milavitsa and Lauma branded shops. Own retail operations were conducted in Belarus and Latvia. As of the end of Q1 2015 the Group operated 66 own retail outlets. As of 31 March 2015, there were 577 Milavitsa branded shops operated by Milavitsa trading partners. Additionally, as of 31 March 2015, there were 41 Lauma Lingerie retail outlets operated by Lauma Lingerie trading partners.
Own & franchise store locations, geography
| Own | Franchise | Total | |
| Russia | 0 | 367 | 367 |
| Ukraine | 0 | 92 | 92 |
| Belarus | 56 | 8 | 64 |
| Baltics | 10 | 32 | 42 |
| Kazakhstan | 0 | 46 | 46 |
| Moldova | 0 | 26 | 26 |
| Other regions | 0 | 47 | 47 |
Investments
During Q1 2015 the Group’s investments into property, plant and equipment totalled 291 thousand EUR. Investments were made into equipment and facilities to maintain effective production for future periods.
Personnel
As of 31 March 2015, the Group employed 2 346 employees including 429 in retail. The rest were employed in production, wholesale, administration and support operations.
Total salaries and related taxes during Q1 2015 amounted to 4 241 thousand EUR. The remuneration of key management of the Group, including the key executives of the subsidiaries, totalled 350 thousand EUR.
Aleksei Kadõrko
Chief Financial Officer
+372 6845 000
info@silvanofashion.com
