CORRECTION: Mistake in attached file. Wrong table in Consolidated statement of profit and loss (page 14). New corrected file attached.
Baltika Group’s first quarter resulted in net loss in the amount of 493 thousand euros. The result of last year same period was loss of 1,136 thousand euros and comparative figure of continued operations was loss of 783 thousand euros.
In connection with Baltika Group’s exit from the Russian retail business, which represented a major line of business of the Group, the results of the Russian companies’ retail are presented as discontinued operation.
In 2016 first quarter retail revenue was 10,505 thousand euros, decreasing 715 thousand euros i.e. 6% compared to same period last year. Wholesale and franchise revenue increased in first quarter by 11%. Sales growth is mainly due to Russian retail market transition to franchise and Monton collection entering German department store chain Peek & Cloppenburg and higher sales to Finnish wholesale partners. Baltika’s international e-store Andmorefashion.com revenue was 252 thousand euros, decreasing 5% in the first quarter compared to same period last year.
Baltics first quarter retail sales were 8,428 thousand euros, decreasing by 10% compared to same period last year. In addition to the lower fashion goods, buying activity Baltika had a different selling approach than last year: planned inventories were on a lower level and company had less sale campaigns. Thus, Baltics retail revenue decreased compared to same period last year, but at the same time gross profit margin has improved substantially.
Group’s gross profit margin in first quarter was 50.6%, which is 5.2 percentage points higher than last year same period margin 45.4% and gross profit in the first quarter was 5,311 thousand euros. In addition to lower mark-downs more efficient inventories management and weaker USA dollar helped to improve margin. At the same time, it is hard to keep high gross profit margin in the future due to intense competition in fashion industry.
Baltika’s first quarter results confirm that decision to end operating Ukrainian and Russian high-risk loss-making retail markets and focusing on profit-making Baltics markets and developing other sales channels, was a right decision. Baltika Group’s this year first quarter loss was smaller than latest years. In addition to exiting from Ukrainian and Russian markets the inventories, management process have been more efficient and decreased management costs. While markets’ operating costs remain on last year level, head-office operating expense decreased 4% compared to same period last year.
Highlights of the period until the date of release of this quarterly report
- From February 1st 2016 Maigi Pärnik-Pernik continues working as a member of Management Board and is responsible for the finance functions and for the disclosure of information on the exchange.
- On 9th of February 2016 Baltika held a fashion show to launch spring-summer collection. The newest collections were shown in Baltika’s headquarter and after the show collections were available in shops and in e-store.
- On 22 February 2016 Baltika signed an agreement with OÜ Ellipse Group to sell 100% of shares of Russia’s retail operating company OOO Olivia that owns subsidiaries OOO Stelsing and OOO Plazma. OÜ Ellipse Group will continue to cooperate with Baltika as franchise partner and on 22 February, cooperation agreement was signed for the next five years. The price received for the Russian entities is 463 thousand euros and payment schedule is agreed for 5 years, depending on Russian entities financial results.
- On 14th of March 2016 Lilian Nõlvak started working as a communication manager of AS Baltika. Previously Lilian worked as PR manager in Elion Ettevõtted AS (now known as Telia Eesti AS).
- Supervisory Council of AS Baltika decided to recall from the Management Board starting from 17 March 2016 Management Board member Kati Kusmin.
- Baltika ended representing Blue Inc London brand in Baltics states under the franchise agreement due to low sales efficiency and closed four stores in Estonia and in Latvia at the beginning of the year. Baltman store was opened as a replacement in one of the sales area in Tallinn Ülemiste shopping centre and in Riga Origo shopping centre, Bastion store was opened.
- Monton presented its Rio Olympics special collection for the first time to public on April 18th 2016 in Lennusadam.
- From May 2nd 2016 Kristel Sooaru starts working as Sales and Marketing Director. Kristel has previously occupied different management positions at Baltika for 19 years, last position was the head of menswear collections and before that she was the head of Baltman brand. Before returning to Baltika Kristel was the purchase manager of TKM King, which is the holding company of Tallinna Kaubamaja Group’s footwear trade store chains ABC King and SHU.
Consolidated statement of financial position
| 31 March 2016 | 31 Dec 2015 | |
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | 190 | 398 |
| Trade and other receivables | 1,993 | 1,607 |
| Inventories | 10,548 | 10,424 |
| Total current assets | 12,731 | 12,429 |
| Non-current assets | ||
| Deferred income tax asset | 234 | 234 |
| Other non-current assets | 613 | 584 |
| Property, plant and equipment | 2,970 | 2,910 |
| Intangible assets | 1,865 | 1,944 |
| Total non-current assets | 5,682 | 5,672 |
| TOTAL ASSETS | 18,413 | 18,101 |
| EQUITY AND LIABILITIES | ||
| Current liabilities | ||
| Borrowings | 4,745 | 3,009 |
| Trade and other payables | 5,770 | 6,709 |
| Total current liabilities | 10,515 | 9,718 |
| Non-current liabilities | ||
| Borrowings | 3,267 | 3,312 |
| Other liabilities | 336 | 283 |
| Total non-current liabilities | 3,603 | 3,595 |
| TOTAL LIABILITIES | 14,118 | 13,313 |
| EQUITY | ||
| Share capital at par value | 8,159 | 8,159 |
| Share premium | 496 | 496 |
| Reserves | 1,182 | 1,182 |
| Retained earnings | -5,049 | 1,310 |
| Net loss for the period | -493 | -6,359 |
| TOTAL EQUITY | 4,295 | 4,788 |
| TOTAL LIABILITIES AND EQUITY | 18,413 | 18,101 |
Consolidated statement of profit and loss
| 1 Q 2016 | 1 Q 2015 | |
| Continuing operations | ||
| Revenue | 10,505 | 11,220 |
| Cost of goods sold | -5,194 | -6,131 |
| Gross profit | 5,311 | 5,089 |
| Distribution costs | -5,001 | -5,012 |
| Administrative and general expenses | -669 | -736 |
| Other operating income (-expense) | -25 | -7 |
| Operating profit | -384 | -666 |
| Finance costs | -109 | -117 |
| Profit (loss) before income tax | -493 | -783 |
| Income tax expense | 0 | 0 |
| Net profit from continuing operations | -493 | -783 |
| Net loss for the period from discontinued operations | 0 | -353 |
| Net loss for the period | -493 | -1,136 |
| Basic earnings per share from net loss for the period, EUR | -0.01 | -0.03 |
| From continuing operations | -0.01 | -0.02 |
| From discontinued operations | 0.00 | -0.01 |
| Diluted earnings per share from net loss for the period, EUR | -0.01 | -0.03 |
| From continuing operations | -0.01 | -0.02 |
| From discontinued operations | 0.00 | -0.01 |
Maigi Pärnik-Pernik
Member of the Management Board
maigi.parnik@baltikagroup.com
