Baltika’s unaudited financial results, fourth quarter and 12 months of 2016


Baltika Group’s fourth quarter resulted in net profit in the amount of 620 thousand euros, which is 287 thousand euros improvement over the same period comparative result in the previous year. The result of last year fourth quarter was net loss of 4,641 thousand euros and comparative figure of continued operations was a profit of 333 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 2015 results of the Russian companies’ retail are presented as discontinued operation.

In the fourth quarter Baltika’s revenue was 12,704 thousand euros, decreasing 6% compared to same period last year. Revenue growth was largest with 19% in wholesale and franchise and were 923 thousand euros. The increase in revenue is mainly attributable to Russian retail market’s transition to franchise partner and Monton women’s collection entrance to German department store chain Peek & Cloppenburg. Within year the number of Monton selling Peek & Cloppenburg department stores increased from 3 to 25.

In addition to wholesale channel the franchise is actively being developed as well. At the beginning of October Baltika signed a franchise agreement with Serbian enterprise Victoria Elegans d.o.o., who will open Baltika’s brands representing store Monton&More in Novi Sad Serbia in March 2017. Monton&More is a Baltika’s new store concept to increase international sales, in addition to Monton other Baltika’s brands are represented in these stores as well. At the end of fourth quarter there were 33 franchise stores, forming 26% of total stores portfolio.

Retail revenue in fourth quarter decreased by 8% compared to same period last year and was 11,413 thousand euros. Revenue from Baltika Group’s e-store Andmorefashion.com increased 12% in the fourth quarter and was 310 thousand euros. Countries with largest e-store sales were Estonia, Lithuania, Latvia, Russia and Finland. The e-commerce sales volume increased most in Lithuania where revenue increased 48% compared to same period last year.

Baltika’s gross profit margin in the fourth quarter was 51.8%, which is 3.8 percentage points higher than the comparative 48.0% margin in the same period last year. Gross profit margin has increased due to better intake margin and lower mark-downs. Gross profit in the fourth quarter was 6,575 thousand euros, which is 98 thousand euros more than in same period last year.

Baltika’s 2016 revenue totalled 46,993 thousand euros, which is 4% less than in the previous year.

In the year total resulted in a net profit 177 thousand euros. In the last year the net loss was 6,359 thousand euros and the comparative result from continued operations was a loss in amount of 844 thousand euros.

One of the reasons behind the improved results is the decision to leave from unprofitable high risk retail markets in Ukraine and Russia and transfer those brand stores over to franchise partner. This has allowed to increase franchise channel revenue while minimizing the risks and to keep Baltika’s brands on these complicated markets.

In addition, the results have improved as well due to more effective gross profit margin management and decrease in distribution and administrative expense. The year gross profit amounted 23,497 thousand euros i.e. 421 thousand euros more than in last year and distribution, administrative and general expense has decreased almost 800 thousand euros.

In a year 2017 Baltika will continue with chosen course and strategy. Baltika’s objective in home markets: in Estonia, Latvia and Lithuania is to maintain and strengthen their current position and the company’s objective is also to grow outside Baltics through wholesale and franchise. 

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

  • At the beginning of October Baltika signed a franchise agreement with Serbian enterprise Victoria Elegans d.o.o., who will open the first Monton&More multibrand store in Novi Sad Serbia in March 2017.
  • On 22nd of October in Tallinn Kultuurikatel during Tallinna Fashion Week Baltman – the first men’s fashion brand in Estonia – presented its special collection to celebrate the 25th anniversary of Baltman.
  • At the last week of October in Riga Fashion Week, which is the most influential fashion event in Baltics, Ivo Nikkolo presented its 2017 spring-summer collection, which received a warm feedback from Estonian, Latvian and Lithuanian fashion-audience. In addition, an overview of the collection was published in Vogue Russia and Elle Italy websites.
  • At the beginning of November Monton marketing team won Digitegu 2016 (“Digital deed 2016”) award for the best e-mail marketing.
  • In the fourth quarter one new Baltman retail store was opened in Riga Mols shopping centre. In October, two freshly renovated Baltika’s brand shops: Monton and Mosaic were opened in Kaunas Mega shopping centre. Both stores were upgraded into modern and fashionable stores using some of the new brand concept store elements which will provide better costumer experience.

 

Consolidated statement of financial position

  31 Dec 2016 31 Dec 2015
ASSETS    
Current assets    
Cash and cash equivalents 419 398
Trade and other receivables 1,956 1,607
Inventories 11,096 10,424
Total current assets 13,471 12,429
Non-current assets    
Deferred income tax asset 228 234
Other non-current assets 522 584
Property, plant and equipment 3,022 2,910
Intangible assets 1,676 1,944
Total non-current assets 5,448 5,672
TOTAL ASSETS 18,919 18,101
     
EQUITY AND LIABILITIES    
Current liabilities    
Borrowings 5,835 3,009
Trade and other payables 6,923 6,709
Total current liabilities 12,758 9,718
Non-current liabilities    
Borrowings 1,196 3,312
Other liabilities 0 283
Total non-current liabilities 1,196 3,595
TOTAL LIABILITIES 13,954 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 profit (loss) for the period 177 -6,359
TOTAL EQUITY 4,965 4,788
TOTAL LIABILITIES AND EQUITY 18,919 18,101

   

Consolidated statement of profit and loss

  4 Q 2016 4 Q 2015 2016 2015
         
Continuing operations        
Revenue 12,704 13,505 46,993 48,806
Client bonus provision 23 -70 23 -70
Revenue after client bonus provision 12,727 13,435 47,016 48,736
Cost of goods sold -6,152 -6,958 -23,519 -25,660
Gross profit 6,575 6,477 23,497 23,076
         
Distribution costs -5,242 -5,555 -20,336 -21,010
Administrative and general expenses -630 -683 -2,504 -2,603
Other operating income 95 282 44 242
Operating profit (loss) 798 521 701 -295
         
Finance costs -173 -147 -519 -508
Profit (loss) before income tax 625 374 182 -803
         
Income tax expense -5 -41 -5 -41
         
Net profit (loss) from continuing operations 620 333 177 -844
         
Net loss for the period from discontinued operations 0 -4,974 0 -5,515
         
Net profit (loss) for the period 620 -4,641 177 -6,359
         
         
Basic earnings per share from net profit (loss) for the period, EUR 0.02 -0.11 0.00 -0.16
From continuing operations 0.02 0.01 0.00 -0.02
From discontinued operations 0.00 -0.12 0.00 -0.14
         
Diluted earnings per share from net profit (loss) for the period, EUR 0.02 -0.11 0.00 -0.16
From continuing operations 0.02 0.01 0.00 -0.02
From discontinued operations 0.00 -0.12 0.00 -0.14
           

Maigi Pärnik-Pernik
Member of the Management Board

maigi.parnik@baltikagroup.com


Attachments

Baltika_Interim report 4Q 2016.pdf