Baltika Group’s second quarter resulted in net profit in the amount of 199 thousand euros. The result of last year same period was a profit of 346 thousand euros.
Group’s 2017 second quarter revenue was 11,732 thousand euros, decreasing by 1% compared to the same period last year. Retail revenue in the second quarter was 9,891 thousand euros, decreasing 4% compared to same period last year, at the same time e-store and wholesale and franchise sales continued to increase. The retail sales in the Baltic region were mostly impacted by the lowest demand in the recent years for the spring-summer collection in April and May. In June the retail sales recovered and due to the season-end sales campaign, that was earlier than usual, there was a growth in sales.
Wholesale and franchise revenue increased 17% in second quarter and was 1,376 thousand euros. Higher sales volumes to Peek & Cloppenburg department stores chain and an entrance to new franchise market in Serbia supported the growth in wholesale and franchise revenue. At the end of second quarter there were 32 franchise stores representing Baltika’s brands, forming 25% of the total stores portfolio. In the first half-year the wholesale and franchise revenue increased 9% and was 3,221 thousand euros.
Baltika Group’s e-store Andmorefashion.com sales revenue increased 47% in the second quarter and was 371 thousand euros. Orders were placed from 31 countries. Countries with the largest e-store revenues were continually Estonia, Latvia, Lithuania, Russia and Finland. The best-selling brands in e-store were Monton and Mosaic – two of the Baltika’s largest brands’ revenue comprised respectively 34% and 31% from e-store revenue. Similarly to wholesale and franchise revenue, the e-store revenue increased in first half-year as well: revenue increased 43% compared to same period last year and was 720 thousand euros.
The company’s gross profit margin in the second quarter was 51.3%, which is 1.0 percentage points lower than in the same period last year. The decrease in gross profit margin is mainly due to higher mark-downs in retail business. Due to weak sales results in April and May, the inventory level was higher than expected, thus the season-end sale campaign started already at the beginning of June, which in turn resulted in good sales results in June but had deeper mark-downs than in previous year. The quarter gross profit was 6,014 thousand euros, decreasing 165 thousand euros compared to last year’s comparable result. The first half-year’s gross profit amounted 11,264 thousand euros (2016 I half-year: 11,490 thousand euros).
Group’s second quarter distribution and general expense stayed on the same level as in the same period last year. The distribution and general expense ratio to revenue in the second quarter was 48.7% i.e. due to decreased revenue the expense ratio has increased 0.4 percentage in second quarter. At the same time the first half-year’s expense ratio to revenue has decreased 0.2 percentage points.
In the first half-year Baltika’s revenue increased 1% compared to same period last year. The e-store and wholesale and franchise revenue showed growth; with that one of the company’s objectives for 2017 – revenue growth in all of the sales channels – was partly met. Company ended the half-year with a loss in the amount of 391 thousand euros, the comparative result from previous year was a loss in the amount of 147 thousand euros. The decrease is mainly due to deeper mark-downs in retail, which in turn decrease a gross profit.
Highlights of the period until the date of release of this quarterly report
- The Annual General Meeting of AS Baltika, held on 8th of May 2017, decided to approve the Annual report for 2016 and profit allocation to retained earnings. Meeting appointed the auditors for auditing the financial years 2017-2019 to be AS PricewaterhouseCoopers. Annual General Meeting decided to conditionally increase the share capital of the Company and to issue convertible bonds according to the Terms and Conditions of K-Bonds presented by Supervisory Board.
- With a decision of AS Baltika Supervisory Board on 29th of May 2017 Ingrid Kormik is appointed as additional member of AS Baltika Management Board. Ingrid is the head of purchasing and supply chain, which contains purchasing, production planning, logistics as well as quality and technical design department management. Ingrid Kormik is a one of the most valued purchasing and supply chain experts in Estonia and she has occupied different positions in Baltika since 2001.
- Financial Supervision Authority approved on 10th of July 2017 the Convertible bond offering prospectus. The offering comprises of 900 bonds with issuance price of 5,000 euros, therefore total of 4,500,000 euros. Bonds with the term of three year bear 6% interest p.a. Each bond gives to its owner the right to subscribe for 15,625 shares of the Company with subscription price 0.32 euros per share. The subscription for the shares will take place from 15th of July 2019 until 18 August 2019 2 p.m. The company's shareholders fixed in the share register on 14th of July 2017 08:00 a.m. shall be granted the pre-emptive right on allocation of the bonds. Offer period terminates at 2 p.m. on 16th of August 2017. Results of the offering will be announced on 17th of August 2017.
Consolidated statement of financial position
| 30 June 2017 | 31 Dec 2016 | |
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | 304 | 419 |
| Trade and other receivables | 2,499 | 1,956 |
| Inventories | 11,900 | 11,096 |
| Total current assets | 14,703 | 13,471 |
| Non-current assets | ||
| Deferred income tax asset | 228 | 228 |
| Other non-current assets | 566 | 522 |
| Property, plant and equipment | 2,733 | 3,022 |
| Intangible assets | 1,581 | 1,676 |
| Total non-current assets | 5,108 | 5,448 |
| TOTAL ASSETS | 19,811 | 18,919 |
| EQUITY AND LIABILITIES | ||
| Current liabilities | ||
| Borrowings | 6,595 | 5,835 |
| Trade and other payables | 7,418 | 6,923 |
| Total current liabilities | 14,013 | 12,758 |
| Non-current liabilities | ||
| Borrowings | 1,224 | 1,196 |
| Total non-current liabilities | 1,224 | 1,196 |
| TOTAL LIABILITIES | 15,237 | 13,954 |
| EQUITY | ||
| Share capital at par value | 8,159 | 8,159 |
| Share premium | 496 | 496 |
| Reserves | 1,182 | 1,182 |
| Retained earnings | -4,872 | -5,049 |
| Net loss for the period | -391 | 177 |
| TOTAL EQUITY | 4,574 | 4,965 |
| TOTAL LIABILITIES AND EQUITY | 19,811 | 18,919 |
Consolidated statement of profit and loss
| 2 Q 2017 | 2 Q 2016 | 6M 2017 | 6M 2016 | ||
| Revenue | 11,732 | 11,818 | 22,489 | 22,323 | |
| Cost of goods sold | -5,718 | -5,639 | -11,225 | -10,833 | |
| Gross profit | 6,014 | 6,179 | 11,264 | 11,490 | |
| Distribution costs | -5,093 | -5,108 | -10,152 | -10,109 | |
| Administrative and general expenses | -620 | -600 | -1,279 | -1,269 | |
| Other operating income (-expense) | 22 | -12 | 20 | -37 | |
| Operating profit (loss) | 323 | 459 | -147 | 75 | |
| Finance costs | -124 | -113 | -244 | -222 | |
|
Profit (loss) before income tax |
199 | 346 | -391 | -147 | |
| Income tax expense | 0 | 0 | 0 | 0 | |
| Net profit (loss) for the period | 199 | 346 | -391 | -147 | |
| Basic earnings per share from net profit (loss) for the period, EUR | 0.00 | 0.01 | -0.01 | 0.00 | |
| Diluted earnings per share from net profit (loss) for the period, EUR | 0.00 | 0.01 | -0.01 | 0.00 | |
Maigi Pärnik-Pernik
Member of the Management Board
maigi.parnik@baltikagroup.com
