Management Report
Business results
From the beginning of the year the Group's major markets have continued to
recover. Economic situation in Russia, the Group's key market, was steadily
improving until September with first signs of slow-down of growth appearing in
the fall. The consumers' purchasing power has increased and unemployment rate
has lowered; Russian Ruble strengthened against multi-currency basket in 1H 2010
by 3.3 %, but, starting from July has began to weaken against the major
currencies. However, oil and gas prices continue to support Russian economy. As
a result, retail sales in the end customer market have been growing since the
end of 2009 with minor slow down of growth in the fall. The Group's sales in
Russia in 9 months 2010 were 24.0% above respective period in 2009.
In Ukraine, presidential elections in February brought certain stability and
alleviated some of the uncertainty that existed in the market. The signs of
Ukrainian economy recovery are not as strong as in Russia.
The Belarusian market has been stable during 2009 and has not weakened in 9
months 2010. The Belarusian economy's GDP growth is forecast at a 11-12% rate
for 2010. In Q3 2010 retail operations in Belarus demonstrated an increase of
38.0% in local currency terms and 43.7% in EUR terms as compared to Q3 2009.
Despite the difficult situation that remains in the Baltics, where economy
suffered the most in 2009, Lauma Lingerie's Q3 2010 sales in the Baltic
countries increased by 82.5% as compared to Q3 2009.
In general, 9 months 2010 sales level and market situation confirmed management
forecast of business recovery. Q3 sales demonstrated an increase of 22.1% as
compared to Q3 2009.
The opinion of the management of the Group is that after a significant drop in
2008 the markets have entered into the stabilization phase and that consumers
have adjusted their purchasing patterns to the new market conditions.
On overall apparel and lingerie markets are currently undersupplied, especially
in Russia, because of limited orders placed for finished garments by major
retailers in 2009 while the demand has grown significantly. The situation is
favourable for the companies operating their own production units and those
capable of fast restock of their retail outlets due to effective sourcing and
logistics solutions. At the same time this has brought severe rivalry for local
production capacities and the price per labour minute in the market has on
average increased by 30-50%. Currently there is a shortage of production
capacities for the major producers and there is a clear trend of raising prices
of the labour as a result of it.
At the end of the reporting period the Group and its franchising partners
operated 385 Milavitsa and Lauma lingerie outlets, including 48 stores operated
directly by the Group and the rest by franchising partners. The Group's retail
focus has been shifted towards the promotion and support of franchising in
cooperation with existing and new partners.
Based on 9 months 2010 sales and orders collected for Q4 2010, the management
estimates 2010 sales growth at around 20-22% on annual basis.
Financial performance
The Group's sales from continuing operations amounted to EEK 1,133,361 thousand
(EUR 72,435 thousand) in 9 months 2010, representing a 26.2% increase as
compared to the respective period in the previous year. Overall wholesale sales
from continuing operations increased by 37.8%, while retail sales from
continuing operations presented a decrease of 8.1%, mainly due to closures of
underperforming stores and the restructuring of the Group's distribution model
that was carried out by the management in 2009. Decrease in retail sales is thus
in line with management expectations and follows the restructuring decisions
taken in 2009 when loss-making own retail operations in Russia were gradually
discontinued. As the result, the proportion of retail sales in total sales
decreased by 6.7% and came at 18.0% of total sales in 9 months 2010.
The Group's gross margin from continuing operations in the 9 months' period
decreased and was 40.2%, as compared to 43.1% in the respective period in the
previous year. Q3 2010 gross margin decreased as well as compared to Q3 2009 and
amounted to 39.4%. Decrease in gross margin is mainly explained by higher
customs duties on materials imported by the Group from the EU after Belarus
joining the Customs Union with Russia and by the decline of the proportion of
retail sales in total sales.
The consolidated operating profit from continuing operations amounted to EEK
227,047 thousand (EUR 14,511 thousand), compared to EEK 63,181 thousand (EUR
4,038 thousand) in 9 months 2009. The consolidated operating margin from
continuing operations was 20.0% (7.0% in 9 months 2009). The operating profit
and the operating margin in 2009 were adversely influenced by one-off expenses.
Consolidated net profit from foreign exchange rate fluctuations amounted to EEK
9,435 thousand (EUR 603 thousand) in 9 months 2010 and was mainly accrued in Q1
2010 and mainly related to the intra-croup borrowings in EUR and USD. Foreign
exchange loss in Q3 2010 amounted to EEK 3,786 thousand (EUR 242 thousand). SP
ZAO Milavitsa incurred a foreign currency gain as a result of BYR depreciation
in Q3 2010.
In line with management expectations, the effective tax rate in Q3 increased
compared to the previous quarter and amounted to 24.4%. This is mainly explained
by foreign currency gain in largest subsidiary SP ZAO Milavitsa as the result of
Belorussian Ruble depreciation against Russian Ruble and Euro. Effective tax
rate for 9 months 2010 amounted to 23.0% and was still lower than expected due
to relatively low rate in Q2 2010 (19.2%). Nevertheless, effective tax rates in
Q3 and 9 months 2010 improved significantly as compared to the respective
periods in the previous year. While statutory tax rates in Belarus and Russia
remained unchanged the improvement of the effective tax rate is caused by the
terminated loss making operations, lowering profitability of the Group's largest
subsidiary SP ZAO Milavitsa and use of tax loss of prior years in Russia.
Consolidated net profit from continuing operations attributable to equity
holders amounted to EEK 150,505 thousand (EUR 9,619 thousand) in 9 months 2010,
compared to net loss of EEK 7,683 thousand (EUR 491 thousand) in 9 months 2009;
net margin from continuing operations attributable to equity holders was 13.3%
(up from a negative margin of 0.9% in 9 months 2009).
In 9 months 2010, the Group's return on equity amounted to 27.6% (-7.7% in 9
months 2009) and return on assets was 16.9% (-4.3% in 9 months 2009).
Financial position
As of 30 September 2010 consolidated assets amounted to EEK 933,320 thousand
(EUR 59,650 thousand) representing an increase of 9.7% as compared to the
position as of 31 December 2009.
Property, plant and intangibles balances decreased by EEK 3,004 thousand
(EUR 192 thousand) as compared to 31 December 2009, the key reason being
disposals along with transfers to assets held for sale for the net book value of
EEK 6,211 thousand (EUR 397 thousand). Depreciation and amortisation charge for
the period amounted to EEK 20,388 thousand (EUR 1,303 thousand).
After high season summer months the finished goods balance decreased
significantly in production and retail entities of the Group. As the result,
inventory balance amounted to EEK 193,736 thousand (EUR 12,382 thousand)
compared to EEK 266,289 thousand (EUR 17,019 thousand) as of 31 December 2009.
The company expects that the inventory balance will increase in Q4 in line with
the seasonality trends of the business.
Trade receivables increased by EEK 7,950 thousand (EUR 508 thousand) as compared
to 31 December 2009 and amounted to EEK 139,568 thousand (EUR 8,920 thousand) as
of 30 September 2010. However, as compared to the balance of EEK 186,852
thousand (EUR 11,942 thousand) as of 30 June 2010 trade receivables decreased by
EEK 47,284 thousand (EUR 3,022 thousand) in line with the seasonality trends
bringing in cash proceeds from high sales in summer months.
Foreign exchange fluctuations had a negative impact on the Group's equity, in
the form of a negative change in the currency translation reserve in the amount
of EEK 12,846 thousand (EUR 821 thousand) for 9 months 2010. On 21 September
2010 the Group paid out a dividend in the amount of EEK 30,980 thousand (EUR
1,980 thousand). Equity attributable to equity holders increased by EEK 112,140
thousand (EUR 7,167 thousand) and amounted to EEK 601,996 thousand (EUR 38,475
thousand) as of 30 September 2010.
Current liabilities decreased by EEK 56,188 thousand (EUR 3,591 thousand) in 9
months 2010, in line with management expectations.
The liquidity position of the Group improved in 9 months 2010 with respect to
the total balance of borrowings and related maturities. Current and non-current
loans and borrowings decreased by EEK 22,734 thousand (EUR 1,453 thousand) to
EEK 5,508 thousand (EUR 352 thousand) as of 30 September 2010. Loans received
and loans repaid in 9 months 2010 amounted to EEK 10,452 thousand (EUR 668
thousand) and EEK 33,312 thousand (EUR 2,129 thousand) respectively, including
finance lease liabilities repaid in the amount of EEK 798 thousand (EUR 51
thousand). In Q2 2010 the Group settled an overdraft facility of AS Lauma
Lingerie that amounted to EEK 14,473 thousand (EUR 925 thousand) as of 31 March
2010.
In 2009 the Group divested its loss making apparel business line through the
sale of shares in its former 100% subsidiary PTA Grupp AS. At the date of
disposal the Group had outstanding guarantees issued to Danske Bank A/S Estonian
branch securing certain borrowings and guarantee limits of PTA Grupp AS. As of
30 September 2010 PTA Grupp AS's balance of borrowings and guarantees from
Danske Bank A/S Estonian branch that were secured by a surety provided by SFG
amounted respectively to EEK 4,850 thousand (EUR 310 thousand) and EEK 3,567
thousand (EUR 228 thousand).
Tax liabilities and other payables, including payables to employees, amounted to
EEK 59,698 thousand (EUR 3,815 thousand). Provisions amounted to EEK 2,832
thousand (EUR 181 thousand) as of 30 September 2010 and included residual
provisions for the restructuring of Russian retail operations in the amount of
EEK 376 thousand (EUR 24 thousand). Majority of Russian retail restructuring
initiatives were finalized in Q2 2010 and the management does not anticipate any
further provisions or write-offs related to Russian retail operations.
Sales
Sales by business segments
--------------------------------------------------------------------------------
| | 2010 | 2009 | Chang | 2010 9 | 2009 9 | Change | 2010 9 | 2009 9 |
| | 9 | 9 | e EEK | months | months | EUR | months | months |
| | month | month | thous | EUR | EUR | thousa | percent | percent |
| | s EEK | s EEK | and | thousa | thousa | nd | age | age |
| | thous | thous | | nd | nd | | from | from |
| | and | and | | | | | sales | sales |
--------------------------------------------------------------------------------
| Whole | 924,6 | 671,1 | 253,5 | 59,098 | 42,895 | 16,203 | 81.6% | 74.7% |
| sale | 82 | 61 | 21 | | | | | |
--------------------------------------------------------------------------------
| Retai | 203,5 | 221,4 | -17,9 | 13,006 | 14,151 | -1,145 | 18.0% | 24.7% |
| l | 00 | 15 | 15 | | | | | |
--------------------------------------------------------------------------------
| Other | 5,179 | 5,523 | -344 | 331 | 353 | -22 | 0.4% | 0.6% |
| opera | | | | | | | | |
| tions | | | | | | | | |
--------------------------------------------------------------------------------
| Total | 1,133 | 898,0 | 235,2 | 72,435 | 57,399 | 15,036 | 100.0% | 100.0% |
| | ,361 | 99 | 62 | | | | | |
--------------------------------------------------------------------------------
Sales by markets
In 9 months 2010, the Group focused mainly on the Baltic, Russian, Belarusian
and Ukrainian markets.
Total sales by markets
--------------------------------------------------------------------------------
| | 2010 | 2009 | Chang | 2010 9 | 2009 9 | Change | 2010 9 | 2009 9 |
| | 9 | 9 | e EEK | months | months | EUR | months | months |
| | month | month | thous | EUR | EUR | thousa | percent | percent |
| | s EEK | s EEK | and | thousa | thousa | nd | age | age |
| | thous | thous | | nd | nd | | from | from |
| | and | and | | | | | sales | sales |
--------------------------------------------------------------------------------
| Russi | 644,4 | 519,6 | 124,7 | 41,186 | 33,211 | 7,975 | 56.9% | 57.9% |
| a | 21 | 39 | 82 | | | | | |
--------------------------------------------------------------------------------
| Belar | 313,2 | 240,0 | 73,16 | 20,019 | 15,343 | 4,676 | 27.6% | 26.7% |
| us | 29 | 66 | 3 | | | | | |
--------------------------------------------------------------------------------
| Balti | 66,76 | 45,06 | 21,70 | 4,267 | 2,880 | 1,387 | 5.9% | 5.0% |
| cs | 4 | 2 | 2 | | | | | |
--------------------------------------------------------------------------------
| Ukrai | 59,55 | 47,84 | 11,70 | 3,806 | 3,058 | 748 | 5.2% | 5.3% |
| ne | 1 | 7 | 4 | | | | | |
--------------------------------------------------------------------------------
| Other | 49,39 | 45,48 | 3,911 | 3,157 | 2,907 | 250 | 4.4% | 5.1% |
| marke | 6 | 5 | | | | | | |
| ts | | | | | | | | |
--------------------------------------------------------------------------------
| Total | 1,133 | 898,0 | 235,2 | 72,435 | 57,399 | 15,036 | 100.0% | 100.0% |
| | ,361 | 99 | 62 | | | | | |
--------------------------------------------------------------------------------
The majority of lingerie sales revenue in 9 months 2010 in the amount of EEK
644,421 thousand (EUR 41,186 thousand) was generated in the Russian market,
accounting for 56.9% of all lingerie sales in 9 months 2010 as compared to EEK
519,639 thousand (EUR 33,211 thousand) in 9 months 2009. Sales in Russia
comprise both retail sales and wholesale. The second largest region for lingerie
sales was Belarus, where sales reached EEK 313,229 thousand (EUR 20,019
thousand), contributing 27.6% of lingerie sales (both retail and wholesale) as
compared to EEK 240,066 thousand (EUR 15,343 thousand) in 9 months 2009.
Although still affected by the economic situation, sales in the major markets
demonstrated a positive trend in terms of pieces sold in 9 months 2010 as
compared to the respective period in 2009.
The most considerable sales growth took place on the Russian and Ukranian
markets, while Belarussian operations were relatively stable showing a slight
increase. Overall sales results in 9 months were slightly above management
expectations after a difficult Q4 2009.
Changes in the sales strategy introduced by Milavitsa in late 2009 and early
2010 were implemented in 9 months 2010 in Russia and Ukraine. The Group aims to
increase control over its distribution and its organizational structure has been
adjusted accordingly.
To support the growth of sales, Milavitsa continued conducting additional
marketing activities in Belarus, Ukraine and Russia and implementing supportive
measures in the opening of new franchised stores. Joint programs with dealers
and distributors were continued in 9 months 2010 in the fields of marketing and
franchising.
Intima, the largest and the most respected European lingerie magazine, produced
a substantial report on Milavitsa in its September issue which is available at
www.intima.fr.
Lauma Lingerie experienced a sharp recovery in sales in their major markets
after being affected by the crisis. A new sales and marketing manager with
considerable experience in the industry has recently joined the company.
In terms of lingerie brands, the sales of “Milavitsa” core brand accounted for
72.6% of total lingerie sales revenue in 9 months 2010 (9 months 2009: 74.8%)
and amounted to EEK 819,067 thousand (EUR 52,348 thousand). The sales of “Lauma
Lingerie” core brand accounted for 8.0% of total lingerie sales (9 months 2009:
5.5%) and amounted to EEK 90,250 thousand (EUR 5,768 thousand). Other brands
such as “Alisee”, “Aveline”, “Hidalgo” and “Laumelle” comprised 19.4% of total
lingerie sales in 9 months 2010 (9 months 2009: 19.7%), amounting to EEK 218,865
thousand (EUR 13,988 thousand).
Wholesale
In 9 months 2010, wholesale revenue amounted to EEK 924,682 thousand (EUR 59,098
thousand), representing 81.6% of the Group's total revenue (9 months 2009:
74.7%). The main wholesale regions were Russia, Belarus, Ukraine and the Baltic
States. Gradual improvements in sales were observed already in Q1 and Q2 2010
despite the expectations of the difficult start of the year. Wholesale results
in Q3 continued improving compared to the same period of 2009 demonstrating a
positive trend.
Additional activities were introduced in the non-core markets targeted at the
diversification of the Group's sales towards the western European countries.
Some markets will be approached through sales agents, while others will be
served by local dealers. The Group will also seek private label production
opportunities where practical.
Wholesales in September were negatively affected by extremely low level of
stocks available and limited production output.
Retail operations
Total lingerie retail sales of the Group in 9 months 2010 amounted to EEK
203,500 thousand (EUR 13,006 thousand), representing a 8.1% decrease as compared
to the respective period in previous year.
Retail operations were conducted in Belarus, Russia and Latvia. At the end of 9
months 2010 the Group operated 48 own retail outlets with a total area of 4,099
square meters. As of 30 September 2010, there were 325 Milavitsa branded shops
operated by Milavitsa trading partners in Russia, Belarus, Ukraine, Moldavia,
Kazakhstan, Uzbekistan, Kyrgyzstan, Latvia, Azerbaijan, Armenia, Cyprus,
Germany, Georgia and Slovenia, of which 17 shops were opened in Q3 2010. Some
underperforming shops were closed or relocated. Additionally, as of 30 September
2010, there were 12 Lauma Lingerie retail outlets operated by Lauma Lingerie
trading partners in Lithuania, Latvia, Estonia and Russia, of which 3 were
opened in Q3 2010. International retail expansion of Milavitsa resulted in
opening of Milavitsa branded stores in Germany, Georgia and Slovenia. The 200th
Milavitsa store was opened in Russia. Also a Milavitsa store was opened in
Tverskaja street, the major shopping street in Moscow.
In 9 months 2010 6 new own lingerie stores were opened, including 2 under
Milavitsa brand name in Belarus and 4 stores under Lauma Lingerie brand name in
Latvia. One underperforming store was closed in Belarus and three
underperforming stores were closed in Russia and 18 stores were transferred to
Milavitsa's trading partners in the course of the strategy to shift focus from
own retail chain towards the development of Milavitsa franchise network, thus
terminating the loss making own retail operations in Russia.
Number of own stores as of:
--------------------------------------------------------------------------------
| | 30.09.2010 | 31.12.2009 |
--------------------------------------------------------------------------------
| Latvia | 9 | 5 |
--------------------------------------------------------------------------------
| Belarus | 39 | 38 |
--------------------------------------------------------------------------------
| Russia | 0 | 21 |
--------------------------------------------------------------------------------
| Total stores | 48 | 64 |
--------------------------------------------------------------------------------
| Total sales area, sq m | 4,099 | 5,523 |
--------------------------------------------------------------------------------
A number of sales promotions were conducted in the Milavitsa retail chain in
Belarus. Own retail operations in Belarus remain one of the key priorities for
the Group's further sales development in the country. Overall retail operations
in the country demonstrated a 48.3% growth in local currency terms and a 45.2%
growth in EUR terms as compared to the same period in 2009 mainly due to the
number of new shops opened in the recent year. Sales per square meter in the
like-for-like shops have increased as well due to high season sales in
May-August.
In the Baltics, retail sales decreased by 44.3% as compared to the respective
period of prior year and amounted to EEK 9,529 thousand (EUR 609 thousand).
Decrease in own retail sales in the Baltics is explained by the divestment of
Lithuanian retail operations in November 2009.
In respect of lingerie retail in Russia the strategic decision to shift focus
from own retail chain towards the development of Milavitsa franchise network was
made in H2 2009, that resulted in the termination of the loss making own retail
operations in Russia. As the result, the Group's own Oblicie stores were
rebranded to Milavitsa and a transfer of stores to Milavitsa's trading partners
commenced while non-performing stores were closed. During H1 2010 all 21
remaining stores were either transferred to trading partners or closed. As of 30
June 2010 the Group did not have any own retail store in Russia. Certain
structural and management changes have been made in the Group's Russian
operations (including the establishment of a separate franchise department) to
implement the selected franchise development strategy.
Own stores by concept
--------------------------------------------------------------------------------
| Market | Milavitsa | Lauma | Total | Sales area, |
| | stores | Lingerie | | sq m |
| | | stores | | |
--------------------------------------------------------------------------------
| Belarus | 39 | 0 | 39 | 3,539 |
--------------------------------------------------------------------------------
| Latvia | 0 | 9 | 9 | 560 |
--------------------------------------------------------------------------------
| Total | 39 | 9 | 48 | 4,099 |
--------------------------------------------------------------------------------
Discontinued operations
Discontinued operations' reported results in 9 months 2009 include operations of
PTA (apparel business line) for H1 2009. Results of PTA operations are presented
in the consolidated income statement as a single line item under ‘Loss from
discontinued operations'.
Production, sourcing, purchasing and logistics
Due to the high demand on the market, similarly to H1 2010, in Q3 2010 the
Group's manufacturing companies increased their production and purchasing
volumes.
The total volume of production in SP ZAO Milavitsa amounted to 3,918 thousand
pieces in Q3 2010, representing a 3.9% increase as compared to the respective
period in the previous year. The total production volume in Lauma Lingerie
amounted to 386.7 thousand pieces in Q3 2010, showing an increase of 106% as
compared to the respective period in the previous year. Production capacities in
SP ZAO Milavitsa in Q3 2010 increased by 4.17% compared to Q2 2010 in order to
prepare for increased production volumes in 2010-2011.
Investment
In 9 months 2010, the Group's investments totalled EEK 23,438 thousand (EUR
1,498 thousand) with investments into retail amounting to EEK 4,068 thousand
(EUR 260 thousand). Other investments were made in equipment and facilities to
maintain effective production.
Personnel
As of 30 September 2010, the Group employed 3,155 employees including 360 in
retail and 2,001 in production. The rest were employed in wholesale,
administration and support operations.
Total salaries and wages in 9 months 2010 amounted to EEK 213,122 thousand (EUR
13,621 thousand). The remuneration of the members of the Management Board
totalled EEK 4,350 thousand (EUR 278 thousand). The members of the Management
Board also serve as executives for the Group's subsidiaries.
Key Events in 9 months 2010
Resolutions of the Extraordinary General Meeting
On 9 November 2010 the Extraordinary General Meeting approved the Supervisory
Council's proposal to start a share buyback program under the following
conditions:
SFG is entitled to buy back its own shares from the date of the approval of the
buyback until 30 June 2011;
The total nominal value of own shares to be bought back by SFG may not exceed
3,960,700 shares, i.e 10% of total share capital of SFG;
The maximum price payable by SFG for one share to be 4.00 EUR;
The maximum amount payable by SFG for its own shares to be 15,842,800 EUR;
Own shares to be paid for with assets exceeding the share capital, compulsory
reserves and share premium.
The Management Board of SFG has the right to appoint an investment firm or a
credit institution as the lead manager of the buyback program no later than 2
weeks (two weeks) from the approval of the buy-back program by the Extraordinary
General Meeting.
Election of the Chairman of the Board
On 8 November 2010 the Supervisory Board of AS Silvano Fashion Group appointed
Mr. Märt Meerits as the Chairman of the Management Board. Mr. Norberto Rodriguez
was appointed as the Vice Chairman of the Management Board
Silvano Fashion Group established an Audit Committee
On November 8, the Supervisory Board of Silvano Fashion Group approved the
formation of the Audit Committee on grounds of the Authorised Public Accountants
Act. The committee has three members: Ms. Jekaterina Stuge (Chairperson), Ms.
Maivi Ots and Mr. Otto Tamme.
Registration of share capital reduction
The decrease of the share capital of Aktsiaselts Silvano Fashion Group was
registered in Estonian commercial register on 15 October 2010.
The reduction of the share capital was decided by the Annual General Meeting of
SFG on 28 June 2010, by which the share capital of SFG was decreased from EEK
400,000,000 (EUR 25,564,659) to EEK 396,070,000 (EUR 25,313,487) by cancelling
of 393,000 A-shares owned by SFG.
Changes in the Supervisory Board
The extraordinary general meeting of shareholders of AS Silvano Fashion Group
was held on 5 March 2010, in Tallinn. The meeting resolved to recall members of
the Supervisory Board of SFG Mr. Indrek Rahumaa and Mr. Priit Põldoja and to
elect Mr. Risto Mägi, Mr. Stephan Balkin, Mr. Otto Tamme and Mr. Sven Kunsing to
the Supervisory Board.
Resignation of a Member of the Supervisory Board
On 24 March 2010 a member of the Supervisory Board Mr. Sven Kunsing presented to
SFG an application for his resignation from the position of a supervisory board
member, and requested that the application would be provided to the next
ordinary general meeting of SFG. The shareholders of the Company acknowledged
Sven Kunsing's resignation from the supervisory board on the Annual General
Meeting held on 28 June 2010.
Share buy-back program of the Group's subsidiary SP ZAO Milavitsa
On 21 May 2010 the parent company of the Group approved the share buy-back
program of the Group's largest subsidiary SP ZAO Milavitsa. The terms of the
program permit a buy-back of up to 1,967 shares of SP ZAO Milavitsa,
representing up to 20% of all shares in SP ZAO Milavitsa, in the period between
June 2010 and February 2011 with the objective of subsequent cancellation of
shares; the offered price per share of SP ZAO Milavitsa is 3,000,000 BYR. As of
3 November 2010, 165 shares have been acquired by SP ZAO Milavitsa constituting
1.69% of all shares in SP ZAO Milavitsa. The management of the Group does not
expect that the shareholding of SFG will increase significantly after the
completion of the buy-back program. Changes in AS SFG's shareholding as the
result of share buy-back will take place in H1 2011, provided the Annual General
Meeting of SP ZAO Milavitsa will resolve to cancel the shares that were
repurchased by SP ZAO Milavitsa.
Changes in the Management Board
On 5 June 2010 the term of office of Dmitry Ditchkovsky and Sergei Kusonski as
Management Board members of SFG expired. Mr. Ditchkovski and Mr. Kusonski will
continue to work in the same positions in the management of SFG under employment
agreements.
On 5 August 2010 the Supervisory Board of AS Silvano Fashion Group decided to
increase the number of the Management Board members to three members and to
elect Märt Meerits as the new management board member of SFG.
The resolutions of the Annual General Meeting
The Annual General Meeting was held on 28 June 2010. Apart from other decisions,
the resolutions of the general meeting included:
Approval of a distribution of EEK 30,985,744 (EUR 1,980,350) as dividends, of
which EEK 0.78233 (EUR 0.05) per share have been paid to the shareholders of the
Company on 21 September 2010.
Election of Ants Susi as the supervisory board member of the Company. Ants Susi
has worked as a management board member of Estonian company OÜ Baltsped since
1997. OÜ Baltsped provides international carrier transportation and freight
forwarding services. He is a member of the supervisory board of AS Esmar and a
member of the management board of OÜ Callada Invest. In addition, he is a member
of the management board of a Latvian company Spedline SIA and a Lithuanian
company Spedline UAB.
Approval of the new Articles of Association of the Company.
Decision to reduce the share capital of the Company by EEK 3,930,000 to EEK
396,070,000 by means of cancelling 393,000 own shares owned by the Company. The
share capital was reduced for the purpose of increasing the value of all
remaining shares of the Company; share capital reduction was registered on 15
October 2010.
Selected financial data
--------------------------------------------------------------------------------
| Key figures and ratios | 9months | 9 months | Change |
| | 2010 | 2009 | |
--------------------------------------------------------------------------------
| Net sales from continuing operations (EEK | 1,133,36 | 898,099 | 235,262 |
| thousand) | 1 | | |
--------------------------------------------------------------------------------
| Net profit from continuing operations, | 150,505 | -7,683 | 142,822 |
| attributable to owners of the Company (EEK | | | |
| thousand) | | | |
--------------------------------------------------------------------------------
| Earnings before interest, taxes and | 247,779 | 89,874 | 157,905 |
| depreciation (EBITDA) from continuing | | | |
| operations (EEK thousand) | | | |
--------------------------------------------------------------------------------
| Earnings before interest and taxes (EBIT) | 227,047 | 63,181 | 163,866 |
| from continuing operations (EEK thousand) | | | |
--------------------------------------------------------------------------------
| Net sales from continuing operations (EUR | 72,435 | 57,399 | 15,036 |
| thousand) | | | |
--------------------------------------------------------------------------------
| Net profit from continuing operations, | 9,619 | -491 | 10,110 |
| attributable to owners of the Company (EUR | | | |
| thousand) | | | |
--------------------------------------------------------------------------------
| Earnings before interest, taxes and | 15,836 | 5,744 | 10,092 |
| depreciation (EBITDA) from continuing | | | |
| operations (EUR thousand) | | | |
--------------------------------------------------------------------------------
| Earnings before interest and taxes (EBIT) | 14,511 | 4,038 | 10,473 |
| from continuing operations (EUR thousand) | | | |
--------------------------------------------------------------------------------
| Operating margin from continuing | 20.0% | 7.0% | - |
| operations, % | | | |
--------------------------------------------------------------------------------
| Net margin from continuing operations | 13.3% | -0.9% | - |
| attributable to owners of the Company, % | | | |
--------------------------------------------------------------------------------
| ROA, % | 16.9% | -4.3% | - |
--------------------------------------------------------------------------------
| ROE, % | 27.6% | -7.7% | - |
--------------------------------------------------------------------------------
| Earnings per share (EPS), in EEK | 3.80 | -1.10 | - |
--------------------------------------------------------------------------------
| Earnings per share (EPS), in EUR | 0.24 | -0.07 | - |
--------------------------------------------------------------------------------
| Current ratio | 4.3 | 3.0 | - |
--------------------------------------------------------------------------------
| Quick ratio | 3.1 | 1.8 | - |
--------------------------------------------------------------------------------
The Group's operating results are summarised in the following figures and
ratios:
Consolidated statement of financial position
Unaudited
--------------------------------------------------------------------------------
| | 30.09. | 31.12. | 30.09. | 30.09.20 | 31.12.2 | 30.09.20 |
| | 2010 | 2009 | 2009 | 10 | 009 | 09 |
--------------------------------------------------------------------------------
| | EEK | EEK | EEK | EUR | EUR | EUR |
| | thousa | thousa | thousa | thousand | thousan | thousand |
| | nd | nd | nd | | d | |
--------------------------------------------------------------------------------
| ASSETS | | | | | | |
--------------------------------------------------------------------------------
| Non-current | | | | | | |
| assets | | | | | | |
--------------------------------------------------------------------------------
| Property, plant | 166,13 | 168,24 | 182,20 | 10,618 | 10,753 | 11,645 |
| and equipment | 6 | 8 | 5 | | | |
--------------------------------------------------------------------------------
| Intangible assets | 8,027 | 8,919 | 8,981 | 513 | 570 | 574 |
--------------------------------------------------------------------------------
| Investment | 19,793 | 20,090 | 19,809 | 1,265 | 1,284 | 1,266 |
| property | | | | | | |
--------------------------------------------------------------------------------
| Investments in | 2,018 | 2,175 | 2,206 | 129 | 139 | 141 |
| equity accounted | | | | | | |
| investees | | | | | | |
--------------------------------------------------------------------------------
| Available-for-sal | 5,617 | 5,664 | 6,681 | 359 | 362 | 427 |
| e financial | | | | | | |
| assets | | | | | | |
--------------------------------------------------------------------------------
| Deferred tax | 18,964 | 18,119 | 0 | 1,212 | 1,158 | 0 |
| asset | | | | | | |
--------------------------------------------------------------------------------
| Other receivables | 10,342 | 9,920 | 29,588 | 661 | 634 | 1,891 |
--------------------------------------------------------------------------------
| Total non-current | 230,89 | 233,13 | 249,47 | 14,757 | 14,900 | 15,944 |
| assets | 7 | 5 | 0 | | | |
--------------------------------------------------------------------------------
| Current assets | | | | | | |
--------------------------------------------------------------------------------
| Inventories | 193,73 | 266,28 | 236,10 | 12,382 | 17,019 | 15,090 |
| | 6 | 9 | 7 | | | |
--------------------------------------------------------------------------------
| Corporate income | 1,612 | 7,260 | 5,914 | 103 | 464 | 378 |
| tax asset | | | | | | |
--------------------------------------------------------------------------------
| Other tax | 17,070 | 22,875 | 16,429 | 1,091 | 1,462 | 1,050 |
| receivables | | | | | | |
--------------------------------------------------------------------------------
| Trade receivables | 139,56 | 131,61 | 130,39 | 8,920 | 8,412 | 8,334 |
| | 8 | 8 | 9 | | | |
--------------------------------------------------------------------------------
| Other receivables | 6,353 | 18,260 | 21,890 | 406 | 1,167 | 1,399 |
--------------------------------------------------------------------------------
| Prepayments | 11,156 | 9,529 | 9,591 | 713 | 609 | 613 |
--------------------------------------------------------------------------------
| Cash and cash | 332,22 | 153,93 | 166,49 | 21,233 | 9,838 | 10,641 |
| equivalents | 4 | 1 | 5 | | | |
--------------------------------------------------------------------------------
| Assets classified | 704 | 7,526 | 7,197 | 45 | 481 | 460 |
| as held for sale | | | | | | |
--------------------------------------------------------------------------------
| Total current | 702,42 | 617,28 | 594,02 | 44,893 | 39,452 | 37,965 |
| assets | 3 | 8 | 2 | | | |
--------------------------------------------------------------------------------
| TOTAL ASSETS | 933,32 | 850,42 | 843,49 | 59,650 | 54,352 | 53,909 |
| | 0 | 3 | 2 | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| LIABILITIES AND | | | | | | |
| EQUITY | | | | | | |
--------------------------------------------------------------------------------
| Equity | | | | | | |
--------------------------------------------------------------------------------
| Share capital at | 400,00 | 400,00 | 400,00 | 25,565 | 25,565 | 25,565 |
| per value | 0 | 0 | 0 | | | |
--------------------------------------------------------------------------------
| Share premium | 223,29 | 223,29 | 223,29 | 14,271 | 14,271 | 14,271 |
| | 3 | 3 | 3 | | | |
--------------------------------------------------------------------------------
| Own shares | -7,041 | -7,041 | -7,041 | -450 | -450 | -450 |
--------------------------------------------------------------------------------
| Statutory capital | 1,046 | 1,046 | 1,046 | 67 | 67 | 67 |
| reserve | | | | | | |
--------------------------------------------------------------------------------
| Other reserves | 5,461 | 0 | 0 | 349 | 0 | 0 |
--------------------------------------------------------------------------------
| Translation | -199,3 | -186,5 | -172,8 | -12,743 | -11,922 | -11,047 |
| reserve | 85 | 39 | 48 | | | |
--------------------------------------------------------------------------------
| Retained earnings | 178,62 | 59,097 | 53,996 | 11,416 | 3,777 | 3,451 |
| | 2 | | | | | |
--------------------------------------------------------------------------------
| Total equity | 601,99 | 489,85 | 498,44 | 38,475 | 31,308 | 31,857 |
| attributable to | 6 | 6 | 6 | | | |
| equity holders of | | | | | | |
| the Company | | | | | | |
--------------------------------------------------------------------------------
| Non-controlling | 164,11 | 136,14 | 132,16 | 10,489 | 8,701 | 8,447 |
| interest | 8 | 1 | 6 | | | |
--------------------------------------------------------------------------------
| Total equity | 766,11 | 625,99 | 630,61 | 48,964 | 40,009 | 40,304 |
| | 4 | 7 | 2 | | | |
--------------------------------------------------------------------------------
| Non-current | | | | | | |
| liabilities | | | | | | |
--------------------------------------------------------------------------------
| Loans and | 4,475 | 4,052 | 11,047 | 286 | 259 | 706 |
| borrowings | | | | | | |
--------------------------------------------------------------------------------
| Deferred tax | 0 | 0 | 266 | 0 | 0 | 17 |
| liabilities | | | | | | |
--------------------------------------------------------------------------------
| Other liabilities | 0 | 1,455 | 485 | 0 | 93 | 31 |
--------------------------------------------------------------------------------
| Provisions | 0 | 0 | 0 | 0 | 0 | 0 |
--------------------------------------------------------------------------------
| Total non-current | 4,475 | 5,507 | 11,798 | 286 | 352 | 754 |
| liabilities | | | | | | |
--------------------------------------------------------------------------------
| Current | | | | | | |
| liabilities | | | | | | |
--------------------------------------------------------------------------------
| Loans and | 1,033 | 24,190 | 31,340 | 66 | 1,546 | 2,003 |
| borrowings | | | | | | |
--------------------------------------------------------------------------------
| Trade payables | 99,168 | 123,99 | 111,73 | 6,338 | 7,925 | 7,141 |
| | | 9 | 3 | | | |
--------------------------------------------------------------------------------
| Corporate income | 13,785 | 3,552 | 3,380 | 881 | 227 | 216 |
| tax payable | | | | | | |
--------------------------------------------------------------------------------
| Other tax payable | 9,889 | 24,831 | 18,526 | 632 | 1,587 | 1,184 |
--------------------------------------------------------------------------------
| Other payables | 16,758 | 14,270 | 0 | 1,071 | 912 | 0 |
--------------------------------------------------------------------------------
| Provisions | 2,832 | 3,395 | 15,866 | 181 | 217 | 1,014 |
--------------------------------------------------------------------------------
| Deferred tax | 0 | 0 | 19,684 | 0 | 0 | 1,258 |
| liability | | | | | | |
--------------------------------------------------------------------------------
| Accrued expenses | 19,245 | 24,033 | 240 | 1,230 | 1,536 | 15 |
--------------------------------------------------------------------------------
| Deferred income | 21 | 649 | 313 | 1 | 41 | 20 |
--------------------------------------------------------------------------------
| Total current | 162,73 | 218,91 | 201,08 | 10,400 | 13,991 | 12,851 |
| liabilities | 1 | 9 | 2 | | | |
--------------------------------------------------------------------------------
| Total liabilities | 167,20 | 224,42 | 212,88 | 10,686 | 14,343 | 13,605 |
| | 6 | 6 | 0 | | | |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES | 933,32 | 850,42 | 843,49 | 59,650 | 54,352 | 53,909 |
| AND EQUITY | 0 | 3 | 2 | | | |
--------------------------------------------------------------------------------
Consolidated income statement for 9 months 2010
Unaudited
--------------------------------------------------------------------------------
| | 2010 9 | 2009 9 | 2010 9 | 2009 9 |
| | months | months | months EUR | months |
| | EEK | EEK | thousand | EUR |
| | thousand | thousand | | thousand |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Continuing operations | | | | |
--------------------------------------------------------------------------------
| Revenue | | | | |
--------------------------------------------------------------------------------
| Sales revenue | 1,133,361 | 898,099 | 72,435 | 57,399 |
--------------------------------------------------------------------------------
| Costs of goods sold | -678,124 | -511,253 | -43,340 | -32,675 |
--------------------------------------------------------------------------------
| Gross Profit | 455,237 | 386,846 | 29,095 | 24,724 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other operating income | 7,088 | 19,543 | 453 | 1,249 |
--------------------------------------------------------------------------------
| Distribution costs | -113,250 | -133,137 | -7,238 | -8,509 |
--------------------------------------------------------------------------------
| Administrative expenses | -97,791 | -118,789 | -6,250 | -7,592 |
--------------------------------------------------------------------------------
| Other operating expenses | -24,237 | -91,282 | -1,549 | -5,834 |
--------------------------------------------------------------------------------
| Operating profit / loss | 227,047 | 63,181 | 14,511 | 4,038 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Finance income and finance | | | | |
| costs | | | | |
--------------------------------------------------------------------------------
| Interest expenses | -1,127 | -7,338 | -72 | -469 |
--------------------------------------------------------------------------------
| Gains/losses on conversion | 9,435 | 9,576 | 603 | 612 |
| of foreign currencies | | | | |
--------------------------------------------------------------------------------
| Other financial income / | 10,874 | 7,291 | 695 | 466 |
| expenses | | | | |
--------------------------------------------------------------------------------
| Net finance income/ (costs) | 19,182 | 9,529 | 1,226 | 609 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Share of profit of equity | -141 | -298 | -9 | -19 |
| accounted investees | | | | |
--------------------------------------------------------------------------------
| Profit before tax | 246,088 | 72,412 | 15,728 | 4,628 |
--------------------------------------------------------------------------------
| Income tax expense | -56,516 | -61,695 | -3,612 | -3,943 |
--------------------------------------------------------------------------------
| Profit / (loss) from | 189,572 | 10,717 | 12,116 | 685 |
| continuing operations | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Discontinued operations | | | | |
--------------------------------------------------------------------------------
| Loss from discontinued | 0 | -36,034 | 0 | -2,303 |
| operations (net of income | | | | |
| tax) | | | | |
--------------------------------------------------------------------------------
| Profit / (loss) for the | 189,572 | -25,317 | 12,116 | -1,618 |
| period | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Attributable to | | | | |
--------------------------------------------------------------------------------
| Owners of the Company | 150,505 | -43,717 | 9,619 | -2,794 |
--------------------------------------------------------------------------------
| Non-controlling interest | 39,067 | 18,400 | 2,497 | 1,176 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per share | | | | |
--------------------------------------------------------------------------------
| Basic earnings per share | 3.80 | -1.10 | 0.24 | -0.07 |
| (EEK/EUR) | | | | |
--------------------------------------------------------------------------------
| Diluted earnings per share | 3.80 | -1.10 | 0.24 | -0.07 |
| (EEK/EUR) | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Continuing operations | | | | |
--------------------------------------------------------------------------------
| Basic earnings per share | 3.80 | -0.19 | 0.24 | -0.01 |
| (EEK/EUR) | | | | |
--------------------------------------------------------------------------------
| Diluted earnings per share | 3.80 | -0.19 | 0.24 | -0.01 |
| (EEK/EUR) | | | | |
--------------------------------------------------------------------------------
Märt Meerits
Chairman of the Management Board
AS Silvano Fashion Group
Tel +372 680 1396
E-mail mart.meerits@silvanofashion.com
