Baltika’s second quarter net profit amounted to 572 thousand euro and the group achieved 1 408 thousand euros EBITDA that signifies 11% EBITDA margin.
Profitability was achieved essentially as a result of previous action to restructure retail network and streamlining internal work processes. The most important steps in retail network restructuring were the closing of loss making stores in 2010-2011, and initiatives to improve sales efficiency through increasing the number of multi-brand concept stores. Additionally, third party brands were added to further enhance the product selection offered to customers through concession agreements (third party products included the German men’s clothing brand Stones, hand-made JAG men’s shoes in Baltman stores, women’s clothing brand TSCity in Ukraine etc). Retail network restructuring was finalised in 2011 with last closing of stores in the beginning of 2012.
Baltika sales in the second quarter amounted to 13,157 thousand euros, an increase of 4% in spite of an 8% decrease in average operating area. The Group’s sales efficiency increased in the second quarter by 12%. Highest sales growth came from Latvia with a 19% increase and from a brand perspective the highest sales growth was achieved by Baltman and Ivo Nikkolo with 21% and 18% increase respectively. With half-year total sales growth of 6% and sales efficiency growth of 14% the company is on track to achieve the financial targets set for 2012, which is 5% and 10% growth respectively.
Strong cost control in the supply chain and good fashion collections with improved inventory management have increased the gross profit margin to 59%, that is one percentage point better than the second quarter of previous year.
Work done on cost efficiency lead to a further reduction of operating expenses, which have decreased in the second quarter by 366 thousand euros i.e. 5%. Operating expenses ratio to revenues was 52% in the second quarter, improving 7 percentage points compared to same period in last year (Q2 2011: 59%). This supports the company’s financial targets also on the cost side, where the target was improving the ratio by 4 percentage points for the full year.
The company’s management anticipate that in spite of the financial tensions in Europe sales will continue to grow in the Baltics and Russia, while the situation in Ukraine remains complicated. Company plans to invest in the existing retail network and new stores 5,000 thousand euros, from which 3,000 thousand euros will be invested during the current and following year. Baltika’s additional objective is to increase its international marketing capability and develop in addition to own retail network through multi- channels. The company will achieve this by growing the traditional wholesale and e-commerce business as well as by finding international franchise and concession operators.
2012 second quarter highlights
- Annual general meeting of shareholders on 20 April elected Supervisory Council composition: Tiina Mõis, Reet Saks, Lauri Kustaa Äimä, Jaakko Sakari Mikael Salmelin, Valdo Kalm. The Supervisory Board meeting on 23 May elected Jaakko Sakari Mikael Salmelin as the chairman of the Supervisory Board.
- In accordance with the decision taken to decrease share capital on the Annual general meeting of shareholders new share capital of AS Baltika was registered in the Commercial Register on 11 May 2012 and the new share capital is 7,159 thousand euros.
- Continuing the partnership formed with the Estonian Olympic Committee in 2004, Monton provided the Estonian London Olympic team with ceremonial uniforms and leisurewear. The Olympic fans gear collection that Monton launched in the second quarter performed well during presale and has been selling well since May both in the retail system and the e-store.
Consolidated statement of financial position
| 30 June 2012 | 31 Dec 2011 | |
| ASSETS | ||
| Current assets | ||
| Cash and bank | 649 | 863 |
| Trade and other receivables | 1,923 | 2,189 |
| Inventories | 11,501 | 10,048 |
| Assets held for sale | 5,029 | 0 |
| Total current assets | 19,102 | 13,100 |
| Non-current assets | ||
| Deferred income tax asset | 838 | 838 |
| Other non-current assets | 716 | 629 |
| Investment property | 8,549 | 8,549 |
| Property, plant and equipment | 2,330 | 8,031 |
| Intangible assets | 3,534 | 3,665 |
| Total non-current assets | 15,967 | 21,712 |
| TOTAL ASSETS | 35,069 | 34,812 |
| EQUITY AND LIABILITIES | ||
| Current liabilities | ||
| Borrowings | 3,147 | 3,178 |
| Trade and other payables | 7,646 | 6,785 |
| Total current liabilities | 10,793 | 9,963 |
| Non-current liabilities | ||
| Borrowings | 15,550 | 15,144 |
| Other liabilities | 32 | 83 |
| Total non-current liabilities | 15,582 | 15,227 |
| TOTAL LIABILITIES | 26,375 | 25,190 |
| EQUITY | ||
| Share capital at par value | 7,159 | 25,056 |
| Share premium | 0 | 89 |
| Reserves | 2,775 | 2,494 |
| Retained earnings | 75 | -11,592 |
| Net loss for the period | -472 | -5,863 |
| Currency translation differences | -843 | -727 |
| Total equity attributable to equity holders of the parent | 8,694 | 9,457 |
| Non-controlling interest | 0 | 165 |
| TOTAL EQUITY | 8,694 | 9,622 |
| TOTAL LIABILITIES AND EQUITY | 35,069 | 34,812 |
Consolidated statement of comprehensive income
| Q2 2012 | Q2 2011 | 6M 2012 | 6M 2011 | |
| Revenue | 13,157 | 12,642 | 25,800 | 24,413 |
| Cost of goods sold | -5,412 | -5,327 | -11,600 | -11,207 |
| Gross profit | 7,745 | 7,315 | 14,200 | 13,206 |
| Distribution costs | -6,235 | -6,535 | -12,819 | -13,563 |
| Administrative and general expenses | -684 | -751 | -1,368 | -1,494 |
| Other operating income | 156 | -3 | 189 | 3 |
| Other operating expenses | -15 | -125 | -25 | -346 |
| Operating profit (loss) | 967 | -99 | 177 | -2,194 |
| Finance income | -90 | -6 | 17 | 15 |
| Finance costs | -292 | -332 | -634 | -619 |
| Profit (loss) before income tax | 585 | -438 | -440 | -2,798 |
| Income tax expense | -13 | -7 | -31 | -10 |
| Net profit (loss) | 572 | -444 | -471 | -2,808 |
| Profit (loss) attributable to: | ||||
| Equity holders of the parent company | 572 | -444 | -472 | -2,808 |
| Non-controlling interest | 0 | 0 | 1 | 0 |
| Other comprehensive income (loss) | ||||
| Currency translation differences | -194 | 74 | -116 | 206 |
| Total comprehensive income (loss) | 378 | -370 | -587 | -2,602 |
| Comprehensive income (loss) attributable to: | ||||
| Equity holders of the parent company | 378 | -370 | -588 | -2,602 |
| Non-controlling interest | 0 | 0 | 1 | 0 |
| Basic earnings per share, EUR | 0.02 | -0.02 | -0.01 | -0.10 |
| Diluted earnings per share, EUR | 0.02 | -0.02 | -0.01 | -0.10 |
Maigi Pärnik
Member of the Management Board
maigi.parnik@baltikagroup.com
