Consolidated interim report of Q3 and 9 months of 2008 25.11.2008
PROFITS
AS Silvano Fashion Group ended the third quarter of 2008 with consolidated net
sales of EEK 488.1 million (EUR 31.2 million), representing a 22.7% increase on
the third quarter of 2007. The Group's gross margin in the third quarter of
2008 reached 40.6% compared to 40.2% in the third quarter of 2007. Consolidated
operating profit amounted to EEK 43.3 million (EUR 2.8 million), representing a
7.3% decline compared to operating profit of Q3 2007. The consolidated
operating margin reached 8.9% (down from 11.8% in Q3 2007).
Consolidated net profit attributable to equity holders amounted to EEK 8.4
million (EUR 0.5 million), compared to EEK 16.5 million (EUR 1.1 million) in Q3
2007, and the net margin was 1.7% (down from 4.2% in Q3 2007).
Cumulative nine months' sales of AS Silvano Fashion Group amounted to EEK
1,402.6 million (EUR 89.6 million), showing 19.2% increase compared to 9M 2007.
The Group's gross and operating margins in the nine months of 2008 stood at
42.6% and 11.3% respectively (42.6% and 16.9% (normalised1) in 9M 2007).
Operating profit in the nine months of 2008 amounted to EEK 158.6 million (EUR
10.1 million) compared to normalised EEK 198.4 million (EUR 12.7 million) in 9M
2007 .
In the nine months of year 2008, the Group earned a net profit of EEK
40.6 million (EUR 2.6 million), representing a 55.2% decline compared to the
nine months of 20071, and net margin reached 2.9% (7.7% in 9M 20071).
In the nine months of 2008, the Group's return on equity was 5.3% (down from
15.2% (normalised1) in the nine months of 2007) and return on assets was 3.5%
(down from 9.5% (normalised1) in the nine months of 2007).
The substantial increase in sales and the decline in profitability compared to
the nine months of 2007 are a function of the rapid expansion of the Group's
retail network (as detailed below), and continues to be in line with the
management's expectations.
BALANCE SHEET
At 30 September 2008, consolidated assets amounted to EEK 1,263.5 million (EUR
80.8 million), up from EEK 1,089.6 million (EUR 69.6 million) at 31 December
2007. The increases in both assets and liabilities are related mainly to retail
expansion.
Trade receivables have increased by EEK 44.3 million (EUR 2.8 million).
Inventories increased by EEK 41.2 million (EUR 2.6 million) to reach EEK 378.8
million (EUR 24.2 million) at 30 September 2008. The growth in inventory
results primarily from the retail expansion. Due to the expansion of the retail
network, the Group made rental prepayments and deposits for store premises,
which increased other receivables and prepayments.
Property, plant and intangibles increased by EEK 63.8 million (EUR 4.1 million).
Current liabilities increased by EEK 65.6 million (EUR 4.2 million). Tax
liabilities, other payables, including payables to employees, and provisions
amounted to EEK 87.8 million (EUR 5.6 million), remaining at the expected
level.
Current and non-current loans and borrowings increased by EEK 41.0 million (EUR
2.6 million) to EEK 70.2 million (EUR 4.5 million). This includes finance lease
liabilities of EEK 5.9 million (EUR 0.4 million.)
Equity attributable to equity holders increased by EEK 64.3 million (EUR 4.1
million) to reach EEK 798.0 million (EUR 51.0 million).
SALES
Sales by business segments 9months 9months
9months 9months 9months 9months 2008 2007
2008 2007 Change 2008 2007 Change perc perc
EEK EEK EEK EUR EUR EUR from from
mil mil mil million million million sales sales
Women's apparel 146.3 107.5 38.8 9.3 6.9 2.4 10.4% 9.1%
Lingerie 1,207.9 1,044.1 163.8 77.2 66.7 10.5 86.1% 88.7%
Subcontracting
services and
other sales 48.4 25.5 22.9 3.1 1.6 1.5 3.5% 2.2%
Total 1,402.6 1,177.1 225.5 89.6 75.2 14.4 100.00% 100.00%
Sales by markets
In the nine months of 2008, the Group mainly focused on Russia, Belarus and
Ukraine markets.
Total sales by markets
9months 9months 9months 9months 2008 2007
2008 2007 Change 2008 2007 Change perc perc
EEK EEK EEK EUR EUR EUR from from
mil mil mil million million million sales sales
Estonia 114.1 126.8 -12.7 7.3 8.1 -0.8 8.1% 10.8%
Finland 28.3 39.2 -10.9 1.8 2.5 -0.7 2.0% 3.3%
Latvia 36.5 37.3 -0.8 2.3 2.4 -0.1 2.6% 3.2%
Belarus 267.7 217.9 49.8 17.1 13.9 3.2 19.1% 18.5%
Ukraine 112.4 72.9 39.5 7.2 4.7 2.5 8.0% 6.2%
Russia 727.1 571.0 156.1 46.5 36.5 10.0 51.9% 48.5%
Other markets 116.5 112.0 4.5 7.4 7.1 0.3 8.3% 9.5%
Total 1,402.6 1,177.1 225.5 89.6 75.2 14.4 100.00% 100.0%
Women's apparel
The main driver of growth for women's apparel sales was the expansion of the
PTA retail chain. In the nine months of 2008 retail sales were 87.9% from the
total revenue of the women's apparel segment (9M 2007: 73.3%). Sales volume in
the Baltics decreased by 0.7%, amounting to EEK 68.6 million (EUR 4.4 million).
Sales revenue in Russia was EEK 46.0 million (EUR 2.9 million) giving 4.6 times
growth to 9M 2007 and in Ukraine EEK 15.3 million (EUR 0.9 million).
Lingerie
The majority of lingerie sales revenue in the nine months of 2008 was earned on
the Russian market, amounting to EEK 670.8 million (EUR 42.9 million),
accounting for 55.5% of all lingerie sales volume for the nine months of 2008,
compared to 9M 2007: EEK 571.0 million (EUR 36.5 million). Sales in Russia
comprise both retail sales and wholesale. The second biggest region of lingerie
sales is Belarus, amounting to EEK 263.3 million (EUR 16.8 million),
contributing 21.8% of all lingerie sales revenue (also comprising both retail
sales and wholesale) compare to 9M 2007: EEK 217.9 million (EUR 13.9 million).
Similarly to the women's apparel segment, the Baltic sales of lingerie were
affected by the economic slowdown (and significantly higher inflation) in the
region, which continues to have an effect on consumer spending.
In terms of lingerie brands, the sales of “Milavitsa” core brand accounted for
76.2% of total lingerie sales revenue in the nine months of 2008 (9M 2007:
76.0%) and amounted to EEK 779.0 million (EUR 49.8 million). The sales of
“Lauma” core brand accounted for 7.0% of total lingerie sales (9M 2007 : 5.6 %)
and amounted to EEK 72.0 million (EUR 4.6 million). Other brands such as
“Alisee”, “Aveline”, “Laumelle”, “Lauma Aqua” and “Laumelle Aqua” comprised
16.8% of total lingerie sales in 9M 2008 (9M 2007: 18.4%), amounting to EEK
171.9 million (EUR 11.0 million).
Retail operations
Total retail sales of the Group in the nine months of 2008 amounted to EEK
352.5 million (EUR 22.5 million), representing a 75.5% increase on the nine
months of 2007.
Retail operations were conducted in Estonia, Latvia, Russia, Belarus, Poland,
Lithuania and Ukraine. At the end of September 2008, the Group operated 136
retail outlets with a total area of 15,014 square metres.
Women's apparel was retailed in Estonia, Latvia, Lithuania, Russia and Ukraine.
At the end of September 2008, the Group operated 39 women's apparel stores with
a total sales area of 7,301 square metres.
Lingerie was retailed in Russia, Belarus, Latvia, Lithuania, Ukraine, Poland
and Estonia. At the end of September 2008, the Group operated 97 lingerie
stores with a total area of 7,713 square metres.
Within the nine months of 2008, 26 new stores were opened: 10 in the apparel
business (operating under PTA brand name), including 3 in Ukraine, 6 in Russia
and 1 in Estonia, and 16 stores in the lingerie business, including 8 under
Oblicie name (6 in Russia, 1 in Ukraine and 1 in Estonia), 6 under Milavitsa
name in Belarus, 1 store under Lauma Lingerie brand name in Latvia and 1 stock
outlet in Estonia. Five underperforming stores were closed: 1 PTA store in
Ukraine, 1 Oblicie store in Ukraine, 1 Milavitsa store in Belarus and 2 Splendo
stores in Poland.
Number of stores at 30 September:
30.09.2008 31.12.2007
Estonia 11 8
Latvia 7 6
Poland 8 10
Belarus 28 23
Russia 56 44
Lithuania 20 20
Ukraine 6 4
Total stores 136 115
Total sales area, sq m 15,014 12,454
In the nine months of 2008, women's apparel retail revenue compared to the nine
months of 2007 increased by 61.1%, amounting to EEK 133.6 million (EUR 8.5
million). The total like-for-like growth was a negative 3% mainly because of
the drop of sales in the Baltics. The like-for-like growth in Russia was +49%,
in Estonia -6% and in Latvia -6% in 9M 2008. Results in Baltics are influenced
by overall macro economical situation and by the fact that the Baltic stores
have already been in operation for long enough to be close to optimal capacity.
The like-for-like increase in the Oblicie lingerie retail chain in Russia is
about 56% for stores operating longer than one year, continuing to offer strong
evidence to the viability of the continuing expansion of the Group's operations
into the retail sector in its primary target markets. The major objective in
the lingerie business continues to be retail expansion, mainly in Russia. By
the end of the year, the Group also intends to open a few shops under the
“Milavitsa” brand in Russia in order to capitalise on the brand awareness in
the country.
Stores by concept
Market PTA Oblicie Milavitsa Other Total Sales area,
stores stores stores stores sq m
Russia 17 39 - - 56 6,320
Ukraine 5 1 - - 6 873
Estonia 9 1 - 1 11 2,120
Latvia 4 - - 3 7 1,196
Lithuania 4 - - 16 20 1,626
Belarus - - 28 - 28 2,527
Poland - 1 - 7 8 352
Total 39 42 28 27 136 15,014
Wholesale
In the nine months of 2008, wholesale amounted to EEK 1,001.7 million (EUR 64.0
million), representing 71.4% of the Group's total revenue (9M 2007: 80.8%). The
main wholesale regions were Russia, Belarus, Ukraine and the Baltic States for
lingerie, and Finland and the Baltic states for women's apparel. In the nine
months of 2008, revenue from wholesale of women's apparel decreased by 66.7%
compared to the nine months of 2007, amounting to EEK 14.0 million (EUR 0.9
million).
Lingerie wholesale in the nine months of 2008 increased by 8.7% compared to the
nine months of 2007, amounting to EEK 987.7 million (EUR 63.1 million). Most of
the lingerie wholesale partners are located in Russia.
Investment
In the nine months of 2008, the Group's investments totalled EEK 60.4 million
(EUR 3.9 million). A total of EEK 24.2 million (EUR 1.5 million) was invested
in retail operations, EEK 12.4 million (EUR 0.8 million) was invested in real
estate for retail needs in Belarus, while other investments were made in
equipment and facilities to maintain effective production.
Personnel
At the end of September 2008, the Group employed a staff of 4,079 including 885
in retail and 2,402 in production. The rest are employed in wholesale,
administration and support operations. The average number of employees in the
nine months of 2008 was 4,059.
The total salaries and wages for the nine months of 2008 amounted to EEK 259.9
million (EUR 16.6 million). The remuneration paid to members of the Management
Board totalled EEK 4.4 million (EUR 0.3 million). Four members of the
Management Board also serve as executives for the Group's subsidiaries.
Share Buyback Programme
The extraordinary general meeting of shareholders of AS Silvano Fashion Group
held on 6 October 2008 authorised the buyback of AS Silvano Fashion Group's own
shares under the following conditions: SFG is entitled to buy back its own
shares within one year as of the resolution of the general meeting of the
shareholders, the total nominal value of own shares to be bought back by SFG
may not exceed 10% of total share capital of SFG, the maximum price payable by
SFG for one share will be EUR 3.50 (three Euros and fifty cents), the maximum
amount payable by SFG for its own shares is EUR 3,000,000 (three million
Euros), own shares will be paid for with assets exceeding the share capital,
compulsory reserves and share premium.
On 6 October 2008, the management board of AS Silvano Fashion Group, acting
under the authorization granted by the aforementioned general meeting of
shareholders, decided to initiate the share buyback program. The buyback period
started on 07.10.2008.
To date, the amount of shares bought back is 393 000, the average price per
share is 1.15 EUR, the cost in total is 452,968 EUR.
After the transactions listed above, AS Silvano Fashion Group owns 393,000 of
its own shares, which constitute 0.9825% of the share capital. Under the
buyback program, shares up to the value of 2,547,032 million Euros remain to be
bought back. The maximum amount of shares that remains to be bought back is
3,607,000.
The share buyback program is being implemented in accordance with the
Commission Regulation (EC) No 2273/2003 of 22.12.2003, implementing Directive
2003/6/EC of the European Parliament and of the Council as regards exemptions
for buy-back programmes and stabilization of financial instruments. The
programme is managed by AS Hansapank, which buys back shares on behalf of AS
Silvano Fashion Group. AS Hansapank carries out the buyback according to the
regulations and within the framework of the programme, and makes its trading
decisions independently of, and without influence by AS Silvano Fashion Group
with regard to the timing of the purchases.
Merger of Subsidiaries
Two subsidiaries of SFG operating primarily on the Russian retail market - ZAO
Linret (“Linret”) and ZAO Stolichnaja Torgovaja Kompanija Milavitsa (“STK”)
have signed a merger agreement, as a result of which STK will be merged into
Linret. The new entity will operate under the name of ZAO Milavitsa Linret and
will combine the operations and resources of the two companies. ZAO Milavitsa
Linret will be 49% owned by SFG directly and 51% by SP ZAO Milavitsa, a
Belorussian subsidiary of SFG. The merger will be preceded by a sale of 51% of
shares in Linret to STK.
The merger will contribute to the efficiency of SFG's Russian operations
through decreased administrative expenses and better coordination between the
previously independent sales structures.
Establishment of a new subsidiary in Estonia
SFG established a new subsidiary in Estonia under the name OÜ Linret EST. The
share capital of the new subsidiary is EEK 40,000 (approximately EUR 2,556),
100% of which is held by SFG. The reason for establishing the new subsidiary is
the structural development of SFG's retail network and the need for a clearer
separation between retail and management functions within the group. The
establishment of OÜ Linret EST will not have significant impact on the economic
activities of SFG.
PTA introduces a new trademark
PTA Grupp AS, a subsidiary SFG, engaged in the retail and wholesale of women's
apparel and lingerie has introduced a brand-new Avenue trademark. Avenue is a
new collection aimed at wholesale clients, offering classical women's apparel,
clothes with a contemporary cut, feminine and decorous models. In the Avenue
collection designers have mainly focused on costumes - both everyday and more
festive models. Goods bearing the Avenue trademark are going to be marketed in
all Baltic states as well as in Russia, Ukraine and Belorussia. Goods bearing
Avenue trademark will reach stores in the first half of 2009.
Selected financial data
The Group's operating results are best summarised in the following figures and
ratios:
Key figures and ratios 30.09.08 30.09.07 Change
Net sales (EEK million) 1,402.6 1,177.1 225.5
Net income, attributable
to shareholders (EEK million) 40.6 162.8 -122.2
Earnings before interest,
taxes and depreciation (EBITDA)
( EEK million) 192.6 298.8 -106.2
Earnings before interest
and taxes (EBIT) (EEK million) 158.6 270.6 -112.0
Net sales (EUR million) 89.6 75.2 14.4
Net income attributable
to shareholders (EUR million) 2.6 10.4 -7.8
Earnings before interest,
taxes and depreciation (EBITDA)
( EUR million) 12.3 19.1 -6.8
Earnings before interest
and taxes (EBIT) (EUR million) 10.1 17.3 -7.2
Operating margin, % 11.3% 23.0% -
Net margin, % 2.9% 13.8% -
ROA, % 3.5% 17.1% -
ROE, % 5.3% 27.4% -
Earnings per share (EPS), in EEK 1.01 4.23 -
Earnings per share (EPS), in EUR 0.07 0.27 -
Current ratio 3.2 3.5 -
Quick ratio 1.8 2.1 -
Underlying formulas:
Operating margin = operating profit / sales revenue
Net margin = net profit attributable to equity holders of the parent / sales
revenue
ROA (return on assets) = net profit attributable to equity holders of the
parent / average total assets
ROE (return on equity) = net profit attributable to equity holders of the
parent / average equity
EPS (earnings per share) = net profit attributable to equity holders of the
parent / weighted average number of ordinary shares
Current ratio = current assets / current liabilities
Quick ratio = (current assets - inventories) / current liabilities
Balance Sheet
Consolidated, unaudited
30.09.08 30.09.07 31.12.07 30.09.08 30.09.07 31.12.07
EEK th EEK th EEK th EUR th EUR th EUR th
ASSETS
Non-current assets
Property, plant and equipment 290,745 247,905 246,541 18,582 15,844 15,757
Intangible assets 47,613 29,822 27,976 3,043 1,906 1,788
Investment property 23,626 0 22,954 1,510 0 1,467
Investments in equity
accounted investees 3,317 78 876 212 5 56
Available-for-sale
financial assets 8,856 9,216 8,480 566 589 542
Other receivables 673 67,171 595 43 4,293 38
Total non-current assets 374,830 354,192 307,422 23,956 22,637 19,648
Current assets
Inventories 378,757 303,231 337,528 24,207 19,380 21,572
Prepaid taxes 45,735 22,672 24,471 2,923 1,449 1,564
Trade receivables 202,780 153,822 158,531 12,960 9,831 10,132
Other receivables 66,389 46,636 29,713 4,243 2,981 1,899
Prepayments 66,811 26,959 51,680 4,270 1,723 3,303
Cash and cash equivalents 128,177 180,992 180,233 8,192 11,568 11,519
Total current assets 888,649 734,312 782,156 56,795 46,932 49,989
TOTAL ASSETS 1 263,479 1 088,504 1 089,578 80,751 69,569 69,637
LIABILITIES AND EQUITY
Equity
Share capital at par value 400,000 400,000 400,000 25,565 25,565 25,565
Share premium 223,293 229,395 223,293 14,271 14,661 14,271
Statutory capital reserve 1,046 1,046 1,046 67 67 67
Translation reserve -52,823 -54,967 -76,512 -3,376 -3,513 -4,890
Retained earnings 226,499 161,833 185,927 14,476 10,343 11,883
Total equity attributable
to equity holders
of the parent 798,015 737,307 733,754 51,003 47,123 46,896
Minority interest 176,634 138,817 136,313 11,289 8,872 8,712
Total equity 974,649 876,124 870,067 62,292 55,995 55,608
Non-current liabilities
Loans and borrowings 8,089 4,976 4,068 517 318 260
Deferred tax liabilities 201 201 201 13 13 13
Other liabilities 56 0 360 3 0 23
Provisions 125 140 139 8 9 9
Total non-current liabilities 8,471 5,317 4,768 541 340 305
Current liabilities
Loans and borrowings 62,117 26,396 25,160 3,970 1,687 1,608
Trade payables 130,790 122,669 122,888 8,359 7,840 7,854
Corporate income tax liability 3,583 7,542 3,192 229 482 204
Other tax liabilities 19,887 17,039 23,486 1,271 1,089 1,501
Other payables 39,652 15,490 17,555 2,534 990 1,121
Provisions 24,299 17,927 22,462 1,553 1,146 1,436
Deferred income 31 0 0 2 0 0
Total current liabilities 280,359 207,063 214,743 17,918 13,234 13,724
Total liabilities 288,830 212,380 219,511 18,459 13,574 14,029
TOTAL LIABILITIES AND EQUITY 1 263,479 1 088,504 1 089,578 80,751 69,569
69,637
Income Statement-9 months 2008
Consolidated, unaudited
2008 2007 2008 2007
9months 9months 9months 9months
EEK th EEK th EUR th EUR th
Net sales 1 402,593 1 177,125 89,642 75,232
Costs of goods sold -805,033 -675,292 -51,451 -43,159
Gross Profit 597,560 501,833 38,191 32,073
Other operating income 14,364 83,490 918 5,336
Distribution costs -240,081 -140,334 -15,344 -8,969
Administrative expenses -160,190 -125,298 -10,238 -8,008
Other operating expenses -53,026 -49,099 -3,389 -3,138
Operating profit 158,627 270,592 10,138 17,294
Interest expenses -2,613 -2,018 -167 -129
Gains/losses on
conversion of foreign
currencies -14,974 4,819 -957 308
Other financial
income / expenses 8,715 6,212 557 397
Total financial
income / expenses -8,872 9,013 -567 576
Share of profit of
equity accounted investees 2,378 0 152 0
Profit before corporate
income tax 152,133 279,605 9,723 17,870
Corporate income tax -74,603 -72,381 -4,768 -4,626
Net profit for period 77,530 207,224 4,955 13,244
Net profit attributable
to parent company 40,572 162,820 2,593 10,406
Net profit attributable
to minority shareholders 36,958 44,404 2,362 2,838
Earnings per share
Basic earnings
per share (EEK/EUR) 1.01 4.23 0.07 0.27
Diluted earnings
per share (EEK/EUR) 1.01 4.23 0.07 0.27
Income Statement-Q3
Consolidated, unaudited
2008 2007 2008 2007
Q3 Q3 Q3 Q3
EEK th EEK th EUR th EUR th
Net sales 488,080 397,924 31,194 25,432
Costs of goods sold -289,947 -237,923 -18,531 -15,206
Gross Profit 198,133 160,001 12,663 10,226
Other operating income 4,209 4,005 269 256
Distribution costs -84,006 -50,366 -5,369 -3,219
Administrative expenses -55,796 -47,738 -3,566 -3,051
Other operating expenses -19,198 -19,136 -1,227 -1,223
Operating profit 43,342 46,766 2,770 2,989
Interest expenses -1,064 -1,627 -68 -104
Gains/losses on
conversion of
foreign currencies -13,472 3,864 -861 247
Other financial
income / expenses 3,473 4,616 222 295
Total financial
income / expenses -11,063 6,853 -707 438
Share of profit
of equity
accounted investees 1,064 0 68 0
Profit before
corporate income tax 33,343 53,619 2,131 3,427
Corporate income tax -17,978 -24,894 -1,149 -1,591
Net profit for period 15,365 28,725 982 1,836
Net profit attributable
to parent company 8,434 16,523 539 1,056
Net profit attributable
to minority shareholders 6,931 12,202 443 780
Earnings per share
Basic earnings
per share (EEK/EUR) 0.21 0.42 0.01 0.03
Diluted earnings
per share (EEK/EUR) 0.21 0.42 0.01 0.03
Dmitry Ditchkovsky
Chairman of the Management Board
+ 372 6710 700
