Klementi                      NEWS RELEASE                      08/25/2003



FINANCIAL RESULTS, 6 MONTHS 2003



The unaudited consolidated group net turnover of AS Klementi in the first half

year of 2003 was EEK 54.8m (EUR 3.5m)  and the  net loss amounted to EEK 19.0m

(EUR 1.2m). During the same period of  the previous year, the net turnover was

EEK 57.3m (EUR 3.7m) and net loss EEK 18.7m (EUR 1.2m). 



The  unaudited consolidated  group net  turnover of  AS Klementi in the second

quarter of 2003 was EEK 23.0m (EUR 1.5m) and the net loss amounted to EEK 9.9m

(EUR 0.6m). During the same period o f the previous year, the net turnover was

EEK 24.9m (EUR 1.6m) and net loss EEK 14.2m (EUR 0.9m). Compared with the same

period of the previous year the loss decreased by EEK 4.3m (EUR 0.3m).



As of 30 June 2003, the group employed 530 people. During the year, the number

of employees decreased by 16.1%, i.e. by 102 persons. In the second quarter of

2003 the number of employees decreased by 34 persons.





From 2-10 June 2003 the public issue of AS Klementi shares took place. 575,000

new A-shares were issued with a nominal value of EEK 10 (EUR 0.64)and an issue

price  of  EEK  27.50  (EUR 1.76)  per  share.  The  issue  was 3.5 times over

subscribed  by the  investors.  The total  number of shares subscribed for was

1,993,617, in the sum of EEK 54.8m (EUR 3.5m). Resultant of the issue EEK15.8m

(EUR 1.0m)  additional capital  was raised to finance the turnover increase of

the  autumn season 2003.  The share capital  of the company after the issue is

EEK 18,968,750 (EUR 1,212,321). 





» Sales analysis



The sales breakdown by activity in the first half-year was as follows:



NET SALES                       2003       2002      2003      2002      03/02

                                EEKm       EEKm      EURm      EURm     change

Apparel sales                   42.4       35.0       2.7       2.2      21.1%

Subcontracting and other        12.4       22.3       0.8       1.5     -44.5%

TOTAL                           54.8       57.3       3.5       3.7      -4.4%



The biggest increase, i.e. 2.2 times,  by EEK 6.9m (EUR 0.4m)  was experienced

in the apparel wholesale in the Nordic countries. The share of retail turnover

in the apparel sales in the first half of 2003 was 57%.

  

The first half of 2003 saw continuation of the new retail concept development.

Five inefficient outlets were closed and  in May the first two shops  that are

in compliance  with the new concept were opened in  Tallinn (Kristiine Centre)

and Riga (Origo Centre).



The  company  has planned  for the current year to acquire 100% of SIA Vision,

the Latvian company retailing Klementi apparel in Latvia.  SIA Vision has been

retailing Klementi products already for several years and is currently renting

two outlets  in Riga.  As of now  AS Klementi does not  own any  shares in the

company and the turnover from the outlets  in Riga is not yet reflected in the

retail sales figures. 



The decrease in turnover as compared  to the  previous year  was caused by the

re-orientation from subcontracting to own production.  The difference in sales

accrued from the subcontracting and wholesale time shift. If in the first half

of 2002 the bankrupted  P.T.A. Group OY  gave  EEK 9.5m (EUR 0.6m) of the sub-

contracting  and other sales turnover,  then now after  the acquisition of PTA

trademarks this turnover is reflected with a quarter shift, shown in the third

quarter own production, i.e. apparel sales figures.





» Profit analysis



The results of the first quarter  were most  influenced by the low mark-ups in

retail  in  January and February on  the collections from the previous season.

The loss in the second quarter was primarily due to the low wholesale activity

that is characteristic of the given period.



The one-off costs during the first half-year amounted to EEK 4.0m (EUR 0.26m),

including:



• Costs  from the previous  periods in the amount of  EEK 1.9m (EUR 0.12m), of

  which EEK 1.1m (EUR 0.07m) additional sales loss was accounted for wholesale

  of the previous year in Latvia and Lithuania.



• The  one-off costs accrued  from the  development of the new concept and re-

  organisation of the shops amounted to EEK 0.4m (EUR 0.02m).



• Arrangement costs of the public share issue were EEK 0.7m (EUR 0.04m)



• The  optimisation  of the demand for workforce started last year was resumed

  in  the  first  half  of  2003.   During the period  the number of employees

  decreased by 78 persons.  The redundancy costs for the given period amounted

  to EEK 1.1m (EUR 0.07m).  The company  should  achieve the optimal workforce

  demand by the end of the third quarter.





» Balance sheet analysis and ratios



The  consolidated  total  assets of AS Klementi as of 30.06.03 were EEK 113.9m

(EUR 7.3m).  The inventories  have  decreased  over  the  year  by 32.3%, i.e.

EEK 13.8m  (EUR 0.9m)  and  the  inventory  turnover ratio has improved by 1.1

points.



The  capital expenditures of  the first half-year were EEK 0.9m, most of which

went into opening a new shop in the Kristiine shopping centre.





The key financial ratios of AS Klementi group as of 30.06.2003:



                                                         2003             2002

                                                  I half-year      I half-year

- year-over-year sales growth                           -4.4%            28.0%



- apparel sale share in total net sales                 77.4%            61.1%



- inventory turnover (adjusted to year)                  3.8              2.7

  [net sales / average inventory]



- current ratio                                          0.90             0.87

  [current assets / current liabilities]



- liquidity ratio                                        0.31             0.43

  [current assets-inventory / current liabilities]



- EBIT margin [operating profit / net sales]           -30.1%           -28.8%



- net margin [net profit / net sales]                  -34.7%           -32.7%







The consolidated financial  statements of  AS Klementi group are prepared in

compliance with the International Accounting Standards.



» BALANCE SHEET, consolidated, unaudited

                                   30.06.2003     30.06.2002     31.12.2002

                                     EEK '000       EEK '000       EEK '000



Cash and bank                           1 498          1 514          4 485

Customer receivables                   11 548          9 203         12 537

Accrued income                            412          1 077            868

Prepaid expenses                        1 495          3 276          2 896

Inventories                            28 835         42 607         29 002

CURRENT ASSETS                         43 788         57 677         49 788



Long-term financial assets              2 580          3 182          2 578

Tangible assets                        61 949         50 996         64 649

Intangible assets                       5 618            842          5 771

FIXED ASSETS                           70 147         55 020         72 998

ASSETS                                113 935        112 697        122 786



Debt obligations                       34 334         38 840         34 792

Customer prepayments                       17            674            952

Accounts payable                        8 214         12 751         10 867

Miscellaneous payables                      0          3 862              0

Taxes payable                           3 964          3 193          3 875

Accrued expenses                        2 192          7 297          3 905

Unearned revenue                            0             12             12

Short-term provisions                       6              6             12

CURRENT LIABILITIES                    48 727         66 635         54 415



Long-term debt                         27 494         16 758         27 467

Other long-term payables                4 928              0          4 928

Long-term provisions                       68             68             68

LONG-TERM LIABILITIES                  32 490         16 826         32 463

TOTAL LIABILITIES                      81 217         83 461         86 878



Share capital                          18 969         35 250         13 219

Share premium                          40 926          3 774         30 863

Revaluation reserve                    15 578            816         15 578

Other reserves                          1 046          1 046          1 046

Retained earnings                     -24 798          7 083          7 083

Profit for the financial year         -19 003        -18 733        -31 881

OWNERS' EQUITY                         32 718         29 236         35 908

LIABILITIES AND EQUITY                113 935        112 697        122 786





» BALANCE SHEET Consolidated, unaudited

                                   30.06.2003     30.06.2002     31.12.2002

                                     EUR '000       EUR '000       EUR '000



Cash and bank                              96             97            287

Customer receivables                      738            588            801

Accrued income                             26             69             55

Prepaid expenses                           96            209            185

Inventories                             1 843          2 723          1 854

CURRENT ASSETS                          2 799          3 686          3 182



Long-term financial assets                165            203            165

Tangible assets                         3 959          3 259          4 132

Intangible assets                         359             54            368

FIXED ASSETS                            4 483          3 516          4 665

ASSETS                                  7 282          7 202          7 847



Debt obligations                        2 195          2 482          2 223

Customer prepayments                        1             43             61

Accounts payable                          525            815            694

Miscellaneous payables                      0            247              0

Taxes payable                             254            204            247

Accrued expenses                          140            466            250

Unearned revenue                            0              1              1

Short-term provisions                       0              0              1

CURRENT LIABILITIES                     3 115          4 258          3 477



Long-term debt                          1 757          1 071          1 755

Other long-term payables                  315              0            315

Long-term provisions                        4              4              4

LONG-TERM LIABILITIES                   2 076          1 075          2 074

TOTAL LIABILITIES                       5 191          5 333          5 551



Share capital                           1 212          2 253            845

Share premium                           2 616            241          1 973

Revaluation reserve                       996             52            996

Other reserves                             67             67             67

Retained earnings                      -1 585            453            453

Profit for the financial year          -1 215         -1 197         -2 038

OWNERS' EQUITY                          2 091          1 869          2 296

LIABILITIES AND EQUITY                  7 282          7 202          7 847





» Q2 INCOME STATEMENT consolidated, unaudited

                                  Q2 2003    Q2 2002     Q2 2003   Q2 2002

                                 EEK '000   EEK '000    EUR '000  EUR '000



Net sales                          22 968     24 898       1 468      1 591

Change in inventories                 771      4 947          49        316

Other revenue                         289        340          18         22

TOTAL REVENUE                      24 028     30 185       1 535      1 929






Goods, raw material and services    9 982     13 465         637        860

Miscellaneous operating expenses    7 788     14 852         497        949

Personnel expenses                 12 627     13 189         808        843

Depreciation                        1 858      1 696         119        108

Other expenses                        386         51          25          4

TOTAL EXPENSES                     32 641     43 253       2 086      2 764



OPERATING PROFIT                   -8 613    -13 068        -551       -835



Interest expenses                  -1 283     -1 179         -82        -75

Foreign exchange profit (loss)        -41         26          -2          1

Other financial income / expense       49         65           3          5

NET FINANCIAL ITEMS                -1 275     -1 088         -81        -69



NET PROFIT                         -9 888    -14 156        -632       -904

Basic earnings per share (EEK/EUR)  -5.93      -4.02       -0.38      -0.26

Diluted earnings per share(EEK/EUR) -5.75      -3.79       -0.37      -0.24







» I HALF-YEAR INCOME STATEMENT consolidated, unaudited

                                     2003       2002        2003      2002

                                     I HY       I HY        I HY      I HY

                                 EEK '000   EEK '000    EUR '000  EUR '000



Net sales                          54 779     57 286       3 501      3 661

Change in inventories              -1 990     -1 517        -127        -97

Other revenue                         615        769          39         49

TOTAL REVENUE                      53 404     56 538       3 413      3 613



Goods, raw material and services   22 852     19 342       1 460      1 236

Miscellaneous operating expenses   14 712     21 296         940      1 361

Personnel expenses                 27 345     28 081       1 748      1 795

Depreciation                        3 693      3 337         236        213

Other expenses                      1 290        982          83         63

TOTAL EXPENSES                     69 892     73 038       4 467      4 668



OPERATING PROFIT                  -16 488    -16 500      -1 054     -1 055

Interest expenses                  -2 536     -2 398        -162       -153

Foreign exchange profit (loss)        -80         34          -5          2

Other financial income / expense      101        131           6          9

NET FINANCIAL ITEMS                -2 515     -2 233        -161       -142



NET PROFIT                        -19 003    -18 733      -1 215     -1 197

Basic earnings per share (EEK/EUR) -13.78      -5.31       -0.88      -0.34

Diluted earnings per share(EEK/EUR)-13.28      -5.02       -0.85      -0.32





Toomas Leis

Chairman

+372 6 710 700