Last update: 05.07.2024 12:06 (GMT+3)
AS BALTIKA Financial results 22.07.2005
Consolidated financial results, 6 months 2005
HIGHLIGHTS, 6m 2005
- Group sales increased 15.3% yoy to EEK 310.5mln
- Retail sales up 34.0% yoy
- Gross margin expanded to 51.9% (46.2% in 6m 2004)
- Operating profit EEK 26.7mln vs EEK 5.0mln previous year
- Operating margin at 8.6% (1.9% in 6m 2004)
- Net profit EEK 28.2mln (EEK 1.7mln in 6m 2004)
The consolidated half year sales of Baltika Group totalled EEK 310.5 million
(EUR 19.8mln), up 15.3% yoy. The increase was driven by growth in retail sales
across all the key markets. The Group’s operating profit reached EEK 26.7
million (EUR 1.7mln) compared with last year’s six month result of EEK 5.0mln
(EUR 320 thousand). Net profit amounted to EEK 28.2 million (EUR 1.8mln)
compared with EEK 1.7 million (EUR 110 thousand) in the same period last year.
Gross and operating margins in the first six months of 2005 stood at 51.9% and
8.6%, respectively (46.2% and 1.9% in 6m 2004).
The 2Q 2005 sales of Baltika totalled EEK 160.3 million (EUR 10.2mln), growing
15.5% compared with the corresponding period of last year. The gross margin
reached 54.8% (48.4% in 2Q 2004). Operating margin stood at 11.5% in 2Q and
operating profit amounted to EEK 18.5 million/EUR 1.2mln (EEK 2.5mln/EUR 158
thousand in 2Q 2004). 2Q 2005 net margin expanded to 11.1% and net profit
reached EEK 17.8 million (EUR 1.1mln). In the second quarter of last year, net
profit amounted to EEK 1.1 million (EUR 73 thousand).
SALES
Sales breakdown by segment
EEK million 2Q 2005 2Q 2004 Change 6m 2005 6m 2004 Change
Retail sales 140.6 109.0 29.0% 252.3 188.3 34.0%
Wholesale 16.6 17.7 -6.0% 50.7 57.2 -11.3%
Subcontracting 0 11.7 -100.0% 0.5 23.2 -97.7%
Other sales 3.0 0.3 879.4% 6.9 0.6 1029%
Total 160.3 138.7 15.5% 310.5 269.3 15.3%
1 EUR = 15.6466 EEK
Due to the establishment of a joint venture on the basis of Baltika’s
production unit Baltika Tailor OÜ in November 2004, the consolidated sales
results do not include subcontracting figures starting from December 2004.
Thus, in comparable terms, net sales of the first six months of this year grew
by 23.4% yoy.
RETAIL SALES
In the first six months of 2005, Baltika’s retail sales grew faster than in
the comparable period last year, registering a 34.0% yoy increase to EEK 252.3
million/EUR 16.1mln (EEK 188.3mln/EUR 12.0mln, +28.9% in 6m 2004). Sales
efficiency (sales/m2) increased by 20% compared with the first half of 2004
while the average retail space grew 11% yoy in the same period. Like-for-like
sales (sales on comparable areas) increased 19% yoy in 6m 2005.
Well managed mid-season sale in April, precisely timed summer collection
launch and successful campaigns of special products helped to drive the second
quarter sales. Also, higher store traffic continues to be seen in Baltika
stores this year if compared with the previous year. The share of retail sales
in overall sales has increased to 81% in the first six months of 2005 compared
to 70% in the same period last year.
In terms of store concepts, the sales of Baltika’s largest fashion brand
Monton accounted for 53% of the total retail sales in the first half of 2005
and amounted to EEK 134 million (EUR 8.6mln), up 25% on last year’s figure.
The sales of CHR/Evermen grew 56% yoy amounting to EEK 67 million (EUR 4.3mln)
and the sales of Baltman increased 46% yoy to EEK 27 million (EUR 1.7mln).
All the bigger retail markets posted solid sales growth in the first half of
the year. The largest retail markets by sales were Estonia with EEK 72
million/EUR 4.6mln (+30% yoy), followed by Lithuania (EEK 59mln/EUR 3.8mln,
+23%) and Ukraine (EEK 43mln/EUR 2.7mln, +31%). Baltika’s newest retail market
Russia, launched in May 2004, generated retail sales of EEK 25 million (EUR
1.6mln) in the first six months of 2005. The smallest market Poland that
comprises 7% of total sales posted a 3% sales growth.
SHOPS AND SALES AREA
As of the end of June, Baltika Group operated 76 shops in six countries, with
a total area of 11,340 m2. At the end of June 2004, Baltika’s retail system
comprised of 78 shops with a total area of 10,907 m2.
Number of shops by country
30.06.2005
Estonia 23
Latvia 10
Lithuania 16
Ukraine 12
Russia 7
Poland 8
Total 76
During the second quarter, two stores were closed and two opened and thus, the
number of stores remained the same in the retail system. Two store openings
took place in Ukraine, while one closing occurred in Ukraine and one in
Russia.
WHOLESALE
The share of wholesale sales in Baltika’s total sales has decreased to 16% in
the first half of 2005 from the year ago figure of 21%. The wholesale sales of
own products in the first half of 2005 totalled EEK 50.7 million (EUR 3.2mln),
decreasing 11.3% compared with the corresponding period last year. The drop is
mainly due to the acquisition of a 50.1% holding in the Russian retail company
in April 2004 as a result of which part of Baltika’s Russian wholesale sales
are recorded as retail sales starting from May 2004.
EARNINGS AND MARGINS
Baltika Group achieved solid profitability improvements in 2Q 2005. In the
first six months of this year, the Group’s gross profit increased by 29.4% to
EEK 161.1 million (EUR 10.3mln). Half year gross profit margin improved to
51.9% from last year’s corresponding figure of 46.2%. The results were driven
by growth of the retail system and improved sales efficiency. More exact price
policy, higher first price margins and improved inventory management
contributed to the enhanced gross margin.
The gains in gross profitability translated into solid first half operating
profit that totalled EEK 26.7 million (EUR 1.7mln). In the first six months of
last year, operating profit amounted to EEK 5.0 million (EUR 320 thousand).
Operating margin rose to 8.6% in the review period from 1.9% in 6m 2004.
The exchange rate fluctuations did not have a significant impact on the
quarter’s results, since higher costs from dollar-based purchases from China
were compensated for by an increase in export sales in Ukraine and Russia.
The Group’s net financial expenses were EEK -1.0 million (EUR -66 thousand)
including interest expense of EEK 2.8 million/EUR 178 thousand (EEK 3.5mln/EUR
222 thousand in 6m 2004). Interest expenses have declined in conjunction with
the decrease in total debt obligations and the reduced cost of borrowing as
well as the lower than average usage of the bank’s overdraft.
Net profit of the Group after taxes and minority shareholding grew from EEK
1.7 million (EUR 110 thousand) in 6m 2004 to EEK 28.2 million (EUR 1.8mln) for
the first half of 2005. In the review period net profit margin enhanced to
9.1% from 0.6% a year ago.
BALANCE SHEET
On 30 June 2005, the total assets of Baltika Group amounted to EEK 318.1
million (EUR 20.3mln), staying almost at the same level in comparison with the
end of last year. Inventories have increased in the system by EEK 1.1 million
(EUR 70 thousand) during the first six months of 2005, totalling EEK 146.6
million (EUR 9.4mln). In this period, the inventories of finished goods and
merchandise in the retail system have decreased whereas with the start of the
new season, the inventories of the next season’s materials and purchased
merchandise for sale have increased.
Accounts receivable increased by EEK 3.0 million (EUR 195 thousand) since the
end of the last year, amounting to EEK 30.5 million (EUR 2.0mln). In the same
period, accounts payable grew by EEK 0.7 million (EUR 44 thousand), totalling
EEK 31.8 million (EUR 2.0mln).
At the end of the period, the Group’s total borrowings amounted to EEK 92.1
million (EUR 5.9mln) and net debt was EEK 77.7 million (EUR 5.0mln). The net
debt to equity ratio was 46.8% (75.9% at the end of 2004).
PERSONNEL
As of 30 June 2005, Baltika Group employed 1,630 people, including 932 in
production and 556 in retail; 412 people worked outside Estonia. At the same
time last year, the number of employees stood at 1,734, including 1,015 in
production and 575 in retail.
ENLARGEMENT OF THE SHARE CAPITAL
In accordance with the terms of the convertible bond program adopted by the
General Meeting of Baltika on 6 April 2001, 189,000 B-bonds were converted
into shares in May 2005. As a result, 189,000 new registered shares with a
nominal value of EEK 10.00 (EUR 0.64) per share were issued and the share
capital of the company was increased by EEK 1,890,000 (EUR 120,793). The total
issue price of the shares was EEK 34.09 (EUR 2.18) per share including a
premium of EEK 24.09 (EUR 1.54) per share. The new amount of the share capital
after the increase is EEK 58,229,500 (EUR 3,721,543) and the number of shares
is 5,822,950.
ANNUAL GENERAL MEETING
Baltika’s Annual General Meeting, held on 18 May 2005, approved the company’s
annual report for 2004 and the proposal for profit distribution. It was
resolved to pay a dividend of EEK 0.75 (EUR 0.048) per share out of the
retained earnings of the previous periods, totalling EEK 4.37 million (EUR
0.28mln). The list of shareholders entitled to dividend was fixed at 08:00 on
1 June 2005. The dividend payout date was 7 June 2005.
The Annual general Meeting re-elected the members of the Council for the next
three-year term in full including Miles Burger, Joakim Helenius, Claire
Chabrier and Reet Saks.
AS PricewaterhouseCoopers was appointed as the auditor of Baltika in 2005 and
2006.
CHANGE IN INCOME STATEMENT FORMAT
From the beginning of 2005, Baltika uses a new income statement format. The
need to change the format arose from the Group’s strategy to transform from a
production company to a retail enterprise. The new format of income statement
allows for a better presentation of the financial position of Baltika as a
retail group. The income statements of the previous financial year are
restated to make them comparable with the new format. The new income statement
format is in accordance with the IAS 1 requirements pertaining to mandatory
entries and the presentation of financial statements.
KEY FIGURES OF THE GROUP (6 months 2005)
30.06.2005 30.06.2004 Change, %
Sales (EEK mln) 310.5 269.4 15.3%
Retail sales (EEK mln) 252.3 188.3 34.0%
Share of retail sales in total sales 81% 70%
Number of shops 76 78 -2.6%
Retail sales area (m2) 11,340 10,907 4.0%
Gross margin, % 51.9% 46.2%
Operating margin, % 8.6% 1.9%
Net margin, % 9.1% 0.6%
Inventory turnover 4.27 3.50 22.0%
Return on equity 32.5% -30.5%
Return on assets 13.5% -10.9%
Definitions of key indicators
Gross margin = (Net sales-COGS)/Net sales
Operating margin = Operating income/Net sales
Net margin = Net profit/Net sales
Inventory turnover* = Net sales/Average inventories
Return on equity* = Net profit /Average equity
Return on assets* = Net profit /Average total assets
*Based on 12-month average
1 EUR = 15.6466 EEK
CONSOLIDATED INCOME STATEMENT
(unaudited, in EEK thousand)
2Q 2005 2Q 2004 6m 2005 6m 2004 2004
Net sales 160,271 138,732 310,488 269,350 581,878
Cost of goods sold 72,491 71,566 149,390 144,807 303,429
Gross profit 87,780 67,166 161,098 124,543 278,449
Selling and marketing expenses -48,616 -47,339 -96,761 -86,509 -185,126
Administrative expenses -23,128 -16,404 -42,357 -34,054 -71,155
Other operating income 2,838 28 5,682 1,913 1,692
Other operating expenses -420 -979 -996 -887 -5,073
Operating profit 18,454 2,472 26,666 5,006 18,787
Financial income (expenses) -970 -1,638 -1,034 -3,285 -4,771
Financial income from -23 0 934 0 -714
investments in joint venture
Financial income from other -39 3 459 171 3,309
investments
Interest expenses -1,297 -1,678 -2,790 -3,471 -6,683
Foreign exchange gain (loss) 51 75 5 81 -1,501
Other financial income 338 -38 358 -66 818
(expenses)
Profit before income tax 17,484 834 25,632 1,721 14,016
Income tax -342 -138 -712 -137 947
Net profit 17,142 696 24,920 1,584 14,963
Net profit attributable to -635 -442 -3,240 -140 -1,738
minority interest
Net profit attributable to parent 17,777 1,138 28,160 1,724 16,701
Basic earnings per share 3.10 0.21 4.96 0.31 3.01
Diluted earnings per share 2.87 0.20 4.67 0.30 3.01
CONSOLIDATED INCOME STATEMENT
(unaudited, in EUR thousand)
2Q 2005 2Q 2004 6m 2005 6m 2004 2004
Net sales 10,243 8,867 19,844 17,215 37,189
Cost of goods sold 4,633 4,574 9,548 9,255 19,393
Gross profit 5,610 4,293 10,296 7,960 17,796
Selling and marketing expenses -3,107 -3,026 -6,184 -5,529 -11,832
Administrative expenses -1,478 -1,048 -2,707 -2,176 -4,548
Other operating income 181 2 363 122 108
Other operating expenses -27 -63 -64 -57 -324
Operating profit 1,179 158 1,704 320 1,201
Financial income (expenses) -62 -105 -66 -210 -305
Financial income from -1 0 60 0 -46
investments in joint venture
Financial income from other -2 0 29 11 211
investments
Interest expenses -83 -107 -178 -222 -427
Foreign exchange gain (loss) 3 5 0 5 -96
Other financial income 22 -2 23 -4 52
(expenses)
Profit before income tax 1,117 53 1,638 110 896
Income tax -22 -9 -46 -9 61
Net profit 1,096 44 1,593 101 956
Net profit attributable to -41 -28 -207 -9 -111
minority interest
Net profit attributable to parent 1,136 73 1,800 110 1,067
Basic earnings per share 0.20 0.01 0.32 0.02 0.19
Diluted earnings per share 0.18 0.01 0.30 0.02 0.19
CONSOLIDATED BALANCE SHEET
(unaudited, in EEK thousand)
30.06.2005 30.06.2004 31.12.2004
ASSETS
Current assets
Cash and cash equivalents 13,381 8,227 12,515
Held for trading investments 1,062 548 603
Customer receivables 30,545 20,252 27,501
Other receivables and prepaid 8,252 14,621 10,012
expenses
Inventories 146,595 164,312 145,460
Total current assets 199,835 207,960 196,091
Non-current assets
Investments in joint ventures 2,028 0 1,095
Investment property 7,500 0 7,500
Deferred income tax 4,349 4,876 4,349
Other non-current assets 4,615 3,190 2,837
Tangible fixed assets 72,290 84,341 77,325
Intangible assets 27,469 26,775 27,983
Total non-current assets 118,251 119,182 121,089
TOTAL ASSETS 318,086 327,142 317,180
EQUITY AND LIABILITIES
Current liabilities
Debt obligations 29,871 62,903 74,504
Accounts payable 31,838 42,882 31,154
Tax liabilities 12,369 15,858 12,669
Accrued expenses 15,797 12,902 10,515
Other current liabilities 124 129 924
Total current liabilities 89,999 134,674 129,766
Non-current liabilities
Long-term debt 62,244 70,191 45,944
Total non-current liabilities 62,244 70,191 45,944
TOTAL LIABILITIES 152,243 204,865 175,710
SHAREHOLDERS' EQUITY
Share capital (par value) 58,230 54,994 56,340
Unregistered share capital 0 880 0
Share premium 49,061 43,811 44,508
Mandatory legal reserve 5,634 4,800 4,800
Other reserves 3,898 18,085 21,983
Retained earnings 13,076 -16,508 -16,508
Net profit for the period 28,160 1,724 16,701
Exchange rate differences 4,326 5,974 6,622
Minority interest 3,458 8,517 7,024
TOTAL EQUITY 165,843 122,277 141,470
TOTAL LIABILITIES AND EQUITY 318,086 327,142 317,180
CONSOLIDATED BALANCE SHEET
(unaudited, in EUR thousand)
30.06.2005 30.06.2004 31.12.2004
ASSETS
Current assets
Cash and cash equivalents 855 526 800
Held for trading investments 68 35 39
Customer receivables 1,952 1,294 1,758
Other receivables and prepaid 527 934 640
expenses
Inventories 9,369 10,501 9,297
Total current assets 12,772 13,291 12,532
Non-current assets
Investments in joint ventures 130 0 70
Investment property 479 0 479
Deferred income tax 278 312 278
Other non-current assets 295 204 181
Tangible fixed assets 4,620 5,390 4,942
Intangible assets 1,756 1,711 1,788
Total non-current assets 7,558 7,617 7,739
TOTAL ASSETS 20,329 20,908 20,271
EQUITY AND LIABILITIES
Current liabilities
Debt obligations 1,909 4,020 4,762
Accounts payable 2,035 2,741 1,991
Tax liabilities 791 1,014 810
Accrued expenses 1,010 825 672
Other short-term liabilities 8 8 59
Total current liabilities 5,752 8,607 8,294
Non-current liabilities
Long-term debt 3,978 4,486 2,936
Total non-current liabilities 3,978 4,486 2,936
TOTAL LIABILITIES 9,730 13,093 11,230
SHAREHOLDERS' EQUITY
Share capital (par value) 3,722 3,515 3,601
Unregistered share capital 0 56 0
Share premium 3,136 2,800 2,845
Mandatory legal reserve 360 307 307
Other reserves 249 1,156 1,405
Retained earnings 836 -1,055 -1,055
Net profit for the period 1,800 110 1,067
Exchange rate differences 276 382 423
Minority interest 221 544 449
TOTAL EQUITY 10,599 7,815 9,042
TOTAL LIABILITIES AND EQUITY 20,329 20,908 20,271
Ülle Järv
CFO
+372 630 2741
Triin Palge
Head of investor relations
+372 630 2886
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