Klementi                      FINANCIAL RESULTS                 03/11/2003



PRELIMINARY FINANCIAL RESULTS FOR 2002



The core business of AS Klementi is the design, sale and manufacturing of

womenswear. In addition the company provides CMT (cutting, making, trimming)

services.

The company markets its products in the Baltic States and Nordic Countries.

As of 31 December 2002, the group of AS Klementi also comprised two

subsidiaries besides the parent company.



-Klementi Trading OY      100% ownership      wholesale trade;

-UAB Klementi Vilnius     100% ownership      retail trade.



» MAIN EVENTS IN 2002



The year 2002 marked the beginning of major changes for AS Klementi. 

On 21 April 2002, P.T.A. Group OY, a major customer and the parent 

company of AS Klementi was declared bankrupt. The volume of the 

services provided to P.T.A.Group OY in 2001 amounted to EEK 19.8m 

(EUR 1.3m), that is 17.8% of the turnover of Klementi. At the moment

of declaring bankruptcy, P.T.A. Group had a 79.08% shareholding in

AS Klementi.

The bankruptcy of the parent company resulted in a short-term setback 

in the economic activities of AS Klementi.

On 12 July 2002, the Estonian private equity company Alta Capital 

together with co-investors acquired the shareholding of P.T.A. in 

AS Klementi.

At the same time, AS Klementi purchased internationally recognised 

trademarks (PTA, Avenue, MalliMari, MasterCoat, ClubLine and Piretta) 

that from P.T.A. Group OY.

The acquisition of the trademarks and customer relations provided 

AS Klementi as a fashion industry company with an opportunity 

to significantly increase its exports to the Nordic Countries. 

Considering the time factor necessary for product development and 

presale process, the full impact of the acquired trademarks will 

be not seen before the autumn of 2003.

Change of the principal shareholder has also caused changes in the 

business concept and strategy of AS Klementi. A new active team has 

been formed to implement new goals and the company is in the process 

of reorganisation.



The new management of the company comprises:

Toomas Leis       -    Chairman of the Board

Anu Kudeviita     -    Retail Sales Manager

Leif Hill         -    Fashion Manager

Johanna Leppäaho  -    Fashion Controller

Katrin Kuldma     -    Creative Director

Mare-Ann Perkmann -    Production Manager

Liili Kaska       -    Financial Manager

Erik Haavamäe     -    Financial Controller



During the restructuring of the company, the assets and activities 

of the company have been revalued on the basis of the generally 

accepted accounting practices and prudence principle. As a result 

of the revaluation, the balance sheet prepared as of the end of 

2002 should give a fairer and more objective view of the actual 

financial status of the company.



» OBJECTIVES



The main objective of AS Klementi is to replace the former 

production-centred management by a customer-oriented approach.

The priority of the renewed Klementi is to be more open and 

transparent for investors.



The focus is placed on the development of two strong trademarks, 

i.e. PTA and Klementi. The trademark Klementi has been aimed at 

the Baltic market with retail trade serving as the distribution 

channel. The target market of the trademark PTA includes both 

the Nordic Countries and the Baltic States with wholesale as the 

distribution channel.



Currently, AS Klementi owns a real estate with a total area of 

17,500 square metres. The company’s own needs cover nearly 

60% of it. As the management and development of real estate is 

not the core business of AS Klementi, the company intends 

to sell the real estate this year and to rent the production 

and administrative premises required for its principal activity.



Since 2003, the company has been divided into three separate profit 

centres: Retail, Fashion and Manufacturing. The three profit centres 

are coordinated and serviced by the General Management. The idea 

behind the new structure of the organisation based on the profit 

centres is to render the company more flexible and economically 

more efficient.



The objective of the Retail profit centre is to develop and 

launch a new retail concept. The new retail concept has been 

aimed at mainstream customers with an average and a lower 

income level. 

The determining factors include the location and size of the 

stores and the compatibility between their interior and the 

collections. The optimisation of the stores was commenced in the 

fourth quarter of 2002. By the moment, four inefficient stores 

have been closed down and one new store has been opened. 

Expansion to the Latvian market through a new subsidiary 

has been planned for the first quarter of 2003. The objective 

is to establish a retail network covering all the Baltic States. 

By the end of 2003, the sales area of the stores should increase 

up to 3650 square metres. The emphasis has been placed on a more 

aggressive price policy and optimum management of stock reserves.



The objective of the Fashion profit centre is to win back the 

wholesale customers of the trademark PTA in the Nordic Countries 

and to expand to the wholesale market in the Baltic States. 

Wholesale agreements have been concluded with the most strategic 

customers, such as Åhlens, NK, MQ and SAKS in Sweden as well 

as Stockmann, Sokos, Halonen, Alexi 13 and Tradeka in Finland. 

The women’s clothes manufactured under the trademarks of 

AS Klementi will be sold by more than 200 stores in the Nordic 

Countries starting from the autumn season of 2003.



The main task of the Manufacturing profit centre is to improve 

the speed and efficiency of the manufacturing process and 

achieve more proactive sales. The new strategy of the company 

provides for a gradual replacement of the former simple 

subcontracting or CMT service by the provision of a more 

complex integrated service 

(starting from product development and material supply and 

ending with the logistics of the finished products).



The major challenge of the General Management in 2003 is to 

develop a new more flexible information system that allows 

for a more operational management accounting.



» COMMENTS ON PRELIMINARY FINANCIAL RESULTS



» SALES ANALYSIS



QUARTER IV

The unaudited consolidated group net sales of AS Klementi 

in the fourth quarter of 2002 was EEK 37.7m (EUR 2.4m). 

When compared to the same period of 2001, the increase was 

EEK 5.8m (EUR 0.4m), i.e. 18.1%.

Apparel sales accounted for 81% of the net sales in the fourth 

quarter of 2002. The largest increase in the sale of apparel, 

i.e. by four times, was achieved in the Nordic Countries.



Apparel sales in the fourth quarter by the markets were:

                   2002      2001       2002      2001   2002/2001

                 EEK mln   EEK mln    EUR mln    EUR mln    Change

 Estonia            19.1      15.8        1.3       1.0      21%

 Latvia, Lithuania   4.5       4.9        0.2       0.3      -8%

 Finland, Sweden     6.9       1.7        0.4       0.1     306%

 Other countries      -         -          -         -        -

 Total              30.5      22.4        1.9       1.4      36%

 



YEAR 2002

The unaudited consolidated group net sales of AS Klementi in 

2002 were EEK 133.3m (EUR 8.5m). 

When compared to 2001, the turnover increased by 20.5%, i.e.

by EEK 22.7m (EUR 1.4m). The export accounted for EEK 73.3m 

(EUR 4.7m), i.e.55.02% of the net sales.



The sales structure underwent significant changes during the year.

The  share  of  apparel sales in the net sales increased to 74.1%  

(63.6%  in  2001).

In 2002, the sales were EEK 98.7m (EUR 6.3m); growth 40.4%.

 

The  share  of subcontracting dropped to 22.8% during the same 

period (32.2% in 2001).

In 2002, the sales were EEK 30.4m (EUR 1.9m); decrease 14.6%.

 

The share of other sales decreased to 3.1% (4.2% in 2001).

In 2002, the sales were EEK 4.2m (EUR 0.3m); decrease 11.0%.



Apparel sales increased by 40.4% during the year, while the sales 

in the Nordic Countries increased 2.1 times. The changes in the 

sales structure and the increase in the sales in the Nordic 

Countries mainly resulted from the sale of the autumn 

collections acquired from the bankruptcy estate of P.T.A.Group OY.



Annual apparel sales by the markets were:

                    2002       2001       2002      2001   2002/2001

                   EEK mln   EEK mln    EUR mln    EUR mln   Change

 Estonia             53.7      44.5        3.5       2.8      21%

 Latvia, Lithuania1   7.5      12.0        1.1       0.8      46%

 Finland, Sweden     27.0      12.7        1.7       0.8     113%

 Other countries      0.5       1.1        0.0       0.1     -55%

 Total               98.7      70.3        6.3       4.5      40%





» PROFIT ANALYSIS



The group loss of AS Klementi in the fourth quarter of 2002 was 

EEK 16.7m (EUR 1.1m). The profit in the same period of the 

previous year amounted to EEK 0.8m (EUR 0.05m). In the fourth 

quarter of 2002, a large part of the management of the company 

was replaced. The concept of the new management of the activity 

evaluation principles significantly differs from the one 

used by the former management. The loss in the fourth quarter of 

2002 was mainly caused by the application of the new accounting 

principles aimed at increasing the transparency of the balance 

sheet of the company. In the fourth quarter, the stocks 

(unsold collections of the previous periods and materials) 

remained below EEK 6.5m (EUR 0.4m).

In addition, the results in the fourth quarter of 2002 were 

affected to the extent of EEK 3.4m (EUR 0.2m) by the expenditure

 related to the development of the sales structure in the 

Nordic Countries, commenced in August 2002.



The final result of the economic activities of 2002 was a loss of 

EEK 31.9m (EUR 2.0m). The profit of the previous year was EEK 1.0m 

(EUR 0.06m).

The loss was caused by the following factors:

-the bankruptcy of P.T.A. Group OY and change of the owner involved 

one-time  expenditure in the amount of EEK 6.4m (EUR 0.4m); 

the volume of orders not  covered because of the loss of 

P.T.A as a major customer served as an  indirect impact on the 

results of 2002;

-the stock reserves contained a number of products from the years 

1999, 2000 and 2001, which had not been sold or discounted. 

The discounts resulted in  a loss of EEK 10.5m (EUR 0.7m). 

Nevertheless, the sales campaign of the  stocks was a success since 

the goods dating from the previous years and  remaining in the 

stocks were sold, causing the stock reserves to decrease  by 

one-third by the end of 2002;

-the overhead costs related to the development of the sales 

structure in the  Nordic Countries amounted to EEK 4.8m (EUR 0.3m);

-the insufficient management and marketing activities of the 

Lithuanian  shops resulted in a loss of EEK 2.8m (EUR 0.2m) on 

the market.

The end of  the year saw the replacement of the management board 

of the Lithuanian  subsidiary;

-the creation of the new team and increase in the organisation’s 

efficiency  involved dismissal benefits in the amount of 

EEK 1.2m (EUR 0.1m).



» BALANCE SHEET ANALYSIS



The consolidated balance sheet total of AS Klementi was 

EEK 127.2m (EUR 8.1m) as of 31 December 2002. 

In the assets of the balance sheet, the stocks decreased by 

EEK 13.3m (EUR 0.9m).

The time structure of the assets has undergone significant changes. 

The stock balance of the collections from previous periods 

(spring 2002 and older) was EEK 0.7m (EUR 0.04m) as of 31 

December 2002, constituting 4% of the total finished products and 

stock balance of the goods for resale. The average stock price 

of the products dating from previous periods was EEK 137 (EUR 9).

The stock balance of the collections from previous periods 

(spring 2001 and older) was EEK 5.9m (EUR 0.4m) as of 

31 December 2001, constituting 22% of the total finished 

products and stock balance of the goods for resale for 

the period. The average stock price of the products dating 

from previous periods was EEK 320 (EUR 20).



Changes in inventories

                       31.12.2002  31.12.2001  31.12.2002   31.12.2001

                        EEK th       EEK th      EUR th      EUR th

 Raw materials           6 298       4 944         403         316

 Work in progress        5 188       9 838         332         629

 Finished goods         15 725      24 201       1 005       1 547

 Goods for resale        1 646       2 785         105         178

 Prepayments to suppliers  145         575           9          36

 Total inventories      29 002      42 343       1 854       2 706

 



As a result of the claims management commenced at the end 

of the year, the customer receivables have decreased by EEK 

3.3m (EUR 0.2m). 

The share of the claims in the net turnover dropped from 

14.3% to 9.4%.

The manufacturing and administrative complex owned by 

AS Klementi was recorded at acquisition cost in the balance 

sheet until the end of 2002. Considering the significant 

difference between the net book value and market value of 

the property, it was decided to revalue it according to an 

independent expert opinion. 

As a result of this single transaction, the fixed assets 

increased 

by EEK 19.2m (EUR 1.2m). Changes in the same amount occurred 

in the revaluation reserve.



As a result of recording the trademarks purchased from the 

bankruptcy estate of P.T.A. Group  OY, the intangible assets 

increased by EEK 5.2m 

(EUR 0.3m). As the trademarks were purchased with a long-term 

payment option, they were recorded in the intangible assets at 

discounted market value.





» FINANCIAL RATIOS



The key financial ratios of AS Klementi were:



                                        2002       2001

year-over-year sales growth              20%       -3%



apparel sales share in total sales       74%       64%



inventory turnover                       3.7       3.2

[net sales/average inventory]



liquidity ratio                         0.38      0.41

[current assets-inventories)/current liabilities]



current ratio                           0.91      1.17

[current assets/current liabilities]



EBIT margin                           -19.8%      5.1%

[operating profit/net sales]



net margin                            -23.9%      0.9%

[net profit/net sales]



return on equity (ROE)                -72.2%      2.1%

[net profit/average equity]



return on assets ROA                  -25.9%      0.9%

[net profit/average total assets]



BALANCE SHEET                                           

consolidated, unaudited                                 

                            31.12.02  31.12.01  31.12.02  31.12.01

                            EEK th    EEK th    EUR th     EUR th

                                                        

Cash and bank                 4 485    3 925       287        251

Customer receivables         12 537   15 847       801      1 013

Other receivables,accrued      868      768         55         49

income

Prepaid expenses              2 896    2 264        185       145

Inventories                  29 002   42 343      1 854     2 706

CURRENT ASSETS               49 788   65 147      3 182     4 164

                                                         

Long-term financial assets    2 578    2 856        165       182

Tangible assets              69 101   50 067      3 331     3 200

Intangible assets             5 771      906        368        58

FIXED ASSETS                 77 450   53 829      4 949     3 440

ASSETS                      127 238  118 976      8 131     7 604

                                                        

Short-term debt              34 792   38 730      2 223     2 475

Customer advancess              952        6         61         0

Accounts payable             10 867    9 802        694       626

Other payables                    0    1 035          0        66

Taxes payable                3 875     2 951        247       189

Accrued expenses             3 905     3 125        250       200

Other unearned revenue          12        12          1         1

Short-term provisions           12        12          1         1

CURRENT LIABILITIES          54 415   55 673      3 477     3 558

                                                        

Long-term debt               27 467   15 266      1 755       976

Other long-term payables      4 928        0        315         0

Provisions                       68       68          4         4

LONG-TERM LIABILITIES        32 463   15 334      2 074       980

TOTAL LIABILITIES            86 878   71 007      5 551     4 538

                                                        

Share capital                13 219   35 250        845     2 253

Share premium                30 863    3 774      1 973       241

Revaluation reserve          20 030      816      1 280        52

Other reserves                1 046      923         67        59

Retained earnings             7 083    6 202        453       397

Profit   for  the           -31 881    1 004     -2 038        64

financial year

OWNERS’ EQUITY               40 360   47 969      2 580     3 066

LIABILITIES & EQUITY        127 238  118 976      8 131     7 604



INCOME STATEMENT,                                        

fourth quarter of 2002

consolidated, unaudited                                  

                                2002     2001     2002      2001

                                EEK th   EEK th   EUR th    EUR th

                                                         

Net sales                       37 736   31 958    2 412    2 042

Change in inventories         -13 885     7 065   -887        452

Other revenue                     252       699     16         45

TOTAL REVENUE                   24 103   39 722    1 541    2 539

                                                         

Goods, materials and services   10 629   17 191      680    1 099

Misc. operating expenses        10 232    6 335      654      405

Personnel expenses              15 785   12 722    1 009      813

Depreciation                     2 128    1 602      136      102

Other costs                        613     -207       40      -12

TOTAL EXPENSES                  39 387   37 643    2 519    2 407

                                                         

OPERATING PROFIT               -15 284    2 079     -978      132

                                                  

FINANCIAL INCOME                    90      154        6        9

Income      from     subsidiary      0        0        0        0

companies

Foreign exchange gain               30       94        3        6

Other   interest  and   similar     60       60        3        3

income

                                                         

FINANCIAL EXPENSES               1 507    1 427       96       90

Financial  expenses related  to      0        0        0        0

subsidiary companies

Interest expenses                1 463    1 401       93       89

Foreign exchange loss               44       48        3        1

Other financial expenses             0        8        0        0

                                                         

NET PROFIT                     -16 701      806   -1 068       51

Basic earnings per share (EEK)  -12.63     0.23   -0.40      0.01

Diluted earnings per share      -12.63     0.22   -0.40      0.01

(EEK)



INCOME STATEMENT                                          

consolidated, unaudited                                   

                                2002       2001     2002     2001

                                EEK th    EEK th   EUR th   EUR th

                                                          

Net sales                       133 258   110 591    8 517   7 068

Change in inventories           -13 126    14 658     -839     937

Other revenue                     1 598     2 391      102     153

TOTAL REVENUE                   121 730   127 640    7 780   8 158



Goods, materials and services    44 680    46 346    2 856   2 962

Misc. operating expenses         35 137    18 436    2 246   1 178

Personnel expenses               58 688    49 915    3 751   3 190

Depreciation                      7 214     6 084      461     389

Other costs                       2 406     1 249      154      81

TOTAL EXPENSES                  148 125   122 030    9 468   7 800



OPERATING PROFIT                -26 395     5 610   -1 688     358

                                                          

FINANCIAL INCOME                    378       352       24      22

Income      from     subsidiary       0         0        0       0

companies

Foreign exchange gain               121        96        8       6

Other   interest  and   similar     257       256       16      16

income

                                                          

FINANCIAL EXPENSES                5 864     4 958      374     316

Financial  expenses related  to       0         0        0       0

subsidiary companies

Interest expenses                 5 718     4 791      365     306

Foreign exchange loss               146       114        9       7

Other financial expenses              0        53        0       3

                                                          

NET PROFIT                      -31 881     1 004   -2 038      64

Basic earnings per share (EEK)   -12.06      0.28    -0.77    0.02

Diluted   earnings  per   share  -12.06      0.30    -0.77    0.02

(EEK)





Toomas Leis

CEO

+372 6 710 700