Atnaujinta: 2024.11.30 00:18 (GMT+2)
Baltika FINANCIAL RESULTS 02/18/2003
PRELIMINARY RESULTS FOR 2002
Preliminary economic results of Baltika for 2002
1. Implementation of BG strategy for 2002-2004
The general meeting of shareholders of AS Baltika, held in May 2002,
approved the Baltika Group strategy for 2002-2004. According to the
strategy, the main goal of the Baltika Group (BG) is to become the leading
specialised clothing trade company in Central and East Europe by 2004. The
goals for the first year of the three-year programme, 2002, were:
- to accelerate the growth of sales in comparison with the year 2001 (22%)
and to increase the share of retail sales to 50% of the total sales.
Result: the sales of BG grew 17% when compared to 2001 (EEK 485.4m / EUR
31.02m in 2002 when compared to EEK 414.4m /EUR 26.5m in 2001); the share
of retail sales formed 52% of the total sales of the group (37% in 2001;
EEK 254.6m / EUR 16.3m in 2002; EEK 153m / EUR 9.8m in 2001, growth 67%).
Together with controlled retail sales (shop-in-shop and franchise
agreements), retail sales amounted to EEK 323m (EUR 20.6m) and formed 67%
of the total sales of BG in 2002;
- to launch a new international fashion brand.
Result: Monton was launched simultaneously on the five main retail markets
of BG: Estonia, Latvia, Lithuania, Poland and the Ukraine, in September
2002. Since September when the brand was launched, the sales of the Monton
brand products increased to 76% of the total retail sales of BG. More than
16,000 people have joined the Monton World customer programme on the five
markets. The launch of Monton was elected among the top five at the
Estonian Marketing Act competition in 2002;
- to prepare and launch a new retail concept (portfolio of retail brands)
to segment the markets.
Result: since September 2002, BG operates four retail brands: Monton,
Baltman, CHR/Evermen and Baltika Vabrikupood.
2. General economic results
The unaudited consolidated net sales of the Baltika Group were EEK 485.4m
(EUR 31.02m), which exceeds the results for 2001 by EEK 71m (EUR 4.54m) (EEK
414.4m / EUR 26.5m, respectively), i.e. the growth was 17.13%. The planned
sales growth of Baltika was 4%, i.e. EEK 19.6m (EUR 1.25m) short of the
target figure, 22% (totalling EEK 505m / EUR 32.3m). The smaller than
expected sales were caused by negative seasonal effects on all the retail
markets of the Baltika Group, the re-position of the target customer groups
due to the new retail concept, the falling trend of men’s classical clothing
in Scandinavia, and a more conservative sales policy for the Russian market.
The structure of sales was as follows:
- the retail sales of BG-owned shops were EEK 254.6m (EUR 16.3m), growth
66%; the retail sales for 2001 were EEK 153m / EUR 9.8m, respectively;
- sales covered by retail cooperation agreements (shop-in-shop and
franchise) were EEK 68.6m (EUR 4.4m), growth 6% (EEK 65m / EUR 4.2m in 2001,
respectively);
- sales under wholesale contracts amounted to EEK 104.2m / EUR 6.66m, fall
12% (EEK 119m / EUR 7.60m in 2001, respectively);
- subcontracting sales amounted to EEK 53.1m / EUR 3.4m, fall 29%; EEK 75m
/ EUR 4.8m in 2001, respectively);
- other sales amounted to EEK 4.6m / EUR 0.3m, growth 130% (EEK 2m / EUR
0.1m in 2001, respectively).
The share of the BG retail system in the total group sales grew from 37% in
2001 to 52% in 2002.
The share of export grew from 71% in 2001 to 73% in 2002 (EEK 292.2m / EUR
18.7m in 2001 and EEK 354.6m / EUR 22.7m in 2002).
The consolidated operating profit of BG in 2002 was EEK 13.8m /EUR 0.9m (EEK
23.1m / EUR 1.5m in 2001, respectively), including EEK 8.3m / EUR 0.5m worth
of the one-off launching costs of Monton.
The consolidated net profit of BG was EEK 6.8m / EUR 0.4m (EEK 8.9m / EUR
0.6m less than in 2001, when the respective figure was EEK 15.7m / EUR 1.0m).
Besides the aforementioned one-off costs, the profit of 2002 was also
influenced by the change that took place in the sales portfolio over the
year: sales corresponding to the costs of opening new retail markets (Latvia)
and retail sales areas (4256 m2 was added during the year) and their
operation had only a partial effect on the year’s results, while the volumes
of wholesale and contracting agreements, mainly relating to overhead costs,
decreased. Interests paid on the loan capital involved to finance the
development of the company amounted to EEK 8.8m / EUR 0.6m, which exceeds the
previous year’s interests by EEK 3.2m / EUR 0.2m. Due to the change in the
brand portfolio and the structure of the sales areas (the areas of older
trademarks were replaced by Monton areas), a need arose to revaluate, on a
conservative basis, the inventories kept in those areas and in stock during
the previous periods (stock price value EEK 8.9m /EUR 0.6m), for which an
additional write-down reserve of EEK 0.74m / EUR 0.05m was formed in 2002;
the total reserve amounts to EEK 1.72m / EUR 0.1m.
The balance sheet total of Baltika was EEK 372.9m / EUR 23.8m as of
31.12.2002, having increased by EEK 75.5m / EUR 4.8m over the year.
Inventories increased by EEK 44.7m / EUR 2.9m in connection with the
increased retail area. Investments in production, retail sale and IT projects
increased fixed assets by EEK 30.0m / EUR 1.9m. The loan capital used to
finance investments and the growth of inventories increased the loan
obligations of BG by EEK 45.3m / EUR 2.30m. In October 2002, Baltika issued
one-year bonds totalling EEK 50.0m / EUR 3.2m, yield 4.95%, in a closed bond
issue. The equity capital of the group amounted to EEK 170.0m / EUR 10.9m at
the end of the year, having increased by EEK 30m / EUR 1.9m. The special
meeting of shareholders held in September decided to increase the share
capital by EEK 6.444.500 /EUR 0.4m by issuing 644,450 shares with a nominal
value of EEK 10 and a price of EEK 36 / EUR 2.30 each, totalling EEK 23.2m /
EUR 1.5m, to finance the strategic growth plans of the group and increase the
personal holdings of the senior management. The entire issue was subscribed
for by OÜ BMIG, an investment company founded by the senior managers of
Baltika. The new amount of share capital is EEK 54.44m / EUR 3.5m.
Since 17 February 2003 the shares of Baltika have been transferred to the
main list of the Tallinn Stock Exchange.
The market value of AS Baltika shares as of 231.12.2002 was EEK 200.2m / EUR
12.8m. The closing price of the Baltika share on the Tallinn Stock Exchange
on 31.12.2002 was EEK 36.77, having grown 17% over the year.
The major economic indicators of BG for 2002 were as follows:
2002 2001
1. growth in sales since previous year 17% 22%
2. retail sales in total sales 52% 37%
3. operating profit to net sales 2.8% 5.6%
4. profit margin 1.4% 4.0%
5. return on equity 4.0% 11.3%
6. commercial area (m2) 10153 6823
7. markets (countries) managed via own 6 5
retail trade organisations
8. retail concepts 4 2
9. shops (retail outlets) 70 55
3. Development of retail trade
In accordance with the BG strategy for 2002-2004, major developments took
place in the group’s retail concepts and retail network in 2002.
Retail concepts
The preparations for launching a new retail concept that began in 2001 were
completed in September 2002 when the group’s new retail brand portfolio was
simultaneously introduced to the five main markets of Baltika. The goal of
the new concept (set of retail brands) is to segment the markets by offering
fashion and products to different consumer groups and thus cover larger
market shares in all the markets. As of 2002, the retail brand portfolio of
Baltika is composed of the leading retail concept MONTON; BALTMAN that offers
a fashionable classical lifestyle collection for men; CHR/EVERMEN offering
reliable women’s and men’s clothing collections at a good price; and BALTIKA
VABRIKUPOOD that sells inventories of previous seasons’ clothes.
The relative shares of the concepts in sales since the launch of the new
brand portfolio in 2002 were:
Monton 76%
Baltman 8%
CHR/Evermen 11%
Baltika Vabrikupood 5%.
The launch of Monton particularly brought about a substantial change in the
size of the areas operated by the brands. While up to 200 m2 was sufficient
for a concept so far, the Monton prototype shop occupies 350 m2.
The preparation and launching on five markets of the Monton retail concept
cost BG a total of EEK 22.4m, of which investments made in 2002 amounted to
EEK 18.3m, including EEK 3.3m on brand development, EEK 8.0m on shop renewal
and EEK 7.0m on launching.
Retail network
Alongside the launch of the new retail concept, the retail network of BG grew
significantly over the year. The number of markets managed via the group’s
own retail trade organisations grew from five to six (the Latvian subsidiary
Baltika Latvija was added through a joint project with our former franchise
partner) in 2002. The total number of shops and managed retail trade areas
increased from 55 to 70 and the total area grew from 6823 m2 to 10,153 m2.
Importantly for BG as a rapidly growing retail trade organisation, we were
able to open new Monton brand shops in the most presentable shopping centres
of the capitals (Tallinn, Riga, Vilnius, Kiev, Warsaw) of all our main
markets in 2002.
4. Production
The restructuring of the BG production division continued in 2002 to meet the
strategic goals of BG: to produce a growing proportion of retail system
products ourselves so as to ensure a high quality and a flexible and quick
ordering system.
The construction of the AS Virulase Ahtme factory was completed; the capacity
of the renewed production unit increased 21% in 2002.
The total output of 2002 was 818,000 products (841,000 in 2001). The output
of own products continued to grow and amounted to 461,000 pieces (432,000
products in 2001), forming 56% of the total output. The quantity of the
products manufactured under subcontracting agreements fell from 409,000 in
2001 to 357,000 in 2002. The main reasons for the decrease were the falling
consumption trend of men’s classical clothes in Scandinavian countries and
the bankruptcy of a former major buyer, the Finnish company P.T.A.
5. Organisation and personnel
The management structure of the Baltika Group changed after the launch of the
new retail concept. The former structure, which supported development and
launching activities, was replaced by a more traditional structure based on
the management of specific areas of operation on 2.12.2002.
The new structure comprises four divisions:
- Production Division - manages the operations of all production units and
contracting sales activities;
- Retail Division - manages the development of retail concepts,
collections, and the creation and management of
inventories;
- Sales Division - coordinates and supports the operations of the retail
organisations, manages wholesale;
- Business Processes Division - coordinates and manages the group’s
internal business processes, including the movement of money, goods and
information.
Market organisations have been established on all the main markets of BG to
manage retail operations (the Latvian market subsidiary was added in 2002).
BG currently operates on six markets via its retail organisations (Estonia,
Latvia, Lithuania, Poland, the Ukraine and Sweden).
The Baltika Group employed 1725 people at the end of 2002, including 387 in
trade companies and 1061 in production companies; 1451 people in Estonia and
274 abroad. The parent company employed 838 people.
The members of the supervisory board and management board were paid
management fees and wages in a total amount of EEK 3.1m / EUR 0.20m in 2002.
As the second part of the three-year share option programme aimed at
motivating the senior management of BG, 192,000 convertible debentures were
distributed between 24 key employees of the group on the basis of a
supervisory board resolution.
6. Plans for 2003
The goals for 2003 derive from the strategies for 2002-2004 (the second year
of implementation) as well as the need to respond to the results of the
changes made in 2002 to review the tactical priorities.
The management of BG has pointed out the following main goals for 2003:
1. improvement of the efficiency of operations on all levels;
2. acceleration of the turnover of inventories;
3. continuation of the rapid growth of sales;
4. stabilisation of wholesale and contracting volumes.
As the goal of the improved system efficiency is prioritised, the scope of
investments will significantly decrease in 2003 when compared to 2002 (the
investment budget for 2003 is EEK 15m / EUR 0.96).
BG is making preparations in 2003 for establishing a joint retail venture in
Russia.
The Baltika Group will celebrate its 75th birthday in 2003.
Income statement
consolidated, unaudited
EEK ‘000 2001
2002
Revenue
Net sales 485 440 414 437
Other revenue 6 022 1 303
Total revenue 491 462 415 740
Expenses
Goods and materials -179 499 -166 506
Change in finished 1 620 2 649
goods inventories
Other operating -126 096 -84 578
expenses
Personnel expenses -151 043 -126 222
Depreciation of -19 230 -14 241
fixed assets
Other expenses -3 459 -3 716
Total expenses -477 707 -392 614
Operating profit 13 755 23 126
Financial income 869 484
Financial expenses -9 142 -6 764
Profit before taxes 5 482 16 846
Income tax -602 -185
Postponed income tax 2 752 0
Profit before 7 632 16 661
minority
shareholding
Minority 834 950
shareholding
Net profit of the 6 798 15 711
group
Basic earnings per 1.25 3.27
share (EEK)
Income statement
consolidated, unaudited
EUR ‘000
2002 2001
Revenue
Net sales 31 025 26 487
Other revenue 385 83
Total revenue 31 410 26 571
Expenses
Goods and materials -11 472 -10 642
Change in finished 104 169
goods inventories
Other operating -8 059 -5 406
expenses
Personnel expenses -9 653 -8 067
Depreciation of fixed -1 229 -910
assets
Other expenses -221 -237
Total expenses -30 531 -25 093
879 1 478
Operating profit
Financial income 56 31
Financial expenses -584 -432
Profit before taxes 350 1 077
Income tax -38 -12
Postponed income tax 176 0
Profit before 488 1 065
minority shareholding
Minority shareholding 53 61
Net profit of the 434 1 004
group
Basic earnings per 0.08 0.21
share (EEK)
Balance sheet
consolidated, unaudited
‘000 EEK 31.12.200 31.12.2001
2
ASSETS
Current assets
Cash and bank 10 010 12 626
Shares and securities 542 574
Accounts receivable 47 609 56 115
Other receivables 19 457 10 802
Inventories 175 856 131 145
Total current assets 253 474 211 262
Fixed assets
Long-term financial 7 2 600
investments
Other receivables 6 153 -
Tangible assets 108 382 78 390
Intangible assets 4 921 5 180
Total fixed assets 119 463 86 170
TOTAL ASSETS 372 937 297 432
LIABILITIES AND OWNERS’
EQUITY
Current liabilities
Debt obligations 90 633 34 721
Customer prepayments 149 154
Accounts payable 33 708 40 544
Other tax liabilities 8 086 5 081
Accrued expenses 7 769 6 641
Total current 140 345 87 141
liabilities
Long-term liabilities
Long-term debt 55 469 63 723
Pension provisions 25 -
Provisions for 116 -
liabilities and charges
Total long-term 55 610 63 723
liabilities
TOTAL LIABILITIES 195 955 150 864
Minority shareholding 7 049 6 632
OWNERS’ EQUITY 169 933 139 936
Share capital 54 444 48 000
Share premium 41 665 24 910
Reserves 22 885 22 885
Retained earnings 44 141 28 430
Profit for the 6 798 15 711
financial year
TOTAL LIABILITIES AND 372 937 297 432
OWNERS’ EQUITY
Balance sheet
consolidated, unaudited
‘000 EUR 31.12.2002 31.12.2001
ASSETS
Current assets
Cash and bank 640 807
Shares and securities 35 37
Accounts receivable 3 043 3 586
Other receivables 1 244 690
Inventories 11 239 8 382
Total current assets 16 200 13 502
Fixed assets
Long-term financial 0 166
investments
Other receivables 393 -
Tangible assets 6 927 5 010
Intangible assets 315 331
Total fixed assets 7 635 5 507
TOTAL ASSETS 23 835 19 009
LIABILITIES AND OWNERS’
EQUITY
Current liabilities
Debt obligations 5 792 2 219
Customer prepayments 10 10
Accounts payable 2 154 2 591
Other tax liabilities 517 325
Accrued expenses 497 424
Total current 8 970 5 569
liabilities
Long-term liabilities
Long-term debt 3 545 4 073
Pension provisions 2 -
Provisions for 7 -
liabilities and charges
Total long-term 3 554 4 073
liabilities
TOTAL LIABILITIES 12 524 9 642
Minority shareholding 451 424
OWNERS’ EQUITY 10 861 8 944
Share capital 3 480 3 068
Share premium 2 663 1 592
Reserves 1 463 1 463
Retained earnings 2 821 1 817
Profit for the 434 1 004
financial year
TOTAL LIABILITIES AND 23 835 19 009
OWNERS’ EQUITY
Meelis Milder
CEO
+372 6302 731
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