Klementi                      FINANCIAL RESULTS                 05/26/2004



AUDITED FINANCIAL RESULTS 2003



COMMENTS ON THE YEAR 2003 AUDITED RESULTS



The audited consolidated group net turnover of 12 months of 2003 

was EEK 133.6m (EUR 8.5m) and the net loss amounted 

to EEK 21.6m (EUR 1.4m).

During the same period of the previous year the turnover was 

EEK 133.3m (EUR 8.5m) and the net loss was EEK 31.9m (EUR2,0m). 



As of December 31, 2003 there were 450 employees in the group. 

As of December 31, 2002 the number of staff in the group was 580. 

During a year the number of employees was 

reduced by 22% i.e. 130 persons.



As of December 31, 2003 in addition to the parent company

four subsidiaries belonged to AS Klementi group:



Klementi Trading OY shareholding 100% - wholesale business  

Klementi Trading AB shareholding 100% - wholesale business

SIA Vision shareholding 100% - retail business

UAB Klementi Vilnius shareholding 100% - retail business





>> Sales analysis



The net turnover breakdown by activity over 12 months was as follows:



NET TURNOVER                       2003    2002    2003    2002    03/02

                                   EEKm    EEKm    EURm    EURm   change

Apparel sales                     109.9    98.7     7.0     6.3     11.3%

Subcontracting and other sales     23.7    34.6     1.5     2.2   - 31.5%

TOTAL                             133.6   133.3     8.5     8.5      0.2%



Over the past two years the share of apparel sales in turnover has 

increased from 64% to 82%. 55% of the apparel sales came from wholesale 

and 45% from retail.





>> Profit analysis



The loss of 2003 includes one-off costs in the amount of 

EEK 4.9m (EUR 0.31m), including:



- EEK 1.9m (EUR 0.12m) costs from the previous periods, of 

which EEK 1.1m (EUR 0.07m) was due to the additional wholesale loss of the 

previous year in Latvia and Lithuania.



- EEK 0.8m (EUR 0.04m) for developing the new retail concept and the new 

Klementi logo and reorganising the outlets.



- EEK 2.2m (EUR 0.14m) for redundancy payments in the given period.





>> Balance sheet analysis and ratios



The consolidated balance sheet of AS Klementi as of December 31, 2003 

was EEK 122.0m (EUR 7.8m).



The key financial ratios of AS Klementi group as of December 31, 2003 

were as follows:



                                                            2003    2002

- year-over-year turnover growth                            0,3%     20%

- apparel sale share in total turnover                       82%     74%

- inventory turnover ratio (adjusted to year)

  [net turnover / average inventory]                         4.3     3.7

- current ratio

  [current assets / currents liabilities]                   0.79    0.91

- liquidity ratio  [current assets-inventory

 / current liabilities]                                     0.29    0.38

- EBIT margin  [operating profit / net turnover]          -12,4%  -19.8%

- net margin [net profit / net turnover]                  -16.6%  -23.9%





>> Plans for year 2004



For Klementi 2004 is the first full year that sees the trademark PTA 

represented in the Baltic States and the Nordic countries.



In 2004 the trademark PTA enters the Norwegian market. By now the

contract of sale has been signed and the first sales have taken place.



At the beginning of 2004 sales cooperation with Lithuanian market

leader Apranga was started.



The aim in retailing is to increase the items density in outlets

and sales effectiveness. In 2004 two new retail outlets will be opened

in Tallinn (in Viru and Ülemiste Centre).



At the beginning of 2004 the wage structure of manufacturing piecework 

labourers changed. The reason for changing the wage structure

in manufacturing  was that the old system was too complicated and 

non-transparent. The new system should enable the valuation 

of individual’s contribution to the work process more fairly and reduce 

personnel expenses that are caused by ineffectiveness.



In order to manage business activities in a more operational manner the 

implementation of new integrated business software Microsoft Axapta has 

been started.



The consolidated reports of AS Klementi (group) have been prepared 

in accordance with the International Accounting Standards.



>> BALANCE SHEET

consolidated, audited

                                  31.12.03   31.12.02   31.12.03   31.12.02

                                   EEK’000    EEK’000    EUR’000    EUR’000



Cash and bank                        2 916      4 485       186         287

Customer receivables                14 862     12 537       950         801

Misc. receivables and accrued income 1 097        868        70          55

Prepaid expenses                       945      2 896        61         185

Inventories                         33 284     29 002     2 127       1 854

CURRENT ASSETS                      53 104     49 788     3 394       3 182



Long-term financial investments      1 173      2 568        75         165

Tangible fixed assets               60 403     64 649       860       4 132

Intangible assets                    7 306      5 771       467         368

NON-CURRENT ASSETS                  68 882     72 998     4 402       4 665

ASSETS                             121 986    122 786     7 796       7 847



Debt obligations                    47 604     34 792     3 042       2 223

Customer prepayments                   470        952        30          61

Accounts payable                     9 745     10 567       623         694

Miscellaneous payables                 782        300        50           0

Tax liabilities                      3 242      3 875       207         247

Accrued expenses                     5 064      3 917       324         250

Short-term provisions                   12         12         1           1

SHORT-TERM LIABILITIES              66 919     54 415     4 277       3 477

Long-term liabilities               21 283     27 467     1 360       1 755

Other long-term liabilities          4 204      4 928       269         315

Long-term provisions                    68         68         4           4

LONG-TERM LIABILITIES               25 555     32 463     1 633       2 074

TOTAL LIABILITIES                   92 474     86 878     5 910       5 551

Share capital                       18 969     13 219     1 212         845

Share premium                       40 294     30 863     2 575       1 973

Revaluation reserve                 15 578     15 578       996         996

Other reserves                       1 046      1 046        67          67

Retained profit                    -24 798      7 083    -1 585         453

Profit for the financial year      -21 641     -31 881   -1 383      -2 038

Unrealised exchange rate differences    64          0         4           0

EQUITY                              29 512      35 908    1 886       2 296

LIABILITIES AND EQUITY             121 986     122 786    7 796       7 847





>> INCOME STATEMENT

consolidated, audited

                                       2003       2002       2003       2002

                                    EEK’000    EEK’000    EUR’000    EUR’000

Net sales                           133 630    133 258      8 540      8 517

Other revenue                         2 254      1 598        144        102

TOTAL REVENUE                       135 884    134 856      8 684      8 619

Change in inventories                 3 220     13 126        206        839

Goods, raw material                  50 634     44 680      3 236      2 856

Miscellaneous operating expenses     35 504     35 137      2 269      2 246

Personnel expenses                   52 720     58 688      3 369      3 751

Depreciation                          7 572      7 214        484        461

Other expenses                        2 152      2 406        137        154

TOTAL EXPENSES                      151 802    161 251      9 701     10 307



OPERATING PROFIT                    -15 918    -26 395     -1 017     -1 688



Interest expenses                    -5 754     -5 718       -368       -365

Foreign exchange profit (loss)           45        -25          3         -1

Other financial income/expense          -14        257         -1         16

NET FINANCIAL ITEMS                  -5 723     -5 486       -366       -350



NET PROFIT                          -21 641    -31 881     -1 383     -2 038

Basic earnings per share (EEK/EUR)   -13.19     -31.03      -0.84      -1.98

Diluted earnings per share (EEK/EUR) -13.19     -31.03      -0.84      -1.98





Toomas Leis

Chairman

+372 6 710 700