Klementi            FINANCIAL RESULTS          21.06.2005



CONSOLIDATED INTERIM REPORT FOR THE 1ST QUARTER OF 2005



Explanatory memorandum to interim report for the 1st

quarter of 2005



AS  Klementi  is  a company operating in Estonia  in  the

field   of  development,  production,  retail  sale   and

wholesale of sewn products. The company is registered and

operates  in Tallinn. The head office of the  company  is

located at Akadeemia tee 33, Tallinn.



Results for three months of 2005



The  consolidated net sales of the AS Klementi  group  in

the  first  quarter of 2005 were 32.2 million  EEK  (€2.1

million)  and  the net income was 1.4 million  EEK  (€100

000). The sales for the same period of the previous  year

were 39.1 million EEK (€2.5 million) and the net loss was

1.4  million EEK (€100 000). The sales decreased  in  the

1st  quarter  of 2005 by 17.5% compared to  the  previous

year.  Despite  the smaller sales, the  group’s  earnings

before   depreciation,  financial  income  and   expenses

increased nearly 2.4-fold.



Sales  of clothing formed 74% of the 1st quarter’s  total

sales (80% in the 1st quarter of 2004). The percentage of

subcontracted production in the sales structure increased

by  5.2%  in  the  1st  quarter  of  2005.  Export  sales

decreased by 6.7 million EEK (€400 000) compared  to  the

same period during the previous year. The decrease in the

net  sales  is  attributable to a decrease  in  wholesale

circulation to Sweden and Norway.



The  share  of  retail  sales as a part  of  total  sales

increased  by  nearly  9%  in the  1st  quarter  of  2005

compared to the 1st quarter of 2004. Retail sales  formed

nearly  59%  of clothing sales during the 1st quarter  of

2005  (43%,  respectively,  the  1st  quarter  of  2004).

Compared  to the previous year, the average retail  sales

per  square metre increased by nearly 4.4%. As of the end

of  the  1st  quarter of 2005, Klementi  was  using  2799

square  metres  of sales area (compared  to  2356  square

metres a year ago).



Beginning in 2005, AS Klementi is putting more stress  on

developing  retail trade and extending sales  areas.  PTA

shops were opened in the Sola centre in Daugavpils at the

end of the 1st quarter and in the Mols centre in Riga  at

the  beginning  of  the 2nd quarter. In cooperation  with

interior architect Mari Koger, a new interior design  was

created  for the PTA shops, which was used for the  first

time in the PTA shop in the Riga Mols centre.



Cooperation  began  in the 1st quarter  with  large-scale

purchasers of full subcontracting services. In connection

with  a  partial re-orientation from production to ready-

made goods, the company’s profitability in this area  has

improved.



In  2004, AS Klementi started developing a new MS  Axapta

information  system and preparing for its  implementation

in  2005.  The new integrated information system provides

much quicker information on retail trade developments and

sales    statistics,   helping   to   improve   inventory

management. The needs of product development were greatly

taken  into account in the development of the information

system.  Production management will be incorporated  into

the  integrated information system in the  2nd  stage  of

implementation.   Cooperation  with  the   company   that

consults on the software implementation has turned out to

be  more effort and time consuming than planned; this has

inhibited  corporate management and also the results  for

the 1st quarter.



Compared  to the 1st quarter of 2004, the company’s  cash

flow  from  operating  activities  has  improved  by  4.3

million EEK (€300 000).



The  group employed 456 people as of 31 March 2005 (499

on 31 March 2004).







Profit analysis



Earnings   before   interest,  taxes,  depreciation   and

amortisation,  (EBITDA)  for the  1st  quarter  of  2005,

amounted  to  4.5 million EEK (€300 000), representing  a

2.6 million EEK (€200 000) growth compared to last year.



Balance sheet and ratios



The  consolidated balance sheet total of AS Klementi  was

108.9 million EEK (€7.0 million) as of 31 March 2005. The

balance  sheet  total has increased by  3.1  million  EEK

(€200 000) since the beginning of the year.



Accounts  receivable have increased by  6.0  million  EEK

(€400  000)  as  of end of the year due to  the  sale  of

spring  season  products  to  wholesale  customers.   The

group’s  inventories  totalled  28.3  million  EEK  (€1.8

million)  at the end of 2004. Accounts payable  increased

by  0.5  million EEK (€30 000) as of the end of  the  1st

quarter  of  2005.  Debt  obligations  decreased  by  1.7

million EEK (€100 000) in the 1st quarter of 2005.



The   main   financial   indicators   and   ratios   that

characterise  the consolidated data of  the  AS  Klementi

group for the first three months of 2005 are as follows:



                                       1st        1st    Change

Main financial indicators          quarter    quarter

                                      2005       2004

Operating   income,   EEK    (in    32 307     39 497    -18.4%

thousands)

Earnings    before    interests,     4 543      1 914     2 629

taxes,     depreciation      and

amortisation (EBITDA),  EEK  (in

thousands)

Margin, %                              14%         5%         -

Earnings  before  interests  and     2 734         12     2 722

taxes (EBIT), EEK (in thousands)

EBIT to net sales, %                    8%      0,03%          

Loss  for  the period,  EEK  (in     1 445    - 1 368     2 813

thousands)

ROA, %                                1.3%     -1.16%         -

ROE, %                                7.6%      -4,9%         -

Earnings per share (EPS), EEK         0.74      -0.72      1.46

Share  of clothes sales in total     74.4%      80.4%         -

sales, %

Current ratio                         0.66       0.81         -

Quick ratio                           0.27       0.37         -

Inventory turnover                    1.13       1.34         -



The ratios were calculated as follows:

Return on assets (ROA): Net income / average total assets

Return  on  equity  (ROE): Net income  /  average  equity

capital

Earnings  per  share (EPS): Net income /  average  common

shares

Current ratio: Current assets / current liabilities

Quick  ratio:  (Current assets – inventories)  /  current

liabilities

Inventory turnover: Net sales / average inventory for the

period









Balance Sheet

Consolidated, unaudited (In thousands)

                  31.03.  31.03.  31.12.  31.03. 31.03.   31.12.

                   2005    2004    2004    2005   2004     2004

                                           

                     EEK    EEK     EEK     EUR     EUR     EUR

ASSETS                                                       

Current assets                                               

Cash and bank      1 452    1 778   3 400      93    114     217

Accounts          15 882   24 541   9 906   1 015 1  568     633

receivable           

Other short-term   1 593      605   1 706     102     39     109

receivables

Prepaid expenses   1 541    1 375   1 141      98     88      73

Inventories       28 752   34 311  28 255   1 838  2 193   1 806

                     

Total current     49 220   62 610  44 408   3 146  4 002   2 838

assets               

                                                             

Fixed assets                                                 

Long-term             955      988     955       61    63     61

financial

investments

Tangible assets   51 454   59 459   52 896   3 289  3 800  3 381

                     

Intangible assets  7 271    6 997    7 574     464     447   484

Total fixed       59 680   67 444   61 425   3 814   4 310 3 926

assets               

TOTAL ASSETS     108 900  130 054  105 833   6 960   8 312 6 764

                    

                                                             

OWNERS’ EQUITY                                               

AND LIABILITIES

Current                                                      

liabilities

Debt obligations  54 167  53 007    43 183   3 462   3 388 2 760

                    

Customer             221      26       223      14       2    14

prepayments

Accounts payable   9 726  12 168     9 189     622     778   588

                           

Other payables        68     142         -       4       9     -

Tax liabilities    2 363   3 975     1 399     151     254    89

Accrued expenses   8 346   6 971     7 747     533     445   495

Short-term            12     803        12       1      51     1

provisions

Total current     74 903  77 092    61 753   4 787   4 927 3 947

liabilities          

                                                             

Long-term                                                    

liabilities

Long-term debt    13 547  21 283    26 219     866   1 360 1 676

                     

Other long-term       25   3 363        25       2     215     2

payables

Long-term            146      68       148       9       5     9

provisions

Total long-term   13 718  24 714    26 392     877   1 580 1 687

liabilities          

Total liabilities 88 621 101 806    88 145   5 664   6 507 5 634

                     

                                                             

Owners’ equity                                               

Share capital     19 469  18 969    18 969   1 244   1 212 1 212

                     

Issue premium     40 994  40 294    40 294   2 621   2 575 2 575

                     

Revaluation       13 876  15 578    13 876     887     995   887

reserve             

Other reserves     1 046   1 046     1 046      67      67    67

Retained earnings-56 636 -46 439   -44 735 - 3 620  -2 968-2 859

                     

Unrealised            85    168        139       5      11     9

foreign exchange

differences

Net income for     1 445 -1 368    -11 901       92    -87  -761

the financial               

year

Total owners’     20 279  28 248    17 688    1 296  1 805 1 130

equity              

TOTAL OWNERS’    108 900 130 054   105 833    6 960  8 312 6 764

EQUITY AND           

LIABILITIES                 

Income Statement – 1st quarter

Consolidated, unaudited (In thousands)





                               2005    2004    2005    2004

                                1st     1st     1st     1st

                            quarter quarter quarter quarter

                                EEK     EEK     EUR     EUR

                                

Operating income                                           

Net sales                    32 218  39 056   2 059   2 496

Other operating income           89     441       6      28

Total operating income       32 307  39 497   2 065   2 524

                                                           

Operating expenses                                         

Change in inventories           494   1 910      32     122

Materials, raw materials and  8 868  16 640     567   1 063

services

Other operating expenses      6 890   6 882     440     440

Labour                       11 512  11 676     736     746

Other operating expenses          -     475       -      30

Total operating expenses     27 764  37 583   1 775   2 401

                                                           

EBITDA                        4 543   1 914     290     123

Depreciation                  1 809   1 902     116     122

Earnings                      2 734      12     174       1

                                                           

Financial income and                                       

expenses

Interest expenses            -1 066  -1 439     -68     -92

Foreign exchange gain (loss)    -93      44      -6       3

Other financial income and     -130      15      -8       1

expenses

Total financial income and  - 1 289  -1 380     -82     -88

expenses                                            

Net income (loss)             1 445  -1 368      92     -87

                                       

                                                           

Earnings per share                                         

Basic earnings per share       0.74   -0.72    0.05   -0.05

(EEK/EUR)

Diluted earnings per share     0.74   -0.72    0.05   -0.05

(EEK/EUR)





Toomas Leis

CEO of AS Klementi

+372 671 0700