OREANDA-NEWS. Summarized selected financial indicators of the Group for 6 months of 2016 compared to 6 months of 2015 and 30.06.2016 compared to 31.12.2015 were as follows: 

in thousands of EUR 6m 2016 6m 2015 Change
Revenue 30 595 34 498 -11.3%
EBITDA 11 218 8 546 31.3%
Net profit for the period 6 133 3 052 101.0%
Net profit attributable equity holders of the Parent company 5 986 2 756 117.2%
Earnings per share (EUR) 0.16 0.07 120.9%
Operating cash flow for the period 8 708 8 241 5.7%

 

in thousands of EUR 30.06.2016 31.12.2015 Change
Total assets 59 216 53 635 10.4%
Total current assets 47 842 40 870 17.1%
Total equity attributable to equity holders of the Parent company 40 609 40 194 1.0%
Loans and borrowings 0 0 N/A
Cash and cash equivalents 28 546 21 274 34.2%

 

Margin analysis, % 6m 2016 6m 2015 Change
Gross profit 56.3 45.2 24.7%
EBITDA 36.7 24.8 48.0%
Net profit 20.0 8.8 126.6%
Net profit attributable equity holders of the Parent company 19.6 8.0 144.9%

 

Financial ratios, % 30.06.2016 31.12.2015 Change
ROA 22.9 17.4 31.9%
ROE 30.9 23.7 30.3%
Price to earnings ratio (P/E) 6.0 5.0 19.7%
Current ratio 3.2 4.2 -23.7%
Quick ratio 2.3 2.6 -13.3%

 Consolidated Statement of Financial Position

 

in thousands of EUR Note 30.06.16 31.12.15
ASSETS      
Current assets      
Cash and cash equivalents   28 546 21 274
Current loans granted   6 6
Trade and other receivables 2 5 198 4 120
Inventories 3 14 092 15 470
Total current assets   47 842 40 870
       
Non-current assets      
Investments in associates   0 1
Available-for-sale investments   340 372
Deferred tax asset   741 465
Intangible assets   321 443
Investment property   1 019 1 130
Property, plant and equipment 4 8 953 10 354
Total non-current assets   11 374 12 765
TOTAL ASSETS   59 216 53 635
       
LIABILITIES AND EQUITY      
Current liabilities      
Trade and other payables 5 12 060 7 985
Tax liabilities   2 730 1 661
Total current liabilities   14 790 9 646
       
Non-current liabilities      
Deferred tax liability   14 13
Total non-current liabilities   14 13
Total liabilities   14 804 9 659
       
Equity      
Share capital 6 11 400 11 400
Share premium   11 914 11 914
Treasury shares 6 -1 427 -579
Statutory reserve capital   1 306 1 306
Unrealised exchange rate differences   -15 411 -16 238
Retained earnings   32 827 32 391
Total equity attributable to equity holders of the Parent company   40 609 40 194
Non-controlling interest   3 803 3 782
Total equity   44 412 43 976
TOTAL EQUITY AND LIABILITIES   59 216 53 635

 

 Consolidated Income Statement

 

in thousands of EUR Note 2Q 2016 2Q 2015   6m 2016 6m 2015
Revenue 8 17 237 21 425   30 595 34 498
Cost of goods sold   -7 694 -11 704   -13 371 -18 921
Gross Profit   9 543 9 721   17 224 15 577
             
Distribution expenses   -2 215 -2 460   -4 230 -4 783
Administrative expenses   -1 144 -1 556   -2 265 -3 265
Other operating income   86 123   169 246
Other operating expenses   -306 -320   -558 -572
Operating profit   5 964 5 508   10 340 7 203
             
Currency exchange income/(expense)   -975 -942   -2 494 -1 031
Other finance income/(expenses)   36 87   101 260
Net financial income   -939 -855   -2 393 -771
             
Profit (loss) from associates using equity method   0 2   0 0
Profit before tax 5 025 4 655   7 947 6 432
             
Income tax expense   -1 006 -1 254   -1 814 -3 380
             
Profit for the period   4 019 3 401   6 133 3 052
Attributable to :            
   Equity holders of the Parent company   3 827 3 277   5 986 2 756
   Non-controlling interest   192 124   147 296
             
Earnings per share from profit attributable to equity holders of the Parent company, both basic and diluted (EUR) 7 0.10 0.08   0.16 0.07

 Business environment and results

Group`s results for 6 months of 2016 were defined by continued difficulties in economies of its major sales markets – Russia, Belarus, Kazakhstan and Ukraine. The Group didn`t achieve growth rate of sales compared to 6 months of 2015. Total sales during 6 months of 2016 amounted to 30 595 thousand EUR. Previously undermined by devaluations and high inflation rates purchasing power in region`s countries remains low, future expectations are still more on a negative or neutral side. Policy makers in CIS countries tend to delay real economic reforms substituting them by rhetoric and cosmetic changes; therefore it is hard to see some kind of relatively fast recovery in growth rates of economies under discussion.

Over the year the Group managed to cut its production, commercial and administrative expenses. Gross profit margin in 6 months of 2016 is up to 56.3% from 45.15% in 6 months of 2015. Compared to 6 months of 2015 commercial and administrative expenses diminished respectively by 11.6% and 30.6%. Personnel expenses decreased by 22%; total number of employees compared to the beginning of 2016 diminished by 3%.

Russian statistics is somewhat improving compared to 2015, inflation rate is falling and is currently ca 7% in yearly terms, GDP declined “only” by 0.7% during Q2 of 2016. Russian economy is starting to adapt to new reality, but purchasing power of population in real terms is still falling.  Group`s sales on Russian market totalled 17 303 thousand EUR, decline is 5.7% compared to 6 months of 2015. Group`s Russian subsidiary opened 5 more stores in Q2 of 2016, 2 more stores were opened in July 2016. The Group will continue opening own stores. In addition to growing sales and better control of the market this allows further developing of retail concept of Group`s brands to make it more attractive for us and our franchisee retail partners.

Belarusian economy at the moment isn`t demonstrating signs of stabilisation, GDP decreased by 2.5% in 6 months of 2016, nominal retail turnover decreased by 1.6%, salaries stand still. International financial institutions predict that in 2016 Belarusian GDP will fall by around 3%, inflation rate will be 12% - 15%. Major factors behind this are believed to be unreformed economy (particularly public sector and state-controlled entities), delayed impact of recession in main trading partner – Russia, continued pressure on Belarusian rouble, low demand for consumption, high level of debts in economy. Share of problematic credits in banking sector is continuously growing, according to official statistics it was more that 12% of banking assets as of the end of June 2016. Group`s sales in Belarus in 6 months of 2016 were 9 145 thousand EUR and diminishing by 18.1% compared to 6 months of 2015. In Belarus the Group will focus on improving profitability of its retail business, we will also continue to expand our store chain there depending on availability of reasonably priced selling areas.

Our partners in Kazakhstan as well are struggling with reduced demand of customers and devaluation of national currency. The process of optimisation in number and quality of stores is an ongoing activity there, total number of franchising stores diminished by 7 during 6 months of 2016. Group`s sales to Kazakhstan clients fell by 35.9% during 6 months of 2016 and amounted to 1 075 thousand EUR. The Group expects stabilisation of Kazakhstan market in the end of 2016.

Ukraine economy is supposed (particularly IMF projections) to return to positive growth in 2016, supported by improving consumer and investor confidence, gradually rising real incomes, and a gradual easing of credit conditions. Group`s efforts to establish more productive relationships with partners there led to improvement of sales by 17% to the level of 903 thousand EUR, although comparison base is relatively low. 

Financial performance

The Group`s sales amounted to 30 595 thousand EUR during 6 months of 2016, representing a 11.3% decrease as compared to the same period of previous year. Overall, wholesales decreased by 10.7% and retail sales decreased by 13.6%, measured in EUR.

The Group’s reported gross profit margin during 6 months of 2016 continued to improve increasing to 56.3%, reported gross margin was 45.2% in the respective period of previous year. Consolidated operating profit for 6 months of 2016 amounted to 10 340 thousand EUR, compared to 7 203 thousand EUR in 6 months of 2015. The consolidated operating profit margin was 33.8% for 6 months of 2016 (20.9% in 6 months of 2015). Consolidated EBITDA for 6 months of 2016 was 11 218 thousand EUR, which is 36.7% in margin terms (8 546 thousand EUR and 24.8% for 6 months of 2015).

Reported consolidated net profit attributable to equity holders of the Parent company for 6 months of 2016 amounted to 5 986 thousand EUR, compared to net profit of 2 756 thousand EUR in 6 months of 2015, net profit margin attributable to equity holders of the Parent company for 6 months of 2016 was 19.6% against 8.0% in 6 months of 2015. 

Financial position

As of 30 June 2016 consolidated assets amounted to 59 216 thousand EUR representing an increase by 10.4% as compared to the position as of 31 December 2015.

Trade and other receivables increased by 1 078 thousand EUR as compared to 31 December 2015 and amounted to 5 198 thousand EUR as of 30 June 2016. Inventory balance decreased by 1 378 thousand EUR and amounted to 14 092 thousand EUR as of 30 June 2016.

Equity attributable to equity holders of the Parent company increased by 415 thousand EUR and amounted to 40 609 thousand EUR as of 30 June 2016. Current liabilities increased by 5 144 thousand EUR during 6 months of 2016. 

Sales structure

Sales by markets

in thousands of EUR 6m 2016 6m 2015 Change, EUR Change, % 6m 2016, % of sales 6m 2015, % of sales
Russia 17 303 18 340 -1 037 -5.7% 56.6% 53.2%
Belarus 9 145 11 169 -2 023 -18.1% 29.9% 32.4%
Kazakhstan 1 075 1 675 -601 -35.9% 3.5% 4.9%
Ukraine 903 772 131 17.0% 3.0% 2.2%
Moldova 672 579 93 16.1% 2.2% 1.7%
Latvia 506 575 -69 -12.0% 1.7% 1.7%
Estonia 204 118 86 72.9% 0.7% 0.3%
Lithuania 173 202 -29 -14.4% 0.6% 0.6%
Other markets 614 1 068 -454 -42.5% 2.0% 3.1%
Total 30 595 34 498 -3 902 -11.3% 100.0% 100.0%

 

The majority of lingerie sales revenue during 6 months of 2016 in the amount of 17 303 thousand EUR was generated in Russia, accounting for 56.6% of total sales. The second largest market was Belarus, where sales reached 9 145 thousand EUR, contributing 29.9% of lingerie sales (both retail and wholesale). Volumes in Kazakhstan decreased significantly to 1 075 thousand EUR, there was a remarkable increase in Ukraine and Moldova – accordingly 17.0% and 16.1%. 

Sales by business segments

 

in thousands of EUR 6m 2016 6m 2015 Change, EUR Change, % 6m 2016, % from sales 6m 2015, % from sales
Wholesale 23 245 26 038 -2 793 -10.7% 76.0% 75.5%
Retail 7 297 8 446 -1 149 -13.6% 23.9% 24.5%
Other operations 53 14 38 265.1% 0.2% 0.0%
Total 30 595 34 498 -3 904 -11.3% 100.0% 100.0%

 

During 6 months of 2016 wholesale revenue amounted to 23 245 thousand EUR, representing 76.0% of the Group’s total revenue (6 months of 2015: 75.5%). The main wholesale regions were Russia, Belarus, Kazakhstan and Ukraine.

Our retail revenue decreased by 13.6% and amounted to 7 297 thousand EUR, this represents 23.9% of the Group`s total revenue. The decrease in retail revenue is mainly attributable to Belarusian operations. 

Own & franchise store locations, geography 

  Own Franchise Total
Russia 11 383 394
Ukraine 0 92 92
Belarus 56 2 58
Baltics 9 24 33
Kazakhstan 0 51 51
Moldova 0 26 26
Other regions 0 40 40
Total 76 618 694

At the end of the reporting period the Group and its franchising partners operated 645 Milavitsa and 49 Lauma Lingerie branded stores, including 76 stores operated directly by the Group. 

Production, sourcing, purchasing and logistics

During 6 months of 2016 the Group’s investments into property, plant and equipment totalled 207 thousand EUR. Investments were made mainly into opening and renovating own stores, as well into equipment and facilities to maintain effective production for future periods.

Personnel

As of 30 June 2016, the Group employed 1 989 employees including 361 in retail. The rest were employed in production, wholesale, administration and support operations.

Total salaries and related taxes during 6 months of 2016 amounted to 5 745 thousand EUR (7 407 thousand EUR in 6 months of 2015). The remuneration of key management of the Group, including the key executives of all subsidiaries, totalled 511 thousand EUR.

Decisions made by governing bodies during 6 months 2016

On June 29, 2016 Silvano Fashion Group held its regular Annual General Meeting of Shareholders. The Meeting adopted following decisions.

·         The Meeting approved the 2015 Annual Report.

·         The Meeting decided to distribute dividends in the amount 0.15 EUR per share (record date 13.07.2016, payment completed on 15.07.2016).

·         The Meeting decided to re-appoint AS PricewaterhouseCoopers as the Group`s auditor for financial year 2016.

·         The Meeting decided to cancel the 1 000 000 own shares acquired within the own share buy-back programme as approved by the shareholders of AS Silvano Fashion Group on 29th of June 2015;

·         The Meeting decided to adopt a share buy-back program in the following: effective period until 30.06.2017; maximum number of shares to be acquired not more than 1 000 000; maximum share price 2.70 EUR per share.