OREANDA-NEWS. November 30, 2015.

Selected Financial Indicators

Summarized selected financial indicators of the Group for 9 months of 2015 compared to 9 months of 2014 and 30.09.2015 compared to 31.12.2014 were as follows:

in thousands of EUR 9m 2015 9m 2014 Change
Revenue 51 871 87 139 -40.5%
EBITDA 13 484 13 025 3.5%
Net profit for the period 8 331 9 235 -9.8%
Net profit attributable equity holders of the Parent company 7 908 8 431 -6.2%
Earnings per share (EUR) 0.21 0.22 -2.5%
Operating cash flow for the period 14 264 7 621 87.2%

 

in thousands of EUR 30.09.2015 31.12.2014 Change
Total assets 51 141 67 339 -24.1%
Total current assets 37 819 47 005 -19.5%
Total equity attributable to equity holders of the Parent company 39 981 46 753 -14.5%
Loans and borrowings 0 0 NA
Cash and cash equivalents 20 058 13 308 50.7%

 

Margin analysis, % 9m 2015 9m 2014 Change
Gross profit 46.2 33.9 36.4%
EBITDA 26.0 14.9 73.9%
Net profit 16.1 10.6 51.5%
Net profit attributable equity holders of the Parent
company		 15.2 9.7 57.6%

 

Financial ratios, % 30.09.2015 31.12.2014 Change
ROA 13.6 11.9 14.1%
ROE 18.9 17.2 10.2%
Price to earnings ratio (P/E) 6.0 5.0 18.8%
Current ratio 4.9 3.6 35.6%
Quick ratio 3.1 1.6 94.7%

 

Consolidated Statement of Financial Position

in thousands of EUR Note 30.09.15 31.12.14
ASSETS      
Current assets      
Cash and cash equivalents   20 058 13 308
Current loans granted   12 329
Trade and other receivables 2 3 661 6 906
Inventories 3 14 088 26 462
Total current assets   37 819 47 005
       
Non-current assets      
Long-term receivables   0 241
Investments in associates   71 84
Available-for-sale investments   379 525
Deferred tax asset   374 649
Intangible assets   460 687
Investment property   1 160 1 638
Property, plant and equipment 4 10 878 16 510
Total non-current assets   13 322 20 334
TOTAL ASSETS   51 141 67 339
       
LIABILITIES AND EQUITY      
Current liabilities      
Trade and other payables 5 6 455 9 703
Tax liabilities   1 282 3 335
Total current liabilities   7 737 13 038
       
Non-current liabilities      
Deferred tax liability   0 283
Total non-current liabilities   0 283
Total liabilities   7 737 13 321
       
Equity      
Share capital 6 11 700 11 700
Share premium   13 066 13 066
Treasury shares 6 -1 858 -585
Statutory reserve capital   1 306 1 306
Unrealised exchange rate differences   -10 195 -5 649
Retained earnings   25 962 26 915
Total equity attributable to equity holders of the Parent company   39 981 46 753
Non-controlling interest   3 425 7 265
Total equity   43 406 54 018
TOTAL EQUITY AND LIABILITIES   51 143 67 339

Consolidated Income Statement

in thousands of EUR Note 3Q 2015 3Q 2014   9m 2015 9m 2014
Revenue 8 17 373 32 479   51 871 87 139
Cost of goods sold   -8 972 -22 110   -27 893 -57 605
Gross Profit   8 401 10 369   23 978 29 534
             
Distribution expenses   -2 312 -5 184   -7 095 -12 777
Administrative expenses   -1 544 -2 186   -4 809 -5 652
Other operating income   78 206   324 597
Other operating expenses   -282 -402   -854 -1 043
Operating profit   4 341 2 803   11 544 10 659
             
Currency exchange income/(expense)   1 938 140   907 -500
Other finance income/(expenses)   73 171   333 420
Net financial income   2 011 311   1 240 -80
             
Profit (loss) from associates using equity method   1 -2   1 -1
Profit before tax and gain/(loss) on net monetary position 6 353 3 112   12 785 10 578
             
Income tax expense   -1 074 -1 954   -4 454 -4 768
Profit before gain/(loss) on net monetary position   5 279 1 158   8 331 5 810
             
Gain on net monetary position   0 2 444   0 3 425
Profit for the period   5 279 3 602   8 331 9 235
Attributable to :            
   Equity holders of the Parent company   5 152 3 406   7 908 8 431
   Non-controlling interest   127 196   423 804
             
Earnings per share from profit attributable to equity holders of the Parent company, both basic and diluted (EUR) 7 0.14 0.09   0.21 0.22

Business environment

The business environment for our core markets remained intact for the 3rd quarter of the year. Clearly enough for both the supply and demand side, the retailers in our core markets have to great extent adjusted their price point, reflected in somewhat higher price inflation in the consumer segment. The low demand for the base materials, including oil, created worrying assumptions with regards to the value of the national currencies in our core markets – Russia, Belarus, Kazakhstan et al. Nevertheless, the countries indicated that some gunpowder is still left, somewhat winning back the losses against the major currencies of the world. On average, in Q3 2015 the Russia’s rouble traded at 46% discount to EUR compared to the Q3 in the previous year, the Belarus rouble retreated by 33% in the respective period, and the Ukrainian Hryvnia depreciated for about 42%. This, in short, means that consumers in those markets had less purchasing power to satisfy for the need to re-stock compared to their liquidity in the same period a year ago.

On the other hand, we have notified some healthier trends in the economies of our core markets, i.e. that the rent prices, affecting the profitability of our own shops and the franchise business, have started to retreat. When previously the dropping customer traffics at stores remained unnoticed by landlords, the current indicates much more flexibility to meet the outcry of the retailers regarding the rental cost. Whether and to which extent this tendency shall compensate for the less business is yet unclear.

Further to the tendencies noted above, we see the customers returning to the stores. It is probably too early to call it breaking point, but at least it signals that the buyers are out there. More business is noted in the cheaper segment of the product offering.

Unfortunately we saw the consumption of the Group’s products deteriorating for Russia’s consumer market. The Q3 2015 sales totalled 8 746 thousand EUR against 17 037 thousand EUR in the respective period a year ago. When aggregated, the 9m 2015 sales reached 27 086 thousand EUR in 2015 compared to 47 582 thousand EUR during 9m of 2014, indicating a backdrop of 43.1%. Notwithstanding the heavy windfalls, the Group’s financial position and the profitability speak of the timely downsizing process that has enabled to retain the profit generation ability in general. 

In Belarus, the Q3 2015 sales totalled 5 817 thousand EUR, retreating from the Q3 sales in the previous year of 10 980 thousand EUR. Given that last year included significant sales discounts, the profitability of sales eventually increased. The total sales for 9m in 2015 reached 16 986 thousand EUR compared to 26 491 thousand EUR a year ago, which is 35.9% less in EUR terms than in the previous year.

In Ukraine, the sales continue to stall, outpaced by Kazakhstan by total sales volume. We sold in Ukraine for 611 thousand EUR in Q3 2015, down from 1 183 thousand EUR in Q3 of 2014. 9m 2015 aggregated sales in the region totalled 1 412 thousand EUR, down from 2 489 thousand EUR a year ago, which is 64% less.

The market continued to contract also on our other main markets, including the Baltics where we also conduct own retail operations.

We continue to monitor the development of the currency rates, especially the Russia’s Rouble, Belarus Rouble and Ukrainian Hryvnia. The more stable the currencies, the more we see our intermediaries becoming more aggressive on purchases. On the cost side, we are keeping tight control over the overhead costs and continue monitoring the efficiency of our capital usage (especially the inventory and purchasing planning). The more successful we are there, the better we become on the performance of the owners capital that has been entrusted with us by the shareholders.

Financial performance

The Group`s sales amounted to 51 871 thousand EUR during 9 months of 2015, representing a 40.5% decrease as compared to the same period of previous year. Overall, wholesales decreased by 42.8% and retail sales decreased by 29.6%, measured in EUR.

The Group’s reported gross profit margin during 9 months of 2015 continued to improve, increasing year-to-year to 46.2%, reported gross margin was 33.9% in the respective period of previous year. Consolidated operating profit for 9 months of 2015 amounted to 11 544 thousand EUR, compared to 10 659 thousand EUR in 9 months of 2014 (the contribution of the Q3 2015 was 4 341 thousand EUR compared to 2 803 thousand EUR in Q3 2014). The consolidated operating profit margin was 22.3% for 9 months of 2015 (12.2% in 9 months of 2014). Consolidated EBITDA for 9 months of 2015 was 13 484 thousand EUR, which is 26.0% in margin terms (13 025 thousand EUR and 14.9% for 9 months of 2014).

During 9 months of 2015 the Group continued with internal restructuring, which will allow us to streamline internal management and intragroup capital allocation. This brought 2.4 million EUR of additional income tax expense. As a result reported consolidated net profit attributable to equity holders of the Parent company for 9 months of 2015 amounted to 7 908 thousand EUR, compared to net profit of 8 431 thousand EUR in 9 months of 2014, net profit margin attributable to equity holders of the Parent company for 9 months of 2015 was 15.2% against 9.7% in 9 months of 2014.

Financial position

As of 30 September 2015 consolidated assets amounted to 51 141 thousand EUR representing decrease by 24.1% as compared to the position as of 31 December 2014.

Trade and other receivables decreased by 3 245 thousand EUR as compared to 31 December 2014 and amounted to 3 661 thousand EUR as of 30 September 2015. Inventory balance decreased by 12 374 thousand EUR and amounted to 14 088 thousand EUR as of 30 September 2015.

Equity attributable to equity holders of the Parent company decreased by 6 772 thousand EUR and amounted to 39 981 thousand EUR as of 30 September 2015. Current liabilities decreased by 5 301 thousand EUR during 9 months of 2015.

Sales structure

Sales by markets

in thousands of EUR 9m 2015 9m 2014 Change 9m 2015
% from sales		 9m 2014
 % from sales
Russia 27 086 47 582 -43.1% 52.2% 54.6%
Belarus 16 986 26 491 -35.9% 32.7% 30.4%
Ukraine 1 383 3 848 -64.0% 2.7% 4.4%
Baltics 1 412 2 489 -43.3% 2.7% 2.9%
Other markets 5 003 6 728 -25.6% 9.6% 7.7%
Total 51 871 87 139 -40.5% 100.0% 100.0%

The majority of lingerie sales revenue during 9 months of 2015 in the amount of 27 086 thousand EUR was generated in Russia, accounting for 52.2% of total sales. The second largest market was Belarus, where sales reached 16 986 thousand EUR, contributing 32.7% of lingerie sales (both retail and wholesale). Volumes in Ukraine decreased significantly to 1 383 thousand EUR, the drop was also remarkable in the Other markets and the Baltics.

Sales by business segments

in thousands of EUR 9m 2015 9m 2014 Change, % 9m 2015, % from sales 9m 2014, % from sales
Wholesale 39 122 68 450 -42.8% 75.4% 78.6%
Retail 12 722 18 065 -29.6% 24.5% 20.7%
Other operations 27 624 -95.7% 0.1% 0.7%
Total 51 871 87 139 -40.5% 100.0% 100.0%

During 9 months of 2015 wholesale revenue amounted to 39 122 thousand EUR, representing 75.4% of the Group’s total revenue (9 months of 2014: 78.6%). The main wholesale regions were Russia, Ukraine, Belarus, Kazakhstan and Moldova.

Total lingerie retail sales of the Group in 9 months of 2015 amounted to 12 722 thousand EUR, representing 24.5% of the Group’s total revenue.

As of 30 September 2015 there were altogether 693 Milavitsa and Lauma branded shops. Own retail operations were conducted in Belarus and Latvia. As of the end of Q3 2015 the Group operated 66 own retail outlets. As of 30 September 2015, there were 593 Milavitsa branded shops operated by Milavitsa trading partners. Additionally, as of 30 September 2015, there were 34 Lauma Lingerie retail outlets operated by Lauma Lingerie trading partners.

Own & franchise store locations, geography

  Own Franchise Total
Russia 0 376 376
Ukraine 0 92 92
Belarus 56 8 64
Baltics 10 25 35
Kazakhstan 0 56 56
Moldova 0 26 26
Other regions 0 44 44

Investments

During 9 months of 2015 the Group’s investments into property, plant and equipment totalled 390 thousand EUR. Investments were made into equipment and facilities to maintain effective production for future periods.

Personnel

As of 30 September 2015, the Group employed 2 029 employees including 373 in retail. The rest were employed in production, wholesale, administration and support operations.

Total salaries and related taxes during 9 months of 2015 amounted to 11 673 thousand EUR. The remuneration of key management of the Group, including the key executives of the all subsidiaries, totalled 1 000 thousand EUR.

Decisions made by governing bodies during 9 months 2015

On June 29, 2015 Silvano Fashion Group held its regular Annual General Meeting of Shareholders. The Meeting adopted following decisions.

· The Meeting approved the 2014 Annual Report.

· The Meeting decided to distribute dividends in the amount 0.10 EUR per share (record date 13.07.2015, payment completed on 15.07.2015).

· The Meeting decided to re-appoint AS PricewaterhouseCoopers as the Group`s auditor for financial year 2015.

· 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 30th of June 2014;

· The Meeting decided to adopt a share buy-back program in the following: effective period until 29.06.2016; maximum number of shares to be acquired not more than 1 000 000; maximum share price 2.00 EUR per share.