Market announcement

Title

Baltika's unaudited financial results, Q4 and 12 months 2012

Message

Baltika ended the fourth quarter with 1,294 thousand euros profit before tax
and the net profit was 1,075 thousand euros. The year 2012 profit before tax
was 1,056 thousand euros and net profit 805 thousand euros. Baltika exceeded
the financial targets set for the year 2012, finishing the year with 3,725
thousand euros EBITDA, which is 24% higher than planned 3,000 thousand euros. 

Performance exceeded the target owing to strong growth in sales efficiency (14%
against the projected 10%) and a marked improvement in the gross margin. Gross
margin in 2012 was 54.5%, increasing year over year 1.4 percentage points.
Solid sales results and the rise in the gross margin were underpinned by sales
growth in the Baltic countries and Russia. The best results were achieved in
Latvia and Russia where sales per square metre grew by 21% and 15%
respectively. Another contributing factor continued to be effective cost
control: the ratio of operating expenses to revenue improved by 5 percentage
points, 1 percentage point more than targeted. 

The year 2012 was pivotal in both returning to profit and strengthening the
financial position. By divesting real estate, considerably reducing the loan
burden and improving its investment capabilities, Baltika has created a solid
basis and opened up new opportunities for future development. 

2012 fourth quarter highlights

  -- On 29 November 2012, Baltika signed an agreement for the purchase of the
     Bastion trademark and the acquisition of retail stores operated under the
     Bastion trade name. Six Bastion stores in Estonia were taken over from OÜ
     Bastion by Baltika’s subsidiary OÜ Baltman and one Bastion store in Latvia
     was taken over by Baltika’s subsidiary SIA Baltika Latvija. All seven
     stores have been successfully integrated into Baltika’s retail system and
     the figures for 2012 include the first Bastion sales within Baltika Group.
     By adding Bastion to its brand portfolio the Group can expand its target
     customer base, offer a wider product range and increase its market share in
     the Baltics. Baltika believes that Bastion has strong retail and wholesale
     potential in the Group’s home market, the Baltics, as well as in
     Scandinavia and Eastern Europe.
  -- On 28 December 2012, Baltika launched a revamped Monton concept flagship
     store in the Piterland shopping centre in St Petersburg. Following this, in
     February a revamped Monton concept flagship store was opened in Tallinn and
     in Riga and in March a Monton concept flagship store will be opened in
     Vilnius.
  -- As agreed in 2012, on 28 January 2013 Pille Põldsam joined Baltman OÜ
     Management Board. Pille Põldsam has gained experience at AS Stockmann group
     – last position as the area manager of both Seppälä’s Estonian region and
     Baltic and Ukrainian region. In Baltika Group, she will deal with the
     Estonian market, being responsible for setting and meeting the retail sales
     targets, organising the work of retail operations and managing the sales
     and service teams.

Objectives for 2013

Baltika’s goals for 2013 are business expansion and profitable growth. To
achieve this, the Group will continue to implement its investment plan in 2013.
 In line with its unveiled investment plan, in the next few years the Group
intends to open 25 new stores and to invest 5,000 euros in the retail system of
which around 3,000 euros will be invested in 2013. Renovation of almost 20
stores and the launch of around ten new stores, primarily in Latvia, Russia and
Ukraine will be made in 2013. According to the investment plan, the Group will
also continue to launch new-concept Monton stores and in the second half of
2013 will open the first new-concept Mosaic stores. 

Priorities of 2013 include developing international competitiveness of all
Group brands. The Group will also continue to develop its additional sales
channels and grow their sales: in 2013 special attention will be paid to
increasing wholesale, franchise and e-store sales. In addition, to tap its
extensive experience and strong retail competencies, the Group is considering
the possibility of entering into franchising agreements for the sale of new
brands in its current markets. 

Management’s targets for 2013 are to increase total sales over 10% and to at
least double the Group’s net profit. The targets are in line with the budget
approved by the company’s Supervisory Council on 13 February 2013. 



Consolidated statement of financial position

                                                        31 Dec 2012  31 Dec 2011
--------------------------------------------------------------------------------
ASSETS                                                                          
Current assets                                                                  
Cash and bank                                                 2,078          863
Trade and other receivables                                   1,836        2,189
Inventories                                                  11,471       10,048
Total current assets                                         15,385       13,100
Non-current assets                                                              
Deferred income tax asset                                       637          838
Other non-current assets                                      1,088          629
Investment property                                               0        8,549
Property, plant and equipment                                 2,256        8,031
Intangible assets                                             4,150        3,665
Total non-current assets                                      8,131       21,712
TOTAL ASSETS                                                 23,516       34,812
                                                                                
EQUITY AND LIABILITIES                                                          
Current liabilities                                                             
Borrowings                                                    1,598        3,178
Trade and other payables                                      7,005        6,785
Total current liabilities                                     8,603        9,963
Non-current liabilities                                                         
Borrowings                                                    4,702       15,144
Other liabilities                                                25           83
Total non-current liabilities                                 4,727       15,227
TOTAL LIABILITIES                                            13,330       25,190
                                                                                
EQUITY                                                                          
Share capital at par value                                    7,159       25,056
Share premium                                                    63           89
Reserves                                                      1,182        2,494
Retained earnings                                             1,667      -11,592
Net profit (loss) for the period                                804       -5,863
Currency translation differences                               -689         -727
Total equity attributable to equity holders of the           10,186        9,457
 parent                                                                         
Non-controlling interest                                          0          165
TOTAL EQUITY                                                 10,186        9,622
TOTAL LIABILITIES AND EQUITY                                 23,516       34,812



Consolidated statement of comprehensive income

                                              Q4 2012  Q4 2011     2012     2011
--------------------------------------------------------------------------------
                                                                                
Revenue                                        16,188   15,485   56,332   53,409
Cost of goods sold                             -7,109   -7,001  -25,615  -25,042
Gross profit                                    9,079    8,484   30,717   28,367
                                                                                
Distribution costs                             -7,021   -6,812  -26,193  -27,095
Administrative and general expenses              -734     -742   -2,722   -2,864
Other operating income                            285       36      341       59
Other operating expenses                         -141   -2,490     -184   -2,917
Operating profit (loss)                         1,468   -1,524    1,959   -4,450
                                                                                
Finance income                                      0        2       61        3
Finance costs                                    -174     -314     -964   -1,344
                                                                                
Profit (loss) before income tax                 1,294   -1,836    1,056   -5,791
                                                                                
Income tax expense                               -219      -44     -251      -69
                                                                                
Net profit (loss)                               1,075   -1,880      805   -5,860
Profit (loss) attributable to:                                                  
Equity holders of the parent company            1,075   -1,883      804   -5,863
Non-controlling interest                            0        3        1        3
                                                                                
                                                                                
Other comprehensive income (loss)                                               
Currency translation differences                   26      -30       38       20
                                                                                
Total comprehensive income (loss)               1,101   -1,910      843   -5,840
Comprehensive income (loss) attributable to:                                    
Equity holders of the parent company            1,101   -1,913      842   -5,843
Non-controlling interest                            0        3        1        3
                                                                                
                                                                                
Basic earnings per share, EUR                    0.03    -0.05     0.02    -0.19
Diluted earnings per share, EUR                  0.03    -0.05     0.02    -0.19



Maigi Pärnik
Member of the Management Board
[email protected]