Market announcement

Title

Consolidated interim report for Q4 and 12 months of 2014 (unaudited)

Message

Tallinn, 2015-02-27 16:30 CET (GLOBE NEWSWIRE) --


Selected Financial Indicators

Summarized selected financial indicators of the Group for 12 months 2014
compared to 12 months 2013 and 31.12.2014 compared to 31.12.2013 were as
follows: 


in thousands of EUR                              31.12.2014  31.12.2013   Change
--------------------------------------------------------------------------------
Total assets                                         67 350      76 629   -12.1%
Total current assets                                 46 802      55 080   -15.0%
Total equity attributable to equity holders of       46 649      52 370   -10.9%
 the Parent company                                                             
Loans and borrowings                                      0          79  -100.0%
Cash and cash equivalents                            13 308      19 165   -30.6%

Margin analysis, %                                    12m 2014  12m 2013  Change
--------------------------------------------------------------------------------
Gross profit                                              36.3      35.2    3.1%
EBITDA                                                    15.3      16.0   -4.4%
Net profit                                                10.4       9.8    6.3%
Net profit attributable equity holders of the Parent       8.9       9.0   -0.9%
 company                                                                        

Financial ratios, %            31.12.2014  31.12.2013  Change
-------------------------------------------------------------
ROA                                  11.8        13.2  -11.0%
ROE                                  17.0        19.7  -13.6%
Price to earnings ratio (P/E)         5.1         9.6  -47.1%
Current ratio                         3.5         4.7  -23.9%
Quick ratio                           1.5         2.6  -39.7%

in thousands of EUR                                   12m 2014  12m 2013  Change
--------------------------------------------------------------------------------
Revenue                                                100 868   121 680  -17.1%
EBITDA                                                  15 422    19 472  -20.8%
Net profit for the period                               10 457    11 867  -11.9%
Net profit attributable equity holders of the Parent     8 993    10 946  -17.8%
company                                                                         
Earnings per share (EUR)                                  0.23      0.28  -17.1%
Operating cash flow for the period                       8 643    18 654  -53.7%



Consolidated Statement of Financial Position

in thousands of EUR                                           31.12.14  31.12.13
--------------------------------------------------------------------------------
ASSETS                                                                          
Current assets                                                                  
Cash and cash equivalents                                       13 308    19 165
Prepayments                                                        233       196
Current loans granted                                              329         0
Trade and other receivables                                      6 470    10 846
Inventories                                                     26 462    24 873
Total current assets                                            46 802    55 080
                                                                                
Non-current assets                                                              
Long-term receivables                                              241         0
Investments in associates                                           84       124
Available-for-sale investments                                     739       497
Deferred tax asset                                                 649       460
Intangible assets                                                  687       719
Investment property                                              1 638     1 592
Property, plant and equipment                                   16 510    18 157
Total non-current assets                                        20 548    21 549
TOTAL ASSETS                                                    67 350    76 629
                                                                                
LIABILITIES AND EQUITY                                                          
Current liabilities                                                             
Current borrowings                                                   0        79
Trade and other payables                                         9 703    10 837
Tax liabilities                                                  3 503       905
Total current liabilities                                       13 206    11 821
                                                                                
Non-current liabilities                                                         
Deferred tax liability                                             253     1 953
Total non-current liabilities                                      253     1 953
Total liabilities                                               13 459    13 774
                                                                                
Equity                                                                          
Share capital                                                   11 700    11 820
Share premium                                                   13 066    13 822
Treasury shares                                                   -585      -224
Statutory reserve capital                                        1 306     1 306
Unrealised exchange rate differences                            -5 649    -1 215
Retained earnings                                               26 811    26 861
Total equity attributable to equity holders of the Parent       46 649    52 370
 company                                                                        
Non-controlling interest                                         7 242    10 485
Total equity                                                    53 891    62 855
TOTAL EQUITY AND LIABILITIES                                    67 350    76 629



Consolidated Income Statement

in thousands of EUR                                4Q  4Q 2013      12m      12m
                                                 2014              2014     2013
--------------------------------------------------------------------------------
Revenue                                        13 729   22 868  100 868  121 680
Cost of goods sold                             -6 641  -15 183  -64 246  -78 815
Gross Profit                                    7 088    7 685   36 622   42 865
                                                                                
Distribution expenses                          -2 884   -5 076  -15 661  -17 200
Administrative expenses                        -1 751   -2 125   -7 403   -7 106
Other operating income                           -142       -1      455      495
Other operating expenses                         -593     -289   -1 636   -2 211
Operating profit                                1 718      194   12 377   16 843
                                                                                
Currency exchange income/(expense)              1 214       48      714     -275
Other finance income/(expenses)                   270      294      690    1 015
Net financial income                            1 484      342    1 404      740
                                                                                
Profit (loss) from associates using equity          5       -4        4        5
 method                                                                         
Profit before tax and gain/(loss) on net        3 207      532   13 785   17 588
 monetary position                                                              
                                                                                
Income tax expense                             -1 241       10   -6 009   -3 894
Profit before gain/(loss) on net monetary       1 966      542    7 776   13 694
 position                                                                       
                                                                                
Gain on net monetary position                    -744     -422    2 681   -1 827
Profit for the period                           1 222      120   10 457   11 867
Attributable to :                                                               
Equity holders of the Parent company              562      237    8 993   10 946
Non-controlling interest                          660     -117    1 464      921
                                                                                
Earnings per share from profit attributable      0.01     0.01     0.23     0.28
 to equity holders of the Parent company,                                       
 both basic and diluted (EUR)                                                   



Business environment

The financial results of the Group for FY 2014 were below the numbers for FY
2013; the economic instability on our core markets continued also in Q4 2014
and it was reflected by the sharp decline of the local currencies there. Yet
our balance sheet is strong and the Group is profitable. In FY 2014 we paid the
highest cash dividend in the history of the Group (EUR 0.30 per share), we
unified the supply terms on our main markets and continued with the cost
control programs throughout the whole organisation. 

Current economic situation sorts out the supply side of the market: less
efficient businesses shall be closed, consolidated or de-leveraged. The
financing (cost) of doing business in our core markets has skyrocketed, if
attainable at all. One of the expected trends is that the rent prices shall
likely drop, facilitating for new store openings. Pure importers without local
production capacity are facing higher input cost due to more expensive dollar,
and this provides us with an additional competitive advantage. 

Already quoted several times before, the economic power games have led to
substantial weakening of the currencies of the emerging markets. The worst of
the performers being the Ukrainian Hryvnia where the country’s balance sheet is
utmost dependent on the foreign donors’ will. The table reflects on how much
our consumers in our main markets have been forced to cut their spending
measured in the weakening of their buying currency against Euro. 

The last quarter of the year brought no relief in breaking the trend of falling
sales (Q4 2014 -40% in cash terms, including hyperinflation effect that affects
the last quarter most significantly, against Q4 2013, whole year -17.1%). The
drop affected our main markets, with the exception of the Baltic and the
Western countries. 

In this environment, we continue focusing on the profitability of the business
and on fixed costs. This, in first order, means strict control of the operating
expenses, managing the profitability of the sales and active debtors management
related to FX risk. We managed to grow the EPS for Q4 2014 compared to Q4 2013. 

The Group’s sales in Q4 2014 were significantly lower the benchmark in Q4 2013,
the net sales reached 13 729 thousand EUR, compared to 22 868 thousand EUR a
year ago. The corresponding numbers for 12 months of 2014 were 100 868 thousand
EUR against 121 680 thousand EUR for 12 months of 2013. The wholesale segment
affected both the decrease in net sales in Q4 and the decrease in 12 months of
2014. 

The wholesale segment contributed 79 144 thousand EUR in 12 months 2014 (100
259 thousand EUR in 12 months 2013). The retail segment contributed 21 158
thousand EUR for 12 months 2014 (20 707 thousand EUR a year ago). 

The net profit stood at 1 222 thousand Euros in Q4 2014 compared to 120
thousand EUR in Q4 2013. The corresponding net profit for 12 months of 2014 was
10 457 thousand EUR compared to 11 867 thousand EUR a year ago. The Group’s
EBITDA reached 15 422 thousand EUR in 12 months of 2014 compared to 19 472
thousand EUR in the corresponding period of 2013. 

The economic outlook for most of our major markets will most likely deteriorate
due to non-economic factors (sanctions) and their corresponding effect on the
real economies (energy prices, currencies, inflation). For Russia, the real
effect is a result of falling energy prices (oil, gas and mineral products,
consisting between half to two thirds of the government’s budget income),
maturing foreign debt (outflow of capital), and weaker currency (-48.8% against
Euro and -57.8% against USD from beginning of year, all fuelling import-related
inflationary environment). As of end of Q4 2014 the total store count is 369
units in Russia. 

Belarus economic growth is stalling due to lack of real structural reforms and
cooling economic climate of its main export market – Russia. During 2014 at a
cost of diminished foreign reserves, taken loans and near zero economic growth
the country has managed to hold its currency exchange rate relatively stable.
But Belarus had to face reality and in the end of December 2014 - beginning of
January 2015 Belarus rouble was devalued by approximately 30% against USD and
Euro.  There are a total of 56 stores operated directly by the Group and 8
franchise stores. The Group’s sales revenue in Belarus reached 29 982 thousand
EUR for 12 months of 2014 compared to 30 794 thousand EUR for the same period a
year ago (both wholesale and retail segment). 

Negative information flow regarding Ukraine is continuously on the radar of
global media. For the Group, the 12 months of 2014 net sales dropped to 4 352
thousand EUR compared to 8 514 thousand EUR for the same period a year ago. We
have very vague visibility about the outlook for 2015. There are 91 franchise
stores in total in the country as of end of 2014. 

In the Baltics, the Group primarily operates via own stores and franchise
partners. The Group operates 10 own stores, complemented by 34 partner stores
in the region. The sales in the Baltic countries aggregated 3 146 thousand EUR
for 12 months of 2014, compared to 2 733 thousand EUR for the same period a
year ago. 

During 12 months of 2014 net increase (including openings and store closures
primarily due to relocations) of the Milavitsa and Lauma stores totalled a mere
3 units, bringing the total store count to 682 units. Total geography of our
franchise partners covers more than 20 countries, including Milavitsa and Lauma
Lingerie branded stores. 

Financial performance

The Group`s sales amounted to 100 868 thousand EUR during 12 months of 2014,
representing a 17.1% decrease as compared to the same period of previous year.
Overall, wholesales decreased by 21.1% and retail sales increased by 2.2%. 

The Group’s reported gross profit margin during 12 months of 2014 increased
year-to-year to 36.3%, reported gross margin was 35.2% in the respective period
of previous year. Consolidated operating profit for 12 months of 2014 amounted
to 12 377 thousand EUR, compared to 16 843 thousand EUR in 12 months of 2013.
The consolidated operating profit margin was 12.3% for 12 months of 2014 (13.8%
in 12 months of 2013). Consolidated EBITDA for 12 months of 2014 was 15 431
thousand EUR, which is 15.3% in margin terms (19 472 thousand EUR and 16.0% for
12 months of 2013). 

The Group has made a provision in trade receivables in the amount of 1.18
million EUR for 2014. In summary, consolidated net profit attributable to
equity holders of the Parent company for 12 months of 2014 amounted to 8 993
thousand EUR, compared to 10 946 thousand EUR in 12 months of 2013, net profit
margin attributable to equity holders of the Parent company for 12 months of
2014 was 8.9% against 9.0% in 12 months of 2013. 

Financial position

As of 31 December 2014 consolidated assets amounted to 67 350 thousand EUR
representing decrease by 12.1% as compared to the position as of 31 December
2013. 

Trade and other receivables decreased by 4 376 thousand EUR as compared to 31
December 2013 and amounted to 6 470 thousand EUR as of 31 December 2014.
Inventory balance increased by 1 589 thousand EUR and amounted to 26 462
thousand EUR as of 31 December 2014. 

Equity attributable to equity holders of the Parent company decreased by 5 721
thousand EUR and amounted to 46 649 thousand EUR as of 31 December 2014. 

Current liabilities increased by 1 385 thousand EUR during 12 months of 2014.
Current and non-current loans and borrowings decreased by 79 thousand EUR to
zero balance as of 31 December 2014. 

Sales structure

Sales by markets

in thousands of      12 months     12 months  Change     12 months     12 months
 EUR                      2014          2013                  2014          2013
                                                      % from sales  % from sales
--------------------------------------------------------------------------------
Russia                  55 266        71 326  -22.5%         54.8%         58.6%
Belarus                 29 982        30 794   -2.6%         29.7%         25.3%
Ukraine                  4 352         8 514  -48.9%          4.3%          7.0%
Kazakhstan               3 823         3 824    0.0%          3.8%          3.1%
Baltics                  3 146         2 733   15.1%          3.1%          2.2%
Moldova                  1 905         2 267  -16.0%          1.9%          1.9%
Other markets            2 394         2 222    7.7%          2.4%          1.8%
Total                  100 868       121 680  -17.1%        100.0%        100.0%

The majority of lingerie sales revenue during 12 months of 2014 in the amount
of 55 266 thousand EUR was generated in Russia, accounting for 54.8% of total
sales. The second largest market was Belarus, where sales reached 29 982
thousand EUR, contributing 29.7% of lingerie sales (both retail and wholesale).
Belarus minor drop reflects significantly higher own retail component from the
sales structure than on average for the Group. The real growth in sales is
observed for the Baltic markets and the Other markets, and this is also one of
the targets for the development in the future. 

Sales by business segments

in thousands of    12m      12m     Change,  12m 2014, % from   12m 2013, % from
 EUR              2014     2013       %           sales              sales      
--------------------------------------------------------------------------------
Wholesale         79 144  100 259    -21.1%             78.5%              82.4%
Retail            21 158   20 707      2.2%             21.0%              17.0%
Other                566      715    -20.8%              0.6%               0.6%
 operations                                                                     
Total            100 868  121 681    -17.1%            100.0%             100.0%

During 12 months of 2014 wholesale revenue amounted to 79 144 thousand EUR,
representing 78.5% of the Group’s total revenue (12 months of 2014: 82.4%). The
main wholesale regions were Russia, Ukraine, Belarus, Kazakhstan and Moldova. 

Total lingerie retail sales of the Group in 12 months of 2014 amounted to 21
158 thousand EUR, representing 21% of the Group’s total revenue (and minor
growth vis-à-vis sales through retail channel in 2013). 

As of 31 December 2014 there were altogether 682 Milavitsa and Lauma branded
shops. Own retail operations were conducted in Belarus and Latvia. As of the
end of 12 months of 2014 the Group operated 66 own retail outlets. As of 31
December 2014, there were 574 Milavitsa branded shops operated by Milavitsa
trading partners in Russia, Ukraine, Moldova, Kazakhstan, Uzbekistan,
Kyrgyzstan, Azerbaijan, Armenia, Germany, South Africa, Lithuania, Latvia,
Estonia, Georgia, United Arab Emirates, Iran, Slovenia, Belgium and Italy.
Additionally, as of 31 December 2014, there were 42 Lauma Lingerie retail
outlets operated by Lauma Lingerie trading partners in Estonia, Latvia,
Lithuania, Russia, Ukraine, Saudi Arabia, Albania, Uganda and Mongolia. 

Own & franchise store locations, geography

               Own  Franchise  Total
------------------------------------
Russia           0        369    369
Ukraine          0         91     91
Belarus         56          8     64
Baltics         10         34     44
Kazakhstan       0         43     43
Moldova          0         26     26
Other regions    0         45     45

Investments

During 12 months of 2014 the Group’s investments into property, plant and
equipment totalled 420 thousand EUR. Investments were made into equipment and
facilities to maintain effective production for future periods. 

Personnel

As of 31 December 2014, the Group employed 2 749 employees including 481 in
retail. The rest were employed in production, wholesale, administration and
support operations. 

Total salaries and related taxes during 12 months of 2014 amounted to 23 692
thousand EUR. The remuneration of key management of the Group, including the
key executives of the subsidiaries, totalled 1 305 thousand EUR. 

Decisions made by governing bodies during 12 months 2014

On 30 June 2014 Silvano Fashion Group held its regular Annual General Meeting
of Shareholders. The Meeting adopted following decisions. 

  -- The Meeting approved the 2013 Annual Report.
  -- The Meeting decided to distribute dividends in the amount 0.10 EUR per
     share (record date 14.07.2014, paid out on 15.07.2014).
  -- The Meeting decided to re-appoint AS PricewaterhouseCoopers as the Group`s
     auditor for financial year 2014.
  -- The Meeting decided to cancel the 400 000 own shares acquired within the
     own share buy-back programme as approved by the shareholders of AS Silvano
     Fashion Group on 28th of June 2013.
  -- The Meeting decided to adopt a share buy-back program in the following:
     effective period until 30.06.2015; maximum number of shares to be acquired
     not more than 1 000 000; maximum share price 2.00 EUR per share.


On October 16, 2014, the Company announced Extraordinary General Meeting that
was held on November 7, 2014 and decided to amend the earlier profit
distribution proposal, resulting in additional dividend in amount of 0.20 Euros
per share. 




         Aleksei Kadõrko
         Chief Financial Officer
         +372 6845 000
         [email protected]