Market announcement

Title

Consolidated interim report for Q3 and 9 months of 2015 (unaudited)

Message

Tallinn, 2015-11-27 22:47 CET (GLOBE NEWSWIRE) --


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      7 908    8 431   -6.2%
 company                                                                        
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        39 981      46 753  -14.5%
 the Parent company                                                             
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     15.2      9.7   57.6%
company                                                                       



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              39 981    46 753
 Parent company                                                                 
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      3Q  9m 2015  9m 2014
                                                  2015    2014                  
--------------------------------------------------------------------------------
Revenue                                    8    17 373  32 479   51 871   87 139
Cost of goods sold                              -8 972     -22  -27 893  -57 605
                                                           110                  
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                  1      -2        1       -1
 equity method                                                                  
Profit before tax and gain/(loss) on net         6 353   3 112   12 785   10 578
 monetary position                                                              
                                                                                
Income tax expense                              -1 074  -1 954   -4 454   -4 768
Profit before gain/(loss) on net                 5 279   1 158    8 331    5 810
 monetary position                                                              
                                                                                
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             7      0.14    0.09     0.21     0.22
 attributable to equity holders of the                                          
 Parent company, both basic and diluted                                         
 (EUR)                                                                          

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       9m 2014
                                               % from sales  % 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     9m      9m     Change,   9m 2015, % from    9m 2014, % from 
 EUR               2015    2014      %            sales              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. 

Aleksei Kadõrko
Chief Financial Officer
Silvano Fashion Group
Tel +372 6845 000
E-mail: [email protected]