Market announcement

Title

CORRECTION: Baltika's unaudited financial results, first quarter 2016

Message

CORRECTION: Mistake in attached file. Wrong table in Consolidated statement of
profit and loss (page 14). New corrected file attached. 

Baltika Group’s first quarter resulted in net loss in the amount of 493
thousand euros. The result of last year same period was loss of 1,136 thousand
euros and comparative figure of continued operations was loss of 783 thousand
euros. 

In connection with Baltika Group’s exit from the Russian retail business, which
represented a major line of business of the Group, the results of the Russian
companies’ retail are presented as discontinued operation. 

In 2016 first quarter retail revenue was 10,505 thousand euros, decreasing 715
thousand euros i.e. 6% compared to same period last year. Wholesale and
franchise revenue increased in first quarter by 11%. Sales growth is mainly due
to Russian retail market transition to franchise and Monton collection entering
German department store chain Peek & Cloppenburg and higher sales to Finnish
wholesale partners. Baltika’s international e-store Andmorefashion.com revenue
was 252 thousand euros, decreasing 5% in the first quarter compared to same
period last year. 

Baltics first quarter retail sales were 8,428 thousand euros, decreasing by 10%
compared to same period last year. In addition to the lower fashion goods,
buying activity Baltika had a different selling approach than last year:
planned inventories were on a lower level and company had less sale campaigns.
Thus, Baltics retail revenue decreased compared to same period last year, but
at the same time gross profit margin has improved substantially. 

Group’s gross profit margin in first quarter was 50.6%, which is 5.2 percentage
points higher than last year same period margin 45.4% and gross profit in the
first quarter was 5,311 thousand euros. In addition to lower mark-downs more
efficient inventories management and weaker USA dollar helped to improve
margin. At the same time, it is hard to keep high gross profit margin in the
future due to intense competition in fashion industry. 

Baltika’s first quarter results confirm that decision to end operating
Ukrainian and Russian high-risk loss-making retail markets and focusing on
profit-making Baltics markets and developing other sales channels, was a right
decision. Baltika Group’s this year first quarter loss was smaller than latest
years. In addition to exiting from Ukrainian and Russian markets the
inventories, management process have been more efficient and decreased
management costs. While markets’ operating costs remain on last year level,
head-office operating expense decreased 4% compared to same period last year. 

Highlights of the period until the date of release of this quarterly report

  -- From February 1st 2016 Maigi Pärnik-Pernik continues working as a member of
     Management Board and is responsible for the finance functions and for the
     disclosure of information on the exchange.
  -- On 9th of February 2016 Baltika held a fashion show to launch spring-summer
     collection. The newest collections were shown in Baltika’s headquarter and
     after the show collections were available in shops and in e-store.
  -- On 22 February 2016 Baltika signed an agreement with OÜ Ellipse Group to
     sell 100% of shares of Russia’s retail operating company OOO Olivia that
     owns subsidiaries OOO Stelsing and OOO Plazma. OÜ Ellipse Group will
     continue to cooperate with Baltika as franchise partner and on 22 February,
     cooperation agreement was signed for the next five years. The price
     received for the Russian entities is 463 thousand euros and payment
     schedule is agreed for 5 years, depending on Russian entities financial
     results.
  -- On 14th of March 2016 Lilian Nõlvak started working as a communication
     manager of AS Baltika. Previously Lilian worked as PR manager in Elion
     Ettevõtted AS (now known as Telia Eesti AS).
  -- Supervisory Council of AS Baltika decided to recall from the Management
     Board starting from 17 March 2016 Management Board member Kati Kusmin.
  -- Baltika ended representing Blue Inc London brand in Baltics states under
     the franchise agreement due to low sales efficiency and closed four stores
     in Estonia and in Latvia at the beginning of the year. Baltman store was
     opened as a replacement in one of the sales area in Tallinn Ülemiste
     shopping centre and in Riga Origo shopping centre, Bastion store was
     opened.
  -- Monton presented its Rio Olympics special collection for the first time to
     public on April 18th 2016 in Lennusadam.
  -- From May 2nd 2016 Kristel Sooaru starts working as Sales and Marketing
     Director. Kristel has previously occupied different management positions at
     Baltika for 19 years, last position was the head of menswear collections
     and before that she was the head of Baltman brand. Before returning to
     Baltika Kristel was the purchase manager of TKM King, which is the holding
     company of Tallinna Kaubamaja Group’s footwear trade store chains ABC King
     and SHU.



Consolidated statement of financial position

                               31 March 2016  31 Dec 2015
---------------------------------------------------------
ASSETS                                                   
Current assets                                           
Cash and cash equivalents                190          398
Trade and other receivables            1,993        1,607
Inventories                           10,548       10,424
Total current assets                  12,731       12,429
Non-current assets                                       
Deferred income tax asset                234          234
Other non-current assets                 613          584
Property, plant and equipment          2,970        2,910
Intangible assets                      1,865        1,944
Total non-current assets               5,682        5,672
TOTAL ASSETS                          18,413       18,101
                                                         
EQUITY AND LIABILITIES                                   
Current liabilities                                      
Borrowings                             4,745        3,009
Trade and other payables               5,770        6,709
Total current liabilities             10,515        9,718
Non-current liabilities                                  
Borrowings                             3,267        3,312
Other liabilities                        336          283
Total non-current liabilities          3,603        3,595
TOTAL LIABILITIES                     14,118       13,313
                                                         
EQUITY                                                   
Share capital at par value             8,159        8,159
Share premium                            496          496
Reserves                               1,182        1,182
Retained earnings                     -5,049        1,310
Net loss for the period                 -493       -6,359
TOTAL EQUITY                           4,295        4,788
TOTAL LIABILITIES AND EQUITY          18,413       18,101





Consolidated statement of profit and loss

                                                              1 Q 2016  1 Q 2015
--------------------------------------------------------------------------------
Continuing operations                                                           
Revenue                                                         10,505    11,220
Cost of goods sold                                              -5,194    -6,131
Gross profit                                                     5,311     5,089
                                                                                
Distribution costs                                              -5,001    -5,012
Administrative and general expenses                               -669      -736
Other operating income (-expense)                                  -25        -7
Operating profit                                                  -384      -666
                                                                                
Finance costs                                                     -109      -117
Profit (loss) before income tax                                   -493      -783
                                                                                
Income tax expense                                                   0         0
                                                                                
Net profit from continuing operations                             -493      -783
                                                                                
Net loss for the period from discontinued operations                 0      -353
                                                                                
Net loss for the period                                           -493    -1,136
                                                                                
                                                                                
Basic earnings per share from net loss for the period, EUR       -0.01     -0.03
From continuing operations                                       -0.01     -0.02
From discontinued operations                                      0.00     -0.01
                                                                                
Diluted earnings per share from net loss for the period, EUR     -0.01     -0.03
From continuing operations                                       -0.01     -0.02
From discontinued operations                                      0.00     -0.01



Maigi Pärnik-Pernik
Member of the Management Board
[email protected]