Market announcement

Title

Baltika’s Unaudited Financial Results, Fourth Quarter and 12 Months of 2020

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BALTIKA'S UNAUDITED FINANCIAL RESULTS, FOURTH QUARTER AND 12 MONTHS OF 2020

Baltika  Group ended the fourth quarter with a net loss of 1,352 thousand euros.
The  loss for the  same period last  year was 2,609 thousand  euros. Despite the
second  wave of COVID-19, the quarter results have improved 1,257 thousand euros
year  over-year due  to Baltika  Group's heavy  focus on  fixed costs reduction,
which  led to  operating expense  decreasing by  2,406 thousand euros. With one-
offs:  reserve  for  expense  of  closing  stores  in 2021 in the amount of 230
thousand  euros and reduction  of deferred tax  assets reserve in  the amount of
140 thousand  euros, Baltika finished  the year with  a net loss of 377 thousand
euros.

The  Group's  sales  revenue  for  the  fourth quarter was 3,978 thousand euros,
decreasing by 61% compared to the same period last year. Retail sales revenue in
the  fourth quarter decreased by 63% and  despite having one less brand to sell,
e-com  increased sales by  9%. The main reason for  the decrease in retail sales
was  the second  wave of  COVID-19 and the  restrictions in  place in Latvia and
Lithuania starting from November and full store closure from mid-December. Sales
to business customers decreased due to the strategic decision to exit this sales
channel.

The  gross profit for  the quarter was  2,222 thousand euros, decreasing by 51%
i.e.  2,303 thousand euros compared to the same  period of the previous year (Q4
2019: 4,525 thousand  euros). The company's gross profit margin was 55.9% in the
fourth  quarter, which is  11.3 percentage points higher  than the margin of the
same quarter of the previous year (Q4 2019: 44.6%). The decrease in gross profit
amount  is due to the decrease in  sales volumes. The positive increase in gross
profit  margin is  due to  Baltika Group  selling more  full price  stock to end
customers and fewer discounted items.

The  Group's distribution and administrative expenses in the fourth quarter were
2,983 thousand  euros, decreasing  by 45% i.e.  2,406 thousand euros compared to
the  same period last year.  Over 70% of the decrease  in expense relates to the
reduction  in retail costs. These  costs are reduced not  only by the closure of
stores  but  also  with  reduction  of  per  store  and  market office expenses.
Consistent   and  significant  reductions  in  distribution  and  administrative
expenses  is a part of Baltika Group's ongoing restructuring plan, a focus area,
which  has led to decrease by 601 thousand euros. In line with the restructuring
plan  Baltika Group head-office staff  has been reduced during  the quarter by a
further 22 people (reduction of 67 people for the total of 2020).

12 months  total gross profit amounts to 9,676 thousand euros, compared to prior
year 19,191 thousand euros (decreasing 50%) with the biggest decline coming from
the  second quarter where most of stores were  closed for a period due to COVID-
19. Fourth  quarter situation  was not  as bad  due to  Baltika´s biggest market
Estonia  remaining operational. Operating expenses  in the 12 months amounted to
14,587 thousand  euros, decreasing by 34% that is 7,673 thousand euros with 31%
of  the amount coming from the second quarter  when the stores were closed for a
period of time due to COVID-19 and 61% coming from the second half-year where it
was  mainly  due  to  cost  savings  in  line with the restructuring plan. Other
operating  income of the four quarters in  the amount of 5,442 thousand euros is
mainly  due to 4,585 thousand euros connected to the restructuring of creditors'
claims  in accordance with  the restructuring plan  approved on 19 June 2020 and
the reversal of the impairment of the right to use the property arising from the
lease  agreements for the  production buildings in  the amount of 1,320 thousand
euros.  Fourth quarter includes  the reserve expense  made for closing stores in
2021 in  the amount of 230 thousand euros. Yearly net financial expense was 761
thousand  euros and tax expense  147 thousand euros mainly due  to the change in
deferred  tax reserve in the amount of  140 thousand euros. The net loss for the
year 2020 is 377 thousand euros (compared to 5,909 net loss the prior year).

Owing  to the  careful management  of the  stock situation,  to received loan of
2,550 thousand  euros from KJK Fund SICAV-SIF via its holding company and to all
the  cost savings  achieved, Baltika  Group has  managed to retain the financial
stability achieved by the end of third quarter despite the second wave of Covid-
19 and  finished the  year with  1,467 thousand euros  cash and cash equivalents
with  no use of  bank overdraft (with  3,000 thousand euros limit). Baltika will
continue implementing the strategy - develop its only remaining women's clothing
brand  Ivo Nikkolo with  the new contemporary  quality products partly available
from  spring-summer 2021 and fully from autumn-winter. More focus will be put on
accessories  a  with  wide  selection  of  quality products already available in
spring-summer  and one separate  standalone accessories store  to be launched in
spring  2021. Another focus is to continue searching for cooperation partners to
increase online sales.

Consolidated statement of financial position

                                       31 Dec 2020   31 Dec 2019
-----------------------------------------------------------------
  ASSETS

  Current assets

  Cash and cash equivalents                  1,427           264

  Trade and other receivables                  318           621

  Inventories                                3,467         7,644

  Assets classified as held for sale             0            28

  Total current assets                       5,212         8,557

  Non-current assets

  Deferred income tax asset                    140           281

  Other non-current assets                     111           222

  Property, plant and equipment              1,218         1,683

  Right-of-use assets                        9,199        16,040

  Intangible assets                            597           536

  Total non-current assets                  11,255        18,762

  TOTAL ASSETS                              16,477        27,319



  LIABILITIES AND EQUITY

  Current liabilities

  Borrowings                                   252         1,731

  Lease liabilities                          3,127         5,383

  Trade and other payables                   3,019         4,118

  Total current liabilities                  6,398        11,232

  Non-current liabilities

  Borrowings                                   874           488

  Lease liabilities                          6,493        12,396

  Total non-current liabilities              7,367        12,884

  TOTAL LIABILITIES                         13,765        24,116



  EQUITY

  Share capital at par value                 5,408         5,408

  Reserves                                   3,931         4,045

  Retained earnings                         -6,250          -341

  Net profit (loss) for the period           ?-377        -5,909

  TOTAL EQUITY                               2,712         3,203

  TOTAL LIABILITIES AND EQUITY              16,477        27,319

Consolidated statement of profit and loss and comprehensive income

                                             4Q 2020  4Q 2019 12m 2020 12m 2019
-------------------------------------------------------------------------------




 Revenue                                       3,978   10,138   19,480   39,630

 Client bonus provision                          250       81      250       81

 Revenue after client bonus
 provision                                     4,228   10,219   19,730   39,711

 Cost of goods sold                           -2,006   -5,694  -10,054  -20,520

 Gross profit                                  2,222    4,525    9,676   19,191



 Distribution costs                           -2,575   -4,745  -12,234  -19,588

 Administrative and general
 expenses                                      - 408     -644   -2,353   -2,672

 Other operating income (-
 expense)                                       -318   -1,418    5,442   -1,443

 Operating profit (loss)                      -1,079   -2,282      531   -4,512




 Finance costs                                  -126     -321     -761   -1,391

 Profit (loss) before income
 tax                                          -1,205   -2,603     -230   -5,903



 Income tax expense                             -147       -6     -147       -6



 Net profit (loss) for the
 period                                       -1,352   -2,609     -377   -5,909



 Total comprehensive income
 (loss)
 for the period                               -1,352   -2,609     -377   -5,909





 Basic earnings per share from
 net profit (loss)
  for the period, EUR                          -0.02    -0.05    -0.01    -0.16



 Diluted earnings per share
 from net profit (loss)
  for the period, EUR                          -0.02    -0.05    -0.01    -0.16



Flavio Perini
Chairman of Management Board, CEO
[email protected] (mailto:[email protected])