Börsiteade

Pealkiri

Baltika's unaudited financial results, third quarter and 9 months of 2013

Teade

A strong half-year was followed by decreased sales in third quarter 2013 and
brought a net loss of 784 thousand euros. Nine months ended with a net loss of
763 thousand euros, a weakening of 493 thousand euros year-over-year. 

The main factor that undermined third quarter performance was the situation in
the retail segment. Unusual warm weather in August and September dampened
demand for autumn goods in all  Baltika’s five retail markets. In addition,
consumer behaviour was affected by increasing uncertainty and slackening
economic growth, particularly in Russia, but to a lesser extent also in the
Baltics. Competition intensity in Estonia and Lithuania has grown due to new
brands entered the market and retail sales area has widened. 

In the first half-year the Group’s retail sales grew by 8%, in the third
quarter there was 2% shrinkage, which lowered nine-month retail sales growth to
5%. In the third quarter, moderate retail sales growth was achieved in the
Baltics (2%), where the growth driver was Estonia (5%). In nine-month terms,
the strongest retail sales growth was recorded in Estonia (14%), followed by
Latvia (8%) and Lithuania (4%). 

In the third-quarter retail sales in Russia fell by 14% and in Ukraine by 6%.
Addition to slackening economic growth, sales were driven down by the weakening
of the exchange rates of the Russian rouble against euro. The Group’s
nine-month foreign exchange loss amounted to 372 thousand euros. 

Wholesale and e-commerce revenues grew by 20% in third quarter which meets the
expectations set for 2013 to develop also other sale channels and increase
sales volumes through wholesale partners and franchise. 

Compared with the third quarter last year, the Group’s total revenue decreased
by 135 thousand euros, i.e. 1%. Gross margin for the third quarter was 48.9%, a
decrease of 2.9 percentage points year-over-year. The slide in the margin is
attributable to consumers’ unseasonably weak demand for autumn-winter goods due
what the proportion of new season garments sale from total sales was smaller
than in last year. 

Although after two weak months, sales resumed growth in October, the figures
did not fully meet management’s expectations. Weaker than expected results at
the beginning of the fourth quarter may put achievement of the company’s
financial targets for 2013, which were released on 1 October, at risk. The
current year’s fluctuating sales figures along with the uncertainties
prevailing in the economy make it difficult to make forecasts for the near
future. 

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

  --    At the request received from KJK Fund Sicav-SIF in June, the company’s
     H-bonds were converted into ordinary shares. On 16 July, the 5,000,000
     ordinary shares were transferred to the shareholder’s client account at the
     Estonian Central Register of Securities. The new shares account for 12.3%
     of the new total number of shares. Thus, the interest of Baltika’s largest
     investor (through the account of ING Luxembourg S.A.) increased to 30.86%.
     Baltika now has 40,794,850 ordinary shares with a par value of 0.2 euros
     each.
  --    In August, the Group celebrated its 85th anniversary with a fashion
     evening where Baltika’s brands presented their new collections for the
     coming season and the guests could get a glimpse into the origins of
     Estonian fashion through rare documentary footage featuring the birth and
     development of the domestic fashion industry.
  --    In August, the first Blue Inc London store was opened in Riga, Latvia,
     in line with a franchise agreement signed with A Levy & Son Ltd in May,
     which grants Baltika the right to represent the Blue Inc trademark in the
     Baltics. The next Blue Inc stores were opened in September in Valmiera,
     Latvia, and in October in Tallinn, Estonia.
  --    In October, Valanga OOO, Baltika’s franchise partner in Belarus, opened
     the first two Monton brand stores in Minsk. The total area of the stores is
     380 sqm. According to plan, in the next five years at least five Monton
     stores with a sales area of 150-250 sqm will be opened in Belarus.
  --    In October, Baltman’s designer Aivar Lätt alias Antonio received the
     highest recognition in the Estonian fashion world – the Golden Needle
     award. According to Antonio, his special Baltman Limited Edition
     collection, which was created for the Golden Needle, represents the essence
     of his work so far. The colourful collection, which also included some
     female fashion, played with grunge-style elements, bold and vibrant colour
     and design solutions. Baltika’s designers have been rewarded with Golden
     Needle award eight times throughout the years.
  --    At the end of October, Monton presented to the media and the guests of
     the Estonian Olympic Committee the collection of outfits created for the
     2014 Sochi Winter Olympics, after which all who wished could pre-order the
     new items from Monton’s e-shop. The limited collection combines the
     Estonian national colours and ethnic patters and stands out for its clean
     and clear colour solution. The well-thought-out ensemble was created by
     Monton’s head designers Piret Puppart and Peeter Rästa. The collection will
     be made available in the retail network in the last days of November.
  --    In the third quarter, the number of the Group’s stores grew by four. In
     July a Monton multi-brand store was opened in the Riga Plaza shopping
     centre in Latvia and in August an Ivo Nikkolo store was opened in the Alfa
     shopping centre and the first Blue Inc store was opened the Origo shopping
     centre (both in Riga). In September, the second Blue Inc store was opened
     in the Valleta shopping centre in Valmiera, Latvia, and the first
     new-concept Baltman store was opened in the Rocca al Mare shopping centre
     in Estonia. In Russia, one store was closed. In addition to changes to the
     retail system, which were made in the third quarter,  three new stores were
     opened in October: a Blue Inc store in the Rocca al Mare shopping centre in
     Tallinn and two stores, which sell Monton and Mosaic fashion products in
     the Gulliver shopping centre in Kiev, Ukraine.

Consolidated statement of financial position

                                  30 Sep 2013  31 Dec 2012
----------------------------------------------------------
ASSETS                                                    
Current assets                                            
Cash and cash equivalents                 752        2,078
Trade and other receivables             2,408        1,836
Inventories                            14,457       11,471
Total current assets                   17,617       15,385
Non-current assets                                        
Deferred income tax asset                 637          637
Other non-current assets                1,112        1,088
Property, plant and equipment           3,016        2,256
Intangible assets                       3,852        4,150
Total non-current assets                8,617        8,131
TOTAL ASSETS                           26,234       23,516
                                                          
EQUITY AND LIABILITIES                                    
Current liabilities                                       
Borrowings                              2,481        1,598
Trade and other payables                8,304        7,005
Total current liabilities              10,785        8,603
Non-current liabilities                                   
Borrowings                              4,550        4,702
Other liabilities                          14           25
Total non-current liabilities           4,564        4,727
TOTAL LIABILITIES                      15,349       13,330
                                                          
EQUITY                                                    
Share capital at par value              8,159        7,159
Share premium                             653           63
Reserves                                1,182        1,182
Retained earnings                       2,471        1,667
Net profit (loss) for the period         -763          804
Currency translation differences         -817         -689
TOTAL EQUITY                           10,885       10,186
TOTAL LIABILITIES AND EQUITY           26,234       23,516



Consolidated statement of comprehensive income

                                              Q3 2013  Q3 2012  9M 2013  9M 2012
--------------------------------------------------------------------------------
                                                                                
Revenue                                        14,209   14,344   41,659   40,144
Cost of goods sold                             -7,262   -6,906  -19,504  -18,506
Gross profit                                    6,947    7,438   22,155   21,638
                                                                                
Distribution costs                             -6,807   -6,353  -20,146  -19,172
Administrative and general expenses              -686     -620   -2,128   -1,988
Other operating income                              3       17       41       90
Other operating expenses                         -114     -168     -265      -77
Operating profit (loss)                          -657      314     -343      491
                                                                                
Finance income                                      0       53        0       70
Finance costs                                    -119     -165     -412     -799
                                                                                
Profit (loss) before income tax                  -776      202     -755     -238
                                                                                
Income tax expense                                 -8       -1       -8      -32
                                                                                
Net profit (loss)                                -784      201     -763     -270
Profit (loss) attributable to:                                                  
Equity holders of the parent company             -784      201     -763     -271
Non-controlling interest                            0        0        0        1
                                                                                
                                                                                
Other comprehensive income (loss)                                               
Currency translation differences                  -35      128     -128       12
                                                                                
Total comprehensive income (loss)                -819      329     -891     -258
Comprehensive income (loss) attributable to:                                    
Equity holders of the parent company             -819      329     -891     -259
Non-controlling interest                            0        0        0        1
                                                                                
                                                                                
Basic earnings per share, EUR                   -0.02     0.01    -0.02    -0.01
Diluted earnings per share, EUR                 -0.02     0.01    -0.02    -0.01



Maigi Pärnik
Member of the Management Board
[email protected]