Börsiteade

Pealkiri

Consolidated interim report for Q3 and 9 months of 2014 (unaudited)

Teade

Tallinn, 2014-11-11 15:00 CET (GLOBE NEWSWIRE) --
Selected Financial Indicators

Summarized selected financial indicators of the Group for 9 months 2014
compared to 9 months 2013 and 30.09.2014 compared to 31.12.2013 were as
follows: 



in thousands of EUR                                     9m 2014  9m 2013  Change
--------------------------------------------------------------------------------
Revenue                                                  87 139   98 812  -11.8%
EBITDA                                                   13 025   18 501  -29.6%
Net profit for the period                                 9 235   11 747  -21.4%
Net profit attributable equity holders of the Parent      8 431   10 709  -21.3%
 company                                                                        
Earnings per share (EUR)                                   0.22     0.27  -20.5%
Operating cash flow for the period                        7 621   15 274  -50.1%





in thousands of EUR                              30.09.2014  31.12.2013   Change
--------------------------------------------------------------------------------
Total assets                                         79 114      76 629     3.2%
Total current assets                                 57 438      55 080     4.3%
Total equity attributable to equity holders of       58 404      52 370    11.5%
 the Parent company                                                             
Loans and borrowings                                      0          79  -100.0%
Cash and cash equivalents                            22 374      19 165    16.7%





Margin analysis, %                                      9m 2014  9m 2013  Change
--------------------------------------------------------------------------------
Gross profit                                               33.9     35.6   -4.8%
EBITDA                                                     14.9     18.7  -20.2%
Net profit                                                 10.6     11.9  -10.9%
Net profit attributable equity holders of the Parent        9.7     10.8  -10.7%
 Company                                                                        





Financial ratios, %            30.09.2014  31.12.2013  Change
-------------------------------------------------------------
ROA                                  11.2        13.4  -16.4%
ROE                                  16.2        19.9  -18.6%
Price to earnings ratio (P/E)         7.3         9.5  -23.3%
Current ratio                         5.0         4.7    7.5%
Quick ratio                           2.9         2.6   14.5%

Consolidated Statement of Financial Position



in thousands of EUR                                       30.09.2014  31.12.2013
--------------------------------------------------------------------------------
ASSETS                                                                          
Current assets                                                                  
Cash and cash equivalents                                     22 374      19 165
Prepayments                                                      400         196
Trade and other receivables                                   10 772      10 846
Inventories                                                   23 892      24 873
Total current assets                                          57 438      55 080
                                                                                
Non-current assets                                                              
Investments in associates                                        115         124
Available-for-sale investments                                   549         497
Deferred tax asset                                               608         460
Intangible assets                                                753         719
Investment property                                            1 725       1 592
Property, plant and equipment                                 17 926      18 157
Total non-current assets                                      21 676      21 549
TOTAL ASSETS                                                  79 114      76 629
                                                                                
LIABILITIES AND EQUITY                                                          
Current liabilities                                                             
Current borrowings                                                 0          79
Trade and other payables                                       6 850      10 837
Tax liabilities                                                4 617         905
Total current liabilities                                     11 467      11 821
                                                                                
Non-current liabilities                                                         
Deferred tax liability                                           266       1 953
Total non-current liabilities                                    266       1 953
Total liabilities                                             11 733      13 774
                                                                                
Equity                                                                          
Share capital                                                 11 820      11 820
Share premium                                                 13 822      13 822
Treasury shares                                               -1 164        -224
Statutory reserve capital                                      1 306       1 306
Other reserves                                                     0           0
Unrealised exchange rate differences                          -2 454      -1 215
Retained earnings                                             35 074      26 861
Total equity attributable to equity holders of the            58 404      52 370
 Parent company                                                                 
Non-controlling interest                                       8 977      10 485
Total equity                                                  67 381      62 855
TOTAL EQUITY AND LIABILITIES                                  79 114      76 629

Consolidated Income Statement



in thousands of EUR                           3Q 2014  3Q 2013  9m 2014  9m 2013
--------------------------------------------------------------------------------
Revenue                                        32 479   29 865   87 139   98 812
Cost of goods sold                            -22 110  -18 068  -57 605  -63 632
Gross Profit                                   10 369   11 797   29 534   35 180
                                                                                
Distribution expenses                          -5 184   -3 739  -12 777  -12 124
Administrative expenses                        -2 186   -1 577   -5 652   -4 981
Other operating income                            206       62      597      496
Other operating expenses                         -402     -764   -1 043   -1 922
Operating profit                                2 803    5 779   10 659   16 649
                                                                                
Currency exchange income/(expense)                                              
Other finance income/(expenses)                   171      313      420      721
Net financial income                              311      585      -80      398
                                                                                
Profit (loss) from associates using equity         -2        1       -1        9
 method                                                                         
                                                                                
Profit before tax and gain/(loss) on net        3 112    6 365   10 578   17 056
 monetary position                                                              
                                                                                
Income tax expense                             -1 954   -1 249   -4 768   -3 904
Profit before gain/(loss) on net monetary       1 158    5 116    5 810   13 152
 position                                                                       
                                                                                
Gain on net monetary position                   2 444   -1 704    3 425   -1 405
Profit for the period                           3 602    3 412    9 235   11 747
Attributable to :                                                               
Equity holders of the Parent company            3 406    3 093    8 431   10 709
Non-controlling interest                          196      319      804    1 038
                                                                                
Earnings per share from profit attributable      0.09     0.08     0.22     0.27
 to equity holders of the Parent company,                                       
 both basic and diluted (EUR)                                                   

Business environment

The new economic reality, clouted by punishing sanctions, armed conflicts,
falling consumer sentiment, weaker currencies and probably an endless list of
other factors that can be outlined to reason the companies’ financial strength
(or weakness). Nevertheless, the economic situation is the same for all market
participants, starting from the consumers and ending with companies satisfying
the consumer needs. The economy is also the same for competitors. Therefore we
believe that the crisis-like situation is the stress test for the companies on
the markets, their business models and their ability to generate profit to
their shareholders. 

Our economic environment starts from the wallet of our customers. This wallet
has shown the tendency to contract, especially where imported goods are
concerned. For the clarity reasons, we have outlined the table with the
movement of most important currencies to us similar to the previous report (see
the appended report). 

What described the environment during Q3 was the erosion of expectations for
the stabilization of the economic environment, or perhaps, some political
intent (that, indeed, took place in case of Ukraine) to stop the non-economic
factors influencing the consumers’ ability to spend. Therefore, the consumer
weakness in our main consumer markets – Russia, Belarus, Ukraine and Kazakhstan
– continued. Looking beyond Q3 (until the end of the year), what we need to
factor in is that our main market – Russia – continues to be challenging due to
weakening of Russia’s Rouble. Therefore our expectation that currencies would
not be an issue for the second half of the FY 2014 proved ungrounded. 

In this environment, the company continuously focuses on the profitability of
the business. This, in first order, means strict control of the operating
expenses and secondly, managing the profitability of the sales (which, to our
concern, has been weaker in Q3 due to currency exposure and due to
hyperinflation effect on gross margin). 

The Group’s sales in Q3 2014 were above the benchmark in Q3 2013, the net sales
reached 32 479 thousand EUR, compared to 29 865 thousand EUR a year ago. The
corresponding numbers for 9 months of 2014 were 87 139 thousand EUR against 98
812 thousand EUR for 9 months of 2013. The wholesale segment affected both the
increase in net sales in Q3 and the decrease in 9 months of 2014. 

The wholesale segment contributed 25 043 thousand EUR in Q3 2014 (24 338
thousand EUR in Q3 2013), which translates into 68 450 thousand EUR in 9 months
of 2014 (81 900 thousand EUR in 9 months of 2013). The retail segment
contributed 7 295 thousand EUR during Q3 2014 (5 431 thousand EUR in Q3 2013),
and correspondingly 18 065 thousand EUR for the same period in 2014 (16 614
thousand EUR a year ago). The Company conducted clearance sale in Q3 in its
stores it operates in Belarus that has positively affected the sales, but
negatively the margins. 

Measured by the sales volume, the Q3 sales dynamics year-to-year between the
main markets was as follows: Russia 17 037 thousand EUR (17 087 thousand EUR in
Q3 2013), Belarus 10 980 thousand EUR (8 029 thousand EUR in Q3, 2013), Ukraine
1 183 thousand EUR (1 982 thousand EUR in Q3, 2013), the Baltic States 898
thousand EUR (723 thousand EUR in Q3, 2013), the other markets contributed 2
380 thousand EUR (2 044 thousand EUR in Q3, 2013). 

The net profit to shareholders of the Parent company stood at 3 406 thousand
Euros in Q3 2014 compared to 3 093 thousand EUR in Q3, 2013. The corresponding
net profit for 9 months of 2014 was 8 431 thousand EUR compared to 10 709
thousand EUR a year ago. The Group’s EBITDA reached 13 025 thousand EUR in 9
months of 2014 compared to 18 501 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 (-17% against
Euro and -24% against USD from beginning of year, all fuelling import-related
inflationary environment). The real economy’s growth in 2014 is questionable.
As of end of Q3 2014 the total store count is 382 units in Russia. 

Belarus economic growth is stalling because of cooling economic climate of its
main export market – Russia. The country has managed targeted inflation policy
rather well that also has created some stability for the currency (Belarus
Rouble weakened by 2.2% against Euro during 9 months of 2014). There are a
total of 54 stores operated directly by the Group and 5 franchise stores. The
Group’s sales revenue in Belarus reached 26 491 thousand EUR for 9 months of
2014 compared to 24 587 thousand EUR for the same period a year ago. 

Negative information flow regarding Ukraine is continuously on the radar of
global media. The currency stabilized in Q3 2014 after dropping 49% against
Euro from the beginning of the year. For the Group, the 9 months of 2014 net
sales dropped to 3 848 thousand EUR compared to 7 141 thousand EUR for the same
period a year ago. We have very vague visibility about the outlook for 2014.
There are 97 franchise stores in total in the country as of end of Q3 2014. 

In the Baltics, the Group primarily operates via own stores and franchise
partners. The Group operates 9 own stores, complemented by 33 partner stores in
the region. The sales in the Baltic countries aggregated 2 489 thousand EUR for
9 months of 2014, compared to 2 015 thousand EUR for the same period a year
ago. 

On the store openings, during 9 months of 2014 net increase (including openings
and store closures primarily due to relocations) for Milavitsa stores were 4
units and 3 openings under the Lauma Lingerie brand. The Group therefore
operated directly and via franchise a total of 686 stores. 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 87 139 thousand EUR during 9 months of 2014,
representing a 11.8% decrease as compared to the same period of previous year.
Overall, wholesales decreased by 16.4% and retail sales increased by 8.7%. 

The Group’s reported gross profit margin during 9 months of 2014 decreased
year-to-year to 33.89%, reported gross margin was 35.60% in the respective
period of previous year. Consolidated operating profit for 9 months of 2014
amounted to 10 659 thousand EUR, compared to 16 649 thousand EUR in 9 months of
2013. The consolidated operating profit margin was 12.2% for 9 months of 2014
(16.8% in 9 months of 2013). Consolidated EBITDA for 9 months of 2014 was 13
025 thousand EUR, which is 14.9% in margin terms (18 501 thousand EUR and 18.7%
for 9 months of 2013). 

During Q3 of 2014 the Group distributed profit from subsidiaries to the Parent
company, which brought additional 0.5 million EUR in tax expenses. The total
tax expense stood at 4 768 thousand EUR for 9 months of 2014 compared to 3 904
thousand EUR during the corresponding period of the last year. In order to
reflect changed economic reality during Q3 the Group made a provision in trade
receivables in the amount of 1,3 million EUR, additional write-down of
inventory were performed as well. 

Currency exchange losses in 9 months of 2014 amounted to 500 thousand EUR (323
thousand EUR in 9 months of 2013). Gain on net monetary position, which is
highly dependent on inflation rate in Belarus and exchange rates` movements,
increased by 4 830 thousand EUR compared to 9 months of 2013. As a result
consolidated net profit attributable to equity holders of the Parent company
for 9 months of 2014 amounted to 8 431 thousand EUR, compared to 10 709
thousand EUR in 9 months of 2013, net profit margin attributable to equity
holders of the Parent company for 9 months of 2014 was 9.7% against 10.8% in 9
months of 2013. 

Financial position

As of 30 September 2014 consolidated assets amounted to 79 114 thousand EUR
representing an increase by 3.2% as compared to the position as of 31 December
2013. 

Trade and other receivables decreased by 74 thousand EUR as compared to 31
December 2013 and amounted to 10 772 thousand EUR as of 30 September 2014.
Inventory balance decreased by 981 thousand EUR and amounted to 23 892 thousand
EUR as of 30 September 2014. Changes in trade debtors and stock balance were in
line with the seasonality trend of the business. 

Equity attributable to equity holders of the Parent company increased by 6 034
thousand EUR and amounted to 58 404 thousand EUR as of 30 September 2014. 

Current liabilities decreased by 354 thousand EUR during 9 months of 2014.
Current and non-current loans and borrowings decreased by 79 thousand EUR to
zero balance as of 30 September 2014. 

Sales structure

Sales by markets



in thousands of        9 months      9 months  Change     9 months      9 months
 EUR                       2014          2013                 2014          2013
                                                            % from  % from sales
                                                             sales              
--------------------------------------------------------------------------------
Russia                   47 582        58 375  -18.5%        54.6%         59.1%
Belarus                  26 491        24 587    7.7%        30.4%         24.9%
Kazakhstan                3 197         3 219   -0.7%         3.7%          3.3%
Ukraine                   3 848         7 141  -46.1%         4.4%          7.2%
Moldova                   1 628         1 888  -13.8%         1.9%          1.9%
Baltics                   2 489         2 015   23.5%         2.9%          2.0%
Other markets             1 903         1 587   19.9%         2.2%          1.6%
Total                    87 139        98 812  -11.8%       100.0%        100.0%

The majority of lingerie sales revenue during 9 months of 2014 in the amount of
47 582 thousand EUR was generated in Russia, accounting for 54.6% of total
sales. The second largest market was Belarus, where sales reached 26 491
thousand EUR, contributing 30.4% of lingerie sales (both retail and wholesale). 

Sales by business segments



in thousands of        9 months      9 months  Change   9 months      9 months  
 EUR                       2014          2013             2014          2013    
                                                          % from    % from sales
                                                          sales                 
--------------------------------------------------------------------------------
Wholesale                68 450        81 900  -16.4%        78.6%         82.9%
Retail                   18 065        16 614    8.7%        20.7%         16.8%
Other operations            624           298  109.4%         0.7%          0.3%
Total                    87 139        98 812  -11.8%       100.0%        100.0%

During 9 months of 2014 wholesale revenue amounted to 68 450 thousand EUR,
representing 78.6% of the Group’s total revenue (9 months of 2013: 82.9%). The
main wholesale regions were Russia, Ukraine, Belarus, Kazakhstan and Moldova. 

Total lingerie retail sales of the Group in 9 months of 2014 amounted to 18 065
thousand EUR, representing 20.7% of the Group’s total revenue (9 months of
2014: 16.8%). 

As of 30 September 2014 there were altogether 686 Milavitsa and Lauma branded
shops. Own retail operations were conducted in Belarus and Latvia. As of the
end of 9 months of 2014 the Group operated 63 own retail outlets. As of 30
September 2014, there were 584 Milavitsa branded shops operated by Milavitsa
trading partners in Russia, Ukraine, Moldova, Kazakhstan, Uzbekistan,
Kyrgyzstan, Azerbaijan, Armenia, Germany, South Africa, Lithuania, Estonia,
Georgia, United Arab Emirates, Iran, Slovenia, Belgium and Italy. Additionally,
as of 30 September 2014, there were 39 Lauma Lingerie retail outlets operated
by Lauma Lingerie trading partners in Estonia, Latvia, Lithuania, Russia,
Ukraine, Saudi Arabia and Albania. 

Own & franchise store locations, geography



               Own  Franchise  Total
------------------------------------
Russia           0        382    382
Ukraine          0         97     97
Belarus         54          5     59
Baltics          9         33     42
Kazakhstan       0         39     39
Moldova          0         26     26
Other regions    0         41     41

Investments

During 9 months of 2014 the Group’s investments into property, plant and
equipment totalled 258 thousand EUR. Investments were made into equipment and
facilities to maintain effective production for future periods. 

Personnel

As of 30 September 2014, the Group employed 2 811 employees including 472 in
retail. The rest were employed in production, wholesale, administration and
support operations. 

Total salaries and related taxes during 9 months of 2014 amounted to 18 621
thousand EUR. The remuneration of key management of the Group, including the
key executives of the subsidiaries, totalled 905 thousand EUR. 

Decisions made by governing bodies during 9 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
         Silvano Fashion Group
         [email protected]