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Pealkiri

Baltika’s Unaudited Financial Results, Fourth Quarter and 12 Months of 2018

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Baltika Group ended the fourth quarter with the loss of 1,472 thousand euros,
which includes an allowance for impairment, particularly for Eastern European
franchise partners in the amount of 1,605 thousand euros. Last year's comparable
result was net profit in the amount of 920 thousand euros.

In the fourth quarter, Group's sales revenue decreased 5% compared with the last
year same period and was 12,281 thousand euros. Channel, with the largest share,
retail, decreased 4% and was 11,160 thousand euros. Sales revenue decreased the
most in Estonia and Lithuania, Latvian result stayed in the last year's level.
Sales of formal clothes and men`s clothes continued to decline.

Business customers` (wholesale, franchise and consignation) sales revenue in
fourth quarter was 604 thousand euros decreasing by 30% compared with the last
year same period. The main reason for the decline in sales revenue was the
change of the cooperation agreement with the department store chain in Germany
and Central Europe, Peek & Cloppenburg, in this autumn, according to which
Monton collections are no longer sold in most department stores in Germany.
Another important reason of the decrease in sales revenue was the continued
decrease in franchise sales volumes in Russia, Belarus and Ukraine.

Baltika Group's e-store Andmorefashion.com revenue increased 10% in the fourth
quarter compared with the same period last year and was 472 thousand euros.
Monton formed 37% of the fourth quarter's e?store sales and sales revenue
increased 11% compared to year before.

Gross profit for the quarter was 6,368 thousand euros, decreasing by 754
thousand euro compared with the same period last year (4Q 2017: 7,122 thousand
euros). Gross profit decrease was driven by lower sales, which was amplyfied by
3 percentage points lower gross profit margin compared with the fourth quarter
of last year (4Q 2017: 51.9%). The decrease of the margin is caused by the
higher purchase prices and the increased sales volumes of the products sold at
discount.

Group's distribution expense in the fourth quarter was 5,501 thousand euros,
increasing by 76 thousand euros compared with the same period last year.
Distribution expenses has increased in retail segment due to the growth of
expenses related to rental agreements and costs related to entering Finnish
retail market.

12 months of 2018

Company ended the twelve months with the loss of 3,141 thousand euros, which
includes an allowance for impairment in amount of 1,605 thousand euros
(particularly the allowance for impairment for Eastern European franchise
partners). Last year's result was net profit in the amount of 58 thousand euros.
The negative result was mainly driven by the business customers and retail sales
revenue decrease, respectively nearly 2 and 1 million euro and higher
distribution costs related to entering Finnish market.

In twelve months total Baltika' s sales revenue decreased by 6% and was 44,691
thousand euros. E-commerce showed sales growth by 16%, retail decreased by 3%
and business customers sales decreased by 31%. Company' s gross profit was
22,316 thousand euros, which is 1,354 thousand euros less than in 2017. Gross
profit decrease in 2018 is driven by the decrease of sales revenue of business
customers, particularly Germany and Eastern-European region customers. In
addition, the gross profit was influenced by the decrease in Estonian retail
sales, particularly in fourth quarter and men' s segment lower sales. Women' s
segment gross profit increased compared with the last year and the most impacted
the improvement of the result Monton' s women collection gross profit increase
by 3%.

Baltika`s Strategy 2022 was based on the international growth but due to the
changes in fashion industry which resulted in lower sales and the unexpectedly
negative financial results of franchise partners, Management Board has
formalized a new 2019 and 2020 action and financial plan. A new plan focuses on
changing the business plan radically, including restructuring the brand
portfolio, focusing on home markets, simplificying business processes and
reducing the costs significantly. Management Board has presented the modified
plan to the Supervisory Board and the 2019-2020 action and financial plan will
be decided in coming weeks, after that the public will be informed. If the
action plan will be approved by the Supervisory Board it might influence the
Management Board`s estimates of trade receivables, inventories and fixed assets
impairment which may result in one-off costs. Due to that, the financial results
in the 2018 annual report disclosed on 20th of March in 2019 may change compared
with the results disclosed in this report.

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

  * In November, a new concept store, Vèrenni, representing all Baltika Group`s
    brands was opened in T1 Mall of Tallinn department store. In the new
    concept, the products in the store are grouped based on the customer needs,
    i.e according to the situation in which the clothes are needed. During the
    first months, the store proved to be particularly popular among men, who
    thought it was easier to find the clothes, which were grouped this way.
  * As the complex economic and political situation in Ukraine and Belarus has
    caused a significant decrease in sales volumes and solvency of Baltika's
    franchise partners on these markets, Baltika decided to terminate franchise
    agreements before the end of their period of validity with Belarusian and
    Ukrainian partners in the first quarter of 2019. Cooperation with Russian
    franchise partner will continue but on a smaller scale. Consequently,
    Baltika evaluates the Eastern European partners' liabilities as not fully
    collectable and thus creates an allowance for impairment in 2018. The early
    termination of the agreements results in a decrease of nearly 1,000 thousand
    euros in Baltika`s wholesale and franchise sales revenue in 2019.
  * In December, two new Monton sales points were opened in the Slovenian
    department stores in Ljubljana and Celjes due to the rapidly growing sales
    volumes of the consignment partner Montecristo SL.


Consolidated statement of financial position

                                     31 Dec 2018   31 Dec 2017
---------------------------------------------------------------
  ASSETS

  Current assets

  Cash and cash equivalents                  428           704

  Trade and other receivables              1,264         2,055

  Inventories                             11,016        10,499

  Total current assets                    12,708        13,258

  Non-current assets

  Deferred income tax asset                  286           189

  Other non-current assets                   513           487

  Property, plant and equipment            1,986         2,395

  Intangible assets                        1,480         1,513

  Total non-current assets                 4,265         4,584

  TOTAL ASSETS                            16,973        17,842



  LIABILITIES AND EQUITY

  Current liabilities

  Borrowings                               7,829         1,309

  Trade and other payables                 5,934         5,984

  Total current liabilities               13,763         7,293

  Non-current liabilities

  Borrowings                               1,165         5,363

  Total non-current liabilities            1,165         5,363

  TOTAL LIABILITIES                       14,928        12,656



  EQUITY

  Share capital at par value               4,079         8,159

  Share premium                                0           496

  Reserves                                 1,107         1,345

  Retained earnings                            0        -4,872

  Net profit (loss) for the period        -3,141            58

  TOTAL EQUITY                             2,045         5,186

  TOTAL LIABILITIES AND EQUITY            16,973        17,842

Consolidated statement of profit and loss and comprehensive income

                                                4Q 2018 4Q 2017    2018    2017
-------------------------------------------------------------------------------


 Revenue                                         12,281  12,969  44,691  47,459

 Client bonus provision                               0      16       0      16

 Revenue after client bonus provision            12,281  12,985  44,691  47,475

 Cost of goods sold                              -5,913  -5,863 -22,375 -23,805

 Gross profit                                     6,368   7,122  22,316  23,670



 Distribution costs                              -5,501  -5,425 -21,005 -20,630

 Administrative and general expenses               -642    -567  -2,375  -2,387

 Other operating income (-expense)               -1,645     -12  -1,621     -35

 Operating profit (loss)                         -1,420   1,118  -2,685     618



 Finance costs                                     -149    -159    -553    -521

 Profit (loss) before income tax                 -1,569     959  -3,238      97



 Income tax expense                                  97     -39      97       0



 Net profit (loss) for the period                -1,472     920  -3,141      58



 Total comprehensive income (loss) for the
 period                                          -1,472     920  -3,141      58





 Basic earnings per share from net loss for the
 period, EUR                                      -0.04    0.02   -0.08    0.00



 Diluted earnings per share from net loss for
 the period, EUR                                  -0.04    0.02   -0.08    0.00

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

Attachment

  * Baltika_Interim_report_4Q 2018 (https://ml-
    eu.globenewswire.com/Resource/Download/64dfb8f6-f617-4eb1-b7e6-55abfa1b7aef)