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Pealkiri

BALTIKA’S UNAUDITED FINANCIAL RESULTS, FIRST QUARTER OF 2019

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Baltika Group ended the first quarter with a net loss of 1,442 thousand euros.
The loss for the same period last year was 982 thousand euros. The result for
the first quarter of 2019 includes a negative impact of 117 thousand euros on
the new accounting standard IFRS 16.

As of 1 January 2019, IFRS 16, "Leases", amended the recognition of lease
contracts so that the rent payments for the remaining term of the lease period
are recognized in the statement of financial position at their present value as
both assets and liabilities, and period rent expenses are not recognized in
income statement, instead of that the depreciation and interest expense are
recognized in the income statement. The impact of the mandatory new accounting
standard IFRS 16 on the income statement is shown in the table below.

                                                     1Q 2019
-------------------------------------------------------------
  Decrease in rent expenses                            1,605

  Increase in depreciation                            -1,502

  Increase in operating profit                           103

  Calculated interest expense on lease liabilities      -220
-------------------------------------------------------------
  Decrease in the net profit                            -117

In addition, IFRS 16 has a significant impact on the company's various balance
sheet assets and liabilities. As at 31.03.19, fixed assets (i.e all lease
payments at their present value, up to the end of the contract term) are
increasing by 16,577 thousand euros and at the same time short-term lease
liabilities increasing by 6,815 thousand euros and long-term lease liabilities
by 9,879 thousand euros.

The Group's sales revenue decreased by 10% in the first quarter compared to the
same period last year and amounted to 9,270 thousand euros. The largest sales
channel, retail, sales decreased by 2% and totalled 7,975 thousand euros.
Revenue decreased by 5% in both the Estonian and Latvian markets, while sales
revenue in Lithuania increased by 6%. For several consecutive quarters, there
has been a downward trend in the sales of formal clothing and the men's segment,
while demand for dresses and outerwear has increased.

The sales revenue of business customers (wholesale, franchise and consignment
customers) in the first quarter was 708 thousand euros, decreasing by 58%
compared with last year. The decrease in sales revenue of nearly 1 million euros
is related to the termination of contracts of franchise partners of Belarus and
Ukraine and the decrease in Russian franchise volumes. Another important reason
for the decrease in sales revenue was the change in cooperation agreement with
Peek & Cloppenburg, a chain of German and Central European department stores, in
autumn 2018, and closure of Spanish franchise stores.

The sales revenue of the first quarter of the Baltika Group's online store
Andmorefashion.com increased by 16% compared to the same period last year and
amounted to 544 thousand euros. Monton accounted for 37% of sales in the first
quarter, followed by Mosaic with 26%. The most distant countries to which
Baltika's brand orders were shipped in the first quarter were Japan, Australia,
USA and Canada.

The quarter's gross profit was 4,434 thousand euros, lower by 449 thousand euros
compared to the same period last year (1Q 2018: 4,883 thousand euros). The
decrease in gross profit is primarily due to the decreased sales revenue of
business customers. The gross profit margin was 47.8%, the same level as in the
first quarter of the previous year (1Q 2018: 47.2%).

In the first quarter, Group's marketing expenses were 5 029 thousand euros,
decreasing by 98 thousand euros compared to the same period last year. The
decrease in distribution costs is primarily related to the recognition of leases
in the Group's balance sheet due to the change in accounting policies of IFRS
16 "Leases".

Equity

As of the end of the first quarter, the equity of the company is negative and
the shareholders' meeting on 12 April 2019 confirmed the following resolutions
in order to restore equity and comply with the requirements of the Commercial
Law: to increase the nominal value of AS Baltika share to 1 euro and to change
the existing shares so that for every 10 shares one new share is given,
thereafter decrease the nominal value of the share to 0.10 euros and decrease
share capital from 4,079 thousand euros to 408 thousand euros to cover the
losses. In addition, a decision was taken to increase the share capital by 5
million euros via public offering in August 2019.

KJK Fund, Sicav-SIF, the largest shareholder, holding 38.9% of shares of AS
Baltika, has confirmed its willingness to subscribe for new shares pursuant to
its proportion of holding and according to terms specified in the Prospectus, up
to 5,000 thousand euros depending on usage of other participants' subscription
rights. This means that KJK Fund, Sicav-SIF will also subscribe to shares which
it is given additional subscription rights according to the allocation terms
specified in the Prospectus and which are not subscribed by other shareholders.

The impact of the resolutions confirmed at the General Meeting of Shareholders
on the Group's financial position is shown in the pro forma equity table below.

                                          pro forma         pro forma
                    31 March 2019          entry(1)          entry(2) pro forma
-------------------------------------------------------------------------------
 EQUITY

 Share capital at
 par value                  4,079            -3,672             5,000     5,408

 Share premium                  0                 0                 0         0

 Reserves                   1,107            -1,107                 0         0

 Retained earnings         -5,119             4,779                 0      -340

 Net profit (loss)
 for the period            -1,442                 0                 0    -1,442

 TOTAL EQUITY              -1,375                 0             5,000     3,625

(1 )pro forma entry agenda number 7 of the annual general meeting of
shareholders impact: "To decrease the share capital in the remaining amount of
losses 4,012,972 euros after all reserves have been used to cover these losses
by simplified reduction as follows: to decrease the share capital with three
million six hundred seventy one thousand five hundred thirty six (3,671,536)
euros.
(2)pro forma entry agenda number 8 of the annual general meeting of shareholders
impact: "To increase the share capital of AS Baltika by issuing additionally
fifty million (50,000,000) ordinary shares with the nominal value of 0.10 euros
with the issuance price of 0.10 euros. The share capital of AS Baltika will be
increased by five million (5,000,000) euros and the new amount of the share
capital is 5,407,949 (five million four hundred seven thousand nine hundred and
forty nine) euros."

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

  * In March 2019, the Supervisory Board of AS Baltika approved the business
    plan for 2019 and 2020. The main parts of the operational plan are
    optimizing the brand portfolio and sales channels, digitalisation and
    changing the purchasing base. With the transition to an optimized brand
    portfolio, significant simplification of business processes and dissolving
    the production in Estonian production units, Baltika Group's fixed costs
    will be reduced by nearly two million euros over the next 12 months.
  * In March 2019, the Supervisory Board of AS Baltika approved Mae Hansen, the
    third member of the management board of AS Baltika. She is responsible for
    implementing the company's 2019 and 2020 business plan.
  * In 14 March 2019 the Supervisory Board decided to present to the general
    meeting of shareholders the proposal to increase the nominal value of the
    share to 1 euro and to exchange the existing shares so that for each 10
    shares one new share is given, thereafter decrease the nominal value of the
    share to 0.10 euros and decrease share capital from 4,079 thousand euros to
    408 thousand euros to cover the losses in order to implement the 2019-2020
    operational plan and meet the net asset requirement set out in the
    Commercial Code.
  * In 14 March 2019 Supervisory Board decided to propose to the general meeting
    of shareholders to increase in August 2019 the share capital by 5 million
    euros via public offering.
  * In 14 March 2019 Supervisory Board gave the consent to the management board
    to take a loan of 3 million euros from KJK Fund SICAV-SIF in the next 2
    months. The loan was taken into two parts - 1,500 thousand euros was taken
    in March 2019 and 1,500 thousand euros in April 2019. The loan bears a 6%
    interest and is repaid from the funds generated from the share emission in
    August 2019.
  * In 12 April 2019, the Annual General Meeting of AS Baltika shareholders
    approved the annual report for 2018 and the confirmation of losses. The
    General Meeting resolved to recall Valdo Kalm, member of the Supervisory
    Board of AS Baltika. In order to bring the equity into accordance with the
    requirements of the Commercial Code, the general meeting adopted a decision
    to increase the nominal value of AS Baltika share to 1 euros and to exchange
    the existing shares so that 1 new share can be received for every 10 shares,
    then reduce the nominal value of the share to 0.1 euros and reduce the share
    capital from 4,079 thousand to 408 thousand euros to cover losses. In
    addition, a decision was made to increase the share capital by 5 million
    euros via public offering in August 2019.

Consolidated statement of financial position

                                     31 March 2019   31 Dec 2018
-----------------------------------------------------------------
  ASSETS

  Current assets

  Cash and cash equivalents                    465           428

  Trade and other receivables                1,092           866

  Inventories                                10,48        10,707

  Total current assets                      12,037        12,001

  Non-current assets

  Deferred income tax asset                    286           286

  Other non-current assets                     213           287

  Property, plant and equipment             18,288         1,878

  Intangible assets                            529           543

  Total non-current assets                  19,316         2,994

  TOTAL ASSETS                              31,353        14,995



  LIABILITIES AND EQUITY

  Current liabilities

  Borrowings                                15,957         7,829

  Trade and other payables                   5,907         5,934

  Total current liabilities                 21,864        13,763

  Non-current liabilities

  Borrowings                                10,864         1,165

  Total non-current liabilities             10,864         1,165

  TOTAL LIABILITIES                         32,728        14,928



  EQUITY

  Share capital at par value                 4,079         4,079

  Share premium                                  0             0

  Reserves                                   1,107         1,107

  Retained earnings                         -5,119             0

  Net profit (loss) for the period          -1,442        -5,119

  TOTAL EQUITY                              -1,375            67

  TOTAL LIABILITIES AND EQUITY              31,353        14,995

Consolidated statement of profit and loss and comprehensive income



                                                              1Q 2019 1Q 2018
-----------------------------------------------------------------------------




 Revenue                                                         9,27  10,343

 Cost of goods sold                                            -4,836   -5,46

 Gross profit                                                   4,434   4,883



 Distribution costs                                            -5,029  -5,127

 Administrative and general expenses                             -598    -595

 Other operating income (-expense)                                117     -17

 Operating profit (loss)                                       -1,076    -856



 Finance costs                                                   -366    -126

 Profit (loss) before income tax                               -1,442    -982



 Income tax expense                                                 0       0



 Net profit (loss) for the period                              -1,442    -982



 Total comprehensive income (loss) for the period              -1,442    -982





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



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

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

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