Börsiteade

Pealkiri

Baltika's unaudited financial results, third quarter of 2022 and 9 months 2022

Teade

The  third  quarter  was  eventful  for  the  Group.  We  had  set ourselves big
challenges  for the third  quarter, and we  are happy to  say that the set goals
were met:

  * In July, we completed the closing of the Moetänava store. As the Group is
    currently only involved in the development of Ivo Nikkolo products, the
    Moetänava sized trading space did not support our new business model. After
    the closure of Moetänava, we opened a new Ivo Nikkolo outlet store in the
    Arsenal center in Tallinn, which has been very well received by our
    customers.
  * At the beginning of August, we closed an important financing transaction
    (partial sale of Ivo Nikkolo trademarks, which the Group continues to use
    under an exclusive license), which will significantly support the growth of
    the Group's business in the following years.
  * At the end of September, we opened our new Ivo Nikkolo e-store to offer
    customers the best possible shopping experience. The opening of the new e-
    store is the first step in our decision to actively move forward with the
    development of our omnichannel strategy. Also, at the same time as the
    opening of the new e-store, the entire Group switched to a new Enterprise
    Resource Planning (ERP) system, which enables the Group to make better
    management decisions in the future.

The  result of  the third  quarter was  significantly affected  by our strategic
decision  to sell some of  the Ivo Nikkolo trademarks  and to continue using the
trademarks  under an  exclusive license.  The purpose  of the  transaction is to
finance  the Group's  business activities,  and the  Group will  use the amounts
received  from  the  transaction  to  finance  core  activities,  projects,  and
investments. The sales price of the trademarks was 8,000 thousand euros, and the
money will be received by the Group in four instalments, the last payment to the
Group  will take place at  the end of 2024. Despite  the transfer of trademarks,
the  Group retains the exclusive right to  use the trademarks for 10 years based
on an exclusive trademark license agreement. The period of the license agreement
is  automatically renewed for the  following one year and  after the end of each
subsequent  renewed period unless the contracting party provides the other party
with  a notification of a different content no less than three months before the
end  of the period. The validity of the  license agreement ends in any case when
the  legal  protection  of  all  trademarks  has  ended.  Otherwise, the license
agreement  can only be terminated by written agreement of the parties. The Group
pays  a license fee of a  maximum of 345 thousand euros per  year for the use of
trademarks, depending on the turnover. As a result of the transaction, the Group
received a one-time profit in the amount of 7,436 thousand euros, which explains
the  increase in operating and net profit  for the quarter compared to the third
quarter  of last year. The transaction also had a positive effect on the Group's
equity: as a result of the transaction, the Group's equity is in compliance with
the 50% share capital requirement stipulated in the Commercial Code.

The  opening of the new Ivo Nikkolo  e-store on September 22 marks the beginning
of  our  decision  to  take  a  strong  step forward with the development of the
omnichannel  strategy. In nine months, sales  through other channels account for
approximately  10% of total sales. The Group aims to double this share next year
through   the   omnichannel   strategy   and   the   development  of  additional
functionalities  of the e-store.  Together with the  opening of the new e-store,
the  Group switched to a new ERP system. The introduction of the new system also
means  that the entire Group implements a  single ERP system. The group-wide ERP
system  allows the Group  to collect, store  and analyse its  business data in a
centralized  location, providing more opportunities  and transparency for making
strategic management decisions.

The Group ended the third quarter with a net profit of 6,611 thousand euros. The
result of the third quarter has been significantly affected by the conclusion of
the contract for the sale of the Ivo Nikkolo trademarks and the contract for the
exclusive  use of the Ivo Nikkolo trademarks.  The adjusted result for the third
quarter,  without taking  into account  the effect  of the  previously mentioned
transaction,  was a net  loss of EUR  825 thousand. Compared to  the same period
last  year, the  Group's adjusted  result weakened  by 433 thousand  euros (last
year,  the Group ended the third quarter with a net loss of 392 thousand euros).
The  weakening of  the adjusted  result is  related to  the transition from five
brands  (Monton, Mosaic,  Baltman, Bastion  and Ivo  Nikkolo) to  one brand (Ivo
Nikkolo) and the closing of unprofitable stores.

The  sales revenue of the  Group in the third  quarter was 2,427 thousand euros,
decreasing by 36% compared to the same period last year (Q3 2021: 3,817 thousand
euros).  The  sale  of  Ivo  Nikkolo  products  accounted  for  99% of the third
quarter's  sales  revenue,  whereas  in  the  comparable period, the sale of Ivo
Nikkolo products accounted for 69% of the entire third quarter's sales revenue -
the  remaining  31% was  the  sales  revenue  of the discontinued brands Monton,
Mosaic,  Baltman and Bastion. The reason for  the decrease in sales revenue were
as follows:

 1. The Group has continued to close unprofitable stores as planned. In nine
    months, we have closed 10 unprofitable stores. During 2022, unprofitable
    stores will continue to be closed in Estonia, as the market with the largest
    number of stores. The closing of unprofitable stores is planned to be
    completed by the end of 2022.
 2. The sales revenue of the third quarter of last year included the sales
    revenue of the discontinued brands Monton, Mosaic, Baltman and Bastion. The
    sales result of the third quarter of this year includes the revenue from the
    sale of discontinued brands at a minimum (1%), in the comparable period, the
    sales revenue of discontinued brands made up 31% of the sales revenue of the
    third quarter.
 3. In 2021, Ivo Nikkolo underwent a renewal course. The transitional collection
    released last July and August was similar in style to Monton. In addition,
    during the transition season, customers found the Ivo Nikkolo collection
    still in the Monton store fronts. These circumstances supported additional
    sales of Ivo Nikkolo products in the comparable period.

E-com  sales revenue for the third quarter was 200 thousand euros, decreasing by
36% compared  to the  same period  last year.  The result  of the e-store in the
third  quarter of 2021 is not fully comparable, because in the comparable period
the  Group had two e-stores, Monton and Ivo Nikkolo, therefore the result of the
e-store  in  the  third  quarter  of  last  year included the sale of discounted
products  of the  discontinued brands  Baltman and  Monton through the Monton e-
store shop. The Monton e-shop was finally closed in September 2021.

The  gross profit for the third  quarter was 1,321 thousand euros, decreasing by
45% compared  to the same period last  year (Q3 2021: 1,921 thousand euros). The
Group's  gross profit margin was 54% in the  third quarter, an improvement of 4
percentage  points compared  to the  same period  last year  (Q3 2021: 50%). The
increase  in raw material and transportation prices and the strengthening of the
US dollar led to a significant cost increase in the price and delivery of goods.
Despite  the increase in  prices, the Group  has been able  to improve the gross
margin thanks to well-managed discounts and partially passing on price increases
to customers.

The  Group's distribution and administration  expenses were 2,022 thousand euros
in  the third quarter, decreasing  by 28% compared to the  same period last year
(Q3  2021: 2,590 thousand euros).  The decrease  in retail  costs is  related to
general cost savings and the closing of unprofitable stores. The group's general
administrative expenses have remained at a similar level to the same period last
year.

The  Group  ended  the  quarter  with  cash and cash equivalents of 282 thousand
euros, using the bank's overdraft facility in the amount of 2,042 thousand euros
(out of the limit of 3,000 thousand euros) at the end of the quarter.

Baltika continues to implement its strategy:

 1. We develop modern, high-quality products in our women's fashion brand Ivo
    Nikkolo, which is available in Estonia, Latvia and Lithuania and in our e-
    store.
 2. We continue with the development of our omnichannel strategy and e-store
    functionalities.
 3. We continue to open new Ivo Nikkolo concept stores in the Baltics. At the
    end of November this year, we will open a new Ivo Nikkolo concept store in
    the Panorama shopping centre in Vilnius.

Ongoing quarter

Ivo Nikkolo's fall collection has been well received. In October, sales of Ivo
Nikkolo products through all channels increased by 10 percent compared to the
same period in 2021. Retail sales efficiency (sales per m2 per month, EUR) was
138 EUR, increasing by 23% compared to October last year. The increase in the
turnover of Ivo Nikkolo products is an important sign that the demand for our
products remains even if the general purchasing power of customers decreases.

In  the fourth quarter,  the Group will  continue with general  cost savings and
productivity enhancements to make the business even smoother and more efficient.
In  the fourth quarter, the Group plans to  close three stores, two of which are
unprofitable  (one each in Estonia and Lithuania)  and one store in Estonia that
does  not match the profile  of Ivo Nikkolo stores.  The closing of the store in
Lithuania will be replaced by a new Ivo Nikkolo concept store.

In the fourth quarter, the focus is also on marketing activities. In October, we
started  an extensive  brand awareness  campaign in  Latvia and Lithuania, which
will  last until the end of the year. In October, Ivo Nikkolo presented a modern
feminine clothing and accessory collection at Riga Fashion Week (11.10.2022) and
Tallinn Fashion Week (20.10.2022).

By  the  fourth  quarter  of  2022, the  overall  market situation for inventory
purchases  will be more  negative due to  external factors compared  to the same
period  last year, mainly  due to increased  inventory prices and transportation
costs.  To avoid  possible delays  in the  supply chain,  the Group  has brought
inventory  orders forward, therefore an increase in inventory levels is expected
in the following periods.

Consolidated statement of financial position

                                     30 Sept 2022   31 Dec 2021
----------------------------------------------------------------
  ASSETS

  Current assets

  Cash and cash equivalents                   282           614

  Trade and other receivables                 194           696

  Inventories                               2,414         2,491

  Total current assets                      2,890         3,801

  Non-current assets

  Deferred income tax asset                    80            80

  Trade and other receivables               5,716             0

  Other non-current assets                    162           172

  Property, plant and equipment             1,181           855

  Right-of-use assets                       5,046         5,956

  Intangible assets                           595           631

  Total non-current assets                 12,781         7,694

  TOTAL ASSETS                             15,671        11,495



  LIABILITIES AND EQUITY

  Current liabilities

  Borrowings                                  356           364

  Lease liabilities                         1,884         1,692

  Trade and other payables                  2,310         2,438

  Total current liabilities                 4,550         4,494

  Non-current liabilities

  Borrowings                                3,201         2,425

  Lease liabilities                         3,191         4,264

  Trade and other payables                    151             0

  Total non-current liabilities             6,543         6,689

  TOTAL LIABILITIES                        11,094        11,183



  EQUITY

  Share capital at par value                5,408         5,408

  Reserves                                  4,431         4,431

  Retained earnings                        -9,527        -6,627

  Net profit (loss) for the period          4,265        -2,900

  TOTAL EQUITY                              4,577           312

  TOTAL LIABILITIES AND EQUITY             15,671        11,495

Consolidated statement of profit or loss and other comprehensive income

                                                3Q 2022 3Q 2021 9m 2022 9m 2021
-------------------------------------------------------------------------------




 Revenue                                          2,427   3,817   6,810   9,156

 Cost of goods sold                              -1,106  -1,896  -3,452  -4,707

 Gross profit                                     1,321   1,921   3,358   4,449



 Distribution costs                              -1,706  -2,287  -5,340  -6,124

 Administrative and general expenses               -316    -303    -949  -1,138

 Other operating income (-expense)                7,372     369   7,420   1,054

 Operating profit (loss)                          6,670    -300   4,489  -1,759



 Finance costs                                      -59     -92    -224    -251

 Profit (loss) before income tax                  6,611    -392   4,265  -2,010



 Income tax expense                                   0       0       0       0



 Net profit (loss) for the period                 6,611    -392   4,265  -2,010



 Total comprehensive income (loss)
 for the period                                   6,611    -392   4,265  -2,010





 Basic earnings per share from net profit
 (loss)
  for the period, EUR                              0.12   -0.01    0.08   -0.04



 Diluted earnings per share from net profit
 (loss)
  for the period, EUR                              0.12   -0.01    0.08   -0.04


Brigitta Kippak
Chairman of The Management Board, CEO
[email protected]
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