Börsiteade

Pealkiri

SFG: Consolidated interim report of Q3 and 9 months of 2008

Teade

Consolidated interim report of Q3 and 9 months of 2008         25.11.2008

PROFITS
AS Silvano Fashion Group ended the third quarter of 2008 with consolidated net
sales of EEK 488.1 million (EUR 31.2 million), representing a 22.7% increase on
the third quarter of 2007. The Group's gross margin in the third quarter of
2008 reached 40.6% compared to 40.2% in the third quarter of 2007. Consolidated
operating profit amounted to EEK 43.3 million (EUR 2.8 million), representing a
7.3% decline compared to operating profit of Q3 2007. The consolidated
operating margin reached 8.9% (down from 11.8% in Q3 2007). 

 Consolidated net profit attributable to equity holders amounted to EEK 8.4
million (EUR 0.5 million), compared to EEK 16.5 million (EUR 1.1 million) in Q3
2007, and the net margin was 1.7% (down from 4.2% in Q3 2007). 

Cumulative nine months' sales of AS Silvano Fashion Group amounted to EEK
1,402.6 million (EUR 89.6 million), showing 19.2% increase compared to 9M 2007.
The Group's gross and operating margins in the nine months of 2008 stood at
42.6% and 11.3% respectively (42.6% and 16.9% (normalised1) in 9M 2007).
Operating profit in the nine months of 2008 amounted to EEK 158.6 million (EUR
10.1 million) compared to normalised EEK 198.4 million (EUR 12.7 million) in 9M
2007 . 

In the nine months of year 2008, the Group earned a net profit of EEK
40.6 million (EUR 2.6 million), representing a 55.2% decline compared to the
nine months of 20071, and net margin reached 2.9% (7.7% in 9M 20071). 
In the nine months of 2008, the Group's return on equity was 5.3% (down from
15.2% (normalised1) in the nine months of 2007) and return on assets was 3.5%
(down from 9.5% (normalised1) in the nine months of 2007). 

The substantial increase in sales and the decline in profitability compared to
the nine months of 2007 are a function of the rapid expansion of the Group's
retail network (as detailed below), and continues to be in line with the
management's expectations. 

BALANCE SHEET
At 30 September 2008, consolidated assets amounted to EEK 1,263.5 million (EUR
80.8 million), up from EEK 1,089.6 million (EUR 69.6 million) at 31 December
2007. The increases in both assets and liabilities are related mainly to retail
expansion. 

Trade receivables have increased by EEK 44.3 million (EUR 2.8 million). 

Inventories increased by EEK 41.2 million (EUR 2.6 million) to reach EEK 378.8
million (EUR 24.2 million) at 30 September 2008. The growth in inventory
results primarily from the retail expansion. Due to the expansion of the retail
network, the Group made rental prepayments and deposits for store premises,
which increased other receivables and prepayments. 

Property, plant and intangibles increased by EEK 63.8 million (EUR 4.1 million).

Current liabilities increased by EEK 65.6 million (EUR 4.2 million). Tax
liabilities, other payables, including payables to employees, and provisions
amounted to EEK 87.8 million (EUR 5.6 million), remaining at the expected
level. 

Current and non-current loans and borrowings increased by EEK 41.0 million (EUR
2.6 million) to EEK 70.2 million (EUR 4.5 million). This includes finance lease
liabilities of EEK 5.9 million (EUR 0.4 million.) 

Equity attributable to equity holders increased by EEK 64.3 million (EUR 4.1
million) to reach EEK 798.0 million (EUR 51.0 million).

SALES
Sales by business segments                                      9months  9months
	        9months 9months         9months 9months         2008     2007
                2008    2007    Change  2008    2007    Change  perc     perc
                EEK     EEK     EEK     EUR     EUR     EUR     from     from
                mil	mil	mil	million	million	million	sales    sales

Women's apparel	146.3	107.5	38.8	9.3	6.9	2.4	10.4%	9.1%
Lingerie	1,207.9	1,044.1	163.8	77.2	66.7	10.5	86.1%	88.7%
Subcontracting 
services and 
other sales	48.4	25.5	22.9	3.1	1.6	1.5	3.5%	2.2%
Total	     1,402.6	1,177.1	225.5	89.6	75.2	14.4	100.00%	100.00% 

Sales by markets
In the nine months of 2008, the Group mainly focused on Russia, Belarus and
Ukraine markets. 
Total sales by markets
	       9months 9months         9months 9months         2008     2007
                2008    2007    Change  2008    2007    Change  perc     perc
                EEK     EEK     EEK     EUR     EUR     EUR     from     from
                mil	mil	mil	million	million	million	sales    sales
Estonia	       114.1	126.8	-12.7	7.3	8.1	-0.8	8.1%	10.8%
Finland	        28.3	39.2	-10.9	1.8	2.5	-0.7	2.0%	3.3%
Latvia	        36.5	37.3	-0.8	2.3	2.4	-0.1	2.6%	3.2%
Belarus	       267.7	217.9	49.8	17.1	13.9	3.2	19.1%	18.5%
Ukraine	       112.4	72.9	39.5	7.2	4.7	2.5	8.0%	6.2%
Russia	       727.1	571.0	156.1	46.5	36.5	10.0	51.9%	48.5%
Other markets  116.5	112.0	4.5	7.4	7.1	0.3	8.3%	9.5%
Total	     1,402.6	1,177.1	225.5	89.6	75.2	14.4	100.00%	100.0%
 
Women's apparel
The main driver of growth for women's apparel sales was the expansion of the
PTA retail chain. In the nine months of 2008 retail sales were 87.9% from the
total revenue of the women's apparel segment (9M 2007: 73.3%). Sales volume in
the Baltics decreased by 0.7%, amounting to EEK 68.6 million (EUR 4.4 million).
Sales revenue in Russia was EEK 46.0 million (EUR 2.9 million) giving 4.6 times
growth to 9M 2007 and in Ukraine EEK 15.3 million (EUR 0.9 million). 

Lingerie
The majority of lingerie sales revenue in the nine months of 2008 was earned on
the Russian market, amounting to EEK 670.8 million (EUR 42.9 million),
accounting for 55.5% of all lingerie sales volume for the nine months of 2008,
compared to 9M 2007: EEK 571.0 million (EUR 36.5 million). Sales in Russia
comprise both retail sales and wholesale. The second biggest region of lingerie
sales is Belarus, amounting to EEK 263.3 million (EUR 16.8 million),
contributing 21.8% of all lingerie sales revenue (also comprising both retail
sales and wholesale) compare to 9M 2007: EEK 217.9 million (EUR 13.9 million).
Similarly to the women's apparel segment, the Baltic sales of lingerie were
affected by the economic slowdown (and significantly higher inflation) in the
region, which continues to have an effect on consumer spending. 

In terms of lingerie brands, the sales of “Milavitsa” core brand accounted for
76.2% of total lingerie sales revenue in the nine months of 2008 (9M 2007:
76.0%) and amounted to EEK 779.0 million (EUR 49.8 million). The sales of
“Lauma” core brand accounted for 7.0% of total lingerie sales (9M 2007 : 5.6 %)
and amounted to EEK 72.0 million (EUR 4.6 million). Other brands such as
“Alisee”, “Aveline”, “Laumelle”, “Lauma Aqua” and “Laumelle Aqua” comprised
16.8% of total lingerie sales in 9M 2008 (9M 2007: 18.4%), amounting to EEK
171.9 million (EUR 11.0 million). 

Retail operations
Total retail sales of the Group in the nine months of 2008 amounted to EEK
352.5 million (EUR 22.5 million), representing a 75.5% increase on the nine
months of 2007. 

Retail operations were conducted in Estonia, Latvia, Russia, Belarus, Poland,
Lithuania and Ukraine. At the end of September 2008, the Group operated 136
retail outlets with a total area of 15,014 square metres. 
Women's apparel was retailed in Estonia, Latvia, Lithuania, Russia and Ukraine.
At the end of September 2008, the Group operated 39 women's apparel stores with
a total sales area of 7,301 square metres. 
Lingerie was retailed in Russia, Belarus, Latvia, Lithuania, Ukraine, Poland
and Estonia. At the end of September 2008, the Group operated 97 lingerie
stores with a total area of 7,713 square metres. 
Within the nine months of 2008, 26 new stores were opened: 10 in the apparel
business (operating under PTA brand name), including 3 in Ukraine, 6 in Russia
and 1 in Estonia, and 16 stores in the lingerie business, including 8 under
Oblicie name (6 in Russia, 1 in Ukraine and 1 in Estonia), 6 under Milavitsa
name in Belarus, 1 store under Lauma Lingerie brand name in Latvia and 1 stock
outlet in Estonia. Five underperforming stores were closed: 1 PTA store in
Ukraine, 1 Oblicie store in Ukraine, 1 Milavitsa store in Belarus and 2 Splendo
stores in Poland. 

Number of stores at 30 September:
	              30.09.2008	31.12.2007
Estonia	                      11	8
Latvia	                       7	6
Poland	                       8	10
Belarus	                      28	23
Russia	                      56	44
Lithuania	              20	20
Ukraine	                       6	4
Total stores	             136	115
Total sales area, sq m	  15,014	12,454

In the nine months of 2008, women's apparel retail revenue compared to the nine
months of 2007 increased by 61.1%, amounting to EEK 133.6 million (EUR 8.5
million). The total like-for-like growth was a negative 3% mainly because of
the drop of sales in the Baltics. The like-for-like growth in Russia was +49%,
in Estonia -6% and in Latvia -6% in 9M 2008. Results in Baltics are influenced
by overall macro economical situation and by the fact that the Baltic stores
have already been in operation for long enough to be close to optimal capacity. 

The like-for-like increase in the Oblicie lingerie retail chain in Russia is
about 56% for stores operating longer than one year, continuing to offer strong
evidence to the viability of the continuing expansion of the Group's operations
into the retail sector in its primary target markets. The major objective in
the lingerie business continues to be retail expansion, mainly in Russia. By
the end of the year, the Group also intends to open a few shops under the
“Milavitsa” brand in Russia in order to capitalise on the brand awareness in
the country. 

Stores by concept

Market	   PTA       Oblicie     Milavitsa     Other    Total     Sales area, 
           stores     stores        stores     stores             sq m

Russia	      17	39	        -	-	56	6,320
Ukraine	       5	1	        -	-	6	873
Estonia	       9	1	        -	1	11	2,120
Latvia	       4	-	        -	3	7	1,196
Lithuania      4	-	        -	16	20	1,626
Belarus        -	-	        28	-	28	2,527
Poland	       -	1	        -	7	8	352
Total	      39	42	        28	27	136	15,014

Wholesale 
In the nine months of 2008, wholesale amounted to EEK 1,001.7 million (EUR 64.0
million), representing 71.4% of the Group's total revenue (9M 2007: 80.8%). The
main wholesale regions were Russia, Belarus, Ukraine and the Baltic States for
lingerie, and Finland and the Baltic states for women's apparel. In the nine
months of 2008, revenue from wholesale of women's apparel decreased by 66.7%
compared to the nine months of 2007, amounting to EEK 14.0 million (EUR 0.9
million). 
Lingerie wholesale in the nine months of 2008 increased by 8.7% compared to the
nine months of 2007, amounting to EEK 987.7 million (EUR 63.1 million). Most of
the lingerie wholesale partners are located in Russia. 

Investment
In the nine months of 2008, the Group's investments totalled EEK 60.4 million
(EUR 3.9 million). A total of EEK 24.2 million (EUR 1.5 million) was invested
in retail operations, EEK 12.4 million (EUR 0.8 million) was invested in real
estate for retail needs in Belarus, while other investments were made in
equipment and facilities to maintain effective production. 

Personnel
At the end of September 2008, the Group employed a staff of 4,079 including 885
in retail and 2,402 in production. The rest are employed in wholesale,
administration and support operations. The average number of employees in the
nine months of 2008 was 4,059. 
The total salaries and wages for the nine months of 2008 amounted to EEK 259.9
million (EUR 16.6 million). The remuneration paid to members of the Management
Board totalled EEK 4.4 million (EUR 0.3 million). Four members of the
Management Board also serve as executives for the Group's subsidiaries. 

Share Buyback Programme
The extraordinary general meeting of shareholders of AS Silvano Fashion Group
held on 6 October 2008 authorised the buyback of AS Silvano Fashion Group's own
shares under the following conditions: SFG is entitled to buy back its own
shares within one year as of the resolution of the general meeting of the
shareholders, the total nominal value of own shares to be bought back by SFG
may not exceed 10% of total share capital of SFG, the maximum price payable by
SFG for one share will be EUR 3.50 (three Euros and fifty cents), the maximum
amount payable by SFG for its own shares is EUR 3,000,000 (three million
Euros), own shares will be paid for with assets exceeding the share capital,
compulsory reserves and share premium. 
On 6 October 2008, the management board of AS Silvano Fashion Group, acting
under the authorization granted by the aforementioned general meeting of
shareholders, decided to initiate the share buyback program. The buyback period
started on 07.10.2008. 
To date, the amount of shares bought back is 393 000, the average price per
share is 1.15 EUR, the cost in total is 452,968 EUR. 

After the transactions listed above, AS Silvano Fashion Group owns 393,000 of
its own shares, which constitute 0.9825% of the share capital. Under the
buyback program, shares up to the value of 2,547,032 million Euros remain to be
bought back. The maximum amount of shares that remains to be bought back is
3,607,000. 
The share buyback program is being implemented in accordance with the
Commission Regulation (EC) No 2273/2003 of 22.12.2003, implementing Directive
2003/6/EC of the European Parliament and of the Council as regards exemptions
for buy-back programmes and stabilization of financial instruments. The
programme is managed by AS Hansapank, which buys back shares on behalf of AS
Silvano Fashion Group. AS Hansapank carries out the buyback according to the
regulations and within the framework of the programme, and makes its trading
decisions independently of, and without influence by AS Silvano Fashion Group
with regard to the timing of the purchases. 
 
Merger of Subsidiaries
Two subsidiaries of SFG operating primarily on the Russian retail market - ZAO
Linret (“Linret”) and ZAO Stolichnaja Torgovaja Kompanija Milavitsa (“STK”)
have signed a merger agreement, as a result of which STK will be merged into
Linret. The new entity will operate under the name of ZAO Milavitsa Linret and
will combine the operations and resources of the two companies. ZAO Milavitsa
Linret will be 49% owned by SFG directly and 51% by SP ZAO Milavitsa, a
Belorussian subsidiary of SFG. The merger will be preceded by a sale of 51% of
shares in Linret to STK. 
The merger will contribute to the efficiency of SFG's Russian operations
through decreased administrative expenses and better coordination between the
previously independent sales structures. 

Establishment of a new subsidiary in Estonia
SFG established a new subsidiary in Estonia under the name OÜ Linret EST. The
share capital of the new subsidiary is EEK 40,000 (approximately EUR 2,556),
100% of which is held by SFG. The reason for establishing the new subsidiary is
the structural development of SFG's retail network and the need for a clearer
separation between retail and management functions within the group. The
establishment of OÜ Linret EST will not have significant impact on the economic
activities of SFG.  

PTA introduces a new trademark
PTA Grupp AS, a subsidiary SFG, engaged in the retail and wholesale of women's
apparel and lingerie has introduced a brand-new Avenue trademark. Avenue is a
new collection aimed at wholesale clients, offering classical women's apparel,
clothes with a contemporary cut, feminine and decorous models. In the Avenue
collection designers have mainly focused on costumes - both everyday and more
festive models. Goods bearing the Avenue trademark are going to be marketed in
all Baltic states as well as in Russia, Ukraine and Belorussia. Goods bearing
Avenue trademark will reach stores in the first half of 2009. 

Selected financial data

The Group's operating results are best summarised in the following figures and
ratios: 
Key figures and ratios	        30.09.08	30.09.07	Change
Net sales (EEK million)	         1,402.6	1,177.1	        225.5
Net income, attributable 
to shareholders (EEK million)	    40.6	  162.8	       -122.2
Earnings before interest,
taxes and depreciation (EBITDA) 
( EEK million)	                    192.6	  298.8	       -106.2 
Earnings before interest 
and taxes (EBIT) (EEK million)	    158.6	  270.6	       -112.0
Net sales (EUR million)              89.6	   75.2	         14.4
Net income attributable 
to shareholders (EUR million)	     2.6	   10.4	         -7.8
Earnings before interest, 
taxes and depreciation (EBITDA) 
( EUR million)	                    12.3	   19.1	         -6.8 
Earnings before interest 
and taxes (EBIT) (EUR million)	    10.1	   17.3   	-7.2
Operating margin, %	            11.3%	   23.0%	-
Net margin, %	                     2.9%	   13.8%	-
ROA, %	                             3.5%	   17.1%	-
ROE, %	                             5.3%	   27.4%	-
Earnings per share (EPS), in EEK     1.01	   4.23	        -
Earnings per share (EPS), in EUR     0.07	   0.27	        -
Current ratio	                     3.2	   3.5	        -
Quick ratio	                     1.8	   2.1	        -
 
Underlying formulas:
Operating margin = operating profit / sales revenue
Net margin = net profit attributable to equity holders of the parent / sales
revenue 
ROA (return on assets) = net profit attributable to equity holders of the
parent / average total assets 
ROE (return on equity) = net profit attributable to equity holders of the
parent / average equity 
EPS (earnings per share) = net profit attributable to equity holders of the
parent / weighted average number of ordinary shares 
Current ratio = current assets / current liabilities
Quick ratio = (current assets - inventories) / current liabilities


Balance Sheet
Consolidated, unaudited
		               30.09.08  30.09.07 31.12.07 30.09.08 30.09.07 31.12.07
		                EEK th	 EEK th  EEK th  EUR th	EUR th	 EUR th
ASSETS							
Non-current assets							
Property, plant and equipment	290,745	247,905	246,541	18,582	15,844	15,757
Intangible assets		47,613	29,822	27,976	3,043	1,906	1,788
Investment property		23,626	0	22,954	1,510	0	1,467
Investments in equity 
accounted investees		3,317	78	876	212	5	56
Available-for-sale 
financial assets		8,856	9,216	8,480	566	589	542
Other receivables		673	67,171	595	43	4,293	38
Total non-current assets	374,830	354,192	307,422	23,956	22,637	19,648
Current assets							
Inventories		        378,757	303,231	337,528	24,207	19,380	21,572
Prepaid taxes		         45,735	22,672	24,471	2,923	1,449	1,564
Trade receivables		202,780	153,822	158,531	12,960	9,831	10,132
Other receivables		66,389	46,636	29,713	4,243	2,981	1,899
Prepayments		        66,811	26,959	51,680	4,270	1,723	3,303
Cash and cash equivalents	128,177	180,992	180,233	8,192	11,568	11,519
Total current assets		888,649	734,312	782,156	56,795	46,932	49,989
TOTAL ASSETS		      1 263,479	1 088,504 1 089,578 80,751 69,569 69,637
							
LIABILITIES AND EQUITY							
Equity							
Share capital at par value	400,000	400,000	400,000	25,565	25,565	25,565
Share premium		        223,293	229,395	223,293	14,271	14,661	14,271
Statutory capital reserve	1,046	1,046	1,046	67	67	67
Translation reserve		-52,823	-54,967	-76,512	-3,376	-3,513	-4,890
Retained earnings		226,499	161,833	185,927	14,476	10,343	11,883
Total equity attributable 
to equity holders 
of the parent		        798,015	737,307	733,754	51,003	47,123	46,896 
Minority interest		176,634	138,817	136,313	11,289	8,872	8,712
Total equity		        974,649	876,124	870,067	62,292	55,995	55,608
Non-current liabilities							
Loans and borrowings		8,089	4,976	4,068	517	318	260
Deferred tax liabilities	201	201	201	13	13	13
Other liabilities		56	0	360	3	0	23
Provisions		        125	140	139	8	9	9
Total non-current liabilities	8,471	5,317	4,768	541	340	305
Current liabilities							
Loans and borrowings		62,117	26,396	25,160	3,970	1,687	1,608
Trade payables		        130,790	122,669	122,888	8,359	7,840	7,854
Corporate income tax liability	3,583	7,542	3,192	229	482	204
Other tax liabilities		19,887	17,039	23,486	1,271	1,089	1,501
Other payables		        39,652	15,490	17,555	2,534	990	1,121
Provisions		        24,299	17,927	22,462	1,553	1,146	1,436
Deferred income		            31	0	0	2	0	0
Total current liabilities	280,359	207,063	214,743	17,918	13,234	13,724
Total liabilities		288,830	212,380	219,511	18,459	13,574	14,029
TOTAL LIABILITIES AND EQUITY 1 263,479 1 088,504 1 089,578  80,751  69,569
69,637 


Income Statement-9 months 2008
Consolidated, unaudited

		2008     2007       2008    2007
                9months   9months  9months  9months
                EEK th    EEK th   EUR th   EUR th
					
Net sales		1 402,593	1 177,125	89,642	 75,232
Costs of goods sold	 -805,033	-675,292	-51,451	-43,159
Gross Profit		  597,560	 501,833	 38,191  32,073
					
Other operating income	   14,364	  83,490	    918	  5,336
Distribution costs 	 -240,081	-140,334	-15,344	 -8,969
Administrative expenses	 -160,190	-125,298	-10,238	-8,008
Other operating expenses  -53,026	-49,099	         -3,389	-3,138
Operating profit	  158,627	270,592	         10,138	17,294
					
Interest expenses	  -2,613	 -2,018	           -167	  -129
Gains/losses on 
conversion of foreign 
currencies		 -14,974	  4,819	           -957    308
Other financial 
income / expenses	   8,715	  6,212	            557	   397
Total financial 
income / expenses         -8,872	  9,013	           -567	   576
					
Share of profit of 
equity accounted investees 2,378	      0	            152	     0
					
Profit before corporate 
income tax		  152,133	279,605	          9,723	  17,870
Corporate income tax	  -74,603	-72,381 	 -4,768	  -4,626
Net profit for period	   77,530	207,224	          4,955	  13,244
					
Net profit attributable 
to parent company	   40,572	162,820	          2,593	  10,406
Net profit attributable 
to minority shareholders   36,958	 44,404	          2,362    2,838
					
					
Earnings per share					
Basic earnings 
per share (EEK/EUR)	   1.01	           4.23	           0.07	   0.27
Diluted earnings 
per share (EEK/EUR)	   1.01	           4.23	           0.07	   0.27

Income Statement-Q3
Consolidated, unaudited

		2008   2007   2008  2007 
                Q3      Q3     Q3     Q3
                EEK th  EEK th  EUR th  EUR th
					
Net sales		 488,080	 397,924	31,194	  25,432
Costs of goods sold     -289,947	-237,923	-18,531  -15,206
Gross Profit		 198,133	 160,001	 12,663	  10,226
					
Other operating income	  4,209	          4,005	            269	     256
Distribution costs       -84,006	-50,366	         -5,369	  -3,219
Administrative expenses	 -55,796	-47,738	         -3,566	  -3,051
Other operating expenses -19,198	-19,136	         -1,227	  -1,223
Operating profit	  43,342 	 46,766	          2,770	   2,989
					
Interest expenses	  -1,064	-1,627	            -68	    -104
Gains/losses on 
conversion of 
foreign currencies	  -13,472	 3,864	           -861	     247
Other financial 
income / expenses	    3,473	 4,616	            222	     295
Total financial 
income / expenses	  -11,063        6,853	           -707	     438
					
Share of profit 
of equity 
accounted investees	    1,064	     0	             68	     0
					
Profit before 
corporate income tax	   33,343	53,619	           2,131    3,427
Corporate income tax	  -17,978	-24,894	          -1,149   -1,591
Net profit for period	   15,365	28,725	             982    1,836
					
Net profit attributable 
to parent company	    8,434	16,523	             539    1,056
Net profit attributable 
to minority shareholders    6,931	12,202	             443      780
					
					
Earnings per share					
Basic earnings 
per share (EEK/EUR)	     0.21	0.42	            0.01     0.03
Diluted earnings 
per share (EEK/EUR)	     0.21	0.42	            0.01     0.03

Dmitry Ditchkovsky
Chairman of the Management Board
+ 372 6710 700