TIIMARI PLC Interim Report 4 November 2011 at 09:30 a.m.
TIIMARI PLC'S INTERIM REPORT 1 January to 30 September 2011
THE STRENGTHENING OF GROUP’S EQUITY DURING THE THIRD QUARTER IMPROVED THE GROUP’S LIQUIDITY AND STRENGTHENED EQUITY RATIO SIGNIFICANTLY
The subscription rights issue and directed share issue in September 2011 resulted in a EUR 34.1 million net increase in equity, raising the equity ratio to 42.5% (4.2% on 30 June 2011) and net gearing improved to 43.5 % (1 417 % on 30 June 2011).
Tiimari Group’s revenue for the first nine months of the year was 2.3 % lower than a year ago.
Tiimari Group’s revenue for the third quarter of the year was 2.5 % higher than a year ago. The operating profit for the third quarter was lower than during the comparison period and estimated due the clearance sale of discontinued items to clearance sales and problems with the availability and sufficiency of products.
THE THIRD QUARTER OF 2011 IN BRIEF
– Revenue grew by 2.5% to EUR 15.8 million (15.4)
– Gross margin was EUR 8.2 million (8.1), equalling 52.2% (52.8%)
– EBITDA was EUR -4.1 million (-2.8)
– Operating profit (EBIT) was EUR -4.6 million (-3.6)
– Income before taxes was EUR -10.3 million (-4.2)*
– Earnings per share (EPS) were EUR -0.50 (-0.24)*
REVIEW PERIOD (9 MONTHS) 2011 IN BRIEF
– Revenue fell by 2.3% to EUR 44.8 million (45.9)
– Gross margin was EUR 23.8 million (26.1), equalling 53.1% (56.9%)
– EBITDA was EUR -11.9 million (-6.9)
– Operating profit (EBIT) was EUR -13.6 million (-9.4)
– Income before taxes was EUR -20.3 million (-10.9)*
– Earnings per share (EPS) were EUR -1.13 (-0.65)*
– Equity ratio was 42.5% (21.3%)
-Net gearing ratio was 43.5 % (237.6 %)
-Interest-bearing net liabilities were EUR 13.5 (38.7)
* As a result of the share issues, EUR 4.9 million of non-recurring costs were included in other financing costs in the consolidated financial statement in accordance with IAS 32 and 39 and IFRIC 19. The cost had no impact on cash flow, consolidated statements of cash flow and the Group’s shareholders’ equity.
The figures in this Interim Report are unaudited.
| GROUP KEY FINANCIAL FIGURES | |||||||
| EUR 1 000 | |||||||
| 7-9/11 | 7-9/10 | Chg % | 1-9/11 | 1-9/10 | Chg % | 1-12/10 | |
| REVENUE | 15 763 | 15 382 | 2,5 % | 44 825 | 45 866 | -2,3 % | 75 797 |
| GROSS PROFIT | 8 234 | 8 120 | 1,4 % | 23 815 | 26 081 | -8,7 % | 43 834 |
| EBITDA | -4 098 | -2 830 | -44,8 % | -11 891 | -6 949 | -71,1 % | -2 571 |
| OPERATING PROFIT | -4 596 | -3 620 | -27,0 % | -13 592 | -9 352 | -45,3 % | -12 613 |
| EARNINGS PER SHARE EUR | -0,50 | -0,24 | -106,3 % | -1,13 | -0,65 | -74,5 % | -0,89 |
| SOLVENCY RATIO | 42,5 % | 21,3 % | 18,9 % | ||||
| GEARING | 43,5 % | 237,6 % | 208,5 % | ||||
| AVERAGE NUMBER OF PERSONNEL | 635 | 568 | 11,8 % | 592 | 579 | 2,2 % | 591 |
TIIMARI OUTLOOK FOR 2011
Due to the weaker than expected third-quarter profit development Tiimari adjust the full-year forecast of EBITDA provided in the Interim Report for the second quarter of 2011.
We estimate that during 2011, the declining trend in Tiimari’s revenue, reported on a monthly basis, will cease and that Tiimari’s full-year EBITDA for 2011 will be negative (2010:EUR -1.3 million) and significantly lower than last year .The revenue of Gallerix is forecast to grow and its EBITDA is anticipated to be positive and better than in 2010 (2010:EUR 0.1 million).
We estimate earlier that during 2011, the declining trend in Tiimari’s revenue, reported on a monthly basis, will cease and that Tiimari’s full-year EBITDA for 2011 will be negative (2010:EUR -1.3 million) and lower than last year. The revenue of Gallerix is forecast to grow and its EBITDA is anticipated to be positive and better than in 2010 (2010: EUR 0.1 million).
COMMENTS FROM THE MANAGING DIRECTOR
The Group’s extensive financial restructuring process was completed during the third quarter. As a result of the restructuring, the company’s equity ratio improved considerably, annual financial expenses will decrease and new capital was raised for the improvement of the company’s business. However, it will take a few months to recover from the challenging financial situation of the first part of the year, after which the company’s operating models are expected to return to normal.
In the third quarter, the company started to gradually implement its new strategy. Starting in July, purchases from the Far East were increased, four new stores were opened in Finland and the Tiimari chain’s marketing concepts in particular were updated. Many development projects targeted at 2012 were launched, relating to product group management, product ranges and a new store concept. In accordance with its new strategy, Gallerix continued taking over franchise shops.
The Tiimari segment’s declining trend in sales is ceasing. In the latter part of the third quarter in August and September, sales developed positively with the exception of the Juhla (“Party”) range, which was launched on a large scale last year and is now being refocused. The number of customers at Finnish Tiimari shops has generally continued to increase since August. Problems with the availability and sufficiency of products and the clearance sale of discontinued items have still had a negative impact on total sales and gross profit. The clearance sale will continue till the end of 2011.
The Gallerix chain’s sales trend continued to be positive in the third quarter. In particular, this was due to the increased number of shops operated directly by Gallerix.
The current fourth quarter is critical for the company's full-year performance. The holiday seasons of the fourth quarter (Halloween and Christmas) usually account for about 40 % of the company’s annual revenue.
GROUP REVENUE AND PROFIT DEVELOPMENT
When assessing Tiimari group’s revenue and profit development in the review period, it must be kept in mind that they are strongly influenced by seasonal changes. Because of this, Tiimari's result for the first three quarters has traditionally been non-profitable and the result for the fourth quarter significantly profitable in comparison.
Group revenue for the review period 1 January to 30 September 2011 fell by 2.3 % to EUR 44.8 million (45.9). In the third quarter, revenue increased by 2.5% to EUR 15.8 million (15.4). The Group’s declining trend in revenue is showing signs of improvement. In the last two quarters, revenue has increased by 5.6% year-on-year.
In the review period 1 January to 30 September 2011, the gross margin fell to EUR 23.8 million (26.1), equalling 53.1% (58.9%). The gross margin for the third quarter was 52.2% (52.8%). Problems with the availability and sufficiency of products and the clearance sale of discontinued items have had a negative impact on gross profit. The clearance sale will continue till the end of 2011.
EBITDA for the review period 1 January to 30 September 2011 fell to EUR -11.9 million (-6.9). The Group’s EBITDA for the third quarter was EUR -4.1 million (-2.8). Tiimari Group’s most important cost items are personnel and rental costs. They have accounted for about 80 % of the Group’s fixed costs. The Group’s fixed costs in the review period 1 January to 30 September 2011 increased by 8 % and personnel costs by 10 % year-on-year. For Gallerix, personnel costs for the first nine months of 2011 increased by 42 %, due to the increased number of shops operated directly by Gallerix. The Tiimari segment’s costs increased by 4.7%.
The operating profit for the review period 1 January to 30 September 2011 decreased to EUR -13.6 million (-9.4).The Group’s third quarter operating profit declined to EUR -4.6 million (-3.6).
Net financial expenses during the review period 1 January to 30 September 2011 were EUR -6.7 million (-1.6). In the third quarter, net financial expenses amounted to EUR -5.7 million (-0.6). They included a non-recurring cost of EUR 4.9 million resulting from the share issues, recognised in other financial expenses in accordance with IAS 32 and 39 and IFRIC 19. This cost had no impact on cash flow and the Group’s shareholders’ equity. However, the cost influenced the result before taxes, the profit for the period and the performance-based key figures. Net income for the review period 1 January to 30 September 2011 was EUR -20.3 million (-10.7), and earnings per share were EUR -1.13 (-0.65). Earnings per share for the third quarter were EUR -0.50 (-0.24).
Tiimari group’s result for the review period 1 January to 30 September 2011 included about EUR 1.6 million of non-recurring costs (2.95). Of the non-recurring costs, EUR 1.4 million had an effect on the company's EBITDA and EUR 0.2 million on depreciation. In addition, as a result of the share issues, EUR 4.9 million of non-recurring costs recognised in accordance with IAS 32 and 39 and IFRIC 19 had an effect on the company’s financial expenses.
Tiimari group’s result for the third quarter included a total of EUR 0.5 million in non-recurring costs (2.95). Of the non-recurring costs, EUR 0.3 million were related to an equalisation premium, EUR 0.1 million to costs resulting from personnel changes in the company management and EUR 0.1 million to transfers of the business operations of Gallerix franchise shops. In addition, as a result of the share issues, EUR 4.9 million of non-recurring costs recognised in accordance with IAS 32 and 39 and IFRIC 19 had an effect on the company’s financial expenses.
REVENUE AND PROFIT DEVELOPMENT BY OPERATING SEGMENT
The Tiimari Group comprises two leading retail shop concepts, Tiimari and Gallerix. They are reported as separate segments. In addition, the Others segment includes common expenses for the Group (i.a. senior management).
TIIMARI
The Tiimari segment comprises all the Tiimari concept shops in Finland and the Baltic countries. The segment revenue for the review period 1 January to 30 September 2011 declined by 7.3 % to EUR 34.1 million (36.8). The Tiimari segment’s gross margin for the review period 1 January to 30 September 2011 was EUR 19.0 million (EUR 22.4 million), representing 55.6% (60.9%) of revenue. In early 2011 the gross margin percentage was lower than during the comparison period because of changes in the distribution of sales, higher realised purchase prices and, simultaneously, lower sales prices partly due to clearance sales. The Tiimari segment’s revenue for the third quarter was EUR 12.2 million and gross margin for the third quarter was EUR 6.7 million (7.0), representing 55.1 % (56.0%) of revenue.
The Tiimari segment’s EBITDA for the review period 1 January to 30 September 2011 decreased to EUR -10.5 million (-5.6). In the third quarter, the Tiimari segment’s EBITDA was EUR -3.2 million (-2.3). The operating profit for this segment in the review period decreased to EUR -11.6 million (-7.2). EBITDA and the operating profit was undermined by a decrease in sales in comparison with the corresponding period last year as well as by a simultaneous decline in margins.
On 30 September 2011, the number of stores operated by the company was 191 (185), of which 172 (166) were in Finland.
GALLERIX
The Gallerix segment comprises the Gallerix concept shops in Sweden. In accordance with Gallerix’s strategy, the company has continued to increase the number of shops operated directly by Gallerix. The goal is to increase shop-specific sales, harmonise the product ranges in the shops and increase the proportion of centralised purchasing and in this way to improve the profitability of the entire chain. A strategic goal is to increase the number of retail shops operated directly by Gallerix. On 30 September 2011, Gallerix operated a total of 35 shops (11 shops on 30 September 2010,14 shops on 31 December 2010) and franchise entrepreneurs operated 48 shops.
Following the transition, revenue and gross profits of the Gallerix segment have developed favourably. However, at the same time personnel and rental expenses and the inventory level have increased.
Gallerix’s revenue for the review period 1 January to 30 September 2011 rose by 18.4 % to EUR 10.7 million (9.1). In Gallerix retail shops, comparable sales development in local currency was 1.9 % for the first nine months of the year. Gallerix’s revenue for the third quarter was EUR 3.6 million (2.9).
The Gallerix segment’s gross margin improved during the review period 1 January to 30 September 2011 to EUR 4.8 million (3.6), representing 44.9% (39.9%) of revenue. The improvement in gross margin resulted mainly from the increased number of shops operated directly by Gallerix and the decrease in the number of franchise shops. The Gallerix segment’s gross margin for the third quarter was EUR 1.5 million (1.1), representing 42.4 % (37.5 %) of revenue.
The Gallerix segment’s EBITDA for the review period 1 January to 30 September 2011 was EUR -0.7 million (-0.3). The decrease was a result of costs related to the acquisition and taking over of franchise shops. The Gallerix segment’s EBITDA for the third quarter was EUR -0.7 million (-0.3).
The Gallerix segment’s operating profit declined to EUR -1.2 million (EUR -1.0 million) during the review period 1 January to 30 September 2011, representing -11.6% (-10.6%) of revenue. The Gallerix segment’s operating profit for the third quarter was EUR -0.7 million (0.5).
OTHERS
Other operations include common expenses for the Group and senior management (Board of Directors, Managing Director and Chief Financial Officer). All operating and personnel costs related to business management were allocated to the segments in the review period 1 January to 30 September 2011. No revenue was recorded for Other operations during the period. The costs of Other operations decreased year-on-year and amounted to EUR 0.8 million (1.2). The costs of Other operations for the third quarter were EUR 0.17 million (0.25).
BALANCE SHEET, FINANCIAL POSITION AND CASH FLOW
In the third quarter, the company arranged a directed share issue and a rights issue, which strengthened the Group’s equity by EUR 34.1 million in net terms. EUR 10.0 million of the subscription payments relating to the subscriptions made in the rights issue was paid in cash and EUR 3.0 million was paid by offsetting loan receivables from the company. As a result of the directed issue, the company’s interest-bearing liabilities decreased by EUR 21.9 million. The subscription price of new shares was entered in the invested unrestricted equity reserve. The Group’s equity ratio strengthened, reaching 42.5% on 30 September 2011, compared with 18.9% on 31 December 2010. The Group’s equity was EUR 31.1 million on 30 September 2011, compared with EUR 12.5 million on 31 December 2010. Equity was decreased by the loss for the review period 1 January to 30 September 2011. Equity per share was EUR 0.08 on 30 September 2011, compared with EUR 0.76 on 31 December 2010.
The Group’s non-current assets on 30 September 2011 amounted to EUR 44.2 million, a decrease of EUR 1.6 million compared with EUR 45.8 million on 31 December 2010. The decrease resulted mainly from the depreciation according to plan.
The net working capital for the Group on 30 September 2011 was EUR 6.7 million, compared with EUR -1.6 million on 31 December 2010. The net working capital is affected by the seasonal fluctuations in the operations, so that there is an increase during the year and a reduction by the end of the financial year. Because of the seasonal fluctuation, net working capital is not comparable to the situation on 31 December 2010.
The Group’s non-current liabilities on 30 September 2011 amounted to EUR 8.0 million, a decrease of EUR 13.7 million compared with EUR 21.6 million on 31 December 2010. Non-current liabilities were particularly decreased by the EUR 11.0 million repayment of non-current interest-bearing loans from financial institutions within the directed share issue in September 2011. The Group’s current liabilities on 30 September 2011 totalled EUR 34.1 million, compared with EUR 31.9 million on 31 December 2010. Interest-bearing non-current liabilities decreased EUR -14.0 million. Interest-bearing current liabilities increased by EUR 5.7 million to EUR 17.4 million, compared with EUR 11.7 million on 31 December 2010. This was due to the increase in seasonal financing needed to finance the seasonal increase in working capital.
The Group’s interest-bearing net liabilities on 30 September 2011 amounted to EUR 13.5 million, compared with EUR 26.0 on 31 December 2010. The decrease was mainly a result of the directed share issue which was arranged in September 2010 and used for conversion of EUR 21.9 million in interest-bearing liabilities to equity. The Group’s gearing on 30 September 2011 was 43.5%, compared with 208.5% on 31 December 2010.
The covenants of the bank financing agreement renewed in connection with the company’s financial restructuring in September 2011 were met on 30 September 2011. The parties have agreed that the levels of the financing agreement covenants for the period 2011–2014 will be specified by 31 December 2011.
In order to strengthen its financial position, Gallerix negotiated additional debt financing of EUR 0.3 million in the third quarter.
Cash flow from operations in the review period 1 January to 30 September 2011 was EUR -21.3 million (-15.1).The negative figure resulted from the non-profitability of business operations and changes in working capital. Cash flow from investing activities in the review period 1 January to 30 September 2011 was EUR -0.2 million (-0.7). Cash flow from financing in the review period 1 January to 30 September 2011 was EUR 25.7 million (15.3). A total of EUR 13.0 million worth of new shares was subscribed in the rights issue in September 2011 and EUR 21.9 million worth of new shares was subscribed in the directed share issue. Funds acquired from the directed issue were used for the repayment of the company’s interest-bearing liabilities. As a result of the rights issue in September, the Group’s cash and cash equivalents increased by EUR 4.2 and totalled EUR 5.8 million on 30 September, compared with EUR 1.6 million on 31 December 2010.
On 30 September 2011, the company had EUR 0.2 million of unused credit facilities based on the company's debt financing agreement valid on 30 September 2011. The company announced on 10 June 2011 that it is considering and investigating the option to sell the Gallerix business in order to improve the financial situation.
INVESTMENTS
No significant investments were made during the period. The Group’s investments in the review period amounted to EUR 0.2 million (EUR 0.5 million).
The Tiimari segment’s investments were EUR 0.1 million (0.5) in the review period 1 January to 30 September 2011 and EUR 0.1 million (0.2) in the third quarter. The Gallerix segment’s investments were EUR 0.1 million (0.0) in the review period 1 January to 30 September 2011 and EUR 0.0 million (0.0) in the third quarter.
PERSONNEL
The average number of personnel in the review period 1 January to 30 September 2011 was 592 (582).The numbers have been altered to reflect the share of full-time employees.The majority of the shop personnel are part-time employees.Tiimari Retail Ltd is the biggest employer in the Group, employing 470 (440) people on 30 September 2011.
SHARES AND SHARE CAPITAL
Tiimari shares are subject to public trading on the NASDAQ OMX Helsinki Plc stock exchange.The closing price of a Tiimari share on 30 September 2011 was EUR 0.10 (1.28), and the market value of the company was EUR 40.4 million (21.1).The company’s share capital on 30 September 2011 was EUR 7,686,200 and the number of shares was 404,275,522. A total of 387,800,767 new shares were subscribed in the rights issue and directed share issue in September 2011. The subscription price of new shares was entered in the invested unrestricted equity reserve. Thus, the share capital remained unchanged. At the end of the review period, the company did not hold any of its own shares.
DECISIONS OF THE EXTRAORDINARY MEETING OF TIIMARI PLC’S SHAREHOLDERS ON 1 JULY 2011 (Stock Exchange Release, 1 July 2011, www.tiimari.com)
In accordance with the Board of Directors’ proposal, the Extraordinary Meeting of Tiimari Plc’s Shareholders held on 1 July 2011 authorised the Board of Directors to decide on the issuance of a maximum of 428,969,771 new shares in two share emissions.The authorisation corresponded to approximately 2,600 per cent of the total number of the company’s registered shares at the time of deciding on the authorisation.The purpose of the authorisation was to strengthen the company’s balance sheet and financial position and ensure the continuation of the company’s business operations, and it covered the share emissions arranged in September 2011, relating to the company’s refinancing plan published on 10 June 2011.
The Extraordinary Meeting of Shareholders held on 1 July 2011 also made the decision to elect Hannu Ryöppönen, Juha Mikkonen, Alexander Rosenlew, Benedict Wrede and Mia Åberg to the company’s Board of Directors.The decision regarding the change in the composition of the Board of Directors was conditional and required the company to complete the emissions (as defined in the authorisation given by the Extraordinary Meeting of Shareholders on 1 July 2011) by 31 October 2011.
SHARE ISSUES
Under the authorisation received on 1 July 2011 from the Extraordinary Meeting of Shareholders, on 30 August 2011 Tiimari Plc’s Board of Directors decided on the arrangement and conditions of a rights issue amounting to a maximum of EUR 14.8 million and a directed share issue amounting to a maximum of EUR 23.8 million. EUR 13.0 million worth of new shares were subscribed in the rights issue and EUR 21.9 million worth of new shares were subscribed in the directed issue. Before the share emissions, the number of the shares totalled 16,474,755 and after the share emissions 404,275,522 (Stock Exchange Release, 27 September 2011 www.tiimari.com)
BOARD OF DIRECTORS
The Extraordinary Meeting of Shareholders held on 1 July 2011 decided to elect Hannu Ryöppönen, Juha Mikkonen, Alexander Rosenlew, Benedict Wrede and Mia Åberg to the company’s Board of Directors. The decision ceased to be conditional and the change in the composition of the Board became effective on 29 September 2011. In its organisation meeting, the new Board of Directors elected Benedict Wrede as its chairman and Juha Mikkonen as its vice chairman. Benedict Wrede was elected chairman of the Appointment and Remuneration Committee of the Board and Alexander Rosenlew and Mia Åberg were elected members of this committee. Juha Mikkonen was elected chairman of the Audit Committee and Benedict Wrede and Mia Åberg were elected members.
MANAGEMENT
The Board of Directors appointed Niila Rajala, MBA, (born 1964) as the new Managing Director of Tiimari Plc as of 17 May 2011. Chief Financial Officer Kai Järvikare resigned on 31 August 2011 (Stock Exchange Release, 13 June 2011, www.tiimari.com). On 12 September 2011, the Board appointed Jarmo Kanervo, M.Sc. Econ., (born 1954) as Tiimari Plc’s acting CFO and member of the Management Group.The appointment was temporary, lasting until the company had recruited a new permanent CFO.On 25 October 2011, the company decided to appoint Jarmo Kanervo as the Chief Financial Officer.
SHORT-TERM BUSINESS-RELATED RISKS AND UNCERTAINTIES
The Group’s revenue and results development, financial position and cash flows are affected by several uncertainties related to the business operations. The main risks relate to the following factors:
- failure in the development or implementation of company strategy may have a negative effect on the company's future growth and profitability and endanger the continuation of business operations
- unsuccessful measures to develop business operations, sales and profitability in accordance with the new business operations plan
- choosing product ranges that do not meet consumers' expectations and failure in renewals of store concept
- seasonal fluctuations in income and cash flow
- exchange rate fluctuations
- problems relating to the availability of products and the reliability of the supply chain (logistics and product flow risks)
- exposure of the company to impairment of goodwill and intangible assets
- decline in the general financial situation and consumer demand in the company’s geographic operating areas
- general changes in interest rates
- unsuccessful liquidity and refinancing risk management
The operational risks and uncertainties of the company have been presented in more detail in the registration document and securities notes for the rights issue and directed share issue, dated 30 August 2011, and in the 2010 financial statements, and no significant changes in risks have occurred since.
EVENTS AFTER THE PERIOD UNDER REVIEW
On 12 September 2011, the Board of Directors appointed Jarmo Kanervo, M.Sc. Econ., as the company’s acting CFO, and on 25 October 2011 the Board appointed him as the company’s Chief Financial Officer.
The company and the company’s main financier bank have agreed that the levels of financing covenants for the financial period ending on 31 December 2011 and future financial periods will be specified by the partners by 31 December 2011.
Board of Directors
TiimariPlc
Further information:
Managing Director, Niila Rajala, +358 (0)3 812911, niila.rajala@tiimari.fi
Chief Financial Officer, Jarmo Kanervo, +358 (0)3 812911, jarmo.kanervo@tiimari.fi
Distribution:
NASDAQ OMX Helsinki
important news media
www.tiimari.com
Tiimariplc is a listed company.The Group consists of two retail store concepts: Tiimari and Gallerix.The concepts operate around 300 shops in five countries around the Baltic Sea region. Both concepts are forerunners in their respective fields.
NOTES TO THE FINANCIAL STATEMENTS, 1 JANUARY 2011–30 SEPTEMBER 2011
Basis of preparation
This Interim Report was prepared in accordance with the IFRS accounting standards, but in the preparation all IAS 34 standard requirements have not been fulfilled. As of the beginning of the financial year, the company has implemented new or revised IFRS standards and IFRIC interpretations, as described in the financial statements of 2010. The implementation of these new and revised standards and interpretations does not have an impact on the figures reported. Otherwise, the same accounting principles and calculation methods as in the previous annual financial statements have been applied.
The preparation of financial statements in accordance with IFRS requires Tiimari’s management to use estimates and assumptions that affect amounts of assets and liabilities at the time of the preparation as well as amounts of income and expenses in the financial period. Inventory valuation is based on regular stocktaking which is the foundation for the management of the goods flow process. As a general rule, shops do not order goods directly but their inventories are replenished automatically through the logistics system. Time-based mechanical devaluations (30 months 25%, 36 months 50% and 42 months 100%) were abandoned in the beginning of this year as we moved into comprehensive product life cycle management in a systematic goods flow process. Specific write-offs are made, when necessary.
Furthermore, discretion is needed in the application of financial statement accounting principles. Estimates and assumptions are based on knowledge at the time of the Interim Report and consequently include risks and uncertainties. Actual results may differ from the estimates and assumptions made. The figures in the income statement and the balance sheet are for the entire Group. The sum of individual figures may deviate from the presented total figures as the figures in this document have been rounded. This Interim Report is unaudited.
| CONSOLIDATED INCOME STATEMENT | |||||
| eur 1 000 | 7-9/2011 | 7-9/2010 | 1-9/2011 | 1-9/2010 | 1-12/2010 |
| SALES | 15 763 | 15 382 | 44 825 | 45 866 | 75 797 |
| Cost of goods sold | -7 529 | -7 262 | -21 010 | -19 785 | -31 963 |
| Gross profit | 8 234 | 8 120 | 23 815 | 26 081 | 43 834 |
| Gross profit, % | 52 % | 53 % | 53 % | 57 % | 58 % |
| Other operating income | 36 | 248 | 835 | 1 184 | 961 |
| Employee | |||||
| benefit costs | -5 808 | -4 365 | -16 039 | -14 506 | -20 544 |
| Depreciation | -498 | -739 | -1 701 | -2 351 | -3 124 |
| Goodwill impairment | 0 | -52 | 0 | -52 | -6 918 |
| Other operating expenses | -6 561 | -6 833 | -20 502 | -19 708 | -26 822 |
| OPERATING PROFIT | -4 596 | -3 620 | -13 592 | -9 352 | -12 613 |
| Operating profit, % | -29 % | -24 % | -30 % | -20 % | -17 % |
| Financial income | 0 | 28 | 629 | 214 | 266 |
| Financial expenses | -5 665 | -605 | -7 376 | -1 767 | -2 499 |
| Net financial income | -5 665 | -577 | -6 747 | -1 553 | -2 233 |
| INCOME BEFORE TAXES | -10 261 | -4 198 | -20 338 | -10 905 | -14 845 |
| Taxes | 15 | 164 | 43 | 251 | 192 |
| NET INCOME FOR THE PERIOD | -10 245 | -4 034 | -20 295 | -10 654 | -14 653 |
| Equity holders of the company | -10 245 | -4 034 | -20 295 | -10 654 | -14 653 |
| Earnings per share | |||||
| for profit attributable | |||||
| to the equity holders of the company | |||||
| Total | -0,50 | -0,24 | -1,13 | -0,65 | -0,89 |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | |||||
| NET INCOME FOR THE PERIOD | -10 245 | -4 034 | -20 295 | -10 654 | -14 653 |
| Translation diffrences | -17 | 191 | -117 | 544 | 656 |
| Comprehensive income | |||||
| for the period net of tax | -10 262 | -3 843 | -20 412 | -10 110 | -13 997 |
| Comprehensive income for the period attributable to: | |||||
| Equity holders of the company | -10 262 | -3 843 | -20 412 | -10 110 | -13 997 |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||
| eur 1 000 | |||
| 30.9.2011 | 30.9.2010 | 31.12.2010 | |
| ASSETS | |||
| Goodwill | 25 809 | 32 702 | 25 877 |
| Other intangible assets | 14 827 | 15 803 | 15 496 |
| Tangible assets | 3 391 | 4 529 | 4 275 |
| Other financial assets | 104 | 105 | 104 |
| Receivables | 5 | 0 | 5 |
| Deferred tax assets | 29 | 29 | 29 |
| Total non-current assets | 44 165 | 53 167 | 45 785 |
| Inventories | 19 556 | 17 499 | 14 435 |
| Trade and other receivables | 3 633 | 3 426 | 4 168 |
| Cash and bank | 5 777 | 2 301 | 1 626 |
| Total current assets | 28 966 | 23 226 | 20 229 |
| TOTAL ASSETS | 73 131 | 76 392 | 66 013 |
| SHAREHOLDERS' EQUITY AND LIABILITIES | |||
| Equity attributable to equity holders of parent company | |||
| Share capital | 7 686 | 7 686 | 7 686 |
| Invested unrestricted equity reserve | 57 116 | 23 011 | 23 011 |
| Translation differences | -124 | -119 | -7 |
| Retained earnings | -33 588 | -14 290 | -18 229 |
| TOTAL SHAREHOLDERS' EQUITY | 31 090 | 16 288 | 12 461 |
| LIABILITIES | |||
| Deferred tax liabilities | 5 655 | 5 678 | 5 740 |
| Interest-bearing liabilities | 1 850 | 22 194 | 15 859 |
| Provisions | 449 | 31 | 31 |
| Total non-current liabilities | 7 954 | 27 903 | 21 630 |
| Interest bearing liabilities | 17 436 | 18 812 | 11 743 |
| Account payable and other payable | 16 471 | 13 389 | 20 180 |
| Provisions | 180 | 0 | 0 |
| Total current liabilities | 34 088 | 32 201 | 31 923 |
| TOTAL LIABILITIES | 42 042 | 60 104 | 53 553 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 73 131 | 76 392 | 66 013 |
| Consolidated Statement of Cash Flows | ||||
| EUR 1 000 | ||||
| 1-9/2011 | 1-9/2010 | 1-12/2010 | ||
| Cash flow from operations | ||||
| Profit/loss for financial period | -20 295 | -10 654 | -14 653 | |
| Adjustments: | ||||
| Depreciation and impairment | 1 701 | 2 403 | 10 043 | |
| Gain (+) and loss (-) on sale of fixed assets | -8 | 7 | ||
| Financial income and expenses | 6 746 | 1 554 | 2 247 | |
| Taxes | -43 | -251 | -192 | |
| Other adjustments | 10 | 39 | 77 | |
| Change in working capital: | ||||
| Change in inventories | -5 195 | -2 260 | 834 | |
| Change in short-term receivables | 499 | 464 | 472 | |
| Change in short term liabilities | -3 707 | -5 491 | 501 | |
| Change in provisions | 599 | |||
| Interest paid | -553 | -611 | -1 018 | |
| Dividends received | 4 | 5 | ||
| Interest income received | 1 | 7 | 13 | |
| Other financing items | -970 | -273 | -782 | |
| Taxes paid | -95 | -59 | -8 | |
| Net cash flow from operations | -21 305 | -15 127 | -2 459 | |
| Cash flow from investment activities | ||||
| Investments in | ||||
| tangible and intangible assets | -246 | -512 | -665 | |
| Capital gains from tangible and intangible assets | 8 | 1 | 2 | |
| Loans granted | -202 | |||
| Repayment of loan receivables | -202 | |||
| Income on sale of investments | 1 | |||
| Net cash flow from investments | -238 | -713 | -864 | |
| Cash flow from financing activities | ||||
| Proceeds from share issue | 9 255 | |||
| Short-term loans, increase | 14 536 | 8 000 | ||
| Short-term loans, decrease | -1 000 | 9 | ||
| Long-term loans, increase | 3 000 | |||
| Short-term loans, net change | 7 500 | 2 133 | ||
| Payment of lease liabilities | -87 | -193 | -241 | |
| Net cash flow from financing | 25 704 | 15 316 | 1 892 | |
| Change in liquid assets | 4 161 | -524 | -1 431 | |
| Liquid assets, beginning of review period | 1 626 | 3 024 | 3 024 | |
| Effect of exchange rate changes on liquid assets | -10 | -198 | 34 | |
| Liquid assets, end of review period | 5 777 | 2 302 | 1 626 | |
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | |||||
| EUR 1 000 | |||||
| Attributable to the equity holders of the company | |||||
| Share capital | Invested unrestricted equity reserve | Translation differences | Retained earnings | Total | |
| Shareholders' equity 1.1.2010 | 7 686 | 23 011 | -663 | -3 667 | 26 366 |
| Comprehensive income | |||||
| for the period | 544 | -10 654 | -10 110 | ||
| Share based payments | 31 | 31 | |||
| Equity on 30.9.2010 | 7 686 | 23 011 | -119 | -14 290 | 16 287 |
| Shareholders' equity 1.1.2011 | 7 686 | 23 011 | -7 | -18 229 | 12 461 |
| Comprehensive income | |||||
| for the period | -117 | -20 295 | -20 412 | ||
| Directed share issue | 21 850 | 21 850 | |||
| Rights issue | 13 052 | 13 052 | |||
| Expenses on share issues | -797 | -797 | |||
| Calculated exp. on share issues (IAS 32 ja 39, IFRIC 19) | 4 870 | 4 870 | |||
| Equity portion of convertible capital loan | 56 | 56 | |||
| Share based payments | 10 | 10 | |||
| Equity on 30.9.2011 | 7 686 | 57 116 | -124 | -33 588 | 31 090 |
| SEGMENT INFORMATION | |||||
| NET SALES | |||||
| eur 1 000 | 2011 | 2010 | 2011 | 2010 | 2010 |
| 7-9 | 7-9 | 1-9 | 1-9 | 1-12 | |
| Tiimari | 12 191 | 12 540 | 34 142 | 36 840 | 61 924 |
| Gallerix | 3 576 | 2 877 | 10 738 | 9 066 | 13 914 |
| Other operations | 0 | 47 | 0 | 356 | 376 |
| Eliminations | -3 | -82 | -54 | -396 | -416 |
| Group | 15 763 | 15 382 | 44 825 | 45 866 | 75 797 |
| EBITDA | |||||
| eur 1 000 | 2011 | 2010 | 2011 | 2010 | 2010 |
| 7-9 | 7-9 | 1-9 | 1-9 | 1-12 | |
| Tiimari | -3 244 | -2 299 | -10 476 | -5 580 | -1 330 |
| Gallerix | -683 | -284 | -677 | -293 | 135 |
| Other operations | -171 | -247 | -737 | -1 076 | -1 376 |
| Group | -4 098 | -2 830 | -11 891 | -6 949 | -2 571 |
| OPERATING PROFIT | |||||
| eur 1 000 | 2011 | 2010 | 2011 | 2010 | 2010 |
| 7-9 | 7-9 | 1-9 | 1-9 | 1-12 | |
| Tiimari | -3 525 | -2 869 | -11 556 | -7 240 | -10 435 |
| Gallerix | -884 | -473 | -1 246 | -962 | -724 |
| Other operations | -186 | -279 | -789 | -1 150 | -1 455 |
| Group | -4 596 | -3 621 | -13 592 | -9 352 | -12 613 |
| DEPRECIATION AND GOODWILL IMPAIRMENT | |||||
| eur 1 000 | 2011 | 2010 | 2011 | 2010 | 2010 |
| 7-9 | 7-9 | 1-9 | 1-9 | 1-12 | |
| Tiimari | 281 | 570 | 1 080 | 1 660 | 9 105 |
| Gallerix | 201 | 189 | 569 | 669 | 859 |
| Other operations | 15 | 32 | 52 | 74 | 79 |
| Group | 498 | 791 | 1 701 | 2 403 | 10 042 |
| CAPITAL EXPENDITURE | |||||
| eur 1 000 | 2011 | 2010 | 2011 | 2010 | 2010 |
| 7-9 | 7-9 | 1-9 | 1-9 | 1-12 | |
| Tiimari | 82 | 206 | 104 | 475 | 622 |
| Gallerix | 2 | 30 | 138 | 32 | 33 |
| Other operations | 0 | 0 | 0 | 10 | 10 |
| Group | 84 | 236 | 242 | 517 | 665 |
|
NET SALES BY GEOGRAPHICAL AREA |
|||||
| eur 1 000 | 2011 | 2010 | 2011 | 2010 | 2010 |
| 7-9 | 7-9 | 1-9 | 1-9 | 1-12 | |
| Finland | 11 481 | 11 827 | 32 152 | 34 559 | 58 384 |
| Sweden | 3 579 | 2 874 | 10 786 | 9 371 | 14 258 |
| Other countires | 703 | 681 | 1 887 | 1 936 | 3 156 |
| Group | 15 763 | 15 382 | 44 825 | 45 866 | 75 797 |
| INTANGIBLE ASSETS | |||||
| eur 1 000 | 30.9.2011 | 30.9.2010 | 31.12.2010 | ||
| Book value at 1 January | 41 373 | 49 401 | 49 402 | ||
| Changes in exchange rates | -158 | 585 | 777 | ||
| Additions | 85 | 134 | 184 | ||
| Depreciation and impairment | -855 | -1 615 | -8 879 | ||
| Disposals and intra-balance sheet transfer | 192 | 0 | -111 | ||
| Book value at the end of period | 40 637 | 48 505 | 41 373 | ||
| TANGIBLE ASSETS | |||||
| eur 1 000 | 30.9.2011 | 30.9.2010 | 31.12.2010 | ||
| Book value at 1 January | 4 275 | 4 904 | 4 904 | ||
| Changes in exchange rates | -19 | 50 | 262 | ||
| Additions | 157 | 373 | 481 | ||
| Depreciation and impairment | -826 | -788 | -1 131 | ||
| Disposals and intra-balance sheet transfer | -196 | -10 | -241 | ||
| Book value at the end of period | 3 391 | 4 529 | 4 275 | ||
| CHANGES IN PROVISIONS | 1.1.2011 | Additions | Used provisions | 30.9.2011 | |
|
Changes in provisions, non-current |
|||||
| Other provisions (shop rents, personnel) | 31 | 418 | 0 | 449 | |
| Changes in provisions, current | |||||
| Other provisions (shop rents, personnel) | 0 | 317 | -137 | 180 | |
| Total | 31 | 735 | -137 | 629 | |
|
KEY FINANCIAL FIGURES |
|||||
| 2011 | 2010 | 2011 | 2010 | 2010 | |
| 7-9 | 7-9 | 1-9 | 1-9 | 1-12 | |
| Net sales | 15 763 | 15 382 | 44 825 | 45 866 | 75 797 |
| EBITDA | -4 098 | -2 829 | -11 891 | -6 949 | -2 571 |
| Operating profit | -4 596 | -3 620 | -13 592 | -9 352 | -12 613 |
| Profit/loss for the financial period | -10 245 | -4 034 | -20 295 | -10 654 | -14 653 |
| Earnings per share, EUR | -0,5 | -0,24 | -1,13 | -0,65 | -0,89 |
| Shareholders' equity per share, EUR | 0,08 | 0,99 | 0,76 | ||
| Solvency ratio | 42,5 % | 21,3 % | 18,9 % | ||
| Gearing | 43,5 % | 237,6 % | 208,5 % | ||
| Net working capital | 6 718 | 7 536 | -1 551 | ||
| Operating cash flow | -20 540 | -13 558 | -1 429 | ||
| Net Interest-bearing liabilities | 13 509 | 38 705 | 25 976 | ||
| Balance sheet total | 73 131 | 76 392 | 66 013 | ||
| Average number of shares (pcs) | 20 690 | 16 475 | 17 895 | 16 475 | 16 475 |
| CONTINGENT LIABILITIES | |||
| 30.9.2011 | 30.9.2010 | 31.12.2010 | |
| Loans from financial institutions | |||
| against the following securities | 17 035 | 25 000 | 11 632 |
| Corporate mortgages | 31 137 | 31 137 | 31 137 |
| Pledged shares | 1 476 | 1 476 | |
| Other own liabilities | |||
| Bank quarantees | 2 714 | 2 758 | 2 891 |
| Other liabilities | 5 | 5 | 5 |
| Leasing liabilities | |||
| Due within one year | 22 | 55 | 80 |
| Due after one year | 25 | 38 | 48 |
| OTHER RENT LIABILITIES | |||
| Due within one year | 14 965 | 13 822 | 15 534 |
| Due after one year | 22 789 | 18 814 | 26 182 |
| Other rent liabilities is covered by a provision of EUR 0.6 million. The amount of remaining provision at the end of the period under review is EUR 0.5 million. | |||
| NOMINAL AMOUNTS OF DERIVATIVES | 30.9.2011 | 30.9.2010 | 31.12.2010 |
| Forward exchange contracts | 0 | 177 | 0 |
|
|
|||
| MARKET VALUE VS. NOMINAL AMOUNTS OF DERIVATIVES | 30.9.2011 | 30.9.2010 | 31.12.2010 |
| Forward exchange contracts | 0 | -13 | 0 |
| Foreign exhange contracts have been valued at market value on reporting day. | |||
| Tiimari has not open foreign exchange contracts at the end of the period under review. | |||
| Tiimari does not apply hedge accounting and the effect of the derivatives | |||
|
has been booked directly in the income statement. |
|||
RELATED PARTY TRANSACTIONS
During the period under review a financial expense of EUR 330 thousand accrued to the company from the convertible capital loans granted to the related party companies. The expenses were divided as follows:
|
Interests on convertible capital loans (EUR 1 000) |
7-9/2011 | 1-9/2011 | 1-12/2010 |
| Hannu Krook | 1 | 4 | 5 |
| Pecun Inc. (Hannu Ryöppönen) | 1 | 4 | 5 |
| St. James's International Ltd (Sven-Olof Kulldorff) | 1 | 4 | 5 |
| Virala Oy (parent company of Atine Group Oy) | 95 | 272 | 216 |
| Assetman Oy (Juha Mikkonen) | 16 | 46 | 38 |
| Total | 114 | 330 | 269 |
During the period under review financial expenses accrued to the company from financing received from related parties as follows:
- Virala Oy Ab was paid a guarantee fee of EUR 75 thousand on 27 September 2011
- Tiimari raised a EUR 3.0 million bridge financing from Unioca Partners Oy during July-August and paid that financing back on 27 September 2011. Tiimari paid an arrangement fee of EUR 100 thousand and interests of EUR 98 thousand to Unioca Partners Oy relating to this bridge financing.
During the period under review persons and companies belonging to related parties subscribed company’s shares in directed share issue and rights issue as follows:
| Related party subscriptions (EUR 1 000) | Directed share issue | Rights issue |
| Pecun Inc. (Hannu Ryöppönen) | 160 | - |
| Assetman Oy (Juha Mikkonen) | 780 | 1 127 |
| Unioca Partners Oy | 4 600 | 3 454 |
| St. James's International Oy (Sven-Olof Kulldorff) | 60 | - |
| Oy Rosaco Ab (Alexander Rosenlew) | - | 54 |
| Niila Rajala | - | 75 |
| Total | 5 600 | 4 710 |
FLAGGINGS
Virala Oy Ab and its subsidiary Atine Group Oy, both of which belong to the Virala Group, announced on 10 June 2011 that they had agreed on selling all Tiimari shares and convertible capital loans held by them to Unioca Partners Oy (Stock Exchange Release 10 June 2011). The realization of the transactions was announced with a stock exchange release published on 13 June 2011 (Stock Exchange Release 13 June 2011). As a result of the transactions, Virala Group’s ownership in Tiimari fell below the flagging threshold of 1/20.
Unioca Partners Oy (“Unioca”) announced on 10 June 2011 that it had agreed on buying all Tiimari convertible capital loans held by Virala Oy Ab and all Tiimari shares held by Atine Group Oy and Vessilä Oy Ab. The realization of the transactions was announced with a stock exchange release published on 13 June 2011 (Stock Exchange Release 13 June 2011). As a result of the transactions, Unioca’s portion of Tiimari’s shares and votes exceeded the flagging threshold of 1/5.
Unioca announced on 10 June 2011 that it had given a subscription guarantee and a subscription commitment relating to Tiimari’s planned share issues, as a result of which Unioca’s ownership in Tiimari could exceed the flagging threshold of 2/3 (Stock Exchange Release 10 June 2011). Unioca announced on 27 September 2011 that, as a result of the share subscriptions and trades made in connection with the share issues, it holds a total of 260,347,076 Tiimari shares, i.e. 64.40 % of Tiimari’s shares and votes after the new shares have been registered into the trade register. Thus Unioca’s portion of Tiimari’s shares and votes exceeded the flagging threshold of 1/2 (Stock Exchange release 27 September 2011).
Assetman Oy announced on 10 June 2011 that it had given a subscription commitment relating to Tiimari’s planned share issues, as a result of which Assetman Oy’s ownership in Tiimari could fall below the flagging threshold of 1/10 (Stock Exchange Release 10 June 2011). Assetman announced on 27 September 2011 that, as a result of the share subscriptions and trades made in connection with the share issues, it holds a total of 37,100,408 Tiimari shares, i.e. 9.18 % of Tiimari’s shares and votes after the new shares have been registered into the trade register. Thus Assetman’s portion of Tiimari’s shares and votes fell below the flagging threshold of 1/2 (Stock Exchange release 27 September 2011).
| 10 MAJOR SHAREHOLDERS on 30 September 2011 | Shares | Shares % |
| Unioca Partners Oy | 260 347 076 | 64,40 |
| Varma Mutual Pension Insurance Company | 38 042 727 | 9,41 |
| Assetman Oy | 37 100 408 | 9,18 |
| Belgrano Investment Oy | 18 375 396 | 4,55 |
| Baltiska Handels A.B. | 14 326 128 | 3,54 |
| Ryöppönen Hannu Ragnvald | 1 937 777 | 0,48 |
| Rajala Niila Pekka | 1 780 091 | 0,44 |
| Suomen Bestand Oy | 1 335 016 | 0,33 |
| Mattila Rauno | 1 085 520 | 0,27 |
| Primate Oy | 750 000 | 0,19 |
| CALCULATION OF KEY FINANCIAL RATIOS | |||
| Gross margin = Revenue - materials and supplies *) | |||
| EBITDA = Operating profit + depreciation and amortisation | |||
| Earnings/share (EPS), EUR = Earnings before tax - income taxes / issue-adjusted average number of shares for the fiscal year | |||
| Shareholders' equity / share, EUR = Equity attributable to the equity holders of the parent company / issue-adjusted number of shares at the end of the fiscal year | |||
| Equity ratio % = Shareholders' equity * 100 / Total assets - prepayments received | |||
| Gearing ratio % = Interest-bearing liabilities - cash and cash equivalents * 100 / Shareholders' equity | |||
| Interest-bearing net liabilities = Interest-bearing liabilities – cash and cash equivalents | |||
| Net working capital = Inventory + short-term non-interest-bearing receivables – short-term non-interest-bearing liabilities | |||
| Operating cashflow = EBITDA - increase in net working capital - capital expenditure | |||
| *) In Gallerix franchising activities further charged rental payments are reduced from gross margin. | |||
