Consolidated interim report for Q4 and 12 months of 2008 27.12.2009
PROFITS
AS Silvano Fashion Group ended the fourth quarter of 2008 with consolidated net
sales of EEK 292.2 million (EUR 18.7 million), representing a 20.0% decline
compared to the fourth quarter of 2007. The Group's gross margin in the fourth
quarter of 2008 reached 50.1% compared to 46.5% in the fourth quarter of 2007.
In the fourth quarter of 2008, the Group had a normalised2 operating loss of
EEK 29.3 million (EUR 1.9 million), representing a 157.5% decline compared to
Q4 2007. The consolidated operating margin2 equalled -10.0% (down from 14.0% in
Q4 2007).
Consolidated net result attributable to equity holders2 amounted to EEK -74.6
million (EUR -4.9 million), compared to EEK 24.1 million (EUR 1.5 million) in
Q4 2007, and the net margin2 was -26.2% (down from 6.6% in Q4 2007).
In 2008, consolidated net sales of AS Silvano Fashion Group totalled EEK
1,694.8 million (EUR 108.3 million), showing 9.9% increase compared to 2007.
The Group's gross and operating margins2 in 2008 stood at 43.9% and 7.6%
respectively (43.6% and 15.1% (normalised1) in 2007). Operating profit2 of 2008
amounted to EEK 129.3 million (EUR 8.3 million) compared to normalised EEK
231.6 million (EUR 14.8 million) in 2007 . The Group ended 2008 with a net
loss2 of EEK 35.9 million (EUR 2.3 million), representing a 136.8% decline
compared to 20071, and net margin2 equalled -2.1% (6.3% in 20071).
In 2008, the Group's return on equity2 was -5.2% (down from 16.4% (normalised1)
in 2007) and return on assets2 was -3.1% (down from 10.3% (normalised1) in
2007).
BALANCE SHEET
At 31 December 2008, consolidated assets amounted to EEK 1,208.5 million (EUR
77.2 million), up from EEK 1,089.6 million (EUR 69.6 million) at 31 December
2007.
Trade receivables have increased by EEK 9.5 million (EUR 0.6 million).
Inventories increased by EEK 96.9 million (EUR 6.2 million) to reach EEK 434.4
million (EUR 27.8 million) at 31 December 2008. The growth in inventory results
primarily from the slowdown in customers consumption, also 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 35.1 million (EUR 2.2 million).
Current liabilities increased by EEK 190.7 million (EUR 12.2 million). Tax
liabilities, other payables, including payables to employees, and provisions
amounted to EEK 119.2 million (EUR 7.6 million), remaining at the expected
level.
Current and non-current loans and borrowings increased by EEK 108.9 million
(EUR 7.0 million) to EEK 138.1 million (EUR 8.8 million), including finance
lease liabilities of EEK 7.1 million (EUR 0.5 million.)
Equity attributable to equity holders decreased by EEK 92.5 million (EUR 5.9
million) to reach EEK 641.2 million (EUR 41.0 million).
SALES
Sales by business segments
2008EEK 2007EEK ChangeEEK 2008EUR 2007EUR ChangeEUR 2008EEK
2007EEK
million million million million million million perc
perc
Women's apparel 201.2 155.7 45.5 12.9 10.0 2.9 11.9% 10.1%
Lingerie 1,419.8 1,347.4 72.4 90.7 86.1 4.6 83.8% 87.4%
Subcontracting
services and
other sales 73.8 39.3 34.5 4.7 2.5 2.2 4.3% 2.5%
Total 1,694.8 1,542.4 152.4 108.3 98.6 9.7 100.00% 100.00%
Sales by markets
In 2008, the Group mainly focused on Russia, Belarus and Ukraine markets.
Total sales by markets
2008EEK 2007EEK ChangeEEK 2008EUR 2007EUR ChangeEUR 2008EEK 2007EEK
million million million million million million perc
perc
Estonia 139.2 167.3 -28.1 8.9 10.7 -1.8 8.2% 10.8%
Finland 33.0 39.6 -6.6 2.1 2.5 -0.4 2.0% 2.6%
Latvia 46.1 50.1 -4.0 2.9 3.2 -0.3 2.7% 3.2%
Belarus 268.2 278.9 -10.7 17.1 17.8 -0.7 15.8% 18.1%
Ukraine 137.1 99.5 37.6 8.8 6.4 2.4 8.1% 6.5%
Russia 927.0 766.0 161.0 59.3 49.0 10.3 54.7% 49.7%
Other markets 144.2 141.0 3.2 9.2 9.0 0.2 8.5% 9.1%
Total 1,694.8 1,542.4 152.4 108.3 98.6 9.7 100.00% 100.0%
Women's apparel
The main driver of growth for women's apparel sales was the expansion of the
PTA retail chain. In 2008, retail sales were 90.0% from the total revenue of
the women's apparel segment (2007: 76.5%). Retail sales volume in the Baltics
increased by 2.5%, amounting to EEK 96.7 million (EUR 6.2 million). Sales
revenue in Russia was EEK 63.8 million (EUR 4.1 million) giving 3.8 times
growth to 2007 and in Ukraine EEK 22.5 million (EUR 1.4 million).
Lingerie
The majority of lingerie sales revenue in 2008 was earned on the Russian
market, amounting to EEK 863.2 million (EUR 55.2 million), accounting for 59.3%
of all lingerie sales volume for 2008, compared to 2007: EEK 829.2 million (EUR
53.0 million). Sales in Russia comprise both retail sales and wholesale. The
second biggest region of lingerie sales is Belarus, amounting to EEK 267.7
million (EUR 17.1 million), contributing 18.4% of all lingerie sales revenue
(also comprising both retail sales and wholesale) compared to 2007: EEK 278.9
million (EUR 17.8 million). Sales in Russia were heavily affected by the
financial crisis and devaluation of the Russian rouble. As the result sales in
Q4 were lower in comparison to 2008. Economic chaos in Ukraine and devaluation
of Hryvnia resulted in substantial drop in sales in the country. Sales in
Belarus were not affected by the crisis in the neighboring countries in Q4 and
reached the planned figures. 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
76.1% of total lingerie sales revenue in 2008 (2007: 75.7%) and amounted to EEK
1,080.0 million (EUR 69.0 million). The sales of “Lauma” core brand accounted
for 5.7% of total lingerie sales (2007: 7.5 %) and amounted to EEK 80.8 million
(EUR 5.2 million). Other brands such as “Alisee”, “Aveline”, “Laumelle”, “Lauma
Aqua” and “Laumelle Aqua” comprised 18.2% of total lingerie sales in 2008
(2007: 16.8%), amounting to EEK 259.1 million (EUR 16.6 million).
Retail operations
Total retail sales of the Group in 2008 amounted to EEK 476.5 million (EUR 30.5
million), representing a 70.5% increase on 2007.
Retail operations were conducted in Estonia, Latvia, Russia, Belarus, Poland,
Lithuania and Ukraine. At the end of 2008, the Group operated 134 retail
outlets with a total area of 14,566 square meters.
Women's apparel was retailed in Estonia, Latvia, Lithuania, Russia and Ukraine.
At the end of 2008, the Group operated 37 women's apparel stores with a total
sales area of 6,833 square meters.
Lingerie was retailed in Russia, Belarus, Latvia, Lithuania, Ukraine, Poland
and Estonia. At the end of 2008, the Group operated 97 lingerie stores with a
total area of 7,733 square meters.
In 2008, 36 new stores were opened: 13 in the apparel business (operating under
PTA brand name), including 4 in Ukraine, 7 in Russia, 1 in Estonia and 1 in
Lithuania, and 23 stores in the lingerie business, including 9 under Oblicie
name (7 in Russia, 1 in Ukraine and 1 in Estonia), 12 under Milavitsa name (7
in Belarus and 5 in Russia), 1 store under Lauma Lingerie brand name in Latvia
and 1 stock outlet in Estonia. Seventeen underperforming stores were closed: 5
PTA stores in Russia, 1 PTA store in Ukraine, 6 Oblicie stores in Russia, 1
Oblicie store in Ukraine, 2 Milavitsa stores in Belarus and 2 Splendo stores in
Poland.
Number of stores at 31 December:
31.12.2008 31.12.2007
Estonia 11 8
Latvia 7 6
Poland 8 10
Belarus 28 23
Russia 52 44
Lithuania 21 20
Ukraine 7 4
Total stores 134 115
Total sales area, sq m 14,566 12,454
In 2008, women's apparel retail revenue compared to 2007 increased by 59.3%,
amounting to EEK 188.6 million (EUR 12.0 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 +33%, in Estonia -4% and in Latvia -3%
in 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 49% for stores operating longer than one year, however it is still below
breakeven on average. Retail development continues to be the major objective of
the Group, however the focus has been shifted towards franchising versus
directly operated stores. In Q4 the Group opened 4 Milavitsa monobrand shops in
Russia and one Oblicie shop was re-branded to Milavitsa. Intention is to
capitalise on the brand awareness in the country. The remaining Oblicie stores
will be re-branded to Milavitsa in 2009.
Stores by concept
Market PTA Oblicie Milavitsa Other Total Sales area
Russia 13 34 5 - 52 5,467
Ukraine 6 1 - - 7 994
Estonia 9 1 - 1 11 2,120
Latvia 4 - - 3 7 1,196
Lithuania 5 - - 16 21 1,883
Belarus - - 28 - 28 2,554
Poland - 1 - 7 8 352
Total 37 37 33 27 134 14,566
Wholesale
In 2008, wholesale amounted to EEK 1,144.5 million (EUR 73.2 million),
representing 67.5% of the Group's total revenue (2007: 79.3%). 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 2008,
revenue from wholesale of women's apparel decreased by 53.0% compared to 2007,
amounting to EEK 19.5 million (EUR 1.3 million).
Lingerie wholesale in 2008 decreased by 4.8% compared to 2007, amounting to EEK
1,124.9 million (EUR 71.9 million). Most of the lingerie wholesale partners are
located in Russia. There was a slow down in wholesales operations in Russia and
Ukraine in Q4 due to the financial crisis.
Investment
In 2008, the Group's investments totalled EEK 93.3 million (EUR 6.0 million). A
total of EEK 38.6 million (EUR 2.5 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 December 2008, the Group employed a staff of 3,901 including 851
in retail and 2,319 in production. The rest are employed in wholesale,
administration and support operations. The average number of employees in 2008
was 3,953.
The total salaries and wages for 2008 amounted to EEK 355.2 million (EUR 22.7
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.
Sale of Splendo Polska Sp. z o.o.
The Group has entered into a share purchase agreement for the sale of all its
shares (90% of the share capital) in Splendo Polska Sp. z o.o., a Polish retail
subsidiary operating 6 retail outlets. The closing of the transaction is
expected to occur within four weeks, subject to the fulfilment of certain
conditions precedent. Taking account of the SFG's total investment in Splendo,
the transaction is estimated to generate a loss of approximately EEK 18.8
million (EUR 1.2 million).
The sale of Polish retail operations will improve the efficiency of the group,
as SFG's business model adjusts to the global economic downturn. The management
intends to focus its short- and mid-term efforts on SFG's primary target
markets of Russia, Ukraine, Belarus and the Baltics. Further action may be
expected in the coming quarters to ensure that SFG remains competitive in the
changing market conditions.
Selected financial data
The Group's operating results are best summarised in the following figures and
ratios:
Key figures and ratios 31.12.2008 31.12.2007 Change
Net sales (EEK million) 1,694.8 1,542.4 152.4
Net income, attributable
to shareholders (EEK million)-119.0 186.9 -305.9
Earnings before interest,
taxes and depreciation
(EBITDA) ( EEK million) 95.0 360.1 -265.1
Earnings before interest and
taxes (EBIT) (EEK million) 46.2 321.5 -275.3
Net sales (EUR million) 108.3 98.6 9.7
Net income attributable to
shareholders (EUR million) -7.6 11.9 -19.5
Earnings before interest,
taxes and depreciation
(EBITDA) ( EUR million) 6.1 23.0 -16.9
Earnings before interest
and taxes (EBIT) (EUR million) 3.0 20.6 -17.6
Operating margin, % 2.7% 20.8% -
Net margin, % -7.0% 12.1% -
ROA, % -10.4% 19.7% -
ROE, % -17.3% 31.5% -
Earnings per share (EPS), in EEK -2.97 4.85 -
Earnings per share (EPS), in EUR -0.19 0.31 -
Current ratio 2.1 3.6 -
Quick ratio 1.1 2.3 -
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
31.12.2008 31.12.2007 31.12.2008 31.12.2007
EEK th EEK th EUR th EUR th
ASSETS
Non-current assets
Property, plant and equipment 293,530 246,541 18,760 15,757
Intangible assets 16,085 27,976 1,028 1,788
Investment property 23,141 22,954 1,479 1,467
Investments in equity
accounted investees 2,879 876 184 56
Available-for-sale
financial assets 8,778 8,480 561 542
Other receivables 1,643 595 105 38
Total non-current assets 346,056 307,422 22,117 19,648
Current assets
Inventories 434,412 337,528 27,764 21,572
Prepaid taxes 62,070 24,471 3,967 1,564
Trade receivables 4 168,013 158,531 10,738 10,132
Other receivables 5 66,623 29,713 4,258 1,899
Prepayments 49,209 51,680 3,145 3,303
Cash and cash equivalents 7 82,129 180,233 5,249 11,519
Total current assets 862,456 782,156 55,121 49,989
TOTAL ASSETS 1 208,512 1 089,578 77,238 69,637
LIABILITIES AND EQUITY
Equity
Share capital at par value 400,000 400,000 25,565 25,565
Share premium 223,293 223,293 14,271 14,271
Own shares -7,041 0 -450 0
Statutory capital reserve 1,046 1,046 67 67
Translation reserve -58,086 -76,512 -3,713 -4,890
Retained earnings 82,035 185,927 5,243 11,883
Total equity attributable to
equity holders of the parent 641,247 733,754 40,983 46,896
Minority interest 141,977 136,313 9,074 8,712
Total equity 783,224 870,067 50,057 55,608
Non-current liabilities
Loans and borrowings 18,197 4,068 1,163 260
Deferred tax liabilities 201 201 13 13
Other liabilities 1,314 360 84 23
Provisions 125 139 8 9
Total non-current liabilities 19,837 4,768 1,268 305
Current liabilities
Loans and borrowings 119,946 25,160 7,666 1,608
Trade payables 167,951 122,888 10,734 7,854
Corporate income tax liability 4,006 3,192 256 204
Other tax liabilities 18,150 23,486 1,160 1,501
Other payables 23,892 17,430 1,527 1,113
Provisions 70,817 22,462 4,526 1,436
Accrued expenses 689 125 44 8
Total current liabilities 405,451 214,743 25,913 13,724
Total liabilities 425,288 219,511 27,181 14,029
TOTAL LIABILITIES
AND EQUITY 1 208,512 1 089,578 77,238 69,637
Income Statement 12 months of 2008
Consolidated, unaudited
31.12.2008 31.12.2007 31.12.2008 31.12.2007
EEK th EEK th EUR th EUR th
Net sales 1 694,762 1 542,438 108,315 98,580
Costs of goods sold -950,969 -870,780 -60,778 -55,653
Gross Profit 743,793 671,658 47,537 42,927
Other operating income 34,579 105,794 2,210 6,761
Distribution costs -337,607 -213,958 -21,577 -13,674
Administrative expenses -219,976 -170,552 -14,059 -10,900
Other operating expenses -174,585 -71,394 -11,158 -4,563
Operating profit 46,204 321,548 2,953 20,551
Interest expenses -5,070 -2,926 -324 -187
Gains/losses on conversion
of foreign currencies -62,054 4,256 -3,966 272
Other financial income / expenses 6,697 13,087 428 836
Total financial income / expenses -60,427 14,417 -3,862 921
Share of profit of
equity accounted investees 1,752 988 112 63
Profit before corporate income tax -12,471 336,953 -797 21,535
Corporate income tax -87,777 -92,943 -5,610 -5,940
Net profit for period -100,248 244,010 -6,407 15,595
Net profit attributable
to parent company -118,961 186,914 -7,603 11,946
Net profit attributable
to minority shareholders 18,713 57,096 1,196 3,649
Earnings per share
Basic earnings per share (EEK/EUR) 10 -2.97 4.81 -0.19 0.31
Diluted earnings per share (EEK/EUR) 10 -2.97 4.81 -0.19 0.31
Income Statement-Q4
Consolidated, unaudited
31.12.2008 31.12.2007 31.12.2008 31.12.2007
Q4 EEK th Q4 EEK th Q4 EUR th Q4 EUR th
Net sales 292,169 365,313 18,673 23,348
Costs of goods sold -145,936 -195,488 -9,327 -12,494
Gross Profit 146,233 169,825 9,346 10,854
Other operating income 20,215 22,304 1,292 1,425
Distribution costs -97,526 -73,624 -6,233 -4,705
Administrative expenses -59,786 -45,254 -3,821 -2,892
Other operating expenses -121,559 -22,295 -7,769 -1,425
Operating profit -112,423 50,956 -7,185 3,257
Interest expenses -2,457 -908 -157 -58
Gains/losses on conversion
of foreign currencies -47,080 -563 -3,009 -36
Other financial income / expenses -2,018 6,875 -129 439
Total financial income / expenses -51,555 5,404 -3,295 345
Share of profit of
equity accounted investees -626 988 -40 63
Profit before corporate
income tax -164,604 57,348 -10,520 3,665
Corporate income tax -13,174 -20,562 -842 -1,314
Net profit for period -177,778 36,786 -11,362 2,351
Net profit attributable to
parent company -159,533 24,094 -10,196 1,540
Net profit attributable
to minority shareholders -18,245 12,692 -1,166 811
Earnings per share
Basic earnings per share (EEK/EUR) 10 -3.99 0.60 -0.25 0.04
Diluted earnings per share (EEK/EUR) 10 -3.99 0.60 -0.25 0.04