Published: 2018-02-27 11:10:17 CET
Baltika
Quarterly report

Baltika’s unaudited financial results, fourth quarter and 12 months of 2017

Baltika Group ended the fourth quarter with a net profit of 920 thousand euros, which exceeds the result of same period last year by 300 thousand euros. The result of fourth quarter in last year was a net profit of 620 thousand euros.

In the fourth quarter Group’s revenue increased 2% compared to same period last year and was 12,969 thousand euros. Retail revenue in the fourth quarter was 11,626 thousand euros, increasing 2% and strong sales growth was continually shown by e‑store. Wholesale and franchise sales decreased 7% compared to the fourth quarter last year.

Baltic region retail business recovered after the three quarter long period of decrease and resulted in 2% sales growth in the fourth quarter compared to the fourth quarter of last year. In November and December the offer of autumn-winter season collection brought visitors back to shopping centres, sales growth was supported by increase both in sales transactions and in average spend. Sales were recovering faster in Estonia and Latvia, showing increase 4% and 2% respectively in the fourth quarter. In year total retail sales amounted to 39,476 thousand euros, decreasing 1% compared to last year.

Wholesale and franchise revenue decreased 7% in the fourth quarter and was 857 thousand euros. Wholesale and franchise revenue growth was supported by recently added market Serbia and Peek & Cloppenburg department stores chain in Germany and Austria. The fourth quarter sales revenue decreased mainly due to complicated economic situation of Eastern-European franchise partners and smaller demand for new orders. While franchise sales decreased in the fourth quarter, then the wholesale increased and one of the growth reason was successful sale of PyeongChang Olympic collection to the partners. The biggest brand in wholesale and franchise was Monton with 60% share of sales. At the end of the fourth quarter there were 33 franchise stores representing Baltika’s brands, forming 26% of the total stores portfolio. In year total the wholesale and franchise revenue increased 5% and was 6,300 thousand euros.

Baltika Group’s e-store Andmorefashion.com revenue increased 38% in the fourth quarter and was 427 thousand euros. The most-selling brand in e-store was Monton, comprising of 37% from revenue. By country, most of the sales were in Estonia with share of 53%, followed by Latvia 17% and Lithuania 16%. Compared to same period last year, the largest growth was in Latvia (+54%). Total of 7,300 orders from 31 counties were received in the fourth quarter. In November, Click&Collect service that so far had been available in Estonia and Latvia, was also launched in Lithuania. E‑store processes of assembling orders and merchandising were simplified through new developments. In year total, the e-store Andmorefashion.com revenue increased 38% and was 1,468 thousand euros.

Implementing the more conservative cost policy and efficient inventory management process together with more favourable input conditions in the second half-year, recovered the gross profit growth at the end of year and led to the highest gross profit margin earned in a quarter in last five years. The company’s gross profit margin in the fourth quarter was 54.9% increasing by 3.1 percentage points in the year. The gross profit for the quarter was 7,122 thousand euros, increasing by 547 thousand euros compared to last year’s comparable result. The year total gross profit amounted to 23,670 thousand euros (2016: 23,497 thousand euros).

Group’s distribution and general expense increased 2% in the fourth quarter and 1% in a year. The distribution and general expense to revenue ratio in the fourth quarter was 46.2% remaining at the same level in comparable period. In year total, the ratio was 48.5% improving by 0.1 percentage points.

In year total, Baltika’s revenue increased 1%. The e-store and wholesale and franchise revenue showed growth; with that one of the company’s objectives for 2017 – revenue growth in all of the sales channels – was partly met. In spite of the weak result of nine months, which was caused by poor sales and decreased gross profit related to deeper discounts in retail sector, with the contribution of strong fourth quarter company managed to end the year in profit. Company ended the 2017 in a profit of 58 thousand euros, last year profit was 177 thousand euros.

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

  • In September the biggest brand in Baltika’s portfolio Monton celebrated its 15th birthday. For the occasion, Monton designers created a special collection named “Freedom” as a tribute to all free spirits, to freedom of creation and expression and to free Estonia. Swallow campaign, created for the communication of Monton’s anniversary and special collection, won the prize of Digital Deed 2017 in branded content category.
  • To Celebrate Estonia’s 100th and Canada's 150th birthday, a premiere under the concept called Northern Spirit EstoSyle was held in Toronto in Canada in September. During this event, eight internationally most recognized Estonian fashion and design brands were showcased, including three Baltika’s brands: Monton, Baltman and Ivo Nikkolo.
  • On 11 November 2017, Supervisory Board decided to recall the head of purchasing and supply chain Ingrid Uibukant from the Management Board starting from 18th of December 2017. Management Board of Baltika AS will continue with two members: Chief Executive Officer Meelis Milder and Chief Financial Officer Maigi Pärnik-Pernik.
  • In November Monton and the Estonian Olympic Committee revealed the new Olympic collection dedicated to Estonia's 100th birthday. Monton’s collection for the PyeongChang Winter Olympics is called 1918 after the year of birth of Estonian Republic. Many of the world media publications have named the outfit of Estonian Olympic Delegation as one of the best in PyeongChang.
  • In December, Baltika started the new pilot project to support the e-store growth in Finland, within this project new pop-up store was opened in Iso Omena Shoppingcenter in Espoo. Initial duration for the Finnish project is planned for six months with the purpose to support the integration of e-store Andmorefashion.com and physical store to offer unified and better shopping experience to the customer.
  • In the fourth quarter, Baltika opened Monton Andmore store in Estonia in Nautica shopping center and pop-up store with new concept was opened in Finland in Iso Omena shopping center. Franchise partner in Ukraine opened Monton store in Kiev in Gorodok shopping center
  • In relation to unite marketing and communication areas in Baltika Group and bring their management under one unit, starting from December Mari-Liis Küppar works in Baltika as new Marketing and Communication Manager. She has previous working experience in Swedbank AS, Saku Õlletehase AS and AS Värska Vesi. The role of the marketing and communication department is to represent stronger customer view in the organisation to bring Group’s business strategy into life. Thereby, there is intention to make the brands’ marketing communication stronger in different channels.
  • Starting from January 2018, Raivo Videvik is working in Baltika as new Export Director, for the purpose to put effort into the growth of export and to accelerate the increase of sales in franchise and wholesale. Previously, Raivo has been responsible for managing sales department and export area in Timbeco Woodhouse OÜ, being active in developing business and retail processes in Elektrum Eesti OÜ and also in Eesti Gaas AS.

 

Consolidated statement of financial position 

 Thousand euros 31 Dec 2017 31 Dec 2016
ASSETS    
Current assets    
Cash and cash equivalents 704 419
Trade and other receivables 2,055 1,956
Inventories 10,499 11,096
Total current assets 13,258 13,471
Non-current assets    
Deferred income tax asset 189 228
Other non-current assets 487 522
Property, plant and equipment 2,395 3,022
Intangible assets 1,513 1,676
Total non-current assets 4,584 5,448
TOTAL ASSETS 17,842 18,919
     
EQUITY AND LIABILITIES    
Current liabilities    
Borrowings 1,309 5,835
Trade and other payables 5,984 6,923
Total current liabilities 7,293 12,758
Non-current liabilities    
Borrowings 5,363 1,196
Total non-current liabilities 5,363 1,196
TOTAL LIABILITIES 12,656 13,954
     
EQUITY    
Share capital at par value 8,159 8,159
Share premium 496 496
Reserves 1,345 1,182
Retained earnings -4,872 -5,049
Net profit for the period 58 177
TOTAL EQUITY 5,186 4,965
TOTAL LIABILITIES AND EQUITY 17,842 18,919

 

Consolidated statement of profit and loss 

 Thousand euros 4 Q 2017 4 Q 2016 2017 2016
         
Revenue 12,969 12,704 47,459 46,993
Client bonus provision 16 23 16 23
Revenue after client bonus provision 12,985 12,727 47,475 47,016
Cost of goods sold -5,863 -6,152 -23,805 -23,519
Gross profit 7,122 6,575 23,670 23,497
         
Distribution costs -5,425 -5,242 -20,630 -20,336
Administrative and general expenses -567 -630 -2,387 -2,504
Other operating income (-expense) -12 95 -35 44
Operating profit 1,118 798 618 701
         
Finance costs -159 -173 -521 -519
Profit before income tax 959 625 97 182
         
Income tax expense -39 -5 -39 -5
         
Net profit for the period 920 620 58 177
           
         
Basic earnings per share from net profit for the period, EUR 0.02 0.02 0.00 0.00
         
Diluted earnings per share from net profit for the period, EUR 0.02 0.02 0.00 0.00
           

 

Maigi Pärnik-Pernik

Member of the Management Board

maigi.parnik@baltikagroup.com

 

 


Baltika_Interim report 4Q 2017.pdf