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Published: 2013-11-08 18:00:00 CET
Silvano Fashion Group
Quarterly report

Consolidated interim report for Q3 and 9 months of 2013 (unaudited)

Tallinn, 2013-11-08 18:00 CET --  

Selected Financial Indicators

Summarized selected financial indicators of the Group for 9 months 2013 compared to 9 months 2012 and 30.09.2013 compared to 31.12.2012 were as follows:  

in thousands of EUR 9m 2013 9m 2012 Change
Revenue 98 812 97 907 0.9%
EBITDA 18 501 20 942 -11.7%
Net profit for the period 11 747 14 555 -19.3%
Net profit attributable equity holders of the Parent company 10 709 12 485 -14.2%
Earnings per share (EUR) 0.27 0.32 -14.2%
Operating cash flow for the period 15 274 8 107 72.9%

 

in thousands of EUR 30.09.2013 31.12.2012 Change
Total assets 80 945 75 837 6.7%
Total current assets 58 928 55 847 5.5%
Total equity attributable to equity holders of the Parent company 56 981 51 396 10.9%
Loans and borrowings 145 47 208.5%
Cash and cash equivalents 24 708 16 260 52.0%

 

Margin analysis, % 9m 2013 9m 2012 Change
Gross profit 35.6 36.3 -1.8%
EBITDA 18.7 21.4 -12.5%
Net profit 11.9 14.9 -20.0%
Net profit attributable equity holders of the Parent company 10.8 12.8 -15.0%

 

Financial ratios, % 30.09.2013 31.12.2012 Change
ROA 15.0 32.2 -53.4%
ROE 22.3 50.9 -56.1%
Price to earnings ratio (P/E) 8.1 5.5 47.6%
Current ratio 5.6 3.6 55.5%
Quick ratio 3.6 2.1 72.3%

 Consolidated Statement of Financial Position

in thousands of EUR 30.09.2013 31.12.2012
ASSETS    
Current assets    
Cash and cash equivalents 24 708 16 260
Prepayments 412 243
Trade and other receivables 12 956 14 746
Inventories 20 852 24 598
Total current assets 58 928 55 847
     
Non-current assets    
Long-term receivables 0 1
Investments in associates 137 164
Available-for-sale investments 501 492
Deferred tax asset 203 231
Intangible assets 714 443
Investment property 1 616 1 618
Property, plant and equipment 18 846 17 041
Total non-current assets 22 017 19 990
TOTAL ASSETS 80 945 75 837
     
LIABILITIES AND EQUITY    
Current liabilities    
Borrowings 145 47
Trade and other payables 9 076 11 171
Tax liabilities 1 304 1 008
Total current liabilities 10 525 12 226
     
Non-current liabilities    
Deferred tax liability 2 251 2 162
Total non-current liabilities 2 251 2 162
Total liabilities 12 776 14 388
     
Equity    
Share capital 15 760 15 760
Share premium 13 822 13 822
Treasury shares -170 -20
Statutory reserve capital 1 306 1 306
Unrealised exchange rate differences -786 15
Retained earnings 27 049 20 513
Total equity attributable to equity holders of the Parent company 56 981 51 396
Non-controlling interest in equity 11 188 10 053
Total equity 68 169 61 449
TOTAL EQUITY AND LIABILITIES 80 945 75 837

Consolidated Income Statement

in thousands of EUR Q3 2013 Q3 2012 9m 2013 9m 2012
Revenue 29 865 32 406 98 812 97 907
Cost of goods sold -18 068 -22 347 -63 632 -62 409
Gross Profit 11 797 10 059 35 180 35 498
         
Distribution expenses -3 739 -2 982 -12 124 -9 929
Administrative expenses -1 577 -1 738 -4 981 -5 758
Other operating income 62 -63 496 496
Other operating expenses -764 -475 -1 922 -1 263
Operating profit 5 779 4 801 16 649 19 044
         
Currency exchange income/(expense) 272 920 -323 454
Other finance income/(expenses) 313 108 721 420
Net financial income 585 1 028 398 874
         
Profit (loss) from associates using equity method 1 -113 9 9
Profit before tax and gain/(loss) on net monetary position 6 365 5 716 17 056 19 927
 
Income tax expense
-1 249 -2 902 -3 904 -6 110
Profit before gain/(loss) on net monetary position 5 116 2 814 13 152 13 817
         
Gain on net monetary position -1 704 767 -1 405 738
Profit for the period 3 412 3 581 11 747 14 555
Attributable to :        
   Equity holders of the Parent company 3 093 2 824 10 709 12 485
   Non-controlling interest 319 757 1 038 2 070
         
Earnings per share from profit attributable to equity holders of the Parent company, both basic and diluted (EUR) 0.08 0.07 0.27 0.32

Business environment

Silvano Fashion Group with its brand portfolio is a recognized market leader in the lingerie segment in Russia, Belarus, Ukraine, has exceptionally strong foothold in other Russian-speaking countries (including Kazakhstan and Moldova) and is a recognized player in the Baltic consumer markets.

In broader terms we can notice more positive thinking about the world economy, which is supported by a highly liberal money market policies. Nevertheless, there is a long way until the recovery of the real economy. The quantitative easing has in the first hand been targeted to stimulate the economy, and we feel that the retail sector has been among the winners with increasing consumers purchasing volumes.

We see the signs of recovery in the first hand in Europe, among them the optimism in the Baltics of the (expected) improvement in the consumer sentiment, but also signs of expansion plans of Central- and Eastern Europe retail operators. For the Group it translated into growth in sales in Q3 2013 in Belarus, Ukraine and other markets, but unfortunately not in Russia where breaking the downtrend is expected in early 2014. Looking at the Group’s activities in the given economic environment we have noticed that even with sluggish sales growth the opening of the franchise stores persists, that respectively reduces the less predictable wholesale segment’s influence on the top line sales numbers; we also have noticed that the growth continues and concentrates into “new” markets where the previous economic slump has had a softer effect.

Russia’s economy’s current problem is related to GDP growth rate dropping below 2% According to deputy Economy Minister of Russia, the economy expanded by 1.2% during Q3 2013. Notwithstanding the slowdown there, Silvano continues to expand the franchise network that seems to be the panacea against backdrops in orders in the less predictable wholesale segment. The net new openings for the 3rd quarter have somewhat decreased, mainly due to relocation of old stores into new locations. There are a total of 378 franchise stores in Russia as of end of Q3, which, together with wholesales, generated 58 375 thousand EUR in sales for 9 months 2013 compared to 59 560 thousand EUR a year ago.

Belarus consumption continues strongly. The preliminary GDP data indicates a modest 1.1% y-o-y growth. The driver for growth in consumption is related to the rise of average wages in the country (the data is available for 8 months) by 19.5% to 5.5 million roubles (approximately 440 euros a month). The CPI growth is 11% from the beginning of the year (the CB targets 12% inflation for 2013). Perhaps with moderate slow-down, the retail sector continues to grow in the near future. There are a total of 52 stores operated directly by the Group and 5 franchise stores. Belarus sales revenue reached 24 587 thousand EUR for 9 months of 2013 compared to 24 508 thousand EUR for the same period a year ago.

In Ukraine, the real economy has stalled and political attention is set at foreign politics. Nevertheless, the Group’s results are good thanks to the strength of our local franchise and wholesales partners. Nevertheless, the consumption is built on thin ice, as there are no evident signs of the recovery for the near future. There are 93 franchise stores in total in the country as of end of Q3 2013. The sales revenue advanced to 7 141 thousand EUR for 9 months of 2013 compared to 5 740 thousand EUR for the same period a year ago.

The Baltic markets retail sector shows strength, and we share this view with the rest. One of the components fuelling this growth is increase of wages in Q2 (especially in Estonia), hence stimulating the private consumption. At the time of issuance of the report, no macro data was available. The Group operates 9 own stores, complemented by 32 partner stores in the region. The sales in the Baltic countries aggregated 2 015 thousand EUR for 9 months of 2013, compared to 2 530 EUR for the same period a year ago. The drop in sales is related to the decrease in the re-export related wholesales (the Group has streamlined its sales policy and arranges sales via country-based representative offices).

The other markets, Kazakhstan and Moldova in the top, showed continuously good dynamics during 9 months 2013. The sales into these two countries reached 4 677 thousand EUR for the period compared to 3 692 thousand EUR for the 9 months of 2012. The remaining “other” attributed to a wide scope of countries both in the East and West (2 017 thousand EUR in 9 months of 2013 compared to 1 877 thousand EUR in 2012).

On the store openings, Q3 2013 net increase (including openings and store closures primarily due to relocations) for Milavitsa stores were 10 units and 2 units under the Lauma Lingerie brand. The Group therefore operated directly and via franchise a total of 648 stores (net increase of 66 stores compared to end of 2012). Total geography of our franchise partners now covers more than 20 countries, including Milavitsa and Lauma Lingerie branded stores.  

Financial performance

The Group`s sales amounted to 98 812 thousand EUR during 9 months of 2013, representing a 0.9% increase as compared to the same period of previous year. Overall, wholesales increased by 0.17% and retail sales – by 5.04%.

The Group’s reported gross profit margin during Q3 improved year-on-year basis and stood at 39.5%, reported gross margin was 31.0% in the respective period of previous year. For 9 months of 2013, the gross margin aggregated 35.6%, compared to 36.3% a year ago. Consolidated operating profit for Q3 2013 amounted to 5 779 thousand EUR, compared to 4 801 thousand EUR in Q3 2012. For 9 months of 2013 the operating profit stood at 16 649 thousand EUR compared to 19 044 thousand EUR a year ago. The main reason for the drop is related to higher distribution expenses. The consolidated operating profit margin was 16.8% for 9 months of 2013 (19.5% in 9 months of 2012).

Consolidated net profit attributable to equity holders of the Parent company for Q3 2013 amounted to 3 093 thousand EUR, compared to 2 824 thousand EUR in Q3 2012. The net profit attributable to equity holders of the Parent company for 9 months of 2013 amounted to 10 709 thousand EUR, compared to 12 485 thousand EUR a year ago; net profit margin attributable to equity holders of the Parent company for 9 months of 2013 was 10.8% against 12.8% in 9 months of 2012.

Financial position

As of 30 September 2013 consolidated assets amounted to 80 945 thousand EUR representing an increase by 6.7% as compared to the position as of 31 December 2012.

Trade and other receivables decreased by 1 790 thousand EUR as compared to 31 December 2012 and amounted to 12 956 thousand EUR as of 30 September 2013. Inventory balance decreased by 3 746 thousand EUR and amounted to 20 852 thousand EUR as of 30 September 2013. Changes in trade debtors and stock balance were in line with the seasonality trend of the business.

Equity attributable to equity holders of the Parent company increased by 5 585 thousand EUR and amounted to 56 981 thousand EUR as of 30 September 2013.

Current liabilities decreased by 1 701 thousand EUR during 9 months of 2013. Current and non-current loans and borrowings increased by 98 thousand EUR to 145 thousand EUR as of 30 September 2013.

Sales structure

Sales by markets

in thousands of EUR 9m 2013 9m 2012 Change   9m 2013
% from sales
9m 2012
% from sales
Russia 58 375 59 560 -1 185   59.1% 60.8%
Belarus 24 587 24 508 79   24.9% 25.0%
Ukraine 7 141 5 740 1 401   7.2% 5.9%
Baltics 2 015 2 530 -515   2.0% 2.6%
Other markets 6 694 5 569 1 125   6.8% 5.7%
Total 98 812 97 907 905   100.0% 100.0%

The majority of lingerie sales revenue during 9 months of 2013 in the amount of 58 375 thousand EUR was generated in Russia, accounting for 59.1% of total sales. The second largest market was Belarus, where sales reached 24 587 thousand EUR, contributing 24.9% of lingerie sales (both retail and wholesale). Ukraine represented a sales of 7 141 thousand EUR, contributing 7.2% of lingerie sales of the Group.

Sales by business segments 

in thousands of EUR 9m 2013 9m 2012 Change   9m 2013
% from sales
9m 2012
% from sales
Wholesale 81 900 81 759 141   82.9% 83.5%
Retail 16 614 15 817 797   16.8% 16.2%
Other operations 298 331 -33   0.3% 0.3%
Total 98 812 97 907 905   100.0% 100.0%

 

During 9 months of 2013 wholesale revenue amounted to 81 900 thousand EUR, representing 82.9% of the Group’s total revenue (9 months 2012: 83.5%). The main wholesale regions were Russia, Ukraine, Belarus, Kazakhstan and Moldova.

Total lingerie retail sales of the Group in 9 months of 2013 amounted to 16 614 thousand EUR, representing 16.8% of the Group’s total revenue (9 months 2012 16.2%).

As of 30 September 2013 there were altogether 648 Milavitsa and Lauma branded shops. Own retail operations were conducted in Belarus and Latvia. As of the end of 9 months of 2013 the Group operated 61 own retail outlets. As of 30 September 2013, there were 553 Milavitsa branded shops operated by Milavitsa trading partners in Russia, Ukraine, Moldova, Kazakhstan, Uzbekistan, Kyrgyzstan, Latvia, Azerbaijan, Armenia, Germany, South Africa, Lithuania, Estonia, Georgia, United Arab Emirates, Iran, Slovenia, Belgium and Italy. Additionally, as of 30 September 2013, there were 34 Lauma Lingerie retail outlets operated by Lauma Lingerie trading partners in Lithuania, Latvia, Estonia, Belarus and Albania.

Investments

During 9 months 2013 the Group’s investments into property, plant and equipment totalled 3 215 thousand EUR. Main investments were made into equipment and facilities to improve logistic facilities and maintain effective production for future periods.

Personnel

As of 30 September 2013, the Group employed 3 159 employees including 365 in retail. The rest were employed in production, wholesale, administration and support operations.

Total salaries and related taxes during 9 months 2013 amounted to 18 324 thousand EUR. The remuneration of key management of the Group, including the key executives of the subsidiaries, totalled 507 thousand EUR.

Decisions made by governing bodies during 9 months 2013

On 28 June 2013 Silvano Fashion Group held its regular Annual General Meeting of Shareholders. The Meeting adopted following decisions.

  • The Meeting approved the 2012 Annual Report.
  • The Meeting decided to distribute dividends in the amount 0.10 EUR per share (record date 12.07.2013, paid out on 15.07.2013).
  • The Meeting decided to reduce the share capital of the Company by reducing the nominal value of the shares by 0.10 EUR per share (record date 12.07.2013, to be paid out after the registration of the capital reduction is completed) and amend the Articles of Association accordingly.
  • The Meeting decided to adopt a share buy-back program in the following: effective period until 30.06.2014; maximum number of shares to be acquired not more than 400,000; maximum share price 2.50 EUR per share.
  • The Meeting decided to recall Mr Pavel Daneyko from the Supervisory Board due to the expiration of his term, and appointed Mr Mart Mutso as the new Supervisory Board member.
  • The Meeting decided to re-appoint AS PricewaterhouseCoopers as the Group`s auditor for financial year 2013.

In June, Silvano Fashion Group established a 100% subsidiary in Latvia (SIA Linret) for holding purposes.

 

         Aleksei Kadõrko
         CFO
         Silvano Fashion Group
         +372 6845 000
         aleksei.kadorko@silvanofashion.com


SFG Q3 and 9 months of 2013 interim report EN 08.11.13.pdf