News Column

Baltika’s unaudited financial results, second quarter and 6 months of 2014

July 21, 2014

Baltika’s second-quarter net profit from continuing operations totalled 405 thousand euros, comparative figure in prior year was 641 thousand euros profit. Group second-quarter net profit including discontinued operations was 648 thousand euros that is 24 thousand euros better result compared to same period in previous year. In connection with Baltika’s exit from the Ukrainian retail business, which represented a major line of business of the Group, the 2014 results of the Ukrainian entity are presented as discontinued operation. Therefore the results of the discontinued operation are reported separately from continuing operations to allow better assessment of the performance of continuing operations. For comparability, the figures for 2013 have been adjusted accordingly. The Group’s second-quarter revenue grew by 257 thousand euros, amounting to 12,970 thousand euros. In line with the strategic objective of placing greater focus on the development of other sales channels and increase sales in e-store and though wholesale and franchise, the proportion of other channels from total revenues has increased. Wholesale and franchise revenues quarterly increase was 41% and e-store sales growth 18%. Second quarter retail revenue remained on the same level as prior year amounting to 12,064 thousand euros. Baltic countries sales grew by 353 thousand euros (+4%) and Russia sales decreased by 338 thousand euros (-15%). Baltika’s second-quarter gross margin was 56.5%, 2.3 percentage points lower compared to the same period in prior year. In addition to heightening of competition in retail and in Russia it is due to weakening of the exchange rate of rouble, the margin is impacted by the increase of other sales channels proportion from revenues. While the results from Baltics are satisfactory then Group total results were still negatively impacted by results of Russia. Retail sales in Russia decreased in the second quarter by 15% compared to prior year, which were somewhat compensated by cost savings from weakening rouble. Baltika envisages focusing going forward own retail network operating stores in St. Petersburg and Kaliningrad region. New wholesale and franchise partners are sought to operate existing stores or open new stores in other regions. Half-year result with discontinued operations was a net loss of 1,834 thousand euros, which includes the loss from allowance for assets in Ukraine of 1,095 thousand euros. Half-year result of continued operations was a net loss of 505 thousand euros. Highlights of the period until the date of release of this quarterly report -- The Annual General Meeting of AS Baltika, held on 28 April 2014, decided to approve the Annual report for 2013 and profit allocation to retained earnings. Meeting elected the auditors for auditing the financial years 2014-2016 to be AS PricewaterhouseCoopers. Annual General Meeting decided to conditionally increase the share capital of the Company and to issue convertible bonds according to the Terms and Conditions of J-Bonds presented by Council. -- On 29 April 2014Baltika signed an agreement by which Baltika Retail Ukraina Ltd (BRU) was sold to OÜ Ellipse Group. The owner of the acquirer is Boriss Loifenfeld, the Baltika’s adviser in Eastern European matters. BRU will continue cooperation with Baltika as franchise partner; contract was signed in 29 April for next five years. BRU’s assets and liabilities were sold for a price close to carrying amount and as a result of the sales transaction Baltika recognised a receivable from BRU in amount of 1.25 million euros, for what the parties have agreed a five-year settlement schedule. The receivable is secured with BRU’s commercial assets. Collectability of this receivable depends on the development of the Ukrainian economy and improvements in the entity’s operating results. Baltika will keep the impairment made in the first quarter as allowance reserve for BRU receivable. -- Financial Supervision Authority approved on 3rd July 2014 the Convertible bond offering prospectus. The offering comprises of 600 bonds with issuance price of 5,000 euros, therefore total of 3,000,000 euros. Bonds with the term of three year bear 6.5% interest p.a. Each bond gives to its owner the right to subscribe for 10,000 shares of the Company with subscription price 0.5 euros per share. The subscription for the shares will take place from 15 July 2017 10 a.m. until 30 July 2017 2 p.m. The company's shareholders fixed in the share register on 14 July 2014 08:00 a.m. shall be granted the pre-emptive right to subscribe for the bonds. Offer period starts from 14 July 2014 at 10:00 and terminates at 14:00 on 28 July 2014. The bonds to be issued on 28 July 2014 results of the offering will be announced on 29 July 2014. -- Baltika launched in the second quarter in Estonia and Lithuania new bonus program AndMore. This allows using program advantages in all of Baltika’s six different brand stores instead of current by only one brand. In autumn the program will be launched in Latvia and e-store. Bonus program offers to clients among other two times longer return period and personalised offers and discounts. -- New Monton store was opened in Latvia, Riga Mols shopping centre in April. Baltman store was closed in the same month in Estonia, Viru centre in Tallinn. May changes in retail network took place in Estonia – Ivo Nikkolo store moved to new location within Tallinn Viru centre and new Mosaic store was opened in Foorum, Tallinn. In June one new Monton store was opened in Estonia in Narva Astri centre and one Monton store was closed in Russia in Mir shopping centre in Ufa. Consolidated statement of financial position 30 June 2014 31 Dec 2013 ----------------------------------------------------------- ASSETS Current assets Cash and cash equivalents 509 852 Trade and other receivables 1,287 1,514 Inventories 14,056 13,751 Total current assets 15,852 16,117 Non-current assets Deferred income tax asset 494 494 Other non-current assets 784 1,013 Property, plant and equipment 2,791 3,023 Intangible assets 3,725 3,693 Total non-current assets 7,794 8,223 TOTAL ASSETS 23,646 24,340 EQUITY AND LIABILITIES Current liabilities Borrowings 2,255 3,158 Trade and other payables 8,087 7,503 Total current liabilities 10,342 10,661 Non-current liabilities Borrowings 4,014 2,171 Total non-current liabilities 4,014 2,171 TOTAL LIABILITIES 14,356 12,832 EQUITY Share capital at par value 8,159 8,159 Share premium 747 684 Reserves 1,182 1,182 Retained earnings 2,573 2,471 Net profit (loss) for the period -1,834 102 Currency translation differences -1,537 -1,090 TOTAL EQUITY 9,290 11,508 TOTAL LIABILITIES AND EQUITY 23,646 24,340 Consolidated statement of profit and loss Q2 Q2 6M 2014 6M 2013 2014 2013 -------------------------------------------------------------------------------- Continuing operations Revenue 12,970 12,713 25,141 24,388 Cost of goods sold -5,639 -5,232 -11,893 -10,826 Gross profit 7,331 7,481 13,248 13,562 Distribution costs -6,090 -5,830 -12,044 -11,541 Administrative and general expenses -751 -707 -1,468 -1,442 Other operating income 21 43 18 43 Other operating expenses -4 -129 -73 -127 Operating profit (loss) 507 858 -319 495 Finance income 0 -17 0 0 Finance costs -92 -200 -171 -293 Profit (loss) before income tax 415 641 -490 202 Income tax expense -10 0 -15 0 Net profit (loss) from continuing operations 405 641 -505 202 Net profit (loss) for the period from 243 -17 -1,329 -181 discontinued operations Net profit (loss) for the period 648 624 -1,834 21 Basic earnings per share, EUR 0.02 0.02 -0.04 0.00 Continuing operations 0.01 0.02 -0.01 0.01 Discontinued operations 0.01 0.00 -0.03 -0.01 Diluted earnings per share, EUR 0.02 0.02 -0.04 0.00 Continuing operations 0.01 0.02 -0.01 0.01 Discontinued operations 0.01 0.00 -0.03 -0.01 Maigi PÄrnik Member of the Management Board Copyright © 2014 OMX AB (publ).

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Source: OMX

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