silvano fashion group 4q 2008 highlights
TRANSCRIPT
Silvano Fashion Group4Q 2008 Highlights
www.silvanofashion.com
4
Apparel
Business model – existing structure
KT OyFinland
PrekybaLithuania
VisionLatvia
PTAUkraine
KlementiEstonia
PTA GruppEstonia
Lingerie
LinretRussia
SplendoPoland
Lauma LingerieLatvia
TK MilavitsaBelarus
STK MilavitsaRussia
GimilBelarus
MilavitsaBelarus
Linret LTLithuania
Production Retail Wholesale
PTAUkraine
LinretRussia
JunonaBelarus
FSLFrance
Holding
Markets & Brands
6
Revenue Breakdown
Data as of 31.12.2008
Please note that the wholesales/retail split includes only direct retail sales of Oblicie, PTA, Splendo, Lauma, Amadea and Milavitsa stores
Lingerie 83,7%
Wholesales
66,5% of sales in 2008
(79,3% of lingerie)
Retail
17,3% of sales in 2008
(20,7% of lingerie)
Wholesales
1,0% of sales in 2008
(9,0% of clothing)
Retail
10,8% of sales in 2008
(91,0% of clothing)
4,4% of sales in 2008
Milavitsa
33 Stores
Oblicie
37 Stores
PTA
37 Stores
Branded retail outlets
Branded retail outlets
Apparel 11,9% Subcontracting 4,4%
Lauma, Amadea
20 Stores
Top Wholesales Distributors:
STK Milavitsa (Russia)
TK Milavitsa (Belarus)
TK Milavitsa (Ukraine)
150+ Milavitsa stores owned and operated by
independent distributors
Top Wholesales Distributors:
Anttila (Finland)
Apranga (Lithuania)
Tallinna Kaubamaja (Estonia)
Splendo
7 Stores
98,4% in wholesale in 2008
1,6% in wholesale in 2008
777
Wholesales Distribution
Lingerie98,4% in wholesales in 2008
Apparel1,6% in wholesales in 2008
3 Top Wholesales Distributors in 2008:
• STK Milavitsa (Russia)
• TK Milavitsa (Belarus)
• TK Milavitsa (Ukraine)
3 Top Wholesales Distributors in 2008:
• Anttila (Finland)
• Apranga (Lithuania)
• Tallinna Kaubamaja (Estonia)
Major Markets Major Markets
Russia69,6%
Belarus10,9%
Ukraine9,9%
Other9,6%
Finland54,2%
Other17,8%
Estonia28,0%
8
Sales by regions
2008 2007
9
Sales by Regions (Apparel vs Lingerie)
10
Product Brand Portfolio
MilavitsaBelarus
Lauma LingerieLatvia
PTAEstonia
LinretRussia/Lithuania
SplendoPoland
11
Lingerie Sales by Brands
2008 2007
Operations
13
Retail Network as of 31.12.2008
Poland
Belarus
BalticsRussia
28 shops7 shops
13 shops
34 shops4 shops
150+ MILAVITSA BRANDED OUTLETS OWNED AND OPERATED BY DISTRIBUTORS – FRANCHISE PROGRAM IS BEING LAUNCHED
WITH QUICKLY GROWING OUTLET NETWORK THE IMPORTANCE OF RETAIL CHANNEL WILL GROW
60 shopes opened/acquired in 2007
36 new stores opened in 2008
17 shops closed in 2008
134 shops in operations
Delays in Shopping Center openings
Retail development put on hold in Q4
5 directly operated Milavitsa stores in
Russia (new and rebranded)
6 shops1 shop
no. of retail shops
134
115
55
0
20
40
60
80
100
120
140
160
2006 2007 2008P
retail space (sqm)
8 538
12 45414 566
0
2000
4000
6000
8000
10000
12000
14000
16000
1H 2007 2007 2008
existing
Ukraine
1 shop
16 shops
18 shops
1 shop5 shops
14
Retail Brand Portfolio
TK MilavitsaBelarus
Lauma LingerieLatvia
PTABaltics/Ukraine
LinretRussia/Lithuania
SplendoPoland
15
Production Model
OWN PRODUCTION FACILITIES ALLOW FOR FASTER RESPONSE TO CHANGING CUSTOMER DEMAND
Apparel factory in Tallin, Estonia
Lingerie factory in Liepaja, Latvia
Lingerie factory in Minsk, Belarus
16 sourcing partners
LINGERIE APPAREL
WHILE MAINTAINING OWN PRODUCTION FACILITIES SHARE OF OUTSOURCING WILL BE INCREASING
Outsourced
69%
Own production
31%
Outsourced
66%
Own production
34%
2 sourcing partners in Ukraine
16
Personnel
2008 2007
Financials & Business Development
18
2008 Key Performance Indicators
2008 BUSINESS OVERVIEW 2008* 2007 Change Sales EUR mill. 108,3 98,6 9,9%EBITDA EUR mill. 11,4 17,3 -34,2%EBITDA margin % 10,5% 17,5% - EBIT EUR mill. 8,3 14,8 -44,3%EBIT margin % 7,6% 15,0% - EBT EUR mill. 4,5 15,8 -71,5%EBT margin % 4,2% 16,0% - Net profit EUR mill. -1,1 9,9 -111,1%Net margin % -1,0% 10,0% -
Non-current assets EUR mill. 22,1 19,6 12,8%Current assets EUR mill. 55,1 50,0 10,2%Equity EUR mill. 50,1 55,6 -9,9%Non-current liabilities EUR mill. 1,2 0,3 300,0%Current liabilities EUR mill. 25,9 13,7 89,1%Total assets EUR mill. 77,2 69,6 10,9% Free cash flow EUR mill. -12,0 -10,4 15,4%Capital expenditure EUR mill. 6,0 9,6 -37,5%
Employees 3 901 3 581 8,9%Number of stores 134 115 16,5%
Number of stores lingerie 97 85 14,1%Number of stores apparel 37 30 23,3%
Sales space 1,000 m2 14,5 12,5 16,0%Sales space lingerie 7,7 6,7 14,9%Sales space apparel 6,8 5,8 17,2%
* Normalized results by the adjustments described on slide 21
191919
Q4 and 2008 Financial Performance
€ `000 Q4 2008 Q4 2007 change % 2008* 2007 change %
Sales revenue 18,673 23,348 -20,0% 108,315 98,580 +9,9%
COGS 9,327 12,494 -25,3% 60,778 55,653 +9,2%
Gross profit 9,346 10,854 -13,9% 47,537 42,927 +10,7%
Gross profit margin 50,1% 46,5% +3,6 p.p. 43,9% 43,5% +0,4 p.p.
Distribution costs 6,233 4,705 +32,5% 21,577 13,674 +57,8%
Administrative expenses 3,821 2,892 +32,1% 14,059 10,900 +29,0%
Other operating income 1,292 1,425 -9,3% 2,210 1,046 +111,3%
Other operating expenses 2,456 1,425 +72,4% 5,845 4,563 +28,1%
EBITDA -933 3,903 -123,9% 11,379 17,288 -34,2%
EBITDA margin -5,0% 16,7% -21,7 p.p. 10,5% 17,5% -7,0 p.p.
EBIT -1,872 3,257 -157.5% 8,266 14,836 -44,3%
EBIT margin -10,0% 13,9% -23,9 p.p. 7,6% 15,0% -7,4 p.p.
Corporate income tax 842 1,314 -35,9% 5,610 5,940 -5,6%
Net profit -6,049 2,351 -357,3% -1,095 9,880 -111,1%
Net profit margin -32,4% 10,1% -42,5 p.p. -1,0% 10,0% -11,0 p.p.
Consolidated P&L
* Normalized results by the adjustments described on slide 21
20
2008 Financial Performance
• EUR 108.3 million consolidated net sales, 9.8% increase compared to 2007– Significant growth of retail sales to reach 28.1% from total sales, compared to 18.1% in 2007– 11.9% apparel sales proportion in total sales up from 10.1% in 2007
• Gross margin improved from 43.5% in 2007 to 43.9% in 2008– The margin improvement was mainly driven by the growth in retail sales
• One-off write-offs in Q4 2008 amounted to EUR 5.3 million. Normalized EBITDA EUR 11.4 million excluding one-offs
• EUR 3.9 million net loss from foreign exchange (EUR 0.3 million gain in 2007)– partially generated by intercompany trading and borrowing balances within the Group denominated
in EUR currency• Average BYR/EUR rate in 2008 was 3134,80 as compared to 2937,06 in 2007• Average RUR/EUR rate in 2008 was 36,45 as compared to 35,03 in 2007
• EUR 7.6 million total net loss of the Group– 163.6% decline compared to 2007– net margin equalled -7.0% (12.1% in 2007)
• Negative 17.3% ROE– Down from 31.5% in 2007
• ROA was -10.4% – Down from 19.7% in 2007– Deterioration of ROA partially caused by increase in working capital, mainly increase in inventories
and trade accounts receivable
One-off expenses in 2008
• Russian retail restructuring– In Q4 2008 it management decided that all PTA stores in Russia and selected
Oblicie stores should be closed in 1H 2009 based on performance up to date and due to deteriorating market situation. A loss related to Russian retail operations restructuring was estimated in the approximate amount of EUR 2.1 million and was recognized in other operating expenses in the amount of EUR 1.9 million and EUR 0.2 million in COGS
• Splendo disposal– In Q4 the Group negotiated 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. Transaction was expected to generate a loss of approximately EUR 1.2 million taking into account the Group’s total investment in Splendo. The amount was fully provided as other operating expenses in 2008
• Goodwill impaired– Goodwill in the amount of EUR 2.1 million was assessed to be impairied and
write-off recorded in other operating expenses
21
22
Balance Sheet
• EUR 77.2 million consolidated assets at 31 December 2008– Up from EUR 69.6 million at 31 December 2007
• EUR 0.6 million increase in trade receivables in 2008.
• EUR 6.2 million increase in inventory to reach EUR 27.8 million at 31/12/2008
– The growth in inventory was driven primarily by slowdown in customer consumption 4Q 2008 and also due to the expansion of the retail network
• Property, plant and intangibles increased by EUR 2.2 million.
• Current liabilities increased by EUR 12.2 million – mainly due to increase in loans and borrowings
• Equity attributable to equity holders decreased by EUR 5.9 million to EUR 41.0 million
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Income Statement – Retail and Wholesales
Income Statement – Lingerie and Apparel
24
2008 2007
INCOME STATEMENT, TEUR SFG Consolidated
Apparel LingerieSFG
ConsolidatedApparel Lingerie
NET SALES 108 315 15 476 92 839 98 580 11 975 86 605
GROSS PROFIT 47 537 7 782 39 755 42 927 5 156 37 771
Gross profit margin 43,9% 50,3% 42,8% 43,5% 43,1% 43,6%
EBITDA 11 379 -1 475 12 854 17 288 -1 294 18 582
EBITDA margin 10,5% -9,5% 13,8% 17,5% -10,8% 21,5%
OPERATING PROFIT/EBIT 8 266 -2 246 10 512 14 836 -1 806 16 642
Operating profit / EBIT margin 7,6% -14,5% 11,3% 15,0% -15,1% 19,2%
NET PROFIT -1 095 -2 527 1 432 9 880 -1 991 11 871
Net margin -1,0% -16,3% 1,5% 10,0% -16,6% 13,7%
252525
Margins in 2008
Revenue, EBITDA, Net Profit (€ ‘000) EBITDA, Net Profit Margin (%)
98,580108,315
17,288
11,379
9,880
-1,095
0,000
20,000
40,000
60,000
80,000
100,000
2007 2008
Sales
-5,000
0,000
5,000
10,000
15,000
20,000EBITDA, Net Profit
Sales EBITDA Net Profit
-1,0%
17,5%
10,5%10,0%
-5,0%
0,0%
5,0%
10,0%
15,0%
20,0%
2007 2008
EBITDA Margin Net Margin
-7,0 p.p.
-11,0 p.p.9,9%
262626
Margins in Q4 2008
-32,4%
16,7%
-5,0%10,1%
-40,0%
-30,0%
-20,0%
-10,0%
0,0%
10,0%
20,0%
Q4 2007 Q4 2008
EBITDA Margin Net Margin
Revenue, EBITDA, Net Profit (€ ‘000) Revenue, EBITDA, Net Profit (%)
-21,7 p.p.
-42,5 p.p.
18,673
23,348
-0,933
3,903
-6,049
2,531
0,000
20,000
Q4 2007 Q4 2008
Sales
-7,000
-5,000
-3,000
-1,000
1,000
3,000
5,000EBITDA, Net Profit
Sales EBITDA Net Profit
-20,0%
27
Anti-Crisis Steps Implemented in Q4
• Focus on the lingerie business
• Product matrix reconsidered to reduce the number of articles– Most expensive, slow moving models terminated– New launches reduced
• Cost-cutting procedures
• Ukrainian wholesales channel restructured
• Termination of the Polish operations
• Construction of logistics terminal in Belarus put on hold
• Payment terms to be extended for customers– Price decrease to be considered
• Moratorium on price increase with suppliers, extended payment terms, push for lower prices
28
Retail Expansion Reconsidered
• 17 underperforming shops closed
• Limited number of lingerie shops to be opened in 2009
• All PTA stores in Russia to be closed in 1H 2009
• Selected Oblicie stores to be closed in 1H 2009
• Focus on franchising
• Entry-level Milavitsa shop concept to be introduced for franchising
• Oblicie shops to be rebranded into Milavitsa
• SFG opened the first directly operated Milavitsa shop in Russia– To capitalize on brand awareness and extend business opportunities– To polish existing franchised model
• 150+ Milavitsa stores in 11 countries
– 5 Milavitsa directly operated stores in Russia by the end of the year • 4 new, 1 re-branded
• The first Jockey store opened in Vilnius– Under franchising agreement with Jockey Intl– One store in Kaunas to be rebranded to Jockey
29
Share Buyback Programme
• The extraordinary general meeting of shareholders of SFG held on 6 October 2008 authorised the buyback of SFG’s own shares under the following conditions:
– SFG is entitled to buy back its own shares within one year of the resolution of the general meeting of the shareholders,
– the total nominal value of own shares to be bought back by SFG may not exceed 10% of total share capital of SFG, the maximum price payable by SFG for one share will be EUR 3.50,
– the maximum amount payable by SFG for its own shares is EUR 3,000,000, – own shares will be paid for with assets exceeding the share capital, compulsory
reserves and share premium.
• To date, the amount of shares bought back is 393,000, the average price per share was 1.15 EUR and total cost amounted to 450,106 EUR.
• After the transactions above, SFG owns 393,000 of its own shares, which constitute 0.9825% of the share capital.
• Under the buyback program, shares up to the maximum value of 2,547,032 million Euros remain to be bought back. The maximum amount of shares that remains to be bought back is 3,607,000.
30
Sale of the Polish Subsidiary
• In Q4 the Group negotiated 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
– transaction was signed in Q1 2009
• Transaction to generate a loss of approximately EUR 1.2 million taking into account the Group’s total investment in Splendo
– The amount was fully provided as other operating expenses in 2008
• The sale of loss-making subsidiary will end cash outflows to Polish operations
– Net loss of Splendo Polska Sp. z.o.o. amounted to EUR 0.9 million in 2008
• Splendo to be acquired by a local wholesale partner of the Group– Splendo retail outlets will continue their business after being rebranded as
“Milavitsa” franchise stores
