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Silvano Fashion Group 4Q 2008 Highlights www.silvanofashion.com.

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Presentation on theme: "Silvano Fashion Group 4Q 2008 Highlights www.silvanofashion.com."— Presentation transcript:

1 Silvano Fashion Group 4Q 2008 Highlights www.silvanofashion.com

2 2 Highlights Vertically integrated fashion group (design, manufacturing, retail) focusing on lingerie womenswear in Baltics, Russia and CIS with a strong focus on development of own retail capacity Operating top lingerie brands in Russia, Ukraine and Belarus, including Milavitsa – one of the most recognized brands in this region In-house design supported by experienced foreign designers Own production facilities in the region allowing for cost efficient and flexible production supply Quickly growing retail capacity benefiting from accelerating retail space development in Russia and Ukraine Favourable trends in consumption habits in major target markets – shift from open-air shopping to branded stores, strong GDP and disposable income growth Large potential customer base – 252 million population in target markets IMPLEMENTATION OF PROVED BUSINESS MODEL OF INTEGRATED FASHION GROUP

3 3 Competitive Advantages Well-recognized and reputable trademarks - the trademarks of Milavitsa and Lauma Lingerie are among the best-known lingerie brands in Russia and CIS countries. The PTA trademark products are highly regarded in the Baltic States and Scandinavia. Flexible and vertically integrated Group structure with quickly growing retail capacity - the vertical integration of the Group allows it to capture the overwhelming share of value from product development to retail. Strong management team - the combined management of the Group is comprised of highly qualified and professional executives having long-term experience in womens apparel and lingerie industry in different markets. Flexibility in manufacturing and logistics - the proximity of the Groups manufacturing capacity to the target markets serves as a material competitive advantage as compared to many competitors. Access to affordable labour resources - a large share of the output of the Group is manufactured in Belarusian regions. Outsourcing is organized and controlled by Milavitsa. Committed principal shareholder - the Principal Shareholder is actively involved in the management of the Company and contributes its investment and management expertise towards the successful fulfilment of the strategic objectives of the Group.

4 4 Apparel Business model – existing structure KT Oy Finland Prekyba Lithuania Vision Latvia PTA Ukraine Klementi Estonia PTA Grupp Estonia Lingerie Linret Russia Splendo Poland Lauma Lingerie Latvia TK Milavitsa Belarus STK Milavitsa Russia Gimil Belarus Milavitsa Belarus Linret LT Lithuania ProductionRetail Wholesale PTA Ukraine Linret Russia Junona Belarus FSL France Holding

5 Markets & Brands

6 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 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

7 777 Wholesales Distribution Lingerie 98,4% in wholesales in 2008 Apparel 1,6% 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

8 8 Sales by regions 20082007

9 9 Sales by Regions (Apparel vs Lingerie)

10 10 Product Brand Portfolio Milavitsa Belarus Lauma Lingerie Latvia PTA Estonia Linret Russia/Lithuania Splendo Poland

11 11 Lingerie Sales by Brands 20082007

12 Operations

13 13 Retail Network as of 31.12.2008 Poland Belarus Baltics Russia 28 shops 7 shops 13 shops 34 shops 4 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 shops 1 shop Ukraine 1 shop 16 shops 18 shops 1 shop 5 shops

14 14 Retail Brand Portfolio TK Milavitsa Belarus Lauma Lingerie Latvia PTA Baltics/Ukraine Linret Russia/Lithuania Splendo Poland

15 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 16 Personnel 20082007

17 Financials & Business Development

18 18 2008 Key Performance Indicators 2008 BUSINESS OVERVIEW 2008*2007Change SalesEUR mill.108,398,69,9% EBITDAEUR mill.11,417,3-34,2% EBITDA margin%10,5%17,5% - EBITEUR mill.8,314,8-44,3% EBIT margin%7,6%15,0% - EBTEUR mill.4,515,8-71,5% EBT margin%4,2%16,0% - Net profitEUR mill.-1,19,9-111,1% Net margin%-1,0%10,0% - Non-current assetsEUR mill.22,119,612,8% Current assetsEUR mill.55,150,010,2% EquityEUR mill.50,155,6-9,9% Non-current liabilitiesEUR mill.1,20,3300,0% Current liabilitiesEUR mill.25,913,789,1% Total assetsEUR mill.77,269,610,9% Free cash flowEUR mill.-12,0-10,415,4% Capital expenditureEUR mill.6,09,6-37,5% Employees 3 9013 5818,9% Number of stores 13411516,5% Number of stores lingerie 978514,1% Number of stores apparel 373023,3% Sales space1,000 m 2 14,512,516,0% Sales space lingerie 7,76,714,9% Sales space apparel 6,85,817,2% * Normalized results by the adjustments described on slide 21

19 19 Q4 and 2008 Financial Performance `000 Q4 2008Q4 2007change %2008*2007change % Sales revenue18,67323,348-20,0%108,31598,580+9,9% COGS9,32712,494-25,3%60,77855,653+9,2% Gross profit9,34610,854-13,9%47,53742,927+10,7% Gross profit margin50,1%46,5%+3,6 p.p.43,9%43,5%+0,4 p.p. Distribution costs6,2334,705+32,5%21,57713,674+57,8% Administrative expenses3,8212,892+32,1%14,05910,900+29,0% Other operating income1,2921,425-9,3%2,2101,046+111,3% Other operating expenses2,4561,425+72,4%5,8454,563+28,1% EBITDA-9333,903-123,9%11,37917,288-34,2% EBITDA margin-5,0%16,7%-21,7 p.p.10,5%17,5%-7,0 p.p. EBIT-1,8723,257-157.5%8,26614,836-44,3% EBIT margin-10,0%13,9%-23,9 p.p.7,6%15,0%-7,4 p.p. Corporate income tax8421,314-35,9%5,6105,940-5,6% Net profit-6,0492,351-357,3%-1,0959,880-111,1% 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 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

21 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 Groups 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 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

23 23 Income Statement – Retail and Wholesales

24 Income Statement – Lingerie and Apparel 24 2008 2007 INCOME STATEMENT, TEUR SFG Consolidated ApparelLingerie SFG Consolidated ApparelLingerie NET SALES108 31515 47692 83998 58011 97586 605 GROSS PROFIT47 5377 78239 75542 9275 15637 771 Gross profit margin43,9%50,3%42,8%43,5%43,1%43,6% EBITDA11 379-1 47512 85417 288-1 29418 582 EBITDA margin10,5%-9,5%13,8%17,5%-10,8%21,5% OPERATING PROFIT/EBIT8 266-2 24610 51214 836-1 80616 642 Operating profit / EBIT margin7,6%-14,5%11,3%15,0%-15,1%19,2% NET PROFIT-1 095-2 5271 4329 880-1 99111 871 Net margin-1,0%-16,3%1,5%10,0%-16,6%13,7%

25 25 Margins in 2008 Revenue, EBITDA, Net Profit ( 000)EBITDA, Net Profit Margin (%) -7,0 p.p. -11,0 p.p. 9,9%

26 26 Margins in Q4 2008 Revenue, EBITDA, Net Profit ( 000)Revenue, EBITDA, Net Profit (%) -21,7 p.p. -42,5 p.p. -20,0%

27 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 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 29 Share Buyback Programme The extraordinary general meeting of shareholders of SFG held on 6 October 2008 authorised the buyback of SFGs 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 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 Groups 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

31 www.silvanofashion.com For further information please contact Baiba.Gegere@silvanofashion.com


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