THE FIRST QUARTER IN SHORT
Consolidated net sales of the first quarter of 2016 were 4.5 mil. euros, representing a 11% decrease on the first quarter compared to the same period in 2015 (net sales 5.1 mil. euros in Q1 2015). At the same time, consolidated EBITDA amounted to -50 thousand euros (EBITDA 257 thousand euros in Q1 2015).
The turnover of Skano Fibreboard OÜ Pärnu factory (incl. Isotex) was 2.1 mil. euros, increasing 12% as compared to the respective period last year, the operating profit of the first quarter was 76 thousand euros compared with the operating profit 114 thousand euros last year.
The turnover of Skano Fibreboard OÜ Püssi factory was 1.2 mil. euros, representing 25% decrease in the first quarter compared to the same period in 2015. Operating loss amounted to 41 thousand euros compared with the operating loss 9 thousand euros last year.
Sales mainly decreased in our core markets. As our main foreign markets Russia and Finland are still very weak due to the general economic situation we have been continuously expanding the list of our target markets and made significant efforts in product development.
The priority of the management of the company is continuously to ensure the sales of the production of both factories in order to guarantee the maximum production capacity and efforts are taken in this direction on an on-going basis.
Sales of Suomen Tuulielijona OY in Q1 2016 decreased 14% compared to last year, which amounted to 1.4 mil. euros (1,6 mil euros in Q1 2015). Suomen Tuulileijona OY is the wholesaler of Skano fibreboard products in Finland.
The turnover of Skano Furniture Factory OÜ in Pärnu decreased in the first quarter by 21% and amounted to 1.1 mil. euros. The operating loss of the first quarter was 211 thousand euros as in 2015 the operating loss of the same period was 89 thousand euros. In the first quarter of 2016 sales to Russia decreased due to very weak demand by 19% as compared to 2015. In addition to seeking new sales possibilities in the current markets the company has made considerable effort to enter into new markets like UK, France and USA.
The turnover of Skano Furniture OÜ retail chain decreased 25% as compared to the same period last year being 490 thousand euros, operating loss was 157 thousand euros compared with the sales 653 thousand and operating loss 240 thousand euros in the first quarter of 2015. 2016 first quarter operating loss 157 thousand euros (in Q1 2015: operating loss 240 thousand euros) contains also a loss from a drop of currency exchange rate of hryvnia 116 thousand euros (in Q1 2015: exchange rate loss 268 thousand euros).
Retail sale decreased in all markets and is still very weak in Ukraine due to the conflict and difficult economic situation. The sales of Skano Furniture Factory OÜ own furniture still forms a considerable part of the retail sale and it enables the furniture factory to operate more profitably than it would be possible without its own retail chain.
INCOME STATEMENT
Consolidated net sales of the first quarter in 2016 was 4.5 mil. euros (5.1 mil. euros in same period of 2015) representing a 11% decrease compared to Q1 2015. The Group’s gross margin in the first quarter of 2016 was 18% compared to 23% in the first quarter of 2015. Consolidated operating loss amounted to 268 thousand euros (operating profit 36 thousand euros from main activities in same period 2015. The consolidated operating margin of net sales was -5.9% (0.7% from main activities in Q1 2015). Consolidated net loss amounted to 355 thousand euros (compared to net loss 39 thousand euros in Q1 2015), and the net margin was -7.8% (-0.8% in Q1 2015).
POSITION OF FINANCIAL STATEMENT
As of 31.03.2016 the total assets of Skano Group AS amounted to 14.6 mil. euros (31.03.2015: 15.0 mil. euros). The liabilities of the company accounted for 68% (31.03.2015: 65%) thereof, i.e. 10.0 mil. euros (31.03.2015: 9.8 mil. euros).
Receivables and prepayments have remained at the same level, 2.3 mil. euros within 12 months. Inventories have increased 0.3 mil euros with 12 months, amounting to 3.7 mil. euros on 31.03.2016. (31.03.2015: 3.3 mil. euros). Property, plant and intangibles amounted to 8,0 mil euros decreased by 0.2 mil. euros mainly as a result of depreciation.
Short-term loans have decreased by 0.6 mil. euros and amounted to 2.2 mil. euros in 31.03.2016 which was a result of usage of bank overdraft and restructuring of the loan between short- and long-term payment schedule (31.03.2015: 2.8 mil. euros). Supplier payables, tax liabilities, other payables, including payables to employees, and provisions amounted to 3.4 mil. euros (31.03.2015: 3.2 mil. euros).
Long-term loans have increased by 0.6 mil euros and amounted to 4.2 mil. euros in 31.03.2016 (31.03.2015: 3.6 mil. euros). The increase was caused by restructuring of the loan between short- and long-term payment schedule.
Current and non-current liabilities have increased by 0.2 mil. euros to 10.0 mil. euros (31.03.2015: 9.8 mil. euros).
DIVISIONAL REVIEW
NET SALES BY BUSINESS SEGMENTS
| th EUR | % of net sales | |||
| Q1 2016 | Q1 2015 | Q1 2016 | Q1 2015 | |
| Skano Fibreboard OÜ | 3,273 | 3,445 | 72.0% | 67.4% |
| Skano Furniture Factory OÜ | 1,052 | 1,325 | 23.1% | 25.9% |
| Skano Furniture OÜ retail | 490 | 653 | 10.8% | 12.8% |
| Suomen Tuulileijona OY | 1,379 | 1,604 | 30.3% | 31.4% |
| Elimination | (1,649) | (1,919) | (36.3%) | (37.6%) |
| TOTAL | 4,545 | 5,108 | 100.0% | 100.0% |
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| Q1 2016 | Q1 2015 | Q1 2016 | Q1 2015 | |
| Finland | 1,898 | 2,076 | 41.8% | 40.6% |
| Estonia | 654 | 792 | 14.4% | 15.5% |
| Russia | 579 | 773 | 12.7% | 15.1% |
| Great Britain | 324 | 206 | 7.1% | 4.0% |
| Portugal | 263 | 0 | 5.8% | 0.0% |
| Latvia | 187 | 181 | 4.1% | 3.5% |
| Sweden | 139 | 199 | 3.1% | 3.9% |
| South Africa | 99 | 360 | 2.2% | 7.0% |
| Lithuania | 93 | 101 | 2.0% | 2.0% |
| Ukraine | 61 | 86 | 1.3% | 1.7% |
| Denmark | 48 | 56 | 1.1% | 1.1% |
| Germany | 27 | 38 | 0.6% | 0.7% |
| Other countries | 173 | 240 | 3.8% | 4.7% |
| TOTAL | 4,545 | 5,108 | 100.0% | 100.0% |
Regarding the markets, turnover has increased in Great Britain and in new market Portugal. The turnover has decreased most in Russia and South Africa.
PROFIT BY BUSINESS SEGMENTS
| th EUR | Q1 2016 | Q1 2015 |
| Skano Furniture factory | (211) | (89) |
| Skano Furniture retail | (157) | (240) |
| Skano Fibreboard | 35 | 105 |
| Suomen Tuulileijona OY | (19) | 41 |
| Elimination | 84 | 219 |
| TOTAL | (268) | 36 |
| Net financial costs | (86) | (72) |
| Income tax | (1) | (3) |
| NET PROFIT | (355) | (39) |
SKANO FIBREBOARD
The net sales of Skano Fibreboard in the first quarter of 2016 amounted to 3.3 mil. euros and operating profit to 35 thousand euros. In the same period last year, the turnover of Skano Fibreboard totaled to 3.4 mil. euros and the operating profit from main activities 105 thousand euros.
The decrease in sales in the first quarter compare to last year took place in Russia and South Africa. Sales increased most in Great Britain and Portugal.
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| Q1 2016 | Q1 2015 | Q1 2016 | Q1 2015 | |
| Finland (incl. to Suomen Tuulileijona OY) | 1,469 | 1,612 | 44.9% | 46.8% |
| Estonia | 372 | 415 | 11.4% | 12.0% |
| Great Britain | 318 | 199 | 9.7% | 5.8% |
| Portugal | 263 | 0 | 8.0% | 0.0% |
| Russia | 251 | 368 | 7.7% | 10.7% |
| Sweden | 139 | 199 | 4.2% | 5.8% |
| South Africa | 99 | 360 | 3.0% | 10.4% |
| Latvia | 84 | 57 | 2.6% | 1.7% |
| Denmark | 48 | 56 | 1.5% | 1.6% |
| Germany | 27 | 38 | 0.8% | 1.1% |
| Other countries | 203 | 141 | 6.2% | 4.1% |
| TOTAL | 3,273 | 3,445 | 100.0% | 100.0% |
| th EUR | Net sales | Operating Profit | ||
| Q1 2016 | Q1 2015 | Q1 2016 | Q1 2015 | |
| Pärnu Fibreborad factory | 1,712 | 1,310 | 126 | 77 |
| Püssi Fibreboard factory | 1,182 | 1,577 | (41) | (9) |
| Pärnu interior boards factory (Isotex) | 379 | 558 | (50) | 37 |
| TOTAL | 3,273 | 3,445 | 35 | 105 |
The net sales of the Pärnu fibreboard factory and interior board’s line increased 12 % in the first quarter of 2016 compared to the same quarter of 2015 and amounted to 2.1 mil. euros.
The turnover of Püssi fibreboard factory amounted to 1.2 mil. euros decreasing 25% compared to the same quarter in 2015 (turnover 1.6 mil. euros in Q1 2015).
SKANO FURNITURE
FURNITURE RETAIL SALES
Skano Group AS retail business is operated by a private limited company Skano Furniture OÜ and its subsidiaries in Latvia, Lithuania and Ukraine. Skano has totally 10 stores in Tallinn (3), Tartu, Pärnu, Riga, Vilnius, Kiev (2) and Kharkiv at the end of the first quarter in 2016. A shop in Dnipropetrovsk was handed over to a local dealer based on franchise agreement.
RETAIL SALES BY COUNTRIES
| th EUR | % of net sales | Number of stores | ||||
| Q1 2016 | Q1 2015 | Q1 2016 | Q1 2015 | 31.03.16 | 31.03.15 | |
| Estonia | 277 | 369 | 56.5% | 56.5% | 5 | 4 |
| Latvia | 103 | 124 | 21.0% | 19.0% | 1 | 1 |
| Lithuania | 69 | 84 | 14.1% | 12.9% | 1 | 1 |
| Ukraine | 41 | 76 | 8.4% | 11.6% | 3 | 4 |
| TOTAL | 490 | 653 | 100.0% | 100.0% | 10 | 10 |
Retail sale amounted to 490 thousand euros in the first quarter of 2016 and operating loss 157 thousand euros (sales 653 thousand euros and operating loss 240 thousand euros in Q1 2015). Current year first quarter operating loss 157 thousand euros (in Q1 2015: operating loss 240 thousand euros) contains also a loss from a drop of currency exchange rate of hryvnia 116 thousand euros (in Q1 2015: exchange rate loss 268 thousand euros).
FURNITURE PRODUCTION
The net sales of the Skano Furniture Factory in the first quarter amounted to 1.1 mil. euros and operating loss to 211 thousand euros. In the same period last year, the turnover of the factory amounted also to 1.3 mil. euros and the operating loss to 89 thousand euros. As compared to the previous year the turnover of the factory has decreased 21%. In the first quarter the sales decreased in Russia by 19% due to colder economic environment and weaker purchasing power for imported durable goods.
FURNITURE FACTORY SALES BY COUNTRIES
| th EUR | % of net sales | |||
| Q1 2016 | Q1 2015 | Q1 2016 | Q1 2015 | |
| Finland | 445 | 433 | 42.3% | 32.7% |
| Russia | 328 | 405 | 31.2% | 30.6% |
| Other countries | 25 | 146 | 2.4% | 11.0% |
| Subsidiaries | 254 | 341 | 24.1% | 25.7% |
| TOTAL | 1,052 | 1,325 | 100.0% | 100.0% |
FORECAST AND DEVELOPMENT
SKANO FIBREBOARD. We expect sales of Skano Fibreboard in Q2 2016 to be similar compared to sales of the same period last year. Sales in our core markets are lower due to weak demand which we expect to compensate with sales in new markets. On the other hand we see already better results in efficiency even with lower production volumes compared to last year as a result of the recent production improvement plan.
SKANO FURNITURE RETAIL SALES. We expect total retail sale in Q2 2016 to be lower compared to sales of the same period last year. We expect steady sales in the Baltics but decrease in Ukraine due to political and economic instability.
SKANO FURNITURE FACTORY. In Q2 2016 we expect smaller sales of the furniture factory compared to the same period in 2015 because of the deteriorated economic situation in the near regions, especially in Russia. In Russia sales are down due to weak currency, broad-based economic downturn and low consumer confidence.
FINANCIAL HIGHLIGHTS
| th EUR | 3 m 2016 | 3 m 2015 | 3 m 2014 |
| Income statement | |||
| Revenue | 4,545 | 5,108 | 5,351 |
| EBITDA | (50) | 257 | 100 |
| EBITDA margin | (1.1%) | 5.0% | 1.9% |
| Operating profit | (268) | 36 | (125) |
| Operating margin | (5.9%) | 0.7% | (2.3%) |
| Net profit | (355) | (39) | (186) |
| Net margin | (7.8%) | (0.8%) | (3.5%) |
| Balance sheet (31.03) | |||
| Total assets | 14,591 | 14,989 | 14,980 |
| Return on assets | (2.4%) | (0.3%) | (1.2%) |
| Equity | 4,529 | 5,212 | 6,574 |
| Return on equity | (7.8%) | (0.7%) | (2.8%) |
| Debt-to-equity ratio | 68.0% | 65.2% | 56.1% |
| Share (31.03) | |||
| Closing price | 0.726 | 0.845 | 0.995 |
| Earnings per share | (0.08) | (0.01) | (0.04) |
| Price-earnings ratio | (9.08) | (84.5) | (24.9%) |
| Book value of a share | 1.01 | 1.16 | 1.46 |
| Market to book ratio | 0.72 | 0.73 | 0.68 |
| Market capitalization | 3,266 | 3,802 | 4,477 |
EBITDA = Earnings before interest, taxes, depreciation and amortization
EBITDA margin = EBITDA / Revenue
Operating margin = Operating profit / Revenue
Net margin = Net profit / Revenue
Return on assets = Net profit / Total assets
Return on equity = Net profit / Equity
Debt-to-equity ratio = Liabilities / Total assets
Earnings per share = Net profit / Total shares
Price-earnings ratio = Closing price / Earnings per share
Book value of a share = Equity / Total shares
Market to book ratio = Closing price / Book value of a share
Market capitalization = Closing price * Total shares
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| th EUR | 31.03.2016 | 31.12.2015 | 31.03.2015 |
| Cash and bank | 278 | 292 | 691 |
| Receivables and prepayments (Note 1) | 2,252 | 997 | 2,326 |
| Inventories (Note 2) | 3,681 | 3,426 | 3,347 |
| Total current assets | 6,211 | 4,715 | 6,364 |
| Investment property (Note 3) | 406 | 406 | 407 |
| Tangible fixed assets (Note 4) | 7,955 | 8,120 | 8,189 |
| Intangible fixed assets (Note 5) | 19 | 21 | 29 |
| Total fixed assets | 8,380 | 8,547 | 8,625 |
| TOTAL ASSETS | 14,591 | 13,262 | 14,989 |
| Debt obligations (Note 6) | 2,237 | 1,253 | 2,795 |
| Payables and prepayments (Note 7) | 3,422 | 2,684 | 3,185 |
| Short-term provisions (Note 8) | 12 | 15 | 11 |
| Total current liabilities | 5,671 | 3,952 | 5,991 |
| Non-current debt obligations (Note 6) | 4,163 | 4,163 | 3,563 |
| Non-current provisions (Note 8) | 228 | 228 | 223 |
| Total non-current liabilities | 4,391 | 4,391 | 3,786 |
| Total liabilities | 10,062 | 8,343 | 9,777 |
| Share capital at nominal value (Note 9) | 2,699 | 2,699 | 2,699 |
| Issue premium | 364 | 364 | 364 |
| Statutory capital reserve | 288 | 288 | 288 |
| Other reserves | 6 | 7 | 0 |
| Currency translation | (25) | 7 | (65) |
| Retained profits | 1,552 | 1,965 | 1,965 |
| Net profit (loss) for the year (Note 10) | (355) | (411) | (39) |
| Total equity | 4,529 | 4,919 | 5,212 |
| TOTAL LIABILITIES AND EQUITY | 14,591 | 13,262 | 14,989 |
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
| th EUR | 1st Q 2016 | 1st Q 2015 | |
| RETURN ON SALES (Note 11) | 4,545 | 5,108 | |
| Cost of production sold | (3,728) | (3,922) | |
| Gross profit | 817 | 1,186 | |
| Marketing expenses | (874) | (833) | |
| General administrative expenses | (145) | (174) | |
| Other income | 8 | 65 | |
| Other expenses | (74) | (208) | |
| Operating profit (loss) (Note 11) | (268) | 36 | |
| Financial income and financial expenses | (86) | (72) | |
| Profit (loss) before taxes | (354) | (36) | |
| Prepaid income tax | (1) | (3) | |
| NET PROFIT (LOSS) FOR THE PERIOD | (355) | (39) | |
| Basic earnings per share (Note 10) | (0.08) | (0.01) | |
| Diluted earnings per share (Note 10) | (0.08) | (0.01) | |
| Other comprehensive income: | |||
| Currency translation differences | (32) | (49) | |
| TOTAL COMPREHENSIVE INCOME | (387) | (88) | |
The planned time of publishing of interim report of the second quarter of 2016 is week 35 (29-31st of August 2016)
Gregory Devine Grace
CEO
+372 4478 338
greg.grace@skanogroup.com
