THE FIRST HALF IN SHORT
Consolidated net sales of the first half of 2016 were 9.0 mil. euros, representing an 8% decrease compared to the same period in 2015 (net sales 9.8 mil. euros in H1 2015). At the same time, consolidated EBITDA amounted to -23 thousand euros (EBITDA 524 thousand euros in H1 2015). Reducing the stock volumes of own produced goods negatively influenced the EBITDA of the first half of 2016 through changes in inventories in the amount of 466 thousand euros (In H1 2015 the increase in stock had a positive effect to EBITDA in the amount of 324 thousand euros).
The turnover Skano Fibreboard OÜ Pärnu factory (incl. Isotex) was 3.8 mil. euros, what was in the same level as in H1 2015, the operating profit of the first half was 116 thousand euros compared with the operating profit 332 thousand euros last year.
The turnover of Skano Fibreboard OÜ Püssi factory was 2.4 mil. euros, representing 8,3% decrease in the first half compared to the same period in 2015. Operating loss amounted to 148 thousand euros compared with the operating loss 113 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 H1 2016 decreased 12.4% compared to last year, which amounted to 2.6 mil. euros (2.9 mil euros in H1 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 15.4% and amounted to 2.1 mil. euros. The operating loss of the first quarter was 293 thousand euros as in 2015 the operating loss of the same period was 147 thousand euros. In the first half of 2016 sales to Finland decreased due to very weak demand by 14.5% 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 and to extend the product ranges.
The turnover of Skano Furniture OÜ retail chain decreased 16,1% as compared to the same period last year being 1.1 mln. 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 half in 2016 was 9.0 mil. euros (9.8 mil. euros in same period of 2015) representing an 8% decrease compared to H1 2015. Consolidated operating loss amounted to 455 thousand euros (operating profit 104 thousand euros in same period 2015). The consolidated operating margin was -5.1% (1.1% in H1 2015). Consolidated net loss amounted to 624 thousand euros (compared to net loss 51 thousand euros in H1 2015), and the net margin was -6.9% (-0.5% in H1 2015).
POSITION OF FINANCIAL STATEMENT
As of 30.06.2016 the total assets of Skano Group AS amounted to 13.0 mil. euros (30.06.2015: 14.0 mil. euros). The liabilities of the company accounted for 67% (30.06.2015: 63%) thereof, i.e. 8.7 mil. euros (30.06.2015: 8.9 mil. euros).
Receivables and prepayments amounted 1.5 mil. euros what is 0.3 mil. euros less than in H1 2015 (30.06.2015: 1.8 mil. euros). Inventories have decreased 0.3 mil euros with 12 months, amounting to 1.5 mil. euros on 30.06.2016. (30.06.2015: 1.8 mil. euros). Property, plant and intangibles amounted to 8.3 mil euros decreased by 0.3 mil. euros mainly as a result of depreciation.
Short-term loans have decreased by 0.3 mil. euros and amounted to 1.6 mil. euros in 30.06.2016 which was a result of usage of bank overdraft and factoring and restructuring of the loan between short- and long-term payment schedule (30.06.2015: 1.9 mil. euros). Supplier payables, tax liabilities, other payables, including payables to employees, and provisions amounted to 2.7 mil. euros (30.06.2015: 2.7 mil. euros).
Long-term loans have increased by 0.2 mil euros and amounted to 4.2 mil. euros in 30.06.2016 (31.03.2015: 4.0 mil. euros). The increase was caused by restructuring of the loan between short- and long-term payment schedule.
Current and non-current liabilities have decreased by 0.2 mil. euros to 8.7 mil. euros (30.06.2015: 8.9 mil. euros).
DIVISIONAL REVIEW:
NET SALES BY BUSINESS SEGMENTS
| th EUR | % of net sales | |||
| H1 2016 | H1 2015 | H1 2016 | H1 2015 | |
| Skano Fibreboard OÜ | 6,265 | 6,494 | 69.8% | 66.5% |
| Skano Furniture Factory OÜ | 2,137 | 2,525 | 23.8% | 25.9% |
| Skano Furniture OÜ retail | 1,074 | 1,287 | 12.0% | 13.2% |
| Suomen Tuulileijona OY | 2,573 | 2,937 | 28.7% | 30.1% |
| Elimination | -3,072 | -3,482 | -34.2% | -35.7% |
| TOTAL | 8,977 | 9,761 | 100.0% | 100.0% |
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| H1 2016 | H1 2015 | H1 2016 | H1 2015 | |
| Finland | 3,529 | 3,968 | 39.3% | 40.7% |
| Estonia | 1,461 | 1,574 | 16.3% | 16.1% |
| Russia | 1,297 | 1,551 | 14.4% | 15.9% |
| Great Britain | 560 | 515 | 6.2% | 5.3% |
| Portugal | 429 | 6 | 4.8% | 0.1% |
| Latvia | 374 | 379 | 4.2% | 3.9% |
| Sweden | 324 | 333 | 3.6% | 3.4% |
| South Africa | 172 | 423 | 1.9% | 4.3% |
| Lithuania | 162 | 202 | 1.8% | 2.1% |
| Ukraine | 163 | 178 | 1.8% | 1.8% |
| Denmark | 79 | 91 | 0.9% | 0.9% |
| Germany | 73 | 83 | 0.8% | 0.9% |
| Other countries | 354 | 458 | 3.9% | 4.7% |
| TOTAL | 8,977 | 9,761 | 100.0% | 100.0% |
Regarding the markets, turnover has increased in Great Britain and in new market Portugal. The total turnover has decreased due to decrease in main markets in Finland and Russia.
OPERATING PROFIT(LOSS) BY BUSINESS SEGMENTS
| th EUR | H1 2016 | H1 2015 |
| Skano Furniture Factory | -293 | -147 |
| Skano Furniture retail | -100 | -160 |
| Skano Fibreboard | -31 | 219 |
| Suomen Tuulileijona OY | -54 | 35 |
| Elimination | 23 | 157 |
| TOTAL | -455 | 104 |
| Net financial costs | -166 | -152 |
| Income tax | -3 | -3 |
| NET PROFIT | -624 | -51 |
SKANO FIBREBOARD
The net sales of Skano Fibreboard (together with daughter company Suomen Tuulileijona OY) in the first half of 2016 amounted to 6.3 mil. euros and operating loss to 85 thousand euros. In the same period last year, the turnover of Skano Fibreboard totaled to 6.6 mil. euros and the operating profit 254 thousand euros. In 2016 the decrease in the stock of own produced goods affected the operating loss through changes in inventories.
The decrease in sales in the first half compare to last year took place in our main markets in Finland and Russia. Sales increased most in Great Britain and Portugal. The increase in sales does not cover in full the decrease in main markets
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| H1 2016 | H1 2015 | H1 2016 | H1 2015 | |
| Finland (incl. to Suomen Tuulileijona OY) | 2,707 | 3,041 | 43.5% | 46.3% |
| Estonia | 802 | 820 | 12.7% | 12.5% |
| Russia | 584 | 800 | 9.3% | 12.2% |
| Great Britain | 546 | 496 | 8.7% | 7.6% |
| Portugal | 429 | 6 | 6.8% | 0.1% |
| Sweden | 324 | 333 | 5.1% | 5.1% |
| South Africa | 172 | 423 | 2.7% | 6.4% |
| Latvia | 175 | 132 | 2.8% | 2.0% |
| Denmark | 79 | 91 | 1.3% | 1.4% |
| Germany | 73 | 83 | 1.2% | 1.3% |
| Other countries | 373 | 337 | 5.9% | 5.1% |
| TOTAL | 6,264 | 6,562 | 100.0% | 100.0% |
| th EUR | Net sales | Operating Profit | ||
| H1 2016 | H1 2015 | H1 2016 | H1 2015 | |
| Pärnu fibreborad factory | 3,058 | 2,837 | 185 | 338 |
| Püssi fibreboard factory | 2,446 | 2,667 | -148 | -113 |
| Pärnu interior boards factory (Isotex) | 760 | 990 | -69 | -6 |
| TOTAL | 6,264 | 6,494 | -32 | 219 |
The net sales of the Pärnu fibreboard factory increased 7.8 % in the first half of 2016 compared to the same period of 2015 and amounted to 3.1 mil. euros.
The turnover of Püssi fibreboard factory amounted to 2.4 mil. euros decreasing 8.3% compared to the same period in 2015 (turnover 2.7 mil. euros in H1 2015).
FURNITURE PRODUCTION
The net sales of the Skano Furniture Factory in the first half amounted to 2.1 mil. euros and operating loss to 293 thousand euros. In the same period last year, the turnover of the factory amounted to 2.5 mil. euros and the operating loss to 147 thousand euros. As compared to the previous year the turnover of the factory has decreased 15.4%. The sales decrease was mainly due to sales decrease in Finland.
FURNITURE FACTORY SALES BY COUNTRIES
| th EUR | % of net sales | |||
| H1 2016 | H1 2015 | H1 2016 | H1 2015 | |
| Finland | 786 | 919 | 36.8% | 36.4% |
| Russia | 713 | 751 | 33.4% | 29.7% |
| Other countries | 104 | 242 | 4.9% | 9.6% |
| Subsidiaries | 534 | 613 | 25.0% | 24.3% |
| TOTAL | 2,137 | 2,525 | 100.0% | 100.0% |
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 half in 2016.
RETAIL SALES BY COUNTRIES
| th EUR | % of net sales | Number of stores | ||||
| H1 2016 | H1 2015 | H1 2016 | H1 2015 | 30.06.16 | 30.06.15 | |
| Estonia | 650 | 729 | 60.6% | 57.0% | 5 | 5 |
| Latvia | 199 | 247 | 18.5% | 19.3% | 1 | 1 |
| Lithuania | 109 | 172 | 10.2% | 13.4% | 1 | 1 |
| Ukraine | 115 | 131 | 10.7% | 10.2% | 3 | 4 |
| TOTAL | 1,073 | 1,279 | 100.0% | 100.0% | 10 | 11 |
Retail sale amounted to 1,1 mil. euros in the first half of 2016 and operating loss 100 thousand euros (sales 1,3 mil. euros and operating loss 160 thousand euros in H1 2015). Operating loss contains also a loss from a drop of currency exchange rate of hryvnia 38 thousand euros (in H1 2015: exchange rate loss 243 thousand euros).
FORECAST AND DEVELOPMENT
SKANO FIBREBOARD. Skano Fibreboard sales in H2 2016 will 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. Also the cost control gives better results.
In July 2016 we received Sintef Certification, which has no opened the doors to sell our wind barrier boards on the Norwegian market.
SKANO FURNITURE FACTORY. In H2 2016 the sales of the furniture factory are showing uptrend compared to the same period in 2015 because of new buyers. Also new product ranges and alternative products made of wood will give the additional sales. Cost savings will give the positive effect to the results of H2
SKANO FURNITURE RETAIL SALES. We expect steady sales in the Baltics but decrease in Ukraine due to political and economic instability.
FINANCIAL HIGHLIGHTS
| th EUR | H1 2016 | H1 2015 | H1 2014 |
| Income statement | |||
| Revenue | 8,977 | 9,761 | 10,701 |
| EBITDA | -23 | 524 | 531 |
| EBITDA margin | -0.3% | 5.4% | 5.0% |
| Operating profit | -455 | 104 | 87 |
| Operating margin | -5.1% | 1.1% | 0.8% |
| Net profit | -624 | -51 | -44 |
| Net margin | -6.9% | -0.5% | -0.4% |
| Balance sheet (30.06) | |||
| Total assets | 13,005 | 14,032 | 15,133 |
| Return on assets | -2.8% | -0.4% | -0.3% |
| Equity | 4,293 | 5,136 | 6,737 |
| Return on equity | -8.5% | -1.0% | -0.7% |
| Debt-to-equity ratio | 67.0% | 63.4% | 55.5% |
| Share (30.06) | |||
| Closing price | 0.556 | 0.805 | 1.000 |
| Earnings per share | -0.08 | -0.01 | -0.01 |
| Price-earnings ratio | -6.95 | -80.50 | -100.00 |
| Book value of a share | 0.95 | 1.14 | 1.50 |
| Market to book ratio | 0.59 | 0.71 | 0.67 |
| Market capitalization | 2,501 | 3,622 | 4,499 |
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 | 30.06.2016 | 31.12.2015 | 30.06.2015 |
| Cash and bank | 106 | 292 | 306 |
| Receivables and prepayments (Note 1) | 1,510 | 997 | 1,806 |
| Inventories (Note 2) | 3,085 | 3,426 | 3,355 |
| Total current assets | 4,701 | 4,715 | 5,467 |
| Investment property (Note 3) | 406 | 406 | 407 |
| Tangible fixed assets (Note 4) | 7,849 | 8,120 | 8,133 |
| Intangible fixed assets (Note 5) | 49 | 21 | 25 |
| Total fixed assets | 8,304 | 8,547 | 8,565 |
| TOTAL ASSETS | 13,005 | 13,262 | 14,032 |
| Debt obligations (Note 6) | 1,641 | 1,253 | 1,932 |
| Payables and prepayments (Note 7) | 2,672 | 2,684 | 2,708 |
| Short-term provisions (Note 8) | 8 | 15 | 8 |
| Total current liabilities | 4,321 | 3,952 | 4,648 |
| Non-current debt obligations (Note 6) | 4,163 | 4,163 | 4,013 |
| Non-current provisions (Note 8) | 228 | 228 | 235 |
| Total non-current liabilities | 4,391 | 4,391 | 4,248 |
| Total liabilities | 8,712 | 8,343 | 8,896 |
| 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 | 5 | 7 | 2 |
| Currency translation | 9 | 7 | (129) |
| Retained profits | 1,552 | 1,965 | 1,963 |
| Net profit (loss) for the year (Note 10) | (624) | (411) | (51) |
| Total equity | 4,293 | 4,919 | 5,136 |
| TOTAL LIABILITIES AND EQUITY | 13,005 | 13,262 | 14,032 |
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
| th EUR | Q2 2016 | Q2 2015 | H1 2016 | H1 2015 | |
| RETURN ON SALES (Note 11) | 4,432 | 4,653 | 8,977 | 9,761 | |
| Cost of production sold | (3,710) | (3,652) | (7,438) | (7,574) | |
| Gross profit | 722 | 1,001 | 1,539 | 2,187 | |
| Marketing expenses | (765) | (793) | (1,638) | (1,627) | |
| General administrative expenses | (155) | (179) | (301) | (353) | |
| Other income | 61 | 200 | 69 | 266 | |
| Other expenses | (50) | (161) | (124) | (369) | |
| Operating profit (loss) (Note 11) | (187) | 68 | (455) | 104 | |
| Financial income and financial expenses | (80) | (80) | (166) | (152) | |
| Profit (loss) before taxes | (267) | (12) | (621) | (48) | |
| Prepaid income tax | (1) | 0 | (3) | (3) | |
| NET PROFIT (LOSS) FOR THE PERIOD | (268) | (12) | (624) | (51) | |
| Basic earnings per share (Note 10) | (0.06) | (0.00) | (0.14) | (0.01) | |
| Diluted earnings per share (Note 10) | (0.06) | (0.00) | (0.14) | (0.01) | |
| Other comprehensive income: | |||||
| Currency translation differences | 34 | (64) | 2 | (113) | |
| TOTAL COMPREHENSIVE INCOME | (234) | (76) | (622) | (164) | |
The planned time of publishing of interim report of the third quarter of 2016 is week 48 (28-30th of November 2016)
Gregory Devine Grace
CEO
+372 4478 338
greg.grace@skanogroup.com
