Skano Group AS 2017 3Q interim report
THE 3rd QUARTER 2017 IN SHORT
Skano Group is engaged in the manufacture and distribution of building materials and furniture as well as retail trade of furniture and furnishings. Skano Group is a holding company consisting of the following companies, all 100% owned:
Subsidiary Location Activity
Skano Fibreboard OÜ Estonia Production and Distribution
Suomen Tuulileijona OY Finland Distribution
Skano Furniture Factory OÜ Estonia Production and Distribution
Skano Furniture OÜ Estonia Retail
SIA Skano Latvia Retail
UAB Skano LT Lithuania Retail
Skano Group sold its Ukrainian retail subsidiary TOV Skano Ukraine in March 2017.
Skano Fibreboard OÜ produces and distributes softboard products for use in many different applications, the main category being within construction (insulation, soundproofing, and interior finishing panels for walls and ceilings). Suomen Tuulileijona OY is the distributor of Skano’s fibreboard products in Finland.
Skano Furniture Factory OÜ produces original, premium price level home furniture made of timber. Skano Furniture OÜ consists of a furniture retail store chain operating in Estonia, Latvia, Lithuania and Ukraine (the Ukrainian retail chain was sold in March 2017).
The principal markets of the company are all Nordic countries, Russia, South Africa, Portugal and the Baltics.
The shares of Skano Group AS are listed on the Nasdaq Tallinn Stock Exchange.
As at 30 September 2017 the Group employed 226 people (30 September 2016: 283 people).
Skano Group recorded EBITDA of € 289 thousand for 3Q 2017, which resulted in EBITDA for the first 9 months of 2017 being € 942 thousand (which equates to 7.5% of sales), which compares favourably with 2016 where EBITDA for the first 9 months were € 219 thousand (1.6% of sales). It should be noted that nine months 2017 results were influenced by one-off gains of 48 thousand euros due to the disposal of Skano’s Ukrainian retail subsidiary in March and 142 thousand euros from property sale in September.
Net profit for 3Q 2017 was € 14 thousand and for the first 9 months 2017 was € 117 thousand (9M 2016: loss of € 667 thousand).
Consolidated net sales for 3Q 2017 were € 4.08 million, making net sales for 9 months 2017 of € 12.57 million, being a 7.7% decrease compared to the same period in 2016.
Fibreboard sales in 3Q 2017 were € 3.17 million, and total sales for 9 months 2017 were € 9.29 million, which is 3.7% less than same period in 2016. Excluding sales to Finland (subdued demand for fibreboards) and UK (cancelling of contract with one large loss-making customer), Fibreboard sales for the first 9 months 2017 increased by 18% compared to same period last year. Strongest sales growth came from sales to Sweden, Latvia, South Africa, Thailand and Ukraine. EBITDA for fibreboard for first 9 months 2017 was € 0.87 million (in 9 months 2016 EBITDA were € 0.50 million).
Furniture wholesale sales in 3Q 2017 were € 0.72 million, and total sales for 9 months 2017 were € 2.59 million, which is 18.5% down on same period last year. Russia is our largest wholesale market, and our two Russian importers recorded different fortunes, one increasing sales of Skano furniture this year while the other decreased sales of Skano furniture. Our second largest market is Finland where our sole importer continues to struggle which resulted in 30% sales drop in Finland for first 9 months in 2017. EBITDA for furniture wholesale for first nine months 2017 was negative € 10 thousand (9M 2016 EBITDA was negative € 169 thousand).
Furniture retail sales in third quarter 2017 were € 0.37 million, and total sales for nine months 2017 were € 1.38 million. When excluding the discontinued shop operations in Ukraine and last year closure of the third Tallinn shop, sales of our existing six shops in the Baltics showed sales growth of 16% compared to same period in 2016. EBITDA for furniture retail for first nine months 2017 was € 96 thousand (9M 2016 EBITDA was negative € 174 thousand).
Total Furniture operations of Skano (wholesale+retail) EBITDA for the first 9 months of 2017 were therefore positive € 86 thousand (9M 2016 result was EBITDA negative of € 343 thousand).
Balance Sheet
As of 30.09.2017 the total assets of Skano Group AS were € 11.9 million (30.09.2016: € 13.1 million). The liabilities of the company as of 30.09.2017 were € 7.9 million (30.09.2016: € 8.8 million), of which Skano has bank loans (including overdraft facilities and factoring) of € 5.3 million.
Receivables and prepayments amounted to € 1.8 mil. (30.09.2016: € 1.8 mil.). Inventories were € 2.6 mil. as of 30.09.2017 (30.09.2016: € 2.8 mil.). Property, plant and intangibles were to € 7.3 mil. as of 30.09.2017 (€ 8.2 mil. as of 30.09.2016).
Outlook
The overall global demand for Fibreboard remains strong, as we can see from our overall 18% sales growth in selling to customers located in 32 countries (excluding sales to Finland and UK). The Finnish situation is however still cause for some concern.
The good performance of Skano’s own retail furniture operations has made up for wholesale sales decline, thus enabling Skano to record a positive EBITDA result for our total furniture activities. We remain bullish on the outlook for our own furniture chain, while our wholesale sales outlook to Finland continues to look weak.
DIVISIONAL REVIEW:
NET SALES BY BUSINESS SEGMENTS
|
th EUR |
% of net sales |
|
9M 2017 |
9M 2016 |
9M 2017 |
9M 2016 |
Fibreboards production and sales |
9,285 |
9,648 |
73.9% |
70.8% |
Furniture production and sales |
2,591 |
3,181 |
20.6% |
23.3% |
Furniture retail Baltics: today shops |
1,380 |
1,225 |
11.0% |
9.0% |
Furniture retail Baltics: closed shops |
0 |
201 |
0 |
1.4% |
Furniture retail Ukraine: closed shops |
64 |
186 |
0.4% |
1.5% |
Group transactions |
(748) |
(812) |
(5.9%) |
(6.0%) |
TOTAL |
12,572 |
13,629 |
100,0% |
100.0% |
PROFIT BY BUSINESS SEGMENTS
th EUR |
9M 2017 |
9M 2016 |
EBITDA by business units: |
|
|
Fibreboards production and sales |
873 |
502 |
Furniture production and sales |
(10) |
(167) |
Furniture retail Baltics |
45 |
(70) |
Furniture retail Ukraine |
51 |
(104) |
Group transactions |
(17) |
58 |
TOTAL EBITDA |
942 |
219 |
Depreciation |
(614) |
(642) |
TOTAL OPERATING PROFIT/ LOSS |
328 |
(423) |
Net financial costs |
(211) |
(240) |
Income tax |
0 |
(4) |
NET PROFIT/ LOSS |
117 |
(667) |
Fibreboard profit was helped by further production concentration to thicker boards, which are more profitable for Skano.
Furniture production and sales (wholesale and retail) in total made positive EBITDA in the total amount of € 86 thousand.
FIBREBOARDS production and sales
The total sales of fibreboards in 9 months 2017 amounted to € 9.29 mil., down from sales of € 9,65 mil. in 9 months 2016. However, we recorded a good increase in operating earnings before depreciation, amortisation and interest (ie EBITDA) up from € 502 thousand in 9 months 2016 to € 873 thousand in 9 months 2017.
Strong sales growth was recorded in South Africa, Sweden and Thailand while largest sales decline was recorded in Finland and Great Britain. In Finland our sales subsidiary Suomen Tuulileijona is experiencing weaker demand compared to last year. Sales to Great Britain last year consisted mostly of selling very thin boards as underlay, and our sales was heavily loss-making due to the extensive price competition in this segment. The exit from this market has improved our total fibreboard profitability.
FIBREBOARD SALES BY GEOGRAPHICAL SEGMENTS
|
th EUR |
% of net sales |
|
9M 2017 |
9M 2016 |
9M 2017 |
9M 2016 |
Finland |
3,393 |
3,958 |
36.6% |
41.0% |
Estonia |
1,266 |
1,379 |
13.6% |
14.3% |
Russia |
1,173 |
1,104 |
12.6% |
11.4% |
Sweden |
605 |
463 |
6.5% |
4.8% |
South-Afrika |
564 |
230 |
6.1% |
2.4% |
Portugal |
515 |
538 |
5.5% |
5.6% |
Latvia |
341 |
262 |
3.7% |
2.7% |
Great Britain |
222 |
869 |
2.4% |
9.0% |
Ukraine |
164 |
91 |
1.8% |
0.9% |
Thailand |
164 |
0 |
1.8% |
0.0% |
Netherlands |
146 |
48 |
1.6% |
0.5% |
Lithuania |
141 |
124 |
1.5% |
1.3% |
United Arab Emirates |
93 |
70 |
1.0% |
0.7% |
Denmark |
85 |
112 |
0.9% |
1.2% |
Germany |
67 |
111 |
0.7% |
1.2% |
Hungary |
50 |
0 |
0.5% |
0.0% |
Saudi Arabia |
46 |
36 |
0.5% |
0.4% |
Australia |
33 |
0 |
0.4% |
0.0% |
Other countries |
217 |
253 |
2.3% |
2.6% |
TOTAL |
9,285 |
9,648 |
100.0% |
100.0% |
FURNITURE production and sales
FURNITURE PRODUCTION
Sales dropped to € 2.59 mil. in 9 months 2017, from € 3.18 mil. in 9 months 2016. The largest sales decline came from the Finnish market reflecting the current difficulties experienced by Skano’s large Finnish wholesale customer. Our Russian market was down, however one of our two importers recorded sales increase of Skano furniture this year while the other one recorded a sales decline. Sales to Skano retail units increased its share of total furniture sales within the Group.
FURNITURE WHOLESALE SALES BY COUNTRIES
|
th EUR |
% of net sales |
|
9M 2017 |
9M 2016 |
9M 2017 |
9M 2016 |
Russia |
915 |
1,039 |
35.3% |
32.7% |
Finland |
788 |
1,129 |
30.4% |
35.5% |
Skano Retail |
669 |
750 |
25.8% |
23.6% |
Other countries |
219 |
263 |
8.1% |
8.2% |
TOTAL |
2,591 |
3,181 |
100.0% |
100.0% |
FURNITURE RETAIL SALES
Skano group retail business recorded sales € 1.44 mil. in 9 months 2017. Skano has 4 shops in Estonia: Tallinn two, Tartu one and a factory shop in Pärnu. Vilnius recorded sales growth of 22 % this year compared to same period last year, as well as improving its net result. Riga shop sales were slightly at same level as last year but improved its net result due to better gross margin and less fixed costs.
RETAIL SALES BY COUNTRIES
|
th EUR |
% of net sales |
Number of stores |
|
9M 2017 |
9M 2016 |
9M 2017 |
9M 2016 |
30.09.2017 |
30.09.2016 |
Estonia* |
939 |
789 |
65.0% |
49.0% |
4 |
4 |
Latvia |
258 |
278 |
17.9% |
17.2% |
1 |
1 |
Lithuania |
183 |
150 |
12.7% |
9.3% |
1 |
1 |
Ukraine** |
64 |
186 |
4.4% |
11.5% |
0 |
3 |
Estonia (closed shop) |
0 |
201 |
0.0% |
12.5% |
0 |
1 |
Other countries |
0 |
8 |
0.0% |
0.5% |
0 |
0 |
TOTAL |
1,444 |
1,612 |
100.0% |
100.0% |
6 |
10 |
* Ongoing shops
** Ukraine business was sold in March 2017
FINANCIAL HIGHLIGHTS
Income statement |
2Q 2017 |
2Q 2016 |
2Q 2015 |
Revenue |
4,025 |
4,432 |
4,653 |
EBITDA |
294 |
(27) |
267 |
EBITDA margin |
7.3% |
(0.6%) |
5.7% |
Operating profit |
86 |
(187) |
68 |
Operating margin |
2.1% |
(4.2%) |
1.5% |
Net profit |
15 |
(268) |
(42) |
Net margin |
0.4% |
(6.1%) |
(0.9%) |
|
Income statement |
1H 2017 |
1H 2016 |
1H 2015 |
Revenue |
8,487 |
8,977 |
9,761 |
EBITDA |
660 |
(23) |
524 |
EBITDA margin |
7.7% |
(0.3%) |
5.4% |
Operating profit |
244 |
(455) |
104 |
Operating margin |
2.9% |
(5.1%) |
1.1% |
Net profit |
103 |
(624) |
(51) |
Net margin |
1.2% |
(6.9%) |
(0.5%) |
|
Balance sheet |
30.06.2017 |
30.06.2016 |
30.06.2015 |
Total assets |
12,204 |
13,005 |
14,032 |
Return on assets |
0.8% |
(4.8%) |
(0.4%) |
Equity |
3,963 |
4,293 |
5,136 |
Return on equity |
2.6% |
(14.5%) |
(1.0%) |
Debt-to-equity ratio |
67.5% |
67.0% |
63.4% |
|
Share |
30.06.2017 |
30.06.2016 |
30.06.2015 |
Closing price |
0.533 |
0.540 |
0.805 |
Earnings per share |
0.02 |
(0.14) |
(0.01) |
Price-earnings ratio |
26.65 |
(3.86) |
(80.50) |
Book value of a share |
0.88 |
0.95 |
1.14 |
Market to book ratio |
0.60 |
0.57 |
0.71 |
Market capitalization |
2,398 |
2,429 |
3,622 |
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 |
30.09.2017 |
31.12.2016 |
30.09.2016 |
|
|
|
|
Cash and bank accounts |
312 |
184 |
248 |
Receivables and prepayments (Note 1) |
1,773 |
965 |
1,790 |
Inventories (Note 2) |
2,554 |
2,760 |
2,839 |
Total current assets |
4,639 |
3,909 |
4,877 |
|
|
|
|
Investment property (Note 3) |
170 |
405 |
405 |
Tangible fixed assets (Note 4) |
7,055 |
7,584 |
7,720 |
Intangible fixed assets (Note 5) |
52 |
66 |
72 |
Total fixed assets |
7,277 |
8,055 |
8,197 |
|
|
|
|
TOTAL ASSETS |
11,916 |
11,964 |
13,074 |
|
|
|
|
Debt obligations (Note 6) |
708 |
1,176 |
1,649 |
Payables and prepayments (Note 7) |
2,400 |
2,497 |
2,770 |
Short-term provisions (Note 8) |
5 |
15 |
5 |
Total current liabilities |
3,113 |
3,688 |
4,424 |
|
|
|
|
Non-current debt obligations (Note 6) |
4,613 |
4,163 |
4,163 |
Non-current provisions (Note 8) |
213 |
213 |
228 |
Total non-current liabilities |
4,826 |
4,376 |
4,391 |
|
|
|
|
Total liabilities |
7,939 |
8,064 |
8,815 |
|
|
|
|
Share capital at nominal value (Note 9) |
2,699 |
2,699 |
2,699 |
Share premium |
364 |
364 |
364 |
Statutory capital reserve |
288 |
288 |
288 |
Other reserves |
2 |
2 |
6 |
Currency translation reserve |
- |
40 |
17 |
Retained earnings |
507 |
1,552 |
1,552 |
Net profit (loss) for the period (Note 10) |
117 |
(1,045) |
(667) |
Total equity |
3,977 |
3,957 |
4,259 |
|
|
|
|
TOTAL LIABILITIES AND EQUITY |
11,916 |
11,964 |
13,074 |
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
th EUR |
3Q 2017 |
3Q 2016 |
9M 2017 |
9M 2016 |
|
|
|
|
|
SALES (Note 11) |
4,085 |
4,652 |
12,572 |
13,629 |
|
|
|
|
|
Cost of production sold |
(3,457) |
(3,636) |
(10,100) |
(11,075) |
|
|
|
|
|
Gross profit |
628 |
1,016 |
2,472 |
2,554 |
|
|
|
|
|
Marketing expenses |
(501) |
(712) |
(1,573) |
(2,350) |
General administrative expenses |
(110) |
(159) |
(531) |
(459) |
Other income |
187 |
3 |
238 |
71 |
Other expenses |
(121) |
(116) |
(278) |
(239) |
|
|
|
|
|
Operating profit (loss) (Note 11) |
83 |
32 |
328 |
(423) |
Financial income and financial expenses |
(69) |
(74) |
(211) |
(240) |
|
|
|
|
|
Profit (loss) before taxes |
14 |
(42) |
117 |
(663) |
Prepaid income tax |
- |
(1) |
- |
(4) |
|
|
|
|
|
NET PROFIT (LOSS) FOR THE PERIOD |
14 |
(43) |
117 |
(667) |
|
|
|
|
|
Basic earnings per share (Note 10) |
0.00 |
0.01 |
0.03 |
(0.15) |
Diluted earnings per share (Note 10) |
0.00 |
0.01 |
0.03 |
(0.15) |
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
Currency translation differences |
- |
8 |
- |
10 |
|
|
|
|
|
TOTAL COMPREHENSIVE INCOME (LOSS) |
14 |
(35) |
117 |
(657) |
The planned time of publishing of interim report of the fourth quarter of 2017 is week 9 in 2018 (27-28th of February 2018).
Torfinn Losvik
Member of the Management Board
+372 569 90 988
torfinn.losvik@skanogroup.com
|