THE 2nd 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:
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 soft-board 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 June 2017 the Group employed 225 people (30 June 2016: 295 people).
Skano Group recorded net profit for second quarter of 2017 of 15 thousand euros (2Q 2016: loss of 268 thousand euros), thus net profit for first half 2017 was 103 thousand euros (1H 2016: loss of 624 thousand euros). The first half 2017 results were influenced by a one-off gain of 48 thousand euros due to the disposal of Skano’s Ukrainian retail subsidiary.
Consolidated net sales of 2Q 2017 were 4.03 mil. euros, representing a 9% decrease compared to the same period in 2016 (4.43 mil. euros). When excluding sales to Finland, group sales actually increased by 5% compared to 2Q 2016.
Operating Profit Before Interests, Taxes, Depreciation and Amortisation (“EBITDA”) for first half 2017 was 660 thousand euros (same period last year EBITDA was negative 23 thousand euros), which equates to 8% of sales.
- Fibreboard sales in 2Q 2017 were 2.85 mil. euros. Total sales for 1H 2017 were 6.11 mil. euros, which is 4% down on same period last year. However, if excluding sales to Finland, fibreboard sales were up 6% compared to same period in 2016, with most notable strong growth in South Africa, Thailand and Sweden. There is a sign that the Finnish market is now recovering, thus we expect improved 2H 2017 sales to Finland. Operating profit for fibreboard division in 1H 2017 was 185 thousand euros (in 1H 2016 operating loss 85 thousand euros).
Furniture wholesale sales in 2Q 2017 were 0.92 mil. euros. Total sales for 1H 2017 were 1.88 mil. euros, which is 9% down on same period last year. Both Finland and Russia decreased sales in this period, while other markets improved by 49%. The operating loss in 1H 2017 was 29 thousand euros (1H 2016 operating loss of 293 thousand euros).
Furniture retail sales in 2Q 2017 were 0.5 mil. euros. Total sales for 1H 2017 were 1.07 mil. euros, which as level with last year. When excluding the discontinued Ukrainian retail operations, which were sold in 1Q 2017, retail sales were up 5% compared to same period in 2016. The operating profit in 1H 2017 was 100 thousand euros (in 1H 2016 operating loss of 100 thousand euros).
POSITION OF FINANCIAL STATEMENT
As of 30.06.2017 the total assets of Skano Group AS were 12.2 mil. euros (30.06.2016: 13.0 mil. euros). The liabilities of the company as of 30.06.2017 were 8.2 mil. euros (30.06.2016: 8.7 mil. euros).
Receivables and prepayments amounted 1.4 mil. euros (30.06.2016: 1.5 mil. euros). Inventories were 2.9 mil. euros as of 30.06.2017 (30.06.2016: 3.1 mil. euros). Property, plant and intangibles were to 7.6 mil. euros as of 30.06.2017 (8.3 mil. euros as of 30.06.2016).
OUTLOOK
Fibreboard sales development is progressing well, with the exception of Finland. We have secured agents for Germany, Czech Republic and Slovakia, and Poland, and they have all started making customer orders. In addition, we have entered Thailand and secured a large construction company as our first customer in that growing market. We remain hopeful that the Finnish market shall improve somewhat in light of the forthcoming customer campaigns being planned for this autumn.
The challenge for Furniture wholesale will be to secure more customers in markets outside of our two main markets of Finland and Russia. Furniture retail has had a good start this year, and we hope the positive consumer purchasing in the Baltic markets shall continue thus securing stable economic background for our six shops in the three Baltic countries.
DIVISIONAL REVIEW:
NET SALES BY BUSINESS SEGMENTS
| th EUR | % of net sales | |||
| 1H 2017 | 1H 2016 | 1H 2017 | 1H 2016 | |
| Fibreboards production and sales | 6,113 | 6,359 | 72.0% | 70.8% |
| Furniture production and sales | 1,876 | 2,137 | 22.1% | 23.8% |
| Furniture retail Baltics | 1,007 | 959 | 11.9% | 10.7% |
| Furniture retail Ukraine | 64 | 115 | 0.8% | 1.3% |
| Consolidation | (573) | (593) | (6.8%) | (6.6%) |
| TOTAL | 8,487 | 8,977 | 100.0% | 100.0% |
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| 1H 2017 | 1H 2016 | 1H 2017 | 1H 2016 | |
| Finland | 2,867 | 3,529 | 33.8% | 39.3% |
| Estonia | 1,613 | 1,461 | 19.0% | 16.3% |
| Russia | 1,255 | 1,297 | 14.8% | 14.4% |
| Sweden | 456 | 324 | 5.4% | 3.6% |
| Latvia | 393 | 172 | 4.6% | 1.9% |
| South-Afrika | 363 | 374 | 4.3% | 4.2% |
| Portugal | 265 | 429 | 3.1% | 4.8% |
| Lithuania | 210 | 560 | 2.5% | 6.2% |
| Ukraine | 180 | 163 | 2.1% | 1.8% |
| Great Britain | 170 | 162 | 2.0% | 1.8% |
| Thailand | 116 | - | 1.4% | - |
| Netherlands | 115 | 17 | 1.4% | 0.2% |
| Germany | 76 | 73 | 0.9% | 0.8% |
| Denmark | 64 | 79 | 0.8% | 0.9% |
| Kazakhstan | 47 | 43 | 0.6% | 0.5% |
| Arabia | 36 | 70 | 0.4% | 0.8% |
| Australia | 33 | 27 | 0.4% | 0.3% |
| Hungary | 31 | 25 | 0.4% | 0.3% |
| Saudi-Arabia | 27 | 36 | 0.3% | 0.4% |
| Other countries | 170 | 136 | 1.8% | 1.5% |
| TOTAL | 8,487 | 8,977 | 100% | 100% |
Skano’s three main markets of Finland, Estonia and Russia together has about 68% share of total sale of the group in 1H 2017. We have also gained entry into new market, Thailand (construction boards) and increase the market share in Sweden (construction boards).
PROFIT BY BUSINESS SEGMENTS:
FIBREBOARDS production and sales
| th EUR | 1H 2017 | 1H 2016 |
| Fibreboards production and sales | 185 | (85) |
| Furniture production and sales | (29) | (293) |
| Furniture retail Baltics | 49 | (46) |
| Furniture retail Ukraine (incl. disposal related gain) | 51 | (54) |
| Consolidation | (12) | 23 |
| TOTAL | 244 | (455) |
| Net financial costs | (141) | (166) |
| Income tax | - | (3) |
| NET PROFIT | 103 | (624) |
Fibreboard profit was helped by further production concentration to thicker boards, which are more profitable for Skano. Total furniture profit is now positive, and should remain so if sales stays at its current levels.
FURNITURE production and sales
FURNITURE PRODUCTION
Sales dropped to 1.88 mil. euros in 1H 2017, from 2.13 mil. euros in 1H 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 slightly down while deliveries to Kazakhstan and Germany helped us grow our sales outside of our two main markets Finland and Russia. Sales to Skano retail units held up well, and increased its share of total furniture sales within the Group.
FURNITURE WHOLESALE SALES BY COUNTRIES
| th EUR | % of net sales | |||
| 1H 2017 | 1H 2016 | 1H 2017 | 1H 2016 | |
| Finland | 575 | 786 | 30.7% | 36.8% |
| Russia | 635 | 713 | 33.8% | 33.4% |
| Other countries | 155 | 104 | 8.3% | 4.8% |
| Group retail companies | 511 | 534 | 27.2% | 25.0% |
| TOTAL | 1,876 | 2,137 | 100.0% | 100.0% |
FURNITURE RETAIL SALES
Skano group retail business recorded sales 1.07 mil. euros in 1H 2017. When excluding the discontinued Ukrainian operations, sales were up by 5% compared to the same period last year. Estonia experienced strong growth at the start of the year (we have 4 shops; Tallinn two, Tartu one and a factory shop in Pärnu). Vilnius recorded sales growth of 9% this year compared to same period last year, as well as improving its net result. Riga shop sales were 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 | ||||
| 1H 2017 | 1H 2016 | 1H 2017 | 1H 2016 | 30.06.2017 | 30.06.2016 | |
| Estonia | 689 | 650 | 64.3% | 60.6% | 4 | 5 |
| Latvia | 199 | 199 | 18.6% | 18.5% | 1 | 1 |
| Lithuania | 119 | 109 | 11.1% | 10.1% | 1 | 1 |
| Ukraine | 64 | 115 | 6.0% | 10.7% | 0 | 3 |
| Other countries | - | 1 | - | 0.1% | - | - |
| TOTAL | 1,071 | 1,074 | 100.0% | 100.0% | 6 | 10 |
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 | 30.06.2017 | 31.12.2016 | 30.06.2016 |
| Cash and bank accounts | 190 | 184 | 106 |
| Receivables and prepayments (Note 1) | 1,448 | 965 | 1,510 |
| Inventories (Note 2) | 2,903 | 2,760 | 3,085 |
| Total current assets | 4,541 | 3,909 | 4,701 |
| Investment property (Note 3) | 405 | 405 | 406 |
| Tangible fixed assets (Note 4) | 7,202 | 7,584 | 7,849 |
| Intangible fixed assets (Note 5) | 56 | 66 | 49 |
| Total fixed assets | 7,663 | 8,055 | 8,304 |
| TOTAL ASSETS | 12,204 | 11,964 | 13,005 |
| Debt obligations (Note 6) | 651 | 1,176 | 1,641 |
| Payables and prepayments (Note 7) | 2,556 | 2,497 | 2,672 |
| Short-term provisions (Note 8) | 8 | 15 | 8 |
| Total current liabilities | 3,215 | 3,688 | 4,321 |
| Non-current debt obligations (Note 6) | 4,813 | 4,163 | 4,163 |
| Non-current provisions (Note 8) | 213 | 213 | 228 |
| Total non-current liabilities | 5,026 | 4,376 | 4,391 |
| Total liabilities | 8,241 | 8,064 | 8,712 |
| 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 | 5 |
| Currency translation reserve | - | 40 | 9 |
| Retained earnings | 507 | 1,552 | 1,552 |
| Net profit (loss) for the period (Note 10) | 103 | (1,045) | (624) |
| Total equity | 3,963 | 3,957 | 4,293 |
| TOTAL LIABILITIES AND EQUITY | 12,204 | 11,964 | 13,005 |
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
| th EUR | 2Q 2017 | 2Q 2016 |
| SALES (Note 11) | 4,025 | 4,432 |
| Cost of production sold | (3,218) | (3,710) |
| Gross profit | 807 | 722 |
| Marketing expenses | (471) | (690) |
| General administrative expenses | (186) | (230) |
| Other income | - | 61 |
| Other expenses | (64) | (50) |
| Operating profit (loss) (Note 11) | 86 | (187) |
| Financial income and financial expenses | (71) | (80) |
| Profit (loss) before taxes | 15 | (267) |
| Prepaid income tax | - | (1) |
| NET PROFIT (LOSS) FOR THE PERIOD | 15 | (268) |
| Basic earnings per share (Note 10) | 0.00 | (0.06) |
| Diluted earnings per share (Note 10) | 0.00 | (0.06) |
| Other income: | ||
| Currency translation differences | - | 34 |
| TOTAL CONSOLIDATED INCOME | 15 | (234) |
The planned time of publishing of interim report of the third quarter of 2017 is week 48 in 2017 (29-30th of November 2017).
Torfinn Losvik
Member of the Management Board
+372 569 90 988
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