THE 4TH 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 31 December 2017 the Group employed 223 people (31 December 2016: 266 people).
Skano Group recorded EBITDA of € 21 thousand for 4Q 2017, which resulted in EBITDA for full year 2017 being € 974 thousand (which equates to 6% of sales), which compares favourably with 2016 where EBITDA for 12 months was € 117 thousand (1% of sales). It should be noted that 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 loss for 4Q 2017 was € 243 thousand and for 12 months 2017 was € 127 thousand (12M 2016: loss of € 1 045 thousand).
Consolidated net sales for 4Q 2017 were € 3.78 million, making net sales 12 months 2017 of € 16.36 million, being a 7% decrease compared to the same period in 2016.
Fibreboard sales in 4Q 2017 were € 2.55 million, and total sales for 12 months 2017 were € 11.84 million, which is 3% 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 12 months 2017 increased by 19% compared to same period last year. Strongest sales growth came from sales to South Africa, Portugal and Sweden. EBITDA for Fibreboard full year 2017 was € 0.91 million (in 2016 EBITDA was € 0.53 million).
Furniture wholesale sales in 4Q 2017 were € 0.99 million, and total sales for full year 2017 were € 3.58 million, which is 15% down on same period last year. Russia overtook Finland to become our largest wholesale market, and increased sales with 4% from 2016 to 2017. In Finland our sole importer recorded sales drop of 32%, however substantial restructuring during the year bode well for more stable performance in year 2018. EBITDA for furniture wholesale for full year 2017 was negative € 57 thousand (2016 EBITDA was negative € 448 thousand).
Furniture retail sales in fourth quarter 2017 were € 0.48 million, and total sales for twelve months 2017 were € 1.93 million. When excluding the discontinued shop operations in Ukraine and the closure in 2016 of the third Tallinn shop, sales of our existing six shops in the Baltics showed sales growth of 11% in 2017 compared to 2016. EBITDA for furniture retail for full year 2017 was € 118 thousand (2016 EBITDA was negative € 140 thousand).
Total Furniture operations of Skano (wholesale and retail) EBITDA for 2017 were therefore positive € 60 thousand (2016 result was EBITDA negative of € 588 thousand).
Balance Sheet
As of 31.12.2017 the total assets of Skano Group AS were € 10.9 million (31.12.2016: € 12.0 million). The liabilities of the company as of 31.12.2017 were € 7.2 million (31.12.2016: € 8.1 million), of which Skano has bank loans of € 4.6 million.
Receivables and prepayments amounted to € 1.2 million (31.12.2016: € 1.0 million). Inventories were € 2.3 million as of 31.12.2017 (31.12.2016: € 2.8 million). Property, plant and intangibles were € 7.3 million as of 31.12.2017 (€ 8.1 million as of 31.12.2016).
Outlook
The overall global demand for Fibreboard remains strong, as we can see from our overall 19% sales growth in selling to customers located in 32 countries (excluding sales to Finland and UK).
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 has improved compared to last year.
DIVISIONAL REVIEW:
NET SALES BY BUSINESS SEGMENTS
| th EUR | % of net sales | |||
| 2017 | 2016 | 2017 | 2016 | |
| Fibreboards production and sales | 11,836 | 12,170 | 72% | 70% |
| Furniture production and sales | 3,579 | 4,235 | 22% | 24% |
| Furniture retail Baltics: todays shops | 1,868 | 1,692 | 11% | 10% |
| Furniture retail Baltics: closed shops | - | 233 | 0% | 1% |
| Furniture retail Ukraine: closed shops | 64 | 278 | 0% | 2% |
| Group transactions | (990) | (1,106) | -6% | -6% |
| TOTAL | 16,357 | 17,502 | 100% | 100% |
PROFIT BY BUSINESS SEGMENTS
| th EUR | 2017 | 2016 |
| EBITDA by business units: | ||
| Fibreboards production and sales | 912 | 533 |
| Furniture production and sales | (57) | (448) |
| Furniture retail Baltics | 67 | (83) |
| Furniture retail Ukraine | 51 | (57) |
| Group transactions | - | 172 |
| TOTAL EBITDA | 974 | 117 |
| Depreciation | (825) | (848) |
| TOTAL OPERATING PROFIT/ LOSS | 149 | (731) |
| Net financial costs | (275) | (309) |
| Income tax | - | (5) |
| NET PROFIT/ LOSS | (127) | (1,045) |
Fibreboard profit was helped by further production concentration to thicker boards, which are more profitable for Skano.
Furniture profitability was much improved in 2017 due to extensive streamlining of this unit’s cost structure.
FIBREBOARDS production and sales
The total sales of fibreboards for 2017 were € 11.836 million, which are 3% down from year 2016 sales level. We recorded good increase in operating earnings before depreciation, amortisation and interest (ie EBITDA), up from € 533 thousand in 2016 to € 913 thousand in 2017.
Strong sales growth was recorded in South Africa, Portugal and Sweden while largest sales decline was recorded in Finland (weak demand) and Great Britain (cancelling of one large loss-making customer).
FIBREBOARD SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| 2017 | 2016 | 2017 | 2016 | |
| European Union | 8,700 | 9,822 | 74% | 81% |
| Russia | 1,631 | 1,527 | 14% | 13% |
| Africa | 679 | 288 | 6% | 2% |
| Middle East | 260 | 197 | 2% | 2% |
| Asia | 241 | 39 | 2% | 0% |
| Other | 325 | 297 | 3% | 2% |
| TOTAL | 11,836 | 12,170 | 100% | 100% |
FURNITURE production and sales
FURNITURE PRODUCTION
Sales dropped to € 3.58 million in 2017, down from € 4.24 million in 2016. However, our largest market Russia experienced sales growth of 4% up from year 2016, while our sole importer in Finland recorded sales decline of 32%. Sales to Skano retail units increased its share of total furniture sales within the Group, and further focus on retail activities should continue to provide more sales stability.
FURNITURE WHOLESALE SALES BY COUNTRIES
| th EUR | % of net sales | |||
| 2017 | 2016 | 2017 | 2016 | |
| Russia | 1,406 | 1,349 | 39% | 32% |
| Finland | 995 | 1,463 | 28% | 35% |
| Skano Retail | 900 | 1,007 | 25% | 24% |
| Other countries | 278 | 416 | 8% | 10% |
| TOTAL | 3,579 | 4,235 | 100% | 100% |
FURNITURE RETAIL SALES
Skano group retail business recorded sales of € 1.93 million in 2017, which is 12% decline from year 2016. However, the 6 ongoing shops in the Baltics increased sales in 2017 with 11% up from 2016.
RETAIL SALES BY COUNTRIES
| th EUR | % of net sales | Number of stores | ||||
| 2017 | 2016 | 2017 | 2016 | 31.12.2017 | 31.12.2016 | |
| Estonia* | 1,266 | 1,089 | 71% | 49% | 4 | 4 |
| Latvia | 356 | 363 | 15% | 16% | 1 | 1 |
| Lithuania | 246 | 231 | 11% | 10% | 1 | 1 |
| Ukraine** | 64 | 278 | 3% | 13% | - | 3 |
| Estonia (closed shop) | - | 233 | 0% | 11% | - | 1 |
| Other countries | - | 8 | 0% | 0% | - | - |
| TOTAL | 1,932 | 2,202 | 100% | 100% | 6 | 10 |
* Ongoing shops
** Ukraine business was sold in March 2017
FINANCIAL HIGHLIGHTS
| th EUR | 4Q 2017 | 4Q 2016 |
| Income statement | ||
| Revenue | 3,785 | 3,873 |
| EBITDA | 21 | (102) |
| EBITDA margin | 1% | -3% |
| Operating profit | (179) | (307) |
| Operating margin | -5% | -8% |
| Net profit | (243) | (378) |
| Net margin | -6% | -10% |
| Income statement | 2017 | 2016 |
| Revenue | 16,357 | 17,502 |
| EBITDA | 980 | 117 |
| EBITDA margin | 6% | 1% |
| Operating profit | 149 | (730) |
| Operating margin | 1% | -4% |
| Net profit | (127) | (1,045) |
| Net margin | -1% | -6% |
| Balance sheet | 31.12.2017 | 31.12.2016 |
| Total assets | 10,937 | 11,964 |
| Return on assets | -1% | -9% |
| Equity | 3,753 | 3,957 |
| Return on equity | -3% | -26% |
| Debt-to-equity ratio | 66% | 67% |
| Share | 31.12.2017 | 31.12.2016 |
| Closing price | 0,608 | 0,46 |
| Earnings per share | (0,03) | (0,23) |
| Price-earnings ratio | (21,55) | (1,98) |
| Book value of a share | 0,83 | 0,88 |
| Market to book ratio | 0,73 | 0,52 |
| Market capitalization | 2,735 | 2,070 |
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 | 31.12.2017 | 31.12.2016 |
| Cash and bank accounts | 74 | 184 |
| Receivables and prepayments (Note 1) | 1,215 | 965 |
| Inventories (Note 2) | 2,335 | 2,760 |
| Total current assets | 3,624 | 3,909 |
| Investment property (Note 3) | 170 | 405 |
| Other shares and issues | 189 | - |
| Tangible fixed assets (Note 4) | 6,908 | 7,584 |
| Intangible fixed assets (Note 5) | 47 | 66 |
| Total fixed assets | 7,313 | 8,055 |
| TOTAL ASSETS | 10,937 | 11,964 |
| Debt obligations (Note 6) | 593 | 1,176 |
| Payables and prepayments (Note 7) | 1,956 | 2,497 |
| Short-term provisions (Note 8) | 13 | 15 |
| Total current liabilities | 2,562 | 3,688 |
| Non-current debt obligations (Note 6) | 4,422 | 4,163 |
| Non-current provisions (Note 8) | 200 | 213 |
| Total non-current liabilities | 4,622 | 4,376 |
| Total liabilities | 7,184 | 8,064 |
| Share capital at nominal value (Note 9) | 2,699 | 2,699 |
| Share premium | 364 | 364 |
| Statutory capital reserve | 288 | 288 |
| Other reserves | 9 | 2 |
| Currency translation reserve | - | 40 |
| Retained earnings | 520 | 1,552 |
| Net profit (loss) for the period (Note 10) | (127) | (1,045) |
| Total equity | 3,753 | 3,900 |
| TOTAL LIABILITIES AND EQUITY | 10,937 | 11,964 |
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
| th EUR | 4Q 2017 | 4Q 2016 | 2017 | 2016 |
| SALES (Note 11) | 3,785 | 3,873 | 16,357 | 17,502 |
| Cost of production sold | (3,319) | (3,350) | (13,419) | (14,425) |
| Gross profit | 466 | 522 | 2,938 | 3,077 |
| Marketing expenses | (467) | (589) | (2,040) | (2,939) |
| General administrative expenses | (172) | (136) | (703) | (595) |
| Other income | 17 | 27 | 255 | 98 |
| Other expenses | (23) | (131) | (301) | (371) |
| Operating profit (loss) (Note 11) | (179) | (307) | 149 | (730) |
| Financial income and financial expenses | (64) | (69) | (275) | (309) |
| Profit (loss) before taxes | (243) | (376) | (127) | (1,039) |
| Prepaid income tax | - | (2) | - | (6) |
| NET PROFIT (LOSS) FOR THE PERIOD | (243) | (378) | (127) | (1,045) |
| Basic earnings per share (Note 10) | (0.05) | (0.08) | (0.03) | (0.23) |
| Diluted earnings per share (Note 10) | (0.05) | (0.08) | (0.03) | (0.23) |
| Other comprehensive income: | ||||
| Currency translation differences | - | 23 | - | 33 |
| TOTAL COMPREHENSIVE INCOME (LOSS) | (243) | (355) |
(127) | (1,012) |
The planned time of publishing of interim report of the first quarter of 2018 is week 22 in 2018 (30-31th of May 2018).
Torfinn Losvik
Member of the Management Board
+372 569 90 988
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