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Skano Group AS 2017 4q inetrin report

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

This email address is being protected from spambots. You need JavaScript enabled to view it.

 


Skano 2017_4Q_interim report.pdf