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Audited Annual Report 2017

The Supervisory Board of Skano Group AS approved on 30th of April 2018 the annual report and loss covering proposal for the year 2017 of Skano Group AS.

 OVERVIEW OF OPERATING RESULTS

Skano Group recorded EBITDA for full year 2017 being € 973 thousand (which equates to 6% of sales), which compares favourably with 2016, where EBITDA for 12 months was € 119 thousand (1% of sales). It should be noted that 2017 results were influenced by one-off gains of € 46 thousand due to the disposal of Skano’s Ukrainian retail subsidiary in March and € 186 thousand from investment property sale in September.

Net loss for 12 months 2017 was € 127 thousand (12M 2016: loss of € 1 045 thousand).

Consolidated net sales for 12 months 2017 were € 16.36 million, being a 7% decrease compared to the same period in 2016 (€ 17.50 million).

Fibreboard sales for 12 months 2017 were € 11.84 million, which is 3% less than same period in 2016 (€ 12.16 million). 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 € 913 thousand (in 2016 EBITDA was € 526 thousand).

Furniture wholesale sales full year 2017 were € 3.58 million, which is 16% down on same period last year (2016 € 4.24 million). 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 made by the importer 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 for twelve months 2017 were € 1.93 million (2016 € 2.20 million), a decrease of 12% compared to 2016. 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 € 117 thousand (2016 EBITDA was negative € 75 thousand).

Total Furniture operations of Skano (wholesale and retail) EBITDA for 2017 were therefore positive € 60 thousand (2016 result was EBITDA negative of € 523 thousand).

GROUP’S REVENUE BY ACTIVITY

 

€ thousand

% of net sales

 

2017

2016

2017

2016

Fibreboards production and sales

11,836

12,170

72%

70%

Furniture production and sales

3,578

4,235

22%

24%

Furniture retail Baltics: todays shops

1,868

1,692

11%

10%

Furniture retail Baltics: closed shops

0

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%

GROUP’S REVENUE BY GEOGRAPHICAL MARKETS

 

€ thousand

% of sales

2017

2016

2017

2016

Finland

4,918

6,06

30%

35%

Russia

3,037

2,878

19%

16%

Estonia

2,845

3,129

17%

18%

Portugal

921

717

6%

4%

Latvia

835

760

5%

4%

Other EU

2,122

2,797

13%

16% 

Africa

679

288

4%

2%

Middle East

260

197

2%

1% 

Asia

241

39

1%

0%

Other

498

637

3%

4% 

TOTAL

16,356

17,502

100%

100%

The Group’s total sales have seen increases in new markets, such as South Africa, Portugal and Sweden, while we recorded sales decline in Finland, Estonia and UK.

THE GROUP’S PROFIT/LOSS BY SEGMENTS

€ thousand

2017

2016

EBITDA by business units:

   

Fibreboards production and sales

913

526

Furniture production and wholesale

(57)

(448)

Furniture retail

117

(75)

    incl. furniture retail Ukraine

0

(57)

Group transactions

1

116

TOTAL EBITDA

973

119

Depreciation

(825)

(849)

TOTAL OPERATING PROFIT/ LOSS

148

(730)

Net financial costs

(275)

(310)

Income tax

(0)

(6)

NET PROFIT/ LOSS

(127)

(1,045)

STATEMENT OF FINANCIAL POSITION AND CASH FLOW STATEMENT

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 borrowings of € 5.0 million (31.12.2016: € 5.3 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). Non-current assets were € 7.3 million as of 31.12.2017 (€ 8.1 million as of 31.12.2016).

Liabilities totalled as at 31.12.2017 € 7.2million, which is € 0.9 million less compared to 2016 (2016: € 8.1 million).

In 2017, the Group’s cash flows from operating activities totalled € 158 thousand € (2016: € 300 thousand). Investment activities resulted in negative cash flows of € -145 thousand in 2017, however improvement compared to € -364 thousand in 2016. Financing activities also resulted in negative cash flows of € -123 thousand (2016: € -77 thousand).

In 2017, investments in non-current assets totalled € 352 thousand. In 2016, the investments totalled € 393 thousand.

PERFORMANCE OF BUSINESS UNITS

SKANO FIBREBOARD (including SUOMEN TUULILEIJONA OY)

Skano Fibreboard business activity is producing and sale of fibreboards. Skano Fibreboard factories are located in Pärnu and Püssi. The subsidiary Suomen Tuulileijona Oy is registered in Finland and focusing on sale of boards in Finland.

The total sales of fibreboards for 2017 were € 11.84 million, which are 3% down from year 2016 (€ 12.17 million) sales level. We recorded good increase in operating earnings before depreciation, amortisation and interest (i.e. EBITDA), up from € 526 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).

THE SALES OF SKANO FIBREBOARD BY COUNTRY

 

€ thousand

% of net sales 

2017

2016

2017

2016

European Union (including Suomen Tuulileijona sales)

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%

Interior finishing boards

Interior finishing boards are 100% produced under Isotex brand. Interior finishing boards are made of natural softboard, which is produced in Pärnu fibreboard factory’s main production line and the boards have milled tenons and the surface is covered with paper or textile. This technology enables to produce boards of different colours and patterns.

General construction boards

Wind-protection boards continued to be the largest product group at Pärnu softboard factory. The main product group of Püssi fibreboard factory is boards for the pin board segment, which Skano sells across several continents.

SKANO FURNITURE FACTORY (including SKANO FURNITURE OÜ)

FURNITURE PRODUCTION AND WHOLESALE

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.

The sales of the furniture factory by country

 

€ thousand

% 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%

SKANO FURNITURE: RETAIL SALES

Skano group retail business is operated by a subsidiary Skano Furniture OÜ and its subsidiaries in Latvia, Lithuania and Ukraine (the Ukraine business was sold in March 2017). As of 31.12.2017 Skano has a total of 6 stores: two stores in Tallinn, one store in Tartu, one store in Pärnu, one store in Riga and one store in Vilnius.

Skano group retail business recorded sales of € 1.93 million in 2017, which is 12% decline from year 2016 (€ 2.20 million). However, the 6 ongoing shops in the Baltics increased sales in 2017 with 11% up from 2016.

RETAIL SALES BY COUNTRY

 

€ thousand

% of net sales

Number of stores 

2017

2016

2017

2016

31.12.2017

31.12.2016

Estonia*

1,266

1,089

66%

49%

4

4

Estonia (closed shop)

0

233

0%

11%

0

1

Latvia

356

363

18%

16%

1

1

Lithuania

246

231

13%

10%

1

1

Ukraine**

64

278

3%

13%

0

2

Other countries

0

8

0%

0%

0

0

TOTAL (ongoing shops)

1,932

2,202

100%

100%

6

8

* Ongoing shops

** Ukraine business was sold in March 2017

FORECAST AND DEVELOPMENT

SKANO FIBREBOARD (with Finnish subsidiary)

We are planning to widen our business in Middle East and Asia, while securing our position in the European market. Further focus has been applied on those product applications where Skano Fibreboard has a clear competitive edge.

SKANO FURNITURE FACTORY

Extensive streamlining of the unit´s cost structure has helped to improve profitability. Production processes have been aligned to better meet today's competitive environment.

SKANO FURNITURE RETAIL SALES

We expect our shops in the Baltics to continue their steady performance from last year, and we are looking to open additional shops in the Baltics this year.

 

FINANCIAL RATIOS

€ thousand

2017

2016

Income statement

   

Revenue

16,357

17,502

EBITDA

973

117

EBITDA margin

6%

1%

Operating profit (loss)

148

(731)

Operating margin

1%

(4%)

Net profit (loss)

(127)

(1,047)

Net margin

(1%)

(6%)

     

Statement of financial position

31.12.2017

31.12.2016

Total assets

10,937

11,965

Return on assets

(1%)

(9%)

Equity

3753

3901

Return on equity

(3%)

(27%)

Debt-to-equity ratio

66%

67%

     

Share

31.12.2017

31.12.2016

Last Price*

0.62

0.46

Earnings per share

(0.03)

(0.23)

Price-earnings ratio

(21.74)

(1.96)

Book value of a share

0.83  

0.87  

Market to book ratio

0.74  

0.52

Market capitalization, € thousand

2,771

2,047

Number of shares

4,499,061

4,499,061

EBITDA = operating profit + depreciation

EBITDA margin = EBITDA / revenue

Operating margin = operating profit (loss) / revenue

Net margin = net profit (loss) / revenue

Return on total assets = net profit (loss) / total assets

Return on equity = net profit (loss) / equity

Debt ratio = liabilities / total assets

Earnings (loss) per share = net profit (loss) / number of shares

Price/earnings (PE) ratio = last price / earnings per share

Book value of share = equity / number of shares

Market to book value = last price / book value of share

Market capitalisation = last price * number of shares

* http://www.nasdaqbaltic.com/market/?instrument=EE3100092503&list=3&pg=details&tab=historical

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

€ thousand

31.12.2017

31.12.2016

Cash and cash equivalents (Note 3)

74

184

Receivables and prepayments (Notes 3; 5)

1,215

965

Inventories (Note 6)

2,336

2,760

     

Total current assets

3,624

3,909

     

Investment property (Note 7)

170

405

Available-for-sale financial assets (Note 9)

182

0

Other shares and issues (Note 14)

7

               0

Property, plant and equipment (Note 8)

6,908

7,584

Intangible assets (Note 8)

47

66

     

Total non-current assets

7,313

8,055

     

TOTAL ASSETS

10,937

11,964

     

Borrowings (Notes 3; 10)

593

1,176

Payables and prepayments (Notes 3; 12)

1,956

2,497

Short-term provisions (Note 13)

13

15

     

Total current liabilities

2,562

3,688

     

Long-term borrowings (Notes 3; 10)

4,422

4,163

Long-term provisions (Note 13)

200

213

Total non-current liabilities

4,622

4,376

     

Total liabilities

7,184

8,064

     

Share capital (at nominal value) (Note 14)

2,699

2,699

Share premium

364

364

Statutory reserve capital

288

288

Other reserves

9

2

Unrealised currency differences

0

40

Retained earnings

393

507

     

Total equity (Note 14)

3,753

3,900

     

TOTAL LIABILITIES AND EQUITY

10,937

11,964

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

€ thousand

2017

2016

Revenue (Note 25)

16,357

17,502

Cost of goods sold (Note 16)

(13,419)

(14,425)

     

Gross profit

2,938

3,077

     

Distribution costs (Note 17)

(2,040)

 (2,939) 

Administrative expenses (Note 18)

(703)

                (595)

Other operating income (Note 20)

255

54

Other operating expenses (Note 21)

(301)

(327)

     

Operating profit (loss) (Note 25)

149

(730)

     

Finance income (Note 22)

4

0

Finance costs (Note 22)

(279)

(309)

     

LOSS BEFORE INCOME TAX

(127)

(1,039)

Corporate income tax (Notes 14; 23)

(0)

(6)

     

NET LOSS FOR THE FINANCIAL YEAR

(127)

(1,045)

     

Other comprehensive income (loss)

   

Other comprehensive income (loss) that can in certain cases be reclassified to the income statement

   

Currency translation differences 

(40)

33

     

TOTAL COMPREHENSIVE LOSS FOR THE FINANCIAL YEAR

(167)

(1,012)

     

Basic earnings per share (Note 15)

(0.03)

(0.23)

Diluted earnings per share (Note 15)

(0.03)

(0.23)

Proposal for covering of loss: to cover the loss with retained earnings.

The audited Annual Report 2017 of Skano Group AS is also available on company’s web page http://www.skano.com

Publishing of interim report for the first quarter of 2018 will be not later then the 31st of May 2018.

SKANO GROUP Annual Report 2017.pdf

 

Torfinn Losvik

 CEO & Chairman of the Management Board

 Phone: + 372 56 99 09 88

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