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Skano Group Interim Report 1st Quarter 2018

Skano Group Interim Report 1st Quarter 2018

 

Management report

Skano Group AS unaudited first quarter 2018 results and second quarter outlook

Consolidated net sales for Q1 2018 were € 3.71 million, being a 17% decrease compared to the same period in 2017 (Q1 2017: € 4.46 million). Skano Group recorded EBITDA of negative € 17 thousand for Q1 2018, which compare poorly with EBITDA of € 366 thousand for Q1 2017. Main reasons for negative EBITDA in Q1 2018 were lower sales revenue as well as higher prices of raw material woodchip in the fibreboard division. It should be noted that Q1 2017 results were positively influenced by one-off gains of € 48 thousand due to the disposal of Skano’s Ukrainian retail subsidiary in Q1 2017. Net loss for 1Q 2018 was € 274 thousand (Q1 2017: profit of € 88 thousand).

Already in April 2018 the trend turned, with Fibreboard sales ahead of April 2017 sales, and Furniture profitability greatly strengthened due to the change in the production process implemented in Q1. Group EBITDA for April 2018 of € 110 thousand was thus ahead of April 2017 EBITDA (€ 96 thousand). Sales and order development in May, and outlook for rest of Q2, is looking good.

Divisional review of first quarter 2018

Fibreboard sales in Q1 2018 were € 2.72 million, which is 17% less than same period in 2017. Most significant drop was from Finland (subdued demand for fibreboards) but also slow start in other regions. EBITDA for Fibreboard Q1 2018 was € 30 thousand (Q1 2017 EBITDA was € 313 thousand).

Furniture wholesale sales in Q1 2018 were € 800 thousand, 17% down on same period last year. Russia, who overtook Finland last year in total sales revenue has continued it´s good trend and increased revenues compared to last year same period by 14% (Q1 2018 € 361 thousand). In Finland our sole importer recorded sales drop of 12% during Q1 2018 (€ 234 thousand) compared to Q1 2017. Largest sales decline however came from Skano’s own retail chain, sale from Skano furniture wholesale to Skano furniture retail dropped by 46% in Q1 2018 compared to same period last year. EBITDA for furniture wholesale for Q1 2018 was negative € 32 thousand (Q1 2017 EBITDA was negative € 5 thousand).

Furniture retail sales in Q1 2018 were € 332 thousand (Q1 2017 € 549 thousand). EBITDA for furniture retail for Q1 2018 was negative € 20 thousand (Q1 2017 EBITDA was positive € 63 thousand). Q1 2017 EBITDA results include 48 thousand one-off gains from disposal of Ukraine retail store chain.

Total Furniture operations of Skano (wholesale and retail) EBITDA for 2018 first quarter were negative € 52 thousand (2017 first quarter result was positive EBITDA of € 57 thousand).

Balance Sheet

As of 31.03.2018 the total assets of Skano Group AS were € 11.9 million (31.03.2017: € 12.7 million). The liabilities of the company as of 31.03.2018 were € 8.4 million (31.12.2017: € 8.8 million), of which Skano has borrowings of € 5.7 million (31.03.2017: € 5.8 million).

Receivables and prepayments amounted to € 2.3 million (31.03.2017: € 2.1 million). Inventories were € 2.4 million as of 31.03.2018 (31.03.2017: € 2.6 million). Property, plant and intangibles were € 7.1 million as of 31.03.2018 (€ 7.9 million as of 31.03.2017).

Outlook

Despite slow start for 2018 we see improved demand for fibreboard and we expect sales revenue as well as EBITDA to recover during Q2. In addition, more focused sales and marketing activities have been started where we focus on the various product applications of our fibreboards, such as expansion joint filler boards, pin and notice boards, sound insulation and other. 

In Furniture, we expect both sales revenue and EBITDA to recover somewhat, this being linked to better performance of Skano’s retail unit as well as lower costing in production as a result of ending our kiln operations and instead buying in dried and cut material for our production.

Divisional review

Net Revenue by business segments

  € thousand % of net sales
  Q1 2018 Q1 2017 Q1 2018 Q1 2017
Fibreboards production and sales 2,723   3,265   73 % 73 %
Furniture production and sales 800   959   22 % 22 %
Furniture retail 332   549   9 % 12 %
  incl. furniture retail Ukraine 0   64   0 % 1 %
Group transactions (144 ) (311 ) (4 %) (7 %)
TOTAL 3,711   4,462   100 % 100 %

Net Profit by business segments

€ thousand Q1 2018 Q1 2017
EBITDA by business units:    
Fibreboards production and sales 30   313  
Furniture production and wholesale (32 ) (5 )
Furniture retail (20 ) 63  
  incl. furniture retail Ukraine 0   1  
Group transactions (1 ) (5 )
TOTAL EBITDA (23 ) 366  
Depreciation 191   208  
TOTAL OPERATING PROFIT/ LOSS (214 ) 158  
Net financial costs (66 ) (70 )
Income tax 0   0  
NET PROFIT/ LOSS (281 ) 88  

Fibreboard sales

The total sales of fibreboards for Q1 2018 were € 2.72 million, which are 17% down from Q1 2017 sales level (€ 3.27 million). All regions (see table below) showed decline, the only exception was our sales to Russia which showed some increase. Apart from the structural changes in the Finnish construction sector, we expect the other markets to somewhat recover during Q2.

Fibreboard sales by geographical segment 

  € thousand % of net sales 
  Q1 2018 Q1 2017 Q1 2018 Q1 2017
European Union (including Suomen Tuulileijona sales) 2,198 2,630 81 % 81 %
Russia 298 259 11 % 8 %
Africa 42 132 2 % 4 %
Middle East 73 82 3 % 3 %
Asia 47 118 2 % 4 %
Other 65 43 2 % 1 %
TOTAL 2,723 3,265 100 % 100 %

Furniture wholesale sales

Sales dropped to € 800 thousand in Q1 2018, down from € 959 thousand in Q1 2017. However, our largest market Russia experienced sales growth of 14% in Q1 2018 compared to Q1 2017, while our sole importer in Finland recorded sales decline of 12% for same period. Sales to Skano retail units decreased in first quarter compared to same period last year, however more marketing activities should yield better performance in Q2. Other countries sales were negatively influenced by the delay of the usual Q1 order from our Kazakhstan importer.

Furniture wholesale sales by countries 

  € thousand % of net sales
  Q1 2018 Q1 2017 Q1 2018 Q1 2017
Russia 361 316 45 % 33 %
Finland 234 266 29 % 28 %
Skano Retail 141 259 18 % 27 %
Other countries 64 118 8 % 12 %
TOTAL 800 959 100 % 100 %

Furniture retail sales 

Skano Group retail business recorded sales of € 332 thousand in Q1 2018, which is 46% decline from Q1 2017. The recent appointment of a marketing specialist into our retail unit will result in more focused marketing and sales campaigns which should help improve sales.

Reteail sales by country

  € thousand % of net sales Number of stores 
  Q1 2018 Q1 2017 Q1 2018 Q1 2017 31.03.2018 31.03.2017
Estonia 204 322 61 % 59 % 4 4
Latvia 74 88 22 % 16 % 1 1
Lithuania 54 74 16 % 14 % 1 1
Ukraine* 0 64 0 % 12 % 0 3
TOTAL (ongoing shops) 332 549 100 % 100 % 6 9

People

On the 31st of March 2018, the group employed 221 people (down from 237 people as of 31.03.2017). The average number of personnel in Q1 2018 was 222 (Q1 2017: 244).

During first three months of 2018, wages and salaries with taxes amounted to € 0.90 million (first three months 2017: € 1.03 million). Payments made to management board members of all group companies including all subsidiaries with relevant taxes were € 40 thousand in Q1 2018 and € 103 thousand in Q1 2017.

Financial highlights

€ thousand Q1 2018 Q1 2017
Income statement    
Revenue 3,711   4,462  
EBITDA (23 ) 366  
EBITDA margin (1 %) 8 %
Operating profit (214 ) 158  
Operating margin (6 %) 4 %
Net profit (281 ) 88  
Net margin (8 %) 2 %
     
Statement of financial position 31.03.2018   31.03.2017  
Total assets 11,846   12,705  
Return on assets (2 %) 1 %
Equity 3,487   3,949  
Return on equity (8 %) 2 %
Debt-to-equity ratio 71 % 69 %
     
Share 31.03.2018   31.03.2017  
Last Price* 0.54   0.57  
Earnings per share (6 %) 2 %
Price-earnings ratio (8.66 ) 29.09  
Book value of a share 0.78   0.88  
Market to book ratio 0.70   0.65  
Market capitalization, € thousand 2,429   2,429  
Number of shares 4,499,061   4,499,061  

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 = Last price / Earnings per share 
Book value of a share = Equity / Total shares
Market to book ratio = Last price / Book value of a share
Market capitalization = Last price * Total shares
*http://www.nasdaqbaltic.com/

Consolidated statement of financial positions

€ thousand 31.03.2018 31.12.2017 31.03.2017
Cash and cash equivalents (Note 2) 60 74 152
Receivables and prepayments (Note 3) 2,318 1,215 2,068
Inventories (Note 4) 2,343 2,336 2,627
Total current assets 4,721 3,624 4,847
       
Investment property (Note 5) 170 170 405
Available-for-sale financial assets (Note 8) 187 182 0
Other shares and issues 0 7 0
Property, plant and equipment (Note 6) 6,724 6,908 7,391
Intangible assets (Note 7) 43 47 61
Total non-current assets 7,124 7,313 7,858
       
TOTAL ASSETS 11,845 10,937 12,705
       
Borrowings (Notes 9) 1,240 593 1,638
Payables and prepayments (Notes 10) 2,486 1,956 2,729
Short-term provisions (Note 11) 10 13 13
Total current liabilities 3,736 2,562 4,380
       
Long-term borrowings (Notes 9) 4,421 4,422 4,163
Long-term provisions (Note 11) 200 200 213
Total non-current liabilities 4,621 4,622 4,376
Total liabilities 8,358 7,184 8,756
       
Share capital (at nominal value) (Note 12) 2,699 2,699 2,699
Share premium 364 364 364
Statutory reserve capital 288 288 288
Other reserves 24 9 2
Unrealised currency differences 0 0 0
Retained earnings 113 393 596
Total equity 3,487 3,753 3,949
       
TOTAL LIABILITIES AND EQUITY 11,845 10,937 12,705

Consolidated statement of profit or loss and other comprehensive income

€ thousand Q1 2018 Q1 2017
Revenue (Note 14) 3,711   4,462  
Cost of goods sold (Note 15) 3,294   3,425  
Gross profit 416   1,036  
     
Distribution costs (Note 16) 454   602  
Administrative expenses (Note 17) 150   235  
Other operating income (Note 19) 3   51  
Other operating expenses (Note 19) 30   93  
Operating profit (loss) (214 ) 158  
     
Finance income (Note 20) 1   4  
Finance costs (Note 20) 67   73  
LOSS BEFORE INCOME TAX (281 ) 88  
Corporate income tax 0   0  
     
NET LOSS FOR THE FINANCIAL YEAR (281 ) 88  
     
Other comprehensive income (loss)    
Other comprehensive income (loss) that can in certain cases be reclassified to the income statement    
Currency translation differences  0   (40 )
TOTAL COMPREHENSIVE LOSS FOR THE FINANCIAL YEAR (281 ) 48  
     
Basic earnings per share (Note 13) (0.06 ) (0.02 )
Diluted earnings per share (Note 13) (0.06 ) (0.01 )

Torfinn Losvik

Member of the Management Board

+372 569 90 988

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