Skano Group Interim Report 2nd Quarter 2018
Management report
SKANO GROUP AS unaudited second quarter 2018 results
Consolidated net sales for Q2 2018 were € 3.95 million, being a 2% decrease compared to the same period in 2017. Skano Group recorded EBITDA of positive € 238 thousand for Q2 2018, which is 19% down compared to Q2 2017. Main reasons for lower EBITDA in Q2 2018 were lower sales revenue as well as higher prices of raw material woodchip in the fibreboard division. Net loss for Q2 2018 was € 22 thousand (Q2 2017: profit of € 15 thousand).
divisional review of second quarter 2018
Fibreboard sales in Q2 2018 were € 2.96 million, which is 4% more than same period in 2017. Most significant increase was from Portugal, Russia and Thailand. EBITDA for Fibreboard Q2 2018 was € 171 thousand (Q2 2017 EBITDA was € 186 thousand).
Furniture wholesale sales in Q2 2018 were € 778 thousand, 15% down on same period last year. Both Russia and Finland experienced sales slowdown, while sales in other markets such as Kazakhstan and Ukraine showed an increase. Skano’s own retail chain sales decreased by 14% compared to same period last year (Q2 2017: € 248 thousand). Despite the sales slowdown, EBITDA for furniture wholesale for Q2 2018 was positive € 78 thousand (Q2 2017 EBITDA was positive € 75 thousand), reflecting the increased profitability achieved by ending our own kiln operations and instead source dried and cut material.
Furniture retail sales in Q2 2018 were € 430 thousand, down 18% from same period last year. EBITDA for furniture retail for Q2 2018 was negative € 11 thousand (Q2 2017 EBITDA was positive € 40 thousand), reflecting the weak sales in Q2.
Total Furniture operations of Skano (wholesale and retail) EBITDA for 2018 second quarter were positive € 67 thousand.
Balance Sheet
As of 30.06.2018 the total assets of Skano Group AS were € 11.3 million (30.06.2017: € 12.2 million). The liabilities of the company as of 30.06.2018 were € 7.9 million (30.06.2017: € 8.2 million), of which Skano has borrowings of € 5.1 million as at 30.06.2018 (30.06.2017: € 5.5 million).
Receivables and prepayments amounted to € 1.7 million as at 30.06.2018 (30.06.2017: € 1.4 million). Inventories were € 2.6 million as of 30.06.2018 (30.06.2017: € 2.9 million). Property, plant and intangibles were € 6.9 million as of 30.06.2018 (€ 7.6 million as of 30.06.2017).
Outlook
Despite slow start for 2018 we have experienced good improvement in demand for fibreboard during second quarter, as also reflected in higher sales in July month compared to July last year. However, the recent woodchip price increase is causing some concern. Sales and marketing activities are focusing more on the various product applications of our fibreboards, such as the positive health and environmental benefits of using wood fibre boards compared to competing synthetic materials.
In Furniture, we expect improved retail performance linked to the forthcoming launch of new shop concept for our best selling shop in Järve centre, the recent launch of Skano web-shop, and the scheduled opening of a new shop in Decco centre in Riga. We also see positive wholesale development in the UK market with our collections.
Divisional review
Net Revenue by business segments
| € thousand | € thousand | |||||||
| Q2 2018 | Q2 2017 | 6M 2018 | 6M 2017 | |||||
| Fibreboards production and sales | 2,957 | 2,848 | 5,680 | 6,113 | ||||
| Furniture production and sales | 778 | 917 | 1,578 | 1,876 | ||||
| Furniture retail | 430 | 522 | 762 | 1,071 | ||||
| incl. furniture retail Ukraine | 0 | 0 | 0 | 64 | ||||
| Group transactions | (215 | ) | (261 | ) | (360 | ) | (573 | ) |
| TOTAL | 3,949 | 4,025 | 7,660 | 8,487 | ||||
Net Profit by business segments
| € thousand | Q2 2018 | Q2 2017 | 6M 2018 | 6M 2017 | ||||
| EBITDA by business units: | ||||||||
| Fibreboards production and sales | 171 | 186 | 208 | 500 | ||||
| Furniture production and wholesale | 78 | 75 | 45 | 70 | ||||
| Furniture retail | (11 | ) | 40 | (30 | ) | 103 | ||
| incl. furniture retail Ukraine | 0 | 0 | 0 | 1 | ||||
| Group transactions | (0 | ) | (7 | ) | (8 | ) | (12 | ) |
| TOTAL EBITDA | 238 | 295 | 214 | 661 | ||||
| Depreciation | 182 | 209 | 373 | 417 | ||||
| TOTAL OPERATING PROFIT/ LOSS | 55 | 86 | (159 | ) | 244 | |||
| Net financial costs | (77 | ) | (72 | ) | (138 | ) | (142 | ) |
| Income tax | 0 | 0 | 0 | 0 | ||||
| NET PROFIT/ LOSS | (22 | ) | 15 | (297 | ) | 103 | ||
FIBREBOARD sales
The total sales of fibreboards for Q2 2018 were € 2.96 million, which are 4% up from Q2 2017 sales level (€ 2.85 million). We recorded solid sales increase in markets such as Portugal, Russia and Thailand while sales were dropping in Finland and South Africa.
FIBREBOARD SALES BY GEOGRAPHICAL SEGMENTS
| € thousand | € thousand | |||
| Q2 2018 | Q2 2017 | 6M 2018 | 6M 2017 | |
| European Union | 2,165 | 2,078 | 4,363 | 4,709 |
| Russia | 423 | 360 | 721 | 619 |
| Asia | 143 | 55 | 190 | 173 |
| Middle East | 100 | 28 | 173 | 110 |
| Other | 93 | 96 | 158 | 139 |
| Africa | 33 | 231 | 75 | 363 |
| TOTAL | 2,957 | 2,848 | 5,680 | 6,113 |
FURNITURE wholesale sales
Sales dropped to € 778 thousand in Q2 2018, down from € 917 thousand in Q2 2017. Russian consumer confidence is still negatively influenced by the sanctions imposed on Russia while in Finland our exclusive distributor is continuing with their restructuring. Skano’s retail shops in the Baltics recovered slightly from a very weak Q1, however still less sales compared to Q2 2017. Good news is the orders received from Kazakhstan and Ukraine.
FURNITURE WHOLESALE SALES BY COUNTRIES
| € thousand | € thousand | |||
| Q2 2018 | Q2 2017 | 6M 2018 | 6M 2017 | |
| Russia | 277 | 320 | 638 | 635 |
| Finland | 213 | 316 | 448 | 582 |
| Skano Retail | 213 | 248 | 354 | 507 |
| Other countries | 75 | 33 | 139 | 151 |
| TOTAL | 778 | 917 | 1,578 | 1,876 |
FURNITURE RETAIL SALES
Skano Group retail business recorded sales of € 430 thousand in Q2 2018, which is 18% decline from Q2 2017. Estonian sales have been sluggish and more marketing efforts as well as the recent opening of a web shop should help improve Estonian sales performance. The new sales manager in Lithuania has with her good activities managed to raise sales in Lithuania with sales more than doubling in Q2 2018 compared to same period last year. Latvia sales were poor in Q2, and Skano will open a new shop in Riga in September which will help improve the Latvian sales.
RETAIL SALES BY COUNTRIES
| € thousand | € thousand | Number of stores | ||||
| Q2 2018 | Q2 2017 | 6M 2018 | 6M 2017 | 30.06.2018 | 30.06.2017 | |
| Estonia | 263 | 367 | 467 | 689 | 4 | 4 |
| Latvia | 65 | 111 | 139 | 198 | 1 | 1 |
| Lithuania | 102 | 44 | 155 | 119 | 1 | 1 |
| Ukraine* | 0 | 0 | 0 | 64 | 0 | 0 |
| 430 | 522 | 762 | 1,071 | 6 | 6 | |
*Ukraine retail operations divested in March 2017.
PEOPLE
On the 30th of June 2018, the Group employed 214 people (compared to 218 people as of 30.06.2017). The average number of personnel in Q2 2018 was 210 (Q2 2017: 219).
During first six months of 2018, wages and salaries with taxes amounted to € 1.8 million (first six months 2017: € 2.0 million). Payments made to management board members of all group companies including all subsidiaries with relevant taxes were € 84 thousand in six months 2018 and € 128 thousand in six months 2017.
FINANCIAL HIGHLIGHTS
| € thousand | ||||||||
| Income statement | Q2 2018 | Q2 2017 | 6M 2018 | 6M 2017 | ||||
| Revenue | 3,949 | 4,025 | 7,660 | 8,487 | ||||
| EBITDA | 238 | 295 | 214 | 661 | ||||
| EBITDA margin | 6 | % | 7 | % | 3 | % | 8 | % |
| Operating profit | 55 | 86 | (159 | ) | 244 | |||
| Operating margin | 1 | % | 2 | % | (2 | %) | 3 | % |
| Net profit | (22 | ) | 15 | (297 | ) | 103 | ||
| Net margin | (1 | %) | 0 | % | (4 | %) | 1 | % |
| Statement of financial position | 30.06.2018 | 31.12.2017 | 30.06.2017 | 31.12.2016 | ||||
| Total assets | 11,331 | 10,937 | 12,205 | 11,965 | ||||
| Return on assets | (0 | %) | 0 | % | (2 | %) | 1 | % |
| Equity | 3,475 | 3,753 | 3,963 | 3,901 | ||||
| Return on equity | (0 | %) | 0 | % | (7 | %) | 3 | % |
| Debt-to-equity ratio | 69 | % | 66 | % | 68 | % | 67 | % |
| Share | 30.06.2018 | 31.12.2017 | 30.06.2017 | 31.12.2016 | ||||
| Last Price* | 0.49 | 0.62 | 0.58 | 0.46 | ||||
| Earnings per share | (0 | %) | 0 | % | (7 | %) | 2 | % |
| Price-earnings ratio | (100.81 | ) | 190.60 | (8.85 | ) | 20.18 | ||
| Book value of a share | 0.77 | 0.83 | 0.88 | 0.87 | ||||
| Market to book ratio | 0.63 | 0.74 | 0.66 | 0.53 | ||||
| Market capitalization, € thousand | 2,205 | 2,771 | 2,627 | 2,070 | ||||
| Number of shares, piece | 4,499,061 | 4,499,061 | 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
*
Consolidated statement of financial positions
| € thousand | 30.06.2018 | 31.12.2017 | 30.06.2017 |
| Cash and cash equivalents (Note 2) | 54 | 74 | 190 |
| Receivables and prepayments (Note 3) | 1,736 | 1,215 | 1,448 |
| Inventories (Note 4) | 2,595 | 2,336 | 2,903 |
| Total current assets | 4,385 | 3,624 | 4,541 |
| Investment property (Note 5) | 170 | 170 | 405 |
| Available-for-sale financial assets (Note 8) | 177 | 182 | 0 |
| Other shares and issues | 0 | 6 | 0 |
| Property, plant and equipment (Note 6) | 6,560 | 6,908 | 7,202 |
| Intangible assets (Note 7) | 39 | 47 | 56 |
| Total non-current assets | 6,946 | 7,313 | 7,663 |
| TOTAL ASSETS | 11,331 | 10,937 | 12,205 |
| Borrowings (Notes 9) | 653 | 593 | 651 |
| Payables and prepayments (Notes 10) | 2,576 | 1,956 | 2,556 |
| Short-term provisions (Note 11) | 6 | 13 | 8 |
| Total current liabilities | 3,235 | 2,562 | 3,215 |
| Long-term borrowings (Notes 9) | 4,421 | 4,422 | 4,813 |
| Long-term provisions (Note 11) | 200 | 200 | 213 |
| Total non-current liabilities | 4,621 | 4,622 | 5,026 |
| Total liabilities | 7,856 | 7,184 | 8,241 |
| 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 (Notes 8; 12) | 28 | 9 | 2 |
| Unrealised currency differences | 0 | 0 | 0 |
| Retained earnings | 96 | 393 | 610 |
| Total equity (Note 13) | 3,475 | 3,753 | 3,963 |
| TOTAL LIABILITIES AND EQUITY | 11,331 | 10,937 | 12,205 |
Consolidated statement of profit or loss and other comprehensive income
| € thousand | Q2 2018 | Q2 2017 | 6M 2018 | 6M 2017 | ||||
| Revenue (Note 14) | 3,949 | 4,025 | 7,660 | 8,487 | ||||
| Cost of goods sold (Note 15) | 3,183 | 3,218 | 6,477 | 6,643 | ||||
| Gross profit | 766 | 808 | 1,183 | 1,844 | ||||
| Distribution costs (Note 16) | 527 | 471 | 981 | 1,073 | ||||
| Administrative expenses (Note 17) | 144 | 186 | 294 | 421 | ||||
| Other operating income (Note 19) | 9 | 0 | 12 | 51 | ||||
| Other operating expenses (Note 19) | 49 | 64 | 78 | 157 | ||||
| Operating profit (loss) (Note 11) | 55 | 86 | (159 | ) | 244 | |||
| Finance income (Note 20) | 0 | 0 | 1 | 4 | ||||
| Finance costs (Note 20) | 77 | 72 | 139 | 145 | ||||
| LOSS BEFORE INCOME TAX | (22 | ) | 15 | (297 | ) | 103 | ||
| Corporate income tax | 0 | 0 | 0 | 0 | ||||
| NET LOSS FOR THE FINANCIAL YEAR | (22 | ) | 15 | (297 | ) | 103 | ||
| Other comprehensive income (loss) | ||||||||
| Other comprehensive income (loss) that can in certain cases be reclassified to the income statement | ||||||||
| Currency translation differences | 0 | 0 | 0 | (40 | ) | |||
| TOTAL COMPREHENSIVE LOSS FOR THE FINANCIAL YEAR | (22 | ) | 15 | (297 | ) | 63 | ||
| Basic earnings per share (Note 13) | (0 | %) | 0 | % | (7 | %) | 2 | % |
| Diluted earnings per share (Note 13) | (0 | %) | 0 | % | (7 | %) | 1 | % |
Torfinn Losvik
Member of the Management Board
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