THE 4th QUARTER 2016 IN SHORT
Consolidated net sales of the 2016 were 17.5 mil. euros, representing an 9,3% decrease compared to the same period in 2015 (18.6 mil. euros in 2015). Consolidated EBITDA amounted to 100 thousand euros (EBITDA 739 thousand euros in 2015). Reducing the stock volumes of own produced goods negatively influenced the EBITDA of 2016 through changes in inventories in the amount of 529 thousand euros (In 2015 the increase in stock had a positive effect to EBITDA in the amount of 477 thousand euros).
The turnover of Skano Fibreboard OÜ together with its Finnish subsidiary in 2016 was 12.1 mil. euros (2015: 12.6 mil. euros). The operating loss in 2016 was 96 thousand euros (in 2015 operating profit 268 thousand euros).
Sales mainly decreased in our core markets. As our main foreign markets, Russia and Finland are still very weak due to the general economic situation, we have been continuously expanding the list of our target markets and made significant efforts in product development and in making the production process more effective with the aim to reduce costs.
The turnover of Skano Furniture Factory OÜ was 4.2 mil. euros, including the amount of 1.0 mil. euros sales to group retail companies (2015 respectively 4.8 mil. euros and 1.2 mil. euros). The sales decreased in 2016 by 11.8% and amounted. The decrease in sales has turned to small increase during 4Q 2016. The operating loss in 2016 was 658 thousand euros compare to the operating loss in the amount of 634 thousand euros in 2015.The operating loss includes the write-offs of the receivables from subsidiaries respectively 202 thousand euros in 2016 and 265 thousand euros in 2015. The operating loss was also affected by decrease of inventories through changes in inventory of finished goods. 2016 costs were higher also due to one-off redundancy cots what will give the good start for the year 2017. In 2016 sales to Finland decreased by 17.3% due to very weak demand as compared to the same period in 2015. In addition to seeking new sales possibilities in the current markets the company has made considerable effort to enter into new markets and to lower the production costs.
The priority of the management of the company is continuously to ensure the sales quantity of the produced goods from both factories in order to maximize production efficiency and efforts are taken in this direction on an on-going basis.
The turnover of Skano Furniture OÜ retail chain was 2,2 mil. euros what is 13.2% lower than in 2015. The trend turned to positive side in 4Q 2016. The sales of Skano Furniture Factory OÜ own furniture still forms a considerable part of the retail sales.
INCOME STATEMENT
Consolidated net sales in 2016 was 17.5 mil. euros (18.8 mil. euros in 2015) representing an 6.8% decrease compared to 2015. Consolidated operating loss amounted to 730 thousand euros (101 thousand euros in 2015). The consolidated operating margin was -4.21% (-0,5% in 2015).
Consolidated net loss in 2016 amounted to 1.0 mi. euros (compared to net loss 0.4 mil. euros in 2015), and the net margin was -3.8% (-0.2% in 2015).
POSITION OF FINANCIAL STATEMENT
As of 31.12.2016 the total assets of Skano Group AS amounted to 12.0 mil. euros (31.12.2015: 13.3 mil. euros). The liabilities of the company accounted for 67.4% from the total assets (31.12.2015: 62.9%), amounted of 8.1 mil. euros (31.12.2015: 8.3 mil. euros).
Receivables and prepayments amounted 1.0 mil. euros and were on the same level as of 31.12.2015 (31.12.2015: 1.0 mil. euros). Inventories have decreased for the amount of 0.6 mil euros with 12 months, amounting to 2.8 mil. euros on 31.12.2016. (31.12.2015: 3.4 mil. euros). Property, plant and intangibles amounted to 8.1 mil. euros as of 31.12.2016 (8,5 mil. euros as of 31.12.2015).
Current and non-current liabilities have decreased by 0.2 mil. euros to 8.1 mil. euros (31.12.2015: 8.3 mil. euros).
DIVISIONAL REVIEW:
NET SALES BY BUSINESS SEGMENTS
| th EUR | % of net sales | |||
| 2016 | 2015 | 2016 | 2015 | |
| Fibreboards production and sales | 12,170 | 12,696 | 69.5% | 67.6% |
| Furniture production and sales | 4,235 | 4,801 | 24.2% | 25.6% |
| Furniture retail | 2,203 | 2,537 | 12.6% | 13.5% |
| Group transactions | (1,106) | (1,245) | (6.3%) | (6.6%) |
| TOTAL | 17,502 | 18,789 | 100.0% | 100.0% |
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| 2016 | 2015 | 2016 | 2015 | |
| Finland | 6,060 | 6,912 | 34.6% | 36.8% |
| Estonia | 3,129 | 3,256 | 17.9% | 17.3% |
| Russia | 2,878 | 3,351 | 16.4% | 17.8% |
| Great Britain | 1,244 | 1,206 | 7.1% | 6.4% |
| Latvia | 760 | 774 | 4.3% | 4.1% |
| Portugal | 717 | 235 | 4.1% | 1.3% |
| Sweden | 596 | 574 | 3.4% | 3.1% |
| Ukraine | 394 | 400 | 2.3% | 2.1% |
| Lithuania | 406 | 434 | 2.3% | 2.3% |
| SAR | 288 | 493 | 1.6% | 2.6% |
| Germany | 206 | 160 | 1.2% | 0.9% |
| Denmark | 123 | 158 | 0.7% | 0.8% |
| Other countries | 701 | 836 | 4.0% | 4.4% |
| TOTAL | 17,502 | 18,789 | 100.0% | 100.0% |
Regarding the markets. turnover has increased in our new market Portugal and in Great Britain. The decrease in turnover was mainly because of lower sales in Russia and Finland.
PROFIT BY BUSINESS SEGMENTS
| th EUR | 2016 | 2015 |
| Fibreboards production and sales | (96) | 268 |
| Furniture production and sales | (658) | (634) |
| Furniture retail | (83) | (352) |
| Elimination | 107 | 617 |
| TOTAL | (730) | (101) |
| Net financial costs | (310) | (301) |
| Income tax | (5) | (9) |
| NET PROFIT | (1,045) | (411) |
SKANO FIBREBOARD including SUOMEN TUULILEIJONA
The net sales of Skano Fibreboard in 2016 amounted to 12.1 mil. euros and operating loss to 96 thousand euros. In the same period 2015 the turnover of Skano Fibreboard totalled 12.6 mil. euros and the operating profit totalled 268 thousand euros. The decrease in the stock of finished production affected negatively the operating result trough changes in inventories of finished goods.
The decrease in sales in 2016 compare to last year was mainly because of decrease of sales in Finland and Russia, total decrease in these markets was 860 thousand euros. In 2015 Finnish and Russian market was 57.7% from the total sales, in 2016 the share was 52,8%. Sales increased most in Portugal.
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| 2016 | 2015 | 2016 | 2015 | |
| Finland | 4,597 | 5,134 | 41.3% | 44.6% |
| Estonia | 1,682 | 1,752 | 13.8% | 13.7% |
| Russia | 1,527 | 1,850 | 11.5% | 13.1% |
| Great Britain | 1,146 | 1,163 | 9.1% | 8.3% |
| Portugal | 717 | 235 | 5.6% | 0.8% |
| Sweden | 596 | 573 | 4.8% | 4.6% |
| Latvia | 397 | 305 | 2.7% | 2.2% |
| SAR | 288 | 493 | 2.4% | 4.4% |
| Lithuania | 175 | 102 | 1.3% | 0.7% |
| Denmark | 123 | 158 | 1.2% | 1.4% |
| Germany | 140 | 160 | 1.2% | 1.2% |
| Other countries | 682 | 683 | 5.2% | 4.9% |
| TOTAL | 12,070 | 12,608 | 100.0% | 100.0% |
SKANO FURNITURE
FURNITURE PRODUCTION
The net sales of the Skano Furniture Factory in 2016 amounted to 4.2 mil. euros including sales to group retail operations 1.0 mil. euros. Operating loss was 658 thousand euros. In 2015 the turnover of the factory amounted to 4.8 mil. euros and the operating loss to 634 thousand euros. The decrease in sales was 11.8% mainly due to sales decrease in Finland. The operating loss was negatively affected by decrease in inventories through changes in finished goods inventories.
FURNITURE FACTORY SALES BY COUNTRIES
| th EUR | % of net sales | |||
| 2016 | 2015 | 2016 | 2015 | |
| Finland | 1,463 | 1,770 | 35.5% | 36.5% |
| Russia | 1,349 | 1,501 | 32.7% | 31.2% |
| Other countries | 417 | 373 | 8.2% | 8.1% |
| Group retail companies | 1,007 | 1,157 | 23.6% | 24.2% |
| TOTAL | 4,236 | 4,801 | 100.0% | 100.0% |
FURNITURE RETAIL SALES
Skano group retail business is operated by a private limited daughter company Skano Furniture OÜ and its subsidiaries in Latvia, Lithuania and Ukraine. As of 31.12.2016 Skano has totally 8 stores: two stores in Tallinn, one store in Tartu, one store in Pärnu, one store in Riga, one store in Vilnius, one store in Kiev and one store in Kharkiv. In October 2016, the shop in Tallinn Rocca al Mare was closed and the shop in Pärnu Road was enlarged. Also, one shop in Kiev was closed in October 2016.
RETAIL SALES BY COUNTRIES
| th EUR | % of net sales | Number of stores | ||||
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Estonia* | 1,330 | 1,472 | 60.4% | 58.0% | 4 | 5 |
| Latvia | 363 | 469 | 16.5% | 18.5% | 1 | 1 |
| Ukraine** | 278 | 264 | 12.6% | 10.4% | 2 | 4 |
| Lithuania | 231 | 332 | 10.5% | 13.1% | 1 | 1 |
| TOTAL | 2,202 | 2,537 | 100.0% | 100.0% | 8 | 11 |
* In October 2016, the shop in Tallinn Rocca al Mare centre was closed and the amount of shops in Estonia remained 4.
** In October 2016, the shop in Kiev Arax centre was closed and the 2 shops remain in Ukraine.
Retail sale amounted to 2.2 mil. euros in 2016 (2015: 2.5 mil. euros) what is 13.2% less than in 2015. Operating loss in 2016 was 83 thousand euros (2015: 352 thousand euros). Operating loss in 2015 contains a loss from a drop of currency exchange rate of hryvnia in the amount of 243 thousand euros and inter-company receivable write-offs in the amount of 125 thousand euros.
FORECAST AND DEVELOPMENT
SKANO FIBREBOARD. 2017 has started with the bigger sales in our core market in Finland. We are planning to enter to European biggest fibreboard market in Germany and the negotiations with the local sales agents are in process. We expect to compensate the lower sales in our core markets with sales in new markets. The improvement program of our production process is in work and the aim is to lower the production costs.
In July 2016, Skano Fibreboard OÜ received Sintef Certification, which has now opened the doors to sell our wind barrier boards on the Norwegian market, the negotiations are in process.
SKANO FURNITURE FACTORY. The cost cut program in 2016 gives a better start to 2017 and even with the lower sales volumes to earn profit. At the same time the cooperation with Great Britain and Norwegian agents are under negotiations to increase the sales in Great Britain and to enter into Norwegian market.
SKANO FURNITURE RETAIL SALES. We expect steady sales in the Baltics in 2017. The cost savings improve the profitability of the business unit. The Ukrainian subsidiary is planned to sell during 1Q 2017 to minimise the risk of the political and economic instability. At the same time, we expect to continue the sales to Ukraine in cooperation with the partners.
FINANCIAL HIGHLIGHTS
| th EUR | 2016 | 2015 | 2014 |
| Income statement | |||
| Revenue | 17 502 | 18 789 | 20 330 |
| EBITDA | 100 | 739 | -312 |
| EBITDA margin | 0,6% | 3,9% | -1,5% |
| Operating profit | -730 | -101 | -1 199 |
| Operating margin | -4,2% | -0,5% | -5,9% |
| Net profit | -1 045 | -411 | -1 481 |
| Net margin | -6,0% | -2,2% | -7,3% |
| Balance sheet (30.09) | |||
| Total assets | 11 964 | 13 262 | 13 329 |
| Return on assets | -8,7% | -3,1% | -11,1% |
| Equity | 3 900 | 4 919 | 5 300 |
| Return on equity | -26,8% | -8,4% | -27,9% |
| Debt-to-equity ratio | 67,4% | 63,8% | 57,5% |
| Share (30.09) | |||
| Closing price | 0,460 | 0,730 | 0,850 |
| Earnings per share | -0,23 | -0,09 | -0,33 |
| Price-earnings ratio | -2,00 | -8,11 | -2,58 |
| Book value of a share | 0,87 | 1,09 | 1,18 |
| Market to book ratio | 0,53 | 0,67 | 0,72 |
| Market capitalization | 2 070 | 3 284 | 3 824 |
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 | 31.12.2016 | 31.12.2015 |
| Cash and bank | 184 | 292 |
| Receivables and prepayments | 965 | 997 |
| Inventories | 2,760 | 3,426 |
| Total current assets | 3,909 | 4,715 |
| Investment property | 405 | 406 |
| Tangible fixed assets | 7,584 | 8,120 |
| Intangible fixed assets | 66 | 21 |
| Total fixed assets | 8,055 | 8,547 |
| TOTAL ASSETS | 11,964 | 13,262 |
| Debt obligations | 1,176 | 1,253 |
| Payables and prepayments | 2,497 | 2,684 |
| Short-term provisions | 15 | 15 |
| Total current liabilities | 3,688 | 3,952 |
| Non-current debt obligations | 4,163 | 4,163 |
| Non-current provisions | 213 | 228 |
| Total non-current liabilities | 4,376 | 4,391 |
| Total liabilities | 8,064 | 8,343 |
| Share capital at nominal value | 2,699 | 2,699 |
| Issue premium | 364 | 364 |
| Statutory capital reserve | 288 | 288 |
| Other reserves | 2 | 7 |
| Currency translation | 40 | 7 |
| Retained profits | 1,552 | 1,965 |
| Net profit (loss) for the year | (1,045) | (411) |
| Total equity | 3,957 | 4,919 |
| TOTAL LIABILITIES AND EQUITY | 11,964 | 13,262 |
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
| th EUR | 4Q 2016 | 4Q 2015 | 2016 | 2015 | |
| RETURN ON SALES | 3,873 | 4,225 | 17,502 | 18,789 | |
| Cost of production sold | (3,350) | (3,543) | (14,425) | (14,870) | |
| Gross profit | 522 | 682 | 3,077 | 3,919 | |
| Marketing expenses | (589) | (807) | (2,939) | (3,203) | |
| General administrative expenses | (136) | (183) | (595) | (705) | |
| Other income | 27 | 61 | 98 | 342 | |
| Other expenses | (131) | (34) | (371) | (454) | |
| Operating profit (loss) | (307) | (281) | (730) | (101) | |
| Financial income and financial expenses | (69) | (75) | (309) | (301) | |
| Profit (loss) before taxes | (376) | (356) | (1,039) | (402) | |
| Prepaid income tax | (2) | (5) | (6) | (9) | |
| NET PROFIT (LOSS) FOR THE PERIOD | (378) | (361) | (1,045) | (411) | |
| Basic earnings per share | (0.08) | (0.08) | (0.23) | (0.09) | |
| Diluted earnings per share | (0.08) | (0.07) | (0.23) | (0.09) | |
| Other comprehensive income: | |||||
| Currency translation differences | 23 | 97 | 33 | 23 | |
| TOTAL COMPREHENSIVE INCOME | (355) | (264) | (1,012) | (388) | |
The planned time of publishing of interim report of the first quarter of 2017 is week 22 in 2017 (30-31th of May 2017)
Torfinn Losvik
Member of the Management Board
+372 569 90 988
torfinn.losvik@skanogroup.com
