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SKN: Skano Group AS 2Q 2017 report

THE 2nd 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:

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 soft-board 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 30 June 2017 the Group employed 225 people (30 June 2016: 295 people).

Skano Group recorded net profit for second quarter of 2017 of 15 thousand euros (2Q 2016: loss of 268 thousand euros), thus net profit for first half 2017 was 103 thousand euros (1H 2016: loss of 624 thousand euros). The first half 2017 results were influenced by a one-off gain of 48 thousand euros due to the disposal of Skano’s Ukrainian retail subsidiary.

Consolidated net sales of 2Q 2017 were 4.03 mil. euros, representing a 9% decrease compared to the same period in 2016 (4.43 mil. euros). When excluding sales to Finland, group sales actually increased by 5% compared to 2Q 2016.

Operating Profit Before Interests, Taxes, Depreciation and Amortisation (“EBITDA”) for first half 2017 was 660 thousand euros (same period last year EBITDA was negative 23 thousand euros), which equates to 8% of sales.

  1. Fibreboard sales in 2Q 2017 were 2.85 mil. euros. Total sales for 1H 2017 were 6.11 mil. euros, which is 4% down on same period last year. However, if excluding sales to Finland, fibreboard sales were up 6% compared to same period in 2016, with most notable strong growth in South Africa, Thailand and Sweden. There is a sign that the Finnish market is now recovering, thus we expect improved 2H 2017 sales to Finland. Operating profit for fibreboard division in 1H 2017 was 185 thousand euros (in 1H 2016 operating loss 85 thousand euros). 

Furniture wholesale sales in 2Q 2017 were 0.92 mil. euros. Total sales for 1H 2017 were 1.88 mil. euros, which is 9% down on same period last year. Both Finland and Russia decreased sales in this period, while other markets improved by 49%. The operating loss in 1H 2017 was 29 thousand euros (1H 2016 operating loss of 293 thousand euros).

Furniture retail sales in 2Q 2017 were 0.5 mil. euros. Total sales for 1H 2017 were 1.07 mil. euros, which as level with last year. When excluding the discontinued Ukrainian retail operations, which were sold in 1Q 2017, retail sales were up 5% compared to same period in 2016. The operating profit in 1H 2017 was 100 thousand euros (in 1H 2016 operating loss of 100 thousand euros).

POSITION OF FINANCIAL STATEMENT

As of 30.06.2017 the total assets of Skano Group AS were 12.2 mil. euros (30.06.2016: 13.0 mil. euros). The liabilities of the company as of 30.06.2017 were 8.2 mil. euros (30.06.2016: 8.7 mil. euros).

Receivables and prepayments amounted 1.4 mil. euros (30.06.2016: 1.5 mil. euros). Inventories were 2.9 mil. euros as of 30.06.2017 (30.06.2016: 3.1 mil. euros). Property, plant and intangibles were to 7.6 mil. euros as of 30.06.2017 (8.3 mil.  euros as of 30.06.2016).

OUTLOOK

Fibreboard sales development is progressing well, with the exception of Finland. We have secured agents for Germany, Czech Republic and Slovakia, and Poland, and they have all started making customer orders. In addition, we have entered Thailand and secured a large construction company as our first customer in that growing market. We remain hopeful that the Finnish market shall improve somewhat in light of the forthcoming customer campaigns being planned for this autumn.

The challenge for Furniture wholesale will be to secure more customers in markets outside of our two main markets of Finland and Russia. Furniture retail has had a good start this year, and we hope the positive consumer purchasing in the Baltic markets shall continue thus securing stable economic background for our six shops in the three Baltic countries.

DIVISIONAL REVIEW:

NET SALES BY BUSINESS SEGMENTS

  th EUR % of net sales
  1H 2017 1H 2016 1H 2017 1H 2016
Fibreboards production and sales 6,113 6,359 72.0% 70.8%
Furniture production and sales 1,876 2,137 22.1% 23.8%
Furniture retail Baltics 1,007 959 11.9% 10.7%
Furniture retail Ukraine 64 115 0.8% 1.3%
Consolidation (573) (593) (6.8%) (6.6%)
TOTAL 8,487 8,977 100.0% 100.0%

NET SALES BY GEOGRAPHICAL SEGMENTS

  th EUR % of net sales
  1H 2017 1H 2016 1H 2017 1H 2016
Finland 2,867 3,529 33.8% 39.3%
Estonia 1,613 1,461 19.0% 16.3%
Russia 1,255 1,297 14.8% 14.4%
Sweden 456 324 5.4% 3.6%
Latvia 393 172 4.6% 1.9%
South-Afrika 363 374 4.3% 4.2%
Portugal 265 429 3.1% 4.8%
Lithuania 210 560 2.5% 6.2%
Ukraine 180 163 2.1% 1.8%
Great Britain 170 162 2.0% 1.8%
Thailand 116 - 1.4% -
Netherlands 115 17 1.4% 0.2%
Germany 76 73 0.9% 0.8%
Denmark 64 79 0.8% 0.9%
Kazakhstan 47 43 0.6% 0.5%
Arabia 36 70 0.4% 0.8%
Australia 33 27 0.4% 0.3%
Hungary 31 25 0.4% 0.3%
Saudi-Arabia 27 36 0.3% 0.4%
Other countries 170 136 1.8% 1.5%
TOTAL 8,487 8,977 100% 100%

Skano’s three main markets of Finland, Estonia and Russia together has about 68% share of total sale of the group in 1H 2017. We have also gained entry into new market, Thailand (construction boards) and increase the market share in Sweden (construction boards).

PROFIT BY BUSINESS SEGMENTS:

FIBREBOARDS production and sales

th EUR 1H 2017 1H 2016
Fibreboards production and sales 185 (85)
Furniture production and sales (29) (293)
Furniture retail Baltics 49 (46)
Furniture retail Ukraine (incl. disposal related gain) 51 (54)
Consolidation (12) 23
TOTAL 244 (455)
Net financial costs (141) (166)
Income tax                        - (3)
NET PROFIT 103 (624)

Fibreboard profit was helped by further production concentration to thicker boards, which are more profitable for Skano. Total furniture profit is now positive, and should remain so if sales stays at its current levels.

FURNITURE production and sales

FURNITURE PRODUCTION

Sales dropped to 1.88 mil. euros in 1H 2017, from 2.13 mil. euros in 1H 2016. The largest sales decline came from the Finnish market reflecting the current difficulties experienced by Skano’s large Finnish wholesale customer. Our Russian market was slightly down while deliveries to Kazakhstan and Germany helped us grow our sales outside of our two main markets Finland and Russia. Sales to Skano retail units held up well, and increased its share of total furniture sales within the Group.  

FURNITURE WHOLESALE SALES BY COUNTRIES

  th EUR % of net sales
  1H 2017 1H 2016 1H 2017 1H 2016
Finland 575 786 30.7% 36.8%
Russia 635 713 33.8% 33.4%
Other countries 155 104 8.3% 4.8%
Group retail companies 511 534 27.2% 25.0%
TOTAL 1,876 2,137 100.0% 100.0%

FURNITURE RETAIL SALES

Skano group retail business recorded sales 1.07 mil. euros in 1H 2017. When excluding the discontinued Ukrainian operations, sales were up by 5% compared to the same period last year. Estonia experienced strong growth at the start of the year (we have 4 shops; Tallinn two, Tartu one and a factory shop in Pärnu). Vilnius recorded sales growth of 9% this year compared to same period last year, as well as improving its net result. Riga shop sales were at same level as last year but improved its net result due to better gross margin and less fixed costs.

RETAIL SALES BY COUNTRIES

  th EUR % of net sales Number of stores
  1H 2017 1H 2016 1H 2017 1H 2016 30.06.2017 30.06.2016
Estonia 689 650 64.3% 60.6% 4 5
Latvia 199 199 18.6% 18.5% 1 1
Lithuania 119 109 11.1% 10.1% 1 1
Ukraine 64 115 6.0% 10.7% 0 3
Other countries - 1 - 0.1% - -
TOTAL 1,071 1,074 100.0% 100.0% 6 10

FINANCIAL HIGHLIGHTS

Income statement 2Q 2017 2Q 2016 2Q 2015
Revenue 4,025 4,432 4,653
EBITDA 294 (27) 267
EBITDA margin 7.3% (0.6%) 5.7%
Operating profit 86 (187) 68
Operating margin 2.1% (4.2%) 1.5%
Net profit 15 (268) (42)
Net margin 0.4% (6.1%) (0.9%)
 
Income statement 1H 2017 1H 2016 1H 2015
Revenue 8,487 8,977 9,761
EBITDA 660 (23) 524
EBITDA margin 7.7% (0.3%) 5.4%
Operating profit 244 (455) 104
Operating margin 2.9% (5.1%) 1.1%
Net profit 103 (624) (51)
Net margin 1.2% (6.9%) (0.5%)
 
Balance sheet 30.06.2017 30.06.2016 30.06.2015
Total assets 12,204 13,005 14,032
Return on assets 0.8% (4.8%) (0.4%)
Equity 3,963 4,293 5,136
Return on equity 2.6% (14.5%) (1.0%)
Debt-to-equity ratio 67.5% 67.0% 63.4%
 
Share 30.06.2017 30.06.2016 30.06.2015
Closing price 0.533 0.540 0.805
Earnings per share 0.02 (0.14) (0.01)
Price-earnings ratio 26.65 (3.86) (80.50)
Book value of a share 0.88 0.95 1.14
Market to book ratio 0.60 0.57 0.71
Market capitalization 2,398 2,429 3,622

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 30.06.2017 31.12.2016 30.06.2016
       
Cash and bank accounts 190 184 106
Receivables and prepayments (Note 1) 1,448 965 1,510
Inventories (Note 2) 2,903 2,760 3,085
Total current assets 4,541 3,909 4,701
       
Investment property (Note 3) 405 405 406
Tangible fixed assets (Note 4) 7,202 7,584 7,849
Intangible fixed assets (Note 5) 56 66 49
Total fixed assets 7,663 8,055 8,304
       
TOTAL ASSETS 12,204 11,964 13,005
       
Debt obligations (Note 6) 651 1,176 1,641
Payables and prepayments (Note 7) 2,556 2,497 2,672
Short-term provisions (Note 8) 8 15 8
Total current liabilities 3,215 3,688 4,321
       
Non-current debt obligations (Note 6) 4,813 4,163 4,163
Non-current provisions (Note 8) 213 213 228
Total non-current liabilities 5,026 4,376 4,391
       
Total liabilities 8,241 8,064 8,712
       
Share capital at nominal value (Note 9) 2,699 2,699 2,699
Share premium 364 364 364
Statutory capital reserve 288 288 288
Other reserves 2 2 5
Currency translation reserve - 40 9
Retained earnings 507 1,552 1,552
Net profit (loss) for the period (Note 10) 103 (1,045) (624)
Total equity 3,963 3,957 4,293
       
TOTAL LIABILITIES AND EQUITY 12,204 11,964 13,005

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

th EUR 2Q 2017 2Q 2016
     
SALES (Note 11) 4,025 4,432
     
Cost of production sold (3,218) (3,710)
     
Gross profit 807 722
     
Marketing expenses (471) (690)
General administrative expenses (186) (230)
Other income - 61
Other expenses (64) (50)
     
Operating profit (loss) (Note 11) 86 (187)
Financial income and financial expenses (71) (80)
     
Profit (loss) before taxes 15 (267)
Prepaid income tax - (1)
     
NET PROFIT (LOSS) FOR THE PERIOD 15 (268)
     
Basic earnings per share (Note 10) 0.00 (0.06)
Diluted earnings per share (Note 10) 0.00 (0.06)
     
Other income:    
Currency translation differences - 34
     
TOTAL CONSOLIDATED INCOME 15 (234)

The planned time of publishing of interim report of the third quarter of 2017 is week 48 in 2017 (29-30th of November 2017).

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_2Q interim report.pdf