Quarterly Report • Feb 28, 2023
Quarterly Report
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| Commercial name | AS Baltika |
|---|---|
| Commercial registry number | 10144415 |
| Legal address | Valukoja 10, Tallinn 11415, Estonia |
| Phone Web page |
+372 630 2700 [email protected] www.baltikagroup.com |
| Main activities | Design, development and sales arrangement of the fashion brands of clothing |
| Auditor | KPMG Baltics OÜ |
| Financial year Reporting period |
1 January 2022 – 31 December 2022 1 October 2022 – 31 December 2022 |
| Brief description of Baltika Group 3 | ||
|---|---|---|
| Management report 4 | ||
| Management board's confirmation of the management report 14 | ||
| Interim financial statements 15 | ||
| Condensed consolidated statement of financial position 16 | ||
| Condensed consolidated statement of profit or loss and other comprehensive income 17 | ||
| Condensed consolidated cash flow statement 18 | ||
| Condensed consolidated statement of changes in owner's equity 19 | ||
| Notes to consolidated interim report 20 | ||
| NOTE 1 | General Information 20 | |
| NOTE 2 | Basis for Preparation 20 | |
| NOTE 3 | Significant management estimates, judgements and errors 20 | |
| NOTE 4 | Management of financial risks 21 | |
| NOTE 5 | Trade and other receivables 21 | |
| NOTE 6 | Inventories 22 | |
| NOTE 7 | Property, plant and equipment 22 | |
| NOTE 8 | Intangible assets 22 | |
| NOTE 9 | Finance lease 23 | |
| NOTE 10 | Borrowings 23 | |
| NOTE 11 | Trade and other payables 24 | |
| NOTE 12 | Provisions 24 | |
| NOTE 13 | Equity 24 | |
| NOTE 14 | Segments 26 | |
| NOTE 15 | Revenue 27 | |
| NOTE 16 | Other operating income and expenses 27 | |
| NOTE 17 | Sale and use of Ivo Nikkolo trademarks under exclusive license 27 | |
| NOTE 18 | Earnings per share 29 | |
| NOTE 19 | Related parties 29 | |
| AS Baltika Supervisory Board 31 | ||
| AS Baltika Management Board 32 |
Baltika Group, with the parent company AS Baltika, is an international fashion retailer. Baltika develops and operates fashion brand Ivo Nikkolo. Baltika employs a business model, which controls various stages of the fashion process: design, supply chain management, wholesale, and retail.
The shares of AS Baltika are listed on the Nasdaq Tallinn Stock Exchange that is part of the NASDAQ exchange group.
As of 31 st December 2022, the Group employed 143 people (31 December 2021: 173).
The parent company is located and has been registered at Valukoja 10 in Tallinn, Estonia.
The Group consists of the following companies:
| Subsidiary | Location | Activity | Holding as at 31 Dec 2022 |
Holding as at 31 Dec 2021 |
|---|---|---|---|---|
| OÜ Baltika Retail | Estonia | In liquidation | 100% | 100% |
| OÜ Baltman | Estonia | Retail | 100% | 100% |
| SIA Baltika Latvija1 | Latvia | Retail | 100% | 100% |
| UAB Baltika Lietuva1 | Lithuania | Retail | 100% | 100% |
1 Interest through a subsidiary.
The Group's fourth quarter sales revenue across all channels totalled 2,803 thousand euros, increasing by 7% compared to the same period last year (Q4 2021: 2,614 thousand euros). Sales revenue for 12 months reached 9,613 thousand euros, decreasing by 18% compared to the previous year (2021: 11,770 thousand euros). In 2022, the sales revenue of the e-store accounted for 10% (2021: 17%) of the Group's total revenue.
The year 2022 brought with it strong growth in sales of Ivo Nikkolo products. The sales revenue of Ivo Nikkolo products increased by 38% to 9,482 thousand euros in 2022. In 2022, sales of Ivo Nikkolo products accounted for 98% of the Group's total sales revenue. From the second half of 2021, the Group operated with only one brand – Ivo Nikkolo. In 2021, the sales revenue of the discontinued brands Monton, Mosaic, Baltman and Bastion made up 42%, the remaining 58% of the sales revenue was made up by the sale of Ivo Nikkolo products.
In the fourth quarter, the Group showed strong sales revenue growth in both retail and e-store sales. Fourth quarter retail sales were 2,530 thousand euros, increasing by 6% compared to the same period last year (Q4 2021: 2,395 thousand euros). The sales revenue of the e-store in the fourth quarter was 235 thousand euros, which is 13% higher compared to the same period last year (Q4 2021: 209 thousand euros).
In the last quarter of the year, we continued to update our store network. At the end of November, we opened the first new Ivo Nikkolo concept store in Lithuania – we replaced the old Ivo Nikkolo store in the Vilnius Panorama shopping centre with a new Ivo Nikkolo concept store. Panorama shopping centre is located in Žverynas, one of the oldest and most prestigious business and residential districts in the centre of Vilnius. Panorama shopping centre is highly valued among visitors for its bright interior design, comfortable shopping environment and high-quality service. In the fourth quarter, Ivo Nikkolo's main focus was on marketing activities. In October, we started an extensive brand awareness campaign in Latvia and Lithuania, which lasted for three months. In addition to the above, Ivo Nikkolo presented a modern feminine clothing and accessory collection at the two biggest fashion events in the Baltics, which were Riga Fashion Week (11.10.2022) and Tallinn Fashion Week (20.10.2022).
The gross profit of the fourth quarter was 1,579 thousand euros, decreasing by 5% compared to the same period last year (Q4 2021: 1,671 thousand euros). Gross profit for 12 months was 4,938 thousand euros, decreasing by 19% compared to the same period last year (12 months 2021: 6,120 thousand euros). The decrease in gross profit is due to the fact that the Group operates with only one brand (Ivo Nikkolo) in 2022, but in the comparable period, a significant part of the Group's sales revenue was the sales results of the discontinued brands Monton, Mosaic, Baltman and Bastion. The Group's gross profit margin was 56% in the fourth quarter, while the comparable period's gross profit margin was 64%. The decrease in the gross profit margin by 8 percentage points is due to the increase in raw material and transportation prices in the second half of 2022 and the strengthening of the US dollar, which led to a significant increase in costs in the purchase price and delivery of goods. The Group has only partially passed on the price increase to customers, which explains the decrease in the gross profit margin compared to the comparison period. The Group's 12-month gross profit margin was 51%, remaining at a similar level compared to the same period last year (12M 2021: 52%).
The net loss for the fourth quarter was 561 thousand euros, the result of the comparable period was a net loss of 890 thousand euros. The Group's 12-month net profit was 3,493 thousand euros. The 12 month result is significantly affected by the conclusion of the contract for the sale of the Ivo Nikkolo trademarks and the contract for the exclusive use of the Ivo Nikkolo trademarks in August. The result for 12 months without considering the sale transaction of Ivo Nikkolo trademarks was a net loss of 3,943 thousand euros. In the comparable period, there was a net loss of 2,900 thousand euros.
The Group's distribution and administrative expenses were 2,084 thousand euros in the fourth quarter, decreasing by 9% compared to the same period last year (Q4 2021: 2,289 thousand euros). Despite high inflation and the energy crisis, the Group has been able to reduce distribution and administrative expenses through consistent cost reduction, increased efficiency and closure of unprofitable stores.
The Management Board of the Group assesses the results of 12 months as positive. The Group was able to strongly increase the sales revenue of Ivo Nikkolo products and maintain good gross profitability despite the uncertain economic environment, increased raw material and transport prices and the
volatility of the US dollar. Consistently increasing efficiency and closing unprofitable stores has gradually improved the Group's financial indicators. Increasing efficiency will continue to be the Group's focus. The Group remains committed to its chosen strategy and continues to implement it:
of the compromise agreement are confidential. Harju County Court approved on 10th January 2023 the compromise agreement.
The sales revenue of the Group in the fourth quarter was 2,803 thousand euros, increasing by 7% compared to the same period last year.
The share of the e-store's sales revenue in the fourth quarter was 8%, which is at a similar level compared to the same period last year.
The Group's 12-month sales revenue was 9,613 thousand euros, decreasing by 18% compared to the same period last year.
| EUR thousand | 4 Q 2022 | 4 Q 2021 | +/- | 12M 2022 | 12M 2021 | +/- |
|---|---|---|---|---|---|---|
| Retail | 2,530 | 2,395 | 6% | 8,635 | 9,785 | -12% |
| E-com sales | 235 | 209 | 13% | 943 | 1,866 | -49% |
| Other | 38 | 10 | 263% | 35 | 120 | -71% |
| Total | 2,803 | 2,614 | 7% | 9,613 | 11,770 | -18% |
As of December 31, 2022, the Group had 25 stores. In the fourth quarter, 2 stores were closed (the Viru Centre store in Tallinn and Viljandi Centrum centre store). In addition to the above, at the end of November, the old Ivo Nikkolo store in the Vilnius Panorama shopping centre was replaced by a new Ivo Nikkolo concept store.
| 31 December 2022 |
31 December 2021 |
Average area change* |
|
|---|---|---|---|
| Estonia | 9 | 16 | -49% |
| Lithuania | 9 | 9 | -4% |
| Latvia | 7 | 9 | -29% |
| Total stores | 25 | 34 | |
| Total sales area, sqm | 6,433 | 9,236 | -30% |
*Yearly average area changes also consider the time store is closed for renovation or closings due to COVID-19 restrictions.
Retail sales in the fourth quarter were 2,530 thousand euros, increasing by 6% compared to the same period last year.
12-month retail sales were 8,635 thousand euros, decreasing by 12% compared to the same period last year.
| EUR thousand |
4 Q 2022 | 4 Q 2021 | +/- | Share | 12M 2022 |
12M 2021 |
+/- | Share |
|---|---|---|---|---|---|---|---|---|
| Estonia | 1,139 | 1,315 | -13% | 45% | 3,987 | 5,915 | -33% | 46% |
| Lithuania | 742 | 682 | 9% | 29% | 2,452 | 2,303 | 6% | 28% |
| Latvia | 648 | 398 | 93% | 26% | 2,219 | 1,566 | 42% | 26% |
| Total | 2,530 | 2,395 | 6% | 100% | 8,659 | 9,785 | -12% | 100% |
| 4 Q 2022 | 4 Q 2021 | +/- | 12M 2022 | 12M 2021 | +/- | |
|---|---|---|---|---|---|---|
| Estonia | 139 | 94 | 47% | 100 | 107 | -7% |
| Lithuania | 107 | 95 | 13% | 87 | 103 | -16% |
| Latvia | 127 | 86 | 48% | 100 | 103 | -3% |
| Total | 125 | 93 | 34% | 96 | 105 | -9% |
The largest share is the Group's only brand Ivo Nikkolo. Ivo Nikkolo's fourth quarter retail sales were 2,530 thousand euros, increasing by 19% compared to the same period last year. Ivo Nikkolo's 12 month retail sales were 8,541 thousand euros, increasing by 43% compared to the same period last year. As of 12 months, the retail sales of Ivo Nikkolo products accounts for 99% of the Group's total sales revenue.
The decrease in sales revenue of Monton, Mosaic, Bastion and Baltman is related to the closure decision, which is part of the ongoing restructuring plan of Baltika Group.
| 12M | 12M | |||||||
|---|---|---|---|---|---|---|---|---|
| EUR thousand | 4 Q 2022 | 4 Q 2021 | +/- | Share | 2022 | 2021 | +/- | Share |
| Monton | 0 | 188 | -100% | 0% | 84 | 3 050 | -97% | 1% |
| Mosaic | 0 | 78 | -100% | 0% | 28 | 767 | -96% | 0% |
| Baltman | 2,530 | 2,130 | 19% | 100% | 8,541 | 5,968 | 43% | 99% |
| Ivo Nikkolo | 0 | 0 | 0% | 0% | 6 | 1 | 463% | 0% |
| Bastion | 2,530 | 2,395 | 6% | 100% | 8,659 | 9,786 | -12% | 100% |
| Total | 0 | 188 | -100% | 0% | 84 | 3,050 | -97% | 1% |
E-com sales revenue in fourth quarter was 235 thousand euros, increasing by 13% compared to the same period last year. The growth of the e-store sales revenue has been supported by the opening of the new Ivo Nikkolo online store at the end of September. Opening a new online store enables the Group to offer customers the best possible shopping experience.
The gross profit for the quarter was 1,579 thousand euros, decreasing by 92 thousand euros compared to the same period last year (Q4 2021: 1,672 thousand euros). The Group's gross profit margin was 56% in the fourth quarter, decreasing by 8 percentage points compared to the same period last year (Q4 2021: 64%). The decrease in the gross profit margin by 8 percentage points is due to the increase in raw material and transportation prices in the second half of 2022 and the strengthening of the US dollar, which led to a significant increase in costs in the purchase price and delivery of goods. The Group has only partially passed on the price increase to customers, which explains the decrease in the gross profit margin compared to the comparable period.
The Group's 12-month gross profit was 4,938 thousand euros, decreasing by 1,182 thousand euros compared to the same period last year (12M 2021: 6,120 thousand euros). The Group's 12-month gross profit margin was 51%, decreasing by 1 percentage point compared to the same period last year (12M 2021: 52%).
The Group's distribution and administrative expenses were 2,084 thousand euros in the fourth quarter, decreasing by 9% compared to the same period last year (Q4 2021: 2,289 thousand euros). The costs of retail markets decreased by 9% (181 thousand euros) compared to the same period last year. The
reduction in costs in retail markets is related to overall cost savings and closing unprofitable stores. The Group's administrative expenses have decreased by 7% (24 thousand euros) compared to the same period last year. Reducing the Group's administrative expenses is one part of the Group's restructuring plan.
The distribution and general administration expenses of the Group for 12 months were 8,559 thousand euros, decreasing by 10% compared to the same period last year (12M 2021: 9,551 thousand euros).
The operating loss for the fourth quarter was 518 thousand euros, in the same period last year the operating loss was 746 thousand euros.
The Group's 12-month operating profit was 3,787 thousand euros. The 12-month result, without considering the sale of Ivo Nikkolo trademarks, was an operating loss of 3,649 thousand euros. The result of the comparable period was an operating loss of 2,505 thousand euros.
The net loss for the fourth quarter was 561 thousand euros, the result of the comparable period was a net loss of 890 thousand euros.
The Group's 12-month net profit was 3,493 thousand euros. The 12-month result, without considering the sale of Ivo Nikkolo trademarks, was a net loss of 3,943 thousand euros. In the comparable period, there was a net loss of 2,900 thousand euros.
As of 31 December 2022, the Group's cash and cash equivalents amounted to 222 thousand euros (614 thousand euros as at 31 December 2021). As of the end of the quarter, the overdraft was used in the amount of 2,740 thousand euros (out of the limit of 3,000 thousand euros).
Fixed assets were acquired in the fourth quarter for 233 thousand euros and depreciation was 139 thousand euros. The residual value of fixed assets has increased by 369 thousand euros compared to the end of the previous year and was 1,855 thousand euros.
Right of use assets as of 31 December 2022 amounted to 4,602 thousand euros. The assets have decreased by 1,608 thousand euros compared to year end, with new contracts amounting to 931 thousand euros, 2,172 thousand euros decreased due to depreciation, 366 thousand euros decreased due to contracts, most of which are related to the termination of shop leases through restructuring.
As of 31 December 2022, the total debt was 9,244 thousand euros, which together with the change in overdraft represents a decrease in debt of 72 thousand euros compared to the end of the previous year (31.12.2021: 9,712 thousand euros).
As of December 31, 2022, the company's equity was 3,631 thousand euros. The Group's equity has increased by 3,493 thousand euros compared to the end of the previous year (31.12.2021: 138 thousand euros), which is due to the Group's strategic decision to sell some of Ivo Nikkolo's trademarks and to continue using the trademarks under an exclusive license. As a result of the transaction, the Group received a one-time profit in the amount of 7,436 thousand euros, bringing the Group's equity into line with the requirement of 50% share capital stipulated in the Commercial Code.
Cash flow from operating activities in the fourth quarter was 56 thousand euros (Q4 2021: -398 thousand euros). In the fourth quarter, 233 thousand euros (Q4 2021: 200 thousand euros) were put into investment activities. Cash flows from financing activities include repayments of lease obligations with interest of 492 thousand euros. The part of overdrafts increased by 698 thousand euros during the quarter, bank loan repayments were made in the amount of 89 thousand euros. The Group's total cash flow for the fourth quarter amounted to -60 thousand euros (Q4 2021: -159 thousand euros).
As at 31 December 2022, Group's net debt (interest-bearing debt less cash and cash equivalents) was 8,022 thousand euros, which is 536 thousand euros less than at the end of the previous year (31.12.2021: 8,558 thousand euros). The net debt to equity ratio as of 31 December 2022 was 777% (31 December 2021: 2606%). The Group's liquidity ratio was 0.82 at the end of the fourth quarter (31.12.2021: 0.78)
As at 31 December 2022 Baltika Group employed 143 people, which is 30 people less than at 31 December 2021 (173), thereof 106 (31.12.2021: 133) in the retail system, and 37 (31.12.2021: 40) at the head office.
Baltika Group employees' remuneration expense in 12 months of the year amounted to 3,354 thousand euros (12 months 2021: 3,998 thousand euros). The remuneration expense of the members of the Supervisory Board and Management Board totalled 226 thousand euros (12 months 2021: 456 thousand euros).
The Group's sales revenue in the period 01.01.2023 – 26.02.2023 was 1,365 thousand euros, decreasing by 6% compared to the same period last year. The decrease in sales revenue compared to the previous period is due to the following circumstances:
Retail sales efficiency during the period 01.01.2023 – 26.02.2023 (sales per m2 per month, EUR) was 119 EUR, increasing by 27% compared to the same period last year.
At the beginning of January, we joined the Tango e-shop packaging recycling system. The goal of joining the system is to reduce the amount of disposable packaging waste generated when shopping in our estore. From now on, our customers have the opportunity to order their goods in Low imPACK reusable packaging and get the deposit money back after returning the packaging. Among the clothing trade companies, Baltika is the first to have joined the e-shop's packaging circulation system with its Ivo Nikkolo brand e-shop.
At the beginning of January, we closed our Ivo Nikkolo store in Vilnius Akropolis shopping centre in Lithuania due to the expiration of the lease. The new Ivo Nikkolo concept store opened in Lithuania in November 2022 in the Vilnius Panorama shopping centre has been well received by our former Vilnius Akropolis centre customers.
At the beginning of February, we reopened the brand store at Ivo Nikkolo Suur-Karja 14. The store was closed in November 2020, when during the COVID pandemic, the legendary location of the Suur-Karja street store became commercially problematic due to the lack of tourists. In today's market situation, the Group again believes in the potential of this region. In addition to the above, in the current quarter we will finish the renovation of the Ivo Nikkolo store in the Galleria Riga shopping centre in Latvia, as a result of which we will open a new Ivo Nikkolo concept store in Latvia at the begging of March.
| Q4 2022 | Q4 2021 | Q4 2020 | Q4 2019 | Q4 2018 | |
|---|---|---|---|---|---|
| Revenue (EUR thousand) | 2,803 | 2,614 | 3,978 | 10,139 | 12,281 |
| Retail sales (EUR thousand) | 2,530 | 2,395 | 3,400 | 9,294 | 11,160 |
| Share of retail sales in revenue | 90% | 92% | 86% | 92% | 91% |
| Gross margin | 56% | 64% | 56% | 45% | 52% |
| EBITDA (EUR thousand)1 | 124 | 44 | 459 | 786 | -1,151 |
| Net profit (EUR thousand)2 | -561 | -890 | -1,352 | -2,609 | -1,472 |
| EBITDA margin3 | 4% | 2% | 12% | 8% | -9% |
| Operating margin4 | -18% | -29% | -27% | -23% | -12% |
| EBT margin5 | -20% | -34% | -30% | -26% | -13% |
| Net margin6 | -20% | -34% | -34% | -26% | -12% |
| 12M and | |||||
|---|---|---|---|---|---|
| 31 | 12M and 31 | 12M and 31 | 12M and 31 | 12M and 31 | |
| December | December | December | December | December | |
| Sales activity key figures | 2022 | 2021 | 2020 | 2010 | 2018 |
| Revenue (EUR thousand) | 9,613 | 11,770 | 19,480 | 39,630 | 44,691 |
| Retail sales (EUR thousand) | 8,635 | 9,785 | 16,995 | 35,566 | 38,416 |
| Share of retail sales in revenue | 90% | 83% | 87% | 90% | 86% |
| Number of stores in retail | 25 | 34 | 61 | 82 | 94 |
| Number of stores | 25 | 34 | 61 | 82 | 117 |
| Sales area (sqm) (end of period) | 6,433 | 9,236 | 14,869 | 16,467 | 17,758 |
| Number of employees (end of period) | 142 | 173 | 277 | 529 | 975 |
| Gross margin | 51% | 52% | 50% | 48% | 50% |
| EBITDA (EUR thousand)1 | 6,553 | 1,197 | 6,549 | 3,806 | -1,609 |
| Net profit (EUR thousand)2 | 3,493 | -2,900 | -377 | -5,908 | -5,119 |
| EBITDA margin3 | 68% | 10% | 34% | 10% | -4% |
| Operating margin4 | 39% | -21% | 3% | -11% | -6% |
| EBT margin5 | 36% | -245 | -1% | -15% | -7% |
| Net margin6 | 36% | -25% | -2% | -15% | -7% |
| Inventory turnover | 2.13 | 1.78 | 3.14 | 2.02 | 2.07 |
| Other ratios | 12M and 31 December 2022 |
12M and 31 December 2021 |
12M and 31 December 2020 |
12M and 31 December 2010 |
12M and 31 December 2018 |
|---|---|---|---|---|---|
| Current ratio | 0.82 | 0.78 | 0.81 | 0.75 | 0.90 |
| Net gearing ratio | 777% | 2,606% | 329% | 616% | 12785% |
| Return on equity7 | -382% | -309% | -31% | 3409% | -138% |
| Return on assets8 | -31% | -22% | -2% | -21% | -28% |
1The 12 months 2022 EBITDA without the impact of the sale of the Ivo Nikkolo trademarks was -883 thousand euros.
2The result for 9 months 2022 without the impact of the sale of the Ivo Nikkolo trademarks was a net loss of 3,943 thousand euros
3The 12 months 2022 EBITDA margin without the impact of the sale of the Ivo Nikkolo trademarks was -9%
4The 12 months 2022 operating profit margin without the impact of the sale of the Ivo Nikkolo trademarks was -38%
5The 12 months 2022 EBT margin without the impact of the sale of the Ivo Nikkolo trademarks was - 41%
6The 12 months 2022 net margin without the impact of the sale of the Ivo Nikkolo trademarks was -41% 7The 12-month return on equity without the impact of the sale of the Ivo Nikkolo trademarks was -382% 8The 12-month return on assets without the impact of the sale of the Ivo Nikkolo trademarks was -31%
EBITDA = Operating profit-amortisation depreciation and loss from disposal of fixed assets EBITDA margin = EBITDA÷Revenue Gross margin = (Revenue-Cost of goods sold)÷Revenue Operating margin = Operating profit÷Revenue EBT margin = Profit before income tax÷Revenue Net margin = Net profit (attributable to parent)÷Revenue Current ratio = Current assets÷Current liabilities Inventory turnover = Cost of goods sold÷Average inventories* Net gearing ratio = (Interest-bearing liabilities-cash and cash equivalents)÷Equity Return on equity (ROE) = Net profit÷Average equity* Return on assets (ROA) = Net profit÷Average total assets*
*Based on 12-month average
The Management Board confirms that the management report presents a true and fair view of all significant events that occurred during the reporting period as well as their impact on the condensed consolidated interim financial statements; includes the description of major risks and doubts influencing the remainder of the financial year; and provides an overview of all significant transactions with related parties.
Brigitta Kippak Chairman of The Management Board, CEO 28 February 2023
Margus Olesk Member of The Management Board, CFO 28 February 2023
The Management Board confirms the correctness and completeness of AS Baltika's consolidated interim report for the fourth quarter of 2022 as presented on pages 16-30.
The Management Board confirms that:
Brigitta Kippak Chairman of The Management Board, CEO 28 February 2023
Margus Olesk Member of The Management Board, CFO 28 February 2023
| Note | 31 Dec 2022 | 31 Dec 2021 | |
|---|---|---|---|
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 222 | 614 | |
| Trade and other receivables | 5 | 3,285 | 696 |
| Inventories | 6 | 2,056 | 2,491 |
| Total current assets | 5,562 | 3,801 | |
| Non-current assets | |||
| Deferred income tax asset | 91 | 80 | |
| Trade and other receivables | 5 | 2,756 | 0 |
| Other non-current assets | 5 | 107 | 172 |
| Property, plant and equipment | 7 | 1,269 | 855 |
| Right-of-use assets | 9 | 4,602 | 6,210 |
| Intangible assets | 8 | 586 | 631 |
| Total non-current assets | 9,411 | 7,948 | |
| TOTAL ASSETS | 14,973 | 11,749 | |
| LIABILITIES AND EQUITY | |||
| Current liabilities | |||
| Borrowings | 10 | 3,096 | 364 |
| Lease liabilities | 9 | 1,714 | 2,050 |
| Trade and other payables | 11,12 | 1,950 | 2,438 |
| Total current liabilities | 6,760 | 4,852 | |
| Non-current liabilities | |||
| Borrowings | 10 | 1,070 | 2,425 |
| Lease liabilities | 9 | 3,364 | 4,333 |
| Trade and other payables | 11,12 | 147 | 0 |
| Total non-current liabilities | 4,582 | 6,758 | |
| TOTAL LIABILITIES | 11,342 | 11,611 | |
| EQUITY | |||
| Share capital at par value | 13 | 5,408 | 5,408 |
| Reserves | 13 | 4,431 | 4,431 |
| Retained earnings (-losses) | -6,208 | -9,701 | |
| TOTAL EQUITY | 3,631 | 138 | |
| TOTAL LIABILITIES AND EQUITY | 14,973 | 11,749 |
| Note | 4Q 2022 | 4Q 2021 | 12m 2022 | 12m 2021 | |
|---|---|---|---|---|---|
| Revenue | 14, 15 | 2,803 | 2,614 | 9,613 | 11,770 |
| Cost of goods sold | -1,223 | -943 | -4,675 | -5,650 | |
| Gross profit | 1,579 | 1,671 | 4,938 | 6,120 | |
| Distribution costs | -1,779 | -1,960 | -7,111 | -8,084 | |
| Administrative and general expenses | -305 | -329 | -1,448 | -1,467 | |
| Other operating income (-expense) | 16 | -12 | -128 | 7,408 | 926 |
| Operating profit (loss) | -518 | -746 | 3,787 | -2,505 | |
| Finance costs | -53 | -79 | -304 | -330 | |
| Profit (loss) before income tax | -571 | -825 | 3,483 | -2,835 | |
| Income tax expense | 11 | -65 | 11 | -65 | |
| Net profit (loss) for the period | -561 | -890 | 3,493 | -2,900 | |
| Total comprehensive income (loss) for the period |
-561 | -890 | 3,493 | -2,900 | |
| Basic earnings per share from net profit (loss) for the period, EUR |
17 | -0,01 | -0,02 | 0,06 | -0,05 |
| Diluted earnings per share from net profit (loss) for the period, EUR |
17 | -0,01 | -0,02 | 0,06 | -0,05 |
| Note | 4Q 2022 | 4Q 2021 | 12m 2022 |
12m 2021 |
|
|---|---|---|---|---|---|
| Cash flows from operating activities | |||||
| Operating profit (loss) Adjustments: |
-518 | -746 | 3,787 | -2,505 | |
| Depreciation, amortisation and impairment of PPE and intangibles |
629 | 718 | 2,672 | 3,601 | |
| Loss on sale of property, plant and equipment | 14 | -191 | 366 | -148 | |
| Gain on sale of intangible assets | 0 | 0 | -7,436 | 0 | |
| Other non-monetary adjustments | 0 | 500 | 0 | 500 | |
| Changes in working capital: | |||||
| Change in trade and other receivables | 5 | -49 | -469 | 465 | -379 |
| Change in inventories | 358 | 463 | 435 | 976 | |
| Change in trade and other payables | 11 | -360 | -645 | -488 | -581 |
| Interest paid and other financial expense | -25 | -28 | -70 | -34 | |
| Interest received | 7 | 66 | |||
| Net cash generated from operating activities | 56 | -398 | -203 | 1,430 | |
| Cash flows from investing activities | |||||
| Acquisition of property, plant and equipment, intangibles | 7, 8 | -233 | -200 | -1,427 | -369 |
| Proceeds from disposal of PPE and intangible assets | 0 | 0 | 2,021 | 0 | |
| Net cash used in investing activities | -233 | -200 | 594 | -369 | |
| Cash flows from financing activities | |||||
| Received borrowings | 10 | 0 | 0 | 1,000 | 0 |
| Repayments of borrowings | 10 | -89 | -89 | -356 | -293 |
| Change in bank overdraft | 10 | 698 | 1,267 | 754 | 1,985 |
| Finance lease payments | 0 | -4 | -21 | -8 | |
| Repayments of lease liabilities, principle | 9 | -427 | -671 | -1,870 | -3,284 |
| Repayments of lease liabilities, interest | -65 | -64 | -289 | -274 | |
| Net cash generated from (used in) financing activities | 117 | 439 | -782 | -1,874 | |
| Total cash flows | -60 | -159 | -392 | -813 | |
| Cash and cash equivalents at the beginning of the | |||||
| period | 282 | 773 | 614 | 1,427 | |
| Cash and cash equivalents at the end of the period | 222 | 614 | 222 | 614 | |
| Change in cash and cash equivalents | -60 | -159 | -392 | -813 |
| Share capital | Reserves | Retained earnings |
Total equity attributable to owners of the Parent |
|
|---|---|---|---|---|
| Balance as at 31 December 2020 | 5,408 | 3,931 | -6,627 | 2,712 |
| Net profit (loss) for the reporting period | 0 | 0 | -2,900 | -2,900 |
| Total comprehensive income (loss) | 0 | 0 | -2,900 | -2,900 |
| Increase of subordinated loan | 0 | 500 | 0 | 500 |
| Balance as at 31 December 2021 | 5,408 | 4,431 | -9,527 | 312 |
| Impact of correction of errors | 0 | 0 | -174 | -174 |
| Adjusted balance as at 31 December 2021 | 5,408 | 4,431 | -9,701 | 138 |
|---|---|---|---|---|
| Net profit (loss) for the reporting period | 0 | 0 | 3,493 | 3,493 |
| Total comprehensive income (loss) | 0 | 0 | 3,493 | 3,493 |
| Balance as at 31 December 2022 | 5,408 | 4,431 | -6,208 | 3,631 |
Baltika Group, with the parent company AS Baltika, is an international fashion retailer. Baltika develops and operates fashion brand Ivo Nikkolo. Baltika employs a business model, which means that it controls various stages of the fashion process: design, supply chain management, wholesale and retail. AS Baltika's shares are listed on the Nasdaq Tallinn Stock Exchange. The largest shareholder and the only company holding more than 20% of shares (Note 13) of AS Baltika is KJK Fund Sicav-SIF (on ING Luxembourg S.A. account).
The consolidated condensed interim financial statements of the Group for the fourth quarter ended 31 December 2022 are prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union. The interim financial statements should be read in conjunction with the Group's most recently published annual financial statements for the year ended 31 December 2021, prepared in accordance with International Financial Reporting Standards (IFRS). The interim report does not include all the information required for the presentation of the annual accounts. However, selected explanatory notes have been included in the interim financial statements to explain events and transactions that are significant to an understanding of changes in the Group's financial position and performance since the last annual financial statements. The same accounting policies and methods of computation have been applied in the preparation of the interim financial statements as in the Group's annual financial statements for the year ended 31 December 2021.
This interim report has not been audited or otherwise reviewed by auditors and includes only the Group's consolidated reports and does not include all the information required for full annual financial statements.
In preparing these interim financial statements, management has made judgements and estimates that affect the application of the Group's accounting policies and the reported amounts of assets and liabilities, income and expenses.
Actual results may differ from these estimates. The significant judgements management made in the process of applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements, except for the following significant management estimates added during the reporting period.
On 8th August 2022, the parent company of the Group and Niul OÜ (Buyer) concluded a contract for the transfer of Ivo Nikkolo trademarks (Sale Agreement), on the basis of which the Buyer acquired some of the Ivo Nikkolo trademarks. Despite the transfer of the trademarks, the Group retains the exclusive right to use the trademarks on the basis of the trademark exclusive license agreement concluded on the 8th of August 2022 between the parent company of the Group and the Buyer.
The Group management concluded that the transaction is not a sale-leaseback, because the scope of the IFRS 16 "Leases" standard excludes contracts resulting from license agreements falling within the scope of IAS 38 "Intangible assets" (such as license agreements for the use of trademarks). The management of the Group is of the opinion that the requirements of IAS 38 to apply IFRS 16 saleleaseback accounting principles to intangible assets applies only to certain intangible assets that are not excluded from the scope of application of IFRS 16. Therefore, the Group accounts for the sale and use of the trademarks based on an exclusive license agreement as two separate transactions and not as a sale-leaseback transaction.
Transfer of control of the Ivo Nikkolo trademarks
Based on the terms of the contract, the management of the Group assessed that the Buyer has gained control over the trademarks at the moment of signing the Sale Agreement, because from that moment the Buyer can control the use of the trademarks and receive basically all the remaining benefits from the trademarks. Therefore, the management of the Group came to the conclusion that according to the standard IFRS 15 "Revenue from Contracts with Customers", the Group recognises a profit or loss from the transaction, which is the difference between the net proceeds received from the transaction and the carrying amount of the trademarks (note 8 and 17).
In the fourth quarter, the Group identified that the IFRS 16 lease accounting contained arithmetical and factual errors. Due to errors, the Group's right-of-use assets and lease liabilities were undervalued. The errors have been corrected by adjusting the balances of assets, liabilities and equity for the periods presented on 31.12.2021. The table below provides an overview of the result of error corrections for the Group's consolidated financial statements.
| Before | Corrections | After | |
|---|---|---|---|
| 31 Dec 2021 | corrections | corrections | |
| Right-of-use assets | 5,956 | 254 | 6,210 |
| Other assets | 5,539 | 0 | 5,539 |
| Total assets | 11,495 | 254 | 11,749 |
| Lease liabilities | 5,956 | 428 | 6,384 |
| Other liabilities | 5,227 | 0 | 5,227 |
| Total liabilities | 11,183 | 428 | 11,611 |
| Retained earnings (-losses) | -9,527 | -174 | -9,701 |
| Other equity line items | 9,839 | 0 | 9,839 |
| Total equity | 312 | -174 | 138 |
In its daily activities, the Group is exposed to different types of risks. Risk management is an important and integral part of the business activities of the Group. The Group's ability to identify, measure and control different risks is a key variable for the Group's profitability. The Group's management defines risk as a potential negative deviation from the expected financial results. The main risk factors are market (including currency risk, interest rate risk and price risk), credit, liquidity, and operational risks. Management of the Group's Parent company considers all the risks as significant risks for the Group. The Group uses the ability to regulate retail prices, reduces expenses and if necessary, restructures the Group's internal transactions to hedge certain risk exposures.
The basis for risk management in the Group are the requirements set by the Nasdaq Tallinn, the Financial Supervision Authority and other regulatory bodies, adherence to generally accepted accounting principles, as well as the company's internal regulations and risk policies. Overall risk management includes identification, measurement and control of risks. The management of the Parent company plays a major role in managing risks and approving risk procedures. The Supervisory Board of the Group's Parent company monitors the management's risk management activities.
The condensed interim financial statements do not include all the information on the Group's financial risk management that is required to be disclosed in the annual accounts. Accordingly, this interim report should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2021. There have been no material changes in the Group's risk management policies since the end of the previous financial year.
| Short-term trade and other receivables | 31 Dec 2022 | 31 Dec 2021 |
|---|---|---|
| Trade receivables, net | 84 | 41 |
| Other receivables | 3,000 | 0 |
| Other prepaid expenses | 185 | 100 |
| Tax prepayments and tax reclaims, thereof | 17 | 47 |
| Value added tax | 17 | 47 |
| Other current receivables | -1 | 508 |
|---|---|---|
| Total | 3,285 | 696 |
| Long-term trade and other receivables | ||
| Other receivables1 | 2,756 | 0 |
| Total | 2,756 | 0 |
| Other long-term assets | ||
| Non-current lease prepayments | 107 | 172 |
| Total | 107 | 172 |
All trade and other receivables are in euros.
1The entry reflects the long-term receivable against Niul OÜ arising from the sale of trademarks in the present value of 2,756 thousand euros (note 17).
| 31 Dec 2022 | 31 Dec 2021 | |
|---|---|---|
| Fabrics and accessories | 20 | 2 |
| Finished goods and goods purchased for resale | 1,973 | 2,556 |
| Allowance for impairment of finished goods and goods purchased for resale |
-41 | -100 |
| Prepayments to suppliers | 104 | 33 |
| Total | 2,056 | 2,491 |
During the financial year, the Group invested a total of 1,104 thousand euros in property, plant and equipment (in the comparable period, the total investment volume was 228 thousand euros. The most important investments are related to the opening of new Ivo Nikkolo concept stores.
During the financial year, the Group wrote off property, plant and equipment in the carrying amount of 220 thousand euros (in the comparable period in the carrying amount of 83 thousand euros). The most significant write-offs are related to store inventory and construction work written off during the closing of unprofitable stores.
During the financial year, the Group invested a total of 323 thousand euros in intangible assets (in the comparable period, the total amount of investments was 141 thousand euros).
In connection with the development of the new e-store and the implementation of the ERP system, the group has made investments in the amount of 71 thousand euros during the financial year.
During the financial year, the Group sold some of Ivo Nikkolo trademarks. The carrying amount of the trademarks sold was 256 thousand euros. The sale price of the transaction was 8,000 thousand euros and the result of the transaction was a profit of 7,436 thousand euros, which was reflected in the item "Other operating income (-expense)" of the condensed consolidated statement of profit or loss and other comprehensive income. Following the trademarks sale agreement, the Group and the Buyer of the trademarks entered into an exclusive trademark license agreement, on the basis of which the Group will continue to use the trademarks. The group accounted for the exclusive license agreement as an intangible asset in the acquisition cost of 252 thousand euros. More detailed information about the transaction is disclosed in note 17.
During the financial year, the Group signed five new lease agreements for the use of commercial premises. When entering into lease agreements, the Group recorded 931 thousand euros in right of use assets and lease obligations (in the comparable period, right of use assets and lease liabilities were added in the amount of 1,040 thousand euros).
In addition to the above, the Group closed 12 unprofitable stores during the financial year. As a result of the closure of unprofitable stores and modification of lease agreements, the right to use assets and lease liabilities decreased in the amount of 366 thousand euros (in the comparable period, because of the termination of lease agreements and modification of lease agreements, the right to use assets and lease liabilities decreased in the amount of 1,150 thousand euros).
| 31 Dec 2022 | 31 Dec 2021 | |
|---|---|---|
| Current borrowings | ||
| Current portion of bank loans | 356 | 356 |
| Current portion of overdraft | 2,740 | 0 |
| Current portion of finance lease liabilities | 0 | 8 |
| Total | 3,096 | 364 |
| Non-current borrowings | ||
| Non-current bank loans | 0 | 356 |
| Non-current overdraft | 0 | 1,985 |
| Loans received from related parties (note 19) | 1,000 | 0 |
| Other non-current liabilities | 70 | 84 |
| Total | 1,070 | 2,425 |
| Total borrowings | 4,166 | 2,789 |
During the financial year, the Group received a loan with a principal amount of 1,000 thousand euros from its largest shareholder, KJK Fund SICAV-SIF. No interest is applied to the loan and the loan is granted without collateral. The loan repayment deadline is December 2024.
During the financial year, the Group made bank loan repayments in the amount of 356 thousand euros (2021: 293 thousand euros). Group´s overdraft facilities with the banks were used in the amount of 2,740 thousand euros as of 31 December 2022 (31 December 2021: 1,985 thousand euros).
Interest expense from all interest carrying borrowings in the reporting period amounted to 359 thousand euros (2021: 330 thousand euros), 12 months interests from lease liabilities recognised under IFRS 16 in the amount of 289 thousand euros (12 months 2021: 274 thousand euros).
| Average risk premium |
Carrying amount |
|
|---|---|---|
| Borrowings at floating interest rate (based on 6-month Euribor) | EURIBOR +2.00% | 3,096 |
| Total | 3,096 | |
| Average risk premium |
Carrying amount |
|
|---|---|---|
| Borrowings at floating interest rate (based on 6-month Euribor) | EURIBOR +2.00% | 2,697 |
| Total | 2,697 |
| 31 Dec 2022 | 31 Dec 2021 | |
|---|---|---|
| Current liabilities | ||
| Trade payables | 1,012 | 1,032 |
| Tax liabilities, thereof | 385 | 759 |
| Personal income tax | 48 | 68 |
| Social security taxes and unemployment insurance premium | 238 | 329 |
| Value added tax | 89 | 361 |
| Other taxes | 10 | 1 |
| Payables to employees1 | 276 | 329 |
| Other current payables2 | 181 | 140 |
| Other accrued expenses | 6 | 16 |
| Customer prepayments | 61 | 57 |
| Total | 1,921 | 2,333 |
| Other non-current liabilities2 | 147 | 0 |
|---|---|---|
| Total | 147 | 0 |
| Total trade and other payables | 2,068 | 2,333 |
1Payables to employees consist of accrued wages, salaries and vacation reserve.
2Other current and non-current payables include the liability arising from the exclusive license agreement for Ivo Nikkolo trademarks in the adjusted acquisition cost of 164 thousand euros (current liability is 17 thousand euros and non-current liability is 147 thousand euros).
| 31 Dec 2022 | 31 Dec 2021 | |
|---|---|---|
| EUR (euro) | 730 | 1,045 |
| USD (US dollar) | 288 | 3 |
| Total | 1,018 | 1,048 |
| 31 Dec 2022 | 31 Dec 2021 | |
|---|---|---|
| Other provision | 29 | 105 |
| Total | 29 | 105 |
| 31 Dec 2022 | 31 Dec 2021 | |
|---|---|---|
| Share capital | 5,408 | 5,408 |
| Number of shares (pcs) | 54,079,485 | 54,079,485 |
| Nominal value of share (EUR) | 0.10 | 0.10 |
| Other reserves | 4,431 | 4,431 |
As at 31 December 2022, under the Articles of Association, the company's minimum share capital is 2,000 thousand euros and the maximum share capital is 8,000 thousand euros and as at 31 December 2021, under the Articles of Association, the company's minimum share capital was 2,000 thousand euros and the maximum share capital was 8,000 thousand euros. As at 31 December 2022 and 31 December 2021 share capital consists of ordinary shares, that are listed on the Nasdaq Tallinn Stock Exchange and all shares have been paid for.
1Other reserves amounting to EUR 4,431 thousand represent, as at 31 December 2022 and 31 December 2021 represents the non-interest-bearing loan with no fixed repayment date from KJK Fund Sicav-SIF.
| Number of shares |
Holding | |
|---|---|---|
| 1. ING Luxembourg S.A. | 48,526,500 | 89.73% |
| 2. AS Genteel | 1,297,641 | 2.40% |
| 3. Clearstream Banking AG | 1,069,624 | 1.98% |
| 4. AS SEB Bankas | 349,730 | 0.65% |
| 5. Kaima Capital Eesti OÜ | 231,578 | 0.43% |
| 6. SWEDBANK AS CLIENTS | 152,831 | 0.28% |
| 7. Tarmo Kõiv | 114,002 | 0.21% |
| 8. PAAVO KAIS | 108,000 | 0.20% |
| 9. Other shareholders | 2,229,579 | 4.12% |
| Total | 54,079,485 | 100% |
The members of the Management Board and Supervisory Board and their close relatives owned Baltika shares as of 31 December 2022: 233,153 shares.
| Number of | ||
|---|---|---|
| shares | Holding | |
| 1. ING Luxembourg S.A. | 48,526,500 | 89.73% |
| 2. AS Genteel | 1,297,641 | 2.40% |
| 3. Clearstream Banking AG | 1,069,624 | 1.98% |
| 4. AS SEB BANKAS | 303,945 | 0.56% |
| 5. Kaima Capital Eesti OÜ | 231,578 | 0.43% |
| 6. SWEDBANK AS, LATVIJA | 152,922 | 0.28% |
| 7. Tarmo Kõiv | 143,000 | 0.26% |
| 8. PAAVO KAIS | 105,000 | 0.19% |
| 9. Other shareholders | 2,249,275 | 4.17% |
| Total | 54,079,485 | 100% |
The members of the Management Board and Supervisory Board and their close relatives owned Baltika shares as of 31 December 2021: 233,153 shares.
The shares of the Parent company are listed on the Nasdaq Tallinn. After registering the increase of AS Baltika share capital in Commercial Register on August 13, 2019, KJK Fund Sicav-SIF (ING Luxembourg S.A. AIF ACCOUNT account) shareholding in AS Baltika increased and made the entity a controlling shareholder (shareholding of 89.73%).
| Retail segment |
E-com segments |
All other segments1 |
Total | |
|---|---|---|---|---|
| 4 Q 2022 | ||||
| Revenue (from external customers) | 2,530 | 235 | 38 | 2,803 |
| Segment profit (loss)2 | 74 | 59 | 0 | 133 |
| Incl. depreciation and amortisation | -96 | -6 | 0 | -102 |
| 4 Q 2021 | ||||
| Revenue (from external customers) | 2,395 | 209 | 10 | 2,614 |
| Segment profit (loss)2 | -379 | 21 | 1 | -357 |
| Incl. depreciation and amortisation | -88 | -6 | 0 | -94 |
| 12M 2022 and as at 31 December 2022 | ||||
| Revenue (from external customers) | 8,635 | 943 | -35 | 9,613 |
| Segment profit (loss)2 | -1,202 | 86 | 1 | -1,115 |
| Incl. depreciation and amortisation | -359 | -24 | 0 | -384 |
| Inventories of segments | 1,112 | 1,112 | ||
| 12M 2021 and as at 31 December 2021 | ||||
| Revenue (from external customers) | 9,785 | 1,866 | 120 | 11,770 |
| Segment profit (loss)2 | -435 | 129 | 31 | -275 |
| Incl. depreciation and amortisation | -412 | -23 | 0 | -435 |
| Inventories of segments | 1,915 | 1,915 |
1All other segments include sale of goods to wholesale, materials and sewing services. 2The segment profit is the segment operating profit.
| 4 Q 2022 | 4 Q 2021 | 12m 2022 | 12m 2021 | |
|---|---|---|---|---|
| Total segment profit | 133 | -357 | -1,115 | -275 |
| Unallocated expenses1 : |
||||
| Costs of goods sold and distribution costs | -334 | 68 | -1,058 | -1,689 |
| Administrative and general expenses | -305 | -329 | -1,448 | -1,467 |
| Other operating income (expenses), net | -12 | -128 | 7,408 | 926 |
| Operating profit (loss) | -518 | -746 | 3,787 | -2,505 |
1Unallocated expenses include the expenses of the parent and production company that are not allocated to the reportable segments in internal reporting.
| 31 Dec 2022 | 31 Dec 2021 | |
|---|---|---|
| Total inventories of segments | 1,112 | 1,915 |
| Inventories in Parent company and production company | 944 | 576 |
| Inventories on statement of financial position | 2,056 | 2,491 |
| 4 Q 2022 | 4 Q 2021 | 12m 2022 | 12m 2021 | |
|---|---|---|---|---|
| Sale of goods in retail channel | 2,530 | 2,395 | 8,635 | 9,785 |
| Sale of goods in wholesale and franchise channel | 37 | 6 | 24 | 73 |
| Sale of goods in e-commerce channel | 235 | 209 | 943 | 1,866 |
| Other sales | 1 | 4 | 12 | 47 |
| Total | 2,803 | 2,614 | 9,613 | 11,770 |
| 4 Q 2022 | 4 Q 2021 | 12m 2022 | 12m 2021 | |
|---|---|---|---|---|
| Estonia | 1,303 | 1,426 | 4,519 | 6,976 |
| Latvia | 695 | 716 | 2,419 | 2,665 |
| Lithuania | 795 | 452 | 2,633 | 2,029 |
| Other countries | 10 | 20 | 42 | 100 |
| Total | 2,803 | 2,614 | 9,613 | 11,770 |
| 4 Q 2022 | 4 Q 2021 | 12m 2022 | 12m 2021 | |
|---|---|---|---|---|
| Gain (loss) from sale, impairment of PPE Gain (loss) from sale, impairment of tangible |
-14 | -72 | -98 | -115 |
| assets1 | 0 | 0 | 7,436 | 0 |
| Other operating income2 | 23 | 59 | 156 | 1,213 |
| Foreign exchange gain (-loss) | -10 | -6 | -45 | -12 |
| Other operating expenses | -12 | -109 | -42 | -160 |
| Total | -12 | -128 | 7,408 | 926 |
1The entry reflects the one-time profit from the sale of Ivo Nikkolo brands in the amount of 7,436 thousand euros (Note 17).
2Other operating income in the comparable period includes government grants. The Group did not receive any government grants during the financial year.
The parent company of the Group and Niul OÜ (Buyer) signed a trademark transfer agreement on the 8 th of August 2022, on the basis of which the Buyer acquired some of the Ivo Nikkolo trademarks. Despite the transfer of the trademarks, the Group retains the exclusive right to use the trademarks on the basis of the exclusive trademark license agreement concluded between the Group's parent company and the Buyer on the 8th of August 2022.
The purpose of the transaction is to finance the Group's core activities, projects and investments.
The sale price of the trademarks is 8,000 thousand euros. Pursuant to the sales agreement, the Buyer undertakes to pay the purchase price as follows:
In addition, the Group's parent company and the Buyer have signed on the 8th of August 2022 notarised pledge agreements with respect to the trademarks and in favour of Group's parent company to secure the performance of the obligations by the Buyer under the sales agreement.
The gain or loss on arising on derecognition is the difference between the net proceeds received and the carrying amount of the trademarks. The transaction price of the sales contract has been adjusted by significant financing component (the market interest rate used for adjustment was 2.81%), because the purchase price is paid on the basis of a long-term payment schedule. The Group reported a one-time profit from the transaction in the amount of 7,436 thousand euros (note 16).
As of the fourth quarter, all contractual cash flows have been received on time. According to the management of the Group, the receivables are not related to a significant credit risk as of 31.12.2022, because there are no indications of a possible decrease in the Buyer's credit rating and there have been no payment defaults. The credit risk related to the receivables is additionally mitigated by the fact that pledge agreements have been made in favour of the Group's parent company with respect to the trademarks, which ensure the fulfilment of obligations arising from the sales contract by the Buyer.
Under the license agreement, the Buyer granted the Group a world-wide and unlimited right to use and exploit the trademarks and the rights arising from the trademarks, i.e. an exclusive license of the trademarks for the whole validity of the license agreement.
The license agreement is valid for 10 years as of the signing of the agreement (the Initial Term). After the expiration of the Initial Term, the license agreement will automatically renew for one additional year (the Renewal Term) and this occurs after the expiration of each Renewal Term unless a party gives notice of non-renewal to the other party not less than three months prior to the expiration of the Initial Term or any Renewal Term. The license agreement will terminate in any case if the trademark protection for all trademarks has expired. Otherwise, the license agreement may be terminated only by written agreement between the parties.
The Group pays the Buyer a license fee based on the license agreement, which consists of several components, as follows:
When concluding the license agreement, the Group recognised an intangible asset from the agreement at its acquisition cost. Since the fee paid for the use of trademarks is partially variable (2.5% of the Group's annual turnover), the Group measured the acquisition cost of the intangible asset based on the agreed minimum payments. From the license agreement, the Group recognised 253 thousand euros in the acquisition cost of the intangible asset and 172 thousand euros as a liability based on the agreed minimum payments for future periods (note 8 and 11). The market interest rate used for the present value of the assets and liabilities was 3.77%.
| Basic earnings per share | 4 Q 2022 | 4 Q 2021 | 12m 2022 | 12m 2021 | |
|---|---|---|---|---|---|
| Weighted average number of shares (thousand) | pcs | 54,079 | 54,079 | 54,079 | 54,079 |
| Net profit (-loss) from continuing operations | -561 | -890 | 3,493 | -2,900 | |
| Basic earnings per share | EUR | -0.01 | -0.02 | 0.06 | -0.05 |
| Diluted earnings per share | EUR | -0.01 | -0.02 | 0.06 | -0.05 |
The average price (arithmetic average based on daily closing prices) of AS Baltika share on the Nasdaq Tallinn Stock Exchange in the reporting period was 0.20 euros (2021: 0.31 euros).
For the purpose of these financial statements, parties are considered to be related if one party has the ability to control the other party, is under common control, or can exercise significant influence over the financial and management decisions of the other one in accordance with IAS 24, Related Party Disclosures. Not only the legal form of the transactions and mutual relationships, but also their actual substance has been taken into consideration when defining related parties.
For the reporting purposes in consolidated interim statements of the Group, the following entities have been considered related parties:
1Only members of the Parent company Management Board and Supervisory Board are considered as key management personnel, as only they have responsibility for planning, directing and controlling Group activities.
| 4 Q 2022 | 4 Q 2021 | 12m 2022 | 12m 2021 | |
|---|---|---|---|---|
| Services purchased | 0 | -9 | 0 | 9 |
| Total | 0 | -9 | 0 | 9 |
In 2022, AS Baltika has not purchased services from related parties. In 2021, AS Baltika mainly purchased management services from related parties.
| 31 Dec 2022 | 31 Dec 2021 | |
|---|---|---|
| Other loans and interests (Note 10) | 1,000 | 3,992 |
| Subordinated loans (presented in equity as part of other reserves) | 4,431 | 0 |
| Payables to related parties total | 5,431 | 3,992 |
All transactions in 2022 as well as in 2021 reporting periods and balances with related parties as at 31 December 2022 and 31 December 2021 were with entities under the control or significant influence of the members of the Supervisory Board.
| 4 Q 2022 | 4 Q 2021 | 12m 2022 | 12m 2021 | |
|---|---|---|---|---|
| Salaries of the members of the Management Board | 29 | 84 | 199 | 440 |
| Remuneration of the members of the Supervisory Council | 3 | 3 | 13 | 13 |
| Total | 32 | 87 | 212 | 453 |
KRISTJAN KOTKAS Member of the Supervisory Board since 08.10.2019, Chairman of the Supervisory Board since 21.06.2022 General Counsel at KJK Capital Oy Master's degree in Law, University of Tartu Master's degree in Law, University of Cape Town Baltika shares held on 31 December 2022: 0
JAAKKO SAKARI MIKAEL SALMELIN Member of the Supervisory Board since 21.06.2010, Chairman of the Supervisory Board during the period 23.05.2012 to 20.06.2022 Partner, KJK Capital Oy Master of Science in Finance, Helsinki School of Economics Baltika shares held on 31 December 2022: 0
REET SAKS Member of the Supervisory Board since 25.03.1997 Legal Advisor at Farmi Piimatööstus Degree in Law, University of Tartu Baltika shares held on 31 December 2022: 0
LAURI KUSTAA ÄIMÄ Member of the Supervisory Board since 18.06.2009 Managing Director of Kaima Capital Oy Master of Economics, University of Helsinki Baltika shares held on 31 December 2022: 231,578 shares (on Kaima Capital Eesti OÜ account)
Member of the Board since November 1st, CFO since 01.06.2022, in the Group since 2022 Taxation and Customs Degree (Estonian Academy of Security Sciences) Baltika shares held on 31 December 2022: 0
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