The sixth report of the reorganization advisor on the fulfillment
of the reorganization plan
On 19 June 2020, Harju County Court approved the
reorganization plan of AS Baltika (Baltika). The
restructuring advisor needs to submit a report to the court and the
impacted creditors every six months. The first report was submitted
in December 2020. The sixth report is hereby published to all
investors. The data and numbers in the report refer to Baltika on a
stand-alone basis, not as a Group i.e. the numbers are not
consolidated.
The reorganization process has allowed Baltika to continue with
business restructuring. We have closed the majority of unprofitable
stores and launched a new store concept in four locations. We have
optimized business processes and significantly reduced operating
costs. The processes related to cost optimization, efficiency
improvement, and profitability enhancement will continue throughout
2023. The decisions and changes made during the reorganization
process are already having a positive impact on Baltika's financial
results. Baltika confirms its ability to successfully fulfill the
reorganization plan and the commitments made in the plan.
Brigitta Kippak
Chairman of The Management Board, CEO
brigitta.kippak@baltikagroup.com
THE REPORT OF THE REORGANISATION ADVISOR ON
THE FULFILMENT OF THE REORGANISATION PLAN
Harju County Court confirmed with 19.06.2020
ruling for civil case 2-20-4688 the reorganisation plan of AS
Baltika (hereafter Baltika).
In accordance with § 50 of the Reorganisation
Act, the reorganisation advisor of Baltika hereby presents to the
court and creditors the sixth written report regarding the
fulfilment of the reorganisation plan.
To verify the fulfilment of the reorganisation
plan and evaluate the financial situation, the reorganisation
advisor has used the audited accounts of Baltika as at 31.12.2022
and unaudited accounts as at 30.04.2023.
Fulfilment of the reorganisation
plan
The claims of 30 creditors in the total amount
of 12 206 649.74 euros were transformed based on the
reorganisation plan. Claims were transformed in two groups.
Total financial impact of reduction of claims
based on the reorganisation plan is 5 045 198 euros,
which is recorded under other operating revenue in Baltika’s 2020
profit and loss statement.
Based on the reorganisation plan Baltika had to
pay interest on the claims in Group I and starting from June of
2021 start payments of principal amounts in Group. Baltika has
fulfilled this obligation to Swedbank AS. Other creditors in Group
have confirmed to reorganisation advisor that they do not require
Baltika to pay in accordance with the reorganisation plan and agree
to be paid later.
Based on the reorganisation plan, payments of
principal amounts of claims in Group II had to begin from the end
of 2021. The first payments were made before the deadline or 31
December 2021, the second payments were made before the deadline of
31 December 2022.
Baltika’s financial
situation
Within the first six month after the
confirmation of reorganisation plan Baltika’s financial situation
has been positively influenced by both transformation of the
creditors’ claims and also several substantive changes in Baltika´s
operations, as a result of which compared to the state prior to
reorganisation, the gross profit of Baltika from the sale of
goods has improved and various operating expenses have reduced
(incl rent expenses that fall under several operating expenses,
payroll).
The below table contains the prognosis of 2022
profit and loss statement presented in the reorganisation plan of
Baltika, actual profit and loss for 2022, the figures for 4 months
from the prognosis (01.01.2023 until 30.04.2023) and the actual
profit and loss statement for four months of 2023.
Thousand euros |
Prognosis 12 months 2022 in reorganisation
plan |
Actual 12 months 2022 |
Prognosis 4 months 2023 |
Actual 4 months 2023 |
Revenue |
19 014 |
2 887 |
9 618 |
1 971 |
Total revenue |
19 014 |
2 887 |
9 618 |
1 971 |
Cost of goods sold |
13 451 |
4 060 |
5 359 |
1 423 |
Gross profit |
5 564 |
-1 173 |
4 259 |
548 |
Gross profit margin |
29% |
-41% |
44% |
28% |
Various operating expenses |
2 353 |
1 150 |
905 |
319 |
Payroll |
2 312 |
1 562 |
830 |
534 |
Depreciation, amortisation and impairment |
187 |
140 |
73 |
39 |
Other operating expense (-) /income (+) |
0 |
7 379 |
0 |
4 |
Operating income (-loss) |
711 |
3 354 |
2 450 |
-339 |
Revenue for 2022 was 2 887 th. Euro and has
declined 53% in comparison to 2021 (2021: 6 113 th. Euro).
Revenue was significantly affected by the following events:
- Unpredictable state of war between Russia and Ukraine that had
an impact of the sales of Baltika from the first weeks of
March.
- All Baltic countries experienced high rates of COVID-19 cases
in the first quarter of 2022, which impacted negatively on the
visits to stores and also presented challenges to everyday
management of stores’ operations, due to which quality of service
also declined and impacted on sales negatively.
- During 2022 a total of 12 stores were closed resulting is
significant decline in revenue compared to 2021. Decline in revenue
was compensated by opening of four new concept stores and one
outlet store.
- Adjustment of intra-group transfer pricing that resulted in
decreasing of AS Baltika’s revenue by 2 330 th Euro.
Operating profit for 2022 was materially
impacted by Baltika’s strategic decision to sell part of Ivo
Nikkolo trademarks and continue using them under an exclusive
licence agreement. As a result of this transaction, Baltika
recorded a one-off gain of 7 436 th Euro and as a result
operating profit for the year was 3 354 th Euro.
Revenue for 01.01.2023 – 30.04.2023 was 1 971
thousand Euro, an increase of 31% compared to the same period last
year (01.01.2022 – 30.04.2022: 1 499 thousand Euro) Increase
in revenue was caused by the following:
- Demand for Ivo Nikkolo products has increased in comparison to
previous year. Revenue of retail segment of Baltika grew 7%
during the first four months of 2023 as compared to the same period
previous year.
- Group’s retail segment has been growing organically. As of end
of April last year Baltika was operating 30 stores, whereas at the
end of April this year the number of stores was 25. Hence Baltika
was able to grow revenue despite of decreasing number of
stores.
Gross profit for 01.01.2023 – 30.04.2023 was
548 th. Euro, and gross profit margin 28%. Gross profit for
the comparable period of the previous year was 290 th. Euro
and gross profit margin 19%. Gross profit margin has improved by
nine percentage points. Comparable period saw a significant
increase in prices of raw materials and cost of transportation. In
addition, during the comparable period US dollar was strong in
relation to Euro, which caused a considerable increase in the cost
of goods and their procurement. By the end of 2022 prices of raw
materials and transportations started to decline and US Dollar was
weakening against Euro. As a result, Baltika was able to procure
goods on considerably more favourable terms as compared to same
period last year.
Operating loss for 01.01.2023 – 30.04.2023 was
339 thousand Euro. Operating loss for the comparable period
the previous year was 774 thousand Euro. Baltika has decreased
its operating loss by 56%. Reduction of loss is a result of
material increase in revenue, improved gross margin, and continuous
reduction of expenses.
The prognosis vs actual cumulative profit and loss for 40 months
from 1 January 2020 to 30 April 2023 is presented in the table
below.
Thousand euros |
Prognosis in reorganisation plan
for 40 months till 30.04.2023 |
Actual for 40 months till 30.04.2023 |
Revenue |
48 849 |
20 861 |
Total revenue |
48 849 |
20 861 |
Cost of goods sold |
36 955 |
19 463 |
Gross profit |
11 894 |
1 398 |
Gross profit margin |
24% |
7% |
Various operating expenses |
7 629 |
5 248 |
Payroll |
8 112 |
6 700 |
Depreciation, amortisation and impairment |
487 |
317 |
Other operating expense (-) /income (+) |
3 776 |
11 241 |
Operating income (-loss) |
-558 |
374 |
While observing the actual profit and loss for
40 months (01.01.2020 to 30.04.2023), into which period fall the
impact of reorganisation of claims, the impact of closure of stores
due to Covid-19, lower number of visitors due to high number of
Covid cases within population, and the impact of the war in
Ukraine, as well as decline in demand caused by rising energy
prices and inflation, one can see that cumulatively both actual
revenue and gross profit are lower than in prognosis made while
compiling reorganisation plan. At the same time actual various
operating expenses and payroll expenses are lower than in
prognosis. Due to the one-off gain of 7 436 th Euro from the
sale of trademarks, cumulative operating profit of Baltika is 374
th Euro, and this result is significantly better that in the
prognosis made while compiling reorganisation plan.
Baltika’s shareholders’ equity as of 30 April
2023 is 2 480 thousand Euro.
For the fulfilment of the reorganisation plan it
is important that Baltika’s future financial results, considering
the worsening of results in 2021 and the first half of 2022, are
such that they allow repayment of creditors’ claims in accordance
with the terms of the reorganisation plan. According to the
forecast made by Baltika’s management and presented to
reorganisation advisor, Baltika’s projected financial results and
cash flows would be sufficient for that purpose.
The number of Baltika’s employees reduced from
112 as at the end of March 2020 to 58 as at 31.10.2020 and 40 as at
30.04.2023.
Based on the above, the reorganisation
advisor is of the opinion that as a result of confirming of the
reorganisation plan, and implementing the reorganisation measures,
Baltika´s financial situation has improved. Baltika has followed in
its operations the reorganisation plan, due to which fulfilling the
reorganisation plan, including paying the creditors’ claims in the
period set out in reorganisation plan, is still
realistic.
The reorganisation advisor confirms, that he has
forwarded this report in addition to the court also to all the
creditors that are impacted by reorganisation.
Tallinn, 16.06.2023.a.
Artur SuitsReorganisation advisor of Aktsiaselts
Baltika
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