The third 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 third 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.
Due to the reorganization proceedings, Baltika has been able to
focus and follow through with its business turnaround during the
last year – switching to just one brand (Ivo Nikkolo), optimizing,
and also heavily reducing all operating expenses even further than
what was previously indicated in the reorganization plan. The new
in-store assortment and the new business strategy have also helped
Baltika survive the negative impact of the second wave of Covid-19.
Baltika confirms it will certainly be able to successfully complete
the reorganization plan and will manage the payment of all
obligations according to the plan, if not even earlier than
expected if there will not be any additional or other negative
business scenarios in particular due to Covid-19 further spread all
over Baltics.
Flavio PeriniMember of Management Board, CEO
flavio.perini@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 reorganization plan of AS
Baltika (hereafter Baltika).
In accordance with § 50 of the Reorganisation
Act, the reorganization advisor of Baltika hereby presents to the
court and creditors the third written report regarding the
fulfillment of the reorganization plan.
To verify the fulfillment of the reorganization
plan and evaluate the financial situation, the reorganization
advisor has used the audited accounts of Baltika as of 31.12.2020
and unaudited accounts as of 31.10.2021.
Fulfillment of the reorganization
plan
The claims of 30 creditors in the total amount
of 12 206 649.74 euros were transformed based on the
reorganization plan. Claims were transformed in two groups.
The total financial impact of reduction of
claims based on the reorganization plan is 5 045 198
euros, which is recorded under other operating revenue in Baltika’s
2020 profit and loss statement.
Based on the reorganization 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 I. Baltika has
fulfilled this obligation to Swedbank AS. Other creditors in Group
I have confirmed to the reorganization 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 must start from the end of
2021. As of the date of this report Baltika has not made any
payments to Group II creditors yet but the company has informed
reorganisation advisor about its intent to do so before 31 December
2021.
Baltika’s financial
situation
Within the first six months 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).
Results of 2021 are being significantly affected
by restrictions caused by the Covid-19 pandemic and the closure of
stores in Lithuania, Latvia and Estonia. The sharp decline in
revenue starting from December 2020 (stores were completely closed
in Latvia and Lithuania from December of 2020 and in Estonia from
March of 2021, and reopened to visitors in May of 2021 in Lithuania
and Estonia and June of 2021 in Latvia), which was partly
compensated by an increase in revenue from e-channel, meant that
during 2021 Baltika’s actual revenue, gross profit and operating
profit were considerably lower than the respective figures
presented in the prognosis in the reorganisation plan.
The below table contains the prognosis of the
2020 profit and loss statement presented in the reorganisation plan
of Baltika, the actual profit and loss for 2020, the figures for 10
months from the prognosis (01.01.2021 until 30.10.2021) and the
actual profit and loss statement for ten months of 2021.
Thousand euros |
Prognosis 12 months 2020 in reorganization
plan |
Actual 12 months 2020 |
Prognosis 10 months 2021 |
Actual 10 months 2021 |
Revenue |
12 300 |
9 891 |
16 125 |
6 349 |
Total revenue |
12 300 |
9 891 |
16 125 |
6 349 |
Cost of goods sold |
11 302 |
8 578 |
11 030 |
4 956 |
Gross profit |
998 |
1 313 |
5 095 |
1 393 |
Gross profit margin |
8.1% |
13,3% |
31,6% |
21,9% |
Various operating expenses |
2 844 |
2 140 |
2 029 |
1 304 |
Payroll |
3 533 |
2 576 |
1 893 |
1 734 |
Depreciation, amortisation and impairment |
137 |
82 |
137 |
95 |
Other operating expense (-) /income (+) |
3 895 |
3 747 |
-119 |
116 |
Operating income (-loss) |
-1 622 |
262 |
1 154 |
-1 623 |
The comparison shows that the actual operating
profit of Baltika for 2020 was far better than the prognosis made
when compiling the reorganisation plan, but the actual operating
profit for the ten months of 2021 is considerably worse than the
prognosis made when compiling the reorganisation plan. The actual
operating profit for the ten months of 2021 is €2 777 thousand
lower than that of prognosis, whereas for the first four months of
2021 the profit was lower by € 2 849 thousand, which shows that
during the last six months the performance has somewhat improved.
Looking at the combined profit and loss for 22 months or the period
from 01.01.2020 to 31.10.2021, which reflects both the impact of
the measures of reorganisation plan and the impact of the closure
of stores due to Covid-19, one can see that cumulatively both
combined figures of actual revenue and operating profit are lower
than those of prognosis in reorganisation plan (see table
below).
Thousand euros |
Prognosis in reorganization plan
for 22 months till 31.10.2021 |
Actual for 22 months till 31.10.2021 |
Revenue |
28 425 |
16 240 |
Total revenue |
28 425 |
16 240 |
Cost of goods sold |
22 332 |
13 534 |
Gross profit |
6 093 |
2 706 |
Gross profit margin |
21,4% |
16,7% |
Various operating expenses |
4 874 |
3 443 |
Payroll |
5 427 |
4 310 |
Depreciation, amortisation and impairment |
274 |
177 |
Other operating expense (-) /income (+) |
4 014 |
3 863 |
Operating income (-loss) |
-468 |
-1 361 |
The comparison between actual profit and loss
for 22 months and prognosis made while compiling reorganisation
plan shows that actual various operating expenses and payroll
expenses are lower than in prognosis. Therefore, the deficit of
operating profit can be fully explained by lower gross profit,
which in turn is caused by the circumstances that began in December
of 2020 and continued throughout the first half of 2021 (closed
stores).
For the fulfillment of the reorganisation plan,
it is important that Baltika’s future financial results,
considering the temporary worsening in the first half of 2021, 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 until the end of 2021 and for
2022 (presented to reorganisation advisor in December 2021), and
assuming normalised retail activities, Baltika’s 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 of 31.10.2020 and 42 as of
31.10.2021.
Baltika’s shareholders’ equity is € 948 thousand
as of 31.10.2021.
As of 31.10.2021, Baltika had overdue payables
in the amount of €16 thousand that have been paid as of the date of
this report, which shows that Baltika has been able to meet its
current liabilities.
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, 16.12.2021.a.Artur SuitsReorganisation
advisor of Aktsiaselts BaltikaDigitally signed
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