The fifth 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 fifth 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
continue with business reorganisations during 2022 – to close the
vast majority of unprofitable stores and launch a new store concept
in four locations. We have optimised business processes and
significantly reduced operating expenses. Our strategic decision to
sell some of Ivo Nikkolo’s trademarks brought Baltika a one-time
profit in the amount of 7,436 thousand euros, which successfully
fulfilled the equity recover plan. Baltika confirms that it will be
able to successfully fulfil the restructuring plan and the
obligations assumed by 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 fifth 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 31.12.2021
and unaudited accounts as at 31.10.2022.
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
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 I. Baltika has
fulfilled this obligation to Swedbank AS. Other creditors in Group
I 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, and the first payments were made before the deadline or 31
December 2021. As of the date of this report Baltika has not yet
made payments to Group II creditors that are due at the end of
2022, but the company has informed reorganisation advisor about its
intent to do so before 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 2021
profit and loss statement presented in the reorganisation plan of
Baltika, actual profit and loss for 2021, the figures for 10 months
from the prognosis (01.01.2022 until 31.10.2022) and the actual
profit and loss statement for ten months of 2022.
|
Thousand euros |
Prognosis 12 months 2021 in reorganisation
plan |
Actual 12 months 2021 |
Prognosis 10 months 2022 |
Actual 10 months 2022 |
|
Revenue |
17 535 |
6 113 |
17 485 |
4 638 |
|
Total revenue |
17 535 |
6 113 |
17 485 |
4 638 |
|
Cost of goods sold |
12 202 |
5 402 |
12 158 |
3 649 |
|
Gross profit |
5 333 |
711 |
5 327 |
989 |
|
Gross profit margin |
30% |
12% |
30% |
21% |
|
Various operating expenses |
2 432 |
1 640 |
1 963 |
992 |
|
Payroll |
2 267 |
2 028 |
1 931 |
1 278 |
|
Depreciation, amortisation and impairment |
162 |
56 |
158 |
111 |
|
Other operating expense (-) /income (+) |
-119 |
111 |
0 |
7 378 |
|
Operating income (-loss) |
591 |
-2 902 |
1 275 |
5 987 |
Results of 2021 were significantly affected by
restrictions caused by Covid-19 pandemic and closure of stores in
Lithuania, Latvia and Estonia. 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.
Revenue, gross profit and operating profit for the first four
months of 2022 were significantly affected by the following
events:
- Unpredictable state of war between Russia and Ukraine that had
an impact of the sales of Baltika in the first weeks of March
(decline in number of visitors to stores). The strongest impact was
experienced in the Lithuanian market where visitor numbers began to
decline from the second half of February (local media was covering
the threat of potential war). By the end of March the situation in
the Baltics had stabilised and visitor numbers started to recover
gradually.
- 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.
- Decline in revenue resulted from planned closure of loss making
stores.
Revenue for 01.05.2022 – 31.10.2022 was
3 139 thousand Euro, which is by 923 thousand Euro lower than
for the same period previous year (revenue for comparable period
was 4 062 thousand Euro). Decline in revenue was caused
by planned closure of loss making stores.
During 01.05.2022 – 31.10.2022 three loss making stores were
closed:
-
- In July of 2022 Veerenni store in Estonia
- In August of 2022 Valmiera Galerija Valleta store in
Latvia
- In October of 2022 Jõhvi Pargikeskus store in Estonia.
Reduced revenue will in future be compensated by opening of a
new store:
- In August of 2022 outlet store in Arsenali Keskus in
Tallinn.
In addition to aforementioned, in the end of
November the old kind of Ivo Nikkolo store in Vilnius Panorama
Commercial Centre was replaced with a store with new Ivo Nikkolo
concept. The new concept will support growth of sales of Ivo
Nikkolo products going forward.
Gross profit for 01.05.2022 – 31.10.2022 was
700 th. Euro, and gross profit margin 22%. Gross profit for
the comparable period of the previous year was 764 th. Euro
and gross profit margin 19%. Decline of gross profit is directly
related to decline in revenue. Gross profit margin has improved by
three percentage points. Increase in prices of raw materials and
cost of transportation, and strengthening of US dollar, have
brought about a considerable increase in the cost of goods and
their procurement. Despite of that Baltika has managed to improve
its gross margin as a result of well managed pricing policy on its
markets (discounting in stores has been strategically thought
through and increase in cost of goods has been partially passed on
to consumers).
Operating profit for 01.05.2022 – 31.10.2022 was
6 761 th. Euro. Operating loss for the comparable period
the previous year was 898 th Euro. Operating profit for
01.05.2022 – 31.10.2022 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, which explains the increase in operating profit
as compared with the same period last year. Operating profit for
the current period (01.05.2022 – 31.10.2022,) without taking into
account the gain from sale of Ivo Nikkolo trademarks, would have
been (668) thousand Euros. Still this result would have been 230
thousand Euro better that for the same period last year.
The prognosis vs actual cumulative profit and loss for 34 months
from 1 January 2020 to 31 October 2022 is presented in the table
below.
|
Thousand euros |
Prognosis in reorganisation plan
for 34 months till 31.10.2022 |
Actual for 34 months till 31.10.2022 |
|
Revenue |
47 321 |
20 642 |
|
Total revenue |
47 321 |
20 642 |
|
Cost of goods sold |
35 663 |
17 630 |
|
Gross profit |
11 658 |
3 013 |
|
Gross profit margin |
25% |
15% |
|
Various operating expenses |
7 239 |
4 771 |
|
Payroll |
7 731 |
5 883 |
|
Depreciation, amortisation and impairment |
457 |
249 |
|
Other operating expense (-) /income (+) |
3 776 |
11 236 |
|
Operating income (-loss) |
7 |
3 346 |
While observing the actual profit and loss for
34 months (01.01.2020 to 31.10.2022), 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, 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 3 346 th Euro, and
this result is significantly better that in the prognosis made
while compiling reorganisation plan.
As a result of operating profit for ten months
of 2022, Baltika’s shareholders’ equity has become positive and is
5 930 thousand Euro as at 31.10.2022.
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 36 as at
31.10.2022.
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, 16.12.2022.a.
Artur SuitsReorganisation advisor of Aktsiaselts
Baltika
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