2011-08-12 08:30:00 CEST
2011-08-12 08:30:11 CEST
REGULATED INFORMATION
Tiimari Oyj Abp - Interim report (Q1 and Q3)
Tiimari Plc: INTERIM REPORT FOR THE FIRST HALF OF THE YEAR
INTERIM REPORT FOR THE FIRST HALF OF THE YEAR
TIIMARI PLC Interim Report 12 August 2011 at 9.30
INTERIM REPORT
INTERIM REPORT FOR THE FIRST HALF OF THE YEAR
In the first half of the year, Tiimari Group's revenue was 5% lower than a year
ago during the first half of the year. The second quarter revenue increased by
9% in comparison with the previous year. As Easter fell into the second quarter
in 2011, unlike previous year, the second quarter revenue and key figures are
not comparable to the second quarter figures of the previous year. The Group's
income before taxes was well below from previous year.
THE SECOND QUARTER OF 2011 IN BRIEF
- Revenue grew by 9.0% to EUR 15.5 million (14.2)
- Gross margin was EUR 8.9 million (9.0), gross margin % 57.6% (63.2%)
- EBITDA was EUR -3.5 million (-1.6)
- Operating profit (EBIT) was EUR -4.2 million (-2.5)
- Income before taxes was EUR -5.3 million (-3.0)
- Earnings per share (EPS) were EUR -0.32 (-0.18)
THE FIRST HALF OF 2011 IN BRIEF
- Revenue declined by 4.7% to EUR 29.1 million (30.5)
- Gross margin was EUR 15.6 million (18.0), gross margin % 53.6% (58.9%)
- EBITDA was EUR -7.8 million (-4.1)
- Operating profit (EBIT) was EUR -9.0 million (-5.7)
- Income before taxes was EUR -10.1 million (-6.7)
- Earnings per share (EPS) were EUR -0.61 (-0.40)
All figures are unaudited. The interim report was informally reviewed by the
auditors in order to ensure that the financial statements do not include
material misstatements. In the informal audit report, the auditor draws
attention to the sections of business risks and uncertainties, going concern
and goodwill impairment. The informal report by the auditors written in Finnish
is attached to this Interim Report.
GROUP KEY FINANCIAL FIGURES
EUR 1,000
1-6/2011 1-6/2010 Change % 1-12/2010
REVENUE 29,062 30,484 -5 75,797
OPERATING PROFIT -8,996 -5,732 -57 -12,613
EARNINGS PER SHARE EUR -0.61 -0.40 -53 -0.89
TIIMARI OUTLOOK FOR 2011
We estimate that during 2011, the declining trend in Tiimari's revenue,
reported on a monthly basis, will cease and that Tiimari's EBITDA for the
entire year 2011 will remain negative (2010: EUR -1.3 million) and lower than
last year. The revenue of Gallerix is forecast to grow and its EBITDA is
anticipated to be positive and better than in 2010 (2010: EUR 0.1 million).
(See a company announcement published on 5 August 2011 www.tiimari.com)
COMMENTS OF THE MANAGING DIRECTOR
Our financial situation has remained very challenging. This forces us to use
operational processes which are not optimal for the targets of the company.
Investments in the business have been kept at a minimum.
We have battled against a declining trend in sales. Our gross margin
performance has been hit by several factors. Tiimari has faced challenges with
regard to availability and sufficiency of goods. The clearance sale of
discontinued goods has undermined our sales margin. The clearance sale
continues in the third quarter but at the same time our category management is
improving.
Tiimari chain's sales trend seems to be reaching “the hard bottom”: decline in
sales that has continued for several quarters has evened out in the second
quarter. There are still challenges in the improvement of margins. One of our
targets is to increase direct purchasing from the Far East, which would enable
us to improve our margins. The whole year's success relies on the remaining
significant seasons: Back to School, Halloween and Christmas (the fourth
quarter contributes 40% of the annual revenue). Gallerix chain's sales trend
was positive during the period under review, partly due to currency exchange
rates (Euro/SEK). In May-June, the most significant impact was generated by the
former franchise shops that were transferred to be operated by the chain unit.
We continue to make arrangements to implement the refinancing package during
the second half of the year 2011 as announced on 10 June 2011(Stock Exchange
Release, 10 June 2011, www.tiimari.com). The Extraordinary Meeting of Tiimari
Plc's Shareholders on 1 July 2011 (Stock Exchange Release, 1 July 2011,
www.tiimari.com) authorized the Company's Board to implement the planned
financial restructures.
GOING CONCERN
The Interim Report was prepared according to the going concern principle with
the assumption that the operations of the company will continue for 12 months.
Furthermore, the principle presupposes that the company is able to execute the
realisation of assets and the payment of loans through its ordinary business
activities. Tiimari's economic situation is challenging. The going concern
principle is based on the business operations plan approved by the Board of
Directors and on the implementation of the refinancing package authorized by
Extraordinary Meeting on 1 July 2011 (Stock Exchange Release, 1 July 2011,
www.tiimari.com).
GROUP REVENUE AND PROFIT DEVELOPMENT
The Group's revenue for the first half of the year declined by 4.7% to EUR 29.1
million (30.5). The sales for the significant Easter period occurred mainly in
April whereas in the comparison period the Easter sales occurred entirely in
the first quarter, and consequently the second quarter figures are not
comparable to the second quarter figures of the previous year. In the second
quarter, revenue grew by 9.0% to EUR 15.5 million (14.2).
In the first half of the year, the gross margin fell to EUR 15.6 million
(18.0), equalling 53.6% (58.9%). In early 2011 the gross margin percentage was
lower than during the comparison period due to several factors. Because of the
financial situation Tiimari has faced challenges with regard to availability
and sufficiency of goods. The clearance sale of discontinued goods has
undermined our sales margin. In the second quarter, the gross margin was EUR
8.9 million (9.0), equalling 57.6% (63.2%) of revenue.
EBITDA for the first half of the year decreased to EUR -7.8 million (-4.1). In
the second quarter, the Group's EBITDA was EUR -3.5 million (-1.6). The
operating profit decreased in the first half of the year to EUR -9.0 million
(-5.7). The Group's second quarter operating profit declined to EUR -4.2
million (-2.5).
Net financial expenses amounted to EUR -1.1 million (-1.0) in the first half of
the year and EUR -1.1 million (-0.5) during the second quarter. The profit for
the first half of the year was EUR -10.1 million (-6.6). The second quarter
profit was EUR -5.2 million (-3.0). The earnings per share for the first half
of the year was EUR -0.61 (-0.40) and for the second quarter EUR -0.32 (-0.18).
The second quarter results of Tiimari business operations include non-recurring
cost items EUR 1.0 million of which EUR 0.8 million affecting EBITDA.
Non-recurring items relating to Tiimari's updated store strategy include EUR
0.7 million rent liabilities and EUR 0.2 million extra depreciation of outdated
store fixtures in fixed assets. The second quarter results also include
non-recurring items incurred by changes in the company's management amounting
to approximately EUR 0.1 million. These items do not have a cash-flow impact in
the second quarter. The rent liabilities will have a minor monthly effect on
the company's cash flow starting from the third quarter of 2011.
BUSINESS CONCEPT AND SEASONAL CHANGES
Due to the Tiimari concept, the seasonal changes in the operations have
traditionally been strong. During the spring the quarterly results are
significantly affected by the Easter holiday sales peak occurring either during
the first or the second quarter. The fourth quarter contributes about 40% of
the annual revenue. The remaining 60% is accumulated during the first three
quarters with approximately 20% per quarter, depending on when Easter occurs.
The summer holiday period is traditionally quiet in terms of revenue.
The Tiimari Group comprises two leading retail shop concepts: Tiimari and
Gallerix. The concepts operate 268 shops in five countries around the Baltic
Sea region. Both concepts are forerunners in their markets.
Tiimari has 183 shops in Finland and the Baltic states. Tiimari specialises in
hobby and craft, gift wrapping, cards, school and office supplies, party, small
decoration articles as well as seasonal products. The core of the concept is
the element of surprise, affordability and diversity. The operational core
comprises a broad assortment of over 20,000 different items, a low average
price, small shops, weekly new products and large volume. The Tiimari chain was
established in Lahti in 1975.
Gallerix operates 85 shops in Sweden, 30 of which are own shops. The rest
operate on a franchising principle. Gallerix specialises in paintings, frames
and framing, small decoration articles, gift wrapping and cards. The core of
the concept is cosiness, attractiveness, humour and sense of excitement. The
Gallerix chain was established in Uppsala in 1974.
In the Tiimari Group, the product purchase and sales in the shops work in close
cooperation. A key factor is to succeed consistently and continuously combine a
broad product offering and a high turnover rate. The purchasing operations are
managed through analyses based on market research and customer feedback. It is
possible to gain synergy benefits through larger joint purchasing volumes and
partly intersecting product offerings.
Due to seasonal changes, Tiimari's result for the first three quarters has
traditionally been non-profitable and the result for the fourth quarter
significantly profitable in comparison. The extent of the non-profitable
operations during the first three quarters in relation to the profit during the
fourth quarter has defined the full year result.
OPERATING SEGMENTS
TIIMARI
The Tiimari segment comprises all the Tiimari concept shops in Finland and the
Baltic states. The segment revenue for the review period declined by 9.7% to
EUR 22.0 million (24.3). Tiimari's sales in other markets developed more
favourably than in Finland: revenue declined by 5.6% and amounted to EUR 1.2
million (1.3).
At the end of the review period, Tiimari had 183 (192) own shops, of which 164
(168) are in Finland. The Tiimari segment's gross margin was EUR 12.2 million
(15.4), equalling 55.7% (63.4%). The decline in the margins for product
categories accounts for half of the difference in margins. In early 2011 the
gross margin percentage was lower than in the comparison period due to changes
in the distribution of sales as well as higher realised purchase prices and
simultaneously lower sales prices.
The Tiimari segment's EBITDA declined and was EUR -7.2 million (-3.3) for the
first half of the year and EUR -1.3 million for the whole year 2010. The
operating profit for this segment decreased to EUR -8.0 million (-4.4). The
operating profit was undermined by a significant decrease in sales in
comparison with the corresponding period last year as well as by a simultaneous
decline in margins.
The Tiimari segment's investments during the review period were EUR 0.022
million (0.269).
GALLERIX
The Gallerix segment comprises the Gallerix concept shops in Sweden. The
Gallerix segment revenue grew by 15.7% to EUR 7.2 million (6.2). Revenue of the
Gallerix shops in Sweden in local currency amounted to SEK 63.9 million (58.2),
an increase of 9.8%. Gallerix shops' comparable sales growth was 1.7% in the
first half of the year.
According to its new strategy, Gallerix has continued taking over retail shops
in order to enhance shop-specific sales development, to increase the share of
centralised purchasing and in this way to improve the gross profit of the
entire chain. A strategic goal of Gallerix is to increase the number of retail
shops operated directly by Gallerix. At the end of the review period, Gallerix
operated 30 shops (a year ago the corresponding number was 17 and at the end of
2010 it was 14) and 55 shops were operated by franchise entrepreneurs.
With the transition, revenue and gross profits of the Gallerix business
operations have developed favourably. However, at the same time personnel,
rental expenses and the inventory level have increased along with transferred
retail shops. The gross margin improved to EUR 3.3 million (2.5), equalling
46.2% (40.4%). Margin improvement results mainly from increasing the number of
own shops and decreasing the number of franchise shops.
The Gallerix segment's EBITDA was EUR 0.006 million (-0.009) for the first half
of the year and EUR 0.1 million for the whole year 2010.
The operating profit grew to EUR -0.362 million (-0.489), or -5.1% (-7.9). The
Gallerix segment's investments were EUR 0.136 million (0.002) due to the
increase in the number of own shops. In order to strengthen the company's
financial situation Gallerix has negotiated additional EUR 0.3 million
long-term loan during the period under review.
OTHERS
Other operations include common expenses for the Group and senior management
(Board of Directors, Managing Director and Chief Financial Officer). All
business management related operations and personnel were allocated in the
segments during the review period. The operating profit grew and was EUR -0.6
million (-0.9). No internal management fees were charged during the review
period.
IMPAIRMENT TESTING
The units which contain goodwill are tested annually for potential impairment.
Testing during the year is not justified because of the seasonality of the
business, particularly with the strong focus of business on the Christmas
season. However, testing is carried out whenever there have been significant
deviations from the targets in the company's economic situation.
The reporting structure used in monitoring the Group's business operations has
not changed in 2010 and 2011. Units generating cash flow and containing
goodwill are Tiimari and Gallerix.
On 5 August 2011 the company published a Stock Exchange Release lowering the
outlook for the Tiimari segment for 2011 and providing information on
non-recurring items mainly related to the new, updated store strategy and
included in the Interim Report for the second quarter of 2011. On 1 July 2011
the Board of Directors was authorised by the Extraordinary Meeting of
Shareholders to implement a new financing arrangement. The implementation of
this arrangement will change the company's financial position and solvency in
autumn 2011, enabling stronger growth and profitability improvements. The
implementation period for the strategy is 2011-2015.
As the company did not reach its profit development targets for the review
period and made a decision with regard to non-recurring items related to the
strategy and included these in the second quarter of 2011, the company decided
on 5 August 2011 to test the Group's goodwill for potential impairment of the
Tiimari business operations. Testing showed that in the review period goodwill
value of the Tiimari business operations exceeded the book value by
approximately EUR 1.0 million; however, maintaining the current goodwill level
requires the strategic targets to be achieved, particularly in 2012-2015. The
Company's value in use is very sensitive to the development of sales and
profitability according the expectation particularly during the last quarter.
The next impairment testing will be carried out according to the normal
schedule in connection with the preparation of the 2011 financial statements.
For Gallerix segment the impairment testing was not performed because Gallerix
performance and outlook has not changed materially since the previous time of
testing.
MANAGEMENT, SHOP NETWORK AND PERSONNEL EXPENSES
The influence of cost savings in the Tiimari segment could be seen particularly
in other fixed costs which amounted to EUR 2.3 million in the review period
(2.7) before non-recurring items were recorded. Of the personnel expenses of
the Group, Gallerix's personnel expenses saw a particularly significant
increase, 36%, due to the increase in the proportional share of own shops and
these expenses totalled EUR 2.0 million (1.5). Shop rental expenses in the
Tiimari segment were at a lower level than in the corresponding period in the
previous year and amounted to EUR 6.9 million (7.1), whereas in the Gallerix
segment shop rental expenses were 40% higher than in the corresponding period
and were EUR 0.843 million (0.604) due to the increase in the proportional
share of own shops.
INVESTMENTS
Investment restrictions in fixed assets continued particularly in the Tiimari
segment and the Group capital expenditure during the review period totalled EUR
0.158 million (0.281). In the Tiimari segment, investments amounted to EUR
0.022 million (0.269) and in the Gallerix segment to EUR 0.136 million (0.002).
INVENTORY
Inventory totalled EUR 16.8 million on 30 June 2011, a EUR 0.5 million increase
on the comparison period (EUR 16.3 million). The inventory increase resulted
from the significant increase in the share of Gallerix's own shops and the
resulting inclusion of the products in shops' inventories into the Group
inventory. Measures are still being taken in order to improve inventory
turnover levels by clarifying the product offering and by developing purchase
management.
CHANGES IN GROUP STRUCTURE
There were no changes in Group structure during the review period. During the
first half of the comparison year 2010, the Tiimari segment withdrew from
Russia, Norway and Poland and closed all Tiimari shops in Sweden. In addition,
in the same period in Finland all but one Gallerix shops were closed.
BALANCE SHEET, FINANCIAL POSITION AND CASH FLOW
During the first half of 2011 the company was identifying structural and
financial options to strengthen its balance sheet. As a result of the survey
the company announced on 10 June 2011 plans to implement a fairly extensive
financial restructuring. At the same time the company sharpened its strategy
and business plan to improve profitability. To improve financial situation the
company announced also to consider a possible sale of Gallerix business.
Financial restructuring approved by the Extraordinary Meeting of Tiimari Plc's
Shareholders on 1 July 2011 (Stock Exchange Release, 1 July 2011,
www.tiimari.com) may have a significant impact on performance throughout the
year.
The net working capital for the Group was EUR 4.3 million. The net working
capital at the end of the comparison period was EUR 9.1 million and EUR -1.6
million at the end of the 2010 financial year. The net working capital is
affected by the seasonal fluctuations in the operations, so that there is an
increase during the year and a reduction by the end of the financial year. The
inventory levels were EUR 16.8 million (16.3 at the end of the comparison
period).
Short-term receivables amounted to EUR 3.7 million, after falling by EUR 0.5
million since the beginning of the financial year (3.3). Short-term
non-interest bearing liabilities amounted to EUR 16.2 million, after falling by
EUR 4.0 million since the beginning of the financial year (10.4). Both trade
payables and value added tax liabilities decreased from the beginning of the
financial year.
Non-current assets totalled EUR 44.6 million (53.5), a decrease of EUR 1.2
million from the beginning of the review period. The most significant factor
explaining the decrease in non-current assets is that, as announced on 14
February 2011, in the fourth quarter of 2010 Tiimari recorded a goodwill
impairment in the Tiimari business operations amounting to EUR 6.9 million with
no effect on the cash flow.
Due to the seasonal nature of business operations, the amount of net
liabilities increased. Interest-bearing net liabilities totalled EUR 39.7
million (36.7), increasing by EUR 13.7 million from the beginning of the
financial year. The equity ratio was 4.2% (26.5% at end of the comparison
period and 18.9% at the end of the 2010 financial year), and net gearing was
1,417.6% (182.2% at the end of the comparison period and 208.5% at the end of
the 2010 financial year). The equity ratio has been undermined by the
non-profitability of the Tiimari business operations and a goodwill impairment
amounting to EUR 6.9 million that decreased the shareholders' equity by having
an impact on the results but not on the cash flow, executed in the last quarter
of 2010.
The Group has ensured the continuity of debt financing with the Standstill
agreement, signed on 30 December 2010 for the period ending 30 December 2011.
The company's financing covenants related to EBITDA are not applied during the
Standstill agreement period between 30 December 2010 and 30 December 2011. On
30 December 2010, the company issued a convertible capital loan amounting to
EUR 3 million and received the capital in January 2011, which solidified the
financial position and liquidity of the Group in the first quarter. Despite the
Standstill agreement and convertible capital loan issued, the Group's financial
position continues to be very challenging.
The refinancing package approved by the Extraordinary Meeting of Tiimari Plc's
Shareholders on 1 July 2011 (Stock Exchange Release, 1 July 2011,
www.tiimari.com) enables, once implemented, the company to decrease
interest-bearing liabilities significantly and improve its equity ratio as well
as strengthen the Company's liquidity.
The objectives of the planned financial restructuring are
(a) to raise, through the Rights Issue, at least EUR 11 million of new
capital needed to implement the Company's new business plan and to turn the
business profitable, to stabilize the Company's balance sheet and financial
position, and to ensure the continuity of the business, and
(b) to lower the current interest bearing debt level of the Company by at
least EUR 21.8 million through the Directed Issue with the effect of lowering
the net gearing of the Tiimari Group, improving the equity ratio, as well as
lowering financial expenses.
(c) to ensure abilities to get interest-bearing debt (loans from financial
institutions) needed to finance Company's net working capital.
The Extraordinary General Meeting authorized the board to decide on the share
issues required when implementing the financial restructuring. If implemented
the prepared share issues would strengthen significantly the Company's
liquidity and solvency as well as ensure the continuity of the business and the
implementation of the new business plan. The Company has received subscription
commitments and guarantees to Right Issue total of EUR 11.0 million and
subscription commitments of Directed Issue totaling EUR 21.8 million where the
subscriptions are paid by offsetting the creditors' loan receivables from the
Company. The Company's objective is to implement the share issues during the
third quarter.
Shareholders' equity per share was EUR 0.17 (1.22).
Operational cash flow was EUR -13.9 million (-13.6). The negative cash flow was
affected by the decrease in short-term non-interest bearing liabilities of EUR
6.1 million (7.1) and the non-profitability of operations in the review period.
The short-term liabilities decreased due to trade payments and other payables
related to regular Christmas sales. The total investments for the Group were
EUR 0.158 million (0.281).
PERSONNEL
The average number of personnel in the Group during the review period was 570
(602). The numbers have been altered to reflect the share of full-time
employees. The majority of the shop personnel are part-time employees. Tiimari
Retail Ltd is the biggest employer in the Group, employing 461 (453) people.
SHARES AND SHARE CAPITAL
Tiimari shares are listed on the NASDAQ OMX Helsinki Plc stock exchange. As at
30 June 2011, the share price was EUR 0.34 (1.25), and the market value of the
company was EUR 5.6 million (20.6). The share capital of the company was EUR
7,686,200 at the end of the review period, and the number of shares was
16,474,755. At the end of the review period, the company did not hold any of
its own shares.
ANNUAL GENERAL MEETING - 30 MARCH 2011 (Stock Exchange Release 30 March 2011
www.tiimari.com)
The Annual General Meeting of Tiimari Plc approved the financial statements for
2010 and discharged the Board members and the Managing Director from liability.
In accordance with the Board's proposal, the Meeting decided that the loss for
the financial year, EUR 10,978,164.90, shall be booked as retained earnings and
that no dividend is to be distributed.
The Board composition was decided as five members. Hannu Ryöppönen, Sven-Olof
Kulldorff, Juha Mikkonen, Alexander Rosenlew and Sissi Silván were elected to
the Board.
It was decided that the members of the Board shall receive the following
remunerations:
- the chairman of the Board will receive EUR 2,400 a month
- the vice chairman of the Board will receive EUR 1,800 a month
- other members of the Board will receive EUR 1,200 a month
- for the meetings of the Board committees, a separate sum of EUR 100 per
meeting shall be paid
Travel and accommodation costs are paid in accordance with the company's
expenses remuneration policies.
KPMG Ltd was elected to continue as the Group Auditor. KPMG Ltd named Sixten
Nyman, APA, to continue as the auditor with primary responsibility. It was
decided that the auditor's remuneration be paid against the auditor's invoice
and according to the principles approved by the Audit Committee.
In accordance with the Board's proposal, the Annual General Meeting authorised
the Board to decide on a maximum issue of 5,000,000 shares and/or releasing
special rights to shares (including share options) in one or several tranches
in accordance with Chapter 10, Section 1 of the Finnish Limited Liability
Companies Act. This authorisation supersedes previous share-issue
authorisations and is valid until the next Annual General Meeting or 30 June
2012 if this is earlier.
The Annual General Meeting, in accordance with the Board's proposal, decided to
change Section 9 in the company's Articles of Association to the following:
“The notice of the Annual General Meeting shall be published on the Company's
website three (3) months at the earliest and three (3) weeks at the latest
prior to the Meeting, although always a minimum of nine (9) days prior to the
record date of the Meeting as defined in Chapter 4, Section 2, Subsection 2 of
the Finnish Limited Liability Companies Act. The Board of Directors can also
decide to publish the notice by other means. In order for the shareholders to
be entitled to participate in the Meeting, they are required to register for
the Meeting on the date specified in the notice at the latest, which can be ten
(10) days prior to the Meeting at the earliest.”
ORGANISATION OF THE BOARD OF DIRECTORS (Stock Exchange Release, 30 March 2011
www.tiimari.com)
In its organisation meeting held after the Annual General meeting, the Board
elected Hannu Ryöppönen as its chairman and Juha Mikkonen as its vice chairman.
Hannu Ryöppönen was elected chairman of the Appointment and Remuneration
Committee of the Board and Alexander Rosenlew and Juha Mikkonen were elected
members of this committee. Juha Mikkonen was elected chairman of the Audit
Committee and Hannu Ryöppönen and Sissi Silván were elected members.
MANAGEMENT
The Board of Directors appointed Niila Rajala MBA (born 1964) as the new
Managing Director of Tiimari Plc as of 17 May 2011. Hannu Krook MBA (KTM), who
had submitted his resignation as the Managing Director, agreed to continue to
remain at the service of the company for special assignments designated by the
Board of Directors until, at least, 17 June 2011. (Stock Exchange Release, 17
May 2011, www.tiimari.com)
The CFO of Tiimari Plc, Kai Järvikare, has resigned as of 31 August 2011.
(Stock Exchange Release, 13 June 2011, www.tiimari.com)
BUSINESS-RELATED RISKS AND UNCERTAINTIES
The Group's revenue and results development is affected by several
uncertainties related to the business operations. The main risks relate to the
following factors:
-- The Group has ensured the continuity of debt financing with the Standstill
agreement, signed on 30 December 2010 for the period ending 30 December
2011. Despite the Standstill agreement and financial arrangements carried
out in early 2011, the Group's financial position continues to be very
challenging. The Group has explored options to secure long-term financing,
as announced previously. Once the financing solution approved by the
Extraordinary Meeting of Tiimari Plc's Shareholders on 1 July 2011 (Stock
Exchange Release, 1 July 2011, www.tiimari.com) is implemented, the Group's
capital structure will strengthen significantly. Failure to maintain
adequate liquidity and refinancing risk management before the financing
solution is implemented may jeopardise the continuity of business.
-- the costs associated with acquiring capital are difficult to predict
-- the success of the management in the measures taken to develop operations
and improve profitability: renewal of the product offering and elimination
of non-profitable operations
-- actual sales can differ greatly from the forecast as can the periodisation
of the seasonal operative cash flow accrual and their impact on the
company's financial position, loan covenants and on the predictability of
both cash flow and results
-- the development of foreign exchange rates for goods purchased outside the
euro currency area and the gross margin received from the sales of these
goods
-- the choice of business premises in the long term
-- the availability of seasonal products and the functionality of the supply
chain
-- the general development of salaries, rents and transport expenses
-- sensitivity to changes in various factors in the valuation of goodwill and
the Tiimari and Gallerix brands
-- a relative weakening of economic conditions and a possible downturn in
consumer demand can negatively affect the company's sales as well as the
availability of external financing and the terms
-- general changes in interest rates
-- The company is involved as a defendant and a plaintiff in certain ongoing
property and rental agreement-related disputes as well as in one other
contract termination-related dispute. The Financial Statement includes
cumulative provisions of EUR 0.3 million related to disputes.
The operational risks and uncertainties of the company have been presented in
more detail in the 2010 financial statements and no significant changes in
risks have occurred since.
EVENTS AFTER THE PERIOD UNDER REVIEW
In this Interim Report several references are made to the decisions of the
Extraordinary Meeting of Tiimari Plc's Shareholders on 1 July 2011.
DECISIONS OF THE EXTRAORDINARY MEETING OF TIIMARI PLC'S SHAREHOLDERS ON 1 JUNE
2011 (Stock Exchange Release, 1 July 2011, www.tiimari.com)
In accordance with the Board of Directors' proposal, the Extraordinary Meeting
of Tiimari Plc's Shareholders held on 1 July 2011 authorised the Board of
Directors to decide on the issuance of a maximum of 428,969,771 new shares in
two share emissions. The proposed authorisation corresponds to approximately
2,600 percent of the total number of the company's registered shares. The
authorisation can be used to strengthen the company's balance sheet and
financial position and ensure the continuation of the Company's business
operations, and it covers the following share emissions relating to the
Company's Re-financing Plan published on 10 June 2011:
1. a Rights Issue based on shareholders' pre-emptive right of subscription, in
which a maximum of 164,747,550 new shares are offered for subscription at the
subscription price of EUR 0.09 per share,
2. a directed share issue, in which a maximum of 264,222,221 new shares are
offered for the subscription of the lenders of (i) the Company's convertible
capital loans issued on 19 October 2009 and 30 December 2010 amounting to EUR
7.98 million, (ii) the Company's debenture loan maturing on 9 October 2014 and
amounting to EUR 11 million and (iii) the Company's financial institution loans
and credits amounting to at maximum EUR 4.8 million, at the subscription price
of EUR 0.09 per share and subject to a condition that the subscribers pay their
subscriptions by offsetting their respective loan receivables from the Company.
The authorisation affords the Board of Directors a right to decide on all other
terms and conditions for the emissions. The authorisation also provides the
Board of Directors with a right to decide on a directed share issue and, thus,
issue new shares in deviation of the pre-emptive subscription rights of the
shareholders subject to applicable law. The authorisation is valid until 31
December 2011.
The Extraordinary Meeting of Shareholders also made the decision to elect
Benedict Wrede and Mia Åberg to the Board of Directors of the Company, in
addition to the current Board Members: Hannu Ryöppönen, Juha Mikkonen and
Alexander Rosenlew. The decision regarding the composition of the Board of
Directors is conditional and requires the Company to complete the emissions (as
defined in the authorisation given by the Extraordinary Meeting of Shareholders
on 1 July 2011) by 31 October 2011. The new composition of the Board of
Directors and the term of the new Board Members shall become effective on the
same date the shares subscribed in the emissions mentioned above are registered
in the Trade Register.
Board of Directors
Tiimari Plc
Further information:
Managing Director, Niila Rajala, +358 (0)3 812911, niila.rajala@tiimari.fi
Chief Financial Officer, Kai Järvikare, +358 (0)44 7129475,
kai.jarvikare@tiimari.fi
Distribution:
NASDAQ OMX Helsinki
important news media
www.tiimari.com
Tiimari Plc is a listed company. The group consists of two retail shop
concepts: Tiimari and Gallerix. These two concepts do business in five
countries within the Baltic Sea region and there are altogether nearly 300
shops. All concepts belong to the forerunners of their market segment.
NOTES TO THE FINANCIAL STATEMENT, 1 JANUARY 2011-30 JUNE 2011
Basis of preparation
This Interim Report was prepared in accordance with IAS 34. As of the beginning
of the financial year, the company has implemented new or revised IFRS
standards and IFRIC interpretations, as described in the financial statements
of 2010. The implementation of these new and revised standards and
interpretations does not have an impact on the figures reported. Otherwise, the
same accounting principles and calculation methods as in the previous annual
financial statements have been applied.
The preparation of financial statements in accordance with IFRS requires
Tiimari's management to use estimates and assumptions that affect amounts of
assets and liabilities at the time of the preparation as well as amounts of
income and expenses in the financial period. Inventory valuation is based on
regular stocktaking which is the foundation for the management of the goods
flow process. As a general rule, shops do not order goods directly but their
inventories are replenished automatically through the logistics system.
Time-based mechanical devaluations (30 months 25%, 36 months 50% and 42 months
100%) were abandoned at the end of the previous year as we moved into
comprehensive product life cycle management in a systematic goods flow process.
Specific write-offs are made, when necessary.
Furthermore, discretion is needed in the application of financial statement
accounting principles. Estimates and assumptions are based on knowledge at the
time of the Interim Report and consequently include risks and uncertainties.
Actual results may differ from the estimates and assumptions made. The figures
in the income statement and the balance sheet are for the entire Group. The sum
of individual figures may deviate from the presented total figures as the
figures in this document have been rounded. This Interim Report is unaudited.
CONSOLIDATED INCOME STATEMENT
eur 1 000 4-6/2011 4-6/2010 1-6/2011 1-6/2010 1-12/201
0
SALES 15 534 14 242 29 062 30 484 75 797
Cost of goods sold -6 594 -5 239 -13 481 -12 523 -31 963
Gross profit 8 940 9 003 15 581 17 961 43 834
Gross profit, % 58 % 63 % 54 % 59 % 58 %
Other operating income 237 479 799 936 961
Employee
benefit costs -5 300 -4 747 -10 231 -10 141 -20 544
Depreciation -691 -867 -1 203 -1 612 -3 124
Goodwill impairment 0 0 0 0 -6 918
Other operating expenses -7 368 -6 361 -13 941 -12 875 -26 822
OPERATING PROFIT -4 183 -2 493 -8 996 -5 732 -12 613
Operating profit, % -27 % -18 % -31 % -19 % -17 %
Financial income 12 88 629 186 266
Financial expenses -1 090 -568 -1 711 -1 162 -2 499
Net financial income -1 078 -480 -1 082 -976 -2 233
INCOME BEFORE TAXES -5 260 -2 973 -10 077 -6 707 -14 845
Taxes 15 46 28 87 192
NET INCOME FOR THE PERIOD -5 246 -2 927 -10 050 -6 620 -14 653
Equity holders of the company -5 246 -2 927 -10 050 -6 620 -14 653
Earnings per share
for profit attributable
to the equity holders of the
Company
Total -0,32 -0,18 -0,61 -0,40 -0,89
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
NET INCOME FOR THE PERIOD -5 246 -2 927 -10 050 -6 620 -14 653
Translation diffrences -119 83 -100 353 656
Comprehensive income
for the period net of tax -5 365 -2 844 -10 150 -6 267 -13 997
Comprehensive income for the period attributable
to:
Equity holders of the company -5 365 -2 844 -10 150 -6 267 -13 997
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
eur 1 000
30.6.2011 30.6.2010 31.12.2010
ASSETS
Goodwill 25 828 32 618 25 877
Other intangible assets 15 028 16 085 15 496
Tangible assets 3 629 4 652 4 275
Other financial assets 104 104 104
Receivables 5 5 5
Deferred tax assets 29 29 29
Total non-current assets 44 622 53 492 45 785
Inventories 16 812 16 268 14 435
Trade and other receivables 3 653 3 284 4 168
Cash and bank 1 131 2 873 1 626
Total current assets 21 597 22 425 20 229
TOTAL ASSETS 66 218 75 917 66 013
SHAREHOLDERS' EQUITY AND LIABILITIES
Equity attributable to equity holders of parent company
Share capital 7 686 7 686 7 686
Distributable equity fund 23 011 23 011 23 011
Translation differences -107 -310 -7
Retained earnings -27 792 -10 267 -18 229
TOTAL SHAREHOLDERS' EQUITY 2 799 20 120 12 461
LIABILITIES
Deferred tax liabilities 5 682 5 810 5 740
Interest-bearing liabilities 18 459 22 192 15 859
Provisions 449 31 31
Total non-current liabilities 24 590 28 032 21 630
Interest bearing liabilities 22 352 17 338 11 743
Account payable and other payable 16 161 10 426 20 180
Provisions 317 0 0
Total current liabilities 38 830 27 764 31 923
TOTAL LIABILITIES 63 420 55 796 53 553
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 66 218 75 917 66 013
Consolidated Statement of Cash Flows
EUR 1 000
1-6/2011 1-6/2010 1-12/2010
Cash flow from operations
Profit/loss for financial period -10 050 -6 621 -14 653
Adjustments:
Depreciation and impairment 1 203 1 612 10 043
Gain (+) and loss (-) on sale of fixed assets 8 7
Financial income and expenses 1 111 998 2 247
Taxes -28 -87 -192
Other adjustments -14 77
Change in working capital:
Change in inventories -2 431 -1 100 834
Change in short-term receivables 804 466 472
Change in short term liabilities -4 121 -8 039 501
Change in provisions 736 0 0
Interest paid -503 -605 -1 018
Dividends received 4 5
Interest income received 1 6 13
Other financing items -552 -199 -782
Taxes paid -107 -64 -8
Net cash flow from operations -13 948 -13 620 -2 459
Cash flow from investment activities
Investments in
tangible and intangible assets -162 -275 -665
Capital gains from tangible and intangible assets 2
Loans granted -177
Repayment of loan receivables -202
Income on sale of investments 1 1
Net cash flow from investments -162 -451 -864
Cash flow from financing activities
Long-term loans, increase 3 000 6 500
Short-term loans, net change 10 648 7 500 2 133
Payment of lease liabilities -66 -131 -241
Net cash flow from financing 13 582 13 869 1 892
Change in liquid assets -528 -202 -1 431
Liquid assets, beginning of review period 1 626 3 024 3 024
Effect of exchange rate changes on liquid 33 51 34
assets
Liquid assets, end of review period 1 131 2 873 1 626
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
EUR 1 000
Attributable to the equity holders of the company
Share Distributable Translation Retained Total
capital equity fund differences earnings
Shareholders' 7 686 23 011 -663 -3 667 26 367
equity 1.1.2010
Comprehensive
income
for the period 353 -6 620 -6 267
Share based 21 21
payments
Equity on 30.6.2010 7 686 23 011 -310 -10 267 20 121
Shareholders' 7 686 23 011 -7 -18 229 12 461
equity 1.1.2011
Comprehensive
income
for the period -100 -10 050 -10 150
Equity portion of 472 472
convertible loan
Share based 15 15
payments
Equity on 30.6.2011 7 686 23 011 -107 -27 792 2 798
SEGMENT INFORMATION
NET SALES
eur 1 000 2011 2010 2011 2010 2010
4-6 4-6 1-6 1-6 1-12
Tiimari 11 757 11 252 21 951 24 300 61 924
Gallerix 3 796 2 988 7 162 6 189 13 914
Other operations 0 227 0 309 376
Eliminations -19 -225 -51 -314 -416
Group 15 534 14 242 29 062 30 484 75 797
EBITDA
eur 1 000 2011 2010 2011 2010 2010
4-6 4-6 1-6 1-6 1-12
Tiimari -3 218 -1 453 -7 232 -3 281 -1 330
Gallerix 66 66 6 -9 135
Other operations -339 -237 -566 -829 -1 376
Group -3 492 -1 624 -7 793 -4 119 -2 571
OPERATING PROFIT
eur 1 000 2011 2010 2011 2010 2010
4-6 4-6 1-6 1-6 1-12
Tiimari -3 709 -2 004 -8 031 -4 371 -10 435
Gallerix -116 -228 -362 -489 -724
Other operations -358 -258 -603 -871 -1 455
Group -4 183 -2 491 -8 996 -5 731 -12 613
DEPRECIATION AND GOODWILL IMPAIRMENT
eur 1 000 2011 2010 2011 2010 2010
4-6 4-6 1-6 1-6 1-12
Tiimari 491 551 799 1 090 9 105
Gallerix 182 294 368 480 859
Other operations 19 21 37 42 79
Group 691 867 1 203 1 612 10 042
CAPITAL EXPENDITURE
eur 1 000 2011 2010 2011 2010 2010
4-6 4-6 1-6 1-6 1-12
Tiimari 0 168 22 269 622
Gallerix 111 2 136 2 33
Other operations 0 10 0 10 10
Group 110 180 158 281 665
NET SALES BY GEOGRAPHICAL AREA
eur 1 000 2011 2010 2011 2010 2010
4-6 4-6 1-6 1-6 1-12
Finland 11 117 10 562 20 671 22 732 58 384
Sweden 3 809 3 084 7 207 6 497 14 258
Other countires 607 596 1 184 1 255 3 156
Group 15 534 14 242 29 062 30 484 75 797
INTANGIBLE ASSETS
eur 1 000 30.6.2011 30.6.2010 31.12.2010
Book value at 1 January 41 373 49 401 49 402
Changes in exchange rates -114 370 777
Additions 76 18 184
Depreciation and impairment -572 -1 035 -8 879
Disposals and intra-balance sheet transfer 93 -51 -111
Book value at the end of period 40 856 48 703 41 373
TANGIBLE ASSETS
eur 1 000 30.6.2011 30.6.2010 31.12.2010
Book value at 1 January 4 275 4 904 4 904
Changes in exchange rates -13 22 262
Additions 82 253 481
Depreciation and impairment -618 -527 -1 131
Disposals and intra-balance sheet transfer -97 0 -241
Book value at the end of period 3 629 4 652 4 275
CHANGES IN PROVISIONS 1.1.2011 Additions 30.6.2011
Changes in provisions, non-current
Other provisions (shop rents, personnel) 31 418 449
Changes in provisions, current
Other provisions (shop rents, personnel) 0 317 317
Total 31 735 766
KEY FINANCIAL FIGURES
2011 2010 2011 2010 2010
4-6 4-6 1-6 1-6 1-12
Net sales 15 534 14 242 29 062 30 484 75 797
EBITDA -3 492 -1 626 -7 793 -4 120 -2 571
Operating profit -4 183 -2 493 -8 996 -5 732 -12 613
Profit/loss for the financial period -5 246 -2 927 -10 050 -6 620 -14 653
Earnings per share, EUR -0,32 -0,18 -0,61 -0,40 -0,89
Shareholders' equity per share, EUR 0,17 1,22 0,76
Solvency ratio 4,23 % 26,5 % 18,9 %
Gearing 1417,6 % 182,2 % 208,5 %
Net working capital 4 304 9 078 -1 551
Operating cash flow -13 703 -13 034 -1 429
Net Interest-bearing liabilities 39 680 36 657 25 976
Balance sheet total 66 218 75 917 66 013
Average number of shares (pcs) 16 475 16 475 16 475 16 475 16 475
CONTINGENT LIABILITIES
30.6.2011 30.6.2010 31.12.2010
Loans from financial institutions
against the following securities 21 945 23 500 11 632
Corporate mortgages 31 137 31 137 31 137
Pledged shares 1 476 1 476 1 476
Other own liabilities
Bank quarantees 2 679 3 014 2 891
Other liabilities 5 5 5
Leasing liabilities
Due within one year 32 60 80
Due after one year 28 50 48
OTHER RENT LIABILITIES
Due within one year 16 386 13 668 15 534
Due after one year 23 002 20 313 26 182
Other rent liabilities is covered by a provision of EUR 0,6 million.
NOMINAL AMOUNTS OF DERIVATIVES 30.6.2011 30.6.2010 31.12.2010
Forward exchange contracts 0 1 324 0
MARKET VALUE VS. NOMINAL AMOUNTS OF 30.6.2011 30.6.2010 31.12.2010
DERIVATIVES
Forward exchange contracts 0 44 0
Foreign exhange contracts have been valued at market value on reporting day.
Tiimari has not open foreign exchange contracts at the end of the period under
review.
Tiimari does not apply hedge accounting and the effect of the derivatives
have been booked directly in the income statement.
RELATED PARTY TRANSACTIONS (EUR 1 000) Q2 2011 Q2 2010 1-12 2010
Managing Director remuneration (Hannu Krook, 190 111 231
since May 17, 2011 Niila Rajala)
Board remuneration 50 53 107
Interest paid on capital loan (paid 31 March 2011 for period 1 Apr 2010 - 31 Mar
2011)
Hannu Krook 5
Hannu Ryöppönen 5
Sven-Olof Kulldorff 5
Virala Oy Ab (Atine Group Oy parent company) 216
Assetman Oy 38
Baltiska Handels A.B. 19
Total 288
During the first half of the year interests of 2009 convertible capital loan
have deferred
EUR 199 thousand. During the first half of the year interests of
2011 convertible capital loan have deferred EUR 112 thousand.
MAJOR SHAREHOLDERS Shares Shares %
Major shareholders 30.6.2011
Unioca Partners Oy 3 837 731 23,29
Assetman Oy 1 740 645 10,57
Varma Mutual Pension Insurance Company 828 912 5,03
Primate Oy 750 000 4,55
Baltiska Handels A.B. 716 483 4,35
Kargol Oy Ab 580 000 3,52
Aktia Capital Fund 488 149 2,96
Cumasa Oy 407 625 2,47
Suomen Bestand Oy 210 253 1,28
Etera Mutual Pension Insurance Company 210 000 1,27
PRESUMPTIONS OF IMPAIRMENT TESTING
The cash flow estimate for Tiimari segment is based on -4.28 % decline in
revenue for the second half of year 2011 when full year 2011 revenue would be
EUR 58.0 million. The nominal revenue in 2008 of EUR 71.1 million (which had
the margin of 63.8%) would be reached in 2013 (revenue EUR 74.4 million). This
would mean an annual growth of 17.35 % in 2012, 9.41 % in 2013, 9.03 % in 2014
and 4.5 % in 2015. The terminal growth assumption is 0 %. In 2010 the margin
was 63.6%, in 2011 the expectation is 57.5%, in 2012 the expectation is 62.6%,
in 2013 the expectation is 63.0%, in 2014 the expectation is 62.4%, in 2015 the
expectation is 62.0 % with the terminal expectation at 62.0%. The growth of
fixed costs is expected to be an average of 5% per annum. The pre-tax discount
rate used was 10.51% (10.51%).
In the sensitivity analysis for Tiimari segment, a pre-tax discount rate of
11.51% would lead to the goodwill impairment being EUR 2.7 million. The
corresponding growth percentages of -4.78 %, 16.85 %, 8.91 %, 8.53 %, 4.00 %
and the terminal growth of -0.5 % would lead to a goodwill impairment of a EUR
1.7 million higher.
CALCULATION OF KEY FINANCIAL RATIOS
Gross margin = Revenue - materials and supplies *)
EBITDA = Operating profit + depreciation and amortisation
Earnings/share (EPS), EUR = Earnings before tax - income taxes /
issue-adjusted average number of shares for the fiscal year
Shareholders' equity / share, EUR = Equity attributable to the equity holders
of the parent company / issue-adjusted number of shares at the end of the fiscal
year
Equity ratio % = Shareholders' equity * 100 / Total assets - prepayments
received
Gearing ratio % = Interest-bearing liabilities - cash and cash equivalents * 100
/ Shareholders' equity
Interest-bearing net liabilities = Interest-bearing liabilities -
cash and cash equivalents
Net working capital = Inventory + short-term non-interest-bearing receivables -
short-term non-interest-bearing liabilities
Operating cashflow = EBITDA - increase in net working capital - capital
expenditure
*) In Gallerix franchising activities further charged rental
payments are reduced from gross margin.
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