European Lingerie Group AB publishes unaudited 9 Months and Third Quarter 2020 Report (January 1 – September 30, 2020), including condensed interim consolidated financial statements.
ELG is pleased to publish its 9 months and third quarter 2020 report. During the third quarter, the Group experienced rather stable recovery of its volumes and filled its production close to fully utilised capacity.
“We are satisfied with the results of the reporting quarter and in some product groups we managed to trade even at the level above the same period last year. Q3 2020 showed that the measures implemented by us for recovering lost sales volumes and improving profitability margins start to pay back. This further provides solid base to complete the investment and restructuring process of the bonds,” commented Indrek Rahumaa, CEO of the Group.
The Group’s sales amounted to EUR 48,664 thousand in 9 months 2020 (Q3 2020: EUR 16,013 thousand), representing a 17.6% decrease as compared to sales of 9 months 2019 (15.5% decrease to Q3 2019). In 9 months 2020, the decrease in sales was mainly a result of COVID-19 outbreak and related reduction of orders during the lock-down period followed by partial deferral of orders by customers and delayed shipments of novelty collection by lingerie garment segment. In addition to that, due to introduction of a smaller Felina swimwear collection in 2020, revenue of swimwear was also lower in 9 months 2020 than in the same period last year. In the reporting quarter, the textiles segment achieved a growth in revenue whereby the lingerie segment still experienced a drop. The drop in the revenue of the lingerie ready garment segment in the reporting quarter is mainly explained by the continuing relatively weak customer turnover in physical stores as well as the delay of autumn/winter 2020 novelty shipments as explained above. Furthermore, closure of stores during the second quarter of 2020 limited significantly the possibility of sales of spring/summer 2020 novelties to be at full price and larger parts of those than normally were either sold at discount or returned at the end of the season, which was a negative effect to the revenue of the reporting quarter carried as a consequence of the lock-down imposed in the second quarter of 2020.
Profitability margins in 9 months 2020 were below previous year which is explained by COVID-19 outbreak and shortfall in revenue which made it difficult to cover part of the fixed costs. The drop in profitability though was partly outweighed by the additional business from protective masks, state subsidies received for the down-time payments to employees and strict cost control during the lock-down period. Q3 2020 profitability from traditional textile and lingerie product operations was satisfactory, however, it was negatively affected by the write downs accrued for the face masks stock in the amount of EUR 960 thousand to reflect their net realisable value at period-end and outweigh the higher profit realised on the medical mask business during the second quarter of 2020.
Normalised EBITDA in 9 months 2020 amounted to EUR 2,951 thousand (Q3 2020: EUR 952 thousand) and decreased by 61.3% compared to 9 months 2019 (68.2% decrease to Q3 2019). Normalised EBITDA margin in 9 months 2020 and 9 months 2019 was 6.1% and 12.9% respectively (Q3 2020 and Q3 2019: 5.9% and 15.8% respectively).
Normalised net profit in 9 months 2020 amounted to a loss of EUR 2,804 thousand (Q3 2020: loss of EUR 1,078 thousand), compared to normalised net profit of EUR 1,085 thousand in 9 months 2019 (Q3 2019: EUR 660 thousand). Decrease in net profit is as well explained by the reasons described above.
Core operating markets for European Lingerie Group are Germany, Spain, France, Poland, Benelux countries, Baltic countries, Russia, Belarus, Italy and Ukraine. Group’s sales in its core markets in 9 months 2020 were 86.5% of its total sales against 84.1% in 9 months 2019 (85.1% in Q3 2020 against 84.3% in Q3 2019).
As a result of COVID-19 outbreak, sales in all markets operated by the Group demonstrated a decrease in 9 months, except Baltic countries and France. In Q3 2020, also Belarussian and Polish markets demonstrated a recovery and growth.
Sales in the Baltic countries increased by 39.9% in 9 months 2020 compared to previous year (Q3 2020: increase by 27.7%). 9 months increase is explained by sales of medical masks and respirators, while Q3 growth was a result of the market and production recovery after the first wave of COVID-19.
Sales in France increased by 41.4% in 9 months 2020 and by 22.0% in Q3 2020 compared to previous year. Such an outstanding growth was caused by two factors. Firstly, Felina’s Hungarian production facility concluded a contract for sewing protective masks for a French customer. Secondly, switch of demand from traditional shopping to online during the lock-down period resulted in higher sales achieved by the Group’s online retailer – Dessus-Dessous S.A.S.
Sales in Spain had the most dramatic drop – by 65.7% in 9 months 2020 and by 149.0% in Q3 2020 compared to previous year. This was mainly a result of Covid-19 impact as well as substantial returns received by the Group from its key customer in the market in Q3 2020 which combined the returns related to Q1 and Q2 2020, but were delayed due to closure of retail stores in Spring.
Sales in Italy decreased by 21.6% in 9 months 2020 and by 55.7% in Q3 2020 compared to previous year. 9 months drop was not as significant as Q3 because of sales of medical masks imported by the Group from China. Like for like sales change in 9 months 2020 (excluding medical masks impact) was a decrease of 54.6%. Both Spain and Italy suffered severely from the COVID-19 and applied restrictions, which lowered substantially the level of tourists in the country during the summer vacation period and as a result reduced customer flow and sales in the retail stores.
Sales in Russia decreased by 38.0% in 9 months and 28.0% in Q3 2020. This was a result of tighter restrictions on movement imposed by the government in the region together with complete closure of stores except for pharmacies and grocery shops for 2 months during Q2 2020. Belarus and Poland suffered from the same effect as large portion of lingerie ready garments produced in these countries are exported to Russia for retail. After the release of restrictions in June 2020, the Russian market started recovering quite fast and sales volume started to pick up.
Sales in Ukraine decreased by 18.4% in 9 months 2020 and by 29.6% in Q3 2020 compared to previous year. The lower year-to-date drop is explained by Senselle by Felina lingerie sales in the region which are not shipped regularly on monthly basis.
In July 2020 the Group reached an agreement on a standstill with the Bondholder Committee regarding ELG’s defaults under the Terms and Conditions as well as a cooperation between the ELG and the Bondholder Committee to explore and execute a potential restructuring of the Group and the Bonds. The initial long stop date for the standstill was 30 November 2020, which was later extended to accommodate the investment process deadlines with a requirement to sign binding investment agreement by mid-December at the latest and full closing of transaction in January 2021 at the latest.
European Lingerie Group AB 9 months and Third quarter Report of 2020 is available for viewing and download here.
This information is information that European Lingerie Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out below, at 18:25 CET on 30 November 2020.
For more information, please contact:
Head of Strategy, M&A and IR
European Lingerie Group AB