European Lingerie Group AB Investor Newsletter

Edition 3 – March 2019

 
 
 
 

Welcome from CEO Peter Partma
 
 
 

Welcome to the third edition of European Lingerie Group AB investor newsletter. Sales results of Q4 2018 justified our previous belief that the bottom line of declining sales was hit in Q3 2018 and recovery should start. We see this improving trend across most of the markets and especially in Russia. Unfortunately, the trend of closure of small specialized retail shops in Southern and Central Europe continues and the macroeconomy is slowing down in most European markets, which limits the recovery speed to some extent.
 
 

In 2018 the Group invested actively in new technology, new people and process changes. The new products added to the Group’s product portfolio in 2018 started to convert into sales in Q4 2018.  This will continue bringing additional revenue at accelerated speed throughout 2019, as the Group constantly feeds the pipeline with additional novelties, complementary products and other initiatives. It is expected that innovations will comprise at least 10% of the total sales this year. 

 

To highlight a few of the latest initiatives, that you can also read about here, the Group has launched a new brand Senselle by Felina, a fusion lingerie collection aimed at primarily Eastern European and CIS countries. Also, to expand operations and add capacity for private label and Senselle by Felina production, ELG acquired Yustyna Ltd (now Senselle Ltd), a lingerie ready garment producer in Belarus. We will also continue to build and strengthen our international team, just recently Felina welcomed its new Creative Director.

 

In 2019 ELG continues investing current profit into several initiatives and new projects, including product range expansion and developing the online channel. This will allow us to sustain the revenue and expand into new sales channels, products and target customer segments in the future, but unfortunately reduces operating profit margins in the short term.
 
 
 

Investor events
 
 

Pareto Securities organizes a Nordic Corporate Bond Conference on March 21, 2019 in Stockholm, at Sheraton Hotel (Tegelbacken 6). For more information, please contact European Lingerie Group investor relations.
 
 
 

Q4 and 12 months 2018 results
 
 
 

In Q4 2018 the Group was able to demonstrate growth in sales predicted in the previous quarters. The new product lines delivered first sales results as well as the largest markets of the Group such as Russia, Ukraine, Spain and Poland started gradually recovering and bringing positive tendency.
 
 

The Group’s sales amounted to EUR 77.2 million in 12 months 2018 (Q4 2018: EUR 18.1 million). As part of the costs are fixed, decline in revenue caused a drop of profitability margins. Normalised EBITDA in 12 months 2018 amounted to EUR 9.3 million (Q4 2018: EUR 1.3 million). Normalised EBITDA margin in 6 months 2018 was 12.0% (Q4 2018: 7.2%).


The largest growth in sales in Q4 2018 was in Russia and Ukraine, where sales increased by 41.0% and 21.4% respectively. In 12 months 2018, the sales in Poland increased by 3.6% whereas the sales in Spain reduced by 1.5%. The net deficit in Spain is still heavily influenced by the change of the overall retail concept in Southern Europe explained above. Sales in Germany decreased by 0.4% in 12 months 2018 and by 0.2% in Q4 2018 due to the slowdown of the European macroeconomy and blocked potential growth.

 

European Lingerie Group AB 12 Months and Fourth Quarter 2018 Report is available for viewing and download here and the presentation of the report here.
 
 
 

Update on the bond term conditions and covenants
 
 

The Group understands that it is on the edge with its bond financial covenant at the moment and the net debt/EBITDA threshold goes down from 4.50 to 4.25 from February 2019. The management is fully focused that the Group complies with the covenant’s requirements and several improvement steps are in the implementation process.
 
 
 

ELG acquires Yustyna, a lingerie ready garment producer in Belarus, for Senselle brand and private label production
 
 
 

In January 2019, the Group announced the acquisition of Yustyna Ltd (subsequently renamed to Senselle Ltd), a lingerie ready garment producer in Belarus. The acquisition is part of the Group’s strategy to expand operations and add capacity for private label and ELG newest own brand Senselle by Felina production.
 
 

With this acquisition the Group gained an additional production platform and added competence for ready-made garment production. Having a production unit in Belarus allows the Group to be close to its main markets, so as to provide short delivery times, react quicker to market demands and have a sustainable cost structure. The acquisition will not impact the Group profitability for 2019, but will have a positive cost impact in the coming years on the production of lingerie ready garments. The deal was financed by the Group’s own resources. The Group plans to have additional CAPEX investments in the acquired plant to update some of its production machinery.
 
 

The target is to produce all of Senselle by Felina in the Belarus unit, which is located close to the brand’s main markets, Eastern Europe and CIS countries. Recently lauched Senselle by Felina is a fusion lingerie collection providing unprecedented fit and comfort of premium lingerie garments at great value. First three series of Senselle classical collection are already in retail whereas the full range will be available from March.

 

Product range expansion is part of ELG’s strategy execution to position itself as a one-stop supplier of all relevant product segments. In 2018 ELG also launched both a sport and swim collection by Felina.
 
  
 
 
 
 

Initiatives and plans going forward
 
 
 

ELG is working on a number of new initiatives to respond faster to changes in the market to capture the competitive positioning of the Group. We believe that the omni-channel sales strategy is the long term sustainable and innovative one and we will be pursuing it. Continued development and geographical expansion of Dessus-Dessous, a premium lingerie online store acquired in 2018, is our priority. This step proves our strong commitment towards online sales channel development for ELG. We plan for the investments in own online development to facilitate growth of our online customers, the fastest growing customer group for ELG.
 
 

In addition, we assess an investment in an online start-up project in the lingerie industry to leverage from the Group's 5,000 points of sale and bringing those online. The idea is to develop an online store which would be promoted as a separate online retail concept while products placed would be those of the retail stores. Shipping would be done by the individual stores while all customer experience would be mainly supported by "Omni-channel" project online by ELG.

 

As an integrated group, ELG has the possibilities to react to market trends much faster so we are working on reducing our lead time for ready garments in the coming year. We also continue to bring synergies into the group structure of cost reduction, shorter lead times and productivity increases as well as continue to strengthen our international team.
 
 
 
 
 

ELG brings spacer cup molding in-house
 
 
 

From January 2019, ELG started with in-house production of spacer molded cups at one of the Group companies, Lauma Fabrics plant. This development reinforces the full vertical integration of ELG and offers new possibilities for growth. Felina, also an ELG company, will be one of the biggest clients for Lauma Fabrics in spacer cups.
 
 
 

Sara Shahin joins Felina as Creative Director
 
 

As the newest addition to European Lingerie Group leadership, from February 2019 Mrs. Sara Shahin joined Felina GmbH as Creative Director. Mrs. Shahin has over 10 years of international experience in creating designs for big brands in the lingerie, intimate apparel and fashion industry. Sara is in charge of the strategic and operative management of Felina and Conturelle collections as well as introducing new product lines to the market.
 
  
 
 

Investor relations contact
 
 

Silver Pukk

+372 509 7147

silver.pukk@elg-corporate.com
 
 
 

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