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SFG manufacturing & wholesale operations are growing
Aug '08
AS Silvano Fashion Group (SFG) announces consolidated Interim Report for Q2 and 6 months of 2008. AS Silvano Fashion Group and its subsidiaries continued retail expansion in the first 6 months of 2008, opening 19 new shops in different countries.

The Group recorded a substantial growth in Russia and Ukraine, at the same time the weakening in consumer confidence in the Baltic countries has had an effect on the Group's results in the region. Economies of the Baltic countries still experience a slowdown, with inflation also gathering pace, mainly in step with the rising prices of energy and food.

However, the Management estimates the Baltic slowdown to be counterbalanced by favourable economic situation in the other growing markets, such as Russia, Belarus, Ukraine, and Kazakhstan, and the Group's revenue outlook for the year remain in line with earlier expectations.

The SFG manufacturing and wholesale operations are growing as compare to the previous year with exception of Lauma Lingerie which is downsizing its production in Liepaja and shifting it to China and Belarus. The fact that the share of retail has grown at a high pace is pulling down the profitability and respectively Net Profit and EBITDA numbers.

However at the same time retail operations in Russia, the major region for the retail expansion of the Group, are demonstrating more than a 50% growth year-on-year (for the shops with more than 1 year in operations).

LFL lingerie retail sales are also growing in Belarus, Lithuania and Poland. Apparel retail performance in the Baltic countries is lower compare to the previous year mainly due to the economic situation in the region. The Management foresaw the drop in earnings when budgeting year 2008 considering this to be a temporary consequence of the retail expansion.

AS Silvano Fashion Group ended the second quarter of 2008 with consolidated net sales of EEK 485.7 million (EUR 31.0 million), representing an 18.3% increase on the second quarter of 2007. The Group's gross margin in the second quarter of 2008 reached 42.7% compared to 46.3% in the second quarter of 2007. Consolidated operating profit amounted to EEK 59.7 million (EUR 3.8 million), representing a 32.5% decline compared to normalised operating profit of Q2 2007. The consolidated operating margin reached 12.3% (down from 21.5% in Q2 2007).

Consolidated net profit attributable to equity holders amounted to EEK 18.1 million (EUR 1.2 million), compared to EEK 40.6 million (EUR 2.6 million) in Q2 2007, and the net margin was 3.7% (down from 9.9% in Q2 2007).

Cumulative six months' sales of AS Silvano Fashion Group amounted to EEK 914.5 million (EUR 58.4 million), showing 17.4% increase compared to H1 2007. The Group's gross and operating margins in the first half of the 2008 stood at 43.7% and 12.6% respectively (43.9% and 19.5% (normalised) in H1 2007). Operating profit in the first six months of 2008 amounted to EEK 115.3 million (EUR 7.4 million) compared to normalised EEK 151.6 million (EUR 9.7 million) in H1 2007.

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