European Lingerie Group AB Investor Newsletter

Edition 4 – August 2019

 
 
 
 

Welcome from CEO Peter Partma
 
 
 

Welcome to the 4th edition of European Lingerie Group AB investor newsletter. Even though the trend of closure of small specialized retail shops in Southern and Central Europe still continues and macroeconomy is slowing down in most European markets, which limits the recovery speed to some extent, the sales results of the second quarter of 2019 for European Lingerie Group were at the level of the previous year. During 6 months 2019, both - textiles and lingerie segments performed better than in 6 months 2018.
 
 

The Group continues realising its strategy of vertical integration, which takes time and bears costs during the transformation phase of the previous processes. In 2019, the Group’s new product lines, including our new brand Senselle by Felina and also Felina swimwear, have started bringing good volumes. The contribution of these new products to total sales will continue with increasing pace throughout the whole year. 

 

On the production side, we continue investing in our manufacturing base in order to improve the quality of our products as well as to offer better and new materials to our customers. As a results of these investments, which you can read about here, we will be able to serve backlog on orders we have in new technologies. Named investments will gradually convert into cost savings and profit margin improvement starting from the second half of this year. 

 

We also continue to build and strengthen our international team. In July Group company Lauma Fabrics welcomed its new CFO and starting from September, Felina Group will have a new CEO. 
 
 
 

ELG AB investors meeting, September 4, Liepaja, Latvia
 
 

European Lingerie Group AB (ELG) invites investors to a meeting held at ELG company Lauma Fabrics headquarters in Liepaja, Latvia (Ziemeļu iela 19) on Wednesday, September 4, 2019 at 11.00 am (EEST). The purpose of this event is to give an in-depth overview of ELG operations, performance and strategy. A detailed agenda will be provided to before the event. Participants are kindly asked to register for the event by contacting ELG investor relations by e-mail or by phone: +372 509 7147. More information about the event can be found here.
 
 
 

Q2 and 6 months 2019 results
 
 
 

In 6 months 2019, the growth in sales was achieved by sales of new product lines, i.e. the Group's new brand Senselle by Felina lingerie and new Felina swimwear collection, as well as the general increase of orders from traditional customers in the textile segment and the overall improvement of the sales trend in particular markets.
 
 

The Group’s sales amounted to EUR 39,985 thousand in 6 months 2019 (Q2 2019: EUR 18,963 thousand), representing a 4.3% increase as compared to pro forma sales of 6 months 2018 (0.1% decrease to pro forma sales of Q2 2018). Profitability margins in 6 months 2019 are generally comparable to those of 6 months 2018 and some demonstrating a slight improvement. 

 

Normalised EBITDA in 6 months 2019 amounted to EUR 4,628 thousand (Q2 2019: EUR 1,944 thousand) and increased by 0.5% compared to pro forma normalised EBITDA in 6 months 2018 (11.1% decrease to pro forma normalised EBITDA for Q2 2018). Normalised EBITDA margin in 6 months 2019 and 6 months 2018 was 11.6% and 12.0% respectively (Q2 2019 and Q2 2018: 10.3% and 11.5% respectively).


The largest growth in sales in 6 months 2019 was in Russia and Belarus. These markets grew by 44.8% and 34.2% respectively in 6 months 2019 (11.3% and 57.2% respectively in Q2 2019). Spain and Poland also delivered sizeable growth both in 6 months and Q2 2019, whereby sales in these countries in 6 months 2019 increased by 6.4% and 3.1% respectively (Q2 2019: 7.2% and 1.3% respectively). 

 

European Lingerie Group AB 6 Months and Second Quarter 2019 Report is available for viewing and download here and the presentation of the report here.
 
 
 

Investments into production
 
 

During 6 months 2019 the Group invested into property plant and equipment and intangible assets EUR 1,400 thousand. The main investments during this period related to the remaining payment for the spacer molding equipment for Lauma Fabrics, the down-payment for 2 new knitting machines, lace and racheltronic technology, as well as the next instalment for the stenter (pictured below) acquired by LSEZ Lauma Fabrics SIA. In addition to this, the Group continues investing in its new sewing plant in Belarus, whereby it increases the number of sewing machines there and develops a new material cutting facility, which is necessary for sewing operations.
 
 
 

Yustyna, a lingerie ready garment producer in Belarus, obtains BSCI certificate
 
 
 

In January 2019, the Group announced the acquisition of Yustyna OOO (subsequently renamed to Senselle OOO), 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.
 
 

In May 2019, Senselle OOO obtained the Business Social Compliance Initiative (BSCI) A-grade certificate. The company is the first lingerie producer to obtain a BSCI A-grade certificate in Belarus and also in the region, as no other lingerie producer in the neighbouring countries of Latvia and Lithuania has this level BSCI certificate.
 
 

The main reason for obtaining the BSCI certificate for Senselle OOO is transparency of the company's high standards of the working conditions within the supply chain, social compliance and achievements in business sustainability. Undoubtedly the BSCI certificate will raise the reputation of Senselle as a socially responsible business and offer more value to the its customers.

 

BSCI unites over 1,000 companies around one common Code of Conduct and offers one single Implementation System that enable all companies sourcing all types of products from all geographies to collectively address the complex labour issues of their supply chain. 
 
  
 
 
 
 

Medical business separation
 
 
 

In May 2019 LSEZ Lauma Fabrics SIA established a new subsidiary SIA Lauma Medical in order to separate its medical business into it. The separation was done for allowing the business to develop and be led independently as it focuses on a different market, product development process, etc.
 
 
 

ELG companies receive top rankings and awards
 
 

For two consecutive years, Dessus-Dessous, part of ELG, is ranked by Capital Magazine as one of the top French e-commerce sites for lingerie, those offering the best shopping experience. This year’s standing for Dessus-Dessous is no 2 (up one place, from no 3 last year).
 
  
 
 
 

In April 2019, Lauma Fabrics, a major textile materials manufacturer for the lingerie industry in Europe, part of ELG, was awarded by the State Revenue Service of Latvia as the largest taxpayer in Kurzeme region, Latvia in the group of average taxpayers in 2018.
 
 
 

Evi Vandenzavel joins Felina as CEO 
 
 
 

As the newest addition to European Lingerie Group leadership, from September 2019, Evi Vandenzavel joins the Felina Group, part of ELG, as CEO. Mrs. Vandenzavel is an experienced sales professional with over 15 years of work history in the chemical and apparel & fashion industries. Her most recent position has been Global Sales Director for Van de Velde, a lingerie business.
 
 
 

Jelena Vershinina joins Lauma Fabrics as CFO
 
 

Starting from July 2019, Jelena Vershinina took the position of CFO of LSEZ Lauma Fabrics SIA, a ELG company. Mrs. Vershinina has extensive expertise in advisory and corporate finance, audit of EU funds administration and SAP implementation. Her most recent and longest-standing position was Senior Associate at KPMG Latvia. 
 
  
 
 

Investor relations contact
 
 

Silver Pukk

+372 509 7147

silver.pukk@elg-corporate.com
 
 
 

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