MG BALTIC MG BALTIC GROUP ANNUAL REPORT FOR 2006

Transcription

1 MG BALTIC GROUP ANNUAL REPORT FOR 26 MG BALTIC 2 6

2 PRESIDENT S STATEMENT Goals for the period till 21 were set for the MG Baltic Group s companies in autumn 26. For the first time in the history of the Group, maturity level has been achieved: companies, their managers and teams have started measuring their objectives and results without limiting themselves to a one-year period; they have a vision of how will they have to look after four years. These are ambitious and optimistic goals oriented towards rapid growth of the companies. Lithuanian economy and international markets the companies are present in are experiencing economic growth. Major companies of the Group are holding leading positions, thus they are in position to, and, I d say, they must grow faster than the market. Every day the leading position obligates you to prove by your thoughts, objectives, and works that you are worth it; it means that you have to be the most innovative, the fastest and the most reliable. This cannot be achieved without great willingness and even greater efforts. I wish you hard, yet interesting and meaningful work and continually good results! President of MG Baltic Group Darius Juozas Mockus

3 MG Baltic Group in 26 MG Baltic Group has direct or indirect control over the group of companies engaged in wholesale and retail trade activities, provision of logistics services, production, media activities, real estate development and management, and construction activities. In 26, the principal activities and objectives for MG Baltic Group have remained the same as those in the previous year: appreciation of companies under its direct or indirect control, representation of their interests, development of realisation markets for their products, increase in sales volumes, implementation of new technologies, adoption of modern management principles, and rending of consultations to companies under its control. During 26, MG Baltic Group further focused its business activities on companies under its control to concentrate similar activities in large companies and dispose of certain other companies. For that purpose, the following companies were sold in 26: Park MV SIA, Prekybos Marketingo Paslaugos UAB, and Didneriai UAB. To ensure an adequate diversification of business risks for the group, in 26 MG Baltic Group subsidiary MG Baltic Investment Holding acquired Mitnija UAB group of companies, which is currently on the 7th top position among construction companies in Lithuania according to the scope of construction and building works carried out; and the group of media companies was further strengthened as a result of launching the Internet-based portal www alfa.lt. These solutions have demonstrated the strategy of MG Baltic Group to invest into dynamic industry sectors with the best growth perspectives, as well as its goal to exercise control over the leading companies in relevant industry sectors. MG Baltic Group paid considerable attention to the implementation of projects for business and real estate development, improvement of productive capacity, and marketing. To manage the financial risks associated with implementation of ambitious projects, MG Baltic Group further maintained active business relations with the following banks operating in Lithuania: SEB Vilniaus Bankas AB, Bayerische Hypo und Vereinsbank AG branch in Vilnius, DnB NORD Bankas AB, Sampo Bankas AB. The current project financing contracts do not expose cash flows of companies or implementation of projects to risks, and the portfolio of non-current and current financial liabilities has been balanced in view of the purpose of use of the funds borrowed. The portfolio of financial liabilities comprises liabilities denominated in the euros or litas, taking account of the maturity term of borrowings and the structure of revenue generated by companies in different currencies. MG Baltic Group companies use risk management services rendered by the banks. All MG Baltic Group companies use the services provided by insurance companies. Assets subject to mandatory registration and managed by MG Baltic Group companies have been insured against possible risks. Insurance coverage also involves working capital of companies, freight forwarding, construction risk, and third party liability risk. To manage the risks associated with trade receivables, commodity risk hedging is used. MG Baltic Group companies use the services provided by insurance broker UAD BB March Lietuva, commodity risk hedging services are received from Coface Austria Kreditversicherung AG branch in Lithuania, property, third party liability and other risks are insured with Lietuvos Draudimas AB and UADB Ergo Lietuva. MG BALTIC Group 26 3

4 MG Baltic Group continuously supports events aimed at developing social progress, science, public spirit, and creativity. For several years in a row, Apranga AB has been supporting a concert held in Daukantas square to celebrate the 1st of September; LNK organises annual telemarathon race Gerumo Diena; support rendered by Stumbras AB for Pažaislis Music Festival has already become a tradition; MG Baltic Group supports music support fund and festival Sugržimai, also supports Lithuanian Free Market Institute, as well as several publications of the National Museum of Lithuania, nominal scholarships are provided to four students from the Faculty of Economics of Vilnius University for the best academic performance results. In 26, the Mayor of Kaunas awarded an exceptional symbol of gratitude Gerumo Plyta to Mitnija UAB for its good efforts for the benefit of Kaunas community. In 27, MG Baltic Group became a sponsor of the National Progress Premium. Supporting Lithuanian government indicative to strengthen the cooperation between academic and business societies, In September 27 MG Baltic Investment Holding has signed a cooperation agreement with Kaunas Technology University (KTU) and other Lithuanian academic institutions for establishing an integrated science studies and business centre (Valey) Santaka. At the end of 26, MG Baltic Group consisted of 3119 employees, up from 246 at the end of 25. Structure of MG Baltic Group (End of August, 27):! "# 34 " 5 "! 2 3 "! #$%&'()*+*#$,-)&').&./#'(/ ! 12 MG BALTIC Group 26 4

5 MG Baltic Group financial performance As at 31 December 26, MG Baltic Group group comprised 45 companies (31 companies as at 1 January 26). In 26, net audited consolidated sales of MG Baltic Group Group increased by 19.8 per cent as compared to 25 and amounted to LTL 1,5 million as compared to LTL million in 25. MG Baltic Group consolidated sales 23 26, LTL million ,8% +4,7% ,8% In 26, MG Baltic Group group introduced changes in accounting policy and replaced the cost method formerly applied in accounting for long-term investment property by the fair value method. Pursuant to the requirements of Business Accounting Standards, changes in accounting policy were introduced retrospectively and applied to comparative figures for the year 25. Preliminary audited consolidated profit before tax and minority interest earned by MG Baltic Group and its subsidiaries in 26 amounted to LTL million or 46.6 per cent higher as compared to LTL million in 25. This amount includes the revaluation result of investment property of LTL 9.6 million for 26 as compared to LTL 83.3 million in 25. MG Baltic Group consolidated profit before tax and minority interest 23 26, LTL million +198% 125,7 +47% 184,3 42, MG BALTIC Group 26 5

6 Strategic business directions of MG Baltic Group Retail trade sector The main companies operating in this sector belong to Apranga AB group. In 26, Apranga AB group achieved consolidated sales of LTL million (25: LTL 17. million) and consolidated net profit of LTL 17.4 million (25: LTL 8.9 million). As a result of expanding its business activities to the Latvian and Estonian markets, Apranga AB group has significantly increased the number and area of its retail outlets. In 26, its retail outlets covered an area of 39, m 2, which is 28.7% larger as compared to the previous period. Trade network in foreign markets covered an area of 1.4 thousand m 2, which accounted for 26.8% of the total trade area operated by Apranga group. As at 31 December 26, Apranga group operated the network of 65 retail outlets in the Baltic countries. In 27, Apranga group plans to increase its consolidated sales up to LTL 352 million and earn profit before tax of approximately LTL 31 million. Apranga group sales, LTL million Apranga group EBT, LTL million , , , P 5 11,1 7, P Apranga AB shares are successfully traded on Vilnius Stock Exchange. During the last three years since 24, the value of shares of Apranga group increased even eight times. Currently, the capitalisation of Apranga AB group is LTL 621 million ,18 LTL / share 77 mltl Cap Share price* of AB Apranga ,6 LTL / share 621 mltl Cap * Recalculated regarding share capital increase from retained profits (in December 5, 25) MG BALTIC Group 26 6

7 The sector of production and trade in consumer goods The main companies operating in this sector are Stumbras AB, Mineraliniai vandenys UAB and Tromina UAB. Stumbras AB core line of business is production of and trade in alcoholic products. In 26, the company s sales revenue amounted to LTL 12 million (25: LTL 82.8 million), and its net profit was LTL 18.5 million (25: 21.1 million), excluding revenue from discontinued operations. In 26, the company s net profit from discontinued operations amounted to LTL 1.4 million as compared to loss of LTL 1.3 million incurred in 25. In 26, Stumbras AB pursued its objectives to offer new products to consumers, improve awareness of currently available brands and increase the volume of exports of products. These objectives have been successfully achieved by the company. According to ACNielsien data, the company enjoys a market share of approx. 38 per cent of strong alcoholic drinks. The company plans to pursue an aggressive development strategy and in 21 it expects to achieve LTL 2 million in sales. The company believes that its growth of sales will mainly be reached through development of export markets, where the company plans to earn almost 4 per cent of its total sales revenue. The shares of Stumbras AB are traded on Vilnius Stock Exchange. Currently, Stumbras AB capitalisation is LTL 32 million. AB Stumbras financial performance* 24 26, LTL million ,2 82,8 21, , Sales, mltl EBITDA, mltl Profit before tax, mltl * Continued operations Mineraliniai vandenys UAB core line of business is wholesale trade in consumer goods. According to the requirements set forth in relevant laws, the company is engaged in wholesale trade in alcoholic beverages, tobacco products and consumer goods. In 26, the company s sales reached LTL 393 million (25: LTL 387 million) and its operating profit was LTL 7.6 million (25: LTL 2.4 million). Mineraliniai vandenys UAB is a distributor of about 5 % of products produced by Stumbras AB. The company also imports and distributes in the Lithuanian market over 7 brands of alcoholic drinks from all over the world. The company s business partners are globally-known producers representing such brands as Moet & Chandon, Metaxa, Grant s, Camus, Hennessy, Antinori, Baron, Philippe de Rothschild.SA. The company is also a distributor of British American Tobacco Nordic and Japan Tobacco International tobacco products, Nestle products and other food products and consumer goods of the globally-known producers. In 27, the company plans to achieve LTL 41 million in sales and further develop its business activities in Poland, Latvia and Estonia. MG BALTIC Group 26 7

8 Mineraliniai vandenys UAB sales 25 26, 27 progn., LTL million P Tromina UAB core line of business is warehousing of consumer goods, such as alcoholic drinks, tobacco, food, chemistry products, etc., accounting for goods and delivery of goods to retail and wholesale companies. In 26, the company's sales amounted to LTL 25 million (25: LTL 2 million). Media sector The main companies operating in this sector are Laisvas ir nepriklausomas kanalas UAB, Alfa Media UAB, Neo-Press UAB, UPG Baltic UAB and Mediafon UAB, which are united under MG Baltic Media Holding (a subsidiary of MG Baltic Group). The financial performance indicators of these companies are not made public. LNK (Laisvas ir nepriklausomas kanalas UAB) is one of the leaders among Lithuanian national channels. LNK channel s competitor in terms of popularity is TV3 channel, whereas other national channels are significantly behind. The key strategic objective of LNK is to be a leader in TV author shows and original shows during the Prime Time period (from 7pm to 1pm). The Prime Time period has been selected due to the fact that an overall TV watchability is the highest during this period and it is the most preferred period among the buyers of TV commercials. In 26, audience of LNK during the Prime Time accounted on average for 27.4%. Lithuania's national TV channels Share, Prime time ( ), 26 27,4% 25,7% 15,7% 9,6% 21,5% LNK TV3 LTV BTV O ther 1,8 1,6 1,4 1,2 1,8,6,4,2 Lithuania's specialized TV channels share, %, 26 5 kanalas Tango TV TV1 MTV Lt LTV2 Prime time (19:-23:) metu All time MG BALTIC Group 26 8

9 In August 26, MG Baltic Media was joined by news portal which is controlled by Alfa Media UAB. It was started as an editorship part of reality show Alfa, and subsequently it continued the activities as an independent news portal. During October-December 26, the portal s design and structure were improved, and a strong advertising campaign was launched on the Internet, therefore, with effect from 27, the portal s visitation has significantly increased. The vision of portal is to become a leader among analogous portals in Lithuania with 6-7 thousand unique users per month. Such results are expected to be achieved within the next five years. Neo-Press UAB is engaged in publishing of the following magazines: Viltys ir Likimai, Nuo... Iki..., and Istorijos. In 26, the average circulation of the Viltys ir Likimai magazine was 12,38 copies, and the average circulation of the Nuo...Iki... magazine was 26,849 copies. In 27, the company expects further growth in circulation of magazines. In April 27, MG Baltic Media Holding acquired 5% + 1 vote of UPG Baltic UAB a magazine publishing company, which is absolute leader of crossword publishing in Lithuania, and also engades in publishing of men s magazines, computer magazines, and kid s magazines. In August, 27, MG Baltic Media Holding has acquired 51% of Mediafon UAB, which engades in electronic communications. Mediafon is mobile content support leader in Lithuania (the majority of TV votings are technically implemented by Mediafon UAB). The company also engages in call transit services. Real estate development and building sector This sector includes MG Valda UAB and Mitnija UAB group of companies, as well as Group s latest acquisition MTK Construction SIA (former Kalnozols Celtnieciba SIA). MG Valda UAB core line of business is investments in real estate development projects, rent, management and administration of real estate, sale of real estate and consultations relating to designing, building, development and sale of real estate objects. In 26, MG Valda UAB group companies achieved consolidated sales of LTL 29.5 million (25: LTL 25.1 million) and consolidated profit before tax and minority interest of LTL million (25: LTL 12.5 million). In 26, MG Valda UAB group introduced changes in accounting policy and replaced the cost method formerly applied in accounting for long-term investment property by the fair value method. Pursuant to the requirements of Business Accounting Standards, changes in accounting policy were introduced retrospectively and applied to comparative figures for the year 25. The result of revaluation of investment property of MG Valda UAB group amounted to LTL 18.7 million for 26 as compared to LTL 85.7 million for 25. In Vilnius Business Triangle, MG Valda UAB currently operates modern office buildings covering an area of over 3, m 2. All office premises have been rented. At the end of 26, MG Valda acquired Timidus UAB, which owned territory of almost 6 ha in a prestigious area of Vilnius. There are plans to develop a prestigious residential housing complex in this territory. In 26, the subsidiary Megarenta UAB successfully transferred for use the logistics centre located at Greiino str. 38, Vilnius, and currently operates warehousing premises covering an area of 3, m 2. In 26, Megarenta UAB was awarded a contract for the construction of a bakery factory. This project is one of the first industrial projects of such type in Lithuania, where the development company will develop and subsequently lease a finished factory constructed in accordance with a MG BALTIC Group 26 9

10 conceptual project prepared by a customer. The subsidiary Vš V. Gerulaiio Teniso Akademija (Tennis Academy) signed a contract to obtain EU support amounting to LTL 23.8 million designated for the development of a multifunctional sports and health complex. It is expected to start the construction works of the complex in 27, and bring it into use at the end of 28. Mitnija UAB is the 7th among the top construction companies in Lithuania in terms of the scope of construction works carried out without using external services. The company has a powerful technical base, manufacturing workshop for metal products. In 26, Mitnija UAB group of companies achieved consolidated sales of LTL million (25: LTL million). In 26, the main construction object was a commercial and entertainment centre Kauno Akropolis. In addition, the following projects initiated by the company were developed: residential housing complex at Krvs str. in Kaunas, residential block housing at Kiški str. in Kaunas, construction works (SMD) carried out under construction contracts administrative building and car parks for Vilbra UAB, warehouse for metal products and piping for Lytagra AB and other objects. To improve the existing production base and further develop the projects initiated, in 26 the company acquired 85 per cent of shares of Vilmeta UAB and 1 per cent of shares of Žaliasis Kvartalas UAB. In 26, the average number of employees was 63. In 27 it is planned to increase sales of Mitnija UAB group up to LTL 2 million. In 27, the company plans to pursue industrial and residential housing construction activities: complete the projects that have already been started and participate actively in implementing the newly initiated projects. Sales of Mitnija UAB 24 26, 27 progn., LTL millions 2 131,5 139,7 85, In August, 27, the MG Baltic Investment Holding (a subsidiary of MG Baltic Group) has acquired 75% of MTK Construction SIA (former Kalnozols Celtnieciba SIA), one of the leading construction companies in Latvia. In the period of 25-26, Kalnozols Celtnieciba has encountered management problems, which resulted in deterioration of profitability. During the year of 26, the management has been replaced and order restored. However, company results of 26 and 27 are still suffering from unprofitable projects, which were undertaken by the previous management. In the process of acquisition, MG Baltic Investment Holding has injected EUR 2,6 million to improve MTK Construction SIA liquidity. It is expected that the company will make no loss in 27, and will be profitable from 28. MG BALTIC Group 26 1

11 Production sector This sector includes Biofuture AB, which was demerged from Stumbras AB by way of reorganisation at the end of 25. The core line of business of this company is production of distilled, dehydrated ethyl alcohol (bioethanol). In 26, Biofuture AB started independent production activities of bioethanol. In 26, the company produced about 16, t of bioethanol, and in 27 it plans to produce 2, t of bioethanol. In 26, the company s sales amounted to LTL 27.3 million, and net profit amounted to LTL.62 million. According to the audited financial statements of Stumbras AB for the year ended 31 December 26, sales of LTL 18 million and net profit of LTL 1.4 million should be attributed to Biofuture AB as discontinued operations of Stumbras AB. Biofuture UAB bioethanol production 25 26, 27 progn., t thou / year The company receives subsidies from the state designated to promote a more active production and consumption of biofuel. In 26, the company received subsidies amounting to LTL 4.7 million. Subsidies for raw materials are approved annually, therefore, their continuity is uncertain because of the absence of long-term programmes for the promotion of production of biofuel. In 26, the company approved a project for improving its production capacity and in it plans to make investments of over LTL 2 million, as a result of which the company s production output will increase from 2 to 32 thousand tons of bioethanol per year, and LTL 9 million in sales will be achieved. MG BALTIC Group 26 11

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