UTENOS TRIKOTAŽAS, AB. CONSOLIDATED AND COMPANY'S INTERIM FINANCIAL STATEMENTS for the 9 months period ended 30 september 2018 (UNAUDITED)

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1 UTENOS TRIKOTAŽAS, AB CONSOLIDATED AND COMPANY'S INTERIM FINANCIAL STATEMENTS for the 9 months period ended 30 september 2018 (UNAUDITED)

2 INFORMATION ABOUT COMPANY name Legal and organisation form Date and place of incorporation Utenos Trikotažas AB Legal entity, public company Registered with the Register of Legal Entities of Utena District on 6 st December 1994; reregistered with the Ministry of Economy of the Republic of Lithuania on 18 st September Registration code Code of the Register of Legal Entities Authorised share capital Address Name of Register of Legal Entities Telephone Fax Website Main activities Auditors BĮ EUR J.Basanavičiaus g.122, LT-28214, Utena, Lithuania Registrų centras VĮ utenos.trikotazas@ut.lt production of knit-wear and textile artictes ERNST&YOUNG BALTIC UAB 2

3 TABLE OF CONTENT PAGE FINANCIAL STATEMENTS: REVIEW OF ACTYVITY OF THE GROUP COMPANIES 4-9 BALANCE SHEET 10 STATEMENT OF COMPREHENSIVE INCOME STATEMENTS OF CHANGES IN EQUITY 13 STATEMENTS OF CASH FLOWS 14 EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS

4 REVIEW OF ACTYVITY OF THE GROUP COMPANIES Utenos trikotazas AB textile sales of products and services reached EUR 23,7 million over first three quarters of 2018, an increase of 28 % compared to last year, when the group sales amounted to EUR 18,5 million. The 's alone revenues has grown by almost a third (32,5 %) over the same period last year, reaching EUR 21,2 million year to date. During nine months of 2018 The earned EUR 1,18 million of pre-tax profit, when in 2017 it amounted to EUR 420 thousand. The EBITDA reached EUR 1,87 million an increase of 56,2 % as compared to the same period in Exports accounted for 83,4% of the 's revenue. Compared to last year, exports increased by 38,4% in three quarters 2018 to EUR 19,7 million. The 's export increase was key to with export sales up by 40,5% to reach EUR 18,3 million. Sales in German speaking countries, Germany, Austria and Switzerland, (DACH) recorded 33,4 % growth, and the amount of orders delivered tо this largest sales region in 2018 for the nine months amounted to EUR 10,6 million. In Scandinavia, s sales increased even stronger by 42%. Growth is recorded in all business segments of Utenos trikotazas. Sales of products manufactured on demand jumped 38 % to EUR 18,6 million driven by exports, UTENOS and ABOUT branded sales - grew by 1,5 % to EUR 2,6 million, while the sales of services of functional-technical garments manufacturing provided by Šatrija AB increased by 0,7% to EUR 2,4 million. 4

5 Key performance indicators of the Trade Revenue (EUR '000) Change Change 9M 9M % 9M 9M % Products manufactured on demand of other clients Own brands (ABOUT, UTENOS) Services of functionaltechnical garments manufacture , , , , , , ,5 Revenue (EUR '000) Change Change III Q III Q % III Q III Q % Products manufactured on demand of other clients Own brands (ABOUT, UTENOS) Services of functionaltechnical garments manufacture , , (11,1) (10,6) , , ,7 Sales by regions Revenue (EUR '000) Change Change 9M 9M % 9M 9M % Export , ,5 DACH (Germany, Austria, Switzerland) Scandinavia (Sweden, Norway, Denmark, Finland) , , , ,8 Other regions , ,1 Domestic (6,9) (2,8) , ,5 5

6 Revenue (EUR '000) Change Change III Q III Q % III Q III Q % Export , ,3 DACH (Germany, Austria, Switzerland) , ,0 Scandinavia (Sweden, Norway, Denmark, Finland) , ,1 Other regions , ,8 Domestic (1,8) (13,5) , ,7 Operating figures M M Change % M M Change % Manufactured items units , ,4 Average number of employees (1,7) (0,7) Financial ratio Change Change 9M 9M 9M 9M Revenue (EUR'000) ,0% ,5% Operating profit (loss) (EUR'000) ,5% ,3% Operating profit (loss) margin (%) 5,3 3,1 2,2p.p 5,2 1,4 3,8p.p EBITDA (EUR'000) ,2% ,0% EBITDA margin (%) 7,9 6,5 1,4p.p 7,5 4,3 3,2p.p Profit (loss) before tax (EUR'000) ,7% (14,9)% Profit (loss) before tax, margin (%) 5,0 2,3 2,7p.p 5,0 7,9 (2,9)p.p Net profit (loss) for the year (EUR'000) ,6% (13,0)% Net profit (loss) for the year margin (%) 4,9 2,0 2,9p.p 4,9 7,5 (2,6)p.p Number of shares, (thousand)

7 Change Change III Q III Q III Q III Q Revenue (EUR'000) ,2% ,7% Operating profit (loss) (EUR'000) ,0% 209,5% Operating profit (loss) margin 8,4 3,6 (%) 8,1 4,4 3,7p.p 4,8p.p EBITDA (EUR'000) ,2% ,1% EBITDA margin (%) 10,5 7,4 3,1p.p 10,3 6,1 4,2p.p Profit (loss) before tax (EUR'000) ,0% (18,1)% Profit (loss) before tax, margin (%) 8,1 13,2 6,8 3,3 3,5p.p (5,1)p.p Net profit (loss) for the year (EUR'000) ,5% (22,1)% Net profit (loss) for the year margin (%) 7,9 13,4 6,5 3,5 3,0p.p (5,5)p.p Number of shares, (thousand) Relative ratios Change Change 9M 9M p.p 9M 9M p.p. Return on capital employed (%) 39,8 21,4 18,4 75,4 49,7 25,7 Return on assets (%) 6,0 3,5 2,5 11,2 8,0 3,2 Return on shareholders equity (%) 13,1 7,8 5,3 23,7 20,8 2,9 Debt ratio (%) 52,8 55,5 (2,7) 52,8 61,3 (8,5) Debt-to-equity ratio (%) 111,8 124,8 (13,0) 112,0 158,4 (46,4) Liquidity ratio (%) 107,7 153,7 (46,0) 94,1 140,7 (46,6) Equity to assets ratio (%) 47,2 44,5 2,7 47,2 38,7 8,5 Ratios related with the share price M M Change P/E 8,79 21,75 (12,96) EPS 0,11 0,06 0,05 EV/EBITDA 6,15 8,14 (1,99) 7

8 Information regarding the price of shares and their dynamics Utenos Trikotažas AB share price dynamics, during 12 months period from 1 October 2017 to 30 September Price ratios M M Open price, EUR 0,950 0,800 High price, EUR 1,250 1,500 Low price, EUR 0,900 0,680 Last price, EUR 1,000 1,270 Traded volume Turnover, million EUR 0,06 0,10 Capitalisation, million EUR 9,50 12,07 8

9 Utenos Trikotažas AB, OMX Baltic Benchmark GI and OMX Vilnius Index dynamics during 12 months period from 1 October 2017 to 30 September Index/ Equity / Change, % OMX Baltic Benchmark GI 948,29 939,54 0,9 OMX Vilnius 689,27 641,84 7,4 UTR1L 1,02 EUR 1,40 EUR (27,1) 9

10 BALANCE SHEET ASSETS Non-current assets Notes Intangible assets Property, plant and equipment Investment property Investments into subsidiaries Trade and other receivables Receivables from subsidiaries Deferred income tax asset Current assets Inventories Trade receivables Other current assets Current financial assets Cash and cash equivalents Total assets EQUITY AND LIABILITIES Equity attributable to the shareholders of the Share capital Revaluation surplus Legal reserve Reserve for acquisition of own shares Foreign currency translation reserve Cash flow hedge reserve 12 (8) (21) (8) (21) Accumulated retained earnings/ (losses) Non-controlling interest Total equity LIABILITIES Non-current liabilities Borrowings Borrowings from subsidiaries Deferred income tax liabilities Non-current portion of derivative financial instruments Provisions for employee benefits Current liabilities Current portion of non-current borrowings Current financial liabilities Current portion of derivative financial instruments Trade payables Payables to other related parties and subsidiaries Income tax payable Accrued expenses and other current liabilities Total liabilities Total equity and liabilities

11 STATEMENT OF COMPREHENSIVE INCOME Notes January-September July-September Sales 6, Cost of sales 16 (18 997) (14 777) (7 190) (5 526) Gross profit Selling expenses 17 (1 521) (1 504) (555) (527) General and administrative expenses 17 (1 999) (1 720) (649) (616) Other operating income Other operating expenses 18 (12) (7) (5) (2) Operating profit (losses) Finance income Finance costs 19 (250) (274) (133) (84) Profit (losses) before tax Income tax (26) (58) (22) 11 Net profit (losses) Net profit (losses) attributable to: Equity shareholders of the Non-controlling interest Other comprehensive income to be reclassified to profit or loss in subsequent periods Foreign currency translation gain (loss) (20) Net other comprehensive income to be reclassified to profit or loss in subsequent (20) periods Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent perinds Other comprehensive income (loss) 32 (83) 16 (63) Net other comprehensive income (loss) not to be reclassified to profit or loss in 32 (83) 16 (63) subsequent periods Other comprehensive income (loss) 12 (71) 46 (51) Total comprehensive income (loss) for the period Basic/dilutive earnings per share 20 0,12 0,04 0,06 0,02 11

12 Statements of comprehensive income (cont d) Notes January-September July-September Sales Cost of sales 16 (17 115) (13 120) (6 463) (4 964) Gross profit Selling expenses 17 (1 432) (1 430) (524) (503) General and administrative expenses 17 (1 531) (1 233) (490) (462) Other operating income Other operating expenses 18 (7) (5) (2) (1) Operating profit (losses) Finance income Finance costs 19 (120) (129) (42) (42) Profit (losses) before tax Income tax (27) (58) (23)

13 STATEMENTS OF CHANGES IN EQUITY Share capital Foreign currency translation reserv e Reserv e for acquisition of own shares Other reserv e Legal reserv e Rev aluation surplus Accumulated retained earnings/ (losses) Total Noncontrolling terest Total equity Balance as of 30 June (43) Net profit (loss) for the year (3) 31 Other comprehensive income (45) (12) (110) (122) Total comprehensive income (loss) (11) 22 (113) 91 Transfer of revalution surplus to retained (16) - (16) - (16) earnings Balance as of 31 December (21) Net profit (loss) for the year Other comprehensive income - (20) Total comprehensive income (loss) - (20) Reserve for acquisition of ow n shares (49) Balance as of 30 September (8) Share capital Legal reserve Revaluation surplus Other reserve Accumulated retained earnings/ (losses) Total Balance as of 30 eptember (43) Net profit (loss) for the year Other comprehensive income (loss) Total comprehensive income (loss) Transfer of revalution surplus to retained earnings - - (12) Balance as of 31 December (21) Net profit (loss) for the year Other comprehensive income (loss) Total comprehensive income (loss) Transfer of revalution surplus to retained earnings - - (31) Balance as of 30 September (8)

14 STATEMENTS OF CASH FLOWS Cash flows from operating activities 30 September 30 September Profit (loss) for the period Adjustments for non-cash items: Depreciation and amortization (Gain) on disposal of property, plant and equipment and investment property 2 (13) - (11) Impairment and write-off of i accounts receivable (1) Impairment and write-off of inventories Interest expense, net of interest income Income tax (income) expense Changes in working capital: (377) (2 036) (346) (2 031) (Increase) decrease in inventories (542) (424) (374) (580) (Increase) decrease in trade receivables - - (140) (1 062) (Increase) decrease in other receivables and other current assets (Increase) decrease in trade and other accounts payable (1 645) (1 425) 886 Increase (decrease) in taxes payable and other current liabilities 452 (24) 504 (13) Income tax (paid) (19) (22) (19) (10) Net cash generated from operating activities (454) Cash flows from investing activities Acquisition of property, plant and equipment (571) (551) (524) (398) Acquisition of intangible assets (15) (32) (15) (31) Proceeds from sale of property, plant and equipment (2) Investments in subsidiaries (acquisition) (51) Interest received Net cash flows generated from (to) investing activities (588) (570) (539) (425) Cash flows from financing activities Proceeds from borrowings Repayment of borrowings and financial lease payments (759) (554) (959) (1 420) Dividends Share capital reduction income Interest paid (61) (73) (45) (104) Net cash flows from financing activities 495 (123) Net increase in cash and cash equivalents (46) (366) (13) (409) Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period

15 EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS 1. General information The is engaged in production of knit-wear and textile articles. The shares of Utenos Trikotažas AB are listed on the additional List of the NASDAQ OMX Vilnius Stock Exchange. As of 30 September 2018 and 31 December 2017 the shareholders of the were as follows: As of 30 September 2018 As of 31 December 2017 Number of shares held Interest held(%) Number of shares held Interest held(%) Koncernas SBA UAB Algirdas Šabūnas Investment Fund East Capital Asset Other shareholders All the shares are registered ordinary shares with a par value of EUR 0.29 each. As of 30 September 2018 and 31 December 2017 subsidiaries did not hold any shares of the. The did not hold its own shares within this period. The consolidated group (hereinafter the ) consists of the and the following subsidiaries: 's share (%) Šatrija AB Gotija UAB PAT MTF Mrija Registered address 30 September December 2017 Profile Šatrijos str. 3, Raseiniai 89,78 89,78 Sewing of clothes Laisvės Str. 33, Kaunas 100,00 100,00 Retail trade Matrosovo Str. 13, Mukachev, Ukraine 98,95 98,95 Production of knitted articles 15

16 2. Form and contents of the financial statements These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. 3. Change in the accounting method of the Companies and the s Non-current assets Buildings group In order to achieve a more accurate accounting of the financial results in March 31, 2013 the Non-current assets Buildings group accounting method was changed to the fair value method, as the book value of the Companies and the s Non-current assets Buildings group, which was carried at historical cost, less subsequent accumulated depreciation, had not corresponded with the buildings market value. 4. Consolidation The consolidated financial statements of the include Utenos trikotažas AB and its subsidiaries as well as associated companies. The financial statements of the subsidiaries are prepared for the same reporting year, using consistent accounting policies. Subsidiaries are consolidated from the date from which effective control is transferred to the and cease to be consolidated from the date on which control is transferred out of the. All intercompany transactions, balances and unrealised gains and losses on transactions among the companies have been eliminated. The equity and net income attributable to non-controlling interests are shown separately in the statement of financial position and the statement of comprehensive income. 5. Financial risk factors Due to the geo-political situation in Ukraine and significant drop in the value of UAH against EUR, the Management of the and the re-designated loan granted, related interests and other long term receivables as a part of net investment in Mrija PAT MTF. Accordingly gains (losses) arising from foreign exchange related to the monetary items considered to be part of net investment into foreign operation is accounted in s consolidated financial statements through other comprehensive income (loss). Amount of monetary items attributed to net investment amounts to EUR 3.5 million and foreign currency exchange difference related to this amount for the 9 months of 2018 comprises EUR (20) thousand, which is accounted in the s consolidated financial statements through other comprehensive income. Other comprehensive income (loss) from foreign currency translation included in the consolidated statements of changes in equity in other comprehensive income attributable to the equity holders of the : Foreign currency exchange difference on monetary intems attributed to net investments, EUR (22 807) Foreign currency translation reserve on other items, EUR Other comprehensive income EUR, net (20 000) 16

17 6. Segment information The has two main business segments: production of knitted articles and production of functional-technical garments In assessing operational performance of segments the s Board takes into account the sales revenue, gross profit, EBITDA (earnings before financial activity result, taxes, depreciation and amortization), profit (loss) ratios, therefore the report on the s segments discloses these items in respect of each segment. As the Board also assesses other item s of the statement of comprehensive income by each segment, these items are presented in the report on the s segments. Inter-segment transactions are eliminated on consolidation. Below, there is a summary of major indicators for the main business segments of the included in the statement of comprehensive income for the 9 months of 2018 and for the 9 months of 2017: of 30 September 2018 External sales Internal sales Total revenue Production of knitted articles Production of functionaltechnical garments Eliminations Total (711) (711) Gross profit EBITDA Profit (loss) of 30 September 2017 External sales Internal sales Total revenue Production of knitted articles Production of functionaltechnical garments Eliminations Total (726) (726) Gross profit EBITDA Profit (loss) Non-current intangible assets Amortization expenses of intangible assets are included within general and administrative expenses in profit and loss statement. 17

18 8. Non-current tangible assets Depreciation of non-current tangible property amounted to EUR 623 thousand as of 30 September 2018, EUR 492 thousand are included into cost of sales in the s Profit (loss) statement. The remaining amounts were included in general and administrative expenses and inventories in the statement of financial position. As of 30 September 2018 and 31 December 2017 the Companies and the s Non-current assets Buildings group is recognized at fair value. 9. Inventories Raw materials Work in progress Finished goods Goods for resale Write-down to net realisable value: Opening balance (795) (650) (471) (326) Change (100) (145) (100) (145) Closing balance (895) (795) (571) (471) Trade receivables Trade receivables, gross llowance for trade receivables: Opening balance (193) (115) (166) (94) hange - (78) - (72) losing balance (193) (193) (166) (166) Changes in impairment allowance for doubtful trade receivables as of 30 September 2018 and 31 December 2017 were recorded within the s and s general and administrative expenses. 18

19 11. Cash and cash equivalents Cash at bank and on hand Other reserves and retained earnings (deficit) Revaluation surplus Revaluation surplus reflects the result of the revaluation (net of deferred tax) of the property, plant and equipment. Legal reserve A legal reserve is a compulsory reserve under the Lithuanian legislation. Annual transfers of not less than 5 % of net profit of the calculated according to the Lithuanian s law, are compulsory until the reserve reaches 10 % of the share capital. Legal reserve is fully formed by the. The legal reserve cannot be distributed as dividends but can be used to cover cummulated losses. Foreign currency translation reserve The foreign currency translation reserve represents translation differences arising on consolidation of financial statements of foreign subsidiaries. Reserve for acquisition of own shares In 2015 according to the decision of the shareholders of Šatrija AB the reserve for acquisition of own shares of EUR 300 thousand was formed. In 2017 according to the decision of the shareholders of Šatrija AB the reserve for acquisition of own shares was reduced to EUR 100 thousand. Cash flow hedge reserve The s loan with DNB Bankas AB is with floating interest rate that is linked to EURIBOR. On 26 Novem ber 2014 the signed interest rate swap contract with DNB Bankas AB in order to avoid the interest rate fluctuations. The agreement is valid until 25 November The fair value of interest rate swap contract used for interest rate risk hedging was EUR 17 thousand as of 30 September 2018 (EUR 29 thousand as of 31 December 2017) and was accounted for under current amounting EUR 5 thousand (EUR 10 thousand as of 31 December 2017) and non-current liabilities amounting EUR 12 thousand (EUR 19 thousand as of 31 December 2017). Accumulated retained earnings (losses) Pursuant to the provisions of the Law on Limited Liability Companies of the Republic of Lithuania, if the total of retained earnings at the beginning of the financial year and net profit (loss) for the year is negative, the General Shareholders Meeting has to make a decision to cover these losses. Transfers to distributable results should be made in the following sequence: transfer from reserves not used in the reporting financial year; transfer from the compulsory legal reserve; transfer from the share premium. At the date of these financial statements the was not informed about any actions of the shareholders of the Co. regarding retained deficit. 19

20 The balances of other reserves as of 30 September 2018 and 31 December 2017 were as follows: Revaluation surplus Legal reserve Reserve for acquisition of own shares Foreign currency translation reserve Cash flow hedge reserve (8) (21) (8) (21) Accumulated retained earnings/ (losses) Borrowings Current Current portion of non-current bank borrowings Other short term liabilities Non-current - - Borrowings from subsidiaries Long-term bank borrowings Total borrowings The s borrowings from subsidiaries consist of the loan granted by subsidiary Satrija AB, amounting EUR thousand with maturity as at 26 November 2019 and variable interest rate 12 month Euribor %. On 1 June 2017 a zero balance service agreement was signed between AB DNB Bankas, AB Uten os Trikotažas and AB Šatrija. Under this contract, on 30 september 2018, AB "Utenos trikotažas" was owed EUR 1 thousand to AB Šatrija. On 12 April 2018 The company signed agreement with Luminor AB regarding credit line up to EUR thousand (additional amount of EUR 800 thousand with termination as at 31 March 2019). On 26 April 2018 The company signed agreement with Luminor AB regarding loan up to EUR thousand (additional amount of EUR thousand with termination as at 25 November 2019). The interest rate for the borrowings is based on variable interest rate, therefore, in the opinion of management, the carrying amount of borrowings approximates their fair value. 20

21 14. Accrued expenses and other current liabilities Accrual for vacation reserve Wages, salaries and social security Amounts payable for services and non-current assets Taxes payable, except for income tax Prepayments received Other liabilities Revenue Change Change Revenue (EUR '000) 9M 9M % 9M 9M % Products manufactured on demand of other clients Own brands (ABOUT, UTENOS) Services of functionaltechnical garments manufacture , , , , , , , Change Change Revenue (EUR '000) III Q III Q % III Q III Q % Products manufactured on demand of other clients Own brands (ABOUT, UTENOS) Services of functionaltechnical garments manufacture , , (11,1) (10,6) , , ,7 21

22 16. Cost of sales January-September July-September Wages and salaries and social security Materials Other overhead expenses Depreciation and amortisation January-September July-September Wages and salaries and social security Materials Other overhead expenses Depreciation and amortisation Selling general and administrative expenses Selling expenses January-September July-September Wages and salaries and social security Advertising and marketing costs Other selling expenses General and administrative expenses Wages and salaries and social security Communications and consulting services Taxes other than income tax Depreciation and amortization Security Vehicles exploitation expenses Services of financial institutions Premises exploitation expenses Travel expenses Representation expenses Impairment and write-off (reversal) of Inventories Other

23 Selling expenses January-September July-September Wages and salaries and social security Advertising and marketing costs Other selling expenses General and administrative expenses Wages and salaries and social security Communications and consulting services Taxes other than income tax Depreciation and amortization Security Vehicles exploitation expenses Services of financial institutions Premises exploitation expenses Travel expenses Representation expenses Impairment and write-off (reversal) of inventories Other Other income and expenses January-September July-September Gain from disposal of non-current assets Rent income Other income Other income Rent costs (9) (4) (3) (1) Other expenses (3) (3) (2) (1) Other expenses (12) (7) (5) (2) January-September July-September Gain from disposal of non-current assets Rent income Other income Other income Rent costs (6) (5) (2) (1) Other expenses (1) Other expenses (7) (5) (2) (1) 23

24 19. Finance costs, net January-September July-September Foreign exchange gain (loss) 20 (93) (85) (52) Interest expenses (84) (73) (30) (24) Interest income - 10 (10) - (64) (156) (125) (76) January-September July-September Foreign exchange gain (loss) 6 (4) 5 (1 962) Interest expenses (101) (104) (37) (34) Interest income Dividends Share capital reduction income Other (40) (17) Basic/dilutive earnings per share Profit (loss) per share reflect the s net profit/(loss), divided by the outstanding number of shares. Calculation of the profit/(loss) per share is presented below: January-September July-September Profit/ (loss) attributable to the equity holders of the Weighted average number of shares in issue (thousand) Basic/dilutive earnings per share (in EUR) 0,12 0,04 0,06 0, Post balance sheet events There were no material post balance sheet events, that could make a significant impact for the financial statem ent of the and the. 24