The third report of the reorganization advisor on the

On June 19, 2020, Harju County Court approved AS Baltika’s reorganization plan (Baltic). The restructuring advisor must submit a report to the court and to the creditors concerned every six months. The first report was submitted in December 2020. The third report is published to all investors. Data and figures in the report refer to Baltika on an individual basis, not as a group, i.e. figures are not consolidated.

Due to the reorganization process, Baltika was able to focus and continue its corporate turnaround over the past year – moving to a single brand (Ivo Nikkolo), optimizing and drastically reducing all expenses of operating even further than what was previously stated. in the reorganization plan. The new in-store assortment and new business strategy also helped Baltika survive the negative impact of the second wave of Covid-19. Baltika confirms that she will certainly be able to complete the reorganization plan and handle the payment of all obligations according to plan, even sooner than expected if there will be no additional or negative business scenarios, including due to Covid- 19 have spread throughout the Baltic Sea.

Flavio Perini
Member of the Management Board, CEO

[email protected]

REPORT OF THE REORGANIZATION ADVISOR ON THE REALIZATION OF THE REORGANIZATION PLAN

The Harju County Court confirmed by decision of 19.06.2020 for the civil case 2-20-4688 the reorganization plan of AS Baltika (hereafter Baltic).

In accordance with § 50 of the Reorganization Act, the Baltika reorganization adviser submits to the court and to the creditors the third written report on the execution of the reorganization plan.

To verify the completion of the reorganization plan and assess the financial situation, the reorganization advisor used the audited accounts of Baltika at 12.31.2020 and the unaudited accounts as at October 31, 2021.

Realization of the reorganization plan

The claims of 30 creditors for a total amount of 12,206,649.74 euros were converted on the basis of the recovery plan. The complaints were transformed into two groups.

The total financial impact of the reduction in claims on the basis of the reorganization plan is 5,045,198 euros, which is recorded in other operating income in Baltika’s 2020 income statement.

Based on the reorganization plan, Baltika had to pay interest on Group I receivables and from June 2021 start payments of the principal amounts of Group I. Baltika fulfilled this obligation to Swedbank AS. Other Group I creditors have confirmed to the reorganization advisor that they do not require Baltika to pay according to the reorganization plan and agree to be paid later.

Based on the reorganization plan, principal payments of Group II receivables are due to start at the end of 2021. As of the date of this report, Baltika has not yet made any payments to Group II creditors, but the company has informed the reorganization advisor of his intention. to do so before December 31, 2021.

Baltika’s financial situation

In the first six months after the confirmation of the reorganization plan, Baltika’s financial situation was positively influenced both by the transformation of creditors’ claims and also by several substantial changes in Baltika’s operations, as a result of which , compared to the condition before the reorganization, Baltika’s gross profit from the sale of goods improved and various operating expenses decreased (including rental charges which fall under several operating expenses, the payroll).

The 2021 results are significantly affected by restrictions caused by the Covid-19 pandemic and store closures in Lithuania, Latvia and Estonia. The sharp drop in revenue from December 2020 (stores were completely closed in Latvia and Lithuania from December 2020 and Estonia from March 2021, and reopened to visitors in May 2021 in Lithuania and Estonia and June 2021 in Latvia), which was partly offset by an increase in e-channel revenue, meant that in 2021 Baltika’s actual revenue, gross margin and operating profit were significantly lower than the respective figures presented in the prognosis of the reorganization plan.

The table below contains the forecast for the 2020 income statement presented in the Baltika reorganization plan, the actual result for 2020, the figures for 10 months of the forecast (01.01.2021 until 30.10.2021) and the actual result and declaration of loss for ten months of 2021.

Thousands of euros 12-month forecast for 2020 in reorganization plan Actual 12 months 2020 10-month forecast 2021 Actual 10 months 2021
Income 12,300 9,891 16 125 6 349
Total income 12,300 9,891 16 125 6 349
Cost of goods sold 11,302 8,578 11,030 4 956
Gross profit 998 1313 5,095 1,393
Gross margin 8.1% 13.3% 31.6% 21.9%
Various operating expenses 2,844 2 140 2,029 1,304
Pay 3,533 2,576 1,893 1,734
Amortization and depreciation 137 82 137 95
Other operating expenses (-) / income (+) 3 895 3,747 -119 116
Operating result (-loss) -1 622 262 1,154 -1 623

The comparison shows that Baltika’s actual operating profit for 2020 was much better than the prognosis made when drawing up the reorganization plan, but the actual operating profit for the ten months of 2021 is considerably worse than the prognosis. done during the development of the reorganization plan. The actual operating profit for the ten months of 2021 is 2,777 thousand euros lower than the forecast, while for the first four months of 2021 the result is 2,849 thousand euros lower, which shows that at performance has improved somewhat over the past six months. Looking at the cumulative income statement over 22 months or the period from 01.01.2020 to 31.10.2021, which reflects both the impact of the measures in the reorganization plan and the impact of the closure of stores due to Covid- 19, it can be seen that cumulatively the combined figures of actual turnover and operating profit are lower than those forecast in the reorganization plan (see table below).

Thousands of euros Prognosis in the reorganization plan for
22 months until 31.10.2021
Real for 22 months until 10/31/2021
Income 28,425 16 240
Total income 28,425 16 240
Cost of goods sold 22 332 13,534
Gross profit 6,093 2 706
Gross margin 21.4% 16.7%
Various operating expenses 4 874 3,443
Pay 5 427 4 310
Amortization and depreciation 274 177
Other operating expenses (-) / income (+) 4,014 3,863
Operating result (-loss) -468 -1 361

The comparison between the actual result over 22 months and the forecast made during the preparation of the reorganization plan shows that the actual various operating costs and personnel costs are lower than the forecast. Therefore, the operating profit deficit can be fully explained by the decrease in gross margin, which in turn is caused by the circumstances that started in December 2020 and continued throughout the first half of 2021 ( stores closed).

For the realization of the reorganization plan, it is important that the future financial results of Baltika, taking into account the temporary deterioration in the first half of 2021, are such as to allow the reimbursement of the creditors’ claims in accordance with the terms of the reorganization plan. According to the forecast made by the management of Baltika through the end of 2021 and into 2022 (presented to the reorganization advisor in December 2021), and assuming normalized retail activities, the financial results and cash flow of Baltika would be sufficient to this end.

The number of Baltika employees increased from 112 at the end of March 2020 to 58 on 31.10.2020 and 42 on 31.10.2021.

Baltika’s shareholders’ equity amounted to 948 thousand euros at October 31, 2021.

As of October 31, 2021, Baltika had overdue debts in the amount of 16 thousand euros which have been paid as of the date of this report, which shows that Baltika has been able to meet its current debts.

Based on the above, the reorganization advisor is of the opinion that following the confirmation of the reorganization plan and the implementation of the reorganization measures, the financial situation of Baltika has improved. Baltika followed in its operations the reorganization plan, due to which the realization of the reorganization plan, including the payment of the claims of creditors within the period foreseen in the reorganization plan, is always realistic.

The reorganization advisor confirms that he sent this report in addition to the court also to all creditors who are affected by the reorganization.

Tallinn, 16.12.2021.a.
Artur costumes
Aktsiaselts Baltika reorganization advisor
Digitally signed


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