Sales revenue in the first three months of this year account for good 22 percent of Gorenje Group's total revenue budgeted for the year, which is 2 percent ahead of the dynamic plan for the period, and just under 1 percent short of comparable revenue generated in the corresponding period last year.* We wrapped up the first three months successfully, with a profit of EUR 2.5 million, which is good 31 percent of the result budgeted for the entire year, and 23.5 percent more than in the last year's first quarter.
EBITDA reached EUR 22.4 million (+8.7%) and it is on track with the budget. EBIT of EUR 7.8 million is approximately on a par with the figure for the first quarter of 2017, and accounts for nearly 31 percent of the 2018 annual budget. Net financial liabilities increased by EUR 3.5 million to a total of EUR 411.5 million.
Steepest growth in Eastern Europe and in markets beyond Europe
Sales revenue in the activity of Domestic Appliances reached EUR 247 million, which is comparable to last year's first quarter. The highest revenue growth was generated in the markets of Eastern Europe and outside Europe, especially in Israel, Brazil, and Chile.
In Western Europe, our sales grew in Austria, Denmark, and France, while they decreased in the Netherlands, Germany, and Great Britain, especially due to repositioning in terms of pricing, change in the structure of sales channels, and restriction of sales of underperforming products.
Pursuing the strategy of increasing the share of premium and innovative products
With further growth in markets outside Europe, we are mitigating our reliance on the mature European markets and improving our sales structure by stepping up the share of premium brands and appliances. Thus, revenue from sales of Asko brand appliances grew by more than 8 percent, mostly in Scandinavia, while sales revenue under this brand in Australia increased slightly due to local currency's depreciation.
Innovative appliances already account for over 23 percent of total major domestic appliance sales, while premium appliances now account for nearly 30 percent.
We increased our investments into product development to 2.7 percent of total Gorenje Group revenue. Early in the year, we launched the first stage of the new generation of Gorenje WaveActive washing machines and dryers, and the upgraded BIO built-in oven.
Efficiency of management is the key
Throughout the rest of the year, we shall continue to pay a lot of attention to efficient management of key risks. Carefully targeted activities with solid marketing support will fuel sales growth, with favourable product and geographical structure and positioning of our brands, in order to increase the average downstream prices of our products in the markets. We shall ensure cost efficiency and productivity of our processes at all levels of our operations, and strive to improve our working capital turnover with intensive supply chain financing activities, in order to cut the Group's debt.
Auditor: there were no irregularities regarding Torpedo sponsorship
The Supervisory Board was informed about the auditor's report, commissioned by the Management Board based on a Supervisory Board resolution, on the sponsorship of the Torpedo Football Club in the 2014/2015 season. In the audit, the auditor did not find any economic, accounting, or legal irregularities and found that the services specified in the relevant contracts had been rendered, and that Gorenje brand's recognition had improved during the sponsorship period. It is also indicated in the report, that Gorenje management did not breach any of their legal obligations with regard to the deal.
Process of searching for a strategic partner completed
At the session, the Supervisory Board members were presented the closing activities of the process of searching for a strategic partner, and the selection of the best bidder. On May 8, Gorenje d.d. received three binding offers of interested partners based in Asia. On May 9, two of the best bidders were invited to improve their offers. The Management Board, working with its financial and legal advisors and the key shareholders who actively participated in the process, examined the received offers and the two improved offers. The choice of the best bidder was based on strategic elements that formed the foundation for the start of the process of searching for a strategic partnership, on feasibility of the transaction, and on the price offered to the shareholders. Taking into account these criteria, the Chinese group Hisense was selected as the best bidder. Hisense offered EUR 12 per share subject to condition that they acquire no less than 50% + one company share in the takeover process. The selected bidder committed to announce a takeover intent no later than in 15 days, and to announce its takeover bid to all shareholders within the mandatory deadline. Thus, the process of examining the opportunities for strategic partnerships was completed.
Shareholders Assembly to take place on June 12
The Supervisory Board members also approved the date for the next Shareholders Assembly. The Assembly will be held a month earlier, on June 12. The convocation will be announced tomorrow.