Fixed assets include office and warehouse installation costs and the rental of a car. Inventories at the end of 2015 are elevated because in all textile shops, the inventory is renewed, in particular, twice a year and according to the spring/summer and fall/winter collections. A good part of this stock will not be devalued because it will be sold all year around at the same price: particularly for linen that is a recurrent collection. As for the N-1 inventory, it is sold in private sales at the same price as B to B. The margin is therefore a constant average throughout the year! The debt repayment period is long (~ 68 days), but normal for this sector. Mia Zia works with a trustee specialised in the recovery of receivables whose portfolio of customers is exclusively "textile". Accruals represent the pre-paid registration for a trade show (which concerns the collection sold and produced in the following year).
The capital consists of formation capital.
The finance lease debt consist of the leasing of the car.
The amount of commercial debt (about 23% of raw material costs) is related to the fact that the clients (boutiques) pay with payment plans spread over the entire season (between 30 and 90 days). These debts are managed by the trustee.
Account of results
Turnover in the first quarter of 2016 is lower than in the second quarter of 2015 (the company being established in June 2015), with the big season being the WINTER season.
The profit figures on June 30 are not very representative because there is already a part of the purchases from the WINTER collection that was only invoiced from July 1 to September 30!
30/06/2016: YTD from January to June 2016
The working capital requirements are negative as of 31/12/2015, which means that the requirements are greater than the resources. MIA ZIA must therefore finance its current assets, which accounts for the majority of the total assets, by its permanent capital or by financial resources outside of the operating cycle. The change in the working capital requirements during the first half of 2016 is not very representative because the inventory is only at the end of the year in December (last inventory as of 31/12/2015).
30/06/2016: YTD from January to June 2016
The three-year financing plan was developed by Mia Zia management according to its market experience and ambitions for the development of its collections, marketing, and sales.
In order to increase its B2B and B2C sales, the Mia Zia management has the goal of:
1) improving the website and e-shop to boost B2C sales;
2) paying close attention to dialogue and exchange with partner boutiques in the context of B2B activities;
3) hiring an additional commercial employee to explore boutiques in Flanders and elsewhere such as in Wallonia, Brussels, or France;
4) opening a Pop-up Store several times a year.
The assumptions used for each income category are:
1) B to B sales: 20% growth owing to the hiring of an additional representative who will concentrate on the Flemish market in Belgium.
2) Web sales: 60% growth due to the improvement of the web site and E-marketing.
3) Private sales: stable volume, our private sales clientele remains very loyal.
4) POP-UP sale stores + showroom sale + EVENTS: same as WEB sales;
5) Retailers: given an increase in BtoB sales, the inventory will also increase and the destocking sales will necessarily follow.
To establish the costs for the year 2016, the management of Mia Zia based the amounts mainly on the first half of 2016 and multiplied by two in order to arrive at a total of 12 months.
In addition, they have estimated a growth rate of 20% of operations related to the operating cycle such as the shipping and advertising costs as well as the entertainment, catering, and travel costs. Wages and rents were indexed on the basis of the Consumer Price Index, namely, 1.5%. A significant change is the inclusion in the profit and loss account of an additional employee and therefore the salary (60,000 EUR) of such employee.
A decline in inventories in line with sales is expected at the end of the year from an increase in sales and by purchasing less inventory during supplier orders.
A period of 60 days is assumed for the recovery of receivables (a reasonable assumption).
As in 2015, a down payment is planned for the Maison & Objet trade fair, which will take place in 2017 and which therefore concerns sales and production in 2017 (accruals).
The car credit will end by December 2016. The payment period for commercial debts is assumed to be reduced as compared to 2015, with a payment period of 70 days.
Break even year
1 December 2016