Unaudited consolidated interim accounts for the first quarter of 2013

The consolidated unaudited sales revenue of the Tallinna Kaubamaja Group in the first quarter of 2013 was 112.0 million euros. The return on sales grew by 5.6% compared to the first quarter of 2012, when the sales revenue was 106.0 million euros. The sales revenue grew in most segments of the group, whereas the greatest growth was seen in the retail sales segments of motor vehicles and department stores. The net loss of the accounting period was 2.3 million euros in connection with the income tax calculated on dividends in the sum of 3.8 million euros. The profits earned in the first quarter of 2012 amounted to 3.2 million euros. The profit before taxes was 1.5 million euros, which made up half of the profit earned in the same period in the previous year.

The first quarter of 2013 was characterised by the general downtrend of retail trade in connection with consumer expenses being directed to cover the rise in electricity prices and the heating costs of the drawn-out winter. The extraordinarily long winter has also hindered the sale of the fashion spring collections of the group. The gross margin of the group underwent a fall in the first quarter compared to the year before due to premium points being awarded to customers through the new loyalty programme, as well as due to the lower prices of products in the daily shopping basket, which has in turn had a favourable impact on turnover. Heating and electricity costs of the Group have gone up (17.1%) due to the long winter and rise in electricity prices. Profit was significantly influenced by the rise in labour costs (13.4%). Additional sales areas brought about an increase in the number of employees (6.2%), but the average labour cost per person went up as well. This was mostly caused by adjustments made in the wage level of service personnel. Competent and motivated employees are the basis for raising the efficiency in the future. Depreciation increased as a result of substantial investments made in 2012.

Supermarkets

The consolidated revenue of the first quarter of 2013 in the business segment of supermarkets and the sale revenue in Estonia were 79.6 million euros, which is 2.9% larger compared to the same period the year before. The average sale revenue of goods per a square metre of the sales area was 0.34 thousand euros per month in the first quarter of 2013, showing a 5.1% decrease compared to the results of 2012. The sales revenue of goods of comparable stores per a square metre of selling space in the first quarter was an average of 0.36 thousand euros per month, thus showing a decrease of 2.3% compared to the results of 2012.  7.9 million purchases were made in Selvers in the first quarter of 2013, exceeding the number of sales made in the first quarter of 2012 by 1.5%. In the first quarter of 2013, the consolidated pre-tax profit of supermarkets was 0.03 million euros, whereas the profit made in Estonia made up 0.62 million euros of the consolidated profit. Both the consolidated profit and the profit made in Estonia decreased by 1.8 million euros compared to the base year. The net loss of the supermarket segment amounted to 1.7 million euros, which is 3.6 million euros less than the profit of the year before. The net loss earned in Estonia was 1.1 million euros in the first quarter of 2013, which is 3.6 million euros less compared to the year before. The difference in net profit and profit before income tax results from the income tax calculated on dividends – the income tax on dividends of 2012 was entered in the accounts of the second quarter. The losses before taxes and net loss totalled to 0.6 million euros in Latvia, remaining on the same level compared to the year before. Business activity has been frozen in Latvia.

The opening of new stores has supported the growth of turnover in the first quarter of 2013. The significantly changed competition-related situation had a negative influence on the results of comparable stores; opening new Selver stores also causes the constant redistribution of customers between stores. Since 2012 was a leap year and had an additional selling day, and because Saare Selver is closed for improvement works and has no turnover, the reference base is higher. Due to the renewal of the loyalty programme in May 2012, the premium points awarded to customers reduced revenue in the accounts, while there was no such effect in the first quarter of 2012. Compared to the base period, the percentage of food products in the total turnover has increased somewhat in the first quarter of the current year. Margins have also been influenced by the increased proportion of campaign products in overall sales and the prices of products in the daily shopping basket have been reduced, which has had a positive impact on the growth of average purchases. The profit earned in Estonia has been positively influenced by cost-effective management. The increase in electricity and heating prices has decreased profits. In addition, profits are influenced by opening new stores and renovating the existing ones, as well as one-time costs connected with opening new stores: Läänemere Selver was opened in Tallinn in the first quarter of 2013, and a part of the alteration works in Saare Selver also fell in the first quarter. The SelveEkspress service was launched in Tondi and Keila Selvers in the first quarter. Expansion is to be continued in 2013. A new store will be opened in Tartu in the summer, and at least 2 stores will be opened at the end of the year. As at the end of the first quarter of 2013, the Selver chain included 41 Selver stores with the total sale area of 76.2 thousand square metres.

Department stores

In the first 3 months of 2013, the sale revenue of the business segment of department stores was 20.0 million euros, growing 5.2% compared to the same period in 2012. The sale revenue per square metre of department stores amounted to 0.78 thousand euros per month in the first three months of 2013, exceeding the result of the same period in the previous year by 2.4%. At the same time, the sales area of department stores has increased by 499 m² thanks to renovation works. The final campaign of winter goods carried out in January had a positive impact on sales revenue; however, the late beginning of spring slowed down the sales of seasonal fashion products. The pre-tax loss of department stores amounted to 0.26 million euros in the first quarter of 2013, being better than the respective results of 2012 by 0.02 million euros. The final campaign of Muusikapood that was launched in both shopping centres at the end of January had a negative effect on the result of the supermarkets. The sales revenue of OÜ TKM Beauty Estonia operating the I.L.U. beauty stores was 1.0 million euros in the first quarter of 2013, having grown by 21.9% compared to the same period of 2012. The net loss of the I.L.U. chain was 0.1 million euros, which is 0.02 million euros less than in the same period of the year before. Compared to the first quarter of 2012, the I.L.U. chain opened its sixth store at the Tasku Centre in Tartu in August 2012.

Car Trade

The sales revenue of the car trade segment in the first quarter of 2013 was 9.0 million euros without intersegment transactions (6.1 million euros in the first quarter of 2012), which surpasses the revenue of the same period in 2012 by 47.5%. The steep growth in sales revenue can be explained by additional sale revenue from AS Viking Motors acquired in the third quarter of 2012. On the basis of comparable businesses, the sales growth would have remained at 4.6%. 458 vehicles were sold in the first three months of the current year, which is 109 more than in the same period of 2012. The pre-tax profit of the segment in the first quarter of 2013 totalled to 0.3 million euros, which is 0.1 million euros or 30.9% less compared to the same period of 2012, although the gross margin of the segment remained on the same level. The decrease of profit was mainly caused by the depreciation of the Viking Motors trademark as well as the growth of labour costs due to the need for additional sales personnel in connection with the increasing sales volume. The goal set for 2013 is to maintain and enhance the existing efficiency and market share. Seeking expansion options and taking existing trademarks to the Baltics through the dealer network owned by the group is still on the agenda. The group is also planning to integrate Viking Motors AS into the business environment of the group and adjust the structure of the car trade segment. In addition, the plan foresees building and opening a new building for KIA Automobiles in Riga.

Footwear trade

The sales revenue of the footwear trade in the first quarter of 2013 amounted to 2.7 million euros, indicating a reduction of 7.5% compared to the same period of 2012. The decreased sales revenue resulted from closing Latvian stores at the end of March 2012; the high reference base in Estonian stores in the first quarter of 2012; unfavourable weather conditions, which hindered the sale of spring collections; as well as the diminishing purchasing interest of customers due to the increasing prices of food and energy. The losses of the first quarter totalled to 0.6 million euros, while the losses of the first quarter in 2012 amounted to 0.5 million euros. A new store was opened in the first quarter of 2013 – Shu store in the Jõhvi shopping centre Tsentraal.

Real Estate

The sale revenue of the business segment of real estate outside the group totalled 0.8 million euros in the first quarter of 2013, which grew by 4.3% compared to the same period in 2012, while the sales revenue was 0.7 million euros. The increase in sale revenue outside the group mainly resulted from rent income on the immovable property purchased by SIA TKM Latvija at the end of 2012, as well as from the reorganisation of the rental spaces of Tartu Kaubamaja Kinnisvara OÜ and Tallinna Kaubamaja Kinnisvara OÜ that occurred in the first half of 2012. The pre-tax profit of the real estate segment amounted to 2.1 million euros in the first quarter of 2013, which is 0.3 million euros or 16.0% more than in the same period of the year before, when the profit before taxes was 1.8 million euros. The profit growth was mainly sparked by additional rental spaces leased to the other segments of the group in 2012. The immovable properties of Selver in Valga and Sõbra Selver in Tartu were purchased in the first quarter of 2013. The development projects of Selver will be continued in 2013, while construction works in Peetri Selver are underway in Rae Parish.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In thousands of euros

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

In thousands of euros

         Raul Puusepp
         Chairman of the Board
         Phone +372 731 5000