Unaudited consolidated interim accounts for the second quarter and first six months of 2018

In the second quarter of 2018, the unaudited sales revenue of the Tallinna Kaubamaja Group was 174.9 million euros, exceeding the year-on-year result by 6.2%. The sales revenue generated in the first half of the year was 334.4 million euros, growing by 6.1% compared to the result of the first half of 2017, when the sales revenue was 315.3 million euros. In the second quarter of 2018, the unaudited consolidated net profit of the Group was 9.2 million euros, which is 6.6% higher compared to the profit of the same period of the previous year. The net profit of the Group in six months of 2018 was 9.0 million euros, which is 7.9% higher than the previous comparable result. The pre-tax profit in the first half of the year was 15.3 million euros, showing a growth of 3.6% compared to the previous year. The size of the net profit was influenced by the dividend payment, on which income tax of 6.2 million euros was accrued in the first quarter of 2018, whereas a year earlier, income tax was accrued in the amount of 6.4 million euros.

In the second quarter of 2018, the Group increased their sales revenue and profit. The car segment of the Group continued to produce the highest sales revenue and profit. Optimisation of the footwear segment selling spaces reduced the sales revenues of comparable periods, but led to profit in the second quarter. Several ongoing extensive road works in Tallinn made it harder for customers to access the Group’s important retail stores of different segments, which, in turn, led to reduced visiting frequency and slowdown of the sales revenue growth in these stores. The gross profitability compared to the earlier results decreased slightly because of the growth of the proportion of the car trade segment, a segment with a lower-than-average gross profitability in the Group, and more sales campaigns in the Selver segment. In the second quarter, the growth of labour costs slowed down somewhat, because the correction of wages has not occurred at the same pace in the comparable periods. However, the introduction of more self-checkout stations and improving the workflow of the commercial processes has an important role to play in controlling labour costs. The most important current development projects are improving the convenience of use and delivery speed of e-stores as well as the developments of car showrooms in all three Baltic States, a sales building of the department store segment in Tallinn, a new production building of Kulinaaria, and one Selver store.

Selver supermarkets

In the first half of 2018, the consolidated sales revenue of the supermarkets business segment was 217.9 million euros – an increase of 4.5% compared to the same period of the previous year. The consolidated sales revenue was 112.3 million euros in the second quarter, growing by 3.1% year-on-year. In Selver stores, 18.9 million purchases were made in the first half of 2018, which exceeded the year-on-year results by 2.7%. In the first half of 2018, the consolidated pre-tax profit of the supermarket segment was 6.9 million euros – a growth of 0.6 million euros compared to the previous year. The net profit was 2.8 million euros in the first half of the year – a growth of 0.2 million euros compared to the previous year. The pre-tax profit earned in Estonia was 7.0 million euros and the net profit was 3.0 million euros. The difference in the net profit and pre-tax profit is due to the income tax paid on dividends: in 2018, the income tax on dividends was higher by 0.4 million euros compared to the previous year. In the second quarter, the pre-tax profit and net profit was 3.7 million euros, of which the profit earned in Estonia accounted for 3.8 million euros. The profit of the second quarter exceeded the result of the comparable period in the previous year by 0.3 million euros. In the first half of the year, the loss earned in Latvia was 0.2 million euros, of which the second quarter accounted for 0.1 million euros, being 20% of the level of the previous year in both periods.

The sales revenue growth of Selver stores retained the rate of growth in the relevant market segment in the second quarter. The sales revenue of comparable stores reduced by 0.4%. The sales revenue was influenced by several factors: active road construction works, which affected and are still affecting access to several important stores of the chain this year, slowdown of the sale of alcohol, concentration of the celebrations of Midsummer Day on a shorter period, and the closing of one Selver store. The number of purchases as well as the average purchase have grown in the second quarter. E-Selver is still doing well: its sales increased by one third in the second quarter compared to the second quarter of the previous year. The growth of the sales revenue is the primary reason for the profit amount earned in Estonia. Gross margin on the sale is 0.1 percentage point lower due to higher inflation and a larger number of campaigns. In terms of operating costs, the cost efficiency level has improved compared to the previous year. As expected, investments have had a positive impact and allowed cutting administrative costs and managing labour costs efficiently in the context of a strong pressure to increase wages. The operating costs in the second quarter include one-time expenditure in the amount of 151,000 euros incurred in relation to closing of a store. The loss earned in Latvia decreased because some contracts within the Group ended. The comparison basis of 2018 does not include five new supermarkets opened in Tallinn last year and a mobile store in Hiiumaa. The comparison basis of 2018 is higher because of a supermarket closed in Tallinn.

Department stores

In the first six months of 2018, the department store business segment earned a sales revenue of 46.6 million euros, which is 3.1% less than last year. Of this, the sales revenue generated in the second quarter was 23.8 million euros, which was 5.0% lower than the revenue earned in the second quarter of 2017. The pre-tax profit of department stores in the first half of 2018 was 0.7 million euros – 46.8% lower than the year-on-year result. The pre-tax profit was 1.1 million euros in the second quarter, which was 9.9% less than the result achieved in 2017. The repair works in Gonsiori Street, which disturbed the entire traffic in downtown Tallinn and had a negative impact on the flow of customers, influenced the sales revenue in the department store segment in the second quarter. In the first half of 2018, the sales revenue of OÜ TKM Beauty Eesti, which operates the I.L.U. cosmetics stores, was 2.0 million euros, showing a decrease of 2.7% compared to the same period in 2017. The loss earned in the first half of 2018 was 0.2 million euros, the loss was smaller by 0.03 million euros compared to the first half of 2017. In the second quarter of 2018, the sales revenue was 1.0 million euros, decreasing by 8.4% compared to the same period in 2017. The loss in the second quarter of 2018 was 0.05 million euros, which is 0.04 million euros less than the loss earned in the comparable period in 2017. Poor access to the Rocca al Mare Centre due to construction works at the Rocca al Mare junction had a negative impact in the second quarter; construction works at Kristiine Centre had a similar effect.

Car trade

In the first half of 2018, the sales revenue of the car trade segment was 62.5 million euros. The sales revenue exceeded the year-on-year revenue by 23.0% and the sales revenue of KIAs increased by 7.2%. The sales revenue earned in the second quarter, 34.9 million euros, exceeded the year-on-year result by 31.1% and the sales revenue of KIAs increased by 19.3%. Altogether, 2,879 new vehicles were sold in the first half of the year, of which 1,650 cars were sold in the second quarter. The net profit of the segment earned in the first half of 2018 was 1.9 million euros, which is 4.4% higher than the profit earned in the same period in previous year. The pre-tax profit of the segment earned in the first half of 2018 was 2.6 million euros, exceeding the profit of the first half of 2017 by 14.7%. The pre-tax profit of the second quarter of 2018 was 1.7 million euros, which exceeded the year-on-year profit by 70.6%. The driver of the growth of the sales revenue and profit was selling and servicing Peugeot vehicles that was added to the car trade segment in the beginning of 2018 and the overall high growth trend in the car market. Selling and servicing of all car brands of the Group was successful in all Baltic States. In the second quarter, the earlier car sale transactions with car rental companies were realised, resulting in a steep jump in the sales numbers of new cars.

Footwear trade

The sales revenue of the footwear trade segment was 4.7 million euros in the first half of 2018. Compared to the previous year, the sales revenue decreased by 12.6% in the first half of the year. In the second quarter, the sales revenue generated by the segment was 2.5 million euros, showing a year-on-year decrease of 9.0%. The sales volumes have decreased because compared to the results of the previous year, as several footwear stores, belonging to the footwear trade segment, that did not meet the expectations have been closed. The loss was 0.2 million euros in the first half of the year. The loss earned in the comparable period a year earlier was 0.9 million euros. The profit in the second quarter was 0.1 million euros, which compared to the year-on-year results is higher by 0.1 million euros. This better result generated in the second quarter is the result of using better supply channels than previously and reorganisation of the volume of selling spaces. In the second half of 2018, the segment continues its work to optimise the selling spaces at ABC King stores.

Real estate

In the first half of 2018, the sales revenue earned in the real estate segment outside the Group was 2.7 million euros. The sales revenue grew by 8.6% compared to last year. The sales revenue of the segment earned outside the Group was 1.4 million euros in the second quarter. The sales revenue increased by 9.6% year-on-year. The pre-tax profit of the real estate segment in the first half of 2018 was 5.3 million euros, which is 8.3% lower than the result earned in the same period last year. The pre-tax profit of the segment in the second quarter of 2018 was 2.5 million euros, which is 16.0% lower compared to the results of the same period last year. The growth in the segment’s sales revenue was positively affected by the gas station and store, completed in the beginning of this year for a partner outside the Group, which is located in Rae rural municipality, in close proximity to the Selver store in Peetri. The growth of the segment is driven significantly also by Tartu Kaubamaja Centre and Viimsi Centre that, despite strong competition, are occupied by tenants and still popular among visitors. The decrease in profit was affected by previous contracts concluded inside the Group, related to Latvian real estate, which have ended by now.

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

Attachment

• Börs_Kaubamaja_2Q2018_eng