Published: 2018-10-11 15:30:00 CEST
Tallinna Kaubamaja Grupp
Quarterly report

Unaudited consolidated interim accounts for the third quarter and first nine months of 2018

Segments (EURm)Q3/18Q3/17yoy9m/189m/17yoy
Supermarkets112.4108.53.6%330.3317.14.2%
Department stores22.823.3-2.3%69.371.4-2.9%
Cars28.125.211.5%90.776.119.2%
Footwear2.52.6-4.1%7.28.0-9.9%
Real Estate1.31.28.0%4.03.78.4%
Total sales167.1160.93.9%501.6476.25.3%
       
Supermarkets6.05.020.1%12.911.214.7%
Department stores0.30.7-64.5%1.02.0-53.0%
Cars1.21.19.3%3.83.412.9%
Footwear-0.2-0.23.8%-0.4-1.1-60.5%
Real Estate2.62.9-10.3%8.08.7-9.0%
Total profit before tax9.99.53.5%25.224.33.5%

In the 3rd quarter of 2018, the unaudited consolidated sales revenue of Tallinna Kaubamaja Group was 167.1 million euros, exceeding the year-on-year result by 3.9%. The sales revenue generated in the first nine months was 501.6 million euros, showing an increase of 5.3% compared to the result of the first nine months of 2017, when the sales revenue was 476.2 million euros. In the 3rd quarter of 2018, the unaudited consolidated net profit of the Group was 9.9 million euros, which is 3.5% higher than the profit of the same period of the previous year. The net profit of the Group in the first nine months of the year was 18.9 million euros, which was 5.6% higher than in the same period of the previous year. The pre-tax profit in the first nine months of the year was 25.2 million euros, showing a growth of 3.5% compared to the previous year. The size of the net profit was influenced by the dividend payment, on which income tax of 6.3 million euros was accrued in the 1st quarter of 2018, whereas a year earlier, income tax was accrued in the amount of 6.4 million euros.

In the 3rd quarter of 2018, the Group’s car trade and supermarket segment continued to produce a good sales growth. The total sales results of the department stores and footwear segment were slightly lower than the previous year. In the footwear segment, the decrease in the total sales revenue was due to closure of stores that did not meet expectations in 2017. However, the comparable footwear segment stores have shown improvement in both sales revenue and efficiency. The traffic management that complicated access to the Tallinn store and the reduction of the number of visiting tourists had a negative impact on the sales revenue generated by the Kaubamaja segment. A stronger growth of the sales revenue has come from the e-commerce channels of the Group’s retail segments, the development of which is still among the priorities of the Group. In the 3rd quarter, the Group continued at the same margin level compared to the previous year, although there were fleet transactions at a more modest margin in the growing car segment. In the first nine months of the year, the labour costs of the Group have grown by 9.0% and the average wages of the Group have increased by 6.2%. A lack of labour force in the service sector has complicated the Group’s choices when recruiting personnel. We are planning several technological innovations to ensure our high service culture.

Selver supermarkets

In the first nine months of 2018, the consolidated sales revenue of the supermarkets business segment was 330.3 million euros, showing a growth of 4.2% in the year-on-year comparison. The consolidated sales revenue in the 3rd quarter was 112.4 million euros, growing by 3.6% in comparison with the same period last year. In Selver stores, 28.9 million purchases were made in the first nine months of 2018, which exceeded the result of the previous year by 2.6%.

In the first nine months of 2018, the consolidated pre-tax profit of the supermarkets segment was 12.9 million euros, increasing by 1.6 million euros compared to the previous year. The net profit earned in nine months was 8.8 million euros, growing by 1.2 million euros compared to last year. The pre-tax profit earned in Estonia was 13.1 million euros and the net profit was 9.0 million euros. The difference between the net profit and profit before income tax is due to income tax paid on dividends – the income tax on dividends was 0.4 million euros higher in 2018 compared to the year earlier. In the 3rd quarter, the pre-tax profit and the net profit was 6.0 million euros, of which the profit earned in Estonia accounted for 6.0 million euros. The profit earned in the 3rd quarter exceeded the year-on-year result by 1.0 million euros. The loss earned in Latvia in nine months was 0.2 million euros and the result in the 3rd quarter was zero. A decision was adopted to terminate the activities of SIA Selver Latvia.

In the 3rd quarter, the sales revenue growth of Selver stores retained a pace of growth similar to the non-specialised stores market segment. The growth trend was visible in the number of purchases as well as the size of the average purchase in the 3rd quarter. The results were positively influenced by extremely good summer weather and the opening of new stores. The growth of sales of seasonal goods reached 40% during summer months. The results of several stores that have a significant weight in the chain were negatively impacted by road construction works that worsened the accessibility of the stores. In a situation of strong competition, the sales revenue in comparable stores has also increased. In the 3rd quarter, the sales revenue in the e-commerce sector was 38%.

The growth of sales revenue is the primary reason for the profit earned in Estonia. In terms of operating costs, the cost efficiency level has improved compared to the previous year. The main reason behind the growth of labour costs in the 3rd quarter is a strong pressure on wages and recruiting new employees to new opening stores.

The comparison basis of 2018 does not include five new supermarkets that opened in Tallinn last year or the mobile store in Hiiumaa. The comparison basis of 2018 is larger because of a supermarket that was closed in Tallinn. This year, Selver plans to open at least two new stores and extend the SelveEkspress service. By the end of the 3rd quarter, the SelveEkspress service is available at 44 Selver stores. We plan to continue to develop our e-commerce area by opening an order picking centre of the e-store in Tallinn this year to improve our capability to serve the growing number of customers. Compared to competitors, e-Selver covers the largest home delivery area and services customers in Harju, Rapla and Pärnu counties. Plans for this year include extending the service area even further and installing the first e-Selver food locker, where the orders of the e-store customers can be delivered.

Department stores

In the first nine months of 2018, the department stores business segment earned a sales revenue of 69.3 million euros, which is 2.9% less than in the same period last year. Of this, the sales revenue generated in the 3rd quarter was 22.8 million euros, which was 2.3% lower than the revenue earned in the 3rd quarter of 2017. The pre-tax profit of the department stores segment in the first nine months of 2018 was 1.0 million euros, which is 53.0% lower on the year-on year basis. The pre-tax profit was 0.3 million euros in the 3rd quarter, which was 0.5 million euros less than the year-on-year result. The sales revenue of the department stores segment in nine months was influenced by the longer and stronger summer discount campaign, because the long winter and early summer did not help with the sale of spring goods. The repair works on Gonsiori Street and the renovation of Tammsaare Park, which disturbed the traffic and movement of pedestrians in downtown Tallinn, influenced the sales revenue of the 3rd quarter and reduced the number of customers that visited the store in Tallinn. In addition, renovation works were undertaken on the first floor of the Tartu department store in July and August and a completely renewed women’s shoe department and men’s department were opened at the beginning of September. Taking into account the location of department stores next to main streets in downtown, the structural changes in the number of tourists in eight months of 2018 have had a significant impact on the result of the first nine months of 2018. The number of foreign tourists has remained at the same record-high level as in the previous year; however, the number of tourists from Finland has dropped. The changes in the excise policy have influenced the purchase behaviour of Finnish tourists, resulting not only in the decreased sales of alcoholic beverages, but also decreased sales in other groups of goods, such as perfumery products, clothes, and footwear. The number of Tax Free purchase registrations has reduced, showing an average decline of 15%.

In the 3rd quarter of 2018, the sales revenue of OÜ TKM Beauty Eesti, which operates the I.L.U. cosmetics stores, was 1.0 million euros, showing a decrease of 3.0% compared to the same period in 2017. The loss earned in the 3rd quarter was 0.04 million euros, which was 0.02 million euros better compared to last year. The sales revenue was 3.1 million euros in the first nine months of 2018, decreasing by 2.8% of the comparable period in 2017. The loss in the first nine months of 2018 was 0.2 million euros, which was 0.1 million euros less than the loss earned in the comparable period in 2017. In September, the new I.L.U. web store was opened, which launched as expected. The sales revenue was negatively influenced by the decreased number of customers that visited the store in Kristiine Centre and the drop in sales, which were caused by large-scale reorganisation and renovation works at the centre. The road construction works of the Rocca al Mare traffic junction worsened the accessibility of the Rocca al Mare shopping centre and weakened the result of I.L.U. store.

Car Trade

In the first nine months of 2018, the sales revenue of the car trade was 90.7 million euros. The sales revenue exceeded the year-on-year revenue by 19.2% and the sales revenue of KIAs increased by 5.2%. The sales revenue earned in the 3rd quarter, 28.1 million euros, exceeded the year-on-year result by 11.5% and the sales revenue of KIAs increased by 0.9%. In the Group’s car trade segment, a total of 4,101 new vehicles were sold in the first nine months of the year, of which 1,222 cars were sold in the 3rd quarter. The pre-tax profit of the segment in the first nine months of 2018 was 3.8 million euros, which is 12.9% higher than the profit earned in the same period in the previous year. The pre-tax profit of the 3rd quarter of 2018 was 1.2 million euros, which exceeded the year-on-year profit by 0.1 million euros.

A significant driver of the growth of the sales revenue of the segment was adding the Peugeot brand into the product selection of the subsidiary Viking Motors AS from the beginning of 2018. This has significantly increased the sales revenue generated by the sale of cars as well as services and spare parts. Moreover, cooperation with car rental companies has been promoted in 2018 and the share in this sector has been increased. It must also be noted that the growth in the trade volumes of the segment is supported by the general stable growth of approx. 13% of the car market in the Baltics. The bestselling KIA models were the updated crossover Sportage, which came on sale in summer, and the family hatchback Cee’d. In addition, the sale of new Opel cars has been successful, primarily the sale of the completely new large family car OPEL Insignia, which the customers have received well. Based on the results of the first nine months of the year, the business efforts of the Group’s car dealers have been satisfactory.

In the 4th quarter, it is planned to start the construction works to establish new Škoda and KIA car centres in Latvia and Lithuania to extend the car trade segment. The centres are planned to be opened in the second half of 2019.

Footwear trade

The sales revenue of the footwear trade segment was 7.2 million euros in the first nine months of 2018, decreasing by 9.9% on the year-on-year basis. In the 3rd quarter, the sales revenue was 2.5 million euros, which was 4.1% lower than in the same period in the previous year. The loss in the first nine months of 2018 was 0.4 million euros, which, compared to the year-on-year results, has improved by 0.6 million euros. The loss in the 3rd quarter remained at the same level as in the previous year – 0.2 million euros. The road construction works of the Rocca al Mare traffic junction worsened the accessibility of the Rocca al Mare shopping centre affecting negatively the results of the ABC King and SHU stores located there. The opening of the ABC King store in Kristiine Centre in accordance with the new concept fell in the 3rd quarter. Renewing this concept is one of the key factors to make the ABC King stores more efficient.

Real estate

In the first nine months of 2018, the sales revenue earned in the real estate segment outside the Group was 4.0 million euros. The sales revenue grew by 8.4% compared to last year. The sales revenue of the segment earned outside the Group was 1.3 million euros in the 3rd quarter. The sales revenue increased by 8.0% year-on-year. The pre-tax profit of the real estate segment in the first nine months of 2018 was 8.0 million euros, which is 9.0% lower than the result earned in the same period last year. The pre-tax profit of the segment in the 3rd quarter of 2018 was 2.6 million euros, which is 10.3% lower than the result of the same period last year.

Tartu Kaubamaja Centre, which, despite strong competition, is showing good results and is still popular among customers, was the primary driver of the growth of the segment’s sales revenue. During the year, the gas station and store that opened in close proximity to Peetri Selver has supported the growth of sales. 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

 30.09.201831.12.2017
ASSETS  
Current assets  
Cash and cash equivalents28,13233,662
Trade and other receivables13,23016,127
Inventories71,47775,816
Total current assets112,839125,605
Non-current assets  
Long-term trade and other receivables115114
Investments in associates1,8111,724
Investment property50,51049,902
Property, plant and equipment204,395214,475
Intangible assets5,2625,675
Total non-current assets262,093271,890
TOTAL ASSETS374,932397,495
   
LIABILITIES AND EQUITY  
Current liabilities  
Borrowings14,22954,818
Trade and other payables76,29785,569
Total current liabilities 90,526140,387
Non-current liabilities   
Borrowings85,15848,732
Provisions for other liabilities and charges420360
Total non-current liabilities 85,57849,092
TOTAL LIABILITIES176,104189,479
Equity  
Share capital16,29216,292
Statutory reserve capital2,6032,603
Revaluation reserve80,76782,124
Currency translation differences-255-255
Retained earnings99,421107,252
TOTAL EQUITY198,828208,016
TOTAL LIABILITIES AND EQUITY374,932397,495

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

In thousands of euros

 III quarter 2018III quarter 20179 months 20189 months 2017
Revenue167,133160,893501,571476,226
Other operating income1281591,193900
     
Cost of sales-124,534-119,734-377,094-356,613
Other operating expenses-13,263-13,371-40,844-40,450
Staff costs-15,932-14,352-48,249-44,254
Depreciation, amortisation and impairment losses-3,372-3,360-10,199-9,947
Other expenses-186-568-829-1,125
Operating profit9,9749,66725,54924,737
Finance income1111
Finance costs-216-188-573-571
Finance income on shares of associates11157187135
Profit before tax9,8709,53725,16424,302
Income tax expense-1-5-6,250-6,391
NET PROFIT FOR THE FINANCIAL YEAR9,8699,53218,91417,911
Other comprehensive income:    
Items that will not be subsequently reclassified to profit or loss   
Other comprehensive income for the financial year0000
TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR9,8699,53218,91417,911

Raul Puusepp

Chairman of the Board

Phone +372 731 5000

Attachment


Börs_Kaubamaja_3Q2018_eng.pdf