AB Novaturas consolidated interim financial statements for the twelve-month period ended 31 December 2018 (unaudited)
2018 twelve-month highlights:
- Novaturas’s turnover was EUR 181.8 mln, or 29% more than in 2017.
- Gross profit amounted to EUR 26.2 mln and was 2% smaller than in 2017.
- Operating expenses totaled EUR 18.5 mln, or 13% more than in 2017. Excluding the impact of commissions and one-time expenses, operating costs increased by 1% from the prior year.
- EBITDA amounted to EUR 8.0 mln and was 25% smaller than in 2017.
- The effective tax rate was 18.0%, compared to 10.8% in 2017. The main reason was dividends the Estonian subsidiary paid to the parent company which resulted in a tax payment of EUR 600,000 in Estonia.
- Novaturas had a net profit of EUR 5.4 mln, which is 34% less than in 2017.
- The company served 305,660 clients, 31% more than in 2017.
2018 fourth-quarter highlights:
- Novaturas’s turnover was EUR 41.5 mln, or 25% more than in the same period of 2017.
- Gross profit amounted to EUR 5.9 mln and was 11% lower than in the same period of 2017.
- Operating expenses totaled EUR 5.4 mln, 4% more than in the same period of 2017. Excluding the impact of commissions and one-time expenses, operating costs decreased by 11% from the same period a year earlier.
- EBITDA amounted to EUR 0.6 mln and was 58% smaller than in the same period of 2017. One of the main reasons for this was one-time expenses related to a change of aviation partner in Lithuania.
- Novaturas had a loss of EUR 0.2 mln, which is EUR 0.8 million less compared to EUR 0.6 million profit in 2017.
- The company served 62.1 thousand clients, 27% more than in the same period of 2017.
The company served 305,660 clients in the full year 2018 which is 31% more than in 2017. During the last quarter of the year we still felt some effects of abnormally hot and dry summer weather in all three Baltic countries. Hot weather persisted throughout June, July and August decreasing demand for outbound travel. This influenced last-minute prices – as we had to reduce prices and profitability to try to stimulate demand. The impact of lower last-minute prices during the summer was smaller in the fourth quarter than in the third quarter. During the fourth quarter we had to change our aviation partner in the Lithuanian market due to financial difficulties experienced by Small Planet Airlines. The change of aviation partner resulted in write-offs of EUR 0.4 million and further negatively influenced results for the quarter by causing an increase in aviation costs.
Flight package tours continue to be our main product. The most popular destinations remain Turkey, Greece and Bulgaria for the summer season and Egypt for the winter season. For each season we introduce new destinations on the market or reintroduce older ones. For the summer of 2018 we added Tunisia, and for the 2018/2019 winter season we added Jordan and Cuba. The wide variety of destinations in our portfolio enables us to satisfy our clients’ diverse needs. All major destinations grew during the reporting period.
The number of clients served grew in all source markets where Novaturas operates. The strongest growth was recorded in the Belarusian market, where the number of clients rose 102%. We do not fly from Belarus, but rather sell our Lithuanian products through Belarusian agencies. The Lithuanian source market grew 30%, while the Latvian market grew by 31% and the Estonian market was up 31%.
Passenger growth was strongest for flight package tours, at 31%, with a growth rate of 29% for other products. The other products passengers bought were mainly flight tickets for charter flights which we operate. Our flight tickets are sold through travel agencies and via the GDS channel, reaching very diverse types of travelers.
Travel agencies’ share in our sales increased by 1.8 percentage points to 72.7%. Rather than focusing on our own retail share (which decreased by 1.7 percentage points to 11.4%), we have mainly focused on web sales. Web sales’ share of revenue rose by 0.1 percentage points during 2018 to 14.1%, while that of GDS sales was little changed at 1.8%. As planned, in June we introduced a new version of the company’s webpage in all thee countries where we operate. The responsive design of the new webpage is much better suited to mobile devices, which customers are using more and more not only to search for information but also to make purchases online.
We kept our operating expenses under control during the reporting period. They grew at a much slower pace than sales, increasing the efficiency of the company. Direct marketing expenditures were 0.8% of sales during the fourth quarter and 0.7% for the full year, similar to the levels for corresoponding periods of 2017. Salaries and related items, which increased by 4% over the full-year period, in the fourth quarter decreased by 10% form the same quarter a year earlier. Excluding the impact of commissions and one-off expenditures, operating expenses in 2018 increased by 1% compared 2017, and during fourth quarter even decreased by 11%. One-time expenses, incurred mainly in the Company’s IPO and in relation to bankruptcy of Small Planet Airlines, amounted to EUR 887,000. With one-time costs included, operating costs less commissions paid rose by 2% in the full year period and during the fourth quarter decreased by 5% year-on-year. Total costs, including commissions, grew by 13% in full year period and 1% in the fourth quarter. Commission expenses remained stable at 5.2% of sales in 2018, compared to 5.3% in 2017.
Profit tax expenses include EUR 600,000 paid in Estonia on dividends paid by the subsidiary there to the parent company.
“Other current liabilities and accrued expenses” includes EUR 1.6 million related to the market value of open hedge contracts. “Cash and cash equivalents” includes EUR 1.5 million of restricted cash, which is used to issue guarantees covering prepayments received from customers, as required by the law in each country of operations.
The company in September 2018 renewed its overdaft agreement through the end of 2020 and will be able to use the overdraft in the January-June period each year. Servicing of the long-term loan is in accordance with the loan agreement and EUR 6.0 million of the loan has already been repaid. The high level of advances received from customers was due to a strong increase in passenger volumes and very good advanced sales at the end of the period.
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