Published: 2019-04-25 07:00:00 CEST
Tallink Grupp
Annual Financial Report

AS Tallink Grupp Audited Annual Report of the 2018 Financial Year

Tallink Grupp AS and its subsidiaries (the Group) carried a record number of 9 756 611 passengers in 2018, 891 passengers more than in 2017. The number of cargo units transported increased by 5.7%. The Group’s revenue amounted to EUR 949.7 million (EUR 967.0 million in 2017). EBITDA was EUR 142.8 million (EUR 158.3 million, 2017) and net profit for the year EUR 40.0 million or EUR 0.06 per share (EUR 46.5 million or EUR 0.07 per share in 2017).

In 2018, the Group’s total revenue decreased by EUR 17.3 million to EUR 949.7 million.

  • Total revenue from route operations (core business segments) increased by EUR 0.7 million to EUR 883.7 million despite a EUR 7.4 million decrease in revenue from the Finland-Sweden segment, which was mainly due to the 68-day maintenance of the cruise ferry Baltic Princess.
  • Other revenue streams (segment other) decreased by EUR 19.4 million to EUR 74.8 million. The largest decrease occurred in charter revenue, which dropped by EUR 10.8 million because fewer ships were chartered out. There was also lower revenue from onshore shops (in Tallinn Old Harbour area) as the price level of products sold in onshore shops in Estonia has become less competitive after recent years’ excise duty increases. In addition, there was lower revenue from hotels because Tallink Pirita Spa Hotel in Tallinn ceased operations from November 2018 due to the sale of the hotel property by its owner.

The cargo business sustained growth in 2018. Transported cargo volumes increased by 5.7% and cargo revenues grew by 6.1% or EUR 7.1 million to EUR 124.9 million. The number of transported cargo units grew in all geographical segments, supported by positive economic developments in the Group’s main markets.

In 2018, the Group’s ships carried a total of 5.1 million passengers on the Estonia-Finland routes, 0.3% more than the year before, and the number of cargo units transported on the routes increased by 5.4%. On the Tallinn-Helsinki route competition increased through capacity added by competitors, which put pressure on ticket prices. However, the new shuttle vessel Megastar improved the efficiency of shuttle operations and the Group was able to improve the segment result despite a challenging competitive environment. The segment’s revenue increased by EUR 1.5 million to EUR 356.0 million and the segment’s result increased by EUR 2.4 million to EUR 80.3 million.

The Finland-Sweden routes’ revenue decreased by EUR 7.4 million to EUR 337.5 million and the segment’s result decreased by EUR 2.3 million to EUR 16.2 million. The first-quarter maintenance and repair of the cruise ferry Baltic Princess affected the Finland-Sweden segment’s carriage volumes and financial result. The segment’s result was also weakened by a rise in bunker prices which increased fuel costs.

The Estonia-Sweden routes’ revenue grew by EUR 1.7 million compared to 2017. Growth was supported by a 0.4% higher number of passengers and a 10.9% increase in the number of transported cargo units. The segment’s result decreased compared to the previous year due to higher fuel costs attributable to a rise in bunker prices.

The Latvia-Sweden route’s revenue increased by EUR 4.8 million compared to 2017. Growth was supported by a 7.0% higher number of passengers and a 24.5% increase in the number of transported cargo units. Positive development of the route’s carriage volumes and revenue continued in 2018. However, due to higher fuel costs resulting from an increase in bunker prices, the segment result improved by only EUR 0.2 million to EUR -1.0 million.

In 2018, the Group’s revenue and operating result were influenced by the following operational factors:

  • The number of passengers travelling on the Group’s ships increased in almost all geographical segments (Estonia-Finland, Estonia-Sweden and Latvia-Sweden).
  • The number of cargo units transported on the Group’s ships increased in all geographical segments.
  • The first-quarter maintenance and repair of the cruise ferry Baltic Princess affected the Finland-Sweden segment’s carriage volumes and financial result.
  • Charter revenue decreased compared to the same period last year as fewer ships were chartered out. 
  • An increase in bunker prices drove up fuel costs.

Key figures

For the year ended 31 December201820172016
Revenue (million euros)949.7967.0937.8
Gross profit (million euros)183.8194.6192.6
EBITDA¹ (million euros)142.8158.3149.5
EBIT¹ (million euros)63.571.971.6
Net profit for the period (million euros)40.046.544.1
    
Depreciation and amortisation (million euros)79.386.477.9
Capital expenditures¹ (million euros)36.4219.368.9
Weighted average number of ordinary shares outstanding669 859 148669 882 040669 882 040
Earnings per share¹0.060.070.07
    
Number of passengers¹9 756 6119 755 7209 457 522
Number of cargo units¹384 958364 296328 190
Average number of employees¹7 4307 4067 163
    
As at 31 December201820172016
Total assets (million euros)1 500.91 558.61 539.0
Total liabilities (million euros)644.0722.3729.1
Interest-bearing liabilities (million euros)510.1560.9558.9
Net debt¹ (million euros)428.0472.0480.1
Net debt to EBITDA¹3.03.03.2
Total equity (million euros)856.9836.3809.9
Equity ratio¹ (%)57.1%53.7%52.6%
    
Number of ordinary shares outstanding669 865 540669 882 040669 882 040
Equity per share¹1.281.251.21
    
Ratios201820172016
Gross margin¹ (%)19.4%20.1%20.5%
EBITDA margin¹ (%)15.0%16.4%15.9%
EBIT margin¹ (%)6.7%7.4%7.6%
Net profit margin¹ (%)4.2%4.8%4.7%
    
ROA¹ (%)4.1%4.3%4.6%
ROE¹ (%)4.8%5.6%5.4%
ROCE¹ (%)5.2%5.3%5.6%

¹ Alternative performance measures based on ESMA guidelines are disclosed in the “Alternative performance measures” section of the report.

Sales

The Group’s revenue amounted to EUR 949.7 million in 2018 (967.0 million in 2017). Restaurant and shop sales on board and on shore in the total amount of EUR 524.4 million (536.7 million in 2017) contributed more than half of total revenue. Ticket sales amounted to EUR 243.8 million (242.7 million in 2017) and sales of cargo transport to EUR 124.9 million (111.7 million in 2017).

Geographically, 37.5% or EUR 356.0 million of revenue was generated by the Estonia-Finland routes and 35.5% or EUR 337.5 million by the Finland-Sweden routes. Revenue from the Estonia-Sweden routes was EUR 119.0 million or 12.5% and from the Latvia-Sweden route EUR 71.3 million or 7.5%. The share of revenue generated by other geographical segments decreased to 7.9% or EUR 74.8 million.

Earnings

Gross profit for 2018 amounted to EUR 183.8 million (EUR 194.6 million in 2017) and EBITDA to EUR 142.8 million (EUR 158.3 million in 2017). Net profit for 2018 was EUR 40.0 million (EUR 46.5 million in 2017). Net profit per share was EUR 0.06 (EUR 0.07 in 2017).

The Group’s profitability was influenced mainly by the following factors:

  • Fuel costs grew by EUR 16.6 million due to an increase in bunker prices. At the same time, the Group achieved fuel savings. Through various energy efficiency initiatives, in 2018 the ships’ average fuel consumption per nautical mile decreased by 3.2%.
  • Charter revenue decreased because fewer ships were chartered out compared to the previous year.
  • Revenue from onshore shops (in the port area) decreased because the price level in onshore shops in Estonia has become less competitive after recent years’ excise duty increases.
  • Nonrecurring costs incurred and proceeds received in 2018:
    • Costs of EUR 1.5 million from the listing of shares on the Nasdaq Helsinki Stock Exchange.
    • Costs of EUR 0.9 million from the termination of the lease of an old fuel tank.
    • Other proceeds of EUR 1.0 million received under a compensation agreement with the former owner of the Superfast vessels.

The cost of goods sold at shops and restaurants, which is the largest operating cost item, amounted to EUR 217.2 million (EUR 227.8 million in 2017).

Fuel costs for 2018 amounted to EUR 102.5 million (EUR 85.9 million in 2017). Fuel costs were impacted by an increase in carriage capacity and higher fuel prices throughout the year. As a result, annual fuel costs increased by 19.3%. The Group makes continuous efforts to improve and optimize its day to day operations and lower the fleet’s fuel costs.

The Group’s personnel expenses amounted to EUR 218.1 million (EUR 215.2 million in 2017). The average number of employees in 2018 was 7 430 (7 406 in 2017).

Administrative expenses for the period amounted to EUR 55.5 million and sales and marketing expenses to EUR 69.3 million (EUR 53.7 million and 71.3 million respectively in 2017).

Depreciation and amortisation of the Group’s assets totalled EUR 79.3 million (EUR 86.4 million in 2017). There were no impairment losses related to the Group’s property, plant and equipment and intangible assets.

Net finance costs decreased by EUR 2.3 million compared to the previous year, mainly through EUR 3.9 million lower interest expenses. Total gains from exchange rate differences and the revaluation of cross currency and interest rate derivatives decreased by EUR 1.6 million.

The Group’s exposure to credit risk, liquidity risk and market risks, and its financial risk management activities are described in the notes to the financial statements.

Liquidity and cash flow

The Group’s net operating cash flow for 2018 was EUR 156.8 million (EUR 136.2 million in 2017).

The Group’s cash used in investing activities was EUR 35.7 million (EUR 86.8 million in 2017). A number of investments were made to upgrade the ships’ restaurants, shops and cabins. Investments were also made in the development of the online booking and sales systems.

In 2018, the Group’s loan repayments totalled EUR 190.0 million (EUR 174.4 million in 2017), including the repayment of senior unsecured bonds of NOK 900 million issued in 2013. A term loan of EUR 110.0 million was taken to partly refinance the redemption of the bond issue.

Interest payments were EUR 19.4 million (EUR 20.7 million in 2017).

At 31 December 2018, the Group’s cash and cash equivalents totalled EUR 82.2 million (EUR 88.9 million at 31 December 2017). In addition, available unused overdraft credit lines amounted to EUR 75.0 million (EUR 75.0 million in 2017).

In management’s opinion, the Group has sufficient liquidity to support its operations.


Consolidated statement of profit or loss and other comprehensive income

For the year ended 31 December, in thousands of EUR20182017
Revenue (Note 4)949 723966 977
Cost of sales (Note 5)-765 892-772 372
Gross profit183 831194 605
   
Sales and marketing expenses (Note 5)-69 315-71 339
Administrative expenses (Note 5)-55 223-53 012
Impairment loss on receivables (Note 23)-272-660
Other operating income4 6332 873
Other operating expenses-153-509
Result from operating activities63 50171 958
   
Finance income (Note 5)8 63112 738
Finance costs (Note 5)-27 552-33 987
Share of profit of equity-accounted investees (Note 12)440
Profit before income tax44 58450 749
   
Income tax  (Note 6)-4 535-4 253
   
Net profit40 04946 496
Net profit attributable to equity holders of the Parent40 04946 496
   
Other compherensive income  
Items that may be reclassified to profit or loss  
Exchange differences on translating foreign operations26713
Other comprehensive income26713
   
Total comprehensive income40 31646 509
Total comprehensive income attributable to equity holders of the Parent40 31646 509
   
Basic and diluted earnings per share (in EUR, Note 7)0.0600.069


Consolidated statement of financial position

As at 31 December, in thousands of EUR20182017
ASSETS  
Cash and cash equivalents (Note 8)82 17588 911
Trade and other receivables (Note 9)43 80546 466
Prepayments (Note 10)6 0845 395
Prepaid income tax4640
Inventories (Note 11)35 74140 675
Current assets167 851181 487
   
Investments in equity-accounted investees (Note 12)407403
Other financial assets (Note 13)320344
Deferred income tax assets (Note 6)17 93418 722
Investment property300300
Property, plant and equipment (Note 14)1 267 9281 308 441
Intangible assets (Note 15)46 16448 900
Non-current assets1 333 0531 377 110
TOTAL ASSETS1 500 9041 558 597
   
LIABILITIES AND EQUITY  
Interest-bearing loans and borrowings (Note 16)78 658159 938
Trade and other payables (Note 17)100 68295 548
Derivatives (Note 23)91829 710
Payables to owners23
Income tax liability11634
Deferred income (Note 18)32 11331 429
Current liabilities212 489316 662
   
Interest-bearing loans and borrowings (Note 16)431 477400 968
Derivatives (Note 23)04 688
Other liabilities220
Non-current liabilities431 499405 656
Total liabilities643 988722 318
   
Share capital (Note 19)361 736361 736
Share premium (Note 19)662639
Reserves (Note 19)69 47468 946
Retained earnings425 044404 958
Equity attributable to equity holders of the Parent856 916836 279
Total equity856 916836 279
TOTAL LIABILITIES AND EQUITY1 500 9041 558 597


Consolidated statement of cash flows

For the year ended 31 December, in thousands of EUR20182017
   
CASH FLOWS FROM OPERATING ACTIVITIES  
Net profit for the period40 04946 496
Adjustments for:  
Depreciation and amortisation (Notes 14, 15)79 28086 371
Net loss on disposals of property, plant and equipment-104-1 903
Net interest expense (Note 5)19 80623 744
Net income/expense from derivatives (Note 5)-5 0555 631
Profit from equity-accounted investees (Note 12)-4-40
Net unrealised foreign exchange loss/gain4 294-7 564
Treasury shares60
Income tax (Note 6)4 5354 253
Adjustments102 758110 492
Changes in:  
Receivables and prepayments related to operating activities2 407-6 707
Inventories4 934-1 956
Liabilities related to operating activities6 723-12 140
Changes in assets and liabilities14 064-20 803
Cash generated from operating activities156 871136 185
Income tax paid-87-7
NET CASH FROM OPERATING ACTIVITIES156 784136 178
   
CASH FLOWS FROM INVESTING ACTIVITIES  
Purchase of property, plant, equipment and intangible assets-36 037-219 207
Proceeds from disposals of property, plant, equipment368132 448
Interest received71
NET CASH USED IN INVESTING ACTIVITIES-35 662-86 758
   
CASH FLOWS FROM FINANCING ACTIVITIES  
Proceeds from loans received110 000184 000
Repayment of loans received-69 666-134 321
Repayment of bonds (Note 16)-120 3030
Change in overdraft (Note 16)0-40 110
Payments for settlement of derivatives-3 569-3 592
Payment of finance lease liabilities-108-102
Interest paid-19 440-20 744
Payment of transaction costs related to loans-1 113-216
Dividends paid (Note 19)-20 096-20 096
Reduction of share capital-1-1
Income tax on dividends paid (Note 19)-3 562-4 100
NET CASH USED IN FINANCING ACTIVITIES-127 858-39 282
   
TOTAL NET CASH FLOW-6 73610 138
   
Cash and cash equivalents at the beginning of period88 91178 773
Decrease/increase in cash and cash equivalents (Note 8)-6 73610 138
Cash and cash equivalents at the end of period82 17588 911


Veiko Haavapuu
Financial Director
         
AS Tallink Grupp
Sadama 5/7, 10111 Tallinn
E-mail veiko.haavapuu@tallink.ee

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Tallink Grupp AR 2018 ENG.pdf