Management report
In the first quarter (1 January - 31 March) of the 2018 financial year Tallink
Grupp AS and its subsidiaries (the Group) carried 1.9 million passengers, which
is 0.5% less than in the first quarter last year. The Group's unaudited revenue
for the first quarter decreased by 3.9 % to a total of EUR 184.2 million.
Unaudited EBITDA for the first quarter was EUR 4.2 million (EUR 5.3 million in
Q1 2017) and unaudited net loss was EUR 19.6 million (net loss of EUR 20.3
million in Q1 2017).
In the first quarter, which is also the low season, the Group's revenue and
operating result were impacted 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 maintenance and repair of the cruise ferry Baltic Princess lasted for
68 days affected the Finland-Sweden segment's first quarter carriage volumes
and financial result.
* Charter and charter related revenue decreased compared to the same period
last year due to fewer ships in charter.
Sales and segments
In the first quarter, the number of passengers travelling on the Group's ships
on the Estonia-Finland routes increased by 1.3% or 13.3 thousand to a total of
1 025 thousand. Due to the higher competition, there was pressure on ticket
prices that resulted in a decline in average ticket prices and lower ticket
revenue. The segment revenue decreased by 0.9% to EUR 72.3 million. The Estonia-
Finland segment result increased by 7.0% and was EUR 8.6 million. The better
segment result was achieved mainly due to lower marketing costs as in the first
quarter last year there were marketing costs related to the launch of the
Shuttle ferry Megastar.
The maintenance and repair of the cruise ferry Baltic Princess, which is one of
the four ships operating on the Finland-Sweden routes, affected the routes'
first-quarter carriage volumes and financial results. The number of passengers
on the Finland-Sweden routes decreased by 9.9% to 523 thousand. The segment
revenue decreased by 9.2% to EUR 62.7 million. The segment result improved by
EUR 0.5 million as fewer trips resulted in lower ship operating and marketing
costs.
The Estonia-Sweden route's first-quarter revenue increased by 6.2% compared to
the same period last year. The growth was supported by a 5.7% rise in the number
of passengers and 15.9% increase in transported cargo units.
The Latvia-Sweden route's first-quarter revenue increased by 24.0% compared to
same period last year. The growth was supported by a 16.8% rise in the number of
passengers and a 62.6% increase in transported cargo units.
The charter and charter related revenue decreased by EUR 2.8 million as fewer
ships were chartered out compared to the first quarter in the previous year. Two
Superfast ferries were sold in December 2017, and one Superfast ferry remains
chartered out.
Earnings
In the first quarter of 2018, the Group's gross profit decreased by EUR 1.2
million compared to the same period last year, amounting to EUR 13.7 million.
First-quarter EBITDA decreased by EUR 1.1 million to EUR 4.2 million. The
Group's first quarter result from operations was impacted by charter and charter
related revenue, which was EUR 2.8 million lower than in the same period last
year because fewer ships were chartered out.
Amortisation and depreciation expense decreased by EUR 1.4 million to EUR 19.4
million compared to the first quarter of 2017. The decline is a result of less
depreciation cost from two sold Superfast ferries and addition of depreciation
cost of Shuttle ferry Megastar, compared to the first quarter last year.
Net finance costs decreased by EUR 0.5 million compared to the first quarter
last year. The change includes decline of EUR 1.0 million in interest costs
compared to same period the previous year and increase of EUR 0.5 million in
losses from foreign exchange differences and the revaluation of cross currency
and interest rate derivatives.
The Group's unaudited net loss for the first quarter of 2018 was EUR 19.6
million or EUR 0.029 per share compared to a net loss of EUR 20.3 million or EUR
0.030 per share in the same period last year.
Investments
In the first quarter, the Group's investments amounted to EUR 8.4 million. Most
of the investments were made in the fleet's technical dockings and upgrades of
the ships public areas. Investments were also made in the development of online
booking and sales systems.
Dividends
To the shareholders' annual general meeting in 2018, the Management Board will
propose a dividend of EUR 0.03 per share from net profit for 2017.
Financial position
In the last twelve months the Group has reduced its interest bearing liabilities
by EUR 212.2 million to EUR 551.0 million (EUR 763.2 million at 31 March 2017).
Total bank debt at the end of the first quarter of 2018 is comparable to the
level at the end of 2016, before the drawdown of a EUR 184 million loan in
January 2017, which was used to finance the purchase of the Shuttle ferry
Megastar. The repayment of bank debt (scheduled and early repayment of loans and
repayment of an overdraft) was supported by positive cash flow from operations
and the sale of two Superfast ferries in December 2017.
In the first quarter, the Group's net debt increased by EUR 8.9 million to EUR
480.9 million and the net debt to EBITDA ratio was 3.1 at the reporting date.
At the end of the first quarter, total liquidity (cash, cash equivalents and
unused credit facilities) amounted to EUR 142.8 million (EUR 74.7 million at 31
March 2017) providing a strong financial position for sustainable operations.
The Group had EUR 70.1 million (EUR 72.2 million at 31 March 2017) in cash and
cash equivalents and EUR 72.7 million (EUR 2.5 million at 31 March 2017) in
unused credit lines.
Key figures
For the period Q1 2018 Q1 2017 Change %
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Revenue (million euros) 184.2 191.5 -3.9%
Gross profit (million euros) 13.7 14.9 -7.8%
Net loss for the period (million euros) -19.6 -20.3 3.7%
EBITDA (million euros) 4.2 5.3 -20.3%
Depreciation and amortisation (million euros) 19.4 20.8 -6.6%
Capital expenditures (million euros) 8.4 204.2
Weighted average number of ordinary shares
outstanding 669 882 040 669 882 040 0.0%
Earnings per share -0.029 -0.030 3.7%
Number of passengers 1 930 449 1 939 784 -0.5%
Number of cargo units 90 687 83 797 8.2%
Average number of employees 7 242 7 209 0.5%
As at 31.03.18 31.12.17 Change %
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Total assets (million euros) 1 531.6 1 558.6 -1.7%
Total liabilities (million euros) 714.6 722.3 -1.1%
Interest-bearing liabilities (million euros) 551.0 560.9 -1.8%
Net debt (million euros) 480.9 472.0 1.9%
Net debt to EBITDA 3.06 2.98 2.7%
Total equity (million euros) 817.1 836.3 -2.3%
Equity ratio (%) 53.3% 53.7%
Number of ordinary shares outstanding 669 882 040 669 882 040 0.0%
Equity per share 1.22 1.25 -2.3%
Ratios Q1 2018 Q1 2017
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Gross margin (%) 7.4% 7.8%
EBITDA margin (%) 2.3% 2.7%
Net profit margin (%) -10.6% -10.6%
EBITDA: Earnings before net financial items, share of profit of equity accounted
investees,
taxes, depreciation and amortisation
Earnings per share: net profit / weighted average number of shares outstanding
Equity ratio: total equity / total assets
Equity per share: shareholder's equity / number of shares outstanding
Gross margin: gross profit / revenue
EBITDA margin: EBITDA / revenue
Net profit margin: net profit or loss / revenue
Net debt: interest-bearing liabilities less cash and cash equivalents
Net debt to EBITDA: net debt / 12-months trailing EBITDA
Consolidated statement of profit or loss and other comprehensive income
Unaudited, in thousands of EUR Q1 2018 Q1 2017
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Revenue (Note 3) 184 155 191 548
Cost of sales -170 448 -176 678
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Gross profit 13 707 14 870
Sales and marketing expenses -16 313 -17 780
Administrative expenses -12 728 -12 610
Other operating income 113 123
Other operating expenses -27 -135
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Result from operating activities -15 248 -15 532
Finance income (Note 4) 3 078 2 491
Finance costs (Note 4) -7 373 -7 273
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Loss before income tax -19 543 -20 314
Income tax -23 -14
Net loss for the period -19 566 -20 328
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Other comprehensive income 411 0
Exchange differences on translating foreign operations -68 -142
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Other comprehensive income/expense for the period 343 -142
Total comprehensive expense for the period -19 223 -20 470
Earnings per share (in EUR per share, Note 5) -0.029 -0.030
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Consolidated statement of financial position
Unaudited, in thousands of EUR 31.03.2018 31.12.2017
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ASSETS
Cash and cash equivalents 70 129 88 911
Trade and other receivables 42 630 46 466
Prepayments 15 261 5 395
Prepaid income tax 44 40
Inventories 37 499 40 675
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Current assets 165 563 181 487
Investments in equity-accounted investees 403 403
Other financial assets 338 344
Deferred income tax assets 18 718 18 722
Investment property 300 300
Property, plant and equipment (Note 7) 1 298 412 1 308 441
Intangible assets (Note 8) 47 885 48 900
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Non-current assets 1 366 056 1 377 110
TOTAL ASSETS 1 531 619 1 558 597
LIABILITIES AND EQUITY
Interest-bearing loans and borrowings (Note 9) 164 282 159 938
Trade and other payables (Note 13) 93 472 95 548
Derivatives (Note 6) 31 321 29 710
Payables to owners ¹ 3 3
Income tax liability 0 34
Deferred income 38 727 31 429
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Current liabilities 327 805 316 662
Interest-bearing loans and borrowings (Note 9) 386 742 400 968
Derivatives (Note 6) 0 4 688
Other liabilities 16 0
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Non-current liabilities 386 758 405 656
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Total liabilities 714 563 722 318
Share capital (Note 10) 361 736 361 736
Share premium 639 639
Reserves 68 367 68 946
Retained earnings 386 314 404 958
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Equity attributable to equity holders of the Parent 817 056 836 279
Total equity 817 056 836 279
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TOTAL LIABILITIES AND EQUITY 1 531 619 1 558 597
Consolidated statement of cash flows
Unaudited, in thousands of EUR Q1 2018 Q1 2017
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period -19 566 -20 328
Adjustments 24 403 25 624
Changes in:
Receivables and prepayments related to operating activities -6 025 -9 831
Inventories 3 177 -6 003
Liabilities related to operating activities 6 356 7 671
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Changes in assets and liabilities 3 508 -8 163
Cash generated from operating activities 8 345 -2 867
Income tax paid -52 -18
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NET CASH FROM/USED IN OPERATING ACTIVITIES 8 293 -2 885
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, equipment and intangible assets
(Notes 7, 8, 9) -8 365 -204 212
Proceeds from disposals of property, plant, equipment 26 25
Interest received 1 1
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NET CASH USED IN INVESTING ACTIVITIES -8 338 -204 186
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans received (Note 9) 0 184 000
Repayment of loans received (Note 9) -14 500 -10 024
Change in overdraft (Note 9) 2 331 32 371
Payments for settlement of derivatives -837 -905
Payment of finance lease liabilities (Note 9) -25 -26
Interest paid -5 706 -4 728
Payment of transaction costs related to loans 0 -164
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NET CASH USED IN/FROM FINANCING ACTIVITIES -18 737 200 524
TOTAL NET CASH FLOW -18 782 -6 547
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Cash and cash equivalents at the beginning of period 88 911 78 773
Decrease in cash and cash equivalents -18 782 -6 547
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Cash and cash equivalents at the end of period 70 129 72 226
Veiko Haavapuu
Financial Director
AS Tallink Grupp
Sadama 5/7
10111 Tallinn, Estonia
Tel. +372 640 9914
E-mail veiko.haavapuu@tallink.ee
Attachment
* Tallink Grupp 2018 Q1 ENG (https://prlibrary-
eu.nasdaq.com/Resource/Download/ab8164c5-0f82-4dbc-b384-afeed8807de5)