In the second quarter (1 April - 30 June) of the 2018 financial year Tallink Grupp AS and its subsidiaries (the Group) carried 2.6 million passengers, which is 1.7% more than in the second quarter last year. The Group's unaudited revenue for the second quarter decreased by 1.7% to a total of EUR 255.4 million. Unaudited EBITDA for the second quarter was EUR 43.5 million (EUR 48.9 million in Q2 2017) and unaudited net profit was EUR 15.3 million (net profit of EUR 17.9 million in Q2 2017).
In the second quarter, 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 competition on the maritime traffic between Estonia and Finland puts pressure on ticket prices.
- Strong growth of cargo volumes.
- Higher fuel cost due to increase in bunker prices.
- Charter revenue decrease compared to the same period last year as fewer ships are chartered out.
"The results were significantly impacted by the increase in fuel prices in global markets compared to the same period last year. The decline in the absolute number of passengers on the Tallinn-Helsinki route in the second quarter of 2018 according to the Port of Tallinn statistics has also had an impact on the wider market and the competitive landscape, although Tallink has managed to increase both passenger numbers and market share on this route as a result of investments made by the company. The excise duty levels in place in Estonia also have an impact on the results and affect the Estonian tourism and service sectors negatively as a whole. In today's world, where the travel and recreational choices are increasingly abundant in the target markets for our services, every aspect is important in keeping Estonia attractive as a tourism destination," Paavo Nõgene, CEO of Tallink Grupp AS, said.
Sales and segments
In the second quarter, the revenue from route operations increased in almost all geographical segments (Estonia-Finland, Estonia-Sweden and Latvia-Sweden), total by EUR 1.8 million.
The number of passengers travelling on the Group's ships on the Estonia-Finland routes increased by 2.2% or more than 30 thousand to a total of 1 379 thousand passengers. Due to higher competition, there was pressure on ticket prices that resulted in a decline in average ticket prices and lower ticket revenue. However, the cargo revenue showed strong growth also in second quarter and the total segment revenue increased by 0.7% to EUR 96.2 million. The Estonia-Finland segment result increased by 6.3% and was EUR 21.0 million.
The Finland-Sweden routes passenger number and revenue were almost on the same level compared to second quarter last year, being respectively 761 thousand passengers and EUR 88.6 million segment revenue. The segment result decreased by EUR 2.2 million to a total of EUR 7.2 million mainly due to higher fuel cost.
The Estonia-Sweden route's second-quarter revenue increased by 2.3% compared to the same period last year. The growth was supported by a 1.3% rise in the number of passengers and 17.2% increase in transported cargo units. The segment result decreased by EUR 1.2 million to a total of EUR 2.5 million mainly due to higher fuel cost.
The Latvia-Sweden route's second-quarter revenue increased by 4.6% compared to same period last year. The growth was supported by a 7.7% rise in the number of passengers and a 32.3% increase in transported cargo units. The segment result decreased by EUR 0.3 million to a total of EUR -0.9 million mainly due to higher fuel cost.
Earnings
In the second quarter of 2018, the Group's gross profit decreased by EUR 2.2 million compared to the same period last year, amounting to EUR 57.1 million. Second-quarter EBITDA decreased by EUR 5.3 million to EUR 43.5 million. The Group's second quarter result from operations was impacted mainly by:
- EUR 2.8 million lower charter revenue compared to last year as fewer ships were chartered out.
- Higher fuel cost due to increase in bunker prices globally, which had negative effect on the results of all geographical segments.
Amortisation and depreciation expense decreased by EUR 1.9 million to EUR 19.7 million compared to the second 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 second quarter last year.
Net finance costs decreased by EUR 0.3 million compared to the first quarter last year. The change includes decline of EUR 0.9 million in interest costs compared to same period the previous year and increase of EUR 0.6 million in losses from foreign exchange differences and the revaluation of cross currency and interest rate derivatives.
The Group's unaudited net profit for the second quarter of 2018 was EUR 15.3 million or EUR 0.023 per share compared to a net profit of EUR 17.9 million or EUR 0.027 per share in the same period last year.
Results of the first 6 months of 2018
In the first 6 months (1 January - 30 June) of the 2018 financial year the Group carried 4.6 million passengers which is almost 35 thousand passengers more compared to the same period last year. The Group's unaudited revenue for the period decreased by 2.6% and was EUR 439.6 million. Unaudited EBITDA for the first 6 months was EUR 47.7 million (EUR 54.1 million, 6M 2017) and unaudited net loss was EUR 4.3 million (EUR 2.4 million, 6M 2017 net loss).
The financial result of the first 6 months of 2018 was impacted by following factors:
The maintenance and repair of the cruise ferry Baltic Princess that lasted for 68 days.
Lower charter revenue compared to last year.
Higher fuel cost due to increase in bunker prices.
Competition on the maritime traffic between Estonia and Finland, which puts pressure on ticket prices.
Investments
In the second quarter, the Group's investments amounted to EUR 6.4 million. Most of the investments were made to upgrades of the ships cabins, public areas and to the development of online booking and sales systems.
Dividends
In June 2018 the shareholders' annual general meeting decided to pay a dividend of EUR 0.03 per share from net profit for 2017. The total dividend amount of EUR 20.1 million was paid out on 05 July 2018 (third quarter).
Financial position
In the second quarter, the Group's net debt decreased by EUR 33.9 million to EUR 447.0 million and the net debt to EBITDA ratio was 2.9 at the reporting date.
At the end of the second quarter, total liquidity (cash, cash equivalents and unused credit facilities) amounted to EUR 165.4 million (EUR 92.2 million at 30 June 2017) providing a strong financial position for sustainable operations.
The Group had EUR 90.4 million (EUR 82.0 million at 30 June 2017) in cash and cash equivalents and EUR 75.0 million (EUR 10.2 million at 30 June 2017) in unused credit lines.
Veiko Haavapuu
Financial Director
AS Tallink Grupp
Sadama 5/7
10111 Tallinn, Estonia
Tel. +372 640 9914
E-mail veiko.haavapuu@tallink.ee