AS Tallink Grupp Unaudited Consolidated Interim Report Q3 2016

In the third quarter (1 July - 30 September) of the 2016 financial year AS Tallink Grupp and its subsidiaries’ (the Group) carried 2.9 million passengers which is 5.7% more compared to the third quarter last year. The number of cargo units transported increased by 6.7% and the number of passenger vehicles transported increased by 6.2% compared to same period last year.

The Group’s unaudited consolidated revenue for the third quarter was EUR 273.5 million, which is on the same level with the third quarter last year. The Group’s unaudited EBITDA for the third quarter amounted to EUR 67.1 million compared to EUR 76.8 million last year and unaudited net profit was EUR 42.8 million compared to EUR 45.2 million in same period last year.

In the third quarter, the revenue increased in all Group’s operated routes. The revenue growth of core operations from onboard and ticket sale was supported by the larger number of passengers travelling with the Group’s operated ships. The revenue from chartering of ships is visibly lower as there were fewer ships chartered out compared to third quarter last year. The Group’s operating result is lower compared to same period last year mainly due to lower result from chartering and cost of charter of the fast ferry Superstar.

The new LNG fast ferry Megastar was christened and launched in July 2016. The construction is proceeding according to the schedule and the interior works of the ship have started. The new LNG fast ferry Megastar will be delivered to the Group in January 2017 and the vessel will start to operate the Shuttle service on Tallinn-Helsinki route. At the same time, the Group has initiated number of marketing activities to introduce the new vessel and its qualities to main markets, more info on project http://megastar.tallink.com/.

In expectation of the new LNG fast ferry Megastar to the market next year, the Group operated the cruise ferry Silja Europa on Tallinn-Helsinki route day cruise service in 2016 third quarter July and August. This operational change has enabled the Group to increase its market share on the route by 2% to 58%, compared to same period last year. The Estonia-Finland route’s third quarter revenue increased by 7.0%, the increase is driven mainly by growth in the passenger number and cargo volume from the added capacity, compared to last year. The Estonia-Finland segment result for the third quarter was lower compared to the same period last year due to the cost of charter of the fast ferry Superstar.

The Finland-Sweden routes third quarter revenue increased by 0.9%, compared to same period last year. The revenue growth was supported by the higher passenger number on the routes. The Group’s Finland-Sweden routes market share increased in the third quarter by 2% to 54%. The number of cargo units transported on Finland-Sweden routes increased by 5.2% compared to same period last year. The segment result for the third quarter is slightly lower due to higher marketing and operating costs.

Similarly to previous quarters of 2016, the Estonia-Sweden and Latvia-Sweden routes positive development continues, the routes revenue growth was driven mainly by higher ticket revenue and on-board sales. The Estonia-Sweden routes revenue increased by 2.5% and segment result improved by 10.9% or EUR 0.7 million. The Latvia-Sweden route revenue increased by 3.2% and segment result improved by 10.9% or EUR 0.4 million compared to third quarter last year.

In the third quarter the Group’s total ticket revenue increased by 5.4% or EUR 4.3 million and restaurants and shop sales increased by 4.0% or EUR 5.7 million, compared to the same period last year. The sales growth is supported mainly by the higher number of passengers travelling with the Group’s operated ships.

The revenue from chartering activities has reduced in total by EUR 7.3 million in the third quarter due to fewer ships are chartered out, compared to the same period last year.

In the third quarter of the 2016 financial year the Group’s gross profit decreased by EUR 8.0 million and amounted to EUR 76.8 million, compared to the same period last year, EBITDA decreased by EUR 9.7 million to the total of EUR 67.1 million. The third quarter profitability was impacted by less revenue from chartering, higher marketing costs, cost of charter of the fast ferry Superstar and higher ships operating costs.

In the third quarter the Group’s net debt decreased by EUR 8.3 million to a total of EUR 457.9 million and the net debt to EBITDA ratio was a solid 3.1 at the end of third quarter. The third quarter interest cost was EUR 1.4 million lower compared to same period last year from regular repayment of loans and also repayment of loans related to sale of ships. Combined with gain from revaluation of cross currency and interest derivatives, the total finance costs decreased by EUR 4.2 million compared to the third quarter last year.

The unaudited net profit for the third quarter of the 2016 financial year was EUR 42.8 million or EUR 0.064 per share compared to the net profit of EUR 45.2 million or EUR 0.067 per share in the same period last year.

In June 2016 the shareholders annual general meeting decided to pay a dividend of EUR 0.02 per share from financial year 2015 profits. The total dividend amount of EUR 13.4 million was paid out on 05 July 2016 (third quarter). In addition to dividend payment the annual general meeting decided the share capital reduction in amount of EUR 40.2 million or EUR 0.06 per share. According to the procedures set out in Commercial Code the share capital reduction payments to the shareholders will be made on 23 December 2016.

The total liquidity, cash and unused credit facilities, at the end of the third quarter was EUR 116.3 million providing a strong financial position for sustainable operations. The Group had EUR 88.8 million in cash and equivalents and the total of unused credit lines were at EUR 27.5 million.

Q3 KEY FIGURES           

    2016
July-Sep
2015
July-Sep
Change
Revenue EUR million 273.5 273.6 -0.0%
Gross profit EUR million 76.8 84.8 -9.4%
Gross margin    28.1% 31.0%  
EBITDA EUR million 67.1 76.8 -12.6%
EBITDA margin   24.6% 28.1%  
Net profit for the period EUR million 42.8 45.2 -5.3%
Net profit margin    15.7% 16.5%  
         
Depreciation and amortization EUR million 19.3 18.4 4.5%
Investments EUR million 15.1 11.3 33.6%
         
Weighted average number of ordinary shares outstanding 1 669,882,040 669,882,040 0.0%
Earnings per share  EUR 0.06 0.07 -5.3%
         
Number of passengers   2,855,112 2,701,412 5.7%
Number of cargo units   81,170 76,062 6.7%
Average number of employees   7,366 7,040 4.6%
         
    30.09.2016 30.06.2016  
Total assets EUR million 1,552.0 1,567.4 -1.0%
Interest-bearing liabilities EUR million 546.7 558.5 -2.1%
Net debt EUR million 457.9 466.2 -1.8%
Total equity EUR million 811.2 807.7 0.4%
         
Equity ratio   52.3% 51.5%  
Net debt to EBITDA   3.1 2.9  
         
Number of ordinary shares outstanding 1 669,882,040 669,882,040 0.0%
Shareholders’ equity per share EUR 1.21 1.21 0.4%
           

EBITDA:  Earnings before net financial items, taxes, depreciation and amortization;
Earnings per share: net profit / weighted average number of shares outstanding;
Equity ratio: total equity / total assets;
Shareholder’s equity per share: shareholder’s equity / number of shares outstanding;
Gross margin: gross profit / net sales;
EBITDA margin: EBITDA / net sales;
Net profit margin: net profit / net sales;
Net debt: Interest bearing liabilities less cash and cash equivalents;
Net debt to EBITDA: Net debt / 12-months trailing EBITDA.
Share numbers exclude own shares.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(unaudited, in thousands of euros) 01.07.2016- 01.07.2015- 01.01.2016- 01.01.2015-
  30.09.2016 30.09.2015 30.09.2016 30.09.2015
         
Revenue (Note 3) 273,615 273,557 711,670 717,572
Cost of sales -196,839 -188,803 -560,154 -544,341
Gross profit 76,776 84,754 151,516 173,231
           
Sales and marketing expenses -16,571 -15,085 -53,166 -46,801
Administrative expenses -12,548 -10,992 -38,825 -34,310
Other operating income 180 -125 1,753 1,360
Other operating expenses 22 -156 -6 -737
Result from operating activities 47,859 58,396 61,272 92,743
         
Finance income (Note 4) 4,398 2,210 8,760 9,507
Finance costs (Note 4) -9,999 -12,039 -29,685 -32,647
         
Profit/-loss before income tax 42,258 48,567 40,347 69,603
           
Income tax 580 -3,355 245 -9,205
           
Net profit/-loss for the period 42,838 45,212 40,592 60,398
         
Other comprehensive income/-expense        
Items that may be reclassified to profit or loss        
Exchange differences on translating foreign operations -99 -202 -264 -256
Other comprehensive income/-expense for the period -99 -202 -264 -256
Total comprehensive income/-expense for the period 42,739 45,010 40,328 60,142
         
Earnings per share (in EUR per share)        
  - basic (Note 5) 0.064 0.067 0.061 0.090
  - diluted (Note 5) 0.064 0.067 0.061 0.090

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(unaudited, in thousands of euros)

ASSETS 30.09.2016 31.12.2015
       
Current assets    
Cash and cash equivalents 88,772 81,976
Trade and other receivables  41,986 36,583
Prepayments 9,592 5,274
Income tax prepayment 1,482 1,224
Inventories 37,624 29,197
Total current assets 179,456 154,254
       
Non-current assets    
Investments in equity-accounted investees 350 350
Other financial assets 361 308
Deferred income tax assets 19,410 19,410
Investment property 300 300
Property, plant and equipment (Note 7) 1,301,226 1,311,418
Intangible assets (Note 8) 50,904 52,726
Total non-current assets 1,372,551 1,384,512
       
TOTAL ASSETS 1,552,007 1,538,766
       
       
LIABILITIES AND EQUITY    
     
Current liabilities    
Interest bearing loans and borrowings (Note 9) 125,995 81,889
Trade and other payables 83,257 88,480
Payments to shareholders (Note 14) 40,193 0
Income tax liability 2,500 4,567
Deferred income 33,986 28,906
Total current liabilities 285,931 203,842
       
Non-current liabilities    
Interest bearing loans and borrowings (Note 9) 420,685 467,447
Derivatives (Note 6) 34,232 42,863
Other payables 0 192
Total non-current liabilities 454,917 510,502
TOTAL LIABILITIES 740,848 714,344
       
EQUITY    
Equity attributable to equity holders of the parent    
Share capital 361,736 404,290
Share premium  639 639
Reserves 71,026 65,083
Retained earnings 377,758 354,410
Total equity attributable to equity holders of the parent 811,159 824,422
TOTAL EQUITY 811,159 824,422
       
TOTAL LIABILITIES AND EQUITY  1,552,007 1,538,766

CONSOLIDATED CASH FLOW STATEMENT

(unaudited, in thousands of euros) 01.01.2016- 01.01.2015-
    30.09.2016 30.09.2015
Cash flows from operating activities    
Net profit/-loss for the period 40,592 60,398
Adjustments 79,014 91,250
Changes in receivables and prepayments related to operating activities -9,914 -8,089
Changes in inventories -8,427 2,639
Changes in liabilities related to operating activities -326 -7,103
Income tax paid -1,621 -490
  99,318 138,605
Cash flow from/used in investing activities    
Purchase of property, plant and equipment and intangible assets (Notes 7, 8, 9) -46,197 -29,823
Proceeds from disposals of property, plant and equipment 144 25,004
Interest received 51 57
  -46,002 -4,762
Cash flows used in financing activities    
Repayment of loans (Note 9) -55,039 -68,962
Change in overdraft (Note 9) 44,096 -8,700
Payment of finance lease liabilities (Note 9) -74 -60
Interest paid -18,434 -21,485
Payments for settlement of derivatives -3,341 -3,195
Payments of transaction costs related to loans 0 -1,429
Dividend paid (Note 12) -13,398 -13,398
Income tax on dividends paid -330 -2,818
  -46,520 -120,047
       
TOTAL NET CASH FLOW 6,796 13,796
       
Cash and cash equivalents:    
- at the beginning of period 81,976 65,311
- increase (+) / decrease (-) 6,796 13,796
- at the end of period 88,772 79,107

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Tallink Silja AB är det ledande serviceföretaget inom passagerar- och lasttrafiken på Östersjön. Verksamheten drivs från Stockholm mot Tallinn, Riga, Helsingfors, Åbo och Mariehamn samt mellan Kapellskär och Paldiski. Tallink Silja AB ingår i Tallink-koncernen. AS Tallink Grupp är noterat på Tallinnbörsen, som ingår i OMX. AS Tallink Grupp har en flotta på 13 fartyg som trafikerar på sex linjer under varumärkena Tallink och Silja Line. Sedan 2002 har åtta nya fartyg beställts och satts i trafik på Östersjön vilket gör att Tallink och Silja Line har Östersjöns modernaste flotta som motsvarar kraven på säkerhet, komfort och miljöhänsyn. Senaste tillskottet i Tallinks flotta är Megastar som togs i trafik i januari 2017 på sträckan Tallinn – Helsingfors. Megastar drivs med LNG och har en mängd innovativa lösningar för att minimera miljöpåverkan. Tallink äger och driver även fyra hotell i Tallinn under varumärket Tallink Hotels. Tallink Hotels femte hotell öppnade våren 2010 i Lettlands huvudstad Riga. AS Tallink Grupp har 7000 anställda i Estland, Sverige, Finland, Lettland och Tyskland och transporterar årligen över 9 miljoner passagerare.