VIKING LINE'S INTERIM REPORT FOR THE PERIOD JANUARY - SEPTEMBER 2014
Viking Line Abp INTERIM REPORT 13.11.2014, 9.00 A.M.
VIKING LINE'S INTERIM REPORT FOR THE PERIOD JANUARY - SEPTEMBER 2014
Consolidated sales of the Viking Line Group during the period January 1 – September 30, 2014 decreased by 4.4 per cent to 401.1 million euros compared to the same period of 2013 (EUR 419.7 M). Operating income amounted to EUR 9.5 M (32.7 including and 9.9 excluding the capital gain from the sale of the Isabella). Net financial items totalled EUR -6.3 M (-5.1). Consolidated income before taxes amounted to EUR 3.2 M (27.6) Income after taxes totalled EUR 2.5 M (20.7 including and 3.5 excluding the capital gain from the sale of the Isabella).
Competition in Viking Line’s service area implies continued pressure on both prices and volume. The economic downturn in Finland is another uncertainty factor. In recent months, however, lower bunker prices have had a positive effect on operations and the Board of Directors is still of the opinion that operating income will improve in 2014 compared to operating income in 2013, excluding the capital gain from the sale of the Isabella.
SALES AND EARNINGS
Consolidated sales of the Viking Line Group during the period January 1 – September 30, 2014 decreased by 4.4 per cent to 401.1 million euros compared to the same period of 2013 (EUR 419.7 M). Operating income amounted to EUR 9.5 M (32.7 including and 9.9 excluding the capital gain from the sale of the Isabella). Net financial items totalled EUR -6.3 M (-5.1). Consolidated income before taxes amounted to EUR 3.2 M (27.6) Income after taxes totalled EUR 2.5 M (20.7 including and 3.5 excluding the capital gain from the sale of the Isabella).
Passenger-related revenue decreased by 5.4 per cent to EUR 368.5 M (389.5), while cargo revenue increased by 8.9 per cent to EUR 29.6 M (27.1). Net sales revenue decreased by 5.1 per cent to EUR 289.2 M (304.8). The Group’s operating expenses decreased by 4.6 per cent to EUR 255.6 M (267.9).
Consolidated sales during the third quarter, July 1 – September 30, 2014, decreased by 2.6 per cent to EUR 160.1 M compared to the same quarter of 2013 (164.4). Operating income in the third quarter amounted to EUR 22.0 M (26.6) and income after taxes totalled EUR 16.7 M (18.9).
The decrease in consolidated sales is primarily explained by the prevailing pressure on prices in today’s tough competitive situation, combined with falling volume early in 2014 and an economic downturn in Finland that affects the pattern of consumption. Overall, this has had a negative impact on net sales revenue per passenger.
The Group’s bunker (vessel fuel) expenses decreased during the period by EUR 2.5 M, equivalent to 5.4 per cent. The decrease is explained by lower average bunker prices and the Group’s continued efforts to optimize the bunker consumption of its vessels.
The Board of Directors also believes that the Group’s action programme aimed at improving operational efficiency is continuing to have a positive impact on operating expenses. Combined with ongoing measures to boost sales, this is expected to improve earnings from day-to-day operations in the future.
SERVICES AND MARKET TRENDS
The Viking Line Group provides passenger and cargo carrier services using seven vessels on the northern Baltic Sea. The Group’s vessels served the same routes as during 2013. During the period June 12 – September 2, 2014 the Gabriella and the Mariella served the Helsinki (Finland)–Tallinn (Estonia) route, while continuing to sail on their regular Helsinki–Mariehamn (Åland Islands, Finland)–Stockholm (Sweden) route.
The number of passengers on Viking Line’s vessels during the report period increased by 91,003 to 5,089,760 (4,998,757). During the report period, Viking Line reduced its market share on the Turku (Finland)–Mariehamn/Långnäs (Åland Islands, Finland)–Stockholm route by 1.4 percentage points to 56.9 per cent. On the Helsinki–Mariehamn–Stockholm route, market share increased by 0.8 percentage points to 46.1 per cent. In cruise services between Stockholm and Mariehamn, market share decreased by 0.1 percentage points to 53.9 per cent. On the Helsinki–Tallinn route, market share increased by 2.0 percentage points to 25.0 per cent. On the short route across the Sea of Åland between Mariehamn and Kapellskär (Sweden), market share increased by 2.2 percentage points to 43.7 per cent. This gave the Group a total market share in its service area of 35.0 per cent (34.5).
Viking Line’s cargo volume was 96,554 cargo units (88,819). Viking Line achieved a cargo market share of 21.8 per cent (20.7).
INVESTMENTS AND FINANCING
The Group’s investments amounted to EUR 6.3 M (169.5).
On September 30, 2014 the Group’s non-current interest-bearing liabilities amounted to EUR 201.8 M (225.5). The equity/assets ratio was 36.1 per cent, compared to 33.8 per cent a year earlier.
At the end of September 2014, the Group’s cash and cash equivalents amounted to EUR 81.9 M (88.9). Net cash flow from operating activities amounted to EUR 12.3 M (19.9).
FINANCIAL REPORTING
This Interim Report was prepared in compliance with International Financial Reporting Standards (IFRSs) and was drawn up as a summary of the financial statements for the period in compliance with IAS 34. Estimates and judgments as well as accounting principles and calculation methods are the same as in the latest annual financial statements. Recognized income taxes are based on an estimated average tax rate, which is expected to apply throughout the fiscal year. This Interim Report is unaudited.
ORGANIZATION AND PERSONNEL
On January 16, 2014, the M/S Rosella was recorded in the Finnish ship register and on January 22, 2014 the M/S Viking XPRS was recorded in the Estonian ship register.
The average number of Group employees was 2,848 (3,151), of whom 2,114 (1,986) worked for the parent company. Land-based personnel totalled 664 (708) and shipboard personnel totalled 2,184 (2,443).
In addition to the Group’s own employees, the Viking XPRS was staffed by an average of 237 people employed by a staffing company. The expenses for them are recognized among “Other operating expenses”.
RISK FACTORS
Since the Year-end Report was published, no changes have occurred that affect the Group’s short-term assessment of the risks in its business operations. Special risks during the immediate future are primarily related to bunker prices.
Viking Line is continuing its efforts to adapt to the European Union’s sulphur directive, which goes into effect on January 1, 2015, and is in the final stage of negotiations with various bunker suppliers.
DE-MUTUALISATION AND MERGER WITHIN THE ALANDIA INSURANCE GROUP
Consent has been received from the Finnish Financial Supervisory Authority to re-organize Redarnas Ömsesidiga Försäkringsbolag (Finnish business identity code 0145065-2), “RÖF” − an Åland-based shipowners' mutual insurance company and parent company of the Alandia Insurance Group − into a limited liability insurance company and to merge RÖF with its wholly owned insurance subsidiary Försäkringsaktiebolaget Alandia (0205048-2), “Alandia”, with RÖF as the acquiring company and Alandia as the acquired company. The process will be completed in such a way that both the change in the legal form of RÖF and the merger are registered in the Finnish Trade Register as of December 31, 2014. Distribution of shares will be carried out as of the same date.
According to preliminary calculations, Viking Line Abp's ownership share in the merged company will amount to slightly more than 20 per cent. According to our preliminary assessment, Viking Line Abp will not have significant influence on the company. When the change in the legal form of the company is registered, Viking Line Abp’s shares in the merged company will be appraised at fair value.
Preliminary appraisals of the net asset value of the merged company that have been conducted by outside appraisers give a total value of EUR 140 M based on the financial statements as of December 31, 2013.
Nonrecurring income equivalent to Viking Line Abp’s holding in the merged company will be recognized as a financial income item in the consolidated statement of comprehensive income, and the shares will be reported under “Investments available for sale” in the consolidated balance sheet. The final income item will depend on an appraisal as of December 31, 2014. During future accounting periods, changes in the fair value of these shares will be reported via the statement of total comprehensive income against the fair value reserve under equity.
For further information on Alandia Insurance, please see www.alandia.com.
OUTLOOK FOR THE FULL FINANCIAL YEAR 2014
Competition in Viking Line’s service area implies continued pressure on both prices and volume. The economic downturn in Finland is another uncertainty factor. In recent months, however, lower bunker prices have had a positive effect on operations and the Board of Directors is still of the opinion that operating income will improve in 2014 compared to operating income in 2013, excluding the capital gain from the sale of the Isabella.
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | |||||
| Jul 1, 2014– | Jul 1, 2013– | Jan 1, 2014– | Jan 1, 2013– | Jan 1, 2013– | |
| EUR M | Sep 30, 2014 | Sep 30, 2013 | Sep 30, 2014 | Sep 30, 2013 | Dec 31, 2013 |
| SALES | 160.1 | 164.4 | 401.1 | 419.7 | 549.4 |
| Other operating revenue | 0.1 | 0.2 | 0.5 | 23.2 | 23.5 |
| Expenses | |||||
| Goods and services | 44.3 | 43.4 | 111.8 | 114.9 | 150.6 |
| Salary and other employment benefit expenses | 30.1 | 31.9 | 91.9 | 98.5 | 130.1 |
| Depreciation and impairment losses | 8.0 | 8.8 | 24.6 | 27.4 | 35.7 |
| Other operating expenses | 55.8 | 53.8 | 163.7 | 169.4 | 221.9 |
| 138.1 | 137.9 | 392.0 | 410.2 | 538.2 | |
| OPERATING INCOME | 22.0 | 26.6 | 9.5 | 32.7 | 34.7 |
| Financial income | 0.7 | 0.3 | 0.9 | 0.9 | 1.2 |
| Financial expenses | -2.0 | -2.0 | -7.2 | -6.0 | -8.3 |
| INCOME BEFORE TAXES | 20.7 | 25.0 | 3.2 | 27.6 | 27.7 |
| Income taxes | -4.0 | -6.1 | -0.7 | -6.9 | -0.2 |
| INCOME FOR THE PERIOD | 16.7 | 18.9 | 2.5 | 20.7 | 27.5 |
| Other comprehensive income | |||||
| Items that may be transferred to the income statement | |||||
| Translation differences | 0.0 | -0.1 | -0.5 | -0.3 | -0.4 |
| Investments available for sale | - | - | - | - | 0.0 |
| 0.0 | -0.1 | -0.5 | -0.3 | -0.4 | |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 16.7 | 18.8 | 2.0 | 20.4 | 27.1 |
| Income attributable to: | |||||
| Parent company shareholders | 16.7 | 18.9 | 2.5 | 20.7 | 27.5 |
| Total comprehensive income attributable to: | |||||
| Parent company shareholders | 16.7 | 18.8 | 2.0 | 20.4 | 27.1 |
| Earnings per share before and after dilution, EUR | 1.55 | 1.75 | 0.23 | 1.92 | 2.54 |
| CONSOLIDATED BALANCE SHEET | |||||
| EUR M | Sep 30, 2014 | Sep 30, 2013 | Dec 31, 2013 | ||
| ASSETS | |||||
| Non-current assets | |||||
| Intangible assets | 0.7 | 0.9 | 0.8 | ||
| Land | 1.1 | 1.1 | 1.1 | ||
| Buildings and structures | 11.1 | 11.8 | 11.7 | ||
| Renovation costs for rented properties | 0.6 | 0.5 | 0.7 | ||
| Vessels | 346.9 | 370.5 | 365.2 | ||
| Machinery and equipment | 7.1 | 8.3 | 8.0 | ||
| Investments available for sale | 0.0 | 0.0 | 0.0 | ||
| Receivables | 0.5 | 0.7 | 0.5 | ||
| Total non-current assets | 368.0 | 393.6 | 388.1 | ||
| Current assets | |||||
| Inventories | 16.3 | 15.3 | 15.0 | ||
| Income tax assets | 1.3 | 0.5 | 0.2 | ||
| Trade and other receivables | 47.2 | 40.7 | 31.0 | ||
| Cash and cash equivalents | 81.9 | 88.9 | 96.1 | ||
| Total current assets | 146.7 | 145.4 | 142.2 | ||
| TOTAL ASSETS | 514.7 | 539.0 | 530.3 | ||
| EQUITY AND LIABILITIES | |||||
| Equity | |||||
| Share capital | 1.8 | 1.8 | 1.8 | ||
| Reserves | 0.0 | 0.0 | 0.0 | ||
| Translation differences | -0.4 | -0.2 | -0.3 | ||
| Retained earnings | 184.2 | 180.8 | 187.5 | ||
| Equity attributable to parent company shareholders | 185.6 | 182.4 | 189.0 | ||
| Total equity | 185.6 | 182.4 | 189.0 | ||
| Non-current liabilities | |||||
| Deferred tax liabilities | 29.7 | 29.7 | 29.7 | ||
| Non-current interest-bearing liabilities | 201.8 | 225.5 | 221.2 | ||
| Total non-current liabilities | 231.5 | 255.2 | 250.8 | ||
| Current liabilities | |||||
| Current interest-bearing liabilities | 19.3 | 19.4 | 15.1 | ||
| Income tax liabilities | 1.7 | 7.0 | - | ||
| Trade and other payables | 76.6 | 75.1 | 75.4 | ||
| Total current liabilities | 97.6 | 101.5 | 90.4 | ||
| Total liabilities | 329.1 | 356.6 | 341.3 | ||
| TOTAL EQUITY AND LIABILITIES | 514.7 | 539.0 | 530.3 | ||
| CONSOLIDATED CASH FLOW STATEMENT | |||||
| Jan 1, 2014– | Jan 1, 2013– | Jan 1, 2013– | |||
| EUR M | Sep 30, 2014 | Sep 30, 2013 | Dec 31, 2013 | ||
| OPERATING ACTIVITIES | |||||
| Income for the period | 2.5 | 20.7 | 27.5 | ||
| Adjustments | |||||
| Depreciation and impairment losses | 24.6 | 27.4 | 35.7 | ||
| Capital gains from non-current assets | -0.2 | -22.8 | -22.8 | ||
| Other items not included in cash flow | 1.1 | -0.3 | -0.4 | ||
| Interest expenses and other financial expenses | 5.0 | 5.3 | 7.1 | ||
| Interest income and other financial income | -0.1 | -0.1 | -0.1 | ||
| Dividend income | 0.0 | 0.0 | 0.0 | ||
| Income taxes | 0.7 | 6.9 | 0.2 | ||
| Change in working capital | |||||
| Change in trade and other receivables | -16.2 | -11.6 | -1.9 | ||
| Change in inventories | -1.3 | -0.1 | 0.3 | ||
| Change in trade and other payables | 2.7 | -3.0 | -4.1 | ||
| Interest paid | -5.9 | -3.5 | -3.7 | ||
| Financial expenses paid | -0.6 | -0.6 | -0.8 | ||
| Interest received | 0.0 | 0.0 | 0.1 | ||
| Financial income received | 0.0 | 0.0 | 0.1 | ||
| Taxes paid | -0.1 | 1.5 | 1.4 | ||
| NET CASH FLOW FROM | |||||
| OPERATING ACTIVITIES | 12.3 | 19.9 | 38.4 | ||
| INVESTING ACTIVITIES | |||||
| Investments in vessels | -5.4 | -166.7 | -168.6 | ||
| Investments in other intangible and tangible assets | -0.9 | -2.8 | -3.7 | ||
| Divestments of vessels | - | 29.9 | 29.9 | ||
| Divestments of other intangible and tangible assets | 0.3 | 0.2 | 0.2 | ||
| Payments received for non-current receivables | - | 0.0 | 0.2 | ||
| Dividends received | 0.0 | 0.0 | 0.0 | ||
| NET CASH FLOW FROM INVESTING ACTIVITIES | -6.0 | -139.3 | -142.0 | ||
| FINANCING ACTIVITIES | |||||
| Increase in non-current liabilities | - | 179.1 | 179.1 | ||
| Amortization of non-current liabilities | -15.1 | -16.0 | -24.6 | ||
| Dividends paid | -5.4 | - | - | ||
| NET CASH FLOW FROM FINANCING ACTIVITIES | -20.5 | 163.1 | 154.4 | ||
| CHANGE IN CASH AND CASH EQUIVALENTS | -14.2 | 43.6 | 50.8 | ||
| Cash and cash equivalents at beginning of period | 96.1 | 45.3 | 45.3 | ||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 81.9 | 88.9 | 96.1 | ||
| STATEMENT OF CHANGES IN CONSOLIDATED EQUITY | |||||
| Equity attributable to parent company shareholders | |||||
| Share | Translation | Retained | Total | ||
| EUR M | capital | Reserves | differences | earnings | equity |
| Equity, Jan 1, 2014 | 1.8 | 0.0 | -0.3 | 187.5 | 189.0 |
| Income for the period | 2.5 | 2.5 | |||
| Translation differences | 0.0 | -0.2 | -0.3 | -0.5 | |
| Total comprehensive income for the period | - | 0.0 | -0.2 | 2.2 | 2.0 |
| Dividend to shareholders | -5.4 | -5.4 | |||
| Equity, Sep 30, 2014 | 1.8 | 0.0 | -0.4 | 184.2 | 185.6 |
| Equity, Jan 1, 2013 | 1.8 | 0.0 | 0.1 | 160.0 | 162.0 |
| Income for the period | 20.7 | 20.7 | |||
| Translation differences | 0.0 | -0.3 | 0.0 | -0.3 | |
| Total comprehensive income for the period | - | 0.0 | -0.3 | 20.7 | 20.4 |
| Equity, Sep 30, 2013 | 1.8 | 0.0 | -0.2 | 180.8 | 182.4 |
| QUARTERLY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||
| 2014 | 2014 | 2014 | 2013 | |
| EUR M | Q3 | Q2 | Q1 | Q4 |
| SALES | 160.1 | 137.5 | 103.4 | 129.7 |
| Other operating revenue | 0.1 | 0.3 | 0.1 | 0.3 |
| Expenses | ||||
| Goods and services | 44.3 | 39.1 | 28.4 | 35.7 |
| Salary and other employment benefit expenses | 30.1 | 30.3 | 31.6 | 31.5 |
| Depreciation and impairment losses | 8.0 | 8.0 | 8.5 | 8.3 |
| Other operating expenses | 55.8 | 55.8 | 52.1 | 52.5 |
| 138.1 | 133.3 | 120.6 | 128.1 | |
| OPERATING INCOME | 22.0 | 4.5 | -17.1 | 2.0 |
| Financial income | 0.7 | 0.1 | 0.1 | 0.3 |
| Financial expenses | -2.0 | -3.1 | -2.2 | -2.2 |
| INCOME BEFORE TAXES | 20.7 | 1.6 | -19.1 | 0.1 |
| Income taxes | -4.0 | -0.2 | 3.5 | 6.7 |
| INCOME FOR THE PERIOD | 16.7 | 1.4 | -15.6 | 6.7 |
| Other comprehensive income | ||||
| Items that may be transferred to the income statement | ||||
| Translation differences | 0.0 | -0.4 | -0.1 | 0.0 |
| Investments available for sale | - | - | - | 0.0 |
| 0.0 | -0.4 | -0.1 | 0.0 | |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 16.7 | 1.0 | -15.8 | 6.7 |
| Income attributable to: | ||||
| Parent company shareholders | 16.7 | 1.4 | -15.6 | 6.7 |
| Total comprehensive income attributable to: | ||||
| Parent company shareholders | 16.7 | 1.0 | -15.8 | 6.7 |
| Earnings per share before and after dilution, EUR | 1.55 | 0.13 | -1.45 | 0.62 |
| SEGMENT INFORMATION, VIKING LINE GROUP | |||
| Jan 1, 2014– | Jan 1, 2013– | Jan 1, 2013– | |
| OPERATING SEGMENTS, EUR M | Sep 30, 2014 | Sep 30, 2013 | Dec 31, 2013 |
| Sales | |||
| Vessels | 397.4 | 416.0 | 544.7 |
| Unallocated | 3.8 | 3.9 | 4.9 |
| Total, operating segments | 401.2 | 419.9 | 549.6 |
| Eliminations | -0.2 | -0.2 | -0.2 |
| Total sales of the Group | 401.1 | 419.7 | 549.4 |
| Operating income | |||
| Vessels | 43.5 | 66.3 | 81.2 |
| Unallocated | -34.0 | -33.6 | -46.4 |
| Total operating income of the Group | 9.5 | 32.7 | 34.7 |
| PLEDGED ASSETS AND CONTINGENT LIABILITIES | |||
| EUR M | Sep 30, 2014 | Sep 30, 2013 | Dec 31, 2013 |
| Contingent liabilities | 221.4 | 246.2 | 236.9 |
| Assets pledged for own debt | 315.7 | 316.2 | 315.7 |
| FINANCIAL RATIOS AND STATISTICS | |||
| Jan 1, 2014– | Jan 1, 2013– | Jan 1, 2013– | |
| Sep 30, 2014 | Sep 30, 2013 | Dec 31, 2013 | |
| Equity per share, EUR | 17.19 | 16.88 | 17.50 |
| Equity/assets ratio | 36.1 % | 33.8 % | 35.6 % |
| Investments, EUR M | 6.3 | 169.5 | 172.3 |
| – as % of sales | 1.6 % | 40.4 % | 31.4 % |
| Passengers | 5,089,760 | 4,998,757 | 6,533,650 |
| Cargo units | 96,554 | 88,819 | 119,704 |
| Average number of employees, full time equivalent | 2,848 | 3,151 | 3,104 |
| Earnings per share = (Income before taxes – income taxes +/– non-controlling interests) / Average number of shares | |||
| Equity per share = Equity attributable to parent company shareholders / Number of shares on balance sheet date | |||
| Equity/assets ratio, % = (Equity including non-controlling interests) / (Total assets – advances received) | |||
| When rounding off items to the nearest EUR 1,000,000, rounding-off differences of EUR +/– 0.1 M may occur. | |||
The Year-end Report for the financial year 2014 will be published on February 12, 2015.
Mariehamn, Åland, November 12, 2014
VIKING LINE ABP
The Board of Directors
Jan Hanses
President and CEO
CEO Jan Hanses, jan.hanses@vikingline.com, +358-(0)18-27000