Viking Line's Interim Report for the period January 1 - September 30, 2016
Viking Line Abp INTERIM REPORT 16.11.2016, 9.00 AM
VIKING LINE'S INTERIM REPORT FOR THE PERIOD JANUARY 1 - SEPTEMBER 30, 2016.
Consolidated sales of the Viking Line Group for the period January 1 – September 30, 2016 were 397.3 million euros (EUR 403.1 M for January 1 – September 30, 2015). Other operating revenue amounted to EUR 2.0 M (0.3). Operating income totalled EUR 14.8 M (22.5). Net financial items totalled EUR -3.2 M (-2.9). Consolidated income before taxes amounted to EUR 11.6 M (19.7). Income after taxes totalled EUR 9.7 M (16.2).
Competition in Viking Line’s service area means there is greater pressure on prices as well as volumes. The economic trend in Finland is still an uncertainty factor. However, the bunker price has so far had a favourable effect on earnings. The Board of Directors' assessment is that operating income will be lower in 2016 than in 2015.
SALES AND EARNINGS
Consolidated sales of the Viking Line Group for the period January 1 – September 30, 2016 were 397.3 million euros (EUR 403.1 M for January 1 – September 30, 2015). Other operating revenue amounted to EUR 2.0 M (0.3). Operating income totalled EUR 14.8 M (22.5). Net financial items totalled EUR -3.2 M (-2.9). Consolidated income before taxes amounted to EUR 11.6 M (19.7). Income after taxes totalled EUR 9.7 M (16.2).
Passenger-related revenue decreased by 0.7 per cent to EUR 362.3 M (364.9) as a result of lower passenger volume, while cargo revenue decreased by 6.4 per cent to EUR 32.9 M (35.1). Net sales revenue decreased by 1.9 per cent to EUR 281.5 M (286.9).
Consolidated operating income declined mainly due to lost revenue in connection with planned and completed vessel dry-dockings for modernization and maintenance of vessels as well as lower demand during the latter period of the reporting period. Salary and other employment benefit expenses increased due to the limiting of restitution in conjunction with a change in the Seamen’s Pensions Act in Finland. However, the cost effect of this is expected to decrease during the financial year. Consolidated operating expenses increased by 1.4 per cent to EUR 247.8 M (244.3). The weaker Swedish krona had a negative effect on consolidated income.
Consolidated bunker expenses decreased by 22.0 per cent to EUR 29.2 M (37.5) as a result of lower average bunker prices combined with the Group’s continued efforts to optimize the bunker consumption of its vessels.
During the third quarter, July 1 – September 30, 2016, consolidated sales decreased by 2.9 per cent to EUR 159.3 M compared to the year-earlier quarter (EUR 164.1 M for the period July 1 – September 30, 2015). Third quarter operating income amounted to EUR 25.3 M (30.1).
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 in 2015. The extensive vessel modernizations that were carried out during the spring caused longer service interruptions than normal, which adversely affected the Group’s market share.
The number of passengers on Viking Line’s vessels during the report period amounted to 5,015,177 (5,066,883). During the report period, Viking Line decreased its market share on the Turku (Finland)–Mariehamn/Långnäs (Åland Islands, Finland)–Stockholm (Sweden) route by 1.5 percentage points to 55.4 per cent. On the Helsinki (Finland)–Mariehamn–Stockholm route, market share decreased by 0.7 percentage points to 42.2 per cent. In cruise services between Stockholm and Mariehamn, market share increased by 0.5 percentage points to 57.6 per cent. On the Helsinki–Tallinn (Estonia) route, market share decreased by 0.8 percentage points to 23.3 per cent. On the short route over the Sea of Åland, market share decreased by 0.3 percentage points to 42.0 per cent. The Group thus had a total market share in its service area of 33.7 per cent (34.8).
Viking Line’s cargo volume was 98,327 cargo units (99,371). Viking Line achieved a cargo market share of 20.7 per cent (21.9). Meanwhile the number of cars transported increased by 28,510 units (+5.5 per cent) to 545,708 (517,198).
INVESTMENTS AND FINANCING
The Group’s investments amounted to EUR 13.4 M (8.0).
In March 2016 Viking Line Abp sold Park Alandia Hotell, which resulted in a slight increase in consolidated other operating revenue. The hotel served as a support unit for vessel operations and did not have a material effect on the Group’s sales, operating income or assets.
On September 30, 2016, the Group’s non-current interest-bearing liabilities amounted to EUR 154.8 M (178.2). The equity/assets ratio was 44.1 per cent, compared to 42.2 per cent a year earlier.
At the end of September 2016, the Group’s cash and cash equivalents amounted to EUR 86.1 M (93.5). Net cash flow from operating activities amounted to EUR 17.5 M (29.7).
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 judgements 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 financial year. This Interim Report is unaudited.
ORGANIZATION AND PERSONNEL
The average number of Group employees was 2,772 (2,765), of whom 2,078 (2,068) worked for the parent company. Land-based personnel totalled 666 (676) and shipboard personnel totalled 2,106 (2,089).
In addition to the Group’s own employees, the Viking XPRS was staffed by an average of 250 (241) people employed by a staffing company.
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 in the immediate future are primarily related to bunker (vessel fuel) prices. Fluctuations in bunker prices have a direct impact on the Group’s earnings. In order to partly offset the risk of higher bunker prices, the Group has entered into fixed-price agreements related to a portion of its estimated bunker consumption during 2016.
ONGOING LEGAL ACTIONS
On February 27, 2015, the Helsinki District Court announced its ruling in a case between Viking Line and the Finnish State regarding fairway charges levied during the years 2001–2004. According to the judgement, the Finnish State was required to pay approximately EUR 12.4 M in accordance with Viking Line's claim as well as legal expenses plus interest. Following the appeal by the Finnish State, on August 8, 2016, the Helsinki Court of Appeal reversed the Helsinki District Court’s decision and rejected Viking Line’s claim due to the statute of limitations. Viking Line has filed a leave to appeal with the Supreme Court of Finland.
OUTLOOK FOR THE FULL FINANCIAL YEAR 2016
Competition in Viking Line’s service area means there is greater pressure on prices as well as volumes. The economic trend in Finland is still an uncertainty factor. However, the bunker price has so far had a favourable effect on earnings. The Board of Directors' assessment is that operating income will be lower in 2016 than in 2015.
| CONSOLIDATED INCOME STATEMENT | |||||
| Jul 1, 2016– | Jul 1, 2015– | Jan 1, 2016– | Jan 1, 2015– | Jan 1, 2015– | |
| EUR M | Sep 30, 2016 | Sep 30, 2015 | Sep 30, 2016 | Sep 30, 2015 | Dec 31, 2015 |
| SALES | 159.3 | 164.1 | 397.3 | 403.1 | 530.5 |
| Other operating revenue | 0.2 | 0.1 | 2.0 | 0.3 | 0.5 |
| Expenses | |||||
| Goods and services | 45.6 | 46.0 | 115.7 | 116.2 | 153.2 |
| Salary and other employment benefit expenses | 31.0 | 29.6 | 92.5 | 88.5 | 118.1 |
| Depreciation and impairment losses | 7.0 | 6.7 | 20.9 | 20.3 | 27.7 |
| Other operating expenses | 50.6 | 51.7 | 155.3 | 155.8 | 205.5 |
| 134.2 | 134.0 | 384.4 | 380.8 | 504.6 | |
| OPERATING INCOME | 25.3 | 30.1 | 14.8 | 22.5 | 26.4 |
| Financial income | 0.5 | 0.5 | 3.8 | 3.8 | 5.0 |
| Financial expenses | -2.5 | -3.2 | -7.0 | -6.7 | -8.2 |
| INCOME BEFORE TAXES | 23.2 | 27.4 | 11.6 | 19.7 | 23.2 |
| Income taxes | -4.7 | -5.4 | -1.9 | -3.4 | -4.4 |
| INCOME FOR THE PERIOD | 18.6 | 22.0 | 9.7 | 16.2 | 18.7 |
| Income attributable to: | |||||
| Parent company shareholders | 18.6 | 22.0 | 9.7 | 16.2 | 18.7 |
| Earnings per share before and after dilution, EUR | 1.72 | 2.03 | 0.90 | 1.50 | 1.73 |
| CONSOLIDATED STATEMENT OF | |||||
| COMPREHENSIVE INCOME | |||||
| Jul 1, 2016– | Jul 1, 2015– | Jan 1, 2016– | Jan 1, 2015– | Jan 1, 2015– | |
| EUR M | Sep 30, 2016 | Sep 30, 2015 | Sep 30, 2016 | Sep 30, 2015 | Dec 31, 2015 |
| INCOME FOR THE PERIOD | 18.6 | 22.0 | 9.7 | 16.2 | 18.7 |
| Other comprehensive income | |||||
| Items that may be transferred to the income statement | |||||
| Translation differences | -0.4 | -0.3 | -0.9 | 0.0 | 0.5 |
| Investments available for sale | - | 0.6 | - | -0.2 | 0.7 |
| -0.4 | 0.3 | -0.9 | -0.2 | 1.2 | |
| COMPREHENSIVE INCOME FOR THE PERIOD | 18.2 | 22.3 | 8.8 | 16.0 | 19.9 |
| Comprehensive income attributable to: | |||||
| Parent company shareholders | 18.2 | 22.3 | 8.8 | 16.0 | 19.9 |
| CONSOLIDATED BALANCE SHEET | |||||
| EUR M | Sep 30,2016 | Sep 30, 2015 | Dec 31, 2015 | ||
| ASSETS | |||||
| Non-current assets | |||||
| Intangible assets | 1.7 | 0.7 | 0.8 | ||
| Land | 0.6 | 1.1 | 1.1 | ||
| Buildings and structures | 9.4 | 10.3 | 10.0 | ||
| Renovation costs for rented properties | 2.1 | 0.8 | 1.2 | ||
| Vessels | 313.3 | 328.6 | 324.5 | ||
| Machinery and equipment | 5.4 | 6.1 | 5.5 | ||
| Investments available for sale | 26.8 | 25.9 | 26.8 | ||
| Receivables | 0.2 | 0.3 | 0.2 | ||
| Total non-current assets | 359.4 | 373.7 | 370.0 | ||
| Current assets | |||||
| Inventories | 17.8 | 17.5 | 17.2 | ||
| Income tax assets | 0.4 | 0.1 | 0.5 | ||
| Trade and other receivables | 44.3 | 41.0 | 29.4 | ||
| Cash and cash equivalents | 86.1 | 93.5 | 110.7 | ||
| Total current assets | 148.6 | 152.0 | 157.8 | ||
| TOTAL ASSETS | 508.0 | 525.7 | 527.8 | ||
| EQUITY AND LIABILITIES | |||||
| Equity | |||||
| Share capital | 1.8 | 1.8 | 1.8 | ||
| Reserves | 0.7 | -0.2 | 0.7 | ||
| Translation differences | -1.3 | -0.9 | -0.4 | ||
| Retained earnings | 223.1 | 221.0 | 223.6 | ||
| Equity attributable to parent company shareholders | 224.2 | 221.8 | 225.7 | ||
| Total equity | 224.2 | 221.8 | 225.7 | ||
| Non-current liabilities | |||||
| Deferred tax liabilities | 34.5 | 31.4 | 34.5 | ||
| Non-current interest-bearing liabilities | 154.8 | 178.2 | 174.0 | ||
| Total non-current liabilities | 189.3 | 209.6 | 208.4 | ||
| Current liabilities | |||||
| Current interest-bearing liabilities | 19.3 | 19.3 | 23.5 | ||
| Income tax liabilities | 1.9 | 3.1 | 1.3 | ||
| Trade and other payables | 73.3 | 71.9 | 68.9 | ||
| Total current liabilities | 94.5 | 94.3 | 93.7 | ||
| Total liabilities | 283.8 | 303.9 | 302.1 | ||
| TOTAL EQUITY AND LIABILITIES | 508.0 | 525.7 | 527.8 | ||
| CONSOLIDATED CASH FLOW STATEMENT | |||||
| Jan 1, 2016– | Jan 1, 2015– | Jan 1, 2015– | |||
| EUR M | Sep 30, 2016 | Sep 30, 2015 | Dec 31, 2015 | ||
| OPERATING ACTIVITIES | |||||
| Income for the period | 9.7 | 16.2 | 18.7 | ||
| Adjustments | |||||
| Depreciation and impairment losses | 20.9 | 20.3 | 27.7 | ||
| Capital gains from non-current assets | -1.5 | 0.0 | 0.0 | ||
| Other items not included in cash flow | 1.1 | 0.0 | -0.5 | ||
| Interest expenses and other financial expenses | 3.9 | 4.4 | 5.9 | ||
| Interest income and other financial income | -0.1 | -0.1 | -0.1 | ||
| Dividend income | -2.4 | -1.6 | -1.6 | ||
| Income taxes | 1.9 | 3.4 | 4.4 | ||
| Change in working capital | |||||
| Change in trade and other receivables | -14.9 | -11.7 | -0.1 | ||
| Change in inventories | -0.6 | -1.4 | -1.1 | ||
| Change in trade and other payables | 5.7 | 5.9 | 1.7 | ||
| Interest paid | -4.7 | -5.3 | -5.4 | ||
| Financial expenses paid | -0.5 | -0.5 | -0.7 | ||
| Interest received | 0.0 | 0.0 | 0.1 | ||
| Financial income received | 0.1 | 0.0 | 0.0 | ||
| Taxes paid | -1.1 | -0.1 | -0.3 | ||
| NET CASH FLOW FROM | |||||
| OPERATING ACTIVITIES | 17.5 | 29.7 | 48.7 | ||
| INVESTING ACTIVITIES | |||||
| Investments in vessels | -9.9 | -6.7 | -7.6 | ||
| Investments in other intangible and tangible assets | -3.6 | -1.3 | -2.4 | ||
| Divestments of other intangible and tangible assets | 2.6 | 0.1 | 0.1 | ||
| Payments received for non-current receivables | - | - | 0.2 | ||
| Dividends received | 2.4 | 1.6 | 1.6 | ||
| NET CASH FLOW FROM INVESTING ACTIVITIES | -8.5 | -6.3 | -8.1 | ||
| FINANCING ACTIVITIES | |||||
| Increase in non-current liabilities | 0.2 | - | - | ||
| Amortization of non-current liabilities | -23.5 | -23.5 | -23.5 | ||
| Dividends paid | -10.3 | -7.6 | -7.6 | ||
| NET CASH FLOW FROM FINANCING ACTIVITIES | -33.6 | -31.1 | -31.1 | ||
| CHANGE IN CASH AND CASH EQUIVALENTS | -24.5 | -7.6 | 9.5 | ||
| Cash and cash equivalents at beginning of period | 110.7 | 101.1 | 101.1 | ||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 86.1 | 93.5 | 110.7 | ||
| 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, 2016 | 1.8 | 0.7 | -0.4 | 223.6 | 225.7 |
| Income for the period | 9.7 | 9.7 | |||
| Translation differences | 0.0 | -0.9 | 0.0 | -0.9 | |
| Comprehensive income for the period | - | 0.0 | -0.9 | 9.7 | 8.8 |
| Dividend to shareholders | -10.3 | -10.3 | |||
| Equity, Sep 30, 2016 | 1.8 | 0.7 | -1.3 | 223.1 | 224.2 |
| Equity, Jan 1, 2015 | 1.8 | 0.0 | -0.8 | 212.3 | 213.3 |
| Income for the period | 16.2 | 16.2 | |||
| Translation differences | 0.0 | -0.1 | 0.1 | 0.0 | |
| Remeasurement of investments available for sale | -0.2 | -0.2 | |||
| Comprehensive income for the period | - | -0.2 | -0.1 | 16.3 | 16.0 |
| Dividend to shareholders | -7.6 | -7.6 | |||
| Equity, Sep 30, 2015 | 1.8 | -0.2 | -0.9 | 221.0 | 221.8 |
| QUARTERLY CONSOLIDATED INCOME STATEMENT | ||||
| 2016 | 2016 | 2016 | 2015 | |
| EUR M | Q3 | Q2 | Q1 | Q4 |
| SALES | 159.3 | 131.1 | 106.9 | 127.4 |
| Other operating revenue | 0.2 | 0.2 | 1.5 | 0.2 |
| Expenses | ||||
| Goods and services | 45.6 | 38.4 | 31.7 | 37.0 |
| Salary and other employment benefit expenses | 31.0 | 31.0 | 30.5 | 29.6 |
| Depreciation and impairment losses | 7.0 | 7.2 | 6.7 | 7.3 |
| Other operating expenses | 50.6 | 53.6 | 51.1 | 49.7 |
| 134.2 | 130.2 | 120.0 | 123.7 | |
| OPERATING INCOME | 25.3 | 1.1 | -11.6 | 3.9 |
| Financial income | 0.5 | 2.8 | 0.5 | 1.2 |
| Financial expenses | -2.5 | -2.4 | -2.0 | -1.6 |
| INCOME BEFORE TAXES | 23.2 | 1.4 | -13.1 | 3.5 |
| Income taxes | -4.7 | 0.2 | 2.6 | -1.0 |
| INCOME FOR THE PERIOD | 18.6 | 1.6 | -10.5 | 2.5 |
| Income attributable to: | ||||
| Parent company shareholders | 18.6 | 1.6 | -10.5 | 2.5 |
| Earnings per share before and after dilution, EUR | 1.72 | 0.15 | -0.97 | 0.23 |
| QUARTERLY CONSOLIDATED STATEMENT OF | ||||
| COMPREHENSIVE INCOME | ||||
| 2016 | 2016 | 2016 | 2015 | |
| EUR M | Q3 | Q2 | Q1 | Q4 |
| INCOME FOR THE PERIOD | 18.6 | 1.6 | -10.5 | 2.5 |
| Other comprehensive income | ||||
| Items that may be transferred to the income statement | ||||
| Translation differences | -0.4 | -0.4 | -0.1 | 0.5 |
| Investments available for sale | - | - | - | 0.8 |
| -0.4 | -0.4 | -0.1 | 1.4 | |
| COMPREHENSIVE INCOME FOR THE PERIOD | 18.2 | 1.2 | -10.6 | 3.9 |
| Comprehensive income attributable to: | ||||
| Parent company shareholders | 18.2 | 1.2 | -10.6 | 3.9 |
| SEGMENT INFORMATION, VIKING LINE GROUP | |||
| Jan 1, 2016– | Jan 1, 2015– | Jan 1, 2015– | |
| OPERATING SEGMENTS, EUR M | Sep 30, 2016 | Sep 30, 2015 | Dec 31, 2015 |
| Sales | |||
| Vessels | 395.1 | 399.2 | 525.1 |
| Unallocated | 2.3 | 4.1 | 5.6 |
| Total, operating segments | 397.4 | 403.3 | 530.7 |
| Eliminations | -0.2 | -0.2 | -0.2 |
| Total sales of the Group | 397.3 | 403.1 | 530.5 |
| Operating income | |||
| Vessels | 49.4 | 55.5 | 71.2 |
| Unallocated | -34.6 | -32.9 | -44.7 |
| Total operating income of the Group | 14.8 | 22.5 | 26.4 |
| PLEDGED ASSETS AND CONTINGENT LIABILITIES | |||
| EUR M | Sep 30, 2016 | Sep 30, 2015 | Dec 31, 2015 |
| Contingent liabilities | 174.1 | 197.5 | 197.5 |
| Assets pledged for own debt | 313.6 | 313.6 | 313.6 |
| FINANCIAL RATIOS AND STATISTICS | |||
| Jan 1, 2016– | Jan 1, 2015– | Jan 1, 2015– | |
| Sep 30, 2016 | Sep 30, 2015 | Dec 31, 2015 | |
| Equity per share, EUR | 20.76 | 20.54 | 20.89 |
| Equity/assets ratio | 44.1 % | 42.2 % | 42.8 % |
| Investments, EUR M | 13.4 | 8.0 | 10.0 |
| – as % of sales | 3.4 % | 2.0 % | 1.9 % |
| Passengers | 5,015,177 | 5,066,883 | 6,568,684 |
| Cargo units | 98,327 | 99,371 | 133,163 |
| Average number of employees, full-time equivalent | 2,772 | 2,765 | 2,735 |
| 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 2016 will be published on February 16, 2017.
Mariehamn, Åland, November 15, 2016
VIKING LINE ABP
The Board of Directors
Jan Hanses
President and CEO
CEO Jan Hanses, jan.hanses@vikingline.com, +358-18-27000