Quarterly Report • Apr 29, 2021
Quarterly Report
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| Company | AS Tallink Grupp |
|---|---|
| Type | Company Release |
| Category | Management interim statement or quaterly financial report |
| Disclosure time | 29 Apr 2021 09:30:00 +0300 |
Title
AS Tallink Grupp Unaudited Consolidated Interim Report Q1 2021
In the first quarter (1 January - 31 March) of the 2021 financial year, Tallink Grupp AS and its subsidiaries (the Group) carried 267 224 passengers, which is 82.9% less than in the first quarter last year. The number of cargo units transported decreased by 14.5% in the same comparison. The Group's unaudited consolidated revenue decreased by 65.3% or EUR 101.2 million to a total of EUR 53.7 million. Unaudited EBITDA was EUR -6.3 million (EUR -1.3 million in Q1 2020) and unaudited net loss was EUR 34.4 million (net loss of EUR 30.2 million in Q1 2020).
Given the uncertainty regarding the duration of the crisis and the course of the post-crisis recovery with progress of vaccinations, the business environment has remained challenging.
In the current situation, the focus has remained on cost and cash flow management to ensure the sustainability of the Group's core business.
Operations of Tallinn-Stockholm route vessels, Baltic Queen and Victoria I, Latvia-Sweden route vessels, Romantika and Isabelle, and Helsinki-Stockholm route vessels, Silja Serenade and Silja Symphony, were suspended. Operations of Tallinn-Helsinki route cruise ferry Silja Europa were also suspended. Tallink Hotel Riga has remained closed since October 2020. Tallink City hotel was undergoing renovation. Tallink Spa & Conference Hotel and Tallink Express Hotel operated in very limited capacity.
Estonia-Finland routes shuttle vessels Megastar and Star, cargo vessel Seawind,
Paldiski-Kapellskär route cargo vessels Regal Star and Sailor, and Turku-Stockholm route cruise ferries Baltic Princess and Galaxy continued operating to ensure international movement of cargo. Operations, particularly Estonia-Finland route, were impacted negatively by additional traveling restrictions imposed by Finnish Government concerning commuter traffic since late January.
In the first quarter of 2021, the Group's total revenue decreased by EUR 101.2 million to EUR 53.7 million. Total revenue in the first quarter of 2020 and 2019 was EUR 154.9 million and EUR 178.9 million, respectively.
Revenue from route operations (core business) decreased by EUR 99.2 million to EUR 44.5 million. The passenger operations and segment results on all routes were significantly affected by the Covid-19 situation and imposed travel restrictions.
The number of passengers carried on the Estonia-Finland routes decreased by 76.2% compared to last year. The number of transported cargo units decreased by 11.0%. Estonia-Finland routes' revenue decreased by EUR 34.4 million to EUR 24.8 million. The segment result decreased by EUR 8.2 million to EUR -4.9 million. The segment reflects operations of two shuttle vessels, a cargo vessel and expenses of suspended cruise ferry Silja Europa.
The number of passengers carried on the Finland-Sweden routes' decreased by 88.1%. The number of transported cargo units decreased by 17.6%. The route's revenue decreased by EUR 42.4 million to EUR 14.8 million and the segment result decreased by 63.5% or EUR 5.2 million to EUR -13.3 million. The segment reflects Turku-Stockholm operations and expenses of two suspended Helsinki-Stockholm route cruise ferries. The results do not reflect EUR 4.9 million government assistance related to operation of Turku-Stockholm route.
On Estonia-Sweden routes' the number of passengers carried decreased by 93.1%. The number of transported cargo units decreased by 4.2%. Despite the decrease in route's revenue by EUR 12.3 million to EUR 4.9 million, the segment result increased by 32.0% to EUR -3.2 million. Estonia-Sweden route reflects operation of two cargo vessel and expenses of two suspended cruise ferries.
The Latvia-Sweden route operations were suspended in the first quarter. The EUR -3.5 million segment results reflects the expenses of the two suspended cruise ferries.
Revenue from the segment other decreased by a total of EUR 3.2 million and amounted to EUR 9.2 million. The decrease was mainly driven by significantly lower accommodation sales and lower revenue from services provided at the hotels. The segment revenue was positively impacted by an increase in online shop sales, opening of Burger King restaurants and revenue from providing mooring services at the Tallinn Old City Harbour.
Earnings
In the first quarter of 2021, the Group's gross profit decreased by EUR 19.8 million compared to the same period last year, amounting to EUR -20.0 million. EBITDA decreased by EUR 5.1 million and amounted to EUR -6.3 million.
In 2020, the Group's main focus was on activities aimed at reducing the cost base and increasing efficiency. As a result, the cost of sales declined by EUR 81.4 million or 52.5% compared to previous year. Sales, marketing and administrative expenses declined by EUR 12.3 million or 45.1%. Management expects improved efficiency also from the coming periods.
Excluding cost of goods sold and depreciation and amortisation, reduction in all other operating expenses (including sales, marketing and administrative expenses) was 53.8% or EUR 66.6 million.
During the quarter, there was an exemption from ships' fairway dues in Estonia amounting to EUR 1.1 million. The exemption is valid until April 2021.
The Group used temporary salary support measures offered by Estonian government which reduced personnel expenses by EUR 2.0 million. In addition, government assistance from Group's other home markets amounted to EUR 5.0 million.
Amortisation and depreciation expense decreased by EUR 1.1 million to EUR 23.7 million compared to last year.
Net finance costs increased by EUR 0.6 million compared to the first quarter last year. The change includes an increase of EUR 0.6 million in interest expense.
The Group's unaudited net loss for the first quarter of 2021 was EUR 34.4 million or EUR 0.051 per share compared to a net loss of EUR 30.2 million or EUR 0.045 per share in 2020 and net loss of EUR 25.3 million or EUR 0.038 per share in 2019.
Investments The Group's investments in first quarter of 2021 amounted to EUR 4.2 million.
Due to the changed economic environment and suspension of vessel operations, ship-related investments were kept to minimum and only critical maintenance and repair works were performed.
Investments were also made in the development of the online booking and sales systems as well as other administrative systems and in relation to the opening of Burger King restaurants.
Due to a deteriorated operating environment after the reporting date and considering the Company's long-term interests, the Management Board has decided to propose to the Supervisory Board not to pay dividends from net profit for 2020.
Financial position In the first quarter, the Group's net debt increased by EUR 36.2 million to EUR 713.5 million.
In order to relieve the liquidity issues caused by the COVID-19 situation, Group entities were allowed to postpone tax payments in 2020 and 2021 by home markets tax boards. The postponed tax liabilities amounted to EUR 4.8 million at the end of the quarter and have different settlement dates over the coming years.
At 31 March 2021, the Group's cash and cash equivalents amounted to EUR 14.8 million (EUR 16.5 million at 31 March 2020) and the Group had EUR 81.7 million in unused credit lines (EUR 62.7 million at 31 March 2020). The total liquidity buffer (cash, cash equivalents and unused credit facilities) amounted to EUR 96.4 million (EUR 79.2 million at 31 March 2020). At the reporting date, the Group had undrawn part of EUR 90.0 million of the EUR 100.0 million working capital loan from Nordic Investment Bank. At the same time, the current trade and other payables amounted to EUR 61.9 million (EUR 100.7 million at 31 March 2020).
During the quarter, the Group was in negotiations with financial institutions to agree on the amendment and the prolongation of the waivers of financial covenants and the postponement of principal payments under existing loan agreements.
At 31 March 2021, the Group had 3 953 employees (6 819 at 31 March 2020). The number of employees includes 258 employees on maternity leave.
Due to the Covid-19 situation the following changes regarding personnel were effective in the first quarter of 2021:
In the first quarter of 2021, staff costs amounted to EUR 23.4 million (EUR 51.5 million in 2020), which is a 54.6% decrease compared to the same period last year. The staff costs were impacted by salary support in a total amount of EUR 2.0 million from the government of Estonia, paid directly to employees in March. Salary support paid by the government of Sweden amounted to EUR 2.9 million and is recognised as other operating income. Effective reduction in salary costs, including salary support measure in Sweden, amounts to EUR 31.0 million, which is a decrease of 60.2% compared to the first quarter last year.
Economic Environment
The Group considers Finland, Sweden, Estonia and Latvia its home markets with the most exposure to the economic developments in Finland. The Group has also high exposure to the economic developments in Estonia and Sweden. In the first quarter of 2021, the Group's economic environment was dominated by the Covid-19 pandemic and stricter restrictions related to international travelling.
The consumer confidence for Finnish consumers worsened by the end of the quarter, mainly reflecting the rigid restrictions imposed by the Finnish government. Despite the slow stabilisation of confidence of the Swedish consumers the overall demand in passenger traffic remained low due to hindrances in travelling. The international travel restrictions and reduced air traffic also effectively meant the absence of demand from the customers from outside our home markets and the state-level travelling and border-crossing restrictions effectively allowed to offer only international cargo operations to and from Sweden.
In the first quarter, the cargo market fared somewhat better relative to the passenger business, supported by the recovering business confidence on all the home markets. Yet the market conditions regarding price competition remained challenging resulting in an overall decline both in the number of carried cargo units and in the average revenue per unit.
Measured in euros the global fuel prices increased, on average, by 10% in the first quarter of 2021 compared to last year. The Group's overall fuel cost declined by 45% compared to the same period last year, the cost was mainly affected by the changed operating schedule.
The European Union and the Group's home markets made strong progress with the vaccination process late in the first quarter and at the reporting date it can be said that the level of protection against COVID-19 among the adult population in Estonia, Finland and Sweden has reached about 40% (either vaccinated or recovered from COVID-19).
For the foreseeable future, the key risk has to do with global and regional developments with the Covid-19 situation, progress of vaccinations and related restrictions on travel and other economic activities, its economic damage and its impact on local and international trade.
In March 2021, AS Tallink Grupp filed an action against AS Tallinna Sadam with a claim of EUR 15.4 million for the fees paid by the Group in 2017, 2018 and 2019. The compensation is demanded for unjust enrichment or alternatively for damage caused by abusing the dominant position AS Tallinna Sadam has on the market for provision of port services in Old City Harbour.
Completion of renovation and planned reopening of Tallink City Hotel The renovation of Tallink City Hotel is estimated to be completed in late spring of 2021. The planned reopening of Tallink City Hotel is expected in June 2021.
According to the European Union (EU) vaccination program the Member States should have vaccinated 70% of the entire adult population, expected to be required for controlling a pandemic, by summer 2021. Depending on the pace of vaccination and natural infections, the pandemic might be controlled by the end 2021 in Europe, according to EU. In Group's main markets - Finland and Estonia vaccination has progressed at a vigorous rate, providing a positive outlook for a gradual recovery of traffic between Estonia and Finland.
The Group's earnings are not generated evenly throughout the year. The summer period is the high season in the Group's operations. In management's opinion and based on prior experience most of the Group's earnings are generated during the summer (June-August). However, this year, dependent on situation with the crossborder travelling, the period may extend to autumn.
Due to the ongoing COVID-19 situation the earnings outlook is uncertain and continues to be strongly affected by external factors such as the progress of vaccination, states' decisions regarding the timing of the lifting of travel restrictions and allowing passenger traffic as well as the duration of the recovery period. Management expects the passenger traffic between Estonia and Finland to recover rapidly after the restrictions have been lifted.
Tallink Grupp AS does not have any substantial ongoing research and development projects. The Group is continuously seeking opportunities for expanding its operations in order to improve its results.
The Group is continuously looking for innovative ways to upgrade the ships and passenger area technology to improve its overall performance through modern solutions. The most recent technical projects are focusing on the solutions for reduction of the ships CO2 footprint.
The Group's business, financial position and operating results could be materially affected by various risks. These risks are not the only ones we face. Additional risks and uncertainties not presently known to us, or that we currently believe are immaterial or unlikely, could also impair our business.
The order of presentation of the risk factors below is not intended to be an indication of the probability of their occurrence or of their potential effect on our business.
Key figures
| For the period | Q1 2021 | Q1 2020 Change % | |
|---|---|---|---|
| ------------------------------------------------------------------------------- Revenue (million euros) |
53.7 | 154.9 | -65.3% |
| Gross profit (million euros) | -20.0 | -0.2 | - |
| EBITDA¹ (million euros) | -6.3 | -1.3 | -400.6% |
| EBIT¹ (million euros) | -30.0 | -26.0 | -15.2% |
| Net profit/loss for the period (million euros) |
-34.4 | -30.2 | -14.0% |
| Depreciation and amortisation (million euros) | 23.7 | 24.8 | -4.5% |
| Capital expenditures¹ ² (million euros) | 4.2 | 27.1 | -84.5% |
| Weighted average number of ordinary shares outstanding |
669,882,040 669,882,040 | 0.0% | |
| Earnings/loss per share¹ | -0.051 | -0.045 | -14.0% |
| Number of passengers | 267,224 | 1,566,730 | -82.9% |
| Number of cargo units | 85,156 | 99,617 | -14.5% |
| Average number of employees | 3,986 | 7,066 | -43.6% |
| As at | 31.03.2021 | 31.12.2020 Change % | |
|---|---|---|---|
| ------------------------------------------------------------------------------- Total assets (million euros) |
1,492.5 | 1,516.2 | -1.6% |
| Total liabilities (million euros) | 812.4 | 801.9 | 1.3% |
| Interest-bearing liabilities (million euros) | 728.3 | 705.1 | 3.3% |
| Net debt¹ (million euros) | 713.5 | 677.3 | 5.4% |
| Net debt to EBITDA¹ | 238.7 | 84.2 | 183.4% |
| Total equity (million euros) | 680.1 | 714.3 | -4.8% |
| Equity ratio¹ (%) | 46% | 47% | |
| Number of ordinary shares outstanding | 669,882,040 669,882,040 | 0.0% | |
| Equity per share¹ | 1.02 | 1.07 | -4.8% |
| Ratios¹ ------------------------------------------------------------------------------- |
Q1 2021 | Q1 2020 | |
| Gross margin (%) | -37.2% | -0.1% | |
| EBITDA margin (%) | -11.7% | -0.8% | |
| EBIT margin (%) | -55.8% | -16.8% | |
| Net profit/loss margin (%) | -64.1% | -19.5% | |
| ROA (%) | -6.4% | 4.5% | |
| ROE (%) | -15.2% | 5.5% | |
| ROCE (%) | -7.6% | 5.3% |
(1) Alternative performance measures based on ESMA guidelines are disclosed in the Alternative Performance Measures section of this Interim Report. (2) Does not include additions to right-of-use assets.
EBITDA: result from operating activities before net financial items, share of profit of equity-accounted investees, taxes, depreciation and amortization EBIT: result from operating activities Earnings per share: net profit or loss/ 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 EBIT margin: EBIT / net sales Net profit margin: net profit or loss / net sales Capital expenditure: additions to property, plant and equipment - additions to right-of-use assets + additions to intangible assets ROA: earnings before net financial items, taxes 12-months trailing / average total assets ROE: net profit 12-months trailing / average shareholders' equity ROCE: earnings before net financial items, taxes 12-months trailing / (total assets - current liabilities (average for the period)) Net debt: interest-bearing liabilities less cash and cash equivalents Net debt to EBITDA: net debt / EBITDA 12-months trailing
Consolidated statement of profit or loss and other comprehensive income
| Unaudited, in thousands of EUR | Q1 2021 | Q1 2020 |
|---|---|---|
| ------------------------------------------------------------------------------- Revenue (Note 3) |
53,746 | 154,930 |
| Cost of sales | -73,721 -155,102 | |
| ------------------------------------------------------------------------------- Gross loss /profit |
-19,975 | -172 |
| Sales and marketing expenses | -5,073 | -13,948 |
| Administrative expenses | -9,956 | -13,424 |
| Impairment loss on receivables | ||
| Other operating income | 5,038 | 1,532 |
| Other operating expenses ------------------------------------------------------------------------------- |
-13 | -22 |
| Result from operating activities | -29,979 | -26,034 |
| Finance income (Note 4) | 5 | 1 |
|---|---|---|
| Finance costs (Note 4) | -4,677 | -4,112 |
| Share of profit/loss of equity-accounted investees | 0 | 0 |
| ------------------------------------------------------------------------------- Loss before income tax |
-34,651 | -30,145 |
| Income tax | 220 | -53 |
| Net loss for the period | -34,431 | -30,198 |
| Net loss for the period attributable to equity holders of the | ||
| Parent | -34,431 | -30,198 |
| Other comprehensive income | ||
| Items that may be reclassified to profit or loss | ||
| Exchange differences on translating foreign operations | 174 | 585 |
| ------------------------------------------------------------------------------- Other comprehensive income for the period |
174 | 585 |
| Total comprehensive loss for the period | -34,257 | -29,613 |
| Total comprehensive loss for the period attributable to | ||
| equity holders of the Parent | -34,257 | -29,613 |
| Loss per share (in EUR, Note 5) ------------------------------------------------------------------------------- |
-0.051 | -0.045 |
| Consolidated statement of financial position | ||
| Unaudited, in thousands of EUR | 31.03.2021 31.03.2020 31.12.2020 | |
| ------------------------------------------------------------------------------- |
| Cash and cash equivalents | 14,762 | 16,462 | 27,834 |
|---|---|---|---|
| Trade and other receivables | 25,680 | 31,112 | 25,463 |
| Prepayments | 12,491 | 11,631 | 7,216 |
| Prepaid income tax | 25 | 1 | 0 |
| Inventories | 29,561 | 39,452 | 28,707 |
| ------------------------------------------------------------------------------- Current assets |
82,519 | 98,658 | 89,220 |
| Investments in equity-accounted investees | 245 | 403 | 245 |
| Other financial assets and prepayments | 508 | 1,847 | 2,233 |
| Deferred income tax assets | 20,270 | 18,674 | 20,270 |
| Investment property | 300 | 300 | 300 |
| Property, plant and equipment (Note 6) | 1,349,398 | 1,353,868 | 1,363,485 |
| Intangible assets (Note 7) ------------------------------------------------------------------------------- |
39,267 | 44,023 | 40,448 |
| Non-current assets | 1,409,988 | 1,419,115 | 1,426,981 |
| TOTAL ASSETS | 1,492,507 | 1,517,773 | 1,516,201 |
| LIABILITIES AND EQUITY | |||
| Interest-bearing loans and borrowings (Note 8) |
149,511 | 100,784 | 111,601 |
| Trade and other payables | 61,886 | 100,679 | 73,477 |
| Derivatives | 0 | 0 | 0 |
| Payables to owners | 6 | 6 | 6 |
| Income tax liability | 10 | 0 | 10 |
Deferred income 22,238 32,867 23,253 -------------------------------------------------------------------------------
| Interest-bearing loans and borrowings (Note 8) |
578,777 | 490,213 | 593,518 |
|---|---|---|---|
| ------------------------------------------------------------------------------- | |||
| Derivatives | 0 | 0 | 0 |
| Other liabilities | 0 | 0 | 0 |
| ------------------------------------------------------------------------------- Non-current liabilities |
578,777 | 490,213 | 593,518 |
| ------------------------------------------------------------------------------- Total liabilities |
812,428 | 724,549 | 801,865 |
| Share capital (Note 9) | 314,844 | 314,844 | 314,844 |
| Share premium | 663 | 663 | 663 |
| Reserves | 69,516 | 69,681 | 69,854 |
| Retained earnings | 295,056 | 408,036 | 328,975 |
| ------------------------------------------------------------------------------- Equity attributable to equity holders of the |
|||
| Parent | 680,079 | 793,224 | 714,336 |
| Total equity ------------------------------------------------------------------------------- |
680,079 | 793,224 | 714,336 |
| TOTAL LIABILITIES AND EQUITY | 1,492,507 | 1,517,773 | 1,516,201 |
| Consolidated statement of cash flows | |||
| Unaudited, in thousands of EUR | Q1 2021 Q1 2020 | ||
| ------------------------------------------------------------------------------- | |||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||
| Net loss for the period | -34,431 -30,198 | ||
| Adjustments | 28,223 | 29,387 | |
| Changes in: | |||
| Receivables and prepayments related to operating activities | -3,307 | 1,645 |
| Inventories | -854 | -2,197 |
|---|---|---|
| Liabilities related to operating activities | -11,814 | 2,237 |
| ------------------------------------------------------------------------------- Changes in assets and liabilities |
-15,975 | 1,685 |
| Cash generated from operating activities | -22,183 | 874 |
| Income tax repaid/paid | -39 | 13 |
| ------------------------------------------------------------------------------- NET CASH FROM OPERATING ACTIVITIES |
-22,222 | 887 |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||
| Purchase of property, plant, equipment and intangible assets (Notes 6, 7) |
-4,201 -27,070 | |
| Proceeds from disposals of property, plant, equipment | 7 | 44 |
| Proceeds from other financial assets | 0 | 0 |
| Interest received | 0 | 1 |
| ------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES |
-4,194 -27,025 | |
| CASH FLOWS FROM FINANCING ACTIVITIES | ||
| Proceeds from loans received (Note 8) | 0 | 15,000 |
| Repayment of loans received (Note 8) | -14,667 -14,667 | |
| Repayment of bonds (Note 8) | 0 | 0 |
| Change in overdraft (Note 8) | 37,581 | 12,258 |
| Payments for settlement of derivatives | 0 | 0 |
| Payment of lease liabilities (Note 8) | -4,225 | -3,915 |
| Interest paid | -5,144 | -4,748 |
| Payment of transaction costs related to loans ------------------------------------------------------------------------------- |
-201 | -205 |
| Dividends paid (Note 10) | 0 | 0 |
| Reduction of share capital | 0 | 0 |
|---|---|---|
| Income tax on dividends paid | 0 | 0 |
| ------------------------------------------------------------------------------- NET CASH FROM/USED IN FINANCING ACTIVITIES |
13,344 | 3,723 |
| TOTAL NET CASH FLOW ------------------------------------------------------------------------------- |
-13,072 -22,415 | |
| Cash and cash equivalents at the beginning of period | 27,834 | 38,877 |
| Change in cash and cash equivalents ------------------------------------------------------------------------------- |
-13,072 -22,415 | |
| Cash and cash equivalents at the end of period | 14,762 | 16,462 |
Joonas Joost Financial director
AS Tallink Grupp Sadama 5 10111 Tallinn, Estonia E-mail [email protected]
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