Tallink Grupp

Earnings Release • Feb 28, 2018

AS Tallink Grupp Unaudited Consolidated Interim Report Q4 2017

AS Tallink Grupp Unaudited Consolidated Interim Report Q4 2017

Tallinn, 2018-02-28 08:50 CET (GLOBE NEWSWIRE) --

AS Tallink Grupp Unaudited Consolidated Interim Report Q4 2017

In the 2017 financial year (1 January ? 31 December), Tallink Grupp AS and its

subsidiaries (the Group) carried a record number, a total of 9.8 million

passengers, which is 3.2% more compared to the 2016 financial year. The number

of cargo units transported increased by 11% compared to the previous financial

year. The Group?s unaudited consolidated revenue amounted to EUR 967.0 million

(EUR 937.8 million, 2016). Unaudited EBITDA increased almost by EUR 12 million

and amounted to EUR 161.1 million (EUR 149.5 million, 2016), unaudited net

profit for the financial year was EUR 49.3 million or EUR 0.074 per share (EUR

44.1 million or EUR 0.066 per share, 2016).

The biggest milestone for the Group in the 2017 financial year was the launch

of the new LNG powered Shuttle vessel Megastar. On the Tallinn-Helsinki route,

the ship carried more than 2 million passengers in its first year. This is the

highest ever number of passengers carried on any of the Group?s vessels on the

Baltic Sea in one year. Megastar improved the efficiency of the Group?s Shuttle

operations and the Group was able to increase the Estonia ? Finland segment

result despite the tighter competition in the market.

The most positive development in 2017 was the growth of the cargo business. The

Cargo volumes increased in all geographical segments in total by 11.0%, the

cargo revenues increased by 13.3% or EUR 13.8 million compared to last year and

amounted to EUR 117.7 million in 2017. In order to be better positioned to

serve our cargo customers and capture increasing cargo volumes, the cargo ship

Sea Wind previously operating from Tallinn Old City Harbour started operating

from Muuga Harbour in October.

Sales and segments

In the financial year 2017, the revenues in all core operational segments

increased compared to the previous year. The shops and restaurants revenue

increased by EUR 15.3 million and ticket revenue by EUR 6.7 million, the growth

was supported by the 3.2% increase in passenger numbers. The cargo revenue

increased by EUR 13.8 million compared to same period in 2016. The growth was

driven by the increase of number of transported cargo units in all geographical

segments following positive economic developments in our main markets.

In 2017, The Group?s ships carried a total of 5.1 million passengers on the

Estonia ? Finland routes, which is on the same level compared to last year and

the number of transported cargo units on the routes increased by 11.6%. On the

Tallinn ? Helsinki route there was increased competition from added capacity by

competitors, which put pressure on ticket prices. In addition, the Group

operated one cruise ferry on the Tallinn ? Helsinki route in contrast to two

cruise ferries in the period of March to August in 2016. The new Shuttle vessel

Megastar improved the efficiency of the Shuttle operations and the Group was

able to increase the segment result in a changed competitive environment. The

segment revenue increased by EUR 1.2 million and amounted to EUR 354.5 million,

the segment result increased by EUR 2.4 million and amounted to EUR 77.9

million.

The Finland-Sweden routes? revenue increased by EUR 7.5 million and amounted to

EUR 344.8 million compared to the previous year. Growth was supported by a 1.1%

higher passenger number and by a 7.6% increase in the number of transported

cargo units. The segment?s result increased by EUR 3.2 million, compared to the

previous year, amounting to EUR 18.5 million.

The Estonia-Sweden routes? revenue increased by EUR 7.2 million, compared to

the previous year. Growth was supported by a 4.8% higher passenger number and

by a 2.9% increase in the number of transported cargo units. The segment?s

result decreased compared to the previous year due to higher operating costs,

as since December 2016 there is larger vessel deployed on the route.

The Latvia-Sweden route?s revenue increased by EUR 21.9 million, compared to

the previous year. Growth was supported by a 45.8% higher passenger number and

by a 70.1% increase in the number of transported cargo units from added

capacity. The cruise ferry Romantika started operating on Riga ? Stockholm

route in December 2016 as a second ship on this route. Due to the increased

capacity, the segment?s result was negative in 2017. However, based on the

positive development of the route?s carriage volumes since the second ship was

added to the route, management estimates that the segment result will improve

in 2018.

Earnings

In 2017, the Group?s EBITDA increased by EUR 11.7 million and amounted to EUR

161.1 million. A higher revenue from all core operational segments supported

the growth, however the charter and charter related revenue decreased by EUR

6.7 million compared to the same period last year due to fewer ships in

charter.

The rerouting of ships in December 2016 resulted in more optimal operating

costs in the financial year 2017. Starting from February 2017 there is no

charter hire cost from fast ferry Superstar. At the same time, the total fuel

cost was EUR 11.6 million higher compared to the previous year due to the

increase in global fuel prices and higher total consumption. The amortisation

and depreciation cost increased by EUR 8.5 million to EUR 86.4 million. The

increase is driven by the purchase of the new Shuttle ferry Megastar,

maintenance works of five ships and renovations and upgrades to the ships.

Net finance costs decreased by EUR 5.6 million compared to the previous year

mainly from EUR 4.2 million lower interest expenses. Total gains from exchange

rate differences and the revaluation of cross currency and interest rate

derivatives increased by EUR 1.3 million.

The Group?s unaudited net profit for the financial year 2017 was EUR 49.3

million or EUR 0.074 per share compared to a net profit of EUR 44.1 million or

EUR 0.066 per share last year.

Investments

In the 2017 financial year the Group?s investments amounted to EUR 219.2

million. The largest investment was the purchase of the Shuttle ferry Megastar

in January 2017. A number of investments were made to upgrade the ships

restaurants, shops and cabins. Investments were made also to the development of

the online booking and sales systems.

Dividends

In June 2017 the Annual General Meeting decided to pay a dividend of EUR 0.03

per share from the net profit for 2016. The announced dividends in the total

amount of EUR 20.1 million were paid out on 5 July 2017. To the Annual

Shareholders? Meeting in 2018 the management board will propose a dividend of

EUR 0.03 per share from the financial year 2017 net profit.

Results of Q4 of 2017

In the fourth quarter (1 October ? 31 December) of 2017, the revenues from all

geographical segments increased compared to same period last year. Unaudited

revenue for the period increased by 3% to EUR 232.9 million, which was

supported by a 4% higher passenger number and 14.1% higher transported cargo

volumes. Unaudited EBITDA increased by EUR 1.7 million and amounted to EUR 31.6

million, the unaudited net profit for the period was EUR 3.9 million.

Financial position

In January 2017 the EUR 184 million long-term export credit loan was taken to

finance the purchase of the new Shuttle vessel. In December 2017 two Superfast

vessels were sold for EUR 133.5 million. The proceeds from the sale were used

for early repayment of loans in the total amount of EUR 59.6 million.

In the fourth quarter, the Group?s net debt decreased by EUR 163.2 million to

EUR 472 million. The net debt to EBITDA ratio improved and was 2.9 at the

reporting date.

At the end of the fourth quarter, total liquidity (cash, cash equivalents and

unused credit facilities) amounted to EUR 163.9 million (EUR 113.8 million, 31

December 2016) providing a strong financial position for sustainable

operations. The Group had EUR 88.9 million (EUR 78.8 million, 31 December 2016)

in cash and cash equivalents and EUR 75 million (EUR 35 million, 31 December

2016) in unused credit lines.

KEY FIGURES

For the period Q4 2017 Q4 2016 Change

%

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Revenue (million euros) 232.9 226.1 3.0%

Gross profit (million euros) 38.5 41.1 -6.2%

Net profit for the period (million euros) 3.9 3.5 10.3%

EBITDA (million euros) 31.6 29.9 5.8%

Depreciation and amortisation (million euros) 21.8 19.6 11.5%

Capital expenditures (million euros) 7.2 22.5 -68.0%

Weighted average number of ordinary shares 669 882 040 669 882 040 0.0%

outstanding

Earnings per share 0.006 0.005 10.3%

Number of passengers 2 316 144 2 226 283 4.0%

Number of cargo units 97 345 85 349 14.1%

Average number of employees 7 287 7 061 3.2%

As at 31.12.17 30.09.17 Change

%

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Total assets (million euros)¹ 1 559.9 1 710.8 -8.8%

Total liabilities (million euros) 720.8 875.6 -17.7%

Interest-bearing liabilities (million euros) 560.9 715.3 -21.6%

Net debt (million euros) 472.0 635.2 -25.7%

Net debt to EBITDA 2.9 4.0 -26.5%

Total equity (million euros)¹ 839.1 835.2 0.5%

Equity ratio (%)¹ 53.8% 48.8%

Number of ordinary shares outstanding 669 882 040 669 882 040 0.0%

Equity per share¹ 1.25 1.25 0.5%

Ratios Q4 2017 Q4 2016

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Gross margin (%) 16.5% 18.2%

EBITDA margin (%) 13.6% 13.2%

Net profit margin (%) 1.7% 1.6%

EBITDA: Earnings before net financial items, share of profit of equity

accounted investees, taxes, depreciation and amortisation

Earnings per share: net profit / weighted average number of shares outstanding

Equity ratio: total equity / total assets

Equity per share: shareholder?s equity / number of shares outstanding

Gross margin: gross profit / revenue

EBITDA margin: EBITDA / revenue

Net profit margin: net profit / revenue

Net debt: interest-bearing liabilities less cash and cash equivalents

Net debt to EBITDA: net debt / 12-months trailing EBITDA

¹ Restated, see Note 13.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Unaudited, in thousands of EUR Q4 2017 Q4 2016 12M 2017 12M 2016

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Revenue (Note 3) 232 856 226 135 966 977 937 805

Cost of sales -194 346 -185 069 -772 372 -745 223

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Gross profit 38 510 41 066 194 605 192 582

Sales and marketing expenses -17 157 -19 102 -71 339 -72 268

Administrative expenses -13 635 -12 148 -50 869 -50 973

Other operating income 2 429 697 2 873 2 450

Other operating expenses -327 -178 -509 -184

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Result from operating activities 9 820 10 335 74 761 71 607

Finance income (Note 4) 4 932 1 754 12 738 10 514

Finance costs (Note 4) -10 804 -7 604 -33 987 -37 289

Share of profit of equity-accounted 40 13 40 13

investees

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Profit/loss before income tax 3 988 4 498 53 552 44 845

Income tax -115 -986 -4 253 -741

Net profit/loss for the period 3 873 3 512 49 299 44 104

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Other comprehensive income/expense

Exchange differences on translating 35 -205 13 -469

foreign operations

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Other comprehensive income/expense for 35 -205 13 -469

the period

Total comprehensive income/expense for 3 908 3 307 49 312 43 635

the period

Basic and diluted earnings per share (in 0.006 0.005 0.074 0.066

EUR per share, note 5)

\================================================================================

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Unaudited, in thousands of EUR 31.12.17 31.12.2016 01.01.2016

restated ² restated ²

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ASSETS

Cash and cash equivalents 88 911 78 773 81 976

Trade and other receivables 46 466 38 674 36 583

Prepayments 6 705 7 926 5 274

Prepaid income tax 40 91 1 224

Inventories 40 675 38 719 29 197

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Current assets 182 797 164 183 154 254

Investments in equity-accounted 403 363 350

investees

Other financial assets 344 348 308

Deferred income tax assets 18 722 18 791 19 410

Investment property 300 300 300

Property, plant and equipment (Note 1 308 441 1 304 897 1 311 418

7)

Intangible assets (Note 8) 48 900 50 127 52 726

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Non-current assets 1 377 110 1 374 826 1 384 512

TOTAL ASSETS 1 559 907 1 539 009 1 538 766

\================================================================================

LIABILITIES AND EQUITY

Interest-bearing loans and 159 938 106 112 81 889

borrowings (Note 9)

Trade and other payables (Note 13) 94 055 106 970 92 170

Derivatives (Note 6) 29 710 0 0

Payables to owners ¹ 3 4 0

Income tax liability 34 10 4 567

Deferred income 31 429 30 895 28 906

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Current liabilities 315 169 243 991 207 532

Interest-bearing loans and 400 968 452 793 467 447

borrowings (Note 9)

Derivatives (Note 6) 4 688 32 359 42 863

Other liabilities 0 0 192

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Non-current liabilities 405 656 485 152 510 502

Total liabilities 720 825 729 143 718 034

\================================================================================

Share capital (Note 10) 361 736 361 736 404 290

Share premium 639 639 639

Reserves 68 946 68 774 65 083

Retained earnings (Note 13) 407 761 378 717 350 720

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Equity attributable to equity 839 082 809 866 820 732

holders of the Parent

Total equity 839 082 809 866 820 732

\================================================================================

TOTAL LIABILITIES AND EQUITY 1 559 907 1 539 009 1 538 766

\================================================================================

¹ Payments related to reduction of share capital.

² See Note 13.

CONSOLIDATED STATEMENT OF CASH FLOWS

Unaudited, in thousands of EUR 12M 2017 12M 2016

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CASH FLOWS FROM OPERATING ACTIVITIES

Net profit/loss for the period 49 299 44 104

Adjustments 106 802 104 247

Changes in:

Receivables and prepayments related to operating activities -8 017 -4 969

Inventories -1 956 -9 522

Liabilities related to operating activities -9 943 16 785

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Changes in assets and liabilities -19 916 2 294

Cash generated from operating activities 136 185 150 645

Income tax paid -7 -3 265

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NET CASH FROM OPERATING ACTIVITIES 136 178 147 380

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant, equipment and intangible assets -219 207 -68 638

(Notes 7, 8, 9)

Proceeds from disposals of property, plant, equipment 132 448 169

Interest received 1 74

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NET CASH USED IN INVESTING ACTIVITIES -86 758 -68 395

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from loans received (Note 9) 184 000 280 000

Repayment of loans received (Note 9) -134 321 -313 524

Change in overdraft (Note 9) -40 110 36 713

Payments for settlement of derivatives -3 592 -4 289

Payment of finance lease liabilities (Note 9) -102 -99

Interest paid -20 744 -24 083

Payment of transaction costs related to loans -216 -2 989

Dividends paid (Note 11) -20 096 -13 398

Reduction of share capital -1 -40 189

Income tax on dividends paid -4 100 -330

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NET CASH FROM/USED IN FINANCING ACTIVITIES -39 282 -82 188

TOTAL NET CASH FLOW 10 138 -3 203

\================================================================================

Cash and cash equivalents at the beginning of period 78 773 81 976

Increase/decrease in cash and cash equivalents 10 138 -3 203

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Cash and cash equivalents at the end of period 88 911 78 773

\================================================================================

Veiko Haavapuu

Financial Director

AS Tallink Grupp

Sadama 5/7

10111 Tallinn, Estonia

Tel. +372 640 9914

E-mail veiko.haavapuu@tallink.ee