Tallink Grupp

Earnings Release • Apr 26, 2017

AS Tallink Grupp Audited Annual Report of the 2016 Financial Year

AS Tallink Grupp Audited Annual Report of the 2016 Financial Year

Tallinn, 2017-04-26 16:00 CEST (GLOBE NEWSWIRE) --

AS Tallink Grupp Audited Annual Report of the 2016 Financial Year

In the 2016 financial year the Group carried an all-time high number, a total

of 9.5 million passengers which is 5.4% more than the year before (2015: 9.0

million). The number of cargo units transported increased by 6.5% and the

number of passenger vehicles transported increased by 4.2% compared to the

previous financial year. The Group?s consolidated revenue amounted to EUR 937.8

million (2015: EUR 945.2 million) and EBITDA to EUR 149.5 million (2015: EUR

181.4 million). Net profit amounted to EUR 44.1 million or EUR 0.066 per share

(2015: EUR 59.1 million or EUR 0.088 per share).

The Group increased the number of passengers on all operated routes and the

majority of the routes had strong growth in passenger volumes throughout the

year. The Group deployed previously chartered out ship Silja Europa to the

Tallinn - Helsinki route and on top of that, three ships were rerouted in

December 2016. Through these actions optimal carriage capacity was achieved on

all operated routes.

On the Estonia-Finland route the annual passenger number increased in 2016 by

7.0% to a record level of 5.1 million (2015: 4.7 million). Thanks to the higher

capacity and passenger number, the Group increased its market share on the

route by 2 percentage points to 58%. On the Finland-Sweden routes the passenger

number increased by 2.1% to 2.9 million passengers, the Group increased its

market share on the route by 1 percentage point to 54%. The Group?s total

passenger market share on the North Baltic Sea increased to 48%.

The positive development of the Estonia-Sweden and Latvia-Sweden routes

throughout the 2016 financial year resulted in a higher passenger number,

revenue and segment result. The Estonia-Sweden route passenger number increased

by 3.8% to 1.0 million passengers. The Latvia-Sweden route passenger number

increased by 11.1% to 0.5 million passengers.

In the 2016 financial year the Group increased revenue on all operated routes.

The revenue growth in core operations from onboard and ticket sale was

supported by the larger number of passengers travelling with ships operated by

the Group.

The revenue from chartering activities decreased throughout the 2016 financial

year as fewer ships were chartered out compared to the previous financial year.

Two of the chartered out ships Silja Festival and Regina Baltica were sold in

the first half of the 2015 financial year and cruise ferry Silja Europa

returned from charter to the Tallinn ? Helsinki route on March 2016. Three

Superfast ferries remain chartered out.

Due to the changes in chartering and the routes? operating capacity the Group´s

profits declined as chartering activity where profitability is higher was

replaced by route operations that involve higher ship operating costs. In

addition the Group incurred the charter costs of fast ferry Superstar, which

was sold at the end of 2015 and chartered back until the delivery of a new fast

ferry, Megastar, in January 2017.

In the 2016 financial year the Group?s investments amounted to EUR 68.9

million. The majority of investments were made in the renewal and upgrade of

the fleet: down payment for the new LNG fast ferry Megastar, large scale

renovation of cruise ferry Silja Europa, upgrade of a number of restaurants,

shops and cabins in older vessels of the Group?s fleet. Investments were also

made in the ships? technical maintenance, energy efficient technical solutions

for ships, and development of online booking and sales systems.

In February 2015 Tallink Grupp AS and Meyer Turku Oy signed a contract for the

construction of the new LNG powered fast ferry Megastar for the

Tallinn-Helsinki route shuttle service. The production of the Megastar

continued throughout 2016 and the vessel was delivered to the Group in January

2017. The cost of the ship is over EUR 230 million and EUR 23 million of it was

paid to the shipyard during 2016. Total prepayment for the ship as at 31

December 2016 was EUR 46 million.

The key highlights of the 2016 financial year were the following:

- Higher passenger number and revenue

- Lower chartering revenues compared to last year

- Market share growth on routes

- Cruise ferry Silja Europa?s return from charter to the

Tallinn-Helsinki route

- A new logistics centre launched in Maardu, Harjumaa

- New passenger terminals opened in Stockholm and Helsinki

- Ships re-rerouted in December 2016

- Group-wide ship renovation programme continued

- Construction of the new LNG fast ferry Megastar finalised

KEY FIGURES OF THE FINANCIAL YEAR 2016

For the year ended 31 December 2016 2015 Change

%

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Revenue (million euros) 937.8 945.2 -0.8%

Gross profit (million euros) 192.6 223.4 -13.8%

Net profit for the period (million euros) 44.1 59.1 -25.4%

EBITDA (million euros) 149.5 181.4 -17.6%

Depreciation and amortisation (million euros) 77.9 78.1 -0.3%

Investments (million euros) 68.9 43.6 58.0%

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

outstanding1

Earnings per share 0.066 0.088 -25.0%

Number of passengers 9 457 522 8 976 226 5.4%

Number of cargo units 328 190 308 029 6.5%

Average number of employees 7 163 6 835 4.8%

As at 31 December 2016 2015 Change

%

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Total assets (million euros) 1 539.0 1 538.8 0.0%

Total liabilities (million euros) 725.5 714.3 1.6%

Interest-bearing liabilities (million euros) 558.9 549.3 1.7%

Net debt (million euros) 480.1 467.3 2.7%

Total equity (million euros) 813.6 824.4 -1.3%

Equity ratio (%) 52.9% 53.6%

Number of ordinary shares outstanding1 669 882 040 669 882 040 0.0%

Shareholders? equity per share 1.21 1.23 -1.6%

Ratios 2016 2015 Change

%

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Gross margin (%) 20.5% 23.6%

EBITDA margin (%) 15.9% 19.2%

Net profit margin (%) 4.7% 6.3%

Return on assets (ROA) 4.7% 6.3%

Return on equity (ROE) 5.4% 7.4%

Return on capital employed (ROCE) 5.4% 7.7%

Net debt to EBITDA 3.2 2.6 23.1%

SALES

The Group?s consolidated revenue amounted to EUR 937.8 million in 2016 (945.2

million in 2015). Restaurant and shop sales on-board and on mainland of EUR

521.5 million (500.6 million in 2015) contributed more than half of total

revenue. Ticket sales amounted to EUR 236.0 million (228.0 million in 2015) and

sales of cargo transport to EUR 103.9 million (104.4 million in 2015).

In the 2016 financial year the revenue structure of the Group changed compared

to the previous financial year. After the expiry of the cruise ferry Silja

Europa charter contract in February 2016 the Group increased the capacity of

its route operations by deploying the ship on Tallinn-Helsinki route.

Therefore, in 2016 a decrease in chartering revenue was expected and by

increasing the capacity of its core route operations the Group increased the

passenger number to an all-time high level and earned total annual revenue

comparable to the year before.

Geographically, 37.7% or EUR 353.3 million of revenue came from the

Estonia-Finland route and 36.0% or EUR 337.4 million from the Finland-Sweden

route. Revenue from the Estonia-Sweden route was EUR 110.1 million or 11.7% and

from the Latvia-Sweden route EUR 44.6 million or 4.8%. The share of revenue

generated by other geographical segments decreased to 9.9% or EUR 92.5

million.

EARNINGS

Gross profit was EUR 192.6 million (EUR 223.4 million in 2015), EBITDA EUR

149.5 million (EUR 181.4 million in 2015). Net profit for 2016 was EUR 44.1

million (EUR 59.1 million in 2015). Basic and diluted earnings per share were

EUR 0.066 (EUR 0.088 in 2015).

The cost of goods related to sales at shops and restaurants, which is the

largest operating cost item, amounted to EUR 225.0 million (EUR 215.4 million

in 2015).

Fuel cost for 2016 was EUR 74.2 million (EUR 94.2 million in 2015). Fuel cost

was impacted by lower fuel price level throughout the year and efficiencies

from continuous efforts to optimize the fleet?s fuel cost, the total annual

fuel cost decreased by 21.2%.

The Group?s personnel expenses amounted to EUR 210.0 million (EUR 193.8 million

in 2015). The average number of employees in the 2016 financial year was 7 163

(6 835 in 2015).

Administrative expenses for 2016 amounted to EUR 51.0 million, and sales and

marketing expenses to EUR 72.3 million (EUR 47.3 million and 63.6 million

respectively in 2015).

Depreciation and amortisation of the Group?s assets was EUR 77.9 million (EUR

78.1 million in 2015). There were no impairment losses related to the Group?s

property, plant, equipment and intangible assets.

The Group?s net finance costs for 2016 amounted to EUR 26.8 million (EUR 34.2

million in 2015).

The Group?s exposure to credit risk, liquidity risk and market risks, and its

financial risk management activities are described in the notes to the

financial statements.

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December, in thousands of EUR 2016 2015 Notes

--------------------------------------------------------------------------------

Revenue 937 805 945 203 4

Cost of sales -745 -721 5

223 780

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Gross profit 192 582 223 423

Sales and marketing expenses -72 268 -63 578 5

Administrative expenses -50 973 -47 311 5

Other operating income 2 450 983

Other operating expenses -184 -10 254

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Result from operating activities 71 607 103 263

Finance income 10 514 12 808 5

Finance costs -37 289 -46 964 5

Share of profit of equity-accounted investees 13 64 12

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Profit before income tax 44 845 69 171

Income tax -741 -10 101 6

Net profit attributable to equity holders of the Parent 44 104 59 070

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Other comprehensive income

Exchange differences on translating foreign operations -469 160

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Other comprehensive income for the year -469 160

Total comprehensive income attributable to equity 43 635 59 230

holders of the Parent

Basic and diluted earnings per share (in EUR per share) 0.066 0.088 7

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December, in thousands of EUR 2016 2015 Notes

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ASSETS

Cash and cash equivalents 78 773 81 976 8

Trade and other receivables 38 674 36 583 9

Prepayments 7 926 5 274 10

Prepaid income tax 91 1 224

Inventories 38 719 29 197 11

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Current assets 164 183 154 254

Investments in equity-accounted investees 363 350 12

Other financial assets 348 308 13

Deferred income tax assets 18 791 19 410 6

Investment property 300 300

Property, plant and equipment 1 304 897 1 311 418 14

Intangible assets 50 127 52 726 15

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Non-current assets 1 374 826 1 384 512

TOTAL ASSETS 1 539 009 1 538 766

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

LIABILITIES AND EQUITY

Interest-bearing loans and borrowings 106 112 81 889 16

Trade and other payables 103 280 88 480 17

Dividends payable to shareholders 4 0

Income tax liability 10 4 567 6

Deferred income 30 895 28 906 18

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Current liabilities 240 301 203 842

Interest-bearing loans and borrowings 452 793 467 447 16

Derivatives 32 359 42 863 24

Other liabilities 0 192

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Non-current liabilities 485 152 510 502

Total liabilities 725 453 714 344

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

Share capital 361 736 404 290 19

Share premium 639 639 19

Reserves 68 774 65 083 19

Retained earnings 382 407 354 410

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Equity attributable to equity holders of the Parent 813 556 824 422

Equity 813 556 824 422

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

TOTAL LIABILITIES AND EQUITY 1 539 009 1 538 766

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

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December, in thousands of EUR 2016 2015 Notes

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CASH FLOWS FROM OPERATING ACTIVITIES

Net profit for the period 44 104 59 070

Adjustments for:

Depreciation and amortisation 77 858 78 102 14, 15

Net gain/loss on disposals of property, plant and -83 9 164

equipment

Net interest expense 27 980 36 099 5

Net income/expense from derivatives -6 215 4 926 5

Gain on disposal of financial assets 0 -186

Profit from equity-accounted investees -13 -64 12

Net unrealised foreign exchange gain 4 889 -5 591

Share option programme reserve -910 300

Income tax 741 10 101 6

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Adjustments 104 247 132 851

Changes in:

Receivables and prepayments related to operating -4 969 1 463

activities

Inventories -9 522 2 118

Liabilities related to operating activities 16 785 -4 139

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Changes in assets and liabilities 2 294 -558

Cash generated from operating activities 150 645 191 363

Income tax paid -3 265 553

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NET CASH FROM OPERATING ACTIVITIES 147 380 191 916

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant, equipment and -68 638 -43 629

intangible assets

Proceeds from disposals of property, plant, 169 115 370

equipment

Proceeds from other financial assets 0 229

Interest received 74 74

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NET CASH USED IN/FROM INVESTING ACTIVITIES -68 395 72 044

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from loans 280 000 0

Repayment of loans -313 524 -133 263

Change in overdraft 36 713 -59 052 16

Payments for settlement of derivatives -4 289 -4 045

Payment of finance lease liabilities -99 -80

Interest paid -24 083 -33 210

Payment of transaction costs related to loans -2 989 -1 429

Dividends paid -13 398 -13 398 19

Reduction of share capital -40 189 0 19

Income tax on dividends paid -330 -2 818 19

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NET CASH USED IN FINANCING ACTIVITIES -82 188 -247 295

TOTAL NET CASH FLOW -3 203 16 665

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Cash and cash equivalents at the beginning of period 81 976 65 311

Decrease/increase in cash and cash equivalents -3 203 16 665 8

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

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

Janek Stalmeister

Chairman of the Management Board

AS Tallink Grupp

Tel +372 640 9800

E-mail janek.stalmeister@tallink.ee

Veiko Haavapuu

Finance Director

AS Tallink Grupp

Sadama 5/7, 10111 Tallinn

Tel +372 640 9914

E-mail veiko.haavapuu@tallink.ee