Tallink Grupp

Earnings Release • May 18, 2018

AS Tallink Grupp Unaudited Consolidated Interim Report Q1 2018

AS Tallink Grupp Unaudited Consolidated Interim Report Q1 2018

Management report

In the first quarter (1 January - 31 March) of the 2018 financial year Tallink

Grupp AS and its subsidiaries (the Group) carried 1.9 million passengers, which

is 0.5% less than in the first quarter last year. The Group's unaudited revenue

for the first quarter decreased by 3.9 % to a total of EUR 184.2 million.

Unaudited EBITDA for the first quarter was EUR 4.2 million (EUR 5.3 million in

Q1 2017) and unaudited net loss was EUR 19.6 million (net loss of EUR 20.3

million in Q1 2017).

In the first quarter, which is also the low season, the Group's revenue and

operating result were impacted by the following operational factors:

* The number of passengers travelling on the Group's ships increased in almost

all geographical segments (Estonia-Finland, Estonia-Sweden and Latvia-

Sweden).

* The maintenance and repair of the cruise ferry Baltic Princess lasted for

68 days affected the Finland-Sweden segment's first quarter carriage volumes

and financial result.

* Charter and charter related revenue decreased compared to the same period

last year due to fewer ships in charter.

Sales and segments

In the first quarter, the number of passengers travelling on the Group's ships

on the Estonia-Finland routes increased by 1.3% or 13.3 thousand to a total of

1 025 thousand. Due to the higher competition, there was pressure on ticket

prices that resulted in a decline in average ticket prices and lower ticket

revenue. The segment revenue decreased by 0.9% to EUR 72.3 million. The Estonia-

Finland segment result increased by 7.0% and was EUR 8.6 million. The better

segment result was achieved mainly due to lower marketing costs as in the first

quarter last year there were marketing costs related to the launch of the

Shuttle ferry Megastar.

The maintenance and repair of the cruise ferry Baltic Princess, which is one of

the four ships operating on the Finland-Sweden routes, affected the routes'

first-quarter carriage volumes and financial results. The number of passengers

on the Finland-Sweden routes decreased by 9.9% to 523 thousand. The segment

revenue decreased by 9.2% to EUR 62.7 million. The segment result improved by

EUR 0.5 million as fewer trips resulted in lower ship operating and marketing

costs.

The Estonia-Sweden route's first-quarter revenue increased by 6.2% compared to

the same period last year. The growth was supported by a 5.7% rise in the number

of passengers and 15.9% increase in transported cargo units.

The Latvia-Sweden route's first-quarter revenue increased by 24.0% compared to

same period last year. The growth was supported by a 16.8% rise in the number of

passengers and a 62.6% increase in transported cargo units.

The charter and charter related revenue decreased by EUR 2.8 million as fewer

ships were chartered out compared to the first quarter in the previous year. Two

Superfast ferries were sold in December 2017, and one Superfast ferry remains

chartered out.

Earnings

In the first quarter of 2018, the Group's gross profit decreased by EUR 1.2

million compared to the same period last year, amounting to EUR 13.7 million.

First-quarter EBITDA decreased by EUR 1.1 million to EUR 4.2 million. The

Group's first quarter result from operations was impacted by charter and charter

related revenue, which was EUR 2.8 million lower than in the same period last

year because fewer ships were chartered out.

Amortisation and depreciation expense decreased by EUR 1.4 million to EUR 19.4

million compared to the first quarter of 2017. The decline is a result of less

depreciation cost from two sold Superfast ferries and addition of depreciation

cost of Shuttle ferry Megastar, compared to the first quarter last year.

Net finance costs decreased by EUR 0.5 million compared to the first quarter

last year. The change includes decline of EUR 1.0 million in interest costs

compared to same period the previous year and increase of EUR 0.5 million in

losses from foreign exchange differences and the revaluation of cross currency

and interest rate derivatives.

The Group's unaudited net loss for the first quarter of 2018 was EUR 19.6

million or EUR 0.029 per share compared to a net loss of EUR 20.3 million or EUR

0.030 per share in the same period last year.

Investments

In the first quarter, the Group's investments amounted to EUR 8.4 million. Most

of the investments were made in the fleet's technical dockings and upgrades of

the ships public areas. Investments were also made in the development of online

booking and sales systems.

Dividends

To the shareholders' annual general meeting in 2018, the Management Board will

propose a dividend of EUR 0.03 per share from net profit for 2017.

Financial position

In the last twelve months the Group has reduced its interest bearing liabilities

by EUR 212.2 million to EUR 551.0 million (EUR 763.2 million at 31 March 2017).

Total bank debt at the end of the first quarter of 2018 is comparable to the

level at the end of 2016, before the drawdown of a EUR 184 million loan in

January 2017, which was used to finance the purchase of the Shuttle ferry

Megastar. The repayment of bank debt (scheduled and early repayment of loans and

repayment of an overdraft) was supported by positive cash flow from operations

and the sale of two Superfast ferries in December 2017.

In the first quarter, the Group's net debt increased by EUR 8.9 million to EUR

480.9 million and the net debt to EBITDA ratio was 3.1 at the reporting date.

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

unused credit facilities) amounted to EUR 142.8 million (EUR 74.7 million at 31

March 2017) providing a strong financial position for sustainable operations.

The Group had EUR 70.1 million (EUR 72.2 million at 31 March 2017) in cash and

cash equivalents and EUR 72.7 million (EUR 2.5 million at 31 March 2017) in

unused credit lines.

Key figures

For the period Q1 2018 Q1 2017 Change %

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Revenue (million euros) 184.2 191.5 -3.9%

Gross profit (million euros) 13.7 14.9 -7.8%

Net loss for the period (million euros) -19.6 -20.3 3.7%

EBITDA (million euros) 4.2 5.3 -20.3%

Depreciation and amortisation (million euros) 19.4 20.8 -6.6%

Capital expenditures (million euros) 8.4 204.2

Weighted average number of ordinary shares

outstanding 669 882 040 669 882 040 0.0%

Earnings per share  -0.029 -0.030 3.7%

Number of passengers 1 930 449 1 939 784 -0.5%

Number of cargo units 90 687 83 797 8.2%

Average number of employees 7 242 7 209 0.5%

As at 31.03.18 31.12.17 Change %

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Total assets (million euros) 1 531.6 1 558.6 -1.7%

Total liabilities (million euros) 714.6 722.3 -1.1%

Interest-bearing liabilities (million euros) 551.0 560.9 -1.8%

Net debt (million euros) 480.9 472.0 1.9%

Net debt to EBITDA 3.06 2.98 2.7%

Total equity (million euros) 817.1 836.3 -2.3%

Equity ratio (%) 53.3% 53.7%

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

Equity per share 1.22 1.25 -2.3%

Ratios Q1 2018 Q1 2017

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Gross margin (%) 7.4% 7.8%

EBITDA margin (%) 2.3% 2.7%

Net profit margin (%) -10.6% -10.6%

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 or loss / revenue

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

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

Consolidated statement of profit or loss and other comprehensive income

Unaudited, in thousands of EUR Q1 2018 Q1 2017

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Revenue (Note 3) 184 155 191 548

Cost of sales -170 448 -176 678

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Gross profit 13 707 14 870

Sales and marketing expenses -16 313 -17 780

Administrative expenses -12 728 -12 610

Other operating income 113 123

Other operating expenses -27 -135

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Result from operating activities -15 248 -15 532

Finance income (Note 4) 3 078 2 491

Finance costs (Note 4) -7 373 -7 273

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Loss before income tax -19 543 -20 314

Income tax  -23 -14

Net loss for the period -19 566 -20 328

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Other comprehensive income 411 0

Exchange differences on translating foreign operations -68 -142

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Other comprehensive income/expense for the period 343 -142

Total comprehensive expense for the period -19 223 -20 470

Earnings per share (in EUR per share, Note 5) -0.029 -0.030

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Consolidated statement of financial position

Unaudited, in thousands of EUR 31.03.2018 31.12.2017

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ASSETS

Cash and cash equivalents 70 129 88 911

Trade and other receivables 42 630 46 466

Prepayments 15 261 5 395

Prepaid income tax 44 40

Inventories 37 499 40 675

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Current assets 165 563 181 487

Investments in equity-accounted investees 403 403

Other financial assets 338 344

Deferred income tax assets 18 718 18 722

Investment property 300 300

Property, plant and equipment (Note 7) 1 298 412 1 308 441

Intangible assets (Note 8) 47 885 48 900

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Non-current assets 1 366 056 1 377 110

TOTAL ASSETS 1 531 619 1 558 597

LIABILITIES AND EQUITY

Interest-bearing loans and borrowings (Note 9) 164 282 159 938

Trade and other payables (Note 13) 93 472 95 548

Derivatives (Note 6) 31 321 29 710

Payables to owners ¹ 3 3

Income tax liability 0 34

Deferred income 38 727 31 429

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Current liabilities 327 805 316 662

Interest-bearing loans and borrowings (Note 9) 386 742 400 968

Derivatives (Note 6) 0 4 688

Other liabilities 16 0

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Non-current liabilities 386 758 405 656

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Total liabilities 714 563 722 318

Share capital (Note 10) 361 736 361 736

Share premium 639 639

Reserves 68 367 68 946

Retained earnings 386 314 404 958

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Equity attributable to equity holders of the Parent 817 056 836 279

Total equity 817 056 836 279

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TOTAL LIABILITIES AND EQUITY 1 531 619 1 558 597

Consolidated statement of cash flows

Unaudited, in thousands of EUR Q1 2018 Q1 2017

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CASH FLOWS FROM OPERATING ACTIVITIES

Net loss for the period -19 566 -20 328

Adjustments 24 403 25 624

Changes in:

Receivables and prepayments related to operating activities -6 025 -9 831

Inventories 3 177 -6 003

Liabilities related to operating activities 6 356 7 671

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Changes in assets and liabilities 3 508 -8 163

Cash generated from operating activities 8 345 -2 867

Income tax paid -52 -18

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NET CASH FROM/USED IN OPERATING ACTIVITIES 8 293 -2 885

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant, equipment and intangible assets

(Notes 7, 8, 9) -8 365 -204 212

Proceeds from disposals of property, plant, equipment 26 25

Interest received 1 1

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NET CASH USED IN INVESTING ACTIVITIES -8 338 -204 186

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from loans received (Note 9) 0 184 000

Repayment of loans received (Note 9) -14 500 -10 024

Change in overdraft (Note 9) 2 331 32 371

Payments for settlement of derivatives -837 -905

Payment of finance lease liabilities (Note 9) -25 -26

Interest paid -5 706 -4 728

Payment of transaction costs related to loans 0 -164

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NET CASH USED IN/FROM FINANCING ACTIVITIES -18 737 200 524

TOTAL NET CASH FLOW -18 782 -6 547

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

Decrease in cash and cash equivalents -18 782 -6 547

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Cash and cash equivalents at the end of period 70 129 72 226

Veiko Haavapuu

Financial Director

AS Tallink Grupp

Sadama 5/7

10111 Tallinn, Estonia

Tel. +372 640 9914

E-mail veiko.haavapuu@tallink.ee

Attachment

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