Tallink Grupp — Investor Presentation 2016

Apr 6, 2017

The company

— Tallink is the leading European provider of leisure and business travel and sea transportation services in the Baltic Sea region

Operations

• Fleet of 16 vessels
• Operating five hotels

Key facts

• Revenue of EUR 938 million in 2016
• Operating EUR 1.5 billion asset base
• Nearly 7,000 employees
• Serving 9.5 million passengers annually
• Transporting 328 thousand cargo units annually
• Listed on Nasdaq OMX Baltic TAL1T

Over 50 years of operating and cruising experience

Tallink's business model

Product offering

Overnight cruises & passenger transportation

On-board tax-free shopping

Hotel & travel packages City break

Cargo transportation

Revenue structure in 2016 Shuttle service

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Tallink's position in the global ferry market

The World's top Duty free & Travel Retail Shops

Ranking by actual and estimated retail sales in 2015

Rank Location

Sales > US \$ 1,500 million

• 1 Seoul Incheon Int'l Airport, South Korea AIRPORT SHOPS
• 2 Dubai Dubai International Airport, U.A.E.
• 3 Singapore Changi Airport

Sales > US\$ 1,000 million

4	London – Heathrow Airport, UK	AIRPORT SHOPS
5	Bangkok – Suvarnabhumi Airport, Thailand	AIRPORT SHOPS
6	Shanghai – Pudong Airport, China P.R	AIRPORT SHOPS
	Sales > US\$ 800 million
7	Hong Kong – Hong Kong International Airport	AIRPORT SHOPS
8	Tokyo – Narita Airport, Japan	AIRPORT SHOPS
Sales > US\$ 600 million
9	Paris – Charles de Gaulle Airport, France	AIRPORT SHOPS
10	Beijing – Capital Airport, China P.R.	AIRPORT SHOPS
11	Frankfurt – Frankfurt-Main Airport, Germany	AIRPORT SHOPS

12 Taipei – Taoyuan International Airport, Taiwan AIRPORT SHOPS

Sales > US\$ 500 million

13	Tallink	FERRIES
14	Istanbul – Atatürk Airport , Turkey	AIRPORT SHOPS
15	Cheju – Int'l Airport, South Korea	AIRPORT SHOPS
16	Amsterdam – Schipol Airport, Netherlands	AIRPORT SHOPS
17	London – Gatwick Airport, United Kingdom	AIRPORT SHOPS

Source: Generation Research 2016

AIRPORT SHOPS AIRPORT SHOPS

	Rank Company	Gross tons
1	Stena Line	909,412
2	Grimaldi Lines	477,667
3	Tallink	466,960
4	DFDS Seaways	412,722
5	P&O Ferries	409,659

	Rank Company	Beds
1	Tallink	18,963
2	Stena Line	16,847
3	Viking Line	14,026
4	Grand Navi Veloci	13,328
5	Tirrenia	11,876

		EUR million
	Rank Company	Revenue
1	DFDS Group	1,805
2	Stena Line	1,335
3	Tallink	945
4	Viking Line	530
5	Finnlines	511

Data: Ro/pax / ferries above 1,000 GT Source: ShipPax MARKET:16; Company reports

Tallink's vision

— To be the market pioneer in Europe by offering excellence in leisure and business travel and sea transportation services

Long term objectives toward increasing the company value and profitability

• Strive for the highest level of customer satisfaction
• Increase volumes and strengthen the leading position on our home markets
• Develop a wide range of quality services directed at different customers and pursue new growth opportunities
• Ensure cost efficient operations
• Manage the optimal debt level that will allow sustainable dividends

Current strategic cornerstones and competitive advantages

Most modern fleet

Wide route network

Strong market share & brand awareness

High safety level & environmental standards

Tallink's passenger market share is 48% of the Northern Baltic Sea

Market shares Passenger operations

We are targeting new customers from a wider country base More than 10% of our passengers come from outside of our home markets

	Web sales sites in 17 language China	Finland Italy	Lithuania	Poland	Russia
9	Denmark Estonia	France Japan Germany Latvia	Netherlands Noway	Spain Sweden	International

Highlights and milestones

Tallink's performance after the management buyout

Highlights and outlook

2016 highlights

• Higher passenger number and revenue
• Lower chartering revenues compared to last year
• Market share growth on routes
• Cruise ferry Silja Europa return from charter to Tallinn Helsinki route
• The new logistics center in Tallinn start of operations
• New passenger terminal opened in Stockholm and Helsinki
• Re-routing of vessels in December 2016
• Group-wide ship public areas renovation program
• New LNG fast ferry Megastar started on Tallinn Helsinki Shuttle service

2017 outlook

• Scheduled maintenances of five ships in Q1 low season
• Two ships on Riga Stockholm route
• Estonia Finland routes lower operating costs from termination of the fast ferry Superstar charter and less capacity on cruise service
• Group-wide ship renovation program continues
• Nordic economies modest growth

Group-wide ship renovation program Investments to upgrade the fleet in period 2014-2016

Large scale renovation of three cruise ferries

• Silja Serenade
• Silja Symphony
• Silja Europa

Expansion of shops and modernizing restaurants to improve the performance through retail space

• Modern retail environment visual
• Leveraging own brands
• Introducing international premium brands
• Wider selection of the products

Upgrading of cabins

• Responding to higher expectations of the passengers
• Focus on different cabin classes

Tallink Grupp has invested more than EUR 63 million since 2014 to upgrade its existing fleet.

Ongoing development projects Focus on improvments and efficiencies of operations

Investments to support revenue generation

• IT solutions
• Taking revenue management to next level
• Further developments of mobile booking apps to capture growing handheld devices online traffic
• Improving online booking solutions user experience
• Customer centric and personalized digital channels development

Delivering operational efficiencies

• Efficient ship operations
• Utilising monitoring systems
• Passenger logistics in terminals
• Self check-in, improved boarding pass
• Tallink Logistics Center
• Leveraging and fine tuning the operations

New LNG fast ferry Megastar Development of the Tallinn – Helsinki route

Specifications

• Built in Meyer Turku Shipyard
• Gross tonnage 49,000
• Length 212 meters
• Capacity 2,800 passengers
• Dual fuel engine
• Service speed 27 knots

Financing

• The vessel cost is over EUR 230 million
• 20% was paid during the construction period
• 80% was financed with long term bank loan OECD-term export credit loan with CIRR based fixed interest rate

New LNG powered fast ferry for the Tallinn – Helsinki Shuttle service Start of operations on 29 January 2017.

New LNG fast ferry Megastar Safer ship with smaller ecological footprint

Technical innovations deliver improved safety, high energy efficiency and environmental savings

• Safe Return to Port (SRtP) compliant ship
• Dual fuel ship uses environmentally friendly LNG as main fuel
• LNG produces 25% less CO2, 85% less NOx and almost zero SOx and particles
• Improved ship hull hydrodynamics enable very low hull resistance and high propulsion efficiency to further minimise fuel consumption and emissions
• Ships Green Passport improved waste management and recycling

Megastar will comply with the current and future emission regulations for the Emission Control Areas, including the Baltic Sea.

New LNG fast ferry Megastar Ship with new services and concepts

Introducing new concepts and brands

• Traveller Superstore expanded to 2800 sq.m
• Q-shopping self-service solution
• New garage concept with improved shop-to-car access for shop customers
• Seven restaurants, cafes and bars
• Leveraging own brands
• Introducing international premium brands
• Four different travel classes
• standard Star Class
• upgraded Comfort Class
• exclusive Business Lounge
• a new Sitting Lounge
• A special area with a playroom for the kids

On Megastar there is a floating department store where modern solutions make shopping a pleasure.

Results Quarterly seasonality breakdown

Revenue (EUR million)

EBITDA (EUR million)

The dynamics of high seasonality on the profit level Net result by quarters

-23 -13 -12 6 29 10 36 45 43 8 -1 4 -30 -20 -10 0 10 20 30 40 50 2014 net profit 27 2015 net profit 59 2016 net profit 44 EUR million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Typical to the Tallink business model is that most of the result is made in the summer, the high season.

Consolidated Income Statement

(EUR million)	2014	2015	2016 (1)
Sales	921	945	938
Cost of sales (2)	(740)	(722)	(745)
Marketing, general & admin (2)	(112)	(111)	(123)
EBITDA	151	181	149
Margin (%)	16.3%	19.2%	15.9%
Net Profit	27	59	44
EPS	0.04	0.09	0.07

Notes:

(1) Unaudited

(2) Includes amortization and depreciation

Costs breakdown

(EUR million)	2015	2016	Change
Cost of goods	215,401	225,047	4%
Fuel cost	94,191	74,250	-21%
Staff costs	142,368	151,908	7%
Marketing & Administration (1)	102,839	114,967	12%
Port & stevedoring	92,213	101,010	10%
Ship operating expenses	76,249	89,877	18%
Other costs (2)	40,577	32,256	-21%
Total costs from operations	763,838	789,315	3%
Depreciation and amortisation	78,102	77,861	0%
Net finance cost	34,156	27,181	-20%
Total costs	876,096	894,357	2%

Notes:

(1) Depreciation and amortisation excluded

(2) Including one-off costs from vessel sale in 2015

Consolidated Cash Flow Statement

(EUR million)	2014	2015	2016 (1)
Operating cash flow	151	192	147
Capital expenditure	(49)	(44)	(68)
Asset disposal	0	115	0
Free cash flow	102	263	79
Debt financing (net effect)	(46)	(192)	3
Interests & other financial items	(37)	(38)	(31)
(2) Dividend paid	(20)	(13)	(54)
Dividend tax	(5)	(3)	0
Change in cash	(7)	17	(3)

Notes:

(1) Unaudited

(2) Includes share capital reduction payment to shareholders

Consolidated Statement of Financial Position

(EUR million)	31.12.2013	31.12.2014	31.12.2015	(1) 31.12.2016
Total assets	1,722	1,686	1,539	1,539
Non-current assets	1,572	1,545	1,385	1,374
Current assets	150	140	154	164
- of which cash	72	65	82	79
Total liabilities	951	907	714	725
Interest bearing liabilities	794	743	549	559
Other liabilities	157	170	165	166
Shareholders' equity	771	778	824	814
Net debt/EBITDA	4.6x	4.5x	2.6x	3.2x
Net debt	722	678	467	480
Equity/assets ratio	45%	46%	54%	53%
BVPS (2) (in EUR)	1.15	1.16	1.23	1.21

Notes:

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(1) Unaudited (2) Shareholders' equity / number of shares outstanding

The management board targets to distribute at least 50% of the net profit, calculated over the long term, as dividends or capital repayment, taking however the Group's financial position into account.

2016 dividend

• Total distributions EUR 0.08 per share:
• Dividend EUR 0.02 per share
• Share capital reduction EUR 0.06 per share

2017 dividend

— Management board will propose dividend of EUR 0.03 per share from financial year 2016 net profit

Tallink Grupp has made total of EUR 121 million dividend payments to shareholders in period 2013-2016.

Debt structure

Total EUR 559 million interest bearing liabilities as at 31.12.2016

Long term bank loans

• 5 standalone loan agreements with bank syndicate, amortizing project loans and commercial term loan
• Maturities 1-12 years
• EUR denominated
• EURIBOR floating,1/3 hedged

Bond

• Senior unsecured NOK 900 m (EUR 120 m)
• Listed in Oslo Stock Exchange
• 3M NIBOR +5% (3M EURIBOR +4.88%)
• Issue date 18.06.2013
• Maturity date 18.10.2018
• Currency risk eliminated by swapping to EUR

Unrivalled suite of competitive advantages

Extensive Sales Network

• 21 own sales offices

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• Network of >1,800 travel agents and tour operators worldwide

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• Growing online presence and call centres

Modern fleet

• ¹¹ core vessels have an average age of 12.6 years
• Ice class vessels

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• Luxurious on-board experience, e.g. spacious shopping areas

Extensive route network

• Variety of short cruises between key cities
• Optimised schedules with frequent and reliable departures all year
• Established relationships with port authorities

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Strong quality brands

• Silja Line and Tallink are the most recognised cruise brands in the Northern Baltic Sea Region
• They are associated with a quality customer experience Finland Estonia Sweden

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Comprehensive offer

• Varied on-board experience
• Travel packages and excursions
• Addressing all budget ranges and customer preferences

48% Market share of the Northern Baltic Sea Region passenger market

Loyal customer base

• 9.5 million passengers in 2016
• 2.2 million Club One card holders growing at 10% in 2016
• Every third passenger is a club one member

High safety and environmental standards 4

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• We proactively seek compliance with the highest standards
• In 2016, only 2 of the over ⁹⁸⁰⁰ scheduled trips were cancelled for technical reasons

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• Our ice-classed fleet is versatile to operate anywhere
• We have experience in selling and chartering vessels all over the world

Tallink's Fleet

Megastar Built: 2017 Length 1212m Passengers: 2800

Lane meters: 1130

Star Built: 2007 Length 186m Passengers: 2080 Lane meters: 2000

Victoria I

Built: 2004 Length: 193m Passengers: 2500 Lane meters: 1030

Silja Europa

Built: 1993 Length: 202m Passengers: 3123 Lane meters: 932

Romantika

Built: 2002 Length 193m Passengers: 2500

Tallink has invested EUR 1.5 billion to create a modern fleet.

Tallink's Fleet

Silja Serenade

Built: 1990 Length 203m Passengers: 2852 Lane meters: 950

Silja Symphony

Built: 1991 Length 203m Passengers: 2852

Baltic Princess

Built: 2008 Length: 212m Passengers: 2800 Lane meters: 1130

Isabelle

Built: 1989 Length 171m Passengers: 2480 Riga Lane meters: 850 -Stockholm

Galaxy

Built: 2006 Length: 212m Passengers: 2800

Superfast VII/VIII/IX

Built: 2001/2002 Length: 203m Passengers: 717 Chartered out Lane meters: 1924

Tallink has invested EUR 1.5 billion to create a modern fleet.

Ownership structure

Shareholders of AS Tallink Grupp

Top 10 shareholders Institutional investors Retail investors

Ten largest shareholders as at 31 March 2017

Infortar AS	38%
Baltic Cruises Holding L.P.	18%
Baltic Cruises Investment L.P.	6%
ING Luxembourg S.A. AIF Account	4%
ING Luxembourg Client Account	3%
State Street Bank and Trust Omnibus Fund OM01	2%
Clearstream Banking Luxembourg S.A. Clients	2%
Nordea Bank Finland Plc Clients	1%
Skandinaviska Enskilda Banken Finnish Clients	1%
BNYM Clients	1%

Safety, security and environmental protection are a high priority

Policies and certifications

• Safety and Security Policy
• Environmental Policy
• ISO 14001:2004 Environmental Certificate by Lloyds Register
• MARPOL Sewage Pollution Prevention Certificate
• MARPOL Air Pollution Prevention Certificate
• International Anti-Fouling System Certificate
• MARPOL Oil Pollution Prevention Certificate
• Document of Compliance for Anti-Fouling System
• MARPOL Garbage Pollution Prevention Attestation
• Passenger Ship Safety Certificate
• International Ship Security Certificate
• Safety Management Certificate
• Document for Dangerous Goods

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