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 % |
| 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 % |
| 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 | |
| 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 |
| Revenue (Note 3) | 184 155 | 191 548 |
| Cost of sales | -170 448 | -176 678 |
| 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 |
| Result from operating activities | -15 248 | -15 532 |
| Finance income (Note 4) | 3 078 | 2 491 |
| Finance costs (Note 4) | -7 373 | -7 273 |
| Loss before income tax | -19 543 | -20 314 |
| Income tax | -23 | -14 |
| Net loss for the period | -19 566 | -20 328 |
| Other comprehensive income | 411 | 0 |
| Exchange differences on translating foreign operations | -68 | -142 |
| 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 |
Consolidated statement of financial position
| Unaudited, in thousands of EUR | 31.03.2018 | 31.12.2017 |
| 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 |
| 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 |
| 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 |
| 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 |
| Non-current liabilities | 386 758 | 405 656 |
| 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 |
| Equity attributable to equity holders of the Parent | 817 056 | 836 279 |
| Total equity | 817 056 | 836 279 |
| TOTAL LIABILITIES AND EQUITY | 1 531 619 | 1 558 597 |
Consolidated statement of cash flows
| Unaudited, in thousands of EUR | Q1 2018 | Q1 2017 |
| 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 |
| Changes in assets and liabilities | 3 508 | -8 163 |
| Cash generated from operating activities | 8 345 | -2 867 |
| Income tax paid | -52 | -18 |
| 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 |
| 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 |
| NET CASH USED IN/FROM FINANCING ACTIVITIES | -18 737 | 200 524 |
| TOTAL NET CASH FLOW | -18 782 | -6 547 |
| Cash and cash equivalents at the beginning of period | 88 911 | 78 773 |
| Decrease in cash and cash equivalents | -18 782 | -6 547 |
| 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
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