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 periodQ1 2018Q1 2017Change %
Revenue (million euros)184.2191.5-3.9%
Gross profit (million euros)13.714.9-7.8%
Net loss for the period (million euros)-19.6-20.33.7%
EBITDA (million euros)4.25.3-20.3%
    
Depreciation and amortisation (million euros)19.420.8-6.6%
Capital expenditures (million euros)8.4204.2 
Weighted average number of ordinary shares outstanding669 882 040669 882 0400.0%
Earnings per share -0.029-0.0303.7%
    
Number of passengers1 930 4491 939 784-0.5%
Number of cargo units90 68783 7978.2%
Average number of employees7 2427 2090.5%
    
As at31.03.1831.12.17Change %
Total assets (million euros)1 531.61 558.6-1.7%
Total liabilities (million euros)714.6722.3-1.1%
Interest-bearing liabilities (million euros)551.0560.9-1.8%
Net debt (million euros)480.9472.01.9%
Net debt to EBITDA3.062.982.7%
Total equity (million euros)817.1836.3-2.3%
Equity ratio (%)53.3%53.7% 
    
Number of ordinary shares outstanding669 882 040669 882 0400.0%
Equity per share1.221.25-2.3%
    
RatiosQ1 2018Q1 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 EURQ1 2018Q1 2017
Revenue (Note 3)184 155191 548
Cost of sales-170 448-176 678
Gross profit13 70714 870
   
Sales and marketing expenses-16 313-17 780
Administrative expenses-12 728-12 610
Other operating income113123
Other operating expenses-27-135
Result from operating activities-15 248-15 532
   
Finance income (Note 4)3 0782 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 income4110
Exchange differences on translating foreign operations-68-142
Other comprehensive income/expense for the period343-142
   
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 EUR31.03.201831.12.2017
ASSETS  
Cash and cash equivalents70 12988 911
Trade and other receivables42 63046 466
Prepayments15 2615 395
Prepaid income tax4440
Inventories37 49940 675
Current assets165 563181 487
   
Investments in equity-accounted investees403403
Other financial assets338344
Deferred income tax assets18 71818 722
Investment property300300
Property, plant and equipment (Note 7)1 298 4121 308 441
Intangible assets (Note 8)47 88548 900
Non-current assets1 366 0561 377 110
TOTAL ASSETS1 531 6191 558 597
   
LIABILITIES AND EQUITY  
Interest-bearing loans and borrowings (Note 9)164 282159 938
Trade and other payables (Note 13)93 47295 548
Derivatives (Note 6)31 32129 710
Payables to owners ¹33
Income tax liability034
Deferred income38 72731 429
Current liabilities327 805316 662
   
Interest-bearing loans and borrowings (Note 9)386 742400 968
Derivatives (Note 6)04 688
Other liabilities160
Non-current liabilities386 758405 656
Total liabilities714 563722 318
   
Share capital (Note 10)361 736361 736
Share premium639639
Reserves68 36768 946
Retained earnings386 314404 958
Equity attributable to equity holders of the Parent817 056836 279
Total equity817 056836 279
TOTAL LIABILITIES AND EQUITY1 531 6191 558 597


Consolidated statement of cash flows

Unaudited, in thousands of EURQ1 2018Q1 2017
   
CASH FLOWS FROM OPERATING ACTIVITIES  
Net loss for the period-19 566-20 328
Adjustments24 40325 624
Changes in:  
Receivables and prepayments related to operating activities-6 025-9 831
Inventories3 177-6 003
Liabilities related to operating activities6 3567 671
Changes in assets and liabilities3 508-8 163
Cash generated from operating activities8 345-2 867
Income tax paid-52-18
NET CASH FROM/USED IN OPERATING ACTIVITIES8 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, equipment2625
Interest received11
NET CASH USED IN INVESTING ACTIVITIES-8 338-204 186
   
CASH FLOWS FROM FINANCING ACTIVITIES  
Proceeds from loans received (Note 9)0184 000
Repayment of loans received (Note 9)-14 500-10 024
Change in overdraft (Note 9)2 33132 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 loans0-164
NET CASH USED IN/FROM FINANCING ACTIVITIES-18 737200 524
   
TOTAL NET CASH FLOW-18 782-6 547
   
Cash and cash equivalents at the beginning of period88 91178 773
Decrease in cash and cash equivalents-18 782-6 547
Cash and cash equivalents at the end of period70 12972 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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