Tallink Grupp
Annual Financial Report

Audited Annual Report of the 2013 Financial Year

Tallinn, 2014-04-30 08:50 CEST -- Audited Annual Report of the 2013 Financial Year

The growth experienced during the previous years has turned into a more stable market environment. During the 2013 financial year the Nordic economies continued to experience a slowdown that in turn had an effect on the Group’s customer spending behaviour. At the same time several competitors invested in new built or newer vessels resulting in a changed competitive landscape. Compared to the previous period an increased number of the Group’s vessels went through scheduled maintenance works resulting in fewer voyages and hence lower passenger volumes. In addition, the cruise ferries Silja Europa and Baltic Princess switched their operating routes resulting temporarily in fewer sailings due to the change.  These various factors had an effect to the slight decline in the volumes resulting in a somewhat weaker annual result.

During the 2013 financial year a total of 9.11 million passengers travelled on the Group’s vessels. The Group’s consolidated revenue for 2013 was EUR 942.0 million (EUR 943.9 million in 2012). Gross profit was EUR 190.2 million (EUR 201.2 million in 2012), EBITDA EUR 156.2 million (EUR 165.5 million in 2012). Net profit for 2013 was EUR 43.3 million (EUR 56.3 million in 2012), representing earnings per share of EUR 0.065 (EUR 0.084 in 2012).

During the 2013 financial year the Group’s increased focus was on developing the on-board concept.  It is our vision for the long term on-board development of new business concepts for bars, restaurants, shops, boutiques, servicing, technical innovations, customer communication etc, we call this “Newboard”.  Aside from smaller upgrades the first noticeable improvement comes from Silja Serenade where restaurants, shops and other public areas were upgraded in the first quarter of 2014.

Active development of the on-line sales channels continued throughout the year. The volume and share of on-line bookings has increased.

In 2013 spring the Group invested around EUR 30 million in the development of the Riga – Stockholm route by purchasing the cruise ferry Isabelle. In the recent years the Riga – Stockholm route has been the fastest growing route and this investment supports the further development. The upgrade helped to achieve 8.4% higher revenue and a positive segment result for 2013.

In 2013 June the Group issued a NOK 900 million (EUR 118 million) senior unsecured bond to pre-pay an existing bank loan. The bond was listed on the Oslo stock exchange in October. The access to capital markets is important for improving financial flexibility through diversified funding sources.

The key highlights of the 2013 financial year were the following:

• Operations impacted by an overall weak economic environment in the region
• Changed competitive landscape
• Development of the online sales channels
• Development of “Newboard”
• Purchase of the cruise ferry Isabelle
• Bond issue

In management’s opinion, the Group’s financial position allows the Group to pay dividends. Management will propose to the 2014 shareholders’ general meeting a dividend distribution of EUR 0.03 per share, i.e. EUR 20,096,461 in aggregate.

KEY FIGURES OF THE FINANCIAL YEAR 2013

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
Shareholder’s equity per share: shareholder’s equity / number of shares outstanding
Gross margin: gross profit / net sales
EBITDA margin: EBITDA / net sales
Net profit margin: net profit / net sales
ROA: Earnings before net financial items, taxes /Average total assets
ROE:  Net profit/Average shareholders’ equity
ROCE: Earnings before net financial items, taxes / (Total assets – Current liabilities (average for the period))
Net debt: Interest-bearing liabilities less cash and cash equivalents
Net debt to EBITDA: Net debt / 12-months trailing EBITDA
¹ Share numbers exclude own shares.

SALES

The Group’s consolidated revenue amounted to EUR 942.0 million in 2013 (943.9 million in 2012). Restaurant and shop sales on-board and on mainland of EUR 507.3 million (517.5 million in 2012) contributed more than half of total revenue. Ticket sales amounted to EUR 249.2 million (241.0 million in 2012) and sales of cargo transport to EUR 105.6 million (102.8 million in 2012). The distribution of sales between operational segments remained more or less stable compared to the previous financial year.

Geographically, 36.4% or EUR 343.2 million of revenue came from the Finland-Sweden route and 33.7% or EUR 317.4 million from the Estonia-Finland route. Revenue from the Sweden-Estonia route was EUR 104.9 million or 11.2% and from the Sweden-Latvia route EUR 71.9 million or 7.6%. The share of revenue generated by other geographical segments increased to 11.1% (EUR 114.8 million).

EARNINGS

Gross profit was EUR 190.2 million (EUR 201.2 million in 2012), EBITDA EUR 156.2 million (EUR 165.5 million in 2012). Net profit for 2013 was EUR 43.3 million (EUR 56.3 million in 2012). Basic and diluted earnings per share were EUR 0.065 (EUR 0.084 in 2012).

The cost of goods related to sales at shops and restaurants, which is the largest operating cost item, amounted to EUR 220.2 million (EUR 213.7 million in 2012). Accordingly, the proportion of sales on the tax- paid routes (Finland-Estonia and Latvia-Sweden routes), where the margin is lower, increased, whereas the share of the Finland-Sweden tax-free routes decreased.

Fuel costs for 2013 were EUR 129.8 million (EUR 143.9 million in 2012). Fuel costs were impacted by lower fuel price levels throughout the year. Measured in euros, in 2013 the average market price of the reference fuel (Fuel oil 1% sulphur content) was approximately 13% lower than in the 2012 calendar year.

The Group’s personnel expenses amounted to EUR 182.4 million (EUR 180.5 million in 2012). The average number of employees in the 2013 financial year was 6,948 (6,868 in 2012).

Administrative expenses for 2013 amounted to EUR 45.1 million and marketing expenses to EUR 63.3 million (EUR 44.1 million and 65.4 million respectively in 2012).

Depreciation and amortisation of the Group’s assets was EUR 73.2 million (EUR 71.0 million in 2012). There were no changes in depreciation policies in 2013. There were no impairment losses related to the Group’s property, plant, equipment and intangible assets.

The Group’s net finance costs for 2013 amounted to EUR 36.0 million (EUR 41.0 million in 2012).

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 STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CASH FLOWS

         Janek Stalmeister
         Member of the Management Board, CFO
         
         AS Tallink Grupp
         Tel +372 640 9800
         E-mail janek.stalmeister@tallink.ee
         
         
         Harri Hanschmidt
         Head of the Finance Department
         
         AS Tallink Grupp
         Sadama 5/7. 10111 Tallinn
         Tel +372 640 8981
         E-mail harri.hanschmidt@tallink.ee