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TALLINNA KAUABAMAJA UNAUDITED CONSOLIDATED INTERIM ACCOUNTS 4TH QUARTER AND 12 MONTHS OF 2014

TALLINN, 11.02.2015, www.nasdaqomxbaltic.com - The consolidated unaudited sales revenue of the Tallinna Kaubamaja group of 12 months was 535.0 million euros, which is an increase of 7.3%.

The consolidated unaudited sales revenue of the Tallinna Kaubamaja group in the fourth quarter of 2014 was 145.5 million euros, which is 5.3% higher than the sales revenue in the previous year. The sales revenue of 12 months was 535.0 million euros, which is an increase of 7.3% from the result of 498.7 million euros in 2013. The consolidated unaudited net profit in the fourth quarter of 2014 was 10.0 million euros, which was an 11.4% increase from the profits for the comparable period of the previous year. The net profit for the group for the 12 months of 2014 was 20.3 million euros, which was 16.2% higher than the profit for the previous year (the profit for 2013 was 17.5 million euros). The profit before tax in 2014 was 22.5 million euros, which is an increase of 5.9% compared to the year before.

In the fourth quarter, there was the continuous positive tendency of sales growth in the group’s main retail segments, which was higher than in the Estonian retail market on the average. The only retail segments with sales lower than the sales results from the preceding year were footwear and car segments. In the fourth quarter, the increased effect of several negative factors influencing the market could be felt. The year 2014 on the whole, but especially the 4th quarter, was affected by the expansion of the Estonian retail market with the emergence of new commercial premises and market participants. This is good news for consumers, but it has watered down the economic results of numerous market participants. The anticipated flow of tourists at the end of the year, especially from the East, was significantly lower than expected and diminished the sales of exclusive goods. All segments of the group were profitable in the fourth quarter. The only segment that ended the year with a loss was the footwear segment, which was affected by the changes in sales premises and product range. The group managed to achieve a 16.2% annual growth of the net profit for the year 2014. The increase of staff costs slowed down at the end of the year (the growth of the fourth quarter was 6.4%, the total for the year was 11.8%), which resulted from the slowdown of the increase of the number of employees; in the last quarter of 2014, the number of employees increased by 6.3% in comparison with the preceding year. The lower growth of profits in 2014 was due to lower sales margins in car and footwear segments. The influence was most felt in the footwear segment, where the margin decreased due to changes in product ranges.

Selver supermarkets

The consolidated sales revenue of the supermarket business segment in 2014 was 368.2 million euros, which in an increase of 7.3% in comparison with the preceding year. The consolidated sales revenue of the fourth quarter was 99.2 million euros, increasing by 7.7% in comparison with the same period in the preceding year. Throughout 2014, 35.6 million purchases were made in Selver supermarkets, which is 5.2% more than in the previous year. The consolidated profit before tax for 2014 in the supermarket segment was 8.1 million euros and the net profit was 7.7 million euros. The consolidated profit before tax and net profit for the fourth quarter was 4.4 million euros. The net profit for the fourth quarter was an increase of 0.8 million euros in comparison with the same period in the preceding year. The net profit for the year 2014 was an increase of more than 3.0 million euros in comparison with the year 2013. The increase in turnover in 2014 was supported by new stores that had been opened in 2012 and 2013. The increase of turnover was also supported by low inflation rate, good consumer confidence, and private consumption spending indicators. In the second half of the year especially, the turnover was affected by successful marketing campaigns and also the category management project and the changes in product range that take clients’ needs into account to a larger extent. There was negative influence proceeding from changing competitive environment, as a result of which, there is a redistribution of clients between stores, including Selver supermarkets. Looking by segments, the increase of turnover is led by the food segment, where there was an increase in the sales of fresh groceries and the increased range of gourmet products. The profits for 2014 were positively affected by the continuous improvement of the efficiency of activities. In addition to that, changes in the labour market had an effect on the profits throughout the year 2014, as a result of which, the average wages have increased and the staff expenses have also risen. The annual results also include the non-capitalized costs related to one-off projects. Larger one-off projects in the reported year were as follows: on 1 January, new commerce software was implemented in Selver supermarkets; in the first quarter, the Gurmeekauplus store selling gourmet food items in Solaris centre was closed, and a new section of gourmet goods was opened in Pirita Selver; in June, a new Selver supermarket was opened at the Astri shopping centre in Narva. In 2014, the content of the SelveEkspress service was improved and the webpage of Selver was updated.

Department stores

The sales revenue of the department store business segment in 2014 was 92.5 million euros, which is a 3.3% increase in comparison with the same period last year. The sales revenue of the fourth quarter was 28.4 million euros, which is 5.0% more than the revenue of the fourth quarter in 2013. The profit before tax of department stores in 2014 was 4.8 million euros, which was 10.2% higher than the profit for the preceding year. The profit before tax for the fourth quarter was 2.9 million euros, which was 4.6% more in comparison with the preceding period. In conclusion of 2014, it should also be said that the results of Kaubamaja department stores were affected by difficult access to both department store buildings, as tramways were renovated in Tallinn and the streets in the centre of Tartu were closed for extensive reconstruction works. The results were also affected by autumn and winter months that were warmer than usual, which allowed clients to postpone the purchase decision of clothing items and had the most profound effect on the sales of outdoor clothing. In the fourth quarter, the results of Kaubamaja were affected by aggressive and large-scale campaigns of the competitors and also the altered competitive environment in the Tallinn retail market, as the renovated Ülemiste shopping centre reopened in October. However, taking all this into consideration, Kaubamaja department stores have managed to be profitable and hold their market share. The sales revenue of OÜ TKM Beauty, which operates the I.L.U. cosmetic stores in Estonia, in the fourth quarter of the 2014 was 1.6 million euros, which is an increase of 3.7% in comparison with the same period in 2013. The sales revenue for the year 2014 was 4.7 million euros, representing a growth of 1.6% in comparison with the year 2013. The profit in the fourth quarter was 0.01 million euros; in the comparable period in 2013, the loss was 0.01 million euros. The total loss for the year 2014 was 0.3 million euros, which was 0.07 million euros lower in comparison with 2013.

Car Trade

The sales revenue of the car trade segment in 2014 was 57.7 million euros. The sales revenue was 20.1% higher than the same revenue for the previous year; including the sales revenue of KIAs increasing by 16.9%. The sales revenue for the fourth quarter of 13.9 million euros was 1.2% lower than in the same period of the previous year, whereas the sales revenue of KIAs grew by 14.2%. The decrease of the sales revenue in the fourth quarter was mostly due to the weaker result of the Latvian company of the car trade segment. At the end of 2013, a new car show room was opened in Latvia, and at the same time, the consumption increased in anticipation of the conversion to euro, so the reference base was higher. In 2014, altogether 3,050 new vehicles were sold, out of which 624 vehicles were sold in the fourth quarter. The net profit of the segment for 2014 was 1.7 million euros. The profit before tax for the segment in 2014 was 2.0 million euros, which is an increase of 6.1% in comparison with the profit for 2013. The net profit for the fourth quarter of 2014 was 0.6 million euros, which is an increase of 48.8% in comparison with the same period in the previous year.

Footwear trade

The sales revenue of the footwear segment in 2014 was 13.4 million euros, which was a decrease of 9.0% in comparison with the preceding year. The turnover for the fourth quarter was 3.2 million euros, which is a decrease of 21.3% in comparison with the same period for the previous year. The loss for 2014 was 1.3 million euros, whereas the loss for 2013 was 0.1 million euros. The profit for the fourth quarter of 2014 was 0.04 million euros. The profit for the fourth quarter in 2013 was 0.1 million euros. The annual sales revenue was affected strongly by the relocation of ABC flagship store to the first floor of the Viru shopping centre and the termination of rent lease of the SHU store in the same shopping centre. In addition, there was a long and warm autumn in the fourth quarter, which did not favour the sales of warm winter boots, thereby negatively affecting both sales revenues and sales margin. In the fourth quarter, we continued making changes in the planned product range and brand portfolio, and in relation to that, reorganizing store supplies, which resulted in temporary diminishing of the gross margin. In comparison with the previous period, the level of store supplies by the end of 2014 was optimized down by 1.95 million euros.

Real Estate

The extra-group sales revenue of the real estate business segment for 2014 was 3.3 million euros. The sales revenue increased by 1.1% in comparison with the previous year. The extra-group sales revenue for the fourth quarter of 2014 was 0.8 million euros, which was a decrease of 10.4% in comparison with the previous year. The decrease of turnover was a result of higher reference base of 2013, which was due to rearrangements with the changes of lessees at the end of 2013. The profit before tax for real estate segment in 2014 was 8.8 million euros, which was 0.2 million euros or 2.3% more than in the previous fiscal year (in 2013 it was 8.6 million euros). The profit before tax for the fourth quarter of 2014 was 2.1 million euros (in the fourth quarter of 2013, it was 2.1 million euros). The annual profit increase in 2014 resulted from the increase of the rentable areas belonging to the Company in 2013, as at the end of the year, the Peetri Selver supermarket in Rae rural municipality and a car show room in Ulmana Street in Riga were completed.

Raul Puusepp
Chairman of the Board