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TALLINNA KAUBAMAJA GROUP UNAUDITED CONSOLIDATED INTERIM ACCOUNTS FOR THE 2ND QUARTER OF 2017
TALLINN, 13.07.2017, www.nasdaqbaltic.com - The unaudited consolidated sales revenue of the 2nd quarter of 2017 of Tallinna Kaubamaja Group was 164.6 million euros, indicating an increase of 9.4% in a year-on-year basis.
The sales revenue of the first six months was 315.3 million euros, having increased by 9.7% compared to the results of the first six months of 2016, when the sales revenue was 287.4 million euros. The unaudited consolidated net profit of the Group in the 2nd quarter of 2017 was 8.6 million euros, which is 0.4% higher on a year-on-year basis. The net profit of the Group in the first six months of 2017 was 8.4 million euros, remaining at the same level as in the year prior. The profit before taxes in the first six months was 14.8 million euros, having increased by 8.5% compared to the year prior. The net profit was impacted by a dividend payment, from which 6.4 million euros of income tax was paid in the 1st quarter of 2017; in the year prior, 5.2 million euros of income tax was paid.
The 9.4% increase in the sales revenue of the Group in the 2nd quarter was supported by the confidence of the consumers and the increase in wages, as well as the development activities of the Group, which is why the growth of the sales revenue was able to exceed the overall trend of retail statistics in Estonia. In the 2nd quarter, the car trade segment achieved the highest growth in sales, with several large-scale procurements won. Selver also had an important role in the increase of the sales revenue, with three new stores opened in the 2nd quarter, but also with excellent growth at comparable stores. The strong development of the Group in the sector of e-commerce was pleasing, with the sales revenue of the sector doubling in a year-on-year basis. On the other hand, the global growth of e-commerce has further increased the tough competition in the market of footwear and beauty products. Furthermore, the sales revenue of the footwear segment of the Group was placed under pressure by the absence of weather appropriate to the season, as well as operating with a composition, which includes 4 stores less compared to the year prior. The Group managed to increase profit in the 2nd quarter, but the increase was lower than the growth in the sales revenue in connection with the one-time expenditure on opening new Selver stores. The volume of labour costs also increased, impacted by both the increased number of employees due to the new stores as well as by the adjustment of the wages based on the situation of the labour market.
Selver supermarkets
The consolidated sales revenue of the supermarket segment in the first six months of 2017 was 208.5 million euros, increasing by 8.8% in a year-on-year basis. The consolidated sales revenue of the 2nd quarter was 109.0 million euros, increasing by 10.1% in a year-on-year basis. The consolidated profit before taxes of the supermarket segment in the first six months of 2017 was 6.2 million euros, having increased by 0.2 million euros compared to the year prior. The net profit in the first six months amounted to 2.6 million euros, decreasing by 0.8 million euros compared to the year prior. The domestic profit before taxes was 7.3 million euros and the net profit 3.7 million euros. The difference between the net profit and the profit before taxes arises from the income tax paid on the dividends: in 2017, the income tax on the dividends was 1.0 million euros higher compared to the year prior. The profit before taxes and the net profit in the 2nd quarter were 3.4 million euros, with the domestic profit amounting to 4.0 million euros. The profit of the 2nd quarter remained at the level of the year before. The loss earned in Latvia in the first six months was 1.1 million euros, of which the share of the 2nd quarter amounted to 0.5 million euros. The loss remained at the level of the year prior. The sales revenue of Selver remained above the average increase in turnover of the market segment in the 2nd quarter as well. The growth in sales revenue was supported by the new stores opened and the stores renovated in the last few years and successful marketing campaigns. The reference base of the 2nd quarter of 2017 was lower by the two stores opened in Tallinn and Maardu in the last quarter of 2016 and the three stores opened in 2017 and by one store, which was temporarily closed for renovation works for one month. The reference base is higher by the store closed in Narva in the 1st quarter of 2016 and by the additional day arising from the leap year. The segment of e-commerce remained successful, with the sales revenue more than doubling in the 2nd quarter compared to the year prior. The operations performed with the selection of goods and the higher confidence of the consumers, which was supported by continuing growth in income, has increased the cost of the average purchases of the customers from the perspective of comparable stores. The amount of profit earned in Estonia was, above all, influenced by the increase in gross profit arising from the sale of goods. Optimisation of trade processes has also had a positive impact. With respect to operational expenditure, the level of cost-efficiency has improved compared to the year prior. As expected, investments have had a positive impact, which enabled saving on administrative costs and maintain labour efficiency at the level of the year prior in the conditions of pressure for higher wages. The expenditure and investments of 2017 include the costs of opening three new stores; in the reference period, the costs included the costs of opening one store and renovating one store. The profit of the reference period was also influenced by a one-time income as a result of a court judgment regarding a sales tax from the sale of excise goods. This year, it is planned to open at least two more stores in Tallinn and expand the SelveEkspress service in the stores to be opened as well as two existing stores. We are developing the e-Selver service in order to increase our ability to service the demand quicker and more conveniently.
Department stores
The sales revenue of the business segment of department stores in the first 6 months of 2017 was 48.1 million euros, increasing by 4.5% in a year-on-year basis. Thereof, the sales revenue in the 2nd quarter amounted to 25.0 million euros, which is 5.0% higher compared to the revenues of the 2nd quarter of 2016. The profit before taxes of the department stores was 1.3 million euros in the first six months of 2017, which was 19.9% higher than in the year prior. The profit before taxes in the 2nd quarter was 1.3 million euros, which was 1.4% better compared to the result of 2016. The sales revenue of the department stores in the first six months was influenced by successful sales campaigns, with the discount campaigns of the season getting off to a good start in January as well as in June. In the 2nd quarter, the profits were impacted by the unusually cold spring, which hindered the sales of summer season goods. The sales of the successfully launched online store reached the base of the year prior from March, which also has a positive impact on the result of the first six months. The sales revenue of OÜ TKM Beauty Eesti, operating the cosmetics stores of I.L.U., in the 2nd quarter of 2017 was 1.1 million euros, indicating a drop of 3.0% compared to the same period in 2016. In the 2nd quarter of 2017, the loss was 0.1 million euros, which is 0.05 million euros lower than the reference period’s loss in 2016. The sales revenue of the first six months of 2017 amounted to 2.1 million euros, decreasing by 6.7% compared to the same period in the year prior. The loss of the first six months of 2017 amounted to 0.2 million euros, which is 0.04 million euros lower in a year-on-year basis. The sales revenue of the 2nd quarter was negatively impacted by the weak results of Tartu stores, incl. the reconstruction works at the store in Lõunakeskus and the break in the business activities resulting from relocation in the shopping centre.
Car Trade
The sales revenue of the car trade segment in the first six months of 2017 was 50.9 million euros. The sales revenue exceeded the revenue of the same period in the year prior by 22.9%, thereat, the sales revenue of KIAs increased by 33.9%. The sales revenue of 26.6 million euros of the 2nd quarter was 15.0% higher in a year-on-year comparison, thereat, the sales revenue of KIAs grew by 18.2%. A total of 2,433 new vehicles were sold in the first six months, of which 1,318 vehicles in the 2nd quarter. The net profit of the segment in the first six months of 2017 amounted to 1.8 million euros, which is 84.9% higher in a year-on-year comparison. The profit before taxes of the segment in the first six months of 2017 was 2.3 million euros, exceeding the profit before taxes of the first six months of 2016 by 60.7%. The profit before taxes of the 2nd quarter of 2017 amounted to 1.0 million euros, which is 7.2% higher in a year-on-year comparison. All car dealers included in the Group fared well in the first six months. Several large-scale public procurement procedures were won in Estonia, Latvia, and Lithuania. The sales of Opels remain at the good level achieved in 2016.
Footwear trade
The sales revenue of the footwear trade segment was 5.4 million euros in the first six months of 2017. The sales revenue dropped by 7.1% compared to the first six months of the year prior. Four stores of the footwear trade segment have been closed compared to the year prior, which has in turn decreased the comparable sales volumes. In the 2nd quarter, the sales revenue of the segment was 2.8 million euros, having decreased by 17.9% year-on-year. The modest result was due to the later arrival of the summer season. The profit of the first six months amounted to 0.9 million euros, having increased by 0.4 million euros compared to the year prior. In the 2nd quarter, the business outcome of the footwear trade segment remained at the level of the year prior. Improvement of the sales margin of the segment may be deemed a positive factor. The segment continues to work in the name of shaping a competitive selection of goods and optimum designing of the sales premises in order to find a sustainable business model in today’s competition situation.
Real estate
The external sales revenue of the real estate segment was 2.5 million euros in the first six months of 2017. The sales revenue increased by 1.1% compared to the year prior. The external sales revenue in the 2nd quarter was 1.2 million euros, which is 2.7% more in a year-on-year comparison. The profit before taxes of the real estate segment in the first six months was 5.8 million euros, which is 4.0% more in a year-on-year comparison. The profit before taxes in the 2nd quarter was 2.9 million euros, which is 3.7% more in a year-on-year comparison. The increase in the sales revenue and profit were supported by new lease contracts concluded. Viimsi Center and Tartu Kaubamaja Center, managed by Group’s real estate business segment, stayed covered by tenants and popular among the visitors, in spite of the significant increase in competition. Preparation of development projects will continue in 2017. In connection with the plans to refurbish the commercial building of Tallinn department store, an architectural competition was announced to find the best solution for new buildings of the Kaubamaja Quarter in central Tallinn. The surface area of the flagship department store in Tallinn will increase by up to 2.5 times compared to the current surface area.
Raul Puusepp
Chairman of the Board
