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TALLINNA KAUBAMAJA GROUP UNAUDITED CONSOLIDATED INTERIM ACCOUNTS FOR 4TH QUARTER AND 12 MONTHS OF 2017

TALLINN, 25.01.2018, www.nasdaqbaltic.com - The sales revenue earned in twelve months 2017 was 651.3 million euros, having grown by 8.8% compared to the result of 2016. 

The unaudited consolidated sales revenue of Tallinna Kaubamaja Group was 175.0 million euros in the fourth quarter of 2017, exceeding the year-on-year result by 7.4%. The sales revenue earned in twelve months was 651.3 million euros, having grown by 8.8% compared to the result of 2016, when the sales revenue amounted to 598.4 million euros. The unaudited consolidated net profit of the Group in the fourth quarter of 2017 was 11.9 million euros, which is 50.1% higher compared to the same period of the previous year. The Group’s net profit was 29.8 million euros in 2017, which is 16.0% better than the profit for the previous year. Profit before tax was 36.5 million euros in twelve months, showing a growth of 17.8% compared to the previous year. Net profit was influenced by a dividend payment, on which 6.7 million euros in income tax was calculated in the first quarter of 2017. A year before, income tax was calculated in the sum of 5.3 million euros.

The result of the Group in the fourth quarter as well as for the entire year of 2017 was very positive. The growth in the sales revenue of the Group’s main areas of activity increased faster than that of the respective market segment. The car segment showed an extremely strong sales revenue growth. The sales results of the Group’s e-store doubled in a year and exceeded the respective e-commerce sales statistics in Estonia. As there has not been a proper winter in recent years, it has taught better management of inventories of seasonal goods, which has resulted in an improved sales margin in the fourth quarter. More efficient electricity solutions implemented in the financial year have helped save other operating expenses. The Group’s labour costs have grown by 10.5% in a year with the average salary growth being 7.9%, which corresponds to the recent average salary growth in retail and wholesale sectors published by Statistics Estonia. The addition of two new Selver stores has caused an increase in the number of employees in the last quarter of the year and the total salary expenses. The profit of the fourth quarter was influenced by the revaluation of investment properties. The value of investment properties grew in 2017; however, the growth was slightly lower than in 2016, which had an unfavourable effect on other revenue, affecting it by 0.5 million euros.

Selver supermarkets

In 2017, the consolidated sales revenue in the business segment of supermarkets was 433.1 million euros, having grown by 8.3% on a year-on-year basis. The consolidated sales revenue of the fourth quarter was 116.1 million euros, having grown by 6.6% compared to the same period of the previous year. 37.7 million purchases were made at Selver stores in 2017, exceeding the result of the previous year by 4.0%. The consolidated profit before tax of the supermarket segment was 16.8 million euros in 2017, showing a year-on-year growth of 2.1 million euros. The net profit for the same period was 13.2 million euros, having grown by 1.2 million euros year-on-year. The profit before tax earned in Estonia was 19.8 million euros and net profit was 16.2 million euros. The difference between the net profit and profit before tax arises from the income tax paid on dividends: in 2017, the income tax on dividends was higher by 1.0 million euros compared to the previous year. The profit before tax and net profit was 5.6 million euros in the fourth quarter, of which the profit earned in Estonia accounted for 6.2 million euros. The profit earned in the fourth quarter exceeded that of the previous year by 1.4 million euros. The loss incurred in Latvia in twelve months was 2.1 million euros, of which the share of the fourth quarter was 0.5 million euros. Loss remained at the same level as the previous year.

The growth of Selvers’ sales revenue continued in the fourth quarter at a faster rate than the average of the market segment. The growth of the sales revenue was primarily supported by new stores opened in 2016 and 2017. Seven new stores were opened from October 2016 to the end of 2017, by which the reference base of the fourth quarter of 2017 is lower. The reference base of 2017 is higher by a store closed in Narva in the first quarter of 2016 and one additional day because of the leap year. E-commerce has shown good results with the sales revenue doubled in twelve months. Although competition is tight, new stores have helped increase the number of purchases. The growth of the average shopping basket is influenced by successful assortment and campaign activities and accelerated inflation in the second half of the year.

The generation of profit earned in Estonia has above all been influenced by the increased sales revenue. As for operating expenses, cost-effectiveness has improved compared to the previous year. As expected, investments have had a positive impact, enabling saving on operating expenses. Although salary pressure is strong, labour efficiency has remained at the level of previous year. Salary expenses increased because the over-the-counter service contract and cooperation with the partner of the e-store courier service were terminated. This enables better control of the processes, quality and expenses. The expenses incurred and investments made in 2017 include the opening expenses of five new stores and a mobile shop in Hiiu County. The reference period includes the opening expenses of three stores and renovation expenses of two stores. The profit of the reference period is influenced by a one-time positive income of 0.4 million euros as a result of a judicial decision of the sales tax on products subject to excise duty. The net profit of the financial year is influenced by a one-time judicial decision that required Selver to pay a penalty and influenced the profit along with taxes in the amount of 0.4 million euros.

Department stores

The sales revenue in the business segment of department stores was 102.4 million euros in 2017, having grown by 4.4% year-on-year. The sales revenue earned in the fourth quarter was 31.0 million euros, which was 3.6% higher than the revenue of the fourth quarter in 2016. The profit before tax of the department stores segment was 4.3 million euros in 2017, which was 0.2% lower compared to the pervious year’s result. The profit before tax was 2.3 million euros in the fourth quarter, which was lower by 11.5% than in the same period of 2016. The sales revenue of the department stores segment of twelve months was influenced by successful sales campaigns organised throughout the year. Although the beginning of the autumn season in September was very positive, winter weather expected in the last quarter did not arrive. Regardless, good inventory management helped increase the margin in the last quarter. The sales of the e-store launched in March 2016 have doubled in reporting year and influenced the 12-month result positively. The utility cost savings compared to the previous year have positively influenced the profit of department stores in 2017, which is primarily thanks to the investments made into LED lighting in Tallinn as well as Tartu stores over recent years. However, depreciation on investments made in previous years and labour costs increased faster and slowed down profit growth.

The sales revenue in the fourth quarter of 2017 of OÜ TKM Beauty Eesti, which operates the I.L.U. cosmetics stores, was 1.5 million euros, a 3.0% decrease compared to the same period of 2016. In the fourth quarter, as in the previous period, the company broke even. The sales revenue was 4.7 million euros in 2017, having deceased by 5.3% compared to the 2016. Loss earned in 2017 was 0.3 million euros, which is 0.05 million euros less than the loss of the 2016. In April 2017, the store in Tartu Lõunakeskus moved to a new section of the shopping centre. This brought about optimisation of the store’s assortment, renovation of its interior design and termination of the provision of beauty services in the sales area.

Car trade

The sales revenue in the car trade segment was 99.7 million euros in 2017. The sales revenue exceeded the year-on-year revenue by 20.7%; whereas, the annual sales revenue earned from the sale of KIAs increased by 24.1%. The sales revenue of 23.6 million euros earned in the fourth quarter exceeded the year-on-year result by 22.2%. The sales revenue of KIAs grew by 18.8% and the strongest sales results were achieved in the sale of OPEL and Peugeot vehicles. In 2017, the Group’s car segment sold altogether 4,706 new vehicles, from which 1,043 vehicles were sold in the fourth quarter. The net profit of the segment was 3.3 million euros in 2017, which is 2.6% higher than the profit earned for the same period the year before. The profit before tax of the segment was 3.9 million euros in 2017, exceeding the profit earned in the 2016 by 6.8%. Operating profit of the fourth quarter of 2017 was 0.7 million euros, surpassing the operating profit of the fourth quarter of 2016 by 6.1%. Good economic results in the car trade segment in Latvian and Lithuanian sales centres caused a reduction of 36.3% in the net profit earned in the fourth quarter due to a tax system that is different from the one in Estonia compared to the earlier period because of income tax calculated there.

Footwear trade

The sales revenue in the business segment of footwear was 11.1 million euros in 2017, having decreased by 13.7% on a year-on-year basis. The sales revenue was 3.1 million euros in the fourth quarter, which is lower by 13.4% compared to the same period of the previous year. The loss of the segment incurred in the fourth quarter increased by 1.9 million euros year-on-year, mainly due to the final reduction of goodwill. EBITDA of the fourth quarter of the segment was positive and exceeded the year-on-year result by 0.2 million euros. In 2017, attention was paid to optimising the sales space and lowering the cost base of a square meter and increasing the revenue base. At the end of 2017, the sales space used was 18.2% smaller compared to the situation the year before. During the year, the focus was on finding more appropriate procurement channels to improve the margin. The first results were realised in the fourth quarter.

Real estate

The external sales revenue of the real estate segment was 5.0 million euros in 2017. The sales revenue increased by 1.4% on a year-on-year basis. The external sales revenue was 1.3 million euros in the fourth quarter, showing a growth of 2.6% compared to the same period of the previous year. The profit before tax of the real estate segment was 14.5 million euros in 2017, surpassing the year-on-year result by 58.9%. The profit before tax was 5.8 million euros in the fourth quarter, being almost 10 times higher than the profit of the same period in the previous year. The sales revenue increased in all real estate companies during the financial year. The sales revenue growth was driven by Viimsi shopping centre that customers have received well. Tartu Kaubamaja Centre has been successful in keeping up with the sales revenue growth although competition has increased in the centre of Tartu. The profit of the real estate segment was influenced by the revaluation of assets in the segment which resulted in a growth of the result of the quarter by 3.2 million euros (revaluation made in 2016 resulted in profit lower by 2.2 million euros). The winners of the architecture competition for constructing new buildings on the registered immovable located at Gonsiori 2 / Rävala 6 were chosen from among 15 competition projects on 15 November 2017. The winner of the competition was a project called “CITY BREAK”, which was submitted by the architecture bureau DAGOpen OÜ.