Market announcement

Title

UNAUDITED CONSOLIDATED INTERIM ACCOUNTS FOR 2009

Message

In 2009, the consolidated non-audited sales revenue of Tallinna Kaubamaja Group 
amounted to 6.4 billion kroons (408.3 million euros). The sales revenue of the  
group in the same period of 2008 was 6.5 billion kroons (417.4 million euros),  
which amounts to decrease of 2% compared to the previous year. The sales revenue
of the fourth quarter was 1.6 billion kroons (104.4 million euros), which is 10%
lower than the sales revenue of the same quarter in 2008. The year ended with a 
loss of 196.7 million kroons (12.6 million euros) due to the discounts of the   
fixed assets realised at the end of the year. The loss in the fourth quarter was
173.7 million kroons (11.1 million euros) and it includes the revaluation of the
land and buildings in Latvia in the amount of 175.0 million kroons (11.2 million
euros) and the discount of construction in work in Estonia in the amount of 36.0
million kroons (2.3 million euros). The net profit of 2008 was 83.1 million     
kroons (5.3 million euros), year ago in the fourth quarter the loss was 68.6    
million kroons (4.4 million euros), which included a discount of fixed assets of
86.8 million kroons (5.5 million euros).                                        
In 2009, Tallinna Kaubamaja Group, like the whole retail sector, has faced the  
challenge of operating with a substantially reduced turnover and under an       
enormous price pressure. At the same time, the expenditure of the Group has     
increased due to the expansion of the operable premises and growth in the number
of employees. Compared to the same period of the previous year, the depreciation
of the fixed assets, caused by the large investments of 2008 (52.6 million      
kroons, 3.4 million euros added), and the financial expenses (7.6 million       
kroons, 0.5 million euros added) have grown. In comparison with the last year's 
third and fourth quarter, the financial expenses have decreased due to the      
decline of EURIBOR. The Group has negotiated with partners and suppliers for    
more favourable service prices in order to reduce operating expenses. In larger 
business segments, the Group managed to agree upon a wage reduction of 10% for  
the office employees since the beginning of the second quarter. As a result of  
the dropped sales volumes, the size of the sales personnel has been regulated by
way of natural rotation and part-time work. Footwear stores have been closed in 
unprofitable and unpromising locations. Tallinna Kaubamaja decided in October to
halt the operation of Selvers in Latvia due to the exceedingly poor economic    
situation in Latvia. Other business segments of Tallinna Kaubamaja in Latvia are
smaller in extent and have accomplished stability during their longer           
activities.                                                                     
In 2009, the sales revenue of the business segment of department stores was     
1,196.5 million kroons (76.5 million euros), i.e. 22% less than in the same     
period of the previous year. The sales revenue of the fourth quarter was 347.7.0
million kroons (22.0 million euros), which is 21% less than in the same period  
of the previous year. According to the data of the Estonian Statistical Office, 
the turnover of the retail companies comparable with Kaubamaja department stores
fell by 30.6% in the fourth quarter and by a total of 28.3% in the twelve       
months. For department stores, the twelve months of 2009 finally yielded a      
profit of 28.0 million kroons (1.8 million euros), falling short of the result  
of the previous year by 95.9 million kroons (6.1 million euros). In addition to 
the continuing economic recess, the profit of 2009 was adversely affected also  
by the substantial renovations performed in the first and third quarter in      
beauty, footwear, children's and women's department. In the second quarter, the 
negative effect stemmed from the discounts that were more vigorous and extensive
in 2009 than in the same period of the previous year. At the same time, the     
purchase rally and Christmas campaigns in the fourth quarter were successful and
had a positive effect on the profit. From the second quarter on, the cost saving
measures, adopted by the management of the company in the first quarter, have   
contributed to the profit. In the twelve months of 2009, the department stores  
managed to attain a saving of 16.5% on all personnel related expenses relative  
to the same period of the previous year. Agreements with partners have enabled  
to reduce the administrative and logistics expenses as well as other operating  
expenses.                                                                       
The first store of the I.L.U. beauty stores chain was opened in the new Pärnu   
Centre in the second half of March. In 2009, the sales revenue of OÜ TKM Beauty 
Eesti that operates the I.L.U. stores totalled to 12.2 million kroons (0.8      
million euros). The sales revenue of the fourth quarter was 7.6 million kroons  
(0.5 euros). In the light of the overall decline of 16.0% in the retail trade in
the 2009, the sector of beauty products, toiletries and pharmaceutical products 
experienced a smaller drop in the sales, decreasing by 4.0%. Due to the         
launching activities of the chain with a novel concept, the company incurred a  
loss of 6.6 million kroons (0.4 million euros) in 2009.                         
The consolidated sales revenue of the business segment of supermarkets amounted 
to 4.8 billion kroons (304.0 million euros) in 2009, which is 11% more than in  
the same period of the previous year. In 2009, the consolidated pre-tax loss of 
Selver was 30.6 million kroons (2.0 million euros). The consolidated net loss in
2009 was 34.9 million kroons (2.2 million euros), showing a decrease of 98.7    
million kroons (6.3 million euros) compared to the same period of 2008, when the
consolidated net profit was 63.7 million kroons (4.1 million euros). In 2009,   
the sales revenue in Estonia was 4.6 billion kroons (294.7 million euros),      
increasing by 8% compared to 2008. In comparable stores, the turnover per square
metre of the sales area was 6.2 thousand kroons a month, showing a decrease of  
10%. The pre-tax profit earned in Estonia in 2009 was 115.7 million kroons (7.4 
million euros) and the net profit 111.3 million kroons (7.1 million euros),     
growing by 12% and 36%, respectively, compared to the same period of the        
previous year. The economic results of 2009 in Estonia were influenced by the   
overall economic recession, changes of competition situation in the retail      
market, overall decrease of sales prices and changes in the structure of the    
shopping basket of customers. The costs related to the launch of new stores and 
lower sales efficiency in the launching period also had their effect. The       
reduction of operating expenses had a positive effect on profit. New contracts  
have been concluded to reduce fixed costs, the basic salaries of employees have 
been cut and the staff has been optimised according to the economic situation.  
The sales revenue in Latvia in 2009 was 0.2 billion kroons (9.6 million euros). 
Pre-tax and net loss amounted to 146.3 million kroons (9.3 million euros). Due  
to the drastic deterioration of the economic environment in Latvia, in autumn   
the decision was made to freeze the business activities of the subsidiary SIA   
Selver Latvia and make the employees redundant. As of the end of 2009, 5 out of 
6 Selver stores in Latvia were closed. In relation to the freeze of the business
activities in Latvia, extraordinary expenditures were made in the amount of 51.7
million kroons (3.3 million euros). Single extraordinary expenses were related  
mainly to premature termination of contracts, provision of redundancy payments  
of employees and the sale of the assets of the stores.                          
In 2009, the sales revenue of the business segment of real estate was 42.6      
million kroons (2.7 million euros) and the sales revenue increased by 4%        
compared to 2008. In the fourth quarter, the sales revenue was 10.3 million     
kroons (0.7 million euros), decreasing by 4% compared to the same period in 2008
when the sales revenue amounted to 10.8 million kroons (0.7 million euros). The 
annual loss amounted to 115.6 million kroons (7.4 million euros), of which a    
loss of 169.7 million kroons (10.8 million euros) realised in the fourth        
quarter. The loss was incurred from the revaluation of the land and buildings in
Latvia in the amount of 175.0 million kroons (11.2 million euros) and 36.0      
million kroons (2.3 million euros) in Estonia from construction in work.        
The sales revenue of the car trade segment for the 2009 was 207.9 million kroons
(13.3 million euros), which is 57% less than in the previous year. 853 new      
vehicles were sold in 2009. At the same time in 2008, the sales revenue from the
sales of 2,056 cars was 494.9 million kroons (31.6 million euros). The sales    
revenue for the fourth quarter of 2009 was 29.1 million kroons (1.9 million     
euros) and altogether 79 new cars were sold. The sales revenue for the same     
period in 2008 was 57.8 million kroons (3.7 million euros). A continuing steep  
fall in the car trading market was seen in the fourth quarter. Due to the       
overall economic recession and a drastic decrease in consumption (especially in 
the car trade), the loss of the 12 month in the car trade amounted to 23.0      
million kroons (1.5 million euros). The keywords of 2009 were aggressive        
reductions of inventories and cut of expenses. The inventories decreased by 85% 
during the year. Bringing the inventory into accordance with the market         
situation had also a negative effect on the care sales margins. In 2010, the    
goal is to earn a profit in the care trade. This belief is based on cut         
expenses, optimal inventories and the launch of various strategic new models in 
2009.                                                                           
In 2009, the sales revenue of the footwear trade was 179.9 million kroons (11.5 
million euros), the fourth quarter amounted to a turnover of 43.7 million kroons
(2.8 million euros), decreasing by 29.5% in comparison with the respective      
period of 2008. The loss in the fourth quarter amounted to 11.5 million kroons  
(0.7 million euros), of which the loss of Latvian businesses amounts to 1.7     
million kroons (0.1 million euros) and the discount of the claims of SIA        
Suurtüki 5.1 million kroons (0.3 million euros). The total loss of the footwear 
trade of the fourth quarter of 2008 was 16.6 million kroons (1.1 million euros).
The loss of 2009 was a total of 51.2 million kroons (3.3 million euros),        
including the 11.5 million kroons (0.7 million euro) loss of Latvian businesses.
The main reasons for the loss are the decreased revenues from sale, the costs   
relating to the closing of unprofitable stores, and vigorous discounts to sell  
old inventories, also the discounts of claims of the Latvian businesses.        

CONSOLIDATED STATEMENT OF FINANCIAL POSITION                                    

thousand kroons/euros                                                           
--------------------------------------------------------------------------------
|                           |  31 December 2009   |      31 December 2008      |
--------------------------------------------------------------------------------
|                           |   EEK    |   EUR*   |     EEK     |     EUR*     |
--------------------------------------------------------------------------------
| ASSETS                    |          |          |             |              |
--------------------------------------------------------------------------------
| Current assets            |          |          |             |              |
--------------------------------------------------------------------------------
| Cash at bank and in hand  |  158,702 |   10,143 |     101,353 |        6,478 |
--------------------------------------------------------------------------------
| Trade receivables         |   75,655 |    4,835 |      96,538 |        6,170 |
--------------------------------------------------------------------------------
| Other receivables         |  147,021 |    9,396 |      73,019 |        4,668 |
--------------------------------------------------------------------------------
| Prepaid and refundable    |    8,820 |      564 |      41,475 |        2,651 |
| taxes                     |          |          |             |              |
--------------------------------------------------------------------------------
| Prepaid expenses          |   12,404 |      793 |      12,161 |          777 |
--------------------------------------------------------------------------------
| Inventories               |  616,554 |   39,405 |     781,304 |       49,933 |
--------------------------------------------------------------------------------
| Total current assets      | 1,019,15 |   65,136 |   1,105,850 |       70,677 |
|                           |        6 |          |             |              |
--------------------------------------------------------------------------------
| Fixed assets              |          |          |             |              |
--------------------------------------------------------------------------------
| Prepaid expenses          |   25,499 |    1,630 |      31,074 |        1,985 |
--------------------------------------------------------------------------------
| Shares in affiliated      |   20,323 |    1,299 |      17,505 |        1,119 |
| companies                 |          |          |             |              |
--------------------------------------------------------------------------------
| Other long-term           |    3,613 |      231 |       3,801 |          243 |
| receivables               |          |          |             |              |
--------------------------------------------------------------------------------
| Investment property       |   55,800 |    3,566 |           0 |            0 |
--------------------------------------------------------------------------------
| Tangible fixed assets     | 2,689,63 |  171,899 |   2,998,073 |      191,612 |
|                           |        9 |          |             |              |
--------------------------------------------------------------------------------
| Intangible fixed assets   |   62,018 |    3,964 |      68,431 |        4,374 |
--------------------------------------------------------------------------------
| Goodwill                  |  104,993 |    6,710 |     109,499 |        6,998 |
--------------------------------------------------------------------------------
| Total fixed assets        | 2,961,88 |  189,299 |   3,228,383 |      206,331 |
|                           |        5 |          |             |              |
--------------------------------------------------------------------------------
| TOTAL ASSETS              | 3,981,04 |  254,435 |   4,334,233 |      277,008 |
|                           |        1 |          |             |              |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| LIABILITIES AND OWNERS'   |    ,     |    ,     |      ,      |      ,       |
| EQUITY                    |          |          |             |              |
--------------------------------------------------------------------------------
| Current liabilities       |          |          |             |              |
--------------------------------------------------------------------------------
| Interest bearing loans    |  249,969 |   15,976 |     318,098 |       20,330 |
| and borrowings            |          |          |             |              |
--------------------------------------------------------------------------------
| Prepayments received for  |    4,407 |    2,983 |     190 |        5,237 |   |
| goods and services        |          |          |         |              |   |
--------------------------------------------------------------------------------
| Accounts payable          |  713,855 |   45,623 |     800,467 |       51,161 |
--------------------------------------------------------------------------------
| Taxes payable             |   63,490 |    4,058 |      76,460 |        4,887 |
--------------------------------------------------------------------------------
| Other short-term          |   62,720 |    4,009 |      78,213 |        4,997 |
| liabilities               |          |          |             |              |
--------------------------------------------------------------------------------
| Provisions                |      445 |       28 |       3,534 |          226 |
--------------------------------------------------------------------------------
| Total current liabilities | 1,093,46 |   69,884 |   1,282,009 |       81,934 |
|                           |        2 |          |             |              |
--------------------------------------------------------------------------------
| Long-term liabilities     |          |          |             |              |
--------------------------------------------------------------------------------
| Interest bearing loans    | 1,271,65 |   81,273 |   1,215,409 |       77,679 |
| and borrowings            |        1 |          |             |              |
--------------------------------------------------------------------------------
| Provisions                |    1,736 |      111 |       1,462 |           93 |
--------------------------------------------------------------------------------
| Total long-term           | 1,273,38 |   81,384 |   1,216,871 |       77,772 |
| liabilities               |        7 |          |             |              |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES         | 2,366,84 |  151,269 |   2,498,880 |      159,706 |
|                           |        9 |          |             |              |
--------------------------------------------------------------------------------
| Owners' equity            |          |          |             |              |
--------------------------------------------------------------------------------
| Share capital             |  407,292 |   26,031 |     407,292 |       26,031 |
--------------------------------------------------------------------------------
| Mandatory reserve         |   40,729 |    2,603 |      40,729 |        2,603 |
--------------------------------------------------------------------------------
| Revaluation reserve       |  664,332 |   42,459 |     682,028 |       43,590 |
--------------------------------------------------------------------------------
| Retained earnings         |  510,374 |   32,619 |     705,719 |       45,105 |
--------------------------------------------------------------------------------
| Foreign currency          |   -8,535 |     -545 |        -415 |          -27 |
| translation               |          |          |             |              |
--------------------------------------------------------------------------------
| TOTAL OWNER`S EQUITY      | 1,614,19 |  103,167 |   1,835,353 |      117,302 |
|                           |        2 |          |             |              |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES AND     | 3,981,04 |  254,435 |   4,334,233 |      277,008 |
| OWNER`S EQUITY            |        1 |          |             |              |
--------------------------------------------------------------------------------


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                                  
                                                                                
thousand kroons/euros                                                           
--------------------------------------------------------------------------------
|                                 |        2009         |         2008         |
--------------------------------------------------------------------------------
|                                 |   EEK    |   EUR*   |   EEK    |   EUR*    |
--------------------------------------------------------------------------------
| Revenue                         | 6,388,12 |  408,276 | 6,531,42 |   417,434 |
|                                 |        7 |          |        0 |           |
--------------------------------------------------------------------------------
| Other income                    |  217,898 |   13,926 |  166,164 |    10,619 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Materials and consumables used  | -4,966,4 | -317,412 | -4,937,9 |  -315,592 |
|                                 |       17 |          |       23 |           |
--------------------------------------------------------------------------------
| Other operating expenses        | -727,064 |  -46,468 | -706,908 |   -45,180 |
--------------------------------------------------------------------------------
| Personnel expenses              | -614,084 |  -39,247 | -669,319 |   -42,777 |
--------------------------------------------------------------------------------
| Depreciation and amortisation   | -193,835 |  -12,388 | -141,278 |    -9,028 |
--------------------------------------------------------------------------------
| Impairment loss of fixed assets | -224,681 |  -14,360 |  -91,488 |    -5,848 |
--------------------------------------------------------------------------------
| Other expenses                  |  -34,339 |   -2,195 |  -15,429 |      -983 |
--------------------------------------------------------------------------------
| Operating profit                | -154,395 |   -9,868 |  135,239 |     8,645 |
--------------------------------------------------------------------------------
| Financial expenses              |    5,565 |      356 |    8,825 |       564 |
--------------------------------------------------------------------------------
| Financial income                |  -46,406 |   -2,966 |  -42,586 |    -2,722 |
--------------------------------------------------------------------------------
| Financial income from shares of |    2,818 |      180 |    3,304 |       211 |
| associated companies            |          |          |          |           |
--------------------------------------------------------------------------------
| Total net financial items       |  -38,023 |   -2,430 |  -30,457 |    -1,947 |
--------------------------------------------------------------------------------
| Profit before income tax        | -192,418 |  -12,298 |  104,782 |     6,698 |
--------------------------------------------------------------------------------
| Income tax                      |   -4,331 |     -277 |  -21,653 |    -1,385 |
--------------------------------------------------------------------------------
| Net profit/loss for the period  | -196,749 |  -12,575 |   83,129 |     5,313 |
--------------------------------------------------------------------------------
| Other comprehensive income      |          |          |          |           |
--------------------------------------------------------------------------------
| Revaluation of land and         |        0 |        0 |  -59,800 |    -3,822 |
| buildings (note 10)             |          |          |          |           |
--------------------------------------------------------------------------------
| Exchange differences on         |   -8,120 |     -519 |     -425 |       -27 |
| translating foreign operations  |          |          |          |           |
--------------------------------------------------------------------------------
| Other comprehensive income for  |   -8,120 |     -519 |  -60,225 |    -3,849 |
| the reporting period            |          |          |          |           |
--------------------------------------------------------------------------------
| TOTAL COMPREHENSIVE INCOME      | -204,869 |  -13,094 |   22,904 |     1,464 |
--------------------------------------------------------------------------------


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                                  
                                                                                
thousand kroons/euros                                                           
--------------------------------------------------------------------------------
|                                 |  4th quarter 2009   |   4th quarter 2008   |
--------------------------------------------------------------------------------
|                                 |   EEK    |   EUR*   |   EEK    |   EUR*    |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Revenue                         | 1,633,13 |  104,376 | 1,815,17 |   116,011 |
|                                 |        5 |          |        4 |           |
--------------------------------------------------------------------------------
| Other income                    |   77,943 |    4,981 |   48,661 |     3,110 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Materials and consumables used  | -1,246,4 |  -79,665 | -1,378,8 |   -88,123 |
|                                 |       87 |          |       24 |           |
--------------------------------------------------------------------------------
| Other operating expenses        | -186,583 |  -11,925 | -205,030 |   -13,104 |
--------------------------------------------------------------------------------
| Personnel expenses              | -138,997 |   -8,884 | -195,087 |   -12,468 |
--------------------------------------------------------------------------------
| Depreciation and amortisation   |  -50,631 |   -3,236 |  -41,643 |    -2,661 |
--------------------------------------------------------------------------------
| Impairment loss of fixed assets | -224,681 |  -14,360 |  -91,488 |    -5,848 |
--------------------------------------------------------------------------------
| Other expenses                  |  -24,602 |   -1,572 |   -6,871 |      -439 |
--------------------------------------------------------------------------------
| Operating profit                | -160,903 |  -10,285 |  -55,108 |    -3,522 |
--------------------------------------------------------------------------------
| Financial expenses              |    1,427 |       91 |    4,769 |       305 |
--------------------------------------------------------------------------------
| Financial income                |  -14,982 |     -958 |  -19,274 |    -1,232 |
--------------------------------------------------------------------------------
| Financial income from shares of |      746 |       48 |    1,036 |        66 |
| associated companies            |          |          |          |           |
--------------------------------------------------------------------------------
| Total net financial items       |  -12,809 |     -819 |  -13,469 |      -861 |
--------------------------------------------------------------------------------
| Profit before income tax        | -173,712 |  -11,104 |  -68,577 |    -4,383 |
--------------------------------------------------------------------------------
| Income tax                      |        0 |        0 |        0 |         0 |
--------------------------------------------------------------------------------
| Net profit/loss for the period  | -173,712 |  -11,104 |  -68,577 |    -4,383 |
--------------------------------------------------------------------------------
| Other comprehensive income      |          |          |          |           |
--------------------------------------------------------------------------------
| Revaluation of land and         |        0 |        0 |  -59,800 |    -3,822 |
| buildings (note 10)             |          |          |          |           |
--------------------------------------------------------------------------------
| Exchange differences on         |   -8,208 |     -525 |     -168 |       -11 |
| translating foreign operations  |          |          |          |           |
--------------------------------------------------------------------------------
| Other comprehensive income for  |   -8,208 |     -525 |  -59,968 |    -3,833 |
| the reporting period            |          |          |          |           |
--------------------------------------------------------------------------------
| TOTAL COMPREHENSIVE INCOME      | -181,920 |  -11,629 | -128,545 |    -8,216 |
--------------------------------------------------------------------------------


Raul Puusepp                                                                    
Chairman of the Board                                                           
Phone +372 731 5000