Market announcement

Title

Unaudited consolidated interim accounts for the first quarter of 2013

Message

Segments (EURm)    Q1/13  Q1/12    yoy  
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Supermarkets        79,6   77,3   2,9%  
Department stores   20,0   19,0   5,2%  
Cars                 9,0    6,1   47,5% 
Footwear             2,7    2,9   -7,5% 
Real Estate          0,8    0,7   4,3%  
Total sales        112,0  106,0   5,6%  
----------------------------------------
                                        
Supermarkets        -1,7    1,9  -191,8%
Department stores   -1,5   -0,3   418,1%
Cars                 0,3    0,4   -28,8%
Footwear            -0,6   -0,5   19,8% 
Real Estate          1,2    1,8   -31,0%
Total net profit    -2,3    3,2  -171,0%
----------------------------------------

The consolidated unaudited sales revenue of the Tallinna Kaubamaja Group in the
first quarter of 2013 was 112.0 million euros. The return on sales grew by 5.6%
compared to the first quarter of 2012, when the sales revenue was 106.0 million
euros. The sales revenue grew in most segments of the group, whereas the
greatest growth was seen in the retail sales segments of motor vehicles and
department stores. The net loss of the accounting period was 2.3 million euros
in connection with the income tax calculated on dividends in the sum of 3.8
million euros. The profits earned in the first quarter of 2012 amounted to 3.2
million euros. The profit before taxes was 1.5 million euros, which made up
half of the profit earned in the same period in the previous year. 

The first quarter of 2013 was characterised by the general downtrend of retail
trade in connection with consumer expenses being directed to cover the rise in
electricity prices and the heating costs of the drawn-out winter. The
extraordinarily long winter has also hindered the sale of the fashion spring
collections of the group. The gross margin of the group underwent a fall in the
first quarter compared to the year before due to premium points being awarded
to customers through the new loyalty programme, as well as due to the lower
prices of products in the daily shopping basket, which has in turn had a
favourable impact on turnover. Heating and electricity costs of the Group have
gone up (17.1%) due to the long winter and rise in electricity prices. Profit
was significantly influenced by the rise in labour costs (13.4%). Additional
sales areas brought about an increase in the number of employees (6.2%), but
the average labour cost per person went up as well. This was mostly caused by
adjustments made in the wage level of service personnel. Competent and
motivated employees are the basis for raising the efficiency in the future.
Depreciation increased as a result of substantial investments made in 2012. 

Supermarkets

The consolidated revenue of the first quarter of 2013 in the business segment
of supermarkets and the sale revenue in Estonia were 79.6 million euros, which
is 2.9% larger compared to the same period the year before. The average sale
revenue of goods per a square metre of the sales area was 0.34 thousand euros
per month in the first quarter of 2013, showing a 5.1% decrease compared to the
results of 2012. The sales revenue of goods of comparable stores per a square
metre of selling space in the first quarter was an average of 0.36 thousand
euros per month, thus showing a decrease of 2.3% compared to the results of
2012.  7.9 million purchases were made in Selvers in the first quarter of 2013,
exceeding the number of sales made in the first quarter of 2012 by 1.5%. In the
first quarter of 2013, the consolidated pre-tax profit of supermarkets was 0.03
million euros, whereas the profit made in Estonia made up 0.62 million euros of
the consolidated profit. Both the consolidated profit and the profit made in
Estonia decreased by 1.8 million euros compared to the base year. The net loss
of the supermarket segment amounted to 1.7 million euros, which is 3.6 million
euros less than the profit of the year before. The net loss earned in Estonia
was 1.1 million euros in the first quarter of 2013, which is 3.6 million euros
less compared to the year before. The difference in net profit and profit
before income tax results from the income tax calculated on dividends – the
income tax on dividends of 2012 was entered in the accounts of the second
quarter. The losses before taxes and net loss totalled to 0.6 million euros in
Latvia, remaining on the same level compared to the year before. Business
activity has been frozen in Latvia. 

The opening of new stores has supported the growth of turnover in the first
quarter of 2013. The significantly changed competition-related situation had a
negative influence on the results of comparable stores; opening new Selver
stores also causes the constant redistribution of customers between stores.
Since 2012 was a leap year and had an additional selling day, and because Saare
Selver is closed for improvement works and has no turnover, the reference base
is higher. Due to the renewal of the loyalty programme in May 2012, the premium
points awarded to customers reduced revenue in the accounts, while there was no
such effect in the first quarter of 2012. Compared to the base period, the
percentage of food products in the total turnover has increased somewhat in the
first quarter of the current year. Margins have also been influenced by the
increased proportion of campaign products in overall sales and the prices of
products in the daily shopping basket have been reduced, which has had a
positive impact on the growth of average purchases. The profit earned in
Estonia has been positively influenced by cost-effective management. The
increase in electricity and heating prices has decreased profits. In addition,
profits are influenced by opening new stores and renovating the existing ones,
as well as one-time costs connected with opening new stores: Läänemere Selver
was opened in Tallinn in the first quarter of 2013, and a part of the
alteration works in Saare Selver also fell in the first quarter. The
SelveEkspress service was launched in Tondi and Keila Selvers in the first
quarter. Expansion is to be continued in 2013. A new store will be opened in
Tartu in the summer, and at least 2 stores will be opened at the end of the
year. As at the end of the first quarter of 2013, the Selver chain included 41
Selver stores with the total sale area of 76.2 thousand square metres. 

Department stores

In the first 3 months of 2013, the sale revenue of the business segment of
department stores was 20.0 million euros, growing 5.2% compared to the same
period in 2012. The sale revenue per square metre of department stores amounted
to 0.78 thousand euros per month in the first three months of 2013, exceeding
the result of the same period in the previous year by 2.4%. At the same time,
the sales area of department stores has increased by 499 m² thanks to
renovation works. The final campaign of winter goods carried out in January had
a positive impact on sales revenue; however, the late beginning of spring
slowed down the sales of seasonal fashion products. The pre-tax loss of
department stores amounted to 0.26 million euros in the first quarter of 2013,
being better than the respective results of 2012 by 0.02 million euros. The
final campaign of Muusikapood that was launched in both shopping centres at the
end of January had a negative effect on the result of the supermarkets. The
sales revenue of OÜ TKM Beauty Estonia operating the I.L.U. beauty stores was
1.0 million euros in the first quarter of 2013, having grown by 21.9% compared
to the same period of 2012. The net loss of the I.L.U. chain was 0.1 million
euros, which is 0.02 million euros less than in the same period of the year
before. Compared to the first quarter of 2012, the I.L.U. chain opened its
sixth store at the Tasku Centre in Tartu in August 2012. 

Car Trade

The sales revenue of the car trade segment in the first quarter of 2013 was 9.0
million euros without intersegment transactions (6.1 million euros in the first
quarter of 2012), which surpasses the revenue of the same period in 2012 by
47.5%. The steep growth in sales revenue can be explained by additional sale
revenue from AS Viking Motors acquired in the third quarter of 2012. On the
basis of comparable businesses, the sales growth would have remained at 4.6%.
458 vehicles were sold in the first three months of the current year, which is
109 more than in the same period of 2012. The pre-tax profit of the segment in
the first quarter of 2013 totalled to 0.3 million euros, which is 0.1 million
euros or 30.9% less compared to the same period of 2012, although the gross
margin of the segment remained on the same level. The decrease of profit was
mainly caused by the depreciation of the Viking Motors trademark as well as the
growth of labour costs due to the need for additional sales personnel in
connection with the increasing sales volume. The goal set for 2013 is to
maintain and enhance the existing efficiency and market share. Seeking
expansion options and taking existing trademarks to the Baltics through the
dealer network owned by the group is still on the agenda. The group is also
planning to integrate Viking Motors AS into the business environment of the
group and adjust the structure of the car trade segment. In addition, the plan
foresees building and opening a new building for KIA Automobiles in Riga. 

Footwear trade

The sales revenue of the footwear trade in the first quarter of 2013 amounted
to 2.7 million euros, indicating a reduction of 7.5% compared to the same
period of 2012. The decreased sales revenue resulted from closing Latvian
stores at the end of March 2012; the high reference base in Estonian stores in
the first quarter of 2012; unfavourable weather conditions, which hindered the
sale of spring collections; as well as the diminishing purchasing interest of
customers due to the increasing prices of food and energy. The losses of the
first quarter totalled to 0.6 million euros, while the losses of the first
quarter in 2012 amounted to 0.5 million euros. A new store was opened in the
first quarter of 2013 – Shu store in the Jõhvi shopping centre Tsentraal. 

Real Estate

The sale revenue of the business segment of real estate outside the group
totalled 0.8 million euros in the first quarter of 2013, which grew by 4.3%
compared to the same period in 2012, while the sales revenue was 0.7 million
euros. The increase in sale revenue outside the group mainly resulted from rent
income on the immovable property purchased by SIA TKM Latvija at the end of
2012, as well as from the reorganisation of the rental spaces of Tartu
Kaubamaja Kinnisvara OÜ and Tallinna Kaubamaja Kinnisvara OÜ that occurred in
the first half of 2012. The pre-tax profit of the real estate segment amounted
to 2.1 million euros in the first quarter of 2013, which is 0.3 million euros
or 16.0% more than in the same period of the year before, when the profit
before taxes was 1.8 million euros. The profit growth was mainly sparked by
additional rental spaces leased to the other segments of the group in 2012. The
immovable properties of Selver in Valga and Sõbra Selver in Tartu were
purchased in the first quarter of 2013. The development projects of Selver will
be continued in 2013, while construction works in Peetri Selver are underway in
Rae Parish. 



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In thousands of euros

                                      31.03.2013  31.12.2012
------------------------------------------------------------
ASSETS                                                      
------------------------------------------------------------
Current assets                                              
Cash and bank                              9,160      13,494
Trade receivables and prepayments         12,140      18,497
Inventories                               50,365      48,264
Total current assets                      71,665      80,255
------------------------------------------------------------
Non-current assets                                          
Receivables and prepayments                  671         667
Investments in associates                  1,668       1,628
Investment property                        3,756       3,756
Property. plant and equipment            197,455     190,298
Intangible assets                         11,073      11,236
Total non-current assets                 214,623     207,585
------------------------------------------------------------
TOTAL ASSETS                             286,288     287,840
------------------------------------------------------------
                                                            
LIABILITIES AND EQUITY                                      
------------------------------------------------------------
Current liabilities                                         
Borrowings                                16,663      17,210
Trade payables and other liabilities      79,829      64,151
Total current liabilities                 96,492      81,361
------------------------------------------------------------
Non-current liabilities                                     
Borrowings                                59,845      59,781
Provisions and prepayments                   511         519
------------------------------------------------------------
Total non-current liabilities             60,356      60,300
TOTAL LIABILITIES                        156,848     141,661
------------------------------------------------------------
Equity                                                      
Share capital                             24,438      24,438
Statutory reserve capital                  2,603       2,603
Revaluation reserve                       50,799      51,079
Currency translation differences            -202          -7
Retained earnings                         51,802      68,066
TOTAL EQUITY                             129,440     146,179
------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY             286,288     287,840
------------------------------------------------------------



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

In thousands of euros

                                                          3 months      3 months
                                                              2013          2012
--------------------------------------------------------------------------------
                                                                                
Revenue                                                    112,010       106,034
Other operating income                                         214           148
                                                                                
Materials, consumables used and services                   -85,568       -79,893
Other operating expenses                                   -12,410       -11,506
Staff costs                                                 -9,710        -8,562
Depreciation, amortisation and impairment losses            -2,751        -2,538
Other expenses                                                 -91          -140
--------------------------------------------------------------------------------
Operating profit                                             1,694         3,543
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Finance income                                                   8            55
Finance costs                                                 -259          -409
Finance income on shares of associates                          40            39
--------------------------------------------------------------------------------
Profit before tax                                            1,483         3,228
--------------------------------------------------------------------------------
Corporate income tax                                        -3,772            -4
--------------------------------------------------------------------------------
NET PROFIT/LOSS FOR THE FINANCIAL YEAR                      -2,289         3,224
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Other comprehensive income:                                                     
--------------------------------------------------------------------------------
Items that will be reclassified subsequently to                                 
 profit or loss                                                                 
Currency translation differences                              -195           -31
--------------------------------------------------------------------------------
Other comprehensive loss for the financial year               -195           -31
--------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME/LOSS FOR THE FINANCIAL           -2,484         3,193
 YEAR                                                                           
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         Raul Puusepp
         Chairman of the Board
         Phone +372 731 5000