Market announcement

Title

Unaudited consolidated interim accounts for the second quarter and first six months of 2013

Message

Segments (EURm)    Q2/13  Q2/12    yoy    6m/13  6m/12    yoy  
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Supermarkets        84.5   84.1   0.5%    164.0  161.3   1.7%  
Department stores   21.4   21.0   1.6%     41.4   40.0   3.3%  
Cars                13.0    9.4   39.2%    22.1   15.5   42.5% 
Footwear             4.1    3.6   12.5%     6.8    6.6   3.6%  
Real Estate          0.8    0.7   11.2%     1.6    1.4   7.7%  
Total sales        123.8  118.8   4.2%    235.8  224.9   4.9%  
---------------------------------------------------------------
                                                               
Supermarkets         0.4   -0.1  -461.9%   -1.3    1.8  -175.7%
Department stores    1.0    0.8   21.3%    -0.5    0.5  -198.6%
Cars                 0.8    0.6   32.2%     1.0    0.9   8.2%  
Footwear             0.3    0.2   55.4%    -0.3   -0.3   -7.6% 
Real Estate          2.2    0.8   163.8%    3.4    2.6   31.4% 
Total net profit     4.6    2.3   100.6%    2.4    5.5   -57.4%
---------------------------------------------------------------

The consolidated unaudited sales revenue of the Tallinna Kaubamaja Group in the
first half-year of 2013 was 235.8 million euros, having grown by 4.9% compared
to the result of the first half-year of 2012, when the sales revenue was 224.9
million euros. In the 2nd quarter, the sales revenue of the Group was 123.8
million euros, thus exceeding the sales revenue of a year before by 4.2%. The
consolidated unaudited net profit of the Group in the first six months of 2013
was 2.4 million euros, which is more than twice as low as the profit of the
same period of the previous year, i.e. 5.5 million euros. The net profit of the
Group in the 2nd quarter was 4.6 million euros, which is twice as much as the
profit of the comparable period of last year. The net profit of the quarter was
significantly influenced by the 3.8 million euro income tax on dividends; in
2013, it was recorded in the first quarter results, in 2012, however, in the
2nd quarter results in the same amount. The pre-tax profit of the first
half-year was 6.1 million euros, having decreased by 34.1% in a year. In the
2nd quarter, the pre-tax profit reached 4.6 million euros, but was 23.6% lower
compared to the same period of the previous year. 

The net profit was significantly smaller than last year’s result, but
corresponded to the enterprise’s plans in the most part – considering both
expansions and the changes in competition and the business environment. As
planned, compared to the year earlier, 1.3 million euros additional bonus
points were awarded to customers through a loyalty program, which reduced the
Group's half-year gross profit. This in turn caused a decrease in the gross
profit margin. The updated loyalty programme launched in May 2012 has been
successful and supports the turnover of the Group’s various retail segments.
0.3 million euros of non-capitalised development costs related to the opening
of new stores are recorded in the operating costs of the first half-year. Other
factors causing the profit decrease were the expected increase of heating,
electricity and labour expenses (in the first half-year, heating and
electricity costs grew by 20.0% and labour costs by 13.3%). The turnover
increase was smaller than expected. Many newly added retail stores in the
market give customers great choices, and people have come to deem the
freshness, quality, price and availability of goods and fast and competent
service in stores more and more important. Thus, in order to improve the
management of goods, the Group has started updating the trade software in the
supermarket chain, training service and support personnel and improving supply
processes. In the first half of 2013, Läänemere Selver was opened in Tallinn
and Aardla Selver in Tartu, and Saare Selver in Saaremaa was expanded. The
SelveEkspress service was added to seven Selver stores and a Shu shoe store was
opened in Jõhvi. 

Selver supermarkets

The consolidated sales revenue of the supermarket business segment in the first
half of 2013 was 164.0 million euros, having increased by 1.7% compared to the
period of a year before. The consolidated sales revenue of the 2nd quarter was
84.5 million euros, having grown by 0.5% compared to the same period of the
previous year. The average monthly sales revenue of goods per a square metre of
the sales area was 0.35 thousand euros in the first half of 2013 and 0.36
thousand euros in the 2nd quarter, remaining 6.6% and 8.1% lower compared to
the previous year, respectively. The sales revenue of goods in comparable
stores per a square metre of the sales area was an average of 0.36 thousand
euros in the first half of 2013 and 0.37 thousand euros in the 2nd quarter,
indicating a decrease of 4.0% and 5.6%, respectively. 16.4 million purchases
were made from Selver stores in the first half of 2013, exceeding the number of
purchases made during the period of a year earlier by 2.0%. This year, the
growth of the sales revenue of Selver stores has been lower than the turnover
growth of the market segment (non-specialised stores predominantly selling
food, alcohol and tobacco). An increase in the sales revenue of goods has been
supported by the opening of new stores. Foodstuffs, whose proportion of the
total turnover has increased, have indicated more positive sales results in the
first half-year. The sale of industrial goods remained smaller than in the
previous year. The results of comparable stores have been influenced by the
changed competitive situation. New stores have been opened both by competitors
and Selver itself, as a result of which, customers are constantly redistributed
between existing and new stores. The sales revenue basis of the previous year
is higher thanks to certain campaigns that were not organised this year. In
accounting terms, the sales revenue was negatively influenced by additional
bonus points awarded to customers; this impact did not exist before May last
year. In addition, the reference basis of 2012 was higher due to the loss of
turnover from Saare Selver, which was closed for three weeks in the first half
of 2013 for renovation works. 

The consolidated pre-tax profit of the supermarket segment in the first half of
2013 was 0.4 million euros. After taxes, the first half-year ended with a loss
of 1.3 million euros. The consolidated pre-tax profit and net profit of the 2nd
quarter was 0.4 million euros. The net profit of the 2nd quarter exceeded the
net loss earned a year earlier by 0.5 million euros; the net loss of the first
half of the year remained 3.1 million euros lower than the year before. The
pre-tax profit and net profit earned in Estonia in the 2nd quarter was 1.0
million euros. In the first half-year, the profit before income tax was 1.6
million euros, the half-year ended with a loss of 0.1 million euros. The
difference between net profit and profit before income tax was caused by the
income tax paid on dividends – the income tax on 2012 dividends had been
recorded in the 2nd quarter. The pre-tax loss and net loss incurred in Latvia
in the first half-year was 1.2 million euros, of which, the share of the 2nd
quarter made up 0.6 million euros. The loss remained on the same level with the
year before. Business in Latvia has been frozen. The decrease of margins had a
significant negative impact on the economic results of Selvers in the first
half-year. The main reason for this was an increase in the percentage of food
products, as the margin thereof is lower than that of industrial goods. The
proportion of products sold at a discount has increased; in addition, the bonus
points accompanying the loyalty programme, which was launched in May 2012, have
had an impact on the margin drop. Continued cost-effective activities have had
a positive effect on the profit earned in Estonia. The increase in heating and
electricity costs has had a decreasing effect on profit. Furthermore,
generating profit was influenced by the costs related to opening and launching
new stores and renovating existing ones. There are plans to open three new
stores in the fourth quarter of 2013 – in the Baltic Station in Tallinn, in
Peetri Small Town and in Viljandi city centre. 

Department stores

The sales revenue of the department stores business segment in the first six
months of 2013 was 41.4 million euros, having grown by 3.3% compared to the
same period of the previous year. Of that, the sales revenue of the 2nd quarter
was 21.4 million euros, which was 1.6% higher than the revenue of the 2nd
quarter of 2012. The pre-tax profit of department stores in the first half of
2013 was 0.7 million euros, which is 37.3% better than the result achieved a
year ago. In the 2nd quarter, the pre-tax profit was 1.0 million euros, which
was 21.3% or 0.2 million euros higher than the profit of 2012. The sales
revenue of department stores per a square metre of sales area in the first
half-year was 0.27 thousand euros per month, which is 2.1% more than in the
same period of the previous year. In the 2nd quarter, the sales results of
Kaubamaja were influenced by the competitors' summertime discount campaigns,
which were launched considerably sooner than previously. The department stores’
operating profit of the first six months of 2013 was 0.6 million euros, which
was 41.0% or 0.2 million euros better than the result of the previous year. The
results of department stores were negatively influenced by the final campaign
of the Music Department that began at the end of January in both Tallinn and
Tartu. The sales revenue of OÜ TKM Beauty Eesti, which operates the I.L.U.
beauty stores, was 2.0 million euros, having increased by 17.0% compared to the
same period of the previous year. The net loss of the I.L.U. chain in the first
half-year was 0.3 million euros, which is an improvement of 3.3% compared to
the result of a year ago. Compared to the first half of the past year, in
August 2012 the I.L.U. chain also opened a sixth store in the Tasku Centre in
Tartu. 

Car Trade

The sales revenue of the car trade segment in the first half of 2013, excluding
intra-segment transactions, was 22.1 million euros. The sales revenue exceeded
the revenue of the same period of the previous year by 42.5%; among that, the
sales revenue of KIAs increased by 17.2%. The sales revenue of 13.0 million
euros earned in the 2nd quarter exceeded the sales revenue of a year before by
39.2%, and the sales revenue of KIAs had increased by 15.0%. A total of 1,100
cars were sold in the first half-year, 642 of them in the 2nd quarter. The net
profit earned in the segment in the first half of 2013 reached 1.0 million
euros and the net profit of the 2nd quarter was 0.8 million euros. The results
of the same period of the previous year were exceeded by 8.2% and 32.2%,
respectively. The reorganisation of the legal structure of the car segment
began in the first half of 2013. The structural changes are planned to be
completed in third quarter and as a result, the holdings of KIA Auto AS in the
Latvian subsidiary Forum Auto SIA and in the Lithuanian subsidiary UAB KIA Auto
will be transferred to TKM Auto OÜ, with the car business undertaken by the
Group in Estonia being joined under AS Viking Motors. 

Footwear trade

The turnover of the footwear trade segment in the first half of 2013 was 6.8
million euros, having increased by 3.6% in a year. In the 2nd quarter, the
turnover was 4.1 million euros, which is 12.5% higher than the turnover of the
same period of 2012. Compared to the weak first quarter result, there were
signs of stabilisation in the 2nd quarter and the new stores (three Shu stores
and one ABC store) opened in the fourth quarter of 2012 and the first quarter
of 2013 also yielded results. The loss of the first half-year reached 0.3
million euros, which is decreased 0.02 million euros compared to the same
period of the previous reporting year. The profit of the 2nd quarter was 0.3
million euros, which is 0.1 million euros more than the result of the second
quarter of 2012. The reorganisation of the legal structure of the footwear
segment was completed in the 2nd quarter of 2013. As a result of the structural
changes, AS Tartu Kaubamaja and OÜ Suurtüki NK were joined under AS ABC King.
As of 17 May 2013, the business name of AS ABC King has been AS TKM King. At
the end of the second quarter of 2013, the footwear store chain of the Group
included 28 stores with a total area of 8.8 thousand square metres. 

Real Estate

The sales revenue of the business segment of real estate outside the Group
totalled to 1.6 million euros in the first half of 2013 (1.4 million euros in
the first half of 2012), having grown 7.7% compared to the same period of the
previous year. The extra-Group sales revenue of the second quarter was 0.8
million euros (0.7 million euros in the second quarter of 2012), showing an
increase of 11.2% from the same period of the previous year. The sales revenue
has increased thanks to the rental spaces added in 2012 and 2013. The pre-tax
profit of the real estate segment in the first half-year was 4.3 million euros,
which is 0.7 million euros more than in the same period of the previous year
(the profit of the first half-year of 2012 was 3.6 million euros), having
increased by 19.4% compared to the same period of the previous year. The
pre-tax profit of the real estate segment in the second quarter of 2013 was 2.2
million euros (in the 2nd quarter of 2012, the pre-tax profit was 1.8 million
euros), which is 0.4 million euros more than in the same period of last year –
an increase of 22.8%. A new Peetri Selver in Rae Parish will be completed in
2013, and there are plans to reconstruct a building in Ulmana Street in Riga in
order to turn it into a modern car showroom. 



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In thousands of euros

                                      30.06.2013  31.12.2012
------------------------------------------------------------
ASSETS                                                      
------------------------------------------------------------
Current assets                                              
Cash and bank                             12,000      13,494
Trade receivables and prepayments         11,676      18,497
Inventories                               48,727      48,264
Total current assets                      72,403      80,255
------------------------------------------------------------
Non-current assets                                          
Receivables and prepayments                  674         667
Investments in associates                  1,714       1,628
Investment property                        3,756       3,756
Property, plant and equipment            200,816     190,298
Intangible assets                         10,900      11,236
Total non-current assets                 217,860     207,585
------------------------------------------------------------
TOTAL ASSETS                             290,263     287,840
------------------------------------------------------------
                                                            
LIABILITIES AND EQUITY                                      
------------------------------------------------------------
Current liabilities                                         
Borrowings                                15,440      17,210
Trade payables and other liabilities      62,372      64,151
Total current liabilities                 77,812      81,361
------------------------------------------------------------
Non-current liabilities                                     
Borrowings                                77,346      59,781
Provisions and prepayments                 1,049         519
------------------------------------------------------------
Total non-current liabilities             78,395      60,300
TOTAL LIABILITIES                        156,207     141,661
------------------------------------------------------------
Equity                                                      
Share capital                             24,438      24,438
Statutory reserve capital                  2,603       2,603
Revaluation reserve                       50,521      51,079
Currency translation differences            -235          -7
Retained earnings                         56,729      68,066
TOTAL EQUITY                             134,056     146,179
------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY             290,263     287,840
------------------------------------------------------------



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

In thousands of euros

                                        II quarter     II    6 months   6 months
                                           2013     quarter    2013       2012  
                                                     2012                       
--------------------------------------------------------------------------------
                                                             
Revenue                                    123,771  118,833   235,781    224,867
Other operating income                         201      102       415        250
                                                                                
Materials, consumables used and            -93,041  -87,986  -178,609   -167,879
 services                                                                       
Other operating expenses                   -12,839  -11,627   -25,249    -23,133
Staff costs                                -10,298   -9,101   -20,008    -17,663
Depreciation, amortisation and              -2,744   -3,571    -5,495     -6,109
 impairment losses                                                              
Other expenses                                -123      -65      -214       -205
--------------------------------------------------------------------------------
Operating profit                             4,927    6,585     6,621     10,128
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Finance income                                   9       33        17         88
Finance costs                                 -335     -579      -594       -988
Finance income on shares of associates          46       40        86         79
--------------------------------------------------------------------------------
Profit before tax                            4,647    6,079     6,130      9,307
--------------------------------------------------------------------------------
Income tax                                       2   -3,762    -3,770     -3,766
--------------------------------------------------------------------------------
NET PROFIT FOR THE FINANCIAL YEAR            4,649    2,317     2,360      5,541
--------------------------------------------------------------------------------
Other comprehensive income:                                                     
Items that will be reclassified                                                 
 subsequently to  profit or loss                                                
Currency translation differences               -33      169      -228        138
--------------------------------------------------------------------------------
Other comprehensive income/loss for            -33      169      -228        138
 the financial year                                                             
--------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR THE           4,616    2,486     2,132      5,679
 FINANCIAL YEAR                                                                 
--------------------------------------------------------------------------------
                                                                                




         Raul Puusepp
         Chairman of the Board
         Phone +372 731 5000