Market announcement

Title

Unaudited consolidated interim accounts for the fourth quarter and twelve months of 2014

Message

Segments (EURm)    Q4/14  Q4/13     yoy  12m/14  12m/13      yoy
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Supermarkets        99.2   92.1    7.7%   368.2   343.1     7.3%
Department stores   28.4   27.0    5.0%    92.5    89.6     3.3%
Cars                13.9   14.1   -1.2%    57.7    48.0    20.1%
Footwear             3.2    4.1  -21.3%    13.4    14.7    -9.0%
Real Estate          0.8    0.9  -10.4%     3.3     3.3     1.1%
Total sales        145.5  138.2    5.3%   535.0   498.7     7.3%
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Supermarkets         4.4    3.5   23.7%     7.7     4.7    65.8%
Department stores    2.9    2.7    4.6%     3.4     3.2     6.3%
Cars                 0.6    0.4   48.8%     1.7     1.9   -14.3%
Footwear             0.0    0.1  -69.9%    -1.3    -0.1  1350.0%
Real Estate          2.1    2.1   -1.5%     8.8     7.8    13.2%
Total net profit    10.0    8.9   11.4%    20.3    17.5    16.2%
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The consolidated unaudited sales revenue of the Tallinna Kaubamaja group in the
fourth quarter of 2014 was 145.5 million euros, which is 5.3% higher than the
sales revenue in the previous year. The sales revenue of 12 months was 535.0
million euros, which is an increase of 7.3% from the result of 498.7 million
euros in 2013. The consolidated unaudited net profit in the fourth quarter of
2014 was 10.0 million euros, which was an 11.4% increase from the profits for
the comparable period of the previous year. The net profit for the group for
the 12 months of 2014 was 20.3 million euros, which was 16.2% higher than the
profit for the previous year (the profit for 2013 was 17.5 million euros). The
profit before tax in 2014 was 22.5 million euros, which is an increase of 5.9%
compared to the year before. 

In the fourth quarter, there was the continuous positive tendency of sales
growth in the group’s main retail segments, which was higher than in the
Estonian retail market on the average. The only retail segments with sales
lower than the sales results from the preceding year were footwear and car
segments. In the fourth quarter, the increased effect of several negative
factors influencing the market could be felt. The year 2014 on the whole, but
especially the 4th quarter, was affected by the expansion of the Estonian
retail market with the emergence of new commercial premises and market
participants. This is good news for consumers, but it has watered down the
economic results of numerous market participants. The anticipated flow of
tourists at the end of the year, especially from the East, was significantly
lower than expected and diminished the sales of exclusive goods. All segments
of the group were profitable in the fourth quarter. The only segment that ended
the year with a loss was the footwear segment, which was affected by the
changes in sales premises and product range. The group managed to achieve a
16.2% annual growth of the net profit for the year 2014. The increase of staff
costs slowed down at the end of the year (the growth of the fourth quarter was
6.4%, the total for the year was 11.8%), which resulted from the slowdown of
the increase of the number of employees; in the last quarter of 2014, the
number of employees increased by 6.3% in comparison with the preceding year.
The lower growth of profits in 2014 was due to lower sales margins in car and
footwear segments. The influence was most felt in the footwear segment, where
the margin decreased due to changes in product ranges. 

Selver supermarkets

The consolidated sales revenue of the supermarket business segment in 2014 was
368.2 million euros, which in an increase of 7.3% in comparison with the
preceding year. The consolidated sales revenue of the fourth quarter was 99.2
million euros, increasing by 7.7% in comparison with the same period in the
preceding year. Throughout 2014, 35.6 million purchases were made in Selver
supermarkets, which is 5.2% more than in the previous year. The consolidated
profit before tax for 2014 in the supermarket segment was 8.1 million euros and
the net profit was 7.7 million euros. The consolidated profit before tax and
net profit for the fourth quarter was 4.4 million euros. The net profit for the
fourth quarter was an increase of 0.8 million euros in comparison with the same
period in the preceding year. The net profit for the year 2014 was an increase
of more than 3.0 million euros in comparison with the year 2013. The increase
in turnover in 2014 was supported by new stores that had been opened in 2012
and 2013. The increase of turnover was also supported by low inflation rate,
good consumer confidence, and private consumption spending indicators. In the
second half of the year especially, the turnover was affected by successful
marketing campaigns and also the category management project and the changes in
product range that take clients’ needs into account to a larger extent. There
was negative influence proceeding from changing competitive environment, as a
result of which, there is a redistribution of clients between stores, including
Selver supermarkets. Looking by segments, the increase of turnover is led by
the food segment, where there was an increase in the sales of fresh groceries
and the increased range of gourmet products. The profits for 2014 were
positively affected by the continuous improvement of the efficiency of
activities. In addition to that, changes in the labour market had an effect on
the profits throughout the year 2014, as a result of which, the average wages
have increased and the staff expenses have also risen. The annual results also
include the non-capitalized costs related to one-off projects. Larger one-off
projects in the reported year were as follows: on 1 January, new commerce
software was implemented in Selver supermarkets; in the first quarter, the
Gurmeekauplus store selling gourmet food items in Solaris centre was closed,
and a new section of gourmet goods was opened in Pirita Selver; in June, a new
Selver supermarket was opened at the Astri shopping centre in Narva. In 2014,
the content of the SelveEkspress service was improved and the webpage of Selver
was updated. 

Department stores

The sales revenue of the department store business segment in 2014 was 92.5
million euros, which is a 3.3% increase in comparison with the same period last
year. The sales revenue of the fourth quarter was 28.4 million euros, which is
5.0% more than the revenue of the fourth quarter in 2013. The profit before tax
of department stores in 2014 was 4.8 million euros, which was 10.2% higher than
the profit for the preceding year. The profit before tax for the fourth quarter
was 2.9 million euros, which was 4.6% more in comparison with the preceding
period. In conclusion of 2014, it should also be said that the results of
Kaubamaja department stores were affected by difficult access to both
department store buildings, as tramways were renovated in Tallinn and the
streets in the centre of Tartu were closed for extensive reconstruction works.
The results were also affected by autumn and winter months that were warmer
than usual, which allowed clients to postpone the purchase decision of clothing
items and had the most profound effect on the sales of outdoor clothing. In the
fourth quarter, the results of Kaubamaja were affected by aggressive and
large-scale campaigns of the competitors and also the altered competitive
environment in the Tallinn retail market, as the renovated Ülemiste shopping
centre reopened in October. However, taking all this into consideration,
Kaubamaja department stores have managed to be profitable and hold their market
share. The sales revenue of OÜ TKM Beauty, which operates the I.L.U. cosmetic
stores in Estonia, in the fourth quarter of the 2014 was 1.6 million euros,
which is an increase of 3.7% in comparison with the same period in 2013. The
sales revenue for the year 2014 was 4.7 million euros, representing a growth of
1.6% in comparison with the year 2013. The profit in the fourth quarter was
0.01 million euros; in the comparable period in 2013, the loss was 0.01 million
euros. The total loss for the year 2014 was 0.3 million euros, which was 0.07
million euros lower in comparison with 2013. 

Car Trade

The sales revenue of the car trade segment in 2014 was 57.7 million euros. The
sales revenue was 20.1% higher than the same revenue for the previous year;
including the sales revenue of KIAs increasing by 16.9%. The sales revenue for
the fourth quarter of 13.9 million euros was 1.2% lower than in the same period
of the previous year, whereas the sales revenue of KIAs grew by 14.2%. The
decrease of the sales revenue in the fourth quarter was mostly due to the
weaker result of the Latvian company of the car trade segment. At the end of
2013, a new car show room was opened in Latvia, and at the same time, the
consumption increased in anticipation of the conversion to euro, so the
reference base was higher. In 2014, altogether 3,050 new vehicles were sold,
out of which 624 vehicles were sold in the fourth quarter. The net profit of
the segment for 2014 was 1.7 million euros. The profit before tax for the
segment in 2014 was 2.0 million euros, which is an increase of 6.1% in
comparison with the profit for 2013. The net profit for the fourth quarter of
2014 was 0.6 million euros, which is an increase of 48.8% in comparison with
the same period in the previous year. 

Footwear trade

The sales revenue of the footwear segment in 2014 was 13.4 million euros, which
was a decrease of 9.0% in comparison with the preceding year. The turnover for
the fourth quarter was 3.2 million euros, which is a decrease of 21.3% in
comparison with the same period for the previous year. The loss for 2014 was
1.3 million euros, whereas the loss for 2013 was 0.1 million euros. The profit
for the fourth quarter of 2014 was 0.04 million euros. The profit for the
fourth quarter in 2013 was 0.1 million euros. The annual sales revenue was
affected strongly by the relocation of ABC flagship store to the first floor of
the Viru shopping centre and the termination of rent lease of the SHU store in
the same shopping centre. In addition, there was a long and warm autumn in the
fourth quarter, which did not favour the sales of warm winter boots, thereby
negatively affecting both sales revenues and sales margin. In the fourth
quarter, we continued making changes in the planned product range and brand
portfolio, and in relation to that, reorganizing store supplies, which resulted
in temporary diminishing of the gross margin. In comparison with the previous
period, the level of store supplies by the end of 2014 was optimized down by
1.95 million euros. 

Real Estate

The extra-group sales revenue of the real estate business segment for 2014 was
3.3 million euros. The sales revenue increased by 1.1% in comparison with the
previous year. The extra-group sales revenue for the fourth quarter of 2014 was
0.8 million euros, which was a decrease of 10.4% in comparison with the
previous year. The decrease of turnover was a result of higher reference base
of 2013, which was due to rearrangements with the changes of lessees at the end
of 2013. The profit before tax for real estate segment in 2014 was 8.8 million
euros, which was 0.2 million euros or 2.3% more than in the previous fiscal
year (in 2013 it was 8.6 million euros). The profit before tax for the fourth
quarter of 2014 was 2.1 million euros (in the fourth quarter of 2013, it was
2.1 million euros). The annual profit increase in 2014 resulted from the
increase of the rentable areas belonging to the Company in 2013, as at the end
of the year, the Peetri Selver supermarket in Rae rural municipality and a car
show room in Ulmana Street in Riga were completed. 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In thousands of euros

                                      31.12.2014  31.12.2013
------------------------------------------------------------
ASSETS                                                      
------------------------------------------------------------
Current assets                                              
Cash and bank                             24,626      14,766
Trade receivables and prepayments         17,938      15,991
Inventories                               56,876      51,937
Total current assets                      99,440      82,694
------------------------------------------------------------
Non-current assets                                          
Receivables and prepayments                  338         313
Investments in associates                  1,778       1,711
Investment property                        3,035       3,035
Property, plant and equipment            227,914     229,406
Intangible assets                         10,402      10,636
Total non-current assets                 243,467     245,101
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TOTAL ASSETS                             342,907     327,795
------------------------------------------------------------
                                                            
LIABILITIES AND EQUITY                                      
------------------------------------------------------------
Current liabilities                                         
Borrowings                                20,405      14,300
Trade payables and other liabilities      70,317      67,725
Total current liabilities                 90,722      82,025
------------------------------------------------------------
Non-current liabilities                                     
Borrowings                                77,663      77,104
Provisions and prepayments                   692         878
------------------------------------------------------------
Total non-current liabilities             78,355      77,982
TOTAL LIABILITIES                        169,077     160,007
------------------------------------------------------------
Equity                                                      
Share capital                             16,292      24,438
Statutory reserve capital                  2,603       2,603
Revaluation reserve                       67,159      68,617
Currency translation differences            -255        -257
Retained earnings                         88,031      72,387
TOTAL EQUITY                             173,830     167,788
------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY             342,907     327,795
------------------------------------------------------------



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

In thousands of euros

                                       IV quarter     IV        12     12 months
                                          2014      quarter   months      2013  
                                                     2013      2014             
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Revenue                                   145,512   138,205   535,045    498,721
Other operating income                        195       399       715        966
                                                                                
Materials, consumables used and          -106,392  -100,722  -402,233   -372,930
 services                                                                       
Other operating expenses                  -13,547   -13,885   -51,510    -51,365
Staff costs                               -12,599   -11,843   -46,493    -41,571
Depreciation, amortisation and             -2,844    -2,509   -10,970    -10,730
 impairment losses                                                              
Other expenses                               -180      -364      -767       -726
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Operating profit                           10,145     9,281    23,787     22,365
--------------------------------------------------------------------------------
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Finance income                                  5         7        24         31
Finance costs                                -367      -378    -1,494     -1,322
Finance income on shares of                    24        29       172        163
 associates                                                                     
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Profit before tax                           9,807     8,939    22,489     21,237
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Income tax                                    144        -3    -2,194     -3,773
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NET PROFIT FOR THE FINANCIAL YEAR           9,951     8,936    20,295     17,464
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Other comprehensive income:                                                     
Items that will be reclassified                                                 
 subsequently to  profit or loss                                                
Revaluation of land and buildings               0    18 650         0     18 650
Currency translation differences                0        -7         2       -250
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Other comprehensive income for the              0    18,643         2     18,400
 financial year                                                                 
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TOTAL COMPREHENSIVE INCOME FOR THE          9,951    27,579    20,297     35,864
 FINANCIAL YEAR                                                                 
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         Raul Puusepp
         Chairman of the Board
         Phone +372 731 5000