Market announcement

Title

Unaudited consolidated interim accounts for the first quarter of 2016

Message

Segments (EURm)          Q1/16  Q1/15     yoy
---------------------------------------------
Supermarkets              92.8   86.3   7.6% 
Department stores         22.2   21.8   1.6% 
Cars                      18.2   12.3   47.9%
Footwear                   2.4    2.2   8.8% 
Real Estate                1.2    0.8   48.2%
Total sales              136.9  123.5   10.8%
---------------------------------------------
                                             
Supermarkets               2.5    1.0  137.5%
Department stores         -0.2   -0.2  -22.3%
Cars                       0.5    0.5   -0.4%
Footwear                  -0.5   -0.7  -26.7%
Real Estate                2.8    2.1   29.6%
Total profit before tax    5.0    2.7   84.9%
---------------------------------------------

The total consolidated unaudited sales revenue of Tallinna Kaubamaja Group of
the 1st quarter of 2016 amounted to 136.9 million euros. Compared to the 1st
quarter of 2015, when the sales revenue was 123.5 million euros, the growth was
10.8%. The sales revenue increased in all segments of the Group. The net loss
of the accounting period was 0.2 million euros due to income tax calculated
from dividends in the amount of 5.2 million euros. The loss of the 1st quarter
of 2015 was 1.2 million euros, including income tax in the amount of 3.9
million euros. The profit before tax was almost twice as high compared to the
previous year, amounting to 5.0 million euros. 

The 1st quarter results of this accounting year are successful in every aspect.
Sales revenue grew across all segments, as did the EBITDA. The success was a
result of carefully considered marketing campaigns, well-planned stock
management and improving of the service quality. Sales was also supported by
the economic environment with its favourable consumption dynamics and the
specifics of the 2016 calendar – the leap year and the early Easter holidays.
Viimsi Selver and e-Selver that were successfully launched in 2015 had a
significant positive impact on sales revenue. Positive sales results in the
footwear trade segment and reduced losses confirm right choices in footwear
brand selection combined with changes in the type of service. The growth of
profit before tax was supported by improved margin as a result of the
optimisation of trade processes and the administrative expenses. The winter,
which arrived at the beginning of the year, benefitted the sale of fashion
goods by reducing the depth of the end of season discount campaign for fashion
goods. Labour costs were increased by the extended stores network and
implementing a remuneration system, based on good sales’ results. 

Selver supermarkets

The consolidated sales revenue of the supermarket segment in the 1st quarter of
2016 and the sales revenue in Estonia were 92.8 million euros, increasing by
7.6% compared to the previous yearThe sales revenue of a subsidiary of Selver,
Kulinaaria OÜ, increased in the 1st quarter of 2016 by 10.6% compared to the
previous year. 8.2 million purchases were made from Selvers in the 1st quarter
of 2016, remaining at the level of the previous year. The consolidated profit
before tax of the supermarket segment was 2.5 million euros in the 1st quarter
of, of which the profit earned in Estonia formed 3.0 million euros, increasing
by 1.3 million euros compared to the previous year. The consolidated net loss
of the supermarket segment was 0.1 million euros, the loss was 1.0 million
euros smaller than the results of the previous year. The net profit earned in
Estonia amounted to 0.4 million euros in the 1st quarter of 2016, exceeding the
results of the previous year by 0.9 million euros. The difference between net
profit and profit before tax arises from income tax paid from dividends – in
2016, the income tax from dividends was 0.4 million euros higher than in the
previous year. The profit before tax and net profit earned in Latvia were 0.5
million euros in 2016. The loss decreased by 16.4% compared to the previous
year. The business in Latvia has been frozen. The increase in the revenue from
the sales of goods in the 1st quarter of 2016 has been supported by successful
campaigns and holiday season sales. Improvement of the economic security of the
consumers, an increase in the real income of the people and the activities
undertaken to improve the selection offered to the customers have increased the
value of the average shopping cart. The reference base of the 1st quarter of
2016 does not include Viimsi Selver (Viimsi Selver, the seventh hypermarket of
the chain, was opened in August 2015) or the e-Selver opened in the end of the
year. Compared to the base year, the 1st quarter of 2016 included one
additional day due to the leap year and was affected by Easter holidays
shifting from April to March. The number of purchases from the perspective of
comparable Selvers has also increased, primarily led by the Selver stores
opened in the last five years, which still remain in the above-the-average
growth phase and gain new customers in the conditions of tight competition. The
profit earned in Estonia was primarily affected by an increase in the gross
profit from the sales of goods, which was above all achieved through changes in
the operating principles of the sales of goods and by optimising the process of
purchasing of goods. With respect to operational expenditure, the level of
cost-efficiency has been improved compared to the previous year. 

Department stores

The sales revenue of Kaubamaja department stores’ business segment in the first
3 months of 2016 was 22.2 million euros, representing an increase of 1.6%
compared to the same period of the previous year. The loss before tax of the
department stores in the 1st quarter of 2016 was 0.2 million euros, which is
22.3% better compared to the results of the year before. The sales revenue of
the department stores was affected by renovation works in the Ilu- ja
Naistemaailm (Beauty and Women) department in Tartu, which interfered with
business on the first floor of the building in Tartu The results of the
department stores were positively influenced by well-led discount campaigns and
the winter which had helped to increase the sale of winter goods. In the
beginning of March, a Kaubamaja e-store was opened, with the number of products
in the selection already amounting to 20,000 at the time of opening. The
products sold at the e-store are photographed by using modern photo robots. The
works on the renovated Ilu- ja Naistemaailm (Beauty and Women) department in
the department store of Tartu were completed. Both the sales areas and the
brand selection have been renewed. In addition to top brands, the selection was
complemented with Estonian design from Tiina Talumees and August. The sales
revenue of OÜ TKM Beauty Eesti, which operates the I.L.U. beauty stores, amount
to 1.6 million euros in the 1st quarter of 2016, increasing by 3.1% compared to
the same period of the previous year. The loss of the first quarter was 0.1
million euros, which is 3.9% lower than the loss of the comparable period of
2015. The result of the 1st quarter was positively impacted by successful sales
campaigns and changes in the selections of the stores located outside of
Tallinn. 

Car Trade

The sales revenue of car trade segment of the 1st quarter of 2016 was 18.2
million euros. The sales revenue increased by 47.9% compared to the previous
year, with the sales revenue of KIAs increasing by 39.4%. A total of 886 new
vehicles were sold in the first three months of the year. The profit before tax
of the segment of the 1st quarter of 2016 was 0.5 million euros, remaining at
the same level with the profit of the comparable period of the previous year.
In the 1st quarter, KIA’s popular core models KIA Optima and crossover SUV KIA
Sportage were launched and the entire Baltic dealership network was supplied
with demo and salon cars. A significant contribution in the growth of the sales
revenue of the vehicle segment, although with a thinner margin than provided by
regular sales, was gained from the increased sales of Forum Auto SIA as a
result of winning a high-volume public procurement; wholesale selling to
enterprises also grew in Latvia. 

Footwear trade

The footwear trade segment sales revenue of the 1st quarter of 2016 was 2.4
million euros, increasing by 8.8% compared to the same period of the previous
year. Sales revenue growth was achieved, regardless of the late spring, thanks
to a better commodity composition, where the assortment of goods and the
portfolio of brand products were moved closer to the expectations of the target
customer. The company’s level of stocks and their age structure have been
optimised. The positive change is also reflected in the financial results of
the segment. The net loss of the quarter was 0.5 million euros, which is a
better result than planned and 26.7% lower compared to the 1st quarter of 2015. 

Real Estate

The external sales revenue of the real estate segment in the 1st quarter of
2016 was 1.2 million euros. The sales revenue increased by 48.2% compared to
the previous year. The profit before tax of the real estate segment in the 1st
quarter of 2016 was 2.8 million euros, which is 29.6% better compared to the
results of the year before. The increase in the sales revenue was supported by
the 14,000-square metre Viimsi Center opened in August 2015 and by renting the
building in Rezekne Latvia to an external party. 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In thousands of euros

                                              31.03.2016  31.12.2015
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ASSETS                                                              
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Current assets                                                      
Cash and cash equivalents                         14,087      13,911
Trade and other receivables                       12,801      20,191
Inventories                                       65,491      61,110
Total current assets                              92,379      95,212
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Non-current assets                                                  
Long-term trade and other receivables                293         293
Investments in associates                          1,824       1,778
Investment property                               44,981      44,963
Property, plant and equipment                    196,749     196,691
Intangible assets                                  8,894       9,043
Total non-current assets                         252,741     252,768
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TOTAL ASSETS                                     345,120     347,980
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LIABILITIES AND EQUITY                                              
--------------------------------------------------------------------
Current liabilities                                                 
Borrowings                                        34,366      33,377
Trade and other payables                          73,438      77,066
Total current liabilities                        107,804     110,443
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Non-current liabilities                                             
Borrowings                                        57,419      57,426
Provisions for other liabilities and charges         502         502
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Total non-current liabilities                     57,921      57,928
TOTAL LIABILITIES                                165,725     168,371
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Equity                                                              
Share capital                                     16,292      16,292
Statutory reserve capital                          2,603       2,603
Revaluation reserve                               65,337      65,701
Currency translation differences                    -255        -255
Retained earnings                                 95,418      95,268
TOTAL EQUITY                                     179,395     179,609
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TOTAL LIABILITIES AND EQUITY                     345,120     347,980
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

In thousands of euros

                                                          3 months      3 months
                                                              2016          2015
--------------------------------------------------------------------------------
                                                                    
Revenue                                                    136,850       123,458
Other operating income                                         267           231
                                                                                
Cost of sales                                             -102,848       -93,401
Other operating expenses                                   -12,759       -12,558
Staff costs                                                -13,298       -11,716
Depreciation, amortisation and impairment losses            -2,806        -2,849
Other expenses                                                -241          -229
--------------------------------------------------------------------------------
Operating profit                                             5,165         2,936
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Finance income                                                   2             8
Finance costs                                                 -208          -283
Finance income on shares of associates                          46            47
--------------------------------------------------------------------------------
Profit before tax                                            5,005         2,708
--------------------------------------------------------------------------------
Income tax expense                                          -5,219        -3,873
--------------------------------------------------------------------------------
NET LOSS FOR THE FINANCIAL YEAR                               -214        -1,165
--------------------------------------------------------------------------------
Other comprehensive income:                                                     
Items that may be subsequently reclassified to  profit                          
 or loss                                                                        
Currency translation differences                                 0             0
--------------------------------------------------------------------------------
Other comprehensive income for the financial year                0             0
--------------------------------------------------------------------------------
TOTAL COMPREHENSIVE LOSS FOR THE FINANCIAL YEAR               -214        -1,165
--------------------------------------------------------------------------------




         Raul Puusepp
         Chairman of the Board
         Phone +372 731 5000