Market announcement

Title

Unaudited consolidated interim accounts for the second quarter and first six months of 2018

Message

Segments (EURm)           Q2/18   Q2/17     yoy     6m/18   6m/17    yoy
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  Supermarkets              112.3   109.0    3.1%     217.9   208.5    4.5%

  Department stores          23.8    25.0    -5.0%     46.6    48.1   -3.1%

  Cars                       34.9    26.6    31.1%     62.5    50.9   23.0%

  Footwear                    2.5     2.8    -9.0%      4.7     5.4   -12.6%

  Real Estate                 1.4     1.2    9.6%       2.7     2.5    8.6%
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  Total sales               174.9   164.6    6.2%     334.4   315.3    6.1%
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  Supermarkets                3.7     3.4    8.5%       6.9     6.2   10.4%

  Department stores           1.1     1.3    -9.9%      0.7     1.3   -46.8%

  Cars                        1.7     1.0    70.6%      2.6     2.3   14.7%

  Footwear                    0.1     0.0   -453.3%    -0.2    -0.9   -74.1%

  Real Estate                 2.5     2.9   -16.0%      5.3     5.8   -8.3%
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  Total profit before tax     9.2     8.7    6.4%      15.3    14.8    3.6%
-----------------------------------------------------------------------------

In  the  second  quarter  of  2018, the  unaudited sales revenue of the Tallinna
Kaubamaja  Group was 174.9 million  euros, exceeding the  year-on-year result by
6.2%. The  sales revenue  generated in  the first  half of  the year  was 334.4
million  euros, growing  by 6.1% compared  to the  result of  the first  half of
2017, when  the sales revenue was 315.3 million  euros. In the second quarter of
2018, the  unaudited consolidated net profit of the Group was 9.2 million euros,
which  is 6.6% higher compared to the profit  of the same period of the previous
year.  The net profit of the Group  in six months of 2018 was 9.0 million euros,
which  is 7.9% higher than the previous comparable result. The pre-tax profit in
the  first half of  the year was  15.3 million euros, showing  a growth of 3.6%
compared  to the previous year. The size of the net profit was influenced by the
dividend  payment, on which income  tax of 6.2 million euros  was accrued in the
first  quarter of 2018, whereas  a year earlier,  income tax was  accrued in the
amount of 6.4 million euros.

In  the  second  quarter  of  2018, the  Group increased their sales revenue and
profit.  The car  segment of  the Group  continued to  produce the highest sales
revenue  and profit. Optimisation of the footwear segment selling spaces reduced
the  sales  revenues  of  comparable  periods,  but  led to profit in the second
quarter.  Several ongoing  extensive road  works in  Tallinn made  it harder for
customers  to access the Group's important  retail stores of different segments,
which,  in turn,  led to  reduced visiting  frequency and  slowdown of the sales
revenue  growth in these stores. The gross profitability compared to the earlier
results  decreased slightly because of  the growth of the  proportion of the car
trade  segment, a segment  with a lower-than-average  gross profitability in the
Group,  and more sales campaigns  in the Selver segment.  In the second quarter,
the growth of labour costs slowed down somewhat, because the correction of wages
has  not  occurred  at  the  same  pace  in the comparable periods. However, the
introduction  of more self-checkout  stations and improving  the workflow of the
commercial  processes has an important role to play in controlling labour costs.
The most important current development projects are improving the convenience of
use  and delivery speed of e-stores as well as the developments of car showrooms
in  all three Baltic States, a sales building of the department store segment in
Tallinn, a new production building of Kulinaaria, and one Selver store.

Selver supermarkets

In  the first half  of 2018, the consolidated  sales revenue of the supermarkets
business  segment was 217.9 million euros -  an increase of 4.5% compared to the
same  period of  the previous  year. The  consolidated sales  revenue was 112.3
million  euros in  the second  quarter, growing  by 3.1% year-on-year. In Selver
stores,  18.9 million  purchases  were  made  in  the  first half of 2018, which
exceeded  the  year-on-year  results  by  2.7%. In  the  first half of 2018, the
consolidated pre-tax profit of the supermarket segment was 6.9 million euros - a
growth  of 0.6 million euros compared  to the previous year.  The net profit was
2.8 million  euros in the first half of the year - a growth of 0.2 million euros
compared  to the previous  year. The pre-tax  profit earned in  Estonia was 7.0
million  euros and the net  profit was 3.0 million euros.  The difference in the
net  profit and pre-tax  profit is due  to the income  tax paid on dividends: in
2018, the  income tax on  dividends was higher  by 0.4 million euros compared to
the  previous year. In the second quarter, the pre-tax profit and net profit was
3.7 million  euros, of  which the  profit earned  in Estonia  accounted for 3.8
million  euros. The  profit of  the second  quarter exceeded  the result  of the
comparable  period in the previous year by  0.3 million euros. In the first half
of  the year,  the loss  earned in  Latvia was  0.2 million euros,  of which the
second  quarter accounted for  0.1 million euros, being  20% of the level of the
previous year in both periods.

The  sales revenue growth  of Selver stores  retained the rate  of growth in the
relevant  market segment in the second  quarter. The sales revenue of comparable
stores  reduced by  0.4%. The sales  revenue was  influenced by several factors:
active road construction works, which affected and are still affecting access to
several  important  stores  of  the  chain  this  year,  slowdown of the sale of
alcohol, concentration of the celebrations of Midsummer Day on a shorter period,
and  the closing  of one  Selver store.  The number  of purchases as well as the
average purchase have grown in the second quarter. E-Selver is still doing well:
its  sales increased by one  third in the second  quarter compared to the second
quarter  of the previous  year. The growth  of the sales  revenue is the primary
reason for the profit amount earned in Estonia. Gross margin on the sale is 0.1
percentage point lower due to higher inflation and a larger number of campaigns.
In  terms of operating costs, the cost efficiency level has improved compared to
the  previous  year.  As  expected,  investments  have had a positive impact and
allowed  cutting administrative costs  and managing labour  costs efficiently in
the  context of a strong pressure to  increase wages. The operating costs in the
second  quarter  include  one-time  expenditure  in  the amount of 151,000 euros
incurred  in relation to closing of a store. The loss earned in Latvia decreased
because some contracts within the Group ended. The comparison basis of 2018 does
not include five new supermarkets opened in Tallinn last year and a mobile store
in  Hiiumaa. The  comparison basis  of 2018 is  higher because  of a supermarket
closed in Tallinn.

Department stores

In  the first six months of 2018, the department store business segment earned a
sales revenue of 46.6 million euros, which is 3.1% less than last year. Of this,
the  sales revenue generated in the second quarter was 23.8 million euros, which
was  5.0% lower than the revenue earned in  the second quarter of 2017. The pre-
tax  profit of department stores in the first half of 2018 was 0.7 million euros
-  46.8% lower than the year-on-year result.  The pre-tax profit was 1.1 million
euros  in the second  quarter, which was  9.9% less than the  result achieved in
2017. The repair works in Gonsiori Street, which disturbed the entire traffic in
downtown  Tallinn and had a negative impact on the flow of customers, influenced
the  sales revenue in the department store segment in the second quarter. In the
first half of 2018, the sales revenue of OÜ TKM Beauty Eesti, which operates the
I.L.U.  cosmetics stores,  was 2.0 million  euros, showing  a decrease  of 2.7%
compared  to the same period in 2017. The loss earned in the first half of 2018
was  0.2 million euros, the  loss was smaller  by 0.03 million euros compared to
the  first half of  2017. In the second  quarter of 2018, the  sales revenue was
1.0 million  euros, decreasing by 8.4% compared to  the same period in 2017. The
loss in the second quarter of 2018 was 0.05 million euros, which is 0.04 million
euros less than the loss earned in the comparable period in 2017. Poor access to
the Rocca al Mare Centre due to construction works at the Rocca al Mare junction
had  a negative  impact in  the second  quarter; construction works at Kristiine
Centre had a similar effect.

Car trade

In  the first half of 2018, the sales revenue of the car trade segment was 62.5
million  euros. The sales revenue exceeded the year-on-year revenue by 23.0% and
the  sales revenue of  KIAs increased by  7.2%. The sales revenue  earned in the
second  quarter, 34.9 million euros, exceeded  the year-on-year result by 31.1%
and the sales revenue of KIAs increased by 19.3%. Altogether, 2,879 new vehicles
were  sold in the first half  of the year, of which  1,650 cars were sold in the
second  quarter. The net profit of the segment earned in the first half of 2018
was  1.9 million euros, which is 4.4% higher than  the profit earned in the same
period  in previous year. The pre-tax profit  of the segment earned in the first
half  of 2018 was 2.6 million euros,  exceeding the profit of  the first half of
2017 by  14.7%. The pre-tax profit of the second quarter of 2018 was 1.7 million
euros, which exceeded the year-on-year profit by 70.6%. The driver of the growth
of  the sales revenue and profit was selling and servicing Peugeot vehicles that
was added to the car trade segment in the beginning of 2018 and the overall high
growth  trend in the car market. Selling and  servicing of all car brands of the
Group  was successful in all  Baltic States. In the  second quarter, the earlier
car  sale transactions with  car rental companies  were realised, resulting in a
steep jump in the sales numbers of new cars.

Footwear trade

The  sales revenue of  the footwear trade  segment was 4.7 million  euros in the
first  half of 2018. Compared to the  previous year, the sales revenue decreased
by 12.6% in the first half of the year. In the second quarter, the sales revenue
generated  by the segment was 2.5 million euros, showing a year-on-year decrease
of 9.0%. The sales volumes have decreased because compared to the results of the
previous  year,  as  several  footwear  stores,  belonging to the footwear trade
segment,  that did not meet the expectations have been closed. The loss was 0.2
million  euros in the first half of the  year. The loss earned in the comparable
period  a year earlier was  0.9 million euros. The profit  in the second quarter
was  0.1 million euros, which compared to  the year-on-year results is higher by
0.1 million  euros. This  better result  generated in  the second quarter is the
result of using better supply channels than previously and reorganisation of the
volume  of selling spaces. In the second half of 2018, the segment continues its
work to optimise the selling spaces at ABC King stores.

Real estate

In  the first half of 2018, the sales  revenue earned in the real estate segment
outside the Group was 2.7 million euros. The sales revenue grew by 8.6% compared
to last year. The sales revenue of the segment earned outside the Group was 1.4
million  euros in the second quarter.  The sales revenue increased by 9.6% year-
on-year.  The pre-tax  profit of  the real  estate segment  in the first half of
2018 was  5.3 million euros, which  is 8.3% lower than  the result earned in the
same  period last year. The pre-tax profit  of the segment in the second quarter
of  2018 was 2.5 million euros, which is  16.0% lower compared to the results of
the  same  period  last  year.  The  growth  in  the segment's sales revenue was
positively  affected by the gas station and store, completed in the beginning of
this  year  for  a  partner  outside  the  Group,  which is located in Rae rural
municipality,  in close proximity to  the Selver store in  Peetri. The growth of
the  segment is driven  significantly also by  Tartu Kaubamaja Centre and Viimsi
Centre  that,  despite  strong  competition,  are  occupied by tenants and still
popular  among  visitors.  The  decrease  in  profit  was  affected  by previous
contracts concluded inside the Group, related to Latvian real estate, which have
ended by now.



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In thousands of euros

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                                                 30.06.2018   31.12.2017
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  ASSETS
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  Current assets

  Cash and cash equivalents                          16,872       33,662

  Trade and other receivables                        12,949       16,127

  Inventories                                        72,422       75,816
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  Total current assets                              102,243      125,605
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  Non-current assets

  Long-term trade and other receivables                 115          114

  Investments in associates                             1,7        1,724

  Investment property                                50,477       49,902

  Property, plant and equipment                     203,208      214,475

  Intangible assets                                   5,398        5,675
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  Total non-current assets                          260,898       271,89
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  TOTAL ASSETS                                      363,141      397,495
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  LIABILITIES AND EQUITY
-------------------------------------------------------------------------
  Current liabilities

  Borrowings                                         21,682       54,818

  Trade and other payables                           78,896       85,569
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  Total current liabilities                         100,578      140,387
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  Non-current liabilities

  Borrowings                                         73,184       48,732

  Provisions for other liabilities and charges          420          360
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  Total non-current liabilities                      73,604       49,092
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  TOTAL LIABILITIES                                 174,182      189,479
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  Equity

  Share capital                                      16,292       16,292

  Statutory reserve capital                           2,603        2,603

  Revaluation reserve                                 81,22       82,124

  Currency translation differences                     -255         -255

  Retained earnings                                  89,099      107,252
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  TOTAL EQUITY                                      188,959      208,016
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  TOTAL LIABILITIES AND EQUITY                      363,141      397,495
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

In thousands of euros

-------------------------------------------------------------------------------
                      II quarter     II quarter
                      2018           2017           6 months 2018 6 months 2017
-------------------------------------------------------------------------------


 Revenue                     174,891        164,645       334,438       315,333

 Other operating
 income                          352            259         1,065           741



 Cost of sales              -131,873       -123,213       -252,56      -236,879

 Other operating
 expenses                    -13,744        -13,585       -27,581       -27,079

 Staff costs                 -16,529        -15,747       -32,317       -29,902

 Depreciation,
 amortisation and
 impairment losses             -3,39         -3,306        -6,827        -6,587

 Other expenses                 -335           -228          -643          -557
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 Operating profit              9,372          8,825        15,575         15,07
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 Finance income                    0              0             0             0

 Finance costs                  -187           -200          -357          -383

 Finance income on
 shares of associates             24             27            76            78
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 Profit before tax             9,209          8,652        15,294        14,765
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 Income tax expense                0            -15        -6,249        -6,386
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 NET PROFIT FOR THE
 FINANCIAL YEAR                9,209          8,637         9,045         8,379
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 Other comprehensive
 income:

 Items that will not
 be subsequently
 reclassified to
 profit or loss
-------------------------------------------------------------------------------
 Other comprehensive
 income for the
 financial year                    0              0             0             0
-------------------------------------------------------------------------------
 TOTAL COMPREHENSIVE
 INCOME FOR THE
 FINANCIAL YEAR                9,209          8,637         9,045         8,379
-------------------------------------------------------------------------------

Raul Puusepp

Chairman of the Board

Phone +372 731 5000

Attachment

  * Börs_Kaubamaja_2Q2018_eng (https://prlibrary-
    eu.nasdaq.com/Resource/Download/b6edcd93-c7f7-43c3-aeb1-d8cea1ceff1e)