Market announcement

Title

Unaudited consolidated interim accounts for the second quarter and first six months of 2019

Message

Segments (EURm)           Q2/19   Q2/18     yoy     6m/19   6m/18    yoy
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  Supermarkets              117.8   111.4    5.8%     228.7   216.1    5.9%

  Department stores          24.6    23.8    3.6%      47.8    46.6    2.5%

  Cars                       35.7    34.9    2.1%      62.0    62.5   -0.8%

  Footwear                    2.2     2.5   -13.6%      4.1     4.7   -13.7%

  Real Estate                 1.4     1.4    4.0%       2.8     2.7    5.6%
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  Total sales               181.7   174.0    4.5%     345.4   332.6    3.9%
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  Supermarkets                3.7     3.7    -2.4%      6.0     6.9   -12.5%

  Department stores           0.9     1.1   -23.4%      0.4     0.7   -39.8%

  Cars                        1.6     1.7    -6.8%      2.2     2.6   -15.9%

  Footwear                   -0.2     0.1   -259.4%    -0.6    -0.2   185.0%

  Real Estate                 2.8     2.5    11.3%      5.4     5.3    1.0%

  IFRS 16                    -0.4     0.0              -0.8     0.0
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  Total profit before tax     8.4     9.2    -9.2%     12.6    15.3   -17.4%
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In  the second quarter of 2019, the  unaudited consolidated sales revenue of the
Tallinna  Kaubamaja Group was 181.7 million euros,  exceeding the results of the
previous  year  by  4.5%. The  sales  revenue  of the first half-year was 345.4
million  euros,  showing  a  growth  of  3.9% compared to the first half-year of
2018, when  the comparable sales revenue was  332.6 million euros. In the second
quarter  of 2019, the Group's unaudited  consolidated net profit was 8.4 million
euros,  which  was  9.2% lower  than  the  profit  of the comparable period. The
Group's  net profit was 6.2 million euros in the first six months of 2019, which
is  nearly one  third lower  year-on-year. The  pre-tax profit  was 12.6 million
euros  in  the  first  half-year,  showing  a  decrease of 17.4% compared to the
previous  year. The net  profit was influenced  by a dividend  payment, on which
income  tax  in  the  amount  of  6.5 million  euros was calculated in the first
quarter  of 2019, compared to  the income tax  of 6.2 million euros calculated a
year earlier.

The  sales revenue of the  Group grew in all  important retail sales segments in
the  second quarter of 2019. The sales revenue growth of 2.1% in the car segment
is  also satisfactory compared to the multi-digit growth numbers of the previous
year.  Efficient  work  with  the  assortment  of  goods  and  the management of
mercantile  processes has resulted  in an improved  sales margin, which balances
out  the strong pressure on the labour costs growth. In a year, the labour costs
of  the Group increased at  the same rate as  the respective average in Estonia,
i.e. by one tenth. However, the reasons why the profit was lower compared to the
result  of the  previous year  are also  the influences  of the  IFRS 16 and the
growth  of other operating  expenses, such as  computer and communication costs,
that  support more  extensive process  automation. In  order to  manage the wage
pressure,  market  participants  are  reviewing  free services offered in retail
trade  market  to  price  them,  which  resulted  in  many  market participants,
including  Selver e-stores, increasing the  threshold of free-of-charge delivery
of packages in the second half-year.

The most important development projects of the Group are improvement of the user
convenience and speed of delivery of e-stores, implementing of business software
in  the  central  kitchen,  real  estate  segment,  and  footwear  segment,  the
development  of car  showrooms in  Latvia and  Lithuania, and the new production
plant  of Kulinaaria.  The alcohol  display limit,  which entered  into force in
June,  obligated store chains to place alcohol  apart from other goods and limit
its  visibility, which  required undertaking  the labour-intensive and expensive
reconstruction  of  stores.  In  the  supermarkets  segment,  there is a plan to
renovate  two stores this year and expand the SelveEkspress service to 52 Selver
stores  by  the  end  of  the  year.  More  attention is paid to responsible and
sustainable behaviour and promotion thereof.

From  1 January 2019, the  Group applies  the new  mandatory financial reporting
standard  IFRS 16 (Leases) in  lease cost accounting.  Pursuant to the standard,
leased assets and liabilities are recognised in the balance sheet at the present
value  of lease payments and the depreciation on the leased assets and estimated
interest  costs on lease liabilities in the income statement. As of 30.06.2019,
the  assets leased  in accordance  with IFRS  16 were recognised  in the balance
sheet  of  the  Group  in  the  net  present value of lease payments of 102,939
thousand  euros  and  corresponding  calculated  liabilities of 103,690 thousand
euros. The impact of IFRS 16 on the income statement is as follows:

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 in thousands of euros                            II quarter 2019 6 months 2019
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 Decrease in other operating expenses                       4 243         8 478

 Increase in depreciation                                  -4 109        -8 214
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 Increase in operating profit                                 134           264
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 Calculated interest expense on lease liabilities            -512         -1015
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 Decrease in the net profit                                  -378          -751
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Selver supermarkets

The  consolidated sales revenue of the  supermarkets business segment was 228.7
million  euros in the first half-year  of 2019, increasing by 5.9% in comparison
with  the same period  last year. The  consolidated sales revenue  of the second
quarter  was 117.8 million  euros, growing  by 5.8% in  comparison with the same
period  last year.  At Selver  stores, 19.8 million  purchases were  made in the
first half of 2019, exceeding the year-on-year result by 4.5%.

In  the second  quarter of  2019, both pre-tax  profit and  net profit were 3.7
million  euros, remaining  at the  same level  of the  comparable period of last
year.  The  consolidated  pre-tax  profit  of  the supermarkets segment was 6.0
million  euros in the first half-year, which is 0.9 million euros lower compared
to the result of the previous year. The net profit earned in the first half-year
was  2.1 million euros, decreasing  by 0.8 million euros  compared to last year.
The  difference between the  net profit and  profit before income  tax is due to
income  tax paid  on dividends  - income  tax paid  on dividends was 0.1 million
euros  lower in  2019 compared to  the year  earlier. The  lower tax load due to
dividends  is caused by the changes in the taxation principles of dividends that
allow applying a lower tax rate on one third of the previous year's dividends.

The growth of the sales revenue of the second quarter in Selver supermarkets was
at  the same pace as in the relevant market segment. The comparison basis of the
second  quarter is  lower by  two stores  that were  added in the second half of
2018 and  partly higher  by the  specific goods  sales due to exceptionally good
summer weather last year. E-commerce shows good results, where the sales revenue
grew  39% in the second quarter.  Profit earning is influenced  by the growth of
sales revenue and more efficient management of goods. Investments have continued
to  have a positive impact, allowing cutting administrative and management costs
as  well as employees' working hours. To  balance the decrease in the employees'
working  hours,  their  wages  were  adjusted,  which  translated  into a slight
decrease  in  the  efficiency  regarding  labour  costs.  The  results  are also
influenced  by the amendment of  the Alcohol Act, due  to which significant one-
time expenses were incurred during the rearrangement of sales floors.

This  year,  Selver  plans  to  renovate  up  to  two  stores  and introduce the
SelveEkspress  service to 52 Selver stores by the end of the year. As at the end
of  the second  quarter of  2019, the SelveEkspress  service is available in 49
stores and over 300,000 loyal customers have used the service. The work with the
development  of e-commerce will continue to  improve the capacity to service the
rapidly growing number of customers.

Department stores

In the first six months of 2019, the department stores business segment earned a
sales  revenue of 47.8 million euros,  which is 2.5% more than  last year in the
same  period. In the second quarter, the  sales revenue of the department stores
was 24.6 million euros, which is 3.6% higher than the comparable result achieved
last year. Kaubamaja e-store grew by 38% in the first half-year of 2019 compared
to  the same period last  year. The pre-tax profit  of the department stores was
0.4 million  euros in the first six  months of 2019, which was 39.8% lower year-
on-year.  The pre-tax profit  of the department  stores was 0.9 million euros in
the  second quarter, which was 23.4% lower than the comparable period. The sales
results  of the department stores in the first half-year were influenced by very
successful  campaigns  organised  in  the  first  and  second quarter. The 42nd
Osturalli  sales campaign  organised in  spring was  the most  successful of all
time.  Good weather in the  beginning of spring was  favourable for the sales of
seasonal  goods. In the second quarter, the  result of the department stores was
influenced  by the reconstruction of the alcoholic beverages departments in both
sales   houses,   which   disturbed  the  sales  process  in  Toidumaailm  (Food
Department).  The  labour  costs  that  increased  in  the  second  quarter also
influenced the profit of the department stores.

This year, Kaubamaja pays special attention to sustainability and especially how
packages  are used in the sales houses. Starting from the beginning of 2019, all
plastic  bags have to  be paid for  in the department  stores and the goal is to
gradually   replace  all  packages  with  packages  manufactured  from  recycled
materials.  At the end  of June, reusable  bags fully manufactured from recycled
plastic  bottles were  added to  plastic bags  made from  recycled materials and
paper bags.

In  the second quarter of 2019, the sales  revenue of OÜ TKM Beauty Eesti, which
operates  I.L.U. cosmetics  stores, was  1.1 million euros,  showing a growth of
8.4% compared  to the same period in 2018. The loss was 0.1 million euros in the
second  quarter of 2019, which remained  at the same level  as in the comparable
period  of 2018. The sales revenue was  2.2 million euros in the first half-year
of  2019, growing by 5.7% year-on-year. The loss  earned in the first six months
of 2019 was 0.2 million euros, which was at the same level as the loss earned in
the  comparable  period  of  2018. The  sales  revenue of the second quarter was
positively  influenced by the continued growth  of popularity of the e-store and
successful marketing campaigns.

Car trade

The  sales revenue of the car trade  segment was 62.0 million euros in the first
half-year  of 2019. The sales revenue  decreased by 0.8% year-on-year. The sales
revenue  of 35.7 million euros earned in  the second quarter exceeded the result
of  the previous year  by 2.1%. In the  first half-year, 2,773 new vehicles were
sold  altogether, of which 1,630 vehicles in  the second quarter. The net profit
of  the segment  earned in  the first  half-year of  2019 was 1.5 million euros,
which  was 18.3% lower than the profit earned  in the previous year. The pre-tax
profit  of the segment  was 2.2 million euros  in the first  half-year, which is
15.9% lower  than the profit earned in  the first half-year of 2018. The pre-tax
profit  earned in  the second  quarter of  2019 was 1.6 million  euros, which is
6.8% lower  year-on-year. In the beginning of  the second quarter, the KIA plant
had  some issues with  the delivery of  cars. This caused  most of the sales and
divestments  to be effected  in May and  some in June.  The majority of divested
cars  were  vehicles  of  short  term  lease  companies.  Due to the exchange of
importers  and coordination of  action strategy, the  margins earned on Opel and
Peugeot vehicles were temporarily smaller than planned.

Footwear trade

The  sales revenue of  the footwear trade  segment was 4.1 million  euros in the
first  half-year of 2019. The sales revenue  dropped by 13.7% in the first half-
year  compared to last  year. The sales  revenue of the  segment was 2.2 million
euros in the second quarter, decreasing by 13.6% year-on-year. The loss was 0.6
million  euros in  the first  half-year. The  year-on-year loss  was 0.2 million
euros.  In the second quarter, the loss was 0.2 million euros, which is a weaker
result  by 0.3 million euros  compared to the  same period last  year. The sales
revenue  earned in the second quarter was unfavourably influenced by the partial
delay  in the spring season  goods and the assortment  of goods. From 1 May, TKM
Group  merged the chain's commercial activities under joint management and Anne-
Liis Ostov, who took on the position of a member of board of TKM King, continues
also as manager of TKM Beauty Eesti.

Real estate

The  sales revenue earned in the real  estate segment outside the Group was 2.8
million  euros in the first six months  of 2019. The sales revenue grew by 5.6%
compared to last year. The sales revenue outside of the Group of the segment was
1.4 million  euros in the  second quarter. The  sales revenue increased by 4.0%
year-on-year.  The pre-tax  profit of  the real  estate segment  was 5.4 million
euros  in the  first half-year  of 2019. The  profit grew  1.0% compared to last
year. The pre-tax profit of the segment earned in the second quarter of 2019 was
2.8 million  euros, which  is 11.3% higher  than the  result earned  in the same
period last year. The sales revenue grew in all real estate segment companies in
the  first half-year. The Latvian real estate company that leased the commercial
space  in the Ogre building to a party outside of the Group achieved the highest
sales  growth in  the segment.  The growth  of the  sales revenue outside of the
Group  as  well  as  the  completion  of  Kolde  Selver  at the end of last year
increased  the profit  of the  segment in  the reporting  period. This year, the
development of the Latvian and Lithuanian car centres will continue.


CONSOLIDATED STATEMENT OF FINANCIAL POSITION


In thousands of euros?


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                                                 30.06.2019   31.12.2018
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  ASSETS
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  Current assets

  Cash and cash equivalents                          25,386       37,235

  Trade and other receivables                        14,201       16,093

  Inventories                                        70,625       78,212
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  Total current assets                              110,212      131,540
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  Non-current assets

  Long-term trade and other receivables                 113          113

  Investments in associates                           1,742        1,738

  Investment property                                59,873       59,866

  Property, plant and equipment                     315,976      212,687

  Intangible assets                                   4,914        5,133
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  Total non-current assets                          382,618      279,537
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  TOTAL ASSETS                                      492,830      411,077
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  LIABILITIES AND EQUITY
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  Current liabilities

  Borrowings                                         32,845       26,002

  Trade and other payables                           81,601       90,775
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  Total current liabilities                         114,446      116,777
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  Non-current liabilities

  Borrowings                                        175,142       68,313

  Provisions for other liabilities and charges          370          370
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  Total non-current liabilities                     175,512       68,683
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  TOTAL LIABILITIES                                 289,958      185,460
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  Equity

  Share capital                                      16,292       16,292

  Statutory reserve capital                           2,603        2,603

  Revaluation reserve                                94,541       95,587

  Currency translation differences                     -149         -149

  Retained earnings                                  89,585      111,284
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  TOTAL EQUITY                                      202,872      225,617
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  TOTAL LIABILITIES AND EQUITY                      492,830      411,077
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


In thousands of euros

-------------------------------------------------------------------------------
                        II quarter     II quarter
                           2019           2018      6 months 2019 6 months 2018
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 Revenue                     181,731        173,977       345,426       332,610

 Other      operating
 income                          157            352           397         1,065



 Cost of sales              -136,408       -130,959      -259,734      -250,732

 Other      operating
 expenses                    -10,273        -13,744       -20,825       -27,581

 Staff costs                 -18,299        -16,529       -35,545       -32,317

 Depreciation,
 amortisation     and
 impairment losses            -7,693         -3,390       -15,330        -6,827

 Other expenses                 -160           -335          -411          -643
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 Operating profit              9,055          9,372        13,978        15,575
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 Finance costs                  -752           -187        -1,466          -357

 Finance   income  on
 shares of associates             58             24           114            76
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 Profit before tax             8,361          9,209        12,626        15,294
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 Income tax expense                0              0        -6,453        -6,249
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 NET PROFIT FOR THE
 FINANCIAL YEAR                8,361          9,209         6,173         9,045
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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                8,361          9,209         6,173         9,045
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Raul Puusepp

Chairman of the Board

Phone +372 731 5000