Market announcement

Title

AS Tallink Grupp Unaudited Consolidated Interim Report Q2 2019

Message

In the second quarter (1 April - 30 June) of the 2019 financial year Tallink
Grupp AS and its subsidiaries (the Group) carried 2.7 million passengers, which
is 0.8% more than in the second quarter last year. The Group's unaudited revenue
for the second quarter increased by 0.3% to a total of EUR 256.1 million.
Unaudited EBITDA for the second quarter was EUR 50.7 million (EUR 43.5 million
in Q2 2018) and unaudited net profit was EUR 14.9 million (net profit of EUR
15.3 million in Q2 2018).

In the second quarter, the Group's revenue and operating result were impacted by
the following operational factors:

  * The number of passengers travelling on the Group's ships increased in almost
    all geographical segments (Estonia-Finland, Finland-Sweden and Latvia-
    Sweden).
  * The competition on the maritime traffic between Estonia and Finland puts
    pressure on ticket prices.
  * In 2019 the Easter holidays, when traffic volumes usually increase, were in
    April, last year the holidays were in March.

Sales and segments

In the second quarter of 2019, the Group's total revenue increased by EUR 0.7
million and amounted to EUR 256.1 million. The revenue in the second quarter of
2018 and 2017 was EUR 255.4 and EUR 259.9 million, respectively.

  * The total revenue from the shipping operations in the Baltic Sea (core
    business) increased by 0.5% or EUR 1.3 million to 235.8 million.
  * The revenue from the other segment, including intra-group eliminations,
    decreased by a total of EUR 0.6 million and amounted to EUR 20.3 million.
    The decrease was driven largely by lower accommodation sales resulting from
    the ceased operations of Tallink Pirita Spa Hotel in Tallinn from November
    2018 due to sale of the hotel property by its owner.

In the second quarter of 2019, The Group's ships carried a total of 1.4 million
passengers on the Estonia-Finland routes, which is a 0.5% increase compared to
last year. The number of transported cargo units on the routes decreased by
0.8%. On the Tallinn - Helsinki route, added capacity by competitors further
increased pressure on ticket prices. The Estonia-Finland segment revenue
decreased by EUR 1.3 million and amounted to EUR 94.9 million. The segment
result increased by EUR 0.5 million and amounted to EUR 21.5 million.

The Finland-Sweden routes' revenue increased by EUR 1.0 million and amounted to
EUR 89.6 million. The segment result of Finland-Sweden routes increased by
29.1% or EUR 2.1 million, supported by an increase in the number of carried
passengers and transported cargo units.

While the number of passengers carried on the Estonia-Sweden routes decreased by
3.0% and the number of transported cargo units decreased by 10.4%, the routes'
revenue decreased only by 0.8% or EUR 0.3 million and amounted to EUR 31.3
million.

The Latvia-Sweden route's revenue increased by EUR 1.8 million, which is a 9.9%
increase compared to last year. The positive development of the route's
passenger and cargo carriage volumes continued in the second quarter of the
2019 financial year, which resulted in a 5.2% increase in the number of carried
passengers and a 7.4% increase in transported cargo units.

Earnings

In the second quarter of 2019, the Group's gross profit increased by EUR 3.6
million compared to the same period last year, amounting to EUR 60.6 million.
Second quarter EBITDA increased by EUR 7.2 million and amounted to EUR 50.7
million, second quarter comparable EBITDA, i.e. without IFRS 16 adoption effect,
increased by EUR 3.0 million compared to the same period last year and was EUR
46.5 million.

The Group's second quarter result was impacted positively by lower fuel cost
resulting from agreements with the fuel suppliers to fix the price for 41% of
total fuel purchasing volume for the 2019 financial year and from savings on
total fuel consumption, through various energy efficiency initiatives.

Amortisation and depreciation expense increased by EUR 3.6 million to EUR 23.3
million compared to the second quarter of 2018. The increase was mainly a result
of the IFRS 16 adoption effect in the amount of EUR 3.7 million.

Net finance costs decreased by EUR 0.6 million compared to the second quarter
last year. The change includes a decline of EUR 1.3 million in interest costs
compared to same period the previous year and EUR 150 thousand less profit from
foreign exchange differences and the revaluation of cross currency and interest
rate derivatives. In addition, in Q2 there is EUR 0.6 million interest expense
from right-of-use assets liabilities (IFRS 16 adoption effect).

Second quarter profit before income tax increased by 22.0% or EUR 4.1 million
compared to the same period last year and amounted to EUR 23.0 million.

Net profit for the second quarter of 2019 was impacted by the higher income tax,
which was related to increase in dividends compared to last year.

The Group's unaudited net profit for the second quarter of 2019 was EUR 14.9
million or EUR 0.022 per share compared to a net profit of EUR 15.3 million or
EUR 0.023 per share in the second quarter of 2018 and compared to a net profit
of EUR 17.9 million or EUR 0.027 per share in the second quarter of 2017.

Results of the first 6 months of 2019

In the first 6 months (1 January - 30 June) of the 2019 financial year the Group
carried 4.5 million passengers which is 1.2% less compared to the same period
last year. The Group's unaudited revenue for the period decreased by 1.0% and
was EUR 435.0 million. Unaudited EBITDA for the first 6 months was EUR 54.5
million (EUR 47.7 million, 6M 2018) and unaudited net loss was EUR 10.4 million
(EUR 4.3 million, 6M 2018 net loss).

The financial result of the first 6 months of 2019 was impacted by following
factors:

  * Planned dockings of seven ships in the first quarter resulted in 50 trips
    less compared to last year. Among other ships, the maintenance and repair of
    the cruise ferry Baltic Queen lasted for 42 days, which affected the
    Estonia-Sweden segment's carriage volumes and financial result.
  * High competition on the maritime traffic between Estonia and Finland, which
    puts pressure on ticket prices.

Investments

In the second quarter of 2019 financial year the Group's investments amounted to
EUR 18.5 million, which included a prepayment for the new ship in the amount on
EUR 12.4 million.

Investments were also made to the ships' technical maintenance and innovative
energy efficiency solutions as well as to the development of the online booking
and sales systems.

Dividends

In May 2019 the shareholders' annual general meeting decided to pay a dividend
of EUR 0.05 per share from net profit for 2018. The total dividend amount of EUR
33.5 million was paid out on 03 July 2019 (third quarter). In addition, to
improve the Company's capital structure, the shareholders' annual general
meeting decided to reduce the Company's share capital by EUR 0.07 per share or
by EUR 46.9 million, which is expected to be paid in December 2019. The list of
entitled shareholders was fixed on 20 June 2019.

Financial position

In the second quarter, the Group's net debt decreased by EUR 19.7 million to EUR
537.1 million and the net debt to EBITDA ratio was 3.6 at the reporting date.

At the end of the second quarter, total liquidity (cash, cash equivalents and
unused credit facilities) amounted to EUR 123.1 million (EUR 165.4 million at
30 June 2018) providing a strong financial position for sustainable operations.

At 30 June 2019, the Group's cash and cash equivalents amounted to EUR 67.1
million (EUR 90.4 million at 30 June 2018) and the Group had EUR 56.0 million in
unused credit lines (EUR 75.0 million at 30 June 2018).

Economic Environment

The Group considers Finland, Sweden, Estonia and Latvia its home markets as
these are the countries to and from the shipping routes are operated. In terms
of exposure to economic conditions, the Group is exposed the most to
developments in Finland as nearly half of the passenger originate from that
country. Exposure is also high to economic developments in Estonia (19% of total
passengers in 2018) and Sweden (11%). The number of passengers from Latvia
accounted for 5% of the total passengers in 2018 while the remaining 19% came
from the rest of the world, mainly Europe.

There is no data yet available for the GDP for the second quarter of 2019,
however, the apparent census of various sources for full year of 2019 has
projected the real GDP growth rates to slow relative to 2018 for all the home
markets. The first half-year's business confidence developments across all home
markets corroborate such expectations.

Further, the GDP growth rates of the first quarter of 2019 were in-line with the
annual expectations in Sweden and Latvia. The growth pace in Finland was even
slower relative to the full year consensus estimates. In Estonia, however, the
first quarter GDP growth rate was ahead of the expected pace for the full year.

According to the OECD data, the business confidence continued to decline across
all of the home markets also throughout the second quarter of 2019. For the
second quarter in a row, the decline was particularly steep in Estonia. Among
the Group's home markets business confidence remained the highest in Latvia with
a positive outlook towards the future also still present in Sweden. The
indicator implies businesses possessing a pessimistic outlook in Finland and
Estonia.

As the first quarter trends suggested the further weakening of the low
confidence of Swedish consumers effectively stopped in the second quarter of
2019.  However, this was not the case with the Finnish consumers' confidence
which continued to plummet also in the second quarter of 2019. The confidence is
now clearly below the long-term averages. The long-term data also suggests
consumer confidence development being a leading indicator for business
confidence in Finland. Thus the short-term outlook for Finnish business
confidence is weak.

While the Finnish and Swedish consumers were more wary with their spending in
the second quarter due to relatively low confidence the consumer confidence in
Estonia and Latvia remained buoyant with consumers more inclined to spend rather
than save.

According to Eurostat's harmonised indices of consumer prices in the second
quarter of 2019, the price inflation increased relative to the inflation
measured in the first quarter of 2019 across all the home markets. The increase
in inflation rate was more substantial in Estonia and Latvia while the increase
in both Finland and Sweden was marginal. The inflation remained above the ECB
target rate of 2% in Estonia and Latvia and below the target in Sweden and
Finland.

The labour situation has remained challenging in the first half of the year
reflecting the recent low unemployment rates in the home markets, particularly
in Estonia. The situation of the Estonian labour market has also contributed to
the growing divergence between business and consumer confidence developments,
which steepened well in the first half of 2019.

Measured in euros the effective market prices of relevant fuels remained, on
average, at comparable levels to the second quarter of 2018. And lastly, the
operating environment on the Estonia-Finland route saw an increase in
competition with additional departures and capacity introduced during the
quarter.

Key risks to the economic environment in all of the home markets have to do with
uncertainties from increasing protectionist tendencies (including a potential
trade war between China and the US, the UK's withdrawal from the EU) and
potential deferral of investments leading to decreasing trade for all of the
open economies around the Baltic Sea. Also, global fuel prices are expected to
remain volatile due to uncertainties in the global economy and politics.

Events in Q2

Changes in the Management Board
On 22 February 2019, it was announced that the Supervisory Board appointed Mrs
Piret Mürk-Dubout as a Member of the Management Board. The mandate of Mrs Mürk-
Dubout started on 15 April 2019 and lasts for a period of three years.

Prepayment for the new ship
The first instalment of the prepayment according to the shipbuilding contract to
Rauma Marine Constructions in an amount of EUR 12.4 million was made in April
2019.

Dividends and capital reduction
In May 2019 the shareholders' general meeting decided to pay a dividend of EUR
0.05 per share from net profit for 2018. The total dividend in amount of EUR
33.5 million was paid out on 03 July 2019 (third quarter). The dividend related
income tax in amount of EUR 8.0 million was recorded in the second quarter. In
addition, to improve the Company's capital structure, the shareholders' annual
general meeting decided to reduce the Company's share capital by EUR 0.07 per
share or by EUR 46.9 million, which is expected to be paid in December 2019.

Events after the reporting period and outlook

Signing of the loan agreement
Tallink Superfast Ltd., a subsidiary of Tallink Grupp AS, and KfW IPEX-Bank GmbH
signed a loan agreement in the amount of EUR 197.6 million to finance the new
EUR 247 million LNG powered fast ferry currently under construction in Rauma
Marine Constructions Oy.

The loan is arranged and long-term financing is provided by KfW IPEX-Bank GmbH.
Finnish Export Credit Agency "Finnvera" guarantees 95% of this post-delivery
buyer credit.

The loan is secured by the mortgage on the new vessel and the corporate
guarantee of Tallink Grupp AS. This OECD-term export credit loan will be drawn
on the delivery of the vessel, presumably in the beginning of 2022 and has the
final maturity of twelve years from the drawdown.

Contingent risk
In the legal proceedings commenced in 1996 (against S.A. Bureau Veritas and Jos
L. Meyer Werft GmbH) the French court (Tribunal de Grande Instance de Nanterre)
reached a verdict on 19 July 2019 which found there to be no legal grounds for
the claims made against Bureau Veritas, which meant it was unnecessary to adopt
any verdicts regarding involved persons. The court decided to order Bureau
Veritas to pay Tallink Silja OY a compensation to cover the legal costs. The
said compensation has no significant impact on the financial results of the
Group.

Earnings
The Group's earnings are not generated evenly throughout the year. The summer
period is the high season in the Group's operations. In management's opinion and
based on prior experience most of the Group's earnings are generated during the
summer (June-August).

Research and development projects
Tallink Grupp AS does not have any substantial ongoing research and development
projects. The Group is continuously seeking opportunities for expanding its
operations in order to improve the results.

The Group is looking for innovative ways to upgrade our ships and passenger area
technology to improve the overall performance of our company through modern
solutions. A collaboration with the Tallinn University of Technology (TalTech)
was started in the first quarter of 2019 to develop so-called ?Smart Car Deck"
solutions for the Group's vessels over the next two years.

In addition to that, the Group is participating in a programme, funded by the
European Space Agency, with a goal to develop techniques for autonomous
navigation for ships, using a combination of different sensors, machine learning
and artificial intelligence.

Risks
The Group's business, financial position and operating results could be
materially affected by various risks. These risks are not the only ones we face.
Additional risks and uncertainties not presently known to us, or that we
currently believe are immaterial or unlikely, could also impair our business.
The order of presentation of the risk factors below is not intended to be an
indication of the probability of their occurrence or of their potential effect
on our business.

  * Accidents, disasters
  * Macroeconomic developments
  * Changes in laws and regulations
  * Relations with trade unions
  * Increase in the fuel prices and interest rates
  * Market and customer behaviour


Key figures

 For the period                                    Q2 2019     Q2 2018 Change %
-------------------------------------------------------------------------------
 Revenue (million euros)                             256.1       255.4     0.3%

 Gross profit (million euros)                         60.6        57.1     6.1%

 EBITDA¹ (million euros)                              50.7        43.5    16.6%

 EBITDA adjusted² (million euros)                     46.5        43.5     6.8%

 EBIT¹ (million euros)                                27.4        23.8    15.1%

 Net profit for the period (million euros)            14.9        15.3    -2.6%



 Depreciation and amortisation³ (million
 euros)                                               23.3        19.7    18.5%

 Capital expenditures¹ ?(million euros)               18.5         6.4

 Weighted average number of ordinary shares
 outstanding                                   669 882 040 669 882 040     0.0%

 Earnings per share¹                                 0.022       0.023    -2.6%



 Number of passengers¹                           2 651 843   2 631 326     0.8%

 Number of cargo units¹                             99 546     101 072    -1.5%

 Average number of employees¹                        7 363       7 611    -3.3%



 As at                                            30.06.19    31.03.19 Change %
-------------------------------------------------------------------------------
 Total assets³ (million euros)                     1 609.9     1 572.3     2.4%

 Total liabilities (million euros)                   800.0       744.0     7.5%

 Interest-bearing liabilities? (million euros)       604.2       604.6    -0.1%

 Net debt¹ (million euros)                           537.1       556.8    -3.5%

 Net debt to EBITDA¹                                   3.6         3.9    -8.2%

 Total equity (million euros)                        809.9       828.3    -2.2%

 Equity ratio¹ (%)                                   50.3%       52.7%



 Number of ordinary shares outstanding         669 882 040 669 882 040     0.0%

 Equity per share¹                                    1.21        1.24    -2.2%



 Ratios¹                                           Q2 2019     Q2 2018
-------------------------------------------------------------------------------
 Gross margin (%)                                    23.7%       22.3%

 EBITDA margin (%)                                   19.8%       17.0%

 EBITDA margin adjusted² (%)                         18.1%       17.0%

 EBIT margin (%)                                     10.7%        9.3%

 Net profit margin (%)                                5.8%        6.0%



 ROA (%)                                              4.0%        4.2%

 ROE (%)                                              4.1%        5.5%

 ROCE (%)                                             4.9%        5.3%



((1) Alternative performance measures based on ESMA guidelines are disclosed in
the Alternative Performance Measures section of this Interim Report.
(2) Comparable EBITDA for Q2 2019 without IFRS 16 adoption effect.
(3) Please see note 6 for IFRS 16 adoption effect on assets.
(4) Please see note 8 for IFRS 16 adoption effect on interest-bearing
liabilities.
(5) Does not include additions to right-of-use assets.)

EBITDA: result from operating activities before net financial items, share of
profit of equity-accounted investees, taxes, depreciation and amortization
EBIT: result from operating activities
Earnings per share: net profit / weighted average number of shares outstanding
Equity ratio: total equity / total assets
Shareholder's equity per share: shareholder's equity / number of shares
outstanding
Gross margin: gross profit / net sales
EBITDA margin: EBITDA / net sales
EBIT margin: EBIT / net sales
Net profit margin: net profit / net sales
Capital expenditure: additions to property, plant and equipment - additions to
right-of-use assets + additions to intangible assets
ROA: earnings before net financial items, taxes 12-months trailing / average
total assets
ROE: net profit 12-months trailing / average shareholders' equity
ROCE: earnings before net financial items, taxes 12-months trailing / (total
assets - current liabilities (average for the period))
Net debt: interest-bearing liabilities less cash and cash equivalents
Net debt to EBITDA: net debt / EBITDA 12-months trailing


Consolidated statement of profit or loss and other comprehensive income

                                                               Jan-Jun  Jan-Jun
 Unaudited, in thousands of EUR              Q2 2019  Q2 2018     2019     2018
-------------------------------------------------------------------------------
 Revenue (Note 3)                            256 103  255 409  434 973  439 564

 Cost of sales                              -195 469 -198 356 -363 840 -368 804
-------------------------------------------------------------------------------
 Gross profit                                 60 634   57 053   71 133   70 760



 Sales and marketing expenses                -19 212  -20 329  -36 254  -36 642

 Administrative expenses                     -14 443  -13 805  -29 511  -26 533

 Other operating income                          439      954    1 163    1 067

 Other operating expenses                        -11      -54      -25      -81
-------------------------------------------------------------------------------
 Result from operating activities             27 407   23 819    6 506    8 571



 Finance income (Note 4)                          93    2 880    1 095    5 958

 Finance costs (Note 4)                       -4 506   -7 844   -9 837  -15 217
-------------------------------------------------------------------------------
 Profit/loss before income tax                22 994   18 855   -2 236     -688



 Income tax                                   -8 104   -3 576   -8 129   -3 599



 Net profit/loss for the period               14 890   15 279  -10 365   -4 287

 Net profit/loss for the period
 attributable to equity holders of the
 Parent                                       14 890   15 279  -10 365   -4 287



 Other comprehensive income

 Items that may be reclassified to profit
 or loss

 Exchange differences on translating
 foreign operations                              257      461      422      393
-------------------------------------------------------------------------------
 Other comprehensive income for the period       257      461      422      393



 Total comprehensive income/loss for the
 period                                       15 147   15 740   -9 943   -3 894

 Total comprehensive income/loss for the
 period attributable to equity holders of
 the Parent                                   15 147   15 740   -9 943   -3 894



 Earnings per share (in EUR, Note 5)           0.022    0.023   -0.015   -0.006
-------------------------------------------------------------------------------


Consolidated statement of financial position

 Unaudited, in thousands of EUR                30.06.2019 30.06.2018 31.12.2018
-------------------------------------------------------------------------------
 ASSETS

 Cash and cash equivalents                         67 070     90 402     82 175

 Trade and other receivables                       53 270     56 052     43 805

 Prepayments                                       12 134     14 367      6 084

 Prepaid income tax                                    46         49         46

 Inventories                                       39 326     40 953     35 741
-------------------------------------------------------------------------------
 Current assets                                   171 846    201 823    167 851



 Investments in equity-accounted investees            407        403        407

 Other financial assets                               326        324        320

 Deferred income tax assets                        17 934     18 718     17 934

 Investment property                                  300        300        300

 Property, plant and equipment (Note 6)         1 373 420  1 285 775  1 267 928

 Intangible assets (Note 7)                        45 640     47 199     46 164
-------------------------------------------------------------------------------
 Non-current assets                             1 438 027  1 352 719  1 333 053

 TOTAL ASSETS                                   1 609 873  1 554 542  1 500 904



 LIABILITIES AND EQUITY

 Interest-bearing loans and borrowings (Note
 8)                                               108 190    163 235     78 658

 Trade and other payables                         107 626    107 003    100 682

 Derivatives                                            0     28 441        918

 Payables to owners                                33 496     20 099          2

 Income tax liability                               8 049      3 562        116

 Deferred income                                   46 635     45 284     32 113
-------------------------------------------------------------------------------
 Current liabilities                              303 996    367 624    212 489



 Interest-bearing loans and borrowings (Note
 8)                                               495 970    374 201    431 477

 Other liabilities                                      0         16         22
-------------------------------------------------------------------------------
 Non-current liabilities                          495 970    374 217    431 499
-------------------------------------------------------------------------------
 Total liabilities                                799 966    741 841    643 988



 Share capital (Note 9)                           361 736    361 736    361 736

 Share premium                                        663        639        662

 Reserves                                          70 893     70 641     69 474

 Retained earnings                                376 615    379 685    425 044
-------------------------------------------------------------------------------
 Equity attributable to equity holders of the
 Parent                                           809 907    812 701    856 916

 Total equity                                     809 907    812 701    856 916
-------------------------------------------------------------------------------
 TOTAL LIABILITIES AND EQUITY                   1 609 873  1 554 542  1 500 904


Consolidated statement of cash flows

                                                                Jan-Jun Jan-Jun
 Unaudited, in thousands of EUR                 Q2 2019 Q2 2018    2019    2018
-------------------------------------------------------------------------------


 CASH FLOWS FROM OPERATING ACTIVITIES

 Net profit/loss for the period                  14 890  15 279 -10 365  -4 287

 Adjustments                                     36 133  28 140  65 377  52 543

 Changes in:

 Receivables and prepayments related to
 operating activities                           -11 569 -12 513 -15 521 -18 538

 Inventories                                     -3 021  -3 455  -3 585    -278

 Liabilities related to operating activities     14 154  19 064  21 704  25 420
-------------------------------------------------------------------------------
 Changes in assets and liabilities                 -436   3 096   2 598   6 604

 Cash generated from operating activities        50 587  46 515  57 610  54 860

 Income tax paid                                   -136     -19    -218     -71
-------------------------------------------------------------------------------
 NET CASH FROM OPERATING ACTIVITIES              50 451  46 496  57 392  54 789



 CASH FLOWS FROM INVESTING ACTIVITIES

 Purchase of property, plant, equipment and
 intangible assets (Notes 6, 7)                 -18 456  -6 284 -43 718 -14 649

 Proceeds from disposals of property, plant,
 equipment                                           64      16     142      42

 Interest received                                    0       0       1       1
-------------------------------------------------------------------------------
 NET CASH USED IN INVESTING ACTIVITIES          -18 392  -6 268 -43 575 -14 606



 CASH FLOWS FROM FINANCING ACTIVITIES

 Repayment of loans received (Note 8)           -14 834 -12 834 -31 334 -27 334

 Change in overdraft (Note 8)                     9 152  -2 331  19 009       0

 Payments for settlement of derivatives               0    -909  -1 029  -1 746

 Payment of lease liabilities (Note 8)           -3 667     -27  -7 134     -52

 Interest paid                                   -3 415  -3 854  -8 434  -9 560
-------------------------------------------------------------------------------
 NET CASH USED IN FINANCING ACTIVITIES          -12 764 -19 955 -28 922 -38 692



 TOTAL NET CASH FLOW                             19 295  20 273 -15 105   1 491
-------------------------------------------------------------------------------


 Cash and cash equivalents at the beginning of
 period                                          47 775  70 129  82 175  88 911

 Increase in cash and cash equivalents           19 295  20 273 -15 105   1 491
-------------------------------------------------------------------------------
 Cash and cash equivalents at the end of period  67 070  90 402  67 070  90 402


Veiko Haavapuu
Financial Director

AS Tallink Grupp
Sadama 5
10111 Tallinn, Estonia
E-mail [email protected]