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Coronavirus implications for Tallinna Kaubamaja Grupp AS business

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On  12 March, the Government of the Republic declared an emergency situation due
to the global pandemic spread of the coronavirus, which causes the disease known
as  COVID-19, the detection of  the spread of  the virus within  Estonia and the
high  probability  of  its  further  spread,  and  the  resulting  risk  of mass
infection.  As of 27 March, additional restrictions  were imposed on the freedom
of  movement  in  commercial  enterprises  under  the  order  of the head of the
emergency  situation of 24 March. The measures will remain valid until the order
is  amended and their  necessity is assessed  at least every  two weeks. At this
time,  it is not known when the shopping centres can be reopened for business in
their entirety.

The various measures established to prevent the spread of the COVID-19 virus led
to  abrupt  changes  in  the  current  organisation  of life and in the economic
environment  and affected the daily work  of the companies of Tallinna Kaubamaja
Group.  Tallinna  Kaubamaja  Group  monitors  the  developments  related  to the
outbreak  closely and  diligently implements  the instructions  of the  WHO, the
Government of the Republic, and the Health Board.

The  end of the first quarter  of 2020, which began at a  good pace for both the
Estonian  economy as a whole  and Tallinna Kaubamaja Group,  was hit hard by the
coronavirus  crisis,  which  has  had  a  serious  impact  on  the  economy. The
coronavirus crisis began at the end of the first quarter and as such, its impact
will  not be fully  reflected in the  results for the  first quarter of Tallinna
Kaubamaja  Group. According  to the  unaudited financial  results for  the first
quarter  of 2020, published  on 13 April,  the Group's  sales revenue was 175.5
million  euros (an increase  of 7.4% compared to  the first quarter of 2019) and
the  net loss for the accounting period  was 1.7 million euros due to the income
tax on dividends (the loss in the first quarter of 2019 was 2.2 million euros).

In  connection with  the virus  threat, the  Group immediately  took measures to
ensure  the safety of both its customers  and employees. To ensure the safety of
customers,  the Group's retail  units were equipped  with hand disinfectants and
instructions  for their use  at store entrances.  In addition, signs and warning
lines  are used  to make  sure that  people keep  a two-metre distance from each
other  in  the  stores  and  the  number  of  people in the store at one time is
limited.  Security staff  and store  employees instruct  customers to  make safe
purchases.  Corresponding instructions are also  distributed via speakers and on
the  digital screens in the stores. Customers are encouraged to use self-service
checkouts,  which also ensure a safe  distance between customers. To protect the
health  of store employees, safety glasses  have been installed at checkouts and
protective  visors  and  masks  have  been  distributed to personnel who come in
direct contact with customers.

If,  despite all  the measures  taken, an  employee of  a sales unit catches the
coronavirus,  crisis exercises have been carried out in stores to deal with such
cases  and  action  plans,  a  work  environment  disinfection plan, and a staff
replacement  plan have  been prepared,  which ensures  a quick  reopening of the
sales unit.

Proceeding  from the order of the Government  of the Republic, all stores of the
Group's  footwear  trade  segment,  the  industrial  goods  departments  of  the
Kaubamaja  segment, and I.L.U. shops have  been closed since 27 March. The Tartu
Kaubamaja department store, Viimsi Shopping Centre, and the historical Kaubamaja
building,  mainly used  by the  Kaubamaja segment  and located  in the centre of
Tallinn - all managed by the Group's real estate segment - are also closed.

Closing  the  stores  has  led  to  an  enormous growth in the popularity of the
Group's e-stores. Their performance could not immediately keep up with the sharp
increase  in  demand.  However,  solutions  were  quickly  found  to improve the
assembly  capacity  of  e-shops.  The  employees  of  closed  sales  units  were
reassigned  to  e-shops;  temporary  additional  staff  was  recruited. Fast and
efficient solutions are constantly being sought to increase supply and technical
capacities.

Despite the significant increase in the sales volumes of the Group's e-channels,
the  sales revenues  of the  Group in  the coming  months will  be lower than in
2019. The negative impact is less pronounced in the supermarket segment, as food
and  convenience  stores  remain  open.  A  larger  decline in sales revenues is
expected  in the  footwear, Kaubamaja  and car  trade segment.  In addition, the
changes concern the Group's real estate segment due to the closure of properties
managed  by it. The business of the Group's real estate segment is characterised
by  a large share of  intra-group turnover, which is  why the decrease in rental
income  due to  the closures  has a  smaller impact  on the Group's consolidated
financial results.

In  the changed situation, the entire  Group's cost base is critically reviewed.
Various  measures have been used to reduce labour costs, including the reduction
of  wages and the use of state aid  measures, to deal with the surplus of labour
due  to  the  reduction  of  workload  related  to  the slowdown in the economic
activities  of the  Group companies.  Negotiations are  underway with lessors to
reduce the rental costs of closed sales areas.

In  conclusion, the ability of the Group  to adapt quickly and react flexibly is
crucial.  The Group is  constantly monitoring its  changing risk assessments and
analysing  the effects of the  virus on an ongoing  basis. It is highly probable
that  the change in consumption  behaviour, the loss of  revenue of closed sales
units  and the additional costs incurred to prevent the spread of the virus will
put  pressure on the  Group's profit. The  duration of the movement restrictions
and  other measures are  unknown and the  overall impact of  the pandemic on the
Group's  financial  results  cannot  be  objectively  predicted  at  present. We
estimate  that the  economic changes  caused by  the virus  will not  affect the
Group's sustainability.

Raul Puusepp
Chairman of the Executive Board
Tel. +372 731 5000