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AS Tallink Grupp Unaudited Consolidated Interim Report Q4 2018

Teade

In  the 2018 financial year (1 January -  31 December), Tallink Grupp AS and its
subsidiaries  (the  Group)  carried  a  record  number,  a  total  of 9 756 611
passengers,  which is 891 passengers  more compared to  the 2017 financial year.
The number of cargo units transported increased by 5.7% compared to the previous
financial  year.  The  Group's  unaudited  consolidated  revenue amounted to EUR
949.7 million  (EUR 967.0 million, 2017). Unaudited EBITDA was EUR 142.8 million
(EUR  158.3 million, 2017) and unaudited  net profit for  the financial year was
EUR  40.0 million or EUR 0.06 per share (EUR 46.5 million or EUR 0.07 per share,
2017).

In  the  2018 financial  year,  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, Estonia-Sweden and Latvia-
    Sweden).
  * The number of cargo units transported on the Group's ships increased in all
    geographical segments.
  * The maintenance and repair of the cruise ferry Baltic Princess in the first
    quarter affected the Finland-Sweden segment's carriage volumes and financial
    result.
  * Charter revenue decreased compared to the same period last year as fewer
    ships are chartered out.
  * Higher fuel cost due to increase in bunker prices.

Sales and segments

In 2018, the Group's total revenue decreased by EUR 17.3 million and amounted to
EUR 949.7 million.

  * The total revenue from the route operations (core business) increased by EUR
    0.7 million to EUR 883.7 million, despite the EUR 7.4 million decrease of
    the Finland-Sweden segment revenue mainly from cruise ferry Baltic Princess
    68 days maintenance.
  * The revenue from the other segment decreased by total of EUR 19.4 million
    and amounted to EUR 74.8 million. The largest decrease in the other segment
    was from charter revenue in amount of EUR 10.8 million, as fewer ships are
    chartered out. There was also lower revenue from shops on land (in Tallinn
    Old Harbour area) as the price level of products sold in land shops in
    Estonia is less competitive after excise increases over recent years. In
    addition, there is lower revenue from hotels, Tallink Pirita Spa Hotel in
    Tallinn ceased operations from November 2018 due to sale of the hotel
    property by its owner.

The positive development of the cargo business continued in 2018 financial year,
the transported cargo volumes increased in total by 5.7%, the cargo revenues
increased by 6.1% or EUR 7.1 million and amounted to EUR 124.9 million in 2018.
The growth was driven by the increase of number of transported cargo units in
all geographical segments following positive economic developments in the
Group's main markets.

In 2018, The Group's ships carried a total of 5.1 million passengers on the
Estonia - Finland routes, which is 0.3% increase compared to last year and the
number of transported cargo units on the routes increased by 5.4%. On the
Tallinn - Helsinki route there was increased competition from added capacity by
competitors, which put pressure on ticket prices. The new Shuttle vessel
Megastar improved the efficiency of the Shuttle operations and the Group was
able to increase the segment result in continuously challenging competitive
environment. The segment revenue increased by EUR 1.5 million and amounted to
EUR 356.0 million, the segment result increased by EUR 2.4 million and amounted
to EUR 80.3 million.

The Finland-Sweden routes' revenue decreased by EUR 7.4 million and amounted to
EUR 337.5 million, the segment's result decreased by EUR 2.3 million, compared
to the previous year and amounted to EUR 16.2 million. The maintenance and
repair of the cruise ferry Baltic Princess in the first quarter (lasted for 68
days) affected the Finland-Sweden segment's carriage volumes and financial
result, the segment's result was also impacted by the higher fuel cost due to
increase in bunker prices.

The Estonia-Sweden routes' revenue increased by EUR 1.7 million, compared to the
previous year. Growth was supported by a 0.4% higher passenger number and by a
10.9% increase in the number of transported cargo units. The segment's result
decreased compared to the previous year due to higher fuel cost from increase in
bunker prices.

The Latvia-Sweden route's revenue increased by EUR 4.8 million, compared to the
previous year. Growth was supported by a 7.0% higher passenger number and by a
24.5% increase in the number of transported cargo units. The positive
development of the route's carriage volumes and revenue continued in 2018
financial year, however due to higher fuel cost from increase in bunker prices,
the segment result improved EUR 0.2 million and amounted to EUR -1.0 million.

Earnings

In 2018, the Group's EBITDA decreased by EUR 15.5 million and amounted to EUR
142.8 million. The Group's profitability was impacted mainly by the following
factors:

  * Total EUR 16.6 million higher fuel cost due to the increase in bunker
    prices. At the same time, the Group achieved savings on total fuel
    consumption, through various energy efficiency initiatives the ships average
    fuel consumption per nautical mile has decreased by 3.2% in 2018 financial
    year.
  * Negative impact to EBITDA from decrease of charter revenue, as fewer ships
    are chartered out compared to the same period last year.
  * Negative impact to EBITDA from decrease of revenue from shops on land (in
    port area) as the price level of products sold on land shops is less
    competitive after excise increases over recent years in Estonia.
  * Impact to EBITDA from nonrecurring costs and proceeds in 2018 are as
    follows:

      * Costs EUR 1.5 million related to the listing of shares in Nasdaq
        Helsinki stock exchange.
      * Cost EUR 0.9 million accrued according to the old fuel tank rental
        agreement termination.
      * Other proceeds EUR 1.0 million received from the compensation agreement
        with former Superfast vessels owner.

Net finance costs decreased by EUR 2.3 million compared to the previous year
mainly from EUR 3.9 million lower interest expenses. Total gains from exchange
rate differences and the revaluation of cross currency and interest rate
derivatives decreased by EUR 1.6 million.

The Group's unaudited net profit for the financial year 2018 was EUR 40.0
million or EUR 0.06 per share compared to a net profit of EUR 46.5 million or
EUR 0.07 per share last year.

Investments

In the 2018 financial year the Group's investments amounted to EUR 36.4 million.
A number of investments were made to upgrade the ships restaurants, shops and
other public areas. On cruise ferry Silja Serenade there was restaurant Bon
Vivant renewed, nightclub Starlight, restaurant Grill House and Sea Pub built.
On cruise ferry Baltic Queen there was Grande Buffet renewed, new Fastlane
restaurant and new Silja Land built. On cruise ferry Silja Europa there was
Theatre Europa with 528 seats fully renewed.

Investments were also made to ship's technical maintenance to keep the ships in
good technical working condition and innovative energy efficiency solutions like
upgrade of HVAC systems, fuel monitoring systems, preparations for high voltage
shore power connections and hybrid battery solutions.

Investments were made also to the development of the online booking and sales
systems.

Dividends

In  June 2018 the shareholders' annual general meeting decided to pay a dividend
of  EUR 0.03 per share from the net  profit for 2017. The announced dividends in
the total amount of EUR 20.1 million were paid out on 5 July 2018.

To the shareholders' annual general meeting in 2019 the management board will
propose a dividend of EUR 0.05 per share from the financial year 2018 net
profit. In addition, the supervisory board of Tallink Grupp AS proposed to the
management board for the purpose of improving the company's capital structure to
prepare a proposal for the 2019 shareholders' annual general meeting to reduce
the company's share capital by 7 cents per share.

Results of the Q4 of 2018

In the fourth quarter (1 October - 31 December) of 2018, the Group's revenue
decreased by EUR 6.3 million compared to same period last year and amounted to
EUR 226.6 million. The decrease was driven by 3.0% lower passenger number in the
fourth quarter, decrease in hotel revenues and chartering revenues.

The fourth quarter EBITDA decreased by EUR 4.9 million to EUR 24.0 million and
net result for the period was EUR -1.8 million. The lower profitability resulted
from decrease in revenue and nonrecurring cost recorded in fourth quarter from
the cost accrual related to termination of fuel tank rental agreement and costs
related to the listing of Group's shares in Nasdaq Helsinki stock exchange.

Financial position

In  the fourth quarter, the Group's net debt increased by EUR 5.7 million to EUR
428.0 million (EUR 472.0 million at 31 December 2017) and the net debt to EBITDA
ratio was 3.0 at the reporting date (3.0 at 31 December 2017).

At  the end of the  fourth quarter, total liquidity  (cash, cash equivalents and
unused  credit facilities) amounted  to EUR 157.2 million  (EUR 163.9 million at
31 December   2017) providing   a  strong  financial  position  for  sustainable
operations.

The  Group had EUR  82.2 million (EUR 88.9 million  at 31 December 2017) in cash
and  cash  equivalents  and  EUR  75.0 million  (EUR 75.0 million at 31 December
2017) in unused credit lines.

Events in Q4

Change in loan obligations
In July 2018, Tallink Grupp AS signed a loan agreement in the amount of EUR 110
million. The final maturity of the floating interest rate Euribor based loan is
six years. The financing was arranged by Nordea Bank AB (publ), Finnish Branch,
Danske Bank A/S, Finland Branch and HSH Nordbank AG.

The loan was drawn in October 2018 and was used to repay the NOK 900 million
bonds issued in June 2013 and to terminate the related hedge transactions. The
new loan is guaranteed by Tallink Fast Ltd., a subsidiary of Tallink Grupp AS
and is secured by the mortgage on the vessel Baltic Princess belonging to the
same subsidiary.

Termination of operation of Pirita Spa Hotel
On 15 November 2018, the Group's subsidiary OÜ TLG Hotell ceased to operate the
Pirita Spa Hotel due to the sale of the property by the Group's major
shareholder Infortar AS. The transaction has no significant impact on the
consolidated financial results of Tallink Grupp AS.

Preparations for new ship order
In October 2018, Tallink Grupp AS and Rauma Marine Constructions signed a Letter
of Intent for the construction of a new LNG powered shuttle ferry for the
Tallinn-Helsinki route. The estimated cost of the project is approximately 250
million euros and the new vessel will be built at the Rauma shipyard in Finland.
The construction of the new ship is expected to be completed by the end of 2021.

Capital reduction and dividend policy
In October 2018, the supervisory board of Tallink Grupp AS proposed to the
management board for the purpose of improving the company's capital structure to
prepare a proposal for the 2019 general shareholders' meeting to reduce the
company's share capital by at least 7 cents per share.

In October 2018, the management board of Tallink Grupp AS decided to supplement
the company's dividend policy, according to which if the economic performance
enables it, dividends would be paid in the minimum amount of 5 cents per share.

Secondary listing on Nasdaq Helsinki stock exchange
On 23 November 2018 Nasdaq Helsinki approved the listing application of Tallink
Grupp AS and trading in the Finnish share depositary receipts "FDRs" of the
Tallink Grupp AS on Nasdaq Helsinki commenced on 3 December 2018.

Events after the reporting period and outlook

Changes in the Management Board
On 4 February 2019, it was announced that the Tallink Grupp AS Supervisory Board
has appointed Mrs Kadri Land and Mr Harri Hanschmidt as Members of the
Management Board and has recalled from the Management Board Mr Janek Stalmeister
following his resignation. The mandate of Mr Janek Stalmeister ended on 2
February 2019. The mandate of Mrs Kadri Land and Mr Harri Hanschmidt started on
4 February 2019 and lasts for a period of three years.

On 22 February 2019, it was announced that the Supervisory Board has appointed
Mrs Piret Mürk-Dubout as a Member of the Management Board and has recalled from
the Management Board Mr Andres Hunt following his resignation. The mandate of Mr
Andres Hunt ended on 26 February 2019, the mandate of Mrs Mürk-Dubout begins on
15 April 2019 and lasts for a period of three years.

From 15 April, the Management Board of Tallink Grupp will operate with five
members under the leadership of Mr Paavo Nõgene and will include Mr Lembit
Kitter, Mrs Kadri Land, Mr Harri Hanschmidt and Mrs Piret Mürk-Dubout.

Fuel price risk management
In December 2018, it was agreed with the main fuel supplier to fix the price of
approximately 40% of the total fuel purchasing volume for the period from
February to December 2019.

Ship dockings
The modernisation of the Group's fleet continues in 2019 and in the first half
there are planned dockings of seven vessels: Regal Star, Baltic Queen, Star,
Silja Symphony, Galaxy, Victoria I and Isabelle.

The investments will be made to ship's technical maintenance, upgrades to public
areas and number of energy efficiency projects: electrical high voltage shore
connections, HVAC systems, heat recovery systems and battery packs for hybrid
solution. The planned service breaks of seven vessels will total to 126 days in
2019.

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 on-going research and development
projects. The Group is engaged continuously to find various opportunities for
expanding the Group's operations, in order to improve the results.

We are 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 to develop so-called ?Smart Car Deck" solutions for the Group's
vessels over the next two years.

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                                    Q4 2018     Q4 2017 Change %
-------------------------------------------------------------------------------
 Revenue (million euros)                             226.6       232.9    -2.7%

 Gross profit (million euros)                         34.6        38.5   -10.1%

 EBITDA¹ (million euros)                              24.0        28.8   -16.8%

 EBIT¹ (million euros)                                 3.7         7.0   -47.7%

 Net profit for the period (million euros)            -1.8         1.1  -264.6%



 Depreciation and amortisation (million euros)        20.3        21.8    -6.9%

 Capital expenditures¹ (million euros)                16.0         7.2

 Weighted average number of ordinary shares
 outstanding                                   669 791 219 669 882 040     0.0%

 Earnings per share¹                                -0.003       0.002  -264.6%



 Number of passengers¹                           2 247 226   2 316 144    -3.0%

 Number of cargo units¹                             98 286      97 345     1.0%

 Average number of employees¹                        7 228       7 287    -0.8%



 As at                                          31.12.2018  30.09.2018 Change %
-------------------------------------------------------------------------------
 Total assets (million euros)                      1 500.9     1 534.8    -2.2%

 Total liabilities (million euros)                   644.0       676.1    -4.7%

 Interest-bearing liabilities (million euros)        510.1       515.2    -1.0%

 Net debt¹ (million euros)                           428.0       422.3     1.4%

 Net debt to EBITDA¹                                  3.00        2.86     4.8%

 Total equity (million euros)                        856.9       858.7    -0.2%

 Equity ratio¹ (%)                                   57.1%       55.9%



 Number of ordinary shares outstanding         669 865 540 669 882 040     0.0%

 Equity per share¹                                    1.28        1.28    -0.2%



 Ratios                                            Q4 2018     Q4 2017
-------------------------------------------------------------------------------
 Gross margin¹ (%)                                   15.3%       16.5%

 EBITDA margin¹ (%)                                  10.6%       12.4%

 EBIT margin¹ (%)                                     1.6%        3.0%

 Net profit margin¹ (%)                              -0.8%        0.5%



 ROA¹ (%)                                             4.1%        4.3%

 ROE¹ (%)                                             4.8%        5.7%

 ROCE¹ (%)                                            5.2%        5.3%

¹ Alternative performance measures based on ESMA guidelines are disclosed in the
Alternative Performance Measures section of this Interim Report.

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
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-Dec  Jan-Dec
 Unaudited, in thousands of EUR              Q4 2018  Q4 2017     2018     2017
-------------------------------------------------------------------------------
 Revenue (Note 3)                            226 550  232 856  949 723  966 977

 Cost of sales                              -191 928 -194 346 -765 892 -772 372
-------------------------------------------------------------------------------
 Gross profit                                 34 622   38 510  183 831  194 605



 Sales and marketing expenses                -16 714  -17 157  -69 315  -71 339

 Administrative expenses                     -16 371  -16 438  -55 495  -53 672

 Other operating income                        2 134    2 429    4 633    2 873

 Other operating expenses                          0     -327     -153     -509
-------------------------------------------------------------------------------
 Result from operating activities              3 671    7 017   63 501   71 958



 Finance income (Note 4)                         864    4 932    8 631   12 738

 Finance costs (Note 4)                       -5 376  -10 804  -27 552  -33 987

 Share of profit of equity-accounted
 investees                                         4       40        4       40
-------------------------------------------------------------------------------
 Profit before income tax                       -837    1 185   44 584   50 749



 Income tax                                     -923     -115   -4 535   -4 253



 Net profit for the period                    -1 760    1 070   40 049   46 496
-------------------------------------------------------------------------------


 Other comprehensive income                        0        0      411        0

 Exchange differences on translating
 foreign operations                              -35       35      267       13
-------------------------------------------------------------------------------
 Other comprehensive income/expense for the
 period                                          -35       35      678       13



 Total comprehensive income for the period    -1 795    1 105   40 727   46 509



 Earnings per share (in EUR per share, Note
 5)                                           -0.003    0.002    0.060    0.069
-------------------------------------------------------------------------------


Consolidated statement of financial position

 Unaudited, in thousands of EUR                      31.12.2018 31.12.2017
--------------------------------------------------------------------------
 ASSETS

 Cash and cash equivalents                               82 175     88 911

 Trade and other receivables                             43 805     46 466

 Prepayments                                              6 084      5 395

 Prepaid income tax                                          46         40

 Inventories                                             35 741     40 675
--------------------------------------------------------------------------
 Current assets                                         167 851    181 487



 Investments in equity-accounted investees                  407        403

 Other financial assets                                     320        344

 Deferred income tax assets                              17 934     18 722

 Investment property                                        300        300

 Property, plant and equipment (Note 7)               1 267 928  1 308 441

 Intangible assets (Note 8)                              46 164     48 900
--------------------------------------------------------------------------
 Non-current assets                                   1 333 053  1 377 110

 TOTAL ASSETS                                         1 500 904  1 558 597



 LIABILITIES AND EQUITY

 Interest-bearing loans and borrowings (Note 9)          78 658    159 938

 Trade and other payables                               100 682     95 548

 Derivatives (Note 6)                                       918     29 710

 Payables to owners                                           2          3

 Income tax liability                                       116         34

 Deferred income                                         32 113     31 429
--------------------------------------------------------------------------
 Current liabilities                                    212 489    316 662



 Interest-bearing loans and borrowings (Note 9)         431 477    400 968

 Derivatives (Note 6)                                         0      4 688

 Other liabilities                                           22          0
--------------------------------------------------------------------------
 Non-current liabilities                                431 499    405 656
--------------------------------------------------------------------------
 Total liabilities                                      643 988    722 318



 Share capital (Note 10)                                361 736    361 736

 Share premium                                              662        639

 Reserves                                                69 474     68 946

 Retained earnings                                      425 044    404 958
--------------------------------------------------------------------------
 Equity attributable to equity holders of the Parent    856 916    836 279

 Total equity                                           856 916    836 279
--------------------------------------------------------------------------
 TOTAL LIABILITIES AND EQUITY                         1 500 904  1 558 597


Consolidated statement of cash flows

                                                               Jan-Dec  Jan-Dec
 Unaudited, in thousands of EUR                                   2018     2017
-------------------------------------------------------------------------------


 CASH FLOWS FROM OPERATING ACTIVITIES

 Net profit for the period                                      40 049   46 496

 Adjustments                                                   103 169  110 492

 Changes in:

 Receivables and prepayments related to operating activities     1 996   -6 707

 Inventories                                                     4 934   -1 956

 Liabilities related to operating activities                     6 723  -12 140
-------------------------------------------------------------------------------
 Changes in assets and liabilities                              13 653  -20 803

 Cash generated from operating activities                      156 871  136 185

 Income tax paid                                                   -87       -7
-------------------------------------------------------------------------------
 NET CASH FROM OPERATING ACTIVITIES                            156 784  136 178



 CASH FLOWS FROM INVESTING ACTIVITIES

 Purchase of property, plant, equipment and intangible assets
 (Notes 7, 8, 9)                                               -36 037 -219 207

 Proceeds from disposals of property, plant, equipment             368  132 448

 Interest received                                                   7        1
-------------------------------------------------------------------------------
 NET CASH USED IN INVESTING ACTIVITIES                         -35 662  -86 758



 CASH FLOWS FROM FINANCING ACTIVITIES

 Proceeds from loans received (Note 9)                         110 000  184 000

 Repayment of loans received (Note 9)                          -69 666 -134 321

 Repayment of bonds (Note 9)                                  -120 303        0

 Change in overdraft (Note 9)                                        0  -40 110

 Payments for settlement of derivatives                         -3 569   -3 592

 Payment of finance lease liabilities (Note 9)                    -108     -102

 Interest paid                                                 -19 440  -20 744

 Payment of transaction costs related to loans                  -1 113     -216

 Dividends paid (Note 11)                                      -20 096  -20 096

 Reduction of share capital                                         -1       -1

 Income tax on dividends paid                                   -3 562   -4 100
-------------------------------------------------------------------------------
 NET CASH USED IN/FROM FINANCING ACTIVITIES                   -127 858  -39 282



 TOTAL NET CASH FLOW                                            -6 736   10 138
-------------------------------------------------------------------------------


 Cash and cash equivalents at the beginning of period           88 911   78 773

 Increase in cash and cash equivalents                          -6 736   10 138
-------------------------------------------------------------------------------
 Cash and cash equivalents at the end of period                 82 175   88 911


Veiko Haavapuu
Financial Director

AS Tallink Grupp
Sadama 5/7
10111 Tallinn, Estonia
E-mail [email protected]




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