Unaudited consolidated interim accounts for the third quarter and nine months of 2015

The unaudited consolidated sales revenue of Tallinna Kaubamaja Grupp in the 3rd quarter of 2015 was 139.8 million euros, exceeding the year-on-year sales revenue by 4.9%. The sales revenue in the first nine months was 402.6 million euros, an increase of 3.3% compared to the nine-month results in 2014, when the sales revenue was 389.5 million euros. The unaudited consolidated net profit of the Group for the 3rd quarter of 2015 was 6.7 million euros, which is 19.9% more year-on-year. The profit of the Group for 9 months in 2015 was 11.4 million euros, which was better by 10.5% compared to the results of the same period in the previous year. Pre-tax profit in the first nine months was 15.3 million euros, a growth of 20.7% compared to the results of the previous period. The net profit was influenced by the dividend payment for which income tax of 3.9 million euros was paid during 9 months in 2015, whereas a year before income tax was paid in the amount of 2.4 million euros.

The sales results in the 3rd quarter can be described by uneven consumption by months. Finally, long-awaited summer arrived in Estonia in August, attracting clients to the beach and making buying fashion goods less important. Due to continued warm weather in September, consumers did not start buying autumn season goods in the 3rd quarter. The supermarkets segment showed a more stable and stronger sales growth, which was supported by the opening of a new Selver store in Viimsi in the middle of the quarter. The car trade segment showed a strong sales growth because of several fleet orders and the usual sales had yielded good results as well. The decrease in the sales of footwear trade segment that has lost its market due to tough competition conditions ceased in the 3rd quarter. The gross margin of the Group continued to grow little by little in the 3rdquarter, being a sign of a consistently improving management of goods. A significant cost group is labour costs, which increased by 8.8% in the 3rd quarter. These costs increased because of the added number of employees in the new Selver store. The average salary also grew moderately. Miscellaneous operating costs had a little faster growth in the 3rd quarter compared to previous quarters because they included one-time costs related to the opening of a new store.

Selver supermarkets

The consolidated sales revenue of the supermarkets business segment in 9 months of 2015 was 279.3 million euros, a year-on-year growth of 3.9%. The consolidated sales revenue in the 3rd quarter was 97.1 million euros, having grown by 4.5% compared to the same period in the previous year. Selver’s subsidiary Kulinaaria OÜ’s turnover earned outside the Group, which does not account for a significant portion of the total turnover of the segment, has increased during 9 months and in the 3rd quarter by 40%. This growth is supported by the fast-growing demand for catering services. SIA Selver’s sales revenue remained on the same level as the previous year in the 3rd quarter and during 9 months. 26.8 million purchases were made in Selver stores in 9 months of 2015, which exceeded the year-on-year number of purchases by 0.5%. The consolidated pre-tax profit of the supermarkets segment for 9 months of 2015 was 6.3 million euros, and the net profit was 4.1 million euros, growing year-on-year by 2.7 million and 0.8 million euros, respectively. The pre-tax profit earned in Estonia was 8.2 million euros and the net profit was 6.0 million euros. The pre-tax profit and net profit was 3.3 million euros in the 3rd quarter, showing a growth of 0.2 million euros (+7.4%), whereof the profit earned in Estonia was 3.9 million euros. The difference in the net profit and pre-tax profit is due to the income tax paid on dividends, i.e. the income tax paid on dividends was 0.37 million euros in 2014 and 2.22 million euros in 2015. The results of the 3rd quarter of 2015 were influenced by the seventh hypermarket, Viimsi Selver, which was opened in August. The additional store increases the competition within the chain in addition to strong competition outside the Group. Regardless, the number of purchases has increased on the year-on-year basis. The average shopping basket has grown according to the results of 9 months as well as the 3rd quarter. Successful marketing campaigns have increased the growth of turnover in the 3rd quarter of 2015 that have primarily had an impact on the faster growth of sales of industrial consumer goods. A greater efficiency in the primary process, i.e. selling of goods, has mostly influenced the profit earned in Estonia. The inventories have been managed better, which has resulted in a reduced need for price reduction and write-off of goods. As regards to operating costs, the previous year’s cost-efficiency level has been maintained. This has been achieved in a situation, where the base year costs include the opening costs of one store, whereas this year’s operating costs include the opening costs of one store as well as the renovation costs of one store.

Department stores

The sales revenue of the department stores business segment was 66.6 million euro in 9 months of 2015, a year-on-year growth of 3.7%. Of this result, the 3rd quarter sales revenue was 21.3 million euros, which was 1.8% higher compared to the revenue earned in the 3rd quarter of 2014. The pre-tax profit of department stores earned in 9 months of 2015 was 1.6 million euros, being lower of the results achieved a year before by 16.7%. The pre-tax profit in the 3rd quarter was 0.6 million euros, which was lower of the profit earned in 2014 by 15.6%. In the 3rdquarter, the sales results of the department stores were influenced by the summer that arrived finally in August and warmer than usual September that primarily held back the outerwear sales. The 3rd quarter results were influenced negatively also by the repairs of Viru bus station in Tallinn, which lasted for 9 weeks and made it harder for clients to access the department store in Tallinn. Taking into account the attractive positon of department stores for tourists in the city centre, the exceptionally low number of tourists had a negative impact on the sales revenue earned in 9 months. The sales revenue of OÜ TKM Beauty Eesti that operates I.L.U. cosmetics stores was 1.2 million euros the 3rd quarter of 2015, growing 12.9% year-on-year. The loss earned in the 3rdquarter was 0.1 million euros, which was lower by 0.01 million euros compared to the loss earned for the same period in 2014. The sales revenue earned in 9 months of 2015 was 3.4 million euros, showing a growth of 10.4% compared to the same period in 2014. The loss earned in 9 months of 2015 was 0.3 million euros, which was smaller by 0.03 million euros compared to the loss earned in the same period in 2014. The renovation works carried out in September in the largest I.L.U. chain store in Rocca al Mare had a negative effect on the sales revenue. During the renovation, the assortment offered for men was optimised and the area of the store was reduced a little. At the same time, the restructuring works conducted in the store at Ülemiste centre affected the comparison basis for the 3rd quarter sales revenue positively. During that time, the Ülemiste I.L.U. store was partly closed in the previous period.

Car Trade

The sales revenue of car trade earned in 9 months of 2015 was 45.6 million euros. The sales revenue exceeded the revenue earned during the same period of the previous year by 4.2%, including an increase in the sales revenue by 8.3% of KIA cars. The sales revenue of 17.3 million euros earned in the 3rd quarter exceeded the year-on-year results by 13.6%, including the sales revenue from KIA sales by 8.1%. During the first nine months, altogether 2,266 new vehicles were sold, whereof 861 vehicles in the 3rd quarter. The net profit of the segment earned in 9 months of 2015 was 1.3 million euros, a result that exceeded the year-on-year outcome by 17.7%. The pre-tax profit of the segment in 9 months of 2015 was 1.8 million euros, which exceeded the 9-month-profit earned in 2014 by 9.8%. The net profit of the 3rd quarter of 2015 was 0.7 million euros, which was lower by 21.3% on the year-on-year basis. In the 3rd quarter, the sales of new cars grew thanks to several public procurements of KIA and OPEL. The usual sales of OPEL was fostered by supportive marketing campaigns provided by the producer and a better pricing of models. The turnover has been higher also because of better results achieved in the follow-up servicing.

Footwear trade

The sales revenue of the footwear trade in first nine months of 2015 was 8.5 million euros, a drop of 16.4% year-on-year. The sales revenue was 3.2 million euros in the 3rd quarter, showing lower results by 4.6% compared to the same period in 2014. The loss earned in the first nine months was 1.2 million euros. The loss was smaller on the year-on-year basis by 11.3%. The footwear segment had earned a loss of 0.3 million euros by the end of the 3rd quarter, although the loss was 34.9% smaller than the year-on-year loss. Although the decrease in sales revenue ceased in the 3rd quarter, the turnover remained smaller than expected due to an extraordinarily warm August that enabled the consumers to postpone buying of autumn season goods. The consumers are more driven by need in their purchasing decisions, and the purchases are made at the last minute depending on the weather and because the selection of goods is extensive due to steep competition. The last month in the quarter was successful and allows us to presume that strategic changes introduced in the Group’s footwear segment will be fruitful, especially the brand portfolio changes.

Real estate

The sales revenue of the real estate business earned outside the Group in the first 9 months of 2015 was 2.6 million euros, which is 3.8% higher than in the same period of the previous year. The sales revenue earned outside the Group in the 3rd quarter was 1.0 million euros, which is 16.7% more than in the same period last year. The pre-tax profit of the real estate segment in 9 months of 2015 was 6.7 million euros, which remained on the same level as the previous financial year. The pre-tax profit earned in the 3rd quarter was 2.3 million euros, which is 1.3% more than in the same period of the previous financial year. On 13 August, Viimsi shopping and recreation centre was opened. The added rental spaces supported the growth of the sales revenue and profit in the 3rdquarter.