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Published: 2023-10-11 15:30:00 CEST
Tallinna Kaubamaja Grupp
Quarterly report

Unaudited consolidated interim accounts for the third quarter and first nine months of 2023

Segments (EURm)Q3/23Q3/22yoy9m/239m/22yoy
Supermarkets153.5149.82.4%455.2433.15.1%
Department stores23.922.94.1%75.671.45.9%
Cars51.139.828.4%148.6112.432.3%
Security segment4.02.468.0%10.46.949.9%
Real Estate1.71.67.8%4.94.66.5%
Total sales234.1216.58.2%694.7628.410.5%
Supermarkets6.22.6141.1%12.68.057.4%
Department stores-0.4-0.2157.6%-0.20.3-175.9%
Cars3.63.212.3%11.48.533.7%
Security segment0.00.1-52.5%0.10.147.9%
Real Estate2.22.7-19.7%7.68.1-6.0%
IFRS 16-0.5-0.7-25.4%-1.5-1.7-8.9%
Total profit before tax11.27.843.6%29.923.328.2%

In the third quarter of 2023, the consolidated unaudited sales revenue of the Group was 234.1 million euros, which was 8.2% more than the sales revenue of the same period last year. The sales revenue in the nine months was 694.7 million euros, which was a 10.5% increase in comparison with the result of the first nine months of 2022, when the sales revenue was 628.4 million euros. The consolidated unaudited net profit of the third quarter of 2023 was 11.2 million euros, thus coming close to the result of the same period of 2021, which was less affected by the increase in energy prices, but exceeded the profit of the comparable period of 2022 by 3.4 million euros. The net profit of the Group for the first nine months of 2023 was 24.6 million euros, which was 30.5% higher than the result of the comparable period in the previous year. In the first nine months, the pre-tax profit was 29.9 million euros, increasing by 28.2% compared to the year before. Net profit was affected by the dividend payment, from which 5.3 million euros of income tax was calculated in the first quarter of 2023; 4.5 million euros of income tax was calculated a year before.

In the third quarter of 2023, the Group achieved a strong 8.2% increase in sales revenue thanks to the continued significant sales performance of the car segment, which was supported by higher-volume sales transactions. The security segment also contributed to the high growth rate of sales volume, where the two prominent security companies acquired in the third quarter added synergy and turnover growth. In the supermarket and Kaubamaja department store segments, sales growth is more modest due to changes in consumer behaviour. Growing uncertainty about the future has made customers more cautious and thrifty. Although price growth has slowed down and wage growth is catching up with price increases, food prices have still grown rapidly and exceed the growth rate of wages. The latter affects the sales growth of the supermarket segment the most. The limited physical access to the Tallinn building of Kaubamaja due to large-scale road construction works in the centre of Tallinn continued to have an inhibiting effect on the result of the Kaubamaja department store segment in the third quarter. The decrease in energy prices has provided an opportunity to restore the profitability of the Group to the level of 2021. The labour costs of the Group increased by 11.0% in the third quarter of 2023, while the number of employees decreased by 1.0%.

In the third quarter, the Group adopted an important strategic decision for the development of the logistics centre. TKM Kinnisvara AS is building a logistics centre with a total area of 17,200 m2 on its property located at 1 Paemurru Street, city of Maardu. In August, TKM Kinnisvara AS and AS Merko Ehitus Eesti signed a construction contract for the construction of the logistics centre with a cost of approximately 20 million euros. The cost of the construction is financed from own funds and a bank loan. The modern energy class A building will be built in accordance with the requirements of the BREEAM certificate. The logistics centre will primarily serve the cargo volumes of Selver, its completion is scheduled for the autumn 2024. The establishment of the logistics centre will add new business opportunities for the companies of TKM Group and increase the efficiency of work processes. Logistics cooperation between Selver and AS Balbiino, which is a company of the NG Investeeringud OÜ Group, which has a significant holding in the Group, will continue in the new logistics centre. NG Logistics OÜ, a subsidiary of AS Balbiino, will be responsible for the day-to-day operation of the logistics centre. The operation of the logistics centre by NG Logistics OÜ is not a significant or unusual transaction in the sense of the regulations of the Nasdaq Tallinn Stock Exchange. The exact terms and conditions of the transactions concerning the operation of the logistics centre will be agreed upon in 2024 in accordance with market conditions and the transfer pricing regulation.

In the third quarter, the Group's security segment enhanced its market position and future prospects with the acquisition of two prominent security companies. The first, Skarabeus Julgestusteenustus OÜ, is a pan-Estonian firm with branches in Tallinn, Tartu, Pärnu, and Central Estonia. It offers manned security, patrol, and technical security services. In 2022, the company had a revenue of 3.1 million euros and employed 168 people. The second, Caesari Turvateenistuse AS, is among Estonia's oldest security companies, having operated since 1994. Serving primarily Harju County, it provides manned security, patrol, and technical security services and oversees the construction and maintenance of security systems. Its 2022 revenue stood at 727 thousand euros with 31 employees.

In August, the supermarket segment opened its 73rd store with a sales area of 3,700 m2 in Kurna Park. In the construction of Kurna Selver, materials that turned out to be unnecessary in other stores were used as much as possible. LED technology was introduced throughout the store, and the selection of technology was based on environmentally friendly solutions. In September, the supermarket segment opened a fully renovated Delice store with a completely new premium brand and concept at Solaris Centre in the heart of Tallinn. In the Kaubamaja department store segment, development work on the e-shop platform continued. The renovated I.L.U. cosmetics store of Kristiine Centre, which was transferred to a new concept, was opened in the third quarter. The development of the functionalities of the Partner Card loyalty programme for the retail segments has continued. In the third quarter, the convenience functionalities of the Partner application were improved and the ‘pay later’ payment solutions were further developed, which are planned to be made available to customers in the last quarter of the year.

Earlier in the reporting year, development work took place, during which the largest store in the supermarket segment in Järve, Tallinn, was closed for renovation works for nearly two months in the second quarter. Reopened at the end of May, the renovated Järve Selver has been well received by customers. In the first quarter, the supermarket segment renovated the Ringtee Selver in Tartu and the Ülemiste I.L.U. store was renovated under a new concept, while the sales area was increased by almost half to 460 square metres. The NYX make-up shop-in-shop with a separate entrance was opened in the Ülemiste I.L.U. cosmetics store. In the real estate segment, the solar park built on the roof of Viimsi Centre was completed in the second quarter. In January, WOW Selver in Saare County, which did not meet expectations, and Punane Selver in Lasnamäe, Tallinn, were closed in May.

At the end of the reporting period, the number of loyal customers was more than 717 thousand, which is 1.9% more than the year before. The proportion of loyal customers in the turnover of the group was 84.8% (during the first nine months of 2022, it was 83.9%). The Partner Card application launched a year ago had been used by more than 176 thousand customers by the end of the quarter, which is about 24% of all customers who have a Partner Card. The application allows customers to conveniently use their personal phone as a scanner and as a payment solution. More than 12 thousand new loyal customers have registered their first Partner Card directly from the application. About 13% of the users of all Selver self-service cash registers use a phone instead of a scanner, and the most active users of the application are those aged up to 24. At the end of the third quarter, we added the possibility of creating and sharing shopping lists, and customers can now see their personal Selver special offers directly from their phone.

Selver supermarkets

The consolidated sales revenue of the supermarket business segment in the nine months of 2023 was 455.2 million euros, increasing by 5.1% compared to the previous year. The consolidated sales revenue was 153.5 million euros in the third quarter, increasing by 2.4% in comparison with the same period of last year. In the first nine months and during the third quarter of 2023, the average sales revenue per square metre of selling space was 0.43 thousand euros per month, which is 5.3% and 1.7% higher, respectively, than during the same periods last year. From the point of view of comparable stores, the revenue from the sale of goods per square metre of selling space was 0.44 thousand euros in the first nine months of the year and in the third quarter, increasing by 6.7% and 3.1%, respectively, compared to the reference period. In the first nine months of 2023, 33.1 million purchases were made from the stores, which was 1.8% more than in the reference year.

In the third quarter of 2023, both pre-tax profit and net profit were 6.2 million euros, which was 3.7 million euros more than in the reference period. The consolidated pre-tax profit of the supermarket segment in the first nine months of 2023 was 12.6 million euros, increasing by 4.6 million euros in comparison with the previous year. The net profit in the first nine months was 11.4 million euros – an increase of 5.6 million euros compared to the previous year. The difference between net profit and profit before income tax is due to the income tax paid on dividends – this year, the income tax on dividends was 1 million euros less than the year before.

The financial results of the first nine months of 2023 were affected by the increased turnover from the opening of the Priisle and Tabasalu Selvers in Tallinn in 2022 and the Kurna Selver in August 2023, and the lost turnover from the closure of the WOW Selver in Saare County and Punane Selver in Tallinn. Sales revenue has been affected by the suspension of sales due to renovation works at Ringtee Selver in Tartu and Järve Selver (the largest Selver store in Tallinn) and Delice Solaris in Tallinn. All the projects listed above have also involved one-time costs and investments. The results of the supermarket segment continue to be affected by accelerated inflation and a decrease in consumer confidence. During 2023, the price increase has slowed down, but the price level of products and services is still high. The significant increase in the price of food products has forced customers to change their shopping habits, increased interest in campaign products, and reduced the volume sales of goods below the level of last year. The warm weather had a positive effect on the sale of seasonal goods in June and August, while the demand for industrial goods that are not essential on a daily basis is more modest. The growth of e-commerce sales slowed somewhat in the third quarter, but remained faster than the growth of retail sales. Electricity expenses have decreased compared to last year, which has made it possible to improve the profit position. The growth of labour costs in the first nine months has been faster than the growth of sales revenue in the supermarket segment (9%). The faster increase in wage costs is due to the general pressure to increase wages and partly due to the temporary closure of stores for renovation, where sales were suspended. Possibilities have been sought to increase the efficiency of work processes by reducing working hours and thereby increasing employee wages.

The rapid decline in the production volume of Kulinaaria OÜ, which belongs to the supermarket segment, which started in the second half of last year, slowed down in the second quarter, but returned to a slow decline again at the end of the third quarter. The ready-made party dishes category is the most affected. The central kitchen continues with daily consistent product development as the expectations of customers for new products have increased. In the third quarter, we launched new products in every category. The products were very well received by the customers. Sustainability is important in the central kitchen – sustainable development goals are taken into account in production, packaging, employee well-being, and the supply chain. Thanks to environmentally friendly solutions and more resource-efficient production, the footprint of Selveri Köök has decreased by approximately 80% in 6 years. In 2022, the footprint was significantly reduced thanks to the adoption of green electricity. When it comes to packaging, Kulinaaria OÜ has completely switched to salad boxes made of 100% recycled material, which ensure food safety and hygiene. In addition, their production requires less plastic.

Selver opened one new store this year – Kurna Selver in Harju County in August. Three stores have been renovated: Ringtee Selver in Tartu was reopened in February; in May, the largest store of the Selver chain – Järve Selver – was reopened in Tallinn; and in September, the Delice Solaris store was opened with a renewed concept. In the first quarter, 14 Selver stores started issuing identity documents issued by the Police and Border Guard Board. By the end of the third quarter, this number had reached 41. It is planned to further increase the number of stores issuing identity documents this year. Issuing ID cards and passports earned us the title of the best cooperation project of the 2023 Trade Act of the Year.

As at the end of March, the supermarket segment includes 71 Selver stores, 2 Delice stores, and the mobile store and café, with a total sales area of 120.3 thousand m2, as well as e-Selver, which is the e-shop with the largest service area in Estonia, and the central kitchen Kulinaaria OÜ.

Department stores

The sales revenue of the business segment of the Kaubamaja department store in the first nine months of 2023 was 75.6 million euros, exceeding the sales of the same period last year by 5.9%. The sales revenue of the third quarter was 23.9 million euros, which was 4.1% better than last year. The pre-tax profit of the Kaubamaja department stores segment in the first nine months of 2023 was 0.2 million euros. The pre-tax loss of the third quarter was 0.4 million euros, which increased by 0.3 million compared to the same period last year.

The average sales revenue of Kaubamaja department stores per square metre of selling space was 0.3 thousand euros per month in the first nine months – 8% higher than in the same period last year. Last year, the full-scale war that started in Ukraine negatively affected sales in the second half of the first quarter. This spring, however, customer interest was high and the number of visits to stores was much higher than last year. The discount of winter season goods was affected by a warmer-than-average winter in the first six months of the year, which is why the discount percentages were higher this year, but the increased sales volumes compensated for the lower margin and had a positive effect on the result. The results of the second and third quarter were negatively affected by the construction works of the Old City Harbour tram line in the centre of Tallinn, which started at the beginning of April, as a result of which most of the intersections surrounding the Kaubamaja department store were closed by the beginning of July. Pedestrian traffic was also affected. The sales of fashion goods at the beginning of the autumn season were affected by an warmer-than-average September, but the Ilu Aeg campaign at the beginning of September had the best sales figures in years.

In the third quarter of 2023, the sales revenue of OÜ TKM Beauty Eesti, which operates the I.L.U. cosmetics stores, was 2.0 million euros, which is 34.0% more than in the second quarter of 2022. In the third quarter, the profit was 0.1 million euros, which was equivalent to the comparable period in 2022. The sales revenue in the first nine months of 2023 was 5.6 million euros, which is 28.0% more than in the same period of 2022. In the first nine months of 2023, the profit was 0.2 million euros, which was 0.1 million euros more than during the comparable period in 2022. The most important event of the third quarter was the renovation of the I.L.U. cosmetics store in Kristiine Centre under a new concept and its opening in early August. Due to the renovation, there was a one-month business interruption in the store. All stores showed an increase in sales and the number of visitors, but the growth was stronger in renovated stores.

Car trade

The sales revenue of the car trade segment was 148.6 million euros in the first nine months of 2023. The sales revenue increased by 32.3% compared to the sales revenue of the same period last year. The 51.1-million-euro sales revenue of the third quarter was 28.4% higher than the sales revenue in the third quarter of 2022. In the first nine months, a total of 4,842 new vehicles were sold, of which 1,673 were sold in the third quarter. The net revenue of the segment in the first nine months of 2023 was 10.2 million euros, exceeding the profit for the same period of the year before by 2.1 million euros. The pre-tax profit of the segment for the first nine months of 2023 was 11.4 million euros, exceeding the profit for the same period in 2022 by 2.9 million euros. The pre-tax profit of the third quarter of 2023 was 3.6 million euros, which is 12.3% higher than the profit of the same period of the year before.

The continued stable and timely vehicle deliveries of the car brands represented by the Group are behind the outstanding results of the third quarter of 2023. The normalised supply situation has made it possible to ensure good sales, while in the situation of intense competition it has become common to offer discounted prices. Some major sales to fleet customers and car rental companies took place in the third quarter. The Group also achieved success in several public procurements. The fleet sold by the Group has reached a volume that keeps the after-sales services and body repair departments working at full capacity.

The increase in the price of new cars and increased loan interest rates have made private customers especially cautious when making purchase decisions, and they tend to postpone them. On the other hand, the price increase has increased interest in used cars. Interest in electric cars and plug-in hybrids has stabilised.

At the end of 2023, sales of new Škoda vehicles will begin in Vilnius. The new Škoda Superb mid-class sedan and the KIA EV9 electric SUV are expected to hit the market in the near future.

Security segment

The sales revenue of the security segment outside the Group in the first nine months of 2023 was 10.4 million euros, increasing by 49.9% in comparison with the same period of last year. The pre-tax profit of the segment in the first nine months of the year was 0.1 million euros, increasing by 0.05 million euros compared to the same period last year. The sales revenue of the segment outside the Group in the third quarter of 2023 was 4.0 million euros, increasing by 68.0% compared to the same period last year. The pre-tax profit of the third quarter of 2023 was 0.03 million euros, which is 0.03 million euros less than the profit of the same period of the year before.

The third-quarter results of the segment were as expected. Several important contracts were concluded, for example with the Art Museum of Estonia, where the security segment company Viking Security AS will start providing security services from March next year. The biggest negative impact is still the risk of payment difficulties for customers and partners.

In the third quarter, two strong Estonian security companies were added to the security segment through acquisition: Skarabeus Julgestusteenistus OÜ, whose 2022 revenue was 3.1 million euros, and Caesari Turvateenistuse AS, whose 2022 revenue was 0.7 million euros. The acquired companies are planned to be merged with Viking Security AS by the end of 2023. The acquisition of the two companies will strengthen the business activities of all areas through the combination of strong industry know-how, increased operational capacity, and cost efficiency.

Real estate

The sales revenue earned in the real estate segment outside the Group was 4.9 million euros in the first nine months of 2023. Sales revenue increased by 6.5% compared to the same period last year. The sales revenue of the segment outside the Group in the third quarter was 1.7 million euros. Sales revenue increased by 7.8% compared to the previous year. The pre-tax profit of the real estate segment in the first nine months of 2023 was 7.6 million euros, with the profit decreasing by 6.0%. The pre-tax profit of the segment in the third quarter was 2.2 million euros. Pre-tax profit decreased by 19.7% in the reference period.

Despite the deepening uncertainty in the economy, the number of visitors to the shopping centres belonging to the segment showed growth. The number of visitors to shopping areas in the centre of Tallinn decreased due to street reconstruction and road closures taking place in the surrounding area. The sales revenue growth of the segment was positively impacted by the high occupancy of retail spaces in both Estonia and Latvia. In May, the car wash completed as an extension of the gas station in Peetri at 1 Raudkivi Road leased to a party outside the Group started operations. In June, the Viimsi Centre solar park was completed, which covers part of the energy needs of the rental premises of the centre and contributed to the increase in sales revenue of the real estate segment.

The decline in the profit of the segment is attributable to the increase in the cost of loan money due to the increase in interest rates in the euro area intended by the European Central Bank to tighten monetary policy, as the majority of the loan portfolio of the Group is concentrated in the real estate segment. The interest expense has multiplied compared to the reference base of a year ago.

In companies in the real estate segment, sustainability plays an important role: attention is constantly paid to improving the energy efficiency of buildings and developing more resource-efficient and environmentally friendly solutions. The extension of the Saku Selver parking lot was completed in September, which increases the convenience of customers visiting the store.

In the third quarter, TKM Kinnisavara AS started developing a logistics centre in Maardu for the needs of the Group. The total area of the centre is 17,200 m2 and the construction will cost approximately 20 million euros. The construction of the logistics centre is financed from the Group's own funds and a bank loan. A solar energy park will be built on the roof of the logistics centre, the energy production of which will cover a significant part of the building's electricity consumption. Completion of logistics centre is planned for autumn 2024.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In thousands of euros

 30.09.202331.12.2022
ASSETS  
Current assets  
Cash and cash equivalents8,74422,436
Trade and other receivables22,81827,200
Inventories96,72689,194
Total current assets128,288138,830
Non-current assets  
Long-term receivables and prepayments308299
Investments in associates1,7581,722
Investment property64,27063,623
Property, plant and equipment417,381420,600
Intangible assets24,80221,723
Total non-current assets508,519507,967
TOTAL ASSETS636,807646,797
   
LIABILITIES AND EQUITY  
Current liabilities  
Borrowings31,42797,107
Trade and other payables98,614111,449
Total current liabilities 130,041208,556
Non-current liabilities   
Borrowings262,305190,825
Deferred tax liabilities5,2995,299
Provisions for other liabilities and charges590458
Total non-current liabilities 268,194196,582
TOTAL LIABILITIES398,235405,138
Equity  
Share capital16,29216,292
Statutory reserve capital2,6032,603
Revaluation reserve105,141106,981
Retained earnings114,536115,783
TOTAL EQUITY238,572241,659
TOTAL LIABILITIES AND EQUITY636,807646,797


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

In thousands of euros

  III quarter 2023III quarter 20229 months 20239 months 2022
     
 Revenue234,113216,457694,661628,376
 Other operating income3263441,1861,206
      
 Cost of merchandise-170,489-157,845-505,471-457,629
 Service expenses-14,195-17,019-44,320-46,033
 Staff costs-25,577-23,046-78,298-69,274
 Depreciation, amortisation and impairment losses-10,379-9,778-30,657-29,199
 Other expenses-222-142-805-629
 Operating profit13,5778,97136,29626,818
 Finance income241403
 Finance costs-2,495-1,255-6,592-3,646
 Finance income on shares of associates accounted for using the equity method5658166160
 Profit before tax11,1627,77529,91023,335
 Income tax expense00-5,301-4,480
 NET PROFIT FOR THE FINANCIAL YEAR11,1627,77524,60918,855
 Other comprehensive income:    
 Items that will not be subsequently reclassified to profit or loss    
 Other comprehensive income for the financial year0000
 TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR11,1627,77524,60918,855
Basic and diluted earnings per share (euros)0.270.190.600.46 
         

Raul Puusepp

Chairman of the Board

Phone +372 731 5000

Attachment



Bors_Kaubamaja_3Q2023_eng.pdf