TKM Grupp
Quarterly report

Unaudited consolidated interim accounts for the first quarter of 2022

In the first quarter of 2022, the consolidated unaudited sales revenue of the Group was 198.9 million euros. Compared to the first quarter of 2021, when comparable sales revenue was 190.8 million euros, the growth was 4.3%. The net profit for the reporting period was 0.4 million euros, which increased by 2.6 million euros compared to the first quarter of 2021. The pre-tax profit was 4.9 million euros, which was 2.7 million euros more than the comparable result of the year before.

The economic result of the Group in the first quarter of 2022 met the Group’s expectations. Unlike the year before when the stores of fashion and industrial goods were temporarily closed, all stores of the Group remained open for the entire reporting period this year. The expected normalisation of the economic environment was shaken by the unexpected and frightening aggression of Russia against Ukraine which began in February resulting in an increase in prices and delivery difficulties and changed the regular behaviour of the consumers. In spite of the complicated situation, the Group was able to increase its pre-tax profit or reduce the loss in all segments. In the retail segments, the gross profitability was improved, which in turn helped balance the increases in energy prices and labour costs. Labour costs grew by 7.2% in the first quarter of 2022, while the number of employees declined by 4.9%. The labour efficiency was achieved by merging the processes of the Selver and ABC Supermarkets stores in 2021. The wider use of self-service cash registers, which are becoming increasingly popular among the customers, has also enabled optimising the labour force.

In the Kaubamaja department store segment, the Tallinn department store of Kaubamaja completely renovated the Naistemaailm section in the reporting quarter. Preparations were launched for the designing and construction of a new Selver store in Tartu. The construction of a solar park on the roof of the building of the Pirita Selver has also been launched. In the first quarter, investments were made in updating the e-store platform of the Group, as well as in convenience applications of the loyalty programme. Based on the strategic decision to terminate footwear trade in separate footwear stores, 11 ABC King and SHU stores were closed in the first quarter.

Selver supermarkets

The consolidated sales revenue of the supermarket business segment in the first quarter of 2022 was 139.5 million euros, increasing by 4.2% compared to the same period of the previous year. The average monthly sales revenue per square metre of sales area in the first quarter of 2022 was 0.40 thousand euros, increasing by 6.0% compared to the previous period. In terms of comparable stores, the sales revenue of goods per square metre of sales area was also 0.40 thousand euros, growing by 4.3% compared to the reference period. In the first quarter of 2022, 10 million purchases were made from Selver stores, accounting for an increase of 3% compared to the previous year.

The consolidated pre-tax profit of the supermarket segment in the first quarter of was 2.3 million euros, which is 0.8 million euros more than in the previous year. The consolidated net profit of the supermarket segment was 0.1 million euros, which is 0.2 million euros more than last year. The difference between the net profit and loss before income tax is due to the income tax paid on dividends – this year, the income tax on dividends was 0.6 million euros more than in the year before. The entire revenue of the supermarket segment was earned in Estonia.

The actual sales results and the reference base of the supermarket segment include the impacts of COVID-19; the increase in prices and the Ukrainian crisis have also somewhat affected the consumption habits of customers. The prices of many goods and services have increased in the global market and the transition of those increases into final retail prices is impossible for the retail sector to prevent. Several goods of Russian or Ukrainian origin have had to be replaced with alternative products which are somewhat more expensive. The increase in prices has largely stemmed from an increase in the prices of electricity, gas, and fuel, which has significantly increased the operating expenditure of businesses and all this is inevitably carried over to the final prices of all products and services, irrespective of the field. In order to alleviate the increase in prices for the customers, Selver is carrying out a ‘price freeze’ campaign for the third year in a row, fixing the prices of more than 400 products. In order to counter-balance the price pressure, Selver has taken steps to increase efficiency. Investments in self-service cash registers and IT solutions have had a positive effect on the labour efficiency and on the main process of handling goods. The LIDL store chain which entered the Estonian market with 8 stores in the first quarter this year has not yet had a clearly measurable impact on the sales activities of Selver stores in their first month in operation.

The fact that the Easter holiday was in the first quarter in the reference year but falls in the second quarter this year should also be taken into consideration while comparing the sales results. The lower reference basis in the reference year due to the temporary closing of stores within the framework of the re-branding process of the Selver ABC stores also has an effect.

The sales revenue of the central kitchen of Kulinaaria, which is included in the supermarket segment, increased 21.4% in the first quarter. The pre-tax profit decreased by 6.5% in the reference period, mainly due to the depreciation and financial costs arising from the new production building. On the one hand, the remarkable growth in the turnover is based on the decline in the turnover due to the restrictions implemented in the reference period, but successful marketing campaigns have also supported the growth. The production capacity of the new factory has accelerated product development. The central kitchen entered a new segment in the category of confectioneries – the first small torte based on high-quality ingredients was marketed for the International Women’s Day under the trademark of Selveri Köök and more is about to come. Various different confectioneries, desserts, and soups were also brought to the market. There are plans to start offering a breakfast selection in the near future. The catering segment has not recovered to the pre-pandemic level.

Selver is planning to open two new stores this year and renovate up to two stores. Development of the e-store service, for which there is an increasing demand, remains in the focus. While the SelveEkspress service is currently available to the customers at all Selver stores, there are plans to start offering the self-service solution at all Selver ABC stores as well by the end of the year.

Department stores

The sales revenue of the Kaubamaja department stores segment in the first three months of 2022 was 21.7 million euros, which was 20.7% more than in the same period of the previous year. The pre-tax loss of the Kaubamaja department store segment in the first quarter of 2022 was 1.7 million euros. The pre-tax loss decreased by 0.6 million euros. While there was a steep rise in the coronavirus figures in the first quarter last year, which resulted in the closing of all fashion and industrial goods’ stores on 11 March, all stores remained open this year and the customers’ interest in visiting physical stores remained at a high level, supporting an increase in the sales revenues of all stores of the Kaubamaja department store segment.

The sales revenue of the Kaubamaja department stores per square metre of sales area was 0.26 thousand euros per month in the first three months, which is 18% higher than in the same period last year. Kaubamaja opened the spring season on 10 March with a fully renewed Naistemaailm in Tallinn and the ‘Ilu Aeg’ spring campaign was more successful than ever before. The campaigns in February were affected negatively by the full-scale war launched by Russia against Ukraine on 24 February.

In the first quarter of 2022, the sales revenue of OÜ TKM Beauty Eesti, which operates the I.L.U. cosmetics stores, was 1.3 million euros, which was 34.5% more than in the same period in 2021. In the first quarter, the loss was 0.02 million euros, which decreased by 0.04 million euros compared to the comparable period of 2021. Both the ‘Eesti Kuu’ campaign of Estonian products in February and the Women’s Day campaign in March proved successful. Several new trademarks were added to the portfolio. A social campaign was launched in March in cooperation with the Red Cross to collect donations for the people of Ukraine who have suffered in the war.

The sales revenue of the shoe stores of TKM King AS, which are being reported under the Kaubamaja department store segment as of 1 April 2021, was 1.3 million euros in the first quarter of 2022, increasing by 24.1% compared to the same period last year. The loss for the first quarter was 0.4 million euros, which is 0.2 million euros better than in the same period last year. Based on the strategic decision to terminate footwear trade in separate footwear stores, eleven ABC King and SHU stores were closed in the first quarter, which was accompanied by a significant sale of the stocks.

Car trade

The sales revenue of the car trade segment in the first quarter of 2022 was 34.0 million euros. The sales revenue decreased by 6.1% compared to the previous year. The segment's consolidated pre-tax profit in the first quarter was 2.1 million euros, which is 0.9 million euros more than in the previous year. In the first three months of the year, a total of 1,277 new passenger cars were sold. The turnover of the car trade segment dropped primarily due to the continued shortage of new cars. The new vehicles of Peugeot and Škoda were most affected by delivery problems of the brands represented by the Group. In connection with the reduced availability of new cars, the possibilities for switching an old car for a new one also shrunk, which in turn reduced the stocks of used cars and the respective growth in sales. From the positive perspective, the car shortage has alleviated the price pressure, which has had a positive effect on profitability. Follow-up services are being provided in the normal rhythm and are fulfilling the expectations. The launch of the new KIA Sportage SUV has been successful and the sales have progressed as expected. The new Peugeot 308, the KIA EV6 electric car, and Škoda Fabia have also been added to the selection of models.

Security segment

The sales revenue of the security segment outside the Group in the first quarter of 2022 was 2.3 million euros, increasing by 57.6% in comparison with the same period of last year. The segment broke even in the first quarter, thereby improving the pre-tax profit by 0.1 million euros. The areas of cash transport and control centre services exhibited the fastest growth. The turnover decreased in the area of technology projects, partly due to deliberate reduction of the risks in a complicated environment, but partly also due to delayed deliveries. New customers were gained in all areas in the course of the quarter and the general demand for the services was at a good level. The biggest negative factors affecting the profitability are still the labour shortage and the increase in energy prices. The chance of the technology projects being halted due to issues in the general construction sector has arisen as an additional risk.

Real estate

The sales revenue of the real estate segment outside the Group in the first quarter of 2022 was 1.5 million euros, increasing by 18.5% in comparison with the first quarter of the last year. The pre-tax profit of the segment was 2.6 million euros in the first quarter. The profit increased by 3.9% in the reference period.

The significant increase in the sales revenue of the segment partly stemmed from the impact of the temporary rent discounts provided to the tenants during the restrictions imposed by the Government of the Republic to prevent the spread of COVID-19 in the reference period. The increased sales revenue and profit this year was supported by the new tenants added to the Tartu Kaubamaja centre last year, as well as the opening of the reconstructed business centre in Salaspils, Latvia. The profit has also been affected by a significantly faster increase in energy prices compared to the previous levels. The well-planned and tasteful marketing campaigns became important keywords of the shopping centres managed by the real estate segment in the beginning of the year. The image campaign of the people of Viimsi in which the local people of Viimsi were used as models in the campaign of the Viimsi Keskus centre was redesigned and became very popular.

Preparations have been launched this year for the designing and construction of a new Selver store in Tartu. The construction of a solar park on the roof of the building of the Pirita Selver has begun. The electricity to be generated by using the solar panels will be used for the own consumption of the building. A detailed plan is being drawn up for increasing the building rights on the plot of the Laulasmaa Selver.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In thousands of euros

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

In thousands of euros

Raul Puusepp

Chairman of the Board

Phone +372 731 5000

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• Börs_Kaubamaja_1Q2022_eng