TKM Grupp
Quarterly report

Unaudited consolidated interim accounts for the first quarter of 2020

In the first quarter of 2020, the unaudited consolidated sales revenue of Tallinna Kaubamaja Group was 175.5 million euros. The growth was 7.4% compared to the first quarter of 2019, when the comparable sales revenue was 163.4 million euros. The net loss of the reporting period was 1.7 million euros, influenced by the income tax calculated on dividends (5.8 million euros). The loss in the first quarter of 2019 was 2.2 million euros, including 6.5 million euros of income tax. The pre-tax profit was 4.1 million euros – 0.2 million euros lower than the result of the previous year.

The first quarter of 2020, which began positively for the Group, ended with closing the selling spaces of the footwear segment, department store segment manufactured goods departments, and I.L.U. due to the restrictions arising from the coronavirus crisis. The jump in the sales of the supermarket segment, which occurred in the middle of March after the emergency situation was declared, receded quickly as the customers became more careful in visiting the stores and the maximum capacity of the e-store was reached. Declaring the emergency situation also resulted in a significant change in the consumption behaviour of the customers with a steep decline in the consumption of manufactured and fashion products. The powerful discounts in the footwear segment in the first months of the year and stopping of the trading in March, as well as decreasing of the margin of the car trade segment of the Group in connection with the increase in sales volume of large customers all had a negative effect on the gross margin. The sudden transfer of consumption to online channels resulted in an increase of the turnover of the e-stores of the Group, where there is still some room for development to be able to meet the demand of customers, in spite of the rapid changes in the organisation of work. Labour costs increased by 5.7% in the first quarter.

The important development activities which continued in the first quarter of 2020 included the construction of the new production building of the central kitchen of Kulinaaria, as well as the renovation of the old factory building according to the plan. The Selver store in Võru was successfully moved to the new location in the Kagukeskus shopping mall in March and was the latest Selver store to introduce the SelveEkspress service. The SelveEkspress service is now available in all Selver stores. Selver is planning to expand one and renovate up to three stores this year. In the beginning of March, a SHU store with an updated concept was opened at Lasnamäe Centrum, moving to a different location in the same shopping centre. The development of the Latvian car showroom of the car segment of the Group will continue.

Selver supermarkets

The consolidated sales revenue of the supermarkets business segment was 118.3 million euros in the first quarter of 2020, increasing by 6.7% in comparison with the same period of last year. 9.3 million purchases were made at Selver supermarkets in the first quarter of 2020, showing a drop of 1.5% year on year. In the first quarter of 2020, the consolidated pre-tax profit of the supermarkets segment was 3.4 million euros, which 1.0 million euros higher than the result of the previous year. The consolidated net profit of the supermarkets segment was 1.3 million euros, which is 2.8 million euros higher compared to the same period in the previous year. The difference between the net profit and profit before income tax is due to income tax paid on dividends – income tax paid on dividends was 1.8 million euros lower in 2020 compared to the year before. Closing the Vilja Selver in Võru in February and opening the store in the new premises in the Kagukeskus shopping mall in March had an impact on the economic results of the Selver supermarkets in the first quarter. Closing of the Suurejõe Selver in Pärnu for renovation in March also had an impact. The Selver store in Ülemiste City in Tallinn is temporarily closed due to the emergency situation.

Successful campaigns and a remarkable growth of e-commerce where the increase in the sales revenue reached 65% have had a positive effect on the sales results of the first quarter. The additional day of sales gained thanks to the leap year also had an impact. Negative impacts arise from closing of the stores and the restrictions applied to trading in certain locations due to the emergency situation.

Increased sales revenue, the investments made in increasing the efficiency of daily processes, and the warmer winter, which enabled saving on administrative expenses, have had an impact to the profit earned. The SelveEkspress service is available in all Selvers, which has enabled keeping the labour efficiency at last year’s level in the conditions of wage pressure which were prevailing in the beginning of the year.

Selver is planning to expand one and renovate up to three stores this year. It is planned to strongly develop the e-store service to satisfy the demand for the service which increased considerably.

Department stores

In the first three months of 2020, the department stores business segment earned a sales revenue of 21.1 million euros, which is 7.6% less than in the same period of last year. The pre-tax loss of the Kaubamaja department stores in the first quarter of 2020 was 1.0 million euros, showing an increase of 0.5 million euros in the year-on-year comparison. The beginning of the year was quite successful for department stores – the seasonal discount campaigns in the beginning of the year worked well and the Kodu Aeg campaign organised in February was the most successful in the last nine years. Yet, conclusively, the sales result of the Kaubamaja department stores in the first quarter was influenced by the emergency situation declared by the Government of the Republic of Estonia due to the COVID-19 virus, which resulted in a lower number of visitors to the department stores from the middle of March. On 27 March, the Government of the Republic of Estonia ordered the closing of all shopping malls and Kaubamaja also closed all selling spaces of manufactured goods in Tallinn and Tartu with only the grocery stores remaining open. At the same time, the Osturalli campaign began in the e-store and lasted 17 days this year. The 7-day turnover of this year’s Osturalli in the e-store exceeds the level of last year by more than 50% and the amount of products sold was more than 80% higher.

In the first quarter of 2020, the sales revenue of OÜ TKM Beauty Eesti, which operates I.L.U. cosmetics stores, was 1.1 million euros, which is at the same level compared to the same period in 2019. The loss in the first quarter was 0.05 million euros, which was 49.2% lower than the loss in the comparable period in 2019. Analysing and changing the assortment were in the focus in the first quarter, including expanding the assortment of the e-store. The result of the quarter remained stable thanks to the successful marketing campaigns in January and February. The result of the second half of March was negatively impacted by declaration of the emergency situation in connection with the outbreak of the COVID-19 virus, with all physical stores of I.L.U. closed on 27 March and only the e-store remaining open.

Car trade

The sales revenue of the car trade segment was 33.1 million euros in the first quarter of 2020. The sales revenue increased by 25.5% year on year. In the first three months of the year, 1,348 new vehicles were sold altogether. In the first quarter of 2020, the car market decreased in all Baltic States; according to the data of Statistics Estonia, 3.0% fewer new passenger cars were registered in Estonia in the first two months of 2020. The pre-tax profit of the segment in the first quarter of 2020 was 0.3 million euros, showing a 0.3 million decrease in the year-on-year comparison. In spite of the increase in the sales revenue, the reasons behind the weaker profitability results in the first quarter of 2020 were the start-up costs of the new Škoda car showroom in Latvia and increased sales to large customers, which have lower margins.

Footwear trade

The sales revenue of the footwear trade segment was 1.6 million euros in the first quarter of 2020. The loss of the first quarter increased by 0.5 million euros compared to the previous year, remaining at 0.9 million euros. Strong realisation of the inventories of previous seasons in January and February had a negative impact on the sales revenue of the first quarter. In the beginning of March, a SHU store with an updated concept was opened at Lasnamäe Centrum, moving to a different location in the same shopping mall. The beginning of the new season in March failed completely due to the emergency situation declared in Estonia in connection with the COVID-19 virus. From 27 March 2020, all stores of the footwear trade segment of the Group are closed based on a Regulation of the Government of the Republic of Estonia until the Government has revoked the restriction.

Real estate

The sales revenue earned in the real estate segment outside the Group was 1.3 million euros in the first quarter of 2020. The sales revenue dropped by 4.9% compared to the first three months of 2019. The pre-tax profit of the real estate segment in the first quarter of 2020 was 2.7 million euros, which is 0.8% higher than the result earned in the same period last year. The drop in the sales revenue was caused by the emergency situation declared by the Government of the Republic on 12 March 2020 and the restriction of the freedom of movement implemented on 27 March 2020, as well as the prohibition on visiting shopping centres. The real estate segment of the Group has, as a responsible and caring lessor, lowered the rent until the end of the emergency situation, as the emergency situation and the prohibition on visiting the centres cause a complicated economic situation for the tenants. The profit of the segment increased slightly in spite of the drop in the sales revenue due to the emergency situation. The profit was increased by the new Škoda car showroom and the showroom intended for used cars completed and leased for the car segment of the Group in Latvia at the end of the year. This year, the development of the Latvian car centre of the car segment of the Group will continue.

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

Attachment

• Börs_Kaubamaja_1Q2020_eng