Unaudited consolidated interim accounts for the first quarter of 2018 Attachments

Unaudited consolidated interim accounts for the first quarter of 2018

In the first quarter of 2018, the unaudited consolidated sales revenue of the Tallinn Kaubamaja Group was 159.5 million euros. Compared to the first quarter of 2017, when its sales revenue was 150.7 million euros, the growth accounted for 5.9%. The net loss for the period amounted to 0.2 million euros due to the income tax expense on dividends (6.2 million euros). The loss in the first quarter of 2017 was 0.3 million euros, including income tax of 6.4 million euros. The pre-tax profit - 6.1 million euros - remained at the same level as in the previous year.

The beginning of 2018 was positive for the Group - there was a growth in sales revenue. The pre-tax profit remained at a solid level, comparable to that of the previous year. In terms of the important retail segments of the Group, a strong sales revenue growth was seen in supermarkets and car trade segments. In spite of the intensification of the competitive situation, the department stores managed to maintain the same level of sales revenue in essence. In estimated comparison with its direct competitors, based on the statistics published by the Tax and Customs Board, the sales revenue of the Group's segment of Kaubamaja stores can be considered good under certain market situation. The sales of the footwear segment decreased mainly due to reduced selling space. In the first quarter of 2018, the largest, nearly 1.5 times sales growth was recorded in the Group e-stores. The key to growth of Kaubamaja and Selver's e-stores is the fact that the e-shopping experience offered is of an equivalent quality with which the regular customers of the Group are accustomed to in physical stores. Investments in the user-friendliness, service and logistics development of e-stores as well as organizational changes in process reorganization have been successful and according to plan. Labour costs increased by 11.5% in the first quarter, including a 3.8% increase in the number of employees. Growth of 7.5% of the average wage per employee remained at the same pace with the trends of the wholesale and retail trade statistics of the Republic.

Selver supermarkets

In the first quarter of 2018, the consolidated sales revenue of the supermarket business segment was 105.6 million euros, being increased by 6.1% compared to the previous period. In the first quarter of 2018, the consolidated pre-tax profit of the supermarket segment was 3.1 million euros. The profit earned in Estonia amounted to 3.2 million euros of it, remaining at the level of the previous year (a decline of 0.1 million euros). The consolidated net loss of the supermarket segment was 0.9 million euros, which accounted for an increase of 0.1 million euros compared the first quarter of the previous year. The net loss in Estonia in the first quarter of 2018 was 0.8 million euros. The difference between net profit and pre-tax profit is a result of income tax expense on dividends - in 2018, the income tax on dividends was 0.4 million euros less than in the previous year. The pre-tax loss in Latvia in the first quarter of 2018 was 0.1 million euros. The loss was reduced due to the expiration of intra-group contracts. The business in Latvia is frozen.

The sales revenue growth of Selver stores in the first quarter, which was somewhat faster than the market segment, has been achieved with the support of new stores. In terms of comparable stores, Selver stores have managed to keep the sales revenue at the level of last year, despite the constantly increasing number of competitors' stores and the re-distribution of loyal customers between the stores of Selver. In the first quarter, both the number of purchases and the average purchase has increased. E-Selver is still doing well: its sales in the first quarter, compared to the first quarter of last year, grew by 1.5 times. The comparison basis of the year 2018 does not include the five new supermarkets opened in Tallinn and the mobile store of Hiiumaa.

The profits earned in Estonia were mostly affected by revenue growth. In terms of operating expenses, the level of cost-efficiency was better than last year. As expected, investments have had a positive effect: they have enabled to save on administrative costs and efficiently manage labour costs in the pressurising wage situation.

This year, Selver plans to open at least two stores and extend the SelveEkspress service to these two stores, as well as fourteen existing stores. It is also planned to introduce electronic price tags in Selver's fruit and vegetable sections. We will continue to develop e-commerce to increase our capability to serve the rapidly increasing number of customers: it is also planned to install the first e-Selver food lockers, where customers of our e-store can pick up their deliveries. On 1 April, the e-Selver service expanded to Pärnu.

Department stores

In the first three months of 2018, the department store business segment earned a sales revenue of 22.8 million euros, which is 1.0% less than last year. The pre-tax loss of the department stores in the first quarter of 2018 was 0.4 million euros, which is 0.5 million euros less than last year. In the first quarter, the sales results of the department store segment were affected by the long and cloudy winter, which had a negative impact on the sale of spring goods at the beginning of the new season. The sale of discounted goods in the winter weather conditions also negatively affected the marginal.In the first quarter of 2018, the sales revenue of OÜ TKM Beauty Eesti, which operates the I.L.U. cosmetics stores, was 1.1 million euros, which was 3.2% more than in the same period last year. The loss in the first quarter of 2018 was 0.1 million euros, which is 12.5% more than last year. In February, the Kvartal store in Tartu was closed due to unsatisfactory results. The final sale and costs related to the closing the store influenced the profitability of the I.L.U. chain.

Car Trade

In the first quarter of 2018, the sales revenue of the car trade segment was 27.6 million euros. Sales revenue increased by 14.0% compared to last year and the sales revenue of KIAs decreased by 5.9%. A total of 1,229 new vehicles were sold in the first three months of the year. The sales revenue and the increase in the number of cars sold was supported by the rapid growth of the Estonian car market, which continued in the first quarter of 2018. The pre-tax profit of the segment in the first quarter of 2018 was 0.9 million euros, which is 0.4 million euros less than in the same period last year. In January, Viking Motors AS, the Estonian retail seller in car trade segment, started selling and servicing Peugeot cars in Tallinn by opening a new showroom. Until now, the Group's Latvian car company -Forum Auto SIA - has successfully sold Peugeot cars. This new business direction has shown better results than expected. The Latvian subsidiary Forum Auto SIA has also shown great results, winning several public procurements. The decrease in the car trade segment's profit has, on the one hand, been a result of the launch of the new showroom in Tallinn. On the other hand, compared to the first quarter of 2017, the higher volume of fleet sales has lowered the sales margin of cars.

Footwear trade

In the first quarter of 2018, the sales revenue of the footwear business segment was 2.2 million euros, which accounted for a decrease of 16.5% compared to the same period of the previous year. Reason for the decrease compared to last year, five footwear stores have been closed during the selling space optimization. The loss in the first quarter decreased by 0.5 million euros compared to the previous year, staying at a level of 0.3 million euros. The goal of the segment in 2018 is to increase profitability through new procurement channels and an increase in margins. In 2018, it is planned to re-open the ABC King store in Kristiine shopping centre, which was closed in 2017, and to continue with the activities to increase the profitability of selling space. We have started working with the store concept innovations of ABC King.

Real Estate

In the first quarter of 2018, the sales revenue in the real estate segment outside the Group was 1.3 million euros. Sales revenue increased by 7.6% compared to last year. The pre-tax profit of the real estate segment in the first quarter of 2018 was 2.9 million euros, which is 0.4% less than last year. The growth in the segment's sales revenue was positively affected by the gas station and store, completed in January 2018 for a partner outside the Group, which is located in Rae municipality, in the immediate vicinity of the Selver store in Peetri. Tartu Kaubamaja Centre and Viimsi Centre are showing good results and contributing to the segment's sales growth. The decrease in profit was affected by previous contracts concluded inside the Group, related to Latvian real estate, which have ended by now. At the end of 2018, it is planned to open Kolde Selver, which is currently under construction. It is also planned to continue with the development works of the Estonian, Latvian and Lithuanian car centres, a new sales building of department store in Tallinn and the central kitchen of Kulinaaria.

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