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AS Tallink Grupp Unaudited Consolidated Interim Report Q3 2022

Tallink Grupp
Tallink Grupp

The Q3 2022 results of AS Tallink Grupp will be introduced at an Investor Webinar held today at 15:00 (EEST). To participate, please join via the following link; we kindly ask participants to provide their questions latest by 12:00 by email to: investor@tallink.ee. Further details available in a previously published announcement.

In the third quarter (1 July – 30 September) of the year, Tallink Grupp AS and its subsidiaries (the Group) carried 1 893 603 passengers, which is 65.5% more than in the third quarter of last year. The number of cargo units transported increased by 13.1% in the same comparison. The Group’s unaudited consolidated revenue increased by 49.9% or EUR 85.1 million to a total of EUR 255.6 million. Unaudited EBITDA was EUR 67.7 million (EUR 35.1 million in third quarter of 2021) and the unaudited net profit for the quarter was EUR 37.9 million (net profit of EUR 5.5 million in third quarter of 2021).

The Group’s operations and operating results showed overall improvements in most home markets in the third quarter of 2022. Moreover, the number of passengers increased by a fifth in comparison to the third quarter and by 66% compared to the previous year. Although to a limited effect, the recovery in demand was negatively affected by the war in Ukraine that emerged at the end of February 2022.

Given the uncertainties regarding the geopolitical situation, the business environment has improved but remained challenging. In the current situation, the focus has remained on costs and cash flow management to ensure the sustainability of the Group’s core business.

Despite the global challenges, the company is on the path of recovery, which is also evidenced by the best third quarter financial result in the last three years and the September results, which show the positive impact of the company's charter contracts and meet the low season goals.

The following operational factors impacted results in the third quarter:

  • 2 shuttle vessels, 2 cargo vessels, 5 cruise ferries and 3 hotels were operating

  • long-term charter of 2 vessels, including the extension one of them

  • short-term charter of 4 vessels

  • docking of 1 vessel, totalling 11 days

  • high global fuel prices

  • cost savings from previously implemented measures.

Operations During the Quarter
During the third quarter, most of the routes were operating according to the schedules with a few differences.

The operation of the cruise ship Victoria I was mostly suspended in the third quarter. In the beginning of July, cruise ferry Victoria I was chartered out to Scotland on a short-term agreement, so the company temporarily no longer offers daily departures on the Tallinn-Stockholm route.

Silja Europa operated on the Tallinn-Helsinki line and temporarily served the special cruises on the Helsinki-Visby and Tallinn-Saaremaa lines. In August, cruise vessels Silja Europa and Galaxy were chartered to provide accommodation in the Netherlands under a short-term contract. The company no longer operates a cruise ship on the Tallinn-Helsinki route and only Baltic Princess will continue to operate on the Turku-Stockholm route.

Only one cruise ship Baltic Queen operated on the Tallinn-Stockholm route and briefly replaced Silja Europa on the Tallinn-Helsinki and Helsinki-Åland routes in September.

The cargo ship Sailor operated on the Paldiski-Stockholm line and underwent planned dry docking for 11 days for scheduled maintenance.

The cargo ship Regal Star operated regularly on the Tallinn-Helsinki route, and briefly replaced the cargo ship Sailor on the Paldiski-Stockholm route.

Estonia-Finland route’s shuttle vessels Megastar and Star, and the three Finland-Sweden routes’ cruise ferries continued their operations throughout the third quarter. The cruise ferry Galaxy stopped operating on the Turku-Stockholm route at the end of the quarter due to a charter contract.

Tallink City Hotel, Tallink Spa & Conference Hotel and Tallink Express Hotel were all operating during the third quarter. Tallink Hotel Riga has remained closed since October 2020.

Sales and Segments
In the third quarter of 2022, the Group’s total revenue increased by EUR 85.1 million to EUR 255.6 million. Total revenue in the third quarter of 2021 and 2020 was EUR 170.5 million and EUR 143.7 million, respectively.

Revenue from route operations (core business) increased by EUR 68.1 million to EUR 210.8 million compared to the third quarter of 2021.

The number of passengers carried on the Estonia-Finland routes increased by 66.9% compared to last year. The number of transported cargo units increased by 24.8%. Estonia-Finland routes’ revenue increased by EUR 30.3 million to EUR 93.5 million. The segment result improved by EUR 16.6 million to EUR 26.7 million. The segment reflects operations of two shuttle vessels, a cruise ferry, and a cargo vessel.

The number of passengers carried on the Finland-Sweden routes increased by 73.6%. The number of transported cargo units decreased by 15.9%. The route’s revenue increased by EUR 32.9 million to EUR 93.8 million and the segment result increased by EUR 4.6 million to EUR 10.9 million. The segment reflects the operations of Turku-Stockholm and Helsinki-Stockholm routes.

On Estonia-Sweden routes’ the number of carried passengers increased by 31.5% compared to last year. The number of transported cargo units decreased by 4.1%. Estonia-Sweden routes’ revenue increased by EUR 4.9 million to EUR 23.5 million and the segment result of EUR 1.5 million remained effectively on par with last year. Estonia-Sweden route reflects operation of one cargo vessel and one cruise ferry.

Revenue from the segment other increased by a total of EUR 18.6 million and amounted to EUR 46.8 million. The increase was mainly driven by chartering out vessels and accommodation sales and to a lesser extent by various retail activities.

Earnings
In the third quarter of 2022, the Group’s gross profit improved by EUR 35.7 million compared to the same period last year, amounting to EUR 66.0 million. EBITDA increased by EUR 32.6 million and amounted to EUR 67.7 million.

In addition, the reduction in fairway dues in Estonia amounted to EUR 0.5 million (EUR 0.6 million in third quarter of 2021).

Amortisation and depreciation expense in the third quarter amounted to EUR 23.7 million (EUR 23.7 million in 2021).

The Group’s unaudited net profit for the third quarter of 2022 was EUR 37.9 million or EUR 0.051 per share compared to a net profit of EUR 5.5 million or EUR 0.008 per share in the third quarter 2021 and net loss of EUR 23.9 million or EUR 0.036 per share in the third quarter 2020.

Results of the First 9 Months of 2022
In the first 9 months (1 January – 30 September) of the 2022 financial year, the Group carried 4.2 million passengers which is 126.5% more compared to the same period last year. The Group’s unaudited revenue for the period increased by 82.9% and amounted to EUR 567.7 million. Unaudited EBITDA for the first 9 months was EUR 85.4 million (EUR 33.2 million, 9 months 2021) and unaudited net loss was EUR 2.8 million (EUR 53.2 million, 9 months 2021).

The financial result of the first 9 months of 2022 was impacted by recovering demand driven by the increase in customer numbers, the chartering of several vessels, the war in Ukraine as well as the rapid increase in the global fuel prices.

Investments
The Group’s investments in the third quarter of 2022 amounted to EUR 5.5 million. Sailor underwent scheduled maintenance. The maintenance and repair works lasted a total of 11 days in the third quarter of 2022.

Due to the continuously challenging economic environment ship-related investments were kept to minimum. Only critical maintenance and repair works were performed as well as investments in relation to the building of MyStar.

Investments were also made in the development of the online booking and sales systems as well as other administrative systems and in relation to the opening of new Burger King restaurants.

Dividends
Due to a complicated operating environment and considering the Group’s long-term interests, the Supervisory Board proposed not to pay dividends, which was approved by the shareholders during the annual general meeting on 9 June 2022.

Financial Position
At the end of the third quarter of 2022, the Group’s net debt amounted to EUR 608.7 million having decreased by EUR 47.3 million compared to the end of the second quarter of 2022 and by EUR 51.0 million compared to the end of the third quarter of 2021.

As of 30 September 2022, the Group’s cash and cash equivalents amounted to EUR 102.8 million (EUR 143.1 million on 30 September 2021) and the Group had EUR 123.2 million in unused credit lines (EUR 109.3 million on 30 September 2021). The total liquidity buffer (cash, cash equivalents and unused credit facilities) amounted to EUR 226.0 million (EUR 252.5 million on 30 September 2021). The current trade and other payables amounted to EUR 85.3 million (EUR 85.6 million on 30 September 2021).

Personnel
As of 30 September 2022, the Group had 4 916 employees (4 513 on 30 September 2021). The number of employees includes 171 employees on maternity leave. The following table provides a more detailed overview of the Group’s personnel.

In the third quarter of 2022, staff costs amounted to EUR 42.7 million (EUR 36.9 million in 2021), which is an 15,8% increase compared to the same period last year. The increase in average FTEs is 11.1% compared to the third quarter of 2021. The increase is driven mainly by expanded operations (more ships and hotels operated) compared to the third quarter of 2021 and reduced workload in the comparison period.

Economic Environment
The Group’s operations were predominantly impacted by changes in consumer behaviour in the post COVID-19 environment and the economic developments in its core markets Finland, Sweden, and Estonia, but also by the global geopolitical situation and war in Europe. The demand for international travel has continued to grow steadily since the last COVID-19 pandemic related travel restrictions in the EU were waived but has not yet returned to pre-COVID-19 levels. Additionally, the recovery of inbound tourism from Asia has been haltered by the remaining COVID-19 restrictions in these countries.

Consumer confidence continued to decline in the third quarter due to the combination of high energy prices, the war in Ukraine, the tightening monetary policy and the high inflation. However, despite the consumer tendency to consume less and save more, the company’s passenger volumes have recovered rapidly during the third quarter.

The company’s cargo business remained steady and robust during the period, although the market conditions and availability of shipping fleet put further pressure on the already challenging price competition.

During the third quarter, the significant increase of the global fuel prices continued – on average more than 100% compared to the same period last year. The combination of this significant increase and the higher frequency of operations resulted in the Group’s overall fuel cost rising by more than 100% or nearly EUR 22 million compared to the same period in 2021.

For the foreseeable future and according to current best knowledge and estimates, the key risks for the business continue to be related to the developments with fuel prices, the war in Ukraine, the rising interest rates and the changing customer travel and consumption habits.

Events in the Third Quarter
Short-Term Charter of Cruise Ferry Victoria I
AS Tallink Grupp and Corporate Travel Management (North) Ltd on behalf of The Scottish Government have signed a short-term time-charter agreement for the vessel Victoria I. The vessel is used to provide temporary accommodation in Scotland and was chartered from 8 July 2022 for six months with an option to extend the charter for another three months.

Short-Term Chartering of Two Cruise Vessels
Tallink Grupp signed an agreement with Slaapschepen Public BV, an organisation nominated by Centraal Orgaan Opvang Asielzoekers (COA) in the Netherlands, for the short-term charter of two vessels. The company’s Tallinn-Helsinki route vessel Silja Europa has been chartered to provide temporary accommodation in the Netherlands from 20 August 2022 for a period of seven months, with the option to extend the charter agreement by another three months. The company’s second vessel Galaxy, previously operating on the Turku-Stockholm route, has also been chartered to provide accommodation in the Netherlands, from 20 September 2022 also for seven months, with the option to extend the charter agreement by another three months. Both vessels have been hired with Tallink Grupp’s technical crew only.

Temporary Changes in the Schedule of Baltic Princess
Tallink Grupp’s vessel Baltic Princess timetable and destination port changed temporarily from 11 September 2022 until 31 March 2023. Starting from 11 September, the vessel started to operate between Turku, Finland and Kapellskär, Sweden.

Extension of Vessel Charter Agreement (Atlantic Vision)
A subsidiary of AS Tallink Grupp, Baltic SF IX Limited and Marine Atlantic Inc, a Canadian company with the state participation therein, have concluded to extend the current charter agreement of MV Atlantic Vision (ex. Superfast IX) for 18 months, until May 2024, with an option to extend the agreement for an additional 12 months. The vessel has been on the long-term bareboat charter since 14 November 2008.

Events After the Reporting Period and Outlook
Completion of the New Dual Fuel Shuttle Vessel MyStar
The new dual fuel (LNG, MGO) shuttle vessel, built in Rauma Shipyard, successfully passed the first sea trials that took place on 14-18 September and the next sea trials will take place in the beginning of November 2022. The ship is expected to be delivered and start operating on the Tallinn-Helsinki route in November 2022.

Earnings
The Group’s earnings are not generated evenly throughout the year. The summer period is the high season in the Group’s operations. In management’s opinion and based on prior experience, most of the Group’s earnings are generated during the summer months (June-August).

The war in Ukraine is expected to have a negative impact on the demand of certain customer groups, mainly customers from the countries directly participating in the conflict and from Asian countries, together with the risk of an increase in some input prices, mainly fuel and raw materials. The exact magnitude and duration of the potential effects from the conflict remain difficult to assess.

Despite the uncertainties in the outlook of the economic environment the management is continuously looking for ways to manage risks for the low season for examples through charters.

Research and Development Projects
The Group does not have any substantial ongoing research and development projects. The Group is continuously seeking opportunities for expanding its operations to improve its results.

The Group is continuously looking for innovative ways to upgrade the ships and passenger area technology to improve its overall performance through modern solutions. The most recent technical projects are focusing on the solutions for reducing the CO2 footprint of the ships.

Risks
The Group’s business, financial position and operating results could be materially affected by various risks. These risks are not the only ones we face. Additional risks and uncertainties not presently known to us, or that we currently believe are immaterial or unlikely, could also impair our business. The order of presentation of the risk factors below is not intended to be an indication of the probability of their occurrence or of their potential effect on our business.

  • Protracted geopolitical and military conflict in Europe

  • Governmental restrictions on business activities

  • Impact of high inflation on consumer habits

  • Accidents, disasters

  • Macroeconomic and labour market developments

  • Changes in laws and regulations

  • Relations with trade unions

  • Increase in the fuel prices and interest rates

  • Market and customer behaviour

Key Figures

For the period

Q3 2022

Q3 2021

Change %

Revenue (million euros)

255.6

170.5

49.9%

Gross profit/loss (million euros)

66.0

30.3

117.8%

EBITDA¹ (million euros)

67.7

35.1

92.7%

EBIT¹ (million euros)

43.9

11.5

283.6%

Net profit /loss for the period (million euros)

37.9

5.5

586.1%

 

 

 

 

Depreciation and amortisation (million euros)

23.7

23.7

0.3%

Capital expenditures¹ ²(million euros)

5.5

3.7

49.2%

Weighted average number of ordinary shares outstanding

743 569 064

694 444 381

7.1%

Earnings/loss per share¹

0.051

0.008

540.8%

 

 

 

 

Number of passengers

1 893 603

1 144 092

65.5%

Number of cargo units

102 399

90 538

13.1%

Average number of employees

5 255

4 647

13.1%

 

 

 

 

As at

30.09.2022

30.06.2022

Change %

Total assets (million euros)

1 535.3

1 550.1

-1.0%

Total liabilities (million euros)

845.1

897.8

-5.9%

Interest-bearing liabilities (million euros)

711.5

746.5

-4.7%

Net debt¹ (million euros)

608.7

655.9

-7.2%

Net debt to EBITDA¹

5.5

8.4

-34.5%

Total equity (million euros)

690.2

652.3

5.8%

Equity ratio¹ (%)

45%

42%

 

 

 

 

 

Number of ordinary shares outstanding

743 569 064

743 569 064

0.0%

Equity per share¹

0.93

0.88

5.8%

 

 

 

 

Ratios¹

Q3 2022

Q3 2021

 

Gross profit/loss margin (%)

25.8%

17.8%

 

EBITDA margin (%)

26.5%

20.6%

 

EBIT margin (%)

17.2%

6.7%

 

Net profit/loss margin (%)

14.8%

3.2%

 

 

 

 

 

ROA (%)

1.0%

-4.0%

 

ROE (%)

-0.9%

-11.5%

 

ROCE (%)

1.2%

-4.7%

 

1 Alternative performance measures based on ESMA guidelines are disclosed in the Alternative Performance Measures section of this Interim Report.

2 Does not include additions to right-of-use assets.

EBITDA: result from operating activities before net financial items, share of profit of equity-accounted investees, taxes, depreciation and amortization
EBIT: result from operating activities
Earnings/loss per share: net profit or loss/ weighted average number of shares outstanding
Equity ratio: total equity / total assets
Shareholder’s equity per share: shareholder’s equity / number of shares outstanding
Gross profit/loss margin: gross profit / net sales
EBITDA margin: EBITDA / net sales
EBIT margin: EBIT / net sales
Net profit/loss margin: net profit or loss / net sales
Capital expenditure: additions to property, plant and equipment – additions to right-of-use assets + additions to intangible assets
ROA: earnings before net financial items, taxes 12-months trailing / average total assets
ROE: net profit 12-months trailing / average shareholders’ equity
ROCE: earnings before net financial items, taxes 12-months trailing / (total assets – current liabilities (average for the period))
Net debt: interest-bearing liabilities less cash and cash equivalents
Net debt to EBITDA: net debt / EBITDA 12-months trailing

Consolidated statement of profit or loss and other comprehensive income

Unaudited, in thousands of EUR

Q3 2022

Q3 2021

Jan-Sep
2022

Jan-Sep
2021

Revenue (Note 3)

255 555

170 495

567 726

310 319

Cost of sales

-189 536

-140 185

-496 090

-308 689

Gross profit/loss

66 019

30 310

71 636

1 630

 

 

 

 

 

Sales and marketing expenses

-9 455

-8 260

-27 397

-20 254

Administrative expenses

-12 156

-11 866

-35 050

-32 272

Other operating income

-463

1 281

5 112

13 002

Other operating expenses

0

-9

-84

-17

Result from operating activities

43 945

11 456

14 217

-37 911

 

 

 

 

 

Finance income (Note 4)

-133

70

48

71

Finance costs (Note 4)

-6 188

-6 226

-17 847

-16 054

Profit/loss before income tax

37 624

5 300

-3 582

-53 894

 

 

 

 

 

Income tax

248

220

794

656

 

 

 

 

 

Net profit/loss for the period

37 872

5 520

-2 788

-53 238

Net profit/loss for the period attributable to equity holders of the Parent

37 872

5 520

-2 788

-53 238

 

 

 

 

 

Other comprehensive income

 

 

 

 

Items that may be reclassified to profit or loss

 

 

 

 

Exchange differences on translating foreign operations

43

32

491

136

Other comprehensive income for the period

43

32

491

136

 

 

 

 

 

Total comprehensive profit/loss for the period

37 915

5 552

-2 297

-53 102

Total comprehensive profit/loss for the period attributable to equity holders of the Parent

37 915

5 552

-2 297

-53 102

 

 

 

 

 

Profit/loss per share (in EUR, Note 5)

0.051

0.008

-0.004

-0.079

 

Consolidated statement of financial position

Unaudited, in thousands of EUR

30.09.2022

30.09.2021

31.12.2021

ASSETS

 

 

 

Cash and cash equivalents

102 813

143 113

127 556

Trade and other receivables

39 988

34 370

29 298

Prepayments

14 522

14 605

11 924

Prepaid income tax

1

25

0

Inventories

39 757

35 191

34 631

Current assets

197 081

227 304

203 409

 

 

 

 

Investments in equity-accounted investees

165

245

165

Other financial assets and prepayments

3 377

544

555

Deferred income tax assets

21 840

20 270

21 840

Investment property

300

300

300

Property, plant and equipment (Note 6)

1 279 659

1 330 698

1 323 353

Intangible assets (Note 7)

32 878

37 295

36 293

Non-current assets

1 338 219

1 389 352

1 382 506

TOTAL ASSETS

1 535 300

1 616 656

1 585 915

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Interest-bearing loans and borrowings (Note 8)

249 707

89 157

244 436

Trade and other payables

85 257

85 645

91 687

Payables to owners

6

6

6

Income tax liability

47

14

47

Deferred income

48 299

32 361

21 734

Current liabilities

383 316

207 183

357 910

 

 

 

 

Interest-bearing loans and borrowings (Note 8)

461 765

713 606

535 489

Non-current liabilities

461 765

713 606

535 489

Total liabilities

845 081

920 789

893 399

 

 

 

 

Share capital (Note 9)

349 477

349 477

349 477

Share premium

663

663

663

Reserves

66 885

68 454

67 930

Retained earnings

273 194

277 273

274 446

Equity attributable to equity holders of the Parent

690 219

695 867

692 516

Total equity

690 219

695 867

692 516

TOTAL LIABILITIES AND EQUITY

1 535 300

1 616 656

1 585 915

 

Consolidated statement of cash flows

Unaudited, in thousands of EUR

Q3 2022

Q3 2021

Jan-Sep
2022

Jan-Sep
2021

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net profit/loss for the period

37 872

5 520

-2 788

-53 238

Adjustments

29 671

29 734

88 590

86 110

Changes in:

 

 

 

 

Receivables and prepayments related to operating activities

5 254

-4 274

-14 602

-13 371

Inventories

4 736

-171

-5 126

-7 073

Liabilities related to operating activities

-17 051

-6 584

21 033

19 492

Changes in assets and liabilities

-7 061

-11 029

1 305

-952

Cash generated from operating activities

60 482

24 225

87 107

31 920

Income tax repaid/paid

-39

-41

-115

-117

NET CASH FROM/USED OPERATING ACTIVITIES

60 443

24 184

86 992

31 803

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Purchase of property, plant, equipment and intangible assets (Notes 6, 7)

-5 500

-3 686

-23 633

-11 001

Proceeds from disposals of property, plant, equipment

-38

776

2 743

790

Interest received

4

1

6

2

NET CASH USED IN INVESTING ACTIVITIES

-5 534

-2 909

-20 884

-10 209

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from loans received (note 8)

0

90 000

0

90 000

Repayment of loans received (Note 8)

-25 042

0

-71 030

-14 667

Change in overdraft (Note 8)

-6 481

-30 407

11 646

9 926

Payment of lease liabilities (Note 8)

-4 332

-4 039

-12 844

-10 744

Interest paid

-6 548

-5 871

-18 022

-14 968

Payment of transaction costs related to loans

-298

-294

-601

-495

Issue of shares

0

34 633

0

34 633

NET CASH FROM/USED IN FINANCING ACTIVITIES

-42 701

84 022

-90 851

93 685

 

 

 

 

 

TOTAL NET CASH FLOW

12 208

105 297

-24 743

115 279

 

 

 

 

 

Cash and cash equivalents at the beginning of period

90 605

37 816

127 556

27 834

Change in cash and cash equivalents

12 208

105 297

-24 743

115 279

Cash and cash equivalents at the end of period

102 813

143 113

102 813

143 113


Anneli Simm
Investor Relations Coordinator

AS Tallink Grupp
Sadama 5
10111 Tallinn, Estonia
E-mail anneli.simm@tallink.ee

 

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