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AS Tallink Grupp Unaudited Consolidated Interim Report Q3 2022
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% |
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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% |
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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% |
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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% |
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Number of ordinary shares outstanding | 743 569 064 | 743 569 064 | 0.0% |
Equity per share¹ | 0.93 | 0.88 | 5.8% |
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Ratios¹ | Q3 2022 | Q3 2021 |
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Gross profit/loss margin (%) | 25.8% | 17.8% |
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EBITDA margin (%) | 26.5% | 20.6% |
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EBIT margin (%) | 17.2% | 6.7% |
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Net profit/loss margin (%) | 14.8% | 3.2% |
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ROA (%) | 1.0% | -4.0% |
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ROE (%) | -0.9% | -11.5% |
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ROCE (%) | 1.2% | -4.7% |
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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 | Jan-Sep |
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 |
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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 |
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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 |
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Income tax | 248 | 220 | 794 | 656 |
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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 |
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Other comprehensive income |
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Items that may be reclassified to profit or loss |
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Exchange differences on translating foreign operations | 43 | 32 | 491 | 136 |
Other comprehensive income for the period | 43 | 32 | 491 | 136 |
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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 |
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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 |
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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 |
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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 |
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LIABILITIES AND EQUITY |
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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 |
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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 |
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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 | Jan-Sep |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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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: |
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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 |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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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 |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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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 |
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TOTAL NET CASH FLOW | 12 208 | 105 297 | -24 743 | 115 279 |
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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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