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AS Tallink Grupp Unaudited Consolidated Interim Report Q3 2021

In the third quarter (1 July – 30 September) of the 2021 financial year, Tallink Grupp AS and its subsidiaries (the Group) carried 1 144 092 passengers, which is 13.0% less than in the third quarter last year. The number of cargo units transported decreased by 1.1% in the same comparison. The Group’s unaudited consolidated revenue increased by 18.6% or EUR 26.7 million to a total of EUR 170.5 million. Unaudited EBITDA was EUR 35.1 million (EUR 5.7 million in Q3 2020) and unaudited net profit was EUR 5.5 million (net loss of EUR 23.9 million in Q3 2020).

Despite some alleviation of restrictions in Group’s home markets in Estonia and Sweden, in the third quarter, the Group’s operations and operating results were continuously strongly influenced by the COVID-19 situation. Restrictions on international travel and communications advising against travelling by state authorities, particularly in Finland, was in place for most of the quarter. The operational factors impacting results were following:

  • during the quarter 2 shuttle vessels, 2 cargo vessels, 6 cruise ferries and 3 hotels were operating;
  • reopening of Tallinn-Stockholm and Helsinki-Stockholm routes;
  • short-term charter of Victoria I and Romantika;
  • significant increase in the global fuel prices;
  • cost savings from previously implemented measures.

To enhance travelling and contribute to resolving the COVID-19 crisis, the Group offers the opportunity for passengers to perform COVID-19 antigen testing and get vaccine shots on board the Tallinn-Helsinki shuttle ferries since June 2021.

Operations during the quarter
Given the uncertainty regarding the duration of the crisis and the course of the post-crisis recovery with progress of vaccinations, the business environment has 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.

Cruise ferry Baltic Queen returned to operations on Tallinn-Stockholm route in the beginning of July. Cruise ferry Silja Europa operated on Tallinn-Helsinki route. Cruise ferry Silja Serenade operated special cruises on Helsinki-Mariehamn routes in July. Cruise ferry Silja Symphony operated Swedish domestic cruises in July and August. In the beginning of August, the operations of the Helsinki-Stockholm route were restarted with cruise ferry Silja Serenade. Cruise ferry Silja Symphony started operating on Helsinki-Stockholm route from late August.

Cruise ferries Victoria I and Romantika were chartered out to Morocco during the quarter. Operations of the Riga-Stockholm route vessel Isabelle were suspended during the quarter.

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 and will not be opened in 2021.

Estonia-Finland routes’ shuttle vessels Megastar and Star, Paldiski-Kapellskär route cargo vessels Regal Star and Sailor, and Turku-Stockholm route cruise ferries Baltic Princess and Galaxy continued their operations throughout the quarter.

Sales and segments
In the third quarter of 2021, the Group’s total revenue increased by EUR 26.7 million to EUR 170.5 million. Total revenue in the third quarter of 2020 and 2019 was EUR 143.7 million and EUR 287.8 million, respectively.

Revenue from route operations (core business) increased by EUR 10.5 million to EUR 142.7 million. The passenger operations and segment results on all routes were significantly affected by the COVID-19 situation and imposed travel restrictions.

The number of passengers carried on the Estonia-Finland routes decreased by 30.3% compared to last year. The number of transported cargo units decreased by 5.3%. Estonia-Finland routes’ revenue decreased by EUR 7.0 million, or 10.0%, to EUR 63.2 million. The segment result increased by EUR 6.7 million to EUR 10.1 million. The segment effectively reflects operations of two shuttle vessels, one cruise ferry and the costs of cargo vessel SeaWind being docked for repairs for the majority of the quarter.

The number of passengers carried on the Finland-Sweden routes increased by 10.3%. The number of transported cargo units increased by 4.9%. The route’s revenue increased by EUR 6.6 million to EUR 60.9 million and the segment result improved by EUR 16.4 million to EUR 6.3 million. The segment reflects the operations of Turku-Stockholm and Helsinki-Stockholm routes, as well as domestic cruises.

On Estonia-Sweden routes’ the number of passengers carried increased by 103 thousand (reopening of Tallinn-Stockholm route). The number of transported cargo units increased by 22.3%. Estonia-Sweden routes’ revenue increased by EUR 13.6 million to EUR 18.6 million and the segment result improved by EUR 5.1 million to EUR 1.6 million. Estonia-Sweden route reflects operation of two cargo vessels and one cruise ferry.

The Latvia-Sweden route operations were suspended in the third quarter. The EUR -1.9 million segment results reflects the expenses of the suspended cruise ferry Isabelle.

Revenue from the segment other increased by a total of EUR 15.6 million and amounted to EUR 28.1 million. The increase was mainly driven by charter revenue and various retail activities.

In the third quarter of 2021, the Group’s gross profit improved by EUR 33.3 million compared to the same period last year, amounting to EUR 30.3 million. EBITDA increased by EUR 29.4 million and amounted to EUR 35.1 million.

During the quarter, there was a reduction in ships’ fairway dues in Estonia amounting to EUR 0.6 million. The reduction is valid until the end of 2021. The exemption from ships’ fairway dues in the third quarter of 2020 amounted to EUR 1.1 million.

In the third quarter, the government assistance from Group’s home markets was limited at EUR 0.3 million (EUR 4.6 million in third quarter of 2020).

The quarterly earnings of 2021 account for EUR 0.5 million non-recurring expenses related to the public offering of shares.

Amortisation and depreciation expense decreased by EUR 1.7 million to EUR 23.7 million compared to last year.

As a result of increased interest-bearing liabilities net finance costs increased by EUR 2.0 million compared to the third quarter of last year.

Despite the continuous negative impact of COVID-19, lower impact from support measures and government assistance, increasing fuel prices, the Group managed to earn the first quarterly net profit since the beginning of the COVID-19 pandemic. The earnings were supported by partial alleviation of travel restrictions, cost savings from previously implemented measures and short-term chartering of vessels.

The Group’s unaudited net profit for the third quarter of 2021 was EUR 5.5 million or EUR 0.008 per share compared to a net loss of EUR 23.9 million or EUR 0.036 per share in 2020 and net profit of EUR 54.6 million or EUR 0.082 per share in 2019.

Results of the first 9 months of 2021
In the first 9 months (1 January – 30 September) of the 2021 financial year the Group carried 1.8 million passengers which is 43.7% less compared to the same period last year. The Group’s unaudited revenue for the period decreased by 14.7% and amounted to EUR 310.3 million. Unaudited EBITDA for the first 9 months was EUR 33.2 million (EUR 6.9 million, 9 months 2020) and unaudited net loss was EUR 53.2 million (EUR 81.5 million, 9 months 2020).

The financial result of the first 9 months of 2021 was impacted by suspension of operations of vessels and hotels due to the COVID-19 situation and travel restrictions as well as increase in global fuel prices.

The Group’s investments in third quarter of 2021 amounted to EUR 3.7 million.

Due to the changed economic environment and suspension of vessel operations, ship-related investments were kept to minimum and only critical maintenance and repair works were performed.

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 Burger King restaurants.

Due to a deteriorated operating environment and considering the Group’s long-term interests, the shareholders’ annual general meeting decided not to distribute dividends for 2020.

Financial position
In order to relieve the liquidity issues caused by the COVID-19 situation, Group entities were allowed to postpone tax payments in 2020 and 2021 by home markets tax boards. The postponed tax liabilities amounted to EUR 4.9 million at the end of the quarter and have different settlement dates over the coming years.

At the end of the preceding quarter, the Group agreed with financial institutions on the amendment and the prolongation of the waivers of financial covenants and the postponement of principal payments under existing loan agreements. From the second quarter of 2021 until the end of first quarter of 2022 repayments in the total amount of EUR 82.1 million are deferred and added to the last payment of each respective loan facility. The deferrals for the 2021 financial year amount to EUR 67.4 million.

In order to strengthen the liquidity position, the Group held a public offering of shares in Estonia and Finland in the third quarter. The Group issued 73 687 024 new shares and raised EUR 34.6 million new equity capital.

At the end of the third quarter 2021, the Group’s net debt had increased by EUR 19.2 million to EUR 659.7 million compared to the end of the third quarter 2020.

As at 30 September 2021, the Group’s cash and cash equivalents amounted to EUR 143.1 million (EUR 30.7 million at 30 September 2020) and the Group had EUR 109.3 million in unused credit lines (EUR 84.3 million at 30 September 2020). The total liquidity buffer (cash, cash equivalents and unused credit facilities) amounted to EUR 252.5 million (EUR 115.0 million at 30 September 2020). The current trade and other payables amounted to EUR 85.6 million (EUR 102.9 million at 30 September 2020).

As at 30 September 2021, the Group had 4 513 employees (5 726 at 30 September 2020). The number of employees includes 232 employees on maternity leave. The following table provides a more detailed overview of the Group’s personnel.

Due to the COVID-19 situation some of the Finnish personnel were on unpaid leave following the end of summer season, except the staff on duty on vessels.

In the third quarter of 2021, staff costs amounted to EUR 36.5 million (EUR 48.1 million in 2020), which is an 24.1% decrease compared to the same period last year. In the third quarter of 2021 the Group did not receive any salary support from governments (EUR 3.8 million from government of Sweden in 2020, recognised as other operating income).

Economic Environment
The Group considers Finland, Sweden, Estonia and Latvia its home markets with the most exposure to the economic and travel restriction developments in Finland. The Group has also high exposure to the economic and travel restriction developments in Estonia and Sweden. In the third quarter of 2021, the Group’s economic environment was dominated by the ongoing COVID-19 pandemic and restrictions related to international travel.

The confidence of the Finnish and Estonian consumers continued to improve throughout the quarter and in Sweden the consumer confidence remained high. However, the overa...

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