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2021-02-25

AS Tallink Grupp Unaudited Consolidated Interim Report Q4 2020

In the 2020 financial year (1 January – 31 December), Tallink Grupp AS and its subsidiaries (the Group) carried a total of 3 732 102 passengers, which is 62% passengers less compared to the 2019 financial year. The number of cargo units transported decreased by 5.2% compared to the previous financial year. The Group’s unaudited consolidated revenue amounted to EUR 442.9 million (EUR 949.1 million in 2019). Unaudited EBITDA was EUR 8.0 million (EUR 171.1 million, 2019) and unaudited net loss for the financial year was EUR 108.3 million or EUR 0.16 per share (net profit of EUR 49.7 million or EUR 0.07 per share, 2019).

Impact of Covid-19 and travel restrictions
In the 2020 financial year, the Group’s operations and operating results were strongly influenced by the Covid-19 situation, restrictions on international travel and communications advising against travelling by state authorities. As a result of changes in the operating schedules there were 20% less trips compared to last year. Other limitations included restrictions on maximum capacity on vessels.

Travelling restrictions on all routes were in force from March until June and again starting from September. While the restrictions remained limited in most markets during the summer months, the restrictions for international passenger traffic to and from Sweden have been continuously in force effectively since March 2020. During the summer, vessel operations were flexibly rerouted to other routes and operated various special cruises. From mid-December the Group operates the shuttle and cargo service on Estonia-Finland route, Turku-Stockholm route and Paldiski-Kapellskär cargo route with the operation of other routes and vessels suspended.

Several operational changes were effective in 2020:

  • Daily operations of the Tallinn-Stockholm, Riga-Stockholm and Helsinki-Stockholm routes were suspended from mid-March 2020.
  • Tallink City Hotel was closed from March 2020, Riga Hotel was from since October 2020.

Throughout the year our vessels were flexibly rerouted to other routes:

  • The cruise ferry Victoria I was temporarily rerouted to the Tallinn-Helsinki route from June until late December. It also operated a limited number of special cruises to various destinations. In autumn, the ferry operated also weekly Tallinn-Stockholm-Riga roundtrip.
  • During summer season and until the end of September, the cruise ferry Baltic Queen operated special cruises from Tallinn to Mariehamn and from Tallinn to Turku. In addition to that, the cruise ferry also operated special return trips on the Tallinn-Stockholm route and special cruises on the Helsinki-Riga route.
  • From mid-March until mid-April the shuttle vessel Star was temporarily rerouted to Paldiski-Sassnitz route.  
  • In spring, the cruise ferry Romantika operated special return trips on the Riga-Stockholm route in order to secure transport of cargo. During summer season and until the end of September the ferry operated special cruises from Riga to Mariehamn and from Riga to Helsinki.
  • The cruise ferry Isabelle operated temporarily on the Paldiski-Kapellskär route from June to October.
  • The cruise ferry Silja Serenade operated on the Helsinki-Riga route during summer season.
  • From July until the end of October the cruise ferry Silja Symphony operated special cruises from Stockholm to Visby and special cruises from Stockholm to Härnösand.

The Estonia-Finland routes shuttle vessels Megastar, cargo vessel Seawind, the Paldiski-Kapellskär route cargo vessel Regal Star and the Turku-Stockholm route cruise ferries Baltic Princess and Galaxy continued operating on their regular routes. Shuttle vessel Star returned to Tallinn-Helsinki route operations from mid-May. From July 2020, cargo vessel Sailor started operating on Paldiski-Kapellskär route in addition to cargo vessel Regal Star.

Changes concerning personnel
Due to the Covid-19 situation the following changes relating to personnel were in force in the financial year of 2020:

  • During spring the workload and remuneration of all Latvian and Estonian personnel was reduced to 70% for two and three months, respectively.
  • In autumn the workload and remuneration of a portion of Estonian personnel was reduced to 70% until spring 2021.
  • Most of the Finnish personnel were temporarily laid off, except the staff on duty.
  • The workload of Swedish personnel was reduced to varying extent.
  • Reorganisation and collective redundancies concerned both shore and sea personnel in all markets.

Given the different labour regulations in our home markets most efficient immediate response to the changes in the environment was possible on the Finnish flagged vessels. The situation was the most difficult in Estonia and Latvia where the rigid legislation did not enable to combine unpaid leave with other salary support measures to the employee. Therefore, lengthy redundancies processes were first initiated in Estonia and Latvia but were carried out in Finland and Sweden later in the year. After completion of the processes some support functions were migrated to Estonia.

As a result of changes in the business and processes regarding personnel, including collective redundancies processes, the number of employees at the end of the year decreased by 3 040 compared to the beginning of the year. The average number of employees during the year and the number of employees at the end of the year were, respectively, 16.0% and 42.0% lower compared to the same period last year.

Support measures
In the second quarter of 2020 the Group used temporary salary compensation measures offered by the states.

In the second quarter of 2020, the Estonian Parliament approved the change in legislation granting exemption from ships’ fairway dues for twelve months starting from April 2020. The effect of the exemption amounted to EUR 3.4 million in the 2020 financial year.

During the year the Group received a net total of EUR 36.6 million in direct financial support from various government grants from all home markets.

Activities to improve liquidity
On 30 July 2020, the shareholders’ annual general meeting decided not to pay dividends from net profit for 2019.

In order to relieve the liquidity issues caused by the Covid-19 situation, the Group’s companies were allowed to postpone the tax payments. At the end of the year, the postponed tax liability amounted to EUR 5.4 million and will be paid by autumn 2021.

During the year the Group negotiated with existing and new financial institutions financing and payment terms including waivers of loan covenants, deferral of loan principal repayments for the year 2020 and new loan agreements. As a result, the Group’s liquidity improved in great extent.

Sales and segments
In 2020, the Group’s total revenue decreased by EUR 506.2 million and amounted to EUR 442.9 million. The total revenue in 2019 amounted to EUR 949.1 million and in 2018 to EUR 949.7 million.

Revenue from route operations (core business) decreased by EUR 483.0 million to EUR 400.2 million. The passenger operations and segment results on all routes were significantly affected by the Covid-19 situation and imposed travel restrictions.

In 2020, The Group’s ships carried a total of 2.4 million passengers on the Estonia-Finland routes, which is a 52.3% decrease compared to last year. The number of transported cargo units on the routes increased by 1.0%. Estonia-Finland routes’ revenue decreased by EUR 153.5 million and amounted to EUR 200.4 million. The segment result decreased by EUR 77.0 million to EUR 3.5 million. The Estonia-Finland routes’ results include also the operations of the Tallinn-Turku, Tallinn-Mariehamn and Paldiski-Sassnitz routes.

The Finland-Sweden routes’ revenue decreased by EUR 194.9 million and amounted to EUR 149.5 million. The segment result decreased by EUR 80.7 million to EUR -53.9 million. The Finland-Sweden routes’ results include also the operations of the Helsinki-Riga route and the special cruises from Stockholm to Visby and to Härnösand.

The Estonia-Sweden routes’ revenue decreased by EUR 77.4 million, compared to the previous year, and amounted to EUR 34.9 million. The segment result decreased by EUR 22.6 million to EUR -17.9 million. The Estonia-Sweden routes’ results reflect the operations of the Paldiski-Kapellskär route and the limited operations of the Tallinn-Stockholm route.

The Latvia-Sweden route’s revenue decreased by EUR 57.1 million, compared to the previous year and amounted to EUR 15.4 million. The segment result decreased by EUR 18.1 million to EUR -17.5 million. The Latvia-Sweden route’s results include the limited operations of the Riga-Stockholm route as well as the special cruises from Riga to Helsinki and to Mariehamn.

Revenue from the segment other decreased by a total of EUR 28.5 million and amounted to EUR 45.2 million. The decrease was mainly driven by significantly lower accommodation sales and lower revenue from services provided at the hotels. The segment revenue was positively impacted by an increase in online shop sales, opening of Burger King restaurants and revenue from providing mooring services at the Tallinn Old City Harbour.

Earnings
In 2020, the Group’s gross profit decreased by EUR 240.3 million compared to last year, amounting to EUR -43.5 million. The Group’s EBITDA decreased by EUR 163.1 million and amounted to EUR 8.0 million.

In 2020 the Group’s profitability was impacted mainly by the following factors:

  • Significant cut in operating expenses, including significant decrease in personnel expenses as a result of collective redundancies, state support measures and remuneration cuts.
  • Negative impact from one-off costs related to redundancies processes in the amount of EUR 9.0 million. Positive financial impact from the redundancy processes is expected to start from 2021.
  • Positive impact from various government grants in total net amount of EUR 36.6 million.
  • Positive impact from exemption from ships’ fairway dues in Estonia in the amount of EUR 3.4 million.

Amortisation and depreciation expense increased by EUR 4.4 million to EUR 100.7 million compared to last year.

Compared to last year, net finance costs increased by EUR 0.2 million to EUR 17.8 million. The change includes a decrease of EUR 0.3 million in interest costs compared to same period the previous year and EUR 0.5 million net loss from foreign exchange differences.

The Group’s unaudited net loss for 2020 financial year was EUR 108.3 million or EUR 0.162 per share compared to a net profit of EUR 49.7 million or EUR 0.074 per share in 2019 and net profit of EUR 40.0 million or EUR 0.060 per share in 2018.

Investments
In the 2020 financial year the Group’s investments amounted to EUR 100.1 million. The Group’s investments mainly reflect prepayments for a new LNG shuttle vessel MyStar in the total amount of EUR 61.8 million and a purchase of a ro-pax vessel Sailor in the amount of EUR 8.5 million.

Investments were made in the ships’ technical maintenance and completion of energy efficiency and emissions reduction projects. 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 ...

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