In the second quarter (01.12.2009-28.02.2010) of the financial year 2009/2010 AS Tallink Grupp and its subsidiaries' (The Group) unaudited revenue was EUR 158 million (EEK 2 472 million), being EUR 9.4 million (EEK 147 million) or 5.6% lower than in the second quarter of the previous financial year. While the revenues increased in many of the segments the impact to the decrease came from the Finland-Germany route in January and February as the ships were in maintenance and there were no operations and also from the Finland-Sweden route where the Group's largest cruise ferry Silja Europa had technical problems and was out of operations for most of December. The Group's passenger volumes decreased by 10% in the second quarter compared to the same period of the previous financial year. The volumes were affected by the technical issues with Silja Europa, but the key element was also the seasonality. While the second quarter is the lowest season in the operations the importance of the Group's targeted travel offerings and campaigns is higher. The timing of these sales activities but as well the occurrence of the winter holidays has been different in current financial year compared to the low season of the previous financial year. Thus there has been a high volatility compared the February and March traffic figures to the previous year. On a cumulative basis the current financial year seven months passenger volumes are however positive by 1%. Improvement of the passengers' spending continued in the second quarter of the 2009/2010 financial year. The total of ticket, restaurant and shops revenues per passenger increased by approximately 12% compared to the second quarter of 2008/2009 financial year. The adjusted offering selection, product pricing and a stronger Swedish krona, but as well the overall improvement in customer confidence in the region are influential the increase. The Group's cargo volumes are showing a recovery. Excluding the stop of the operations in the Finland-Germany route in January and February the other core routes show a total of 5% increase in the cargo volumes in the second quarter. The Management continues to focus on the cost efficiency and on the improvement of the Group results. The sale or charter of older and non performing vessels is a high priority. There are currently several negotiations open to either charter or sell some of the older and non performing vessels. By introducing several new vessels during the previous years the Group has gone through significant product improvement. The focus has now moved to the more detail level of product development but which is also very important. Although the customer satisfaction has shown healthy increase the management continues to put high efforts on the value of the customer satisfaction and in parallel to the personnel development through more extensive specialized education and enhanced motivation schemes. The high customer satisfaction, quality product offering and happy personnel are key factors for the Group to improve the operations and results. -------------------------------------------------------------------------------- | Q2 KEY FIGURES | Q2 2009/2010 | Q2 2008/2009 | Change % | -------------------------------------------------------------------------------- | | EEK | EUR | EEK | EUR | | -------------------------------------------------------------------------------- | Net sales (million) | 2 472 | 158 | 2 619 | 167 | -6% | -------------------------------------------------------------------------------- | Gross profit (million) | 228 | 14.5 | 355 | 22.7 | -36% | -------------------------------------------------------------------------------- | Gross margin | 9% | | 14% | | | -------------------------------------------------------------------------------- | EBITDA (million) | 163 | 10.4 | 234 | 15.0 | -30% | -------------------------------------------------------------------------------- | EBITDA margin | 7% | | 9% | | | -------------------------------------------------------------------------------- | Net profit/-loss | -255 | -16.3 | -323 | -20.7 | 21% | | (million) | | | | | | -------------------------------------------------------------------------------- | Net profit margin | -10% | | -12% | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Depreciation & amort. | 283 | 18.1 | 262 | 16.7 | 8% | | (million) | | | | | | -------------------------------------------------------------------------------- | Investments (million) | 61 | 3.9 | 56 | 3.6 | 9% | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Weighted average number | 669 882 040 | 669 882 040 | 0% | | of ordinary shares | | | | | outstanding during Q2* | | | | -------------------------------------------------------------------------------- | Earnings per share | -0.38 | -0.02 | -0.48 | -0.03 | 21% | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Number of passengers | 1 623 522 | 1 807 414 | -10% | -------------------------------------------------------------------------------- | Cargo units | 54 151 | 56 602 | -4% | -------------------------------------------------------------------------------- | Average number of | 6 406 | 6 768 | -5% | | employees | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | 28.02.2010 | 30.11.2009 | | -------------------------------------------------------------------------------- | | EEK | EUR | EEK | EUR | | -------------------------------------------------------------------------------- | Total assets (million) | 29 545 | 1 888 | 29 862 | 1 909 | -1.1% | -------------------------------------------------------------------------------- | Total liabilities | 19 733 | 1 261 | 19 818 | 1 267 | -0.4% | | (million) | | | | | | -------------------------------------------------------------------------------- | Interest-bearing | 17 770 | 1 136 | 17 919 | 1 146 | -0.8% | | liabilities (million) | | | | | | -------------------------------------------------------------------------------- | Total equity (million) | 9 812 | 627 | 10 044 | 642 | -2.3% | -------------------------------------------------------------------------------- | Equity ratio | 33.2% | | 33.6% | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Number of ordinary | 669 882 040 | 669 882 040 | 0% | | shares outstanding* | | | | -------------------------------------------------------------------------------- | Shareholders' equity | 14.6 | 0.94 | 15.0 | 0.96 | -2.3% | | per share | | | | | | -------------------------------------------------------------------------------- Net profit margin - net profit / net sales; EBITDA - Earnings before net financial items, taxes, depreciation and amortization; EBITDA margin - EBITDA / net sales; Gross margin - gross profit / net sales; Net profit margin - net profit / net sales; Equity ratio - total equity / total assets; Earnings per share - net profit / weighted average number of shares outstanding; Shareholder's equity per share - shareholder's equity / number of shares outstanding. * Share numbers exclude own shares. As an effect of the cost reduction activities the Group's administrative and general expenses continued to decrease in the second quarter being EUR 2.4 million (EEK 37 million) or 19% lower than in the second quarter of the previous financial year. The Group's EBITDA for the second quarter of the 2009/2010 financial year was EUR 10.4 million (EEK 163 million) which is EUR 4.5 million (EEK 71 million) or 30% less than a year ago. While the operations are fundamentally healthy the result in the second quarter was depressed by higher fuel costs in relation to higher consumption in the tough ice conditions and also the higher fuel price. In the comparable period in the second quarter of the previous financial year the fuel prices were at very low levels. Total fuel costs were EUR 8.2 million (EEK 129 million) higher in the second quarter of 2009/2010 compared to the second quarter of previous financial year. In addition the technical issues with Silja Europa and maintenance dockings of some vessels had an impact to the second quarter results. The depreciation of the Group's assets in the second quarter was EUR 1.7 million (EEK 27 million) higher compared to the second quarter of the previous financial in result of the new cruise ferry Baltic Queen. The Group's net financial expenses in the second quarter were EUR 8.6 million (EEK 135 million). The improvement of EUR 10.3 million (EEK 161 million) compared to the previous financial year is mainly the effect of the lower interest expenses and foreign exchange rate gain from SEK/EUR rate movements. The Group's unaudited net loss for the second quarter of the 2009/2010 financial year was EUR 16.3 million (EEK 255 million). In the second quarter of the previous financial year the net loss was EUR 20.1 million (EEK 323 million). In the second quarter the Group's investments in amount of EUR 3.9 million (EEK 61 million) were related mostly to the ships' maintenances. It is common in the Group's operations that most of the scheduled dockings and bigger maintenance works are carried out in the low season. The Group's fleet renewal program has been completed and thus the Group's investment requirement is relatively small going ahead. This helps to concentrate on the core operations. As there are no capital commitments then more free funds can be used to reduce the Group's net debt. The Management continues to focus on the cost efficiency and on the improvement of the Group results. The sales or charters of older and non performing vessels have high priority. There are currently several negotiations open to either charter or sell some of the older and non performing vessels. In the end of the second quarter the Group's cash and cash equivalents amounted to EUR 34.3 million (EEK 537 million) compared to the EUR 28.9 million (EEK 452 million) a year ago. The higher liquidity position, lower interest payments and no capital commitments for the coming periods are increasing the Group's strength for smooth and stable operations. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited, in thousands of EEK) 01.12.2009- 01.12.2008- 01.09.2009- 01.09.2008- 28.02.2010 28.02.2009 28.02.2010 28.02.2009 Revenue 2,471,947 2,619,011 5,308,780 5,650,360 Cost of sales -2,244,420 -2,264,213 -4,570,365 -4,691,564 Gross profit 227,527 354,798 738,415 958,796 Marketing expenses -194,348 -186,978 -421,934 -402,634 Administrative expenses -156,225 -193,410 -302,471 -369,004 Other income 1,166 589 8,238 3,745 Other expenses 2,195 -2,856 -590 -3,127 Results from operating -119,685 -27,857 21,658 187,776 activities Financial income 99,476 10,261 112,205 97,772 Financial expenses -234,438 -305,714 -407,128 -639,521 Loss from normal operation -254,647 -323,310 -273,265 -353,973 before income tax Income tax 0 -18 0 -18 Net loss for the period -254,647 -323,328 -273,265 -353,991 Other comprehensive income/- expense Exchange differences on 22,900 7,790 11,448 1,379 translating foreign operations Cash flow hedges -485 -26,317 17,508 -110,543 Other comprehensive income/- 22,415 -18,527 28,956 -109,164 expense for the period Total comprehensive income/- -232,232 -341,855 -244,309 -463,155 expense for the period Loss attributable to: Equity holders of the parent -254,647 -323,328 -273,265 -353,991 Total comprehensive income/- expense attributable to: Equity holders of the parent -232,232 -341,855 -244,309 -463,155 Earnings per share (in EEK per share) - basic -0.38 -0.48 -0.41 -0.53 - diluted -0.38 -0.48 -0.41 -0.53 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited, in thousands of EUR) 01.12.2009- 01.12.2008- 01.09.2009- 01.09.2008- 28.02.2010 28.02.2009 28.02.2010 28.02.2009 Revenue 157,986 167,385 339,293 361,124 Cost of sales -143,445 -144,710 -292,100 -299,846 Gross profit 14,541 22,675 47,193 61,278 Marketing expenses -12,422 -11,950 -26,967 -25,733 Administrative expenses -9,984 -12,361 -19,331 -23,584 Other income 75 39 527 240 Other expenses 140 -183 -38 -200 Results from operating -7,650 -1,780 1,384 12,001 activities Financial income 6,358 656 7,171 6,249 Financial expenses -14,983 -19,539 -26,020 -40,873 Loss from normal operation -16,275 -20,663 -17,465 -22,623 before income tax Income tax 0 -1 0 -1 Net loss for the period -16,275 -20,664 -17,465 -22,624 Other comprehensive income/- expense Exchange differences on 1,463 497 732 89 translating foreign operations Cash flow hedges -31 -1,682 1,119 -7,065 Other comprehensive income/- 1,432 -1,185 1,851 -6,976 expense for the period Total comprehensive income/- -14,843 -21,849 -15,614 -29,600 expense for the period Loss attributable to: Equity holders of the parent -16,275 -20,664 -17,465 -22,624 Total comprehensive income/- expense attributable to: Equity holders of the parent -14,843 -21,849 -15,614 -29,600 Earnings per share (in EUR per share) - basic -0.02 -0.03 -0.03 -0.03 - diluted -0.02 -0.03 -0.03 -0.03 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (unaudited, in thousands of EEK) ASSETS 28.02.2010 31.08.2009 Current assets Cash and cash equivalents 536,638 782,043 Receivables 621,617 797,762 Prepayments 267,919 179,892 Derivatives 17,086 6,493 Inventories 279,494 297,527 Total current assets 1,722,754 2,063,717 Non-current assets Investments in associates 9,180 0 Other financial assets and prepayments 7,007 7,664 Deferred income tax assets 207,453 207,455 Investment property 4,694 4,694 Property, plant and equipment 26,498,311 27,049,393 Intangible assets 1,095,321 1,134,738 Total non-current assets 27,821,966 28,403,944 TOTAL ASSETS 29,544,720 30,467,661 LIABILITIES AND EQUITY Current liabilities Interest bearing loans and borrowings 1,604,146 1,655,760 Payables 1,375,302 1,415,762 Deferred income 374,604 331,323 Derivatives 212,293 179,842 Total current liabilities 3,566,345 3,582,687 Non-current liabilities Interest bearing loans and borrowings 16,165,431 16,827,627 Other liabilities 1,236 1,330 Total non-current liabilities 16,166,667 16,828,957 TOTAL LIABILITIES 19,733,012 20,411,644 EQUITY Equity attributable to equity holders of the parent Share capital 6,738,170 6,738,170 Share premium 9,999 9,999 Reserves 1,153,365 1,124,409 Retained earnings 1,910,174 2,183,439 Total equity attributable to equity holders 9,811,708 10,056,017 of the parent TOTAL EQUITY 9,811,708 10,056,017 TOTAL LIABILITIES AND EQUITY 29,544,720 30,467,661 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (unaudited, in thousands of EUR) ASSETS 28.02.2010 31.08.2009 Current assets Cash and cash equivalents 34,297 49,982 Receivables 39,729 50,986 Prepayments 17,123 11,497 Derivatives 1,092 415 Inventories 17,863 19,015 Total current assets 110,104 131,895 Non-current assets Investments in associates 587 0 Other financial assets and prepayments 447 490 Deferred income tax assets 13,259 13,259 Investment property 300 300 Property, plant and equipment 1,693,551 1,728,771 Intangible assets 70,004 72,523 Total non-current assets 1,778,148 1,815,343 TOTAL ASSETS 1,888,252 1,947,238 LIABILITIES AND EQUITY Current liabilities Interest bearing loans and borrowings 102,524 105,822 Payables 87,898 90,484 Deferred income 23,942 21,175 Derivatives 13,568 11,494 Total current liabilities 227,932 228,975 Non-current liabilities Interest bearing loans and borrowings 1,033,159 1,075,482 Other liabilities 79 85 Total non-current liabilities 1,033,238 1,075,567 TOTAL LIABILITIES 1,261,170 1,304,542 EQUITY Equity attributable to equity holders of the parent Share capital 430,648 430,648 Share premium 639 639 Reserves 73,713 71,862 Retained earnings 122,082 139,547 Total equity attributable to equity holders 627,082 642,696 of the parent TOTAL EQUITY 627,082 642,696 TOTAL LIABILITIES AND EQUITY 1,888,252 1,947,238 CONSOLIDATED CASH FLOW STATEMENT (unaudited, in thousands of EEK) 01.09.2009 - 01.09.2008 - 28.02.2010 28.02.2009 Cash flows from operating activities Net loss for the period -273,265 -353,991 Adjustments 961,261 1,048,050 Changes in assets related to operating 105,211 435,376 activities Changes in liabilities related to operating -83,141 -362,948 activities Income tax paid -763 -258 709,303 766,229 Cash flow used for investing activities Purchase of property, plant, equipment and -66,628 -224,337 intangible assets Proceeds from disposals of property, plant, 99,721 17,693 equipment Acquisition of associate -9,180 -6,120 Proceeds/-payments from settlement of -30,543 1,524 derivatives Interest received 2,492 5,232 -4,138 -206,008 Cash flow from (+)/ used for (-) financing activities Proceeds from loans 0 187,759 Redemption of loans -573,688 -888,080 Change in overdraft -21,510 103,791 Repayment of finance lease liabilities -2,447 -3,875 Interest paid -352,925 -541,029 -950,570 -1,141,434 TOTAL NET CASH FLOW -245,405 -581,213 Cash and cash equivalents: - at the beginning of period 782,043 1,043,785 - increase (+) / decrease (-) -245,405 -581,213 Cash and cash equivalents at end of period 536,638 462,572 CONSOLIDATED CASH FLOW STATEMENT (unaudited, in thousands of EUR) 01.09.2009 - 01.09.2008 - 28.02.2010 28.02.2009 Cash flows from operating activities Net loss for the period -17,465 -22,624 Adjustments 61,436 66,983 Changes in assets related to operating 6,725 27,826 activities Changes in liabilities related to operating -5,314 -23,197 activities Income tax paid -49 -16 45,333 48,972 Cash flow used for investing activities Purchase of property, plant, equipment and -4,259 -14,337 intangible assets Proceeds from disposals of property, plant, 6,374 1,131 equipment Acquisition of associate -587 -391 Proceeds/-payments from settlement of -1,952 97 derivatives Interest received 159 334 -265 -13,166 Cash flow from (+)/ used for (-) financing activities Proceeds from loans 0 12,000 Redemption of loans -36,665 -56,759 Change in overdraft -1,375 6,633 Repayment of finance lease liabilities -157 -248 Interest paid -22,556 -34,578 -60,753 -72,952 TOTAL NET CASH FLOW -15,685 -37,146 Cash and cash equivalents: - at the beginning of period 49,982 66,710 - increase (+) / decrease (-) -15,685 -37,146 Cash and cash equivalents at end of period 34,297 29,564 Janek Stalmeister CFO AS Tallink Grupp Tel. +372 6409 800 e-mail: janek.stalmeister@tallink.ee