Unaudited consolidated interim accounts for the first quarter of 2024

In the first quarter of 2024, the consolidated unaudited sales revenue of the Group was 221.5 million euros. Compared to the first quarter of 2023, the growth was 1.6%. The net loss for the reporting period was 1.5 million euros, which was 2.1 million euros lower compared to the profit of the first quarter of 2023, including income tax of 5.3 million euros (5.3 million euros in 2023). The pre-tax profit was 3.8 million euros, and it also decreased compared to the comparable result of the previous year by 2.1 million euros.

At a time when the retail trade volume index has been in decline for almost two years, and in the first months of the reporting year, the sales revenue of the entire retail trade area was in decline, even in current prices, the Group still managed to increase its sales revenue. The increase in turnover was supported by the successful sales of the Group’s car segment. The security segment, which expanded last year, also contributed with high sales growth numbers. The first quarter of the year has traditionally had the weakest profit due to the special nature of the Group’s business operations. This year, the result was affected by a more restrained increase in sales revenue than in the previous year, and by the great price pressure caused by the economic recession in all segments, especially in Group's largest business segments. The car market as a whole, including the Group’s car segment, was characterised by improved inventory levels and bigger discount campaigns. In the Supermarkets segment, margins were affected by the higher share of discounted products in customers' shopping baskets. The continued rise in service prices increased input costs, to cope with which we are looking for even greater efficiency in all business processes. Labour costs increased by 5.6% in the first quarter of 2024, while the number of employees increased by 1.7%.

In order to enhance the shopping convenience of our customers, the Group has invested over a long period in the development of online stores. In the first quarter of 2024, the new online store of Kaubamaja, launched on a new platform, featured, among other enhancements, an AI-based search engine, an advanced filtering system, and an extensive range of inspirational modules throughout the site. Brands now have enhanced opportunities to strengthen their image through the online store's brand shops. In the near future, customers will also have the option to order clothes from the online store to try on in the physical store.

To ensure better quality and price, Selveri Köök, its private label in the supermarket segment, actively continues product development with the aim of offering customers a wide variety of new flavours. At the same time, great attention is paid to reducing the salt, sugar, and fat content in the products. At the beginning of the year, several new products were added to Selveri Köök's selection - chicken puree soup and minced meat soup, ready meals, and snack platters. Among the desserts, a new addition to the range is the cheerful spring Selveri Tibu (Selver Chick) cake, which has already received a warm welcome from customers.

In order to streamline processes, the Group began developing a central logistics centre in Maardu last year. Large-scale construction works for the centre took place in the first quarter. Completion of the logistics centre is scheduled for autumn 2024. Work continued to install a total of 49 new public electric car chargers in 17 Selver parking lots. Almost half of them, i.e., 25, are ultra-fast chargers, which allow charging the amount of energy needed to travel 100 kilometres in just a few minutes.

The success of the Group’s activities and investment decisions is evidenced by record numbers of loyal customers joining the Group's Partner Card loyalty programme. At the end of the reporting period, the number of loyal customers exceeded 731 thousand, marking a 3.7% growth year-on-year. The Partner App has been downloaded by more than 220,000 Partner Card clients. As an added feature of the Partner Card programme, the TKM Group's subsidiary TKM Finants AS offers "pay later" payment solutions to Partner Card customers. To promote responsible lending principles, TKM Finants AS joined the Tax and Customs Board's X-Road service for individual tax data at the end of March, enabling the lender to more accurately assess customers' creditworthiness and make responsible credit decisions.

Selver supermarkets

The consolidated sales revenue of the supermarket business segment in the first quarter of 2024 was 146.4 million euros, decreasing by 0.5% compared to the same period of the previous year. The average monthly sales revenue per square metre of sales area in the first quarter of 2024 was 0.40 thousand euros, decreasing by 6.5% compared to the previous period. In terms of comparable stores, the sales revenue of goods per square metre of sales area was 0.40 thousand euros, decreasing by 4.3% compared to the reference period. In the first quarter of 2024, 9.3 million purchases were made from Selver stores, accounting for a decrease of 2.5% compared to the previous year.

The consolidated pre-tax profit of the supermarkets segment in the first quarter of 2024 was 1.0 million euros, 0.7 million euros less than in the previous year. The consolidated net profit of the supermarket segment was 0.6 million euros, 1.1 million euros less than last year. The difference between the net profit and profit before income tax is due to the income tax paid on dividends – this year, the income tax on dividends was 0.5 million euros higher than in the year before.

Selver's sales results have been affected by the general downturn in the Estonian retail environment. Retail trade volumes have seen a prolonged decline, and consumer confidence remains low. The growth of Selver's sales revenue has slightly lagged behind the segment due to a higher comparison base and a larger proportion of discounted products in the shopping basket. The comparison base data is impacted by the closure of Järve Selver in March 2023 for renovation and the preceding clearance sale of the largest store, the closure of WOW Selver ABC in January 2023, and the shutdown of Punane Selver in May 2023. The base data excludes information from the Kurna Selver, which was opened in August 2023.

The economic outcomes for the first quarter of 2024 will be primarily influenced by reduced sales of goods and a decrease in gross profit stemming from a reduction in gross margin. To mitigate the effects of diminished purchasing power and consumer confidence, we have increased the discounts offered and, since January, have initiated the permanently good standard prices project. Within this framework, we consistently offer customers approximately 650 products at highly favourable prices. During the reporting period, the costs of many services and materials have risen, leading to the overall level of operating expenses, despite cost-saving efforts, being on par with the previous year. The ongoing optimisation of work processes has allowed us to maintain labour costs at last year's level and achieve moderate wage growth.

Selver plans to open two new stores this year - in Tallinn Rocca al Mare centre and in Tartu, at Raadi. Both stores are slated for opening in the latter half of the year. The focus remains on product assortment and process optimisation. As a sustainability-oriented company, we strive to base all our activities on conscious resource usage and contribute towards sustainable development. To this end, we have developed a sustainability strategy that directs our daily operations. As a company valuing openness and transparency, we have also published our commitments and objectives on our website. Our emphasis is on reducing greenhouse gas emissions from direct activities, enhancing waste recycling, minimising food waste, reducing packaging use, shortening supply chains, and developing fast and convenient digital solutions.

In the Kulinaaria field, active product development continues with the aim of offering customers a wide variety of new flavours, and great attention is paid to reducing the salt, sugar, and fat content of products.

Department stores

The sales revenue of the department stores segment in the first three months of 2024 was 24.0 million euros, 2.9% less than in the same period of the previous year. The pre-tax loss of the Kaubamaja department store segment in the first quarter of 2024 was 1.2 million euros. The pre-tax loss increased by 0.4 million euros.

The sales revenue of the Kaubamaja department store per square metre of sales area was 0.30 thousand euros per month in the first three months, which is 4.6% less than in the same period last year. The cooling of the economic situation, which began towards the end of the fourth quarter of last year, persisted into the first quarter of this year, resulting in a more robust winter discount campaign compared to the previous year, which also impacted the results of Kaubamaja. At the same time, it's important to remember that the base of the first quarter of last year was very strong, with growth percentages in the double digits. The performance of the Kaubamaja Tallinn sales house was adversely affected by the ongoing construction of the Vanasadama tramway in the centre of Tallinn, and the closure of the Viru Keskus bus terminal, which significantly reduced foot traffic. On 29 February, Kaubamaja launched an online store on a new platform, where customer usability has been significantly enhanced, and the AI-based recommendation engine sets the stage for improved sales outcomes. On the new platform, the online shop forms a unified entity with physical stores, where the key concepts include pre-shopping, fast delivery, and the option to order from the online store and pay in the physical store, or vice versa.

In the first quarter of 2024, the sales revenue of OÜ TKM Beauty Eesti, which operates the I.L.U. cosmetics stores, was 2.0 million euros, 16.6% more than in the same period in 2023. In the first quarter, the profit was 0.04 million euros, which, compared to the profit of the comparable period of 2023, decreased by EUR 0.01 million. The reference base was affected by Ülemiste I.L.U.'s one-month business interruption for repairs in the previous period. Despite the fall in consumer confidence, sales results met expectations thanks to successful promotional campaigns.

Car trade

The sales revenue of the car trade segment in the first quarter of 2024 was 44.8 million euros. The sales revenue increased by 7.5% compared to the previous year. The consolidated pre-tax profit of the segment was 2.3 million euros in the first quarter, which is 0.7 million euros weaker than last year's result.

In the Baltic car market, economic uncertainty has hindered the purchase of new cars, leading to a considerable decline across the Baltics for the first three months. Despite the market's uncertainty, the Group's car segment has sold a total of 1,349 new passenger cars in the first three months of the year, which is 3.6% more than last year. The market downturn has necessitated price campaigns and other marketing activities better suited to the current market situation but have pressured sales margins.

An important event of the first quarter was the launch of the Škoda showroom by the Group's Lithuanian car company, Motus Auto UAB, in Vilnius. Škoda consistently maintains one of the three leading positions in the Baltic car market, and the addition of Škoda to the Motus Auto UAB brand portfolio supports the significant growth potential of the Group's car business in Lithuania. However, the initial costs of the Škoda showroom were incurred in the first quarter, negatively affecting profits.

In the spring, the KIA range will be expanded with an updated model of the popular SUV, the KIA Sorento. Škoda's model lineup will be enhanced by the completely renewed mid-class passenger car, the Škoda Superb, which has enjoyed great sales success in the past, and the updated SUV, the Škoda Kodiaq.

Security segment

The sales revenue of the security segment outside the Group in the first quarter of 2024 was 4.5 million euros, increasing by 58.6% in comparison with the same period of last year. The pre-tax profit of the segment in the first quarter was 0.1 million euros, compared to the same period last year, it was 0.2 million euros weaker.

The results of the first quarter were most affected by the costs related to the merger of the companies at the end of 2023. The negative economic environment is particularly impacting the field of security technology, where there has been greater pressure on profit margins, which also affected the results of the first quarter. The turnovers of all business areas increased, with the most significant growth in the volume of services in the control centre, which almost doubled.

Real estate

The sales revenue of the real estate segment outside the Group in the first quarter of 2024 was 1.7 million euros, increasing by 8.2% in comparison with the first quarter of the last year. The pre-tax profit of the segment was 2.2 million euros in the first quarter. The profit decreased by 11.0% in the reference period.

The growth of the segment's sales revenue was primarily supported by the revitalised commercial space rental market in the centres, with new tenants added to the rental spaces of Tallinna Kaubamaja Gallery, Tartu Kaubamaja Centre, and Viimsi Centre. Despite the general uncertainty characterising the economic landscape, the number of visitors to the centres continues to increase. The growth in the segment's sales income was also contributed to by the car wash, built as an extension of the petrol station at Raudkivi tee 1, leased to a non-group entity, situated in the immediate vicinity of Peetri Selver, which commenced operations last summer.

The decrease in the segment's profit was largely due to the rise in the cost of borrowing, triggered by the swift increase in the euro area interest rate, which began at the end of 2022 and impacted the segment's interest expenses with some delay. The majority of the Group's loan portfolio is concentrated in the real estate segment. Interest expense has almost doubled compared to the benchmark from a year ago.

In the second half of last year, TKM Kinnisvara AS began developing a logistics centre in Maardu to meet the needs of the TKM Group. The total area of the centre is 17,200 m², and the construction will cost approximately 20 million euros. The construction of the logistics centre is funded through the Group's own resources and a bank loan. A solar energy park will be constructed on the roof of the logistics centre, the energy production of which will cover a significant part of the building's electricity consumption. The completion of the logistics centre is scheduled for autumn 2024. At the end of last year, TKM Kinnisvara AS and Enefit Volt commenced a partnership to install a total of 49 new public electric car chargers in 17 Selver car parks. Almost half of these, i.e., 25, are ultra-fast chargers, enabling the charging of the amount of energy needed to travel 100 kilometres in just a few minutes.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In thousands of euros

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

In thousands of euros

Raul Puusepp

Chairman of the Board

Phone +372 731 5000

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