Unaudited consolidated interim accounts for the fourth quarter and twelve months of 2022

In the fourth quarter of 2022, the consolidated unaudited sales revenue of the Group was 234.4 million euros, which was 7.7% more than the sales revenue of the same period of last year. The sales revenue of 2022 was 862.8 million euros, showing a growth of 5.0% compared to the result of 2021, when the sales revenue was 821.6 million euros. In the fourth quarter of 2022, the unaudited consolidated net profit of the Group was 10.6 million euros, which was 9.2% lower than the profit of the comparable period in the previous year. The net profit of the Group in 2022 was 29.5 million euros, which was 7.9% lower than the result of the previous year. The pre-tax profit earned in 2022 was 34.9 million euros, which was 4.2% less than the year before.

The economic results of the Group in the fourth quarter showed a positive development compared to the third quarter. The growth of sales revenue picked up a bit, and the decline in profit slowed down. Compared to the previous year, the sales revenue of all segments increased in the fourth quarter. The car segment showed the fastest growth in the fourth quarter, where the improvement in the availability of cars revived the entire market. Regardless of the high price pressure, the Group was able to maintain a strong sales margin thanks to good inventory management and well-thought-out sales campaigns. The increase in energy costs continued, which increased comparable costs by 10.0 million euros during the year, accounting for the lion’s share of the increase in service costs. The increase in energy costs was also the main reason in the slowdown of the profit of the segments, negatively affecting the profit of the supermarkets segment the most. In the real estate segment, the annual revaluation of investment properties took place in the fourth quarter, where the increase in the value of assets was 1.3 million euros lower than a year earlier, leading to a decrease in the quarterly profit of the segment. The net profit of the Group in 2022 decreased by 2.3 million euros due to the calculated loss from lease contracts based on the application of IFRS 16 (in 2021, the respective figure was 2.9 million euros). Due to high inflation, expectations of wage growth for employees have increased. The labour costs of the Group increased by 8.6% in the fourth quarter, while the number of employees decreased by 0.8% as a result of optimising operations. Although the Group’s 2022 EBITDA (earnings before financial income and expenses and depreciation) decreased by only 1.5% compared to the previous year, the Group’s cash flow from operations decreased significantly. The largest financial contribution was made to normalize the inventory of the car trade segment, which was depleted by the beginning of 2022. In addition, the regulatory shortening of payment terms in the groceries and the reduction of related debts to suppliers had a significant impact.

In October, a new Selver store was opened in Tabasalu near Tallinn, which was long awaited by the local community. Tabasalu Selver was one of the first commercial spaces opened in the new A energy class Tabasalu Centre (13,000 square metres of service and office space). In the fourth quarter, Krooni Selver underwent a comprehensive renovation: the warehouse, sales hall, and office and utility rooms were renovated with the most modern and environmentally friendly technological solutions in mind. The new interior design concept of Selver was introduced in the sales hall. Further developments continued on the Partnerkaart application completed in August, which was one of the most anticipated digital developments among our customers. The Partnerkaart app has all the functions of the Partnerkaart card – it works as a scanner and a means of payment. The focus is still on updating the platforms of the e-stores, for which demand is growing, and developing services. In September, the party snacks of Selveri Köök, previously ordered from a separate environment, were integrated into the eSelver platform, enabling customers to conveniently order from both the grocery store and Selveri Köök with one order and delivery to a significantly expanded area. Construction works for the creation of a solar park on the roof of the Pirita Selver building, where electricity is used for own consumption, was completed. A similar park is under construction on the roof of the Viimsi Centre. One of the major renovation projects of the sales space in the first half of 2022 was the opening of the renovated Naistemaailm in the Kaubamaja in Tallinn in the first quarter, where both the physical environment and the selection of brands were updated. In June, the new Priisle Selver was opened in the Lasnamäe district in Tallinn. In September, the completely renovated I.L.U. cosmetics store was opened with a new concept in the Pärnu Keskus Centre. A renewed store was also opened in Rocca al Mare in October. In accordance with the strategic decision to stop selling shoes in stand-alone shoe stores, all ABC King and SHU stores were closed by the end of the second quarter.

Selver supermarkets

The consolidated sales revenue of the supermarkets business segment in 2022 was 594.9 million euros, increasing by 4.5% compared to the previous year. The consolidated sales revenue was 161.8 million euros in the fourth quarter, increasing by 6.8% in comparison with the same period of last year. The average monthly sales revenue per square metre of sales area in 2022 was 0.42 thousand euros, increasing by 3.7% compared to the same period last year. In the fourth quarter, the respective indicator was 0.45 thousand euros, which is 4.7% more than in the same period last year. In terms of comparable stores, the sales revenue of goods per square metre in 2022 was 0.43 thousand euros, growing by 3.7% compared to the same period last year. In the fourth quarter, the respective indicator was 0.46 thousand euros, which is 4.3% more than in the same period last year. In 2022, 43.7 million purchases were made from the stores, which was 2.2% higher than in the reference year.

On 1 October, Selveri Köök joined the e-Selver ordering environment. In the first months of the year, the production volume of Selveri Köök reached close to the pre-pandemic level, but inflation and a significant decrease in consumer confidence led to a decrease in the consumption volume, especially in desserts and party snacks, at the beginning of autumn.

In the fourth quarter of 2022, the consolidated pre-tax profit was 4.9 million euros – 1.4 million euros lower than during the reference period. The consolidated net profit was 5.9 million euros, improving by 2.8% compared to the previous year. The consolidated pre-tax profit of the supermarkets segment in 2022 was 12.9 million euros, decreasing by 7.6 million euros in comparison with the previous year. In 2022, the net profit was 11.7 million euros, which signifies a decrease of 6.6 million euros in comparison with the previous year. The difference between the net profit and pre-tax profit arises from the income tax paid from dividends.

The economic results of 2022 were affected by the increased turnover of the new Priisle and Tabasalu Selver supermarkets opened in Tallinn, as well as the one-time costs and investments made for the openings. The results were also affected by the closure of Krooni Selver in Rakvere for renovation and the one-time expenses and investments related to this project. The results of the supermarkets segment have been significantly affected by accelerated inflation, the war in Ukraine, and the effects of COVID-19 included in the reference base. The 2022 reference base was lower by the costs associated with the rebranding of Selver ABC stores and the negative effects of temporary store closures. The reference base was higher due to one closed store and a significantly higher e-commerce and manufactured goods basis on the crest of the 2021 health crisis in the first half of the year. Due to high food inflation, the decline in the volume sales of foodstuffs worsened in the fourth quarter. The increase in prices was mostly caused by price increases on the part of food producers and the increase in the price of energy carriers, which increased the operating costs of companies, which in turn are transferred to the final prices of products and services. The impact of inflation is mitigated by customers buying campaign products in larger quantities. The share of discounted products in the shopping basket increased to almost half of the shopping basket in the fourth quarter. In the last quarter of the year, e-commerce turnover grew at a similar pace to retail turnover, but the results of the whole year remained 3% below the level of 2021 due to the big drop in the second quarter. In order to fight the price pressure, Selver has taken actions to increase efficiency. During the renovations, the equipment has been replaced with more environmentally friendly and energy-efficient alternatives. During the year, self-service payment terminals have been introduced in all stores. The Partnerkaart application, launched in the third quarter, is very popular among our customers. Various IT solutions have been developed, that have had a positive impact on labour efficiency and the main process of handling goods. The economic results of the segment are strongly affected by the significant increase in the price of electricity (increase of 8.4 million euros in twelve months), significantly increasing the operating expenses of the segment. The exceptionally high level of inflation has also led to strong pressure on the increase in wages, the growth rate of which has been faster than the growth of sales revenue.

With the merger decision of 9 August 2022, the internal restructuring of TKM Group was carried out, during which Selver AS and TKM King AS merged. TKM King was deleted from the commercial register after the merger. By the time of the merger, all retail stores of TKM King AS had been closed, and the wholesale business of TKM King AS had been merged with Selver AS. The merger will not have a significant impact on the economic results of Selver AS.

In January 2023, renovation works will begin in Ringtee Selver in Tartu and the store on Saaremaa will be closed due to worse than expected economic results.

Department stores

In 2022, the Kaubamaja department stores business segment earned a sales revenue of 105.2 million euros, which is 12.6% more than last year. In the fourth quarter, the sales revenue of the Kaubamaja department store segment amounted to 33.7 million euros, which was 3.1% better than the result in the same period the year before. The pre-tax profit of the segment in 2022 was 2.3 million euros. The profit increased by 3.0 million euros over the year. The pre-tax profit of the fourth quarter was 2.0 million euros, being 1.7 million euros higher than the result of the same period of the year before.

The annual average sales revenue of Kaubamaja department stores per square metre of selling space was 0.3 thousand euros per month, which is 18% higher than in the same period last year. One of the biggest news for the customers of the Kaubamaja department store in the first half of 2022 was the opening of the renovated Naistemaailm in Tallinn, where both the physical environment and the selection of brands were updated. The shopping behaviour of customers is increasingly characterised by the keywords quality, sustainability, and planning – they visit stores less often, think through their purchases, and make larger purchases at once. In the last year, the number of visits to physical stores grew significantly, which indicates the easing of the fear of the coronavirus and the interest to enjoy the shopping experience in physical stores as well. There has been noticeable activity among foreign tourists as well. Trade and leisure in the city centre area have also been stimulated by the distinctive concept of the new Toidumaailm (Food department) in Tallinn, where high-quality and a unique assortment of goods are valued above all. The campaigns of last year showed good sales results and a higher percentage of total sales of goods. In summer, Kaubamaja launched the sustainable product labelling project ‘World. One and only’, which helps to make sustainable choices in the e-store. The label has been very popular among our customers. In December, Kaubamaja was the first major retail company to introduce recycled packaging made from textile scraps, which can be reused up to 20 times. The goal is to reduce packaging waste caused by e-commerce, offering customers the opportunity to recycle the boxes. Kaubamaja ended the year with a successful Christmas season and, as part of a charity project, donated to the non-profit association Laste ja Noorte Kriisiprogramm (Children and Youth Crisis Programme) to organise grief support camps for children in 2023.

In the fourth quarter of 2022, the sales revenue of OÜ TKM Beauty Eesti, which operates the I.L.U. cosmetics stores, was 2.3 million euros, which is 13.2% more than in the fourth quarter of 2021. In the fourth quarter of 2022, the profit was 0.1 million euros, which is 0.04 million euros less than in the comparable period in 2021. The most important event of the fourth quarter was the opening of the renewed I.L.U. cosmetics store in Rocca al Mare, during which 27 new beauty brands were added to the store selection and the area of skin care and exclusive perfumes was expanded. The sales revenue of 2022 was 6.7 million euros, which is 20.7% more than in the same period of 2021. The profit in 2022 was 0.3 million euros, which was 0.03 million euros more than in the comparable period in 2021. The most important keywords of the year are the development of the new concept and brand of IL.U. cosmetics stores and investments for the modernisation of the stores in Pärnu and Rocca al Mare.

Car trade

The sales revenue of the car trade segment in 2022 was 146.8 million euros, which was 0.7% higher than the result of the previous year. The sales revenue of 34.4 million euros in the fourth quarter exceeded the sales revenue of the same period in the previous year by 16.2%. In 2022, a total of 5,134 new vehicles were sold, 1,139 of them in the fourth quarter. The net profit of the segment in 2022 was 9.4 million euros, exceeding the profit of the year before by 2.4 million euros. The pre-tax profit of the segment in 2022 was 10.7 million euros, which is 3.3 million euros more than the pre-tax profit in 2021. The pre-tax profit of the fourth quarter of 2022 was 2.2 million euros, which is 0.6 million euros more than the profit of the same period of the year before.

The year 2022 ended successfully for the car segment of the Group. The results of all companies in the car segment exceeded the results of 2021 and in total, the year ended with a new profit record. This was contributed by new business directions such as the full-service vehicle rental service, which is very popular among our customers, the steadily growing Škoda business in Latvia, and the sale and service of KIAs in Lithuania. The year 2022 as a whole was most affected by a supply shortages of new cars, which at the same time provided an opportunity to earn a higher profit margin. The delivery and availability of KIA vehicles was somewhat better than in the case of other brands we represent, such as Škoda and Peugeot. At the same time, the share of electric and hybrid cars in sales was still marginal due to their limited availability in our market.

Thanks to KIA vehicles, the segment has secured a position among the top 4 of the Baltic car market. In Estonia, KIAs were in third place in terms of sales. The best-selling models were the KIA Sportage SUV and the KIA Ceed series. In 2023, we will add the KIA E-Niro electric car and the Peugeot 408 mid-class SUV to our selection, as well as several Škoda model updates.

Security segment

The sales revenue of the security segment outside the Group in the fourth quarter of 2022 was 2.9 million euros, increasing by 22.5% in comparison with the same period of last year. The segment had a zero pre-tax profit in the fourth quarter, but the result was 0.1 million euros better than in the same period last year. The sales revenue of the security segment outside the Group in 2022 was 9.8 million euros, increasing by 20.1% in comparison with the last year. The pre-tax profit earned in 2022 was 0.1 million euros. The pre-tax profit increased by 0.1 million euros compared to previous year.

The fourth quarter was successful in all business areas. The field of technical projects showed the fastest growth, where several large projects, delayed for various reasons in the first half of the year, were finally realised. 2022 was a successful year as a whole – both the turnover and profit of the company grew. There was a strong growth in the portfolio of services and a slight decline in the construction of security engineering projects. Increases in almost all input prices and labour shortages presented major challenges, which the company was able to cope with by increasing volumes and streamlining operations.

Real estate

The sales revenue earned in the real estate segment outside the Group was 6.2 million euros in 2022. Sales revenue increased by 17.2% compared to the same period last year. The sales revenue earned in the segment outside the Group was 1.6 million euros in the fourth quarter. Sales revenue increased by 10.2% compared to the previous year. The pre-tax profit of the real estate segment in 2022 was 11.3 million euros, the profit decreased by 6.9%. The pre-tax profit of the fourth quarter of the segment was 3.2 million euros. The pre-tax profit decreased by 22.2% in the reference period.

The opening of a reconstructed business centre in Salaspils (Latvia) last summer and the lease contract signed in the Kuldīga Centre this year significantly contributed to the increase in sales revenue. The significant increase in sales revenue was brought about by the temporary rent discounts during the coronavirus restrictions applied in the comparison period. Last year, new tenants were added to the rental premises of Tallinna Kaubamaja Gallery and Tartu Kaubamaja mall. The number of visitors to shopping centres, which had increased since the beginning of the year, began to approach the pre-pandemic level in spring, but slowed down again in the second half of the year and remained at a similar level.

The decrease in the profit of the last year of the segment was caused by the multiplied energy prices and the increase in the cost of borrowings due to the increase in the interest rates of the euro area intended to tighten the monetary policy by the European Central Bank. The annual fair value assessment of investment properties had the biggest impact on the fourth quarter profit of the segment. The increase in the value of the properties of the previous year exceeded the growth of the reporting year, as a result of which the profit of the last quarter was 1.3 million euros smaller. In 2021, a registered immovable located in Saare County was sold, the sale profit of which is also reflected in the profit of the comparison period.

The Group’s real estate companies have paid a lot of attention to improving the energy efficiency of buildings and started implementing the sustainable development strategy of the Group. An important role in the implementation of the strategy is the ongoing collection of various non-financial data, which allows it to be analysed and linked to financial data. It is also necessary for making improvement decisions. The companies have made several investments for the more accurate measurement and management of the energy consumption of technical systems. An automatic ventilation control system has been implemented in several centres. Most of the lighting in the centres has been replaced with LED lights. Automatic lighting control has been introduced in the Tartu Kaubamaja centre. Construction works for the creation of a solar park on the roof of the Pirita Selver building, where electricity produced is mainly used to cover on-site consumption of the building, was completed in the summer. Development work has started to build a solar park on the roof of Viimsi Centre as well. The construction possibilities of solar power plants are also being analysed for other buildings belonging to the Group. In 2022, the segment invested 0.5 million euros in increasing energy efficiency as part of the sustainability strategy.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In thousands of euros

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

In thousands of euros

Raul Puusepp
Chairman of the Board
Phone +372 731 5000

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