Unaudited consolidated interim accounts for the second quarter and first six months of 2024

The Group’s unaudited consolidated sales revenue for the second quarter of 2024 was 237.3 million euros, 2.1% less than the same period last year. The sales revenue for the first half of the year was 458.8 million euros, a decrease of 0.4% compared to 460.5 million euros in the first half of 2023. The Group’s unaudited consolidated net profit for the second quarter of 2024 was 9.9 million euros, which is 23.2% lower than the net profit for the same period last year. The net profit for the first six months of 2024 was 8.4 million euros, a decline of 37.9% compared to the same period last year. Profit before tax for the first half of the year was 13.7 million euros, decreasing by 27.1% compared to the previous year.

The economic results of the Group in the second quarter of 2024 were significantly influenced by the prolonged downturn in the retail sector. Among the Group’s major retail segments, the car segment performed the best, achieving a 1.4% increase in sales revenue despite a 9% decline in the Baltic car market in the first half of the year. This growth was driven by a strategic brand selection, with both KIA and Škoda sales volumes increasing in the Baltic market. The security segment also continued to contribute the highest sales growth, expanding both organically and through the acquisition of security companies in the previous year (AS Walde in February 2023, Skarabeus Julgestusteenistus OÜ in July, and Caesari Turvateenistuse AS in August). Although discount campaigns have reduced product sales margins in the challenging economic environment, the Group has managed to maintain its gross profitability at last year's level through the sale of services. Thanks to implemented cost-efficiency measures, operating expenses have remained at the previous year’s level. Continuous process optimization has allowed for controlled labour costs. The Group’s labour costs increased by 2.0% in the second quarter of 2024, while the number of employees grew by 1.6%. The Group’s net profit was negatively impacted by the gradual increase in interest rates on the Group’s loans.

To enhance customer convenience, the Group has been investing in the development of e-commerce for a long time. In the first quarter of 2024, the new e-shop of Kaubamaja, built on a new platform, was launched. In the near future, there are plans to add an instalment payment option for Partnerkaart holders. At the end of June, the Food Department of Kaubamaja’s Tartu department store was closed for comprehensive renovation. The updated Food Department, featuring modern innovative solutions and technology, is scheduled to reopen in August. Preparations have begun to transition I.L.U. in Lõunakeskus to a new concept, planned for the last quarter of the year. Selver plans to open two new stores this year – in Rocca al Mare Centre in Tallinn and in Raadi, Tartu, with both openings scheduled for the second half of the year. To streamline processes, the Group started developing a central logistics centre in Maardu last year. Major construction works took place in the first half of the year. The logistics centre is expected to be completed in the autumn of 2024. In the car segment, plans are underway to start constructing a KIA start-up showroom on the Bikernieku property in Riga to better support KIA sales. In Tallinn, Viking Motors AS has signed a lease agreement for the former Länsi Auto OPEL centre in Rae parish, Peetri village, where a KIA flagship store is planned to open in autumn 2024. In Lithuania, TKM Lietuva UAB has announced a construction tender for a new KIA-Škoda multi-brand dealership, with construction expected to start later this year.

The selected business strategy and investment decisions are validated by new records in the number of loyal customers enrolled in the Group’s Partnerkaart loyalty program. At the end of the reporting period, the number of loyal customers exceeded 737,000, growing by 3.7% over the year. The share of loyal customers in the Group’s turnover was 86.3% in the first half of 2024 (85.3% in the first half of 2023).

Selver supermarkets

The consolidated sales revenue of the supermarket business segment for the first half of 2024 was 296.7 million euros, a decrease of 1.6% compared to the previous year. The consolidated sales revenue for the second quarter was 150.3 million euros, decreasing by 2,7% compared to the same period of the previous year. The average monthly sales revenue per square meter of selling space for goods was 0.40 thousand in both the first half and the second quarter of 2024. In 2023, the sales revenue per square meter was 0.43 thousand and 0.44 thousand, respectively. In comparable stores, the sales revenue per square meter was 0.40 thousand in the first half (a change of -6.5%) and 0.41 thousand in the second quarter (a change of -8.5%). A total of 21.7 million purchases were made in stores in the first half of 2024, the same level as last year. The pre-tax profit and net profit for the second quarter of 2024 were both 5.2 million euros, 0.5 million euros higher than in the base period. The consolidated pre-tax profit of the supermarket segment for the first half of the year was 6.2 million euros, remaining relatively stable compared to the same period last year. The net profit for the first half was 4.6 million euros, a decrease of 0.6 million euros compared to the previous year. The difference between net profit and pre-tax profit is due to the income tax on dividends – this year, the dividend tax was 0.5 million euros higher than last year.

The baseline data is affected by the closure of Järve Selver for renovation in March and the preceding clearance sale of the largest store, the closure of WOW Selver ABC in January, and the closure of Punane Selver in May. The baseline data do not include the figures for Kurna Selver, which opened in August 2023.

Selver’s sales results have been influenced by the overall situation in the Estonian retail market, where volumes continue to decline, and consumer confidence is weak. Modest additions to selling space and increased discount campaigns have resulted in slower sales revenue growth than the market average. To stimulate customer purchasing activity, Selver has increased the number of discounts offered and has not passed on the increase in VAT to some product prices. In January, a project offering permanently good regular prices was launched, providing customers with around 650 products at very favourable prices. In spring, a targeted campaign, Golden Wednesday, was launched for customers of retirement age, which has been very well received by the target group. The first half-year profit was primarily affected by the reduced turnover of goods and the decreased gross profit from product sales. During the reporting period, the prices of many services and materials increased. Thanks to implemented cost-saving measures, operating expenses remained at the previous year's level. Continuous process optimization has allowed maintaining labour efficiency at last year’s level and ensuring moderate wage growth.

Selver plans to open two new stores this year – in Rocca al Mare Centre in Tallinn and in Raadi, Tartu. Both stores are scheduled to open in the second half of the year. The focus remains on the assortment of goods and process optimization. As a responsible company, Selver aims to adopt conscious resource use and contribute to sustainable development in all its activities. A sustainable development strategy has been developed to guide daily operations. As a company valuing openness and transparency, Selver has published its obligations and goals on its website. Selver’s focus is on reducing greenhouse gas emissions, increasing waste recycling, reducing food waste, packaging and packaging use, short supply chains, and fast and convenient digital solutions. In the culinary products field, active product development continues, aiming to offer customers many new flavours, with significant attention to reducing salt, sugar, and fat content. Two Selveri Köök products were recognised at the Estonian Best Food Product 2024 competition: blueberry-yogurt cream meringue cake and whole-grain oat porridge.

Department stores

The department store segment’s sales revenue for the first six months of 2024 was 49.4 million euros, a decline of 4.5% compared to the same period last year. Sales revenue for the second quarter was 25.4 million euros, down by 5.9% from the previous year. The pre-tax loss for the department store segment for the first six months of 2024 was 1.0 million euros, which was 1.2 million euros lower than the result for the same period last year. The pre-tax profit for the second quarter was 0.2 million euros. The pre-tax profit decreased by 0.8 million euros.

The average monthly sales revenue per square meter of selling space for the Kaubamaja department stores over the six months was 0.30 thousand euros, 5.7% lower than the same period last year. The economic slowdown that began towards the end of the fourth quarter of last year continued into the first half of this year, resulting in a more aggressive winter discount campaign compared to the previous year, which impacted the Kaubamaja department stores' performance. It is also important to note that the base for the first quarter of last year was very strong, with double-digit growth rates. The performance of the Kaubamaja Tallinn department store was negatively affected in the second quarter by the ongoing construction of the Vanasadama tram line in Tallinn city centre and the closure of the Viru Centre bus terminal, significantly reducing foot traffic. In the first quarter, Kaubamaja launched a new e-commerce platform, significantly enhancing customer usability and incorporating an AI-based recommendation engine to improve sales results. The new platform integrates seamlessly with physical stores, featuring pre-shopping, fast delivery, and the option to order online and pay in-store, or vice versa.

The sales revenue of OÜ TKM Beauty Eesti, which operates I.L.U. cosmetic stores, was 1.9 million euros in the second quarter of 2024, a 2.0% increase compared to the same period in 2023. The profit for the second quarter of 2024 was 0.02 million euros, 0.05 million euros less than the comparable period in 2023. The sales revenue for the first half of 2024 was 3.9 million euros, an increase of 8.9% compared to the same period in 2023. The profit for the first half of 2024 was 0.04 million euros, 0.06 million euros less than the result for the comparable period in 2023. The successful marketing campaigns drove the quarter's sales results, but the overall economic situation led customers to focus on purchasing promotional products, which put pressure on sales margins. Preparations began to transition the I.L.U. store in Lõunakeskus to a new concept, scheduled for the last quarter of the year.

Car trade

The car segment’s sales revenue for the first half of 2024 was 98.9 million euros, a 1.4% increase compared to the same period last year. Sales revenue for the second quarter was 54.1 million euros, a 3.1% decrease compared to the second quarter of 2023. A total of 3,171 new vehicles were sold in the first half of the year, the same number as in the previous year. In the second quarter, 1,822 new vehicles were sold. The pre-tax profit for the segment in the first half of 2024 was 5.6 million euros, 2.1 million euros lower than the result for the previous year. The pre-tax profit for the second quarter of 2024 was 3.3 million euros, 1.4 million euros lower than the same period last year.

The Baltic car market as a whole is experiencing deeper volume declines compared to other retail sectors. Preliminary data indicates a 9% decrease in new car sales volume in the Baltic region. The largest decline was seen in the Estonian market (-17%), while new car sales in Lithuania remained at the previous year's level. The introduction of a car tax in Estonia has not significantly accelerated purchasing decisions among customers. Discount campaigns, driven by the market downturn, have put pressure on sales margins, being a primary reason for the decline in profit. Additionally, the start-up costs of the Group’s Lithuanian auto company, Motus Auto UAB’s Škoda dealership, which opened earlier this year, negatively impacted profits. The car segment's profit was supported by growing sales of spare parts, after-sales services, and bodywork, thanks to an increasing car fleet.

Despite the downturn in the car market, the KIA brand, imported by the Group, shows positive growth numbers. To further support KIA sales, the Group plans to start constructing a KIA start-up showroom on the Bikernieku property in Riga to ensure presence in that district. In Tallinn, Viking Motors AS signed a lease agreement for the former Länsi Auto OPEL centre in Rae parish, Peetri village, with plans to open a KIA flagship store in autumn 2024. In Lithuania, TKM Lietuva UAB announced a construction tender for a new KIA-Škoda multi-brand dealership, with construction expected to start later this year.

Security segment

The outside the Group sales revenue of the security segment for the second quarter of 2024 was 5.7 million euros, reflecting a 63.2% increase compared to the same period last year. The segment’s pre-tax profit for the second quarter was 0.04 million euros, 0.01 million euros lower than the result for the same period last year. The outside the Group sales revenue of the security segment for the first half of 2024 was 10.3 million euros, a 61.1% increase compared to the same period last year. The proportion of outside the Group sales in total sales was 76% in the first half of the year. The pre-tax loss for the segment in the first half of 2024 was 0.1 million euros, 0.2 million euros lower than the result for the same period last year.

The company's performance improved in the second quarter compared to the beginning of the year, achieving profitability. Sales growth was supported by both the addition of merged companies' revenues and continued strong organic growth. Post-merger synergies have begun to emerge, although several changes are still in progress. The negative impact of the economic environment remains evident in increased customer insolvency and declining margins. The most significant negative impact was in the security technology sector, although the outlook for the second half of the year shows a positive trend.

Real estate

The sales revenue earned in the real estate segment outside the Group was 3.4 million euros for the first half of 2024, an 8.4% increase compared to the same period last year. The sales revenue earned in the real estate segment outside the Group was 1.8 million euros for the second quarter, an 8.6% increase compared to the previous year. The pre-tax profit for the real estate segment in the first half of 2024 was 3.9 million euros, a decrease of 28.1%. The pre-tax profit for the second quarter was 1.7 million euros, a 42.1% decrease compared to the same period last year.

The growth in sales revenue for the first half of the year was supported by a revitalised commercial rental market in the centres. The general uncertainty associated with the crises of recent years has somewhat diminished, which is reflected in the stabilisation of visitor numbers to the centres. However, the visitor traffic to commercial spaces in central Tallinn has decreased due to ongoing street reconstruction work in the surrounding area. The segment's sales revenue was also boosted by a car wash, which was completed in May last year as an extension to the petrol station rented to an external party near Peetri Selver. Several solar parks were completed last year, covering part of the electricity needs of the rented business buildings, thereby contributing to the sales revenue growth of the Group’s real estate segment.

The segment’s profit continues to be significantly impacted by the rising cost of borrowing due to the tightening of monetary policy. The increase in interest rates that began at the end of 2022 has gradually affected the segment’s interest expenses. Most of the Group’s loan portfolio is concentrated in this segment, which has grown during the reporting period due to the development of the logistics centre. TKM Kinnisvara AS became the first privately owned Estonian company to sign a 16.1 million euros loan agreement with the Nordic Investment Bank (NIB). The modern A-energy class logistics centre building will be constructed in accordance with BREEAM certification and EU taxonomy requirements. The centre will have a total area of 17,200 square meters and will cost approximately 20 million euros to build. A solar energy park will be installed on the roof of the logistics centre, covering a significant portion of the building’s electricity consumption. The logistics centre is scheduled to be completed in the autumn of 2024. The decrease in the segment’s profit for the second quarter of 2024 compared to the previous year was due to a one-time compensation reflected in the second quarter of 2023 related to the early termination of a lease agreement.

TKM Kinnisvara AS has started cooperating with Kohila Municipality to potentially develop a commercial building on a property located in the Härjaoja area of Kohila. The cooperation agreement initially involves identifying the possibilities for constructing a store building. The project is in its early stages, and more details will be clarified after the road network, planning, and development plans for the area are approved. Renovation work began on the ground floor of the Tartu Kaubamaja centre, giving a fresh look to the Kaubamaja Food Department and common areas. Several tenants in the centre are also updating their sales environments.

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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