Unaudited consolidated interim accounts for the fourth quarter and twelve months of 2023

Segments (EURm)	Q4/23	Q4/22	yoy	12m/23	12m/22	yoy
Supermarkets	165.0	161.8	2.0%	620.2	594.9	4.3%
Department stores	34.9	33.7	3.3%	110.5	105.2	5.0%
Cars	45.7	34.4	32.9%	194.4	146.8	32.4%
Security segment	5.3	2.9	82.6%	15.7	9.8	59.5%
Real Estate	1.7	1.6	8.1%	6.6	6.2	6.9%
Total sales	252.6	234.4	7.8%	947.3	862.8	9.8%

Supermarkets	7.4	4.9	51.4%	20.0	12.9	55.1%
Department stores	1.9	2.0	-4.1%	1.6	2.3	-28.6%
Cars	1.9	2.2	-12.5%	13.3	10.7	24.3%
Security segment	-0.2	0.0	NA	-0.1	0.1	-173.2%
Real Estate	2.8	3.2	-12.2%	10.4	11.3	-7.8%
IFRS 16	-0.7	-0.6	13.1%	-2.2	-2.3	-3.0%
Total profit/loss before tax	13.1	11.6	12.8%	43.0	34.9	23.1%

In the fourth quarter of 2023, the consolidated unaudited sales revenue of the Group was 252.6 million euros, which was 7.8% more than the sales revenue of the same period of last year. The sales revenue of 2023 was 947.3 million euros, showing a growth of 9.8% compared to the result of 2022, when the sales revenue was 862.8 million euros. In the fourth quarter of 2023, the Group’s unaudited consolidated net profit was 12.8 million euros, which was 20.6% higher than the profit of the comparable period in the previous year. The net profit of the Group in 2023 was 37.4 million euros, growing by 26.9%. Pre-tax profit earned in 2023 was 43.0 million euros, showing an improvement of 23.1% compared to the year before.

With a significant nearly 50 million euros increase in sales volume, the Group's automotive segment contributed to the growth in revenue in the fourth quarter of 2023, supported by strong results from all companies within the Group's automotive segment. The overall increase in sales revenue achieved by the Group in the fourth quarter was 7.8%. The security segment also contributed to the high growth rate of the sales volume, where the two security companies acquired during the third quarter merged with Viking Security, adding synergy and turnover growth. In the supermarket and department stores segments, sales growth was more modest due to changes in consumer behaviour. Growing uncertainty about the future has made customers more cautious and careful about spending. Regardless of the price hike slowing down, the prices of goods remain high and customers are looking for savings through discounted prices and shopping cart optimization. The latter affects the sales growth of the supermarket segment the most. Preference of discounted prices in the retail segment and the price pressure in the car trade segment have had a slight negative impact on the entire gross margin of the Group. On the other hand, the drop in energy prices compared to 2022 has provided the Group an opportunity to bring its profitability back to its previous level. The labour costs of the Group increased by 7.8% in the fourth quarter of 2023, while the number of employees decreased by 0.5%.

In November, TKM Kinnisvara AS and Enefit Volt partnered to build a total of 31 new public electric vehicle charging stations to the car parks of 11 Selver stores. Approximately half of the charging stations (15 pcs) are super-fast charging stations where it is possible to charge the necessary amount of energy for driving 100 km in only a few minutes. In the retail segment development of the functionalities for Partner Card loyalty programme continued. Convenience functions of the Partner Card application were improved and payment solutions for postponing payments were developed further.

Earlier in the reporting year, the Group contributed to the following developments. During the second half of the financial year, the real estate segment launched the development of the logistics centre in Maardu to meet the needs of the Group. The centre will have a total area of 17,200 m2 and it will cost around 20 million euros to build. The construction of the logistics centre is financed from the Group’s own funds and a bank loan. The modern building with A energy class will be built in accordance with the requirements of the BREEAM certificate. The logistics centre will primarily serve the cargo volumes of Selver and the completion of the logistics centre is scheduled for the autumn 2024. The establishment of the logistics centre will add new business opportunities for the companies of TKM Group and increase the efficiency of work processes. In the third quarter, the security segment of the Group improved its market position and future prospects by acquiring two outstanding security companies. It purchased companies called Skarabeus Julgestusteenistus OÜ and Caesari Turvateenistuse AS, which were merged with Viking Security AS in December to improve efficiency. This investment provides positive synergy through the combination of strong industry know-how, increased operational capacity, and cost efficiency. In the third quarter, the supermarket segment opened its 73rd store with a sales area of 3,700 m2 in Kurna Park. In September, the supermarket segment opened a fully renovated Delice store with a new concept at Solaris Centre in the heart of Tallinn. In the Kaubamaja department store segment, development work on the e-shop plat-form continued. The renovated I.L.U. cosmetics store at Kristiine Centre, which was transferred to a new concept, was opened in the third quarter. In the second quarter, the largest store in the supermarket segment in Järve, Tallinn, was closed for renovation works for nearly two months. Reopened at the end of May, the renovated Järve Selver has been well received by customers. In the first quarter, the supermarket segment renovated Ringtee Selver in Tartu. In the first quarter, the Ülemiste I.L.U. cosmetics store was renovated: the sales area was increased by almost half to 460 square metres. The NYX make-up shop-in-shop with a separate entrance was opened in the Ülemiste I.L.U. cosmetics store. In the real estate segment, the solar park built on the roof of Viimsi Centre was completed in the second quarter; in November, the solar park of Põltsamaa Selver was completed. In January, the Group closed WOW Selver in Saare County, and in May, Punane Selver in Lasnamäe, Tallinn was also closed, because these stores did not meet expectations.

At the end of the reporting period, the number of loyal customers was over 714 thousand, which is 1.3% more than the year before. The proportion of loyal customers in the sales revenue of the supermarkets and the department stores segment of the Group was 85.2% (in 2022, 84.4%). In the final quarter of the year, the modern and convenient payment solutions for postponing payments of the Partner Kuukaart payment card, offered as part of Partner Card loyalty programme of the Group, received an up-date. The services ‘Osamakse’ (Partial Payment) and ‘Järelmaks’ (Payment in Instalments) were added to the payment solutions in addition to Ostulimiit (Purchase Limit). Ostulimiit has been on the market for three years, allowing customers to pay for their purchases of the whole month with a single aggregate invoice in the following month. The Osamakse service enables to pay for purchases in 3 or 6 equal instalments without any additional fees. The Järelmaks service offers an instalment plan for up to 36 months. The new payment solutions were first launched in the Kaubamaja department stores. In the first half of 2024, the new payment solutions will also be adopted by the online store of Kaubamaja, and in the future, by the e-Selver online store.

Selver supermarkets

The consolidated sales revenue of the supermarket business segment in 2023 was 620.2 million euros, increasing by 4.3% year on year. The consolidated sales revenue was 165.0 million euros in the fourth quarter, increasing by 2.0% year on year. The average monthly sales revenue per square metre of sales area in 2023 was 0.43 thousand euros, increasing by 3.7% year on year. In the fourth quarter, the respective indicator was 0.45 thousand euros, which is 0.6% less than in the comparable period last year. In 2023, the sales revenue from goods per square metre of sales area was 0.44 thousand euros in reference stores, which was an increase of 4.8% year on year, whereas in the fourth quarter, it was 0.45 thousand euros, which was a decrease of 0.3% comparing with the previous year. In 2023, 44.2 million purchases were made at the stores, which was 1.1% higher than in the reference year.

In the fourth quarter of 2023, the pre-tax profit was 7.4 million euros and the net profit was 7.0 million euros, which was 2.5 million euros and 1.0 million euros more, respectively, than in the reference period. The consolidated pre-tax profit of the supermarket segment in 2023 was 20.0 million euros, increasing by 7.1 million euros in comparison with the previous year. The net profit of the year was 18.4 million euros – an increase of 6.6 million euros compared to the previous year. The difference between the net profit and pre-tax profit arises from the income tax paid from dividends.

The financial outcome of 2023 was affected by the increased turnover from the opening of the Priisle and Tabasalu Selver stores in Tallinn in 2022 and the Kurna Selver in August 2023, and the lost turnover from the closure of the WOW Selver in Saaremaa in 2022 and Punane Selver in Tallinn in 2023. The sales turnover was mostly affected by the temporary closure of Ringtee Selver in Tartu, Delice Solaris in Tallinn, as well as Järve Selver in Tallinn, the largest store in the chain, due to renovations which halted their sales. All the projects listed above have also involved one-time costs and investments. In 2023, the results of the supermarket segment were impacted by the exceptionally high and broad level of inflation and a decline in consumer confidence. During 2023, the price hike slowed down, but the price level of products and services remained high. The significant increase in the prices of food products has changed the purchase habits of customers and increased their interest in discounted products, so the volume of product sales has been declining since the spring of 2022. The sales outcome of the fourth quarter was additionally affected by a lower demand for non-essential food and industrial products and the increasing demand for discounted products. The proportion of discounted products in the shopping cart reached a historic high – about 55%. The increase of sales revenue of online commerce slowed down in the fourth quarter, but the online turnover grew at the same pace as retail turnover during the year. The remarkable improvement in the profits has been significantly supported by the decreased cost of energy. In the second quarter of the financial year, energy costs declined compared to the previous year, and during the year as a whole, remained a quarter below the 2022 level. The growth of labour costs has been faster than the growth of sales revenue in the supermarket segment. The faster increase in wage costs is due to the general pressure to increase wages and partly due to the temporary closure of stores for renovation, where sales were suspended. At the same time, the chain has reorganised its work processes and completed successful changes in the structure, which has led to a decrease in working hours and thereby to an increase in the wages of employees.

The decline of production volumes of Kulinaaria OÜ, part of the supermarket segment, which started in the second half of 2023, slowed down during the second half of the financial year. During the fourth quarter, after leaving a fast and widespread increase in raw material prices behind, the consumption of Selveri Köök products showed signs of stabilisation. The central kitchen continued with daily consistent product development as the expectations of customers for new flavours have increased. Sustainable development has been important in production, packaging, the well-being of staff, and the delivery chain of the central kitchen. Thanks to environmentally friendly solutions and more resource-efficient production, the footprint of Selveri Köök has decreased by approximately 80% in the last 6 years. During the financial year, the use of plastic was reduced considerably. Over 80% of all boxes and containers used by Kulinaaria became recyclable. Due to top-of-the-line food production technology and the technical systems of the production building, well-planned to the tiniest detail, the products have a longer shelf life without using any additives in them. The production of Selveri Köök complies with the highest requirements set to food industry.

Selver opened one new store in 2023 – Kurna Selver in Harju County in August. Three stores have been renovated: Ringtee Selver in Tartu, which was reopened in February; in May, the largest store of the Selver chain – Järve Selver – was reopened in Tallinn; and in September, the Delice Solaris store was opened with a renewed concept. The issuance of identity documents issued by the Estonian Police and Border Guard Board that was launched in the first quarter was expanded to 41 stores across Estonia by the end of the year. Issuing ID-cards and passports earned the title of the best cooperation project of the 2023 Trade Act of the Year.

As at the end of December, the supermarket segment includes 71 Selver stores, 2 Delice stores, and a mobile grocery store and a café, with a total sales area of 120.4 thousand m2. In addition, it includes e-Selver, which is the e-shop with the largest service area in Estonia, and the central kitchen Kulinaaria OÜ.

Department stores

The sales revenue of the business segment of the department stores in 2023 was 110.5 million euros, exceeding the sales of the same period last year by 5.0%. The sales revenue of the fourth quarter was 34.9 million euros, which was 3.3% better than last year. The pre-tax profit of the Kaubamaja department stores in 2023 was 1.6 million euros, showing a decrease of 0.7 million euros compared to the results from last year. In the fourth quarter, the pre-tax profit was 1.9 million euros, which was 4.1% lower than in the comparable period last year.

The 12-month average sales revenue of Kaubamaja department store per square metre of sales area was 0.3 thousand euros per month, which is 6% higher than in the same period last year. The first half of the financial year is characterised by a strong growth in sales, because the full-scale war that Russia launched against Ukraine in 2022 had a negative impact on the sales of the second half of the first quarter of the reference year. Interest among customers was intense in the beginning of the spring sales in 2023, and the number of customers visiting our shops was significantly higher compared to the previous year. The discount of winter season goods was affected by a warmer-than-average winter, which is why the discount percentages were higher in 2023, but the increased sales volumes compensated for the lower margin and had a positive effect on the result. Construction works of the Old City Harbour tram line in the centre of Tallinn started in the second quarter, and as a result, most of the intersections surrounding the Kaubamaja department store were closed by the beginning of July in 2023. Pedestrian traffic was also affected. This had a considerable impact on the sales of the second half of the year, and in addition, a warmer-than-average September affected the sales of autumn goods negatively. Towards the end of the fourth quarter, the number of visitors to the department stores indicated a slight decline in the economic situation; however, the largest promotional campaign of Kaubamaja, Osturalli, achieved the best result of all time. During the Christmas season, the Kaubamaja department store sold a record number of hand-made chocolate truffles for a charity project and the proceeds from the sales were donated to the charity fund Minu Unistuste Päev that helps children with serious illnesses to cope emotionally.

In the fourth quarter of 2023, the sales revenue of OÜ TKM Beauty Eesti, which operates I.L.U. cosmetics stores, was 2.9 million euros, which is 23.4% more than in the same period of 2022. In the fourth quarter of 2023, the profit was 0.2 million euros, which is 0.1 million euros more than in the fourth quarter of 2022. The increase in the sales of the fourth quarter was driven by successful marketing campaigns for Black Friday and the Christmas season. The sales revenue of 2023 was 8.4 million euros, which is 26.4% more than in 2022. The profit in 2023 was 0.4 million euros, which was 0.2 million euros more than the result of 2022. The most important event of the year was the implementation of the updated concept and selection of goods at I.L.U. stores at the Ülemiste and Kristiine shopping centres. The overhauled stores led to a 25% increase in the number of regular customers of I.L.U. stores compared to the previous year, whereas the number of young customers under 25 showed a particularly strong growth.

Car trade

The sales revenue of the car trade segment in 2023 was 194.4 million euros, which was 32.4% higher than the result of the previous year. The sales revenue of 45.7 million euros in the fourth quarter exceeded the sales revenue of the same period in the previous year by 32.9%. Throughout the year, a total of 6,264 new vehicles were sold, 1,422 of them in the fourth quarter. The net profit of the segment in 2023 was 11.2 million euros, exceeding the profit of the year before by 1.8 million euros. The pre-tax profit of the segment in 2023 was 13.3 million euros, which is 2.6 million euros more than the pre-tax profit in 2022. The pre-tax profit of the fourth quarter of 2023 was 1.9 million euros, which was 0.3 million euros less than the profit of the same period of the year before.

Overall, 2023 was a successful year for the car trade segment of the Group. The sales results of all companies in the car trade segment exceeded the results of 2022, and in total, the year ended with a new profit record. A car part crisis that impacted the supply at the beginning of the year, eased during the second half of the year. The normalised supply situation and the skilful planning of inventory allowed to increase sales; on the other hand, more promotional campaigns were organised due to fierce competition, affecting the sales margin. Price increases of new vehicles and the growing interest rates of loans made private customers careful when making purchase decisions, but it also increased interest in used vehicles among customers. There was some increase in interest in hybrid and electric vehicles, but the sales of electric cars did not show marked improvement. The volume of cars sold by the Group ensures that the follow-up service and body repair departments work at full capacity.

Thanks to KIA vehicles, the segment has secured a position among the four best companies on the Baltic car market. Similarly to the previous year, the Kia Sportage urban SUV and the KIA Ceed remained popular. At the end of 2023, the new models that were launched on the market included the KIA EV9 electric SUV, which is currently the only vehicle of its kind on the market. In addition, the middle class sedan Škoda Superb and the Škoda Kodiaq are going to be added to the selection.

The most important event of 2023 is, without a doubt, being granted the sales rights for Škoda in Lithuania, and finding the suitable rental premises for a start-up showroom in Vilnius by the end of the year. This allows us to start selling new Škoda vehicles in Vilnius soon.

Security segment

The external sales revenue of the security segment in 2023 was 15.7 million euros, increasing by 59.5% compared to the year before. The pre-tax loss in 2023 was 0.1 million euros. The pre-tax loss increased by 0.2 million euros compared to last year. The external sales revenue was 5.3 million euros in the fourth quarter, increasing by 82.6% in comparison with the same period of the previous year. The pre-tax loss of the fourth quarter was 0.2 million euros, which is 0.2 million euros lower than in the same period of the year before.

The results of the fourth quarter were impacted by the activities and expenses related to the companies acquired during the summer. The provisioning of claims due to a bankruptcy of a cooperation partner had a significant impact on the profit. In December, SKARABEUS Julgestusteenistus OÜ and Caesari Turvateenistuse AS were merged with Viking Security AS, establishing a strong foundation for future growth. All business segments grew and demand for services remains high.

Real estate

The sales revenue earned in the real estate segment outside the Group was 6.6 million euros in 2023. Sales revenue increased by 6.9% compared to the previous year. The sales revenue earned in the segment outside the Group was 1.7 million euros in the fourth quarter. Sales revenue increased by 8.1% compared to the previous year. The pre-tax profit of the real estate segment in 2023 was 10.4 million euros, with the profit decreasing by 7.8%. The pre-tax profit of the fourth quarter of the segment was 2.8 million euros. Pre-tax profit decreased by 12.2% in the reference period.

Throughout the year, the increase in the sales profit of the segment has been supported by the successful operation of the department stores and the permanent occupation of retail premises. Although the economic environment is generally uncertain, the department stores of the segment have managed to increase their visitor numbers throughout the year, including in the final quarter of the year where the economic outlook deteriorated. The volatile economic conditions of the last few years have put the catering sector in a very complicated situation. During the year 2023, the number of visitors of the retail premises in the city centre of Tallinn was significantly impacted by the road reconstruction works in the area. Traffic restrictions due to partially closed streets continue to have a big impact on the activity of the tenants. Carefully positioned marketing campaigns have supported the success of shopping centres. In the second half of 2023, the Tartu Kaubamaja department store launched a new updated image campaign that focuses on excessive consumption and carries the message ‘Choose rarely, but choose well’. The following Christmas campaign continued and endorsed the same message.

The sales revenue of the segment was further increased by a car wash, opened in May, which was completed as an extension of the gas station at Raudkivi tee 1, located in the immediate vicinity of Peetri Selver, and is leased to an external party. In June, the solar park of the Viimsi Shopping Centre, and in November, the solar park of Põltsamaa Selver were ready to be taken into use. The power produced by all solar parks of the company is primarily used to cover the local power consumption needs of the buildings. In 2023, the segment invested 0.5 million euros in increasing energy efficiency as part of its sustainability strategy. The drop in the profits of the segment is largely due to the increased interest rates in the euro area, leading to the skyrocketing of loan interest. Most of the loan portfolio of the Group is concentrated in the real estate segment, where the interest expense has multiplied during the reference period. The annual fair value assessment of real estate investments affected the fourth-quarter profit of the segment. The increase in the value of the assets of the previous year exceeded the growth of the reporting year, as a result of which the profit of the final quarter was 0.4 million euros smaller. The profit of 2023 also reflects a financial compensation (0.5 million) paid due to a premature termination of a lease agreement.

Real estate companies focus on the implementation of the sustainability strategy and pay constant close attention to improving the energy efficiency of buildings and developing environmentally friendly solutions. For the purposes of energy efficiency, they continue to improve the automated heating and ventilation systems of buildings and the instalment of remote meters. In November, TKM Kinnisvara AS and Enefit Volt partnered to build a total of 31 new public electric vehicle charging stations to the car parks of 11 Selver stores. Approximately half of stations (15 pcs) are super-fast charging stations where it is possible to charge the necessary amount of energy for driving 100 km in only a few minutes. During the second half of the year, TKM Kinnisvara AS started the development of the logistics centre in Maardu to cover the needs of the Group. The centre will have a total area of 17,200 m2 and it will cost around 20 million euros to build. The construction of the logistics centre is financed from the Group’s own funds and a bank loan. A solar park will be built on the roof of the centre, which will cover a significant part of the electricity consumption of the building. The completion of the logistics centre is scheduled for autumn 2024.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In thousands of euros

	31.12.2023	31.12.2022
ASSETS
Current assets
Cash and cash equivalents	42,064	22,436
Trade and other receivables	25,568	27,200
Inventories	98,254	89,194
Total current assets	165,886	138,830
Non-current assets
Long-term receivables and prepayments	243	299
Investments in associates	1,732	1,722
Investment property	64,971	63,623
Property, plant and equipment	433,306	420,600
Intangible assets	25,370	21,723
Total non-current assets	525,622	507,967
TOTAL ASSETS	691,508	646,797

LIABILITIES AND EQUITY
Current liabilities
Borrowings	48,820	97,107
Trade and other payables	114,573	111,449
Total current liabilities	163,393	208,556
Non-current liabilities
Borrowings	258,857	190,825
Deferred tax liabilities	5,356	5,299
Provisions for other liabilities and charges	526	458
Total non-current liabilities	264,739	196,582
TOTAL LIABILITIES	428,132	405,138
Equity
Share capital	16,292	16,292
Statutory reserve capital	2,603	2,603
Revaluation reserve	116,521	106,981
Retained earnings	127,960	115,783
TOTAL EQUITY	263,376	241,659
TOTAL LIABILITIES AND EQUITY	691,508	646,797

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

In thousands of euros

		IV quarter 2023	IV quarter 2022		12 months 2023		12 months 2022

	Revenue	252,596	234,387		947,257		862,763
	Other operating income	830	993		2,016		2,199

	Cost of merchandise	-180,529	-166,806		-686,000		-624,435
	Service expenses	-16,365	-17,235		-60,685		-63,268
	Staff costs	-30,370	-28,184		-108,668		-97,458
	Depreciation, amortisation and impairment losses	-10,113	-9,873		-40,770		-39,072
	Other expenses	-89	-157		-894		-786
	Operating profit	15,960	13,125		52,256		39,943
	Finance income	46	1		86		4
	Finance costs	-2,984	-1,551		-9,576		-5,197
	Finance income on shares of associates accounted for using the equity method	74	37		240		197
	Profit before tax	13,096	11,612		43,006		34,947
	Income tax expense	-281	-982		-5,582		-5,462
	NET PROFIT FOR THE FINANCIAL YEAR	12,815	10,630		37,424		29,485
	Other comprehensive income:
	Items that will not be subsequently reclassified to profit or loss
	Revaluation of land and buildings	11,989	0		11,989		0
	Other comprehensive income for the financial year	11,989	0		11,989		0
	TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR	24,804	10,630		49,413		29,485
Basic and diluted earnings per share (euros)		0.31		0.26		0.92		0.72