Aktsiaselts Tallink Grupp Listing of Finnish Depositary Receipts on Nasdaq Helsinki

Transcription

1 SUMMARY 16 November 2018 Aktsiaselts Tallink Grupp Listing of Finnish Depositary Receipts on Nasdaq Helsinki This summary document (the Listing Summary ) has been prepared in connection with the secondary listing of AS Tallink Grupp, a public limited liability company incorporated under the laws of Estonia, in which AS Tallink Grupp s shares are listed on the main list of Nasdaq Helsinki Ltd ( Nasdaq Helsinki ) in the form of Finnish share depositary receipts (each a Depositary Receipt or FDR ) (the Listing ). AS Tallink Grupp s shares are listed on the Baltic Main List of Nasdaq Tallinn AS ( Nasdaq Tallinn ) under the symbol TAL1T. The total number of AS Tallink Grupp s shares is and the closing price of the share was EUR on 15 November In this Listing Summary, any reference to Tallink, the Company or the Group means Tallink together with its subsidiaries on a consolidated basis, except where it is clear from the context that the term means AS Tallink Grupp or a particular subsidiary or business segment only. The Supervisory Board of the Company resolved on 21 May 2018 to approve the secondary listing of the Company s shares on the main list of Nasdaq Helsinki and to authorize the Management Board of the Company to commence the preparations of the secondary listing. On the basis of such authorization, the Management Board of the Company resolved on 1 November 2018 to approve the Listing as well as to submit a listing application to Nasdaq Helsinki for the secondary listing of Tallink s shares on the main list of Nasdaq Helsinki in the form of FDRs. On 16 November 2018, the Management Board of the Company approved this Listing Summary. Following the Listing, the Company s shares will continue to be listed also on Nasdaq Tallinn. The Company does not offer or issue any new shares in connection with the Listing. The main purpose of the Listing is to further improve the Company s visibility and to make the Company s shares more widely accessible to investors, as well as to increase trading volumes and facilitate more efficient price formation of the Company s shares. The Company is expected to submit an application to Nasdaq Helsinki on or about 19 November 2018 for the FDRs to be listed on the main list of Nasdaq Helsinki with the trading code TALLINK. The application relates to all the FDRs corresponding Tallink shares issued as at the date of this Listing Summary. Trading in the FDRs on the main list of Nasdaq Helsinki is expected to commence on or about 3 December OP Corporate Bank plc is acting as the Finnish financial advisor and Swedbank AS as the Estonian financial advisor to the Company in connection with the Listing and issuance of FDRs. Tallink has appointed Nordea Bank Abp as the issuer of the FDRs ( Nordea or the FDR Issuer ). The FDRs are issued in the Finnish book-entry system. One FDR entitles its holder to one share of the Company, and it may be converted into one share of the Company according to the FDR terms and conditions. A number of the Company s shares corresponding to the number of the outstanding FDRs are held in custody by the sub-custodian bank appointed by the FDR Issuer in Estonia in the name of the FDR Issuer and for the account of the FDR holders. As at the date of this Listing Summary, the sub-custodian bank of the FDR Issuer in Estonia is Swedbank AS. An FDR is a form of right that has been issued as a book-entry in accordance with Chapter 5 of the Finnish Act on Book-Entry System and Settlement (348/2017, as amended) and registered into the Finnish book-entry system. An FDR is a security as defined in Chapter 2, Section 1, subsection 1 of the Finnish Securities Markets Act (746/2012, as amended) (the Finnish Securities Markets Act ). In this document all the references to the issuer are references to the Company, except where it is clear from the context that the term means Nordea as the FDR Issuer. The Company has on 31 October 2018 entered into a market making agreement with Nordea Bank Abp s Danish branch (the Market Maker ) concerning certain market making activities to be provided by the Market Maker in respect of the FDRs. No offering of FDRs or other securities of the Company is made on the basis of this Listing Summary in connection with the Listing in any jurisdiction. Ahead of the Listing, the Management Board of the Company resolved on 1 November 2018 to reward certain employees in Tallink Silja Oy and Tallink Silja AB (the Target Employees ) with an FDR bonus in Finland and Sweden (the Employee Offering ). The Company has received FDR bonus acceptance forms from in total of 271 Target Employees. As a result, the Company will allocate in total up to FDRs to the Target Employees pursuant to the Employee Offering. These bonus FDRs will also be listed on Nasdaq Helsinki as a part of the Listing. The Company has also agreed with Nasdaq Helsinki on the possibility to provide a one-off tranche of FDRs from treasury worth of approximately EUR following the commencement of trading in the FDRs (the Liquidity Tranche ). The possible offering of the Liquidity Tranche will be carried out in accordance with the applicable exemption from preparing the prospectus, and it is not carried out on the basis of this Listing Summary. The FDR Issuer has agreed on not to charge the conversion fees from the Company s shareholders amounting EUR 120, resulting from the conversion of their shares into FDRs, for a certain period of time (the Free FDR Conversion Period ). During the Free FDR Conversion Period, one free conversion event is offered per book-entry account. However, the fees of the account service providers of Tallink shareholders will be charged from the Tallink shareholders. The Free Conversion Period commences on or about 19 November 2018 at noon Finnish time and ends on or about 29 November 2018 at 6.00 pm Finnish time, provided that the Free FDR Conversion Period is not extended. Further details will be specified in a stock exchange release. This Listing Summary is not an offer to sell or solicitation to purchase FDRs or other securities of Tallink in any country. The FDRs or other securities of Tallink have not been nor will they be registered under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act ), or the securities laws of any state of the United States, and as such, and they cannot be offered or sold directly or indirectly in the United States (as defined in Regulation S of the U.S. Securities Act), unless they have been registered under the U.S. Securities Act or pursuant to an exemption from the registration requirements of the U.S. Securities Act and in compliance with any applicable state securities laws of the United States. The distribution of this Listing Summary may be restricted by law in certain jurisdictions. This Listing Summary may not be sent to any jurisdiction in which it would not be permissible. Neither OP Corporate Bank plc nor Swedbank AS accept any legal responsibility whatsoever for the Listing Summary or the FDRs. For certain risk factors related to Tallink or the FDRs, see Section D - Risks of this Listing Summary. OP Corporate Bank plc Finnish Financial Advisor to AS Tallink Grupp Swedbank AS Estonian Financial Advisor to AS Tallink Grupp

2 Regulation applicable to the Listing Summary. This Listing Summary has been prepared in accordance with the Finnish Securities Markets Act, European Commission Regulation (EC) No 809/2004 (as amended) (the Prospectus Regulation ) implementing Directive 2003/71/EC of the European Parliament and of the Council concerning information contained in prospectuses as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements (the Prospectus Directive ), European Commission Delegated Regulation (EU) No 486/2012 (as amended) amending Regulation (EC) No 809/2004 as regards the format and the content of the prospectuses, the base prospectuses, the summary and the final terms and as regards disclosure requirements (the Commission Regulation 486/2012 ), Decree 1019/2012 of the Ministry of Finance on the Prospectus Referred to in Chapter 3-5 of the Finnish Securities Markets Act, and the regulations and guidelines issued by the FIN- FSA. Exemption from preparing a prospectus. This Listing Summary is not a prospectus. The Company has received an exemption from the Finnish Financial Supervisory Authority (the FIN-FSA ) from the obligation to publish a prospectus in connection with the Listing, pursuant to Chapter 4, Section 5, subsection 2 of the Finnish Securities Markets Act. The FIN-FSA has not approved the Listing Summary and is not liable for the correctness of the information presented therein. The journal number of the FIN-FSA s exemption decision is FIVA 60/ /2018. The Company has prepared this Listing Summary and is legally responsible for its contents according to and within the limitations of the Finnish Securities Markets Act. Availability of the Listing Summary and other Company materials; no incorporation by reference. This Listing Summary has been prepared in Finnish and translated into English. In case of any discrepancies, the Finnish language version is decisive. Both language versions of this Listing Summary are expected to be available in electronic form on the Company s website at and in Finnish on OP Financial Group s website at on or about 19 November Printed copies of both language versions of this Listing Summary are expected to be available at the Company s headquarters at Sadama 5/7, Tallinn, Estonia, and printed copies of the Finnish language version are expected to be available at the service point of Nasdaq Helsinki at Fabianinkatu 14, FI Helsinki, Finland, on or about 19 November The English-language Offering Memorandum relating to the initial public offering of the Company, dated 18 November 2005, and the Offering Memorandum relating to the Company s share issue, dated 8 August 2006, are expected to be available in electronic form on the Company s website on or about 19 November The financial information of the Company is available in English at and stock exchange releases of the Company are available in English on at Information presented in any of the above-mentioned websites or any other website is not part of this Listing Summary, and prospective investors should not rely on such information. Restrictions on reliance. Prospective investors should rely solely on the information contained in the Listing Summary as well as on the stock exchange releases published by Tallink. No one has been authorized to provide any information or give any statements other than those provided in the Listing Summary. Delivery of the Listing Summary shall not, under any circumstances, indicate that the information presented in the Listing Summary is correct on any day other than the date of the Listing Summary, or that there would not be any changes in the business of Tallink after the date of the Listing Summary. Information given in the Listing Summary is not a guarantee or grant for future events by Tallink, and shall not be considered as such. Unless otherwise stated, any estimates with respect to market development relating to Tallink or its industry are based upon the reasonable estimates of the Company s management. The possible offering of the Liquidity Tranche will be carried out in accordance with the applicable exemption from preparing the prospectus, and it is not carried out on the basis of this Listing Summary. No offering of securities. This Listing Summary is not an offer to sell or solicitation to purchase FDRs or other securities of Tallink in any country. No FDRs or any other securities of Tallink are offered or sold under this Listing Summary, and no action has been or will be taken to register or permit public offering of FDRs in any jurisdiction whatsoever. Ahead of the Listing, the Employee Offering was made solely to the Target Employees in Finland and Sweden subject to and in compliance with the respective exceptions concerning employee offerings provided in Chapter 4, Section 3, subsection 3, item 3 of the Finnish Securities Markets Act and the Swedish Financial Instruments Trading Act (SFS 1991:980) (Sw. Lag (1991:980) om handel med finansiella instrument), Chapter 2, Section 5, sixth paragraph. No unlawful distribution of the Listing Summary. The distribution of this Listing Summary may be restricted by law in certain jurisdictions. Tallink requires that any person who receives this Listing Summary into their possession acquire adequate information of these restrictions and comply with them. Tallink accepts no legal responsibility for persons who violate these restrictions, irrespective of whether this person is Tallink s shareholder or not. Correspondingly, this Listing Summary or release or any other material related to the Listing or the FDRs may not be delivered or published in or into any jurisdiction unless the laws and regulations of such jurisdiction are complied with. Failure to comply with these restrictions may result in violation of applicable securities laws. Prospective investors shall consult their own advisors. Prospective investors must not construe the contents of this Listing Summary as legal, investment or tax advice. Each prospective investor should consult their own counsel, accountant or business advisor as to legal, investment and tax advice and related matters pertaining to the Listing or the FDRs, if they deem it necessary. Forward-looking statements. Certain statements in this Listing Summary are based on the beliefs of the Company s management as well as assumptions made by and information currently available to the Company s management, and such statements may constitute forward-looking statements. Among others, the words believe, expect, anticipate, intend or plan and similar expressions identify certain of such forwardlooking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ even materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Examples of these risks, uncertainties and other factors include, but are not limited to, those discussed in Section D - Risks in this Listing Summary. The list of risks discussed in Section D - Risks is not exhaustive and new risks may emerge from time to time. Should one or more of these or other risks or uncertainties materialize, or should any underlying assumptions prove to be incorrect, the actual results of operations or financial condition of the Company could differ materially from those described in the Listing Summary as anticipated, believed, estimated or expected. Legal matters. Certain legal matters in connection with the Listing will be passed upon for Tallink by Roschier, Attorneys Ltd with regard to the Finnish legislation and Ellex Raidla Advokaadibüroo OÜ with regard to the Estonian legislation.

3 SUMMARY Summaries are made up of information required by regulation known as elements. These elements are numbered in Sections A E (A.1 E.7). This Listing Summary contains all the elements required to be included in a summary for this type of securities and issuer. Because some elements are not required to be addressed, there may be gaps in the numbering sequence of the elements. Even though an element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the element. In this case a short description of the element is included in the summary with the mention of not applicable. Section A Introduction and warnings A.1 Warning The Company has received an exemption from the FIN-FSA from the obligation to publish a prospectus pursuant to Chapter 4, Section 5, subsection 2 of the Finnish Securities Markets Act, and therefore the Company only publishes this Listing Summary, which is, despite its name, a standalone document instead of a summary of a full prospectus. Where a claim relating to the information contained in this Listing Summary is brought before a court, the plaintiff investor might, under applicable law, have to bear the costs of translating this Listing Summary before legal proceedings are initiated. Tallink assumes civil liability in respect of this Listing Summary only if it is misleading or inaccurate or inconsistent when read together with Tallink s other disclosures (Tallink s financial information is available in English at and stock exchanges releases are available in English at or if it does not provide, when read together with Tallink s other disclosures, key information in order to aid investors when considering whether to invest in the securities of the Company. A.2 Information to be provided regarding consent by the issuer or person responsible for drawing up the summary for the use of intermediary financial organizations Not applicable. Section B Issuer B.1 Legal and Commercial Name B.2 Domicile/Legal Form/Legislation/ Country of Incorporation The Company s legal name is Aktsiaselts Tallink Grupp (AS Tallink Grupp) and it operates commercially under the trade marks Tallink, Silja Line and Club One. The legal and commercial name of the FDR Issuer is Nordea Bank Abp. The Company is a public limited liability company (in Estonian: aktiaselts) incorporated and domiciled in Tallinn, Estonia, established on 21 August 1997 and regulated by the Estonian Commercial Code (in Estonian: äriseadustik) and supplementing Estonian laws and regulations. Since 9 December 2005, the shares of AS Tallink Grupp have been listed on Nasdaq Tallinn where the shares are traded under the symbol TAL1T. The ISIN code of Tallink s shares is EE Tallink has a single share class. 1

4 The FDR Issuer is a public limited liability company incorporated and domiciled in Helsinki, Finland, established on 27 September 2017 and regulated by the Finnish Limited Liability Companies Act (in Finnish: osakeyhtiölaki, 624/2006, as amended) and supplementing Finnish laws and regulations. B.3 Key factors relating to the issuer s current operations and principal activities Overview The Group is the leading 1 European ferry operator in offering high quality minicruise and passenger transport services in the Northern Baltic Sea region as well as a leading 2 provider of ro-ro cargo services on selected routes. The Group provides its services on various routes between Finland and Sweden, Estonia and Finland, Estonia and Sweden, as well as Latvia and Sweden under the brand names of Tallink and Silja Line. The Group owns a total fleet of 14 vessels that include cruise ferries, high-speed ro-pax ferries and ro-ro cargo vessels. 11 core vessels consist of cruise ferries and ro-pax ferries. Additionally, the Group operates two ro-ro cargo vessels and owns one vessel chartered out. Further, the Group operates three hotels (prior to 15 November 2018 four hotels) in Tallinn and one hotel in Riga in leased premises. The Group also operates 15 shops and one restaurant in Estonia. The Group s revenue has grown at a CAGR 3 of 1.1 percent between 2015 and Strategy The Group s vision is to be the market pioneer in Europe by offering excellence in leisure and business travel and sea transportation services. The Group has set the following long-term goals for itself for increasing the Group s value and profitability: Increase volumes and strengthen market position; Strive for the highest level of customer satisfaction; Optimal debt level that allows sustainable dividends; Cost-efficient operations; Develop a wide range of quality services for different customers and to pursue new growth opportunities. The Group s main strategic cornerstones and competitive advantages for successful and profitable operations are modern fleet, a wide route network, strong quality brands, high safety and environmental standards, loyal customer base, comprehensive offering, and extensive sales network. 1 Measured by market share of passengers in the maritime passenger transport services in the Northern Baltic Sea region including Estonia- Finland, Finland-Sweden (incl. the Åland Island routes), Estonia-Sweden, Latvia-Sweden, Finland-Russia, and Estonia-Russia in Source: Company information for the Company s passenger volumes; ShipPax MARKET:18 (reflects year 2017), except for management estimates for Navirail on Estonia-Finland route and BSL/DFS on Estonia-Sweden route as well as Port of Helsinki statistics for Finland-Russia route and Port of Tallinn statistics for Estonia-Russia route. 2 Measured by market share of cargo units on the Company operated routes between Estonia-Finland, Helsinki-Stockholm, and Turku- Stockholm. Source: Company estimates; Company information for the Company s and Viking Line s cargo unit volumes and ShipPax for Eckerö Line and Finnlink cargo unit figures. 3 CAGR = (Ending value / Beginning value) ^(1/ (end year beginning year)) -1. 2

5 The following graphic presents a summary of Tallink s strategic cornerstones: (1) The arithmetic mean of the 11 core vessels ages is approximately 17 years. (2) Based on brand tracking surveys commissioned by Tallink and conducted by Annalect Finland on brand awareness, image and preference (continuous tracking since August 2016) the brands were ranked the highest in image and preference towards the brand categories in Estonia, Finland, and Sweden. Key highlights The key highlights of Tallink are as follows: Well established platform Tallink is a market leader in passenger transport services in the Northern Baltic Sea region with a market share of 47%. 4 The Group has a large, modern and highquality fleet of 14 vessels with its 11 core vessels having a market value weighted average age of 14 years as at 30 June This enables the Company to benefit from scale and flexibility from optimizing its fleet utilization as well as to offer its customers a quality experience. Fleet book value amounted to EUR million at the end of year Fleet quality is maintained through regular maintenance as well as a vessel renovation program launched in The vessels are operated in accordance with the MARPOL convention aiming to keep air and sea pollution at the lowest practicable level and the Group operates under a zero spill to the sea policy. The latest addition to the Company s fleet, LNG-fueled Megastar, utilizes several energy saving technologies. The Company s wide route network and frequent departures add convenience to customers. The Group offers frequent departures and short travel time on the Tallinn Helsinki route connecting the two countries; Star and Megastar have a crossing time of two hours. The Company has comprehensive access to port facilities with favorable connections to main channels and city centers. Efficient port operations are based on long-lasting relationships with the local ports. Strong service orientation The Company has strong service orientation with focus on high quality services and comprehensive offering. Tallink and Silja Line are strong quality brands established in 1989 and 1957, respectively. The Company has a comprehensive offering to address various customer needs and preferences. It offers end-to-end travel solutions comprising shuttle service, short and overnight cruises and passenger transportation, on-board tax-free shopping, on-board catering, hotel and travel packages, conference services, onshore shopping, as well as cargo transportation solutions. The Company has developed a wide range of own brands for catering and retail, and additionally, has a wide range of external franchises and brands. The Group s catering approach is built on i) different concepts to cater a wide range of customer segments, ii) local and global trend following, iii) introduction of new brands and concepts not available ashore, and iv) high level of service. The Group s retail approach is based on the following four themes: i) great brands at 3

6 competitive prices, ii) modern environments to deliver an enticing shopping experience, iii) building on captive audience, and iv) leveraging big data in development. Tax and duty regulations currently support advantageous prices on board. 5 Advantageous prices partly support passenger volumes, contributing to onboard restaurant and shop sales and thus supporting margins. The Group s service orientation is reflected in its revenue distribution: restaurant and shop sales generated over half of total revenue, ranging from 53% in 2015 to 56% in 2016 and The Company ranked the world s 12th largest duty free and travel retail locations measured by revenue, being the only ferry operator among airport shops in Stable revenue profile with future opportunities High entry barriers are reflected in the Company s market share and past stable revenue profile. In the Company management s view, the following aspects create high barriers to entry: i) Port capacity & departure slots: Regional port capacity and convenient departure slots are already actively utilized and thus limit the capacity for additional vessels. ii) Low substitution risk: Shuttle is superior to air travel for Tallinn Helsinki crossing, with low cost, easy access with light security controls, central end-point locations, and two-hour crossing time at fastest as its main benefits. Favorable characteristics are also reflected in the passenger choices; out of approx. 9 million passengers in total of Tallinn Helsinki corridor crossings in 2016, the share of ferries was 97% whereas the trips by air totaled only 0.3 million. 7 For differentiated cruise offering there are no similar travel alternatives. iii) Required asset base: Significant initial investment is required for a sufficient number of vessels to enable frequent timetables. iv) Highly regulated waterways: There are strict regulatory and environmental requirements for vessels and ports of operation, in addition to a requirement for an ice-class fleet for all-year operations. v) Brand recognition: Tallink and Silja Line are strong quality brands built over decades, established in 1989 and 1957, respectively. vi) Loyalty program: The Company has over 2.3 million Club One loyalty program members enabling targeted offers and facilitating understanding of customer needs. vii) Sales infrastructure: The Company has an extensive sales network of 11 own sales offices and nearly travel agents and tour operators worldwide. Establishing a sales and marketing network in multiple countries is an operational challenge and requires investments. The Group s past six-year revenue profile is stable with a CAGR of 0.5%. The number of passengers has grown from 9.3 million in 2012 to 9.8 million in 2017 with a CAGR of 1.0%. 4 Measured by market share of passengers in the maritime passenger transport services in the Northern Baltic Sea region including Estonia- Finland, Finland-Sweden (incl. the Åland Island routes), Estonia-Sweden, Latvia-Sweden, Finland-Russia, and Estonia-Russia in Source: Company information for the Company s passenger volumes; ShipPax MARKET:18 (reflects year 2017), except for management estimates for Navirail on Estonia-Finland route and BSL/DFS on Estonia-Sweden route as well as Port of Helsinki statistics for Finland-Russia route and Port of Tallinn statistics for Estonia-Russia route. 5 According to the current regulation, onboard consumption is excise duty and VAT free on all operating routes. Excise tax and VAT are not applicable for routes via the Åland Islands. Duty free shopping is subject to quantity limitations. For Estonia Finland Estonia and Latvia Sweden Latvia routes VAT is defined by the departure country s VAT level, and excise tax is Estonian or Latvian excise tax, respectively. 6 Source: Generation Research Source: FinEst Link Final Report, 7 February

7 The following table presents the Group s total revenue and result from operating activities in millions of EUR for the periods indicated: (Millions of EUR) For the financial year ended 31 December (Audited) Result from Revenue operating activities Tallink has an extensive customer reach through omnichannel marketing communications offering long-term opportunities for business development. The main customer groups include transportation, leisure, shopping, entertainment, and cargo. Via Club One loyalty program the Company reaches 2.3 million members creating further possibilities in marketing communication to the Company. The total of Club One members has been increasing from 2.0 million in 2015, to 2.2 million in 2016, and reached 2.3 million in Over the longterm, the Company may have opportunities to increase the number of new international customers. The share of passengers from countries other than Finland, Estonia, Sweden, Latvia, Lithuania, and Russia carried by the Group has grown from 11% in 2015 to 13% in Dividend potential The Group s dividend strategy foresees that if the economic performance enables it, dividends would be paid in the minimum amount of EUR 0.05 per share. Tallink has paid out a total of EUR 161 million distributions to shareholders both dividends and share capital reduction during the period from 1 January 2013 to 16 November Details on dividend distribution and dividend payout ratio 8 are shown in the following table: For the financial year ended 31 December (EUR unless otherwise stated) Dividend per share Dividend payout ratio (%) 43% 46% 23% 49% 46% In addition, in connection with the share capital reduction in 2016, a payment of EUR 0.06 per share was made to shareholders. On 9 October 2018, the Group s Supervisory Board gave the Group s Management Board the instruction to prepare a proposal for the General Meeting of Shareholders 2019 to reduce the Company s share capital by at least EUR 0.07 per share. The aim of the reduction is to improve the Company s capital structure. The Company intends to distribute the reduced amount to shareholders. A decline in the Group s net debt supports the updated dividend policy. Tallink s net debt has declined from EUR 722 million in 2013 to EUR 467 million in 2015 and totaled EUR million on 30 September In addition, Tallink s dividend potential is supported by the Company s experienced management with strong transportation and regional expertise, skilled personnel, and a clear strategic plan supported by unrivalled suite of competitive advantages. The following table shows the decrease in net debt between the financial year 2013 and 30 September 2018: For the nine months ended 30 September For the financial year ended 31 December (Millions of EUR) Net debt

8 Products and services The Group is the market leader in the Northern Baltic Sea in the maritime passenger transport sector with a modern fleet and a variety of routes and services, from various transport and leisure products to a high speed Tallink Shuttle service between Tallinn and Helsinki. 9 The Group s offering also includes complete leisure and fun-filled short and overnight cruise experiences with possible overnight hotel and spa stays at various destinations, on-board and onshore shopping, as well as ro-ro cargo transportation services. A proportion of the Group s products are sold as combined services and travel packages. Travel packages are tailored to suit customer preferences by market areas to the type of vessel, length of trip, use of conference services, hotel accommodation and other leisure products. All the Group s vessels are built to accommodate a large number of passenger vehicles as well as ro-ro cargo. The majority of the Group s vessels have been designed and built in Finnish shipyards. The Group offers its customers end-to-end travel experiences, from joyful and easy cruises or transportation between top destinations to hotel accommodation as well as taxi services through AS Tallink Takso, of which the Group owns 34%. The Group has divided its operations into six services. The following table presents the Group s revenue by service in thousands of euros for the periods indicated: For the nine months ended 30 September For the financial year ended 31 December (thousands of EUR) Services Restaurant and shop sales onboard and on mainland Ticket sales Sales of cargo transportation Sales of accommodation Income from charter of vessels Other Total Restaurant and shop sales on-board and on mainland The Group offers a wide selection of products and options including restaurants, fast food and night clubs, as well as beauty products, beverages and deli items onboard and onshore. In addition to its onboard offering, the Group has 15 shops and one restaurant in Estonia. Together these services accounted for approximately 55.5% of the Group s revenue in The revenue of restaurant and shop sales grew 3.5% (CAGR) from 2015 through Ticket sales Ticket sales comprises ticket sales for cruises, shuttle transports and travel packages to passengers and vehicles. It is the second largest service by revenue. Ticket sales accounted for 25.1% of the Group s revenue in The revenue of ticket sales grew 3.2% (CAGR) from 2015 through The dividend payout ratio is calculated by dividing the total dividends for financial year by the consolidated net profit of the same financial year. 9 Measured by market share of passengers in the maritime passenger transport services in the Northern Baltic Sea region including Estonia- Finland, Finland-Sweden (incl. the Åland Island routes), Estonia-Sweden, Latvia-Sweden, Finland-Russia, and Estonia-Russia in Source: Company information for the Company s passenger volumes; ShipPax MARKET:18 (reflects year 2017), except for management estimates for Navirail on Estonia-Finland route and BSL/DFS on Estonia-Sweden route as well as Port of Helsinki statistics for Finland-Russia route and Port of Tallinn statistics for Estonia-Russia route. 6

9 Sales of cargo transportation The Group operates mainly mixed tonnage concept vessels, which carry both passengers and ro-ro cargo, such as lorries and trailers. In addition, the Group owns two cargo vessels. The Group offers cargo service on all its routes. In 2017, cargo services accounted for 12.2% of the Group s revenue. The revenue of cargo services rose by 6.2% (CAGR) from 2015 through Sales of accommodation The Group operates the second largest hotel chain in Estonia and the third largest in the Baltics by the total number of beds under the brand Tallink Hotels. In 2017, number of stays totalled As at the date of this Listing Summary, the Group operates four hotels: Tallink City Hotel, Tallink Spa & Conference Hotel, Tallink Express Hotel and Tallink Hotel Riga (Pirita Spa Hotel operations discontinued as of 15 November 2018). Accommodation services accounted for 2.2% of the Group s revenue in The revenue of accommodation services grew 5.3% (CAGR) from 2015 through Income from charter of vessels The Company has currently one vessel, Superfast IX (renamed Atlantic Vision), chartered out. The vessel was also the only vessel chartered out in At the end of 2016, three vessels were chartered out, whereas four vessels were chartered out at the end of Revenue from chartering accounted for 1.9% of the Group s revenue in The revenue of other services decreased 40.7% (CAGR) from 2015 through Other In addition to the aforementioned services, the Group has versatile onshore and onboard services including advertising, gaming, as well as spa and beauty services. Furthermore, the Company offers a wide range of conference and business meeting services on board and in the hotels. The Group also owns 34% of AS Tallink Takso, which offers taxi service in Tallinn. In 2017, other services accounted for 3.1% of the revenue. The revenue declined 13.1% (CAGR) from 2015 through The total number of passengers carried by the Group in 2017 was approximately 9.8 million. The total number of cargo units carried exceeded 364 thousand. On the Tallinn-Helsinki route alone the Group transported around 5 million passengers a year. The passenger mix by nationality was as follows: % of passengers Nationality Finnish 48% 51% 50% Estonian 19% 20% 20% Swedish 12% 12% 12% Latvian 4% 3% 3% Lithuanian 2% 2% 2% Russian 2% 2% 2% Other 13% 10% 11% The following table provides an overview of transported passengers, cargo units and passenger vehicles by route in 2017, 2016 and 2015 and for the nine-month periods ended 30 September 2018 and 2017: For the nine months ended 30 September For the financial year ended 31 December PASSENGERS Finland-Sweden Estonia-Finland Estonia-Sweden Latvia-Sweden TOTAL

10 CARGO UNITS Finland-Sweden Estonia-Finland Estonia-Sweden Latvia-Sweden TOTAL PASSENGER VEHICLES Finland-Sweden Estonia-Finland Estonia-Sweden Latvia-Sweden Total The Group s geographical Estonia-Finland segment generated 36.7% of the revenue in 2017, Finland-Sweden segment 35.7%, Estonia-Sweden 12.1%, Latvia-Sweden segment 6.9%, and the Other segment including ships chartered out by the Group, hotel operations, as well as shops and a restaurant in Estonia 8.6% of the total revenue in In addition, with four hotels and a total of over rooms, the Group operates the second largest hotel chain in Estonia and the third largest hotel chain in the Baltics by the total number of beds. The Group operates the hotels as a tenant. Discontinuation of the Pirita Spa Hotel operations as of 15 November 2018 is due to the sale of the property by the Company s major shareholder AS Infortar. The following table provides information on Tallink s hotels: Name of the Hotel Location Rooms in total Opened Tallink Hotel Riga Riga; Latvia Tallink City Hotel Tallinn; Estonia Tallink Express Hotel Tallinn; Estonia The Tallink Spa & Conference Hotel Tallinn; Estonia Fleet The Group s main revenue-generating assets are vessels, which account for approximately 80% of total assets. At the end of 2017 financial year the Group owned 14 vessels. The vessel types and operations at the end of the financial year 2017 are described in the following table: Vessel name Silja Europa Star Megastar Sea Wind Baltic Queen Vessel type Built/ Renovated Flag/ Ice-class Cruise ferry 1993/2016 Estonia/ 1A super High-speed ro-pax High-speed ro-pax Ro-ro cargo vessel Route Finland- Estonia 2007 Estonia/ 1A Finland- Estonia 2017 Estonia/ 1A Finland- Estonia 1972/1989 /2013 Estonia/ 1B Cruise ferry 2009 Estonia/ 1А super Victoria I Cruise ferry 2004 Estonia/ 1A super Regal Star Silja Symphony Silja Serenade Ro-ro cargo vessel Finland- Estonia Sweden- Estonia Sweden- Estonia 1999 Estonia/1A Sweden- Estonia Cruise ferry 1991 Sweden/1A super Cruise ferry 1990 Finland/1A super Finland- Sweden Finland- Sweden Other information overnight cruise shuttle service shuttle service cargo transportation overnight cruise overnight cruise cargo transportation overnight cruise overnight cruise 10 Two chartered out vessels were sold in the second quarter of One chartered out vessel, the cruise ferry Silja Europa, returned to Tallink s own operations to the Tallinn Helsinki route on 13 March Two chartered out vessels were sold, and were handed over on 14 December

11 Galaxy Cruise ferry 2006 Sweden/1A super Baltic Princess Cruise ferry 2008 Finland/ 1А super Romantika Cruise ferry 2002 Latvia/1A super Isabelle Cruise ferry 1989 Latvia/1A super Atlantic Vision High-speed ro-pax 2002 Canada/1A super Finland- Sweden Finland- Sweden Sweden- Latvia Sweden- Latvia Chartered out overnight cruise overnight cruise overnight cruise overnight cruise/ Former name Superfast IX / Canada As at 31 December 2017 the book value of the ships amounted to EUR million (EUR million at the end of 2016). The Group s vessels are regularly valued by two to three independent international shipbrokers who are also approved by mortgagees. All of the Group s vessels have protection and indemnity insurance (P&I) and hull and machinery insurance (H&M) and they meet all applicable safety regulations. For information on Tallink s ongoing fleet development projects, see Element B.7, Recent events. Routes The picture below shows the routes on which the Group operates: Route Tallinn Helsinki Tallinn Helsinki Stockholm Helsinki (via Mariehamn) Turku Stockholm Turku (via Mariehamn) Tallinn Stockholm Tallinn (via Mariehamn) Riga Stockholm Riga Paldiski Kapellskär Paldiski Muuga Vuosaari Muuga Type Passenger and cargo Passenger and cargo Passenger and cargo Passenger and cargo Passenger and cargo Cargo Cargo 9

12 Personnel The following table provides a detailed overview of the Group s personnel: Personnel As at As at 30 September 31 December Onshore total Estonia Finland Sweden Latvia Russia Germany At sea Hotel Total The number of hotel personnel is not included in the total number of onshore personnel. B.4a Most significant recent trends Macro trends In the global context, the Baltic Sea region is one of the busiest and largest sea trip areas with total annual trips amounting to approximately 4 million with over 260 million passengers travelling. 11 In comparison, the Northern Baltic Sea region (Sweden, Finland, Latvia and Estonia) population in 2017 was 18.8 million. 12 All four countries, which are Tallink s geographical home market, belong to European Union with a strong S&P credit rating. 13 In 2017 the average unemployment rate in the region was 7.5%. Estonia showed the lowest unemployment rate of 5.8% following Sweden s 6.7%, Finland s 8.6% and Latvia s 8.7%. 14 Consumer price index ("CPI") has grown in the region with an average rate of 1.4% from 2015 through During the mentioned period, Estonia has shown CPI growth with an average rate of 2.2% following Latvia s 1.5%, Sweden s 1.4% and Finland s 0.6%. 15 The following table presents macro indicators compound annual growth rates ("CAGR") in Sweden, Finland, Latvia and Estonia at constant prices: 16 Sweden Finland Latvia Estonia Real GDP 2.4% 0.7% 3.5% 2.2% Average household disposable income/ yearly 2.0% 0.1% 4.4% 2.9% Leisure expenditure 2.6% 1.0% 6.6% 1.6% Household earnings 2.9% 0.7% 7.3% 7.3% 11 Measured by market share of passengers in the maritime passenger transport services in the Northern Baltic Sea region including Estonia- Finland, Finland-Sweden (incl. the Åland Island routes), Estonia-Sweden, Latvia-Sweden, Finland-Russia, and Estonia-Russia in Source: Company information for the Company s passenger volumes; ShipPax MARKET:18 (reflects year 2017), except for management estimates for Navirail on Estonia-Finland route and BSL/DFS on Estonia-Sweden route as well as Port of Helsinki statistics for Finland-Russia route and Port of Tallinn statistics for Estonia-Russia route. 12 Source: Oxford Economics. 13 Source: Standard & Poor s. 14 Source: OECD data base. 15 Source: Oxford Economics. 16 Source: Oxford Economics. 10

13 The following table presents the CAGR of the selected private consumer spending indicators from 2010 to 2017 in Sweden, Finland, Latvia and Estonia: 17 Sweden Finland Latvia Estonia Per capita transportation expenditure 1.5% 0.7% 7.7% 1.7% Per capita recreational and cultural consumer expenditure 2.1% 0.2% 6.5% 7.6% Per capita package holiday expenditure 0.7% 0.8% 16.8% 7.1% Real earnings (relative to CPI) 1.7% 0.2% 4.1% 3.8% For the last 7 years ( ) oil price (USD per barrel) has fallen with a CAGR of 5.3%. 18 Competitive landscape The Northern Baltic Sea region is a very competitive market. Tallink, Viking Line and Rederiaktiebolaget Eckerö (Eckerö Line belongs to Rederiaktiebolaget Eckerö and services the Tallinn-Helsinki route only) are the three largest companies providing passenger marine transport services in the region. Tallink also provides ro-ro cargo transportation services, and its main competitors that provide cargo services in the region are DFDS, Stena Line and Finnlines. Tallink is a market leader in passenger marine transport services in the Northern Baltic Sea region. 19 The Group s total revenue was EUR 967 million, result from operating activities was EUR 72 million and EBITDA was EUR 158 million in 2017, whereas Viking Line s revenue was EUR 523 million, operating income was EUR 10 million and EBITDA was EUR 35 million and Rederiaktiebolaget Eckerö s revenue was EUR 233 million, operating profit was EUR 16 million and EBITDA was EUR 31 million in Tallink operates a total of 14 vessels while Viking Line operates seven vessels and Rederiaktiebolaget Eckerö five vessels (Eckerö Line operates one vessel, and Rederiaktiebolaget Eckerö operates two more cruise ships and two cargo ships). Currently Tallink serves passengers on five routes (Tallinn-Helsinki, Tallinn- Stockholm, Helsinki-Stockholm, Turku-Stockholm, Riga-Stockholm) where the Company serviced approximately 9.8 million passengers in Viking Line competes with Tallink on three routes (Tallinn-Helsinki, Helsinki-Stockholm, Turku-Stockholm) and serviced total number of approximately 6.9 million passengers during Rederiaktiebolaget Eckerö competes with Tallink on one route: Eckerö Line belonging to Rederiaktiebolaget Eckerö was active on Tallinn-Helsinki route and serviced approximately 1.5 million passengers during the same year (Rederiaktiebolaget Eckerö serviced a total number of 3.1 million passengers). For Tallink, the largest route by number of passengers is Tallinn- Helsinki with approximately 5 million passengers in 2017, followed by the Helsinki/Turku-Stockholm routes with approximately 3 million passengers, Tallinn-Stockholm route with approximately 1 million passengers and Riga- Stockholm route approximately with 0.7 million passengers. 17 Source: Oxford Economics. 18 Source: Oxford Economics. 19 Measured by market share of passengers in the maritime passenger transport services in the Northern Baltic Sea region including Estonia- Finland, Finland-Sweden (incl. the Åland Island routes), Estonia-Sweden, Latvia-Sweden, Finland-Russia, and Estonia-Russia in Source: Company information for the Company s passenger volumes; ShipPax MARKET:18 (reflects year 2017), except for management estimates for Navirail on Estonia-Finland route and BSL/DFS on Estonia-Sweden route as well as Port of Helsinki statistics for Finland-Russia route and Port of Tallinn statistics for Estonia-Russia route. 11

14 In 2017, cargo units carried by Tallink totalled 364 thousand, exceeding Viking Line s 128 thousand and Rederiaktiebolaget Eckerö s 80 thousand (and Eckerö Line s 77 thousand s) cargo units. 20 The following table presents Tallink s market shares by number of passengers on Tallink s passenger transportation routes in the Northern Baltic Sea region in : 21 Route Tallink Viking Line Eckerö Line Linda Line 2017 EST-FIN (TAL-HEL) 57% 26% 17% 1% FIN-SWE (HEL-STO) (TUR-STO) 54% 46% - - EST-SWE 1 (TAL-STO) 100% LAT-SWE 2 (RIG-STO) 100% EST-FIN (TAL-HEL) 58% 23% 17% 2% FIN-SWE (HEL-STO) (TUR-STO) 54% 46% - - EST-SWE 1 (TAL-STO) 100% LAT-SWE 2 (RIG-STO) 100% EST-FIN (TAL-HEL) 56% 24% 17% 3% FIN-SWE (HEL-STO) (TUR-STO) 53% 47% - - EST-SWE 1 (TAL-STO) 100% LAT-SWE 2 (RIG-STO) 100% Tallink is the only provider of daily passenger transportation on the EST-SWE (TAL-STO) route. 2 Tallink is the only provider of daily passenger and ro-ro cargo transportation on the LAT-SWE (RIG-STO) route. In addition, Tallink has the youngest fleet comparing to its two biggest competitors Viking Line and Rederiaktiebolaget Eckerö (Eckerö Line). The average age of Tallink s fleet is 19 years while Viking Line s and Rederiaktiebolaget Eckerö s average age is respectively 25 years. 22 Tallinn Helsinki tunnel According to FinEst Link Project s study, the possible rail tunnel between Tallinn and Helsinki could have a significant impact on the passengers numbers on the route once the tunnel would be completed. In the base case scenario of the study, the total number of annual passenger on the route would increase due to the tunnel to 22.4 million passengers by 2050, as compared to 14.0 million passengers without the tunnel. In the base scenario of the study, the number of annual new train passengers would be 11.6 million passengers including 3.5 million passengers as a total shift from ferries to trains by year Source: Company information and the annual reports 2017 of Tallink, Viking Line and Rediebolaget Eckerö. 21 Source: ShipPax MARKET: 2018 report (2017 data); Linda Line annual statements for the years 2015 and Source: Company information, Tallink, Viking Line, Rederiaktiebolaget Eckerö and Eckerö Line Annual Reports Source: Helsinki-Tallinn Transport Link: Feasibility Study Final Report: pages 7 and