Aktsiaselts Tallink Grupp - NASDAQ OMX Baltic

into the following principal components: cost of goods sold (representing 24 percent of our total cost base in the
financial year ended August 31, 2005), port charges (15 percent), fuel costs (11 percent) and onboard staff costs
(11 percent). In 2004, the cost of inventory increased and margins decreased as a result of Estonia’s accession to
the European Union and the consequent removal of tax-free shop sales on the Helsinki—Tallinn route. Our
onboard price levels currently follow the price development in onshore shops in Estonia. Our fuel costs are
subject to volatility in oil prices, despite the fact that we purchase our fuel tax-free in Estonia. We currently pass
a portion of the recent increase in oil price on to our customers through a specific fuel surcharge. Furthermore,
our high-speed ro-pax ferries ordered in August 2005 will be more fuel efficient than our existing high-speed
ferries.
We generally benefit from lower Estonian salary levels compared to, for example, Finland or Sweden. In
August 2005, we renewed our agreement with the Estonian Seamen’s Independent Union concerning salary
increases for onboard staff for another three years. Pursuant to the agreement the annual employee salary
increase is five percent. See “Business—Employees and Labor Relations.”
As regards financial expenses, we incur significant interest costs associated with the financing of our
vessels. Approximately 92 percent of our outstanding indebtedness is issued at floating rates and, accordingly,
our results are affected by changes in interest rates payable under the loan agreements.
Seasonality. Passenger traffic on our routes is seasonal, with peaks in passenger numbers typically in the
summer months of June, July and August. Furthermore, our high-speed ferries are out of service during parts of
the winter season, although we will be able to operate the new high-speed ro-pax ferries throughout the winter
season starting from late 2007. As a result of the seasonal nature of our operations, our profitability and cash
flows also fluctuate on a seasonal and, thus, quarterly basis.
The table below illustrates the seasonality of our passenger and cargo traffic during the financial years
ended August 31, 2003, 2004 and 2005.
Financial
year Passengers 1 Ro-ro cargo units
Sep-Nov Dec-Feb Mar-May Jun-Aug Total Sep-Nov Dec-Feb Mar-May Jun-Aug Total
2003 .... 624,211 458,464 635,642 879,600 2,597,917 26,367 19,870 24,395 24,313 94,945
2004 .... 617,392 480,040 641,915 1,089,017 2,828,364 26,502 21,449 27,944 27,530 103,425
2005 .... 840,340 627,537 775,934 1,030,366 3,274,177 32,752 29,199 34,574 34,824 131,349
1 A single passenger taking a round-trip is accounted for as two passengers for the purpose of this table.
Results of Operations
Our main operational segments are passenger ticket sales, restaurant and shop sales and sales of cargo
transport. The table below summarizes our historical results of operations for the past three financial years. The
adjusted column for the financial year ended August 31, 2003 has been added to facilitate comparability between
the financial year ended August 31, 2003 and the financial year ended August 31, 2004 due to changes in our
operating segments during 2003.
For the financial year ended August 31,
2003 2003 (adj.) 1 2004 2005
audited unaudited audited audited
(EEK in millions)
Revenue .................................................... 2,996 2,996 3,406 4,063
Ticket sales .................................................. 827 733 880 1,019
Restaurantandshopsales ....................................... 1,494 1,494 1,665 1,912
Salesofcargotransport ........................................ 579 579 609 722
Travel packages2 ............................................. — 146 169 163
Other3 ...................................................... 95 44 83 247
Costofsales ................................................. (2,133) (2,133) (2,479) (2,980)
Gross profit ................................................. 863 863 928 1,083
Marketing and administrative expenses ............................ (379) (379) (479) (456)
Other operating income ........................................ 3 3 1 2
Other operating expenses ....................................... (6) (6) (2) (1)
Operating profit ............................................. 481 481 446 629
1 The following adjustments have been made to the audited 2003 financial year figures: all sales relating to travel packages have been
included in “Travel packages” instead of “Ticket sales” and “Other,” and onboard cabin sales have been included in “Ticket sales”
instead of “Other.”
2 The full price for travel packages is recorded as revenue rather than just the commissions received from customers.
3 Includes hotel accommodation sales and charter fees.
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