Aktsiaselts Tallink Grupp - NASDAQ OMX Baltic

Following the planned introduction of our high-speed ro-pax ferries in 2007 and 2008, we expect that our
high-speed ferry operations as a whole will become profitable. The segment result (i.e., gross profit of segment
less any segment related marketing expenses) from our Finland—Estonia route shows a decrease to EEK
372 million in the 2005 financial year from EEK 415 million in the 2004 financial year. The segment result from
our Sweden—Estonia routes increased to EEK 327 million in the 2005 financial year from EEK 204 million in
the 2004 financial year. The segment result breakdown is calculated on a group company basis and is not based
solely on the vessels’ direct geographical operations. Therefore, the allocation of the expenses between the
segments reported in our financial statements does not fully reflect the vessels’ geographical operations.
The unaudited segment result based on revenue and the vessels’ direct geographical expenses on the
Finland—Estonia route was EEK 422 million in the 2005 financial year compared to EEK 377 million in the
2004 financial year. This 12 percent increase was due to growth in revenue from this route (17 percent) partly
offset by increases in cost of goods sold and in fuel cost. The unaudited segment result based on revenue and the
vessels’ direct geographical expenses on the Sweden—Estonia route was EEK 272 million in the 2005 financial
year, an increase of 14 percent compared to EEK 238 million in the 2004 financial year. The main driver for this
increase was the impact of the inclusion of the first full year of operation of Victoria I.
Marketing and Administrative Expenses. Our marketing expenses consist of advertising expenses,
depreciation, staff costs and other costs (principally administrative and overhead expenses). Marketing expenses
in the 2005 financial year totaled EEK 336 million, or eight percent of revenue, compared to EEK 351 million, or
ten percent of revenue, in the 2004 financial year. In the 2004 financial year, marketing expenses as a percentage
of revenue were higher due to the extensive marketing campaign related to the launch of Victoria I, the
introduction of the Helsinki—Tallinn—St. Petersburg route (discontinued at the beginning of 2005) and the
opening of Hotell Tallink. We expect our marketing expenses to increase in the near term as a result of the
planned introductions of the New Cruise Ferry and the two high-speed ro-pax ferries.
Our administrative expenses consist of depreciation, staff costs and other costs (principally administrative
and overhead expenses). Administrative expenses in the 2005 financial year totaled EEK 120 million, or
approximately three percent of revenue, compared to EEK 128 million, or approximately four percent of revenue,
in the 2004 financial year. Changes in applicable amortization rules of goodwill reduced depreciation in the 2005
financial year by approximately EEK 21 million.
Other Operating Income and Other Operating Expenses. Our other operating income consists of gain on
disposal of property, plant and equipment, exchange rate differences and penalties received from suppliers. Other
operating income increased to EEK 2 million in the 2005 financial year from EEK 1 million in the 2004 financial
year. Our other operating expenses consisted of loss on disposal of property, plant and equipment, exchange rate
differences and penalties paid to suppliers. Other operating expenses decreased to EEK 1 million in the 2005
financial year from EEK 2 million in the 2004 financial year.
Operating Profit. Our operating profit consists of the sum of our segment result net of unallocated expenses.
Operating profit totaled EEK 629 million (15 percent of revenue) in the 2005 financial year, an increase of EEK
183 million, or 41 percent, from EEK 446 million (13 percent of revenue) in the 2004 financial year. This
increase primarily reflected the overall increase in passenger and cargo volumes and revenue mostly as a result of
the introduction of our new vessel Victoria I and the commencement of the operations of Hotell Tallink.
Net Financial Items. Our net financial expenses consist of interest and other financial expenses and our
foreign exchange losses, net of interest and other financial income and foreign exchange gains. Net financial
expenses increased to EEK 159 million (four percent of revenue) in the 2005 financial year, an increase of 18
percent, from EEK 134 million (four percent of revenue) in the 2004 financial year. This increase was primarily
due to interest payable on additional loan financing relating to our new investments, including loans relating to
the acquisitions of Victoria I, Regal Star and Tallink AutoExpresses 3 and 4.
Profit Before Income Taxes. Our profit before income taxes consists of our operating profit and the income
from HT Valuuta (an associated company until August 30, 2005), net of financial expenses. Profit before income
taxes in the 2005 financial year was EEK 474 million, an increase of EEK 161 million, or 51 percent, compared
to EEK 313 million in the 2004 financial year. The increase was primarily due to an increase in passenger and
cargo volumes, operating and marketing cost efficiency and decreases in interest rates on our loan facilities.
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