Annual Report 2020 Tallink Grupp As
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ANNUAL REPORT 2020 TALLINK GRUPP AS Annual report 2020 Contents Beginning of the financial year 1 January 2020 End of the financial year 31 December 2020 CONTENTS THE GROUP ....................................................................................................................................... 4 STRATEGY.......................................................................................................................................... 4 LETTER TO SHAREHOLDERS ............................................................................................................... 5 MANAGEMENT REPORT...................................................................................................................... 8 CORPORATE GOVERNANCE REPORT .............................................................................................. 22 MANAGEMENT BOARD’S CONFIRMATION ......................................................................................... 37 CONSOLIDATED FINANCIAL STATEMENTS........................................................................................ 38 Consolidated statement of profit or loss and other comprehensive income .................................. 38 Consolidated statement of financial position ................................................................................ 39 Consolidated statement of cash flows ......................................................................................... 40 Consolidated statement of changes in equity ............................................................................... 41 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ................................................................ 43 Note 1 Corporate information ................................................................................................... 43 Note 2 Basis of preparation ...................................................................................................... 43 Note 3 Significant accounting policies .......................................................................................49 Note 4 Segment information ..................................................................................................... 66 Note 5 Operating expenses and financial items .........................................................................70 Note 6 Income tax ..................................................................................................................... 71 Note 7 Earnings per share (EPS) ................................................................................................ 73 Note 8 Cash and cash equivalents ............................................................................................ 74 Note 9 Trade and other receivables ........................................................................................... 74 Note 10 Prepayments ................................................................................................................ 74 Note 11 Inventories ..................................................................................................................... 75 Note 12 Investments in equity-accounted investees ................................................................... 75 Note 13 Other financial assets and prepayments ...................................................................... 76 Note 14 Property, plant and equipment ..................................................................................... 76 Note 15 Intangible assets ........................................................................................................... 79 Note 16 Interest-bearing loans and borrowings ........................................................................ 80 Note 17 Trade and other payables ............................................................................................ 83 Note 18 Deferred income .......................................................................................................... 83 2 | 112 Annual report 2020 Contents Note 19 Share capital and reserves ........................................................................................... 84 Note 20 Contingencies and commitments ................................................................................ 85 Note 21 Related party disclosures .............................................................................................. 87 Note 22 Group entities ..............................................................................................................89 Note 23 Financial risk management ......................................................................................... 90 Note 24 COVID-19 pandemic .....................................................................................................95 Note 25 Subsequent events ....................................................................................................... 97 Note 26 Primary financial statements of the Parent ..................................................................98 STATEMENT BY THE MANAGEMENT BOARD ..................................................................................... 102 INDEPENDENT AUDITORS’ REPORT ................................................................................................. 103 ALTERNATIVE PERFORMANCE MEASURES ....................................................................................... 109 CONTACT INFORMATION ................................................................................................................ 112 3 | 112 Annual report 2020 The Group THE GROUP Tallink Grupp AS (“the Company”) with its subsidiaries (“the Group”) is the leading European ferry operator, which has been offering high quality mini-cruise, passenger transport and ro-ro cargo services in the northern part of the Baltic Sea for over 30 years. The Group provides its services on routes between Estonia, Finland, Sweden and Latvia under the brand names of “Tallink” and “Silja Line”. The Group has a fleet of 15 vessels that include cruise ferries, high-speed ro-pax ferries and ro- ro cargo vessels. In addition, the Group operates three quality hotels in Tallinn city centre and one in Riga, and, as the Burger King franchise owner in the Baltics, eight restaurants of the fast food chain in Estonia, Latvia and Lithuania. The Group’s subsidiary Tallink Duty Free is a successful international travel retail business with a number of shops on board and on shore, and a growing online presence in the Group’s home markets. 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. Currently the strategic focus is on managing costs and cash flows to ensure sustainability and to bring Tallink Grupp through the global crisis. The Group’s strategy is to: • Strive for the highest level of customer satisfaction • Increase business volumes and strengthen its market position in the region • Develop a wide range of quality services for different customers and pursue new growth opportunities • Ensure cost efficient operations • Maintain an optimal debt level that allows paying sustainable dividends. A modern fleet, a wide route network, a strong market share and brand awareness together with high safety, security and environmental standards are the main competitive advantages for the Group. They are the cornerstones for successful and profitable operations. 4 | 112 Annual report 2020 Letter to shareholders LETTER TO SHAREHOLDERS Dear shareholders The past year has undoubtedly been a challenging one not only for Tallink Grupp and the global tourism and transport industries, but for the whole world. The sudden shock of the COVID-19 pandemic breaking out in March 2020 and the lockdowns, restrictions and the global health and economic crisis that followed, have had a clear and significant impact on our business and many others. Despite our own tremendous efforts throughout the year to keep our nose above water and all the external support we have so gratefully received from the authorities and our partners, 2020 will go down in history as the year of unprecedented reductions, decreases and losses on all fronts. Although we had limited control over our fortunes in these circumstances, we focused on what we could influence and what was in our power to change, leaving no stone unturned to reduce the negative impacts of the global crisis on Tallink Grupp and to secure the liquidity and long-term sustainability of the Company. From the outset of the pandemic, the natural priority for us was the health, safety and well-being of all our people – employees, passengers, partners. Extremely rigorous protocols for hygiene, disinfecting and virus control were introduced across the Group already in February, even before the global crisis broke. This is probably why we have managed to avoid any outbreaks of the virus on our vessels and in our hotels and offices despite continued operations and we must give credit for the significant effort all our crew members have made to ensure this. In addition to safety, our immediate focus was also on tightening our control of all costs. Over the year we scrutinised and negotiated many cost items with our partners – in most cases with success, in others with various degrees of success – and postponed all non-critical investments. From a long-term sustainability perspective, it made sense to suspend some of our normal operations