Tallinna Kaubamaja Grupp AS
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Tallinna Kaubamaja Grupp AS Consolidated Annual Report 2016 (translation of the Estonian original) TALLINNA KAUBAMAJA GRUPP AS CONSOLIDATED ANNUAL REPORT 2016 The main areas of activity of Tallinna Kaubamaja Grupp AS (hereinafter referred to as the ‘Tallinna Kaubamaja Group’ or ‘the Group’) are retail and wholesale trade. At the year-end 2016, Tallinna Kaubamaja Grupp AS employed more than 4,100 employees. Legal address: Gonsiori 2 10143 Tallinn Republic of Estonia Commercial Register no.: 10223439 Telephone: 372 667 3200 Fax: 372 667 3205 E-mail: [email protected] Beginning of financial year: 1.01.2016 End of financial year: 31.12.2016 Auditor: PricewaterhouseCoopers AS Bank: Swedbank AS SEB Pank AS Nordea Bank AB Estonian branch LHV Pank AS Lawyer: Helen Tulve Equity as at Ownership Subsidiaries and associates: Share capital 31.12.2016 interest Kaubamaja AS 25 TEUR 14,193 TEUR 100% Selver AS 1,406 TEUR 28,207 TEUR 100% Kulinaaria OÜ 3 TEUR 5,075 TEUR 100% Selver Latvia SIA 285 TEUR -13,166 TEUR 100% Viking Security AS 134 TEUR 881 TEUR 100% TKM Beauty OÜ 3 TEUR -112 TEUR 100% TKM Beauty Eesti OÜ 3 TEUR 38 TEUR 100% TKM Auto OÜ 3 TEUR 6,129 TEUR 100% KIA Auto AS 114 TEUR 5,837 TEUR 100% Viking Motors AS 223 TEUR 346 TEUR 100% Forum Auto SIA 14 TEUR 10 TEUR 100% KIA Auto UAB 3 TEUR 298 TEUR 100% TKM King AS 32 TEUR -1,117 TEUR 100% Tallinna Kaubamaja Kinnisvara AS 28 TEUR 153,264 TEUR 100% Tartu Kaubamaja Kinnisvara OÜ 3 TEUR 41,085 TEUR 100% SIA TKM Latvija 3 TEUR 2,746 TEUR 100% Rävala Parkla AS 600 TEUR 3,524 TEUR 50% The subsidiaries and associates Kaubamaja AS, Selver AS, Kulinaaria OÜ, Viking Security AS, Tartu Kaubamaja Kinnisvara OÜ, Tallinna Kaubamaja Kinnisvara AS, TKM Auto OÜ, TKM Beauty OÜ, TKM Beauty Eesti OÜ, KIA Auto AS, Viking Motors AS, AS TKM King and Rävala Parkla AS are registered in the Republic of Estonia. Selver Latvia SIA, SIA TKM Latvija and Forum Auto SIA are registered in the Republic of Latvia and KIA Auto UAB, in the Republic of Lithuania. This consolidated annual report consists of the management report, the consolidated financial statements, the independent auditor’s report and the profit allocation proposal. Tallinna Kaubamaja Grupp AS 2 Consolidated Annual Report 2016 (translation of the Estonian original) MANAGEMENT REPORT ....................................................................................... 4 CONSOLIDATED FINANCIAL STATEMENTS ........................................................... 30 MANAGEMENT BOARD’S CONFIRMATION OF THE CONSOLIDATED FINANCIAL STATEMENTS .......... 30 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................................... 31 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ............. 32 CONSOLIDATED CASH FLOW STATEMENT ....................................................................................... 33 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .................................................................... 34 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ................................... 35 Note 1 General information ..........................................................................................................35 Note 2 Accounting policies adopted in the preparation of the financial statements ........................35 Note 3 Critical accounting estimates and judgements ...................................................................44 Note 4 Risk management and description of key risks...................................................................45 Note 5 Cash and cash equivalents ................................................................................................49 Note 6 Trade and other receivables ..............................................................................................50 Note 7 Trade receivables ..............................................................................................................50 Note 8 Inventories ........................................................................................................................50 Note 9 Subsidiaries ......................................................................................................................51 Note 10 Investments in associates ................................................................................................51 Note 11 Long-term trade and other receivables .............................................................................52 Note 12 Investment property ........................................................................................................52 Note 13 Property, plant and equipment ........................................................................................54 Note 14 Intangible assets .............................................................................................................58 Note 15 Interest bearing borrowings .............................................................................................59 Note 16 Finance and operating lease ............................................................................................60 Note 17 Trade and other payables ................................................................................................61 Note 18 Taxes ..............................................................................................................................61 Note 19 Share capital ...................................................................................................................62 Note 20 Segment reporting ..........................................................................................................62 Note 21 Other operating expenses ................................................................................................64 Note 22 Staff costs .......................................................................................................................65 Note 23 Finance income and costs ...............................................................................................65 Note 24 Earnings per share ..........................................................................................................65 Note 25 Loan collateral and pledged assets ..................................................................................66 Note 26 Related party transactions ...............................................................................................66 Note 27 Interests of the members of the Management and Supervisory Board ..............................67 Note 28 Shareholders with more than 5% of the shares of Tallinna Kaubamaja AS ........................68 Note 29 Contingent liabilities........................................................................................................68 Note 30 Events after the balance sheet date .................................................................................69 Note 31 Financial information of the Parent ..................................................................................69 INDEPENDENT AUDITOR’S REPORT ................................................................................................ 73 PROFIT ALLOCATION PROPOSAL ..................................................................................................... 80 SIGNATURES OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD TO THE ANNUAL REPORT 2016 ............................................................................................................................................... 81 REVENUE ALLOCATION ACCORDING TO THE ESTONIAN CLASSIFICATION OF ECONOMIC ACTIVITIES (EMTAK) .......................................................................................................................................... 82 Tallinna Kaubamaja Grupp AS 3 Consolidated Annual Report 2016 (translation of the Estonian original) MANAGEMENT REPORT Overview of the Group’s activities The year 2016 was very successful for Tallinna Kaubamaja Group. The Group earned the biggest sales revenue in its history, whereas all Group segments proved to be successful. Net profit of the Group increased in most of the important business segments, although we were more acutely confronted with the challenges of increasing competition, changes in consumer behaviour, and pressure to increase salaries. The Group’s sales areas received additions in the form of three new Selver stores in Tallinn and its neighbourhood, in the segment of department stores, the Tartu department store was renovated, and a new look was given to several departments of the Tallinn department store. In terms of supplementing its business model, the Group made a big step in the development of e-commerce. In spring, the stationary online store of Kaubamaja was launched and excellent progress was made by e-Selver, which was opened at the end of 2015. The boom of online stores and increased popularity of self- service checkout systems at our stores is a sign of customers’ expectations towards the implementation of more innovative and modern solutions. The Group invested a total of 13.1 million euros in 2016, whereas a year earlier, 20.5 million euros was invested. A considerable proportion of capital investments were made to renovate and expand the sales areas; while an important investment was also the development of the Group’s e-commerce. A major challenge in 2017 is the continuing optimisation of trade processes and supplementation with new technological solutions,