TALLINNA KAUBAMAJA

COMMENTARY TO FINANCIAL RESULTS



COMMENTARY TO GROUP FINANCIAL RESULTS, 9M 2000



In Q2 Tallinna Kaubamaja AS made changes to the accounting 

principles, according to which the company's land and buildings will 

be carried at market value on the balance sheet. The requirements of 

International Accounting Standards 16 § 35 were followed upon 

revaluation. As of H2 Kaubamaja also made additional changes to the 

group's accounting principles, whereby no settlement of income and 

expenses will be made on one account. All income and expenses will be 

shown on business income and expenses accounts, respectively. No 

changes have occurred in the group's holdings in its subsidiaries or 

the group's structure. The financial reports of subsidiaries are 

consolidated row-by-row, by eliminating reciprocal receivables, 

liabilities and transactions. Results of affiliated company are 

consolidated under equity method, i.e. only Kaubamaja's share of 

subsidiary's financial result is reflected in the group reports. The 

9 months financial statements are unaudited.



The first 9 months of year 2000 have been very successful for 

Tallinna Kaubamaja AS. The group's net sales were EEK 774.2 million, 

providing 17% or EEK 110.4 mln annual growth (EEK 663.8 mln in 9m 

1999). According to the Estonian Statistics Office the Estonian 

retail sales market grew only an annual 14% in 9m 2000, hence the 

Tallinna Kaubamaja group have managed to increase their market share 

in tight competition. Gain of market share was supported by opening 

of youth department in Tallinna Kaubamaja department store in 

February this year, and opening of Pirita Selver supermarket in May. 

The share of supermarkets chain A-Selver in the group's net retail 

sales stood at 35% in 9m 2000.



In 9 months the group earned EEK 25.5 mln of net profit, having 

almost doubled annually (EEK 12.8 mln in 9 m 1999). Depreciation of 

fixed assets in the amount EEK 5.0 mln from revaluation of the 

group's land and real estate, is shown on depreciation account. Due 

to changes in income tax law the income tax accounts "profit before 

taxes" are comparable, having grown annually from EEK 18.7 mln to EEK 

26.3 mln, or 40.6%. The group's profit margin (percentage share of 

net profit in net turnover) has grown annually from 1.9% to 3.3%. 

increase in the group's net profit proceeds from substantial growth 

in gross profit figure (EEK 39.7 mln, or 23.8%). Increased gross 

profit is mainly from opening of new stores and departments in year 

2000, which has not been accompanied with equal growth in operating 

expenses. The interest expenses have decreased by EEK 3.2. mln in 

2000 financial year.



The group's balance sheet size grew in 9 months by EEK 287.0 mln, 

amounting to EEK 664.2 mln as at 30.09.2000. The assets side on 

balance sheet grew mainly on the account of increased fixed assets, 

which grew by EEK 217.7 mln (106.4%) from end-1999. Growth in fixed 

assets is related with opening of new Selver chain supermarkets 

(equipment, furniture, building) and revaluation of real estate. The 

group improved its information systems and renovated Tallinna 

Kaubamaja main building. The inventories grew by EEK 62.3 mln (or 

57%). Increase in inventories in comparison with the standings at 

31.12.1999 was expected and proceeds from seasonal nature of retail 

sales business (beginning of fall-winter season; Christmas sales) and 

opening of new sales premises. In order to finance the acquisition of 

assets the group has made several issues of commercial papers. The 

group's end-September balance sheet account of other current 

liabilities shows the EEK 34.3 mln liability to investors from the 

issue of commercial papers, to be redeemed this year in the amount of 

EEK 20.0 mln and at the end of 2001 in the amount of EEK 14.3 mln. 

Due to seasonal nature of the retail business the balance sheet 

account "supplier payables" has grown from EEK 72.8 mln (31.12.1999) 

to EEK 107.0 mln (30.09.2000). The payment of these invoices is not 

yet due.



As at 30.09.2000 earnings per share (EPS) were EEK 3.76; as at 

30.09.1999 the EPS stood at EEK 1.88.



On 27.09.2000 a new supermarket Järve Selver was opened in Tallinn. 

Kaubamaja also expanded Selver Kitchen (located in Järve Selver 

supermarket), which provides fresh and quality culinary products to 

other retail companies in the group in Tallinn. At the end of 

September Kaubamaja group launched a new strategic product Hype. The 

first Hype store was opened in Järve Keskus. The Hype stores have 

1,050 m2 of sales premises, and sell a large selection of sport and 

leisure products and provide related services. Supported by opening 

of new stores, the number of first client card holders grew to 40,000 

in September and October.





Urmo Vallner

Management Board member

+372 64 00 200