1
ANNUAL REPORT 2010
E S T R A V E L I A N N U A L R E P O R T 2 0 1 0 2
Contents
ADDRESS BY THE MANAGING DIRECTOR 3Financial highlights of Estravel AS 5Summarised sales of Estravel Group 5Top destination countries of estravel’s customers 6Sales breakdown by customer group 7Ferry ticket sales by carrier 7Package tour sales by operator 8 Sales breakdown by product 8Flights 9Holidays 11Conference travel 12
FINANCIAL STATEMENT 2010Extract from the 2010 Financial Statements of Estravel Ltd
Balance sheet 13Income statement 15Cash flow statement 16Notes 17
AUDITOR’S REPORT 21
E S T R A V E L I A N N U A L R E P O R T 2 0 1 0 3
Dear clients and partners!
2010 was a challenging year for Estravel as well as the tourism sector as a whole. Although the overall econo-mic situation stabilised and the recession seemed to be a thing of the past, the tourism sector was still hit by various backlashes. Regardless of everything, Estravel managed to increase its turnover, sales revenue and profit.
Anne SamlikManaging Director and
Member of the Board of AS Estravel
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We all hope that 2011 will be easier than the year before. We hope that the global economy will get back on its feet and the travel sector will also reco-ver, but even if the difficult times continue, Estra-vel can assure all of its clients that we will always be there for them.
I would like to thank our partners and clients for their trust in us! I would also like to thank our emp-loyees, who make Estravel what it is. There are no difficulties we cannot overcome as a team and it is easier for us make our future better together.
The Eyjafjallajökull volcano in Iceland started erup-ting in 2010. The ash created by the eruptions dis-turbed air traffic for weeks and had a significant impact on the tourism sector in Europe. On one hand, this event exposed the vulnerability of the sector, on the other hand it separated the wheat from the chaff – the attitude of airlines and tra-vel agencies became the factor that determined how people regard these companies in the future. Estravel proved during the ash crisis that the big-gest travel agency in the Baltic States knows how to manage crises and provided great service to its clients. The results of our good crisis management were clearly evident in our sales figures in the sub-sequent months.
ANNE SAMLIKManaging Director and Member of the Board of AS Estravel
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SUMMARISED SALES OF ESTRAVEL GROUP
Accounting unit in the group
(in million Estonian kroons)
Sales Internal sales Summarised sales
Estravel AS (Estonia) 685,907,123 5,565,663 680,341,460
Estravel AS (Latvia, dba. FTB Latvia) 64,172,025 3,281,231 60,890,794
Estravel Vilnius (Lithuania, dba. American Express) 93,248,264 2,002,814 91,245,450
Backoffice Services OÜ
TOTAL 843,327,412 10,849,708 832,477,704
FINANCIAL HIGHLIGHTS OF ESTRAVEL AS
(in million Estonian kroons) 2010 2009
gross sales 745.0 720.4
net sales revenue 90.0 86.0
net revenues total 90.6 86.5
pretax profit 17.1 5.4
profit margin (from net revenues) 17.0% 2.2%
share capital 3.0 3.0
shareholders` equity 31.30 26.5
return on assets 16.1% 1.9%
return on equity 46.9% 6.8%
solvency 1.4 1.3
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SALES BY GEOGRAPHICAL AREAS
Destination country in sales order Share % Change %
EU (excluding Finland, Latvia, Lithuania, Estonia) 36.5 5.7
Estonia (incoming and outcoming) 16.1 -3.1
Europe (excluding EU countries) 12.5 -0.6
Finland 7.5 -0.9
Asia 6.8 1.5
USA 6.5 0.0
Lithuania 1.9 0.2
Latvia 1.7 -0.7
North America (excluding USA) 0.9 -0.6
Other countries 9.7 -1.5
A client praises Annika Sokk from the Call Centre
It’s great to get home and find a letter waiting for you as though someone close to you who cares about you has been waiting for you to get back. Caring about people is what Estravel clearly does – and it’s the thing we appreciate most about you :)My thanks to everyone who played a part in making my holiday so special – especially you, Annika!
“Where should Igo?”
Tiina TomingaSenior Travel Consultant
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A client praisesMonika Kõrveman from Leisure Travel Customer Service
Although it was the first time I’d ever spoken to your customer service assistant, it felt as though she’d known me for years. Not in some gushing or overly exaggerated kind of way, mind – just in a way that put me at ease talking to her and made me feel like a valued customer. She came up with a great holiday package for me without needing any prompting. What could be better than that!
Sales breakdown by customer group Ferry ticket sales* by carrier
Business 48%
Private persons 37%
Government & non-profit 11%
Resellers abroad 2%
Resellers in Estonia 2%
Tallink 74.7%
Viking Line 19.3%
Lindaliini 3.1%
Eckero Line 0.9%
Others 1.8%
“Phuket” Tiina Tominga
Senior Travel Consultant
* technical sales
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Package tour sales* by operator Sales* breakdown by product
Airline tickets 59.3%
Hotel accomodation 14.2%
Package tours & cruises 12.8%
Ferry tickets 5.8%
Insurance 1.4%
Bus & car rental 1.0%
Rail tickets 0.7%
Visas 0.4%
Other services 4,4%
* technical sales
Tez Tour 28.4%
Novatours 19.6%
Finnmatkat 15.9%
Horizon Travel 13.8%
TopTours 8.4%
Aurinkomatkat 6.0%
Germalo Reisid 2.2%
Domina World Travel 1.3%
Others 4.4%
“Zambwesi”
“Georg Swing”“Reunion”
Merlin HeinlaidTravel Consultant
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Flights2010 was a year of stabilisation in the sales of airline tickets, which were hit hard during the recession.
The market was still down in the fi rst months of the year and air traffi c in Europe suffered due to the vol-canic ash coming from Iceland, but sales of airline tic-kets started going up again in the second half of the year. Sales of airline tickets in Estravel increased both in terms of money as well as the number of tickets sold during the year.
The new direct fl ights made available to Estonian pas-sengers were another sign that the recession was a thing of the past. For example, Lufthansa opened its Tallinn-Munich route and Polish airline LOT reopened its Tallinn-Warsaw route. Latvian airline airBaltic also offered direct fl ights from Tallinn to various cities in Finland and Stockholm, but these routes were unfortu-nately closed rather fast. Budget airline Ryanair fi nally arrived in Estonia at the end of 2010 after a long wait,
and broadened the selection of destinations that could be reached directly from Tallinn.
The number of air passengers started increasing glob-ally in the previous year as the recession receded, but there is nothing good without the bad. Fuel prices con-tinued to increase and competition among airlines decreased as a result of the merger of several larger companies and the disappearance of smaller ones. The prices of many airline tickets increase in this situa-tion, especially on long-haul fl ights.
“Mexico”
Gertu KallasTravel Consultant
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The recession may be over, but both clients and airlines are still keeping a close eye on their expenses. This is why airlines organised fewer discount campaigns than during the recession. However, more than a thousand Estravel clients fl ew to various Asian countries with the cheap tickets offered by the Ukrainian Aerosvit Airlines.
Although the recession is now almost over, there are still problems in the pricing of airline tickets. The key issue is the increase in the fuel price, which has made fl ying expensive. Political stability in various destina-tions also has an impact on air travel. However, we can still say that indicators went up in 2010 and there is hope that we will also see a similar increase in 2011.
A client praises Krista Punane from the Airport sales office
I’d recommend Estravel to anyone. You realise just
how good the level of service is when you’re somewhere
on the other side of the world and the airline you’re
meant to be flying with goes on strike. We made the
right choice picking you as our travel agency and we’ll
definitely be using you again in future.
Thanks for the great job you did, Krista!“Waikiki” Gertu Kallas
Travel Consultant
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HolidaysSales of package holidays were affected by the continuing recession as well as several natural catastrophes and unrest in the favourite destinations of Estonian tourists. This is why sales of package holidays decreased in 2010 when compared to the previous year.
The decrease was a result of Force majeure events, which could not have been foreseen. The main prob-lem was the Icelandic ash cloud, which temporarily par-alysed air traffi c in Europe, and the fl oods in Madeira that had an adverse effect on tourism in the region. The unstable economic situation also had an impact on the sales of package holidays, as many people decided against travelling abroad. The bankruptcy of one of the largest Estonian tour operators, TopTours, also shook people’s trust in package holidays.
Egypt and the Canary Islands remained the most popu-lar package holiday destinations in winter with Turkey, Crete and Spain still attracting the most holidaymakers in summer. We also successfully offered charter fl ights
“Hawaii”
to Goa, India, at the end of the year. Not many new des-tinations were offered during the year.
The market of ferry tickets in 2010 was stable in com-parison to previous years. The number of passengers increased, but the sales fi gures were similar to those of 2009. The Tudish-piip campaigns of Rimi supermar-kets proved to be an important channel in selling ferry tickets, as it helped Estravel fi nd new clients and made some corrections in the current positions of Tallink and Viking Line on the market.
The impact of the recession was also felt in the provi-sion of accommodation services. Similarly to 2009, sales remained modest and were mostly restricted to business clients.
Gertu KallasTravel Consultant
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Conference travel
The most noteworthy projects of 2010 took place outside Tallinn. We organised accommodation for the teams and spectators in the Rally Estonia 2010 competition in Southern Estonia. In Pärnu we found accommodation for the official delega-tions of the 30th International Hanseatic Days. We also helped to organise several technological and medical conferences that were large in Estonian terms with more than 250 participants. The majo-rity of them were held in Tartu.
Germany and Scandinavian countries remain the biggest foreign markets of Estravel, but we have
In 2010 Estravel remained one of the largest ser-vice providers on the market of conferences and other events with accommodation in Estonia. We had the chance to take part in several big and important projects during the year and comp-leting them successfully demonstrated our high quality and great ability.
A client praises
Hille Järve from the Tartu sales office
The way your staff deal with clients is second to
none
and your offers are always great, giving you t
he chance
to choose the prices and itineraries that suit yo
u best.
Your team, especially Hille, never once forget
the
promises they make, and I was very impressed by
their
ability to arrange my travels at such short not
ice.
started paying more attention to the East. We are not aiming for our closest eastern neighbour Rus-sia and CIS countries alone, as China is also an important direction for us. We continue contribu-ting to the development of domestic tourism and offering various solutions.
Preparations for selling tickets to the 2012 Olym-pic Games in London and organising related trips started in 2010. Estravel entered into an official contract with the official distributor of the Olym-pic Games and our employees passed the rele-vant training course in London and took a look at accommodation options there. Estravel will start selling tickets to the Olympic Games in spring 2011.
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Annual financial statements 2010
BALANCE SHEETassets
Extract from the 2010 Financial Statements of Estravel Ltd
(in Estonian kroons) 12/31/2010 12/31/2009
Current assets
Cash 9,340,340 38,250,278
Receivables and prepayments 77,156,477 51,491,440
Inventories 501,812 831,454
Total current assets 86,998,629 90,573,172
Non-current assets
Financial assets 1,127,141 1,948,624
Property, plant and equipment 1,415,877 1,588,182
Intangible assets 2,043,185 2,615,598
Total non-current assets 4,586,203 6,152,404
Total assets 91,584,832 96,725,576
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BALANCE SHEETliabilities and equity
(in Estonian kroons) 12/31/2010 12/31/2009
Liabilities
Current liabilities 60,230,317 70,176,066
Total current liabilities 60,230,317 70,176,066
Equity
Share capital at par value 3,000,000 3,000,000
Share premium 450,500 450,500
Statutory capital reserve 300,000 300,000
Other reserves 409,834 409,687
Retained earnings (prior periods) 12,489,323 20,596,292
Profit for the period 14,704,858 1,793,031
Total equity 31,354,515 26,549,510
Total liabilities and equity 91,584,832 96,725,576
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INCOME STATEMENT
STATEMENT OF COMPREHENSIVE INCOME
(in Estonian kroons) 2010 2009
Revenue 90,034,425 86,014,838
Other income 577,045 508,972
Other operating expenses -23,802,354 -25,491,133
Personnel expenses -50,725,431 -54,194,934
Depreciation, amortisation and impairment losses -1,285,814 -1,707,808
Other expenses -2,030,401 -2,855,953
Operating profit 12,767,470 2,273,982
Finance income and expenses 4,303,046 3,122,669
Profit before tax 17,070,516 5,396,651
Income tax expense -2,365,658 -3,603,620
Profit for the year 14,704,858 1,793,031
(in Estonian kroons) 2010 2009
Profit for the year 14,704,858 1,793,031
Other comprehensive income:
Exchange differences on translating foreign operations 147 18,139
Total other comprehensive income 147 18,139
Total comprehensive income for the year 14,705,005 1,811,170
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Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets -551,687 -949,614
Proceeds from sale of property, plant and equipment and intangible assets 0 472,344
Other financial income 83,090 71,266
Proceeds from sale of subsidiary and associated companies 1,579,853 0
Other payments from investing activities -28,850,016 -20,568,961
Loans granted -66,159 0
Repayment of loans granted 380,434 120,909
Interest received 2,472,514 2,348,753
Dividends received 1,000,620 1,020,000
Net cash from investing activities -23,951,351 -17,485,303
STATEMENT OF CASH FLOWS
(in Estonian kroons) 2010 2009
Cash flows from operating activities
Operating profit 12,767,470 2,273,982
Adjustments for
Depreciation, amortisation and impairment losses 1,285,814 1,707,808
Gain/ loss on sale of property, plant and equipment 10,592 305,335
Total adjustments 1,296,406 2,013,143
Change in receivables and prepayments 2,544,092 2,359,724
Change in inventories 329,642 697,813
Change in payables and advances received -10,489,811 -7,175,070
Interest paid -50,828 -70,847
Corporate income tax paid -1,362,109 -4,607,169
Net cash used in operating activities 5,034,862 -4,508,424
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STATEMENT OF CASH FLOWS(continued)
Note 2. Receivables and prepayments
Note 3. Trade receivables
(in Estonian kroons) 2010 2009
Cash flows from financing activities
Dividends paid -9,900,000 -20,002,799
Net cash used in financing activities -9,900,000 -20,002,799
Net cash flow -28,816,489 -41,996,526
Cash and cash equivalents at beginning of period 38,250,278 80,197,585
Decrease in cash and cash equivalents -28,816,489 -41,996,526
Effect of exchange rate fluctuations on cash held -93,449 49,219
Cash and cash equivalents at end of period 9,340,340 38,250,278
As at 31 December (in Estonian kroons) 2010 2009
Trade receivables 11,893,053 15,917,183
Prepaid and refundable taxes 11,000 1,011,046
Other receivables 56,133,403 27,992,691
Prepayments 9,119,021 6,570,520
Total receivables and prepayments 77,156,477 51,491,440
As at 31 December (in Estonian kroons) 2010 2009
Trade receivables 11,953,808 15,410,055
Allowance for doubtful receivables -513,984 -1,279,785
Receivables from the parent and other group companies 453,229 1,786,913
Total trade receivables 11,893,053 15,917,183
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Allowance for doubtful receivables
Note 4. Prepaid taxes and taxes payable
(in Estonian kroons) 2010 2009
Allowance for doubtful receivables at beginning of period 1,279,785 1,548,588
Recovery of items considered doubtful in prior periods -73,514 -89,427
Items considered doubtful in the reporting period 300,962 315,241
Items considered irrecoverable in the reporting period -993,249 -494,617
Allowance for doubtful receivables at end of period 513,984 1,279,785
(in Estonian kroons) 31.12.2010 31.12.2009
Prepayment Payable Prepayment Payable
Corporate income tax 1,003,549
Value added tax 11,000 301,727 7,497 498,462
Personal income tax 1,092,259 941,632
Income tax on fringe benefits 48,199 42,060
Social tax 2,055,755 1,802,866
Mandatory funded pension contributions 71,559 25,167
Unemployment insurance contributions 233,555 206,059
Other Prepaid taxes and taxes payable 236
Total 11,000 3,803,290 1,011,046 3,516,246
Note 5. Other receivables
(in Estonian kroons) 31.12.2010 31.12.2009
Loan receivables 994,929 1,801,724
Interest receivable 226,976 107,279
Accrued items 2,395,226 2,443,761
Group`s cash-pool account 52,163,117 23,313,101
Other receivables 353,155 326,826
Total other receivables 56,133,403 27,992,691
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Note 6. Long-term financial assets
Note 7. Investments in subsidiaries
(in Estonian kroons) 31.12.2010 31.12.2009
Investments in subsidiaries 1,125,058 1,933,362
Long-term receivables 2,083 15,262
Total long-term financial assets 1,127,141 1,948,624
Investments in subsidiaries, general information (In Estonian kroons)
Name of subsidiary Domicile Core activity Shareholding (%)
31/12/10 31/12/09
Estravel Vilnius UAB Lithuania Tourist services 100 100
Backoffice Services Estonia OÜ Estonia Business services – data processing 0 51
Investments in subsidiaries, detailed information (In Estonian kroons)
Name of subsidiary 31/12/09 Disposal Dividends Profit/ loss under the
equity method
31/12/2010
Estravel Vilnius UAB 610,518 514,540 1,125,058
Backoffice Services Estonia OÜ 1,322,844 -322,224 -1,000,620
0
Total 1,933,362 -322,224 -1,000,620 514,540 1,125,058
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Note 9. Payables and advances received
Note 8. Inventories
Note 7. Investments in subsidiaries(continued)
(in Estonian kroons) 31.12.2010 31.12.2009
Trade payables 15,576,787 28,035,251
Payables to employees 3,974,192 3,271,340
Taxes payable 3,803,290 3,516,246
Other payables 4,048,734 5,424,590
Advances received 32,827,314 29,928,639
Total payables and advances received 60,230,317 70,176,066
(in Estonian kroons) 31.12.2010 31.12.2009
Goods purchased for sale 501,812 831,454
Total inventories 501,812 831,454
Investments sold (In Estonian kroons)
Name of subsidiary Investment in the entity
Investment sold in sales price
Profit/ loss frominvestment sold
Backoffice Services Estonia OÜ 51 1,579,853 1,257,629
AS PricewaterhouseCoopers, Pärnu mnt 15, 10141 Tallinn, Estonia T: +372 614 1800, F: +372 614 1900, www.pwc.ee
REPORT OF THE INDEPENDENT AUDITOR ON THE SUMMARY FINANCIAL STATEMENTS
(Translation of the Estonian original)∗
To the Shareholders of AS Estravel
The accompanying summary financial statements, which comprise the balance sheet as of 31 December 2010, the income statement, statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended, are derived from the audited financial statements of AS Estravel for the year ended 31 December 2010. We expressed an unmodified audit opinion on those financial statements in our report dated 8 March 2011.
The summary financial statements do not contain all the disclosures required by accounting principles generally accepted in Estonia. Reading the summary financial statements, therefore, is not a substitute for reading the audited financial statements of AS Estravel.
Management Board's Responsibility for the Summary Financial Statements
Management Board is responsible for the preparation of the summary financial statements that are derived from the audited financial statements.
Auditor's Responsibility
Our responsibility is to express an opinion on the summary financial statements based on our procedures, which were conducted in accordance with International Standard on Auditing 810, "Engagements to Report on Summary Financial Statements."
Opinion
In our opinion, the summary financial statements derived from the audited financial statements of AS Estravel for the year ended 31 December 2010 are consistent, in all material respects, with those financial statements.
AS PricewaterhouseCoopers Eva Jansen Auditor’s Certificate No.501
8 March 2011
∗ This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
Helsinki
Tallinn
Riga
Kuressaare
Haapsalu
Vilnius
Pärnu Tartu
JõhviRakvere
Head office of Finland Travel Bureau (SMT) GroupEstravel/American Express Travel (Head Office & 3 sales offices)Estravel Rakvere Estravel HaapsaluEstravel Kuressaare
ESTRAVELI ESINDUSED
Estravel JõhviEstravel PärnuEstravel Tartu (2 sales offices)FTB Latvia Estravel Branch in Riga (3 sales offices)American Express Travel UAB Estravel Vilnius (1 sales office)
Helsinki
Tallinn
Riga
Kuressaare
Haapsalu
Vilnius
Pärnu Tartu
JõhviRakvere
Head Office: Finland Travel Bureau (SMT) GroupEstravel/American Express Travel Tallinn Office & Bureaus (3)Estravel Rakvere BureauEstravel Haapsalu BureauEstravel Kuressaare Bureau
ESTRAVEL OFFICES
Estravel Jõhvi BureauEstravel Pärnu BureauEstravel Tartu Bureaus (2)FTB Latvia Estravel Branch in Riga Bureaus (3)American Express Travel UAB Estravel Vilnius Bureau