AS Tallink Grupp (TAL1T) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Joonas Joost, and I'd like to thank you all for attending the webinar of the second quarter results of Tallink Grupp. As usual, we will first have a short presentation of the events and results of the second quarter introduced by Management Board member Harri Hanschmidt; and Financial Director, Veiko Haavapuu. The presentation is followed by questions-and-answer session where the questions will be addressed also by the group CEO of Mr. Paavo Nõgene. We have already received numerous questions prior to the webinar, but it is still possible to ask questions also during the webinar by writing a question in the questions box on the right side of your screen. And as per typical protocol, we will start our Q&A session from the questions we have received in advance and will thereafter proceed to questions asked during the webinar. That's all for the introductory info. And now I'd like to give the floor to Harri.

Thank you, Joonas. Hello from my side. My name is Harri Hanschmidt. I'm a Board member for Tallink Grupp. Thank you for tuning in. We will go over the highlights and key facts of the second quarter of 2020. For the new listeners, maybe just to remind, Tallink Grupp is the leading European provider of leisure and business travel and sea transportation services in the Baltic Sea region. We own and operate a fleet of 15 vessels. Our typical route network is 7 ferry routes between our home markets, Estonia, Finland, Sweden and Latvia. This year, obviously, is not a typical year. And here, we also have written down that we have suspended 3 of the usual routes and are operating new temporary routes that we will also talk about during this presentation. Last year -- we also have 4 hotels right now, 3 of them are in Tallink, 1 Riga. 1 hotel in Tallink is closed for renovation until 2021, June. Last year, our revenues were almost in EUR 950 million. We transported nearly 10 million passengers, 380,000 cargo units with a EUR 1.5 billion asset base that is the ships. The group has 6,578 employees. And we have a 2.7 million loyal -- loyalty program called Club One. Let's go over the highlights. Obviously, right now, we are facing still the coronavirus crisis that slowly started in Q1 in March and has affected the Q2 results quite extensively. And the impact has been to the number of trips because of different restrictions of where we can sail to and how often. So we have had 38% less departures compared to the second quarter of last year. We have done extensive cost cutting, including collective redundancies. Our efforts are geared towards ensuring liquidity and sustainability of our operations. And we have taken several measures that we will also talk about more in the presentation. We have renegotiated a fuel price fixing terms that were set in the first quarter. Our physical construction of our new LNG powered vessel MyStar commenced on 6th of April with the keel laying ceremony. And we have received already steel sections to the Rauma yard from Poland. Also, 4 of the main engines have been tested, 1 is still to be tested and 1 of this engines is already delivered to Rauma. So everything right now looks to be on schedule. We have extended the charter agreement of Atlantic Vision that is in Canada until November 2022. We opened 4 of the Burger King restaurants that we were also talking about in the previous quarters. These 4 restaurants are right now open in Tallinn and have had a quite a good start despite various restrictions. First, we only sold delivery option and after that, there is restriction of how many clients can be in restaurants and so forth. But we had a very good start. Next restaurants will be opened in Latvia and Lithuania during this year. We will provide more information about Burger King operations when we have started the whole of the Baltics. We also have purchased a new cargo vessel called Sailor in June. And this is -- the reasoning behind is that cargo operations were not affected so strongly, and there is higher demand in the cargo sector. So this gives us more flexibility to offer the cargo product as all of our vessels are not perfectly suited for flexible cargo operations. We also have an older vessel called Sea Wind that is nearly 50 years old and could potentially need replacement in the future as well. So that's that. On the next page, we see a little bit about steps taken since the start of the COVID-19 situation, with very high standards regarding hygiene and have introduced many measures in the ships on board, also in the offices and in all our businesses. And then so far, have done, I think, very good job of keeping the passengers and staff safe. We have suspended, during the crisis, ships and hotels. We have been very flexible and reopened routes and hotels as the situation allowed it. We have been really flexible with the routes and destinations and actively ensure liquidity. We have taken new overdrafts and also secured working capital loan from the government that has not yet been used. We have scaled down on non-critical costs and investments, decreased workload and remuneration and have done some collective redundancies. And also, we have applied for various support measures provided by the governments -- by the local governments. On the 30th of July Annual General Meeting, it was decided not to pay out dividend this year. We have also postponed some investments, some taxes and loan repayments and have negotiated waivers of covenants and secured new loans, as mentioned before. On the next slide, we can see in March, many of the standard routes ceased operation. And this affected, obviously, end of March and April, May were affected strongly. In June, we had the possibility to open all the routes. During this time, some of the routes we're able to transport cargoes, so turned into cargo routes and, obviously, had limited capacity, did not have the cruise product on board. The start in June was obviously a little bit rocky with many restrictions. The ships could only carry 50% passengers. Right now, it's mostly 75%. We also could not restart routes to Stockholm because the Swedish corona situation has not improved sufficiently and governments right now are restricting passenger travel to Sweden from Estonia and from Finland as well. This situation seems to be getting better and we hope there will be some good news about these routes in the following weeks or months. We also opened some new routes. We go directly from Tallinn to Åland and to Turku. We have a Swedish product from Stockholm to Visby so we are -- have really been flexible using the assets as best as possible. But obviously, the ships best work on their intended routes in regular traffic. So the revenue is not really comparable to the normal operating situation. The next slide then illustrates the impact on transported passengers. In Q2, we had a very strong hit and small numbers of passengers were transported. But in end of Q2, this is in June, picking up and we can already see in July, a little bit better the passenger numbers, but obviously nowhere near the previous year due to the corona situation. On Page 7, we can see the numbers have gone down. We have 85% less passengers, almost 13% less cargo units and 65.8% less passenger cars due to the restrictions. We have done extensive cost cutting efforts. Cost of sales is our variable cost and this is down by 56% as we sell less goods, marketing and administrative cost reduced by 50% or the EUR 17 million and we received direct financial support in Q2, around EUR 17 million. We had a positive EBITDA of EUR 2.4 million and a net loss of EUR 27.4 million in the quarter, typically would be positive. There was some capital expenditure. This is mainly the cost of the Sailor and the working restaurants and some -- talking of one of the vessels. On the next page, we have the seasonality breakdown. And obviously, all this right now shows is that it is a difficult year and not really a comparable year to the regular and operations. Only cargo is related comparable picture. And on seasonality level, typically, the second quarter, we make around EUR 15 million profit. This time it's minus EUR 27 million loss. And management sees that total [ EBITDA ] share, we will not be able to make a profit. And I will give us now over to Veiko Haavapuu, who will talk more detail about the segments and what has been happening.

Hello. My name is Veiko Haavapuu. I'm the Financial Director of Tallink Grupp, and hereby will give you a bit more detailed overview of the developments by segments and other financials. So the revenue development by operational segments as the revenue decline is -- from EUR 256.1 million in 2019 Q2 to EUR 65 million in Q2 this year. The main decline comes from the revenue from restaurants and shop sales as proportionally revenue from the restaurant and shop sales is more than half in -- on the normal operating conditions. The decline is more or less in line also with the decline in passenger numbers. The ticket sales comprises roughly 1/4 under the normal business conditions and the decline of ticket revenue, therefore, is EUR 53.4 million in Q2 2020 and amounted to EUR 12.9 million. The second quarter year-on-year cargo volumes were down by close to 13%, and the revenue is down by EUR 9.3 million or 29.4%. So the decline is mostly due to the weaker market, less trips on our regular routes and also from the lower fuel price, which affects the revenue from the fuel surcharge add on. The hotel revenue is more or less missing in Q2 as majority of the time the hotel operations in our 4 hotels were suspended as people were not traveling during Q2. The charter revenue is 25% up from last year due to the change of the charter price, and as mentioned in May this year, the contract for the vessel Atlantic Vision was extended until November 2022. Other sales is down as well. That's related to other revenue and services, items on ships and on land, and the decline is due to the suspended operations in most of the locations in Q2. So revenue development by the geographical segments. So in a sense, all routes are affected from the travel restrictions to passengers. Still the cargo was moving on the routes where the ships were still going. So the restrictions were lifted for travel in between Estonia and Finland from mid-June and from thereon, we see very nice pickup in numbers. So according to July statistics, in July, we actually -- we were actually already at the 70% level compared to the July year before. The restrictions to passengers' travel are still there for routes to and from Sweden, where only cargo and work-related travel is allowed at the moment but we have worked nonstop to find alternative routes and all the nice special cruises. So in Finland-Sweden segment, we have achieved 40% from last year level during July. So some pickup from there as well. Here, we see the income statement for the Q2. So as mentioned already, the revenue is down, but also we have been working hard on cost cutting. So the cost of sales and overheads are down both as well. Here, we see also the other operating income, and this is related mostly to the support measures from Finnish and Swedish state. So the [indiscernible] supports 3 vessels for cargo service in 2 routes. So 2 vessels on the Turku-Stockholm route and the Megastar cargo on Tallinn-Helsinki route cargo service. And part of the other income here is direct salary compensation for the Swedish state to Swedish employees. And the net result is minus EUR 27 million. So loss, so down from close to EUR 15 million profit last year. Next, please. So the cash flow statement. So the cash flow from the operations is significantly declined, still positive, making relation to the positive EBITDA as well. Capital expenditures or investments amounted to EUR 14.4 million, the majority of this is the purchase of the cargo vessel Sailor. Also the largest investments were the 10-day stocking of cruise Silja Serenade and also some investments to the Burger King restaurants opening projects. So debt financing, the payment of the principles of all of the loans were postponed for this year. And in second quarter, we have drawn additional EUR 20 million from the overdrafts. The interest and other financial costs stood at EUR 3 million, so that's comparable to the Q2 year before. Yes. And the change in cash during the second quarter was plus EUR 5 million. Here, we look at the balance sheet. At the reporting date, the total assets are at EUR 1.5 billion, of which EUR 1.2 billion are the ships and the fixed assets include also the capitalized lease agreements in amount of [ EUR 99.5 million ]. On the current assets, there is less receivables and less cash. In the interest-bearing liabilities, there are the bank loans and also this includes EUR 106.5 million of the lease liabilities. The equity has declined from the losses earned this year and was at reported date EUR 765 million, and the equity ratio stood still solid at 1%. Some ratios as well. The net debt-to-EBITDA stands at 5x at the end of second quarter. And -- but this ratio is expected to hike due to the lower earned EBITDA on a rolling 12-month basis. So in -- during the recovery period, the number becomes rather irrelevant to follow actually. Debt structure. So as mentioned for 2020, the principal payments were postponed in total amount of EUR 61 million, which is directly helping us with creating additional liquidity buffers. During the second quarter and also in July, included here the new overdraft limits in total amount of EUR 60 million were signed with our main lending banks. And at the moment, the additional overdraft limits are not yet drawn. The largest addition to the liquidity buffer is the loan contract agreed with the state agency -- Export Credit Agency, KredEx, in amount of EUR 100 million. And again, this loan is not yet taken into use as we are buffering for the coming periods and also the low season ahead. Yes. Distributions to shareholders. So last week, the Annual General Meeting decided not to pay dividends for -- from 2019 net profit but still, the dividend policy remains unchanged. So if the economic situation will improve, the company's aim to be a stable dividend payer continuous. So some events after the period -- reporting period and outlook. So of course, earnings outlook for the financial year 2020 is highly uncertain and subject to many external factors like travel restrictions or possible improvement or worsening the COVID situation in our home markets. So therefore, in the opinion of the management, the company will not earn profits this year. But to conclude on the more positive note, the construction of the new LNG vessel MyStar is proceeding well according to the plans. And the physical construction of the ship has started with steel cutting on the 6th of April. And following that, we expect to pay the last 20% of the total -- in total amount of EUR 49.4 million down payments for the new ship during the third quarter. And the delivery of the Mystar, the new LNG powered vessel is expected according to the initial schedule in January 2022. Thank you.

Thank you, Harri and Veiko. And that concluded the presentation part of today's webinar. So now we will proceed to the questions, and we will start with the questions that were sent to us in advance prior to the webinar.

The first question, assuming traffic would continue at levels seen in July and August, what operational costs do you expect to have in third quarter?

First of all, good afternoon also from my side, and I would like to say that this last quarter has been a tough period for all the Tallink Silja company, but all employees working in Tallink Grupp has done tremendously good work to protect our business, our company and have been very, very flexible and fast to open new routes and follow the demand where we can see some demand. So I'm grateful for the -- my colleagues. And I can guarantee that all the colleagues working to lower the loss from this COVID-19 period as much as possible to protect all our more than 20,000 investors' investments and to be, again, good dividend payer in very near future. But answering for the question is that, as we all know, we do not give out such specific guidance, and we will discuss the quarter 3 operational costs on the webinar quarter 3. But we, of course, follow very strict cost control this year and have lowered different internal budgets in different departments. So all you have seen now will continue, which means that strict cost control and trying to find the ways how to lower the loss as much as possible.

Thank you. How much of the governmental support of EUR 17 million will be booked in the third quarter? Are there mechanisms in place for further governmental support in Q3 and Q4?

Thank you. These amounts have already been received and booked, fraction in quarter 1 and most in quarter 2. None of this is applicable for quarter 3. The biggest portion in this is the Finnish National Emergency Supply center compensation for partially cover the cargo operations between Tallinn-Helsinki and Turku-Stockholm. They covered difference between the minimum costs and earned income. We received this until about mid of June. So it has ended. But right now, there are discussion how the Traficom organization, which is state organization in Finland, plan to take over the same protection cover system. They have reached from the Finnish government, EUR 25 million until end of this year. It's not yet clear how they will start to support the companies, but all ferry companies have said that the rules must be on place latest of 17 of August, when actually in Finland children going back to schools. And in Finland, recall starting the low season for all the ferry operators. So we -- looking forward, regulations, how government of Finland planning to support the companies to keep open the cargo routes between Finland and Sweden, which is important. And everybody understands that you bring the cargo with the vessels where we need to bring 800 or 900 empty cabins with vessel. Just to bring 80 or 90 trucks from Stockholm to Finland or Finland to Sweden, it needs to have some support from the government. And we hope it will be placed soon. The second portion was the salary compensation support from the Swedish government. I must say that government of Estonia supported also the salary, but it was paid out for the employee directly. In Sweden, it is different. We got all the support from the government and it is then maximum 50% from the salary. There were differences -- sorry, maximum, 75% from salary differences between different months. Average is around 50% and some contribution is coming also in quarter 3 from Swedish government. There were also some other much smaller contributions. And of course, we look all the opportunities for next periods. As I said, Traficom support from the Finnish government. And we haven't yet received government of Estonia support, which is meant for all the ferry companies operating from Port of Tallinn. There are already -- the European Union approved the State Aid program to cover some losses during the lockdown period for the companies cooperating from the Port of Tallinn. So it means we and to our competitors. And also, which is said also in government budget, which was approved in April. And we have mentioned also earlier, there will be the tax mechanism change for the maritime workers working under the flag of Estonia. This needs still the European Commission approval, but we hope that it's coming soon. So it makes a bit more similar tax mechanism between Estonia-Latvia and Estonia-Finland.

Thank you. A question about the new ship. What are your plans for the recently acquired cargo vessel? On what route will it be deployed? Why are you investing in the cargo ship when the market is weakening?

Yes. First, we invested to the cargo vessel because exactly what happened during the COVID-19. We have -- we need to keep open the cargo routes. We saw that when the borders are closed, there are difficulties to bring the cargo from example, Central Europe to Estonia. We opened 1 month Paldiski-Sassnitz cargo route with our fast ferry Star. And also the same, as I said just minutes ago between Turku-Stockholm. When we need to carry the cargo, we don't want to carry 800 empty cabins with the vessels. So we see that it will strengthen our company, and we are more flexible to direct to different demands. And as there was suitable vessel on market with a very favorable price, so we cased this opportunity. The vessel currently operating between the Paldiski-Kapellskär, there are 2 similar vessels now. There was Regal Star before, but now we can operate from both ports daily, which gives us more also competitive advantage between different players on the market.

Thank you. What are your plans for Silja Serenade and Silja Symphony, given that it seems likely that travel restrictions continue for the foreseeable future?

Yes. We will remain flexible and following the situation and act accordingly. But right now, the Symphony is offering cruises for the Swedish market, example, Visby, Stockholm-Visby is very popular. And also, we added now 5 special cruises to [ Härnösand ], UNESCO World Heritage region. So plans are made right now until mid of September. And as we actually see that Swedish COVID-19 infection rate going down, and there are already some rumors that government of Finland, planning to make some changes in the travel restrictions and maybe open Sweden for some purposes travel, then we are ready to react or act as soon as the changes in the restrictions will be in place. And we will offer the Helsinki-Riga cruises with Silja Serenade for the Finns -- Finnish and Latvian market, at least until mid of January, but there are also chance that we will prolong this until end of first quarter.

Next question. What happens if there is a coronavirus outbreak on your ship? Is it likely that you would hold operations on that specific route? Referring here to what the Norwegian shipping company, Hurtigruten did earlier this week when a coronavirus outbreak was detected on one of its ships.

Yes. Thank you. We offer absolutely different service. We offer in transport service and short cruise or short crossing service. This Norwegian company, kind of like more week-long classical cruises where the people are staying on board 1 week or 2 weeks. So we have different service, maximum 2 nights on board in routes. So we can't compare these 2 services between. But we have done a lot to protect our passengers and our crew. All our passengers must confirm a check in that they are well and do not have any virus symptoms. We do not allow passengers with virus symptoms to travel on our vessels and can refuse passengers with visible symptoms. We also have the capacity limit in all our vessels. We prolonged it until the next summer or at least until the vaccine is available for everyone. So we're selling much more less tickets to the vessels than vessels can take. Our priority is to provide safe service. People need to feel safe on board. So how possible to keep distance and everything else. So beside that, we monitor crew members' temperature when they arrive on shift and also while on shift. And if we find out that someone are ill, we isolate this person from other crew and will send off from the vessel next port. So we do everything that's possible to protect everyone who are on board of Tallink Silja Line vessels.

Thank you. Next question. Is there a way to quantify the savings from redundancies made during the second quarter and possible one-off costs related to them?

The best reference we can make is the lower number of employees at the end of quarter 2, which was minus 15% lower than last year. We achieved overall EUR 30 million saving on personnel costs. But quarter 2 is not good reference as the quarter results were heavily impacted also by the support measures. Of course, we keep cost control, and we have done already some redundancy processes but some are ongoing still. So let's be clear that we see a full impact in the last quarter of this year. So today is a bit too early to say exact numbers.

Thank you. How is it that your average ticket price and average purchase from restaurants and shops increased during the quarter, even though you probably had less people traveling in high-class cabins and also less people having the crews just for the fun of it and less shopping? Was your sales mix so much better? And were you able to lift ticket prices because you had lower capacity?

There has definitely been a change in the passenger mix. And actually, if you take the Stockholm-Visby one example, just then more than 70% from our passengers were new for Silja Line. So we kind of found absolutely new customers to come onboard. And now we're working, of course, hard to keep them as our loyal customers in the future. Obviously, we have less passengers from outside home markets, from Asia, from Western Europe. We have seen that the travel in between countries are quite limited, and there are not very good transport connections. Also, we have significant less elderly people but also families with children. That is limited supply and still relatively high demand, and we use dynamic pricing. So this has also contributed to the change in the pricing per pax. But since we have less [ kids ], there is also a statistical effect on the per passengers figures. And also, we had some reduction in pricing in bars and restaurants, and we had standard discounts in the shops on board. So overall, there was increased value for customers and thus resulted in increase of both the average ticket price and average onboard spending per passenger. And maybe just to add that we added the parking car product also to other vessels. It was previous only in shuttle vessels and only mainly one shuttle vessel, Megastar. But during this crises, we added parked car service also to Star, Victoria, Baltic Queen and Silja Serenade, which means that if people spending on board some amount -- some fixed amount of money, they will get back this parked car fee. So this also increased some sales. People bought more from vessel to bring the products to home.

Thank you. Speculative question. At what kind of passenger volume level you think you could have achieved breakeven, all else equal, down 50% or maybe 30%? Any ballpark here would be nice.

This is good question. We can't put everything to the Excel and to find out where is the right answer because it depends a lot which vessel is operating, where we can operate, do we operate the tax-free routes, do we have more tax-free than tax paid routes and so on, so on. So we can't say exactly because especially today, where we have also much different new routes. And also in the one example, just from September, one of our vessel, Baltic Queen, starting to operate in 3 different routes every week, which means that one return trip between Stockholm-Tallinn, one cargo trip between -- return trip between Turku-Stockholm and because of the reason to have the vessel every Friday in Turku, to bring the customers from Finland to the cruise in Tallinn. So the route -- all the routes are very different right now. And where is the breakeven depends which vessels are staying in the port or which vessel is operating and which is the [ project ] -- how is compared also the tax-free routes and tax paid routes.

Thank you. Did you withdraw the working capital loan you made an agreement with? And is it included in your liquidity buffer number, EUR 105 million?

We signed the agreement with KredEx for EUR 100 million. We have not yet drawn any portion of the loan. So it is not reflected in our balance sheet. The EUR 105 million liquidity buffer referring in the question is actively cash and unused overdraft facility and the balance sheet date. So on top of that EUR 105 million liquidity buffer, there's EUR 100 million working capital loan. Also in July, we extended our overdraft by another EUR 20 million.

Thank you. Is the management happy with the achieved reduction in costs? Does second quarter include costs which won't be there in the third quarter? Or in other words, could we thus expect improvement in margins in the Q3?

To answer, I think management is happy that our company is much more flexible right now to follow different demands. All our more than 6,000 employees working hard to survive from this crisis even stronger than we entered into this crisis. So this has been, of course, a very tough 5 months, and we know that crisis not ended. So it will continue. And we hope to see the normal traffic back at least next year in June, July. But nobody knows what will happen in the next months. So we are happy that we have managed to reduce the cost as much as we did. Again, personnel expenses were strongly influenced by the support measures, which allowed extensive savings when talking about margin. The second quarter results were also supported by different financial supports. And of course, we made redundancy processes altogether, and if you calculate all the numbers together, we expect that we will see the effect in the financial results by end of the year, with 1,200 -- approximately minus 1,200 people working less than before the crisis started in Tallink Grupp. So there are lots to do. And of course, let's say, that, that we're trying to save the costs to protect the company. We're trying to do it same time to protect also our employees. Because when we are back in the track, we need to be ready to run our business daily in normal basis again. So it's all the time we need to choose between the bad and more bad versions. But as we ended up with the quarter 2 with positive EBITDA and first half year as well we're positive in EBITDA, then actually we don't lose the money. We -- as all the loan payments are moved to the end of the loan agreement. So from that perspective, yes, as we're not losing the money. And we saw also in July, passenger numbers already in 50% from last year level and which is very important. Tallinn-Helsinki route around 70% from last year numbers. So from that perspective, I think that we can be a bit happy as well.

Thank you. What are the current hotel rental agreements? How much have the rent payments decreased compared to 2019? Are the rental payments suspended for the closed hotel?

Yes, all the rental payments for the hotels has been -- have been reduced by 20% from the 1st of March this year until 31st of May next year. And addition, the payments for the period of March to August have been deferred and will be payable latest in 3 years from now. And the City Hotel will undergo renovations and will be closed until June 2021 and no rent will be paid for that period. And I just add that as we have 3 years' time to pay these 6 months invoices, we are not paying any interest from this 3 years period.

Thank you very much. How much and how has the onboard consumption per passenger changed?

As discussed earlier, there has been an increase in average spending per passenger as the result of both changes in the passengers much, but also changes in the offering. Overall, it has been good, but it is a special situation, and it's difficult to say whether the changes we have seen are temporary or more long-lasting. And of course, it again depends in which routes we can operate and what kind products we can offer to our customers.

Now a question about Burger King restaurants. Are the operations of the first Burger King restaurants profitable?

The first restaurant is doing well. The restaurants are at prime locations. The sales have been good, very stable, even better than expected, but it's a bit early stage of a scale business. We are looking forward to opening in Latvia, Lithuania and other locations in Estonia also during this year, and we will start reporting more detailed information on Burger King at some later stage. But what we can say is Burger King is profitable.

That's very good news. A question about online shopping. Is it generating positive cash flow?

It's an additional channel supporting our sales. It has been growing nicely this year. So principally, yes.

Thank you. And now we have exhausted all questions that came in advance. Looking at the clock, we still have some time. So now we're proceeding the questions that we received during the webinar. So the first question is what internal rate of return do you expect on the Sailor acquisition? Veiko?

So of course, we don't disclose such detailed informations on asset basis, but as mentioned earlier, that we see viable demand on the cargo segment. And also in perspective, we see possible risk replacement of some older cargo vessel.

Thank you. What are the new covenants? How long will they last? What is the amount of loans covered with these covenants? And when does the incurrence tests happen?

Actually, there are not very specific covenants. We asked -- when we asked the loan from KredEx, we said that our head office will stay in Estonia. At least 50% from our employees are working in the companies registered in Estonia. Yes, there are restrictions to pay out dividends, but there are regulation that we can ask approval to pay out dividends. So there are nothing very specific in these overdrafts and loan from KredEx.

Okay. Thank you. Under what market conditions would you need to recognize an impairment on your vessels.

Actually, we have seen that we got too many e-mails from the companies who want to buy the vessels. So we don't see the situation right now. And we also know some deals which have been done here some few months ago with much higher prices than vessels book well. So we know that our vessels are really good. We have a very modern fleet. We have 1 A Super Ice Class, which is very important for some regions. So we don't see any problems right now.

Thank you. Does keeping a 50% capacity limit until the next summer mean that despite potential full recovery in demand, you would still operate at 50% capacity?

First of all, the capacity limit is, in Estonia and Finland, 75% in those region. 50% capacity limit is only in Sweden. This is regulations from the Swedish government. What happens next summer, we will see. But of course, recovery, full demand recovery means also that we need to feel everyone's safe, that everything is okay to increase the capacity limits. I think that right now is the most important thing to build the trust that people who are on board of telling consilient vessels feel safe, and we are not in hurry to increase this limitations.

Next question. How much did your e-commerce sales contribute to restaurant and shop sales as share of total revenue?

Yes. I had actually a few days ago, phone call with one very big e-shop player in Estonia. And I can answer absolutely like he did that, yes, we all think that now everything is in Internet, but it's still only very, very, very small part compared with the normal services we normally have in the shops, restaurants or anywhere else. So yes, we use the Internet, but Internet is still just Internet with less emotions.

There appear to be some emotions in the questions as there is one follow-up question on the topic of governance. So covenants are probably related to bank loans and waivers are also related to them. So my question still stands.

Yes. So that's very natural for bank loans to have covenants and those -- so the new loans have covenants as well, our industry and company-specific covenants. And usually, there are some ratios mentioned and some liquidity -- minimum liquidity buffers, et cetera. Due to the confidentiality of the specific contracts, we cannot go into too many details. But this is -- yes, as Paavo mentioned in the KredEx contract, there are some requirements. We, as an Estonian company, have fulfilled towards the Estonian state which is natural we think. But other than that, this is rather regular covenants package for the company. And of course, as mentioned, due to the tough liquidity position, some of the ratios and limits are exceeded, but also approved and waived for time being from the lending banks and partners. I hope that will answer your question. Thank you.

And I think we have time for one last question, which is once the new ship arrives in January 2022, is there any more CapEx lined up? And any CapEx guidance for the years '21 and '22?

I can answer this one. After the MyStar, right now, there is no CapEx lined up. Obviously, we have maintenance CapEx for the vessels, and then this is the dry docks or docks that the vessels have to go through. So -- but let's see. Right now, there is no CapEx lined up.

Okay. But -- I think we've used up an hour quite well. Thank you, everyone, for calling in and listening to Tallink Grupp's second quarter results webinar. The recording will be uploaded and available, as will be the presentation of the webinar. Thank you, everyone. Bye.