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Correction: Hepsor AS: 2022 II quarter and six months consolidated unaudited interim report

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HEPSOR AS
HEPSOR AS

The sections marked in bold have been corrected for correct contract type.

The consolidated revenues of Hepsor for the first six months of 2022 amounted to 4.0 million euros (including 2.7 million euros in Q2 2022) and a net loss of 0.3 million euros (including 0.3 million euros in Q2 2022).

The sales of development projects still under construction will mostly take place in the second half of the year, and therefore the revenue and profit from these projects will also be reflected in the results of the 3rd and 4th quarters of the year. The Group's revenues and profitability are directly dependent on the development cycle of the projects, which lasts about 24 to 36 months. Sales revenue is only generated at the end of this cycle. The number of projects as well as the revenues and profitability may significantly vary from quarter to quarter depending on the length and timing of the development cycle. Therefore, some financial years or quarters may be weaker or stronger in terms of financial results. In evaluating the sustainability and the financial results of the real estate developer, the portfolio of the development projects and the three-year average financial results are the best criteria for evaluating the Group's financial results.

The Group has generated revenues mainly from the sale of residential development projects. As of 25 July 2022, we have sold 32 apartments in completed projects in Latvia (27 apartments as of the end of Q2 2022), including 13 apartments in the 4b Strēlnieku development project, 18 apartments in the 9 Baložu development project, and 1 apartment in the 24 Āgenskalna development project.

As of date of the current report, the Priisle Kodu development project, a project developed by the Group's affiliate company Hepsor N170 OÜ in Estonia, has reached the stage of signing the real right contracts. The Group's profit share will be reflected in the financial results of the third and fourth quarters of 2022. While contract under the law of obligations were signed at the end of the quarter for all 76 apartments and the commercial space in the development project, by 25 July, or after the end of the quarter, real right contracts were already signed for 32 apartments.

Hepsor currently has three residential development projects under construction in Estonia and Latvia, with a total of 304 new apartments. To date, contracts under the law of obligation and booking agreements have been signed for 48 apartments (52%) in the Mārupes Dārzs (92 apartments) development project near Riga. The sale and construction of Hepsor's second largest residential development project, Kuldīgas Parks (116 apartments) in Riga, is also proceeding according to the plan, and 64 apartments (55%) have been sold. Both projects will be completed in 2023. In Estonia, we continue with the construction of the Paevälja Hoovimajad development project of two apartment buildings in two stages with a total of 96 apartments. To date, contracts under the law of obligation have been concluded for 76 apartments (79%). The first phase of the project with 48 apartments will be completed by the end of the year, the second phase in the first quarter of next year.

In July, we signed a 14-million-euro loan agreement with LHV Pank AS, the purpose of which is to finance the construction of the Ojakalda Kodud development project. There are 101 spacious family apartments in the three-tower residential building on the border of Tallinn and Harku. Our green way of thinking is central to the development of the Ojakalda residential buildings: we create an environmentally conscious and sustainable living environment. The pre-sale of the Ojakalda development project has started and the construction will begin in September 2022.

In addition to the residential development projects already under construction and available for sale, Hepsor also plans to start the construction of the next phase of the Manufaktuuri Kvartal with 160 new apartments in the second half of 2022. In Riga, we plan to start the Raņķa Dambis development project with 36 new apartments. In 2022, a total of 383 apartments are planned to be built in Tallinn and Riga, including 128 in Riga. In addition, in May 2022, Hepsor signed a preliminary agreement for the purchase of real estate in the Imanta area of Riga. About 40 apartments can be built on the property.

Three commercial real estate development projects have been completed or are about to be completed in Tallinn this year. Selver supermarket already operates the commercial space (leasable space approx. 1,500 m2) on the first floor of the 11-storey commercial and residential property at 1 Priisle. Grüne Maja, the office building following the green thinking concept, has 80% of its leasable space covered by lease agreements, and the building itself is already in active use. We are actively continuing negotiations to lease the remaining 20%. At the end of the year, we will hand over the Büroo113 commercial building, which is 100% covered by lease agreements. The anchor tenant in this building is a clinic with a modern and innovative concept. In the case of Büro113, green solutions (earth-heats-earth-cools, energy-efficient architecture, very good interior, solar energy, etc.) have been used for the first time in a city centre downtown high-rise. In 2022, a stock-office commercial development project will be completed at 30 Ulbrokas, Riga, which has also reached 100% occupancy.

In June, we completed the acquisition of the property at 17A Ganību Dambis in Riga. The property has 13 buildings of different commercial functionality (leasable area 8,200 m2) with occupancy of about 81%. As a result, we expect the share of rental income to increase in the third quarter of the year. In this development project the demolished depreciated buildings will be replaced by new commercial premises including offices and stock-offices. In total, the property will accommodate approximately 20,000 m2 of leasable space.

As of the date of this report, the Group has a total of 25 development projects. During the reporting year, the Āgenskalna and Baložu projects in Latvia were completed and a development project in the Imanta area of Riga was acquired.

The management of Hepsor still forecasts a turnover of 28 million euros in 2022 and profit of 3.3 million euros (including 3.1 million euros attributable to the owners of the parent company).

As of this report, we can say that despite of the difficult global situation, customers are not backing out of contracts, and contracts under the law of obligations for new homes continue to be signed on the agreed terms. The sale of new apartments in Riga projects has exceeded our expectations, and there are only 20 unsold apartments in projects currently under construction in Estonia. Russia's military invasion and attack on Ukraine's independence, which began on 24 February 2022, affects businesses and individuals around the world. Although the length, impact and outcome of the ongoing military conflict are still unclear, the high inflation rate, increased energy prices, increase in the Euribor based on the European Central Bank's monetary policy, and the increase in commodity and thus also construction prices are clearly felt. In view of the next two or three quarters, the mentioned factors will have an impact on the confidence of buyers of new homes.

Due to global uncertainty, the Group's management is paying more attention to the risks associated with taking new projects to the sales and construction phase. Despite the above, the management of the Group has not halted any of the current development projects, and according to current information, the sale and construction of new projects mentioned above will start already in autumn 2022.

Consolidated statement of financial position

in thousands of euros

30 June 2022

31 Dec 2021

30 June 2021

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

4,361

10,889

1,277

Trade and other receivables

576

652

636

Current loan receivables

279

2,388

256

Inventories

56,128

37,237

33,084

Total current assets

61,344

51,166

35,253

Non-current assets

 

 

 

Property, plant and equipment

260

229

410

Intangible assets

3

0

0

Financial investments

2

402

2

Non-current loan receivables

2,308

3,408

1,97

Other non-current receivables

380

140

99

Total non-current assets

2,953

4,179

2,481

Total assets

64,297

55,345

37,734

Liabilities and equity

 

 

 

Current liabilities

 

 

 

Loans and borrowings

2,472

5,501

4,393

Current lease liabilities

64

123

72

Prepayments from customers

2,453

1,164

1,238

Trade and other payables

3,959

5,539

1,967

Deferred income tax liability

8

0

0

Total current liabilities

8,956

12,327

7,67

Non-current liabilities

 

 

 

Loans and borrowings

34,641

22,862

19,169

Non-current lease liabilities

66

66

284

Other non-current liabilities

1,762

1,053

1,08

Deferred income tax liability

0

0

73

Total non-current liabilities

36,469

23,981

20,606

Total liabilities

45,425

36,308

28,276

Equity

 

 

 

Share capital

3,855

3,855

6

Share premium

8,917

8,917

3,211

Retained earnings

6,1

6,265

6,241

Total equity

18,872

19,037

9,458

incl. total equity attributable to owners of the parent

18,345

18,904

9,37

incl. non-controlling interest

527

133

88

Total liabilities and equity

64,297

55,345

37,734


Consolidated statement of profit and loss and other comprehensive income

in thousands of euros

6M 2022

Adjusted 

Q2 2022

Q2 2021    

6M 2021

 

 

 

 

 

Revenue

3,954

3,874

2,682

985

Cost of sales (-)

-3,752

-3,29

-2,586

-826

Gross profit

202

584

96

159

Marketing expenses (-)

-173

-100

-78

-52

Administrative expenses (-)

-537

-298

-209

-173

Other operating income

47

43

37

23

Other operating expenses (-)

-39

-51

-32

-38

Operating profit (-loss) of the year

-500

178

-186

-81

Financial income

567

76

58

43

Financial expenses (-)

-312

-191

-144

-83

Profit before tax

-245

63

-272

-121

Current income tax

-5

-16

0

-16

Deferred income tax

-8

-13

-8

-2

Net profit for the year

-258

34

-280

-139

Attributable to owners of the parent

-273

-84

-278

-134

Non-controlling interest

15

118

-2

-5

 

 

 

 

 

Other comprehensive income (-loss)

 

 

 

 

Changes related to change of ownership

135

0

0

0

Change in value of embedded derivatives with minority shareholders

-13

-31

-31

59

Other comprehensive income (-loss) for the period

122

-31

-31

59

Attributable to owners of the parent

-286

0

-200

0

Non-controlling interest

408

-31

169

59

 

 

 

 

 

Comprehensive income (-loss) for the period

-136

3

-311

-80

Attributable to owners of the parent

-559

-84

-478

-134

Non-controlling interest

423

87

167

54

 

 

 

 

 

Earnings per share

 

 

 

 

Basic (euros per share)

-0.07

-0.02

-0.07

-0.03

Diluted (euros per share)

-0.07

-0.02

-0.07

-0.03

Anneli Simm
Head of Investor Relations
Phone: +372 5615 7170
e-mail: anneli@hepsor.ee

Hepsor AS (www.hepsor.ee/en/) is one of the fastest growing residential and commercial real estate developers in Estonia and Latvia. Over the last eleven years Hepsor has developed more than 1,400 homes and 23,000 m2 of commercial space. Hepsor has been the first real estate developer in the Baltic States to implement a number of innovative engineering solutions that make the buildings we construct more energy-efficient and thus more environmentally friendly. The company's portfolio is comprised of 25 development projects with a total sellable space of 176,000 m2.

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