Hepsor AS consolidated unaudited interim report for Q1 2023

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HEPSOR AS
HEPSOR AS

The consolidated sales revenue of Hepsor amounted to 6.0 million euros in the first quarter of 2023 and the net profit was 0.14 million euros (including a net profit attributable to the owners of the parent of 0.24 million euros).

The handover of apartments in the Paevälja Hoovimajad project accounted for most of the sales revenue in the first quarter of 2023. Two apartment buildings with a total of 96 apartments were built as part of the project, of which the first 40 apartments were handed over to homebuyers at the end of 2022. An additional 34 apartments were handed over to homebuyers during the first quarter of 2023, and as at 31 March 2023 real rights agreements have been signed for 74 apartments (77%) and law of obligations agreements or written reservation agreements have been signed for 4 apartments (4%).

The Group’s revenues and profitability are directly dependent on the development cycle of projects, which is approximately 24 to 36 months. Sales revenue is generated only at the end of the cycle. Calendar quarters vary in terms of the number of projects ending during the quarter, which is why both profits and sales revenue can differ significantly across quarters. Therefore, performance can be considerably weaker or stronger in some years and quarters than in others. The portfolio of the company’s development projects and three-year average financial results are a better criteria for assessing the group’s performance in order to assess the overall sustainability and economic results of a real estate development company.

Hepsor has six residential development projects under construction in Estonia and Latvia, with a total of 527 new apartments. There are three development projects under construction and available for sale in Riga, with a total of 246 apartments as at 31 March 2023. Contracts under law of obligations and reservation agreements have been signed for 198 of these apartments (80%). There are also three development projects with a total of 281 new apartments under construction and available for sale in Tallinn. Contracts under law of obligations and reservation agreements have been signed for 61 of these apartments (23%) as at 31 March 2023. In the commercial real estate development segment Grüne Maja, which is an office building that follows a green concept, is being completed in Tallinn. The office building is 100% covered with lease agreements and approximately 79% is in active use. The remaining tenants will move to the new premises in the second quarter of 2023 at the latest.

The Group started the construction of two residential real estate development projects in the first quarter of 2023. In Tallinn, the construction of 154 homes of the Manufaktuuri 7 project was started in the Manufaktuuri quarter, which is being developed together with the long-term cooperation partner Tolaram Group. Law of obligations agreements and reservation agreements had been signed for 32 apartments (21%) of Manufaktuuri 7 homes as at the end of the quarter. In Riga, the construction of 38 homes was started in the Nameja Rezidence project, of which law of obligations agreements and reservation agreements have been signed for 10 apartments (26%).

Two projects under construction in Riga received an occupancy permit, which allows the completed homes to be handed over to buyers in the second quarter of 2023 - 92 homes will be completed in the Mārupes Dārzs project, of which 78 apartments (85%) have been sold according to law of obligations agreements and reservations agreements, and 116 homes will be completed in the Kuldigas Parks project, of which 110 apartments (95%) have been sold according to law of obligations agreements and reservations agreements.

The year 2023 started on a moderately optimistic note in the real estate sector - consumer confidence, which fell to a record low in the last quarter of 2022, showed signs of recovery, and the stabilization of energy prices and inflation continued, which create the preconditions for the recovery of real estate market demand. Unfortunately, Euribor rates continue to rise, which directly affects the monthly housing costs of homebuyers and forces them to postpone making real estate purchase decisions. In Tallinn, the transaction activity of the new development market is higher than at the end of 2022 but continues to be significantly below the previous long-term average. On the other hand, in Riga, the previously described effects were more short-term, and transaction activity remains at the usual level after a temporary dip. Customers do not make quick purchase decisions in the current economic situation, but there is continued interest in the Group's projects, which is why the board is moderately optimistic and continues to implement existing and new projects.

The Group forecasts a revenue of 41.3 million euros, net profit of 3.3 million euros and net profit attributable to the owners of the parent of 1.1 million euros in 2023. The Group's sales results for the first quarter of 2023 give confidence that we the forecasts can be met for 2023.

Consolidated statement of financial position

in thousands of euros

31 March 2023

31 December 2022

31 March 2022

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

2,126

3,754

7,440

Trade and other receivables

1,291

1,731

946

Current loan receivables

0

0

455

Inventories

73,610

69,760

45,128

Total current assets

77,027

75,245

53,969

Non-current assets

 

 

 

Property, plant and equipment

269

314

209

Intangible assets

7

7

3

Financial investments

2

2

2

Investments in associates

972

1,086

0

Non-current loan receivables

1,766

1,766

2,308

Other non-current receivables

61

30

340

Total non-current assets

3,077

3,205

2,862

Total assets

80,104

78,450

56,831

Liabilities and equity

 

 

 

Current liabilities

 

 

 

Loans and borrowings

22,456

22,565

3,833

Current lease liabilities

96

127

92

Prepayments from customers

4,366

3,054

1,856

Trade and other payables

3,481

4,008

3,537

Total current liabilities

30,399

29,754

9,318

Non-current liabilities

 

 

 

Loans and borrowings

26,686

26,015

26,854

Non-current lease liabilities

68

68

66

Other non-current liabilities

2,481

2,290

1,410

Total non-current liabilities

29,235

28,373

28,330

Total liabilities

59,634

58,127

37,648

Equity

 

 

 

Share capital

3,855

3,855

3,855

Share premium

8,917

8,917

8,917

Retained earnings

7,698

7,551

6,411

Total equity

20,470

20,323

19,183

incl. total equity attributable to owners of the parent

20,092

19,937

18,823

incl. non-controlling interest

378

386

360

Total liabilities and equity

80,104

78,450

56,831

Consolidated statement of profit and loss and other comprehensive income

in thousands of euros

Q1 2023

Q1 2022  

 

 

 

Revenue

5,975

1,272

Cost of sales (-)

-5,040

-1,166

Gross profit

935

106

Marketing expenses (-)

-71

-95

Administrative expenses (-)

-347

-328

Other operating income

20

10

Other operating expenses (-)

-23

-7

Operating profit (-loss) of the year

514

-314

Financial income

50

509

Financial expenses (-)

-425

-168

Profit before tax

139

27

Current income tax

0

-5

Net profit for the year

139

22

Attributable to owners of the parent

240

5

Non-controlling interest

-101

17

 

 

 

 Other comprehensive income (-loss)

 

 

Changes related to change of ownership

0

135

Change in value of embedded derivatives with minority shareholders

8

18

Other comprehensive income (-loss) for the period

8

153

Attributable to owners of the parent

-14

-86

Non-controlling interest

22

239

 

 

 

Comprehensive income (-loss) for the period

147

175

Attributable to owners of the parent

226

-81

Non-controlling interest

-79

256

 

 

 

Earnings per share

 

 

Basic (euros per share)

0.06

0.00

Diluted (euros per share)

0.06

0.00



Henri Laks
Member of the Management Board
Phone: +372 5693 9114
e-mail: henri@hepsor.ee

Hepsor AS (www.hepsor.ee) is one of the fastest growing residential and commercial real estate developers in Estonia and Latvia. Over the last twelve years Hepsor has developed more than 1,500 homes and 32,000 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 26 development projects with a total sellable space of 176,000 m2.

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