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Pro Kapital Council approved Consolidated Interim Report for III Quarter and 9 Months of 2022 (Unaudited)

Pro Kapital Grupp
Pro Kapital Grupp

MANAGEMENT REPORT

CEO summary

The third quarter of 2022 continued the trend we have seen in Q2, with a strong demand for real estate assets in the Baltic countries (particularly Estonia and Lithuania).

The market still seems resilient, despite the negative sentiment caused by raising interest rates and an overall bearish outlook of the global economy.

Local and international investors still seem to have a strong interest in the Baltic area, especially in the premium properties segment.

After a few months where it seemed impossible to fix a price with construction companies, due to the volatility in the market of construction materials and supplies, there seem to be an increasing will from the local contractors to get back to work, even at the cost of partially absorbing the development risks, and the fluctuations in the cost of materials.

Real estate development

In Tallinn, we have continued construction of Kindrali Houses and Kalaranna projects.

In Q3 of 2022 we finalised handing over all of the apartments in Kalaranna project, where completion of eight buildings with the total of 240 apartments is now achieved.

This first phase of the Kalaranna project has been a major success, and we are currently working alongside some local construction companies, who are studying the tender package. Our intention is to start the mobilisation of the site for the next phase of Kalaranna (four building for a total of 146 apartments) somewhere between Q1 and Q2 2023.

In Kindrali Houses, we have started the process of notarising deals in the first two buildings (black and white building), which have now reached completion. The third building (red building) is expected to be completed by the end of 2022. All in all, these three buildings comprise 195 residential and 1 commercial units, all of which are sold.

In Riga we are selling our ready luxury product River Breeze Residence and started the tendering process for the further development of Kliversala Residential Quarter - Blue Marine. We have received several offers from construction companies and are in the process of identifying the best option. The tendering process has taken longer since the company has decided to look into various value engineering options to mitigate the risk of increasing construction costs.

In Vilnius, we only have 4 unsold apartments in our Šaltiniu Namai Attico project (including one which serves as a showroom). The real estate market has had a great run in 2021 and we saw a great deal of interest for our luxury properties, achieving some of the highest prices per square meter in all the local market. The construction tendering for the following phase of city villas and a commercial building is now at its final stage are we are expecting to enter into an agreement with the winning bidder within November-December this year and start the construction works within the 1st quarter of 2023.

Hotel operations

We are in the process of renovation of the second half of the rooms (first half has been renovated 5 years ago), which will be completed by the end of the year. The works will also have the added benefit of converting an unused area into 7 standard rooms and creation of a luxurious suite with private sauna and terrace, which will greatly improve the overall prestige of the hotel.

Since the ongoing works, the hotel’s available inventory has been only at 50% for a good part of 2022. Despite this, in the first 9 months it has reached a substantial operative break-even, thanks to a) the MICE (Meetings, Incentives, Conferences and Exhibitions) coming back after a long pause due to the pandemic, and b) an increase in the Average Daily Rate (ADR) which is currently at 89.12 euro (September data), a substantial increase when compared to the 81.07 euro rate of September 2021.

In conclusion, we are confident in our abilities to navigate these turbulent times, thanks to our experience and to the resilience of the Baltic markets. We maintain our position to expand our current inventory, by making intelligent bets on what we feel like the market may absorb, thus creating long-term value for our shareholders and for the communities that we aim to develop in a sustainable, comfortable and aesthetically pleasing way.

Edoardo Preatoni
CEO

Key financials

The total revenue of the Company in nine months of 2022 was 61.6 million euros, having increased more than three times compared to the reference period (2021 9M: 19.4 million euros). The total revenue of the third quarter was 30.4 million euros compared to 12.1 million euros in 2021.

The gross profit for nine months of 2022 has increased three times amounting to 16.2 million euros compared to 5.3 million euros in 2021. The gross profit in the third quarter reached 6.8 million euros (2021 Q3: 3.4 million euros).

The operating result in nine months of 2022 has decreased to 12 million euros profit comparing to 31.2 million euros profit during the same period in 2021.The operating result of the third quarter was 5.6 million euros comparing to 2.8 million euros in 2021. Higher profit in 2021 was affected by one-time sales of investment property and related revenue and by the results of derecognition of AS Tallinna Moekombinaat after loss of control over the subsidiary on 2 June 2021.

The net result for the nine months of 2022 was 8.7 million euros profit, comparing to 22.5 million euros (continuing operations 26.5 million euros) profit in the reference period. The net profit of the third quarter was 4.5 million euros comparing to 1.1 million euros generated in 2021.

Cash generated in operating activities during nine months of 2022 was 25.8 million euros comparing to 1.4 million euros during the same period in 2021. In the third quarter cash generated in operating activities was 14.6 million euros comparing to 5.2 million euros in 2021.

Net assets per share on 30 September 2022 totalled to 0.91 euros compared to 0.63 euros on 30 September 2021.

Key performance indicators

 

2022 9M

2021 9M

2022 Q3

2021 Q3

2021 12M

Revenue, th EUR

61 628

19 373

30 434

12 066

43 095

Gross profit, th EUR

16 211

5 255

6 849

3 442

10 576

Gross profit, %

26%

27%

23%

29%

25%

Operating result, th EUR

11 990

31 152

5 577

2 836

39 820

Operating result, %

19%

161%

18%

24%

92%

Net result, th EUR

8 651

22 463

4 546

1 123

29 757

Net result, %

14%

116%

15%

9%

69%

 

 

 

 

 

 

Earnings per share, EUR

0.15

0.40

0.08

0.02

0.52


 

30.09.2022

30.09.2021

31.12.2021

Total Assets, th EUR

99 731

125 042

116 026

Total Liabilities, th EUR

48 237

89 493

73 183

Total Equity, th EUR

51 494

35 549

42 843

Debt / Equity *

0.94

2.52

1.71

 

 

 

 

Return on Assets, % **

6.2%

14.8%

23.7%

Return on Equity, % ***

28.3%

99.5%

113.5%

Net asset value per share, EUR ****

0.91

0.63

0.76


*debt / equity = total debt / total equity
**return on assets = net profit/loss / total average assets
***return on equity = net profit/loss / total average equity

****net asset value per share = net equity / number of shares

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated interim statement of financial position

in thousands of euros

30.09.2022

30.09.2021

31.12.2021

ASSETS

 

 

 

Current assets

 

 

 

Cash and cash equivalents

11 088

13 283

9 626

Current receivables

1 648

1 458

802

Inventories

35 228

67 811

57 533

Total current assets

47 964

82 552

67 961

Non-current assets

 

 

 

Non-current receivables

2 017

23

21

Property, plant and equipment

7 901

6 677

6 754

Right-of-use assets

229

233

202

Investment property

41 270

35 202

40 734

Intangible assets

350

354

354

Total non-current assets

51 767

42 490

48 065

TOTAL ASSETS

99 731

125 042

116 026

LIABILITIES AND EQUITY

 

 

 

Current liabilities

 

 

 

Current debt

368

530

3 955

Customer advances

2 614

13 516

12 419

Current payables

4 308

5 233

7 297

Tax liabilities

958

656

1 143

Short-term provisions

662

534

713

Total current liabilities

8 910

20 469

25 527

Non-current liabilities

 

 

 

Long-term debt

38 153

64 708

46 455

Other non-current payables

0

3 139

20

Deferred income tax liabilities

1 138

1 133

1 133

Long-term provisions

36

44

48

Total non-current liabilities

39 327

69 024

47 656

TOTAL LIABILITIES

48 237

89 493

73 183

Equity attributable to owners of the Company

 

 

 

Share capital in nominal value

11 338

11 338

11 338

Share premium

5 661

5 661

1 748

Statutory reserve

1 134

1 134

0

Revaluation reserve

2 984

2 984

2 984

Retained earnings

21 726

-8 031

0

Profit/ Loss for the period

8 651

22 463

26 773

Total equity attributable
to owners of the Company

51 494

35 549

42 843

TOTAL EQUITY

51 494

35 549

42 843

TOTAL LIABILITIES AND EQUITY

99 731

125 042

116 026

Consolidated interim statements of comprehensive income

in thousands of euros

2022 9M

2021 9M

2022 Q3

2021 Q3

2021 12M

CONTINUING OPERATIONS

 

 

 

 

 

Operating income

 

 

 

 

 

Revenue

61 628

19 373

30 434

12 066

43 095

Cost of goods sold

-45 417

-14 118

-23 585

-8 624

-32 519

Gross profit

16 211

5 255

6 849

3 442

10 576

 

 

 

 

 

 

Marketing expenses

-345

-358

-108

-119

-502

Administrative expenses

-3 743

-3 549

-1 085

-1 086

-5 592

Other income

9

29 860

1

605

35 615

Other expenses

-142

-56

-80

-6

-277

Operating profit/ loss

11 190

31 152

5 577

2 836

39 820

 

 

 

 

 

 

Financial income

2

5

1

2

6

Financial expense

-3 336

-4 556

-1 032

-1 722

-5 964

Profit / loss before income tax

8 656

26 601

4 546

1 116

33 862

Income tax

-5

-23

0

6

10

Net profit / loss from continuing operations

8 651

26 578

4 546

1 122

33 872

 

 

 

 

 

 

Profit from discontinued operations

0

-4 115

0

0

-4 115

Net profit / loss for the period

8 651

22 463

4 546

1 122

29 757

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

Equity holders of the parent

8 651

22 463

4 546

1 122

29 757

 

 

 

 

 

 

Total comprehensive income / loss for the year

8 651

22 463

4 546

1 122

29 757

Attributable to:

 

 

 

 

 

Equity holders of the parent

8 651

22 463

4 546

1 122

29 757

 

 

 

 

 

 

Earnings per share (continuing operations) €

0.15

0.47

0.08

0.02

0.60

Earnings per share for the period €

0.15

0.40

0.08

0.02

0.52

The full report can be found in the file attached.

Eve Kallast
Group Chief Accountant
+372 614 4920
prokapital@prokapital.ee

 

Attachment