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Pro Kapital Council approved Consolidated Interim Report for III Quarter and 9 Months of 2021 (Unaudited)

·11-min read

MANAGEMENT REPORT

CEO summary

The third quarter of this year has been very dynamic, with amazing results in sales activities and exceeding expectations when signing presale agreements, but it has been also challenging in development activities due to changes in the construction market.

Real estate development

We have continued construction of Kindrali Houses and Kalaranna projects and are preparing project documentation for the following development phases in Tallinn. In September we started handing over apartments in two first buildings of Kalaranna project, where completion of eight buildings with the total of 240 apartments will be achieved step by step in four phases. Today we have reservations or presales concluded for all business premises and for 94% of apartments. This year we started construction of the new project Kindrali Houses in Kristiine City, where three building-complexes with the total of 195 apartments will be raised. In this project we had booked or presold more than half of the apartments before signing the construction agreement. Today 98% of the apartments have been booked or presold in Kindrali.

In Riga we are selling our luxury product River Breeze Residence and prepare technical project for the further development of Kliversala Residential Quarter - Blue Marine. We have received a building permit for City Oasis residential quarter with 326 apartments – a tranquil and green living environment in the city centre. We are ready to proceed with construction activities as soon as the market situation becomes more favourable. Unfortunately, the Latvian real-estate market differs significantly from its neighbouring countries Estonia and Lithuania. However, we are observing higher interest in luxury segment and in River Breeze project.

In 2019 we completed five buildings in Šaltinių Namai Attico project in Vilnius with 115 apartments. Today we have only 5 apartments unsold of which two apartments are furnished as showrooms for the following phase. We are preparing for the following phase with city villas and commercial building and plan to start the construction this year.

Our revenues from the sales of the real estate depend on completion of residential developments as revenues are recorded at the moment notary deeds of sale are concluded. In 2021 we have completed Ratsuri Houses project with 39 apartments and now we have started handing over exclusive homes in prime location of Kalaranna project.

Hotel operations

Last year had a significant impact on PK Parkhotel Kurhaus in Bad Kreuznach, Germany. Due to COVID-19 restrictions the hotel was closed almost half of the year in 2020 and from January till mid-June in 2021. The impact of COVID-19 has been 0.3 million euros in less hotel revenues in the first nine months of 2021 comparing to the last year. Although occupancy has increased this year, the average room rate has influenced revenues negatively. However, due to governmental support, the net result of nine months was better comparing to 2020.

A few years ago, we renovated half of the rooms and part of public spaces. We plan to continue with renovation works in the coming year and make relevant preparations.

In the following months we continue construction works of ongoing development projects and prepare to start with the following phases. Our real estate development is doing well, the Company is a going concern and we have an optimistic view for the future.

Paolo Michelozzi
CEO

Key financials

The total revenue of the Company in the first nine month of 2021 was 21 million euros, having increased by 55% compared to the reference period (2020 9M: 13.6 million euros). The total revenue of the third quarter was 12 million euros, which is 164% higher compared to the same period in 2020 (2020 Q3: 4.6 million euro).

The real estate sales revenues are recorded at the moment of handing over the premises to the buyer. Therefore, the revenues from sales of real estate depend on the completion of the residential developments. The real estate sales have been influenced by completion of Ratsuri Houses project, where all apartments were sold and handed over to new owners and start of handing over apartments in first two buildings of Kalaranna project. The Company has continued with sales of completed developments - River Breeze Residence in Riga and Šaltinių Namai Attico development in Vilnius and presales of ongoing development projects Kalaranna District and Kindrali Houses in Tallinn.

The gross profit in the first nine month of 2021 increased by 14% amounting to 6.1 million euros compared to 5.4 million euros during the same period in 2020. In the third quarter the gross profit figures were 3.4 million euros and 1.9 million euros respectively.

The operating result in the first nine months of 2021 has improved to 3.7 million euros profit comparing to 1.1 million euros profit during the same period in 2020. The operating result of the third quarter was 2.8 million euros profit comparing to 0.9 million euros profit in 2020.

The net result in the first nine months of 2021 was 22.4 million euros profit and in the third quarter 1.1 million euros profit, comparing to losses of 11.1 million euros and 3.2 million euros in the reference period respectively. The positive result of the reporting period was influenced by loss of control and derecognition of the subsidiary AS Tallinna Moekombinaat.

Cash generated from operating activities during the first nine months was 1.4 million euros comparing to -4.5 million euros used during the same period in 2020. In the third quarter of 2021 cash generated from operating activities was 5.2 million euros and 1.9 million euros were used during the same period in 2020.

Net assets per share on 30 September 2021 totalled to 0.63 euros compared to 1.07 euros on 30 September 2020.

Key performance indicators (including discontinued operations)

2021 9M

2020 9M

2021 Q3

2020 Q3

2020 12M

Revenue, th EUR

21 108

13 615

12 066

4 562

19 234

Gross profit, th EUR

6 103

5 371

3 442

1 880

6 775

Gross profit, %

29%

39%

29%

41%

35%

Operating result, th EUR

3 712

1 136

2 836

885

-43 108

Operating result, %

18%

8%

24%

19%

-224%

Net result, th EUR

22 463

-11 085

1 122

-3 183

-59 456

Net result, %

106%

-81%

9%

-70%

-309%

Earnings per share, EUR

0.40

-0.19

0.02

-0.06

-0.98


30.09.2021

30.09.2020

31.12.2020

Total Assets, th EUR

125 042

215 765

179 048

Total Liabilities, th EUR

89 492

157 543

169 477

Total Equity, th EUR

35 549

58 222

9 571

Debt / Equity *

2.52

2.71

14.15

Return on Assets, % **

15%

-5,2%

-30.7%

Return on Equity, % ***

99.5%

-17.1%

-141.2%

Net asset value per share, EUR ****

0.63

1.03

0.23


*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

30.09.2021

Restated*
30.09.2020

31.12.2020

ASSETS

Current assets

Cash and cash equivalents

13 283

7 316

9 393

Current receivables

1 458

1 422

1 797

Inventories

67 811

53 405

58 352

Total current assets

82 552

62 143

69 542

Non-current assets

Non-current receivables

23

4 417

3 517

Property, plant and equipment

6 677

7 011

6 745

Right-of-use assets

233

400

357

Investment property

35 202

141 452

98 512

Intangible assets

355

342

375

Total non-current assets

42 490

153 622

109 506

TOTAL ASSETS

125 042

215 765

179 048

LIABILITIES AND EQUITY

Current liabilities

Current debt

530

78 032

107 581

Customer advances

13 516

7 124

7 866

Current payables

5 233

17 844

22 211

Tax liabilities

656

225

458

Short-term provisions

534

358

459

Total current liabilities

20 469

103 583

138 575

Non-current liabilities

Long-term debt

64 708

50 793

27 255

Other non-current payables

3 139

1 783

2 295

Deferred income tax liabilities

1 133

1 230

1 170

Long-term provisions

44

156

182

Total non-current liabilities

69 024

53 962

30 902

TOTAL LIABILITIES

89 493

157 545

169 477

Equity attributable to owners of the Company

Share capital in nominal value

11 338

11 338

11 338

Share premium

5 661

5 661

5 661

Statutory reserve

1 134

1 134

1 134

Revaluation reserve

2 984

3 262

2 984

Retained earnings

-8 031

47 646

47 647

Profit/ Loss for the period

22 463

-10 672

-55 678

Total equity attributable to owners of the Company

35 549

58 369

13 086

Non-controlling interest

0

-149

-3 515

TOTAL EQUITY

35 549

58 220

9 571

TOTAL LIABILITIES AND EQUITY

* See Note 2 for details regarding restatement.

Consolidated interim statements of profit and loss and other comprehensive income

in thousands of euros

2021
9M

2020
9M

2021
Q3

2020
Q3

2020 12M

CONTINUING OPERATIONS

Operating income

Revenue

19 373

8 743

12 066

3 146

13 637

Cost of goods sold

-14 118

-6 038

-8 624

-1 977

-9 424

Gross profit

5 255

2 705

3 442

1 169

4 213

Marketing expenses

-358

-418

-119

-140

-611

Administrative expenses

-3 549

-3 171

-1 086

-1 054

-4 372

Other income

2 113

26

605

22

384

Other expenses

-56

-14

-6

-3

2 876

Operating profit/ loss

3 405

-872

2 836

-6

2 490

Financial income

53 812

3

2

1

4

Financial expense

-29 474

-4 095

-1 722

-1 279

-5 419

Profit / loss before income tax

27 743

-4 964

1 116

-1 284

-2 925

Income tax

-23

-211

6

-132

-354

Net profit / loss from continuing operations

27 720

-5 175

1 122

-1 416

-3 279

Profit from discontinued operations

-5 257

-5 912

0

-1 768

-56 177

Net profit / loss for the period

22 463

-11 087

1 122

-3 184

-59 456

Attributable to:

Equity holders of the parent

22 178

-10 674

1122

-3 120

-55 678

Non-controlling interest

-285

-413

0

-64

-3 778

Other comprehensive income, net of income tax

Items that will not be reclassified subsequently to profit or loss

Net change in properties revaluation reserve

0

0

0

0

-278

Total comprehensive income / loss for the year

22 463

-11 087

1 122

-3 184

-59 734

Attributable to:

Equity holders of the parent

22 178

-10 674

1 122

-3 120

-55 956

Non-controlling interest

-285

-413

0

-64

-3 778

Earnings per share (continuing operations) €

0.49

-0.09

0.02

-0.02

-0.06

Earnings per share for the period €

0.40

-0.19

0.02

-0.06

-0.99

Consolidated interim statements of cash flows

in thousands of euros

2021
9M

2020
9M

2021
Q3

2020
Q3

2020 12M

Cash flows from operating activities

Profit/loss for the period

22 463

-11 085

1 113

-3 183

-59 456

Adjustments for:

Depreciation, amortisation of non-current assets

282

311

88

102

416

Gain from disposal of investment property

-1 092

0

0

0

0

Loss from write-off of plant, property, equipment

0

0

0

0

8

Change in fair value of property, plant, equipment

0

0

0

0

-16

Change in fair value of investment property

0

0

0

0

43 127

Gain from derecognition of subsidiary

-53 808

0

0

0

0

Finance income and costs

35 033

12 010

1 719

3 936

15 994

Changes in deferred tax assets and liabilities

-37

-118

0

-59

-178

Other non-monetary changes (net amounts)

1 537

-3 118

0

-3 114

-3 110

Changes in working capital:

Trade receivables and prepayments

3 806

-2 049

-513

-1 069

-1 514

Inventories

-9 460

-12 373

156

-8 023

-13 011

Liabilities and prepayments

2 800

11 870

2 736

9 522

10 025

Provisions

-138

29

-38

10

59

Net cash used in operating activities

1 387

-4 523

5 261

-1 878

-7 656

Cash flows from investing activities

Payments for property, plant and equipment

-102

-29

-68

-18

-94

Payments for intangible assets

-13

0

-8

0

-43

Payments for investment property

-411

-657

-165

-260

-844

Proceeds from disposal of investment property

2 000

0

0

0

0

Change in cash from derecognition of subsidiary

-182

0

0

0

0

Interests received

2

2

0

0

1

Net cash used in investing activities

1 294

-684

-241

-278

-980

Cash flows from financing activities

Net proceeds from secured bonds

0

28 500

0

0

28 500

Redemption of convertible bonds

-337

0

-253

0

-33

Repurchase of non-convertible bonds

0

-28 003

0

-3

-28 000

Proceeds from borrowings

18 497

7 689

6 086

4 832

14 410

Repayment of borrowings

-11 855

-684

-8 990

-28

-1 376

Repayment of lease liabilities

-129

-130

-42

-46

-135

Interests paid

-4 967

-5 465

-2 382

-2 344

-5 953

Net cash used/ generated by financing activities

1 209

1 907

-5 581

2 411

7 413

Net change in cash and cash equivalents

3 890

-3 300

-561

255

-1 223

Cash and cash equivalents at the beginning

9 393

10 616

13 331

7 061

10 616

Cash and cash equivalents at the end of the period

13 283

7 316

13 842

7 316

9 393

The full report can be found in the file attached.

Angelika Annus
Member of the Board
+372 614 4920
prokapital@prokapital.ee

Attachment


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