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Pro Kapital Council approved Consolidated Interim Report for IV Quarter and 12 Months of 2022 (Unaudited)

Pro Kapital Grupp
Pro Kapital Grupp

MANAGEMENT REPORT

CEO summary

2022 has been a year to remember for AS Pro Kapital Grupp. The Estonian Chamber of Commerce awarded us the price as the most competitive real estate company in Estonia.

The Competitiveness Ranking is a part of the largest entrepreneurship competition in Estonia, which is organised in cooperation of three organisations: Eesti Kaubandus-Tööstuskoda (Estonian Chamber of Commerce and Industry), EAS (Enterprise Estonia) and Eesti Tööandjate Keskliit Estonian Employers’ Confederation (Estonian Employers’ Confederation). The Competitiveness Ranking calculations are based on the economic indicators of the participating companies.

We are proud of this achievement, and we’ll use it to motivate us to obtain even better results in our future.

In line with the Company’s history, we will focus on the main areas of activities in real estate developments in the three Baltics capitals (Tallinn, Riga and Vilnius) and the hotel operations in Bad Kreuznach, Germany.

Real estate development

In Tallinn, we have completed and handed over the first phase of Kalaranna project, where completion of eight buildings with the total of 240 apartments was achieved.

On 20 October 2022 we made a grand inauguration and invited the major stakeholders of the project as well as local media.

This development has been a great success, both in terms of sales (the project is entirely sold out) and in terms of having created a vibrant community for all the Tallinn residents.

We are grateful to the local authorities to have been helpful throughout the development process and we take pride in knowing that we are helping shape the landscape of this beautiful city.

In Kindrali houses in Kristiine City we are building 3 residential buildings for a total of

195 apartments. The project is entirely sold out (meaning reservations or pre-sales have been achieved for all the units), and the handover of the last building is confirmed by Q1 2023.

In Riga we are selling our luxury product River Breeze Residence which has been awarded the Baltics Prestige Award for its outstanding architecture.

We hold a building permit for City Oasis residential quarter, a project consisting of 326 apartments located in Tallinas iela– a tranquil and green living environment in the city centre. We will be ready to proceed with construction activities as soon as the market situation becomes fit for such an ambitious and vast project.

Out of the three capitals (Tallinn, Riga, Vilnius), Riga seems to have the most challenges in terms of overall market conditions. However, our long-term outlook for the Latvian real estate sector remains bullish.

In 2019 we completed five buildings in Šaltinių Namai Attico project in Vilnius with 115 apartments. Today we have only 2 apartments unsold, out of which one is a model unit. We are preparing for the following phase with city villas (41 units) and a commercial building and plan to start the construction this year.

Vilnius market is extremely active, and we look forward to the next stage of our high-end development.

The Company has also expanded its land portfolio in Vilnius, purchasing a school in Naugarduko street for the price of 6.25M euros.

The school will be converted into a high-end residential property, consisting of circa 50 luxury apartments. An architectural competition is currently ongoing in order to award the project to the architect who provides the best possible design.

Hotel operations

After two hard years, which clearly affected the global sector of tourism because of the pandemic, there seems to be a strong demand in the hotel industry.

In Bad Kreuznach we have reached a substantial operational break even, despite the fact that a large portion of the rooms were not available to the public due to ongoing renovations.

A few years ago, we renovated half of the rooms and part of the common areas. The renovations of the remaining rooms will be completed by the end of Q1 2023, after which we will be able to have newly renovated rooms on the market for a higher Average Daily Rate.

The Baltic real estate sector showed great resilience throughout the pandemic period as well as during the turbulent geopolitical period we live in, and we are confident that we will manage to develop our pipeline of projects in line with the market’s expectations, thus continuing to provide a stream of high-quality properties to the local population. We are aware of the challenging historical times we live in; we will need to be fast to adapt to an ever-changing and fast paced world (especially in regards of the construction works and the related challenges to the supply chain and cost of materials), but we still have a very positive outlook on the Baltic region and thus far the market has been supporting our sentiment.

The economic outlook for the Baltic region is generally positive. The Baltic countries of Estonia, Latvia, and Lithuania have experienced steady economic growth in recent years, driven by a combination of factors such as increasing foreign investment, a growing service sector, and export-oriented manufacturing. The region has also benefited from its proximity to Northern Europe and its membership in the European Union, which has helped to boost trade and investment.

All the positive indicators above will not disappear despite the challenges that are posed to the real estate sector by the global macroeconomic outlook and the geopolitical turmoil caused by the war in Ukraine.

As the CEO of a successful development company, I see the future of real estate being heavily impacted by technology and changing consumer preferences. Smart home technology, virtual and augmented reality, and online marketplaces are becoming increasingly popular and will continue to shape the way we buy, sell, and experience real estate. Additionally, there is a growing demand for sustainable and energy-efficient homes, as well as for flexible living spaces that can adapt to the changing needs of residents. Overall, the future of real estate is exciting and dynamic, and we are constantly looking for innovative ways to stay ahead of the curve and meet the evolving needs of our customers.

Edoardo Preatoni
CEO

Key financials

The total revenue of the Company in twelve months of 2022 was 65.7 million euros compared to the reference period (2021 12M: 43.1 million euros). The total revenue of the fourth quarter was 4 million euros compared to 23.7 million euros in 2021.

The gross profit for twelve months of 2022 has increased by 60% amounting to 17 million euros compared to 10.6 million euros in 2021. The gross profit in the fourth quarter reached 754 thousand euros (2021 Q4: 5.3 million euros).

The operating result in twelve months of 2022 has decreased to 17.7 million euros profit comparing to 39.8 million euros profit during the same period 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 operating result of the fourth quarter was 5.7 million euros comparing to 8.7 million euros in 2021.

The net result for the twelve months of 2022 was 13.4 million euros profit, comparing to 29.8 million euros (continuing operations 33.9 million euros) profit in the reference period. The net profit of the fourth quarter was 4.8 million euros comparing to 7.3 million euros in 2021.

Cash generated in operating activities during 2022 was 17.9 million euros comparing to 13.3 million euros during the same period in 2021. In the fourth quarter cash used in operating activities was 1.7 million euros comparing to 11.9 million euros generated in 2021.

Net assets per share on 31 December 2022 totalled to 0.98 euros compared to 0.76 euros on 31 December 2021.

Key performance indicators

 

2022 12M

2021 12M

2022 Q4

2021 Q4

Revenue, th EUR

65 654

43 095

4 026

23 722

Gross profit, th EUR

16 965

10 576

754

5 321

Gross profit, %

26%

25%

19%

22%

Operating result, th EUR

17 657

39 820

5 666

8 666

Operating result, %

27%

92%

141%

37%

Net result, th EUR

13 452

29 757

4 800

7 292

Net result, %

20%

69%

119%

31%

 

 

 

 

 

Earnings per share, EUR

0.24

0.52

0.08

0.13


 

 

31.12.2022

31.12.2021

Total Assets, th EUR

 

101 256

116 026

Total Liabilities, th EUR

 

45 933

73 183

Total Equity, th EUR

 

55 323

42 843

Debt / Equity *

 

0.83

1.71

 

 

 

 

Return on Assets, % **

 

12.4%

23.7%

Return on Equity, % ***

 

27.4%

113.5%

Net asset value per share, EUR ****

 

0.98

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

 

31.12.2022

31.12.2021

ASSETS

 

 

 

Current assets

 

 

 

Cash and cash equivalents

 

10 589

9 626

Current receivables

 

955

680

Prepaid expenses

 

64

122

Inventories

 

34 224

57 533

Total current assets

 

45 832

67 961

Non-current assets

 

 

 

Non-current receivables

 

2 016

21

Property, plant and equipment

 

7 294

6 754

Right-of-use assets

 

195

202

Investment property

 

45 575

40 734

Goodwill

 

262

262

Intangible assets

 

82

92

Total non-current assets

 

55 424

48 065

TOTAL ASSETS

 

101 256

116 026

LIABILITIES AND EQUITY

 

 

 

Current liabilities

 

 

 

Current debt

 

173

3 955

Customer advances

 

1 659

12 419

Current payables

 

4 120

7 297

Tax liabilities

 

111

1 143

Short-term provisions

 

511

713

Total current liabilities

 

6 574

25 527

Non-current liabilities

 

 

 

Long-term debt

 

38 184

46 455

Other non-current payables

 

0

20

Deferred income tax liabilities

 

1 130

1 133

Long-term provisions

 

45

48

Total non-current liabilities

 

39 359

47 656

TOTAL LIABILITIES

 

45 933

73 183

Equity attributable to owners of the Company

 

 

 

Share capital in nominal value

 

11 338

11 338

Share premium

 

5 661

1 748

Statutory reserve

 

1 134

0

Revaluation reserve

 

2 012

2 984

Retained earnings

 

35 178

26 773

TOTAL EQUITY

 

55 323

42 843

TOTAL LIABILITIES AND EQUITY

 

101 256

116 026

Consolidated interim statements of comprehensive income

in thousands of euros

2022 12M

2021 12M

2022 Q4

2021 Q4

CONTINUING OPERATIONS

 

 

 

 

Operating income

 

 

 

 

Revenue

65 654

43 095

4 026

23 722

Cost of goods sold

-48 689

-32 519

-3 272

-18 401

Gross profit

16 965

10 576

754

5 321

 

 

 

 

 

Marketing expenses

-498

-502

-153

-144

Administrative expenses

-4 946

-5 592

-1 203

-2 043

Other income

6 278

35 615

6 278

5 541

Other expenses

-142

-277

-10

-9

Operating profit

17 657

39 820

5 666

8 666

 

 

 

 

 

Financial income

3

6

1

1

Financial expense

-4 211

-5 964

-875

-1 408

Profit before income tax

13 449

33 862

4 792

7 259

Income tax

3

10

8

33

Profit from continuing operations

13 452

33 872

4 800

7 292

 

 

 

 

 

Loss from discontinued operations

0

-4 115

0

0

Net profit for the period

13 452

29 757

4 800

7 292

 

 

 

 

 

Other comprehensive income net of income tax:

 

 

 

 

Net change in asset revaluation reserve

-972

0

-972

0

 

 

 

 

 

Total comprehensive income for the year

12 480

29 757

3 828

7 292

 

 

 

 

 

Earnings per share (continuing operations) €

0.24

0.60

0.08

0.13

Earnings per share for the period €

0.24

0.52

0.08

0.13

The full report can be found in the file attached.

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

Attachment