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Pro Kapital Council approved Consolidated Interim Report for I Quarter and 3 Months of 2021 (Unaudited)

·12-min read

AS Pro Kapital Grupp has not yet published audited annual report for 2020 (related notice: https://view.news.eu.nasdaq.com/view?id=b9a14c4af26fbcf29852a28f2d4144b75&lang=en). However, the Company is using unaudited financial statements as basis of preparation in this report. All details related to this issue can be find in Note 2 of the report.

MANAGEMENT REPORT

Chairman’s summary

Start of 2021 has been a dynamic working period. We have continued working on our developments, where we see remarkable results, but also had to face a setback as after reporting date the decision of the Supreme Court terminated reorganisation proceedings of our subsidiary AS Tallinna Moekombinaat which led to the permanent insolvency of the subsidiary.

Real estate development

We have continued construction of Ratsuri Houses and Kalaranna projects and preparing project documentation for the following development phases in Tallinn. In March we completed Ratsuri Houses in Kristiine City where we had booked or presold all 39 apartments already prior to the completion. All apartments were sold and handed over within March and April. Soon we start 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 85% of premises. After reporting date, we concluded an agreement for sales of all business premises of Kalaranna project for 16.16 million euros (with VAT) including the option to sell also premises of the last phase, which we are preparing to launch in the near future. This year we have started with construction of the new project Kindrali Houses in Kristiine City, where two building complexes with 129 apartments will be raised by next summer. In this project we had booked or presold more than half of the apartments before signing the construction agreement. Today over 90% of the apartments have been booked or presold.

In Riga we are selling our luxury product River Breeze Residence and prepare for the further development of Kliversala Residential Quarter. 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 will be ready to proceed with construction activities as soon as the market situation becomes more favourable. Unfortunately, the Latvian real-estate market has not been as active as its neighbouring countries Estonia and Lithuania. However, we have observed some changes in the recent months and recovery of the market.

In 2019 we completed five buildings in Šaltiniu Namai Attico project in Vilnius with 115 apartments. Today we have only 5 apartments unsold. 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 the completion of the residential developments as the revenues are recorded at the moment notary deeds of sale are concluded. In 2021 we have already completed Ratsuri Houses project with 39 apartments and soon we start handing over exclusive homes in prime location of Kalaranna project.

T1 Mall of Tallinn

On 3 April 2020 Harju County Court initiated reorganization proceedings of the operator of T1 Mall of Tallinn - AS Tallinna Moekombinaat (TMK). Reorganization proceedings were terminated a year later by the decision of 26 April 2021 of the Supreme Court not to take TMK’s appeal into proceedings. Without the reorganisation proceedings AS Tallinna Moekombinaat is not capable to fulfil its obligations and has become permanently insolvent. On 7 May 2021 Harju County Court appointed Kristo Teder as an interim bankruptcy trustee of TMK. Interim bankruptcy trustee presented to the court a written report and opinion on 27 May 2021. Based on the report the court will take a decision about the following proceedings. The management of TMK continues to operate T1 Mall of Tallinn in cooperation with the interim trustee in bankruptcy until appointment of bankruptcy trustee and declaration of insolvency.

Supreme Court’s decision as an adjusting event after balance sheet date requires writing-off investment into subsidiary. AS Pro Kapital Eesti has written off an investment into subsidiary in amount of 13.4 million euros due to negative equity of TMK and as a result of adjusting event also receivables in the total amount of 26 million euros as at 31 December 2020. When bankruptcy is declared and the Company loses control over subsidiary, TMK will not be consolidated into the group any more. Although discontinuing consolidation will influence consolidated results by 26 million negatively, it will have a positive effect to the Group financial results due to derecognition of negative equity of the subsidiary. Bankruptcy of TMK will not affect liquidity of the Group nor short-term cash flows. Long-term cash flows are influenced by uncollectable receivables to the Group.

Adjusting event described above and writing off the debts of subsidiary on parent company level has triggered a non-compliance with financial covenants of secured bonds (Notes 9 and 19).

Hotel operations

Last year had a significant impact on PK Parkhotel Kurhaus in Bad Kreuznach, Germany. Due to the COVID-19 restrictions, the hotel was closed from March until the end of June and due to new restrictions hotel is not operating since November 2020. The impact of COVID-19 has been 0.7 million euros in less hotel revenues in the first quarter of 2021 comparing to last year. However, due to governmental support, the net result was better by 30 thousand euros. We expect to reopen the hotel in the middle of June.

In the following months we continue construction works of ongoing development projects and plan to start with the following phases. In spite of losing T1 Mall of Tallinn, 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 quarter of 2021 was 6.6 million euros, which is an increase of 12% compared to the reference period (2020 3M: 5.9 million euros). 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 revenue was higher in 2021 due to completion of Ratsuri Houses project, where apartments were handed over to new owners during March-April. In 2021, the Company has continued with presales of current development projects: first phases of Kalaranna District and Kindrali Houses in Tallinn.

The gross profit in the first quarter of 2021 decreased by 8% amounting to 2.0 million euros compared to 2.1 million euros during the same period in 2020.

The operating profit in the first quarter of 2021 was 1.9 million euros compared to 0.3 million euros during the same period in 2020. The increase in operating result is mainly influenced by the sale of investment property.

The net result in the first quarter of 2021 was -2.1 million euros compared to -4.0 million euros during the same period in 2020. The net result of the reporting period was influenced by the sale of the investment property, but as well in fewer administrative (decreased 27% compared to 2020 3M) and financial costs (decreased 6% compared to 2020 3M).

Cash generated from operating activities in the first quarter of 2021 was -2.1 million euros compared to -4.0 million euros during the same period in 2020. The net result of the reporting period was influenced by the sale of the investment property, but as well in fewer administrative (decreased 27% compared to 2020 3M) and financial costs (decreased 6% compared to 2020 3M).

Net assets per share on 31 March 2021 totalled to 0.20 euros compared to 1.19 euros on 31 March 2020.

Key performance indicators

2021 3M

2020 3M

2020 12M (Unaudited*)

Revenue, th EUR

6 563

5 873

19 234

Gross profit, th EUR

1 974

2 137

6 775

Gross profit, %

30%

36%

35%

Operating result, th EUR

1 897

346

-43 108

Operating result, %

29%

6%

-224%

Net result, th EUR

-2 113

-3 966

-59 456

Net result, %

-32%

-68%

-309%

Earnings per share, EUR

-0.03

-0.07

-0.98


31.03.2021

31.03.2020 (Restated*)

31.12.2020 (Unaudited*)

Total Assets, th EUR

185 287

207 361

179 048

Total Liabilities, th EUR

177 829

142 022

169 477

Total Equity, th EUR

7 458

65 339

9 571

Debt / Equity **

18.44

2.10

14.15

Return on Assets, % ***

Return on Equity, % ****

-1.2%

-1.9%

-30.7%

Net asset value per share, EUR *****

-24.8%

-5.9%

-141.2%

* See Note 2 in the “Consolidated Interim Report for I Quarter and 3 Months Of 2021” for details regarding the unaudited status of the report and restatement as a result of an error 2019 year end results

**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

31.03.2021

31.03.2020 (Restated)

31.12.2020 (Unaudited)

ASSETS

Current assets

Cash and cash equivalents

13 331

9 459

9 393

Current receivables

1 542

1 281

1 797

Inventories

61 481

40 329

58 352

Total current assets

76 354

51 069

69 542

Non-current assets

Non-current receivables

3 715

2 942

3 517

Property, plant and equipment

6 717

7 100

6 745

Right-of-use assets

318

480

357

Investment property

97 814

145 406

98 512

Intangible assets

369

364

375

Total non-current assets

108 933

156 292

109 506

TOTAL ASSETS

185 287

207 361

179 048

LIABILITIES AND EQUITY

Current liabilities

Current debt

104 373

83 153

107 581

Customer advances

10 284

5 935

7 866

Current payables

24 011

10 837

22 211

Tax liabilities

1 280

849

458

Short-term provisions

471

329

459

Total current liabilities

140 419

101 103

138 575

Non-current liabilities

Long-term debt

33 425

38 398

27 255

Other non-current payables

2 638

1 064

2 295

Deferred income tax liabilities

1 151

1 320

1 170

Long-term provisions

196

137

182

Total non-current liabilities

37 410

40 919

30 902

TOTAL LIABILITIES

177 829

142 022

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

47 647

47 647

Profit/ Loss for the period

-1 951

-3 788

-55 678

Total equity attributable to owners of the Company

11 135

65 254

13 086

Non-controlling interest

-3 677

85

-3 515

TOTAL EQUITY

7 458

65 339

9 571

TOTAL LIABILITIES AND EQUITY

185 287

207 361

179 048

Consolidated interim statements of profit and loss and other comprehensive income

in thousands of euros

2021 3M

2020 3M

2020 12M (Unaudited)

CONTINUING OPERATIONS

Operating income

Revenue

6 563

5 873

19 234

Cost of goods sold

-4 589

-3 736

-12 459

Gross profit

1 974

2 137

6 775

Marketing expenses

-126

-161

-621

Administrative expenses

-1 143

-1 562

-6 154

Other income

1 351

3

478

Other expenses

-159

-71

-43 586

Operating profit

1 897

346

-43 108

Financial income

1

1

4

Financial expense

-3 994

-4 244

-15 998

Profit / loss before income tax

-2 096

-3 897

-59 102

Income tax

-17

-69

-354

Profit / loss for the period

-2 113

-3 966

-59 456

Attributable to:

Equity holders of the parent

-1 951

-3 788

-55 678

Non-controlling interest

-162

-178

-3 778

Items that will not be reclassified subsequently to profit or loss

Net change in properties revaluation reserve

0

0

-278

Total comprehensive income / loss for the year

-2 113

-3 966

-59 734

Attributable to:

Equity holders of the parent

-1 951

-3 788

-55 956

Non-controlling interest

-162

-178

-3 778

Earnings per share for the period (EUR)

-0.03

-0.07

-0.98

Consolidated interim statements of cash flows

in thousands of euros

2021 3M

2020 3M

2020 12M (Unaudited)

Cash flows from operating activities

Profit/loss for the period

-2 113

-3 966

-59 456

Adjustments for:

Depreciation, amortisation of non-current assets

100

105

416

Gain from disposal of investment property

-1 092

0

0

Loss from write-off PPE and intangible assets

0

0

8

Change in fair value of property, plant, equipment

0

0

-16

Change in fair value of investment property

0

0

43 128

Finance income and costs

3 993

4 243

15 994

Changes in deferred tax assets and liabilities

-19

-27

-178

Other non-monetary changes (net amounts)

2

-1

-3 111

Changes in working capital:

Trade receivables and prepayments

53

-409

-1 514

Inventories

-3 129

703

-13 011

Liabilities and prepayments

3 506

1 336

10 025

Provisions

13

10

59

Net cash generated in operating activities

1 314

1 994

-7 656

Cash flows from investing activities

Payments for property, plant and equipment

-28

-10

-94

Payments for intangible assets

-2

-2

-43

Payments for investment property

-210

-302

-844

Proceeds from disposal of investment property

2 000

0

0

Interests received

0

1

1

Net cash generated in investing activities

1 760

-313

-980

Cash flows from financing activities

Net proceeds from secured bonds

0

28 500

28 500

Redemption of convertible bonds

-69

0

-33

Redemption of non-convertible bonds

0

-28 000

-28 000

Proceeds from borrowings

5 838

100

14 410

Repayment of borrowings

-2 857

-648

-1 376

Repayment of lease liabilities

-46

-48

-135

Interests paid

-2 002

-2 742

-5 953

Net cash generated by financing activities

864

-2 838

7 413

Net change in cash and cash equivalents

3 938

-1 157

-1 223

Cash and cash equivalents at the beginning

9 393

10 616

10 616

Cash and cash equivalents at the end of the period

13 331

9 459

9 393

The full report can be found in the file attached.

Allan Remmelkoor
Member of the Board
+372 614 4920
prokapital@prokapital.ee

Attachment


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