Pro Kapital Council approved Consolidated Interim Report for III
Quarter and 9 Months of 2023 (Unaudited)
MANAGEMENT REPORT
CEO summary
Q3 2023 marks as a continuation of the newly
started developments of AS Pro Kapital Grupp.
Real estate development
In Tallinn, the decision taken earlier in the
year on starting the construction and sales of Kalaranna 8 last
stage, has proven to be the right one. As a reminder, this last and
final stage consists of 4 residential buildings with 146 apartments
and 4 commercial units. Furthermore, the decision on taking
on the construction management in-house has proven to be the right
step. The general contractors to this date seem to be suffering
from the consequences of pandemic and the war and their pricing is
simply not competitive vis-à-vis smaller contractors that we are
able to engage directly. To date we have bought out the
excavation/retainage works, underground monolithic concrete works
and some smaller jobs the consequence of which has resulted in
considerable cost savings. During Q3 we completed the underground
excavation and retainage wall works and embarked on underground
concrete works which will last into Q4 this year. In Q3 also the
concrete panel elements agreement was executed and first buildings’
panelling started going up at the end of the quarter. As of the end
of Q3 we are totalling 44 total sales executed (40 apartments and 4
commercial units).
Within Kristiine City, we are actively advancing
the design and permit procedures for the "Dunte" project located at
Tondi Street 53. It is noteworthy that we have secured significant
concessions from the State Landmark Preservation Committee. This
includes the permission to expand the ground floor windows on the
rear side of the facade into floor-to-ceiling openings. This
adjustment enables us to craft more spacious residential units, to
offer improved sunlight exposure and direct access to small private
terraces.
Still in Kristiine City, we are evaluating the
possibility of starting the construction in Uus Kindrali, where we
already are holding a building permit and look forward to proceed
in the development when the market shows signs of interest in such
a project. We have contacted more than 500 prospective buyers, who
had previously shown interest in the project, with an early bird
offer and the initial feedback has been positive, with
2 000 - euro reservation fees in order to secure the units
which are preferred by the buyers. Given this preliminary feedback
from the market, we anticipate a very strong possibility of
starting the construction site in the early part of 2024. In
parallel with the presale efforts, we are actively engaging with
construction management to be ready with necessary personnel.
In Riga, our sales of the esteemed River Breeze
Residence, recipient of the Baltics Prestige Award for its
exceptional architecture, persist. Adding to the 6 sales in the
first semester, we concluded 3 more transactions during Q3, 2023.
Overall, we are witnessing an upward trajectory in the real estate
segment in Riga, specifically in connection with our project.
We possess a building permit for the City Oasis
residential quarter, comprising approximately 330 apartments and
spanning 32 500 square meters GBA, situated in Tallinas iela—a
serene and verdant living environment in the heart of the city. We
are poised to commence construction as soon as the market
conditions align favourably for this extensive and ambitious
undertaking.
Among the three capitals (Tallinn, Riga,
Vilnius), Riga presents the most formidable challenges in terms of
overall market conditions. Nonetheless, our outlook for the Latvian
real estate sector remains optimistic in the long run.
In 2019 we completed five buildings in Šaltinių
Namai Attico project in Vilnius with 115 apartments. Today we have
only 4 apartments unsold, out of which one is a model unit. During
Q2, we finalized the preparatory works for the start of
construction the final phase with city villas (43 units) and a
residential-commercial building. The agreement we signed with a
company providing construction project management services was able
to mobilize the site in Q3 and the excavation/ piling works have
started.
Despite the geopolitical situation, Vilnius
market is still quite active in the high-end segment 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 building in Naugarduko street for
the price of 6.25 million euros. The school will be converted into
a high-end residential property, consisting of circa 50 luxury
apartments. An architectural competition was carried out for the
purpose, and the winning studio has been in the process of
designing and carrying out the building permit process with the
city.
Hotel operations
Following two challenging years that
significantly impacted the global tourism sector due to the
pandemic, there is now a notable resurgence in demand within the
hotel industry.
In Bad Kreuznach, we have achieved a significant
operational break-even point despite a considerable portion of the
rooms being inaccessible to the public during ongoing renovations.
A few years back, we successfully refurbished half of the rooms
along with some common areas. The remaining room renovations
concluded by the end of Q1 2023, resulting in the availability of
the entire room inventory (116 units) for sale. We are already
witnessing an increase in the Average Daily Rate, and there are
promising trends indicating that we are surpassing the budgeted
proforma.
During Q3, we observe a consistent upward trend
with each month's actual performance exceeding the budget. Notably,
in July, the hotel was awarded a 4-star rating, a development that
is expected to further enhance our performance.
Other matters
On 20 September 2023 we have extended the terms
of 9.7 million euros of unsecured bonds issue, with an original
maturity date of 31 October 2024. The terms have been revised and,
in order to motivate the bondholders on the extension, the interest
rate has been increased to 9% from the previous agreed rate of 8%.
This minimal increase, despite the changed landscape in the
financial and bond markets in the past years, shows the great
confidence that the market has in the solidity of our Company. The
extension applies to 85% of the principal amount, whereas the
remaining 15% will be paid back at the original maturity date of 31
October 2024. The extension is structured for 2 years with the
possibility of prolonging it for an extra 2 years should the
Company deem it necessary to do so.
The real estate sector in the Baltic region has
demonstrated remarkable resilience both during the pandemic and
amid the current turbulent geopolitical climate. We remain
optimistic about our ability to advance our portfolio of projects
in line with market expectations, ensuring a consistent supply of
high-quality properties for the local community. Recognizing the
challenges of our times, we are committed to swift adaptation in an
ever-changing and fast-paced world, particularly concerning
construction works and the associated supply chain challenges and
material costs. Despite these challenges, our outlook for the
Baltic region remains highly positive, supported by the continuous
backing of the market.
Economically, the Baltic region is positioned
favourably, with Estonia, Latvia, and Lithuania having witnessed
sustained growth in recent years. This growth has been fuelled by
factors such as increased foreign investment, the expansion of the
service sector, and a focus on export-oriented manufacturing. The
region's proximity to Northern Europe and its EU membership have
bolstered trade and investment. While there has been a slowdown in
sales activity due to rising inflation and increased lending rates,
the close of Q3 confirms signs of stabilization. Data suggests that
salary increments are gradually catching up with inflation rates,
fostering market recovery.
Despite of the challenges posed by the global
macroeconomic climate and the geopolitical unrest arising from the
conflict in Ukraine, the positive indicators in the region remain
resilient. As we navigate the dynamic landscape of the real estate
sector, we continuously explore innovative strategies to anticipate
future needs and stay ahead of the curve for our clientele. With a
proactive approach to change and a vision that transcends
limitations, we move forward, fully attuned to the evolving global
panorama and prepared to seize every opportunity that arises.
Edoardo Preatoni CEO
Key financials
The total revenue of the
Company in nine months of 2023 was 20 million euros compared to
61.6 million euros in the reference period. The total revenue of
the third quarter was 3.9 million euros compared to 30.4 million
euros in 2022.
The real estate sales revenues are recorded when
premises are handed over to the buyer. Therefore, the revenues from
sales of real estate depend on the completion of the residential
developments. Nine months results include sales in Kindrali Houses
project in Tallinn and River Breeze in Riga. The real estate sales
of the reference period have been influenced by handing over
completed apartments in Kalaranna District in Tallinn.
The gross profit for nine
months of 2023 has decreased by 63% amounting to 6 million euros
compared to 16.2 million euros in 2022. The gross profit in the
third quarter was 1.5 million euros compared to 6.8 million euros
in comparative period.
The operating result in nine
months of 2023 was 1.7 million euros profit comparing to 12 million
euros profit during the same period in 2022. The operating result
for third quarter was 167 thousand euros profit compared to 5.6
million euros profit in the third quarter of 2022.
The net result for the nine
months of 2023 was 1 million euros loss, comparing to 8.7 million
euros profit in the reference period. The net result of the third
quarter was 732 thousand euros loss compared to 4.5 million euros
profit in 2022.
Cash generated in operating
activities during nine months of 2023 was 9.5 million
euros comparing to 19.6 million euros during the same period in
2022. In the third quarter the cash generated was 59 thousand euros
compared to 14.6 million euros in 2022.
Net assets per share on 30 September 2023
totalled to 0.96 euro compared to 0.91 euros on 30 September
2022.
Key performance indicators
|
2023 9M |
2022 9M |
2023 Q3 |
2022 Q3 |
2022 12M |
Revenue, th EUR |
19
969 |
61
628 |
3
857 |
30
434 |
65
654 |
Gross profit, th EUR |
6
000 |
16
211 |
1
544 |
6
849 |
16
965 |
Gross profit, % |
30% |
26% |
40% |
23% |
26% |
Operating result, th EUR |
1
667 |
11
990 |
167 |
5
577 |
17
657 |
Operating result, % |
8% |
19% |
4% |
18% |
27% |
Net result, th EUR |
-1
025 |
8
651 |
-732 |
4
546 |
13
452 |
Net result, % |
-5% |
14% |
-19% |
15% |
20% |
|
|
|
|
|
|
Earnings per share, EUR |
-0.02 |
0.15 |
-0.01 |
0.08 |
0.24 |
|
30.09.2023 |
30.09.2022 |
31.12.2022 |
Total Assets, th EUR |
100
674 |
99
731 |
101
256 |
Total Liabilities, th EUR |
46
376 |
48
237 |
45
933 |
Total Equity, th EUR |
54
298 |
51
494 |
55
323 |
Debt / Equity * |
0.85 |
0.94 |
0.83 |
|
|
|
|
Return on Assets, % ** |
-1% |
6.2% |
12.4% |
Return on Equity, % *** |
-1.9% |
28.3% |
27.4% |
Net asset value per share, EUR **** |
0.96 |
0.91 |
0.98 |
*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 |
30.09.2023 |
30.09.2022 |
31.12.2022 |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
13 781 |
11 088 |
10 589 |
Current receivables |
4 965 |
1 648 |
955 |
Prepaid expenses |
0 |
0 |
64 |
Inventories |
27 665 |
35 228 |
34 224 |
Total current
assets |
46 411 |
47 964 |
45 832 |
Non-current assets |
|
|
|
Non-current receivables |
12 |
2 017 |
2 016 |
Property, plant and equipment |
7 819 |
7 901 |
7 294 |
Right-of-use assets |
198 |
229 |
195 |
Investment property |
45 874 |
41 270 |
45 575 |
Goodwill |
262 |
262 |
262 |
Intangible assets |
98 |
88 |
82 |
Total non-current
assets |
54 263 |
51 767 |
55 424 |
TOTAL ASSETS |
100 674 |
99 731 |
101 256 |
LIABILITIES AND
EQUITY |
|
|
|
Current liabilities |
|
|
|
Current debt |
28 581 |
368 |
173 |
Customer advances |
3 048 |
2 614 |
1 659 |
Current payables |
3 236 |
4 308 |
4 626 |
Tax liabilities |
253 |
958 |
111 |
Short-term provisions |
5 |
662 |
5 |
Total current
liabilities |
35 123 |
8 910 |
6 574 |
Non-current liabilities |
|
|
|
Long-term debt |
10 027 |
38 153 |
38 184 |
Deferred income tax liabilities |
1 136 |
1 138 |
1 130 |
Long-term provisions |
90 |
36 |
45 |
Total non-current
liabilities |
11 253 |
39 327 |
39 359 |
TOTAL LIABILITIES |
46 376 |
48 237 |
45 933 |
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 |
2 012 |
2 984 |
2 012 |
Retained earnings |
34 153 |
30 377 |
35 178 |
TOTAL EQUITY |
54 298 |
51 494 |
55 323 |
TOTAL LIABILITIES AND
EQUITY |
100 674 |
99 731 |
101 256 |
Consolidated interim statements of comprehensive
income
in thousands of euros |
2023 9M |
2022 9M |
2023 Q3 |
2022 Q3 |
2022 12M |
CONTINUING
OPERATIONS |
|
|
|
|
|
Operating income |
|
|
|
|
|
Revenue |
19 969 |
61 628 |
3 857 |
30 434 |
65 654 |
Cost of goods sold |
-13 969 |
-45 417 |
-2 313 |
-23 585 |
-48 689 |
Gross profit |
6 000 |
16 211 |
1 544 |
6 849 |
16 965 |
|
|
|
|
|
|
Marketing expenses |
-486 |
-345 |
-187 |
-108 |
-498 |
Administrative expenses |
-3 860 |
-3 743 |
-1 204 |
-1 085 |
-4 946 |
Other income |
16 |
9 |
16 |
1 |
6 278 |
Other expenses |
-3 |
-142 |
-2 |
-80 |
-142 |
Operating profit/
loss |
1 667 |
11 190 |
167 |
5 577 |
17 657 |
|
|
|
|
|
|
Financial income |
174 |
2 |
86 |
1 |
3 |
Financial expense |
-2 858 |
-3 336 |
-982 |
-1 032 |
-4 211 |
Profit / loss before income
tax |
-1 017 |
8 656 |
-729 |
4 546 |
13 449 |
Income tax |
-8 |
-5 |
-3 |
0 |
3 |
Net profit / loss for the
period |
-1 025 |
8 651 |
-732 |
4 546 |
13 452 |
|
|
|
|
|
|
Other comprehensive income
net of income tax: |
Net change in asset revaluation
reserve |
0 |
0 |
0 |
0 |
-972 |
Total comprehensive income/
loss for the year |
-1 025 |
8 651 |
-732 |
4 546 |
12 480 |
|
|
|
|
|
|
Earnings per share for the period
€ |
-0.02 |
0.15 |
-0.01 |
0.08 |
0.24 |
The full report can be found in the file attached.
Angelika AnnusCFO+372 614 4920prokapital@prokapital.ee
Pro Kapital Grupp As (LSE:0QCX)
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