Consolidated interim report for II quarter and 6 months of 2018 (unaudited) MANAGEMENT REPORT Chairman’s summary During the first half of the year Pro Kapital continued construction works of the new T1 Mall of Tallinn shopping and entertainment centre in Tallinn, which is the Company´s largest single-object development project. The Company is continuously carrying out negotiations to find suitable retail operators for the T1, either international or local. The T1 Mall of Tallinn is expected to be opened this autumn. The Company continued the development of residential areas of Kristiine City in Tallinn, Kliversala in Riga and Šaltinių Namai in Vilnius. In Tallinn, Kristiine City, the Company has completed five of ten Kristina Houses where 149 apartments out of 155 have been handed over to the clients. Following phase of Kristina Houses is currently ongoing with two buildings under development. Each building has 31 apartments. With active presale being carried out simultaneously to construction works, altogether 36 apartments have been presold. Presales have started also for the last set of three buildings of Kristina Houses in Sammu Street, construction of which is expected to commence this autumn. The Company completed renovation of Marsi 6 into a loft apartment building this spring. Being a very popular project in co-operation with Estonian designers, only 1 flat of 45 is still available for sale. Kalaranna residential development projecting works in Tallinn are ongoing for obtaining the building permit. As the interest for the project is very high, we have started with initial reservations in July. We are proud to announce that 7 reservations have been already made. The Company finished the construction works of prestigious River Breeze Residence in Kliversala, Riga, this spring. 6 out of 47 luxury apartments have already been handed over to the clients and two will be handed over in the nearest future. Sales for 39 apartments of River Breeze Residence is currently ongoing. The Company is proceeding with other key projects in Riga. The following phase of Kliversala and Tallinas Residential Complex projecting works are ongoing, as well as the office complex in Zvaigznes Quarter.
In Vilnius the first stage of Šaltinių Namai development has been almost sold. Last year the construction works for the second stage residential buildings started and
74 preliminary agreements have been already signed. Four buildings of the second stage should be completed in the middle of 2019. The Company is interested in obtaining new attractive developments in the region, to start new projects after the completion of Šaltinių Namai. Excellent results At the end of the reporting period the Company recorded net revenue of 15.1 million euros, an increase of 150% as compared to 6.0 million euros in the same period in 2017. Revenues have increased in real estate segment due to completion of 3 apartment buildings in Tallinn and 1 in Riga as the revenues are recorded at the moment notary deed of sale is concluded. The net profit was 2.8 million euros profit for the first six months in 2018, which was 210% better as compared to 2.6 million euros loss during the same period in 2017. The Company is working on increasing its efficiency and results show significant improvement. For 2018 we foresee a positive year end result, which is influenced by completion of residential real estate developments in Tallinn and in Riga and opening of T1 Mall of Tallinn. Overall loans from financial institutions were 48.9 million euros as at 30 June 2018. The loans from minority shareholders were 0.3 million euros. The Company had 10.2 million euros worth convertible bonds debt and 29.1 million euros worth non-convertible bonds debt at the end of reporting date. As at 30 June 2018 there were 87 employees working in the Company, 44 of them were employed in the hotel and property maintenance business. Paolo Michelozzi
CEO Key figures Total revenue was 15 065 thousand euros, which is an increase of 150% compared to the reference period (2017 6M: 6 024 thousand euros from continuing operations and 7 566 thousand euros including discontinued operations). Total revenue of the second quarter was 8 267 thousand euros comparing to 2 950 thousand euros from continuing operations in 2017 (3 952 thousand euros including discontinued operations). Revenues of the Company depend on completing residential developments, as sales revenues are recorded at the moment of handing over the premises. Improved results of 2018 were influenced by the completion of the 4th and 5th apartment buildings in the Kristina Houses development, renovation works of Marsi 6 in Tallinn and River Breeze Residence in Riga, as presales were turned into notarised sales transactions.
Gross profit was 5 033 thousand euros, which is an increase of 185% compared to the reference period (2017 6M: 1 768 thousand euros for continuing operations and 2 347 thousand euros including discontinued operations). Gross profit of the second quarter was 3 229 thousand euros comparing to 954 thousand euros from continuing operations in 2017 (1 412 thousand euros including discontinued operations). Gross profit margin of continuing operations increased by 14%.
Operating result increased by 5 333 thousand euros (590%) compared to the reference period, totalling to operating profit of 4 429 thousand euros (2017 6M: loss of 904 thousand euros for continuing operations and loss of 524 thousand euros including discontinued operations). Operating profit of the second quarter was 3 742 thousand euros comparing to 379 thousand euros loss from continuing operations in 2017 (27 thousand euros loss including discontinued operations). Operating result includes profit from revaluation of Kalaranna project. The project was revalued in connection to reclassification from investment property into inventories. The increase in the value comparing to last year end valuation is related to change of input information in terms of volumes of construction of the project. Total impact from revaluation is 1 910 thousand euros.
Net result increased positively by 5 394 thousand euros (210%) compared to the reference period and totalling to positive result of 2 822 thousand euros (2017 6M: loss of 2 572 thousand euros for continuing operations and loss of 2 310 thousand euros including discontinued operations). Net profit of the second quarter was 2 940 thousand euros comparing to 1 170 thousand euros loss from continuing operations in 2017 (881 thousand euros loss including discontinued operations).
Cash generated from operating activities was 3 172 thousand euros (2017 6M: cash used in operating activities was 2 135 thousand euros). In the second quarter cash generated from operating activities was 269 thousand euros comparing to 423 thousand euros during same period in 2017.
Net assets per share on 30 June 2018 totalled to 1.51 euros (30 June 2017: 1.43 euros). | | Continuing operations | Continuing and discontinued operations* | | | 2018 6M | 2017 6M | 2018 Q2 | 2017 Q2 | 2018 6M | 2017 6M | 2018 Q2 | 2017
Q2 | | | | | | | | | | | | Revenue, th EUR | 15 065 | 6 024 | 8 267 | 2 950 | 15 065 | 7 566 | 8 267 | 3 952 | | Gross profit, th EUR | 5 033 | 1 768 | 3 229 | 954 | 5 033 | 2 347 | 3 229 | 1 412 | | Gross profit, % | 33% | 29% | 39% | 32% | 33% | 31% | 39% | 36% | | Operating result, th EUR | 4 429 | -904 | 3 742 | -379 | 4 429 | -524 | 3 742 | -27 | | Operating result, % | 29% | -15% | 45% | -13% | 29% | -7% | 45% | -1% | | Net result, th EUR | 2 822 | -2 572 | 2 940 | -1 170 | 2 822 | -2 310 | 2 940 | -881 | | Net result, % | 19% | -43% | 36% | -40% | 19% | -31% | 36% | -22% | | | | | | | | | | | | Earnings per share, EUR | 0.05 | -0.05 | 0.05 | -0.02 | 0.05 | -0.03 | 0.05 | -0.02 |
*Comparable period includes discontinued hotel operations in Tallinn and Riga | | 30.06.2018 | 30.06.2017 | 31.12.2017 | | | | | | | Total Assets, th EUR | 197 777 | 151 944 | 175 158 | | Total Liabilities, th EUR | 112 273 | 74 529 | 92 476 | | Total Equity, th EUR | 85 504 | 77 415 | 82 682 | | Debt / Equity | 1.31 | 0.96 | 1.12 | | | | | | | Return on Assets, % | 1.5% | -1.6% | -0.3% | | Return on Equity, % | 3.4% | -2.9% | -0.6% | | Net asset value per share, EUR | 1.51 | 1.43 | 1.46 |
CONSOLIDATED FINANCIAL STATEMENTS Consolidated interim statement of financial position | in thousands of euros | 30.06.2018 | 30.06.2017 | 31.12.2017 | | ASSETS | | | | | Current assets | | | | | | Cash and cash equivalents | 6 711 | 3 181 | 10 317 | | | Current receivables | 3 153 | 4 737 | 4 888 | | | Inventories | 57 078 | 29 524 | 38 024 | | Total current assets | 66 942 | 37 442 | 53 229 | | Non-current assets | | | | | | Non-current receivables | 35 | 40 | 37 | | | Property, plant and equipment | 7 101 | 18 130 | 7 435 | | | Investment property | 123 390 | 96 038 | 114 140 | | | Intangible assets | 309 | 294 | 317 | | Total non-current assets | 130 835 | 114 502 | 121 929 | | TOTAL ASSETS | 197 777 | 151 944 | 175 158 | | | | | | | LIABILITIES AND EQUITY | | | | | Current liabilities | | | | | | Current debt | 9 319 | 7 319 | 6 738 | | | Customer advances | 5 070 | 5 290 | 7 224 | | | Current payables | 12 597 | 5 316 | 10 091 | | | Tax liabilities | 116 | 318 | 132 | | | Short-term provisions | 7 | 145 | 170 | | Total current liabilities | 27 109 | 18 388 | 24 355 | | Non-current liabilities | | | | | | Long-term debt | 79 273 | 50 580 | 62 527 | | | Other non-current payables | 3 738 | 2 182 | 3 437 | | | Deferred income tax liabilities | 2 003 | 3 330 | 2 058 | | | Long-term provisions | 150 | 49 | 99 | | Total non-current liabilities | 85 164 | 56 141 | 68 121 | | TOTAL LIABILITIES | 112 273 | 74 529 | 92 476 | | | | | | | Equity attributable to owners of the Company | | | | | | Share capital in nominal value | 11 338 | 10 854 | 11 338 | | | Share premium | 5 661 | 1 816 | 5 661 | | | Statutory reserve | 1 082 | 1 082 | 1 082 | | | Revaluation reserve | 3 262 | 9 462 | 3 256 | | | Retained earnings | 59 944 | 55 017 | 60 369 | | | Loss for the period | 2 870 | -2 265 | -419 | | Total equity attributable to owners of the Company | 84 157 | 75 966 | 81 287 | | Non-controlling interest | 1 347 | 1 449 | 1 395 | | TOTAL EQUITY | 85 504 | 77 415 | 82 682 | | | | | | | TOTAL LIABILITIES AND EQUITY | 197 777 | 151 944 | 175 158 |
Consolidated interim statements of comprehensive income | in thousands of euros | 2018 6M | Adjusted
2017 6M* | 2018 Q2 | Adjusted
2017 Q2* | 2017 12M | | | | | | | | | Continuing operations: | | | | | | | Operating income | | | | | | | Revenue | 15 065 | 6 024 | 8 267 | 2 950 | 12 077 | | Cost of goods sold | -10 032 | -4 256 | -5 038 | -1 996 | -7 516 | | Gross profit | 5 033 | 1 768 | 3 229 | 954 | 4 561 | | | | | | | | | Marketing expenses | -459 | -454 | -280 | -266 | -822 | | Administrative expenses | -2 323 | -2 466 | -1 238 | -1 273 | -5 256 | | Other income | 2 210 | 273 | 2 034 | 228 | 4 114 | | Other expenses | -32 | -25 | -3 | -22 | -800 | | Operating profit/ loss | 4 429 | -904 | 3 742 | -379 | 1 797 | | | | | | | | | Financial income | 2 | 2 | 1 | 1 | 6 | | Financial expense | -1 661 | -1 657 | -802 | -810 | -3 352 | | Profit/ loss before income tax | 2 770 | -2 559 | 2 941 | -1 188 | -1 549 | | Income tax | 52 | -13 | -1 | 18 | 596 | | Profit/ loss from continuing operations | 2 822 | -2 572 | 2 940 | -1 170 | -953 | | | | | | | | | Profit from discontinued operations* | 0 | 262 | 0 | 289 | 435 | | Profit/ loss for the period | 2 822 | -2 310 | 2 940 | -881 | -518 | | | | | | | | | Attributable to: | | | | | | | Equity holders of the parent | 2 870 | -2 265 | 2 966 | -854 | -419 | | Non-controlling interest | -48 | -45 | -26 | -27 | -99 | | | | | | | | | Other comprehensive income, net of income tax | | | | | | | | Income that will not be reclassified subsequently to profit | | | | | | | | Net change in properties revaluation reserve | 0 | 0 | 0 | 0 | -4 | | Total comprehensive income for the year | | | | | | | Attributable to: | | | | | | | Equity holders of the parent | 2 870 | -2 265 | 2 966 | -854 | -423 | | Non-controlling interest | -48 | -45 | -26 | -27 | -99 | | | | | | | | | Earnings per share from continuing operations (EUR) | 0.05 | -0.05 | 0.05 | -0.02 | -0.02 | | Earnings per share for the period (EUR) | 0.05 | -0.04 | 0.05 | -0.02 | -0.01 |
*2017 comparable information of the reporting period has been adjusted by separating discontinued operations from financial results and indicating them as a total net result on a separate line "profit from discontinued operations".
Consolidated interim statements of cash flows | in thousands of euros | 2018 6M | 2017 6M | 2018 Q2 | 2017 Q2 | 2017 12M | | | | | | | | | Cash flows from operating activities | | | | | | | Loss for the year | 2 822 | -2 310 | 2 940 | -881 | -518 | | Adjustments for: | | | | | | | Depreciation, amortisation of non-current assets | 104 | 351 | 52 | 176 | 455 | | Gain from disposal of property, plant, equipment | -4 | 0 | 14 | 0 | -3 045 | | Change in fair value of property, plant, equipment | 0 | 0 | 0 | 0 | -26 | | Change in fair value of investment property | -1 910 | 0 | -1 910 | 0 | -530 | | Loss from disposal of shares of subsidiaries | 0 | 0 | 0 | 0 | 346 | | Finance income and costs | 1 659 | 1 744 | 801 | 857 | 3 460 | | Other non-monetary changes (net amounts) | 16 456 | 12 898 | 16 109 | 314 | 12 410 | | Changes in working capital: | | | | | | | Trade receivables and prepayments | 1 736 | -260 | 1 306 | -167 | -408 | | Inventories | -19 054 | -15 380 | -17 590 | -2 438 | -23 880 | | Liabilities and prepayments | 1 528 | 997 | -1 322 | 2 749 | 6 556 | | Provisions | -110 | -175 | -129 | -187 | -101 | | Net cash used in/ generated by operating activities | 3 172 | -2 135 | 269 | 423 | -5 281 | | | | | | | | | Cash flows from investing activities | | | | | | | Payments for property, plant and equipment | -90 | -141 | -33 | -43 | -281 | | Payments for intangible assets | 0 | -24 | 0 | 0 | -52 | | Proceeds from disposal of property, plant, equipment | 336 | 0 | 0 | 0 | 6 651 | | Payments for investment property | -22 186 | -9 057 | -12 896 | -4 972 | -24 772 | | Net cash from disposal of shares of subsidiaries | 0 | 0 | 0 | 0 | 6 249 | | Interests received | 2 | 3 | 1 | 2 | 6 | | Net cash used in by investing activities | -21 938 | -9 219 | -12 928 | -5 013 | -12 199 | | | | | | | | | Cash flows from financing activities | | | | | | | Proceeds from increase of share capital | 0 | 0 | 0 | 0 | 4 328 | | Dividend payment | -850 | 0 | 0 | 0 | 0 | | Net changes related to non-controlling interests | 0 | 0 | 0 | 0 | -480 | | Proceeds from bonds | 0 | 0 | 0 | 0 | 1 446 | | Redemption of convertible bonds | 0 | -539 | 0 | -17 | -773 | | Proceeds from borrowings | 22 514 | 11 034 | 15 071 | 4 584 | 28 260 | | Repayment of borrowings | -4 755 | -324 | -2 704 | -156 | -7 048 | | Interests paid | -1 749 | -1 702 | -1 222 | -1 135 | -3 318 | | Net cash generated by financing activities | 15 160 | 9 153 | 11 145 | 4 440 | 22 415 | | | | | | | | | Net change in cash and cash equivalents | -3 606 | -2 201 | -1 514 | -150 | 4 935 | | | | | | | | | Cash and cash equivalents at the beginning of the period | 10 317 | 5 382 | 8 225 | 3 331 | 5 382 | | Cash and cash equivalents at the end of the period | 6 711 | 3 181 | 6 711 | 3 181 | 10 317 |
Allan Remmelkoor
Member of the Board
+372 614 4920
prokapital@prokapital.ee
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