Consolidated interim report for III quarter and 9 months of 2018 (unaudited)MANAGEMENT REPORT
Chairman's summary
I am proud to say, the flagship of our developments, T1 Mall of Tallinn, opened its doors in early November. Thus, I am first and foremost grateful to our team, who has done an outstanding work. Reflecting back on the nine months of 2018, this has been an extensive work with the largest single-object development project. I would, however, like to stress that a shopping mall is not a completed project, instead needs to be in continuous movement to foresee the expectations of the people. T1 Mall of Tallinn will continue to grow and open milestones step-by-step, which is very positive due to public attention it will receive prior to Holiday season this ongoing fourth reporting quarter. We have strategically left vacancy for attractive retail operators and intend to proceed negotiations during following periods. In parallel with the development of the T1 Mall of Tallinn, we continued work with ongoing residential development projects in Tallinn, Vilnius and Riga. Pro Kapital is not merely developing buildings but entire communities, that bring new breathing into unique areas. According to our conservative strategy, all development projects are carried out in phases. This allows us to set up the pace according to the market needs. One of the largest residential quarter developments in the Baltics is Kristiine City in Tallinn. We completed the renovation of Marsi 6 into a loft apartment building in spring 2018. Uniquely designed apartments have been incredibly popular amongst our customers and all lofts are sold. We have completed 5 of ten Kristina Houses and are proceeding with the following phases. The activity of sales of both Marsi 6 and Kristina Houses, is a clear demonstration of a great interest towards the new residential area. Another outstanding development we are soon to start in Tallinn is Kalaranna Quarter, located at the heart of Tallinn at the waterfront. By this being a prime development property in Tallinn it expands on more than 6 hectares. We have learned a great interest towards the project, from the local but also from the Finnish market. Thus, we started the presale for the project in summer 2018. We expect to start the construction works in 2019. In Riga, we are currently developing a unique residential quarter Kliversala, which is one of the very few residential spaces directly at the waterfront, with stunning views over the river Daugava to the old town of Riga. Like all our projects, Kliversala quarter will be completed in stages. In spring 2018 we finished construction works of the first phase – a prestigious River Breeze Residence. We are currently in the process of sales for luxurious apartments in the residence. Pro Kapital will continue with the development of following phases of Kliversala. In parallel we are proceeding with other major developments in Riga. Projecting works are ongoing for Tallinas Residential Complex and office complex in Zvaigznes Quarter. Our prestigious large-scale development in Vilnius is a new quarter surrounded by nature in the most tranquil part of Vilnius Old Town on UNECSO heritage site. The first phase of the development of the residential quarter Šaltinių Namai has, to date, been almost sold. The construction works for the second stage of the residential buildings are ongoing and we are actively pursuing the sales. We expect to complete four buildings of the second stage during the second quarter of 2019. The Company is planning to obtain new attractive developments in Vilnius, aimed at starting new projects following the completion of Šaltinių Namai. Excellent results during nine months The Company has shown improved results for the nine months of 2018 due to the completion of development projects and intensive sales activity. At the end of the reporting period, the net revenue increased by 170% or by 13 million euros compared to the same period of 2017, reaching to 21 million euros. The net profit was 2 million euros compared to 2 million euros loss during the same period of 2017. Overall loans from financial institutions were 60.3 million euros as at 30 September 2018. The loans from minority shareholders including interests were 0.5 million euros. The Company has 10.2 million euros worth convertible bonds debt and 28.3 million euros worth non-convertible bonds debt at the end of reporting date. I am proud to acknowledge our team is remarkably stable. This allows me to say with full confidence that our inhouse competence can insure that the development projects are designed down to the last detail to deliver quality through the operations. As at
30 September 2018 there were 89 employees working in the Company, 44 of them were employed in the hotel and property maintenance business. Paolo Michelozzi
CEO
Key performance indicators
Total revenue was 21.0 million euros, which is an increase of 170% compared to the reference period (2017 9M: 7.8 million euros from continuing operations and 9.8 million euros including discontinued operations). Total revenue of the third quarter was 6.0 million euros comparing to 1.8 million euros from continuing operations in 2017 (2.3 million 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 6.9 million euros, which is an increase of 172% compared to the reference period (2017 9M: 2.5 million euros for continuing operations and
3.3 million euros including discontinued operations). Gross profit of the third quarter was 1.9 million euros comparing to 0.7 million euros from continuing operations in 2017 (1.0 million euros including discontinued operations).
Operating result increased by 5.5 million euros (739%) compared to the reference period, totalling to operating profit of 4.8 million euros (2017 9M: loss of 0.7 million euros for continuing operations and loss of 0.2 million euros including discontinued operations). Operating profit of the third quarter was 0.4 million euros comparing to 0.1 million euros from continuing operations in 2017 (0.3 million euros including discontinued operations). Operating result of nine months 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 1.9 million euros (Note 7).
Net result increased positively by 4.2 million euros (218%) compared to the reference period and totalling to positive result of 2.3 million euros (2017 9M: loss of 1.9 million euros for continuing operations and loss of 1.4 million euros including discontinued operations). Net loss of the third quarter was 0.5 million euros comparing to 0.7 million euros profit from continuing operations in 2017 (0.9 million euros profit including discontinued operations).
Cash generated from operating activities was 3.4 million euros (2017 9M: cash used in operating activities was -3.1 million euros). In the third quarter cash generated from operating activities was 0.3 million euros comparing to 1.0 million euros during the same period in 2017.
Net assets per share on 30 September 2018 totalled to 1.50 euros (30 September 2017: 1.44 euros). | | Continuing operations
| Continuing and discontinued operations
| | | 2018
9 months | 2017
9 months | 2018
Q3 | 2017
Q3 | 2018
9 months | 2017
9 months | 2018
Q3 | 2017
Q3 | | | | | | | | | | | | Revenue, th EUR | 21 043 | 7 796 | 5 978 | 1 773 | 21 043 | 9 817 | 5 978 | 2 251 | | Gross profit, th EUR | 6 892 | 2 531 | 1 859 | 730 | 6 892 | 3 309 | 1 859 | 962 | | Gross profit, % | 33% | 32% | 31% | 41% | 33% | 34% | 31% | 43% | | Operating result, th EUR | 4 779 | -748 | 350 | 107 | 4 779 | -222 | 350 | 302 | | Operating result, % | 23% | -10% | 6% | 6% | 23% | -2% | 6% | 13% | | Net result, th EUR | 2 279 | -1 931 | -543 | 685 | 2 279 | -1 441 | -543 | 870 | | Net result, % | 11% | -25% | -9% | 39% | 11% | -15% | -9% | 39% | | | | | | | | | | | | Earnings per share, EUR | 0,04 | -0,04 | -0,01 | 0,01 | 0,04 | -0,03 | -0,01 | 0,02 |
| | 30.09.2018 | 30.09.2017 | 31.12.2017 | | | | | | | Total Assets, th EUR | 208 798 | 158 854 | 175 158 | | Total Liabilities, th EUR | 123 837 | 80 570 | 92 476 | | Total Equity, th EUR | 84 961 | 78 284 | 82 682 | | Debt / Equity | 1,46 | 1,03 | 1,12 | | | | | | | Return on Assets, % | 1,2% | -1,0% | -0,3% | | Return on Equity, % | 2,7% | -1,8% | -0,6% | | Net asset value per share, EUR | 1,50 | 1,44 | 1,46 |
CONSOLIDATED FINANCIAL STATEMENTS
Consoldated interim statement of financial position thousand euros
| 30.09.2018 | 30.09.2017 | 31.12.2017 | | ASSETS | | | | | Current assets | | | | | Cash and cash equivalents | 7 079 | 8 793 | 10 317 | | Current receivables | 4 055 | 4 054 | 4 888 | | Inventories | 56 661 | 33 803 | 38 024 | Total current assets
| 67 795 | 40 650 | 53 229 | | Non-current assets | | | | | Non-current receivables | 35 | 39 | 37 | | Property, plant and equipment | 7 127 | 7 260 | 7 435 | | Investment property | 133 530 | 104 608 | 114 140 | | Intangible assets | 311 | 297 | 317 | | Total non-current assets | 141 003 | 112 204 | 121 929 | TOTAL ASSETS
| 208 798 | 158 854 | 175 158 | | | | | | | LIABILITIES AND EQUITY | | | | Current liabilities
| | | | | Current debt | 8 184 | 5 524 | 6 738 | | Customer advances | 5 171 | 6 352 | 7 224 | | Current payables | 11 662 | 7 602 | 10 091 | | Tax liabilities | 181 | 254 | 132 | | Short-term provisions | 642 | 155 | 170 | | Total current liabilities | 25 840 | 19 887 | 24 355 | | Non-current liabilities | | | | | Non-term debt | 91 177 | 55 172 | 62 527 | | Other non-current payables | 4 688 | 2 786 | 3 437 | | Deferred income tax | 2 003 | 2 635 | 2 058 | | Long-term provisions | 129 | 90 | 99 | | Total non-current liabilities | 97 997 | 60 683 | 68 121 | | TOTAL LIABILITIES | 123 837 | 80 570 | 92 476 | | | | | | Equity attributable to the 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 | 3 259 | 3 256 | | Retained earnings | 59 944 | 61 220 | 60 369 | | Profit/ loss for the period | 2 320 | 1 374 | -419 | Total equity attributable to the owners of the Company
| 83 607 | 76 857 | 81 287 | | Non-controlling interest | 1 354 | 1 427 | 1 395 | | TOTAL EQUITY | 84 961 | 78 284 | 82 682 | | | | | | | TOTAL LIABILITIES AND EQUITY | 208 798 | 158 854 | 175 158 |
Consolidated interim statements of comprehensive income
thousand euros
| 2018 9M | Adjusted
2017 9M | 2018 Q3 | Adjusted
2017 Q3 | 2017 12M | | | | | | | | | CONTINUING OPERATIONS | | | | | | Operating income
| | | | | | Revenue
| 21043 | 7796 | 5978 | 1773 | 12077 | Cost of goods sold
| -14151 | -5265 | -4119 | -1043 | -7516 | Gross profit
| 6 892 | 2 531 | 1 859 | 730 | 4 561 | | | | | | | | Marketing expenses
| -706 | -636 | -247 | -182 | -822 | Administrative expenses
| -4037 | -3757 | -1714 | -1307 | -5256 | Other income
| 2679 | 1569 | 469 | 1296 | 4114 | Other expenses
| -49 | -455 | -17 | -430 | -800 | | Operating profit/ loss | 4 779 | -748 | 350 | 107 | 1 797 | | | | | | | | | Financial income | 3 | 1399 | 1 | 1440 | 6 | | Financial expense | -2548 | -2581 | -887 | -882 | -3352 | | Profit/ loss before income tax | 2 234 | -1 930 | -536 | 665 | -1 549 | | Income tax | 45 | -1 | -7 | 20 | 596 | | Profit/ loss from continuing operations | 2 279 | -1 931 | -543 | 685 | -953 | | | | | | | | | Profit from discontinued operations | 0 | 490 | 0 | 185 | 435 | | Profit/ loss for the period | 2 279 | -1 441 | -543 | 870 | -518 | | Attributable to: | | | | | | | Equity holders of the parent | 2 320 | -1 374 | -550 | 891 | -419 | | Non-controlling interest | -41 | -67 | 7 | -21 | -99 | | | | | | | | Other comprehensive income, net of income tax
| | | | | | | Income that will not be reclassified subsequent to profit | | | | | | Net chnage in properties revaluation reserve
| 0 | 0 | 0 | 0 | -4 | | Total comprehensive income for the year | 2 279 | -1 441 | -543 | 870 | -522 | | Attributable to: | | | | | | | Equity holders of the parent | 2 320 | -1 374 | -550 | 891 | -423 | | Non-controlling interest | -41 | -67 | 7 | -21 | -99 | | | | | | | | Earnings per share from continuing operations (EUR)
| 0,04 | -0,04 | -0,01 | 0.01 | -0,02 | | Earnings per share for the period (EUR) | 0,04 | -0,03 | -0,01 | 0,02 | -0,01 |
Consolidated interim statements of cash flows | thousand euros | 2018
9M |
2017
9M | 2018
Q3 | 2017
Q3 | 2017
12M | | | | | | | | | Cash flows from operating activities | | | | | | Profit/ loss for the period
| 2 279 | -1 441 | -543 | 870 | -518 | | Adjustment for: | | | | | | | Depreciation, amortisation of non-current assets | 158 | 475 | 54 | 124 | -455 | | Gain from disposal of property, plant and equipment | -4 | -1274 | 0 | -1 247 | -3 045 | | Gain from disposal of investment property | -418 | 0 | -418 | 0 | 0 | | Change in fair value of property, plant and equipment | 0 | 0 | 0 | 0 | -26 | | Change in fair value of investment property | -1 910 | 0 | 0 | 0 | -530 | | Profit/loss from disposal of shares of subsidiaries | 0 | -1 452 | 0 | -1 452 | 346 | | Finance income and costs | 2 545 | 2 645 | 885 | 901 | 3 460 | | Other non-monetary changes (net amounts) | 16 827 | 13 401 | 2 790 | 142 | 12 410 | | Changes in working capital: | | | | | | | Trade receivables and prepayments | 842 | 425 | -894 | 685 | -408 | | Inventories | -18 637 | -19 659 | -2 001 | -4 279 | -23 880 | | Liabilities and prepayments | 1 246 | 4 189 | -227 | 3 192 | 6 556 | | Provisions | 502 | -124 | 612 | 51 | -101 | Net cash used in/ generated by operating activities
| 3 430 | -3 148 | 258 | 1 013 | -5 281 | | | | | | | | | Cash flows from investing activities | | | | | | Payments for property, plant and equipment
| -166 | -154 | -76 | -13 | -281 | | Payments for intangible assets | -7 | -30 | -7 | -6 | -52 | | Proceeds from disposal of property, plant and equipment | 336 | 6 651 | 0 | 6 651 | 6 651 | Payments for investment property
| -31 084 | -17 348 | .-8 898 | -8 291 | -24 772 | | Net cash from disposal of shares of subsidiaries | 0 | 6 235 | 0 | 6 235 | 6 249 | | Interests received | 3 | 4 | 1 | 1 | 6 | | Nets cash used in/ generated by investing activities | -30 918 | -4 642 | -8 980 | 4 577 | -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 | -480 | 0 | 0 | -480 | | Proceeds from the bonds | 0 | 1 446 | 0 | 282 | 1 446 | | Redemption of the bonds | -643 | -773 | -643 | -234 | -773 | Proceeds from borrowings
| 33 474 | 19 276 | 10 960 | 8 242 | 28 260 | | Repayment of borrowings | -5 509 | -6 139 | -754 | -5 815 | -7 048 | Interests paid
| -2 222 | -2 129 | -473 | -427 | -3 318 | | Nets cash used in/ generated by financing activities | 24 250 | 11 201 | 9 090 | 2 048 | 22 415 | | | | | | | | Net change in cash and cash equivalents
| -3 238 | 3 411 | 368 | 5 612 | 4 935 | | | | | | | | | Cash and cash equivalents at the beginning of the period | 10 317 | 5 382 | 6 711 | 3 181 | 5 382 | | Cash and cash equivalents at the end of the period | 7 079 | 8 793 | 7 079 | 8 793 | 10 317 |
Allan Remmelkoor
Member of the Board
+372 614 4920
prokapital@prokapital.ee
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