Published: 2019-01-30 14:30:00 CET
Pro Kapital Grupp
Quarterly report

Consolidated Interim Report for IV Quarter and 12 Months of 2018 (Unaudited)

 

MANAGEMENT REPORT

Chairman’s summary

The year 2018 has been significant for Pro Kapital, with respect to reaching important milestones in the operations which in turn is demonstrated by financial performance of the Company. We have shown stable growth through our business and continue to focus on improving our results.

Pro Kapital aims to strengthen its position as one of the largest and strongest real-estate companies in the Baltics, with more than ever emphasis on all aspects of the business. I’m especially glad to highlight that in the fourth quarter of 2018, Pro Kapital opened a one of a kind shopping and entertainment centre T1 Mall of Tallinn, right at the heart of the future transportation centre of Tallinn. This new landmark will continue to grow and is expected to welcome a unique ferris wheel to be installed on the roof of the mall in early spring of 2019.

As of 19 November 2018, the Company’s shares are traded on the Nasdaq Tallinn Stock Exchange Main List. We are more than ever dedicated in building new communities and aspire sharing our story with investors as equally as with the public.

Building new communities

Our business is not merely about building houses but establishing entire communities and improving the living environment. The Company has nearly 25 years of experience identifying upcoming opportunities and thereby add new value to the areas of development. One of the most significant ongoing developments in Tallinn, the Kristiine City area, allows to expect increase in real-estate price in the entire surrounding area. We develop in multiple phases and have completed six of ten Kristina Houses, in one of the ongoing phases of the whole area. We have sold 155 new homes in five apartment buildings and completed the sixth building in December 2018 with 8 flats yet to be sold. Development of the following four Kristina Houses is currently ongoing. With active presale being carried out simultaneously to construction works, altogether 43 apartments have been presold.

Pro Kapital is in progress with projecting works for a prestigious Kalaranna residential and commercial area, right at the border of Tallinn’s old town. Kalaranna’s unique location just by the bay of Tallinn is making it as one of the most exclusive development projects in town. As a result of increasing interest towards the project, we have started with initial reservations in July 2018. Although we have not yet started the construction nor advertising, we have, to date, made 76 reservations to residential premises in Kalaranna.

In Riga, we are building Kliversala residential area which is a true sight to see in the city centre. The new living area is located right on the bank of the Daugava river on the shore of Agenskalna bay. We finished the construction works of the prestigious River Breeze Residence in spring 2018. We are currently proceeding with the sales of remaining 37 luxury apartments in the residence. Following the completion and ongoing sale of River Breeze Residence, we’re proceeding with the following phase of Kliversala, but also other development projects. Tallinas residential quarter is a modern combination of new and restored historical buildings, for which the projecting works are ongoing. Another new area development Zvaigznes Quarter, for which the projecting is ongoing at this point in time, represents a commercial property for an office complex and be built on the site of a former factory.

In Vilnius, Pro Kapital is developing a Šaltinių Namai area, bordering with and offering a stunning view from the top-hill to the historic old town. The first phase of yhe development is completed and almost sold out. In 2017 the construction works for the second stage of residential buildings, Šaltinių Namai Attico, started and 77 preliminary agreements have been already signed. Four buildings of Šaltinių Namai Attico development are expected to be completed in the middle of 2019. The Company is looking into obtaining new attractive developments in the region, to start new projects after the completion of Šaltinių Namai.

Continuous improvement in the financial results 

The completion of multiple development phases, that have proven to attract the market’s interest, is clearly demonstrated by good financial results for the reporting period. At the end of 2018, the Company recorded net revenue of 28 million euros, an increase of 99% as compared to 14.1 million euros during the same period in 2017. Revenues have increased in real estate segment due to completion of 4 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 18 million euros, which was 18.5 million euros improvement comparing to 0.5 million euros loss during the same period in 2017. The net result was significantly influenced by increased value of investment property due to completion and opening of T1 Mall of Tallinn.
We are continuously focused on improving the efficiency. The Company is exploring opportunities to reduce financial costs by refinancing current debt instruments. We foresee stable growth in revenues and operating results during the upcoming periods.

As at the end of 2018, the Company’s overall loans from financial institutions were 83.3 million euros. The loans from the minority shareholders were 0.3 million euros. The Company had 10.2 million euros worth convertible bonds debt and 28.5 million euros worth non-convertible bonds debt.

As at 31 December 2018, there were 89 employees working in the Company, 40 of them were employed by the hotel and property maintenance business.

Paolo Michelozzi
CEO

Key financials

The total revenue of the Company in 2018 was 28.0 million euros, which is an increase of 99% compared to 12.1 million euros from continuing operations and 14.1 million euros including discontinued operations during the same period in 2017. The total revenue of the fourth quarter of 2018 was 6.9 million euros compared to 4.3 million euros during the same period of 2017. 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 of the Company depend on the completion of the residential developments. The improvement of the results of 2018 was influenced by the completion of the 4th, 5th and 6th apartment buildings in the Kristina Houses development in Tallinn, renovation works of Marsi 6 in Tallinn and River Breeze Residence in Riga, as presales realized in notarised sales transactions.
The gross profit of 2018 was 9.6 million euros, which is an increase of 78% compared to 4.6 million euros for continuing operations and 5.4 million euros including discontinued operations during the same period in 2017. The gross profit of the fourth quarter of 2018 was 2.7 million euros compared to 2.1 million euros during the same period in 2017.
The operating result of 2018 increased by 19.1 million euros, totalling to the operating profit of 21.5 million euros compared to profit of 1.8 million euros for continuing operations and profit of 2.4 million euros including discontinued operations during 12 months of 2017. The operating profit of the fourth quarter in 2018 was 16.7 million euros comparing to 1.2 million euros profit during the same period in 2017. Operating result includes profit from revaluation of investment properties. Total impact from revaluation in 2018 is 18.0 million euros (Note 7).
The net result of 2018 increased by 18.5 million euros, totalling to positive result of 18.0 million euros compared to the loss of 1.0 million euros for continuing operations and loss of 0.5 million euros including discontinued operations during 12 months of 2017. The net profit of the fourth quarter in 2018 was 15.8 million euros compared to 0.9 million euros profit during the same period in 2017.
Cash used in operating activities was -1.0 million euros in 2018 compared to -5.3 million euros during 2017.  In the fourth quarter of 2018 cash used in operating activities was -4.5 million euros comparing to -2.2 million euros during same period in 2017.
Net assets per share on 31 December 2018 totalled to 1.80 euros compared to 1.46 euros on 31 December 2017.

 Continuing operationsContinuing and
discontinued operations
in thousands of euros2018 12M2017 12M adjusted2018 Q42017 Q42018 12M2017 12M
 adjusted
       
Revenue27 99112 0776 9484 28127 99114 098
Gross profit9 5764 5612 6842 0569 5765 380
Gross profit, %34%38%39%48%34%38%
Operating result21 4671 79716 6881 15521 4672 385
Operating result, %77%15%240%27%77%17%
Net result18 040-95315 76192218 040-518
Net result, %64%-8%227%22%64%-4%
Earnings per share, EUR 

0,30
 

-0,02
0,26 

0,02
 

0,30
 

-0,01

2017 12M adjusted - comparative information from the annual audited report 2017.

in thousands of euros31.12.201831.12.2017
   
Total Assets, th EUR245 105175 158
Total Liabilities, th EUR 144 38392 476
Total Equity, th EUR100 72282 682
Debt / Equity *1,431,12
   
Return on Assets, % **8,6%-0,3%
Return on Equity, % ***19,7%-0,6%
Net asset value per share, EUR ****1,781,46


   *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 euros31.12.201831.12.2017
ASSETS  
Current assets  
 Cash and cash equivalents7 04010 317
 Current receivables2 9374 888
 Inventories59 33138 024
Total current assets69 30853 229
Non-current assets  
 Non-current receivables21637
 Property, plant and equipment7 1287 435
 Investment property  168 129114 140
 Intangible assets324317
Total non-current assets175 797121 929
TOTAL ASSETS245 105175 158
   
LIABILITIES AND EQUITY  
Current liabilities  
 Current debt  10 3286 738
 Customer advances5 7167 224
 Current payables11 93910 091
 Tax liabilities357132
 Short-term provisions852170
Total current liabilities29 19224 355
Non-current liabilities  
 Long-term debt  112 00962 527
 Other non-current payables1 0393 437
 Deferred income tax liabilities2 0042 058
 Long-term provisions13999
Total non-current liabilities115 19168 121
TOTAL LIABILITIES144 38392 476
   
Equity attributable to owners of the Company  
 Share capital in nominal value11 33811 338
 Share premium5 6615 661
 Statutory reserve1 0821 082
 Revaluation reserve3 2623 256
 Retained earnings59 94460 369
 Profit/ Loss for the period16 811-419
Total equity attributable to owners of the Company98 09881 287
Non-controlling interest2 6241 395
TOTAL EQUITY100 72282 682
   
TOTAL LIABILITIES AND EQUITY245 105175 158



Consolidated interim statements of comprehensive income

in thousands of euros2018 12M2017 12M adjusted2018 Q4  2017 Q4
CONTINUING OPERATIONS    
Operating income    
Revenue27 99112 0776 9484 281
Cost of goods sold-18 415-7 516-4 264-2 210
Gross profit9 5764 5612 6842 071
     
Marketing expenses-1 336-822-630-186
Administrative expenses-5 427-5 256-1 390-1 478
Other income18 8234 11416 144748
Other expenses-169-800-1200
Operating profit21 4671 79716 6881 155
     
Financial income4613
Financial expense-3 473-3 352-925-817
Profit/ loss before income tax17 998-1 54915 764341
Income tax42596-3582
Profit/ loss from continuing operations18 040-95315 761923
     
Profit from discontinued operations043500
Profit/ loss for the period18 040-51815 761923
     
Attributable to:    
Equity holders of the parent16 811-41914 491955
Non-controlling interest1 229-991 270-32
     
Other comprehensive income,
net of income tax
    
Income that will not be reclassified
subsequently to profit
    
Net change
in properties revaluation reserve
0-403
Total comprehensive income
for the year
18 040-52215 761926
Attributable to:    
Equity holders of the parent16 811-41914 491955
Non-controlling interest1 229-991 270-32
     
Earnings per share
from continuing operations (EUR)
0.30-0.020.260.02
Earnings per share for the period (EUR)0.30-0.010.260.02



Consolidated interim statements of cash flows

in thousands of euros2018 12M2017 12M
adjusted
2018 Q4  2017 Q4
Cash flows from operating activities    
Profit/loss for the period18 040-51815 762923
Adjustments for:    
  Depreciation, amortisation of non-current assets  21445556-20
  Gain from disposal of property, plant, equipment-4-3 04500
  Gain from disposal of investment property-418000
  Change in fair value of property, plant, equipment-13-26-13-26
  Change in fair value of investment property  -17 979-530-16 069-530
  Loss from disposal of shares of subsidiaries034600
  Finance income and costs3 4683 460923815
  Other non-monetary changes (net amounts)15 34512 410-1 428-683
Changes in working capital:    
  Trade receivables and prepayments1 773-408931-833
  Inventories-21 248-23 880-2 611-4 221
  Liabilities and prepayments-1196 556-1 4202 367
  Provisions -107-101-60923
Net cash used in operating activities-1 048-5 281-4 478-2 186
     
Cash flows from investing activities    
Payments for property, plant and equipment-206-281-40-127
Payments for intangible assets-24-52-17-22
Proceeds from disposal of property, plant, equipment3366 65100
Payments for investment property-47 786-24 772-16 702-7 424
Proceeds from disposal of investment property1 00001 0000
Net cash from disposal of shares of subsidiaries06 24900
Interests received4612
Net cash used in by investing activities -46 676-12 199-15 758-7 571
     
Cash flows from financing activities    
Proceeds from increase of share capital04 32804 328
Dividend payment-850000
Net changes related to non-controlling interests0-48000
Proceeds from bonds01 44600
Redemption of convertible bonds-649-773-60
Proceeds from borrowings56 92328 26023 4498 984
Repayment of borrowings-7 496-7 048-1 987-909
Interests paid-3 481-3 318-1 259-1 122
Net cash generated by financing activities 44 44722 41520 19711 281
     
Net change in cash and cash equivalents-3 2774 935-391 524
Cash and cash equivalents at the beginning of the period10 3175 3827 0798 793
Cash and cash equivalents at the end of the period7 04010 3177 04010 317


2017 12M adjusted - comparative information from the annual audited report 2017.

Full report is in the file attached.

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

Attachment


PKG Q4 2018 ENG.pdf