Published: 2019-04-30 08:45:00 CEST
Pro Kapital Grupp
Quarterly report

Consolidated Interim Report for I Quarter and 3 Months of 2019 (Unaudited)

MANAGEMENT REPORT

Chairman’s summary

Our key focus is set on the development of residential and commercial quarters in all Baltic states. We have either already started or are in the planning process for seven large-scale development projects in Tallinn, Riga and Vilnius. In addition to residential and commercial developments, we develop and operate shopping malls. In early November 2018 we opened T1 Mall of Tallinn shopping and entertainment centre right at the heart of the future transportation hub of the capital of Estonia. The concept of the new mall foresees the changes in the customer behaviour – people are looking for ways of spending quality time. In addition to shopping, T1 offers a diverse and large restaurant area, a cinema, family entertainment centre Super Sky Park and a newly opened Ferris Wheel on the rooftop - one of a kind in all Europe.

We have started the year 2019 with strong results in revenues and gross profit. The sales revenues for the first quarter of 2019 were 10.4 million euros, which is an increase of 53% compared to the 6.8 million euros during the same period last year. This result was strongly influenced by the active sales of Kristina Houses development in Tallinn and River Breeze Residence in Riga, but also rental revenues from T1. 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.  As a result of the active sales, the operating result for the first quarter of 2019 was 2.6 million euros comparing to 0.7 million euros profit during the same period in 2018. Gross profit margin has increased significant 51%. However, otherwise the positive results were influenced by 1.7 million euros interest expenses related to T1 project, which in previous periods have been capitalized into cost of investment property. Consequently, the net result of the first quarter in 2019 was 113 thousand euros loss compared to 118 thousand euros loss during the same period in 2018.

Pro Kapital is continuously focused on improving the efficiency. We are exploring opportunities to reduce financial costs by refinancing current debt instruments. We expect stable growth in revenues and operating results during the upcoming periods.

Building new communities

Our activities have significant impact on the wider communities they are built in. We are focused on large area developments and by doing so, we create completely new value to the neighbourhoods which have not been used historically or have been considered invaluable.

One of the most significant ongoing developments in Tallinn, Kristiine City, allows to expect increase in real-estate price in the entire surrounding area. We are currently developing the Kristiine City second development stage Kristiina Houses, consistent of ten apartment buildings and the surrounding infrastructure and greenery as an integral part of every one of our development projects. Kristina Houses has already proven to be highly valued amongst the customers, with more than 85% of the apartments find a new owner during the presales prior the completion of the construction. We finalized the construction of the seventh house during the first quarter of 2019 and realized therefore the pre-sales into notarized sales transactions. Development of the final three Kristina Houses, with 92 new homes is ongoing. Simultaneously to construction works we are actively proceeding with the presales.

Concurrently we are in progress with projecting works for a prestigious Kalaranna Residential and Commercial Quarter, 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 the city. Although we have not yet started with construction nor sales activities, we have started with initial reservations responding to the high interest towards the project. To date we have signed 78 reservation agreements for residential premises in Kalaranna.

In Riga we are building Kliversala residential area right at the heart of the city. A land plot of almost five hectares in total, will be developed as an integral area that binds together the feeling of a metropolitan, modern architecture and well considered living environment. First apartment house of the area, River Breeze Residence was completed last year. The sales of two luxury homes in the River Breeze Residence, totalling to net 2.4 million euros, had a strong impact on the 2019 first quarter revenues. Simultaneously to active sales and development in the Kliversala, we are also proceeding with other major development projects in Riga. The Brivibas Business Quarter, known before as Zvaigznes, will be built on the site of a former factory and its location at the artery of transportation is making it an attractive commercial area. This business quarter is also highly expected in the market, because there is an evident lack of large commercial premises. Another development project under technical design process is Tallinas Street 5/7 residential quarter, which is a modern combination of new and restored historical buildings.

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 construction works for the area’s second stage, Šaltinių Namai Attico, are ongoing and we expect to complete the four houses mid-2019. Likely with our other regions, the sales are actively ongoing during the construction works. 79 preliminary agreements have been signed in Šaltinių Namai Attico project.

Paolo Michelozzi
CEO

Key financials

The total revenue of the Company in the first quarter of 2019 was 10.4 million euros, which is an increase of 53% compared to 6.8 million during the same period in 2018. 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 in the first quarter of 2019 was influenced by active sales of Kristina Houses development in Tallinn and River Breeze Residence in Riga, also the completion of the 7th apartment building in the Kristina Houses development, where presales were realized in notarised sales transactions.
The gross profit of the first quarter of 2019 was 4.1 million euros compared to 1.8 million euros during the same period in 2018. Gross profit margin has increased by 130%.
The operating result of the first quarter in 2019 was 2.6 million euros comparing to 0.7 million euros profit during the same period in 2018. The higher operating result was influenced by good real estate sales in Tallinn and Riga and higher gross margin.
The net result of the first quarter in 2019 was 0.1 million euros loss and remained to the same level as in the comparable period. The net result of the period was influenced negatively by 1.7 million euros of interest expenses in AS Tallinna Moekombinaat due to the change of recognition of interest expenses. They are recorded in finance cost instead of capitalizing them into investment property, which has been done until
31 December 2018 (Note 14).
Cash used in operating activities in the first quarter of 2019 was -0.4 million euros comparing to 2.0 million euros of cash generated during same period in 2018.
Net assets per share on 31 March 2019 totalled to 1.78 euros compared to 1.46 euros on 31 March 2018.

 2019 3M2018 3M2018 12M
    
Revenue, th EUR10 3726 79827 991
Gross profit, th EUR4 1421 8049 576
Gross profit, %40%27%34%
Operating result, th EUR 2 64468721 483
Operating result, %25%10%77%
Net result, th EUR-113-11818 056
Net result, %-1%-2%65%
    
Earnings per share, EUR0.000.000.30


 31.03.201931.03.201831.12.2018
    
Total Assets, th EUR247 386183 962245 112
Total Liabilities, th EUR 146 761101 398144 374
Total Equity, th EUR100 62582 564100 738
Debt / Equity *1.461.231.43
    
Return on Assets, % **-0.1%-0.1%8.6%
Return on Equity, % ***-0.1%-0.1%19.7%
Net asset value per share, EUR ****1.781.461.78


   *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 euros31.03.201931.03.201831.12.2018
ASSETS   
Current assets   
 Cash and cash equivalents6 1668 2257 040
 Current receivables8454 4592 928
 Inventories59 96239 48859 331
Total current assets66 97352 17269 299
Non-current assets   
 Non-current receivables67736216
 Property, plant and equipment7 7437 1257 128
 Investment property   171 672124 316168 145
 Intangible assets321313324
Total non-current assets180 413131 790175 813
TOTAL ASSETS247 386183 962245 112
    
LIABILITIES AND EQUITY   
Current liabilities   
 Current debt   14 54010 66710 328
 Customer advances5 5106 9205 707
 Current payables8 18812 21011 939
 Tax liabilities395510357
 Short-term provisions903176852
Total current liabilities29 53630 48329 183
Non-current liabilities   
 Long-term debt  113 93764 651112 009
 Other non-current payables1 1404 1521 039
 Deferred income tax liabilities2 0042 0042 004
 Long-term provisions144108139
Total non-current liabilities117 22570 915115 191
TOTAL LIABILITIES146 761101 398144 374
    
Equity attributable to owners of the Company   
 Share capital in nominal value11 33811 33811 338
 Share premium5 6615 6615 661
 Statutory reserve1 0821 0821 082
 Revaluation reserve3 2623 2623 262
 Retained earnings76 77159 94459 944
 Profit/ Loss for the period-43-9616 827
Total equity attributable to owners of the Company98 07181 19198 114
Non-controlling interest2 5541 3732 624
TOTAL EQUITY100 62582 564100 738
    
TOTAL LIABILITIES AND EQUITY247 386183 962245 112

 Consolidated interim statements of comprehensive income

in thousands of euros2019 3M2018 3M2018 12M
CONTINUING OPERATIONS   
Operating income   
Revenue10 3726 79827 991
Cost of goods sold-6 230-4 994-18 415
Gross profit4 1421 8049 576
    
Marketing expenses-142-179-1 336
Administrative expenses-1 353-1 085-5 427
Other income2717618 839
Other expenses-30-29-169
Operating profit2 64468721 483
    
Financial income114
Financial expense-2 757-859-3 473
Profit/ loss before income tax-112-17118 014
Income tax-15342
Profit/ loss for the period-113-11818 056
    
Attributable to:   
Equity holders of the parent   -43-9616 827
Non-controlling interest-70-221 229
    
Total comprehensive income/ loss for the year-113-11818 056
Attributable to:   
Equity holders of the parent-43-9616 827
Non-controlling interest-70-221 229
    
Earnings per share for the period (EUR)0.000.000.30

 Consolidated interim statements of cash flows

in thousands of euros2019 3M2018 3M2018 12M
Cash flows from operating activities   
Profit/loss for the period-113-11818 056
Adjustments for:   
  Depreciation, amortisation of non-current assets  9452214
  Gain from disposal of property, plant, equipment0-18-4
  Gain from disposal of investment property00-418
  Change in fair value of property, plant, equipment00-13
  Change in fair value of investment property  00-17 995
  Finance income and costs2 7568583 469
   Changes in deferred tax assets and liabilities00-54
  Other non-monetary changes (net amounts)31-50315 458
Changes in working capital:   
  Trade receivables and prepayments1 5724301781
  Inventories-582-1 464-21 307
  Liabilities and prepayments-4 1452 850-128
  Provisions 1019-107
Net cash used/ generated in operating activities-3772 053-1 048
    
Cash flows from investing activities   
Payments for property, plant and equipment-31-57-206
Payments for intangible assets-10-24
Proceeds from disposal of property, plant, equipment0336336
Payments for investment property-3 533-9 290-47 786
Proceeds from disposal of investment property001 000
Interests received114
Net cash used in investing activities -3 564-9 010-46 676
    
Cash flows from financing activities   
Dividend payment00-850
Redemption of convertible bonds00-9
Redemption of non-convertible bonds00-640
Proceeds from borrowings7 5707 44356 923
Repayment of borrowings-3 843-2 051-7 496
Repayment of lease liabilities-3600
Interests paid-624-527-3 481
Net cash generated by financing activities 3 0674 86544 447
    
Net change in cash and cash equivalents-874-2 092-3 277
Cash and cash equivalents at the beginning of the period7 04010 31710 317
Cash and cash equivalents at the end of the period6 1668 2257 040

The full report is in the file attached.

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

Attachment


PKG Q1 2019 ENG.pdf