Pro Kapital Council approved Consolidated Interim Report for II Quarter and 6 Months of 2022 (Unaudited)MANAGEMENT REPORT CEO summary The second quarter of 2022 continued the trend we have seen in Q1, with a strong demand for real estate assets in the Baltic countries (particularly Estonia and Lithuania). Our available inventory is mainly sold, but we can say (based on the expression of interest of our potential buyers for upcoming projects and on the activity of our competitors) that the volume of transactions and the prices have not been overly impacted by the geopolitical situation. However, there has been a change in sentiment in the market, with analysts taking a more bearish approach due to the inflation which is happening in Europe and the consequent increase of interest rates from the banks. The local real estate sector is coming from two years of great increase in prices, and we are aware that this market cycle will not last forever, however the most important indicators (interest in our upcoming developments and sale price in the secondary market for our already built properties) still show a healthy market. The construction market still poses some challenging issues, due to the increase in cost of materials caused by the complications related to Covid-19 and relative problems in the supply chain and the impossibility of obtaining materials from the regions affected by the war. For certain materials, the market seems to have found a new equilibrium and we are hopeful that as more time goes by, the more the construction market will find stability. Real estate development In Tallinn, we have continued construction of Kindrali Houses and Kalaranna projects. In Q2 of 2022 we continued handing over apartments in Kalaranna project, where completion of eight buildings with the total of 240 apartments will be achieved. We have reservations or presales concluded for all business premises and for 99% of apartments in this phase of the project, and we have currently 4 units left to be notarized. The municipality issued the permit of use for the promenade (as well as took over the maintenance of the same as per the agreement signed between us) (https://news.err.ee/1608664387/gallery-tallinn-s-kalaranna-promenade-finally-officially-opened-to-public), and we are proud to see this community finally come to life. The promenade not only benefits the residents in our developments, but is also very much appreciated by the people who simply want to enjoy a nice walk with a sea view, surrounded by the beautiful architecture we have built. In Kindrali Houses, we have started the process of notarising deals in the first two buildings (black and white building), which are expected to be completed by the fall of 2022. The third building (red building) is expected to be completed by the end of 2022. All in all, these three buildings comprise 195 residential and 1 commercial units, all of which are sold. In Riga we are selling our ready luxury product River Breeze Residence and started the tendering process for the further development of Kliversala Residential Quarter - Blue Marine. We have received several offers from construction companies and are in the process of identifying the best option. In Vilnius, we only have 4 unsold apartments in our Šaltiniu Namai Attico project (including one which serves as a showroom). The real estate market has had a great run in 2021 and we saw a great deal of interest for our luxury properties, achieving some of the highest prices per square meter in all the local market. We received some offers from the construction companies for the following phase of city villas and a commercial building and we aim to start the construction works during the fall of 2022. Hotel operations We are in the process of renovation of the second half of the rooms (first half has been renovated 5 years ago), which will be completed by October. The works will also have the added benefit of converting an unused area into 7 standard rooms and creation of a luxurious suite with private sauna and terrace, which will greatly improve the overall prestige of the hotel. In May, we have hired a new General Manager, Mr. Klaus Brandstetter, who was a 20+ years experience in Starwood Hotels. We wish him the best of luck and we are confident we have picked the right person for the job. Since the ongoing works, the hotel’s available inventory is only at 50%. Despite this, in the first 6 months it has reached a substantial operative break-even, thanks to a) the MICE (Meetings, Incentives, Conferences and Exhibitions) coming back after a long pause due to the pandemic, and b) an increase in the Average Daily Rate (ADR) which is currently at 99.83 euro (June data), a substantial increase when compared to the 81.68 euro rate of June 2021. In conclusion, we are confident in our abilities to navigate these turbulent times, thanks to our experience and to the resilience of the Baltic markets. Our aim is to expand our current inventory, by making intelligent bets on what we feel like the market may absorb, thus creating long-term value for our shareholders and for the communities that we aim to develop in a sustainable, comfortable and aesthetically pleasing way. Edoardo Preatoni
CEO Key financials The total revenue of the Company in the first six months of 2022 was 31.2 million euros, having increased more than four times compared to the reference period (2021 6M: 7.3 million euros). The total revenue of the second quarter was 23.3 million euros compared to 1.7 million euros in 2021. The gross profit for six months of 2022 has increased five times amounting to 9.3 million euros compared to 1.8 million euros in 2021. The gross profit in the second quarter reached 6.8 million euros (2021: 222 thousand euros). The operating result in the first halfyear of 2022 has decreased to 6.4 million euros profit comparing to 28.3 million euros profit during the same period in 2021.The operating result of the second quarter was 5.4 million euros comparing to 26.5 million euros in 2021. Higher profit in 2021 was affected by one-time sales of investment property and related revenue and the results of derecognition of AS Tallinna Moekombinaat after loss of control over the subsidiary on 2 June 2021. The net result for the first six months of 2022 was 4.1 million euros profit, comparing to 25.5 million euros profit (continuing operations) in the reference period. The net profit of the second quarter was 4.3 million euros comparing to 25.1 million euros generated in 2021. Cash generated in operating activities during first six months of 2022 was 11.2 million euros comparing to 3.38 million euros used during the same period in 2021. In the second quarter cash generated in operating activities was 14.4 million euros and 5.2 million euros used respectively in 2021. Net assets per share on 30 June 2022 totalled to 0.83 euros compared to 0.61 euros on 30 June 2021. Key performance indicators | | 2022 6M | 2021 6M | 2022 Q2 | 2021 Q2 | 2021 12M | | Revenue, th EUR | 31 194 | 7 307 | 23 278 | 1 727 | 43 095 | | Gross profit, th EUR | 9 362 | 1 813 | 6 804 | 222 | 10 576 | | Gross profit, % | 30% | 25% | 30% | 25% | 25% | | Operating result, th EUR | 6 413 | 28 318 | 5 424 | 26 532 | 39 820 | | Operating result, % | 21% | 388% | 23% | 1 536% | 92% | | Net result, th EUR | 4 106 | 21 342 | 4 346 | 23 454 | 29 757 | | Net result, % | 13% | 292% | 19% | 1 452% | 69% | | | | | | | | | Earnings per share, EUR | 0.07 | 0.38 | 0.08 | 0.44 | 0.52 |
| | 30.06.2022 | 30.06.2021 | 31.12.2021 | | Total Assets, th EUR | 116 701 | 125 105 | 116 026 | | Total Liabilities, th EUR | 69 752 | 90 677 | 73 183 | | Total Equity, th EUR | 46 949 | 34 428 | 42 843 | | Debt / Equity * | 1.49 | 2.63 | 1.71 | | | | | | | Return on Assets, % ** | 2.8% | 12.8% | 23.7% | | Return on Equity, % *** | 14.5% | 41.1% | 113.5% | | Net asset value per share, EUR **** | 0.83 | 0.61 | 0.76 |
*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 | 30.06.2022 | 30.06.2021 | 31.12.2021 | | ASSETS | | | | | Current assets | | | | | Cash and cash equivalents | 15 208 | 13 842 | 9 626 | | Current receivables | 1 099 | 967 | 802 | | Inventories | 49 621 | 67 967 | 57 533 | | Total current assets | 65 928 | 82 776 | 67 961 | | Non-current assets | | | | | Non-current receivables | 1 519 | 23 | 21 | | Property, plant and equipment | 7 491 | 6 648 | 6 754 | | Right-of-use assets | 198 | 266 | 202 | | Investment property | 41 214 | 35 038 | 40 734 | | Intangible assets | 351 | 354 | 354 | | Total non-current assets | 50 773 | 42 329 | 48 065 | | TOTAL ASSETS | 116 701 | 125 105 | 116 026 | | LIABILITIES AND EQUITY | | | | | Current liabilities | | | | | Current debt | 10 596 | 1 262 | 3 955 | | Customer advances | 11 330 | 13 070 | 12 419 | | Current payables | 7 924 | 4 882 | 7 297 | | Tax liabilities | 110 | 111 | 1 143 | | Short-term provisions | 585 | 475 | 713 | | Total current liabilities | 30 545 | 19 800 | 25 527 | | Non-current liabilities | | | | | Long-term debt | 38 028 | 67 085 | 46 455 | | Other non-current payables | 9 | 2 577 | 20 | | Deferred income tax liabilities | 1 136 | 1 133 | 1 133 | | Long-term provisions | 34 | 82 | 48 | | Total non-current liabilities | 39 207 | 70 877 | 47 656 | | TOTAL LIABILITIES | 69 752 | 90 677 | 73 183 | | Equity attributable to owners of the Company | | | | | Share capital in nominal value | 11 338 | 11 338 | 11 338 | | Share premium | 5 661 | 5 661 | 1 748 | | Statutory reserve | 1 134 | 1 134 | 0 | | Revaluation reserve | 2 984 | 2 984 | 2 984 | | Retained earnings | 21 726 | -8 031 | 0 | | Profit/ Loss for the period | 4 106 | 21 342 | 26 773 | Total equity attributable
to owners of the Company | 46 949 | 34 428 | 42 843 | | TOTAL EQUITY | 46 949 | 34 428 | 42 843 | | TOTAL LIABILITIES AND EQUITY | 116 701 | 125 105 | 116 026 |
Consolidated interim statements of comprehensive income | in thousands of euros | 2022 6M | 2021 6M | 2022 Q2 | 2021 Q2 | 2021 12M | | CONTINUING OPERATIONS | | | | | | | Operating income | | | | | | | Revenue | 31 194 | 7 307 | 23 278 | 1 727 | 43 095 | | Cost of goods sold | -21 832 | -5 494 | -16 474 | -1 505 | -32 519 | | Gross profit | 9 362 | 1 813 | 6 804 | 222 | 10 576 | | | | | | | | | Marketing expenses | -237 | -239 | -123 | -114 | -502 | | Administrative expenses | -2 658 | -2 463 | -1 209 | -1 471 | -5 592 | | Other income | 8 | 29 255 | 8 | 27 923 | 35 616 | | Other expenses | -62 | -48 | -56 | -28 | -278 | | Operating profit/ loss | 6 413 | 28 318 | 5 424 | 26 532 | 39 820 | | | | | | | | | Financial income | 2 | 3 | 0 | 1 | 6 | | Financial expense | -2 304 | -2 835 | -1 078 | -1 442 | -5 964 | | Profit / loss before income tax | 4 111 | 25 486 | 4 346 | 25 092 | 33 862 | | Income tax | -5 | -29 | 11 | -12 | 10 | | Net profit / loss from continuing operations | 4 106 | 25 457 | 4 357 | 25 080 | 33 872 | | | | | | | | | Profit from discontinued operations | 0 | -4 115 | 0 | -1 626 | -4 115 | | Net profit / loss for the period | 4 106 | 21 342 | 4 357 | 23 454 | 29 757 | | | | | | | | | Attributable to: | | | | | | | Equity holders of the parent | 4 106 | 21 342 | 4 357 | 23 454 | 29 757 | | | | | | | | | Total comprehensive income / loss for the year | 4 106 | 21 342 | 4 357 | 23 454 | 29 757 | | Attributable to: | | | | | | | Equity holders of the parent | 4 106 | 21 342 | 4 357 | 23 454 | 29 757 | | | | | | | | | Earnings per share (continuing operations) € | 0.07 | 0.45 | 0.08 | 0.44 | 0.60 | | Earnings per share for the period € | 0.07 | 0.38 | 0.08 | 0.41 | 0.52 |
The full report can be found in the file attached. Eve Kallast
Group Chief Accountant
+372 614 4920
prokapital@prokapital.ee
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