Hepsor AS consolidated unaudited interim report for Q1 2023The consolidated sales revenue of Hepsor amounted to 6.0 million euros in the first quarter of 2023 and the net profit was 0.14 million euros (including a net profit attributable to the owners of the parent of 0.24 million euros). The handover of apartments in the Paevälja Hoovimajad project accounted for most of the sales revenue in the first quarter of 2023. Two apartment buildings with a total of 96 apartments were built as part of the project, of which the first 40 apartments were handed over to homebuyers at the end of 2022. An additional 34 apartments were handed over to homebuyers during the first quarter of 2023, and as at 31 March 2023 real rights agreements have been signed for 74 apartments (77%) and law of obligations agreements or written reservation agreements have been signed for 4 apartments (4%). The Group’s revenues and profitability are directly dependent on the development cycle of projects, which is approximately 24 to 36 months. Sales revenue is generated only at the end of the cycle. Calendar quarters vary in terms of the number of projects ending during the quarter, which is why both profits and sales revenue can differ significantly across quarters. Therefore, performance can be considerably weaker or stronger in some years and quarters than in others. The portfolio of the company’s development projects and three-year average financial results are a better criteria for assessing the group’s performance in order to assess the overall sustainability and economic results of a real estate development company. Hepsor has six residential development projects under construction in Estonia and Latvia, with a total of 527 new apartments. There are three development projects under construction and available for sale in Riga, with a total of 246 apartments as at 31 March 2023. Contracts under law of obligations and reservation agreements have been signed for 198 of these apartments (80%). There are also three development projects with a total of 281 new apartments under construction and available for sale in Tallinn. Contracts under law of obligations and reservation agreements have been signed for 61 of these apartments (23%) as at 31 March 2023. In the commercial real estate development segment Grüne Maja, which is an office building that follows a green concept, is being completed in Tallinn. The office building is 100% covered with lease agreements and approximately 79% is in active use. The remaining tenants will move to the new premises in the second quarter of 2023 at the latest. The Group started the construction of two residential real estate development projects in the first quarter of 2023. In Tallinn, the construction of 154 homes of the Manufaktuuri 7 project was started in the Manufaktuuri quarter, which is being developed together with the long-term cooperation partner Tolaram Group. Law of obligations agreements and reservation agreements had been signed for 32 apartments (21%) of Manufaktuuri 7 homes as at the end of the quarter. In Riga, the construction of 38 homes was started in the Nameja Rezidence project, of which law of obligations agreements and reservation agreements have been signed for 10 apartments (26%). Two projects under construction in Riga received an occupancy permit, which allows the completed homes to be handed over to buyers in the second quarter of 2023 - 92 homes will be completed in the Mārupes Dārzs project, of which 78 apartments (85%) have been sold according to law of obligations agreements and reservations agreements, and 116 homes will be completed in the Kuldigas Parks project, of which 110 apartments (95%) have been sold according to law of obligations agreements and reservations agreements. The year 2023 started on a moderately optimistic note in the real estate sector - consumer confidence, which fell to a record low in the last quarter of 2022, showed signs of recovery, and the stabilization of energy prices and inflation continued, which create the preconditions for the recovery of real estate market demand. Unfortunately, Euribor rates continue to rise, which directly affects the monthly housing costs of homebuyers and forces them to postpone making real estate purchase decisions. In Tallinn, the transaction activity of the new development market is higher than at the end of 2022 but continues to be significantly below the previous long-term average. On the other hand, in Riga, the previously described effects were more short-term, and transaction activity remains at the usual level after a temporary dip. Customers do not make quick purchase decisions in the current economic situation, but there is continued interest in the Group's projects, which is why the board is moderately optimistic and continues to implement existing and new projects. The Group forecasts a revenue of 41.3 million euros, net profit of 3.3 million euros and net profit attributable to the owners of the parent of 1.1 million euros in 2023. The Group's sales results for the first quarter of 2023 give confidence that we the forecasts can be met for 2023. Consolidated statement of financial position | in thousands of euros | 31 March 2023 | 31 December 2022 | 31 March 2022 | | Assets | | | | | Current assets | | | | | Cash and cash equivalents | 2,126 | 3,754 | 7,440 | | Trade and other receivables | 1,291 | 1,731 | 946 | | Current loan receivables | 0 | 0 | 455 | | Inventories | 73,610 | 69,760 | 45,128 | | Total current assets | 77,027 | 75,245 | 53,969 | | Non-current assets | | | | | Property, plant and equipment | 269 | 314 | 209 | | Intangible assets | 7 | 7 | 3 | | Financial investments | 2 | 2 | 2 | | Investments in associates | 972 | 1,086 | 0 | | Non-current loan receivables | 1,766 | 1,766 | 2,308 | | Other non-current receivables | 61 | 30 | 340 | | Total non-current assets | 3,077 | 3,205 | 2,862 | | Total assets | 80,104 | 78,450 | 56,831 | | Liabilities and equity | | | | | Current liabilities | | | | | Loans and borrowings | 22,456 | 22,565 | 3,833 | | Current lease liabilities | 96 | 127 | 92 | | Prepayments from customers | 4,366 | 3,054 | 1,856 | | Trade and other payables | 3,481 | 4,008 | 3,537 | | Total current liabilities | 30,399 | 29,754 | 9,318 | | Non-current liabilities | | | | | Loans and borrowings | 26,686 | 26,015 | 26,854 | | Non-current lease liabilities | 68 | 68 | 66 | | Other non-current liabilities | 2,481 | 2,290 | 1,410 | | Total non-current liabilities | 29,235 | 28,373 | 28,330 | | Total liabilities | 59,634 | 58,127 | 37,648 | | Equity | | | | | Share capital | 3,855 | 3,855 | 3,855 | | Share premium | 8,917 | 8,917 | 8,917 | | Retained earnings | 7,698 | 7,551 | 6,411 | | Total equity | 20,470 | 20,323 | 19,183 | | incl. total equity attributable to owners of the parent | 20,092 | 19,937 | 18,823 | | incl. non-controlling interest | 378 | 386 | 360 | | Total liabilities and equity | 80,104 | 78,450 | 56,831 |
Consolidated statement of profit and loss and other comprehensive income | in thousands of euros | Q1 2023 | Q1 2022 | | | | | | Revenue | 5,975 | 1,272 | | Cost of sales (-) | -5,040 | -1,166 | | Gross profit | 935 | 106 | | Marketing expenses (-) | -71 | -95 | | Administrative expenses (-) | -347 | -328 | | Other operating income | 20 | 10 | | Other operating expenses (-) | -23 | -7 | | Operating profit (-loss) of the year | 514 | -314 | | Financial income | 50 | 509 | | Financial expenses (-) | -425 | -168 | | Profit before tax | 139 | 27 | | Current income tax | 0 | -5 | | Net profit for the year | 139 | 22 | | Attributable to owners of the parent | 240 | 5 | | Non-controlling interest | -101 | 17 | | | | | | Other comprehensive income (-loss) | | | | Changes related to change of ownership | 0 | 135 | | Change in value of embedded derivatives with minority shareholders | 8 | 18 | | Other comprehensive income (-loss) for the period | 8 | 153 | | Attributable to owners of the parent | -14 | -86 | | Non-controlling interest | 22 | 239 | | | | | | Comprehensive income (-loss) for the period | 147 | 175 | | Attributable to owners of the parent | 226 | -81 | | Non-controlling interest | -79 | 256 | | | | | | Earnings per share | | | | Basic (euros per share) | 0.06 | 0.00 | | Diluted (euros per share) | 0.06 | 0.00 |
Henri Laks
Member of the Management Board
Phone: +372 5693 9114
e-mail: henri@hepsor.ee Hepsor AS (www.hepsor.ee) is one of the fastest growing residential and commercial real estate developers in Estonia and Latvia. Over the last twelve years Hepsor has developed more than 1,500 homes and 32,000 m2 of commercial space. Hepsor has been the first real estate developer in the Baltic States to implement a number of innovative engineering solutions that make the buildings we construct more energy-efficient and thus more environmentally friendly. The company's portfolio is comprised of 26 development projects with a total sellable space of 176,000 m2.
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