MANAGEMENT REPORT
CEO review
During the first quarter of 2018 Pro Kapital continued construction works of the new T1 Mall of Tallinn shopping and entertainment centre in Tallinn, which is the Company´s largest single-object development project. Active negotiations with several local and international retail operators were carried on. The Company continued residential development activities in Kristiine City in Tallinn, in Kliversala in Riga and Šaltinių Namai in Vilnius.
In Tallinn, Kristiine City, the Company has completed four apartment buildings where 119 apartments out of 124 have been handed over to the clients. Next three buildings are under construction. Presale has been continuing for all three buildings with 26 apartments presold in the fifth, 14 apartments presold in the sixth and 13 apartments presold in the seventh building at the moment of publishing current interim report. Each building will have 31 apartments.
In Riga, the construction works of River Breeze Residence in Kliversala project were continued and the building was completed at the end of April. 4 luxury apartments have been handed over to the clients and 4 will be handed over in the nearest weeks. 39 apartments are available for sale. Many negotiations are in process with potential new buyers. The projecting works were continued also for Tallinas Residential Complex and for the first stage of office complex in Zvaigznes Quarter.
In Vilnius the first stage of Šaltinių Namai development has been almost sold. Last year the construction works for the second stage residential buildings started and 72 preliminary agreements have been already signed. Four buildings of the second stage should be completed in the middle of 2019. Our Vilnius real estate portfolio has no further projects for development after completion of Šaltinių Namai project, therefor the Company is seeking for obtaining attractive developments in the region.
At the end of reporting period the Company recorded net revenue of 6.8 million euros, an increase of 121% as compared to 3.1 million euros in the same period in 2017. Revenues have increased in real estate segment. This segment is influenced by time of completion of the buildings as revenues are recorded at the moment notary deed of sale is concluded. The net result remained negative due to high financial costs, though recorded net loss of 0.1 million euros for the first three months in 2018 was 92% lower as compared to 1.4 million euros loss during the same period in 2017. The Company is working on increasing its efficiency and results are improving. For 2018 we foresee a positive year end result, which is influenced by completion of residential real estate developments in Tallinn and in Riga and opening of T1 Mall of Tallinn.
Overall loans from financial institutions were 35.7 million euros as at 31 March 2018. The loans from minority shareholders were 0.3 million euros. The Company had 10.2 million euros worth convertible bonds debt and 28.9 million euros worth non-convertible bonds debt at the end of reporting date.
As at 31 March 2018 there were 84 employees working in the Company, 45 of them were employed in the hotel and property maintenance business.
Paolo Michelozzi
CEO
Key figures
Total revenue was 6 798 thousand euros, an increase of 121% compared to the reference period (2017 3M: 3 074 thousand euros for continuing operations and 3 614 thousand 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. Positive results of the first quarter of 2018 were influenced by completion of the 4th apartment building in a Kristina Houses development and renovated Marsi 6 building in Tallinn as presales were turned into notarised sales transactions.
Goss profit was 1 804 thousand euros, an increase of 122% compared to the reference period (2017 3M: 814 thousand euros for continuing operations and 935 thousand euros including discontinued operations). Gross profit margin of continuing operations increased by 1%.
Operating result increased by 1 212 thousand euros (231%) compared to the reference period, totalling to operating profit of 687 thousand euros (2017 3M: loss of 525 thousand euros for continuing operations and loss of 497 thousand euros including discontinued operations). Operating result of the period was influenced positively by real estate sales in Tallinn.
Net result increased positively by 1 284 thousand euros (92%) compared to the reference period, totalling still to negative result of 118 thousand euros (2017 3M: loss of 1 402 thousand euros for continuing operations and loss of 1 429 thousand euros including discontinued operations). The net result of the period was influenced positively by real estate sales in Tallinn. Nevertheless, high interest costs resulted in negative bottom line.
| Continuing operations | Continuing and discontinued operations | |||||
| 2018 3M | 2017 3M | 2017 12M | 2018 3M | 2017 3M | 2017 12M | |
| Revenue, th EUR | 6 798 | 3 074 | 12 077 | 6 798 | 3 614 | 14 098 |
| Gross profit, th EUR | 1 804 | 814 | 4 561 | 1 804 | 935 | 5 380 |
| Gross profit, % | 27% | 26% | 38% | 27% | 26% | 38% |
| Operating result, th EUR | 687 | -525 | 1 797 | 687 | -497 | 2 385 |
| Operating result, % | 10% | -17% | 15% | 10% | -14% | 17% |
| Net result, th EUR | -118 | -1 402 | -953 | -118 | -1 429 | -518 |
| Net result, % | -2% | -46% | -8% | -2% | -40% | -4% |
| Earnings per share, EUR | -0.00 | -0.03 | -0.02 | -0.00 | -0.03 | -0.01 |
| 31.03.2018 | 31.03.2017 | 31.12.2017 | |
| Total Assets, th EUR | 183 962 | 144 439 | 175 158 |
| Total Liabilities, th EUR | 101 398 | 66 143 | 92 476 |
| Total Equity, th EUR | 82 564 | 78 296 | 82 682 |
| Debt / Equity | 1.23 | 0.84 | 1.12 |
| Return on Assets, % | -0.1% | -1.0% | -0.3% |
| Return on Equity, % | -0.1% | -1.8% | -0.6% |
| Net asset value per share, EUR | 1.46 | 1.44 | 1.46 |
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated interim statement of financial position
| in thousands of euros | 31.03.2018 | 31.03.2017 | 31.12.2017 |
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 8 255 | 3 331 | 10 317 |
| Current receivables | 4 459 | 4 568 | 4 888 |
| Inventories | 39 488 | 27 086 | 38 024 |
| Total current assets | 52 172 | 34 985 | 53 229 |
| Non-current assets | |||
| Non-current receivables | 36 | 41 | 37 |
| Property, plant and equipment | 7 125 | 18 261 | 7 435 |
| Investment property | 124 316 | 90 855 | 114 140 |
| Intangible assets | 313 | 297 | 317 |
| Total non-current assets | 131 790 | 109 454 | 121 929 |
| TOTAL ASSETS | 183 962 | 144 439 | 175 158 |
| LIABILITIES AND EQUITY | |||
| Current liabilities | |||
| Current debt | 10 667 | 7 654 | 6 738 |
| Customer advances | 6 920 | 3 846 | 7 224 |
| Current payables | 12 210 | 3 978 | 10 091 |
| Tax liabilities | 510 | 675 | 132 |
| Short-term provisions | 176 | 203 | 170 |
| Total current liabilities | 30 483 | 16 356 | 24 355 |
| Non-current liabilities | |||
| Long-term debt | 64 651 | 44 433 | 62 527 |
| Other non-current payables | 4 152 | 1 827 | 3 437 |
| Deferred income tax liabilities | 2 004 | 3 348 | 2 058 |
| Long-term provisions | 108 | 179 | 99 |
| Total non-current liabilities | 70 915 | 49 787 | 68 121 |
| TOTAL LIABILITIES | 101 398 | 66 143 | 92 476 |
| Equity attributable to 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 | 9 462 | 3 256 |
| Retained earnings | 59 944 | 55 017 | 60 369 |
| Loss for the period | -96 | -1 411 | -419 |
| Total equity attributable to owners of the Company | 81 191 | 76 820 | 81 287 |
| Non-controlling interest | 1 373 | 1 476 | 1 395 |
| TOTAL EQUITY | 82 564 | 78 296 | 82 682 |
| TOTAL LIABILITIES AND EQUITY | 183 962 | 144 439 | 175 158 |
Consolidated interim statements of comprehensive income
| in thousands of euros | 2018 3M | Adjusted 2017 3M | 2017 12M |
| CONTINUING OPERATIONS | |||
| Operating income | |||
| Revenue | 6 798 | 3 074 | 12 077 |
| Cost of goods sold | -4 994 | -2 260 | -7 516 |
| Gross profit | 1 804 | 814 | 4 561 |
| Marketing expenses | -179 | -188 | -822 |
| Administrative expenses | -1 085 | -1 193 | -5 256 |
| Other income | 176 | 45 | 4 114 |
| Other expenses | -29 | -37 | -800 |
| Operating profit/ loss | 687 | -525 | 1 797 |
| Financial income | 1 | 1 | 6 |
| Financial expense | -859 | -847 | -3 352 |
| Loss before income tax | -171 | -1 371 | -1 549 |
| Income tax | 53 | -31 | 596 |
| Loss from continuing operations | -118 | -1 402 | -953 |
| Profit/ loss from discontinued operations | 0 | -27 | 435 |
| Loss for the period | -118 | -1 429 | -518 |
| Attributable to: | |||
| Equity holders of the parent | -96 | -1 411 | -419 |
| Non-controlling interest | -22 | -18 | -99 |
| Other comprehensive income, net of income tax | |||
| Income that will not be reclassified subsequently to profit | |||
| Net change in properties revaluation reserve | 0 | 0 | -4 |
| Total comprehensive income for the year | -118 | -1 429 | -522 |
| Attributable to: | |||
| Equity holders of the parent | -96 | -1 411 | -423 |
| Non-controlling interest | -22 | -18 | -99 |
| Earnings per share from continuing operations (EUR) | -0.00 | -0.03 | 0.02 |
| Earnings per share for the period (EUR) | -0.00 | -0.03 | 0.02 |
Consolidated interim statements of cash flows
| in thousands of euros | 2018 3M | Adjusted 2017 3M | 2017 12M |
| Cash flows from operating activities | |||
| Loss for the year | -118 | -1 429 | -518 |
| Adjustments for: | |||
| Depreciation and amortisation of non-current assets | 52 | 175 | -455 |
| Gain from disposal of property, plant and equipment | -18 | 0 | -3 045 |
| Change in fair value of property, plant and equipment | 0 | 0 | -26 |
| Change in fair value of investment property | 0 | 0 | -530 |
| Loss from disposal of shares of subsidiaries | 0 | 0 | 346 |
| Finance income and costs | 858 | 887 | 3 460 |
| Other non-monetary changes (net amounts) | -503 | 12 584 | 12 410 |
| Changes in working capital: | |||
| Trade receivables and prepayments | 430 | -93 | -408 |
| Inventories | -1 464 | -12 942 | -23 880 |
| Liabilities and prepayments | 2 850 | -1 752 | 6 556 |
| Provisions | 19 | 12 | -101 |
| Net cash used in/ generated by operating activities | 2 053 | -2 558 | -5 281 |
| Cash flows from investing activities | |||
| Payments for property, plant and equipment | -57 | -98 | -281 |
| Payments for intangible assets | 0 | -24 | -52 |
| Proceeds from disposal of property, plant and equipment | 336 | 0 | 6 651 |
| Payments for investment property | -9 290 | -4 085 | -24 772 |
| Net cash from disposal of shares of subsidiaries | 0 | 0 | 6 249 |
| Interests received | 1 | 1 | 6 |
| Net cash used in/ generated by investing activities | -9 010 | -4 206 | -12 199 |
| Cash flows from financing activities | |||
| Proceeds from increase of share capital | 0 | 0 | 4 328 |
| Net changes related to non-controlling interests | 0 | 0 | -480 |
| Proceeds from bonds | 0 | 0 | 1 446 |
| Redemption of convertible bonds | 0 | -522 | -773 |
| Proceeds from borrowings | 7 443 | 6 450 | 28 260 |
| Repayment of borrowings | -2 051 | -168 | -7 048 |
| Interests paid | -527 | -567 | -3 318 |
| Net cash used in/ generated by financing activities | 4 865 | 4 713 | 22 415 |
| Net change in cash and cash equivalents | -2 092 | -2 051 | 4 935 |
| Cash and cash equivalents at the beginning of the period | 10 317 | 5 382 | 5 382 |
| Cash and cash equivalents at the end of the period | 8 225 | 3 331 | 10 317 |
Allan Remmelkoor
Member of the Board
+372 614 4920
prokapital@prokapital.ee
