Pro Kapital Council approved Consolidated Interim Report for I Quarter and 3 Months of 2021 (Unaudited)

Pro KapitalAS Pro Kapital Grupp has not yet published audited annual report for 2020 (related notice: https://view.news.eu.nasdaq.com/view?id=b9a14c4af26fbcf29852a28f2d4144b75&lang=en). However, the Company is using unaudited financial statements as basis of preparation in this report. All details related to this issue can be find in Note 2 of the report. 

MANAGEMENT REPORT

Chairman’s summary 

Start of 2021 has been a dynamic working period. We have continued working on our developments, where we see remarkable results, but also had to face a setback as after reporting date the decision of the Supreme Court terminated reorganisation proceedings of our subsidiary AS Tallinna Moekombinaat which led to the permanent insolvency of the subsidiary.

Real estate development

We have continued construction of Ratsuri Houses and Kalaranna projects and preparing project documentation for the following development phases in Tallinn. In March we completed Ratsuri Houses in Kristiine City where we had booked or presold all 39 apartments already prior to the completion. All apartments were sold and handed over within March and April. Soon we start handing over apartments in two first buildings of Kalaranna project, where completion of eight buildings with the total of 240 apartments will be achieved step by step in four phases. Today we have reservations or presales concluded for 85% of premises. After reporting date, we concluded an agreement for sales of all business premises of Kalaranna project for 16.16 million euros (with VAT) including the option to sell also premises of the last phase, which we are preparing to launch in the near future. This year we have started with construction of the new project Kindrali Houses in Kristiine City, where two building complexes with 129 apartments will be raised by next summer. In this project we had booked or presold more than half of the apartments before signing the construction agreement. Today over 90% of the apartments have been booked or presold.

In Riga we are selling our luxury product River Breeze Residence and prepare for the further development of Kliversala Residential Quarter. We have received a building permit for City Oasis residential quarter with 326 apartments – a tranquil and green living environment in the city centre. We will be ready to proceed with construction activities as soon as the market situation becomes more favourable. Unfortunately, the Latvian real-estate market has not been as active as its neighbouring countries Estonia and Lithuania. However, we have observed some changes in the recent months and recovery of the market.

In 2019 we completed five buildings in Šaltiniu Namai Attico project in Vilnius with 115 apartments. Today we have only 5 apartments unsold. We are preparing for the following phase with city villas and commercial building and plan to start the construction this year.

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. In 2021 we have already completed Ratsuri Houses project with 39 apartments and soon we start handing over exclusive homes in prime location of Kalaranna project.

T1 Mall of Tallinn

On 3 April 2020 Harju County Court initiated reorganization proceedings of the operator of T1 Mall of Tallinn – AS Tallinna Moekombinaat (TMK). Reorganization proceedings were terminated a year later by the decision of 26 April 2021 of the Supreme Court not to take TMK’s appeal into proceedings. Without the reorganisation proceedings AS Tallinna Moekombinaat is not capable to fulfil its obligations and has become permanently insolvent. On 7 May 2021 Harju County Court appointed Kristo Teder as an interim bankruptcy trustee of TMK. Interim bankruptcy trustee presented to the court a written report and opinion on 27 May 2021. Based on the report the court will take a decision about the following proceedings. The management of TMK continues to operate T1 Mall of Tallinn in cooperation with the interim trustee in bankruptcy until appointment of bankruptcy trustee and declaration of insolvency.

Supreme Court’s decision as an adjusting event after balance sheet date requires writing-off investment into subsidiary. AS Pro Kapital Eesti has written off an investment into subsidiary in amount of 13.4 million euros due to negative equity of TMK and as a result of adjusting event also receivables in the total amount of 26 million euros as at 31 December 2020. When bankruptcy is declared and the Company loses control over subsidiary, TMK will not be consolidated into the group any more. Although discontinuing consolidation will influence consolidated results by 26 million negatively, it will have a positive effect to the Group financial results due to derecognition of negative equity of the subsidiary. Bankruptcy of TMK will not affect liquidity of the Group nor short-term cash flows. Long-term cash flows are influenced by uncollectable receivables to the Group.

Adjusting event described above and writing off the debts of subsidiary on parent company level has triggered a non-compliance with financial covenants of secured bonds (Notes 9 and 19).

Hotel operations

Last year had a significant impact on PK Parkhotel Kurhaus in Bad Kreuznach, Germany. Due to the COVID-19 restrictions, the hotel was closed from March until the end of June and due to new restrictions hotel is not operating since November 2020. The impact of COVID-19 has been 0.7 million euros in less hotel revenues in the first quarter of 2021 comparing to last year. However, due to governmental support, the net result was better by 30 thousand euros. We expect to reopen the hotel in the middle of June.

In the following months we continue construction works of ongoing development projects and plan to start with the following phases. In spite of losing T1 Mall of Tallinn, our real estate development is doing well, the Company is a going concern and we have an optimistic view for the future.

Paolo Michelozzi
CEO

Key financials

The total revenue of the Company in the first quarter of 2021 was 6.6 million euros, which is an increase of 12% compared to the reference period (2020 3M: 5.9 million euros). 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 depend on the completion of the residential developments. The real estate sales revenue was higher in 2021 due to completion of Ratsuri Houses project, where apartments were handed over to new owners during March-April. In 2021, the Company has continued with presales of current development projects: first phases of Kalaranna District and Kindrali Houses in Tallinn.

The gross profit in the first quarter of 2021 decreased by 8% amounting to 2.0 million euros compared to 2.1 million euros during the same period in 2020.

The operating profit in the first quarter of 2021 was 1.9 million euros compared to 0.3 million euros during the same period in 2020. The increase in operating result is mainly influenced by the sale of investment property.

The net result in the first quarter of 2021 was -2.1 million euros compared to -4.0 million euros during the same period in 2020. The net result of the reporting period was influenced by the sale of the investment property, but as well in fewer administrative (decreased 27% compared to 2020 3M) and financial costs (decreased 6% compared to 2020 3M).

Cash generated from operating activities in the first quarter of 2021 was -2.1 million euros compared to -4.0 million euros during the same period in 2020. The net result of the reporting period was influenced by the sale of the investment property, but as well in fewer administrative (decreased 27% compared to 2020 3M) and financial costs (decreased 6% compared to 2020 3M).

Net assets per share on 31 March 2021 totalled to 0.20 euros compared to 1.19 euros on 31 March 2020.

Key performance indicators

2021 3M 2020 3M 2020 12M (Unaudited*)
Revenue, th EUR 6 563 5 873 19 234
Gross profit, th EUR 1 974 2 137 6 775
Gross profit, % 30% 36% 35%
Operating result, th EUR 1 897 346 -43 108
Operating result, % 29% 6% -224%
Net result, th EUR -2 113 -3 966 -59 456
Net result, % -32% -68% -309%
Earnings per share, EUR -0.03 -0.07 -0.98
31.03.2021 31.03.2020 (Restated*) 31.12.2020 (Unaudited*)
Total Assets, th EUR 185 287 207 361 179 048
Total Liabilities, th EUR 177 829 142 022 169 477
Total Equity, th EUR 7 458 65 339 9 571
Debt / Equity ** 18.44 2.10 14.15
Return on Assets, % ***
Return on Equity, % **** -1.2% -1.9% -30.7%
Net asset value per share, EUR ***** -24.8% -5.9% -141.2%

* See Note 2 in the “Consolidated Interim Report for I Quarter and 3 Months Of 2021” for details regarding the unaudited status of the report and restatement as a result of an error 2019 year end results

**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 31.03.2021 31.03.2020 (Restated) 31.12.2020 (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 13 331 9 459 9 393
Current receivables 1 542 1 281 1 797
Inventories 61 481 40 329 58 352
Total current assets 76 354 51 069 69 542
Non-current assets
Non-current receivables 3 715 2 942 3 517
Property, plant and equipment 6 717 7 100 6 745
Right-of-use assets 318 480 357
Investment property 97 814 145 406 98 512
Intangible assets 369 364 375
Total non-current assets 108 933 156 292 109 506
TOTAL ASSETS 185 287 207 361 179 048
LIABILITIES AND EQUITY
Current liabilities
Current debt 104 373 83 153 107 581
Customer advances 10 284 5 935 7 866
Current payables 24 011 10 837 22 211
Tax liabilities 1 280 849 458
Short-term provisions 471 329 459
Total current liabilities 140 419 101 103 138 575
Non-current liabilities
Long-term debt 33 425 38 398 27 255
Other non-current payables 2 638 1 064 2 295
Deferred income tax liabilities 1 151 1 320 1 170
Long-term provisions 196 137 182
Total non-current liabilities 37 410 40 919 30 902
TOTAL LIABILITIES 177 829 142 022 169 477
Equity attributable to owners of the Company
Share capital in nominal value 11 338 11 338 11 338
Share premium 5 661 5 661 5 661
Statutory reserve 1 134 1 134 1 134
Revaluation reserve 2 984 3 262 2 984
Retained earnings -8 031 47 647 47 647
Profit/ Loss for the period -1 951 -3 788 -55 678
Total equity attributable to owners of the Company 11 135 65 254 13 086
Non-controlling interest -3 677 85 -3 515
TOTAL EQUITY 7 458 65 339 9 571
TOTAL LIABILITIES AND EQUITY 185 287 207 361 179 048

Consolidated interim statements of profit and loss and other comprehensive income

in thousands of euros 2021 3M 2020 3M 2020 12M (Unaudited)
CONTINUING OPERATIONS
Operating income
Revenue 6 563 5 873 19 234
Cost of goods sold -4 589 -3 736 -12 459
Gross profit 1 974 2 137 6 775
Marketing expenses -126 -161 -621
Administrative expenses -1 143 -1 562 -6 154
Other income 1 351 3 478
Other expenses -159 -71 -43 586
Operating profit 1 897 346 -43 108
Financial income 1 1 4
Financial expense -3 994 -4 244 -15 998
Profit / loss before income tax -2 096 -3 897 -59 102
Income tax -17 -69 -354
Profit / loss for the period -2 113 -3 966 -59 456
Attributable to:
Equity holders of the parent -1 951 -3 788 -55 678
Non-controlling interest -162 -178 -3 778
Items that will not be reclassified subsequently to profit or loss
Net change in properties revaluation reserve 0 0 -278
Total comprehensive income / loss for the year -2 113 -3 966 -59 734
Attributable to:
Equity holders of the parent -1 951 -3 788 -55 956
Non-controlling interest -162 -178 -3 778
Earnings per share for the period (EUR) -0.03 -0.07 -0.98

Consolidated interim statements of cash flows

in thousands of euros 2021 3M 2020 3M 2020 12M (Unaudited)
Cash flows from operating activities
Profit/loss for the period -2 113 -3 966 -59 456
Adjustments for:
Depreciation, amortisation of non-current assets 100 105 416
Gain from disposal of investment property -1 092 0 0
Loss from write-off PPE and intangible assets 0 0 8
Change in fair value of property, plant, equipment 0 0 -16
Change in fair value of investment property 0 0 43 128
Finance income and costs 3 993 4 243 15 994
Changes in deferred tax assets and liabilities -19 -27 -178
Other non-monetary changes (net amounts) 2 -1 -3 111
Changes in working capital:
Trade receivables and prepayments 53 -409 -1 514
Inventories -3 129 703 -13 011
Liabilities and prepayments 3 506 1 336 10 025
Provisions 13 10 59
Net cash generated in operating activities 1 314 1 994 -7 656
Cash flows from investing activities
Payments for property, plant and equipment -28 -10 -94
Payments for intangible assets -2 -2 -43
Payments for investment property -210 -302 -844
Proceeds from disposal of investment property 2 000 0 0
Interests received 0 1 1
Net cash generated in investing activities 1 760 -313 -980
Cash flows from financing activities
Net proceeds from secured bonds 0 28 500 28 500
Redemption of convertible bonds -69 0 -33
Redemption of non-convertible bonds 0 -28 000 -28 000
Proceeds from borrowings 5 838 100 14 410
Repayment of borrowings -2 857 -648 -1 376
Repayment of lease liabilities -46 -48 -135
Interests paid -2 002 -2 742 -5 953
Net cash generated by financing activities 864 -2 838 7 413
Net change in cash and cash equivalents 3 938 -1 157 -1 223
Cash and cash equivalents at the beginning 9 393 10 616 10 616
Cash and cash equivalents at the end of the period 13 331 9 459 9 393

The full report can be found in the file attached.

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