Pro Kapital: Pro Kapital Council approved Consolidated Interim Report for III Quarter and 9 Months of 2021 (Unaudited)

Pro KapitalMANAGEMENT REPORT

CEO summary

The third quarter of this year has been very dynamic, with amazing results in sales activities and exceeding expectations when signing presale agreements, but it has been also challenging in development activities due to changes in the construction market.

Real estate development

We have continued construction of Kindrali Houses and Kalaranna projects and are preparing project documentation for the following development phases in . In September we started 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 all business premises and for 94% of apartments. This year we started construction of the new project Kindrali Houses in City, where three building-complexes with the total of 195 apartments will be raised. In this project we had booked or presold more than half of the apartments before signing the construction agreement. Today 98% of the apartments have been booked or presold in Kindrali.

In Riga¬†we are selling our luxury product River Breeze Residence and prepare technical project for the further development of Kliversala Residential Quarter – Blue Marine. We have received a building permit for City Oasis residential quarter with 326 apartments ‚Äď a tranquil and green living environment in the city centre. We are ready to proceed with construction activities as soon as the market situation becomes more favourable. Unfortunately, the Latvian real-estate market differs significantly from its neighbouring countries and Lithuania. However, we are observing higher interest in luxury segment and in River Breeze project.

In 2019 we completed five buildings in ҆altiniŇ≥ Namai Attico project¬†in Vilnius¬†with 115¬†apartments. Today we have only 5 apartments unsold of which two apartments are furnished as showrooms for the following phase. 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 completion of residential developments as revenues are recorded at the moment notary deeds of sale are concluded. In 2021 we have completed Ratsuri Houses project with 39 apartments and now we have started handing over exclusive homes in prime location of Kalaranna project.

Hotel operations

Last year had a significant impact on PK Parkhotel Kurhaus in Bad Kreuznach, Germany. Due to COVID-19 restrictions the hotel was closed almost half of the year in 2020 and from January till mid-June in 2021. The impact of COVID-19 has been 0.3 million euros in less hotel revenues in the first nine months of 2021 comparing to the last year. Although occupancy has increased this year, the average room has influenced revenues negatively. However, due to governmental support, the net result of nine months was better comparing to 2020.

A few years ago, we renovated half of the rooms and part of public spaces. We plan to continue with renovation works in the coming year and make relevant preparations.

In the following months we continue construction works of ongoing development projects and prepare to start with the following phases. 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 nine month of 2021 was 21 million euros, having increased by 55% compared to the reference period (2020 9M: 13.6 million euros). The total revenue of the third quarter was 12 million euros, which is 164% higher compared to the same period in 2020 (2020 Q3: 4.6 million euro).

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 have been influenced by completion of Ratsuri Houses project, where all apartments were sold and handed over to new owners and start of handing over apartments in first two buildings of Kalaranna project.¬† The Company has continued with sales of completed developments – River Breeze Residence in Riga and ҆altiniŇ≥ Namai Attico development in Vilnius and presales of ongoing development projects Kalaranna District and Kindrali Houses in Tallinn.

The gross profit in the first nine month of 2021 increased by 14% amounting to 6.1 million euros compared to 5.4 million euros during the same period in 2020. In the third quarter the gross profit figures were 3.4 million euros and 1.9 million euros respectively.

The operating result in the first nine months of 2021 has improved to 3.7 million euros profit comparing to 1.1 million euros profit during the same period in 2020. The operating result of the third quarter was 2.8 million euros profit comparing to 0.9 million euros profit in 2020.

The net result in the first nine months of 2021 was 22.4 million euros profit and in the third quarter 1.1 million euros profit, comparing to losses of 11.1 million euros and 3.2 million euros in the reference period respectively. The positive result of the reporting period was influenced by loss of control and derecognition of the subsidiary AS Tallinna Moekombinaat.

Cash generated from operating activities during the first nine months was 1.4 million euros comparing to -4.5 million euros used during the same period in 2020. In the third quarter of 2021 cash generated from operating activities was 5.2 million euros and 1.9 million euros were used during the same period in 2020.

Net assets per share on 30 September 2021 totalled to 0.63 euros compared to 1.07 euros on 30 September 2020.

Key performance indicators (including discontinued operations)

2021 9M 2020 9M 2021 Q3 2020 Q3 2020 12M
Revenue, th EUR 21 108 13 615 12 066 4 562 19 234
Gross profit, th EUR 6 103 5 371 3 442 1 880 6 775
Gross profit, % 29% 39% 29% 41% 35%
Operating result, th EUR 3 712 1 136 2 836 885 -43 108
Operating result, % 18% 8% 24% 19% -224%
Net result, th EUR 22 463 -11 085 1 122 -3 183 -59 456
Net result, % 106% -81% 9% -70% -309%
Earnings per share, EUR 0.40 -0.19 0.02 -0.06 -0.98
30.09.2021 30.09.2020 31.12.2020
Total Assets, th EUR 125 042 215 765 179 048
Total Liabilities, th EUR 89 492 157 543 169 477
Total Equity, th EUR 35 549 58 222 9 571
Debt / Equity * 2.52 2.71 14.15
Return on Assets, % ** 15% -5,2% -30.7%
Return on Equity, % *** 99.5% -17.1% -141.2%
Net asset value per share, EUR **** 0.63 1.03 0.23

  
*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 30.09.2021 Restated*
30.09.2020
31.12.2020
ASSETS
Current assets
Cash and cash equivalents 13 283 7 316 9 393
Current receivables 1 458 1 422 1 797
Inventories 67 811 53 405 58 352
Total current assets 82 552 62 143 69 542
Non-current assets
Non-current receivables 23 4 417 3 517
Property, plant and equipment 6 677 7 011 6 745
Right-of-use assets 233 400 357
Investment property 35 202 141 452 98 512
Intangible assets 355 342 375
Total non-current assets 42 490 153 622 109 506
TOTAL ASSETS 125 042 215 765 179 048
LIABILITIES AND EQUITY
Current liabilities
Current debt 530 78 032 107 581
Customer advances              13 516 7 124 7 866
Current payables 5 233 17 844  22 211
Tax liabilities 656 225 458
Short-term provisions 534 358 459
Total current liabilities 20 469 103 583 138 575
Non-current liabilities
Long-term debt 64 708 50 793 27 255
Other non-current payables 3 139 1 783 2 295
Deferred income tax liabilities 1 133 1 230 1 170
Long-term provisions 44 156 182
Total non-current liabilities 69 024 53 962 30 902
TOTAL LIABILITIES 89 493 157 545 169 477
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 47 646 47 647
Profit/ Loss for the period 22 463 -10 672 -55 678
Total equity attributable to owners of the Company 35 549 58 369 13 086
Non-controlling interest 0 -149 -3 515
TOTAL EQUITY 35 549 58 220 9 571
TOTAL LIABILITIES AND EQUITY

* See Note 2 for details regarding restatement.

 Consolidated interim statements of profit and loss and other comprehensive income

in thousands of euros 2021
9M
2020
9M
2021
Q3
2020
Q3
2020 12M
CONTINUING OPERATIONS
Operating income
Revenue 19 373 8 743 12 066 3 146 13 637
Cost of goods sold -14 118 -6 038 -8 624 -1 977 -9 424
Gross profit 5 255 2 705 3 442 1 169 4 213
Marketing expenses -358 -418 -119 -140 -611
Administrative expenses -3 549 -3 171 -1 086 -1 054 -4 372
Other income 2 113 26 605 22 384
Other expenses -56 -14 -6 -3 2 876
Operating profit/ loss 3 405 -872 2 836 -6 2 490
Financial income 53 812 3     2 1 4
Financial expense -29 474 -4 095 -1 722 -1 279 -5 419
Profit / loss before income tax 27 743 -4 964 1 116 -1 284 -2 925
Income tax -23 -211 6 -132 -354
Net profit / loss from continuing operations 27 720 -5 175 1 122 -1 416 -3 279
Profit from discontinued operations -5 257 -5 912 0 -1 768 -56 177
Net profit / loss for the period 22 463 -11 087 1 122 -3 184 -59 456
Attributable to:
            Equity holders of the parent                         22 178 -10 674 1122 -3 120 -55 678
            Non-controlling interest -285 -413              0 -64 -3 778
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss
Net change in properties revaluation reserve 0 0 0 0 -278
Total comprehensive income / loss for the year 22 463 -11 087 1 122 -3 184 -59 734
Attributable to:
            Equity holders of the parent 22 178 -10 674 1 122 -3 120 -55 956
            Non-controlling interest -285 -413 0 -64 -3 778
Earnings per share (continuing operations) ‚ā¨ 0.49 -0.09 0.02 -0.02 -0.06
Earnings per share for the period ‚ā¨ 0.40 -0.19 0.02 -0.06 -0.99

Consolidated interim statements of cash flows

in thousands of euros 2021
9M
2020
9M
2021
Q3
2020
Q3
2020 12M
Cash flows from operating activities
Profit/loss for the period 22 463 -11 085 1 113 -3 183 -59 456
Adjustments for:
     Depreciation, amortisation of non-current assets 282 311 88 102 416
     Gain from disposal of investment property -1 092 0 0 0 0
     Loss from write-off of plant, property, equipment 0 0 0 0 8
     Change in fair value of property, plant, equipment 0 0 0 0 -16
     Change in fair value of investment property 0 0 0 0 43 127
     Gain from derecognition of subsidiary -53 808 0 0 0 0
     Finance income and costs 35 033 12 010 1 719 3 936 15 994
     Changes in deferred tax assets and liabilities -37 -118 0 -59 -178
     Other non-monetary changes (net amounts) 1 537 -3 118 0 -3 114 -3 110
Changes in working capital:
     Trade receivables and prepayments 3 806 -2 049 -513 -1 069 -1 514
     Inventories -9 460 -12 373 156 -8 023 -13 011
     Liabilities and prepayments 2 800 11 870 2 736 9 522 10 025
     Provisions -138 29 -38 10 59
Net cash used in operating activities 1 387 -4 523 5 261 -1 878 -7 656
Cash flows from investing activities
Payments for property, plant and equipment -102 -29 -68 -18 -94
Payments for intangible assets -13 0 -8 0 -43
Payments for investment property -411 -657 -165 -260 -844
Proceeds from disposal of investment property 2 000 0 0 0 0
Change in cash from derecognition of subsidiary -182 0 0 0 0
Interests received 2 2 0 0 1
Net cash used in investing activities 1 294 -684 -241 -278 -980
Cash flows from financing activities
Net proceeds from secured bonds 0 28 500 0 0 28 500
Redemption of convertible bonds -337 0 -253 0 -33
Repurchase of non-convertible bonds 0 -28 003 0 -3 -28 000
Proceeds from borrowings 18 497 7 689 6 086 4 832 14 410
Repayment of borrowings -11 855 -684 -8 990 -28 -1 376
Repayment of lease liabilities -129 -130 -42 -46 -135
Interests paid -4 967 -5 465 -2 382 -2 344 -5 953
Net cash used/ generated by financing activities 1 209 1 907 -5 581 2 411 7 413
Net change in cash and cash equivalents 3 890 -3 300 -561 255 -1 223
Cash and cash equivalents at the beginning 9 393 10 616 13 331 7 061 10 616
Cash and cash equivalents at the end of the period 13 283 7 316 13 842 7 316 9 393

The full report can be found in the file attached.

PKG Q3 2021 ENG

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