Pro Kapital: Pro Kapital Council approved Consolidated Interim Report for IV Quarter and 12 Months of 2021 (Unaudited)

Pro KapitalMANAGEMENT REPORT

Chairman’s summary

The fourth quarter of 2021 has confirmed the positive trend seen in the previous quarter. The overall market is healthy and we are seeing a solid and steady demand for our projects. The construction market still poses some challenging issues, mainly due to complications related to Covid-19 and relative problems in the supply chain and increase in cost of materials due to lower overall supply, which makes it harder to fix a price for the works with the construction companies.

Real estate development

In Tallinn, we have continued construction of Kindrali Houses and Kalaranna projects. In the third quarter of 2021 we started handing over apartments in Kalaranna project, where completion of eight buildings with the total of 240 apartments will be achieved. Today we are handing over apartments in the fifth and sixth building and we have reservations or presales concluded for all business premises and for 99% of apartments in this phase of the project. Last year we started construction of the new project Kindrali Houses in Kristiine 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 we have no apartment available in Kindrali.

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 invited several construction companies to the tender and are in the process of identifying the best option, subject to the offers we will receive. Latvian real estate sector is lagging its’ neighbouring countries (Estonia and Lithuania) due to what we see as contingent reasons that will have little impact on our long-term value creation strategy. However, it is undeniable that the market is currently moving at a slower pace compared to the other Baltic Republics. This comes with some short-term challenges, but we believe that this untapped potential could also be favourable should we decide to expand our land portfolio in the area, by giving us the chance to buy at a lower price relative to the other Baltic capitals.

In Vilnius, we only have 4 unsold apartments in our Šaltiniu Namai Attico project. 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 sq.m2 in all the local market. We just started the tendering process for the following phase of city villas and a commercial building and we can start construction works this summer.

Hotel operations

The Covid-19 pandemic had a strong impact on all the tourism sector, but luckily the German government has provided a great deal of support in terms of subsidies provided to PK Parkhotel Kurhaus in Bad Kreuznach.

The current restrictions are still based on the “2G+ model”, meaning that all the hotel guest who have 2 doses of vaccines still must present daily negative Covid tests. This clearly complicates the job of selling rooms and we decided to turn this problem into an opportunity, by speeding up the process of renovation of the second half of the rooms (first half has been renovated 5 years ago), doing works in a period where we will not disturb our guests due to the lower occupation of the hotel.

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 the following months we plan on continuing the construction works of ongoing developments and prepare for the upcoming phases. The real estate development is going well, the market is strong and we will continue implementing our strategy of 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 of 2021 was 44.8 million euros, having increased by 133% compared to the reference period (2020 12M: 19.2 million euros). The total revenue of the fourth quarter was 23.7 million euros, which is 4.23 times more than
5.6 million euros during the same period in 2020.

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 buildings of Kalaranna project.  The Company has continued with sales of completed developments – River Breeze Residence in Riga and Šaltinių Namai Attico development in Vilnius and with presales of ongoing development projects Kalaranna District and Kindrali Houses in Tallinn.

The gross profit in 2021 increased by 69% amounting to 11.4 million euros compared to 6.8 million euros in 2020. In the fourth quarter the gross profit figures were 5.3 million euros and 1.4 million euros respectively.

The operating result in 2021 has improved to 12.4 million euros profit comparing to 43.1 million euros loss during the same period in 2020. The operating result of the fourth quarter was 8.7 million euros profit comparing to 1.1 million euros loss in 2020.

The net result in 2021 was 29.8 million euros profit and in the fourth quarter 7.3 million euros profit, comparing to losses of 59.5 million euros and 48.4 million euros in the reference periods respectively. While the results of the reference period 2020 were influenced by the decrease in the value of investment property in the subsidiary AS Tallinna Moekombinaat, then positive results of the reporting period reflect positive effect of loss of control and derecognition of the above-mentioned subsidiary as well as increased sales revenues from property developments in Estonia.

Cash generated from operating activities during 2021 was 13.3 million euros comparing to 7.7 million euros used during the same period in 2020. In the fourth quarter of 2021 cash generated from operating activities was 11.9 million euros and 3.1 million euros were used during the same period in 2020.

Net assets per share on 31 December 2021 totalled to 0.76 euros compared to 0.17 euros on 31 December 2020.

Key performance indicators (including discontinued operations)

2021 12M 2020 12M 2021 Q4 2020 Q4
Revenue, th EUR 44 830 19 234 23 722 5 619
Gross profit, th EUR 11 424 6 775 5 321 1 404
Gross profit, % 25% 35% 22% 25%
Operating result, th EUR 12 380 -43 108 8 666 -44 244
Operating result, % 28% -224% 37% -787%
Net result, th EUR 29 757 -59 456 7 292 -48 371
Net result, % 66% -309% 31% -861%
Earnings per share, EUR 0.52 -0.98 0.13 -0.79
31.12.2021 31.12.2020
Total Assets, th EUR 116 027 179 048
Total Liabilities, th EUR 73 184 169 477
Total Equity, th EUR 42 843 9 571
Debt / Equity * 1.71 14.15
Return on Assets, % ** 20.2% -30.7%
Return on Equity, % *** 113.5 -141.2%
Net asset value per share, EUR **** 0.76 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 31.12.2020
ASSETS
Current assets
Cash and cash equivalents 9 626 9 393
Current receivables 802 1 797
Inventories 57 533 58 352
Total current assets 67 961 69 542
Non-current assets
Non-current receivables 21 3 517
Property, plant and equipment 6 754 6 745
Right-of-use assets 202 357
Investment property 40 734 98 512
Intangible assets 355 375
Total non-current assets 48 066 109 506
TOTAL ASSETS 116 027 179 048
LIABILITIES AND EQUITY
Current liabilities
Current debt 3 955 107 581
Customer advances 12 419 7 866
Current payables 4 379  22 211
Tax liabilities 1 144 458
Short-term provisions 1 125 459
Total current liabilities 23 022 138 575
Non-current liabilities
Long-term debt 46 455 27 255
Other non-current payables 2 526 2 295
Deferred income tax liabilities 1 133 1 170
Long-term provisions 48 182
Total non-current liabilities 50 162 30 902
TOTAL LIABILITIES 73 184 169 477
Equity attributable to owners of the Company
Share capital in nominal value 11 338 11 338
Share premium 5 661 5 661
Statutory reserve 1 134 1 134
Revaluation reserve 2 984 2 984
Retained earnings -8 031 47 647
Profit/ Loss for the period 29 757 -55 678
Total equity attributable to owners of the Company 42 843 13 086
Non-controlling interest 0 -3 515
TOTAL EQUITY 42 843 9 571
TOTAL LIABILITIES AND EQUITY 116 027 179 048

* See Note 2 for details regarding restatement.

 Consolidated interim statements of profit and loss and other comprehensive income

in thousands of euros 2021
12M
2020 12M 2021
Q4
2020 Q4
CONTINUING OPERATIONS
Operating income
Revenue 43 095 13 637 23 722 4 894
Cost of goods sold -32 519 -9 424 -18 401 -3 386
Gross profit 10 576 4 213 5 321 1 508
Marketing expenses -502 -610 -144 -193
Administrative expenses -5 592 -4 372 -2 043 -1 201
Other income 7 654 384 5 541 358
Other expenses -63 2 876 -9 2 891
Operating profit/ loss 12 073 2 491 8 666 3 363
Financial income 53 813 4 1 1
Financial expense -30 882 -5 420 -1 408 -1 327
Profit / loss before income tax 35 004 -2 925 7 259 2 037
Income tax 10 -354 33 -143
Net profit / loss from continuing operations 35 014 -3 279 7 292 1 894
Profit from discontinued operations -5 257 -56 177 0 -50 265
Net profit / loss for the period 29 757 -59 456 7 292 -48 371
Attributable to:
            Equity holders of the parent                         29 757 -55 678 7 292 -45 005
            Non-controlling interest 0      -3 778         0 -3 366
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 -278 0 0
Total comprehensive income / loss for the year 29 757 -59 734 7 292 -48 371
Attributable to:
            Equity holders of the parent 29 757 -55 956 7 292 -45 005
            Non-controlling interest 0 -3 778 0 -3 366
Earnings per share (continuing operations) € 0.62 -0.06 0.13 0.03
Earnings per share for the period € 0.52 -0.99 0.13 -0.79

Consolidated interim statements of cash flows

in thousands of euros 2021 12M 2020 12M 2021 Q4 2020 Q4
Cash flows from operating activities
Profit/loss for the period 29 757 -59 456 7 302 -48 373
Adjustments for:
     Depreciation, amortisation of non-current assets 374 416 92 105
     Gain from disposal of investment property -1 092 0 0 0
     Loss from write-off of plant, property, equipment 0 8 0 8
     Change in fair value of property, plant, equipment -56 -16 -56 -16
     Change in fair value of investment property -5 484 43 127 -5 484 43 127
     Gain from derecognition of subsidiary -53 808 0 0 0
     Finance income and costs 36 440 15 994 1 407 3 984
     Changes in deferred tax assets and liabilities -37 -178 0 -60
     Other non-monetary changes (net amounts) 1 536 -3 110 -7 14
Changes in working capital:
     Trade receivables and prepayments 4 492 -1 514 686 535
     Inventories 818 -13 011 10 278 -636
     Liabilities and prepayments 477 10 025 -2 323 -1 845
     Provisions -127 59 12 31
Net cash used in operating activities 13 290 -7 656 11 907 -3 126
Cash flows from investing activities
Payments for property, plant and equipment -178 -94 -76 -71
Payments for intangible assets -20 -43 -8 -45
Payments for investment property -458 -844 -48 -187
Proceeds from disposal of investment property 2 000 0 0 0
Change in cash from derecognition of subsidiary -182 0 0 0
Interests received 3 1 0 0
Net cash used in investing activities 1 165 -980 -132 -303
Cash flows from financing activities
Net proceeds from secured bonds 0 28 500 0 0
Redemption of convertible bonds -337 -33 0 -30
Repurchase of non-convertible bonds 0 -28 000 0 0
Proceeds from borrowings 22 340 14 410 3 843 6 721
Repayment of borrowings -30 581 -1 376 -18 726 -692
Repayment of lease liabilities -163 -135 -34 -5
Interests paid -5 481 -5 953 -515 -488
Net cash used/ generated by financing activities -14 222 7 413 -15 432 5 506
Net change in cash and cash equivalents 233 -1 223 -3 657 2 077
Cash and cash equivalents at the beginning 9 393 10 616 13 283 7 316
Cash and cash equivalents at the end of the period 9 626 9 393 9 626 9 393

The full report can be found in the file attached.

PKG Q4 2021 ENG

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