MANAGEMENT REPORT
Chairman's summary
The year 2018 has been significant for Pro Kapital, with respect to reaching
important milestones in the operations which in turn is demonstrated by
financial performance of the Company. We have shown stable growth through our
business and continue to focus on improving our results.
Pro Kapital aims to strengthen its position as one of the largest and strongest
real-estate companies in the Baltics, with more than ever emphasis on all
aspects of the business. I'm especially glad to highlight that in the fourth
quarter of 2018, Pro Kapital opened a one of a kind shopping and entertainment
centre T1 Mall of Tallinn, right at the heart of the future transportation
centre of Tallinn. This new landmark will continue to grow and is expected to
welcome a unique ferris wheel to be installed on the roof of the mall in early
spring of 2019.
As of 19 November 2018, the Company's shares are traded on the Nasdaq Tallinn
Stock Exchange Main List. We are more than ever dedicated in building new
communities and aspire sharing our story with investors as equally as with the
public.
Building new communities
Our business is not merely about building houses but establishing entire
communities and improving the living environment. The Company has nearly 25
years of experience identifying upcoming opportunities and thereby add new value
to the areas of development. One of the most significant ongoing developments in
Tallinn, the Kristiine City area, allows to expect increase in real-estate price
in the entire surrounding area. We develop in multiple phases and have completed
six of ten Kristina Houses, in one of the ongoing phases of the whole area. We
have sold 155 new homes in five apartment buildings and completed the sixth
building in December 2018 with 8 flats yet to be sold. Development of the
following four Kristina Houses is currently ongoing. With active presale being
carried out simultaneously to construction works, altogether 43 apartments have
been presold.
Pro Kapital is in progress with projecting works for a prestigious Kalaranna
residential and commercial area, right at the border of Tallinn's old town.
Kalaranna's unique location just by the bay of Tallinn is making it as one of
the most exclusive development projects in town. As a result of increasing
interest towards the project, we have started with initial reservations in July
2018. Although we have not yet started the construction nor advertising, we
have, to date, made 76 reservations to residential premises in Kalaranna.
In Riga, we are building Kliversala residential area which is a true sight to
see in the city centre. The new living area is located right on the bank of the
Daugava river on the shore of Agenskalna bay. We finished the construction works
of the prestigious River Breeze Residence in spring 2018. We are currently
proceeding with the sales of remaining 37 luxury apartments in the residence.
Following the completion and ongoing sale of River Breeze Residence, we're
proceeding with the following phase of Kliversala, but also other development
projects. Tallinas residential quarter is a modern combination of new and
restored historical buildings, for which the projecting works are ongoing.
Another new area development Zvaigznes Quarter, for which the projecting is
ongoing at this point in time, represents a commercial property for an office
complex and be built on the site of a former factory.
In Vilnius, Pro Kapital is developing a Shaltini? Namai area, bordering with and
offering a stunning view from the top-hill to the historic old town. The first
phase of yhe development is completed and almost sold out. In 2017 the
construction works for the second stage of residential buildings, Shaltini? Namai
Attico, started and 77 preliminary agreements have been already signed. Four
buildings of Shaltini? Namai Attico development are expected to be completed in
the middle of 2019. The Company is looking into obtaining new attractive
developments in the region, to start new projects after the completion of
Shaltini? Namai.
Continuous improvement in the financial results
The completion of multiple development phases, that have proven to attract the
market's interest, is clearly demonstrated by good financial results for the
reporting period. At the end of 2018, the Company recorded net revenue of 28
million euros, an increase of 99% as compared to 14.1 million euros during the
same period in 2017. Revenues have increased in real estate segment due to
completion of 4 apartment buildings in Tallinn and 1 in Riga as the revenues are
recorded at the moment notary deed of sale is concluded. The net profit was 18
million euros, which was 18.5 million euros improvement comparing to 0.5 million
euros loss during the same period in 2017. The net result was significantly
influenced by increased value of investment property due to completion and
opening of T1 Mall of Tallinn.
We are continuously focused on improving the efficiency. The Company is
exploring opportunities to reduce financial costs by refinancing current debt
instruments. We foresee stable growth in revenues and operating results during
the upcoming periods.
As at the end of 2018, the Company's overall loans from financial institutions
were 83.3 million euros. The loans from the minority shareholders were 0.3
million euros. The Company had 10.2 million euros worth convertible bonds debt
and 28.5 million euros worth non-convertible bonds debt.
As at 31 December 2018, there were 89 employees working in the Company, 40 of
them were employed by the hotel and property maintenance business.
Paolo Michelozzi
CEO
Key financials
The total revenue of the Company in 2018 was 28.0 million euros, which is an
increase of 99% compared to 12.1 million euros from continuing operations and
14.1 million euros including discontinued operations during the same period in
2017. The total revenue of the fourth quarter of 2018 was 6.9 million euros
compared to 4.3 million euros during the same period of 2017. 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 of the Company depend
on the completion of the residential developments. The improvement of the
results of 2018 was influenced by the completion of the 4(th), 5(th) and 6(th)
apartment buildings in the Kristina Houses development in Tallinn, renovation
works of Marsi 6 in Tallinn and River Breeze Residence in Riga, as presales
realized in notarised sales transactions.
The gross profit of 2018 was 9.6 million euros, which is an increase of 78%
compared to 4.6 million euros for continuing operations and 5.4 million euros
including discontinued operations during the same period in 2017. The gross
profit of the fourth quarter of 2018 was 2.7 million euros compared to 2.1
million euros during the same period in 2017.
The operating result of 2018 increased by 19.1 million euros, totalling to the
operating profit of 21.5 million euros compared to profit of 1.8 million euros
for continuing operations and profit of 2.4 million euros including discontinued
operations during 12 months of 2017. The operating profit of the fourth quarter
in 2018 was 16.7 million euros comparing to 1.2 million euros profit during the
same period in 2017. Operating result includes profit from revaluation of
investment properties. Total impact from revaluation in 2018 is 18.0 million
euros (Note 7).
The net result of 2018 increased by 18.5 million euros, totalling to positive
result of 18.0 million euros compared to the loss of 1.0 million euros for
continuing operations and loss of 0.5 million euros including discontinued
operations during 12 months of 2017. The net profit of the fourth quarter in
2018 was 15.8 million euros compared to 0.9 million euros profit during the same
period in 2017.
Cash used in operating activities was -1.0 million euros in 2018 compared to
-5.3 million euros during 2017. In the fourth quarter of 2018 cash used in
operating activities was -4.5 million euros comparing to -2.2 million euros
during same period in 2017.
Net assets per share on 31 December 2018 totalled to 1.80 euros compared to
1.46 euros on 31 December 2017.
| Continuing and
| discontinued
Continuing operations | operations
---------------------------------------------------------+---------------------
in thousands of 2017 12M | 2017 12M
euros 2018 12M adjusted 2018 Q4 2017 Q4|2018 12M adjusted
---------------------------------------------------------+---------------------
|
|
Revenue 27 991 12 077 6 948 4 281| 27 991 14 098
|
Gross profit 9 576 4 561 2 684 2 056| 9 576 5 380
|
Gross profit, % 34% 38% 39% 48%| 34% 38%
|
Operating |
result 21 467 1 797 16 688 1 155| 21 467 2 385
|
Operating |
result, % 77% 15% 240% 27%| 77% 17%
|
Net result 18 040 -953 15 761 922| 18 040 -518
|
Net result, % 64% -8% 227% 22%| 64% -4%
|
|
Earnings per |
share, EUR 0,30 -0,02 0,26 0,02| 0,30 -0,01
2017 12M adjusted - comparative information from the annual audited report 2017.
in thousands of euros 31.12.2018 31.12.2017
----------------------------------------------------------------
Total Assets, th EUR 245 105 175 158
Total Liabilities, th EUR 144 383 92 476
Total Equity, th EUR 100 722 82 682
Debt / Equity * 1,43 1,12
Return on Assets, % ** 8,6% -0,3%
Return on Equity, % *** 19,7% -0,6%
Net asset value per share, EUR **** 1,78 1,46
*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 31.12.2018 31.12.2017
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ASSETS
Current assets
Cash and cash equivalents 7 040 10 317
Current receivables 2 937 4 888
Inventories 59 331 38 024
--------------------------
Total current assets 69 308 53 229
Non-current assets
Non-current receivables 216 37
Property, plant and equipment 7 128 7 435
Investment property 168 129 114 140
Intangible assets 324 317
--------------------------
Total non-current assets 175 797 121 929
TOTAL ASSETS 245 105 175 158
LIABILITIES AND EQUITY
Current liabilities
Current debt 10 328 6 738
Customer advances 5 716 7 224
Current payables 11 939 10 091
Tax liabilities 357 132
Short-term provisions 852 170
--------------------------
Total current liabilities 29 192 24 355
Non-current liabilities
Long-term debt 112 009 62 527
Other non-current payables 1 039 3 437
Deferred income tax liabilities 2 004 2 058
Long-term provisions 139 99
--------------------------
Total non-current liabilities 115 191 68 121
TOTAL LIABILITIES 144 383 92 476
Equity attributable to owners of the Company
Share capital in nominal value 11 338 11 338
Share premium 5 661 5 661
Statutory reserve 1 082 1 082
Revaluation reserve 3 262 3 256
Retained earnings 59 944 60 369
Profit/ Loss for the period 16 811 -419
--------------------------
Total equity attributable to owners of the Company 98 098 81 287
Non-controlling interest 2 624 1 395
TOTAL EQUITY 100 722 82 682
TOTAL LIABILITIES AND EQUITY 245 105 175 158
Consolidated interim statements of comprehensive income
in thousands of euros 2018 12M 2017 12M adjusted 2018 Q4 2017 Q4
-------------------------------------------------------------------------------
CONTINUING OPERATIONS
Operating income
Revenue 27 991 12 077 6 948 4 281
Cost of goods sold -18 415 -7 516 -4 264 -2 210
--------------------------------------------
Gross profit 9 576 4 561 2 684 2 071
Marketing expenses -1 336 -822 -630 -186
Administrative expenses -5 427 -5 256 -1 390 -1 478
Other income 18 823 4 114 16 144 748
Other expenses -169 -800 -120 0
--------------------------------------------
Operating profit 21 467 1 797 16 688 1 155
Financial income 4 6 1 3
Financial expense -3 473 -3 352 -925 -817
--------------------------------------------
Profit/ loss before income tax 17 998 -1 549 15 764 341
Income tax 42 596 -3 582
--------------------------------------------
Profit/ loss from continuing
operations 18 040 -953 15 761 923
Profit from discontinued
operations 0 435 0 0
Profit/ loss for the period 18 040 -518 15 761 923
Attributable to:
Equity holders of the parent 16 811 -419 14 491 955
Non-controlling interest 1 229 -99 1 270 -32
Other comprehensive income,
net of income tax
Income that will not be
reclassified
subsequently to profit
Net change
in properties revaluation reserve 0 -4 0 3
Total comprehensive income
for the year 18 040 -522 15 761 926
Attributable to:
Equity holders of the parent 16 811 -419 14 491 955
Non-controlling interest 1 229 -99 1 270 -32
Earnings per share
from continuing operations (EUR) 0.30 -0.02 0.26 0.02
Earnings per share for the period
(EUR) 0.30 -0.01 0.26 0.02
Consolidated interim statements of cash flows
2017 12M
in thousands of euros 2018 12M adjusted 2018 Q4 2017 Q4
-------------------------------------------------------------------------------
Cash flows from operating activities
Profit/loss for the period 18 040 -518 15 762 923
Adjustments for:
Depreciation, amortisation of non-current
assets 214 455 56 -20
Gain from disposal of property, plant,
equipment -4 -3 045 0 0
Gain from disposal of investment property -418 0 0 0
Change in fair value of property, plant,
equipment -13 -26 -13 -26
Change in fair value of investment
property -17 979 -530 -16 069 -530
Loss from disposal of shares of
subsidiaries 0 346 0 0
Finance income and costs 3 468 3 460 923 815
Other non-monetary changes (net amounts) 15 345 12 410 -1 428 -683
Changes in working capital:
Trade receivables and prepayments 1 773 -408 931 -833
Inventories -21 248 -23 880 -2 611 -4 221
Liabilities and prepayments -119 6 556 -1 420 2 367
Provisions -107 -101 -609 23
-----------------------------------
Net cash used in operating activities -1 048 -5 281 -4 478 -2 186
Cash flows from investing activities
Payments for property, plant and equipment -206 -281 -40 -127
Payments for intangible assets -24 -52 -17 -22
Proceeds from disposal of property, plant,
equipment 336 6 651 0 0
Payments for investment property -47 786 -24 772 -16 702 -7 424
Proceeds from disposal of investment
property 1 000 0 1 000 0
Net cash from disposal of shares of
subsidiaries 0 6 249 0 0
Interests received 4 6 1 2
-----------------------------------
Net cash used in by investing activities -46 676 -12 199 -15 758 -7 571
Cash flows from financing activities
Proceeds from increase of share capital 0 4 328 0 4 328
Dividend payment -850 0 0 0
Net changes related to non-controlling
interests 0 -480 0 0
Proceeds from bonds 0 1 446 0 0
Redemption of convertible bonds -649 -773 -6 0
Proceeds from borrowings 56 923 28 260 23 449 8 984
Repayment of borrowings -7 496 -7 048 -1 987 -909
Interests paid -3 481 -3 318 -1 259 -1 122
-----------------------------------
Net cash generated by financing activities 44 447 22 415 20 197 11 281
Net change in cash and cash equivalents -3 277 4 935 -39 1 524
Cash and cash equivalents at the beginning
of the period 10 317 5 382 7 079 8 793
Cash and cash equivalents at the end of the
period 7 040 10 317 7 040 10 317
2017 12M adjusted - comparative information from the annual audited report 2017.
Full report is in the file attached.
Allan Remmelkoor
Member of the Board
+372 614 4920
prokapital@prokapital.ee
Attachment
* PKG Q4 2018 ENG (https://ml-eu.globenewswire.com/Resource/Download/85f7d80c-
dcec-40aa-b720-8c1499d68999)
|