MANAGEMENT REPORT
Chairman's summary
The first quarter of 2020 has been a very busy period for us in spite of the
slow-down of businesses in many sectors due to the influence of the worldwide
spread of the SARS-CoV-2 virus and COVID-19.
During the reporting period have refinanced senior secured bonds 2015/2020 with
the new bonds 2020/2024 - each denominated 100 000 euros, carrying a fixed rate
coupon of 8.00 per cent and maturing in February 2024. Pro Kapital intends to
apply for the listing of the new bonds within 12 months from the issue date.
Our real estate developments have been carried on as per our plans. In February
we signed a renovation and construction contract for Ratsuri Houses project in
Tallinn, Kristiine City. The former stable house will be renovated to
accommodate unique apartments with high ceilings and a modern New Holland style
residential house with semi-underground parking will be built next to the
renovated house. The total of 39 apartments will be completed next spring.
Construction of Kalaranna District in Tallinn is continuing and going well so
that we are looking forward to completion of the buildings in 2021. We do not
foresee any delays in the completion timing and external financing has been
secured for both developments.
Currently, we have no ongoing constructions in Riga. We continue sales of luxury
apartments in River Breeze Residence and prepare to proceed with the development
of further phases of Kliversala Quarter. The technical projecting process for
Tallinas residential quarter and Brivibas street business quarter are ongoing.
In Vilnius, more than 70% of the five houses of Shaltiniu Namai Attico project
which were completed last year have been sold already and customers have
remained active even in the current economic conditions.
Due to the restrictions in Germany, PK Parkhotel Kurhaus in Bad Kreuznach has
been closed since the end of March and we estimate to reopen in the middle of
June.
There has been a significant influence of the Emergency State (declared in all
countries of our operations) on retail business and consequently on our T1 Mall
of Tallinn shopping centre. The shopping centres in Estonia were closed since
the end of March and reopened on 11 May. Meanwhile, only the food stores and
pharmacies were allowed to remain open. AS Tallinna Moekombinaat, a subsidiary
owning and operating T1 Mall of Tallinn, submitted an application to Harju
County Court for commencement of reorganisation proceedings with the purpose to
overcome temporary liquidity issues, reasonably reorganise liabilities and
increase profitability. On 3 April 2020 Harju County Court initiated
reorganisation proceedings and AS Tallinna Moekombinaat has to submit a
reorganisation plan on implementation of reorganisation measures, including
impact of reorganisation to the creditors, to the Court by 2 June 2020. The
creditors need to vote to accept the plan and the final decision on approval of
the plan will be taken by the Court. The initiation of reorganisation
proceedings shall not influence the day-to-day economic activities of the T1
Mall of tallinn, its tenants and partners - it means that T1 Mall of Tallinn
continues its operations. The purpose of reorganisation proceedings is to ensure
continuation of normal daily business by safeguarding the rights and interests
of investors, employees, creditors and all cooperation partners. The
reorganisation process involves only AS Tallinna Moekombinaat and has no direct
influence to any other group company of AS Pro Kapital Grupp.
We have started the year 2020 with expected results in revenues and gross
profit. The sales revenues for the first quarter of 2020 were 5.9 million euros,
which is a decrease of 43% compared to the 10.4 million euros during the same
period last year. The result of 2019 was influenced by completion of a new
building in Kristina Houses project. 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. The operating
profit for the first quarter of 2020 was 0.3 million euros comparing to 2.6
million euros during the same period in 2019. The net result was influenced by
2.6 million euros interest expenses related to T1 project. Consequently, the net
result of the first quarter in 2020 was 3 966 thousand euros loss compared to
113 thousand euros loss during the same period in 2019.
In 2020 we do not foresee any completion of real estate projects and we
concentrate on development of ongoing projects, make preparations to start new
projects and contribute to re-establishing normal activities in rental and hotel
operations.
Paolo Michelozzi
CEO
Key financials
The total revenue of the Company in the first quarter of 2020 was 5.9 million
euros, which is a decrease of 43% compared to the reference period (2019
3M: 10.4 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 the first quarter in 2019 due to
completion of an apartment building in Kristina Houses. In 2020, the Company
continues with sales of completed developments - River Breeze Residence in Riga
and Shaltini? Namai Attico development in Vilnius.
The gross profit in the first quarter of 2020 decreased by 48% amounting to 2.1
million euros compared to 4.1 million euros during the same period in 2019.
The operating result in the first quarter of 2020 was 0.3 million euros profit
comparing to 2.6 million euros profit during the same period in 2019. The
decrease in operating result is influenced by the decrease in the total revenues
and a slight increase in operating expenses.
The net result in the first quarter of 2020 was 4.0 million euros loss. In the
comparable period the net result was 0.1 million euros loss. The net result of
the reporting period was influenced by high interest expenses in AS Tallinna
Moekombinaat.
Cash generated from operating activities during the reporting period was 2.0
million euros comparing to 0.4 million euros of cash used in operating
activities in the first quarter of 2019.
Net assets per share on 31 March 2020 totalled to 1.19 euros compared to 1.78
euros on 31 March 2019.
Key performance indicators
2020 3M 2019 3M 2019 12M
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Revenue, th EUR 5 873 10 372 55 276
Gross profit, th EUR 2 137 4 142 15 809
Gross profit, % 36% 40% 29%
Operating result, th EUR 346 2 644 -15 193
Operating result, % 6% 25% -27%
Net result, th EUR -3 966 -113 -29 121
Net result, % -68% -1% -53%
Earnings per share, EUR -0.07 0.00 -0.48
31.03.2020 31.03.2019 31.12.2019
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Total Assets, th EUR 209 622 247 386 210 805
Total Liabilities, th EUR 142 022 146 761 139 187
Total Equity, th EUR 67 600 100 625 71 566
Debt / Equity * 2.10 1.46 1.94
Return on Assets, % ** -1.7% -0.1% -12.8%
Return on Equity, % *** -4.7% -0.1% -34.4%
Net asset value per share, EUR **** 1.19 1.78 1.26
*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 31.03.2020 31.03.2019 31.12.2019
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ASSETS
Current assets
Cash and cash equivalents 9 459 6 166 10 616
Current receivables 1 281 845 1 475
Inventories 40 329 59 962 41 031
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Total current assets 51 069 66 973 53 122
Non-current assets
Non-current receivables 2 942 677 2 297
Property, plant and equipment 7 100 7 108 7 146
Right-of-use assets 480 635 519
Investment property 147 667 171 672 147 365
Intangible assets 364 321 372
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Total non-current assets 158 553 180 413 157 699
TOTAL ASSETS 209 622 247 386 210 821
LIABILITIES AND EQUITY
Current liabilities
Current debt 83 153 14 540 111 759
Customer advances 5 935 5 510 3 974
Current payables 10 837 8 188 8 741
Tax liabilities 849 395 1 155
Short-term provisions 329 903 267
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Total current liabilities 101 103 29 536 125 896
Non-current liabilities
Long-term debt 38 398 113 937 10 871
Other non-current payables 1 064 1 140 1 013
Deferred income tax liabilities 1 320 2 004 1 348
Long-term provisions 137 144 127
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Total non-current liabilities 40 919 117 225 13 359
TOTAL LIABILITIES 142 022 146 761 139 255
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 1 082 1 134
Revaluation reserve 3 262 3 262 3 262
Retained earnings 49 744 76 771 76 725
Profit/ Loss for the period -3 788 -43 -26 981
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Total equity attributable to owners of the
Company 67 351 98 071 71 139
Non-controlling interest 249 2 554 427
TOTAL EQUITY 67 600 100 625 71 566
TOTAL LIABILITIES AND EQUITY 209 622 247 386 210 821
Consolidated interim statements of profit and loss and ohter comprehensive
income
in thousands of euros 2020 3M 2019 3M 2019 12M
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CONTINUING OPERATIONS
Operating income
Revenue 5 873 10 372 55 276
Cost of goods sold -3 736 -6 230 -39 467
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Gross profit 2 137 4 142 15 809
Marketing expenses -161 -142 -728
Administrative expenses -1 562 -1 353 -6 013
Other income 3 27 95
Other expenses -71 -30 -24 341
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Operating profit/ loss 346 2 644 -15 178
Financial income 1 1 4
Financial expense -4 244 -2 757 -14 019
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Loss before income tax -3 897 -112 -29 193
Income tax -69 -1 21
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Loss for the period -3 966 -113 -29 172
Attributable to:
Equity holders of the parent -3 788 -43 -26 981
Non-controlling interest -178 -70 -2 191
Total comprehensive loss for the year -3 966 -113 -29 172
Attributable to:
Equity holders of the parent -3 788 -43 -26 981
Non-controlling interest -178 -70 -2 191
Earnings per share for the period (EUR) -0.07 0.00 -0.48
Consolidated interim statements of cash flows
in thousands of euros 2020 3M 2019 3M 2019 12M
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Cash flows from operating activities
Profit/loss for the period -3 966 -113 -29 172
Adjustments for:
Depreciation, amortisation of non-current assets 105 94 399
Gain from disposal of investment property 0 0 -3
Loss from write-off of PPE and intangible assets 0 0 6
Change in fair value of property, plant, equipment 0 0 -15
Change in fair value of investment property 0 0 24 236
Finance income and costs 4 243 2 756 14 016
Changes in deferred tax assets and liabilities -27 0 -656
Other non-monetary changes (net amounts) -1 31 419
Changes in working capital:
Trade receivables and prepayments -409 1 572 -630
Inventories 703 -582 18 276
Liabilities and prepayments 1 336 -4 145 -6 412
Provisions 10 10 -51
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Net cash used/ generated in operating activities 1 994 -377 20 413
Cash flows from investing activities
Payments for property, plant and equipment -10 -31 -226
Payments for intangible assets -2 -1 -74
Payments for investment property -302 -3 533 -6 019
Proceeds from disposal of investment property 0 0 2 170
Interests received 1 1 4
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Net cash used in investing activities -313 -3 564 -4 145
Cash flows from financing activities
Proceeds from bonds 28 500 0 0
Redemption of non-convertible bonds -28 000 0 -500
Proceeds from borrowings 100 7 570 16 461
Repayment of borrowings -648 -3 843 -21 551
Repayment of lease liabilities -48 -36 -192
Interests and finance costs paid -2 742 -624 -6 910
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Net cash used/ generated by financing activities -2 838 3 067 -12 692
Net change in cash and cash equivalents -1 157 -874 3 576
Cash and cash equivalents at the beginning 10 616 7 040 7 040
Cash and cash equivalents at the end of the period 9 459 6 166 10 616
The full report can be found in the file attached.
Allan Remmelkoor
Member of the Board
+372 614 4920
prokapital@prokapital.ee
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