Market announcement

Title

Liven AS - consolidated unaudited interim report for the II quarter of 2024

Message

Although there were no huge positive development leaps in the operating
environment, there were still some signs of renewed optimism in the residential
property market during the quarter. During the second quarter, we signed 47
contracts under the law of obligation (sales contract; 2024 Q1: 16; 2023 Q2:
12) and during the first half of the year, we signed a total of 63 sales
contracts (2023: 19). Most of the new sales during the quarter came from the
start of signing sales contracts of apartments and new terraced houses of phase
II of Iseära development, and also the sales of previously completed apartments
of Luuslangi development. Liven's market share of new sales in Tallinn and the
surrounding area is estimated to have been around 10% in the first half of
2024, up from the 6-7% estimate of the previous two years.

The weekly sales ratio, which represents the number of homes going out of supply
under  sales contract or  paid reservations, improved  compared to the preceding
quarters  and remined  above the  1% mark throughout  the period.  By the end of
July,  the ratio is approaching 2.0%. The  long-term average is considered to be
1.5-2.0%.

During  the  second  quarter,  we  handed  over  a  total  of  29 new  homes  in
developments completed under the real right contract (12 in 2023). Of these, 13
in  the phase II of the Iseära development,  10 were in phase I of the Luuslangi
development,  5 in phase  II of  the Uus-Meremaa  development, and  one from the
Magdaleena  development. In the same  order, the projects also  had an impact on
the  financial results of  the second quarter.  Revenue for the  quarter was EUR
8,546 thousand  (Q2 2023: EUR 12,258 thousand) and net profit for the period was
EUR  443 thousand (Q1  2023: EUR -431  thousand). The  second quarter result was
also  impacted by  the income  tax expense  of EUR  169 thousand (2023: EUR 104
thousand) related to the payment of dividends.

In  the first six months of the year,  we have delivered a total of 41 new homes
(2023:  19), generated sales revenue  of EUR 12,045 thousand  (2023: EUR 14,553
thousand) and a net profit of EUR 293 thousand (2023: EUR -892 thousand).

Assets increased by EUR 5,250 thousand during the quarter to EUR 72,801 thousand
at  the end of the period. The greatest  impact to the quarterly increase in the
balance  sheet was  from the  EUR 6,200 thousand  issue of publicly traded green
bonds  quarter. During  the quarter,  we received  new bank  loans of EUR 2,579
thousand  to  finance  the  construction  of  projects,  but  together with home
deliveries,  we repaid EUR  5,437 thousand of earlier  construction loans. Total
borrowings  increased by  EUR 4,392 thousand  to EUR  43,737 thousand during the
quarter. As the maturity of construction loans approached, short-term borrowings
increased by EUR 5,120 thousand to EUR 10,053 thousand during the quarter.

The  balance  of  cash  and  cash  equivalents increased by EUR 5,528 during the
quarter to EUR 8,530 at the end of the quarter. Affected by the dividend payment
during  the  quarter  the  equity  decreased  by EUR 138 thousand to EUR 17,886
thousand by the end of the quarter.


Consolidated statement of financial position

 (in thousands of euros)                       30.06.2024 31.12.2023 30.06.2023
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 Current assets

 Cash and cash equivalents                          8,530      3,721      1,918

 Trade and other receivables                          653      1,326        402

 Prepayments                                          617        321      1,186

 Inventories                                       60,785     62,112     57,265
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 Total current assets                              70,584     67,480     60,771
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 Non-current assets

 Investment property                                1,064          0          0

 Property, plant and equipment                        404        388        211

 Intangible assets                                    358        296        262

 Right-of-use assets                                  390        395          0
-------------------------------------------------------------------------------
 Total non-current assets                           2,217      1,079        473
-------------------------------------------------------------------------------
 TOTAL ASSETS                                      72,801     68,559     61,244
-------------------------------------------------------------------------------
 Current liabilities

 Borrowings                                        10,053     17,106      1,108

 Trade and other payables                           8,814      9,121      7,893

 Provisions                                         1,570      2,384          0
-------------------------------------------------------------------------------
 Total current liabilities                         20,437     28,611      9,001
-------------------------------------------------------------------------------
 Non-current liabilities

 Borrowings                                        33,684     21,328     35,051

 Trade and other payables                             753        469        815

 Provisions                                            41         29          5
-------------------------------------------------------------------------------
 Total non-current liabilities                     34,478     21,826     35,871
-------------------------------------------------------------------------------
 Total liabilities                                 54,915     50,437     44,872
-------------------------------------------------------------------------------


 Equity

 Share capital                                      1,185      1,183      1,181

 Share premium                                      9,405      9,339      9,250

 Share option reserve                                 416        363        378

 Own (treasury) shares                                  0         -1         -1

 Statutory capital reserve                            118        115        115

 Retained earnings (prior periods)                  6,468      6,347      6,342

 Profit for the year                                  293        775       -892

 Total equity attributable to owners of the
 parent                                            17,886     18,122     16,373
-------------------------------------------------------------------------------
 Total equity                                      17,886     18,122     16,373
-------------------------------------------------------------------------------
 TOTAL LIABILITIES AND EQUITY                      72,801     68,559     61,244
-------------------------------------------------------------------------------


Consolidated statement of comprehensive income

 (in thousands of     2024 3 months 2023 3 months  2024 6 months  2023 6 months
 euros)                (April-June)  (April-June) (January-June) (January-June)
-------------------------------------------------------------------------------
 Revenue                      8,546        12,258         12,045         14,553

 Cost of sales               -6,983       -12,079         -9,964        -14,315
-------------------------------------------------------------------------------
 Gross profit                 1,563           179          2,081            238
-------------------------------------------------------------------------------


 Distribution costs            -376          -207           -651           -406

 Administrative
 expenses                      -344          -299           -642           -618

 Other      operating
 income                          12             4             12             10

 Other      operating
 expenses                        -3            -4             -7             -4
-------------------------------------------------------------------------------
 Operating profit               852          -327            793           -780
-------------------------------------------------------------------------------


 Finance income                  10             2             25              3

 Finance costs                 -250            -2           -356            -11

 Total finance income
 and finance costs             -239             0           -331             -8
-------------------------------------------------------------------------------
 Profit before tax              612          -327            462           -788
-------------------------------------------------------------------------------
 Income tax expense            -169          -104           -169           -104
-------------------------------------------------------------------------------
 Net  profit  for the
 year                           443          -431            293           -892
-------------------------------------------------------------------------------
 Attributable      to
 owners of the parent           443          -431            293           -892


-------------------------------------------------------------------------------
 Comprehensive income
 for the year                   443          -431            293           -892
-------------------------------------------------------------------------------
 Attributable      to
 owners of the parent           443          -431            293           -892
-------------------------------------------------------------------------------


 Basic    profit/loss
 per share                    0.037        -0.037          0.025         -0.076

 Diluted  profit/loss
 per share                    0.036        -0.036          0.024         -0.074
-------------------------------------------------------------------------------

Similarly  to the end  of Q1 the  customer satisfaction feedback  rating for the
last  12 months, collected at different stages of the customer journey, remained
at  8.0 out of 10 by  the end of  the quarter (Q2  2023: 8.9/10). The decline in
feedback  rating  over  last  year  is  primarily  related  to  the delay in the
completion of construction and handover of homes at Magdalena and Iseära phase I
developments,  the need to improve communication and the quality of construction
management.  In 2024 the focus is on increasing both the quantity and quality of
customer feedback assessments and in the first half of the year, we have already
made positive progress.

Key events in development projects
During  the quarter, the detailed spatial plan for Kadaka tee 88 was adopted and
will  be publicly displayed  until the end  of July. Construction  of the Iseära
phase  II apartment buildings started and the agreements for general contracting
and  financing of the construction were signed for the last 5 terraced houses of
phase  II in July. During the quarter, we also signed an agreement for the long-
term financing of the commercial space in the Väike-Tallinn development.

Annual General Meeting of Shareholders
Liven  AS held  its Annual  General Meeting  of Shareholders  on 19th April. 28
shareholders   attended   at  the  meeting,  forming  94,0% of  all  the  votes.
Shareholders  approved the annual  report for the  financial year 2023, extended
the  authority of Andres Aavik and Peeter Mänd as Supervisory Board Members, and
approved  the new option  program. Consequently, it  was decided to preclude the
pre-emptive  subscription rights  of shareholders  for the  shares to  be issued
under  this program and  give Liven AS  the right to  acquire its own shares for
exercising the option programs.

Additionally,  the shareholders approved the distribution of profits and payment
of  dividends  in  the  amount  of  EUR  635 thousand. According to the dividend
policy, the amount of dividends was 25% of the profit before income tax in 2023
(EUR 220 thousand), plus 12.5% of the profit before income tax in 2022 (EUR 416
thousand).  In  2023, dividends  were  paid  only  on 12.5% of the profit before
income tax in 2022.

Public Offering of Green Bonds
In  May 2024, Liven  AS held  a public  offering of  green bonds  to finance the
development  of new and  existing projects. The  public offering also allowed to
increase the transparency of the company and broaden the range of investors. The
capital  raised can  only be  used by  Liven to  finance projects  that meet the
criteria  outlined in Liven's green financing  framework. The offer and issuance
of  the green bonds  was organised by  LHV Bank and  the legal advisor was Ellex
Raidla law firm.

Liven offered a total of 4,000 unsecured green bonds with a nominal value of EUR
1,000 per bond, maturing on 23 May 2028, with a fixed interest rate of 10.5% per
annum,  payable quarterly. A total of 14,529 bonds were subscribed by the 2,819
investors   who   participated   in   the   offer,   representing   a  3.63-fold
oversubscription.  As a result of the oversubscription, Liven's management board
decided  to increase the  size of the  offer up to  6,200 bonds, i.e. EUR 6,200
thousand.

Negotiations  for the acquisition of a new  property, which started prior to the
bond  offer, are still ongoing and it has not yet been possible to acquire a new
property.  We will continue both the  ongoing negotiations and the consideration
of new investment alternatives.

Significant developments in the economic environment in the period under review
The 6-month Euribor (Euribor), which peaked in autumn 2023 at 4.143%, has fallen
somewhat  in 2024. Compared to  the first quarter  of 2024, the Euribor remained
stable  in the second quarter, showing  a slight decrease and reaching 3.682% at
the  end  of  the  period  (31.03.2024:  3.851%). Since  the reporting date, the
Euribor has continued to decline, reaching 3.591%.

At  the Governing  Council of  the European  Central Bank  in June  2024, it was
decided  to cut the base rate by 25 basis points. The July meeting left the base
rate  unchanged, and while the ECB President has not given any direct indication
of  the ECB's future actions, the general expectation in the markets is that the
ECB will cut rates a further 1-2 times in the second half of 2024.

The  main presumption for lowering Euribor  rates is declining inflation, and in
Estonia, the consumer price inflation rate continued to fall during the quarter.
In   the  second  quarter  of  2024, the  annual  inflation  rate  was  2.5% (Q1
2024: 3.9%).

According  to  the  latest  data  from  Statistics Estonia, the estimated annual
increase  in  average  gross  wages  in  the  second quarter (9.3%) exceeded the
increase  in prices. Despite  this, consumer confidence,  which had remained low
for  a long time, remained weak in the latest quarter. Consumers are more likely
to  view the purchase of  durable goods as a  bargain in the next 12 months than
they  do now, leading  to a general  sentiment to continue  to be on hold and to
delay  purchasing  decisions.  Based  on  the  July  data  from the Institute of
Economic  Research,  the  consumer  confidence  indicator  has improved somewhat
compared  to Q1 2024, but  still remains at  a low level  (Q1 2024 average: -34;
July 2024: -28).

Despite  the above, there were signs of activation of home buyers in the market.
For  example, according to the Land Statistical Office's transaction statistics,
the  volume of  secondary sales  of apartments  increased by  8.5% in the second
quarter  compared  to  the  previous  quarter  (Q2  2024: 1,486 transactions; Q1
2024: 1,370 transactions).   There  was  also  an  increase  in  the  volume  of
transactions on the new developments market.

Compared  to the  first quarter  of 2024, the  offer prices  of new developments
remained stable in the second quarter of 2024, showing a decrease only of 0.5%.
The  number of transactions on the market increased by 63% compared to the first
quarter of 2024, being well above the sales performance in the second quarter of
2023 (79%). The number of new listings was 46, which is compared to the previous
quarter.

Due  to the completion of construction of several development projects in spring
2024, the  stock of unsold ready-to-move-in  apartments remained relatively high
in  the second quarter,  reaching 933 apartments by  the end of  the quarter (Q1
2024: 833; Q2   2023: 525). Consequently,  options  for  homebuyers  and  market
competition remain high.

During  the second quarter, around 513 apartments  were sold in new developments
(based  on market data),  which is 63% higher  than in the  previous quarter (Q1
2024: around  314). Compared to the same period last year, the increase has been
even higher (Q2 2023: ca 286).

The  average price per square metre of a new apartment in Tallinn was EUR 4,350
in  Q2, showing  an annual  increase of  4.8%. On a quarterly comparison, prices
have remained relatively unchanged, dipping by only 0.5%.

Outlook for the future
Despite some recovery in the market during the second quarter, the main
challenges in the second half of 2024 and beyond will continue to be the impact
of the external factors on demand and sales. We expect the external influences
affecting the residential real estate sector to continue to improve gradually,
in particular falling interest rates and real wage growth. Provided that the
demand holds up or increases we are ready to quickly bring new supply to the
market.

We  expect continued  challenges and  risk also  from all  levels of  the public
sector,  as  part  of  the  operating  environment.  There  have  been  positive
developments  in Tallinn's planning procedures, but significant challenges still
remain.  We look forward to the  conclusion of several long-drawn-out procedures
either  in 2024 or  the first  half of  2025. Planned increases  in the  VAT and
income  taxation have negative impact on real estate affordability in the coming
years by simultaneously contributing to increasing sales prices and reduction in
personal income.

In real estate development, results are achieved with a significant time lag and
an increase in marketing expenses in the periods preceding the sales growth. The
results  for 2024 will reflects the conditions  and decisions of 2022 and 2023,
when  construction work  started on  only a  few projects  and the cost base was
heavily  affected by high inflation. To meet  our 20% return on equity target we
need  an annual revenue in excess of EUR 40 million. While we have the necessary
capacity  in our portfolio for the coming years,  we can deliver only up to 110
units in total this year and consequently our revenue potential for 2024 will be
at  approximately EUR  30 million. In  the first  half of  the year, we achieved
revenue  of  EUR  12.0 million  and  delivered  41 homes,  i.e  37% of the total
potential. By the end of July, 54% of the total potential.

With the decisions and actions undertaken in 2024, we will build on our economic
performance  in 2025 and 2026. Achieving good  results will require improvements
in external factors as well as internal efforts to reduce construction costs. As
a result of the developments in the Regati and Iseära projects, we expect to see
a  significant improvement in  financial performance in  2025 and 2026. There is
sufficient  capacity in the development portfolio for the next 3-4 years, but we
continue to actively negotiate and consider acquisition alternatives to increase
the development portfolio.


Joonas Joost
Liven AS CFO
E-mail: joonas.joost@liven.ee