Market announcement

Title

Liven AS - Consolidated unaudited interim report for the III quarter of 2024

Message

Although there were no huge positive development leaps in the operating
environment, there were still signs of renewed optimism in the residential
property market. During the third quarter, we signed 32 contracts under the law
of obligation (sales contract; 2024 Q2: 47; 2023 Q3: 21) and during the first 9
months of the year, we signed a total of 95 sales contracts (2023: 40). Most of
the new sales during the quarter came from the Regati development which is under
construction 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 9 months 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 previous
quarters,  averaging 1.5% over the  period and above  2.0% in October. The long-
term average is considered to be 1.5-2.0%.

During the third quarter, we handed over a total of 27 new homes in developments
completed  under the real  right contract (2024  Q2: 29; 2023 Q3: 15). Of these,
11 in  the  phase  II  of  the  Iseära  development,  10 were  in phase I of the
Luuslangi  development, 3 in phase II of the Uus-Meremaa development, and 3 from
the  Magdaleena development. In the same order,  the projects also had an impact
on  the financial results of the third  quarter. Revenue for the quarter was EUR
7,057 thousand  (2024 Q2:  EUR 8,546 thousand;  2023 Q3: EUR 4,499 thousand) and
net profit for the period was EUR 342 thousand (2024 Q2: EUR 443 thousand; 2023
Q3: EUR -578 thousand).

In  the first nine months of the year, we have delivered a total of 68 new homes
(2023:  74), generated sales revenue  of EUR 19,101 thousand  (2023: EUR 19,052
thousand) and a net profit of EUR 635 thousand (2023: EUR -1,470 thousand).

Assets  increased by EUR 303 thousand during  the quarter to EUR 73,104 thousand
at  the end of the period. During the quarter, we received new bank loans of EUR
5,245 thousand  to finance the construction of  projects, but together with home
deliveries,  we repaid EUR  4,515 thousand of earlier  construction loans. Total
borrowings with other loans increased by EUR 643 thousand to EUR 44,380 thousand
during  the  quarter.  In  connection  with  loan  repayments,  short-term  loan
commitments  decreased  by  EUR  315 thousand  to  EUR 9,738 thousand during the
quarter.

The  balance  of  cash  and  cash  equivalents decreased by EUR 3,723 during the
quarter to EUR 4,807 at the end of the quarter mainly related to the acquisition
of a new property.


Consolidated statement of financial position

 (in thousands of euros)                       30.09.2024 31.12.2023 30.09.2023
-------------------------------------------------------------------------------
 Current assets

 Cash and cash equivalents                          4,807      3,721      2,773

 Trade and other receivables                           81      1,326         90

 Prepayments                                          715        321      1,127

 Inventories                                       65,138     62,112     63,656
-------------------------------------------------------------------------------
 Total current assets                              70,741     67,480     67,646
-------------------------------------------------------------------------------
 Non-current assets

 Prepayments                                           44          0          0

 Investment property                                1,064          0          0

 Property, plant and equipment                        432        388        234

 Intangible assets                                    386        296        297

 Right-of-use assets                                  437        395          0
-------------------------------------------------------------------------------
 Total non-current assets                           2,363      1,079        531
-------------------------------------------------------------------------------
 TOTAL ASSETS                                      73,104     68,559     68,177
-------------------------------------------------------------------------------
 Current liabilities

 Borrowings                                         9,738     17,106     14,542

 Trade and other payables                           8,838      9,121      7,629

 Provisions                                           528      2,384          0
-------------------------------------------------------------------------------
 Total current liabilities                         19,104     28,611     22,171
-------------------------------------------------------------------------------
 Non-current liabilities

 Borrowings                                        34,642     21,328     30,099

 Trade and other payables                           1,032        469         80

 Provisions                                            54         29          4
-------------------------------------------------------------------------------
 Total non-current liabilities                     35,728     21,826     30,183
-------------------------------------------------------------------------------
 Total liabilities                                 54,832     50,437     52,354
-------------------------------------------------------------------------------


 Equity

 Share capital                                      1,190      1,183      1,183

 Share premium                                      9,540      9,339      9,250

 Share option reserve                                 321        363        404

 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                                  635        775     -1,470

 Total equity attributable to owners of the
 parent                                            18,272     18,122     15,823
-------------------------------------------------------------------------------
 Total equity                                      18,272     18,122     15,823
-------------------------------------------------------------------------------
 TOTAL LIABILITIES AND EQUITY                      73,104     68,559     68,177
-------------------------------------------------------------------------------


Consolidated statement of comprehensive income

                                      2024
 (in thousands of euros)                 Q3 2023 Q3 2024 9 months 2023 9 months
-------------------------------------------------------------------------------
 Revenue                              7,057   4,499        19,101        19,052

 Cost of sales                       -5,987  -4,499       -15,951       -18,814
-------------------------------------------------------------------------------
 Gross profit                         1,070       0         3,150           238
-------------------------------------------------------------------------------


 Distribution costs                    -327    -283          -978          -689

 Administrative expenses               -352    -316          -993          -934

 Other operating income                  21      30            33            40

 Other operating expenses               -10      -5           -17            -9
-------------------------------------------------------------------------------
 Operating profit                       403    -574         1,195        -1,354
-------------------------------------------------------------------------------


 Finance income                          31       6            57             9

 Finance costs                          -92     -10          -448           -21

 Total  finance  income  and finance
 costs                                  -61      -4          -391           -12
-------------------------------------------------------------------------------
 Profit before tax                      342    -578           804        -1,366
-------------------------------------------------------------------------------
 Income tax expense                       0       0          -169          -104
-------------------------------------------------------------------------------
 Net profit for the year                342    -578           635        -1,470
-------------------------------------------------------------------------------
 Attributable   to   owners  of  the
 parent                                 342    -578           635        -1,470


-------------------------------------------------------------------------------
 Comprehensive income for the year      342    -578           635        -1,470
-------------------------------------------------------------------------------
 Attributable   to   owners  of  the
 parent                                 342    -578           635        -1,470
-------------------------------------------------------------------------------


 Basic profit/loss per share          0.029  -0.049         0.054        -0.125

 Diluted profit/loss per share        0.028  -0.048         0.052        -0.122
-------------------------------------------------------------------------------


The  customer satisfaction feedback rating for  the last 12 months, collected at
different  stages of the customer journey, increased to 8.4 out of 10 by the end
of  third quarter (Q2 2024: 8.0; Q3  2023: 8.9). The improvement in the feedback
rating  reflects the focus on increasing the number of customer feedback ratings
and improving performance in 2024.

Key events in development projects
At  the beginning of the  quarter, we started the  construction of the last five
terraced houses of Phase II of the Iseära project. At the end of the quarter, we
started  the pre-sales of the Jalami 6 apartment building in Luuslangi Phase II.
On  30 October,  planning  permission  was  issued  for a 30-apartment apartment
building at Virmalise 3.

Acquisition of Kalda 5 property
During  the quarter, we acquired a property at Kalda 5 / Käokõrva 1-12 in Nõmme,
Tallinn. The total value of the transaction was EUR 2.5 million, and we used the
funds raised by the green bonds in spring 2024 to acquire the property.

According  to the existing detailed  plan and the issued  building permit, it is
possible  to build  12 three-storey residential  buildings with  a total  of 72
apartments  and a saleable area of  approximately 6,000 m(2 )on the property. We
plan  to sell and build the development in  several phases and start the sale in
2025.

Increase of share capital in connection with employee share option schemes
During  the quarter, the Board of Directors  of Liven AS decided to increase the
share  capital  by  EUR  14,575.80 from  EUR 1,185,424.20 to EUR 1,200,000.00 by
issuing  145,758 new ordinary  shares with  a nominal  value of EUR 0.1 each, in
accordance  with the previous  decision of the  General Meeting of Shareholders.
The  shares  were  issued  without  a  premium  and  were fully paid for by cash
contributions.

The  share capital increase and  the issuance of new  shares were carried out in
order  to comply  with the  terms and  conditions of  the stock option plan LEOP
("LEOP") and the stock option plan LEOP 2024-2027 ("LEOP 2024-2027"). Of the new
shares,  47,495 shares were  issued directly  to the  beneficiaries of  the LEOP
options.  57,057 shares are intended to be used  to fulfil the terms of the LEOP
and 41, 206 shares to create a LEOP 2024-2027 option fund.

Significant developments in the economic environment in the period under review
The  6-month  Euribor  (Euribor),  which  peaked  a year ago at 4.143%, has been
falling  throughout 2024. Compared  to the  second quarter  of 2024, the Euribor
fell significantly in the third quarter, reaching 3.11% at the end of the period
(30.06.2024: 3.68%) and 2.89% after the reporting date.

At  the Governing Council of  the European Central Bank  in October 2024, it was
decided  to cut the base rate by  25 basis points, as the assumption that annual
inflation  in the euro  area would fall  below 2% was met.  This decision was in
line with an earlier forecast by economic analysts.

The  main presumption for  lowering Euribor is  declining inflation. In Estonia,
annual consumer price inflation rate was 3.0% in the third quarter of 2024 (2024
Q2:  2.5%). According to Eesti Pank's forecasts,  the consumer basket as a whole
will increase by 3.5% in 2024.

According  to  the  latest  data  from  Statistics Estonia, the estimated annual
increase  in  average  gross  wages  in  the  second quarter (8.1%) 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  recent data from the Institute of
Economic  Research, the  consumer confidence  indicator has deteriorated further
compared  to the  second quarter  of 2024 and  remains at  a low  level (October
2024: -37;  average  for  the  second  quarter  of  2024: -28).The October 2024
confidence  indicator is comparable  to two years  ago, when consumer confidence
reached its lowest level in recent history.

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  number of transactions  of apartments (residental)  in Tallinn increased by
12.3% compared   to   the  previous  quarter  (Q3  2024: 2,141 transactions;  Q2
2024: 1,906 transactions).   However,  activity  has  increased  mainly  in  the
aftermarket  buy/sell transactions and  sales of new  developments have remained
rather subdued.

Compared  to the  second quarter  of 2024, the  offer prices of new developments
remained stable in the third quarter of 2024, showing an increase only of 0.3%.
The number of transactions on the market decreased by 28% compared to the second
quarter  of 2024 (Q3  2024: 368 transactions; Q2  2024: 513 transactions), being
also   8% below  the  sales  performance  in  the  third  quarter  of  2023 (404
transactions).  Only 38 new offers  were added, a  similar level compared to the
previous quarter.

Due  to the completion of construction of several development projects in spring
and  summer 2024 and the modest sales volume, the stock of unsold ready-to-move-
in  apartments  remained  relatively  high  in  the third quarter, reaching 931
apartments by the end of the quarter (Q2 2024: 933; Q3 2023: 640). Consequently,
options for homebuyers and market competition remain high.

The average listing price per square metre of a new apartment in Tallinn was EUR
4,362 in  Q3, showing  an annual  increase of  3.3%. On a  quarterly comparison,
listing prices have remained relatively unchanged, increased by only 0.3%.

Outlook for the future
Despite some recovery in the market during both the second and third quarters,
the external environment's impact on demand and sales will continue to be the
main challenge in the last quarter of 2024 and in the years ahead. We expect a
continuation of the gradual improvement in the external factors affecting the
residential real estate sector, in particular the decline in 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.

This  year and beyond will continue to be environmentally challenging and risky,
including  for all levels  of the public  sector. Despite positive developments,
significant  challenges remain in Tallinn's  planning procedures. We continue to
expect  several long-drawn-out procedures  to reach a  conclusion in 2024 or the
first  half  of  2025. Planned  tax  rate  increases  and  additional taxes will
increase  the sales  prices of  new developments  in the  coming years, reducing
incomes and the availability of real estate.

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.

Although  the necessary  capacity is  available in  the portfolio for the coming
years,  we can deliver a maximum of 110 residential and commercial properties in
total  this year. In the  first nine months of  the year, we delivered 68 homes,
62% of  the total available. By the end  of October, 65% of the total potential.
In  the first nine months, we achieved sales revenue of EUR 19.1 million, and we
estimate  that  the  potential  sales  proceeds  from the remaining space in the
portfolio  to be sold  and transferred during  2024 is EUR 13.9 million. This is
unlikely  to  be  fully  realised  in  the  final  months  of  the year, but the
unrealised portion will continue to underpin the results in subsequent periods.

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.
Largely  as a result of  the developments of the  Regati and Iseära projects, as
well  as unrealised sales potential in 2024, we expect a significant improvement
in  financial  results  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: [email protected]

Liven AS - Consolidated unaudited interim report for the III quarter of 2024