Börsiteade

Pealkiri

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

Teade

As expected, the first quarter of 2024 remained a challenging period for
residential property development, due to factors arising from external and
seasonal influences. During the quarter, we signed a total of 16 contracts under
the law of obligations (Q1 2023: 7), most of it came from continuation of
signing the contracts in the Regati development project, which started last
quarter. Demand for ready-to-move-in apartments was also negatively affected by
the increased VAT rate from the beginning of the year and the higher
concentration of demand in the preceding period.

During  the quarter,  we continued  to take  paid reservations for both terraced
houses  and  apartment  buildings  in  the  Iseära development. The weekly sales
ratio,  which represents the number of homes going out of supply under contracts
under  the law of  obligations or paid  reservations is at  1% at the end of the
quarter  and it  has increased  to 1,5% at  the beginning  of Q2.  The long-term
average level can be considered to be 1.5-2.0%.

In  the first quarter,  we handed over  a total of  12 new homes in developments
completed  (11 in  2023 Q1). Of  these, 5 were  in phase  II of  the Uus-Meremaa
development  and 7 were in phase I of the Luuslangi development. Revenue for the
quarter  was EUR 3,498 thousand  (2023 Q1: EUR  2,294 thousand) and net loss for
the period was EUR -150 thousand (2023 Q1: EUR -461 thousand).

Assets  decreased  by  EUR 1,008  thousand  during  the quarter, slipping to EUR
67,551 thousand. Equity decreased to EUR 18,024 thousand by the end of the first
quarter  of 2024 and  the borrowings  increased by  EUR 911 thousand  during the
quarter  to EUR 39,345 thousand. The current borrowings decreased by EUR 15,764
thousand  due to  the repayment  of construction  loans and  the refinancing and
extension  of  existing  loan  agreements.  However,  the recognition of the EUR
3,591 Uus-Meremaa project investor loan as current liability resulted in current
borrowings of EUR 4,933 thousand at the end of the quarter. The repayment timing
of  the Uus-Meremaa loan  is conditional to  the receipt of  the project's sales
revenue,  and if sufficient  sales revenue is  not received within  the next 12
months, Liven has the discretion to defer the loan repayment.


Consolidated statement of financial position

 (in thousands of euros)                       31.03.2024 31.12.2023 31.03.2023
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 Current assets

 Cash and cash equivalents                          3,002      3,721      2,933

 Trade and other receivables                           99      1,326        447

 Prepayments                                          517        321      1,294

 Inventories                                       62,789     62,112     59,683
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 Total current assets                              66,407     67,480     64,357
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 Non-current assets

 Property, plant and equipment                        429        388        246

 Intangible assets                                    340        296        236

 Right-of-use assets                                  375        395          0
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 Total non-current assets                           1,144      1,079        482
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 TOTAL ASSETS                                      67,551     68,559     64,839
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 Current liabilities

 Borrowings                                         4,933     17,106      6,486

 Trade and other payables                           7,097      9,121      8,200

 Provisions                                         2,384      2,384          0
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 Total current liabilities                         14,414     28,611     14,686
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 Non-current liabilities

 Borrowings                                        34,411     21,328     32,269

 Trade and other payables                             673        469        709

 Provisions                                            29         29          7
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 Total non-current liabilities                     35,113     21,826     32,985
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 Total liabilities                                 49,527     50,437     47,671
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 Equity

 Share capital                                      1,184      1,183      1,181

 Share premium                                     9, 354      9,339      9,250

 Share option reserve                                 390        363        326

 Own (treasury) shares                                  0         -1         -1

 Statutory capital reserve                            115        115        102

 Retained earnings (prior periods)                  7,131      6,347      6,772

 Profit for the year                                 -150        775       -461

 Total equity attributable to owners of the
 parent                                            18,024     18,122     17,168

 Non-controlling interest                               0          0          0
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 Total equity                                      18,024     18,122     17,168
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 TOTAL LIABILITIES AND EQUITY                      67,551     68,559     64,839
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Consolidated statement of comprehensive income

 (in thousands of euros)                                 2024          2023
                                                January-March January-March
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 Revenue                                                3,498         2,294

 Cost of sales                                         -2,981        -2,235
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 Gross profit                                             517            59
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 Distribution costs                                      -275          -199

 Administrative expenses                                 -298          -319

 Other operating income                                     0             6

 Other operating expenses                                  -4             0
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 Operating profit                                         -60          -453
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 Finance income                                            15             1

 Finance costs                                           -105            -9

 Total finance income and finance costs                   -90            -8
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 Profit before tax                                       -150          -461
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 Income tax expense                                         0             0
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 Net profit for the year                                 -150          -461
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 Attributable to owners of the parent                    -150          -461

 Attributable to the non-controlling interest               0             0
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 Comprehensive income for the year                       -150          -461
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 Attributable to owners of the parent                    -150          -461

 Attributable to the non-controlling interest               0             0



 Basic profit/loss per share                           -0.013        -0.040

 Diluted profit/loss per share                         -0.012        -0.039
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12-month  rolling customer  satisfaction feedback  rating, collected  at various
stages  of the customer journey  and measured on a  10-point scale, decreased to
7.5 by  the end of the quarter (end of Q1 2023: 8.9/10). The decline in feedback
is  primarily related to the delay of Magdalena and Iseära phase I developments'
construction  completion  and  handover  of  these  homes,  the  need to improve
customer communication and due to confluence of adverse circumstances related to
the  quality of construction management. One of the focus areas for 2024 will be
to increase both the quantity and quality of customer feedback assessments.

Changes  in the financing of the  Regati development project and commencement of
construction
In accordance with the earlier agreement with LHV Bank AS, we refinanced the EUR
6,000 thousand  bank loan secured  by the previous  property mortgage in January
2024. We  also agreed on  the terms of  the extension of  the EUR 3,000 thousand
subordinated mezzanine loan.

In   March   2024, Mitt  &  Perlebach  OÜ,  the  general  contractor,  commenced
construction  work on the Regati development.  The construction is scheduled for
completion  in the summer of 2025. We have had a good experience and cooperation
in  the past with the general contractor, with the construction of homes in both
Suur-Patarei  and Luuslangi projects. The  construction of Regati development is
financed by LHV Pank AS.

Property  purchase  and  refinancing  of  construction  loans  in  the Luuslangi
development project
In  January 2024, we made the  last payment for the  remaining properties in the
Luuslangi  development project.  We also  entered into  a loan  to refinance the
loans   taken  to  finance  the  construction  of  the  previous  buildings  and
infrastructure  and  to  finance  working  capital,  secured  by  the apartments
completed  in  phase I.  The  refinancing  also  allows  for  an earlier interim
interest payment on the mezzanine loan.

Detailed spatial plan for Juhkenatli 48
In  the first quarter  of 2024, the detailed  spatial plan for Juhkentali 48 was
adopted  by  the  Tallinn  City  Council.  After  the reporting period, a public
display  of the  detailed spatial  plan was  held, during  which suggestions for
amendments and changes were received.

Liven's new showroom and Liven 10
In  the first  quarter of  2024, we celebrated  the 10th anniversary  of Liven's
founding  with the opening of a new showroom. The main considerations for moving
to the new space, which is at street level in the Telliskivi Creative City, were
to  provide customers with better accessibility  and quality of service, as well
as  to enhance the home  buying experience. It also  increased the visibility of
the Liven brand and offerings in the public.

Business name change of development company in Germany
At  the beginning of 2024, the name change of the company developing the project
at  Hüttenroder Weg 11 in  Berlin (Wohngarden) was  registered. Previously named
Liven Hermsdorf GmbH, the company is now called Liven HW11 GmbH.

Significant developments in the economic environment in the period under review
The 6-month Euribor rate, which has been rising since spring 2022, reached a 15-
year  high of 4.143% in  mid-October 2023. Since then,  the Euribor has declined
somewhat and remained stable in the first quarter of 2024 compared to the end of
2023, reaching  3.851% at  the  end  of  March  (31.12.2023:  3.861%). After the
reporting  period, the  Euribor has  not changed  significantly, remaining  at a
level  of 3.82 - 3.87%. At the European  Central Bank Governing Council meetings
in  January and March  2024, the ECB decided  to leave the  base rate unchanged.
However, the general market expectation is for Central Bank rates and Euribor to
fall  over the  course of  2024, especially in  the second  half of the year. In
March,  the Swiss central bank decided to  lower interest rates, followed by the
Swedish central bank in May.

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  first  quarter  of  2024, the  annual inflation rate was 3.9% (2023 Q4:
4.3%). A  large part of the increase was due to VAT and excise duty rises at the
beginning  of the  year. Excluding  the impact  of the  tax rises,  annual price
increases  reached 2.4% in March.  According to the  latest data from Statistics
Estonia,  the annual increase in  the average gross salary  in the first quarter
(9.1%)  exceeded inflation. The increase in the minimum wage at the beginning of
the year also impacted salary statistics.

Consumer confidence, which has been low since the second half of 2022, continued
to  be  weak  throughout  the  Q1  of  2024, similar  to  the  previous quarter.
Deflationary expectations have affected the residential real estate sector since
autumn  2022, and this trend appeared to continue into early 2024. Consumers are
more  likely to view the purchase of durable goods more favourably over the next
12 months  rather than now,  so there is  a general sentiment  to wait and delay
purchasing  decisions. However,  there are  signs of  an improvement in consumer
confidence  based on data  from the Estonian  Institute of Economic Research for
April.

The  offer prices of new developments in  the first quarter of 2024 increased by
8.6% compared to the fourth quarter of 2023, mainly due to the addition of a few
new  development projects and  the changed VAT  rate. The number of transactions
declined   by   25% compared   to  the  fourth  quarter  of  2023 but  increased
significantly (64%) compared to the first quarter of 2023. The surge in sales at
the  end of  2023 was linked  to the  tax changes  at the  beginning of 2024, as
homebuyers  were keen  to complete  transactions before  the increase in the VAT
rate.  The number of new offers was higher by 43 or 28% compared to the previous
quarter.

At  the end of 2023, the inventory  of unsold ready-to-move-in apartments surged
to  889 due  to  the  completion  of  several development projects. In the first
months  of 2024, the  inventory decreased  slightly but,  due to low transaction
activity,  remained at a  similar level, totalling  833 apartments at the end of
March. Consequently, options for homebuyers and market competition remain high.

Approximately  310 apartments were  sold in  new developments  during the period
(based  on market data), which is 25% lower  than the previous quarter (2023 Q4:
approximately  420) but  1.6 times  higher  than  the  market low a year ago (Q1
2023: approximately  190). The average price per square metre of a new apartment
in  Tallinn was EUR  4,374 in the first  quarter, showing an  annual increase of
14%. Quarter-on-quarter, the price increased by two percent.

2024 outlook
Our outlook for 2024 has not changed significantly compared to 2023. Demand and
sales will remain the main challenges in 2024. While we expect the environment
and external factors affecting the real estate sector to improve, the year,
especially the first half, will continue to be challenging and risky. Moreover,
the expected interest rate cut scenario is unlikely to lead to a surge in
demand. As the environment improves, we expect demand to pick up, especially in
the second half of the year, and we are ready to quickly bring new supply to the
market.

In  real estate development,  results are achieved  with a significant time lag.
The  results for  2024 will reflect  the years  2022 and 2023, when construction
work  started on only a  few projects and the  cost base was heavily affected by
high  inflation.  Based  on  the  portfolio  of developments completed and under
construction,  we will be  able to deliver  up to 110 residential and commercial
spaces in the current year. Consequently, our maximum potential revenue in 2024
will  be  approximately  30 million  euros,  and  earnings potential will remain
between  the results for  2022 and 2023. This means  that our portfolio is still
too small to achieve our 20% return on equity target in 2024.

Tallinn's  planning procedures continue to face  challenges, but there have also
been  positive  developments  recently.  We  look  forward  to the conclusion of
several long-drawn-out procedures either in 2024 or the first half of 2025.

There  have not  been many  good opportunities  in the  market for acquiring new
properties  in recent years,  but there are  signs of new opportunities emerging
during 2024.

With  the  activities  we  undertake  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.

Joonas Joost
Liven AS CFO
E-mail: [email protected]