Börsiteade

Pealkiri

Hepsor AS: 2022 III quarter and nine months consolidated unaudited interim report

Teade

The consolidated sales revenue of Hepsor for the first nine months of 2022
amounted to 5.6 million euros (including 1.7 million euros in Q3 2022) and the
net loss was 0.1 million euros (including a net profit of 0.1 million euros in
Q3 2022).

The Group's revenues and profitability are directly dependent on the development
cycle of projects, which is approximately 24 to 36 months. Sales revenue is only
generated at the end of the cycle. Calendar quarters vary in terms of the number
of projects ending during the quarter, which is why both profits and sales
revenue can differ significantly across quarters. Therefore, performance can be
considerably weaker or stronger in some years and quarters than in others. To
assess the overall sustainability and economic results of a real estate
development company, the portfolio of the company's development projects and
three-year average financial results are better criteria for assessing the
group's performance.

The sales revenue in the first nine months of this year was generated mainly
from the sale of completed residential development projects. As of the end of
third quarter, we have sold 39 apartments from completed projects in Latvia,
including 20 apartments at 4b Str?lnieku St, 18 apartments at 9 Balozhu St and 1
apartment at 24 ?genskalna St. In the third quarter, we signed real right
contracts for all 76 apartments in the Priisle Kodu development project. The
Group owns a 25% stake in the Priisle Kodu development company Hepsor N170, and
therefore project sales are not reflected in the consolidated sales revenue. The
share in the profit from the Priisle Kodu development project will be reflected
in the Group's results for the third and fourth quarters of 2022.

Hepsor has four residential development projects in Estonia and Latvia, with a
total of 405 new apartments. As of 14 October 2022, contracts under the law of
obligations and reservation agreements have been signed for 55 apartments (60%)
in the M?rupes D?rzs development project (92 apartments) near Riga. In the
Kuld?gas Parks (116 apartments) project in Riga, contracts have been signed for
78 apartments (67%). Both projects will be completed in 2023. In Estonia, we
continue with the construction of the Paevälja Hoovimajad development project,
which includes two apartment buildings with a total of 96 apartments. As of 14
October 2022, contracts under the law of obligations have been signed for 79
apartments (82%). The first phase of the project with 48 apartments will be
completed by the end of this year, and the second phase in Q1 2023. In regard to
new development projects, we started the construction of Ojakalda Kodud in the
third quarter, where we will build 101 spacious new family apartments.

In addition to residential development projects already under construction and
for sale, Hepsor plans to start constructing 218 new apartments in Q4 2022,
including Lilleküla Kodud (26 apartments) and 7 Manufaktuuri St (154 apartments)
in Tallinn, and Nameja Rezidence (38 apartments) in Riga.

Of commercial property developments, four projects have been completed or are
about to be completed this year in Tallinn and Riga, all of which are fully
covered by lease agreements. We built commercial premises on the business
property at 1 Priisle St, which is now leased to the Selver supermarket (leased
area approx. 1500 sq. m). The real right contract for selling the property is
planned to be signed in the fourth quarter of this year. The green office
building Grüne Maja is largely in active use, and the last tenants will move to
the new premises in Q2 2023 at the latest. At the end of the year, we will hand
over the Büroo113 commercial building, which is 100% covered by lease
agreements, and the anchor tenant will be a modern clinic with an innovative
concept. Büroo113 is the first building where green solutions (geothermal
heating and cooling, rainwater use, energy-efficient architecture, excellent
indoor climate, solar energy, etc.) have been applied in a city centre high-
rise. In Riga, a stock office type commercial building will be completed at 30
Ulbrokas St in Q4 2022.

In total, the Group has added approximately 156 apartments to its development
portfolio in the third quarter, including 40 in Riga and 116 in Tallinn.
Approximately 45 new apartments will be built on the 12 Manufaktuuri St property
in the Manufaktuuri Quarter together with our long-term cooperation partner
Tolaram Grup. The Group plans to start the construction of 26 apartments in the
Lilleküla Kodud development project already this year. Up to 45 apartments can
be built on the properties purchased at 1a Alvari St and 5 Alvari St. In Latvia,
a property was added at J?rmalas Gatve, where an energy class A three-storey
residential building with 40 apartments is planned to be built.

In the spring of 2020, Covid-19 and the subsequent lockdown affected the
activity of the real estate market rather briefly, and the number of
transactions and market activity recovered in a matter of a few calendar
quarters. The impact on the Estonian real estate market of Russia's military
invasion of Ukraine, which began on 24 February 2022, has also so far been
modest.

Today, it is clear that the war in Europe, the accelerated energy crisis, strong
inflation and the rise in interest rates do not allow for an objective
assessment of the combined impact of all these factors on Hepsor's home markets
and consumer confidence, or a prediction of when the activity of the real estate
market might recover.

Adjusted Forecasts

The Group's management has decided to change the previously published financial
forecasts for the financial years 2022 to 2024.

The main reasons for adjusting the forecasts are the changes in the economic
environment (cooling of the real estate market) and the extension of the
deadlines for issuing building permits (problems in the national building
register, delays due to the work overload of municipal officials).

Changes in the economic environment are manifested in the real estate market as
significantly decreased transaction activity and pressure on margins. We
forecast that transaction activity in the residential property market will not
start to recover until the end of Q2 2023. Whether we will see the recovery of
the transaction activity in the residential market in Q3 2023, and what the
speed and extent of the recovery will be, depends on how hard the winter heating
season affects household budgets (energy prices) and how the situation in
Ukraine changes (affecting general consumer confidence).

The basic premise of Hepsor's adjusted forecast is that the transaction activity
of the residential property market in both Estonia and Latvia will reach a level
similar to late 2021 in the second half of 2024.

At the moment, Hepsor does not predict the pace of the recovery of transaction
activity in the commercial property market, but assumes that completed
commercial buildings will be rented out and kept on the developer's balance
sheet until the market allows them to be sold at attractive price levels.

The financial forecast for the current financial year has changed the most due
to the following circumstances.

  * Hepsor's management decided not to sell any of the three commercial
    buildings under construction (Büroo113, Grüne Maja, 30 Ulbrokas St). We will
    only consider selling these commercial buildings if there is an attractive
    offer. The buildings to be completed are all fully covered by lease
    contracts, Hepsor considers the quality of the signed leases to be very
    good, the buildings were built based on a sound future-oriented concept
    (green houses) and the developer sees no reason to sell the houses in a down
    market phase. We prefer to earn rental income and sell the houses when the
    market recovers. This decision will significantly affect the sales and
    profitability figures for 2022.
  * Since the transaction activity of the residential market has decreased, we
    do not expect to sell all the apartments at 4b Strelnieku in Riga by the end
    of the year. At the same time, all the unsold apartments in this project are
    rented and earning rental income. This decision has some impact on the sales
    and profitability figures for 2022.
  * The assumption behind the new forecast for 2022 is that real right contracts
    can be signed for 48 apartments in the Paevälja Hoovimajad project by the
    end of the year (i.e. 50% of the total sales volume of the project). As most
    of the real right contracts will be signed in December, it is equally
    possible that their eventual number will be higher or lower than forecast
    (79 apartments are covered by contracts under the law of obligations). If
    real right contracts cannot be signed in December for all the apartments
    mentioned in the forecast, the sales revenue from these apartments will move
    forward by a few weeks to January 2023.

The main reason for the adjustment of the forecasts for 2023 and 2024 financial
year, in addition to the slowed real estate market, is the fact that the
building permit procedure for major development projects has taken significantly
longer than previously expected. Since the start of construction has shifted,
the completion of the buildings and the generation of related sales income has
also move forward in time.

We have conservatively assumed that the recovery of transaction activity in the
residential market will not be fast (recovery will take place in the second half
of 2024), and this in turn will negatively affect the sales periods of our
apartments and also profitability (pressure on margins).

We are conservative in our forecasts, but at the same time we believe that
difficult times and changing business cycles can bring new opportunities and
interesting purchases to grow the development portfolio.

Consolidated statement of financial position

+------------------------------+-----------------+-----------+-----------------+
|                              |                 |31 December|                 |
|    in thousands of euros     |30 September 2022|   2021    |30 September 2021|
+------------------------------+-----------------+-----------+-----------------+
|Assets                        |                 |           |                 |
+------------------------------+-----------------+-----------+-----------------+
|Current assets                |                 |           |                 |
+------------------------------+-----------------+-----------+-----------------+
|Cash and cash equivalents     |            3,110|     10,889|            1,571|
+------------------------------+-----------------+-----------+-----------------+
|Trade and other receivables   |            1,596|        652|              710|
+------------------------------+-----------------+-----------+-----------------+
|Current loan receivables      |              100|      2,388|               29|
+------------------------------+-----------------+-----------+-----------------+
|Inventories                   |           67,118|     37,237|           35,925|
+------------------------------+-----------------+-----------+-----------------+
|Total current assets          |           71,924|     51,166|           38,235|
+------------------------------+-----------------+-----------+-----------------+
|Non-current assets            |                 |           |                 |
+------------------------------+-----------------+-----------+-----------------+
|Property, plant and equipment |              230|        229|              373|
+------------------------------+-----------------+-----------+-----------------+
|Intangible assets             |                2|          0|                0|
+------------------------------+-----------------+-----------+-----------------+
|Financial investments         |                2|        402|                2|
+------------------------------+-----------------+-----------+-----------------+
|Investments in associates     |              209|          0|                0|
+------------------------------+-----------------+-----------+-----------------+
|Non-current loan receivables  |            1,766|      3,408|            2,706|
+------------------------------+-----------------+-----------+-----------------+
|Other non-current receivables |              167|        140|              140|
+------------------------------+-----------------+-----------+-----------------+
|Total non-current assets      |            2,376|      4,179|            3,221|
+------------------------------+-----------------+-----------+-----------------+
|Total assets                  |           74,300|     55,345|           41,456|
+------------------------------+-----------------+-----------+-----------------+
|Liabilities and equity        |                 |           |                 |
+------------------------------+-----------------+-----------+-----------------+
|Current liabilities           |                 |           |                 |
+------------------------------+-----------------+-----------+-----------------+
|Loans and borrowings          |            2,445|      5,501|            4,256|
+------------------------------+-----------------+-----------+-----------------+
|Current lease liabilities     |               33|        123|               36|
+------------------------------+-----------------+-----------+-----------------+
|Prepayments from customers    |            3,497|      1,164|            1,974|
+------------------------------+-----------------+-----------+-----------------+
|Trade and other payables      |            3,213|      5,539|            1,917|
+------------------------------+-----------------+-----------+-----------------+
|Deferred income tax liability |                0|          0|              105|
+------------------------------+-----------------+-----------+-----------------+
|Total current liabilities     |            9,188|     12,327|            8,288|
+------------------------------+-----------------+-----------+-----------------+
|Non-current liabilities       |                 |           |                 |
+------------------------------+-----------------+-----------+-----------------+
|Loans and borrowings          |           43,322|     22,862|           22,192|
+------------------------------+-----------------+-----------+-----------------+
|Non-current lease liabilities |               66|         66|              284|
+------------------------------+-----------------+-----------+-----------------+
|Other non-current liabilities |            2,692|      1,053|            1,372|
+------------------------------+-----------------+-----------+-----------------+
|Total non-current liabilities |           46,080|     23,981|           23,848|
+------------------------------+-----------------+-----------+-----------------+
|Total liabilities             |           55,268|     36,308|           32,136|
+------------------------------+-----------------+-----------+-----------------+
|Equity                        |                 |           |                 |
+------------------------------+-----------------+-----------+-----------------+
|Share capital                 |            3,855|      3,855|                6|
+------------------------------+-----------------+-----------+-----------------+
|Share premium                 |            8,917|      8,917|            3,211|
+------------------------------+-----------------+-----------+-----------------+
|Retained earnings             |            6,260|      6,265|            6,103|
+------------------------------+-----------------+-----------+-----------------+
|Total equity                  |           19,032|     19,037|            9,320|
+------------------------------+-----------------+-----------+-----------------+
|incl. total equity            |                 |           |                 |
|attributable to owners of the |                 |           |                 |
|parent                        |           18,529|     18,904|            9,196|
+------------------------------+-----------------+-----------+-----------------+
|incl. non-controlling interest|              503|        133|              124|
+------------------------------+-----------------+-----------+-----------------+
|Total liabilities and equity  |           74,300|     55,345|           41,456|
+------------------------------+-----------------+-----------+-----------------+

Consolidated statement of profit and loss and other comprehensive income

+-------------------------------------------+-------+-------+-------+----------+
|           in thousands of euros           |9M 2022|9M 2021|Q3 2022|Q3 2021   |
+-------------------------------------------+-------+-------+-------+----------+
|                                           |       |       |       |          |
+-------------------------------------------+-------+-------+-------+----------+
|Revenue                                    |  5,622|  6,946|  1,668|     3,072|
+-------------------------------------------+-------+-------+-------+----------+
|Cost of sales (-)                          | -5,100| -5,791| -1,348|    -2,501|
+-------------------------------------------+-------+-------+-------+----------+
|Gross profit                               |    522|  1,155|    320|       571|
+-------------------------------------------+-------+-------+-------+----------+
|Marketing expenses (-)                     |   -279|   -177|   -106|       -77|
+-------------------------------------------+-------+-------+-------+----------+
|Administrative expenses (-)                |   -764|   -569|   -227|      -271|
+-------------------------------------------+-------+-------+-------+----------+
|Other operating income                     |     47|     56|      0|        13|
+-------------------------------------------+-------+-------+-------+----------+
|Other operating expenses (-)               |    -45|    -49|     -6|         0|
+-------------------------------------------+-------+-------+-------+----------+
|Operating profit (-loss) of the year       |   -519|    416|    -19|       236|
+-------------------------------------------+-------+-------+-------+----------+
|Financial income                           |    849|    146|    282|        71|
+-------------------------------------------+-------+-------+-------+----------+
|Financial expenses (-)                     |   -454|   -319|   -142|      -127|
+-------------------------------------------+-------+-------+-------+----------+
|Profit before tax                          |   -124|    243|    121|       180|
+-------------------------------------------+-------+-------+-------+----------+
|Current income tax                         |     -5|    -16|      0|         0|
+-------------------------------------------+-------+-------+-------+----------+
|Deferred income tax                        |      0|    -45|      8|       -32|
+-------------------------------------------+-------+-------+-------+----------+
|Net profit for the year                    |   -129|    182|    129|       148|
+-------------------------------------------+-------+-------+-------+----------+
|    Attributable to owners of the parent   |   -141|   -175|    132|       -91|
+-------------------------------------------+-------+-------+-------+----------+
|    Non-controlling interest               |     12|    357|     -3|       239|
+-------------------------------------------+-------+-------+-------+----------+
|                                           |       |       |       |          |
+-------------------------------------------+-------+-------+-------+----------+
| Other comprehensive income (-loss)        |       |       |       |          |
+-------------------------------------------+-------+-------+-------+----------+
|Changes related to change of ownership     |    135|     70|      0|        70|
+-------------------------------------------+-------+-------+-------+----------+
|Change in value of embedded derivatives    |       |       |       |          |
|with minority shareholders                 |     18|   -426|     31|      -395|
+-------------------------------------------+-------+-------+-------+----------+
|Other comprehensive income (-loss) for the |       |       |       |          |
|period                                     |    153|   -356|     31|      -325|
+-------------------------------------------+-------+-------+-------+----------+
|    Attributable to owners of the parent   |   -234|     68|     52|        68|
+-------------------------------------------+-------+-------+-------+----------+
|    Non-controlling interest               |    387|   -424|    -21|      -393|
+-------------------------------------------+-------+-------+-------+----------+
|                                           |       |       |       |          |
+-------------------------------------------+-------+-------+-------+----------+
|Comprehensive income (-loss) for the period|     24|   -174|    160|      -177|
+-------------------------------------------+-------+-------+-------+----------+
|    Attributable to owners of the parent   |   -375|   -107|    184|       -23|
+-------------------------------------------+-------+-------+-------+----------+
|    Non-controlling interest               |    399|    -67|    -24|      -154|
+-------------------------------------------+-------+-------+-------+----------+
|                                           |       |       |       |          |
+-------------------------------------------+-------+-------+-------+----------+
|Earnings per share                         |       |       |       |          |
+-------------------------------------------+-------+-------+-------+----------+
|   Basic (euros per share)                 |  -0.07|  -0.05|  -0.04|     -0.02|
+-------------------------------------------+-------+-------+-------+----------+
|   Diluted (euros per share)               |  -0.07|  -0.05|  -0.04|     -0.02|
+-------------------------------------------+-------+-------+-------+----------+

Anneli Simm
Head of Investor Relations
Phone: +372 5615 7170
e-mail: [email protected]

Hepsor AS (www.hepsor.ee/en/
(https://www.globenewswire.com/Tracker?data=kVMsgfzqGIWiOOw5P6lGIHJmaUcchnpxcbc6
kwNBh02e_j1_qjtsy-WWzC-rzfIjprv8vaY-LHTBgs2cf4mPwkutNqkQlt8K_sCAu89HV9s=)) is
one of the fastest growing residential and commercial real estate developers in
Estonia and Latvia. Over the last eleven years Hepsor has developed more than
1,400 homes and 24,000 m(2) of commercial space. Hepsor has been the first real
estate developer in the Baltic States to implement a number of innovative
engineering solutions that make the buildings we construct more energy-efficient
and thus more environmentally friendly. The company's portfolio is comprised of
27 development projects with a total sellable space of 180,000 m(2).