Pro Kapital Council approved Consolidated Interim Report for IV
Quarter and 12 Months of 2023 (Unaudited)
MANAGEMENT REPORT
CEO summary
In 2023 we have been in line with the Company’s
history, by having focus on the main areas of activities in real
estate developments in the three Baltics capitals (Tallinn, Riga
and Vilnius) and the hotel operations in Bad Kreuznach,
Germany.
Real estate development
In Tallinn, the decision taken earlier in the
year on starting the construction and sales of Kalaranna 8 last
stage, has proven to be the right one. As a reminder, this last and
final stage consists of 4 residential buildings with 146 apartments
and 4 commercial units. Furthermore, the decision on taking on the
construction management in-house has proven to be the right step.
The general contractors to this date seem to be suffering from the
consequences of pandemic and the war and their pricing is simply
not competitive vis-à-vis smaller contractors that we are able to
engage directly. To date we have bought out the
excavation/retainage works, underground monolithic concrete works
and some smaller jobs the consequence of which has resulted in
considerable cost savings. In Q4 we continued the concrete works
above ground. Aside from some minor contracts pertaining to
ventilation and finishes, we signed all the major contracts in
regards to the construction, and we can confidently confirm that
our in-house project management model will result in significant
cost savings.
We have currently sold 52 units out of 146, for
a total sold area corresponding to 35,6% of the total inventory. No
significant discounts were applied to our price list, making it
even more impressive given that sales in Kalaranna represent on
average the highest per square meter price ever achieved in
Tallinn’s residential market.
Within Kristiine City, we are actively advancing
the design and permit procedures for the "Dunte" project located at
Tondi Street 53. It is noteworthy that we have secured significant
concessions from the State Landmark Preservation Committee. This
includes the permission to expand the ground floor windows on the
rear side of the facade into floor-to-ceiling openings. This
adjustment enables us to craft more spacious residential units, to
offer improved sunlight exposure and direct access to small private
terraces.
Still in Kristiine City, we started to sign
reservation agreements for our new project Uus-Kindrali, where the
construction is expected to start in Spring 2024. The initial
feedback from prospect buyers has been positive, with 31
reservations out of 91 total units. The reservations are converted
into notarised pre-sale agreements starting from January 2024.
In Riga, our sales of the esteemed River Breeze
Residence, recipient of the Baltics Prestige Award for its
exceptional architecture, persist. Adding to the 9 sales which
happened in the first 9 months of 2023, we have concluded 1 sale in
Q4. 2023 has been the best year in terms of sales of inventory in
River Breeze, and we expect the project to be sold out by end of
2024. Overall, we are witnessing an upward trajectory in the real
estate segment in Riga, specifically in connection with our
project.
We possess a building permit for the City Oasis
residential quarter, comprising of approximately 330 apartments and
spanning 32 500 square meters GBA, situated in Tallinas iela—a
serene and verdant living environment in the heart of the city. We
are poised to commence construction as soon as the market
conditions align favourably for this extensive and ambitious
undertaking.
In 2019 we completed five buildings in Šaltinių
Namai Attico project in Vilnius with 115 apartments. Today we have
only 3 apartments unsold, out of which one is a model unit. During
Q2, we finalized the preparatory works for the start of
construction the final phase with city villas (43 units) and a
residential-commercial building. As of Q4, we have the excavation
and piling works ongoing and we have an agreement with the
construction project management company that oversees the
construction process. The overall construction is planned to be
completed by the end of 2025.
In Q4, we also initiated market outreach for the
sales, presenting and securing reservations for about 25% of the
upscale units within the City Villas project, affirming the demand
for premium class units in Vilnius.
Despite the geopolitical situation, Vilnius
market is active in the high-end segment, and we look forward to
the next stage of our luxury development.
The Company has also expanded its land portfolio
in Vilnius, purchasing a school building in Naugarduko street for
the price of 6.3 million euros in 2022. The school will be
converted into a high-end residential property located on a hill
and opening to spectacular Vilnius Old Town views, consisting of ca
50 luxury apartments. An architectural competition was carried out
for the purpose. The winning studio has been in the process of
designing and carrying out the building permit process with the
city and conditionally to this event we plan on starting the
renovation works that will transform the building to a high-end
residential project by the end of 2025.
Hotel operations
Following two challenging years that
significantly impacted the global tourism sector due to the
pandemic, there is now a notable resurgence in demand within the
hotel industry.
In Bad Kreuznach, we have achieved a significant
operational break-even point despite a considerable portion of the
rooms being inaccessible to the public during ongoing renovations.
A few years back, we successfully refurbished half of the rooms
along with some common areas. The remaining room renovations
concluded by the end of Q1 2023, resulting in the availability of
the entire room inventory (116 units) for sale and we are already
witnessing an increase in the Average Daily Rate.
In July 2023, the hotel was awarded a 4-star
rating.
During Q3 and Q4, we observed a consistent
upward trend with each month's actual performance exceeding the
initial budget. We can proudly say that, thanks to the renovation
work and the excellent team that takes care of our hotel and
guests, our expectations have been exceeded.
Other matters
On 20 September 2023 we have extended the terms
of 9.7 million euros of unsecured bonds issue, with an original
maturity date of 31 October 2024. The terms have been revised and,
in order to motivate the bondholders on the extension, the interest
rate has been increased to 9% from the previous agreed rate of 8%.
This minimal increase, despite the changed landscape in the
financial and bond markets in the past years, shows the great
confidence that the market has in the solidity of our Company. The
extension applies to 85% of the principal amount, whereas the
remaining 15% will be paid back at the original maturity date of 31
October 2024. The extension is structured for 2 years with the
possibility of prolonging it for an extra 2 years should the
Company deem it necessary to do so.
As of the date of publishing this report, the
Company has extended the terms of conditions of the 28.5 million
euro secured bond issue. The Company has made in February, 2024 a
partial repayment of 8.6 million Euros before the maturity and has
extended the balance of the issue of 19.9 million euros until 20
February, 2028. From 21 February 2024 new interest rate for the
bonds is 11% p.a. and the Company has the right to make partial or
full repayment of the issue at any time without penalty.
OÜ PKE Treasury previously OÜ Ilmarise Kvartal
established for real estate development (Ilmarise Kvartal
development project in Põhja Tallinn) was restructured due to the
completion and delivery of the aforementioned project. Through the
restructuring, it was renamed from OÜ Ilmarise Kvartal to OÜ PKE
Treasury.
The aim and purpose for such conversion was
arising out of the need of AS Pro Kapital Grupp to manage its
cashflows more efficiently within the Estonian group. As the core
business of the Company is real estate development, it is
imperative to accurately manage the equity investments into various
projects across the group and OÜ PKE Treasury is specifically
tasked with monitoring the development schedules of each project
and to arrange for and provide sufficient funds needed by each
project. OÜ PKE Treasury holds an office on lease within PKG
headquarters and employs a Treasury Manager responsible for the
abovementioned tasks.
As we conclude Q4, the real estate sector in the
Baltic region has demonstrated commendable resilience throughout
the ongoing challenges posed by the global macroeconomic climate
and geopolitical unrest, notably stemming from the conflict in
Ukraine. Despite these hurdles, there is a measured sense of
optimism within our company, underpinned by the region's favourable
economic positioning.
Estonia, Latvia, and Lithuania have experienced
sustained economic growth, driven by factors such as increased
foreign investment, the expansion of the service sector, and a
focus on export-oriented manufacturing. The proximity to Northern
Europe and EU membership continues to enhance trade and investment
opportunities. While Q3 witnessed a slowdown in sales activity
attributed to rising inflation and increased lending rates, the
close of the quarter reveals encouraging signs of
stabilization.
Acknowledging the challenges posed by the
ever-changing global landscape, we are committed to a proactive and
adaptive approach. Our confidence in advancing our project
portfolio aligns with the region's positive economic indicators.
Despite the ongoing supply chain challenges, material costs, and
construction-related uncertainties, we remain resilient in our
pursuit of meeting market expectations and delivering high-quality
properties for the local community.
The Baltic region's economic fundamentals and
the gradual alignment of salary increments with inflation rates
contribute to a sense of market recovery. As we navigate the
dynamic real estate sector, we continue to explore innovative
strategies to anticipate future needs. Our commitment to staying
ahead of the curve reflects our confidence in the region's
potential and our readiness to capitalize on opportunities as they
arise in this evolving global panorama.
Edoardo Preatoni
CEO
Key financials
The total revenue of the
Company in 2023 was 23 million euros compared to 66 million euros
in the reference period. The total revenue of the fourth quarter
was 3 million euros compared to 4 million euros in 2022. The real
estate sales revenues are recorded at the point of time when legal
title is transferred to the buyer. Therefore, the revenues from
sales of real estate depend on the construction cycle and the
completion of the residential developments. Due to the completion
of the Kalaranna Quarter and Kindrali Houses developments in
Tallinn in 2022, the majority of apartments were handed over,
leading to a decrease in real estate sales revenue in 2023. While
we have started the construction of Kalaranna last stage, the
construction and delivery of units to clients won’t happen until
the end of 2024, when the revenues shall be recorded.
The gross profit for 2023 has
decreased by 59% amounting to 7 million euros compared to 17
million euros in 2022. The gross profit in the fourth quarter was 1
million euros compared to 754 thousand euros in comparative
period.
The operating result in 2023
was 3 million euros profit comparing to 18 million euros profit
during the same period in 2022. The operating result for fourth
quarter was 1 million euros profit compared to 6 million euros
profit in the fourth quarter of 2022.
The net result for the 2023 was
900 thousand euros loss, comparing to 13 million euros profit in
the reference period. The net result of the fourth quarter was 125
thousand euros profit compared to 5 million euros profit in
2022.
Cash generated in operating
activities during 2023 was 9 million euros comparing to 18
million euros during the same period in 2022. In the fourth quarter
the cash used was 440 thousand euros compared to 2 million euros
used in 2022.
Net assets per share on 31 December 2023
totalled to 0.96 euro compared to 0.98 euros on 31 December
2022.
Key performance indicators
|
2023 12M |
2022 12M |
2023 Q4 |
2022 Q4 |
Revenue, th
EUR |
23 021 |
65 654 |
3 052 |
4 026 |
Gross profit, th
EUR |
7 028 |
16 965 |
1 028 |
754 |
Gross profit,
% |
31% |
26% |
34% |
19% |
Operating
result, th EUR |
2 963 |
17 657 |
1 296 |
5 666 |
Operating
result, % |
13% |
27% |
42% |
141% |
Net result, th
EUR |
-900 |
13 452 |
125 |
4 800 |
Net result,
% |
-4% |
20% |
4% |
119% |
|
|
|
|
|
Earnings per
share, EUR |
-0.02 |
0.24 |
0.00 |
0.08 |
|
|
31.12.2023 |
31.12.2022 |
Total Assets, th
EUR |
|
107 237 |
101 256 |
Total
Liabilities, th EUR |
|
52 814 |
45 933 |
Total Equity, th
EUR |
|
54 423 |
55 323 |
Debt / Equity
* |
|
0.97 |
0.83 |
|
|
|
|
Return on
Assets, % ** |
|
-0.08% |
12.4% |
Return on
Equity, % *** |
|
-1.5% |
27.4% |
Net asset value
per share, EUR **** |
|
0.96 |
0.98 |
*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 |
|
31.12.2023 |
31.12.2022 |
ASSETS |
|
|
|
Current
assets |
|
|
|
Cash and cash equivalents |
|
17 065 |
10 589 |
Current receivables |
|
3 551 |
955 |
Prepaid expenses |
|
128 |
64 |
Inventories |
|
35 563 |
34 224 |
Total
current assets |
|
56 307 |
45 832 |
Non-current
assets |
|
|
|
Non-current receivables |
|
10 |
2 016 |
Property, plant and equipment |
|
7 763 |
7 294 |
Right-of-use assets |
|
365 |
195 |
Investment property |
|
42 696 |
45 575 |
Goodwill |
|
0 |
262 |
Intangible assets |
|
96 |
82 |
Total
non-current assets |
|
50 930 |
55 424 |
TOTAL
ASSETS |
|
107 237 |
101 256 |
LIABILITIES AND EQUITY |
|
|
|
Current
liabilities |
|
|
|
Current debt |
|
30 141 |
173 |
Customer advances |
|
3 657 |
1 659 |
Current payables |
|
4 911 |
4 626 |
Tax liabilities |
|
161 |
111 |
Short-term provisions |
|
11 |
5 |
Total
current liabilities |
|
38 881 |
6 574 |
Non-current
liabilities |
|
|
|
Long-term debt |
|
12 695 |
38 184 |
Deferred income tax liabilities |
|
1 130 |
1 130 |
Long-term provisions |
|
108 |
45 |
Total
non-current liabilities |
|
13 933 |
39 359 |
TOTAL
LIABILITIES |
|
52 814 |
45 933 |
Equity
attributable to owners of the Company |
|
|
|
Share capital in nominal value |
|
11 338 |
11 338 |
Share premium |
|
5 661 |
5 661 |
Statutory reserve |
|
1 134 |
1 134 |
Revaluation reserve |
|
2 092 |
2 012 |
Retained earnings |
|
34 198 |
35 178 |
TOTAL
EQUITY |
|
54 423 |
55 323 |
TOTAL
LIABILITIES AND EQUITY |
|
107 237 |
101 256 |
Consolidated interim statements of comprehensive
income
in thousands of euros |
2023 12M |
2022 12M |
2023 Q4 |
2022 Q4 |
CONTINUING OPERATIONS |
|
|
|
|
Operating income |
|
|
|
|
Revenue |
23 021 |
65 654 |
3 052 |
4 026 |
Cost of goods
sold |
-15 993 |
-48 689 |
-2 024 |
-3 272 |
Gross
profit |
7 028 |
16 965 |
1 028 |
754 |
|
|
|
|
|
Marketing
expenses |
-705 |
-498 |
-219 |
-153 |
Administrative
expenses |
-5 440 |
-4 946 |
-1 580 |
-1 203 |
Other
income |
2 119 |
6 278 |
2 103 |
6 278 |
Other
expenses |
-39 |
-142 |
-36 |
-10 |
Operating profit/ loss |
2 963 |
17 657 |
1 296 |
5 666 |
|
|
|
|
|
Financial
income |
254 |
3 |
80 |
1 |
Financial
expense |
-4 115 |
-4 211 |
-1 257 |
-875 |
Profit
/ loss before income tax |
-898 |
13 449 |
119 |
4 792 |
Income
tax |
-2 |
3 |
6 |
8 |
Net
profit / loss for the period |
-900 |
13 452 |
125 |
4 800 |
|
|
|
|
|
Other
comprehensive income net of income tax: |
|
|
|
|
Net change in
asset revaluation reserve |
80 |
-972 |
80 |
-972 |
|
|
|
|
|
Total
comprehensive income / loss for the year |
-820 |
12 480 |
205 |
3 828 |
|
|
|
|
|
Earnings per
share for the period € |
-0.02 |
0.24 |
0.00 |
0.08 |
The full report can be found in the file attached.
Edoardo Preatoni
CEO
+372 614 4920
prokapital@prokapital.ee
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