Pro Kapital Grupp : Consolidated interim report for I quarter and 3 months of 2018 (unaudited)

Consolidated interim report for I quarter and 3 months of 2018 (unaudited)

MANAGEMENT REPORT

CEO review

During the first quarter of 2018 Pro Kapital continued construction works of the new T1 Mall of Tallinn shopping and entertainment centre in Tallinn, which is the Company´s largest single-object development project. Active negotiations with several local and international retail operators were carried on. The Company continued residential development activities in Kristiine City in Tallinn, in Kliversala in Riga and Šaltinių Namai in Vilnius.

In Tallinn, Kristiine City, the Company has completed four apartment buildings where 119 apartments out of 124 have been handed over to the clients. Next three buildings are under construction. Presale has been continuing for all three buildings with 26 apartments presold in the fifth, 14 apartments presold in the sixth and 13 apartments presold in the seventh building at the moment of publishing current interim report. Each building will have 31 apartments.

In Riga, the construction works of River Breeze Residence in Kliversala project were continued and the building was completed at the end of April. 4 luxury apartments have been handed over to the clients and 4 will be handed over in the nearest weeks. 39 apartments are available for sale. Many negotiations are in process with potential new buyers. The projecting works were continued also for Tallinas Residential Complex and for the first stage of office complex in Zvaigznes Quarter.

In Vilnius the first stage of Šaltinių Namai development has been almost sold. Last year the construction works for the second stage residential buildings started and 72 preliminary agreements have been already signed. Four buildings of the second stage should be completed in the middle of 2019. Our Vilnius real estate portfolio has no further projects for development after completion of Šaltinių Namai project, therefor the Company is seeking for obtaining attractive developments in the region.

At the end of reporting period the Company recorded net revenue of 6.8 million euros, an increase of 121% as compared to 3.1 million euros in the same period in 2017. Revenues have increased in real estate segment. This segment is influenced by time of completion of the buildings as revenues are recorded at the moment notary deed of sale is concluded. The net result remained negative due to high financial costs, though recorded net loss of 0.1 million euros for the first three months in 2018 was 92% lower as compared to 1.4 million euros loss during the same period in 2017. The Company is working on increasing its efficiency and results are improving. For 2018 we foresee a positive year end result, which is influenced by completion of residential real estate developments in Tallinn and in Riga and opening of T1 Mall of Tallinn.

Overall loans from financial institutions were 35.7 million euros as at 31 March 2018. The loans from minority shareholders were 0.3 million euros. The Company had 10.2 million euros worth convertible bonds debt and 28.9 million euros worth non-convertible bonds debt at the end of reporting date.

As at 31 March 2018 there were 84 employees working in the Company, 45 of them were employed in the hotel and property maintenance business.

Paolo Michelozzi
CEO

Key figures

Total revenue was 6 798 thousand euros, an increase of 121% compared to the reference period (2017 3M: 3 074 thousand euros for continuing operations and 3 614 thousand euros including discontinued operations). Revenues of the Company depend on completing residential developments, as sales revenues are recorded at the moment of handing over the premises. Positive results of the first quarter of 2018 were influenced by completion of the 4^th apartment building in a Kristina Houses development and renovated Marsi 6 building in Tallinn as presales were turned into notarised sales transactions.

Goss profit was 1 804 thousand euros, an increase of 122% compared to the reference period (2017 3M: 814 thousand euros for continuing operations and 935 thousand euros including discontinued operations). Gross profit margin of continuing operations increased by 1%.

Operating result increased by 1 212 thousand euros (231%) compared to the reference period, totalling to operating profit of 687 thousand euros (2017 3M: loss of 525 thousand euros for continuing operations and loss of 497 thousand euros including discontinued operations). Operating result of the period was influenced positively by real estate sales in Tallinn.

Net result increased positively by 1 284 thousand euros (92%) compared to the reference period, totalling still to negative result of 118 thousand euros (2017 3M: loss of 1 402 thousand euros for continuing operations and loss of 1 429 thousand euros including discontinued operations). The net result of the period was influenced positively by real estate sales in Tallinn. Nevertheless, high interest costs resulted in negative bottom line.

	Continuing operations			Continuing and discontinued operations
	2018 3M	2017 3M	2017 12M	2018 3M	2017 3M	2017 12M
Revenue, th EUR	6 798	3 074	12 077	6 798	3 614	14 098
Gross profit, th EUR	1 804	814	4 561	1 804	935	5 380
Gross profit, %	27%	26%	38%	27%	26%	38%
Operating result, th EUR	687	-525	1 797	687	-497	2 385
Operating result, %	10%	-17%	15%	10%	-14%	17%
Net result, th EUR	-118	-1 402	-953	-118	-1 429	-518
Net result, %	-2%	-46%	-8%	-2%	-40%	-4%
Earnings per share, EUR	-0.00	-0.03	-0.02	-0.00	-0.03	-0.01

	31.03.2018	31.03.2017	31.12.2017
Total Assets, th EUR	183 962	144 439	175 158
Total Liabilities, th EUR	101 398	66 143	92 476
Total Equity, th EUR	82 564	78 296	82 682
Debt / Equity	1.23	0.84	1.12
Return on Assets, %	-0.1%	-1.0%	-0.3%
Return on Equity, %	-0.1%	-1.8%	-0.6%
Net asset value per share, EUR	1.46	1.44	1.46

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated interim statement of financial position

in thousands of euros	31.03.2018	31.03.2017	31.12.2017
ASSETS
Current assets
Cash and cash equivalents	8 255	3 331	10 317
Current receivables	4 459	4 568	4 888
Inventories	39 488	27 086	38 024
Total current assets	52 172	34 985	53 229
Non-current assets
Non-current receivables	36	41	37
Property, plant and equipment	7 125	18 261	7 435
Investment property	124 316	90 855	114 140
Intangible assets	313	297	317
Total non-current assets	131 790	109 454	121 929
TOTAL ASSETS	183 962	144 439	175 158
LIABILITIES AND EQUITY
Current liabilities
Current debt	10 667	7 654	6 738
Customer advances	6 920	3 846	7 224
Current payables	12 210	3 978	10 091
Tax liabilities	510	675	132
Short-term provisions	176	203	170
Total current liabilities	30 483	16 356	24 355
Non-current liabilities
Long-term debt	64 651	44 433	62 527
Other non-current payables	4 152	1 827	3 437
Deferred income tax liabilities	2 004	3 348	2 058
Long-term provisions	108	179	99
Total non-current liabilities	70 915	49 787	68 121
TOTAL LIABILITIES	101 398	66 143	92 476
Equity attributable to owners of the Company
Share capital in nominal value	11 338	10 854	11 338
Share premium	5 661	1 816	5 661
Statutory reserve	1 082	1 082	1 082
Revaluation reserve	3 262	9 462	3 256
Retained earnings	59 944	55 017	60 369
Loss for the period	-96	-1 411	-419
Total equity attributable to owners of the Company	81 191	76 820	81 287
Non-controlling interest	1 373	1 476	1 395
TOTAL EQUITY	82 564	78 296	82 682
TOTAL LIABILITIES AND EQUITY	183 962	144 439	175 158

Consolidated interim statements of comprehensive income

in thousands of euros	2018 3M	Adjusted 2017 3M	2017 12M
CONTINUING OPERATIONS
Operating income
Revenue	6 798	3 074	12 077
Cost of goods sold	-4 994	-2 260	-7 516
Gross profit	1 804	814	4 561
Marketing expenses	-179	-188	-822
Administrative expenses	-1 085	-1 193	-5 256
Other income	176	45	4 114
Other expenses	-29	-37	-800
Operating profit/ loss	687	-525	1 797
Financial income	1	1	6
Financial expense	-859	-847	-3 352
Loss before income tax	-171	-1 371	-1 549
Income tax	53	-31	596
Loss from continuing operations	-118	-1 402	-953
Profit/ loss from discontinued operations	0	-27	435
Loss for the period	-118	-1 429	-518
Attributable to:
Equity holders of the parent	-96	-1 411	-419
Non-controlling interest	-22	-18	-99
Other comprehensive income, net of income tax
Income that will not be reclassified subsequently to profit
Net change in properties revaluation reserve	0	0	-4
Total comprehensive income for the year	-118	-1 429	-522
Attributable to:
Equity holders of the parent	-96	-1 411	-423
Non-controlling interest	-22	-18	-99
Earnings per share from continuing operations (EUR)	-0.00	-0.03	0.02
Earnings per share for the period (EUR)	-0.00	-0.03	0.02

Consolidated interim statements of cash flows

in thousands of euros	2018 3M	Adjusted 2017 3M	2017 12M
Cash flows from operating activities
Loss for the year	-118	-1 429	-518
Adjustments for:
Depreciation and amortisation of non-current assets	52	175	-455
Gain from disposal of property, plant and equipment	-18	0	-3 045
Change in fair value of property, plant and equipment	0	0	-26
Change in fair value of investment property	0	0	-530
Loss from disposal of shares of subsidiaries	0	0	346
Finance income and costs	858	887	3 460
Other non-monetary changes (net amounts)	-503	12 584	12 410
Changes in working capital:
Trade receivables and prepayments	430	-93	-408
Inventories	-1 464	-12 942	-23 880
Liabilities and prepayments	2 850	-1 752	6 556
Provisions	19	12	-101
Net cash used in/ generated by operating activities	2 053	-2 558	-5 281
Cash flows from investing activities
Payments for property, plant and equipment	-57	-98	-281
Payments for intangible assets	0	-24	-52
Proceeds from disposal of property, plant and equipment	336	0	6 651
Payments for investment property	-9 290	-4 085	-24 772
Net cash from disposal of shares of subsidiaries	0	0	6 249
Interests received	1	1	6
Net cash used in/ generated by investing activities	-9 010	-4 206	-12 199
Cash flows from financing activities
Proceeds from increase of share capital	0	0	4 328
Net changes related to non-controlling interests	0	0	-480
Proceeds from bonds	0	0	1 446
Redemption of convertible bonds	0	-522	-773
Proceeds from borrowings	7 443	6 450	28 260
Repayment of borrowings	-2 051	-168	-7 048
Interests paid	-527	-567	-3 318
Net cash used in/ generated by financing activities	4 865	4 713	22 415
Net change in cash and cash equivalents	-2 092	-2 051	4 935
Cash and cash equivalents at the beginning of the period	10 317	5 382	5 382
Cash and cash equivalents at the end of the period	8 225	3 331	10 317

Allan Remmelkoor
Member of the Board
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