Pro Kapital Grupp
Quarterly report

CONSOLIDATED INTERIM REPORT FOR III QUARTER AND 9 MONTHS OF 2017 (UNAUDITED)

MANAGEMENT REPORT

CEO review

During the third quarter of 2017 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 development activities also in Kliversala residential quarter in Riga and residential development projects - Šaltinių Namai in Vilnius and Kristiine City in Tallinn, in Tondi.

In Vilnius by the issuing of the present report 42 apartments out of 44 in building K4-1 have been handed over to the clients. In January 2017, the construction works for the second stage residential buildings started and 65 preliminary agreements have been signed.

In Tallinn, Kristiine City (Tondi quarter), the Company has completed three apartment buildings where 89 apartments out of 93 have been handed over to the clients. Presale continued for the fourth building with 24 presale agreements signed, started also in the fifth building with 16 presale agreements and in the sixth building with 3 presale agreements already signed. Presale for Marsi 6 historical building that will be renovated into a special design loft apartments have been continued successfully having 38 presale agreements out of 45 flats signed.

In Riga, the construction works of River Breeze Residence in Kliversala project were continued and 11 presale agreements have been signed out of 47 flats in total. Many negotiations are in process with potential new buyers. The projecting works were continued also for Tallinas Residential Complex and were initiated for the first stage of office complex in Zvaigznes Quarter.

During the third quarter Pro Kapital concluded the sale transaction of its hotel activities both in Tallinn and in Riga. The goal of the transaction was to exit Tallinn and Riga hotel market which has not been a core business for the Company and to help to speed up the development of its real estate projects in the market which has positive trends.

In September 2017 Pro Kapital announced a public offering of shares of AS Pro Kapital Grupp. In total 2 416 232 new shares were subscribed and allocated to the investors at the issue price of 1.80 euros for each share. The new shares have been admitted to trading on the regulated market (secondary list) operated by Nasdaq Tallinn AS.

For the activity of the Company and development of new projects the Company seeks to attain attractive mix of financing through combining acceptable level of borrowings from financial institutions, expanding its investor base and attracting additional private equity.

At the end of reporting period the Company recorded net revenue of 9.8 million euros, a decrease of 39% as compared to 16.2 million euros in the same period in 2016. Revenues have decreased in real estate segment. This segment is influenced by completion of the buildings as revenues are recorded at the moment notary deed of sale is concluded. Gross profit has decreased only by 29%. The net result remained negative also due to high financial costs, though recorded net losses of 1.4 million euros for nine months in 2017 were 39% lower as compared to 2.4 million euros losses in the same period last year.

Overall loans from financial institutions were 21.1 million euros as at 30 September 2017. The loans from minority shareholders were 0.3 million euros. The Company had 10.3 million euros worth convertible bonds debt and 28.9 million euros worth non-convertible bonds debt at the end of reporting date.

As at 30 September 2017 there were 85 employees working in the Company, 48 of them were employed in hotel and property maintenance business.

Paolo Michelozzi

CEO

Key Figures (incl discontinued operations)

Total revenue of the Company for nine months in 2017 was 9 817 thousand euros, a decrease of 39% compared to the reference period (2016 9 months: 16 177 thousand euros). Total revenue of the third quarter was 2 251 thousand euros comparing to 7 974 thousand euros in 2016. Revenues increased significantly in the third quarter of 2016 due to completion of K4-1 building in Vilnius and preliminary agreements turned into sales deeds. During 2017 no building has been completed yet. Residential development activities continue as planned and sales revenue will be booked upon completion and handing over premises to buyers.

Gross profit for nine months was 3 309 thousand euros, a decrease of 29% compared to the reference period (2016 9 months: 4 630 thousand euros). Gross profit for the third quarter was 962 thousand euros comparing to 3 221 thousand euros in 2016. Although total revenue of reporting period was lower, profitability of activities was higher - gross margin was 34% during nine months in 2017 (2016 9 months: 29%)

Operating result during nine months decreased by 785 thousand euros (139%) compared to the reference period, totalling to loss of 222 thousand euros (2016 9 months: profit of 563 thousand euros). Operating result for the third quarter was profit of 302 thousand euros (2016 Q3: profit of 1 831 thousand euros). Operating result was influenced positively by profit from sales of Tallinn hotel property which was recorded as other income, but marketing costs and consulting costs were higher than during comparative period.

Net result for nine months increased by 929 thousand euros (39%) compared to the reference period, totalling to loss of 1 441 thousand euros (2016 9 months: loss of 2 370 thousand euros). Net result for the third quarter was profit of 870 thousand euros (2016 Q3: profit of 779 thousand euros). The net result was influenced positively by profit from sales of Riga hotel property owning company, which was recorded as financial income. Nevertheless high interest costs resulted in negative bottom line.

Key financial figures (incl discontinued operations)
2017 9M 2016 9M 2017 Q3 2016 Q3
Revenue, th EUR 9 817 16 177 2 251 7 974
Gross profit, th EUR 3 309 4 630 962 3 221
Gross profit, % 34% 29% 43% 40%
Operating result, th EUR -222 563 302 1 831
Operating result, % -2% 3% 13% 23%
Net result, th EUR -1 441 -2 370 870 779
Net result, % -15% -15% 39% 10%
Earnings per share, EUR -0,03 -0,04 0,02 0,01
30.09.2017 30.09.2016 31.12.2016
Total Assets, th EUR 158 854 140 202 142 314
Total Liabilities, th EUR 80 570 57 874 62 110
Total Equity, th EUR 78 284 82 328 80 204
Debt/ Equity 1,03 0,7 0,77
Return on Assets, % 1,0% -1,8% -3,0%
Return on Equity, % -1,8% 2,9% -4,8%
Net asset value per share, EUR 1,44 1,52 1,48

CONSOLIDATED FINANCIAL REPORT

Consolidated interim statements of financial position

in thousands of euros 30.09.2017 31.12.2016
ASSETS
Current Assets
Cash and cash equivalents 8 793 5 382
Current receivables 4 054 4 475
Inventories 33 803 14 144
Total Current Assets 46 650 24 001
Non-Current Assets
Non-current receivables 39 42
Property, plant and equipment 7 260 18 336
Investment property 104 608 99 660
Intangible assets 297 275
Total Non-Current Assets 112 204 118 313
TOTAL ASSETS 158 854 142 314
in thousands of euros 30.09.2017 31.12.2016
LIABILITIES AND EQUITY
Current Liabilities
Current debt 5 524 8 261
Customer advances 6 352 2 226
Current payables 7 602 8 502
Taxes payable 254 547
Short-term provisions 155 5
Total Current Liabilities 19 887 19 541
Non-Current Liabilities
Long-term debt 55 172 38 040
Other long-term liabilities 2 786 804
Deferred income tax liability 2 635 3 360
Long-term provisions 90 365
Total Non-Current Liabilities 60 683 42 569
TOTAL LIABILITIES 80 570 62 110
Equity attributable to equity holders of the parent
Share capital in nominal value 10 854 10 854
Paid in capital 1 816 1 816
Statutory reserve 1 082 1 082
Revaluation reserve 3 259 9 462
Retained earnings 61 220 59 104
Profit (loss) for the period -1 374 -3 913
Total equity attributable to equity holders of the parent 76 857 78 405
Non-controlling interest 1 427 1 799
TOTAL EQUITY 78 284 80 204
TOTAL LIABILITIES AND EQUITY 158 854 142 314
Consolidated interim statements of comprehensive income
in thousands of euros 2017 9M 2016 9M 2017 Q3 2016 Q3
Continuing operations
Operating income
Revenue 7 796 13 772 1 773 6 967
Cost of goods sold -5 265 -10 029 -1 043 -4 188
Gross profit 2 531 3 743 730 2 779
Marketing expenses -636 -295 -182 -122
Administrative expenses -3 757 -3 651 -1 307 -1 223
Other income 1 569 153 1 296 30
Other expenses -455 -67 -430 -12
Operating profit/ loss -748 -117 107 1 452
Financial income 1 399 -40 1 440 -18
Financial expense -2 581 -2 656 -882 -822
Profit/ loss before income tax -1 930 -2 813 665 612
Income tax -1 -185 20 -193
Net profit/ loss from continuing operations -1 931 -2 998 685 419
Profit from discontinued operations 490 628 185 360
Net profit/ loss for the period -1 441 -2 370 870 779
Attributable to:
Equity holders of the parent -1 374 -2 315 891 802
Non-controlling interest -67 -55 -21 -23
Earnings per share from continuing operations (EUR) -0,04 -0,06 0,01 0,01
Earnings per share for the period (EUR) -0,03 -0,04 0,02 0,01
Consolidated interim statements of cash flows
in thousands of euros 2017 9M 2016 9M 2017 Q3 2016 Q3
Cash flows from operating activities
Loss for the year -1 441 -2 370 870 779
Adjustments for:
Depreciation and amortisation of non-current assets 475 529 124 172
Gain from disposal of property, plant and equipment -1 247 0 -1 247 0
Gain from disposal of shares of subsidiaries -1 452 0 -1 452 0
Finance income and costs 2 645 2 715 901 848
Other non-monetary changes (net amounts) 13 041 -51 142 -101
Changes in working capital:
Trade receivables and prepayments 425 137 685 -212
Inventories -19 659 2 622 -4 279 1 428
Liabilities and prepayments 4 189 -917 3 192 154
Provisions -124 10 51 44
Net cash from operating activities -3 148 2 675 -1 013 3 112
Cash flows from investing activities
Payments for property, plant and equipment -154 -686 -13 -586
Payments for intangible assets -30 -1 -6 0
Proceeds from disposal of property, plant and equipment 6 651 0 6 651 0
Payments for investment property -17 348 -5 659 -8 291 -1 236
Net cash from disposal of shares of subsidiaries 6 235 0 6 235 0
Interests received 4 4 1 -12
Net cash from investing activities -4 642 -6 342 4 577 979
Cash flows from financing activities
Net changes in non-controlling interests -480 826 0 0
Proceeds from bonds 1 446 12 637 282 -2 813
Redemption of convertible bonds -773 -12 -234 0
Proceeds from borrowings 19 276 2 025 8 242 471
Repayment of borrowings -6 139 -2 754 -5 815 -804
Interests paid -2 129 -2 233 -427 -373
Net cash from financing activities 11 201 10 489 2 048 -3 519
Net change in cash and cash equivalents 3 411 6 822 5 612 572
Cash and cash equivalents at the beginning of the period 5 382 6 392 3 181 12 642
Cash and cash equivalents at the end of the period 8 793 13 214 8 793 13 214

Allan Remmelkoor
Member of the Management Board
+372 614 4920
prokapital@prokapital.ee

Pro Kapital Grupp AS published this content on 23 November 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 23 November 2017 14:06:04 UTC.

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