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Hepsor
Quarterly Report • May 10, 2023
2218_10-q_2023-05-10_4586deeb-d938-4dc6-b2e7-1b20f75b15cf.pdf
Quarterly Report
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Nameja Rezidence, Riga
2023 I quarter consolidated unaudited interim report
| Corporate name: | Hepsor AS |
|---|---|
| Commercial Register No: | 12099216 |
| Address: | Järvevana tee 7b, 10112 Tallinn |
| E-mail: | [email protected] |
| Telephone: | +372 660 9009 |
| Website: | www.hepsor.ee |
| Reporting period: | 01 January 2023-31 March 2023 |
| Financial year: | 01 January 2023-31 December 2023 |
| Supervisory Board: | Andres Pärloja, Kristjan Mitt, Lauri Meidla |
| Management Board: | Henri Laks |
| Auditor: | Grant Thornton Baltic OÜ |
Hepsor AS (hereinafter referred to as "the Group" or "Hepsor"), a property development company based on Estonian capital, has operations in Estonia and Latvia. The Group entered Latvian market in 2017 and has been operating under the same consolidating group since 2019.
| Management Report 4 | |
|---|---|
| Overview of the Development Projects 7 | |
| Main Events17 | |
| Operating Results 18 | |
| Key financials20 | |
| Share and Shareholders21 | |
| Consolidated Financial Statements 23 | |
| Consolidated statement of financial position23 | |
| Consolidated statement of profit and loss and other comprehensive income 24 | |
| Consolidated statement of changes in equity 25 | |
| Consolidated statement of cash flows 26 | |
| Notes to the consolidated interim financial statements27 | |
| Note 1. General information 27 | |
| Note 2. Inventories27 | |
| Note 3. Trade and other receivables29 | |
| Note 4. Loans granted 29 | |
| Note 5. Loans and borrowings30 | |
| Note 6. Trade and other payables32 | |
| Note 7. Other non-current liabilities32 | |
| Note 8. Embedded derivatives 33 | |
| Note 9. Contingent liabilities33 | |
| Note 10. Revenue 34 | |
| Note 11. Cost of sales34 | |
| Note 12. Marketing expenses34 | |
| Note 13. Administrative expenses34 | |
| Note 14. Personnel expenses 34 | |
| Note 15. Financial income and expenses 35 | |
| Note 16. Information about line item in the consolidated statement of cash flows 35 | |
| Note 17. Subsidiaries36 | |
| Note 18. Shares of associates36 | |
| Note 19. Operating segments37 | |
| Note 20. Related parties38 | |
| Note 21. Events after the reporting period 39 | |
| Note 22. Risk management 39 | |
| Management Board's Confirmation42 | |
Management Report
| FORECASI FOR 2023 | ||||
|---|---|---|---|---|
| 41.1 ME | 3.3 ME | 11 ME | ||
| REVENUES NET PROFIT - - |
CONSOLIDATED CONSOLIDATED CONSOLIDATED NET PROFIT ATTRI- BUTABLE TO OWNERS OF PARENT |
| Project | Assumption | ||
|---|---|---|---|
| Ulbrokas 30 stock-office |
Sold during financial year 2023. | ||
| Paevälja Courtyard Houses |
All 96 apartments sold. | ||
| Strelnieku 4B | All 54 apartments sold. | ||
| Grüne office building |
Measured at fair value using DCF method. The Group earns rental income from the development project. |
||
| Ganibu Dambis | Rental income earned during the development of the project. |
||
| Kuldigas Parks | All 116 apartments sold. | ||
| Märupes Därzs | All 92 apartments sold. | ||
| Büroo 113 | The Group earns financial income with the equity method of accounting from associated company. |
| PROJECT | Total number of apartments |
Apartments sold* |
Apartments sold % |
Apartments available |
|---|---|---|---|---|
| Strelnieku 4b, Latvia | ਦੇ ਪੈ | 36 | 67% | 18 |
| Paevälja Courtyard Houses | 96 | 78 | 81% | 18 |
| Kuldigas Parks, Latvia | 116 | 110 | 95% | 6 |
| Marupes Darzs, Latviai | 92 | 78 | 85% | 14 |
| Ojakalda Homes | 101 | 28 | 28% | 73 |
| l illeküla Homes | 26 | ර | 23% | 20 |
| Nameja Rezidence | 38 | 10 | 26% | 28 |
| Manufaktuuri 7 | 154 | 32 | 21% | 122 |
| lotal | 677 | 378 | 56% | 299 |
| COMMERCIAL DEVELOPMENT PROJECTS IN PROGRESS |
Total rentable area m2 | Occupancy m2 | Occupancy % | |
| Ulbrokas 30 stock-office, Latvia | 3,645 | 3,645 | 100% | |
| Büroo113 office building | 4,002 | 4,002 | 100% | |
| Grüne office building | 3,430 | 3,430 | 100% | |
| Total | 11,077 | 11,077 | 100% | |
| DEVELOPMENT PROJECTS UNDER CONSTRUCTION | ||||
| Started in 2022 | Total under construction | To be started in 2023 | ||
| 219 apartments |
527 | apartments | 332 | apartments |
| *Number of sold apartments includes paid bookings, contracts under law of obligation and real right contracts. | ||
|---|---|---|
Dear shareholders of Hepsor
Revenues 6 million euros The consolidated sales revenue of Hepsor amounted to 6.0 million euros in the first quarter of 2023 and the net profit was 0.14 million euros (including a net profit attributable to the owners of the parent of 0.24 million euros).
The year 2023 started on a moderately optimistic note in the real estate sector - consumer confidence, which fell to a record low in the last quarter of 2022, showed signs of recovery, and the stabilization of energy prices and inflation continued, which create the preconditions for the recovery of real estate market demand. Unfortunately, Euribor rates continue to rise, which directly affects the monthly housing costs of homebuyers and forces them to postpone making real estate purchase decisions. In Tallinn, the transaction activity of the new development market is higher than at the end of 2022 but continues to be significantly below the previous long-term average. On the other hand, in Riga, the previously described effects were more short-term, and transaction activity remains at the usual level after a temporary dip.
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 generated only 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.
The portfolio of the company's development projects and three-year average financial results are a better criteria for assessing the group's performance in order to assess the overall sustainability and economic results of a real estate development company.
Completed development projects
The handover of apartments in the Paevälja Hoovimajad project, which was completed in 2022, continued in the first quarter of 2023 and accounted for most of the quarter's sales revenue. We built two apartment buildings with a total of 96 apartments as part of the project, of which the first 40 apartments were handed over to homebuyers at the end of 2022. We handed over an additional 34 apartments to homebuyers during the first quarter of 2023, and as of 31 March 2023 we have signed real rights agreements for 74 apartments (77%) and law of obligations agreements or written reservation agreements for 4 apartments (4%).
Development projects under construction and available for sale
Hepsor has six residential development projects under construction in Estonia and Latvia, with a total of 527 new apartments. There are three development projects under construction and available for sale in Riga, with a total of 246 apartments as of 31 March 2023. Contracts under law of obligations and reservation agreements have been signed for 198 of these apartments (80%). There are also three development projects with a total of 281 new apartments under construction and available for sale in Tallinn. Contracts under law of obligations and reservation agreements have been signed for 61 of these apartments (23%) as of 31 March 2023.
The commercial real estate development project, Grüne Maja is being completed in Tallinn following a green concept. The office building is fully covered with lease agreements while approximately 79% of the space is already in active use. The remaining tenants are expected to move to the new premises in Q2 2023 at the latest.
Significant events related to development projects in the first quarter of 2023
- We signed a loan agreement to finance the construction of 26 homes in the Lilleküla Kodud project. Construction started already in the fourth quarter of 2022
- We started the construction of 154 homes in the Manufaktuuri 7 project in Tallinn and signed a loan agreement to finance the construction of the project
- We started the construction of 38 homes in Riga in the Nameja Rezidence development project
- Two projects under construction in Riga received an occupancy permit, which allows the completed homes to be handed over to buyers in the second quarter of 2023 - 92 homes will be completed in the Mārupes Dārzs project and 116 homes will be completed in the Kuldigas Parks project.
Future prospects
We forecast a revenue of 41.3 million euros, net profit of 3.3 million euros and net profit attributable to the owners of the parent of 1.1 million euros in 2023. The Group's sales results for the first quarter of 2023 give us confidence that we can expect to meet the forecasts for 2023. Currently customers do not make rapid purchase decisions, but there is still interest in our projects, which gives ground for us to be moderately optimistic to continue with existing and new projects. We believe that rather favourable construction prices should be taken advantage of to execute development projects. Observing the interest of Hepsor's customers in new development projects has given us the perception that there is moderate, if any, room for customers to negotiate a price decrease for the purchase in new developments.
Henri Laks
Member of the Management Board
Overview of the Development Projects
As of 31 March 2023, the Group had 26 active projects in different development phases (31 march 2022: 26 projects) and 176,000 sqm of sellable area (31 December 2022: 178,000 sqm).
Distribution of development portfolio between different development phases (as of 31 March 2023):
Distribution of development portfolio between countries and type (as of 31 March 2023):
Development projects in Tallinn (as of 31 March 2023)
-
-
Development projects in Riga (as of 31 March 2023)
Completed development projects (as of 31 March 2023):
Residential development projects under construction (as of 31 March 2023):
| Project: | Kuldigas Parks Kvarta SIA |
|
|---|---|---|
| Address: | 2a Gregora iela, Riga | |
| Apartments: | 116 | |
| Start of construction: | Q4 2021 | |
| Estimated completion: | Q2 2023 | |
| Website: | hepsor.lv/kuldigasparks/en/ | |
| Project: | Mārupes Dārzs Hepsor Mārupe SIA |
|---|---|
| Address: | 45 Liela, Mārupe, Riga area |
| Apartments: | 92 |
| Start of construction: | Q2 2022 |
| Estimated completion: | Q2 2023 |
| Website: | hepsor.lv/Mārupesdarzs/en/ |
| Project: | Ojakalda Kodud Hepsor 3TORNI OÜ |
|---|---|
| Address: | Paldiski mnt 227c, Tallinn |
| Apartments: | 101 |
| Start of construction: | Q3 2022 |
| Estimated completion: | Q2 2024 |
| Website: | hepsor.ee/ojakalda |
| Project: | Lilleküla Kodud Hepsor N57 OÜ |
|---|---|
| Address: | Nõmme tee 57, Tallinn |
| Apartments: | 26 |
| Start of construction: | Q4 2022 |
| Estimated completion: | Q1 2024 |
| Website | hepsor.ee/lillekylakodud/en/ |
Project:
| Hepsor Phoenix 2 OÜ | |
|---|---|
| Address: | 7 Manufaktuuri, Tallinn |
| Apartments: | 154 |
| Start of construction: | Q1 2023 |
| Estimated completion: | Q4 2024 |
| Website: | hepsor.ee/manufaktuur/m7/en/ |
Manufaktuuri Quarter
Nameja Rezidence
Project:
| Hepsor RD5 SIA | |
|---|---|
| Address: | 5 Ranka Dambis, Riga |
| Apartments: | 38 |
| Start of construction: | Q1 2023 |
| Estimated completion: | Q1 2024 |
| Website: | hepsor.lv/namejarezidence/en/ |
Commercial development projects under construction (as of 31 March 2023):
| Project: | Grüne Büroo Hepsor M14 OÜ |
|
|---|---|---|
| Address: | 14 Meistri, Tallinn | |
| Leasable area: | 3,430 m2 | |
| Start of construction: | Q4 2020 | |
| Estimated completion: | 2022-Q2 2023 | |
| Website: | gryne.ee/en/ |
Development projects the construction of which starts in 2023 (as of 31 March 2023):
| Project: | StockOffice U34 Hepsor U34 SIA |
|
|---|---|---|
| Address: | 34 Ulbrokas, Riga | |
| Leasable area: | 8 526 m2 | |
| Est. start of construction: | Q2 2023 | |
| Estimated completion: | 2024 | |
| Project: | Hepsor JG SIA | |
|---|---|---|
| Address: | Jurmalas Gatve/Imanta 8. linija, Riga |
|
| Apartments: | 40 | |
| Est. start of construction: | Q4 2023 | |
| Estimated completion: | Q4 2024 | |
| Project: | Hepsor Jugla SIA | |
| Address: | 23 Braila, Riga | |
| Apartments: | 100 | |
| Est. start of construction: | Q2 2023 | |
| Estimated completion: | Q3 2024 |
| Project: | Manufaktuuri 5 Hepsor Phoenix 3 OÜ |
|
|---|---|---|
| Address: | 5 Manufaktuuri, Tallinn | |
| Apartments: | 148 | |
| Est. start of construction: | Q2 2024 | |
| Estimated completion: | 2025-2026 |
Residential development projects under construction and available for sale (as of 31 March 2023):
| Project | Apartments | Apartments | Apartments % | Estimated | ||
|---|---|---|---|---|---|---|
| Sold* | Available | Sold* | Available | completion | ||
| 4b Strēlnieku, Latvia | 54 | 36 | 18 | 67% | 33% | 2020 |
| Paevälja Hoovimajad | 96 | 78 | 18 | 81% | 19% | I phase Q4 2022 II phase Q1 2023 |
| Kuldigas Parks, Latvia | 116 | 110 | 6 | 95% | 5% | Q2 2023 |
| Mārupes Dārzs, Latvia | 92 | 78 | 14 | 85% | 15% | Q2 2023 |
| Ojakalda Kodud | 101 | 28 | 73 | 28% | 72% | Q2 2024 |
| Lilleküla Kodud | 26 | 6 | 20 | 23% | 77% | Q1 2024 |
| Manufaktuuri 7 | 154 | 32 | 122 | 21% | 79% | Q4 2024 |
| Nameja Rezidence, Latvia | 38 | 10 | 28 | 26% | 74% | Q2 2024 |
| Total | 677 | 378 | 299 | 56% | 44% |
* Number of sold apartments includes paid bookings, contracts under law of obligation and real right contracts.
In 2023, the Group plans to start the development of two new commercial properties in Latvia (14,026 sqm) as well as Manufaktuuri 7.
Occupancy of commercial development projects (as of 31 March 2022):
| Project name | Rentable area sqm |
Occupancy sqm |
Occupancy % |
|---|---|---|---|
| Ulbokras 30 stock-office, Latvia | 3,645 | 3,645 | 100 |
| Büroo113 | 4,002 | 4,002 | 100 |
| Grüne Office | 3,430 | 3,430 | 100 |
| Total | 11,077 | 11,077 | 100 |
In addition to the new commercial and office buildings developed by the Group, the Group rents out commercial premises in Riga and Tallinn located on properties that are in the development phase for the construction of new buildings.
Group Structure
As of 31 March 2023, the Group was comprised of parent company, 38 subsidiaries and 2 associated companies (31 March 2022: parent company, 34 subsidiaries, 2 associated companies). Tatari 6a Arenduse OÜ is reported as financial investment.
In Q1 of 2023 the following changes took place in the structure of the Group:
✓ On 23 January 2023, Hepsor Latvia OÜ acquired a 29% shareholding in Hepsor BAL9 OÜ bringing its shareholding in the subsidiary up to 100%. The share repurchase agreement was concluded in connection with the completion of the Balozu 9 residential development project in Riga.
Main Events
- ✓ Hepsor RD5 SIA, Hepsor AS group company, and Mitt&Perlebach SIA signed a construction agreement on 16 March 2023 for the construction of the Nameja Rezidence development project in Riga. The value of the construction agreement is approximately 4.6 million euros excluding VAT.
- ✓ Hepsor Phoenix 2 OÜ, Hepsor AS group company, and LHV Pank OÜ signed 17.5 million loan agreement on 15 March 2023. The purpose of the three-year loan is to finance the construction of Manufaktuuri 7 development project.
- ✓ Hepsor Phoenix 2 OÜ, Hepsor AS group company, and Mitt&Perlebach OÜ signed a construction agreement on 8 March 2023 for the construction of the Manufaktuuri 7 development project in the Manufaktuuri Quarter in Tallinn. The value of the construction agreement is approximately 18.5 million euros excluding VAT.
Events after the reporting period:
- ✓ Hepsor Kanada OÜ established a subsidiary Hepsor Kanada SPV 1 OÜ in April. Hepsor Kanada SPV 1 OÜ in turn established a subsidiary in Canada, Hepsor SPV I Ltd.
- ✓ Hepsor Latvia OÜ's subsidiary Hepsor RD5 SIA and the Latvian branch of Bigbank AS signed a loan agreement in the amount of 4 million euros on 20 April 2023. The purpose of the three-year loan is to finance the construction of the Nameja Rezidence development project in Riga.
Operating Results
The Group's sales revenue in Q1 2023 was 6.0 million euros (Q1 2022: 1.3 million euros), of which 0.2 million euros (Q1 2022: 1.1 million euros) or 4% (Q1 2022: 86%) was earned in Latvia.
Compared to the same period last year, the sales revenue of the first quarter of 2023 increased almost five times. Large fluctuations in sales revenue are relatively common in real estate development business. The development cycle of the Group's real estate projects lasts approximately 36 months. In year-on-year comparisons, sales revenues and profits may fluctuate depending on the period between the completion of the construction of the development project and the sale of the completed apartments. In Q1 2023, the Group sold a total of 34 apartments in Paevälja Hoovimajad development project, Paevälja 11, Tallinn. A year earlier, 8 apartments were sold in Riga in 4b Strēlnieku development project. In addition to the sale of apartments, the Group also offers project management services and generates rental income from real estate. In total, other sales revenue amounted to 363 thousand euros (Q1 2022: 158 thousand euros) or 6% (Q1 2022: 12%) of the Group's total sales revenue.
Profitability
The gross profit of development projects sold during the reporting period was 1,160 thousand euros (Q1 2022: 85 thousand euros) and gross profit margin was 20.9% (Q1 2022: 7.9%). The Group's gross profit for Q1 2023 amounted to 935 thousand euros (Q1 2022: 106 thousand euros). In the first quarter the Group's gross profit margin was 15.6% (Q1 2022: 8,6%). The gross profit was mostly affected by the number of apartments sold and the higher profitability of the sold development project.
In the first quarter of 2023, the Group's operating profit was 514 thousand euros (Q1 2022 operating loss: 314 thousand euros) and operating profit margin was 8.6% (Q1 2022: -24.7%). The Group's net profit for the period amounted to 139 thousand euros (Q1 2022: 22 thousand euros) of which the net profit attributable to the owners of the parent amounted to 240 thousand euros (Q1 2022: 5 thousand euros), while the net loss to non-controlling interest was 101 thousand euros (Q1 2022: net profit of 17 thousand euros). In the reporting period the net profit margin was 2.3% (Q1 2022: 1.7%).
Balance Sheet
Total assets of the Group amounted to 80.1 million euros as of 31 March 2023 (31 March 2022: 56.8 million euros), which is 41.1% higher than at the end of the comparable period last year. Inventories made up 92% or 73.6 million euros of total assets (31 March 2022: 79.4% and 45,1 million euros). In the period from 01.04.2022 to 31.03.2023, the Group has purchased four new landspots: residential development projects in Tallinn, Nõmme tee 57 and Manufaktuuri 12 and in Riga, Jurmala Gatve/Imata 8 and commercial development Ganibu Dambis 17, with which 111 new apartments and 21,260 m2 commercial area have been added to the development portfolio.
As of 31 March 2023, cash and cash equivalents accounted for 2.6% or 2.1 million euros of the total assets. As at 31 March 2022, cash and cash equivalents accounted for 13.1% or 7.4 million euros of total assets.
The Group's loan obligations totaled 48.7 million euros as at 31 March 2023, compared to 30.8 million euros as at 31 March 2022. The Group's equity increased by 6.7% over the year to 20.5 million euros. Equity attributable to the owners of the parent increased at the same rate to 20.1 million euros.
Cash Flows
The Group's cash and cash equivalents amounted to 3.8 million euros at the beginning of Q1 2023 (Q1 2022: 10.9 million euros) and to 2.1 million euros as at 31 March 2023 (31 March 2022: 7.4 million euros). The negative cash flow for the period was 1.6 million euros (Q1 2022: 3.7 million euros).
Cash flow from operating activities for Q1 2023 was negative at 1.2 million euros (Q1 2022: -6.9 million euros). Cash flow from operating activities was mostly affected by the growth of inventories, due to the change in inventories the negative cash flow as of Q1 2023 was 3.1 million euros (Q1 2022: 7.4 million euros).
In Q1 2023 cash flow from investments was positive at 21 thousand euros (Q1 2022: 1,136 thousand euros). The largest impact in the comparable period was from repayment of loans granted, the balance of which decreased by 1,0 million euros.
Cash flow from financing activities was negative at 0,5 million euros (Q1 2022: positive 2.1 million euros). In Q1 2023, the Group received more loans than it repaid. The net amount of loans received in three months 2023 was 0,6 million euros (Q1 2022: 2.3 million euros).
Key financials
| in thousands of euros | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | 5,975 | 1,272 |
| Gross profit/-loss | 935 | 106 |
| EBITDA | 560 | -279 |
| Operating profit/-loss | 514 | -314 |
| Net profit/-loss | 139 | 22 |
| Incl net profit/-loss attributable to the owners of parent | 240 | 5 |
| Comprehensive income/-loss | 147 | 175 |
| Incl comprehensive profit/-loss attributable to the owners of parent | 226 | -81 |
| Total assets | 80,104 | 56,831 |
| Incl inventories | 73,610 | 45,128 |
| Total liabilities | 59,634 | 37,648 |
| Incl total loan commitments | 49,142 | 30,687 |
| Total equity | 20,470 | 19,183 |
| Incl equity attributable to the owners of parent | 20,092 | 18,823 |
Key Ratios
| Q1 2023 | Q1 2022 | |
|---|---|---|
| Gross profit margin | 15.6% | 8.3% |
| Operating profit margin | 8.6% | -24.7% |
| EBITDA margin | 9.4% | -21.9% |
| Net profit margin | 2.3% | 1.7% |
| General expense ratio | 7.0% | 33.8% |
| Equity ratio | 25.6% | 33.8% |
| Debt ratio | 61.6% | 54.3% |
| Current ratio | 2.5 | 5.8 |
| Return of equity | 7.3% | 11.0% |
| Return on equity attributable to the owners of the parent | 8.4% | -1.0% |
| Return on assets | 2.1% | 3.5% |
Gross profit margin = gross profit / revenue
Operating profit margin = operating profit / revenue
EBITDA margin = (operating profit + depreciation) / revenue
Net profit margin = net profit / revenue
General expense ratio = (marketing expenses + general and administrative expenses) / revenue
Equity ratio = shareholder's equity / total assets
Debt ratio = interest-bearing liabilities / total assets
Current ratio = current assets / current liabilities
Return on equity = net profit of trailing 12 months / arithmetic average shareholder's equity
Return on equity attributable to the owners of the parent = net profit of trailing 12 months attributable to owners of the parent / arithmetic average
shareholder's equity attributable to owners of the parent
Return on assets = net profit of trailing 12 months / average total assets
Share and Shareholders
The shares of Hepsor AS (HPR1T; ISIN EE3100082306) have been listed in the Main List of Nasdaq Tallinn Stock Exchange since 26 November 2021. The Group has issued 3,854,701 shares with nominal value of 1 euro.
As of 31 March 2023, Hepsor AS had 11,562 shareholders.
Hepsor AS shares held by the members of Management and Supervisory Boards and entities related to them:
| Shareholder | Position | Number of shares | Shareholding % |
|---|---|---|---|
| Henri Laks | Member of Management Board | 498,000 | 12.92 |
| Andres Pärloja | Chairman of Supervisory Board | 997,500 | 25.88 |
| Kristjan Mitt | Member of Supervisory Board | 997,500 | 25.88 |
| Lauri Meidla | Member of Supervisory Board | 507,000 | 13.15 |
| Total | - | 3,000,000 | 77.83 |
Shareholder structure by number of shares held as of 31 March 2023:
| Number of shares | Number of shareholders |
% of shareholders | Number of shares | % of shares |
|---|---|---|---|---|
| 100 001-… | 5 | 0.04% | 3,000,000 | 77.83% |
| 10 001-100 000 | 8 | 0.07% | 214,826 | 5.57% |
| 1001 -10 000 | 51 | 0.44% | 147,898 | 3.84% |
| 101-1000 | 821 | 7.10% | 213,393 | 5.53% |
| 1-100 | 10,677 | 92.35% | 278,584 | 7.23% |
| Total | 11,562 | 100.00% | 3,854,701 | 100.00% |
Between 1 January 2023 to 31 March 31 2023 a total of 1,596 transactions were conducted with the shares of Hepsor AS with 26,683 in the total amount of 241,715 euros. The highest transaction price in the period was 9.3 euros and the lowest was 8.87 euros. The market capitalization of Hepsor AS was 36 million euros as of March 31, 2023, and the equity of the Group amounted to 20 million euros.
Market cap at 31 March 2023 36 million euros
Trading volume and price range of Hepsor AS shares, 12 months (1 April 2022 - 31 March 2023):
Source: Nasdaq Baltic
Change in Hepsor share price in comparison with the benchmark OMX Tallinn index, 12 months (1 April 2022 – 31 March 2023):
Source: Nasdaq Baltic
Consolidated Financial Statements
Consolidated statement of financial position
| in thousands of euros | Note | 31 March 2023 | 31 December 2022 | 31 March 2022 |
|---|---|---|---|---|
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 2,126 | 3,754 | 7,440 | |
| Trade and other receivables | 3 | 1,291 | 1,731 | 946 |
| Current loan receivables | 4 | 0 | 0 | 455 |
| Inventories | 2 | 73,610 | 69,760 | 45,128 |
| Total current assets | 77,027 | 75,245 | 53,969 | |
| Non-current assets | ||||
| Property, plant and equipment | 269 | 314 | 209 | |
| Intangible assets | 7 | 7 | 3 | |
| Financial investments | 2 | 2 | 2 | |
| Investments in associates | 18 | 972 | 1,086 | 0 |
| Non-current loan receivables | 4 | 1,766 | 1,766 | 2,308 |
| Other non-current receivables | 61 | 30 | 340 | |
| Total non-current assets | 3,077 | 3,205 | 2,862 | |
| Total assets | 19 | 80,104 | 78,450 | 56,831 |
| Liabilities and equity | ||||
| Current liabilities | ||||
| Loans and borrowings | 5 | 22,456 | 22,565 | 3,833 |
| Current lease liabilities | 96 | 127 | 92 | |
| Prepayments from customers | 4,366 | 3,054 | 1,856 | |
| Trade and other payables | 6 | 3,481 | 4,008 | 3,537 |
| Total current liabilities | 30,399 | 29,754 | 9,318 | |
| Non-current liabilities | ||||
| Loans and borrowings | 5 | 26,686 | 26,015 | 26,854 |
| Non-current lease liabilities | 68 | 68 | 66 | |
| Other non-current liabilities | 7 | 2,481 | 2,290 | 1,410 |
| Total non-current liabilities | 29,235 | 28,373 | 28,330 | |
| Total liabilities | 19 | 59,634 | 58,127 | 37,648 |
| Equity | ||||
| Share capital | 3,855 | 3,855 | 3,855 | |
| Share premium | 8,917 | 8,917 | 8,917 | |
| Retained earnings | 7,698 | 7,551 | 6,411 | |
| Total equity | 20,470 | 20,323 | 19,183 | |
| incl. total equity attributable to owners of the parent |
20,092 | 19,937 | 18,823 | |
| incl. non-controlling interest | 378 | 386 | 360 | |
| Total liabilities and equity | 80,104 | 78,450 | 56,831 |
| in thousands of euros | Note | Q1 2023 | Q1 2022 |
|---|---|---|---|
| Revenue | 10,19 | 5,975 | 1,272 |
| Cost of sales (-) | 11 | -5,040 | -1,166 |
| Gross profit | 935 | 106 | |
| Marketing expenses (-) | 12 | -71 | -95 |
| Administrative expenses (-) | 13 | -347 | -328 |
| Other operating income | 20 | 10 | |
| Other operating expenses (-) | -23 | -7 | |
| Operating profit (-loss) of the year | 19 | 514 | -314 |
| Financial income | 15.1 | 50 | 509 |
| Financial expenses (-) | 15.2 | -425 | -168 |
| Profit before tax | 139 | 27 | |
| Current income tax | 0 | -5 | |
| Net profit for the year | 139 | 22 | |
| Attributable to owners of the parent | 240 | 5 | |
| Non-controlling interest | -101 | 17 | |
| Other comprehensive income (-loss) | |||
| Changes related to change of ownership | 17 | 0 | 135 |
| Change in value of embedded derivatives with minority shareholders | 8 | 8 | 18 |
| Other comprehensive income (-loss) for the period | 8 | 153 | |
| Attributable to owners of the parent | -14 | -86 | |
| Non-controlling interest | 22 | 239 | |
| Comprehensive income (-loss) for the period | 147 | 175 | |
| Attributable to owners of the parent | 226 | -81 | |
| Non-controlling interest | -79 | 256 | |
| Earnings per share | |||
| Basic (euros per share) | 0.06 | 0.00 | |
| Diluted (euros per share) | 0.06 | 0.00 |
Consolidated statement of changes in equity
| in thousands of euros | Attributable to equity owners of the parent | ||||
|---|---|---|---|---|---|
| Share capital |
Share premium | Retained earnings | Non-controlling interests |
Total equity | |
| Balance of 31 December 2021 | 3,855 | 8,917 | 6,132 | 133 | 19,037 |
| 2022 | |||||
| Net profit/(-loss) for the year | 0 | 0 | 5 | 17 | 22 |
| Other comprehensive income/ (-loss) for the period |
0 | 0 | -86 | 239 | 153 |
| Dividends paid | 0 | 0 | 0 | -29 | -29 |
| Balance of 31 March 2022 | 3,855 | 8,917 | 6,051 | 360 | 19,183 |
| 01 April – 31 December 2022 | |||||
| Net profit/(-loss) for the year | 0 | 0 | 1,391 | -82 | 1,309 |
| Other comprehensive income/ (-loss) for the period |
0 | 0 | -348 | 179 | -169 |
| Balance of 31 December 2022 | 3,855 | 8,917 | 7,094 | 457 | 20,323 |
| 2023 | |||||
| Net profit/(-loss) for the year | 0 | 0 | 240 | -101 | 139 |
| Other comprehensive income/ (-loss) for the period |
0 | 0 | -14 | 22 | 8 |
| Balance of 31 March 2023 | 3,855 | 8,917 | 7,320 | 378 | 20,470 |
Consolidated statement of cash flows
| in thousands of euros | Note | Q1 2023 | Q1 2022 |
|---|---|---|---|
| Net cash flows from (to) operating activities | |||
| Operating profit/(-loss) of the year | 19 | 514 | -314 |
| Adjustments for: | |||
| Depreciation of property, plant and equipment | 46 | 35 | |
| Other adjustments | -2 | -5 | |
| Income tax paid | 0 | -5 | |
| Changes in working capital: | |||
| Change in trade receivables | 440 | -290 | |
| Change in inventories | 16 | -3,131 | -7,428 |
| Change in liabilities and prepayments | 958 | 1,113 | |
| Cash flows from (to) operating activities | -1,175 | -6,894 | |
| Net cash flows to investing activities | |||
| Payments for property, plant and equipment | -2 | -18 | |
| Payments for intangible assets | -1 | 0 | |
| Payments of for acquisition of subsidiaries | -1 | -400 | |
| Proceeds from sale of subsidiaries | 0 | 135 | |
| Interest received | 25 | 17 | |
| Loans granted | 4 | 0 | -176 |
| Loan repayments received | 4 | 0 | 1,129 |
| Other receipts from investing activities | 0 | 449 | |
| Cash flows to investing activities | 21 | 1,136 | |
| Net cash flows from (to) financing activities | |||
| Loans raised | 5 | 4,804 | 4,803 |
| Loan repayments | 5 | -4,242 | -2,479 |
| Interest paid | 1 | -1,004 | -146 |
| Payments of finance lease principal | -2 | -2 | |
| Payments of right to use lease liabilities | -30 | -27 | |
| Dividends paid | 0 | -29 | |
| Payments of for division of a subsidiary | 0 | -18 | |
| Other receipts from financing activities | 0 | -35 | |
| Cash flows from financing activities | -474 | 2,066 | |
| Net cash flow | -1,628 | -3,691 | |
| Cash and cash equivalents at beginning of year | 3,754 | 10,889 | |
| Cashflow in from acquisitions of subsidiaries | 0 | 242 | |
| Increase / decrease in cash and cash equivalents | -1,628 | -3,691 | |
| Cash and cash equivalents at end of year | 2,126 | 7,440 |
Notes to the consolidated interim financial statements
Note 1. General information
The Hepsor AS (hereinafter "the Group") consolidated unaudited interim report for Q1 2023 have been prepared in accordance with IAS 34 Interim Financial Reporting of International Financial Reporting Standards as endorsed in the European Union ("IFRS (EU)"). The Group has consistently applied the accounting policies throughout all periods presented, unless stated otherwise. The interim report for Q1 2023 follow the same accounting principles and methods used in the 2022 audited consolidated financial statements. The current interim financial statements contain the audited financial results for 31.12.2022 and unaudited comparative figures for Q1 2022.
The Group has not made any changes in their critical accounting estimates which may have impact on the consolidated unaudited interim financial statements for Q1 2023.
The Group has not made any changes in the valuation techniques applied for fair value measurement in 2023.
Note 2. Inventories
Inventories are accounted as ready for sale development projects once the project has been granted usage permit. As at 31 March 2023, building permits has been issued to Ulbrokas 30 and Strēlnieku 4b development projects in Riga and a partial building permit has been issued to 14 Meistri development project.
As of 31 March 2023, in ready for sale development projects the Group had 18 (31 December 2022: 26; 31 March 2022: 55) unsold apartments, in Riga 4b Strēlnieku development project.
In addition, a development project is ready for sale in Tallinn, Paevälja 11, for which a usage permit has not been issued. In this project, as of 31 March 2023, there are 22 apartments unsold with real right contracts, 3 of them have been sold with contract under law of obligations and 1 apartment is booked.
As of 31 March 2023, the changes in inventories as stated in cash flow statements have been adjusted by loan interest expense. The capitalized loan interest amounted to 719 thousand euros (31 December 2022: 1,842 thousand euros; 31 March 2022: 464 thousand euros). Further information about interest expenses is provided in Note 16.
Project statuses are classified as following:
| in thousands of euros | 31 March 2023 | 31 December 2022 | 31 March 2022 |
|---|---|---|---|
| A – planning proceedings | 13,355 | 13,236 | 6,908 |
| B – building permit proceedings | 7,209 | 7,272 | 8,475 |
| C – building permit available /construction not yet started | 4,247 | 8,924 | 7,564 |
| D – construction started / sale started | 36,432 | 30,151 | 17,654 |
| E – construction ready for sale | 12,376 | 10,177 | 4,527 |
| Total inventories | 73,610 | 69,760 | 45,128 |
The following development projects are stated as inventories:
| in thousands of euros | 31 March 2023 | 31 December 2022 | 31 March 2022 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Address | Project company | Location | Segment | Acquisition cost |
Project status |
Acquisition cost |
Project status |
Acquisition cost |
Project status |
| Work in progress | |||||||||
| Paevälja 11, Tallinn | Hepsor PV11 OÜ | Estonia | Residential | 3,108 | E | 909 | E | 0 | - |
| Paevälja 11, Tallinn | Hepsor PV11 OÜ | Estonia | Residential | 0 | - | 5,585 | D | 5,055 | D |
| Paldiski mnt 227C, Tallinn |
Hepsor 3Torni OÜ | Estonia | Residential | 4,928 | D | 3,482 | D | 2,680 | C |
| Narva mnt 150, Tallinn |
Hepsor N450 OÜ | Estonia | Residential/ Commercial |
3,643 | A | 3,609 | A | 3,599 | A |
| Manufaktuuri 5, Tallinn |
Hepsor Phoenix 3 OÜ |
Estonia | Residential/ Commercial |
4,430 | B | 4,168 | B | 3,441 | B |
| Manufaktuuri 7, Tallinn |
Hepsor Phoenix 2 OÜ |
Estonia | Residential/ Commercial |
3,838 | D | 3,018 | C | 2,433 | B |
| Tooma 2/Tooma 4 Tallinn |
T2T4 OÜ | Estonia | Commercial | 1,269 | C | 1,248 | C | 1,180 | C |
| Lembitu 4, Tallinn | Hepsor L4 OÜ | Estonia | Commercial | 2,978 | C | 2,954 | C | 2,835 | C |
| Meistri 14, Tallinn | Hepsor M14 OÜ | Estonia | Commercial | 3,476 | D | 3,193 | D | 6,090 | D |
| Alvari 2, Paevälja 9, Tallinn |
Hepsor Fortuuna OÜ |
Estonia | Residential | 1,657 | A | 1,657 | A | 1,659 | A |
| Alvari 1, Tallinn | Hepsor A1 OÜ | Estonia | Residential | 2,022 | A | 2,023 | A | 1,006 | A |
| Kadaka Road 197, Tallinn |
H&R Residentsid OÜ |
Estonia | Residential | 1,185 | A | 1,168 | A | 623 | A |
| Manufaktuuri 12, Tallinn |
Hepsor Phoenix 4 OÜ |
Estonia | Residential | 867 | A | 843 | A | 0 | - |
| Nõmme tee 57, Tallinn |
Hepsor N57 OÜ | Estonia | Residential | 2,396 | D | 1,704 | C | 0 | - |
| Saules alley 2, Riga | Hepsor SA2 SIA | Latvia | Residential | 890 | B | 886 | B | 961 | B |
| Liela 45, Mārupe | Hepsor Mārupe SIA |
Latvia | Residential | 9,293 | D | 7,766 | D | 869 | C |
| Ranka Dambis 5, Riga | Hepsor RD5 SIA | Latvia | Residential | 1,009 | D | 416 | B | 357 | B |
| Ulbrokas 30, Riga | Hepsor U30 SIA | Latvia | Commercial | 0 | - | 0 | - | 2,072 | D |
| Ulbrokas 34, Riga | Hepsor U34 SIA | Latvia | Commercial | 1,188 | B | 1,128 | B | 1,037 | B |
| Braila 23, Riga | Hepsor Jugla SIA | Latvia | Residential | 329 | B | 314 | B | 246 | B |
| Gregora iela 2a, Riga | Hepsor Kvarta SIA | Latvia | Residential | 11,483 | D | 10,125 | D | 4,437 | D |
| Ganību Dambis 17a, Riga |
Hepsor Ganību Dambis SIA |
Latvia | Commercial | 3,963 | A | 3,918 | A | 0 | - |
| Jurmala Gatve, Riia | Hepsor JG SIA | Latvia | Residential | 372 | A | 360 | B | 0 | - |
| -other properties | Estonia | 18 | A | 18 | A | 21 | A | ||
| Total work in progress | 64,342 | 60,492 | 40,601 | ||||||
| Ready for sale real estate development | |||||||||
| Manufaktuuri 22, Tallinn (parking spaces) |
Hepsor Phoenix OÜ |
Estonia | Residential | 16 | E | 16 | ,E | 16 | E |
| Meistri 14, Tallinn | Hepsor Meistri 14 OÜ |
Estonia | Commercial | 4,026 | E | 4,026 | E | 0 | - |
| Strēlnieku 4b, Riga | Hepsor S4B SIA | Latvia | Residential | 1,106 | E | 1,106 | E | 2,549 | E |
| Ulbrokas 30, Riga | Hepsor U30 SIA | Latvia | Commercial | 4,120 | E | 4,120 | E | 0 | - |
| Balozu 9, Riga | Hepsor Bal 9 SIA | Latvia | Residential | 0 | - | 0 | - | 1,912 | E |
| Āgenskalna 24, Riga | Hepsor Agen24 SIA |
Latvia | Residential | 0 | - | 0 | - | 50 | E |
| Total ready for sale real estate development | 9,268 | 9,268 | 4,527 | ||||||
| Total inventories | 73,610 | 69,760 | 45,128 |
Note 3. Trade and other receivables
| in thousands of euros | 31 March 2023 | 31 December 2022 | 31 March 2022 |
|---|---|---|---|
| Trade receivables | |||
| Trade receivables | 347 | 718 | 63 |
| Allowance for doubtful receivables | -10 | -10 | -6 |
| Net trade receivables | 337 | 708 | 57 |
| Prepayments | |||
| Tax prepayment | |||
| Value added tax | 411 | 317 | 455 |
| Other taxes | 0 | 1 | 0 |
| Other prepayments for goods and services | 136 | 279 | 388 |
| Total prepayments | 547 | 597 | 843 |
| Other current receivables | |||
| Interest receivables | 0 | 1 | 36 |
| Other current receivables | 2 | 20 | 10 |
| Escrow account | 405 | 405 | 0 |
| Other current receivables | 407 | 426 | 46 |
| Total trade receivables | 1,291 | 1,731 | 946 |
Note 4. Loans granted
In December 2021, the shareholders of Hepsor P26b OÜ approved the resolution of division of the company, based on which Hepsor P26b OÜ transferred assets to minority shareholders in the amount of 2,098 thousand euros. Of this, 2,080 thousand euros as loan receivable. Additional information is available in Note 8.
| in thousands of euros | Owner of non controlling interest |
Unrelated legal entities |
Related legal entities (Note 20) |
Total |
|---|---|---|---|---|
| 2023 | ||||
| Loan balance as of 31 December 2022 | 0 | 0 | 1,766 | 1,766 |
| Loan balance as of 31 March 2023 | 0 | 0 | 1,766 | 1,766 |
| - non-current portion |
0 | 0 | 1,766 | 1,766 |
| contractual/effective interest rate per annum | - | - | 7% | |
| 2022 | ||||
| Loan balance as of 31 December 2022 | 2,109 | 1,100 | 2,587 | 5,796 |
| Loan granted | 0 | 0 | 176 | 176 |
| Loan collected | -29 | -1,100 | 0 | -1,129 |
| Division of subsidiary | -2,080 | 0 | 0 | -2,080 |
| Loan balance as of 31 March 2022 | 0 | 0 | 2,763 | 2,763 |
| - current portion |
0 | 0 | 455 | 455 |
| - non-current portion |
0 | 0 | 2,308 | 2,308 |
| Loan balance as of 01 April 2022 | 0 | 0 | 2,763 | 2,763 |
| Loan collected | 0 | 0 | -997 | -997 |
| Loan balance as of 31 December 2022 | 0 | 0 | 1,766 | 1,766 |
| - non-current portion |
0 | 0 | 1,766 | 1,766 |
| contractual/effective interest rate per annum | 0%-3% | 0% | 7%-12% |
Note 5. Loans and borrowings
| in thousands of euros | Bank loans | Unrelated legal entities |
Related legal entities (Note 20) |
Total |
|---|---|---|---|---|
| 2023 | ||||
| Loan balance as of 31 December 2022 | 30,129 | 16,145 | 2,306 | 48,580 |
| Received | 4,692 | 61 | 51 | 4,804 |
| Repaid | -3,442 | -300 | -500 | -4,242 |
| Loan balance as of 31 March 2023 | 31,379 | 15,906 | 1,857 | 49,142 |
| - current loan payable |
17,679 | 3,053 | 1,724 | 22,456 |
| - non-current loan payable |
13,700 | 12,853 | 133 | 26,686 |
| Contractual interest rate per annum | 6M Euribor+3.75%-8%; 5.5% |
0-12% | 3%-12% | |
| 2022 | ||||
| Loan balance as of 31 December 2021 | 10,951 | 15,581 | 1,831 | 28,363 |
| Received | 2,844 | 1,959 | 0 | 4,803 |
| Repaid | -607 | -1,872 | 0 | -2,479 |
| Total loan balance as of 31 March 2022 | 13,188 | 15,668 | 1,831 | 30,687 |
| - current loan payable |
2,393 | 1,440 | 0 | 3,833 |
| - non-current loan payable |
10,795 | 14,228 | 1,831 | 26,854 |
| Total loan balance as of 01 April 2022 | 13,188 | 15,668 | 1,831 | 30,687 |
| Received | 24,811 | 1,814 | 464 | 27,089 |
| Repaid | -7,680 | -1,444 | -69 | -9,193 |
| Actual interest rate impact | -190 | -247 | 75 | -362 |
| Compound interest rate | 0 | 354 | 5 | 359 |
| Total loan balance as of 31 December 2022 | 30,129 | 16,145 | 2,306 | 48,580 |
| - current loan payable |
17,040 | 3,352 | 2,173 | 22,565 |
| - non-current loan payable |
13,089 | 12,793 | 133 | 26,015 |
| Contractual interest rate per annum | 6M Euribor +3.75% -8%; 5.5% |
0-12% | 12% | |
| Effective interest rate per annum | 7.6%-12.3% | 5.3%-12.2% | 12,2% |
In March 2021, Hepsor AS signed a three-year 4-million-euro loan agreement with LHV Pank. In July the parties signed an addendum to the loan agreement increasing the loan amount by 2 million euros to 6 million euros. The shares of Hepsor AS held by the members of Management and Supervisory Board of the Group and the shares of Hepsor Finance OÜ were pledged as collateral to secure the loan. The loan agreement states two financial covenants that are measured quarterly:
a) LHV Pank loan and equity ratio of maximum 55%,
b) the ratio of loan commitment taken by the consolidation group to the total assets, cash and cash equivalents and investments to property developments of the consolidation group is a maximum of 70% (seventy percent)
In addition to bank loans, Hepsor N450 OÜ has a joint mortgage in the amount of 2.1 million euros as a loan collateral until the loan obligation to unrelated legal entity has been fulfilled.
As of 31 March 2023, 87% (31 December 2022: 89%; 31 March 2022: 87%) of all loans granted to the Group have been received against the risk of development projects.
| in thousands of euros | Bank loans | Unrelated legal entities |
Related legal entities |
Total |
|---|---|---|---|---|
| Balance as of 31 March 2023 | ||||
| Loans for development projects | 25,460 | 15,906 | 1,383 | 42,749 |
| Loans to headquarters to finance development projects | 5,919 | 0 | 474 | 6,393 |
| Total | 31,379 | 15,906 | 1,857 | 49,142 |
| Balance as of 31 December 2022 | ||||
| Loans for development projects | 24,635 | 16,145 | 2,306 | 43,086 |
| Loans to headquarters to finance development projects | 5,494 | 0 | 0 | 5,494 |
| Total | 30,129 | 16,145 | 2,306 | 48,580 |
| Balance as of 31 March 2022 | ||||
| Loans for development projects | 9,162 | 15,668 | 1,831 | 26,661 |
| Loans to headquarters to finance development projects | 4,026 | 0 | 0 | 4,026 |
| Total | 13,188 | 15,668 | 1,831 | 30,687 |
As of 31 March 2023, the Group had the following bank loans under the following conditions:
| Lender | Country | Loan balance |
Contract term |
Loan limit |
Interest per annum |
Collateral | Cost value of the collateral |
Guarantee given |
|---|---|---|---|---|---|---|---|---|
| LHV Pank AS | Estonia | 4,593 | 2024 | 4,900 | 6M Euribor+3.75% |
Mortgage - Meistri 14, Tallinn | 7,502 | - |
| LHV Pank AS | Estonia | 1,254 | 2025 | 1,300 | 6M Euribor+8% | Mortgage - Lembitu 4, Tallinn | 2,978 | - |
| LHV Pank AS | Estonia | 67 | 2025 | 13,900 | 6M Euribor+5.9% | Mortgage - Paldiski mnt 227c, Tallinn |
4,928 | - |
| LHV Pank AS | Estonia | 0 | 2026 | 3,006 | 6M Euribor+6.5% | Mortgage- Nõmme tee 57, Tallinn | 2,396 | - |
| LHV Pank AS | Estonia | 0 | 2026 | 17,500 | 6M Euribor+8% | Mortgage- Manufaktuuri 7 and Manufaktuuri 12, Tallinn |
4,705 | - |
| Bigbank AS | Latvia | 6,742 | 2025 | 7,000 | 5.5% | Mortgage-Liela 45, Mārupe | 9,293 | - |
| Bigbank AS | Latvia | 682 | 2024 | 1,225 | 6M Euribor+4.5% | Commetcial pledge; Mortgage Strēlnieku 4b, Riga |
1,106 | - |
| Bigbank AS | Latvia | 2,650 | 2024 | 2,650 | 5.5% | Mortgage - Ulbrokas 30, Riga, Commetcial pledge |
4,120 | 500 |
| Bigbank AS | Latvia | 7,476 | 2025 | 7,500 | 5.5% | Mortgage – Gregora 2a, Riga | 11,483 | 423 |
| Bigbank AS | Latvia | 1,985 | 2025 | 2,000 | 6M Euribor+4.5% | Mortgage -Ganību dambis 17A Riga; Commetcial pledge |
3,963 | - |
As of 31 December 2022, the Group had the following bank loans under the following conditions:
| Lender | Country | Loan balance |
Contract term |
Loan limit |
Interest per annum |
Collateral | Cost value of the collateral |
Guaran tee given |
|---|---|---|---|---|---|---|---|---|
| LHV Pank | Estonia | 2,655 | 2023 | 8,605 | 6M Euribor + 4.5% | Mortgage - Paevälja pst 11, Lageloo 3//5, Lageloo 7, Tallinn |
6,495 | - |
| LHV Pank AS | Estonia | 4,483 | 2024 | 4,900 | 6M Euribor + 3.75% | Mortgage - Meistri 14, Tallinn | 7,220 | - |
| LHV Pank AS | Estonia | 1254 | 2025 | 1,300 | 6M Euribor + 8% | Mortgage - Lembitu 4, Tallinn | 2,953 | - |
| LHV Pank AS | Estonia | 0 | 2025 | 13,900 | 6M Eurobor+5.9% | Mortgage-Paldiski mnt 227C, Tallinn | 3,477 | - |
| Bigbank AS | Latvia | 5,687 | 2025 | 7,000 | 5.5% | Mortgage – Liela 45, Mārupe, Riga | 7,766 | - |
| Bigbank AS | Latvia | 828 | 2024 | 1,225 | 6M Euribor + 4.5% | Commercial pledge; Mortgage - Strēlnieku 4b, Riga |
1,106 | - |
| Bigbank AS | Latvia | 2,650 | 2024 | 2,650 | 5.5% | Mortgage - Ulbrokas 30, Riga, Commercial pledge |
4,120 | 500 |
| Bigbank AS | Latvia | 5,957 | 2025 | 7,500 | 5.5% | Mortgage - Gregora 2a, Riga | 10,125 | 423 |
| Bigbank AS | Latvia | 1,985 | 2025 | 2,000 | 6M Euribor+4.5% | Mortgage – Ganibu Dambis 17a, Riga, Commercial pledge |
3,918 | - |
| Lender | Country | Loan balance |
Contract term |
Loan limit |
Interest per annum |
Collateral | Cost value of the collateral |
Guaran tee given |
|---|---|---|---|---|---|---|---|---|
| LHV Pank | Estonia | 815 | 2023 | 8,605 | 6M Euribor + 4.5% | Mortgage - Paevälja pst 11, Lageloo 3//5, Lageloo 7, Tallinn |
5,055 | - |
| LHV Pank AS | Estonia | 2,735 | 2024 | 3,115 | 6M Euribor + 4.75% | Mortgage - Meistri 14. Tallinn | 6,090 | - |
| LHV Pank AS | Estonia | 1,225 | 2022 | 1,300 | 6M Euribor + 8% | Mortgage - Lembitu tn. 4, Tallinn | 2,835 | - |
| Bigbank AS | Latvia | 1,101 | 2024 | 2,500 | 6M Euribor + 4.5% | Commercial pledge; Mortgage - Strelnieku tn. 4b, Riga |
2,549 | - |
| Bigbank AS | Latvia | 1,142 | 2023 | 1,150 | 6% | Mortgage - Balozu 9, Riga | 1,912 | - |
| Bigbank AS | Latvia | 1,023 | 2024 | 2,650 | 5.5% | Mortgage - Ulbrokas 30, Riga, Commercial pledge |
2,072 | 500 |
| Bigbank AS | Latvia | 1,123 | 2025 | 7,500 | 5.5% | Mortgage - Gregora 2a, Riga | 4,437 | 423 |
As of 31 March 2022, the Group had the following bank loans under the following conditions:
Note 6. Trade and other payables
| in thousands of euros | 31 March 2023 | 31 December 2022 | 31 March 2022 |
|---|---|---|---|
| Trade payables | 2,380 | 1,906 | 2,065 |
| Taxes payable | |||
| Value added tax | 354 | 910 | 77 |
| Personal income tax | 28 | 28 | 18 |
| Social security tax | 47 | 51 | 29 |
| Other taxes | 4 | 5 | 28 |
| Total taxes payable | 433 | 994 | 152 |
| Accrued expenses | |||
| Payables to employees | 83 | 109 | 68 |
| Interest payable | 387 | 552 | 238 |
| Other accrued expenses | 36 | 35 | 32 |
| Total accrued expenses | 506 | 696 | 338 |
| Other current payables | |||
| Embedded derivatives (Note 8) | 0 | 8 | 0 |
| Other payables | 162 | 403 | 982 |
| Total other current payables | 162 | 411 | 982 |
| Total trade and other payables | 3,481 | 4,007 | 3,537 |
Note 7. Other non-current liabilities
| in thousands of euros | 31 March 2023 | 31 December 2022 | 31 March 2022 |
|---|---|---|---|
| Non-current interest payables | 1,843 | 1,652 | 1,368 |
| Other non-current payables | 638 | 638 | 42 |
| Total other non-current liabilities | 2,481 | 2,290 | 1,410 |
Note 8. Embedded derivatives
Liabilities assumed by the Group to minority shareholders in accordance with the concluded shareholders' agreements are recognized as embedded derivatives. According to shareholders agreements the profit is shared with minority shareholders in the form as it is agreed in the agreement. Pursuant to the division agreement entered into between the shareholders of Hepsor P26b OÜ the loan granted by the Group to the shareholders was settled with the liability arising from embedded derivatives in the amount of 2,080 thousand euros. More information on loans is provided in Note 4.
As of the end of the reporting period, the group had no liabilities from embedded derivatives, in comparable periods the group had an liablity from embedded derivatives as of 31.12.2022 in the development project Meistri 14, Tallinn in the amount of 8 thousand euros. In 2023, the liablity was reduced by 8 thousand euros through the other comprehensive income.
Note 9. Contingent liabilities
9.1 Contingent liabilities arising from embedded derivatives
In accordance with the shareholders agreements between the Group and minority shareholders of subsidiaries (SPV's), the Group has an obligation as of 31 March 2023 to pay 12,904 thousand euros (31 December 2022: 12,904 thousand euros; 31 March 2022: 8,992 thousand euros) to the minority shareholders upon realization of the business plan. The obligations amounts are estimations calculated based on current business plans of the development projects as of statement of financial position dates. Contingent liabilities are estimated before the full realization of the development projects at each reporting date. As of 31 March 2023, the realization time of contingent liabilities remains between 2023 and 2027.
9.2 Based on the investor agreement signed in December regarding the 4b Strēlnieku development project, the investor will be paid interest depending on how successful the project is upon its completion. In the opinion of the Group's management, there is certain uncertainty arising from the macroeconomic environment both in terms of the interest depending on the success of the project and the time when the payment obligation arises, therefore it is not possible to reliably determine the amount of the interest obligation.
9.3 Group guarantees given
Additional information on the guarantees is provided in Note 5.
Note 10. Revenue
| in thousands of euros | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue from sale of real estate | 5,554 | 1,079 |
| Revenue from project management services | 8 | 47 |
| Revenue from rent | 355 | 111 |
| Revenue from other services | 58 | 35 |
| Total | 5,975 | 1,272 |
Additional information on sales revenue is provided in Note 19.
Note 11. Cost of sales
| in thousands of euros | Q1 2023 | Q1 2022 |
|---|---|---|
| Cost of real estate sold | -4,394 | -994 |
| Personnel expenses (Note 14) | -219 | -121 |
| Interest expenses | -70 | 0 |
| Depreciation | -8 | -8 |
| Other costs | -349 | -43 |
| Total | -5,040 | -1,166 |
Note 12. Marketing expenses
| in thousands of euros | Q1 2023 | Q1 2022 |
|---|---|---|
| Personnel expenses (Note 14) | -28 | -26 |
| Depreciation | -11 | 0 |
| Other marketing expenses | -32 | -69 |
| Total | -71 | -95 |
Note 13. Administrative expenses
| in thousands of euros | Q1 2023 | Q1 2022 |
|---|---|---|
| Personnel expenses | -188 | -222 |
| Depreciation | -27 | -27 |
| Traveling and transport expenses | -18 | -14 |
| Purchased service expenses | -109 | -55 |
| Office expenses | -5 | -10 |
| Total | -347 | -328 |
Note 14. Personnel expenses
| in thousands of euros | Q1 2023 | Q1 2022 |
|---|---|---|
| Salaries | -322 | -278 |
| Social security and other payroll taxes | -113 | -91 |
| Total (Notes 11, 12, 13) | -435 | -369 |
As of 31 March 2023, the Group employed 25 (31 March 2022: 23) people, including including the members of Management and Supervisory Boards. 13 of these people worked in Estonia (31 March 2022: 13) and 12 in Latvia (31 March 2022: 10).
Gross fees paid to the members of Management and Supervisory Boards during the reporting period amounted to 82 thousand euros (Q1 2022: 69 thousand euros).
The Group's definition of labour costs includes payroll expenses (incl. basic salary, additional remuneration, holiday pay and performance pay), payroll taxes, special benefits and taxes calculated on special benefits. The remuneration of the members of the Management Board and the Supervisory Board are also considered to be labour costs.
Note 15. Financial income and expenses
15.1 Financial income
| in thousands of euros | Q1 2023 | Q1 2022 |
|---|---|---|
| Interest incomes | 50 | 60 |
| Other financial incomes | 0 | 449 |
| Total | 50 | 509 |
In first quarter 2022, the Group earned non-recurring financial income from waiver of minority shareholder's loan liability in the amount of 437 thousand euros.
15.2 Financial expenses
| in thousands of euros | Q1 2023 | Q1 2022 |
|---|---|---|
| Interest expenses | -311 | -133 |
| Loss from associates of equity method (Note 18) | -114 | 0 |
| Other financial expenses | 0 | -35 |
| Total | -425 | -168 |
In 2023 borrowing costs in the amount of 719 thousand euros (Q1 2022: 464 thousand euros) have been capitalized as the cost of inventories. Interest expenses of 70 thousand euros have been recognized in the cost of sales in 2023, in the comparable period there were no interest expenses in the cost of sales.
Note 16. Information about line item in the consolidated statement of cash flows
| in thousands of euros | 31 March 2023 | 31 March 2022 |
|---|---|---|
| Inventories | ||
| Reclassification of cash flows from operating activities to financing activities (Note 2) | 719 | 464 |
| Decrease (-)/ increase (+) of change inventories balances (Note 2) | -3,850 | -7,892 |
| Change in inventories | -3,131 | -7,428 |
| Interest paid | ||
| Interest expense in statement of profit or loss and other comprehensive income | -311 | -133 |
| Reclassification of cash flows from operating activities to financing activities (Note 2) | -719 | -464 |
| Decrease (-)/ increase (+) of interest payables | 26 | 451 |
| Interest paid total | -1,004 | -146 |
Note 17. Subsidiaries
In January 2023 the Group aquired a minority stake in Hepsor Bal 9 OÜ, as a result of the transaction, Hepsor Latvia OÜ became the 100% owner of the company.
Changes in Group structure in 2023 and impact on comprehensive income:
| in thousands of euros | Other comprehensive income | ||
|---|---|---|---|
| Comprehensive income attributable to owners of the parent |
Comprehensive income attributable to non controlling interest |
||
| Hepsor Bal 9 OÜ | -11 | 11 | |
| Hepsor Bal 9 SIA | -3 | 3 | |
| Total | -14 | 14 |
Note 18. Shares of associates
At the end of reporting periods, the Group has ownership in the following associates:
| Ownership and voting rights % | |||
|---|---|---|---|
| 31 March 2023 | 31 December 2022 | 31 March 2022 | |
| Hepsor P113 OÜ | 45 | 45 | 45 |
| Hepsor N170 OÜ | 25 | 25 | 25 |
Financial information about associates:
| in thousands of euros | 31 March 2023 | 31 December 2022 | 31 March 2022 | ||||
|---|---|---|---|---|---|---|---|
| Hepsor P113 OÜ |
Hepsor N170 OÜ |
Hepsor P113 OÜ |
Hepsor N170 OÜ |
Hepsor P113 OÜ |
Hepsor N170 OÜ |
||
| Current assets | |||||||
| Cash and cash equivalents | 285 | 20 | 919 | 2 | 25 | 420 | |
| Trade and other receivables | 200 | 7 | 94 | 103 | 11 | 10 | |
| Current loan receivables | 0 | 1,611 | 0 | 1,536 | 0 | 0 | |
| Inventories | 0 | 160 | 0 | 160 | 8,120 | 8,269 | |
| Total current assets | 485 | 1,798 | 1,013 | 1,801 | 8,156 | 8,699 | |
| Non-current assets | |||||||
| Investment property | 13,100 | 0 | 13,100 | 0 | 0 | 0 | |
| Trade and other receivables | 297 | 0 | 297 | 0 | 0 | 0 | |
| Total non-current assets | 13,397 | 0 | 13,397 | 0 | 0 | 0 | |
| Total assets | 13,882 | 1,798 | 14,410 | 1,801 | 8,156 | 8,699 | |
| Current liabilities | |||||||
| Loans and borrowings | 118 | 0 | 158 | 0 | 5,127 | 6,889 | |
| Trade and other payables | 48 | 4 | 286 | 2 | 1,172 | 1,893 | |
| Total current liabilities | 166 | 4 | 444 | 2 | 6,299 | 8,782 | |
| Non-current liabilities | |||||||
| Loans and borrowings | 12,165 | 0 | 12,165 | 0 | 1,795 | 0 | |
| Other non-current liabilities | 294 | 0 | 228 | 0 | 149 | 0 | |
| Total non-current liabilities | 12,459 | 0 | 12,393 | 0 | 1,944 | 0 | |
| Total liabilities | 12,625 | 4 | 12,837 | 2 | 8,243 | 8,782 | |
| Total equity | 1,257 | 1,794 | 1,573 | 1,799 | -87 | -83 | |
| Total liabilities and equity | 13,882 | 1,798 | 14,410 | 1,801 | 8,156 | 8,699 |
The construction of commercial property development project by Hepsor P113 OÜ in Tallinn, Pärnu road 113 was completed in the fourth quarter of 2022. The occupancy of the office building is 100%. As of 31 December 2022, the building was reclassified as an investment property. The investment property is recorded at fair value.
As of 31 December 2022, all 76 apartments and commercial space of 1,488 sqm in the project of an apartment building with commercial space in Tallinn, Narva mnt 170 developed by Hepsor N170 OÜ have been sold under real right contracts.
During the reporting period, the Group received loss from associate company, Hepsor P113 OÜ, by the equity method in the amount of 114 thousand euros (Note 15.2). In the statement of financial position as of 31 March, investments in associates are as follows: Hepsor P113 OÜ 452 thousand euros and Hepsor N170 OÜ 520 thousand euros.
Note 19. Operating segments
The segment reporting is presented in respect of operating and geographical segments.
The Group reports separately information about the following operating segments:
- ✓ residential real estate;
- ✓ commercial real estate;
- ✓ headquarters.
Headquarters are generating revenue from provision of project management services. All personnel expenses are accounted in headquarters.
Geographical segments refer to the location of the real estate. The Group operates in Estonia and Latvia.
Revenue by geographical area:
| in thousands of euros | Q4 2022 | Q4 2021 |
|---|---|---|
| Estonia | 5,762 | 175 |
| Latvia | 213 | 1,097 |
| Total | 5,975 | 1,272 |
Additional information on sales revenue is provided in Note 10.
Segment reporting is presented on the basis of consolidated indicators, where all transactions between the Group companies have been eliminated.
| in thousands of euros | Residential development | Commercial development | Headquarters | Total | |||
|---|---|---|---|---|---|---|---|
| Q1 2023 | Estonia | Latvia | Estonia | Latvia | Estonia | Latvia | |
| Revenue | 5,571 | 0 | 183 | 213 | 8 | 0 | 5,975 |
| incl. revenue from rent | 17 | 0 | 125 | 213 | 0 | 0 | 355 |
| Operating profit/-loss | 1,103 | -29 | 28 | 210 | -540 | -258 | 514 |
| Assets | 26,406 | 25,509 | 14,266 | 9,909 | 3,880 | 134 | 80,104 |
| Liabilities | 14,909 | 20,147 | 9,980 | 5,317 | 6,716 | 2,565 | 59,634 |
| in thousands of euros | Residential development | Commercial development | Headquarters | Total | |||
|---|---|---|---|---|---|---|---|
| Q1 2022 | Estonia | Latvia | Estonia | Latvia | Estonia | Latvia | |
| Revenue | 53 | 943 | 75 | 154 | 47 | 0 | 1,272 |
| incl. revenue from rent | 0 | 38 | 69 | 4 | 0 | 0 | 111 |
| Operating profit/-loss | -23 | 211 | 22 | 27 | -360 | -191 | -314 |
| Assets | 22,982 | 12,125 | 10,873 | 4,112 | 6,246 | 493 | 56,831 |
| Liabilities | 15,513 | 4,770 | 6,892 | 4,091 | 4,970 | 1,412 | 37,648 |
Note 20. Related parties
The Group considers key members of the management (Supervisory and Management Board), their close relatives and entities under their control or significant influence as related parties.
Balances and loan transactions with related parties:
| In thousands of euros | 31 March 2023 | 31 December 2022 | 31 March 2022 |
|---|---|---|---|
| Receivables | |||
| Loans granted (Note 4) | |||
| Associated companies | |||
| Opening balance 01. January | 1,766 | 2,587 | 2,587 |
| Loans granted | 0 | 0 | 0 |
| Loans repaid | 0 | -821 | 0 |
| Balance at the end of period | 1,776 | 1,766 | 2,587 |
| Management and all companies directly or indirectly owned by | |||
| them Loans granted |
0 | 176 | 176 |
| Loan collected | 0 | -176 | 0 |
| Trade and other receivables | |||
| Management and all companies directly or indirectly owned by | 149 | 208 | 2 |
| them Interest receivables |
|||
| Associated companies | 66 | 36 | 228 |
| Management and all companies directly or indirectly owned by | 0 | 0 | 2 |
| Payables | |||
| Prepayments from customers | |||
| Management and all companies directly or indirectly owned by | 560 | 0 | 0 |
| Loans and borrowings (Note 5) | |||
| Associated companies | |||
| Opening balance as at 01. January | 423 | 0 | 0 |
| Loans received | 51 | 464 | 0 |
| Loans repaid | 0 | -41 | 0 |
| Balance at the end of period | 474 | 423 | 0 |
| Management and all companies directly or indirectly owned by | |||
| them Opening balance as at 01. January |
1,883 | 1,831 | 1,831 |
| Loans received | 0 | 80 | 0 |
| Loans repaid | -500 | -28 | 0 |
| Balance at the end of period | 1,383 | 1,883 | 1,831 |
| Trade payables | |||
| Management and all companies directly or indirectly owned by | 2,347 | 1,762 | 1,882 |
| them Interest payables |
|||
| Associated companies | 5 | 2 | 0 |
| Management and all companies directly or indirectly owned by them |
5 | 167 | 92 |
Purchases and sales of goods and services:
| in thousands of euros | Q1 2023 | Q1 2022 |
|---|---|---|
| Sales of goods and services | ||
| Associated companies | 0 | 40 |
| Management and all companies directly or indirectly owned by them | 68 | 19 |
| Total sales of goods and services | 68 | 59 |
| Purchases of goods and services | ||
| Management and all companies directly or indirectly owned by them | 6,672 | 5,499 |
| incl. construction service | 6,627 | 5,460 |
| Interest income earned | ||
| Associated companies | 30 | 45 |
| Management and all companies directly or indirectly owned by them | 0 | 2 |
| Total interest income earned | 30 | 47 |
| Interest expenses incurred | ||
| Associated companies | ||
| Accrued interest | 3 | 0 |
| Management and all companies directly or indirectly owned by them | ||
| Accrued interest | 56 | 57 |
| Interest paid | 218 | 35 |
Note 21. Events after the reporting period
Hepsor Kanada OÜ established a subsidiary Hepsor Kanada SPV 1 OÜ in April. Hepsor Kanada SPV 1 OÜ in turn established a subsidiary in Canada, Hepsor SPV I Ltd
Hepsor Latvia OÜ subsidiary Hepsor RD5 SIA and Latvian affiliate of Bigbank AS signed a 4 million loan agreement on April 2023. The purpose of the three-year loan is to finance the construction of Name Rezidence development project in Riga.
Note 22. Risk management
Risk management is part of the Group's strategic planning and decision-making process. The Group is exposed to a number of risks and uncertainties related to, among other factors, the business and financial risks. The materialisation of any such risks could have a material adverse effect on the Group's business, financial condition, results of operations and future prospects. The Group's risk management process is based on the premise that the Group's success depends on constant monitoring, accurate assessment, and effective management of risks. The Group's management monitors the management of these risks.
Strategic risk
The Group's strategic risks are risks that can significantly impact the execution of its business strategies and ability to achieve the objectives. Such risks are impacted by changes in political environment and market demand as well as microeconomic developments. While the risks can have negative impact on the Group's business, they can also create new business opportunities. The Group carefully selects the new development projects and monitors the market trends in order to adjust its strategy when significant changes occur.
Market risk
The Group is exposed to price risk resulting from decline in the market values of the Group's real estate development projects or increase in input prices. There can be no guarantee that the Group will be able to sell its development projects in future with prices that are similar or higher than the expected market value of these projects. The Group cannot ensure it is able to sell its development projects with expected prices could have an unfavourable impact on the Group's statement of financial position and may have a material adverse effect on the Group's business, financial condition, prospects and results of operations and execution of its strategy. At present it is not possible to assess the extent of any such potential changes.
The Group's income and operating cash flows are substantially independent of changes in market interest rates. The Group actively uses external and internal borrowings to finance its real estate development projects in Estonia and Latvia. A project's external financing is either in the form of a bank loan or investor loan from minority interest holders denominated in Euro.
The interest rates of investor loans are usually fixed, ie interest rates are not floating and do not depend on Euribor.
The Group's bank loans have both fixed and floating interest rates based on Euribor. The management constantly monitors the Group's exposure to interest rate risk which arises from upward movement in Euribor for loans with floating interest rates.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations towards the Group under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities such as trade receivables from rental property and from its financing activities, including deposits with banks and other financial instruments.
In order to minimize credit risk, the Group is only dealing with creditworthy counterparties and deposits cash in banks wellrecognized banks in Estonia and Latvia. If such rating is not available, the Group uses other publicly available financial information and its own trading records to rate its major customers.
The Group is in real estate development business and upon sale of completed property the Group enters into notarized agreement with the buyer. Since most of the transactions are ensured either with money deposited in the notary's deposit account or a bank loan, the Group is not exposed to material credit risk from trade receivables.
Liquidity risk
The Group's liquidity represents its ability to settle its liabilities to creditors on time. A careful management of liquidity and refinancing risks implies maintaining the availability of funding through an adequate amount of committed credit facilities. Due to the nature of the Group's business activities, the Group actively uses external and internal funds to ensure that timely resources are always available to cover capital needs.
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The Group mitigates refinancing risk by monitoring liquidity positions, analyzing different financing options on an ongoing basis and negotiating with financing parties over the course of financing.
Capital risk
The core purpose of the Group's capital risk management is to ensure the most optimal capital structure to support the sustainability of the Group's business operations and shareholders' interests.
The Group uses the debt-to-equity ratio to monitor capital structure. The debt-to-equity ratio is calculated as the ratio of net debt to total capital. The management considers the Group's capital structure optimal.
Geopolitical risk
Russia's military invasion and attack on Ukraine's independence, which began on 24 February 2022, is affecting businesses around the world and the length, impact and outcome of the ongoing military conflict remain unclear. The initial effects of the war have partially subsided – commodity prices have stabilized as a result of the development of new supply chains, energy prices and inflation are also returning to previous levels however, as a negative effect, economic growth has slowed down, and we expect the monetary policy tightened by central banks to continue for a longer period. Although the economic environment is stabilizing, there is still the risk of an escalation of a military conflict, which can have a wide impact on the Group daily activities if the risk materializes.
Management Board's Confirmation
The Management Board confirms that the unaudited interim report for first quarter of 2023, which is comprised of the management report and the interim financial statements, provides a true and fair view of the Group's operations, financial position and results of operations, and describes the significant risks and uncertainties the Group faces.
Henri Laks Member of Management Board Tallinn, 10 May 2023