Quarterly Report • May 11, 2022
Quarterly Report
Open in ViewerOpens in native device viewer
Baložu 9, Riga
| 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 2022-31 March 2022 |
| Financial year: | 01 January 2022-31 December 2022 |
| 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 Development Projects6 | |
| Group Structure12 | |
| Main Events13 | |
| Employees 13 | |
| Operating Results 14 | |
| Share and Shareholders16 | |
| Consolidated Financial Statements 18 | |
| Note 1. General information 22 | |
| Note 2. Inventories22 | |
| Note 3. Trade and other receivables24 | |
| Note 4. Subsidiaries24 | |
| Note 5. Shares of associates25 | |
| Note 6. Loans granted 26 | |
| Note 7. Loans and borrowings27 | |
| Note 8. Trade and other payables29 | |
| Note 9. Other non-current liabilities 29 | |
| Note 10. Embedded derivatives 29 | |
| Note 11. Deferred Income tax 30 | |
| Note 12. Contingent liabilities30 | |
| Note 13. Revenue 30 | |
| Note 14. Cost of sales31 | |
| Note 15. Administrative expenses31 | |
| Note 16. Financial income and expenses 31 | |
| Note 17. Information about line item in the consolidated statement of cash flows 32 | |
| Note 18. Operating segments32 | |
| Note 19. Related parties33 | |
| Note 20. Risk management 34 | |
| Management Board's Confirmation36 |
| RESIDENTIAL DEVELOPMENT PROJECTS FOR SALE |
Total number of apartments |
Apartments sold |
Apartments sold 2022 |
Apartments sold % |
Apartments available |
|---|---|---|---|---|---|
| Strelnieku 4b | 54 | 19 | 6 | 35% | 35 |
| Balozu 9 | 18 | 18 | $\circ$ | 100% | $\circ$ |
| Paevälja Hoovimajad | 96 | 75 | 26 | 78% | 21 |
| Priisle Kodu | 76 | 76 | 4 | 100% | $\circ$ |
| Kuldigas Parks | 116 | 40 | 27 | 34% | 76 |
| Marupes Darzs | 92 | 38 | 38 | 41% | 54 |
| Total | 452 | 266 | 101 | 59% | 186 |
| Started in 2021 | Total under construction | To be started in 2022 | |||
|---|---|---|---|---|---|
| $\vert$ 212 | apartments | 306 | apartments $\frac{1}{2}$ 3,645 m 2 commercial area $\frac{1}{2}$ 12,572 m 2 commercial area $\frac{1}{2}$ 16,250 m 2 commercial area |
383 | apartments |
| Project | Assumption |
|---|---|
| strelnieku 4b | all apartments sold |
| Priisle Kodu | all apartments and commercial premises sold |
| 3alozu 9 | all apartments sold |
| Paevälja Hoovimajad | I phase construction completed and all I phase apartments sold |
| Büroo113 office building | Sold or revalued to fair value using DCF method |
| Grüne office building | Sold or revalued to fair value using DCF method |
| JIbrokas 30 stock-office | Sold or revalued to fair value using DCF method |
Consolidated revenues of Hepsor for Q1 2022 amounted to 1.3 million euros and net profit to 0.02 million euros (including 0.005 million euros attributable to the owners of the parent company). The Group's revenues and profitability are directly dependent on the development cycle of projects, which lasts approximately 24 to 36 months. Sales revenue is only generated at the end of this cycle. Therefore, more projects may end in one quarter than in another and quarters may differ significantly in terms of revenue. In competed development projects, we sold 8 apartments at Strelnieku 4b, Riga in Q1 2022.
The management of Hepsor still forecasts a turnover of 28 million euros in 2022 and profit of 3.3 million euros (including 3.1 million euros attributable to the owners of the parent company) despite the war in Ukraine that was launched in February 2022 and its impact on the global economy.
At the beginning of 2022, the development project at Baložu 9 (18 apartments) was completed in Riga. All the homes in this project had found new owner even before the construction was completed. This year, Priisle Kodu (76 apartments plus commercial space) and the first stage of Paevälja Hoovimajad (48 apartments) will be completed in Tallinn. The sales revenue of these projects will be reflected in the financial results of the following quarters of 2022.
Three commercial development projects will be completed in Tallinn and Riga this year. The first tenants have moved into Grüne Maja, an office building following the green thinking concept. The construction of the Büroo 113 office building, which has already reached 100% occupancy, will be completed by the end of 2022. The latter is the first time that we use green solutions (geothermal heating and cooling, rainwater use, energy-efficient architecture, excellent indoor climate, solar energy, etc.) in a city centre highrise. In 2022, a stock-office commercial development project will be completed at Ulbrokas 30, Riga, which has also reached 100% occupancy.
In May 2022, we sold the last apartment in the Agenskalna 24 development project in Riga. Therefore, the number of development projects in the portfolio dropped to 25. The apartments sold in 2022 reduced the potential turnover to 377 million euros.
Despite the complicated construction market due to the war in Ukraine, supply chain challenges and rising prices, we signed an 8.1 million euro construction contract for the construction of four apartment buildings with 92 apartments in Marupe, near Riga. As of May 2022, a total of 38 booking agreements and contracts under the law of obligations have been sold in the Marupe development project. The project will be completed in 2023. The sale and construction of Hepsor's second largest residential development project, Kuldigas Parks (116 apartments) in Riga, is also proceeding according to plan and 34% of the apartments have been sold. The project will be completed in 2023.
In Estonia, we will start the construction and sale of homes at Ojakalda and Manufaktuuri 7 in 2022. The two projects have a total of 255 homes. In addition to the construction of the Marupe development project, which has already started in Riga this year, we also plan to start the construction of the Ranka Dambis residential development project in Riga (36 apartments). In 2022, a total of 383 apartments are planned to be built in Tallinn and Riga, including 128 in Riga.
As of the date of this report, the market for new developments is still active both in Riga and Tallinn, and interest in new homes and commercial premises is still high. At the same time, it is currently difficult to assess the impact of rapid inflation, the European Central Bank's monetary policy, rising energy prices and the Ukrainian refugee crisis on the economy and consumer behavior in the near future.
As at 31 March 2022 the Group had 26 active projects in different development phases (31 March 2021: 21 projects) ja 177,000 sqm of sellable area (31 March 2021: 131,000 sqm).
Distribution of development portfolio between different development phases as at 3 May 2022:
Construction completed and development project not sold (as at 3 May 2022):
| Project: | Baložu 9 Hepsor BAL9 SIA |
|---|---|
| Address: | Baložu 9, Riga |
| Apartments: | 18 |
| Project completed: | I quarter 2022 |
| Website: | hepsor.lv/balozu9 |
Development projects recorded under construction completed and not sold included the share of unsold apartments of Strelnieku 4b apartment building in Riga that was completed in 2020 (35 apartments) and the apartments of Baložu 9 for which the real right contracts have not yet been signed (9 apartments). The aim of the Group is to sell all apartments in 2022.
Residential development projects the construction of which has started (as at 3 May 2022):
| Priisle Kodu Hepsor N170 OÜ |
|
|---|---|
| Priisle 1a, Tallinn | |
| 76 | |
| IV quarter 2020 | |
| II quarter 2022 | |
| hepsor.ee/priislekodu/?lang=en | |
| Project: | Paevälja Hoovimajad Hepsor PV11 OÜ |
|
|---|---|---|
| Address: | Paevälja 11, Lageloo 7, Tallinn | |
| Apartment: | 96 | |
| Start of construction: | IV quarter 2021 | |
| Estimated completion: | I phase IV quarter 2022 II phase beginning of 2023 |
|
| Website: | hepsor.ee/paevalja/en |
| Project: | Kuldigas Park Kvarta SIA |
|
|---|---|---|
| Address: | Gregora iela 2a, Riga | |
| Apartments: | 116 | |
| Start of construction: | IV quarter 2021 | |
| Estimated completion: | II quarter 2023 | |
| Website: | hepsor.lv/kuldigasparks/en/ |
| Project: | Büroo 113 Hepsor P113 OÜ |
|
|---|---|---|
| Address: | Pärnu mnt 113, Tallinn | |
| Leasable area: | 3,843 m2 | |
| Occupancy: | 100% | |
| Start of construction: | III quarter 2020 | |
| Estimated completion: | IV quarter 2022 | |
| Website: | byroo113.ee | |
| Project: | Grüne Büroo Hepsor M14 OÜ |
||
|---|---|---|---|
| Address: | Meistri 14, Tallinn | ||
| Leasable area: | 3,597 m2 | ||
| Occupancy: | 54% | ||
| Start of construction: | IV quarter 2020 | ||
| Estimated completion: | I-IV quarter 2022 | ||
| Website: | gryne.ee/en/ |
| Project: | StockOffice U30 Hepsor U30 SIA |
|
|---|---|---|
| Address: | Ulbrokas 30, Riga | |
| Leasable area: | 3,645 m2 | |
| Occupancy: | 100% | |
| Start of construction: | III quarter 2021 | |
| Estimated completion: | III quarter 2022 | |
| Website: | hepsor.lv/stokofissu30/en/ | |
| Project: | Priisle Kodu (retail area) Hepsor N170 OÜ |
|
|---|---|---|
| Address: | Priisle 1a, Tallinn | |
| Leasable area: | 1,487 m2 | |
| Occupancy: | 100% | |
| Start of construction: | IV quarter 2020 | |
| Estimated completion: | II quarter 2022 | |
| Website: | hepsor.ee/priislekodu/?lang=en |
| Project: | Marupes Darzs Hepsor Marupe SIA |
|---|---|
| Address: | Liela 45, Marupe, Riga area |
| Apartments: | 92 |
| Est. start of construction: II quarter 2022 | |
| Estimated completion: | II quarter 2023 |
| Website: | hepsor.lv/marupesdarzs/en/ |
| Project: | Ojakalda kodud Hepsor 3TORNI OÜ |
|---|---|
| Address: | Paldiski mnt 227c, Tallinn |
| Apartments: | 101 |
| Est. start of construction: II quarter 2022 | |
| Estimated completion: | 2023 |
| Website: | hepsor.ee/ojakalda/en/ |
| Project: | Manufaktuuri quarter Hepsor Phoenix 2 OÜ |
|---|---|
| Address: | Manufaktuuri 7, Tallinn |
| Apartments: | 154 |
| Est. start of construction: III quarter 2022 | |
| Estimated completion: | 2024–2025 |
| Website: | hepsor.ee/manufaktuur/m7/en/ |
| Project: | Peterburi road business quarter T2T4 OÜ |
|
|---|---|---|
| Address: | Tooma 2/4, Tallinn | |
| Leasable area: | up to 10,000 m2 | |
| Est. start of construction: 2022–2023 | ||
| Website: | hepsor.ee/en/project/peterburi-tee-arikvartal/ |
| Project: | Ranka Dambis Hepsor RD5 SIA |
|---|---|
| Address: | Ranka Dambis 5, Riga |
| Apartment #: | 36 |
| Est. start of construction: IV quarter 2022 | |
| Estimated completion: | 2024 |
* Picture shown is for illustration purpose
* Picture shown is for illustration purpose
| Project: | StockOffice U34 Hepsor U34 SIA |
|---|---|
| Address: | Ulbrokas 34, Riga |
| Leasable area: | 8,373 m2 |
| Est. start of construction: IV quarter 2022 | |
| Estimated completion: | 2024 |
| Project name | Number of apartments |
Number of apartments sold* |
Share of apartments sold % |
Number of unsold apartments |
Share of unsold apartments % |
|---|---|---|---|---|---|
| Strelnieku 4b | 54 | 19 | 35 | 35 | 65 |
| Priisle Kodu | 76 | 76 | 100 | 0 | 0 |
| Paevälja Hoovimajad | 96 | 75 | 78 | 21 | 22 |
| Balozu 9 | 18 | 18 | 100 | 0 | 0 |
| Kuldigas Park | 116 | 40 | 34 | 76 | 66 |
| Marupes Darzs | 92 | 38 | 41 | 54 | 59 |
| Total | 452 | 266 | 59 | 186 | 41 |
* Number of sold apartments includes paid bookings, contracts under law of obligation and real right contracts.
In 2020–2021, the Group started the development of four commercial properties (12,572 sqm in total), all of which will be completed in 2022. In 2022, the Group will start developing stock-office commercial real estate in Riga at Ulbrokas 34.
| Occupancy of commercial development projects under construction as at 3 May 2022: | |||
|---|---|---|---|
| Project name | Rentable area sqm |
Occupancy m2 |
Occupancy % |
Vacancy m2 |
Vacancy % |
|---|---|---|---|---|---|
| Priisle 1a retail space | 1,487 | 1,487 | 100 | 0 | 0 |
| Ulbokras 30 stock-office | 3,645 | 3,645 | 100 | 0 | 0 |
| Büroo113 | 3,843 | 3,843 | 100 | 0 | 0 |
| Grüne Office | 3,597 | 2,059 | 57 | 1,538 | 43 |
| Total | 12,572 | 11,034 | 88 | 1,538 | 12 |
As of 31 March 2022, the Group was comprised of parent company, 34 subsidiaries and 2 associated companies (31 March 2021: parent company, 26 subsidiaries, 2 associated companies). Tatari 6a Arenduse OÜ is reported as financial investment.
At the beginning of 2022, the following structural changes have taken place in the Group:
As of 31 March 2022, the Group employed 23 (31 March 2021: 15) people, including 13 in Estonia and 10 in Latvia.
Total labour cost for the reporting period amounted to 369 thousand euros (Q1 2021: 164 thousand euros). Gross fees paid to the members of Management and Supervisory Boards during the reporting period amounted to 69 thousand euros (Q1 2021: 12 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.
The Group's sales revenue in Q1 2022 was 1.3 million euros (compared with 2.9 million euros in Q1 2021), of which 1.1 million euros (Q1 2021: 0.3 million euros) or 86% (Q1 2021: 12%) was earned from Latvia.
Compared with the same quarter year earlier, sales revenue in Q1 2022 decreased by 56%. The decrease in revenue in Q1 2022 was mainly due to a smaller number of completed projects, which resulted in fewer projects available for sale.
In Q1 2022, the Group sold a total of 8 apartments in Latvia, Strelnieku 4b. A year earlier, 3 apartments were sold in Latvia and 16 in Estonia. 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 158 thousand euros, or 12% of the Group's total sales revenue.
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.
The Group's operating loss for Q1 2022 amounted to 314 thousand euros (compared with operating profit of 259 thousand euros in Q1 2021). The Group's net profit for the reporting period amounted to 22 thousand euros (compared with 173 thousand euros in Q1 2021), of which the profit attributable to the owners of the parent amounted to 5 thousand euros (50 thousand euros in Q1 2021), while the profit to non-controlling interest was 17 thousand euros (123 thousand euros in Q1 2021).
The increase in operating expenses and change in the structure of sales revenue had the most impact on the Group's operating profit. Compared to 95% in 2021, the Group's revenues from the sale of real estate dropped to 85% in Q1 2022. The share of rental income in sales revenue increased therefore decreasing profit margins.
The Group's cash and cash equivalents amounted to 10.9 million euros at the beginning of the Q1 2022 (Q1 2021: 4.2 million
euros) and to 7.4 million euros at the end of the Q1 2022 (Q1 2021: 2.4 million euros). The negative cash flow for the period was 3.7 million euros (Q1 2021: 1.8 million euros).
Cash flow from operating activities for Q1 2022 was negative at 6.9 million euros (Q1 2021: 5.9 million euros). Cash flow from operating activities was mostly affected by the growth in the portfolio of development projects, due to the change in inventories the negative cash flow in Q1 2022 was 7.4 million euros (Q1 2021: 5.9 million euros).
Cash flow from investments was positive at 1.1 million euros in Q1 2022 (Q1 2021: 0.2 million euros). The largest impact was from repayment of loans granted, the balance of which decreased by 1.1 million euros (Q1 2021: 0 euros).
Cash flow from financing activities was positive at 2.1 million euros (Q1 2021: 4.4 million euros). In Q1 2022, the Group received more loans than it repaid. The net amount of loans received in Q1 2022 was 2.3 million euros (Q1 2021: 4.7 million euros).
| % | I quarter 2022 | I quarter 2021 |
|---|---|---|
| Gross profit margin | 8.3% | 14.7% |
| Operating profit margin | -24.7% | 9.0% |
| EBITDA margin | -21.9% | 10.5% |
| Net profit margin | 1.7% | 6.0% |
| General expense ratio | 33.8% | 6.4% |
| Equity ratio | 33.8% | 27.7% |
| Debt ratio | 54.3% | 61.3% |
| Current ratio | 5.8 | 5.3 |
| Return of equity (adjusted) | 16.5% | 34.5% |
| Return on equity attributable to the owners of the parent (adjusted) | -1% | 25% |
| Return on assets | 3.5% | 8.9% |
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 (adjusted) = net profit of trailing 12 months / arithmetic average shareholder's equity (except for net capital raised through initial public offering)
Return on equity attributable to the owners of the parent (adjusted) = net profit of trailing 12 months attributable to owners of the parent / arithmetic average shareholder's equity attributable to owners of the parent (except for net capital raised through initial public offering)
Return on assets = net profit of trailing 12 months / average total assets
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 at 31 March 2022 Hepsor AS had 12,710 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 at 31 March 2021:
| 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 | 0.06% | 210,626 | 5.46% |
| 1001 -10 000 | 53 | 0.42% | 145,892 | 3.78% |
| 101-1000 | 739 | 5.81% | 194,814 | 5.05% |
| 1-100 | 11,905 | 93.67% | 303,369 | 7.87% |
| Total | 12,710 | 100.00% | 3,854,701 | 100.00% |
Between 1 January 2022 and 31 March 2022, a total of 7,785 transactions were conducted with the shares of Hepsor AS with 195,932 shares in the total amount of 2.5 million euros. The highest price for the period was 14.2 euros and the lowest price 11.7 euros. As at 31 March 2021 the market capitalization of Hepsor AS was 46 million euros and the Group's equity amounted to 19 million euros.
In accordance with the Group's strategy, the earned profits will be reinvested in the implementation of new and existing projects. The Group's shareholders may decide to pay dividends or establish a long-term dividend policy in the future, if the Group does not have the opportunity to reinvest its profits in projects with a sufficient return on equity.
| in thousands of euros | Note | 31.03.2022 | 31.12.2021 | 31.03.2021 |
|---|---|---|---|---|
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 7,440 | 10,889 | 2,406 | |
| Trade and other receivables | 3 | 946 | 652 | 861 |
| Current loan receivables | 6 | 455 | 2,388 | 126 |
| Inventories | 2 | 45,128 | 37,237 | 29,235 |
| Total current assets | 53,969 | 51,166 | 32,628 | |
| Non-current assets | ||||
| Property, plant and equipment | 209 | 229 | 448 | |
| Intangible assets | 3 | 0 | 0 | |
| Financial investments | 2 | 402 | 0 | |
| Investments in associates | 0 | 0 | 2 | |
| Non-current loan receivables | 6 | 2,308 | 3,408 | 1,540 |
| Other non-current receivables | 340 | 140 | 67 | |
| Total non-current assets | 2,862 | 4,179 | 2,057 | |
| Total assets | 18 | 56,831 | 55,345 | 34,685 |
| Liabilities and equity | ||||
| Current liabilities | ||||
| Loans and borrowings | 7 | 3,833 | 5,501 | 3,075 |
| Current lease liabilities | 92 | 123 | 138 | |
| Prepayments from customers | 1,856 | 1,164 | 1,031 | |
| Trade and other payables | 8 | 3,537 | 5,539 | 1,919 |
| Total current liabilities | 9,318 | 12,327 | 6,163 | |
| Non-current liabilities | ||||
| Loans and borrowings | 7 | 26,854 | 22,862 | 17,791 |
| Non-current lease liabilities | 66 | 66 | 267 | |
| Other non-current liabilities | 9 | 1,410 | 1,053 | 791 |
| Deferred income tax liability | 11 | 0 | 0 | 71 |
| Total non-current liabilities | 28,330 | 23,981 | 18,920 | |
| Total liabilities | 18 | 37,648 | 36,308 | 25,083 |
| Equity | ||||
| Share capital | 3,855 | 3,855 | 6 | |
| Share premium | 8,917 | 8,917 | 3,211 | |
| Retained earnings | 6,411 | 6,265 | 6,385 | |
| Total equity | 19,183 | 19,037 | 9,602 | |
| incl. total equity attributable to owners of the parent | 18,823 | 18,904 | 9,504 | |
| incl. non-controlling interest | 360 | 133 | 98 | |
| Total liabilities and equity | 56,831 | 55,345 | 34,685 |
| in thousands of euros | Note | Q1 2022 | Q1 2021 |
|---|---|---|---|
| Revenue | 13,18 | 1,272 | 2,889 |
| Cost of sales (-) | 14 | -1,166 | -2,464 |
| Gross profit | 106 | 425 | |
| Marketing expenses (-) | -95 | -48 | |
| Administrative expenses (-) | 15 | -328 | -125 |
| Other operating income | 10 | 20 | |
| Other operating expenses (-) | -7 | -13 | |
| Operating profit (-loss) of the year | 18 | -314 | 259 |
| Financial income | 16 | 509 | 34 |
| interest income | 60 | 24 | |
| other financial income | 449 | 10 | |
| Financial expenses (-) | 16 | -168 | -109 |
| interest expenses (-) | -133 | -87 | |
| loss from associate (-) | 0 | -2 | |
| other financial expenses (-) | -35 | -20 | |
| Profit before tax | 27 | 184 | |
| Current income tax | 10 | -5 | 0 |
| Deferred income tax | 11 | 0 | -11 |
| Net profit for the year | 22 | 173 | |
| Attributable to owners of the parent | 5 | 50 | |
| Non-controlling interest | 17 | 123 | |
| Other comprehensive income (-loss) | |||
| Changes related to change of ownership | 4 | 135 | 0 |
| Change in value of embedded derivatives with minority shareholders | 10 | 18 | -90 |
| Other comprehensive income (-loss) for the period | 153 | -90 | |
| Attributable to owners of the parent | -86 | 0 | |
| Non-controlling interest | 239 | -90 | |
| Comprehensive income (-loss) for the period | 175 | 83 | |
| Attributable to owners of the parent | -81 | 50 | |
| Non-controlling interest | 256 | 33 | |
| Earnings per share | |||
| Basic (euros per share) | 0.00 | 0.01 | |
| Diluted (euros per share) | 0.00 | 0.01 |
| in thousands of euros | Attributable to equity owners of the parent | ||||
|---|---|---|---|---|---|
| Share capital | Share premium | Retained earnings |
Non-controlling interests |
Total equity | |
| Balance at 01 January 2021 | 6 | 3,211 | 6,237 | 65 | 9,519 |
| Net profit for the year | 0 | 0 | 50 | 123 | 173 |
| Other comprehensive income/(-loss) for the period |
0 | 0 | 0 | -90 | -90 |
| Balance at 31 March 2021 | 6 | 3,211 | 6,287 | 98 | 9,602 |
| Balance at 01 January 2022 | 3,855 | 8,917 | 6,132 | 133 | 19,037 |
| Net profit 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 at 31 March 2022 | 3,855 | 8,917 | 6,051 | 360 | 19,183 |
| in thousands of euros | Note | Q1 2022 | Q1 2021 |
|---|---|---|---|
| Net cash flows from (to) operating activities | |||
| Operating profit/(-loss) of the year | 18 | -314 | 259 |
| Adjustments for: | |||
| Depreciation of property, plant and equipment | 35 | 44 | |
| Other adjustments | -5 | 0 | |
| Income tax paid | 10 | -5 | -59 |
| Changes in working capital: | |||
| Change in trade receivables | -290 | -225 | |
| Change in inventories | 2 | -7,428 | -5,898 |
| Change in liabilities and prepayments | 1,113 | -45 | |
| Cash flows from (to) operating activities | -6,894 | -5,924 | |
| Net cash flows to investing activities | |||
| Payments for property, plant and equipment | -18 | 0 | |
| Payments of for acquisition of subsidiaries | 4 | -400 | 0 |
| Proceeds from sale of subsidiaries | 4 | 135 | 0 |
| Interest received | 17 | 1 | |
| Loans granted | 6 | -176 | -239 |
| Loan repayments received | 6 | 1,129 | 0 |
| Other receipts from investing activities | 16 | 449 | 10 |
| Cash flows to investing activities | 1,136 | -228 | |
| Net cash flows from (to) financing activities | |||
| Loans raised | 7 | 4,803 | 8,677 |
| Loan repayments | 7 | -2,478 | -3,971 |
| Interest paid | 17 | -146 | -263 |
| Payments of finance lease principal | -3 | -2 | |
| Payments of right to use lease liabilities | -27 | -33 | |
| Dividends paid | -29 | -37 | |
| Fees paid on division of subsidiaries | 10 | -18 | 0 |
| Other receipts from financing activities | 16 | -35 | -20 |
| Cash flows from financing activities | 2,067 | 4,351 | |
| Net cash flow | -3,691 | -1,801 | |
| Cash and cash equivalents at beginning of year | 10,889 | 4,207 | |
| Cashflow in from acquisitions of subsidiaries | 242 | 0 | |
| Increase / decrease in cash and cash equivalents | -3,691 | -1,801 | |
| Cash and cash equivalents at end of year | 7,440 | 2,406 |
The Hepsor AS (hereinafter "the Group") consolidated unaudited interim report for Q1 2022 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 2022 follows the same accounting principles and methods used in the 2021 audited consolidated financial statements. The current interim financial statements contain the audited financial results for 2021 and unaudited comparative figures for Q1 2021.
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 2022.
The Group has not made any changes in the valuation techniques applied for fair value measurement in Q1 2022.
Inventories are accounted as ready for sale development projects once the project has been granted usage permit.
As at 31 March 2022 the Group had 55 (31 December 2021: 45; 31 March 2021: 53) unsold apartments in Riga, including 1 apartment in Agenskana 24 development project, 36 apartments in Strelnieku 4b development project and 18 apartments in Balozu 9 development project. In Balozu 9 development project all 18 apartments have been sold under the law of obligation.
As at 31 March 2022 the changes in inventories as stated in cash flow statements have been adjusted by loan interest expense. The capitalized loan interest amounted to 464 thousand euros (31 December 2021: 1,518 thousand euros; 31 March 2021: 434 thousand euros). Further information about financial expenses is provided in Note 17.
| in thousands of euros | 31.03.2022 | 31.12.2021 | 31.03.2021 |
|---|---|---|---|
| A – planning proceedings | 6,908 | 6,877 | 3,581 |
| B – building permit proceedings | 8,475 | 7,901 | 8,249 |
| C – building permit available /construction not yet started | 7,564 | 7,150 | 6,197 |
| D – construction started / sale started | 17,654 | 11,985 | 6,536 |
| E – construction ready for sale | 4,527 | 3,324 | 4,672 |
| Total inventories | 45,128 | 37,237 | 29,235 |
Project statuses are classified as following:
The following development projects are stated as inventories:
| in thousands of euros | 31.03.2022 31.12.2021 |
31.03.2021 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Address | Project company | Location | Segment | Acquisi | Project | Acquisi | Project | Acquisi | Project |
| Work in progress | tion cost | status | tion cost | status | tion cost | status | |||
| Mõigu Road 11, Rae | Hepsor Peetri OÜ | Estonia | Residential | 0 | - | 0 | - | 500 | E |
| Pirita Road 26b, Tallinn | Hepsor P26B OÜ | Estonia | Residential | 0 | - | 13 | E | 4,101 | D |
| Paevälja 11, Tallinn | Hepsor PV11 OÜ | Estonia | Residential | 5,055 | D | 2,963 | D | 1 ,975 | B |
| Paldiski mnt 227C, Tallinn | Hepsor 3Torni OÜ | Estonia | Residential | 2,680 | C | 2,517 | C | 2,294 | C |
| Narva mnt 150, Tallinn | Hepsor N450 OÜ | Estonia | Residential/ Commercial |
3,599 | A | 3,582 | A | 3,560 | A |
| Manufaktuuri 5, Tallinn | Hepsor Phoenix 3 OÜ | Estonia | Residential/ Commercial |
3,441 | B | 3,268 | B | 2,932 | B |
| Manufaktuuri 7, Tallinn | Hepsor Phoenix 2 OÜ | Estonia | Residential/ Commercial |
2,433 | B | 2,303 | B | 1,752 | B |
| Tooma 2/Tooma 4 Tallinn |
T2T4 OÜ | Estonia | Commercial | 1,180 | C | 1,159 | C | 1,103 | C |
| Lembitu 4, Tallinn | Hepsor L4 OÜ | Estonia | Commercial | 2,835 | C | 2,811 | C | 2,800 | C |
| Meistri 14, Tallinn | Hepsor M14 OÜ | Estonia | Commercial | 6,090 | D | 5,765 | D | 1,905 | D |
| Alvari 2/Paevälja 9, Tallinn |
Hepsor Fortuuna OÜ | Estonia | Residential | 1,659 | A | 1,656 | A | 0 | - |
| Alaveri 1, Tallinn | Hepsor A1 OÜ | Estonia | Residential | 1,006 | A | 1,004 | A | 0 | - |
| Kadaka Road 197, Tallinn | H&R Residentsid OÜ | Estonia | Residential | 623 | A | 614 | A | 0 | - |
| Balozu street 9, Riga | Hepsor Bal9 SIA | Latvia | Residential | 0 | - | 1,770 | D | 530 | D |
| Saules alley 2, Riga | Hepsor SA2 SIA | Latvia | Residential | 961 | B | 957 | B | 1,044 | B |
| Liela 45, Marupe | Hepsor Marupe SIA | Latvia | Residential | 869 | C | 663 | C | 35 | B |
| Ranka Dambis 5,Riga | Hepsor RD5 SIA | Latvia | Residential | 357 | B | 354 | B | ||
| Ulbrokas 30, Riga | Hepsor U30 SIA | Latvia | Commercial | 2,072 | D | 1,485 | D | 511 | B |
| Ulbrokas 34, Riga | Hepsor U34 SIA | Latvia | Commercial | 1,037 | B | 1,019 | B | ||
| Braila 23, Riga | Hepsor Jugla SIA | Latvia | Residential | 246 | B | 0 | - | 0 | - |
| Gregora iela 2a, Riga | Hepsor Kvarta SIA | Latvia | Residential | 4,437 | D | ||||
| -other properties | Estonia | 21 | A | 21 | A | 19 | A | ||
| -other properties | Latvia | 0 | A | 0 | - | 2 | A | ||
| Total work in progress | 40,601 | 33,926 | 25,063 | ||||||
| Finished real estate development | |||||||||
| Agenskalna 24, Riga | Hepsor Agen24 SIA | Latvia | Residential | 50 | E | 50 | E | 112 | E |
| Strelnieku 4b, Riga | Hepsor S4B SIA | Latvia | Residential | 2,549 | E | 3,245 | E | 4,044 | E |
| Manufaktuuri 22, Tallinn (parking spaces) |
Hepsor Phoenix OÜ | Estonia | Residential | 16 | E | 16 | E | 16 | E |
| Balozu 9, Riga | Hepsor Bal9 SIA | Latvia | Residential | 1,912 | E | 0 | - | 0 | - |
| Total finished real estate development | 4,527 | 3,311 | 4,172 | ||||||
| Total inventories | 45,128 | 37,237 | 29,235 |
| In thousands of euros | 31.03.2022 | 31.12.2021 | 31.03.2021 |
|---|---|---|---|
| Trade receivables | |||
| Trade receivables | 63 | 86 | 104 |
| Allowance for doubtful receivables | -6 | -6 | 0 |
| Net trade receivables | 57 | 80 | 104 |
| Prepayments | |||
| Tax prepayment | |||
| Value added tax | 455 | 382 | 164 |
| Other prepayments for goods and services | 388 | 146 | 55 |
| Total prepayments | 843 | 528 | 219 |
| Other current receivables | |||
| Interest receivables | 36 | 33 | 0 |
| Escrow account | 0 | 0 | 0 |
| Other current receivables | 10 | 11 | 538 |
| Other current receivables | 46 | 44 | 538 |
| Total trade receivables | 946 | 652 | 861 |
In January 2022, Hepsor Latvia OÜ acquired a 50% shareholding in Kvarta Holding OÜ in accordance with an option agreement. Kvarta Holding OÜ owns a 100% shareholding in Kvarta SIA, which is developing Kuldigas Parks residential development project with 116 apartments in Riga at Gregora 2a, and 100% in Hepsor Jugla SIA (former Brofits SIA). Hepsor Jugla SIA owns a property at Braila 23, Riga for the development of residential project with up to 100 apartments.
Purchase price allocation as at 31.12.2021:
| In thousands of euros | Hepsor Jugla SIA | Kvarta Holding OÜ (consolidated) |
|---|---|---|
| Assets | ||
| Cash and cash equivalents | 0 | 290 |
| Trade receivables and prepayments | 0 | 315 |
| Inventories | 240 | 3,108 |
| Total assets | 240 | 3,713 |
| Liabilities | ||
| Trade and other payables | 1 | 639 |
| Loans and borrowings | 161 | 3,074 |
| Loans and borrowings to Group company | -161 | -1,100 |
| Total liablities | 1 | 2,613 |
| Net assets | 239 | 1,100 |
| Acquisition cost | 239 | 1,100 |
| Goodwill | 0 | 0 |
The acquisition cost of Kvarta Holding OÜ includes loan issued by Hepsor Latvia OÜ in the amount of 1,100 thousand euros.
The purchase price of shareholding in Hepsor Jugla SIA amounted to 239 thousand euros plus loan receivable in the amount of 161 thousand euros.
The Group sold its 50% stake in Hepsor Marupe SIA in February 2022 and acquired a minority stake in Hepsor P26b OÜ and Hepsor Peetri OÜ (March 2022) increasing its stake in both companies to 100%.
Changes in Group structure in 2022 and impact on comprehensive income and cash flows:
| in thousands of euros | Other comprehensive income | Cash flows from investing activities |
|
|---|---|---|---|
| Comprehensive income Comprehensive income attributable to owners of attributable to non the parent controlling interest |
Proceeds from sale of subsidiaries |
||
| Changes in ownership | |||
| Hepsor P26B OÜ | -85 | 85 | - |
| Hepsor Peetri OÜ | -10 | 10 | - |
| Hepsor Marupe SIA | 9 | -9 | 135 |
| Total | -86 | 86 | 135 |
At the end of reporting periods, the Group has ownership in the following associates:
| Ownership and voting rights % | |||||||
|---|---|---|---|---|---|---|---|
| 31.03.2022 31.12.2021 31.03.2021 |
|||||||
| Hepsor P113 OÜ | 45 | 45 | 45 | ||||
| Hepsor N170 OÜ | 25 | 25 | 25 |
| In thousands of euros | 31.03.2022 | 31.12.2021 | |||
|---|---|---|---|---|---|
| Hepsor P113 OÜ | Hepsor N170 OÜ | Hepsor P113 OÜ | Hepsor N170 OÜ | ||
| Current assets | |||||
| Cash and cash equivalents | 25 | 420 | 218 | 373 | |
| Trade receivables | 11 | 10 | 85 | 82 | |
| Inventories | 8,120 | 8,269 | 6,991 | 6,591 | |
| Total current assets | 8,156 | 8,699 | 7,294 | 7,046 | |
| Total assets | 8,156 | 8,699 | 4,442 | 7,046 | |
| Current liabilities | |||||
| Loans and borrowings | 5,127 | 6,889 | 0 | 5,534 | |
| Trade and other payables | 1,172 | 1,893 | 1,034 | 1,595 | |
| Total current liabilities | 6,299 | 8,782 | 1,034 | 7,129 | |
| Non-current liabilities | |||||
| Loans and borrowings | 1,795 | 0 | 6,198 | 0 | |
| Other non-current liabilities | 149 | 0 | 147 | 0 | |
| Total non-current liabilities | 1,944 | 0 | 6,345 | 0 | |
| Total liabilities | 8,243 | 8,782 | 7,379 | 7,129 | |
| Total equity | -87 | -83 | -85 | -83 | |
| Total liabilities and equity | 8,156 | 8,699 | 7,294 | 7,046 |
As of 31.03.2022, the Group had contractual commitment to finance:
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 10.
| In thousands of euros | Owner of non controlling interest |
Unrelated legal entities |
Associates | Related legal entities |
Total |
|---|---|---|---|---|---|
| 2022 | |||||
| Loan balance as at 01.01.2022 | 2,109 | 1,100 | 2,587 | 0 | 5,796 |
| Loan granted | 0 | 0 | 0 | 176 | 176 |
| Loan collected | -29 | -1,100 | 0 | 0 | -1,129 |
| Division of subsidiary | -2,080 | 0 | 0 | 0 | -2,080 |
| Loan balance as at 31.03.2022 | 0 | 0 | 2,587 | 176 | 2,763 |
| - current portion |
0 | 0 | 279 | 176 | 455 |
| - non-current portion |
0 | 0 | 2,308 | 2,308 | |
| contractual/effective interest rate per annum |
0-3% | 0% | 7% | 12% | |
| 2021 | |||||
| Loan balance as at 01.01.2021 | 720 | 56 | 1,371 | 0 | 2,147 |
| Loan granted | 0 | 70 | 169 | 0 | 239 |
| Division of subsidiary | -720 | 0 | 0 | 0 | -720 |
| Loan balance as at 31.03.2021 | 0 | 126 | 1,540 | 0 | 1,666 |
| - current portion |
0 | 126 | 0 | 0 | 126 |
| - non-current portion |
0 | 0 | 1.540 | 0 | 1,540 |
| Loan balance as at 01.04.2021 | 0 | 126 | 1,540 | 0 | 1,666 |
| Loan granted | 2,109 | 974 | 1,047 | 0 | 4,130 |
| Loan balance as at 31.12.2021 | 2,109 | 1,100 | 2,587 | 0 | 5,796 |
| -current portion | 2,109 | 0 | 279 | 0 | 2,388 |
| -non-current portion | 0 | 1,100 | 2,308 | 0 | 3,408 |
| contractual/effective interest rate per annum |
0%-3% | 0% | 7% |
In 2020, the shareholders of Hepsor V10 OÜ and Hepsor Kadaka OÜ approved the resolution of division of the companies, based on which Hepsor V10 transferred assets (loan receivable) to minority shareholder in the amount of 274 thousand euros and Hepsor Kadaka OÜ in the amount of 448 thousand euros including 446 as loan receivable. The division took place in Q1 2021.
| in thousands of euros | Bank loans | Unrelated legal entities and individuals |
Related legal entities |
Total |
|---|---|---|---|---|
| 2022 | ||||
| Loan balance as at 01.01.2022 | 10,951 | 15,581 | 1,831 | 28,363 |
| Received | 2,844 | 1,959 | 0 | 4,803 |
| Repaid | -607 | -1,872 | 0 | -2,479 |
| Loan balance as at 31.03.2022 | 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 | 1831 | 26,854 |
| Contractual interest rate per annum | EU6+5.85%-8%; 8.2% | 0-12% | 3%-12% | |
| 2021 | ||||
| Loan balance as at 01.01.2021 | 4,705 | 10,815 | 640 | 16,160 |
| Received | 3,602 | 5,075 | 0 | 8,677 |
| Repaid | -2,692 | -1,279 | 0 | -3,971 |
| Total loan balance as at 31.03.2021 | 5,615 | 14,611 | 640 | 20,866 |
| - current loan payable |
1,833 | 742 | 500 | 3,075 |
| - non-current loan payable |
3,782 | 13,869 | 140 | 17,791 |
| Loan balance as at 01.04.2021 | 5,615 | 14,611 | 640 | 20,866 |
| Received | 10,451 | 1,863 | 1691 | 14,005 |
| Repaid | -5,115 | -893 | -500 | -6,508 |
| Total loan balance as at 31.12.2021 | 10,951 | 15,581 | 1,831 | 28,363 |
| - current loan payable |
2,821 | 2,680 | 0 | 5,501 |
| - non-current loan payable |
8,130 | 12,901 | 1,831 | 22,862 |
| Contractual interest rate per annum | EU6+5.85%-8%; 8.2% | 0-12% | 12% | |
| Effective interest rate per annum | 4.7%-10.7% | 0-12.2% | 12%-13.44% |
Hepsor AS signed a three-year loan agreement with LHV Pank for the amount of 4 million euros in March 2021. The shares of Hepsor AS and Hepsor Finance OÜ were pledged as guarantee on the loan. The loan agreement states two financial covenants that are measured quarterly:
a) LHV Pank loan and equity ratio of maximum 55%,
b) Group's investments to Estonian entities and LHV Pank loan ratio must be at least 1.5x at any given moment.
As at 31 March 2022, 87% (31 December 2021: 86%, 31 March 2021: 97%) 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 and individuals |
Related legal entities |
Total |
|---|---|---|---|---|
| Balance as at 31.03.2022 | ||||
| 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 |
| Balance as at 31.12.2021 | ||||
| Loans for development projects | 6,925 | 15,581 | 1,831 | 24,337 |
| Loans to headquarters to finance development projects | 4,026 | 0 | 0 | 4,026 |
| Total | 10,951 | 15,581 | 1,831 | 28,363 |
| Balance as at 31.03.2021 | ||||
| Loans for development projects | 5,615 | 14,611 | 140 | 20,366 |
| Loans to headquarters to finance development projects | 0 | 500 | 500 | |
| Total | 5,615 | 15,581 | 640 | 20,866 |
As at 31 March 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 |
Guarantee 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 |
In addition to bank loans, Hepsor N450 OÜ has a joint mortgage in the amount of 3.5 million euros as a loan collateral until the loan obligation to unrelated legal entity has been fulfilled.
As at 31 December 2020, 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 |
|---|---|---|---|---|---|---|---|
| LHV Pank AS | Estonia | 1,285 | 2022 | 1,300 | 6M Euribor + 8% | Mortgage - Lembitu 4, Tallinn | 2,811 |
| LHV Pank AS | Estonia | 562 | 2023 | 8,605 | 6M Euribor + 4,5% | Mortgage - Paevälja 11, Lageloo 3 // 5, Lageloo 7 |
2,965 |
| LHV Pank AS | Estonia | 2,375 | 2024 | 3,115 | 6M Euribor + 4,75% | Mortgage - Meistri 14 | 5,765 |
| Bigbank AS | Latvia | 982 | 2023 | 1,150 | 6% | Mortgage - Baložu 9, Riga | 1,770 |
| Bigbank AS | Latvia | 1,687 | 2024 | 2,500 | 6M Euribor + 4,5% | Commercial pledge; Mortgage - Strelnieku 4b, Riga |
3,245 |
| In thousands of euros | 31.03.2022 | 31.12.2021 | 31.03.2021 |
|---|---|---|---|
| Trade payables | 2,065 | 1,506 | 1,170 |
| Taxes payable | |||
| Value added tax | 77 | 254 | 147 |
| Personal income tax | 18 | 18 | 6 |
| Social security tax | 29 | 33 | 10 |
| Other taxes | 28 | 5 | 22 |
| Total taxes payable | 152 | 310 | 185 |
| Accrued expenses | |||
| Payables to employees | 68 | 72 | 67 |
| Interest payable | 238 | 135 | 44 |
| Other accrued expenses | 32 | 29 | 33 |
| Total accrued expenses | 338 | 236 | 144 |
| Other current payables | |||
| Embedded derivatives (Note 10) | 0 | 2,115 | 390 |
| Other payables | 982 | 1,372 | 30 |
| Total other current payables | 982 | 3,487 | 420 |
| Total trade and other payables | 3,537 | 5,539 | 1,919 |
| In thousands of euros | 31.03.2022 | 31.12.2021 | 31.03.2021 |
|---|---|---|---|
| Non-current interest payables | 1,368 | 1,020 | 778 |
| Other non-current payables | 42 | 33 | 13 |
| Total other non-current liabilities | 1,410 | 1,053 | 791 |
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. As of the end of the reporting periods, upon partial or full realization of the business plan of the development project. 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. The related expense in the amount of 18 thousand euros was recognized in other comprehensive income for 2022. More information on loans is provided in Note 6.
Subject to the resolution of the shareholders of Hepsor Peetri OÜ, the dividends in the amount of 29 thousand euros were paid to the minority shareholder, from which income tax of 5 thousand euros was calculated and paid.
As at the end of the reporting period the Group had no liabilities arising from embedded derivatives. In comparative periods the Group had liabilities arising from embedded derivatives with regards to the following projects:
| in thousands of euros | 31.12.2021 | 31.03.2021 |
|---|---|---|
| Current liabilities arising from embedded derivatives | ||
| Residential development Pirita 26b, Tallinn | 2,080 | 274 |
| Residential development Mõigu 11, Rae parish | 35 | 116 |
| Total | 2,115 | 390 |
The deferred income tax liability is provided by the Group on the profit or loss earned from subsidiaries that have a minority holding, and the distribution of profits has not been agreed in the shareholders' agreement. If the parent company assesses that the dividend will be paid in the foreseeable future, the deferred income tax liability is measured to the extent of the planned dividend payment provided that as at the reporting date. The deferred income tax liability is reduced if the distribution of the profit from the development project has been agreed between the shareholders.
As at the end of the reporting period the Group had no deferred income tax liabilities.
| in thousands of euros | 31.12.2021 | 31.03.2021 |
|---|---|---|
| Balance at 01.01 | 60 | 60 |
| Deferred income tax expense | -60 | 11 |
| Balance at the end of reporting period | 0 | 71 |
12.1 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 at 31 March 2022 to pay 8,992 thousand euros (31 March 2021: 5,662 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 2021, the realization time of contingent liabilities remains between 2022 and 2025.
12.2 Contingent obligation from financing the construction of city daycare center
The Group holds contingent obligation to finance the construction of daycare center for the city of Tallinn as part of the development of Manufaktuuri quarter. The potential financing obligation is 390 thousand euros.
12.4 Group guarantees given
Additional information on the guarantees is provided in Note 7.
| in thousands of euros | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue from sale of real estate | 1,079 | 2,758 |
| Revenue from project management services | 47 | 50 |
| Revenue from rent | 111 | 76 |
| Revenue from other services | 35 | 5 |
| Total | 1,272 | 2,889 |
Additional information on sales revenue is provided in Note 18.
| in thousands of euros | Q1 2022 | Q1 2021 |
|---|---|---|
| Cost of real estate sold | 994 | 2,322 |
| Personnel expenses | 121 | 90 |
| Interest expenses | 0 | 23 |
| Depreciation | 8 | 18 |
| Other costs | 43 | 11 |
| Total | 1,166 | 2,464 |
| in thousands of euros | Q1 2022 | Q1 2021 |
|---|---|---|
| Personnel expenses | 222 | 62 |
| Depreciation | 27 | 32 |
| Traveling and transport expenses | 14 | 9 |
| Purchased service expenses | 55 | 16 |
| Office expenses | 10 | 6 |
| Total | 328 | 125 |
| in thousands of euros | Q1 2022 | Q1 2021 |
|---|---|---|
| Interest incomes | 60 | 24 |
| Other financial expenses | 449 | 10 |
| Total | 509 | 34 |
In Q1 2022, the Group earned non-recurring financial income from waiver of minority shareholder's loan liability in the amount of 437 thousand euros.
| in thousands of euros | Q1 2022 | Q1 2022 |
|---|---|---|
| Interest expenses | 133 | 87 |
| Loss from associates of equity method | 0 | 2 |
| Other financial expenses | 35 | 20 |
| Total | 168 | 109 |
In 2022 borrowing costs in the amount of 464 thousand euros (Q1 2021: 434 thousand euros) have been capitalized as the cost of inventories. No interest expense has been recognized in costs of goods sold in Q1 2022 (IQ 2021: 23 thousand euros).
| in thousands of euros | Q1 2022 | Q1 2021 |
|---|---|---|
| Interest paid | ||
| Interest expense in statement of profit or loss and other comprehensive income | -133 | -87 |
| Reclassification of cash flows from operating activities to financing activities | ||
| Change in inventories (Notes 2) | -464 | -434 |
| Decrease (-)/ increase (+) of interest payables | 451 | 258 |
| Interest paid total | -146 | -263 |
The segment reporting is presented in respect of operating and geographical segments.
The Group reports separately information about the following operating segments:
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 | Q1 2022 | Q1 2021 |
|---|---|---|
| Estonia | 175 | 2,541 |
| Latvia | 1,097 | 348 |
| Total | 1,272 | 2,889 |
Additional information on sales revenue is provided in Note 13.
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 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 | -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 |
| in thousands of euros | Residential development | Commercial development | Headquarters | Total | |||
|---|---|---|---|---|---|---|---|
| Q1 2021 | Estonia | Latvia | Estonia | Latvia | Estonia | Latvia | |
| Revenue | 2,477 | 339 | 14 | 7 | 50 | 2 | 2,889 |
| incl. revenue from rent | 0 | 55 | 14 | 7 | 0 | 0 | 76 |
| Operating profit | 504 | 46 | -3 | 8 | -200 | -96 | 259 |
| Assets | 18,345 | 6,438 | 6,177 | 563 | 2,931 | 232 | 34,685 |
| Liabilities | 14,119 | 3,650 | 4,263 | 44 | 2,573 | 434 | 25,083 |
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.
Purchases and sales of goods and services:
| in thousands of euros | Q1 2022 | Q1 2021 |
|---|---|---|
| Sales of goods and services | ||
| Associated companies | 40 | 40 |
| Key members of the management and all companies directly or indirectly owned by them | 19 | 10 |
| Total sales of goods and services | 59 | 50 |
| Purchases of goods and services | ||
| Key members of the management and all companies directly or indirectly owned by them | 5,499 | 2,083 |
| incl. construction service | 5,460 | 2,049 |
| Interest income earned | ||
| Associated companies | ||
| Interest earned | 45 | 25 |
| Key members of the management and all companies directly or indirectly owned by them | ||
| Interest earned | 2 | 0 |
| Interest expenses incurred | ||
| Key members of the management and all companies directly or indirectly owned by them | ||
| Accrued interest | 57 | 8 |
| Interest paid | 35 | 4 |
Balances and loan transactions with related parties:
| In thousands of euros | 31.03.2022 | 31.12.2021 | 31.03.2021 |
|---|---|---|---|
| Receivables | |||
| Loans granted (Note 6) | |||
| Associated companies | |||
| Opening balance | 2,587 | 1,371 | 1,371 |
| Loans granted | 0 | 1,216 | 169 |
| Balance at the end of period | 2,587 | 2,587 | 1,540 |
| Management and all companies directly or indirectly owned by them | |||
| Loans granted | 176 | 0 | 0 |
| Trade and other receivables | |||
| Management and all companies directly or indirectly owned by them | 2 | 12 | 2 |
| Interest receivables | |||
| Associated companies | 228 | 169 | 67 |
| Management and all companies directly or indirectly owned by them | 2 | 0 | 0 |
| Payables | |||
| Loans and borrowings (Note 7) | |||
| Management and all companies directly or indirectly owned by them | |||
| Opening balance as at 01.01 | 1,831 | 640 | 640 |
| Loans received | 0 | 1,691 | 0 |
| Loans repaid | 0 | -500 | 0 |
| Balance at the end of period | 1,831 | 1,831 | 640 |
| Trade payables | |||
| Management and all companies directly or indirectly owned by them | 1,882 | 1,126 | 1,043 |
| Interest payables | |||
| Management and all companies directly or indirectly owned by them | 92 | 70 | 5 |
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.
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.
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. Bank loans have 0% floor clause as protection against negative Euribor meaning that in case of negative Euribor, Euribor is equalized to zero and the margin of such loans does not decrease. The management constantly monitors the Group's exposure to interest rate risk which arises from loans with floating interest rates. Such risk is mainly related to the potential upward movement in Euribor as already warned by European Central Bank.
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.
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.
The impact of the coronavirus COVID-19 is being felt by all businesses around the world. Therefore, the continuing spread of the coronavirus COVID-19 may have an adverse long-term impact on markets where the Group operates. The velocity of change coming out of the pandemic is generating new forms of financial and operational risks arising from inflation, capacity constraints, and supply chain disruptions.
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.
The Management Board confirms that the unaudited interim report for Q1 2022, 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 describe the significant risks and uncertainties the Group faces.
Henri Laks Member of Management Board Tallinn, 10 May 2022
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.