Pro Kapital Council approved Consolidated Interim Report for I Quarter and 3 Months of 2024 (Unaudited)

MANAGEMENT REPORT

Real Estate Development

In 2024, we are continuing the construction and sales activities of the last stage of Kalaranna 8, Tallinn. The final stage consists of 4 residential buildings with 146 apartments and 4 commercial units which, upon completion, brings the total count of the buildings to 12. In Q1 we reached the topping out of all 4 buildings and the construction is proceeding on schedule. We expect to deliver units from the first two buildings by the end of 2024, and complete the remaining two buildings by the first quarter of 2025. With respect to sales in Kalaranna, as of the publishing of this report, we have reached 40% threshold in presales. We deem this a success in today’s challenging market, especially so when our location warrants above average pricing.

In Kristiine City, we have continued the sales activities of our new project Uus-Kindrali, with preparatory construction work having started in March 2024. By the end of the first quarter of 2024, we've sold slightly over 30% of our units, and we anticipate an increase in sales as construction progresses. The loan contract for construction works was signed with AS LHV Pank in April 2024.

In Riga, our sales of the esteemed River Breeze Residence, recipient of the Baltics Prestige Award for its exceptional architecture, persist. 2023 has been the best year in terms of sales of inventory in River Breeze, and we expect the last apartments to be sold and handed over to customers by the end of 2024. In Q1, 2024 we have concluded 2 sales leaving us with 6 unsold inventory units.

In Vilnius we have completed five residential buildings in Šaltinių Namai Attico project with 115 apartments in 2019. By the end of April,2024 we have only 2 apartments unsold, out of which one is a model unit. In September 2023 we started the construction of the final stage of Šaltinių Namai Attico with city villas (43 units) and a Residential-commercial building (15 units). As of the end of April 2024, we have achieved approximately 15% completion in construction, which includes the completion of the second-floor structure in the commercial building and the pouring of the ground floor slab in the villas. The loan contract for construction works was signed with Šiaulių bankas in the beginning of May 2024. As of Q1, 2024, we have reached a 25% sellout threshold while achieving record pricing in the market. We are also continuing the permitting process for our most recent purchase in Naugarduko street. The building, previously a school, will be converted into a high-end residential property located on hill and opening to spectacular Vilnius old town views, consisting of circa 50 luxury apartments. By current plan, we are expecting the permit in the summer and to embark on reconstruction works in Q4, 2024.

Hotel operations

Following two challenging years that significantly impacted the global tourism sector due to the pandemic, there is now a notable resurgence in demand within the hotel industry.

In 2023, the hotel achieved excellent results, and this positive trend has continued into Q1, 2024, with both occupancy and average room rates steadily increasing.

In 2024 special attention and focus is on MICE activities (Meetings, Incentives, Conferences and Exhibitions), aimed at increasing sales in the corporate segment. The successes of Q1, 2024, prove the effectiveness of our strategies, as each month's actual performances have exceeded the monthly budgets set for the year.

Other matters

In January 2024, the Group extended the terms of conditions of the 28.5 million euro secured bond issue. Pro Kapital made a partial repayment of 8.6 million Euros on 5 February 2024 and has extended the balance of the issue of 19.9 million euros until 20 February 2028. The new interest rate for the bonds is 11% p.a. and the Group has the right to make partial or full repayment of the issue at any time without penalty.

On March 22, 2024 the Group acquired 67.5% of the shares of Preatoni Nuda Proprieta S.R.L (registered office in Milan, Italy) at a price of 2,5 million euros.

According to principle of materiality, there were no material differences in the financial statements of Preatoni Nuda Proprieta S.r.l as of acquisition date 22 March 2024 and nearest balance sheet date 31 March 2024, therefore the Group used the financial statements as of 31 March 2024 for recognising the results of Preatoni Nuda Proprieta S.r.l in its consolidated financial statements as of 31 March 2024.

As AS Pro Kapital Grupp is constantly on the lookout for new opportunities the said acquisition will enable the Group to enter a market of bare ownership, a market that is well developed in southern European countries, especially in Italy. We see an opportunity to provide structural support for Preatoni Nuda Proprieta S.R.L while also benefiting from the experience and potentially replicating it in the Baltics.

In the bare ownership model, the buyer acquires the tangible asset of real estate while granting the seller the right to enjoy its benefits, resulting in a discounted valuation commensurate with the seller's age. This strategic approach offers the purchaser a spectrum of opportunities: they may choose to retain the property, anticipating capital appreciation stemming from the initial discounted acquisition, or alternatively, they may opt to transfer the bare ownership to a new investor.

We believe that given the aging population and evolving attitudes of newer generations towards real estate ownership, this approach could offer a fresh perspective on real estate sales. We see this model as both intriguing and innovative, presenting considerable potential for growth while mitigating associated risks.

This transaction describes our attention to new approaches in the field of real estate and stresses our commitment to utilizing the new opportunities.

In closing, I am pleased to report our significant progress and achievements across our real estate development ventures and hotel operations. In 2024, we have demonstrated unwavering commitment to excellence, with our projects in Tallinn, Riga, and Vilnius progressing on schedule and yielding remarkable sales results.

Furthermore, the resurgence in demand within the hotel industry bodes well for our operations, with our focus on MICE activities showing promising results that exceed expectations.

As we navigate through dynamic market landscapes, our commitment to prudent financial management and operational excellence remains steadfast. We are confident that our diversified portfolio, coupled with our unwavering dedication to delivering value to stakeholders, will continue to drive sustainable growth and solidify our position as a leader in the real estate sector.

Thank you to our shareholders, employees, and partners for their continued support and dedication. Together, we look forward to a future filled with promise and opportunity.

Edoardo Preatoni
CEO

Key financials

The total revenue of the Group in the first quarter of 2024 was 3.1 million euros compared to 13.4 million euros in the first quarter of 2023.

The real estate sales revenues are recorded at the point of time when legal title is transferred to the buyer. Therefore, the revenues from sales of real estate depend on the construction cycle and the completion of the residential developments.

In 2024, real estate revenue decreased compared to the previous year due to the completion of the final building of Kindrali Houses at the beginning of 2023, when the last apartments were sold and handed over to the customers. By the end of 2023, most of the apartments in our completed real estate projects had been sold.

In the first quarter of 2024, we are continuing the construction of the final stage of the Kalaranna District, planning to complete and deliver units from the first two buildings by the end of 2024, and to complete the remaining two buildings by the first quarter of 2025.

The gross profit of first three months of 2024 has decreased by 76% amounting to 0.9 million euros compared to 3.7 million euros in 2023.

The operating result in the first quarter of 2024 was 0.7 million euros loss comparing to 2.2 million euros profit during the same period in 2023.

The net result for the first quarter of 2024 was 1.7 million euros loss, comparing to 1.3 million euros profit in the reference period.

Cash used in operating activities during first three months of 2024 was 1.7 million euros comparing to 10.3 million euros generated during the same period in 2023.

Net assets per share on 31 March 2024 totalled to 0.95 euro compared to 1 euro on 31 March 2023.

Key performance indicators

	2024 3M	2023 3M	2023 12M
Revenue, th EUR	3 054	13 415	23 021
Gross profit, th EUR	888	3 666	7 028
Gross profit, %	29%	27%	31%
Operating result, th EUR	-659	2 160	2 963
Operating result, %	-22%	16%	13%
Net result, th EUR	-1 700	1 303	-900
Net result, %	-56%	10%	-4%
Earnings per share, EUR	-0.03	0.02	-0.02

	31.03.2024	31.03.2023	31.12.2023
Total Assets, th EUR	105 855	101 587	107 237
Total Liabilities, th EUR	52 027	44 961	52 814
Total Equity, th EUR	53 828	56 626	54 423
Debt / Equity *	0.97	0.79	0.97
Return on Assets, % **	-1.6%	1.2%	-0.08%
Return on Equity, % ***	-3.1%	2.6%	-1.5%
Net asset value per share, EUR ****	0.95	1.00	0.96

*debt / equity = total debt / total equity
**return on assets = net profit/loss / total average assets
***return on equity = net profit/loss / total average equity

****net asset value per share = net equity / number of shares

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated interim statement of financial position

in thousands of euros	31.03.2024	31.03.2023	31.12.2023
ASSETS
Current assets
Cash and cash equivalents	8 897	18 773	17 065
Current receivables	1 688	2 331	1 411
Prepaid expenses	434	395	268
Inventories	39 980	26 113	35 563
Total current assets	50 999	47 612	54 307
Non-current assets
Non-current receivables	22	15	2 010
Property, plant and equipment	7 710	7 733	7 763
Right-of-use assets	553	268	365
Investment property	40 378	45 615	40 361
Goodwill	204	262	0
Intangible assets	3 654	82	96
Total non-current assets	52 521	53 975	50 595
Assets held for sale	2 335	0	2 335
Total assets held for sale	2 335	0	2 335
TOTAL ASSETS	105 855	101 587	107 237
LIABILITIES AND EQUITY
Current liabilities
Current debt	1 733	28 422	30 141
Customer advances	5 602	1 270	3 657
Current payables	6 303	3 156	4 911
Tax liabilities	208	816	161
Short-term provisions	8	19	11
Total current liabilities	13 854	33 683	38 881
Non-current liabilities
Long-term debt	36 903	10 086	12 695
Other long term liabilities	2	0	0
Deferred income tax liabilities	1 140	1 132	1 130
Long-term provisions	128	60	108
Total non-current liabilities	38 173	11 278	13 933
TOTAL LIABILITIES	52 027	44 961	52 814
Equity attributable to owners of the Company
Share capital in nominal value	11 338	11 338	11 338
Share premium	5 661	5 661	5 661
Statutory reserve	1 134	1 134	1 134
Revaluation reserve	2 092	2 012	2 092
Retained earnings	32 498	36 481	34 198
Total equity attributable to the owners of the Company	52 723	56 626	54 423
Non-controlling interest	1 105	0	0
TOTAL EQUITY	53 828	56 626	54 423
TOTAL LIABILITIES AND EQUITY	105 855	101 587	107 237

Consolidated interim statements of comprehensive income

in thousands of euros		2024 3M	2023 3M	2023 12M
CONTINUING OPERATIONS
Operating income
Revenue		3 054	13 415	23 021
Cost of goods sold		-2 166	-9 749	-15 993
Gross profit		888	3 666	7 028
Marketing expenses		-222	-133	-705
Administrative expenses		-1 325	-1 374	-5 440
Other income		2	1	2 099
Other expenses		-2	0	-19
Operating profit/ loss		-659	2 160	2 963
Financial income		42	20	254
Financial expense		-1 073	-874	-4 115
Profit / loss before income tax		-1 690	1 306	-898
Income tax		-10	-3	-2
Net profit / loss for the period		-1 700	1 303	-900
Other comprehensive income net of income tax:
Net change in asset revaluation reserve		0	0	0
Total comprehensive income / loss for the year		-1 700	1 303	-900
Earnings per share for the period €		-0.03	0.02	-0.02

The full report can be found in the file attached.

Ann-Kristin Kuusik
CFO
+372 614 4920
prokapital@prokapital.ee

Attachment

• PKG_Q1_2024_ENG

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