Hepsor’s consolidated sales revenue for the second quarter of 2023 amounted to 14.6 million euros and net profit was 3.5 million euros (incl. the share owned by the parent company was 1.6 million euros). The consolidated sales revenue for the first half of 2023 totaled 20.6 million euros and net profit 3.6 million euros (incl. the share owned by the parent company was 1.8 million euros).
In Q2 2023, the Group sold a total of 90 apartments of which 8 apartments in Paevälja Hoovimajad development project, Paevälja 11, Tallinn and 82 apartments in Latvia, in Riga in Kuldigas Parks development project, Gregora iela 2a 53 apartments were handed over to customers, in Mārupes Dārzs development project in Liela 45, 28 apartments were handed over to the customers and in Strelnieku 4b delevopment project 1 apartment. In the second quarter, land plots at Tooma st 2, Tooma st 4 and Tooma st 6 were sold in Tallinn.
In the first half of 2023, a total of 195 real rights contracts were signed, based on which a total of 124 new homes were handed over to home buyers. The completion of the Mārupes Dārzs and Kuldigas Parks projects was only at the end of the second quarter and even though the real right contracts for 71 homes had been concluded, the homes had not yet been handed over to buyers at the end of the period and are therefore not reflected in the sales revenue for the period. The signing of real rights contracts for the Kuldigas Parks and Mārupes Dārzs projects and the handover of homes will continue in the third quarter of 2023.
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.
Hepsor has four residential development projects under construction in Estonia and Latvia, with a total of 319 new apartments and 453 m2 of commercial premises. After the completion of two projects in the first half-year, Nameja Rezidence development project remains under construction and for sale in Riga, in which a total of 38 homes will be completed, of which 10 apartments have been pre-sold under the law of obligations and reservation agreements (26%). In Tallinn, three development projects are under construction and for sale with a total of 281 new apartments and 453 m2 of commercial premises- Ojakalda kodud, Lilleküla kodud ja Manufaktuuri 7. As of June 30, 2023, law of obligations and reservation agreements have been concluded for 77 of these apartments (27%).
According to Henri Laks, Member of the Management Board of Hepsor, the second quarter of 2023 went mostly as expected in the real estate sector. „Positive developments include the stabilization of energy prices and inflation, which create the prerequisites for a recovery in demand in the real estate market. At the same time, the Euribor continued to rise, which has a direct impact on the monthly housing costs of households and home buyers and forces real estate purchasing decisions to take a conservative approach. The transaction activity of the Tallinn new development market increased slightly in the second quarter but remains below the previous long-term average. In Riga, transaction activity remains at the normal level," said Laks.
In the commercial real estate market, transaction activity in the Baltics is also rather low. However, from Hepsor’s perspective we can highlight a landmark transaction with which we sold a stock-office type commercial building with 3,642 m2 of rental space called StokOfiss U30 to an experienced asset management company through the sale of parts of Hepsor U30 SIA in Riga, Latvia in the second quarter of 2023.
Work to enter the Canadian market culminated in the first investment in Toronto in the second quarter of 2023, where, together with Canadian partners, a property suitable for residential development was purchased at 3406-3434 Weston road. To develop the property, Weston Limited Partnership was founded, in which, in addition to Hepsor and its Canadian partners, various Canadian and European investors also participate. The goal of the first phase of the acquired development project is to increase the construction volumes of the property from 27,000 m2 to ca 53,000 m2 and to obtain construction rights for the creation of two apartment buildings. The land valuation phase is expected to take 2-2.5 years, after which Weston Limited Partnership will be able to decide whether the additional value created by that point will be realized through the resale of the property or whether the project will move on to the construction phase.
The Group forecasts 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 for 2023. The Group's sales results for the first half of 2023 show that the Group is on track to meet the forecasts for 2023.
Consolidated statement of financial position
in thousands of euros
30 June 2023
31 December 2022
30 June 2022
Assets
Current assets
Cash and cash equivalents
8,304
3,754
4,361
Trade and other receivables
1,372
1,731
576
Current loan receivables
311
0
279
Inventories
68,776
69,760
56,128
Total current assets
78,763
75,245
61,344
Non-current assets
Property, plant and equipment
233
232
260
Intangible assets
5
7
3
Financial investments
2
2
2
Investments in associates
912
1,086
0
Non-current loan receivables
3,233
1,766
2,308
Other non-current receivables
136
30
380
Total non-current assets
4,521
3,123
2,953
Total assets
83,284
78,368
64,297
Liabilities and equity
Current liabilities
Loans and borrowings
11,056
22,565
2,472
Current lease liabilities
64
46
64
Prepayments from customers
3,748
3,054
2,453
Trade and other payables
8,570
4,007
3,959
Deferred income tax liability
0
0
8
Total current liabilities
23,438
29,672
8,956
Non-current liabilities
Loans and borrowings
35,144
26,015
34,641
Non-current lease liabilities
68
68
66
Other non-current liabilities
2,442
2,290
1,762
Total non-current liabilities
37,654
28,373
36,469
Total liabilities
61,092
58,045
45,425
Equity
Share capital
3,855
3,855
3,855
Share premium
8,917
8,917
8,917
Reserve capital
385
Retained earnings
9,035
7,551
6,100
Total equity
22,192
20,323
18,872
incl. total equity attributable to owners of the parent
21,709
19,866
18,345
incl. non-controlling interest
483
457
527
Total liabilities and equity
83,284
78,368
64,297
Consolidated statement of profit and loss and other comprehensive income
in thousands of euros
6M 2023
6M 2022
Q2 2023
Q2 2022
Revenue
20,590
3,954
14,615
2,682
Cost of sales (-)
-15,799
-3,752
-10,759
-2,586
Gross profit
4,791
202
3,856
96
Marketing expenses (-)
-268
-173
-197
-78
Administrative expenses (-)
-787
-537
-440
-209
Other operating income
82
47
62
37
Other operating expenses (-)
-92
-39
-69
-32
Operating profit (-loss) of the year
3,726
-500
3,212
-186
Financial income
1,046
567
996
58
Financial expenses (-)
-1,184
-312
-759
-144
Profit before tax
3,588
-245
3,449
-272
Current income tax(-)
0
-5
0
0
Deferred income tax
0
-8
0
-8
Net profit for the year
3,588
-258
3,449
-280
Attributable to owners of the parent
1,803
-273
1,563
-278
Non-controlling interest
1,785
15
1,886
-2
Other comprehensive income (-loss)
Changes related to change of ownership
68
135
68
0
Change in value of embedded derivatives with minority shareholders
-1,787
-13
-1,795
-31
Other comprehensive income (-loss) for the period
-1,719
122
-1,727
-31
Attributable to owners of the parent
40
-286
54
-200
Non-controlling interest
-1,759
408
-1,781
169
Comprehensive income (-loss) for the period
1,869
-136
1,722
-311
Attributable to owners of the parent
1,843
-559
1,617
-478
Non-controlling interest
26
423
105
167
Earnings per share
Basic (euros per share)
0.47
-0.07
0.41
-0.07
Diluted (euros per share)
0.47
-0.07
0.41
-0.07
Henri Laks
Member of the Management Board Phone: +372 5693 9114 e-mail: henri@hepsor.ee
Hepsor AS (www.hepsor.ee) is one of the fastest growing residential and commercial real estate developers in Estonia and Latvia, which is also present on the Canadian real estate market since 2023. Over the last twelve years Hepsor has developed more than 1,600 homes and ca 36,000 m2 of commercial space. Hepsor has been the first real estate developer in the Baltic States to implement a number of innovative engineering solutions that make the buildings we construct more energy-efficient and thus more environmentally friendly. The company's portfolio is comprised of 24 development projects with a total sellable space of 159,500 m2.
