EfTEN Real Estate Fund III AS unaudited financial results, 3rd quarter and 9 months 2019
The consolidated sales revenue of EfTEN Real Estate Fund III AS for third quarter of 2019 was EUR 2.364 million (third quarter of 2018: EUR 2.238 million), which increased by 5.6% in a year. The Group's net profit for the same period amounted to EUR 1.429 million (third quarter of 2018: EUR 1.399 million).
The consolidated sales revenue of EfTEN Real Estate Fund III AS for 9 months of 2019 was EUR 7.000 million (9 months of 2018: EUR 6.343 million), which increased by 10.4% in a year. The Group’s profit before revaluation of investment properties, depreciation and financial income/ -costs and income tax expense (EBITDA) totaled EUR 4.459 million (9 months of 2018: EUR 4.282 million), which increased by 4.1% in a year. The Group’s net profit for the same period was EUR 5.127 million (9 months of 2018: EUR 4.548 million), including profit from revaluation of investment properties in 2019 EUR 1.46 million (9 months of 2018: EUR 0.962 million).
The consolidated gross profit margin in the first nine months of 2019 was 97% (9 months of 2018: same). Therefore, expenses directly related to management of properties (incl. land tax, insurance, maintenance and improvement costs) accounted for only 3% of the revenue. The Group's expenses related to properties, marketing costs, general expenses, other income and expenses accounted for 22% of the revenue in the first nine months of 2019. The respective indicator was 21% in the first nine months of 2018.
As at 30.09.2019, the Group’s total assets were in the amount of EUR 130.297 million (31.12.2018: 108.503 million), including fair value of investment property, which accounted for 85% (31.12.2018: 95%) of the total assets. The volume of assets increased in year of 2019 mainly due to the share issue, which raised additional funds for the Group in the amount of EUR 16 million and real estate investments in the nine months of the year 2019 for a total of EUR 6.865 million.
In the first nine months of the year, the net asset value of the share of EfTEN Real Estate Fund III AS increased by 3.6%. From the 2018 profit, EUR 3,061 thousand (in spring 2018: EUR 2,191 thousand) was paid out in dividends in May 2019. Without the dividend payment, the Fund's NAV would have increased by 9.7% in the first nine months of 2019. Return on invested capital (ROIC) was 16.7% in the first nine months of 2019 (30.09.2018: 16.4%).
Access to flexible financing conditions will help to increase the Group's competitiveness. In the first nine months of 2019, the Group entered into new loan contracts in the total amount of EUR 6.399 million in connection with the acquisition of new investment properties and developments. As at the end of the first nine months of 2019, the average interest rate on Group's loan agreements (including interest swap contracts) was 1.8% (31.12.2018: same) and the LTV (loan to value) ratio was 50% (31.12.2018: 52%).
During the first nine months of 2019, the Group earned free cash flow of EUR 2.5 million (9 months of 2018: EUR 2.4 million). Following the deduction of Lithuanian income tax expense and the calculation of the dividend income tax expense in Estonian and Latvian companies, EfTEN Real Estate Fund III would be able to pay net dividends to the shareholders in the total amount of EUR 1.9 million (46 cents per share) from the profit earned in the first nine months of the year.
The Group invests in commercial real estate with a strong and long-term tenant base. At the end of the first nine months of 2019, the Group had 11 (31.12.2018: 10) commercial investment properties with a fair value as at the balance sheet date of EUR 111.112 (31.12.2018: EUR 102.787) million and acquisition cost of EUR 101.553 (31.12.2018: EUR 94.627) million.
In January 2019, the Group acquired ABC Motors Autokeskus property in Tallinn for EUR 3 million. In addition, the Group continued the construction of Tähesaju tee Hortes, where EUR 3.7 million was invested during the first 9 months of 2019. The construction of Tähesaju Hortes was completed in the beginning of October 2019.
In June 2019, an independent valuator of the Group's investment properties conducted a periodic valuation process. The value of investment property increased by EUR 1.46 million (1.3%) as a result of revaluations and was mainly related to the improved cash flow forecast.
On 17th of April 2019 EfTEN Real Estate Fund III AS decided to increase the share capital by issuing up to 1,000,000 new ordinary shares based on the decision of the general meeting of shareholders. The new shares were issued at a total value of EUR 16 per share, ie EUR 16 million was received by the Group for the increase of share capital.
The net book value of EfTEN Real Estate Fund III share as at 30.09.2019 was 16.24 euros (31.12.2018: 15.67 euros). EfTEN Real Estate Fund III AS shares are freely traded on the Tallinn Stock Exchange. The closing price of the EFT1T share as at 30.09.2019 was 17.8 euros, rising by 9.9% over the 9 months (from 16.2 euros at 31.12.2018). During the 9 months of 2019, EFT1T shares traded at EUR 16.0 to EUR 19.1 per share, and the median closing price during the 9 months was EUR 17.5. During the 9 months, the volume of transactions with EFT1T shares totaled 1,667 thousand euros.
In addition to the aforementioned share net asset value calculated according to IFRS (EUR 16.24 as at 30.09.2019), EfTEN Real Estate Fund III AS also calculates the net asset value of the share recommended by EPRA (European Public Real Estate Association) to provide investors with the most relevant net asset value. The EPRA recommended guide assumes a long-term economic strategy for real estate companies, so temporary differences in the situation where asset sales are unlikely to occur in the near future obscure the transparency of the fair value of the fund's net assets. EfTEN Real Estate Fund III AS EPRA NAV as at 30.09.2019 was EUR 17.29 (31.12.2018: EUR 16.81).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| 3rd quarter | 9 months | |||
| EUR thousand | 2019 | 2018 | 2019 | 2018 |
| Revenue | 2,364 | 2,238 | 7,000 | 6,343 |
| Cost of services sold | -82 | -99 | -229 | -184 |
| Gross profit | 2,282 | 2,139 | 6,771 | 6,159 |
| Marketing costs | -83 | -108 | -303 | -332 |
| General and administrative expenses | -313 | -269 | -977 | -836 |
| Gain / loss from revaluation of investment properties | 0 | 0 | 1,460 | 962 |
| Other operating income and expense | 0 | 0 | -1 | 7 |
| Operating profit | 1,886 | 1,762 | 6,950 | 5,960 |
| Interest income | 5 | 0 | 5 | 3 |
| Finance costs | -306 | -199 | -1,036 | -719 |
| Profit before income tax | 1,585 | 1,563 | 5,919 | 5,244 |
| Income tax expense | -156 | -164 | -792 | -696 |
| Total comprehensive income for the financial period | 1,429 | 1,399 | 5,127 | 4,548 |
| Earnings per share | ||||
| - Basic | 0.34 | 0.43 | 1.41 | 1.41 |
| - Diluted | 0.34 | 0.43 | 1.41 | 1.41 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| 30.09.2019 | 31.12.2018 | |
| EUR thousand | ||
| ASSETS | ||
| Cash and cash equivalents | 9,293 | 4,859 |
| Short-term deposits | 9,000 | 0 |
| Receivables and accrued income | 705 | 673 |
| Prepaid expenses | 53 | 46 |
| Total current assets | 19,051 | 5,578 |
| Long-term receivables | 0 | 24 |
| Investment property | 111,112 | 102,787 |
| Property, plant and equipment | 134 | 114 |
| Total non-current assets | 111,246 | 102,925 |
| TOTAL ASSETS | 130,297 | 108,503 |
| LIABILITIES AND EQUITY | ||
| Borrowings | 17,245 | 8,105 |
| Derivative instruments | 391 | 189 |
| Payables and prepayments | 936 | 1,019 |
| Total current liabilities | 18,572 | 9,313 |
| Borrowings | 38,449 | 44,743 |
| Other long-term liabilities | 677 | 457 |
| Deferred income tax liability | 4,039 | 3,496 |
| Total non-current liabilities | 43,165 | 48,696 |
| Total liabilities | 61,737 | 58,009 |
| Share capital | 42,225 | 32,225 |
| Share premium | 9,658 | 3,658 |
| Statutory reserve capital | 936 | 621 |
| Retained earnings | 15,741 | 13,990 |
| Total equity | 68,560 | 50,494 |
| TOTAL LIABILITIES AND EQUITY | 130,297 | 108,503 |
Marilin Hein
CFO
Phone 655 9515
E-mail:
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