Fund manager’s comment on the 2022 financial results
In 2022, major changes took place in the European and Baltic commercial real estate market. The rapid acceleration of the inflation rate prompted the central banks to end the so-called zero interest policy that had lasted for almost ten years. While at the beginning of 2022, the EURIBOR rate used as the basis for most loans issued in euro was negative, by the end of the year the 6-month EURIBOR rose to 2.7 % and the 1-month EURIBOR to 1.9 %. In the real estate sector, where investments are usually made with financial leverage, this meant a significant increase in borrowing costs and a decrease in transaction activity.
In the real estate market of the Baltic countries, the use of leverage has generally been lower compared to the so-called developed European countries. Mainly because of this, the rise in interest rates here did not immediately lead to a fall in real estate prices. In particular, the increase in interest rates was accompanied by a significant decrease in the number of real estate transactions in this region. The uncertainty and low transaction activity of the commercial real estate market in the Baltic countries will probably remain in the first half of 2023.
In
Financial overview
The consolidated sales revenue of
The Group’s total assets as at
At the end of
In April, the Fund’s subsidiary EfTEN Valkla OÜ acquired real estate located in Valklaranna tee 36, Valkla in Harju county. The Fund reconstructs the building from nursery home to general nursery home that could accommodate up to 250 customers in the future. Renovation work is performed in stages. The purchase price of the real estate plot was
In April, the Fund’s subsidiary EfTEN Ermi OÜ acquired building rights located in Ermi tn 13, Tila village, Tartu parish in Tartu county. The Fund plans to develop a nursery home for minimum of 120 customers on the land plot used based on the building rights. The building rights’ maturity date is 50 years, which is possible to extend up to 99 years in agreement with the landowner. After developing a nursery home on the land plot, it will be leased to Südamekodud AS based on a long-term lease contract. The purchase price of the building rights was
In 2022, the Group earned a total rental income of
Financing
In the following 12 months, the loan agreements of the Group’s three subsidiaries – EfTEN Evolution UAB, Saules Miestas UABand EfTEN Piepilsetas SIA – will expire, the balance of the loans as at
The weighted average interest rate of the Group’s loan agreements (including taking into account interest rate swap agreements) due to the increase in EURIBOR is 3.7 % (31.12.2021: 2.3 %) and LTV (Loan to Value) 40 % (31.12.2021: 44 %) as of the end of December). All loan agreements of the Fund’s subsidiaries are linked to a floating interest rate. In order to mitigate the risk of an increase in the interest rate of one loan agreement, an interest rate swap agreement has been concluded, where the Euribor is fixed at 0.35 %. The swap agreement expires in 2023, and its fair value is
Information on shares
The net value of the share of
During 2022, the Group has earned a free cash flow of
In connection with the merger of
CONSOLIDATED STATEMEMT OF COMPREHENSIVE INCOME
| 4th quarter | 12 months | ||||
| € thousands | 2022 | 2021 | 2022 | 2021 | |
| Revenue | 3,699 | 3,508 | 14,299 | 12,921 | |
| Cost of services sold | -56 | -48 | -267 | -241 | |
| Gross profit | 3,643 | 3,460 | 14,032 | 12,680 | |
| Marketing costs | -113 | -124 | -367 | -268 | |
| General and administrative expenses | -525 | -1,024 | -1,916 | -2,326 | |
| Gain / loss from valuation of investment properties | -582 | 4,422 | 3,119 | 6,442 | |
| Other operating income and expense | -25 | -17 | 23 | 1 | |
| Operating profit | 2,398 | 6,717 | 14,891 | 16,529 | |
| Other finance income and expense | -582 | -420 | -1,680 | -1,678 | |
| Profit before income tax | 1,816 | 6,297 | 13,211 | 14,851 | |
| Income tax expense | -617 | -942 | -1,803 | -1,752 | |
| Net profit for the financial year | 1,199 | 5,355 | 11,408 | 13,099 | |
| Earnings per share | |||||
| – basic | 0.24 | 1.06 | 2.25 | 2.79 | |
| – diluted | 0.24 | 1.06 | 2.25 | 2.79 | |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
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|
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| € thousands | |||
| ASSETS | |||
| Cash and cash equivalents | 11,331 | 13,074 | |
| Receivables and accrued income | 1,522 | 876 | |
| Prepaid expenses | 49 | 314 | |
| Inventory | 0 | 29 | |
| Total current assets | 12,902 | 14,293 | |
| Long-term receivables | 61 | 4 | |
| Investment property | 168,875 | 161,961 | |
| Property. plant and equipment | 116 | 140 | |
| Intangible assets | 2 | 3 | |
| Total non-current assets | 169,054 | 162,108 | |
| TOTAL ASSETS | 181,956 | 176,401 | |
| LIABILITIES AND EQUITY | |||
| Borrowings | 22,058 | 7,645 | |
| Derivative instruments | 0 | 121 | |
| Payables and prepayments | 1,461 | 1,349 | |
| Total current liabilities | 23,519 | 9,115 | |
| Borrowings | 45,917 | 63,440 | |
| Other long-term debt | 1,008 | 987 | |
| Deferred income tax liability | 7,248 | 5,945 | |
| Total non-current liabilities | 54,173 | 70,372 | |
| Total liabilities | 77,692 | 79,487 | |
| Share capital | 50,725 | 50,725 | |
| Share premium | 16,288 | 16,288 | |
| Statutory reserve capital | 2,149 | 1,489 | |
| Retained earnings | 35,102 | 28,412 | |
| Total equity | 104,264 | 96,914 | |
| TOTAL LIABILITIES AND EQUITY | 181,956 | 176,401 |
Phone +372 6559 515
E-mail: marilin.hein@eften.ee
- EREFIII_Interim_12_months_2022_ENG
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