Comment of the Management Bord
The most important economic event of EfTEN Real Estate Fund III AS in the second quarter of 2019 was a successful additional share offering, in which the fund issued 1 million new shares at a price of EUR 16 per share. The new shares offered were oversubscribed three times. A total of 2,094 subscription orders were issued with a total value of EUR 49 million. The pre-emptive subscription rights of existing shareholders were used to subscribe 818,000 shares. The new capital will be used to continue the investment activities of the fund. The economic indicators of the assets of the fund's portfolio were in line with management expectations. The fund has at the moment one development project in progress, Hortes Gardening Center, in the Tähesaju commercial centre in Tallinn. The new Hortes Gardening Center is planned to be opened in the fourth quarter of this year.
Financial overview
EfTEN Real Estate Fund III AS consolidated revenue for Q2 2019 was EUR 2.321 million (Q2 2018: EUR 2.104 million), showing an increase of 10.3% over the year. The Group's net profit for the same period was EUR 2.329 million (Q2 2018: EUR 1.896 million). The higher net profit in 2019 is due to higher investment property revaluation gains, which totaled EUR 1.460 million in the first half of this year compared to EUR 0.962 million in the second quarter of last year.
EfTEN Real Estate Fund III AS consolidated revenue for the first half of 2019 was EUR 4.636 million (first half of 2018: EUR 4.105 million), an increase of 12.9% over the year. The Group's profit before revaluation of investment property, depreciation charge and finance income/-expense and income tax expense for the first half of 2019 totaled EUR 3.624 million (first half of 2018: EUR 3.262 million), an increase of 11.1% over the year. The Group's net profit for the same period was EUR 3.698 million (first half of 2018: EUR 3.149 million).
In January 2019, the Group acquired ABC Motors Car Center property in Tallinn for EUR 3 million. In addition, the Group continued the construction of Tähesaju tee Hortes, where EUR 2.4 million was invested during the first half of 2019. The completion of Tähesaju Hortes is scheduled for October 2019.
In June 2019, an independent valuer 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 June 2019, EfTEN Real Estate Fund III AS increased it’s the share capital by issuing 1,000,000 new ordinary shares. The new shares were issued at a price 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 30.06.2019 was 15.90 euros (31.12.2018: 15.67 euros). The net asset value of EfTEN Real Estate Fund III AS increased by 1.5% during the first half of 2019. In May 2019, the Fund paid dividends out of 2018 profit in the total amount of 3,061 thousand euros (spring 2018: 2,191 thousand euros). Without the payment of dividends, the NAV of the Fund would have increased 7.5% during the first half of 2019. The ROIC was 18.4% as at June 30, 2019 (June 30, 2018: 16.6%).
In addition to the aforementioned share net asset value calculated according to IFRS (EUR 15.90 as at 30.06.2019), EfTEN Real Estate Fund III AS also calculates the net asset value of the share recommended by EPRA. EfTEN Real Estate Fund III AS EPRA NAV as at 30.06.2019 was EUR 16.92 (31.12.2018: EUR 16.81).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| 2nd quarter | 1st half year | |||
| EUR thousand | 2019 | 2018 | 2019 | 2018 |
| Revenue | 2,321 | 2,104 | 4,636 | 4,105 |
| Cost of services sold | -71 | -37 | -147 | -85 |
| Gross profit | 2,250 | 2,067 | 4,489 | 4,020 |
| Marketing costs | -134 | -122 | -220 | -224 |
| General and administrative expenses | -376 | -305 | -664 | -567 |
| Gain / loss from revaluation of investment properties | 1,460 | 962 | 1,460 | 962 |
| Other operating income and expense | 0 | 7 | -1 | 7 |
| Operating profit | 3,200 | 2,609 | 5,064 | 4,198 |
| Interest income | 0 | 0 | 0 | 3 |
| Finance costs | -392 | -310 | -730 | -520 |
| Profit before income tax | 2,808 | 2,299 | 4,334 | 3,681 |
| Income tax expense | -479 | -403 | -636 | -532 |
| Total comprehensive income for the financial period | 2,329 | 1,896 | 3,698 | 3,149 |
| Earnings per share | ||||
| - Basic | 0.68 | 0.59 | 1.11 | 0.98 |
| - Diluted | 0.68 | 0.59 | 1.11 | 0.98 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| 30.06.2019 | 31.12.2018 | |
| EUR thousand | ||
| ASSETS | ||
| Cash and cash equivalents | 8,597 | 4,859 |
| Short-term deposits | 9,000 | 0 |
| Receivables and accrued income | 669 | 673 |
| Prepaid expenses | 45 | 46 |
| Total current assets | 18,311 | 5,578 |
| Long-term receivables | 53 | 24 |
| Investment property | 109,730 | 102,787 |
| Property, plant and equipment | 123 | 114 |
| Total non-current assets | 109,906 | 102,925 |
| TOTAL ASSETS | 128,217 | 108,503 |
| LIABILITIES AND EQUITY | ||
| Borrowings | 2,807 | 8,105 |
| Derivative instruments | 365 | 189 |
| Payables and prepayments | 1,301 | 1,019 |
| Total current liabilities | 4,473 | 9,313 |
| Borrowings | 52,121 | 44,743 |
| Other long-term liabilities | 553 | 457 |
| Deferred income tax liability | 3,939 | 3,496 |
| Total non-current liabilities | 56,613 | 48,696 |
| Total liabilities | 61,086 | 58,009 |
| Share capital | 42,225 | 32,225 |
| Share premium | 9,658 | 3,658 |
| Statutory reserve capital | 936 | 621 |
| Retained earnings | 14,312 | 13,990 |
| Total equity | 67,131 | 50,494 |
| TOTAL LIABILITIES AND EQUITY | 128,217 | 108,503 |
Marilin Hein
CFO
Phone 655 9515
E-mail: marilin.hein@eften.ee
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