Liven AS - Consolidated unaudited interim report for the III quarter of 2024
Although there were no huge positive development leaps in the operating
environment, there were still signs of renewed optimism in the residential
property market. During the third quarter, we signed 32 contracts under the law
of obligation (sales contract; 2024 Q2: 47; 2023 Q3: 21) and during the first 9
months of the year, we signed a total of 95 sales contracts (2023: 40). Most of
the new sales during the quarter came from the Regati development which is under
construction and also the sales of previously completed apartments of Luuslangi
development. Liven's market share of new sales in Tallinn and the surrounding
area is estimated to have been around 10% in the first 9 months of 2024, up from
the 6-7% estimate of the previous two years.
The weekly sales ratio, which represents the number of homes going out of supply
under sales contract or paid reservations, improved compared to the previous
quarters, averaging 1.5% over the period and above 2.0% in October. The long-
term average is considered to be 1.5-2.0%.
During the third quarter, we handed over a total of 27 new homes in developments
completed under the real right contract (2024 Q2: 29; 2023 Q3: 15). Of these,
11 in the phase II of the Iseära development, 10 were in phase I of the
Luuslangi development, 3 in phase II of the Uus-Meremaa development, and 3 from
the Magdaleena development. In the same order, the projects also had an impact
on the financial results of the third quarter. Revenue for the quarter was EUR
7,057 thousand (2024 Q2: EUR 8,546 thousand; 2023 Q3: EUR 4,499 thousand) and
net profit for the period was EUR 342 thousand (2024 Q2: EUR 443 thousand; 2023
Q3: EUR -578 thousand).
In the first nine months of the year, we have delivered a total of 68 new homes
(2023: 74), generated sales revenue of EUR 19,101 thousand (2023: EUR 19,052
thousand) and a net profit of EUR 635 thousand (2023: EUR -1,470 thousand).
Assets increased by EUR 303 thousand during the quarter to EUR 73,104 thousand
at the end of the period. During the quarter, we received new bank loans of EUR
5,245 thousand to finance the construction of projects, but together with home
deliveries, we repaid EUR 4,515 thousand of earlier construction loans. Total
borrowings with other loans increased by EUR 643 thousand to EUR 44,380 thousand
during the quarter. In connection with loan repayments, short-term loan
commitments decreased by EUR 315 thousand to EUR 9,738 thousand during the
quarter.
The balance of cash and cash equivalents decreased by EUR 3,723 during the
quarter to EUR 4,807 at the end of the quarter mainly related to the acquisition
of a new property.
Consolidated statement of financial position
(in thousands of euros) 30.09.2024 31.12.2023 30.09.2023
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Current assets
Cash and cash equivalents 4,807 3,721 2,773
Trade and other receivables 81 1,326 90
Prepayments 715 321 1,127
Inventories 65,138 62,112 63,656
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Total current assets 70,741 67,480 67,646
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Non-current assets
Prepayments 44 0 0
Investment property 1,064 0 0
Property, plant and equipment 432 388 234
Intangible assets 386 296 297
Right-of-use assets 437 395 0
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Total non-current assets 2,363 1,079 531
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TOTAL ASSETS 73,104 68,559 68,177
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Current liabilities
Borrowings 9,738 17,106 14,542
Trade and other payables 8,838 9,121 7,629
Provisions 528 2,384 0
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Total current liabilities 19,104 28,611 22,171
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Non-current liabilities
Borrowings 34,642 21,328 30,099
Trade and other payables 1,032 469 80
Provisions 54 29 4
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Total non-current liabilities 35,728 21,826 30,183
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Total liabilities 54,832 50,437 52,354
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Equity
Share capital 1,190 1,183 1,183
Share premium 9,540 9,339 9,250
Share option reserve 321 363 404
Own (treasury) shares 0 -1 -1
Statutory capital reserve 118 115 115
Retained earnings (prior periods) 6,468 6,347 6,342
Profit for the year 635 775 -1,470
Total equity attributable to owners of the
parent 18,272 18,122 15,823
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Total equity 18,272 18,122 15,823
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TOTAL LIABILITIES AND EQUITY 73,104 68,559 68,177
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Consolidated statement of comprehensive income
2024
(in thousands of euros) Q3 2023 Q3 2024 9 months 2023 9 months
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Revenue 7,057 4,499 19,101 19,052
Cost of sales -5,987 -4,499 -15,951 -18,814
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Gross profit 1,070 0 3,150 238
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Distribution costs -327 -283 -978 -689
Administrative expenses -352 -316 -993 -934
Other operating income 21 30 33 40
Other operating expenses -10 -5 -17 -9
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Operating profit 403 -574 1,195 -1,354
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Finance income 31 6 57 9
Finance costs -92 -10 -448 -21
Total finance income and finance
costs -61 -4 -391 -12
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Profit before tax 342 -578 804 -1,366
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Income tax expense 0 0 -169 -104
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Net profit for the year 342 -578 635 -1,470
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Attributable to owners of the
parent 342 -578 635 -1,470
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Comprehensive income for the year 342 -578 635 -1,470
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Attributable to owners of the
parent 342 -578 635 -1,470
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Basic profit/loss per share 0.029 -0.049 0.054 -0.125
Diluted profit/loss per share 0.028 -0.048 0.052 -0.122
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The customer satisfaction feedback rating for the last 12 months, collected at
different stages of the customer journey, increased to 8.4 out of 10 by the end
of third quarter (Q2 2024: 8.0; Q3 2023: 8.9). The improvement in the feedback
rating reflects the focus on increasing the number of customer feedback ratings
and improving performance in 2024.
Key events in development projects
At the beginning of the quarter, we started the construction of the last five
terraced houses of Phase II of the Iseära project. At the end of the quarter, we
started the pre-sales of the Jalami 6 apartment building in Luuslangi Phase II.
On 30 October, planning permission was issued for a 30-apartment apartment
building at Virmalise 3.
Acquisition of Kalda 5 property
During the quarter, we acquired a property at Kalda 5 / Käokõrva 1-12 in Nõmme,
Tallinn. The total value of the transaction was EUR 2.5 million, and we used the
funds raised by the green bonds in spring 2024 to acquire the property.
According to the existing detailed plan and the issued building permit, it is
possible to build 12 three-storey residential buildings with a total of 72
apartments and a saleable area of approximately 6,000 m(2 )on the property. We
plan to sell and build the development in several phases and start the sale in
2025.
Increase of share capital in connection with employee share option schemes
During the quarter, the Board of Directors of Liven AS decided to increase the
share capital by EUR 14,575.80 from EUR 1,185,424.20 to EUR 1,200,000.00 by
issuing 145,758 new ordinary shares with a nominal value of EUR 0.1 each, in
accordance with the previous decision of the General Meeting of Shareholders.
The shares were issued without a premium and were fully paid for by cash
contributions.
The share capital increase and the issuance of new shares were carried out in
order to comply with the terms and conditions of the stock option plan LEOP
("LEOP") and the stock option plan LEOP 2024-2027 ("LEOP 2024-2027"). Of the new
shares, 47,495 shares were issued directly to the beneficiaries of the LEOP
options. 57,057 shares are intended to be used to fulfil the terms of the LEOP
and 41, 206 shares to create a LEOP 2024-2027 option fund.
Significant developments in the economic environment in the period under review
The 6-month Euribor (Euribor), which peaked a year ago at 4.143%, has been
falling throughout 2024. Compared to the second quarter of 2024, the Euribor
fell significantly in the third quarter, reaching 3.11% at the end of the period
(30.06.2024: 3.68%) and 2.89% after the reporting date.
At the Governing Council of the European Central Bank in October 2024, it was
decided to cut the base rate by 25 basis points, as the assumption that annual
inflation in the euro area would fall below 2% was met. This decision was in
line with an earlier forecast by economic analysts.
The main presumption for lowering Euribor is declining inflation. In Estonia,
annual consumer price inflation rate was 3.0% in the third quarter of 2024 (2024
Q2: 2.5%). According to Eesti Pank's forecasts, the consumer basket as a whole
will increase by 3.5% in 2024.
According to the latest data from Statistics Estonia, the estimated annual
increase in average gross wages in the second quarter (8.1%) exceeded the
increase in prices. Despite this, consumer confidence, which had remained low
for a long time, remained weak in the latest quarter. Consumers are more likely
to view the purchase of durable goods as a bargain in the next 12 months than
they do now, leading to a general sentiment to continue to be on hold and to
delay purchasing decisions. Based on the recent data from the Institute of
Economic Research, the consumer confidence indicator has deteriorated further
compared to the second quarter of 2024 and remains at a low level (October
2024: -37; average for the second quarter of 2024: -28).The October 2024
confidence indicator is comparable to two years ago, when consumer confidence
reached its lowest level in recent history.
Despite the above, there were signs of activation of home buyers in the market.
For example, according to the Land Statistical Office's transaction statistics,
the number of transactions of apartments (residental) in Tallinn increased by
12.3% compared to the previous quarter (Q3 2024: 2,141 transactions; Q2
2024: 1,906 transactions). However, activity has increased mainly in the
aftermarket buy/sell transactions and sales of new developments have remained
rather subdued.
Compared to the second quarter of 2024, the offer prices of new developments
remained stable in the third quarter of 2024, showing an increase only of 0.3%.
The number of transactions on the market decreased by 28% compared to the second
quarter of 2024 (Q3 2024: 368 transactions; Q2 2024: 513 transactions), being
also 8% below the sales performance in the third quarter of 2023 (404
transactions). Only 38 new offers were added, a similar level compared to the
previous quarter.
Due to the completion of construction of several development projects in spring
and summer 2024 and the modest sales volume, the stock of unsold ready-to-move-
in apartments remained relatively high in the third quarter, reaching 931
apartments by the end of the quarter (Q2 2024: 933; Q3 2023: 640). Consequently,
options for homebuyers and market competition remain high.
The average listing price per square metre of a new apartment in Tallinn was EUR
4,362 in Q3, showing an annual increase of 3.3%. On a quarterly comparison,
listing prices have remained relatively unchanged, increased by only 0.3%.
Outlook for the future
Despite some recovery in the market during both the second and third quarters,
the external environment's impact on demand and sales will continue to be the
main challenge in the last quarter of 2024 and in the years ahead. We expect a
continuation of the gradual improvement in the external factors affecting the
residential real estate sector, in particular the decline in interest rates and
real wage growth. Provided that the demand holds up or increases we are ready to
quickly bring new supply to the market.
This year and beyond will continue to be environmentally challenging and risky,
including for all levels of the public sector. Despite positive developments,
significant challenges remain in Tallinn's planning procedures. We continue to
expect several long-drawn-out procedures to reach a conclusion in 2024 or the
first half of 2025. Planned tax rate increases and additional taxes will
increase the sales prices of new developments in the coming years, reducing
incomes and the availability of real estate.
In real estate development, results are achieved with a significant time lag and
an increase in marketing expenses in the periods preceding the sales growth. The
results for 2024 will reflects the conditions and decisions of 2022 and 2023,
when construction work started on only a few projects and the cost base was
heavily affected by high inflation. To meet our 20% return on equity target we
need an annual revenue in excess of EUR 40 million.
Although the necessary capacity is available in the portfolio for the coming
years, we can deliver a maximum of 110 residential and commercial properties in
total this year. In the first nine months of the year, we delivered 68 homes,
62% of the total available. By the end of October, 65% of the total potential.
In the first nine months, we achieved sales revenue of EUR 19.1 million, and we
estimate that the potential sales proceeds from the remaining space in the
portfolio to be sold and transferred during 2024 is EUR 13.9 million. This is
unlikely to be fully realised in the final months of the year, but the
unrealised portion will continue to underpin the results in subsequent periods.
With the decisions and actions undertaken in 2024, we will build on our economic
performance in 2025 and 2026. Achieving good results will require improvements
in external factors as well as internal efforts to reduce construction costs.
Largely as a result of the developments of the Regati and Iseära projects, as
well as unrealised sales potential in 2024, we expect a significant improvement
in financial results in 2025 and 2026. There is sufficient capacity in the
development portfolio for the next 3-4 years, but we continue to actively
negotiate and consider acquisition alternatives to increase the development
portfolio.
Joonas Joost
Liven AS CFO
E-mail: [email protected]
Liven AS - Consolidated unaudited interim report for the III quarter of 2024