AS PRO KAPITAL

ANNOUNCEMENT

 

COMMENTARY TO THE CONSOLIDATED FINANCIAL RESULTS 09/99

 

The 9-month 1999 consolidated and unaudited balance sheet, income 

statement and commentary to the financial results of AS Pro Kapital 

published via the information system of the Tallinn Stock Exchange 

reflect the unaudited results of the group's parent company, which 

also includes unaudited results of subsidiaries (based on equity 

method), and results of the group, which includes consolidated and 

unaudited results of the parent company and its subsidiaries.

 

Consolidated statements include the results of subsidiaries OÜ 

Nurmelin, OÜ Larvikk, OÜ Ermekta, AS Arco Kinnisvaraarendus, AS Pro 

Haldus, OÜ Neotrust and Latvian and Lithuanian subsidiaries (based 

on equity method).

 

As of 1999, AS Pro Kapital and Pro Kapital group reflect their 

financial results according to the second income statement scheme 

provided by the Accounting Law of the Republic of Estonia, instead 

of the first scheme used earlier. Such transition proceeds from the 

suitability of the second scheme to the principal fields of 

activity of the company as well as the group upon reflecting the 

expenses and income. For comparability purposes, the data from 

previous periods are amended by grouping the income statement 

accounts in accordance with the new scheme.

 

The 9-month 1999 net sales of AS Pro Kapital amounted to 44.9 

million EEK, of which a substantial amount proceeds from the sale 

of real estate objects. In addition, the net turnover figure also 

includes rent income and sale of real estate development-related 

services.

 

The 9-month 1999 net sales of Pro Kapital group amounted to 73.3 

million EEK, including turnover of the parent company, rent income 

from Kristiine Keskus, turnover of OÜ Ermekta and administration 

services provided by AS Pro Haldus.

 

OÜ Larvikk, OÜ Neotrust, AS Arco Kinnisvaraarendus and the 

subsidiaries operating in Latvia and Lithuania had no sales during 

9 months in 1999, due to the fact that these subsidiaries own real 

estate objects that are currently in development stage, and the 

preliminary sales contracts with clients cannot be reflected on the 

account of net sales due to accounting principles used by the 

company.

 

In December 1998, the company changed the accounting principles 

used for reflecting preliminary sales contracts. The new accounting 

principles are described in detail in the commentary to the Q1 1999 

unaudited and consolidated financial statements.

 

Pursuant to the accounting principles of 1999, the preliminary 

contracts in the amount of 76 million EEK concluded by the parent 

company and subsidiaries, and the respective prepayments were not 

suitable to be reflected in 9-month 1999 net turnover figure, but 

on the balance sheet account of customer prepayments.

 

Compared to 1998, the income/expense structure indicates a 

remarkable decrease in the parent company's administrative expenses 

from 19.5 million EEK to 10.3 million EEK. The group's 

administrative expense account has increased from 22.1 million EEK 

to 26.4 million EEK due to the expansion of the group's activities 

during the past year.

 

The group's marketing expenses were mainly related to the 

advertising campaign of Ilmarise quarter and Kristiine Keskus.

 

During H1 the company earned financial income from the sale of 

holding in OÜ Viruäri. Compared to previous accounting period, the 

group's financial expenses have increased due to relative increase 

of bank loans in the group's financial resources. 

 

Both the parent company and the group are in loss at the end of 9 

months of  1999 (parent - 7.6 million EEK, group - 11.4 million 

EEK). The parent company's loss originates mainly from the 

above-mentioned accounting principles in reflecting the preliminary 

sales contracts, and the administrative expenses of the whole 

group. The parent company will bill the group companies for the 

administrative expenses at the end of accounting period, which 

allows a justified diversification of administrative expenses to 

the minority shareholders of the group companies. 

 

The loss posted by the group originates mainly from consolidation 

of the results of the subsidiaries, which own real estate objects 

under construction, and the sales contracts concluded with clients 

cannot yet be reflected on the account of net turnover, as the 

conditions determined by the accounting principles were not met.

 

The conditions concluded during former periods that enable to 

reflect the sales contracts on the account of net turnover are met 

due to the operation in the last quarter of 1999. It is important 

to mention that the Latvian subsidiaries have started an active 

sales campaign. Proceeding from the above-mentioned factors, the 

parent company as well as the group is expected to end the 1999 

with profit. 

 

Compared to 1998, the long-term financial investments of AS Pro 

Kapital have increased from 168 million EEK to 451 million EEK. 

Such an increase was mainly due to additional investments made into 

subsidiaries, hence the long-term financial investments reflected 

on the group balance sheet have decreased y-o-y only from 33 

million EEK to 22 million EEK. The volume of tangible assets has 

shifted from 522 million EEK to 583 million EEK, mainly due to sale 

of holding in OÜ Viruäri (decrease in total assets) and additional 

investments into Kristiine Keskus and Ilmarise quarter (increase in 

total assets).

 

The company's share capital increased to 225 million EEK as a 

result of the share issue completed on 31.03.1999. The total amount 

of thte issue was 270 million EEK. The share premium is reflected 

on the paid-in capital over par account of the balance sheet, which 

has at the same time been decreased by the share issue related 

expenses.

 

The parent's and group's deferred income tax liability, which 

proceeds from the difference between accounting amortization and 

tax amortization, is reflected on the account of long-term 

provisions.

 

 

Ilona Saari

Chief Financial Officer

Pro Kapital group

Tel. +372 6144 920