MANAGEMENT REPORT FOR 6 MONTHS OF 2019
General information
UPP Olaines OÜ (hereafter ‘the Company’) was established for the purpose of funding, acquiring and managing the real estate investment of Olaines Logistics Park: (buildings and land) located at “Šarlotes”, Olaines county, Olaines parish, Latvia, cadastre number 8080 003 0029, registered in the Land Register compartment No.5439 of the city of Olaine parish. The Company was established on 24.08.2017 and had no economic activity until 15.12.2017, when it acquired the cold storage warehouse Olaines Logistics Park.
The business performance is not affected by seasonal factors. The activities of the Company have no environmental or social impact.
As the Company has been established solely for the purpose of funding, acquiring and managing the property, no strategic changes in the business are planned.
The management board is aware of no trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the Company’s prospects for the period after the reporting period of these financial statements outside the course of its regular business activities.
UPP Olaines OÜ is operating based on going concern.
Management commentary for the reporting period
During Q2 2019 the company made 600,653 EUR in operating income and during the first half of 2019 the operating income amounted to 1,244,800 EUR in total. Compared to Q2 2018 the income has decreased by 6.6% and the semi-annual operating income increased by 8.3% compared to the same period in 2018. The company suffered a penalty in the amount of 15,000 EUR by Finantsinspektsioon because it failed to publish the 2018 audited annual results in time, which had minor effect on Q2 2019 results. The overall increase in semi-annual operating profit is due to the transaction costs which occurred in the first half of 2018.
During Q2 2019 the company's financial expenses amounted to 413,416 EUR and during first half of 2019 the financial expenses amounted to 790,090 EUR in total. Compared to Q2 2018 the financial expenses have decreased by 40%, the semi-annual financial expenses decreased by 19.7% compared to the same period in 2018. The decrease in financial expenses is related to the initial recognition of interest rate swap which occurred in Q2 2018. In terms of cash flows the servicing of obligations has remained on similar level throughout reporting periods. The slight increase in repayments of obligations during first half of 2019 is due to the grace period in Q1 2018 during which the company did not repay investment loan principal for three months.
The company’s sole business activity is to collect rental revenue, manage the Olaine property and service its liabilities to lenders and investors. Liabilities include the subordinated bonds with a fixed interest rate and the investment loan which’ rate is also fixed with an interest rate swap agreement. On the revenue side the company earns stable triple-net rental income from reputable tenants, which is fixed with medium-term agreements but is subject to indexation. Due to the economically fixed nature of the company, there needs to be major event in the overall economy or in the company's business activities for them to have significant effect on the company’s financial results.
As of reporting date all regular business operations of the company are running smoothly, including duly and timely collection of rental and utilities payments from the tenants.
As of the end of Q2 2019, there is no vacancy in the premises.
Management board and supervisory board
The management board of UPP Olaines OÜ has one member: Marko Tali, the chairman of the management board.
The supervisory board of UPP Olaines OÜ has three members: Mart Tooming, Tarmo Rooteman, Hallar Loogma.
No remuneration or other benefits have been allotted to the members of the management board and supervisory board.
There are no employees in the company besides the members of the management and supervisory board.
Key indicators of financial performance and position for 6 months 2019
| (in EUR) | Q2 2019 | Q2 2018 | 6 months 2019 | 6 months 2018 | |||
| Net rental income | 639,720 | 653,579 | 1,291,518 | 1,278,097 | |||
| Operating profit | 600,653 | 643,001 | 1,244,800 | 1,148,914 | |||
| Profit for the period | 187,237 | (50,226) | 454,710 | 164,489 | |||
| (in EUR) | 30.06.2019 | 31.12.2018 | |||||
| Investment property | 30,762,000 | 30,762,000 | |||||
| Interest-bearing loans | 29,124,633 | 29,656,633 | |||||
| Interest-bearing loans less shareholder loan | 26,076,333 | 26,608,333 | |||||
| 6 months 2019 | |||||||
| Net profit margin (Total comprehensive income for the period / Net rental income) | 35% | ||||||
| ROA (Net profit for the period / Average total assets for the period) | 1.4% | ||||||
| DSCR (Operating profit / Loan principal and interest payments on interest-bearing loans) | 1.1 | ||||||
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed consolidated interim statement of comprehensive income
| (in EUR) | Note | Q2 2019 | Q2 2018 | 6 months 2019 | 6 months 2018 |
| Net rental income | 5 | 639,720 | 653,579 | 1,291,518 | 1,278,097 |
| Net rental income | 639,720 | 653,579 | 1,291,518 | 1,278,097 | |
| General and administrative expenses | (24,067) | (10,578) | (31,718) | (129,183) | |
| Other income / (cost) | (15,000) | 0 | (15,000) | 0 | |
| Operating profit | 600,653 | 643,001 | 1,244,800 | 1,148,914 | |
| Financial income / (cost) | (413,416) | (693,227) | (790,090) | (984,425) | |
| Profit before income tax | 187,237 | (50,226) | 454,710 | 164,489 | |
| Profit for the period | 187,237 | (50,226) | 454,710 | 164,489 | |
| Total comprehensive income for the period | 187,237 | (50,226) | 454,710 | 164,489 |
Condensed consolidated interim statement of financial position
| (in EUR | Note | 30.06.2019 | 31.12.2018 |
| Cash and cash equivalents | 598,495 | 426,691 | |
| Trade and other receivables | 257,542 | 300,576 | |
| Total current assets | 856,037 | 727,267 | |
| Investment property | 30,762,000 | 30,762,000 | |
| Total non-current assets | 30,762,000 | 30,762,000 | |
| TOTAL ASSETS | 31,618,037 | 31,489,267 | |
| Trade and other payables | 470,681 | 446,036 | |
| Financial derivatives | 598,294 | 416,879 | |
| Loans and borrowings | 6 | 1,064,000 | 1,064,004 |
| Total current liabilities | 2,132,975 | 1,926,919 | |
| Loans and borrowings | 6 | 28,060,633 | 28,592,629 |
| Total non-current liabilities | 28,060,633 | 28,592,629 | |
| TOTAL LIABILITIES | 30,193,608 | 30,519,548 | |
| Share capital | 2,500 | 2,500 | |
| Retained earnings | 1,421,929 | 967,219 | |
| TOTAL EQUITY | 1,424,429 | 969,719 | |
| TOTAL EQUITY AND LIABILITIES | 31,618,037 | 31,489,267 |
Siim Sild
Director
+372 5626 0107
siim.sild@unitedpartners.ee
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