MANAGEMENT REPORT FOR 9 MONTHS 2023
General information
UPP Olaines OÜ (hereafter ‘the Company’ and ‘the Group’ when referred together with subsidiaries) 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 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.
Financial commentary for the second quarter and nine months of 2023
Net operating income was 626 923 euros in 3Q 2023 (670 298 euros in 3Q 2020) and 1 864 577 euros for the nine months of 2023 (1 979 158 euros for 9 months of 2020). Operating profit was 542 929 euros in 3Q 2023 (635 253 euros in 3Q 2020) and 1 693 421 euros for the nine months of 2023 (1 863 48 euros for 9 months of 2020). Net income was 297 664 euros in 3Q 2023 (408 988 euros in 3Q 2020) and 950 756 euros for the nine months of 2023 (1 119 547 euros for 9 months 2020).
Decrease in net operating income for 9 months of 2023 was due to the changes in the lease agreements which the management also reflected upon in the 1Q 2023 commentary. In 3Q 2023 the Group made repairs in Olaine LC which had additional effect on 3Q and 9 months net operating income.
The Group paid a 49 715 euro fine issued by Būvniecības valsts kontroles birojs (State Construction Control Bureau of Latvia) which had a noticeable impact on net income for 3Q and 9 months.
Group received the fine because the Company’s subsdiary, SIA Olaines Logistics did not forward its’ 2020 energy balance to the Bureau in due time. In Latvia, companies which consume more than 500 000kWh of energy for two consecutive years, are consdered large energy consumers and must make energy efficiency investments, or pay energy efficiency fine calculated on the basis of electricity consumed. For companies such as SIA Olaines Logistics, who do not consume the electricity, but are forwarding (selling) bought electricity to ohter clients, there is a requirement to maintain a balance of the kWh-s bought and sold, and to forward annual balance to the Bureau before a due date. SIA Olaines Logistics failed to forward required balance for 2020 in due time because of changes which occurred in Group’s asset management team at that time. Furthermore, because of COVID travel restrictions we were not able to access SIA Olaines Logistics physical mail box, where noticies and reminders regarding the obligation to forward the balance were sent by the Bureau. As a result the Group became liable to pay energy efficiency fee for the full ~8 000MWh of electricity consumed in Olaines LC by the clients of SIA Olaines Logistics. SIA Olaines Logistics appealed to the Bureau several times and also appealed to the Ministry of Economics of Latvia to reduce the fine as it is completely out of proportions compared to the nature of violation and the fact that the SIA Olaines Logistics consumed 0kWh of electricity. However none of the appeals were considered by either inistitution because the due date for appealing was past, leaving the fine in force in full amount.
In 3Q 2023 the Group initiated investments to change all lightning in Olaine LC to LED lights, including outside premises lighting.
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.
Key indicators of financial performance and position for 9 months 2023
| (in EUR) | 3Q 2023 | 3Q 2020 | 9 months 2023 | 9 months 2020 |
| Net operating income | 626 923 | 670 298 | 1 864 577 | 1 979 158 |
| EBIT | 542 929 | 635 253 | 1 693 421 | 1 863 489 |
| Profit for the period | 297 664 | 408 988 | 950 756 | 1 119 547 |
| (in EUR) | 30.09.2021 | 30.09.2020 | |||
| Investment property | 31 320 000 | 30 909 000 | |||
| Interest-bearing loans | 26 624 362 | 27 694 631 | |||
| Interest-bearing loans less shareholder’s loan | 23 682 334 | 24 746 331 | |||
| 9 months 2021 | 9 months 2020 | |
| Net profit margin, % (Total comprehensive income / Net operating income) | 50,1% | 56,6% |
| ROA (Net profit / Average fixed assets) | 4,05% | 4,83% |
| LTV (Interest-bearing loans less shareholder’s loan / Investment property) | 75,6% | 80,1% |
| DSCR (Operating profit / Loan principal and interest payments on interest-bearing loans) | 1,1 | 1,2 |
Management board and supervisory board
The management board of UPP Olaines OÜ has one member: Marko Tali, the chairman of the board. The management board of Olaines Logistics SIA has also one member: Siim Sild, chairman of the 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 of UPP Olaines OÜ. The member of board of Olaines Logistics SIA receives remuneration according to Latvian legislation.
There are no employees in the company besides the members of the management and supervisory board.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed consolidated interim statement of comprehensive income
| (in EUR) | Note | 3Q 2023 | 3Q 2020 | 9 months 2023 | 9 months 2020 |
| Net rental income | 4 | 626 923 | 670 298 | 1 865 121 | 1 979 158 |
| Net rental income | 626 923 | 670 298 | 1 865 121 | 1 979 158 | |
| General and administrative expenses | (34 279) | (35 045) | (121 985) | (115 669) | |
| Other operating expenses | (49 715) | 0 | (49 715) | 0 | |
| Operating profit | 542 929 | 635 253 | 1 693 421 | 1 863 489 | |
| Financial income / (cost) | (245 265) | (232 265) | (742 665) | (743 942) | |
| Profit before income tax | 297 664 | 402 988 | 950 756 | 1 119 547 | |
| Income tax | 0 | 0 | 0 | 0 | |
| Profit for the periood | 297 664 | 402 988 | 950 756 | 1 119 547 | |
| Total comprehensive income for the period | 297 664 | 402 988 | 950 756 | 1 119 547 |
Condensed consolidated interim statement of financial position
| (in EUR) | Note | 30.09.2021 | 30.09.2020 |
| Cash and cash equivalents | 712 869 | 752 089 | |
| Trade and ohter receivables | 231 037 | 317 024 | |
| Total current assets | 943 906 | 1 069 113 | |
| Investment property | 31 320 000 | 30 909 000 | |
| Total non-current assets | 31 320 000 | 30 909 000 | |
| TOTAL ASSETS | 32 263 906 | 31 978 113 | |
| Trade and ohter payables | 505 591 | 383 036 | |
| Financial derivatives | 224 155 | 407 502 | |
| Loans and borrowings | 5 | 1 064 004 | 1 064 004 |
| Total current liabilities | 1 793 750 | 1 854 542 | |
| Loans and borrowings | 5 | 25 560 358 | 26 630 627 |
| Total non-current liabilities | 25 560 358 | 26 630 627 | |
| TOTAL LIABILITIES | 27 354 108 | 28 485 169 | |
| Share capital | 2 500 | 2 500 | |
| Retained earnings | 4 907 298 | 3 490 444 | |
| TOTAL EQUITY | 4 909 798 | 3 492 944 | |
| TOTAL EQUITY AND LIABILITIES | 32 263 906 | 31 978 113 |
UNITED PARTNERS
Siim Sild
Managing Director
+372 5626 0107
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