AS Tallinna Vesi´s financial results for the 3rd quarter of 2020

AS Tallinna Vesi’s sales revenue for the third quarter of 2020 were €13.28 million, showing a decrease of 19.5% compared to the same period last year. This was caused by the reduced tariffs and lower commercial consumption resulting from the coronavirus outbreak. Nevertheless, we have seen a partial increase in commercial consumption during the third quarter compared to the second quarter, which hopefully signals a partial recovery.

Sales to private customers in the main service area decreased by 23.8% to €4.90 million, due to the reduced tariffs. The impact of reduced tariffs was partly balanced by higher consumption of apartment blocks, which is the largest private customer segment of the Company. This was the result of the coronavirus, as large number of people worked from home also during the 3^rd quarter.

In the main service area, the sales revenue from commercial customers dropped by 29.8% to €3.71 million, which was mainly attributable to 18% less consumption and reduced tariffs. In the commercial customer segment, the hospitality sector has seen the greatest impact from the pandemic, resulting in reduced consumption. However, the 3^rd quarter saw some increase in commercial consumption compared to the 2nd quarter, which hopefully indicates a partial recovery from the effects of coronavirus.

The gross profit for the 3rd quarter of 2020 was €5.80 million, showing a 35% decrease mostly due to lower sales revenues. The operating profit was €5.77 million, lower by €1.75 million year-on-year. Besides the negative changes in tariffs and consumption, the operating profit was positively impacted by €1.2 million reduction in the provision, formed for possible third-party claims, which was also reduced in the 2nd quarter.

The net profit for the 3rd quarter of 2020 was €5.64 million, showing a decrease of 23.1% compared to the same period last year. In addition to the changes in the operating profit, the net profit was positively affected by lower interest costs.

Coronavirus also affected the sale of construction services, because a number of new developments in Tallinn were postponed. In the 3rd quarter, the subsidiary Watercom continued the delivery of large projects in Tallinn and elsewhere in Estonia, which had been awarded in 2019. The construction revenue reduced by 17.3% or €0.36 million compared to the same period last year. The decrease in revenues was mainly attributable to reduced revenues from construction services, which were partly offset by higher revenues from road construction.

The Company has just reviewed its dividend policy for going forward. ASTV aims to distribute 50%-80% of the annual profit as dividends. Dividend payments shall be assessed annually considering ASTV’s earnings, investment needs, liquidity position and long-term financial objectives.

MAIN FINANCIAL INDICATORS

€ million, except key ratios	3rd quarter			Change 2020/ 2019	9 months			Change 2020/ 2019
	2020	2019	2018		2020	2019	2018
Sales	13.28	16.49	16.49	-19.5%	13.28	16.49	16.49	-19.5%
Gross profit	5.80	8.92	8.59	-35.0%	5.80	8.92	8.59	-35.0%
Gross profit margin %	43.69	54.12	52.10	-19.3%	43.69	54.12	52.10	-19.3%
Operating profit before depreciation and amortisation	7.35	9.01	8.73	-18.5%	7.35	9.01	8.73	-18.5%
Operating profit before depreciation and amortisation margin %	55.33	54.63	52.95	1.3%	55.33	54.63	52.95	1.3%
Operating profit	5.77	7.52	7.31	-23.3%	5.77	7.52	7.31	-23.3%
Operating profit - main business	5.44	7.19	7.07	-24.4%	5.44	7.19	7.07	-24.4%
Operating profit margin %	43.43	45.60	44.31	-4.8%	43.43	45.60	44.31	-4.8%
Profit before taxes	5.64	7.33	7.14	-23.1%	5.64	7.33	7.14	-23.1%
Profit before taxes margin %	42.45	44.47	43.28	-4.6%	42.45	44.47	43.28	-4.6%
Net profit	5.64	7.33	7.14	-23.1%	5.64	7.33	7.14	-23.1%
Net profit margin %	42.45	44.47	43.28	-4.6%	42.45	44.47	43.28	-4.6%
ROA %	2.24	2.89	2.97	-22.4%	2.24	2.89	2.97	-22.4%
Debt to total capital employed %	57.73	59.29	59.89	-2.6%	57.73	59.29	59.89	-2.6%
ROE %	5.42	7.27	7.58	-25.5%	5.42	7.27	7.58	-25.5%
Current ratio	3.66	5.14	4.99	-28.8%	3.66	5.14	4.99	-28.8%
Quick ratio	3.62	5.10	4.96	-29.0%	3.62	5.10	4.96	-29.0%
Investments into fixed assets	5.92	4.66	4.29	27.1%	5.92	4.66	4.29	27.1%
Payout ratio %	na	72.05	62.11		na	72.05	62.11

Gross profit margin – Gross profit / Net sales
Operating profit before depreciation and amortisation – Operating profit + depreciation and amortisation
Operating profit before depreciation and amortisation margin – Operating profit before depreciation and amortisation / Net sales
Operating profit margin – Operating profit / Net sales
Net profit margin – Net profit / Net sales
ROA – Net profit / Average Total assets for the period
Debt to Total capital employed – Total liabilities / Total capital employed
ROE – Net profit / Average Total equity for the period
Current ratio – Current assets / Current liabilities
Quick ratio – (Current assets – Stocks) / Current liabilities
Payout ratio - Total Dividends per annum/ Total Net Income per annum
Main business – water services related activities, excl. connections profit and government grants, construction services, doubtful debt

STATEMENT OF COMPREHENSIVE INCOME	3rd quarter	3rd quarter		9 months	9 months		12 months
€ thousand	2020	2019		2020	2019		2019
Revenue	13,276	16,487		38,545	47,301		63,423
Cost of goods and services sold	-7,476	-7,565		-21,954	-21,327		-29,470
GROSS PROFIT	5,800	8,922		16,591	25,974		33,953
Marketing expenses	-94	-89		-320	-297		-390
General administration expenses	-1,123	-1,120		-3,631	-4,408		-5,689
Other income (+)/ expenses (-)	1,182	-195		3,387	-256		4,201
OPERATING PROFIT	5,765	7,518		16,027	21,013		32,075
Financial income	3	12		28	30		38
Financial expenses	-133	-199		-357	-691		-809
Other financial income (+)/ expenses (-)	0	0		0	0		0
PROFIT BEFORE TAXES	5,635	7,331		15,698	20,352		31,304
Income tax on dividends	0	0		-4,355	-3,544		-3,544
NET PROFIT FOR THE PERIOD	5,635	7,331		11,343	16,808		27,760
COMPREHENSIVE INCOME FOR THE PERIOD	5,635	7,331		11,343	16,808		27,760
Attributable profit to:
Equity holders of A-shares	5,634	7,330		11,342	16,807		27,759
B-share holder	0.60	0.60		0.60	0.60		0.60
Earnings per A share (in euros)	0.28	0.37		0.57	0.84		1.39
Earnings per B share (in euros)	600	600		600	600		600

STATEMENT OF FINANCIAL POSITION
€ thousand	30/09/2020	30/09/2020		31/12/2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	45,868	61,125		64,775
Trade receivables, accrued income and prepaid expenses	6,827	8,439		7,239
Inventories	695	539		504
TOTAL CURRENT ASSETS	53,390	70,103		72,518
NON-CURRENT ASSETS
Property, plant and equipment	198,839	186,152		189,627
Intangible assets	598	594		710
TOTAL NON-CURRENT ASSETS	199,437	186,746		190,337
TOTAL ASSETS	252,827	256,849		262,855
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current portion of long-term lease liabilities	397	379		352
Current portion of long-term loans	3,631	3,631		3,631
Trade and other payables	7,757	6,719		6,718
Derivatives	28	271		221
Prepayments	2,757	2,639		2,323
TOTAL CURRENT LIABILITIES	14,570	13,639		13,245
NON-CURRENT LIABILITIES
Deferred income from connection fees	33,278	28,981		31,070
Leases	1,465	1,013		964
Loans	85,791	89,490		87,592
Derivatives	0	50		0
Provision for possible third party claims	10,832	19,068		14,442
Other payables	25	36		18
TOTAL NON-CURRENT LIABILITIES	131,391	138,638		134,086
TOTAL LIABILITIES	145,961	152,277		147,331
EQUITY
Share capital	12,000	12,000		12,000
Share premium	24,734	24,734		24,734
Statutory legal reserve	1,278	1,278		1,278
Retained earnings	68,854	66,560		77,512
TOTAL EQUITY	106,866	104,572		115,524
TOTAL LIABILITIES AND EQUITY	252,827	256,849		262,855
CASH FLOWS STATEMENT	9 months	9 months		12 months
€ thousand	2020	2019		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit	16,027	21,013		32,075
Adjustment for depreciation/amortisation	4,634	4,457		6,109
Adjustment for revenues from connection fees	-341	-277		-389
Other non-cash adjustments	-3,610	0		-4,624
Profit/loss(+) from sale and write off of property, plant and equipment, and intangible assets	-14	154		138
Change in current assets involved in operating activities	221	-843		391
Change in liabilities involved in operating activities	-249	195		318
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES	16,668	24,699		34,018
CASH FLOWS USED IN INVESTING ACTIVITIES
Acquisition of property, plant and equipment, and intangible assets	-10,114	-6,147		-10,441
Compensations received for construction of pipelines, incl connection fees	1,618	2,205		3,010
Proceeds from sales of property, plant and equipment and intangible assets	32	7		24
Interest received	34	25		36
TOTAL CASH FLOWS USED IN INVESTING ACTIVITIES	-8,430	-3,910		-7,371
CASH FLOWS USE D IN FINANCING ACTIVITIES
Interest paid and loan financing costs, incl swap interests	-519	-764		-1,056
Lease payments	-452	-306		-404
Received loans	0	0		37,500
Repayment of loans	-1,818	-1,818		-41,136
Dividends paid	-19,888	-14,965		-14,965
Withheld income tax paid on dividends	-113	-36		-36
Income tax paid on dividends	-4,355	-3,544		-3,544
TOTAL CASH FLOW USED IN FINANCING ACTIVITIES	-27,145	-21,433		-23,641
CHANGE IN CASH AND CASH EQUIVALENTS	-18,907	-644		3,006
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD	64,775	61,769		61,769
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	45,868	61,125		64,775

Karl Heino Brookes

Chairman of the Management Board

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Attachment

• Q3 2020 Final report ENG