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MANAGEMENT REPORT FOR 9 MONTHS 2021
general informations
UPP Olaines OÃœ (hereinafter “the Company†and “the Group†when it refers to its subsidiaries) was created with the aim of financing, acquiring and managing the real estate investment of Parc Logistique Olaines: (buildings and land) located in “Å arlotes”, County of Olaines, Parish of Olaines, Latvia, cadastre number 8080 003 0029, registered in the compartment of the land register No. 5439 of the parish town of Olaine. The Company was created on 08.24.2017 and had no economic activity until 12.15.2017, when it acquired the cold store Olaines Logistics Park.
The management board is not aware of any trend, uncertainty, request, commitment or event that is reasonably likely to have a material effect on the Company’s outlook for the period subsequent to the reporting period of these financial statements outside of the during its regular business activities.
UPP Olaines OÜ operates on a going concern basis.
Financial commentary for the second quarter and nine months of 2021
Net operating income amounted to 626,923 euros in 3Q 2021 (670,298 euros in 3Q 2020) and 1,864,577 euros for the nine months of 2021 (1,979,158 euros for the 9 months of 2020). The operating profit amounted to 542,929 euros in 3Q 2021 (635,253 euros in 3Q 2020) and to 1,693,421 euros for the nine months of 2021 (1,863,48 euros for the nine months of 2020). The net result is 297,664 euros in 3Q 2021 (408,988 euros in 3Q 2020) and 950,756 euros for the nine months of 2021 (1,119,547 euros for the 9 months of 2020).
The decrease in net operating income for 9 months of 2021 is due to changes in rental contracts, which management also took into account in the commentary for Q1 2021. In Q3 2021, the Group carried out repairs at Olaine LC which had an additional effect on the 3Q and 9 months net operating income.
The Group paid a fine of 49,715 euros imposed by BÅ«vniecÄ«bas valsts kontroles birojs (Latvia’s National Building Control Office) which had a significant impact on the net result for Q3 and 9 months.
The Group received the fine because the Company’s subsidiary, SIA Olaines Logistics, did not send its 2020 energy report to the Bureau on time. In Latvia, companies that consume more than 500,000 kWh of energy for two consecutive years are considered to be large energy consumers and must make energy efficiency investments, or pay an energy efficiency fine calculated on the basis of the electricity consumed. For companies such as SIA Olaines Logistics, which do not consume electricity, but transfer (sell) purchased electricity to other customers, it is necessary to maintain a balance of purchased and sold kWh, and to pass on the annual balance at the Bureau before a due date. SIA Olaines Logistics did not transmit the required balance for 2020 on time due to changes in the Group’s asset management team at that time. Additionally, due to COVID-related travel restrictions, we were unable to access the physical mailbox of SIA Olaines Logistics, where notifications and reminders regarding the obligation to transmit the balance were sent by the Office. As a result, the Group became liable for the energy efficiency fee for all of the ~ 8,000 MWh of electricity consumed at Olaines LC by SIA Olaines Logistics customers. SIA Olaines Logistics has repeatedly appealed to the Bureau and also asked the Latvian Ministry of Economy to reduce the fine as it is completely disproportionate to the nature of the violation and the fact that SIA Olaines Logistics consumed 0 kWh of electricity. However, none of the appeals were considered by either institution as the appeal deadline had passed, leaving the fine in effect in its entirety.
In Q3 2021, the Group initiated investments to change all of Olaine LC’s lighting to LED lighting, including the lighting of outdoor premises.
The sole business activity of the company is to collect rental income, manage the Olaine property and repay its debts to lenders and investors. Liabilities include subordinated bonds with a fixed interest rate and the investment loan, the rate of which is also fixed with an interest rate swap contract. On the turnover side, the company receives stable triple net rents from reputable tenants, fixed by medium-term agreements but subject to indexation. Due to the economically fixed nature of the business, there must be some major event in the overall economy or in the business activities of the business for them to have a significant effect on the bottom line of the business.
Key financial performance indicators and 9-month situation 2021
| (in euros) | 3Q 2021 | 3Q 2020 | 9 months 2021 | 9 months 2020 |
| Net operating income | 626 923 | 670,298 | 1 864 577 | 1 979 158 |
| BAII | 542,929 | 635,253 | 1,693,421 | 1 863 489 |
| Profit for the period | 297,664 | 408 988 | 950 756 | 1,119,547 |
| (in euros) | 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 minus shareholder 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 loan / Investment property) | 75.6% | 80.1% |
| DSCR (Operating income / Payment of principal and interest on interest-bearing loans) | 1.1 | 1.2 |
Management board and supervisory board
The UPP Olaines OÃœ’s board is made up of one member: Marko Tali, the chairman of the board. The management board of Olaines Logistics SIA also has one member: Siim Sild, chairman of the management board.
The UPP Olaines OÜ supervisory board is made up of three members: Mart Tooming, Tarmo Rooteman, Hallar Loogma.
No compensation or other benefits were awarded to members of the management board and supervisory board of UPP Olaines OÜ. The member of the board of directors of Olaines Logistics SIA is remunerated in accordance with Latvian legislation.
There are no employees in the company other than the members of the management board and the supervisory board.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed interim consolidated statement of comprehensive income
| (in euros) | To note | 3Q 2021 | 3Q 2020 | 9 months 2021 | 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 result | 542,929 | 635,253 | 1,693,421 | 1 863 489 | |
| Financial products / (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 period | 297,664 | 402,988 | 950 756 | 1,119,547 | |
| Total comprehensive income for the period | 297,664 | 402,988 | 950 756 | 1,119,547 |
Summary consolidated interim balance sheet
| (in euros) | To note | 30.09.2021 | 30.09.2020 |
| Cash and cash equivalents | 712,869 | 752,089 | |
| Customers and other 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 | |
| Suppliers and other debts | 505,591 | 383,036 | |
| Financial derivatives | 224,155 | 407,502 | |
| Loans and borrowing | 5 | 1,064,004 | 1,064,004 |
| Total current liabilities | 1 793 750 | 1 854 542 | |
| Loans and borrowing | 5 | 25,560,358 | 26 630 627 |
| Total non-current liabilities | 25,560,358 | 26 630 627 | |
| TOTAL RESPONSIBILITIES | 27 354 108 | 28 485 169 | |
| Share the capital | 2,500 | 2,500 | |
| Retained earnings | 4,907,298 | 3 490 444 | |
| EQUITY | 4,909,798 | 3,492,944 | |
| EQUITY AND TOTAL LIABILITIES | 32 263 906 | 31 978 113 |
UNITED PARTNERS
Siim Sild
General manager
+372 5626 0107
siim.sild@unitedpartners.ee
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