AS Tallinna Vesi´s financial results for the 4th quarter of 2021

The sales revenue of the Tallinna Vesi increased by 3.1% in 2021, reaching €53.29 million. The growth in sales revenue resulted from the increase in sales of construction services. Tallinna Vesi earned €14.93 million on sales in the 4th quarter of 2021.

In 2021, revenue from the sale of water services remained at a level similar to 2020. The revenue from construction services increased over the year, as a number of large pipe and road construction projects were carried out.

The sales from water services sold to commercial customers in the main service area increased by 1.5% in the 4th quarter, reaching €3.9 million. “The main contributor to the growth of sales revenue in the 4th quarter was the increase in water consumption in Tallinn’s hospitality and entertainment businesses,” Aleksandr Timofejev, Chief Executive Officer of AS Tallinna Vesi said. The sales revenue from services sold to private customers of Tallinna Vesi was €5 million in the 4th quarter, showing a decline of 1.8% compared to the year before.

The Company’s gross profit for the 4th quarter of 2021 was €4.8 million, showing a decrease of €0.8 million over the year. “The decrease in gross profit was related to higher cost of goods and services that were 34.4% more expensive than in the comparative period of the year before,” Timofejev said. The biggest impact came from the increase in the market price for electricity and the electricity costs, increasing by 139.1% due to that. The Company’s gross profit for 2021 amounted to €20.6 million, showing a decrease of €1.6 million compared to 2020.

The Company’s operating profit for the 4th quarter of the year was €3.4 million, showing a decrease of €2.3 million compared to the same period in 2020. The operating profit for 2021 amounted to €18.8 million, being 13.8% lower than in the same period of 2020. In addition to the increased electricity costs, the decrease in commercial profit was attributed to the retaining of the provision for potential third-party claims at the third quarter end level.

The Company’s net profit for the 4th quarter of 2021 was €3.2 million, showing a decrease of €2.2 million compared to the same period of 2020. The net profit for 2021 was €16.2 million, whereas in 2020 the same figure stood at €16.7 million.

The sale of construction services provided by the subsidiary Watercom grew 110.8% or 1.4 million euros in the 4th quarter compared to the previous year. The sales from construction services for 2021 totalled 7.3 million euros, growing 40.3% or 2.1 million euros compared to the same period the year before. The growth in revenue is mainly attributable to the pipe and road construction projects won in the procurements that were carried out in 2020 and 2021.

Tallinna Vesi has increased investments in fixed assets to secure sustainable infrastructure and continuity of its service. Investments in pipes increased significantly already in 2021, when a total of nearly 16 km of water and sewage pipes were reconstructed. The volume of investments in fixed assets planned for 2022 amounts to €25 million.

Over the next years, the investments will be planned based on the public water supply and sewerage development plan for the next 12 years, to be completed in cooperation with the City of Tallinn this year, and the pipe reconstruction program prepared in cooperation with the Tallinn Technical University. “The investments made and forthcoming will help us to secure high-quality drinking water for the people of Tallinn, but also keep the natural environment around us cleaner,” Timofejev said.

To provide additional value to customers through digitalization, the Company started installing remote water meters in 2021. „With smart meters, water metering becomes more accurate and there is no longer need for reporting the water meter readings. In the future, we will be able to proactively inform customers about water leaks. Also, remote water meters will allow to notify our customers when water leaks occur in their buildings,” Timofejev described. The plan is to cover the entire service area with remote water meters by 2026.

In addition to investments in the water and sewage network, the Company has started to reduce its environmental impact, by mapping its CO2 footprint last year. To reduce that footprint, 100% of the energy used in Tallinna Vesi’s facilities and in the treatment process is now generated from renewable energy resources. A cogeneration unit shall be set up in the wastewater treatment plant in Paljassaare, to allow the use of biogas from the wastewater treatment process to generate 30% of electricity and 100% of heat energy needed to run the treatment plant.

To finance these investments, the Company plans to use additional loan capital and continue with the established dividend policy.

Main financial indicators

€ million,except key ratios	4th quarter			Change 2021/ 2020	12 months			Change 2021/ 2020
€ million,except key ratios	2021	2020	2019	Change 2021/ 2020	2021	2020	2019	Change 2021/ 2020
Sales	14.93	13.17	16.12	13.4%	53.29	51.72	63.42	3.0%
Gross profit	4.80	5.64	7.98	-14.7%	20.58	22.23	33.95	-7.4%
Gross profit margin %	32.17	42.78	49.49	-24.8%	38.61	42.97	53.53	-10.1%
Operating profit before depreciation and amortisation	5.10	7.41	12.72	-31.1%	25.30	28.07	38.18	-9.9%
Operating profit before depreciation and amortisation margin %	34.17	56.23	78.86	-39.2%	47.47	54.27	60.21	-12.5%
Operating profit	3.42	5.76	11.06	-40.6%	18.78	21.78	32.08	-13.8%
Operating profit - main business	2.91	5.51	10.82	-47.2%	17.52	20.88	31.19	-16.1%
Operating profit margin %	22.89	43.71	68.61	-47.6%	35.23	42.12	50.57	-16.3%
Profit before taxes	3.31	5.64	10.95	-41.3%	18.40	21.34	31.30	-13.8%
Profit before taxes margin %	22.19	42.85	67.93	-48.2%	34.52	41.27	49.36	-16.3%
Net profit	3.21	5.39	10.95	-40.5%	16.17	16.73	27.76	-3.4%
Net profit margin %	21.47	40.91	67.93	-47.5%	30.33	32.35	43.77	-6.2%
ROA %	1.26	2.12	4.21	-40.5%	6.32	6.45	10.83	-2.1%
Debt to total capital employed %	54.94	56.09	56.05	-2.1%	54.94	56.09	56.05	-2.1%
ROE %	2.82	4.92	9.95	-42.7%	14.20	14.69	25.43	-3.3%
Current ratio	2.83	3.85	5.48	42.3%	2.83	3.85	5.48	-26.5%
Quick ratio	2.79	3.80	5.44	43.2%	2.79	3.80	5.44	-26.6%
Investments into fixed assets	5.43	5.65	5.33	-3.9%	15.38	19.42	16.09	-20.8%
Payout ratio %	na	77.70	72.05		na	77.70	72.05

Gross profit margin – Gross profit / Net salesOperating profit before depreciation and amortisation – Operating profit + depreciation and amortisationOperating profit before depreciation and amortisation margin – Operating profit before depreciation and amortisation / Net salesOperating profit margin – Operating profit / Net salesNet profit margin – Net profit / Net salesROA – Net profit / Average Total assets for the periodDebt to Total capital employed – Total liabilities / Total capital employedROE – Net profit / Average Total equity for the periodCurrent ratio – Current assets / Current liabilitiesQuick ratio – (Current assets – Stocks) / Current liabilitiesPayout ratio - Total Dividends per annum/ Total Net Income per annumMain business – water services related activities, excl. connections profit and government grants, construction services, doubtful receivables

STATEMENT OF COMPREHENSIVE INCOME	4th quarter	4th quarter	12 months	12 months
€ thousand	2021	2020	2021	2020

Revenue	14,931	13,172	53,294	51,717
Cost of goods and services sold	-10,127	-7,537	-32,715	-29,491
GROSS PROFIT	4,804	5,635	20,579	22,226

Marketing expenses	-130	-113	-462	-433
General administration expenses	-1,047	-945	-4,438	-4,576
Other income (+)/ expenses (-)	-209	1,180	3,099	4,567
OPERATING PROFIT	3,418	5,757	18,778	21,784

Financial income	1	3	8	31
Financial expenses	-104	-116	-387	-473
PROFIT BEFORE TAXES	3,315	5,644	18,399	21,342

Income tax on dividends	-108	-255	-2,234	-4,610

NET PROFIT FOR THE PERIOD	3,207	5,389	16,165	16,732
COMPREHENSIVE INCOME FOR THE PERIOD	3,207	5,389	16,165	16,732

Attributable profit to:
Equity holders of A-shares	3,207	5,388	16,165	16,731
B-share holder	0.00	0.60	0.00	0.60

Earnings per A share (in euros)	0.16	0.27	0.81	0.84
Earnings per B share (in euros)	0	600	600	600

STATEMENT OF FINANCIAL POSITION
€ thousand	31/12/2021	31/12/2020

ASSETS
CURRENT ASSETS
Cash and cash equivalents	36,559	44,514
Trade receivables, accrued income and prepaid expenses	6,637	7,019
Inventories	702	701
TOTAL CURRENT ASSETS	43,898	52,234

NON-CURRENT ASSETS
Property, plant and equipment	211,546	202,802
Intangible assets	729	629
TOTAL NON-CURRENT ASSETS	212,275	203,431
TOTAL ASSETS	256,173	255,665

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current portion of long-term lease liabilities	421	393
Current portion of long-term loans	3,630	3,630
Trade and other payables	7,835	7,085
Prepayments	3,604	2,445
TOTAL CURRENT LIABILITIES	15,490	13,553

NON-CURRENT LIABILITIES
Deferred income from connection fees	37,241	34,564
Leases	1,236	1,400
Loans	80,336	83,978
Provision for possible third party claims	6,018	9,628
Deferred tax liability	372	255
Other payables	60	32
TOTAL NON-CURRENT LIABILITIES	125,263	129,857
TOTAL LIABILITIES	140,753	143,410

EQUITY
Share capital	12,000	12,000
Share premium	24,734	24,734
Statutory legal reserve	1,278	1,278
Retained earnings	77,408	74,243
TOTAL EQUITY	115,420	112,255
TOTAL LIABILITIES AND EQUITY	256,173	255,665

CASH FLOWS STATEMENT	12 months	12 months
€ thousand	2021	2020

CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit	18,778	21,784
Adjustment for depreciation/amortisation	6,520	6,283
Adjustment for revenues from connection fees	-510	-542
Other non-cash adjustments	-3,610	-4,814
Profit/loss(+) from sale and write off of property, plant and equipment, and intangible assets	-29	-14
Change in current assets involved in operating activities	380	140
Change in liabilities involved in operating activities	938	-215
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES	22,467	22,622

CASH FLOWS USED IN INVESTING ACTIVITIES
Acquisition of property, plant and equipment, and intangible assets	-13,734	-15,682
Compensations received for construction of pipelines, incl connection fees	2,892	1,998
Proceeds from sales of property, plant and equipment and intangible assets	29	32
Interest received	11	35
TOTAL CASH FLOWS USED IN INVESTING ACTIVITIES	-10,802	-13,617

CASH FLOWS USE D IN FINANCING ACTIVITIES
Interest paid and loan financing costs, incl swap interests	-460	-719
Lease payments	-408	-555
Repayment of loans	-3,636	-3,636
Dividends paid	-12,842	-19,888
Withheld income tax paid on dividends	-158	-113
Income tax paid on dividends	-2,116	-4,355
TOTAL CASH FLOW USED IN FINANCING ACTIVITIES	-19,620	-29,266

CHANGE IN CASH AND CASH EQUIVALENTS	-7,955	-20,261

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD	44,514	64,775

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	36,559	44,514