AS Tallinna Vesi’s sales were boosted by consumption of commercial customers

In the second quarter of 2022, AS Tallinna Vesi's net sales grew to 13 million, the increase in net sales was mainly due to increased consumption of water services among commercial customers.

AS Tallinna Vesi’s sales from water services provided to commercial customers in the second quarter of this year was €4.24 million, which is about 23% more than last year. The consumption of water services among commercial customers mainly increased in the hospitality and entertainment sector, such as hotels and spas, restaurants, cultural institutions, and in the transport sector.

According to Aleksandr Timofejev, Chairman of the Board of AS Tallinna Vesi, hotels and spas were able to provide their services to customers in the second quarter of this year in a volume that is comparable to pre-COVID times. “Lifting of the COVID-19 related restrictions at the end of the first quarter had a strong positive impact on the consumption of commercial customers – water consumption in hotels and spas increased by more than 140% in the second quarter compared to a year ago,” Timofejev explained.

Sales from water services provided to private customers in the second quarter fell 1.2% to €4.99 million as a result of the decline in consumption of the largest private customer group - apartment buildings and private houses.

AS Tallinna Vesi’s gross profit for the second quarter of 2022 was €4.42 million. The Company's gross profit for six months fell by 15% due to an increase in operational costs. Rising costs of chemicals, electricity and gas had the biggest impact on cost growth. To minimise this impact, the Company seeks to reduce the amount of chemicals used in treatment processes and, if possible, consumes electricity smartly by monitoring the electricity exchange price and timing consumption accordingly.

The Company’s operating profit for the second quarter was €3.1 million. Operating profit fell by €2.12 million compared to the second quarter of last year. The operating profit for the six months of 2022 was €6.1 million, showing a decrease of €3.77 million compared to the previous year, and this is due to higher electricity costs and the retaining of the provision for potential third-party claims at the level of the third quarter of 2021. When eliminating the impact of the change in operating profit resulting from the provision for potential third-party claims, the Company’s operating profit would have been €4 million in the second quarter of 2021. Operating profit for the second quarter of 2022 would be 22.9% or €0.91 million lower compared to the same period last year.

The Company’s net profit for the second quarter of 2022 was €0.96 million, showing a decrease of €2.12 million compared to the same period last year. The decrease in net profit was affected by changes in operating profit and net financial costs.

In the first half of 2022, AS Tallinna Vesi renovated nearly 10,000 metres of pipelines. “The reconstruction of pipelines has been progressing as planned in the first six months and work will continue in the second half of the year,” Timofejev said.

In the second quarter, extensive reconstruction work was started and continued on Järvevana Road, Sõle, Kolde, Ehte and Sitsi Streets, Astangu area and Ussimäe Road. “On Järvevana Road, we are currently renovating 900 metres of a water supply pipeline, which is one of Tallinn's largest for its diameter and number of consumers and supplies water to the residents in Mustamäe, Haabersti and Kristiine city districts. Large-scale sewer system renovations are being done in Astangu area. Reconstruction works are carried out using eco-friendly no-dig methods that do not require digging up the roads and also cause less disturbance to residents and the traffic,” Timofejev pointed out.

In May, AS Tallinna Vesi signed a contract with Telia Eesti AS to install smart water meters for all its customers by 2026. According to Timofejev, the first 260 smart water meters have already been installed and a larger number of new meters will be delivered this August, after which these will be installed following the regular verification program. “Smart water meters have been long expected by our customers, which is why I am glad we have found the best way to deliver this solution and make monthly invoicing process more convenient. In addition, by installing smart meters, we will make our processes more digital, we will be able to monitor the water network more efficiently and faster identify any water leaks,” he said.

In order to ensure the continuity of the service provided by the Company and the sustainability of its processes, AS Tallinna Vesi continued with several large projects in the second quarter, including the renovation of the water pumping station in Rummu Road, which ensures high-quality drinking water to Lasnamäe and Pirita city districts, and the renovation of the filters that are part of the water treatment process. At the wastewater treatment plant, work continues on strategically important projects such as renovating the main pumping station shaft and the effluent outlet tower, the first of which plays an important role in receiving the wastewater at the treatment plant and the second in discharging treated effluent into the sea.

Over the six months of 2022, the Company has continued to provide reliable and high-quality water and wastewater services, as reflected in the very high level of quality indicators. In the first half of the year, the Company took 1,681 water samples. The quality of tap water was excellent, 100% in line with all quality requirements. According to Timofejev, excellent quality of tap water has been ensured with an effective water treatment process, ongoing preventative maintenance work on the water network and investments in water pumping stations made in recent years that created a secondary chlorination facility across the various city districts. This allows to keep the sanitary status of treated water in the water network and maintain the excellent quality of tap water with hot weather as well.

Also, the wastewater treated at the wastewater treatment plant and discharged to the Baltic Sea met all the strict requirements both in the second quarter and throughout the first half of 2022. “The quality of effluent directly affects the marine environment, which is why we monitor the amounts of pollutants in wastewater received at the treatment plant and in effluent leaving the treatment plant. Pollutant parameters that are significantly lower than the limits required by law is a proof of the excellent level of treated effluent,” Timofejev explained.

The level of water loss in the water network remained low in the second quarter – 14.3%, similarly to the previous year. In the half-year view, the level of water loss is somewhat higher than last year because of the snowy and cold winter that made it difficult to detect leaks and access pipelines in the first quarter.

AS Tallinna Vesi is the largest water utility in Estonia, providing services to more than 24,600 private customers and businesses and 470,000 end consumers in Tallinn and its surrounding municipalities: Cities of Maardu and Saue and Harku Municipality. Tallinna Vesi is listed on the main list of the Nasdaq Tallinn Stock Exchange.

Main financial indicators

million,except key ratios 2nd quarter Change 2022/ 2021 6 months Change 2022/ 2021
2022 2021 2020 2022 2021 2020
Sales 13.00 12.97 12.09 0.3% 25.05 24.75 25.27 1.2%
Gross profit 4.42 5.23 4.73 -15.5% 8.80 10.41 10.79 -15.5%
Gross profit margin % 33.98 40.34 39.16 -15.8% 35.12 42.07 42.70 -16.5%
Operating profit before depreciation and amortisation 4.69 6.80 6.14 -31.0% 9.34 13.03 13.32 -28.3%
Operating profit before depreciation and amortisation margin % 36.09 52.44 50.76 -31.2% 37.26 52.63 52.70 -29.2%
Operating profit 3.08 5.20 4.59 -40.7% 6.09 9.86 10.26 -38.3%
Operating profit - main business 2.83 4.96 4.32 -43.1% 5.74 9.46 9.94 -39.3%
Operating profit margin % 23.70 40.09 37.99 -40.9% 24.29 39.83 40.61 -39.0%
Profit before taxes 2.98 5.11 4.51 -41.8% 5.88 9.68 10.06 -39.2%
Profit before taxes margin % 22.88 39.40 37.29 -41.9% 23.48 39.10 39.82 -40.0%
Net profit 0.96 3.07 0.15 -68.9% 3.84 7.62 5.71 -49.7%
Net profit margin % 7.36 23.70 1.27 -68.9% 15.31 30.80 22.59 -50.3%
ROA % 0.38 1.21 0.06 -68.7% 1.52 3.02 2.22 -49.5%
Debt to total capital employed % 57.09 57.20 59.63 -0.2% 57.09 57.20 59.63 -0.2%
ROE % 0.85 2.75 0.14 -69.0% 3.46 6.96 5.27 -50.3%
Current ratio 1.81 2.75 3.23 -34.2% 1.81 2.75 3.23 -34.2%
Quick ratio 1.75 2.69 3.18 -34.9% 1.75 2.69 3.18 -34.9%
Investments into fixed assets 2.85 5.57 2.52 -48.8% 5.63 7.85 6.11 -28.3%
Payout ratio % na 80.42 77.70   na 80.42 77.70  

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 2nd quarter 2nd quarter   6 months 6 months   12 months
€ thousand 2022 2021   2022 2021   2021
               
Revenue 13,002 12,968   20,054 24,752   53,294
Cost of goods and services sold -8,583 -7,737   -16,254 -14,340   -32,715
GROSS PROFIT 4,419 5,231   8,800 10,412   20,579
               
Marketing expenses -189 -104   -388 -224   -462
General administration expenses -1,094 -992   -2,225 -2,544   -4,438
Other income (+)/ expenses (-) -55 1,064   -102 2,215   3,099
OPERATING PROFIT 3,081 5,199   6,085 9,859   18,778
               
Financial income 1 2   3 7   8
Financial expenses -108 -91   -205 -187   -387
Other financial income (+)/ expenses (-)              
PROFIT BEFORE TAXES 2,974 5,110   5,883 9,679   18,399
               
Income tax on dividends -2,017 -2,036   -2,047 -2,056   -2,234
               
NET PROFIT FOR THE PERIOD 957 3,074   3,836 7,623   16,165
COMPREHENSIVE INCOME FOR THE PERIOD 957 3,074   3,836 7,623   16,165
               
Attributable profit to:              
Equity holders of A-shares 957 3,074   3,836 7,623   16,165
               
Earnings per A share (in euros) 0.05 0.15   0.19 0.38   0.81
STATEMENT OF FINANCIAL POSITION        
€ thousand 30/06/2022 30/06/2021   31/12/2021
         
ASSETS        
CURRENT ASSETS        
Cash and cash equivalents 23,541 37,011   36,559
Trade receivables, accrued income and prepaid expenses 6,643 5,990   6,637
Inventories 982 835   702
TOTAL CURRENT ASSETS 31,166 43,836   43,898
         
NON-CURRENT ASSETS        
Property, plant and equipment 215,830 205,295   211,546
Intangible assets 637 583   729
TOTAL NON-CURRENT ASSETS 216,467 205,878   212,275
TOTAL ASSETS 247,633 249,714   256,173
         
LIABILITIES AND EQUITY        
CURRENT LIABILITIES        
Current portion of long-term lease liabilities 662 390   421
Current portion of long-term loans 3,630 3,630   3,630
Trade and other payables 9,665 9,067   7,835
Prepayments 3,296 2,880   3,604
TOTAL CURRENT LIABILITIES 17,253 15,967   15,490
         
NON-CURRENT LIABILITIES        
Deferred income from connection fees 38,130 35,988   37,241
Leases 1,063 1,277   1,236
Loans 78,540 82,154   80,336
Provision for possible third party claims 6,018 7,221   6,018
Deferred tax liability 303 195   372
Other payables 70 34   60
TOTAL NON-CURRENT LIABILITIES 124,124 126,869   125,263
TOTAL LIABILITIES 141,377 142,836   140,753
         
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 68,244 68,866   77,408
TOTAL EQUITY 106,256 106,878   115,420
TOTAL LIABILITIES AND EQUITY 247,633 249,714   256,173
CASH FLOWS STATEMENT 6 months 6 months   12 months
€ thousand 2022 2021   2021
         
CASH FLOWS FROM OPERATING ACTIVITIES        
Operating profit 6,085 9,859   18,778
Adjustment for depreciation/amortisation 3,250 3,168   6,520
Adjustment for revenues from connection fees -269 -251   -510
Other non-cash adjustments 0 -2,407   -3,610
Profit/loss(+) from sale and write off of property, plant and equipment, and intangible assets -12 0   -29
Change in current assets involved in operating activities -271 892   380
Change in liabilities involved in operating activities -485 126   938
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES 8,298 11,387   22,467
         
CASH FLOWS USED IN INVESTING ACTIVITIES        
Acquisition of property, plant and equipment, and intangible assets -7,351 -5,084   -13,734
Compensations received for construction of pipelines, incl connection fees 1,215 1,351   2,892
Proceeds from sales of property, plant and equipment and intangible assets 13 0   29
Interest received 3 9   11
TOTAL CASH FLOWS USED IN INVESTING ACTIVITIES -6,120 -3,724   -10,802
         
CASH FLOWS USE D IN FINANCING ACTIVITIES        
Interest paid and loan financing costs, incl swap interests -218 -204   -460
Lease payments -230 -205   -408
Repayment of loans -1,818 -1,818   -3,636
Dividends paid -12,835 -12,841   -12,842
Withheld income tax paid on dividends 0 0   -158
Income tax paid on dividends -95 -98   -2,116
TOTAL CASH FLOW USED IN FINANCING ACTIVITIES -15,196 -15,166   -19,620
         
CHANGE IN CASH AND CASH EQUIVALENTS -13,018 -7,503   -7,955
         
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 36,559 44,514   44,514
         
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 23,541 37,011   36,559

Laura KorjusHead of CommunicationsAS Tallinna Vesi(+372) 626 2271laura.korjus@tvesi.ee

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