Financial results for 2023

Given that Tallinna Vesi only operates in Estonia, it is natural that our company is mainly dependent on the trends in Estonian economy. According to the Estonian Economy and Monetary Policy review prepared by Eesti Pank, 2023 proved harder than expected for the Estonian economy and the recession lasted longer than predicted. Changes in the consumer price and construction price indices have a direct impact on Tallinna Vesi’s operating costs and investments.

Main financial indicators of Tallinna Vesi

€ million, except key ratios and share data

    
        
        2023
        2022
        2021
        2020
        2019
    

        Sales
        61.14
        54.56
        53.29
        51.72
        63.42
    

        Gross profit
        24.07
        16.90
        20.58
        22.23
        33.95
    

        Operating profit before depreciation and amortisation (EBITDA)
        25.40
        18.14
        25.30
        28.07
        38.18
    

        Operating profit
        17.35
        11.32
        18.78
        21.78
        32.07
    

        Profit before taxes
        14.21
        10.65
        18.40
        21.34
        31.30
    

        Net profit
        12.84
        8.41
        16.17
        16.73
        27.76
    

        Gross profit margin, %
        39.36
        30.97
        38.61
        42.98
        53.53
    

        EBITDA margin, %
        41.55
        33.24
        47.47
        54.27
        60.21
    

        Operating profit margin, %
        28.38
        20.75
        35.24
        42.12
        50.57
    

        Profit before taxes margin, %
        23.23
        19.51
        34.52
        41.27
        49.36
    

        Net profit margin, %
        21.01
        15.41
        30.33
        32.35
        43.77
    

        ROA, %
        4.80
        3.30
        6.32
        6.45
        10.83
    

        Debt to total assets, %
        58.47
        56.26
        54.94
        56.09
        56.05
    

        ROE, %
        11.27
        7.43
        14.20
        14.69
        25.43
    

        Current ratio
        1.30
        1.24
        2.83
        3.85
        5.48
    

        Number of full-time equivalent employees *
        351
        333
        333
        332
        314
    

        Share price *
        10.60
        12.54
        14.48
        13.25
        11.70
    

        Share capital
        12.00
        12.00
        12.00
        12.00
        12.00
    

        Earnings per share
        0.64
        0.42
        0.81
        0.84
        1.39
    

        Dividend per share
        n/a**
        0,33
        0,65
        0,65
        1,00
    

        Cash balance*
        14.74
        12.65
         36.56 
         44.51
         64.78 
    

        Investments to fixed assets
        34.93
        25.13
        15.38
        19.42
        19.42
    

	2023	2022	2021	2020	2019
Sales	61.14	54.56	53.29	51.72	63.42
Gross profit	24.07	16.90	20.58	22.23	33.95
Operating profit before depreciation and amortisation (EBITDA)	25.40	18.14	25.30	28.07	38.18
Operating profit	17.35	11.32	18.78	21.78	32.07
Profit before taxes	14.21	10.65	18.40	21.34	31.30
Net profit	12.84	8.41	16.17	16.73	27.76
Gross profit margin, %	39.36	30.97	38.61	42.98	53.53
EBITDA margin, %	41.55	33.24	47.47	54.27	60.21
Operating profit margin, %	28.38	20.75	35.24	42.12	50.57
Profit before taxes margin, %	23.23	19.51	34.52	41.27	49.36
Net profit margin, %	21.01	15.41	30.33	32.35	43.77
ROA, %	4.80	3.30	6.32	6.45	10.83
Debt to total assets, %	58.47	56.26	54.94	56.09	56.05
ROE, %	11.27	7.43	14.20	14.69	25.43
Current ratio	1.30	1.24	2.83	3.85	5.48
Number of full-time equivalent employees *	351	333	333	332	314
Share price *	10.60	12.54	14.48	13.25	11.70
Share capital	12.00	12.00	12.00	12.00	12.00
Earnings per share	0.64	0.42	0.81	0.84	1.39
Dividend per share	n/a**	0,33	0,65	0,65	1,00
Cash balance*	14.74	12.65	36.56	44.51	64.78
Investments to fixed assets	34.93	25.13	15.38	19.42	19.42

During the twelve months of 2023, the group’s total sales were €61.14 million, showing an increase of 12.1% or €6.58 million year-on-year. Sales from water services for twelve months of 2023 were €55.62 million, increasing by 13.8% or €6.73 million year-on-year. 91.0% of the sales comprise of sales of water services within and outside of the main service area, 7.8% of construction services and 1.2% of other services.

Sales

€ thousand

Change 2022/23

    
        
        2023
        2022
        2021
        EUR
        %
    

        Water supply service
        9,861
        8,380
        8,097
        1,481
        17.7%
    

        Wastewater disposal service
        14,508
        12,406
        12,000
        2,102
        16.9%
    

      Total from private customers
        24,369
        20,786
        20,097
        3,583
        17.2%
    

        Water supply service
        8, 514
        8,260
        7,115
        254
        3.1%
    

        Wastewater disposal service
        9,087
        8,480
        7,299
        607
        7.2%
    

        Total from business customers
        17,601
        16,740
        14,414
        861
        5.1%
    

        Water supply service
        1,670
        1,599
        1,631
        71
        4.4%
    

        Wastewater disposal service
        4,236
        3,525
        3,422
        711
        20.2%
    

        Stormwater disposal service
        260
        193
        256
        67
        34.7%
    

        Total from outside service area customers
        6,166
        5,317
        5,309
        849
        16.0%
    

        Stormwater collection and treatment 
and fire hydrants service
        6,011
        4,643
        4,011
        1,368
        29.5%
    

        Excessive pollution fees and sewer discharge service
        1,477
        1,403
        1,225
        73
        5.2%
    

        Total from water services
        55,624
        48,889
        45,055
        6,734
        13.8%
    

        Construction services
        4,775
        4,809
        7,328
        -34
          -0.7%
            

        Other services
        742
        860
        911
        -118
          -13.7%
            

                   Total revenue
        61,141
        54,558
        53,294
        6,583
          12.1%
            

	2023	2022	2021	EUR	%
Water supply service	9,861	8,380	8,097	1,481	17.7%
Wastewater disposal service	14,508	12,406	12,000	2,102	16.9%
Total from private customers	24,369	20,786	20,097	3,583	17.2%
Water supply service	8, 514	8,260	7,115	254	3.1%
Wastewater disposal service	9,087	8,480	7,299	607	7.2%
Total from business customers	17,601	16,740	14,414	861	5.1%
Water supply service	1,670	1,599	1,631	71	4.4%
Wastewater disposal service	4,236	3,525	3,422	711	20.2%
Stormwater disposal service	260	193	256	67	34.7%
Total from outside service area customers	6,166	5,317	5,309	849	16.0%
Stormwater collection and treatment and fire hydrants service	6,011	4,643	4,011	1,368	29.5%
Excessive pollution fees and sewer discharge service	1,477	1,403	1,225	73	5.2%
Total from water services	55,624	48,889	45,055	6,734	13.8%
Construction services	4,775	4,809	7,328	-34	-0.7%
Other services	742	860	911	-118	-13.7%
Total revenue	61,141	54,558	53,294	6,583	12.1%

Cost of goods and services sold and gross and operating profits

€ thousand

Financial Data Table





         
    
    2021
    2022
    2023
    Change
    Change 
2022/23
  

    Water abstraction charges
    -1,271
    -1,288
    -1,281
    17
    -1.3%
  

    Chemicals
    -2,742
    -2,238
    -1,822
    -504
    22.5%
  

    Electricity
    -6,408
    -9,234
    -4,612
    2,826
    -30.6%
  

    Pollution tax
    -1,005
    -823
    -894
    -182
    22.1%
  

    Total direct production costs
    -11,426
    -13,583
    -8,609
    2,157
    15.9%
  

    Staff costs 
    -9,684
    -8,229
    -7,243
    -1,455
    17.7%
  

    Depreciation and amortisation
    -7,002
    -5,930
    -5,725
    -1,072
    18.1%
  

    Construction services
    -3,481
    -3,784
    -5,988
    303
    -8.0%
  

    Other costs of goods/services sold
    -5,480
    -6,134
    -5,150
    654
    -10.7%
  

    Other costs of goods/services sold total
    -25,647
    -24,077
    -24,106
    -1,570
    6.5%
  

    Total cost of goods/services sold
    -37,074
    -37,660
    -32,715
    586
    -1.6%
  

	2021	2022	2023	Change	Change 2022/23
Water abstraction charges	-1,271	-1,288	-1,281	17	-1.3%
Chemicals	-2,742	-2,238	-1,822	-504	22.5%
Electricity	-6,408	-9,234	-4,612	2,826	-30.6%
Pollution tax	-1,005	-823	-894	-182	22.1%
Total direct production costs	-11,426	-13,583	-8,609	2,157	15.9%
Staff costs	-9,684	-8,229	-7,243	-1,455	17.7%
Depreciation and amortisation	-7,002	-5,930	-5,725	-1,072	18.1%
Construction services	-3,481	-3,784	-5,988	303	-8.0%
Other costs of goods/services sold	-5,480	-6,134	-5,150	654	-10.7%
Other costs of goods/services sold total	-25,647	-24,077	-24,106	-1,570	6.5%
Total cost of goods/services sold	-37,074	-37,660	-32,715	586	-1.6%

Financial expenses

The group’s net financial income and expenses have resulted in a net expense of €3.14 million, compared to net expense of €0.67 million in the twelve months of 2022. The increase was mainly impacted by higher loan balance and higher interest cost on loans.

In May 2023, AS Tallinna Vesi and AS SEB Pank, together with Swedbank AS and the Estonian branch of OP Corporate Bank plc, signed a syndicated loan agreement for a total amount of €91 million. Within this loan contract, the group refinanced OP Corporate Bank loan in the amount of €37.5 million.

In June 2023, a loan agreement between AS Tallinna Vesi and Nordic Investment Bank was concluded in the amount of €40 million. From this sum, the amount of €8 million was withdrawn in June and €12 million in December 2023.

As at the end of the 4th quarter of 2023, the whole loan amount of €96.82 million was bearing a floating interest rate.

Profit before taxes and net profit

The group’s profit before taxes for the twelve months of 2023 was €14.21 million, being 33.4% or €3.56 million higher than for the same period in 2022. The group’s net profit for the twelve months of 2023 was €12.84 million, being 52.8% or €4.44 million higher than for the equivalent period in 2022, impacted by the €0.92 million lower income tax expense due to the smaller dividend payment.

Statement of financial position

In the 12 months of 2023, the group invested into fixed assets €34.93 million. As of 31/12/2023, non-current tangible assets amounted to €256.11 million, the majority of which in the amount of €206.04 million were pipelines (31/12/2022: €186.7 million). Total non-current assets amounted to €257.40 million (31/12/2022: €230.55 million).

Compared to the year end of 2022, the trade receivables, accrued income and prepaid expenses have been at the same level, €8.61 million. The collectability rate continues to be high at 99.73%, compared to December 2022 when the collectability rate was 99.85%.

Current liabilities have increased by €0.29 million to €18.78 million compared to the end of 2022, mainly due to liabilities related to investments.

Deferred income from connection fees has increased by €5.50 million compared to the end of 2022, reaching €44.65 million.

Provision for possible third-party claims is of the same size as at the end of December 2022, i.e. €6.02 million.

The group’s outstanding loans amount to €96.82 million (31/12/2022: €80.45 million).

The previous NIB loan is being repaid in 11 equal semi-annual payments. The weighted average loan interest as of 31/12/2023 is 5.0%.

The group has total debt to assets level of 58.47%, which falls in the range of 54–65%, reflecting the group’s equity profile. At the same time in 2022, the total debt to assets ratio was 56.26%.

Investors

We aim to be transparent and honest through our business activities, giving timely and accurate information to our shareholders. We treat all our shareholders equally and are dedicated to efficiency while ensuring the sustainability of the company.

Tallinna Vesi is a listed company and its shares have been listed on Nasdaq Baltic Stock Exchanges since 1 June 2005. A company’s market value is a good indication of the overall value of the company and the investors’ perceptions of its business prospects. Market value is affected not only by factors controlled by the company, but also by those which cannot be controlled. Profitability and cost effectiveness are major influences on market value and can be controlled by the Management Board of the company.

Continuing and transparent communication is one of the main factors in maintaining excellent investor relations. Therefore, we continue to regularly communicate our targets, strategy and performance to the investors as well as to all other stakeholders. Each quarter, we introduce the company’s quarterly financial results to the investors and take part in discussions on the webinars. Additionally, we hold regular meetings between key institutional shareholders and potential investors and the company’s Management Board. All shareholders are welcome to ask questions from the members of the Management Board and the Supervisory Council directly at the Annual General Meeting of Shareholders and at all times using e-mail or telephone.

We have worked hard on our investor relations programme since the listing of Tallinna Vesi on the Tallinn Stock Exchange and will continue to do so in the following years. To maintain the transparency of our Management Board’s activities to shareholders, we have reported on Corporate Governance Recommendations on a regular basis since 2006.

Dividends

Dividend allocation to the shareholders is recorded as a liability in the financial statement of the company at the time when the profit allocation and dividend payment is confirmed by the Annual General Meeting of Shareholders.

Every year, the Supervisory Council evaluates, taking into account all the circumstances, the proposal for the dividend to be paid to shareholders and approves it to be presented for a vote by the Annual General Meeting of Shareholders.

In the Annual General Meeting of Shareholders held on 01/06/2023, the Supervisory Council proposed to pay out €0.33 per share from the 2022 profits. The pay-out is equal to 78% of earnings in 2022. The proposal was approved by the Annual General Meeting and the dividend pay-out was made on 28/06/2023.

Tallinna Vesi aims to distribute 50–80% of the annual profit as dividends. Dividend payments are assessed annually considering the company’s earnings, investment needs, liquidity position and long-term financial targets.

Share performance

Tallinna Vesi is listed on Nasdaq Baltic Main List with trading code TVEAT and ISIN EE3100026436.

During the 12 months of 2023, the local retail investors and institutional investors have decreased their shareholdings by 1.54% and 0.01% respectively, while the share of foreign institutional investors has decreased by 0.19% and the share of foreign retail investors has increased by 1.74%.

As of 31/12/2023, the closing price of Tallinna Vesi’s share was €10.60, which is 15.74% lower compared to the price of €12.58 at the beginning of the year (2022: -13.40%). OMX Tallinn index remained stable at +0.1% (2022: -11.71%).

During 2023, 19,918 transactions were made with the company’s shares (2022: 20,167 transactions), during which 504 thousand shares or 2.5% of all shares changed hands (2022: 542 thousand shares or 2.7%).

The turnover of transactions in 12 months of 2023 amounted to €5.9 million, being €1.40 million lower than in the comparative period in 2022.

Activities of the subsidiary Watercom OÜ

Watercom has been established by AS Tallinna Vesi in 2010.

Watercom provides the following services:
• pipe construction and design,
• services related to road maintenance,
• pipe maintenance,
• project management and owner supervision,
• transportation services.

Watercom’s operations are certified to ISO 9001, ISO 14001 and ISO 45001 quality standards.

Watercom’s main objectives and development directions for 2024

2023 was an active and successful year for Watercom. As a stand-alone business, the company delivered more sales and profit than ever before. Watercom is working to continue at a similar pace in 2024, although the situation in the construction market is complicated due to the lack of procurements and price enquiries. The greatest contribution to the achievement of the targets came from the pipe construction activity. At the beginning of 2023, the company successfully launched a new water pipeline maintenance service using the ice-pigging method, which is the most innovative and efficient of those used in this area.

The outlook for 2024 remains positive with the expectations of finding new opportunities to achieve higher external sales and profits. The company continues to explore various opportunities for further growth through the development and launch of new services.

Pipe and road construction

Watercom’s main line of activity in 2023 was the construction of water and wastewater networks for developers, water companies and private individuals. As in previous years, the focus was on feasible construction projects and procurements in Tallinn and elsewhere in Estonia. The external road construction market was affected by the cancellation of procurements for several inner-block projects in Tallinn and the increased volume of contracts in the municipalities around Tallinn.

The year 2023 was rather difficult for the construction sector, as active development in the region has come to a halt and the investment in road construction is significantly down. Watercom managed to win several contracts for both services from the external market, mainly in Harju county, in spite of fierce competition. It was difficult to maintain the profit margin on construction activities in 2023, but thanks to continued effective cost management, the targets set were achieved.

Other services

The year 2023 presented constant challenges for the provision of supervision services by Watercom, as the volume of service provided outside the group fell significantly due to the suspension of development activities. Nevertheless, Watercom will continue to actively participate in procurement tenders in 2024 in order to maintain its sales from supervision services.

Pipe maintenance and transportation services are mainly provided within the group, but are also available to external customers. A proactive jet washing program has helped to keep the number of sewer blockages under much better control. At the beginning of the year, the company launched a new water pipe cleaning service using innovative ice-pigging method.

The development of new services within and outside the group will continue in 2024.