GROUP CEO'S REVIEW
The decrease in activity of the real estate sector following the surge in
Vitamin D has now become the norm, which is well illustrated by the Q2 results
of Arco Vara. At that, the slight drop in base interest rates has not yet shown
a significant impact.
Despite low activity, our team has managed to continue sales of the Kodulahe
Rannakalda project and we also commenced preliminary sales in the next stage of
Kodulahe. While three homes were sold at Rannakalda in the previous quarter,
eight homes and two commercial premises had been sold in the future Soodi 6
development as at the publishing of this report. The construction of the next
stage of Kodulahe should commence at the end of this year.
We have also reached the point of initiating the detailed plan of the final
stage of the Kodulahe development: Lammi 6. Approximately 175 homes are planned
for the Lammi 6 property, construction is expected to begin in about two years.
The proceedings of the detailed plan of Arcojärve, the next major project of
Arco Vara, are nearing the stage of approval. Due to this, we have begun the
designing works for stage I and are registering interested parties.
Our Bulgarian team is continuing development activities at Botanica Lozen, where
approximately 40% of the development volume has been sold. We have noticed the
positive sign of a certain increase in interest, but the important thing is to
convert inquiries into sales, which has not yet reached the desired degree of
efficiency.
The team of Arco Tarc is continuing construction at the padel centre being built
at Helme 18, intended to be completed as early as Q3 of this year. Here, we have
also noticed a slight decrease in construction prices, allowing to increase the
ROE of rental properties during the lease period of the facility.
Our primary challenges in the near future are the sales of the homes completed
at Kuldlehe and Kodulahe, which contain nearly 15 million euros' worth of homes
without contracts. With these projects, any revenue can be redirected into
existing projects and new properties.
KEY PERFORMANCE INDICATORS
In Q2 2024, the group's sales revenue was 943 thousand euros, which is 3.7 times
more than the sales revenue of the Q2 2023 of 254 thousand euros. The group's
sales revenue was 1,933 thousand euros for the 6 months of 2024 which is 3.8
times higher than the sales revenue of 507 thousand euros for the 6 months of
2023.
In Q2 2024, the group's operating loss (=EBIT) was 103 thousand euros and net
loss 339 thousand euros (in 6 months 2024: operating loss 311 thousand euros and
net loss of 688 thousand euros). In Q2 2023, the group had operating loss of
249 thousand euros and net loss of 347 thousand euros. In 6 months 2023, the
group had operating loss of 433 thousand euros and net loss of 638 thousand
euros.
In Q2 2024, 3 apartments were sold, 7 apartments were sold in total in 6 months
2024. As of 30 of June 2024, 44 apartments and one commercial space were ready
in stock. In Q2 2023, no final sales were formalized (in 6 months only 1 parking
space was sold), because group did not have any apartments ready for sale that
time.
In the first 6 months of 2024, the group's debt burden (net loans) increased by
5,610 thousand euros up to the level of 14,218 thousand euros as of 30 June
2024. As of 30 June 2024, the weighted average annual interest rate of interest-
bearing liabilities was 9.4%. This is an increase of 1.2 percentage points
compared to 31 December 2023.
OPERATING REPORT
The group's sales revenue was 943 thousand euros in Q2 2024 (Q2 2023: 254
thousand euros), including the sale of real estate in the group's own
development projects 870 thousand euros (0 euros in Q2 2023). In 2023, income
was received from the operation of the commercial building in Madrid in Sofia -
the commercial building was sold in 2023.
Other sales revenue in 2024 mainly includes revenue from franchise fees of real
estate agencies in Estonia, Latvia and Bulgaria. Franchise fees for the Q2 2024
were 73 thousand euros (in 6 months 128 thousand euros), franchise revenues for
the Q2 2023 were 66 thousand euros (in 6 months 119 thousand euros).
In Q2 2024, the pre-sale of the next stage of Kodulahe began: 66 apartments and
4 commercial premises in the form of three buildings will be built at Soodi 6.
By the time this report is published, 8 apartments and 2 commercial premises
have been booked. The homes are planned to be completed by the very end of 2025.
In the most premium phase of Kodulahe, Rannakalda, a pavilion, 4 service areas
and 108 apartments (as three separate apartment buildings), many of which have a
sea view, have been completed. As of the publication date of the quarterly
report, 36 of the 113 are vacant.
A subsidiary of Arco Vara, Arcojärve OÜ, in 2021 signed an agreement for land
acquisition beside Lake Harku, address Paldiski road 124b, Tallinn. More than
35,000 m(2) of residential and commercial real estate (GBA) is planned for
development. The project is called Arcojärve. As of 30.06.2024, the total
advance payment for the land is 4,978 thousand euros. The subsidiary of Arco
Vara is obliged to pay an additional 1,627 thousand euros for the purchase of
the land within three months from the establishment of the detailed plan for the
property by the Tallinn City Government, but no later than 30.04.2026. The start
of the construction of the first stage is planned for 2025.
In the Kuldlehe project, a spacious and exclusive cluster house with 5 homes was
built in Pirita. The sale of the project has started.
The Botanica Lozen project foresees construction of 54 homes (houses) in three
stages. Construction and sales of the first 16 buildings have begun - the
private houses of the first phase will be completed by the end of 2024. By the
date of publication of the quarterly report, 6 out of 16 houses have been pre-
sold.
Kerberon OÜ, a subsidiary of Arco Vara, is developing a fully automatic padel
center with six indoor courts at Helme 18 with the help of the construction
company Arco Tarc OÜ. The hall is fully leased and according to the plan, will
open its doors in the Q4 2024.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
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In thousands of euros 6m 2024 6m 2023 Q2 2024 Q2 2023
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Revenue from sale of own real estate 1,797 7 870 0
Revenue from rendering of services 136 500 73 254
Total revenue 1,933 507 943 254
Cost of sales -1,376 -191 -559 -105
Gross profit 557 316 384 149
Other income 0 76 0 54
Marketing and distribution expenses -219 -177 -149 -120
Administrative expenses -632 -646 -336 -331
Other expenses -17 -2 -2 -1
Operating loss -311 -433 -103 -249
Financial costs -377 -205 -236 -98
Loss before tax -688 -638 -339 -347
Net loss for the period -688 -638 -339 -347
Total comprehensive loss for the period -688 -638 -339 -347
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Earnings per share (in euros)
- basic -0.07 -0.06 -0.03 -0.03
- diluted -0.07 -0.06 -0.03 -0.03
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
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In thousands of euros 30 June 2024 31 December 2023
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Cash and cash equivalents 1,504 1,472
Receivables and prepayments 6,245 5,798
Inventories 29,619 27,637
Total current assets 37,368 34,907
Receivables and prepayments 18 18
Investment property 1,430 20
Property, plant and equipment 186 221
Intangible assets 19 24
Total non-current assets 1,653 283
TOTAL ASSETS 39,021 35,190
Loans and borrowings 3,391 3,391
Payables and deferred income 3,388 4,013
206 80
Total current liabilities 6,985 7,484
Loans and borrowings 12,331 6,689
Total non-current liabilities 12,331 6,689
TOTAL LIABILITIES 19,316 14,173
Share capital 7,272 7,272
Share premium 3,835 3,835
Statutory capital reserve 2,011 2,011
Other reserves 56 56
Retained earnings 6,531 7,843
Total equity attributable to owners of the
parent 19,705 21,017
TOTAL EQUITY 19,705 21,017
TOTAL LIABILITIES AND EQUITY 39,021 35,190
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Tiina Malm
CFO
Arco Vara AS
Phone: +372 614 4630
www.arcovara.com
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