KEY PERFORMANCE INDICATORS
· In Q2 2017, the group’s revenue was 1.0 million euros,
which is 52% less compared to the revenue of 2.1 million euros in Q2 2016. In 6
months 2017, the group’s revenue was 2.6 million euros, which is 63.5% less
compared to the revenue of 7.2 million euros in 6 months 2016. The revenue of
the Development Division amounted to 0.4 million euros in Q2 2017 and 1.5
million euros in 6 months 2017 (2016: 1.4 million euros in Q2 and 5.8 million
euros in 6 months) and revenue of the Service Division amounted to 0.7 million
euros in Q2 and 1.4 million euros in 6 months (in 2016: 0.8 million euros in Q2
and 1.6 million euros in 6 months).
· In Q2 2017, the group’s operating loss (=EBIT) was 0.2
million euros and net loss 0.4 million euros (in 6 months 2017: operating loss
of 0.4 million euros and net loss of 0.6 million euros). In Q2 2016, the group
had operating loss of 0.1 million euros and net loss of 0.2 million euros. In 6
month 2016, the group earned operating profit of 1.2 million euros and net
profit of 0.9 million euros. In Q2 and 6 months 2017, both the Development
Division and the Service Division had a small loss (below 0.1 million euros).
In Q2 and 6 months 2016, the Development Division earned operating profit of
0.1 million euros and 1.5 million euros, respectively. The Service Division had
operating loss of 0.1 million euros in 6 months 2016.
· In Q2 2017, 1 apartment and 3 land plots were sold in
projects developed by the group (in 6 months 2017: 2 apartments and 6 land
plots). In 2016, 5 apartments, 3 commercial spaces and 4 land plots in Q2 (73
apartments, 5 commercial spaces and 4 land plots in 6 months) were sold. The
number of sold properties explains the large differences in revenue and
operating profit figures of the Development Division. In the first half of
2016, active sale was ongoing in Manastirski project in Bulgaria, but no
development projects have been completed yet in 2017.
· In the first 6 months of 2017, the group’s debt burden
(net loans) increased by 5.1 million euros up to the level of 18.5 million
euros as of 30 June 2017. As of 30 June 2017, the weighted average annual
interest rate of interest bearing liabilities was 5.0%. This is a decrease of
0.3 percentage points compared to 31 December 2016.
Main financial figures
6 months 6 months Q2 Q2
2017 2017 2017 2016
--------------------------------------------------------------------------------
In millions of euros
------------- --------
Revenue
--------------------------------------------------------------------------------
Development 1.5 5.8 0.4 1.4
--------------------------------------------------------------------------------
Service 1.4 1.6 0.7 0.9
--------------------------------------------------------------------------------
Eliminations -0.3 -0.2 -0.1 -0.2
--------------------------------------------------------------------------------
Total revenue 2.6 7.2 1.0 2.1
--------------------------------------------------------------------------------
------------- --------
Operating profit (EBIT)
--------------------------------------------------------------------------------
Development 0.0 1.5 0.0 0.1
--------------------------------------------------------------------------------
Service -0.1 -0.1 0.0 0.0
--------------------------------------------------------------------------------
Unallocated income and expenses -0.3 -0.3 -0.2 -0.2
--------------------------------------------------------------------------------
Eliminations 0.0 0.1 0.0 0.0
--------------------------------------------------------------------------------
Total operating profit/loss (EBIT) -0.4 1.2 -0.2 -0.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Finance income and expense -0.2 -0.3 -0.2 -0.1
--------------------------------------------------------------------------------
Net profit/loss -0.6 0.9 -0.4 -0.2
--------------------------------------------------------------------------------
Cash flows from/used in operating -3.0 3.6 -2.3 0.7
activities
--------------------------------------------------------------------------------
Cash flows used in investing -0.4 -0.9 -0.1 -0.9
activities
--------------------------------------------------------------------------------
Cash flows from/used in financing 3.3 -2.5 2.0 -0.8
activities
--------------------------------------------------------------------------------
Net cash flows -0.1 0.2 -0.4 -1.0
--------------------------------------------------------------------------------
Cash and cash equivalents at beginning 0.8 0.7 1.1 1.9
of period
--------------------------------------------------------------------------------
Cash and cash equivalents at end of 0.7 0.9 0.7 0.9
period
--------------------------------------------------------------------------------
--------------------------------------- -------------
Total assets, at period end 31.7 25.6
-------------
Invested capital, at period end 27.5 21.2
-----------------------------------------------------------------
Net loans, at period end 18.5 9.9
-----------------------------------------------------------------
Equity, at period end 8.3 10.4
-----------------------------------------------------------------
Key ratios
--------------------------------------------------------------------------------
--------------------------------------- ------------- -------
EPS (in euros) -0.10 0.14 -0.05 -0.03
------------- --------
-------
Diluted EPS (in euros) -0.09 0.13 -0.05 -0.03
-------------------------------------------------------------------------
ROIC (rolling, four quarters) -9.9% 6.3%
-----------------------------------------------------------------
ROE (rolling, four quarters) -25.3% 17.1%
--------------------------------------- -------------
ROA (rolling, four quarters) -8.3% 5.7%
--------------------------
Current ratio 0.87 3.49
-----------------------------------------------------------------
Quick ratio 0.06 0.36
-----------------------------------------------------------------
Financial leverage 3.83 2.47
-----------------------------------------------------------------
Average loan term (in years) 0.7 1.5
-----------------------------------------------------------------
Average annual interest rate of loans 5.0% 5.7%
-----------------------------------------------------------------
Number of staff, at period end 131 185
-----------------------------------------------------------------
Revenue and net profit/loss from continuing operations
Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4
Total Q1 Q2 Q3 Q4 Total Q1 Q1 6M
2014 2014 2014 2014 2014 2015 2015 2015 2015
2015 2016 2016 2016 2016 2016 2017 2017 2017
--------------------------------------------------------------------------------
----------------------------------------------------------------------
In
milli
ons of
euros
--------------------------------------------------------------------------------
----------------------------------------------------------------------
Revenu 1.1 1.1 1.2 5.8 9.2 4.4 2.1 2.1 2.1
10.7 5.1 2.1 1.2 1.3 9.7 1.6 1.0 2.6
e
--------------------------------------------------------------------------------
----------------------------------------------------------------------
Net 0.4 -0.3 0.4 0.6 1.1 0.7 0.0 0.2 -0.4
0.5 1.1 -0.2 -0.4 -1.3 -0.8 -0.3 -0.3 -0.6
profi
t/loss
--------------------------------------------------------------------------------
----------------------------------------------------------------------
GROUP CEO’S REVIEW
Q2 was the last quarter providing modest results. This was an end to our
journey through a desert, which required a strong cash management.
Unfortunately, we could not outperform ourselves and did not start the final
sales of Kodulahe apartments in Q2, because the construction period was
extended by more than four weeks due to circumstances not controlled by Arco
Vara.
We made revenues only through brokerage, evaluations and renting out
properties, in a total amount of 1 mln euros in 3 months. During this period,
we helped nearly 2200 people, out of those 1500 in Estonia and the rest in
Bulgaria. A good sign is that brokerage and appraisal revenues have increased
both in Estonia and in Bulgaria in the last 24 months (2016 figures included
the Latvian subsidiary, which was sold in the autumn of 2016), and the rental
income from Madrid Blvd building has increased as well. Unfortunately, this
growth has not been sufficient to cover the overhead and interest costs of the
group.
In the ongoing 3rd quarter, we have started the transfer and final sales of
Kodulahe 1. stage apartments. The expected revenue of the 1. stage exceeds 16
mln euros. We stick to our plan to complete the sale of the 1. stage by the end
of this year, after which we can allocate the cash into new developments.
In the Iztok Parkside project, we are still applying for construction permit.
We have made some progress in various aspects of this procedure, but have not
achieved a breakthrough. Until the construction and presale of this project
will start, Iztok Parkside will remain a cost item in our P/L statement.
In the Oa street development in Tartu, as well as in Kodulahe 2. stage, design
works are in progress. Our aim is to start construction of both projects in
this year.
We continue our efforts to find tenants for the remaining rental areas in the
Madrid Blvd building, as well as to find new land plots suitable for
development in Sofia.
To summarize, we can see from ongoing work that the second half of 2017 will
provide both more news and profits.
The ambitions of Arco Vara as the most people-oriented real estate company
still remain higher than its 2017 results.
SERVICE DIVISION
In Q2 2017, revenue of the Service Division amounted to 682 thousand euros (Q2
2016: 850 thousand euros), which included intra-group revenue of 56 thousand
euros (Q2 2016: 126 thousand euros). In 6 months 2017, the revenue of 1,362
thousand euros decreased by 14.8% compared to the revenue of 1,598 thousand
euros in 6 months 2016. In 6 months 2017, revenue of the Service Division from
main services (real estate brokerage and valuation services) decreased by 18%
compared to 6 months 2016. The main reason is the fact that the revenue in the
amount of 468 thousand euros from the Latvian agency (which was sold in Q4
2016) was included in the group revenue in 6 months 2016. It is good to see
from the table below that the revenue from main services increased
significantly in the Estonian agency (compared to the Q2 and 6 months 2016,
respective increases were 28% and 23%).
Revenue of real estate agencies from brokerage and valuation
6 months 6 months Change, Q2 2017 Q2 2016 Change,
2017 2016 % %
--------------------------------------------------------------------------------
In thousands of
euros
Estonia 841 655 28% 435 355 23%
--------------------------------------------------------------------------------
Bulgaria 354 329 8% 157 186 -16%
--------------------------------------------------------------------------------
Latvia - 468 - - 233 -
--------------------------------------------------------------------------------
Total 1,195 1,452 -18% 592 774 -24%
--------------------------------------------------------------------------------
In Q2 and 6 months 2017, Estonian agency had net loss of 46 thousand euros and
108 thousand euros, respectively (in 2016: net loss of 46 thousand euros in Q2
and 119 thousand euros in 6 months). Bulgarian agency earned net profit of 6
thousand euros in Q2 2017 and 41 thousand euros in 6 months 2017. (2016: net
profit of 7 thousand euros in Q2 and net loss of 2 thousand euros in 6 months).
In addition to brokerage and valuation services, the Service Division also
provides real estate management and accommodation services in Bulgaria. The
revenue from real estate management was 63 thousand euros in 6 months 2017, 52
thousand euros of which was intra-group revenue (6 months 2016: 56 thousand and
47 thousand euros, respectively). Revenue from accommodation services amounted
to 86 thousand euros in 6 months 2017, of which 47 thousand euros was made in
Q2 (2016: 64 thousand euros in 6 months and 34 thousand euros in Q2).
The numbers of brokerage deals and valuation reports of the Service Division,
together with the number of staff are shown in the following graphs. For better
comparability, only Bulgarian and Estonian figures are shown.
On 30 June 2017, the number of staff in the Service Division was 118 (on
31.12.2016: 97).
DEVELOPMENT DIVISION
The revenue of the Development Division totalled 406 thousand euros in Q2 2017
(in Q2 2016: 1,403 thousand euros) and 1,469 thousand euros in 6 months 2017
(in 6 months 2016: 5,815 thousand euros), including revenue from the sale of
properties in the group’s own development projects in the amount of 248
thousand euros in Q2 and 1,186 thousand euros in 6 months (2016: 1,277 thousand
euros in Q2 and 5,582 thousand euros in 6 months).
Most of the other revenue of the Development Division consists of rental income
from commercial and office premises in Madrid Blvd building in Sofia, amounting
to 120 thousand euros in Q2 2017 and 212 thousand euros in 6 months 2017 (2016:
88 thousand euros in Q2 and 163 thousand euros in 6 months). By the publishing
date of the interim report, last two office spaces remained vacant. The group
expects to rent out all vacant spaces during Q3 2017.
In Q2 and 6 months 2017, the Development Division had operating loss of 29
thousand euros and 43 thousand euros, respectively. In 2016, the Development
Division earned operating profit of 105 thousand euros in Q2 and 1,491 thousand
euros in 6 months. Revenue and profitability figures were significantly higher
in first half 2016 due to the conclusion of most of sale agreements in the last
stage of Manastirski project in Sofia in that period (the construction of
apartment building was finished in December 2015).
The construction and presale of apartments of the first stage apartment
building (with 125 apartments and 5 commercial spaces) in the group’s largest
development project Kodulahe continued in Tallinn. By the publishing date of
the interim report, presale agreements for 100 apartments and two commercial
spaces have been concluded. The construction of the apartment building will be
finished in Q3 2017.
In Q2 2017, preparatory works in the second stage of Kodulahe project
continued, where a building with ca 70 apartments and commercial spaces is
planned. Preparatory works also continued for Oa street properties in Tartu,
where 4 smaller apartment buildings are planned. Both of these projects are
expected to be finalised by mid-2019.
In Q2 2017, one apartment was sold in Madrid Blvd complex in Sofia. As of 30
June 2017, 3 apartments remained unsold. Additional 15 apartments are furnished
and are being rented out as accommodation service. Unsold parking places are
also being rented out.
In Q2 2017, the delay that had emerged during Q1 in the development of Iztok
Parkside project in Sofia continued. The problem lies in obtaining construction
permit for the construction of access road, which is located on state-owned
land. By the publication date of interim report, presale agreements for 15
apartments remained in force, but further presale has been stopped by now until
the construction permit issue will be cleared out. Iztok project consists of
three apartment buildings with 68 apartments (7,070 square meters of
apartments’ sellable area).
As of 30 June 2017, 6 Marsili residential plots remained unsold in Latvia. In
Q2 2017, three plots were sold in the project.
As of 30 June 2017, 5 people were employed in the Development Division, the
same number as at the end of 2016.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note 6 months 6 months Q2 Q2
2017 2016 2017 2016
--------------------------------------------------------------------------------
In thousands of euros
------------ --------
Revenue from sale of own real 1,186 5,582 248 1,277
estate
--------------------------------------------------------------------------------
Revenue from rendering of services 1,422 1,569 760 817
--------------------------------------------------------------------------------
Total revenue 2, 3 2,608 7,151 1,008 2,094
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cost of sales 4 -1,933 -4,692 -682 -1,513
--------------------------------------------------------------------------------
Gross profit 675 2,459 326 581
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Other income 19 28 9 27
--------------------------------------------------------------------------------
Marketing and distribution 5 -214 -280 -105 -138
expenses
--------------------------------------------------------------------------------
Administrative expenses 6 -824 -1,021 -412 -522
--------------------------------------------------------------------------------
Other expenses -26 -18 -18 -12
--------------------------------------------------------------------------------
Gain on sale of subsidiaries 0 1 0 1
--------------------------------------------------------------------------------
Operating profit/loss -370 1,169 -200 -63
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Finance income and costs 7 -272 -296 -157 -124
--------------------------------------------------------------------------------
Net profit/loss -642 873 -357 -187
----------------------------------------- ------------ -------
------------ --------
----------------------------------------- ------------ -------
Net profit/loss for the period -642 873 -357 -187
--------------------------------------------------------------------------------
attributable to owners of the -642 878 -357 -182
parent
------------ --------
attributable to non-controlling 0 -5 0 -5
interests
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total comprehensive income/expense -642 873 -357 -187
for the period
--------------------------------------------------------------------------------
attributable to owners of the -642 878 -357 -182
parent
------------ --------
attributable to non-controlling 0 -5 0 -5
interests
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Earnings per share (in euros) 8
------------ --------
- basic -0.10 0.14 -0.05 -0.03
--------------------------------------------------------------------------------
- diluted -0.09 0.13 -0.05 -0.03
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 30 June 31 December
2017 2016
--------------------------------------------------------------------------------
In thousands of euros
-------------
Cash and cash equivalents 752 845
--------------------------------------------------------------------------------
Receivables and prepayments 9 501 470
--------------------------------------------------------------------------------
Inventories 10 18,296 14,593
--------------------------------------------------------------------------------
Total current assets 19,549 15,908
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Receivables and prepayments 9 11 11
--------------------------------------------------------------------------------
Investments 8 0
--------------------------------------------------------------------------------
Investment property 11 11,155 10,835
--------------------------------------------------------------------------------
Property, plant and equipment 707 718
--------------------------------------------------------------------------------
Intangible assets 265 248
--------------------------------------------------------------------------------
Total non-current assets 12,146 11,812
--------------------------------------------------------------------------------
TOTAL ASSETS 31,695 27,720
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Loans and borrowings 12 17,044 9,372
--------------------------------------------------------------------------------
Payables and deferred income 13 5,279 4,369
--------------------------------------------------------------------------------
Provisions 43 108
--------------------------------------------------------------------------------
Total current liabilities 22,366 13,849
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Loans and borrowings 12 1,051 4,886
--------------------------------------------------------------------------------
Total non-current liabilities 1,051 4,886
--------------------------------------------------------------------------------
TOTAL LIABILITIES 23,417 18,735
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Share capital 4,555 4,555
--------------------------------------------------------------------------------
Share premium 292 292
--------------------------------------------------------------------------------
Statutory capital reserve 2,011 2,011
--------------------------------------------------------------------------------
Other reserves 8 52 52
--------------------------------------------------------------------------------
Retained earnings 1,368 2,075
--------------------------------------------------------------------------------
Total equity attributable to owners of the 8,278 8,985
parent
--------------------------------------------------------------------------------
Equity attributable to non-controlling 0 0
interests
--------------------------------------------------------------------------------
TOTAL EQUITY 8,278 8,985
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY 31,695 27,720
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
Note 6 months 6 months Q2 Q2
2017 2016 2017 2016
--------------------------------------------------------------------------------
In thousands of euros
---------- --------
Cash receipts from customers 3,641 9,635 1,602 3,809
--------------------------------------------------------------------------------
Cash paid to suppliers -6,272 -4,156 -3,909 -2,392
--------------------------------------------------------------------------------
Other taxes paid and recovered (net) 102 -1,149 181 -378
--------------------------------------------------------------------------------
Cash paid to employees -460 -636 -248 -312
--------------------------------------------------------------------------------
Other cash payments and receipts 12 -62 22 -15
related to operating activities (net)
--------------------------------------------------------------------------------
NET CASH FROM/USED IN OPERATING -2,977 3,632 -2,352 712
ACTIVITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Payments made on purchase of tangible -48 -74 -33 -35
and intangible assets
--------------------------------------------------------------------------------
Payments made on purchase and 11 -330 -29 -13 -11
development of investment property
--------------------------------------------------------------------------------
Proceeds from sale of a subsidiary 0 1 0 1
--------------------------------------------------------------------------------
Payments made on purchase of a 0 -840 0 -840
subsidiary
--------------------------------------------------------------------------------
Loans provided -7 0 -2 0
--------------------------------------------------------------------------------
Other payments related to investing -8 -3 -8 0
activities
--------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES -393 -945 -56 -885
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Proceeds from loans received 12 4,176 1,071 2,522 51
--------------------------------------------------------------------------------
Settlement of loans and borrowings 12 -339 -2,998 -168 -580
--------------------------------------------------------------------------------
Interest paid -451 -391 -218 -189
--------------------------------------------------------------------------------
Dividends paid -65 -61 -65 -61
--------------------------------------------------------------------------------
Other payments related to financing -44 -128 -44 0
activities
--------------------------------------------------------------------------------
NET CASH FROM/USED IN FINANCING 3,277 -2,507 2,027 -779
ACTIVITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NET CASH FLOW -93 180 -381 -952
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash and cash equivalents at beginning 845 745 1,133 1,877
of period
--------------------------------------------------------------------------------
Increase in cash and cash equivalents -93 180 -381 -952
--------------------------------------------------------------------------------
Cash and cash equivalents at the end 752 925 752 925
of period
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
------------
Equity attributable to owners of the parent Non-cont Total
rolling equity
interest
s
--------------------------------------------------------------------
Share Share Statutory Other Retain Total
capita premiu capital reserv ed
l m reserve es earnin
gs
---------------------------------------------------------------
In
thousands
of euros
--------
Balance as 4,282 292 2,011 298 2,656 9,539 91 9,630
of 31
December
2015
--------------------------------------------------------------------------------
Dividends 0 0 0 0 -61 -61 0 -61
paid
--------------------------------------------------------------------------------
Change in 0 0 0 0 0 0 -77 -77
non-contro
lling
interest
--------------------------------------------------------------------------------
Total 0 0 0 0 878 878 -5 873
comprehens
ive income
for the
period
--------------------------------------------------------------------------------
Balance as 4,282 292 2,011 298 3,473 10,356 9 10,365
of 30 June
2016
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Balance as 4,555 292 2,011 52 2,075 8,985 0 8,985
of 31
December
2016
--------------------------------------------------------------------------------
Dividends 0 0 0 0 -65 -65 0 -65
paid
--------------------------------------------------------------------------------
Total 0 0 0 0 -642 -642 0 -642
comprehens
ive income
for the
period
--------------------------------------------------------------------------------
Balance as 4,555 292 2,011 52 1,368 8,278 0 8,278
of 30 June
2017
--------------------------------------------------------------------------------
Kristel Tumm
CFO
Arco Vara AS
Tel: +372 614 4662
www.arcorealestate.com |