KEY PERFORMANCE INDICATORS
In Q2 2019, the group's revenue was 0.7 million euros, which is 106% more than
the revenue of 0.3 million euros from continuing operations in Q2 2018. In Q2
2018, revenue together with the discontinued service segment was 1.1 million
euros. In 6 months 2019, the group's revenue was 1.7 million euros, which is 3%
less than the revenue of 1.8 million euros in 6 months 2018.
In Q2 2019, the group's operating loss (=EBIT) was 59 thousand euros and net
loss 174 thousand euros (in 6 months 2019: operating loss 54 thousand euros and
net loss of 286 thousand euros). In Q2 2018, the group had operating loss of
159 thousand euros from continuing operations (239 thousand in overall) and net
loss of 351 thousand euros. In 6 months 2018, the group made operating loss of
176 thousand euros and net loss of 402 thousand euros.
In Q2 2019, 3 apartments were sold in projects developed by the group (in 6
months 2019 10 apartments). In Q2 2018, 1 apartment was sold (8 apartments and
1 land plot in 6 months).
In the 6 months of 2019, the group's debt burden (net loans) increased by 1.7
million euros up to the level of 17.4 million euros as of 30 June 2019. As of
30 June 2019, the weighted average annual interest rate of interest-bearing
liabilities was 4.7%. This is a decrease of 0.3 percentage points compared to
31 December 2018.
GROUP CEO'S REVIEW
There is not much to be proud of in the results of the second quarter.
We are still stuck with Iztok Parkside where the construction is completed and
more than 80% of the project is presold. The project's book value as stock is
more than 7 million EUR and expected sales revenue is about 9 million EUR. The
good news at the bad game is that the customers still wish to receive their
apartments and have not started to back out from their presale contracts. Since
the Bulgarian bureaucracy machinery has not yet resolved the question which
public institution owns the access streets, the delivery of apartments, as well
as earning the revenue and profit have been delayed. We need to continue
patiently and resiliently to resolve the problem and appreciate every single
step that brings us closer to the end solution.
In Kodulahe project, construction of the second apartment block is on schedule
and more than 85% of the sellable apartment area has been presold. We expect
sales revenue and profit in the fourth quarter. Commencement of construction of
the third apartment block depends on reaching a satisfactory construction price.
In Lozen project, construction tender is going on and it is possible to commence
construction in the fourth quarter provided that the construction price meets
our expectations. Madrid Blvd occupancy rate is close to 100% and generates
positive cashflow.
During 2019, the group will continue to seek an answer to two key questions:
first, how to close the Iztok Parkside project as quickly and profitably as
practically possible, and second, whether it is better to hold and push the real
estate development projects further, or to seek alternative solutions in order
to achieve at least 20% annual return on equity.
OPERATING REPORT
The revenue of the group totalled 695 thousand euros in Q2 2019 (in Q2
2018: 1,076 thousand euros, of which 337 thousand euros from continuing
operations) and 1,746 thousand euros in 6 months 2019 (in 6 months 2018: 3,223
thousand euros, of which 1,793 thousand euros from continuing operations),
including revenue from the sale of properties in the group's own development
projects in the amount of 440 thousand euros in Q2 and 1,263 thousand euros in
6 months 2019 (2018: 182 thousand euros in Q2 and 1,492 thousand euros in 6
months).
Most of the other revenue of the group consisted of rental income from
commercial and office premises in Madrid Blvd building in Sofia, amounting to
178 thousand euros in Q2 2019 and 350 thousand euros in 6 months (2018: 128
thousand euros in Q2 and 252 thousand euros in 6 months). In Q2 2019, all office
and commercial spaces together with parking places were rented out.
In Q2 and 6 months 2019, the group had an operating loss of 59 thousand euros
and 54 thousand euros, respectively. In 2018, the group had an operating loss
from continuing operations of 157 thousand euros in Q2 and 66 thousand euros in
6 months.
In Q1 2019, construction works continued in Stage II of Kodulahe project, a
building with 68 apartments and 1 commercial space. The project is expected to
be finalized by the end of 2019. By the publishing date of the interim report,
62 apartments have been presold.
Design works for Stages III-V of Kodulahe continued in Q2 and have been largely
finished by now. Under favourable market conditions, the construction of Stage
III is scheduled to start in the autumn of 2019 and the joint construction of
Stages IV-V in 2000. The apartment buildings will become ready for final sale in
about 1,5 years after the construction begins.
In Q2, construction tender began for building 4 smaller apartment buildings on
Oa street plots in Tartu under the project name of Kodukalda. The construction
is scheduled to start in the early autumn of 2019.
In Iztok Parkside project in Sofia, construction has been completed. By the
publishing date of the interim report, presale agreements for 56 apartments have
been concluded. Iztok project consists of three apartment buildings with 67
apartments (7,070 square meters of apartments' sellable area).
In Madrid Blvd building, out of the 15 apartments previously used for offering
accommodation service, 10 have been sold as of the date of this report.
In the Lozen project near Sofia in Bulgaria, design works have been completed
and construction tender is in process. The project foresees construction of 179
homes (apartments and houses), commercial spaces and a kindergarten. Under
favourable market conditions, construction may start in the second half of
2019, possibly divided into smaller sub-stages. Considering the nature of
terrain on a mountain slope, minimum construction period is 2 years.
As of 30 June 2019 and the date of this report, 4 Marsili residential plots
remained unsold in Latvia.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
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In thousands of euros 6m 2019 6m 2018 Q2 2019 Q2 2018
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Continuing operations
Revenue from sale of own real estate 1,263 1,492 440 182
Revenue from rendering of services 483 301 255 155
Total revenue 1,746 1,793 695 337
Cost of sales -1,329 -1,224 -514 -208
Gross profit 417 569 181 129
Other income 91 41 0 36
Marketing and distribution expenses -153 -68 -68 -25
Administrative expenses -382 -576 -149 -260
Other expenses -27 -47 -23 -37
Gain on sale of subsidiaries 0 15 0 0
Operating profit/loss -54 -66 -59 -157
Financial income and expenses -232 -226 -115 -112
Net profit/loss from continuing operations -286 -292 -174 -269
Net loss from discontinued operations 0 -110 0 -82
Net loss for the period -286 -402 -174 -351
Total comprehensive income/expense for the
period -286 -402 -174 -351
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Earnings per share from continuing operations
(in euros)
- basic -0.03 -0,03 -0.02 -0.03
- diluted -0.03 -0,03 -0.02 -0,03
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Earnings per share (in euros)
- basic -0.03 -0.05 -0.02 -0.04
- diluted -0.03 -0.04 -0.02 -0.04
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
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In thousands of euros 30 June 2019 31 December 2018
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Cash and cash equivalents 1,277 2,327
Investments 0 69
Receivables and prepayments 698 739
Inventories 21,286 17,482
Total current assets 23,261 20,617
Receivables and prepayments 20 25
Investment property 11,462 12,344
Property, plant and equipment 388 267
Intangible assets 233 262
Total non-current assets 12,103 12,898
TOTAL ASSETS 35,364 33,515
Loans and borrowings 16,575 12,547
Payables and deferred income 4,671 3,982
Total current liabilities 21,246 16,529
Loans and borrowings 1,403 3,985
Total non-current liabilities 1,403 3,985
TOTAL LIABILITIES 22,649 20,514
Share capital 6,299 6,299
Share premium 2,285 2,285
Statutory capital reserve 2,011 2,011
Other reserves 245 245
Retained earnings 1,875 2,161
TOTAL EQUITY 12,715 13,001
TOTAL LIABILITIES AND EQUITY 35,364 33,515
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Kristel Tumm
CFO
Arco Vara AS
Phone: +372 614 4662
www.arcovara.com
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