KEY PERFORMANCE INDICATORS
In Q3 2019, the group's revenue was 0.5 million euros, which is 62% less than
the revenue of 1.3 million euros from continuing operations in Q3 2018. In Q3
2018, revenue together with the discontinued service segment was 2.1 million
euros. In 9 months 2019, the group's revenue was 2.2 million euros, which is
27% less than the revenue of 3.0 million euros in 9 months 2018.
In Q3 2019, the group's operating loss (=EBIT) was 64 thousand euros and net
loss 174 thousand euros (in 9 months 2019: operating loss 118 thousand euros and
net loss of 460 thousand euros). In Q3 2018, the group had operating profit of
167 thousand euros from continuing operations (191 thousand overall) and net
profit of 42 thousand euros. In 9 months 2018, the group made operating profit
of 100 thousand euros and net loss of 360 thousand euros.
In Q3 2019, 2 apartments were sold in projects developed by the group (in 9
months 2019 12 apartments). In Q3 2018, 4 apartments and 2 commercial areas were
sold (12 apartments, 2 commercial areas and 1 land plot in 9 months).
In 9 months 2019, the group's debt burden (net loans) increased by 3.4 million
euros up to the level of 19.1 million euros as of 30 September 2019. As of 30
September 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
Q3 was completed with Kodulahe construction works on schedule, Madrid Blvd
rental property occupied with paying tenants and the construction of two
Estonian developments with 80 apartments kicked off.
We continue to be in a seriously failure with Iztok Parkside, where end-solution
by public authorities to resolve the streets land question has seemingly become
an endless inching week by week. The end solution has not been achieved yet. The
associated uncertainty on project sale timeline and damage to return on equity
and cashflows is not proportionate to the end profit that we still expect to
achieve. It is obvious that any promise on schedule by the management to the
shareholders is not reliable under those circumstances. We simply do our best
until the resolution.
As for Q4 results, Kodulahe will save the full year of Arco Vara. The deliveries
of Kodulahe phase 2 apartments have started to take place and we can expect the
year to end up with profitable Q4. The group is also in the process of further
reducing its operating expenses by circa 10% per annum.
OPERATING REPORT
The revenue of the group totalled 476 thousand euros in Q3 2019 (in Q3
2018: 2,124 thousand euros, of which 1,256 thousand euros from continuing
operations) and 2,222 thousand euros in 9 months 2019 (in 9 months 2018: 5,347
thousand euros, of which 3,049 thousand euros from continuing operations),
including revenue from the sale of properties in the group's own development
projects in the amount of 224 thousand euros in Q3 and 1,487 thousand euros in
9 months 2019 (2018: 1,045 thousand euros in Q3 and 2,537 thousand euros in 9
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
186 thousand euros in Q3 2019 and 536 thousand euros in 9 months (2018: 167
thousand euros in Q3 and 419 thousand euros in 9 months). In Q3 2019, nearly all
office and commercial spaces together with parking places were rented out.
In Q3 and 9 months 2019, the group had an operating loss of 64 thousand euros
and 118 thousand euros, respectively. In 2018, the group had an operating profit
from continuing operations of 167 thousand euros in Q3 and 100 thousand euros in
9 months.
In Q3 2019, construction works came close to an end in Stage II of Kodulahe
project, a building with 68 apartments and 1 commercial space. The project is
expected to be largely realized by the end of 2019. By the publishing date of
the interim report, 16 apartments have been sold and 49 apartments presold.
In Q3, design works for Stages III-V of Kodulahe came close to an end and
construction of Stage III was started. In Stage III, a residential building with
50 apartments will be constructed at Soodi 4 in Merimetsa district in Tallinn.
Under favourable market conditions, the joint construction of Stages IV-V will
be started in 2000. The apartment buildings will become ready for final sale in
about 1,5 years after the start of construction. By the publishing date of the
interim report, presale agreements for 4 apartments in the Stage II building
have been concluded.
Q3 also marked the start of construction of 4 smaller apartment buildings with a
total of 30 apartments on Oa street plots in Tartu under the project name of
Kodukalda. The construction is scheduled to end in Q4 2020.
In Iztok Parkside project in Sofia, the final sale of apartments could not start
in Q3 because the access road problem remained unsolved. By the publishing date
of the interim report, presale agreements for 58 apartments have been concluded.
Iztok project consists of three apartment buildings with 67 apartments.
In Madrid Blvd building, out of the apartments previously used for offering
accommodation service, one remains unsold and two have been presold as of the
date of this report.
In the Lozen project near Sofia in Bulgaria, design works have been completed
and main contractor has been chosen for Stage 1. Construction permit is expected
in Q1 2020. The project foresees construction of 179 homes (apartments and
houses), commercial spaces and a kindergarten. Under favourable market
conditions, construction may start in Q1 2020, possibly divided into smaller
sub-stages. Considering the nature of terrain on a mountain slope, minimum
construction period is 2 years.
As of 30 September 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 9m 2019 9m 2018 Q3 2019 Q3 2018
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Continuing operations
Revenue from sale of own real estate 1,487 2,537 224 1,045
Revenue from rendering of services 735 512 252 211
Total revenue 2,222 3,049 476 1,256
Cost of sales -1,641 -2,102 -312 -878
Gross profit 581 947 164 378
Other income 91 133 0 92
Marketing and distribution expenses -204 -96 -51 -28
Administrative expenses -538 -837 -156 -260
Other expenses -48 -62 -21 -15
Gain on sale of subsidiaries 0 15 0 0
Operating loss -118 100 -64 -167
Financial income and costs -342 -375 -110 -150
Net loss from continuing operations -460 -275 -174 17
Net loss from discontinued operations 0 -85 0 25
Net loss for the period -460 -360 -174 42
Total comprehensive income/expense for the
period -460 -360 -174 42
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Earnings per share from continuing operations
(in euros)
- basic -0.05 -0.03 -0.02 0.00
- diluted -0.05 -0.03 -0.02 0.00
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Earnings per share (in euros)
- basic -0.05 -0.04 -0.02 0.00
- diluted -0.05 -0.04 -0.02 0.00
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
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In thousands of euros 30 September 2019 31 December 2018
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Cash and cash equivalents 899 2,327
Investments 0 69
Receivables and prepayments 775 739
Inventories 22,806 17,482
Total current assets 24,480 20,617
Receivables and prepayments 20 25
Investment property 10,874 12,344
Property, plant and equipment 373 267
Intangible assets 230 262
Total non-current assets 11,497 12,898
TOTAL ASSETS 35,977 33,515
Loans and borrowings 16,615 12,547
Payables and deferred income 4,272 3,982
Total current liabilities 20,887 16,529
Loans and borrowings 2,639 3,985
Total non-current liabilities 2,639 3,985
TOTAL LIABILITIES 23,526 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 1,611 2,161
TOTAL EQUITY 12,451 13,001
TOTAL LIABILITIES AND EQUITY 35,977 33,515
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Kristel Tumm
CFO
Arco Vara AS
Phone: +372 614 4662
www.arcovara.com
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