KEY PERFORMANCE INDICATORS
In Q4 2019, the group's revenue was 10.9 million euros, which is 18.6 times more
than the revenue of 0.6 million euros from continuing operations in Q4 2018. In
Q4 2018, revenue together with the discontinued service segment was 1.3 million
euros. In 12 months 2019, the group's revenue was 13.1 million euros, which is
3.6 times more than the revenue of 3.6 million euros in 12 months 2018. The
group recognizes revenue from the sale of apartments at the date of conclusion
of the right in notary, so fluctuations in revenue periodically mostly depend on
the time of completion of the developed houses.
In Q4 2019, the group's operating profit (=EBIT) was 1.068 thousand euros and
net profit 848 thousand euros (in 12 months 2019: operating profit 950 thousand
euros and net profit of 388 thousand euros). In Q4 2018, the group had operating
profit of 1 thousand euros from continuing operations (loss of 75 thousand
overall) and net loss of 107 thousand euros. In 12 months 2018, the group made
operating profit of 101 thousand euros and net loss of 382 thousand euros from
continuing operations.
In Q4 2019, 70 apartments were sold in projects developed by the group (in 12
months 2019 82 apartments). In Q4 2018, 1 commercial area and 1 land plot were
sold (12 apartments, 3 commercial areas and 2 land plots in 12 months).
In 12 months 2019, the group's debt burden (net loans) decreased by 2.8 million
euros down to the level of 11.5 million euros as of 31 December 2019. As of 31
December 2019, the weighted average annual interest rate of interest-bearing
liabilities was 4.2%. This is a decrease of 0.8 percentage points compared to
31 December 2018.
GROUP CEO'S REVIEW
The Christmas of Arco Vara was green. The cash flow of the fourth quarter was
enough to dampen the small numbers of the first nine months and make the whole
year profitable. On the one hand, one ought to suffer through quite many news
during the year that were carried by conservative realism, in other words, the
drought of good news. Our development processes in Bulgaria Iztok Parkside
project were not fast enough which led to unsold apartments in the value of more
than 9 million euros, which in turn led to losses in the profit of the Group. On
the other hand, the performance of the fourth quarter of Arco Vara is an example
of what kind of positive emotions can a good property development bring to
clients, the team and the shareholders of the company itself.
The development of Kodulahe will continue as planned in the pace of the
construction as well as preselling. We do not intend to reduce the profit margin
and, on the current presumptions, it is conceivable that we will start the
construction of two succeeding apartment buildings still in this year. The first
clients have started to buy apartments in the development project of Iztok, even
though it is presumed after the decision of the Bulgarian government to
dispossess the street lands to the city of Sofia, that it will take up to five
more months before the certificate of occupancy for the building will be
granted. The board has so far also been wrong when making presumptions. The
beginning of construction of the new development project in Sofia, Lozen, is
possible if it is supported by the sufficient interest of the clients. We would
like to determine the interest of the clients during the first half of the year.
Ground-breaking is also the refinancing of the loan agreement with the reduction
of interest rates for Madrid Blvd which was preceded by the selling of the last
apartment. The outstanding amount of the bank loan for Madrid Blvd is under EUR
6 million and the building has started to operate as a full investee that is
profitable for the owner. There are still the daily challenges to keep the
occupancy rate of the building, the satisfaction of the lessees and the lease
payment.
With this, the year 2019 is successfully concluded. The objectives of the year
2020 are to bring joy to the clients with the construction and sale of the
development project of Oa Street in Tartu (1,967 m(2) GSA) at the end of the
year and with the certificate of occupancy and sale of apartments of Iztok
Parkside in Sofia (6,553 m(2) GSA) by the middle of the year. The results of the
year should also be supported by the rental income from Madrid Blvd and licence
fees. The results of 2021 and the following years will depend on the way Arco
Vara realizes the third building of Kodulahe that is being constructed (3,406
m(2) GSA) and if Arco Vara starts building in Lozen, Sofia and the fourth and
fifth building in Kodulahe during the year 2020.
The company is sufficiently capitalised to continue with the foregoing. It can
also be said that the maximum has been undertaken with the equity in the amount
of EUR 13 million in total. The board is therefore aware of the expectation of
many shareholders about subsequently raising dividend rates in comparison to the
dividends paid between 2014-2019.
OPERATING REPORT
The revenue of the group totalled 10,887 thousand euros in Q4 2019 (in Q4
2018: 1,285 thousand euros, of which 586 thousand euros from continuing
operations) and 13,109 thousand euros in 12 months 2019 (in 12 months
2018: 6,632 thousand euros, of which 3,635 thousand euros from continuing
operations), including revenue from the sale of properties in the group's own
development projects in the amount of 10,665 thousand euros in Q4 and 12,152
thousand euros in 12 months 2019 (2018: 241 thousand euros in Q4 and 2,778
thousand euros in 12 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
159 thousand euros in Q4 2019 and 696 thousand euros in 12 months (2018: 167
thousand euros in Q4 and 586 thousand euros in 12 months). In Q4 2019, nearly
all office and commercial spaces together with parking places were rented out.
In Q4 and 12 months 2019, the group had an operating profit of 848 thousand
euros and 388 thousand euros, respectively. In 2018, the group had an operating
profit from continuing operations of 1 thousand euros in Q4 and 101 thousand
euros in 12 months.
In Q4 2019, construction works finished in Stage II of Kodulahe project and keys
were handed over for 65 apartment owners of total 68 apartments. By the
publishing date of the interim report, 3 apartments and a commercial space have
not been sold.
In Q4, construction of Kodulahe Stage III continued. 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 2020. 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 13 apartments in the Stage
III building have been concluded.
In Q4 also continued 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. By the publishing
time of the interim report, 6 apartments have been presold.
In Iztok Parkside project in Sofia, the final sale of apartments started at the
end Q4 2019, but the main sales are planned during 2020 after receiving an
occupancy permit. By the publishing date of the interim report, presale
agreements for 10 apartments have not 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, 2 remain presold as of the date of this report; there are
no unsold apartments left.
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 Q2 2020, possibly divided into smaller
stages. Considering the nature of terrain on a mountain slope, minimum
construction period is 2 years.
As of 31 December 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 12m 2019 12m 2018 Q4 2019 Q4 2018
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Continuing operations
Revenue from sale of own real estate 12,152 2,778 10,665 241
Revenue from rendering of services 957 857 222 345
Total revenue 13,109 3,635 10,887 586
Cost of sales -11,295 -2,446 -9,654 -344
Gross profit 1,814 1,189 1,233 242
Other income 137 135 46 2
Marketing and distribution expenses -96 -133 108 -37
Administrative expenses -777 -1,224 -239 -387
Other expenses -52 -73 -21 -15
Loss on inventory write-down -76 -21 -76 -21
Gain on sale of subsidiaries 0 228 0 213
Operating profit/loss 950 101 1,068 1
Financial income and costs -562 -482 -220 -107
Profit/loss before tax 388 -381 848 -106
Income tax 0 -1 0 -1
Net profit/loss from continuing operations 388 -382 848 -107
Net loss from discontinued operations 0 -162 0 -77
Net profit/loss for the period 388 -544 848 -184
Total comprehensive income/expense for the
period 388 -544 848 -184
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Earnings per share from continuing
operations (in euros)
- basic 0.04 -0.04 0.09 -0.01
- diluted 0.04 -0.04 0.09 -0.01
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Earnings per share (in euros)
- basic 0.04 -0.06 0.09 -0.02
- diluted 0.04 -0.06 0.09 -0.02
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
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In thousands of euros 31 December 2019 31 December 2018
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Cash and cash equivalents 870 2,327
Investments 0 69
Receivables and prepayments 544 739
Inventories 15,807 17,482
Total current assets 17,221 20,617
Receivables and prepayments 0 25
Investment property 11,051 12,344
Property, plant and equipment 265 267
Intangible assets 217 262
Total non-current assets 11,533 12,898
TOTAL ASSETS 28,754 33,515
Loans and borrowings 6,416 12,547
Payables and deferred income 3,135 3,982
Total current liabilities 9,551 16,529
Loans and borrowings 5,904 3,985
Total non-current liabilities 5,904 3,985
TOTAL LIABILITIES 15,455 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 2,459 2,161
TOTAL EQUITY 13,299 13,001
TOTAL LIABILITIES AND EQUITY 28,754 33,515
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Tiina Malm
CFO
Arco Vara AS
E-mail: info@arcovara.com
www.arcovara.com
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