Market announcement

Title

Unaudited consolidated interim report for Q3 and 9 months of 2022

Message

GROUP CEO'S REVIEW

The cooling of the real estate market in the third quarter did not cause panic
in Arco Vara's developments. The planned final sales of the Kodulahe quarter
were held as expected and there was no visible concern among customers who had
bought a home from the pre-sale in 2021, which generated 5.2 million euros in
sales revenue and 560,000 euros in net profit in the third quarter of 2022.

As in the whole real estate market, there has been a decrease in the number of
inquiries also in the Rannakalda development, part of the Kodulahe project. As
of the date of publication, no customers have withdrawn from their contracts,
and approximately 35% of the building has been pre-sold. The Arco Tarc team
continues with the construction of Kodulahe Rannakalda, and works are on
schedule both in terms of construction speed and budget. To get a good overview
of the pace of construction, there is a live broadcast on the following link:
kodulahe.ee/hoone.

In the interim period, the expansion of the Kodulahe quarter has been confirmed.
Detailed plan for the construction of up to 6,500 sqm was initiated on the Soodi
6 property, and Kodulahe OÜ won the Lammi 6 auction of state land, acquiring
another approximately 1.5 hectares of land.

Botanica Lozen Residences development of private houses in Bulgaria reached the
building permit in the third quarter and an agreement has been reached with the
main contractor to start construction in November. Unfortunately, the goal of
starting construction in the third quarter could not be met, but on the positive
side, construction solutions were optimized to ensure a more efficient
construction process both in terms of time and budget.

As for the commercial building Madrid BLVD in Sofia, 20 out of 22 spaces in the
building were covered with leases at the time of the publication of this report.
Two remaining spaces are office spaces, for which there is little interest in
the Sofia market, according to statistics. The local team evaluated possible
reductions in the volume of individual spaces by creating more leasable office
units, but the possible solutions and the associated costs were not justified in
today's market situation.

In today's economic environment, one can clearly see homebuyers' worries about
the future, which is amplified by media coverage of possible dramatic scenarios.
However, considering the long-term nature of real estate development, the Arco
Vara team must continue to grow in order to reach the 2026 goal of developing at
least 200 apartments every year.

KEY PERFORMANCE INDICATORS

In  Q3 2022, the  group's revenue  was 5,232 thousand  euros, which is 8,5 times
more  than the revenue  of 613 thousand euros  in Q3 2021. In 9 months 2022, the
group's revenue was 13,167 thousand euros, which is 17% more than the revenue of
11,283 thousand euros in 9 months 2021.

In  Q3 2022, the group's operating profit (=EBIT) was 659 thousand euros and net
profit  556 thousand  euros  (in  9 months 2022: operating profit 1,785 thousand
euros  and  net  profit  of  1,506 thousand  euros).  In  Q3 2021, the group had
operating  profit of 294 thousand euros and net profit of 202 thousand euros. In
9 months  2021, the group made operating profit  of 2,724 thousand euros and net
profit of 2,425 thousand euros.

In  Q3 2022, 31 apartments were sold  in projects developed by  the group (in 9
months  2022 72 apartments and a land plot  in Latvia). In Q3 2021, only garages
were sold (in addition, 63 apartments and a commercial space in 9 months).

In the 9 months of 2022, the group's debt burden (net loans) decreased by 4,038
thousand  euros down  to the  level of  7,146 thousand euros  as of 30 September
2022. As  of  30 September  2022, the  weighted  average annual interest rate of
interest-bearing  liabilities  was  5.0%. This  is  a decrease of 0.2 percentage
points compared to 31 December 2021.

OPERATING REPORT

The revenue of the group totalled 5,232 thousand euros in Q3 2022 (in Q3
2021: 613 thousand euros,) and 13,167 thousand euros in 9 months 2022 (in 9
months 2021: 11,283 thousand euros), including revenue from the sale of
properties in the group's own development projects in the amount of 4,960
thousand euros in Q3 and 12,337 thousand euros in 9 months 2022 (2021: 305
thousand euros in Q3 and 10,441 thousand euros in 9 months).

Most of the other revenue of the group consisted of rental and property
management services income from commercial and office premises in Madrid Blvd
building in Sofia, amounting to 189 thousand euros in Q3 2022 and 595 thousand
euros in 9 months (2021: 214 thousand euros in Q3 and 608 thousand euros in 9
months). By the time of publishing the present report, 2 offices remain vacant,
but all commercial spaces, together with parking places, were rented out. The
free office spaces make 13.3% of the rented office and retail area.

In Q1 2022, the construction company Arco Tarc OÜ was established, which laid
the foundation for a new business segment. In 2022, the service will be offered
only intra-group with a fixed profit margin of 4%.

The construction of the IV-V stage buildings in Kodulahe was completed in the
second quarter of 2022. Two residential buildings with 36 apartments were
completed at Pagi 3 and Pagi 5. In the Q2 2022, the final sale was finalized for
41 apartments, the rest of the customers were met at the notary at the beginning
of July. By the time of publishing the present report, the house is fully sold.

The construction of the Stage VI of Kodulahe project at Lammi 8 started in
February 2022 by Arco Vara's own construction company Arco Tarc OÜ. The
construction includes a pavilion, 4 commercial areas and 108 apartments, out of
which many have sea view. The apartment buildings will become ready in about 2
years after the construction begins. Apartment sales also commenced in February
2022. As at the date of publishing the annual report, 42 units out of the 113
had been presold.

A subsidiary of Arco Vara, Aktsiaselts Kolde, signed an agreement for land
acquisition beside Lake Harku, address Paldiski road 124b, Tallinn. More than
35,000 m2 of residential and commercial real estate (GBA) is planned for
development. The expected development period is 6 years with the start of
construction planned for 2023. By the time of publishing the present report, the
detailed planning has been started.

The plan is to build a cluster house with 5 homes Pirita Kuldlehe project. Road
construction in underway. The construction of the house is planned to start in
the end of 2022, and the house will be completed within a year. The sale of the
project has not started.

The last vision of the Botanica Lozen project foresees construction of 54 homes
(houses) in three stages. The expected start time of construction is the autumn
of 2022, when the construction of the first 16 buildings will start. Minimum
construction period is 2 years.

As of 30 September 2022 and the date of this report, 3 Marsili residential plots
remained unsold in Latvia.


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

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 In thousands of euros                      9m 2022 9m 2021 Q3 2022 Q3 2021
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 Revenue from sale of own real estate        12,337  10,441   4,960     305

 Revenue from rendering of services             830     842     272     308

 Total revenue                               13,167  11,283   5,232     613



 Cost of sales                              -10,665  -8,455  -4,282    -277

 Gross profit                                 2,502   2,828     950     336



 Other income                                   209     272       7     250

 Marketing and distribution expenses           -153    -109     -45     -44

 Administrative expenses                       -764    -631    -251    -230

 Other expenses                                  -9     -58      -2     -18

 Gain on revaluation of investment property       0     422       0       0

 Operating profit                             1,785   2,724     659     294



 Financial income and costs                    -279    -299    -103     -92

 Profit before tax                            1,506   2,425     556     202

 Net profit for the period                    1,506   2,425     556     202


 Total comprehensive income for the period    1,506   2,425     556     202
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 Earnings per share (in euros)

 - basic                                       0.14    0.26    0.05    0.02

 - diluted                                     0.14    0.24    0.05    0.02
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

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  In thousands of euros                      30 September 2022 31 December 2021
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 Cash and cash equivalents                               1,637            1,863

 Receivables and prepayments                             4,752            3,701

 Inventories                                            12,983           15,761

 Total current assets                                   19,372           21,325



 Receivables and prepayments                                22                5

 Investment property                                     9,422            9,943

 Property, plant and equipment                             310              154

 Intangible assets                                          58               87

 Total non-current assets                                9,812           10,189

 TOTAL ASSETS                                           29,184           31,514



 Loans and borrowings                                    2,117            6,043

 Payables and deferred income                            3,194            2,368

 Total current liabilities                               5,311            8,411



 Loans and borrowings                                    5,029            5,141

 Total non-current liabilities                           5,029            5,141

 TOTAL LIABILITIES                                      10,340           13,552



 Share capital                                           7,272            7,272

 Share premium                                           3,835            3,835

 Statutory capital reserve                               2,011            2,011

 Retained earnings                                       5,726            4,844

 Total equity attributable to owners of the
 parent                                                 18,844           17,962

 TOTAL EQUITY                                           18,844           17,962

 TOTAL LIABILITIES AND EQUITY                           29,184           31,514
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Tiina Malm
CFO
Arco Vara AS
Phone: +372 614 4630
www.arcovara.com