Börsiteade

Pealkiri

Arco Vara AS Interim report for II quarter and 6 months 2013

Teade

Group Chief Executive’s review

General comments

In the second quarter we continued to change the group’s course in line with
the goals and targets set. Our focus is increasingly shifting from cleaning up
the statement of financial position and resolving our key issues, which stem
from the past, to the future, i.e. re-launching major development operations
and enhancing our organisation and work processes. This entails the following: 

A.   Cleaning up the statement of financial position

  -- We realised the Tivoli project at a public auction. We exited the project
     without monetary loss even though the revenue raised from the Tivoli
     properties was smaller than the venture partner’s loan receivable from
     Tivoli Arendus OÜ for which Arco Vara had provided a surety guarantee.
  -- We continued to seek solutions for restructuring the Ahtri 3 project.
     Regrettably, in the second quarter a satisfactory solution could not be
     found. The parties will sustain their efforts. Until an in-court or
     out-of-court settlement is reached, we have to be prudent and maintain a
     provision of 1.9 million euros recognised for the surety guarantee Arco
     Investeeringute AS has provided to Danske bank to secure the loan
     liabilities of the group’s associate Arco HCE OÜ.
  -- We continued to perform the construction contracts signed by Arco Ehitus OÜ
     and to date we have completed the Paide project. Only the Kuusalu project
     still needs to be completed. When construction operations have been
     discontinued, Arco Ehitus OÜ will probably remain a group entity because it
     is involved in a number of pending litigations. None of the lawsuits
     connected with Arco Ehitus OÜ is likely to have a significant effect on the
     group’s operations or profitability.

B.   Restructuring

  -- All companies that sell products or services to the end-consumer will
     belong directly to the parent and will receive the financial resources they
     need for developing their business straight from the parent.  There will be
     no intra-group holding companies, mixed or unclear managerial
     accountability or chains of command consisting of more than two links.
  -- We are going to implement integrated production whereby Arco Vara will 
     incorporate into the end-product  that is delivered to the consumer all the
     know-how of its analysts, brokers, appraisers, product designers, project
     managers and marketing staff. In order to achieve maximum synergies from
     the new approach, many internal processes will have to be reviewed and
     changed. Implementation of an integrated production process is time
     consuming and requires additional investments in data processing.

C.   Re-launch of development operations

  -- We completed and put on sale 14 apartments in the Bišumuiža-1 development
     project in Riga. Our inventory includes another 14 apartments that are
     awaiting completion.
  -- We started preparations for completing sections A and B in the Manastirski
     project in Sofia (approx. 130 apartments).
  -- We acquired the entire Paldiski mnt 70c property in Tallinn and initiated a
     detailed plan process for the construction of at least 300 apartments.
  -- We started preparations for initiating the detailed plan processes for the
     Liimi 1b and Lehiku street properties in Tallinn.
  -- We made additional investments in the Madrid project in Sofia so as to
     increase its rental and sales revenues. We are planning to continue
     relevant investments.

Comments on sales volumes

I am pleased to report that in contrast to the first half of 2012 when over
half of the group’s revenue was generated by construction operations, in the
first half of 2013 over half of our revenue resulted from development
operations. Arco Vara’s business focus has again shifted to real estate
development and real estate services. 

Shrinkage in sales volumes was a negative inevitability. We expect the downward
trend to continue for at least four quarters because we are selling off
finished goods (self-developed real estate) more quickly than our stocks can be
replenished. This is the effect of previous years’ production gap in our
development operations. 

As anticipated, we succeeded in increasing our development revenues compared
with the first half of 2012. Having refinanced our Bulgarian loans in the first
quarter, we could complete sales of the Manastirski and Madrid apartments,
which had previously been suspended. As a result, Sofia was the main source of
our second-quarter development revenues. However, according to current
projections in third and fourth quarter development revenues will decline.
Current development operations cannot compensate for the decrease in existing
stocks and, thus, also in sales volumes that is going to emerge in the next
four quarters. 

Construction revenues were also in line with expectations as both Arco Ehitus
OÜ and the customers fulfilled their obligations. At the end of the second
quarter, our order backlog in the construction business amounted to approx. 1
million euros, which will translate into revenue in the third or fourth
quarter. 

An encouraging development was slight sales growth at the Service division,
particularly in light of fierce competition in the real estate service sectors
in Estonia, Latvia and Bulgaria and the sentiment of the consumers and the
financial sector, who are still displaying uncertainty rather than confidence.
In Sofia, total second-quarter transaction activity in the real estate market
grew by 41% (compared with the first quarter) and Arco Imoti EOOD’s brokerage
and valuation revenue increased by 20%. It should be noted that the market is
mostly based on local customers. In Riga, revenue growth resulted from
valuation services and brokerage fees earned on transactions conducted by
non-residents. Local demand for real estate is still weak and local demand for
brokerage services is even weaker. Sales volumes in Tallinn and the rest of
Estonia remained stable. All units of the Service division are profitable. 


Comments on profit

The first half-year proved that the people who make up the organisation of Arco
Vara are able to create added value in the real estate sector and to conduct
business so that it generates cash. 

The group’s target for 2013 was to start earning operating profit. We ended the
first quarter with an operating profit as well as a small net profit. In the
second quarter we achieved a net profit of half a million euros even without
the reversal of the provision set up for the surety guarantee provided to the
Tivoli project (1 million euros). Together with the reversal of the provision,
our actual net profit was 1.5 million euros. 

Despite this, I would still like to underline that in order to change our
course for the long term and maintain profitability, we need to increase sales.
Growth will be supported by units of the Service division but the main
opportunities for growth have to be sought in continuing and expanding
development operations. Unfortunately, in recent years there has been a major
gap in Arco Vara’s production process, which is now separating our current
inventory of completed apartments and plots from the inventory of products that
will be completed in the future. Our future inventory is currently in the stage
of work in progress and its completion requires capital. 

Accordingly, our biggest challenges include raising interim financing for
development operations in 2013-2014 and speeding up ongoing development
projects so as to fill the gap between our current and future inventory more
quickly. 



Comments on loan burden

As stated in our previous reports, our loan burden is not going to continue
decreasing at the same pace as in the first quarter. In the second quarter the
total loan burden decreased somewhat but net loans (loan balance less cash and
cash equivalents) grew by 1 million euros to 15.2 million euros. Net loans
increased because we took a loan to purchase a property at Paldiski mnt 70c in
Tallinn in order to re-launch large-scale development operations. By the date
of release of this report, we have initiated a detailed plan process for the
property. 

Over 80% of our loans are related to the Bulgarian development projects.

We expect an increase in the group’s loan burden in the second half of the year
because we are planning to expand our development operations concurrently with
the sale of existing stocks but free cash flow from the sale of goods will not
be sufficient for this. 



Comments on human resources

In the second quarter the number of people working for the group did not change
considerably compared with the end of 2012 and we are not planning to make any
major changes to personnel or personnel expenses except for those resulting
from shrinkage of operations at the Construction division and reinforcement of
our marketing, financial management and information processing teams. 



KEY PERFORMANCE INDICATORS

  -- Arco Vara group ended the first six months of 2013 with revenue of 7.7
     million euros compared with 11.1 million euros for the first half of 2012.
     Revenue proved 31% smaller than in the comparative period, principally
     because construction volumes decreased significantly. The Service and
     Development divisions posted revenue growth, 7% and 5% up on the first six
     months of the previous year respectively.
  -- The group’s operating profit for the first half-year amounted to 2.0
     million euros including 1 million euros from the reversal of a provision.
     The same period in 2012 ended in an operating loss of 0.6 million euros.
  -- Net profit for the first half-year was 1.5 million euros compared with a
     net loss of 1.3 million euros incurred in the first half of 2012.
  -- Equity to assets ratio improved notably, being 17.1% at the reporting date
     (31 December 2012: 10.8%).
  -- The loan burden (net loans) decreased to 15.2 million euros (30 June 2012:
     20.9 million euros) and the average interest rate of loans dropped to 5.1%
     per year.
  -- At the end of the second quarter, the group’s order backlog in the
     construction business stood at 1.0 million euros compared with 10.3 million
     euros at the end of the second quarter of 2012.  In 2013, the group will
     duly complete all environmental engineering projects which are in progress.
     After that, provision of environmental engineering services will be
     discontinued.
  -- In the first half-year, the group sold 52 apartments and plots in its
     self-developed projects (2012 HY1: 35).

                                         6 months     6 months  Q2 2013  Q2 2012
                                             2013         2012                  
--------------------------------------------------------------------------------
In millions of euros                                                            
--------------------------------------------------------------------------------
Revenue                                       7.7         11.1      4.8      7.4
--------------------------------------------------------------------------------
Operating profit/loss                         2.0         -0.6      1.7     -0.1
--------------------------------------------------------------------------------
Net profit/loss                               1.5         -1.3      1.5     -0.4
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
EPS (in euros)                               0.32        -0.18     0.32    -0.09
--------------------------------------------------------------------------------
                                                                                
---------------------------------------------------------------                 
Total assets at period-end                   28.7         53.5                  
---------------------------------------------------------------                 
Invested capital at period-end               20.8         43.1                  
---------------------------------------------------------------                 
Net loans at period-end                      15.2         20.9                  
---------------------------------------------------------------                 
Equity at period-end                          4.9         19.9                  
---------------------------------------------------------------                 
                                                                                
---------------------------------------------------------------                 
Average loan term (in years)                  1.7          2.1                  
---------------------------------------------------------------                 
Average interest rate of loans (per          5.1%         6.9%                  
 year)                                                                          
---------------------------------------------------------------                 
ROIC (rolling, four quarters)                 neg          neg                  
---------------------------------------------------------------                 
ROE (rolling, four quarters)                  neg          neg                  
---------------------------------------------------------------                 
                                                                                
---------------------------------------------------------------                 
Number of staff at period-end                  76          126                  
---------------------------------------------------------------                 



REVENUE AND PROFIT

                                 6 months 2013  6 months 2012  Q2 2013  Q2 2012
-------------------------------------------------------------------------------
In millions of euros                                                           
-------------------------------------------------------------------------------
Revenue                                                                        
-------------------------------------------------------------------------------
Service                                    1.3            1.3      0.7      0.7
-------------------------------------------------------------------------------
Development                                4.0            3.8      2.8      3.1
-------------------------------------------------------------------------------
Construction                               2.4            6.1      1.4      3.7
-------------------------------------------------------------------------------
Eliminations                              -0.1           -0.1     -0.1     -0.1
-------------------------------------------------------------------------------
Total revenue                              7.6           11.1      4.8      7.4
-------------------------------------------------------------------------------
                                                                               
-------------------------------------------------------------------------------
Operating profit/loss                                                          
-------------------------------------------------------------------------------
Service                                    0.1            0.1      0.0      0.1
-------------------------------------------------------------------------------
Development                                2.2           -0.4      1.9      0.2
-------------------------------------------------------------------------------
Construction                               0.1            0.2      0.0     -0.2
-------------------------------------------------------------------------------
Unallocated income and expenses           -0.1           -0.7      0.0     -0.3
-------------------------------------------------------------------------------
Eliminations                              -0.3            0.2     -0.2      0.1
-------------------------------------------------------------------------------
Total operating profit/loss                2.0           -0.6      1.7     -0.1
-------------------------------------------------------------------------------
                                                                               
-------------------------------------------------------------------------------
Finance income and costs (net)            -0.5           -0.7     -0.2     -0.3
-------------------------------------------------------------------------------
Net profit/loss                            1.5           -1.3      1.5     -0.4
-------------------------------------------------------------------------------



CASH FLOWS

                                           6 months     6 months      Q2      Q2
                                               2013         2012    2013    2012
--------------------------------------------------------------------------------
In millions of euros                                                            
--------------------------------------------------------------------------------
Cash flows from operating activities           -0.4         -0.3    -0.5     0.9
--------------------------------------------------------------------------------
Cash flows from investing activities            1.4          0.9     0.0    -0.2
--------------------------------------------------------------------------------
Cash flows from financing activities           -2.0         -0.5    -0.1    -0.2
--------------------------------------------------------------------------------
Net cash flow                                  -1.0          0.1    -0.6     0.5
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Cash and cash equivalents at beginning          1.8          2.2     1.4     1.8
 of period                                                                      
--------------------------------------------------------------------------------
Cash and cash equivalents at end of             0.8          2.4     0.8     2.3
 period                                                                         
--------------------------------------------------------------------------------

At 30 June 2013, the largest current liabilities to be settled in the next 12
months comprised: 

  -- repayments to be made under the settlement schedule of the loan of the
     Boulevard Residence Madrid project in Sofia of 0.9 million euros;
  -- repayments of the loan taken for the Manastirski project of 0.7 million
     euros;
  -- repayments of the loan taken for the Bišumuiža-1 project of 0.5 million
     euros.

In the first half of 2013, we made repayments under the loans taken for the
Madrid and Manastirski projects in Sofia and repaid in full the loans taken by
Pärnu Turg OÜ and Kolde AS. 

In addition, Marsili II SIA made sales-linked loan repayments and we followed
the settlement schedule agreed for the bank loan taken by Arco Real Estate AS. 



SERVICE DIVISION

In 2013, the Service division’s semi-annual results were somewhat better than
in the previous year. Operating profit for the first half of 2013 was 92
thousand euros compared with 59 thousand euros for the first half of 2012.
Revenue amounted to 1,305 thousand euros compared with 1,291 thousand euros
generated in the first half of 2012. The number of brokerage transactions
decreased by 4% while the number of valuation reports issued grew by 6% year
over year. The number of brokers increased by 12% and the number of appraisers
remained stable. 

                                                                                
                                                6 months      6 months   Change,
                                                    2013          2012         %
--------------------------------------------------------------------------------
Number of completed brokerage transactions           692           718       -4%
--------------------------------------------------------------------------------
Number of projects on sale at end of                 170           233      -27%
 period                                                                         
--------------------------------------------------------------------------------
Number of valuation reports issued during          3,342         3,160        6%
 the period                                                                     
--------------------------------------------------------------------------------
Number of appraisers  at end of period¹               46            46        0%
--------------------------------------------------------------------------------
Number of brokers at end if period¹                   77            69       12%
--------------------------------------------------------------------------------
Number of staff at end of period                      39            40       -3%
--------------------------------------------------------------------------------
¹ Includes people working under service                                         
 contracts                                                                      



DEVELOPMENT DIVISION

In the second quarter of 2013, Arco Vara sold 35 apartments and 2 plots in its
own development projects: 2 Baltezers plots and 1 Bišumuiža-1 apartment in
Latvia, 4 Kodukolde apartments and 1 Kastanimaja apartment in Estonia and 23
Manastirski and 6 Residence Madrid apartments in Bulgaria. 

Phase VI of the Kodukolde development project at Helme 16 in Tallinn, which
consists of two apartment buildings with a total of 48 apartments, was
completed in June 2012. The last apartment in the project was sold in June
2013. 

The permit for the construction of a mixed-use residential/commercial building
of energy class B called Kastanimaja (Chestnut House) at Tehnika 53 in Tallinn
was obtained in January 2012. By the date of release of this report,
construction work has been completed and the building has been issued a permit
of use. Sales have been successful: to date 13 out of the 14 apartments have
been sold (final sales under contracts on the transfer of real property
rights). 

In Bulgaria, we continue to sell phase I of the Manastirski project. To date,
95% of the 74 apartments have either been reserved or sold and we have started
planning phase II of the Manastirski project. In the commercial/residential
building Boulevard Residence Madrid in Sofia we continue to lease out
commercial and office premises and to sell and rent out the remaining free
apartments. 

Although the third quarter of 2012 we suspended development and construction
operations in the Bišumuiža-1 apartment buildings project in Latvia, in
February 2013 we extended the construction permit to continue development of
the project. By the date of release of this report, a building with 14
apartments and a sellable area of 1,149 square metres has been completed. 3 of
the apartments have been reserved and 5 are covered with pre-sale contracts.
The last building of the project, also with 14 apartments, is awaiting its
turn. The outer shell has already been erected. All apartments in the project’s
previously completed 7 buildings have been sold. 

On 11 April 2013 Kylemore International Invest Corp, a creditor of Tivoli
Arendus OÜ, demanded settlement of debts and initiated enforcement proceedings
for satisfying its claims through sale of real estate belonging to Tivoli
Arendus OÜ. At the second auction held on 10 June 2013, the properties
belonging to Tivoli Arendus OÜ were acquired for their opening price of 7.8
million euros by International Invest Project OÜ. Tivoli Arendus OÜ used the
funds raised for settling its liabilities to Kylemore International Invest
Corp. The sale of the properties and the release from the surety obligations
also extinguished Arco Investeeringute AS’s receivable from Tivoli Arendus OÜ
(the receivable had already been written down to nil value). Tivoli Arendus OÜ
is Arco Investeeringute AS’s 50% joint venture with International Invest
Project OÜ. 

In order to recover a loan, Danske Bank A/S initiated enforcement proceedings
against Arco HCE OÜ, which is a 50% joint venture of Arco Investeeringute AS.
The object of the proceedings was to exercise a mortgage created for the
benefit of Danske Bank A/S on a property located at Ahtri 3 in Tallinn. On 20
February 2013, the court suspended the enforcement proceedings against Arco HCE
OÜ. Since Arco Investeeringute AS had provided a surety guarantee to Arco HCE
OÜ’s bank loan, the creditor Danske Bank A/S sent Arco Investeeringute AS a
claim for paying out the full amount of the guarantee, i.e. 1.9 million euros.
Arco Investeeringute AS contested the claim. In response, Danske Bank A/S filed
a petition for declaring Arco Investeeringute AS bankrupt. Arco Investeeringute
AS has contested the petition. Concurrently with the legal proceedings, Arco
Vara AS is seeking alternative solutions for resolving the situation. 

At the end of June 2013, the division employed 7 people (30 June 2012: 20).

For further information on our projects, please refer to:
www.arcorealestate.com/development. 



CONSTRUCTION DIVISION

The Construction division specialises in environmental engineering and the
construction of infrastructure assets. 

At the end of the second quarter of 2013, the largest projects in progress were
the construction of the Paide wastewater treatment plant (remaining balance 0.7
million euros) and the construction of the Kuusalu public water and wastewater
network (remaining balance 0.3 million euros). 

In the second quarter of 2013, the group secured contracts of 93 thousand euros
for additional work to be performed under its ongoing construction projects. At
the end of the second quarter, the Construction division’s order backlog stood
at 1.0 million euros compared with 10.3 million euros at the end of the second
quarter of 2012. 

At 30 June 2013, the division employed 17 people (30 June 2012: 52 people).



Consolidated statement of comprehensive income

                                      Note   6 months   6 months      Q2      Q2
                                                 2013       2012    2013    2012
--------------------------------------------------------------------------------
In thousands of euros                                                           
--------------------------------------------------------------------------------
Revenue from rendering of services              4,241      8,116   2,301   4,748
--------------------------------------------------------------------------------
Revenue from sale of own real estate            3,421      2,961   2,539   2,701
--------------------------------------------------------------------------------
Total revenue                          3        7,662     11,077   4,840   7,449
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Cost of sales                          4       -5,799     -9,612  -3,718  -6,797
--------------------------------------------------------------------------------
Gross profit                                    1,863      1,465   1,122     652
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Other income                                      213        209     194      17
--------------------------------------------------------------------------------
Marketing and distribution expenses    5         -126       -143     -61     -61
--------------------------------------------------------------------------------
Administrative expenses                6         -966     -1,384    -476    -687
--------------------------------------------------------------------------------
Other expenses                                    -54       -736     -36     -20
--------------------------------------------------------------------------------
Gain on transactions involving         14       1,098          0   1,000       0
 subsidiaries and joint ventures                                                
--------------------------------------------------------------------------------
Operating profit/loss                           2,028       -589   1,743     -99
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Finance income                         7           19         45       7      23
--------------------------------------------------------------------------------
Finance costs                          7         -500       -744    -242    -350
--------------------------------------------------------------------------------
Profit/loss for the period                      1,547     -1,288   1,508    -426
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Profit/loss for the period                      1,547     -1,288   1,508    -426
 attributable to                                                                
--------------------------------------------------------------------------------
Owners of the parent                            1,541     -1,294   1,503    -430
--------------------------------------------------------------------------------
Non-controlling interests                           6          6       5       4
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Total comprehensive income/expense              1,547     -1,288   1,508    -426
 for the period attributable to                                                 
--------------------------------------------------------------------------------
Owners of the parent                            1,541     -1,294   1,503    -430
--------------------------------------------------------------------------------
Non-controlling interests                           6          6       5       4
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Earnings per share (in euros)          8         0.32      -0.27    0.32   -0.09
--------------------------------------------------------------------------------



Consolidated statement of financial position

                                              Note      30 June      31 December
                                                           2013             2012
--------------------------------------------------------------------------------
In thousands of euros                                                           
--------------------------------------------------------------------------------
Cash and cash equivalents                                   739            1,775
--------------------------------------------------------------------------------
Receivables and prepayments                    9          2,874            3,094
--------------------------------------------------------------------------------
Inventories                                    10        13,056           11,701
--------------------------------------------------------------------------------
Total current assets                                     16,669           16,570
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Investments in equity-accounted investees                     1                1
--------------------------------------------------------------------------------
Investment property                            11        11,482           14,097
--------------------------------------------------------------------------------
Property, plant and equipment                               516              540
--------------------------------------------------------------------------------
Intangible assets                                            19               21
--------------------------------------------------------------------------------
Total non-current assets                                 12,018           14,659
--------------------------------------------------------------------------------
TOTAL ASSETS                                             28,687           31,229
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Loans and borrowings                           12         3,173           16,838
--------------------------------------------------------------------------------
Payables and deferred income                   13         5,780            6,645
--------------------------------------------------------------------------------
Provisions                                     14         2,084            3,084
--------------------------------------------------------------------------------
Total current liabilities                                11,037           26,567
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Loans and borrowings                           12        12,736            1,231
--------------------------------------------------------------------------------
Payables and deferred income                   13             0               64
--------------------------------------------------------------------------------
Total non-current liabilities                            12,736            1,295
--------------------------------------------------------------------------------
TOTAL LIABILITIES                                        23,773           27,862
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Share capital                                  8          3,319            3,319
--------------------------------------------------------------------------------
Statutory capital reserve                                 2,011            2,011
--------------------------------------------------------------------------------
Retained earnings                                          -417           -1,958
--------------------------------------------------------------------------------
Total equity attributable to owners of the                4,913            3,372
 parent                                                                         
--------------------------------------------------------------------------------
Equity attributable to non-controlling                        1               -5
 interests                                                                      
--------------------------------------------------------------------------------
Total equity                                              4,914            3,367
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY                             28,687           31,229
--------------------------------------------------------------------------------



Consolidated statement of cash flows

                                      Note   6 months   6 months      Q2      Q2
                                                 2013       2012    2013    2012
--------------------------------------------------------------------------------
In thousands of euros                                                           
--------------------------------------------------------------------------------
Cash receipts from customers                    7,900     14,020   4,502   7,629
--------------------------------------------------------------------------------
Cash paid to suppliers                         -6,341    -12,700  -3,929  -5,882
--------------------------------------------------------------------------------
Taxes paid                                     -1,332     -1,022    -789    -493
--------------------------------------------------------------------------------
Taxes recovered                                   135        341      82     106
--------------------------------------------------------------------------------
Cash paid to employees                           -634       -850    -340    -433
--------------------------------------------------------------------------------
Other cash payments and receipts                 -115        -77     -58     -53
 related to operating activities                                                
--------------------------------------------------------------------------------
NET CASH USED IN/FROM OPERATING                  -387       -288    -532     874
 ACTIVITIES                                                                     
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Purchase of property, plant and                    -9        -19      -9      -7
 equipment and intangible assets                                                
--------------------------------------------------------------------------------
Proceeds from sale of property,                     6          6       4       6
 plant and equipment                                                            
--------------------------------------------------------------------------------
Proceeds from sale of investment                   20      1 149       0       9
 property                                                                       
--------------------------------------------------------------------------------
Proceeds from sale of a subsidiary              1,610          0       0       0
--------------------------------------------------------------------------------
Loans provided                                     -8       -236      -8    -173
--------------------------------------------------------------------------------
Repayment of loans provided                         0          1               1
--------------------------------------------------------------------------------
Placement of security deposits                   -263          0       0       0
--------------------------------------------------------------------------------
Interest received                                   4          6       0       3
--------------------------------------------------------------------------------
Other payments related to investing                 0        -29       0       0
 activities                                                                     
--------------------------------------------------------------------------------
NET CASH FROM/USED IN INVESTING                 1,360        878     -13    -161
 ACTIVITIES                                                                     
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Proceeds from loans received           12       1,420        745   1,327     484
--------------------------------------------------------------------------------
Settlement of loans and finance        12      -2,926       -484  -1,260    -319
 lease liabilities                                                              
--------------------------------------------------------------------------------
Interest paid                                    -457       -738    -209    -345
--------------------------------------------------------------------------------
Other payments related to financing                -9        -12      -7     -10
 activities                                                                     
--------------------------------------------------------------------------------
NET CASH USED IN FINANCING                     -1,972       -489    -149    -190
 ACTIVITIES                                                                     
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
NET CASH FLOW                                    -999        101    -694     523
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Cash and cash equivalents at                    1,775      2,209   1,433   1,787
 beginning of period                                                            
--------------------------------------------------------------------------------
Decrease/increase in cash and cash               -999        101    -694     523
 equivalents                                                                    
--------------------------------------------------------------------------------
Decrease in cash and cash                         -37          0       0       0
 equivalents through sale of a                                                  
 subsidiary                                                                     
--------------------------------------------------------------------------------
Cash and cash equivalents at end of               739      2,310     739   2,310
 period                                                                         
--------------------------------------------------------------------------------



Egert Paulberg
Financial Controller
Arco Vara AS
Phone: +372 614 4503
[email protected]
http://www.arcorealestate.com