Börsiteade

Pealkiri

2020 Annual Report of Arco Vara

Teade

GROUP CEO'S REVIEW

At the beginning of 2020, due to the constraints of COVID-19, price fluctuations
and  rapid market adjustment were  also expected in the  real estate sector, but
this did not take place for new developments. Arco Vara and our partners reacted
quickly to limit the spread of the virus, which ensured the timely completion of
the sites and the fulfilment of the set sales targets.

The  improved  terms  of  development  loans  can  be  considered  an  important
development,  which are important for  the successful implementation of Estonian
development  projects also  in 2021 and  2022. In Bulgaria,  the main keyword is
obtaining an usage permit for Iztok Parkside, where most of the final sales took
place in the first quarter of 2021.

On  the  Estonian  side  of  development  activities, Arco Vara has achieved the
reputation  of  a  reliable  developer,  which  is  shown  by the success of the
Kodulahe  and Kodukalda projects. Today, Kodulahe Phase 3 building has been sold
out  and approximately 70% of  the Phase 4 and  Phase 5 buildings have been pre-
sold.  There are  4 unsold apartments  in the  Tartu Kodukalda  project, but the
interest  in the development is constant, which provides certainty for achieving
final sales in the second quarter.

In  addition to  the finalised  projects and  the projects  to be  completed, we
started  designing the 6th stage of Kodulahe at the end of 2020, the public sale
of  which will commence  3 months earlier than  had been planned  - in the third
quarter of 2021.

The  Bulgarian development activity achieved  the long-awaited authorisation for
use of Iztok Parkside, which is expected to be sold out in the second quarter of
2021. At  the moment, 66 out  of the 67 apartments  have been sold  there in the
development project.

The  commercial property site Madrid BLVD had an occupancy rate of approximately
95% during  2020, which is a  successful achievement for  the team there, taking
into  account the situation  of last year.  Due to the  multiple purposes of the
building  and the restrictions that favoured the building, the tenants were able
to  continue their business  for most of  the year, which  ensured a lower-than-
expected decrease in sales revenue.

Based  on the  results of  2020, and pointing  out the  2.5-fold increase in the
return  on equity and an increase of the net profit margin of almost 2 times, we
are  on the track to increase development  volumes in the next three years. This
is  also supported by the  contracts concluded at the  beginning of 2021 for the
development  of the registered immovables at Paldiski road 124b and Soodi street
6.

In  2021, the main tasks are  the successful start of  the 6th stage of Kodulahe
and  the  start  of  designing  new  development  projects  in  both Estonia and
Bulgaria.


KEY PERFORMANCE INDICATORS

In  2020, the Group's revenue  was 14,056 thousand euros,  which is 7% more than
the revenue of 13,109 thousand euros in 2019.

In  2020, the Group's operating profit (=EBIT)  was 1,449 thousand euros and net
profit  1,012 thousand euros. In  2019, the Group made  operating profit of 950
thousand and net profit of 388 thousand euros.

In  2020, 81 apartments and one land plot in Latvia were sold in the development
projects of the Group (in 2019: 82 apartments).

In  2020, the Group's debt  burden (net loans)  decreased by 2,951 euros down to
the  level of  8,499 thousand euros  as of  31 December 2020. As  of 31 December
2020, the  weighted average annual interest rate of interest-bearing liabilities
was 4.8%, which is 0.6% higher than on 31 December 2019.



OPERATING REPORT

The   revenue   of   the   Group  totalled  14,056 thousand  euros  in  2020 (in
2019: 13,109 thousand  euros), including revenue from  the sale of properties in
the  Group's own development projects in the amount of 13,129 thousand euros (in
2019: 12,152 thousand euros).

Most  of the other revenue consists of  rental income from commercial and office
premises  in Madrid Blvd  building in Sofia,  amounting to 614 thousand euros in
2020 (in  2019: 696 thousand  euros).  In  2020, Covid-19 brought changes in the
economic  situation of tenants. Several tenants have been replaced during 2020,
but  in a more  favourable direction for  Arco Vara. In  the end of 2020, 95% of
retail and office spaces were rented out.

In  the II Stage of the Kodulahe quarter, which was completed and mainly sold in
2019, commercial space remains unsold - the last apartment was sold in Q2 2020.
In 2020, Lahepea 9 house received usage permit.

In  Q4 2020, construction works ended in Stage  III of Kodulahe quarter, where a
building with 50 apartments was finished at Soodi 4 Merimetsa. By the publishing
date  of the annual  report, all apartments  have been sold  and the house has a
usage permit.

At  the  end  of  2020, the  joint  construction  of Stages IV and V of Kodulahe
started.  Two  36-apartment  residential  buildings  at  Pagi  3 and  Pagi  5 in
Merimetsa  are under construction. The apartment buildings will become ready for
final  sale in about 1,5 years. By the publishing date of the annual report, 38
apartments of total 72 have been presold and 18 booked for waiting for notary.

In  Q4 2020, final sales  of Oa street  plots in Tartu  started, where 4 smaller
apartment  buildings were constructed  under the Kodukalda  project name. By the
publishing time of the interim report, 26 of the 30 apartments have been sold.

In  Iztok Parkside project in  Sofia, the majority of  final sales of apartments
started in December 2020, after receiving a usage permit. By the publishing date
of  the annual report, presale agreement for 1 apartment has not been concluded.
Iztok  project  consists  of  three  apartment  buildings  with  a  total of 67
apartments. As the apartments were handed over a year later than promised due to
bureaucratic  obstacles, 2 clients want compensation in  the total amount of 40
thousand  euros.  As  these  apartment  owners  want  compensation  for pain and
suffering, but not to give up the apartments, the obligation to pay compensation
is not realistic and no reserve has been formed for this purpose.

In  the Lozen project near Sofia in  Bulgaria, design works have been completed.
As  the development was designed as a premium class product, it has been decided
to temporarily freeze the project and wait for the market to recover from Covid-
19. Under  favourable  market  conditions,  construction  may start in Q3 2021,
divided  into smaller sub-stages. The project foresees construction of 179 homes
(apartments  and houses), commercial spaces and a kindergarten. Minimum expected
construction period is 2 years.

In  the third  quarter of  2020, 1 plot of  land with  no book value was sold in
Latvia  for  40 thousand  euros.  As  of 31 December 2020, 4 Marsili residential
plots remained unsold in Latvia.


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

-----------------------------------------------------------------
  In thousands of euros                           2020      2019
-----------------------------------------------------------------


  Revenue from sale of own real estate          13,129    12,152

  Revenue from rendering of services               927       957

  Total revenue                                 14,056    13,109



  Cost of sales                                -11,313   -11,295

  Gross profit                                   2,743     1,814



  Other income                                      10       137

  Marketing and distribution expenses              -89       -96

  Administrative expenses                         -922      -777

  Other expenses                                  -273      -121

  Loss on revaluation of investment property       -20        -7

  Operating profit                               1,449       950



  Financial income and costs                      -437      -562

  Net profit for the period                      1,012       388



  Total comprehensive income for the period      1,012       388
-----------------------------------------------------------------

-----------------------------------------------------------------
  Earnings per share (in euros)

  - basic                                         0.11      0.04

  - diluted                                       0.11      0.04
-----------------------------------------------------------------


CONSOLIDATED STATEMENT OF FINANCIAL POSITION

-------------------------------------------------------------------------------
  In thousands of euros                       31 December 2020 31 December 2019
-------------------------------------------------------------------------------


 Cash and cash equivalents                               2,200              870

 Receivables and prepayments                             1,344              544

 Inventories                                            14,960           15,807

 Total current assets                                   18,504           17,221



 Receivables and prepayments                                 5                0

 Investment property                                     9,564           11,051

 Property, plant and equipment                              22              265

 Intangible assets                                         136              217

 Total non-current assets                                9,727           11,533

 TOTAL ASSETS                                           28,231           28,754



 Loans and borrowings                                    3,482            6,416

 Payables and deferred income                            3,308            3,135

 Total current liabilities                               6,790            9,551



 Loans and borrowings                                    7,217            5,904

 Total non-current liabilities                           7,217            5,904

 TOTAL LIABILITIES                                      14,007           15,455



 Share capital                                           6,299            6,299

 Unregistered share capital                                273                0

 Share premium                                           2,285            2,285

 Statutory capital reserve                               2,011            2,011

 Other reserves                                              0              245

 Retained earnings                                       3,356            2,459

 Total equity attributable to owners of the
 parent                                                 14,224           13,299

 TOTAL EQUITY                                           14,224           13,299

 TOTAL LIABILITIES AND EQUITY                           28,231           28,754
-------------------------------------------------------------------------------


Tiina Malm
CFO
Arco Vara AS
Phone: +372 614 4630
www.arcovara.com