Börsiteade

Pealkiri

Unaudited consolidated interim report for Q3 and 9 months of 2020

Teade

GROUP CEO'S REVIEW

We can consider the Q3 2020 positive. The sales recovery turned out to be faster
than   expected,   which   confirms  that  Arco  Vara's  developments  meet  the
expectations  of our clients. Construction work has also continued as planned on
ongoing developments.

The  most significant shift in  the Q3 2020 may be  considered the change of the
Bulgarian  manager  as  of  30 July.  The  main  tasks of the new manager are to
complete  the  usage  permit's  process  for  Iztok Parkside and to initiate the
development  of at  least two  new residential  properties in  the first half of
2021.

By  the time of  submitting the report,  more than ¾  of the Kodulahe complex in
Stage  III had been pre-sold. The sales  revenue is expected in the Q1 2021, but
if  favourable construction conditions continue, the start of the final sales in
the  Q4 2020 is  not ruled  out. In  Stage IV  and V of the Kodulahe apartments,
negotiations  are  underway  for  the  prime  contracting,  but the start of the
construction depends on the achievement of the desired construction price.

We  started designing  the Stage  VI of  the Kodulahe complex (formerly Paldiski
road 74), where the construction of approximately 120 apartments is planned. The
completion   date  of  the  design  process  and  the  estimated  start  of  the
construction works is the Q4 2021.

In  Tartu,  the  development  of  Kodukalda  30 apartments  is  in  the phase of
construction according to the schedule and presale contracts have been concluded
for  the sale of  16 apartments. The buildings  are expected to  be completed in
December 2020. The sales revenue is expected by the Q4 2020.

Bulgaria  Iztok  Parkside  apartment  buildings  have  not received the expected
permit  for use. In the Q3, we  re-launched the application process of the usage
permit.  Thus, we have reached  the final stage of  the development process, the
result  of which we are expecting in  the first quarter of 2021. The interest of
customers who have entered into a presale contract has continued up to this day.

The  Madrid BLVD building  offices were slightly  refurbished to return to 100%
tenant occupancy.

Due to the change of the Bulgarian manager, we are witnessing structural changes
in  the development  team, which  has boosted  the motivation  of the  team. The
Estonian  development  team  has  also  obtained  good  results  in managing the
constraints  related to the Covid-19 crisis. In conclusion, the Management Board
of  Arco  Vara  is  optimistic  about  the  realisation of ongoing developments,
potentially  resulting in an  increase in sales  and construction volumes in the
coming years.


KEY PERFORMANCE INDICATORS

In  Q3 2020, the group's revenue was  569 thousand euros, which is 20% more than
the  revenue of  476 thousand euros  in Q3  2019. In 9 months  2020, the group's
revenue  was 3,758 thousand euros, which is  69% more than the revenue of 2,222
thousand euros in 9 months 2019.

In  Q3 2020, the group's  operating loss (=EBIT)  was 126 thousand euros and net
loss  228 thousand euros  (in 9 months  2020: operating profit 49 thousand euros
and net loss of 277 thousand euros). In Q3 2019, the group had operating loss of
64 thousand  euros and  net loss  of 174 thousand  euros. In  9 months 2019, the
group  made operating  loss of  118 thousand euros  and net loss of 460 thousand
euros.

In  Q3 2020, 2 apartments were  sold in projects  developed by the  group (in 9
months 2020 17 apartments). In Q3 2019, 2 apartments were sold (12 apartments in
9 months).

In the 9 months of 2020, the group's debt burden (net loans) increased by 1,901
thousand  euros  up  to  the  level  of 15,771 thousand euros as of 30 September
2020. As  of  30 September  2020, the  weighted  average annual interest rate of
interest-bearing  liabilities was  5.0%. This is  an increase  of 0.8 percentage
points compared to 31 December 2019.


OPERATING REPORT

The  revenue  of  the  group  totalled  569 thousand  euros  in  Q3  2020 (in Q3
2019: 476 thousand  euros,)  and  3,758 thousand  euros  in 9 months 2020 (in 9
months   2019: 2,222 thousand   euros),  including  revenue  from  the  sale  of
properties in the group's own development projects in the amount of 337 thousand
euros  in Q3 and 3,114 thousand euros in 9 months 2020 (2019: 224 thousand euros
in Q3 and 1,487 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
178 thousand  euros in  Q3 2020 and  488 thousand euros  in 9 months (2019: 186
thousand  euros in Q3  and 536 thousand euros  in 9 months). The  Q2 of 2020 and
Covid-19 brought  changes in the economic  situation of tenants. Several tenants
have been replaced during the last months, but surprisingly in a more favourable
direction  for Arco Vara, that  is why starting from  the autumn 2020 all retail
and office spaces with the accompanying parking spaces are rented out.

In  the II  Stage of  the Kodulahe  project, which  was completed  at the end of
2019, commercial space remains unsold - the last apartment was sold in Q2 2020.
In 2020, Lahepea 9 house received permit of use.

In Q3 2020, construction works continued in Stage III of Kodulahe project, where
a  building with 50 apartments will be located at Soodi 4 Merimetsa. The project
was  expected  to  be  finalized  by  the  Q1 2021, but in continuing favourable
construction  conditions, the house can  be finished by the  end of 2020. By the
publishing date of the interim report, 38 apartments have been presold.

Stages  IV-V of Kodulahe  have construction permits,  design works are finished.
The joint construction of Stages IV and V is scheduled to start latest in 2021.
The  apartment buildings  will become  ready for  final sale  in about 1,5 years
after the construction begins.

In  Q3 2020, construction works of Oa street  plots in Tartu continued, where of
4 smaller  apartment buildings are constructed under Kodukalda project name. The
construction  is scheduled  to end  in Q4  2020. By the  publishing time  of the
interim report, 16 apartments have been presold.

In Iztok Parkside project in Sofia, the final sale of apartments continued in Q3
2020, but  the  main  sales  are  planned  to  take  place  during Q1 2021 after
receiving  an occupancy  permit. By  the publishing  date of the interim report,
presale  agreements  for  9 apartments  have  not  been concluded. Iztok project
consists of three apartment buildings with a total of 67 apartments.

In  the Lozen project near  Sofia in Bulgaria, design  works have been completed
and  construction tender  is in  process. 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 2021, divided into smaller sub-stages. The
project  foresees construction of 179 homes  (apartments and houses), commercial
spaces and a kindergarten. Minimum construction period is 2 years.

In  Q3 2020 a land plot  without accounting value was  sold in Latvia. As of 30
September 2020 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 2020 9m 2019 Q3 2020 Q3 2019
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 Revenue from sale of own real estate         3,114   1,487     337     224

 Revenue from rendering of services             644     725     232     252

 Total revenue                                3,758   2,222     569     476



 Cost of sales                               -2,981  -1,641    -440    -312

 Gross profit                                   777     581     129     164



 Other income                                     0      91       0       0

 Marketing and distribution expenses            -66    -203      -9     -51

 Administrative expenses                       -654    -538    -239    -156

 Other expenses                                  -8     -48      -7     -21

 Operating profit (loss)                         49    -118    -126     -64



 Financial income and costs                    -326    -342    -102    -110

 Net loss for the period                       -277    -460    -228    -174



 Total comprehensive expense for the period    -277    -460    -228    -174
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 Earnings per share (in euros)

 - basic                                      -0.03   -0.05   -0.03   -0.02

 - diluted                                    -0.03   -0.05   -0.02   -0.02
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

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   In thousands of euros          30 September 2020   31 December 2019
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  Cash and cash equivalents                     618                870

  Receivables and prepayments                   368                544

  Inventories                                21,680             15,807

  Total current assets                       22,666             17,221



  Receivables and prepayments                     5                  0

  Investment property                         9,351             11,051

  Property, plant and equipment                 253                265

  Intangible assets                             167                217

  Total non-current assets                    9,776             11,533

  TOTAL ASSETS                               32,442             28,754



  Loans and borrowings                       10,298              6,416

  Payables and deferred income                3,562              3,135

  Total current liabilities                  13,860              9,551



  Loans and borrowings                        5,647              5,904

  Total non-current liabilities               5,647              5,904

  TOTAL LIABILITIES                          19,507             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                           2,067              2,459

  TOTAL EQUITY                               12,935             13,299

  TOTAL LIABILITIES AND EQUITY               32,442             28,754
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Tiina Malm
CFO
Arco Vara AS
Phone: +372 614 4630
www.arcovara.com