Unaudited consolidated interim report for Q2 and 6 months of 2023
GROUP CEO’S REVIEW
For Arco Vara’s standpoint, the real estate market was breathing
easier in Q2 but will be more apparent after the summer how safe
this uneven activity is. The resolutions of the European Central
Bank regarding baseline interest rates continue to be the primary
influencer of the real estate and construction sectors. The slowing
inflation rate is also slowly injecting a sense of certainty in
homebuyers, illustrated by the threefold increase of inquiries over
the quarter.
At the end of the last quarter, Arco Vara took a big step
towards selling 200 homes this year while focusing on developing
residential real estate. The sales process of Arco Vara’s first
Bulgarian development, the Madrid BLVD building erected in 2010,
was successfully concluded. Due to the structure of the
transaction, the balance sheet volume of the company increased to
nearly 56 million euros as at the end of Q2, but this is solely an
accounting change. We intend to invest the nearly 4 million euros
of released capital in purchasing new plots and designing ongoing
developments.
In Bulgaria, we continue construction and development of
Botanica Lozen, where 2 residential houses of the 16 homes of the
first stage have found buyers. The Bulgarian team is also in the
process of designing the next project of the development with 24
residential houses, construction is supposed to commence next
year.
The main activity in Estonian developments of Arco Vara is seen
in Kodulahe Kvartal, the Rannakalda stage of which will be
completed as early as in Q4 of this year. As at the moment of
publishing this report, 51 homes and 3 business premises have been
pre-sold, with the preliminary contract volume of nearly 14.4
million euros.
Based on the interest of customers in Kodulahe Kvartal, we also
launched the architectural contest for the next stage and aim to
already reach the establishment of the detailed plan this year. The
plot at Soodi 6, which begins next year, involves around 68 homes
and 250 m² of commercial premises.
The construction of the Kuldlehe boutique building has
progressed according to plan. Based on statistics from Kodulahe,
interest in large apartments is currently low and therefore we can
expect a longer sales period for the five homes at Kuldlehe. The
homes will be completed in the first half of 2024, and by then we
can expect the first buyers.
During these changing times, we have been successful at the
sales processes of Kodulahe Kvartal and Madrid BLVD, significantly
alleviating the financing risks of the company during the current
“cash is king” period where involving capital is expensive. With
the released capital, we plan to increase the development volumes
of Arco Vara with new plots in the second half of the year and
deliver about 65 new homes at Kodulahe in Q4.
KEY PERFORMANCE INDICATORS
In 2023, the apartment buildings have not yet
reached the stage of completion, which is why the group's sales
revenue for the Q2 2023 was 254 thousand euros, which is 97% less
than the sales revenue of the Q2 2022 of 7,633 thousand euros. In 6
months 2023, the group’s revenue was 507 thousand euros, which is
94% less than the revenue of 7,935 thousand euros in 6 months
2022.
In Q2 2023, the group’s operating loss (=EBIT)
was 249 thousand euros and net loss 347 thousand euros (in 6 months
2023: operating loss 433 thousand euros and net loss of 638
thousand euros). In Q2 2022, the group had operating profit of
1,023 thousand euros and net profit of 934 thousand euros. In 6
months 2022, the group made operating profit of 1,126 thousand
euros and net profit of 950 thousand euros.
In Q2 2023, no final sale contracts were signed (1 parking space
was sold in 6 months). In Q2 2022, 41 apartments were sold in
projects developed by the group (in 6 months 2022, 41 apartments
and 1 land plot in Latvia).
In the 6 months of 2023, the group’s debt burden (net loans)
increased by 1,178 thousand euros up to the level of 15,840
thousand euros as of 30 June 2023. The base currency of the group’s
all loan agreements is euro, and most of the loan obligations have
a fixed interest rate, except the base interest rate for the
financing loan for the Tallinn Lammi 6 land (in the amount of
approx. 3.5 million euros) is 6 months’ EURIBOR. As of 30 June
2023, the weighted average annual interest rate of interest-bearing
liabilities was 6.0%. This is an increase of 0.2 percentage points
compared to 31 December 2022. The reason for the increase in the
average interest rate of loan obligations is use of a short-term
credit line with a higher interest rate in the summer of 2023.
The group’s cash and cash equivalents totaled 10,432 thousand
euros as of 30 June 2023 (31 December 2022 3,427 thousand). The
temporary high amount of cash in the account is due to the advance
payment for the sale of Madrid Blvd, of which 4,888 thousand was
repaid to the bank that financed the activities of Madrid Blvd by
the time of publication of this report.
OPERATING REPORT
In the Q2 2023, no apartment buildings were completed, which is
why the group's sales revenue was 254 thousand euros (in Q2 2022,
the sales revenue was 7,633 thousand euros).
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 175
thousand euros in Q2 2023 and 371 thousand euros in 6 months (2022:
202 thousand euros in Q2 and 406 thousand euros in 6 months). As of
30 June 2023, the Madrid building was in an ongoing sales process,
which was completed in July 2023. There is no profit or loss from
the sale of the building in 2023 because the discounts were
recognized in 2022. The transaction is not reflected in the sales
revenue, as it is the sale of a real estate investment. Equity
capital worth 4.1 million euros was released from the
transaction.
Arco Vara's own construction company Arco Tarc OÜ is the main
contractor for the most premium stage of Kodulahe - Rannakalda.
Under construction are a pavilion, 4 service areas and 108
apartments (in three separate apartment buildings), many of which
have sea views. The apartment buildings will be ready in the Q4
2023. As at the date of publishing the interim report, 55 units out
of the 113 have been presold.
A subsidiary of Arco Vara, Aktsiaselts Kolde, in 2021 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
project is called Arcojärve. In Q2 2023, the next land purchase
prepayment of 1,626 thousand euros was paid, as of 30.06.2023, the
total advance payment for the said land is 4,978 thousand euros.
The expected development period is 6 years with the start of
construction planned for 2024.
Construction is underway in the Kuldlehe project. The plan is to
build a spacious and exclusive cluster house with 5 homes in Pirita
in 2023. The sale of the project has started.
The Botanica Lozen project foresees construction of 54 homes
(houses) in three stages. Construction and sales of the first 16
buildings have begun. The construction time of the whole project is
at least 2 years. By the date of publication of the quarterly
report, 2 out of 16 houses have been pre-sold.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
In thousands of
euros |
6m 2023 |
6m 2022 |
Q2 2023 |
Q2 2022 |
|
|
|
|
|
Revenue from sale of own real
estate |
7 |
7,377 |
0 |
7,346 |
Revenue from rendering of
services |
500 |
558 |
254 |
287 |
Total
revenue |
507 |
7,935 |
254 |
7,633 |
|
|
|
|
|
Cost of sales |
-191 |
-6,383 |
-105 |
-6,274 |
Gross
profit |
316 |
1,552 |
149 |
1,359 |
|
|
|
|
|
Other income |
76 |
202 |
54 |
8 |
Marketing and distribution
expenses |
-177 |
-108 |
-120 |
-64 |
Administrative expenses |
-646 |
-513 |
-331 |
-274 |
Other expenses |
-2 |
-7 |
-1 |
-6 |
Operating
profit/loss |
-433 |
1,126 |
-249 |
1,023 |
|
|
|
|
|
Financial costs |
-205 |
-176 |
-98 |
-89 |
Profit/loss before
tax |
-638 |
950 |
-347 |
934 |
Net profit/loss for the
period |
-638 |
950 |
-347 |
934 |
Total comprehensive income/ loss for
the period |
-638 |
950 |
-347 |
934 |
|
|
|
|
|
Earnings per share (in
euros) |
|
|
|
|
- basic |
-0,06 |
0,09 |
-0,03 |
0,09 |
-
diluted |
-0,06 |
0,09 |
-0,03 |
0,09 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
In thousands of euros |
30 June 2023 |
31 December 2022 |
|
|
|
Cash and cash equivalents |
10,432 |
3,427 |
Receivables and
prepayments |
5,837 |
4,387 |
Inventories |
31,111 |
22,511 |
Investment property for
sale |
9,050 |
9,050 |
Total current
assets |
56,430 |
39,375 |
|
|
|
Receivables and
prepayments |
18 |
18 |
Investment property |
2 |
82 |
Property, plant and
equipment |
268 |
284 |
Intangible assets |
32 |
46 |
Total non-current
assets |
320 |
430 |
TOTAL
ASSETS |
56,750 |
39,805 |
|
|
|
Loans and borrowings |
6,635 |
5,255 |
Payables and deferred
income |
13,705 |
3,681 |
Total current
liabilities |
20,340 |
8,936 |
|
|
|
Loans and borrowings |
19,637 |
12,834 |
Total non-current
liabilities |
19,637 |
12,834 |
TOTAL
LIABILITIES |
39,977 |
21,770 |
|
|
|
Share capital |
7,272 |
7,272 |
Share premium |
3,835 |
3,835 |
Statutory capital reserve |
2,011 |
2,011 |
Retained earnings |
3,655 |
4,917 |
Total equity
attributable to owners of the parent |
16,773 |
18,035 |
TOTAL
EQUITY |
16,773 |
18,035 |
TOTAL LIABILITIES AND EQUITY |
56,750 |
39,805 |
Tiina MalmCFOArco Vara ASPhone: +372 614
4630www.arcovara.com
- ArcoVara_aruanne Q2 2023 ENG
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