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ARC1T - Arco Vara AS News Story

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Last Trade - 05/05/21

Micro Cap
Market Cap £16.3m
Enterprise Value £17.9m
Revenue £18.2m
Position in Universe 452nd / 795

2020 Annual Report of Arco Vara

Thu 1st April, 2021 7:39am
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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


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.


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.


 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     


 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
Arco Vara AS
Phone: +372 614 4630

*     AVG AA 2020 ENG
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