Unaudited consolidated interim report for Q3 and 9 months of 2019

KEY PERFORMANCE INDICATORSIn Q3 2019, the group’s revenue was 0.5 million euros, which is 62% less than the revenue of 1.3 million euros from continuing operations in Q3 2018. In Q3 2018, revenue together with the discontinued service segment was 2.1 million euros. In 9 months 2019, the group’s revenue was 2.2 million euros, which is 27% less than the revenue of 3.0 million euros in 9 months 2018.In Q3 2019, the group’s operating loss (=EBIT) was 64 thousand euros and net loss 174 thousand euros (in 9 months 2019: operating loss 118 thousand euros and net loss of 460 thousand euros). In Q3 2018, the group had operating profit of 167 thousand euros from continuing operations (191 thousand overall) and net profit of 42 thousand euros. In 9 months 2018, the group made operating profit of 100 thousand euros and net loss of 360 thousand euros.In Q3 2019, 2 apartments were sold in projects developed by the group (in 9 months 2019 12 apartments). In Q3 2018, 4 apartments and 2 commercial areas were sold (12 apartments, 2 commercial areas and 1 land plot in 9 months).In 9 months 2019, the group’s debt burden (net loans) increased by 3.4 million euros up to the level of 19.1 million euros as of 30 September 2019. As of 30 September 2019, the weighted average annual interest rate of interest-bearing liabilities was 4.7%. This is a decrease of 0.3 percentage points compared to 31 December 2018.
Q3 was completed with Kodulahe construction works on schedule, Madrid Blvd rental property occupied with paying tenants and the construction of two Estonian developments with 80 apartments kicked off.We continue to be in a seriously failure with Iztok Parkside, where end-solution by public authorities to resolve the streets land question has seemingly become an endless inching week by week. The end solution has not been achieved yet. The associated uncertainty on project sale timeline and damage to return on equity and cashflows is not proportionate to the end profit that we still expect to achieve. It is obvious that any promise on schedule by the management to the shareholders is not reliable under those circumstances. We simply do our best until the resolution.As for Q4 results, Kodulahe will save the full year of Arco Vara. The deliveries of Kodulahe phase 2 apartments have started to take place and we can expect the year to end up with profitable Q4. The group is also in the process of further reducing its operating expenses by circa 10% per annum.
OPERATING REPORTThe revenue of the group totalled 476 thousand euros in Q3 2019 (in Q3 2018: 2,124 thousand euros, of which 1,256 thousand euros from continuing operations) and 2,222 thousand euros in 9 months 2019 (in 9 months 2018: 5,347 thousand euros, of which 3,049 thousand euros from continuing operations), including revenue from the sale of properties in the group’s own development projects in the amount of 224 thousand euros in Q3 and 1,487 thousand euros in 9 months 2019 (2018: 1,045 thousand euros in Q3 and 2,537 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 186 thousand euros in Q3 2019 and 536 thousand euros in 9 months (2018: 167 thousand euros in Q3 and 419 thousand euros in 9 months). In Q3 2019, nearly all office and commercial spaces together with parking places were rented out.In Q3 and 9 months 2019, the group had an operating loss of 64 thousand euros and 118 thousand euros, respectively. In 2018, the group had an operating profit from continuing operations of 167 thousand euros in Q3 and 100 thousand euros in 9 months.In Q3 2019, construction works came close to an end in Stage II of Kodulahe project, a building with 68 apartments and 1 commercial space. The project is expected to be largely realized by the end of 2019. By the publishing date of the interim report, 16 apartments have been sold and 49 apartments presold.In Q3, design works for Stages III-V of Kodulahe came close to an end and construction of Stage III was started. In Stage III, a residential building with 50 apartments will be constructed at Soodi 4 in Merimetsa district in Tallinn. Under favourable market conditions, the joint construction of Stages IV-V will be started in 2000. The apartment buildings will become ready for final sale in about 1,5 years after the start of construction. By the publishing date of the interim report, presale agreements for 4 apartments in the Stage II building have been concluded.Q3 also marked the start of construction of 4 smaller apartment buildings with a total of 30 apartments on Oa street plots in Tartu under the project name of Kodukalda. The construction is scheduled to end in Q4 2020.In Iztok Parkside project in Sofia, the final sale of apartments could not start in Q3 because the access road problem remained unsolved. By the publishing date of the interim report, presale agreements for 58 apartments have been concluded. Iztok project consists of three apartment buildings with 67 apartments.In Madrid Blvd building, out of the apartments previously used for offering accommodation service, one remains unsold and two have been presold as of the date of this report.In the Lozen project near Sofia in Bulgaria, design works have been completed and main contractor has been chosen for Stage 1. Construction permit is expected in Q1 2020. The project foresees construction of 179 homes (apartments and houses), commercial spaces and a kindergarten. Under favourable market conditions, construction may start in Q1 2020, possibly divided into smaller sub-stages. Considering the nature of terrain on a mountain slope, minimum construction period is 2 years.As of 30 September 2019 and the date of this report, 4 Marsili residential plots remained unsold in Latvia.
Arco Vara AS
Phone: +372 614 4662
AttachmentAVG Q3 2019 ENG

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