KEY PERFORMANCE INDICATORS
-- In Q4 2017, the group's revenue was 8.0 million euros, which is 5.7 times
higher compared to the revenue of 1.2 million euros in Q4 2016. In 2017,
the group's revenue was 18.3 million euros, which is 88.7% higher compared
to the revenue of 9.7 million euros in 2016. The revenue of the Development
Division amounted to 7.4 million euros in Q4 2017 and 15.9 million euros in
2017, and the revenue of the Service Division amounted to 0.8 million euros
in Q4 and 2.9 million euros in 2017.
-- In Q4 2017, the group's operating profit (=EBIT) was 0.8 million euros and
net profit 0.7 million euros. In 2017, operating profit was 1.3 million
euros and net profit 0.8 million euros. The operating profit of the
Development Division amounted to 1.1 million euros in Q4 2017 and 2.0
million euros in 2017. The Service Division earned a small operating loss
in Q4 2017 and operating loss of 0.2 million euros in 2017 as a whole.
-- In Q4 2017, 57 apartments were sold in projects developed by the group (in
2017: 117 apartments, 2 commercial spaces and 6 land plots). In 2016, 77
apartments, 9 commercial spaces and 8 land plots were sold. In the first
half of 2016, active sales were made in Manastirski project in Bulgaria; in
the second half of 2017, Kodulahe I stage apartments got ready for final
sale.
-- In 2017, the group's debt burden (net loans) decreased by 3.4 million euros
down to the level of 10.0 million euros as of 31 December 2017. As of 31
December 2017, the weighted average annual interest rate of interest
bearing liabilities was 5.4%, which is 0.1% higher than on 31 December
2016.
Main financial figures
12 months 12 months Q4 Q4
2017 2016 2017 2016
--------------------------------------------------------------------------------
In millions of euros
-------------- --------
Revenue
--------------------------------------------------------------------------------
Development 15.9 7.0 7.4 0.6
--------------------------------------------------------------------------------
Services 2.9 3.2 0.8 0.8
--------------------------------------------------------------------------------
Eliminations -0.5 -0.5 -0.2 -0.2
--------------------------------------------------------------------------------
Total revenue 18.3 9.7 8.0 1.2
--------------------------------------------------------------------------------
-------------- --------
Operating profit (EBIT)
--------------------------------------------------------------------------------
Development 2.0 0.6 1.1 -0.9
--------------------------------------------------------------------------------
Services -0.2 -0.2 -0.1 0.0
--------------------------------------------------------------------------------
Unallocated income and expenses -0.5 -0.4 -0.2 0.0
--------------------------------------------------------------------------------
Eliminations 0.0 -0.1 0.0 -0.2
--------------------------------------------------------------------------------
Total operating profit/loss (EBIT) 1.3 -0.1 0.8 -1.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial income and expenses -0.5 -0.6 -0.1 -0.1
--------------------------------------------------------------------------------
Income tax 0.0 -0.1 0.0 -0.1
--------------------------------------------------------------------------------
Net profit/loss 0.8 -0.8 0.7 -1.3
--------------------------------------------------------------------------------
Cash flows of operating activities -2.0 1.7 0.3 -1.3
--------------------------------------------------------------------------------
Cash flows of investing activities -0.5 -2.4 -0.1 0.0
--------------------------------------------------------------------------------
Cash flows of financing activities 3.9 0.8 0.9 1.7
--------------------------------------------------------------------------------
Net cash flows 1.4 0.1 1.1 0.4
--------------------------------------------------------------------------------
Cash and cash equivalents at 0.8 0.7 1.1 0.4
beginning of period
--------------------------------------------------------------------------------
Cash and cash equivalents at end of 2.2 0.8 2.2 0.8
period
--------------------------------------------------------------------------------
------------------------------------- --------------
Total assets, at period end 24.3 27.7
--------------
Invested capital, at period end 22.1 23.2
-----------------------------------------------------------------
Net loans, at period end 10.0 13.4
-----------------------------------------------------------------
Equity, at period end 9.8 9.0
-----------------------------------------------------------------
Key ratios
--------------------------------------------------------------------------------
12 months 12 months Q4 Q4
2017 2016 2017 2016
--------------------------------------------------------------------------------
------------------------------------- -------------- -------
EPS (in euros) 0.12 -0.13 0.11 -0.21
-------------- --------
-------
Diluted EPS (in euros) 0.11 -0.13 0.10 -0.20
-------------------------------------------------------------------------
ROIC (rolling, four quarters) 3.2% -3.7%
-----------------------------------------------------------------
ROE (rolling, four quarters) 8.8% -8.4%
------------------------------------- --------------
ROA (rolling, four quarters) 2.8% -3.2%
----------------------------
Current ratio 2.72 1.15
-----------------------------------------------------------------
Quick ratio 0.69 0.09
-----------------------------------------------------------------
Financial leverage 2.49 3.09
-----------------------------------------------------------------
Average loan term (in years) 1.7 1.2
-----------------------------------------------------------------
Average annual interest rate of 5.4% 5.3%
loans
-----------------------------------------------------------------
Number of staff, at period end 140 110
-----------------------------------------------------------------
GROUP CEO'S REVIEW
For Arco Vara, year 2017 ended with healthy sales revenue of 18 mln euros,
which, among other things, is a sustainable level. Compared to the end of 2016,
we had created a much stronger foundation by the end of 2017.
Firstly, we now have two active ongoing developments, Iztok Parkside and
Kodulahe, in addition to which we gained opportunities to increase our
development volumes. We have used these opportunities by now by acquiring Lozen
project in Sofia and Paldiski mnt 74 plot in Tallinn. Figuratively speaking, at
any point in time, we have at least two cranes up and working, and 1000+
apartments lined up in the Group's development portfolio.
Secondly, our cash position has improved and our loan burden has decreased by
over 20%. In addition, the loan burden has been restructured from mostly
short-term to mostly long-term.
Thirdly, the Group made a profit and the profit reached our bank account. As a
director and as a shareholder, this is the kind of profit I value the most.
The only thing where we remained below our expectations was the size of the
profit, which amounted to 0.8 mln euros. Return on equity of 8.8% p.a. is not
enough. Here we have to take a look in the mirror and find opportunities to
increase equity turnover. In Madrid Blvd building in Sofia, the rental income
was below expectations because we did not achieve full occupancy, and the lost
profits were in the same ballpark. In Kodulahe project Estonia, about 10% of
the project remained unsold by year-end, to be sold during 2018. We saw no good
reason to accelerate sales in the situation where construction prices are on
the rise and where we will not have new sellable apartments in Kodulahe before
2019. In our real estate services business, we did not yet reach profit in
2017, despite increased revenues.
In 2018, we will mostly be laying foundation for the results of 2019-2020,
which will mostly come from Lozen, Kodulahe and smaller developments. We will
continue providing real estate services with the aim of becoming the most
people-focused real estate company. Towards the end of the year, we will start
selling Iztok Parkside apartments and thus the fourth quarter will have the
largest bearing on our annual results. The results of Iztok Parkside project
will also have the largest impact on our net profit. In terms of distributing
the net profit of 2017, dividend payments should remain at previous levels and
earned cash should be reinvested into growth.
In summary, Arco Vara will continue accelerating. As the pace of real estate
development is comparable to that of a road roller, the acceleration may be
less visible, but will have a longer-lasting impact.
SERVICE DIVISION
In Q4 2017, revenue of the Service Division amounted to 793 thousand euros (Q4
2016: 827 thousand euros), which included intra-group revenue of 155 thousand
euros (Q4 2016: 136 thousand euros). In 2017, the revenue decreased by 9.2% to
2,935 thousand euros, compared to the revenue of 3,231 thousand euros in 2016.
In 2017, revenue of the Service Division from main services (real estate
brokerage and valuation services) decreased by 9% compared to 2016. The main
reason is that the revenue in the amount of 771 thousand euros from the Latvian
agency (which was sold in Q4 2016) was included in the group revenue in 2016.
As the table below demonstrates, sales revenues of both Estonian and Bulgarian
real estate agencies have actually increased significantly.
Revenue of real estate agencies from brokerage and valuation
12 months 12 months Change, Q4 Q4 Change
2017 2016 % 2017 2016 , %
--------------------------------------------------------------------------------
In thousands of
euros
Estonia 1,793 1,422 26% 468 386 21%
--------------------------------------------------------------------------------
Bulgaria 798 639 25% 238 195 22%
--------------------------------------------------------------------------------
Latvia - 771 - - 77 -
--------------------------------------------------------------------------------
Total 2,591 2,832 -9% 706 658 7%
--------------------------------------------------------------------------------
In Q4 and 12 months 2017, Estonian agency had net loss of 123 thousand euros
and 235 thousand euros, respectively (in 2016: 37 thousand euros and 188
thousand euros). Bulgarian agency earned net profit of 4 thousand euros in Q4
2017 and 50 thousand euros in 12 months 2017. (2016: net loss of 2 thousand
euros in Q4 and 19 thousand euros in 12 months).
In addition to brokerage and valuation services, the Service Division also
provides real estate management and accommodation services in Bulgaria. The
revenue from real estate management was 124 thousand euros in 2017, of which
102 thousand euros was intra-group revenue (2016: 118 thousand and 100 thousand
euros, respectively). Revenue from accommodation services amounted to 182
thousand euros in 2017, out of which 47 thousand euros was made in Q4 (2016:
144 thousand euros in 12 months and 40 thousand euros in Q4).
On 31 December 2017, the number of staff in the Service Division was 126 (on
31.12.2016: 97).
DEVELOPMENT DIVISION
The revenue of the Development Division totalled 7,349 thousand euros in Q4
2017 (in Q4 2016: 647 thousand euros) and 15,860 thousand euros in 2017 (in
2016: 7,048 thousand euros), including revenue from the sale of properties in
the group's own development projects in the amount of 7,515 thousand euros in
Q4 and 14,390 thousand euros in 12 months (2016: 519 thousand euros in Q4 and
6,562 thousand euros in 12 months). In Q3, the construction of apartments of
the first stage apartment building (with 125 apartments and 5 commercial
spaces) in the group's largest ongoing development project Kodulahe came close
to an end, and active final sales went on in both Q3 and Q4. By the publishing
date of the interim report, sale agreements for 115 apartments and 2 commercial
spaces have been concluded.
Most of the other revenue of the Development Division consists of rental income
from commercial and office premises in Madrid Blvd building in Sofia, amounting
to 133 thousand euros in Q4 2017 and 493 thousand euros in 2017 (2016: 117
thousand euros in Q4 and 369 thousand euros in 12 months). By the publishing
date of the interim report, last two office spaces remain vacant.
In Q4 and 12 months 2017, the Development Division had operating profit of
1,149 thousand euros and 2 million euros, respectively. In 2016, the
Development Division had operating loss of 913 thousand euros in Q4 and
operating profit of 611 thousand euros in 12 months.
In Q4 2017, one apartment was sold in Madrid Blvd complex in Sofia. By the end
of the quarter, 1 apartment remained unsold. Additional 15 apartments have been
furnished and are being rented out as accommodation service. Unsold parking
places are also being rented out.
In Q4 2017, preparatory works in the second stage of Kodulahe project
continued, where a building with 68 apartments and commercial spaces is
planned. Preparatory works also continued for Oa street properties in Tartu,
where 4 smaller apartment buildings are planned. Both projects are expected to
be finalised by mid-2019.
In Iztok Parkside project in Sofia, construction started in October 2017. By
the publication date of this report, presale agreements for 26 apartments have
been signed. Iztok project consists of three apartment buildings with 68
apartments (7,070 square meters of apartments' sellable area).
As of 31 December 2017, 6 Marsili residential plots remained unsold in Latvia.
During 2017, four plots were sold in the project. Additionally, the sale of
Baltezers-3 project (68 undeveloped land plots as a whole) was finished.
As of 31 December 2017, 5 people were employed in the Development Division, the
same number as at the end of 2016.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note 12 months 12 months Q4 Q4
2017 2016 2017 2016
--------------------------------------------------------------------------------
In thousands of euros
------------- --------
Revenue from sale of own real 15,245 6,620 7,182 577
estate
--------------------------------------------------------------------------------
Revenue from rendering of 3,008 3,127 780 732
services
--------------------------------------------------------------------------------
Total revenue 2, 3 18,253 9,747 7,962 1,309
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cost of sales 4 -14,687 -6,745 -6,414 -1,191
--------------------------------------------------------------------------------
Gross profit 3,566 3,002 1,548 118
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Other income 346 182 292 147
--------------------------------------------------------------------------------
Marketing and distribution 5 -487 -556 -140 -138
expenses
--------------------------------------------------------------------------------
Administrative expenses 6 -1,875 -2,064 -650 -545
--------------------------------------------------------------------------------
Other expenses -350 -99 -307 -70
--------------------------------------------------------------------------------
Gain/loss on revaluation of 88 -584 88 -584
investment property
--------------------------------------------------------------------------------
Gain on sale of subsidiaries 0 4 0 3
--------------------------------------------------------------------------------
Operating profit/loss 1,288 -115 831 -1,069
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Finance income and costs 7 -489 -590 -105 -131
--------------------------------------------------------------------------------
Profit/loss before tax 799 -705 726 -1,200
--------------------------------------------------------------------------------
Income tax -14 -127 -14 -127
--------------------------------------------------------------------------------
Net profit/loss 785 -832 712 -1,327
--------------------------------------- ------------- -------
------------- --------
--------------------------------------- ------------- -------
Net profit/loss for the period 785 -832 712 -1,327
--------------------------------------------------------------------------------
attributable to owners of the 8 785 -832 712 -1,327
parent
------------- --------
attributable to non-controlling 0 0 0 0
interests
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total comprehensive 785 -832 712 -1,327
income/expense for the period
--------------------------------------------------------------------------------
attributable to owners of the 8 785 -832 712 -1,327
parent
------------- --------
attributable to non-controlling 0 0 0 0
interests
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Earnings per share (in euros) 8
------------- --------
- basic 0.12 -0.13 0.11 -0.21
--------------------------------------------------------------------------------
- diluted 0.11 -0.13 0.10 -0.20
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 31 December 31 December
2017 2016
--------------------------------------------------------------------------------
In thousands of euros
----------------
Cash and cash equivalents 2,284 845
--------------------------------------------------------------------------------
Receivables and prepayments 9 747 470
--------------------------------------------------------------------------------
Inventories 10 8,974 14,593
--------------------------------------------------------------------------------
Total current assets 12,005 15,908
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Receivables and prepayments 9 18 11
--------------------------------------------------------------------------------
Investments 34 0
--------------------------------------------------------------------------------
Investment property 11 11,299 10,835
--------------------------------------------------------------------------------
Property, plant and equipment 704 718
--------------------------------------------------------------------------------
Intangible assets 275 248
--------------------------------------------------------------------------------
Total non-current assets 12,330 11,812
--------------------------------------------------------------------------------
TOTAL ASSETS 24,335 27,720
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Loans and borrowings 12 1,871 9,372
--------------------------------------------------------------------------------
Payables and deferred income 13 2,486 4,369
--------------------------------------------------------------------------------
Provisions 59 108
--------------------------------------------------------------------------------
Total current liabilities 4,416 13,849
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Loans and borrowings 12 10,132 4,886
--------------------------------------------------------------------------------
Total non-current liabilities 10,132 4,886
--------------------------------------------------------------------------------
TOTAL LIABILITIES 14,548 18,735
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Share capital 4,555 4,555
--------------------------------------------------------------------------------
Additional paid-in capital 292 292
--------------------------------------------------------------------------------
Statutory capital reserve 2,011 2,011
--------------------------------------------------------------------------------
Other reserves 8 134 52
--------------------------------------------------------------------------------
Retained earnings 2,795 2,075
--------------------------------------------------------------------------------
Total equity attributable to owners of the 9,787 8,985
parent
--------------------------------------------------------------------------------
TOTAL EQUITY 9,787 8,985
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY 24,335 27,720
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
12 months 12 months Q4 Q4
2017 2016 2017 2016
--------------------------------------------------------------------------------
In thousands of euros
----------- --------
Cash receipts from customers 12,613 14,290 5,177 2,008
--------------------------------------------------------------------------------
Cash paid to suppliers -10,498 -9,608 -2,367 -2,858
--------------------------------------------------------------------------------
Other taxes paid and recovered (net) -2,112 -1,737 -1,564 -110
--------------------------------------------------------------------------------
Cash paid to employees -964 -1,151 -261 -257
--------------------------------------------------------------------------------
Other cash payments and receipts related -1,001 -96 -723 -23
to operating activities (net)
--------------------------------------------------------------------------------
NET CASH FROM/USED IN OPERATING ACTIVITIES -1,960 1,698 262 -1,240
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Payments made on purchase of tangible and -74 -99 0 -18
intangible assets
--------------------------------------------------------------------------------
Proceeds from sale of property, plant and 0 1 0 1
equipment
--------------------------------------------------------------------------------
Payments made on purchase and development -370 -383 -24 0
of investment property
--------------------------------------------------------------------------------
Proceeds from sale of a subsidiary 0 41 0 40
--------------------------------------------------------------------------------
Payments made on purchase of a subsidiary 0 -1,890 0 0
--------------------------------------------------------------------------------
Loans provided -37 0 -30 0
--------------------------------------------------------------------------------
Repayment of loans provided 4 0 2 0
--------------------------------------------------------------------------------
Other receipts related to investing 24 0 1 0
activities
--------------------------------------------------------------------------------
Other payments related to investing -34 -3 -11 0
activities
--------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES -487 -2,333 -62 23
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Proceeds from loans received 6,085 6,135 883 2,850
--------------------------------------------------------------------------------
Settlement of loans and borrowings -1,809 -4,637 -353 -1,259
--------------------------------------------------------------------------------
Interest paid -879 -797 -263 -176
--------------------------------------------------------------------------------
Dividends paid -65 -61 0 0
--------------------------------------------------------------------------------
Proceeds from share capital increase 0 273 0 273
--------------------------------------------------------------------------------
Other receipts related to financing 665 0 665 0
activities
--------------------------------------------------------------------------------
Other payments related to financing -110 -138 -6 0
activities
--------------------------------------------------------------------------------
NET CASH FROM/USED IN FINANCING ACTIVITIES 3,887 775 926 1,688
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NET CASH FLOW 1,439 140 1,126 471
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash and cash equivalents at beginning of 845 745 1,158 414
period
--------------------------------------------------------------------------------
Increase in cash and cash equivalents 1,439 140 1,126 471
--------------------------------------------------------------------------------
Decrease in cash and cash equivalents 0 -40 0 -40
through sale of subsidiaries
--------------------------------------------------------------------------------
Cash and cash equivalents at the end of 2.284 845 2.284 845
period
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
-------------
Equity attributable to owners of the parent Non-cont Total
rolling equity
interest
s
-------------------------------------------------------------------
Share Share Statutory Other Retain Total
capita premiu capital reserv ed
l m reserve es earnin
gs
---------------------------------------------------------------
In thousands
of euros
-------
Balance as 4,282 292 2,011 298 2,656 9,539 91 9,630
of 31
December
2015
--------------------------------------------------------------------------------
Total 0 0 0 0 -832 -832 0 -832
comprehensi
ve income
for the
period
--------------------------------------------------------------------------------
Transactions 273 0 0 -246 251 278 -91 187
with
owners:
--------------------------------------------------------------------------------
Increase of 273 0 0 -298 298 273 0 273
share
capital
--------------------------------------------------------------------------------
Dividends 0 0 0 0 -61 -61 0 -61
paid
--------------------------------------------------------------------------------
Change in 0 0 0 0 14 14 -91 -77
non-control
ling
interest
--------------------------------------------------------------------------------
Formation of 0 0 0 52 0 52 0 52
equity
reserve
--------------------------------------------------------------------------------
Balance as 4,555 292 2,011 52 2,075 8,985 0 8,985
at 31
December
2016
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Balance as 4,555 292 2,011 52 2,075 8,985 0 8,985
of 31
December
2016
--------------------------------------------------------------------------------
Total 0 0 0 0 785 785 0 785
comprehensi
ve income
for the
period
--------------------------------------------------------------------------------
Transactions 0 0 0 82 -65 17 17
with
owners:
--------------------------------------------------------------------------------
Dividends 0 0 0 0 -65 -65 0 -65
paid
--------------------------------------------------------------------------------
Formation of 0 0 0 82 0 82 0 82
equity
reserve
--------------------------------------------------------------------------------
Balance as 4,555 292 2,011 134 2,795 9,787 0 9,787
of 31
Detsember
2017
--------------------------------------------------------------------------------
Kristel Tumm
CFO
Arco Vara AS
Tel: +372 614 4662
www.arcorealestate.com
Attachment:
https://cns.omxgroup.com/cds/DisclosureAttachmentServlet?messageAttachmentId=663923Arco Vara: Arco Vara AS unaudited consolidated interim report for the fourth quarter and 12 months of 2017
© 2018 GlobeNewswire
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