Arco Vara
Arco Vara AS Interim Report (unaudited) for fourth quarter and twelve months 2014
DGAP-News: Arco Vara 2015-02-06 / 10:10 --------------------------------------------------------------------- Directors' report CHANGES IN GROUP STRUCTURE DURING IN YEAR 2014 On 14 February 2014, Arco Vara AS divested its 100% share in Arco Ehitus OÜ to the company Stratcorp OÜ. The sale price of the share included two parts: 1) 10 thousand euros paid on transfer of the share; 2) 30% out of the amount, that Arco Ehitus OÜ will gain from actions brought by Arco Ehitus OÜ through Ministry of Education and Research and OÜ Loksa Haljastus. Income tax is deducted from proceeds. The group's gain on the transaction amounted to 652 thousand euros not considering the impact of sale price. As a result of the divestment, the group's liabilities decreased by 1,020 thousand euros and its assets declined by 368 thousand euros. On 19 March 2014, the chairman of the management board of Arco Real Estate SIA realised his option to gain additional ownership share in the company. As a result, the group's ownership interest in Arco Real Estate SIA declined from 78.5% to 70.6% and non-controlling interest in the group's equity increased by 5 thousand euros. On 24 April 2014, Arco Real Estate AS divested its 100% share in Bulgarian subsidiary Arco Imoti EOOD to the group's parent company Arco Vara AS. On 25 April 2014, Arco Investeeringute AS divested its 100% share in Bulgarian subsidiary Arco Projects EOOD to the group's parent company Arco Vara AS. On 25 April 2014, Arco Invest EOOD divested its 100% share in Bulgarian subsidiary Arco Projects EOOD to the group's parent company Arco Vara AS. In May 2014, the group's management adopted a decision to start liquidation of the group's subsidiary Fineprojekti OÜ. On 15 August 2014, the group's Latvian subsidiary Arco Real Estate SIA divested it's 40% share in associate Arco Property Management SIA. The sale price was the share's nominal value of 1 thousand euros. The transaction has no impact on the group's financial position and income statement. On 30 September 2014, the group's Estonian subsidiary Arco Investeeringute AS acquired for the purchase price of 1 euro additional 50% ownership in the group's joint venture Tivoli Arendus OÜ. As a result of the transaction, Arco Investeeringute AS has 100% ownership of Tivoli Arendus OÜ and Tivoli Arendus OÜ became a subsidiary for the group. The transaction has no direct significant impact on the group's financial position and income statement. But there could be long-term impact depending on the results of ongoing court disputes between Tivoli Arendus OÜ and Nordecon AS, where Tivoli Arendus claims Nordecon for 1.2 million euros and Nordecon claims Tivoli Arendus for 0.2 million euros. On 3 November 2014, was registered in Estonian Business Register Arco Vara AS 100% subsidiary Kodulahe OÜ with paid in share capital of 2,500 euros. On 23 December 2014, was registered in Bulgarian Trade Register Arco Vara AS 100% subsidiary Arco BB EOOD with paid in share capital of 511 euros (1,000 Bulgarian lev). The two new companies were established in fourth quarter taking in mind interests of the group's new development projects. Key Performance Indicators · In 12 months 2014, the group's revenue from continuing operations was 9.2 million euros, which was 1.5 million euros less compared to 12 months 2013. Revenue of Service division has increased by 6.3% up to 3.1 million euros. Revenue of Development division amounted to 6.5 million euros in 2014 (in 2013: 8.1 million euros), decreased by 19.4%. The main reason for decrease of revenue in Development division is because the group's development projects are in such stage, where revenue is not accrued yet. Most of Development division revenue in 2014 accrued in fourth quarter then sale of apartments to clients amounted to 4.9 million euros. In Q4 0214, the group's revenue amounted to 5.8 million euros, which is almost three times more than in Q4 2013. · In 12 months 2014, operating profit (=EBIT) from continuing operations was 2.3 million euros and net profit from continuing operations was 1.1 million euros, in previous year the same figures were 4.5 million euros and 3.5 million euros respectively. The better profit figures in 2013 were due to reversal of provisions and revaluation of assets and liabilities in total amount of 3.3 million euros (in 2014: 1.1 million euros). In Q4 2014, the group's operating profit from continuing operations amounted to 1.1 million euros (in Q4 2013: 2.2 million euros). In 9 months 2014, the group's operating profit amounted to 1.1 million euros and net profit amounted to 0.4 million euros. The group's net profit for 2014 was 0.8 million euros, in 2013 it was 3.4 million euros. · Equity to assets ratio has increased compared to the year end 2013. At 31 December 2014, it was 33.5% (at 31 December 2013: 27.2%). In addition to the profitable operating activities the main reason is share issue conducted in Q3 2014, 1.3 million euros was raised in equity. · The balance of the group's total assets is increased by 1.8 million euros in 2014. Main reason is increase of inventory through construction of Manastirski Livadi II stage apartment building in Sofia. · The group's net loans have decreased by 0.5 million euros in 12 months 2014. As at 31 December 2014, the weighted average annual interest rate of loans is 5.8%. This is a decrease by 0.2 percentage point since the end of year 2013 mainly due to very low Euribor rates in second half of 2014. · In 12 months 2014, were sold 77 apartments or commercial areas and 4 residential plots in projects developed in the group (in 12 months 2013 were sold 78 apartments or commercial areas and 4 plots), that includes 73 apartments in Q4 2014 (23 apartments or commercial areas and 1 plot in Q4 2013). 12 months 12 months Q4 Q4 2014 2013 2014 2013 -------------------------------------------------------------------------------- In millions of euros -------------------------------------------------------------------------------- Revenue from continuing operations 9.2 10.7 5.8 2.0 -------------------------------------------------------------------------------- Operating profit from continuing 2.3 4.5 1.1 2.2 operations -------------------------------------------------------------------------------- Net profit from continuing 1.1 3.5 0.6 2.0 operations -------------------------------------------------------------------------------- Net profit from discontinued -0.3 -0.1 -0.2 -0.6 operations -------------------------------------------------------------------------------- Net profit for the period 0.8 3.4 0.4 1.4 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- EPS (in euros) 0.15 0.72 0.07 0.30 -------------------------------------------------------------------------------- ROIC (rolling, four quarters) 3.4% 20.7% ----------------------------------------------------------------- ROE (rolling, four quarters) 10.7% 66.7% ROA (rolling, four quarters) 3.1% 12.6% ----------------------------------------------------------------- ----------------------------------------------------------------- 31 December 31 December 2014 2013 ----------------------------------------------------------------- In millions of euros ----------------------------------------------------------------- Total assets at period-end 27.0 25.2 ----------------------------------------------------------------- Invested capital at period-end 24.1 21.7 ----------------------------------------------------------------- Net loans at period-end 13.6 14.1 ----------------------------------------------------------------- Equity at period-end 9.1 6.9 ----------------------------------------------------------------- ----------------------------------------------------------------- Average loan term (in years, at 2.3 0.3 period-end) ----------------------------------------------------------------- Weighted average annual interest 5.8% 6.0% rate of loans ----------------------------------------------------------------- Number of staff at period-end 189 178 ----------------------------------------------------------------- CONTINUING OPERATIONS Statement of comprehensive income ------------------------------- 12 months 2014 12 months Q4 2014 Q4 2013 2013 -------------------------------------------------------------------------------- In millions of euros -------------------------------------------------------------------------------- Revenue -------------------------------------------------------------------------------- Development 6.5 8.1 5.2 1.3 -------------------------------------------------------------------------------- Service 3.1 2.9 0.7 0.8 -------------------------------------------------------------------------------- Eliminations -0.4 -0.3 -0.1 -0.1 -------------------------------------------------------------------------------- Total revenue 9.2 10.7 5.8 2.0 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Operating profit -------------------------------------------------------------------------------- Development 1.9 5.1 1.2 2.4 -------------------------------------------------------------------------------- Service 0.3 0.2 0.1 0.1 -------------------------------------------------------------------------------- Eliminations 0.0 -0.5 -0.3 -0.2 -------------------------------------------------------------------------------- Unallocated items 0.1 -0.3 0.1 -0.1 -------------------------------------------------------------------------------- Total operating profit 2.3 4.5 1.1 2.2 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Finance income and expenses, -1.1 -1.0 -0.4 -0.2 net -------------------------------------------------------------------------------- Income tax expense -0,1 0.0 -0.1 0.0 -------------------------------------------------------------------------------- Net profit 1.1 3.5 0.6 2.0 -------------------------------------------------------------------------------- Cash flows 12 months 12 months Q4 Q4 2014 2013 2014 2013 -------------------------------------------------------------------------------- In millions of euros -------------------------------------------------------------------------------- Cash flows from/used in operating 0.2 0.3 3.7 0.4 activities -------------------------------------------------------------------------------- Cash flows from/used in investing 0.4 1.6 0.0 0.3 activities -------------------------------------------------------------------------------- Cash flows from/used in financing 0.3 -2.8 -3.4 -0.4 activities -------------------------------------------------------------------------------- Net cash flows 0.9 -0.9 0.3 0.3 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Cash and cash equivalents at 0.8 1.7 1.4 0.5 beginning of period -------------------------------------------------------------------------------- Cash and cash equivalents at end of 1.7 0.8 1.7 0.8 period -------------------------------------------------------------------------------- Revenue and net profit/loss from continuing operations 2012-2014 Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total 2012 2012 2012 2012 2012 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 -------------------------------------------------------------------------------- ---------------------------------------------- In milli ons of euros -------------------------------------------------------------------------------- ---------------------------------------------- Revenu 1.3 3.7 2.4 3.5 10.9 1.7 3.5 3.5 2.0 10.7 1.1 1.1 1.2 5.8 9.2 e -------------------------------------------------------------------------------- ---------------------------------------------- Net -1.2 -0.3 0.3 -16.5 -17.7 0.0 1.4 0.1 2.0 3.5 0.4 -0.3 0.4 0.6 1.1 profi t/loss -------------------------------------------------------------------------------- ---------------------------------------------- In Q4 2012, financial results were negatively affected by recognition of provisions and revaluation of assets and liabilities in total amount of 15.6 million euros. Group Chief Executive's review When we compare the quarterly results of 2014, we can see that the roller-coaster ride of Arco Vara continues. Quarterly operation and sales volumes and profits vary a lot. The modest start of the year was followed by a fourth quarter which was powerful considering the size of Arco Vara, where the group sold apartments for nearly 5 million euros. At the same time, Arco Vara began last year with a practically empty stock and this will hopefully be the last such start of the year. Despite the rollercoaster analogy, I'd like to note that Arco Vara is riding in the right direction and is increasingly stabilising. When I say the right direction, I mean that the business operations of the group continue to be profitable and also growth-oriented. The profit of 2013 was predominantly caused by the successful removal of obligations and risks taken by the group which it couldn't manage and the settling of the balance sheet, whereas the profit of 2014 also contains a large share of the main activities of the group: selling developed products and providing real estate services. In a regularly functioning business process, projects release increasingly more money which can be used to start new projects or decrease the obligations and interest costs of the group. This process also began in the fourth quarter and will pick up speed in the 1st quarter of 2015 due to the continued delivery of developed products to clients. Stabilising means that smaller fluctuations between operating and sales volumes of the quarters and the financial results are expected in the future and the quarters will become more comparable. When the only stabilising factor in 2014 was the service division, i.e. the group earned a stable cash flow by providing mediation and valuation services, then the development division has also become more stable as at the end of the year. Our projects are divided between different stages of development, where something is always being purchased, planned, built or on sale as completed stock. Considering the small size of the group and the operating on three markets simultaneously, we can't ensure complete stability in 2015 and the timing and funding of all processes continues to be under tension. Efficiency losses are also incurred in the fluctuation: for example, the balancing between expenses of foreign funding which are incurred during the phase of development, especially construction, and the excess cash - which does not earn revenue in temporary standstill - incurred during the phase of realising the development. The most optimal solution would be ongoing funding of the development phase of one project with the realisation revenue of another development and the ongoing account balance of the group would be minimal all year round. In 2014 as a whole, the projects of Arco Vara were generally in the phase of development, the final quarter of 2014 and the first quarter of 2015 are predominantly in the realisation phase. In the final quarter of 2015, we will enter a development phase again and will probably be bearing the construction costs of the development project at Paldiski road in Tallinn. The group met all the objectives set for the year: revenue exceeded 9 million euros (planned 9 million), net profit from main activities 0.8 million euros (planned was 0.5 million) and the rate of return of sold development projects exceeds 20% per year. The group's rate of return on equity as a whole did not exceed 20% per year just yet in 2014, because our balance sheet still contains approx. 25% of assets which are not in the active development cycle. This primarily covers the land bank in Latvia and Estonia, obtained in recent years. The management is continually working on bringing this land bank into active development, realise it or exchange it for land which suits our objectives better. Forecast and objectives for 2015 The management is predicting for the group at least 11 million euros as revenue and at least 1 million euros as net profit in 2015. In addition to changes of the general economic environment, the achievement of the forecast in 2015 and the results of the group in 2015 - 2017 also depend on the following critical intermediate results. (i) Final stabilisation of the loan for Madrid Blvd from Piraeus Bank and extending important rent contracts. The principal amount of loan to the sum of 950 thousand euros needs to be repaid for the final extension of the loan until December 2017, which requires a careful balancing act between all needs and risks of the group; (ii) Successful sale of the apartments at Madrid Blvd to the sum of approx. 1 million euros per year; as at the date of the quarterly report, three apartments out of 34 have been sold or pre-sold after restarting the sale; (iii) Final sale of the apartments of Manastirski AB block, releasing an additional more than 2 million euros; (iv) Starting and finishing the construction of Manastirski D-block (final stage of the development project), which will release about 80 apartments for pre-sale in 2015 and the delivery and sale of which will take place in 2016; (v) Buying a new plot suitable for development in Sofia, with gross sellable area (GSA) of at least 7,000 m2, on which to build in 2016 and sell to final consumers in 2017; (vi) The completion of the construction project for Paldiski road 70c first stage and beginning construction in the fourth quarter 2015. The sold volume of first stage is predicted to exceed 120 apartments and the gross sellable area (GSA) of apartments is 8,000 m2. The sale of existing completed products in Latvia also influences the results to an extent, but the management board is not particularly optimistic about the outlook of new developments in Latvia. The reasons for the pessimism have remained the same, heightened requirements for self-financing for residential loans by Latvian banks, heightened requirements for real estate investment for obtaining a residence permit and also the decreased revenue from oil and its consequences, which will carry along the economic food chain to all local or CIS consumers who used to make real estate purchases in Latvia. The management board is most optimistic about the real estate market in Sofia, which is indicating the strongest absolute demand, the increase of demand and the margins of the developer. In Tallinn, the key issue is entering the market with a product which would exceed the consumers' expectations by its properties, the developed and added quality for apartment supply, and bring the cost of using apartments lower. Arco Vara does not need to bring more trees into the forest. DEVELOPMENTS IN Arco Vara HOME MARKETS Sofia In Q4 2014, were made 6,975 sale-purchase transactions with real-estate in Sofia, which is 37.8% more than in third quarter. The transaction activity is practically doubled if compared to previous year. The average price of apartments was 710, 800 and 803 euros for one-, two- and three-bedroom apartments respectively apartment (it must be taken into consideration that in Bulgaria, a legal share of the public premises of the building is also considered part of the area of the apartment and that apartments sold on the secondary market predominantly include interior finishing, whereas new apartments have no interior finishing). An increased transaction activity has probably been hindered also by the appointment of new Bulgarian government which stabilized political and economical situation in the country. It should be also mentioned the bankruptcy of the fourth largest bank in Bulgaria in summer followed by payments to bank clients from guaranteed deposits starting from December - part of that money found it's way to the real estate market, for sure. Riga The transaction activity in Riga market showed clear decreasing trend in Q4 2014. In fourth quarter, were concluded 2,615 real estate sales transactions, which is 19.5% less than 3,116 transactions in third quarter and 3.9% less than in Q4 2013. Fourth quarter was the first after the changes have been made to the living permit laws in September and the negative impact is clearly seen if judged by transaction statistics. In fourth quarter, the new projects share was 15% out of all sales transactions with apartments (total of 1,957 in Riga). The rate has been fluctuating between 15-20% during the year. The total number of apartment sales dropped by 16.9% compared to third quarter and by 6.8% compared to Q4 2013. The further activity of the Riga real estate market will be influenced by a law amendment which will enter into force on 1 March 2015, providing that in the case of bankruptcy proceedings of a private person, the mortgage loan granted to him or her is paid also when the realizable value of the mortgage is less than the outstanding loan (so-called non-recourse loans). We can predict that the self-financing requirements of banks will increase up to approx. 40% and it will hinder transaction activity, especially for newer real estate. As an alternative to increased self-financing requirements banks will probably offer to the borrowers somewhat higher interest rate. At the same time, Latvia and Riga, out of three Arco Vara home markets, is most vulnerable to the adverse developments in Russia and surrounding countries bounded economically and politically to Russia. Tallinn In Tallinn, 3,029 transactions of purchase and sale of real estate have been completed in fourth quarter, increased by 13.3% compared to previous quarter. The number of transactions remained practically the same (0.6% increase) if compared to Q4 2013 (3,011 transactions made then). 2,102 transactions for purchase and sale of apartment ownerships were carried out in Q4 in Tallinn, which is 14% more than in previous quarter and 1.5% less than in Q4 2013. The average sales price for apartment ownerships was 1,480 euros per m2 in Q4, which is 12.1% higher compared to Q4 2013. Despite the slight decline of transaction activity in the middle of the 2014, there are no dramatic changes predicted for the Tallinn real estate market. Terms and conditions of banks for granting loans have not changed over the year. If anything, buyers have more choices thanks to increased supply. More research is done before finalizing a purchase than in the past few years when there was a deficit of new developments in particular on the market and the buyer had less time to make a choice. SERVICE DIVISION In Q4 2014, revenue of service division was 738 thousand euros, that included intra-group revenue of 130 thousand euros (Q4 2013: 790 thousand and 90 thousand euros, respectively). In 2014, revenue of service division increased by 6% compared to previous year and amounted to 3,139 thousand euros (includes intra-group revenue of 451 thousand euros). Sales growth came from Latvia and Bulgaria, where 12 months revenue from main activities of real estate agencies, brokerage and valuation of real estate, increased by 17% and 61%, respectively. Annual revenue of Estonian real estate agency decreased by 17% compared to previous year. If we compare fourth quarters of 2013 and 2014, then the decline is even 33%. Revenue drop of Estonian agency is mostly connected to the decrease in sales of valuation services (by 25% in 2014). Revenue of real estate agencies from brokerage activities 12 months 12 months Change Q4 2014 Q4 2013 Change 2014 2013 % % -------------------------------------------------------------------------------- In thousands of euros -------------------------------------------------------------------------------- Estonia 1,166 1,409 -17% 239 359 -33% ----------------- ----------------------- ----------------- Latvia 1,170 1,004 17% 291 272 7% -------------------------------------------------------------------------------- Bulgaria 536 332 61% 154 100 54% -------------------------------------------------------------------------------- Total 2,872 2,745 5% 684 731 -6% -------------------------------------------------------------------------------- The revenue growth of Latvian and Bulgarian agencies was caused both by general increased activity on the market and strongly seizing the market by increasing the number of employees. But growth in Latvian remains mainly to the first half of 2014 and is slowed down in second half of the year. There would not be a big surprise to see further slow down in 2015 due to adverse effect of recent changes in laws that directly influencing real estate sales. In 2014, brokerage of the group's own assets has 44% of Bulgarian agency's revenue. All three real estate agencies ended up with a net profit in 2014: Estonian agency's net profit was 48 thousand euros (in 2013: 156 thousand euros), Latvian agency's net profit was 65 thousand euros (in 2013: 81 thousand euros) and Bulgarian agency's net profit was 90 thousand euros (in 2013: 25 thousand euros). In addition to brokerage and valuation services, the service division also provides real estate management services as well as accommodation service in Bulgaria. The revenue from real estate management was 148 thousand euros in 12 months 2014, 105 thousand euros of which was intra-group revenue (12 months 2013: 135 thousand and 103 thousand euros, respectively). Revenue from accommodation services amounted to 74 thousand euros in 12 months 2014 (12 months 2013: 24 thousand euros). The accommodation services have been provided since July 2013. The number of staff in service division has been increased to 176 employees as at 31 December 2014, growing by 15 people within a year. DEVELOPMENT DIVISION In 2014, revenue of development division totalled 6,466 thousand euros, dropped by 20% compared to previous year (in 2013: 8,049 thousand euros). Most of 2014 revenue accrued in fourth quarter amounted to 5,203 thousand euros (in Q4 2013: 1,279 thousand euros). The big leap in revenues in fourth quarter comes from getting permit of use for two apartment buildings: for Manastirski Livadi second stage building (with 135 apartments and smaller commercial spaces in total) and for last stage building (with 14 apartments) in Bisumuiza-1 project in Riga. In Q4 2014, was sold 61 apartments and commercial spaces in Manastirski project II stage and one Madrid Blvd building apartment in Sofia, also 11 apartments in Bisumuiza-1 project last stage in Riga. Information on sold real estate properties in the group's own development projects is presented in following table. Number of sold real estate properties 2014 2013 ------------------------------------------------- ------------------------------------------------- Estonia, Tallinn 0 20 ------------------------------------------------- Tehnika 53 0 14 ------------------------------------------------- Helme 16, Kodukolde 0 6 ------------------------------------------------- Latvia, Riia 18 16 ------------------------------------------------- Kometas street, Bišumuiža-1 14 11 ------------------------------------------------- Baltezers-5 plots in Marsili 4 5 ------------------------------------------------- Bulgaria, Sofia 63 47 ------------------------------------------------- Madrid Blvd 1 8 ------------------------------------------------- Manastirski Livadi 62 39 ------------------------------------------------- Total 81 83 ------------------------------------------------- Most of other revenue of development division consisted of rental income from commercial and office space in Madrid Blvd building in Sofia, amounted to 953 thousand euros in 12 months 2014 (in 12 months 2013: 956 thousand euros). In 2014, operating profit of development division was 1,942 thousand euros (in 2013: 5,100 thousand euros). In 2013, the impact of extraordinary items to the profit amounted to 3,332 thousand euros and 521 thousand euros in 2014. As at 31.12.2014, the group had in stock 113 apartments and smaller commercial spaces ready for sale, of which 109 in Bulgaria and 4 in Riga. Pre-sale agreements were concluded to 48 apartments and commercial spaces in stock, revenue from final sales will be accrued in first quarter of 2015. After a year break, was restarted in fourth quarter the sale of apartments in Madrid Blvd building. In December, was concluded first sale transaction and as at the interim report date two more apartments have been presold. 15 apartments and all parking places, out of all Madrid Blvd unsold assets, are rented out. In Q4 2014, four more apartments were prepared for letting out. In Bulgaria, the group will be coming to the end with preparations for the construction of Manastirski Livadi D-block (also named as Manastirski III stage). Construction should start in Q1 2015. The building will have at least 80 apartments and commercial areas with saleable area of nearly 6,900 m2 and construction will be finished by the end of 2015. In the most important Estonian development project for the group, Paldiski road 70C, has been reached to the final stage of concluding first stage design contract. The construction works of the apartment building (at least 120 apartments) should start in fourth quarter of 2015. In February 2014, the group acquired as an addition to the land bank, two land plots with building right for 2 apartment buildings (32 apartments with GSA of 2,035 m2) near Tallinn, at Instituudi tee 7 and 9 in Harku. In Q3 2014, the development of the project was suspended due to the need to use the group's finances for carrying out best yielded projects (Paldiski road 70c for example). The sale of the development project could also be an option. As at 31 December 2014, 5 people were employed in development division, one employee hired during a year. SUMMARY TABLE OF ARCO VARA'S PROJECTS AS AT 31 DECEMBER 2014 Project Address Product Stage Area of GSA / GLA (above No of units name main plot(s) grade) available (above grade) type (m2) or-------------------------------------------------------------------------------- Manastir Manastir Apartme S5 4,445 6,906 74 ski A/B ski, nts Sofia -------------------------------------------------------------------------------- Manastir Manastir Apartme S5 - 160 2 ski C ski, nts Sofia -------------------------------------------------------------------------------- Manastir Manastir Apartme S3 2,223 6,869 87 ski D ski, nts Sofia -------------------------------------------------------------------------------- Madrid Madrid Lease: S5/S6 - 7,350 16 Blvd Blvd, Retail Sofia /Office -------------------------------------------------------------------------------- Madrid Madrid Apartme S5/S6 - 3,726 33 Blvd Blvd, nts Sofia -------------------------------------------------------------------------------- Bisumuiz Kometas Apartme S5 - 105 1 a-1 2, Riga nts -------------------------------------------------------------------------------- Bisumuiz Kometas Apartme S5 2,118 278 3 a-1 4, Riga nts -------------------------------------------------------------------------------- Marsili Marsili, Residen S5 - 27,545 15 residen near tial tial Riga plots plots -------------------------------------------------------------------------------- Marsili Marsili, Residen S2 120,220 <120,220> <68> residen near tial tial Riga plots plots -------------------------------------------------------------------------------- Instituu Instituu Apartme S3/S5 5,003 2,035 32 di 7, 9 di tee nts 7,9 Harku -------------------------------------------------------------------------------- PM 70C Paldiski Apartme S3 28,498 21,420 334 road nts 70C, Tallinn -------------------------------------------------------------------------------- Lehiku Lehiku Apartme S2 5,915 <1,100> <5> carpet 21,23 nts buildin Tallinn g -------------------------------------------------------------------------------- Liimi Liimi Lease: S2 2,463 <6,500> <1> 1b, Office Tallinn -------------------------------------------------------------------------------- Viimsira Haabneem Office/ S3/S5 14,174 500 1 nna e, Mix Viimsi vald -------------------------------------------------------------------------------- Note: Value presented inbetween < > means future target value as the project is in early (S1, S2) development stage and the building rights or the design have not been finished yet. The table does not reflect sellable or lettable volumes below grade including parking spaces and storages. Description of stages S1: Land plot acquired S2: Building Rights Procedure S3: Design and Preparation Works S4: Construction S5: Marketing and Sale S6: Facility Management and/or Lease PEOPLE As at 31 December 2014, 189 people worked for the group (178 at the end of 2013). Employee remuneration expenses in 2014 amounted to 2.5 million euros (in 2013: 2.5 million euros). The remuneration of the member of the management board/chief executive and the members of the supervisory board of the group's parent company including social security charges in 2014 amounted to 102 thousand euros compared with 174 thousand euros in 2013. The management board of Arco Vara AS has one member. Since 22 October 2012, the member of the management board and chief executive of Arco Vara AS has been Tarmo Sild. The supervisory board of Arco Vara AS has 7 members. More information on members of management and supervisory board you can find on Arco Vara corporate web page: http://www.arcorealestate.com/en/company-investor/key-persons/supervisory-board DESCRIPTION OF THE MAIN RISKS Liquidity risk The group's free funds are placed on current accounts or short-term deposits with the banks operating in Estonia, Latvia and Bulgaria. Owing to high refinancing risk, cash flow management is critical. The group's cash and cash equivalents balance is constantly smaller than the balance of loans that require refinancing in the next 12 months. At 30 June 2014, the weighted average duration of interest-bearing liabilities was 2.4 years. At the end of Q3 2014, the group's cash and cash equivalents totalled 1.4 million euros. Out of the cash and cash equivalents balance 0.3 million euros was in accounts with restricted withdrawal opportunities (mostly accounts of designated purpose where withdrawals require the banks' consent). Liquidity and refinancing risks continue to be the most significant risks for the group. Interest rate risk The base currency of most of the group's loan agreements is the euro and the base interest rate is 3 or 6 months EURIBOR. As a result, the group is exposed to developments in international capital markets. The group does not use hedging instruments to mitigate its long-term interest rate risk. In 9 months 2014, the group's interest-bearing liabilities has increased by 2.9 million euros and amounted to 17.8 million euros at 31 December 2014. In first 9 months 2014, interest payments on interest-bearing liabilities totalled 0.5 million euros. The group's weighted average loan interest rate is 5.8%. This is a decrease by 0.2 percentage point in 9 months 2014 mainly due to decreased Euribor rates. Currency risk Purchase and sales contracts are mostly signed in local currencies: euros (EUR), and Bulgarian lev (BGN). Real estate sales are mostly nominated in euros, as a result of which the group's assets and liabilities structure does not denote a significant currency risk. The group is not protected against currency devaluations. Most liquid funds are held in short-term deposits denominated in euros. Devaluation risk decreased since the beginning of year 2014 because Republic of Latvia transferred to euro. Share and shareholders Arco Vara AS has issued a total of 6,117,012 shares with nominal value of 0.7 euros per share. The shares are freely traded on NASDAQ OMX Tallinn stock exchange. In September 2014, share capital was raised by issuing 1,375,305 new shares. As at 31 December 2014, the company had 1,668 shareholders and the share price closed at 0,828 euros, a decrease by 40.86% within 2014. During the year, the highest price per share was 1.55 euros and lowest price 0.821 euros. As at 31 December 2014, market capitalization of shares amounted to 5,065 thousand euros (as at 31 December 2013: 6,638 thousand euros) and P/E ratio of the share was 5.3 (as at 31 December 2013: 1.9). Major shareholders at 31 December 2014 No of shares Interest % AS Baltplast 862 820 14,1% AS Lõhmus Holdings 587 378 9,6% Gamma Holding Investment OÜ 554 759 9,1% Alarmo Kapital OÜ 489 188 8,0% HM Investeeringud OÜ 485 000 7,9% LHV PENSIONIFOND L 378 765 6,2% FIREBIRD REPUBLICS FUND LTD 356 428 5,8% FIREBIRD AVRORA FUND, LTD. 185 800 3,0% LHV PENSIONIFOND XL 169 583 2,8% FIREBIRD FUND L.P. 150 522 2,5% Other shareholders 1 896 769 31,0% ---------------------------------------------------------------- Total 6 117 012 100,0% Holdings of members of the Position No of Intere management shares st % and supervisory boards at 31 December 2014 Toomas Tool (AS Baltplast) member of supervisory board 862 820 14,1% Rain Lõhmus (AS Lõhmus member of supervisory board 587 378 9,6% Holdings) Arvo Nõges (Gamma Holding member of supervisory board 554 759 9,1% Investment OÜ) Hillar-Peeter Luitsalu (HM chairman of supervisory board 513 884 8,4% Investeeringud OÜ, connetced persons) Tarmo Sild ja Allar Niinepuu member of management board/ 489 188 8,0% (Alarmo Kapital OÜ) member of supervisory board Stephan David Balkin member of supervisory board - - Aivar Pilv member of supervisory board - - -------------------------------------------------------------------------------- Total 3 008 029 49,2% Condensed consolidated interim financial statements Consolidated statement of comprehensive income Note 12 months 12 months Q4 Q4 2014 2013 2014 2013 -------------------------------------------------------------------------------- In thousands of euros -------------------------------------------------------------------------------- Continuing operations -------------------------------------------------------------------------------- Revenue from rendering of 3,744 3,791 883 970 services -------------------------------------------------------------------------------- Revenue from sale of own real 5,414 6,937 4,929 1,012 estate -------------------------------------------------------------------------------- Total revenue 2, 3 9,158 10,728 5,812 1,982 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Cost of sales 4 -5,902 -7,749 -4,004 -1,440 -------------------------------------------------------------------------------- Gross profit 3,256 2,979 1,808 542 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Other income 7 609 703 16 505 -------------------------------------------------------------------------------- Marketing and distribution 5 -324 -278 -84 -86 expenses -------------------------------------------------------------------------------- Administrative expenses 6 -1,811 -1,676 -602 -501 -------------------------------------------------------------------------------- Other expenses 7 -82 -196 -48 -134 -------------------------------------------------------------------------------- Gain on transactions involving -27 2,897 -27 1,897 joint ventures -------------------------------------------------------------------------------- Gain on sale of subsidiaries 16 662 98 0 0 ----------------------------------------------- Operating profit 2,283 4,527 1,063 2,223 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Finance income and costs 8 -1,062 -972 -368 -234 -------------------------------------------------------------------------------- Profit before tax 1,221 3,555 695 1,989 ----------------------------------------------- Income tax -75 0 -75 0 -------------------------------------------------------------------------------- Net profit from continuing 1,146 3,555 620 1,989 operations --------------------------------- ------------- ------- ---------------------------------------------------- -------- Discontinued operations -------------------------------------------------------------------------------- Loss from discontinued 14 -324 -128 -196 -563 operations ----------------------------------------------- ----------------------------------------------------------------- Net profit for the period 822 3,427 424 1,426 -------------------------------------------------------------------------------- attributable to owners of the 803 3,410 423 1,426 parent -------------------------------------------------------------------------------- attributable to non-controlling 19 17 1 0 interests -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total comprehensive income for 822 3,427 424 1,426 the period -------------------------------------------------------------------------------- attributable to owners of the 803 3,410 423 1,426 parent -------------------------------------------------------------------------------- attributable to non-controlling 19 17 1 0 interests -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Earnings per share (in euros) 9 -------------------------------------------------------------------------------- - basic 0.15 0.72 0.07 0.30 -------------------------------------------------------------------------------- - diluted 0.14 0.66 0.07 0.28 -------------------------------------------------------------------------------- Consolidated statement of financial position Note 31 December 31 December 2014 2013 -------------------------------------------------------------------------------- In thousands of euros -------------------------------------------------------------------------------- Cash and cash equivalents 1,691 818 -------------------------------------------------------------------------------- Receivables and prepayments 10 1,205 656 -------------------------------------------------------------------------------- Inventories 11 11,970 10,780 -------------------------------------------------------------------------------- Assets belonging to sales group 16 0 847 -------------------------------------------------------------------------------- Total current assets 14,866 13,101 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Investments in equity-accounted investees 0 1 ------------------------------------- Receivables and prepayments 10 5 252 -------------------------------------------------------------------------------- Investment property 12 11,585 11,331 ------------------------------------- Property, plant and equipment 434 459 -------------------------------------------------------------------------------- Intangible assets 113 13 -------------------------------------------------------------------------------- Total non-current assets 12,137 12,056 -------------------------------------------------------------------------------- TOTAL ASSETS 27,003 25,157 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Loans and borrowings 13 3,194 12,589 -------------------------------------------------------------------------------- Payables and deferred income 14 2,659 1,746 -------------------------------------------------------------------------------- Provisions 202 172 -------------------------------------------------------------------------------- Liabilities belonging to sales group 16 72 1,488 -------------------------------------------------------------------------------- Total current liabilities 6,127 15,995 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Loans and borrowings 13 11,826 2,308 -------------------------------------------------------------------------------- Total non-current liabilities 11,826 2,308 -------------------------------------------------------------------------------- TOTAL LIABILITIES 17,953 18,303 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Share capital 15 4,282 3,319 -------------------------------------------------------------------------------- Share premium 15 292 0 -------------------------------------------------------------------------------- Statutory capital reserve 2,011 2,011 ------------------------------------- Other reserves 9 179 60 -------------------------------------------------------------------------------- Retained earnings 2,250 1,452 -------------------------------------------------------------------------------- Total equity attributable to owners of the 9,014 6,842 parent -------------------------------------------------------------------------------- Equity attributable to non-controlling 36 12 interests -------------------------------------------------------------------------------- TOTAL EQUITY 9,050 6,854 -------------------------------------------------------------------------------- TOTAL LIABILITIES AND EQUITY 27,003 25,157 -------------------------------------------------------------------------------- Consolidated statement of cash flows Note 12 months 12 months Q4 Q4 2014 2013 2014 2013 -------------------------------------------------------------------------------- In thousands of euros -------------------------------------------------------------------------------- Cash receipts from customers 10,812 10,516 5,745 2,242 -------------------------------------------------------------------------------- Cash paid to suppliers -8,945 -7,058 -1,775 -1,112 -------------------------------------------------------------------------------- Taxes paid -1,150 -1,976 -306 -448 -------------------------------------------------------------------------------- Taxes recovered 805 189 274 6 -------------------------------------------------------------------------------- Cash paid to employees -866 -846 -249 -209 ------------------------------------------- Other cash payments and receipts -210 -218 -7 -77 related to operating activities -------------------------------------------------------------------------------- Net cash flow of discontinued -250 -317 -2 37 operations -------------------------------------------------------------------------------- NET CASH FROM OPERATING ACTIVITIES 196 290 3,680 439 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Purchase of property, plant and -71 -34 -39 -16 equipment -------------------------------------------------------------------------------- Proceeds from sale of property, 0 118 0 100 plant and equipment -------------------------------------------------------------------------------- Proceeds from sale of investment 0 80 0 60 property -------------------------------------------------------------------------------- Proceeds from sale of a subsidiary 16 10 1,610 0 0 -------------------------------------------------------------------------------- Proceeds from sale of an associate 1 0 0 0 -------------------------------------------------------------------------------- Loans provided -3 -48 0 -11 -------------------------------------------------------------------------------- Placement of security deposits -247 -263 0 0 -------------------------------------------------------------------------------- Release of security deposits 679 258 0 258 -------------------------------------------------------------------------------- Interest received 5 7 2 2 -------------------------------------------------------------------------------- Net cash flow of discontinued 0 -56 0 -56 operations -------------------------------------------------------------------------------- NET CASH FROM/USED IN INVESTING 374 1,672 -37 337 ACTIVITIES -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Proceeds from loans received 13 4,885 3,046 832 165 -------------------------------------------------------------------------------- Settlement of loans and finance 13 -4,800 -4,809 -3,608 -325 lease liabilities -------------------------------------------------------------------------------- Interest paid -1,091 -964 -576 -222 -------------------------------------------------------------------------------- Proceeds from share capital issue 15 1,375 0 0 -66 -------------------------------------------------------------------------------- Other payments related to financing -76 -75 -25 0 activities -------------------------------------------------------------------------------- NET CASH FROM/USED IN FINANCING 293 -2,802 -3,377 -448 ACTIVITIES -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NET CASH FLOW 863 -840 266 328 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Cash and cash equivalents at 818 1,775 1,415 570 beginning of period -------------------------------------------------------------------------------- Decrease in cash and cash 863 -840 266 328 equivalents -------------------------------------------------------------------------------- Change in cash through purchase/sale 10 -37 10 0 of subsidiaries -------------------------------------------------------------------------------- Cash and cash equivalents 0 -80 0 -80 recalssified to sales group assets -------------------------------------------------------------------------------- Cash and cash equivalents at end of 1,691 818 1,691 818 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 3,319 0 2,011 0 -1,958 3,372 -5 3,367 at 31 December 2012 -------------------------------------------------------------------------------- Formation of 0 0 0 60 0 60 0 60 equity reserve (note 9) -------------------------------------------------------------------------------- Total 0 0 0 0 3,410 3,410 17 3,427 comprehensi ve income for the period ------------------------------------------------------------------- Balance as 3,319 0 2,011 60 1,452 6,842 12 6,854 at 31 December 2013 -------------------------------------------------------------------------------- ------------------------------------------------------------------- Balance as 3,319 0 2,011 60 1,452 6,842 12 6,854 at 31 December 2013 -------------------------------------------------------------------------------- Total 0 0 0 0 803 803 19 822 comprehensi ve income for the period -------------------------------------------------------------------------------- Increase of 963 292 0 0 0 1,255 0 1,255 share capital -------------------------------------------------------------------------------- Formation of 0 0 0 119 0 119 0 119 equity reserve (note 9) -------------------------------------------------------------------------------- Change in 0 0 0 0 -5 -5 5 0 non-control ling interests -------------------------------------------------------------------------------- Balance as 4,282 292 2,011 179 2,250 9,014 36 9,050 at 31 December 2014 -------------------------------------------------------------------------------- Evelin Kanter Head of Legal Department Arco Vara AS Tel: +372 614 4594 evelin.kanter@arcovara.ee http://www.arcorealestate.com News Source: NASDAQ OMX --------------------------------------------------------------------- 2015-02-06 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG. The issuer is solely responsible for the content of this announcement. The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- Language: English Company: Arco Vara Estonia ISIN: EE3100034653 End of News DGAP News-Service --------------------------------------------------------------------- 320425 2015-02-06
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