News
- 27.08.2010: INTERIM REPORT SECOND QUARTER AND SIX MONTHS 2010
- 05.08.2010: Explanation by Arco Vara to the information published this morning on entering
- 28.06.2010: Authorisation for use was granted to project of Arco Vara in Sofia
- 28.05.2010: FIRST QUARTER AND THREE MONTHS 2010 CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
- 26.05.2010: Indrek Porila has began another litigation against Arco Vara AS
News
29.05.2009: FIRST QUARTER AND THREE MONTHS 2009 CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
ARCO VARA
FIRST QUARTER AND THREE MONTHS 2009 CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Management report for the first quarter of 2009
Comments by the CEO
During the 1st quarter 2009, 14 apartments or plots were sold and 13 objects reserved in Arco Vara projects. In the Boulevard Residence Madrid project in Sofia, a 30-year rental agreement was concluded with the Austrian supermarket chain Billa, by which the supermarket will rent approx. 900 m2 of the ground floor sales space of the building.
The strategy of Arco Vara development division is to complete and sell the unfinished apartments in project Kodukolde and plots in project Merivälja2 in Tallinn, Bišumuiža-1 in Riga, Boulevard Residence in Madrid and Manastirski in Sofia by using the benefits of dropped construction prices and releasing this way invested equity as well as reducing the liabilities of the Group. Together with the drop in construction prices and considering our goal to maintain our competitiveness, we have decreased the prices of plots and apartments of Arco Vara projects in the 1st quarter.
In the construction division, new agreements in the amount of 103 million kroons (6.6 million euros) were concluded in the 1st quarter (2008 Q1: 11 million kroons, 7.1 million euros). Considering the general situation on the Estonian construction market, the decrease in contract prices of Arco Vara construction division has been low on year-over-year basis – 7.3%. Compared to the 4th quarter 2008 when the situation in the real estate and construction sector changed rapidly, the volume of new construction agreements has increased 35%, from 69 million kroons (4.4 million euros) to 103 million kroons (6.6 million euros). One of the most important goals of the construction division for the near future is to decrease the administration costs of the Latvian subsidiary, similarly to what has already been done in Estonia. The operating loss of the Estonian construction division (without nonrecurring redundancy costs) was approx. 0.5 million kroons (0.03 million euros).
By restructuring the service division, we have considerably decreased its administration costs. The number of employees has been reduced by 290 persons (80%), at the same time, the turnover has decreased less. During the 1st quarter, the work organisation of some smaller offices outside the capital was changed: the classical office-based work organisation was given up and replaced by the home office system, whereby all services were maintained. In other offices, more cost effective work organisation solutions are being implemented in cooperation with employees. In the service division, the property management department has managed to maintain the turnover and profitability, after the balance sheet date, 2 objects have been added to their portfolio.
The nonrecurring expenditure of the service division in the 1st quarter amounting to 1.5 million kroons (0.1 million euros) was caused by redundancy payments, sales of intangible assets and vehicles used by redundants, which was, due to market situation, made under the price level fixed in leasing contracts, and sales of properties acquired in earlier years as current investments under their cost price.
The aim of the service division is to continue implementing the partially applied and in the current market situation justified work organisation also in foreign markets, which allows increasing service provision with unlimited means in these countries, with a future focus on Estonia, Latvia and Bulgaria.
All in all, we have managed to save in the 1st quarter on y-o-y basis more than 17 million kroons (1.1 million euros) administration and marketing costs, which means that we are ahead our annual schedule of saving 60 million kroons (4 million euros) that we set ourselves in autumn. The number of persons employed by the Group has decreased from 654 persons in 1st quarter 2008 to 259 persons in 1st quarter 2009. However, the Group earned a loss of 14.7 million kroons (0.8 million euros) in the first quarter, wherefrom the portion of nonrecurring expenditures was approx. 5 million kroons (0.3 million euros).
KEY FINANCALS
· Revenue and other income for the 1st quarter totalled 95.6 million kroons (6.1 million euros), 15% down year-over-year.
· EBIT amounted to -13.9 million kroons (-0.9 million euros), 53.2% up year-over-year.
· Net profit amounted to -14.7 million kroons (-0.9 million euros), 12.0% up year-over-year.
· Equity ratio was 36.8% (2008 Q1: 54.3%). ROE was -92.4% (2008 Q1: 7.8%). ROIC was -46.7% (2008 Q1: 6.1%)
· Construction division was awarded new construction contracts worth 103 million kroons (6.6 million euros), (2008 Q1: 111 million kroons, 7.1 million euros)
· Group’s order backlog in the Construction division stood at 232.0 million kroons (14.8 million euros), (2008 Q1: 358 million kroons, 22.9 million euros)
· Over the quarter, a total of 14 apartments and plots were sold (2008 Q1: 11) and 13 reserved (2008 Q1: 48).
|
EEK |
EUR |
|||
|
2009 Q1 |
2008 Q1 |
2009 Q1 |
2008 Q1 |
|
|
In millions |
||||
|
Revenue and other income |
95.6 |
111.9 |
6.1 |
7.2 |
|
EBIT |
-13.9 |
-29.7 |
-0.9 |
-1.9 |
|
incl. revaluation of investment property |
0.0 |
-12.4 |
0.0 |
-0.8 |
|
Profit / loss before tax |
-14.7 |
-16.4 |
-0.9 |
-1.0 |
|
incl. profit or loss from transfer of financial assets |
0.0 |
0.0 |
0.0 |
0.0 |
|
Net profit / loss |
-14.7 |
-16.7 |
-0.9 |
-1.1 |
|
|
||||
|
EPS 1 (in kroons and euros) |
-0.15 |
-0.16 |
-0.01 |
-0.01 |
|
|
||||
|
Total assets at period end |
1,894.2 |
3,521.8 |
121.1 |
225.1 |
|
Invested capital at period end |
1,689.4 |
3,227.8 |
108.0 |
206.3 |
|
Net loans at period end |
877.8 |
684.4 |
56.1 |
43.7 |
|
Equity at period end |
697.1 |
1,911.3 |
44.6 |
122.2 |
|
|
||||
|
Current Ratio |
1.9 |
2.1 |
||
|
|
||||
|
ROIC (rolling 12 months) |
-46.7% |
6.2% |
||
|
ROE (rolling 12 months) |
-92.4% |
7.8% |
||
|
|
||||
|
Number of staff at period end |
258 |
654 |
||
REVENUE AND PROFIT
|
EEK |
EUR |
|||
|
|
2009 Q1 |
2008 Q1 |
2009 Q1 |
2008 Q1 |
|
In millions |
||||
|
Revenue and other income |
||||
|
Services |
10.8 |
32.6 |
0.7 |
2.1 |
|
Development |
30.1 |
29.7 |
1.9 |
1.9 |
|
Construction |
58.9 |
89.5 |
3.8 |
5.7 |
|
Eliminations |
-4.2 |
-39.9 |
-0.3 |
-2.5 |
|
Total revenue and other income |
95.6 |
111.9 |
6.1 |
7.2 |
|
|
||||
|
EBIT |
||||
|
Services |
-5.2 |
-8.2 |
-0.3 |
-0.5 |
|
Development |
-0.3 |
-16.1 |
0.0 |
-1.0 |
|
Construction |
-3.4 |
4.2 |
-0.2 |
0.3 |
|
Eliminations |
-0.1 |
-4.6 |
0.0 |
-0.3 |
|
Unallocated expenses |
-4.9 |
-5.1 |
-0.3 |
-0.3 |
|
Total EBIT |
-13.9 |
-29.7 |
-0.8 |
-1.8 |
|
|
||||
|
Interest income and expense |
-5.0 |
5.0 |
-0.3 |
0.3 |
|
Net other financial items |
4.3 |
8.3 |
0.3 |
0.5 |
|
Income tax expense |
0.0 |
-0.4 |
0.0 |
0.0 |
|
Net profit / loss |
-14.7 |
-16.7 |
-0.8 |
-1.0 |
The Group sold a total of 14 apartments and plots (2008 Q1: 11). The development division was able to maintain the revenue, the revenue of the construction division decreased 34% and the one of the service division 67%.
Due to the low stock-in-trade an improvement in turnover can be expected in the 4th quarter 2009. In autumn, the project “Boulevard Residence Madrid” will be completed in Sofia. In Tallinn, more than 60 apartments add in the “Kodukolde” project and in the “Merivälja2” project more than 50 plots with full infrastructure. The recent reservations and new sales will be reflected after the end of construction and authorisation for use are obtained as turnover.
No substantial revaluations were made in the 1st quarter. More than before, interests paid are recognised as interest costs, as some of the projects have been frozen and the Group is not capitalizing these interests anymore. The financial income and expenses were mainly influenced by the exchange rate profit of 4.2 million kroons (0.3 million euros) from the claim against AS Ühendatud Kapital in US dollars. As at the end of the quarter the Group has liquid assets in value of 114.5 million kroons (7.3 million euros). Interest-bearing liabilities amount to 979.4 million kroons (62.6 million euros) of which 477.3 million kroons (30.5 euros) are short-term.
CASH FLOWS
|
EEK |
EUR |
|||
|
2009 Q1 |
2008 Q1 |
2009 Q1 |
2008 Q1 |
|
|
In millions |
||||
|
Cash flows from operating activities |
-1.1 |
-33.3 |
-0.1 |
-2.1 |
|
Cash flows from investing activities |
27.6 |
-180.6 |
1.8 |
-11.6 |
|
Cash flows from financing activities |
-84.4 |
-69.4 |
-5.4 |
-4.4 |
|
Net cash flow |
-57.9 |
-283.3 |
-3.7 |
-18.1 |
|
|
||||
|
Cash and cash equivalents at beginning of period |
172.6 |
765.0 |
11.0 |
48.9 |
|
Effect of exchange rate fluctuations |
-0.1 |
0.0 |
0.0 |
0.0 |
|
Cash and cash equivalents at end of period |
114.5 |
481.7 |
7.3 |
30.8 |
In January 2009 the company made an extraordinary repayment of 40 million kroons related to Tivoli and Laeva projects loans to SEB Bank by releasing the Group from the obligation to maintain liquid assets worth 150 million kroons (9.6 million euros) in SEB bank accounts.
The biggest short-term liabilities are the bond stock in the amount of approx. 52 million kroons (3.3 million euros) to be redeemed, the loan related to the Ahtri project in the amount of 97.2 million kroons (6.2 million euros), and approx. 77 million kroons (4.9 million euros) calculated principal returns from the sales of assets („Kodukolde”, „Merivälja2” and „Boulevard Residence Madrid”). Short-term liabilities have been mostly affected by accounting the Tivoli and Laeva2 project loans as short-term loans, in the amount of 120 million kroons (7.7 million euros) with an expiry date of 31.03.2010. On a current basis, loans in the project „Kodukolde” in Tallinn and „Bišumuiža-1” in Riga, Latvia have been paid, where the recent loan payments per sold square meter are higher than the sales turnover. After the balance sheet date, the relevant loans have been refunded and the loan servicing costs remained under the sales prices, by leaving the Group more disposable funds. After the balance sheet date, most of the Group liabilities will be in euros.
SERVICE DIVISION
Cost and business model optimisation started in autumn has had good results but is still not sufficient for earning net profit. By cash flow, the revenues and expenses of the division in 1st quarter are in balance and didn’t need any subsidy from parent company.
In the 1st quarter, as the liquidity of the company is most important, the division sold objects that were acquired earlier as short-term investments, due to the market situation, the prices have been sometimes under the cost price. The number of employees in the division has decreased within 12 months by 80%, a total of 290 persons, while the turnover has decreased by 67%.The number of brokerage transactions of the Group in 12 months has decreased by 57%, and the number of valuation reports has decreased by 60%.
The property management department has managed to maintain the turnover and the profitability, after the balance sheet date, 2 more objects were added to the portfolio.
The nonrecurring operating costs of the division amounted to more than 1.5 million kroons (0.1 million euros) and were related to redundancy payments and sales of assets under their cost price.
The number of employees in the division has been reduced by 66 persons. At the end of the 1st quarter the division employed 73 persons (2008 Q1: 360 persons).
|
2009 Q1 |
2008 Q1 |
change, % |
|
|
Number of brokered objects |
208 |
483 |
-56,9% |
|
Projects being sold, pcs. |
186 |
247 |
-24,7% |
|
Number of valuation reports |
810 |
2 052 |
-60,5% |
|
Number of appraisers* |
33 |
44 |
-25,0% |
|
Number of real estate brokers* |
111 |
201 |
-44,8% |
|
Number of division staff at the end of period |
73 |
360 |
-79,7% |
* Includes authorisation agreements
DEVELOPMENT DIVISION
In the 1st quarter 2009, 14 apartments or plots were sold and 13 were reserved. Within the “Boulevard Residence Madrid” project in Sofia, long-term lease agreement was concluded with the Austrian supermarket chain “Billa”; the supermarket will lease 900 m2 of retail premises. Tallinn Administrative Court annulled the decision of Tallinn City Council with what detailed plan of Tivoli project in Tallinn was established, (see Note 16). After the balance sheet date an appeal is drafting.
The main risk factor for the development division is the refinancing of loans of empty plots in Estonia.
Although the cash flow of the Group is tense, we will finish the construction of unfinished apartments and plots with more favourable construction prices in order to satisfy the demand with ready to be sold stock. No new investments are planned.
In order to reduce liquidity risk, the prices in current projects in the Baltic’s as well as in Sofia have been decreased substantially and during the year we aim at selling cash flow generating projects. For some employees, salaries and working times have been reduced. At the end of the 1st quarter the division employed 43 persons (2008 Q1: 55 persons).
Further information on the projects: www.arcorealestate.com/development
CONSTRUCTION DIVISION
The construction division has mostly won tenders of environmental and infrastructure engineering. The average volume of the tenders has decreased and the contractor is usually the state or local governments.
The biggest new contracts in the 1st quarter were the Emajõe-Võhandu drinking water project and the Kohtla-Järve-Kiviõli sewerage project.
In the 1st quarter the division was awarded construction contracts worth 103 million kroons (6.6 million euros), in the 1st quarter of 2008 the corresponding figure was 111 million kroons (7.1 million euros). At the end of the 1st quarter, the division’s order backlog was 232 million kroons (14.8 million euros) and the internal sales accounted for 0%, in the 1st quarter of 2008 the division’s order backlog was 358 million kroons (22.9 million euros).
At the end of the 1st quarter the division employed 127 persons (2008 Q1: 195 persons).
|
EEK |
EUR |
||||
|
Note |
2009 Q1 |
2008 Q1 |
2009 Q1 |
2008 Q1 |
|
|
in thousands |
|||||
|
Rendering of services |
75 914 |
88 691 |
4 852 |
5 668 |
|
|
Sale of goods |
18 408 |
18 830 |
1 176 |
1 203 |
|
|
Total revenue |
2 |
94 322 |
107 521 |
6 028 |
6 871 |
|
Cost of sales |
-87 592 |
-86 327 |
-5 598 |
-5 517 |
|
|
Gross profit |
6 730 |
21 194 |
430 |
1 354 |
|
|
Other income |
3 |
1 308 |
4 394 |
84 |
281 |
|
Selling and distribution costs |
4 |
-879 |
-4 672 |
-56 |
-299 |
|
Administrative expenses |
5 |
-20 602 |
-34 075 |
-1 317 |
-2 178 |
|
Other expenses |
3 |
-475 |
-16 512 |
-30 |
-1 055 |
|
EBIT |
-13 918 |
-29 671 |
-889 |
-1 897 |
|
|
Finance income |
6 |
7 772 |
14 011 |
497 |
895 |
|
Finance expenses |
6 |
-8 529 |
-703 |
-545 |
-45 |
|
Profit / loss before tax |
-14 675 |
-16 363 |
-937 |
-1 047 |
|
|
Income tax expense |
0 |
-366 |
0 |
-23 |
|
|
Net profit / loss |
|
-14 675 |
-16 729 |
-937,00 |
-1 070 |
|
Other Comprehensive income |
|
|
|
|
|
|
Exchange differences on translation foreign subsidiaries |
0 |
-278 |
0 |
-18 |
|
|
Other Comprehensive income for the period |
-14 675 |
-17 007 |
-938 |
-1 087 |
|
|
Total comprehensive income |
|
-14 675 |
-17 007 |
-938,00 |
-1 087 |
|
Profit attributable to: |
|
|
|
|
|
|
Equity holders of the parent |
-860 |
-1 442 |
-55 |
-92 |
|
|
Minority interest |
-13 815 |
-15 287 |
-883 |
-977 |
|
|
|
-14 675 |
-16 729 |
-938 |
-1 069 |
|
|
Comprehensive income attributable to: |
|
|
|
|
|
|
Equity holders of the parent |
|
-860 |
-1 442 |
-55 |
-92 |
|
Minority interest |
|
-13 815 |
-15 565 |
-883 |
-995 |
|
-14 675 |
-17 007 |
-938 |
-1 087 |
||
|
Earnings per share |
7 |
|
|
||
|
- Basic earnings per share |
-0.15 |
-0.16 |
-0.01 |
-0.01 |
|
|
- Diluted earnings per share |
-0.15 |
-0.16 |
-0.01 |
-0.01 |
|
Consolidated statement of financial position
|
EEK |
EUR |
||||
|
Note |
2009 Q1 |
2008 Q1 |
2009 Q1 |
2008 Q1 |
|
|
in thousands |
|||||
|
Cash and cash equivalents |
114 514 |
172 574 |
7 319 |
11 029 |
|
|
Other financial assets |
0 |
40 416 |
0 |
2 583 |
|
|
Receivables |
8 |
275 323 |
294 352 |
17 596 |
18 813 |
|
Prepayments |
6 934 |
6 165 |
443 |
394 |
|
|
Inventories |
9 |
871 588 |
849 440 |
55 705 |
54 289 |
|
Biological assets |
2 940 |
3 679 |
188 |
235 |
|
|
Total current assets |
|
1 271 299 |
1 366 626 |
81 251 |
87 343 |
|
Financial assets |
255 |
255 |
16 |
16 |
|
|
Receivables |
8 |
9 666 |
6 671 |
618 |
427 |
|
Investment property |
10 |
547 114 |
542 753 |
34 967 |
34 688 |
|
Property, plant and equipment |
11 |
53 464 |
41 812 |
3 417 |
2 672 |
|
Intangible assets |
12 |
12 381 |
12 475 |
791 |
797 |
|
Total non-current assets |
|
622 880 |
603 966 |
39 809 |
38 600 |
|
TOTAL ASSETS |
|
1 894 179 |
1 970 592 |
121 060 |
125 943 |
|
Loans and borrowings |
13 |
477 342 |
353 417 |
30 508 |
22 587 |
|
Liabilities |
14 |
123 370 |
132 677 |
7 885 |
8 480 |
|
Deferred income |
75 962 |
65 174 |
4 855 |
4 165 |
|
|
Provisions |
5 419 |
5 917 |
346 |
378 |
|
|
Total current liabilities |
|
682 093 |
557 185 |
43 594 |
35 610 |
|
Loans and borrowings |
13 |
502 089 |
692 919 |
32 089 |
44 286 |
|
Liabilities |
14 |
8 588 |
4 404 |
549 |
281 |
|
Deferred income tax liability |
20 |
20 |
1 |
1 |
|
|
Provisions |
4 291 |
4 291 |
274 |
274 |
|
|
Total non-current liabilities |
|
514 988 |
701 634 |
32 913 |
44 842 |
|
TOTAL LIABILITIES |
|
1 197 081 |
1 258 819 |
76 507 |
80 452 |
|
|
|
|
|
|
|
|
Share capital |
952 842 |
952 842 |
60 898 |
60 898 |
|
|
Share premium |
712 514 |
712 514 |
45 538 |
45 538 |
|
|
Statutory capital reserve |
31 463 |
31 463 |
2 011 |
2 011 |
|
|
Other reserves |
-998 483 |
-984 668 |
-63 815 |
-62 932 |
|
|
Retained earnings |
-3 992 |
-3 992 |
-255 |
-255 |
|
|
Own shares (minus) |
|
694 344 |
708 159 |
44 377 |
45 260 |
|
Minority interests |
2 754 |
3 614 |
176 |
231 |
|
|
Total equity |
|
697 098 |
711 773 |
44 553 |
45 491 |
|
TOTAL LIABILITIES AND EQUITY |
|
1 894 179 |
1 970 592 |
121 060 |
125 943 |
Condensed consolidated interim cash flow statement
|
EEK |
EUR |
||||
|
Note |
2009 Q1 |
2008 Q1 |
2009 Q1 |
2008 Q1 |
|
|
in thousands |
|||||
|
Net profit / loss |
-14 675 |
-16 729 |
-938 |
-1 070 |
|
|
Interest income and expense |
6 |
5 014 |
-5 019 |
320 |
-321 |
|
Gains and losses on other financial assets |
6 |
-52 |
507 |
-3 |
32 |
|
Impairment losses on financial assets |
6 |
14 |
-13 264 |
1 |
-848 |
|
Depreciation, amortisation and impairment losses on property, plant and equipment and intangible assets |
1 094 |
1 325 |
70 |
85 |
|
|
Gain / loss on the sale of property, plant and equipment and intangible assets |
3 |
263 |
-1 |
17 |
-1 |
|
Gain / loss on the sale of investment property |
3 |
43 |
4 |
3 |
1 |
|
Change in the fair value of investment property and biological assets |
3 |
0 |
12 437 |
0 |
795 |
|
Exchange gains and losses |
6 |
-4 219 |
4 468 |
-270 |
286 |
|
Corporate income tax expense |
6 |
0 |
366 |
0 |
23 |
|
Operating cash flow before working capital changes |
-12 518 |
-15 906 |
-800 |
-1 018 |
|
|
Change in receivables and prepayments |
19 659 |
20 767 |
1 256 |
1 327 |
|
|
Change in inventories |
-30 430 |
-44 466 |
-1 945 |
-2 842 |
|
|
Change in biological assets |
447 |
-16 |
29 |
-1 |
|
|
Change in payables and deferred income |
21 727 |
6 313 |
1 389 |
403 |
|
|
NET CASH USED IN OPERATING ACTIVITIES |
-1 115 |
-33 308 |
-71 |
-2 131 |
|
|
Acquisition of property, plant and equipment and intangible assets |
-13 701 |
-7 242 |
-876 |
-463 |
|
|
Proceeds from sale of property, plant and equipment and intangible assets |
341 |
89 |
22 |
6 |
|
|
Acquisition of investment property |
-5 100 |
-516 |
-326 |
-33 |
|
|
Proceeds from sale of investment property |
205 |
103 |
13 |
7 |
|
|
Acquisition of subsidiaries and interests in jointly controlled entities, net of cash acquired |
0 |
-82 616 |
0 |
-5 280 |
|
|
Acquisition of other financial assets |
0 |
-80 000 |
0 |
-5 113 |
|
|
Proceeds from sale of other financial assets |
41 123 |
8 332 |
2 628 |
533 |
|
|
Loans granted |
-942 |
-30 667 |
-60 |
-1 960 |
|
|
Repayment of loans granted |
3 417 |
832 |
218 |
53 |
|
|
Interest received |
2 284 |
11 052 |
146 |
706 |
|
|
NET CASH USED IN / FROM INVESTING ACTIVITIES |
27 627 |
-180 633 |
1 765 |
-11 544 |
|
|
Proceeds from loans received |
28 720 |
12 115 |
1 836 |
774 |
|
|
Repayment of loans and payment of finance lease liabilities |
-98 978 |
-58 656 |
-6 326 |
-3 749 |
|
|
Change in overdraft |
869 |
43 |
56 |
3 |
|
|
Change in group account liability |
0 |
-804 |
0 |
-51 |
|
|
Interest paid |
-15 050 |
-17 156 |
-962 |
-1 096 |
|
|
Dividends paid |
0 |
-2 557 |
0 |
-163 |
|
|
Income tax paid on dividends |
0 |
-2 338 |
0 |
-149 |
|
|
NET CASH USED IN / FROM FINANCING ACTIVITIES |
-84 439 |
-69 353 |
-5 396 |
-4 431 |
|
|
NET CASH FLOW |
-57 927 |
-283 294 |
-3 702 |
-18 106 |
|
|
Cash and cash equivalents at beginning of period |
172 574 |
765 008 |
11 029 |
48 893 |
|
|
Decrease / increase in cash and cash equivalents |
-57 927 |
-283 294 |
-3 702 |
-18 106 |
|
|
Effect of exchange rate fluctuations |
-133 |
8 |
-9 |
0 |
|
|
Cash and cash equivalents at end of period |
114 514 |
481 722 |
7 318 |
30 787 |
|
Whole report
