2023 Annual Report of Arco Vara
GROUP CEO’S REVIEW
While 2021 and 2022 were a sprint on the real estate market,
last year marked the start of a marathon in the heat of
Euribor. The base interest rates of the central bank have
pushed both investors and consumers into a comfortable trot,
waiting for the lowering of interest rates like a drinking station
at a distance run to inject new energy into the economy.
At the same time, looking back shows us positive signs that also
alleviate future business risks of Arco Vara. For example, we have
come through an extremely volatile time for prices of materials, as
indicated by the stabilised construction prices.
The completion of homes at Kodulahe Quarter was the peak of last
year for us, as we delivered 66 new homes in the Rannakalda
development. The success of the Rannakalda site was also tied to
the stabilised construction costs, boosting the profits of the
group to 3.6 million euros.
In addition to completing the homes, Arco Vara commenced the
assessment of environmental impact, having conducted the initial
lifetime analysis in the Kodulahe Rannakalda building to be used to
improve the impact of future projects as early as in the designing
stage. The results of the analysis are provided in more depth on
page 19 of this report.
The largest factor in our Bulgarian activities last year was the
sale of the Madrid Blvd building, which was successfully completed
in Q2. The sale of the building was connected to the long-term
strategy of focusing on developing residential real estate and
reach the delivery of 200 homes every year.
The Bulgarian construction activities continued as scheduled at
Botanica Lozen. At the time of publishing this report, six of the
16 houses have been pre-sold, intended to be completed at the end
of 2024. The next milestone in the Botanica Lozen development is
issuing the stage II construction permit, which is planned to cover
24 residential buildings.
Looking at financial indicators, Arco Vara reached a new level
of 20% ROE, which is one of the long-term goals of the company.
Considering the delivery of homes, the volume of assets of the
company decreased while the equity-to-asset ratio increased to
nearly 60%, enhancing the security and capacity of the company to
continue developments as planned despite the difficult times in the
world of interest rates.
The period of tension continues in 2024 while the team of Arco
Vara focuses on making new investments. We are in a period where
the construction costs have stabilised but the stock of the company
is decreasing and interest expenses remain high, creating
opportunities for us to obtain new development volumes.
KEY PERFORMANCE INDICATORS
The group’s revenue was 18,339 thousand euros,
which is 36% more than the revenue of 13,494 thousand euros in
2022.
In 2023, the Group’s operating profit (=EBIT)
was 3,940 thousand euros and net profit 3,550 thousand euros. In
2022, the group made operating profit of 1,062 thousand euros and
net profit of 695 thousand euros.
In 2023, 66 apartments and 3 commercial spaces
were sold in projects developed by the group in Estonia and three
land plots in Latvia. In 2022, 72 apartments and a land plot in
Latvia.
In 2023, the group’s debt burden (net loans)
decreased by 6,054 thousand euros down to the level of 8,608
thousand euros as of 31 December 2022. As of 31 December 2023, the
weighted average annual interest rate of interest-bearing
liabilities was 8.2%. This is an increase of 2.4 percentage points
compared to 31 December 2022.
OPERATING REPORT
The revenue of the Group totaled 18,339 thousand euros in 2023
(in 2022: 13,494 thousand euros), including revenue from the sale
of properties in the Group’s own development projects in the amount
of 17,581 thousand euros (in 2022: 12,426 thousand euros).
Most of the other revenue consisted of rental income from
commercial and office premises in Madrid Blvd building in Sofia,
amounting to 371 thousand euros in the first half of 2023. The sale
process of the Madrid building was completed in July 2023. There
was no profit or loss from the sale of the building in 2023,
because discounts were recognized in 2022. The transaction is not
reflected in the sales revenue, as it was a sale of real estate
investments that is reported in the net amount in other income.
Equity capital worth 4.1 million euros was released from the
transaction.
Arco Vara's own construction company Arco Tarc OÜ is the main
contractor for the most premium stage of Kodulahe called
Rannakalda. By the end of 2023, a pavilion, 4 commercial spaces and
108 apartments (in three separate apartment buildings), many of
which have a sea view, were completed. As of the publication date
of the annual report, 70 of the 113 plots have been sold.
A subsidiary of Arco Vara, Aktsiaselts Kolde, in 2021 signed an
agreement for land acquisition beside Lake Harku, address Paldiski
road 124b, Tallinn. More than 35,000 m2 of residential
and commercial real estate (GBA) is planned for development. The
project is called Arcojärve. The expected development period is 6
years with the start of construction planned for 2024.
In the Pirita Kuldlehe project, a spacious and exclusive cluster
housing with 5 homes was built in 2023. The sale of the project has
started.
The Botanica Lozen project foresees construction of 54 homes
(houses) in three stages. The construction and sale of the first 16
buildings has started - the private houses of the first stage will
be completed by the end of 2024. By the date of publication of the
annual report, 6 out of 16 houses have been pre-sold.
There were 3 Marsili residential plots in stock in Latvia on
31.12.2022, which were sold in 2023. As of the reporting date,
there is no development activity in Latvia.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
In
thousands of euros |
2023 |
2022 |
|
|
|
Revenue from sale of own real
estate |
17,581 |
12,426 |
Revenue from rendering of
services |
758 |
1,068 |
Total
revenue |
18,339 |
13,494 |
|
|
|
Cost of sales |
-12,740 |
-10,913 |
Gross
profit |
5,599 |
2,581 |
|
|
|
Other income |
107 |
67 |
Marketing and distribution
expenses |
-387 |
-249 |
Administrative expenses |
-1,387 |
-1,118 |
Other expenses |
-20 |
-14 |
Gain/loss on investment
property |
28 |
-205 |
Operating
profit |
3,940 |
1,062 |
|
|
|
Financial income and
costs |
-390 |
-367 |
Profit before
tax |
3,550 |
695 |
Net profit for the period |
3,550 |
695 |
attributable to owners of
the parent |
3,550 |
695 |
Total comprehensive income for the period |
3,550 |
695 |
attributable to owners of the parent |
3,550 |
695 |
|
|
|
Earnings per share (in
euros) |
|
|
- basic |
0.34 |
0.07 |
-
diluted |
0.34 |
0.07 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
In
thousands of euros |
31 December 2023 |
31 December 2022 |
|
|
|
Cash and cash equivalents |
1,472 |
3,427 |
Receivables and
prepayments |
5,798 |
4,387 |
Inventories |
27,637 |
22,511 |
Investment property held for
sale |
0 |
9,050 |
Total current
assets |
34,907 |
39,375 |
|
|
|
Receivables and
prepayments |
18 |
18 |
Investment property |
20 |
82 |
Property, plant and
equipment |
221 |
284 |
Intangible assets |
24 |
46 |
Total non-current
assets |
283 |
430 |
TOTAL
ASSETS |
35,190 |
39,805 |
|
|
|
Loans and borrowings |
3,391 |
5,255 |
Payables and deferred
income |
4,013 |
3,681 |
Warranty provision |
80 |
0 |
Total current
liabilities |
7,484 |
8,936 |
|
|
|
Loans and borrowings |
6,689 |
12,834 |
Total non-current
liabilities |
6,689 |
12,834 |
TOTAL
LIABILITIES |
14,173 |
21,770 |
|
|
|
Share capital |
7,272 |
7,272 |
Share premium |
3,835 |
3,835 |
Statutory capital reserve |
2,011 |
2,011 |
Other reserves |
56 |
0 |
Retained earnings |
7,843 |
4,917 |
Total equity
attributable to owners of the parent |
21,017 |
18,035 |
TOTAL
EQUITY |
21,017 |
18,035 |
TOTAL LIABILITIES AND EQUITY |
35,190 |
39,805 |
Tiina Malm
CFO
Arco Vara AS
Phone: +372 614 4630
www.arcovara.com
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