Construction, Estonia, EU – Baltic States, Good for Business, Real Estate

Revenue increased in development division where revenue amounted to 4.4 million euros in the first three months 2016, compared to 3.8 million euros in the same period a year ago. Revenue of the service division decreased by 4% year-on-year to 0.7 million euros in the quarter, the company told the stock exchange.

In first the first three months of 2016, the group's operating profit was 1.2 million euros and net profit 1.1 million euros. In the first quarter of 2015, the same figures were 0.9 million euros and 0.7 million euros, respectively. "Similarly to the revenue growth the operating profit of the first quarter came from the development division. Service division ended the first quarter with an operating loss of 73,000 euros, due to the continuing unprofitability of the Estonian brokerage unit," the company's management said.

In the first quarter, 68 apartments and two commercial spaces were sold in projects developed in the group, compared to 48 apartments and 5 commercial spaces sold in the same period a year ago.

The expected revenue of the first stage of the Kodulahe residential area in Tallinn is 16 million euros and the expected revenue of the Iztok Parkside project in Sofia, Bulgaria is approximately 7 million euros, the company said.

In the first quarter of the year, the group continued to decrease its debt burden. Net loans decreased by 2.5 million euros in the first three months to 9.5 million euros as at Mar. 31, 2016. Total loans and borrowings amounted to 11.4 million euros at the end of March, down by 1.4 million euros through the quarter.

"The goal of the management is to double the activity volumes and profit of Arco Vara by the end of 2018 at the latest. Therefore, the results of the first quarter of 2016 are an example of a quarter which, according to the goal of the management, should be a relatively typical quarterly result for Arco Vara starting from 2018," the management said in the press release.

In order to double the activity volumes, the company must achieve a stable development and sales activity. "In 2013–2015, we were involved in restarting the development business, resulting in mostly positive, if volatile quarterly results, whereas now the goal is constant development, constant sales, and constant profit.  All this is supported by the brand, which is kept visible by the service division and data flow. Sales volumes and profit achievable in the future are possible only if we manage to launch and constantly maintain development projects which the clients want and can buy at present," the management said.

According to the management, from the second quarter of 2016 to the end of the third quarter of 2017, the group must undergo a period of construction and pre-sales when very little is happening for the income statement. The following quarterly results will be relatively modest in the financial sense.