News
News
ARCO VARA FIRST QUARTER AND THREE MONTHS 2009 CONDENSED CONSOLIDATED INTERIM
29.05.2009,
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).
Whole report you can read here