According to Q Vara AS's bond issue terms' sub clause 13.3.2, Q Vara hereby
presents the consolidated unaudited financial results for the 9 months of 2007.
1. Introduction
As stated in Q Vara's last quarterly reports the most problematic project for
the Group has been Silukalni residential development in Latvia. Fortunately the
third quarter of 2007 brought positive news as five semi-detached houses
together with greening and infrastructure were completed and ten families moved
into their new homes. Right after completing the first houses Q Buve moved on
to build the next six houses that according to the project schedule will be
ready in the beginning of 2008. Currently all the six houses are sold. The
current situation proves that replacing the former main contractor with Q Buve
was a correct choice.
The gross profit from the first houses is almost zero because the sales prices
of these houses in 2005 and 2006 were relatively low compared to the final
construction cost. Altogether 30 houses that were sold in the first stage will
have similarly low profitability. The sale of the rest of the houses started in
2007 and the profit earned from these houses should somewhat improve the
project's total result.
In addition to handing over the first units in Pinki another very positive
event was getting the approval of Trophy project's detail plan in Lithuania.
According to the detail plan Q Vara can develop an apartment building with 2
300 sqm of net space. The new evaluation report that was ordered after the
detail plan approval valued the project's property at 6 000 000 LTL (27 189 600
EEK).
Considering the Group's liquidity the most important development was finalizing
the sale of Sofia project in the beginning of the fourth quarter 2007.
According to the agreed transaction structure EOOD Q Delta repays Q Vara's
loans in total amount of 3 222 658 EUR and OOD Delta Imoti purchases 40% of
EOOD Q Delta's shares for 714 310 EUR. The sale of the remaining 20% of the
shares is also agreed and the transaction details will be disclosed right after
the agreements will be signed.
The Sofia transaction's proceeds will be used for repaying Q Vara's most
expensive loans that altogether should reduce Q Vara's annual interest expence
by approximately 19 million EEK (1.2 million EUR). Also the proceeds will be
used for accounts payable and creating a liquidity buffer.
At the same time with its efforts on different projects Q Vara also continued
to reduce fixed costs and by that improve its liquidity. The need for cutting
the fixed costs is derived from the current market situation in which the sales
pace is low and the demand is weak and unpredictable.
The first fixed cost cut was realized after Q Vara moved into the same office
with its subsidiary Q Ehitus. Besides cost reduction the move also aimed to
increase the synergies and efficiency between the two companies. Sharing an
office also decreased fixed costs by eliminating several positions with
overlapping responsibilities. Similar changes are being carried out also in Q
Vara's Latvian subsidiary. Also Q Ehitus and Q Buve have reduced their costs,
mainly by reducing its number of workers. Both companies' capacity exceeded the
current projects' needs.
As a result of the above described cost reductions Q Vara Group's annual fixed
costs are expected to decrease by 11 million EEK (0.7 million EUR). When also
the interest expense reduction is added the total amount of annual cost
reducton is 30 million EEK (1.9 million EUR). As lay offs result in one time
expenses the cost effects should realize in the beginning of 2008.
Besided reorganizing the group through cost reductions also building more
efficient organization continued. For example one of Q Vara's main values came
to the center of focus in the third quarter - beauty of the developments. It
means that the management decided to set up a special architecture and design
unit that should manage all projects' design and architectural planning.
As a more general change in the third quarter reorganizing Q Vara into public
limited company (aktsiaselts) was finished and starting from September 4, 2007
the company's official name is AS Q Vara.
2. Personnel
In the third quarter the number of Q Vara Group's employees decreased to 91.
The following table presents the number of employees in Q Vara Group's
companies in all target markets.
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EST LAT LIT BLG Kokku
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Q Vara AS 21 21
Q Haldus OÜ 4 4
Q Ehitus OÜ 27 27
Q Estate SIA 15 15
Q Buve SIA 20 20
Q Vara UAB 4 4
Q Vara EOOD 2 2
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Kokku 52 35 4 2 91
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There were no changes in Q Vara Group companies' managements.
3. Financial results
Q Vara's consolidated operating income in the first 9 months of 2007 was 106
178 thousand EEK; 6 786 thousand EUR (2006 9 months: 144 761 thousand EEK; 9
252 thousand EUR). Compared to the operating revenues disclosed about the first
6 months of 2007 the amount has decreased because Q Vara does not record its
Sofia project as a consolidated real estate investment but as subsidiary's
shares for sale in the end of the third quarter. As a result the operating
revenues of the 9 months of 2007 do not include the revaluation profit from
Sofia project anymore. Instead the profit is recorded as financial revenue from
the revaluation of subsidiaries' shares.
Sales revenue for the the 9 months of 2007 was 94 237 thousand EEK; 6 023
thousand EUR (2006 9 months: 39 596 thousand EEK; 2 531 thousand EUR) that is
the best result for 9 months since Q Vara was established. The sales revenue
for the third quarter was 37 128 thousand EEK; 2 373 thousand EUR. In 2007 the
9 months' the sales revenue exceeded the sales revenue of the 9 months in 2006
by 138%. The revenue was mainly derived from Pinki and Kirsiaed residential
projects. As the sale of the land plots in Terminal no. 11 is currently
recorded as prepayment the revenues from there will be realized in the next
quarters.
During the 9 months of 2007 Q Vara generated altogether 44 833 thousand EEK of
gross profit (sales revenues minus cost of goods sold). Compared to the 6
months. results gross profit increased by 174%. So the gross results are
improving which the management will support by lowering the fixed costs in the
near months.
The consolidated net profit for the nine month period was 1 940 thousand EEK;
124 thousand EUR (In 2006: 93 611 thousand EEK; 5 983 thousand EUR). The net
profit is expected to improve as a result of the proposed reduction in fixed
costs.
In the 9 months of 2007 also financial expenses have played a significant role
in the net profit amount. Altogether the financial expenses amounted -27 573
thousand EEK to which other financial expenses and revenues are added in the
profit and loss statement. As described above the repayment of AS GILD
Arbitrage's loans will reduce financial expenses in the future quarters
significantly.
At the end of the third quarter 2007 Q Vara Group is still strongly
capitalized: equity forms 34,9% of total assets. In the end of the quarter the
total asset amount was 871 642 thousand EEK; 55 708 thousand EUR and total
equity amount was 304 504 thousand EEK; 19 464 thousand EUR. At the end of the
third quarter 2006 the total asset amount was 678 007 thousand EEK; 43 333
thousand EUR. Compared to the end of the third quarter of 2006 the asset amount
of Q Vara has grown 28,6% by the end of the third quarter in 2007.
4. Q Vara's consolidated profit and loss statement for the 9 months of 2007
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01.01.2007- 01.01.2006-
30.09.2007 31.12.2006
Unaudited Audited
thousand EEK thousand EEK
-------------------------------------------------------------
Operating revenues
Sales revenues 94 237 63 231
Change in RE investments' value 9 438 161 545
Other operating revenues 2 503 2 867
Total operating revenues 106 178 227 643
Operating expenses
Cost of construction -49 404 -63 789
Direct development costs -2 905 -8 950
Development overhead costs -54 631 -23 326
Marketing costs -7 025 -9 459
Administrative expenses -1 979 -1 940
Other operating expenses -5 949 -6 929
Total operating expenses -121 893 114 393
Operating profit -15 715 113 250
Financial income and expenses 18 167 -3 046
Pre-tax profit 2 452 110 204
Deferred income tax -452 -10 787
Real estate tax -60 -59
Net profit (loss) 1 940 99 358
Mother company's shareholders' share 4 943 79 831
Minority share -3 003 19 527
-------------------------------------------------------------
-------------------------------------------------------------
01.01.2007- 01.01.2006-
30.09.2007 31.12.2006
Unaudited Audited
thousand EUR thousand EUR
-------------------------------------------------------------
Operating revenues
Sales revenues 6 023 4 041
Change in RE investments' value 603 10 325
Other operating revenues 160 183
Total operating revenues 6 786 14 549
Operating expenses
Cost of construction -3 157 -4 077
Direct development costs -186 -572
Development overhead costs -3 492 -1 491
Marketing costs -449 -605
Administrative expenses -126 -124
Other operating expenses -380 -443
Total operating expenses -7 790 -7 311
Operating profit -1 004 7 238
Financial income and expenses 1 161 -195
Pre-tax profit 157 7 043
Deferred income tax -29 -689
Real estate tax -4 -4
Net profit (loss) 124 6 350
Mother company's shareholders' share 316 5 102
Minority share -192 1 248
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5. Q Vara's consolidated balance sheet as of 30.09.2007
-------------------------------------------------------------
30.09.2007 31.12.2006
Unaudited Audited
thousand EEK thousand EEK
-------------------------------------------------------------
Current assets
Cash and cash equivalents 4 307 1 116
Subsidiaries- shares for sale 41 020
Accounts receivable 16 060 4 174
Short-term loans 74 020 74 334
Other short-term receivables 56 111 48 645
Interest receivables 11 219 6 677
Prepayments 36 743 25 908
Real estate for sale 367 175 216 043
Total current assets 606 655 376 897
Non-current assets
Long-term loans 255 5 760
Associated companies 32 618 32 618
Real estate investments 218 040 338 250
Tangible and intangible assets 14 074 8 826
Goodwill 0 2 886
Total non-current assets 264 987 388 340
Total assets 871 642 765 237
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Liabilities and equity
Current liabilities
Short-term loans 362 349 290 169
Capital lease liabilities 133 1 149
Customer prepayments 8 679 5 577
Accounts payable 14 895 22 163
Personnel related liabilities 3 045 2 650
Other short-term liabilities 3 128 0
Interest liabilities 26 303 14 164
Tax liabilities 3 104 0
Total current liabilities 421 996 335 872
Non-current liabilities
Long-term loans 37 280 14 936
Other long-term payables 2 018 90
Issued bonds 76 863 76 863
Capital lease liabilities 2 094 5 468
Deferred income tax 26 847 27 040
Total non-current liabilities 145 102 124 397
Total liabilities 567 098 460 269
Equity
Mother company's shareholders' equity
Share capital 181 511 73 511
Reserves 7 361 7 361
Unrealized exchange rate differences -587 177
Retained earnings 70 574 175 231
Mother company's shareholders' equity 258 859 256 280
Minority share 45 685 48 688
Total equity 304 544 304 968
Total liabilities and equity 871 642 765 237
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-------------------------------------------------------------
30.09.2007 31.12.2006
Unaudited Audited
thousand EUR thousand EUR
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Assets
Current assets
Cash and cash equivalents 275 71
Subsidiaries' shares for sale 2 622
Accounts receivable 1 026 267
Short-term loans 4 731 4 751
Other current receivables 3 586 3 109
Interest receivables 717 427
Prepayments 2 348 1 657
Real estate for sale 23 467 13 808
Total current assets 38 772 24 090
Non-current assets
Long-term loans 16 368
Associated companies 2 085 2 085
Real estate investments 13 935 21 618
Tangible and intangible assets 899 564
Godwill 0 184
Total non-current assets 16 936 24 819
Total assets 55 708 48 909
Liabilities and equity
Current liabilities
Short-term loans 23 158 18 545
Capital lease liabilities 9 74
Customer prepayments 555 357
Accounts payable 952 1 416
Personnel related liabilities 218 169
Other short-term liabilities 200 0
Interest liabilities 1 681 905
Tax liabilities 198 0
Total current liabilities 26 970 21 467
Non-current liabilities
Long-term loans 2 383 955
Other long-term liabilities 129 6
Issued bonds 4 912 4 912
Capital lease liabilities 134 349
Deferred income tax liabilities 1 716 1 728
Total non-current liabilities 9 274 7 950
Total liabilities 36 244 29 417
Equity
Mother company's shareholders' equity
Share capital 11 601 4 698
Reserves 470 470
Unrealized exchage rate differences -38 13
Retained earnings 4 511 11 197
Mother company's shareholders' equity 16 544 16 378
Minority share 2 920 3 114
Total equity 19 464 19 492
Total liabilities and equity 55 708 49 909
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Additional information:
Meelis Šokman
Chairman of the management board
Q Vara AS
Phone: 668 1600
Q Vara's financial results of the 9 months in 2007
| Source: Q Vara
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