ARCO VARA AS - NASDAQ OMX Baltic

The Group recognised an EEK 7.5 million gain from disposal of shares of subsidiary Sportings Riga
SIA by Arco Development SIA to a minority shareholder. As a result of the transaction, the Group’s
stake in Sportings SIA was not changed. Furthermore the Group accounted for EEK 3.4 million
interest income in 2006.
All the other income and expense accounts are relatively immaterial in nature.
Corporate income tax
The Group incurred a total of EEK 9.6 million worth of income tax in 2006. The majority of the tax
expense or EEK 6.0 million was attributable to income tax on the profit of Latvian and Bulgarian
subsidiaries. Furthermore EEK 3.6 million was recognised as tax on dividends.
Net profit
Net profit before minority interests for the financial year ended 31 December 2006 was EEK 217.3
million, an increase of EEK 100.9 million as compared to the previous financial year. The minority
interest from net profit in 2006 was EEK 9.4 million.
YEAR ENDED 31 DECEMBER 2005 COMPARED TO YEAR ENDED 31 DECEMBER 2004
Revenue
Consolidated revenue of the Group increased in 2005 by 36.0 per cent, EEK 126.0 million on a yearon-year
basis, reaching EEK 475.9 million. Major factors contributing to such growth were positive
developments in the construction division, considerable increase in brokerage and appraisal services
and the addition of revenues from asset management services.
There were noteworthy changes in the revenue structure of the Group in 2005. As all of the revenue
growth for 2005 originated from the construction division with absolute growth of EEK 128.7 million,
the corresponding percent of total revenue deriving from services and real estate development
divisions showed a relative decrease as a percentage of revenue. In 2005, the construction division
revenues reached EEK 175.5 million. On a year-on year basis the weight as a percentage of revenue
increased in construction division by 23.5 per cent reaching 36.9 per cent. The services division
declined to 13.6 per cent and real estate development to 49.6 per cent as percentage of revenue in
2005, contributing EEK 64.5 million and EEK 235.9 million respectively.
The revenue growth in construction stemmed both from organic growth of existing Deena Ehituse OÜ
and Tallinna Linnaehituse AS operations and the acquisition of the environmental construction
company OÜ Veemaailm Inc. The total consolidated revenue of Deena Ehituse OÜ and OÜ
Veemaailm Inc reached EEK 168.0 million in 2005, twice the revenue generated by Deena Ehituse in
2004. The Group accounted for rental and property management services revenue for the first time in
the construction division in the amount of EEK 0.3 million in 2005.
A total of EEK 64.5 million worth of revenues were generated by the services division in 2005, a
decline of 2.7 per cent as compared to the previous financial year. The relative decline in revenue does
not adequately reflect the development of the division revenues. The decline was a result of
accounting for exceptional revenues from the sale of properties in 2004 for EEK 22.2 million (EEK
0.6 million in 2005). The majority or 74.1 per cent of the division revenues are attributable to
brokerage and appraisal services with sales of EEK 47.8 million and asset management services with
revenues of EEK 9.4 million. Brokerage and appraisal services experienced considerable revenue
increases in Estonia, Latvia and Lithuania. The most aggressive growth was in Lithuania where
revenue multiplied by 3.4 times as compared to 2005. In 2005, the Explorer Property Fund – Baltic
States AB, managed by AVEC Asset Management AS (former name Arco Varavalitsemise AS),
commenced its investing activities. The new asset management service line generated a total of EEK
9.4 million in revenues in 2005. In addition to major revenue items, the Group accounted for EEK 3.8
147