Interim report
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Interim report for Q2 2026 (unaudited)) 1 INTERIM REPORT FOR THE SECOND QUARTER OF 2026 (UNAUDITED) Company name Arco Vara AS Registry number 10261718 Address Rotermanni 10, 10111 Tallinn, Republic of Estonia Telephone +372 614 4630 E-mail info@arcovara.com Corporate website www.arcovara.com Financial year 1 January 2026 – 31 December 2026 Reporting period 1 January 2026 – 30 June 2026 Supervisory board Kert Keskpaik, Tarmo Sild, Steven Yaroslav Gorelik, Hillar-Peeter Luitsalu, Allar Niinepuu Chief executive officer Rait Riim Auditor KPMG Baltics OÜ
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Interim report for Q2 2026 (unaudited)) 2 Contents Management Report ............................................................................................................ 3 Group CEO’s Review ......................................................................................................................... 3 Arco Vara's Active Projects as of 30.06.2026 ................................................................................ 7 Group structure ............................................................................................................................... 8 Key Performance Indicators ........................................................................................................... 10 People .............................................................................................................................................. 13 Description of Main Risks ............................................................................................................... 14 Shares and shareholders ................................................................................................................ 15 Share price ................................................................................................................................................. 15 Shareholder structure ............................................................................................................................. 16 CEO's Confirmation of the Management Report .......................................................................... 17 Condensed Consolidated Interim Financial Statements ................................................... 18 Consolidated Statement of Comprehensive Income ................................................................... 18 Consolidated Statement of Financial Position .............................................................................. 19 Consolidated Statement of Cash Flows ........................................................................................ 20 Consolidated Statement of Changes in Equity ............................................................................. 21 1. Significant accounting policies .......................................................................................................... 22 2. Segment information .......................................................................................................................... 22 3. Revenue ................................................................................................................................................. 23 4. Cost of sales ......................................................................................................................................... 24 5. Marketing and distribution expenses .............................................................................................. 24 6. Administrative expenses .................................................................................................................... 24 7. Finance income and costs .................................................................................................................. 25 8. Earnings per share .............................................................................................................................. 25 9. Receivables and prepayments .......................................................................................................... 25 10. Inventories .......................................................................................................................................... 26 11. Investment property .......................................................................................................................... 26 12. Interest bearing liabilities................................................................................................................. 27 13. Payables and deferred income ........................................................................................................ 28 14. Transactions and Balances with Related Parties ......................................................................... 29 Statement by the CEO/ Member of the Management Board ..................................................... 30
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Interim report for Q2 2026 (unaudited)) 3 Management Report Group CEO’s Review The second quarter of 2026 marked my first full quarter as the Chief Executive Officer of Arco Vara. Thanks to more than 20 years of experience in the real estate sector, my transition into the role has been both smooth and efficient. During the quarter, Arco Vara focused on three key priorities: • the successful completion of the ongoing development projects at Iili (form. Soodi) and Spordi; • preparations for the construction of the Lutheri Quarter and Arcojärve residential developments; and • the implementation of the Company's new long - term growth strategy. Starting with the latter, the Supervisory Board approved the new strategy developed by our management team, with the diversification of Arco Vara's product portfolio at its core. The development of comprehensive residential communities will remain the Company's primary business focus. However, we intend to complement this by developing townhouses, detached houses and residential building plots. Over the longer term, we also see opportunities in the development of build-to-rent residential properties and commercial buildings. In addition, we aim to offer products across different price segments and locations in order to better respond to market demand. Our strategic objective is to deliver at least 150 new homes to customers each year. Our development projects on Spordi Street in the Kristiine district of Tallinn and on Iili Street (formerly Soodi Street) in the Kodulahe residential quarter in Haabersti are progressing according to schedule. Completion of both developments is expected in November–December 2026. During the second quarter, we sold 19 new homes, representing one of Arco Vara's strongest quarterly sales performances in recent years. 2 countries 30+ years of experience 2800+ new homes 380 000+ developed m2 Preparatory work for our next major development projects – Lutheri Quarter and Arcojärve – is also progressing as planned. Although valid building permits already cover a substantial part of the Lutheri Quarter development, detailed technical construction designs must be completed before construction can commence. As a result, the second quar ter was largely dedicated to design work. We expect construction at Lutheri Quarter to begin in the fourth quarter of 2026. The detailed spatial planning process for Arcojärve has entered its final stage. Following the adoption of the detailed spatial plan, amendments arising from the public consultation process have been incorporated, and we expect the plan to be formally approved in the coming months. The construction designs for the first buildings have already been completed and will be submitted for building permits once the detailed spatial plan is approved. Our objective is to commence construction of the Arcojärve development during the first half of 2027. The market for new residential developments in Tallinn remains highly competitive. During the second quarter of 2026, approximately 3,200 –3,300 new apartments
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Interim report for Q2 2026 (unaudited)) 4 were available across 106 development projects, representing an increase of around 12% compared with a year earlier. The supply of new apartments continues to grow at a moderate pace. A total of 325 new apartments were sold in Tallinn during the second quarter of 2026, representing a 13% decrease compared with 373 apartments sold during the corresponding period of the previous year. Although sales volumes declined temporarily during the quarter, the longer-term trend continues to indicate gradual and stable market growth. Against this highly competitive backdrop, I am particularly pleased that Arco Vara achieved one of its strongest quarterly sales performances in recent years. The average asking price of new apartments in Tallinn reached EUR 5,329 per square metre during the second quarter of 2026, increasing by 5.6% year -on-year. Across Tallinn's districts, average asking prices ranged from approximately EUR 4,050 per square me tre in Haabersti to EUR 6,740 per square metre in Pirita, with prices continuing to show an upward trend. The continued increase in asking prices despite higher market supply is primarily driven by rising development costs. In addition to general inflation, increasingly stringent regulatory requirements are also contributing to higher construction costs. For e xample, apartment buildings for which construction commences after 1 July 2026 must include civil protection shelters. According to various estimates, this requirement is expected to increase construction costs and may raise the final selling prices of new apartments by approximately 2 – 8%. Arco Vara's second-quarter loss reflects the inherently cyclical nature of the real estate development business. During the active construction phase of development projects, costs are recognised as incurred, whereas revenue and profit are generated primarily upon project completion and the handover of completed homes to customers. As the completion of the Spordi Street and Kodulahe Iili developments is scheduled for the fourth quarter of 2026, we expect a significant increase in revenue and a substantial improvement in profitability towards the end of the year. Accordingly, we expect both the fourth quarter and the 2026 financial year as a whole to be profitable for Arco Vara. Overall, Arco Vara is well positioned to take the next important step in both growth and profitability. Our existing land bank provides a strong foundation for developing integrated residential communities, while expanding the portfolio with smaller and mo re diverse projects will strengthen business diversification and reduce dependence on the development cycle of individual large-scale projects. The implementation of strategic changes takes time, and their benefits will not materialise overnight. At the same time, it is important to recognise the cyclical nature of the real estate development business. Arco Vara's development portfolio has now rea ched a stage where the majority of projects are either under active preparation or construction. By the nature of our business model, revenue and profit are realised primarily upon project completion and the handover of homes to customers. Consequently, next year's financial performance wi ll largely depend on the sale of completed inventory, while the financial contribution from projects currently entering construction will be recognised only upon their completion. I am confident that the successful implementation of our new strategy and the launch of new development projects will begin to generate tangible benefits over the next two to three years, creating a solid foundation for Arco Vara's long - term, sustainable growth.
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Interim report for Q2 2026 (unaudited)) 5 Revenue and net profit/loss Q1 2025 Q2 2025 Q3 2025 Q4 2025 Total 2025 Q1 2026 Q2 2026 Q3 2026* Q4 2026* Total 2026* In millions of euros Revenue 1.7 1.4 2.5 2.1 7.7 0.4 4.3 2.6 23.1 30.5 Net profit/loss 0.1 -0.1 0.3 -0.7 -0.5 -0.6 -0.6 -0.3 2.6 1.2 *Forecast Current assets Inventories PPE Other Liabilities Loans Equity 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 000 Assets Liabilities and equity Balance sheet structure 30.06.2026 527 195 283 134 4 1 143 0 500 1 000 1 500 Residential units in development DP in process DP issued Construction permit Construction Completed/sale -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 -8 -4 0 4 8 12 16 20 24 Q1 2025 Q2 2025 Q3 2025 Q4 2025 Q1 2026 Q2 2026 Q3 2026 Q4 2026 In millions of euros Revenue Net profit/loss
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Interim report for Q2 2026 (unaudited)) 6 48 920 34 309 42 545 16 967 715 3 903 8 902 24 231 263 0 0 10 000 20 000 30 000 40 000 50 000 60 000 Detail plan in progress Detail plan issued Building permit available Construction In stock Development volumes (gross m²) Residential (m²) Commercial (m²) Total 149 849 m² Development schedule 2025 - 2028
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Interim report for Q2 2026 (unaudited)) 7 Arco Vara's Active Projects as of 30.06.2026 Project name Kodulahe Rannakalda Address Lammi 8, Tallinn Product main type Apartments, commercial spaces Project stage Sale Area of plot m2 9,525 GSA/GLA (above ground) 1,960 No of units (above ground)/ available 113/4 Project name Botanica Lozen Stage I Address Lozen, near Sofia Product main type Houses Project stage Construction Area of plot m2 20,190 GSA/GLA (above ground) 5,485 No of units (above ground)/ available 16/0 Project name Kuldlehe Address Lehiku road 11, Tallinn Product main type Apartments Project stage Sale Area of plot m2 5,219 GSA/GLA (above ground) 558 No of units (above ground)/ available 5/1 Project name Stage VI Kodulahe Address Soodi 6, Tallinn Product main type Apartments, commercial spaces Project stage Construction Area of plot m2 5,444 GSA/GLA (above ground) 4,543 No of units (above ground)/available 66/29 Project name Spordi 3a, 3b Address Spordi 3a, 3b, Tallinn Product main type Apartments Project stage Construction Area of plot m2 5,566 GSA/GLA (above ground) 4,312 No of units (above ground)/available 56/32 Project name Arcojärve Address Paldiski road 124b, Tallinn Product main type Apartments, commercial spaces Project stage Detail plan in process Area of plot m2 69,506 GSA/GLA (above ground) <35,529> No of units (above ground) <382> Note: Values presented between < > sign represent future target values for projects which do not have a construction permit yet. Th e table does not reflect sellable or lettable volumes below grade including parking spaces and storages. The table does not give complete overview of the group’s land reserves.
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Interim report for Q2 2026 (unaudited)) 8 Arco Vara's Active Projects as of 30.06.2026 Project name Stage VII Kodulahe Address Lammi 6, Tallinn Product main type Apartments, commercial spaces Project stage Detail plan in process Area of plot m2 14,553 GSA/GLA (above ground) <12,327> No of units (above ground) <182> Project name Stage II and Stage III Botanica Lozen Address Lozen, near Sofia Product main type Houses Project stage Detail plan issued Area of plot m2 27,260 GSA/GLA (above ground) <11,309> No of units (above ground) <155> Project name Padel venue Address Helme 18, Tallinn Product main type Sports hall Project stage On rent Area of plot m2 5,712 GSA/GLA (above ground) 1,983 No of units (above ground)/ available 1/0 Project name Stage I-IV Luther Quarter Address Luther Quarter, Tallinn Product main type Apartments, commercial spaces Project stage I-III Building permit issued, IV Detail plan in process Area of plot m2 35,660 GSA/GLA (above ground) <51,577> No of units (above ground) <512> Note: Values presented between < > sign represent future target values for projects which do not have a construction permit yet. Th e table does not reflect sellable or lettable volumes below grade including parking spaces and storages. The table does not give complete overview of the group’s land reserves.
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Interim report for Q2 2026 (unaudited)) 9 Group structure Arco Vara AS is part of the OÜ Alarmo Kapital group. As of 30 June 2026, the Group consisted of 22 companies. Significant subsidiaries as of 30.06.2026 Company name Location Share capital (nominal value) Equity on 30.06.2026 Group's shareholding in € thousands in € thousands Kodulahe Kvartal OÜ Estonia 140 4 555 100% Kerberon OÜ Estonia 5 1 744 100% Arcojärve OÜ Estonia 28 531 100% Kodukalda OÜ Estonia 3 -405 100% Arco Tarc OÜ Estonia 3 959 100% Arco L Torn OÜ Estonia 3 -261 100% Arco Spordi OÜ Estonia 3 378 100% Arco L Torn II OÜ Estonia 3 438 100% Arco L Factory OÜ Estonia 3 423 100% Botanica Lozen EOOD Bulgaria 8 700 6 318 75%
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Interim report for Q2 2026 (unaudited)) 10 Key Performance Indicators The Group's revenue for the first six months of 2026 amounted to EUR 4,319 thousand, representing an increase of EUR 1,2 26 thousand compared with the first six months of 2025. For the first six months of 2026, the Group reported an operating loss (EBIT) of EUR 1,193 thousand and a net loss of EUR 1,142 thousand. In the first six months of 2025, the Group generated an operating profit of EUR 265 thousand and a net loss of EUR 43 thousand. During the second quarter of 2026, the Group sold 19 apartments in its development projects, of which 16 were sold under preliminary sale and purchase agreements and 3 under real right contracts. By comparison, in the second quarter of 2025, the Group sold 6 apartments, of which 1 was sold under a preliminary sale and purchase agreement and 5 under real right contracts. As of 30 June 2026, the Group had 65 apartments and 1 commercial unit available for sale across its development projects. As of 30 June 2025, the Group had 19 completed apartments and 1 commercial unit in inventory. As of the end of the first half of 2026, the Group's net debt amounted to EUR 45,218 thousand, an increase of EUR 11,957 thousand compared with the end of the corresponding period of the previous year. The increase in net debt was primarily attributable to the utilisation of development loans to finance the construction of the Group's ongoing real estate development projects. As of 30 J une 2026, the weighted average interest rate on the Group's interest-bearing liabilities was 8.77%. Key performance indicators 6 months 2026 6 months 2025 In thousands of euros Revenue 4 319 3 093 Operating profit/loss -1 205 265 Finance income and costs 202 0 Interest income and costs -151 -295 Income tax 0 -13 Net profit/loss -1 154 -43 Cash flows from operating activities -9 561 Cash flows from investing activities 0 Cash flows from financing activities 8 847 Net cash flow -714 Cash and cash equivalents at the beginning of period 2 784 1 472 Cash and cash equivalents at end of period 2 070 1 388 Total assets at end of period 89 591 79 046 Net debt at end of period 45 218 33 261 Equity at end of period 37 409 36 363 * Comparative cash flow information is not presented due to a change in methodology (from the direct method to the indirect method) and is therefore not comparable with prior periods. Cash flow data for 2025 is presented in the report for the respective period.
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Interim report for Q2 2026 (unaudited)) 11 Key Ratios 30 June 2026 30 June 2025 Net profit ratio (rolling, four quarters) -17.08% 0.26% EPS (in euros) -0.03 -0.01 Diluted EPS (in euros) -0.03 -0.01 EBITDA per share (in euros) (rolling, four quarters) -0.07 0.04 ROIC (rolling, four quarters) -1.83% 0.19% ROE (rolling, four quarters) -4.32% 0.09% ROA (rolling, four quarters) -1.76% 0.04% Equity ratio 0.42 0.47 Current ratio 10.19 10.17 Quick ratio 0.41 0.96 Financial leverage 2.39 2.13 Average loan term (in years) 1.00 2.31 Average annual interest rate of loans 8.77% 9.07% Number of staff, at period end 15 11 Formulas used: Net profit ratio = net profit attributable to owners of the parent / revenue for the period Earnings per share (EPS) = net profit attributable to owners of the parent / weighted average number of ordinary shares outstanding during the period Diluted earnings per share (Diluted EPS) = net profit attributable to owners of the parent / (weighted average number of ordinary shares outstanding during the period + number of all potentially issued shares) EBITDA per share = operating profit + depreciation and amortization / weighted average number of ordinary shares outstanding during the period Invested capital = current + non-current interest-bearing loans and borrowings + equity (at the end of period) Net loans = current + non-current interest-bearing loans and borrowings – cash and cash equivalents Return on invested capital (ROIC) = profit before tax of last four quarters / average invested capital Return on equity (ROE) = net profit of last four quarters / average equity Return on assets (ROA) = net profit of last four quarters / average total assets Equity ratio = equity / total assets Current ratio = current assets / current liabilities Quick ratio = (current assets - inventory) / current liabilities Financial leverage = total assets / equity Number of staff = number of people working for the group under employment or service contracts
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Interim report for Q2 2026 (unaudited)) 12 Operating report The Group's revenue for the second quarter of 2026 amounted to EUR 3,929 thousand (Q2 2025: EUR 1,264 thousand), of which EUR 3,794 thousand (Q2 2025: EUR 1,264 thousand) was generated from the sale of real estate in the Group's own development projects. Other revenue mainly comprises franchise fee income from the Group's real estate agencies in Estonia, Latvia and Bulgaria. Franchise fee income amounted to EUR 81 thousand in the second quarter of 2026 (Q2 2025: EUR 79 thousand). Estonian Development Projects Kodulahe Quarter – Iili 6/8/10 (formerly Soodi 6 ) The seventh stage of the Kodulahe Quarter is approaching completion. The three apartment buildings have been fully constructed, and the focus of construction has shifted to interior finishing works and the installation of technical systems. Completion is scheduled for autumn 2026, with th e execution of final sale and purchase agreements expected to commence in November – December. Sales performance has been strong: by the date of publication of this interim report, 36 apartments and all four commercial units had been pre-sold. Kodulahe Quarter – Rannakalda Following the reporting period, the final commercial unit (the pavilion) in the Rannakalda development was sold. By the date of publication of this interim report, only three larger four- and five-room apartments remained available for sale. Kuldlehe At the boutique residential development in Pirita, only one of the five exclusive homes remains available for sale. Spordi 3a and 3b The Spordi development continues to progress steadily towards completion. Construction has reached the interior finishing stage, and the buildings are scheduled for completion in autumn 2026. Sales activity remains stable and, by the date of publication of this inte rim report, 33 of the 56 apartments remained available for sale. Arcojärve Preparations for the Arcojärve development project are nearing completion. Approval of the detailed spatial plan is expected in August 2026, and the majority of the design work has now been completed. The Company aims to obtain the building permit by the end of 2026 and commence construction at the beginning of 2027. Luther Quarter During the reporting period, active design work and preparations for the commencement of construction continued at the Luther Quarter development. At the same time, registration of prospective customers and preparations for pre -sales are continuing to supp ort the launch of public sales in autumn/winter 2026. Construction is scheduled to commence during the second half of 2026. Bulgarian Development Projects During the second quarter of 2026, the Group successfully completed the sale of a 25% ownership interest in Botanica Lozen EOOD. Cooperation with the new partner has started very well, and the development of the project continues in line with the planned schedule. All 16 houses in the first stage of the Botanica Lozen development have been sold. By the date of publication of this interim report, 15 houses had been handed over to customers, with the final handover scheduled for the third quarter of 2026. Preparations for the second stage are progressing in parallel. The next stage will comprise detached houses, townhouses and a smaller apartment building. Other Following the reporting period, Arco Vara AS sold the Helme 18 padel centre in Tallinn. The transaction value, including VAT, amounted to EUR 2.88 million and exceeded the carrying amount of the asset. The transaction is consistent with the Company's strategy of focusing on residential real estate development. The capital released from the sale will primarily be used to finance the Luther Quarter and Arcojärve development projects.
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Interim report for Q2 2026 (unaudited)) 13 People Remuneration As of 30 June 2026, the Group employed 15 people, unchanged from 31 December 2025, when the Group also employed 15 people. Personnel expenses for the first half of 2026 amounted to EUR 517 thousand, compared with EUR 324 thousand in the corresponding period of 2025. These personnel expenses also include the remuneration of the construction team, which is capitalised as part of the cost of development projects under construction and recognised as an expense through the cost of apartments sold. Personnel expenses include remuneration accrued to the Chief Executive Officer of the parent company, including social tax, amounting to EUR 229 thousand for the first six months of 2026, of which EUR 171 thousand was recognised in the second quarter (first six months of 2025: EUR 117 thousand, of which EUR 59 thousand was recognised in the second quarter). During the first six months of 2026, remuneration paid to the members of the Supervisory Board, including social tax, totalled EUR 61 thousand, of which EUR 34 thousand was recognised in the second quarter. In the first six months of 2025, remuneration accrued to the Supervisory Board totalled EUR 18 thousand, of which EUR 13 thousand related to the second quarter. Management board and Supervisory board The Management Board of Arco Vara AS customarily consists of a single member. Since 1 April 2026, Rait Riim has served as the Chief Executive Officer and sole member of the Management Board. His term of office is three years. The Supervisory Board of Arco Vara AS consists of five members. Since 12 January 2021, the Supervisory Board has comprised Kert Keskpaik (Chairman of the Supervisory Board), Tarmo Sild, Hillar -Peeter Luitsalu, Allar Niinepuu, and Steven Yaroslav Gorelik. In the second quarter of 2025, the General Meeting of Shareholders extended the terms of office of the Supervisory Board members for a further five years. The General Meeting also approved remuneration of EUR 5 thousand per month (net) for the Chairman of the Supervisory Board and EUR 500 (net) per meeting for each ordinary member of the Supervisory Board. Further information about the key management personnel of Arco Vara is available on the Company's website at www.arcovara.com.
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Interim report for Q2 2026 (unaudited)) 14 Description of Main Risks Strategic risk The majority of the Group’s equity is allocated to development activities, with a primary focus on residential real estate development. The residential development cycle, from land acquisition to the final sale of completed units to end customers, spans several years and includes planning, design, construction, and sales. Equity is primarily invested at the beginning of the cycle (land acquisition), based on the assumption that there will be future demand for a certain type of development product. Since thi s demand is largely based on forecasts, the Group’s main risk lies in allocating equity to a development project for which future demand may not materialize or may differ from expectations. To mitigate this risk, the Group: (i) allocates equity across various development projects and markets (2025: Tallinn and Sofia), (ii) continuously monitors supply and demand in its core markets, and (iii) seeks to minimize the time gap between investment and demand by entering into pre - agreements with buyers, acquiring land without immediate equity investment or by deferring such investment, and utilizing alternative project financing solutions to reduce reliance on equity. Credit risk The Group considers its credit risks to be largely mitigated. Since the final sale of development products almost always coincides with customer payment, customer-related receivables rarely arise in practice. Additionally, the Group does not keep its cash and cash equivalents in a single bank. Currency risk Real estate purchase and sale transactions are predominantly concluded in euros, which means the Group’s asset and liability structure carries no significant foreign exchange risk. However, the Group is not protected against currency devaluation. The majority of liquid assets are held in demand deposits or short -term euro-denominated deposits and current accounts. Liquidity and interest rate risks All of the Group's loan agreements are denominated in euros, and the majority of its borrowings are linked to the six-month EURIBOR. Consequently, the Group is exposed to developments in the international capital markets. The Group has not hedged its long -term interest rate risk using derivative instruments. As of 30 June 2026, the Group's interest-bearing liabilities amounted to EUR 4 7,228 thousand, of which EUR 4,070 thousand is due within the next 12 months. During the first six months of 2026, the Group's interest -bearing liabilities increased by EUR 6,825 thousand compared with 31 December 2025. The Group's cash and cash equivalents amounted to EUR 2,070 thousand as of 30 June 2026 (31 December 2025: EUR 2,784 thousand). During the second quarter of 2026, the Group paid EUR 1 504 thousand in interest on its interest-bearing liabilities (Q2 2025: EUR 509 thousand). A portion of the interest expense was capitalised, while the remainder was recognised as an expense in the statement of profit or loss. As of 30 June 2026, the weighted average interest rate on the Group's loans wa s 8.77%, representing a decrease of 0. 13 percentage points compared with the end of 2025. In the third quarter of 2025, Arco Vara AS completed a EUR 15 million bond issue, consisting of 150,000 bonds with a nominal value of EUR 100 each, bearing an interest rate of 8.8% and maturing on 24 September 2028. Since 25 September 2025, Arco Vara's bon ds have been listed on the Nasdaq Tallinn Baltic Bond List.
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Interim report for Q2 2026 (unaudited)) 15 Shares and shareholders Share price Arco Vara AS has 17,368,367 ordinary shares in issue, each with a nominal value of EUR 0.70. The Company's shares (ticker: ARC1T, ISIN: EE3100034653) are freely traded on the Nasdaq Tallinn Stock Exchange. As of 30 June 2026, the share price closed at EUR 1.270, compared with EUR 1.660 at the end of 2025. During the second quarter of 2026, the share traded between a high of EUR 1.350 and a low of EUR 1.300. Equity per share amounted to EUR 2.06 as of 30 June 2026, compared with EUR 2.09 as of 31 December 2025. As of 30 June 2026, the Company's market capitalisation amounted to EUR 22,058 thousand, and the price -to- book (P/B) ratio was 0.7 0 (31 December 2025: EUR 28,831 thousand and 0.79, respectively). The charts below illustrate the share price performance and trading volumes of Arco Vara AS over the second quarter. of 2026 and the last three years. Source: https://www.nasdaqbaltic.com/statistics/et/instrument/EE3100034653/trading 30.06.2026
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Interim report for Q2 2026 (unaudited)) 16 Shareholder structure As of 30 June 2026, Arco Vara had a total of 6,980 shareholders (31 December 2025: 7,239), including 6,427 individual shareholders (31 December 2025: 6,660), who collectively held a 10.6% ownership interest in the Company (31 December 2025: 10.5%). The distribution of the Company's ownership by shareholder category is presented in the charts below. Ownership structure as of 30.06.2026 Ownership structure as of 31.12.2025 Major shareholders on 3 0 June 2026 Name No of shares Share, % OÜ ALARMO KAPITAL 9 163 104 52.76% LUTHER FACTORY OÜ 1 618 926 9.32% LUTHER FACTORY HOLDING OÜ 1 570 001 9.04% PEEDA OÜ 668 644 3.85% TEMM CAPITAL OÜ 342 949 1.97% FIREBIRD REPUBLICS FUND LTD 1 329 357 1.90% AIA TÄNAV OÜ 229 000 1.32% MARKO TEIMANN 200 029 1.15% Total 14 122 010 81.31% Holdings of management and supervisory board members on 3 0 June 2026 Name No of shares Share, % Tarmo Sild ja Allar Niinepuu (Alarmo Kapital OÜ) Members of the Supervisory board 9 163 104 52.76% Tarmo Sild (Individual and via Aia Tänav OÜ) Member of the Supervisory board 229 000 1.32% Kert Keskpaik (Individual and via K Vara OÜ) Chairman of the Supervisory board 213 771 1.23% Hillar-Peeter Luitsalu (HM Investeeringud OÜ, lähikondsed) Member of the Supervisory board 114 517 0.66% Allar Niinepuu (OÜ Kavass) Member of the Supervisory board 29 288 0.17% Steven Yaroslav Gorelik1 Member of the Supervisory board 0 0.00% Rait Riim Member of the Management board 0 0.00% Total 9 749 680 56.13% 1 Steven Yaroslav Gorelik is active as fund manager in three investment funds holding interest in Arco Vara: Firebird Republics Fund Ltd. Firebird Avrora Fund Ltd and Firebird Fund L.P. Other companies 84.2% Funds 3.7% Banks and nominee accounts 1.5% Individuals 10.6% Other companies 84.5% Funds 3.7% Banks and nominee accounts 1.4% Individuals 10.5%
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Interim report for Q2 2026 (unaudited)) 17 CEO's Confirmation of the Management Report The Chief Executive Officer and Member of the Management Board confirms that the Management Report for the second quarter of 2026 of Arco Vara AS presents a true and fair view of Arco Vara AS as the issuer and of the companies included in the consolidation group as a whole, their business development, financial performance and financial position, and includes a description of the principal risks and uncertainties. Rait Riim Chief Executive and Member of the Management Board of Arco Vara AS 30 July 2026
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Interim report for Q2 2026 (unaudited)) 18 Condensed Consolidated Interim Financial Statements Consolidated Statement of Comprehensive Income Note 6 months 2026 6 months 2025 Q2 2026 Q2 2025 In thousands of euros Revenue from sale of own real estate 4 064 2 853 3 794 1 264 Revenue from rendering of services 255 240 135 123 Total revenue 2.3 4 319 3 093 3 929 1 387 Cost of sales 4 -4 039 -2 069 -3 714 -961 Gross profit 280 1 025 215 426 Other income 90 1 2 0 Marketing and distribution expenses 5 -219 -193 -95 -125 Administrative expenses 6 -1 035 -562 -595 -293 Other expenses -321 -4 -249 -4 Operating profit/loss -1 205 265 -721 5 Finance income and costs 7 202 0 213 0 Interest income and costs 7 -151 -295 -66 -152 Profit/loss before tax -1 154 -30 -575 -147 Income tax 0 -13 0 0 Total comprehensive income/expense for the period -1 154 -43 -575 -146 attributable to owners of the parent -1 129 -43 -550 -146 attributable to non-controlling interests -25 0 -25 0 Earnings per share (in euros) 8 - basic -0.07 0.00 -0.03 -0.01 - diluted -0.07 0.00 -0.03 -0.01
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Interim report for Q2 2026 (unaudited)) 19 Consolidated Statement of Financial Position Note 30 June 2026 31 December 2025 In thousands of euros Cash and cash equivalents 2 070 2 784 Receivables and prepayments 9 1 381 6 420 Inventories 10 83 275 74 127 Total current assets 86 726 83 331 Receivables and prepayments 9 18 18 Investment property 11 2 296 2 296 Property, plant and equipment 2 521 551 Intangible assets 2 31 41 Total non-current assets 2 866 2 905 TOTAL ASSETS 89 591 86 236 Loans and borrowings 12 4 070 4 180 Payables and deferred income 13 4 171 8 560 Provisions 270 347 Total current liabilities 8 511 13 087 Loans and borrowings 12 43 218 36 283 Payables and deferred income 453 503 Total non-current liabilities 43 671 36 786 TOTAL LIABILITIES 52 182 49 873 Share capital 12 158 12 158 Additional paid-in capital 16 399 16 399 Statutory capital reserve 2 011 2 011 Other reserves 8 51 28 Retained earnings 5 767 6 593 Total Comprehensive Income for the Reporting Period -1 154 -826 Total equity attributable to owners of the parent 35 232 36 363 Non-controlling interest (Minority interest) 2 177 0 TOTAL EQUITY 37 409 36 363 TOTAL LIABILITIES AND EQUITY 89 591 86 236
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Interim report for Q2 2026 (unaudited)) 20 Consolidated Statement of Cash Flows Note 6 months 2026 Q2 2026 In thousands of euros Cash flows from operating activities Operating profit/(loss) -1 205 -721 Adjustments: Depreciation and impairment of property, plant and equipment 24 12 Change in receivables and prepayments 9 5 040 5 587 Change in inventories 10 -9 148 -4 490 Change in trade payables and deferred income 13 -4 491 -6 644 Net cash flows from operating activities -9 561 -6 036 Cash flows from investing activities Payments for acquisition of tangible and intangible assets -13 -10 Interest received 13 6 Net cash flows from investing activities 0 -3 Cash flows from financing activities Proceeds from borrowings 12 11 089 6 430 Repayments of borrowings 12 -4 260 -3 506 Interest paid -181 -79 Proceeds from the sale of own shares 2 200 2 200 Net cash flows from financing activities 8 847 5 045 Net cash flow -714 -995 Cash and cash equivalents at the beginning of the period 2 784 3 065 Change in cash and cash equivalents -714 -995 Cash and cash equivalents at the end of the period 2 070 2 070 As of 2026, the Group prepares its statement of cash flows using the indirect method, whereas in previous periods the direct method was applied. Due to the change in methodology, cash flows for the reporting period are not comparable with those of prior pe riods. Accordingly, comparative cash flow information for 2025 is not presented. For cash flow information for 2025, please refer to the report published for the respective period.
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Interim report for Q2 2026 (unaudited)) 21 Consolidated Statement of Changes in Equity Share capital Share premium Statutory capital reserve Other reserves Retained earnings Non- controlling interest Total equity In thousands of euros Balance as at 31 December 2024 7 272 3 835 2 011 28 6 593 0 19 739 Increase of share capital 4 886 12 564 0 0 0 0 17 450 Total comprehensive income for the period 0 0 0 0 -43 0 -43 Balance as at 30 June 2025 12 158 16 399 2 011 28 6 551 0 37 146 Balance as at 31 December 2025 12 158 16 399 2 011 28 5 767 0 36 363 Change in non-controlling interest 0 0 0 0 0 2 200 2 200 Total comprehensive income for the period 0 0 0 0 -1 129 -25 -1 154 Balance as at 30 June 2026 12 158 16 399 2 011 28 4 639 2 175 37 409
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Interim report for Q2 2026 (unaudited)) 22 Notes to the Condensed Interim Financial Statements 1. Significant accounting policies The unaudited consolidated interim financial report of Arco Vara AS for Q 2 2026 has been prepared in accordance with the International Financial Reporting Standard IAS 34 "Interim Financial Reporting". The condensed consolidated interim report is intended to be read in conjunction with the audited consolidated financial statements for the year ended 31 December 2025, which were prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union. The Group’s interim financial report is presented in thousands of euros, unless otherwise stated. 2. Segment information The Group analyses its segments based on a combination of two characteristics: business activity and geographical location. The three main reportable segments are Bulgarian Development, Estonian Development, and Estonian Construction. Revenue by operating segment 6 months 2026 6 months 2025 Q2 2026 Q2 2025 In thousands of euros Estonia Development 1 196 2 853 922 1 264 Other 243 240 127 123 Total revenue 1 439 3 093 1 049 1 387 Bulgaria Development 2 880 0 2 880 0 Total revenue 2 880 0 2 880 0 Group total Development 4 076 2 853 3 802 1 264 Construction 0 0 0 0 Other 243 240 127 123 Total revenue 4 319 3 093 3 929 1 387
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Interim report for Q2 2026 (unaudited)) 23 Revenue by operating segment 6 months 2026 6 months 2025 Q2 2026 Q2 2025 In thousands of euros Estonia Revenue 1 439 3 093 1 049 1 387 Operating profit/loss -977 396 -607 75 Net profit/loss -1 094 86 -664 -52 Bulgaria Revenue 2 880 0 2 880 0 Operating profit/loss -228 -139 -114 -73 Net profit/loss -59 -135 89 -97 Latvia Operating profit/loss 0 8 0 3 Net profit/loss 0 7 0 3 Group total Revenue 4 319 3 093 3 929 1 387 Operating profit/loss -1 205 265 -721 5 Net profit/loss -1 154 -43 3 208 -146 3. Revenue External revenue by the type of goods and services and by client location 6 months 2026 6 months 2025 Q2 2026 Q2 2025 In thousands of euros Estonia Sale of own real estate 1 184 2 853 914 1 264 Rental of real estate 102 88 53 44 Franchise 95 88 49 46 Other revenue 1 8 1 0 Total revenue 1 381 3 037 1 017 1 354 Bulgaria Sale of own real estate 2 880 0 2 880 0 Franchise 43 41 25 26 Total revenue 2 923 41 2 905 26 Latvia Franchise 15 15 8 8 Total revenue 15 15 8 8 Group total Sale of own real estate 4 064 2 853 3 794 1 264 Rental of real estate 102 88 53 44 Franchise 153 144 81 79 Other revenue 1 8 1 0 Total revenue 4 319 3 093 3 929 1 387
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Interim report for Q2 2026 (unaudited)) 24 4. Cost of sales 6 months 2026 6 months 2025 Q2 2026 Q2 2025 In thousands of euros Cost of real estate sold (notes 10, 11) -3 798 -1 895 -3 568 -861 Brokerage fees -114 -28 -74 -17 Property management costs -54 -73 -23 -42 Vehicle expenses -1 -9 0 -8 Personnel expenses 0 -7 0 0 Other costs -71 -57 -48 -34 Total cost of sales -4 039 -2 069 -3 714 -961 5. Marketing and distribution expenses 6 months 2026 6 months 2025 Q2 2026 Q2 2025 In thousands of euros Advertising expenses -171 -70 -71 -47 Personnel expenses -41 -55 -20 -31 Depreciation, amortisation and impairment losses -7 -5 -3 -2 Other marketing and distribution expenses 0 -64 0 -44 Total marketing and distribution expenses -219 -193 -95 -125 6. Administrative expenses 6 months 2026 6 months 2025 Q2 2026 Q2 2025 In thousands of euros Personnel expenses -476 -324 -288 -171 Personnel related expenses -44 0 -33 0 Office expenses -112 -43 -54 -25 IT expenses -33 -15 -16 -7 Services purchased -173 -110 -110 -56 Depreciation, amortisation and impairment losses -17 -46 -9 -23 Legal service fees -76 -9 -63 -4 Owner-related and listing expenses -22 0 -11 0 Other expenses -83 -14 -11 -7 Total administrative expenses -1 035 -562 -595 -293
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Interim report for Q2 2026 (unaudited)) 25 7. Finance income and costs 6 months 2026 6 months 2025 Q2 2026 Q2 2025 In thousands of euros Interest expenses -164 -277 -72 -130 Interest income 13 9 6 2 Other finance income and costs 202 -27 213 -24 Total finance income and costs 51 -295 146 -152 8. Earnings per share Basic earnings per share are calculated by dividing the net profit for the reporting period by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share are calculated by taking into account all potentially issuable shares. 6 months 2026 6 months 2025 Q2 2026 Q2 2025 Weighted average number of ordinary shares outstanding during the period 17 368 367 10 388 367 17 368 367 10 388 367 Number of ordinary shares potentially to be issued (at period end) 0 63 000 0 63 000 Net profit/loss attributable to owners of the parent (in thousands of euros) -1 154 -43 -575 -146 Earnings per share (in euros) -0.07 0.00 -0.03 -0.01 Diluted earnings per share (in euros) -0.07 0.00 -0.03 -0.01 Under the 2023 bonus program, the former CEO who departed in 2024 is entitled to 15,000 shares based on tenure. A reserve of 27 thousand euros has been recognized in equity for these options, based on the grant date share price as of 17 May 2023. 9. Receivables and prepayments Short-term receivables and prepayments 30 June 2026 31 December 2025 In thousands of euros Receivables from customers 111 163 Miscellaneous receivables 0 6 Prepaid and recoverable taxes 386 637 Other accrued income 10 -2 Prepayments 873 5 617 Total short-term receivables and prepayments 1 381 6 420 As of 31 December 2025, a prepayment of 4,977 thousand euros has been made for the Arcojärve property. Long-term receivables 30 June 2026 31 December 2025 In thousands of euros Prepayments 18 18 Total long-term receivables and prepayments 18 18
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Interim report for Q2 2026 (unaudited)) 26 10. Inventories Properties purchased and being developed for resale 30 June 2026 31 December 2025 In thousands of euros Properties in stock 1 641 2 520 Properties under construction 23 469 22 396 Properties with a building permit 38 765 37 087 Properties in the construction permit process 2 971 2 971 Properties in the detailed planning process 16 429 9 152 Total inventories 83 275 74 127 2026 2025 In thousands of euros Balance at the beginning of period, 1 January 74 127 29 170 Properties purchased for development 6 610 39 272 Construction costs of apartment buildings 6 686 248 Capitalized borrowing costs 1 951 388 Other capitalized costs -2 371 1 759 Cost of sold properties (note 4) -3 729 -1 906 Balance at the end of period, 30 June 83 275 68 930 11. Investment property 2026 2025 In thousands of euros Balance at the beginning of period, 1 January 2 296 2 296 Capitalised development costs 0 0 Reclassification to/from inventories (note 10) 0 0 Balance at the end of period, 30 June 2 296 2 296
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Interim report for Q2 2026 (unaudited)) 27 12. Interest bearing liabilities As of 30 June 2026 As of 31 December 2025 Total of which current portion of which non- current portion Total of which current portion of which non- current portion In thousands of euros Bank loans 28 357 41 28 316 21 529 122 21 407 Bonds 18 892 4 000 14 892 18 866 4 000 14 866 Finance lease liabilities 39 29 10 68 58 10 Total 47 288 4 070 43 218 40 463 4 180 36 283 During the first half of 2026, the Group repaid EUR 2,172 thousand of borrowings through cash transactions (first half of 2025: EUR 14,763 thousand) and obtained new borrowings totalling EUR 7,405 thousand (first half of 2025: EUR 36,378 thousand). In addition, during the first six months of 2026, purchasers made direct repayments to the banks amounting to EUR 512 thousand (first six months of 2025: EUR 2,565 thousand). These payments are not reflected in the Group's statement of cash flows. During the first six months of 2026, the following borrowings were repaid: EUR 1,593 thousand of the bank loan financing the construction of the Botanica Lozen residential development project in Bulgaria; EUR 2,088 thousand relating to the repayment of the loan associated with the Arco L Torn development project; EUR 512 thousand of the bank loan financing the construction of the Kodulahe Rannakalda apartment development; EUR 46 thousand of the bank loan financing the acquisition of land for Kodulahe Stage VII (Lammi 6); EUR 22 thousand of the development loan related to the padel centre; and EUR 29 thousand relating to capitalised office lease liabilities. During the first six months of 2026, the Group entered into the following new borrowings: EUR 2,689 thousand under the development loan for the Spordi 3a/3b residential development project; EUR 4,668 thousand under the development loan for Kodulahe Stage VI (Iili 6/8/10). During the first six months of 2025, the following borrowings were repaid: EUR 2,861 thousand under the bank loan financing the construction of the Kodulahe Rannakalda apartment development, of which EUR 2,565 thousand was repaid directly by purchasers to the bank; EUR 39 thousand under the bank loan financing the acquisition of land for Kodulahe Stage VII (Lammi 6); EUR 2,000 thousand under a short-term bank loan obtained to finance the Lutheri Quarter acquisition; EUR 12,000 thousand under a short-term loan obtained to finance the Lutheri Quarter acquisition; and EUR 29 thousand relating to capitalised office lease liabilities. During the first six months of 2025, the Group entered into the following new borrowings: EUR 900 thousand under the bank loan financing the Kodulahe Rannakalda apartment development; EUR 2,190 thousand under the land acquisition loan for the Spordi 3a and 3b development project; EUR 2,000 thousand under a short-term bank loan obtained to finance the Lutheri Quarter acquisition; EUR 12,000 thousand under a short-term loan obtained to finance the Lutheri Quarter acquisition; EUR 17,700 thousand under the bank loan financing the Lutheri development project; and EUR 1,582 thousand under the bank loan financing the construction of the Botanica Lozen residential development project in Bulgaria.
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Interim report for Q2 2026 (unaudited)) 28 13. Payables and deferred income Short-term payables and deferred income 30 June 2026 31 December 2025 In thousands of euros Trade payables 1 256 3 217 Miscellaneous payables 631 809 Taxes payable Value added tax -750 0 Corporate income tax -3 0 Social security tax 58 55 Personal income tax 68 59 Other taxes 8 6 Total taxes payable -618 120 Accrued expenses Payables to employees 119 206 Other accrued expenses 0 192 Total accrued expenses 119 397 Deferred income Prepayments received on sale of real estate 2 783 4 016 Total deferred income 2 783 4 016 Total short-term payables and deferred income 4 171 8 560 As of 31 December 2025, trade payables included a higher-than-usual balance payable to the contractor for the scheduled construction works of the Botanica Lozen development. Customer advances received for the Botanica Lozen development amounted to EUR 597 thousand as of 30 June 2026, compared with EUR 3,376 thousand as of 31 December 2025. In addition, customer advances received for the I ili 6/8/10 (form. Soodi 6) development amounted to EUR 1,590 thousand as of 30 June 2026, compared with EUR 522 thousand as of 31 December 2025. Customer advances received for the Spordi 3a/3b development amounted to EUR 592 thousand as of 30 June 2026, compared with EUR 241 thousand as of 31 December 2025. No customer advances had been received for either the Kuldlehe or the Lutheri developments as of 30 June 2026 or 31 December 2025. Long-term payables 30 June 2026 31 December 2025 In thousands of euros Other long-term payables 453 503 Total long-term payables 453 503
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Interim report for Q2 2026 (unaudited)) 29 14. Transactions and Balances with Related Parties The Group has conducted transactions with or holds balances involving the following related parties: 1) The parent company OÜ Alarmo Kapital and companies controlled by the Management Board and Supervisory Board members of Arco Vara AS that have controlling influence over the Group’s parent company; 2) Other related parties, including members of the Management Board and Supervisory Board of Arco Vara AS, as well as companies under their control (excluding those with controlling influence over the Group’s parent company). Transactions with related parties 6 months 2026 6 months 2025 In thousands of euros Other related parties Services purchased 35 96 Paid interest 25 8 Balances with related parties 30 June 2026 31 December 2025 In thousands of euros Other related parties Long-term liabilities 453 503 Bonds issued 510 540 Remuneration accrued to the Chief Executive Officer of the parent company, including social tax, amounted to EUR 228 thousand during the first six months of 2026 (first six months of 2025: EUR 117 thousand). Remuneration accrued to the members of the Supervisory Board, including social tax, amounted to EUR 61 thousand during the first six months of 2026 (first six months of 2025: EUR 18 thousand). The Chief Executive Officer's remuneration is based on the Management Board member's service agreement. Under the Management Board service agreement of Rait Riim, Chief Executive Officer of Arco Vara AS, the Supervisory Board has approved a fixed monthly remuneration of EUR 15.5 thousand (gross). In the event of termination of the service agreement, the Chief Executive Officer is entitled to a severance payment equivalent to four months' remuneration. Members of the Supervisory Board are entitled to EUR 500 (net) for each meeting attended, up to a maximum of EUR 1,000 (net) per calendar month. Payment is conditional upon the Supervisory Board member signing the minutes of the respective meeting. Supervisory Board members are also reimbursed for reasonable travel expenses incurred in connection with attending Supervisory Board meetings. The Chairman of the Supervisory Board receives an additional fixed remuneration of EUR 5 thousand (net) per month.
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Interim report for Q2 2026 (unaudited)) 30 Statement by the CEO/ Member of the Management Board The CEO / member of the management board of Arco Vara AS has prepared Arco Vara AS’s condensed consolidated interim financial statements for the first quarter ended on 30 June 2026. The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and they give a true and fair view of the financial position, financial performance and cash flows of Arco Vara AS. Arco Vara AS is a going concern. Rait Riim Chief Executive and Member of the Management Board of Arco Vara AS 30 July 2026