TIDMEBP
RNS Number : 5158G
East Balkan Properties PLC
13 May 2011
EAST BALKAN PROPERTIES plc
FULL YEAR RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2010
East Balkan Properties Plc ("EBP" / "Company" / "Group"),
formerly Equest Balkan Properties Plc, an Isle of Man registered
company for commercial property investments in the Balkan region,
announces today its final results for the year ended 31 December
2010.
Highlights for Year 2010
Financial
-- Net Asset Value per share of Euro 0.36, a decrease of 14.3%
(2009: Euro 0.42)
-- Full year pre-tax loss of Euro 14.7 million (2009: pre-tax
loss of Euro 64.7 million)
-- Total assets of Euro 89.4 million (2009: Euro 187.1
million)
-- Total net debt of Euro 31.7 million (2009: Euro 106.2
million). Gearing ratio of 38% on total equity of Euro
51.0 million (2009: 65% gearing on Euro 58.2 million)
-- Net rental income of Euro 4.3 million (2009: Euro 6.2
million)
-- Group cash balance of Euro 3.3 million (2009: Euro 6.5
million)
-- Euro 1.4 million net cash recovered in June 2010 from sale of
mixed use land assemblage (Apollo project)
in Belgrade
Operational
-- Disposal of 51% of Vitantis Shopping Center and Moldova Mall
at year-end
-- Completion of debt restructuring with all major creditors,
involving Euro 90.8 million in mortgage debt
-- Completed cost reduction exercise resulting in savings of
nearly Euro 1.0 million per annum
-- Strategy in progress for recovery and realisation of value
from the Company's portfolio
Commenting on the results, James Ede-Golightly, Non-executive
Chairman of EBP, said:
"In 2010 EBP reduced the scale of its activities through the
disposal of indebted assets which were of minimal value to
shareholders yet costly in cash terms to support. The Company also
simplified its operations and cut costs. These measures have helped
to strengthen the balance sheet and to sustain the working capital
position. The market remained depressed and the operating
performance of the assets was mixed, resulting in a modest decline
in valuations over the year.
With a more cost effective structure and a strengthened balance
sheet in place, the focus is now on maximizing operational
performance and exploiting opportunities to realize value from each
of the Company's assets."
For further information please contact:
East Balkan Properties:
Graham Smith
Tel: +44 1624 681 250
Michael Uhler
Tel: +49 172 183 3194
Arbuthnot Securities:
Hugh Field
Tel: +44 20 7012 2000
CHAIRMAN'S STATEMENT
Introduction
In December 2005 EBP joined the AIM market, raising GBP 140
million to invest in commercial property in South Eastern Europe.
In July 2008 the shareholders passed an EGM to implement a revised
strategy that is focused on realizing value, primarily via the
disposal of its investment and development properties. Since 2008,
EBP has rationalised, stabilised, and simplified its corporate
structure and property holdings while reducing dramatically the
administrative cost base. Even so, the combined impact of negative
market conditions, leverage, and high running costs has resulted in
shareholder equity declining 75% from its peak.
The table below summarizes our results:
Total
Liabilities
Attributable as % of
Total Shareholder Total
Date Assets Equity Assets
----------------- -------- ------------- -------------
30(th) June
2008 EUR430m EUR203m 53%
31(st) December
2008 EUR273m EUR132m 52%
30(th) June
2009 EUR190m EUR55m 71%
31(st) December
2009 EUR187m EUR58m 69%
30(th) June
2010 EUR156m EUR57m 63%
31(st) December
2010 EUR89m EUR51m 43%
----------------- -------- ------------- -------------
The key development in 2010 has been to reduce balance sheet
leverage through the disposal of marginal assets with significant
debt and high holding costs and of minimal expected value to
shareholders. Over 2010 EBP has become smaller, with total assets
falling from Euro 187 million to Euro 89 million and has lowered
the ratio of total liabilities to total assets from 69% to 43%.
Following this rationalisation, EBP's portfolio (not including
cash deposits and other working capital in the holding companies)
as at 31 December 2010 can be summarised as follows:
NAV
Project Use Country Ownership contribution
--------------- ------------- -------------- ---------- --------------
Glorient 13 Land/ 35
1 Portfolio Retail Bulgaria 40% EUR35.4m
Equest
2 Logistics 3 Warehouses Romania 100% EUR7.8m
Domenii /
3 Cartex 4 Offices Romania 100% -EUR3.3m
6 Land / 2
4 Other Retail Mostly Serbia Various EUR8.5m
--------------- ------------- -------------- ---------- --------------
Outlook
The cost reduction measures together with elimination of asset
management fees at Vitantis and Moldova Mall were fully effective
only from the beginning of 2011, and will result in a further
reduction in costs in 2011. While some incremental savings are
expected during the year, the cost base is now consistent with the
minimal requirements of the Company to manage the assets and
operate as a public company.
With new service providers and a leaner operating structure in
place the focus is now on ensuring that the underlying assets are
performing as well as possible given the environment, and
identifying opportunities to realise value for shareholder on a
timely basis.
With respect to our financing, we should meet all interest
obligations. We will need to rely on negotiated financial covenant
testing moratoriums to avoid technical breaches, especially for the
LTV test ratios.
Glorient
Glorient's current NAV contribution to the Group is Euro 35.4
million. The portfolio consists of 35 lease contracts on retail
stores at 22 locations plus 13 plots of development land of which 5
are at shell and core status awaiting leasing. All the assets are
in Bulgaria.
At year end 2010, the Glorient portfolio was valued by CBRE at
Euro 107.5 million using a net initial yield of 9.5% on net income
of Euro 9.7 million. EBP recognised a Euro 4.2 million contribution
to its result from Glorient through associate income though no
interest or cash dividends have been received from this holding.
The portfolio carries a mortgage debt of only Euro 22.5 million
that is amortizing rapidly. The Board sees the prospects of a
distribution from refinancing proceeds if a sale at a reasonable
threshold cannot be negotiated with our partner or a third
party.
The table below shows the major tenants in the Glorient
portfolio. Nearly all leases were signed for an original 10 year
term. At 31 December 2010, the weighted average lease duration for
the Technomarket stores was 6.2 years at an average rent of Euro
4.95 per sqm per month.
No of Total Percent
Tenant Name Stores Area (m(2)) Rent Roll WAL
----------------------------- -------- ------------- ----------- ----
Technomarket 20 89,539 60% 6.2
Other TM Related Properties 4 23,434 14% 5.6
Billa / Praktiker /
Baumax, et al 11 34,433 26% 7.5
Total 35 147,406 100%
At Glorient, no covenants are in breach though the high
amortization obligation means nearly all cash flow is required for
debt service. EBP has never received a dividend on this
investment.
Discussions with our majority partner and other interested
parties regarding the disposal of this investment have continued.
The funding environment in the region remains challenging and the
board can only progress negotiations after prospective purchasers
demonstrate the acceptable level of funding certainty.
Equest Logistics
Equest Logistics property contributes Euro 7.8 million to Group
NAV. This investment consists of three modern logistics warehouses
with 56,630 sqm of premises of which 14% is for office use. These
buildings are situated in the Bucharest West industrial park along
the A1 highway near Bucharest.
The facilities contain 40 warehouse bays of which 30 are now
leased. We let 3 bays in 2010 and a further 3 bays so far in 2011,
but lost 3 tenants due to their financial problems during the same
period. Our largest tenants are DOMO (Romania) with 8 bays and DHL
with 6 bays. Overall occupancy stands at 68% due to low demand for
the office premises.
This investment has met all debt service obligations and
financial covenants thresholds since construction on Building 3 was
completed in March 2009. Surplus cash flow for fund level expenses
is also a contributor to liquidity.
Recent approaches by brokers support our belief that strong
investor interest in the sector belies the lack of sales activity
and that yields may become more favourable than the 11% used by
CBRE in our most recent valuation. Even so, to maximize equity
recovery, the board favours a sale upon stabilized occupancy if
this can be achieved in the near future.
Office Portfolio
This portfolio of four Class A and B office buildings, most with
on-site parking, has been held as a "core holding" since the May
2008 strategic review. The buildings have achieved near 90% overall
occupancy, in part due to several leases at Casa Mosilor in the
post period. We let floors 1 to 7 in just 3 months and should see a
return of positive cash flow starting in June 2011.
In 2011, we expect rental income to be stable and
non-recoverable service charges to be minimal. Meeting debt service
obligations should also be easier in 2011 since Deutsche
Pfandbriefbank AG cancelled the outstanding swap contract in March
2011. Even so, the surplus cash flow is blocked for Group purposes
by the lender to provide additional collateral.
The valuation of the office portfolio fell below the value of
the debt at year end, resulting in a negative contribution to NAV.
We continue to hold the assets as we see signs of improved activity
in the office market and anticipate valuation uplift in 2011 as a
consequence of recent lettings. Unlike the retail portfolio, the
assets are substantially self-funding resulting in minimal cost of
continued ownership.
Other Assets
The remaining assets are miscellaneous land holdings and two
small retail shops. Collectively, the assets contribute Euro 8.5
million to Group NAV. We have been marketing most of these assets
for sale, though to date no credible offers have been sourced.
Market demand for land and shop premises is currently low due to
market conditions. The sales efforts are also complicated by
continuing disputes with our former partners though we hope for
resolution of the remaining issues in 2011.
-- Ploesti, a 39,200 square meter (sqm) site, is part of a
larger assemblage for which development plans have been suspended.
Once valued at about Euro 154 per square meter, the site is being
marketed for sale at Euro 70 per square meter.
-- Simanovci, a 310,900 sqm (76.8 acre) parcel surrounded by
rural farmland located west of Belgrade, beyond the airport. Access
and visibility are good, but this area has not developed as a
logistics submarket.
-- Plot 34, a corner position retail site measuring 5,500 sqm
with flat topography situated along a major arterial roadway in New
Belgrade. The site is suitable for a small retail and office scheme
and is being marketed for sale at Euro 1.6 million.
-- Eurosalon, a 33,700 sqm (8.3 acre) retail site in Zemun, a
northern suburb of Belgrade, for big box retail use.
-- Krusevac is 1,600 sqm of retail premises in a small retail
building anchored by a supermarket. The local population is ca 140k
residents and the town is 100 km south of Belgrade toward Nis. The
store was leased to Technomarket Serbia for ca Euro 200k per year,
but following rent arrears exceeding Euro 350k, the lease was
terminated. Collections efforts are underway.
-- Bratislava is a 26,700 sqm site adjacent to a Carrefour
anchored shopping center which is suitable for up to 7,000 sqm of
retail premises.
-- Kosice is an 8,600 sqm outparcel contiguous to a Carrefour
anchored shopping center which can be improved with a 3,630 sqm
retail building. This corner location site has excellent visibility
and Kosice is Slovakia's second largest city so we expect demand to
return when the market recovers.
-- Krasovskaya Str is a 520 sqm retail store along a busy
arterial route in Bratislava. The shop is leased to
Technomarket.
Disposals
In June 2010 the sale of the Apollo project was completed. The
project was a large land assemblage in Old Belgrade at a famous
cultural landmark that would have required over Euro 100 million in
financing for construction to begin. The board decided to sell
because the annual interest burden exceeded total Group resources
and obtaining building permits and construction financing was
increasingly unlikely. We recovered Euro 1.4 million in cash and
successfully unloaded Euro 20.8 million of related mortgage
debt.
In June and December 2009, and March 2010, the Group signed
restructuring agreements ending the joint ventures Archway and
Aurora, which once consisted of twelve development properties in
Serbia. We sold our interests in 8 assets, including the only
completed development in New Belgrade, and obtained 100% ownership
in 4 properties.
On 31 December 2010, EBP sold 51% of its interest in Balkan
Properties Cooperatief UA, which through its subsidiaries is the
owner of Vitantis and Moldova Mall, to Denesol Ltd for the nominal
amount of Euro 5, while retaining a 49% interest. Although legal
completion of the sale took place only after the year-end, the sale
has been accounted for in 2010, as described in Note 1(d).
The assets had been held at close to zero contribution to Group
NAV since June 2010 interim results. Despite a vigorous operational
focus, at revised forecast performance levels, the Board could not
find an economic rationale to maintain ownership of either Vitantis
or Moldova Mall.
Excluding the profit realised on the sale, the assets
contributed a loss of Euro 22.4 million (including the fair value
adjustments) to the consolidated loss for the year. At 31 December
2010, CBRE valued Vitantis and Moldova Mall at Euro 30.9 million
and Euro 7.4 million, respectively, against debt levels of Euro
42.9 million and Euro 13.0 million. After adding in working
capital, the combined net assets amounted to negative Euro 16.1
million, and consequently this amount is also the profit realised
on disposal. NOI forecasts for 2011 are Euro 2.5 million and Euro
0.7 million. Even with cap rate compression, the probability of
values exceeding debt levels was judged unlikely. Given that the
administrative costs which could not be recovered from the SPV's
cash flows also exceeded Euro 0.35 per annum, the Board's decision
to exit was unanimous
Further details on the sales of subsidiaries and associates are
disclosed in Notes 1(d), 5, 15 and 26 in the financial
statements.
Financial Results
NAV is Euro 0.36 per share, down from Euro 0.42 per share at 31
December 2009.
In the twelve months to 31 December 2010 the Company made a pre
tax loss of Euro 14.7 million (31 December 2009: pre-tax loss Euro
64.7 million), including a revaluation loss of Euro 30.7 million
(31 December 2009: revaluation loss Euro 47.8 million) equating to
a basic loss per share of Euro 0.11 (31 December 2009: loss per
share Euro 0.45).
Costs & Liquidity
Cost cutting efforts have yielded good results and we now
believe we are now on track to hold central administrative
expenses, including asset management fees, to under Euro 1.2
million per annum.
Excluding bad debts, administrative costs fell to Euro 2.354
million (2009: Euro 6.054 million) and within 2010 costs fell from
Euro 1.6 million in the first half to Euro 1.4 million in the
second half. In the interim 2010 results, we announced numerous
cost reduction initiatives. The benefits began to accumulate in
earnest since November 2010. Additional savings related to the
disposal of 51% of our interest in the Romanian shopping malls were
only effective after the end of the financial period.
While some further incremental savings, such as audit costs, are
expected to flow through from the simplification of the Group, the
potential for additional savings are limited given the capabilities
required to manage the assets and Group structure effectively as
well as the costs associated with a quotation on AIM.
At the asset level, the Company has systematically reviewed all
property service contracts and was able to negotiate improvements
in contract terms that have helped reduce service charges for
tenants and has reduced non-recoverable expenses. In October 2010,
we transferred asset management responsibilities for our Serbian
assets to NAI Atrium.
While the Group continues to be loss making at the Group level,
most of the local companies are expected to return to nominal
profitability in 2011 due to lower finance costs, improved levels
of rental income and improved cost structures.
Financing
In 2010, we restructured our debt facilities with UniCredit Bank
Austria and UniCredit Tiriac Bank on Vitantis and Moldova Mall and
negotiated financial covenant moratoriums with Deutsche
Pfandbriefbank, lender to Domenii and Cartex. Our facility with
Raiffeisen Bank for ELC remains unproblematic. RZB granted some
minor modifications on the financial covenants in exchange for a
minor margin increase. Despite some challenges, we met all interest
and amortization payment obligations in all facilities throughout
the year (and the post period). While the banking environment
remains difficult, we can report significant progress in
stabilizing our debt obligations.
Going Concern
The Group continues to adopt a going concern basis for the
preparation of these financial statements.
The Directors believe the Group will be able to manage its
business risks for the foreseeable future despite continued
challenging economic conditions. After making enquiries and
examining major areas which could give rise to significant
financial exposures, the Board has a reasonable expectation that
the Company and the Group have adequate resources to continue their
operations. The Group has primarily mortgage debt facilities
secured at the local company level and without any performance or
payment guarantees from the Group. In the event of a financing
default, each lender only has recourse to the local company
borrower and cannot seek recourse from the Company. In a distress
situation, to limit the financial damage to the Group,
underperforming assets could be released back to the appropriate
lender, or sold for a nominal value, as was the case with Vitantis
and Moldova Mall.
With respect to the Company's cash position, the Board has a
reasonable expectation that sufficient liquidity will be available
to meet ongoing expenses from a combination of existing cash
reserves, net sales proceeds arising from the disposal program, and
cash flow from normal operations.
Please refer to Note 1 (c) for a full disclosure of the
uncertainties and mitigating factors considered by the Directors
before concluding that the Group shall continue to adopt a going
concern basis for the preparation of the financial statements.
Financial Statements
Please refer to the accompanying financial statements and the
Notes for the details on the financial position of the Group. In
addition, we provide an analysis of the Group's objectives and
policies for managing its capital, its debt facilities and hedging
positions, and its exposure to credit and liquidity risk.
James Ede-Golightly
Non-executive Chairman
12 May 2011
DIRECTORS' REPORT
The Directors of the Company present their report and financial
statements for the year ended 31 December 2010.
Principal Activity and Incorporation
The Company is a closed-end investment company, incorporated on
4 November 2005 in the Isle of Man. The Company's ordinary shares
were admitted to trading on 14 December 2005 on the AIM Market as
operated by the London Stock Exchange Group Plc.
Investment Policy
At the EGM in July 2008, shareholders voted to adopt an
investment policy as follows:
-- The Company may invest in a portfolio of real estate assets
in the commercial, retail and industrial property sectors within
the target region of the Balkans, principally limited to Romania,
Bulgaria and Serbia.
-- It intends to hold 100% ownership in the majority of its
investments, or a significant minority position where it may exert
significant control. The Company may make single investments that
represent (by gross value) more than 25% of the Company's total
gross assets.
-- There is no limit on the level of borrowing that the Company
may take on, but will exercise prudent judgement of the portfolio's
ability to service debt and honour lending covenants.
-- The Company intends to dispose of the majority of its
existing investment and development properties to realise the value
in such holdings, and focus on a much reduced number of development
opportunities within the target region. Disposal of its investments
will take place as and when the local market conditions permit.
-- The Company will seek to return capital to shareholders as
and when disposals create sufficient liquidity, subject to the
requirements of a prudent capital management policy.
Results and Dividends
The Group's results for the year ended 31 December 2010 are set
out in the Consolidated Statement of Comprehensive Income on page
11.
A review of the Group's activities is contained within the
Chairman's Statement on page 2.
No dividend has been declared for the year ended 31 December
2010 (2009: nil).
Directors
The current Directors, all of whom are non-executive, and those
who held office throughout the year are as below:
Name Date of Appointment Date of Resignation
---------------------------------- -------------------- --------------------
Donald Lake (Chairman) 30 July 2007 30 June 2010
James Ede-Golightly (Chairman 9 November 2009
from 30 June 2010)
Robin James 10 November 24 June 2010
2005
Charles Jillings 4 April 2008
Graham Smith 12 October 2009
Pradeep Verma 12 October 2009
Graham Smith, Pradeep Verma, and James Ede-Golightly were
re-appointed at the AGM on 24 June 2010.
Each of the directors received remuneration at the rate of
EUR30,000 per annum, except for the Chairman who received EUR40,000
per annum. In addition to their fixed annual remuneration (prorated
to June 2010), Donald Lake and Robin James received further
compensation of EUR19,178 and EUR17,500 respectively, for
additional services.
Governance
Although the Company is not obliged by the listing rules to do
so, the Board intends, where appropriate for a Company of its size,
to comply with the main provisions of the principles of good
governance and code of best practice set out in the Combined Code
('the Code').
The Directors recognise the value of the Principles of Good
Governance and Code of Best Practice as set out in the Combined
Code and they will take appropriate measures to ensure that the
Company complies with the Combined Code to the extent appropriate
taking into account the size of the Company and the nature of its
business.
Responsibilities of the Board
The Board of Directors is responsible for the determination of
the investment policy of the Company and for its overall
supervision via the investment policy and objectives that it has
set out. The Board is also responsible for the Company's day-to-day
operations; however, since the Board members are all non-executive,
in order to fulfil these obligations, the Board has delegated
operations through arrangements with local third party property
managers and with external consultants.
At each of the quarterly Board meetings, the financial
performance of the Company is reviewed. In addition, a committee of
the Board meets monthly to receive regular reports from the
managers and consultants. The materials discussed include the
valuation of the Company's assets, asset and fund level operational
performance reports, compliance and shareholders reports, and
management accounts.
Company Secretary
The secretary of the Company at the 2010 financial year end and
as at the date of this report is Philip Scales.
Directors' Interests in Shares of the Company
Save as disclosed below none of the Directors nor any member of
their respective immediate families nor any person connected with
the Directors had any interest, whether beneficial or
non-beneficial, in any share capital of the Company.
Number of
Ordinary Percentage
Name Shares Shareholding
--------------------- ---------- --------------
James Ede-Golightly 40,000 0.03%
Pradeep Verma was employed by Carrousel Capital as a consultant
until March 2010, and so had an indirect interest in the Company
from the date of his appointment to March 2010, as a result of
Carrousel's shareholding of 20,382,917 ordinary shares (14.56%) in
the Company.
James Ede-Golightly is a director of ORA Capital Partners Ltd.,
and has an indirect interest in the Company through OCS Trading
Limited, a subsidiary of ORA Capital Partners Ltd., which owns
24,220,000 million shares in the Company (representing 17.30% of
its share capital).
Share Capital
As at the date of this report, the Company has 140,000,000
ordinary shares of Euro 0.01 each in issue. The Company's ordinary
shares are traded on AIM, a market operated by the London Stock
Exchange plc in Pound Sterling. However the Company's reporting
currency is the Euro to reflect the underlying assets and
liabilities in the Balkan region.
At the 2010 Annual General Meeting of the Company, the Company's
shareholders approved a resolution to permit the Board of Directors
to undertake market purchases of the Company's own shares up to a
maximum number of 21,000,000 ordinary shares (representing 15
percent of the Company's issued share capital) at a minimum price
of Euro 0.01 per ordinary share and a maximum price per ordinary
share equal to 105 percent of the average of the mid-market
quotation for an ordinary share as derived from the Daily Official
List of the London Stock Exchange plc for the five business days
immediately proceeding the day on which the ordinary shares are
contracted to be purchased. As at the date of this report, no
ordinary shares have been bought back under this authority and at
present the Company does not hold any ordinary shares in treasury.
The above authority remains valid until the conclusion of the 2011
Annual General Meeting unless renewed prior to such time.
Substantial Shareholdings
In so far as is known to the Company each of the following
persons has at the date of this report, directly or indirectly, an
interest in 3% or more of the issued ordinary shares in the capital
of the Company:
Percentage
Name Shareholding
-------------------------- --------------
Utilico Emerging Markets
Limited 23.1%
OCS Trading Limited 17.3%
Carrousel Capital 14.5%
UNIQA Financial Services 9.7%
Weiss Capital 6.0%
Carmignac Gestion 5.1%
Barnard Nominees Limited 4.2%
Share Options
The Company does not operate any employee share option schemes
and no options to subscribe for ordinary shares in the Company have
been granted.
Audit Committee
The audit committee, which comprises James Ede-Golightly,
Charles Jillings and Pradeep Verma, meets at least twice each year.
The committee monitors the integrity of the financial statements of
the Company and any formal announcements relating to the Company's
financial performance. It also reviews regular reports from
management and the external auditors on accounting and internal
control matters. Where appropriate, the committee monitors the
progress of action taken in relation to such matters.
The audit committee also recommends the appointment of and
reviews the fees and performance of the external auditors.
Auditors
A resolution will be submitted to the forthcoming Annual General
Meeting of the Company to re-appoint Grant Thornton as auditor of
the Company and Group for the ensuing year.
Company Website
To provide a portal for investor information and in accordance
with the requirements of AIM, the Company maintains a website at:
www.ebp-plc.com
By order of the Board,
Graham Smith
Director
12 May 2011
Statement of Directors' responsibilities in respect of the
Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRS). Under company law the directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the group
and parent company and of their profit or loss for that period.
In preparing those financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and estimates that are reasonable and
prudent;
-- state whether applicable IFRS have been followed, subject to
any material departures disclosed and explained in the financial
statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group will continue
in business.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and the group and to enable them
to ensure that the financial statements comply with the Isle of Man
Companies Acts 1931-2004. They are also responsible for
safeguarding the assets of the Company and the group and hence for
taking reasonable steps for the prevention and detection of fraud
and other irregularities.
In so far as the directors are aware:
-- there is no relevant audit information of which the Company's
auditors are unaware; and
-- the directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditors are aware of that
information.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the Isle of Man governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
To the best of our knowledge:
-- The financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
-- The Chairman's statement includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
Graham Smith
Director
12 May 2011
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF EAST BALKAN
PROPERTIES PLC
We have audited the Group and Parent Company financial
statements of East Balkan Properties Plc for the year ended 31
December 2010, which comprise the Consolidated Statement of
Comprehensive Income on page 11, Consolidated and Company Statement
of Financial Position on page 12, the Consolidated Statement of
Changes in Equity on page 13, the Consolidated and Company Cash
Flow Statements on page 14, and the related accounting policies and
Notes on pages 15 to 37]. The financial reporting framework that
has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRS) (as adopted by
the European Union).
This report is made solely to the Company's members, as a body,
in accordance with Section 15 of the Companies Act 1982. Our audit
work has been undertaken so that we might state to the Company's
members those matters we are required to state to them in an
auditors' report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities
As explained more fully in the directors' responsibilities
statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
Ethical Standards for Auditors.
Scope of the audit
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are fee from
material misstatement, whether caused by fraud or error. This
includes an assessment of whether the accounting policies are
appropriate to the Group and Company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and the
overall presentation of the financial statements.
Opinion
In our opinion the financial statements:
-- give a true and fair view of the Group and Company's affairs
as at 31 December 2010 and of the Group's loss for the year then
ended;
-- have been properly prepared in accordance with IFRS as
adopted by the European Union; and
-- have been properly prepared in accordance with the
requirements of the Isle of Man Companies Acts 1931 to 2004.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Isle of Man Companies Acts 1931 to 2004 require us to
report to you if, in our opinion:
-- proper books of account have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the financial statements are not in agreement with the
accounting records and returns; or
-- certain disclosures of directors' remuneration specified by
law are not made; or
-- we have not received all the information and explanations we
require for our audit.
Grant Thornton
Chartered Accountants
3rd Floor, Exchange House
54-58 Athol Street
Douglas, Isle of Man IM1 1JD
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
Notes 31 December 2010 31 December 2009
EUR'000 EUR'000
Revenue 9,352 12,953
Property operating expenses (5,038) (6,769)
------------------------------ ------ ------------------ ------------------
Net rental and related income 4 4,314 6,184
------------------------------ ------ ------------------ ------------------
Net loss from fair value
adjustment on property
assets 10,12 (30,729) (47,818)
Share of profit/(loss) from
associate 15 4,207 (8,158)
Profit on sale of a
subsidiary 5 10,387 7,371
Impairment of goodwill and
acquired building rights 11 - (1,148)
Administrative expenses 6 (2,812) (9,129)
------------------------------ ------ ------------------ ------------------
Operating loss (14,633) (52,698)
------------------------------ ------ ------------------ ------------------
Finance income 7 21,558 589
Finance costs 7 (21,624) (12,590)
------------------------------ ------ ------------------ ------------------
(66) (12,001)
Loss before tax (14,699) (64,699)
------------------------------ ------ ------------------ ------------------
Income tax (expense)/credit 8 (785) 1,884
------------------------------ ------ ------------------ ------------------
Loss for the year (15,484) (62,815)
------------------------------ ------ ------------------ ------------------
Other comprehensive
income/(expense)
Fair value movement on
development property - (1,007)
Realisation of reserves on
sale of subsidiary 7,116 3,936
Exchange differences on
translating foreign
operations 1,170 (8,694)
Share of other comprehensive
income of associates - (1,327)
Reclassification of
investment - (3,383)
Other comprehensive
income/(expense) for the
year 8,286 (10,475)
------------------------------ ------ ------------------ ------------------
Total comprehensive expense
for the year (7,198) (73,290)
------------------------------ ------ ------------------ ------------------
Loss attributable to
Owners of the parent (15,484) (62,872)
Non-controlling interests - 57
------------------------------ ------ ------------------ ------------------
(15,484) (62,815)
------------------------------ ------ ------------------ ------------------
Total comprehensive expense
attributable to
Owners of the parent (7,198) (70,457)
Non-controlling interests - (2,833)
------------------------------ ------ ------------------ ------------------
(7,198) (73,290)
------------------------------ ------ ------------------ ------------------
Loss per share - basic and
diluted 9 (0.11) (0.45)
------------------------------ ------ ------------------ ------------------
The Notes below are an integral part of these financial
statements.
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
Group 31 Group 31 Company 31 Company 31
December December December December
Notes 2010 2009 2010 2009
EUR'000 EUR'000 EUR'000 EUR'000
ASSETS
Non-current
assets
Investment
property 10 40,885 112,390 - -
Development
property 12 1,960 24,502 - -
Other
property,
plant and
equipment 13 2 302 - -
Investment in
subsidiaries 14 - - 29,379 47,379
Investment in
associates 15 24,498 20,836 - -
Loans and
receivables 14,15 11,925 11,519 20,635 13,840
Deferred
income tax
assets 16 - 810 - -
79,270 170,359 50,014 61,219
-------------- ------ ------------ ------------ ------------ ------------
Current
assets
Loan
receivables 17 - 600 - 600
Trade and
other
receivables 17 3,402 5,444 16 31
Inventory -
Land held
for sale 18 3,400 4,194 - -
Cash and cash
equivalents 3,285 6,543 1,237 4,033
10,087 16,781 1,253 4,664
-------------- ------ ------------ ------------ ------------ ------------
Total assets 89,357 187,140 51,267 65,883
-------------- ------ ------------ ------------ ------------ ------------
EQUITY
Share capital 24 1,400 1,400 1,400 1,400
Retained
earnings 59,167 74,651 49,727 64,122
Translation
reserve (9,303) (17,589) - -
Revaluation
reserve (238) (238) - -
-------------- ------ ------------ ------------ ------------ ------------
Total equity 51,026 58,224 51,127 65,522
-------------- ------ ------------ ------------ ------------ ------------
Liabilities
Non-current
liabilities
Bank
borrowings 19 32,666 34,129 - -
Deposits 243 250 - -
Other long
term loans 20 1,489 1,677 - -
Other
non-current
liabilities - 2,315 - 24
34,398 38,371 - 24
-------------- ------ ------------ ------------ ------------ ------------
Current
liabilities
Trade and
other
payables 21 2,227 8,491 140 337
Interest
rates swaps 22 876 5,074 - -
Bank
borrowings 19 830 76,779 - -
Other short
term loans 20 - 201 - -
3,933 90,545 140 337
-------------- ------ ------------ ------------ ------------ ------------
Total
liabilities 38,331 128,916 140 361
-------------- ------ ------------ ------------ ------------ ------------
Total equity
and
liabilities 89,357 187,140 51,267 65,883
-------------- ------ ------------ ------------ ------------ ------------
The financial statements were approved and authorised for issue
by the Board of Directors on 12 May 2011 and were signed on their
behalf by:
James Ede-Golightly Graham Smith
Chairman Director
The Notes below are an integral part of these financial
statements.
STATEMENT OF CHANGES IN EQUITY
Total equity
attributable
to the
equity
holders of
Share Retained Translation the parent Non-controlling Total
Capital Earnings Reserve company interests Equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
GROUP
Balance at 1
January 2009 1,400 139,676 (12,395) 128,681 2,833 131,514
------------------- -------- ---------- ------------ ------------- ---------------- ----------
Loss for the year - (62,872) - (62,872) 57 (62,815)
Other
comprehensive
income /
(expense)
Fair value
movement on
development
property - (1,007) - (1,007) - (1,007)
Realisation of
reserves on sale
of subsidiary - - 3,936 3,936 - 3,936
Exchange
differences on
translating
foreign
operations - (57) (9,130) (9,187) 493 (8,694)
Share of other
comprehensive
income of
associates - (1,327) - (1,327) - (1,327)
Reclassification
of investment - - - - (3,383) (3,383)
Total
comprehensive
(expense) - (65,263) (5,194) (70,457) (2,833) (73,290)
Balance at 31
December 2009 1,400 74,413 (17,589) 58,224 - 58,224
------------------- -------- ---------- ------------ ------------- ---------------- ----------
Loss for the year - (15,484) - (15,484) - (15,484)
Other
comprehensive
income
Realisation of
reserves on sale
of subsidiary - - 7,116 7,116 - 7,116
Exchange
differences on
translating
foreign
operations - - 1,170 1,170 - 1,170
Share of other
comprehensive
income of
associates - - - - - -
Total
comprehensive
income/(expenses) - (15,484) 8,286 (7,198) - (7,198)
Balance at 31
December 2010 1,400 58,929 (9,303) 51,026 - 51,026
------------------- -------- ---------- ------------ ------------- ---------------- ----------
COMPANY
Balance at 1
January 2009 1,400 180,453 - 181,853 - 181,853
------------------- -------- ---------- ------------ ------------- ---------------- ----------
Loss for the year - (116,331) - (116,331) - (116,331)
Balance at 31
December 2009 1,400 64,122 - 65,522 - 65,522
------------------- -------- ---------- ------------ ------------- ---------------- ----------
Loss for the year - (14,395) - (14,395) - (14,395)
Balance at 31
December 2010 1,400 49,727 - 51,127 - 51,127
------------------- -------- ---------- ------------ ------------- ---------------- ----------
The Notes below are an integral part of these financial
statements.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
Group 31 Group 31 Company 31 Company
December December December 31 December
2010 2009 2010 2009
EUR'000 EUR'000 EUR'000 EUR'000
Loss for the year
before tax (14,699) (64,699) (14,395) (116,331)
--------------------- ------------ ------------ ------------ -------------
Adjustments for:
- share of
(profit)/loss in
associate (4,207) 8,158 - -
- net loss from fair
value adjustment on
property assets 30,729 47,571 - -
- finance income (21,558) (588) (4,655) (8,692)
- finance costs 17,082 7,695 - -
- foreign exchange
loss 5,153 2,019 - -
- profit on sale of
subsidiaries (10,387) (7,371) - -
- depreciation of
property, plant and
equipment 68 64 - -
- impairment of
acquired building
rights - 1,151 - -
- impairment of
loans/ investments - 2,313 18,000 122,518
- fair value
movement on
interest rate
swaps (611) 3,075 - -
Changes in working
capital:
- decrease in
receivables (169) 576 15 520
- increase in
payables (471) (697) (392) (61)
Cash inflow /
(outflow) from
operation 930 (733) (1,427) (2,046)
--------------------- ------------ ------------ ------------ -------------
Finance costs paid (5,480) (6,218) - (74)
Tax paid 25 9 - -
Net cash outflow
from operating
activities (4,525) (6,942) (1,427) (2,120)
--------------------- ------------ ------------ ------------ -------------
Cash flow from
investing
activities
Capital contribution
from associate - 6,555 - -
Additions to
investment property - (2,414) - -
Proceeds on sale of
investment
property 1,400 5,972 1,049 -
Additions to
development
property - (1,600) - -
Purchase of other
property, plant and
equipment (25) (178) - -
Loans advanced to
subsidiaries - - (2,418) (6,484)
Loans repaid by
subsidiaries - - - 10,260
Acquisition of
subsidiaries, net
of cash acquired 588 - - 9,383
Net cash flows
attributable to sold
subsidiaries (970) - - -
Interest received 30 547 - -
--------------------- ------------ ------------ ------------ -------------
Net cash inflow
/(outflow) from
investing
activities 1,023 8,882 (1,369) 13,159
--------------------- ------------ ------------ ------------ -------------
Cash flows from
financing
activities
Repayment of
borrowings (1,248) (14,404) - (10,049)
Proceeds from
borrowing and other
loans 5,118 3,500 - -
SWAP settlements (3,628) - - -
--------------------- ------------ ------------ ------------ -------------
Net cash (outflow) /
inflow from
financing
activities 242 (10,904) - (10,049)
--------------------- ------------ ------------ ------------ -------------
Net
(decrease)/increase
in cash & cash
equivalents (3,260) (8,964) (2,796) 990
--------------------- ------------ ------------ ------------ -------------
Cash & cash
equivalents at
beginning of year 6,543 15,530 4,033 3,043
Foreign exchange
gains/(losses) on
cash and cash
equivalents 2 (23) - -
--------------------- ------------ ------------ ------------ -------------
Cash & cash
equivalents at end
of year 3,285 6,543 1,237 4,033
--------------------- ------------ ------------ ------------ -------------
The Notes below are an integral part of these financial
statements.
STATEMENT OF ACCOUNTING POLICIES
For the year ended 31 December 2010
General information
East Balkan Properties plc ("the Company") and its subsidiaries
(together "the Group") are a property group with a portfolio of
development property and investment property assets in South East
Europe.
The principal accounting policies are set out below.
Basis of preparation
These financial statements have been prepared in accordance with
the Isle of Man Companies Acts 1931-2004, International Financial
Reporting Standards ("IFRS") and IFRIC interpretations as adopted
by the European Union. The consolidated financial statements have
been prepared on a going concern basis and on a historical cost
basis as amended by the revaluation of investment property,
development property and financial assets and financial liabilities
at fair value through profit or loss. Comparative information for
the Group and Company financial statements is presented for the
year ended 31 December 2009.
In accordance with the provisions of Section 3 of the Isle of
Man Companies Act 1982, no separate income statement has been
presented for the Company. The amount of the Company's loss for the
year recognised in the Statement of Comprehensive Income is
EUR14,395,000 (2009: loss EUR116,331,000).
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgment or complexity, or areas where assumptions
and estimates are significant to the financial statements are
disclosed in Note 1.
Specifically, the Directors have prepared the consolidated
financial statements on a going concern basis. This is a key
judgement of the Board, and is discussed further in Note 1(c).
In preparing the Group financial statements for the current
year, the Group has adopted the following new IFRS amendments to
IFRS and IFRIC interpretations which have not had a significant
impact on the results or net assets of the Group:
- Amendment to IAS 27 Consolidated and Separate Financial
Statements, effective from 1st July 2009. These changes relate to
the attributing of losses to a non controlling interest and the
accounting for a loss of control in a subsidiary. The adoption of
the amendments to IAS 27 has had no impact on the results or net
assets of the Group.
- Amendments to IFRS 3 Business Combinations, effective for
business combinations for which the acquisition date is on or after
the beginning of the first annual reporting period beginning on or
after 1st July 2009. The amendments revise the approach on to
business combinations in stages, accounting for non controlling
interests, contingent consideration and costs of acquisition. The
adoption of the amendments to IFRS 3 has had no impact on the
results or net assets of the Group.
- Amendments to IAS 39 Financial Instruments: Recognition and
Measurement - Eligible Hedged Items, effective for annual periods
beginning on or after 1st July 2009. The amendments clarify the
application of the requirements on designation of a risk or a
portion of cash flows for hedge accounting purposes, exemptions for
business combination contracts and the treatment of loan prepayment
penalties as closely related embedded derivatives.
- Amendments to IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations, effective for periods beginning on or
after 1 January 2010. Clarifies that IFRS 5 and other IFRSs that
specifically refer to non-current assets (or disposal groups)
classified as held for sale or discontinued operations set out all
the disclosures required in respect of those assets or
operations.
- Amendments to IFRS 8 Operating Segments, effective for periods
beginning on or after 1 January 2010. Clarifies that a measure of
segment assets should be disclosed only if that amount is regularly
provided to the chief operating decision maker.
- Amendments to IAS 1 Presentation of Financial Statements,
effective for periods beginning on or after 1 January 2010.
Amendment to clarify the classification of a liability that can, at
the option of the counterparty, be settled by the issue of the
entity's equity instruments.
- Amendments to IAS 7 Statement of Cash Flows, effective for
periods beginning on or after 1 January 2010. Amends to IAS 7 state
explicitly that only an expenditure that results in a recognized
asset can be classified as a cash flow from investing
activities.
Standards, amendments and interpretations effective, but do not
have any impact on the Group:
- IFRIC 12 Service Concession Agreements, effective for annual
periods beginning on or after 30 March 2009.
- IFRIC 15 Agreements for the Construction of Real Estate,
effective for annual periods beginning on or after 1 January
2010.
- IFRIC 16 Hedges of Net Investment in a Foreign Operation,
effective for annual periods beginning on or after 1 July 2009.
- IFRIC 17 Distributions of Non-Cash Assets to Owners, effective
for annual periods beginning on or after 1st July 2009.
- IFRIC 18 Transfers of Assets from Customers, effective for
transfers of assets from customers received on or after 1st July
2009.
- Amendments to IAS 17 Leases, effective for annual periods
beginning on or after 1 January 2010.
- Amendments to IAS 18 Revenue, effective for annual periods
beginning on or after 1 January 2010.
- Amendments to IAS 36 Impairment of Assets, effective for
annual periods beginning on or after 1 January 2010.
- Amendments to IAS 38 Intangible Assets, effective for annual
periods beginning on or after 1 January 2010.
- Amendments to IFRIC 9 Reassessment of Embedded Derivatives,
effective for annual periods beginning on or after 1 January
2010.
- Amendments to IFRIC 16 Hedges of Net Investment in a Foreign
Operation, effective for annual periods beginning on or after 1
January 2010.
Standards, amendments and interpretations not yet effective, but
not expected to have a significant impact on the Group:
- Revision to IFRS 1 First Time Adoption of IFRS, effective for
annual periods beginning on or after 1 July 1009.
- Amendment to IFRS 2 Group Case-settled Share-based Payment
transactions, effective for annual reporting periods beginning on
or after 1 January 2010.
Basis of consolidation
(a) Subsidiaries
Subsidiaries are all entities over which the Group has the power
to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting
rights. The existence and effect of potential voting rights that
are currently exercisable or convertible are considered when
assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated from
the date that control ceases.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Group, except for certain
acquisitions that do not meet the definition of a business
combination under IFRS 3. These are accounted for as asset
acquisitions. The cost of an acquisition is to be measured as the
fair value of the assets given, equity instruments issued, and
liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date,
irrespective of the extent of any non-controlling interest. The
excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded
as goodwill. If the cost of an acquisition is less than the fair
value of the net assets of the subsidiary acquired, the difference
is recognised directly in the income statement. Investments in
subsidiaries are carried at cost less any provision for permanent
impairment in the value in the Company's financial statements.
Inter-company transactions, balances, and unrealised gains on
transactions between group companies are eliminated on
consolidation. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred. Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies adopted by
the Group.
(b) Transactions with non-controlling interests
The Group applies a policy of treating transactions with
non-controlling interests as transactions with parties external to
the Group. Disposals to minority interests result in gains and
losses for the Group that are recorded in the income statement.
Purchases from non-controlling interests result in goodwill, being
the difference between any consideration paid and the relevant
share acquired of the carrying value of net assets of the
subsidiary.
(c) Associates
Associates are all entities over which the Group has significant
influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting and are
initially recognised at cost. The Group's investment in associates
includes goodwill identified on acquisition, net of any accumulated
impairment loss.
The Group's share of its associates' post-acquisition profits or
losses is recognised in the income statement, and its share of
post-acquisition movements in reserves is recognised in reserves.
The cumulative post-acquisition movements are adjusted against the
carrying amount of the investment. When the Group's share of losses
in an associate equals or exceeds its interest in the associate,
including any other unsecured receivables, the Group does not
recognise further losses, unless it has incurred obligations or
made payments on behalf of the associate.
Accounting policies of associates have been reviewed to ensure
consistency with the policies adopted by the Group.
Segment reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being property investment business, in
one geographical area, being South East Europe. This is consistent
with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-makers, who are
responsible for the allocating resources and assessing performance
of the operating segment, have been identified as the Directors
that make strategic decisions.
Foreign currency translation
(a) Functional and presentationcurrency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the 'functional
currency'). The consolidated financial statements are presented in
Euros, which is the Company's presentational currency. The
functional currency of each entity within the Group is a key
judgement of management and the directors. This judgement
prioritises primary factors, such as the source of competitive
forces and the denomination of sales prices and input costs, over
secondary considerations such as the source of financing, in
accordance with IAS21. These considerations indicate that the
functional currencies of the Balkan trading entities are Romanian
New Lei, Serbian Dinar, Bulgarian Lev, Slovakian Koruna and the
functional currency of the holding companies is the Euro.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income
statement. Non-monetary items carried at fair value, which are
denominated in foreign currencies, are translated at the rates
prevailing at the date when the fair value was determined, and the
gain or loss is recognised in the income statement.
(c) Group companies
The results and financial position of all the group entities
(none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
(i) assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;
(ii) income and expenses for each income statement are
translated at average exchange rates (unless this average is not a
reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions); and
(iii) all resulting exchange differences are recognised as a
separate component of Other Comprehensive Income.
When a foreign operation is sold, such exchange differences are
recognised in the income statement as part of the gain or loss on
sale.
Investment property
Property that is held for rental yields or for capital
appreciation or both is classified as investment property.
Investment property comprises freehold land, freehold buildings,
and land held under operating leases. Investment property is
measured initially at its cost, including related transaction costs
and subsequently revalued at the balance sheet date to fair value.
The revaluation method is described in section 1 of the Notes to
the Accounts.
Investment property that is being redeveloped for continuing use
as investment property or for which the market has become less
active continues to be measured at fair value.
Changes in fair values of investment property are recorded in
the income statement. Depreciation is not provided in respect of
investment properties.
Development property
Property that is being constructed or developed for future use
as investment property is classified as development property. The
Group has elected to use the fair value model to measure
development property after initial recognition. Development
property is revalued to fair value.
Upon completion, development property to be held for long-term
rental income and capital appreciation is transferred to investment
property classification in the Statement of Financial Position.
Intangible assets - acquired building rights
Acquired building rights that do not meet the definition of
investment property under IAS 40 Investment Property (Amended) are
accounted for as intangible assets. Acquired building rights have a
finite useful life and are carried at historical cost less
amortisation. Amortisation is calculated on a straight line basis
over the life of the acquired building rights.
Other property, plant, and equipment
Other property, plant, and equipment consist of fixtures,
fittings, & equipment and are stated at historical cost.
Historical cost includes expenditure that is directly attributable
to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying value of the replaced part is derecognised.
All other repairs and maintenance are charged to the income
statement during the financial period in which they are
incurred.
Depreciation is calculated using the straight-line method to
allocate cost over the assets' estimated useful economic lives of 5
to 15 years. Depreciation expense is included within "property
operating expenses" in the income statement. The assets' residual
values and useful lives are reviewed and adjusted if appropriate,
at least at each financial year-end. An asset's carrying amount is
written down immediately to its recoverable amount if its carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are recognised in the income
statement.
Leasing
(a) A group company is the lessee
Leases in which a significant portion of the risks and rewards
of ownership are retained by another party, the lessor, are
classified as operating leases. Payments, including prepayments,
made under operating leases (net of any incentives received from
the lessor) are charged to the income statement on a straight-line
basis over the period of the lease.
(b) A group company is the lessor
Properties leased out under operating leases are included in
investment property in the balance sheet. Lease income is
recognised over the term of the lease on a straight-line basis.
Impairment of assets
Assets including goodwill that have an indefinite useful life
are not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation or depreciation
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less
costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units).
Financial assets
The Group classifies its financial assets into the following
categories: at fair value through profit or loss and loans and
receivables. The Group has not classified any of its financial
assets as held to maturity or as assets available-for-sale. The
classification depends on the purpose for which the financial
assets were acquired. Management determines the classification of
its financial assets at initial recognition.
Unless otherwise indicated, the carrying amounts of the Group's
financial assets are a reasonable approximation of their fair
value.
(a) Financial assets at fair value through profit or loss
Financial assets at fair value through the profit or loss
comprise only in-the-money derivatives (see financial liabilities
policy for out-of-the money derivatives), which are measured
initially at fair value, with changes in fair value recognised in
the income statement in finance income or finance costs.
(b) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities
greater than 12 months after the balance sheet date. These are
classified as non-current assets. Loans and receivables are
classified as trade and other receivables, cash and cash
equivalents or loans and receivables in the balance sheet.
Loans and receivables are initially recognised at fair value,
plus transaction costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortised
cost using the effective interest method, less impairment.
Cash and cash equivalents comprise cash on hand and demand
deposits, together with other short-term, highly liquid investments
that are readily convertible into known amounts of cash and which
are not subject to a significant risk of changes in value.
Trade receivables
Trade receivables are non-derivative financial assets with fixed
or determinable payment terms that are not quoted in an active
market. The carrying value of trade receivables approximates their
fair values. A provision for impairment of trade receivables is
established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original
terms of receivables.
Inventory - land assets held for resale
Inventories are stated at the lower of cost and net realisable
value.
Investments in subsidiaries
Parent company investment in subsidiary undertakings are stated
at cost less any provision for impairment.
Equity and reserves
Shares are classified as equity when there is no obligation to
transfer cash or other assets. Incremental costs directly
attributable to the issue of new shares are shown in equity as a
deduction, net of tax, from the proceeds. The revaluation reserve
within equity comprises gains and losses due to the revaluation of
property, plant and equipment, investment property, development
property and acquired building rights. Foreign currency translation
differences arising on the translation of the Group's foreign
entities are included in the translation reserve. Retained earnings
include all current and prior period retained profits.
Financial liabilities
The Group classifies its financial liabilities into the
following categories: at fair value through profit or loss and
other financial liabilities.
Unless otherwise indicated, the carrying amounts of the Group's
financial liabilities are a reasonable approximation of their fair
value.
(a) Financial liabilities at fair value through profit or
loss
Financial liabilities at fair value through the profit or loss
comprise only out-of-the-money derivatives (see financial assets
policy for in-the-money derivatives), which are measured initially
at fair value, with changes in fair value recognised in the income
statement in finance income or finance costs.
(b) Other financial liabilities
Other financial liabilities include borrowings and trade and
other payables, which are measured initially at fair value, and
subsequently at amortised cost using the effective interest
method.
Financial liabilities are recognised when the Group becomes a
party to the contractual agreements of the instrument.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
Trade payables and other payables
Trade payables and other payables are recognised initially at
fair value and subsequently measured at amortised cost using the
effective interest method.
Taxation
(a) Income tax
The Company is resident in the Isle of Man for income tax
purposes, being subject to the standard rate of income tax, which
is currently 0%. As the Company is listed on a recognised stock
exchange, it is not regarded as a Relevant Company for the purposes
of Attribution Regime for Individuals and, therefore, there will be
no attribution assessable upon the shareholders.
The Group is liable to tax in Curacao, the Netherlands,
Bulgaria, Serbia, Slovakia, and Romania on the activities of its
subsidiaries.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income and
expenditure that are taxable or deductible in other periods and it
also excludes items that are not taxable or deductible. The Group's
liability for current tax is calculated using tax rates applicable
at the balance sheet date.
(b) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amount of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit. It is accounted for using the
balance sheet liability method.
Deferred income tax is provided in full on temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Revenue recognition
Revenue includes rental income and service charges from
properties.
Rental income from operating leases is recognised in income on a
straight-line basis over the lease term. When the Group provides
incentives to its customers, the cost of incentives are recognised
over the lease term, on a straight line basis, as a reduction of
rental income.
Service charges are recognised in the accounting period in which
the services are rendered. When the Group is acting as an agent,
the commission, rather than gross income, is recorded as
revenue.
Finance income
Finance income is accrued on a time basis by reference to the
outstanding principal and the effective interest rate
applicable.
Interest expense
Interest expense for borrowings is recognised within finance
costs in the income statement using the effective interest rate
method. The effective interest rate method is a method of
calculating the amortised cost of a financial liability and of
allocating the interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future cash payments throughout the expected life of the
financial instrument, or a shorter period where appropriate, to the
net carrying amount of the financial liability. When calculating
the effective interest rate, the Group estimates cash flows
considering all contractual terms of the financial instrument (for
example, prepayment options). The calculation includes all fees and
points paid or received between parties to the contract that are an
integral part of the effective interest rate, transaction costs and
all other premiums or discounts.
Expenses
Expenses are accounted for on an accruals basis. The Group's
property operating expenses, administration fees, finance costs and
all other expenses are charged to the income statement. Transaction
costs directly attributable to the purchase of investment property
are included within the cost of the property.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2010
1 Critical accounting estimates and judgements
In the process of applying the Group's accounting policies, the
Directors have made the following estimates and judgements that
have had the most significant effect on these financial
statements.
(a) Classification of property as investment, development, and
inventory
Investment property is property held for rental income and
capital appreciation. Development property is property that does
not earn rental income and that is being developed for future use
as investment property. Development property is transferred to the
category of investment property when construction is completed and
the property starts earning rental income. Inventory - land assets
held for resale are recognised for properties owned by the Group
specifically to be sold.
(b) Estimate of fair value of investment and development
properties
The best evidence of fair value is current prices in an active
market for similar lease and other contracts. In the absence of
such information, the Group determines the amount within a range of
reasonable, fair value estimates. In making its judgement, the
Group engages CB Richard Ellis to carry out independent valuations
of its properties. These are completed in accordance with the
appropriate sections of the current Practice Statements contained
in the Royal Institution of Chartered Surveyors Appraisal and
Valuation Standards, 6th Edition (the "Red Book"). This is an
internationally accepted basis of valuation.
In completing these valuations the valuer considers the
following:
- current prices in an active market for properties of a
different nature, condition or location (or subject to different
lease or other contracts), adjusted to reflect those
differences;
- recent prices of similar properties in less active markets,
with adjustments to reflect any changes in economic conditions
since the date of the transactions that occurred at those prices;
and
- discounted cash flow projections based on reliable estimates
of future cash flows, derived from the terms of any existing lease
and other contracts and (where possible) from external evidence
such as current market rents for similar properties in the same
location and condition, and using discount rates that reflect
current market assessments of the uncertainty in the amount and
timing of the cash flows.
(c) Going concern
In assessing the going concern basis of preparation of the
consolidated financial statements for the year ended 31 December
2010, the directors have prepared cash-flow forecasts, and
stress-tested the assumptions in those forecasts. The conclusion
reached is that while there will always remain inherent uncertainty
within the cash flow forecasts, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future,
and for a period of at least 12 months from the date of signing of
these financial statements. Accordingly they continue to adopt the
going concern basis in preparing the consolidated financial
statements for the year ended 31 December 2010.
(d) Asset disposals
On 31 December 2010, the Company sold 51% of its interest in
Balkan Properties Cooperatief UA, which through its subsidiaries is
the holding vehicle for the Group's investments in Vitantis and
Moldova Mall, for a nominal consideration of 5 Euros. Although
certain legal formalities were not completed until after the
year-end, the Board considered control to have passed prior to the
year-end on the grounds that on that date the buyer took full
responsibility for administering the investments and setting their
strategy and funding policy, assumed decision-making powers and
carried the commercial risk.
The results of these companies are consolidated in the Statement
of Comprehensive Income in these financial statements, but with
control passing to the buyer on 31 December 2010, they are
accordingly deconsolidated from the Statement of Financial
Position. The Company retained a 49% holding, and the investments
are therefore accounted for as associates from that date. (See
Notes 5, 14, and 15)
If the disposal had not taken place by the year-end and EBP had
continued to consolidate Vitantis and Moldova Mall in the year end
balance sheet, the contribution would have been negative Euro 16.1
million, resulting in a reduction of NAV to Euro 34.9 million.
Because the investments had a negative value at the balance sheet
date, they are carried as associates in the accounts at nil
value.
The accounting impact is described in further detail in Notes 5,
15 and 26.
(e) Functional currency
Functional currency is a key judgement by management and the
Board, discussed further within the Statement of Accounting
Policies on page 17.
2 Financial risk management
2.1 Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk, price risk, cash flow
and fair value interest rate risk), credit risk, and liquidity
risk. The financial risks relate to the following financial
instruments: trade receivables, loans and receivables, derivatives,
cash and cash equivalents, trade and other payables and
borrowings.
Risk management is carried out by the Board of Directors with
advice from external consultants.
(a) Market risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the Romanian New Lei (RON) and Serbian Dinar (RSD)
and to a lesser extent to the Slovakian Koruna (SKK), Pound
Sterling (GBP), and the Bulgarian Lev (BGN) which is currently
pegged against the Euro.
The following tables summarise the Group's net financial assets
by foreign currency. The Group's financial assets and liabilities
at carrying amounts are included in the table, categorised by the
currency at their carrying amount.
31 December 2010 EUR RON RSD Total
------------------------------------
EUR'000 EUR'000 EUR'000 EUR'000
------------------------------------ --------- -------- -------- ---------
FINANCIAL ASSETS
Non-current financial assets
Loans and receivables 11,925 - - 11,925
Total non-current financial assets 11,925 - - 11,925
------------------------------------ --------- -------- -------- ---------
Current financial assets
Trade & other receivables 372 2,658 372 3,402
Cash & cash equivalents 2,172 1,043 70 3,285
Total current financial assets 2,544 3,701 442 6,687
------------------------------------ --------- -------- -------- ---------
Total financial assets 14,469 3,701 442 18,612
------------------------------------ --------- -------- -------- ---------
FINANCIAL LIABILITIES
Non-current financial liabilities
Bank borrowings 32,666 - - 32,666
Deposits - 243 - 243
Other long term loans 139 1,350 - 1,489
Total non-current financial
liabilities 32,805 1,593 - 34,398
------------------------------------ --------- -------- -------- ---------
Current financial liabilities
Trade and other payables 301 1,873 53 2,227
Interest rates swaps 876 - - 876
Bank borrowings 830 - - 830
Total current liabilities 2,007 1,873 53 3,933
------------------------------------ --------- -------- -------- ---------
Total liabilities 34,812 3,466 53 38,331
------------------------------------ --------- -------- -------- ---------
Net financial liabilities by
currency (20,343) 235 389 (19,719)
------------------------------------ --------- -------- -------- ---------
31 December 2009 EUR RON BGN RSD Total
-----------------------------
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------------------------- --------- -------- -------- -------- ----------
FINANCIAL ASSETS
Non-current financial assets
Loans and receivables 11,519 - - - 11,519
Total non-current financial
assets 11,519 - - - 11,519
----------------------------- --------- -------- -------- -------- ----------
Current financial assets
Loan receivable 600 - - - 600
Trade & other receivables 220 5,182 - 42 5,444
Cash & cash equivalents 4,710 1,523 15 295 6,543
Total current financial
assets 5,530 6,705 15 337 12,587
----------------------------- --------- -------- -------- -------- ----------
Total financial assets 17,049 6,705 15 337 24,106
----------------------------- --------- -------- -------- -------- ----------
FINANCIAL LIABILITIES
Non-current financial
liabilities
Bank borrowings 34,129 - - - 34,129
Deposits - 250 - - 250
Other long term loans 600 1,077 - - 1,677
Other non-current
liabilities 267 197 - 1,851 2,315
Total non-current financial
liabilities 34,996 1,524 - 1,851 38,371
----------------------------- --------- -------- -------- -------- ----------
Current financial
liabilities
Trade and other payables 3,969 9,261 - 335 13,565
Bank borrowings 76,779 - - - 76,779
Other short-term loans 107 - - 94 201
Total current liabilities 80,855 9,261 - 429 90,545
----------------------------- --------- -------- -------- -------- ----------
Total liabilities 115,851 10,785 - 2,280 128,916
----------------------------- --------- -------- -------- -------- ----------
Net financial
(liabilities)/assets by
currency (98,802) (4,080) 15 (1,943) (104,810)
----------------------------- --------- -------- -------- -------- ----------
The Company does not have any significant concentration of
foreign exchange risk. The Group's property assets are valued in
Euro, rental income is linked to the Euro, and borrowings are
denominated in Euro.
The sensitivity analyses below are based on a change in an
assumption while holding all other assumptions constant. In
practice this is unlikely to occur and changes in some of the
assumptions may be correlated - for example, change in interest
rate, and change in foreign currency rates. The Group manages
foreign currency risk on an overall basis.
The sensitivity analysis prepared below by management for
foreign currency risk illustrates how changes in the fair value or
future cash flows of a financial instrument will fluctuate because
of changes in foreign exchange rates.
If the Euro weakened/strengthened by 10% against the Romanian
Lei with all other variables held constant, post-tax loss for the
year would have been EUR3,068,000 lower and EUR2,510,000 higher
(2009: post-tax profit for the year would have been EUR3,561,000
lower and EUR4,352,000 higher).
If the Euro weakened/strengthened by 10% against the Serbian
Dinar with all other variables held constant, post-tax loss for the
year would have been EUR544,000 lower and EUR445,000 higher (2009:
post-tax profit for the year would have been EUR2,884,000 lower,
and EUR3,525,000 higher).
(ii) Price risk
The Group is exposed to property price and property rentals
risk. The Company does not have any significant concentration of
price risk as the assets or asset owning companies can be sold
individually and at the full discretion of the Group. The potential
impact of future value reductions will be mitigated by the
moratorium on loan to value covenants offered as part of the debt
restructurings.
(iii) Cash flow and fair value interest rate risk
The Group takes on exposure to the effects of fluctuations in
the prevailing levels of market interest rates on its financial
position and cash flows, as the Group's cash is deposited in
interest bearing accounts at floating rates. The Group manages
interest rate risk on these assets by monitoring interest rates
offered by the market.
The Group's interest rate risk arises from long-term borrowings.
Borrowings issued at variable rates expose the Group to cash flow
interest rate risk. Borrowings issued at fixed rates expose the
Group to fair value interest rate risk.
The Group may mitigate its cash flow interest rate risk by using
floating-to-fixed interest rate swaps. Such interest rate swaps
have the economic effect of converting borrowings from floating
rates to fixed rates. Generally, the Group raises long-term
borrowings at floating interest rates and swaps them into fixed
rates.
The Group's cash flow and fair value interest rate risk is
periodically monitored by the Board with input from consultants.
During 2010, the Company cancelled the existing interest rate swaps
as part of the loan restructuring in respect of Vitantis and
Moldova Mall. Further, an interest swap contract was cancelled
after the year-end as described in Note 27.
Trade and other receivables and payables are interest-free and
have settlement dates within one year.
The sensitivity analysis below reflects the sensitivity of loan
interest (on unswapped loans only), and the sensitivity of the fair
value of interest rate swaps, to changes in interest rates.
An increase in 100 basis points in Euribor interest rate would
result in an increase in the post-tax profit for the year of
EUR113,500 (2009: EUR337,000). A decrease in 100 basis points in
Euribor interest rate would result in a decrease in the post-tax
profit for the year of EUR113,500 (2009: EUR337,000). This is a
combined effect of interest costs of unhedged borrowings and fair
value change of interest rate swaps.
The Company does not have any significant concentration of cash
flow and fair value interest rate risk.
(b) Credit risk
Credit risk arises from cash and cash equivalents as well as
credit exposures with respect to rental customers, including
outstanding receivables. It has policies in place to ensure that
where possible rental contracts are made with customers with an
appropriate credit history. Cash transactions are limited to
high-credit-quality financial institutions.
Trade receivables are monitored monthly and litigation is used
actively to enforce collection efforts. The Group has significant
concentration risk with respect to entities of Technomarket Domo in
Bulgaria and Romania, but this company has continued to meet all
its rental obligations. For other tenants, limited provisions have
been made at the local company level for bad debts incurred in
2010. The Directors have not made a Group level adjustment in
excess of these amounts.
The cash flow forecast for the going concern evaluation includes
consideration of future bad debts. The assumption for 2011 is that
new bad debts will not materially exceed the amount of bad debts
from 2010 that will be collected through enforcements efforts.
(c) Liquidity risk
Prudent liquidity risk management implies conserving cash
balances. The Group is active in minimising costs, operational and
administrative, controlling or delaying discretionary capital
expenditures, and actively collecting rental invoices.
Non-discretionary expenditures are also being monitored by the
Board.
The Group has diversified its mortgage lending relationships and
restructured several facilities. The maturity of existing loans has
been extended to December 2012 and April 2013. In 2009, the Group
repaid its corporate level bridge financing on schedule and
completed its construction projects.
The Group has no committed or undrawn mortgage debt facility and
will rely on operational cash flows and cash reserves to meet its
liquidity requirements.
The effective interest rate on bank borrowings not repaid or
otherwise retired during the period at the balance sheet date was
4.78% (2009: 6.84%).
The fair value of these fixed and floating-rate borrowings
approximated their carrying values at 31 December 2009 and 2010.
All bank borrowings are denominated in Euro. The Group has no
undrawn fixed rate borrowings (2009: none).
A summary table with maturity of financial liabilities presented
below shows the liquidity risks as at 31 December 2010 and 31
December 2009.
Between Between
Less than 1 and 2 and Over 5
Group 1 year 2 years 5 years years
EUR'000 EUR'000 EUR'000 EUR'000
------------------------------ ---------- --------- --------- --------
2010
Cartex loan finance - 4,951 - -
Domenii loan finance - 10,470 - -
Equest Logistics loan finance 920 18,275 - -
Other loans payable - - 1489 -
Trade and other payables 1,666 - - -
Other non-current liabilities 151 220 197 1,747
2009
Moldova Mall loan finance 20,702 - - -
Vitantis loan finance 37,797 - - -
Cartex loan finance 4,800 - - -
Domenii loan finance 10,150 - - -
Other loan finance 5,237 5,147 29,092 7,486
Other loans payable 201 600 1,077 -
Trade and other payables 10,641 - - -
Other non-current liabilities 151 220 197 1,747
------------------------------ ---------- --------- --------- --------
Less Between Between
than 1 and 2 and Over
Parent 1 year 2 years 5 years 5 years
EUR'000 EUR'000 EUR'000 EUR'000
------------------------- -------- --------- --------- ---------
2010
Trade and other payables 140 - - -
-------------------------
2009
Trade and other payables 337 - - -
------------------------- -------- --------- --------- ---------
The above schedule has, in accordance with IFRS7 Financial
Instruments: Disclosures, been presented in line with the
conditions present at the balance sheet date, with regards to the
contractual maturities of financial liabilities held by the
Group.
2.2 Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
In order to maintain or adjust the capital structure, the Group
may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares, or sell assets to reduce
debt.
Consistent with others in the industry, the Group monitors
capital on the basis of the gearing ratio. This ratio is calculated
as net debt divided by total capital. Net debt is calculated as
total borrowings (including bank loans and loans from
non-controlling investors), and other long term loans as shown in
the consolidated balance sheet, less cash and cash equivalents.
Total capital is calculated as equity, as shown in the consolidated
balance sheet, plus net debt.
Group
2010 2009
EUR'000 EUR'000
--------------------------------- -------- --------
Total borrowings 33,496 110,908
Other loans 1,489 1,878
Less: cash and cash equivalents (3,285) (6,543)
--------------------------------- -------- --------
Net debt 31,700 106,243
--------------------------------- -------- --------
Total equity 51,026 58,224
Total capital 82,726 164,467
--------------------------------- -------- --------
Gearing ratio 38% 65%
--------------------------------- -------- --------
3 Summary of financial assets and liabilities by category
All financial instruments held at fair value are Level 2 in the
fair value hierarchy.
The carrying amounts of the Group's financial assets and
liabilities as recognised are categorised as follows.
Financial
assets and Financial
liabilities at liabilities
fair value measured at
31 December through profit Loans and amortised
2010 or loss receivables cost Total
EUR'000 EUR'000 EUR'000 EUR'000
---------------- --------------- ---------------- --------------- --------
FINANCIAL
ASSETS
Non-current
financial
assets
Loans and
receivables - 11,925 - 11,925
---------------- --------------- ---------------- --------------- --------
Total
non-current
financial
assets - 11,925 - 11,925
---------------- --------------- ---------------- --------------- --------
Current assets
Trade & other
receivables - 3,402 - 3,402
Cash & cash
equivalents - 3,285 - 3,285
---------------- --------------- ---------------- --------------- --------
Total current
financial
assets - 6,687 - 6,687
---------------- --------------- ---------------- --------------- --------
Total financial
assets - 18,612 - 18,612
---------------- --------------- ---------------- --------------- --------
FINANCIAL
LIABILITIES
Non-current
financial
liabilities
Bank borrowings - - 32,666 32,666
Deposits - - 243 243
Other long term
loans - - 1,489 1,489
Other
non-current
liabilities - - - 0
---------------- --------------- ---------------- --------------- --------
Total
non-current
financial
liabilities - - 34,398 34,398
---------------- --------------- ---------------- --------------- --------
Current
financial
liabilities
Trade and other
payables - - 2,227 2,227
Interest rates
swaps 876 - - 876
Bank borrowings - - 830 830
Other short
term loans - - - 0
--------------- ---------------- --------------- --------
Total current
financial
liabilities 876 - 3,057 3,933
---------------- --------------- ---------------- --------------- --------
Total financial
liabilities 876 - 37,455 38,331
---------------- --------------- ---------------- --------------- --------
Financial
assets and Financial
liabilities at liabilities
fair value measured at
31 December through profit Loans and amortised
2009 or loss receivables cost Total
EUR'000 EUR'000 EUR'000 EUR'000
---------------- --------------- ---------------- --------------- --------
FINANCIAL
ASSETS
Non-current
financial
assets
Loans and
receivables - 11,519 - 11,519
---------------- --------------- ---------------- --------------- --------
Total
non-current
financial
assets - 11,519 - 11,519
---------------- --------------- ---------------- --------------- --------
Current assets
Loans
receivable - 600 - 600
Trade & other
receivables - 5,444 - 5,444
Cash & cash
equivalents - 6,543 - 6,543
---------------- --------------- ---------------- --------------- --------
Total current
financial
assets - 12,587 - 12,587
---------------- --------------- ---------------- --------------- --------
Total financial
assets - 24,106 - 24,106
---------------- --------------- ---------------- --------------- --------
FINANCIAL
LIABILITIES
Non-current
financial
liabilities
Bank borrowings - - 34,129 34,129
Deposits - - 250 250
Other long term
loans - - 1,677 1,677
Other
non-current
liabilities - - 2,315 2,315
---------------- --------------- ---------------- --------------- --------
Total
non-current
financial
liabilities - - 38,371 38,371
---------------- --------------- ---------------- --------------- --------
Current
financial
liabilities
Trade and other
payables - - 8,491 8,491
Interest rates
swaps 5,074 - - 5,074
Bank borrowings - - 76,779 76,779
Other short
term loans - - 201 201
---------------
Total current
financial
liabilities 5,074 - 85,471 90,545
---------------- --------------- ---------------- --------------- --------
Total financial
liabilities 5,074 - 123,842 128,916
---------------- --------------- ---------------- --------------- --------
The carrying amounts of the Company's financial assets and
liabilities as recognised at the respective year-ends are
categorised as follows.
Financial
assets and Financial
liabilities at liabilities
fair value measured at
31 December trough profit Loans and amortised
2010 or loss receivables cost Total
EUR'000 EUR'000 EUR'000 EUR'000
---------------- --------------- ---------------- --------------- --------
FINANCIAL
ASSETS
Non-current
financial
assets
Loans and
receivables - 20,635 - 20,635
---------------- --------------- ---------------- --------------- --------
Total
non-current
financial
assets - 20,635 - 20,635
---------------- --------------- ---------------- --------------- --------
Current assets
Trade & other
receivables - 16 - 16
Cash & cash
equivalents - 1,237 - 1,237
---------------- --------------- ---------------- --------------- --------
Total current
financial
assets - 1,253 - 1,253
---------------- --------------- ---------------- --------------- --------
Total financial
assets - 21,888 - 21,888
---------------- --------------- ---------------- --------------- --------
Current
financial
liabilities
Trade and other
payables - - 140 140
Bank borrowings - - - -
Other short
term loans - - - -
---------------- --------------- ---------------- --------------- --------
Total current
financial
liabilities - - 140 140
---------------- --------------- ---------------- --------------- --------
Total financial
liabilities - - 140 140
---------------- --------------- ---------------- --------------- --------
Financial
assets and Financial
liabilities at liabilities
fair value measured at
31 December trough profit Loans and amortised
2009 or loss receivables cost Total
EUR'000 EUR'000 EUR'000 EUR'000
---------------- --------------- ---------------- --------------- --------
FINANCIAL
ASSETS
Non-current
financial
assets
Loans and
receivables - 13,840 - 13,840
---------------- --------------- ---------------- --------------- --------
Total
non-current
financial
assets - 13,840 - 13,840
---------------- --------------- ---------------- --------------- --------
Current assets
Loans
receivable - 600 - 600
Trade & other
receivables - 31 - 31
Cash & cash
equivalents - 4,033 - 4,033
---------------- --------------- ---------------- --------------- --------
Total current
financial
assets - 4,664 - 4,664
---------------- --------------- ---------------- --------------- --------
Total financial
assets - 18,504 - 18,504
---------------- --------------- ---------------- --------------- --------
FINANCIAL
LIABILITIES
Non-current
financial
liabilities
Bank borrowings - - - -
Deposits - - - -
Other long term
loans - - - -
Other
non-current
liabilities - - 24 24
---------------- --------------- ---------------- --------------- --------
Total
non-current
financial
liabilities - - 24 24
---------------- --------------- ---------------- --------------- --------
Current
financial
liabilities
Trade and other
payables - - 337 337
Bank borrowings - - - -
Other short
term loans - - - -
---------------- --------------- ---------------- --------------- --------
Total current
financial
liabilities - - 337 337
---------------- --------------- ---------------- --------------- --------
Total financial
liabilities - - 361 361
---------------- --------------- ---------------- --------------- --------
4 Net rental and related income
Group 2010 Group 2009
EUR'000 EUR'000
------------------------------- ----------- -----------
Gross rental income 7,420 10,470
Service charge income 1,163 1,841
Other property income 769 642
Property operating expenses (5,038) (6,769)
Net rental and related income 4,314 6,184
------------------------------- ----------- -----------
Net rental and related income analysed by geographical
location:
2010 Romania Serbia Total
EUR'000 EUR'000 EUR'000
------------------------------- -------- -------- --------
Revenue 9,352 - 9,352
Property operating expenses (5,026) (12) (5,038)
------------------------------- -------- -------- --------
Net rental and related income 4,326 (12) 4,314
------------------------------- -------- -------- --------
Future rental income
At the balance sheet date the Group had contracted with tenants
for the following future minimum non-cancellable operating lease
payments:
Group 2010 Group 2009
EUR'000 EUR'000
--------------------------------------------- ----------- -----------
No later than 1 year 3,418 11,310
Later than 1 year and no later than 5 years 8,743 35,956
Later than 5 years - 22,773
Total 12,161 70,039
--------------------------------------------- ----------- -----------
5 Profit on sale of subsidiaries
Balkan
Properties Aurora /
2010 Cooperatief Apollo Archway Other Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
---------------------- ------------ -------- ---------- -------- --------
Proceeds - 1,400 - - 1,400
Net
(assets)/liabilities 16,102 (2,127) - (42) 13,933
Realisation of
translation reserve (7,698) 582 - - (7,116)
Additional credit in
respect of
completion of
Archway/Aurora
transaction - - 2,170 - 2,170
Profit/(loss) on sale
of subsidiaries 8,404 (145) 2,170 (42) 10,387
---------------------- ------------ -------- ---------- -------- --------
Elan Aurora
2009 BCS Dooel / Archway Other Total
EUR'000 EUR'000 EUR'000 EUR'000
----------------------------- ----------- ----------- -------- --------
Proceeds 5,649 - 323 5,972
Net assets (5,824) - (375) (6,199)
Realisation of translation
reserve 51 - (3,051) (3,000)
Costs of sale - - (328) (328)
Net credit in the year in
respect of completion of
Archway/Aurora transaction - 10,926 - 10,926
Profit/(loss) on sale of
subsidiaries (124) 10,926 (3,431) 7,371
----------------------------- ----------- ----------- -------- --------
The above figures for Balkan Properties Cooperatief UA (the
owner of Vitantis and Moldova Mall) relate to the disposal of 51%
of the Company's interest for a nominal consideration of 5 Euros as
described in Notes 1(d) and 26. As the Company thereby surrendered
control of Balkan Properties Cooperatief UA, the profit recorded on
sale results from the net liabilities of the Company's interest in
Balkan Properties Cooperatief UA and its subsidiaries on 31
December 2010, the disposal date. The Group's results for the year
include the net income of Balkan Properties Cooperatief UA up to
that date, including the fair value adjustment on property assets
as well as the other finance income and other finance expenses
described in Note 7.
The contribution of Vitantis and Moldova Mall and their disposal
to the consolidated comprehensive expense for the year to 31
December 2010 is as follows:
EUR'000
--------------------------------------------------- ---------
Net rental and related income less administrative
expenses 1,838
Loss from fair value adjustment on property
assets (25,351)
Release from old loan liabilities included
in Other finance income (Note 7) 21,068
Fair value of new replacement loan liability
(Note 7) (13,000)
Finance income and costs not included above
and income tax expense (6,995)
Profit on sale 8,404
--------------------------------------------------- ---------
Loss for the year (14,036)
--------------------------------------------------- ---------
Realisation of reserves on sale 7,698
--------------------------------------------------- ---------
Total comprehensive expense for the year (6,338)
--------------------------------------------------- ---------
The net credit in respect of completion of the Archway/Aurora
transaction reflects the partial reversal of prior year impairments
associated with the sale of investments held by Aurora BV and the
associated re-acquisition of assets by Archway BV in 2008 and
2009.
6 Administration expenses
Group 2010 Group 2009
EUR'000 EUR'000
------------------------------- ----------- -----------
Audit fees 97 106
Non-audit fees 66 99
Management fees 686 3,283
Other professional expenses 1,155 1,423
Directors' fees 186 179
Bad debts 458 3,075
Other administration expenses 164 964
Total 2,812 9,129
------------------------------- ----------- -----------
7 Finance income and finance costs
Finance income and finance costs include all finance-related
income and expenses. The following amounts have been included in
the income statement line for the reporting periods presented:
Group 2010 Group 2009
EUR'000 EUR'000
-------------------------------------------- ----------- -----------
Interest on short-term bank deposits 30 172
Other finance income* 21,528 417
----------- -----------
Finance income 21,558 589
-------------------------------------------- ----------- -----------
Fair value movement on interest rate swaps (611) 2,313
Interest expense on borrowings 3,947 7,247
Bank charges 49 444
Net foreign exchange losses 5,153 2,019
Other finance expenses* 13,086 567
Finance costs 21,624 12,590
-------------------------------------------- ----------- -----------
* - The Other finance income and Other finance expenses consist
primarily of the restructuring of the loans to Vitantis and Moldova
Mall, as a result of which the original loan liabilities were
replaced by liabilities under which the repayment amount would
depend on future proceeds. The release from the original liability
is recognised as income, and the fair value of the new liability as
expense (Note 5).
Foreign exchange losses have arisen from the translation of Euro
loans in subsidiaries to the local functional currency.
Commercially, these foreign exchange losses are offset by foreign
exchange gains from the translation of Euro denominated investment
property in subsidiaries to the local functional currency. These
foreign exchange gains are included within the net gain or loss
from fair value adjustments on investment property (Note 10).
8 Income tax (expense) / credit
Group 2010 Group 2009
EUR'000 EUR'000
---------------------------------------------- ----------- -----------
Current tax 25 (11)
Deferred tax
Movement in deferred tax liability (Note 16) - 1,525
Movement in deferred tax asset (Note 16) (810) 370
(785) 1,884
---------------------------------------------- ----------- -----------
The tax on the Group's loss before tax differs from the
theoretical amount that would arise using the weighted average rate
of the applicable profits of the consolidated companies as
follows:
Group Group
2010 2009
EUR'000 EUR'000
Loss before tax (14,699) (64,699)
------------------------------------------------- --------- ---------
Tax calculated at the domestic rate in the
Isle of Man of 0% (2009: 0%) - -
Tax calculated at domestic tax rates applicable
to profits in the respective countries 25 (196)
Timing differences arising and not deductible
for tax purposes (810) 1,875
Tax losses for which no deferred tax has
been recognised - 205
Tax credit (785) 1,884
------------------------------------------------- --------- ---------
There have been no changes in the applicable tax rates in any of
the countries in which the Group operates.
9 Loss per share
The basic loss per ordinary share is calculated by dividing the
net loss attributable to the ordinary shareholders of the Company
by the weighted average number of ordinary shares in issue during
the year.
Group
2010 Group 2009
Loss attributable to ordinary shareholders of the
Company (EUR'000) (15,484) (62,872)
Weighted average number of ordinary shares in issue
('000) 140,000 140,000
Basic loss per share in Euros (0.11) (0.45)
----------------------------------------------------- --------- -----------
The Company has no dilutive potential ordinary shares; the
diluted loss per share is the same as the basic loss per share.
10 Investment property
Group Group
2010 2009
EUR'000 EUR'000
-------------------------------------------------------- --------- ---------
Beginning of year 112,390 146,674
Additions - 11,671
Transfer from development property (Note 12) - 6,428
Disposals (38,325) (9,541)
Exchange differences (1,699) (8,254)
Loss from fair value adjustments on investment property (31,481) (34,588)
End of year 40,885 112,390
-------------------------------------------------------- --------- ---------
Investment property analysed by geographical location at their
carrying amount:
Romania Serbia Total
EUR'000 EUR'000 EUR'000
---------------------------- -------- -------- --------
Investment property - 2010 36,785 4,100 40,885
Investment property - 2009 107,240 5,150 112,390
---------------------------- -------- -------- --------
The Group's investment properties were revalued at 31 December
2010 and 2009 by independent professionally qualified valuers CB
Richard Ellis. Valuations were prepared in accordance with the RICS
Appraisal and Valuation Standards. Valuations of investment
properties were determined using a number of valuation techniques
including current prices in active markets.
The exchange differences in the above table arise from the
translation of investment property from each subsidiary's
functional currency to the Group's presentational currency.
11 Acquired building rights
Group Group
2010 2009
EUR'000 EUR'000
----------------------------------- -------- --------
Beginning of year - 1,750
Disposals - (499)
Amortisation of acquired building
rights - -
Impairment of acquired building
rights - (1,148)
Exchange differences - (103)
End of year - -
----------------------------------- -------- --------
Licences and rights acquired from third parties are classified
as acquired building rights. These building rights give the Group
the right to construct on the land. Each building right is
amortised over its individual term, which ranges from 80 to 99
years.
12 Development property
Group Group
2010 2009
EUR'000 EUR'000
-------------------------------------------------------- --------- ---------
Beginning of year 24,502 64,258
Additions - 1,600
Transfer (to)/from investment property (Note 10) - (6,428)
Disposals (21,762) (17,600)
Exchange differences (1,941) (3,338)
Gain/(loss) from fair value adjustments on development
property 1,161 (13,990)
End of year 1,960 24,502
-------------------------------------------------------- --------- ---------
Development property analyse by geographical location at their
carrying amount:
Romania Serbia Total
EUR'000 EUR'000 EUR'000
----------------------------- -------- -------- --------
Development property - 2010 1,960 - 1,960
Development property - 2009 2,740 21,762 24,502
----------------------------- -------- -------- --------
The Group's development properties were revalued at 31 December
2010 and 2009 by independent professionally qualified valuers CB
Richard Ellis. Valuations were prepared in accordance with the RICS
Appraisal and Valuation Standards. Valuations of development
properties were determined using a number of valuation techniques
including the residual method.
These properties are held for future development for use as
investment properties and are accounted for under IAS 40 Investment
Property (Amended).
13 Other property, plant and equipment
Group 2010 Group 2009
EUR'000 EUR'000
--------------------------------------------------- ----------- -----------
Beginning of year
Cost 454 293
Accumulated depreciation (152) (93)
----------- -----------
Net book amount 302 200
--------------------------------------------------- ----------- -----------
Year ending 31 December
Opening net book amount 302 200
Additions 25 178
Cost of PPE in disposed subsidiaries (422) -
Accumulated depreciation in disposed subsidiaries 215 -
Depreciation charge (68) (64)
Exchange difference - (12)
----------- -----------
End of year 2 302
--------------------------------------------------- ----------- -----------
At 31 December
Cost 4 454
Accumulated depreciation (2) (152)
----------- -----------
Net book amount 2 302
--------------------------------------------------- ----------- -----------
The Company has no property, plant, and equipment.
14 Investments in subsidiaries
Significant subsidiaries held by the Group are listed in the
table below. The investments in subsidiaries are not directly held
by the Company but via intermediate holding companies.
Name of
significant % of ordinary share capital and Country of
subsidiary voting rights held incorporation
2010 2009
------------------ ------------------ ------------------ ------------------
Cartex Construct
SRL 100% 100% Romania
Domenii
Imobiliare SRL 100% 100% Romania
Equest Logistic
SRL 100% 100% Romania
Modul Linea SRL 70% 70% Romania
Rivium Galleria
Mall SRL
("Moldova Mall") - 100% Romania
Vitantis SRL - 100% Romania
Europroject DOO 100% 100% Serbia
Star Imobiliare
DOO ("Apollo") - 100% Serbia
T-Property Plot
34 DOO 100% 100% Serbia
Retail Stores DOO 100% 100% Serbia
As described in Notes 1(d) and 5, on 31 December 2010 the
Company sold 51% of its interest in Balkan Properties Cooperatief
UA, the owner of Vitantis SRL and Rivium Galleria Mall SRL.
Consequently, they are not treated as subsidiaries in the balance
sheet of that date, but as associates. (See Note 15)
All subsidiary undertakings are included in the consolidation.
The Company's cost of investment in subsidiaries at 31 December
2010 was EUR29,379,000 (2009: EUR47,379,000). During 2010 the
investment in subsidiaries were impaired by EUR18,000,000 (2009:
nil) to bring the value of the Company's investment in subsidiaries
in line with the group consolidated balance sheet.
Movement in investments in subsidiaries is as follows:
Company
---------------------------------------------------------
EUR'000
--------------------------------------------------------- ---------
Balance as at 31 December 2008 56,762
Capital Balkan Properties NV reduction in share premium (10,037)
Debt assigned from Trigon Properties BV to Capital
Balkan Properties NV 654
--------------------------------------------------------- ---------
Balance as at 31 December 2009 47,379
Provision for impairment (18,000)
Balance as at 31 December 2010 29,379
--------------------------------------------------------- ---------
The Company enters into loans with its direct subsidiaries. At
31 December 2010 loans and receivables due from subsidiaries was
EUR20,635,000 (2009: EUR13,840,000). During 2010 these loans and
receivables were impaired by nil (2009: EUR113,826,000) to reflect
the expected unrecoverable amount.
15 Associates
Investments in associates
Group 2010 Group 2009
EUR'000 EUR'000
---------------------------------------------------- ----------- -----------
Beginning of year 20,836 32,884
Reclassification of investment in Forum Serdika
COOP (545) 14,964
Capital distribution from Forum Serdika COOP - (6,555)
Glorient demerger - (10,972)
Current year profit/(loss) as below 1,932 (8,158)
Prior year adjustment to property valuations 2,275 -
---------------------------------------------------- ----------- -----------
Share of devaluation on development property - (1,327)
---------------------------------------------------- ----------- -----------
End of year 24,498 20,836
---------------------------------------------------- ----------- -----------
Summary financial information for equity accounted investees,
adjusted for the percentage ownership held by the Group:
Profit/(loss) Interest
Assets Liabilities Revenues after tax held
Name of
associate EUR'000 EUR'000 EUR'000 EUR'000 %
------------ -------- ------------ --------- -------------- -------------
2010
Balkan
Properties
Cooperatief
UA 20,265 (28,154) (3,190) (4,904) 49
IBN SRO 2,010 (2,992) (40) (180) 37
Glorient
Investment
BG 44,437 (19,939) (3,858) 1,932 40
-------- ------------ --------- --------------
66,712 (51,085) (7,088) (3,152)
-------- ------------ --------- --------------
2009
Forum
Serdika
COOP 583 (33) (18) (6,675) 80
IBN SRO 1,784 (2,662) (24) (877) 37
Glorient
Investment
BG 42,449 (22,158) (3,441) (606) 40
------------ -------- ------------ --------- -------------- -------------
44,816 (24,853) (3,483) (8,158)
------------ -------- ------------ --------- -------------- -------------
As described in Note 1(d), Balkan Properties Cooperatief UA was
consolidated as a subsidiary up to the point of its part disposal
on 31 December 2010, and its results are included in the
Consolidated Statement of Comprehensive Income for the year. It
became an Associate on that date. As the fair value of its net
assets was negative at that date, the Group does not recognise its
share of such negative assets in accordance with the accounting
policy for Associates.
The negative net assets of IBN SRO and are likewise not
recognised in accordance with the accounting policies.
During 2010 the Group acquired the interest in Forum Serdika
Cooperatief UA which it did not previously control, and it is
therefore consolidated as a wholly owned subsidiary at the
year-end. Forum Serdika Cooperatief UA did not hold any investment
assets.
Loans to associates
Loans to associates consist of EUR11,925,000 (2009:
EUR11,519,000) which is included within non-current assets. These
loans are unsecured and bear interest at 2.2% per annum.
16 Deferred income tax
The movement in deferred income tax assets and liabilities
during the year is as follows:
Group
----------------------------------------- --------
Deferred tax assets EUR'000
----------------------------------------- --------
Beginning of year 2009 440
Changes in fair value of swaps (Note 8) 370
At 31 December 2009 810
----------------------------------------- --------
Beginning of year 2010 810
Write off of deferred tax balance (810)
At 31 December 2010 -
----------------------------------------- --------
Deferred income tax credited/charged to the income statement is
recognised for decreases in the fair value of investment properties
to the extent that the realisation of the related tax benefit
through the future increase in fair value of the investment
properties is probable. Deferred income tax assets are recognised
for tax losses to the extent that the realisation of the related
tax benefit through the future taxable profits is probable.
Deferred income tax credited/charged to the income statement is
recognised for decreases/increases in the fair value of interest
rate swaps to the extent that the realisation of the related tax
benefit through the future increase in fair value of the swaps is
probable.
17 Trade and other receivables
Group Group Company Company
2010 2009 2010 2009
EUR'000 EUR'000 EUR'000 EUR'000
----------------------------- -------- -------- -------- --------
Trade receivables 1,367 3,144 - -
Other accrued income and
prepaid expenses 732 1,398 16 31
Other receivables 1,303 902 - -
Trade and other receivables 3,402 5,444 16 31
----------------------------- -------- -------- -------- --------
The Group impaired receivables of EUR458,000 during the year
ended 31 December 2010 (2009: EUR1,103,000). Trade receivables that
are less than three months past due are not considered impaired.
These relate to a number of independent customers for whom there is
no recent history of default. The Company has no trade
receivables.
18 Inventory - land assets held for resale
Group Group
2010 2009
EUR'000 EUR'000
------------------------------------------------------- -------- --------
Balance as at 1 January 2010 4,194 -
Land assets acquired as part of Archway restructuring - 4,194
Loss from fair value adjustments (408) -
Exchange difference (386) -
Balance as at 31 December 2010 3,400 4,194
------------------------------------------------------- -------- --------
The Group's inventory was valued at 31 December 2010 by
independent professionally qualified valuers CB Richard Ellis.
Valuations were prepared in accordance with the RICS Appraisal and
Valuation Standards.
19 Bank borrowings
The Group's borrowings are at floating and fixed rates of
interest. Interest costs may increase or decrease as a result of
changes in the prevailing market interest rates.
Group Group
2010 2009
EUR'000 EUR'000
------------------ -------- --------
Non-current
Bank borrowings 32,666 34,129
Current
Bank borrowings 830 76,779
Total borrowings 33,496 110,908
------------------ -------- --------
The above borrowings are secured by way of floating charges over
certain of the Group's assets, including property assets, which
have a fair value of at 31 December 2010 of EUR36,785,000 (2009:
EUR131,344,000).
The maturity of non-current borrowings is as follows:
Group Group
2010 2009
EUR'000 EUR'000
----------------------- -------- --------
Between 1 and 2 years 830 3,418
Between 2 and 5 years 31,836 25,602
Over 5 years - 5,109
32,666 34,129
----------------------- -------- --------
The effective interest rate on bank borrowings at the balance
sheet date was 4.78% (2009: 6.84%).
The fair value of these fixed and floating-rate borrowings
approximated their carrying values at 31 December 2009 and 2010.
All bank borrowings are denominated in Euro. The Group has no
undrawn fixed rate borrowings. (2009: nil).
The Company has no borrowings.
20 Other loans
Group Group
2010 2009
EUR'000 EUR'000
------------------- -------- --------
Non-current
Long term loans 1,489 1,677
Current
Short term loans - 201
Total other loans 1,489 1,878
------------------- -------- --------
21 Trade and other payables
Group Group Company Company
2010 2009 2010 2009
EUR'000 EUR'000 EUR'000 EUR'000
--------------------------- -------- -------- -------- --------
Trade payables 480 2,766 140 84
Other payables 887 1,041 - -
Rents received in advance 356 1,195 - -
Interest payable 122 1,725 - -
Accrued expenses 382 1,764 - 253
At 31 December 2,227 8,491 140 337
--------------------------- -------- -------- ------- ---------
Trade payables are interest free and have settlement dates
within one year.
22 Interest rate swaps
Group Group
2010 2009
EUR'000 EUR'000
---------------- -------- --------
At 31 December 876 5,074
---------------- -------- --------
During the year, EUR3.6 million was used to cancel the swap
contracts related to Vitantis and Moldova Mall. The notional amount
of the outstanding floating-to-fixed interest rate swap contracts
at 31 December 2010 was EUR14,950,000 (2009: EUR76,900,000). At 31
December 2010 the fixed interest rate on the outstanding interest
rate swap contract was 4.5% (2009: 4.5%), and the floating rates
were primarily 3 month Euribor. Gains and losses on interest swap
contract are recognised in the income statement within finance
income and costs.
23 Net asset value per share
Group 2010 Group 2009
EUR'000 EUR'000
---------------------------------------------------- ----------- -----------
Net assets attributable to ordinary shareholders of
the Company 51,026 58,224
Number of ordinary shares outstanding 140,000 140,000
Basic net assets per share 0.36 0.42
---------------------------------------------------- ----------- -----------
Net asset value per share is calculated by dividing the net
assets attributable to the ordinary shares of the Company by the
number of ordinary shares in issue at 31 December 2010 and
2009.
24 Share capital
The total number of authorised and issued ordinary shares of the
Company at 31 December 2010 and 2009 together with their rights are
explained below.
Number of shares Ordinary shares Total
Company '000 EUR'000 EUR'000
----------------------------- ----------------- ---------------- --------
Authorised shares of EUR0.01
each at 31 December 2010
and 2009 300,000 3,000 3,000
Issued shares of EUR0.01
each at 31 December 2010
and 2009 140,000 1,400 1,400
----------------------------- ----------------- ---------------- --------
All shares are fully paid and each ordinary share carries one
vote on a poll vote.
25 Commitments
The Group has no capital commitments as at 31 December 2010
(2009: nil).
26 Related party transactions
Graham Smith is a director of the Company and the Administrator
IOMA Fund and Investment Management Limited, ("IOMAFIM"). During
the year, IOMAFIM received fees of EUR180,000 (2009:
EUR80,000).
As described in Notes 1(d) and 5, the Company sold 51% of its
interest in Balkan Properties Cooperatief UA on 31 December 2010
for a nominal sum of 5 Euros. As disclosed in Note 5, the value of
the assets sold amounted to negative EUR16,102,000. The acquirer,
Denesol Limited, is wholly owned by George Teleman. Mr Teleman is a
director of Romanian subsidiaries of EBP, including Vitantis and
Rivium which were wholly owned by Balkan Properties Cooperatief UA
prior to the sale. Mr Teleman is also a director and shareholder of
the Romanian company which holds the property management contracts
for all the income properties owned by EBP in Romania.
In the prior year the Company was managed by Equest Property
Management Limited ("the Investment Manager"), which in turn
received advice from Equest Partners Limited ("the Investment
Advisor"). Certain partners, directors, and senior managers of the
Investment Manager and the Investment Advisor were regarded as key
management personnel. The Investment Manager provided property
management, investment management and advisory services to the
Group and was entitled to an advisory and performance fee under the
terms of the Property Management and Advisory agreement. The
Investment Manager received fees for the year ended 31 December
2009 of EUR3,283,000.
The Investment Advisor was also responsible during the prior
year for (i) the preparation of the Company's interim reports and
annual reports and accounts and (ii) the implementation and
adherence to such financial reporting procedures as are necessary
for the Company to compile all financial information which is, or
could be, relevant to the market. These services cost the Group an
estimated EUR0.5 million in 2009 and are included in Other
Administrative Expenses in Note 6. IOMAFIM assumed responsibility
for this Group function for the 2010 financial year and
onwards.
27 Post balance sheet events
In January 2011, the Group completed the acquisition of the 20%
share of Forum Serdika Cooperatif UA owned by Trans Balkan
Investments Ltd (TBI) (formerly EIB), to take 100% control of that
SPV. Since its primary asset was sold in December 2009, the only
asset was the EUR400,000 escrowed for indemnities. TIB accepted 20%
of the net asset of Forum Serdika Cooperatif UA as
consideration.
In March 2011, Domenii Cartex SRL and Deutsche Pfandbriefbank
agreed to cancel the interest rate swap contract held by Domenii
Cartex SRL. The cancellation cost was EUR614,000 which was paid
from blocked escrow accounts and therefore had no direct impact on
the free cash-flow.
In March 2011, the Company terminated the Technomarket Serbia
lease in Krusevac after bad debts accrued to over EUR350,000.
Collection efforts have been initiated.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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