RNS Number:1317R
European Convergence Property CoPLC
31 March 2008
31 March 2008
European Convergence Property Company plc
Interim Results for the period ended 31 December 2007
European Convergence Property Company PLC ("ECPC", the "Company" or the
"Group"), a property company focused on investing in commercial, retail and
industrial property in South-East Europe with a view to taking advantage of high
yields and the potential for capital appreciation, announces its interim results
for the six month period ended 31 December 2007.
Highlights
Towards the end of 2007 the Company completed the sale of its Romanian
investment properties to DEGI Deutsche Gesellschaft fur Immobilienfonds m.b.H.
The three investment properties sold were Millennium Business Centre (purchase
price, Euro52.6m), PGV Tower (Euro27.4m), and Construdava (Euro26.5m). These are all
prime office locations based in Bucharest and their yields at point of sale were
approximately 6.40%, 6.55%, and 7.20% respectively.
The net consideration for the disposals was approximately Euro110.5m (after
transaction costs and adjustments of Euro5.5m for the net current assets of the
trading companies being sold). The properties were acquired for a combined cost
of Euro89.1m, and were re-valued earlier this year at Euro97.5m. As at 31 December
2007 this increased the unaudited NAV per share to Euro1.21.
After repaying the external financing of the projects the Company was left with
net proceeds of approximately Euro49.9m (prior to any adjustments for items such as
deferred tax and management fees), which included a gain of approximately Euro15.9m
on the initial equity investment.
As previously reported we have seen considerable yield compression in the market
and the Company decided not to pursue further acquisitions and instead to return
the proceeds of the sale along with any un-invested cash to Shareholders.
With Shareholder approval and to facilitate an efficient mechanism for returning
these monies to Shareholders, along with any un-invested cash, the Company was
re-registered as a company governed by the Isle of Man Companies Act 2006 on 21
December 2007.
Following the re-registration, an initial return of capital of Euro58.9 million
(Euro0.94 per share) was made to Shareholders on 31 January 2008.
In relation to the Company's remaining asset Mall Veliko Turnovo, Bulgaria; a
number of offers have been considered and rejected. The Company is hopeful that
a sale can be concluded in the near future. The property is currently carried at
fair value measured as at its last revaluation date of January 2007.
Erwin Brunner 28 March 2008
Chairman
Enquiries:
European Convergence Property Company plc +44 (0)1624 640200
Anderson Whamond
Charlemagne Capital +44 (0)20 7518 2100
Christopher Fitzwilliam Lay/Varda Lotan
Panmure Gordon +44 (0)20 7459 3600
Hugh Morgan/Jonathan Lack/Stuart Gledhill
Smithfield Consultants +44 (0)20 7360 4900
George Hudson
www.europeanconvergence.com
Consolidated Income Statement
Note (Unaudited) (Unaudited) (Audited)
1 July 2007 to 1 July 2006 to Year ended
31 December 2007 31 December 2006 30 June 2007
Euro'000 Euro'000 Euro'000
------------------ ------ ------------ ------------ ----------
Realised gain on sale
of investment property 6,871 - -
Net gain from fair
value adjustment on
investment property 6 - - 13,124
Net rent and related
income 9,429 1,278 5,766
Manager's fees (2,354) (563) (2,343)
Audit and professional
fees (1,433) (127) (258)
Other expenses (7,615) (578) (1,771)
------------------ ------ ------------ ------------ ----------
Administrative
expenses (11,402) (1,268) (4,372)
------------------ ------ ------------ ------------ ----------
------------------ ------ ------------ ------------ ----------
Net operating profit
before net 4,898 10 14,518
financing income
------------------ ------ ------------ ------------ ----------
Financial income 648 423 743
Financial expenses (3,074) (370) (2,923)
------------------ ------ ------------ ------------ ----------
Net financing
income/(expense) (2,426) 53 (2,180)
------------------ ------ ------------ ------------ ----------
Profit before tax 2,472 63 12,338
Income tax expense 10 4,715 (290) (5,890)
------------------ ------ ------------ ------------ ----------
Retained profit/(loss)
for the year 7,187 (227) 6,448
------------------ ------ ------------ ------------ ----------
------------------ ------ ------------ ------------ ----------
Basic and diluted
profit/(loss) 7 0.1146 (0.0036) 0.1028
per share (Euro)
------------------ ------ ------------ ------------ ----------
Consolidated Balance Sheet
Note (Unaudited) (Unaudited) (Audited)
At 31 December At 31 December At 30 June
2007 2006 2007
Euro'000 Euro'000 Euro'000
------------------- ------ ------------ ------------ ----------
Investment
property 6 32,550 80,217 131,971
Property,
plant and
equipment 44 - 62
------------------- ------ ------------ ------------ ----------
Total
non-current
assets 32,594 80,217 132,033
------------------- ------ ------------ ------------ ----------
Trade and
other
receivables 6,494 5,208 3,977
Cash and cash
equivalents 60,643 25,132 23,107
------------------- ------ ------------ ------------ ----------
Total current
assets 67,137 30,340 27,084
------------------- ------ ------------ ------------ ----------
Total assets 99,731 110,557 159,117
------------------- ------ ------------ ------------ ----------
Issued share
capital 62,696 62,696 62,696
Retained
earnings/(loss
es) 10,422 (3,440) 3,235
Foreign
currency
translation
reserve 3,314 168 1,758
------------------- ------ ------------ ------------ ----------
Total equity 76,432 59,424 67,689
------------------- ------ ------------ ------------ ----------
Interest-beari
ng loans and
borrowings 8 19,175 50,008 80,108
Rental
guarantees 125 - -
Deferred tax
liability 280 - 5,045
------------------- ------ ------------ ------------ ----------
Total
non-current
liabilities 19,580 50,008 85,153
------------------- ------ ------------ ------------ ----------
Trade and
other payables 3,719 1,125 6,275
------------------- ------ ------------ ------------ ----------
Total current
liabilities 3,719 1,125 6,275
------------------- ------ ------------ ------------ ----------
Total
liabilities 23,799 51,133 91,428
------------------- ------ ------------ ------------ ----------
Total equity &
liabilities 99,731 110,557 159,117
------------------- ------ ------------ ------------ ----------
Consolidated Statement of Changes in Equity
Share capital Retained Foreign currency Total
earnings translation
reserve
Euro'000 Euro'000 Euro'000 Euro'000
----------------- ---------- ---------- ---------- ----------
Balance at 1
July 2006 62,696 (3,213) (122) 59,361
Foreign
exchange
translation
differences - - 290 290
Retained profit
for the period - (227) - (227)
----------------- ---------- ---------- ---------- ----------
Balance at 31
December 2006 62,696 (3,440) 168 59,424
----------------- ---------- ---------- ---------- ----------
Balance at 1 July 2006 62,696 (3,213) (122) 59,361
Foreign exchange translation - - 1,880 1,880
differences
Retained profit for the year - 6,448 - 6,448
----------------- ---------- ---------- ---------- ----------
Balance at 30 June 2007 62,696 3,235 1,758 67,689
----------------- ---------- ---------- ---------- ----------
Balance at 1 July 2007 62,696 3,235 1,758 67,689
Foreign exchange translation - - 1,556 1,556
differences
Retained profit for the period - 7,187 - 7,187
----------------- ---------- ---------- ---------- ----------
Balance at 31 December 2007 62,696 10,422 3,314 76,432
----------------- ---------- ---------- ---------- ----------
Consolidated Cash Flow Statement
(Unaudited) (Unaudited) (Audited)
For the period from For the period from Year ended
1 July 2007 to 1 July 2006 to 30 June 2007
31 December 2007 31 December 2006
Euro'000 Euro'000 Euro'000
------------------------ ----------- ----------- ----------
Operating activities
Group profit/(loss)
for the period 7,187 (227) 6,448
Adjustments for:
Net gain from sale of
investment property (6,871) - -
Net gain from fair
value adjustment on
investment property - - (13,124)
Financial income (648) (423) (743)
Financial expense 3,074 370 2,923
Foreign currency
translated 1,556
Depreciation 18 290 1,880
Income tax expense (4,715) 290 5,890
------------------------ ----------- ----------- ----------
Operating
profit/(loss) before
changes in (399) 300 3,284
working capital
------------------------ ----------- ----------- ----------
(Increase)/decrease
in trade and other
receivables (2,517) 683 (3,696)
Increase/(decrease)
in trade and other
payables (2,431) 119 5,108
Cash generated (used
in)/from operations (5,347) 1,102 4,696
Interest paid (3,074) (370) (2,923)
Income and
corporation tax paid (50) (158) (852)
Interest received 648 423 743
------------------------ ----------- ----------- ----------
Cash flows generated
(used in)/from (7,823) 997 1,664
operating activities
------------------------ ----------- ----------- ----------
Investing activities
Staged payments
relating to property
acquisitions - (55,695) (88,425)
Sale of investment
property 106,291 - -
Purchase of property,
plant and equipment - - (62)
------------------------ ----------- ----------- ----------
Cash flows used in
investing activities 106,291 (88,487)
------------------------ ----------- ----------- ----------
Financing activities
Proceeds from long
term loans - 36,258 67,108
Repayment of long
term loans (60,933) - (750)
Share issue expenses - - -
Cash flows generated
from financing
activities (60,933) 36,258 66,358
------------------------ ----------- ----------- ----------
Net
(decrease)/increase
in cash and cash
equivalents 37,536 (18,440) (20,465)
Cash and cash
equivalents at
beginning of period 23,107 43,572 43,572
------------------------ ----------- ----------- ----------
Cash and cash
equivalents at end of
period 60,643 25,132 23,107
------------------------ ----------- ----------- ----------
Notes to the Consolidated Financial Statements (Unaudited)
1 The Company
European Convergence Property Company plc (the "Company") was incorporated and
registered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004
on 1 June 2005 as a public company with registered number 113616C.
Pursuant to a prospectus dated 15 June 2005 there was an original placing of up
to 100,000,000 Ordinary Shares. Following the close of the placing on 24 June
2005 62,696,333 Shares were issued.
The Shares of the Company were admitted to trading on the Alternative Investment
Market of the London Stock Exchange ("AIM") on 28 June 2005 when dealings also
commenced.
The Company's agents and the Manager perform all significant functions.
Accordingly, the Company itself has no employees.
2 The Subsidiaries
For efficient portfolio management purposes, the Company has established the
following subsidiary companies:-
--------------------------------- ------------ ---------
Country of Percentage of
incorporation shares held
--------------------------------- ------------ ---------
European Convergence Property Company Bulgaria
EOOD Bulgaria 100%
European Property Acquisitions EOOD Bulgaria 100%
European Convergence Property Company (Cayman)
Limited Cayman Islands 100%
ECPC (Cyprus) Limited Cyprus 100%
European Convergence Property Company (Malta)
Limited Malta 100%
European Convergence Property Company SRL(1) Romania 100%
Paris Development SRL(1) (sold August 2007) Romania 100%
European Property Development Invest SRL (sold
August 2007) Romania 100%
European Property Millenium SRL (2) Romania 100%
Millennium Estates SRL (2) (sold August 2007) Romania 100%
European Property Imobiliar Invest SRL Romania 100%
European Property Development Corporation SRL Romania 100%
Convergence Property Invest SRL Romania 100%
Orange Convergence Finance BV The Netherlands 100%
European Convergence Property Company Real
Estate Trading and Management Limited Turkey 100%
--------------------------------- ------------ ---------
(1) During the year European Convergence Property Company SRL was merged with
Paris Developments SRL subsequent to which, European Convergence Property
Company SRL was deregistered on 7 November 2006.
(2) During the year European Property Millenium SRL was merged with Millennium
Estate SRL and consequently, European Property Millenium SRL is currently in the
process of being deregistered.
3 Significant Accounting Policies
The interim consolidated financial statements of the Company for the six months
ended 31 December 2007 comprises the Company and its subsidiaries (together
referred to as the "Group"). The interim consolidated financial statements are
unaudited.
3.1 Basis of presentation
These interim financial statements have been prepared in accordance with
International Accounting Standard 34: Interim Financial Reporting Accounting.
Policies have been applied on a consistent basis as those adopted for the last
full financial statements.
3.2 Investment property
Investment properties are those which are held either to earn rental income or
for capital appreciation or both. Investment properties are stated at fair
value. Any gain or loss arising from a change in fair value is recognised in the
income statement.
3.3 Basis of consolidation
Subsidiaries
Subsidiaries are those enterprises controlled by the Company. Control exists
where the Company has the power, directly or indirectly, to govern the financial
and operating policies of an enterprise so as to obtain benefits from its
activities. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control effectively
commences until the date that control effectively ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains arising from
intra-group transactions, are eliminated in preparing the consolidated financial
statements.
Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated to Euro at the foreign
currency exchange rates ruling at the balance sheet date. Foreign exchange
differences arising on translation are recognised directly in equity.
3.4 Dividends
Dividends are recognised as a liability in the year in which they are declared
and approved. There was no dividend declared as at 31 December 2007 (30 June
2007: Nil).
4 Segment Reporting
Segment information is presented in respect of the Group's business and
geographical segments. The segments are managed on a worldwide basis, but
operate in three principal geographical areas, Bulgaria, Romania and Turkey. The
location of the customers is the same as the location of the assets.
6 months ended Bulgaria Romania Turkey Unallocated Total
31 December 2007
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
---------------- -------- --------- --------- --------- ---------
Net rent and associated
income 1,303 8,216 - 8,126 9,429
Segment results (111) 3,041 (2) 4,259 7,187
Segment assets 31,371 - - 68,360 99,731
Segment liabilities (19,817) - (23) (3,459) (23,299)
---------------- -------- --------- --------- --------- ---------
6 months ended Bulgaria Romania Turkey Unallocated Total
31 December 2006
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
---------------- -------- --------- --------- --------- ---------
Net rent and associated
income - 1,278 - - 1,278
Segment results (22) 196 - (401) (227)
Segment assets 30,012 61,770 - 18,775 110,557
Segment liabilities (13,011) (37,688) - (434) (51,133)
---------------- -------- --------- --------- --------- ---------
Year ended 30 June 2007 Bulgaria Romania Turkey Unallocated Total
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
---------------- -------- --------- --------- --------- ---------
Net rent and associated
income 1,660 4,106 - - 5,766
Segment results 2,223 6,119 (6) (1,888) 6,448
Segment assets 33,846 107,380 - 17,891 159,117
Segment liabilities (19,973) (70,040) - (1,415) (91,428)
---------------- -------- --------- --------- --------- ---------
5 Net Asset Value per Share
The net asset value per share as at 31 December 2007 is Euro1.21 based on net
assets of Euro75.9 million and 62,696,333 ordinary shares in issue.
6 Investment Property
31 December 2007 31 December 2006 30 June 2006
Group Group Group
Euro'000 Euro'000 Euro'000
---------------------- ------------ ----------- -----------
At beginning of period 131,971 24,522 24,522
Additions through:
direct acquisitions of
property - 55,695 94,325
acquisition of subsidiary - - -
companies
Disposals 99,421 - -
Net gain from fair value
adjustments on investment
property - - 13,124
---------------------- ------------ ----------- -----------
Balance at end of period 32,550 80,217 131,971
---------------------- ------------ ----------- -----------
Security
At 31 December 2007, there was a first rank mortgage on the above properties
securing the bank loans of Euro19 million.
7 Basic and Diluted Earnings/(Loss) per Share
Basic and diluted earnings/(loss) per share is calculated by dividing the profit
/(loss) attributable to equity holders of the Company by the number of ordinary
shares in issue during the period:
31 December 2007 31 December 2006 30 June 2007
-------------------------- ----------- ----------- ---------
Profit attributable to
equity holders of the
Company (Euro'000) 7,187 (227) 6,448
Number of ordinary shares
in issue (thousands) 62,696 62,696 62,696
-------------------------- ----------- ----------- ---------
Basic and diluted
earnings per share (Euro per
share) 0.1146 (0.0036) 0.1028
-------------------------- ----------- ----------- ---------
8 Interest-Bearing Loans and Borrowings
This note provides information about the Group's interest-bearing loans and
borrowings.
Non-current liabilities
Group Group Group
31 December 2007 31 December 2006 30 June 2007
Euro'000 Euro'000 Euro'000
------------------------ ----------- ----------- ----------
Secured bank loans 19,175 50,008 80,108
------------------------ ----------- ----------- ----------
9 Exchange Rates
The following exchange rates were used to translate assets and liabilities into
the reporting currency at 31 December 2007:
Bulgarian Lev 1.9558
Romanian Lei 3.6082
Turkish Lira 1.7042
10 Taxation
Income tax expense
Group
Euro'000
--------------------------- -------------------------
Current tax 50
Deferred tax (4,765)
--------------------------- -------------------------
(4,715)
-------------------------
Deferred income tax is based on temporary differences between revalued amounts
of investment property in the books of the subsidiaries and their respective tax
bases. The deferred tax position is based on the capital gains tax rate of 16%
in Romania and 10% in Bulgaria.
11 Commitments at the Balance Sheet Date
There were no material commitments as at the balance sheet date.
12 Post Balance Sheet Events
At the end of January 2008 the Company made a capital distribution to
shareholders of Euro0.94 per share.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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