TIDMEBP
RNS Number : 6185U
Equest Balkan Properties PLC
26 June 2009
?
The following amendments have been made to the 'Final Results' announcement
released on 25 June 2009 at 7.00 am under RNS No 4678U.
The following sections have been added into the announcement having previously
been omitted: The Directors report; Details of the board; The statement of
directors responsibilities and the Independent auditor's report.
All other details remain unchanged.
The full amended text is shown below.
EQUEST BALKAN PROPERTIES plc
FULL YEAR RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2008
Equest Balkan Properties plc ("EBP" / "Company" / "Group"), an Isle of Man
registered company specialising in commercial property investments in the Balkan
region, announces today its final results for the year ended 31 December 2008.
Highlights for year 2008
* Net Asset Value per share of Euro 0.92 under IFRS (31 December 2007: Euro 1.49),
a decrease of 38.3%
* Net Asset Value per share of Euro 0.92 under EPRA (European Public Real Estate
Association) (31 December 2007: Euro 1.56), a decrease of 40.4%
* Pre-tax loss of Euro 64.3 million (31 December 2007: Euro 3.5 million)
* No dividend declared (31 December 2007: Euro 0.035 per share)
* Strategic reviews carried out during 2008 for a disposal program of property
assets and a review of operating costs to achieve cost savings
* Successful sale of City Center Sofia (CCS) shopping mall for Euro 101.5 million
* Construction completions of Vitantis Retail Park (Euro 59.5 million with 34,213
sqm GLA) and Equest Logistic Center (Euro 39.0 million with 56,630 sqm GLA)
* Approximately 135 new lease contracts signed in 2008 and in the 1st half of
2009, involving 77,000 sqm (65% of total current income yielding space by area,
excluding that owned by associates)
* Total non-current property assets of Euro 256.6 million, including those held by
associates (31 December 2007: Euro 372.6 million), and net rental income of Euro
11.4 million (31 December 2007: Euro 8.5 million)
* Group cash balance of Euro 15.5 million (31 December 2007: Euro 8.1 million)
* Total borrowings (secured) of Euro 117.9 million and other (unsecured) loans of
Euro 10.2 million, resulting in an overall gearing ratio of 46.1%
* Post period event of default for Moldova Mall financing due to breach of
financial covenants
* Post period event of default for Vitantis for failing to fully meet all of the
required criteria to convert a development loan of Euro 37.8 million to
investment loan status, due to timing issues, though we met the financial
covenants. The excess of property value above financing amounts to Euro 26.6
million as at 31 December 2008.
Commenting on the results, Charles Jillings, Non-executive Chairman of EBP,
said:
"The operating markets for EBP in South East Europe remain extremely
challenging. Whilst EBP successfully sold its largest asset and several small
land parcels in 2008, the disposal program has not yet reached its intended goal
to return cash to shareholders.
We remain very concerned about the economic outlook and the resultant trend in
property prices in South East Europe. These issues adversely affect the value
and operating results of EBP's portfolio as well as the ability to meet loan
obligations. Given that we have only non-recourse debt secured over specific
properties and relatively low gearing levels, we expect that even in this
economic downturn, we can continue to support the majority of our holdings.
EBP's Board is participating actively in the disposal program and monitoring
closely the Company's financial performance. To improve the momentum on sales,
the Board has assigned a director to work with some local offices to assist with
the disposal program. In addition, the Board has retained an experienced
consultant to work with the Investment Adviser's Chief Financial Officer and
Finance Director to reduce costs and optimise the Group's cash flows. The
Company's aims remain to continue to cut costs, further dispose of assets and
return cash to shareholders."
Michael Uhler of Equest Partners Limited, EBP's Investment Adviser, added:
"In early 2008, we initiated our disposal program and were pleased to complete
the sale of our largest asset, City Center Sofia, as well as some of our smaller
land holdings. We were also able to secure a construction loan and a corporate
bridge facility before the capital markets closed. As a result, we met all
capital obligations in 2008 and ended the year with Euro 15.5 million in cash.
We have minimal equity commitments related to our diminishing construction
pipeline.
Asset valuations have continued to decline primarily because appraisers have
moved out yields. As a result, in the post year end period, we breached our
financial covenants at Moldova Mall and have begun discussions with our lender
to relinquish ownership voluntarily. We do not believe it is in Shareholder's
interests to cure the covenant breach or to reposition the asset on the terms
available. With respect to the covenant breach at Vitantis we believe that this
was a breach largely of a technical nature, and that should the matter go to
arbitration, the company is in a strong position and the outcome may even
benefit the company. We are in active discussion with the bank concerned on this
matter and with our other lenders to avoid similar circumstances should problems
arise elsewhere. We are pleased with the constructive dialogues held with
Raiffeisen Zentralbank and Hypo Real Estate Bank.
Our peer group is operating under similar circumstances. We expect the situation
to persist until a broader economic recovery begins.
We started 2009 with a renewed impetus to cut costs and to sell assets.
Fortunately, our income producing assets are of high quality, mostly newly
constructed, and our land bank contains several well located parcels. We believe
these assets should be attractive to local and international investors with a
long term interest in the growth prospects for the Balkan Region."
For further information please contact:
+-------------------------------------+-------------------------------------+
| Equest Partners Limited | |
+-------------------------------------+-------------------------------------+
| Tel: + 44 20 7240 7600 | |
| Michael Uhler | |
| Naomi Kora | |
| | |
+-------------------------------------+-------------------------------------+
| KBC Peel Hunt - NOMAD and Joint | |
| Broker | |
| Tel: +44 20 7418 8900 | |
| Capel Irwin | |
| Alex Vaughan | |
| Arbuthnot Securities - Joint Broker | |
| Tel: +44 20 7012 2000 | |
| Alastair Moreton | |
| Hannah Pearce | |
| | |
+-------------------------------------+-------------------------------------+
Chairman's Statement
Introduction
These are disappointing results. Our objective over the last year was to bring
sharper focus onto asset disposals and cost structures, to put EBP in a stronger
position financially and ultimately to return cash to shareholders. We have made
some progress but not enough relative to market conditions. The investor market
continues to deteriorate, due largely to scarce financing, and evidenced by
sharply rising yield expectations and infrequent sales. At an operating level,
we see slowed leasing activity and financing consequences as a result of lower
valuations. EBP's position remains relatively weak.
The Board remains focussed on three objectives: stability, profitability and
return of capital. Stability will require further leasing and ultimately asset
sales. We must expect further declines in asset values as the structural
concerns over the Balkans rise. We may need to distance ourselves on occasions
from the lenders. Profitability remains elusive and in the short-term will be
difficult to achieve as revenues come under pressure. However, we will keep
focus on the cost base at both the fund and asset level, as one defence within
our control. Further progress is needed in this area
Return of capital remains a key goal and is directly reliant upon cash generated
by asset sales. The Board believes the Company should sell assets until it has
collected sufficient free cash to return to shareholders. Given market
conditions, we intend to frequently review our disposal plan in the context of
our cash requirements.
To strengthen the Board's position, the Board has appointed Mr. Donald Lake to
work with the local country manager to assist with the asset disposal program in
Romania.
We will continue to retain our commitment to shareholders to return capital in a
tax efficient manner, which may include the buying back of shares once further
asset sales have been completed.
Results
IFRS NAV decreased 38.3% to Euro 0.92 per share from Euro 1.49 at 31 December
2007.
In the twelve months to 31 December 2008, the Company made a pre tax loss of
Euro 64.3 million (31 December 2007: pre-tax profit Euro 3.5 million), including
a revaluation loss of Euro 20.8 million (31 December 2007: revaluation gain Euro
14.5 million) equating to a basic loss per share of Euro 0.44 (31 December 2007:
earnings per share Euro 0.05).
Net rental income grew to Euro 11.5 million (31 December 2007: Euro 8.6 million)
reflecting nearly a full year's results for City Center Sofia and partial year
income from Vitantis Retail Park, and one building at Equest Logistic Centre.
The net change in fair value of property assets showed a loss of Euro 20.8
million, or 9.8% of net asset value (31 December 2007: gain of Euro 14.5
million). Most of this decline is attributable to market yields moving out on
investment assets from 100 to 150 basis points over the year 2008.
Portfolio
Following the strategic review, the management team was directed to complete the
existing construction pipeline, exit from all other development related
commitments as well as joint ventures, and to sell assets, in particular City
Center Sofia (CCS), and our holdings in Serbia. The objective was and remains to
reduce the construction cash commitments, to curb all future cash uses related
to new projects, and to simplify the portfolio by ending joint ventures. We
prefer 100% owned, completed and fully let assets in the current environment.
The previously stated goal was to reduce the portfolio to Euro 220 million by
the end of 2008.
Vitantis was completed and opened for trading in September 2008. In March 2009
the construction pipeline was completed with the delivery of the third and final
building at Equest Logistic Centre. Any further construction investments are now
discretionary. As of June 2009, Vitantis is 95% let and Equest Logistic Centre
has leasing commitments which will bring total occupancy to 67% by September
2009.
Looking forward, achieving disposals will be increasingly difficult in the short
term. Local economic conditions have deteriorated further in 2009 and this is
affecting our tenant's businesses, their ability to pay rent on time and will
eventually impact on our asset values. In the current environment, the disposals
that are completing often reflect distressed realisations and bear little
resemblance to fair value exchanges.
Valuations
CBRE appraises the portfolio semi-annually and continues to move yields up and
values down in response to the growing economic uncertainty. Between 2007 and
June 2009, yields on income assets are out about 150 to 200 basis points and
development land values are down between 25% and 50%.
The Board has also approved value reductions from CBRE year end valuations of
certain assets for which they believe the CBRE valuation is inappropriate as a
result of post period events. The value for Moldova Mall, for example, has been
written down to the outstanding debt balance to reflect a worst case scenario
even though we are working with our lender to achieve a constructive outcome for
all parties.
Costs
As part of the strategic review, the Company examined its operating costs with a
view to reducing costs and improving efficiency.
In 2008, EBP simplified its holding structure by merging 13 Dutch NV holding
companies into one entity, Capital Balkan Properties NV. Additional mergers at
the BV level are planned for 2009.
Also, EBP replaced its auditor believing that accounting and audit fees could be
substantially reduced without sacrificing the quality of the audit of our
financial statements.
Disappointingly, administrative costs increased by Euro 1.6 million (excluding
bad and doubtful debt expenses) from 2007 to 2008. Legal fees related to the
corporate bridge loan and two mortgage facilities explain much of the variance,
as do one time advisory charges for the NV restructuring.
Financing / Funding
The Company ended the year with Euro 15.5 million in cash which formed a
positive platform with which to start 2009. Our Total Non-current Liabilities
reduced to Euro 117.8 million, and at a Group level gearing reduced to 46.1%.
More importantly, all of the bank debt held by the Group is non-recourse and
secured individually by specific assets. There are no cross default provisions
between facilities.
Fortunately, none of our bank debt will mature prior to 2011; though as a result
of the events of default at Moldova Mall and Vitantis, these loans are
technically payable immediately. We do not believe it is in Shareholder's
interest to cure the covenant breach at Moldova Mall or to restructure the loan
on the terms available. With respect to the event of default at Vitantis, we
believe that this was a breach of a technical nature related to the conditions
precedent, not financial covenants. This dispute should go to arbitration. We
believe the company is in a strong position and the outcome may even benefit the
company. We are in active discussion with the bank concerned on this matter. As
at the 31 December 2008, the amount of the property value above financing for
these two assets amounts to Euro 26.6 million.
EBP had Euro 10.0 million of unsecured property related loans including accrued
interest as at the end of 2008. Euro 1.3 million of the liability was repaid in
the first half of 2009. The repayment terms of the Euro 8.7 million are being
negotiated with the lender, Equest Investment Balkans Limited.
Hedging
The Company has a policy to hedge interest rate risk for its mortgage loans by
entering into swap agreements with the respective lenders. Since interest rates
have fallen significantly since 2007, all of the swap positions now show a
negative fair value; the Group does not hedge account for these swaps under
IAS39. The Company's finance costs are locked in at the higher historical levels
on most of its bank debt. Development loans are hedged upon conversion to
investment loan status, so the debt tied to Equest Logistic Centre and the
Apollo project is not yet hedged.
Excluding amortisation, the prevailing interest rate, including margin, on the
hedged debt is approximately 6.5%.
Change in Nominated Adviser
In March 2008, the Company announced that it had appointed KBC Peel Hunt Ltd as
Nominated Adviser (NOMAD) and Joint Broker and Arbuthnot Securities Limited as
Joint Broker.
Change in Non-executive Chairman and Directors
In April 2008 the Company appointed Charles Jillings (53) and Andrzej Sobczak
(58) as Non-executive Directors. Charles Jillings was subsequently elected as
Non-executive Chairman on 23 July 2008, replacing Lord St John of Bletso. In
parallel, Dr Solomon Passy resigned as Non-executive Director on 23 July 2008.
Charles Jillings is the Executive Director of Utilico Emerging Markets Limited,
which holds 32,360,483 ordinary shares (23.11%) in EBP, and Andrzej Sobczak was
the Deputy Chief Executive of Carrousel Capital Ltd, which holds 36,995,000
ordinary shares (26.43%) in EBP. Andrzej resigned as a Director of the Company
effective from 29 May 2009.
Going Concern
The Directors believe the Group is able to successfully manage its business
risks in the current challenging economic environment. 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 its operations for the foreseeable future.
The Group has primarily mortgage debt facilities secured at the local company
level and collateralized only by specific assets. In the event of a financing
default, each lender only has recourse to the borrower and not to the Company or
other Group companies. Therefore, even in a distress situation, underperforming
assets can be released back to the appropriate lender to limit the financial
damage to the Group. With respect to its cash position, the Board has a
reasonable expectation that sufficient liquidity will be available from a
combination of existing cash reserves, draws on committed yet unfunded mortgage
loans, net sales proceeds arising from the disposal program, cash flow from
normal operations, periodic reimbursements of VAT, and interest income.
Accordingly, the Group continues to adopt the going concern basis of preparation
of these 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.
Outlook
Though we are actively seeking to dispose of selected assets to meet operational
or loan obligations and to raise cash for any shareholder distributions, we will
review our disposal program on a monthly basis through 2009.
The Board remains committed to a return to shareholders of equity capital in a
tax efficient manner, including the buying back of shares once further asset
sales have been completed.
Charles Jillings
Non-executive Chairman
24 June 2009
Investment Manager's Update
While the global economic crisis was slow to reach the Balkan region, it arrived
in the last quarter of 2008. After addressing our outlook on 2009 market
conditions, we will point out a few important activities completed in 2008.
Market conditions
We are seeing signs of the broader economic crisis in Romania which has fallen
into recession. Post period demands for rent reductions by our retail tenants,
in part due to currency devaluations in Romania, continue to escalate. Tenant
defaults are increasing and we are re-assessing our estimates for stabilised
occupancy and performance levels for the next 12 months. Declines here could
have an exacerbating impact on future valuations as well. On a brighter note,
tenant demand for the Equest Logistic Centre and for our offices in Bucharest
appears to be strong, though small concessions for new leases are now standard
in the market.
Recent commercial market statistics for the Balkan region indicate that net
absorption of commercial premises has slowed and there are not yet signs of
improvement.
Completed activities
From an operational perspective, the income producing assets met our
expectations during 2008 especially for Vitantis Retail Park (Vitantis) and
Equest Logistic Centre (ELC). We completed a Euro 58.7 million construction
pipeline and signed enough new leases to replace nearly all the rental revenues
lost when City Center Sofia (CCS) was sold. Excluding Glorient, over 60% of our
current rent roll by area was secured in 2008 or early 2009, for predominantly
five year initial terms and includes many international tenants.
At the Group level, we successfully sourced a corporate bridge facility, and at
the SPV level, we closed and funded two construction loans at favourable terms.
Selling CCS enabled EBP to meet all of its cash obligations in 2008, and to end
the year on a positive note. Despite external factors, we believe EBP is
generally well positioned internally to address the numerous challenges ahead in
2009.
As the year 2009 has progressed, however, the mounting stress on our retail
tenants became evident and rent collections and expense recoveries have slowed.
We initiated a round of cost saving measures at a local company level to reduce
operating and administrative expenses. These measures should translate into
lower service charges for our tenants and thus improved recovery rates.
Operational issues are of growing importance in 2009.
EBP Property Portfolio
Valuations
Excluding assets sold, the EBP portfolio is valued as follows:
+-----------------+-------------+--------------+----+------------+---------+--------------+
| Project | Land Use | Country | EURm | EURm |
+-----------------+-------------+-------------------+------------+---------+
| At CBRE | | | | |
| valuation | | | | |
+-----------------+-------------+-------------------+------------+------------------------+
| Vitantis * | Retail | Romania | 67.5 | |
+-----------------+-------------+-------------------+------------+------------------------+
| Equest | Warehouse | Romania | 30.8 | |
| Logistics * | | | | |
+-----------------+-------------+-------------------+------------+------------------------+
| Domenii / | Offices | Romania | 20.3 | |
| Cartex * | | | | |
+-----------------+-------------+-------------------+------------+------------------------+
| Targoviste * | Retail | Romania | 7.4 | |
+-----------------+-------------+-------------------+------------+------------------------+
| Apollo * | Mixed | Serbia | 35.0 | |
+-----------------+-------------+-------------------+------------+------------------------+
| | 161.0 |
+----------------------------------------------------------------+---------+
| Serdika ** | Offices | Bulgaria | 17.6 | |
+-----------------+-------------+-------------------+------------+---------+
| Ploesti ** | Retail | Romania | 6.0 | |
+-----------------+-------------+-------------------+------------+---------+
| At CBRE valuation | 23.6 |
+----------------------------------------------------------------+---------+
| Glorient | Retail | Bulgaria | 44.1 | |
| Portfolio *** | | | | |
+-----------------+-------------+-------------------+------------+---------+
| At CBRE valuation, minority ownership interest | 44.1 |
+----------------------------------------------------------------+---------+
| At Director's valuations |
+--------------------------------------------------------------------------+
| Archway *** | Retail | Serbia | | |
+-----------------+-------------+-------------------+------------+---------+
| Moldova Mall * | Retail | Romania | | |
+-----------------+-------------+-------------------+------------+---------+
| Skopje Business | Offices | Macedonia | | |
| * | | | | |
+-----------------+-------------+-------------------+------------+---------+
| Euro Car Park | Parking | Romania | | |
| ** | | | | |
+-----------------+-------------+-------------------+------------+---------+
| | 27.9 |
+----------------------------------------------------------------+---------+
| Total | | | | 256.6 |
+-----------------+----------------------------+----+------------+---------+
| * Wholly owned | | | |
+----------------------------------------------+----+------------+------------------------+
| ** Controlling ownership interest | | | |
+----------------------------------------------+----+------------+------------------------+
| *** Non controlling ownership interest | | | |
+-----------------+-------------+--------------+----+------------+---------+--------------+
The technical methodology utilised by CBRE to value assets remained unchanged
from previous periods. Income producing assets are valued based on cash flow
features reflecting rising yield expectations for investors (about 100 to 150
bps higher net initial yields than at 31 December 2007) and more conservative
assumptions for non-recoverable expenses, lease renewal probabilities, and
stabilised occupancy levels. Since 2007, CBRE has applied increasingly less
favourable market assumptions to reflect the continued deterioration in the
investment and banking sectors.
Land sites are valued using a development residual method. CBRE has assumed
higher finance costs, lower overall gearing during construction, and more
conservative exit yields.
The Glorient Portfolio consists of 41 properties: 28 retail warehouses, 2
supermarkets, 1 office- warehouse, 1 retail warehouse under development and 9
sites in pre-development stage. The investment assets are valued based on cash
flow features. The land plots have been valued on a price per square meter basis
since comparables exist.
Due to post period events, the valuations for select assets were marked down to
reflect ongoing negotiations with lenders, joint venture partners, and
interested investors.
Bank debt / Funding issues
The commercial mortgage market in the Balkan Region effectively closed for new
business in the third quarter of 2008, and as a result construction starts and
investment sales have stalled. Borrowers and lenders are occupied with
restructuring repayment obligations following covenant breaches, predominately
loan to value breaches.
The Company had Euro 117.8 million in bank debt and Euro 10.2 million in other
property related debt at year end.
+----+-------------+--+----------+--+---------+--+----------+--+------------------+--+-------+
| | Project | | Lender | | Amount* | | Maturity | | Covenants | | Amort |
+----+-------------+--+----------+--+---------+--+----------+--+------------------+--+-------+
| 1. | Vitantis | | BACA | | EUR41.3m | | 31/03/12 | | 1.20 / 70% | | 2% pa |
+----+-------------+--+----------+--+---------+--+----------+--+------------------+--+-------+
| 2. | Equest | | RZB | | EUR17.7m | | 30/04/13 | | 1.20 / 71% | | 3% pa |
| | Logistics | | | | | | | | | | |
+----+-------------+--+----------+--+---------+--+----------+--+------------------+--+-------+
| 3. | Moldova | | BACA | | EUR20.7m | | 09/08/11 | | 1.20 / 70% | | 2% pa |
| | Mall | | | | | | | | | | |
+----+-------------+--+----------+--+---------+--+----------+--+------------------+--+-------+
| 4. | Domenii | | HRE | | EUR15.0m | | 24/09/12 | | 1.35 / 75%, 90% | | None |
| | Offices | | | | | | | | | | |
+----+-------------+--+----------+--+---------+--+----------+--+------------------+--+-------+
| 5. | Targoviste | | BRD | | EUR2.9m | | 12/02/13 | | NA / NA | | 3%pa |
+----+-------------+--+----------+--+---------+--+----------+--+------------------+--+-------+
| 6. | Apollo | | Hypo | | EUR20.2m | | 10/02/17 | | NA / NA | | N/A |
| | | | Adria | | | | | | | | |
+----+-------------+--+----------+--+---------+--+----------+--+------------------+--+-------+
*Principal loan balances outstanding at 31 December 2008, excluding current
amounts
In 2008 we established two loans: a construction loan for Equest Logistic Centre
of Euro 25.7 million, on a five year term at normal market rates and a corporate
debt facility of Euro 15.0 million on a seven month term at normal market rates.
Both facilities were secured from Raiffeisen Zentralbank. The construction loan
is not yet fully drawn though building has been completed. The corporate debt
was repaid early and in full from CCS sales proceeds in November 2008.
The banking environment remains difficult. We will qualify to draw up to Euro
7.9 million from the Equest Logistic Centre debt facility once certain letting
agreements are completed. VAT reimbursements related to prior construction works
also contribute periodically to liquidity.
Fortunately, we have no scheduled term maturities on our mortgage secured debt
until 2011 though both Moldova Mall and Vitantis loans are technically payable
following their respective event of default, as referred to in the Chairman's
statement.
Property disposals
Global developments in the property sector have had an impact in our region and
investment sales brokers are reporting that investor yield expectations have
risen. We were fortunate to have secured a 7.1% yield on CCS in November 2008.
Since then, investor activity, even on prime assets, has been limited to only a
few transactions, mostly by distressed sellers. While we expect a favourable
outcome in the marketing of our assets, we cannot predict the timing associated
with an orderly sales process.
The main disposals during 2008 included:
City Center Sofia - Shopping Mall, Bulgaria
The sale of EBP's largest asset completed at a price of Euro 101.5 million. The
sale created a net cash inflow to the Company of Euro 37.0 million, primarily
the return of capital invested since the original Euro 94 million price paid in
December 2005.
Aurora / Archway Portfolio - Retail Development Joint Venture, Serbia
In June 2008 the Company agreed a staged sale contract whereby EBP agreed to
sell its shares in the Aurora portfolio, consisting of nine retail land plots,
to its joint venture partner at prices tied to 31 December 2007 valuations. The
Company has a remaining financial interest in the portfolio but, as the
valuation of that interest is currently indeterminable with any reasonable
degree of precision, and the events which will enable its recognition have not
yet occurred, the financial statements ascribe a zero value to it.
Additionally, the Company disposed of two small land holdings: the Sarajevska
land plot in Old Belgrade and finalised the earlier sale of a retail land plot
in central Skopje in May 2009 (post period).
Property acquisitions
Following the strategic review in May 2008, EBP has not entered into any new
purchase contracts. However, under prior contracts, EBP had one remaining
purchase payment commitment and had an obligation to restructure a joint
venture, both of which completed in the year.
Skadarlija / Apollo - Mixed Use Development Site, Belgrade
In May 2008, the Company made the final Euro 8.0 million instalment payment to
complete the acquisition of this former brewery site in the centre of Old
Belgrade. In addition, the Company incurred some late payment costs.
Serdika - Mixed Use Development Site, Sofia
In July 2008 EBP contributed its ownership interest in this prime assemblage to
a new Dutch co-operative owned by the company and a minority partner in order to
facilitate the sale of the site to an Austrian institutional investor. The
minority partner also contributed its proportion of ownership of the property to
the new SPV. Unfortunately, the Austrian investor chose to end negotiations in
January 2009.
A deposit of Euro 15 million was paid by the investor in respect of the proposed
purchase, subject to an agreement with, and security provided by, the minority
partner alone. Euro 10.0 million of the Euro 15 million was paid to the Company.
The minority partner has since repaid the investor the whole Euro 15 million
leaving the company indebted to the minority partner, Equest Investments Balkans
Limited, for Euro 10.0 million. The terms and timing of the repayment of the
Euro 10.0 million are being negotiated.
Investment property
The Company's investment assets include the retail projects Vitantis, Moldova
Mall, and Targoviste; three logistic warehouses in Bucharest; four office
buildings in Bucharest; and an office building in Skopje.
Vitantis Retail Park - Bucharest, Romania
With three anchors (Carrefour, Technomarket and Praktiker) and about 85% of its
11,000 sqm retail gallery leased, Vitantis is still transitioning to a
stabilised operation. Since the gallery shops opened in September 2008 the
Romanian Lei has devalued by over 14%, which has put pressure on retailers since
all lease payments are based on the Euro and payable in local currency. On a
more positive note, we know the performance of our anchor stores is very strong
and our monthly footfall statistics are improving.
In light of the current operational issues and the event of default, the sale of
this asset has been postponed until the asset reaches stabilised levels and the
current negotiations are resolved with the bank.
Moldova Mall - Shopping Mall, Iasi, Romania
As noted in a post period RNS announcement, due to a breach of financial
covenants, Bank Austria has declared an event of default for this financing.
The retailers in this asset have suffered disproportionally from the
depreciation of the Romania Lei and have made numerous demands for rent
reductions. As nearly 33% of the rent roll expires annually in each of the next
three years, the downward pressure on rents is expected to continue for some
time. This could also lead to a further decline in the asset value.
Based on the 31 December 2008 CBRE valuation of Euro 26.5 million, the Company
has lost a significant portion of the Euro 35.0 million invested to date, and
has impaired the carrying value of the asset down to the level of outstanding
loan finance, reflecting a prudent view of the likely recoverable value. The
Board continues to examine its options for this asset, which may include
allowing it to revert to the lender. This will have no further impact on net
assets.
Equest Logistic Centre -Three Modern Distribution Warehouses, Bucharest, Romania
In April 2008 the Company secured a Euro 25.7 million five year construction to
investment loan with Raiffeisen Zentralbank (RZB), of which Euro 17.7 million
had been utilised as at year end 2008. These modern facilities are attracting
tenants as planned and achieving top rents in the market. Building 1, an office
warehouse of 20,308 sqm, opened in February 2008 and is now 100% let. Building
2, an office warehouse of 18,161 sqm, opened in October and is 42.2% let.
Building 3, an office warehouse of 18,161 sqm, was completed in March 2009 and
agreed heads of terms for a lease agreement with Domo Retail S.A. in April 2009
for 57.4% of the premises. These contracts will bring the overall leasing status
to 67% which is the minimal threshold needed to qualify to draw on the RZB
facility. Though Euro 7.9 million is committed and available from RZB, we will
not qualify to draw the full amount without additional leases.
We plan to market this property for sale once stabilised occupancy is achieved.
Development property
We made significant construction progress during 2008 and have effectively
completed the construction pipeline. There is no remaining development project
with committed equity. The portfolio contains several land parcels which require
further capital to complete key pre-development initiatives, such as securing
building permits, which we believe are needed to protect value and enhance the
marketability of the land. Since construction financing for new projects cannot
be obtained on favourable terms, each project is being marketed for sale
and / or we are in discussions with a third party capital investor.
Euro Car Park - Mixed Use Development Site, Bucharest, Romania
This land concession in the centre of Bucharest is a project the Company is
still evaluating. The project is a mixed use urban scheme with a car park,
offices, and ground level retail and estimated return on cost of over 12%,
subject to the final architectural design and detailed construction costs.
Associates
Glorient Investment BV (40% EBP) - Retail Warehouse Portfolio, Bulgaria
Glorient continues to expand its holdings and now owns 32 investment properties
and nine development sites. Glorient has made a cautious entry into Slovakia by
securing four sites which will eventually host Technomarket stores.
Cost savings
A merger proposal for several BV entities has been submitted to the relevant
bankers for consideration and approval. The concept is to reduce the total count
of BV's to save administration costs and to simplify our corporate structure.
Subordinate SPV's may be merged later in 2009 to further reduce complexity. The
merger application was filed in February 2009 and will be completed by the third
quarter of 2009, subject to approval from banks and the completion of amended
finance documentation, primarily subordination agreements and share pledges. No
joint venture entities are to be merged and no cross guarantees or cross default
provisions are contemplated as part of the merger.
Hedging
We believe that some cash should be directed to buy down existing swap contracts
to reduce the annual finance costs at the SPV level. This would relieve some of
the pressure on interest service covenants.
Swap Positions
+----------+---------+------------+-------------+------------+----+
| Project | | Hedge | Maturity | Base Rate | |
+----------+---------+------------+-------------+------------+----+
| Moldova Mall | fixed @ | exp | 3-M | |
| | 4.15% | 09/08/2011 | EURIBOR | |
+--------------------+------------+-------------+------------+----+
| Targoviste | fixed @ | exp | 1-M | |
| | 3.97% | 12/02/2013 | EURIBOR | |
+--------------------+------------+-------------+------------+----+
| Vitantis | | fixed @ | exp | 3-M | |
| | | 5.21% | 31/03/2012 | EURIBOR | |
+----------+---------+------------+-------------+------------+----+
| Bucharest | fixed @ | exp | 3-M | |
| Offices | 4.50% | 24/09/2012 | EURIBOR | |
+----------+---------+------------+-------------+------------+----+
Outlook
We expect general market conditions to improve in late 2009 and early 2010 due
to lower interest rates and a general improvement in lending conditions.
Investor activity until then will be limited.
Financial statements
Copies of the accounts will be sent to shareholders shortly and will be
available from Equest Balkan Properties c/o IOMA, IOMA House, Hope Street,
Douglas, Isle of Man IM1 1AP and on the company's website www.equestbalkan.com.
Equest Property Management Limited
24 June 2009
Directors' report
The Directors of the Company present their report and financial statements for
the year ended 31 December 2008.
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
the AIM Market operated by the London Stock Exchange plc on 14 December 2005.
The Company invests in commercial property in South Eastern Europe, primarily
Bulgaria, Serbia and Romania. Its investment objectives are to invest,
principally, in a range of income-producing commercial, retail and industrial
property, where it sees such investment as having the potential for capital
appreciation. The Company may also invest in select development projects and
land acquisitions.
Results and dividends
The Group's results for the year ended 31 December 2008 are set out in the
Consolidated Income Statement on page 23.
A review of the Group's activities is contained within the Chairman's Statement
and the Investment Manager's Report on pages 4 and 8 respectively.
No dividend has been declared for the year ending 31 December 2008.
The Directors declared an interim dividend of EUR0.0357 (2.5p) per share for the
period to 31 December 2007 (see Note 9 to the financial statements). The interim
dividend was paid on 9 November 2007 for shareholders on the register at 12
October 2007.
Directors
The current Directors and those who held office throughout the year:
+-----------------------------------------+---------------+--------------------+
| Name | Date of | Date of |
| | Appointment | Resignation |
+-----------------------------------------+---------------+--------------------+
| Lord Anthony St. John of Bletso | 10 November | 23 July 2008 |
| (Non-executive Chairman) | 2005 | |
+-----------------------------------------+---------------+--------------------+
| Ionut Costea (Non-executive Director) | 10 November | |
| | 2005 | |
+-----------------------------------------+---------------+--------------------+
| Robin James (Non-executive Director) | 10 November | |
| | 2005 | |
+-----------------------------------------+---------------+--------------------+
| Solomon Passy (Non-executive Director) | 10 November | 23 July 2008 |
| | 2005 | |
+-----------------------------------------+---------------+--------------------+
| Donald Lake (Non-executive Director) | 30 July 2007+ | |
+-----------------------------------------+---------------+--------------------+
| Charles Jillings (Non-executive | 4 April 2008* | |
| Chairman) | | |
+-----------------------------------------+---------------+--------------------+
| Andrzej Sobczak (Non-executive | 4 April 2008 | 29 May 2009 |
| Director) | | |
+-----------------------------------------+---------------+--------------------+
+ Appointed Non-executive Deputy Chairman on 23 July 2008
* Appointed Non-executive Chairman on 23 July 2008
In compliance with good corporate governance, Donald Lake will retire by
rotation at the start of the forthcoming Annual General Meeting and, being
eligible, has offered himself for immediate re-appointment.
Biographical details of all Directors are set out on page 19 of the report.
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 the Investment Adviser and Administrator.
At each of the regular Board meetings held, the financial performance of the
Company is reviewed. In addition, the members of the Board receive regular
reports from the Investment Adviser and Administrator. These include the
valuation of the Company's assets, investment performance reports, compliance
and shareholders reports and management accounts.
Company Secretary
The secretary of the Company at the 2008 financial year end and as at the date
of this report is Philip Scales.
Interests of the Directors in contracts with the Company
Details of the Directors' letters of appointment with the Company are set out
below. Other than letters of appointment, no Director had any material interest
in any significant contract with any Group company at any time in the 2008
financial year. The interests of Directors and their connected persons in the
ordinary share capital of the Company are disclosed below.
Directors' service contracts
The following Directors have entered or agreed to enter into letters of
appointment with the Company, details of which are set out below:
+------------------------+------------------------+----------------------+
| Name | Title | Annual Remuneration |
+------------------------+------------------------+----------------------+
| Charles Jillings | Non-executive Chairman | EUR40,000 |
+------------------------+------------------------+----------------------+
| Ionut Costea | Non-executive Director | EUR30,000 |
+------------------------+------------------------+----------------------+
| Robin James | Non-executive Director | EUR30,000 |
+------------------------+------------------------+----------------------+
| Donald Lake | Non-executive Director | EUR30,000 |
+------------------------+------------------------+----------------------+
| | | |
+------------------------+------------------------+----------------------+
Directors' interests in shares of the Company
Save as disclosed below, as at 19 June 2009 none of the Directors nor any
members 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.
+------------------------+------------------------+----------------------+
| Name | Number of Ordinary | Percentage |
| | Shares | Shareholding (%) |
| | | |
+------------------------+------------------------+----------------------+
| Donald Lake* | 13,000 | 0.009 |
| | | |
+------------------------+------------------------+----------------------+
*Mr. Lake was deemed interested in the said ordinary shares by virtue of his
partner having a beneficial interest in such ordinary shares
In April 2008, the Company appointed to the Board of Directors Charles David
Owen Jillings (53) and Andrzej Wiktor Sobczak (58), as Non-executive directors,
with immediate effect. Charles is the Executive Director of Utilico Emerging
Markets Limited, which holds 32,360,483 ordinary shares (23.11%) in the Company
(as at 18 April 2009), and Andrzej was the Deputy Chief Executive of Carrousel
Capital Ltd, which holds 36,995,000 ordinary shares (26.43%) in the Company (as
at 18 April 2009). Andrzej resigned as a Director of the Company effective from
29 May 2009.
Share capital
As at the date of this report, the Company has 140,000,000 ordinary shares of
EUR0.01 each in issue. The Company's ordinary shares are traded on the AIM Market
operated by the London Stock Exchange plc in pounds sterling. However the
Company's reporting currency is the Euro to reflect the underlying assets and
liabilities in the Balkan region.
At the 2008 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 EUR0.01 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 preceding 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 2009 Annual General Meeting
unless renewed prior to such time.
Substantial shareholdings
In so far as is known to the Company as at 6 April 2009 each of the following
persons has, directly or indirectly, an interest in 3% or more of the issued
ordinary shares in the capital of the Company:
+------------------------+------------------------+----------------------+
| Name | Number of Ordinary | Percentage |
| | Shares | Shareholding (%) |
+------------------------+------------------------+----------------------+
| Carousel Capital | 36,995,000 | 26.43 |
+------------------------+------------------------+----------------------+
| Utilico Emerging | 32,360,483 | 23.11 |
| Markets | | |
+------------------------+------------------------+----------------------+
| UNIQA Financial | 13,525,280 | 9.66 |
| Services | | |
+------------------------+------------------------+----------------------+
| Weiss Asset Management | 8,325,000 | 5.95 |
+------------------------+------------------------+----------------------+
| Carmignac Gestion | 7,177,165 | 5.13 |
+------------------------+------------------------+----------------------+
| Deutsche Asset | 5,177,019 | 3.70 |
| Management* | | |
+------------------------+------------------------+----------------------+
* Deemed interested in the said ordinary shares by virtue of managing holdings
for a number of beneficial shareholders none of whom individually owns an
interest in 3% or more of the issued ordinary shares of the Company.
Share options
The Company does not operate any employee share options schemes and no options
to subscribe for ordinary shares in the Company have been granted.
The Audit Committee
The audit committee, which comprises Robin James (Chairman), Charles Jillings
and Donald Lake, 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
During the year, Grant Thornton was appointed as auditor to fill a casual
vacancy. A resolution will be submitted to the forthcoming Annual General
Meeting of the Company to re-appoint Grant Thornton as auditors of the Company
for the ensuing year.
Post balance sheet events
A summary of the significant transactions entered into by the Group subsequent
to 31 December 2008 is included in Note 32 of the financial statements.
Relations with shareholders
The Company is committed to maintaining an effective dialogue with its
shareholders. Shareholders will have the opportunity at the Annual General
Meeting of the Company to ask questions about the Company's activities and
performance. It is the Board's intention that Directors and representatives of
the Investment Manager will attend the forthcoming Annual General Meeting.
Company website
To provide a portal for investor information and in accordance with the
requirements of AIM, the Company maintains a website at: www.equestbalkan.com
By order of the Board
___________________
Philip Scales
Company Secretary
24 June 2009
The Board
The Board of the Company comprises four Non-Executive Directors. Brief
biographical details of the members of the Board are provided below:
Charles Jillings (Non-executive Chairman)
Charles Jillings (53), qualified as a Chartered Accountant, is the Executive
Director of Utilico Emerging Markets Limited, an investment company which
invests predominantly in emerging markets. He has previously worked in corporate
finance at Hill Samuel for 10 years. He has been a director of a number of
listed companies.
Ionut Costea (Non-executive Director)
Ionut Costea (49) is based in Bucharest and is currently the President and CEO
of Eximbank Romania. Mr Costea is the former Chairman of the Board of Emporiki
Bank Romania, part of French Credit Agricole Group, as well as Raiffeisen Banca
Pentru Locuinte, part of the Austrian Raiffeisen Group. Mr Costea holds a PhD in
Economics and was formerly an Alternate Director of the Board of Directors of
the European Bank for Reconstruction and Development (EBRD), and Deputy Minister
of Finance of Romania.
Robin James (Non-executive Director)
Robin James (64) is based in the Isle of Man and, until he retired in June 2005,
was CEO of the banking and financial services group, Singer & Friedlander (Isle
of Man) Holdings Limited. Mr James is currently licensed by the Isle of Man
Financial Supervision Commission to provide Corporate and Trust Services under
section 7 of the Financial Services Act 2008 and is a Non-executive director of
a diverse number of companies including five listed companies. Mr James spent
nine years with Kleinwort Benson Limited in the UK and South Africa. He is also
Chairman of the Company's Audit Committee.
Donald Lake (Non-executive Director)
Donald Lake (64) is based in the Isle of Man. Mr Lake is a Chartered Surveyor
and a director of four other listed companies. He has advised on property
investment deals throughout the UK and acted for developers, institutions, banks
and occupiers.
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 elected to prepare the
financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union. The financial statements are
required by law to give a true and fair view of the state of affairs of the
Company and Group and of the profit or loss of the Group 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 that the financial statements comply with International Financial Reporting Standards as adopted by the European Union, 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 proper accounting records which
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.
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.
By Order of the Board
Philip Scales
Company Secretary
24 June 2009
Independent auditor's report to the members of
Equest Balkan Properties plc
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF EQUEST BALKAN PROPERTIES PLC
We have audited the Consolidated and Parent Company financial statements of
Equest Balkan Properties Plc for the year ended 31 December 2008, which comprise
the Consolidated Income Statement on page 23, the Consolidated and Company
Balance Sheets on pages 24 and 25, the Consolidated and Company Statement of
Changes in Equity on pages 26 and 27, the Consolidated and Company Cash Flow
Statements on page 28, the Statement of Accounting Policies on pages 29 to 36,
and the related notes on pages 37 to 65. These financial statements have been
prepared under the accounting policies set out therein.
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 of directors and auditors
The directors' responsibilities for preparing the financial statements in
accordance with applicable Isle of Man company law and International Financial
Reporting Standards (IFRS) (as adopted by the European Union) are set out in the
Statement of Directors' Responsibilities on page 20. Our responsibility is to
audit the financial statements in accordance with relevant legal and regulatory
requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Isle of Man
Companies Acts 1931 to 2004. We also report to you whether, in our opinion, the
information given in the Directors' Report is consistent with the financial
statements. In addition we report to you if, in our opinion, the Group and
Company have not kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if information
specified by law regarding directors' transactions with the Group and Company is
not disclosed.
We read the Directors' Report and any other information accompanying the
financial statements and consider the implications for our report, if we become
aware of any apparent misstatements or inconsistencies within it.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgments made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the Group's and Company's circumstances, consistently applied and adequately
disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Emphasis of Matter - Going Concern
In forming our opinion on the financial statements, which is not qualified, we
have considered the adequacy of the disclosures made in Note 1(d) to the
financial statements concerning the Group's ability to continue as a going
concern.
As explained in Note 1(d) to the financial statements, the Directors are
currently in negotiations with a lender, Equest Investment Balkans plc,
regarding agreement of repayment terms for an unsecured loan facility, but have
not yet secured any commitments from the lender.
This condition, along with the other matters explained in Note 1(d) to the
financial statements, indicate the existence of a material uncertainty which may
cast significant doubt about the company's ability to continue as a going
concern. The financial statements do not include the adjustments that would
result if the company was unable to continue as a going concern.
Opinion
In our opinion:
* the financial statements give a true and fair view, in accordance with
International Financial Reporting Standards (as adopted by the European Union),
of the state of the Group and Company's affairs as at 31 December 2008 and of
the Group's result for the year then ended;
* except in respect of the non-accrual of proposed dividends in the prior year as
disclosed in Note 9, the financial statements have been properly prepared in
accordance with the Isle of Man Companies Acts 1931-2004; and
* the information given in the Directors' Report is consistent with the financial
statements.
Grant Thornton
Chartered Accountants
3rd Floor, Exchange House
54-58 Athol Street
Douglas
Isle of Man IM1 1JD
CONSOLIDATED INCOME STATEMENT
+--------------+--------+--------+----------+------------+
| | | | 2008 | 2007 |
+ + + +----------+------------+
| | | | Group | Group |
| | | | | (restated) |
+--------------+--------+--------+----------+------------+
| | | Notes | EUR '000 | EUR '000 |
| | | | | |
+--------------+--------+--------+----------+------------+
| | | | | |
+--------------+--------+--------+----------+------------+
| | | | | |
+--------------+--------+--------+----------+------------+
| | | | |
+-----------------------+--------+----------+------------+
| Revenue | | 21,252 | 16,207 |
+-----------------------+--------+----------+------------+
| Property | | (9,791) | (7,616) |
| operating | | | |
| expenses | | | |
+-----------------------+--------+----------+------------+
| Net rental and | 4 | 11,461 | 8,591 |
| related income | | | |
+-----------------------+--------+----------+------------+
| | | | |
+-----------------------+--------+----------+------------+
| (Loss)/Net gain |11, 14 | (20,838) | 14,523 |
| from fair value | | | |
| adjustment on | | | |
| property assets | | | |
+-----------------------+--------+----------+------------+
| Share of profit | 18 | 966 | 4,612 |
| from associate | | | |
+-----------------------+--------+----------+------------+
| Loss | | 5 | (14,807) | - |
| on | | | | |
| sale | | | | |
| of | | | | |
| subsidiaries | | | | |
+--------------+--------+--------+----------+------------+
| Administrative | 6 | (13,021) | (7,107) |
| expenses | | | |
+-----------------------+--------+----------+------------+
| Operating | | (36,239) | 20,619 |
| (loss)/profit | | | |
+-----------------------+--------+----------+------------+
| | | | |
+-----------------------+--------+----------+------------+
| Finance income | 7 | 437 | 1,593 |
+-----------------------+--------+----------+------------+
| Finance costs | 7 | (26,339) | (13,767) |
+-----------------------+--------+----------+------------+
| Impairment of |13, 17 | (2,197) | (4,973) |
| goodwill and | | | |
| acquired | | | |
| building rights | | | |
+-----------------------+--------+----------+------------+
| (Loss)/profit | | (64,338) | 3,472 |
| for the year | | | |
| before tax | | | |
+-----------------------+--------+----------+------------+
| | | | |
+-----------------------+--------+----------+------------+
| Income tax | 8 | 1,741 | 3,545 |
| credit | | | |
+-----------------------+--------+----------+------------+
| | | | |
+-----------------------+--------+----------+------------+
| (Loss)/profit | | (62,597) | 7,017 |
| for the year | | | |
| after tax | | | |
+-----------------------+--------+----------+------------+
| | | | |
+-----------------------+--------+----------+------------+
| Attributable | | | |
| to: | | | |
+-----------------------+--------+----------+------------+
| | | | |
+-----------------------+--------+----------+------------+
| Equity | | (61,653) | 7,663 |
| shareholders in | | | |
| the Company | | | |
+-----------------------+--------+----------+------------+
| Minority | | (944) | (646) |
| interest | | | |
+-----------------------+--------+----------+------------+
| | | | | |
+--------------+--------+--------+----------+------------+
| | | | (62,597) | 7,017 |
+--------------+--------+--------+----------+------------+
| | | | | |
+--------------+--------+--------+----------+------------+
| | | | |
+-----------------------+--------+----------+------------+
| (Loss)/earnings | | | |
| per share for | | | |
| (loss)/profit | | | |
| attributable to | | | |
| the equity | | | |
| holders of the | | | |
| Company during | | | |
| the year: | | | |
+-----------------------+--------+----------+------------+
| | | | | |
+--------------+--------+--------+----------+------------+
| (Loss)/earnings | 10 | (0.44) | 0.05 |
| per share - | | | |
| basic and | | | |
| diluted | | | |
+--------------+--------+--------+----------+------------+
CONSOLIDATED AND COMPANY BALANCE SHEETS
+-------------+----------+----------+----------+-----------------+----------+----------+
| | | | Group | Group | Company | Company |
+ + + +----------+-----------------+----------+----------+
| | | | 2008 | 2007 (restated) | 2008 | 2007 |
+-------------+----------+----------+----------+-----------------+----------+----------+
| | | Notes | EUR '000 | EUR '000 | EUR '000 | EUR '000 |
+-------------+----------+----------+----------+-----------------+----------+----------+
| ASSETS | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Non-current assets | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Investment property | 11 | 146,674 | 290,454 | - | - |
+------------------------+----------+----------+-----------------+----------+----------+
| Prepaid operating | 12 | - | 5,752 | - | - |
| leases | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Acquired building | 13 | 1,750 | 7,505 | - | - |
| rights | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Development | 14 | 64,258 | 23,215 | - | - |
| property | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Other property, | 15 | 200 | 181 | - | - |
| plant and equipment | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Investments in | 16 | - | - | 56,762 | 2 |
| subsidiaries | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Goodwill | 17 | - | 2,455 | - | - |
+------------------------+----------+----------+-----------------+----------+----------+
| Investment in | 18 | 32,884 | 38,256 | - | - |
| associates | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Loans and | 16, 18 | 1,148 | 3,910 | 131,442 | 197,859 |
| receivables | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Deferred income tax | 19 | 440 | 893 | - | - |
| assets | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Total non-current | | 247,354 | 372,621 | 188,204 | 197,861 |
| assets | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Current assets | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Loan receivable | 18 | 61 | 1,000 | - | - |
+------------------------+----------+----------+-----------------+----------+----------+
| Trade and other | 20 | 9,951 | 8,832 | 1,151 | 2,004 |
| receivables | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Cash and cash | | 15,530 | 8,083 | 3,043 | 105 |
| equivalents | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Total current | | 25,542 | 17,915 | 4,194 | 2,109 |
| assets | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| | | | | | | |
+-------------+----------+----------+----------+-----------------+----------+----------+
| Total assets | | 272,896 | 390,536 | 192,398 | 199,970 |
+------------------------+----------+----------+-----------------+----------+----------+
| | | | | | |
+------------------------+ +----------+-----------------+----------+----------+
| EQUITY | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Share capital | 26 | 1,400 | 1,400 | 1,400 | 1,400 |
+------------------------+----------+----------+-----------------+----------+----------+
| Distributable | | 176,242 | 176,242 | 176,242 | 176,242 |
| reserve | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Retained earnings | | (38,719) | 22,809 | 4,211 | 21,181 |
+------------------------+----------+----------+-----------------+----------+----------+
| Translation reserve | | (12,395) | (1,080) | - | - |
+------------------------+----------+----------+-----------------+----------+----------+
| Revaluation reserve | | 2,153 | 8,944 | - | - |
+------------------------+----------+----------+-----------------+----------+----------+
| Total equity | | 128,681 | 208,315 | 181,853 | 198,823 |
| attributable to | | | | | |
| equity holders of | | | | | |
| the parent company | | | | | |
+ + +----------+-----------------+----------+----------+
| | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Minority interest | | 2,833 | 1,762 | - | - |
+------------------------+----------+----------+-----------------+----------+----------+
| Total equity | | 131,514 | 210,077 | 181,853 | 198,823 |
+------------------------+----------+----------+-----------------+----------+----------+
| | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Liabilities | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Non-current | | | | | |
| liabilities | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Bank borrowings | 21 | 113,550 | 146,618 | - | - |
+------------------------+----------+----------+-----------------+----------+----------+
| Deferred income tax | 19 | 1,976 | 5,123 | - | - |
| liabilities | | | | | |
+------------------------+----------+----------+-----------------+----------+----------+
| Deposits | | 447 | 1,501 | - | - |
+------------------------+----------+----------+-----------------+----------+----------+
| Other long term | 22 | 200 | 1,063 | | - |
| loans | | | | - | |
+------------------------+----------+----------+-----------------+----------+----------+
| Other | | | 1,253 | - | - | |
| non-current | | | | | | |
| liabilities | | | | | | |
+-------------+----------+----------+----------+-----------------+----------+----------+
| Total non-current | | 117,426 | 154,305 | | |
| liabilities | | | | - | - |
+-------------+----------+----------+----------+-----------------+----------+----------+
+--------+--------+--------+---------+---------+---------+---------+
| | | | | | |
+-----------------+--------+---------+---------+---------+---------+
| Current | | | | | |
| liabilities | | | | | |
+-----------------+--------+---------+---------+---------+---------+
| Trade and other | 24 | 9,693 | 19,272 | 496 | 1,147 |
| payables | | | | | |
+-----------------+--------+---------+---------+---------+---------+
| Bank borrowings | 21 | 4,215 | 807 | - | - |
+-----------------+--------+---------+---------+---------+---------+
| Other short | 22 | 10,048 | 6,075 | 10,049 | - |
| term loans | | | | | |
+-----------------+--------+---------+---------+---------+---------+
| Total current | | 23,956 | 26,154 | 10,545 | 1,147 |
| liabilities | | | | | |
+-----------------+--------+---------+---------+---------+---------+
| | | | | | | |
+--------+--------+--------+---------+---------+---------+---------+
| Total | | 141,382 | 180,459 | 10,545 | 1,147 |
| liabilities | | | | | |
+-----------------+--------+---------+---------+---------+---------+
| | | | | | | |
+--------+--------+--------+---------+---------+---------+---------+
| Total equity | | 272,896 | 390,536 | 192,398 | 199,970 |
| and liabilities | | | | | |
+--------+--------+--------+---------+---------+---------+---------+
The financial statements below were approved and authorised for issue by the
Board of Directors on 24 June 2009 and were signed on their behalf by:
Donald Lake
Director and Deputy Chairman
Robin James
Director
The notes below are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+------------+------------+----------+----------+------------+---------+
| | | ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY | | |
+----------------------------------+----------------------------------+--------------------------------------------------------------------------------+-----------------------------------------------+---------+
| | | Share | Distributable | Retained | Translation | Revaluation | Total (resta-ted) | Minority | Total |
| | | Capital | Reserve | Earnings | Reserve | Reserve | | Interest | Equity |
| | | | | (resta-ted) | | (restated) | | | |
+ +----------------------------------+ + + + + + + + +
| | | | | | | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| | | EUR | EUR '000 | EUR '000 | EUR '000 | EUR '000 | EUR '000 | EUR '000 | EUR '000 |
| | | '000 | | | | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Balance at 1 January 2007 | | 1,400 | 196,640 | 15,146 | 819 | 9,900 | 223,905 | 855 | 224,760 |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Profit for the year | | - | - | 7,663 | - | - | 7,663 | (646) | 7,017 |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Fair value movement on | | - | - | - | - | (607) | (607) | 874 | 267 |
| development property (restated) | | | | | | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Deferred tax | | - | - | - | - | (349) | (349) | (136) | (485) |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Exchange differences on | | - | - | - | - | - | (1,899) | (18) | (1,917) |
| translating foreign operations | | | | | (1,899) | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Total recognised income and | | - | - | 7,663 | (1,899) | (956) | 4,808 | 74 | 4,882 |
| expense for the year | | | | | | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Dividends declared | | - | (20,398) | - | - | - | (20,398) | - | (20,398) |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Minority interest arising on | | - | - | - | - | - | - | 833 | 833 |
| acquisitions | | | | | | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Balance at 31 December 2007 | | 1,400 | 176,242 | 22,809 | (1,080) | 8,944 | 208,315 | 1,762 | 210,077 |
| (restated) | | | | | | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Loss for the year | | - | - | (61,653) | - | | (61,653) | (944) | (62,597) |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Fair value movement on | | - | - | - | - | (646) | (646) | (371) | (1,017) |
| development property | | | | | | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Realisation of reserves on sale | | - | - | 125 | (347) | (125) | (347) | - | (347) |
| of subsidiary | | | | | | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Exchange differences on net | | - | - | - | (9,362) | - | (9,362) | - | (9,362) |
| investment in foreign operations | | | | | | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Exchange differences on | | - | - | - | (1,606) | (233) | (1,839) | (68) | (1,908) |
| translating foreign operations | | | | | | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Share of revaluation reserve of | | - | - | - | - | (5,613) | (5,613) | - | (5,613) |
| an associate | | | | | | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Minority interest on disposals | | - | - | - | - | - | - | 2,454 | 2,454 |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Deferred tax | | - | - | - | - | (174) | (174) | - | (174) |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Total recognised income and | | - | - | (61,528) | (11,315) | (6,791) | (79,634) | 1,071 | (78,563) |
| expense for the year | | | | | | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| | | | | | | | | | |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+-------------------------+----------+----------+
| Balance at 31 December 2008 | | 1,400 | 176,242 | (38,719) | (12,395) | 2,153 | 128,681 | 2,833 | 131,514 |
+----------------------------------+----------------------------------+---------+---------------+-------------+-------------+-------------+------------+------------+----------+----------+------------+---------+
The notes below are an integral part of these financial statements.
+--------------------------+-------+--------------------------+-----------+----+----------+--------+----+----+--------+--------------------------+
| COMPANY STATEMENT OF CHANGES IN EQUITY | | | | |
+-------------------------------------------------------------+-----------+------------------------+---------+--------+
| | | | | | | |
+--------------------------+-------+--------------------------+-----------+------------------------+---------+--------+
| | | | | | |
+ + + + + + +
| | | | | | | |
+--------------------------+-------+--------------------------+------------------------------------+---------+--------+--------------------------+
| | | Share | Distributable | Retained | Total |
| | | Capital | Reserve | Earnings | Equity |
+ + +--------------------------+----------------+----------+-------------+
| | | EUR '000 | EUR '000 | EUR '000 | EUR '000 |
+--------------------------+-------+--------------------------+----------------+----------+-------------+
| Balance at 1 January | | 1,400 | 196,640 | 9,739 | 207,779 |
| 2007 | | | | | |
+--------------------------+-------+--------------------------+----------------+----------+-------------+
| Profit and total | | - | - | 11,442 | 11,442 |
| recognised income and | | | | | |
| expense for the year | | | | | |
+--------------------------+-------+--------------------------+----------------+----------+-------------+
| Dividends declared | | - | (20,398) | - | (20,398) |
+--------------------------+-------+--------------------------+----------------+----------+-------------+
| Balance at 31 December | | 1,400 | 176,242 | 21,181 | 198,823 |
| 2007 | | | | | |
+--------------------------+-------+--------------------------+----------------+----------+-------------+
| Loss and total | | - | - | (16,970) | (16,970) |
| recognised income and | | | | | |
| expense for the year | | | | | |
+--------------------------+-------+--------------------------+----------------+----------+-------------+
| Dividends declared | | - | - | - | - |
+--------------------------+-------+--------------------------+----------------+----------+-------------+
| Balance at 31 December | | 1,400 | 176,242 | 4,211 | 181,853 |
| 2008 | | | | | |
+--------------------------+-------+--------------------------+-----------+----+----------+--------+----+----+--------+--------------------------+
The notes below are an integral part of these financial statements.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
+-------------------------------+--+-------+------------+------------+-----------+-----------+
| | | | Group | Group | Company | Company |
| | | | 2008 | 2007 | 2008 | 2007 |
+-------------------------------+--+-------+------------+------------+-----------+-----------+
| | | Notes | EUR '000 | EUR '000 | EUR '000 | EUR '000 |
+-------------------------------+--+-------+------------+------------+-----------+-----------+
| | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Cash (outflow)/inflow (used by)/ | 27 | (3,019) | 2,990 | (7,932) | (4,623) |
| generated from operations | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Finance costs | | (11,576) | (5,908) | (84) | (8) |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Tax paid | | (138) | (445) | - | - |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Net cash inflow/(outflow) from | | (14,733) | (3,363) | (8,016) | (4,631) |
| operating activities | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Cash flow from investing | | | | | |
| activities | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Proceeds on sale of subsidiaries | 30 | 41,654 | - | - | - |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Purchase of investment property | 11 | (13,511) | (11,583) | - | - |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Proceeds on sale of investment | | 2,150 | - | - | - |
| property | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Purchase of prepaid operating | 12 | - | (2,212) | - | - |
| leases | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Purchase of building rights | 13 | - | (671) | - | - |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Purchase of development property | 14 | (45,842) | (25,153) | - | - |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Purchase of other property, | 15 | (149) | (22) | - | - |
| plant and equipment | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Proceeds on disposal of other | 15 | - | 221 | - | - |
| property, plant and equipment | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Loans advanced to subsidiaries | 16 | - | - | (14,890) | (51,049) |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Loans repaid by subsidiaries | 16 | - | - | 26,666 | 47,139 |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Acquisition of subsidiaries, net | 30 | - | (25,200) | 1,785 | (1) |
| of cash acquired | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Interest received | | 134 | 2,234 | - | 13,485 |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Net cash (outflow)/inflow from | | (15,564) | (62,386) | 13,561 | 9,574 |
| investing activities | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Cash flows from financing | | | | | |
| activities | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Dividends paid | 9 | - | (20,398) | - | (20,398) |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Repayment of long term | | (4,026) | - | - | - |
| borrowings | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Loans advanced | | (606) | (4,910) | (2,594) | - |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Proceeds from borrowing and | | 40,607 | 44,380 | - | - |
| other loans | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Net cash inflow/(outflow) from | | 35,975 | 19,072 | (2,594) | (20,398) |
| financing activities | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Net (decrease)/increase in cash | | 5,678 | (46,677) | 2,951 | (15,455) |
| & cash equivalents | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Cash & cash equivalents at | | 8,083 | 52,921 | 105 | 15,607 |
| beginning of year | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Foreign exchange gains/(losses) | | 1,769 | 1,839 | (13) | (47) |
| on cash and cash equivalents | | | | | |
+----------------------------------+-------+------------+------------+-----------+-----------+
| Cash & cash equivalents at end | | 15,530 | 8,083 | 3,043 | 105 |
| of year | | | | | |
+-------------------------------+--+-------+------------+------------+-----------+-----------+
The notes below are an integral part of these financial statements.
STATEMENT OF ACCOUNTING POLICIES
For the year ended 31 December 2008
General Information
Equest 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 except as disclosed in Note 9, International Financial
Reporting Standards ("IFRS") and IFRIC interpretations 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 period from
1 January 2006 to 31 December 2007.
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 Consolidated Income
Statement is EUR16,970,000 (2007: profit EUR11,442,000).
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 (d).
Restatement of comparative amounts
During the year the management performed a detailed review of the Company's IFRS
financial statements for 2006 and 2007 and the related accounting policies. This
review exercise identified an error, which necessitated restatement of the
financial statements for 2007 in accordance with IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors. The nature and effect of
restatement is detailed below.
Investment and development property in the associate
In 2006 and in 2007 development property of Glorient Investments BG was
accounted for as investment property with revaluation gain/loss taken to the
income statement. The comparative financial statements for 2007 have been
restated to correct this error and to recognise fair value changes on
development property in the revaluation reserve in equity. In 2006 the effect of
the change resulted in a reduction of consolidated profit after tax by
EUR9,900,000. In 2007, the effect of the change resulted in an increase of
consolidated profit after tax by EUR2,850,000.
The effect of restatement of prior period balances on total equity of the Group
as at 31 December 2006 and 31 December 2007 is summarised below:
+------------------------------------------------+----------------+-----------+
| | 2006 | 2007 |
| | EUR '000 | EUR '000 |
+------------------------------------------------+----------------+-----------+
| | | |
+------------------------------------------------+----------------+-----------+
| Retained earnings as previously reported | 25,046 | 29,859 |
+------------------------------------------------+----------------+-----------+
| | | |
+------------------------------------------------+----------------+-----------+
| | | |
+------------------------------------------------+----------------+-----------+
| Effect of recognition of property revaluation | (9,900) | (7,050) |
| in Glorient Investments BG | | |
+------------------------------------------------+----------------+-----------+
| | | |
+------------------------------------------------+----------------+-----------+
| | | |
+------------------------------------------------+----------------+-----------+
| | | |
+------------------------------------------------+----------------+-----------+
| Retained earnings restated | 15,146 | 22,809 |
+------------------------------------------------+----------------+-----------+
| | | |
+------------------------------------------------+----------------+-----------+
The effect of restatement of prior period balances on the income statement for
the year ended 31 December 2007 is as follows:
+----------------------------------------------------+-----------------------+
| | EUR '000 |
| | |
+----------------------------------------------------+-----------------------+
| Profit for the year ended 31 December 2007 (as | 4,167 |
| previously reported) | |
+----------------------------------------------------+-----------------------+
| | |
+----------------------------------------------------+-----------------------+
| Effect of recognition of development property | 2,850 |
| revaluation in Glorient Investments BG | |
+----------------------------------------------------+-----------------------+
| | |
+----------------------------------------------------+-----------------------+
| | |
+----------------------------------------------------+-----------------------+
| | |
+----------------------------------------------------+-----------------------+
| Profit for the year ended 31 December 2007 | 7,017 |
| (restated) | |
+----------------------------------------------------+-----------------------+
| | |
+----------------------------------------------------+-----------------------+
Changes to accounting policies since the last year
The accounting policies adopted are consistent with those of previous financial
year except for IFRIC 11: IFRS 2 - Group and Treasury Share Transactions - which
was adopted on 1 January 2008. Adoption of this interpretation did not have any
effect on the financial performance or position of the Group.
The IASB also issued various interpretations that are effective from 1 January
2008, but have no relevance to the activities of the Group. These are IFRIC 12,
IFRIC 13 and IFRIC 14.
Certain new standards, amendments and interpretations to existing standards
which may be relevant to the Group have been published that are mandatory for
later accounting periods and which have not been adopted early. These are:
- IFRS 1 and IAS 27 Cost of an Investment in a Subsidiary, Jointly Controlled
Entity or Associate (Amendment) effective 1 January 2009
- IFRS 3 Business Combinations (Revised) effective 1 July 2009
- IFRS 7 Financial Instruments: Disclosure (Amendment) effective 1 January 2009
- IFRS 8 Operating Segments effective 1 January 2009
- IAS 1 Presentation of Financial Statements (Revised) effective 1 January 2009
- IAS 23 Borrowing Costs (Revised) effective 1 January 2009
- IAS 27 Consolidated and Separate Financial Statements (Amendment) effective 1
July 2009
- IAS 32 and IAS 1 Puttable Financial Instruments and Obligations Arising on
Liquidation (Amendment) effective 1 January 2009
- IAS 39 Eligible Hedged Items (Amendment) effective 1 July 2009
- IFRIC 15 Agreements for the Construction of Real Estate effective 1 January
2009
- IFRIC 17 Distributions of Non-cash Assets to Owners effective 1 July 2009
The Group is currently assessing the impact of these new standards and changes
on the financial statements.
In May 2008 the IASB issued its first omnibus of amendments to its standards,
primarily with a view to removing inconsistencies and clarifying wording. There
are separate transitional provisions for each standard. The Group has decided
not to adopt early any of these amendments as they are not anticipated to have a
significant impact on the reported results of the Group.
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 (Note 30). 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, plus costs directly attributable to
the acquisition. 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 minority
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 minority interests
The Group applies a policy of treating transactions with minority 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 minority 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.
Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the Group's share of the net identifiable assets of the acquired subsidiary
or associate at the date of acquisition. Goodwill has an indefinite useful life.
Goodwill on acquisition of subsidiaries is presented separately in the balance
sheet. Goodwill on acquisition of associates is included in investments in
associates and is tested for impairment as part of the overall balance.
Separately recognised goodwill is tested annually for impairment and carried at
cost less accumulated impairment losses. Impairment losses on goodwill are not
reversed. Gains and losses on the disposal of an entity include the carrying
amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment
testing. The allocation is made to those cash-generating units or groups of
cash-generating units that are expected to benefit from the business combination
in which the goodwill arose.
(b) Acquired building rights
Acquired building rights that do not meet the definition of investment property
under IAS40 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.
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 Eastern Europe.
Foreign currency translation
(a) Functional and presentation currency
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 local currencies, 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,
except for differences arising on the re-translation of non-monetary items, in
respect of which gains and losses are recognised directly in equity.
(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 equity.
On consolidation, exchange differences arising from the translation of the net
investment in foreign entities are taken to shareholders' equity. 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 and
that is not occupied by the companies in the Group is classified as investment
property. The Group has elected to use the fair value model to measure
investment property after initial recognition.
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.
Subsequent expenditure is charged to the asset's carrying amount 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. All other repairs and
maintenance costs are charged to the income statement during the financial
period in which they are incurred.
Fair value is based on active market prices, adjusted if necessary, for any
difference in the nature, location or condition of the specific asset. These
valuations are prepared semi-annually by CB Richard Ellis. The fair value of
investment property reflects, among other things, rental income from current
leases and assumptions about rental income from future leases in the light of
current market conditions. The fair value also reflects, on a similar basis, any
cash outflows that could be expected in respect of the property.
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 measured initially at its cost, including related
transaction costs and subsequently revalued at the balance sheet date to fair
value.
Fair value is based on active market prices, adjusted if necessary, for any
difference in the nature, location or condition of the specific asset. These
valuations are prepared semi-annually by CB Richard Ellis. The fair value of
development property reflects, among other things, rental income from temporary
current leases and the potential development project including the assumptions
about rental income from future leases in the light of current market
conditions. The fair value also reflects, on a similar basis, any cash outflows
that could be expected in respect of the property.
Gains in fair values of development property are credited to the revaluation
reserves in shareholders' equity. Decreases that offset previous increases of
the same asset are charged against other reserves directly in equity; all other
decreases are charged to the income statement. Upon completion, development
property to be held for long-term rental income and capital appreciation is
transferred to investment property.
Other property, plant and equipment
Other property, plant and equipment consists of fixtures, fittings & equipment
and is stated at a 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 carried 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 rate method,
less impairment.
Cash and cash equivalents includes cash in hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of
three months or less, and bank overdrafts.
Trade receivables
Trade receivables are non-derivative financial assets with fixed or determinable
payment 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. Significant financial difficulties of the debtor, probability that
the debtor will enter bankruptcy or financial reorganisation, and default or
delinquency in payments are considered indicators that the trade receivable is
impaired. The amount of the provision is the difference between the asset's
carrying amount and the present value of estimated future cash flows, discounted
at the original effective interest rate. The carrying amount of the asset is
reduced through the use of an allowance account, and the amount of the loss is
recognised in the income statement. When a trade receivable is uncollectible, it
is written off against the allowance account for trade receivables. Subsequent
recoveries of amounts previously written off are credited in the income
statement.
Share capital
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.
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 carried at fair value with changes in fair value
recognised in the income statement as finance income or finance costs.
(b) Other financial liabilities
Other financial liabilities include borrowings and trade and other payables,
which are measured at amortised cost using the effective interest rate method.
Financial liabilities are recognised when the Group becomes a party to the
contractual agreements of the instrument. All interest-related charges and, if
applicable, changes in an instrument's fair value that are reported in profit or
loss are included in the income statement line items finance costs or finance
income.
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 standard rate of income tax for companies in the Isle of Man is 0% and
consequently no provision for Isle of Man taxation has, therefore, been made.
As the Company is wholly owned by non-resident members, the Company meets the
definition as being a 'distributing company' and is, therefore, exempt from the
distributable profits charge and the Attribution Regime for Individuals which
will commence from 1 January 2009.
The Group is liable to tax in the Netherlands Antilles, the Netherlands,
Bulgaria, Serbia, Montenegro 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. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in
a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit nor loss.
Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantially enacted by the balance sheet date and are expected to
apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
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.
Provisions
Provisions for legal claims are recognised when: the Group has a present legal
or constructive obligation as a result of past events; it is more likely than
not that an outflow of resources will be required to settle the obligation; and
the amount has been reliably estimated.
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.
Dividend distributions
Dividend distributions to the Company's shareholders are recognised as a
liability in the Group's financial statements in the period in which the
dividends are approved.
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 2008
1 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical
experience as adjusted for current market conditions and other factors.
The Directors make estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are outlined below.
(a) Classification of property as prepaid operating leases, investment,
development and acquired
building rights
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 the 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. Acquired building
rights are licences and rights acquired from third parties that give the Group
the right to construct on the land. Prepaid operating leases are the up-front
payments that relate to operating leases acquired by the Group.
(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 considers information from a variety of sources
(discussed further in Note 11) and engages external, professional advisers
to carry out third party 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) Income taxes
The Group is subject to income taxes in different jurisdictions. Estimates are
required in determining the worldwide provision for income taxes. There are some
transactions and calculations for which the ultimate tax determination is
uncertain. The Group recognises deferred tax liabilities on the revaluation of
investment property and development property. The Group is structured in a way
that future disposal of investment property and development property is expected
to be through the sale of the corporate entity which owns the property, rather
than the sale of the underlying property, therefore the Directors do not
anticipate the crystallisation of these deferred tax liabilities. Where the
final tax outcome of these matters is different from the amounts that were
initially recorded, such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made.
(d) Going concern
In assessing the going concern basis of preparation of the consolidated
financial statements for the year ended 31 December 2008, the directors have
taken into account the status of current negotiations on loans.
The Group's forecasts and projections to July 2010 have been prepared taking
into account the economic environment and its challenges and the mitigating
factors referred to above. These forecasts take into account possible changes in
trading performance, potential sales of properties and the future financing of
the Group. They show that the Group will have sufficient facilities for its
ongoing operations.
While there will always remain some inherent uncertainty within the
aforementioned 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 2008.
Impact of Serdika project
Debt obligations relating to the Serdika development are not anticipated to be
repaid in the next 12 months; since the terms for repayment are the subject of
discussions with the lender (as was the case at the balance sheet date), the
debt has been shown as a current liability in the financial statements.
However, interest expenses are forecast to be paid on a current basis. The Group
intends to repay the outstanding principal from the sale of the Serdika asset,
which is being actively marketed. If further capital is needed this could come
all or in part from the undrawn commitment relating to the Equest Logistic
Centre and future asset sales.
It is possible that discussions with the
lender may not be completed for some time. The Directors have concluded that
this circumstance represents a material uncertainty that casts significant doubt
upon the Group's ability to continue as a going concern. In the opinion of the
Directors, agreement will be reached with the lender to defer repayment of the
unsecured loan balance for a period of at least 12 months from the date of issue
of these financial statements.
Therefore, after making enquiries, and considering the uncertainties described
above, the directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. For
these reasons, they continue to adopt the going concern basis in preparing the
annual report and accounts.
Impact of Moldova and Vitantis events
The Group cash flow forecast assumes that all surplus cash flow from operations
is being held at the local company level for both Vitantis and Moldova Mall. No
cash from these assets is needed to meet the other obligations of the Group; as
a result, the Board does not believe that the situations at Moldova Mall and
Vitantis (as discussed in the Chairman's statement) will affect the normal
operations of the Fund.
The financial statements do not include any
adjustments that would result if the going concern basis of preparation were to
become no longer appropriate.
(e) Disposal of subsidiaries
During the year the Group disposed of a subsidiary, Lerma BV. As a result of
this disposal management are exposed to certain contingent liabilities, but have
judged based on currently available facts that the probability of these
liabilities crystallising is less than 50%, and therefore these liabilities have
not been provided for.
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, cashflow 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 Investment Manager under policies approved
by the Board of Directors. The Investment Manager identifies and evaluates
financial risks in close co-operation with the Group's operating companies. The
Board approves written principles for overall risk management and oversees the
development of policies covering areas such as foreign exchange risk and
interest rate risk.
(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 Macedonian
Dinar, Slovakian Koruna, UK Pound Sterling and the Bulgarian Lev, (BGN) which is
currently pegged against the Euro.
The following table summarises the Group's net financial assets by foreign
currency at 31 December 2008. The Group's financial assets and liabilities at
carrying amounts are included in the table, categorised by the currency at their
carrying amount.
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| |
+-------------------------------+
| | | | | | | |
| | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| 2008 | EUR | RON | BGN | RSD | Other | Total |
| | EUR '000 | EUR '000 | EUR | EUR | EUR | EUR '000 |
| | | | '000 | '000 | '000 | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| FINANCIAL ASSETS | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Non-current financial assets | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Loans and receivables | 1,148 | - | - | - | - | 1,148 |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Total non-current financial | 1,148 | - | - | - | - | 1,148 |
| assets | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Current financial assets | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Loan receivable | 61 | - | - | - | - | 61 |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Trade & other receivables | 911 | | 40 | 135 | 57 | 9,951 |
| | | 8,808 | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Cash & cash equivalents | 10,989 | 4,198 | 56 | 5 | 282 | 15,530 |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Total current financial | 11,961 | 13,006 | 96 | 140 | 339 | 25,542 |
| assets | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Total financial assets | 13,109 | 13,006 | 96 | 140 | 339 | 26,690 |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| FINANCIAL LIABILITIES | | | | | | |
| Non-current financial | | | | | | |
| liabilities | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Bank borrowings | 113,550 | | | | | 113,550 |
| | | - | - | - | - | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Deposits | - | 447 | - | - | - | 447 |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Other long term loans | 200 | - | - | - | - | 200 |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Other non-current liabilities | 1,253 | - | - | - | - | 1,253 |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Total non-current financial | 115,003 | 447 | - | | | 115,450 |
| liabilities | | | | - | - | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Current financial liabilities | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Trade and other payables | 4,054 | 5,498 | 28 | 26 | 87 | 9,693 |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Bank borrowings | 4,215 | | | | | 4,215 |
| | | - | - | - | - | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Other short-term loans | 10,048 | - | - | - | - | 10,048 |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Total current liabilities | 18,317 | 5,498 | 28 | 26 | 87 | 23,956 |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Total liabilities | 133,320 | 5,945 | 28 | 26 | 87 | 139,406 |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
| Net financial assets by | (120,211) | 7,061 | 68 | 114 | 252 | (112, 716) |
| currency | | | | | | |
+-------------------------------+-----------+----------+-------+--------+--------+------------+
The following tables summarises the Group's net financial assets by foreign
currency at 31 December 2007. The Group's financial assets and liabilities at
carrying amounts are included in the table, categorised by the currency at their
carrying amount.
+----------------------+---+---+---+---+-----+---+---+---+---+---+---+---+---+---+---+---+----------------+
| |
+----------------------+
| | | | | | | |
+--------------------------+-----------+-------------+-----------+-----------+-----------+----------------+
| 2007 | EUR | RON | BGN | RSD | Other | Total |
| | EUR '000 | EUR '000 | EUR '000 | EUR '000 | EUR '000 | EUR '000 |
+--------------------------+-----------+-------------+-----------+-----------+-----------+----------------+
| | | | | | | |
+--------------------------+-----------+-------------+-----------+-----------+-----------+----------------+
| FINANCIAL ASSETS | | | | | | |
+--------------------------+-----------+-------------+-----------+-----------+-----------+----------------+
| Non-current financial | | | | | | |
| assets | | | | | | |
+--------------------------+-----------+-------------+-----------+-----------+-----------+----------------+
| Loans and receivables | 3,910 | - | - | - | - | 3,910 |
+--------------------------+-----------+---------+---------------+-------+---------------+----------------+
| | | | | | | |
+--------------------------+-----------+---------+---------------+-------+---------------+----------------+
| Total non-current | 3,910 | - | - | - | - | 3,910 |
| financial assets | | | | | | |
+--------------------------+-----------+---------+---------------+-------+---------------+----------------+
| | | | | | | |
+--------------------------+-------+-------------+---------------+-------+-----------+--------------------+
| Current financial assets | | | | | | |
+--------------------------+-------+-------------+---------------+-------+-----------+--------------------+
| Loans receivable | 1,000 | - | - | - | - | 1,000 |
+--------------------------+-----------+---------+---------------+-------+---------------+----------------+
| Trade and other | 967 | 5,541 | 1,482 | 417 | 425 | 8,832 |
| receivables | | | | | | |
+--------------------------+-----------+---------+---------------+-------+---------------+----------------+
| Cash and cash | 409 | 4,545 | 1,283 | 358 | 1,488 | 8,083 |
| equivalents | | | | | | |
+--------------------------+-----------+---------+---------------+-------+---------------+----------------+
| | | | | | | |
+--------------------------+-----------+---------+---------------+-------+---------------+----------------+
| Total current financial | 2,376 | 10,086 | 2,765 | 775 | 1,913 | 17,915 |
| assets | | | | | | |
+--------------------------+-----------+---------+---------------+-------+---------------+----------------+
| | | | | | | |
+--------------------------+-----------+---------+---------------+-------+---------------+----------------+
| Total financial assets | 6,286 | 10,086 | 2,765 | 775 | 1,913 | 21,825 |
+--------------------------+-----------+---------+---------------+-------+---------------+----------------+
| FINANCIAL | | | | | | |
| LIABILITIES | | | | | | |
+----------------------+-------+-------------+-----------+-----------+-----------+------------------------+
| Non-current | | | | | | |
| financial | | | | | | |
| liabilities | | | | | | |
+----------------------+-------+-------------+-----------+-----------+-----------+------------------------+
| Bank borrowings | 146,618 | - | - | - | - | 146,618 |
+----------------------+---------------+---------+-----------+-----------+---------------+----------------+
| Deposits | - | 96 | 1,405 | - | - | |
| | | | | | | 1,501 |
+----------------------+---------------+---------+-----------+-----------+---------------+----------------+
| Other long term | 1,063 | - | - | - | - | 1,063 |
| loans | | | | | | |
+----------------------+---------------+---------+-----------+-----------+---------------+----------------+
| | | | | | | |
+----------------------+---------------+---------+-----------+-----------+---------------+----------------+
| Total non-current | 147,681 | 96 | 1,405 | - | - | 149,182 |
| financial | | | | | | |
| liabilities | | | | | | |
+----------------------+---------------+---------+-----------+-----------+---------------+----------------+
| | | | | | | |
+----------------------+-------+-------------+---------------+-----------+---------------+----------------+
| Current financial | | | | | | |
| liabilities | | | | | | |
+----------------------+-------+-------------+---------------+-----------+---------------+----------------+
| Trade and other | 8,617 | 7,048 | 1,598 | 663 | 1,346 | 19,272 |
| payables | | | | | | |
+----------------------+---------------+---------+-----------+-----------+---------------+----------------+
| Bank borrowings | 807 | - | - | - | - | 807 |
+----------------------+---------------+---------+-----------+-----------+---------------+----------------+
| Other short-term | 4,995 | - | 840 | 240 | - | 6,075 |
| loans | | | | | | |
+----------------------+---------------+---------+-----------+-----------+---------------+----------------+
| | | | | | | |
+----------------------+---------------+---------+-----------+-----------+---------------+----------------+
| Total current | 14,419 | 7,048 | 2,438 | 903 | 1,346 | 26,154 |
| financial | | | | | | |
| liabilities | | | | | | |
+----------------------+---------------+---------+-----------+-----------+---------------+----------------+
| | | | | | | |
+----------------------+-------+-------------+---------------+-----------+---------------+----------------+
| Total financial | 162,100 | 7,144 | 3,834 | 903 | 1,346 | 175,336 |
| liabilities | | | | | | |
+----------------------+---------------+---------+-----------+-----------+---------------+----------------+
| Net financial assets | (155,814) | 2,942 | (1,069) | (128) | 567 | (153,511) |
| by currency | | | | | | |
+----------------------+---+---+---+---+-----+---+---+---+---+---+---+---+---+---+---+---+----------------+
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 EUR3,831,600
lower and EUR3,134,900 higher (2007: post-tax profit for the year would have been
EUR1,742,000 higher and EUR1,425,000 lower).
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
EUR369,000 lower, and EUR451,000 higher (2006: post-tax profit for the year would
have been EUR451,000 lower and EUR369,000 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.
(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 mitigates 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 rates and swaps them into fixed rates
that are lower than those available if the Group borrowed at fixed rates
directly. Under the interest rate swaps, the Group agrees with other parties to
exchange, at specified intervals (primarily quarterly), the difference between
the fixed contract rates and floating-rate interest amounts calculated by
reference to the agreed notional amounts.
The Group's cash flow and fair value interest rate risk is periodically
monitored by the Investment Manager. The Investment Manager analyses the Group's
interest rate exposure. This analysis takes into account exposure to the
effects of fluctuations in the prevailing levels of market interest rates on its
financial position and cash flows. Interest costs may increase as a result of
such changes. They may reduce or create losses in the event that unexpected
movements arise. Various scenarios are considered including re-financing,
renewal of existing positions, alternative financing and hedging.
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 EUR480,000 (2007: EUR460,000). A
decrease in 100 basis points in Euribor Interest rate would result in a decrease
in the post-tax profit for the year of EUR480,000 (2007: EUR287,000). This is a
combined effect of interest costs of unswapped 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. The Group has no significant concentrations of credit risk. |
| 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. |
| The Company does not have any significant concentration of credit risk. |
| |
+----------------------------------------------------------------------------+
(c) Liquidity risk
Prudent liquidity risk management implies conserving cash balances by minimising
costs, eliminating discretionary capital expenditures and collecting rental
invoices. These measures are taken by the Investment Manager.
Non-discretionary expenditures are carefully monitored and paid whenever
contractually obligated.
The Group has diversified its lending relationships to secure mortgage debt and
the maturity of these loans is staged in later years so as not to concentrate
the refinance risk. In 2008, the Group secured corporate level bridge financing
to meet interim capital obligations related to its construction pipeline. No
further construction is planned and the corporate loan was repaid ahead of
schedule from net sales proceeds.
The Group has access to a EUR7.9m committed yet undrawn mortgage debt facility.
These amounts are being held in reserve and will remain available through 2010
provided existing leasing levels are maintained at Equest Logistic Center which
is likely.
The Group's liquidity position is monitored on a weekly basis by the Investment
Manager and on a monthly basis by the Board of Directors. In addition, the
Board has appointed a consultant to monitor cash flows and debt covenant
performance.
A summary table with maturity of financial liabilities presented below shows the
liquidity risks as at 31 December 2007 and 31 December 2008.
+------------+--------+---------+---------+--------+
| Group | Less | Between | Between | Over 5 |
| | than 1 | 1 and 2 | 2 and 5 | years |
| | year | years | years | |
+------------+ + + + +
| 2008 | | | | |
+------------+--------+---------+---------+--------+
| | EUR '000 | EUR '000 | EUR '000 | EUR '000 |
+------------+--------+---------+---------+--------+
| | | | | |
+------------+--------+---------+---------+--------+
| Moldova | 1,664 | 1,636 | 20,669 | - |
| Mall | | | | |
| loan | | | | |
| finance | | | | |
+------------+--------+---------+---------+--------+
| Vitantis | 2,485 | 3,508 | 40,023 | - |
| loan | | | | |
| finance | | | | |
+------------+--------+---------+---------+--------+
| Other | 4,001 | 6,673 | 47,799 | 10,770 |
| loan | | | | |
| finance | | | | |
+------------+--------+---------+---------+--------+
| Other | 611 | 10,659 | - | - |
| loans | | | | |
| payable | | | | |
+------------+--------+---------+---------+--------+
| Trade | 6,467 | - | - | - |
| and | | | | |
| other | | | | |
| payables | | | | |
+------------+--------+---------+---------+--------+
| | | | | |
+------------+--------+---------+---------+--------+
| 2007 | | | | |
+------------+--------+---------+---------+--------+
| Borrowings | 807 | 2,451 | 122,233 | 21,934 |
+------------+--------+---------+---------+--------+
| Other | 6,075 | - | 1,063 | - |
| loans | | | | |
| payable | | | | |
+------------+--------+---------+---------+--------+
| Trade | 19,272 | - | - | - |
| and | | | | |
| other | | | | |
| payables | | | | |
+------------+--------+---------+---------+--------+
+---------------------------+------------+------------+-------------+-------------+
| Parent | Less than | Between 1 | Between 2 | Over 5 |
| | 1 year | and 2 | and 5 years | years |
| | | years | | |
+---------------------------+ + + + +
| 2008 | | | | |
+---------------------------+------------+------------+-------------+-------------+
| | EUR '000 | EUR '000 | EUR '000 | EUR '000 |
+---------------------------+------------+------------+-------------+-------------+
| | | | | |
+---------------------------+------------+------------+-------------+-------------+
| Borrowings | - | - | - | - |
+---------------------------+------------+------------+-------------+-------------+
| Other loans payable | 611 | 10,659 | - | - |
+---------------------------+------------+------------+-------------+-------------+
| Trade and other payables | 614 | - | - | - |
+---------------------------+------------+------------+-------------+-------------+
| | | | | |
+---------------------------+------------+------------+-------------+-------------+
| 2007 | | | | |
+---------------------------+------------+------------+-------------+-------------+
| Borrowings | - | - | - | - |
+---------------------------+------------+------------+-------------+-------------+
| Other loans payable | - | - | - | - |
+---------------------------+------------+------------+-------------+-------------+
| Trade and other payables | 1,147 | - | - | - |
+---------------------------+------------+------------+-------------+-------------+
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.
As discussed in the Chairman's statement, events of default occurred post
year end at Moldova Mall and Vitantis. While the Group continues to participate
in active discussions with the bank providing finance at these two properties,
the expected pattern of settlement of these loans may differ from those outlined
above as a result of the aforementioned post balance sheet date events,
including the possibility that these debts may become due within one year of the
balance sheet date. As discussed in the Chairman's statement, these loans are
non-recourse and secured individually by specific assets, with no cross-default
provisions between facilities.
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 minority 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 | | |
+-------------+----------+---------+
| | 2008 | 2007 |
+-------------+----------+---------+
| | EUR'000s | |
| | | EUR'000s |
+-------------+----------+---------+
| Total | 117,765 | 147,425 |
| borrowings | | |
+-------------+----------+---------+
| Other | 10,248 | 7,138 |
| loans | | |
+-------------+----------+---------+
| Less: | (15,530) | (8,083) |
| cash | | |
| and | | |
| cash | | |
| equivalents | | |
+-------------+----------+---------+
| Net | 112,483 | 146,480 |
| debt | | |
+-------------+----------+---------+
| | | |
+-------------+----------+---------+
| Total | 131,514 | 210,077 |
| equity | | |
+-------------+----------+---------+
| | | |
+-------------+----------+---------+
| Total | 243,997 | 356,557 |
| capital | | |
+-------------+----------+---------+
| | | |
+-------------+----------+---------+
| Gearing | 46% | 41% |
| ratio | | |
+-------------+----------+---------+
| Parent | | |
+-------------+----------+---------+
| | 2008 | 2007 |
+-------------+----------+---------+
| | EUR'000s | EUR'000s |
+-------------+----------+---------+
| Total | - | - |
| borrowings | | |
+-------------+----------+---------+
| Other | 10,048 | - |
| loans | | |
+-------------+----------+---------+
| Less: | (3,043) | (105) |
| cash | | |
| and | | |
| cash | | |
| equivalents | | |
+-------------+----------+---------+
| Net | 7,005 | (105) |
| debt | | |
+-------------+----------+---------+
| | | |
+-------------+----------+---------+
| Total | 181,853 | 198,823 |
| equity | | |
+-------------+----------+---------+
| | | |
+-------------+----------+---------+
| Total | 188,859 | 198,718 |
| capital | | |
+-------------+----------+---------+
| | | |
+-------------+----------+---------+
| Gearing | 4% | 0% |
| ratio | | |
+-------------+----------+---------+
3 Summary of financial assets and liabilities by category
The carrying amounts of the Group's financial assets and liabilities as
recognised at 31 December 2008 are categorised as follows.
+-------------+-------------+-------------+-------------+-----------+
| |
+-------------+
| | | | | |
+-------------+-------------+-------------+-------------+-----------+
| | | | | |
+-------------+-------------+-------------+-------------+-----------+
| 2008 | Financial | Loans | Financial | Total |
| | assets | and | liabilities | |
| | and | receivables | measured at | |
| | liabilities | | amortised | |
| | at fair | | cost | |
| | value | | | |
| | through | | | |
| | profit or | | | |
| | loss | | | |
+-------------+-------------+-------------+-------------+-----------+
| | EUR'000s | EUR'000s | EUR'000s | EUR'000s |
+-------------+-------------+-------------+-------------+-----------+
| FINANCIAL | | | | |
| ASSETS | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Non-current | | | | |
| financial | | | | |
| assets | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Loans | - | 1,148 | - | |
| and | | | | 1,148 |
| receivables | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Total | - | | - | |
| non-current | | 1,148 | | 1,148 |
| financial | | | | |
| assets | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Current | | | | |
| assets | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Loans | - | 61 | - | 61 |
| receivable | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Trade | - | 9,951 | - | 9,951 |
| & | | | | |
| other | | | | |
| receivables | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Cash & | - | 15,530 | - | 15,530 |
| cash | | | | |
| equivalents | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Total | - | 25,542 | - | 25,542 |
| current | | | | |
| financial | | | | |
| assets | | | | |
+-------------+-------------+-------------+-------------+-----------+
| | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Total | - | 26,690 | - | 26,690 |
| financial | | | | |
| assets | | | | |
+-------------+-------------+-------------+-------------+-----------+
| FINANCIAL | | | | |
| LIABILITIES | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Non-current | | | | |
| financial | | | | |
| liabilities | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Bank | - | - | 113,550 | 113,550 |
| borrowings | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Deposits | - | - | 447 | 447 |
+-------------+-------------+-------------+-------------+-----------+
| Other | - | - | 200 | 200 |
| long | | | | |
| term | | | | |
| loans | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Other | - | - | 1,253 | 1,253 |
| non-current | | | | |
| liabilities | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Total | - | - | 115,450 | 115,450 |
| non-current | | | | |
| financial | | | | |
| liabilities | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Current | | | | |
| financial | | | | |
| liabilities | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Trade | 2,995 | - | 6,698 | 9,693 |
| and | | | | |
| other | | | | |
| payables | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Bank | - | - | 4,215 | 4,215 |
| borrowings | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Other | - | - | 10,048 | 10,048 |
| short | | | | |
| term | | | | |
| loans | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Total | 2,995 | - | | 23,956 |
| current | | | 20,961 | |
| financial | | | | |
| liabilities | | | | |
+-------------+-------------+-------------+-------------+-----------+
| | | | | |
+-------------+-------------+-------------+-------------+-----------+
| Total | 2,995 | - | | 139,406 |
| financial | | | 136,411 | |
| liabilities | | | | |
+-------------+-------------+-------------+-------------+-----------+
The carrying amounts of the Group's financial assets and liabilities as
recognised at 31 December 2007 are categorised as follows.
+-----------------------------+---------------+-------------+---------------------+----------+
| | | | | |
+-----------------------------+---------------+-------------+---------------------+----------+
| 2007 | Financial | Loans and | Financial | Total |
| | assets | receivables | liabilities | |
| | and | | measured at | |
| | liabilities | | amortised | |
| | at fair value | | cost | |
| | through | | | |
| | profit or | | | |
| | loss | | | |
+-----------------------------+---------------+-------------+---------------------+----------+
| | EUR '000 | EUR '000 | EUR '000 | EUR '000 |
+-----------------------------+---------------+-------------+---------------------+----------+
| FINANCIAL ASSETS | | | | |
+-----------------------------+---------------+-------------+---------------------+----------+
| Non-current financial | | | | |
| assets | | | | |
+-----------------------------+---------------+-------------+---------------------+----------+
| Loans and receivables | - | 3,910 | - | 3,910 |
+-----------------------------+---------------+-------------+---------------------+----------+
| Total non-current financial | - | 3,910 | - | 3,910 |
| assets | | | | |
+-----------------------------+---------------+-------------+---------------------+----------+
| Current assets | | | | |
+-----------------------------+---------------+-------------+---------------------+----------+
| Loans receivable | - | 1,000 | - | 1,000 |
+-----------------------------+---------------+-------------+---------------------+----------+
| Trade and other receivables | 756 | 8,076 | - | 8,832 |
| | | | | |
+-----------------------------+---------------+-------------+---------------------+----------+
| Cash and cash equivalents | - | 8,083 | - | 8,083 |
+-----------------------------+---------------+-------------+---------------------+----------+
| Total current financial | 756 | 17,159 | - | 17,915 |
| assets | | | | |
+-----------------------------+---------------+-------------+---------------------+----------+
| | | | | |
+-----------------------------+---------------+-------------+---------------------+----------+
| Total financial assets | 756 | 21,069 | - | 21,825 |
+-----------------------------+---------------+-------------+---------------------+----------+
| FINANCIAL LIABILITIES | | | | |
+-----------------------------+---------------+-------------+---------------------+----------+
| Non-current financial | - | - | 146,618 | 146,618 |
| liabilities | | | | |
| Bank borrowings | | | | |
+-----------------------------+---------------+-------------+---------------------+----------+
| Deposits | - | - | 1,501 | 1,501 |
+-----------------------------+---------------+-------------+---------------------+----------+
| Other long term loans | - | - | 1,063 | 1,063 |
+-----------------------------+---------------+-------------+---------------------+----------+
| Total non-current financial | - | | 149,182 | 149,182 |
| liabilities | | - | | |
+-----------------------------+---------------+-------------+---------------------+----------+
+-----------------------------+---------------+-------------+------------+-------+--+
| Current financial | | | | |
| liabilities | | | | |
+-----------------------------+---------------+--------------------------+-------+--+
| Trade and other payables | - | - | 19,272 | 19,272 |
+-----------------------------+---------------+-------------+------------+----------+
| Bank borrowings | - | - | 807 | 807 |
+-----------------------------+---------------+-------------+------------+----------+
| Other short term loans | - | | 6,075 | 6,075 |
| | | - | | |
+-----------------------------+---------------+-------------+------------+----------+
| Total current financial | - | - | 26,154 | 26,154 |
| liabilities | | | | |
+-----------------------------+---------------+-------------+------------+----------+
| | | | | |
+-----------------------------+---------------+-------------+------------+----------+
| Total financial liabilities | - | - | 175,336 | 175,336 |
+-----------------------------+---------------+-------------+------------+-------+--+
The carrying amounts of the Company's financial assets and liabilities as
recognised at 31 December 2008 are categorised as follows.
+----------------------------+--------------+--------------+-------------+---------------+
| |
+----------------------------+
| | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| 2008 | Financial | Loans and | Financial | Total |
| | assets and | receivables | liabilities | |
| | liabilities | | measured at | |
| | at fair | | amortised | |
| | value | | cost | |
| | through | | | |
| | profit or | | | |
| | loss | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| | EUR'000s | EUR'000s | EUR'000s | EUR'000s |
+----------------------------+--------------+--------------+-------------+---------------+
| FINANCIAL ASSETS | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| Non-current financial | | | | |
| assets | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| Loans and receivables | - | 131,442 | - | 131,442 |
+----------------------------+--------------+--------------+-------------+---------------+
| Total non-current | - | 131,442 | - | 131,442 |
| financial assets | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| Current assets | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| Loans receivable | - | - | - | - |
+----------------------------+--------------+--------------+-------------+---------------+
| Trade & other receivables | - | 1,151 | - | 1,151 |
+----------------------------+--------------+--------------+-------------+---------------+
| Cash & cash equivalents | - | 3,043 | | 3,043 |
| | | | | |
| | | | - | |
+----------------------------+--------------+--------------+-------------+---------------+
| Total current financial | - | 4,194 | - | 4,194 |
| assets | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| Total financial assets | - | 135,636 | - | 135,636 |
+----------------------------+--------------+--------------+-------------+---------------+
| FINANCIAL LIABILITIES | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| Non-current financial | | | | |
| liabilities | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| Bank borrowings | - | - | - | - |
+----------------------------+--------------+--------------+-------------+---------------+
| Deposits | - | - | - | - |
+----------------------------+--------------+--------------+-------------+---------------+
| Other long term loans | - | - | - | - |
+----------------------------+--------------+--------------+-------------+---------------+
| Other non-current | - | - | - | |
| liabilities | | | | - |
+----------------------------+--------------+--------------+-------------+---------------+
| Total non-current | - | - | - | |
| financial liabilities | | | | - |
+----------------------------+--------------+--------------+-------------+---------------+
| Current financial | | | | |
| liabilities | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| Trade and other payables | - | - | 496 | 496 |
+----------------------------+--------------+--------------+-------------+---------------+
| Bank borrowings | - | - | - | - |
+----------------------------+--------------+--------------+-------------+---------------+
| Other short term loans | - | - | 10,049 | 10,049 |
+----------------------------+--------------+--------------+-------------+---------------+
| Total current financial | - | - | 10,545 | 10,545 |
| liabilities | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
| Total financial | - | - | 10,545 | 10,545 |
| liabilities | | | | |
+----------------------------+--------------+--------------+-------------+---------------+
The carrying amounts of the Company's financial assets and liabilities as
recognised at 31 December 2007 are categorised as follows.
+--------------------------+---------------+-------------+-------------+------------+----+
| |
+--------------------------+
| | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| 2007 | Financial | Loans and | Financial | Total |
| | assets and | receivables | liabilities | |
| | liabilities | | measured at | |
| | at fair value | | amortised | |
| | through | | cost | |
| | profit or | | | |
| | loss | | | |
+--------------------------+---------------+-------------+-------------+------------+
| | EUR'000s | EUR'000s | EUR'000s | EUR'000s |
+--------------------------+---------------+-------------+-------------+------------+
| FINANCIAL ASSETS | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| Non-current financial | | | | |
| assets | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| Loans and receivables | - | 197,861 | - | 197,861 |
+--------------------------+---------------+-------------+-------------+------------+
| | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| Total non-current | - | 197,861 | - | 197,861 |
| financial assets | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| Current assets | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| Loans receivable | - | - | - | - |
+--------------------------+---------------+-------------+-------------+------------+
| Trade & other | - | 2,004 | - | 2,004 |
| receivables | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| Cash & cash equivalents | - | 105 | - | 105 |
+--------------------------+---------------+-------------+-------------+------------+
| Total current financial | - | 2,109 | - | 2,109 |
| assets | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| Total financial assets | - | 199,970 | - | 199,970 |
+--------------------------+---------------+-------------+-------------+------------+
| FINANCIAL LIABILITIES | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| Non-current financial | | | | |
| liabilities | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| Bank borrowings | - | - | - | - |
+--------------------------+---------------+-------------+-------------+------------+
| Deposits | - | - | - | - |
+--------------------------+---------------+-------------+-------------+------------+
| Other long term loans | - | - | - | - |
+--------------------------+---------------+-------------+-------------+------------+
| Other non-current | - | - | - | - |
| liabilities | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| Total non-current | - | - | - | - |
| financial liabilities | | | | |
+--------------------------+---------------+-------------+-------------+-----------------+
| Current financial | | | | |
| liabilities | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| Trade and other payables | - | - | 1,147 | 1,147 |
+--------------------------+---------------+-------------+-------------+------------+
| Bank borrowings | - | - | - | - |
+--------------------------+---------------+-------------+-------------+------------+
| Other short term loans | - | | - | - |
| | | - | | |
+--------------------------+---------------+-------------+-------------+------------+
| Total current financial | - | | 1,147 | 1,147 |
| liabilities | | - | | |
+--------------------------+---------------+-------------+-------------+------------+
| | | | | |
+--------------------------+---------------+-------------+-------------+------------+
| Total financial | - | - | 1,147 | 1,147 |
| liabilities | | | | |
+--------------------------+---------------+-------------+-------------+------------+----+
4 Net rental and related income
+-----------+---------+---------+
| | Group | Group |
| | 2008 | 2007 |
+-----------+---------+---------+
| | EUR'000 | EUR'000 |
+-----------+---------+---------+
| | | |
+-----------+---------+---------+
| Gross | 16,899 | 12,792 |
| rental | | |
| income | | |
+-----------+---------+---------+
| Service | 2,964 | 2,677 |
| charge | | |
| income | | |
+-----------+---------+---------+
| Other | 1,389 | 738 |
| property | | |
| income | | |
+-----------+---------+---------+
| Property | (9,791) | (7,616) |
| operating | | |
| expenses | | |
+-----------+---------+---------+
| | | |
+-----------+---------+---------+
| Net | 11,461 | 8,591 |
| rental | | |
| and | | |
| related | | |
| income | | |
+-----------+---------+---------+
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 | Group |
| | 2008 | 2007 |
+--------+--------+--------+
| | EUR'000 | EUR'000 |
+--------+--------+--------+
| | | |
+--------+--------+--------+
| No | 8,089 | 6,825 |
| later | | |
| than 1 | | |
| year | | |
+--------+--------+--------+
| Later | 27,245 | 22,150 |
| than 1 | | |
| year | | |
| and no | | |
| later | | |
| than 5 | | |
| years | | |
+--------+--------+--------+
| Later | 9,058 | 14,981 |
| than 5 | | |
| years | | |
+--------+--------+--------+
| | | |
+--------+--------+--------+
| Total | 44,392 | 43,956 |
+--------+--------+--------+
The comparative information for 31 December 2007 relating to future rental
income has been reclassified to exclude Associates.
5 Loss on sale of subsidiaries
+----------------------------------------------------------+------------+------------+------------+------------+
| | Lerma BV | Aurora BV | Other | Total |
+----------------------------------------------------------+------------+------------+------------+------------+
| 2008 | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+----------------------------------------------------------+------------+------------+------------+------------+
| Proceeds | 37,004 | 4,500 | 150 | 41,654 |
+----------------------------------------------------------+------------+------------+------------+------------+
| Net assets | (38,618) | (994) | 605 | (39,007) |
+----------------------------------------------------------+------------+------------+------------+------------+
| Realisation of translation | | 347 | | 347 |
| reserve | | | | |
+----------------------------------------------------------+------------+------------+------------+------------+
| Costs of sale | (2,041) | | | (2,041) |
+----------------------------------------------------------+------------+------------+------------+------------+
| Minority interest at the | | 300 | | 300 |
| date of sale | | | | |
+----------------------------------------------------------+------------+------------+------------+------------+
| Provision against | | (16,060) | | (16,060) |
| receivables subject to | | | | |
| completion of the | | | | |
| transaction | | | | |
+----------------------------------------------------------+------------+------------+------------+------------+
| | | | | |
+----------------------------------------------------------+------------+------------+------------+------------+
| Profit/(loss) on sale of | (3,655) | (11,907) | 755 | (14,807) |
| subsidiaries | | | | |
+----------------------------------------------------------+------------+------------+------------+------------+
The loss on sale of Aurora BV has uncompleted elements which may result in
further revenues accruing to the Group, but which the Group cannot yet recognise
as the transaction remains contingent. As a result receivables due to the Group
on completion of the transaction have been provided for at the year end.
6 Administration expenses
+----------------+--------+--------+
| | Group | Group |
| | 2008 | 2007 |
+----------------+--------+--------+
| | EUR'000 | EUR'000 |
+----------------+--------+--------+
| | | |
+----------------+--------+--------+
| Audit | 135 | 399 |
| fees | | |
+----------------+--------+--------+
| Non-audit | 106 | 176 |
| fees | | |
+----------------+--------+--------+
| Management | 5,712 | 4,373 |
| fees | | |
+----------------+--------+--------+
| Other | 1,691 | 908 |
| professional | | |
| expenses | | |
+----------------+--------+--------+
| Directors' | 180 | 140 |
| fees | | |
+----------------+--------+--------+
| Bad | 4,307 | |
| debts | | |
+----------------+--------+--------+
| Other | 890 | 1,111 |
| administration | | |
| expenses | | |
+----------------+--------+--------+
| | | |
+----------------+--------+--------+
| Total | 13,021 | 7,107 |
+----------------+--------+--------+
Bad debts include EUR4,255,000 of loans due from an associate Archway BV to EBP
Plc as at 31 December 2008 written off to the income statement as a result of
impairment of those loans.
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 | Group |
| | 2008 | 2007 |
+------------+--------+--------+
| | EUR'000 | EUR'000 |
+------------+--------+--------+
| | | |
+------------+--------+--------+
| Fair | - | 658 |
| value | | |
| movement | | |
| on | | |
| interest | | |
| rate | | |
| swaps | | |
+------------+--------+--------+
| Interest | 167 | 692 |
| on | | |
| short-term | | |
| bank | | |
| deposits | | |
+------------+--------+--------+
| Other | 270 | 243 |
| finance | | |
| income | | |
+------------+--------+--------+
| | | |
+------------+--------+--------+
| Finance | 437 | 1,593 |
| income | | |
+------------+--------+--------+
| | | |
+------------+--------+--------+
| Fair | 4,764 | - |
| value | | |
| movement | | |
| on | | |
| interest | | |
| rate | | |
| swaps | | |
+------------+--------+--------+
| Interest | 10,491 | 6,241 |
| expense | | |
| on | | |
| borrowings | | |
+------------+--------+--------+
| Bank | 595 | 346 |
| charges | | |
+------------+--------+--------+
| Net | 9,662 | 6,607 |
| foreign | | |
| exchange | | |
| losses | | |
+------------+--------+--------+
| Other | 827 | 573 |
| finance | | |
| expenses | | |
+------------+--------+--------+
| | | |
+------------+--------+--------+
| Finance | 26,339 | 13,767 |
| costs | | |
+------------+--------+--------+
Foreign exchange losses have arisen from the translation of Euro loans in
subsidiaries to the local functional currency. 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 from fair value
adjustments on investment property (Note 10).
8 Income tax credit/(expense)
+-----------+--------+--------+
| | Group | Group |
| | 2008 | 2007 |
+-----------+--------+--------+
| | EUR'000 | EUR'000 |
+-----------+--------+--------+
| | | |
+-----------+--------+--------+
| Current | (102) | (283) |
| tax | | |
+-----------+--------+--------+
| Deferred | | |
| tax | | |
+-----------+--------+--------+
| Movement | 1,342 | 3,703 |
| in | | |
| deferred | | |
| tax | | |
| liability | | |
| (Note 18) | | |
+-----------+--------+--------+
| Movement | 501 | 125 |
| in | | |
| deferred | | |
| tax | | |
| asset | | |
| (Note | | |
| 18) | | |
+-----------+--------+--------+
| | | |
+-----------+--------+--------+
| | 1,741 | 3,545 |
+-----------+--------+--------+
The tax on the Group's profit 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 |
| | 2008 | 2007 |
+--------------------------------------------+-------------------+-------------+
| | EUR '000 | (restated) |
| | | EUR '000 |
+--------------------------------------------+-------------------+-------------+
| (Loss)/profit before tax | (64,338) | 3,472 |
+--------------------------------------------+-------------------+-------------+
| | | |
+--------------------------------------------+-------------------+-------------+
| Tax calculated at the domestic rate in the | - | - |
| Isle of Man of 0% (2007: 0%) | | |
+--------------------------------------------+-------------------+-------------+
| Tax calculated at domestic tax rates | 1,827 | 6,762 |
| applicable to profits in the respective | | |
| countries (see below) | | |
+--------------------------------------------+-------------------+-------------+
| Income not subject to tax | 18 | - |
+--------------------------------------------+-------------------+-------------+
| Expenses not deductible for tax purposes | (7) | (2,422) |
+--------------------------------------------+-------------------+-------------+
| Tax losses for which no deferred tax has | (97) | (795) |
| been recognised | | |
+--------------------------------------------+-------------------+-------------+
| | | |
+--------------------------------------------+-------------------+-------------+
| Tax credit | 1,741 | 3,545 |
+--------------------------------------------+-------------------+-------------+
There have been no changes in the applicable tax rates in any of the countries
in which the Group operates. There has been a reversal of deferred tax
liabilities in the year of EUR702,000. Of this, EUR310,000 was originally recognised
on acquisition of Cartex Construct SRL. In 2007 these properties were re-valued
when the 1% minority interest ownership was restructured. In accordance with
Romanian tax rules, the re-valued amount became the new tax base for the
revalued assets. Accordingly the deferred tax liability that was recognised at
acquisition on these assets was reversed, resulting in a decrease in both the
deferred tax liability and the related goodwill that arose on acquisition (Note
16).
9 Dividends
+---------+--------+--------+
| | | |
+---------+--------+--------+
| | 2008 | 2007 |
+---------+--------+--------+
| | EUR '000 | EUR '000 |
+---------+--------+--------+
| | | |
+---------+--------+--------+
| Final | - | 15,400 |
| paid | | |
| for | | |
| 2006 - | | |
| EUR0.11 | | |
| per | | |
| share | | |
+---------+--------+--------+
| Interim | | 4,998 |
| paid | | |
| for | | |
| 2007 - | | |
| EUR0.0357 | | |
| per | | |
| share | | |
+---------+--------+--------+
| | - | |
+---------+--------+--------+
| | - | 20,398 |
+---------+--------+--------+
No dividends were paid in respect of 2008.
In April 2007, the Board of Directors of the Company declared a dividend of
EUR0.11 (c7.5p) per share in respect of 2006. This dividend was paid on 25 May
2007 to shareholders on the register at 11 May 2007. In accordance with the
Group's accounting policy under IFRS this dividend was not accrued at 31
December 2006. However this was not in accordance with the Isle of Man Companies
Acts 1931 to 2004 which require a proposed dividend to be accrued at the balance
sheet date to which it relates.
In September 2007, the Board of Directors of the Company declared an interim
dividend of EUR0.0357 (c2.5p) per share in respect of 2007. This dividend was paid
on 9 November 2007 to shareholders on the register at 12 October 2007.
10(Loss)/earnings per share
The basic (loss)/earnings per ordinary share are calculated by dividing the net
(loss)/profit attributable to the ordinary shareholders of the Company by the
weighted average number of ordinary shares in issue during the year.
+-----------------+--------+----------+---------+
| | | Group | Group |
| | | 2008 | 2007 |
+-----------------+--------+----------+---------+
| | | EUR'000 | EUR'000 |
+-----------------+--------+----------+---------+
| | | | |
+-----------------+--------+----------+---------+
| (Loss)/profit | | (61,653) | 7,663 |
| attributable | | | |
| to ordinary | | | |
| shareholders | | | |
| of the | | | |
| Company | | | |
+-----------------+--------+----------+---------+
| Weighted | | 140,000 | 140,000 |
| average | | | |
| number | | | |
| of | | | |
| ordinary | | | |
| shares | | | |
| in issue | | | |
+-----------------+--------+----------+---------+
| | | | |
+-----------------+--------+----------+---------+
| Basic | | (EUR0.44) | EUR0.05 |
| (loss)/earnings | | | |
| per share | | | |
+-----------------+--------+----------+---------+
The Company has no dilutive potential ordinary shares; the diluted
(loss)/earnings per share is the same as the basic (loss)/earnings per share.
11 Investment property
+-------------+-----------+---------+
| |
+-------------+
| | | |
+-------------+-----------+---------+
| | | |
+-------------+-----------+---------+
| | Group | Group |
| | 2008 | 2007 |
+-------------+-----------+---------+
| | EUR'000 | EUR'000 |
+-------------+-----------+---------+
| | | |
+-------------+-----------+---------+
| Beginning | 290,454 | 219,578 |
| of year | | |
+-------------+-----------+---------+
| Additions | 13,511 | 59,220 |
+-------------+-----------+---------+
| Transfer | (6,887) | 3,390 |
| (to)/from | | |
| development | | |
| property | | |
| (Note 14) | | |
+-------------+-----------+---------+
| Transfer | - | 1,596 |
| from | | |
| prepaid | | |
| operating | | |
| leases | | |
| (Note 12) | | |
+-------------+-----------+---------+
| Disposals | (116,724) | - |
+-------------+-----------+---------+
| Exchange | (16,808) | (8,812) |
| differences | | |
+-------------+-----------+---------+
| Net | (16,872) | 15,482 |
| (loss)/gain | | |
| from fair | | |
| value | | |
| adjustments | | |
| on | | |
| investment | | |
| property | | |
+-------------+-----------+---------+
| | | |
+-------------+-----------+---------+
| End of | 146,674 | 290,454 |
| year | | |
+-------------+-----------+---------+
Except for two of the Group's investment properties which were valued at
potential sale prices, the Groups investment properties were revalued at 31
December 2008 and 2007 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.
In the income statement, direct operating expenses include EUR250,000 relating to
investment property that was unlet (2007: EUR45,000).
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.
12 Prepaid operating leases
+--------------+---------+---------+
| | Group | Group |
| | 2008 | 2007 |
+--------------+---------+---------+
| | EUR'000 | EUR'000 |
+--------------+---------+---------+
| | | |
+--------------+---------+---------+
| Beginning | 5,752 | 5,221 |
| of year | | |
+--------------+---------+---------+
| Additions | - | 2,212 |
| | | |
+--------------+---------+---------+
| Transfer | - | (1,596) |
| to | | |
| investment | | |
| property | | |
| (Note 11) | | |
+--------------+---------+---------+
| Disposals | (5,116) | - |
+--------------+---------+---------+
| Amortisation | (30) | (66) |
| of prepaid | | |
| operating | | |
| leases | | |
+--------------+---------+---------+
| Exchange | (606) | (19) |
| differences | | |
+--------------+---------+---------+
| | | |
+--------------+---------+---------+
| End of | - | 5,752 |
| year | | |
+--------------+---------+---------+
The up-front payments relate to operating leases acquired by the Group. Each
operating lease is amortised over its individual term, which ranges from 80 to
99 years.
The directors have obtained a valuation of the land relating to these operating
leases at 31 December 2007 by independent professionally qualified valuers CB
Richard Ellis. Valuations were prepared in accordance with the RICS Appraisal
and Valuation Standards. At 31 December 2007 the market value of the land was
EUR8,940,000.
13 Acquired building rights
+--------------+--------+--------+---------+--------+
| | | | | |
+--------------+--------+--------+---------+--------+
| | | | Group | Group |
| | | | 2008 | 2007 |
+--------------+--------+--------+---------+--------+
| | | | EUR'000 | EUR'000 |
+--------------+--------+--------+---------+--------+
| | | | | |
+--------------+--------+--------+---------+--------+
| Beginning | | | 7,505 | 3,741 |
| of year | | | | |
+--------------+--------+--------+---------+--------+
| Additions | | | - | 4,128 |
| | | | | |
+--------------+--------+--------+---------+--------+
| Disposals | | | (3,302) | - |
+--------------+--------+--------+---------+--------+
| Amortisation | | | (39) | (80) |
| of acquired | | | | |
| building | | | | |
| rights | | | | |
+--------------+--------+--------+---------+--------+
| Impairment | | | (1,815) | - |
| of | | | | |
| acquired | | | | |
| building | | | | |
| rights | | | | |
+--------------+--------+--------+---------+--------+
| Exchange | | | (599) | (284) |
| differences | | | | |
+--------------+--------+--------+---------+--------+
| | | | | |
+--------------+--------+--------+---------+--------+
| End of | | | 1,750 | 7,505 |
| 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.
In 2008 the Group's acquired building rights have been impaired to reflect
potential sales prices.
In 2008 the directors have obtained a valuation of the land relating to these
acquired building rights by independent professionally qualified valuers CB
Richard Ellis. Valuations were prepared in accordance with the RICS Appraisal
and Valuation Standards. At 31 December 2008 the market value of the land was
EUR3,500,000 (2007: EUR12,880,000).
14 Development property
+-------------+---------+---------+
| | Group | Group |
| | 2008 | 2007 |
+-------------+---------+---------+
| | EUR'000 | EUR'000 |
+-------------+---------+---------+
| | | |
+-------------+---------+---------+
| Beginning | 23,215 | 700 |
| of year | | |
+-------------+---------+---------+
| Additions | 45,842 | 25,167 |
| | | |
+-------------+---------+---------+
| Transfer | 6,887 | (3,390) |
| from / | | |
| (to) | | |
| investment | | |
| property | | |
| (Note 11) | | |
+-------------+---------+---------+
| Disposals | (2,665) | - |
+-------------+---------+---------+
| Exchange | (4,409) | (1,420) |
| differences | | |
+-------------+---------+---------+
| Gain | - | 3,117 |
| from | | |
| fair | | |
| value | | |
| adjustments | | |
| on | | |
| development | | |
| property | | |
| credited to | | |
| equity | | |
+-------------+---------+---------+
| Loss | (4,612) | (959) |
| from | | |
| fair | | |
| value | | |
| adjustments | | |
| on | | |
| development | | |
| property | | |
| charged to | | |
| income | | |
| statement | | |
+-------------+---------+---------+
| | | |
+-------------+---------+---------+
| End of | 64,258 | 23,215 |
| year | | |
+-------------+---------+---------+
The Group's development properties were revalued at 31 December 2008 and 2007 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.
If development property had been carried under the cost model the carrying
amounts would have been EUR68,870,000 (2007: EUR21,057,000).
15 Other property, plant and equipment
+---------------------------------------------------------------------------+--+--+-------+-------------------+-------------------------------------------+
| Group Group | | | |
| 2008 2007 | | | |
| EUR'000 EUR'000 | | | |
| Group Group | | | |
| 2008 2007 | | | |
| EUR'000 EUR'000 | | | |
| At | | | |
| beginning | | | |
| of year | | | |
| Cost 280 506 | | | |
| Accumulated (99) (50) | | | |
| depreciation | | | |
| | | | |
| Net 181 456 | | | |
| book | | | |
| amount | | | |
| Year | | | |
| ending | | | |
| 31 | | | |
| December | | | |
| Opening 181 456 | | | |
| net | | | |
| book | | | |
| amount | | | |
| Additions 149 23 | | | |
| Disposals (43) (221) | | | |
| Depreciation (68) (70) | | | |
| charge | | | |
| Exchange (19) (7) | | | |
| difference | | | |
| | | | |
| End of 200 181 | | | |
| year | | | |
| At 31 | | | |
| December | | | |
| Cost 293 280 | | | |
| Accumulated (93) (99) | | | |
| depreciation | | | |
| | | | |
| Net 200 181 | | | |
| book | | | |
| amount | | | |
| | | | |
+---------------------------------------------------------------------------+--+--+-------+
| | | | Group |
| | | | |
+---------------------------------------------------------------------------+--+--+-------+-------------------+-------------------------------------------+
The Company has no property, plant and equipment.
16 Investments in subsidiaries
Significant subsidiaries held by the Group are as follows:
+--------------------+--------+----------+----------+--------+---------------+
| | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Name of | % of | % of | | Country |
| significant | ordinary | ordinary | | of |
| subsidiary | share | share | | incorporation |
| | capital | capital | | |
| | and | and | | |
| | voting | voting | | |
| | rights | rights | | |
| | held | held | | |
| | 2008 | 2007 | | |
+-----------------------------+----------+----------+--------+---------------+
| | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Auriga | | 0%* | 100% | | Bulgaria |
| EAD | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Capital | | 100% | 100% | | Bulgaria |
| Properties | | | | | |
| EAD | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Equilibrium | | 100% | 100% | | Bulgaria |
| EOOD | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Elan | | 0%* | 100% | | Macedonia |
| Properties | | | | | |
| DOOEL | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Elan | | 100% | 100% | | Macedonia |
| Properties | | | | | |
| BC-S DOOEL | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Airport | | 0%** | 100% | | Romania |
| Smart | | | | | |
| Office | | | | | |
| SRL | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Cartex | | 100% | 100% | | Romania |
| Construct | | | | | |
| SRL | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Casa | | 0%** | 100% | | Romania |
| Mosilor | | | | | |
| SRL | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Domenii | | 100% | 100% | | Romania |
| Imobiliare | | | | | |
| SRL | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Equest | | 100% | 100% | | Romania |
| Logistic | | | | | |
| SRL | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Man | | 75% | 75% | | Romania |
| Construct-UN-Impex | | | | | |
| SRL | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Modul | | 70% | 70% | | Romania |
| Linea | | | | | |
| SRL | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Modul | | 100% | 100% | | Romania |
| Shopping | | | | | |
| Center | | | | | |
| SRL | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Rivium | | 100% | 100% | | Romania |
| Galleria | | | | | |
| Mall SRL | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Union | | 100% | 100% | | Romania |
| Properties | | | | | |
| SRL | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Vitantis | | 100% | 100% | | Romania |
| SRL | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Euro | | 0%* | 70% | | Serbia |
| Projekt | | | | | |
| DOO | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Retail | | 100% | 0% | | Serbia |
| Park | | | | | |
| Development | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Star | | 100% | 100% | | Serbia |
| Imobiliare | | | | | |
| DOO | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| Star | | 0%* | 100% | | Serbia |
| Invest | | | | | |
| DOO | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| T | | 0%* | 70% | | Serbia |
| Future | | | | | |
| DOO | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
| T | | 0%* | 70% | | Serbia |
| Property | | | | | |
| DOO | | | | | |
+--------------------+--------+----------+----------+--------+---------------+
* - sold in the year
** - merged into Domenii Imobiliare SRL in the year
The above significant investments in subsidiaries are not directly held by the
Company but via intermediate holding companies. All subsidiary undertakings are
included in the consolidation. The Company's cost of investment in subsidiaries
at 31 December 2008 was EUR56,762,000 (2007: EUR1,880).
Movement in investments in subsidiaries during 2008 is as follows:
+--------------+---------------------------------+---------+
| | | Company |
| | | 2008 |
+--------------+---------------------------------+---------+
| | | EUR'000 |
+--------------+---------------------------------+---------+
| | | |
+--------------+---------------------------------+---------+
| Beginning of year | 2 |
+------------------------------------------------+---------+
| Capital contribution into Lerma BV | 36,228 |
+------------------------------------------------+---------+
| Capital contribution into Banbury BV | 14,532 |
+------------------------------------------------+---------+
| Capital contribution into Capital Balkan | 6,000 |
| Properties NV | |
+------------------------------------------------+---------+
| | | |
+--------------+---------------------------------+---------+
| End of year | 56,762 |
| | |
+--------------+---------------------------------+---------+
The Company enters into loans with its direct subsidiaries. At 31 December 2008
loans and receivables due from subsidiaries was EUR131,442,000 (2007:
EUR197,859,000). During the year the Company lent EUR63,852,175 (2007: EUR51,049,000)
and was repaid EUR55,456,000 (2007: EUR47,139,000) on the loans due from subsidiary
undertakings. All loans to subsidiaries are unsecured with no set repayment date
and are subject to interest at the rate of 9.9% per annum. Total loan interest
income for the year was EUR11,705,000 (2007: EUR17,009,000). There was accrued
interest on these loans at 31 December 2008 of EUR12,029,000 (2007: EUR17,385,000).
The Company does not intend to seek repayment of these loans or the accrued
interest within 12 months of the balance sheet date.
The Company also has EUR855,000 (2007: EUR1,922,000) due from its direct
subsidiaries included within trade and other receivables (Note 20). These
amounts are short-term in nature, are unsecured with no set repayment date and
are not subject to interest.
17 Goodwill
+--------------+---------+---------+
| | Group | Group |
| | 2008 | 2007 |
+--------------+---------+---------+
| | EUR'000 | EUR'000 |
+--------------+---------+---------+
| | | |
+--------------+---------+---------+
| At | | |
| beginning | | |
| of year | | |
+--------------+---------+---------+
| Cost | 2,455 | 7,421 |
+--------------+---------+---------+
| Accumulated | - | - |
| impairment | | |
+--------------+---------+---------+
| | | |
+--------------+---------+---------+
| Net | 2,455 | 7,421 |
| book | | |
| amount | | |
+--------------+---------+---------+
| | | |
+--------------+---------+---------+
| Beginning | | |
| of year | | |
+--------------+---------+---------+
| Opening | 2,455 | 7,421 |
| net | | |
| book | | |
| amount | | |
+--------------+---------+---------+
| Disposals | (2,066) | - |
| of | | |
| subsidiaries | | |
+--------------+---------+---------+
| Impairment | (382) | (4,973) |
| charge | | |
+--------------+---------+---------+
| Exchange | (7) | 7 |
| differences | | |
+--------------+---------+---------+
| | | |
+--------------+---------+---------+
| End of | - | 2,455 |
| year | | |
+--------------+---------+---------+
| At 31 | | |
| December | | |
+--------------+---------+---------+
| Cost | 382 | 7,421 |
+--------------+---------+---------+
| Accumulated | (382) | (4,966) |
| impairment | | |
+--------------+---------+---------+
| | | |
+--------------+---------+---------+
| Net | - | 2,455 |
| book | | |
| amount | | |
+--------------+---------+---------+
Goodwill is allocated to the particular cash-generating units identified as each
operating company acquired.
An impairment charge of EUR382,000 arose in 2008 as a result of local revaluation
of investment property of Cartex Construct SRL.
In 2007 the recoverable amount of goodwill allocated to a property in Bulgaria
of EUR2,065,000 had been determined using a value-in-use calculation with the
following key assumptions: gross margin 44%, growth rate 10% and discount rate
10%. No impairment charge arose as a result of this impairment test. The
value-in-use calculations use post-tax cash flow projections based on financial
budgets approved by management covering a four year period.
In 2007 the recoverable amount of goodwill allocated to properties in Romania
EUR389,000 has been determined using fair value less costs to sell. Fair value
less costs to sell had been determined using the valuation of the property
assets by independent professionally qualified valuers CB Richard Ellis. An
impairment charge of EUR4,973,000 arose in 2007 as a result of the restructuring
of the 1% minority ownership of certain companies. An amount of EUR6,660,000 was
credited to deferred income tax in the income statement as a result of this
restructuring.
18 Associates
Investments in associates
+-------------+---------+---------+
| | Group | Group |
| | 2008 | 2007 |
+-------------+---------+---------+
| | EUR'000 | EUR'000 |
+-------------+---------+---------+
| | | |
+-------------+---------+---------+
| Beginning | 38,256 | 36,495 |
| of year | | |
+-------------+---------+---------+
| Impairment | (641) | - |
| in the | | |
| year | | |
+-------------+---------+---------+
| Exchange | - | (1) |
| differences | | |
+-------------+---------+---------+
| Share | 1,607 | 4,612 |
| of | | |
| profit | | |
+-------------+---------+---------+
| Share | (5,613) | (2,850) |
| of | | |
| devaluation | | |
| on | | |
| development | | |
+-------------+---------+---------+
| Share | (725) | - |
| of | | |
| translation | | |
| reserve | | |
+-------------+---------+---------+
| | | |
+-------------+---------+---------+
| End of | 32,884 | 38,256 |
| year | | |
+-------------+---------+---------+
Summary financial information for equity accounted investees, adjusted for the
percentage ownership held by the Group:
+------------+--------+--------+-------------+----------+--------+-----------+
| | | Assets | Liabilities | Revenues | Profit | %interest |
| | | | | | after | |
| | | | | | tax | |
+------------+--------+--------+-------------+----------+--------+-----------+
| Name | | EUR'000 | EUR'000 | EUR'000 | EUR'000 | held |
| of | | | | | | |
| associate | | | | | | |
+------------+--------+--------+-------------+----------+--------+-----------+
| | | | | | | |
+------------+--------+--------+-------------+----------+--------+-----------+
| 2008 | | | | | | |
+------------+--------+--------+-------------+----------+--------+-----------+
| Archway | | 6,614 | 5,962 | 195 | 350 | 50 |
| Properties | | | | | | |
| BV | | | | | | |
+------------+--------+--------+-------------+----------+--------+-----------+
| Glorient | | 47,474 | 14,661 | 3,509 | 1,258 | 40 |
| BV | | | | | | |
+------------+--------+--------+-------------+----------+--------+-----------+
| | | | | | | |
+------------+--------+--------+-------------+----------+--------+-----------+
| | | 54,088 | 20,623 | 3,704 | 1,608 | |
+------------+--------+--------+-------------+----------+--------+-----------+
+-----------+--------+-------------+----------+------------+----------+
| Name | Assets | Liabilities | Revenues | Profit | % |
| of | | EUR '000 | EUR '000 | after | interest |
| associate | EUR '000 | | | tax | held |
| | | | | (restated) | |
| | | | | EUR '000 | |
+-----------+--------+-------------+----------+------------+----------+
| 2007 | | | | | |
+-----------+--------+-------------+----------+------------+----------+
+------------+-----------+---------+--------+--------+--------+
| Archway | 6,840 | 5,824 | 1,401 | 1,014 | 50 |
| Properties | | | | | |
| BV | | | | | |
+------------+-----------+---------+--------+--------+--------+
| Glorient | 47,934 | 10,694 | 1,304 | 3,598 | 40 |
| BV | | | | | |
+------------+-----------+---------+--------+--------+--------+
| | | | | | |
+------------+-----------+---------+--------+--------+--------+
| | 54,774 | 16,518 | 2,705 | 4,612 | |
+------------+-----------+---------+--------+--------+--------+
Loans to associates
Loans to associates consist of EUR1,000,000 (2007: EUR4,910,000) which is included
within current assets (2007: EUR1,000,000 is a current asset, EUR3,910,000 is a
non-current asset). These loans are unsecured and bear interest at 10% per
annum. The non-current portion of the loans will mature in 2010.
19 Deferred income tax
The movement in deferred income tax assets and liabilities during the year is as
follows:
+--------------------+----------+--------+--------+
| | | Tax | Total |
| | Changes | losses | |
| | in fair | | |
| | value | | |
| | of | | |
| | property | | |
| | and | | |
| | swaps | | |
+--------------------+----------+--------+--------+
| | Group | Group | Group |
| | 2007 | 2007 | 2007 |
+--------------------+----------+--------+--------+
| Deferred | EUR'000 | EUR'000 | EUR'000 |
| tax | | | |
| assets | | | |
+--------------------+----------+--------+--------+
| | | | |
+--------------------+----------+--------+--------+
| Beginning | - | 769 | 769 |
| of year | | | |
+--------------------+----------+--------+--------+
| Credited | 106 | 19 | 125 |
| to | | | |
| income | | | |
| statement | | | |
| (Note 7) | | | |
+--------------------+----------+--------+--------+
| Exchange | - | (1) | (1) |
| differences | | | |
+--------------------+----------+--------+--------+
| At 31 | 106 | 787 | 893 |
| December | | | |
| 2007 | | | |
+--------------------+----------+--------+--------+
| | | | |
+--------------------+----------+--------+--------+
| | | Tax | Total |
| | Changes | losses | |
| | in fair | | |
| | value | | |
| | of | | |
| | property | | |
| | and | | |
| | swaps | | |
+--------------------+----------+--------+--------+
| | Group | Group | Group |
| | 2008 | 2008 | 2008 |
+--------------------+----------+--------+--------+
| Deferred | EUR'000 | EUR'000 | EUR'000 |
| tax | | | |
| assets | | | |
+--------------------+----------+--------+--------+
| | | | |
+--------------------+----------+--------+--------+
| Beginning | 106 | 787 | 893 |
| of year | | | |
+--------------------+----------+--------+--------+
| Credited/(charged) | 501 | - | 501 |
| to income | | | |
| statement (Note 7) | | | |
+--------------------+----------+--------+--------+
| Credited | (74) | - | (74) |
| to | | | |
| reserves | | | |
+--------------------+----------+--------+--------+
| Disposal | (82) | (787) | (869) |
| of a | | | |
| subsidiary | | | |
+--------------------+----------+--------+--------+
| Exchange | (11) | - | (11) |
| differences | | | |
+--------------------+----------+--------+--------+
| | | | |
+--------------------+----------+--------+--------+
| At 31 | 440 | - | 440 |
| December | | | |
| 2008 | | | |
+--------------------+----------+--------+--------+
+--------------+----------+---------+
| | | Total |
| | Changes | |
| | in fair | |
| | value | |
| | of | |
| | property | |
| | and | |
| | swaps | |
+--------------+----------+---------+
| | Group | Group |
| | 2007 | 2007 |
+--------------+----------+---------+
| Deferred | EUR'000 | EUR'000 |
| tax | | |
| liabilities | | |
+--------------+----------+---------+
| | | |
+--------------+----------+---------+
| Beginning | 8,515 | 8,515 |
| of year | | |
+--------------+----------+---------+
| Acquisition | (3,703) | (3,703) |
| of | | |
| subsidiaries | | |
+--------------+----------+---------+
| Charged | 485 | 485 |
| to | | |
| income | | |
| statement | | |
| (Note 7) | | |
+--------------+----------+---------+
| Exchange | (174) | (174) |
| differences | | |
+--------------+----------+---------+
| | | |
+--------------+----------+---------+
| At 31 | 5,123 | 5,123 |
| December | | |
| 2007 | | |
+--------------+----------+---------+
| | | |
+--------------+----------+---------+
| | | Total |
| | Changes | |
| | in fair | |
| | value | |
| | of | |
| | property | |
| | and | |
| | swaps | |
+--------------+----------+---------+
| | Group | Group |
| | 2008 | 2008 |
+--------------+----------+---------+
| Deferred | EUR'000 | EUR'000 |
| tax | | |
| liabilities | | |
+--------------+----------+---------+
| Beginning | 5,123 | 5,123 |
| of year | | |
+--------------+----------+---------+
| Credited | (1,342) | (1,342) |
| to | | |
| income | | |
| statement | | |
| (Note 7) | | |
+--------------+----------+---------+
| Charged | 188 | 188 |
| to | | |
| equity | | |
+--------------+----------+---------+
| Disposal | (1,739) | (1,739) |
| of a | | |
| subsidiary | | |
+--------------+----------+---------+
| Exchange | (254) | (254) |
| differences | | |
+--------------+----------+---------+
| | | |
+--------------+----------+---------+
| At 31 | 1,976 | 1,976 |
| December | | |
| 2008 | | |
+--------------+----------+---------+
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.
Deferred income tax that relates to revaluation of development property in the
revaluation reserve is charged to equity. Deferred income tax that relates to
revaluation of development property in the income statement is charged to the
income statement.
20 Trade and other receivables
+--------+--------+--------+--------+-----------+----------+-----------+------------+
| | | | | Group | Group | Company | Company |
+--------+--------+--------+--------+-----------+----------+-----------+------------+
| | | | | 2008 | 2007 | 2008 | 2007 |
+--------+--------+--------+--------+-----------+----------+-----------+------------+
| | | | | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+--------+--------+--------+--------+-----------+----------+-----------+------------+
| | | | | | | | |
+--------+--------+--------+--------+-----------+----------+-----------+------------+
| Trade | | | 2,296 | 1,298 | - | - |
| receivables | | | | | | |
+-----------------+--------+--------+-----------+----------+-----------+------------+
| Due from subsidiary undertakings | - | - | 855 | 1,922 |
+-----------------------------------+-----------+----------+-----------+------------+
| Accrued income and prepaid | 1,308 | 5,060 | 76 | 72 |
| expenses | | | | |
+-----------------------------------+-----------+----------+-----------+------------+
| Other | | | 6,347 | 2,474 | 220 | 10 |
| receivables | | | | | | |
+-----------------+--------+--------+-----------+----------+-----------+------------+
| | | | | | | | |
+--------+--------+--------+--------+-----------+----------+-----------+------------+
| Trade and other | | 9,951 | 8,832 | 1,151 | 2,004 |
| receivables | | | | | |
+--------+--------+--------+--------+-----------+----------+-----------+------------+
The estimated fair values of receivables approximate their carrying amounts.
There is no concentration of credit risk with respect to trade receivables as
the Group has a large number of tenants.
+--------+--------+--------+--------+--------+--------+--------+
| Trade receivables past | | | Group | Group |
| due | | | | |
+--------------------------+--------+--------+--------+--------+
| | | | | | 2008 | 2007 |
+--------+--------+--------+--------+--------+--------+--------+
| | | | | | EUR'000 | EUR'000 |
+--------+--------+--------+--------+--------+--------+--------+
| | | | | | | |
+--------+--------+--------+--------+--------+--------+--------+
| Up to 30 days | | | 1,727 | 1,086 |
| outstanding | | | | |
+--------------------------+--------+--------+--------+--------+
| 30 days to 60 days | | | 105 | 73 |
| outstanding | | | | |
+--------------------------+--------+--------+--------+--------+
| 60 days to 90 days | | | 406 | 64 |
| outstanding | | | | |
+--------------------------+--------+--------+--------+--------+
| 90 days or more | | | 58 | 75 |
| outstanding | | | | |
+--------------------------+--------+--------+--------+--------+
| | | | | | | |
+--------+--------+--------+--------+--------+--------+--------+
| At 31 December 2008 | | | 2,296 | 1,298 |
+--------+--------+--------+--------+--------+--------+--------+
The Group impaired receivables of EUR52,000 during the year ended 31 December 2008
(2007: nil). 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.
21 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 |
| 2008 2007 |
| EUR'000 EUR'000 |
| Non-current |
| Bank borrowings 113,550 146,618 |
| Current |
| Bank borrowings 4,215 807 |
| |
| Total 117,765 147,425 |
| borrowings |
| |
+--------------------------------------+
The above borrowings are secured by way of fixed and floating charges over
certain of the Group's assets, including property assets which have a fair value
of at 31 December 2008 of EUR181,729,000 (2007: EUR254,354,000).
The maturity of non-current borrowings is as follows:
+--------+--------+---------+---------+
| | | Group | Group |
+--------+--------+---------+---------+
| | | 2008 | 2007 |
+--------+--------+---------+---------+
| | | EUR'000 | EUR'000 |
+--------+--------+---------+---------+
| | | | |
+--------+--------+---------+---------+
| Between 1 and 2 | 4,860 | 2,451 |
| years | | |
+-----------------+---------+---------+
| Between 2 and 5 | 98,436 | 122,233 |
| years | | |
+-----------------+---------+---------+
| Over 5 years | 10,254 | 21,934 |
+-----------------+---------+---------+
| | | | |
+--------+--------+---------+---------+
| | | 113,550 | 146,618 |
+--------+--------+---------+---------+
The effective interest rate on bank borrowings at the balance sheet date was
5.80% (2007: 4.26%).
The fair value of these fixed and floating-rate borrowings approximated their
carrying values at 31 December 2007 and 2008. All bank borrowings are
denominated in Euro. The Group has undrawn fixed rate borrowings, expiring
within one year, of EUR7,924,000 (2007: EUR14,725,493).
The Company has no borrowings.
22 Other loans
+---------+--------+--------+--------+--------+--------+--------+
| | | | | | Group | Group |
+---------+--------+--------+--------+--------+--------+--------+
| | | | | | 2008 | 2007 |
+---------+--------+--------+--------+--------+--------+--------+
| | | | | | EUR'000 | EUR'000 |
+---------+--------+--------+--------+--------+--------+--------+
| | | | | | | |
+---------+--------+--------+--------+--------+--------+--------+
| Non-current | | | | | |
+------------------+--------+--------+--------+--------+--------+
| Long term loans | | | | 200 | 1,063 |
+------------------+--------+--------+--------+--------+--------+
| Current | | | | | | |
+---------+--------+--------+--------+--------+--------+--------+
| Short term | | | | 10,048 | 6.075 |
| loans | | | | | |
+------------------+--------+--------+--------+--------+--------+
| | | | | | | |
+---------+--------+--------+--------+--------+--------+--------+
| Total other | | | | 10,248 | 7,138 |
| loans | | | | | |
+---------+--------+--------+--------+--------+--------+--------+
The long term loans are unsecured and interest free.
In 2008 the short term loan of EUR10,048,000 (2007: EUR6,075,000) is unsecured and
bears interest at the 3 month EURIBOR rate plus 2% per annum (2007: 9.5% - 10%
per annum). This loan is further discussed in Note 1 (d).
Long term loans all mature between 2 and 5 years (2007: between 2 and 5 years).
23 Derivative financial instruments
Interest rate swaps
The notional amount of the outstanding floating-to-fixed interest rate swap
contracts at 31 December 2008 was EUR80,080,000 (2007: EUR96,100,000).
At 31 December 2008 the average fixed interest rates on the outstanding interest
rate swaps were 4.5% (2007: 4.20%), and the floating rates were primarily 3
month EURIBOR. Gains and losses on interest swaps are recognised in the income
statement within finance income.
+--------+--------+---------+--------+
| | | Group | Group |
+--------+--------+---------+--------+
| | | 2008 | 2007 |
+--------+--------+---------+--------+
| | | EUR'000 | EUR'000 |
+--------+--------+---------+--------+
| | | | |
+--------+--------+---------+--------+
| Interest rate | (2,995) | 756 |
| swaps | | |
+-----------------+---------+--------+
| | | | |
+--------+--------+---------+--------+
| Total | | (2,995) | 756 |
+--------+--------+---------+--------+
The fair value of interest rate swaps at 31 December 2008 is included within
trade and other payables andwithin trade and other receivables at 31 December
2007.
24 Trade and other payables
+--------+--------+--------+--------+--------+--------+--------+---------+---------+
| | | | | | Group | Group | Company | Company |
+--------+--------+--------+--------+--------+--------+--------+---------+---------+
| | | | | | 2008 | 2007 | 2008 | 2007 |
+--------+--------+--------+--------+--------+--------+--------+---------+---------+
| | | | | | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+--------+--------+--------+--------+--------+--------+--------+---------+---------+
| | | | | | | | | |
+--------+--------+--------+--------+--------+--------+--------+---------+---------+
| Trade payables | | | | 1,844 | 5,124 | 146 | - |
+-----------------+--------+--------+--------+--------+--------+---------+---------+
| Property tax | | | | - | 78 | - | - |
| payable | | | | | | | |
+-----------------+--------+--------+--------+--------+--------+---------+---------+
| Other payables | | | | 3,078 | 1,151 | - | 1,147 |
+-----------------+--------+--------+--------+--------+--------+---------+---------+
| Rents received in | | | 1,550 | 1,982 | - | - |
| advance | | | | | | |
+--------------------------+--------+--------+--------+--------+---------+---------+
| Deposits received from | | | - | 32 | - | - |
| tenants | | | | | | |
+--------------------------+--------+--------+--------+--------+---------+---------+
| Interest | | | | 247 | 872 | 74 | - |
| payable | | | | | | | |
+-----------------+--------+--------+--------+--------+--------+---------+---------+
| Accrued | | | | 2,222 | 2,033 | 276 | - |
| expenses | | | | | | | |
+-----------------+--------+--------+--------+--------+--------+---------+---------+
| Deferred consideration | | | - | 8,000 | - | - |
+--------------------------+--------+--------+--------+--------+---------+---------+
| Provisions for | | | 752 | - | - | - |
| liabilities | | | | | | |
+--------------------------+--------+--------+--------+--------+---------+---------+
| | | | | | | | | |
+--------+--------+--------+--------+--------+--------+--------+---------+---------+
| At 31 December | | | | 9,693 | 19,272 | 496 | 1,147 |
+--------+--------+--------+--------+--------+--------+--------+---------+---------+
Trade payables are interest free and have settlement dates within one year.
25 Net asset value per share
+---------------------------+--------+-----------+------------+
| | | Group | Group |
| | | 2008 | 2007 |
+---------------------------+--------+-----------+------------+
| | | EUR'000 | EUR'000 |
+---------------------------+--------+-----------+------------+
| | | | |
+---------------------------+--------+-----------+------------+
| Net assets attributable | | 128,681 | 208,315 |
| to ordinary shareholders | | | |
| of the Company | | | |
+---------------------------+--------+-----------+------------+
| Number of ordinary shares | | 140,000 | 140,000 |
| outstanding at 31 | | | |
| December 2008 | | | |
+---------------------------+--------+-----------+------------+
| | | | |
+---------------------------+--------+-----------+------------+
| Basic net assets per | | EUR0.92 | EUR1.49 |
| share | | | |
+---------------------------+--------+-----------+------------+
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 2008 and 2007.
EPRA net asset value per share at 31 December 2008 is as follows:
+---------------------------+--------+-----------+-----------+
| | | Group | Group |
| | | 2008 | 2007 |
+---------------------------+--------+-----------+-----------+
| | | EUR'000 | EUR'000 |
+---------------------------+--------+-----------+-----------+
| Net asset attributable to | | 128,681 | 208,315 |
| ordinary shareholders of | | | |
| the Company | | | |
+---------------------------+--------+-----------+-----------+
| Deferred Tax Liability | | 1,976 | 5,123 |
+---------------------------+--------+-----------+-----------+
| Deferred Tax Asset | | (440) | (893) |
+---------------------------+--------+-----------+-----------+
| Directors' valuation of | | 1,750 | 8,633 |
| acquired building rights | | | |
| owned by Man-Construct | | | |
| (2007: CBRE valuation) | | | |
+---------------------------+--------+-----------+-----------+
| Fair Value of acquired | | (3,457) | (3,457) |
| building rights at | | | |
| acquisition | | | |
+---------------------------+--------+-----------+-----------+
| | | | |
+---------------------------+--------+-----------+-----------+
| EPRA adjusted net asset | | 128,510 | 217,721 |
| value | | | |
+---------------------------+--------+-----------+-----------+
| | | | |
+---------------------------+--------+-----------+-----------+
| EPRA NAV per share | | EUR0.92 | EUR1.56 |
+---------------------------+--------+-----------+-----------+
26 Share capital
The total number of authorised and issued ordinary shares of the Company at 31
December 2008 and 2007 together with their rights are explained below.
+--------+--------+---------+----------+--------+
| | | Number | Ordinary | Total |
| | | of | shares | |
| | | shares | | |
+--------+--------+---------+----------+--------+
| Company | '000 | EUR'000 | EUR'000 |
+-----------------+---------+----------+--------+
| | | | | |
+--------+--------+---------+----------+--------+
| Authorised at | 300,000 | 3,000 | 3,000 |
| 31 December | | | |
| 2008 and 2007 | | | |
+-----------------+---------+----------+--------+
| Issued at 31 | 140,000 | 1,400 | 1,400 |
| December 2008 | | | |
| and 2007 | | | |
+-----------------+---------+----------+--------+
| | | | | |
+--------+--------+---------+----------+--------+
On 29 June 2007 at the Company's Annual General Meeting a resolution was passed
to increase the authorised share capital of the Company by 100,000,000 ordinary
shares of EUR0.01 each to 300,000,000 ordinary shares of EUR0.01 each.
All shares are fully paid and each ordinary share carries one vote on a poll
vote.
27 Cash used by operations
+--------------------------------------------------------------------------------------------------+--+----------+--------+--+-------+
| | | |
+-------------------------------------------------------------------------------------------------------------------------+--+-------+
| Company Company Company | | |
| 2008 2007 | | |
| EUR '000 EUR '000 | | |
| (Loss)/profit for the year (5,455) 11,442 | | |
| Adjustments for: | | |
| (11,976) (17,490) | | |
| - finance income | | |
| - finance costs 10,151 52 | | |
| Changes in working capital: | | |
| - decrease in receivables 71 767 | | |
| - increase in payables (724) 606 | | |
| Cash used by operations (7,933) (4,623) | | |
| | | |
+-------------------------------------------------------------------------------------------------------------------------+--+-------+
| | | |
+-------------------------------------------------------------------------------------------------------------------------+--+-------+
| Group | | |
| Group Group | | |
| 2008 2007 | | |
| EUR '000 (restated) | | |
| EUR '000 | | |
| Group | | |
| Group Group | | |
| 2008 2007 | | |
| EUR '000 (restated) | | |
| EUR '000 | | |
| (Loss)/profit for the year before tax (64,338) 3,472 | | |
| Adjustments for: | | |
| - share of profit in associate (restated) (966) (4,612) | | |
| - net loss/(gain) from fair value adjustment on 20,838 (14,523) | | |
| property assets | | |
| - finance income (437) (935) | | |
| - finance costs 11,245 7,160 | | |
| - foreign exchange loss 9,662 6,607 | | |
| - loss on sale of subsidiaries 14,807 - | | |
| - amortisation of acquired business rights and 69 146 | | |
| prepaid operating leases | | |
| - depreciation of property, plant and equipment 68 70 | | |
| - goodwill impairment 382 4,973 | | |
| - impairment of acquired building rights 1,701 | | |
| - impairment of loans 4,307 - | | |
| - fair value movement on interest rate swaps 4,764 (658) | | |
| - other provisions 750 - | | |
| Changes in working capital (excluding the effects of | | |
| disposals): | | |
| - increase in receivables | | |
| (4,974) (2,961) | | |
| - (decrease)/increase in payables (897) 4,251 | | |
| Cash (used by)/generated (3,019) 2,990 | | |
| from operations(1,885) | | |
| | | |
+--------------------------------------------------------------------------------------------------+--+-------------------+
| | | |
+--------------------------------------------------------------------------------------------------+--+----------+--------+--+-------+
28 Commitments
The Group has no capital commitments as at 31 December 2008 (2007: EUR7,777,000).
29 Related party transactions
The following have been identified as related parties:
* Subsidiaries;
* Associates;
* Individuals including the Directors of the Company, and certain partners,
directors and senior managers of Equest Property Management Limited and Equest
Partners Limited who meet the definition of "key management personnel" in IAS24;
* Close family members of key management personnel and companies controlled by, or
associated with, key management personnel or their close family members;
Group
(a) Directors
The directors of the Company received fees during the year as set out in Note 6.
None of the directors had any interest in shares of the Company or interest in
any material contract for the provision of services to the Group during the
year.
(b) Key management personnel
The Company is managed by Equest Property Management Limited ("the Investment
Manager") which receives advice from Equest Partners Limited ("the Investment
Advisor"). Certain partners, directors and senior managers of the Investment
Manager and the Investment Advisor are regarded as key management personnel. The
Investment Manager provides property management, investment management and
advisory services to the Group and receives an advisory and performance fee
under the terms of the Property Management and Advisory agreement. A summary of
the terms of the agreement, together with the amount of fees paid in 2008 and
2007 and any amounts due to or prepaid to the Investment Manager at 31 December
2008 and 2007 are included in Note 32. The Investment Advisors' fees are met by
the Investment Manager.
Certain subsidiaries have appointed directors who are key management personnel.
George Teleman, a partner of the Investment Advisor, was the administrator of
all the Romanian subsidiaries and received annual administrator remuneration
of EUR33,000 in 2008 (2007: EUR44,000).
The Investment Manager owned 676,264 shares in the Company at 31 December 2008
(2007: 676,264).
Company
The Company has entered into loans with its subsidiaries (Note 16).
30 Acquisition and disposal of subsidiaries
During the years ended 31 December 2008 and 31 December 2007 all of the Group's
purchases have been accounted for as asset combinations and there have been no
acquisitions that meet the definition of business combinations.
Asset acquisitions
There were no asset acquisitions during 2008. During 2007 the Group acquired a
number of subsidiaries that have been accounted for as asset acquisitions. The
Group acquired investment property of EUR47,637,000, building rights of
EUR3,457,000, borrowings of EUR19,965,000 and other net liabilities of EUR5,096,000
and paid EUR25,200,000 net of cash acquired.
Asset disposals
During 2008 the Group disposed of a number of subsidiaries. These subsidiaries
do not qualify under IFRS5 as discontinued operations, and hence have not been
presented as discontinued operations in the consolidated financial statements.
The loss on sale of subsidiaries has been presented on the income statement and
analysed in Note 5 to the financial statements.
The assets held by these subsidiaries include investment property
of EUR116,724,000, development property of EUR2,665,000, building rights
of EUR3,302,000, prepaid operating leases of EUR5,116,000, borrowings of
EUR64,697,000 and other net liabilities of EUR22,651,000 and received EUR41,654,000 of
cash.
31 Management, performance and administration fees
Details of the management, performance and administration fees are as follows:
Management and performance fees
On 10 July 2007, the Company entered into an amended and restated Property
Management and Advisory Agreement ("the Amended Management Agreement") with
Equest Property Management Limited ("the Investment Manager"). The Amended
Management Agreement amends and restates the Property Management and Advisory
Agreement between the Company and the Investment Manager dated 8 December 2005
("the Original Management Agreement"). Pursuant to the terms of the Amended
Management Agreement the Investment Manager is responsible for, inter alia, the
provision of property management services to the Company in relation to the
portfolio of assets held by it from time to time as well as for instructing
other providers to furnish the Company with services that the Investment Manager
is unable (for regulatory or other reasons) to provide.
(a) Management fee
Under the terms of the Original Management Agreement the Investment Manager was
entitled to a management fee equal to 1.8% per annum of the Company's Euro
placing proceeds at its admission to the AIM Market of the London Stock Exchange
plc ("the Euro Placing Proceeds"). Once the aggregate Euro Pacing Proceeds had
been invested by the Company, the fee would be equal to 1.8% per annum of the
gross property assets of the Group as shown in the valuation statement prepared
by the Company's property appraiser as at 30 June and 31 December each year.
Under the terms of the Amended Management Agreement, effective from the
valuation statement issued for the period ended 31 December 2006, the Investment
Manager is entitled to a management fee equal to 1.5% per annum of the gross
property assets of the Group as shown in the valuation statement prepared by the
Company's property appraiser as at 30 June and 31 December each year. Management
fees are payable semi-annually in advance within 30 days of the date of the
relevant valuation statement. Following completion of any subsequent placing of
shares of the Company, the annual management fee shall be reduced to 1.25% per
annum of the gross property assets of the Group effective from the valuation
statement next due immediately following completion of such placing.
The Investment Manager received fees for the year ended 31 December 2008 of
EUR5,712,000 (2007: EUR4,373,000) and none of them was included as accrued expenses
at 31 December 2008 as the management fees are billed and paid in advance. At
31 December 2007 EUR266,000 was included in accrued expenses.
(b) Performance fee
In addition to the annual management fee, under the Original Management
Agreement, the Company agreed to pay to the Investment Manager a performance
fee. Subject to the Company paying (or setting aside for payment) to
shareholders an amount equal to 10% of the Euro placing price multiplied by the
number of shares sold in the placing each year from the date of admission ("the
Hurdle"), the Investment Manager was entitled to 20% of (i) net distributable
income (after deducting amounts paid/set aside for distributions necessary to
meet the Hurdle), and (ii) the difference between the uplift or cumulative gains
on properties as at the end of the current year, and the uplift or cumulative
gains on properties in the immediately preceding year. Net distributable income
was calculated as the Company's net profit for the year, adjusted to reverse the
effects of net gains or losses (realised or unrealised) on investment properties
recognised in the income statement. Further details on the calculation of the
performance fee under the Original Management Agreement are set out in the
Company's AIM Admission Document dated 9 December 2005.
Under the Amended Management Agreement, the Investment Manager is entitled to an
annual performance fee equal to 20% of the excess total return over a 10%
cumulative annual return. In addition to achieving such a hurdle, the payment of
the performance fee will be subject to a 'high watermark' test. To achieve a
performance fee, the net asset value ("NAV") of the Company at the end of the
relevant financial period must be higher than the NAV at the end of the previous
financial period, or the highest previously recorded NAV at the end of the
financial period in relation to which a performance fee was last earned. The
first period for calculating a performance fee under the Amended Management
Agreement began on 1 January 2007 and ended on 31 December 2007. Each subsequent
calculation period is a period of twelve months ending on 31 December.
No performance fee was payable for the year ended 31 December 2008 (2007: nil).
Administration fees
On 3 July 2006 the original administration and registrar agreement dated 8
December 2005 ("the Administration Agreement") between the Company and Northern
Trust International Fund Administration Services (Isle of Man) Limited was
novated to IOMA Fund and Investment Management Limited ("IOMA") . Under the
terms of the novated Administration Agreement, IOMA is entitled to receive an
annual fee of EUR80,000 plus VAT payable quarterly in arrears and an accounting
fee calculated on a time spent basis.
On 1 October 2007, Equest Partners Limited ("the Investment Advisor") assumed
responsibility from IOMA 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.
Administration and accounting fees for the year ended 31 December 2008 were
EUR168,000 (2007: EUR161,000), of which EUR23,500 were included in trade creditors at
31 December 2008 (2007: EUR56,000 was included in accrued expenses).
32 Post balance sheet events
Post year-end, the Group has received notice of events of default on loan
obligations from its lender at the Moldova Mall and Vitantis properties. These
events of default are discussed further in the Chairman's statement and the
Investment Manager's Update. The Group also entered into negotiations to dispose
of a property, Elan, post year-end, which has indicated that it is not
appropriate to carry this property at CBRE values. The Group has therefore
impaired the carrying value of this property to its expected sale value, as
discussed in Note 11.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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