Ablon Group
INTERIM RESULTS
FOR THE PERIOD ENDED 30 JUNE 2007
Ablon Group Limited ("Ablon" or "the Company"), a leading real estate owner and
developer in CEE, today announces its results for the period ended 30 June 2007
in accordance with International Financial Reporting Standards (IFRS) as adopted
by the EU.
PROPERTY OVERVIEW
-- Property Assets:
-- Combined estimated value of EUR 540.7 million as at 30 June 2007, an
increase of 28% compared to the last valuation made on 30 September
2006(1)
-- 103,400 square meters of existing and income generating office, and
retail assets (at 11 locations) in Budapest and Prague
-- Significant development land bank comprising a further 817,900 square
metres in the next five years (at 19 locations) in Budapest, Prague and
Bucharest
-- Well positioned to expand in other cities in Central and Eastern Europe
following additional plot acquisitions in Prague for residential
development and in Bucharest for an office and residential development
(1) Based on the latest King Sturge valuation report as at 30 June 2007
FINANCIAL HIGHLIGHTS
-- Net Asset Value (NAV) growth of 12% for the six months ended 30 June
2007
-- Pre-tax Profit of EUR 22.7 million for the six months ended 30 June 2007
-- Gross rental income of EUR 5.2 million for the six months ended 30 June
2007
-- Shareholders funds increased from EUR 129 million at 31 December 2006 to
EUR 277 million at 30 June 2007, an increase of EUR 148 million
-- Adjusted net asset value per share of *2.99 at 30 June 2007
-- In February, Ablon Group commenced trading on AIM, raising �97.2 million
(EUR 145.9) (including over-allotment option) gross proceeds
RESULTS IN BRIEF
Period ended 30 June
in thousands of Euros 2007 2006
Gross rental income 5,151 3,913
Gross residential income 613 1,653
--------------------
Net sales income 5,350 5,565
--------------------
Net gain from fair value adjustment on
investment property 21,314 56,573
Sales and administrative expenses (3,105) (1,975)
Other income/(expenses) 19 72
--------------------
Net operating profit 23,578 58,995
--------------------
--------------------
Net financing income / (expense) (874) (8,978)
Profit before income tax 22,704 50,017
--------------------
Tax (5,577) (16,665)
--------------------
Profit for the year 17,127 33,352
--------------------
Basic earnings per share (euro) 0.17 0.48
--------------------
Diluted earnings per share (euro) 0.17 0.48
--------------------
SUMMARY CONSOLIDATED BALANCE SHEET
in thousands of Euros 30 Jun 2007 31 Dec 2006
Assets
------------------------------
Total non-current assets 333 952 294 795
------------------------------
Total current assets 143 862 36 661
------------------------------
Total assets 477 814 331 456
Gross Net Asset Value 540.7 434.2
Net Asset Value Per Share �2.99 �2.67
EQUITY
Total equity 276 545 129 311
LIABILITIES
Total non-current liabilities 170 588 161 714
Total current liabilities 30 681 40 431
Total liabilities 201 269 202 145
Total equity and liabilities 477 814 331 456
Uri Heller, Founder and Chief Executive of Ablon, commented: "We are very
pleased with the continued progress made during the first half of 2007 and are
delighted to present another strong set of results that demonstrates our ability
to fully capitalize on the attractive opportunities available to us in our core
markets.
"The positive macroeconomic trends prevalent in these markets show no signs of
diminishing, with the market for office space in Budapest continuing to be
particularly strong having just seen the highest second quarter 'take-up' ever
recorded. Tenant demand in Budapest showed a significant yearly increase for the
fifth year in succession and this was reflected in the 39% increase in Ablon's
gross rental income for the period.
"Our strategy of providing high quality spaces in attractive locations is
reaping benefits and this becomes very apparent as Ablon continues to win
significant contracts such as the recent public tender from the Hungarian Post
for approximately 24,000 square metres of office space for 10 years.
"We remain committed to generating strong returns for all of our shareholders,
proven by our 12% increase in NAV per share for the six month period, and are
actively pursuing our ambition of becoming the leading city real estate owner
and developer in Central and Eastern Europe. We continue to develop projects on
our extensive land bank and continue to seek more attractive sites for
development both in our current markets and in neighbouring countries where
other attractive opportunities also exist."
For further information, please contact:
Ablon Group Limited Shared Value Limited
Daniel Avidan, CFO Nicolas Duperrier
Tel. +36 1 225 6600 Tel. +44 (0)20 7321 5010
ablon@sharedvalue.net
Credit Suisse Securities (Europe) Limited
Chris Byrne / Richard Probert
Tel. +44 (0)20 7888 8888
______________________________________
CHAIRMAN'S INTERIM STATEMENT
Property Portfolio
As at 30 June 2007, Ablon Group's portfolio comprised properties at 27 different
locations split into 50 different projects or phases, of which there were 13
completed projects and 16 development projects as follows:
-- Properties at 17 locations in Budapest, with a total of 31 phases of
development. The properties comprised 10 completed projects (including
Z�ldv�ros Residential Park which had sold 239 out of the 240 flats) and
21 development projects.
-- Properties at 7 locations in Prague, with a total of 10 phases of
development, comprising 3 completed projects and 4 development projects.
-- Properties at 3 locations in Bucharest, with a total of 9 phases of
development, comprising 3 development projects.
Operational Review
During the first half of 2007, Ablon Group had successfully completed
residential, retail and office development projects at the following locations:
Budapest
In December 2006, the Business Center 30 office building was completed and as of
30 June 2007 the occupancy rate had already reached 70%, securing a current
annualized income of EUR 1.67 million.
Global Immo Kft., a wholly owned subsidiary of Ablon Group and the project
company for the Gateway Office Park project in Budapest, recently won a
significant public tender from the Hungarian Post for approximately 24,000
square metres of office space on a 10 years lease contract. Under the terms of
this agreement, the total gross rental income will be approximately EUR 5
million per annum. Construction of the Gateway Office Park project is at an
advanced stage of construction and the property is situated on approximately
11,250 square metres of land in district 13 of Budapest, an area that has become
the 'Office Building Corridor' of Budapest. The project is expected to have a
total of 36,298 square metres of lettable office and retail space and
underground parking.
In December 2006, the Group also started the construction of the Europeum
project, a four-star hotel located on Blaha Lujza Square, one of the busiest
squares in downtown Budapest, with easy access to public transportation and
motorways. The hotel will have 235 rooms, 5,500 square meters of retail space
and 229 parking places and construction is expected to be completed during the
second quarter of 2009.
Prague
Occupancy at the Meteor Centre Office Park, has now reached 89% following the
project's completion in December 2006. The site's annualized rental income
reached EUR 1.6 million as at 30 June 2007.
Following a period of due diligence, Ablon completed the acquisition of 394,701
square metres of land located 30 kilometers southwest of Prague city centre in
April. The site, which is situated 0.7 kilometres from a main highway, was
purchased for EUR 7.1 million and the sale was initiated in December 2006. Ablon
is confident of obtaining planning permission for the plot and subject to this,
plans to develop the site for residential housing. The expected building rights
for the land will enable the Company to construct 320 family homes. 50% of these
homes will be semi detached houses (with a floor area of 150 square metres
each); 47% will be detached houses (with a floor area of 150 - 330 square metres
each) and 3% will be terraced houses (with a floor area of 150 square metres
each). A kindergarten as well as some retail and service units will also be
built on-site. Ablon expects to begin marketing shortly after a building permit
is obtained around January 2009. The site will be developed in three one-year
phases, the timing of which will be determined by market demand.
Bucharest
In June, the Company increased its stake in the two development companies that
own the plots and development rights to the Timisoara Avenue and Mogosoaia
Village development projects, in Bucharest, from 80% to 88% as part of a
non-cash transaction. Under the terms of the agreement, Ablon will take on all
future equity and shareholders' loans required to finance these projects. The
share of Ablon's partners in the two development companies will be diluted from
20% to 12%. Timisoara Avenue is a 40,930 square metre plot in the Br�ncusi
neighbourhood in western Bucharest. The Group expects to build a residential
complex on the plot, including leisure facilities, consisting of approximately
1,800 apartments for middle class residents. Ablon expects to complete work on
the development in 2012 with the aggregate expected gross saleable area expected
to be 180,000 square metres. Mogosoaia Village is a 93,800 square metre plot,
located seven kilometres northwest of the city centre of Bucharest; Ablon
expects to build 116 villas on the plot. The development is expected to be
completed in 2009 with an aggregate expected gross saleable area of 40,000
square metres.
In June, the Company also completed the acquisition of a 33,650 square metre
plot of land, located in the Pipera District of Bucharest, for a purchase price
of EUR 9.5 million. Ablon has obtained building rights for 117,000 square meters
on the plot and plans to develop the site for residential housing and office
use. The Company will construct approximately 1,000 apartments, taking up
100,000 square meters, with offices being constructed on the remaining 17,000
square meters of space. This will be the Company's first office development in
the city and total revenues from the project are expected to be between EUR 120
and EUR 140 million.
Please find below the updated list of the Group projects as at 30 June 2007:
Expected Valuation
Annualised by King
Project Group shareProject Type Completed Lettable Gross Rent Under Development Sturge as
Area (sq. m) (EUR p.a.) development sites at 30.6.07
As of 30.06.07 (Group
share)
------------------------------------------------------------------------------------------------------------------------
Budapest
------------------------------------------------------------------------------------------------------------------------
Business Center 99 100% Office 15,900 2,923,000 0 37,400 61,810,000
Budafoki B. Center 100% Office 3,300 312,000 0 145,000 29,700,000
Fogarasi Office Center 100% Office 2,700 400,000 0 0 5,660,000
M3 Business Center 100% Office 9,700 1,637,000 0 8,400 28,000,000
Business Center 91 100% Office 6,700 967,000 0 0 14,900,000
Zoldvaros 100% Residential 16,300 14,000 0 29,100 9,146,000
Buy-Way Dunakeszi 100% Retail 21,600 1,137,000 0 3,700 24,300,000
Buy-Way Soroksar 100% Retail 11,900 765,000 0 0 14,600,000
Business Center 30 100% Office 13,000 1,665,000 0 0 33,220,000
Gateway 100% Office 0 36,300 0 49,200,000
Europeum l 100% Hotel/Retail 0 19,000 17,700 0 30,600,000
Airport City 100% Storage 0 0 55,000 22,300,000
Hold Residence 100% Hotel 0 6,100 13,600,000
Katona Residence 100% Hotel 0 5,700 10,200,000
Nap Residence 100% Hotel 0 18,000 4,100 9,000,000
Erzsebet BC 100% Office 0 12,700 7,300,000
Newage Center 100% Office 0 13,200 13,900,000
------------------------------------------------------------------------------------------------------------------------
Total Budapest 101,100 9,857,000 54,000 320,400377,346,000
------------------------------------------------------------------------------------------------------------------------
Prague
------------------------------------------------------------------------------------------------------------------------
Palmovka B.C. 100% Office 4,200 653,000 0 0 9,728,000
Meteor Office Park 100% Office 14,400 1,624,000 0 5,500 35,895,000
Cakovice 100% Residential 0 0 10,800 3,226,000
May House P4 100% Office 0 0 7,200 7,630,000
Kolben Business Park 100% Mixed use 0 0 73,000 54,334,000
Ritka 100% Residential 0 0 64,000 6,877,500
------------------------------------------------------------------------------------------------------------------------
Total Prague 18,600 2,277,000 0 160,500117,690,500
------------------------------------------------------------------------------------------------------------------------
Bucharest
------------------------------------------------------------------------------------------------------------------------
Mogosaia 88% Residential 40,000 6,688,000
Timisoara 88% Residential 180,000 29,480,000
Pipera 100% Residential 117,000 9,500,000
------------------------------------------------------------------------------------------------------------------------
Total Bucharest 0 0 0 337,000 45,668,000
------------------------------------------------------------------------------------------------------------------------
Total Group 119,700 12,134,000 54,000 817,900540,704,500
------------------------------------------------------------------------------------------------------------------------
Financial Review
Gross rental income
Gross rental income was EUR 5.2 million for the six months ended 30 June 2007,
representing an increase of EUR 1.3 million, or 32%, from the EUR 3.9 million
generated during the six month period ended 30 June 2006. This increase can be
attributed to the opening of the new BC30 project in Budapest at the end of 2006
and the improved occupancy at the Meteor A+B Offices in Prague.
Gross residential income
Gross residential income was EUR 0.6 million for the six months ended 30 June
2007, representing a decrease of EUR 1.1 million, or 63% from the EUR 1.7
million generated during the six months ended 30 June 2006. This decrease in
residential income is a result of the sale of all the units in the Zoldvaros
residential project in Budapest.
Net service charge income/(expense)
Net service charge income was EUR 0.1 million for the six months ended at 30
June 2007, a decrease of EUR 0.2 million, from the EUR 0.3 million generated
during the six months ended 30 June 2006.
Cost of Residential income
The Cost of Residential income was EUR 0.5 million for the six months ended 30
June 2007, a decrease of EUR 1 million, or 64%, from the EUR 1.5 million during
the six months ended at 30 June 2006.
Net gain on fair value adjustment of investment property
Net gain on the fair value adjustment of investment property was EUR 21.3
million for the six months ended 30 June 2007, representing a decrease of EUR
35.3 million or 62% from the EUR 56.6 million generated during the six months
ending 30 June 2006. This decrease is primarily due to the appreciation of the
Hungarian Forint by more than 14% against the Euro during the period between 30
June 2006 and 30 June 2007, affecting the value of Ablon's properties in Hungary
which are valued by King Sturge in Euros, but appraised in Forint for reporting
purposes.
Selling and marketing expenses
Selling and marketing expenses remain unchanged at EUR 0.7 million for the six
month period ending 30 June 2007, compared to the six month period ending 30
June 2006.
Administrative expenses
Administrative expenses were EUR 2.4 million for the six months ended 30 June
2007, marking, an increase of EUR 1.1 million or 79% from the EUR 1.3 million
spent during the six months ending 30 June 2006. This increase was primarily due
to the EUR 401,000 spent on stock options given to employees during the IPO
process, an increase of EUR 360,000 in management fee costs, higher auditing,
legal and consultancy costs accrued since the company become public, higher
travelling expenses due to business development efforts.
Net Financing income (expense)
Net Financing expense was EUR 0.9 million for the six months ended 30 June 2007,
a decrease of EUR 7.5 million or 89% from EUR 8.4 million during the same period
of 2006. Once again, the decrease is primarily due to the appreciation of the
Hungarian Forint, that appreciated by more than 14% against the Euro, during the
period between 30 June 2006 to 30 June 2007. Since all the loans are in Euro,
the Forint translated obligation went down. The company also earned higher
interest income on the cash balance on the IPO proceeds, though this decline was
offset by higher interest rates on Ablon's loans, due to the increase in
Euribor.
Current Income Tax
Current Income Tax increased by EUR 0.2 million, or 84%, from EUR 0.2 million
for the six months ended 30 June 2006 to EUR 0.4 million during the six months
ended at 30 June 2007. This increase was primarily due to Ablon generating
higher rental income.
Deferred Income Tax
Deferred Income Tax decreased by EUR 11.3 million, or 69% from EUR 16.5 million
in the six months ended at 30 June 2006 to EUR 5.2 million for the six months
ended 30 June 2007. This decrease is mainly due to smaller revaluation gains for
the period. Since Ablon is incorporated in Guernsey, the deferred taxes are not
expected to be paid, as the Group is able to sell the company that holds the
property and not the property itself.
Balance Sheet Overview
Investment property
Investment property increased from EUR 269.7 million at 31 December 2006, to EUR
299.4 million as of 30 June 2007. The increase was primarily due to the EUR 21.3
million in revaluation gains.
Current assets
Current assets include inventories (in particular, property intended for sale),
current receivables (rent receivables, receivables from property sales, and
receivables from shareholders) and other assets, bank balances and cash. Total
current assets increased by EUR 107.4 million from EUR 36.7 million at
31 December 2006 to EUR 144 million at 30 June 2007. The increase was primarily
due to EUR 84.4 million cash increase as a result of the IPO that took place at
on 7 February 2007. The inventory increase of EUR 20.7 million is due to the
purchase of 2 sites for residential projects in Bucharest and near Prague.
Non-Current Liabilities
Non-current liabilities include long-term borrowing from commercial banks and
shareholders, deferred tax liabilities for future tax obligations. Total
non-current liabilities increased from EUR 161.7 million as at 31 December 2006
by EUR 8.9 million to EUR 170.6 million as at 30 June 2007. The increase was
primarily due to an increase of EUR 5.9 million in deferred tax liability due to
revaluation profits.
Current Liabilities
Current liabilities decreased by EUR 9.7 million from EUR 40.4 million at
31 December 2006 to EUR 30.7 million at 30 June 2007. This decrease is a result
of the repayment of short term loans using some of the IPO proceeds.
Liquidity and capital resources
June 30 2007 Dec 31 2006
Non current
Bank loans 127,988 125,508
Shareholders loan 0 0
Loans from minority shareholders 0 0
Total non current 127,988 125,508
Current
Bank loans 21,544 16,269
Shareholders loan 0 13,454
Loans from minority shareholders 0 2,196
Total current 21,544 31,919
149,532 157,427
The Group's liquidity and capital resources come from operations, rental income
and the sales of apartments. The Group finances its development activity with
bank loans and shareholder loans. Typically project finance covers the 3 year
duration of the construction, and after the construction completion, the loan is
usually extended to a long term loan of between 12-15 years.
On 7 February 2007, Ablon Group completed its IPO on the AIM market of the
London Stock Exchange. The total gross proceeds from the IPO, including the
exercise of the over-allotment option, were �97.16 million, equivalent to EUR
145.9 million. The estimated IPO costs amounted to EUR 10.7 million. Following
the IPO and upon completion of the over-allotment option, Ablon Group has a
total of 108,864,099 ordinary shares in issue. From the proceeds the Group
repaid EUR 13.6 million shareholder loans, and paid EUR 5 million for the share
exchange with the previous owners of the Group entities.
NAV
The Company's real estate assets were valued on 30 June 2007 at EUR 540.7
million (for its share) by an external independent appraiser (King Sturge), in
accordance with International Valuation Standards. The Company's policy is to
revalue its assets twice each year, ordinarily on 30 June and 31 December. The
following table demonstrates the calculation of Adjusted Net Asset Value based
on the King Sturge valuation report and the Company's financial statements as of
30 June 2007:
EUR Millions
June 30 2007
Shareholders' equity 276.5
Valuation Adjustments (1) 165.1
Deferred Tax Liability 40.7
Total adjusted net asset value 482.3
NAV per share EUR 4.43 = *2.99
(1) Property valuation of 540.7 less IFRS Investment property (EUR 299.4m),
investment property under development (EUR 33.3m) and inventories (EUR 42.9m)
Dividend Policy
As explained in the Company's Admission Document, the Company has adopted a
dividend policy that will reflect long-term earnings and cash flow potential
while at the same time maintaining both prudent dividend cover and adequate
capital resources within the business.
Subject to these factors and where it is otherwise appropriate to do so, the
Company intends to declare a minimum dividend payment of 2% of net asset value
of the Group as of 30 September 2006, in the first quarter of 2008, based on
2007 financial statements, and 7.5% of net asset value of the group as of 30
September 2006, in the first quarter of 2009.
Dennis Twinning
Chairman of the Board
______________________________________
ABOUT ABLON GROUP
Founded in 1993 in Budapest (Hungary), Ablon Group has successfully completed
properties at 13 locations comprising 15 completed projects (including two
completed projects that have been sold) and currently has properties at 19
locations comprising 34 development projects (including properties being
developed in multiple phases) in Budapest (Hungary), Prague (Czech Republic) and
Bucharest (Romania). Its portfolio comprises a diversified mix of office,
residential, retail, logistics and hotel developments valued at EUR 405.8
million by King Sturge, an independent valuation firm, as at 30 September
2006(1). Ablon has to date developed approximately 140,000 square meters of real
estate and its current development projects are expected to comprise
approximately a further 690,900 square meters. Ablon's shares are traded on the
AIM market of the London Stock Exchange under the ticker 'ABL'.
***
COMBINED BALANCE SHEET
in thousands of Euros Note 30 Jun 2007 31 Dec 2006
ASSETS
Non-current assets
Investment property 4 299 364 269 692
Investment property under development 4 33 251 22 903
Property, plant and equipment 5 1 260 1 453
Other non-current assets - 713
Deferred income tax assets 77 34
----------- ------------
Total non-current assets 333 952 294 795
----------- ------------
Current assets
Other current assets 9 028 6 498
Inventories 6 42 887 22 172
Trade receivables 1 444 1 912
Cash and cash equivalents 90 503 6 079
----------- ------------
Total current assets 143 862 36 661
----------- ------------
----------- ------------
Total assets 477 814 331 456
----------- ------------
EQUITY
Capital and reserves
Share capital 7 1 089 1 612
Foreign exchange reserve 2 292 -2 449
Share options 404 -
Restricted reserve 255 633 13
Retained earnings 17 127 127 853
----------- ------------
Total equity attributable to equity
holders of the Controlling
Shareholders 276 545 127 029
----------- ------------
Minority interest - 2 282
----------- ------------
Total equity 276 545 129 311
----------- ------------
LIABILITIES
Non-current liabilities
Other non-current liabilities 1 923 1 414
Borrowings 8 127 988 125 508
Deferred income tax 40 677 34 792
----------- ------------
Total non-current liabilities 170 588 161 714
----------- ------------
Current liabilities
Trade and other payables 8 865 8 439
Current income tax liabilities 272 73
Borrowings 8 21 544 31 919
----------- ------------
Total current liabilities 30 681 40 431
----------- ------------
----------- ------------
Total liabilities 201 269 202 145
----------- ------------
Total equity and liabilities 477 814 331 456
----------- ------------
CONSOLIDATED INCOME STATEMENT
Period ended
in thousands of Euros Note 30 Jun 2007 30 Jun 2006
Gross rental income 5 151 3 913
Gross residential income 613 1 654
Net service charge income/ (expense) 132 269
Cost of residential income (546) (1 512)
----------- ------------
Net sales income 5 350 4 324
----------- ------------
Net gain from fair value adjustment on
investment property 21 314 56 573
Gain on sale of investment - -
Selling and marketing costs (685) (692)
Administrative expenses (2 420) (1 283)
Other income 37 75
Other expenses (18) (3)
----------- ------------
Net operating profit 23 578 58 994
----------- ------------
Financial income 4 070 1 902
Financial expense (4 944) (10 267)
----------- ------------
Net financing income / (expense) (874) (8 365)
Profit before income tax 22 704 50 629
Current income tax (403) (219)
Deferred income tax (5 174) (16 545)
----------- ------------
(5 577) (16 764)
----------- ------------
Profit for the period 17 127 33 865
----------- ------------
Minority interest - 932
Equity holders of the parent 17 127 32 933
----------- ------------
Profit for the period 17 127 33 865
----------- ------------
----------- ------------
Basic earnings per share (euro) 7 0,17 0,48
----------- ------------
Diluted earnings per share (euro) 7 0,17 0,48
----------- ------------
COMBINED STATEMENT OF CASH FLOWS
First six months First six months
Note 2007 2006
Net cash from operating activities (23 538) 778
Net cash used in investing activities (14 547) (3 959)
Net cash used in financing activities 122 509 1 605
Net (decrease)/increase in cash and cash
equivalents 84 424 -1 576
Cash and cash equivalents at beginning of the year 6 079 4 407
Exchange differences on cash and cash equivalents 0 0
Cash and cash equivalents at end of the year 90 503 2 831
COMBINED STATEMENT OF CHANGES IN EQUITY
in thousands of Euros Attributable to equity holders of the Subtotal Minority Total
Company interest equity
------------------------------------------------------------------------
Share Retained Capital Share Foreign Attributable
capital earnings reserve options exchange to equity
reserve holders of
the Group
Balance at 1 January 2006 1 623 93 308 178 (3 014) 92 095 1 357 93 452
---------------------------------------------------------------------------------------------------------
Subtotal: Capital transactions
with shareholders - - - - - - -
---------------------------------------------------------------------------------------------------------
Foreign exchange translation
adjustment - - - (8 966) (8 966) - (8 966)
Current period profit / loss - 32 933 - - 32 933 932 33 865
---------------------------------------------------------------------------------------------------------
Subtotal: Recognised income and
expense for the period - 32 933 - (8 966) 23 967 932 24 899
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Balance at 30 June 2006 1 623 126 241 178 (11 980) 116 062 2 289 118 351
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Balance at 30 June 2006 1 623 126 241 178 (11 980) 116 062 2 289 118 351
---------------------------------------------------------------------------------------------------------
Shares issued (11) (286) - - (297) - (297)
Capital contribution by
shareholders - - - - - - 0
Capital contribution repayment to
shareholders - - (165) - (165) - (165)
---------------------------------------------------------------------------------------------------------
Subtotal: Capital transactions
with shareholders (11) (286) (165) - (462) - (462)
---------------------------------------------------------------------------------------------------------
Foreign exchange translation
adjustment - - - 9 531 9 531 - 9 531
Current period profit / loss - 1 898 - - 1 898 (7) 1 891
---------------------------------------------------------------------------------------------------------
Subtotal: Recognised income and
expense for the period - 1 898 - 9 531 11 429 (7) 11 422
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Balance at 31 December 2006 1 612 127 853 13 (2 449) 127 029 2 282 129 311
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Balance at 1 January 2007 1 612 127 853 13 - (2 449) 127 029 2 282 129 311
---------------------------------------------------------------------------------------------------------
Shares cancelled (1 612)(127 853) (13) - 2 449 (127 029) -(127 029)
Shares issued, net of floating
costs 1 089 - 255 633 - - 256 722 - 256 722
Minority share acquired - - - - - - (2 282) (2 282)
---------------------------------------------------------------------------------------------------------
Subtotal: Capital transactions
with shareholders (523)(127 853) 255 620 - 2 449 129 693 (2 282) 127 411
---------------------------------------------------------------------------------------------------------
Current period foreign exchange
translation adjustment - - - - 2 292 2 292 - 2 292
Share options granted - - - 404 - 404 - 404
Current period profit / loss - 17 127 - - - 17 127 - 17 127
---------------------------------------------------------------------------------------------------------
Subtotal: Recognised income and
expense for the year - 17 127 - 404 2 292 19 823 - 19 823
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Balance at 30 June 2007 1 089 17 127 255 633 404 2 292 276 545 - 276 545
---------------------------------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General information
At the interim report date of 30 June 2007 ABLON Group Ltd (hereinafter "the
Group") was an investment property group listed on the London AIM exchange, with
a major real estate portfolio in Central Eastern Europe. The Group is managed
from Guernsey, and the official address of its headquarters is GY1 4HQ Frances
House, Sir William Place, St Peter Port, Guernsey.
The entities consolidated into the Group are as follows:
Name of entity Controlling
Shareholders Country of incorporation
share
ABLON Bucharest Real Estates Development
S.R.L 100 % Romania
ABLON Design M�rn�ki Iroda Kft. 100 % Hungary
ABLON Kft. 100 % Hungary
ABLON s.r.o. 100 % Czech Republic
Airport City Kft. 100 % Hungary
Airport City s.r.o. 100 % Czech Republic
B.C.P. Kft. 100 % Hungary
BC 2000 s.r.o. 100 % Czech Republic
CD Property s.r.o. 100 % Czech Republic
Century City Kft. 100 % Hungary
Duna Office Center Kft. 100 % Hungary
ES Bucharest Development S.R.L. 100 % Romania
ES Bucharest Properties S.R.L. 100 % Romania
ES Hospitality S.R.L. 100 % Romania
First Chance Kft. 100 % Hungary
First Site Kft. 100 % Hungary
Global Center Kft. 100 % Hungary
Global Development Kft. 100 % Hungary
Global Estates Kft. 100 % Hungary
Global Immo Kft. 100 % Hungary
Global Investment Kft. 100 % Hungary
Global Management Kft. 100 % Hungary
Global Properties Kft. 100 % Hungary
HD Investment s.r.o. 100 % Czech Republic
ICL 1 Budapest Kft. 100 % Hungary
Insite Kft. 100 % Hungary
MH Bucharest Development S.R.L 88 % Romania
MH Bucharest Properties S.R.L 88 % Romania
MQM sro. (from March 2007, See Note 9) 100 % Czech Republic
New Field Kft. 100 % Hungary
New Sites Kft. 100 % Hungary
Polygon BC s.r.o. 100 % Czech Republic
RSL Real Estate Development S.R.L. 100 % Romania
STRIPMALL Management Kft. 100 % Hungary
Szolg�ltat�h�z Kft. 100 % Hungary
YZ Holding spol s.r.o. 100 % Czech Republic
Volanti Ltd. 100 % Cyprus
Z�ldv�ros Lak�park Kft. 100 % Hungary
K9 Kft. 100 % Hungary
Sarokh�z Kft. 100 % Hungary
The entities within the Group are limited liability companies incorporated and
domiciled in Hungary, the Czech Republic and Romania.
These consolidated interim financial statements have been authorised for issue
by the Board of Directors on the 10th of September 2007.
2.1 Basis of preparation
ABLON Group's interim report for January 1 - June 30, 2007 has been prepared in
line with IAS 34, Interim Financial Reporting. ABLON Group Ltd has applied the
same accounting principles in the preparation of the interim report as in its
combined financial statements for 2006. No seasonality effects occurred during
the periods presented. The information presented in the interim report has been
reviewed by auditors.
The consolidated financial statements have been prepared under the historical
cost convention except that investment property and certain financial
instruments are carried at fair value. Non-current assets and asset disposal
groups held for sale are stated at the lower of carrying amount and fair value
less cost to sell.
Financial statements of the companies within the ABLON Group are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) of Hungary,
Czech Republic and Romania. These local GAAPs differ in certain respects from
IFRS. When preparing these consolidated financial statements, management has
made adjustments to those financial statements for changes to certain accounting
and valuation methods applied in the local GAAP financial statements to comply
with IFRS as adopted by the EU.
These financial statements are not intended to be used for statutory filing
purposes.
2.2 Consolidation
Companies within the Group are all entities over which Ablon Group Ltd. 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 an entity.
Subsidiaries are fully consolidated from the date on which control is commences
until the date control ceases.
The purchase method of accounting is used to account for the acquisition of
subsidiaries. The cost of an acquisition is 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. 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 acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognised directly in the
income statement.
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated.
Ablon Group Ltd., as a holding company was set in January 2007, after the
floating of the Group shares on London Alternative Investment Market.
For the comparison period the financial statements are prepared on a combined
basis: The net assets of the Group entities were aggregated (with eliminations
for intercompany transactions and balances), as are the related share capital
balances and reserves. The equity section of the combined balance sheet
incorporates the equity sections of all combining entities.
For the current period the financial statements are prepared on a consolidated
basis.
2.3 Segment reporting
Based on its organisational and management structure, and internal financial
reporting system, the Group uses business segments, being a distinguishable
component of the Group that provides a similar type or class of customers with a
group of related products and services subject to substantially similar risks
and returns, as its primary segment reporting format and geographical segments,
being a particular economic and political environment subject to substantially
similar risks and returns, as its secondary segment reporting format.
Segment revenues, segment expenses, segment assets and segment liabilities are
determined as those that are directly attributable or can be allocated to a
segment on a reasonable basis, including factors such as the nature of items,
the conducted activities and the relative autonomy of the unit. The Group
allocates segment revenues and segment expenses through an inter-segment pricing
process.
2.4 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'), which is either Hungarian Forint
(HUF) in Hungary, Czech Crowns (CZK) in Czech or Euro in Romania. The
consolidated financial statements are also presented in euros (rounded to the
nearest thousand), which is the Group's presentation currency in line with
requirements of the European markets.
(b) Transactions and balances
Transactions in foreign currencies are translated into the respective functional
currencies of the Group entities using the commercial bank 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 into the relevant functional currency in the
income statement. Non-monetary assets and liabilities that are measured in terms
of historical cost in a foreign currency are translated using the exchange rate
at the date of the transaction. Non-monetary assets and liabilities denominated
into the relevant functional currencies that are stated at fair value are
translated to the functional currency at the foreign exchange rates prevailing
at the dates the fair value was determined.
(c) Group companies
The results and financial position of all of the Group entities (none of which
has the currency of a hyperinflationary economy) that have a functional currency
different from the presentation currency (Euro) 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 as Foreign exchange reserve.
(iv) The exchange rates used for above transactions are the foreign exchange
rates determined by the central banks of each country.
On consolidation, exchange differences arising from the translation of the net
investment in foreign entities, and of borrowings and other currency instruments
designated as hedges of such investments, are taken to shareholders' equity as
Foreign exchange reserve. When a foreign operation is sold, such exchange
differences are recognised in the income statement as part of the gain or loss
on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated into the relevant functional currency at the closing rate.
2.5 Investment property and investment property under development
Property that is held for long-term rental yields or for capital appreciation or
both, and which is not occupied by the companies in the Group, is classified as
investment property.
Investment property under development comprises uncompleted buildings and
construction work. Investment property under development (excluding land on
which construction takes place) is measured at cost.
Investment property comprises freehold land (including land on which
construction takes place) and buildings leased out.
Investment property is measured initially at its cost, including related
transaction costs.
After initial recognition, or at completion of the construction, investment
property is valued 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. If this information is not available, the Group uses
alternative valuation methods such as recent prices on less active markets or
discounted cash flow projections. 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.
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.
The Group applies the fair value model for all building leased out under
operating leases.
The Group obtained an independent valuation report prepared by King Sturge
Budapest and King Sturge Prague as of 30 June 2007, in order to establish fair
values for the properties presented in these financial statements.
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 repairs and
maintenance costs are charged to the income statement during the financial
period in which they are incurred. Borrowing costs that are directly
attributable to the acquisition, construction or production of a qualifying
asset are capitalised as a part of the cost of the asset. Borrowing costs
include interest expense and foreign exchange differences to the extent that
such differences supplement the lower interest rates on foreign exchange
borrowings.
Changes in fair values are recorded in the income statement.
If an investment property becomes owner-occupied, it is reclassified as
property, plant and equipment, and its fair value at the date of
reclassification becomes its cost for accounting purposes.
Property that is being constructed or developed for future use as investment
property is classified as investment property under development and stated at
cost except land until construction or development is complete, at which time it
is reclassified and subsequently accounted for as investment property. Land is
classified immediately as investment property and is stated at fair value.
If an item of property, plant and equipment becomes an investment property
because its use has changed, any difference resulting between the carrying
amount and the fair value of this item at the date of reclassification is
recognised in equity as a revaluation of property, plant and equipment under IAS
16. However, if a fair value gain reverses a previous impairment loss, the gain
is recognised in the income statement.
Investment property held for sale without redevelopment is classified within
non-current assets held for sale when relevant criteria are met.
3.Segment information
Primary reporting format * business segments
The Group is organised on a worldwide basis into two main business segments determined in
accordance with the functionality of investment property:
-- Commercial
-- Residential
------------------------------------------ ----------- ----------- ----------- -------------
Period ended 30 June 2007 Note Commercial Residential Unallocated Group
------------------------------------------ ----------- ----------- ----------- -------------
Revenue 5 151 613 - 5 764
Segment result 5 282 68 - 5 350
Unallocated costs - - - -
Operating profit 24 717 13 (1 152) 23 578
Finance (costs)/income-net (2 268) (442) 1 836 (874)
Profit before income tax 22 449 (429) 684 22 704
Tax expense - - 5 577 5 577
------------------------------------------ ----------- ----------- ----------- -------------
Period ended 30 June 2007 Note Commercial Residential Unallocated Group
------------------------------------------ ----------- ----------- ----------- -------------
Segment assets 346 797 42 876 88 064 477 737
Deferred taxes - - 77 77
Total assets 346 797 42 876 88 141 477 814
Segment liabilities 124 318 35 848 426 160 592
Deferred taxes - - 40 677 40 677
Total liabilities 124 318 35 848 41 103 201 269
Capital expenditure 10 980 21 227 - 32 207
Depreciation 187 - - 187
------------------------------------------ ----------- ----------- ----------- -------------
Period ended 30 June 2006 Note Commercial Residential Unallocated Group
------------------------------------------ ----------- ----------- ----------- -------------
Revenue 3 913 1 654 - 5 567
----------- ----------- ----------- -------------
Segment result 4 178 147 - 4 325
Unallocated costs - - - -
Operating profit 59 040 (46) - 58 995
Finance (costs)/income-net (7 834) (531) - (8 366)
Profit before income tax 51 206 (577) - 50 629
Tax expense - - 16 763 16 763
------------------------------------------ ----------- ----------- ----------- -------------
Period ended 31 December 2006 Note Commercial Residential Unallocated Group
------------------------------------------ ----------- ----------- ----------- -------------
Segment assets 329 075 2 347 - 331 422
Deferred taxes 34 - - 34
Total assets 329 109 2 347 - 331 456
Segment liabilities 165 006 2 347 - 167 353
Deferred taxes - - 34 792 34 792
Total liabilities 165 006 2 347 34 792 202 145
Capital expenditure 19 564 18 665 - 38 229
Depreciation 167 - - 167
Segment assets consist primarily of investment property, property plant and
equipment and receivables. Unallocated assets comprise of deferred tax assets.
Segment liabilities comprise operating liabilities and finances. Unallocated
liabilities mainly comprise of taxation liabilities. Capital expenditure
comprises additions to investment property (Note 4) and property, plant and
equipment (Note 5).
There are no inter-segment transactions.
4. Investment property and investment property under development
Movements of the investment property balances were as follows:
Period ended 30 Jun Year ended 31 Dec
2007 2006
At beginning of period 269 692 199 323
Acquisitions - 3 443
Reclassification from property under
development - 10 193
Capitalized expenses 4 631 7 808
Disposal - -
Net exchange differences 3 727 341
Net gain from fair value adjustments
on investment property 21 314 48 584
------------------- ------------------
At end of period 299 364 269 692
------------------- ------------------
Movements of the investment property under development balances were as follows:
Period ended 30 Jun Year ended 31 Dec
2007 2006
As at beginning of period 22 903 17 212
Acquisitions 10 348 15 884
Reclassification to investment property - (10 193)
------------------- ------------------
As at closing of period 33 251 22 903
------------------- ------------------
The closing amount includes the following projects:
Closing value includes
the following projects:
Project name Place Company name 30 Jun 31 Dec
2007 2006
Budapest/Arpad
Gateway bridge Global Immo
Pest side 13 407 5 464
Europeum Budapest/Blaha Duna Office Center
L. square 7 942 7 170
Katona J. u. Budapest, Centre Sarokh�z 3 200 3 099
Hold u. Budapest, Centre Insite 2 674 2 555
Polygon Prague Polygon 2 297 1 981
Others 3 731 2 634
--------- ---------
Total 33 251 22 903
--------- ---------
5.Property, plant and equipment
Note Land & Plant and Total
buildings equipment
Cost
Balance at 1 January 2006 657 1 390 2 047
Acquisitions - 237 237
Disposal - (62) (62)
Effect of movements in foreign exchange 1 6 7
-----------------------------
Balance at 31 December 2006 658 1 571 2 229
-----------------------------
Balance at 1 January 2007 658 1 571 2 229
Acquisitions 515 117 632
Disposal - (867) (867)
Effect of movements in foreign exchange 18 (17) 1
-----------------------------
Balance at 30 June 2007 1 191 804 1 995
-----------------------------
Depreciation
Balance at 1 January 2006 115 539 654
Acquisitions 7 160 167
Disposal - (43) (43)
Effect of movements in foreign exchange - (2) (2)
-----------------------------
Balance at 31 December 2006 122 654 776
-----------------------------
Balance at 1 January 2007 122 654 776
Acquisitions 144 43 187
Disposal (75) (238) (313)
Effect of movements in foreign exchange - 85 85
-----------------------------
Balance at 30 June 2007 191 544 735
-----------------------------
Carrying amount
At 1 January 2006 542 851 1 393
-----------------------------
At 31 December 2006 536 917 1 453
-----------------------------
At 30 June 2007 1 000 260 1 260
-----------------------------
6.Inventories Period ended
30 Jun 2007 31 Dec 2006
Opening Balance 22 172 6 550
Additions 21 227 18 665
Sales (546) (3 054)
Exchange differences 34 11
-------------------------------
Closing Balance 42 887 22 172
-------------------------------
Inventories comprise residential apartments for sale and areas earmarked for
residential development for sale. There were no circumstances necessitating a
write-down to net realisable value in 2006 and 2005.
Breakdown of inventory value Period ended
30 Jun 2007 31 Dec 2006
Project name Company name
Bucharest - Timisoara Av. MH Development 15 710 11 309
Bucharest - Pipera ES Properties 9 385 0
Prague - �itka MQM 7 088 0
Bucharest - Mogosoaia MH Properties 6 159 5 925
Budapest- Z�ldv�ros Global
Investment 3 140 3 602
Prague - Cakovice HD Investment 1 405 1 336
------------------------
Total 42 887 22 172
------------------------
7.Equity
The number of shares used for the comparison period in the earnings
per share and dividend paid out per share calculations were based
on the 70,000,000 shares which was issued in consideration of the
Group entities in January 2007. We used this number as it gave more
information for the comparison period.
Period ended
Profit per share calculation 30 Jun 2007 30 Jun 2006
Net profit 17 127 33 865
Number of shares 101 354 70 000
Diluted number of
shares 101 784 70 000
-----------------------
Basic earning per share 0,1690 0,4838
-----------------------
Dilutive earning per
share 0,1683 0,4838
-----------------------
Period Year ended
Dividend per share ended 30 31 December
June 2007 2006
-----------------------
Dividend paid 0 0
-----------------------
Dividend per share 0,0000 0,0000
-----------------------
Dilution occurred as a result of share options in the current period.
8. Borrowings
All the Group's borrowings are at floating rates of interest. Therefore interest
costs may increase or decrease as a result of such changes.
Period ended Year ended
30 June 31 December
2007 2006
Non-current
Bank borrowings 127 988 125 508
Related party loans from shareholders
Other loans
------------ ------------
127 988 125 508
------------ ------------
Current
Bank borrowings 19 701 16 269
Related party loans from shareholders 16 13 454
Other loans 1 827 2 196
------------ ------------
21 544 31 919
------------ ------------
Total borrowings 149 532 157 427
------------ ------------
The interest rate on the loans are 3 month Euribor + 1.6% to Euribor +
2.0%, and all loans reprice at least quarterly.
There are no debt covenants for the above
loans.
The maturity of non-current borrowings is Period ended Year ended
as follows: 30 June 31 December
2007 2006
Between 1 and 5 years 61 340 53 086
Over 5 years 66 648 72 422
------------ ------------
127 988 125 508
The effective interest rates at the Period ended Year ended
balance sheet date were as follows: 30 June 31 December
2007 2006
------------ ------------
% %
Bank borrowings and other loans
EUR 5,9% 4,9%
CHF 4,7% 3,6%
USD - 7,7%
The carrying amounts of the Group's Period ended Year ended
borrowings are denominated in the 30 June 31 December
following currencies: 2007 2006
Euro 147 594 153 593
CHF 3 232 3 377
USD - 2 248
9. Acquisitions
On 21 March 2007 the Group has purchased MQM sro. an SPV which
on 26 April 2007 purchased 394,701 square meters of land
earmarked for residential development, located 30 kilometers
southwest of Prague City centre.
Investment property acquired 0
Investment property under construction
acquired 0
Cash acquired 8
Other assets acquired 362
Less: Bank loans acquired 0
Less: Other liabilities acquired 368
Purchase consideration, cash paid 9
---------------------------------------------------------------
Expense arisen on acquisition 7
---------------------------------------------------------------
Net cash outflow from acquisition 1
---------------------------------------------------------------
10. Events after the balance sheet date (i.e. after 30 June 2007)
1. On 26 June 2007 a large state owned public service company has officially
signed a 10-year lease contract with Global Immo Kft., a wholly owned subsidiary
of Ablon Group Ltd., for approximately 24,000 square meters of office space at
the Gateway Office Park in Budapest. Under the terms of the agreement, the lease
of the office space will generate a total gross rental income of approximately
EUR 5 million per annum for the Company, and rental payment will start from
January 2008.
Independent Review Report
On The Condensed Consolidated Interim Financial Information
To the shareholders of Ablon Group Limited
Introduction
We have reviewed the accompanying condensed consolidated balance sheet of Ablon
Group Limited as at 30 June 2007 and the related condensed consolidated income
statement, condensed consolidated cash flow statement and the condensed
consolidated statement of changes in equity for the six-month period then ended
(interim financial information). Management is responsible for the preparation
and presentation of this interim financial information in accordance with
International Financial Reporting Standards IAS 34 Interim Financial Reporting.
Our responsibility is to express a conclusion on this interim financial
information based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity. A review of interim financial information
consists of making inquires, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance with
International Standards on Auditing and consequently does not enable us to
obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the accompanying interim financial information is not prepared, in all
material respects, in accordance with IAS 34 Interim Financial Reporting.
10 September 2007
KPMG Hung�ria Kft.
Istv�n Henye
Partner
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