TIDMABL
RNS Number : 7279O
Ablon Group Limited
12 March 2009
FOR IMMEDIATE RELEASE
12 March 2008
FULL YEAR RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2008
Ablon Group Limited ("Ablon" or "the Company"), a leading real estate owner and
developer in Central and Eastern Europe, today announces its results for the
year ended 31 December 2008 in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the EU.
Property Overview
* Property Assets: - Combined estimated value of EUR5941 million, a decrease of 4% compared to the
valuation on 31 December 2007 (EUR617.4 million).
* 156,950 square metres of existing and income generating office, retail and
logistics assets (at 13 locations) in Budapest and Prague.
* Significant land bank comprising a further 1,305,800 square metres (at 25
locations) in Budapest, Prague, Bucharest, Warsaw and Gdansk to develop as
market conditions permit.
FINANCIAL HIGHLIGHTS
* Gross rental income of EUR16.6 million for the year ended 31 December 2008,
representing a 48% increase compared to the same period last year.
* Adjusted net asset value per share of GBP3.27 at 31 December 2008.
* Pre-tax loss of EUR57 million for the year ended 31 December 2008, primarily
revaluation losses and finance expenses.
* Shareholders' funds decreased from EUR296 million at 31 December 2007 to EUR239
million at 31 December 2008.
There will be a conference call for investors on Monday 16th March at 2.30pm.
The corresponding presentation will be available on the investor relations
section of the Ablon Group website (www.ablon-group.com). The details for the
call are as follows:
+------------------------------------------+------------------------------------------+
| Event Title: | Ablon Group Full Year Results 2009 |
+------------------------------------------+------------------------------------------+
| Conference Speaker 1: | Uri Heller, Chief Executive Officer |
+------------------------------------------+------------------------------------------+
| Conference Speaker 2: | Daniel Avidan, Chief Financial Officer |
+------------------------------------------+------------------------------------------+
| UK Access Number: | +44 (0)20 8609 1270 |
+------------------------------------------+------------------------------------------+
| US Toll Number: | +1 (703) 621 9128 |
+------------------------------------------+------------------------------------------+
Investors should contact William Attwell at City Profile on +44(0)20 7448 3244
with any questions. A playback facility will also be available for seven days
after the call. The details are as follows:
+------------------------------------------+------------------------------------------+
| UK Toll Access Number | +44 (0)20 8609 0289 |
+------------------------------------------+------------------------------------------+
| Conference Reference | 257554# |
+------------------------------------------+------------------------------------------+
1 Based on the latest external valuators valuation report as at 31 December 2008
-ends-
RESULTS IN BRIEF
+---------------------------------+----------+----------+
| | Year ended 31 |
| | Decenber |
+---------------------------------+---------------------+
| | | |
+---------------------------------+----------+----------+
| in thousands of Euros | 2008 | 2007 |
+---------------------------------+----------+----------+
| | | |
+---------------------------------+----------+----------+
| Gross rental income | 16,582 | 11,230 |
+---------------------------------+----------+----------+
| Gross residential income | 9 | 958 |
+---------------------------------+----------+----------+
| Gross sales income | 16,591 | 12,188 |
+---------------------------------+----------+----------+
| Net gain (loss) from fair value | (32,579) | 53,358 |
| adjustment on investment | | |
| property | | |
+---------------------------------+----------+----------+
| Impairment of Inventory | (3,447) | 0 |
+---------------------------------+----------+----------+
| Impairment of goodwill | (3,699) | 0 |
+---------------------------------+----------+----------+
| Sales and administrative | (9,770) | (7,874) |
| expenses | | |
+---------------------------------+----------+----------+
| Other income / (expenses) | 89 | (317) |
+---------------------------------+----------+----------+
| | | |
+---------------------------------+----------+----------+
| Net operating loss / profit | (32,720) | 57,009 |
+---------------------------------+----------+----------+
| | | |
+---------------------------------+----------+----------+
| Net financing income / | (24,130) | (4,644) |
| (expense) | | |
+---------------------------------+----------+----------+
| | | |
+---------------------------------+----------+----------+
| Loss / profit before income tax | (56,850) | 52,365 |
+---------------------------------+----------+----------+
| | | |
+---------------------------------+----------+----------+
| Tax | 7,071 | (11,590) |
+---------------------------------+----------+----------+
| | | |
+---------------------------------+----------+----------+
| Minority interest | 0 | 0 |
+---------------------------------+----------+----------+
| | | |
+---------------------------------+----------+----------+
| (Loss) / profit for the period | (49,779) | 40,775 |
+---------------------------------+----------+----------+
| | | |
+---------------------------------+----------+----------+
| Basic earnings/(losses) per | (0.46) | 0.39 |
| share (euro) | | |
+---------------------------------+----------+----------+
| Diluted earnings/(losses) per | (0.46) | 0.39 |
| share (euro) | | |
+---------------------------------+----------+----------+
Summary Consolidated Balance Sheet
+-+------------------------------+------------+-----------+
| | in thousands of Euros | 31 Dec | 31 Dec |
| | | 2008 | 2007 |
+-+------------------------------+------------+-----------+
| | | | |
+-+------------------------------+------------+-----------+
| | Assets | | |
+-+------------------------------+------------+-----------+
| | Total non-current assets | 482,352 | 404 741 |
+-+------------------------------+------------+-----------+
| | Total current assets | 47,757 | 146 572 |
+-+------------------------------+------------+-----------+
| | Total assets | 530,109 | 551 313 |
+-+------------------------------+------------+-----------+
| | | | |
+-+------------------------------+------------+-----------+
| | EQUITY | | |
+-+------------------------------+------------+-----------+
| | Total equity | 238,737 | 296 090 |
+-+------------------------------+------------+-----------+
| | | | |
+-+------------------------------+------------+-----------+
| | LIABILITIES | | |
+-+------------------------------+------------+-----------+
| | Total non-current liabilites | 233,841 | 205 303 |
+-+------------------------------+------------+-----------+
| | Total current liabilities | 57,531 | 49 920 |
+-+------------------------------+------------+-----------+
| | Total liabilities | 291,372 | 255 223 |
+-+------------------------------+------------+-----------+
| | | | |
+-+------------------------------+------------+-----------+
| | Total equity and liabilities | 530,109 | 551 313 |
+-+------------------------------+------------+-----------+
chairman's statement
" I am pleased to report Ablon's preliminary results for the year ended 31
December 2008. As is well publicised, market conditions in Central and Eastern
Europe have continued to deteriorate. In response to the unprecedented
challenges of the economic environment, the Board decided to put a hold on the
majority of our development projects in order to concentrate our efforts on
managing the income generating assets in our portfolio and maintaining cash
flows.
Whilst I believe Ablon is well positioned to navigate the current economic
downturn, we will be impacted by further distress in the markets. Fortunately,
despite a slowdown in activity throughout Central and Eastern Europe, we are not
solely reliant on development projects. We have a very strong team on the
ground, committed to preserving our established assets and enhancing revenue
through active assset management, which these results demonstrate.
The fall out from the banking crisis has been pronounced and our portfolio has
not been immune. Pre-tax losses over the period amounted to EUR57m, which was
mainly due to the reduction in asset value, the capital expenditure in finishing
certain projects that will now add to the rental income of our portfolio and
general financing costs.
Our balance sheet remains relatively robust and gearing levels across the
company are low compared to many of our peers. We feel that interest cover will
be vital in 2009 and this will be one of principal objectives for the next
financial year. Rental income, a key metric for the group, remains strong at
EUR16.6 million as at 31 December 2008.
In line with the Board's recommendation, Ablon will not pay a dividend to
investors for 2008. Until conditions improve in the credit markets, our main
focus for the forseeable future is to maximise income and reduce debt. We also
are committed to maintaining rent levels and minimising our capital expenditure
programme.
We do have cash reserves that will be required to fund shortfalls in operating
cash flow after interest to cover previously committed capital expenditure as
well as bank principal repayments, which should enable us to cope with current
difficulties. Whilst the outlook is uncertain, we believe that we are well
positioned to benefit from the recovery when it arrives."
For further information, please contact:
Ablon Group Limited
Daniel Avidan, CFO
Tel. +36 1 225 6600
KBC Peel Hunt Ltd
Capel Irwin / Alex Vaughan / Daniel Harris
Tel. +44 (0)20 7418 8900
ING Wholesale Banking
Nathalie Bachich de Recina / Julie Wakkie
Tel. +44 (0)20 7767 8362
City Profile Group
Jonathan Gillen / William Attwell
Tel: +44 (0)20 7448 3244
ablon@city-profile.com
NOTES TO EDITORS
About Ablon Group
Founded in 1993 in Budapest (Hungary), Ablon Group has properties at 33
locations, of which there are 14 completed projects and 19 development projects
in Budapest, Prague, Bucharest, Warsaw and Gdansk. Its portfolio comprises a
diversified mix of office, residential, retail, logistics and hotel developments
valued at EUR594 million by King Sturge, an independent valuation firm, as at 31
December 2008. Ablon has, to date, approximately 156,950 square metres of
existing and income generating office and retail assets (at 14 locations) in
Budapest and Prague, with a significant development land bank comprising a
further 1,305,800 square metres in the next five years (at 25 locations) in
Budapest, Prague, Bucharest, Warsaw and Gdansk. Ablon's shares are traded on the
AIM market of the London Stock Exchange under the ticker 'ABL'.
Chief executive officer's STATEMENT
Property Portfolio
As at 31 December 2008, Ablon's portfolio comprised properties at 33 locations
in the CEE, of which there were 14 completed projects and 19 development
projects:
* Properties at 19 locations in Budapest, the properties comprised 12 completed
projects (including Zöldváros Residential Park which has sold 239 out of 240
flats) and seven development projects.
* Properties at six locations in Prague, two completed projects and four
development projects,
* Properties at six locations in Bucharest, all development projects.
* Property at two locations in Poland, all for development.
Operational Review
Budapest
In December 2007, the Company signed a 30-year management contract with Marriott
for its hotel at the Europeum project. The mixed-use development includes a
four-star hotel which will have 235 rooms, 5,500 square metres of retail space
and 229 parking places. Construction is expected to be completed during the
fourth quarter of 2009 and the total cost of the project is estimated to be EUR40
million.
In November 2008, the Group completed the construction of the second phase of
the M3 business centre. The property is an office complex situated in the
developing business district of Budapest, located near the junction of the M3
highway and Hungaria krt.
In January 2009, the Group completed the construction of the second phase of the
Airport City Logistics Park in the southeast of Budapest. The total site
includes close to 20,000 square metres of completed logistics area. As at 31
December 2008, the Company had leased 64% of the first phase.
In June 2008, the Group started the construction of the third phase of BC99
project. Due to current market conditions, the Group decided to stop the
construction after completing the underground parking. The construction will
commence when the financing and market environments improve.
In March 2008, the Group completed the acquisition of a 5,400 square metre
building in Budapest with the intention of converting it into a 74 bedroom
luxury boutique hotel with a total development cost of EUR11 million. The Group
decided to stop the construction after completing the exterior construction
works. The construction will recommence when the financing and market
environments improve.
Prague
The group has started the construction and marketing of Viva residential project
in Prague. The project includes 162 apartments over 10,800 square metres.
Construction is expected to be completed by the end of 2009. As at 31 December
2008, 28 units had been sold.
Bucharest
The Company decided to stop the marketing and construction of the first phase of
the Sunset residential project in Timisoara blv. in Bucharestfor the time being.
The marketing and construction will recommence when the financing and market
environments improve.
In June 2008, the Group completed the acquisition of a 133,264 square metre plot
in Northern Bucharest, Romania, in close proximity to the city's international
airport (Henri Cuanda, Otopeni). On the site of "Airport City" in Bucharest,
Ablon will develop a zone of modern offices and high tech facilities built to
take advantage of the increasing commercial activity around the airport.
According to the PUG (Bucharest General Urban Plan) the current building rights
for the plot extend to 266,500 metres (i.e. 200%). The total development cost is
expected to be approximately EUR280 million. Construction will start as soon as
the Group finds both tenants and financing facilities. The site is located 500
metres north of Bucharest's international airport, and 1.8 km from the DN1
highway, and is easily accessible by train and car.
In July 2008, the Group completed the acquisition of a 1,840 square metre plot
in the second sector of central Bucharest. Ablon has obtained building rights
to develop an 11,000 square metre class 'A' office building and the project is
expected to have a total development cost of approximately EUR15 million.
Construction will start as soon as the Group is able to find financing
facilities. The project is expected to generate revenues of approximately EUR2.4
million per annum. The plot, which is conveniently located between Bucharest's
old and new business districts, within easy reach of Unirii Square, Parliament
and Piata Universitate, already has the specific zoning criteria (PUD) required
for the planned development.
Poland
In January 2008, Ablon completed the acquisition of the Company's first venture
in Poland, in line with the Company's strategy of building a solid portfolio of
assets in the most attractive cities in Central and Eastern Europe. The plot,
which is a 5,290 square metre plot located in the centre of Warsaw, is within
close proximity of the Daewoo / World Trade Tower and the new Hilton Hotel and
Residential Towers. The project is situated in one of the most exclusive and
highly sought after locations in central Warsaw. The Company plans to build up
to 13 floors of mixed use space at the site, occupying approximately 14,500
square metres of office space, and 2,500 of high end residential units. The
total development cost is estimated at EUR40 million. Construction will start as
soon as the Group finds both tenants and financing facilities.
In March 2008, the Group completed the acquisition of an 88,000 square metre
plot of land in Gdansk, through a joint venture in which Ablon has a 51% stake.
Ablon intends to develop the site into a 3-floor luxury residential complex with
recreational facilities for a total development cost of approximately EUR95
million. Construction will start as soon as the Group finds both tenants and
financing facilities. Ablon expects the project to generate an income of between
EUR190 million to EUR220 million once all four phases are complete. The Company also
has an option to buy an additional 30,000 square metres of land in close
proximity to the site.
Portfolio summary
The updated list of the Group's projects as at 31 December 2008 is detailed
overleaf:
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| |
+-----------+
| Project | Group | Project | Completed | Expected | Occupancy | Under | Future | Valuation |
| | holding | Type | Lettable | Annualized | rate | development | Development | (*) |
| | | | Area | Gross Rent | (%)As at | As at | sites (sq. | (EUR |
| | | | (sq. m) | (EUR million | 31.12.08 | 31.12.08 | m) as at | million) |
| | | | | p.a.) | | | 31.12.08 | as at |
| | | | | as at | | | | 31.12.08 |
| | | | | 31.12.08 | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Budapest | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| BC. 99 | 100% | Office | 15,900 | 2.6 | 89% | 17,400 | 20,200 | |
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Budafoki | 100% | Office | 2,600 | 0.3 | 76% | 0 | 136,000 | |
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Fogarasi | 100% | Office | 2,700 | 0.4 | 100% | 0 | 0 | |
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| M3 | 100% | Office | 17,400 | 1.1 | 33% | 0 | 0 | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| BC. 91 | 100% | Office | 6,700 | 0.9 | 83.4% | 0 | 0 | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| BC. 30 | 100% | Office | 12,900 | 2.3 | 97% | 0 | 0 | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Buy-Way | 100% | Retail | 21,600 | 1.2 | 53% | 0 | 3,700 | |
| Dunakeszi | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Buy-Way | 100% | Retail | 11,900 | 0.7 | 60% | 0 | 0 | |
| Soroksar | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Zoldvaros | 100% | Residential | | | | 0 | 29,100 | |
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Gateway | 100% | Office | 35,800 | 5.4 | 94% | 0 | 0 | |
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Europeum | 100% |Hotel/Retail | 0 | | | 18,700 | 0 | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Airport | 100% | Storage | 10,100 | 0.5 | 64% | 9,350 | 51,450 | |
| City | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Hold | 100% | Hotel | 0 | | | | 6,700 | |
| Residence | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Katona | 100% | Hotel | 0 | | | | 6,100 | |
| Residence | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Nap | 100% | Hotel | 0 | 0.1 | | | 5,100 | |
| Residence | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Rosslyn | 100% | Hotel | 0 | | | 5,400 | 0 | |
| hotel | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Erzsebet | 100% | Office | 0 | | | | 17,900 | |
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Newage | 100% | Office | 0 | | | | 13,700 | |
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Rakoczi | 100% | Retail | 750 | | 0% | | | |
| (*) | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Total | | | 138,350 | 15.5 | 73.2% | 50,850 | 289,950 | 365 |
| Budapest | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Prague | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Palmovka | 100% | Office | 4,200 | 0.8 | 100% | 0 | 0 | |
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Meteor | 100% | Office | 14,400 | 2.0 | 100% | 0 | 5,500 | |
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| VIVA | 100% | Residential | 0 | | | 10,800 | 0 | |
| Residence | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| May | 100% | Office | 0 | | | 0 | 7,200 | |
| House | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Kolben | 100% | Mixed | 0 | | | 0 | 73,000 | |
| | | use | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Ritka | 100% | Residential | 0 | | | 0 | 64,000 | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Total | | | 18,600 | 2.8 | 100% | 10,800 | 149,700 | 99 |
| Prague | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Bucharest | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Mogosaia | 88% | Residential | | | | | 40,000 | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Sunset | 88% | Residential | | | | | 184,500 | |
| Res. | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Pipera | 100% | Mix | | | | | 100,000 | |
| 3H | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Pipera | 100% | Mix | | | | | 100,000 | |
| 4H | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Airport | 100% | Office | | | | | 264,000 | |
| city | | | | | | | | |
| (*) | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Vlad | 100% | Office | | | | | 11,000 | |
| Tepes | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Minority | | | | | | | | -0.9 |
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Total | | | 0 | 0 | | 0 | 699,500 | 104 |
| Bucharest | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Poland | | | | | | | | |
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Warsaw | 100% | Mix | 0 | 0 | | 0 | 17,000 | |
| center | | | | | | | | |
| (*) | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Gdansk | 51% | Residential | 0 | 0 | | 0 | 88,000 | |
| (*) | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Minority | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Total | | | | | | | 105,000 | 26 |
| Poland | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
| Total | | | 156,950 | 18.3 | 76.4% | 61,650 | 1,244,150 | 594 |
| Group | | | | | | | | |
+-----------+---------+--------------+-----------+------------+-----------+-------------+-------------+-----------+
(*)Valuation was completed by GVA Robertson for Hungary and Poland assets, and
by King Sturge for Czech and Romania assets. The numbers are based on residual
development approach.
Of the total valuation of EUR594 million, completed projects account for EUR265
million.
Financial Review
Gross rental income
Gross rental income was EUR16.6 million for the year ended 31 December 2008,
representing an increase of EUR5.4 million, or 48%, from the EUR11.2 million
generated during the year ended 31 December 2007. This increase can be
attributed to the opening of the new Gateway project in Budapest at the
beginning of 2008, higher occupancy of the BC30 project in Budapest and the
improved occupancy at the Meteor A+B Offices in Prague.
Net service charge income
Net service charge income was EUR0.2 million for the year ended 31 December
2008, a decrease of EUR0.3 million from the EUR0.5 million generated during the year
ended 31 December 2007.
Net (loss) / gain on fair value adjustment of investment property
Net loss on the fair value adjustment of investment property was EUR32.6
million for the year ended 31 December 2008, from the EUR53.4 million gain
generated during the year ended 31 December 2007. Revaluation gains are mainly
impacted by the completion of investment properties projects, or due to an
increase/decrease in the value of Ablon's existing portfolio. The main reason
for the 2008 revaluation losses is the decrease of the properties' values due to
the global economic crisis, which is reflected in much higher expected exit
yields and higher discount rates, resulting in a lower valuation.
Impairment of goodwill
EUR3.7 million of the losses incurred during the year ended 31 December 2008, was
the result of adjusting the purchasing cost of the company that owns Ablon's
Warsaw development to market value.
Impairment of inventory
EUR3.4 million of the losses incurred during the year ended 31 December 2008, was
the result of adjusting the plots held by the company in Romania, Czech Republic
and Poland to market value.
Sales and marketing expenses
Sales and marketing expenses were EUR1.3 million for the year ended 31
December 2008, a decrease of EUR0.2 million, or 28%, from the EUR1.5 million at the
year ended 31 December 2007.
Administrative expenses
Administrative expenses were EUR8.5 million for the year ended 31 December
2008, an increase of EUR2.2 million or 35% from the EUR6.3 million spent during the
year ended 31 December 2007. This increase consisted of EUR1.2 million spent on
stock options and bonus shares granted to employees during the IPO process and
for the year 2007, an increase of EUR0.4 million in wages due to a higher
headcount. An additional EUR0.3 million comes from price inflation in Euro terms
in the different countries in which the Company is active, represented by higher
miscellaneous expenses such as traveling costs, car expenses etc.
Net Financing income / (expense)
Net financing expense was EUR24.1 million for the year ended 31 December 2008,
representing an increase of EUR19.5 million from the EUR4.6 million expense recorded
during the year ended 31 December 2007. The increase in financial expenses is
primarily due to the following: depreciation of local currencies in Hungary,
Czech Republic and Romania of 4.5%, 1.1% and 10% respectively against the Euro.
Since the Company borrows in Euro, the Group had EUR15.4 million foreign exchange
losses. The higher average 3M Euribor rate paid in 2008 was 4.92%, compared to
4.15% in 2007. Around 80% of the Group's loans are linked to Euribor. The Group
started to expense the interest on the Gateway project since 1 January 2008.
Another reason for the increase in finance expenses was the higher balance of
Group loans in 2008.
Current Income Tax
Current income tax was EUR0.1 million for the year ended 31 December 2008, a
decrease of EUR0.6 million, from EUR0.7 million for year ended 31 December 2007.
Deferred Income Tax
Deferred income tax decreased by EUR18.1 million from a EUR10.9 million expense in
the year ended 31 December 2008 to a EUR7.2 million income for the year ended 31
December 2008. The decrease is primarily due to operational and finance losses.
Balance Sheet Overview
Investment property
Investment property decreased in value by EUR2.8 million, to EUR367.2 million as at
31 December 2008, from EUR370.0 million as at 31 December 2007. This change was
primarily due to the purchase of two sites in Warsaw and Bucharest, and the
completion of the first building in the Airport city project in Budapest. These
purchases were almost completely offset by revaluation losses on the existing
properties due the economic downturn.
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 decreased by EUR98.8 million from EUR146.6 million at 31 December
2007 to EUR47.8 million at 31 December 2008. The decrease was primarily due to a
EUR46.4 million decrease in cash and financial securities as a result of
purchasing new development sites in Poland and Romania. The inventory decrease
of EUR48.2 million is due to the reclassification of part of the plots to long
term inventory, as the current development plan was suspended as a result of the
economic downturn.
Non Current Liabilities
Non current liabilities include long?term borrowings from commercial banks and
shareholders, as well as deferred tax liabilities for future tax obligations.
Total non?current liabilities increased by EUR28.5 million from EUR205.3 million as
at 31 December 2007 to EUR233.8 million as at 31 December 2008. This was primarily
due to an increase of EUR34.7 million in long term borrowing, mainly as a result
of the refinancing of some of the yielding assets, and for project finance.
Deferred income tax decreased by EUR5.6 million due to the losses for the year.
Current Liabilities
Current liabilities increased by EUR7.6 million from EUR49.9 million at 31 December
2007 to EUR57.5 million at 31 December 2008. The increase was primarily due to a
EUR3.5 million increase in trade payables and a EUR4.2 million increase in short
term loans.
Liquidity and capital resources
The Group's liquidity and capital resources come from operations, rental income
and the sale of apartments. The Group finances its development activity with
bank loans. Typically, project finance covers the three 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.
The company's loan to value ratio was 39% at 31 December 2008, compared to 31%
at 31 December 2007.
Due to the unprecedented global economic downturn, , and in particular the CEE
countries in which the company operates, that was especially accelerated in
September 2008, the company has experienced difficulties in the application of
new loans in order to finance the construction of new projects. As yet, we do
not see any signs for improvement in the banking sector. This means that the
company cannot, for the time being, execute its development plan, and we cannot
estimate when it will be possible at this stage. If the economic downturn
continues to accelerate, the company may also face the problem of renewing
certain short term loans that mature in the coming year. The Group has 10
properties with a book value of EUR83 million with no debt or mortgage costs.
There are only four loans with LTV covenants. One has an 80% LTV covenant and
based on a recent valuation may require a payment of Euro 3.7 million to bring
into compliance. Two of the other loans has a 75% LTV requirement and based on
latest valuations, is comfortably within the covenant. The remaining loan which
has a 71% LTV covenant but a valuation is not required until one year after
completion in late 2009. The company is doing all it can to increase liquidity,
by marketing properties for sale, applying for new loans and by cutting expenses
across the business.
NAV
The Company's real estate assets were valued on 31 December 2008 at EUR594 million
(for its share) by external independent appraisers (King Sturge and GVA), in
accordance with International Valuation Standards. The Company's policy will
change from 1st January 2009 and it will revalue its assets on an annual basis,
on 31 December. The following table demonstrates the calculation of Adjusted Net
Asset Value based on the King Sturge and GVA valuation report and the Company's
financial statements as at 31 December 2008:
+----------------------+--------------+--------------+
| | EUR Million |
+----------------------+-----------------------------+
| |Dec 31, 2008 |Dec 31, 2007 |
+----------------------+--------------+--------------+
| | | |
+----------------------+--------------+--------------+
| Shareholders' equity | 238.7 | 296.1 |
+----------------------+--------------+--------------+
| Valuation | 111.2 | 167.4 |
| Adjustments1 | | |
+----------------------+--------------+--------------+
| Deferred Tax | 40.1 | 45.7 |
| Liability | | |
+----------------------+--------------+--------------+
| Minority rights | -0.9 | -2.6 |
+----------------------+--------------+--------------+
| Total adjusted net | 389.1 | 506.6 |
| asset value | | |
+----------------------+--------------+--------------+
| NAV per share EUR | 3.57 | 4.65 |
+----------------------+--------------+--------------+
| NAV per share GBP | 3.27 (EUR/GBP = | 3.66 (EUR/GBP = |
| | 1.09) | 1.27) |
+----------------------+--------------+--------------+
1 Property valuation of 594 less IFRS Investment property (EUR367.2m), investment
property under development (EUR35.5m), property plant and equipment (EUR10.3m) and
inventories (EUR69.8m)
The decrease in the NAV is primarily due to the global economic crisis which
has led to substantial changes in the assumptions that were used by the
appraisers, which have resulted in higher exit yields, higher discount rates and
higher construction costs for new development projects.
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.
In May 2008, the Group paid a cash dividend of GBP4.0 million to the Group's
shareholders (or 2 per cent of Ablon's net asset value (NAV) on September 2006)
on account of the profits of 2007. This dividend is in line with the dividend
policy that was declared before the IPO. This was Ablon's first dividend payment
to shareholders since the Company's initial public offering in February 2007.
Based on the total number of 109,608,919 shares in issue at the time, the
dividend per share was GBP0.0365.
As a result of increased volatility in the global financial markets, the
Company's Board of Directors has decided to change its dividend policy and has
voted in favor of cancelling the 2008 dividend payment to shareholders, which
was due for payment in 2009.
Ablon has taken this step to support the Company's growth initiatives during the
current challenging market environment. The Company's Management and Board of
Directors believe that shareholders' interests will be better served by
retaining its earnings to maintain NAV and earnings growth. The Company cannot
at this stage indicate when it will pay the next dividend.
Since the Company did not meet the 2008 NAV targeted growth set by the Board in
the beginning of 2008, the management and the employees are not entitled to an
annual bonus for 2008. A new set of NAV targets will be set by the remuneration
committee for 2009.
Uri Heller
C.E.O.
ABLON Group
Consolidated Financial Statements
Prepared under IFRS as adopted by the EU
Year ended 31 December 2008
Independent Auditors' Report
To the shareholders of Ablon Group Limited
We have audited the accompanying consolidated financial statements of Ablon
Group Limited ("the Group"), which comprise the consolidated balance sheet as at
31 December 2008, and the consolidated income statement, consolidated statement
of changes in equity and consolidated statement of cash flows for the year then
ended, and a summary of significant accounting policies and other explanatory
notes.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these
consolidated financial statements in accordance with International Financial
Reporting Standards as adopted by the EU. This responsibility includes:
designing, implementing and maintaining internal control relevant to the
preparation and fair presentation of financial statements that are free from
material misstatements, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are
reasonable in the circumstances.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit. We conducted our audit in accordance with
International Standards on Auditing. Those standards require that we comply with
relevant ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on our judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In
making those risk assessments, we consider internal control relevant to the
entity's preparation and fair presentation of the financial statements in order
to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity's
internal control. An audit also includes evaluating the appropriateness of
accounting principles used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view
of the consolidated financial position of the Ablon Group Limited as at 31
December 2008, and of its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with International
Financial Reporting Standards as adopted by the EU.
11 March 2009
KPMG Hungaria Kft.
Gábor Agóes
Partner
+----+---------------------------------+------+---------+---------+
| Consolidated balance sheet | | |
+---------------------------------------------+---------+---------+
| | | |As at 31 December |
| | | | |
+----+---------------------------------+------+-------------------+
| | | | | |
+----+---------------------------------+------+---------+---------+
| | in thousands of Euros |Note | 2008 | 2007 |
+----+---------------------------------+------+---------+---------+
| | | | | |
+----+---------------------------------+------+---------+---------+
| | | | | |
+----+---------------------------------+------+---------+---------+
| | ASSETS | | | |
+----+---------------------------------+------+---------+---------+
| | Non-current assets | | | |
+----+---------------------------------+------+---------+---------+
| | Investment property | 5 | 367 217 | 369 952 |
+----+---------------------------------+------+---------+---------+
| | Investment property under | 5 | 35 491 | 24 551 |
| | development | | | |
+----+---------------------------------+------+---------+---------+
| | Property, plant and equipment | 6 | 10 295 | 1 299 |
+----+---------------------------------+------+---------+---------+
| | Long term loans | 7 | 8 375 | 8 807 |
+----+---------------------------------+------+---------+---------+
| | Deferred income tax assets | 16 | 1 024 | 132 |
+----+---------------------------------+------+---------+---------+
| | Long term inventory | 9 | 59 950 | 0 |
+----+---------------------------------+------+---------+---------+
| | | | | |
+----+---------------------------------+------+---------+---------+
| | Total non-current assets | | 482 352 | 404 741 |
+----+---------------------------------+------+---------+---------+
| | | | | |
+----+---------------------------------+------+---------+---------+
| | Current assets | | | |
+----+---------------------------------+------+---------+---------+
| | Other current assets | 8 | 4 516 | 7 601 |
+----+---------------------------------+------+---------+---------+
| | Inventories | 9 | 9 825 | 57 991 |
+----+---------------------------------+------+---------+---------+
| | Trade receivables | 10 | 907 | 2 050 |
+----+---------------------------------+------+---------+---------+
| | Securities | 11 | 2 510 | 51 144 |
+----+---------------------------------+------+---------+---------+
| | Cash and cash equivalents | 12 | 29 999 | 27 786 |
+----+---------------------------------+------+---------+---------+
| | Total current assets | | 47 757 | 146 572 |
+----+---------------------------------+------+---------+---------+
| | | | | |
+----+---------------------------------+------+---------+---------+
| | Total assets | | 530 109 | 551 313 |
+----+---------------------------------+------+---------+---------+
+------------------------------------------------------------+
| Consolidated balance sheet (continued) |
+ +
| | |
+------------------------------------------------------------+
+---------------------------------+------+-----------+---------+
| | | As at 31 December |
| | | |
+---------------------------------+------+---------------------+
| | | | |
+---------------------------------+------+-----------+---------+
| in thousands of Euros |Note | 2008 | 2007 |
+---------------------------------+------+-----------+---------+
| | | | |
+---------------------------------+------+-----------+---------+
| | | | |
+---------------------------------+------+-----------+---------+
| EQUITY | | | |
+---------------------------------+------+-----------+---------+
| Capital and reserves | | | |
+---------------------------------+------+-----------+---------+
| Share capital | 13 | 1 089 | 1 089 |
+---------------------------------+------+-----------+---------+
| Treasury shares | 13 | (16) | 0 |
+---------------------------------+------+-----------+---------+
| Foreign exchange reserve | | (4 414) | 178 |
+---------------------------------+------+-----------+---------+
| Share based payment reserve | 27 | 2 975 | 875 |
+---------------------------------+------+-----------+---------+
| Share premium | | 255 893 | 255 893 |
+---------------------------------+------+-----------+---------+
| Retained earnings | | (16 790) | 38 055 |
+---------------------------------+------+-----------+---------+
| Total equity attributable to | | 238 737 | 296 090 |
| equity holders of the Parent | | | |
+---------------------------------+------+-----------+---------+
| Minority interest | | 0 | 0 |
+---------------------------------+------+-----------+---------+
| Total equity | | 238 737 | 296 090 |
+---------------------------------+------+-----------+---------+
| | | | |
+---------------------------------+------+-----------+---------+
| LIABILITIES | | | |
+---------------------------------+------+-----------+---------+
| Non-current liabilities | | | |
+---------------------------------+------+-----------+---------+
| Other non-current liabilities | | 1 636 | 2 165 |
+---------------------------------+------+-----------+---------+
| Borrowings | 15 | 192 090 | 157 393 |
+---------------------------------+------+-----------+---------+
| Deferred income tax | 16 | 40 115 | 45 745 |
+---------------------------------+------+-----------+---------+
| Total non-current liabilites | | 233 841 | 205 303 |
+---------------------------------+------+-----------+---------+
| | | | |
+---------------------------------+------+-----------+---------+
| Current liabilities | | | |
+---------------------------------+------+-----------+---------+
| Trade and other payables | 14 | 18 210 | 14 663 |
+---------------------------------+------+-----------+---------+
| Current income tax liabilities | | 22 | 157 |
+---------------------------------+------+-----------+---------+
| Borrowings | 15 | 39 299 | 35 100 |
+---------------------------------+------+-----------+---------+
| Total current liabilities | | 57 531 | 49 920 |
+---------------------------------+------+-----------+---------+
| | | | |
+---------------------------------+------+-----------+---------+
| Total liabilities | | 291 372 | 255 223 |
+---------------------------------+------+-----------+---------+
| | | | |
+---------------------------------+------+-----------+---------+
| Total equity and liabilities | | 530 109 | 551 313 |
+---------------------------------+------+-----------+---------+
+---+---------------------------------+------+-----------+-----------+
| Consolidated income statement |
+--------------------------------------------------------------------+
| | | | | |
+---+---------------------------------+------+-----------+-----------+
| | | | Period ended 31 |
| | | | December |
+---+---------------------------------+------+-----------------------+
| | | | | |
+---+---------------------------------+------+-----------+-----------+
| | in thousands of Euros |Note | 2008 | 2007 |
+---+---------------------------------+------+-----------+-----------+
| | | | | |
+---+---------------------------------+------+-----------+-----------+
| | Gross rental income | 18 | 16 582 | 11 230 |
+---+---------------------------------+------+-----------+-----------+
| | Gross residential income | 18 | 9 | 958 |
+---+---------------------------------+------+-----------+-----------+
| | Net service charge income/ | 18 | 163 | 506 |
| | (expenses) | | | |
+---+---------------------------------+------+-----------+-----------+
| | Cost of residential income | 18 | (68) | (852) |
+---+---------------------------------+------+-----------+-----------+
| | Net sales income | | 16 686 | 11 842 |
+---+---------------------------------+------+-----------+-----------+
| | Net gain/(loss) from fair value | 5 | (32 579) | 53 358 |
| | adjustment on investment | | | |
| | property | | | |
+---+---------------------------------+------+-----------+-----------+
| | Impairment of inventory | 9 | (3 447) | 0 |
+---+---------------------------------+------+-----------+-----------+
| | Impairment of goodwill | 24 | (3 699) | 0 |
+---+---------------------------------+------+-----------+-----------+
| | Selling and marketing costs | | (1 309) | (1 542) |
+---+---------------------------------+------+-----------+-----------+
| | Administrative expenses | 19 | (8 461) | (6 332) |
+---+---------------------------------+------+-----------+-----------+
| | Other income | | 500 | 147 |
+---+---------------------------------+------+-----------+-----------+
| | Other expenses | | (411) | (464) |
+---+---------------------------------+------+-----------+-----------+
| | | | | |
+---+---------------------------------+------+-----------+-----------+
| | Net operating profit / (loss) | | (32 720) | 57 009 |
+---+---------------------------------+------+-----------+-----------+
| | | | | |
+---+---------------------------------+------+-----------+-----------+
| | Finance income | 20 | 3 159 | 3 198 |
+---+---------------------------------+------+-----------+-----------+
| | Finance expenses | 20 | (27 289) | (7 842) |
+---+---------------------------------+------+-----------+-----------+
| | Net finance income / (expenses) | | (24 130) | (4 644) |
+---+---------------------------------+------+-----------+-----------+
| | | | | |
+---+---------------------------------+------+-----------+-----------+
| | Profit / (loss) before income | | (56 850) | 52 365 |
| | tax | | | |
+---+---------------------------------+------+-----------+-----------+
| | | | | |
+---+---------------------------------+------+-----------+-----------+
| | Current income tax | 21 | (108) | (656) |
+---+---------------------------------+------+-----------+-----------+
| | Deferred income tax | 21 | 7 179 | (10 934) |
+---+---------------------------------+------+-----------+-----------+
| | Total income tax | | 7 071 | (11 590) |
| | (expenses)/income | | | |
+---+---------------------------------+------+-----------+-----------+
| | | | | |
+---+---------------------------------+------+-----------+-----------+
| | Profit / (loss) for the period | | (49 779) | 40 775 |
+---+---------------------------------+------+-----------+-----------+
| | | | | |
+---+---------------------------------+------+-----------+-----------+
| | Attributable to: | | | |
+---+---------------------------------+------+-----------+-----------+
| | Minority interest | | 0 | 0 |
+---+---------------------------------+------+-----------+-----------+
| | Equity holders of the parent | | (49 779) | 40 775 |
+---+---------------------------------+------+-----------+-----------+
| | Profit / (loss) for the period | | (49 779) | 40 775 |
+---+---------------------------------+------+-----------+-----------+
| | | | | |
+---+---------------------------------+------+-----------+-----------+
| | Basic earnings per share (euro) | 13 | (0.46) | 0.39 |
+---+---------------------------------+------+-----------+-----------+
| | Diluted earnings per share | 13 | (0.46) | 0.39 |
| | (euro) | | | |
+---+---------------------------------+------+-----------+-----------+
+-------+------+------+----------+----------+------------+---------+---------+----------+--------------+----------+------+------+
| Consolidated statement of changes in equity |
+ +
| | |
+-----------------------------------------------------------------------------------------------------------------+------+
| Consolidated statement of changes in | | | | | | |
| equity | | | | | | |
+--------------------------------------------------------+---------+---------+----------+--------------+----------+-------------+
| | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| in |Note | Attributable to equity holders of the | Subtotal | Minority | Total |
| thousands | | Company | | interest | equity |
| of Euros | | | | | |
+--------------+------+-----------------------------------------------------------------+--------------+----------+-------------+
| | | Share | Treasury | Retained | Share | Share | Foreign | Attributable | | |
| | | capital | shares | earnings | premium | based | exch. | to equity | | |
| | | | | | | payment | reserve | holders of | | |
| | | | | | | reserve | | the Group | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Balance at | | 1 612 | 0 | 127 853 | 13 | 0 | (2 449) | 127 029 | 2 282 | 129 311 |
| 1 January | | | | | | | | | | |
| 2007 | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Shares | | (1 612) | | (127 853) | ( 13) | | 2 449 | (127 029) | 0 | (127 029) |
| cancelled | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Shares | | 1 089 | | | | | | 1 089 | 0 | 1 089 |
| issued | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Capital | | | | | 255 893 | | | 255 893 | | 255 893 |
| contribution | | | | | | | | | | |
| by | | | | | | | | | | |
| shareholders | | | | | | | | | | |
| net of | | | | | | | | | | |
| floating | | | | | | | | | | |
| costs | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Minority | | | | (2 720) | | | | (2 720) | (2 282) | (5 002) |
| share | | | | | | | | | | |
| purchased | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Subtotal: | | ( 523) | 0 | (130 573) | 255 880 | 0 | 2 449 | 127 233 | (2 282) | 124 951 |
| Capital | | | | | | | | | | |
| transactions | | | | | | | | | | |
| with | | | | | | | | | | |
| shareholders | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Foreign | | | | | | | 178 | 178 | | 178 |
| exchange | | | | | | | | | | |
| translation | | | | | | | | | | |
| adjustment | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Share | 27 | | | | | 875 | | 875 | | 875 |
| options | | | | | | | | | | |
| granted | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Current | | | | 40 775 | | | | 40 775 | | 40 775 |
| period | | | | | | | | | | |
| profit / | | | | | | | | | | |
| loss | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Subtotal: | | 0 | 0 | 40 775 | 0 | 875 | 178 | 41 828 | 0 | 41 828 |
| Recognised | | | | | | | | | | |
| income and | | | | | | | | | | |
| expense for | | | | | | | | | | |
| the period | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Balance at | | 1 089 | 0 | 38 055 | 255 893 | 875 | 178 | 296 090 | 0 | 296 090 |
| 31 December | | | | | | | | | | |
| 2007 | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Balance at | | 1 089 | 0 | 38 055 | 255 893 | 875 | 178 | 296 090 | 0 | 296 090 |
| 1 January | | | | | | | | | | |
| 2008 | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Cash paid | 13 | | (16) | | | | | (16) | | ( 16) |
| to acquire | | | | | | | | | | |
| Treasury | | | | | | | | | | |
| shares | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Dividend | | | | (5 066) | | | | (5 066) | | (5 066) |
| payment to | | | | | | | | | | |
| shareholders | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Subtotal: | | 0 | (16) | (5 066) | 0 | 0 | 0 | (5 082) | 0 | (5 082) |
| Capital | | | | | | | | | | |
| transactions | | | | | | | | | | |
| with | | | | | | | | | | |
| shareholders | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Foreign | | | | | | | (4 592) | (4 592) | | (4 592) |
| exchange | | | | | | | | | | |
| translation | | | | | | | | | | |
| adjustment | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Share | 27 | | | | | 2 100 | | 2 100 | | 2 100 |
| options and | | | | | | | | | | |
| free shares | | | | | | | | | | |
| granted | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Current | | | | (49 779) | | | | (49 779) | | (49 779) |
| period | | | | | | | | | | |
| profit / | | | | | | | | | | |
| (loss) | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Subtotal: | | 0 | 0 | (49 779) | 0 | 2 100 | (4 592) | (52 271) | 0 | (52 271) |
| Recognised | | | | | | | | | | |
| income and | | | | | | | | | | |
| expense for | | | | | | | | | | |
| the period | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| | | | | | | | | | | |
+--------------+------+----------+----------+------------+---------+---------+----------+--------------+----------+-------------+
| Balance at | | 1 089 | ( 16) | (16 790) | 255 893 | 2 975 | (4 414) | 238 737 | 0 | 238 737 |
| 31 December | | | | | | | | | | |
| 2008 | | | | | | | | | | |
+-------+------+------+----------+----------+------------+---------+---------+----------+--------------+----------+------+------+
Consolidated statement of changes in equity
+----------------------------------------------+------+----------------+----------------+
| Consolidated statement of cash flows |
+---------------------------------------------------------------------------------------+
| | | | |
+----------------------------------------------+------+----------------+----------------+
| |Note | 2008 | 2007 |
+----------------------------------------------+------+----------------+----------------+
| | | | |
+----------------------------------------------+------+----------------+----------------+
| Cash flows from operating activities | | | |
+----------------------------------------------+------+----------------+----------------+
| Profit for the period | | (49 779) | 40 775 |
+----------------------------------------------+------+----------------+----------------+
| Adjustments for: | | | |
+----------------------------------------------+------+----------------+----------------+
| - income tax expense | 21 | (7 071) | 11 590 |
+----------------------------------------------+------+----------------+----------------+
| - depreciation of property, plant and | 6 | 256 | 155 |
| equipment | | | |
+----------------------------------------------+------+----------------+----------------+
| - loss on disposals of property, plant and | 6 | 0 | 797 |
| equipment | | | |
+----------------------------------------------+------+----------------+----------------+
| - foreign exchange (gain) or loss on | | 12 642 | (362) |
| translation to functional currency | | | |
+----------------------------------------------+------+----------------+----------------+
| - net change of fair value adjustment on | 5 | 32 579 | (53 358) |
| investment property - market value changes | | | |
+----------------------------------------------+------+----------------+----------------+
| - interest income | 20 | (1 691) | (1 535) |
+----------------------------------------------+------+----------------+----------------+
| - interest expenses | 20 | 10 345 | 6 237 |
+----------------------------------------------+------+----------------+----------------+
| - goodwill impairment | 24 | 3 699 | 0 |
+----------------------------------------------+------+----------------+----------------+
| - costs of share based payments | 27 | 2 100 | 875 |
+----------------------------------------------+------+----------------+----------------+
| - interest capitalised | 20 | 3 512 | 3 066 |
+----------------------------------------------+------+----------------+----------------+
| Changes in working capital: | | | |
+----------------------------------------------+------+----------------+----------------+
| - net movements in other non current | 14 | (2 265) | 751 |
| liabilities | | | |
+----------------------------------------------+------+----------------+----------------+
| - trade and other receivables |8,10 | 4 234 | (879) |
+----------------------------------------------+------+----------------+----------------+
| - inventories | 9 | (9 283) | (35 818) |
+----------------------------------------------+------+----------------+----------------+
| - payables | 14 | 3 547 | 5 863 |
+----------------------------------------------+------+----------------+----------------+
| Cash generated/ (used) from operations | | 2 825 | (21 843) |
+----------------------------------------------+------+----------------+----------------+
| | | | |
+----------------------------------------------+------+----------------+----------------+
| Interest paid | 20 | (13 857) | (9 303) |
+----------------------------------------------+------+----------------+----------------+
| Income taxes paid | 21 | (242) | (649) |
+----------------------------------------------+------+----------------+----------------+
| Net cash from operating activities | | (11 274) | (32 670) |
+----------------------------------------------+------+----------------+----------------+
| | | | |
+----------------------------------------------+------+----------------+----------------+
| Cash flows from investing activities | | | |
+----------------------------------------------+------+----------------+----------------+
| Purchases of investment property | 5 | (19 706) | (8 949) |
+----------------------------------------------+------+----------------+----------------+
| Purchases of investment property under | 5 | (25 532) | (39 070) |
| development | | | |
+----------------------------------------------+------+----------------+----------------+
| Purchase of minority interest | | 0 | (5 002) |
+----------------------------------------------+------+----------------+----------------+
| Purchases of property, plant and equipment | 6 | (7 853) | (789) |
+----------------------------------------------+------+----------------+----------------+
| Purchases of subsidiaries | 24 | (13 871) | (1) |
+----------------------------------------------+------+----------------+----------------+
| Sale / (Purchases) of financial securities | 11 | 48 634 | (51 144) |
+----------------------------------------------+------+----------------+----------------+
| Interest received | 20 | 1 691 | 1 535 |
+----------------------------------------------+------+----------------+----------------+
| Net cash used in investing activities | | (16 637) | (103 420) |
+----------------------------------------------+------+----------------+----------------+
| | | | |
+----------------------------------------------+------+----------------+----------------+
| Cash flows from financing activities | | | |
+----------------------------------------------+------+----------------+----------------+
| Proceeds from borrowings | | 48 569 | 40 910 |
+----------------------------------------------+------+----------------+----------------+
| Repayments of borrowings | | (13 363) | (13 940) |
+----------------------------------------------+------+----------------+----------------+
| Payment to shareholders for the share | | 0 | (5 000) |
| exchange | | | |
+----------------------------------------------+------+----------------+----------------+
| Proceeds from issuance of share capital | | 0 | 388 |
+----------------------------------------------+------+----------------+----------------+
| Share issue net of expenses | | 0 | 134 564 |
+----------------------------------------------+------+----------------+----------------+
| Repurchase of own shares | 13 | (16) | 0 |
+----------------------------------------------+------+----------------+----------------+
| Dividends paid to the Company's shareholders | 13 | (5 066) | 0 |
+----------------------------------------------+------+----------------+----------------+
| Net cash used in financing activities | | 30 124 | 156 922 |
+----------------------------------------------+------+----------------+----------------+
| | | | |
+----------------------------------------------+------+----------------+----------------+
| Net (decrease)/increase in cash and cash | | 2 213 | 21 707 |
| equivalents | | | |
+----------------------------------------------+------+----------------+----------------+
| Cash and cash equivalents at beginning of | 12 | 27 786 | 6 079 |
| the year | | | |
+----------------------------------------------+------+----------------+----------------+
| Cash and cash equivalents at end of the year | | 29 999 | 27 786 |
+----------------------------------------------+------+----------------+----------------+
1. Reporting Entity
ABLON Group Ltd (hereinafter "the Company") is a company domiciled in Guernsey.
The consolidated financial statements of the Company as at and for the year
ended 31 December 2008 comprise the Company and its subsidiaries (together
referred to as the "Group" and individually as "Group entities").
The Company has been listed on the London AIM exchange. 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 Group owns subsidiary companies which purchase, develop, hold and sell real
estate assets with a major real estate portfolio in Central and Eastern Europe
The Group entities are limited liability companies incorporated and domiciled in
Hungary, the Czech Republic, Romania, Poland, Croatia and Cyprus as listed
below:
+-----------------------------------+--------------+---------------+
| Name of entity | Controlling | Country of |
| |Shareholders |incorporation |
| | share | |
+-----------------------------------+--------------+---------------+
| AB-GR NEKRETNINE d.o.o. | 100% | Croatia |
+-----------------------------------+--------------+---------------+
| ABLON Bucharest Real Estates | 100% | Romania |
| Development S.R.L | | |
+-----------------------------------+--------------+---------------+
| ABLON GROUP d.o.o. | 100% | Croatia |
+-----------------------------------+--------------+---------------+
| ABLON Kft. | 100% | Hungary |
+-----------------------------------+--------------+---------------+
| ABLON Sp. z o.o. | 100% | Poland |
+-----------------------------------+--------------+---------------+
| 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 |
+-----------------------------------+--------------+---------------+
| Bright Site Kft. | 100% | Hungary |
+-----------------------------------+--------------+---------------+
| CD Property s.r.o. | 100% | Czech |
| | | Republic |
+-----------------------------------+--------------+---------------+
| Century City Kft. | 100% | Hungary |
+-----------------------------------+--------------+---------------+
| Cymanco Ltd. | 100% | Cyprus |
+-----------------------------------+--------------+---------------+
| 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 |
+-----------------------------------+--------------+---------------+
| Future Field 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 |
+-----------------------------------+--------------+---------------+
| Hotel Rosslyn 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 |
+-----------------------------------+--------------+---------------+
| Mor Eden Sp. z.o.o. (from Januar | 100% | Poland |
| 2008, see Note 10) | | |
+-----------------------------------+--------------+---------------+
| MQM Czech s.r.o. | 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 | 100% | Romania |
| S.R.L. | | |
+-----------------------------------+--------------+---------------+
| SPH Development Sp. z o.o. | 51% | Poland |
+-----------------------------------+--------------+---------------+
| SPH Properties Sp. z o.o. | 100% | Poland |
+-----------------------------------+--------------+---------------+
| STRIPMALL Management Kft. | 100% | Hungary |
+-----------------------------------+--------------+---------------+
| Szolgáltatóház Kft. | 100% | Hungary |
+-----------------------------------+--------------+---------------+
| YZ Holding spol. s.r.o. | 100% | Czech |
| | | Republic |
+-----------------------------------+--------------+---------------+
| Volanti Ltd. | 100% | Cyprus |
+-----------------------------------+--------------+---------------+
These consolidated financial statements have been authorised for issue by
the Board of Directors on the 11th of March 2009.
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
2. Summary of Accounting Policy
2.1 Basis of preparation
(a) Statement of compliance
ABLON Group's consolidated financial statements for January 1 - December 31,
2008 and 2007 has been prepared in line with International Financial Reporting
Standards (IFRSs) as adopted by the EU.
These financial statements are not intended to be used for statutory filing
purposes.
(b) Basis of measurement
The consolidated financial statements have been prepared under the historical
cost convention except that investment property and financial instruments at
fair value through profit or loss are measured at fair value. Non-current assets
are stated at the lower of carrying amount and fair value less cost to sell. The
Group does not have asset disposal groups held for sale.
The Financial Statements are prepared based on going concern assumption. The
Management constantly monitors the Group's financial position and believes that
cash inflows are sufficient to cover the expected cash outflows in the next 12
months.
(c) 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, Polish Zloty (PLN) in Poland and
Romanian Lei (RON) in Romania. The consolidated financial statements are
presented in euros (rounded to the nearest thousand), which is the Group's
presentation currency.
(d) Application of new standards
A number of new standards, amendments to standards and interpretations are
not yet effective for the year ended 31 December 2008, and have not been applied
in preparing these consolidated financial statements:
Revised IFRS 3 Business Combinations (2008) incorporates the following changes
that are likely to be relevant to the Group's operations:
* The definition of a business has been broadened, which may result in more
acquisitions being treated as business combinations.
* Contingent consideration will be measured at fair value, with subsequent changes
in fair value recognised in profit or loss.
* Transaction costs, other than share and debt issue costs, will be expensed as
incurred.
* Any pre-existing interest in an acquiree will be measured at fair value, with
the related gain or loss recognised in profit or loss.
* Any non-controlling (minority) interest will be measured at either fair value,
or at its proportionate interest in the identifiable assets and liabilities of
an acquiree, on a transaction-by-transaction basis.
Revised IFRS 3, which becomes mandatory for the Group's 2010 consolidated
financial statements, will be applied prospectively and therefore there will be
no impact on prior periods in the Group's 2010 consolidated financial
statements.
IFRS 8 Operating Segments (effective from 1 January 2009) The Standard
introduces the "management approach" to segment reporting and requires segment
disclosure based on the components of the entity that management monitors in
making decisions about operating matters. Operating segments are components of
an entity about which separate financial information is available that is
evaluated regularly by the Group's Chief Operating Decision Maker in deciding
how to allocate resources and in assessing performance. Currently the Group
presents segment information in respect of its business segments (see Note 4).
The Standard will have no effect on the profit or loss or equity.
Revised IAS 1 Presentation of Financial Statements (2007) introduces the term
"total comprehensive income," which represents changes in equity during a period
other than those changes resulting from transactions with owners in their
capacity as owners. Total comprehensive income may be presented in either a
single statement of comprehensive income (effectively combining both the income
statement and all non-owner changes in equity in a single statement), or in an
income statement and a separate statement of comprehensive income. Revised IAS
1, which becomes mandatory for the Group's 2009 financial statements, is
expected to have a significant impact on the presentation of the consolidated
financial statements as the Group plans to provide total comprehensive income in
a single statement of comprehensive income for its 2009 consolidated financial
statements.
Amendments to IAS 39 Financial Instruments: Recognition and Measurement -
Eligible Hedged Items clarifies the application of existing principles that
determine whether specific risks or portions of cash flows are eligible for
designation in a hedging relationship. The amendments will become mandatory for
the Group's 2010 consolidated financial statements, with retrospective
application required. The Group is currently in the process of evaluating the
potential effect of this amendment.
Revised IAS 23 Borrowing Costs (effective from 1 January 2009) The revised
Standard removes the option to expense borrowing costs and requires the
capitalization of borrowing costs that relate to qualifying assets (those that
take a substantial period of time to get ready for use or sale). There will be
no impact on prior periods in the Group's 2009 consolidated financial statements
as the Group's current accounting policy meets the revised requirements of IAS
23 Borrowing Costs (see Note 2.4).
Amendments to IAS 27, Consolidated and Separate Financial Statements (effective
for annual periods beginning on or after 1 January 2009) The amendments remove
the definition of "cost method" currently set out in IAS 27, and instead require
all dividends from a subsidiary, jointly controlled entity or associate to be
recognised as income in the separate financial statements of the investor when
the right to receive the dividend is established.
In addition, the amendments provide guidance when the receipt of dividend income
is deemed to be an indicator of impairment. Amendments to IAS 27 are not
relevant as these are the consolidated financial statements of the Group.
IAS 40, Investment Property (effective for annual periods beginning on or after
1 January 2009) IAS 40 is amended to include property under construction or
development for future use as investment property in its definition of
"investment property". This results in such property being within the scope of
IAS 40; previously it was within the scope of IAS 16. The Company expects to
adopt the amendments to IAS 40 prospectively from 1 January 2009. This will
result in the remeasurement of investment property under construction at 1
January 2009 to fair value, with the change in value at that date recorded
through the income statement.
On 27 November 2008 the IFRIC issued its guidance IFRIC 17 Distributions of
Non-cash Assets to Owners. IFRIC 17 clarifies that:
* a dividend payable should be recognised when the dividend is appropriately
authorised and is no longer at the discretion of the entity.
* an entity should measure the dividend payable at the fair value of the net
assets to be distributed.
* an entity should recognise the difference between the dividend paid and the
carrying amount of the net assets distributed in profit or loss.
The Interpretation also requires an entity to provide additional disclosures if
the net assets being held for distribution to owners meet the definition of a
discontinued operation. An entity shall apply this Interpretation prospectively
for annual periods beginning on or after 1 July 2009. Retrospective application
is not permitted. Earlier application is permitted. If an entity applies this
Interpretation for a period beginning before 1 July 2009, it shall disclose that
fact and also apply IFRS 3 (as revised in 2008), IAS 27 (as amended in May 2008)
and IFRS 5 (as amended by this Interpretation). The Group is currently in the
process of evaluating the potential effect of this guidance.
The Group does not expect the following amendments to have any significant
impact on the consolidated financial statements:
IFRIC 13 - 'Customer Loyalty Programmes' , Amendment to IFRS 2 - Share-based
Payment - Vesting Conditions and Cancellations Amended IAS 27 - Consolidated and
Separate Financial Statements, Amendments to IAS 32 and IAS 1 Presentation of
Financial Statements - Puttable Financial Instruments and Obligations Arising on
Liquidation, IFRIC 16 Hedges of a Net Investment in a Foreign Operation
The International Accounting Standards Board made certain amendments to existing
standards as part of its first annual improvements project. The effective dates
for these amendments vary by standard and most will be applicable to the Group's
2009 consolidated financial statements. The Group does not expect these
amendments to have any significant impact on the consolidated financial
statements.
2.2Basis of consolidation
Financial statements of the companies within the ABLON Group are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) of Hungary,
Czech Republic, Poland and Romania. These local GAAPs differ in certain respects
from IFRSs. 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 IFRSs as adopted by the EU.
The preparation of financial statements in conformity with IFRSs 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 consolidated
financial statements, are disclosed in Note 4.1 (Critical accounting estimates
and judgments).
Subsidiaries 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 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 recognised 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. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of subsidiaries have been aligned with those of
the individual entities and the consolidated Group where necessary to ensure
consistency with the policies adopted by the Group.
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) 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 into the relevant functional currency are recognised 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.
(b) 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.
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 recognized 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, expressed in
its functional currency and translated into the presentation 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 at 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 uses professional appraisers for the investment properties. The group
until 31 December 2008 had a policy to revalue the investment properties twice a
year, at the end of June, and at the end of December. The policy is changing
from 2009, with revaluations once a year, at the end of December. Fair value is
determined by professional appraisers based on economic evaluations that are
also performed according to the income capitalization method. This method
consists of estimating the value of the asset by discounting the expected flow
of revenues over the useful life of the asset. This calculation involves making
assumptions, among other things, as to the capitalization rates, the continued
lease of the assets by the existing tenants, including during the option
periods, and the occupancy rates in the different assets. Fair value is
sometimes measured with reference to recent real estate transactions with
similar characteristics and location to the estimated asset.
The Group applies the fair value model for all building leased out under
operating leases.
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 period in which
they are incurred.
Changes in fair values are recognised in the income statement.
If an investment property becomes owner-occupied, it is reclassified to
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 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
recognized 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.
Borrowing costs that are directly attributable to the acquisition, construction
or production of a qualifying asset are capitalized as a part of the cost of the
asset. Borrowing costs include interest expenses and foreign exchange
differences to the extent that such differences supplement the lower interest
rates on foreign exchange borrowings. Capitalisation of borrowing costs
commences when the activities to prepare the asset are in progress and
expenditures and borrowing costs are being incurred. Capitalisation of borrowing
costs may continue until the assets are substantially ready for their intended
use. If the resulting carrying amount of the asset exceeds its recoverable
amount, an impairment loss is recognized. The capitalization rate is arrived at
by reference to the actual rate payable on borrowings for development purposes
or, with regard to that part of the development cost financed out of general
funds, to the average rate.
2.6 Property, plant and equipment
Items of property, plant and equipment are stated at historical cost less
accumulated depreciation and impairment losses. Cost includes expenditure that
is directly attributable to the acquisition or construction of the items of
property, plant and equipment.
Subsequent costs are included in the asset's carrying amount or recognized 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. Repairs and maintenance are charged to the income
statement during the period in which they are incurred.
Depreciation, based on a component approach, is calculated using the
straight-line method to allocate the cost over an asset's estimated useful life,
as follows:
- Land Nil
- Buildings 50 years
- Vehicles 5 years
- Fixtures and fittings 7 years
- IT equipment 3 years
- Other equipment 7 years
The assets' residual values are considered as nil, however they are reviewed,
along with assets' estimated useful lives and depreciation methods at least at
each financial year-end and adjusted if appropriate.
Gains and losses on disposals are determined by comparing proceeds with the
carrying amount. These are included in the income statement as other income or
expenses.
2.7 Intangible assets
i) Goodwill
All business combinations are accounted for by applying the purchase method.
Goodwill arises on the acquisition of subsidiaries, associates and joint
ventures and represents the excess of the cost of acquisition over the Group's
interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities of the acquiree .
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is no longer amortised but is tested
annually for impairment (see accounting policy 2.9.)
Any excess of the Group's interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities of the acquiree over the cost of
acquisition is recognised immediately in profit or loss.
ii) Other intangible asset
Other intangible assets acquired by the Group, which have finite useful lives,
are measured at cost less accumulated amortisation and accumulated impairment
losses.
iii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other
expenditure, including expenditure on internally generated goodwill and brands,
is recognised in profit or loss as incurred.
iv) Amortisation
Amortisation is charged to the income statement on a straight-line basis over
the estimated useful lives of intangible assets unless such lives are
indefinite. Goodwill and intangible assets with an indefinite useful life are
systematically tested for impairment at each balance sheet date. Other
intangible assets are amortised from the date they are available for use. The
estimated useful lives are as follows:
- Patents and trademarks 10-20 years
- Software 3 years
2.8 Leases
(a) A group company is the lessee
i) Operating lease
Leases in which substantially all 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.
ii) Finance lease
Leases of assets where the Group has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalised at
the commencement of the lease period at the lower of the fair value of the
leased property and the present value of the minimum lease payments. Each lease
payment is apportioned between the reduction of the outstanding liability and
the finance expenses. The corresponding rental obligations, net of finance
charges, are included in current and non-current borrowings. The interest
element of the minimum lease payments is charged to the income statement over
the lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The investment properties
acquired under finance leases are carried at their fair value.
(b) A group company is the lessor
i) Operating lease
Properties leased out under operating leases are included in investment property
in the balance sheet (Note 6). The Group's lease contracts are considered to be
operating leases as the Group entities have not transferred substantially all
the risks and rewards of the properties to the lessee. This may be indicated if
* the lease does not transfer ownership of the asset to the lessee by the end of
the lease term,
* the lessee does not have the option to purchase the asset,
* the lease term is not for the major part of the economic life of the asset,
* at the inception of the lease the present value of the minimum lease payments
amounts are substantially less then all of the fair value of the leased asset;
and
* the leased assets are not of such a specialised nature that only the lessee can
use them without major modifications.
Substantially all operating lease contracts are denominated in Euro. The
embedded foreign exchange derivatives in these host lease contracts have not
been separately accounted for, as Euro is commonly used in all contracts to
purchase or sell non-financial items in the economic environments in which the
transactions take place.
ii) Finance lease
When assets are leased out under a finance lease, the present value of the lease
payments is recognised as a receivable. The difference between the gross
receivable and the present value of the receivable is recognised as unearned
finance income.
Finance income is recognised over the term of the lease based on a pattern
reflecting a constant periodic rate of return on the lessor's net investment in
the finance lease
The Group does not have any finance lease.
2.9 Impairment
Non-financial assets
The carrying amounts of the Group's assets, other than inventories (note 9),
investment property (note 5) and deferred tax assets (note 16) are reviewed at
each balance sheet date to determine whether there is any indication of
impairment. If any such indication exists, the asset's recoverable amount is
estimated.
For goodwill, intangible assets that have an indefinite useful life and
intangible assets that are not yet available for use, the recoverable amount is
estimated at each balance sheet date.
Assets that are subject to depreciation or amortisation are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in the income statement.
Impairment losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to the
cash-generating unit (Group of units) and then, to reduce the carrying amount of
the other assets in the unit (Group of units) on a pro rata basis.
Financial assets
A financial asset is assessed at each reporting date to determine whether there
is any objective evidence that it is impaired. A financial asset is considered
to be impaired if objective evidence indicates that one or more events have had
a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is
calculated as the difference between its carrying amount, and the present value
of the estimated future cash flows discounted at the original effective interest
rate. An impairment loss in respect of an available-for-sale financial asset is
calculated by reference to its fair value.
Individually significant financial assets that are not paid in time are tested
for impairment on an individual basis. The remaining financial assets are
assessed collectively in groups that share similar credit risk characteristics.
i) Calculation of recoverable amount
Non-financial assets
The recoverable amount of non-financial assets is the greater of their fair
value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specified to the asset. For an asset that does not
generate largely independent cash inflows, the recoverable amount is determined
for the cash-generating unit to which the asset belongs.
Financial assets
The recoverable amount of the Group's receivables carried at amortised cost is
calculated as the present value of estimated future cash flows, discounted at
the original effective interest rate (i.e. the effective interest rate computed
at initial recognition of these financial assets). Receivables with a short
duration are not discounted.
ii) Reversal of impairment
Non-financial assets
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, an impairment loss is reversed when there is an
indication that the impairment loss may no longer exist and there has been a
change in the estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset's carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised.
Financial assets
An impairment loss in respect of a receivable carried at amortised cost is
reversed if the reversal can be related objectively to an event occurring after
the impairment loss was recognised. Such reversal is recognised in the income
statement.
2.10 Inventories
Properties that are being developed for future sale are classified as
inventories at their deemed cost. Inventories are measured at the lower of cost
and net realisable value. As inventories are not ordinarily interchangeable the
cost of inventories are assigned by using specific identification of their
individual cost. Net realisable value is the estimated selling price in the
ordinary course of business less cost to complete redevelopment and selling
expenses.
Inventories which are expected to be realised beyond the normal operating cycle
of the residential property construction business are shown as long term
inventories.
2.11 Trade receivables
Trade receivables are recognised initially at fair value and measured
subsequently at amortised cost, less provision for impairment. A provision for
impairment of trade receivables is established when there is objective evidence
that one or more events have had a negative effect on the estimated future cash
flows of that asset.
2.12 Securities
Securities held by the Group are classified as financial assets at fair value
through profit or loss. Upon initial recognition attributable transaction costs
are recognised in profit or loss when incurred. Financial instruments at fair
value through profit or loss are measured at fair value, and changes therein are
recognised in profit or loss.
2.13 Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with
banks.
2.14 Shareholders' equity
Share capital
Ordinary shares are classified as equity.
The Group has a total of 108,864,099 ordinary shares in issue. The shares of the
Group are measured at their acquisition costs.
Share capital only includes paid up shares.
Foreign exchange reserve
The Foreign exchange reserve comprises all foreign exchange differences arising
from the translation of the financial statements of Group companies into euro
which is the presentation currency of these consolidated financial statements.
Share based employee benefits
The fair value of employee stock options is measured using the Black-Scholes
formula. Measurement inputs include share price on measurement date, exercise
price of the instrument, expected volatility (based on weighted average historic
volatility adjusted for changes expected due to publicly available information),
weighted average expected life of the instruments (based on historical
experience and general option holder behaviour), expected dividends, and the
risk-free interest rate (based on government bonds). Service and non-market
performance conditions attached to the transactions are not taken into account
in determining fair value.
The grant date fair value of options granted to employees is recognised as an
employee expense, with a corresponding increase in equity, over the period that
the employees become unconditionally entitled to the options. The amount
recognised as an expense is adjusted to reflect the actual number of share
options that vest.
Treasury/own shares
When share capital is repurchased, the amount of the consideration paid, which
includes directly attributable costs, is net of any tax effects, and is
recognised as a deduction from equity. Repurchased shares are classified as
treasury shares and are presented as a deduction from total equity. When
treasury shares are sold or reissued subsequently, the amount received is
recognised as an increase in equity, and the resulting surplus or deficit on the
transaction is transferred to / from retained earnings.
Minority interest
Minority interest arises when the Controlling shareholders have less than 100%
control over entities in the Group. Minority interest is attributable to the
minority shareholders and it is classified as equity, separately from equity
attributable to equity holders of the parent.
2.15 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised cost; any difference
between the proceeds (net of transaction costs) and the redemption value is
recognised in the income statement over the period of the borrowings using the
effective interest method.
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.
2.16 Income tax
Income tax expenses comprise current and deferred tax. Income tax expenses are
recognised in profit or loss except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for the following temporary differences: the
initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit, and
differences relating to investments in subsidiaries and jointly controlled
entities to the extent that it is probable that they will not reverse in the
foreseeable future. In addition, deferred tax is not recognised for taxable
temporary differences arising on the initial recognition of goodwill. Deferred
tax is measured at the tax rates that are expected to be applied to the
temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date. Deferred tax assets and
liabilities are offset if there is a legally enforceable right to offset current
tax liabilities and assets, and they relate to income taxes levied by the same
tax authority on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis or their tax
assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future
taxable profits will be available against which the temporary difference can be
utilised. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
Additional income taxes that arise from the distribution of dividends are
recognised at the same time as the liability to pay the related dividend is
recognised.
2.17 Provisions
Provisions for legal claims are recognised when all of the following criteria
are met: 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 can be reliably estimated.
A provision for onerous contracts is recognized when the expected benefits to be
derived by the Group from a contract are lower than the unavoidable cost of
meeting its obligations under the contract.
2.18 Trade and other payables
Trade payables are not interest bearing and are recognised initially at fair
value, subsequent to which they are stated at amortized cost.
2.19 Revenue recognition
Revenue includes rental income, service charges and management charges from
properties, and income from residential property sales.
Rental income from operating leases is recognised on a straight-line basis over
the lease term. When the Group provides incentives to its customers (such as
rental free periods), the cost of such incentives is recognised over the lease
term, on a straight-line basis, as a reduction of rental income.
Revenue from the sale of residential properties is recognised in the income
statement when the significant risks and rewards of ownership have been
transferred to the buyer. The transfer of risks and rewards usually occurs when
the sales contract are signed by the seller and the buyer.
Service and management charges are recognised in the accounting period in which
the services are rendered. When the Group is acting as an agent, the commission
retained by the Group rather than gross income is recorded as revenue.
2.20 Net finance costs
Net finance costs comprise interest payable on borrowings calculated using the
effective interest rate method net of interest capitalized, dividends received,
foreign exchange gains and losses.
2.21 Dividend distribution
Dividend distribution to the Group's shareholders is recognised as a liability
against retained earnings in the Group's financial statements in the period in
which the dividends are approved.
2.22 Employee benefits, other than share based payments
The Group does not operate a defined contribution or a defined benefit
retirement scheme. Defined contributions to pension funds are deducted from the
gross salaries as they fall due.
2.23 Financial instruments recognition and derecognition
Any contract that gives rise to a financial asset of one entity, and a financial
liability or equity instrument of another entity is classified as a financial
instrument. All financial instruments are initially recognised in the Group's
balance sheet when the Group becomes a party to the contractual agreement at
cost (at trade date). Initial cost represents given or received consideration
and all transaction costs. 'Regular way' purchases or sales of financial assets
are recognised using trade date accounting.
Financial assets are derecognised when the Group loses control of the
contractual rights that comprise the financial assets (at trade date). Financial
liabilities are derecognised from the Group's balance sheet when they are
extinguished, repaid or cancelled.
2.24 Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its
ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period. Diluted EPS is
determined by adjusting the profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding for the effects
of all dilutive potential ordinary shares, which comprise share options granted
to employees.
3. Critical accounting estimates and judgements
3.1 Critical accounting estimates and assumptions
Estimates and judgments are continually evaluated and are based on historical
experience as adjusted for current market conditions and other factors.
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results.
(a) Estimate of fair value of investment 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
including:
* current prices in an active market for properties of 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.
b) Principal assumptions for management's estimation of fair value
If information on current or recent prices for investment properties is not
available, the fair values of investment properties are determined using
discounted cash flow valuation techniques. The Group uses assumptions that are
mainly based on market conditions existing at each balance sheet date.
The principle assumptions underlying management's estimation of fair value are
those related to: the receipt of contractual rentals; expected future market
rentals; void periods; maintenance requirements; and appropriate discount rates.
These valuations are regularly compared to actual market yield data and actual
transactions by the Group and those reported by the market.
The expected future market rentals are determined on the basis of current market
rentals for similar properties in the same location and condition.
3.2 Critical judgements in applying the Group's accounting policies
Distinction between investment properties and owner-occupied properties
The Group determines whether a property qualifies as investment property. In
making its judgement, the Group considers whether the property generates cash
flows largely independently of the other assets held by an entity.
Owner-occupied properties generate cash flows that are attributable not only to
property but also to other assets used in the production or supply process.
Some properties comprise a portion that is held to earn rentals or for capital
appreciation and another portion that is held for use in the production or
supply of goods or services or for administrative purposes. If these portions
can be sold separately (or leased out separately under a finance lease), the
Group accounts for the portions separately. If the portions cannot be sold
separately, the property is accounted for as investment property only if an
insignificant portion is held for use in the production or supply of goods or
services or for administrative purposes. Judgment is applied in determining
whether ancillary services are so significant that a property does not qualify
as investment property. The Group considers each property separately in making
its determination.
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| 4. | 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 31 December 2008 | Note | Commercial | Residential | Unallocated | Group |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Revenue | 18 | 16 582 | 9 | 0 | 16 591 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | | | | | | |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Segment result | | 16 745 | (59) | 0 | 16 686 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Impairment (losses)/ reversal | | (3 699) | (3 447) | 0 | (7 146) |
| | of losses | | | | | |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Operating profit/ (loss) | | (21 361) | (6 960) | (4 400) | (32 721) |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Finance (costs)/income-net | | | | (24 130) | (24 130) |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Profit before income tax | | (21 361) | (6 960) | (28 530) | (56 851) |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Tax (expense)/income | 21 | | | 7 071 | 7 071 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Period ended 31 December 2008 | Note | Commercial | Residential | Unallocated | Group |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Segment assets | | 422 468 | 73 102 | 33 515 | 529 085 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Deferred taxes | 16 | | | 1 024 | 1 024 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Total assets | | 422 468 | 73 102 | 34 539 | 530 109 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | | | | | | |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Segment liabilities | | 216 081 | 34 879 | 296 | 251 256 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Deferred taxes | 16 | | | 40 115 | 40 115 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Total liabilities | | 216 081 | 34 879 | 40 411 | 291 371 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | | | | | | |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Capital expenditure | 5,6,9 | 53 091 | 17 233 | | 70 324 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Depreciation | 6 | 256 | | | 256 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | | | | | | |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Period ended 31 December 2007 | Note | Commercial | Residential | Unallocated | Group |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Revenue | 18 | 11 230 | 958 | 0 | 12 188 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | | | | | | |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Segment result | | 11 737 | 106 | 0 | 11 843 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Operating profit/ (loss) | | 60 776 | (110) | (3 658) | 57 008 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Finance (costs)/income-net | | | | (4 643) | (4 643) |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Profit before income tax | | 60 776 | (110) | (8 301) | 52 365 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Tax (expense)/income | 21 | | | (11 590) | (11 590) |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Period ended 31 December 2007 | Note | Commercial | Residential | Unallocated | Group |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Segment assets | | 418 917 | 52 307 | 79 958 | 551 181 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Deferred taxes | 16 | | | 132 | 132 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Total assets | | 418 917 | 52 307 | 80 090 | 551 313 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | | | | | | |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Segment liabilities | | 156 955 | 52 307 | 216 | 209 477 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Deferred taxes | 16 | | | 45 745 | 45 745 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Total liabilities | | 156 955 | 52 307 | 45 961 | 255 222 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | | | | | | |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
| | Capital expenditure | 5,6,9 | 46 889 | 36 634 | | 83 523 |
+------+---------------------------------+--------+------------+-------------+-------------+-----------+
Segment assets consist primarily of investment property, property plant and
equipment and receivables. Unallocated assets comprise deferred tax assets.
Segment liabilities comprise operating liabilities and finances. Unallocated
liabilities mainly comprise deferred taxation liabilities. Capital expenditure
comprises additions to investment property (Note 5) and property, plant and
equipment (Note 6).
There are no inter-segment transactions.
Secondary reporting format ? geographical segments
The Group's single geographical segment is Central and Eastern Europe.
5. Investment property and investment property under development
Movements of the investment property balances were as follows:
+--------------------------------+-------------+-------------+
| Investment property | Period ended 31 December |
+--------------------------------+---------------------------+
| | 2008 | 2007 |
+--------------------------------+-------------+-------------+
| | | |
+--------------------------------+-------------+-------------+
| At beginning of period | 369 952 | 269 692 |
+--------------------------------+-------------+-------------+
| Acquisitions of property | 13 815 | 7 030 |
+--------------------------------+-------------+-------------+
| Acquisition of subsidiary | 14 180 | 0 |
+--------------------------------+-------------+-------------+
| Reclassification from/(to) | (1 572) | 0 |
| property plant and equipment | | |
+--------------------------------+-------------+-------------+
| Reclassification from | 13 610 | 37 422 |
| investment property under | | |
| development | | |
+--------------------------------+-------------+-------------+
| Capitalized expenses | 5 891 | 1 919 |
+--------------------------------+-------------+-------------+
| Effect of movements in foreign | (16 080) | 532 |
| exchange | | |
+--------------------------------+-------------+-------------+
| Net gain from fair value | (32 579) | 53 358 |
| adjustments on investment | | |
| property | | |
+--------------------------------+-------------+-------------+
| At end of period | 367 217 | 369 952 |
+--------------------------------+-------------+-------------+
As Ablon Budapest offices were moved from BC 99 to Gateway BC and Ablon Prague
from Palmovka BC to Meteor BC there were corresponding reclassification between
investment property and property plant and equipment.
Investment properties were based on the values of independent valuation reports
prepared by GVA Robertson for properties in Hungary and Poland and by King
Sturge for properties in Czech Republic and Romania as of 31 December 2008, in
order to establish fair values for the properties presented in these financial
statements.
The 93% of the book value of investment properties were based on independent
valuation reports. The remaining 7% of the Group investment properties valued at
a more conservative value, based on the management judgment.
The appraisals used exit yield for the fair value calculation of the completed
projects in the range of 7%-9% (2007: 6-7,75%), depending on their judgement.
For the development sites the range of 8-10% was used. (2007: 7%-8,5%).
Under the current, highly volatile market environment the range of accuracy of
the stated figures is +/- 10%, which is higher than the 5% accuracy rate used
for the comparative period.
At 31 December 2008 and 2007 all investment property are subject to registered
collateral to secure bank loans up to MEUR 309 at 31 December 2008 (2007: MEUR
259).
Movements of the investment property under development were as follows:
+--------------------------------+-------------+-------------+
| Investment property under | Period ended 31 December |
| development | |
+--------------------------------+---------------------------+
| | 2008 | 2007 |
+--------------------------------+-------------+-------------+
| | | |
+--------------------------------+-------------+-------------+
| As at beginning of period | 24 551 | 22 903 |
+--------------------------------+-------------+-------------+
| Acquisitions | 25 532 | 39 070 |
+--------------------------------+-------------+-------------+
| Effect of movements in foreign | (982) | 0 |
| exchange | | |
+--------------------------------+-------------+-------------+
| Reclassification to investment | (13 610) | (37 422) |
| property | | |
+--------------------------------+-------------+-------------+
| As at closing of period | 35 491 | 24 551 |
+--------------------------------+-------------+-------------+
M3 Business Center building "B" and Airport City Building "C" were completed
during 2008 and was transferred to investment property from investment property
under development and subsequently valued at fair value.
The closing amounts include the following projects:
+--------------------------------+-------------+-------------+------------+------------+
| Closing value includes the | | | | |
| following projects: | | | | |
+--------------------------------+-------------+-------------+------------+------------+
| Project name | Place | Company | 2008 | 2007 |
| | | name | | |
+--------------------------------+-------------+-------------+------------+------------+
| Europeum | Budapest | Duna Office | 18 909 | 11 742 |
| | | Center | | |
+--------------------------------+-------------+-------------+------------+------------+
| Airport City Building "D" | Budapest | Airport | 4 229 | 0 |
| | | City | | |
+--------------------------------+-------------+-------------+------------+------------+
| Airport City Building "C" | Budapest | Airport | 0 | 1 870 |
| | | City | | |
+--------------------------------+-------------+-------------+------------+------------+
| BC99 - 3rd phase | Budapest | ICL-1 | 3 276 | 1 247 |
+--------------------------------+-------------+-------------+------------+------------+
| Kolben Park | Prague | Polygon | 2 812 | 2 449 |
+--------------------------------+-------------+-------------+------------+------------+
| Hold u. | Budapest, | Insite | 2 696 | 2 794 |
| | Centre | | | |
+--------------------------------+-------------+-------------+------------+------------+
| M3 | Budapest | Global | 0 | 1 771 |
| | | Estate | | |
+--------------------------------+-------------+-------------+------------+------------+
| Others | | | 3 569 | 2 679 |
+--------------------------------+-------------+-------------+------------+------------+
| Total | | | 35 491 | 24 551 |
+--------------------------------+-------------+-------------+------------+------------+
+--+----------------------------------+------+-----------+-----------+--------+
| 6.| Property, plant and equipment | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | |Note | Land & | Plant | Total |
| | | | buildings | and | |
| | | | | equipment | |
+--+----------------------------------+------+-----------+-----------+--------+
| | Cost | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | Balance at 1 January 2007 | | 658 | 1 571 | 2 229 |
+--+----------------------------------+------+-----------+-----------+--------+
| | Acquisitions | | 538 | 251 | 789 |
+--+----------------------------------+------+-----------+-----------+--------+
| | Disposal | | 0 | (947) | (947) |
+--+----------------------------------+------+-----------+-----------+--------+
| | Effect of movements in foreign | | 15 | (5) | 10 |
| | exchange | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | Balance at 31 December 2007 | | 1 211 | 870 | 2 081 |
+--+----------------------------------+------+-----------+-----------+--------+
| | | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | Balance at 1 January 2008 | | 1 211 | 870 | 2 081 |
+--+----------------------------------+------+-----------+-----------+--------+
| | Acquisitions* | | 7 264 | 589 | 7 853 |
+--+----------------------------------+------+-----------+-----------+--------+
| | Disposal | | 0 | (132) | (132) |
+--+----------------------------------+------+-----------+-----------+--------+
| | Reclassified (to)/from | | 1 504 | 0 | 1 504 |
| | investment property | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | Effect of movements in foreign | | (67) | (163) | (230) |
| | exchange | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | Balance at 31 December 2008 | | 9 912 | 1 164 | 11 076 |
+--+----------------------------------+------+-----------+-----------+--------+
| | | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | Depreciation | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | Balance at 1 January 2007 | | 122 | 654 | 776 |
+--+----------------------------------+------+-----------+-----------+--------+
| | Charge for the year | | 39 | 116 | 155 |
+--+----------------------------------+------+-----------+-----------+--------+
| | Disposal | | 50 | (200) | (150) |
+--+----------------------------------+------+-----------+-----------+--------+
| | Effect of movements in foreign | | 5 | (4) | 1 |
| | exchange | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | Balance at 31 December 2007 | | 216 | 566 | 782 |
+--+----------------------------------+------+-----------+-----------+--------+
| | | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | Balance at 1 January 2008 | | 216 | 566 | 782 |
+--+----------------------------------+------+-----------+-----------+--------+
| | Charge for the year | | 87 | 169 | 256 |
+--+----------------------------------+------+-----------+-----------+--------+
| | Disposal | | 0 | (132) | (132) |
+--+----------------------------------+------+-----------+-----------+--------+
| | Reclassified (to)/from | | (68) | 0 | (68) |
| | investment property | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | Effect of movements in foreign | | (9) | (49) | (58) |
| | exchange | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | Balance at 31 December 2008 | | 226 | 554 | 780 |
+--+----------------------------------+------+-----------+-----------+--------+
| | | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | Carrying amount | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
| | At 31 December 2007 | | 995 | 304 | 1 299 |
+--+----------------------------------+------+-----------+-----------+--------+
| | At 31 December 2008 | | 9 685 | 610 | 10 295 |
+--+----------------------------------+------+-----------+-----------+--------+
| | | | | | |
+--+----------------------------------+------+-----------+-----------+--------+
*Acquisition include the purchase and subsequent development of Hotel Rosslyn in
Budapest (TEUR 7 254), which is a hotel under development. As the construction
of the property is still in progress no depreciation has been recorded on the
project so far.
There are no separate collaterals on assets of property plant and equipment.
Collaterals refer to projects of which only a fraction is owner occupied
property, which is classified as property plant and equipment. These collaterals
are shown as part of the collaterals on investment property.
+--+----------------------------------------------------+-------------+------------+
| 7.| Long term loans |Period ended 31 December |
+--+----------------------------------------------------+--------------------------+
| | | 2008 | 2007 |
+--+----------------------------------------------------+-------------+------------+
| | | | |
+--+----------------------------------------------------+-------------+------------+
| | Long term loans | 8 375 | 8 807 |
+--+----------------------------------------------------+-------------+------------+
| | | | |
+--+----------------------------------------------------+-------------+------------+
| | The Group has a long term loan given to third party, which is secured by |
| | mortgage on land |
+--+----------------------------------------------------+-------------+------------+
+----+--------------------------------+-------------------+-------------+------------+
| | | | |
| | | | |
| | | | |
| 8. Other current assets | | | |
+-------------------------------------+-------------------+-------------+------------+
| | | | | |
+----+--------------------------------+-------------------+-------------+------------+
| | | | Period ended 31 December |
+----+--------------------------------+-------------------+--------------------------+
| | | | 2008 | 2007 |
+----+--------------------------------+-------------------+-------------+------------+
| | Vat reclaimable | | 1 841 | 4 084 |
+----+--------------------------------+-------------------+-------------+------------+
| | Prepaid expenses | | 1 015 | 921 |
+----+--------------------------------+-------------------+-------------+------------+
| | Escrow account of land | | 750 | 750 |
| | purchase | | | |
+----+--------------------------------+-------------------+-------------+------------+
| | Income tax advance | | 520 | 229 |
+----+--------------------------------+-------------------+-------------+------------+
| | Deposits | | 151 | 1 011 |
+----+--------------------------------+-------------------+-------------+------------+
| | Other current assets | | 135 | 356 |
+----+--------------------------------+-------------------+-------------+------------+
| | Services not invoiced | | 51 | 66 |
+----+--------------------------------+-------------------+-------------+------------+
| | Loans receivable | | 41 | 151 |
+----+--------------------------------+-------------------+-------------+------------+
| | Receivable from employees | | 12 | 32 |
+----+--------------------------------+-------------------+-------------+------------+
| | Total other current assets | | 4 516 | 7 601 |
+----+--------------------------------+-------------------+-------------+------------+
+--+----------------------------+-----------+-------------+-------------+------------+
| 9.| Inventories | | | |
+--+----------------------------+-----------+-------------+--------------------------+
| | | | | Period ended 31 December |
+--+----------------------------+-----------+-------------+--------------------------+
| | Current inventory | | | 2008 | 2007 |
+--+----------------------------+-----------+-------------+-------------+------------+
| | | | | | |
+--+----------------------------+-----------+-------------+-------------+------------+
| | Opening Balance | | | 57 991 | 22 172 |
+--+----------------------------+-----------+-------------+-------------+------------+
| | Additions | | | 17 233 | 36 634 |
+--+----------------------------+-----------+-------------+-------------+------------+
| | Acquisition of subsidiary | | | 2 501 | 0 |
+--+----------------------------+-----------+-------------+-------------+------------+
| | Reclassification to long | | | (59 950) | 0 |
| | term inventory | | | | |
+--+----------------------------+-----------+-------------+-------------+------------+
| | Sales | | | (15) | (844) |
+--+----------------------------+-----------+-------------+-------------+------------+
| | Impairment of inventory | | | (3 447) | 0 |
+--+----------------------------+-----------+-------------+-------------+------------+
| | Exchange differences | | | (4 488) | 29 |
+--+----------------------------+-----------+-------------+-------------+------------+
| | Closing Balance | | | 9 825 | 57 991 |
+--+----------------------------+-----------+-------------+-------------+------------+
| | | | | | |
+--+----------------------------+-----------+-------------+-------------+------------+
| | Long term inventory | | | Period ended 31 December |
+--+----------------------------+-----------+-------------+--------------------------+
| | | | | 2008 | 2007 |
+--+----------------------------+-----------+-------------+-------------+------------+
| | Opening Balance | | | 0 | 0 |
+--+----------------------------+-----------+-------------+-------------+------------+
| | Reclassification from | | | 59 950 | 0 |
| | inventory | | | | |
+--+----------------------------+-----------+-------------+-------------+------------+
| | Closing Balance | | | 59 950 | 0 |
+--+----------------------------+-----------+-------------+-------------+------------+
| | | | | | |
+--+----------------------------+-----------+-------------+-------------+------------+
| | TOTAL inventory closing | | | 69 775 | 57 991 |
| | balance | | | | |
+--+----------------------------+-----------+-------------+-------------+------------+
Inventories comprise plots and developments for residential purposes. The reason
for reclassification to long term inventory is detailed in Note 28, term is
detailed in note 2.10.
Long term inventory includes plots in Romania, Hungary, Poland and Czech, where
the company has plans to develop residential projects. Due to the current
financial and economical market conditions the development is postponed for
unknown period.
At 31 December 2008 and 2007 some inventory property were subject to registered
collateral to secure bank loans up to Euro 21 million at 31 December 2008 (2007:
MEUR 20).
+-------------------------+--------------+-------------+----------+----------+
| Breakdown of inventory | | | Period ended 31 |
| value | | | December |
+-------------------------+--------------+-------------+---------------------+
| | | | 2008 | 2007 |
+-------------------------+--------------+-------------+----------+----------+
| | | | | |
+-------------------------+--------------+-------------+----------+----------+
| Project name | Company name | Termination | | |
+-------------------------+--------------+-------------+----------+----------+
| Bucharest - Timisoara | MH | Long | 18 252 | 16 899 |
| Av. | Development | term | | |
+-------------------------+--------------+-------------+----------+----------+
| Bucharest - Sunset | ESD | Long | 13 336 | 13 315 |
| residences | | term | | |
+-------------------------+--------------+-------------+----------+----------+
| Bucharest - Pipera | ES | Long | 8 200 | 9 391 |
| | Properties | term | | |
+-------------------------+--------------+-------------+----------+----------+
| Prague - Cakovice | HD | Current | 7 620 | 1 646 |
| | Investment | | | |
+-------------------------+--------------+-------------+----------+----------+
| Bucharest - Mogosoaia | MH | Long | 6 698 | 6 286 |
| | Properties | term | | |
+-------------------------+--------------+-------------+----------+----------+
| Prague - Ritka | MQM Czech | Long | 5 800 | 7 695 |
| | | term | | |
+-------------------------+--------------+-------------+----------+----------+
| Gdansk | SP | Long | 4 700 | 0 |
| | Development | term | | |
+-------------------------+--------------+-------------+----------+----------+
| Budapest - Zöldváros | Global | Long | 2 964 | 2 759 |
| | Investment | term | | |
| | -ICL | | | |
+-------------------------+--------------+-------------+----------+----------+
| Warsaw | Mor Eden | Current | 2 205 | 0 |
+-------------------------+--------------+-------------+----------+----------+
| Total | | | 69 775 | 57 991 |
+-------------------------+--------------+-------------+----------+----------+
+----+----------------------------------------+-----+----------+-----------+
| | | | |
| | | | |
| | | | |
| 10. Trade receivables | | | |
+---------------------------------------------+-----+----------+-----------+
| | | | Period ended 31 |
| | | | December |
+----+----------------------------------------+-----+----------------------+
| | | | 2008 | 2007 |
+----+----------------------------------------+-----+----------+-----------+
| | Trade receivables | | 1 389 | 2 683 |
+----+----------------------------------------+-----+----------+-----------+
| | Less: provision for impairment of | | (482) | (633) |
| | receivables | | | |
+----+----------------------------------------+-----+----------+-----------+
| | Trade receivables - net | | 907 | 2 050 |
+----+----------------------------------------+-----+----------+-----------+
The Group has TEUR 540 trade receivables aged over a year. The provision set
up on these receivables is TEUR 482. (In 2007 TEUR 782 was over a year with
TEUR 428 provision set up for it).
+----+----------------------------------------+-----+-----------+-----------+
| | | |
| | | |
| 11. Securities | | Period ended 31 |
| | | December |
+---------------------------------------------+-----+-----------------------+
| | | | 2008 | 2007 |
+----+----------------------------------------+-----+-----------+-----------+
| | | | | |
+----+----------------------------------------+-----+-----------+-----------+
| | Opening Balance | | 51 144 | 0 |
+----+----------------------------------------+-----+-----------+-----------+
| | Purchase | | 0 | 95 000 |
+----+----------------------------------------+-----+-----------+-----------+
| | Sale | | (47 421) | (45 000) |
+----+----------------------------------------+-----+-----------+-----------+
| | Realised gain/(loss) on sale | | (606) | 2 580 |
+----+----------------------------------------+-----+-----------+-----------+
| | Unrealised gain/(loss) | | (607) | (1 436) |
+----+----------------------------------------+-----+-----------+-----------+
| | Closing Balance | | 2 510 | 51 144 |
+----+----------------------------------------+-----+-----------+-----------+
The Group kept its excess liquidity in securities consisting prime corporate
bonds during the period. It has been revalued according to IAS 39 fair value
valuation requirement at the year end through the income statement. The cost of
the securities held at the balance sheet date was TEUR 3 125 while the market
price was TEUR 2 510, which was the base of the fair valuation (in 2007 the cost
was TEUR 52 580, while the fair value was TEUR 51 144)
+----+----------------------------------------+-----+----------+-----------+
| | | |
| | | Period ended 31 |
| 12. Cash and cash equivalents | | December |
+---------------------------------------------+-----+----------------------+
| | | | 2008 | 2007 |
+----+----------------------------------------+-----+----------+-----------+
| | Bank balances | | 29 981 | 27 723 |
+----+----------------------------------------+-----+----------+-----------+
| | Petty cash | | 18 | 63 |
+----+----------------------------------------+-----+----------+-----------+
| | Cash and cash equivalents | | 29 999 | 27 786 |
+----+----------------------------------------+-----+----------+-----------+
+-----+-------------------------+-----------+------------------+-----------+-----------+
| 13. | Equity | | | | |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | | | | Period ended 31 |
| | | | | December |
+-----+-------------------------+-----------+------------------+-----------------------+
| | Earnings per share calculation | 2008 | 2007 |
+-----+--------------------------------------------------------+-----------+-----------+
| | | | | | |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | Net profit / (loss) | | | (49 779) | 40 775 |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | Number of shares (in | | | 108 864 | 105 150 |
| | thousands) | | | | |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | Diluted number of | | | 108 864 | 105 460 |
| | shares (in thousands) | | | | |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | | | | | |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | Basic earning per share | | | (0.4573) | 0.3878 |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | Diluted earning per | | | (0.4573) | 0.3866 |
| | share | | | | |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | | | | | |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | | | | Period ended 31 |
| | | | | December |
+-----+-------------------------+-----------+------------------+-----------------------+
| | | | | 2008 | 2007 |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | Dividend paid | | | 5 066 | 0 |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | Dividend per share (in | | | 0.0465 | 0.0000 |
| | EUR) | | | | |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | | | | | |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | Dilution occured as a result of share options issued in the previous period. |
+-----+--------------------------------------------------------------------------------+
| | | | | | |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | On the 25th of March 2008 the Company issued shares under the Long term |
| | incentive plan. The shares become vested on 25 March 2009, if the employee |
| | stays until that date with the company. As of 31 December 2008 there are 734 |
| | 420 shares under this plan. Until the shares become vested they are held by |
| | the Trust and are presented under 'Share based payment' in the equity section |
| | of the balance sheet. |
+-----+--------------------------------------------------------------------------------+
| | During the period average share price was below the exercise price of |
| | options, thus options do not have a diluting effect (in 2007 the dilution was |
| | based on the options) |
+-----+--------------------------------------------------------------------------------+
| | The dilution effect of free shares given is not shown as it would derease the |
| | loss per share figure. |
+-----+--------------------------------------------------------------------------------+
| | The par value per share | | | | |
| | is 0.01 euro. | | | | |
+-----+-------------------------+-----------+------------------+-----------+-----------+
| | The Group has purchased 20 541 of its own shares on 10 October 2008 at a |
| | price of 58 pence per share. The shares are held in treasury. |
+-----+-------------------------+-----------+------------------+-----------+-----------+
+----+----------------------------------+--------------------+-----------+-----------+
| 14. Trade and other payables | | Period ended 31 |
| | | December |
+---------------------------------------+--------------------+-----------------------+
| | | | 2008 | 2007 |
+----+----------------------------------+--------------------+-----------+-----------+
| | Trade payables | | 16 025 | 10 118 |
+----+----------------------------------+--------------------+-----------+-----------+
| | Accrued expenses | | 1 149 | 4 155 |
+----+----------------------------------+--------------------+-----------+-----------+
| | Social security and other taxes | | 552 | 160 |
+----+----------------------------------+--------------------+-----------+-----------+
| | Other payables | | 484 | 230 |
+----+----------------------------------+--------------------+-----------+-----------+
| | Total other current liabilities | | 18 210 | 14 663 |
+----+----------------------------------+--------------------+-----------+-----------+
Trade payables are interest free and have settlement dates within one year of
the balance sheet dates. Trade payables are denominated in HUF, CZK, EUR, RON,
PLN and USD.
+----------------+-----------------------------------+----------------+----------------+----------------+
| 15. Borrowings | |
+ +----------------+
| | |
+--------------------------------------------------------------------------------------+----------------+
| | | | Period ended 31 December |
+----------------+-----------------------------------+----------------+---------------------------------+
| | | | 2008 | 2007 |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | Non-current | | | |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | Bank borrowings | | 190 169 | 156 370 |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | Loans from minority shareholders | | 1 921 | 1 023 |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | | | 192 090 | 157 393 |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | Current | | | |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | Bank borrowings | | 39 281 | 35 084 |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | Related party loans from | | 18 | 16 |
| | shareholders | | | |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | | | 39 299 | 35 100 |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | | | | |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | Total borrowings | | 231 389 | 192 493 |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | | | | |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | The Group has MEUR 183 at floating rate of interest while MEUR 48 is at fixed rate. |
| | Loans at floating rate of interest reprice at least quarterly |
+----------------+--------------------------------------------------------------------------------------+
| | Covenants: MEUR 140 of the borrowings of the Group are subject to covenants which |
| | may include loan to value, interest service coverage ratio and debt service coverage |
| | ratio. |
+----------------+--------------------------------------------------------------------------------------+
| | | | Period ended 31 December |
+----------------+-----------------------------------+----------------+---------------------------------+
| | The maturity of non-current | | 2008 | 2007 |
| | borrowings is as follows: | | | |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | Between 1 and 5 years | | 94 579 | 82 597 |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | Over 5 years | | 97 511 | 74 796 |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | | | 192 090 | 157 393 |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | | | | |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | The effective interest rates at | | Period ended 31 December |
| | the balance sheet date were as | | |
| | follows: | | |
+----------------+-----------------------------------+----------------+---------------------------------+
| | | | 2008 | 2007 |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | Bank borrowings and related party | | | |
| | loans from shareholders | | | |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | EUR | | 5.0% | 6.4% |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | CHF | | 2.7% | 4.7% |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | CZK | | 6.6% | |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | The rates presented are average interest rates weighted by the amount of loan |
| | including all loans with fixed and variable interest rates |
+----------------+--------------------------------------------------------------------------------------+
| | | | | |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | The carrying amounts of the | | Period ended 31 December |
| | Group's borrowings are nominated | | |
| | in the following currencies (in | | |
| | thousands of the respective | | |
| | currency) : | | |
+----------------+ +----------------+---------------------------------+
| | | | 2008 | 2007 |
+----------------+-----------------------------------+-----------------------------------+----------------+----------------+
| | | | | |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | EUR | | 226 346 | 190 594 |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | CHF | | 3 073 | 3 157 |
+----------------+-----------------------------------+----------------+----------------+----------------+
| | CZK | | 79 811 | 0 |
+----------------+-----------------------------------+----------------+----------------+----------------+
+--------------------------------------------------------------------------+
| 16. Deferred tax |
+ +
| | |
+--------------------------------------------------------------------------+
+----+---------------------------------+----+-----------+-----------+
| Movement of net deferred tax assets/(liability) |
+-------------------------------------------------------------------+
| | | | Period ended 31 |
| | | | December |
+----+---------------------------------+----+-----------------------+
| | The gross movement on the | | 2008 | 2007 |
| | deferred income tax account is | | | |
| | as follows: | | | |
+----+---------------------------------+----+-----------+-----------+
| | Beginning of the year (Note | | (45 613) | (34 758) |
| | 2.1) | | | |
+----+---------------------------------+----+-----------+-----------+
| | Exchange differences | | (657) | 79 |
+----+---------------------------------+----+-----------+-----------+
| | Income statement charge (Note | | 7 179 | (10 934) |
| | 21) | | | |
+----+---------------------------------+----+-----------+-----------+
| | End of the period | | (39 091) | (45 613) |
+----+---------------------------------+----+-----------+-----------+
| | | | | |
+----+---------------------------------+----+-----------+-----------+
| | | | | |
+----+---------------------------------+----+-----------+-----------+
| Recognised tax assets and liabilities are attributable to the |
| following: |
+-------------------------------------------------------------------+
| | | | As at 31 December |
+----+---------------------------------+----+-----------------------+
| | | | 2008 | 2007 |
+----+---------------------------------+----+-----------+-----------+
| | Investment property | | (40 318) | (45 741) |
+----+---------------------------------+----+-----------+-----------+
| | Other items | | 483 | (424) |
+----+---------------------------------+----+-----------+-----------+
| | Deferred tax assets on tax | | 744 | 552 |
| | losses carried forward | | | |
+----+---------------------------------+----+-----------+-----------+
| | Net tax liabilities | | (39 091) | (45 613) |
+----+---------------------------------+----+-----------+-----------+
| |
+-------------------------------------------------------------------+
| Deferred tax assets and liabilities are split as follows: |
+-------------------------------------------------------------------+
| | | | As at 31 December |
+----+---------------------------------+----+-----------------------+
| | | | 2008 | 2007 |
+----+---------------------------------+----+-----------+-----------+
| | Tax assets | | 1 024 | 132 |
+----+---------------------------------+----+-----------+-----------+
| | Tax liabilities | | (40 115) | (45 745) |
+----+---------------------------------+----+-----------+-----------+
| | Net tax assets / (liabilities) | | (39 091) | (45 613) |
+----+---------------------------------+----+-----------+-----------+
Deferred tax liabilities arise mainly on the fair value adjustment of investment
property (i.e. as it is not taxable under statutory tax rules), while deferred
tax assets mainly arise on tax loss carry forwards.
There are no unrecognised deferred tax assets or liabilities.
17. Contingent assets, contingent liabilities
The Group has no significant pending legal cases.
In accordance with the Group's environmental policy and applicable legal
requirements, there was no need to recognise a provision for site restoration in
respect of contaminated land or other abuse of the environment.
It is not anticipated that any material financial liabilities will arise from
the contingent liabilities.
The Group receives bank guarantees to secure 3 months of lease payments from its
tenants, and from subcontractors to secure their construction guarantees. The
total guarantee is MEUR 5.1 at 31 December 2008 (2007: MEUR 5.8). No asset has
been recognised in these financial statements with respect to these guarantees
received. The Group has given bank guarantees to construction companies in the
value of MEUR 0.4 as at 31 December 2008 (2007: 0)
+--------+--------------------------------+------------+-----------+----------+
| 18. Revenue and cost of sales | | | |
+-----------------------------------------+------------+-----------+----------+
| | | | | |
+--------+--------------------------------+------------+-----------+----------+
| | | | Period ended 31 |
| | | | December |
+--------+--------------------------------+------------+----------------------+
| | | | | |
+--------+--------------------------------+------------+-----------+----------+
| | | | 2008 | 2007 |
+--------+--------------------------------+------------+-----------+----------+
| | Gross rental income | | 16 582 | 11 230 |
+--------+--------------------------------+------------+-----------+----------+
| | Service charge income | | 7 325 | 4 746 |
+--------+--------------------------------+------------+-----------+----------+
| | Service charge expense | | (7 162) | (4 240) |
+--------+--------------------------------+------------+-----------+----------+
| | Net rental and service income | | 16 745 | 11 736 |
+--------+--------------------------------+------------+-----------+----------+
| | | | | |
+--------+--------------------------------+------------+-----------+----------+
| | Residential income | | 9 | 958 |
+--------+--------------------------------+------------+-----------+----------+
| | Residential cost | | (68) | (852) |
+--------+--------------------------------+------------+-----------+----------+
| | Net residential income | | (59) | 106 |
+--------+--------------------------------+------------+-----------+----------+
| | | | | |
+--------+--------------------------------+------------+-----------+----------+
| | | | | |
+--------+--------------------------------+------------+-----------+----------+
| | The Group leases Investment property to tenants under operating |
| | leases which have a duration period of more than one year. |
+--------+--------------------------------------------------------------------+
| | The Group have rental contracts in retail properties where the |
| | rental fee is calculated as a minimum fee plus turnover fee. For |
| | the periods presented above these conditions have not been met, |
| | and no contingent rental income has been recognised. |
+--------+--------------------------------------------------------------------+
| | The future aggregate minimum rentals receivable under |
| | non-cancellable operating leases are as follows: |
+--------+--------------------------------------------------------------------+
| | | | | |
+--------+--------------------------------+------------+-----------+----------+
| | | | Period ended 31 |
| | | | December |
+--------+--------------------------------+------------+----------------------+
| | | | | |
+--------+--------------------------------+------------+-----------+----------+
| | | | 2008 | 2007 |
+--------+--------------------------------+------------+-----------+----------+
| | Not later than 1 year | | 18 193 | 15 954 |
+--------+--------------------------------+------------+-----------+----------+
| | Later than 1 year and not | | 50 503 | 44 749 |
| | later than 5 years | | | |
+--------+--------------------------------+------------+-----------+----------+
| | Later than 5 years | | 25 332 | 23 593 |
+--------+--------------------------------+------------+-----------+----------+
| | | | 94 028 | 84 296 |
+--------+--------------------------------+------------+-----------+----------+
Service charge expenses not generating service income was TEUR 1 438 in 2008 and
TEUR 856 in 2007. Service charge expenses generating service income was TEUR 5
724 for 2008 and TEUR 3 384 for 2007.
+---+----------------------------------------------+------+--------+--------+
| 19. Administrative expenses | | | |
+--------------------------------------------------+------+--------+--------+
| | | |Period ended 31 |
| | | | December |
+---+----------------------------------------------+------+-----------------+
| | | | | |
+---+----------------------------------------------+------+--------+--------+
| | |Note | 2008 | 2007 |
+---+----------------------------------------------+------+--------+--------+
| | Legal, auditing and advisory fees | | 3 002 | 3 382 |
+---+----------------------------------------------+------+--------+--------+
| | Share options and free shares | 27 | 2 100 | 875 |
+---+----------------------------------------------+------+--------+--------+
| | Wages | | 853 | 465 |
+---+----------------------------------------------+------+--------+--------+
| | Travelling | | 576 | 301 |
+---+----------------------------------------------+------+--------+--------+
| | Office supplies | | 585 | 361 |
+---+----------------------------------------------+------+--------+--------+
| | Depreciation | 6 | 256 | 155 |
+---+----------------------------------------------+------+--------+--------+
| | Other services | | 337 | 335 |
+---+----------------------------------------------+------+--------+--------+
| | Social security and other payroll related | | 392 | 193 |
| | taxes | | | |
+---+----------------------------------------------+------+--------+--------+
| | Rental fees | | 293 | 169 |
+---+----------------------------------------------+------+--------+--------+
| | Other personal type expenses | | 67 | 96 |
+---+----------------------------------------------+------+--------+--------+
| | Total administrative expense | | 8 461 | 6 332 |
+---+----------------------------------------------+------+--------+--------+
| | | | | |
+---+----------------------------------------------+------+--------+--------+
| | The number of people employed by the Group | | 93 | 104 |
| | as at the end of the period | | | |
+---+----------------------------------------------+------+--------+--------+
+--+----------------------------------------------+------+-----------+----------+
| 20. Finance income and expense |
+-------------------------------------------------------------------------------+
| | | | | |
+--+----------------------------------------------+------+-----------+----------+
| | | | Period ended 31 |
| | | | December |
+--+----------------------------------------------+------+----------------------+
| | |Note | 2008 | 2007 |
+--+----------------------------------------------+------+-----------+----------+
| | Interest income | | 1 691 | 391 |
+--+----------------------------------------------+------+-----------+----------+
| | Gain on securities | | 0 | 1 144 |
+--+----------------------------------------------+------+-----------+----------+
| | Foreign exchange transaction gains | | 1 468 | 1 663 |
+--+----------------------------------------------+------+-----------+----------+
| | Total finance income | | 3 159 | 3 198 |
+--+----------------------------------------------+------+-----------+----------+
| | | | | |
+--+----------------------------------------------+------+-----------+----------+
| | Interest expenses | | (13 857) | (9 303) |
+--+----------------------------------------------+------+-----------+----------+
| | - Less Interest capitalized | | 3 512 | 3 066 |
+--+----------------------------------------------+------+-----------+----------+
| | Interest cost on bank borrowings | | (10 345) | (6 237) |
+--+----------------------------------------------+------+-----------+----------+
| | Foreign exchange transaction losses | | (15 433) | (1 276) |
+--+----------------------------------------------+------+-----------+----------+
| | Loss on financial instruments | | (1 213) | 0 |
+--+----------------------------------------------+------+-----------+----------+
| | Other | | (298) | (329) |
+--+----------------------------------------------+------+-----------+----------+
| | Total finance expenses | | (27 289) | (7 842) |
+--+----------------------------------------------+------+-----------+----------+
+---------------------------+------------+---------+----------+--------+
| 21. Income tax expenses |
+----------------------------------------------------------------------+
| | | | | |
+---------------------------+------------+---------+----------+--------+
| | | | Period ended 31 |
| | | | December |
+---------------------------+------------+---------+-------------------+
| | | | 2008 | 2007 |
+---------------------------+------------+---------+----------+--------+
| | Current | | 108 | 656 |
| | tax | | | |
+---------------------------+------------+---------+----------+--------+
| | Deferred | | (7 179) | 10 934 |
| | tax (Note | | | |
| | 16) | | | |
+---------------------------+------------+---------+----------+--------+
| | | | (7 071) | 11 590 |
+---------------------------+------------+---------+----------+--------+
| | | | | |
+---------------------------+------------+---------+----------+--------+
| The tax on the Group's profit before tax differs from the |
| theoretical amount that would arise using the weighted average tax |
| rate of the applicable profits of the consolidated companies as |
| follows: |
+---------------------------+------------+---------+----------+--------+
+---------------------------+------------+-----------+---------+----------+--------+
| | | Period ended 31 December |
+---------------------------+------------+-----------------------------------------+
| | | 2008 | | 2007 | |
+---------------------------+------------+-----------+---------+----------+--------+
| | | | | | |
+---------------------------+------------+-----------+---------+----------+--------+
| Profit before tax | | (56 851) | | 52 365 | |
+---------------------------+------------+-----------+---------+----------+--------+
| | | | | | |
+---------------------------+------------+-----------+---------+----------+--------+
| Tax calculated at | | (10 073) | 17.72% | 10 958 | 20.93% |
| domestic tax rates | | | | | |
| applicable to profits in | | | | | |
| the respective countries | | | | | |
+---------------------------+------------+-----------+---------+----------+--------+
| Effect of tax rate | | 83 | -0.15% | (1 062) | 9.10% |
| changes | | | | | |
+---------------------------+------------+-----------+---------+----------+--------+
| Tax effect of costs not | | 540 | -0.95% | 680 | 0.20% |
| deductible from corporate | | | | | |
| tax base | | | | | |
+---------------------------+------------+-----------+---------+----------+--------+
| Expired carry forward tax | | 2 821 | -4.96% | 656 | 0.00% |
| loss deferred tax asset | | | | | |
+---------------------------+------------+-----------+---------+----------+--------+
| Other, net | | (443) | 0.78% | 359 | 0.00% |
+---------------------------+------------+-----------+---------+----------+--------+
| Tax charge | | (7 071) | 12.44% | 11 590 | 29.90% |
+---------------------------+------------+-----------+---------+----------+--------+
In 2008 the Group's income is taxed in Hungary at 20%, in Czech Republic at 21%,
in Poland at 19 % and Romania at 16%. The income is not taxed in Guernsey.
At 1 Jan 2008 the Czech corporate tax was lowered from 24% to 21%.
+----+------------+----------+---------+--------+--------+--------+--------+--------+
| 22. Commitments | | | | | | | |
+-----------------+----------+---------+--------+--------+--------+--------+--------+
| | | | | | | | | |
+----+------------+----------+---------+--------+--------+--------+--------+--------+
| | The Group has capital commitments of TEUR 8 461 (2007: TEUR 28 569) in |
| | respect of capital expenditures contracted for at the balance sheet date, |
| | but not yet incurred, for investment property and property, plant and |
| | equipment. |
+----+------------+----------+---------+--------+--------+--------+--------+--------+
+----+-------------------------------------------+------+------------+------------+
| 23. Related-party transactions | | | |
+------------------------------------------------+------+------------+------------+
| | | | | |
+----+-------------------------------------------+------+------------+------------+
| | The following schedule details the | | | |
| | transactions with related parties: | | | |
+----+-------------------------------------------+------+------------+------------+
| | | | | |
+----+-------------------------------------------+------+------------+------------+
| | | | | |
+----+-------------------------------------------+------+------------+------------+
| | |Note | Period ended 31 |
| | | | December |
+----+-------------------------------------------+------+-------------------------+
| | | | | |
+----+-------------------------------------------+------+------------+------------+
| | | | 2008 | 2007 |
+----+-------------------------------------------+------+------------+------------+
| | Volksbank Group and affiliates (1) | | | |
+----+-------------------------------------------+------+------------+------------+
| | Expenses | | 9 427 | 6 129 |
+----+-------------------------------------------+------+------------+------------+
| | Income | | 0 | 0 |
+----+-------------------------------------------+------+------------+------------+
| | Receivables | | 0 | 0 |
+----+-------------------------------------------+------+------------+------------+
| | Liabilities | | 0 | 0 |
+----+-------------------------------------------+------+------------+------------+
| | Loans received from related party | | 144 980 | 151 199 |
+----+-------------------------------------------+------+------------+------------+
| | Loans outstanding at related party | | 0 | 0 |
+----+-------------------------------------------+------+------------+------------+
| | | | | |
+----+-------------------------------------------+------+------------+------------+
| | Uri Heller and affiliates (2) | | | |
+----+-------------------------------------------+------+------------+------------+
| | Expenses | | 1 | 46 |
+----+-------------------------------------------+------+------------+------------+
| | Income | | 0 | 89 |
+----+-------------------------------------------+------+------------+------------+
| | Receivables | | 0 | 0 |
+----+-------------------------------------------+------+------------+------------+
| | Liabilities | | 14 | 53 |
+----+-------------------------------------------+------+------------+------------+
| | Loans received from related party | | 0 | 0 |
+----+-------------------------------------------+------+------------+------------+
| | Loans outstanding at related party | | 0 | 0 |
+----+-------------------------------------------+------+------------+------------+
| | | | | |
+----+-------------------------------------------+------+------------+------------+
| | Management and affiliates (3) | | | |
+----+-------------------------------------------+------+------------+------------+
| | Expenses: | | | |
+----+-------------------------------------------+------+------------+------------+
| | Short term employee benefits | | 999 | 923 |
+----+-------------------------------------------+------+------------+------------+
| | Share based payments (share options and | | 1 338 | 457 |
| | free shares) | | | |
+----+-------------------------------------------+------+------------+------------+
| | Income | | 0 | 0 |
+----+-------------------------------------------+------+------------+------------+
| | Liabilities | | 18 | 16 |
+----+-------------------------------------------+------+------------+------------+
+-------------------------------------------------------------------------+
| (1) Volksbank Group, one of the shareholders with significant influence |
| include the following entities: Kotva GMBH, Investcredit Bank AG, |
| Österreichische Volksbanken AG, Skalea Investments Ltd. |
+-------------------------------------------------------------------------+
| (2) Uri Heller, one of the shareholders with significant influence |
| include the following entities: Michepro Holdings Ltd., DH Management |
| Ltd., Tradotek Kft. |
+-------------------------------------------------------------------------+
| (3) Management included ABLON Group's Limited directors and entities |
| related to them: Mr. Dennis R. Twining, Mr. Uri Heller, Mr. Daniel |
| Avidan, Mr. Robert Glatter, Mr. Gerald Williams. |
+-------------------------------------------------------------------------+
During the period, Investcredit Bank AG continued to provide source of finance
for the Group. The transactions with Investcredit Bank AG were made on terms
equivalent that prevail in arm's length transactions. The interest rate on the
loans range from 3 month Euribor +1.3 to 2.5 % and the interest rate on all
loans reprice quarterly. The loans are secured by mortgages. The total amount of
mortgages on the properties is MEUR 222.
The Key management personnel did not receive Post employment benefits,
termination benefits or other long term benefits during the period.
24. Acquisition of new subsidiaries
+---+------------------------------------+----------------------------+-------------+
| | On 30 January 2008 the Group has purchased Mor-Eden Investment Sp. z o.o., an |
| | SPV which owns 5,290 square meters of land earmarked for office and |
| | residential development, located in Central Warsaw. |
+---+-------------------------------------------------------------------------------+
| | | |
+---+-----------------------------------------------------------------+-------------+
| | Investment property acquired | 14 180 |
+---+-----------------------------------------------------------------+-------------+
| | Inventory acquired | 2 501 |
+---+-----------------------------------------------------------------+-------------+
| | Cash acquired | 36 |
+---+-----------------------------------------------------------------+-------------+
| | Other assets acquired | 6 |
+---+-----------------------------------------------------------------+-------------+
| | Less: Liabilities acquired | (4 123) |
+---+-----------------------------------------------------------------+-------------+
| | Less: Deferred taxes acquired | (2 392) |
+---+-----------------------------------------------------------------+-------------+
| | Net assets acquired | 10 208 |
+---+-----------------------------------------------------------------+-------------+
| | Purchase consideration, cash paid | 13 907 |
+---+-----------------------------------------------------------------+-------------+
| | Goodwill | 3 699 |
+---+-----------------------------------------------------------------+-------------+
| | | |
+---+-----------------------------------------------------------------+-------------+
| | Net cash outflow from acquisition* | 13 871 |
+---+-----------------------------------------------------------------+-------------+
| | *Net cash outflow = Purchase consideration - cash acquired |
+---+-------------------------------------------------------------------------------+
| | | |
+---+------------------------------------+------------------------------------------+
| | An impairment loss of TEUR 3 699 has been charged on Goodwill taking into |
| | account the market developments. |
| | Inventory recognised at the acquisition date for was higher than the carrying |
| | amount immediately before the combination. The recognised amount being TEUR 2 |
| | 501 and the carrying amount TEUR 778. |
| | Profit of the new subsidiary was 2 344 TEUR during the period. |
+---+------------------------------------+----------------------------+-------------+
+-+------------------------------+---------+---------+------------+--+----------+---------+------------+
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| 25. Fair value of financial | | | | | | | |
| instruments | | | | | | | |
+--------------------------------+---------+---------+------------+--+----------+---------+------------+
| | | As at 31 December 2008 | | As at 31 December 2007 |
+-+------------------------------+--------------------------------+--+---------------------------------+
| | | Book | Fair | Difference | | Book | Fair | Difference |
| | | Value | value | | | Value | value | |
+-+------------------------------+---------+---------+------------+--+----------+---------+------------+
| | Other non-current assets | 8 375 | 8 375 | 0 | | 8 807 | 8 807 | 0 |
+-+------------------------------+---------+---------+------------+--+----------+---------+------------+
| | Loans and advances | 41 | 41 | 0 | | 151 | 151 | 0 |
+-+------------------------------+---------+---------+------------+--+----------+---------+------------+
| | Trade receivables | 907 | 907 | 0 | | 2 050 | 2 050 | 0 |
+-+------------------------------+---------+---------+------------+--+----------+---------+------------+
| | Securities | 2 510 | 2 510 | 0 | | 51 144 | 51 144 | 0 |
+-+------------------------------+---------+---------+------------+--+----------+---------+------------+
| | Cash and cash equivalents | 29 999 | 29 999 | 0 | | 27 786 | 27 786 | 0 |
+-+------------------------------+---------+---------+------------+--+----------+---------+------------+
| | Interest bearing loans and | 231 389 | 231 389 | 0 | | 192 493 | 192 022 | 471 |
| | borrowings | | | | | | | |
+-+------------------------------+---------+---------+------------+--+----------+---------+------------+
| | Other non current | 1 635 | 1 635 | 0 | | 2 165 | 2 165 | 0 |
| | liabilities | | | | | | | |
+-+------------------------------+---------+---------+------------+--+----------+---------+------------+
| | Trade and other payables | 18 182 | 18 182 | 0 | | 14 663 | 14 663 | 0 |
+-+------------------------------+---------+---------+------------+--+----------+---------+------------+
Loans with fixed rates may have a fair value, different from the book value. If
the fixed interest rate is lower than the interest rate achievable for the Group
at the balance sheet date the fair value is lower than the book value, if the
fixed rate would be higher the fair value would be lower.
The Group has MEUR 49 loan at an average fixed interest rate of 5.91%. Taking
into account year end comparable rates and achievable company margins the proper
discount rate for the company was between 5.795 %- 5.995%. The 5.91% average
fixed rate interest is inside these achievable interest range on the market, so
the fair values of fixed interest loans do not differ significantly from the
book values.
The fair values of short term receivables and payables do not differ
significantly form carrying values due to their short term nature and liquidity.
26. Financial risk management and sensitivity analysis
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk and price risk), credit risk, liquidity risk and cash
flow interest rate risk.
(1) Financial risk management
Risk management is carried out by the Group. The Group identifies and evaluates
financial risks in close co-operation with its operating units.
(a) Market risk
Major market risk is the risk that tenants breach their rental contract. Market
risk is also the risk that changes in market prices, such as foreign exchange
rates, interest rates and equity prices will affect the Group's income or the
value of its holdings of financial instruments.
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk,
primarily with respect to the Euro, Hungarian forint, Czech crown, Romanian lei
and Polish zloty. Foreign exchange risk arises from future commercial
transactions, recognised monetary assets and liabilities and net investments in
foreign operations.
The Groups profit is largely dependent on revaluations. The revaluations are
nominated in Euro, but as the functional currency differs from Euro the
revaluation amount is translated to the local functional currencies. The gain in
the local functional currency is translated to EUR. Because of this the change
of FX rates influences the revaluation gain as a weakening of the local currency
against the Euro would mean larger revaluation revenue. On the other hand,
liabilities nominated in EUR are also translated into the local currency where a
weakening of the local currency against the EUR would cause an FX loss. The
proportion of loans (both external and internal) and investment properties vary
by country.
Effect of possible Fx changes to the profit before tax figure:
+------------+-----------------+----------+
| | -10% | +10% |
+------------+-----------------+----------+
| HUF | (13 031) | 10 662 |
+------------+-----------------+----------+
| CZK | (684) | 560 |
+------------+-----------------+----------+
| RON | 6 034 | (4 937) |
+------------+-----------------+----------+
| PLN | (2 083) | 533 |
+------------+-----------------+----------+
'-' means weakening, while '+' strengthening of the EUR against the listed
currencies. As the proportion of loans and investment property differs by
country the effect of EUR change may have opposite effects.
Some of the assets and liabilities can be characterised by the currencies they
are nominated in. The table below lists the underlying currencies in TEUR by
balance sheet rows as at 31 December 2008.
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Assets | EUR | HUF | CZK | PLN | RON | Others | TOTAL |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Other non-current | 0 | 0 | 0 | 8 375 | 0 | 0 | 8 375 |
| assets | | | | | | | |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Deferred income tax | 0 | 33 | 122 | 869 | 0 | 0 | 1 024 |
| assets | | | | | | | |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Other current assets | 165 | 2 248 | 326 | 175 | 1 602 | 0 | 4 516 |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Trade receivables | 119 | 476 | 299 | 13 | 0 | 0 | 907 |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Financial instruments | 2 510 | 0 | 0 | 0 | 0 | 0 | 2 510 |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Cash and cash | 27 102 | 2 316 | 482 | 33 | 24 | 42 | 29 999 |
| equivalents | | | | | | | |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| | | | | | | | |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Long term liabilities | | | | | | | |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Other non-current | 146 | 1 041 | 449 | 0 | 0 | 0 | 1 636 |
| liabilities | | | | | | | |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Borrowings | 189 038 | 0 | 0 | 1 156 | 0 | 1 896 | 192 090 |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Deferred income tax | 0 | 34 567 | 3 146 | 2 298 | 104 | 0 | 40 115 |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| | | | | | | | |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Short term liabilities | | | | | | | |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Trade and other | 3 532 | 9 414 | 4 151 | 97 | 1 000 | 15 | 18 209 |
| payables | | | | | | | |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Current income tax | 0 | 0 | 11 | 0 | 11 | 0 | 22 |
| liabilities | | | | | | | |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
| Borrowings | 36 170 | 0 | 2 963 | 0 | 0 | 167 | 39 300 |
+------------------------+---------+--------+-------+-------+-------+--------+---------+
*Others include: CHF, USD, GBP
(ii) Price risk
The Group is exposed to property price and property rentals risk.
Rent prices are set in long term rental contracts (based in Euro) which are not
sensitive to market price changes. About 20% of the yearly income is coming from
new contracts signed during the year, so a change in market prices would have an
effect on the 20% of rental fees.
If the rent prices on the market would change by 10% generally for the
investment properties in the Group's portfolio, than profit before tax would
change by TEUR 332.
The Groups profit is largely dependent on revaluations. If the valuation prices
would rise by 10%, than profit before tax would rise by MEUR 38.6, if they would
drop, profit before tax would drop by MEUR 39.8.
(iii) Interest rate risk
The Group's interest rate risk arises from long-term borrowings (Note 15).
Borrowings issued at variable rates expose the Group to cash flow interest rate
risk.
The below table shows the interest charge sensitivity in different scenarios,
i.e. if EURIBOR is at 3% +/- 0.5% (in TEUR).
+--------------------------------------------+------------------------------------------+
| 3 - month | Interest |
| EURIBOR | charge in 1 |
| | year |
+--------------------------------------------+------------------------------------------+
| 3.50% | 11 |
| | 024 |
+--------------------------------------------+------------------------------------------+
| 3.00% | 10 |
| | 315 |
+--------------------------------------------+------------------------------------------+
| 2.50% | 9 |
| | 606 |
+--------------------------------------------+------------------------------------------+
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.
Interest costs may increase or decrease as a result of such changes.
(b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group's receivables from customers
and investment securities.
There are no significant concentrations of credit risk. The Group exposure to
credit risk in most of the countries of activity is minimised by the requirement
for customers to pay most of the amount due on purchased housing units prior to
handover. The Group limits its exposure to credit risk arising from bank
deposits by transacting only with reputable bank counterparties
The Group's main activity at the moment is rental of offices. In 2008 83% of
rental fees are coming from Budapest and 17% from Prague offices. At 31 December
2008 22.4% of the annualised rental income is coming from a long term contract
with the Hungarian Post Office. The second largest contract is lower than 10% of
the total income.
The Groups policy ensures that furbishment works are covered by deposits (either
in the form of cash deposits or bank guarantees), which exist throughout the
rental period.
The Table below lists the balance sheet line items exposed to credit risk:
+---+---------------+---------------+------------+------------+----------+
| | | | As at 31 December | |
+---+---------------+---------------+-------------------------+----------+
| | in thousands | Note | 2008 | 2007 |Exposure |
| | of Euros | | | | to |
| | | | | | credit |
| | | | | | risk |
+---+---------------+---------------+------------+------------+----------+
| | | | | | |
+---+---------------+---------------+------------+------------+----------+
| | Non-current | | | | |
| | assets | | | | |
+---+---------------+---------------+------------+------------+----------+
| | Long term | 7 | 8 375 | 8 807 | 1 |
| | loans | | | | |
+---+---------------+---------------+------------+------------+----------+
| | | | | | |
+---+---------------+---------------+------------+------------+----------+
| | Current | | | | |
| | assets | | | | |
+---+---------------+---------------+------------+------------+----------+
| | Other current | 8 | 4 516 | 7 601 | 2 |
| | assets | | | | |
+---+---------------+---------------+------------+------------+----------+
| | Trade | 10 | 907 | 2 050 | 3 |
| | receivables | | | | |
+---+---------------+---------------+------------+------------+----------+
| | Securities | 11 | 2 510 | 51 144 | 4 |
+---+---------------+---------------+------------+------------+----------+
| | Cash and cash | 12 | 29 999 | 27 786 | 5 |
| | equivalents | | | | |
+---+---------------+---------------+------------+------------+----------+
| | Maximum | | 46 307 | 97 388 | |
| | exposure to | | | | |
| | credit risk | | | | |
+---+---------------+---------------+------------+------------+----------+
| | | | | | |
+---+---------------+---------------+------------+------------+----------+
| | |
+---+--------------------------------------------------------------------+
|1 | The long term loan is secured by the Group by a mortgage on land. |
+---+--------------------------------------------------------------------+
|2 | Other current assets include various short term receivables. Out |
| | of the TEUR 4 516 at the year end TEUR 2 361 is tax receivable |
| | from tax authorities in the countries of operation (2007: out of |
| | TEUR 7601 TEUR 4 313 was tax receivable). It also includes |
| | deposits to various third parties (among the largest: estate |
| | agents, banks, construction companies). |
+---+--------------------------------------------------------------------+
|3 | Trade receivables involve customer debt from regular sales |
| | activity. Receivables are mainly secured by cash deposits and |
| | bank guarantees as described in Note 17. Contingent assets, |
| | contingent liabilities and provisions. The debt is very |
| | fragmented among partners. The largest debt does not reach the |
| | 10% of the total receivables. |
+---+--------------------------------------------------------------------+
|4 | Financial instruments are A rated corporate bonds. |
+---+--------------------------------------------------------------------+
|5 | Cash is held at prime rated banks within the European Union. |
+---+---------------+---------------+------------+------------+----------+
(c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial
obligations as they fall due.
Prudent liquidity risk management implies maintaining sufficient cash and
marketable securities, the availability of funding through an adequate amount of
committed credit facilities and the ability to close out market positions. Due
to the dynamic nature of the underlying businesses, Group Treasury aims to
maintain flexibility in funding by keeping committed credit lines available.
The acid test ratio (Receivables+ Short term investments+Cash/Current
liabilities) is 0.58 at the year end (2007: 1.62).
(d) Cash flow and fair value risk
The Group had MEUR 33 in cash and short term investments at the year end. The
Group used its excess liquidity in bank deposits and prime rated financial
securities during the year.
None of the above risks are hedged by derivative instruments.
(2) Capital management
The Board's policy is to maintain a strong capital base so as to maintain
investor, creditor and market confidence and to sustain future development of
the business. The Board of Directors monitors the possibility of net asset value
growth of the company as a primary guideline. The Board of Directors also
monitors the return on capital, which the Group defines as net operating income
divided by total shareholders' equity, excluding non-redeemable preference
shares and minority interests. The Board of Directors also monitors the level of
dividends to ordinary shareholders.
Dividend Policy
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.
The board approved the declaration of GBP4.0 million dividend on account of the
profits of 2008. This dividend is in line with the dividend policy that was
declared before the IPO.
As a result of increased volatility in the global financial markets, and the
resulting uncertainty, the Company's Board of Directors has decided it would not
be prudent to recommend the payment of a dividend for the current year.
Neither the Company nor any of its subsidiaries are subject to externally
imposed capital requirements.
27. Share based payments
The remuneration committee of the board approved granting of 744 820 new shares
free of charge to senior management of Ablon, based of the Long Term Incentive
Plan that was approved before the IPO. The shares are vesting one year after the
grant date of 25th March 2008.
On 31 January 2007 Ablon Group Limited granted stock options to the senior
management. The exercise price was the price 2.5 pounds per share, and the
options are vesting in 3 equal parts over 3 years until 31 January 2010. The
number of options as of 31 December 2008 was 4 225 536 under this scheme out of
which 1 489 824 are vested as of 31 December 2008. On June 29th 2007 additional
80 000 stock options were granted, out of which 26 667 are vested as of 31
December 2008. The exercise price was 2.79 pounds per share. The options are
vesting in 3 equal parts over three years until 29 June 2010.
The option values were calculated using the Black-Scholes formula based on their
value at the point of grant and these values are acknowledged in the financial
statements proportionally to the vesting period.
The following table shows the movements in the share options and in free shares
granted
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| Number of share options and free shares | Share | Share | Free |
| | options | options | shares |
| | granted as | granted | |
| | at 31. | as at 29. | |
| | January 2007 | June 2007 | |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| outstanding number of options/shares as at | 4,469,472 | 80,000 | 744,820 |
| 31. December 2007 | | | |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| forfeited during the period | 243,936 | 0 | 10,400 |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| exercised during the period | 0 | 0 | 0 |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| expired during the period | 0 | 0 | 0 |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| outstanding number of options/shares as at | 4,225,536 | 80,000 | 734,420 |
| 31. December 2008 | | | |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| | | | |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| | | | |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| Balance sheet effect of share options and | As at 31 December | |
| free shares (TEUR) | | |
+ +-------------------------------------------------------------+-----------+
| | 2008 | 2007 | |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| Share based payment reserve | 2,975 | 875 | |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| | | | |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| | | | |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| Income statement effect of share options and | Period ended 31 December | |
| free shares (TEUR) | | |
+ +-------------------------------------------------------------+-----------+
| | 2008 | 2007 | |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
| Administrative expenses | 2,100 | 875 | |
+----------------------------------------------+----------------------------------------------+--------------+-----------+
28. Events after the balance sheet date (i.e. after 31 December 2008)
On the 3rd of February 2009 the Company has decided to put a hold on
developments projects, except those listed below. Until the time comes that
credit lines from banks are reinstated , the Company will only undertake minor
refurbishment and design projects.
* Airport City Phase 2 - already completed in January 2009
* Blaha Center
* Viva Residence
The expected cost to complete Viva Residence and Blaha Center is 27 MEUR
Those residential properties for which the Company has stopped development
activities has been reclassed to long term inventory as described in Note 9.
In case of one loan the loan to value covenant was breached as at 31st of
December 2008. The management expects that the bank might ask to restore the
required loan to value ratio which would result in a repayment of MEUR 3.7 part
of the loan.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR CKDKDCBKDAND
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