TIDMABL
SIX MONTHS RESULTS FOR THE PERIOD ENDED 30 JUNE 2009
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 six months ended 30 June 2009 in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU.
PROPERTY OVERVIEW
-- Property Assets:
Combined estimated value of EUR5941 million.
-- 166,290 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 1,296,450 square metres (at
25 locations) in Budapest, Prague, Bucharest, Warsaw and Gdansk to
develop as market conditions permit.
FINANCIAL HIGHLIGHTS
-- Gross rental income of EUR9.2 million for the six month period ended 30
June 2009, representing a 9% increase compared to the same period last
year.
-- Adjusted net asset value per share of GBP2.95 at 30 June 2009.
-- Pre-tax loss of EUR2.9 million for the period ended 30 June 2009.
-- Shareholders' funds decreased from EUR239 million at 31 December 2008 to
EUR236 million at 30 June 2009.
RESULTS IN BRIEF
Six months ended 30
June
in thousands of Euros 2009 2008
Gross rental income 9,209 8,440
Gross residential income 2 2
Gross sales income 9,211 8,442
Net gain (loss) from fair value adjustment on 3,887 (23,085)
investment property
Impairment of Inventory (222) 0
Impairment of goodwill (3,699)
Sales and administrative expenses (3,034) (4,486)
Other income / (expenses) 49 (108)
Net operating profit / (loss) 9,882 (22,826)
Net financing income / (expense) (12,812) 8,532
Profit / (loss) before income tax (2,930) (14,294)
Tax 1,468 1,855
Minority interest 0 98
Profit / (loss) for the period (1,462) (12,439)
Basic earnings/(losses) per share (euro) (0.01) (0.11)
Diluted earnings/(losses) per share (euro) (0.01) (0.11)
SUMMARY CONSOLIDATED BALANCE SHEET
in thousands of Euros 30 June 2009 31 Dec 2008
Assets
Total non-current assets 487,174 482,352
Total current assets 35,324 47,757
Total assets 522,498 530,109
EQUITY
Total equity 236,048 238,737
LIABILITIES
Total non-current liabilities 224,139 233,841
Total current liabilities 62,311 57,531
Total liabilities 286,450 291,372
Total equity and liabilities 522,498 530,109
CHAIRMAN'S STATEMENT
Dennis Twining, Chairman of Ablon, commented: "Unprecedented macro economic conditions exacerbated by a general lack of liquidity in our markets continue to overshadow Ablon's financial results. While there has been some improvement in the credit markets, overall market conditions in Central and Eastern Europe have not improved. We have not seen any green shoots of recovery in our markets during the first half of 2009, and are unlikely to see much improvement for the full year.
"As a result of this, the Board is maintaining its focus on the priorities established last year to preserve cash. These priorities are to maximize rental income, continue cost reduction and reduce uncommitted capital expenditure outlays. The objective is that we have the cash reserves available to cover previously committed capital expenditure commitments and ongoing bank principal repayments.
"While our overall gearing is low we may face difficulties renewing certain facilities if current conditions prevail. With this in mind, we are focusing all of our efforts on maintaining rent levels, minimising our capital expenditure programme, and managing our debt exposure. In parallel, we continue to defer activity in the majority of Ablon's development projects so that all efforts are focused on managing the income generating assets already in our portfolio.
"In contrast to these concerns, our rental income has increased to record levels even though our vacancy rate has increased somewhat due to new completions. Ablon continues to participate in new tenders from potential occupiers to fill this vacancy. However with difficult market conditions and with our established tenants facing stress, it is possible that the Company's occupancy rates could decrease during the course of the year. This will make maintaining the new level of rental income a challenging objective as more and more of our clients submit to the effects of the banking crisis. That said, we believe we are as well positioned as any other player in our market to meet these challenges and win new tenders thanks to our high quality, well located real estate portfolio backed by our strong in-house sales and technical staff.
"When the market does recover we will be very well positioned to benefit. The quality of our asset portfolio has not diminished, we still have a very significant land bank that was purchased on very favourable terms and our operations continue to be supported by relatively low gearing levels, strong rental income and a dedicated team."
-ends-
CONFERENCE CALL INFORMATION
The Company will host a conference call to present the results at 2:00 PM (London Time) / 3:00 PM (CET) / 9:00 AM (New York Time) today.
To participate in the conference call, please register online at:www.sharedvalue.net/ablon/hy2009
The number for the conference call will be available upon registration.
For further information, please contact:
Ablon Group LimitedDaniel Avidan, CFOTel. +36 1 225 6600
KBC Peel Hunt Ltd(Nominated Adviser and Broker)Capel Irwin / Alex Vaughan / Daniel HarrisTel. +44 (0)20 7418 8900
ING Wholesale Banking(Joint Corporate Broker)Nathalie Bachich de Recina / Julie WakkieTel. +44 (0)20 7767 8362
Shared Value LimitedNicolas Duperrier / Mark WalterTel. +44 (0)20 7321 5010ablon@sharedvalue.net
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 166,290 square metres of existing and income generating office and retail assets (at 13 locations) in Budapest and Prague, with a significant development land bank comprising a further 1,296,450 square metres (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 30 June 2009, 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
The occupancy rate for Ablon Group's Budapest portfolio decreased by 6% as at 30 June 2009 compared to 31 December 2008. Ablon has completed the second phase of its Airport city project, but the premises remains vacant and this has contributed significantly towards the decrease in Ablon's occupancy rate in Budapest for the first half of 2009. At present, the Company is facing difficulties in leasing its vacant office space in Budapest due to the scale of the economic crisis in Hungary, where supply of office space in Budapest is currently far outstripping demand.
In December 2007, Ablon signed a 30-year management contract with Marriott who will operate the Company's hotel complex at its Europeum project. The mixed-use Europeum development includes a four-star hotel which will have 235 rooms, 5,500 square metres of retail space and 229 parking spaces. 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 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 30 June 2009, the Company had leased 33% of the total completed buildings.
In June 2008, the Group started the construction of the third phase of its BC99 project. Due to current market conditions, the Group decided to stop the construction after completing an underground parking area at the site. Construction will recommence 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 its construction after completing the exterior construction works. Construction will recommence when the financing and market environments improve.
Prague
The group is close to completing the construction of its 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 30 June 2009, 38 units had already 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 Bucharest for the time being. The site's marketing and construction will recommence when the financing and market environments improve.
Poland
In June 2009, Ablon received a construction permit for its first project in Poland. The plot, 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 building permit allows the building of 13 floors of mixed use space at the site, occupying approximately 16,500 square metres of office and retail space, and 500 square meters of high-end residential units. Construction will commence once the Group finds a sufficient number of tenants and is able to procure the required financing facilities to complete the project.
In July 15, 2009, the Group completed the acquisition of a company that holds a plot on Jerusalemskaya Av. in Warsaw. The plot size is 25,000 square meters and the building rights for offices will be between 40,000 - 50,000 square meters lettable area. The purchase price was offset with a loan that was granted, in December 2007, to a third party that owned the purchased company, so no additional cash was paid at the acquisition date. The total off-set loan amount was EUR8.4 million as at June 30, 2009.
Portfolio summary
The updated list of the Group's projects as at 30 June 2009 is detailed overleaf:
Project Group Project Completed Expected Under Future Valuation
holding Type Lettable Annualized Occupancy development Development (*)
Area Gross rate As sites (EUR million)
(sq. m) Rent (%)As at 30.06.09 (sq. m) as
(EUR at as at at
million 30.06.09 30.06.09 31.12.08
p.a.)
as
at 30.06.09
=----------------------------------------------------------------------------------------------------------
Budapest
=----------------------------------------------------------------------------------------------------------
BC. 99 100% Office 15,900 2.5 86% 0 37,600
=----------------------------------------------------------------------------------------------------------
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 75% 0 0
=----------------------------------------------------------------------------------------------------------
BC. 30 100% Office 12,900 2.4 97% 0 0
=----------------------------------------------------------------------------------------------------------
Buy-Way 100% Retail 21,600 1.1 47% 0 3,700
Dunakeszi
=----------------------------------------------------------------------------------------------------------
Buy-Way 100% Retail 11,900 0.6 51% 0 0
Soroksar
=----------------------------------------------------------------------------------------------------------
Zoldvaros 100% Residential 0 29,100
=----------------------------------------------------------------------------------------------------------
Gateway 100% Office 35,800 5.5 97% 0 0
=----------------------------------------------------------------------------------------------------------
Europeum 100% Hotel/Retail 0 18,700 0
=----------------------------------------------------------------------------------------------------------
Airport 100% Storage 19,440 0.5 33% 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
hotel
=----------------------------------------------------------------------------------------------------------
Erzsebet 100% Office 0 17,900
=----------------------------------------------------------------------------------------------------------
Newage 100% Office 0 13,700
=----------------------------------------------------------------------------------------------------------
Rakoczi 100% Retail 750 0%
(*)
=----------------------------------------------------------------------------------------------------------
Total 147,690 15.4 67% 18,700 312,750 365
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 166,290 18.2 76.4% 29,500 1,266,950 594
Group
=----------------------------------------------------------------------------------------------------------
The above valuations are based on the appraisal dated 31 December 2008. The group will commission an updated valuation appraisal at the 2009 year end.
Financial Review
Gross rental income
Gross rental income was EUR9.2 million for the period ended 30 June 2009, representing an increase of EUR0.8 million, or 9%, from the EUR8.4 million generated during the period ended 30 June 2008. This increase can be attributed to the higher occupancy of the Gateway project in Budapest and the opening of Airport city project in Budapest on July 2008.
Net service charge income
Net service charge income was nil for the period ended 30 June 2009, compared to the EUR0.2 million generated during the period ended 30 June 2008. The decrease is due to a higher vacancy rate for the Company's Budapest office and retail buildings.
Net (loss) / gain on fair value adjustment of investment property
Net gain on the fair value adjustment of investment property was EUR3.9 million for the period ended 30 June 2009, from a EUR23.1 million loss generated during the period ended 30 June 2008. 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 in the properties' values due to the global economic crisis, which is reflected in much higher than expected exit yields and higher discount rates, resulting in a lower valuation. In June 2009, the group did not have an external valuation appraisal for the portfolio, and the gain is mainly due to exchange rate differences as local currencies have depreciated against the euro.
Impairment of goodwill
In the period ended at 30 June 2009 there was no impairment of goodwill, compared to a EUR3.7 million loss incurred during the period ended 30 June 2008, as a result of adjusting the purchasing cost of the company that owns Ablon's Warsaw development to market value.
Impairment of inventory
Impairment of inventory for the period ended 30 June 2009 was EUR0.2 million, as a result of market value adjustments to a plot held by the company in the Czech Republic.
Sales and marketing expenses
Sales and marketing expenses were EUR0.3 million for the period ended 31 June 2009, a decrease of EUR0.6 million, or 66%, from EUR0.9 million at the period ended 30 June 2008. The decrease is mainly due to the temporary termination of marketing activities in Romania, and decreases in commissions paid to external brokers for leasing office space.
Administrative expenses
Administrative expenses reached EUR2.8 million for the period ended 30 June 2009, a decrease of EUR0.8 million or 22% from the EUR3.6 million spent during the period ended 30 June 2008. This decrease consisted of EUR0.3 million spent on stock options and bonus shares granted to employees during the IPO process and for the year 2007, and a decrease of EUR0.5 million in wages, traveling expenses and other expenses.
Net Financing income / (expense)
Net financing expense was EUR12.8 million for the period ended 30 June 2009, compared to EUR8.5 million income for the period ended 30 June 2008. The increase in financial expenses is primarily due to the depreciation of local currencies in Hungary and Romania of 2.8% and 5.5% respectively against the Euro. Since the Company borrows in Euros, the Group had EUR7.8 million foreign exchange losses compared to EUR13.1 million foreign exchange gains for the period ended 30 June 2008.
Current Income Tax
Current income tax was EUR0.2 million for the period ended 30 June 2009, a decrease of EUR0.5 million, from EUR0.7 million for the period ended 30 June 2008.
Deferred Income Tax
Deferred income tax decreased by EUR1.0 million from a EUR2.6 million income for the period ended 30 June 2008 to an income of EUR1.6 million for the period ended 30 June 2009. While last year's income was due to revaluation losses, this year's income is the result of changing corporate tax rate in Hungary. Instead of 16% corporate tax and 4% special tax there will be 19% corporate tax in the future, resulting in lower deferred tax liability on accumulated revaluation reserves.
Balance Sheet Overview
Investment property
Investment property increased in value by EUR7.2 million, to EUR409.9 million as at 30 June 2009, from EUR402.7 million as at 31 December 2008. This change was primarily due to the completion of the second building in Ablon's Airport city project in Budapest, and investments made through the construction of the Europeum project, BC99 phase 3, until it was stopped after completing the development's underground parking area.
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 EUR12.5 million from EUR47.8 million at 31 December 2008 to EUR35.3 million at 30 June 2009. The decrease was primarily due to a EUR12.5 million decrease in cash and financial securities as a result of EUR7.6 million amortization of loans (EUR3.9 million onetime payment to cure LTV covenant), and EUR5.2 million decrease in trade and other payables.
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 decreased by EUR9.7 million from EUR233.8 million as at 31 December 2008 to EUR224.1 million as at 30 June 2009. This was primarily due to a one time repayment of EUR3.9 million as part of a long term loan to bring an LTV covenant back into compliance, and an increase of the short term loans.
Current Liabilities
Current liabilities increased by EUR4.8 million from EUR57.5 million at 31 December 2008 to EUR62.3 million at 30 June 2009. The increase was primarily due to an increase of EUR9.9 million in short term loans, caused by the granting of 12 month extensions on loans that matured during the current reporting period and by the natural conversion of long term loans to short term loans, within twelve months of their date of maturity. Total current liabilities was offset by EUR5.2 million thanks to a decrease in trade and other payables.
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 30 June 2009, unchanged from 31 December 2008.
Due to the unprecedented global economic downturn that has had a particularly severe impact on the economies of CEE countries where Ablon operates, the company has experienced difficulties in applying for new loans in order to finance the construction of new projects. As yet, there are no early signs of improvement in the banking sector. For the present time therefore, the company is not in a position to execute its development plan until the banking sector improves and a sufficient amount of finance can be procured.
If the economic downturn does not recede, the company may also face challenges in renewing certain short term loans that mature in the coming year. That said, the Group does have 10 properties with a book value of EUR83 million with no debt or mortgage costs. There are five loans with LTV covenants. One has an 80% LTV covenant and based on a recent valuation the Group repaid EUR3.7 million in April 2009 to bring it into compliance. Two of the other loans have a 75% LTV requirement and based on latest valuations, the Company is comfortably within that covenant. A remaining loan has a 71% LTV covenant, but a valuation is not required until one year after its completion in the beginning of 2010. 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 valuation policy changed as of 1st January 2009 and it now revalues 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
Jun 30, 2009 Dec 31, 2008
Shareholders' equity 236.0 238.7
Valuation Adjustments2 104.6 111.2
Deferred Tax Liability 38.0 40.1
Minority rights -1.0 -0.9
Total adjusted net asset value 377.6 389.1
NAV per share EUR 3.45 3.57
NAV per share GBP 2.95 (EUR/GBP = 1.17) 3.27 (EUR/GBP = 1.09)
The decrease in the NAV is primarily due to six month losses and further depreciation in some of the Group's assets.
Tax changes
At the end of June 2009, new tax laws were approved by the Hungarian parliament. The changes include new laws on withholding tax on interest and management fees to non tax treaty countries of 30% transfer duty on the acquisition of project companies holding real estate. These changes will increase the Group's future tax payments.
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.
As a result of increased volatility in the global financial markets, and 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.
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 improve the Company's working capital position. The Company cannot at this stage indicate when it will pay its 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 was set by the remuneration committee for 2009.
Uri HellerC.E.O.
ABLON GroupCondensed Consolidated InterimFinancial StatementsPrepared under IAS 34 'Interim FinancialReporting'Six months ended 30 June 2009
Independent Auditors' Report on Review of Interim Financial Information
To the shareholders of Ablon Group Limited
Introduction
We have reviewed the condensed consolidated interim financial statements (the "interim financial information") of Ablon Group Ltd. (the "Group") for the period ended 30 June 2009 which comprise Consolidated statement of financial position as at 30 June 2009, Consolidated statement of comprehensive income, Consolidated statement of changes in equity, Consolidated statement of cash flows for the 6 month period then ended and a summary of significant accounting policies and selected explanatory notes. Management is responsible for the preparation and fair presentation of this condensed consolidated interim financial information in accordance with IAS 34, 'Interim Financial Reporting'. Our responsibility is to express a conclusion on this interim financial information based on our review.
Scope of Review
We conducted our review in accordance with the International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information as at 30 June 2009 is not prepared, in all material respects, in accordance with IAS 34, 'Interim Financial Reporting'.
1 September 2009
KPMG Hungária Kft.
Agócs GáborPartner
All amounts in thousands of Euros except otherwise stated.
Condensed consolidated statement of financial position
in thousands of Euros Note 30 Jun 2009 31 Dec 2008
ASSETS
Non-current assets
Investment property 5 409 857 402 708
Property, plant and equipment 6 10 490 10 295
Long term loans 8 003 8 375
Deferred tax assets 1 514 1 024
Long term inventory 7 57 310 59 950
Total non-current assets 487 174 482 352
Current assets
Other current assets 3 148 4 516
Inventories 7 11 655 9 825
Trade receivables 472 907
Investment in securities 0 2 510
Cash and cash equivalents 20 049 29 999
Total current assets 35 324 47 757
TOTAL ASSETS 522 498 530 109
Condensed consolidated statement of
financial position (continued)
in thousands of Euros Note 30 Jun 2009 31 Dec 2008
EQUITY
Capital and reserves
Share capital 8 1 096 1 089
Treasury shares 8 (69) (16)
Translation difference (6 152) (4 414)
Share based payment reserve 8 1 698 2 975
Share premium 257 727 255 893
Retained earnings (18 252) (16 790)
Total equity attributable to equity holders of the parent 236 048 238 737
Non-controlling interest 0 0
TOTAL EQUITY 236 048 238 737
LIABILITIES
Non-current liabilities
Other non-current liabilities 1 413 1 636
Borrowings 9 184 764 192 090
Deferred tax liability 37 962 40 115
Total non-current liabilities 224 139 233 841
Current liabilities
Trade and other payables 13 022 18 210
Current income tax liabilities 85 22
Borrowings 9 49 204 39 299
Total current liabilities 62 311 57 531
TOTAL LIABILITIES 286 450 291 372
TOTAL EQUITY AND LIABILITIES 522 498 530 109
Condensed consolidated statement
of comprehensive income
6 months ended
in thousands of Euros Note 30 Jun 2009 30 Jun 2008
Gross rental income 9 209 8 440
Gross residential income 2 2
Net service charge income/ (expenses) (8) 161
Cost of residential income (1) (51)
Gross profit 9 202 8 552
Net gain/(loss) from fair value adjustment on investment property 5 3 887 (23 085)
Impairment of inventory 7 (222) 0
Impairment of goodwill 0 (3 699)
Selling and marketing costs (283) (870)
Administrative expenses (2 751) (3 616)
Other income 113 87
Other expenses (64) (195)
Net operating profit / (loss) 9 882 (22 826)
Finance income 2 662 17 480
Finance expenses (15 474) (8 948)
Net finance income / (expenses) (12 812) 8 532
Profit / (loss) before income tax (2 930) (14 294)
Current tax (164) (718)
Deferred tax 1 632 2 573
Total income tax (expenses)/income 1 468 1 855
Profit / (loss) for the period (1 462) (12 439)
Other comprehensive income
Foreign currency translation differences (1 738) 11 196
Share-based payment reserve 564 878
Other comprehensive income for the period, net of income tax (1 174) 12 074
Total comprehensive income for the period (2 636) (365)
Profit attributable to:
The owners of the Company (1 462) (12 537)
Non-controlling interest 0 98
Profit / (loss) for the period (1 462) (12 439)
Total comprehensive income attributable to:
The owners of the Company (2 636) (463)
Non-controlling interest 0 98
Total comprehensive income for the period (2 636) (365)
Earnings per share
Basic earnings per share (euro) 8 (0,01) (0,11)
Diluted earnings per share (euro) 8 (0,01) (0,11)
Condensed consolidated
cash flow statement
First six months 2009 First six months 2008
Net cash from operating (5 390) (14 992)
activities
Net cash used in investing (7 458) (10 418)
activities
Net cash used in financing 2 898 14 298
activities
Net cash decrease in cash (9 950) (11 112)
and cash equivalents
Cash and cash equivalents 29 999 27 786
at beginning of the year
Cash and cash equivalents 20 049 16 674
at the end of the year
Condensed consolidated
statement
of changes in equity
in thousands of Euros Attributable to equity holders of the Company Subtotal Minority interest Total equity
Share capital Treasury shares Retained earnings Share premium Share based payment reserve Trans- Total attributable
lation reserve to equity
holders of the Group
Balance at 1 1 089 0 38 055 255 893 875 178 296 090 0 296 090
January 2008
Dividend paid (5 066) 0
Subtotal: Capital 0 0 (5 066) 0 0 0 (5 066) 0 (5 066)
transactions
with
shareholders
Foreign exchange 11 196 11 196 11 196
translation
adjustment
Share options granted 878 878 878
Current period (12 537) (12 537) 98 (12 439)
profit / loss
Subtotal: Recognised 0 0 (12 537) 0 878 11 196 (463) 98 (365)
income and expense
for the period
Balance at 30 June 2008 1 089 0 20 452 255 893 1 753 11 374 290 561 98 290 659
Balance at 1 July 2008 1 089 0 20 452 255 893 1 753 11 374 290 561 98 290 659
Cash paid to acquire (16) (16) (16)
Treasury shares
Dividend payment 0 0
to shareholders
Subtotal: Capital 0 (16) 0 0 0 0 ( 16) 0 (16)
transactions
with shareholders
Foreign exchange (15 788) (15 788) (15 788)
translation
adjustment
Share options and free 1 222 1 222 1 222
shares granted
Current period (37 242) (37 242) ( 98) (37 340)
profit / loss
Subtotal: Recognised 0 0 (37 242) 0 1 222 (15 788) (51 808) ( 98) (51 906)
income
and expense for
the period
Balance at 31 December 1 089 (16) (16 790) 255 893 2 975 (4 414) 238 737 0 238 737
2008
Balance at 1 1 089 (16) (16 790) 255 893 2 975 (4 414) 238 737 0 238 737
January 2009
Cash paid to acquire (53) (53) (53)
Treasury shares
Shares issued 7 1 834 (1 841) 0 0
as employee
benefits
Subtotal: Capital 7 (53) 0 1 834 (1 841) 0 (53) 0 (53)
transactions
with shareholders
Foreign exchange (1 738) (1 738) (1 738)
translation
adjustment
Share options granted 564 564 564
Current period (1 462) (1 462) (1 462)
profit / loss
Subtotal: Recognised 0 0 (1 462) 0 564 (1 738) (2 636) 0 (2 636)
income
and expense for
the period
Balance at 30 June 2009 1 096 (69) (18 252) 257 727 1 698 (6 152) 236 048 0 236 048
Notes to the consolidated financial statements
1. Reporting Entity
ABLON Group Ltd (hereinafter "the Company") is a company domiciled in Guernsey. The condensed consolidated interim financial statements of the Company as at and for the six months ended 30 June 2009 comprise the Company and its subsidiaries (together referred to as the "Group" and individually as "Group entities").
The Company is listed on the London AIM exchange. The Group is managed from Guernsey, and the official address of its headquarter is GY1 4HQ Frances House, Sir William Place, St Peter Port, Guernsey.
The Group's primary activity is to purchase, develop, rent, hold and sell real estates with a real estate portfolio mainly located 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
Avacero Ltd. 100% Cyprus
B.C.P. Kft. 100% Hungary
BC 2000 s.r.o. 100% Czech Republic
Bluebeat Ltd. 100% Cyprus
Bright Site Kft. 100% Hungary
CD Property s.r.o. 100% Czech Republic
Century City Kft. 100% Hungary
Duna Office Center Kft. 100% Hungary
ES Bucharest Development S.R.L. 100% Romania
ES Bucharest Properties S.R.L. 100% Romania
ES Hospitality S.R.L. 100% Romania
First Chance Kft. 100% Hungary
First Site Kft. 100% Hungary
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 S.R.L. 100% Romania
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
2. Basis of preparation
(a) Statement of compliance
The condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard No. 34'Interim Financial Reporting' ("IAS 34").
These financial statements are not intended to be used for statutory filing purposes.
These condensed consolidated interim financial statements were authorised for issue by the Board of Directors on 1 September 2009.
(b) Basis of measurement
The condensed consolidated interim financial statements have been prepared on the historical cost basis except for the following:
-- investment property is measured at fair value
-- financial instruments at fair value through profit or loss are
measured at fair value
The methods used to measure fair values are discussed further in the accounting policy published in the most recent consolidated financial statement of the Group.
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
The functional currencies of the Group's entities are the currencies of the primary economic environment in which the entities operate. The following functional currencies are used: Hungarian Forint (HUF) in Hungary, Czech Crowns (CZK) in Czech Republic, Polish Zloty (PLN) in Poland, Romanian Lei (RON) in Romania, Croatian Kune (HRK) in Croatia and euro (EUR) in Cyprus.
The condensed consolidated interim financial statements are presented in euro, which is the Group's presentation currency. All information presented in euro has been rounded to the nearest thousand.
(d) Use of estimates and judgements
The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the condensed consolidated interim financial statements is included in the most recent consolidated financial statement of the Group.
3. Accounting policies and changes in accounting policies
(a) Amendment to IAS 40
With the exceptions mentioned below the accounting policies adopted and method of computation are consistent with those of the annual financial statements for the year ended 31 December 2008, as described in the annual financial statements for the year ended 31 December 2008.
In May 2008, as part of its annual improvement process, the IASB approved changes that brought properties being constructed or developed for future use as investment property into the scope of IAS 40. For annual periods beginning on or after 1 January 2009, entities reporting under IFRS are required to apply the amendment prospectively and re-measure properties being constructed or developed for future use as investment property to fair value. Any differences between the carrying amount and the fair value as at 1 January 2009 are to be charged directly to profit or loss on 1 January 2009.
(b) Reclassification of land relating to investment property under construction
In 2008 the Group separated investment properties under construction into 'land' and 'buildings under construction'. Land was presented in the statement of financial position as investment property and was measured at fair value. Buildings under construction were presented in the statement of financial position as investment property under construction and were measured at cost. Based on the amendments to IAS 40, buildings under construction are now included in the scope of IAS 40, and are measured at fair value. As plots, buildings under construction and income generating buildings are now handled the same way the Group reclassified all investment property under development to investment property, as it results in the financial statements more relevant information about the change in the fair value of a project.
The effect of this reclassification was as follows:
in thousands of Euros 2008 2007
Increase in Investment property 35 491 24 551
Decrease in Investment property under (35 491) (24 551)
development (and the related land)
This change has no effect on basic or on diluted EPS.
4. Segment information
The following segment information has been prepared in accordance with IFRS 8, "Operating Segments," which defines requirements for the disclosure of financial information of an entity's operating segments. It follows the "management approach", which requires presentation of the segments on the basis of the internal reports about components of the entity which are regularly reviewed by the chief operating decision-maker in order to allocate resources to a segment and to assess its performance. Management reporting for the Group is based on IFRS.
Operating segments
The Group determines two different operating segments based on the functionality of investment properties:
1. commercial segment
Commercial activities cover developments and operations for office, retail and storage purposes. The segment derives revenues mainly from rental income and services connected to the operation of the held properties.
2. residential segment
Residential activities cover residential developments. Residential segment derives revenues from sale of these residential developments.
3. unallocated
Unallocated activities cover holding company activities and assets and liabilities not split between the defined commercial and residential segments.
All the Group's activities and assets are located in Central and Eastern Europe.
Segment assets include all operating assets used by a segment and consist primarily of investment property, property plant and equipment, inventories and receivables. While most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by the two segments is allocated to the segments on a reasonable basis.
Segment liabilities include all operating liabilities and consist primarily of accounts payable, wages and accrued liabilities.
4. Segment
information
Period ended Note Commercial Residential Unallocated Group
30 June 2009
Revenue 9 209 2 0 9 211
Segment gross 9 201 1 0 9 202
profit
Impairment 0 (222) 0 (222)
(losses)/
reversal of
losses
Operating 11 757 (461) (1 414) 9 882
profit/
(loss)
Finance (9 720) (4 980) 1 888 (12 812)
(costs)/income-net
Profit before 2 037 (5 441) 474 (2 930)
income tax
Tax 1 468 1 468
(expense)/income
Period ended Note Commercial Residential Unallocated Group
30 June 2009
Segment 425 811 72 559 22 614 520 984
assets
Deferred 1 514 1 514
taxes
Total assets 425 811 72 559 24 128 522 498
Segment 209 247 38 974 267 248 488
liabilities
Deferred 37 962 37 962
taxes
Total 209 247 38 974 38 229 286 450
liabilities
Capital 5,6,7 10 342 3 724 14 066
expenditure
Depreciation 6 149 149
Period ended Note Commercial Residential Unallocated Group
30 June 2008
Revenue 8 440 2 0 8 442
Segment gross 8 601 (49) (0) 8 552
profit
Operating (20 846) (411) (1 569) (22 826)
profit/
(loss)
Finance 5 119 594 2 819 8 532
(costs)/income-net
Profit before (15 727) 183 1 250 (14 294)
income tax
Tax 1 855 1 855
(expense)/income
Period ended Note Commercial Residential Unallocated Group
31
December 2008
Segment 422 468 73 102 33 515 529 085
assets
Deferred 1 024 1 024
taxes
Total assets 422 468 73 102 34 539 530 109
Segment 216 081 34 879 296 251 256
liabilities
Deferred 40 115 40 115
taxes
Total 216 081 34 879 40 411 291 371
liabilities
Capital 5,6,7 53 091 17 233 70 324
expenditure
Depreciation 6 256 256
5. Investment property
The carrying amount of investment property is the fair value of the property as determined by a registered independent appraiser having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued. Fair values are determined having regard to recent market transactions for similar properties in the same location as the Group's investment property. The date of the last valuation is 31 December 2008.
From 1 January 2009 the Group applies the improvements to IFRSs and specifically improvements to IAS 40 Investment property. Under the new requirements investment property under development was reclassified to investment property.
The following table shows the movements in the balances of investment property during the period, and the classification of the investment properties by country and by status.:
Investment property Period ended 30 Period ended 31
Jun 2009 Dec 2008
At beginning of period 402 708 394 503
Acquisition of properties 0 13 815
Acquisition of subsidiaries 0 14 180
Capitalised expenses 9 743 31 423
Reclassification from/(to) 0 (1 572)
property plant and
equipment
Reclassification from/(to) inventory 1 914 0
Disposal 0 0
Effect of movements in foreign exchange (8 395) (17 062)
Net gain from fair value adjustments 3 887 (32 579)
on investment
property
At end of period 409 857 402 708
Closing value according
to asset segments:
Investment property by countries : Period ended 30 Period ended 31
Jun 2009 Dec 2008
Hungary 323 266 317 670
Czech Republic 48 007 47 527
Romania 20 969 22 075
Poland 17 615 15 436
TOTAL 409 857 402 708
Investment property by Period ended 30 Period ended 31
status of projects: Jun 2009 Dec 2008
Projects for future development 105 163 96 438
Projects under development 32 350 44 224
Finished projects 272 344 262 046
TOTAL 409 857 402 708
6. Property, plant and equipment
Note Land & Plant and Total
buildings equipment
Cost
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 (67) (163) (230)
foreign exchange
Balance at 31 December 2008 9 912 1 164 11 076
Balance at 1 January 2009 9 912 1 164 11 076
Acquisitions 568 31 599
Disposal 0 (87) (87)
Reclassified (to)/from 0 0 0
investment property
Effect of movements in (201) (43) (244)
foreign exchange
Balance at 30 June 2009 10 279 1 065 11 344
Depreciation
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 (9) (49) (58)
foreign exchange
Balance at 31 December 2008 226 554 780
Balance at 1 January 2009 226 554 780
Charge for the year 58 91 149
Disposal 0 (72) (72)
Reclassified (to)/from 0 0 0
investment property
Effect of movements in 9 (12) (3)
foreign exchange
Balance at 30 June 2009 293 561 854
Carrying amount
At 31 December 2008 9 685 610 10 295
At 30 June 2009 9 986 504 10 490
Acquisition mostly includes the development of Hotel Rosslyn in Budapest.
7. Inventories
Current inventory Period ended Period ended
30 Jun 2009 31 Dec 2008
Opening Balance 9 825 57 991
Additions 3 724 17 233
Acquisition of subsidiary 0 2 501
Reclassification from /(to) long term (144) (59 950)
inventory
Reclassification from/(to) investment (1 914)
property
Sales 0 (15)
Impairment of inventory 0 (3 447)
Exchange differences 164 (4 488)
Closing Balance 11 655 9 825
Long term inventory Period ended Period ended
30 Jun 2009 31 Dec 2008
Opening Balance 59 950 0
Reclassification from/(to) inventory 144 59 950
Sales (1)
Net exchange difference (2 716)
Acquisition 155
Impairment (222)
Closing Balance 57 310 59 950
TOTAL inventory closing balance 68 965 69 775
Inventories comprise plots and developments for residential purposes. Inventories which are expected to be realised beyond the normal operating cycle of the residential property construction business are classified as long term inventories. These are plots in Romania, Hungary, Poland and Czech Republic where the Group plans to develop residential projects but due to the current financial and economic market conditions the development is postponed for unknown period.
The Group has set up a TEUR 222 (2008: nil) impairment on inventory, based on management estimates.
8. Equity
Earnings per share calculation Period ended Period ended
30 Jun 2009 30 Jun 2008
Net profit / (loss) (1 462) (12 439)
Number of shares (in thousands) 109 185 108 864
Diluted number of shares (in thousands) 109 185 108 864
Basic earnings per share (in euro) (0,013) (0,114)
Diluted earnings per share (in euro) (0,013) (0,114)
Period ended Period ended
30 Jun 2009 30 Jun 2008
Dividend paid 0 5 066
Dividend per share (in euro) 0,0000 0,0465
On the 25th of March 2008 the Company 720 620 shares became vested under the Long term incentive plan.
During the period the average share price was below the exercise price of the options, therefore options did not have a diluting effect.
The dilution effect of free shares during the vesting period would decrease the loss per share figure, therefore it is not considered in the calculation.
The par value per share is 0.01 euro.
The Group has 171 541 pieces of repurchased treasury shares (30 June 2008: nil).
9.Borrowings
This note provides information about the contractual terms of the Group's interest-bearing borrowings which are measured at amortised cost.
Period ended 30 June Year ended 31
2009 December 2008
Non-current
Bank borrowings 182 857 190 169
Loans from minority shareholders 1 907 1 921
184 764 192 090
Current
Bank borrowings 49 204 39 281
Related party loans 0 18
from shareholders
49 204 39 299
Total borrowings 233 968 231 389
The maturity of non-current Period ended 30 June Year ended 31
borrowings is as follows: 2009 December 2008
Between 1 and 5 years 86 298 94 579
Over 5 years 98 466 97 511
184 764 192 090
The effective interest Period ended 30 June Year ended 31
rates at the balance 2009 December 2008
sheet date were as follows:
% %
Bank borrowings and related party
loans from shareholders
EUR 3,6% 5,0%
CHF 2,4% 2,7%
CZK 4,8% 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 30 June Year ended 31
Group's borrowings are 2009 December 2008
nominated in the following
currencies (in thousands
of the respective currency) :
EUR 226 536 226 346
CHF 2 950 3 073
CZK 142 023 79 811
10. Events after the balance sheet date (i.e. after 30 June 2009)
On July 15 2009 the Group completed an acquisition of a company that holds a plot on Jerusalemskaya Av. in Warsaw. The plot size is 25,000 square meters and the building rights for offices will be between 40,000 - 50,000 square meters lettable area. The purchase price was offset with a loan that was granted to the third party that was the owner of the purchased company on December 2007, so there were no additional cash paid at the acquisition date. The loan amount that was offset at 30 June 2009 was about EUR8.4 million.
1 Based on the latest external valuators valuation report as at 31 December 2008
2 Property valuation of EUR594 m less IFRS Investment property (EUR409.9m), property plant and equipment (EUR10. 5m) and inventories (EUR69.0m)
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