| Thu 10 Feb 2011, 17:00 | | NEP - New Europe Property Investments Plc - Condensed consolidated audited |
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NEP
NEP
NEP - New Europe Property Investments Plc - Condensed consolidated audited
financial statements for the year ended 31 December 2010
NEW EUROPE PROPERTY INVESTMENTS PLC
(Incorporated and registered in the Isle of Man with
registered number 00121 1V)
(Registered as an external company with limited liability under the laws of
South Africa, Reg No 2009/000025/10)
AIM share code: NEPI
JSE share code: NEP
ISIN code: IM00B23XCH02
("NEPI", "the Group" or "the Company")
CONDENSED CONSOLIDATED AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2010
DIRECTORS` COMMENTARY
1 DISTRIBUTABLE EARNINGS
The Group has achieved distributable earnings of 17.61 EUR cents per share in
respect of the 2010 financial year. This represents an 11.7% increase on the
15.77 EUR cents per share in distributable earnings generated during the 2009
financial year and compares positively with the estimated 2.2% inflation in the
euro area. Accordingly the Company has declared a second interim dividend of
9.26 EUR cents per share and will recommend this to shareholders as a final
dividend per share in respect of the 2010 financial year.
The improvement in distributable earnings was supported by the continued
performance of the Group`s portfolio held as at 31 December 2009, favourable
acquisitions made during 2010 and a reduction in costs achieved through the
internalisation of its investment advisor, NEPI Investment Management Limited.
2 OTHER HIGHLIGHTS
On 4 August 2010 the Company completed the transfer of its listing from the
Alternative Exchange ("AltX") of the JSE Limited ("JSE") to the Main Board of
the JSE in South Africa. During the year the Company raised EUR36 million
through a vendor placement in March and private placement in April,
respectively. The Company raised a further EUR40 million in December 2010
through an over-subscribed rights issue. The capital raisings combined with the
transfer of the Company`s listing to the Main Board of the JSE in South Africa
extended the Company`s shareholder base and improved liquidity in the trading of
the Company`s shares. The Board has decided to pursue a listing on the Bucharest
Stock Exchange.
3 PROPERTY ACQUISITIONS AND DEVELOPMENT
The Group continued to expand its asset base in Romania through three
acquisitions and an extension of its retail property in Braila that is planned
to be fully operational by the end of the first quarter of 2011. The Group took
steps to secure undeveloped land plots adjacent to an existing property that the
Group is interested to invest in with the view to launch a re-development of the
combined properties.
Acquisitions
As announced on 11 March 2010, the Group acquired a 33 000 m2 retail park
located in Pitesti, Romania. The property is fully leased to Auchan hypermarket
and Bricostore DIY. Linked to the property is an under-performing 7 000 m2
shopping gallery over which NEPI has a call option expiring in June 2011.
The Group acquired the Otopeni Warehouse, a 5 000 m2 warehouse located in the
proximity of the Bucharest international airport, during the second half of the
year. The property is tenanted by UPS Romania, the Romanian subsidiary of the
international courier, and Delamode, a transportation and logistics company.
Although small, the property includes vacant land which provides extension
opportunities in a highly desirable area once the existing lease agreements
expire.
During December 2010 the Group acquired Floreasca Business Park, a 36 000 m2 A-
class office building located on one of Bucharest`s main boulevards. Floreasca
Business Park has convenient access to a subway station and other means of
public transport and is leased mainly to international corporations. Although
NEPI`s main focus is on retail assets, NEPI is of the view that the Bucharest
office market offered value for investors and concluded this acquisition
following a review of 12 potential acquisition targets, based on visibility,
technical quality, design, parking facilities and access to public transport.
The Floreasca Business Park achieved the highest ranking of the potential
acquisition targets.
Development
In Braila, the Group began expanding its shopping mall by constructing a ten-
screen cinema and a large entertainment area that includes a food court and an
ice rink all of which are planned to be fully operational by the end of March
2011. This expansion is expected to further strengthen the dominant position of
Promenada Mall Braila in its region. The Group has also acquired land adjacent
to the property and is considering a further extension of the centre given
demand for space from larger fashion retailers.
The Group has secured land adjacent to one of Carrefour Property`s existing
operating properties in Romania and has reached a preliminary agreement with
Carrefour Property to redevelop the combined properties. The agreement is
subject to receiving approval from the Carrefour Property Board and documenting
the terms of the joint venture. It is expected that this will result in a
regionally dominant shopping centre of some 50 000 m2 on completion.
In the Directors` Commentary in the interim results for the six months ended 30
June 2010 reference was made to an agreement in relation to the development of a
shopping centre in Bucharest. The Group decided not to proceed with this project
due to an unfavourable feasibility study. Finally, the Group did not proceed
with an investment and re-development opportunity of a shopping centre in Bacau,
Romania due to the counter party withdrawing from the transaction.
4 DEBT
As reported in the Directors` Commentary in the interim results for the six
months ended 30 June 2010, in June 2010 the Group successfully refinanced a loan
facility in relation to Retail Park Auchan Pitesti. The Group capped the
reference rate (Euribor) at 2.25% in relation to the new loan facility and
reduced the cap strike levels to 2.25% on all the other outstanding variable
interest rate loans.
With the acquisition of Floreasca Business Park the Group took over a EUR71
million facility from Raiffeissen Bank and entered into a cap agreement at 2% in
relation to the reference rate (Euribor). As a result, the Group`s overall loan
to value ratio increased to 49% when adjusted for cash at hand, which is below
the Board`s target range.
5 PROSPECTS
NEPI is well positioned for further growth in distributable earnings in 2011.
The Group will continue to explore further investment and development
opportunities in the Romanian market.
By order of the Board
Martin Slabbert
Chief Executive Officer
Victor Semionov
Financial Director
10 February 2011
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Group Group
Audited Audited
31 Dec 10 31 Dec 09
EUR EUR
ASSETS
Non-current assets 328 991 707 151 470 854
Investment property 313 755 281 145 965 096
Investment property at fair value 300 899 292 139 222 255
Investment property under development 12 855 989 6 742 841
Goodwill 13 849 887 4 414 804
Financial assets at fair value through
profit or loss 1 386 539 1 090 954
Current assets 31 185 529 15 673 022
Trade and other receivables 7 338 247 3 396 479
Cash and cash equivalents 23 847 282 12 276 543
Total assets 360 177 236 167 143 876
EQUITY AND LIABILITIES
Total equity attributable to equity holders 155 087 026 72 719 463
Share capital 712 686 386 247
Share premium 159 308 324 76 731 744
Share based payment reserve 759 550 234 900
Currency translation reserve (2 964 825) (2 650 069)
Accumulated loss (2 728 709) (1 983 359)
Total liabilities 205 090 210 94 424 413
Non-current liabilities 185 374 433 86 440 422
Interest bearing borrowings 168 564 379 77 970 398
Deferred tax liabilities 15 586 362 7 388 314
Financial liabilities at fair value through
profit or loss 1 223 692 1 081 710
Current liabilities 19 715 777 7 983 991
Trade and other payables 7 656 857 4 173 641
Loans and borrowings 9 847 153 1 956 386
Tenant deposits 2 211 767 1 853 964
Total equity and liabilities 360 177 236 167 143 876
Net assets value per share 2.18 1.88
Adjusted net asset value per share 2.22 1.97
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Group Group
Audited Audited
31 Dec 10 31 Dec 09
EUR EUR
Cash flows from operating activities* 3 335 524 2 612 814
Cash flows from financing activities 53 813 129 12 537 009
Cash flows from investing activities (45 441 (7 055 693)
330)
Net increase in cash and cash equivalents 11 895 835 8 094 130
Cash and cash equivalents brought forward 12 276 543 4 418 847
Translation effect on cash and cash 136 584 (236 434)
equivalents
Cash and cash equivalents carried forward 23 847 282 12 276 543
*Includes interest paid on bank borrowings amounting to EUR5 542 335 for
the year ended 31 December 2010 and EUR2 240 009 for the year ended
31 December 2009
CONSOLIDATED STATEMENT OF INCOME
Group Group
Audited Audited
31 Dec 10 31 Dec 09
EUR EUR
Net rental and related income 16 224 196 8 270 884
Contractual rental income and expense
recoveries 21 269 338 10 708 873
Property operating expenses (5 045 142) (2 437 989)
Share based payments (524 650) (153 059)
Foreign exchange gain 178 175 1 811 011
Investment advisory fees (703 323) (670 725)
Administrative expenses (1 991 478) (1 543 992)
Fair value adjustment on investment property 1 111 927 575 253
Profit before net finance expense 14 294 847 8 289 372
Net finance expense (5 906 809) (3 445 924)
Finance income 581 765 261 512
Finance expense (6 488 574) (3 707 436)
Profit before tax 8 388 038 4 843 448
Tax (1 476 694) (2 121 193)
Profit for the year attributable to
equity holders 6 911 344 2 722 255
Weighted average number of shares in issue 52 388 748 29 397 896
Diluted weighted average number
of shares in issue 56 334 549 30 877 071
Basic weighted average earnings
per share (EUR cents) 13.19 9.26
Diluted weighted average earnings
per share (EUR cents) 12.27 8.82
Distributable earnings per share (EUR cents) 17.61 15.77
Headline earnings per share (EUR cents) 11.07 13.74
Diluted headline earnings per share
(EUR cents) 10.29 13.08
STATEMENT OF OTHER COMPREHENSIVE INCOME
Group Group
Audited Audited
31 Dec 10 31 Dec 09
EUR EUR
Profit for the year attributable to equity
holders 6 911 344 2 722 255
Other comprehensive income
- currency translation differences (314 756) (1 892 383)
Total comprehensive income for the year 6 596 588 829 872
STATEMENT OF CHANGES IN EQUITY
Share
Based
Share Share Payments
capital premium reserve
Group audited EUR EUR EUR
Opening balance 1 January 2009 267 950 52 487 190 81 841
Transactions with owners 118 297 24 244 554 153 059
- shares issue 118 297 24 263 927 -
- issue cost recognised to equity - (19 373) -
- share based payment reserve - - 153 059
- dividend distribution - - -
Total comprehensive income - - -
- other comprehensive income - - -
- profit for the year - - -
Balance at 31 December 2009 386 247 76 731 744 234 900
Opening balance 1 January 2010 386 247 76 731 744 234 900
Transactions with owners 326 439 82 576 580 524 650
- share issue 326 439 82 949 893 -
- issue cost recognised to equity - (373 313) -
- share based payment reserve - - 524 650
- dividend distribution - - -
Total comprehensive income - - -
- other comprehensive income - - -
- profit for the year - - -
Balance at 31 December 2010 712 686 159 308 324 759 550
STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Currency
Translation Accumulated
reserve loss Total
Group audited EUR EUR EUR
Opening balance 1 January 2009 (757 686) (681 386) 51 397 909
Transactions with owners - (4 024 228) 20 491 682
- shares issue - - 24 382 224
- issue cost recognised to equity - - (19 373)
- share based payment reserve - - 153 059
- dividend distribution - (4 024 228) (4 024 228)
Total comprehensive income (1 892 383) 2 722 255 829 872
- other comprehensive income (1 892 383) - (1 892 383)
- profit for the year - 2 722 255 2 722 255
Balance at 31 December 2009 (2 650 069) (1 983 359) 72 719 463
Opening balance 1 January 2010 (2 650 069) (1 983 359) 72 719 463
Transactions with owners - (7 656 694) 75 770 975
- share issue - - 83 276 332
- issue cost recognised to equity - - (373 313)
- share based payment reserve - - 524 650
- dividend distribution - (7 656 694) (7 656 694)
Total comprehensive income (314 756) 6 911 344 6 596 588
- other comprehensive income (314 756) - (314 756)
- profit for the year - 6 911 344 6 911 344
Balance at 31 December 2010 (2 964 825) (2 728 709) 155 087 026
NOTES TO THE CONDENSED CONSOLIDATED AUDITED FINANCIAL STATEMENTS
BASIS OF PREPARATION
The condensed audited consolidated financial statements have been prepared in
accordance with the recognition and measurement criteria of the International
Financial Reporting Standards (IFRS), its interpretations adopted by the
International Accounting Standards Board (IASB), the presentation and the
disclosure requirements of IAS 34 Interim Financial Reporting and the Listings
Requirements of the JSE. The accounting policies adopted are consistent with
those of the prior year.
Ernst & Young has audited the financial information set out in this report.
Their unmodified audit report is available for inspection at the Group`s
registered office.
INVESTMENT PROPERTY
Investment properties are those held either to earn rental income or for capital
appreciation or both. After initial recognition investment properties are
measured at fair value. Fair values are determined annually by external
independent professional valuators with appropriate and recognised professional
qualifications and recent experience in the location and category of property
being valued.
BUSINESS COMBINATIONS
The four acquisitions made by the Group during 2010, described in more detail in
the Directors` Commentary, were accounted for as business combinations in terms
of IFRS 3 Revised.
EFFECTS OF BUSINESS COMBINATIONS ON THE GROUP`S FINANCIAL STATEMENTS
Acquisition Net asset
Effective price for value at
acquisition 100% of acquisition
date equity date
EUR EUR
Retail Park Auchan Pitesti 1 Jan 2010 14 091 414 11 697 401
Otopeni Warehouse 20 Sep 2010 4 995 460 4 995 460
Floreasca Business Park 31 Dec 2010 30 280 445 28 616 031
NEPI Investment Management Limited 30 Jun 2010 6 825 948 944 172
EFFECTS OF BUSINESS COMBINATIONS ON THE GROUP`S FINANCIAL STATEMENTS
(CONTINUED)
Contribution Contribution
to 2010 to 2010
consolidated consolidated
Goodwill revenues net profit
EUR EUR EUR
Retail Park Auchan Pitesti 2 394 013 5 722 010 7 583 231*
Otopeni Warehouse - 204 533 139 757
Floreasca Business Park 1 664 414 - -
NEPI Investment Management Limited 5 881 776 - (224 299)
*Includes the fair value gain of EUR 6 598 117
BANK LOANS AND BORROWINGS AS AT 31 DECEMBER 2010
Facility Outstanding Available
amount amount for
Borrower EUR EUR drawdown
EUR
Nepi Bucharest One SRL 7 300 000 6 200 000 1 100 000
Nepi Bucharest Two SRL 6 824 800 5 800 000 1 024 800
General Investment SRL 15 000 000 11 388 868 -
Premium Portfolio 13 995 000 13 681 912 -
Promenada Mall 40 000 000 40 000 000 -
Retail Park Auchan Pitesti 28 813 000 28 813 000 -
Floreasca Business Park* 77 000 000 71 413 947 -
BANK LOANS AND BORROWINGS AS AT 31 DECEMBER 2010 (CONTINUED)
Interest rate Hedge
Borrower EUR
Nepi Bucharest One SRL 1M Euribor +4.5% 1M Euribor capped at 2.25%
Nepi Bucharest Two SRL 1M Euribor +1.9% 1M Euribor capped at 2.25%
General Investment SRL Fixed at 6.23% -
Premium Portfolio Fixed at 5.17% -
Promenada Mall 3M Euribor +3.0% 3M Euribor capped at 2.25%
Retail Park Auchan Pitesti 1M Euribor +4.0% 1M Euribor capped at 2.25%
Floreasca Business Park* 3M Euribor +2.353% 3M Euribor capped at 2.00%
*The interest rate cap in relation to Floreasca Business Park was acquired
and paid for in January 2011
BANK LOANS REPAYMENT PROFILE
2011 2012 2013
EUR EUR EUR
Nepi Bucharest One SRL - - 6 200 000
Nepi Bucharest Two SRL 5 800 000 - -
General Investment SRL 1 005 008 1 064 641 1 137 283
Premium Portfolio 350 996 241 105 334 551
Promenada Mall - 2 155 654 2 155 653
Retail Park Auchan Pitesti - 2 204 194 1 887 252
Floreasca Business Park 3 629 552 4 399 692 63 384 703
Total 10 785 556 10 065 286 75 099 442
BANK LOANS REPAYMENT PROFILE (CONTINUED)
2014 2015 Total
EUR EUR EUR
Nepi Bucharest One SRL - - 6 200 000
Nepi Bucharest Two SRL - - 5 800 000
General Investment SRL 8 181 936 - 11 388 868
Premium Portfolio 12 755 260 - 13 681 912
Promenada Mall 35 688 693 - 40 000 000
Retail Park Auchan Pitesti 2 247 414 22 474 140 28 813 000
Floreasca Business Park - - 71 413 947
Total 58 873 303 22 474 140 177 297 727
RECONCILIATION OF PROFIT FOR THE YEAR TO DISTRIBUTABLE EARNINGS
Group Group
Audited Audited
31 Dec 10 31 Dec 09
EUR EUR
Profit for the year attributable to
equity holders 6 911 344 2 722 255
Unrealised foreign exchange gain (178 175) (1 811 011)
Realised foreign exchange losses - (87 000)
Listing expenses - 905 048
Acquisition fees 831 369 286 211
Share based payment fair value 524 650 153 059
Accrued interest on share based payments 491 064 170 721
Fair value adjustment (1 111 (575 253)
927)
Financial assets at fair value 836 397 855 754
Amortisation of the financial assets (426 032) (117 288)
Deferred tax expense 1 460 883 2 114 061
Share issue cum distribution 2 325 443 547 821
Distributable earnings for the year 11 665 016 5 164 378
Number of shares entitled to distribution 73 346 586 37 070 515
Distributable earnings per share for
the year (EUR cents) 17.61 15.77
First interim dividend (EUR cents) 8.35 7.66
Second interim dividend (EUR cents) 9.26 8.11
RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS
Group Group
Audited 31 Audited 31
Dec 10 Dec 09
EUR EUR
Profit for the year attributable to
equity holders 6 911 344 2 722 255
Changes in currency translation reserve
of foreign subsidiaries - 1 892 382
Fair value adjustment of investment property (1 111 927) (575 253)
Headline earnings 5 799 417 4 039 384
RECONCILIATION OF NET ASSET VALUE TO ADJUSTED NET ASSET VALUE
Group Group
Audited 31 Audited 31
Dec 10 Dec 09
EUR EUR
Adjusted net asset value 170 571 937 80 070 467
Net asset value per the statement of financial
position 155 087 026 72 719 463
Loans in respect of the share purchase scheme 13 748 436 4 377 494
Deferred tax 15 586 362 7 388 314
Goodwill (13 849 (4 414 804)
887)
Net asset value per share 2.18 1.88
Adjusted net asset value per share 2.22 1.97
Number of shares for net assets value
per share purposes 71 268 704 38 624 771
Number of shares for adjusted net assets value
per share purposes 76 933 734 40 657 663
LEASE EXPIRY PROFILE
Total based Total based
on rental on rented
Year income area
2011 3.8% 5.3%
2012 9.6% 8.8%
2013 3.7% 2.4%
2014 14.5% 12.9%
2015 20.0% 15.3%
2016 4.4% 3.4%
2017 3.3% 2.0%
2018 3.1% 1.5%
2019 1.0% 1.1%
>=2020 36.6% 47.3%
Total 100% 100%
SEGMENTAL ANALYSIS
Group Group
31 Dec 10 31 Dec 09
EUR EUR
Contractual rental income and expense
recoveries
Retail 13 636 990 4 807 694
Industrial 1 376 030 1 191 587
Office 6 256 318 4 709 592
Total 21 269 338 10 708 873
Profit before net finance expense
Retail 16 902 869 6 652 814
Industrial 961 679 179 460
Office (430 901) 3 032 304
Corporate (3 138 800) (1 575 206)
Total 14 294 847 8 289 372
PAYMENT OF SECOND INTERIM DIVIDEND
The board has approved and notice is hereby given of a dividend per share of
9.26 EUR cents for the six months ended 31 December 2010.
The salient dates for the dividend are set out below:
Last day to trade (JSE) Friday 25 February 2011
Ex-dividend date (JSE) Monday 28 February 2011
Ex-dividend date (AIM) Wednesday 2 March 2011
Record date Friday 4 March 2011
Payment date Friday 11 March 2011
No dematerialisation or rematerialisation of share certificates, nor transfer of
shares between registers in the Isle of Man and South Africa will take place
between Monday, 28 February 2011 and Friday, 4 March 2011.
Shareholders on the South African sub-register will receive dividends in South
African Rand, based on the exchange rate to be obtained by the Company on 18
February 2011. A further announcement in this respect will be made on or before
18 February 2011.
Registered office
2nd Floor, Anglo International House, Lord Street, Douglas, Isle of Man,
IM1 4LN
Transfer secretaries and settlement agent
Computershare Investor Services (Proprietary) Limited, 70 Marshall Street,
Johannesburg, 2001, South Africa
(PO Box 61051, Marshalltown, 2107, South Africa)
Computershare Investor Services (Jersey) Limited, 2nd floor,
Queensway House, Hilgrove Street, St Helier, JE1 1ES, Jersey
Directors
Dan Pascariu (Chairman)*, Desmond de Beer#, Michael Mills*, Dewald Joubert*,
Jeffrey Zidel*, Victor Semionov (Financial Director), Martin Slabbert (Chief
Executive Officer)
*Independent non-executive director
#Non-executive director
For further information please contact
New Europe Property Investments Plc
+40 74 432 8882 Martin Slabbert
Smith & Williamson Corporate Finance Limited
+44 20 7131 40000 Azhic Basirov/Charles Combe
South African Sponsor
Java Capital +27 11 283 0042
Date: 10/02/2011 17:00:01 Produced by the JSE SENS Department.
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