| Wed 8 Feb 2012, 17:48 | | NEP - New Europe Property Investment Plc - Condensed consolidated audited |
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NEP
NEP
NEP - New Europe Property Investment Plc - Condensed consolidated audited
financial statements for the year ended 31 December 2011
NEW EUROPE PROPERTY INVESTMENT PLC
(Incorporated and registered in the Isle of Man with registered number 001211V)
(Registered as an external company with limited liability under the laws of
South Africa, Registration number 2009/000025/10)
AIM share code: NEPI
BVB share code: NEP
JSE share code: NEP
ISIN code: IM00B23XCH02
("NEPI", "the Group" or "the Company")
CONDENSED CONSOLIDATED AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31
DECEMBER 2011
DIRECTORS` COMMENTARY
DISTRIBUTABLE EARNINGS
The Group has achieved distributable earnings of 24.67 euro cents per share for
the financial year ended 31 December 2011. This is as a result of continued
strong performances in the Group`s assets, the favourable acquisition of the
Floreasca offices in Bucharest during December 2010 and a settlement with the
vendor of the Raiffeisen office portfolio in relation to the non-performance of
certain obligations towards the Group.
The vendor settlement gave rise to non-recurring income and as a result the
Board resolved to limit the full year dividend to 20.25 euro cents per share, an
improvement of 15% over the 17.61 euro cents distributable earnings per share
generated during the 2010 financial year. The retained distributable earnings of
Euro4.4 million generated during the 2011 financial year will be considered for
distribution in relation to the 2012 and 2013 financial years, whilst the Group
pursues further growth in dividend distributions and a number of property
developments. Accordingly, the Board has declared a final dividend of 10.48 euro
cents per share in respect of the six months ended 31 December 2011.
OTHER HIGHLIGHTS
The Company raised a combined Euro68.8 million via a private placement during
June 2011 and a rights issue during December 2011. Both capital raisings were
substantially oversubscribed, despite turmoil in the capital markets in the
second half of the 2011 financial year. As a result, the shareholder base of the
Company expanded significantly and the liquidity in the trading of the Company`s
shares improved thus contributing to the inclusion of the Company`s shares in a
number of indices during December 2011.
In respect of the Raiffeisen portfolio which was acquired in 2008, the vendor
undertook a number of obligations towards the Group, which included rental
guarantees and performing refurbishments. In addition, the vendor undertook the
obligation to buy the property in Constanta from the Group as a result of an
option exercised by the Group during the 2009 financial year. A number of the
vendor`s obligations were not fulfilled or fulfilled late. In August 2011 the
parties had reached a financial settlement that was subsequently implemented.
The settlement agreement led to the transfer of the Constanta property to the
vendor and the realisation by the Group of substantial late payment and non-
performance penalties. Some Euro2.4 million of the vendor`s settlement
obligations towards the Group remained outstanding at the 2011 financial year-
end and these are secured over three real estate properties owned by the vendor
group.
The Company was admitted to trading on the regulated market of the Bucharest
Stock Exchange on 20 June 2011.
RETAIL ACQUISITIONS, EXTENSIONS AND DEVELOPMENTS
Promenada Mall Braila | The Group finalised and opened an extension of
Promenada Mall Braila consisting of a 10-screen cinema complex and a large
entertainment area during April 2011. The entertainment extension has proved to
be successful and contributed to a substantial increase in footfall and tenants`
turnovers. A vacancy of some 7 000m2 occurred following the insolvency of Staer,
a national furniture retailer, during February 2011. A redevelopment was pursued
in order to integrate the purpose-built former Staer space into the shopping
centre. This redevelopment was completed in November 2011 and the vacancy has
been re-let. The Group is currently underway with a re-configuration and re-
tenanting of the fashion section of the Mall that will result in the addition of
C&A and H&M as tenants during the second quarter of the 2012 financial. It is
expected that this will strengthen the centre`s regional dominance.
Brasov Strip Mall | During the year, the Group acquired land adjacent to its
retail asset in Brasov that borders a top-performing Carrefour hypermarket and
initiated a redevelopment of the combined property into a 5 300m2 GLA strip
mall. The fully let redevelopment was completed in November 2011, with DM and
Flanco opening for trade on 1 December 2011, whilst C&A, Deichman, New Yorker
and Takko are expected to be trading by the end of the first quarter of the 2012
financial year.
Retail Park Auchan Pitesti | During the year, the Group acquired the
underperforming remaining 7 000m2 GLA galleria linked to the Retail Park Auchan
Pitesti that it did not acquire in 2010 to become the sole owner of the
property. The Group redeveloped the galleria into a value centre which resulted
in an addition of 3 345m2 of GLA to the retail park. This included an extension
of the Auchan hypermarket sales area by 3 200m2 turning it into the largest
hypermarket in Romania outside of the capital city. The redeveloped section of
the property was opened on 1 December 2011 with 8 195m2 of it having been let by
year-end to tenants including Domo, Naturlich, Reserved outlet and Toyplex.
Ploiesti Shopping City | During the year, the Group acquired land adjacent to
Carrefour`s operating hypermarket in Ploiesti, Romania and reached agreement
with Carrefour Property to redevelop the combined properties into a regional
shopping centre. The Ploiesti hypermarket is Carrefour`s leading hypermarket in
Romania outside of Bucharest. Construction works commenced during December 2011
and leases have been agreed with tenants including Altex, Bershka, Cinema City,
H&M, Lee Cooper, Massimo Dutti, New Yorker, Office Shoes, Orsay, Oysho, Pull and
Bear, Reserved, Stradivarius, Vodafone and Zara. Several other tenant
negotiations are ongoing and the development that will comprise 56 000m2 GLA on
completion is progressing as scheduled and is expected to open towards the end
of the 2012 financial year.
Victoria City Centre | During November 2011, the Group concluded an agreement
to acquire a 50% shareholding in a company that owns a former factory site
located in the north-western part of Bucharest, an area which is under-serviced
with retail space and that benefits from excellent accessibility both by car and
public transportation. There is a metro stop in front of the site allowing
direct metro access to the proposed development. Further public transport is
available through bus, tram and trolley lines. It is proposed to develop a 56
000m2 GLA shopping centre on the site. As of the date of this report, this
development remains subject to the Group and the joint venture partner agreeing
to and formally adopting a project development plan, which is expected to occur
by the end of February 2012.
Brasov buy and leaseback | The Group is currently finalising a due diligence
in relation to a buy and leaseback transaction with Mobexpert, the leading
Romanian furniture retailer, in relation to its retail asset in Brasov, Romania.
The retail asset is located on a site of some 15 600m2 that borders NEPI`s
recently completed strip mall and the Carrefour hypermarket in Brasov.
OFFICE ACQUISITIONS, EXTENSIONS AND DEVELOPMENTS
Brasov Office | As previously reported, the Group finalised the refurbishment
of the Brasov office building during the 2011 financial year. 3 400m2 of the
refurbished office area remains unrented at the 2011 financial year-end.
Victoriei Office | During August 2011, the Group indirectly acquired a 4 400m2
plot of land in Victoriei Square, Bucharest. The land that contains a neglected
historic villa that has been declared a national monument is located in the
centre of Bucharest, 200 metres from the central government seat and 20 metres
from an entrance to one of the largest metro nodes of the city. The intention is
to refurbish the villa and to develop a complimentary A-class office building on
the land that will integrate with, and expand the public space of Victoriei
Square. The project is in design and permitting phase.
City Business Centre | During January 2012, the Group concluded agreements to
indirectly acquire 47 000m2 GLA A-class offices in the town centre of Timisoara,
Romania. Timisoara is the fourth largest city in Romania with a population in
excess of 315 000 and is home to a growing back-office activities-and-services
market that offers a skilled labour force, low costs and proximity to Western
Europe. The acquisition includes three existing office buildings of some 27
150m2 GLA and a forward commitment to acquire two further office buildings of
some 20 000m2 GLA that are under development. Tenants in the three existing
buildings include Alcatel, Deloitte, IBM, Microsoft, PWC, Raiffeisen Bank and
Unicredit. Autoliv and SAP are expected to become tenants in the office
buildings under development.
DISPOSALS
As a result of exercising of a put option, the Group transferred in August 2011
the Constanta property, a 6 797m2 GLA office building that was part of the
Raiffeisen portfolio, to the vendor as part of the financial settlement
mentioned above.
DEBT
In April 2011, the Group repaid the Euro6.8 million Alpha Bank loan facility
that was due for repayment and replaced this in June 2011 with a Euro9.5 million
revolving facility from Unicredit Bank. The new revolving facility carries an
interest rate of 1 month Euribor plus 3.0% and matures on 31 May 2012 when, at
the Group`s option, the facility is convertible into a term-loan repayable on 31
December 2014. As at 31 December 2011, the new facility was undrawn.
The Group entered into a swap agreement during November 2011, fixing its base
rate in relation to Euro104.7 million of its interest bearing debt at 1.8% for 5
years from this date.
Prospects
The Group will continue to pursue further growth in recurring distributable
earnings per share in the medium-term via the combination of an expected strong
performance of its existing portfolio together with the acquisition and
development activities reported on above as well as exploring further
acquisitions and developments in Romania and in some of the other countries in
the region.
By order of the Board
Martin Slabbert
Chief executive officer
Victor Semionov
Financial director
8 February 2012
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
31 Dec 11 31 Dec 10
Euro Euro
ASSETS
Non-current assets 362 404 369 328 991 707
Investment property 341 802 837 313 755 281
Investment property at fair value 316 393 495 300 899 292
Investment property under development 25 409 342 12 855 989
Goodwill 13 351 499 13 849 887
Other long term assets 6 213 458 -
Financial assets at fair value through
profit or loss 1 036 575 1 386 539
Current assets 62 816 541 31 185 529
Trade and other receivables 7 751 441 7 338 247
Cash and cash equivalents 55 065 100 23 847 282
Total assets 425 220 910 360 177 236
EQUITY AND LIABILITIES
Total equity attributable to equity holders 235 258 940 155 087 026
Share capital 955 693 712 686
Share premium 227 844 770 159 308 324
Share based payment reserve 7 456 257 759 550
Currency translation reserve (2 650 522) (2 964 825)
Accumulated profit/(loss) 1 652 742 (2 728 709)
Total liabilities 189 961 970 205 090 210
Non-current liabilities 174 098 216 185 374 433
Interest bearing borrowings 156 629 879 168 564 379
Deferred tax liabilities 15 086 152 15 586 362
Financial liabilities at fair value through
profit or loss 2 382 185 1 223 692
Current liabilities 15 863 754 19 715 777
Trade and other payables 5 259 041 7 656 857
Interest bearing borrowings 8 235 659 9 847 153
Tenant deposits 2 376 830 2 211 767
Total equity and liabilities 425 220 910 360 177 236
Net asset value per share 2.41 2.18
Adjusted net asset value per share 2.43 2.22
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
31 Dec 11 31 Dec 10
Euro Euro
Cash flows from operating activities* 17 186 867 3 335 524
Cash flows from financing activities 38 246 038 53 813 129
Cash flows from investing activities (24 164 735) (45 441 330)
Net increase in cash and cash equivalents 31 268 170 11 707 323
Cash and cash equivalents brought forward 23 847 282 12 276 543
Translation effect on cash and cash
equivalents (50 352) (136 584)
Cash and cash equivalents carried forward 55 065 100 23 847 282
*Includes interest paid on bank borrowings amounting to Euro7 649 493
for the year ended 31 December 2011 and EuroEuro5 542 335 for the year
ended 31 December 2010.
CONSOLIDATED STATEMENT OF INCOME
Audited Audited
31 Dec 11 31 Dec 10
Euro Euro
Net rental and related income 23 727 203 16 224 196
Contractual rental income and expense
recoveries 32 069 075 21 269 338
Property operating expenses (8 341 872) (5 045 142)
Share based payments (1 041 647) (524 650)
Unrealised foreign exchange (loss)/gain (475 883) 178 175
Investment advisory fees - (703 323)
Administrative expenses (2 023 349) (1 991 478)
Fair value adjustment on investment property 3 010 852 1 111 927
Profit before net finance expense 23 197 176 14 294 847
Net finance expense (4 925 640) (5 906 809)
Finance income 6 253 858 581 765
Finance expense (11 179 498) (6 488 574)
Profit before tax 18 271 536 8 388 038
Tax 500 210 (1 476 694)
Profit for the year attributable
to equity holders 18 771 746 6 911 344
Weighted average number of shares in issue 78 659 834 52 388 748
Diluted weighted average number
of shares in issue 84 264 285 56 334 549
Basic weighted average earnings per share
(euro cents) 23.86 13.19
Diluted weighted average earnings per share
(euro cents) 22.28 12.27
Distributable earnings per share (euro cents) 24.67 17.61
Headline earnings per share (euro cents) 20.04 11.07
Diluted headline earnings per share
(euro cents) 18.70 10.29
RECONCILIATION OF PROFIT FOR THE YEAR TO DISTRIBUTABLE EARNINGS
Audited Audited
31 Dec 11 31 Dec 10
Euro Euro
Profit for the year attributable to
equity holders 18 771 746 6 911 344
Unrealised foreign exchange loss/(gain) 475 883 (178 175)
Acquisition fees - 831 369
Share based payment fair value 1 041 647 524 650
Accrued interest on share based payments 685 186 491 064
Fair value adjustment on investment property (3 010 852) (1 111 927)
Financial assets at fair value 4 263 016 836 397
Amortisation of financial assets (972 520) (426 032)
Deferred tax expense (500 210) 1 460 883
Share issue cum distribution 2 323 347 2 325 443
Distributable earnings for the year 23 077 243 11 665 016
Less: dividends declared (18 689 531) (11 665 016)
Interim dividend (8 293 733) (4 869 996)
Final dividend (10 395 798) (6 795 020)
Earnings not distributed 4 387 712 -
Number of shares entitled to distribution 99 196 545 73 346 586
Distributable earnings per share for
the year (euro cents) 24.67 17.61
Less: dividends declared (20.25) (17.61)
Interim dividend per share (euro cents) (9.77) (8.35)
Final dividend per share (euro cents) (10.48) (9.26)
Earnings per share not distributed
(euro cents) 4.42 -
STATEMENT OF OTHER COMPREHENSIVE INCOME
Audited Audited
31 Dec 11 31 Dec 10
Euro Euro
Profit for the year attributable to
equity holders 18 771 746 6 911 344
Other comprehensive income
- currency translation differences 314 303 (314 756)
Total comprehensive income for the year 19 086 049 6 596 588
RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS
Audited Audited
31 Dec 11 31 Dec 10
Euro Euro
Profit for the year attributable
to equity holders 18 771 746 6 911 344
Fair value adjustment of investment property (3 010 852) (1 111 927)
Headline earnings 15 760 894 5 799 417
RECONCILIATION OF NET ASSET VALUE TO ADJUSTED NET ASSET VALUE
Unaudited Audited
31 Dec 11 31 Dec 10
Euro Euro
Adjusted net asset value 249 738 983 170 571 937
Net asset value per the statement of
financial position 235 258 940 155 087 026
Loans in respect of the share purchase scheme 12 745 390 13 748 436
Deferred tax liabilities 15 086 152 15 586 362
Goodwill (13 351 499) (13 849 887)
Net asset value per share 2.41 2.18
Adjusted net asset value per share 2.43 2.22
Number of shares for net asset value
per share purposes 97 569 456 71 268 704
Number of shares for adjusted net asset
value per share purposes 102 783 693 76 933 734
SEGMENTAL ANALYSIS
Audited Audited
31 Dec 11 31 Dec 10
Euro Euro
Contractual rental income and expense
recoveries
Retail 14 848 471 13 636 990
Industrial 1 830 940 1 376 030
Office 15 389 664 6 256 318
Total 32 069 075 21 269 338
Profit before net finance expense
Retail 13 180 638 16 902 869
Industrial 1 097 525 961 679
Office 10 788 682 (430 901)
Corporate (1 869 669) (3 138 800)
Total 23 197 176 14 294 847
LEASE EXPIRY PROFILE
Total Total
based on based on
rental rented
Year income area
2012 1.1% 1.9%
2013 4.5% 2.3%
2014 17.1% 15.0%
2015 21.4% 18.1%
2016 3.8% 3.1%
2017 7.5% 6.2%
2018 3.4% 1.9%
2019 1.2% 1.1%
2020 2.6% 3.1%
>= 2021 37.4% 47.3%
Total 100% 100%
NOTES TO THE CONDENSED CONSOLIDATED AUDITED FINANCIAL STATEMENTS
BASIS OF PREPARATION
The condensed consolidated audited 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 Standard Board (IASB), the presentation and the
disclosure requirements of IAS 34 Interim Financial Reporting and the Listing
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 these financial statements. Their unmodified audit report is available
for inspection at the Group`s registered office. The independent auditor`s
report will be included in NEPI`s 2011 annual report.
INVESTMENT PROPERTY
Investment property are those held either to earn rental income or for capital
appreciation or both. After initial recognition investment property are measured
at fair value. Fair value is 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.
PAYMENT OF FINAL DIVIDEND
The board has approved and notice is hereby given of a dividend per share of
10.48 euro cents for the six months ended 31 December 2011
The salient dates for the dividend are set out below:
Last day to trade cum dividend (JSE) Friday, 24 February 2012
Ex-dividend date (JSE) Monday, 27 February 2012
Ex-dividend date (AIM and BVB) Wednesday, 29 February 2012
Record date Friday, 2 March 2012
Payment date Monday, 5 March 2012
No dematerialisation or rematerialisation of share certificates, nor transfer of
shares between sub-registers in the Isle of Man, South Africa and Romania will
take place between Monday, 27 February 2012 and Friday, 2 March 2012.
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 or
before 17 February 2012. A further announcement in this respect will be made on
or before 17 February 2012.
STATEMENT OF CHANGES IN EQUITY
Share
based
Share Share payment
capital premium reserve
Group audited Euro Euro Euro
Opening balance 1 January 2010 386 247 76 731 744 234 900
Transactions with owners 326 439 82 576 580 524 650
- issue of shares 326 439 82 949 893 -
- issue cost recognised to - (373 313) -
equity
- 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
Opening balance 1 January 2011 712 686 159 308 324 759 550
Transactions with owners 243 007 68 536 446 6 696 707
- issue of shares 243 007 69 914 745 -
- issue cost recognised to - (1 378 299) -
equity
- share based payment reserve - - 6 696 707
- dividend distribution - - -
Total comprehensive income - - -
- other comprehensive income - - -
- profit for the period - - -
Balance at 31 December 2011 955 693 227 844 770 7 456 257
STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Currency Accumulated
translation profit/
reserve (loss) Total
Group audited Euro Euro Euro
Opening balance 1 January 2010 (2 650 069) (1 983 359) 72 719 463
Transactions with owners - (7 656 694) 75 770 975
- issue of shares - - 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
Opening balance 1 January 2011 (2 964 825) (2 728 709) 155 087 026
Transactions with owners - (14 390 295) 61 085 865
- issue of shares - - 70 157 752
- issue cost recognised to
- equity - - (1 378 299)
- share based payment reserve - - 6 696 707
- dividend distribution - (14 390 295) (14 390 295)
Total comprehensive income 314 303 18 771 746 19 086 049
- other comprehensive income 314 303 - 314 303
- profit for the period - 18 771 746 18 771 746
Balance at 31 December 2011 (2 650 522) 1 652 742 235 258 940
BANK LOANS AND BORROWINGS AS AT 31 DECEMBER 2011
Facility Outstanding Available
amount amount for drawdown
Borrower Euro Euro Euro
Nepi Bucharest One SRL 6 200 000 6 200 000 -
General Investment SRL 15 000 000 8 721 936 -
Nepi Bucharest Two and Unique 9 500 000 - 9 500 000
Delamode SRL
Pemium Portofolio 13 995 000 13 330 916 -
Promenada Mall 40 000 000 40 000 000 -
Retail Park Auchan Pitesti 28 813 000 28 596 902 -
Floreasca Business Park 77 000 000 67 808 485 -
Total 190 508 000 164 658 239 9 500 000
BANK LOANS REPAYMENT PROFILE
2012 2013 2014
Borrower Euro Euro Euro
Nepi Bucharest One SRL - 6 200 000 -
General Investment SRL 1 064 641 1 137 283 6 520 012
Nepi Bucharest Two and/or - - -
Unique Delamode SRL
Premium Portofolio 241 106 334 550 12 755 260
Promenada Mall 2 155 653 2 155 654 35 688 693
Retail Park Auchan Pitesti 2 139 366 1 899 257 2 084 139
Floreasca Business Park 1 794 104 66 014 381 -
Total 7 394 870 77 741 125 57 048 104
BANK LOANS AND BORROWINGS AS AT 31 DECEMBER 2011 (CONTINUED)
Borrower Interest rate Hedge
Nepi Bucharest One SRL 1M Euribor+4.5% 1M Euribor capped at 2.00%
General Investment SRL Fixed at 6.23% -
Nepi Bucharest Two and 1M Euribor+3% 1M Euribor capped at 2.00%
Unique Delamode SRL
Pemium Portofolio Fixed at 5.17% -
Promenada Mall 3M Euribor+3.0% 3M Euribor swapped at 1.8%
Retail Park Auchan Pitesti 1M Euribor+4.0% 1M Euribor capped at 2.00%
Floreasca Business Park 3M Euribor+2.5% 3M Euribor swapped at 1.8%
Total
BANK LOANS REPAYMENT PROFILE
2015 2016 Total
Borrower Euro Euro Euro
Nepi Bucharest One SRL - - 6 200 000
General Investment SRL - - 8 721 936
Nepi Bucharest Two and/or - - -
Unique Delamode SRL
Premium Portofolio - - 13 330 916
Promenada Mall - - 40 000 000
Retail Park Auchan Pitesti 22 474 140 - 28 596 902
Floreasca Business Park - - 67 808 485
Total 22 474 140 - 164 658 239
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
Martin Slabbert +40 74 432 8882
Nominated Adviser and Broker
Smith & Williamson Corporate Finance Limited
Azhic Basirov/Siobhan Sergeant +44 20 7131 4000
JSE Sponsor
Java Capital +27 11 283 0042
Romanian Advisor
Intercapital Invest SA
Razvan Pasol +40 21 222 8731
www.nepinvest.com
Date: 08/02/2012 17:48:29 Produced by the JSE SENS Department.
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