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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| East Euro Prop. | LSE:EEP | London | Ordinary Share | GB00B0XQ3R24 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 28.50 | 24.00 | 33.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
TIDMEEP
RNS Number : 0819R
Eastern European Property Fund Ltd
19 September 2017
Hot Features
Premium
19 September 2017
EASTERN EUROPEAN PROPERTY FUND LIMITED
Unaudited half-yearly results for the six month period
ended 30 June 2017
HIGHLIGHTS
* Property held at 30 June 2017 valued at GBP12.2
million (30 June 2016: GBP15.5 million on a
like-for-like basis; 31 December 2016: GBP15.0
million).
* Net asset value at 30 June 2017 of GBP12.4 million,
equivalent to 79.68p per Ordinary Share (30 June
2016: GBP15.7 million, 100.79p per Ordinary Share; 31
December 2016 of GBP14.9 million, 95.76p per Ordinary
Share).
* Loss for the six months ended 30 June 2017 of GBP2.6
million (six months ended 30 June 2016: income of
GBP0.3 million; year ended 31 December 2016, loss of
GBP1.2 million), equivalent to a loss per share of
16.79p (30 June 2016: earnings of 2.24p; 31 December
2016: loss of 7.80p) per Ordinary Share.
For further information please visit www.eepfl.com
or contact:
Steve Pearce (nominated Bob Locker
adviser) CNC Property Fund Management
Henry Freeman (corporate Limited
broker) Tel: +44 1784 424 740
Liberum Capital Limited
Tel: +44 203 100 2000
Keiran Gallagher Oliver Cadogan
Pera Pera Walnut Investments OOD
Tel: +90 (212) 252 6048 Tel: +40 21 451 0823
Elysium Fund Management
Limited
elysium@elysiumfundman.com
Tel: +44 1481 810 100
CHAIRMAN'S STATEMENT
The uncertain political situation in Turkey during
the first half of the year had a detrimental effect
on business and investor confidence and, in turn,
on the valuation of the Markiz Passage building.
This was a substantial contributor to the 16.8% decrease
in the value of EEP's net assets since 31 December
2016.
Results
EEP reported a net loss after tax for the period
ended 30 June 2017 of GBP2.6 million (30 June 2016:
income of GBP0.3 million), representing a loss per
Ordinary Share of 16.79p (30 June 2016: earnings
of 2.24p). A GBP2.8 million loss on revaluation of
investment properties was the main reason for the
loss in the six month period ended 30 June 2016,
and rental income in the period decreased following
the sale of the Romanian subsidiary in December 2016.
Operating expenses continued to decrease, substantially
due to the sale of the Romanian subsidiary and associated
running costs.
EEP's consolidated net asset value ("NAV") at 30
June 2017 was GBP12.4 million, representing 79.68p
per Ordinary Share (31 December 2016: GBP14.9 million,
95.76p per Ordinary Share).
The Company's share price decreased by 6.50p during
the period from 50.50p at 31 December 2016 to 44.00p
at 30 June 2017, with the discount to NAV narrowing
from 47.3% at 31 December 2016 to 44.8% at 30 June
2017.
Property Portfolio and Valuations
EEP's two remaining properties continue to be marketed
for sale. The enquiries and offers for the Markiz
Passage building unfortunately did not progress to
serious proposals, but, encouragingly, after the
traditional quiet period during Ramadan and the summer
months, EEP has received further enquiries. These
enquiries are being actively pursued.
The Property Manager and Investment Adviser continue
to explore other options to improve the potential
liquidity of the property in Sofia.
The aggregate value of EEP's investment properties
remaining at 30 June 2017 decreased to the equivalent
of GBP12.2 million during the period and resulted
in a net unrealised loss on revaluation of GBP2.8
million (30 June 2016: loss of GBP0.1 million). Note
10 provides a reconciliation of the investment property
valuation movement.
Further details on each property, the prospects for
sales in the foreseeable future, recent market activity
and the investment environment are provided in the
Property Manager and Investment Advisers' Report.
It remains the Board's policy not to disclose the
breakdown of individual property values as that information
could be detrimental to commercial negotiations with
prospective buyers.
Distributions
The Board's intention remains to distribute to Shareholders
substantially all net proceeds of property sales,
subject to the need to retain sufficient funds for
EEP's ongoing operation. Following the disposal of
the Romanian subsidiary and receipt of sale proceeds
in December 2016, the Board decided to retain the
cash and not to immediately undertake further buybacks
of Ordinary Shares whilst options for the disposal
of the Markiz property are pursued. This policy remains
under regular review.
At the AGM held on 18 September 2017, Shareholders
resolved to renew EEP's authority to repurchase up
to 2,331,132 Ordinary Shares (a maximum of 14.99%
of the Ordinary Shares in issue at the date the authority
was sought).
Outlook and Strategy
The Property Manager and Investment Advisers refer
in their report to an upturn in enquiries for the
Turkish property since the quiet summer period, which
have been at levels higher than those received during
the first half of the year. Whilst it is disappointing
not to have been able to progress the enquiries and
offers that were received earlier in the year, the
renewed interest indicates improving market sentiment.
However, it should be noted that, in common with
numerous previous similar approaches, there is no
certainty that the expressions of interest will progress
into bona fide offers for the Company to formally
consider.
The Board, Manager, Property Manager and Investment
Advisers will be working to advance talks with the
interested parties with a view to securing a disposal
of EEP's key property asset as soon as possible.
However, the Board and the Manager remain concerned
at the level of the Company's operating costs relative
to the progress being made with asset disposals.
Should the latest negotiations not progress sufficiently
in the near future, the Board and the Manager will
contact shareholders to discuss options for a more
cost effective longer-term solution.
The Board, as always, is appreciative of your continued
patience. Any shareholder wishing to discuss the
Company's affairs is welcome to contact any of the
Directors, the Manager, the Property Manager or one
of the Investment Advisers.
Martin M. Adams
Chairman
18 September 2017
PROPERTY MANAGER AND INVESTMENT ADVISERS' REPORT
The half year ended 30 June 2017 has effectively
been a consolidating period with limited portfolio
activity in respect of EEP's two remaining properties
in Turkey (Markiz Passage on Istiklal Street, Istanbul)
and Bulgaria (The Atrium on George Washington Street,
Sofia).
In Turkey, President Erdogan led a successful campaign
and, in April 2017, won a referendum to change the
constitution and allow the Presidency to assume executive
powers. Since the end of the campaigning period,
although the result of the referendum was close with
the major cities voting against change, the overall
position is that the business community appears to
have welcomed a calmer political situation and there
is hope that the ruling AK Party will focus on creating
a positive economic environment as predominantly
prevailed in the past.
While the Markiz building has been the subject of
continued interest, primarily for purchase, the quality
of enquiries and potential bid levels have been very
low. The remaining tenant's lease came to an end
in March 2017 and as they had been in financial difficulty
in the previous six months there was no question
of them staying on.
In Bulgaria, while the political regime seems to
have the constant possibility of changing, the day
to day operation of the country continues with little
disruption. Despite repeated allegations of corruption,
the economic situation continues to gradually improve
and the behaviour of part of the political establishment
appears to have limited impact on the population
as a whole.
The Atrium in George Washington Street remains largely
occupied and has had a steady level of income for
some time. This may change next year as the largest
tenant, the United Bulgarian Bank ("UBB"), has been
taken over by KBC Bank, a Belgian universal multi-channel
bank focussing on private clients and small and medium
enterprises. Sales interest and enquiries have remained
at a very low level.
The properties held at 30 June 2017 were as follows:
Markiz Passage, Istiklal Street, Beyoglu, Istanbul
The property has effectively been vacant since the
beginning of 2017 and has been free of any lease
encumbrance since March. There has been some lease
interest for the whole of the property, which would
be considered if the terms were considered satisfactory,
but the enquiries to date have never reached a point
where serious negotiations could start. As indicated
above, potential buyers have made enquiries and visited
the property but were clearly looking to exploit
the political and economic uncertainty that existed
at the time of the referendum and a little time thereafter.
In June, road and landscaping upgrades started on
Istiklal Street and early indications suggested they
should be a significant improvement on the streetscape
of this mainly pedestrianised shopping street when
completed. These works are due to complete before
the end of 2017. Many of the shops that had become
empty in the lead up to the referendum and following
acts of terrorism in Istanbul, which led to the significant
reduction in tourists, have started to be occupied
again, although it should be noted that some of these
are more local operations and do not carry the presence
of the international retailers that were there before.
More recently, after the summer holidays, enquiries
have been received which seem more promising than
those received earlier in the year. However at the
time of writing it's too early to say how much true
intent the individual approaches have and we will
be working to establish this as quickly as possible.
The Atrium, George Washington Street, Sofia
Some small variations in the tenancies have occurred
which reflects the short-term nature of the majority
of the leases at the property. However, overall,
the total lease income has remained largely at the
same level as has been the case for some time due
to the fact that UBB has remained in occupation for
many years. However, as indicated above, UBB has
been taken over by KBC and the advice received locally
is that at the next lease expiry at the end of February
2018, UBB will leave and move to a new building owned
by KBC.
The existing property agencies have been advised
of the situation regarding UBB and the potential
for this space to be available in 2018.
Economic and Political Commentary
Turkey
Although the country has clearly stabilised since
the referendum and there have been no terror attacks
since early 2016, Turkey remains in a 'state of emergency'.
Despite winning the referendum to allow the Presidency
to become an executive role, President Erdogan has
chosen not to remove the additional powers conferred
by this edict and mass arrests have continued, apparently
related to the attempted coup in 2016.
Tourism has improved with a reported 22% increase
in numbers in the first seven months of the year
and the property market appears to have stabilised
following a significant sale of a Dutch fund's commercial
property portfolio primarily located in and around
Istiklal Street in Istanbul.
The average forecast for GDP growth for Turkey for
2017 is 3.7%, according to the latest Economist consensus
poll. The currency appears to have steadied and at
the time of writing stood at TL 3.4 to the US Dollar
compared to TL 3.5 to the US Dollar at the beginning
of 2017. The Turkish stock market has rebounded sharply
since the commencement of the year 2017, up 40.5%
in US Dollar valuation terms and is one of the best
performing markets in the world for the year to date.
However, inflation remains high and was recorded
at 9.8% in July. This is partly due to structural
issues and the weak currency.
Bulgaria
The political situation remains volatile and the
issue of corruption constantly seems to overhang
the state, but this seems to have little penetration
in terms of the mood of the people to suggest that
a significant change in the political and legislative
regime seems likely in the near future.
Bulgaria's economy posted 0.9% growth in GDP for
the second quarter of 2017. In annual terms economic
growth has risen from 3.5% to 3.6% compared to the
first quarter, driven mainly by increasing domestic
consumption.
Future Prospects
The focus is clearly on trying to dispose of the
remaining two properties. In both countries, while
the economies are improving and in Turkey the political
situation is significantly calmer than it was earlier
in the year, they are both still at a stage where
selling the properties will likely continue to be
a difficult task.
However, the more recent signs from Turkey are that
the much calmer environment and improvement in activity
levels, particularly in tourism, has led to business
confidence returning quite quickly. This has been
reflected in the more recent enquiries for the property,
which appear to be at a level above that experienced
in the first half of the year.
In Bulgaria, the Investment Adviser is investigating
a number of options to improve the liquidity of the
asset. In this respect, UBB not renewing its lease
next year will be helpful as the nature of their
occupation, while very positive from an income perspective,
has hindered other potential options for improving
the marketability of the property. The residential
property market has made progress in the last year
and small business operations are becoming more active
once again. The city centre of Sofia which is very
close in terms of the George Washington Street property
has seen significant progress in terms of upgrades
and landscape improvements in the last two years
and includes the direct metro connection to the airport.
All of these improvements are contributing towards
the attractiveness of the property as an option for
leasing and potentially for purchase.
In the event that the properties cannot be sold at
acceptable levels in the near future, the Manager
and Investment Advisers are aware that steps will
need to be taken to contain costs pending a more
improved environment when disposal issues are less
onerous. In this respect, the Manager, Property Manager
and Investment Advisers will prepare detailed options
for consideration by the Company.
Bob Locker
CNC Property Fund Management Limited
Keiran Gallagher
Pera Pera
Oliver Cadogan
Walnut Investments OOD
18 September 2017
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
for the six month period ended 30 June 2017 (unaudited)
1 January
1 January 1 January 2016
2017 2016 to 31
to 30 to 30 December
June 2017 June 2016 2016
Note (unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Income
Rental income 98 330 938
Other income 15 30 74
Bank interest receivable 3 2 7
------------ ------------ ------------
Total income 116 362 1,019
------------ ------------ ------------
Expenses
Performance fees 5 27 9 94
Building maintenance, power
and management (76) (135) (277)
Management fees 5 (87) (99) (198)
Administration fees 5 (58) (50) (110)
Directors' remuneration (35) (41) (76)
Other operating expenses (144) (185) (458)
----------- ----------- ------------
Total expenses (373) (501) (1,025)
------------ ------------ ------------
Investment gains and losses
Loss on revaluation of investment
properties 10 (2,805) (155) (845)
Gain on disposal of investment
properties 10 - 9 9
Loss on disposal of subsidiary - - (481)
------------ ------------ ------------
Total investment losses (2,805) (146) (1,317)
------------ ------------ ------------
Net loss from operating activities
before gains and losses on
foreign currency translation (3,062) (285) (1,323)
Gain on foreign currency
translation 15 300 192
------------ ------------ ------------
Net (loss)/profit from operating
activities (3,047) 15 (1,131)
Movement in provision for
estimated liquidation costs 5 - (59)
Taxation 430 333 (23)
------------ ------------ ------------
(Loss)/profit for the period/year (2,612) 348 (1,213)
Other comprehensive income/(loss)
that may be reclassified
to profit or loss in subsequent
periods
Exchange differences arising
from translation of foreign
operations 111 (451) 327
------------ ------------ ------------
Total other comprehensive
income/(loss) 7 111 (451) 327
------------ ------------ ------------
Total comprehensive loss
for the period/year attributable
to the Owners of the Group (2,501) (103) (886)
------------ ------------ ------------
(Loss)/earnings per share
- basic and diluted 8 (16.79)p 2.24p (7.80)p
------------ ------------ ------------
These results are unaudited and are not the Group's
statutory financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
ATTRIBUTABLE TO THE OWNERS OF THE COMPANY
for the six month period ended 30 June 2017 (unaudited)
Foreign
currency
Share Distributable translation
capital reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 1 January
2017 155 14,561 176 14,892
Total comprehensive
income/(loss) for the
year
Loss for the six month
period - (2,612) - (2,612)
Other comprehensive
income - - 111 111
---------- ---------- ---------- ----------
Net assets at 30 June
2017 155 11,949 287 12,391
---------- ---------- ---------- ----------
for the six month period ended 30 June 2016 (unaudited)
Foreign
currency
Share Distributable translation
capital reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 1 January
2016 155 15,774 (151) 15,778
Total comprehensive
income/(loss) for the
year
Profit for the six month
period - 348 - 348
Other comprehensive
loss - - (451) (451)
---------- ---------- ---------- ----------
Net assets at 30 June
2016 155 16,122 (602) 15,675
---------- ---------- ---------- ----------
for the year ended 31 December 2016 (audited)
Foreign
currency
Share Distributable translation
capital reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 1 January
2016 155 15,774 (151) 15,778
Total comprehensive
income/(loss) for the
year
Loss for the year - (1,213) - (1,213)
Other comprehensive
income - - 327 327
---------- ---------- ---------- ----------
Net assets at 31 December
2016 155 14,561 176 14,892
---------- ---------- ---------- ----------
These results are unaudited and are not the Group's
statutory financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2017 (unaudited)
30 June 30 June 31 December
2017 2016 2016
Note (unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Current assets
Freehold investment property 10 12,169 16,736 14,970
Intangible assets 2 4 3
Trade and other receivables 11 344 213 370
Cash and cash equivalents 1,647 1,211 1,918
Property, plant and equipment - 1 -
---------- ---------- ----------
Total assets 14,162 18,165 17,261
---------- ---------- ----------
Current liabilities
Deferred tax liabilities (1,547) (2,098) (2,095)
Trade and other payables (169) (253) (174)
Provision for estimated
liquidation costs 2 (53) - (59)
Overseas corporate tax (2) (54) (41)
Rents received in advance - (85) -
---------- ---------- ----------
Total liabilities (1,771) (2,490) (2,369)
---------- ---------- ----------
Net assets 12,391 15,675 14,892
---------- ---------- ----------
Capital and reserves
Called-up share capital 12 155 155 155
Distributable reserve 11,949 16,122 14,561
Foreign currency translation
reserve 287 (602) 176
---------- ---------- ----------
Total equity attributable
to owners of the Company 12,391 15,675 14,892
---------- ---------- ----------
NAV per Ordinary Share -
basic and diluted 13 79.68p 100.79p 95.76p
---------- ---------- ----------
These results are unaudited and are not the Group's
statutory financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six month period ended 30 June 2017 (unaudited)
1 January
1 January 1 January 2016
2017 2016 to 31
to 30 to 30 December
Note June 2017 June 2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Net (loss)/profit from operating
activities (3,047) 15 (1,131)
Adjustments for:
Bank interest receivable (3) (2) (7)
Loss on revaluation of investment
properties 10 2,805 155 845
Gain on foreign currency
exchange (15) (300) (192)
Gain on disposal of investment
properties 10 - (9) (9)
Loss on disposal of subsidiary - - 481
Amortisation and depreciation - 2 3
---------- ---------- ----------
Net cash outflow from operating
activities before working
capital changes (260) (139) (10)
Increase in trade and other
receivables (31) (22) (29)
Decrease in trade and other
payables and other current
liabilities (48) (30) (138)
---------- ---------- ----------
Net cash outflow from operating
activities after working
capital changes (339) (191) (177)
Interest received in the
period/year 3 2 7
Tax paid in the period/year (17) (58) (152)
---------- ---------- ----------
Net cash outflow from operating
activities (353) (247) (322)
Investing activities
Deferred consideration from
sale of subsidiary 11 79 - -
Sale of investment property - 556 569
Acquisition and development
of investment property (4) (17) (174)
Proceeds from sale of subsidiary - - 982
---------- ---------- ----------
Net cash inflow from investing
activities 75 539 1,377
---------- ---------- ----------
(Decrease)/increase in cash
and cash equivalents (278) 292 1,055
---------- ---------- ----------
Cash and cash equivalents
at the beginning of the
period/year 1,918 848 848
(Decrease)/increase in cash
and cash equivalents (278) 292 1,055
Foreign exchange movement 7 71 15
---------- ---------- ----------
Cash and cash equivalents
at the end of the period/year 1,647 1,211 1,918
---------- ---------- ----------
These results are unaudited and are not the Group's
statutory financial statements.
NOTES TO THE HALF-YEARLY RESULTS
for the six months ended 30 June 2017
1. General information
The Company is registered in Guernsey as an authorised
closed-ended investment company and its Ordinary Shares
are traded on AIM, a securities market operated by
the London Stock Exchange.
The Company's investment objective and policy is to
carry out an orderly realisation of the Company's
portfolio of assets, distribution of the net proceeds
to Shareholders and then undertake a voluntary winding-up
of the Company. Disposals may be by individual sales
or as transactions incorporating a group of properties.
2. Basis of preparation
These unaudited condensed consolidated half-yearly
results, which have not been audited by an independent
auditor, have been prepared in accordance with IAS
34: Interim financial reporting. They do not include
all of the information required for full annual financial
statements and should be read in conjunction with
the Group's audited consolidated financial statements
for the year ended 31 December 2016.
Going concern
The condensed consolidated half-yearly results have
been prepared on the same basis as the audited consolidated
financial statements for the year ended 31 December
2016, being a non-going concern basis, to reflect
the Company's investment objective and policy to carry
out an orderly realisation of the Company's portfolio
of assets. This has had no significant impact on the
condensed consolidated half-yearly results as the
properties have been measured at fair value and are
expected to be realised in an orderly manner. However,
a GBP53,000 provision (30 June 2016: GBPnil, 31 December
2016: GBP59,000) for the estimated costs of winding
up the Group has been included in the results.
It is possible that corporate income tax will arise
on capital gains on the disposal of the remaining
Turkish property. This liability has been provided
for in these condensed consolidated half-yearly results
as deferred tax and calculated on the assumption that
the property is realised at its current carrying value.
However, additional taxes, such as a 15% withholding
tax, may arise on the repatriation to Guernsey of
non-capital reserves from Turkey.
These condensed consolidated half-yearly results were
approved by the Board of Directors on 18 September
2017.
3. Significant accounting policies
Except for the adoption of the new, relevant, accounting
standards noted below, these unaudited condensed consolidated
half-yearly results have adopted the same accounting
policies as the last audited financial statements,
which were prepared in accordance with International
Financial Reporting Standards ("IFRSs") (with the
exception of IFRS 8, as explained in note 6, and IFRS
13, as explained in note 10), issued by the International
Accounting Standards Board ("IASB"), interpretations
issued by the IFRS Interpretations Committee and applicable
legal and regulatory requirements of Guernsey Law,
which have been adopted and applied consistently.
Effective
date
IFRS Disclosure of Interests in Other Entities 1 January
12 - annual improvements 2017
IAS Statement of Cash Flows - amendments 1 January
7 resulting from the disclosure initiative 2017
IAS Income Taxes - amendments regarding the
12 recognition of deferred tax assets for 1 January
unrealised losses 2017
During the period, the Group did not adopt any standards
or interpretations that had an impact on the financial
position or performance of the Group.
The IASB has issued/revised a number of relevant standards
and interpretations with an effective date after the
date of these unaudited condensed consolidated half-yearly
results. Any standards that are not deemed relevant
to the operations of the Group have been excluded.
The Board has chosen not to early adopt these standards
and interpretations and they do not anticipate that
they would have a material impact on the Group's financial
statements in the period of initial application.
In July 2014, the IASB issued the final version of
IFRS 9, Financial Instruments that replaces IAS 39,
Financial Instruments: Recognition and Measurement
and all previous versions of IFRS 9. IFRS 9 brings
together all three aspects of the accounting for financial
instruments project: classification and measurement,
impairment and hedge accounting. IFRS 9 is effective
for annual periods beginning on or after 1 January
2018, with early application permitted. Except for
hedge accounting, retrospective application is required
but providing comparative information is not compulsory.
For hedge accounting, the requirements are generally
applied prospectively, with some limited exceptions.
The Group plans to adopt the new standard on the required
effective date. The Group has performed a high-level
impact assessment of all three aspects of IFRS 9.
This preliminary assessment is based on currently
available information and may be subject to changes
arising from further detailed analyses or additional
reasonable and supportable information being made
available to the Group in the future. Overall, the
Group expects no significant impact on the consolidated
results or equity, and will perform a more detailed
assessment before the end of 2017.
i) Classification and measurement
The Group does not expect a significant impact on
the consolidated results or equity on applying the
classification and measurement requirements of IFRS
9. It expects to continue measuring at fair value
all financial assets and liabilities currently held
at fair value.
ii) Impairment
IFRS 9 requires the Group to record expected credit
losses on any loans and trade receivables, either
on a 12-month or lifetime basis. The Group expects
to apply the simplified approach and record lifetime
expected losses on all investment income and other
receivables. Given that investment income and other
receivables have not been impaired to date, the Group
does not expect there to be a significant impact on
its equity from reviewing the expected credit losses
on investment income and other receivables over their
lifetimes, but it will need to perform a more detailed
analysis which considers all reasonable and supportable
information, including forward-looking elements to
determine the extent of the impact.
iii) Hedge accounting
The Group does not currently designate any hedges
as effective hedging relationships which qualify for
hedge accounting. Therefore, the Group does not expect
there to be any impact with respect to hedge accounting
as a result of applying IFRS 9.
The impact that IFRS 15 will have on the Group's consolidated
results is also considered to be immaterial because
the Group does not have any contracts with customers
which meet the definition under IFRS 15.
4. Use of estimates and judgements
The significant judgements made by the Directors in
applying the accounting policies and the key sources
of estimation uncertainty were the same as those that
were applied to the consolidated financial statements
for year ended 31 December 2016 (also see note 10).
5. Management, administration and performance fees
Elysium Fund Management Limited ("Elysium") is Manager,
Administrator and Company Secretary to the Company,
CNC Property Fund Management Limited ("CNC") is Property
Manager and Pera Pera Yönetim ve Dani manlik
Hizmetleri ve Tic Limited ("Pera Pera") and Walnut
Investments OOD ("Walnut") are the Investment Advisers.
Pera Pera is Investment Adviser in respect of the
Turkish property and Walnut is Investment Adviser
in respect of the Bulgarian property.
Administration fees
The Company pays Elysium, by way of remuneration for
its administration and secretarial services, an administration
fee of 0.1% of the Gross Asset Value per annum calculated
at the close of business at each quarter end, subject
to a minimum of GBP100,000 per annum.
The total fees due to Elysium relating to the period
ended 30 June 2017 amounted to GBP58,000 (30 June
2016: GBP50,000, 31 December 2016: GBP110,000), which
included GBP8,000 (30 June 2016: GBPnil, 31 December
2016: GBP10,000) for work performed outside of the
scope of the administration agreement.
At 30 June 2017, GBP43,000 (30 June 2016: GBP25,000;
31 December 2016: GBP35,000) was payable to Elysium
in respect of administration related fees.
Management fees
Elysium is entitled to receive a management fee of
1.25% of the Total Assets of the Group per annum.
Total Assets is defined as the ongoing NAV of the
Group plus an amount equal to long-term borrowings
invested by the Group. The management fee is payable
quarterly in advance. The total management fee paid
to Elysium for the period ended 30 June 2017 was GBP87,000
(30 June 2016: GBP99,000; 31 December 2016: GBP198,000).
At 30 June 2017, GBP3,000 (30 June 2016: GBPnil; 31
December 2016: GBPnil) was payable to Elysium in respect
of management fees.
The Manager is responsible for the payment of the
fees of the Investment Advisers and Property Manager.
For details on the payment of commissions to the Investment
Advisers for the sale of properties, please refer
to note 14.
Performance fees
Elysium shall be entitled to receive a performance
fee only in the event of a realisation event, which
shall be paid no later than the date falling three
months after the realisation event. The value of the
performance fee shall be calculated by reference to
the total distribution to Shareholders, as follows:
Total distribution Performance fee
Less than 110 pence None.
per Ordinary Share
Greater than 110 10% of the total distribution in
pence per Ordinary excess of 110 pence per Ordinary
Share but less than Share multiplied by the number of
130 pence per Ordinary shares in issue on the date of the
Share Realisation Event.
Greater than 130 a) 10% of the amount by which the
pence per Ordinary total distribution to Shareholders
Share but less than is in excess of 110 pence per Ordinary
150 pence per Ordinary Share but less than 130 pence per
Share Ordinary Share; and
b) 20% of the amount by which the
total distribution to Shareholders
is in excess of 130 pence per Ordinary
Share but less than 150 pence per
Ordinary Share,
in each case multiplied by the number
of Ordinary Shares in issue on the
realisation date.
Greater than 150 a) 10% of the amount by which the
pence per Ordinary total distribution to Shareholders
Share is in excess of 110 pence per Ordinary
Share but less than 130 pence per
Ordinary Share; and
b) 20% of the amount by which the
total distribution to Shareholders
is in excess of 130 pence per Ordinary
Share but less than 150 pence per
Ordinary Share; and
c) 30% of the amount by which the
total distribution to Shareholders
is in excess of 150 pence per Ordinary
Share,
in each case multiplied by the number
of Ordinary Shares in issue on the
realisation date.
During the period ended 30 June 2016, the performance
fee provision decreased by GBP27,000 to GBPnil (30
June 2016: decrease in provision for performance fee
by GBP9,000 to GBP112,000; 31 December 2016: decrease
in provision for performance fee by GBP94,000 to GBP27,000).
6. Segmental analysis
In accordance with IFRS 8: Operating segments, the
Group is required to present and disclose segmental
information based on the internal reports that are
regularly reviewed by the Board in order to assess
each segment's performance and to allocate resources
to them. However, the Board has opted not to comply
with IFRS 8 due to reasons of commercial sensitivity
and the possible negative impact such information
may have on the proceeds from the sale of individual
properties.
7. Tax effects of other comprehensive income
There are no tax effects arising from the other comprehensive
income disclosed in the condensed consolidated statement
of comprehensive income (30 June 2016 and 31 December
2016: GBPnil).
8. Loss per share - basic and diluted
The loss per Ordinary Share, is based on a loss of
GBP2,612,000 (30 June 2016: profit of GBP348,000;
31 December 2016: loss of GBP1,213,000) and on a weighted
average number of 15,551,250 (30 June 2016: 15,551,250;
31 December 2016: 15,551,250) Ordinary Shares in issue.
There is no difference between the basic and diluted
loss per share.
9. Dividends
The Board does not propose an interim dividend for
the six months ended 30 June 2017 (2016: nil).
10. Freehold investment property
Six months Six months Year ended
ended 30 ended 30 31 December
June 2017 June 2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Brought forward 14,970 17,421 17,421
Additions 4 17 177
Disposals - (556) (1,792)
Realised gain on disposal of
investment property - 9 9
Loss on revaluation of investment
properties (2,805) (155) (845)
---------- ---------- ----------
Carried forward 12,169 16,736 14,970
---------- ---------- ----------
All investment properties were valued by Cushman &
Wakefield, international property advisers, at fair
value at 30 June 2017, 30 June 2016 and 31 December
2016 in accordance with the methodology and guidelines
set out in the latest edition of the Royal Institution
of Chartered Surveyors ("RICS") Appraisal and Valuation
Manual. In the opinion of the Board, the Property
Manager and the Investment Advisers, the fair value
of the properties held at the period end is equal
to the values attributed to them in the independent
valuation report prepared by Cushman & Wakefield.
Property assets in Turkey and Bulgaria are inherently
difficult to value as there is no liquid market or
transparent pricing mechanism. As a result, valuations
are subject to substantial uncertainty. There is no
assurance that the estimates resulting from the valuation
process will reflect the actual sales price even where
such sales occur shortly after the date of the valuation.
The appraisers determine the fair value by applying
the methodology and guidelines as set out in the appropriate
sections of both the current Practice Statements and
United Kingdom Practice Statements contained within
the RICS Valuation - Professional Standards 2014 Edition.
All investment properties are classified as Level
3 in accordance with the fair value hierarchy levels
set in IFRS 13: Fair value measurement. Apart from
the property disposals in the comparative periods,
there were no transfers into or out of Level 3 during
the period.
In accordance with IFRS 13: Fair value measurement,
it is a requirement for the Group to present and disclose
key inputs and the sensitivity of those inputs in
the valuation of the properties. However, the Board
has opted not to fully comply with IFRS 13 due to
reasons of commercial sensitivity and the possible
negative impact such information may have on the proceeds
from the sale of individual properties.
The Group invests primarily in US Dollars, Euros or
local currencies in Turkey and Bulgaria. Although
US Dollars, Euros and the local currencies of those
countries are freely convertible into other currencies,
exchange rate fluctuations could have a material effect
on the market value of the Group's property investments
which, although expressed in Sterling, are valued
by the independent valuer in either US Dollars or
Euros.
11. Trade and other receivables
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Deferred consideration (1) 219 - 290
VAT control account 32 21 22
Prepaid tax 6 49 6
Interest receivable on deferred
consideration (1) 5 - -
Other receivables and prepayments 82 143 47
Management fees paid in advance
(2) - - 5
---------- ---------- ----------
344 213 370
---------- ---------- ----------
(1) The deferred consideration relates to the disposal
of Southern Properties SRL and is payable in instalments
up to 30 June 2018. Effective 1 January 2017, the
balance of the outstanding deferred consideration
attracts interest at a fixed rate of 4% per annum.
Interest amounting to GBP5,000 had been accrued up
to 30 June 2017. At the date of signing these results,
of the EUR340,000 originally receivable, EUR115,000
(GBP79,000) of the deferred consideration had been
received. The deferred consideration is secured by
a charge on the property.
(2) GBP5,000 was paid to Pera Pera during the year as
an advance of the fees due to Pera Pera for the quarter
ending 31 March 2017.
12. Share capital and reserves
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Authorised:
200,000,000 Ordinary Shares
of 1 pence each 2,000 2,000 2,000
------------ ------------ ------------
Issued and fully paid:
15,551,250 (30 June 2016 and
31 December 2016: 15,551,250)
Ordinary Shares of 1 pence
each 155 155 155
------------ ------------ ------------
No Ordinary Shares were purchased or cancelled during
the period.
The Company has one class of Ordinary Shares, which
carry no right to fixed income. Ordinary Shares carry
the right to vote at general meetings and the entitlement
to receive any dividends and surplus assets of the
Company on a winding-up.
Any Ordinary Shares held in treasury do not have the
right to vote at general meetings nor do they have
an entitlement to receive any dividends or surplus
assets of the Company on a winding-up.
Foreign currency translation reserve
The translation reserve comprises all foreign currency
differences arising from the translation of the results
of foreign operations.
Reserve for own shares
The Company has the authority to utilise its distributable
reserve to buy back for cancellation up to 2,331,132
Ordinary Shares (14.99% of the Ordinary Shares in
issue at the time the authority was sought). In addition,
the Company has the authority to purchase up to 10%
of the Ordinary Shares in issue and hold them as Treasury
Shares until a time when they are either re-issued
or cancelled.
During the period ended 30 June 2017, no shares were
purchased to be held as Treasury Shares (30 June 2016
and 31 December 2016: nil).
13. NAV per Ordinary Share
The NAV, in pence per Ordinary Share, is based on
the net assets attributable to equity Shareholders
of GBP12,391,000 and on 15,551,250 Ordinary Shares
in issue at the end of the period (30 June 2016: GBP15,675,000
based on 15,551,250 Ordinary Shares; 31 December 2016:
GBP14,892,000 based on 15,551,250 Ordinary Shares).
14. Related parties
The relationships and transactions between the Group,
Elysium, CNC, Pera Pera and Walnut are disclosed in
note 5. In addition, with effect from 8 May 2012,
Andrew Duquemin was appointed as an alternate Director
for Carol Goodwin. Mr Duquemin is executive chairman
of Elysium.
The Group has agreed to pay Walnut commission of 2%
of the sales proceeds of property in Bulgaria, if
a third party agent is involved, split in the proportion
of 1.5% to the agent and 0.5% to Walnut. If a property
sale is executed solely by Walnut, the rate would
be 1.5%. The Group has agreed to pay Pera Pera commission
on any property sales in Turkey on the same terms
as those agreed with Walnut.
No commissions were incurred during the six months
ended 30 June 2017. The disposal of various units
within the Nil Passage property during the period
ended 30 June 2016 incurred total sales commission
of GBP8,000, which was payable to Pera Pera. The disposal
of the subsidiary containing the Gara Progresului,
Business & Logistics Centre in Bucharest in December
2016 incurred sales commission of GBP19,000, which
was paid to Walnut.
The Directors are not aware of any ultimate controlling
party.
15. Subsequent events
There were no material events after the financial
reporting date that required disclosure as at 18 September
2017.
16. Capital management policy and procedures
The Group's financial risk management objectives and
policies are consistent with those disclosed in the
consolidated financial statements for the year ended
31 December 2016.
The Group's capital management objectives are:
* to ensure that it will be able to continue to operate
in order to return funds in an orderly manner to
Shareholders; and
* to maximise its total return primarily through the
capital appreciation of its investments.
The Board, with the assistance of the Manager, Property
Manager and Investment Advisers, monitors and reviews
the structure of the Group's capital on an ad hoc
basis. This review includes:
* the current and future levels of gearing;
* cash flow projections for the Group;
* the working capital requirements of the Group;
* the need to buy back Ordinary Shares for cancellation
or to be held in treasury, which takes account of the
difference between the NAV per Ordinary Share and the
Ordinary Share price;
* the current and future dividend policy; and
* the return of funds to Shareholders.
The Group's objectives, policies and processes for
managing capital are as disclosed in the Group's consolidated
financial statements for the year ended 31 December
2016.
--- ENDS ---
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BUGDCRSBBGRI
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