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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| European Conv. | LSE:ECPC | London | Ordinary Share | GB00B0B7ZC68 | ORD EUR1.00 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.00105 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMECPC
RNS Number : 4600J
European Convergence Property CoPLC
31 March 2010
31 March 2009
EuroPean convergence PROPERTY company plc
("ECPC" OR "THE COMPANY")
Interim Results for the period ended 31 December 2009
European Convergence Property Company PLC ("ECPC", the "Company" or the "Group")
announces its interim results for the six month period ended 31 December 2009.
In accordance with AIM Rule 20, the Interim Report will shortly be posted to
shareholders and can be downloaded from the Company's website at
www.europeanconvergence.com.
Enquiries:
+--------------------------+----------------------------------+
| Charlemagne Capital (UK) | +44 (0)207 518 2100 |
| Limited | |
+--------------------------+----------------------------------+
| Varda Lotan / | marketing@charlemagnecapital.com |
| Christopher Fitzwilliam | www.charlemagnecapital.com |
| Lay | |
+--------------------------+----------------------------------+
| | |
+--------------------------+----------------------------------+
| Galileo Fund Services | +44 (0)1624 692600 |
| Limited | |
+--------------------------+----------------------------------+
| Ian Dungate, Company | |
| Secretary | |
+--------------------------+----------------------------------+
| | |
+--------------------------+----------------------------------+
| Panmure Gordon (UK) | +44 (0)20 7459 3600 |
| Limited | |
+--------------------------+----------------------------------+
| Hugh Morgan | |
+--------------------------+----------------------------------+
| Stuart Gledhill | |
+--------------------------+----------------------------------+
| | |
+--------------------------+----------------------------------+
| Smithfield Consultants | +44 (0)20 7360 4900 |
+--------------------------+----------------------------------+
| John Kiely | |
+--------------------------+----------------------------------+
| Gemma Froggatt | |
+--------------------------+----------------------------------+
Chairman's Statement
During the period since the last report, the Company has continued to hold its
remaining investment asset, Mall Veliko Turnovo ("MVT") in Bulgaria, whilst
working on maintaining the value of the asset as far as possible, resolving the
deferred sales proceeds issue and reducing costs.
The deferred sales proceeds issue is materially resolved and is progressing
through the administrative steps of final resolution. The Company expects to
announce that it has received the deferred sales proceeds within a month of this
report, and shortly afterwards will announce the quantum and mechanism of
returning some of this cash to shareholders, adding to the previously returned
cash of EUR0.94 per share in January 2008.
The remaining retail asset continues to experience difficult operating
conditions. The Bulgarian economic environment continued to deteriorate into the
first quarter of 2010, as further outlined in the Manager's report. The Board is
of the opinion that this difficult Bulgarian operating environment naturally had
an adverse impact on the valuation of MVT, and commissioned an internal
assessment of value in order to save costs, resulting in a further fall in value
of EUR3.3m. The Manager and the Board are working to ensure that the asset can
continue to be held and operated as effectively as possible through the
foreseeable difficult period, and are optimistic that, in the long term, the
retail market, the investment market and investment asset valuations will
recover.
As part of its cost reduction exercise, in February 2010 the Company announced a
change in year end to 31 December.
The unaudited consolidated net assets of the Company as at 31 December 2009 were
EUR6,253m, giving a net asset value per share of EUR0.10 (30 June 2009 - EUR9.272m and
EUR0.15 per share).
Erwin Brunner
Chairman
30 March 2010
Report of the Manager
The Manager's report should be read in conjunction with previous financial
statements, and previous shareholder's updates issued by the Company, the last
such update being dated 11 February 2010 for the period to 31 December 2009.
The Manager continues to work on the recovery of the deferred sales proceeds
(now in the final administrative stages), the management of the remaining asset,
Mall Veliko Turnovo in Bulgaria, and identifying cost reductions.
Mall Veliko Turnovo
Bulgarian economic overview
The Bulgarian economic downturn continued into the final quarter of 2009 and the
first quarter of 2010. By the end of 2009, GDP had fallen by 6.2% year-on-year,
and unemployment increased from 6.27% in December 2008 to 9.9% in January 2010.
Year-on-year inflation by December 2009 was just 0.6%, with certain prices in
particular sectors falling by up to 25%, and the country having recorded
deflation in 5 of the preceding 12 months.
Retail Property
Market conditions in Bulgaria have remained very challenging throughout the
period and in line with many CEE markets, have suffered from poor investor
sentiment, a very restricted availability of bank debt finance and a supply
overhang of committed developments that opened in 2009, further exacerbating
difficult market conditions.
During 2009 the following trends appeared. Retailers have been more cautious and
some have closed shops altogether. Sales volumes have dropped by as much as 20%
with sales in some secondary cities dropping by as much as 50%. Retailers
pressurised rents downwards, and demand for retail units in shopping centres was
very low, especially in cities outside Sofia. Expectations for 2010 are that
these trends will continue but not worsen.
Rents and capital values are not expected to recover in the near term, and
indeed the last 2 years has seen Bulgarian retail property yield decompression,
and peak rent levels fall by one third. Inevitably there has been near term
impact on capital values with little real recovery expected in the market before
Q4 2011.
Mall Veliko Turnovo Operating Conditions
The Company's one remaining property asset is a wholly owned interest in a
single shopping centre, Mall Veliko Turnovo ("MVT") in central Bulgaria.
The majority of tenants in MVT have continued to experience extremely difficult
trading conditions which have directly impacted their ability to maintain lease
contract commitments entered into before the beginning of the financial crisis.
Further pressure may be felt on rents if consumer spending does not increase
during the year.
The challenge for the Company is and will be to maintain a robust yet pragmatic
approach in dealing with tenants during this period and at all times seek to
preserve rent, and avoid non-contributing empty shop units. Therefore the MVT
centre management strategy will be to focus on tenant and rental preservation,
in mitigation of the negative market effects on the asset's performance and
occupancy levels. Despite these market difficulties, MVT has remained
consistently above 90% occupancy since acquisition. Operational costs have been
maintained at low levels compared to industry standards, by retaining the asset
management in-house.
Since the beginning of the year management has engaged in negotiating with a
couple of new entrants into the market which represent the first encouraging
signs but at rental levels reflecting the current market. The fact that the
asset is unique and the absence of competing or planned retail schemes (MVT is
the only modern shopping centre in its immediate hinterland) will continue to
attract new occupational tenants even under challenging market conditions.
The maintained high level of occupancy at MVT has meant that the investment has
been cash flow positive and is expected to be at worst broadly cash flow neutral
for the forthcoming year. Moreover, taken together with prudently retained cash
reserves, this will ensure that the investment will be comfortably able to
service both its debt finance and working capital obligations.
The operating company is enjoying the support of its lending bank, and
discussions are in progress to extend the current facility for a further 5 years
and utilise part of the existing cash balance to pay down some of the
outstanding debt.
Mall Veliko Turnovo Exit and the Current Market
In the current climate of poor investment sentiment and weak capital markets, an
exit in the short term is considered extremely unlikely.
Normally a very 'thin' market for comparable transactions in any case, there
have been no major transactions involving mature Bulgarian retail assets during
the preceding quarter.
The assessment of value conducted as at 31 December 2009 was an internal one. It
is not proposed to instruct a formal valuation of the property at this current
time.
Cost Reductions
The Manager has successfully implemented a number of cost reductions during the
period, which should impact in future periods, such as closing unused subsidiary
companies, reducing advisors fees, and altering the accounting period to reduce
audit costs, and continues to focus on identifying areas for possible cost
reductions.
Charlemagne Capital (IOM) Limited
30 March 2010
Consolidated Income Statement
+----------------+--------+-------------+-------------+
| | Note | (Unaudited) | (Unaudited) |
| | | 1 July 2009 | 1 July 2008 |
| | | to 31 | to 31 |
| | | December | December |
| | | 2009 | 2008 |
+----------------+--------+-------------+-------------+
| | | EUR'000 | EUR'000 |
+----------------+--------+-------------+-------------+
| | | | |
+----------------+--------+-------------+-------------+
| Realised | | - | - |
| gain on | | | |
| sale of | | | |
| investment | | | |
| property | | | |
+----------------+--------+-------------+-------------+
| Net | 9 | (3,304) | (3,660) |
| loss | | | |
| from | | | |
| fair | | | |
| value | | | |
| adjustment | | | |
| on | | | |
| investment | | | |
| property | | | |
+----------------+--------+-------------+-------------+
| | | | |
+----------------+--------+-------------+-------------+
| Net | | 1,076 | 1,467 |
| rent | | | |
| and | | | |
| related | | | |
| income | | | |
+----------------+--------+-------------+-------------+
| | | | |
+----------------+--------+-------------+-------------+
| Manager's | 6.3 | 354 | 425 |
| fees | | | |
+----------------+--------+-------------+-------------+
| Audit | | (65) | (203) |
| and | | | |
| professional | | | |
| fees | | | |
+----------------+--------+-------------+-------------+
| Other | | (517) | (428) |
| expenses | | | |
+----------------+--------+-------------+-------------+
| Administrative | | (228) | (206) |
| expenses | | | |
+----------------+--------+-------------+-------------+
| | | | |
+----------------+--------+-------------+-------------+
| Net | | (2,456) | (2,399) |
| operating | | | |
| loss | | | |
| before | | | |
| net | | | |
| financing | | | |
| expense | | | |
+----------------+--------+-------------+-------------+
| | | | |
+----------------+--------+-------------+-------------+
| Financial | | 33 | 35 |
| income | | | |
+----------------+--------+-------------+-------------+
| Financial | | (589) | (651) |
| expenses | | | |
+----------------+--------+-------------+-------------+
| Net | | (556) | (616) |
| financing | | | |
| expense | | | |
+----------------+--------+-------------+-------------+
| | | | |
+----------------+--------+-------------+-------------+
| Loss | | (3,012) | (3,015) |
| before | | | |
| tax | | | |
+----------------+--------+-------------+-------------+
| | | | |
+----------------+--------+-------------+-------------+
| Income | 16 | - | 181 |
| tax | | | |
| credit | | | |
+----------------+--------+-------------+-------------+
| | | | |
+----------------+--------+-------------+-------------+
| Retained | | (3,012) | (2,834) |
| loss for | | | |
| the year | | | |
+----------------+--------+-------------+-------------+
| | | | |
+----------------+--------+-------------+-------------+
| Basic | 8 | (0.0481) | (0.0452) |
| and | | | |
| diluted | | | |
| loss | | | |
| per | | | |
| share | | | |
| (EUR) | | | |
+----------------+--------+-------------+-------------+
Consolidated Statement of Comprehensive Income
+--------------------------------+----------+-------------+-------------+
| | | (Unaudited) | (Unaudited) |
| | | 1 July 2009 | 1 July 2008 |
| | | to 31 | to 31 |
| | | December | December |
| | | 2009 | 2008 |
+--------------------------------+----------+-------------+-------------+
| Loss for the period | | (3,012) | (2,834) |
+--------------------------------+----------+-------------+-------------+
| Other comprehensive income | | | |
+--------------------------------+----------+-------------+-------------+
| Currency translation | | (7) | 4 |
| differences | | | |
+--------------------------------+----------+-------------+-------------+
| Total comprehensive loss for | | (3,019) | (2,830) |
| the period | | | |
+--------------------------------+----------+-------------+-------------+
Consolidated Balance Sheet
+------------------+--------+-------------+-----------+
| | Note | (Unaudited) | (Audited) |
| | | At 31 | At 30 |
| | | December | June 2009 |
| | | 2009 | |
+------------------+--------+-------------+-----------+
| | | EUR'000 | EUR'000 |
+------------------+--------+-------------+-----------+
| | | | |
+------------------+--------+-------------+-----------+
| Investment | 9 | 20,400 | 23,600 |
| property | | | |
+------------------+--------+-------------+-----------+
| Property, | | - | 98 |
| plant and | | | |
| equipment | | | |
+------------------+--------+-------------+-----------+
| Total | | 20,400 | 23,698 |
| non-current | | | |
| assets | | | |
+------------------+--------+-------------+-----------+
| | | | |
+------------------+--------+-------------+-----------+
| Trade | 10 | 2,821 | 2,810 |
| and | | | |
| other | | | |
| receivables | | | |
+------------------+--------+-------------+-----------+
| Cash | 11 | 3,890 | 4,200 |
| and | | | |
| cash | | | |
| equivalents | | | |
+------------------+--------+-------------+-----------+
| Total | | 6,710 | 7,010 |
| current | | | |
| assets | | | |
+------------------+--------+-------------+-----------+
| Total | | 27,110 | 30,708 |
| assets | | | |
+------------------+--------+-------------+-----------+
| | | | |
+------------------+--------+-------------+-----------+
| Issued | | 3,682 | 3,682 |
| share | | | |
| capital | | | |
+------------------+--------+-------------+-----------+
| Retained | | 2,569 | 5,581 |
| earnings | | | |
+------------------+--------+-------------+-----------+
| Foreign | | 2 | 9 |
| currency | | | |
| translation | | | |
| reserve | | | |
+------------------+--------+-------------+-----------+
| Total | | 6,253 | 9,272 |
| equity | | | |
+------------------+--------+-------------+-----------+
| | | | |
+------------------+--------+-------------+-----------+
| Interest-bearing | 12 | 19,200 | 19,178 |
| loans and | | | |
| borrowings | | | |
+------------------+--------+-------------+-----------+
| Deferred | | - | - |
| tax | | | |
| liability | | | |
+------------------+--------+-------------+-----------+
| Total | | 19,200 | 19,178 |
| non-current | | | |
| liabilities | | | |
+------------------+--------+-------------+-----------+
| | | | |
+------------------+--------+-------------+-----------+
| Trade | 13 | 1,657 | 2,258 |
| and | | | |
| other | | | |
| payables | | | |
+------------------+--------+-------------+-----------+
| Total | | 1,657 | 2,258 |
| current | | | |
| liabilities | | | |
+------------------+--------+-------------+-----------+
| Total | | 20,857 | 21,436 |
| liabilities | | | |
+------------------+--------+-------------+-----------+
| Total | | 27,110 | 30,708 |
| equity | | | |
| & | | | |
| liabilities | | | |
+------------------+--------+-------------+-----------+
Consolidated Statement of Changes in Equity
+---------------+---------+----------+-------------+---------+
| | Share | Retained | Foreign | Total |
| | capital | earnings | currency | |
| | | | translation | |
| | | | reserve | |
+---------------+---------+----------+-------------+---------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+---------------+---------+----------+-------------+---------+
| Balance | 3,762 | 12,070 | - | 15,832 |
| at 1 | | | | |
| July | | | | |
| 2008 | | | | |
+---------------+---------+----------+-------------+---------+
| Loss | - | (2,834) | - | (2,834) |
| for | | | | |
| the | | | | |
| year | | | | |
+---------------+---------+----------+-------------+---------+
| Other | | | | |
| comprehensive | | | | |
| income | | | | |
+---------------+---------+----------+-------------+---------+
| Foreign | - | - | 4 | 4 |
| exchange | | | | |
| translation | | | | |
| differences | | | | |
+---------------+---------+----------+-------------+---------+
| Total | | (2,834) | 4 | (2,830) |
| comprehensive | | | | |
| loss | | | | |
+---------------+---------+----------+-------------+---------+
| Shares | (80) | 73 | - | (7) |
| cancelled | | | | |
| following | | | | |
| market | | | | |
| purchases | | | | |
+---------------+---------+----------+-------------+---------+
| Total | (80) | 73 | - | (7) |
| transactions | | | | |
| with owners | | | | |
| in the year | | | | |
+---------------+---------+----------+-------------+---------+
| Balance | 3,682 | 9,309 | 4 | 12,995 |
| at 31 | | | | |
| December | | | | |
| 2008 | | | | |
+---------------+---------+----------+-------------+---------+
+---------------+---------+----------+-------------+---------+
| | Share | Retained | Foreign | Total |
| | capital | earnings | currency | |
| | | | translation | |
| | | | reserve | |
+---------------+---------+----------+-------------+---------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+---------------+---------+----------+-------------+---------+
| Balance | 3,762 | 12,070 | - | 15,832 |
| at 1 | | | | |
| July | | | | |
| 2008 | | | | |
+---------------+---------+----------+-------------+---------+
| Loss | - | (6,562) | - | (6,562) |
| for | | | | |
| the | | | | |
| year | | | | |
+---------------+---------+----------+-------------+---------+
| Other | | | | |
| comprehensive | | | | |
| income | | | | |
+---------------+---------+----------+-------------+---------+
| Foreign | - | - | 9 | 9 |
| exchange | | | | |
| translation | | | | |
| differences | | | | |
+---------------+---------+----------+-------------+---------+
| Total | | (6,562) | 9 | (6,553) |
| comprehensive | | | | |
| loss | | | | |
+---------------+---------+----------+-------------+---------+
| Shares | (80) | 73 | - | (7) |
| cancelled | | | | |
| following | | | | |
| market | | | | |
| purchases | | | | |
+---------------+---------+----------+-------------+---------+
| Total | (80) | 73 | - | (7) |
| transactions | | | | |
| with owners | | | | |
| in the year | | | | |
+---------------+---------+----------+-------------+---------+
| Balance | 3,682 | 5,581 | 9 | 9,272 |
| at 30 | | | | |
| June | | | | |
| 2009 | | | | |
+---------------+---------+----------+-------------+---------+
+---------------+---------+----------+-------------+---------+
| | Share | Retained | Foreign | Total |
| | capital | earnings | currency | |
| | | | translation | |
| | | | reserve | |
+---------------+---------+----------+-------------+---------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+---------------+---------+----------+-------------+---------+
| Balance | 3,682 | 5,581 | 9 | 9,272 |
| at 1 | | | | |
| July | | | | |
| 2009 | | | | |
+---------------+---------+----------+-------------+---------+
| Loss | - | (3,012) | - | (3,012) |
| for | | | | |
| the | | | | |
| year | | | | |
+---------------+---------+----------+-------------+---------+
| Other | | | | |
| comprehensive | | | | |
| income | | | | |
+---------------+---------+----------+-------------+---------+
| Foreign | - | - | (7) | (7) |
| exchange | | | | |
| translation | | | | |
| differences | | | | |
+---------------+---------+----------+-------------+---------+
| Total | | (3,012) | (7) | (3,019) |
| comprehensive | | | | |
| loss | | | | |
+---------------+---------+----------+-------------+---------+
| Balance | 3,682 | 2,569 | 2 | 6,253 |
| at 31 | | | | |
| December | | | | |
| 2009 | | | | |
+---------------+---------+----------+-------------+---------+
Consolidated Cash Flow Statement
+--------------+--------+-------------+-------------+
| | Note | (Unaudited) | (Unaudited) |
| | | For the | For the |
| | | period from | period from |
| | | 1 July | 1 July 2008 |
| | | 2009 to | to |
| | | 31 December | 31 December |
| | | 2009 | 2008 |
+--------------+--------+-------------+-------------+
| | | EUR'000 | EUR'000 |
+--------------+--------+-------------+-------------+
| | | | |
+--------------+--------+-------------+-------------+
| Operating | | | |
| activities | | | |
+--------------+--------+-------------+-------------+
| Group | | (3,012) | (2,834) |
| loss | | | |
| for | | | |
| the | | | |
| year | | | |
+--------------+--------+-------------+-------------+
| Adjustments | | | |
| for: | | | |
+--------------+--------+-------------+-------------+
| Net | | 3,304 | 3,660 |
| loss | | | |
| from | | | |
| fair | | | |
| value | | | |
| adjustment | | | |
| on | | | |
| investment | | | |
| property | | | |
+--------------+--------+-------------+-------------+
| | | (33) | (35) |
| Financial | | | |
| income | | | |
+--------------+--------+-------------+-------------+
| | | 589 | 651 |
| Financial | | | |
| expenses | | | |
+--------------+--------+-------------+-------------+
| | | (7) | 4 |
| Foreign | | | |
| currency | | | |
| translated | | | |
+--------------+--------+-------------+-------------+
| | | - | - |
| Depreciation | | | |
+--------------+--------+-------------+-------------+
| | | - | (181) |
| Income | | | |
| tax | | | |
| credit | | | |
+--------------+--------+-------------+-------------+
| Operating | | 841 | 1,265 |
| profit | | | |
| before | | | |
| changes | | | |
| in | | | |
| working | | | |
| capital | | | |
+--------------+--------+-------------+-------------+
| | | | |
+--------------+--------+-------------+-------------+
| Increase | | (11) | (82) |
| in trade | | | |
| and | | | |
| other | | | |
| receivables | | | |
+--------------+--------+-------------+-------------+
| Decrease | | (601) | (641) |
| in trade | | | |
| and | | | |
| other | | | |
| payables | | | |
+--------------+--------+-------------+-------------+
| | | | |
+--------------+--------+-------------+-------------+
| Cash | | 229 | 542 |
| generated | | | |
| from | | | |
| operations | | | |
+--------------+--------+-------------+-------------+
| Interest | | (589) | (651) |
| paid | | | |
+--------------+--------+-------------+-------------+
| Income | | - | 11 |
| and | | | |
| corporation | | | |
| tax | | | |
| received | | | |
+--------------+--------+-------------+-------------+
| Interest | | 33 | 35 |
| received | | | |
+--------------+--------+-------------+-------------+
| Cash | | (327) | (63) |
| flows | | | |
| used | | | |
| in | | | |
| operating | | | |
| activities | | | |
+--------------+--------+-------------+-------------+
| | | | |
+--------------+--------+-------------+-------------+
| Investing | | | |
| activities | | | |
+--------------+--------+-------------+-------------+
| Purchase | | (5) | - |
| of | | | |
| investment | | | |
| property | | | |
+--------------+--------+-------------+-------------+
| Purchase | | - | (7) |
| of | | | |
| property, | | | |
| plant and | | | |
| equipment | | | |
+--------------+--------+-------------+-------------+
| Cash | | (5) | (7) |
| flows | | | |
| used | | | |
| in | | | |
| investing | | | |
| activities | | | |
+--------------+--------+-------------+-------------+
| | | | |
+--------------+--------+-------------+-------------+
| Financing | | | |
| activities | | | |
+--------------+--------+-------------+-------------+
| Purchase | | - | (7) |
| of own | | | |
| shares | | | |
+--------------+--------+-------------+-------------+
| Repayment | | 22 | (60) |
| of long | | | |
| term | | | |
| loans | | | |
+--------------+--------+-------------+-------------+
| Cash | | 22 | (67) |
| flows | | | |
| used | | | |
| in | | | |
| financing | | | |
| activities | | | |
+--------------+--------+-------------+-------------+
| | | | |
+--------------+--------+-------------+-------------+
| Net | | (310) | (137) |
| decrease | | | |
| in cash | | | |
| and cash | | | |
| equivalents | | | |
+--------------+--------+-------------+-------------+
| Cash | | 4,200 | 2,552 |
| and | | | |
| cash | | | |
| equivalents | | | |
| at | | | |
| beginning | | | |
| of period | | | |
+--------------+--------+-------------+-------------+
| Cash | 11 | 3,890 | 2,415 |
| and | | | |
| cash | | | |
| equivalents | | | |
| at end of | | | |
| period | | | |
+--------------+--------+-------------+-------------+
Notes to the Consolidated Financial Statements
1 The Company
European Convergence Property Company plc (the "Company") was originally
incorporated and registered in the Isle of Man under the Isle of Man Companies
Acts 1931 to 2004 on 1 June 2005 as a public company with registered number
113616C. On 21 December 2007 with the approval of Shareholders in general
meeting, the Company was re-registered as a company under the Isle of Man
Companies Act 2006 with registered number 002085v.
Pursuant to a prospectus dated 15 June 2005 there was an original placing of up
to 100,000,000 Ordinary Shares. Following the closing of the placing on 24 June
2005 62,696,333 Shares were issued.
The Shares of the Company were admitted to trading on the London Stock
Exchange's AIM market ("AIM") on 28 June 2005 when dealings also commenced.
The Company's agents and the Manager perform all significant functions.
Accordingly, the Company itself has no employees.
Capital Distribution
Following approval of the Company's Shareholders in general meeting and as a
consequence of the Directors having determined not to invest surplus cash or
reinvest monies received from the sale of certain property assets an amount of
approximately EUR58.9m or EUR0.94 per share was returned to shareholders pro rata by
way of a capital distribution on 31 January 2008.
2 The Subsidiaries
For efficient portfolio management purposes, the Company established the
following subsidiary companies:-
+-------------+---------------+------------+
| | Country | Percentage |
| | of | of |
| | incorporation | shares |
| | | held |
+-------------+---------------+------------+
| European | Bulgaria | 100% |
| Convergence | | |
| Property | | |
| Company | | |
| Bulgaria | | |
| EOOD | | |
+-------------+---------------+------------+
| European | Cayman | 100% |
| Convergence | Islands | |
| Property | | |
| Company | | |
| (Cayman) | | |
| Limited | | |
+-------------+---------------+------------+
| ECPC | Cyprus | 100% |
| (Cyprus) | | |
| Limited | | |
+-------------+---------------+------------+
| European | Malta | 100% |
| Convergence | | |
| Property | | |
| Company | | |
| (Malta) | | |
| Limited | | |
+-------------+---------------+------------+
Interests in the following subsidiary companies were disposed of during the
period:
+-------------+---------------+------------+
| | Country | Percentage |
| | of | of |
| | incorporation | shares |
| | | held |
+-------------+---------------+------------+
| European | Romania | 100% |
| Property | | |
| Imobiliar | | |
| Invest | | |
| SRL* | | |
+-------------+---------------+------------+
| European | Romania | 100% |
| Property | | |
| Development | | |
| Corporation | | |
| SRL** | | |
+-------------+---------------+------------+
| Orange | The | 100% |
| Convergence | Netherlands | |
| Finance | | |
| BV** | | |
+-------------+---------------+------------+
| European | Turkey | 100% |
| Convergence | | |
| Property | | |
| Company | | |
| Real Estate | | |
| Trading and | | |
| Management | | |
| Limited* | | |
+-------------+---------------+------------+
* Liquidated.
** Sold to third parties for nominal value.
3 Significant Accounting Policies
The accounting policies applied by the Group in these condensed consolidated
interim financial statements are the same as those applied by the group in its
consolidated financial statements for the year ended 30 June 2009. The Interim
report of the Company for the period ending 31 December 2009 comprises the
Company and its subsidiaries (together referred to as the 'Group'). The interim
consolidated financial statements are unaudited.
These interim financial statements have been prepared in accordance with
International Financial Reporting Standard (IFRS) 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 consolidated
financial statements of the Group as at and for the year ended 30 June 2009.
4Segment Reporting
Segment information is presented in respect of the Group's business and
geographical segments. The segments are managed on a worldwide basis, but
operate in two principal geographical areas, Bulgaria and Romania. The location
of the customers is the same as the location of the assets.
+-------------+----------+---------+--------+-------------+----------+
| 6 | Bulgaria | Romania | Turkey | Unallocated | Total |
| months | | | | | |
| ended | | | | | |
| 31 | | | | | |
| December | | | | | |
| 2009 | | | | | |
+-------------+----------+---------+--------+-------------+----------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+-------------+----------+---------+--------+-------------+----------+
| Net | 1,076 | - | - | | 1,076 |
| rent | | | | | |
| and | | | | | |
| associated | | | | | |
| income | | | | | |
+-------------+----------+---------+--------+-------------+----------+
| Segment | (3,534) | (2,344) | - | 2,866 | (3,012) |
| results | | | | | |
+-------------+----------+---------+--------+-------------+----------+
| Segment | 23,051 | 2,479 | - | 1,580 | 27,110 |
| assets | | | | | |
+-------------+----------+---------+--------+-------------+----------+
| Segment | (32,038) | (930) | - | 12,111 | (20,857) |
| liabilities | | | | | |
+-------------+----------+---------+--------+-------------+----------+
+-------------+----------+---------+--------+-------------+----------+
| 6 | Bulgaria | Romania | Turkey | Unallocated | Total |
| months | | | | | |
| ended | | | | | |
| 31 | | | | | |
| December | | | | | |
| 2008 | | | | | |
+-------------+----------+---------+--------+-------------+----------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+-------------+----------+---------+--------+-------------+----------+
| Net | 1,467 | - | - | - | 1,467 |
| rent | | | | | |
| and | | | | | |
| associated | | | | | |
| income | | | | | |
+-------------+----------+---------+--------+-------------+----------+
| Segment | (3,238) | - | - | 404 | (2,834) |
| results | | | | | |
+-------------+----------+---------+--------+-------------+----------+
| Segment | 29,734 | 4,270 | - | 910 | 34,914 |
| assets | | | | | |
+-------------+----------+---------+--------+-------------+----------+
| Segment | (19,226) | (800) | - | (1,893) | (21,919) |
| liabilities | | | | | |
+-------------+----------+---------+--------+-------------+----------+
+-------------+----------+---------+-------------+----------+
| Year | Bulgaria | Romania | Unallocated | Total |
| ended | | | | |
| 30 | | | | |
| June | | | | |
| 2009 | | | | |
+-------------+----------+---------+-------------+----------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+-------------+----------+---------+-------------+----------+
| Net | 2,733 | - | - | 2,733 |
| rent | | | | |
| and | | | | |
| associated | | | | |
| income | | | | |
+-------------+----------+---------+-------------+----------+
| Segment | (8,027) | 132 | 1,333 | (6,562) |
| results | | | | |
+-------------+----------+---------+-------------+----------+
| Segment | 26,007 | - | 4,701 | 30,708 |
| assets | | | | |
+-------------+----------+---------+-------------+----------+
| Segment | (19,580) | - | (1,856) | (21,436) |
| liabilities | | | | |
+-------------+----------+---------+-------------+----------+
5 Net Asset Value per Share
The net asset value per share as at 31 December 2009 is EUR0.0998 based on net
assets of EUR6.25 million and 62,616,333 ordinary shares in issue (30 June 2009:
EUR0.1481 based on 62,696,333 shares).
6 Related Party Transactions
6.1Directors of the Company.
Anderson Whamond is a non-executive director of the Manager, and a shareholder
of Charlemagne Capital Limited ("CCL"), the parent of the Manager and Placing
Agent. Additionally, Mr Whamond has an indirect family interest in shares of
CCL. There are no service agreements between Mr Whamond and CCL that are not
determinable within one year.
Charlemagne Capital (Investments) Limited, an entity associated with the
Manager, by way of being a subsidiary of Charlemagne Capital Limited, holds
97,479 ordinary shares in the Company.
Save as disclosed above, none of the Directors had any interest during the year
in any material contract for the provision of services which was significant to
the business of the Company.
6.2 Directors of the Subsidiaries
James Houghton and Jane Bates are directors of the Manager and have been
appointed director(s) to a number of the Group subsidiaries. In compliance with
local regulations, certain subsidiaries have appointed directors who are
employees of or are associated with, the relevant registered office service
provider.
6.3 Manager fees
Annual fees
The Manager is entitled to an annual management fee of 1.25% of the net asset
value of the Company from time to time plus borrowings of the Group, payable
quarterly in arrears.
The Manager shall also be entitled to recharge to the Company all and any costs
and disbursements reasonably incurred by it in the performance of its duties
including costs of travel save to the extent that such costs are staff costs or
other internal costs of the Manager. Accordingly, the Company shall be
responsible for paying all the fees and expenses of all valuers, surveyors,
legal advisers and other external advisers to the Company in connection with any
investments made on its behalf. All amounts payable to the Manager by the
Company shall be paid together with any value added tax, if applicable.
Annual management fees payable for the period ended 31 December 2009 amounted to
EUR178,353 (31 December 2008: EUR223,294).
Performance fees
The Manager is entitled to a performance fee equal to 15% of the total profits
generated by the Company. In order for the performance fee to be payable, the
Company must firstly have returned to its Shareholders an amount equal to the
amount subscribed pursuant to the Placing (ignoring any initial charge paid by
Shareholders). Thereafter the Manager shall be entitled to 15% of any further
distributions of profit or capital. In determining amounts paid to Shareholders
and the amount payable to the Manager pursuant to the performance fee full
account will be taken of any dividends paid, other distributions made and
distributions made on a winding up of the Company.
The Company may procure payment of the Manager's annual fees and any performance
fees from any Group subsidiary company.
Although performance fees are only payable following the distribution of amounts
equivalent to amounts initially subscribed by shareholders, the Group's
accounting policy is to accrue performance fees based on the net asset value of
the Group. As a result of losses made by the Group for the period ended 31
December 2009, performance fees previously accrued were reversed and credited to
the profit and loss account of the Group to the extent of EUR532,751 (31 December
2008: credit of EUR647,772).
7 Charges and Fees
7.1 Nominated Adviser and Broker fees
As Nominated Adviser and Broker to the Company for the purposes of the AIM
Rules, the nominated advisor and broker is entitled to receive an annual fee of
EUR33,462 (GBP30,000).
Advisory fees payable to the Nominated Adviser and Broker for the period ended
31 December 2009 amounted to EUR18,994 (31 December 2008: EUR22,855).
7 Charges and Fees continued
7.2 Custodian fees
The Custodian is entitled to receive fees calculated as 1 basis point per annum
of the value of the debt securities held on behalf of the Company, subject to a
minimum monthly fee of EUR500, payable quarterly in arrears. The Custodian expects
to review and, subject to written agreement between the Company and the
Custodian, may amend the foregoing fees six months after Admission and annually
thereafter.
Custodian fees payable for the period ended 31 December 2009 amounted to EUR3,450
(31 December 2008: EUR3,488).
7.3 Administrator and Registrar fees
The Administrator is entitled to receive a fee of 4 basis points of the net
assets of the Company plus borrowings, subject to a minimum monthly fee of
EUR2,125, payable quarterly in arrears. The Administrator shall assist in the
preparation of the financial statements of the Company for which it shall
receive a fee of EUR2,500 per set.
The Administrator shall provide general secretarial services to the Company for
which it shall receive a minimum annual fee of EUR3,750. Additional fees based on
time and charges, will apply where the number of Board meetings exceeds four per
annum. For attendance at meetings not held in the Isle of Man, an attendance fee
of EUR500 per day or part thereof will be charged.
The Administrator may utilise the services of a CREST accredited registrar for
the purposes of settling share transactions through CREST. The cost of this
service will be borne by the Company. It is anticipated that the cost will be
in the region of GBP6,000 per annum subject to the number of CREST settled
transactions undertaken. The Administrator expects to review and, subject to
written agreement between the Company and the Administrator, may amend the
foregoing fees on an annual basis.
Administration fees payable for the period ended 31 December 2009 amounted to
EUR14,663 (31 December 2008: EUR34,875).
7.4 Other operating expenses
It is anticipated that the costs of managing any properties in the Company's
investment portfolio will be satisfied out of the service charges generated by
tenants. However, to the extent that this is not the case, all such costs, to
include the costs of all other third party service providers, shall be
chargeable to and payable by the Company. The costs associated with maintaining
the Company's subsidiaries, to include the costs of incorporation and third
party service providers shall be chargeable to each subsidiary and payable by
the Company.
7.5 Audit fees
Audit fees payable for the period ended 31 December 2009 amounted to EUR20,820 (31
December 2008: EUR33,759).
8 Basic and Diluted Earnings per Share
Basic and diluted earnings per share are calculated by dividing the profit
attributable to equity holders of the Company by the weighted average number of
ordinary shares in issue during the period:
+--------------+----------+----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+--------------+----------+----------+
| Loss | (3,012) | (2,834) |
| attributable | | |
| to equity | | |
| holders of | | |
| the | | |
| Company | | |
| (EUR'000) | | |
+--------------+----------+----------+
| Weighted | 62,616 | 62,688 |
| average | | |
| number | | |
| of | | |
| ordinary | | |
| shares | | |
| in issue | | |
| (thousands) | | |
+--------------+----------+----------+
| Basic | (0.0481) | (0.0452) |
| and | | |
| diluted | | |
| loss | | |
| per | | |
| share | | |
| (EUR per | | |
| share) | | |
+--------------+----------+----------+
9 Investment Property
+--------------+----------+---------+
| | 31 | 30 |
| | December | June |
| | 2009 | 2009 |
+--------------+----------+---------+
| | EUR000 | EUR'000 |
+--------------+----------+---------+
| At | 23,600 | 31,560 |
| beginning | | |
| of period | | |
+--------------+----------+---------+
| Additions | 104 | - |
+--------------+----------+---------+
| Disposals | - | - |
| through | | |
| sale of | | |
| subsidiaries | | |
+--------------+----------+---------+
| Net | (3,304) | (7,960) |
| loss | | |
| from | | |
| fair | | |
| value | | |
| adjustments | | |
| on | | |
| investment | | |
| property | | |
+--------------+----------+---------+
| Balance | 20,400 | 23,600 |
| at end | | |
| of | | |
| period | | |
+--------------+----------+---------+
The investment property was last valued at 30 June 2009 by an independent third
party, SHM Smith Hodgkinson (Romania) Srl based on discounted cash flow
valuation technique. The Company performed an internal valuation as at 31
December 2009. As at 31 December 2009, there was a first rank mortgage on the
above property securing the bank loans of EUR19.2 million (at 31 December 2008:
EUR19.2 million)
10 Trade and Other Receivables
+-------------+----------+--------+
| | 31 | 30 |
| | December | June |
| | 2009 | 2009 |
+-------------+----------+--------+
| | EUR'000 | EUR'000 |
+-------------+----------+--------+
| Trade | 222 | 229 |
| receivables | | |
+-------------+----------+--------+
| Deferred | 2,478 | 2,478 |
| sale | | |
| proceeds | | |
+-------------+----------+--------+
| Other | 121 | 103 |
+-------------+----------+--------+
| Total | 2,821 | 2,810 |
+-------------+----------+--------+
Intragroup balances are repayable on demand and bear interest at commercial
rates. Loans to subsidiaries outstanding at the year end have been impaired to
fair value.
11 Cash and Cash Equivalents
+-------------+----------+--------+
| | 31 | 30 |
| | December | June |
| | 2009 | 2009 |
+-------------+----------+--------+
| | EUR'000 | EUR'000 |
+-------------+----------+--------+
| | | |
+-------------+----------+--------+
| Bank | 3,890 | 4,200 |
| balances | | |
+-------------+----------+--------+
| Bank | - | - |
| overdrafts | | |
+-------------+----------+--------+
| Cash | 3,890 | 4,200 |
| and | | |
| cash | | |
| equivalents | | |
+-------------+----------+--------+
At 31 December 2009, EUR2.0m was held in a bank account with Alpha Bank subject to
the terms of the loan agreement between Alpha Bank and the Company's Bulgarian
subsidiary, under which all obligations to the Bank under the loan agreement
must be fulfilled before the Bulgarian subsidiary is free to pay a dividend.
12 Interest-Bearing Loans and Borrowings
This note provides information about the contractual terms of the Group's
interest-bearing loans and borrowings.
Non-current liabilities
+---------+----------+--------+
| | 31 | 30 |
| | December | June |
| | 2009 | 2009 |
+---------+----------+--------+
| | EUR'000 | EUR'000 |
+---------+----------+--------+
| Secured | 19,200 | 19,178 |
| bank | | |
| loans | | |
+---------+----------+--------+
Terms and debt repayment schedule:
+---------+--------+-----------+----------+
| Loan | Bank | Effective | Final |
| Amount | | interest | Maturity |
| | | rate | date |
+---------+--------+-----------+----------+
| | | 31 | |
| | | December | |
| | | 2009 | |
+---------+--------+-----------+----------+
| EUR19.2 | Alpha | 5.7% | October |
| million | Bank | | 2011 |
| | Sofia | | |
| | SA | | |
+---------+--------+-----------+----------+
13 Trade and Other Payables
+----------+----------+--------+
| | 31 | 30 |
| | December | June |
| | 2009 | 2009 |
+----------+----------+--------+
| | EUR'000 | EUR'000 |
+----------+----------+--------+
| Taxation | 35 | 26 |
+----------+----------+--------+
| Trade | 126 | 129 |
| payables | | |
+----------+----------+--------+
| Accruals | 1,496 | 2,103 |
+----------+----------+--------+
| Other | - | - |
+----------+----------+--------+
| Total | 1,657 | 2,258 |
+----------+----------+--------+
Accruals include a performance fee of EUR440,815 and other accruals of EUR1,055,250
(30 June 2009 - EUR973,566 and EUR1,129,985 respectively). Other accruals include a
provision of EUR900,000 against the deferred sales proceeds.
14 Exchange Rates
The following exchange rates were used to translate assets and liabilities into
the reporting currency at 31 December 2009:
+-----------+--------+
| Bulgarian | 1.9558 |
| Lev | |
+-----------+--------+
| Turkish | 2.1437 |
| Lira | |
+-----------+--------+
15 Directors' Remuneration
The Company
The maximum amount of remuneration payable to the Directors permitted under the
Articles of Association is EUR300,000 p.a. Each Director currently is paid a fee
of EUR22,500 p.a. The Directors are each entitled to receive reimbursement of any
expenses incurred in relation to their appointment. Total fees and expenses paid
to the Directors for the period ended 31 December 2009 amounted to EUR45,000 (31
December 2008: EUR45,000).
The Subsidiaries
No fees are paid to the directors of the subsidiaries except in circumstances
where a director is appointed in compliance with local regulations and in such
cases the fees payable are nominal.
16 Taxation
Group income tax expense
+------------------+----------+----------+
| | 6 | 6 |
| | months | months |
| | to 31 | to 31 |
| | December | December |
| | 2009 | 2008 |
+------------------+----------+----------+
| | EUR'000 | EUR'000 |
+------------------+----------+----------+
| Current | - | - |
| tax | | |
| expense/(credit) | | |
+------------------+----------+----------+
| Movement | - | (181) |
| in | | |
| deferred | | |
| tax | | |
| liability | | |
+------------------+----------+----------+
| Income | - | (181) |
| tax | | |
| credit | | |
| for | | |
| the | | |
| year | | |
+------------------+----------+----------+
Deferred income tax is based on temporary differences between revalued amounts
of investment property in the books of the subsidiaries and their respective tax
bases. The deferred tax position as at 31 December 2009 is based on the capital
gains tax rate of 10% in Bulgaria.
17 Commitments at the Balance Sheet Date
There were no commitments at the balance sheet date.
18 Post Balance Sheet Events
On 11 February 2010, the Company announced that its accounting period would
change to 31 December in each year with immediate effect.
19 Investment Policy
The Company was established to invest in income producing property assets and
late stage property developments in South East Europe. The Company originally
invested in three such assets in Romania, which were subsequently sold, and one
in Bulgaria which remains in ownership.
The Company uses borrowings in relation to its investments. The debt to equity
ratio differs in respect of each investment but may be as high as 75:25 at the
time of making the investment. By utilising gearing in this way, if the value
of the Company's assets declines then the effect of this gearing will be to have
a disproportionately negative impact on the value of the group's assets and the
debt to equity ratio may exceed 75:25.
The Company was conceived as a one-cycle investment vehicle, and intends to hold
and manage its one remaining asset until divestment can be achieved at an
acceptable level. The Company's intention is to achieve divestment of the
remaining asset, and return cash to shareholders. No further property investment
is anticipated.
At the annual general meeting of the Company to be held in 2012, the Directors
shall propose an ordinary resolution that the Company ceases to continue in
existence. If the resolution is not passed at such annual general meeting, then
the Directors shall propose the same resolution at every fifth annual general
meeting thereafter.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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