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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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RNS Number:0407U
European Convergence Property CoPLC
30 March 2007
30 March 2007
European Convergence Property Company PLC
Results for the six months ended 31 December 2006
European Convergence Property Company PLC ("ECPC", the "Company" or the
"Group"), a property company focused on investing in commercial, retail and
industrial property in South-East Europe with a view to taking advantage of high
yields and the potential for capital appreciation, announces its interim results
for the six month period ending December 31st 2006.
Highlights
Yield compression continued in the target markets over the period, reinforcing
the anticipated convergence of yields in the property market.
A recent revaluation of the existing property portfolio of ECPC by Smith
Hodgkinson shows an increase in the market value of Euro 13.1 million (or 26% of
invested equity) based on the 31 January 2007 unaudited figures.
The increase reflects the continuing yield compression brought about by
increasing demand for high quality properties in the region.
Outlook
Romania
The picture remains similar as reported for 2005. The retail and office markets
were still very much a landlord's market through 2006 with practically all new
supply to the market being fully rented upon completion or very shortly
thereafter and most commentators agree that this will continue for the short
term at least. Having said that, office rents seem stable at the moment with
most grade A properties securing rents in the Euro16-18/ sqm range with over Euro20/
sqm reportedly being secured for the top grade space available for smaller units
of 200-400 sqm.
The retail landscape is set to change markedly over the next few years with a
number of high profile shopping malls rumoured for delivery. However, it is not
envisaged that the Company will be pursuing retail acquisitions in Bucharest and
therefore the Company will not be exposed to the emerging risks in this sector.
Bulgaria
Supply of quality office space has slowed through 2006 with only very few
notable new buildings delivered. True institutional grade A assets have not yet
appeared on the Bulgarian market.
Demand and supply have been more balanced in Sofia than has been experienced in
Bucharest although demand is still buoyant. Consequently rents have increased
slightly compared to 2005 and local grade A buildings transact in the Euro14-16/
sqm range. However, a number of relatively substantial office developments are
understood to be in the pipeline primarily along the Tsarigradsko Shousse artery
running east out of Sofia.
Similar to Bucharest, the retail landscape in Sofia is set to change
dramatically over the next few years with a number of major mall developments
rumoured to be in process of procurement. The market is therefore likely to
favour the tenant over the short term until the retail spend capacity of Sofia
increases to absorb this new supply.
Overall, the focus of players in both markets is rapidly shifting from
investment to development and increases in capital values over the past two
years will lead to more developments passing the feasibility stage and will
incentivise land owners to release their plots to the development market. The
consequent increase in competition between developers and landlords should
witness the further maturing of both markets and the quality of the product
eventually on offer to the institutional investment sector.
Erwin Brunner
Chairman
30 March 2007
Enquiries:
Charlemagne Capital (IOM) Limited Tel. + 44 (0)1624 640200
Anderson Whamond
Charlemagne Capital (UK) Limited
Varda Lotan Tel. + 44 (0)20 7518 2100
Report of the Manager
Property Investment Environment
Yield compression continued through 2006 for the Company's target markets of
Romania and Bulgaria. Grade A stock was being priced at 8.5% in Bucharest at the
beginning of the year which by the end of 2006 had compressed to sub 7%. For
Sofia, despite the quality of product available generally being lower than
offered in Bucharest, yields have followed a similar trend. By the end of 2006,
although few transactions had been recorded, expectations were in the 7.5% range
for product which was being marketed. Increasing prices resulted from similar
drivers as noted for 2005 i.e. the weight of investment capital targeting
primarily the capital cities and the scarcity of good quality product on offer.
The stabilisation of yields which was expected at the beginning of 2006 proved
to be short lived but Bucharest pricing does now seem to be stabilising as
yields begin to approach convergence with those of central Europe.
The Manager did not expend further resources with the pursuit of investments for
the Company in the Istanbul market after Q2 2006 due to the surprising low
number of potentially suitable transaction opportunities identified which were
also considered expensive because of their relatively low quality. Transactions
in the Euro100 million plus range were available and successful deals were
concluded by larger investment funds.
Credit spreads have remained more or less stable compared to those reported at
the end of 2005. The most aggressive players in the local markets continue to be
primarily the Greek banks and debt pricing remains in the 150-175 bps above
EURIBOR by end 2006, although Euro central bank rates had increased by 50 bps
from August to December 2006. For quality investment product 70%+ gearing is
available which means that on balance the leveraged cashflows available to
investors remains similar to those in 2005.
PGV Tower, Bucharest, Romania
In February 2006 the Company closed its first acquisition, PGV Tower. The
property is located in central Bucharest; it was acquired for Euro24.5 million
(including transaction costs) and is expected to generate a running yield of
over 10%. PGV was completed in 2003 and consists of two adjoining buildings; one
six floors in height the adjacent building fourteen floors. It is the head
office of Post Bank in Romania and also other EFG related companies which
together account for c.86% of the lease revenue. The deal is 70% leveraged with
Post Bank.
Mall Veliko Turnovo, Veliko Turnovo, Bulgaria.
The Company announced details of its second acquisition, Mall Veliko Turnovo
(MVT) in May 2006. MVT acquired for Euro29.8 million is a new shopping centre
located in Veliko Turnovo, Bulgaria. Construction completion was achieved in
August 2006 and the Company's transaction was closed in November. Running yields
are currently expected to be c.11% and 65% of the purchase price and transaction
costs are debt financed. MVT was only Bulgaria's third modern shopping centre
after City Centre Sofia and Mall of Sofia opened earlier in 2006. The property
offers c.15,500 sqm of retail space which was 100% leased upon opening to the
public in September 2006.
Construdava, Pipera, Bucharest, Romania
In June 2006, ECPC announced details of the acquisition of Construdava, a new
office building in Pipera, a developing district to the north of central
Bucharest and a rapidly developing commercial and high-end residential area. The
asset was acquired for Euro20.1 million and accommodates c.9,200 sqm of modern
office space with good car parking facilities. The construction works were
completed by Impact SA a listed Romanian development company and the transaction
was closed in December 2006. Running yields are forecast to be in excess of 11%
and approximately 65% of the acquisition price was debt financed.
Millennium Business Centre, Bucharest, Romania
The announcement of the acquisition of the Millennium Business Centre followed
in July 2006. Millennium is a class A office building located in downtown
Bucharest. The transaction closed in January 2007 against a purchase price of
Euro42.5 million.
Running yields are forecast of c.9.5% and 70% of the acquisition price was debt
financed. Millennium provides c.14,310 sqm of grade A office space over 19 floor
levels and is considered a land mark development for the city.
By the close of 2006 negotiations were in progress for the possible acquisition
of three further assets; two office buildings in Bucharest and one mixed use
office and retail centre in Sofia.
Portfolio Valuation
Following the completion of the purchase of the Millennium Business Centre in
Bucharest, the Board appointed an independent valuation agent, SHM Smith
Hodgkinson, to carry out a revaluation of the Company's portfolio of investment
properties as at 31 January 2007.
The revaluation of the individual properties is analysed below.
--------------------- ------------------ ----------------
Eurom Original Acquisition Cost* Revaluation
As at 31 Jan 2007
--------------------- ------------------ ----------------
PGV Tower 24.5 25.6
Mall Veliko Turnovo 29.8 32.5
Impact Construdava 20.1 21.5
Millennium Business Centre 42.5 50.4
--------------------- ------------------ ----------------
Total 116.9 130.0
--------------------- ------------------ ----------------
* including transaction costs
Charlemagne Capital (IOM) Limited
30 March 2007
Consolidated Income Statement
Note (Unaudited) (Unaudited) (Audited)
1 July 2006 to For the period For the period
from from
31 December 1 June 2005 1 June 2005
2006 (date of (date of
incorporation) incorporation)
to to
31 December 30 June 2006
2005
Euro'000 Euro'000 Euro'000
-------------------- ------- ---------- ------------ -----------
Net rent and
related income 1,278 - 913
Manager's fees (563) (410) (865)
Audit and
professional
fees (127) (134) (345)
Other expenses (578) (362) (899)
-------------------- ------- ---------- ------------ -----------
Administrative
expenses (1,268) (906) (2,109)
-------------------- ------- ---------- ------------ -----------
-------------------- ------- ---------- ------------ -----------
Net operating
profit/(loss)
before net
financing
income 10 (906) (1,196)
-------------------- ------- ---------- ------------ -----------
Financial
income 423 653 1,286
Financial
expenses (370) - (388)
-------------------- ------- ---------- ------------ -----------
Net financing
income 53 653 898
-------------------- ------- ---------- ------------ -----------
Profit/(loss)
before tax 63 (253) (298)
Income tax
expense 9 (290) - (28)
-------------------- ------- ---------- ------------ -----------
Retained loss
for the period (227) (253) (326)
-------------------- ------- ---------- ------------ -----------
-------------------- ------- ---------- ------------ -----------
Basic and
diluted loss
per share (Euro) 7 (0.0036) (0.0040) (0.0052)
-------------------- ------- ---------- ------------ -----------
Consolidated Balance Sheet
Note (Unaudited) (Unaudited) (Audited)
At 31December At 31 December At 30 June
2006 2005 2006
Euro'000 Euro'000 Euro'000
-------------------- ------- ---------- ------------ -----------
Investment property 5 80,217 - 24,522
-------------------- ------- ---------- ------------ -----------
Total non-current assets 80,217 - 24,522
-------------------- ------- ---------- ------------ -----------
Trade and other receivables 6 5,208 25 6,181
Cash and cash equivalents 25,132 59,780 43,572
-------------------- ------- ---------- ------------ -----------
Total current assets 30,340 59,805 49,753
-------------------- ------- ---------- ------------ -----------
Total assets 110,557 59,805 74,275
-------------------- ------- ---------- ------------ -----------
Issued share capital 62,696 62,696 62,696
Retained losses (3,440) (3,140) (3,213)
Foreign currency translation
reserve 168 - (122)
-------------------- ------- ---------- ------------ -----------
Total equity 59,424 59,556 59,361
-------------------- ------- ---------- ------------ -----------
Interest-bearing loans and
borrowings 8 50,008 - 13,750
-------------------- ------- ---------- ------------ -----------
Total non-current 50,008 - 13,750
liabilities ------- ---------- ------------ -----------
--------------------
Trade and other payables 1,125 249 1,164
-------------------- ------- ---------- ------------ -----------
Total current liabilities 1,125 249 1,164
-------------------- ------- ---------- ------------ -----------
Total liabilities 51,133 249 14,914
-------------------- ------- ---------- ------------ -----------
Total equity & liabilities 110,557 59,805 74,275
-------------------- ------- ---------- ------------ -----------
Consolidated Statement of Changes in Shareholders' Equity
Share capital Retained Foreign Total
earnings currency
translation
reserve
Euro'000 Euro'000 Euro'000 Euro'000
--------------- ---------- ------------- ------------- --------
Balance at 1 June 2005 - - - -
Shares issued in the period 62,696 - - 62,696
Foreign exchange translation - - - -
differences
Share issue expenses - (2,887) - (2,887)
Retained loss for the period - (253) - (253)
--------------- ---------- ------------- ------------- --------
Balance at 31 December 2005 62,696 (3,140) - 59,556
--------------- ---------- ------------- ------------- --------
Balance at 1 June 2005 - - - -
Shares issued in the period 62,696 - - 62,696
Foreign exchange translation - - (122) (122)
differences
Share issue expenses - (2,887) - (2,887)
Retained loss for the period - (326) - (326)
--------------- ---------- ------------- ------------- --------
Balance at 30 June 2006 62,696 (3,213) (122) 59,361
--------------- ---------- ------------- ------------- --------
--------------- ---------- ------------- ------------- --------
Balance at 1 July 2006 62,696 (3,213) (122) 59,361
Foreign exchange translation - - 290 290
differences
Retained loss for the period - (227) - (227)
--------------- ---------- ------------- ------------- --------
Balance at 31 December 2006 62,696 (3,440) 168 59,424
--------------- ---------- ------------- ------------- --------
Consolidated Cash Flow Statement
(Unaudited) (Unaudited) (Audited)
1 July 2006 to For the period For the period
from from
31 December 1 June 2005 1 June 2005
(date of (date of
incorporation) incorporation)
to to
2006 31 December 30 June 2006
2005
Euro'000 Euro'000 Euro'000
------------------------- ---------- ----------- ------------
Operating activities
Group loss for the period (227) (253) (326)
Adjustments for:
Investment income (423) (653) (1,286)
Investment expense 370 - 388
Income tax expense 290 - 28
Operating profit /
(loss) before changes in 10 (906) (1,196)
working capital
(Increase)/Decrease in trade
and other receivables 973 (25) (140)
Increase/(Decrease) in trade
and other payables 119 249 302
Cash generated from / (used
in) operations 1,102 (682) (1,034)
Interest paid (370) - (388)
Income and corporation
tax paid (158) - (104)
Interest received 423 653 1,286
Cash flows used in
operating activities 997 (29) (240)
Investing activities
Acquisition of
subsidiaries
net of cash acquired - - (7,874)
Repayment of loan acquired
on acquisition - - (2,173)
Staged payments
relating to property
acquisitions (55,695) - (5,900)
Cash flows used in
investing activities (55,695) - (15,947)
Financing activities
Proceeds from
the issue of
ordinary share capital - 62,696 62,696
Proceeds from long tem
borrowings 36,258 - -
Repayment of long term
loans - - (50)
Share issue expenses - (2,887) (2,887)
Cash flows generated from
financing activities 36,258 59,809 59,759
Net (decrease)/increase
in cash and cash equivalents (18,440) 59,780 43,572
Cash and cash equivalents at
beginning of period 43,572 - -
Cash and cash equivalents at
end of period 25,132 59,780 43,572
------------------------- ---------- ----------- ------------
Notes to the Consolidated Financial Statements
1 The Company
European Convergence Property Company plc (the "Company") was 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.
2 Significant Accounting Policies
The interim consolidated financial statements of the Company for the six months
ended 31 December 2006 comprise the Company and its subsidiaries (together
referred to as the "Group"). The interim consolidated financial statements are
unaudited.
2.1 Basis of presentation
These financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") and have been prepared using the same
accounting policies as the preceding annual financial statements.
2.2 Investment property
Investment properties are those which are held either to earn rental income or
for capital appreciation or both. Investment properties are stated at fair
value. Any gain or loss arising from a change in fair value is recognised in the
income statement.
2.3 Basis of consolidation
Subsidiaries
Subsidiaries are those enterprises controlled by the Company. Control exists
where the Company has the power, directly or indirectly, to govern the financial
and operating policies of an enterprise so as to obtain benefits from its
activities. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control effectively
commences until the date that control effectively ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains arising from
intra-group transactions, are eliminated in preparing the consolidated financial
statements.
2.4 Dividends
Dividends are recognised as a liability in the period in which they are declared
and approved. There was no dividend declared as at 31 December 2006.
3 Segment 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.
Bulgaria Romania Unallocated Total
Euro'000 Euro'000 Euro'000 Euro'000
----------------- ---------- ---------- ---------- ----------
Net rent and associated income - 1,278 - 1,278
Segment results (22) 196 (401) (227)
Segment assets 30,012 61,770 18,775 110,557
Segment liabilities (13,011) (37,688) (434) (51,133)
----------------- ---------- ---------- ---------- ----------
4 Net Asset Value per Share
The net asset value per share as at 31 December 2006 is Euro0.9478 based on
62,696,333 ordinary shares in issue as at that date.
5 Investment Property
Group Group Group
31 December 31 December 30 June 2006
2006 2005
Euro'000 Euro'000 Euro'000
-------------- -------------- -------------- --------------
At beginning of period 24,522 - -
Additions through:
- direct acquisitions
of property 55,695 - -
- acquisition of
subsidiary companies - - 24,522
-------------- -------------- -------------- --------------
Balance at end of period 80,217 - 24,522
-------------- -------------- -------------- --------------
Security
At 31 December 2006, there were first rank mortgages on above properties
securing total bank loans of Euro50.0m.
6 Trade and Other Receivables
Trade and other receivables include one contractual staged payment of Euro5.112
million for the Millennium Business Centre in Bucharest.
7 Basic and Diluted Loss per Share
Basic and diluted loss per share are calculated by dividing the loss
attributable to equity holders of the Company by the number of ordinary shares
in issue during the period.
31 December 31 December 30 June 2006
2006 2005
------------------- ------------- ------------- -------------
Loss attributable to
equity holders of the
Company (Euro'000) 227 253 326
Number of ordinary shares
in issue (thousands) 62,696 62,696 62,696
------------------- ------------- ------------- -------------
Basic and diluted loss
per share (Euro per share) 0.0036 0.0040 0.0052
------------------- ------------- ------------- -------------
8 Interest-Bearing Loans and Borrowings
Non-current liabilities
Group Group Group
31 December 31 December 30 June 2006
2006 2005
Euro'000 Euro'000 Euro'000
------------------- ------------- ------------- -------------
Secured bank loans 50,008 - 13,750
------------------- ------------- ------------- -------------
9 Taxation
The income tax expense of Euro290,312 in the consolidated income statement relates
to the profit declared in S.C. Paris Developments SRL, the Romanian subsidiary
directly owning PGV Tower. The outstanding tax liability as at 31 December 2006
for this company was Euro139,057. There are no other group companies with taxable
profits during the period.
10 Commitments as at the Balance Sheet Date
As at the balance sheet date the Company was committed to completing the
purchase of the Millennium Business Centre in Bucharest. The transaction closed
in January 2007 against a final purchase price of Euro42.5 million
11 Post Balance Sheet Events
The Board appointed an independent valuation agent, SHM Smith Hodgkinson, to
carry out a revaluation of the Company's portfolio of investment properties as
at 31 January 2007.
The revaluation of the properties is analysed below.
--------------------- ------------------ ----------------
Original Acquisition Cost* Revaluation
Euro'm As at 31 Jan 2007
Euro'm
--------------------- ------------------ ----------------
PGV Tower 24.5 25.6
Mall Veliko Turnovo 29.8 32.5
Impact Construdava 20.1 21.5
Millennium Business Centre 42.5 50.4
--------------------- ------------------ ----------------
Total 116.9 130.0
--------------------- ------------------ ----------------
* including transaction costs
This information is provided by RNS
The company news service from the London Stock Exchange
END
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