TIDMECPC
RNS Number : 2283T
European Convergence Property CoPLC
24 September 2010
24 September 2010
EuroPean convergence PROPERTY company plc
("ECPC" OR "THE COMPANY")
Interim Results for the period ended 30 June 2010
European Convergence Property Company PLC ("ECPC", the "Company" or the "Group")
announces its interim results for the six month period ended 30 June 2010.
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
This is the second interim report following the Company's decision to change its
accounting year end to 31 December (from 30 June) to bring it into line with the
accounting and tax year of the Company's only remaining asset in Bulgaria.
At the time of this interim report the economic trends in Bulgaria remain very
mixed. While unemployment figures have continued their downward trend and
exports have seen some growth, the Gross Domestic Product ("GDP") has shown a
small decline with a more dramatic decline being seen in Foreign Direct
Investment. The real issue for the Company is the consumption figures for
Bulgaria which have been declining consistently over the last six months.
Whilst retail sales figures for basics such as food were relatively static,
sales of consumer electronics, furniture and cars have slowed considerably
putting great pressure on retailers who in turn look to landlords for
assistance.
The retail market over the last six months has been extremely tough and can be
defined as an Occupiers' market with landlords chasing new and existing
retailers offering bigger incentive packages to obtain the tenant. However,
against this backdrop of difficult retail conditions, four large mall schemes
have opened during the first half of the year with a further 6 to 7 shopping
centres expected to open by the end of the year. Consequently, 2010 is set to
be a record year in terms of shopping centre development.
Occupier demand is mainly driven by international brands entering the market.
These brands are aware of their bargaining position and are seeking significant
discounts on rents and incentive packages to cover costs of fitting out and
stocking new units. Coupled with the increased supply of retail space and the
existence of further space in development this has lead to increased downward
pressure on rents, shortening of lease contract length, rent concessions like
step rents, longer rent-free periods, and turnover rents, as well as landlord
fit-out contributions. There are some very early signs that some retailers are
targeting Central and Eastern Europe with significant expansion plans but this
is against the backdrop of increased supply in the market. In the first Quarter
of 2010 prime shopping centre rents were down around 12.5% on the quarter and
regional centres declines were greater.
The retail investment market has come to a virtual standstill with no
significant retail transactions recorded in the first six months of the year.
Distressed vendors continue to lower their prices but there is a general
reluctance to buy. Shopping Centre yields saw a 100 basis point reduction in
the first quarter of 2010 to stand at 9.5% and rents and capital values are not
expected to recover in the near term with little real recovery expected until
the second half of 2011.
The extremely difficult retail-trading environment and the lack of credible
tenants has impacted the Company's one remaining property asset, the shopping
centre Mall Veliko Turnovo ('MVT') in central Bulgaria, necessitating further
rental concessions in order to maintain acceptable levels of occupancy. These
renegotiations decreased the rental income during the first six months of the
year. Further temporary short term additional tenants' allowances are also
anticipated and as at the end of June 2010 net commercialised space was showing
a slight decline in total occupancy to c. 90% of total leasable space.
The Manager is employing international consultants to undertake a full review of
the shopping centre paying specific attention to the overall client experience,
branding and tenant mix with a view to make recommendations which will
ultimately lead to an increase in both rental and secondary income generation.
MVT was subject to a full independent valuation by SHM Smith Hodgkinson as at 30
June 2009 which led to a reduction in the carrying value of the asset of EUR4.2
million. In the previous interim report published in March 2010, following an
internal review and taking into account the economic environment being seen in
the first quarter of 2010 it was decided to impair the carrying value of MVT by
a further EUR3.3 million. The next independent valuation of MVT will be carried
out for the 31 December 2010 year end report and accounts which it may or may
not lead to a further impairment of this asset.
During the six months to June 2010 the Fund paid a distribution amounting to 3
Euro cents per share. This capital repayment took the total amount repaid to
shareholders to 97 Euro cents.
Erwin Brunner
Chairman
23 September 2010
Consolidated Income Statement
+-----------------+--------+-------------+-------------+
| | Note | (Unaudited) | (Unaudited) |
| | | 1 January | 1 January |
| | | 2010 to 30 | 2009 to 30 |
| | | June 2010 | June 2009 |
+-----------------+--------+-------------+-------------+
| | | EUR'000 | EUR'000 |
+-----------------+--------+-------------+-------------+
| | | | |
+-----------------+--------+-------------+-------------+
| Net | | (23) | |
| loss | | | (4,300) |
| from | | | |
| fair | | | |
| value | | | |
| adjustment | | | |
| on | | | |
| investment | | | |
| property | | | |
+-----------------+--------+-------------+-------------+
| | | | |
+-----------------+--------+-------------+-------------+
| Net | | 913 | 1,266 |
| rent | | | |
| and | | | |
| related | | | |
| income | | | |
+-----------------+--------+-------------+-------------+
| | | | |
+-----------------+--------+-------------+-------------+
| Manager's | 6.3 | (134) | 474 |
| fees | | | |
+-----------------+--------+-------------+-------------+
| Audit | | (17) | 29 |
| and | | | |
| professional | | | |
| fees | | | |
+-----------------+--------+-------------+-------------+
| Other | | (586) | (825) |
| expenses | | | |
+-----------------+--------+-------------+-------------+
| Administrative | | (737) | (322) |
| expenses | | | |
+-----------------+--------+-------------+-------------+
| | | | |
+-----------------+--------+-------------+-------------+
| Net | | 153 | (3,356) |
| operating | | | |
| (loss)/profit | | | |
| before net | | | |
| financing | | | |
| expense | | | |
+-----------------+--------+-------------+-------------+
| | | | |
+-----------------+--------+-------------+-------------+
| Financial | | 224 | 39 |
| income | | | |
+-----------------+--------+-------------+-------------+
| Financial | | (564) | (407) |
| expenses | | | |
+-----------------+--------+-------------+-------------+
| Net | | (340) | (368) |
| financing | | | |
| expense | | | |
+-----------------+--------+-------------+-------------+
| | | | |
+-----------------+--------+-------------+-------------+
| (Loss)/profit | | (187) | (3,724) |
| before tax | | | |
+-----------------+--------+-------------+-------------+
| | | | |
+-----------------+--------+-------------+-------------+
| Income | 16 | - | (4) |
| tax | | | |
| credit | | | |
+-----------------+--------+-------------+-------------+
| | | | |
+-----------------+--------+-------------+-------------+
| Retained | | (187) | (3,728) |
| (loss)/profit | | | |
| for the year | | | |
+-----------------+--------+-------------+-------------+
| | | | |
+-----------------+--------+-------------+-------------+
| Basic | 8 | (0.0030) | (0.0595) |
| and | | | |
| diluted | | | |
| (loss)/earnings | | | |
| per share (EUR) | | | |
+-----------------+--------+-------------+-------------+
Consolidated Statement of Comprehensive Income
+---------------+--------+-------------+-------------+
| | Note | (Unaudited) | (Unaudited) |
| | | 1 January | 1 January |
| | | 2010 to 30 | 2009 to 30 |
| | | June 2010 | June 2009 |
+---------------+--------+-------------+-------------+
| | | EUR'000 | EUR'000 |
+---------------+--------+-------------+-------------+
| Loss | | (187) | (3,728) |
| for | | | |
| the | | | |
| period | | | |
+---------------+--------+-------------+-------------+
| Other | | | |
| comprehensive | | | |
| income | | | |
+---------------+--------+-------------+-------------+
| Currency | | - | |
| translation | | | 5 |
| differences | | | |
+---------------+--------+-------------+-------------+
| Total | | (187) | (3,723) |
| comprehensive | | | |
| loss for the | | | |
| period | | | |
+---------------+--------+-------------+-------------+
Consolidated Balance Sheet
+------------------+--------+-------------+-----------+
| | Note | (Unaudited) | (Audited) |
| | | At 30 June | At 30 |
| | | 2010 | June 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 | 312 | 2,810 |
| and | | | |
| other | | | |
| receivables | | | |
+------------------+--------+-------------+-----------+
| Cash | 11 | 3,389 | 4,200 |
| and | | | |
| cash | | | |
| equivalents | | | |
+------------------+--------+-------------+-----------+
| Total | | 3,701 | 7,010 |
| current | | | |
| assets | | | |
+------------------+--------+-------------+-----------+
| Total | | 24,101 | 30,708 |
| assets | | | |
+------------------+--------+-------------+-----------+
| | | | |
+------------------+--------+-------------+-----------+
| Issued | | 3,682 | 3,682 |
| share | | | |
| capital | | | |
+------------------+--------+-------------+-----------+
| Distributable | | (1,879) | - |
| reserves | | | |
+------------------+--------+-------------+-----------+
| Retained | | 2,382 | 5,581 |
| earnings | | | |
+------------------+--------+-------------+-----------+
| Foreign | | 2 | 9 |
| currency | | | |
| translation | | | |
| reserve | | | |
+------------------+--------+-------------+-----------+
| Total | | 4,187 | 9,272 |
| equity | | | |
+------------------+--------+-------------+-----------+
| | | | |
+------------------+--------+-------------+-----------+
| Interest-bearing | 12 | 19,212 | 19,178 |
| loans and | | | |
| borrowings | | | |
+------------------+--------+-------------+-----------+
| Deferred | | - | - |
| tax | | | |
| liability | | | |
+------------------+--------+-------------+-----------+
| Total | | 19,212 | 19,178 |
| non-current | | | |
| liabilities | | | |
+------------------+--------+-------------+-----------+
| | | | |
+------------------+--------+-------------+-----------+
| Trade | 13 | 702 | 2,258 |
| and | | | |
| other | | | |
| payables | | | |
+------------------+--------+-------------+-----------+
| Total | | 702 | 2,258 |
| current | | | |
| liabilities | | | |
+------------------+--------+-------------+-----------+
| Total | | 19,914 | 21,436 |
| liabilities | | | |
+------------------+--------+-------------+-----------+
| Total | | 24,101 | 30,708 |
| equity | | | |
| & | | | |
| liabilities | | | |
+------------------+--------+-------------+-----------+
Approved by the Board of Directors on 23 September 2010
Consolidated Statement of Changes in Equity
+---------------+---------+----------+-------------+---------+
| | Share | Retained | Foreign | Total |
| | capital | earnings | currency | |
| | | | translation | |
| | | | reserve | |
+---------------+---------+----------+-------------+---------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+---------------+---------+----------+-------------+---------+
| Balance | 3,682 | 9,309 | 4 | 12,995 |
| at 1 | | | | |
| January | | | | |
| 2009 | | | | |
+---------------+---------+----------+-------------+---------+
| Loss | - | (3,728) | - | (3,728) |
| for | | | | |
| the | | | | |
| period | | | | |
+---------------+---------+----------+-------------+---------+
| Other | | | | |
| comprehensive | | | | |
| income | | | | |
+---------------+---------+----------+-------------+---------+
| Foreign | - | - | 5 | 5 |
| exchange | | | | |
| translation | | | | |
| differences | | | | |
+---------------+---------+----------+-------------+---------+
| Total | - | (3,728) | 5 | (3,723) |
| comprehensive | | | | |
| loss | | | | |
+---------------+---------+----------+-------------+---------+
| Shares | - | - | - | - |
| cancelled | | | | |
| following | | | | |
| market | | | | |
| purchases | | | | |
+---------------+---------+----------+-------------+---------+
| Total | - | - | - | - |
| 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 | 9,309 | 4 | 12,995 |
| at 1 | | | | |
| January | | | | |
| 2009 | | | | |
+---------------+---------+----------+-------------+---------+
| Loss | - | (6,740) | - | (6,740) |
| for | | | | |
| the | | | | |
| year | | | | |
+---------------+---------+----------+-------------+---------+
| Other | | | | |
| comprehensive | | | | |
| income | | | | |
+---------------+---------+----------+-------------+---------+
| Foreign | - | - | (2) | (2) |
| exchange | | | | |
| translation | | | | |
| differences | | | | |
+---------------+---------+----------+-------------+---------+
| Total | | (6,740) | (2) | (6,742) |
| comprehensive | | | | |
| loss | | | | |
+---------------+---------+----------+-------------+---------+
| Shares | - | - | - | - |
| cancelled | | | | |
| following | | | | |
| market | | | | |
| purchases | | | | |
+---------------+---------+----------+-------------+---------+
| Total | - | - | - | - |
| transactions | | | | |
| with owners | | | | |
| in the year | | | | |
+---------------+---------+----------+-------------+---------+
| Balance | 3,682 | 2,569 | 2 | 6,253 |
| at 31 | | | | |
| December | | | | |
| 2009 | | | | |
+---------------+---------+----------+-------------+---------+
+---------------+---------+---------------+----------+-------------+---------+
| | Share | Distributable | Retained | Foreign | Total |
| | capital | reserves | earnings | currency | |
| | | | | translation | |
| | | | | reserve | |
+---------------+---------+---------------+----------+-------------+---------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+---------------+---------+---------------+----------+-------------+---------+
| Balance | 3,682 | - | 2,569 | 2 | 6,253 |
| at 1 | | | | | |
| January | | | | | |
| 2010 | | | | | |
+---------------+---------+---------------+----------+-------------+---------+
| Loss | - | - | (187) | - | (187) |
| for | | | | | |
| the | | | | | |
| year | | | | | |
+---------------+---------+---------------+----------+-------------+---------+
| Other | | | | | |
| comprehensive | | | | | |
| income | | | | | |
+---------------+---------+---------------+----------+-------------+---------+
| Foreign | - | - | - | - | - |
| exchange | | | | | |
| translation | | | | | |
| differences | | | | | |
+---------------+---------+---------------+----------+-------------+---------+
| Total | - | - | (187) | - | (187) |
| comprehensive | | | | | |
| loss | | | | | |
+---------------+---------+---------------+----------+-------------+---------+
| Capital | - | (1,879) | - | - | (1,879) |
| distribution | | | | | |
+---------------+---------+---------------+----------+-------------+---------+
| Balance | 3,682 | (1,879) | 2,382 | 2 | 4,187 |
| at 30 | | | | | |
| June | | | | | |
| 2010 | | | | | |
+---------------+---------+---------------+----------+-------------+---------+
Consolidated Cash Flow Statement
+---------------------+--------+-------------+-------------+
| | Note | (Unaudited) | (Unaudited) |
| | | For the | For the |
| | | period from | period from |
| | | 1 January | 1 January |
| | | 2010 to 30 | 2009 to 30 |
| | | June 2010 | June 2009 |
+---------------------+--------+-------------+-------------+
| | | EUR'000 | EUR'000 |
+---------------------+--------+-------------+-------------+
| Operating | | | |
| activities | | | |
+---------------------+--------+-------------+-------------+
| Group | | (187) | (3,728) |
| loss | | | |
| for | | | |
| the | | | |
| period | | | |
+---------------------+--------+-------------+-------------+
| Adjustments | | | |
| for: | | | |
+---------------------+--------+-------------+-------------+
| | | - | 4,300 |
| Net | | | |
| loss | | | |
| from | | | |
| fair | | | |
| value | | | |
| adjustment | | | |
| on | | | |
| investment | | | |
| property | | | |
+---------------------+--------+-------------+-------------+
| | | (224) | (39) |
| Financial | | | |
| income | | | |
+---------------------+--------+-------------+-------------+
| | | 564 | 407 |
| Financial | | | |
| expense | | | |
+---------------------+--------+-------------+-------------+
| | | - | 4 |
| Income | | | |
| tax | | | |
| credit | | | |
+---------------------+--------+-------------+-------------+
| Operating | | 153 | 944 |
| profit | | | |
| before | | | |
| changes | | | |
| in | | | |
| working | | | |
| capital | | | |
+---------------------+--------+-------------+-------------+
| | | | |
+---------------------+--------+-------------+-------------+
| Decrease | | 2,509 | 1,782 |
| in trade | | | |
| and | | | |
| other | | | |
| receivables | | | |
+---------------------+--------+-------------+-------------+
| Decrease | | (955) | (478) |
| in trade | | | |
| and | | | |
| other | | | |
| payables | | | |
+---------------------+--------+-------------+-------------+
| | | | |
+---------------------+--------+-------------+-------------+
| Cash | | 1,707 | 2,248 |
| generated | | | |
| from | | | |
| operations | | | |
+---------------------+--------+-------------+-------------+
| Interest | | (564) | (407) |
| paid | | | |
+---------------------+--------+-------------+-------------+
| Income | | - | (10) |
| and | | | |
| corporation | | | |
| tax (paid)/ | | | |
| received | | | |
+---------------------+--------+-------------+-------------+
| Interest | | 224 | 39 |
| received | | | |
+---------------------+--------+-------------+-------------+
| Cash | | 1,367 | 1,870 |
| flows | | | |
| generated | | | |
| from | | | |
| operating | | | |
| activities | | | |
+---------------------+--------+-------------+-------------+
| | | | |
+---------------------+--------+-------------+-------------+
| Investing | | | |
| activities | | | |
+---------------------+--------+-------------+-------------+
| Purchase | | - | (91) |
| of | | | |
| property, | | | |
| plant and | | | |
| equipment | | | |
+---------------------+--------+-------------+-------------+
| Cash | | - | (91) |
| flows | | | |
| used | | | |
| in | | | |
| investing | | | |
| activities | | | |
+---------------------+--------+-------------+-------------+
| | | | |
+---------------------+--------+-------------+-------------+
| Financing | | | |
| activities | | | |
+---------------------+--------+-------------+-------------+
| Repayment | | 11 | 6 |
| of long | | | |
| term | | | |
| loans | | | |
+---------------------+--------+-------------+-------------+
| Capital | | (1,879) | - |
| distribution | | | |
+---------------------+--------+-------------+-------------+
| Cash | | (1,868) | 6 |
| flows | | | |
| used | | | |
| in | | | |
| financing | | | |
| activities | | | |
+---------------------+--------+-------------+-------------+
| | | | |
+---------------------+--------+-------------+-------------+
| Net | | (501) | 1,785 |
| (decrease)/increase | | | |
| in cash and cash | | | |
| equivalents | | | |
+---------------------+--------+-------------+-------------+
| Cash | | 3,890 | 2,415 |
| and | | | |
| cash | | | |
| equivalents | | | |
| at | | | |
| beginning | | | |
| of period | | | |
+---------------------+--------+-------------+-------------+
| Cash | 11 | 3,389 | 4,200 |
| 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 30 June 2010 represents the
Company's second successive interim report resulting from the Company's decision
to move its year end to 31 December. The interim report 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 | Unallocated | Total |
| months | | | | |
| ended | | | | |
| 30 | | | | |
| June | | | | |
| 2010 | | | | |
+-------------+----------+---------+-------------+----------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+-------------+----------+---------+-------------+----------+
| Net | 913 | - | - | 913 |
| rent | | | | |
| and | | | | |
| associated | | | | |
| income | | | | |
+-------------+----------+---------+-------------+----------+
| Segment | (415) | 154 | | (2,939) |
| results | | | | |
+-------------+----------+---------+-------------+----------+
| Segment | 22,951 | 5 | 1,145 | 24,101 |
| assets | | | | |
+-------------+----------+---------+-------------+----------+
| Segment | (19,299) | (27) | (588) | (19,914) |
| liabilities | | | | |
+-------------+----------+---------+-------------+----------+
+-------------+----------+---------+-------------+----------+
| 6 | Bulgaria | Romania | Unallocated | Total |
| months | | | | |
| ended | | | | |
| 31 | | | | |
| December | | | | |
| 2009 | | | | |
+-------------+----------+---------+-------------+----------+
| | 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 | (19,301) | (930) | (1,556) | (20,857) |
| 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 30 June 2010 is EUR0.0668 based on net assets
of EUR4.20 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
97,478 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 directors 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 30 June 2010 amounted to
EUR167,164 (30 June 2009: EUR182,661).
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 30 June
2010, performance fees previously accrued were partially reversed which led to a
credit to the profit and loss account of the Group of EUR33,079 (30 June 2009:
credit of EUR657,084).
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
30 June 2010 amounted to EUR21,307 (30 June 2009: EUR19,657).
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 30 June 2010 amounted to
EUR3,525 (30 June 2009: EUR3,450)
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 30 June 2010 amounted to
EUR14,981 (30 June 2009: EUR17,250).
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 receivable for the period ended 30 June 2010 amounted to EUR18,971 (30
June 2009: payable EUR66,829).
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:
+--------------+----------+----------+
| | 30 | 30 |
| | June | June |
| | 2010 | 2009 |
+--------------+----------+----------+
| Loss | (187) | (3,728) |
| attributable | | |
| to equity | | |
| holders of | | |
| the | | |
| Company | | |
| (EUR'000) | | |
+--------------+----------+----------+
| Weighted | 62,616 | 62,616 |
| average | | |
| number | | |
| of | | |
| ordinary | | |
| shares | | |
| in issue | | |
| (thousands) | | |
+--------------+----------+----------+
| Basic | (0.0030) | (0.0595) |
| and | | |
| diluted | | |
| loss | | |
| per | | |
| share | | |
| (EUR per | | |
| share) | | |
+--------------+----------+----------+
9 Investment Property
+--------------+--------+---------+
| | 30 | 30 |
| | June | June |
| | 2010 | 2009 |
+--------------+--------+---------+
| | EUR000 | EUR'000 |
+--------------+--------+---------+
| At | 20,400 | 27,900 |
| beginning | | |
| of period | | |
+--------------+--------+---------+
| Additions | 23 | - |
+--------------+--------+---------+
| Disposals | - | - |
| through | | |
| sale of | | |
| subsidiaries | | |
+--------------+--------+---------+
| Net | (23) | (4,300) |
| 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 last performed an internal valuation as at 31
December 2009. As at 30 June 2010, 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
+-------------+--------+--------+
| | 30 | 30 |
| | June | June |
| | 2010 | 2009 |
+-------------+--------+--------+
| | EUR'000 | EUR'000 |
+-------------+--------+--------+
| Trade | 209 | 229 |
| receivables | | |
+-------------+--------+--------+
| Deferred | - | 2,478 |
| sale | | |
| proceeds | | |
+-------------+--------+--------+
| Other | 103 | 103 |
+-------------+--------+--------+
| Total | 312 | 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
+-------------+--------+--------+
| | 30 | 30 |
| | June | June |
| | 2010 | 2009 |
+-------------+--------+--------+
| | EUR'000 | EUR'000 |
+-------------+--------+--------+
| | | |
+-------------+--------+--------+
| Bank | 3,389 | 4,200 |
| balances | | |
+-------------+--------+--------+
| Bank | - | - |
| overdrafts | | |
+-------------+--------+--------+
| Cash | 3,389 | 4,200 |
| and | | |
| cash | | |
| equivalents | | |
+-------------+--------+--------+
At 30 June 2010, 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
+---------+--------+--------+
| | 30 | 30 |
| | June | June |
| | 2010 | 2009 |
+---------+--------+--------+
| | EUR'000 | EUR'000 |
+---------+--------+--------+
| Secured | 19,212 | 19,178 |
| bank | | |
| loans | | |
+---------+--------+--------+
Terms and debt repayment schedule:
+---------+--------+-----------+----------+
| Loan | Bank | Effective | Final |
| Amount | | interest | Maturity |
| | | rate | date |
+---------+--------+-----------+----------+
| | | 30 | |
| | | June | |
| | | 2010 | |
+---------+--------+-----------+----------+
| EUR19.2 | Alpha | 5.7% | October |
| million | Bank | | 2011 |
| | Sofia | | |
| | SA | | |
+---------+--------+-----------+----------+
13 Trade and Other Payables
+----------+--------+--------+
| | 30 | 30 |
| | June | June |
| | 2010 | 2009 |
+----------+--------+--------+
| | EUR'000 | EUR'000 |
+----------+--------+--------+
| Taxation | - | 26 |
+----------+--------+--------+
| Trade | 82 | 129 |
| payables | | |
+----------+--------+--------+
| Accruals | 620 | 2,103 |
+----------+--------+--------+
| Total | 702 | 2,258 |
+----------+--------+--------+
Accruals include a performance fee of EUR407,736 and other accruals of EUR212,521
(30 June 2009 - EUR973,566 and EUR1,129,985 respectively).
14 Exchange Rates
The following exchange rates were used to translate assets and liabilities into
the reporting currency at 30 June 2010:
+------------+--------+
| 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 30 June 2010 amounted to EUR49,145 (30 June
2009: 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 30 | to 30 |
| | June | June |
| | 2010 | 2009 |
+------------------+--------+--------+
| | EUR'000 | EUR'000 |
+------------------+--------+--------+
| Current | - | - |
| tax | | |
| expense/(credit) | | |
+------------------+--------+--------+
| Movement | - | (4) |
| in | | |
| deferred | | |
| tax | | |
| liability | | |
+------------------+--------+--------+
| Income | - | (4) |
| 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 30 June 2010 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
In July 2010 the Bulgarian tax authorities issued an assessment against European
Convergence Property Company Bulgaria EOOD for withholding tax on interest
payments made to its parent. The total amount of the assessment, including
penalties, was for EUR228,000. The company appealed to the Higher Tax Office
against the assessment and was informed on the 13 September that the Higher Tax
Office had upheld the original assessment. The company is currently considering
whether to appeal this decision in the Administrative Court.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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