Ablon Group
Ablon Group Limited ("Ablon" or "the Company"), a leading real estate owner and
developer in CEE, today announces its results for the year ended 31 December
2007 in accordance with International Financial Reporting Standards (IFRS) as
adopted by the EU.
PROPERTY OVERVIEW
-- Property Assets:
-- Combined estimated value of EUR 617.4(1) million as at 31 December
2007, an increase of 46% compared to the valuation on 31 December
2006 (EUR 421.5 million).
-- 139,700 square metres of existing and income generating office, and
retail assets (at 12 locations) in Budapest and Prague
-- Significant development land bank comprising a further 1,040,600 square
metres in the next five years (at 23 locations) in Budapest, Prague,
Bucharest, Warsaw and Gdansk
-- Well positioned to expand in other cities in Central and Eastern Europe
following additional plot acquisitions in Prague, Warsaw and Gdansk for
residential development and in Bucharest for an office and residential
development
FINANCIAL HIGHLIGHTS
-- Net Asset Value (NAV) growth of 85% to EUR 506.6 million for the year
ended 31 December 2007 (31 December 2006: EUR 274.5 million)
-- Pre-tax Profit of EUR 52.4 million for the year ended 31 December 2007
-- Gross rental income of EUR 11.2 million for the year ended 31 December
2007
-- Shareholders funds increased from EUR 129 million at 31 December 2006 to
EUR 296 million at 31 December 2007, an increase of EUR 167 million
-- Adjusted net asset value per share of *3.66 at 31 December 2007
-- In February 2007, Ablon Group commenced trading on AIM, raising �97.2
million (EUR 145.9) (including over-allotment option) gross proceeds
RESULTS IN BRIEF
Year ended 31
December
in thousands of Euros 2007 2006
Gross rental income 11,230 9,209
Gross residential income 958 3,668
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Gross sales income 12,188 12,877
---------- ----------
Net gain from fair value adjustment on
investment property 53,358 48,584
Sales and administrative expenses (7,874) (4,740)
Other income/(expenses) (317) (137)
---------- ----------
Net operating profit 57,009 53,831
---------- ----------
---------- ----------
Net financing income / (expense) (4,644) (2,812)
Profit before income tax 52,365 51,019
---------- ----------
Tax (11,590) (15,263)
---------- ----------
Minority interest 0 (925)
---------- ----------
---------- ----------
Profit for the year 40,775 34,831
---------- ----------
Basic earnings per share (euro) 0.39 0.66
---------- ----------
Diluted earnings per share (euro) 0.39 0.66
---------- ----------
SUMMARY CONSOLIDATED BALANCE SHEET
in thousands of Euros 31 Dec 2007 31 Dec 2006
Assets
Total non-current assets 404 741 294 795
Total current assets 146 572 36 661
----------------- ---------------
Total assets 551 313 331 456
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EQUITY
----------------- ---------------
Total equity 296 090 129 311
----------------- ---------------
LIABILITIES
Total non-current liabilites 205 303 161 714
Total current liabilities 49 920 40 431
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Total liabilities 255 223 202 145
----------------- ---------------
----------------- ---------------
Total equity and liabilities 551 313 331 456
----------------- ---------------
Uri Heller, Founder and Chief Executive of Ablon, commented: "We are very
pleased with the strong set of results for 2007 and are delighted with the
progress we have made in growing our presence in Central and Eastern Europe. We
are particularly proud of our plots in Bucharest and were delighted to have
secured a deal for our first development in Warsaw, one of Central Europe's most
dynamic real estate markets where there will be strong demand for the newly
built and quality residential space that Ablon Group is renowned for.
The positive macroeconomic trends for our markets remain favourable and Ablon
continues to be one of the most well positioned to benefit from upcoming
opportunities in the market thanks to our local expertise and also to our strong
financial backing. Our ability to complete a EUR 45 million financing deal with
Hypo Real Estate Bank is a major feat given the turbulent nature of the credit
markets since 2007 - this deal reflects the strength of our business model and
our current real estate portfolio.
Generating value for our shareholders is at the forefront of our strategy and
in-line with this we are delighted to have achieved 85% NAV growth during 2007.
In addition and in line with its dividend policy Ablon will be paying out its
first dividend to shareholders in May 2008. We believe the group continues to
have good prospects and look forward optimistically to 2008."
CONFERENCE CALL INFORMATION
The Company will host a conference call to present the results at 2 pm (London
Time) / 3 pm (CET) / 9 am (New York Time) today.
To participate in the conference call, please register online at:
www.sharedvalue.net/ablon/fy2007 .
The number for the conference call will be available upon registration.
For further information, please contact:
Ablon Group Limited Shared Value Limited
Daniel Avidan, CFO Nicolas Duperrier
Tel. +36 1 225 6600 Tel. +44 (0)20 7321 5010
ablon@sharedvalue.net
Credit Suisse Securities (Europe) Limited ING
Chris Byrne / Richard Probert Aur�lie Barry
Tel. +44 (0)20 7888 8888 Tel. +44 (0)20 7767 6572
ABOUT ABLON GROUP
Founded in 1993 in Budapest (Hungary), Ablon Group has properties at 28
different locations split into 54 different projects or phases, of which there
are 13 completed projects and 16 development projects in Budapest, Prague,
Bucharest, Warsaw and Gdansk. Its portfolio comprises a diversified mix of
office, residential, retail, logistics and hotel developments valued at EUR
617.4 million by King Sturge, an independent valuation firm, as at 31 December
2007. Ablon has to date approximately 139,700 square metres of existing and
income generating office and retail assets (at 12 locations) in Budapest and
Prague, with a significant development land bank comprising a further 1,040,600
square metres in the next five years (at 23 locations) in Budapest, Prague,
Bucharest, Warsaw and Gdansk. Ablon's shares are traded on the AIM market of the
London Stock Exchange under the ticker 'ABL'.
CHAIRMAN'S STATEMENT
Property Portfolio
As at 25 March 2008, Ablon Group's portfolio comprised properties at 28
different locations split into 54 different projects or phases, of which there
were 13 completed projects and 16 development projects as follows:
-- Properties at 17 locations in Budapest, with a total of 29 phases of
development. The properties comprised 11 completed projects (including
Z�ldv�ros Residential Park which had sold 239 out of the 240 flats) and
18 development projects.
-- Properties at 7 locations in Prague, with a total of 10 phases of
development, comprising 3 completed projects and 7 development projects.
-- Properties at 4 locations in Bucharest, with a total of 12 phases of
development, comprising 12 development projects.
-- Property at 2 locations in Poland, with a total of 5 phases of
development.
Operational Review
During 2007, Ablon Group had residential, retail and office development projects
at the following locations:
Budapest
In July 2007, Global Immo Kft., a wholly owned subsidiary of Ablon Group and the
project company for the Gateway Office Park project in Budapest, won a
significant public tender from the Hungarian Post for approximately 24,000
square metres of office space on a 10 year lease contract. Under the terms of
this agreement, the total gross rental income is approximately EUR 5 million per
annum. Construction of the Gateway Office Park project is completed and the
property is situated on approximately 11,250 square metres of land in district
13 of Budapest, an area that has become the 'Office Building Corridor' of
Budapest. The project has a total of 36,298 square metres of lettable office and
retail space and underground parking.
In December 2007, the company signed a 30 year management contract with Marriot
for the hotel part of the Blaha Center (previously called Europeum). The Group
started construction of the project in December 2006 and the site is situated in
Blaha Lujza Square, one of the busiest squares in downtown Budapest, with easy
access to public transportation and motorways. The development includes a
four-star hotel which will have 235 rooms, 5,500 square metres of retail space
and 229 parking places. Construction is expected to be completed during the
fourth quarter of 2009 and the total cost of the project is estimated to be EUR
40 million, while net operating income from the project, including income from
the hotel, parking and retail space, is expected to reach around EUR 4.5 million
per year for the Company.
In August 2007, the Group started the construction of the second phase of the M3
business centre. The property is an office building situated in the developing
business district of Budapest, located near the junction of the M3 highway and
Hungaria krt. Once the entire development is completed, it will provide a total
of approximately 18,000 square metres of lettable office space. Completion of
the second and final phase of development, totaling 8,400 square metres of
office space, is expected to happen during the fourth quarter of 2008.
In November 2007, the Group started the construction of the first phase of the
Airport City Logistic Park in the southeast of Budapest. The first phase will
see the completion of 10,000 square metres of warehouse space, and construction
is expected to be completed by the second quarter of 2008. The other phases of
the project are expected to be completed by the end of the second quarter of
2009, and the property will cover 117,140 square metres. The Company plans to
develop a logistics centre consisting of a 66,000 square metre warehouse and
5,000 square metres of commercial space.
Prague
Following a period of due diligence, Ablon completed the acquisition of 394,701
square metres of land located 30 kilometres southwest of Prague city centre in
April. The site, which is situated 0.7 kilometres from a main highway, was
purchased for EUR 7.1 million and the sale was initiated in December 2006. Ablon
is confident of obtaining planning permission for the plot and subject to this,
plans to develop the site for residential housing. The expected building rights
for the land will enable the Company to construct 320 family homes. 50% of these
homes will be semi detached houses (with a floor area of 150 square metres
each); 47% will be detached houses (with a floor area of 150 - 330 square metres
each) and 3% will be terraced houses (with a floor area of 150 square metres
each). A kindergarten as well as some retail and service units will also be
built on-site. Ablon expects to begin marketing shortly after a building permit
is obtained around January 2009. The site will be developed in three one-year
phases, the timing of which will be determined by market demand.
Bucharest
In June 2007, the Company increased its stake in the two development companies
that own the plots and development rights to the Timisoara Avenue and Mogosoaia
Village development projects, in Bucharest, from 80% to 88% as part of a
non-cash transaction. Under the terms of the agreement, Ablon will take on all
future equity and shareholders' loans required to finance these projects. The
share of Ablon's partners in the two development companies will be diluted from
20% to 12%. Timisoara Avenue is a 40,930 square metre plot in the Br�ncusi
neighborhood in western Bucharest. The Group expects to build a residential
complex on the plot, including leisure facilities, consisting of approximately
2,120 apartments for middle class residents. Ablon expects to complete work on
the development in 2012 with the aggregate expected gross saleable area expected
to be 180,000 square metres. Mogosoaia Village is a 93,800 square metre plot,
located seven kilometres northwest of the city centre of Bucharest; Ablon
expects to build 116 villas on the plot. The development is expected to be
completed in 2009 with an aggregate expected gross saleable area of 40,000
square metres.
The Group also completed the acquisition of a 33,650 square metre plot of land,
located in the Pipera District of Bucharest, in June, for a purchase price of
EUR 9.5 million. Ablon has obtained building rights for 117,000 square metres on
the plot and plans to develop the site for residential housing and office use.
The Company will construct approximately 1,000 apartments, taking up 100,000
square metres, with offices being constructed on the remaining 17,000 square
metres of space. This will be the Company's first office development in the city
and total revenues from the project are expected to be between EUR 120 and EUR
140 million.
In October 2007, the Group completed the acquisition of a new 40,000 square
metre plot of land located in the Pipera District of Bucharest for a purchase
price of EUR 18.5 million. Ablon has obtained building rights for 120,000 square
metres on the plot and plans to develop the site for residential housing,
offices and a retail complex. The Company will construct approximately 1,000
apartments, taking up 72,000 square metres, with offices and retail space being
constructed on 28,000 square metres of space. The total revenues from the
project are expected to be between EUR 185 and EUR 205 million.
Ablon's portfolio in Bucharest now stands at approximately 4,000 apartments and
41,000 square metres of office and commercial space. The Company is looking to
complete all of its current development projects in Bucharest within 5 years.
Recent Developments
In January 2008, Ablon completed the acquisition of the Company's first
residential venture in Poland, in-line with the Company's strategy of building a
solid portfolio of assets in the most attractive cities in Central and Eastern
Europe. Ablon acquired a new 5,290 square metre plot of land located in the
centre of Warsaw. The plot is strategically situated within close proximity of
the Daewoo / World Trade Tower and the new Hilton Hotel and Residential Towers
and is situated in one of the most exclusive and highly sought after locations
in central Warsaw.
The Company plans to build up to 13 floors of residential space at the site,
occupying approximately 17,000 square metres for a total development cost of EUR
40 million. Construction at the site will commence in the third quarter of 2008
and is expected to last 2 years. The total revenues from the project are
expected to be between EUR 70 and EUR 85 million.
Earlier this month, Ablon announced the acquisition of a 5,409 square metre
building in Budapest with the intention of converting it into a 74 bedroom
luxury boutique hotel for a total development cost of EUR 11 million. Work on
the development is expected to be completed towards the end of 2008. Located in
the 6th district on the Pest side of Budapest, the property is part of a
historical residential area with traditional retail units on the ground levels
of the site. The development lies on the border of Budapest's historic downtown
and the dynamic 13th district, opposite the planned new Government Quarter.
Budapest's biggest shopping centre (Westend) and the West Railway Station are
also in close proximity. The development further strengthens the Group's
portfolio of high-end properties in the in Central and Eastern Europe.
Ablon also recently completed the acquisition of an 88,000 square metre plot of
land in Gdansk, through a joint venture in which Ablon has a 51% stake. Ablon
intends to develop the site into a 3 floor luxury residential complex with
recreational facilities for a total development cost of approximately EUR 95
million. Construction at the site is scheduled to commence within 15 months over
4 different phases with completion expected 4 years later. Ablon expects the
project to generate an income of between EUR 190 million to EUR 220 million once
all four phases are complete. The Company also has an option to buy an
additional 30,000 square metres of land in close proximity to the site.
Portfolio summary
Please find the updated list of the Group projects as at 31 December 2007
overleaf:
Completed Expected Future Valuation by
Group Lettable Annualized Occupancy Currently Development King Sturge
Project holding Project Type Area (sq. Rent (EUR under sites (sq. m) as at
m) million p.a.) development as at March 31.12.07
As of 31.12.07 2008 EUR million
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Budapest
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BC. 99 100% Office 15,900 2.86 98% 0 37,400 63.2
Budafoki 100% Office 3,300 0.3 82% 0 145,000 29.3
Fogarasi 100% Office 2,700 0.4 100% 0 0 5.5
M3 100% Office 9,700 1.6 100% 8,400 0 30.8
BC. 91 100% Office 6,700 1.1 99% 0 0 15.4
Zoldvaros 100% Residential 16,300 .01 0 29,100 9.0
Buy-Way Dunakeszi 100% Retail 21,600 1.3 55% 0 3,700 25.8
Buy-Way Soroksar 100% Retail 11,900 0.8 64% 0 0 14.1
BC. 30 100% Office 12,300 2.1 89% 0 0 36.2
Gateway 100% Office 36,300 4.0 71% 0 0 80.0
Blaha Center l 100% Hotel/Retail 0 0.02 17,700 0 41.2
Airport City 100% Storage 0 10,000 45,000 15.7
Hold Residence 100% Hotel 0 6,100 11.5
Katona Residence 100% Hotel 0 5,700 9.0
Nap Residence 100% Hotel 0 0.05 4,100 7.7
Erzsebet 100% Office 0 12,700 7.3
Newage 100% Office 0 13,200 13.8
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Total Budapest 136,700 14.54 85.94% 36,100 302,000 415.5
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Prague
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Palmovka 100% Office 4,200 0.8 99% 0 0 9.8
Meteor 100% Office 14,400 1.9 98% 0 5,500 36.5
VIVA Residence 100% Residential 0 0 10,800 3.2
May House 100% Office 0 0 7,200 9.2
Kolben 100% Mixed use 0 0 73,000 54.3
Ritka 100% Residential 0 0 64,000 6.9
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Total Prague 18,600 2.7 0 160,500 119.9
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Bucharest
------------------------------------------------------------------------------------------------------------------------
Mogosaia 88% Residential 40,000 8.5
Top Class 88% Residential 180,000 37.0
Pipera 3H 100% Mix 117,000 10.6
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Pipera 4H 100% Mix 100,000 28.5
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Minority -2.6
------------------------------------------------------------------------------------------------------------------------
Total Bucharest 0 0 0 437,000 82.0
------------------------------------------------------------------------------------------------------------------------
Warsaw
------------------------------------------------------------------------------------------------------------------------
City center 100% Residential 0 0 0 17,000 Not included
------------------------------------------------------------------------------------------------------------------------
Gdansk 51% Residential 0 0 0 88,000 Not included
------------------------------------------------------------------------------------------------------------------------
Total Group 156,000 17.24 36,100 1,004,500 617.4
------------------------------------------------------------------------------------------------------------------------
Out the total valuation of EUR 617.4 million, completed projects account for EUR
287.2 million.
Financial Review
Gross rental income
Gross rental income was EUR 11.2 million for the year ended 31 December 2007,
representing an increase of EUR 2 million, or 22%, from the EUR 9.2 million
generated during the year ended 31 December 2006. This increase can be
attributed to the opening of the new BC30 project in Budapest at the end of 2006
and the improved occupancy at the Meteor A+B Offices in Prague.
Gross residential income
Gross residential income was EUR 1.0 million for the year ended 31 December
2007, representing a decrease of EUR 2.7 million, or 73% from the EUR 3.7
million generated during the year ended 31 December 2006. This decrease in
residential income is a result of the sale of all the units in the Zoldvaros
residential project in Budapest.
Net service charge income/ (expense)
Net service charge income was EUR 0.5 million for the year ended 31 December
2007; an increase of EUR 0.2 million, from the EUR 0.3 million generated during
the year ended 31 December 2006.
Cost of Residential income
The Cost of Residential income was EUR 0.9 million for the year ended 31
December 2007, a decrease of EUR 2.2 million, or 71%, from the EUR 3.1 million
during the year ended 31 December 2006. The decrease in residential income is a
result of the sale of all the units in the Zoldvaros residential project in
Budapest.
Net gain on fair value adjustment of investment property
Net gain on the fair value adjustment of investment property was EUR 53.4
million for the year ended 31 December 2007, representing an increase of EUR 4.8
million or 10% from the EUR 48.6 million generated during the year ended 31
December 2006. Revaluation gains are mainly impacted by the completion of
investment properties projects, or due to an increase in the value of Ablon's
existing portfolio. One of the main reasons for the 2007 revaluation gain was
the completion of the Gateway project in Budapest which resulted in a
revaluation gain close to EUR 32.6 million. In addition, the value of the BC30
project increased by EUR 10.2 million in 2007 due to a higher occupancy rate.
Selling and marketing expenses
Selling and marketing expenses were EUR 1.5 million for the year ended 31
December 2007, an increase of EUR 0.3 million, or 25%, from the EUR 1.2 million
at the year ended 31 December 2006. The increase was mainly due to the marketing
efforts behind the two Buyway retail projects in Budapest.
Administrative expenses
Administrative expenses were EUR 6.3 million for the year ended 31 December
2007, an increase of EUR 2.8 million or 80% from the EUR 3.5 million spent
during the year ended 31 December 2006. This increase was due to the EUR 0.9
million spent on stock options given to employees during the IPO process, an
increase of EUR 0.7 million in management fee costs, an increase of EUR 0.3
million in expenses resulting from further activity in Bucharest in 2007, and
higher auditing, legal and consultancy costs accrued since the company became
public. Travelling expenses were also higher in 2007, mainly due to business
development efforts.
Net Financing income (expense)
Net Financing expense was EUR 4.6 million for the year ended 31 December 2007,
representing an increase of EUR 1.8 million or 64% from the EUR 2.8 million
recorded during the year ended 31 December 2006. The increase in financial
expenses are primarily due to higher interest rates in 2007 compared to 2006,
and the completion of the BC30 project at the end of 2006 which resulted in the
financing expenses for this project to be expensed and not capitalized.
Current Income Tax
Current Income Tax was EUR 0.7 million for the year ended 31 December 2007, an
increase of EUR 0.3 million, or 75%, from EUR 0.4 million for the year ended 31
December 2006. This increase was primarily due to Ablon generating higher rental
income.
Deferred Income Tax
Deferred Income Tax decreased by EUR 3.9 million, or 26% from EUR 14.8 million
in the year ended 31 December 2006 to EUR 10.9 million for the year ended 31
December 2007. In 2006, the income tax rate in Hungary increased from 16% to
20%, which created an effect on the previous year's unrealized profits. Since
Ablon is incorporated in Guernsey, the deferred taxes are not expected to be
paid, as the Group is able to sell the company that holds the property and not
the property itself.
Balance Sheet Overview
Investment property
Investment property increased from EUR 269.7 million in value at 31 December
2006, to EUR 370.0 million as of 31 December 2007. The increase was primarily
due to the EUR 53.4 million in revaluation gains, and the completion of the
Gateway project.
Current assets
Current assets include inventories (in particular, property intended for sale),
current receivables (rent receivables, receivables from property sales, and
receivables from shareholders) and other assets, bank balances and cash. Total
current assets increased by EUR 109.9 million from EUR 36.7 million at
31 December 2006 to EUR 146.6 million at 31 December 2007. The increase was
primarily due to the EUR 72.8 million cash and financial securities increase as
a result of the IPO that took place on 7 February 2007. The inventory increase
of EUR 35.8 million is due to the purchase of 3 sites for residential projects
in Bucharest and near Prague.
Non-Current Liabilities
Non-current liabilities include long-term borrowings from commercial banks and
shareholders, deferred tax liabilities for future tax obligations. Total
non-current liabilities increased by EUR 43.6 million from EUR 161.7 million as
at 31 December 2006 to EUR 205.3 million as at 31 December 2007. The increase
was primarily due to an increase of EUR 31.9 million in long term borrowing,
mainly as a result of the refinancing of some of the yielding assets, and for
project finance. The increase of EUR 11.0 million in deferred tax liability is
mainly due to revaluation profits.
Current Liabilities
Current liabilities increased by EUR 9.5 million from EUR 40.4 million at
31 December 2006 to EUR 49.9 million at 31 December 2007. The increase was
primarily due to EUR 6.2 million in trade payables on projects that are
currently under construction.
Liquidity and capital resources
Dec 31 2007 Dec 31 2006
Non current
Bank loans 157,393 125,508
Shareholders loan 0 0
Loans from minority shareholders 0 0
Total non current 157,393 125,508
Current
Bank loans 35,100 16,269
Shareholders loan 0 13,454
Loans from minority shareholders 0 2,196
Total current 35,100 31,919
192,493 157,427
The Group's liquidity and capital resources come from operations, rental income
and the sale of apartments. The Group finances its development activity with
bank loans and shareholder loans. Typically, project finance covers the 3 year
duration of the construction, and after the construction completion, the loan is
usually extended to a long term loan of between 12-15 years.
On 7 February 2007, Ablon Group completed its IPO on the AIM market of the
London Stock Exchange. The total gross proceeds from the IPO, including the
exercise of the over-allotment option, were �97.16 million, equivalent to EUR
145.9 million. The estimated IPO costs amounted to EUR 10.7 million. Following
the IPO and upon completion of the over-allotment option, Ablon Group has a
total of 108,864,099 ordinary shares in issue. From these proceeds the Group
repaid EUR 13.6 million shareholder loans, and paid EUR 5 million for the share
exchange with the previous owners of the Group entities.
In November 2007, the Company completed a EUR 45 million financing deal with
Real Estate Bank International AG, in spite of the turbulent nature of the
credit markets in 2007. The facility is testament therefore to the strength of
Ablon Group's business model and to the quality of its property portfolio. The
facility was granted to refinance a portfolio of two office buildings located in
Budapest and one office building in Prague.
NAV
The Company's real estate assets were valued on 31 December 2007 at EUR 617.4
million (for its share) by an external independent appraiser (King Sturge), in
accordance with International Valuation Standards. The Company's policy is to
revalue its assets twice each year, ordinarily on 30 June and 31 December. The
following table demonstrates the calculation of Adjusted Net Asset Value based
on the King Sturge valuation report and the Company's financial statements as of
31 December 2007:
EUR Million
December 31, 2007 December 31, 2006
Shareholders' equity 296.1 127.0
Valuation Adjustments (2) 167.4 119.4
Deferred Tax Liability 45.7 34.8
Minority rights -2.6 -6.7
Total adjusted net asset value 506.6 274.5
NAV per share EUR 4.65 3.92
NAV per share * 3.66 2.67
(EUR /* = 1.27) ((EUR /* = 1.47)
Dividend Policy
As explained in the Company's Admission Document, the Company has adopted a
dividend policy that will reflect long-term earnings and cash flow potential
while at the same time maintaining both prudent dividend cover and adequate
capital resources within the business.
The Board has approved the declaration of *4.0 million (or 2 per cent of Ablon's
net asset value (NAV) on September 2006) on account of the profits of 2007. This
dividend is in line with the dividend policy that was declared before the IPO.
The dividend is expected to be payable to all shareholders of record as at the
end of the trading on April 4, 2008 and the payment date will be on May 2, 2008.
This is Ablon's first dividend payment to shareholders since the Company's
initial public offering in February 2007.
Subject to several factors and where it is otherwise appropriate to do so, the
Company intends to declare a minimum dividend payment of 7.5% of net asset value
of the group as of 30 September 2006, in the second quarter of 2009.
Further to this, the remuneration committee of the board has also approved the
issuing of 744,820 new shares as part of the senior management team's long term
incentive plan, approved during the Company's IPO in February 2007.
The Board approved the awarding of these incentives as the Company successfully
reached Net Asset Value (NAV) growth criteria for 2007. The shares will be kept
in a trust account for a period of 12 months before being awarded to the
respective members of the management team. A similar set of NAV growth targets
will also determine incentives awarded to senior management for 2008.
Dennis Twinning
Chairman of the Board
(1) Based on the latest King Sturge valuation report as at 31 December 2007
(2) Property valuation of 620.0 less IFRS Investment property (EUR 370.0m),
investment property under development (EUR 24.6m) and inventories (EUR 58.0m)
ABLON Group
Consolidated Financial Statements
Prepared under IFRS as adopted by the EU
Year ended 31 December 2007
Independent Auditors' Report
To the shareholders of Ablon Group Limited
We have audited the accompanying consolidated financial statements of Ablon
Group Limited ("the Group"), which comprise the consolidated balance sheet as at
31 December 2007, and the consolidated income statement, consolidated statement
of changes in equity and consolidated statement of cash flows for the year then
ended, and a summary of significant accounting policies and other explanatory
notes.
Management 's Responsibility far the Financial Statements
Management is responsible for the preparation and fair presentation of these
consolidated financial statements in accordance with International Financial
Reporting Standards as adopted by the EU. This responsibility includes:
designing, implementing and maintaining internal control relevant to the
preparation and fair presentation of financial statements that are free from
material misstatements, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are
reasonable in the circumstances.
Auditors ' Responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit. We conducted our audit in accordance with
International Standards on Auditing. Those standards require that we comply with
relevant ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on our judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In
making those risk assessments, we consider internal control relevant to the
entity's preparation and fair presentation of the financial statements in order
to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity's
internal control. An audit also includes evaluating the appropriateness of
accounting principles used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view
of the consolidated financial position of the Ablon Group Limited as at 31
December 2007, and of its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with International
Financial Reporting Standards as adopted by the EU.
25 March 2008
KPMG Hungaria Kft.
Gabor Agocs
Partner
ABLON Group - IFRS Consolidated Financial Statements 31 December 2007
All amounts in thousands of Euros except otherwise stated.
Consolidated balance sheet
As at 31 December
in thousands of Euros Note 2007 2006
ASSETS
Non-current assets
Investment property 5 369 952 269 692
Investment property under development 5 24 551 22 903
Property, plant and equipment 6 1 299 1 453
Other non-current assets 7 8 807 713
Deferred income tax assets 16 132 34
------------------
Total non-current assets 404 741 294 795
------------------
Current assets
Other current assets 8 7 601 6 498
Inventories 9 57 991 22 172
Trade receivables 10 2 050 1 912
Securities 11 51 144 0
Cash and cash equivalents 12 27 786 6 079
------------------
Total current assets 146 572 36 661
------------------
------------------
Total assets 551 313 331 456
------------------
in thousands of Euros Note 2007 2006
EQUITY
Capital and reserves
Share capital 1 089 1 612
Foreign exchange reserve 178 (2 449)
Share options 875 0
Capital reserve 255 893 13
Retained earnings 38 055 127 853
---------------------
Total equity attributable to equity
holders of the Parent 296 090 127 029
---------------------
Minority interest - 2 282
---------------------
Total equity 296 090 129 311
---------------------
LIABILITIES
Non-current liabilities
Other non-current liabilities 2 165 1 414
Borrowings 15 157 393 125 508
Deferred income tax 16 45 745 34 792
---------------------
Total non-current liabilites 205 303 161 714
---------------------
Current liabilities
Trade and other payables 14 14 663 8 439
Current income tax liabilities 157 73
Borrowings 15 35 100 31 919
---------------------
Total current liabilities 49 920 40 431
---------------------
---------------------
Total liabilities 255 223 202 145
---------------------
---------------------
Total equity and liabilities 551 313 331 456
---------------------
Consolidated income statement
Period ended 31 December
in thousands of Euros Note 2007 2006
Gross rental income 18 11 230 9 209
Gross residential income 18 958 3 668
Net service charge income/ (expense) 18 506 301
Cost of residential income 18 (852) (3 054)
--------------------------
Net sales income 11 842 10 124
--------------------------
Net gain from fair value adjustment
on investment property 5 53 358 48 584
Selling and marketing costs (1 542) (1 221)
Administrative expenses 19 (6 332) (3 519)
Other income 147 175
Other expenses (464) (312)
--------------------------
Net operating profit 57 009 53 831
--------------------------
Financial income 20 3 198 2 032
Financial expense 20 (7 842) (4 844)
--------------------------
Net financing income / (expense) (4 644) (2 812)
Profit before income tax 52 365 51 019
Current income tax 21 (656) (420)
Deferred income tax 21 (10 934) (14 843)
--------------------------
(11 590) (15 263)
--------------------------
Profit for the period 40 775 35 756
--------------------------
Attributable to:
Minority interest 0 925
Equity holders of the parent 40 775 34 831
--------------- ----------
Profit for the period 40 775 35 756
--------------- ----------
--------------- ----------
Basic earnings per share (euro) 13 0,39 0,51
--------------- ----------
Consolidated statement of changes in equity
in thousands of Euros Note Attributable to equity holders of the Company Subtotal Minority Total
interest equity
-------------------------------------------------------------------------------
Share Retained Capital Share Foreign Attributable
capital earnings reserve options exchange to equity
reserve holders of
the Group
----------------------------------------------------------------------------------------------------------------
Balance at 1 January 2006 1 623 93 308 178 0 (3 014) 92 095 1 357 93 452
----------------------------------------------------------------------------------------------------------------
Shares issued (11) (286) 0 (297) (297)
Capital contribution by
shareholders 0 0
Capital contribution
repayment to shareholders (165) (165) (165)
Dividend paid 0 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------
Subtotal: Capital
transactions with
shareholders (11) (286) (165) 0 (462) 0 (462)
----------------------------------------------------------------------------------------------------------------
Current year foreign
exchange translation
adjustment 565 565 565
Current period profit /
loss 0 34 831 0 0 34 831 925 35 756
----------------------------------------------------------------------------------------------------------------
Subtotal: Recognised
income and expense for
the period 0 34 831 0 565 35 396 925 36 321
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Balance at 31 December
2006 1 612 127 853 13 0 (2 449) 127 029 2 282 129 311
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Balance at 1 January 2007 1 612 127 853 13 0 (2 449) 127 029 2 282 129 311
----------------------------------------------------------------------------------------------------------------
Shares cancelled** (1 612) (127 853) (13) 0 2 449 (127 029) 0 (127 029)
Shares issued 1 089 0 0 0 0 1 089 0 1 089
Capital contribution by
shareholders net of
floating costs 255 893 255 893 255 893
Minority share purchased* (2 720) (2 720) (2 282) (5 002)
Dividend paid 0 0
----------------------------------------------------------------------------------------------------------------
Subtotal: Capital
transactions with
shareholders (523) (130 573) 255 880 0 2 449 127 233 (2 282) 124 951
----------------------------------------------------------------------------------------------------------------
Current period foreign
exchange translation
adjustment 178 178 178
Share options granted 27 875 875 875
Current period profit /
loss 40 775 40 775 40 775
----------------------------------------------------------------------------------------------------------------
Subtotal: Recognised
income and expense for
the period 0 40 775 0 875 178 41 828 0 41 828
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Balance at 31 December
2007 1 089 38 055 255 893 875 178 296 090 0 296 090
----------------------------------------------------------------------------------------------------------------
* In January 2007 the Group purchased the remaining 33% of Global Immo Kft, the
entity that owns the Gateway Business Center development project in Budapest,
for EUR 5,000,000, and currently the Group owns 100% of the company. The amount
in excess of the book value of the minority share was booked as a decrease in
the retained earnings.
** In 2006 the equity was a combination of all the different entities of the
Group. For the IPO, there was a restructuring and a holding company was created.
The new holding entity issued new shares in exchange for the equity of the
individual entities, and the capital was classified as share capital and capital
reserve.
Consolidated statement of cash flows
Period ended 31 December
Note 2007 2006
Cash flows from operating activities
Profit for the period 40 775 35 756
Adjustments for:
- income tax expense 21 11 590 15 263
- depreciation of property, plant and equipment 6 155 167
- loss on disposal of property, plant and equipment 6 797 19
- foreign exchange (gain) or loss on translation to
functional currency (362) 217
- net gain from fair value adjustment on investment
property - market value increases 5 (53 358) (48 584)
- interest income 20 (1 535) (294)
- interest expense 20 6 237 4 729
- net movements in other non current liabilities 751 110
Changes in working capital:
- trade and other receivables 8,10 (879) (3 681)
- inventories 9 (35 818) (15 622)
- payables 15 5 863 661
Cash generated/ (used) from operations (25 784) (11 259)
------------------------------
Interest paid 20 (6 237) (4 729)
Income taxes paid / (recovered) 21 (649) 356
------------------------------
Net cash from operating activities (32 670) (15 632)
------------------------------
Cash flows from investing activities
Purchases of investment property 5 (8 949) (8 644)
Expenditures on investment property under development 5 (39 070) (13 024)
Purchase of minority interest (5 002)
Purchases of property, plant and equipment 6 (789) (237)
Purchases of subsidiaries, net of cash acquired 24 (1) (3 265)
Purchases of financial securities (51 144)
Interest received 1 535 294
------------------------------
Net cash used in investing activities (103 420) (24 876)
------------------------------
Cash flows from financing activities
Proceeds from borrowings 40 910 60 670
Repayments of borrowings (13 940) (18 028)
Capital contribution by / (repayment of) restricted
reserve 0 (165)
Paid to existing owners as a payment for the share
exchange (5 000) 0
Proceeds from / (repayment of) share capital* 388 (297)
Share issue net of expense* 134 564 0
Costs of share options 875 0
Net cash used in financing activities 157 797 42 180
------------------------------
Net (decrease)/increase in cash and cash equivalents 21 707 1 672
Cash and cash equivalents at beginning of the year 12 6 079 4 407
Cash and cash equivalents at end of the year 27 786 6 079
------------------------------
* Total of 38,864,099 new shares were issued in the IPO and in the over
allotment for 2.5 pounds each. The gross proceeds were EUR 145,926 thousands and
the total expenses related to the IPO were EUR 10,974 thousands. (See also
Consolidated statement of changes in equity)
Notes to the consolidated financial statements
1. Reporting Entity
ABLON Group Ltd (hereinafter "the Company") is a company domiciled in Guernsey.
The consolidated financial statements of the Company as at and for the year
ended 31 December 2007 comprise the Company and its subsidiaries (together
referred to as the "Group" and individually as "Group entities").
The Company has been listed on the London AIM exchange. The Group is managed
from Guernsey, and the official address of its headquarters is GY1 4HQ Frances
House, Sir William Place, St Peter Port, Guernsey.
The Group owns subsidiary companies which purchase, develop, hold and sell real
estate assets with a major real estate portfolio in Central and Eastern Europe
The Group entities are limited liability companies incorporated and domiciled in
Hungary, the Czech Republic, Romania, Poland as listed below:
-----------------------------------------------------------------------------------------------
Controlling
Name of entity Shareholders share Country of incorporation
ABLON Bucharest Real Estates Development S.R.L 100% Romania
ABLON Design M�rn�ki Iroda Kft. 100% Hungary
ABLON Kft. 100% Hungary
ABLON Sp. z o.o. 100% Poland
ABLON s.r.o. 100% Czech Republic
Airport City Kft. 100% Hungary
Airport City s.r.o. 100% Czech Republic
B.C.P. Kft. 100% Hungary
BC 2000 s.r.o. 100% Czech Republic
CD Property s.r.o. 100% Czech Republic
Century City Kft. 100% Hungary
Duna Office Center Kft. 100% Hungary
ES Bucharest Development S.R.L. 100% Romania
ES Bucharest Properties S.R.L. 100% Romania
ES Hospitality S.R.L. 100% Romania
First Chance Kft. 100% Hungary
First Site Kft. 100% Hungary
Global Center Kft. 100% Hungary
Global Development Kft. 100% Hungary
Global Estates Kft. 100% Hungary
Global Immo Kft. 100% Hungary
Global Investment Kft. 100% Hungary
Global Management Kft. 100% Hungary
Global Properties Kft. 100% Hungary
HD Investment s.r.o. 100% Czech Republic
ICL 1 Budapest Kft. 100% Hungary
Insite Kft. 100% Hungary
MH Bucharest Development S.R.L 88% Romania
MH Bucharest Properties S.R.L 88% Romania
MQM Czech s.r.o. (from March 2007, See Note 9) 100% Czech Republic
New Field Kft. 100% Hungary
New Sites Kft. 100% Hungary
Polygon BC s.r.o. 100% Czech Republic
RSL Real Estate Development S.R.L. 100% Romania
SPH Development Sp. z o.o. 100% Poland
SPH Properties Sp. z o.o. 100% Poland
STRIPMALL Management Kft. 100% Hungary
Szolg�ltat�h�z Kft. 100% Hungary
YZ Holding spol. s.r.o. 100% Czech Republic
Volanti Ltd. 100% Cyprus
Z�ldv�ros Lak�park Kft. 100% Hungary
------------------------------------------------- -------------------- ------------------------
These consolidated financial statements have been authorised for issue by the
Board of Directors on the 25th of March 2008.
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
2. Summary of Accounting Policy
2.1 Basis of preparation
(a) Statement of compliance
ABLON Group's consolidated financial statements for January 1 - December 31,
2007 has been prepared in line with International Financial Reporting Standards
(IFRSs) as adopted by the EU. ABLON Group Ltd has applied the same accounting
principles in the preparation of consolidated report as in its combined
financial statements for 2006. The information presented in the consolidated
report has been audited.
These financial statements are not intended to be used for statutory filing
purposes.
(b) Basis of measurement
The consolidated financial statements have been prepared under the historical
cost convention except that investment property and financial instruments at
fair value through profit or loss are measured at fair value. Non-current assets
are stated at the lower of carrying amount and fair value less cost to sell. The
Group does not have asset disposal groups held for sale.
(c) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates (the 'functional currency'), which is either Hungarian Forint
(HUF) in Hungary, Czech Crowns (CZK) in Czech, Polish Zloty (PLN) in Poland or
Euro in Romania. The consolidated financial statements are presented in euros
(rounded to the nearest thousand), which is the Group's presentation currency in
line with requirements of the European markets.
(d) Basis of consolidation
Financial statements of the companies within the ABLON Group are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) of Hungary,
Czech Republic, Poland and Romania. These local GAAPs differ in certain respects
from IFRSs. When preparing these consolidated financial statements, management
has made adjustments to those financial statements for changes to certain
accounting and valuation methods applied in the local GAAP financial statements
to comply with IFRSs as adopted by the EU.
The preparation of financial statements in conformity with IFRSs requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgment in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgment or complexity, or
areas where assumptions and estimates are significant to the consolidated
financial statements, are disclosed in Note 4.1 (Critical accounting estimates
and judgments).
(e) Application of new standards
A number of new standards, amendments to standards and interpretations are not
yet effective for the year ended 31 December 2007, and have not been applied in
preparing these consolidated financial statements:
IFRS 8 Operating Segments introduces the "management approach" to segment
reporting. IFRS 8, which becomes mandatory for the Group's 2009 financial
statements, will require the disclosure of segment information based on the
internal reports regularly reviewed by the Group's Chief Financial Officer in
order to assess each segment's performance and to allocate resources to them.
Currently the Group presents segment information in respect of its business (see
note 5). Under the management approach, the Group will present segment
information in respect of residential and commercial segments.
IFRIC 11 IFRS 2 - Group and Treasury Share Transactions, IFRIC 12 Service
Concession, IFRIC 13 Customer Loyalty, IFRIC 14 IAS 19 - The Limit on a Defined
Benefit Asset, Minimum Funding Requirements and their Interaction are not
relevant for the Group.
2.2 Basis of consolidation
Subsidiaries within the Group are all entities over which Ablon Group Ltd. has
the power to govern the financial and operating policies generally accompanying
a shareholding of more than one half of the voting rights. The existence and
effect of potential voting rights that are currently exercisable or convertible
are considered when assessing whether the Group controls an entity.
Subsidiaries are fully consolidated from the date on which control is commences
until the date control ceases.
The purchase method of accounting is used to account for the acquisition of
subsidiaries. The cost of an acquisition is measured as the fair value of the
assets given, equity instruments issued and liabilities incurred or assumed at
the date of exchange, plus costs directly attributable to the acquisition.
Identifiable assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured initially at their fair values at the
acquisition date. The excess of the cost of acquisition over the fair value of
the Group's share of the identifiable net assets acquired is recognised as
goodwill. If the cost of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognised directly in the
income statement.
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of subsidiaries have been aligned with those of
the individual entities and the consolidated Group where necessary to ensure
consistency with the policies adopted by the Group.
Ablon Group Ltd., as a holding company was established in January 2007, before
the Company became listed on the London Alternative Investment Market.
For the comparative period the financial statements are prepared on a combined
basis: The net assets of the Group entities were aggregated (with eliminations
for inter-company transactions and balances), as are the related share capital
balances and reserves. The equity section of the consolidated balance sheet
incorporates the equity sections of all combining entities.
For the current period the financial statements are prepared on a consolidated
basis.
2.3 Segment reporting
Based on its organisational and management structure, and internal financial
reporting system, the Group uses business segments, being a distinguishable
component of the Group that provides a similar type or class of customers with a
group of related products and services subject to substantially similar risks
and returns, as its primary segment reporting format and geographical segments,
being a particular economic and political environment subject to substantially
similar risks and returns, as its secondary segment reporting format.
Segment revenues, segment expenses, segment assets and segment liabilities are
determined as those that are directly attributable or can be allocated to a
segment on a reasonable basis, including factors such as the nature of items,
the conducted activities and the relative autonomy of the unit. The Group
allocates segment revenues and segment expenses through an inter-segment pricing
process.
2.4 Foreign currency translation
(a) Transactions and balances
Transactions in foreign currencies are translated into the respective functional
currencies of the Group entities using the commercial bank exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in
foreign currencies into the relevant functional currency are recognised in the
income statement. Non-monetary assets and liabilities that are measured in terms
of historical cost in a foreign currency are translated using the exchange rate
at the date of the transaction. Non-monetary assets and liabilities denominated
into the relevant functional currencies that are stated at fair value are
translated to the functional currency at the foreign exchange rates prevailing
at the dates the fair value was determined.
(b) Group companies
The results and financial position of all of the Group entities (none of which
has the currency of a hyperinflationary economy) that have a functional currency
different from the presentation currency (Euro) are translated into the
presentation currency as follows:
(i) assets and liabilities for each balance sheet presented are translated at
the closing rate at the date of that balance sheet;
(ii) income and expenses for each income statement are translated at average
exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the dates of the transactions); and
(iii) All resulting exchange differences are recognised as a separate component
of equity as Foreign exchange reserve.
(iv) The exchange rates used for above transactions are the foreign exchange
rates determined by the central banks of each country.
On consolidation, exchange differences arising from the translation of the net
investment in foreign entities, and of borrowings and other currency instruments
designated as hedges of such investments, are taken to shareholders' equity as
Foreign exchange reserve. When a foreign operation is sold, such exchange
differences are recognized in the income statement as part of the gain or loss
on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated into the relevant functional currency at the closing rate.
2.5 Investment property and investment property under development
Property that is held for long-term rental yields or for capital appreciation or
both, and which is not occupied by the companies in the Group, is classified as
investment property.
Investment property under development comprises uncompleted buildings and
construction work. Investment property under development (excluding land on
which construction takes place) is measured at cost.
Investment property comprises freehold land (including land on which
construction takes place) and buildings leased out.
Investment property is measured initially at its cost, including related
transaction costs.
After initial recognition, or at completion of the construction, investment
property is valued at fair value. Fair value is based on active market prices,
adjusted, if necessary, for any difference in the nature, location or condition
of the specific asset. If this information is not available, the Group uses
alternative valuation methods such as recent prices on less active markets or
discounted cash flow projections. Investment property that is being redeveloped
for continuing use as investment property or for which the market has become
less active continues to be measured at fair value.
The fair value of investment property reflects, among other things, rental
income from current leases and assumptions about rental income from future
leases in the light of current market conditions. The fair value also reflects,
on a similar basis, any cash outflows that could be expected in respect of the
property.
The Group uses King Sturge as the appraisers for the investment properties. The
group have a policy to revalue the investment properties twice a year, on the
end of June, and on the end of December. Fair value is determined by King Sturge
based on economic evaluations that are also performed according to the income
capitalization method. This method consists of estimating the value of the asset
by discounting the expected flow of revenues over the useful life of the asset.
This calculation involves making assumptions, among other things, as to the
capitalization rates, the continued lease of the assets by the existing tenants,
including during the option periods, and the occupancy rates in the different
assets. Fair value is sometimes measured with reference to recent real estate
transactions with similar characteristics and location to the estimated asset.
The Group applies the fair value model for all building leased out under
operating leases.
Subsequent expenditure is charged to the asset's carrying amount only when it is
probable that future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. All repairs and
maintenance costs are charged to the income statement during the financial
period in which they are incurred. Borrowing costs that are directly
attributable to the acquisition, construction or production of a qualifying
asset are capitalized as a part of the cost of the asset. Borrowing costs
include interest expense and foreign exchange differences to the extent that
such differences supplement the lower interest rates on foreign exchange
borrowings.
Changes in fair values are recorded in the income statement.
If an investment property becomes owner-occupied, it is reclassified as
property, plant and equipment, and its fair value at the date of
reclassification becomes its cost for accounting purposes.
Property that is being constructed or developed for future use as investment
property is classified as investment property under development and stated at
cost except land until construction or development is complete, at which time it
is reclassified and subsequently accounted for as investment property. Land is
classified immediately as investment property and is stated at fair value.
If an item of property, plant and equipment becomes an investment property
because its use has changed, any difference resulting between the carrying
amount and the fair value of this item at the date of reclassification is
recognized in equity as a revaluation of property, plant and equipment under IAS
16. However, if a fair value gain reverses a previous impairment loss, the gain
is recognised in the income statement.
Investment property held for sale without redevelopment is classified within
non-current assets held for sale when relevant criteria are met.
Borrowing costs are capitalized if they are directly attributable to the
acquisition, construction or production of a qualifying asset. Capitalisation of
borrowing costs commences when the activities to prepare the asset are in
progress and expenditures and borrowing costs are being incurred. Capitalisation
of borrowing costs may continue until the assets are substantially ready for
their intended use. If the resulting carrying amount of the asset exceeds its
recoverable amount, an impairment loss is recognized. The capitalization rate is
arrived at by reference to the actual rate payable on borrowings for development
purposes or, with regard to that part of the development cost financed out of
general funds, to the average rate.
2.6 Property, plant and equipment
Items of property, plant and equipment are stated at historical cost less
accumulated depreciation and impairment losses. Cost includes expenditure that
is directly attributable to the acquisition of the items of property, plant and
equipment.
Subsequent costs are included in the asset's carrying amount or recognized as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the
item can be measured reliably. Repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
Depreciation, based on a component approach, is calculated using the
straight-line method to allocate the cost over an asset's estimated useful life,
as follows:
- Land Nil
- Buildings 50 years
- Vehicles 5 years
- Fixtures and fittings 7 years
- IT equipment 3 years
- Other equipment 7 years
The assets' residual values are considered as nil, however they are reviewed,
along with assets' estimated useful lives and depreciation methods at least at
each financial year-end and adjusted if appropriate.
Gains and losses on disposals are determined by comparing proceeds with the
carrying amount. These are included in the income statement as other income or
expense.
2.7 Intangible assets
i) Goodwill
All business combinations are accounted for by applying the purchase method.
Goodwill represents amounts arising on the acquisition of subsidiaries,
associates and joint ventures.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is no longer amortised but is tested
annually for impairment (see accounting policy 2.9.)
When the excess of the cost of the acquisition over the Group's interest in the
net fair value of the identifiable assets, liabilities and contingent
liabilities of the acquiree is negative (negative goodwill), it is recognised
immediately in profit or loss.
ii) Other intangible asset
Other intangible assets that are acquired by the Group, which have finite useful
lives, are measured at cost less accumulated amortisation and accumulated
impairment losses.
iii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other
expenditure, including expenditure on internally generated goodwill and brands,
is recognised in profit or loss as incurred.
iv) Amortisation
Amortisation is charged to the income statement on a straight-line basis over
the estimated useful lives of intangible assets unless such lives are
indefinite. Goodwill and intangible assets with an indefinite useful life are
systematically tested for impairment at each balance sheet date. Other
intangible assets are amortised from the date they are available for use. The
estimated useful lives are as follows:
* Patents and trademarks 10-20 years
* Software 3 years
2.8 Leases
(a) A group company is the lessee
i) Operating lease
Leases in which substantially all of the risks and rewards of ownership are
retained by another party, the lessor, are classified as operating leases.
Payments, including prepayments, made under operating leases (net of any
incentives received from the lessor) are charged to the income statement on a
straight-line basis over the period of the lease.
ii) Finance lease
Leases of assets where the Group has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalised at
the lease's commencement at the lower of the fair value of the leased property
and the present value of the minimum lease payments. Each lease payment is
allocated between the liability and finance charges so as to achieve a constant
rate on the finance balance outstanding. The corresponding rental obligations,
net of finance charges, are included in current and non-current borrowings. The
interest element of the finance cost is charged to the income statement over the
lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The investment properties
acquired under finance leases are carried at their fair value.
(b) A group company is the lessor
i) Operating lease
Properties leased out under operating leases are included in investment property
in the balance sheet (Note 6). The Group's lease contracts are considered to be
operating leases as the Group entities have not transferred substantially all
the risks and rewards of the properties to the lessee. This may be indicated if
-- the lease does not transfer ownership of the asset to the lessee by the
end of the lease term,
-- the lessee does not have the option to purchase the asset,
-- the lease term is not for the major part of the economic life of the
asset,
-- at the inception of the lease the present value of the minimum lease
payments amounts are substantially less then all of the fair value of
the leased asset; and
-- the leased assets are not of such a specialised nature that only the
lessee can use them without major modifications.
Substantially all operating lease contracts are denominated in Euro. The
embedded foreign exchange derivatives in these host lease contracts have not
been separately accounted for, as Euro is commonly used in all contracts to
purchase or sell non-financial items in the economic environments in which the
transactions take place.
ii) Finance lease
When assets are leased out under a finance lease, the present value of the lease
payments is recognised as a receivable. The difference between the gross
receivable and the present value of the receivable is recognised as unearned
finance income.
Lease income is recognised over the term of the lease, which reflects a constant
periodic rate of return.
2.9 Impairment
The carrying amounts of the Group's assets, other than inventories (note 9),
investment property (note 5) and deferred tax assets (note 16) are reviewed at
each balance sheet date to determine whether there is any indication of
impairment. If any such indication exists, the asset's recoverable amount is
estimated.
For goodwill, intangible assets that have an indefinite useful life and
intangible assets that are not yet available for use, the recoverable amount is
estimated at each balance sheet date.
Assets that are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable.
An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in the income statement.
Individually significant financial assets are tested for impairment on an
individual basis. The remaining financial assets are assessed collectively in
groups that share similar credit risk characteristics.
Impairment losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to the
cash-generating unit (Group of units) and then, to reduce the carrying amount of
the other assets in the unit (Group of units) on a pro rata basis.
i) Calculation of recoverable amount
The recoverable amount of the Group's receivables carried at amortised cost is
calculated as the present value of estimated future cash flows, discounted at
the original effective interest rate (i.e. the effective interest rate computed
at initial recognition of these financial assets). Receivables with a short
duration are not discounted.
The recoverable amount of non-financial assets is the greater of their fair
value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specified to the asset. For an asset that does not
generate largely independent cash inflows, the recoverable amount is determined
for the cash-generating unit to which the asset belongs.
ii) Reversal of impairment
An impairment loss in respect of a receivable carried at amortised cost is
reversed if the reversal can be related objectively to an event occurring after
the impairment loss was recognised. Such reversal is recognised in the income
statement.
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, an impairment loss is reversed when there is an
indication that the impairment loss may no longer exist and there has been a
change in the estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset's carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised.
2.10 Inventories
Properties that are being developed for future sale are classified as
inventories at their deemed cost. Inventories are measured at the lower of cost
and net realisable value. As inventories are not ordinarily interchangeable the
cost of inventories are assigned by using specific identification of their
individual cost. Net realisable value is the estimated selling price in the
ordinary course of business less cost to complete redevelopment and selling
expenses.
2.11 Trade receivables
Trade receivables are recognised initially at fair value and measured
subsequently at amortised cost, less provision for impairment. A provision for
impairment of trade receivables is established when there is objective evidence
that one or more events have had a negative effect on the estimated future cash
flows of that asset. All receivables are individually estimated for impairment.
The amount of the provision is the difference between the asset's carrying
amount and the present value of estimated future cash flows, discounted at the
effective interest rate. The amount of the provision is recognised in the income
statement. In addition to individual impairment, collective assessment of
impairment is performed on groups of financial assets that share similar credit
risk characteristics based on past experiences of loss incurred (incurred loss
model).
2.12 Securities
Securities held by the Group are classified as financial assets at fair value
through profit or loss. Upon initial recognition attributable transaction costs
are recognised in profit or loss when incurred. Financial instruments at fair
value through profit or loss are measured at fair value, and changes therein are
recognised in profit or loss.
2.13 Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with
banks.
2.14 Shareholders' equity
Share capital
Ordinary shares are classified as equity
The Group has a total of 108,864,099 ordinary shares in issue. The shares of the
Group are measured at their acquisition costs.
Share capital only includes paid up shares.
Foreign exchange reserve
The Foreign exchange reserve comprises all foreign exchange differences arising
from the translation of the financial statements of Group companies into
euro-denominated consolidated financial statements.
Share options
The fair value of employee stock options is measured using the Black-Scholes
formula. Measurement inputs include share price on measurement date, exercise
price of the instrument, expected volatility (based on weighted average historic
volatility adjusted for changes expected due to publicly available information),
weighted average expected life of the instruments (based on historical
experience and general option holder behaviour), expected dividends, and the
risk-free interest rate (based on government bonds). Service and non-market
performance conditions attached to the transactions are not taken into account
in determining fair value.
The grant date fair value of options granted to employees is recognised as an
employee expense, with a corresponding increase in equity, over the period that
the employees become unconditionally entitled to the options. The amount
recognised as an expense is adjusted to reflect the actual number of share
options that vest.
Minority interest
Minority interest arises when the Controlling Shareholders have less than 100%
control over entities in the Group. Minority interest is attributable to the
minority shareholders and it is classified as equity, separately from equity
attributable to equity holders of the parent.
2.15 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised cost; any difference
between the proceeds (net of transaction costs) and the redemption value is
recognised in the income statement over the period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
2.16 Income tax
Income tax expense comprises current and deferred tax. Income tax expense is
recognised in profit or loss except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for the following temporary differences: the
initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit, and
differences relating to investments in subsidiaries and jointly controlled
entities to the extent that it is probable that they will not reverse in the
foreseeable future. In addition, deferred tax is not recognised for taxable
temporary differences arising on the initial recognition of goodwill. Deferred
tax is measured at the tax rates that are expected to be applied to the
temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date. Deferred tax assets and
liabilities are offset if there is a legally enforceable right to offset current
tax liabilities and assets, and they relate to income taxes levied by the same
tax authority on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis or their tax
assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future
taxable profits will be available against which the temporary difference can be
utilised. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
Additional income taxes that arise from the distribution of dividends are
recognised at the same time as the liability to pay the related dividend is
recognised.
2.17 Provisions
Provisions for legal claims are recognised when all of the following criteria
are met: the Group has a present legal or constructive obligation as a result of
past events; it is more likely than not that an outflow of resources will be
required to settle the obligation; and the amount has been reliably estimated.
A provision for onerous contracts is recognized when the expected benefits to be
derived by the Group from a contract are lower than the unavoidable cost of
meeting its obligations under the contract.
2.18 Trade and other payables
Trade payables are not interest bearing and are recognised initially at fair
value, subsequent to which they are stated at amortized cost.
2.19 Revenue recognition
Revenue includes rental income, service charges and management charges from
properties, and income from residential property sales.
Rental income from operating leases is recognised on a straight-line basis over
the lease term. When the Group provides incentives to its customers (such as
rental free periods), the cost of such incentives is recognised over the lease
term, on a straight-line basis, as a reduction of rental income.
Revenue from the sale of residential properties is recognised in the income
statement when the significant risks and rewards of ownership have been
transferred to the buyer. The transfer of risks and rewards usually occurs when
the sales contract are signed by the seller and the buyer.
Service and management charges are recognised in the accounting period in which
the services are rendered. When the Group is acting as an agent, the commission
retained by the Group rather than gross income is recorded as revenue.
2.20 Net financing costs
Net financing costs comprise interest payable on borrowings calculated using the
effective interest rate method net of interest capitalized, dividends received,
foreign exchange gains and losses.
2.21 Dividend distribution
Dividend distribution to the Group's shareholders is recognised as a liability
against retained earnings in the Group's financial statements in the period in
which the dividends are approved.
2.22 Employee benefits
The Group does not operate a defined contribution or a defined benefit
retirement scheme. Defined contributions to pension funds are deducted from the
gross salaries as they fall due.
2.23 Financial instruments recognition and derecognition
Any contract that gives rise to a financial asset, a financial liability or
equity is classified as a financial instrument. All financial instruments are
initially recognised in the Group's balance sheet when the Group becomes a party
to the contractual agreement at cost (at trade date). Initial cost represents
given or received consideration and all transaction costs. 'Regular way'
purchases or sales of financial assets are recognised using trade date
accounting.
Financial assets are derecognised when the Group loses control of the
contractual rights that comprise the financial assets (at trade date). Financial
liabilities are derecognised from the Group's balance sheet when they are
extinguished, repaid or cancelled.
2.24 Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its
ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period. Diluted EPS is
determined by adjusting the profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding for the effects
of all dilutive potential ordinary shares, which comprise share options granted
to employees.
3. Critical accounting estimates and judgements
3.1 Critical accounting estimates and assumptions
Estimates and judgments are continually evaluated and are based on historical
experience as adjusted for current market conditions and other factors.
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below and quantified in Note 6.
(a) Estimate of fair value of investment properties
The best evidence of fair value is current prices in an active market for
similar lease and other contracts. In the absence of such information, the Group
determines the amount within a range of reasonable fair value estimates. In
making its judgement, the Group considers information from a variety of sources
including:
i) current prices in an active market for properties of different nature,
condition or location (or subject to different lease or other contracts),
adjusted to reflect those differences;
ii) recent prices of similar properties in less active markets, with adjustments
to reflect any changes in economic conditions since the date of the transactions
that occurred at those prices; and
iii) discounted cash flow projections based on reliable estimates of future cash
flows, derived from the terms of any existing lease and other contracts and
(where possible) from external evidence such as current market rents for similar
properties in the same location and condition, and using discount rates that
reflect current market assessments of the uncertainty in the amount and timing
of the cash flows.
b) Principal assumptions for management's estimation of fair value
If information on current or recent prices for investment properties is not
available, the fair values of investment properties are determined using
discounted cash flow valuation techniques. The Group uses assumptions that are
mainly based on market conditions existing at each balance sheet date.
The principle assumptions underlying management's estimation of fair value are
those related to: the receipt of contractual rentals; expected future market
rentals; void periods; maintenance requirements; and appropriate discount rates.
These valuations are regularly compared to actual market yield data and actual
transactions by the Group and those reported by the market.
The expected future market rentals are determined on the basis of current market
rentals for similar properties in the same location and condition.
3.2 Critical judgements in applying the Group's accounting policies
Distinction between investment properties and owner-occupied properties
The Group determines whether a property qualifies as investment property. In
making its judgement, the Group considers whether the property generates cash
flows largely independently of the other assets held by an entity.
Owner-occupied properties generate cash flows that are attributable not only to
property but also to other assets used in the production or supply process.
Some properties comprise a portion that is held to earn rentals or for capital
appreciation and another portion that is held for use in the production or
supply of goods or services or for administrative purposes. If these portions
can be sold separately (or leased out separately under a finance lease), the
Group accounts for the portions separately. If the portions cannot be sold
separately, the property is accounted for as investment property only if an
insignificant portion is held for use in the production or supply of goods or
services or for administrative purposes. Judgment is applied in determining
whether ancillary services are so significant that a property does not qualify
as investment property. The Group considers each property separately in making
its determination.
4. Segment information
Primary reporting format - business segments
The Group is organised on a worldwide basis into two main business segments determined in
accordance with the functionality of investment property:
-- Commercial
-- Residential
-------------------------------------------------------------------------------------------------
Period ended 31 December 2007 Note Commercial Residential Unallocated Group
-------------------------------------------------------------------------------------------------
Revenue 18 11 230 958 12 188
Segment result 11 737 106 0 11 843
Unallocated costs 0
Operating profit 53 460 (110) 3 658 57 009
Finance (costs)/income-net 1 330 (379) (5 594) (4 643)
Profit before income tax 54 790 (489) (1 936) 52 365
Tax expense 21 11 590 11 590
-------------------------------------------------------------------------------------------------
Period ended 31 December 2007 Note Commercial Residential Unallocated Group
-------------------------------------------------------------------------------------------------
Segment assets 418 917 52 307 79 958 551 181
Deferred taxes 16 0 132 132
Total assets 418 917 52 307 80 090 551 313
Segment liabilities 156 955 52 307 216 209 477
Deferred taxes 16 45 745 45 745
Total liabilities 156 955 52 307 45 961 255 222
Capital expenditure 5,6,9 46 889 36 634 83 523
Depreciation 6 155 155
-------------------------------------------------------------------------------------------------
Period ended 31 December 2006 Note Commercial Residential Unallocated Group
-------------------------------------------------------------------------------------------------
Revenue 18 9 209 3 668 12 878
------------------------------------------------
Segment result 9 402 723 10 125
Unallocated costs
Operating profit 53 518 313 53 831
Finance (costs)/income-net 2 577 236 2 812
Profit before income tax 50 941 77 51 019
Tax expense 21 15 263 15 263
-------------------------------------------------------------------------------------------------
Period ended 31 December 2006 Note Commercial Residential Unallocated Group
-------------------------------------------------------------------------------------------------
Segment assets 329 075 2 347 331 422
Deferred taxes 16 34 0 34
Total assets 329 109 2 347 331 456
Segment liabilities 165 006 2 347 167 353
Deferred taxes 16 34 792 34 792
Total liabilities 165 006 2 347 34 792 202 145
Capital expenditure 5,6,9 19 564 18 665 38 229
Depreciation 6 157 0 157
Segment assets consist primarily of investment property, property plant and
equipment and receivables. Unallocated assets comprise deferred tax assets.
Segment liabilities comprise operating liabilities and finances. Unallocated
liabilities mainly comprise deferred taxation liabilities. Capital expenditure
comprises additions to investment property (Note 5) and property, plant and
equipment (Note 6).
There are no inter-segment transactions.
Secondary reporting format geographical segments
The Group's single geographical segment is Central and Eastern Europe.
5. Investment property and investment property under development
Movements of the investment property balances were as follows:
Investment property Period ended 31 December
2007 2006
At beginning of period 269 692 199 323
Acquisitions of property 7 030 3 443
Reclassification from property under
development 37 422 10 193
Capitalized expenses 1 919 7 808
Disposal 0 0
Net exchange differences 532 341
Net gain from fair value adjustments on
investment property 53 358 48 584
-------------------------
At end of period 369 952 269 692
-------------------------
There were no transfers to or from inventory and property, plant and equipment.
The Group obtained an independent valuation report prepared by King Sturge
Budapest, King Sturge Prague and King Sturge Bucharest as of 31 December 2007,
in order to establish fair values for the properties presented in these
financial statements.
The 70% of the book value of investment properties were based on the values
appraised by King Sturge, mostly for the completed projects. The remaining 30%
of the Group investment properties valued at a more conservative value, based on
the management judgment.
The appraisals used exit yield for the fair value calculation of the completed
projects in the range of 6%-7.75%, depending on their judgment. For the
development sites the range of 7%-8.5% was used. (2006: 7.2%)
At 31 December 2007 and 2006 all investment property are subject to registered
collateral to secure bank loans up to MEUR 259 at 31 December 2007 (2006: MEUR
180).
Movements of the investment property under development were as follows:
Investment property under development Period ended 31 December
2007 2006
As at beginning of period 22 903 17 212
Acquisitions 39 070 15 884
Reclassification to investment
property (37 422) (10 193)
--------------------------------
As at closing of period 24 551 22 903
--------------------------------
The Gateway in Budapest was completed in the last quarter of 2007 and was
transferred to investment property from investment property under development
and subsequently valued at fair value. The Katona Project was reclassed from
investment property under development to investment property.
The closing amounts include the following projects:
Closing value includes the following projects:
Project name Place Company name 2007 2006
Europeum Budapest/Blaha L. Duna Office
square Center 11 742 7 170
Hold u. Budapest, Centre Insite 2 794 2 555
Kolben Park Prague Polygon 2 449 1 981
Airport City Budapest Airport City 1 870 218
Budapest Global
M3 Estate 1 771 46
BC99 Budapest ICL-1 1 247 755
Gateway Budapest/Arpad bridge Global Immo
Pest side 0 5 464
Katona J. u. Budapest, Centre Sarokh�z 0 3 099
Others 2 679 1 615
----------------------------
Total 24 551 22 903
----------------------------
6.Property, plant and equipment
Note Land & Plant and Total
buildings equipment
Cost
Balance at 1 January 2006 657 1 390 2 047
Acquisitions 0 237 237
Disposal 0 (62) (62)
Effect of movements in foreign exchange 1 6 7
-------------------------------
Balance at 31 December 2006 658 1 571 2 229
-------------------------------
Balance at 1 January 2007 658 1 571 2 229
Acquisitions 538 251 789
Disposal 0 (947) (947)
Effect of movements in foreign exchange 15 (5) 10
-------------------------------
Balance at 31 December 2007 1 211 870 2 081
-------------------------------
Depreciation
Balance at 1 January 2006 115 539 654
Charge for the year 7 160 167
Eliminated on disposal/reclass 0 (43) (43)
Effect of movements in foreign exchange 0 (2) (2)
-------------------------------
Balance at 31 December 2006 122 654 776
-------------------------------
Balance at 1 January 2007 122 654 776
Charge for the year 39 116 155
Eliminated on disposal/reclass 50 (200) (150)
Effect of movements in foreign exchange 5 (4) 1
-------------------------------
Balance at 31 December 2007 216 566 782
-------------------------------
Carrying amount
At 31 December 2006 536 917 1 453
-------------------------------
At 31 December 2007 995 304 1 299
-------------------------------
At 31 December 2007 and 2006 all property, plant and equipment shown above were
subject to registered collateral to secure bank loans.
There were no impairment charges in the years ended 31 December 2007 and 2006.
7.Other non current assets Period ended 31 December
2007 2006
Other non-current assets 8 807 713
The Group had a TEUR 8 758 long term loan given to third party,which
is secured by mortgage on land
8. Other current assets Period ended 31 December
2007 2006
VAT reclaimable 4 084 1 262
Deposits 1 011 0
Prepaid expenses 921 540
Guarantee to suppliers 750 0
Loans receivable 151 2 699
Services not invoiced 66 1 462
Receivable from employees 32 47
Other current assets 585 488
------------------------
Total other current assets 7 601 6 498
------------------------
9.Inventories Period ended 31 December
2007 2006
Opening Balance 22 172 6 550
Additions 36 634 18 665
Sales (844) (3 054)
Exchange differences 29 11
---------------------------------
Closing Balance 57 991 22 172
---------------------------------
Inventories comprise residential apartments for sale and areas earmarked as
residential development for sale.
There were no circumstances necessitating a write-down to net realisable value
in 2007 and 2006.
At 31 December 2007 and 2006 some inventory property were subject to registered
collateral to secure bank loans up to Euro 20 million at 31 December 2007 (2006:
MEUR 15).
Breakdown of inventory value Period ended 31 December
2007 2006
Project name Company name
Bucharest - Timisoara Av. MH Development 16 899 11 309
Bucharest - Sunset residences ESD 13 315 0
Bucharest - Pipera ES Properties 9 391 0
Prague - *itka MQM Czech 7 695 0
Bucharest - Mogosoaia MH Properties 6 286 5 925
Prague - Cakovice HD Investment 1 646 1 336
Budapest - Z�ldv�ros Global Investment -ICL 2 759 3 602
------------------------
Total 57 991 22 172
------------------------
10. Trade receivables
Period ended 31 December
2007 2006
Trade receivables 2 683 2 130
Less: provision for impairment of
receivables (633) (218)
------------------------
Trade receivables - net 2 050 1 912
------------------------
The Group has TEUR 782 trade receivables aged over a year. The provision
prepared on these receivables is TEUR 428.
11. Securities
The Group kept its excess liquidity in securities consisting prime corporate
bonds during the period. It has been revalued according to IAS 39 fair value
valuation requirement at the year end. The total recognised gain on bonds have
been TEUR 1,144 over the year. Out of the gain TEUR 2,580 was realized, and a
loss of TEUR 1,436 has been recognised but not realized. The cost of the
securities held at the balance sheet date was TEUR 52 580 while the market price
was TEUR 51 144, which was the base of the fair valuation.
12. Cash and cash equivalents
Period ended 31 December
2007 2006
Bank balances 27 723 6 059
Petty cash 63 20
-------------------------
Cash and cash equivalents 27 786 6 079
-------------------------
13.Equity
The number of shares used for the comparison period in the earnings
per share and dividend paid out per share calculations were based
on the 70,000,000 shares which was issued in consideration of the
Group entities in January 2007. We used this number as it gave
more information for the comparison period.
Period ended 31 December
Profit per share calculation 2007 2006
Net profit 40 775 35 756
Number of shares 105 150 70 000
Diluted number of shares 105 460 70 000
-----------------------------
Basic earning per share 0.3878 0.5108
-----------------------------
Diluted earning per share 0.3866 0.5108
-----------------------------
Dividend per share Period ended 31 December
2007 2006
-----------------------------
Dividend paid 0 0
-----------------------------
Dividend per share 0.0000 0.0000
-----------------------------
On 2 February 2007 the Group completed an Initial Public Offering (IPO) on the
London Stock Exchange's Alternative Investment Market (AIM). The gross proceeds
from the IPO were 87.5 million pounds sterling (Euro 131.7 million), resulting
from 35 million shares sold for 2.5 pounds each. The over-allotment option,
which was granted by Ablon Group Limited, has been exercised by the Company's
Stabilising Manager - Credit Suisse. The over-allotment option covered 3,864,097
additional new ordinary shares (the "Over-Allotment Shares"), which have been
allotted and issued by the Ablon Group Limited to Credit Suisse on 2 March. The
total gross proceeds from the IPO and the Over allotment option was 97.16
million pounds, equivalent to 145.9 million euro. The IPO cost amounts to 11
million euro. Following the IPO and upon completion of the over-allotment
option, Ablon Group Limited has a total of 108,864,099 ordinary shares in issue.
From the proceeds the Group repaid EUR 13.6 million shareholders loans, and paid
EUR 5 million for the share exchange with the previous owners of the group
entities.
See Note 2.24 for accounting treatment for the earnings per share ratio.
14. Trade and other payables
Period ended 31 December
2007 2006
Trade payables 10 118 7 445
Accrued expenses 4 154 551
Other payables 230 71
Social security and other taxes 160 372
------------------------------
Total other current assets 14 663 8 439
------------------------------
Trade payables are interest free and have settlement dates within one year of
the balance sheet dates. Trade payables are denominated in HUF, EUR, CZK and
PLN.
15. Borrowings
Period ended 31 December
2007 2006
Non-current
Bank borrowings 156 370 125 508
Related party loans from shareholders 0 0
Loans from minority shareholders 1 023 0
--------------------------
157 393 125 508
--------------------------
Current
Related party loans from shareholders 16 16 269
Loans from minority shareholders 0 13 454
Bank borrowings 35 084 2 196
--------------------------
35 100 31 919
--------------------------
--------------------------
Total borrowings 192 493 157 427
--------------------------
The Group has MEUR 152 at floating rate of interest while 40 M EUR is at
fixed rate of 5.88%. The floating rate of interest on the loans are 3
month Euribor + 1.8% to 3 month Euribor + 2%, and all loans reprice at
least quarterly.
There are no debt covenants for the above
loans.
Period ended 31 December
The maturity of non-current borrowings is as
follows: 2007 2006
Between 1 and 5 years 82 597 53 086
Over 5 years 74 796 72 422
--------------------------
157 393 125 508
The effective interest rates at the balance Period ended 31 December
sheet date were as follows:
2007 2006
Bank borrowings and related party loans from
shareholders
EUR 6,4% 4,90%
CHF 4,7% 3,60%
USD 7,70%
The carrying amounts of the Group's borrowings Period ended 31 December
are denominated in the following currencies: 2007 2006
Euro 190 594 153 593
USD 2 248
CHF 3 157 3 377
16. Deferred tax
Movement of net deferred tax assets/(liability)
Period ended 31 December
The gross movement on the deferred income tax
account is as follows: 2007 2006
Beginning of the year (Note 2.1) (34 758) (19 135)
Exchange differences 79 (780)
Income statement charge (Note 21) (10 934) (14 843)
--------------------------------
End of the period (45 613) (34 758)
--------------------------------
Recognised tax assets and liabilities are attributable to the following:
As at 31 December
2007 2006
Investment property (45 741) (35 730)
Other items (424) (465)
Deferred tax assets on tax losses carried
forward 552 1 437
--------------------------------
Net tax liabilities (45 613) (34 758)
--------------------------------
Deferred tax assets and liabilities are split as follows:
As at 31 December
2007 2006
Tax assets 132 34
Tax liabilities (45 745) (34 792)
--------------------------------
Net tax assets / (liabilities) (45 613) (34 758)
--------------------------------
Deferred tax liabilities arise mainly on the fair value adjustment of investment
property (i.e. as it is not taxable under statutory tax rules), while deferred
tax assets mainly arise on tax loss carry forwards.
Deferred tax assets and liabilities are split by each individual entity
consolidated into the group as such tax assets and liabilities represent
balances with the same taxation authority.
There are no unrecognised deferred tax assets or liabilities.
17. Contingent assets, contingent liabilities and provisions
The Group has no significant pending legal cases.
In accordance with the Group's environmental policy and applicable legal
requirements, there was no need to recognise a provision for site restoration in
respect of contaminated land or other abuse of the environment.
It is not anticipated that any material financial liabilities will arise from
the contingent liabilities.
The Group receives bank guarantees to secure 3 months of lease payments from its
tenants, and from subcontractors to secure their construction guarantees. The
total guarantee MEUR 5.8 at 31 December 2007 (2006: MEUR 3). No asset has been
recognised in these financial statements with respect to these guarantees
received.
The Group has TEUR 1 546 in cash deposits. (2006: TEUR 1 080).
18. Revenue and cost of sales
Period ended 31 December
2007 2006
Gross rental income 11 230 9 209
Service charge income 4 746 3 789
Service charge expense (4 240) (3 488)
-------------------------------
Net rental and service income 11 736 9 510
-------------------------------
Residential income 958 3 668
Residental cost (852) (3 054)
-------------------------------
Net residential income 106 614
-------------------------------
The Group leases Investment property to tenants under operating leases which have a
duration period of more than one year.
The Group has signed agreements with tenants where the rental fee is contingent upon
certain conditions. For the periods presented above these conditions have not been met,
and no contingent rental income has been recognised.
The future aggregate minimum rentals receivable under non-cancellable operating leases
are as follows:
Period ended 31 December
2007 2006
Not later than 1 year 15 954 9 250
Later than 1 year and not later than 5 years 44 749 27 839
Later than 5 years 23 593 5 630
-------------------------------
84 296 42 719
-------------------------------
Service charge expense not generating rental income was TEUR 651 in 2007 and
TEUR 602 in 2006. Service charge expense generating rental income was TEUR 3 589
for 2007 and TEUR 2 886 for 2006.
19. Administrative expenses
Period ended 31 December
Note 2007 2006
Legal, auditing and advisory fees 3 382 670
Wages 1 340 965
Office supplies 361 385
Other services 335 327
Travelling 301 104
Social security and other payroll
related taxes 193 361
Rental fees - external 169 250
Depreciation 6 155 153
Other personal type expenses 96 83
Other 0 221
Total administrative expense 6 332 3 519
The number of people employed by the Group was 104 as at 31 December 2007,
(2006: 100).
20. Finance income and expense
Period ended 31 December
Note 2007 2006
Interest income 391 294
Gain on securities 1 144 0
Foreign exchange transaction gains 1 663 1 738
--------------------------
Total financial income 3 198 2 032
--------------------------
Interest expense (9 303) (5 087)
- Less Interest capitalized 3 066 358
----------------------------------------------------------------------
Interest cost on bank borrowings (6 237) (4 729)
Foreign exchange transaction losses (1 276) (53)
Other (329) (62)
--------------------------
Total financial expense (7 842) (4 844)
--------------------------
21. Income tax expense
Period ended 31 December
2007 2006
Current tax 656 420
Deferred tax
(Note 16) 10 934 14 843
---------------------------
11 590 15 263
---------------------------
Period ended 31 December
2007 2006
Profit before tax 52 365 51 019
---------------------------
Tax calculated at domestic tax rates
applicable to profits in the respective
countries 10 958 20.93% 10 528 20.60%
----------------------------------------------------------------------
Effect of tax rate changes -1 062 -2.03% 4 636 9.10%
Tax effect of costs not deductible from
corporate tax base 680 1.30% 99 0.20%
Expired carry forward tax loss deferred
tax asset 656 1.25% 0 0.00%
Other, net 359 0.68% 0 0.00%
---------------------------
Tax charge 11 590 22.13% 15 263 29.90%
---------------------------
In 2007 the Group's income is taxed in Hungary at 20%, in Czech Republic at 24%,
in Poland at 19 % and Romania at 16%. The income is not taxed in Guernsey.
Effect of tax rate changes: In 2006 there was a 4% special tax introduced in
Hungary as a supplement to the corporate tax. Beginning from 1 Jan 2008 the
Czech corporate tax is lowered from 24% to 21%.
22. Commitments
The Group has capital commitments of TEUR 28 569 (2006: TEUR 23 074) in respect of capital
expenditures contracted for at the balance sheet date, but not yet incurred, for investment
property and property, plant and equipment.
23. Related-party transactions
The following schedule details the transactions
with related parties:
Note Period ended 31 December
2007 2006
Immoconsult and affiliates (1)
---------------------------------------------------
Expenses 6 129 4 823
Income 0 51
Receivables 0 0
Liabilities 0 18
Loans received from related party 151 199 148 617
Loans outstanding at related party 0 1 089
Michepro and affiliates (2)
---------------------------------------------------
Expenses 46 818
Income 89 56
Receivables 0 0
Liabilities 53 136
Loans received from related party 0 6 720
Loans outstanding at related party 0 1 580
Management and affiliates (3)
---------------------------------------------------
Expenses:
Short term employee benefits 923 56
Share based payments (share options) 457 0
Capital expenditure for construction services 0 10 081
Income 0 40
Liabilities 16 0
(1) Volksbank Group (i.e. one of the shareholders with significant influence and one of the
Controlling Shareholders for the comparison period) include the following entities: Kotva
GmbH, Investcredit Bank AG, �sterreichische Volksbanken AG, Skalea Investments Ltd.
(2) Uri Heller (i.e. one of the shareholders with significant influence and one of the
Controlling Shareholders for the comparison period) include the following entities:
Michepro Holdings Ltd., DH Managament Ltd., Tradotek Kft., A&H Fashion Kft, Hotel Rosslyn
Kft. and GVA Hungary Kft. until February 2. 2007.
(3) Management includes ABLON Group's Limited directors and entities related to them: Mr.
Dennis R. Twining, Mr. Uri Heller, Mr. Daniel Avidan, Mr. Robert Glatter, Mr. Gerald
Williams. In the comparison period due to the different organisational structure at the
time it included only Adrienn Lovro and entities related to her: Inter Estates Kft.,
Budapesti �p�t* �s Szerel* Zrt., Kolorex Trade Kft., City Airport Kft.
During the period Investcredit Bank AG continued to provide source of finance
for the Group. Its transactions are priced at arm's length. The interest rate on
the loans range from 3 month Euribor +1.6 to Euribor 2 % and the interest rate
on all loans reprice at least quarterly. The loans are secured by mortgages. The
total amount of mortgages on the properties is MEUR 213.
The Key management personnel did not receive Post employment benefits,
termination benefits or other long term benefits during the period.
24. Acquisition of new subsidiaries
On 21 March 2007 the Group has purchased 100% of MQM Czech sro.,
an SPV which on 26 April 2007 purchased 394,701 square meters
of land earmarked for residential development, located 30
kilometers southwest of Prague City centre.
----------------------------------------------------------------
Investment property acquired 0
Investment property under construction
acquired 0
Cash acquired 8
Other assets acquired 362
Less: Bank loans acquired 0
Less: Other liabilities acquired 368
Purchase consideration, cash paid 9
----------------------------------------------------------------
Expense arisen on acquisition 7
----------------------------------------------------------------
Net cash outflow from acquisition 1
----------------------------------------------------------------
25. Fair value of financial instruments
As at 31 December 2007 As at 31 December 2006
-------------------------- ---------------------------------
Book Fair
As at 31 December 2006 Value value Difference Book Value Fair value Difference
--------------------------------------
Loans and advances 151 151 0 2 699 2 699 0
Trade receivables 2 050 2 050 0 1 912 1 912 0
Cash and cash equivalents 27 786 27 786 0 6 079 6 079 0
Interest bearing loans and borrowings 192 493 192 022 471 157 427 157 427 0
Other non current liabilities 2 165 2 165 0 1 414 1 414 0
Trade and other payables 14 663 14 663 0 8 439 8 439 0
Loans and advances include payments made in relation to purchases of property.
Loans with fixed rates may have a fair value, different from the book value. If
the fixed interest rate is lower than the interest rate achievable for the Group
at the balance sheet date the fair value is lower than the book value, if the
fixed rate would be higher the fair value would be lower. The Group has MEUR 40
loan at fixed interest rate of 5.88%. The fair value calculation was based on
the average EUR interest rate of the Group's loans at the year end.
The fair values of short term receivables and payables do not differ
significantly form carrying values due to their short term nature and liquidity.
26. Financial risk management and sensitivity analysis
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk and price risk), credit risk, liquidity risk and cash
flow interest rate risk.
(1) Financial risk management
Risk management is carried out by the Group. The Group identifies and evaluates
financial risks in close co-operation with its operating units.
(a) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange
rates, interest rates and equity prices will affect the Group's income or the
value of its holdings of financial instruments.
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk,
primarily with respect to the Euro, Hungarian forint, Czech crown, Romanian lei
and Polish zloty. Foreign exchange risk arises from future commercial
transactions, recognised monetary assets and liabilities and net investments in
foreign operations.
The Groups profit is largely dependent on revaluations. The revaluations are
nominated in Euro, but as the functional currency differs from Euro the
revaluation amount is translated to the local functional currencies (HUF, CZK).
The gain in the local functional currency is translated to EUR. Because of this
the change of FX rates influences the revaluation gain as a weakening of the
local currency against the Euro would mean larger revaluation revenue. On the
other hand, liabilities nominated in EUR are also translated into the local
currency where a weakening of the local currency against the EUR would cause an
FX loss. As in the total balance sheet investment property is larger than
liabilities the combined result of the weakening of the local currency would
result in an excess gain in the income statement.
If the HUF would have been 10% weaker against the EUR at the year end the profit
before income tax would have been 10 MEUR higher. If the Czech crown would have
been 10% weaker the profit before income tax would have been TEUR 346 higher.
If the HUF would have been 10% stronger against the EUR at the year end the
profit before income tax would have been 12.3 MEUR lower. If the Czech crown
would have been 10% stronger the profit before income tax would have been TEUR
423 lower.
The Table below lists the underlying currencies for financial assets and
liabilities:
31 December, 2007
-----------------------------------------------------------------------------
Thousands Euro
-----------------------------------------------------------------------------
EUR HUF CZK CHF RON GBP Other Total
-----------------------------------------------------------------------------
Other current
assets 1 880 4 702 244 775 7 601
Trade accounts
receivable 746 1 300 637 0 0 0 2 683
Securities 51 144 51 144
Cash and cash
equivalents 25 289 1 732 484 76 169 36 27 786
Total assets 79 058 7 734 1 365 851 169 36 89 214
-------------------------------------------------------------------------------------------------
Trade accounts
payable 220 8 162 1 527 148 0 61 10 118
Borrowings 190 594 1 899 192 493
-------------------------------------------------------------------------------------------------
Total liabilities 190 814 8 162 1 527 1 899 148 0 61 202 611
-------------------------------------------------------------------------------------------------
(ii) Price risk
The Group is exposed to property price and property rentals risk.
Rent prices are set in long term rental contracts (based in Euro) which are not
sensitive to market price changes. About 20% of the yearly income is coming from
new contracts signed during the year, so a change in market prices would have an
effect on the 20% of rental fees.
If the rent prices on the market would decrease by 10% generally for the
investment properties in the Group's portfolio than as a direct effect the
profit before tax would be TEUR 198 lower.
Rent prices also influence the valuation of investment properties as the King
Sturge valuation uses the discounted cash flow calculations. Our estimation was
based on a similar model for sensitivity purposes: If rent prices would drop by
10% the valuation of investment property would drop by an estimated MEUR 33.2,
and if the rent prices would rise by 10% the values would grow by an estimated
MEUR 33.2.
Interest market prices through expected rate of returns have an effect on the
valuation of the properties as higher expected rate of returns would reduce the
discounted cash flows of future rents. If the discounted rate used in the
discounted cash flow analysis would differ by 10% from management's estimates,
the carrying amount of investment properties would be an estimated MEUR 35.3
thousands lower or MEUR 17.3 higher as as at the 31 December 2007 asset
valuation on which the current valuation is based.
(b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group's receivables from customers
and investment securities.
There are no significant concentrations of credit risk. The Group exposure to
credit risk in most of the countries of activity is minimised by the requirement
for customers to pay most of the amount due on purchased housing units prior to
handover. The Group limits its exposure to credit risk arising from bank
deposits by transacting only with reputable bank counterparties
The Group's main activity at the moment is rental of offices. In 2007 80% of
rental fees are coming from the Budapest and 20% from the Prague offices. At
31.12.2007 21.9% of the annualised rental income is coming from the long term
Hungarian Post contract. The second largest is lower than 10%. Based on the
above the Group has no significant concentration of credit risk.
The Groups policy ensures that furbishment works are covered by deposits and
deposits (either in the form of cash deposits or bank guarantees) exist
throughout the rental period.
The Table below lists the balance sheet rows and their exposure to credit risk:
in thousands of Euros Note 31 Dec 31 Dec Exposure to credit
2007 2006 risk
ASSETS
Non-current assets
Investment property 5 369 952 269 692 None
Investment property under development 5 24 551 22 903 None
Property, plant and equipment 6 1 299 1 453 None
Other non-current assets 7 8 807 713 1
Deferred income tax assets 16 132 34 None
---------------------
Total non-current assets 404 741 294 795
---------------------
Current assets
Other current assets 8 7 601 6 498 2
Inventories 9 57 991 22 172 None
Trade receivables 10 2 050 1 912 3
Securities 11 51 144 4
Cash and cash equivalents 12 27 786 6 079 5
---------------------
Total current assets 146 572 36 661
---------------------
The maximum credit risk is the default of payment of the state institutions and the
various third parties involved
1The year end figure mostly includes a TEUR 8 758 long term loan to third party which is
secured by the Group by a mortgage on land.
Other current assets include various short term receivables. Out of the 7 601 TEUR at
2 the year end TEUR 4 313 is tax receivable from tax authorities in the countries of
operation. It also includes loans and deposits to various third parties (among the
largest: estate agents, banks, construction companies).
Trade receivables involve customer debt from regular sales activity. Receivables are
3 mainly secured by cash deposits and bank guarantees as seen in Note 17. Contingent
assets, contingent liabilities and provisions. The debt is very fragmented among
partners. The largest debt does not reach the 10% of the total receivables.
4Out of the securities MEUR 36.8 is rated in category A-AAA while MEUR 14.3 is non
rated. The bonds are consisting the bonds of several companies.
5Cash is held at prime rated banks inside the European Union.
(c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial
obligations as they fall due.
Prudent liquidity risk management implies maintaining sufficient cash and
marketable securities, the availability of funding through an adequate amount of
committed credit facilities and the ability to close out market positions. Due
to the dynamic nature of the underlying businesses, Group Treasury aims to
maintain flexibility in funding by keeping committed credit lines available.
The balance sheet structure at the year end shows a very liquid situatuation.
The acid test ratio (Recevables+ Short term investments+Cash/Current
liabilities) is 1.62.
(d) Cash flow and fair value risk
The Group had MEUR 78 in cash and short term investments at the year end. The
Group used its excess liquidity in bank deposits and prime rated financial
securities during the year.
The Group's interest rate risk arises from long-term borrowings (Note 15).
Borrowings issued at variable rates expose the Group to cash flow interest rate
risk.
The Group takes on exposure to the effects of fluctuations in the prevailing
levels of market interest rates on its financial position and cash flows.
Interest costs may increase or decrease as a result of such changes.
None of the above risks are hedged by derivative instruments.
(2) Capital management
The Board's policy is to maintain a strong capital base so as to maintain
investor, creditor and market confidence and to sustain future development of
the business. The Board of Directors monitors the possibility of net asset value
growth of the company as a primary guideline. The Board of Directors also
monitors the return on capital, which the Group defines as net operating income
divided by total shareholders' equity, excluding non-redeemable preference
shares and minority interests. The Board of Directors also monitors the level of
dividends to ordinary shareholders.
Dividend Policy
As explained in the Company's Admission Document, the Company has adopted a
dividend policy that will reflect long-term earnings and cash flow potential
while at the same time maintaining both prudent dividend cover and adequate
capital resources within the business.
The board approved the declaration of *4.0 million dividend on account of the
profits of 2007. This dividend is in line with the dividend policy that was
declared before the IPO.
Subject to these factors and where it is otherwise appropriate to do so, the
Company intends to declare a minimum dividend payment of 7.5% of net asset value
of the group as of 30 September 2006, in the second quarter of 2009.
Neither the Company nor any of its subsidiaries are subject to externally
imposed capital requirements.
27. Share options
On 31 January 2007 Ablon Group Limited granted stock options to the senior
management. The exercise price was the price 2.5 pounds per share, and the
options are vesting in 3 equal parts over the next 3 years. The number of
options as of 31 December 2007 was 4 469 472 under this scheme. On June 29th
additional 80 000 stock options were granted. The exercise price was 2.79 pounds
per share. The options are vesting in 3 equal parts over the next three years.
The option values were calculated using the Black-Scholes formula based on their
value at the point of grant and these values are acknowledged in the financial
statements proportionally to the vesting period.
Calculation details:
The volatility for the options was based on the industry average in the Central
Eastern European region of operation. The risk free interest rate used was
6.1-6.2 %.
28. Events after the balance sheet date (i.e. after 31 December 2007)
1. On January 2008 the Company has completed the acquisition of a new 5,290
square metre plot of land located in the centre of Warsaw, Poland. The plot is
strategically situated within close proximity of the Daewoo / World Trade Tower
and the new Hilton Hotel and Residential Towers. The site is located in one of
the most exclusive and highly sought after locations in central Warsaw, and is
within walking distance of main offices, transport networks and the key
commercial and cultural centres in the capital. The Company plans to build up to
13 floors of residential space at the site, occupying approximately 17,000
square metres for a total development cost of EUR 40 million. Construction at
the site will commence in the third quarter of 2008 and is expected to last 2
years. The total revenues from the project are expected to be between EUR 70 and
EUR 85 million.
2. The remuneration committee of the board approved granting of 744,820 new
shares free of charge to senior management of Ablon, based of the Long Term
Incentive Plan that was approved before the IPO. The free shares were given to
the high increase of the company's NAV, which was the criteria for granting the
new shares. The shares are vesting one year after the grant date of 15th of
February 2008.
3. The Company has approved a cash dividend payment of �4 million to the
Company's shareholders. The dividend payment is expected to be payable to all
shareholders of record as at the end of the trading on April 2, 2008 and the
record date will be April 4, 2008. The cash dividend payment, of 2 per cent of
Ablon's net asset value (NAV) for the fiscal year of 2007, is in-line with the
Company's dividend policy. This is Ablon's first dividend payment to
shareholders since the Company's initial public offering in March 2007.
4. The Company has completed on March 2008, the acquisition, through a joint
venture company held in 51% by the Company, of an 88,000 square meter plot in
Gdansk. The intention is to convert it into a 3 floor luxury residential complex
with recreational facilities for a total development, which will include 88,000
square meters sellable area. The total development cost is estimated at EUR 95
million. The total expected income will be between EUR 190 - EUR 220 million.
Construction at the site is scheduled to commence within 15 months in 4 phases
and completion expected 4 years later. Ablon has an option to buy an additional
30,000 square meters of land near the site.
5. From 1st of January 2008 the functional currency of the Romanian entities
became the RON instead of the EUR used so far as a result of an agreement in the
accounting profession.
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