DUPD.L Regulatory News (DUPD)

1 Sep 2009 07:00



DRAGON - Ukrainian Properties & Development PLC

("DUPD" or the "Company"

and together with its subsidiaries, the "Group")

Interim Results for the Period Ended 30 June 2009

The Company is pleased to announce its interim financial statements for the period ending June 30, 2009

Financial Highlights:

NAV per share at 30 June 2009, before and after deferred income tax liabilities ("DITL") grew to $2.65 and $2.51, respectively from $2.47 and $2.35 as at 31 December 2008, mainly as a result of continuing share buyback program. During the first half of 2009, ca 15.7 million shares have been purchased and subsequently cancelled.

Balance sheet remains robust:

Market capitalisation as at 30 June 2009 was £45.3 million ($74.9 million) which, despite a very conservative valuation policy adopted by the Company, represents a 76% discount to NAV, thereby creating strong prospects for share price improvement as the global real estate market recovers in the future.

Operational Highlights since 31 December 2008:

On March 5, Kyiv District Architectural Council approved the new master plan of Green Hills cottage community (www.green-hills.com.ua);

On April 6, the State Expertise Authority issued the Positive Conclusion for the project documentation of Mykolaiv retail centre (Henryland project)

On April, 10, a total of 38 individual property acts were received for each of the properties in the Sadok Vishnevyj residential community; 

On April 30, Kyiv Architectural Administration approved the project documentation of the "Avenue" shopping mall (Komarova Project);

On May 18, concept design has been developed by Colliers International (Moscow) for the shopping centre in Kremenchug (Glangate project);

On May 25, Kyiv Council approved land rezoning for Obolon Residential Towers;

On May 26, the State Expertise Authority issued the Positive Conclusion for the project documentation of Sevastopol retail centre (Glangate project);

On May 29, project works on the part of social infrastructure for Riviera Villas community 

(www.r-v.com.ua)  have been completed;

On June 12, a total of 178 individual state acts were obtained as per newly approved master plan of the Green Hills community;

On June, 24 the State Expertise Authority issued the Positive Conclusion for the project documentation of Vinnitsa retail centre (Henryland project);

On June 28, construction works on the three show homes at Riviera Villas community have been completed, with interior renovation works currently in progress;

On June 30, all works for installing communication lines in the Green Hills community were completed as well as construction of the first 4 showcase homes;

On  June, 30 all works connecting utilities to the show homes at Riviera Villas community as well as construction of access road to the community were completed;

Investment Activity:

In line with the Company's announced investment policy to pursue investments and acquisitions on a highly selective basis, DUPD invested $13.1 million to secure the rights of a completed residential community "Sadok Vishnevyj" near the borders of Kyiv, previously owned by a distressed developer.

Chris Kamtsios, Senior Partner & Managing Director of Dragon Capital Partners ltd 

("DCP or the "Manager") commented:

"DUPD is one of the very few real estate investment companies worldwide that enjoys a privileged status today, being completely debt-free and with ample cash resources to fund the ongoing development of its portfolio projects and consider new investments in distressed assets, on a highly selective basis. While the negative effects of the market downturn, since the beginning of 2008, have resulted in significant share price reduction and lower NAV in absolute terms, projects continue to develop uninterrupted with significant permitting advancement being achieved which will allow the Company to bring them to the market in a phased manner, when market conditions improve.

We keep raising the bar on quality in all of our development projects which allows them a unique status and enhanced marketability over competing offering in the marketplace. Riviera Villas, being the first exclusive residence club in Ukraine, Green Hills, being the first North American style suburban community with extensive social infrastructure and Obolon Residential Towers, designed by renowned British architects, are some of the examples of the quality and unique character of our portfolio projects.

Our key focus remains on maximizing shareholder value. While we have achieved that to a great extend via the results of our share buyback program, launched in July 2008, on the operations side we strive to ensure that all projects are well positioned in terms of concept, design and cost, and continue to obtain permitting to complete developments without delay in order to take advantage of the future market recovery."

Enquiries:

For further information, please contact:

Dragon Ukrainian Properties & Development Plc (www.dragon-upd.com)

Tomas Fiala

+380 44 490 7120

Dragon Capital Partners Limited (Investment Manager)

Chris Kamtsios 

+ 380 44 490 7120

KBC Peel Hunt Ltd (Nominated Adviser and Broker)

Capel Irwin/Daniel Harris 

+ 44 20 7418 8900

Consolidated balance sheet as at 30 June 2009

These consolidated and Parent Company balance sheets were approved by management on 31 August 2009 and were signed on its behalf by:

Chairman of the board Aloysius Wilhelmus Johannes van der Heijden

Non-executive director Fredrik Svinhufvud

The consolidated balance sheets are to be read in conjunction with the notes to and forming part of the financial statements

Consolidated statement of operations for the six months ended 30 June 2009

The consolidated statements of cash flow are to be read in conjunction with the notes to and forming part of the financial statements 

Consolidated statements of cash flow for the six months ended 30 June 2009

The Directors believe that all results derive from continuing activities.

The consolidated statements of cash flow are to be read in conjunction with the notes to and forming part of the financial statements.

Below is set out an abridged version of notes to the financial statements. For a full version please refer to Company's web site http://www.dragon-upd.com/investor-information/important-information/reports.

1. Basis of Preparation

These consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs).

2. Segment Reporting

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets and expenses.

During the year ended 31 December 2008 the following changes were made in the presentation of segments: (a) the land banking segment was segregated from residential property, and (b) the office segment was renamed the mixed-used segment. The segment includes development projects for construction of residential and office centers. Corresponding figures for the six months ended 30 June 2008 are adjusted to conform to the current period presentation.

Statement of operations information by business segment for the six months ended 30 June 2009 is as follows:

Statement of operations information by business segment for the six months ended 30 June 2008 is as follows:

Assets and liabilities by business segments as at 30 June 2009 are as follows:

Assets and liabilities by business segments as at 31 December 2008 are as follows:

3. Investment properties and property under construction

Movements in investment properties for the six months ended 30 June 2009 are as follows:

*During the year ended 31 December 2008 the Group recognized the acquisition of subsidiary Tradecom Inco LCC as an acquisition of assets since the entity had no operations or business activities.

**During six months ended 30 June 2009 the Group recognized the acquisition of subsidiary Novyy region LLC as an acquisition of assets since the entity had no operations or business activities.

Management engaged a registered independent appraiser CB Richard Ellis LLC, having a recognized professional qualification and recent experience in the location and categories of the projects being valued, to assist with the estimation of fair value.

The estimation of fair value is made using a net present value calculation based on certain assumptions, the most important of which are as follows:

rental rates which were based on current market rental rates ranging from USD 10 to USD 47 per sq.m.

development costs based on current market construction prices 

discount rates ranging from 12% to 24%

4. Income tax expense 

a. Income tax expense

Income taxes for the period for the six months ended 30 June 2009 and for the six months ended 30 June 2008 are as follows:

The applicable tax rate is 25% for Ukrainian companies and 10% for Cypriot companies.

b. Reconciliation of effective tax rate

The difference between the total expected income tax expense for the period of the six months ended 30 June 2009 and for the six months ended 30 June 2008 computed by applying the Ukrainian statutory income tax rate to profit before tax and the reported tax expense is as follows:

c. Recognized deferred tax assets and liabilities

The movement in deferred tax liabilities for the period of six months ended 30 June 2009 is as follows:

The movement in deferred tax liabilities for the period from 01 January 2008 to 31 December 2008 is as follows:

5. Earnings per share

Basic earnings per share

The calculation of basic earnings per share is based upon the loss for the six months ended 30 June 2009 attributable to the ordinary shareholders of USD 7,571 thousand (for the six months ended 30 June 2008 profit of USD 33,286 thousand) and a weighted average number of ordinary shares outstanding calculated as follows:

Diluted earnings per share

The calculation of diluted earnings per share is based upon the loss for the six months ended 30 June 2009 attributable to the ordinary shareholders of USD 7,571 thousand (for the six months ended 30 June 2008 profit of USD 33,286 thousand) and a weighted average number of ordinary shares after adjustment for the effects of all dilutive potential ordinary shares calculated as follows:

Because during the six months ended 30 June 2009 the average market price of ordinary shares was below the exercise price of the share options and warrants these options and warrants have no dilutive effect.

6. Related party transactions

a. Transactions with management and close family members

i. Key management remuneration

Key management compensation included in the statement of operations for the six months ended 30 June 2009 and for the six months ended 30 June 2008 is as follows: 

ii. Key management personnel and director transactions

The Directors owned shares in the Parent Company as at 30 June 2009 and 31 December 2008 as follows:

Boris Erenburg, one of the Group's directors, is also an executive of Spinnaker Capital Group, which acquired 14,874,400 shares (12.64%) of the Group during the first and second share issues.

Mr. Rafaël Biosse Duplan, one of the Group's directors, is a partner at emerging markets investment specialist, Finisterre Capital LLP, which is authorised and regulated by the Financial Services Authority. Finisterre Capital LLP is involved in managing total return funds, including Finisterre Recovery Fund 1 which currently owns 9,900,000 shares and Finisterre Global Opportunity Master Fund which currently owns 4,369,299 shares of Dragon - Ukrainian Properties and Development Plc. 

Tomas Fiala, one of the Group's directors, is the principal shareholder and managing director of Dragon Capital Group which acquired 6,831,500 shares (5.80%) of the Group during the first and second share issues. Also Tomas Fiala is a director in Dragon Capital Partners which has received 1,698,416 ordinary shares at a price of USD 2.60 per ordinary share to settle 70 % of the Manager's performance fee for 2007 in the amount of USD 4,432 thousand.

b. Transactions with other related parties

Expenses incurred and outstanding balances of transactions at 30 June 2009 and 31 December 2008:

All outstanding balances have been settled in cash within the period of the six months ended 30 June 2009 .

7. Events subsequent to the balance sheet date

On 2 July 2009 the Parent Company has signed a shareholders agreement and a share purchase agreements with the third party Fontis Limited (Cyprus) under the terms of which two blocks of shares 10% each in the Parent's Company subsidiary Startide Limited will be transferred to Fontis Limited (Cyprus). This transaction is subject to a number of conditions precedent which should be met by the Fontis Limited (Cyprus) and these conditions precedent as well as the consideration in exchange for which Fontis Limited (Cyprus) would be able to receive 20% shareholding in Startide Limited were approved by the Parent Company's board resolution dated 1 August 2008.

8. Results Announcement

This interim results announcement, was approved by the board on 31 August 2009. Full text of the interim Financial Statements could be found at Company's website 

http://www.dragon-upd.com/investor-information/important-information/reports