Kimberly Enterprises Regulatory News (KBE)

23 Mar 2007 07:01

Engel East Europe N.V.23 March 2007 Engel East Europe N.V Results for the year ended 31 December 2006 FRIDAY, 23 March 2007 -- Engel East Europe N.V. ('Engel' or 'the company') isthe AIM-listed (EEE:L) Central and Eastern European residential propertydeveloper. Financial Highlights Figures in •'000 +/- % 2006 2005 Net assets (at 31/12) + 27.9 55,881 43,701NAV/share (•) + 27.9 0.64 0.50 Revenues and revaluation of an investment property + 180.5 29,665 10,574Gross Profit + 480.3 18,709 3,224Operating profit + 528.7 16,573 2,636Net financing costs + 54.4 1,229 796Profit before tax + 670.6 15,373 1,995Profit after tax + 760.3 14,686 1,707Earnings per share (•) + 475.9 0.167 0.029Dividend per share (•) 0.0278 - Jacob Engel, Chairman, said: "I am delighted with this excellent set of results which again reflects theenergy and skills of the Company's management team operating through our sevenestablished offices around Central and Eastern Europe. "During 2006, we entered two new and very attractive markets, Romania and Serbia, while continuing to expand our activities in existing markets. "Over the next few years, I am confident we will continue to expand and createvalue for the benefit of all shareholders. We will source high quality projectsthrough our proven worldwide network of contacts and brokers, whilst using ourexpertise in creating new strategic partnerships in the CEE Region." Contacts Engel East Europe N.V.Nir Netzer, Finance Director Tel: +972 9970 7024 Dawnay, Day Corporate Finance Limited - Nominated AdviserGerald Raingold/Sandy Jamieson Tel: +44 (0) 20 7509 4570 Bankside ConsultantsSimon Bloomfield or Andy Harris Tel: +44 (0) 20 7367 8888 Overview During the year ended 31 December 2006, Engel made excellent progress inidentifying and acquiring land for residential development across Central andEastern Europe ("CEE"). Overall, property values in the company's chosen marketshave remained strong and the company has continued to demonstrate the value ofits network in sourcing high quality sites at low prices. Following a total investment of €29.9 million in existing projects and theeleven new projects purchased during 2006, the potential sales value of thecompany's portfolio, including projects at MOU stage, is now €1.4 billion (March2006: €1 billion) with approximately 17,000 units (March 2006: approximately11,000 units). Approximately 1,500 units (2005: approximately 1,000 units) havebeen sold of which approximately 1,000 units were not taken to profit at theyear end. In addition to expanding its presence in existing countries, Engel entered twonew markets, Serbia and Romania, where development opportunities are underpinnedby healthy economies and strong residential property and mortgage markets. InRomania, the company has already acquired three new sites for approximately1,900 units and has signed a Memorandum of Understanding ("MOU") on a furthertwo projects for approximately 3,500 units. In Serbia, the company's participation in one of the largest and mostprestigious developments makes Engel one of the most important developers inthat country. This is a mixed-use project consisting of approximately 550residential units together with office and retail. With regard to the office andretail area, the Board has determined that favourable rental yields can beachieved and, in this context, intends to hold this investment once the projecthas been completed. As the company intends to hold this property, it applied thefair value method under IAS 40 in these accounts. The company continues its expansion in existing markets and acquired during theyear an additional project in each of Poland and Hungary and two sites in theCzech Republic. Joint venture partnerships and other relationships, established to optimiserisk, form a key part of Engel's strategy and contributed significantly to 2006revenues and released working capital. Through joint ventures, the company cansell in advance a proportion of projects, for a reasonable discount and in atax-efficient manner, whilst retain a substantial share of the upside. In Romania, the company announced participation, in a major land acquisition anda residential project in the Constanta region near the Black Sea, on the basisof percentage deals. In Serbia, the company expects to sign a definitiveagreement with its new joint venture partner for the prestigious Belgrade Marinaproject by the River Danube, during the first half of 2007. A significant proportion of the funds invested in new projects during 2006 camefrom monies received from its joint ventures with the Heitman Group ("theHeitman joint ventures"). In May 2006, a Heitman joint venture purchased the 36per cent minority in two projects in Prague, Czech Republic, to give it 100 percent control of the two projects. During the current year, the company will seekto establish further joint venture partnerships in line with its strategy. In December 2006, the company announced the sale by Jacob Engel of his entireshare interests in Lagna Holdings Limited, which effectively controlled Engel,to Azorim Development & Construction Co. Limited ('Azorim'). Azorim, controlled by Yeshayahu Boymelgreen, is one of largest residential developers inIsrael. Following the sale, Jacob Engel will remain as Executive Chairman ofthe company until at least January 2008 and, along with the rest of the management team, will continue to play an active part in Engel's continuedexpansion in the CEE region. In anticipation of continued expansion and a number of projects moving intoconstruction during 2007, the company is taking various steps to secure theproject management and other expertise and resources it will need. The companyis confident that it will continue to achieve attractive returns on itsprojects because of the low cost of the land it has acquired and withdevelopment costs, although rising, continuing to represent a relatively low aproportion of the value of the projects In November 2006 the company paid an interim dividend of €0.021 per share. In June 2006 the company paid an annual dividend for year 2005 of €0.0068 per share.The directors intend to recommend to the Annual General Meeting a final dividend of €0.053 per share. Outlook Overall, residential developments in the CEE region offer attractive returns asdemand for high quality and affordable housing continues to grow. Consequently, the company will continue to seek new markets and newopportunities in 2007 and is currently in negotiation for the purchase ofvarious sites to add significantly to its portfolio. During 2007, the company expects to complete, or complete key phases of, anumber of projects and, by the end of the year, construction should be under wayat most of its sites. Review of projects Bulgaria The company currently has options to build approximately 1,250 units over 6projects in Sofia of which construction is under way at three sites. In March2006, work began at the Panorama project for 50 apartments near the ring road ofSofia and enjoying a view of Mount Vitosha. The Zar Boris project, for 165 unitslocated in a prestigious area in the south of the city, commenced in July 2006.Building commenced in December 2006 on the Ovcha Koupel project, also in sightof Mount Vitosha, which will comprise 50 apartments most of which were soldoff-plan to a single international investor in January 2007. Bulgaria, which joined the European Union on 1 January 2007, is a coredevelopment market for Engel. At the beginning of 2007, after a period ofrapidly rising property prices which has been followed by a temporary fall ininvestor demand, the company decided to realise a substantial profit on plots ofland in Monastirski and Malinova for a total of €4.7 million. Czech Republic Currently, Engel has 4 projects at various stages of development in the CzechRepublic, with a total projected sales value of €110 million and all in thePrague area. During the course of the year Engel signed agreements to acquire afurther two sites in Prague with a combined sales value of €46 million. Bothare in prestigious areas with the first, for 120 units, in the Prague 6district and the other, for 100 units, located next to the palace gardens closeto the Valtava River in the Troja neighborhood. In May 2006, a Heitman joint venture acquired the 36 per cent minority in theSafranka and Cervenemu Vrchu projects in Prague, with a combined sales value of€64 million for approximately 710 units, to give it 100 per cent control. The first phase of the three-phase Safranka project, consists of 114 units and wasnearly completed at the year end where the sale of 105 units already achievedwill be recognised during the early months of 2007. Hungary Compared to other CEE markets, the residential property market in Hungary ismaturing. Nevertheless, with the company's expertise in the market and the lowcost of land acquired, the company is confident that it can generate excellentreturns from its investments in this country. Engel continued its expansion in April 2006 when a Heitman joint venture,acquired a site in the north of Budapest (Punko) in the prestigious district 3,with excellent transport links to the city centre, for approximately 250 unitsand a projected sales value of €19 million. Construction at this project hasbegun with approximately 60 units sold off plan during 2006. The company's existing projects in Hungary are at various stages ofconstruction. The Raba project in Gyor, Engel's largest to date, will comprise5,000 units over 430,000m(2) and with three elements. This is a particularlyexciting project for the company as it will create an entire community, in ahigh quality location between the old city and the river, with excellenttransport links as Gyor is positioned between Budapest and Vienna. Two buildingson the site were completed during 2006 with 94 out of 150 units sold. Work onthe third building consisting of a further 206 residential units has begun.Phase I of the Sun Palace project in the 3rd District of Budapest, which consistof 276 units, was completed of which 250 units were sold. Poland Through the Heitman joint venture, in January 2006 Engel acquired a 54,000m(2)site in the Wilanow district of Warsaw for 370 units with a project sales valueof €41 million. This is the third project in Poland which, with the size of its population andeconomy and strong investor demand for residential developments, is an importantmarket where Engel will continue to seek opportunities and allocate significantresources. Construction continues at the Lesna Polana project in Zabki, Warsaw, for 768units which are being built on 39,114m(2) of land. During the course of theyear, two buildings on the site, with a total of 160 residential units werecompleted and sold. Construction of two additional buildings, consisting ofanother 89 units each, has started. Serbia In February 2006, Engel won a bidding process, conducted by the Municipality ofBelgrade, to purchase land in Marina Dorcol. The site, next to the River Danubein Belgrade, is for a marina, approximately 600 residential units, a shoppingmall, shops, restaurants and cafes, as well as facilities for about 150 yachts.The sales value of the project is estimated at €160 million. In January 2007, the company announced an MOU with a joint venture partner whichsignificantly improved the terms previously agreed with another party. Thecompany expects to sign a definitive agreement during the first half of 2007with the joint venture partner investing approximately €15 million in theproject. Romania Engel entered the Romanian market in July 2006 by signing MOUs for two projectson a percentage basis. The first is a site in central Romania for thedevelopment of a residential area for 3,000 units. The second is a residentialproject for 500 units, with a sales value of €80 million, in the Constantaregion near the Black Sea. In addition, the company acquired a project in the prestigious Pipera districtof Bucharest for 550 units with a sales value of €69 million and a site inSisest, and another prime location in Bucharest, for 390 units worth €46million. In February 2007, the company signed an agreement for the purchaseof land in a southern suburb of Bucharest for approximately 1,000 units with aprojected sales value of €100 million. Residential developments in Romania continue to offer high returns and thecompany plans further investments in that country during 2007. Other territories In Montreal, Canada, the company has three projects consisting of Trianon sur leGolf, Le Chagall and Le Quartier Parisien and forming part of a joint venturewith Lehman Brothers. The company is in discussions with Lehman Brothers aboutthe future direction of the join venture.The company has taken the decision to seek a buyer for its project in Germany since it is non-core to its future growth. Financial review During 2006, the continued expansion of the company resulted in totalexpenditure on land acquisitions and development costs of €29.9 million. The raise in net asset per share to €0.64 at 31 December 2006 (2005: €0.50)reflects the issue of new shares in December 2005 when the company raised gross€44.2 million (£30 million) and floated on the AIM market in London. The companyexpects net asset value per share to increase in line with the expected returnsfrom the investments made during the year. Total revenues for 2006 include receipts from joint venture partners of €10.9million and the profitable sale of units from the Sun Palace project in Budapestand the Lesna Polana project in Warsaw. The increase in cost of revenues to €11 million (2005: €7.4 million) andselling, general and administrative expenses to €2.1 million (2005: €0.6million) reflect the expansion of activity during the year including new officesin Bulgaria, Romania and Serbia established in 2005 and 2006. The main reason for low tax charge is that the revenues from joint ventures aretax exempt. The expected growth in construction activity during 2007 will increase thecompany's working capital requirements. Engel has a sound balance sheet and willbe able to fund, from existing financial resources, the rate of developmentcurrently planned. Engel East Europe N.V. Consolidated balance sheet 31 December 2006 2005 ----------- ----------- Thousands Euro -------------------ASSETSCurrent assetsCash and cash equivalents 17,354 42,103Restricted bank deposits and cash in escrow 6,489 5,132Trade accounts receivable 1,180 63Other accounts receivable and prepayments 1,918 2,617Loans to related parties and other 2,346 2,448Inventories of housing units 52,046 *32,272 ----------- -----------Total current assets 81,333 84,635 ----------- -----------Non-current assetsInvestment property under development 391 *391Investment property 24,333 -Property and equipment 339 118Deferred tax assets - 274Investment in associate 51 77 ----------- -----------Total non-current assets 25,114 860 ----------- -----------Total assets 106,447 85,495 =========== ===========LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilitiesInterest-bearing loans from banks 12,625 11,312Current portion of finance lease liability 3,681 -Loans and amounts due to related parties and other 8,669 19,538Trade accounts payable 2,748 2,330Other accounts payable 7,202 8,520Income tax payable 405 94 ----------- -----------Total current liabilities 35,330 41,794 ----------- -----------Non-current liabilitiesFinance lease liability 14,794 -Deferred tax liabilities 442 - ----------- -----------Total non-current liabilities 15,236 - ----------- -----------EquityShare capital 878 878Share premium 39,298 39,298Capital reserves (326) -Retained earnings 16,172 3,842Accumulated translation adjustment (214) (325) ----------- -----------Total equity attributable to equity holders of the parent 55,808 43,693Minority interest 73 8 ----------- -----------Total equity 55,881 43,701 ----------- -----------Total liabilities and equity 106,447 85,495 =========== =========== * Reclassified. Engel East Europe N.V. Consolidated income statement For the year ended 31 December ------------------- 2006 2005 ---------- ---------- Thousands Euro ------------------- Revenues 24,961 10,574Change in fair value of investment property 4,704 -Cost of revenues (10,956) (7,350) ---------- ----------Gross profit 18,709 3,224 Selling, general and administrative expenses (2,136) (588) ---------- ----------Operating profit 16,573 2,636 Foreign exchange losses (223) (124)Financial income 1,423 395Financial expenses (2,429) (1,067) ---------- ----------Net financing costs (1,229) (796) Share of profit of associate 29 155 ---------- ----------Profit before tax 15,373 1,995Income tax expense (687) (288) ---------- ----------Profit for the year 14,686 1,707 ========== ========== Attributable to:Equity holders of the parent 14,770 1,781Minority interest (84) (74) ---------- ---------- 14,686 1,707 ========== ========== Earnings per share:Basic earnings per share (Euro) 0.167 0.029 ---------- ----------Diluted earnings per share (Euro) 0.167 0.029 ---------- ---------- Engel East Europe N.V. Consolidated statement of cash flows For the year ended 31 December ----------------------- 2006 2005 ------------ ------------ Thousands Euro ----------------------- Cash from (used in) operating activitiesNet profit for the year 14,686 1,707Adjustment necessary to reflect cash flows from (used in) operating activities:Depreciation 54 19Unrealised foreign exchange losses (gains) 290 (127)Finance expenses, net 1,229 *796Income taxes 477 97Company's share of profits of associate (29) (155)Equity-settled share based payment 14 -Change in fair value of investment property (4,704) -Increase in inventory (16,851) *(14,012)Deferred taxes 152 *202(Increase) decrease in trade accountsreceivable (1,117) 174(Increase) decrease in other accountsreceivable (763) *(2,108)Increase in trade accounts payable 411 1,335Increase (decrease) in other accounts payable 469 (6,413)Cash from (used in) operations:Interest received 469 466Interest paid (1,212) (400)Income taxes paid (401) (382) ------------ ------------Net cash used in operating activities (6,826) (18,801) ------------ ------------Cash from (used in) investing activitiesAcquisition of property and equipment (275) (117)Acquisition of subsidiaries, net of cashacquired (2,713) 671Additional investment in subsidiaries (155) -Loan repaid by associate - 364Short term loans granted to related parties (1,392) (2,448)Short term loans repaid by related parties 1,498 697Restricted cash (1,344) (3,481)Disposal of subsidiary, net of cash disposedof - (22) ------------ ------------Net cash used in investing activities (4,381) (4,336) ------------ ------------ * Reclassified. Engel East Europe N.V. Consolidated statement of cash flows (continued) For the year ended 31 December --------- ------------ 2006 2005 --------- ------------ Thousands Euro --------------------- Cash from (used in) financing activitiesIssue of share capital - 39,576Short term loans received from banks 10,243 6,768Short term loans repaid to banks (9,014) -Short term loans received from related parties 2,696 *16,397Short term loans repaid to related parties (13,668) *(1,350)Payment of finance lease liability (1,572) -Dividend received 139 -Dividend paid to minority shareholders (33) (342)Dividend paid to shareholders (2,440) - ------------ ------------Net cash from (used in) financing activities (13,649) 61,049 ------------ ------------ Increase (decrease) in cash and cash equivalents (24,856) 37,912during the year Effect of exchange rate changes on cash 107 (447) Cash and cash equivalents at the beginning of the year 42,103 4,638 ------------ ------------Cash and cash equivalents at the end of the year 17,354 42,103 ============ ============ * Reclassified. END This information is provided by RNS The company news service from the London Stock Exchange