Kimberly Enterprises Regulatory News (KBE)

28 Mar 2006 07:04

Engel East Europe N.V.28 March 2006 28 March 2006 Engel East Europe N.V. Maiden Preliminary Results for the period ended 31 December 2005 Pipeline of over 11,000 residential units in CEE region Engel East Europe N.V. ("Engel" or "the Company"), the AIM-listed Central andEastern European residential property developer (EEE:L), today announces itsmaiden preliminary audited results. Highlights • Net assets increased to €43.7 million (2004: €3.0 million) • Revenues increased by 36% to €10.6 million (2004: €7.8 million) • Gross profit rose 70% to €3.2 million (2004: €1.9 million) • Gross margin rose to 30% (2004: 24%) • Net profit before tax of €2.0 million • Net Profit after tax of €1.7 million • Net cash position of €42.1 million (2004: €4.6 million) • Sales, profits, cash and EPS all ahead of expectations • Agreement with Heitman Group to invest up to €26.4 million in Engel projects • Current pipeline rose to more than 11,000 units, with projected sales of more than €1 billion • The Directors intend to pay a dividend of €0.6 million, subject to the approval of shareholders at the Company's Annual General Meeting Since period end: • Successful bid to develop a substantial and prestigious project on the Danube in Belgrade with approximately 600 residential units, marina and commercial areas with projected sales of €160 million • Agreement to purchase approximately 54,000 sqm of land in Poland to develop about 300 residential units with projected sales of approximately €41 million • Agreement to purchase approximately 3,400 sqm of land in Bulgaria to develop 50 residential units with projected sales of approximately €7million • Currently in negotiations to purchase more land in the CEE Region for the development of thousands of additional residential units Jacob Engel, founder and Executive Chairman, said: "We are pleased to announce our first set of results since listing on AIM inDecember last year. We have delivered an excellent set of results for the yearwith sales, profits, cash and EPS all ahead of expectations. The projectspipeline rose to over 11,000 units. In the future we will continue to focus onfurther expanding of our business, both in current countries as well as in newemerging markets, by identifying and securing further residential real estatedevelopment opportunities in the highly attractive CEE region." For further information, please contact: Citigate Dewe Rogerson +44 (0)20 7638 9571 Sally Marshak/George Cazenove/Hannah Seward Notes to Editors Engel East Europe is an international residential property developerincorporated in The Netherlands. The Company operates in Central and EasternEurope (the "CEE Region") and has various developments in Hungary, the CzechRepublic, Poland, Bulgaria and Serbia & Montenegro as well as operations inGermany and Canada. Engel is currently involved in the development ofapproximately 11,000 residential units and is in negotiations to purchase landfor the development of thousands of additional units throughout the CEE Region. Engel East Europe was admitted to Aim on 15 December 2005, following a placingof 27.8 million new ordinary shares, which raised gross proceeds of £30 million.Based on the placing price of 108p per ordinary share, the marketcapitalisation of Engel East Europe on commencement of dealings wasapproximately £95 million. The Company's current market capitalisation isapproximately £120 million. Dawnay, Day Corporate Finance Limited is NominatedAdviser to the Company and KBC Peel Hunt Ltd is the broker. Financial Summary 2005 2004 TEUR TEUR ('000) ('000) Revenues 10,574 7,752Cost of revenues (7,386) (5,880)Gross profit 3,188 1,872As a % of Revenues 30.1% 24.1%Other operating income 36 3,830Other operating expenses 0 (1,197)Selling, general and administrative expenses (588) (1,277)Operating profit before financing costs 2,636 3,228As a % of Revenues 24.9% 41.6%Finance Income 395 657Finance Expenses (1,191) (938)Net Financing Costs 796 281Share in profit (loss) of associate 155 (11)Profit (loss) before tax 1,995 2,936As a % of Revenues 18.9% 37.9%Income taxes (tax benefit) 288 (24)Profit for the year 1,707 2,960 Attributable to:Equity holders of the parent 1,781 2,793Minority interest (74) 167 1,707 2,960Earnings per share (•) 0.029 0.047 Overview of Financial Results Revenues for the year to 31 December 2005 were €10.6 million up 36% on the prioryear (2004: €7.8 million). This is mostly attributable to the completion andsale in February 2005 of all 273 residential units in our Juharlieget, DistrictIV, Budapest project in Hungary. Gross profit for the period was €3.2 million, (2004: €1.9 million). The increaseis attributable to the rise in revenues over 2004 as well as a rise in thegross margin to 30.1% from 24.1% in 2004. This was due to the results of theBudapest project completing ahead of expectations and to a small part of thesecond transaction with Heitman Fund. Operating profit before financing costs in 2005 was €2.6 million, well ahead ofanalyst expectations of €2.3 million, although a decline year-on-year of 18%(2004: €3.2 million). The decline reflects the exceptional level of income in2004 from the first investment by the Heitman Fund in a few projects, amountingto €3.8 million gross. Net financing costs amounted to €0.8 million in 2005 compared to €0.3 million in2004. This rise reflects growth in the company's activities and exchange ratedifferences. Net profit before tax of €2.0 million for 2005 was ahead of analyst expectationsof €1.2 million, although lower than 2004 (€2.9 million). The decrease isprimarily related to the results of the JV1 with Heitman Fund in 2004 while theeffect of JV2 is expected to be reflected mainly in 2006 reports. The tax expense in 2005 was €0.3 million, reflecting a low average tax rate of14.4%, compared to a minor tax benefit in 2004. Profit for the year amounted to €1.7 million in 2005, above the analyst'sexpectations, compared to €3.0 million in 2004 and again reflected the decreasein operating income in 2005 as explained above. Basic earnings per share for 2005 are €0.029 per share and are ahead of analystexpectations. Balance Sheet and Cash Flow The balance sheet as at 31 December 2005 showed net assets of €43.7 millioncompared to net assets of €3.0 million at the end of December 2004. This riseprimarily results from the Company's net proceeds of €39.6 million from itsshare offering and listing on AIM in December 2005. Debt stood at €30.9 million at the end of 2005 comprising bank debt and loansfrom related parties. The Company's net cash position increased from €4.6 million as at the end ofDecember 2004 to €42.1 million as at the end of December 2005. This reflectsprimarily the net proceeds of €39.6 million from the share offering in December2005, partially offset by an increase in inventory and a decrease in accountspayable during the year. Business Review 2005 Operations During the year, Engel was involved in the development of approximately 10,000residential units in the Czech Republic, Hungary, Poland, Bulgaria, Germany andCanada. The projects were in various stages of development. In addition, Engelis negotiating to purchase land for the development of thousands of additionalunits throughout the CEE region during the year and has already secured anadditional 3 projects in Bulgaria, Poland and Serbia, a new country for Engel -see developments in 2006. Details of these activities by country are asfollows: Hungary Engel completed and sold all 273 residential units in its Juharlieget, DistrictIV, Budapest project in March 2005. The Company has also commenced its SunPalace, District III, Budapest project, occupying 14,868m2 of land, comprising550 residential units, located on the Budapest Danube Bank. The Group's largest project in Hungary is the Raba Site in Gyor, occupyingapproximately 430,000m2 and located on the small Danube bank approximately 100kmwest of Budapest and close to the Austrian border. The project will include anentire neighbourhood consisting of approximately 5,000 residential units. Poland The Company also has two projects in Poland located in Lesna Polana, Zabki,Warsaw OS and in Emilii Plater, Warsaw. The first project comprises 39,114m2 ofland and will comprise768 units. The second project occupies 1,813m2 ofundeveloped land and is located in one of the most prestigious streets inCentral Warsaw. The project will comprise 68 units. Czech Republic Engel has five developments in Prague. The Prokopsky dvur project, comprising72 residential units, was completed and fully sold. Similarly the Barrandovskydvur project, consisting of 124 residential units was also completed and fullysold. The third project, Rezidence Petrohradska, Vrsovice, on the outskirts ofthe city centre, with 57 residential units, 2 shops was completed in 2005 andall units but 2 were sold. The Company's Cervenemu Vrchu, Vokovice projectlocated in the prestigious Prague 6 area of the city will comprise 161residential units. Lastly, the Safranka, Stodulky project lies on 66,136m2 ofland in the Prague 5 area, and will comprise 525 apartments and 24 semi-detachedhouses. Bulgaria Engel purchased seven projects in Sofia in 2005. These include Kambanite on9,720m2 of land acquired in 2005 and will comprise a secure, gated community ofapproximately 20 luxury houses. The Ovcha Koupel project, located on theoutskirts of Sofia, comprises 50 apartments and the Tsar Boris project willcomprise 165 apartments located on the south-westerly outskirts of Sofia. TheMalinova Dolina project on the southern outskirts of Sofia covers 19,877m2 andwill comprise 281 apartments. The final three projects comprise Monastirski Livadi, Gorna Banya 1 and GornaBanya 2. Monastirski Livadi covers 4,888m2 and will comprise 90 apartments.Gorna Banya 1 covers 10,760m2 with plans to develop 540 apartments. The Companyalso signed a memorandum of understanding to purchase an adjacent plot of land,Gorna Banya 2, to develop an additional 450 units. Canada Engel has three projects under development in Montreal following an opportunityto purchase land at an attractive price in 2004. However, in the future, theCompany intends to focus purely on European emerging markets. The firstproject, Trianon sur le Golf, will comprise a multi-residential developmentoffering a total of 165 units. The second project, Le Chagall, will comprise twotowers of 17 storeys each and offering a total of 198 units. The third project,Le Quartier Parisien, will comprise a multi-residential development of 632residential units. Germany Engel has one project in Germany, Rassnitz, situated in the countryside betweenHalle and Leipzig, occupying 156,000m2 of land and will comprise 216 houses. Partners Engel signed an agreement on 30 December 2005 with an affiliate of the HeitmanGroup, an American-based group of real estate investment funds, to invest in anumber of the Company's residential developments, including current projects aswell as future projects yet to be acquired. Heitman's investments in theprojects will total up to €26.4 million while Engel's estimated share in theprofits of the projects will vary between 50 and 60 per cent depending on thefinancial results of each transaction. In addition the Company will manage thedevelopment of the projects for a fee equal to 5% of the costs. Anotheraffiliate of the Heitman Group already cooperates with the Company inresidential real estate projects in Central & Eastern Europe. The companyalready cooperate with partners as an affiliate of Lehman Brothers and withaffiliate of Volksbank. Developments in 2006 We are pleased to report that we have already added several new projects to ourportfolio in 2006. These include a substantial and prestigious project inBelgrade, where Engel won a bidding round run by the Municipality of Belgrade inFebruary to purchase a development site in the city on the banks of the Danubeof 25,700m2. The Company intends to develop approximately 600 residential unitsand a marina as well as commercial areas with total projected sales ofapproximately €160 million. Engel also signed an agreement in January 2006 to purchase 54,000m2 of land inWarsaw, Poland. The Company intends to develop approximately 300 residentialunits with projected sales of approximately €41 million. In January 2006 the Company also agreed to purchase an additional 3,400m2 ofland in Bulgaria to develop 50 residential units with projected sales ofapproximately €7m. Engel is also in negotiations to purchase additional projects in the CEE Regionfor the development of several thousands further residential units. The Company's current project pipeline amounts to more than 11,000 units inseven countries, with projected sales of more than €1 billion. Strategy Engel East Europe continues to look for opportunities in emerging Europeanmarkets and the Company's principal objectives are to continue expanding itsbusiness activities in these markets. Engel East Europe employs the followingstrategies to achieve these objectives: • Fixing costs and minimising risk in real estate development; • Exploiting the management team's experience to identify potential development sites with relatively low land costs and high profit margins, primarily in or within commuting distance of major population centres; • Adoption of flexible phased development plans, where the number of residential units in each phase is adjusted to the level of demand; • Employing mainly general contractors to construct its development projects on fixed price, ''turn-key'' contracts. The majority of the sales work and the architectural work are provided by third party companies. This minimizes overheads by enabling the Company to maintain a relatively small number of employees. The Company's streamline operations enable it to adjust quickly to changing market conditions; • Aiming to acquire land mostly once it has been zoned for residential use or subject to zoning; • Using established first class local sales agents, with local know-how, to sell our residential units; • Agreements with certain vendors, pursuant to which Engel East Europe undertakes to pay for the land through an agreed percentage of future project proceeds, instead of cash payment, thus substantially reducing the Company's development risks; and • The Company partners with large, international, financial institutions, such as the Heitman Fund and an entity of Lehman Brothers group. Outlook The Company expects the CEE Region to continue to offer attractive developmentopportunities for residential real estate due to the on-going rapid rise indisposable incomes. This results in high growth in demand for modern and goodquality housing. Other factors which make the CEE Region attractive fordevelopment are low land and/or construction costs relative to developedcountries, a fast-growing housing mortgage market, with relatively low interestrates, the existence of a substantial amount of Communist-era housing, which istypically of low quality, as well as higher rates of increase in house pricesthan local rates of inflation. Taking into consideration additional relevantmacroeconomics factors such as the projected annual growth in the GDP and theresidential units per 1,000 of population built per year in those countries, themanagement is confident that there continue to be significant residentialdevelopment opportunities in these markets. Combining its management experience,knowledge and expertise, Engel, as a leader in the CEE Region, will continue toidentify and secure the most attractive opportunities for real estatedevelopment throughout the region. Consolidated Income Statement For the year ended 31 December 2005 2004 Audited T E U R Revenues 10,574 7,752 Cost of sales (7,386) (5,880) Gross profit 3,188 1,872 Other operating income 36 3,830 Other operating expenses - (1,197) Selling, general and administrative expenses (588) (1,277) Operating profit before financing costs 2,636 3,228 Finance income 395 657 Finance expenses (1,191) (938) Net financing costs (796) (281) Share in profit (loss) of associate 155 (11) Profit before tax 1,995 2,936 Income taxes (Tax benefit) 288 (24) Profit for the year 1,707 2,960 Attributable to: Equity holders of the parent 1,781 2,793 Minority interest (74) 167 1,707 2,960 Earnings per share (EUR) 0.029 0.047 Consolidated Balance Sheets 31 December 2005 2004 Audited T E U R AssetsCurrent assetsCash and cash equivalents 42,103 4,638Restricted bank deposits 5,132 1,827Trade accounts receivable 63 262Other accounts receivable and prepayments 2,617 522Loans to related parties and others 2,448 771Inventories of housing units 32,663 16,690 85,026 24,710Non-current assetsProperty and equipment 118 29Deferred tax assets 274 709Investment in associate 77 286 469 1,024Total assets 85,495 25,734 Liabilities and equityCurrent liabilitiesInterest-bearing loans from banks 11,312 5,029Loans and amounts due to related parties and other 19,538 4,099Trade accounts payable 2,330 935Income tax payable 94 363Other accounts payable 8,520 12,299Total liabilities 41,794 22,725Net assets 43,701 3,009 EquityShare capital 878 20Share premium 39,298 -Retained earnings 3,842 2,641Translation reserve (325) (76)Equity attributable to equity holders of the parent 43,693 2,585Minority interest 8 424Total equity 43,701 3,009Total liabilities and equity 85,495 25,734 Consolidated Statements of Cash Flows For the year ended 31 December 2005 2004 Audited T E U R Cash used in operating activitiesNet profit for the year 1,707 2,960 Adjustment necessary to reflect cash flows fromoperating activities: Depreciation 19 12Unrealised foreign exchange losses (gains) (127) 89Finance expenses, net 923 (536)Income taxes 97 643Company's share in losses (profits) of associate (155) 11Gain on sale of subsidiary (36) (3,830)Increase in inventory (7,466) (3,462)Deferred taxes 49 (54)(Increase) decrease in trade accounts receivable 174 (74)Decrease in other accounts receivable (2,068) (531)Increase (decrease) in trade accounts payable 1,335 (2,433)Increase (decrease) in other accounts payable (6,413) 5,809Cash used in operations:Interest received 466 521Interest paid (400) (144)Income taxes paid (382) (403)Net cash used in operating activities (12,277) (1,422) Cash from (used in) investing activitiesPurchase of property and equipment (117) (15)Acquisition of subsidiaries, net of cash acquired (see Note 29) 671 -Proceeds from sale of building held for sale - 2,270Loan repaid by (granted to) associate 364 (137)Short term loans granted to related parties, net (1,751) (915)Restricted cash (3,481) 883Disposal of subsidiary, net of cash disposed of - (755)(see Note 28)Net cash from (used in) investing activities (4,314) 1,331 Consolidated Statements of Cash Flows For the year ended 31 December 2005 2004 A u d i t e d T E U R Cash from financing activitiesIssue of share capital (see Note 26.g.3) 39,576 -Short term loans from (repaid to) banks, net 6,768 (1,612)Short term loans received from related parties, net 8,521 1,734Dividend paid to minority shareholders (362) -Net cash from financing activities 54,503 122 Increase in cash and cash equivalents during the year 37,912 31 Effect of exchange rate changes on cash (447) (3) Cash and cash equivalents at the beginning of the year 4,638 4,610 Cash and cash equivalents at the end of the year 42,103 4,638 Notes to the consolidated financial information 1. Basis of Accounting and Presentation of Financial Information The financial information contained in this announcement does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. However,the financial statements contained in this announcement are extracted from theaudited statutory accounts for the financial year ended 31 December 2005, whichwill be delivered to the Registrar of Companies. The Group has prepared its financial statements under IFRS. 2. AGM Details of the Annual General meeting will be given in due course. This information is provided by RNS The company news service from the London Stock Exchange