17 Aug 2009 08:57
Engel East Europe N.V
Results for the six month period ended 30 June 2009
Monday, 17 August 2009 - Engel East Europe N.V. ('Engel' or 'the Company') the AIM-listed Central and Eastern European property developer (EEE:L), announces results for the six month period ended 30 June 2009.
Financial summary
| 6 months ended (figures in €'000) | 30 June 2009 | 30 June 2008 | Year ended 31 Dec 2008 |
|
| |||
| Net assets | 24,916 | 45,597 | 33,599 |
| NAV/share (€) | 0.28 | 0.52 | 0.38 |
| Revenues | 12,674 | 8,171 | 24,203 |
| Revaluation of investment property | (2,653) | 3,040 | 2,076 |
| Write-down of inventory | (1,185) | (441) | (1,153) |
| Gross profit/(loss) | (2,678) | 4,686 | 4,915 |
| Operating profit/(loss) | (3,986) | 2,579 | (390) |
| Net financing costs | 4,854 | 1,697 | 8,703 |
| Profit/(loss) before tax | (8,838) | 886 | (9,092) |
| Profit/(loss) after tax | (8,422) | 218 | (9,579) |
| Earnings/(loss) per share (€) | (0.096) | 0.002 | (0.109) |
"Whilst the trading environment in Central and Eastern Europe remains tough the Czech and Polish property and construction markets have now stabilised. We will continue our process of controlling costs and debt, whilst driving cash generation through sales of high end products."
Sam Salman, Chairman, Engel East Europe
Enquiries:
| Engel East Europe N.V. | |
| Sam Salman | Tel: +1 (646) 214 2000 |
| Samuel Hibel | Tel: +972 (9) 970 7004 |
| Libertas Capital Corporate Finance Limited | Tel: +44 (0) 20 7569 9650 |
| Sandy Jamieson | |
| Bankside Consultants | Tel: +44 (0) 20 7367 8888 |
| Simon Bloomfield or Andy Harris |
Chairman's Statement
The challenges experienced by the economies and property markets of Central and Eastern Europe last year have continued into 2009 with construction lending and availability of mortgage finance having a negative impact on both Engel's development activities and selling prices achieved.
Against this background, and in the absence of any overall improvement in the business environment, the Board decided to focus mainly on two countries, Poland and the Czech Republic and to complete the construction of projects, or phases of projects, already under construction, in order to generate cash flow and repay bank loans thereby strengthening the Company's balance sheet. At the same time, the Company has been seeking to extend the term of bank loans on certain projects either under construction or where construction has yet to commence.
Financial position
The progress made following this decision is reflected in:
Interest bearing loans from banks reduced to €48.8 million at 30 June 2009 of (31 December 2008: €57.8 million) while cash, excluding restricted deposits and cash in escrow remain approximately at the same level of €6.7 million (31 December 2008: €6.6 million).
Repayment of a total €6.6 million during the first half of 2009, (the Company's share) of 5 loans related mostly to phases of projects. As a result, the loans on the projects concerned (Phase 2 Sun Palace (Hungary), 2nd building at Gyor (Hungary), Phase 1 Shafranka (Czech Republic), Ovcha Kopel (Bulgaria) and Phase 2 Zabki (Poland)) have been fully repaid..
All bank loans are secured either on individual projects and land or by the parent company, with no recourse to the Company except in the case of the Gyor project in Hungary (see below). During the period, we successfully agreed on new terms and extensions on bank loans totalling €12.2 million (the company's share) in respect of the projects at Punko (Hungary), Zar Boris (Bulgaria) and Emili Plater (Poland), and the land at Pipera (Romania).
We are in the process of negotiating, or will seek to negotiate in the second half, additional extensions on other loans totalling €12.8 million on projects at an early stage and where repayment is due within the next few months. The loans relate to land at Sisest (Romania), Pipera (Romania) and Krakow (Poland), and the 3rd building at the Gyor project.
The loan for the third building in Gyor project in Hungary, which is owned by the Arces International BV joint venture with Heitman, is the subject of a legal dispute with the bank about the validity of a shareholder guarantee. The Company's 50 per cent share of the loan concerned is €5.6 million which is due for repayment by 15 Dec 2009.
Further details of bank loans are contained in notes 6 and 8 to the accounts.
On 10 July 2009 the Company announced that it was at an advanced stage in negotiations to sell the Panorama project which is for a total of 59 units. Under the envisaged terms of sale, the Company was permitted to sell up to 19 units separately of which 16 were sold during the period. However, following the election in Bulgaria, the sale was delayed and the Company decided to continue to sell units in the normal course of business with a total of 20 units having been sold to date. As this exceeds the limit set by the envisaged terms of sale, the Company is now discussing a revised agreement with the buyer.
As announced on 10 August 2009, Engel's parent company, Engel Resources and Development Ltd. ('Engel Resources'), has provided a bank guarantee and used its credit lines to support two bank loans to the Company with an aggregate value of approximately €9.3 million. In addition, Engel Resources has made a loan of €2.5 million to the Company. As security, the Company has granted a pledge in favour of Engel Resources over it interests in the Marina Dorcol project in Serbia and the Wilanow commercial project in Poland.
Trading performance
During the period, the total number of units sold and handed over was 272 (6 months ended 30 June 2008: 170) with 266 units completed (6 months ended 30 June 2008: 222 units).
As a result, revenues increased by 55 per cent to €12.7 million (6 months ended 30 June 2008: €8.2 million). However, with lower gross margins reflecting weak selling prices and the lack of any land sales, after writing down the fair value of investment properties by €2.7 million and inventory by €1.2 million, and following foreign exchange losses of €1.6 million, there was a loss before tax of €8.8 million for the period (6 months ended 30 June 2008: €0.9 million).
Approximately half of the loss before tax for the period is attributable to the decrease in value and financial costs of the Marina Dorcol project in Serbia.
The Company's drive to cut costs is reflected in a 38 per cent reduction in selling, general and administrative expenses to €1.3 million (6 months to 30 June 2009: €2.1 million) which will benefit operating margins for the second half of the year.
Due to the global financial crisis the company did not start any new projects during the first six months of the year. Moreover the company halted construction in the Wilanow 1 project (96 residential units in Wilanow district in Warsaw, Poland).
Outlook
Whilst the business environment remains very difficult in Central and Eastern Europe overall, the markets in the Czech Republic and Poland have stabilised. Hungary and Bulgaria remain extremely challenging.
We expect to complete construction in projects where we target more upper market products, which in the absence of write-downs, are likely to improve the company gross margins over the past accounting period from the expected improvement in per unit pricing and gross margins.
The focus on cost control and generating cash will continue and we anticipate that debt at the end of the year should be no higher than at 30 June 2009.
Engel East Europe N.V.
Condensed consolidated interim balance sheet
| 30 June | 31 December | |||
|
| 2009 | 2008 | 2008 | |
| Thousands Euro | ||||
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | 6,717 | 9,268 | 6,628 | |
| Restricted bank deposits and cash in escrow | 3,239 | 10,724 | 10,122 | |
| Trade accounts receivable | 755 | 1,436 | 1,495 | |
| Prepayments and other accounts | 1,457 | 5,253 | 2,306 | |
| Loans to related parties | 6,324 | 6,433 | 6,537 | |
| Income tax receivable | 181 | 115 | 143 | |
| Inventories of housing units | 66,774 | 85,116 | 75,389 | |
| Total current assets | 85,447 | 118,345 | 102,620 | |
| Non-current assets | ||||
| Investment property | 27,281 | 37,207 | 31,665 | |
| Property and equipment | 173 | 245 | 208 | |
| Deferred tax assets | 2,834 | 1,639 | 1,460 | |
| Investment in associate | - | 28 | - | |
| Total non-current assets | 30,288 | 39,119 | 33,333 | |
| Total assets | 115,735 | 157,464 | 135,953 | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities | ||||
| Interest-bearing loans from banks | 48,828 | 57,002 | 57,815 | |
| Current portion of finance lease liability | 3,450 | 715 | 2,006 | |
| Loans and amounts due to related parties and joint venture partners | 7,559 | 5,354 | 5,854 | |
| Trade accounts payable | 4,296 | 8,972 | 5,005 | |
| Other liabilities | 9,724 | 20,195 | 14,710 | |
| Provisions | 1,947 | 1,383 | 2,188 | |
| Income tax payable | 510 | 740 | 590 | |
| Total current liabilities | 76,314 | 94,361 | 88,168 | |
| Non-current liabilities | ||||
| Finance lease liability | 12,691 | 15,902 | 13,184 | |
| Deferred tax liabilities | 1,814 | 1,604 | 1,002 | |
| Total non-current liabilities | 14,505 | 17,506 | 14,186 | |
| Equity | ||||
| Share capital | 878 | 878 | 878 | |
| Share premium | 39,298 | 39,298 | 39,298 | |
| Capital reserves | (340) | (229) | (334) | |
| Retained earnings | (13,188) | 4,860 | (4,829) | |
| Accumulated translation adjustment | (1,732) | 616 | (1,480) | |
| Equity attributable to equity holders of the parent | 24,916 | 45,423 | 33,533 | |
| Minority interest | - | 174 | 66 | |
| Total equity | 24,916 | 45,597 | 33,599 | |
| Total liabilities and equity | 115,735 | 157,464 | 135,953 | |
| Sam Salman | Samuel Hibel | |||
| Chairman | CFO & Acting CEO | 13 August 2009 |
The notes are an integral part of these condensed consolidated interim financial statements.
Engel East Europe N.V.
Condensed consolidated interim statement of comprehensive income
| For the six month period ended 30 June | ||
| 2009 | 2008 | |
|
| Thousands Euro | |
| Revenues | 12,674 | 8,171 |
| Change in fair value of investment property | (2,653) | 3,040 |
| Write down of inventory | (1,185) | (441) |
| Cost of sales | (11,514) | (6,084) |
| Gross profit (loss) | (2,678) | 4,686 |
| Selling, general and administrative expenses | (1,308) | (2,107) |
| Operating profit (loss) | (3,986) | 2,579 |
|
| ||
| Foreign exchange gains (losses) | (1,648) | 483 |
| Other financial income | 609 | 413 |
| Other financial expenses | (3,815) | (2,593) |
| Net finance expenses | (4,854) | (1,697) |
| Share in profit (loss) of associate | 2 | 4 |
| Profit (loss) before tax | (8,838) | 886 |
| Tax benefit (income taxes) | 416 | (668) |
|
| ||
| Profit (loss) for the period | (8,422) | 218 |
| Other comprehensive income: | ||
| Foreign currency translation adjustment | (255) | 467 |
| Total comprehensive income (loss) for the period | (8,677) | 685 |
| Profit (loss) attributable to: | ||
| Equity holders of the parent | (8,359) | 281 |
| Minority interest | (63) | (63) |
| Profit (loss) for the period | (8,422) | 218 |
| Total comprehensive income (loss) attributable to: | ||
| Equity holders of the parent | (8,611) | 748 |
| Minority interest | (66) | (63) |
| Total comprehensive income (loss) for the period | (8,677) | 685 |
| Earning (loss) per share: | ||
| Basic earning (loss) per share (Euro) | (0.096) | 0.002 |
| Diluted earning (loss) per share (Euro) | (0.096) | 0.002 |
The notes are an integral part of these condensed consolidated interim financial statements.
Engel East Europe N.V.
Condensed consolidated interim statement of changes in shareholders' equity
| Attributable to equity holders of the Company | ||||||||
| Share capital | Share premium | Capital reserve | Translation reserve | Retained earnings | Total | Minority interest | Total equity | |
| Thousands Euro | ||||||||
| Balance at 1 January 2008 | 878 | 39,298 | (328) | 149 | 4,579 | 44,576 | 237 | 44,813 |
| Total comprehensive income for the period | - | - | - | 467 | 281 | 748 | (63) | 685 |
| Share based payments | - | - | 99 | - | - | 99 | - | 99 |
| Balance at 30 June 2008 | 878 | 39,298 | (229) | 616 | 4,860 | 45,423 | 174 | 45,597 |
| Balance at 1 January 2009 | 878 | 39,298 | (334) | (1,480) | (4,829) | 33,533 | 66 | 33,599 |
| Total comprehensive loss for the period | - | - | - | (252) | (8,359) | (8,611) | (66) | (8,677) |
| Share based payments | - | - | (6) | - | - | (6) | - | (6) |
| Balance at 30 June 2009 | 878 | 39,298 | (340) | (1,732) | (13,188) | 24,916 | - | 24,916 |
The notes are an integral part of these condensed consolidated interim financial statements.
Engel East Europe N.V.
Condensed consolidated interim statement of cash flows
| For the six month period ended 30 June | ||
|
| 2009 | 2008 |
| Thousands Euro | ||
| Cash flows from operating activities: |
|
|
| Net profit (loss) for the period | (8,422) | 218 |
| Adjustments for: | ||
| Depreciation | 30 | 62 |
| Gain from sale of property and equipment | - | (10) |
| Net finance expenses | 4,854 | 1,697 |
| Income taxes | (416) | 668 |
| Share in profits of associate | (2) | (4) |
| Share based payment | (6) | 99 |
| Change in fair value of investment property | 2,653 | (3,040) |
| Decrease (increase) in inventory | 4,181 | (15,031) |
| Write down of inventory | 1,185 | 441 |
| Decrease (increase) in trade accounts receivable | 636 | (307) |
| Decrease in provisions | (210) | - |
| Increase (decrease) in other accounts receivable | 689 | (2,690) |
| Decrease (increase) in trade accounts payable | (436) | 1,693 |
| Decrease (increase) in other liabilities | (3,967) | 5,840 |
| Cash from (used in) operations: | ||
| Interest received | 709 | 254 |
| Interest paid | (1,216) | (873) |
| Income taxes paid | (138) | (685) |
| Net cash from (used) in operating activities | 124 | (11,668) |
The notes are an integral part of these condensed consolidated interim financial statements.
Engel East Europe N.V.
Condensed consolidated interim statement of cash flows (continued)
| For the six month period ended 30 June | ||
| 2009 | 2008 | |
| Thousands Euro | ||
| Cash flows from investing activities: | ||
| Acquisition of property and equipment | (10) | - |
| Acquisition of investment property | - | (4,356) |
| Proceeds from sales of property and equipment | 15 | 117 |
| Short term loans granted to related parties | (219) | (931) |
| Short term loans repaid by related parties | 279 | 2,673 |
| Decrease in restricted cash | 6,321 | 1,691 |
| Net cash from (used in) investing activities | 6,386 | (806) |
|
| ||
| Cash flows from financing activities: | ||
| Interest-bearing loans received from banks | 2,793 | 18,998 |
| Interest-bearing loans repaid to banks | (10,185) | (8,388) |
| Loans received from related parties and other | 2,076 | 1,202 |
| Loans repaid to related parties and other | (543) | (139) |
| Payment of finance lease liability | (103) | (1,075) |
| Net cash from (used in) financing activities | (5,962) | 10,598 |
| Net increase (decrease) in cash and cash equivalents | 548 | (1,876) |
| Effect of exchange rate fluctuations on cash held | (459) | 114 |
| Cash and cash equivalents at 1 January | 6,628 | 11,030 |
| Cash and cash equivalents at 30 June | 6,717 | 9,268 |
The notes are an integral part of these condensed consolidated interim financial statements.
Independent report on review of condensed consolidated interim financial information
To the shareholders of Engel East Europe N.V
Engel East Europe N.V.
We have reviewed the accompanying condensed consolidated interim balance sheet of Engel East Europe N.V. as at 30 June 2009 and the related condensed consolidated interim statement of comprehensive income, changes in shareholder's equity and cash flows for the six-month period then ended (interim financial information). Management is responsible for the preparation and presentation of this interim financial information in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. Our responsibility is to express a conclusion on this interim financial information based on our review.
We conducted our review in accordance with International Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting.
13 August 2009
KPMG Hungária Kft.
Engel East Europe N.V.
Notes to the condensed consolidated interim financial statements
1. Reporting entity
Engel East Europe N.V. (the "Company") is a Company domiciled in The Netherlands. The condensed consolidated interim financial statements of the Company as at and for the six months ended 30 June 2009 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interests in associates and jointly controlled entities.
The consolidated financial statements of the Group as at and for the year ended 31 December 2008 are available upon request from the Company's registered office at Rapenburgerstraat 204, 1011MN Amsterdam, The Netherlands or at www.engel-ee.com. At the date of preparing these financial statements the Company had not yet prepared consolidated financial statements for the year ended 31 December 2008 in accordance with The Netherlands Civil Code.
2. Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2008.
These condensed consolidated interim financial statements were approved by the Board of Directors on 13 August 2009.
3. Significant accounting policies
Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2008, as described in those annual financial statements.
The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2009.
a. IAS 1 (revised), 'Presentation of financial statements'. The revised standard prohibits the presentation of items of income and expenses (that is 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All 'non-owner changes in equity' are required to be shown in a performance statement.
Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income).
The group has elected to present total comprehensive income in a single statement of comprehensive income for its 2009 consolidated financial statements.
b. IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting'. It requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Chairman and the interim CEO of the Group that makes strategic decisions.
c. The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009, but have no impact for the group:
IFRS 2 (amendment), 'Share-based payment'.
IAS 32 (amendment), 'Financial instruments: Presentation'.
IFRIC 13, 'Customer loyalty programmes'.
IAS 39 (amendment), 'Financial instruments: Recognition and measurement'.
IAS 40 (amendment), 'Investment property'.
4. Estimates
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2008.
5. Segment reporting
The chief operating decision-makers have been identified as the Chairman and the Acting CEO of the Group who review the group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.
The chief operating decision-makers assesses the performance of the operating segments based on a measure of adjusted earnings before tax.
The group considers that it has two operating segments:
Development and sale of residential real estate projects
Commercial properties that include income producing properties and lands designated for commercial projects.
|
| For the six months period ended 30 June | |||||
|
| Residential | Commercial | Total | |||
|
| 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
|
| Thousands Euro | |||||
|
| ||||||
| Total revenues | 12,619 | 8,167 | 55 | 4 | 12,674 | 8,171 |
| Profit (loss) before tax | (3,570) | (1,199) | (5,268) | 2,085 | (8,838) | 886 |
| Total segment assets | 73,266 | 105,754 | 33,130 | 43,523 | 106,396 | 149,277 |
6. Financial risk management
The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the year ended 31 December 2008.
Liquidity risk
At 30 June 2009, EUR 35,131 thousands of the current liabilities interest bearing loans from banks, mature within one year. Given the current conditions in the real estate market in the countries where the Group has projects, management has considered project by project whether the Group will be able to generate sufficient cash from sales of housing units and other assets including investment properties, to repay its financial obligations as they fall due.
At 30 June 2009, EUR 35,131 thousands of the current liabilities interest bearing loans from banks, mature within one year. Given the current conditions in the real estate market in the countries where the Group has projects, management has considered project by project whether the Group will be able to generate sufficient cash from sales of housing units and other assets including investment properties, to repay its financial obligations as they fall due.
For project loans totalling EUR 21,302 thousands (these are usually land loans for projects where the construction has not yet started) management considers it is unlikely that the projects will generate sufficient cash to repay all obligations which fall due in the following year.
In these cases, the Group discusses possible solutions with the financing banks, including extension of the loans, as well as potential sale of these projects.
Whilst in the past banks have been willing to prolong existing loan facilities, there can be no assurance that lending banks will be prepared to agree to extend existing loan facilities beyond currently committed maturity dates. In the event that a bank is not willing to extend a project loan, the bank has the option to call its security. In most cases these loans are secured by the underlying project company assets only. The Company has not guaranteed the loans extended by banks to project companies. In one case, the bank loans which finance the project in Gyor, Hungary, in the amount of EUR 11,266 thousands (the Company's part is EUR 5,633 thousands) are also guaranteed by Arces International B.V., jointly controlled entity (there is a legal dispute with the bank about the validly of this guarantee). Consequently, in most cases, the financial statement exposure of the Group is limited to the value of the specific security pledged on each project. Based on its review, management of the Company believes that there are no indications of the existence of material uncertainties which may cast significant doubt on the Company's ability to continue as a going concern.
The Group is indirectly owned by Engel Resources and Development Ltd., a company which is incorporated and listed in Israel. The Group has guarantees for certain of its bank loans (totalling to EUR 9,580 thousands) from Engel Resources and Development Ltd, see also note 10.
The management believes that in case of necessity the Group could approach its direct and indirect parent companies for support. However the Group has no assurance that it will receive such support.
7. Income tax expense
The Group's consolidated effective tax rate in respect of continuing operations for the six months ended 30 June 2009 was -5% (for the period ended 30 June 2008: -75%).
The change in effective tax rate was caused mainly by the following factors:
Additions tax expenses relating to previous years.
Current year losses for which no deferred tax asset was recognized.
Write off deferred taxes assets which are not expected to be utilize in the future.
8. Loans and borrowings
The following interest-bearing loans from banks were received and repaid during the six months period ended 30 June 2009:
| Carrying | Year of | |||
| Currency | Interest rate | amount | Maturity* | |
| Thousands Euro | ||||
| Received loans | ||||
| Interest bearing loans from banks: | ||||
| Secured bank loan | Czech Crown | 3m Pribor+2.25% | 1,033 | 2010 |
| Secured bank loan | Polish Zloty | 3m Wibor + 4.7% | 1,097 | 2010 |
| Secured bank loan | Polish Zloty | 3m Wibor + 1.35% | 60 | 2010 |
| Secured bank loan | Euro | 3m Euribor+4.5% | 382 | 2010 |
| Secured bank loan | Hungarian Forint | AKK**110 % + 3% - 60% AKK ** | 221 | 2010 |
| 2,793 | ||||
| Loans received from related parties and other: | ||||
| Unsecured loan | Euro | 6% | 2,076 | 2010 |
| Total received loans and borrowings during the period | 4,869 | |||
| Repayments | ||||
| Interest bearing loans from banks: | ||||
| Secured bank loan | Hungarian Forint | 3m Bubor + 2.97-60% AKK | (1,835) | |
| Secured bank loan | Hungarian Forint | 1m Bubor +1.8% | (238) | |
| Secured bank loan | Czech Crown | 3m Pribor+2.25% | (1,421) | |
| Secured bank loan | Polish Zloty | 1y Wibor+1.6% | (1,064) | |
| Secured bank loan | Polish Zloty | 3m Wibor + 4.7% | (240) | |
| Secured bank loan | Hungarian Forint | AKK**110 % + 3% - 60% AKK ** | (1,268) | |
| Secured bank loan | Euro | 3m Euribor+3% | (2,000) | |
| Secured bank loan | Euro | 3m Euribor+4.5% | (1,666) | |
| Secured bank loan | Euro | 3m Euribor+4.5% | (428) | |
| Secured bank loan | Euro | 3m Euribor+4.5% | (25) | |
| (10,185) | ||||
| Loans repaid to related parties and other: | ||||
| Unsecured loan | Euro | 15% | (543) | |
| Total repayments of loans and borrowings during the period | (10,728) | |||
* Represents the latest possible year of maturity.
** AKK - the appropriate latest 3 months' average yield for the one year Hungarian Treasury bill.
The Group finances its projects primarily with commercial bank lines of credit. The loans are expected to be settled in the Group's normal operating cycle and therefore are classified as current liabilities. In some cases the loans repayments date may need to be extended, see note 6.
As of 30 June 2009 the financing bank of the project "Wilanow", Poland informed the jointly controlled entity, Palace Engel Wilanow 1 Sp. z.o.o, about its decision not to proceed with the financing of the project and demanded repaying of the current loan balance in the amount of EUR 645 thousands (the Company's share is EUR 258 thousands).
After the reporting date the loan was repaid.
At the reporting date, the Group breached its requirement to pay the first instalment of a bank loan granted to a project in Bulgaria in the amount of EUR 700 thousands (the Company's share is EUR 280 thousands). The Group is currently in negotiation with the lending bank regarding the terms (including the repayment date) of the loan.
After the reporting date, the Group breached its requirement to pay the bank loan granted to a project in Romania in the amount of EUR 2,648 thousands (the Company's share is EUR 1,059 thousands). The Group is under advanced negotiation to restructure this liability and to prolong the bank loan for a period of additional 12 months.
After the reporting date, the Group breached its requirement to pay the third instalment due under a lease agreement with the municipality of Belgrade, Serbia in the amount of EUR 3.8 million (see note 16 in the annual report). As a result the company will have to pay an additional amount of EUR 1.2 million.
Additionally the Company agreed with the municipality of Belgrade that the forth installment will be reduced in an amount of EUR 0.5 million.
9. Write-down of inventory
During the six months period ended 30 June 2009 the Group recognized write-downs of inventory of EUR 1,185 thousands related to the following projects (the Company's share):
Panorama, Bulgaria - EUR 276 thousands.
Gyor, Hungary - EUR 160 thousands.
Three plots in Canada - EUR 116 thousands.
Krakow, Poland - EUR 633 thousands.
10. Related parties transactions
During the six months period ended 30 June 2009 the Group received loans of EUR 2,016 thousands from Engel General Developers Ltd. (its parent company).These loans were granted in order to repay part of the principal of bank loan which is secured by Engel Recourses and Developments Ltd., an indirect parent company of the Company (see also note 33 in the annual reports).
After the reporting date, the Company signed three separate agreements with its parent company and other related companies, in order to fix the repayment dates of bank loans (see also note 6) totalling to EUR 9,580 thousands which are secured by the parent company.
Additionally, the agreements fixed the repayment dates of loans provided to the Company directly by the parent company. To secure the repayments, the Company agreed to pledge two assets (A plot in Wilanow district in Warsaw, Poland designated for commercial purposes and Marina Dorcol in Serbia) in favour to the parent company.
11. New IFRS pronouncements
Certain new standards, amendments and interpretations to existing standards have been published that are not yet effective for the Group's accounting year ended 30 June 2009, and have not been early adopted in preparing these consolidated financial statements:
1. IFRIC 12 Service Concession Arrangements (effective for first annual reporting period beginning on or after 1 April 2009)
The Interpretation provides guidance to private sector entities on certain recognition and measurement issues that arise in accounting for public-to-private service concession arrangements.
IFRIC 12 is not relevant to the Group's operations as none of the Group entities have entered into any service concession arrangements.
2. Revised IFRS 3 Business Combinations (effective for annual periods beginning on or after 1 July 2009)
The scope of the revised Standard has been amended and the definition of a business has been expanded. The revised Standard also includes a number of other potentially significant changes including:
All items of consideration transferred by the acquirer are recognised and measured at fair value as of the acquisition date, including contingent consideration.
Subsequent change in contingent consideration will be recognized in profit or loss.
Transaction costs, other than share and debt issuance costs, will be expensed as incurred.
The acquirer can elect to measure any non-controlling interest at fair value at the acquisition date (full goodwill), or at its proportionate interest in the fair value of the identifiable assets and liabilities of the acquire, on a transaction-by-transaction basis
Revised IFRS 3 is not relevant to the Group's financial statements as the Group does not have any interests in subsidiaries that will be affected by the revisions to the Standard.
3. Revised IAS 27 Consolidated and Separate Financial Statements (effective for annual periods beginning on or after 1 July 2009)
In the revised Standard the term minority interest has been replaced by non-controlling interest, and is defined as "the equity in a subsidiary not attributable, directly or indirectly, to a parent". The revised Standard also amends the accounting for non-controlling interest, the loss of control of a subsidiary, and the allocation of profit or loss and other comprehensive income between the controlling and non-controlling interest.
Revised IAS 27 is not relevant to the Group's financial statements as the Group does not have any interests in subsidiaries that will be affected by the revisions to the Standard.
4. IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective for annual periods beginning on or after 1 October 2008)
The Interpretation explains the type of exposure that may be hedged, where in the group the hedged item may be held, whether the method of consolidation affects hedge effectiveness, the form the hedged instrument may take and which amounts are reclassified from equity to profit or loss on disposal of the foreign operation.
IFRIC 16 is not relevant to the Group's financial statements as the Group has not designated any hedges of a net investment in a foreign operation
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