Quarterly Report • Aug 31, 2010
Quarterly Report
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Orco Property Group's Board of Directors has approved on 31 August 2010 the condensed consolidated interim financial information as at and for the period ended 30 June 2010. All the figures in this report are presented in thousands of Euros, except if explicitly stated.
| Note | June 2010 |
June 2009 |
|
|---|---|---|---|
| Revenue | 3 | 163,076 | 132,315 |
| Net profit/(loss) from fair value adjustments | |||
| on investment property | 5 | 26,629 | -153,282 |
| Other operating income | 2,333 | 3,626 | |
| Net loss on disposal of assets | 5, 8 | -273 | -769 |
| Cost of goods sold | 7 | -87,899 | -72,327 |
| Employee benefits | -21,055 | -23,884 | |
| Amortisation, impairments and provisions | 6, 7 | -8,311 | -106,048 |
| Other operating expenses | -36,730 | -39,978 | |
| Operating result | 37,770 | -260,347 | |
| Interest expenses | -51,530 | -41,694 | |
| Interest income | 3,101 | 5,052 | |
| Foreign exchange result | -6,910 | -643 | |
| Other net financial results | 12 | 255,405 | -20,706 |
| Financial result | 200,066 | -57,991 | |
| Profit/(loss) before income taxes | 237,836 | -318,338 | |
| Income taxes | 13 | -4,335 | 60,948 |
| Net profit/(loss) for the period | 233,501 | -257,390 | |
| Total profit/(loss) attributable to: | |||
| non controlling interests | -4,232 | -57,533 | |
| owners of the Company | 237,733 | -199,857 | |
| Basic earnings per share (in EUR) | 15 | 19.44 | -18.26 |
| Diluted earnings per share (in EUR) | 15 | 19.44 | -18.26 |
The accompanying notes form an integral part of this condensed consolidated interim financial information.
| Profit /(Loss) for the period: | 2010 | 2009 |
|---|---|---|
| Other comprehensive income | 233,501 | -257,390 |
| Currency translation differences | 13,708 | -8,047 |
| Total comprehensive income for the period | 247,209 | -265,437 |
| Total comprehensive income attributable to: - owners of the Company - non controlling interests |
248,570 -1,361 |
-206,634 -58,803 |
| Assets | |||
|---|---|---|---|
| Note | 30 June 2010 |
31 December 2009 |
|
| NON-CURRENT ASSETS | 1,408,926 | 1,392,979 | |
| Intangible assets | 48,402 | 48,903 | |
| Investment property | 5 | 1,071,801 | 1,072,304 |
| Property, plant and equipment Hotels and own-occupied buildings Fixtures and fittings and other equipments |
6 | 252,451 234,281 18,170 |
235,677 215,393 20,284 |
| Financial assets at fair value through profit and loss | 33,522 | 32,353 | |
| Deferred tax assets | 2,750 | 3,742 | |
| CURRENT ASSETS Inventories |
7 | 555,184 398,455 |
630,554 482,605 |
| Trade receivables Other current assets Derivative instruments Current financial assets Cash and cash equivalents |
12 9 |
28,762 63,821 12 390 63,744 |
31,379 56,347 2,695 488 57,040 |
| Assets held for sale | 8 | 46,675 | 48,930 |
| TOTAL | 2,010,785 | 2,072,463 | |
| Equity and liabilities | |||
| 30 June 2010 |
31 December 2009 |
||
| EQUITY | 367,632 | 104,730 | |
| Equity attributable to owners of the Company | 14 | 320,517 | 56,577 |
| Non controlling interests | 10 | 47,115 | 48,153 |
| LIABILITIES Non-current liabilities Bonds Financial debts Provisions & other long term liabilities Derivative instruments Deferred tax liabilities |
11 11 |
1,643,153 847,461 222,964 490,684 16,816 11,720 105,277 |
1,967,733 1,021,463 409,397 484,634 16,918 9,289 101,225 |
| Current liabilities Current bonds Financial debts Trade payables Advance payments Derivative instruments Other current liabilities |
11 11 |
757,816 8,497 531,919 31,790 43,643 41,035 100,932 |
894,819 59,219 595,776 33,480 53,212 44,380 108,752 |
| Liabilities linked to assets held for sale | 8 | 37,876 | 51,451 |
| Share | Share | Translation | Treasury | Other | Equity attributable | Non controlling | Equity | ||
|---|---|---|---|---|---|---|---|---|---|
| Note | capital | premium | reserve | shares | reserves | to owners of the Company |
interests | ||
| Balance at 31 December 2008 | 44,870 | 400,524 | 18,639 | -20,319 | -139,081 | 304,633 | 116,241 | 420,874 | |
| Loss for the period : | |||||||||
| Translation differences | -6,777 | -6,777 | -1,270 | -8,047 | |||||
| Loss for the period | -199,857 | -199,857 | -57,533 | -257,390 | |||||
| Total comprehensive income | -6,777 | -199,857 | -206,634 | -58,803 | -265,437 | ||||
| Own equity instruments | -380 | -380 | -380 | ||||||
| Non controlling interests' transactions | 10 | -570 | -570 | ||||||
| Balance at 30 June 2009 | 44,870 | 400,524 | 11,862 | -20,699 | -338,938 | 97,619 | 56,868 | 154,487 | |
| Loss for the period : | |||||||||
| Translation differences | 3,914 | 3,914 | 371 | 4,285 | |||||
| Loss for the period | -50,707 | -50,707 | -7,419 | -58,126 | |||||
| Total comprehensive income | 3,914 | -50,707 | -46,793 | -7,048 | -53,841 | ||||
| Own equity instruments | 1,325 | 2,923 | 4,248 | 4,248 | |||||
| Non controlling interests' transactions | 10 | 1,503 | 1,503 | -1,667 | -164 | ||||
| Balance at 31 December 2009 | 44,870 | 400,524 | 15,776 | -19,374 | -385,219 | 56,577 | 48,153 | 104,730 | |
| Profit /(loss) for the period : | |||||||||
| Translation differences | 10,837 | 10,837 | 2,871 | 13,708 | |||||
| Profit /(Loss) for the period | 237,733 | 237,733 | -4,232 | 233,501 | |||||
| Total comprehensive income | 10,837 | 237,733 | 248,570 | -1,361 | 247,209 | ||||
| Capital increase | 14 | 12,751 | 3,464 | -86 | 16,129 | 16,129 | |||
| Non controlling interests' transactions | 10 | -759 | -759 | 323 | -436 | ||||
| Balance at 30 June 2010 | 57,621 | 403,988 | 26,613 | -19,374 | -148,331 | 320,517 | 47,115 | 367,632 |
| 30 June | 30 June | |
|---|---|---|
| 2010 | 2009 | |
| Operating result | 37,770 | -260,347 |
| Net (profit) /loss from fair value adjustments on investment property | -26,629 | 153,282 |
| Amortisation, impairments & provisions | 8,311 | 106,048 |
| Net loss on disposal of assets | 273 | 769 |
| Adjusted operating profit/(loss) | 19,725 | -248 |
| Financial result | -1,596 | -227 |
| Income tax paid | -368 | -2,096 |
| Financial result and income taxes paid | -1,964 | -2,323 |
| Changes in operating assets and liabilities | 59,412 | -42,700 |
| NET CASH FROM /USED IN OPERATING ACTIVITIES | 77,173 | -45,271 |
| Capital expenditures and tangible assets acquisitions | -8,930 | -19,267 |
| Proceeds from sales of non current tangible assets | 31,329 | 45,992 |
| Purchase of intangible assets | -37 | -254 |
| Purchase of financial assets | -691 | -905 |
| Net interest paid | -28,437 | -34,084 |
| NET CASH USED IN INVESTING ACTIVITIES | -6,766 | -8,518 |
| Net issue of equity instruments to shareholders | 16,129 | 380 |
| Proceeds from borrowings | 14,350 | 69,866 |
| Repayments of borrowings | -94,712 | -34,084 |
| NET CASH USED IN/ FROM FINANCING ACTIVITIES | -64,233 | 36,162 |
| NET INCREASE IN CASH | 6,174 | -17,627 |
| Cash and cash equivalents at the beginning of the period | 57,040 | 83,799 |
| Exchange difference on cash and cash equivalents | 530 | 641 |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 63,744 | 66,813 |
Orco Property Group S.A., société anonyme ("the Company") and its subsidiaries (together the "Group") is a real estate group with a major portfolio in Central and Eastern Europe. It is principally involved in leasing out investment property under operating leases as well as in asset management, in operating hotels and extended stay hotels and is also very active in the development of properties for its own portfolio or intended to be sold in the ordinary course of business.
The Company is a limited liability company incorporated for an unlimited term and registered in Luxembourg. The address of its registered office is 40, Parc d'activités Capellen, L-8308 Capellen.
The Company is listed on the EuroNext Paris stock exchange, the Prague stock exchange, the Budapest stock exchange and the Warsaw stock exchange.
These condensed consolidated interim financial information have been approved for issue by the Board of Directors on 31 August 2010.
This condensed consolidated interim financial information as at and for the half-year ended 30 June 2010 has been prepared in accordance with IAS 34, 'Interim financial reporting' as adopted by the European Union and should be read in conjunction with the annual consolidated financial statements as at and for the year ended 31 December 2009, which have been prepared in accordance with IFRS as adopted by the European Union.
In determining the appropriate basis of preparation of the condensed consolidated interim financial information, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. The Group's financial risks including foreign exchange risk, fair value risk, cash flow risk, interest rate risk, price risk, credit risk and liquidity risk are assessed according to the note 3 of the annual consolidated financial statements as at and for the year ended 31 December 2009.
In general, while the residential market remains very difficult, the situation evolved positively over the first half of 2010 with:
As at 30 June 2010, the Group made a profit of EUR 233.5 million (EUR 237.7 million attributable to the Group). After recognizing significant devaluations on investment properties and impairments on developments over 2009 and 2008, the Group recorded valuation gains and impairment write offs over the first half of 2010 (EUR 23.3 million) and a gain of EUR 269.5 million on the derecognition of the Company's bonds as a result of the approval of the Safeguard plan. The loan to value improved to 69.1% as at June 2010 compared to 84.4% as at December 2009.
Despite intense negotiations with the lending banks, the Group still records a significant amount of loans with breaches of bank financing covenants (see note 11). As a result some bank loans might be recalled by the financing banks. This amount includes EUR 36.5 million of loans financing assets that are held for sale and EUR 159.3 million of loans with a contractual term of more than one year but technically considered in breach while not declared in default by the banks. The remaining part of EUR 85.7 million is planned to be either prolonged upon successful negotiations with the lending bank or repaid upon sale of the financed asset.
Beginning of 2009, Orco Property Group's Board of Directors decided to apply for the Company to benefit from a Court Protection from creditors, the Safeguard Procedure. A Court Hearing was held on 25 March 2009 with the Paris Commercial Court ("Tribunal de Commerce de Paris"). On the same day, the Court rendered a judgement opening the Safeguard Procedure for the Company, and Vinohrady S.à r.l., a French subsidiary, for a renewable six months period. During the Safeguard
Procedure, the Company is exempted to repay all the liabilities prior to the judgement pronouncement while interests on debts and bonds continue to be accrued based on contractual arrangements.
The initial period has been prolonged twice with the last period to be ended in June 2010 at the latest. The Safeguard plan was circularized to creditors on 31 March 2010. A majority of 57.42% of creditors were in favor of the proposed plan. The details of the safeguard plan were published in the management report accompanying the 2009 consolidated financial statements. On 19 May 2010, the Court approved the Company's Safeguard plan. This plan combines a strategic and operational restructuring plan and a debt rescheduling plan. The rescheduling plan aims at repaying 100% of the admitted claims, including nominal, accrued interests, and interests to accrue during the Safeguard plan, over ten years as per the schedule below, with effect from 30 April 2010 and a first repayment on 30 April 2011. This repayment schedule is consistent with the Group's business plan and reflects the necessity for the Group to invest in its development projects and assets.
| Year | 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|---|
| % of the total liability | 2% | 5% | 5% | 5% | 5% |
| Year | 6 | 7 | 8 | 9 | 10 |
|---|---|---|---|---|---|
| % of the total liability | 5% | 10% | 14% | 20% | 29% |
The Court appointed Maître Laurent le Guernevé as "Commissaire à l'exécution du plan" in charge of overseeing the performance of the Company in implementing the Safeguard plan. Maître Le Guernevé will more specifically be in charge of distributing among the Company's creditors the amounts that are due to them under the Safeguard plan.
The judgment approving the Safeguard plan ended the observation period opened in 25 March 2009 and allows the Company to carry out its activity as it did prior to the opening of the Safeguard Procedure.
On 10 June 2010, a third party filed an opposition with the Commercial Court of Paris regarding the 19 May 2010 judgment that approved the Company's Safeguard plan. This third party opposition was filed by Maître François Kopf, attorney for Mr. Luc Leroi, bondholder representative for the « OBSAR 2010 » (ISIN FR0010249599), « CONVERTIBLE 2013 » (ISIN FR0010333302), and « OBSAR 2014 » (ISIN XS0291838992 and XS029184062). Regarding these three bonds, the third party opposition contests the maximum bond liability to be reimbursed within the Safeguard plan.
As long as the Commercial Court of Paris has not rendered a decision on the third party opposition, the underlying judgment approving the Safeguard plan is fully effective. A first court hearing is expected in October 2010. The Company sees the risk of this opposition being accepted as remote.
The Safeguard Procedure has provided a legal time frame for the implementation of the restructuring plan of the Group that enabled the Company to accelerate its transition to a 'new Orco':
Many progresses have been made in the restructuring plan of the Group under the protection of the Safeguard procedure opened on the 25th of March 2009 and after the approval of the Safeguard plan:
the short or medium term (see note 11). While some of these assets or activities have already been sold, the restructuring of the assets and activities is not finalized yet.
While the Safeguard plan has been approved on the basis of a business plan supported by the Board of Directors and estimated as achievable by the Commercial Court, the Juge Commissaire and the Mandataire judiciaire, the Group's status as a going concern depends mainly and directly on its capacity to implement the Safeguard plan as approved by the Commercial Court in Paris.
Some subsidiaries and joint ventures held by the Group require funding to continue as a going concern. The business plan is built on the capacity of the Group to generate sufficient cash from its profitable activities in order to support the assets that are currently in development or restructuring.
The financial performance of the Group is also dependent upon the wider economic environment in which the Group operates. The uncertainty of the evolution of real estate market in Central Europe could damage the Group's activity and slow down the asset sales program. It should be noted that this environment has generally been stabilized over the last 9 months.
The Board of Directors is in the opinion that those risks are mitigated by the reasonability of the assumptions taken in the establishment of the business plan and the capital increases completed over the first half of 2010.
The Board of Directors has, as a result of the approval of the Safeguard plan and the restructuring implemented, concluded that there is a reasonable expectation that the Company can continue its operations in the foreseeable future and, accordingly, has formed a judgment that it is appropriate to prepare the condensed consolidated interim financial information on a going concern basis.
The accounting policies applied by the Group in this condensed consolidated interim financial information are consistent with those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2009, except as described below.
(a) New and amended standards adopted by the Group
There is no new standard or amendment adopted by the Group for the first half year 2010.
(b) Standards, amendments and interpretations to existing standards effective in 2010 but not relevant to the Group
(c) The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning 1 January 2010 and have not been early adopted:
recognise as an asset some voluntary prepayments for minimum funding contributions. This was not intended when IFRIC 14 was issued, and the amendments correct the problem. The amendments are effective for annual periods beginning 1 January 2011. Earlier application is permitted. The amendments should be applied retrospectively to the earliest comparative period presented.
Given the seasonal nature of retail sales in the hotel and extended stay residence activities and given high correlation between the sales in the development segment and the number of units ready to be sold, as well as the volatile impact of the valuation of financial instruments and certain categories of lands and buildings at their market value, the results for the first six months cannot be extrapolated to the remainder of the year.
The methodology and assumptions applied for the valuation of real estate assets and developments are consistent with the ones described in the annual consolidated financial statements as at and for the year ended December 31, 2009, except for the main assumptions used for discounted cash flow projections that have been adjusted to the June 2010 market conditions:
On the basis of EUR 1.7 billion of assets portfolio, 43% have been valued by an independent expert, DTZ Debenham Tie Leung ("DTZ"). Each non-valued asset has been reviewed and valued internally (see note 5, 6 and 7).
Furthermore, the impairment test carried on the stocks are based on the gross development value of each project adjusted of the remaining development costs.
The fair value of the financial instruments have been adjusted according to the following assumptions:
The Investment Committee is the responsible body making decisions for all acquisitions and disposals of projects. The Investment Committee assesses the performance of the operating segments based on a measure of adjusted earnings before interests, tax, depreciation and amortisation ("adjusted EBITDA" as defined below).
Corporate expenses are allocated on the basis of the revenue realised by each activity.
Adjusted EBITDA is the recurring operational cash result calculated by deducting from the operating result non-cash and non-recurring elements (Net gain or loss on fair value adjustments – Amortisation, impairments and provisions – Correction of costs of goods sold being the reversal of previous years valuation adjustments and impairments – Net gain or loss on the sale of abandoned developments included in inventories – Net gain or loss on disposal of assets – Attribution of stock options and warrants to executive management ) and the net results on sale of subsidiaries.
End of 2009, the Group structure has been fundamentally changed in order to streamline the management lines and reflect the two main activities to which the Investment Committee is allocating the Group investment capacity on the basis of the strategy defined by the Board of Directors. On one hand the Group is investing in land bank or assets for development and effectively developing them once the project presented is satisfactorily approved by the Investment Committee. Once the asset is developped it can be either sold to a third party or kept in the Group own portfolio for value appreciation. On the other hand, the Group is actively managing its own or third parties real estate assets for operational profitability and value appreciation. These two business lines are the segments by which the operations are analysed and this is why the presentation of the segment
reporting has been adjusted by grouping the previous renting, hospitality and management services segments under the common denomination of "Asset Management"(previously named Commercial Investment Properties).
These two segments or business lines can be defined as following :
This new segmentation is presented below.
| As at 30 June 2010 | Development | Asset Management | TOTAL |
|---|---|---|---|
| Revenue | 101,586 | 61,490 | 163,076 |
| Net gain or loss from fair value adjustments on investment property |
109 | 26,520 | 26,629 |
| Cost of goods sold | -86,919 | -980 | -87,899 |
| Amortisation, impairments and provisions | -4,003 | -4,308 | -8,311 |
| Other operating results | -15,267 | -40,458 | -55,725 |
| Operating result | -4,494 | 42,264 | 37,770 |
| Net gain from fair value adjustments on investment | |||
| property | -109 | -26,520 | -26,629 |
| Amortisation, impairments and provisions | 4,003 | 4,308 | 8,311 |
| Past valuation on goods sold | 1,622 | - 1,622 |
|
| Net loss on disposal of assets | 40 | 233 | 273 |
| Adjusted EBITDA | 1,062 | 20,285 | 21,347 |
| Net gain from fair value adjustments on investment property Amortisation, impairments and provisions Past valuation on goods sold Net loss on disposal of assets |
26,629 -8,311 -1,622 -273 |
||
| Operating result | 37,770 | ||
| Financial result | 200,066 |
Profit before income tax 237,836
| Segment assets | 750,388 | 1,141,535 | 1,891,923 |
|---|---|---|---|
| Investment Properties | 271,276 | 800,525 | 1,071,801 |
| Property, plant and equipment | 2,478 | 249,973 | 252,451 |
| Inventories | 392,691 | 5,764 | 398,455 |
| Other segment assets | 42,738 | 79,803 | 122,541 |
| Assets held for sale | 41,205 | 5,470 | 46,675 |
| Unallocated assets | 118,862 | ||
| Total assets | 2,010,785 | ||
| Segment liabilities | 134,431 | 95,757 | 230,188 |
| Liabilities linked to assets held for sale | 34,876 | 3,000 | 37,876 |
| Unallocated liabilities | 1,780,597 | ||
| Total liabilities | 2,010,785 | ||
| Cash flow elements | |||
| Capital expenditure | 5,346 | 4,062 | 9,408 |
| As at 30 June 2009 ( restated ) | Development | Asset Management | TOTAL |
|---|---|---|---|
| Revenue | 70,182 | 62,133 | 132,315 |
| Net gain or loss from fair value adjustments on investment property | -67,512 | -85,770 | -153,282 |
| Cost of goods sold | -72,263 | -64 | -72,327 |
| Amortisation, impairments and provisions | -69,743 | -36,305 | -106,048 |
| Other operating results | -17,089 | -43,917 | -61,006 |
| Operating result | -156,425 | -103,922 | -260,347 |
| Net gain/(loss) from fair value adjustments on investment property Amortisation, impairments and provisions Past valuation on goods sold Net gain/(loss) on abandoned developments |
67,512 69,743 47 11,592 |
85,770 36,305 - - |
153,282 106,048 47 11,592 |
| Net gain/(loss) on disposal of assets Adjusted EBITDA |
1,089 -6,441 |
-320 17,833 |
769 11,391 |
| Net gain/(loss) from fair value adjustments on investment property Amortisation, impairments and provisions Net gain/(loss) on abandoned developments Past valuation on goods sold Net gain/(loss) on disposal of assets Operating result |
-153,282 -106,048 -11,592 -47 -769 -260,347 |
||
| Financial result | -57,991 | ||
| Profit before income tax | -318,338 | ||
| Segment assets | 830,860 | 1,132,097 | 1,962,957 |
| Investment Properties Property, plant and equipment Inventories Other segment assets Assets held for sale Unallocated assets Total assets |
371,251 6,107 425,657 25,355 2,490 |
754,271 244,374 34,849 79,713 18,890 |
1,125,522 250,481 460,506 105,068 21,380 179,919 2,142,876 |
| Segment liabilities | 113,516 | 107,802 | 221,318 |
| Liabilities linked to assets held for sale Unallocated liabilities Total liabilities |
10,715 | - | 10,715 1,921,558 2,142,876 |
| Cash flow elements | |||
| Capital expenditure | 9,413 | 10,323 | 19,736 |
There were no material business combinations during the first 6 months of 2010 and in 2009.
| Investment property | Freehold buildings | Extended stay hotels |
Land bank | Buildings under construction |
Buildings under finance lease |
TOTAL |
|---|---|---|---|---|---|---|
| Balance at 31 December 2008 | 899,509 | 22,285 | 287,124 | - | 2,800 | 1,211,718 |
| Investments / acquisitions | 3,502 | 67 | 7,535 | 9,023 | - | 20,127 |
| Asset sales | -60,149 | - | -7,279 | - | - | -67,428 |
| Revaluation through income statement | -102,698 | -917 | -65,723 | -7,240 | -1,020 | -177,598 |
| Transfers from properties under development | 50,170 | - | - | 41,682 | - | 91,852 |
| Other Transfers | 3,107 | -5 | -7,033 | -4,744 | -1,500 | -10,175 |
| Translation differences | 2,263 | - | 156 | 1,389 | - | 3,808 |
| Balance at 31 December 2009 | 795,704 | 21,430 | 214,780 | 40,110 | 280 | 1,072,304 |
| Investments / acquisitions | 570 | 7 | 1,076 | 3,557 | - | 5,210 |
| Asset sales | -11,887 | - | -60 | - | - | -11,947 |
| Revaluation through income statement | 26,917 | - | - | - | -288 | 26,629 |
| Transfers | -21,410 | - | -1,507 | - | - | -22,917 |
| Translation differences | 3,320 | - | 1,553 | -2,359 | 8 | 2,522 12 |
| Balance at 30 June 2010 | 793,214 | 21,437 | 215,842 | 41,308 | - | 1,071,801 |
Even though the Group is controlling the majority of the voting right, the operation and the strategy, the disposal of real estate assets located in entities where the Group does not hold 100% of the shares, needs the agreement of the partner.
As at 30 June 2010, 62% of the investment properties portfolio has been valued by DTZ.
79 investment properties (EUR 1,018.8 million) financed by bank loans in local special purpose entities are fully pledged for EUR 711.1 million.
A) Investments / Acquisitions
During the period, the Group invested EUR 5.2 million in investment properties representing mainly EUR 3.6 million in Hungary of capitalization on the development of the Vaci 1 project (Budapest Stock Exchange), retail development in Budapest. The investments have been financed by bank loans of EUR 2.3 million (Budapest Stock Exchange for EUR 1.5 million, Bubny for EUR 0.8 million).
B) Asset sales
During the period, the net book value ("NBV") of the assets sold amounts to EUR 11.9 million, with a total net loss compared to the December 2009 DTZ valuation amounting to EUR -0.1 million and composed mainly of the following disposals:
The asset sales have resulted in a repayment of bank loans amounting to EUR 5.9 million.
The movement in fair value relates mainly to Freehold buildings and to Building under finance lease:
The transfers are mainly made of the following movements:
The Group is expecting to sell 3 investment properties in Germany and 1 Land bank in the Czech Republic, which have been transferred in assets held for sale for EUR 36.7 million: Max Planck Str. (EUR 5.5 million), Cumberland (EUR 28.0 million), Brunnestr. 27 (EUR 1.7 million) and Na Frantisku (EUR 1.5 million).
The Group stopped the sale process of 2 projects in Hungary (Small Budapest Bank and Main Budapest Bank), which have been transferred from assets held for sale for EUR 13.8 million.
82 investment properties (EUR 897.2 million) financed by bank loans in local special purpose entities are fully pledged for EUR 711.7 million.
During the year, the Group has invested EUR 20.1 million in investment property representing mainly capitalization on buildings under construction and investments for zoning and building permits.
Out of the EUR 20.1 million of investments, EUR 6.8 million have been financed by bank loan draw downs.
During 2009, the net book value ("NBV") of the assets sold represents EUR 67.4 million, for a total sale price of EUR 65.7 million out of which EUR 30.3 million have been used to repay the bank loan financing, with a total net loss compared to the December 2008 DTZ valuation amounting to EUR -1.7 million and composed mainly of the following disposals:
The decrease in fair value of the assets mainly relates to Freehold buildings and Land banks:
The transfers are mainly made of the following movements:
Na Porici (EUR 45.4 million) and Budapest Stock Exchange (EUR 41.7 million) have been transferred from Properties under development to Investment Property as at 1st January 2009, due to the application of IAS40 Revised.
Elb Loft (EUR 1.8 million) is transferred from Freeholdbuildings to Landbank.
Helbeger (EUR 11 million) is transferred to Assets held for sale.
| 6 months to 30 June 2010 | 12 months to 31 December 2009 | ||||
|---|---|---|---|---|---|
| 2010 | Fair Value | 2009 | Fair Value | ||
| Revaluation | 30.06.10 | Revaluation | 31.12.09 |
| Freehold Buildings | 26,917 | 793,214 | -102,698 | 795,704 |
|---|---|---|---|---|
| Germany | 23,829 | 524,401 | -39,146 | 546,347 |
| GSG | 23,081 | 463,226 | -26,658 | 441,832 |
| Franklinstrstraße 15 | 900 | 38,150 | -3,128 | 37,250 |
| Cumberland Haus | -127 | - | -2,959 | 28,000 |
| Brunnenstraße 156 & Invalidenstraße 112 | 60 | 8,340 | 1,210 | 8,280 |
| Ku damm 103 | - | - | -518 | 8,170 |
| Kurfüstendamm 102 | 20 | 6,210 | -1,580 | 6,190 |
| Max Planck Strasse | -360 | - | -790 | 5,830 |
| Hüttendorf | - | 5,100 | -2,259 | 5,100 |
| Hakeburg | - | 2,465 | 159 | 2,375 |
| Lutticher Str. 49 | - | - | -240 | 970 |
| Hochwald | - | 910 | -52 | 910 |
| Transferred to assets held for sale | 255 | - | -2,331 | 1,440 |
| Czech Republic | 3,081 | 174,564 | -27,234 | 166,880 |
| Radio Free Europe | 5,419 | 57,000 | -6,831 | 50,000 |
| Na Porici | -1,541 | 47,550 | -2,632 | 47,600 |
| Vltavsk a | - | 26,800 | -7,457 | 26,800 |
| Hlubocky | - | 19,111 | -2,048 | 18,500 |
| Hradcanska | - | 12,833 | -2,380 | 12,450 |
| Stribro | - | 4,410 | -3,582 | 4,410 |
| Jeremiasova | 20 | 2,610 | -460 | 2,590 |
| Americka Park Residential | -672 | 1,418 | -3,336 | 2,380 |
| Belgick a 36 - Na Kozacce | -5 | 756 | -118 | 950 |
| Americka 3 | -17 | 684 | 1,679 | 760 |
| Nad Petruskou 8 | -57 | 396 | -160 | 440 |
| Residence Masaryk, Jana Masaryka 40 | - | 441 | 249 | 441 |
| Letenska | - | 31 | -78 | 440 |
| Americka 13, Prague 2, Czech Rrepublic | -39 | 270 | -60 | 300 |
| Zahrebsk a 35, Prague 2, Czech republic | -27 | 254 | -20 | 280 |
| Slovakia | - | 15,860 | -8,082 | 15,860 |
| Dunaj | - | 15,860 | -2,805 | 15,860 |
| Transferred to assets held for sale | - | - | -5,277 | - |
| Hungary | -660 | 40,961 | -24,511 | 28,395 |
| Paris Department Store | - | 14,445 | -6,972 | 15,000 |
| Szervita Square | -660 | 9,400 | -4,248 | 10,060 |
| Starlight Suite Hotel | - | 3,335 | -1,030 | 3,335 |
| Headquarters of Budapest Bank | - | 13,135 | -10,568 | - |
| Small Budapest Bank | - | 646 | -1,693 | - |
| Poland | 100 | 12,270 | -1,618 | 12,170 |
| Marki | - | 6,670 | -951 | 6,670 |
| Diana Office | 100 | 5,600 | -667 | 5,500 |
| Luxembourg | 567 | 25,158 | -2,122 | 24,591 |
| Orco House | 567 | 25,158 | -2,122 | 24,591 |
| Other | - | - | 15 | - |
| 6 months to 30 June 2010 | 12 months to 31 December 2009 | ||||
|---|---|---|---|---|---|
| 2010 | Fair Value | 2009 | Fair Value | ||
| Revaluation | 30.06.10 | Revaluation | 31.12.09 | ||
| Land bank | - | 215,842 | -65,723 | 214,780 | |
| Czech Republic | - | 97,238 | -38,273 | 97,080 | |
| Bubny | - | 75,862 | -14,871 | 75,000 | |
| Nupaky 1 | - | 4,728 | -497 | 4,590 | |
| Praga | - | 3,751 | -12,483 | 3,640 | |
| Doupovska | - | 3,576 | -3,854 | 3,340 | |
| Mezihori | - | 2,566 | -751 | 2,550 | |
| Bellvue Grand | - | 2,266 | -816 | 2,200 | |
| U Hranic Prague 10, CZ | - | 1,526 | -1,627 | 1,460 | |
| Ostrava - Na Frantisku | - | - | -224 | 1,460 | |
| OBI Decin | - | 1,492 | -372 | 1,450 | |
| Hradec Kralové Plachta Jih | - | 854 | -1,529 | 820 | |
| Rubeska | - | 371 | -1,188 | 360 | |
| Kolin, CZ | - | 246 | -61 | 210 | |
| Germany | - | 86,910 | -15,761 | 86,910 | |
| Leipziger Platz | - | 84,300 | -12,832 | 84,300 | |
| Orco Elb Loft | - | 1,750 | -542 | 1,750 | |
| GSG | - | 860 | -50 | 860 | |
| Helberger | - | - | -1,362 | - | |
| Essen Gruga Carree | - | - | -975 | - | |
| Russia | - | 9,090 | -1,145 | 8,000 | |
| Kaluga 145 Ha | - | 9,090 | -1,145 | 8,000 | |
| Poland | - | 22,098 | -7,929 | 22,290 | |
| Jozefoslaw | - | 6,600 | -1,913 | 6,660 | |
| Szoza Polska | - | 5,903 | -2,059 | 5,950 | |
| Kraków Ruczaj | - | 4,182 | -2,067 | 4,220 | |
| Przy Parku | - | 3,421 | -1,111 | 3,450 | |
| Bialystok | - | 1,992 | -779 | 2,010 | |
| Croatia | - | 506 | -2,745 | 500 | |
| Istria plot (595 k.o. Pican) Obonjan Rivijera |
- - |
506 - |
-462 -2,283 |
500 - |
|
| Other | - | - | 130 | - | |
| Buildings under finance lease | -288 | - | -1,020 | 280 | |
| Extended stay hotels | - | 21,437 | -917 | 21,430 | |
| Buildings under construction | - | 41,308 | -7,240 | 40,110 | |
| Budapest Stock Exchange | - | 41,308 | -7,240 | 40,110 | |
| TOTAL | 26,629 | 1,071,801 | -177,598 | 1,072,304 |
| Hotels and own-occupied buildings |
Own-occupied buildings |
Prepaid operating leases |
Hotels | TOTAL |
|---|---|---|---|---|
| GROSS AMOUNT | ||||
| Balance as at 31 December 2008 | 102,659 | 2,164 | 191,870 | 296,693 |
| Investments / acquisitions | 1,571 | - | 80 | 1,651 |
| Disposal | -227 | - | - | -227 |
| Transfer | 10,510 | - | -11,335 | -825 |
| Translation differences | -1,314 | - | 525 | -789 |
| Balance as at 31 December 2009 | 113,199 | 2,164 | 181,140 | 296,503 |
| Investments / acquisitions | 3,310 | - | 5 | 3,315 |
| Transfer | - - |
6,356 | 6,356 | |
| Translation differences | 7,491 | - | 2,850 | 10,341 |
| Balance as at 30 June 2010 | 124,000 | 2,164 | 190,351 | 316,515 |
| AMORTISATION AND IMPAIRMENT | ||||
| Balance as at 31 December 2008 | 39,276 | 137 | 12,007 | 51,420 |
| Allowance | 146 | - | 938 | 1,084 |
| Impairments | 10,727 | 1,030 | 19,013 | 30,770 |
| Transfer | -119 | - | -2,546 | -2,665 |
| Translation differences | 795 | - | -294 | 501 |
| Balance as at 31 December 2009 | 50,825 | 1,167 | 29,118 | 81,110 |
| Allowance | 158 | 8 | 480 | 646 |
| Impairments | -425 | - | - | -425 |
| Transfer | - - |
635 | 635 | |
| Translation differences | 128 | - | 140 | 268 |
| Balance as at 30 June 2010 | 50,686 | 1,175 | 30,373 | 82,234 |
| NET AMOUNT as at 30 June 2010 | 73,314 | 989 | 159,978 | 234,281 |
| Net amount as at 31 December 2009 | 62,374 | 997 | 152,022 | 215,393 |
As at 30 June 2010, 30% of the hotels and own-occupied buildings portfolio has been valued by DTZ.
24 projects (EUR 213.2 million) financed by bank loans in local special purpose entities are fully pledged for EUR 100.7 million.
During the first half of 2010, the hotel Sirena on the Island of Hvar has been transferred back from asset held for sale to the hotel portfolio, as the Group does not intend to sell this property on a short term basis (EUR 5.7 million).
In the first six months of 2010, Molcom has invested EUR 3.3 million for the new warehouse facility.
The impairment test based on the DTZ valuation as at June 30, 2010 led to the derecognition of part of the impairment from 2009 on the Molcom Logistics project for EUR 0.4 million.
23 projects (EUR 195.2 million) financed by bank loans in local special purpose entities are fully pledged for EUR 99.3 million.
A new warehouse completed in Russia at the end of 2009 has been transferred from Properties under development to Ownoccupied buildings (EUR 19.3 million).
The building located in Ku-Damm 103 has been transferred from own-occupied buildings to Investment Property (EUR 8.7 million) as the Orco Germany headquarters moved to another building in Berlin.
The Sirena Hotel (EUR 5.7 million) has been transferred to Assets held for sale.
The impairment tests based on the DTZ valuation at end of 2009 led to the recognition of the following impairments:
| Inventories | 30 June 2010 |
31 December 2009 |
|---|---|---|
| Opening Balance | 482,605 | 529,827 |
| Abandoned development projects | - -39,956 |
|
| Net impairments | -3,744 | -39,659 |
| Transfers | 74 | -29,626 |
| Translation differences | 4,109 | 2,582 |
| Development costs | 3,310 | 135,207 |
| Cost of goods sold | -87,899 | -75,770 |
| Closing Balance | 398,455 | 482,605 |
Inventories properties are developped with the intention to resell.
As at 30 June 2010, the development projects have been reviewed and tested by the management for potential impairment.
Development costs amounting to EUR 3.3 million have been capitalized on the following projects:
Cost of goods sold amounting to EUR 87.9 million relate mainly to the following project sales:
Impairments have been recognised mainly on the following projects:
9 projects in development (EUR 313.2 million) are pledged for a total amount of EUR 185.9 million.
The Group decided to not finalize and to sell two projects:
Development costs amounting to EUR 135.2 million, out of which EUR 87.5 million have been financed by bank loan draw downs, have been capitalized on the following projects: Sky Office (EUR 47.4 million), H2 Office (EUR 21.0 million), Vysocany gate (EUR 6.8 million), Bernauer Straße (EUR 5.9 million), Zlota 44 (5.7 million), Neuenkirchener Straße (EUR 5.7 million), Targowek / Malborska (EUR 4.6 million), Tschaikowskistraße 33 (EUR 4.2 million), Paris Department store (EUR 2.9 million), Warsaw – Drawska (EUR 4.0 million) and Danzigerstrasse (EUR 2.1 million).
The transfers arise from the following properties: Hradanska (EUR -14.8 million), Paris Department Store (EUR -21.5 million in Investment Property and EUR 2.2 million in fixtures and fittings) -which are now rented and are reclassified as Investment Property.
The project Mostecka in Czech Republic (EUR +10.8 million) was transferred from Investment Property to Inventories, as it is intended to be developed and sold.
Impairments have been recognized mainly on the following properties:
12 projects in development (EUR 238.5 million) are pledged for a total amount of EUR 147.5 million.
| Assets held for sale | June 2010 |
December 2009 |
Liabilities linked to assets held for sale |
June 2010 |
December 2009 |
|---|---|---|---|---|---|
| Opening Balance | 48 930 | - Opening Balance | 51 451 | - | |
| Asset Sales | -19 360 | - Asset sales | -15 473 | - | |
| Interests | 195 | - | |||
| Transfer | 17 171 | 48 411 | Transfer | 1 846 | 50 677 |
| Translation differences | -66 | 519 | Translation differences | -143 | 774 |
| Closing Balance | 46 675 | 48 930 | Closing Balance | 37 876 | 51 451 |
In 20104 assets held for sale (EUR 45.2 million) financed by bank loans in local special purpose entities are fully pledged for EUR 37.4 million.
As at 30 June, 2010, the Group validated the sale of 4 assets from its investment property portfolio. These assets have been transferred in assets held for sale. 3 of them are located in Germany: Cumberland in Berlin (EUR 28.0 million for a debt amounting to EUR 20.0 million), Brunnenstr. 27 in Berlin (EUR 1.7 million for a debt amounting to EUR 1.1 million) and Max Planck Str. in Cologne (EUR 5.5 million for a debt amounting to EUR 3.0 million). The last project is located in Ostrava in Czech Republic: Na Frantisku (EUR 1.5 million, debt free asset).
As at 30 June 2010, 3 assets previously recognized as held for sale have been transferred in investment property or in the Hotel portfolio for EUR 19.5 million:
2 assets located in Germany and previously recognized as held for sale have been sold during the first six months of 2010:
The Group is seeking for selling the Stein project in Slovakia (NBV of EUR 10.0 million) with the lending bank in order to recover part of the bank loan granted to the company (EUR 13.8 million). The company is currently in bankruptcy process.
The bank debts linked to the assets held for sale amount to EUR 37.9 million as at June 30, 2010.
As at December 31, 2009, the Group decided to sell 5 assets from its investment property portfolio (nil in 2008), as the due date of the financing of these non strategic assets is in short term.
These assets have been transferred in assets held for sale.
Two of them are in Germany: Helberger in Frankfurt (EUR 11.0 million, Development segment) and Wasserstr. in Düsseldorf (EUR 8.4 million, Renting segment).
Two projects are located in Hungary, Small Budapest Bank (EUR 0.7 million, Renting Segment) and Main Budapest Bank (EUR 13.2 million, Renting segment).
The last project is located in Slovakia: Stein (EUR 10.0 million, Development segment). The bank debt on these assets amounts to EUR 51.5 million.
Finally, the hotel Sirena on the Hvar Island, previously classified as hotel is planned to be sold and has been recognized as asset held for sale (EUR 5.7 million, Hospitality segment).
As at 30 June 2010, the cash and cash equivalents consist of short term deposits for EUR 3.6 million (EUR 2.2 million as at 31 December 2009), cash in bank for EUR 60.0 million (EUR 54.6 million as at 31 December 2009) and cash in hand for EUR 0.2 million (EUR 0.2 million as at 31 December 2009).
Cash in bank include restricted cash amounting to EUR 28.2 million (EUR 35.2 million as at 31 December 2009), representing:
In 2010, the Group increased its stake in the company Office II invest S.A. to 100%. It results to an increase of the noncontrolling interests of EUR 0.3 million.
In January 2010, the joint venture company Kosic S.à.r.l. repaid part of the share premium to both joint venture holders, the Group and GECGE Kosik Investors S.à.r.l, for EUR 1.9 million. According to the agreement with the partners, the Company received EUR 0.5 million, with a net impact on the consolidated reserves of the Group of EUR - 0.4 million.
In 2009, the Group sold the company NWDC Company s.r.o. (shareholding of the Group of 51% as at December 2008). It results to a decrease of the non-controlling interests of EUR -0.5 million.
The Group increased its participation of 1.31% in Orco Germany by integration of some Orco Germany shares previously disclosed as current financial assets. This operation led to an impact on the non controlling interests of EUR -1.8 million.
At 30 June 2010, the movements in non-current bonds and loans are the following:
| Non-current bonds | Convertible bonds | Non Convertible bonds |
TOTAL |
|---|---|---|---|
| Balance at 31 December 2009 | 150,375 | 259,022 | 409,397 |
| Interest from 31 Dec to 19 May | 6,057 | 4,783 | 10,840 |
| Balance at 19 May 2010 | 156,432 | 263,805 | 420,237 |
| Derecognition of bonds | -156,432 | -171,978 | -328,410 |
| Entry of new bonds | 51,141 | 82,744 | 133,885 |
| Own bonds | -424 | -6,055 | -6,479 |
| Interest from 19 May to 30 June | 1,299 | 2,432 | 3,731 |
| Balance at 30 June 2010 | 52,016 | 170,948 | 222,964 |
On 19 May 2010 the company's safeguard plan was approved (see point 2.1.1.2). This results in a rescheduling of the repayment of the bonds nominal, accrued interests, and interest to accrue during the Safeguard plan, over ten years with effect from 30 April 2010 as described by the amortisation table included in note 2.1.1.2. This rescheduling results in a major change as previous bonds have been derecognised and restructured bonds have been recorded at fair value at the date of the approval of the Safeguard plan. The fair value has been estimated by Management with the assistance of an independent expert (Grant Thornton). On the basis of comparables, the effective interest rate of the "Safeguard bonds" was set at 23.1% resulting in a total value excluding deductions from own bonds of EUR 142.9 million at 19 May 2010 of which EUR 133.9 million is classified as Non Current. The derecognition of the debts results in a gain of EUR 269.6 million. See note 12 for further discussion.
As the consequence of the approval of the Safeguard plan, the terms of the restructured bonds are identical to the ones described in the 31 December 2009 consolidated financial statement except for the following points:
The changes in the derivatives terms and market conditions resulted in income statement recognition of a gain amounting to EUR 6.6 million.
No new bonds have been issued in 2009.
The transfer of bonds to short term (EUR -47.9 million) relates to the OBSAR 1 bond which is due for redemption in November 2010.
In 2009 Orco Property Group sold 76,279 convertibles bonds on the open market for a total consideration of EUR 1.2 million.
Based on requests for early redemption received from individual holders of the Czech bond (the "Bond CZK") that was issued in February 2006, the Group reimbursed 110 bonds (out of 140 outstanding) in 2008 amounting to CZK 1,100,000,000 (EUR 40.8
million). During the year 2009, bondholders requested the reimbursement of 27 bonds CZK, out of the 30 bonds still outstanding, for a value of CZK 200,000,000 (EUR 7.7 million). The Bond CZK is classified in short term for CZK 300,000,000 (EUR -11.3 million) as its repayment can be requested on demand due to a breach of loan covenant (the CZK bonds were downgraded by Moody's in 2008).
| Non-current financial debts | Bank loans | Other non-current borrowings |
Finance lease liabilities |
TOTAL |
|---|---|---|---|---|
| Balance at 31 December 2008 | 793,418 | 31,939 | 1,126 | 826,483 |
| Issue of new loans and drawdowns | 41,912 | 1,456 | 20 | 43,388 |
| Amortized cost review | - | -17,972 | - | -17,972 |
| Repayments of loans | -44,803 | -378 | -44 | -45,225 |
| Transfers | -317,480 | -1,095 | - | -318,575 |
| Translation differences | -3,645 | 160 | 20 | -3,465 |
| Balance at 31 December 2009 | 469,402 | 14,110 | 1,122 | 484,634 |
| Issue of new loans and drawdowns | 8,315 | 890 | - | 9,205 |
| Repayments of loans | -34,214 | -1,723 | -739 | -36,676 |
| Transfers | 26,124 | 39 | - | 26,163 |
| Translation differences | 7,208 | 117 | 33 | 7,358 |
| Balance at 30 June 2010 | 476,835 | 13,433 | 416 | 490,684 |
In 2010, issue of new bank loans and drawdowns (EUR 8.3 million) is mainly due to new financing for the Brno project in the Czech Republic and Molcom in Russia (respectively EUR 2.7 million and EUR 4.8 million).
Transfers of bank loans (EUR 26.1 million) are mainly due to the resolution of breaches on Gebauer Höfe in Germany (EUR 28.9 million) and reclassification of Kosic loan (EUR -1.6 million), which falls due within 12 months.
Repayments of loans mainly relate to the sale of Healthcare projects in Germany (EUR -22.4 million); the repayment of Kosic (EUR -2.9 million) in Czech Republic, Ku'damm (EUR -4.7 million) and GSG (EUR -1.6 million) in Germany. In addition, the refinancing of Brno project in Czech Republic led to the repayment of EUR -2.1 million.
Issue of new bank loans and drawdowns (EUR 41.9 million) are mainly related to the following projects:
Repayments of bank loans (EUR -44.8 million) are mainly related to the following operations:
Asset sales in Germany: Immanuelkirchstrasse (EUR -7.2 million), Reinhardtstrasse (EUR -6.8 million), Prenzlauer (EUR -1.4 million), Kollwitzstrasse (EUR -1.4 million), Wilhelm Kuhr Str. (EUR -1.3 million), Görschstrasse (EUR -1.3 million), John Schehr Str. (EUR -1.4 million), Brunnenstrasse (EUR -1.5 million) and Pappelallee (EUR -2.6 million).
Sale of Nove Dvory (EUR -5.1 million), Brno Shopping (EUR -2.6 million) in the Czech Republic.
Transfers of bank loans (EUR -317.5 million) are mainly due:
to the reclassification of the bank loans, that will fall due within twelve months of year end, of Sky Office in Dusseldorf (EUR - 65.2 million); of Na Porici and Hradcanska in the Czech Republic (EUR -35.9 million and EUR -13.2 million respectively); of Paris Department store (EUR -16.5 million) in Hungary; and of Targowek/Malborska (EUR -15.8 million) and Viterra (EUR -2.7 million) in Poland.
to new breaches on financial covenants for the bank loans financing the following projects: Suncani Hvar (EUR -41.1 million) in Croatia; Zlota (EUR -40.7 million), Marki (EUR -3.7 million), and Przy Parku (EUR -3.6 million) in Poland; Franklinstrasse (EUR - 29.4 million) in Germany; Main Budapest Bank (EUR -19.6 million), and Budapest Stock Exchange (EUR -24.2 million) in Hungary. These loans would be repayable on demand if they are declared in default by the bank hence the non-current part has been reclassified as current.
As at 31 December 2009, the total carrying value of loans in breach due to financial covenants amounts to EUR 364.7 million. As at 30 March 2010, none of the loans with breach of covenants as at 31 December 2009 have been restructured. The objective of the management is to restructure and renegotiate these loans in priority to comply as soon as possible with the bank loan covenants.
Other non-current loans are mainly equity loans from joint ventures and loans from partner companies. The new loans (EUR 1.5 million) mainly relate to MS Invest and Hospitality (EUR +0.7 million and EUR +1.0 million respectively). The transfers relate mainly to a reclassification of advance payments (EUR -0.7 million) in Gebauer Höfe.
As a result of the amortized cost review, the net present value of the profit participating loan granted to the Hospitality joint venture by the partners has been decreased by an amount of EUR 18.0 million.
As at 30 June 2010, the movements in current loans are the following:
| Current financial debts | Bank loans | Other current borrowings |
TOTAL |
|---|---|---|---|
| Balance at 31 December 2009 | 644,925 | 2,302 | 647,227 |
| Issue of new loans and drawdowns | 4,169 | 986 | 5,155 |
| Repayments of loans | -57,686 | -349 | -58,035 |
| Transfers | -26,124 | -39 | -26,163 |
| Translation differences | 1,604 | 7 1,611 |
|
| Balance at 30 June 2010 | 566,888 | 2,907 | 569,795 |
The table includes loans linked to assets held for sale (EUR 37.9 million).
The issue of new loans mainly relates to further drawdowns in Sky Office and Vaci 1 (EUR 2.5 million and EUR 1.5 million respectively).
The repayment of bank loans (EUR -57.7 million) is mainly related to asset sales (EUR -54.4 million): H2 Office (EUR -24.2 million), Hellberger (EUR -8.5 million) and Wasserstr. (EUR -7.0 million) in Germany; Targowek/Marborska (EUR -8.6 million) and Drawska (EUR -3.5 million) in Poland; Benice (EUR -2.2 million) and TQE (EUR -0.4 million). In addition there were repayments in Koliba in Slovakia (EUR -0.6 million); Main Budapest Bank, Orco Budapest, and other projects in Hungary (EUR - 0.4 million); Gebauer Höfe and other projects in Germany (EUR -0.5 million); and refinancing of Molcom in Russia and Brno shopping centre (EUR -1.1 million and -0.7 million respectively).
Transfers of bank loans (EUR -26.1 million) are mainly due to the resolution of breaches on Gebauer Höfe in Germany (EUR -28.9 million) and reclassification of Kosic loan which falls due within 12 months (EUR 1.6 million).
As at 30 June 2010, the movements in current bonds are the following:
| Current bonds | Convertible bonds | Non Convertible bonds |
TOTAL |
|---|---|---|---|
| Balance at 31 December 2009 | - | 59,219 | 59,219 |
| Interest from 31 Dec - 19 May | - | 1,306 | 1,306 |
| Balance at 19 May 2010 | - | 60,525 | 60,525 |
| Derecognition of bonds | - | -60,525 | -60,525 |
| Entry of new bonds | 3,000 | 5,978 | 8,978 |
| Own bonds | -25 | -456 | -481 |
| Balance at 30 June 2010 | 2,975 | 5,522 | 8,497 |
The table shows the current portion of the Safeguard bonds. As at 19 May 2010 the current portion of the total bonds has been valued at EUR 8.5 million.
The following tables describe the maturity of the Group's borrowings. As at 30 June 2010, the total bonds and financial debts amount to EUR 1,291.9 million (EUR 1,600.5 million at 31 December 2009).
| At 30 June 2010 | Less than one year | 1 to 2 years | 2 to 5 years | More than 5 years | Total |
|---|---|---|---|---|---|
| Non-current | |||||
| Bonds | - | 21,983 | 176,882 | 24,099 | 222,964 |
| Convertible bonds | - | 7,741 | 38,109 | 6,166 | 52,016 |
| Non Convertible | - | 14,242 | 138,773 | 17,933 | 170,948 |
| Financial debts | - | 315,637 | 99,831 | 75,216 | 490,684 |
| Bank loans | - | 315,637 | 99,831 | 61,368 | 476,836 |
| Bank loans fixed rate | - | 2,684 | 18,134 | 12,865 | 33,683 |
| Bank loans floating rate | - | 312,953 | 81,697 | 48,503 | 443,153 |
| Other non-current borrowings | - | - | - | 13,433 | 13,433 |
| Finance lease liabilities | - | - | - | 415 | 415 |
| Total | - | 337,620 | 276,713 | 99,315 | 713,648 |
| Current | |||||
| Bonds | 8,497 | - | - - |
8,497 | |
| Convertible bonds | 2,975 | - | - | - 2,975 |
|
| Non Convertible | 5,522 | - | - | - 5,522 |
|
| Financial debts | 531,919 | - | - - |
531,919 | |
| Bank loans | 529,013 | - | - - |
529,013 | |
| Bank loans fixed rate | 102,844 | - | - | - 102,844 |
|
| Bank loans floating rate | 426,169 | - | - | - 426,169 - |
|
| Other borrowings | 2,906 | - | - | - 2,906 |
|
| Liabilities linked to assets held for sale | 37,876 | - | - - |
37,876 | |
| Bank loans floating rate | 37,876 | - | - - |
37,876 | |
| Total | 578,292 | - | - - |
578,292 | |
| TOTAL | 578,292 | 337,620 | 276,713 | 99,315 | 1,291,940 |
| At 31 December 2009 | Less than one year | 1 to 2 years | 2 to 5 years | More than 5 years | Total |
|---|---|---|---|---|---|
| Non-current | |||||
| Bonds | - | 258,720 - |
150,677 | 409,397 | |
| Convertible bonds | - | - 150,375 |
- | 150,375 | |
| Non Convertible | - | - 108,345 |
150,677 | 259,022 | |
| Financial debts | - | 18,492 | 392,094 | 74,048 | 484,634 |
| Bank loans | - | 18,492 | 392,094 | 58,816 | 469,402 |
| Fixed rate | - 2,599 |
17,932 | 9,768 | 30,299 | |
| Floating rate | - 15,893 |
374,162 | 49,048 | 439,103 | |
| Other non-current borrowings | - | - - |
14,110 | 14,110 | |
| Finance lease liabilities | - | - - |
1,122 | 1,122 | |
| Total | - | 18,492 | 650,814 | 224,725 | 894,031 |
| Current | |||||
| Bonds | 59,219 | - | - | - 59,219 |
|
| Convertible bonds | - | - | - | - - |
|
| Non Convertible | 59,219 | - | - | - 59,219 |
|
| Financial debts | 595,776 | - | - | - 595,776 |
|
| Bank loans | 593,475 | - | - | - 593,475 |
|
| Bank loans fixed rate | 99,798 | - | - | - 99,798 |
|
| Bank loans floating rate | 493,677 | - | - | - 493,677 |
|
| Other borrowings | 2,301 | - | - | - 2,301 |
|
| Liabilities linked to assets held for sale | 51,451 | - | - | - 51,451 |
|
| Bank loans floating rate | 51,451 | - | - | - 51,451 |
|
| Total | 706,446 | - | - | - 706,446 |
|
| TOTAL | 706,446 | 18,492 | 650,814 | 224,725 | 1,600,477 |
The other non-current borrowings mainly relate to 50% of the equity loan granted to Hospitality Invest S.à r.l. by AIG, the jointventurer.
The decrease in current bank loans compared to 31 December 2009 is mainly due to the reclassification of non-current loans with breaches on financial covenants of EUR 28.9 million (see note 11.2 Non-current Financial debts). This is partly offset by a reduction of EUR -1.6 million due to the reclassification of Kosic bank loan which falls due within one year.
The Group has entered into interest rate derivatives representing 88.1% of the non-current floating rate borrowings (72.7% in 2009) and 37.0% of the current floating rate borrowings (35.7% in 2009), in order to limit the risk of the effects of fluctuations of market interest rates on its financial position and future cash flows. Most floating interest debt instruments have a fixing period of maximum 3 months.
The increase in current floating rate bank loans is mainly due to the transfer of breached loans in respect of Suncani Hvar, Franklinkstrasse, and main Budapest Bank for respectively EUR 41.1 million, EUR 29.4 million and EUR 19.6 million. In addition there was a transfer of Sky Office (EUR -65.2 million), Na Porici and Hradcanska in the Czech Republic (EUR -35.9 million and EUR -13.2 million respectively); and Viterra (-2.7 million) loans which are due in 2010.
The fixed rate bond in current liabilities (EUR 47.9 million) was transferred from non-current bonds in 2009 as this is due to be repaid in 2010 (nil in 2008).
The other non-current borrowings relate mainly to 50% of the equity loan granted to Hospitality Invest S.à r.l. by AIG, the jointventurer.
The Group has entered into interest rate derivatives representing 72.7% of the non-current floating rate borrowings (in 2008: 72.8%) and 35.7% of the current floating rate borrowings (in 2008: 51.3% ) in order to limit the risk of the effects of fluctuations of market interest rates on its financial position and future cash flows. Most floating interest debt instruments have a fixing period of maximum 3 months.
Bank loans include amounts secured by a mortgage on properties with a value of EUR 1.108 billion (1.087 billion as at 31 December 2008).
Held for sale liabilities in Current represent the loans in respect of Helberger, Stein, Budapest Bank, and Wasserstrasse which are classified as held for sale and accrued interests amounting to EUR 0.3 million.
| At 30 June 2010 | Principal | Accrued Interest |
Total |
|---|---|---|---|
| Long term loans reclassified in ST | |||
| due to Financial covenant breach | 12,660 | - | 12,660 |
| due to non repayment | 71,085 | - | 71,085 |
| due to Financial and administrative breach and/or non repayment | 75,572 | - | 75,572 |
| Total LT loans reclassified in ST | 159,317 | - | 159,317 |
| Short term loans in breach | |||
| due to Financial covenant breach | 272 | 18 | 290 |
| due to non repayment | 50,783 | 5,835 | 56,618 |
| due to Financial and administrative breach and/or non repayment | 27,995 | 822 | 28,817 |
| Total ST loans in breach | 79,050 | 6,675 | 85,725 * |
| Total loans linked to assets held for sale | 36,278 | 195 | 36,473 |
| Total Loans in Breached | 274,645 | 6,870 | 281,515 |
| 30 June 2010 |
31 December 2009 |
|
|---|---|---|
| Expiring within one year | 92,423 | 98,064 |
| Expiring after one year | 51,977 | 34,771 |
| Total | 144,400 | 132,835 |
| 30 June 2010 |
30 June 2009 |
|
|---|---|---|
| Change in carrying value of liabilities at amortised cost | 269,549 | - |
| Change in fair value and realised result on derivative instruments | -1,238 | -2,666 |
| Change in fair value and realised result on other financial assets | 257 | -14,738 |
| Other net finance charges | -13,163 | -3,302 |
| Gain (loss) on other financial results | 255,405 | -20,706 |
Change in the carrying value of liabilities relates to gains on the revaluation of bonds following the approval of the Safeguard plan. This arises from the derecognition of the value of bonds on the date of approval of the Safeguard plan (19 May 2010) of EUR 388.9 million and EUR 17.1 million accrued interest and recognition of the new valuation of EUR 135.9 million and own bonds of EUR 7.0 million. For further discussion see note 2.1 and note 11.
Change in the fair value of derivative instruments essentially relates to movements in fair value of derivative instruments linked to bonds issued by the Group and in fair value of other derivatives (IRS, options and forwards).
Other finance charges consist mainly of impairment of loan receivables registered in other current assets to third party (EUR - 9.4 million), finance and legal fees relating to the financial restructuring, and bank charges.
The income tax expense recognized in the income statement amounts to EUR -4.3 million and is mainly composed of deferred income taxes expense linked to the revaluation of the GSG properties portfolio (EUR -8.2 million) and from the derecognition of the deferred tax liabilities on the Kaluga project in Russia (EUR 1.8 million).
| Number of shares |
Capital | Share premium |
|
|---|---|---|---|
| Balance at 31 December 2008 | 10,943,866 | 44,870 | 400,524 |
| Balance at 31 December 2009 | 10,943,866 | 44,870 | 400,524 |
| Capital increase | 3,110,000 | 12,751 | 3,464 |
| Balance at 30 June 2010 | 14,053,866 | 57,621 | 403,988 |
On 6 April 2010, a capital increase of 1,090,000 new shares at EUR 5.61 per share, out of which EUR 4.1 per share has been allocated to share capital account of the Company and EUR 1.51 to the share premium account of the Company, has been successfully issued.
On 8 April 2010, a capital increase of 1,420,000 new shares at EUR 5.00 per share, out of which EUR 4.1 per share has been allocated to share capital account of the Company and EUR 0.90 to the share premium account of the Company, has been successfully issued.
On 14 April 2010, a capital increase of 600,000 new shares at EUR 5.00 per share, out of which EUR 4.1 per share has been allocated to share capital account of the Company and EUR 0.90 to the share premium account of the Company, has been successfully issued.
The new ordinary shares issued during the 3 capital increases carry the same rights (including voting rights) as the existing shares.
The Company is preparing a prospectus for approval by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg, so that the New Shares from the second and third capital increases can be listed and admitted for trading on Euronext Paris, the Prague Stock Exchange, the Warsaw Stock Exchange and the Budapest Stock Exchange. Until the New Shares are listed and admitted for trading on the above regulated markets, the New Shares shall be recorded, and remain recorded, as nominee account (compte nominatif pur) in the register of the Company held by CACEIS Corporate Trust. Following their listing and admission for trading on the above regulated markets, the New Shares will be fully fungible with the existing shares.
The Extraordinary Shareholders' Meeting held on 8 July 2008 renewed the authorisation granted by shareholders to the Board of Directors on 18 May 2000, in accordance with article 32-3 (5) of Luxembourg corporate law and in addition enhanced the limit of the authorised capital. The Board of Directors was granted full powers to proceed with the capital increases within the revised authorised capital of EUR 300,000,001.20 under the terms and conditions it will set, with the option of eliminating or limiting the shareholders' preferential subscription rights as to the issuance of new shares within the authorised capital.
The Board of Directors has been authorised and empowered to carry out capital increases, in a single operation or in successive tranches, through the issuance of new shares paid up in cash, capital contributions in-kind, transformation of trade receivables, conversion of convertible bonds into shares or, upon approval of the Annual General Shareholders' Meeting, through the capitalisation of earnings or reserves, as well as to set the time and place for the launching of one or a succession of issues, the issuance price, terms and conditions of subscription and payment of new shares. This authorisation is valid for a five-year period ending on 8 July 2013.
A total of EUR 57,620,850.60 has been used to date under this authorisation.
As such, the Board of Directors still has a potential of EUR 242,379,150.60 at its disposal. Considering that all new shares are issued at the par value price of EUR 4.10, a potential total of 59,116,866 new shares may still be created."
Following the execution of the "safeguard Plan" and the capital increases over the period, the following amendments have been adopted:
Warrants 2012 (ISIN code : LU0234878881):
On 22 April 2010, the general meeting of the holders of the warrants 2012 extended the exercise period of the warrants from 18 November 2012 up to 31 December 2019. The exercise price and the exercise ratio remain the same.
Warrants 2014 (ISIN code : XS0290764728):
On 25 March 2010, the general meeting of the holders of the warrants 2014 extended the exercised period of the warrants until 31 December 2019.
The exercise ratio has been adjusted following the capital increases. Each warrant 2014 shall entitle the holder to acquire 1.73 existing shares and/or subscribe to 1.73 new shares at the exercise price of EUR 11.20 to be paid in cash.
| 30 June 2010 |
30 June 2009 |
|
|---|---|---|
| At the beginning of the period | 10,934,765 | 10,943,740 |
| Shares issued | 10,943,866 | 10,943,866 |
| Treasury shares | -9,101 | -126 |
| Weighted average movements | 1,304,000 | -504 |
| Issue of new shares | 1,304,000 | - |
| Treasury shares | - | -504 |
| Weighted average outstanding shares for the | ||
| purpose of calculating the basic earnings per share | 12,238,765 | 10,943,236 |
| Weighted average outstanding shares for the | ||
| purpose of calculating the diluted earnings per share | 12,238,765 | 10,943,236 |
| Net profit/(loss) attributable to the Equity holders of the Company | 237,733 | -199,857 |
| Net profit /(loss) attributable to the Equity holders of the Company | ||
| after assumed conversions / exercises | 237,733 | -199,857 |
| Basic earnings in EUR per share | 19.44 | -18.26 |
| Diluted earnings in EUR per share | 19.44 | -18.26 |
Basic earnings per share is calculated by dividing the profit/(loss) attributable to the Group by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares purchased by the Group and held as treasury shares.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.
The PACEO signed with Société Générale on 13 August 2008 and for a period of 2 years expired in August 2010. As the Group does not intend to exercise this PACEO, the potential dilution has not been taken into account in the calculation of the earning per share ratio.
On 15 May 2008, the Company granted a loan of 825,000 USD to Urso Verde S.A., a Luxembourg subsidiary of OTT&CO S.A.. This loan had a final repayment date as of 15 May 2009, and an interest rate of 10% per year payable at the repayment date. The purpose of this loan was to acquire a forest in Chile in order to launch an 'Endurance forest fund' in conjunction with Orco and the Endurance Fund, which failed due to the current financial context. Urso Verde S.A. pledged 90 660 Company shares to the benefit of the Company in order to secure the reimbursement of its debt (collateralized debt) and the Company exercised its pledge. On 28 and 31 August 2009, the Company sold 90,000 of the shares for an aggregate amount of EUR 812,250 (sale proceeds). Pursuant to the Share Pledge Agreement, the shares remaining after Urso Verde S.A.'s debt has been reduced to zero shall be returned unencumbered. Urso Verde S.A, requested return of the surplus EUR 132,298 in the form of shares.
On 18 June 2010 Urso Verde S.A. requested the Company to return 660 shares that were not sold by the Company during exercise of its pledge to repay debt of Urso Verde S.A. towards the Company. Urso Verde S.A. instructed that these shares shall be transferred to the account of OTT&CO.S.A. As at 30 June 2010, the Company had not returned the shares to Urso Verde S.A..
On 22 February 2007, the Company has granted a loan of EUR 216,068 to OTT&CO S.A. (previously Orco Holding). This loan had a maturity date on 1 March 2008 and an interest rate of 9% per year payable at the repayment date. The purpose of this loan was to facilitate the acquisition of 46,667 new shares of Orco Germany S.A. by OTT&CO S.A.. As at 31 December 2009, this loan (nominal and interests) had not been repaid (the "OPG Receivable").
On 24 March 2010, Urso Verde S.A., OTT & CO S.A. and the Company have agreed to restructure their debts described in the previous paragraphs. The Company and Urso Verde S.A. agreed, that the Company shall return to Urso Verde S.A. surplus of EUR 132,298 left after sale of the shares in cash instead of returning of the shares, and that this amount shall bear an interest of 9% p.a. from 1 September 2009 until repayment (the "Urso Verde Receivable"). On 24 March 2010 Urso Verde S.A. assigned the Urso Verde Receivable amounting to EUR 138,985 (EUR 132,298, plus interest of EUR 6,687 as of 24 March 2010) to OTT&CO S.A. The Company and OTT & CO S.A. agreed to offset the Urso Verde Receivable of EUR 138,985 with the OPG
receivable amounting to EUR 276,058 (EUR 216,068 principal, plus interest accrued of EUR 59,990) as of 24 March 2010, leaving EUR 137,073, being the outstanding principal of the OPG Receivable as of this date. As at 30 June 2010, the OPG Receivable has not been repaid and amounts to EUR 140,385 (nominal + accrued interests).
Besides, Orco Charter, a wholly owned subsidiary of OTT&CO S.A., remains creditor of Blue Yachts, a 70% subsidiary of Suncani Hvar, itself a subsidiary of the Company, for an amount of EUR 181,649 as of 30 June 2010, which has not been reimbursed to date.
As at 30 June 2010, open invoices for unpaid management fees amounted to EUR 6.9 million (EUR 7.2 million as at 31 December 2009). The investment process foresees that any investment proposed by the fund manager has first to be approved by the investment committee. This committee is made of a representative of each investor.
Besides the fund management, there are transactions between the Group and Endurance Fund companies as a consequence of OPG companies renting offices in Endurance Fund buildings and OPG companies rendering administrative, financial or property management services. These transactions resulted in the recognition of EUR 2.2 million revenues (EUR 1.2 million for the year 2009) and EUR 0.2 million expenses (EUR 1.3 million for the year 2009). They also resulted as at 30 June 2010 in a payable of EUR 0.1 million (EUR 0.3 million as at 31 December 2009) and a net loan payable of EU 0.3 million.
In July 2010, the sale of the commercial development for Peugeot in Warsaw has been finalised with a cash impact of EUR 5.2 million, out of which EUR 3.8 million net cash in and EUR 1.4 million of cash unblocked.
In July 2010, the sale of the commercial development Cumberland in Berlin has been finalised with a cash impact of EUR 9.0 million. The sale revenue amounts to EUR 29 million, EUR 1.0 million above the 31 December 2009 DTZ valuation.
In July 2010, the Group closed the restructuring of Hospitality Invest S.à r.l. (the "joint venture") with AIG Global Real Estate Europe.. The Group recovers upfront EUR 6.7 million cash and secures increased priority payments from future cash flows, while Hospitality Invest S.A. is recapitalized and the medium term bank loan secured.
The Profit Participating Loan ("PPL") is a loan granted by both shareholders of the joint venture to the joint venture. These PPLs have a fixed interest rate of 1% and a variable interest rate determined by the accounting profit of the joint venture. These loans are subordinated to all other ordinary creditors.
As at July 8, 2010, the shareholders of the joint venture entered into an agreement which provided for its recapitalization under the terms of this agreement, including the followings:
The PACEO signed with Société Générale on 13 August 2008 and for a period of 2 years expired in August 2010 without being exercised.
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