Kardan N.V. — Earnings Release 2019

Apr 21, 2020

PRESS RELEASE Amsterdam/Tel Aviv, April 20, 2020 Number of pages: 12

FOURTH QUARTER AND 2019 RESULTS KARDAN N.V.

Highlights Q4 and 2019:

Following is a summary of net profit (loss) attributable to equity holders, by activity. Management evaluates performance of main segments by their operational result. Further information that includes detailed segment analysis can be found further in this report.

Net profit (loss) (In € thousands)	12M 2019	12M 2018
Real Estate (development and investment property)	11,538	(17,393)
Net result for discontinued operations (water infrastructure)	(32,233)	65
Other (Avis Ukraine, discontinued operation)	1,472	(2,415)
Total Operations	(19,223)	(19,743)
Holding (Corporate Finance and G&A)	(64,489)	(17,032)
Total	(83,712)	(36,775)

Kardan N.V.

• 12M 2019: €83.7 million net loss to equity holders (12M 2018: net loss of €36.8 million), mainly due to high interest (including interest in arrears) and FX expenses on the Company's debentures and losses of discontinued operation (water infrastructure).

Real Estate

• For the full year 2019 the net profit to equity holders of the real estate activities amounted to €11.5 million (12M 2018: net loss of €17.4 million), mostly as a result of delivery of apartments in both Europark Dalian and the residential JV projects and improved operation of the Galleria Dalian mall.

Discontinued operation (water infrastructure)

12M 2019: €32.2 million net loss attributable to equity holders (12M 2018: net profit of €0.1 million), impacted by a higher provision for doubtful debts, impairments and losses on projects and an impairment on investment in TGI in the amount of €1.2 million.

• Kardan's water infrastructure company - TGI, is currently in the midst of negotiations with the financing banks regarding the restructuring of their debts, which will include, among other things, continuing to provide credit to TGI. This credit includes guarantees required to advance projects and a cash credit line to support TGI's working capital.

Other

• The completion of the sale transaction of Avis Ukraine on March 14, 2019, resulted in a gain of €1.5 million in 12M 2019 (included as part of results from discontinued operations).
• The Company did not repay the February 2018, February 2019 and February 2020 scheduled payments of principal and interest to the Company's Debenture Holders (series A and B). As a result, starting February 2018 the Company is in default.
• In April 2019, each of the assemblies of Debenture Holders (series A and B) approved of the understandings reached in relation to the balance payments; following which, in June 2019, the Company carried out a partial repayment of the balance payments to Debenture Holders B in the amount of approximately €36.5 million (NIS 145 million).

Ariel Hasson, CEO of Kardan NV:

"2019 was again a very difficult year for Kardan. Our results continue to be burdened by high interest expenses, a substantial negative foreign currency impact and the adverse developments of our Water Infrastructure activities. This has further enlarged the negative equity position of the company.

On the positive side, our Chinese real estate activities performed well. All areas of operation showed a positive development. Both the Galleria Dalian and the residential projects have been showing a positive trend on all operational parameters. However, this positive trend has been cruelly disturbed by the outbreak of the coronavirus in China, developing this year. Although the cities where we operate have seen little direct impact from the outbreak, the measures taken by the local government slowed the economic activity substantially. We have taken measures to mitigate the impact as much as possible. Although the region is gradually resuming business activities, it is yet too early to assess when we can expect substantial pick-up of our business activities.

For our Water Infrastructure activities, the year remained extremely harsh. Tahal has continued to struggle with delays in projects, partly in relation to financing. Tahal is currently in the midst of negotiations with its financing banks regarding a restructuring plan where the banks will continue supporting Tahal to allow the company to resume focus on operations.

The depreciation of the euro compared to the Israeli Shekel again had a very significant negative impact. This combined with the high interest expenses on our Company debentures, which includes accrual of penalty interest rates, and the impairment from the losses in our Water Infrastructure activities, resulted in a net loss of € 83.7 million.

We have continued with our efforts to reach a settlement with our Debenture Holders. The negotiations, on which little progress was made in 2019, were fully resumed by the beginning of 2020. We have proposed a settlement structure to our debenture holders, which is based on a debt-to-equity swap and issuance of shares which will constitute control over the company. Such settlement, if completed, will allow Kardan to restore its equity position, allow the Debenture Holders the proper representation in the company's board and improve Kardan's ability to divest its assets in parallel with working on improving the value of those assets. Such settlement is subject to various approvals, including the approval of Kardan's AGM and approval of the assembly of the Debenture Holders. We are convinced that such settlement is the best way to enable the company to optimize its ability to service its debts and is accordingly in the best interest of all stakeholders."

Condensed Consolidated Income Statement Kardan N.V.

By quarter (in €millions)

	Q1 2019	Q2 - 2019	Q3 - 2019	Q4 - 2019	12M - 2019	12M - 2018
Total revenues	3,407	5,859	33,155	22,130	64,551	79,018
Total expenses	(4,748)	(6,684)	(29,175)	(19,789)	(60,396)	(85,031)
Profit (loss) from operations before fair value
adjustments, disposal of assets and financial	(1,341)	(825)	3,980	2,341	4,155	(6,013)
expenses
Loss from fair value adjustments and disposal of
assets and investments, net	-	(112)	(19)	(1,424)	(1,555)	(7,103)
Result from operations before finance expenses	(1,341)	(937)	3,961	917	2,600	(13,116)
Financing expenses, net Equity earnings , net	(23,519) 2,872	(15,910) 2,759	(27,933) 773	(2,129) 8,263	(69,491) 14,667	(23,405) 1,491
Profit (loss) before income tax	(21,988)	(14,088)	(23,199)	7,051	(52,224)	(35,030)
Income tax (expenses) / benefit	(67)	(46)	(440)	(174)	(727)	605
Profit (loss) from continuing operations	(22,055)	(14,134)	(23,639)	6,877	(52,951)	(34,425)
Loss from discontinued operations	(1,216)	(11,310)	(22,324)	(627)	(35,477)	(311)
Profit (Loss) for the period	(23,271)	(25,444)	(45,963)	6,250	(88,428)	(34,736)
Attributable to:
Net result for equity holders Non-controlling interests	(23,505) 234	(23,070) (2,374)	(46,150) 187	9,013 (2,763)	(83,712) (4,716)	(36,775) 2,039
	(23,271)	(25,444)	(45,963)	6,250	(88,428)	(34,736)
Other Comprehensive income (expense)	6,749	(7,404)	(623)	(6,115)	(7,393)	(12,837)
Total Comprehensive expense attributable to Kardan equity holders	(16,756)	(30,474)	(46,773)	2,898	(91,105)	(49,612)

Overall summarized review of FY 2019 results

Kardan recognized a consolidated net loss attributable to equity holders of €83.7 million in 2019 compared to a net loss of €36.8 million in 2018.

The loss in 2019 is mainly the result of high financing expenses, due to the depreciation of the EUR versus the NIS, and the impact of the Israeli CPI on the Company's debentures. This had a negative impact of €35.2 in 2019, as opposed to a positive impact of €6.7 million in 2018. Furthermore, discontinued operation (water infrastructure), impacted the results negatively.

Revenues of the Real Estate activities amounted to €64.6 million in 2019 (in 2018: €79.0 million which included the delivery of building B in the Europark Dalian project, which was sold en-bloc). The rental revenues of Galleria Dalian increased by 69% to €9.1 million 2019 compared to €5.4 million in 2018 reflecting the better performance of the shopping mall. Combined with lower operating costs, the result of operations of the shopping mall came in at a profit of €4 million in 2019 (12M 2018 €11.3 million loss). Also, the development activities performed well. The share of profit of the joint venture residential projects increased significantly in 2019, due to high deliveries of apartments during the year and came in at €14.7 million (2018: €1.5 million), bringing the total operational profit from development to €18.7 million (2018: €5.6 million).

Overall, the Real Estate activities resulted in an operational profit of €22.7 million in the full year 2019 compared to an operational loss of €5.7 million in 2018. Although financing expenses decreased compared to last year due to the partial early repayment of the Dalian loan in Q3 2018 and Q3 2019, they are still at a high level. The net result of the Real Estate activities came in at a profit of €11.6 million in 2019 compared to a loss of €17.4 million in 2018.

Revenue of the water infrastructure activities decreased to €152.8 million in 2019, compared to €175.4 million in 2018. The gross profit decreased significantly compared to 2018 mainly due to a mix of projects with relatively lower profitability, and a provision for losses on several projects. The lower gross profit was partly mitigated by savings in SG&A expenses compared to 2018. High finance expenses and provisions, mainly for impairments, resulted in a total loss of €32.2 million attributable to equity holders compared to a profit of €0.1 million in 2018.

Taking into account the direct equity impact of foreign currency translation differences and changes in the hedge reserves combined with the net result, the total comprehensive expense to Kardan NV's shareholders amounted to €90.1 million in 2019 compared to a comprehensive expense of €49.6 million in 2018. The other comprehensive expense was mainly a result of changes in foreign exchange rates.

Equity

Kardan N.V. (company only, in €thousands)	December 31, 2019	December 31, 2018
Total Assets	294,690	351,188
Total Equity	(150,602)	(59,497)
Equity/Total assets (%)	(51.1%)	(16.9%)

The deficit in shareholders' equity of Kardan N.V. increased from a deficit of €59.5 million as of December 31, 2018 to a deficit of €150.6 million as of December 31, 2019, primarily due to the loss in the period, which is – as mentioned – mainly the result of the heavy finance costs on the debentures and the losses of TGI.

Negotiations with debenture holders

Since the Company did not repay the principal and interest payments which were due in February 2018, February 2019 and February 2020, the Company is in default according to the Deed of Trust as of February 2018. Accordingly, as of March 31, 2018 and until the repayments to the Debenture Holders are rescheduled, the debentures are presented as current liabilities and bear interest in arrears.

In April 2019, each of the assemblies of Debenture Holders (series A and B) approved of the understandings reached in relation to the balance payments; following which, in June 2019 the Company carried out a partial repayment of the balance payments to Debenture Holders B in the amount of approximately €36.5 million (NIS 145 million).

Although not much progress was made in 2019, management is advancing the negotiations with the representatives of the debenture holders in order to reach a debt settlement in the short term. The framework of the debt settlement which is advanced with the Debenture Holders is based on conversion of a portion of the debt into the Company's shares which will grant the control over the Company to the Debenture Holders. Such settlement is not final and is subject to various approvals, including the approval of Kardan's general meeting of shareholders and the approval of the Debenture Holders. Accordingly, as of the date this report, there is no certainty regarding reaching such agreement, its terms and/or the date of its approval.

Covenants

The Company did not meet the debt coverage ratio financial covenant as defined in the Deeds of Trust for the ninth consecutive quarter. In addition, at December 31, 2019 certain Group companies (included in the discontinued operation) did not meet financial covenants for which waivers have not yet been received from the lending banks. For additional information regarding covenants of the Company, see section 12 of part A of the Israeli annual report and note 22 to the consolidated IFRS financial statements. For additional information regarding the covenants of TGI and KLC, see section 8.18 and 7.6.8.6, respectively, of part A of the Israeli annual report.

Financial position and going concern

In their audit opinion as of December 31, 2019, the auditors draw the attention to the existence of a material uncertainty which may cast significant doubts about the Company's ability to continue as a going concern, due to among others - the Company's inability to meet the February 2018 and 2019 payment to the debenture holders. As mentioned, as at the date of this report, the Company is in negotiations with the debenture holders (series A and B) regarding a debt settlement. However, there is no certainty as to the results of these discussions. For additional information see section 3 of the Report of the Board of Directors regarding the cash flow forecast. In addition, please refer to notes 1(B) and 5 to the Consolidated Financial Statements of the Company in relation to the investment in Tahal.

Outlook

The Company intends to continue the negotiations with the debenture holders with the aim to come to an agreement in the near future. At the same time, the Company will continue its efforts to strengthen the financial position of Tahal. In addition, the Company is acting to improve its assets in China and to refinance the project loan.

Due to the uncertainties in relation to the financial position of Tahal, the impact of currencies on the Company's debentures, and the impact of the coronavirus outbreak, as detailed below, which are beyond the Company's control, the Company cannot give guidance on the results of its operations for the year 2020.

A cash flow forecast for the coming two years, including accompanying assumptions and notes, can be found in the Directors' Report.

Impact of COVID-19

In December 2019, the outbreak of the coronavirus pandemic (COVID-19) started in the city of Wuhan, China (one of the 15 leading cities in China) and spread rapidly throughout China and beyond. As a result, an international health emergency was announced. At this stage, the Company is unable to assess the duration and intensity of the crisis and the full impact on its operations and results. However, the deepening of the crisis and its continuation is likely to have a negative impact on its operations. Without derogating from the above, it should be noted that due to the restrictions imposed throughout China following the coronavirus outbreak in the first quarter of 2020, the Company experienced in its real estate activities a decrease in the number of sold units in most of its residential projects, and in the project in Dalian as well as a decrease in sale prices. The investment property operation (Galleria Dalian mall in China) experienced temporary closure of shops, a sharp decrease in the number of visitors and in the shops' turnover. As at the date of this report, the Company already granted rent discounts for all of its tenants in an accumulated amount of RMB 2 million (€0.3 million) and is evaluating granting additional incentives for certain periods. As a result, the Company expects that an impairment loss on the value of Galleria Dalian will be recorded in Q1 2020. The Company will continue paying close attention to the development of the COVID-19 outbreak and its impact on the markets in which it operates and will continue to perform relevant assessments and take proactive measures.

Highlights per activity:

The following is an analysis of the results of the different activities for the year 2019.

REAL ESTATE

Kardan is active in development and management of Real Estate in China through its 100% indirect subsidiary Kardan Land China Ltd. ('KLC'). In order to better reflect the underlying activities, the Company presents the results of the Real Estate activity as two operational segments: Real Estate - Development and Real Estate - Investment Property. The Real Estate - Investment Property segment only includes the results of operation of the Galleria Dalian shopping mall; the Real Estate - Development segment includes the results of the residential development of the Europark Dalian project as well as the results of residential real estate projects under joint control.

Results

	For the year ended December 31,		For the 3 months ended December 31,
In thousands of Euro	2019	2018	2019	2018
Real Estate - Development
Sale of apartments Cost of sales	55,496 (47,053)	73,634 (69,084)	19,776 (16,552)	3,766 (2,474)
Gross Profit	8,443	4,550	3,224	1,292
SG&A expenses Gain (loss) from disposal of fixed assets and investments, net Equity earnings (losses) Operational profit - Real Estate Development segment	(2,889) (1,555) 14,667 18,666	(2,687) 2,278 1,491 5,632	(887) (1,555) 8,263 9,045	(539) 2,278 (369) 2,662
Real Estate - investment Property
Rental revenues Cost of rental revenues	9,055 (3,529)	5,384 (3,738)	2,354 (698)	1,176 (1,044)
Gross Profit	5,526	1,646	1,656	132
SG&A expenses Adjustment to fair value (impairment) of investment property	(1,497) -	(4,366) (8,610)	(125) 131	(1,124) (6,505)
Operational profit (loss) - Real Estate Investment Property segment	4,029	(11,330)	1,662	(7,497)
Total operational profit (loss) - Real Estate	22,695	(5,698)	10,707	(4,835)
Other unallocated expense	(2,217)	(2,311)	(571)	(535)
Profit (loss) before finance expenses and income tax Finance expenses, net	20,478 (8,287)	(8,009) (10,219)	10,136 (2,884)	(5,370) (2,745)
Tax benefits (expenses)	(653)	835	(197)	2,327
Profit (Loss) for the period – attributed to Company's shareholders	11,538	(17,393)	7,055	(5,788)

Additional information - Kardan Land China

	For the year ended December 31		For the three months ended December 31
	2019	2018	2019	2018
Operational Information
Revenue Residential - JV (in €thousands) *	62,861	24,505	28,354	3,714
Gross profit residential - JV (in €thousands) *	29,276	8,464	16,415	1,950
Apartments sold in period (a)	678	842	197	153
Apartments delivered in period (b)	1,679	649	595	22
Total apartments sold, not yet delivered (c)	875	1,896	875	1,896

(a) All residential apartments, incl. Dalian (100%).

(b) In 2019 231 apartments were delivered in the Dalian project compared to 295 apartments in 2018.

(c) KLC part in the gross profit from apartments sold, not yet delivered is €21.7 million as of 31 December 2019.

Units sold in the period
	For the year ended December 31,			For the three months ended, December 31
	2019	2018		2018
100% owned
Europark Dalian	91	105	31	14
Joint Venture projects*
Olympic Garden	135	688	19	(4)
Suzy	297	230	113	-
Palm Garden	2	47	1	7
City Dream	153	51	33	-
	587	737	166	139
Total	678	842	197	153

* 100% number presented; KLC holds approx. 50%

Real Estate – Development

The Real Estate Development segment relates to the residential projects of Europark Dalian and the joint venture residential projects.

In 2019 revenue from the sale of apartments (the handover of apartments in the Europark Dalian project) amounted to €55.5 million (2018: € 73.6 million). In 2019, 231 units in the C towers of the Europark Dalian project were delivered, compared to 295 deliveries in 2018 (included 33 units from building A and the delivery of building B as one block). In addition, some revenue was recognized related to progress of construction of certain apartments. As relatively many units were delivered in Q4 2019, revenue in Q4 2019 is significantly higher than in Q4 2018.

SG&A expenses remained virtually stable at €2.9 million in 2019 compared to €2.7 million in 2018. Selling and marketing activities mainly relate to the C towers in Europark Dalian project, of which the sales process commenced in 2017, and are somewhat levelling off since sales are progressing.

'Equity earnings' comprises the result of the residential activities from joint venture projects, which contributed a profit of €14.7 million in full year 2019, compared with a profit of €1.5 million in 2018. This significant increase resulted from high deliveries of apartments during the year. Revenue from the residential joint venture projects in 2019 amounted to €62.8 million compared to €24.5 million in 2018.

The profit from operations of the Real Estate development segment amounted to €18.7 million in 2019 compared to a profit of €5.6 million in 2018.

The total number of units in inventory decreased from 3,265 at December 31, 2018 to 1,794 as at December 31, 2019. The number of unsold units in inventory (including the inventory of joint venture projects) decreased to 919 as at December 31, 2019 (1,391 as at December 31, 2018). The rate of unsold units for which construction was completed increased to 34% compared to 9% at December 31, 2018. The increase of the percentage of unsold units out of the total number of units in inventory is due to a decrease of total unsold inventory following sales in almost all residential projects in 2019. Please see details about the impact of the coronavirus outbreak on the real estate – development operations in the outlook 2020 section above.

Real Estate – Investment Property

The Real Estate Investment Property segment relates to the results of operation of the Galleria Dalian shopping mall. The result of operations of this segment in 2019 came in at a profit of €4 million (2018 €11.3 million loss).

Revenues of the Investment Property segment increased significantly to €9.1 million in 2019 compared to €5.4 million in 2018, following positive operational trends at Galleria Dalian. This is reflected in the increase in occupancy level (from 92.2% at December 31, 2018 to 94.1% as at December 31, 2019), and the opening rate (from 81% at December 31, 2018 to 92% as at December 31, 2019). After balance sheet date, as of January 2020, our operations were disrupted due to the outbreak of the coronavirus and the related measures to control the outbreak, as detailed in the outlook section above.

The improved trends in 2019 were also reflected in an increased gross margin of the Investment Property segment to 61% compared to 30% in 2018.

SG&A considerably decreased from €4.4 million in 2018 to €1.5 million in 2019, mostly due to lower marketing costs as the mall is almost fully occupied.

The value of the investment property (Galleria Dalian shopping mall) was €214.6 million as per 31 December 2019 compared to €213.6 million at year-end 2018. The increase in value was a result of the appreciation of the RMB versus the EUR (2018: devaluation of €6.3 million and a negative impact of €1.2 million as a result of the depreciation of the RMB versus the EUR). It is noted that it is highly probable that the coronavirus outbreak will, have a negative impact on the value of Galleria Dalian, as early as Q1 2020, however it is too early to estimate such impact. For conservative reasons, the Company decided not to recognize profit from the increase of the fair value of the mall in the fourth quarter of 2019.

Real Estate - Total

The above resulted in an operational profit of the Real Estate activities of €22.7 million in 12M 2019 and €10.7 million in Q4 2019 compared to €5.7 million operational loss for 12M 2018 and €4.8 million loss in Q4 2018.

'Financing expenses, net, amounted to €8.3 million, compared to €10.2 million in 12M 2018. The financing expenses mainly include interest expenses related to the Europark Dalian project loan as well as a positive foreign exchange impact of €0.2 million, compared with a negative foreign exchange impact of €0.1 million in 12M 2018. The decrease in financing expenses is attributable to the partial early repayments of the project loan in Q3 2018 and in Q3 2019.

Tax expenses / benefit in 12M 2019 amounted to an expense of €0.7 as a result of the change in deferred taxes partially offset by tax on dividend received from joint ventures (12M 2018 benefit of €0.8 million as a result of the change in deferred taxes).

Net profit in 12M 2019 amounted to €11.6 million (12M 2018: €17.4 million loss), and to €7.1 million in Q4 2019 (Q4 2018: €5.8 million loss).

Loans – the project loan amounting to €95 million as of December 31, 2019 is presented as a short-term liability as it matures in November 2020, unless extended for additional year as stipulated in the loan agreement, or refinanced. KLC and the lending bank are currently negotiating the said extension.

Additional balance sheet information - Kardan Land China

	2019 (31.12)	2018 (31.12)
(in €thousands)
Real Estate – Development
Share of investment in JVs	47,168	37,568
Inventory	41,728	63,980
Real Estate – Investment Property
Investment Property	214,577	213,577
Cash & short-term investments	36,619	44,517
Total Assets	386,677	403,361
Loans and Borrowings	95,029	100,800
Advance payments from buyers (Real Estate – Development)	4,657	32,486
Total Equity	226,221	213,784

WATER INFRASTRUCTURE (TGI) - Discontinued operations

The results of Tahal Group International B.V. ('TGI' or 'Tahal), Kardan's water infrastructure company, are presented under Profit (loss) from discontinued operations - TGI.

TGI focuses on executing water related, agricultural and environmental projects worldwide in Africa, Central and Eastern Europe, Asia and in other regions.

In thousands of Euro	For the year ended December 31,			For the three months ended December 31,
	2019	2018	2019	2018
Contract revenues Contract cost	152,844 (145,524)	175,397 (148,338)	34,908 (35,065)	58,28358.3 (50,490)
Gross profit	7,320	27,059	(157)	7,793
SG&A expenses	(11,627)	(16,269)	(2,583)	(3,702)
Share of profit (loss) of investments accounted for using the equity method	1,028	(2,900)	93	(2,335)
Other operational income (expenses)	(21,877)	378	(7,986)	495
Result from operations before financing expenses	(25,156)	8,268	(10,633)	2,251
Financing income (expenses), net	(5,476)	(4,209)	878	(3,334)
Income tax expenses	(5,139)	(1,955)	(5,679)	(831)
Net result of water infrastructure activities	(35,771)	2,104	(15,434)	(1,914)
Adjustments to investment in TGI	(1,178)	-	14,807	-
Net result	(36,949)	2,104	(627)	(1,914)
Attributable to:
Equity holders (Kardan N.V.)	(32,233)	65	2,136	(1,719)
Non-controlling interest holders	(4,716)	2,039	(2,763)	(195)
	(36,949)	2,104	(627)	(1,914)

Additional Information Water Infrastructure	2019 (31.12)	2018 (31.12)
Balance sheet (in €thousands)
Cash & short-term investments	11,653	13,974
Total Assets	183,523	228,482
Net debt	(49,363)	(37,526)
Equity attributable to equity holders (Kardan N.V.)	0	38,414
Equity/Assets	0%	17.9%
Other (in USD million)
Backlog	506.2	687.4

During 2019 Kardan's discontinued operation - Water Infrastructure - reported a loss attributable to equity holders of €32.2 million, compared to a profit of €0.1 million in 2018.

Revenues of the water infrastructure activities decreased in 2019 to €152.8 million compared to €175.4 million in 2018.

The gross margin decreased to 4.8% in 2019 compared to 15.4% in 2018 following a change in the mix of projects with a relatively low profitability and a provision for losses on several projects.

Other operational expenses amounted to €21.9 million in 2019, and primarily include provisions and impairments, including on an outstanding debt, for doubtful debts, and costs of the efficiency plan. Combined with the said decrease in gross profit, the operational result decreased to a loss of €25.2 million in 2019 compared to €8.3 million profit in 2018.

Financing expenses increased from €4.2 million in 2018 to €5.5 million in 2019, mostly due to interest expenses on utilization of credit lines and foreign exchange differences.

In Q4 2019, due to the financial position of Tahal, it was decided not to recognize any deferred tax assets on losses and to reverse the existing deferred tax assets in the amount of €4.8 million.

The orders backlog of Tahal decreased from US\$687.4 million at 31 December 2018 to US\$506.2 million at 31 December 2019, mainly due to a revised agriculture operation plan in Quiminha, Angola and the termination of several projects. At this stage, it is not clear whether the outbreak of the coronavirus will have an impact on Tahal's operations, including its backlog, revenues, expenses, and cash flow, and to what extent.

In order to finance its operations, TGI has utilized short term credit lines amounting to €52 million from banks. As a result of delays in receiving advance payments from certain projects, TGI had to extend those credit lines until December 2019. As of the date of this report one credit line of US\$ 25.6 million was extended until December 2020. The financial difficulties that TGI is facing are stemming from the negative cash flow performance, as a result of, amongst others, substantial delay of the start of new projects in Angola, in which TGI heavily invested.

TGI has been negotiating with its financing banks regarding a restructuring of its debt to the banks in parallel to the continued support of TGI in its efforts to reorganize and improve its operations, allowing TGI to return to solid financial performance. This plan includes support in the form of a facility consisting of guarantees required to advance projects and cash credit line to support TGI's working capital. For additional information refer to note 5 to the Consolidated Financial Statements of the Company.

The net loss attributable to equity holders of the water infrastructure operations came in at €32.2 million for 2019 (2018: €0.1 million profit). The impairment of Kardan's investment in Tahal in the amount of €1.2 million in 2019, on balance after partial reversal of the impairment charged in Q3 2019, brought the total loss attributable to equity holders to €32.2 million for 2019.

As a result of the financial position of Tahal, the Company decided to fully impair its investment in Tahal. As a result, an impairment of €1.2 million was recorded and therefore the equity of Tahal attributable to the Company in its financial statements stands at nil as of December 31, 2019.

CORPORATE HOLDING AND OTHER

In thousands of Euro		For the year ended	For the three months ended December 31,
		December 31,
	2019	2018	2019	2018
Corporate expenses:
General and administration expenses	(3,211)	(3,616)	(956)	(913)
Financing income (expense), net	(61,204)	(13,186)	756	(980)
Income tax expenses	(74)	(230)	23	(64)
	(64,489)	(17,032)	(177)	(1,957)
Other activities:
Equity earnings (Avis Ukraine - discontinued operations)	1,472	(2,415)	-	(3,323)
	1,472	(2,415)	-	(3,323)

Corporate expenses:

G&A expenses in 2019 decreased to €3.2 million compared to €3.7 million in 2018.

Financing expenses increased to €61.2 million in 2019, compared to €13.2 million in 2018. Following the depreciation of the EUR compared to the NIS there was a very significant negative impact of foreign exchange differences and the Israeli CPI on the Company's debentures, which are denominated in NIS. The negative impact amounted to €35.2 million in 2019 compared to a positive impact of €6.7 million in 2018; in Q4 2019 there was a positive impact amounting to €7.2 million (Q4 2018: €5.5 million positive). Finance expenses also include interest in arrears regarding the Company's Debentures.

The Income tax expenses relates to tax on hedge instruments.

Other activities

Other activities consisted of equity earnings from the Company's holding in Avis Ukraine joint venture. Following the completion of the sale transaction of the Company's holding in Avis Ukraine in Q1 2019, a gain of €1.5 million was recorded, comprising a €1.3 million release of capital translation reserve and a reversal of impairment loss recorded in Q4 2018 of €0.2 million.

DISCLAIMER

This press release contains forward-looking statements and information, for example concerning the financial condition, results of operations, businesses and potential exposure to market risks of Kardan N.V. and its group companies (jointly "Kardan Group"). All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements (including "forward looking statements" as defined in the Israeli Securities Law). Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. These forward-looking statements are identified by the use of terms and phrases such as ''anticipate'', ''believe'', ''could'', ''estimate'', ''expect'', ''intend'', ''may'', ''plan'', ''objectives'', ''outlook'', ''probably'', ''project'', ''will'', ''seek'', ''target'', ''risks'', ''goals'', ''should'' and similar terms and phrases. A variety of factors, many of which are beyond Kardan Group's control, affect our operations, performance, business strategy and results and could cause the actual results, performance or achievements of Kardan Group to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. For Kardan Group, particular uncertainties arise, amongst others but not limited to and not in any order of importance, (i) from dependence on external financing with the risk that insufficient access to capital threatens its capacity to repay its debts, grow, execute its business model, and generate future financial returns (ii) from concentration of its business in Central Eastern Europe, Africa, India and China as a result of which Kardan Group is strongly exposed to these particular markets (iii) from risks related to the financial markets as a result of Kardan N.V.'s listings on Euronext Amsterdam and the Tel Aviv Stock Exchange (iv) from it being a decentralized organization with a large number of separate entities spread over different geographic areas in emerging markets, so that Kardan Group is exposed to the risk of fraudulent activities or illegal acts perpetrated by managers, employees, customers, suppliers or third parties which expose the organization to fines, sanctions and loss of customers, profits and reputation etc. and may adversely impact Kardan Group's ability to achieve its objectives (v) from the impact of the coronacrisis (vi) from the inability to finalize the negotiations TGI is conducting with its financing banks and (vii) from any of the risk factors specified in Kardan N.V.'s Annual Report to be published in April and in the related "Periodic Report" (published by Kardan N.V. in Israel), and which is also available at the Kardan website. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the relevant forward-looking statement as expected, anticipated, intended, planned, believed, sought, estimated or projected. Kardan N.V. does not intend or assume any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated.

About Kardan

Kardan identifies and develops assets in promising emerging markets, mainly in Asia (predominantly China), Africa and selected CEE and CIS countries. Its activities are mainly focused on two sectors that benefit from the rising middle class: Real Estate and Water Infrastructure. Company headquarters are in the Netherlands. Kardan aims at holding controlling interests in its investments and is actively involved in the definition and implementation of their strategy through its local business platforms. Total assets as of December 31, 2019 amounted to €543 million. Kardan is listed on Euronext Amsterdam and the Tel Aviv Stock Exchange.

The Directors' Report including the non-statutory consolidated financial statements, drawn up in line with the Dutch and Israeli regulations, are presented in a separate document and form an integral part of this release.

For further information please contact:

Floor van Maaren / Eva Lindner

+31 (0)6 2959 7746 / +31 (0) 6 3422 2831

Investor@kardan.nl

www.kardan.nl

"This press release contains regulated information (gereglementeerde informatie) as defined in the Dutch Act on Financial Supervision (Wet op het financieel toezicht)"