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Kardan N.V.
Interim / Quarterly Report • Sep 1, 2020
6875_iss_2020-09-01_54100ed1-b4d1-479a-b367-6c11346ac605.pdf
Interim / Quarterly Report
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PRESS RELEASE
Amsterdam/Tel Aviv, August 31, 2020 Number of pages: 11
SECOND QUARTER AND FIRST HALF 2020 RESULTS KARDAN N.V.
Highlights H1 and Q2 2020:
Following is a summary of net loss attributable to equity holders, by activity. Further information that includes detailed segment analysis can be found further in this report.
| Net profit (loss) (In € thousands) | H1 2020 | H1 2019 | Q2 2020 | Q2 2019 |
|---|---|---|---|---|
| Real Estate (development and investment property) | (4,008) | 1,459 | (4,838) | 265 |
| Water Infrastructure (discontinued operation) | (12,818) | (11,859) | (12,818) | )8,936( |
| Other (Avis Ukraine, discontinued operation) | - | 1,473 | - | - |
| Total Operations | (16,826) | (8,927) | (17,656) | (8,671) |
| Holding (Corporate Finance and G&A) | (14,406) | (37,648) | )9,806( | )14,399( |
| Total | (31,232) | (46,575) | (27,462) | (23,070) |
COVID-19
Further to the 2019 annual financial statements, during the reporting period the COVID-19 crisis continued to affect the Company's results. Due to the crisis, Galleria Dalian's operations and fair value were impacted to a certain extent. In addition, the crisis also has an impact on the real estate development segment and the water infrastructure activities (discontinued operations). For additional information see Note 1C to the interim consolidated financial statements and the result analysis below.
Kardan N.V.
- H1 2020: €31.2 million net loss to equity holders (H1 2019: net loss of €46.6 million), is due to high interest expenses on the debentures, which were partially offset by positive impact of FX and Israeli CPI on the Company's debentures, an impairment loss in the Real Estate activities and a net loss of the Water Infrastructure activities as a result of provisions for losses on projects and doubtful debts.
- Q2 2020: € 27.5 million net loss to equity holders (Q2 2019: net loss of € 23.1 million).
Real Estate
- H1 2020: the net loss to equity holders amounted to €4 million (H1 2019: net profit of €1.5 million), as a result of a decrease of €7.7 million in the value of the Galleria Dalian shopping mall. The loss was mitigated by the profit from deliveries of apartments in the Dalian project and the joint venture projects.
- The COVID-19 pandemic had some impact on the development activities and a more significant impact on the investment property activities. As shops in the Galleria Dalian shopping mall had to be temporarily closed in the first half of 2020, a rental discount of €0.7 million in total was granted to tenants and the valuation of the mall further decreased.
Water infrastructure (discontinued operation)
- H1 2020: the net loss attributable to equity holders amounted to €12.8 million impacted by provisions for doubtful debts and impairments and losses mainly on terminated projects (H1 2019: net loss of €11.9 million).
- Kardan's water infrastructure company TGI, is currently in the midst of ongoing negotiations with the financing banks regarding the restructuring of its debts.
- The outbreak of the COVID-19 virus has impacted the water infrastructure activities. Whilst in a significant number of countries in which it operates, the projects in which TGI is involved continued in full or in part; in some countries the projects have stopped completely for a limited period. In addition, the economic crisis following the COVID-19 outbreak impacts the economic activity in some of the countries where TGI is operating. However, TGI's assessment is that its projects in these affected countries will continue albeit at a slower pace than previously estimated.
Other
- The Company did not repay the February 2018, 2019 and 2020 scheduled payments of principal and interest to the Company's Debenture Holders (series A and B). As a result, since February 2018 the Company is in default.
- The ordinary shares of Kardan delist from the stock exchange of Euronext Amsterdam effective as of today, 31 August 2020. The shares and debentures of Kardan will remain listed on the Israeli Stock Exchange.
Ariel Hasson, CEO of Kardan NV:
The operational performance of our Real Estate activities was quite steady over the quarter, in particular considering the impact of COVID-19, as demonstrated by the solid number of handover of apartments. The performance of Galleria Dalian showed gradual recovery in footfall and shopping mall revenue. Although occupancy was still negatively impacted, and despite rental discounts to support our tenants, we were still able to conclude the second quarter with net operating income of the shopping mall of around €1.2 million. The next quarters will be key as we have not yet returned to the footfall and revenue levels prior to the pandemic and several tenant agreements will need to be reviewed.
Due to the impact of the pandemic, the board had decided to decrease the valuation of Galleria Dalian on top of the external valuation by € 3.7 million, reflecting a prudent approach, resulting in a total revaluation of € 4.8 million in the second quarter.
On a positive note, the extension of the Europark Dalian loan, which is maturing in November 2020, for additional 12 months, is expected to be signed in the coming days, after we have made some partial early repayments as part of the extension agreement. In the coming days, Kardan Land China will pay a dividend of around €7.5 million, which will be used for a further partial repayment to our debenture holders.
The results of our Water Infrastructure activities were heavily impacted by project delays, project losses and impairment of assets. Tahal continues to face significant challenges regarding its financial position and is in the midst of ongoing negotiations with the financing banks to support its operations. Tahal continues to strictly control its costs and is focusing on its core activities in order to improve its operations.
It should be noted that for prudential reasons Kardan has already marked down the value of its investment in Tahal at the end of 2019 to zero. Nonetheless, we continue to consolidate the financial result of Tahal which now takes the investment in Tahal in Kardan's books to a negative value.
The discussions with our debenture holders on a possible debt settlement, which will include a debt to equity conversion, have made significant progress. The negotiations are largely completed and the main principles have been agreed. We are hopeful that we will be able to present the proposed settlement terms for approval at a General Shareholders Meeting and to our bondholders in the coming weeks.
As of today's trading day, the delisting of the Kardan shares at the Euronext Amsterdam stock exchange took effect. The shares of Kardan remain listed on the Israeli Stock Exchange.
Condensed Consolidated Income Statement Kardan N.V.
| (in € thousands) | H1 2020 | H1 2019 | Q2 2020 | Q2 2019 | 12M - 2019 |
|---|---|---|---|---|---|
| Total revenues Total expenses |
15,247 (14,445) |
9,266 (11,432) |
7,715 (7,575) |
5,859 (6,684) |
64,551 (60,396) |
| Profit (loss) from operations before fair value adjustments and disposal of assets |
802 | (2,166) | 140 | (825) | 4,155 |
| Loss from fair value adjustments | (7,711) | (112) | (4,844) | (112) | - |
| Profit (loss) from disposal of assets and investments and other income (expense), net |
1,049 | - | - | - | (1,555) |
| Result from operations before finance expenses |
(5,860) | (2,278) | (4,704) | (937) | 2,600 |
| Financing expenses, net Equity earnings, net |
(18,405) 4,382 |
(39,429) 5,631 |
(12,175) 1,424 |
(15,910) 2,759 |
(69,491) 14,667 |
| Loss before income tax | (19,883) | (36,076) | (15,455) | (14,088) | (52,224) |
| Income tax expenses / (benefit) | (1,469) | 113 | (811) | 46 | 727 |
| Loss from continuing operations | (18,414) | (36,189) | (14,644) | (14,134) | (52,951) |
| Loss from discontinued operations | (12,648) | (12,526) | (12,963) | (11,310) | (35,477) |
| Loss for the period | (31,062) | (48,715) | (27,607) | (25,444) | (88,428) |
| Attributable to: Net result for equity holders Non-controlling interests |
(31,232) 170 (31,062) |
(46,575) (2,140) (48,715) |
(27,462) (145) (27,607) |
(23,070) (2,374) (25,444) |
(83,712) (4,716) (88,428) |
| Other Comprehensive income (expense) | (4,035) | (655) | (3,979) | (7,404) | (7,393) |
| Total Comprehensive expense attributable to Kardan equity holders |
(35,267) | (47,230) | (31,441) | (30,474) | (91,105) |
Overall summarized review of Q2 and H1 2020 results
Q2 2020 resulted in a consolidated net loss attributable to equity holders of €27.5 million (Q2 2019: €23.1 million loss), bringing the result for the first half of 2020 to a consolidated net loss attributable to equity holders of €31.2 million (H1 2019: €46.6 million net loss).
The loss in H1 2020 decreased compared to H1 2019, mainly as a result of lower financing expenses, due to the appreciation of the EUR versus the NIS, and the impact of the Israeli CPI on the Company's debentures. This had a positive impact of €2.6 million in H1 2020, as opposed to a negative impact of €22.6 million in H1 2019.
Revenues of the Real Estate activities amounted to €15.2 million in H1 2020 (H1 2019: €9.2 million). The rental revenues of Galleria Dalian increased slightly to €4.5 million in H1 2020 (H1 2019: €4.3 million), despite rental discounts granted to tenants following the COVID-19 crisis. Combined with lower operating costs, the gross profit of the shopping mall improved to €3.2 million in H1 2020 (H1 2019: €2.4 million). On the other hand, as a result of COVID-19, a decrease in value of the shopping mall amounting to €7.7 million was recognized in H1 2020. The development segment benefited from higher revenue from handover of apartments in the Dalian project. The
handover of apartments in the joint venture residential projects was lower compared to H1 2019, resulting in lower equity earnings in H1 2020 of €4.4 million (H1 2019: €5.6 million).
Overall, the Real Estate activities reported an operational profit of €1.2 million in H1 2020 compared to a profit of €6.6 million in H1 2019. The net result of the Real Estate activities came in at a loss of €4 million in H1 2020 compared to a profit of €1.5 million in H1 2019 impacted by the impairment of the shopping mall and high financing expenses on the Dalian loan.
Revenues of the water infrastructure activities decreased to €48.2 million in H1 2020, compared to €78.8 million in H1 2019, mainly due to delays in projects as a result of Tahal's financial position. The gross profit decreased significantly compared to H1 2019 mainly due to a mix of projects with relatively lower profitability, provisions for project losses and delays of projects. SG&A expenses were lower compared to H1 2019.
In addition, Tahal recorded other operational expense of €4.5 million in H1 2020, due to provisions for doubtful debts in several projects partially offset by profit from the sale of an associate company. Financing expenses remained stable compared to H1 2019 and amounted to €3.3 million. The result of the Water Infrastructure activities attributable to equity holders came in at a net loss of €12.8 million in H1 2020 compared to a net loss of €11.9 million in H1 2019.
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 N.V.'s shareholders amounted to €35.3 million in H1 2020 compared to a total comprehensive expense of €47.2 million in H1 2019. The other comprehensive expense was mainly a result of changes in foreign exchange rates.
Equity
| Kardan N.V. (company only, in €thousands) |
June 30, 2020 |
December 31, 2019 |
|---|---|---|
| Total Assets | 301,496 | 294,209 |
| Total Equity | (185,869) | (150,602) |
| Equity/Total assets (%) | (61.6%) | (51.1%) |
The deficit in shareholders' equity of Kardan N.V. increased from a deficit of €150.6 million as of December 31, 2019 to a deficit of €185.9 million as of June 30, 2020, primarily due to the loss in the period.
Negotiations with debenture holders
Since the Company did not repay the principal and interest payments which were due in February 2018, 2019 and 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.
Management is advancing the negotiations with the representatives of the debenture holders and hopes to reach a debt settlement in the second half of 2020. The framework of the debt settlement 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 shareholders in a general meeting and the approval of the Debenture Holders. The Company intends to bring the proposed settlement for approval of the general meeting of shareholders in the coming weeks. Accordingly, as of the date of 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 eleventh consecutive quarter.
In addition, as at June 30, 2020 some Group companies (included in the discontinued operation) did not meet certain financial covenants for which waivers have not yet been received from the lending banks. However, these companies are discussing with the financing banks restructuring of the debt to the banks.
Financial position and going concern
In their review report as of June 30, 2020, 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, 2019 and 2020 payments 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, which entails, amongst others, conversion of debt to equity and transfer of the control of the Company to the Debenture Holders. However, there is no certainty as to the results of these discussions.
For additional information regarding the financial position of the Company, see section 3 of the Report of the Board of Directors regarding the cash flow forecast and Note 1 to the condensed interim consolidated financial statements. In addition, please refer to Notes 1 and 8 to the condensed interim consolidated financial statements of the Company in relation to the financial position of Tahal.
Highlights per activity:
The following is an analysis of the results of the different activities for H1 2020.
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 six months ended June 30, |
For the three months ended June 30, |
For the year ended December 31, |
||||
|---|---|---|---|---|---|---|
| In thousands of Euro | 2020 | 2019 | 2020 | 2019 | 2019 | |
| Real Estate - Development | ||||||
| Sale of apartments Cost of sales |
10,712 (8,347) |
4,962 (4,187) |
5,381 (4,563) |
3,646 )3,164( |
55,496 (47,053) |
|
| Gross Profit | 2,365 | 775 | 818 | 482 | 8,443 | |
| SG&A expenses | (1,073) | )1,109( | (639) | )662( | (2,889) | |
| Gain (loss) from disposal of fixed assets and investments, net |
- | - | - | - | (1,555) | |
| Equity earnings (losses) | 4,382 | 5,631 | 1,424 | 2,759 | 14,667 | |
| Operational profit - Real Estate Development segment |
5,674 | 5,297 | 1,603 | 2,579 | 18,666 | |
| Real Estate - Investment Property | ||||||
| Rental revenues | 4,535 | 4,304 | 2,334 | 2,213 | 9,055 | |
| Cost of rental revenues | (1,315) | )1,889( | (609) | )895( | (3,529) | |
| Gross Profit | 3,220 | 2,415 | 1,725 | 1,318 | 5,526 | |
| SG&A expenses | (1,072) | )981( | (520) | )487( | (1,497) | |
| Loss from fair value adjustments | (7,711) | )112( | (4,844) | )112( | - | |
| Profit from other income (expense), net | 1,049 | - | - | - | - | |
| Operational profit (loss) - Real Estate Investment Property segment |
(4,514) | 1,322 | )3,639( | 719 | 4,029 | |
| Total operational profit (loss) - Real Estate | 1,160 | 6,619 | (2,036) | 3,298 | 22,695 | |
| Other unallocated expense | (975) | )1,102( | (482) | )543( | (2,217) | |
| Profit (loss) before finance expenses and income tax |
185 | 5,517 | (2,518) | 2,755 | 20,478 | |
| Finance expenses, net | (5,664) | )4,014( | (3,133) | )2,473( | (8,287) | |
| Tax benefits (expenses) | 1,471 | )44( | 813 | )17( | (653) | |
| Profit (Loss) for the period – attributed to Company's shareholders |
(4,008) | 1,459 | (4,838) | 265 | 11,538 |
Additional information - Kardan Land China
| For the six months ended June 30 |
For the three months ended June 30 |
For the year ended December 31 |
|||
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Operational Information | |||||
| Revenue Residential - JV (in €thousands) * | 20,222 | 24,584 | 8,639 | 10,947 | 62,861 |
| Gross profit residential - JV (in €thousands) * | 12,434 | 10,301 | 5,106 | 4,989 | 29,276 |
| Apartments sold in period (a) | 506 | 316 | 317 | 239 | 678 |
| Apartments delivered in period (b) | 351 | 540 | 154 | 227 | 1,679 |
| Total apartments sold, not yet delivered (c) | 1,028 | 1,647 | 1,028 | 1,647 | 875 |
(a) All residential apartments, incl. Dalian (100%).
(b) In H1 2020 38 apartments were delivered in the Dalian project compared to nil apartments in H1 2019.
(c) KLC's part in the gross profit from apartments sold, not yet delivered is estimated at €21 million as of 30 June 2020.
| Units sold in the period | ||||||
|---|---|---|---|---|---|---|
| For the six months ended June 30, |
For the three months ended June 30, |
For the year ended December 31, |
||||
| 2020 | 2019 | 2020 | 2019 | 2019 | ||
| 100% owned | ||||||
| Europark Dalian | 35 | 22 | 19 | 11 | 91 | |
| Joint Venture projects* | ||||||
| Olympic Garden | 100 | 100 | 61 | 52 | 135 | |
| Suzy | 325 | 92 | 203 | 64 | 297 | |
| Palm Garden | 7 | 7 | 5 | - | 2 | |
| City Dream | 39 | 39 | 29 | 112 | 153 | |
| 471 | 294 | 298 | 228 | 587 | ||
| Total | 506 | 316 | 317 | 239 | 678 |
* 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 H1 2020 revenue from the sale of apartments (the handover of apartments in the Europark Dalian project) amounted to €10.7 million (H1 2019: €5 million) and was impacted by some decrease in selling prices of the apartments following the COVID-19 crisis. In H1 2020, 38 units in the C towers of the Europark Dalian project were delivered, compared to no deliveries in H1 2019, when all segment revenues resulted from the progress of construction.
SG&A expenses remained virtually stable at €1.1 million. Selling and marketing activities mainly relate to the C towers in the Europark Dalian project, of which the sales process commenced in 2017.
'Equity earnings' (the result of the residential activities from joint venture projects) decreased in H1 2020 and contributed a profit of €4.4 million in H1 2020 compared with a profit of €5.6 million in H1 2019 due to lower number of apartments delivered in the period . Revenue of the residential joint venture projects in H1 2020 amounted to €20.2 million (H1 2019: €24.6 million). Despite the COVID-19 crisis, in H1 2020 interest remained strong and materialized in relatively high number of apartments sold in most of the Group's residential joint venture projects.
The profit from operations of the Real Estate development segment amounted to €5.7 million in H1 2020 compared to a profit of €5.3 million in H1 2019.
The total number of units in inventory decreased from 1,794 at December 31, 2019 to 1,706 as at June 30, 2020. The number of unsold units in inventory (including the inventory of joint venture projects) decreased to 678 as at June 30, 2020 (919 as at December 31, 2019). The percentage of unsold units for which construction was completed as at June 30, 2020, slightly decreased to 33% (34% as at December 31, 2019). Following the COVID-19 crisis, management concluded, taking into account sales after balance sheet date, that no impairment of the value of the apartment inventory in any of the residential projects was required.
Real Estate – Investment Property
The Real Estate Investment Property segment relates to the results of operation of the Galleria Dalian shopping mall.
Revenues of the Investment Property segment increased slightly to €4.5 million in H1 2020 (H1 2019: €4.3 million), despite rental discounts, granted to tenants in H1 2020 following the COVID-19 crisis. The discounts, amounting to €0.7 million, are spread over the term of the relevant lease.
The gross profit increased significantly from 56% in H1 2019 to 71% in H1 2020 due to actions taken by the management to reduce operating expenses.
SG&A increased slightly from €1 million in H1 2019 to €1.1 million in H1 2020, mainly due to additions to the bad debts provision as a result of the impact of the COVID-19 crisis.
Due to the restrictions imposed by the authorities in China following the outbreak of COVID-19, shops had to be temporarily closed which resulted in a sharp decrease in the footfall and sales. As of 30 June 2020, only 19 shops remained closed (out of 187 shops). As of the date of this report, 18 shops (7.9% of the leased space) are closed in light of several new cases of COVID-19 found in Dalian at the end of July. At end of July, the number of visitors and the sales turnover of the shopping mall reached approximately 77% and 67%, respectively, of their rate before the COVID-19 outbreak.
In light of the impact of the COVID-19 crisis on the operational parameters of Galleria Dalian shopping mall in H1 2020, the Company prepared an updated valuation of the shopping mall. This resulted in an impairment of €7.7 million in H1 2020.
Following the above, the result of operations of the Investment Property segment came in at a loss of €4.5 million in H1 2020 (H1 2019 €1.3 million profit).
The value of the investment property amounted to €203.1 million as per 30 June 2020 compared to €214.6 million at year-end 2019. The decrease in value included a negative impact of €3.8 million as a result of the depreciation of the RMB versus the EUR (H1 2019: positive impact of €0.8 million) in addition to the abovementioned value impairment.
Real Estate - Total
Overall, the Real Estate activities reported an operational profit of €1.2 million in H1 2020 compared to a profit of €6.6 million in H1 2019.
'Financing expenses, net, amounted to €5.7 million, compared to €4 million in H1 2019. The financing expenses mainly include interest expenses related to the Europark Dalian project loan, as well as a negative foreign exchange impact of €0.2 million, compared with a positive foreign exchange impact of €0.1 million in H1 2019.
Tax expenses / benefit in H1 2020 amounted to a benefit of €1.5 million as a result of the change in deferred tax assets related to the value of the investment property (H1 2019: €0.04 million tax benefit).
Net profit / loss in H1 2020 amounted to €4.0 million loss (H1 2019: €1.5 million profit).
Loans – In Q2 2020, it was decided to make partial early repayments of the Dalian loan in the amount of up to RMB 150 million (€19 million). The early repayments are expected to take place from June until November 2020. In June 2020 KLC made a partial early repayment of the Dalian loan in the amount of RMB 90 million (€11.5 million). As at 30 June 2020, the Dalian loan amounted to €82 million which was presented as a short-term liability as it matures in November 2020, unless extended for an additional year as stipulated in the loan agreement, or refinanced. The parties are negotiating the aforesaid extension of the loan for an additional year and have agreed on the extension terms. The management of KLC expects that the extension will be signed in the coming days.
Additional balance sheet information - Kardan Land China
| 2020 (30.6) |
2019 (31.12) |
|
|---|---|---|
| (in €thousands) | ||
| Real Estate – Development | ||
| Share of investment in JVs | 47,445 | 47,168 |
| Inventory | 34,306 | 41,728 |
| Real Estate – Investment Property | ||
| Investment Property | 203,115 | 214,577 |
| Cash & short-term investments | 23,142 | 36,619 |
| Total Assets | 356,176 | 386,677 |
| Loans and Borrowings | 82,025 | 95,029 |
| Advance payments from buyers (Real Estate – Development) | 1,704 | 4,657 |
| Total Equity | 219,297 | 226,221 |
WATER INFRASTRUCTURE (TGI) - Discontinued operation
The results of Tahal Group International B.V. ('TGI' or 'Tahal), Kardan's water infrastructure company, are presented under Profit (loss) from discontinued operation - 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 six months ended June 30, |
For the three months ended June 30, |
For the year ended December 31, |
||
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Contract revenues | 48,243 | 78,814 | 23,985 | 43,399 | 152,844 |
| Contract cost | (48,291) | )70,384( | (26,772) | )39,468( | (145,524) |
| Gross profit (loss) | (48) | 8,430 | (2,787) | 3,931 | 7,320 |
| SG&A expenses | (4,898) | )5,550( | (2,464) | )2,641( | (11,627) |
| Share of profit (loss) of investments accounted for using the equity method |
(204) | )2,385( | (107) | )1,577( | 1,028 |
| Other operational expenses | (4,537) | )12,153( | (5,809) | )11,302( | (21,877) |
| Result from operations before financing expenses | (9,687) | )11,658( | (11,167) | )11,589( | (25,156) |
| Financing expenses, net | (3,334) | )3,283( | (2,161) | )56( | (5,476) |
| Income tax (expenses) / benefit | )841( | 942 | (477) | 335 | (5,139) |
| Net result of water infrastructure activities | (13,862) | )13,999( | (13,805) | )11,310( | (35,771) |
| Adjustments to investment in TGI | 1,178 | - | 842 | - | (1,178) |
| Net result | (12,648) | )13,999( | (12,963) | )11,310( | (36,949) |
| Attributable to: | |||||
| Equity holders (Kardan N.V.) | (12,818) | )11,859( | (12,818) | )8,936( | (32,233) |
| Non-controlling interest holders | 170 | )2,140( | (145) | )2,374( | (4,716) |
| (12,648) | )13,999( | (12,963) | )11,310( | (36,949) |
| Additional Information Water Infrastructure | 2020 (30.6) |
2019 (31.12) |
|
|---|---|---|---|
| Balance sheet (in €thousands) | |||
| Cash & short-term investments | 8,431 | 11,653 | |
| Total Assets | 160,261 | 183,523 | |
| Net debt | (55,394) | (49,363) | |
| Equity attributable to equity holders (Kardan N.V.) | (13,479) | 0 | |
| Equity/Assets | (24%) | 0% | |
| Other (in USD million) | |||
| Backlog | 545.4 | 506.2 |
During H1 2020 Kardan's discontinued operation - Water Infrastructure – reported a loss attributable to equity holders of €12.8 million compared to a loss of €11.9 million in H1 2019.
Revenues of the water infrastructure activities decreased in the first half of 2020 to €48.2 million compared to €78.8 million in H1 2019, mainly due to delays in projects in India and Europe due to the financial position of Tahal.
The gross margin decreased from 11% in H1 2019 to practically zero following delays in projects and provisions for losses mainly on terminated projects.
Other operational expense amounted to €4.5 million in H1 2020, compared to an expense of €12.2 million in H1 2019 and included a provision for doubtful debts partially offset by profit from the sale of an associated company in Q1 2020. Combined with the decrease in gross profit, the operational result amounted to a loss of €9.7 million in H1 2020 compared to an operational loss of €11.7 million in H1 2019.
Financing expenses remained virtually stable at €3.3 million. Finance expenses are mostly due to interest expenses on utilization of credit lines.
In H1 2020 the water infrastructure activities generated a negative cash flow from operating activities of €6.4 million.
Equity of TGI further decreased mainly due to the loss for the period.
In order to finance its operations, TGI has utilized short term credit lines amounting to approximately US\$ 61 million from banks. As a result of its financial position, 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 31 December 2020. TGI has been negotiating with its financing banks regarding a restructuring of its debt in parallel with 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 regarding TGI's financial position refer to Note 8 to the Q2 financial statements of the Company.
CORPORATE HOLDING AND OTHER
| In thousands of Euro | For the six month ended June 30, |
For the three month ended June 30, |
For the year ended December 31, |
|||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | ||
| Corporate expenses: | ||||||
| General and administration expenses | )1,663( | )2,164( | )762( | )933( | (3,211) | |
| Financing income (expense), net | (12,743) | )35,415( | )9,044( | )13,437( | (61,204) | |
| Income tax expenses | - | )69( | - | )29( | (74) | |
| (14,406) | )37,648( | )9,806( | )14,399( | (64,489) | ||
| Other activities: | ||||||
| Equity earnings (Avis Ukraine - discontinued operations) | - | 1,473 | - | - | 1,473 | |
| - | 1,473 | - | - | 1,473 |
Corporate expenses:
G&A expenses in H1 2020 decreased to €1.7 million compared to €2.2 million in H1 2019, mainly due to lower consultancy services expenses and other savings relating to the impact of the COVID-19 crisis, predominantly flight and accommodation costs.
Financing expenses decreased to €12.7 million in H1 2020, compared to €35.4 million in H1 2019 mainly due to net positive impact of foreign currency exchange differences and Israeli CPI in H1 2020 compared to H1 2019. The net positive impact of foreign exchange differences and the Israeli CPI on the Company's debentures, which are denominated in NIS, was €2.6 million in H1 2020 (H1 2019: €22.6 million negative). Finance expenses also include interest in arrears on the Company's Debentures.
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 €1.4 million was recorded.
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 COVID-19 crisis (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 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 consolidated assets as of June 30, 2020 amounted to €488 million.
Kardan is listed on 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
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)"