Annual Report • Apr 27, 2012
Annual Report
Open in ViewerOpens in native device viewer
| KEY FIGURES | 3 |
|---|---|
| LETTER TO THE SHAREHOLDERS | 4 |
| VGP IN 2011 | |
| MARKETS | 8 |
| FACILITY MANAGEMENT | 14 |
| dis posal OF ASSETS |
17 |
| PROFILE | 18 |
| STRATEGY | 20 |
| REPORT OF THE BOARD OF DIRECTORS | 24 |
| CORPORATE GOVERNANCE STATEMENT | 25 |
| RISK FACTORS | 30 |
| SUMMARY OF THE ACCOUNTS AND COMMENTS | 34 |
| INFORMATION ABOUT THE SHARE | 40 |
| OUTLOO K 2012 |
42 |
| BOARD AND MANAGEMENT | |
| BOARD OF DIRECTORS | 44 |
| EXECUTIVE MANAGEMENT TEAM | 45 |
| PORTFOLIO | 46 |
| FINANCIAL REVIEW | 67 |
| investment property | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|
| Total lettable area (m²) | 641,3781 | 576,936 | 535,872 | 351,661 | 176,614 |
| Occupancy rate (%) | 98.5%2 | 98.8% | 91% | 95% | 100% |
| Fair value of property portfolio | 105,565 | 481,624 | 428,105 | 394,027 | 225,171 |
| balance sheet | |||||
| Shareholders' equity | 154,735 | 176,342 | 155,240 | 155,555 | 130,814 |
| Gearing | |||||
| Net debt / shareholders' equity | n.a. | 1.47 | 1.53 | 1.19 | 0.51 |
| Net debt / total assets | n.a. | 52.2% | 54.0% | 45.2% | 23.2% |
| balance sheet | |||||
| Gross rental income | 14,446 | 28,573 | 21,726 | 12,037 | 5,557 |
| Property operating expenses and net service charge income / (expenses) |
(516) | (1,245) | (1,680) | (1,704) | (984) |
| Net rental and related income | 13,930 | 27,328 | 20,046 | 10,333 | 4,573 |
| Other income / (expenses) - incl. Administrative costs | (1,700) | (1,809) | (2,285) | (1,882) | (403) |
| Operating result (before result on portfolio) | 12,230 | 25,519 | 17,761 | 8,451 | 4,170 |
| Net current result | 9,555 | 7,967 | 6,678 | (917) | 2,792 |
| Net valuation gains / (losses) on investment property | 3,133 | 22,759 | (6,754) | 36,396 | 41,527 |
| Deferred taxes | (595) | (4,324) | 1,252 | (6,915) | (7,890) |
| Result on property portfolio | 2,538 | 18,435 | (5,502) | 29,481 | 33,637 |
| Share in the results of associates | 844 | — | — | — | — |
| Net result | 12,937 | 26,402 | 1,176 | 28,564 | 36,429 |
| RESULT PER SHARE |
|||||
| Number of ordinary shares | 18,583,050 | 18,583,050 | 18,583,050 | 18,583,050 | 18,583,050 |
| Net current result per share (in €) | 0.51 | 0.43 | 0.36 | (0.05) | 0.15 |
| Net result per share (in €) | 0.70 | 1.42 | 0.06 | 1.54 | 1.96 |
1 ) Including 573,426 m² under management
2 ) Including VGP CZ I and VGP CZ II. Excluding VGP CZ I and VGP CZ II the occupancy rate would be 94.5%
3 ) The committed leases include leases from associate companies (€ 35.3 m) under management
As already announced in last year's annual report, 2011 has been a year of transformation for VGP, in which we have changed many parameters of our business approach and which can be shortly summarised as follows:
Against the background of the financial crisis, which saw the availability of financing almost disappear, VGP reflected intensively what the best way forward would be for its business and shareholders.
The intensive growth rate of new projects which VGP had been developing through the years regardless the economic cycle combined with the hold strategy by which all completed projects were kept in VGP's portfolio put a significant strain on the Group's ability to arrange for additional or new financing necessary to continue to finance the development of new projects.
As a result VGP's core development activity and main profit contributor was at risk of having to be significantly scaled back due to the lack of sufficient financing means. Such financing being required to be able to keep a strategic land reserve and to be able to construct buildings which are not always prelet in order to be able to attract and convince new tenants of the respective locations.
We therefore decided to dispose of some of the mature income generating assets, which was realised in two subsequent transactions i.e. the sale of an 80 percent equity interest in our two major Czech logistics assets companies, on which we have informed you intensively in our past press releases.
This has allowed VGP to become again completely debt free, and to further enlarge our land bank with new projects in our core markets. It also allowed us to repay during the year a part of the fruits of many years work, to our shareholders in the form of a capital decrease of € 40 million.
This annual report has the difficult task to present the old (before) and new VGP (after the aforementioned transactions) on a comparable basis.
VGP intends to streamline further its asset base in combination with an ambitious growth plan in its core markets in the years to come. In the first quarter of 2012 a binding agreement has been signed with East Capital to sell our asset in Estonia, this transaction will normally close during the second
quarter and will bring again an important financial windfall. We intend to proceed in the same way for other projects, once they are in a more mature phase, in the future.
It is and remains VGP's aim to develop all its new parks for its own account until they are mature and to place them subsequently at the right time in the investment market. We intend to constantly work on the extension of our land bank on top locations to enable us to continue to concentrate on our core development activity.
At the same time we also put a lot of effort into our facility and property management activities providing services for our own assets as well as for our associated companies and occasionally for other third parties. The facility management team has substantially grown over the past year and having reached the necessary critical mass has been split of into a separate specialised subsidiary with its own business plan and management.
A NEW CHALLENGE
When we look at our core markets we have to conclude that economic growth is very tightly connected to the German economy. A lot of our customers are German or German oriented industrial suppliers and a lot of the internal growth of our portfolio is driven by their demand for expansion of their current facilities and from new outsourcing projects.
In the past we have been approached on numerous occasions with the request to realise similar projects in Germany or Poland as the ones realised in the Czech Republic. We have therefore resolutely decided to invest with our VGP park concept in certain German and Polish regions where growth has proven to be most stable .
The German market has shown very solid numbers over the past years in take up of industrial property with extreme low vacancy levels in most of the economic important hubs while also Poland has set a new record in the past year in take-up of modern warehouse space. A large number of enterprises is still active in older premises, in the middle of living concentrations and are expected over time to move to more modern premises.
Last but not least , Germany is a safe haven for investors which is reflected in the higher real estate prices investors are willing to pay for A-class industrial property. Also Poland and the Czech Republic, whose economies have proven stable in the past economically difficult years have come on the radar screens of potential investors, as demonstrated by the transactions realised by VGP in 2011. I expect that the largest part of our future growth will come from our German activities.
I have to thank again our employees which have given the best of themselves and have very well adapted to the new challenges ahead.
The board of directors has decided to convene an Extraordinary Shareholders Meeting to propose a further capital reduction in cash of € 15 million (€ 0.81 per share).
We are very motivated at VGP to prove that we can replicate our business model into the future and into new geographies and it is therefore with optimism that we look into 2012.
Best regards, Jan Van Geet, CEO
I n 2011 VGP successfully changed its business model and strategy from strict develop and hold towards a strategy with a bigger focus on development and a more pro-active approach in respect of potential disposal of the Group's income generating assets, thus effectively realising its historic development profit. The sale of an 80% equity interest in VGP CZ I and VGP CZ II with a total transaction value of around € 435 million allowed the Group to optimise its capital structure and to pay to its shareholders a capital reduction of € 40.0 million in cash.
VGP took full benefit from its competitive developer position in combination with the sustained demand for semi-industrial buildings in the mid-European markets. This not only resulted in the strong development activities seen during the year but also allowed the Group to secure new land plots to support the future development pipeline.
These transactions reflect the renewed investor confidence in the CEE markets.
Investment volumes totalled €6.1bn in Central and Eastern Europe ("CEE", defined as Poland, the Czech Republic, Hungary, Romania and Slovakia) in 2011, up 92% from 2010 (€3.2bn), which represents a record year for growth since our records began. To put this in context, growth across Europe was 14.5% over 2011, with the UK flat at 1.0%, France at 32% and Germany at 29%. Activity in the region peaked in 2006 at €8.6bn before reaching a nadir of €2bn in the depths of the financial crisis in 2009. Growth in CEE in 2011 was boosted by activity in the logistics sector mainly through the sale of VGP to AEW and Tristan Capital and major retail deals, including the sale of the Forum Nova Karolina, Olympia Brno and Galeria Mokotow shopping centres.
| CEE Real Estate Investment (€bn) |
|||||
|---|---|---|---|---|---|
| 2010 | 2011 | ||||
| Poland | 1.8 | 2.4 | 38% | ||
| Czech Republic | 0.8 | 2.2 | 168% | ||
| Hungary | 0.3 | 0.6 | 147% | ||
| Romania | 0.3 | 0.4 | 36% | ||
| Slovakia | 0.1 | 0.5 | 739% |
Source: Jones Lang LaSalle
The Czech Republic was the main driver of growth within the CEE market in 2011, with investment volumes up 168% YoY and net growth of €1.4bn. The retail sector outperformed offices in CEE over 2011, with net growth of €1.3bn, the opposite of what is seen at a wider European level.
Source: Jones Lang LaSalle
1 ) Source Jones Lang LaSalle
Industrial investment volumes also recovered in 2011, reaching €0.63bn, up 155% from the 2010 figure of €0.25bn. Market share grew 10% over the year. Significant industrial and logistics properties were traded in the Czech Republic with the two most notable portfolios having been VGP CZ I located mainly in Prague and VGP CZ II located around major logistic hubs in the Czech Republic. The two transactions totalled more than €400 million and made up 63% of all 2011 volume in this asset class in the CEE region. The VGP sale played a key role in attracting greater investor interest into the logistics sector in CEE.
The occupational story for the logistics and industrial sector is strong as investors look beyond retail towards the maturing warehouse market, which follows retailers across Europe. Development has been driven by expansion as investors upgrade from old space and companies place their outsourcing companies within the region. We are seeing large volumes of take up across Europe in 2011, with the largest volumes were recorded in Poland, Russia and Germany. New supply has significantly decreased with developers turning towards bespoke developments for tenants as opposed to speculative schemes.
We believe that the overall investment sentiment and outlook in CEE, particularly for Poland and the Czech Republic, will continue to be positive. The long-term trend for CEE is one of upward growth, with occupational demand strong and inventories high. Nevertheless, location is key when investing in CEE and we expect investors to proceed with caution when they step over from the side lines into the market.
The main factor that will influence the real estate sector in 2012 will be the situation with the banks. This is in respect of banks' ability to provide new financing on projects and the allimportant question if they are able or willing to extend facilities on loans which mature in 2012, having been granted at the peak of the market. Additionally, factors such as the sovereign debt problems faced by a number of countries along with the concerns facing the euro will also impact on activity. There are a number of issues within the real estate sector in Europe that will be key themes in 2012. These include the freezing and in some cases liquidation of a number of German Open Ended funds along with the treatment of properties falling under NAMA.
In Poland, prime office yields are estimated to be at 6.25%, retail yields at 6.00% and warehouse yields at around 8.0% at the end of Q4 2011. Jones Lang LaSalle forecast prime yields to remain stable in the short term but, this will highly depend on how the situation in the Eurozone and the banking sector evolves throughout 2012. The yield gap between prime and secondary product is 100 to 200 bps and we expect this spread to continue. In terms of other CEE markets we estimate a spread of approximately 0 - 25 bps for the Czech Republic and up to 200 bps for less mature markets.
Own portfolio
During the year 2011 VGP signed new annualised committed leases in excess of € 1.1 million in total of which € 0.9 million related to new lettable area and € 0.2 million to the renewal of existing or replacement leases. These new leases represented 20,353 m² of lettable area. This brings the annualised committed leases to € 4.7 million as at 31 December 2011. The committed annual rent income represents the annualised rent income generated or to be generated by executed leases and future lease agreements.
The signed lease agreements as at 31 December 2011 represent a total of 87,753 m² of lettable area and correspond to 16 different tenants' lease or future lease agreements. The weighted average term of the committed leases was 8.6 years at the end of December 2011.
During the year, 1 project representing a lettable area of 6,154 m² was completed bringing the total wholly owned property portfolio to 4 buildings which represent 67,952 m² of lettable area. The completed building was located in VGP Park Györ (Hungary) and is fully let. The occupancy rate of the own portfolio reached 94.5% at the end of 2011.
Following the sale of VGP CZ I and VGP CZ II, VGP started to perform development activities for its associates as well as providing facility management and leasing services to these associated companies.
During the year 2011 VGP negotiated for its associates new annualised committed leases in excess of € 3.5 million in total of which € 2.7 million related to new lettable area and € 0.8 million to the renewal of existing or replacement leases. These new leases represented 63,651 m² of lettable area. This brings the annualised committed leases in the joint ventures to € 35.3 million as at 31 December 2011. The signed lease agreements represent a total of 591,540 m² of lettable area and correspond to 147 different tenants' lease or future lease agreements. The weighted average term of the committed leases was 4.9 years at the end of December 2011
Prod. Assembling 30% > 5 years 41%
Retail/Wholesale/Other 8% > 2-5 years 38%
COMMITTED LEASE MATURITY 31 December 2011 (in m²)
During the year, 7 projects representing a total lettable area of 56,895 m² were completed bringing the total property portfolio to 53 buildings which represent 573,426 m² of lettable area.
The completed buildings were all located in the Czech Republic i.e. 2 buildings in VGP Park Horni Pocernice representing 7,432 m², 3 buildings in VGP Park Liberec representing 27,754 m² of lettable area, 1 building of 13,014 m² of lettable area in VGP Park Nyrany and 1 building of 8,695 m² of lettable area in VGP Park Olomouc (CZ) All these buildings are fully let.
The portfolio of VGP CZ I and VGP CZ II is solely focussed on the Czech Republic. The occupancy rate of the associates' portfolio reached 100% at the end of 2011.
The development activities for own account and undertaken for associate companies have shown a strong track record over the past few years. Over the total financial period from 2004 to 2011, the property portfolio (in m²) has now increased at a compound annual growth rate ("CAGR") of 89%.
At the end of December 2011 there were 6 buildings under construction: in the Czech Republic; 1 building in each of VGP Park Tuchomerice, and VGP Park Hradek nad Nisou, and in the other countries also 1 building in each of VGP Park Malacky (Slovakia), VGP Park GyŐr (Hungary), VGP Park Tallinn (Estonia) and VGP Park Timisoara (Romania). The new buildings under construction on which several pre-leases have already been signed, represent a total future lettable area of 69,562 m².
VGP is actively looking at further expanding its land bank. During the second half of 2011 new land plots (totalling 155,844 m²) were acquired, allowing the development of 77,000 of lettable area. The Group has currently another 430,000 m² of new plots of land under option, subject to permits, allowing to develop approx. 180,000 m² of new projects. VGP expects to be able to secure the majority of the necessary permits over the next few months.
The current land bank allows VGP to develop besides the current projects under construction (69,562 m²) a further 121,000 of lettable area within the Czech Republic and 154,000 m² of lettable area outside the Czech Republic. VGP is confident that the development activities will continue to be a substantial profit contributor for the Group in the near future driven by attractive construction prices combined with the attractiveness of the VGP land bank to potential tenants.
At the end of December 2011 VGP was developing 6 buildings for its associates: 1 building in each of VGP Park Hradec Králové, VGP Park Nýřany, VGP Park Turnov, and 3 buildings in VGP Park Horni Pocernice. The new buildings under construction on which several pre-leases have already been signed, represent a total future lettable area of 33,261 m².
In March 2012 VGP concluded a second agreement with European Property Investors Special Opportunities, L.P. (EP-ISO) for the sale of an 80% equity interest in VGP CZ IV a.s. following the purchase by VGP CZ IV a.s. of the last remaining development land adjacent to the existing VGP Park Horni Pocernice (Prague) at the end of December 2011. This company will therefore become an associate company during 2012 and VGP will also be retained as developer for the construction of the planned buildings.
Following the sale of VGP CZ IV the associate companies will have a land bank which allows VGP to develop, on behalf of these associates a further 132,000 m²of lettable area besides the current projects under construction (40,926 m²). The development activities should provide the Group with additional development fee income during the next few years.
F or VGP, 2011 was again a very important and ground-breaking year from the perspective of facility management. During 2011 all facility and property management services were regrouped into one group subsidiary VGP FM Services. The services provided by VGP FM Services cover the usual facility management as well as the property management services.
Facility management services are provided internally as well as externally whereby VGP FM Services is responsible for managing the proper and undisturbed operation of the buildings and performs all actions such as maintenance services, waste management services, maintenance greenery etc, that may be necessary in this respect.
In addition and as part of its offered services VGP FM services will also perform project management services. These services cover the performance of capital improvements and any construction works as may be requested by the owner of the buildings. This scope covers the full range of project management services (supervision and coordination of the contractors for design, obtaining permits, performing the works and any tenders relating thereto).
VGP facility management invests constantly in the expansion of its team. The facility team was expanded with 4 new employees during 2011 bringing the total team to 12 employees, and it is anticipated that this number will rise in the years to come.
During the year the property portfolio was extended by one entirely new park in Hrádek nad Nisou, thereby boosting the number of parks to 14. The total buildings under management by VGP facility management increased with nine new buildings, and another three buildings were doubled in size. At the end of 2011, VGP was managing as a result more than 640,000 m2 of lettable area.
The entry of majority capital partners into VGP CZ I (AEW) and VGP CZ II (TRISTAN) introduced a number of new requirements and challenges which ultimately helped VGP facility management to establish itself as a real independent business partner.
During 2011 VGP facility management took a number of initiatives to improve the quality of service and to continue to reduce the operational cost of the tenants. These initiatives were amongst others:
In recent years, facility management has been growing in importance. Companies have come to realise that managing a building or park entails considerable costs and that by cooperating with specialists they can better control these costs and in many cases even significantly reduce them.
VGP FM Services undertakes to be a reliable and flexible partner, to provide comprehensive services while maintaining an individual approach to tenants, to be attentive to customer satisfaction and the good quality of the managed property.
Based on the gained experience of the last 6 years it is VGP's facility management's firm intention to further develop the facility management business by offering new or improved services to existing tenants as well as to look for other external opportunities to accelerate its growth.
The AFM database application for facility management has been in use since 2009. The system was upgraded during 2011 with new modules which allow an even more fluidly connection of the data flow of the individual departments within VGP while allowing external access to VGP's customers. One of the important changes in the AFM upgrade is the launch of the public client section, which will be presented in 2012 to VGP's tenants and partners. By means of direct access to VGP's system, VGP's partners will acquire a unique possibility to monitor online and in real time the process of addressing their requests, to generate
various summary information (such as when and what services and audits are planned in their buildings), and to obtain statements regarding monthly and/ or annual costs related to management of their buildings or parks.
Corresponding to the trend towards green buildings, and including the economical and environmentally friendly operation and management of our buildings, decision was taken to commence work during 2011 on a feasibility study for acquiring LEED certification. LEED is one of the most widely acquired and internationally respected certificates
denoting energy efficiency of a building. It is organised through the U.S. Green Building Council. To acquire the certificate is a rather lengthy and demanding process, but, on the other hand, it verifies that a building's operation is both economical and environmentally friendly and it brings considerable advantages for the tenant in the form of lower operating costs. The certification goes from bronze over silver, gold until platinum. Based on the preliminary results of the feasibility study it has been confirmed that under certain circumstances VGP's buildings would be able to attain as high as the gold level of certification. The concrete outcome and implementation of the study will be known and done during 2012.
Over the past few years VGP management reviewed the different strategic alternatives in order to enable the Group to continue its growth whilst at the same time remaining adequately financed. The most favoured alternative was to look for a new capital partner whereby the VGP Group would retain the operational management of the assets whilst at the same time freeing up the necessary financial means to allow VGP to continue to invest in its development platform and pipeline.
It is with this in mind that VGP decided to change in business model and strategy from a strict develop and hold strategy towards a strategy with a bigger focus on development and a more pro-active approach in respect of potential disposal of the Group's income generating assets.
This strategy resulted in 2011 in the VGP CZ I and VGP CZ II transactions whereby an 80% equity interest was sold to a new capital partner enabling it to continue to develop its business lines such as facility management whilst at the same time allowing the Group to pursue an active development strategy. Both transactions were completed during 2011.
Based on the new strategy VGP entered in two new agreements after the yearend. During the month of February 2012 VGP entered into a binding agreement with East Capital to sell its newly built logistics property of 40,000 m² located in Tallinn (Estonia). The assets will be acquired by East Capital Baltic Property Fund II, a new fund managed by East Capital and the transaction is expected to close by 15 May 2012. The transaction value is around € 24 million. Part of these proceeds will be used for new investments in the Baltic states.
In addition in March 2012 VGP concluded a second agreement with European Property Investors Special Opportunities, L.P. (EPISO) for the sale of an 80% equity interest in VGP CZ IV a.s. following the purchase by VGP CZ IV a.s. of the last remaining development land adjacent to the existing VGP Park Horni Pocernice (Prague) at the end of December 2011. It is expected that the transaction will be closed during the second quarter of 2012.
The net assets of VGP Estonia and VGP CZ IV which are earmarked for sale can be summarised at 31 December 2011 as follows:
The price consideration of these transactions exceeds the unrealised gain on the property portfolio of VGP Estonia and VGP CZ IV as disclosed in the 31 December 2011 consolidated accounts. As at 31 December 2011 the consolidated accounts included a gross rental income for VGP Estonia of € 1.2 million and net financial expenses for VGP Estonia of € 0.3 million.
In respect of VGP CZ IV, VGP will be retained as developer for the planned development activities on this new development land. Besides this VGP will subsequently also be responsible for the operational management of the VGP CZ IV assets and perform facility management services, project management services and lease management services generating additional fee income for the Group.
| In thousands € | |
|---|---|
| Disposal group held for sale | 33,944 |
| Liabilities related to disposal group held for sale | (7,034) |
| Total net assets | 26,910 |
V GP (www.vgpparks.eu) constructs and develops high-end semiindustrial real estate and ancillary offices for its own account and for the account of its associates, which are subsequently rented out to reputable clients on long term lease contracts. VGP has an in-house team which manages all activities of the fully integrated business model: from identification and acquisition of land, to the conceptualisation and design of the project, the supervision of the construction works, contracts with potential tenants and the facility management of its own real estate portfolio. VGP focuses on top locations which are located in the vicinity
of highly concentrated living and/or production centres, with an optimal access to transport infrastructure.
VGP is quoted on Euronext Brussels and the Main Market of the Prague Stock Exchange. VGP owns a property portfolio of € 105.6 million as at 31 December 2011 which represents a total lettable area of over 67,952 m² with another 6 buildings under construction representing 69,562 m². Besides this VGP Facility Management manages 53 buildings which are owned through the associates VGP CZ I and VGP CZ II representing 573,426 m² of lettable through its wholly owned VGP FM Services subsidiary.
VGP has currently a land bank in full ownership of 1,013,237 m². The land bank allows VGP to develop besides the currently completed projects (67,952 m²) and projects under construction (69,582 m2 ) a further 121,000 of lettable area within the Czech Republic and 154,000 m² of lettable area outside the Czech Republic. Besides this, VGP has another 430,000 m² of new plots of land under option, subject to permits, allowing to develop approx. 180,000 m² of new projects. VGP expects to be able to secure the majority of the necessary permits over the next few months.
As from 2010 there was a significant change in business model and strategy of VGP with a shift from a strict develop and hold strategy towards a strategy with a bigger focus on development and a more pro-active approach in respect of potential disposal of the Group's income generating assets. This strategy resulted in 2011 in two landmark sales in the mid-European semi-industrial markets i.e. the VGP CZ I and VGP CZ II transactions. With the realisation of the sale, VGP reorganised its operating activities in three main business lines i.e. Development activities, Facility management activities and Property management services.
Development activities are the core of the VGP Group. Developments are undertaken primarily for the Group's own account. Besides this additional development activities can be carried out on behalf of associate companies or in some exceptional cases for third parties.
The Group pursues a growth strategy in terms of development of a strategic land bank which is suitable for the development of turnkey and ready-to-be-let semi-industrial projects. The plots are zoned for semi-industrial activities. The management of VGP is convinced that the top location of the land and the high quality standards of its real estate projects contribute to the long term value of its portfolio.
The Group concentrates on the sector of semi-industrial accommodation projects situated in the mid-European region. High quality projects are always developed on the basis of VGP building standards, with adaptations to meet specific requirements of future tenants but always ensuring multiple purpose use and easy future re-leasability. In their initial phase of development, some projects are being developed at the Group's own risk (i.e., without being pre-let).
The constructions, which respond to the latest modern quality standards, are leased under long term lease agreements to tenants which are active in the semiindustrial sector, including storing but also assembling, re-conditioning, final treatment of the goods before they go to the industrial clients or the retailers. The land positions are located in the vicinity of highly concentrated living and/ or production centres, with an optimal access to transport infrastructure.
The Group relies on the in-house competences of its team to execute its fully integrated business model, consisting of: the identification and acquisition of the land and development of the infrastructure, the design of the buildings, the coordination of architectural and engineering aspects, the administration to obtain the necessary permits, the tendering and coordination of the construction works including site management, and upon completion the facility management of the real estate portfolio. The Group's team negotiates and contracts building subcontractors and building material deliveries directly and monitors the follow up and coordination of the building activities itself.
During 2011 all facility and property management services were regrouped into one group subsidiary VGP FM Services. The services provided by VGP FM Services cover the usual facility management as well as the property management services.
Facility management services are provided internally as well as externally whereby VGP FM Services is responsible for managing the proper and undisturbed operation of the buildings and performs all actions such as maintenance services, waste management services, maintenance greenery etc, that may be necessary in this respect. In addition VGP FM services will on behalf of the Group or the respective third parties identify, contract, supervise and manage the relationship with third party suppliers.
In addition and as part of its offered services VGP FM services will also perform project management services. These services cover the performance of capital improvements and any other construction works as may be requested by the owner of the buildings. This scope covers the full range of project management services (supervision and coordination of the contractors for design, obtaining permits, performing the works and any tenders relating thereto).
Although the leasing activities have been historically linked to the development activities, the VGP commercial department has seen a significant change during 2011 whereby it now also provides leasing services to third parties (associate companies). The commercial department is responsible for all aspects of the performance and enforcement of the leases and the lease agreements on behalf of the associated companies, as well as for day-to-day cooperation with the tenants.
In accordance with Art.13 of the Belgian Royal Decree of 14 November 2007, the board of directors of VGP NV represented by Mr. Marek Šebesťák, Mr. Jan Van Geet, Mr. Bart Van Malderen, Mr. Jos Thys and Mr. Alexander Saverys, jointly certify that, to the best of their knowledge:
V GP ("the Company") has adopted the principles of corporate governance contained Belgian Code on Corporate Governance published on 12 March 2009 ("2009 Code") which can be consulted on http://www.corporategovernancecommittee.be/en/2009_code/latest_edition/. In accordance with the recommendations set out by the Belgian Code on Corporate Governance, the board of directors adopted a corporate governance charter ("VGP Charter") which is available on the Company's website http://www.vgpparks.eu/ investors/corporate-governance/. This Corporate Governance Statement outlines the key components of VGP's governance framework by reference to the 2009 Code applied for the year ended 31 December 2011. It also explains why the Company departs from a few of the 2009 Code's provisions.
| NAME | YEAR APPOINTED |
NEXT DUE FOR RE-ELE CTION |
MEETINGS ATTENDED |
|---|---|---|---|
| Executive director and Chief Executive Officer | |||
| Jan Van Geet s.r.o. represented by Jan Van Geet | 2008 | 2013 | 7 |
| Non-executive director | |||
| Bart Van Malderen | 2007 | 2013 | 6 |
| Independent, non-executive directors | |||
| Marek Šebesťák | 2011 | 2015 | 6 |
| Alexander Saverys | 2011 | 2015 | 6 |
| Rijo Advies BVBA represented by Jos Thys | 2011 | 2015 | 7 |
Reference is made to Terms of Reference of the board of directors - in Annex 1 of the VGP Charter for an overview of the responsibilities of the board of directors and for a survey of topics discussed at board meetings.
The board of directors consists of five members, with one executive director (the Chief Executive Officer) and four non-executive directors, of which three are independent directors.
The biographies for each of the current directors (see page 44), indicate the breadth of their business, financial and international experience. This gives the directors the range of skills, knowledge and experience essential to govern VGP.
The board of directors does not intend to appoint a company secretary. By doing so the company deviates from the recommendation in the provisions 2.9 of the Corporate Governance Code. The small size of the company and its board of directors makes such appointment not necessary.
The board of directors held 7 board meetings in 2011 of which 3 were held by conference call. The most important points on the agenda were:
Audit committee
| NAME | YEAR APPOINTED |
EXECUTIVE OR NON -EXECUTIVE |
INDEPENDENT | NEXT DUE FOR RE-ELE CTION |
MEETINGS ATTENDED |
|---|---|---|---|---|---|
| Jos Thys (Chairman) | 2011 | Non-executive | Independent | 2015 | 2 |
| Bart Van Malderen | 2011 | Non-executive | — | 2013 | 2 |
| Marek Šebesťák | 2011 | Non-executive | Independent | 2015 | 2 |
The audit committee is comprised of 3 members of the board of directors, of whom 2 are independent. The board of directors sees to it that the audit committee possesses sufficient relevant expertise, particularly regarding financial, audit, accounting and legal matters, to be able to carry out its function effectively. Reference is made to the short biographies of the above mentioned members of the audit committee to testify to their competence in accounting and auditing, as required by the Companies Code, Art. 119, 6°. These biographies can be found on pages 44 of this annual report. The members of the audit committee are appointed for a period that does not exceed the duration of a director's mandate. The members of the audit committee were re-appointed in 2011.
Reference is made to Terms of Reference of the audit committee - in Annex 3 of the VGP Charter - for an overview of the responsibilities of the audit committee. The audit committee meets at least twice a year. By doing so the company deviates from the recommendation in the provisions 5.2/28 of the Corporate Governance Code that requires the audit committee to convene at least four times a year. The deviation is justified considering the smaller size of the company.
Each year, the audit committee assesses its composition and its operation, evaluates its own effectiveness, and makes the necessary recommendations regarding these matters to the board of directors. Given the size of the Group no internal audit function has currently been created. The statutory auditor has direct and unlimited access to the chairman of the audit committee and the chairman of the board of directors. The Chief Executive Officer and the Chief Financial Officer attend all the meetings.
The audit committee met twice in 2011. The most important points on the agenda were:
| NAME | YEAR APPOINTED |
EXECUTIVE OR NON -EXECUTIVE |
INDEPENDENT | NEXT DUE FOR RE-ELE CTION |
MEETINGS ATTENDED |
|---|---|---|---|---|---|
| Bart Van Malderen (Chairman) | 2011 | Non-executive | — | 2013 | 2 |
| Alexander Saverys | 2011 | Non-executive | Independent | 2015 | 1 |
| Jos Thys | 2011 | Non-executive | Independent | 2015 | 2 |
The remuneration committee is comprised of 3 members of the board of directors, of whom 2 are independent.
The remuneration committee met twice in 2011. The CEO and CFO participate in the meetings when the remuneration plan proposed by the CEO for members of the management team is discussed, but not when their own remunerations are being decided. In fulfilling its responsibilities, the remuneration committee has access to all resources that it deems appropriate, including external advice or benchmarking as appropriate. Reference is made to Terms of Reference of the remuneration committee - Annex 2 of the VGP Charter - for an overview of the responsibilities of the remuneration committee.
The most important points on the agenda were:
— discussion on remuneration policy
— allocation of variable remuneration
The company has not set up a nomination committee. By doing so the company deviates from the recommendation in the provisions 5.3 of the Corporate Governance Code. The deviation is justified considering the smaller size of the company.
Since no management committee in the meaning of article 524bis et seq of the Belgian Companies Code has been established, the company has not included specific terms of reference of the executive management. The tasks, responsibilities and powers of the CEO and the executive management are set out in the terms of reference of the board of directors. By doing so, the company as a smaller listed company deviates from the recommendation in provision 6.1 of the Corporate Governance Code.
The VGP Charter foresees that the board of directors assesses its performance every three years as well as to the operation of the audit and remuneration committees.
The board of directors and its committees carried out the last self assessment in March 2011 with a satisfactory result. We refer to the VGP Charter for a description of the main characteristics of the methodology used for this evaluation.
REMUNERATION POLICY FOR NON-EXECUTIVE DIRECTORS
The independent and non-executive directors receive an annual fixed remuneration of € 10,000 (the chairman receives an annual remuneration of € 20,000). The directors also receive an attendance fee of € 1,000 for each meeting of the board of directors (the chairman receives a remuneration of € 2,000) and € 500 for each meeting of the audit committee or the remuneration committee they attend. For further details of the remuneration policy of the directors we refer to Annex 2 point 6.1 of the VGP Charter. Directors do not receive any remuneration linked to performance or results.
The remuneration of the members of the board of directors is reflected in the table below:
| NAME (Amounts in €) |
FIXED REMUNERATION |
VARIABLE BOARD ATTENDAN CE |
VARIABLE COMMITTEE ATTENDAN CE |
TOTAL |
|---|---|---|---|---|
| Chairman | ||||
| Marek Šebesťák | 20,000 | 12,000 | 1,000 | 33,000 |
| Directors | ||||
| Alexander Saverys | 10,000 | 6,000 | 500 | 16,500 |
| Rijo Advies BVBA represented by Jos Thys | 10,000 | 7,000 | 2,000 | 19,000 |
| Bart Van Malderen | 10,000 | 6,000 | 2,000 | 18,000 |
| Jan Van Geet s.r.o. represented by Jan Van Geet | 10,000 | 7,000 | — | 17,000 |
| Tot al |
60,000 | 38,000 | 5,500 | 103,500 |
For the executive management the remuneration is determined by the remuneration committee in line with the rules of the described in the company's charter Annex 2 point 6.2 of the VGP Charter. The executive management consists of Jan Van Geet s.r.o. represented by Jan Van Geet (Chief Executive Officer), Jan Prochazka (Chief Operating Officer) and Dirk Stoop BVBA represented by Dirk Stoop (Chief Financial Officer). VGP strives overall for a position above the market median on the total reward position with a substantial variable part based on company, team and individual performance.
Given the small organisation of the Group the VGP remuneration including the variable remuneration is set based on the performance criteria defined by the remuneration committee of 13 May 2011. These criteria relate amongst others to the occupancy rate of the income generating assets, the gearing level of the Group, the profit contribution of the development activities and the maximalisation of shareholder value.
The remuneration committee will from time to time approve an overall variable remuneration envelope based on the company's performance and delegates the effective allocation of this variable remuneration to the CEO. The allocation by the CEO to executive and senior management will occur based on individual performance taking the overall performance criteria as set by the remuneration committee of 13 May 2011 into consideration.
The remuneration policy is reviewed on an annual basis to accommodate potential developments in (labour) market characteristics, company strategy, company and individual performance as well as other relevant factors influencing the performance and motivation of the management team. Currently VGP expects to continue the current practice for the next two financial years.
Remuneration package 2011 of the CEO
Total remuneration 2011 for the executive management.
For the reported year the data regarding fixed remuneration, variable remuneration, retirement and other benefits are provided as a total for the team.
The members of the executive team are appointed for an undetermined period and the notification period, in case of termination of their employment contract is 12 months.
This rule applies to all members of the executive management. Furthermore there are no claw back provisions for variable remuneration.
VGP's board of Directors and its executive management are responsible for assessing the company risks and the effectiveness of internal controls. VGP has set up a risk assessment and internal control framework aligned with the prescriptions as set forward by the Belgian Corporate Governance Code 2009. This framework is built upon the five basic components of internal control and is aligned with the needs and size of the company.
VGP has several measures in place in order to create a control environment that is sufficiently supportive to the other control components. Amongst others:
VGP has identified and analyzed all its key corporate risks as disclosed in the 'Risk Factors' section in this annual report. These corporate risks are communicated throughout VGP's organisation. The CEO, COO and CFO monitor and analyse on an on-going basis the various levels of risk and develop any action plan as appropriate.
Control measures to mitigate the corporate risks referred to above are described in the 'Risk Factors' section. In addition, control activities are embedded in all key processes and systems in order to assure proper achievement of the company objectives.
The process of establishing financial information is organised as follows:
For periodic closing and financial reporting formal and informal written and oral instructions will be distributed to respective financial team members to ensure communication of timelines; clear assignment of task and responsibilities, and completeness of tasks.
The accounting teams are responsible for producing the accounting figures (closing bookings, reconciliations…) whereas the consolidation team checks the validity of these figures based on coherence tests by comparison with historical and budget figures; sample checks of transactions according to their materiality; specific procedures related to financial risks are in place in order to assure completeness of financial accruals.
The CFO will report periodically to the Audit Committee on all material areas of the financial statements concerning critical accounting judgments and uncertainties.
The quality of VGP's risk management and internal control framework is assessed by:
TRANSPARENCY OF TRANSACTIONS iNVOLVING SHARES OF VGP In line with the Royal Decree of 5 March 2006, which came into force on 10 May 2006, members of the board of directors and the executive committee must notify the FSMA (Financial Services and Markets Authority) of any transactions involving shares of VGP within 5 business days after the transaction. These transactions are made public on the web site of the FSMA (http://www.fsma.be) and also on the VGP website VGP (http:// www.vgpparks.eu/investors/corporategovernance/). The Compliance Officer of VGP ensures that all transactions by "insiders" are made public on this website in a timely manner. Reference is also made to Annex 4 of the VGP Charter. During 2011 two transactions by "insiders" were reported i.e. in August 2011 Mr. Jan Van Geet acquired 8,240 shares and in November 2011, VM Invest NV acquired 18,972 shares.
In accordance with Article 523 of the Companies Code, a member of the board of directors should give the other members prior notice of any agenda items in respect of which he has a direct or indirect conflict of interest of a financial nature with the Company. During 2011 there were no conflicts of interest raised.
DELOITTE Bedrijfsrevisoren BV o.v.v.e. CVBA having its offices at Berkenlaan 8B, 1831 Diegem, Belgium represented by Mr. Gino Desmet has been appointed as Statutory Auditor for a period of three years. The Statutory Auditor's term of office expires at the conclusion of the Ordinary General Meeting on 14 May 2013.
T he following risk factors that could influence the Group's activities, its financial status, its results and further development, have been identified by the Group. The Group takes and will continue to take the necessary measures to manage those risks as effectively as possible.
The Group is amongst others exposed to:
of the Group's business.
Since the Group's business involves the acquisition, development and operation of real estate, it is subject to real estate operating risks, of which some are outside the Group's control. The results and outlook of the Group depend amongst others on the ability to identify and acquire interesting real estate projects and to commercialise such projects at economically viable conditions.
Risks related to the nature and composition of its portfolio: Land for development, semi-industrial properties. The Group's real estate portfolio is concentrated on semi-industrial property. Due to this concentration, an economic downturn in this sector could have a material adverse affect on the Group's business, financial condition, operating results and cash flows. These risks are mitigated by the fact that the real estate portfolio is becoming more and more geographically diversified. In addition the properties are as much as possible standardised, allowing easy re-utilisation in case a tenant would terminate its lease.
The value of a rental property depends to a large extent on the remaining term of the related rental agreements as well as the creditworthiness of the tenants. The Group applies a strict credit policy by which all future tenants are screened for their creditworthiness prior to being offered a lease agreement. In addition the Group will seek to sign as much as possible future lease agreements in order to secure a sustainable future rental income stream.
Nearly 100% of the lease contracts incorporate a provision whereby rents are annually indexed. Tenants will, in general, be required to provide a deposit or bank guarantee or a corporate guarantee depending on their creditworthiness. The lease contracts are usually concluded for periods between 5-10 years (first break option) and include most of the time an automatic extension clause. The lessee cannot cancel the lease contract until the first break option date.
The Group could be exposed to unforeseen cost-overruns and to a delay in the completion of the projects undertaken for its own account or for associated companies. Within VGP there are several internal controls available to minimise these risks i.e.
specific cost control functions as well as project management resources which monitor the projects on a daily basis.
2010, the company also envisages to adopt a more pro-active approach in respect of potential disposal of the Group's income generating assets. The Group's revenues will as a result be partly determined by disposals of real estate projects. This means that Issuer's results and cash flow can fluctuate considerably from year to year depending on the number of projects that can be put up for sale and can be sold in that given year.
The Group is subject to a wide range of EC, national and local laws and regulations. In addition the Group may become subject to disputes with tenants or commercial parties with whom the Group maintains relationships or other parties in the rental or related businesses. Finally a change in tax rules and regulations could have an adverse effect on the tax position of the Group. All these risks are monitored on an ongoing basis and there where necessary, the Group will use external advisors to advice on contract negotiations, regulatory matters or tax matters as the case may be.
To remain attractive and to generate a revenue stream over the longer term a property's condition must be maintained or, in some cases, improved to meet the changing needs of the market. To this end the Group operates an internal facility management team in order to ensure that the properties are kept in good condition. All buildings are insured against such risks as are usually insured against in the same geographical area by reputable companies engaged in the same or similar business.
As from 2011 the facility management has become a standalone business line whereby it not only provides internal services but also facility management services to third parties. VGP FM services will therefore be potentially liable for the quality and or non-performance of its services. In order to minimise this risk a professional indemnity insurance cover was taken out.
The legal systems of the mid-European countries have undergone dramatic changes in recent years, which may result in inconsistent applications of existing laws and regulations and uncertainty as to the application and effect of new laws and regulations. The Group mitigates this risk by using reputable external local lawyers to advise on such specific legal issues as they arise.
Availability of adequate credit facilities. The Group is partly financed by shareholder loans and partly by bank credit facilities. The nonavailability of adequate credit facilities could have an adverse effect on the growth of the Group as well as on its financial condition in case bank credit facilities cannot be extended at their maturity date. The Group ensures that adequate committed credit facilities are in place to sustain its growth. VGP will start renegotiating the extension of maturing credit facilities well in advance of the respective maturity dates (usually 12 months prior to maturity date). As at 31 December 2011 the Group had € 16.9 million committed credit facilities in place with an average maturity of 3.3 years and which were drawn for 90%.
The loan agreements of the Group include financial covenants (see page 92 for further details). Any breach of covenant could have an adverse effect on the financial position of the Group. Covenants are therefore monitored on an on-going basis in order to ensure compliance and to anticipatively identify any potential problems of non-compliance for action. During 2011 the VGP Group remained well within its covenants.
The Group expects that in the medium term it will significantly increase the amount of borrowings. The Group expects that for the foreseeable future it will be operating within a gearing level (net debt / equity) of up to 2:1. As at 31 December 2011 the Group was debt free on a net debt basis. It is anticipated as new development activities are undertaken that the Group will become indebted again.
Changes in interest rates could have an adverse effect on the Group's ability to obtain or service debt and other financing on favourable terms. To this end the Group hedges its interest rate exposure by converting the majority of its variable rate debt to fixed rate debt. As at 31 December 2011 the Group was debt free and therefore none of the gross financial debt was fixed.
The Group's revenues are predominantly denominated in Euro, however, expenses, assets and liabilities are recorded in a number of different currencies other than the Euro, in particular the Czech Crown. The Group reviews these risks on a regular basis and uses financial instruments to hedge these exposures as appropriate.
1 ) Net debt measured as: (Outstanding bank debt + shareholder loans) minus cash.
| CONSOLIDATED INCOME STATEMENT – ANALYTI CAL FORM (in thousands of €) |
2011 | 2010 |
|---|---|---|
| NET CURRENT RESULT | ||
| Gross rental income | 14,445 | 11,226 |
| Service charge income / (expenses) | 830 | 13 |
| Property operating expenses | (1,345) | (715) |
| Net rental and related income | 13,930 | 10,524 |
| Other income / (expenses) - incl. administrative costs | (1,700) | (1,460) |
| Operating result (before result on portfolio) | 12,230 | 9,064 |
| Net financial result2 | (1,737) | (5,660) |
| Revaluation of interest rate financial instruments (IAS 39) |
— | — |
| Taxes | (938) | (1,371) |
| Net current result | 9,555 | 2,033 |
| RESULT ON PROPERTY PORTFOLIO | ||
| Net valuation gains / (losses) on investment properties | 3,133 | 5,193 |
| Deferred taxes | (595) | (987) |
| Result on property portfolio | 2,538 | 4,206 |
| NET RESULT | ||
| Share in the result of associates | 844 | — |
| NET RESULT (on a like for like basis) | 12,937 | 6,239 |
| Adjustments re VGP CZ I and VGP CZ II | — | 20,163 |
| Net result (reported) | 12,937 | 26,402 |
| RESULT PER SHARE |
2011 | 2010 |
| Number of ordinary shares | 18,583,050 | 18,583,050 |
| Net current result (on a like for like basis) per share (in €) | 0.51 | 0.11 |
| Net result (reported) per share (in €) | 0.70 | 1.42 |
2 ) Excluding the revaluation of interest rate financial instruments.
1 ) VGP CZI and VGP CZ II were de-consolidated during 2011. Therefore for comparative purposes the figures as at 31 December 2010 were amended in order to include VGP CZ I only until 16 March 2010 and VGP CZ II until 9 November 2010.
| ASSETS (in thousands of €) |
2011 | 2010 |
|---|---|---|
| Intangible assets | 43 | 62 |
| Investment properties | 71,643 | 186,982 |
| Property, plant and equipment | 278 | 196 |
| Investments in associates | 965 | — |
| Other non-current receivables | 45,313 | — |
| Deferred tax assets | 243 | 1,013 |
| Total non-current assets | 118,485 | 188,253 |
| Trade and other receivables | 9,138 | 3,701 |
| Cash and cash equivalents | 16,326 | 5,341 |
| Disposal group held for sale | 33,944 | 299,942 |
| Total current assets | 59,408 | 308,984 |
| TOTAL ASSETS |
177,893 | 497,237 |
| Share capital | 22,298 | 62,251 |
| Retained earnings | 132,368 | 119,431 |
| Other reserves | 69 | (5,340) |
| Shareholders' equity | 154,735 | 176,342 |
| Non-current financial debt | 4,160 | 120,180 |
| Other non-current financial liabilities | — | 758 |
| Other non-current liabilities | 28 | 1,104 |
| Deferred tax liabilities | 1,520 | 8,309 |
| Total non-current liabilities | 5,708 | 130,351 |
| Current financial debt | 4,692 | 4,820 |
| Other current financial liabilities | — | — |
| Trade debts and other current liabilities | 5,724 | 10,074 |
| Liabilities related to disposal group held for sale | 7,034 | 175,650 |
| Total current liabilities | 17,450 | 190,544 |
| Total liabilities | 23,158 | 320,895 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 177,893 | 497,237 |
During the financial year 2011 VGP sold an 80% equity interest in VGP CZ I and VGP CZ II. The 31 December 2011 income statement therefore includes the results of VGP CZ I for 100% until 16 March 2011 and the results for 100% of VGP CZ II until 9 November 2011. After these dates both companies were deconsolidated and income was reported as "share in the results of associates". Given the significant income contribution of both companies the 31 December 2010 income statement was restated in order to allow a comparison with the 31 December 2011 income statement on a like for like basis.
Gross rental income relates to the lease income from the operating leases concluded with the Group's customers. Fluctuations in the rental income are mainly a result of the growth of the semi-industrial property portfolio. Future growth of the top line will be driven by the development and delivery of new properties to tenants.
Operating cost for the Group are composed of service charge income and expense, property operating expenses and other income and expenses (including administrative costs).
The service charge income and expenses relate to operating expenses borne by the Group and recharged to the tenants: repair & maintenance, energy, insurance etc. Whereas property operating expenses will relate to operating costs borne by the Group which cannot be fully recouped and which mainly relate to consultancy costs of lawyers, brokers and appraisal fees.
Other income relates to income from engineering activities and facility management for third parties and associates and non-recurrent income from tenants. Other expenses relates to the disposal of material, property and equipments and other sundry expenses. Administrative costs relate to general overhead costs.
Gross rental income for the financial year ending 31 December 2011 increased by 28.7 % from € 11.2 million for the period ending 31 December 2010 to € 14.4 million for the period ending 31 December 2011. The strong growth reflects the continuing increase in the portfolio of delivered assets. During 2011 a total of 8 projects were completed which represented 63,049 m² of lettable area.
Although the operating costs in 2011 remained the same as for 2010 at € 2.2 million, the total operating costs as a % of gross rent improved from 19.3% as at the end of 2010 to 15.3% at the end of 2011, reflecting the fact that the property portfolio is becoming more mature with decreasing costs of broker and lawyer fees incurred when signing new committed leases as well as the continuing economies of scale from which the company is benefitting.
Investment properties, which incorporate completed projects, projects under construction and land held for development, are held to earn rental income, for capital appreciation, or for both. The valuation gains or losses on investment properties, investment property under construction and development land (the "property portfolio") represents the change in the fair value of the property portfolio during the respective periods.
The carrying amount of the property portfolio is the fair value of the property as determined by an external valuation expert i.e. Jones Lang LaSalle. The fair value valuations are prepared on the basis of Market Value (in accordance with the current Practices Statements – section 3.2 contained within the RICS Appraisal and Valuation Standards (Sixth Edition – January 2008) published by the Royal Institution of Chartered Surveyors (the "Red Book") and are carried out on a regular basis but at least once a year.
The net valuation of the property portfolio as at 31 December 2011 showed a net valuation gain of € 3.1 million against a net valuation gain of € 22.8 million per 31 December 2010 and represents a € 7.5 million unrealised gain on the new projects currently under construction or completed during the year i.e. the development activities and an aggregate net realised loss of € 4.4 million resulting from the VGP CZ I and VGP CZ II transactions. This € 4.4 million realised valuation loss is composed of a € 1.0 million realised gain on the disposal of the VGP CZ I and VGP CZ II assets and a realised loss of € 5.4 million resulting from the recycling of the existing VGP CZ I and VGP CZ II interest rate swaps through the profit and loss account.
The total property portfolio (including VGP CZ I and VGP CZ II), excluding development land, is valued by the valuation expert at 31 December 2011 based on a market rate of 8.34% (compared to 8.35% as at 31 December 2010) applied to the contractual rents increased by the estimated rental value on unlet space. The (re)valuation of the portfolio was based on the appraisal report of Jones Lang LaSalle.
Net financial result consists of financial income and financial expenses. Financial income relates to interest income received from bank deposit or from loans granted to associates , unrealised gains on interest rate hedging as well as to the positive effect of realised and unrealised foreign exchange gains on monetary and non-monetary assets and liabilities. Financial expenses mainly relate to the interest expense on the bank credit facilities and shareholder debt, the unrealised loss on interest rate hedging and the negative realised and unrealised foreign exchange results on monetary and non-monetary assets and liabilities.
For the period ending 31 December 2011, the reported financial income included a € 2.4 million interest income on loans granted to associates and a € 1.6 million net foreign exchange gain compared to a € 0.2 million unrealised foreign exchange loss as at 31 December 2010 (recorded under financial expenses).
The reported financial expenses as at 31 December 2011 are mainly made up of € 5.7 million (€ 15.6 million per 31 December 2010) interest expenses related to financial debt and a positive impact of € 0.2 million (€ 1.9 million per 31 December 2010) related to capitalised interests. The main reason for the variance relates to the movements in the underlying bank and shareholder debt as at 31 December 2011 the
outstanding financial debt amounted to € 15.2 million (before reclassification to liabilities related to disposal group held for sale) compared to € 266.5 million (before reclassification to liabilities related to disposal group held for sale) as at 31 December 2010.
The Group is subject to tax at the applicable tax rates of the respective countries in which it operates. Additionally, a deferred tax charge is provided for on the fair value adjustment of the property portfolio. The reported taxes decreased from € 8.0 million for the period ending 31 December 2010 to € 1.5 million as at 31 December 2011. The change in the tax line is mainly due to deconsolidation of VGP CZ I and VGP CZ II and to the variance of the fair value adjustment of the property portfolio and has therefore no cash effect.
Net profit on a like for like basis increased from € 6.2 million as at 31 December 2010 to € 12.9 million for the financial year ended 31 December 2011. The reported net profit decreased following the deconsolidation of VGP CZ I and VGP CZ II from € 26.4 million (€ 1.42 per share) for the financial year ended 31 December 2010 to € 12.9 million (€ 0.70 per share) for the financial year ended 31 December 2011.
1 ) Yield applicable for total portfolio including VGP CZ I and VGP CZ II. If VGP CZ I and VGP CZ II would not have been included the yields would have been 9.07% as at the end of December 2011.
) Net debt measured as : (Outstanding bank debt + shareholder loans) minus cash.
Investment properties relate to completed properties projects under construction, as well as land held for development. The fluctuations from one year to the other reflect the timing of the completion and delivery as well as the divestments or acquisitions of such assets.
As at 31 December 2011 and following the sale of VGP CZ I and VGP CZ II the investment property portfolio consists of 4 completed buildings representing 67,952 m² of lettable area with another 6 buildings under construction representing another 69,562 m² of lettable area. Besides this VGP has a total of 53 buildings under management representing 573,426 m² of lettable space which are owned by VGP CZ I and VGP CZ II.
VGP has currently also undertaken additional development activities by which it is currently constructing 4 new buildings (24,300 m²) for VGP CZ I and 2 buildings (16,626 m²) for VGP CZ II.
Other non current receivables relate to loans provided to associates and for which VGP receives an arm's length interest rate. These loans are provided on a proportional basis i.e. proportional to the equity stake in these associates. At the end of December 2011 VGP granted a total of € 45.2 million loans to associates.
Total current assets relate to trade and other receivables and cash held by the Group. The trade and other receivables increased from € 3.7 million at the end of 2010 to € 9.1 million at the end of 2011. This increase is mainly due to an additional amount which VGP will receive from VGP CZ II once the two buildings, which are currently under construction, will be leased for 90%. The net cash inflow from this transaction will amount to € 5.2 million (80% of € 6.5 million) and is expected to be received within the course of 2012. The remaining balance will be converted to a loan to associates. Following the sale of VGP CZ I and VGP CZ II the cash and cash equivalents increased substantially from € 5.4 million as at 31 December 2010 to € 16.3 million as at 31 December 2011.
The other reserves at the end of 2010 include € 5.4 million (net from deferred tax impact) unrealised losses on financial instruments related to VGP CZ I and VGP CZ II. These financial instruments were designated as effective cash flow hedges and the unrealised losses on these financial instruments were recognised directly in equity ("other reserves"). These reserves were reversed during 2011 following the sale of VGP CZ I and VGP CZ II.
Total non-current liabilities comprise non-current financial debt, other noncurrent liabilities and deferred tax liabilities. As at 31 December 2011 the Group was debt free on a net debt basis (before any reclassification to liabilities related to disposal group held for sale). This compares to a net debt (excluding shareholder loans and before any reclassification to liabilities related to disposal group held for sale) as at 31 December 2010 of € 187.8 million (net debt / equity ratio of 1.06) and a net debt (including shareholder loans) of € 259.6 million (net debt / equity ratio of 1.47). The shareholder debt of € 71.8 million outstanding as at 31 December 2010 was fully repaid during 2011 from the proceeds of the VGP CZ I and VGP CZ II transactions.
Euronext Brussels Main Market of Prague
| VGP share VGP VGP VVPR-strip VGPS |
ISIN BE0003878957 ISIN BE0005621926 |
|---|---|
| Market capitalisation 31 Dec-11 | 352,892,120 € |
| Highest capitalisation | 390,244,050 € |
| Lowest capitalisation | 297,328,800 € |
| Share price 31 Dec-10 | 16.60 € |
| Share price 31 Dec-11 | 18.99 € |
As at 31 December 2011 the share capital of VGP was represented by 18,583,050 shares. Ownership of the Company's shares as at 31 December 2011 was as follows:
| Shareholder | Number of shares | % of shares iss ued |
|---|---|---|
| VM Invest NV | 5,159,434 | 27.76% |
| Mr Bart Van Malderen | 3,545,250 | 19.08% |
| Sub-total Bart Van Malderen Group | 8,704,684 | 46.84% |
| Alsgard SA | 7,048,780 | 37.93% |
| Mr Jan Van Geet | 8,565 | 0.05% |
| Sub-total Jan Van Geet Group | 7,057,345 | 37.98% |
| Comm. VA VGP MISV | 929,153 | 5.00% |
| Vadebo France NV | 655,738 | 3.53% |
| Public | 1,236,130 | 6.65% |
| TOTAL | 18,583,050 | 100.00% |
VM Invest NV is a company controlled by Mr. Bart Van Malderen.
Alsgard SA is a company controlled by Mr. Jan Van Geet.
Comm VA VGP MISV is a company controlled by Mr. Bart Van Malderen and Mr. Jan Van Geet. VM Invest NV, Mr. Bart Van Malderen, Comm VA VGP MISV, Alsgard SA and Mr. Jan Van Geet are acting in concert in respect of the holding, the acquisition or disposal of securities. Vadebo France NV is a company controlled by Mrs. Griet Van Malderen.
| 71 . |
JANUARY 2011 | FEBRUARY 2011 | MARCH 2011 | APRIL 2011 | MAY 2011 | JUNE 2011 |
|---|---|---|---|---|---|---|
| 20 | municipal | |||||
| u o, | ||||||
| 18' | ||||||
There are no specific categories of shares. Each share gives the right to one vote. In accordance with Articles 480 to 482 of the Company Code, the company can create shares without voting rights, subject to the fulfilling requirements related to the change of the articles of association. All shares are freely transferable.
The board of directors is expressly permitted to increase the nominal capital on one or more occasions up to an aggregate amount of € 100 million by monetary contribution or contribution in kind, if applicable, by contribution of reserves or issue premiums, under regulations provided by the Belgian Company Code and the articles of association. This permission was extended in 2011 and is now valid until 1 June 2016.
To improve the liquidity of its shares VGP NV concluded a liquidity agreement with KBC Bank. This agreement ensures that there is increased liquidity of the shares which should be to the benefit of the Group in the future as more liquidity allows new shares to be more easily issued in case of capital increases.
In order to optimise the capital structure of the Company and creating additional shareholder value an Extraordinary Shareholders' Meeting will be convened on 11 May 2012, to approve a capital reduction of € 15,052,270.50 in cash. This cash distribution corresponds to € 0.81 per share and will be paid as soon as possible.
| First quarter trading update 2012 | 11 May 2012 |
|---|---|
| General meeting of shareholders | 11 May 2012 |
| Extraordinary shareholders' meeting | 11 May 2012 |
| 2012 half year results | 24 August 2012 |
| Third quarter trading update 2012 | 16 November 2012 |
| JULY 2011 | AUGUST 2011 | SEPTEMBER 2011 | OCTOBER 2011 | NOVEMBER 2011 | DECEMBER 2011 | |
|---|---|---|---|---|---|---|
With an expanding land bank, market conditions which remain very attractive and driven by a sound demand of lettable space, VGP not only sees a lot of opportunities within the markets it is active in but is also focusing on a number of attractive opportunities in Germany and Poland driven by demands from existing and new potential tenants.
VGP is confident that with the available cash proceeds from the VGP CZ I and VGP CZ II transaction, as well as from the anticipated sale of VGP Estonia assets and VGP CZ IV, it should be well positioned to continue to deliver substantial shareholder value through its development activities and its facility management services.
| COMPOSITION | ON 31 DECEMBER 2011 |
||||
|---|---|---|---|---|---|
| NAME | YEAR APPOINTED |
EXECUTIVE OR NON -EXECUTIVE |
INDEPENDENT | NEXT DUE FOR RE-ELE CTION |
|
| Chairman | Marek Šebesťák | 2011 | Non-executive | Independent | 2015 |
| CEO | Jan Van Geet s.r.o. represented by Jan van Geet |
2008 | Executive and reference shareholder |
— | 2013 |
| Directors | Bart Van Malderen | 2007 | Non-executive and reference shareholder |
— | 2013 |
| Alexander Saverys | 2011 | Non-executive | Independent | 2015 | |
| Rijo Advies BVBA represented Jos Thys | 2011 | Non-executive | Independent | 2015 |
Mr Šebesťák is founder and former Chairman of BBDO-Czech Republic, one of the leading international advertising and communication agencies
Jan Van Geet is the founder of VGP. He has overall daily as well as strategic management responsibilities of the Group. He started in the Czech Republic in 1993 and was manager of Ontex in Turnov, a producer of hygienic disposables. Until 2005, he was also managing director of WDP Czech Republic. WDP is a Belgian real estate investment trust with several projects in the Czech Republic.
After his university education in law (KU Leuven) and his MBA in Berlin. Mr Alexander Saverys founded Delphis NV in 2004. Delphis is a company offering multimodal transport solutions throughout Europe, where he acts as CEO. He is also a Director of CMB. In 2006, Delphis bought Team Lines, Europe's no. 2 feeder container operator, operating a network from Iberia to Saint-Petersburg with a clear focus on the Baltic Sea. Team Lines/ Delphis control 62 ships.
Mr Jos Thys holds a Masters Degree in Economics from the University of Antwerp (UFSIA). He is counsel to family owned businesses where he advises on strategic and structuring issues. He also acts as a counsel for the implementation of Corporate Governance at corporate and non-profit organisations. Jos previously had a long career in corporate and investing banking with Paribas, Artesia and Dexia.
During his career, Mr Bart Van Malderen was involved in the management of Ontex, a leading European manufacturer of hygienic disposable products. He became CEO in 1996 and Chairman of the Board in 2003, a mandate which he occupied until mid July 2007.
| Jan Van Geet s.r.o. represented by Jan Van Geet . . |
Chief Executive Officer |
|---|---|
| Jan Procházka . . |
Chief Operating Officer |
| Dirk Stoop BVBA, represented by Dirk Stoop . . |
Chief Financial Officer |
(*1971) Jan Van Geet is the founder of VGP. He has overall daily as well as strategic management responsibilities of the Group. He started in the Czech Republic in 1993 and was manager of Ontex in Turnov, a producer of hygienic disposables. Until 2005, he was also managing director of WDP Czech Republic. WDP is a Belgian real estate investment trust with several projects in the Czech Republic
(*1964) He is civil a engineer and an architect and joined VGP's team in 2002. He takes responsibility for technical concepts and contract execution. Prior to this position, Jan was the managing director of Dvořák, a civil contracting company, at his time one of the major players in the Czech market. Well known projects under his management are the airport terminal Sever 1 in Prague, the cargo terminal, as well as the headquarters of Česká Spořitelna.
(*1961) Joined VGP in 2007. He is responsible for all finance matters i.e. financial planning, control, forecasting, treasury, tax and insurance for all the countries where VGP is/ will be active, as well as investor relations. Dirk worked at Ontex for 5 years as Group Treasurer where he was also responsible for tax and insurance matters. Prior to this he worked at Chep Europe based in London as Treasurer Europe, South America & Asia. Dirk Stoop holds a Masters Degrees in Financial and Commercial Sciences from VLEKHO (HUB) in Belgium.
Vgp Park Timisoara
under construction – own portfolio FUTURE DEVELOPMENT – own portfoliO
under construction – VGP CZ I FUTURE DEVELOPMENT – VGP CZ I
VGP CZ II. (Associate)
Vgp Park Předlice under construction – VGP CZ II FUTURE DEVELOPMENT – VGP CZ II
VGP Park Tuchoměřice VGP Park Hrádek nad Nisou VGP Park horní počernice – VI. phase VGP Park Brno VGP Park Plzeň VGP Park Ústí nad Labem vgp park malacky, slovakia vgp park győr, hungary vgp park timisoara, romania vgp park kekava, latvia vgp park tallinn, estonia
| vgp park | country | land area (m²) | potential lettable area (m²) |
|---|---|---|---|
| VGP Park Hrádek nad Nisou | Czech Republic | 28,348 | 13,669 |
| VGP Park Tuchoměřice | Czech Republic | 14,270 | 6,471 |
| VGP Park Tallinn | Estonia | 22,872 | 13,500 |
| VGP Park Győr | Hungary | 26,639 | 11,175 |
| VGP Park Malacky | Slovakia | 35,999 | 14,747 |
| VGP Park Timisoara | Romania | 33,369 | 10,000 |
| Total | 161,498 | 69,562 |
| vgp park | country | land area (m²) | potential lettable area (m²) |
|---|---|---|---|
| VGP Park Hrádek nad Nisou | Czech Republic | 60,591 | 27,489 |
| VGP Park Tuchoměřice | Czech Republic | 44,431 | 20,140 |
| VGP Park Brno | Czech Republic | 63,592 | 32,577 |
| VGP Park Plzeň | Czech Republic | 92,352 | 41,000 |
| VGP Park Ústí nad Labem1 | Czech Republic | 145,958 | 58,700 |
| VGP Park Kekava | Latvia | 83,173 | 34,400 |
| VGP Park Győr | Hungary | 26,639 | 10,330 |
| VGP Park Malacky | Slovakia | 152,994 | 61,200 |
| VGP Park Timisoara | Romania | 159,839 | 47,930 |
| Total | 829,569 | 333,766 |
1 ) Acquired after year-end.
Prague – West, Czech Republic
| tenants | n/a |
|---|---|
| lettable area (m2) | building A – 6,470 |
| built | under construction |
Hrádek nad Nisou, Czech Republic
| tenants | Drylock Technologies |
|---|---|
| lettable area (m2) | 13,669 |
| built | 2011–2012 |
Tallinn, Estonia
| tenants | Humana Sorteerimiskeskus, Friends Textile, Prime Partner, BDP Eesti, HAVI Logistics, SELEC T NOR , Smarten Logistics, LAPPSET ESTONIA , Wahlquist |
|---|---|
| lettable area (m2) | 40,305 |
| built | 2009 |
| Malacky, Slovakia | ||
|---|---|---|
| tenants | Benteler Automobiltechnik | |
| lettable area (m2) | 14,815 | |
| 2009 built |
Timisoara, Romania
lettable area (m2) 10,000
built under construction
| tenants | HL Display, Szemerey Transport, Skiny, Dana Hungary, Lear Corporation |
|---|---|
| lettable area (m2) | 33,935 |
| built | 2009–2011 |
VGP CZ I (Associate)
Green Tower Prague – West Blue Park Prague – east Green Park Prague – east Vgp Park Horní Počernice Vgp Park Turnov Vesecko Vgp Park Příšovice
| vgp park | land area (m²) | potential lettable area (m²) |
|---|---|---|
| VGP Park Horní Počernice1 | 23,312 | 11,244 |
| VGP Park Turnov | 21,873 | 13,056 |
| Total | 45,185 | 24,300 |
| vgp park | land area (m²) | potential lettable area (m²) |
|---|---|---|
| VGP Park Horní Počernice1 | 271,093 | 75,584 |
| VGP Park Příšovice | 4,856 | 3,500 |
| Total | 275,949 | 79,084 |
1 ) Includes VGP CZ IV development which will be sold by VGP to EPISO during Q2 of 2012.
Prague 9, Czech Republic
tenant Activa
| lettable area (m2) | 10,200 |
|---|---|
built 2003 | 2005 | 2008
| Prague 9, Czech Republic | ||
|---|---|---|
| tenants | Auto Štangl, Activa, Mitsui-soko, ASTRON studio |
|
| lettable area (m2) | 17,096 | |
| built | 2005 |
Prague 5, Czech Republic
| tenants | Mountfield, ABRA Software, MK , CompuGroup CZ a SK |
|---|---|
| lettable area (m2) | 3,560 |
| built | 2005 |
| tenants | Sikla Bohemia, Veba, textilní závody, RM GASTRO CZ, Václav Čížek, Whitesoft |
|---|---|
| lettable area (m2) | 6,400 |
| built | 2006 |
Prague 9 Horní Počernice, Czech Republic
tenant GASTROSTELLA GROUP
lettable area (m2) 4,379
built 2006
Prague 9 Horní Počernice, Czech Republic
| tenants | Lekkerland Česka republika |
|---|---|
| lettable area (m2) | 15,430 |
| built | 2006 |
Prague 9 Horní Počernice, Czech Republic
tenant SATREMA Int.
lettable area (m2) 2,017
built 2007
| tenant | PetCenter CZ |
|---|---|
| lettable area (m2) | 8,279 |
| built | 2007 |
Prague 9 Horní Počernice, Czech Republic
| tenants | U&WE Advertising, A.L.L. production, TNT Post ČR , Bell Technology, |
|---|---|
| Sécheron Tchequie, Timbeum, ING. Pavel Halada, Transforwarding České |
|
| Budějovice, V-PLAS T Vsetín, |
|
| Fresenius Kabi, CWS Čechy |
lettable area (m2) 28,182
built 2007–2008
Prague 9 Horní Počernice, Czech Republic
| tenants | IKEA Česká republika, NIL FISK -AD VANCES , FRANKE |
|---|---|
| lettable area (m2) | 7,658 |
| built | 2007 |
| Prague 9 Horní Počernice, Czech Republic | ||
|---|---|---|
| tenants | Dandeli Havelland Foods, STAR IMPEX, Strom Praha, Česká pošta |
|---|---|
| lettable area (m2) | 8,257 |
| built | 2008 |
| tenant | WAVIN Ekoplastik |
|---|---|
| lettable area (m2) | 13,551 |
| built | 2007 |
Prague 9 Horní Počernice, Czech Republic
tenant Kofola
lettable area (m2) 9,889
built 2007
Prague 9 Horní Počernice, Czech Republic
| tenants | LKY Logistics CZ, Levné knihy, Continental Automotive |
|---|---|
| lettable area (m2) | 12,903 |
| built | 2007 |
Prague 9 Horní Počernice, Czech Republic
tenant DSV Road
lettable area (m2) 11,623
built 2007
| tenant | Coca-Cola HBC Czech Republic |
|---|---|
| lettable area (m2) | 10,877 |
| built | 2008 |
Prague 9 Horní Počernice, Czech Republic
tenant Océ Česká republika
lettable area (m2) 9,517
built 2008
Prague 9 Horní Počernice, Czech Republic
| tenants | PNS, Mediaservis |
|---|---|
| lettable area (m2) | 26,196 |
| built | 2008 |
Prague 9 Horní Počernice, Czech Republic
tenant Alza Logistics
lettable area (m2) 9,559
built 2008
| tenants | Tuplex CZ, OK -Color, BASF stavební hmoty ČR , Brilon CZ, Mail Step, Den Braven Czech and Slovak, Coca-Cola HBC Česká republika, Internet Mall |
|---|---|
| lettable area (m2) | 28,440 |
| built | 2008 |
Prague 9 Horní Počernice, Czech Republic
tenants Bella Bohemia, Askino
lettable area (m2) 4,523
built 2009
Prague 9 Horní Počernice, Czech Republic
| tenants | Radiálka Hradec Králové, Alito, Tiskové a obálkovací centrum, Dexion |
|---|---|
| lettable area (m2) | 6,456 |
| built | 2009 |
Prague 9 Horní Počernice, Czech Republic
| tenants | GUME X, FERRA TT INTERNA TIONAL CZECH |
|---|---|
| lettable area (m2) | 3,709 |
| built | 2010 |
| tenant | G.Gühring – dřevěné obaly, RTR – TRANS PORT A LOGISTIKA |
|---|---|
| lettable area (m2) | 8,974 |
| built | 2010 |
Prague 9 Horní Počernice, Czech Republic
tenant MD Logistika, Datart International
lettable area (m2) 52,121
built 2009
Prague 9 Horní Počernice, Czech Republic
| tenants | První Elektro |
|---|---|
| lettable area (m2) | 2,115 |
| built | 2011 |
Prague 9 Horní Počernice, Czech Republic
| tenant | Landgard květiny & rostliny, Asko - nábytek, Internet Mall |
|---|---|
| lettable area (m2) | 15,012 |
| built | 2008 |
| tenant | Skanska |
|---|---|
| lettable area (m2) | 4,465 |
| built | 2010 |
Prague 9 Horní Počernice, Czech Republic
| tenant | Loomis Czech Republic |
|---|---|
| lettable area (m2) | 5,317 |
| built | 2011 |
Prague 9 Horní Počernice, Czech Republic
| tenants | Whitesoft, VGP – industriální stavby, HORN BACH BAUMARK T CS, Cargotec Czech Republic, NOARK Electric Europe, NACHI Europe, Diamant Spa, Kuka Roboter, CEE , Jan Rejlek, Martifer Solar, Ardo Mochov, Daewoo Leasing Czech Republic, REFLEX CZ, LOVATO, Synventive Molding Solutions, GERODUR CZECH , AB Facility, |
|---|---|
| ROAD ENER GY (CZECH ), Barešová Eva |
lettable area (m2) 5,144
Příšovice, Czech Republic
| tenants | Grupo Antolin Turnov, Aries Data |
|---|---|
| lettable area (m2) | 10,334 |
| built | 2008 |
Industrial zone Vesecko – Turnov, Czech Republic
| tenant | Ontex CZ |
|---|---|
| lettable area (m2) | 12,037 |
| built | 2007 |
VGP PARK MLADÁ BOLESLAV VGP PARK NÝŘANY VGP PARK HRADEC KRÁLOVÉ VGP PARK LIBEREC
| vgp park | land area (m²) | potential lettable area (m²) |
|---|---|---|
| VGP Park Nýřany | 19,876 | 8,961 |
| Total | 19,876 19,876 |
8,961 |
| vgp park | land area (m²) | potential lettable area (m²) |
|---|---|---|
| VGP Park Mladá Boleslav | 50,906 | 24,430 |
| VGP Park Hradec Králové | 13,046 | 4,870 |
| VGP Park Liberec | 40,261 | 24,000 |
| Total | 104,213 | 53,300 |
Industrial zone Liberec – North, Czech Republic
| tenant | PEKM Kabeltechnik |
|---|---|
| lettable area (m2) | 10,624 |
| built | 2008 |
Industrial zone Liberec – North, Czech Republic
| tenant | GRUPO AN TOLIN BOHEMIA |
|
|---|---|---|
| lettable area (m2) | 22,545 | |
| built | 2008 |
Industrial zone Liberec – North, Czech Republic
| tenant | LICON HEA T, JAC Products Holding Europe |
|---|---|
| lettable area (m2) | 9,870 |
| built | 2009 |
Industrial zone Liberec - North, Czech Republic
| tenants | TI Group Automotive System |
|---|---|
| lettable area (m2) | 5,920 |
| built | 2011 |
Industrial zone Liberec – North, Czech Republic
| tenant | KNORR - BREMSE Systémy pro užitková vozidla |
|---|---|
| lettable area (m2) | 20,115 |
|---|---|
| built | 2009–2011 |
Industrial zone Liberec – South, Czech Republic
| tenant | Magna Exteriors & Interiors (Bohemia) |
|---|---|
| lettable area (m2) | 5,028 |
| built | 2004–2006 |
Industrial zone Nýřany, Czech Republic
| tenants | Ranpak, WashTec Cleaning Technology |
|---|---|
| lettable area (m2) | 10,186 |
| built | 2007–2008 |
Industrial zone Nýřany, Czech Republic
| tenant | Pebal |
|---|---|
| lettable area (m2) | 6,476 |
| built | 2009 |
Industrial zone Nýřany, Czech Republic
tenant DHL Solutions
lettable area (m2) 5,482
built 2010
Industrial zone Nýřany, Czech Republic
| tenants | Penny Market |
|---|---|
| lettable area (m2) | 13,014 |
| built | 2011 |
Olomouc – Nemilany, Czech Republic
| tenant | PPL CZ |
|---|---|
| lettable area (m2) | 9,144 |
| built | 2008 |
Olomouc – Nemilany, Czech Republic
| tenants | Activa, V-PLAS T Vsetín, Aries Data, EGT Express CZ |
|---|---|
| lettable area (m2) | 9,957 |
| built | 2009–2010 |
Olomouc – Nemilany, Czech Republic
tenant RTR - TRANSPORT A LOGISTIKA
lettable area (m2) 7,274
built 2009
Olomouc - Nemilany, Czech Republic
| tenants | TRANSKAM - Logistik |
|---|---|
| lettable area (m2) | 8,695 |
| built | 2011 |
Dobřenice, Czech Republic
| tenant | Excelsior Packaging Group |
|---|---|
| lettable area (m2) | 10,458 |
| built | 2009 |
Dobřenice, Czech Republic
| tenant | Damco Czech Republic |
|---|---|
| lettable area (m2) | 13,142 |
| built | 2010 |
Dobřenice, Czech Republic
tenant Vetro Plus
lettable area (m2) 13,447
built 2008
Dobřenice, Czech Republic
| tenants | Den Braven Czech & Slovak |
|---|---|
| lettable area (m2) | 7,655 |
| built | 2011 |
Industrial zone Mladá Boleslav, Czech Republic
tenant HP Pelzer, YAPP Automotive Parts Co.
lettable area (m2) 15,740
built 2009
Ústí nad Labem, Czech Republic
| tenant | Activa |
|---|---|
| lettable area (m2) | 581 |
| built | 2009 |
Ústí nad Labem, Czech Republic
tenant Bohemia Cargo
lettable area (m2) 1,502
built 2009
For the year ended 31 December 2011
| Consolidated financ ial statements |
70 |
|---|---|
| Notes to the c onsolidated financ ial statements |
75 |
| Parent c ompany information |
106 |
| Auditor's rep ort |
108 |
| INCOME STATEMENT (in thousands of €) | note | 2011 | 2010 |
|---|---|---|---|
| Gross rental income | 3. 1. | 14,446 | 28,573 |
| Service charge income | 3. 2. | 5,217 | 6,803 |
| Service charge expenses | 3. 3. | (4,388) | (6,279) |
| Property operating expenses | 3. 4. | (1,345) | (1,769) |
| Net rental and related income | 13,930 | 27,328 | |
| Unrealised valuation gains / (losses) on investment properties | 7,541 | 22,759 | |
| Realised valuation gains / (losses) on disposal of subsidiaries | (4,408) | — | |
| Net valuation gains / (losses) on investment properties | 3. 5. | 3,133 | 22,759 |
| Property result | 17,063 | 50,087 | |
| Administrative cost | 3. 6. | (2,096) | (1,891) |
| Other income | 3. 7. | 1,200 | 716 |
| Other expenses | 3. 8. | (805) | (634) |
| Net operating profit before net financial result | 15,362 | 48,278 | |
| Financial income | 3. 9. | 4,060 | 393 |
| Financial expenses | 3. 9. | (5,797) | (14,240) |
| Net financial result | (1,737) | (13,847) | |
| Result before taxes | 13,625 | 34,431 | |
| Taxes | 3. 10. | (1,532) | (8,029) |
| Result after taxes (consolidated companies) | 12,093 | 26,402 | |
| Share in result of associates | 3.11. | 844 | — |
| Net result | 12,937 | 26,402 |
| RESULT PER SHARE (in €) | note | 2011 | 2010 |
|---|---|---|---|
| Basic earnings per share | 3. 12. | 0.70 | 1.42 |
| Diluted earnings per share | 3. 12. | 0.70 | 1.42 |
The consolidated income statement should be read in conjunction with the accompanying notes.
| STATEMENT OF COMPREHENSIVE INCOME (in thousands of €) | 2011 | 2010 |
|---|---|---|
| Net result | 12,937 | 26,402 |
| Other comprehensive income / (loss) | ||
| Interest rate hedging derivatives | 5,409 | (545) |
| Tax relating to components of other comprehensive income | (1,028) | 104 |
| Other comprehensive income / (loss) related to disposal group held for sale | ||
| Interest rate hedging derivatives – disposal group held for sale | — | 426 |
| Tax relating to components of other comprehensive income | — | (81) |
| Net profit / (loss) recognised directly into equity | 4,381 | (96) |
| Total comprehensive income / (loss) of the period | 17,318 | 26,306 |
| Attributable to: | ||
| Equity holders of the parent | 17,318 | 26,306 |
| Minority interests | — | — |
| ASSETS (in thousands of €) | note | 2011 | 2010 |
|---|---|---|---|
| Intangible assets | 4. 1. | 43 | 62 |
| Investment properties | 4. 2. | 71,643 | 186,982 |
| Property, plant and equipment | 4. 1. | 278 | 196 |
| Investments in associates | 4. 3. | 965 | — |
| Other non-current receivables | 4. 4. | 45,313 | — |
| Deferred tax assets | 3. 10. | 243 | 1,013 |
| Total non-current assets | 118,485 | 188,253 | |
| Trade and other receivables | 4. 5. | 9,138 | 3,701 |
| Cash and cash equivalents | 4. 6. | 16,326 | 5,341 |
| Disposal group held for sale | 4. 7. | 33,944 | 299,942 |
| Total current assets | 59,408 | 308,984 | |
| TOTAL ASSETS | 177,893 | 497,237 | |
| SHAREHOLDERS' EQUITY AND LIABILITIES (in thousands of €) | note | 2011 | 2010 |
| Share capital | 4. 8. | 22,298 | 62,251 |
| Retained earnings | 132,368 | 119,431 | |
| Other reserves | 4. 9. | 69 | (5,340) |
| Shareholders' equity | 154,735 | 176,342 | |
| Non-current financial debt | 4. 10. | 4,160 | 120,180 |
| Other non-current financial liabilities | 4. 11. | — | 758 |
| Other non-current liabilities | 4. 12. | 28 | 1,104 |
| Deferred tax liabilities | 3. 10. | 1,520 | 8,309 |
| Total non-current liabilities | 5,708 | 130,351 | |
| Current financial debt | 4. 10. | 4,692 | 4,820 |
| Other current financial liabilities | 4. 11. | — | — |
| Trade debts and other current liabilities | 4. 13. | 5,724 | 10,074 |
| Liabilities related to disposal group held for sale | 4. 7. | 7,034 | 175,650 |
| Total current liabilities | 17,450 | 190,544 | |
| Total liabilities | 23,158 | 320,895 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 177,893 | 497,237 |
The consolidated balance sheet should be read in conjunction with the accompanying notes.
| STATEMENT OF CHANGES IN EQUITY | SHARE | RETAINED | OTHER RESERVES | |||
|---|---|---|---|---|---|---|
| (in thousands of €) | CAPITAL | EARNINGS | SHARE PREMIUM |
HEDGING RESERVE |
EQUITY | |
| Balance as at 1 January 2010 | 62,251 | 98,233 | 69 | (5,313) | 155,240 | |
| Other comprehensive income / (loss) | — | — | — | (96) | (96) | |
| Result for the period | — | 26,402 | — | — | 26,402 | |
| Total comprehensive income / (loss) | — | 26,402 | — | (96) | 26,306 | |
| Dividends to shareholders | — | (5,204) | — | — | (5,204) | |
| Share capital distribution to shareholders | — | — | — | — | — | |
| Balance as at 31 December 2010 | 62,251 | 119,431 | 69 | (5,409) | 176,342 | |
| Balance as at 1 January 2011 | 62,251 | 119,431 | 69 | (5,409) | 176,342 | |
| Other comprehensive income / (loss) | — | — | — | — | — | |
| Result for the period | — | 12,937 | — | — | 12,937 | |
| Effects of disposals | — | — | — | 5,409 | 5,409 | |
| Total comprehensive income / (loss) | — | 12,937 | — | 5,409 | 18,346 | |
| Dividends to shareholders | — | — | — | — | — | |
| Share capital distribution to shareholders | (39,953) | — | — | — | (39,953) | |
| Balance as at 31 December 2011 | 22,298 | 132,368 | 69 | — | 154,735 |
| CASH FLOW STATEMENT (in thousands of €) | 2011 | 2010 |
|---|---|---|
| Cash flows from operating activities | ||
| Result before taxes | 13,625 | 34,431 |
| Adjustments for: | ||
| Depreciation | 164 | 180 |
| Unrealised (gains) /losses on investment properties | (7,541) | (22,759) |
| Realised( gains) / losses on disposal of subsidiaries | 4,408 | — |
| Unrealised (gains) / losses on financial instruments | — | (506) |
| Net interest paid | 3,508 | 15,849 |
| Operating profit before changes in working capital and provisions | 14,164 | 27,195 |
| Decrease/(Increase) in trade and other receivables | (12,443) | (2,362) |
| (Decrease)/Increase in trade and other payables | 1,194 | 4,716 |
| Cash generated from the operations | 2,915 | 29,549 |
| Net Interest paid | (3,508) | (15,849) |
| Income taxes paid | (119) | (234) |
| Net cash from operating activities | (712) | 13,466 |
| Cash flows from investing activities | ||
| Proceeds from disposal of subsidiaries | 153,777 | — |
| Proceeds from disposal of tangible assets | 1,512 | — |
| Investment property and investment property under construction | (47,721) | (30,791) |
| Net cash from investing activities | 107,568 | (30,791) |
| Cash flows from financing activities | ||
| Gross dividends paid | — | (5,203) |
| Net Proceeds / (cash out) from the issue / (repayment) of share capital | (39,954) | — |
| Proceeds from loans | 18,005 | 37,479 |
| Loan repayments | (73,721) | (12,396) |
| Net cash from financing activities | (95,670) | 19,880 |
| Reclassification to (-) / from held for sale | (6) | (1,573) |
| Net increase / (decrease) in cash and cash equivalents | 11,180 | 982 |
| Cash and cash equivalents at the beginning of the period | 5,341 | 4,327 |
| Effect of exchange rate fluctuations | (195) | 32 |
| Cash and cash equivalents at the end of the period | 16,326 | 5,341 |
| Net increase / (decrease) in cash and cash equivalents | 11,180 | 982 |
The consolidated cash flow statement should be read in conjunction with the accompanying notes.
For the year ended 31 December 2011
VGP NV (the "Company") is a limited liability company and was incorporated under Belgian law on 6 February 2007 for an indefinite period of time with its registered office located at Greenland – Burgemeester Etienne Demunterlaan 5, 1090 Brussels, and the Company is registered under enterprise number 0887.216.042 (Register of Legal Entities Brussels, Belgium).
The Group is a real estate group specialised in the acquisition, development, and management of semi-industrial real estate. The Group focuses on strategically located plots of land in the mid-European region suitable for the development of semi-industrial business parks of a certain size, so as to build up an extensive and well-diversified property portfolio on top locations.
The Company's consolidated financial statements include those of the Company and its subsidiaries (together referred to as "Group"). The consolidated financial statements were approved for issue by the board of directors on 10 April 2012. The consolidated financial statements have been prepared in accordance with the requirements of International Financial Reporting Standards (IFRS) which have been adopted by the European Union.
These standards comprise all new and revised standards and interpretations published by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Interpretations Committee of the IASB, as far as applicable to the activities of the Group and effective as from 1 January 2011.
A number of new standards, amendments to standards and interpretations became effective during the financial year:
Amendments to IAS 32 Financial Instruments: Presentation – Classification of Rights Issues (applicable for annual periods beginning on or after 1 February 2010)
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (applicable for annual periods beginning on or after 1 July 2010)
The above new standards, amendments to standards and interpretation did not give rise to any material changes in the presentation and preparation of the consolidated financial statements of the year.
A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2011, and have not been applied when preparing financial statements:
Amendments to IAS 27 Separate Financial Statements (applicable for annual periods beginning on or after 1 January 2013)
Amendments to IAS 28 Investments in Associates and Joint Ventures (applicable for annual periods beginning on or after 1 January 2013)
The initial application of the above standards, amendments to standards and interpretation is estimated not to give rise to any material changes in the presentation and preparation of the consolidated financial statements.
The consolidated financial statements are prepared on a historic cost basis, with the exception of investment properties and financial derivatives which are stated at fair value. All figures are in thousands of Euros (in thousands of €), unless stated otherwise. Minor rounding differences might occur.
The consolidated financial statements include all the subsidiaries that are controlled by the Group. Control exists when the company has the power to govern the financial and operating policies and obtains the benefits from the entity's activities. Control is presumed to exist when the company owns, directly or indirectly, more than 50% of an entity's voting rights of the share capital. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:
Associates are undertakings in which VGP has significant influence over the financial and operating policies, but which it does not control. This is generally evidenced by ownership of between 20% and 50% of the voting rights. In these instances, such investments are accounted for as associates. The financial information included for these companies is prepared using the accounting policies of the Group and using the same reporting year. The consolidated financial statements include the Group's share of the results of the associates accounted for using the equity method from the date when a significant influence commences until the date when significant influence ceases. When VGP's share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that VGP has incurred obligations in respect of the associate.
IAS 28 Investment In Associates does not address the treatment of revenues derived from transactions with associates (e.g. sales services, interest revenue, …). The Group opted not to eliminate its interest in these transactions.
The consolidated financial statements are presented in Euro (€), rounded to the nearest thousand. The Euro is the functional currency of all Group subsidiaries. Euro is commonly used for transactions in the European real estate market.
Transactions in foreign currencies are translated to Euro at the foreign exchange rate ruling at the date of the transaction. Consequently non-monetary assets and liabilities are presented at Euro using the historic foreign exchange rate. Monetary assets and liabilities denominated in a currency other than Euro at the balance sheet date are translated to Euro at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the consolidated income statement.
The following exchange rates were used during the period:
| date | czech republic |
closing rate |
|---|---|---|
| 31 December 2011 | CZK/EUR | 25.8000 |
| 31 December 2010 | CZK/EUR | 25.0600 |
| date | POLAND | closing rate |
|---|---|---|
| 31 December 2011 | PLN /EUR |
4.4168 |
| 31 December 2010 | PLN /EUR |
— |
| date | romania | closing rate |
| 31 December 2011 | RON /EUR |
4.3197 |
| 31 December 2010 | RON /EUR |
4.2848 |
| date | latvia | closing rate |
| 31 December 2011 | LVL /EUR |
0.702804 |
| 31 December 2010 | LVL /EUR |
0.702804 |
| date | hungary | closing rate |
| 31 December 2011 | HUF/EUR | 311.1300 |
| 31 December 2010 | HUF/EUR | 278.7500 |
The preparation of consolidated financial statements in compliance with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making the judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both the current and future periods.
The main sources of estimates are the valuations made of the property portfolio by the independent external valuation expert. The main uncertainties surrounding the valuation of the portfolio property relate to the current relatively low levels of liquidity in the real estate market and the reduced transactions, resulting in a lack of clarity as to pricing levels and the market drivers. Many transactions that are occurring involve vendors who are more compelled to sell, or purchasers who will only buy at discounted prices. In this environment, prices and values are going through a period of heightened volatility. As a result there is less certainty with regard to valuations with the result that market values can change rapidly in the current market conditions. The estimates used by the valuation expert have been significantly mitigated due to the fact that the Company has concluded an agreement for the sale of an 80% equity interest in VGP CZ I a.s. and VGP CZ II a.s. creating a benchmark market price for prime semi-industrial real estate in Prague (Czech Republic) and the main regional cities in the Czech Republic. Another source of estimates are the estimations of the fair values of derivative financial instruments.
As of 31 December 2011, there are no other significant assumptions concerning the future and other key sources of estimation uncertainty on the balance sheet, which would carry a significant risk of material adjustment to the book value of assets and liabilities for the next financial year
A non-current asset or disposal group is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. A discontinued operation is a component of an entity which the entity has disposed of or which is classified as held for sale, which represents a separate major line of business or geographical area of operations and which can be distinguished operationally and for financial reporting purposes.
For a sale to be highly probable, the entity should be committed to a plan to sell the asset (or disposal group), an active program to locate a buyer and complete the plan should be initiated, and the asset (or disposal group) should be actively marketed at a price which is reasonable in relation to its current fair value, and the sale should be expected to be completed within one year from the date of classification. Assets (or disposal group) classified as held for sale are measured at the lower of their carrying amount and fair value less costs necessary to make the sale. Any excess of the carrying amount over the fair value less costs to sell is included as an impairment loss. Depreciation of such assets is discontinued as from their classification as held for sale.
Comparative balance sheet information for prior periods is not restated to reflect the new classification in the balance sheet.
Investment properties, which incorporate completed projects, projects under construction and land held for development, are held to earn rental income, for capital appreciation, or for both.
Completed projects and development land Completed properties are stated at fair value. An external independent valuation expert with recognised professional qualifications and experience in the location and category of the property being valued, values the portfolio at least annually. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
Land of which the Group has full ownership and on which the Group intends or has started construction (so called "development land") is immediately valued at fair value.
Infrastructure works are not included in the fair value of the development land but are recognised as investment property and valued at cost.
The valuations of properties are prepared by considering the aggregate of the net annual rents receivable from the properties, and where relevant, associated costs. A yield which reflects the risks inherent in the net cash flows is then applied to the net annual rentals to arrive at the property valuation.
In view of the nature of the properties and the basis of valuation the valuation expert, Jones Lang LaSalle, adopted the Income Approach based on the discounted cash flow technique for a 10 year period. The cash flow assumes a ten-year hold period with the exit value calculated on the Estimated Rental Value (ERV). To calculate the exit value the valuation expert has used the exit yield which represents his assumption of the possible yield in the 10th year.
The cash flow is based on the rents receivable under existing lease agreements until their expiry date and the expected rental value for the period remaining in the ten-year period, as applicable. After the termination of existing leases (first break option) the valuator has assumed a certain expiry void i.e. an expiry void of 4 months for industrial premises and 6 months for office premises. The assumed voids are used to cover the time and the cost of marketing, re-letting and possible reconstruction. For currently vacant industrial and office premises an initial void of 8 months has been assumed. Finally the valuator made a general deduction of 0%-2% from the gross income for an on-going vacancy.
Valuations reflect, where appropriate, the type of tenants actually occupying the property or responsible for meeting the lease commitments or likely to be occupying the property after letting vacant accommodation and the market's general perception of their creditworthiness; the allocation of maintenance and insurance responsibilities between lessor and lessee; and the remaining economic life of the property. It has been assumed that whenever rent reviews or lease renewals are pending with anticipated reversionary increases, all notices, and where appropriate counter notices, have been served validly and within the appropriate time.
Any gain or loss arising from a change in fair value is recognised in the consolidated income statement.
Property that is being constructed or developed for future use as investment property is also stated at fair value. The investment properties under construction are valued by the same independent valuation expert i.e. Jones Lang LaSalle. For the properties under construction the valuation expert has used the same approach as applicable for the completed properties but deducting the remaining construction costs from the calculated market value.
All costs directly associated with the purchase and construction of a property and all subsequent capital expenditure qualifying as acquisition costs are capitalised.
Interest and other financial expenses relating to the acquisition of fixed assets incurred until the asset is put in use are capitalised. Subsequently, they are recorded as financial expenses.
Property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (see accounting policy "Impairment on other tangible assets and intangible assets"). The cost of self-constructed assets includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing building items and restoring the building site at which they are located, and an appropriate proportion of production overheads.
Where components of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
The Group recognises in the carrying amount the cost of replacing part of an item of property, plant and equipment at the time that cost is incurred, if it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the consolidated income statement as expenses at the time they are incurred.
Depreciation is charged to the consolidated income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated.
The estimated useful lives are as follows:
| assets | 2011 | 2010 |
|---|---|---|
| Motor vehicles | 4 years | 4 years |
| Other equipment | 4-6 years | 4-6 years |
The residual value, if not insignificant, is reassessed annually.
Trade receivables do not carry any interest and are stated at amortised cost as reduced by appropriate allowances for estimated irrecoverable amounts. An estimate is made for doubtful receivables based on a review of all outstanding amounts at the balance sheet date. An allowance for impairment of
trade and other receivables is established if the collection of a receivable becomes doubtful. Such receivable becomes doubtful when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the allowance is the difference between the asset's carrying amount and the present value of the estimated future cash flows. An impairment loss is recognized in the statement of income, as are subsequent recoveries of previous impairments.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the consolidated cash-flow statement.
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the consolidated income statement over the period of the borrowings on an effective interest basis. The Group classifies as a current portion any part of long-term loans that is due to be settled within one year from the balance sheet date.
Trade and other payables are stated at amortised cost.
A derivative is a financial instrument or other contract which fulfils the following conditions:
Hedging derivatives are defined as derivatives that comply with the company's risk management strategy, the hedging relationship is formally documented and the hedge is effective, that is, at inception and throughout the period, changes in the fair value or cash flows of the hedged and hedging items are almost fully offset and the results are within a range of 80 % to 125 %.
Derivative financial instruments that are not designated as hedging instruments are classified as held-for-trading and carried at fair value, with changes in fair value included in net profit or loss of the period in which they arise.
Fair values are obtained from quoted market prices or discounted cash-flow models, as appropriate. All non-hedge derivatives are carried (as applicable) as current or non-current assets when their fair value is positive and as current or non-current liabilities when their fair value is negative.
VGP holds no derivative instruments nor intends to issue any for speculative purposes.
The carrying amounts of the Group's property, plant and equipment and intangible assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the consolidated income statement.
Impairment losses recognised in respect of cash-generating units reduce the carrying amount of the assets in the unit (group of units) on a pro-rata basis.
An impairment loss is reversed in the consolidated income statement if there has been a change in the estimates used to determine the recoverable amount to the extent it reverses an impairment loss of the same asset that was recognised previously as an expense.
A provision is recognised in the consolidated balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
Rental income from investment property leased out under an operating lease is recognised in the consolidated income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income. Rental income is recognised as from the commencement of the lease contract.
The Group did not enter into any financial lease agreements with tenants, all lease contracts qualify as operating leases.
The lease contracts concluded can be defined as ordinary leases whereby the obligations of the lessor under the lease remain essentially those under any lease, for instance to ensure that space in a state of being occupied is available to the lessee during the whole term of the lease . The lease contracts are usually concluded for periods between 5-10 years (first break option) and include most of the time an automatic extension clause. The lessee cannot cancel the lease contract until the first break option date.
OPERATING EXPENSES Service costs for service contracts entered into and property operating expenses are expensed as incurred.
All leases where VGP act as a lessee are operational leases. The leased assets are not recognised on the balance sheet.
Payments are recognised in profit and loss on a straight line basis over the term of the lease.
Net financial result comprises interest payable on borrowings and interest rate swaps calculated using the effective interest rate method net of interest capitalised, interest receivable on funds invested and interest rate swaps, foreign exchange and interest rate swap gains and losses that are recognised in the consolidated income statement.
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the consolidated income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets and deferred tax liabilities have been offset, pursuant to the fulfilment of the criteria of IAS 12 §74. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic area (geographic segment) and which is subject to risks and rewards that are different from those of other segments. As the majority of the assets of the Group are geographically located in the Czech Republic a distinction between the Czech Republic and the other countries ("Other countries") has been made. The segment assets include all items directly attributable to the segment as well as those elements that can reasonably be allocated to a segment (financial assets and income tax receivables are therefore part of segment assets). Unallocated amounts include the administrative costs incurred for the Group's supporting functions. All rent income is coming from semi-industrial buildings. There is no risk concentration in terms of income contribution from a single tenant. The unallocated assets relate to outstanding receivables of VGP NV to associates (€ 51.9 million) and cash and cash equivalents of VGP NV (€ 14.9 million).
| Income statement (in thousands of €) |
Czech Republic |
||
|---|---|---|---|
| 2011 | 2010 | ||
| Gross rental income | 11,647 | 26,835 | |
| Service charge income / (expenses) | 772 | 515 | |
| Property operating expenses | (1,198) | (1,655) | |
| Net rental and related income | 11,221 | 25,695 | |
| Other income / (expenses) – incl. administrative costs | 447 | (457) | |
| Operating result (before result on portfolio) | 11,668 | 25,238 | |
| Net valuation gains / (losses) on investment property | (3,245) | 22,514 | |
| Operating result (after result on portfolio) | 8,423 | 47,752 | |
| Net financial result | — | — | |
| Taxes | — | — | |
| Share in the result of associates | |||
| Result for the period | — | — |
| Balance sheet (in thousands of €) |
Czech Republic |
||
|---|---|---|---|
| 2011 | 2010 | ||
| Assets | |||
| Investment properties | 21,681 | 133,812 | |
| Other assets (incl. deferred tax) | 2,405 | 5,741 | |
| Disposal group held for sale | 12,024 | 299,942 | |
| Total assets | 36,110 | 439,495 | |
| Shareholders' equity and liabilities | |||
| Shareholders' equity | — | — | |
| Total liabilities | — | — | |
| Liabilities related to disposal group held for sale | — | — | |
| Total shareholders' equity and liabilities | — | — |
| Other countries |
Unallocated | amounts Total |
|||
|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 |
| 2,799 | 1,738 | — | — | 14,446 | 28,573 |
| 57 | 9 | — | — | 829 | 524 |
| (147) | (114) | — | — | (1,345) | (1,769) |
| 2,709 | 1,633 | — | — | 13,930 | 27,328 |
| (491) | (305) | (1,657) | (1,048) | (1,701) | (1,810) |
| 2,218 | 1,328 | (1,657) | (1,048) | 12,229 | 25,518 |
| 6,378 | 245 | — | — | 3,133 | 22,759 |
| 8,596 | 1,573 | (1,657) | (1,048) | 15,362 | 48,277 |
| — | — | (1,737) | (13,847) | (1,737) | (13,847) |
| — | — | (1,532) | (8,028) | (1,532) | (8,028) |
| 844 | — | 844 | — | ||
| — | — | 12,937 | 26,402 | 12,937 | 26,402 |
| Czech Republic |
Other countries |
Unallocated | amounts | Total | ||
|---|---|---|---|---|---|---|
| 2011 2010 |
2011 | 2010 | 2011 | 2010 | 2011 | 2010 |
| 21,681 133,812 |
49,962 | 53,170 | — | — | 71,643 | 186,982 |
| 2,405 5,741 |
3,197 | 4,572 | 66,704 | — | 72,306 | 10,313 |
| 12,024 299,942 |
21,920 | — | — | — | 33,944 | 299,942 |
| 36,110 439,495 |
75,079 | 57,742 | 66,704 | — | 177,893 | 497,237 |
| — | — | — | 154,735 | 176,342 | 154,735 | 176,342 |
| — | — | — | 16,124 | 145,245 | 16,124 | 145,245 |
| — | — | — | 7,034 | 175,650 | 7,034 | 175,650 |
| — | — | — | 177,893 | 497,237 | 177,893 | 497,237 |
| Income statement (in thousands of €) |
Estonia | Slova | kia | ||
|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | ||
| Gross rental income | 1,234 | 822 | 862 | 383 | |
| Service charge income / (expenses) | 39 | 60 | (42) | (47) | |
| Property operating expenses | (39) | (37) | (13) | (3) | |
| Net rental and related income | 1,234 | 845 | 807 | 333 | |
| Other income / (expenses) – incl. administrative costs | (63) | (11) | (10) | (69) | |
| Operating result (before result on portfolio) | 1,171 | 834 | 797 | 264 | |
| Net valuation gains / (losses) on investment property | 4,033 | (1,318) | 798 | 1,804 | |
| Operating result (after result on portfolio) | 5,204 | (484) | 1,595 | 2,068 | |
| Net financial result | — | — | — | — | |
| Taxes | — | — | — | — | |
| Share in the result of associates | — | — | — | — | |
| Result for the period | — | — | — | — |
| Balance sheet (in thousands of €) |
Estonia | Slova | kia | ||
|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | ||
| Assets | |||||
| Investment properties | — | 14,422 | 22,877 | 18,706 | |
| Other assets (incl. deferred tax) | 593 | 1,448 | 362 | 322 | |
| Disposal group held for sale | 21,920 | — | — | — | |
| Total assets | 22,513 | 15,870 | 23,239 | 19,028 | |
| Shareholders' equity and liabilities | |||||
| Shareholders' equity | — | — | — | — | |
| Total liabilities | — | — | — | — | |
| Liabilities related to disposal group held for sale | — | — | — | — | |
| Total shareholders' equity and liabilities | — | — | — | — |
| Slova kia |
Hungary | Other | Total | |||
|---|---|---|---|---|---|---|
| 2011 2010 |
2011 | 2010 | 2011 | 2010 | 2011 | 2010 |
| 862 383 |
703 | 531 | — | — | 2,799 | 1,738 |
| (42) (47) |
62 | (4) | (2) | — | 57 | 9 |
| (13) (3) |
(58) | (49) | (37) | (25) | (147) | (114) |
| 333 | 707 | 478 | (38) | (25) | 2,709 | 1,633 |
| (69) | (95) | (42) | (323) | (183) | (492) | (305) |
| 264 | 612 | 436 | (362) | (208) | 2,218 | 1,328 |
| 1,804 | 2,097 | (821) | (550) | 580 | 6,378 | 245 |
| 2,068 | 2,709 | (385) | (912) | 372 | 8,596 | 1,573 |
| — | — | — | — | — | — | — |
| — | — | — | — | — | — | — |
| — | — | — | — | — | — | — |
| — | — | — | — | — | — | — |
| Hungary | Other | Total | |||
|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 |
| 17,191 | 12,122 | 9,894 | 7,920 | 49,962 | 53,170 |
| 512 | 354 | 1,730 | 455 | 3,197 | 2,579 |
| — | — | — | — | 21,920 | — |
| 17,703 | 12,476 | 11,624 | 8,375 | 75,079 | 55,749 |
| — | — | — | — | — | — |
| — | — | — | — | — | — |
| — | — | — | — | — | — |
| — | — | — | — | — | — |
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Gross lease payments collected/accrued | 13,940 | 27,839 |
| Rent incentives | 506 | 734 |
| Total | 14,446 | 28,573 |
The Group leases out its investment property under operating leases. The operating leases are generally for terms of more than 5 years. The gross rental income reflects the full impact of the income generating assets delivered during 2011 and the deconsolidation of VGP CZ I as from 16 March 2011 and VGP CZ II as from 9 November 2011. The gross rental income of VGP CZ I for the period January 2011 to 16 March 2011 was € 4.6 million and of VGP CZ II for the period January 2011 to 9 November 2011 was € 7 .0 million.
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Recharge of costs borne by tenants | 4,755 | 6,082 |
| Administration fees | 462 | 721 |
| Total | 5,217 | 6,803 |
Service charge income represents income receivable from tenants for energy, maintenance, cleaning, security, garbage management and usage of infrastructure which relates to the service charge expenses charged to the Group.
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Energy | (1,890) | (3,761) |
| Repairs, maintenance and cleaning | (161) | (133) |
| Property taxes | (186) | (338) |
| Others | (2,151) | (2,047) |
| Total | (4,388) | (6,279) |
Property operating expenses mainly include lawyer and broker fees with respect to the conclusion of new rental agreements on completed investment property.
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Consultancy fees (lawyers, brokers and others) | (1,043) | (1,334) |
| Other | (302) | (435) |
| Total | (1,345) | (1,769) |
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Unrealised valuation gain - investment properties | 7,541 | 22,759 |
| Realised valuation loss - VGP CZ I transaction |
(3,358) | — |
| Realised valuation loss - VGP CZ II transaction |
(1,050) | — |
| Total | 3,133 | 22,759 |
The realised valuation loss on the VGP CZ I and VGP CZ II transactions amounting to € 4.4 million is composed of a € 1.0 million realised gain on the disposal of the VGP CZ I and VGP CZ II assets and a realised loss of € 5.4 million resulting from the recycling of the existing VGP CZ I and VGP CZ II interest rate swaps through the profit and loss account.
The total property portfolio (including VGP CZ I and VGP CZ II), excluding development land, is valued by the valuation expert at 31 December 2011 based on a market rate of 8.34%1 (compared to 8.35% as at 31 December 2010) applied to the contractual rents increased by the estimated rental value on unlet space. A 0.10% variation of this market rate would give rise to a variation of the total portfolio value of € 6.4 million.
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Audit, legal and other advisors | (1,116) | (955) |
| Payroll, management fees and other expenses | (816) | (756) |
| Depreciation | (164) | (180) |
| Total | (2,096) | (1,891) |
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Asset and property management income | 926 | 706 |
| Other operating income | 274 | 10 |
| Total | 1,200 | 716 |
The increase in asset and property management income is mainly due to the services provided to asociated companies (VGP CZ I en VGP CZ II).
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Marketing expenses | (619) | (589) |
| Other operating expenses | (186) | (45) |
| Total | (805) | (634) |
1 Yield applicable for total portfolio including VGP CZ I and VGP CZ II. If VGP CZ I and VGP CZ II would not have been included the yields would have been 9.07% as at the end of December 2011.
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Bank interest income | 55 | 29 |
| Interest income - loans to associates | 2,386 | 17 |
| Net foreign exchange gains | 1,619 | — |
| Unrealised gains on interest rate derivatives | — | 347 |
| Financial income | 4,060 | 393 |
| Bank interest expense – variable debt | (584) | (5,370) |
| Bank interest expense – interest rate swaps - hedging | (288) | (3,543) |
| Bank interest expense – interest rate swaps – non-hedging | — | (1,560) |
| Interest paid to related parties | (4,841) | (5,119) |
| Interest capitalised into investment properties | 152 | 1,879 |
| Other financial expenses | (236) | (303) |
| Net foreign exchange losses | — | (224) |
| Financial expenses | (5,797) | (14,240) |
| Net financial costs | (1,737) | (13,847) |
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Current tax | (119) | (234) |
| Deferred tax | (1,413) | (7,795) |
| Total | (1,532) | (8,029) |
| In thousands of € | 2011 | 2010 | ||
|---|---|---|---|---|
| Result before taxes | 13,625 | 34,430 | ||
| Income tax using the domestic corporation tax rate | 19.0% | (2,588) | 19.0% | (6,542) |
| Difference in tax rate non-CZ companies | 1,604 | (865) | ||
| Non-tax-deductible expenditure | (451) | (1,537) | ||
| Non recognition of deferred tax assets | — | 1,146 | ||
| Other | (97) | (229) | ||
| Total | 11.2% | (1,532) | 23.3% | (8,029) |
The majority of the Group's profit before taxes is earned in the Czech Republic. Hence the effective corporate tax rate in Czech Republic is applied for the reconciliation
The expiry of the tax loss carry forward of the Group can be summarised as follows:
| In thousands of € | < 1 YEAR | 2–5 YEARS | >5 YEARS |
|---|---|---|---|
| Tax loss carry forward | 625 | 2,735 | 1,198 |
| In thousands of € | ASSETS | LIABILITIES | NET | |||
|---|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
| Fixed assets | — | 22,470 | (2,925) | (54,798) | (2,925) | (32,328) |
| IFRS hedge accounting |
— | 1,269 | — | — | — | 1,269 |
| Tax losses carried-forward | 1,116 | 7,083 | — | — | 1,116 | 7,083 |
| Capitalized interest | — | — | (560) | (2,635) | (560) | (2,635) |
| Capitalised cost | — | — | (2) | (155) | (2) | (155) |
| Other | — | — | 448 | (526) | 448 | (526) |
| Tax assets / liabilities | 1,116 | 30,822 | (3,039) | (58,114) | (1,923) | (27,292) |
| Set-off of assets and liabilities | (873) | (29,809) | 873 | 29,809 | — | — |
| Reclassification liabilities related to disposal group held for sale |
— | 646 | 19,996 | 646 | 19,996 | |
| Net tax assets / liabilities | 243 | 1,013 | (1,520) | (8,309) | (1,277) | (7,296) |
The deferred tax assets and liabilities are attributable to the following:
A total deferred tax assets of € 133k was not recognised.
| In thousands of € | 2011 | 2010 | |
|---|---|---|---|
| Associates | |||
| VGP CZ I a.s. |
Czech Republic | 274 | — |
| VGP CZ II a.s. |
Czech Republic | 913 | — |
| VGP SUN s.r.o. |
Czech Republic | (46) | — |
| SUN S.a.r.l. | Grand Duchy of Luxembourg | 1 | — |
| Snow Crystal S.a.r.l. | Grand Duchy of Luxembourg | (298) | — |
| Total | 844 | — |
| In number | 2011 | 2010 |
|---|---|---|
| Weighted average number of ordinary shares (basic) | 18,583,050 | 18,583,050 |
| Dilution | — | — |
| Weighted average number of ordinary shares (diluted) | 18,583,050 | 18,583,050 |
| In thousands of € | 2011 | 2010 |
| Result for the period attributable to the Group and to ordinary shareholders | 12,937 | 26,402 |
| Earnings per share (in €) - basic | 0.70 | 1.42 |
| Earnings per share (in €) - diluted | 0.70 | 1.42 |
| In thousands of € | INTANGIBLE ASSETS | PROPeRTY, PLANT AND EQUIPMENT | ||
|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |
| Balance at 1 January | 62 | 64 | 196 | 338 |
| Acquisitions of the year | ||||
| IT software | 13 | 10 | — | — |
| Plant and equipment | — | — | 157 | 20 |
| Furniture and fixtures | — | — | 7 | |
| Motor vehicles | — | — | (129) | (47) |
| Other | 3 | 13 | 7 | 10 |
| Reclassification to (–) / from held for sale | (3) | — | (97) | |
| 13 | 23 | 42 | (114) | |
| Depreciation of the year | ||||
| IT software | (27) | (23) | 0 | — |
| Plant and equipment | — | — | (27) | (17) |
| Furniture and fixtures | — | — | (5) | (5) |
| Motor vehicles | — | — | 79 | (12) |
| Other | (5) | (2) | (7) | (11) |
| Reclassification to (–) / from held for sale | — | — | 17 | |
| (32) | (25) | 40 | (28) | |
| At 31 December | 43 | 62 | 278 | 196 |
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Balance at 1 January | 186,982 | 428,105 |
| Capital expenditure | 32,944 | 28,879 |
| Capitalised interest | 152 | 1,879 |
| Acquisitions | 16,132 | — |
| Sales / (disposals) (Fair value of assets sold / disposed of) | (138,164) | — |
| Increase / (Decrease) in fair value | 7,541 | 22,759 |
| Reclassification to (–) / from held for sale | (33,944) | (294,640) |
| Balance at 31 December | 71,643 | 186,982 |
Investment properties comprise a number of commercial properties that are leased to third parties, projects under construction and land held for development. The carrying amount of investment properties is the fair value of the property as determined by the external independent valuation expert, Jones Lang LaSalle.
As at 31 December 2011 most properties were secured in favour of the Group's banks (see note 4.10).
| In thousands of € | 2011 | 2010 |
|---|---|---|
| As at 1 January | — | — |
| Fair value at initial recognition | 121 | — |
| Result of the year | 844 | — |
| Total | 965 | — |
For the analysis of the result for the year, please refer to note 3.11.
The Group's share in the combined assets, liabilities and results of associates can be summarised as follows
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Investment property and property under construction | 91,468 | — |
| Other non-current assets | 118 | — |
| Current assets | 2,115 | — |
| Non-current liabilities | (88,265) | — |
| Current liabilities | (4,471) | — |
| Total net assets |
965 | |
| Gross rental income | 3,871 | — |
| Result for the period | 844 | — |
| In thousands of € | 2011 | 2010 |
|---|---|---|
| SUN S.a.r.l. | 7,165 | — |
| VGP SUN s.r.o. |
762 | — |
| VGP CZ II a.s. |
2,958 | — |
| Snow Crystal S.a.r.l. | 18,506 | — |
| VGP CZ I a.s. |
15,922 | — |
| Total | 45,313 | — |
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Trade receivables | 945 | 2,667 |
| Tax receivables – VAT | 858 | 1,409 |
| Accrued income and deferred charges | 380 | 3,188 |
| Receivable re VGP CZ II transaction |
6,450 | — |
| Other receivables | 518 | 85 |
| Reclassification to (-) / from held for sale | (13) | (3,648) |
| Total | 9,138 | 3,701 |
The VGP CZ II receivable relates to an additional amount which VGP will receive once two buildings, which are currently under construction, will be leased for 90%. The net cash inflow from this transaction will amount to € 5.2 million (80% of € 6.5 million) and is expected to be received within the course of 2012. The remaining balance will be converted to a loan to associates.
The Group's cash and cash equivalents comprise primarily cash deposits held at Czech and Belgian banks
| CARRYING AMOUNT In thousands of € | 2011 | 2010 |
|---|---|---|
| As at 1 January | 299,942 | — |
| Increase | 33,944 | 299,942 |
| De-consolidations | (299,942) | — |
| As at 31 December | 33,944 | 299,942 |
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Intangible assets | 3 | — |
| Investment properties | 33,922 | 294,643 |
| Property, plant and equipment | — | 80 |
| Deferred tax assets | — | — |
| Trade and other receivables | 13 | 3,646 |
| Cash and cash equivalents | 6 | 1,573 |
| Disposal group held for sale | 33,944 | 299,942 |
| Non-current financial debt | 6,057 | 136,872 |
| Other non-current financial liabilities | — | 9,025 |
| Other non-current liabilities | — | 2,559 |
| Deferred tax liabilities | 646 | 19,998 |
| Current financial debt | 328 | 4,596 |
| Other current financial liabilities | — | — |
| Trade debts and other current liabilities | 3 | 2,600 |
| Liabilities associated with assets classified as held for sale | 7,034 | 175,650 |
| Total net assets |
26,910 | 124,292 |
In March 2011 VGP concluded the sale of an 80% equity interest in VGP CZ I a.s., comprising 6 VGP Parks mainly located in the Prague region, to European Property Investors Special Opportunities, L.P. (EPISO), a property fund co-advised by AEW Europe and Tristan Capital.
In November 2011 VGP concluded the sale of an 80% equity interest in VGP CZ II a.s., comprising 6 VGP Parks mainly located in the northern, eastern and western Czech regions on major transport routes at Hradec Kralove, Liberec, Mlada Boleslav, Pilsen, Olomouc and Usti, to Curzon Capital Partners III (CCP III) fund , a fund managed by Tristan Capital Partners.
After the year-end (February 2012) VGP entered into a binding agreement with East Capital to sell its newly built logistics property of 40,000 m² located in Tallinn (Estonia). In addition in March 2012 VGP concluded a second agreement with Property Investors Special Opportunities, L.P. (EPISO) for the sale of an 80% equity interest in VGP CZ IV a.s. following the purchase by VGP CZ IV a.s. at the end of December 2011 of the last remaining development land adjacent to the existing VGP Park Horni Pocernice (Prague). Both transactions were classified as assets held for sale as at 31 December 2011.
| SHARE CAPITAL MOVEMENT (thousands of €) |
TOTAL OUTSTANDING SHARE CAPITAL AFTER THE TRANSACTION (thousands of €) |
NUMBER OF SHARE ISSUED (units) |
TOTAL NUMBER OF SHARES (units) |
||
|---|---|---|---|---|---|
| 01. 01. 2006 | Cumulative share capital of all Czech companies |
10,969 | 10,969 | — | — |
| 06. 02. 2007 | Incorporation of VGP NV |
100 | 11,069 | 100 | 100 |
| 05. 11. 2007 | Share split | — | 11,069 | 7,090,400 | 7,090,500 |
| 11. 12. 2007 | Contribution in kind of Czech companies |
120,620 | 131,689 | 7,909,500 | 15,000,000 |
| 11. 12. 2007 | Capital increase IPO | 50,000 | 181,689 | 3,278,688 | 18,278,688 |
| 28. 12. 2007 | Exercise of over allotment option – IPO |
4,642 | 186,331 | 304,362 | 18,583,050 |
| 31. 12. 2007 | Elimination capital increase – contribution in kind |
(120,620) | 65,711 | — | 18,583,050 |
| 31. 12. 2007 | Issuing costs capital increase | (3,460) | 62,251 | — | 18,583,050 |
| 08. 07. 2011 | Capital reduction | (39,953) | 22,298 | — | 18,583,050 |
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Share premium | 69 | 69 |
| Hedging reserve | — | (5,409) |
| Total | 69 | (5,340) |
| In thousands of € | 2011 | 2010 |
|---|---|---|
| As at 1 January | (5,409) | (5,313) |
| Gains / (loss) recognised on cash flow hedges | ||
| Interest rate swaps | 5,409 | (3,662) |
| Reclassified to profit or loss | ||
| Interest rate swaps | — | 3,543 |
| Income tax related to gains/losses recognised in other comprehensive income | 23 | |
| As at 31 December | — | (5,409) |
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Loans from related parties VM Invest NV |
— | 71,803 |
| Non-current bank loans | 10,053 | 185,249 |
| Current bank loans | 5,184 | 9,416 |
| Reclassification to liabilities related to disposal group held for sale | (6,385) | (141,468) |
| Total | 8,852 | 125,000 |
| 2011 | ||||
|---|---|---|---|---|
| < 1 YEAR | > 1–5 YEARS | > 5 YEARS | ||
| — | — | — | ||
| 5,184 | 8,353 | 1,700 | ||
| (492) | (5,893) | — | ||
| 4,692 | 2,460 | 1,700 | ||
| MATURITY (thousands of €) | 2010 | |||||
|---|---|---|---|---|---|---|
| < 1 YEAR | > 1–5 YEARS | > 5 YEARS | ||||
| Loans granted by VM Invest NV |
— | 71,803 | — | |||
| Non-current bank loans | 9,416 | 184,649 | 600 | |||
| Reclassification to liabilities related to disposal group held for sale | (4,596) | (136,872) | — | |||
| Total | 4,820 | 119,580 | 600 |
The loans granted to the VGP Group are all denominated in € and can be summarised as follows:
| 2011 (thousands of €) | FACILITY AMOUNT |
FACILITY EXPIRY DATE |
OUTSTANDING BALANCE |
< 1 YEAR | > 1–5 YEARS | > 5 YEARS |
|---|---|---|---|---|---|---|
| Tatra Banka | 1,500 | 31-Dec-13 | 1,500 | 40 | 1,460 | — |
| Tatra Banka | 4,600 | 31-Dec-18 | 2,900 | 200 | 1,000 | 1,700 |
| UniCredit Bank | 4,452 | 28-Sep-12 | 4,452 | 4,452 | — | — |
| Swedbank1 | 6,385 | 12-May-13 | 6,385 | 492 | 5,893 | — |
| Total | 16,937 | 15,237 | 5,184 | 8,353 | 1,700 |
| 2010 (thousands of €) | FACILITY AMOUNT |
FACILITY EXPIRY DATE |
OUTSTANDING BALANCE |
< 1 YEAR | > 1–5 YEARS | > 5 YEARS |
|---|---|---|---|---|---|---|
| KBC Bank / CSOB / CA |
141,468 | 30-Jun-13 | 141,468 | 4,596 | 136,872 | — |
| UniCredit Bank/LBBW | 65,224 | 31-Dec-14 | 43,779 | 1,291 | 42,488 | — |
| Tatra Banka | 3,000 | 31-Dec-11 | 3,000 | 3,000 | — | — |
| Tatra Banka | 1,600 | 31-Dec-18 | 1,600 | 200 | 800 | 600 |
| Swedbank | 4,818 | 12-May-13 | 4,818 | 329 | 4,489 | 0 |
| Total | 216,110 | 194,665 | 9,416 | 184,649 | 600 |
In order to secure the obligations under these agreements, the Group created:
As a general principle, loans are entered into by the Group in Euro at a floating rate, converting to a fixed rate through interest rate swaps in compliance with the respective loan agreements.
For further information on financial instruments we refer to note 5.2.
1) Relates to liabilities associated with disposal group held for sale.
The loan agreements granted by the banks are subject to a number of covenants which can be summarised as follows:
The above mentioned ratio's are tested based on a 12 month period and are calculated as follows:
During the year there were no events of default nor were there any breaches of covenants with respect to loan agreements.
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Fair value of interest rate swaps – hedge accounting | — | 6,677 |
| Fair value of interest rate swaps – held for trading | — | 3,106 |
| Fair value of foreign exchange contracts | — | — |
| Reclassification to liabilities related to disposal group held for sale | — | (9,025) |
| Total | — | 758 |
| Non-current | — | 9,783 |
| Current | — | — |
| Fair value of interest rate swaps – associated with disposal group held for sale | — | (9,025) |
| Total | — | 758 |
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Deposits | — | 2,482 |
| Retentions | — | 1,158 |
| Other non-current liabilities | 28 | 23 |
| Reclassification to liabilities related to disposal group held for sale | — | (2,559) |
| Total | 28 | 1,104 |
Deposits are received from tenants. Retentions are amounts withheld from constructors' invoices. It is common to pay only 90 percent of the total amount due. 5 percent is due upon final delivery of the building; the remaining part is paid, based on individual agreements, most commonly after 3 or 5 years. In view of the VGP CZ I and VGP CZ II transactions the outstanding balances have been reduced to a residual amount.
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Trade payables | 3,786 | 9,016 |
| Retentions | 1,266 | 1,179 |
| Accrued expenses and deferred income | 100 | 663 |
| Other payables | 575 | 1,816 |
| Reclassification to liabilities related to disposal group held for sale | (3) | (2,600) |
| Total | 5,724 | 10,074 |
In March 2011 VGP completed the sale of an 80% equity interest in VGP CZ I a.s. to the European Property Investors Special Opportunities, L.P. (EPISO), a property fund co-advised by AEW Europe and Tristan Capital Partners. The carrying amount of the net assets sold was measured at € 129.5 million.
In November 2011 VGP completed the sale of an 80% equity interest in VGP CZ II a.s., to Curzon Capital Partners III (CCP III) fund , a property fund managed by Tristan Capital Partners. The fair value of the net assets sold was € 66.8 million. An aggregated gain on the disposal of the assets of € 1.0 million was realised which was offset by a realised loss, previously included in other comprehensive loss, of € 5.4 million resulting from the recycling of the existing interest rate swaps through the profit and loss account.
The price consideration of the VGP CZ I and VGP CZ II transactions are subject to a limited upward revision based on a number of performance criteria. As at 31 December 2011 the financial statements did not include any accruals for future payments resulting from achieving these performance criteria. The table below presents the aggregated net assets sold as at the respective dates of sale i.e. as at 16 March 2011 for VGP CZ I and 9 November 2011 for VGP CZ II:
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Investment properties | (424,753) | — |
| Other tangible assets | (87) | — |
| Investments in subsidiaries | (70) | — |
| Deferred tax assets | (2,859) | — |
| Trade and other receivables | (5,086) | — |
| Cash and cash equivalents | (3,607) | — |
| Non-current financial debt | 196,080 | — |
| Other non-current financial liabilities | 8,921 | — |
| Other non-current liabilities | 2,543 | — |
| Deferred tax liabilities | 17,758 | — |
| Trade debts and other current liabilities | 14,855 | — |
| Total net assets disposed | (196,305) | — |
| Fair value adjustment | 4,408 | — |
| Consideration paid | (191,897) | — |
| Cash disposed | 3,607 | — |
| Disposal of assets | (188,290) | — |
Exposures to foreign currency, interest rate, liquidity and credit risk arises in the normal course of business of VGP. The company analyses and reviews each of these risks and defines strategies to manage the economic impact on the company's performance. The results of these risk assessments and proposed risk strategies is reviewed and approved by the board of directors on regular basis.
Some of the risk management strategies include the use of derivative financial instruments which mainly consists of forward exchange contracts and interest rate swaps. The company holds no derivative instruments nor would it issue any for speculative purposes. Following the sale of VGP CZ I and VGP CZ II there were no derivative financial instruments outstanding as at 31 December 2011.
| DERIVATIVES (thousands of €) |
2011 | 2010 | ||||
|---|---|---|---|---|---|---|
| < 1 year | 1-5 years | > 5 years | < 1 year | 1-5 years | > 5 years | |
| Foreign currency | ||||||
| Forward exchange contracts | — | — | — | — | — | — |
| Interest rates | ||||||
| Interest rate swaps | — | — | — | — | 146,067 | — |
VGP incurs principally foreign currency risk on its capital expenditure as well as some of its borrowings and net interest expense/ income. VGP's policy is to economically hedge its capital expenditure as soon as a firm commitment arises, to the extent that the cost to hedge outweighs the benefit and in the absence of special features which require a different view to be taken.
The table below summarises the Group's main net foreign currency positions at the reporting date. Since the Group has elected not to apply hedge accounting, the following table does not include the forecasted transactions. However the derivatives the Group has entered into, to economically hedge the forecasted transactions are included.
| In thousands of € | 2011 | ||||||
|---|---|---|---|---|---|---|---|
| CZK | pln | HUF | RON | LVL | |||
| Trade & other receivables | 40,964 | 53 | — | 2,701 | 15 | ||
| Non-current liabilities and trade & other payables |
(76,406) | (52) | (46,644) | (338) | (15) | ||
| Gross balance sheet exposure | (35,442) | 1 | (46,644) | 2,363 | — | ||
| Forward foreign exchange | — | — | — | — | — | ||
| Net exposure | (35,442) | 1 | (46,644) | 2,363 | — |
| In thousands of € | 2010 | ||||||
|---|---|---|---|---|---|---|---|
| CZK | pln | HUF | RON | LVL | |||
| Trade & other receivables | 68,397 | — | 1,272 | 651 | 71 | ||
| Non-current liabilities and trade & other payables |
(307,694) | — | (3,132) | (78) | (2) | ||
| Gross balance sheet exposure | (239,297) | — | (1,860) | 573 | 69 | ||
| Forward foreign exchange | — | — | — | — | — | ||
| Net exposure | (239,297) | — | (1,860) | 573 | 69 |
The following significant exchange rates applied during the year:
| One € = | 2011 / Closing rate |
2010 / Closing rate |
|---|---|---|
| CZK | 25.800000 | 25.060000 |
| PLN | 4.416800 | — |
| RON | 4.319700 | 4.2848000 |
| LVL | 0.702804 | 0.702804 |
| HUF | 311.130000 | 278.750000 |
A 10 percent strengthening of the euro against the following currencies at 31 December 2011 would have increased / (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2010.
| EFFECTS (thousands of €) | 2011 | ||
|---|---|---|---|
| Equity | Profit or (Loss ) |
||
| CZK | — | 125 | |
| PLN | — | — | |
| HUF | — | 14 | |
| RON | — | (50) | |
| LVL | — | — | |
| Total | — | 89 |
| EFFECTS (thousands of €) | 2010 | ||
|---|---|---|---|
| Equity | Profit or (Loss ) |
||
| CZK | — | 868 | |
| PLN | — | — | |
| HUF | — | 1 | |
| RON | — | (12) | |
| LVL | — | (9) | |
| Total | — | 848 |
A 10 percent weakening of the euro against the above currencies at 31 December 2011 would have had the equal but opposite effect on the above currencies to amounts shown above, on the basis that all other variables remain constant.
The Group applies a dynamic interest rate hedging approach whereby the target mix between fixed and floating rate debt is reviewed periodically. These reviews are carried out within the confines of the existing loan agreements which require that interest rate exposure is to be hedged when certain conditions are met.
Where possible the Group will apply IAS 39 to reduce income volatility whereby some of the interest rate swaps may be classified as cash flow hedges. Changes in the value of a hedging instrument that qualifies as highly effective cash flow hedges are recognised directly in shareholders' equity (hedging reserve).
The Group also uses interest rate swaps that do not satisfy the hedge accounting criteria under IAS 39 but provide effective economic hedges. Changes in fair value of such interest rate swaps are recognised immediately in the income statement. (interest rate swaps held for trading). At the reporting date the Group interest rate profile of the Group's financial instruments was:
| In thousands of € – Nominal amounts | 2011 | 2010 |
|---|---|---|
| Financial debt | ||
| Fixed rate | ||
| Shareholder loans | — | 71,803 |
| Variable rate | ||
| Shareholder loans | — | — |
| Bank debt | 15,237 | 194,665 |
| Reclassified to liabilities related to disposal group held for sale | — | (141,468) |
| 15,237 | 53,197 | |
| Interest rate hedging | ||
| Interest rate swaps | ||
| Held for trading | — | 40,000 |
| In connection with cash flow hedges | — | 106,067 |
| Reclassified to liabilities related to disposal group held for sale | — | (120,000) |
| — | 26,067 | |
| Financial debt after hedging | ||
| Variable rate | ||
| Bank debt | 15,237 | 27,130 |
| Fixed rate | ||
| Shareholder loans | — | 71,803 |
| Bank debt | — | 26,067 |
| — | 98,870 | |
| Fixed rate / total financial liabilities | n.a. | 78.3% |
The effective interest rate on bank debt, including all bank margins and cost of interest rate hedging instruments was 6.78 % for the year 2011. The effective interest rate on total financial debt was 6.85% for the year 2011.
In case of an increase / decrease of 100 basis points in the interest rates, profit before taxes would have been € 153k lower/higher (as compared to € 445k lower/higher profit before taxes for 2010). This impact comes from a change in the floating rate debt and interest rate swaps, with all variables held constant.
An increase / decrease of 100 basis points in the interest rates on the cash flow hedges at 31 December 2010, with all variables held constant, would have resulted in a € 121k positive / negative effect on the other comprehensive income for 2010. For 2011 there is no impact given the fact that there are no interest rate swaps outstanding as at the reporting date.
Credit risk is the risk of financial loss to VGP if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from VGP's receivables from customers and bank deposits.
The management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Each new tenant is analysed individually for creditworthiness before VGP offers a lease agreement. In addition the Group applies a strict policy of rent guarantee whereby, in general, each tenant is required to provide a rent guarantee for 6 months. This period will vary in function of the creditworthiness of the tenant.
At the balance sheet date there were no significant concentrations of credit risk.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset. The maximum exposure to credit risc at the reporting date was:
| In thousands of € | 2011 / CARRYING AMOUNT | 2010 / CARRYING AMOUNT |
|---|---|---|
| Other non–curent receivables | 45,313 | — |
| Trade & other receivables | 9,138 | 3,701 |
| Cash and cash equivalents | 16,326 | 5,341 |
| Total | 70,777 | 9,042 |
The aging of trade receivables at the reporting date was:
| In thousands of € | 2011 / CARRYING AMOUNT | 2010 / CARRYING AMOUNT |
|---|---|---|
| Gross trade receivables | ||
| Gross trade receivables not past due | 676 | 1,513 |
| Gross trade receivables past due | 269 | 1,154 |
| Bad debt and doubtful receivables | — | 819 |
| Provision for impairment of receivables (–) | — | (819) |
| Total | 945 | 2,667 |
There were no impairments recognised during the year. The Board of Directors considers that the carrying amount of trade receivables approximate their fair value
| In thousands of € | 2011 | 2010 |
|---|---|---|
| As at 1 January | 819 | 760 |
| Use | — | — |
| Provisions charged to income statement | — | 59 |
| Provision write backs credited to income statement | — | (819) |
| Deconsolidation | (819) | — |
| As at 31 December | — | 819 |
The company manages its liquidity risk by ensuring that it has sufficient available credit facilities and by matching as much as possible its receipts and payments.
The following are contractual maturities of financial liabilities, including interest payments and derivative financial assets and liabilities.
| In thousands of € | 2011 | |||||
|---|---|---|---|---|---|---|
| CARRYING AMOUNT |
CONTRACTUAL CASH FLOWS |
< 1 YEAR | 1-2 YEARS |
2-5 YEARS |
MORE THAN 5 YEARS |
|
| Non- financial liabilities | ||||||
| Accrued expenses and deferred income | 100 | (100) | (100) | — | — | — |
| Reclassification to liabilities related to disposal group held for sale |
— | — | — | — | — | — |
| Financial liabilities | ||||||
| At amortised cost | ||||||
| Financial liabilities | 5,627 | (5,627) | (5,627) | — | — | — |
| Shareholder loans | — | — | — | — | — | — |
| Secured bank loans | 15,237 | (15,644) | (5,549) | (7,304) | (746) | (2,045) |
| Reclassification to liabilities related to disposal group held for sale |
(6,385) | 6,704 | 715 | 5,989 | — | — |
| Hedging derivatives | ||||||
| Interest rate derivatives | — | — | — | — | — | — |
| Non-hedging derivatives | ||||||
| Interest rate derivatives | — | — | — | — | — | — |
| Foreign exchange derivatives | — | — | — | — | — | — |
| O utflow |
— | — | — | — | — | — |
| I nflow |
— | — | — | — | — | — |
| Reclassification to liabilities related to disposal group held for sale |
— | — | — | — | — | — |
| 14,579 | (14,667) | (10,561) | (1,315) | (746) | (2,045) |
| In thousands of € | 2010 | |||||
|---|---|---|---|---|---|---|
| CARRYING AMOUNT |
CONTRACTUAL CASH FLOWS |
< 1 YEAR | 1-2 YEARS |
2-5 YEARS |
MORE THAN 5 YEARS |
|
| Non- financial liabilities | ||||||
| Accrued expenses and deferred income | 663 | (663) | (663) | — | — | — |
| Reclassification to liabilities related to disposal group held for sale |
(363) | 363 | 363 | — | — | — |
| Financial liabilities | ||||||
| At amortised cost | ||||||
| Financial liabilities | 12,011 | (12,011) | (12,011) | — | — | — |
| Shareholder loans | 71,803 | (91,908) | (5,026) | (5,026) | (81,855) | — |
| Secured bank loans | 194,665 | (232,796) | (26,987) | (25,997) | (178,920) | (892) |
| Reclassification to liabilities related to disposal group held for sale |
(143,706) | 179,242 | 19,459 | 19,566 | 140,218 | — |
| Hedging derivatives | ||||||
| Interest rate derivatives | 6,677 | (8,749) | (3,278) | (3,283) | (2,188) | — |
| Non-hedging derivatives | ||||||
| Interest rate derivatives | 3,106 | (3,637) | (1,455) | (1,467) | (715) | — |
| Foreign exchange derivatives | ||||||
| O utflow |
— | — | — | — | — | — |
| I nflow |
— | — | — | — | — | — |
| Reclassification to liabilities related to disposal group held for sale |
(9,025) | 10,688 | 4,275 | 4,311 | 2,102 | — |
| 135,831 | (159,470) | (25,323) | (11,896) | (121,359) | (892) |
VGP is continuously optimising its capital structure targeting to maximise shareholder value while keeping the desired flexibility to support its growth. The Group targets a maximum gearing ratio of net debt / equity of 2:1. At the end of 2011 the Group was debt free1 in respect of bank and shareholder debt (compared to net debt / equity ratio of 1.51 for 2010).
1) On a net debt basis which is measured as : (Outstanding bank debt + shareholder loans) minus available cash
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
| In thousands of € | 2011 | |||
|---|---|---|---|---|
| CARRYING | IN ACCORDANCE WITH IAS 39 | FAIR | ||
| AMOUNT | FAIR VALUE RECOGNISED IN EQUITY |
FAIR VALUE RECOGNISED IN PROFIT OR LOSS |
VALUE | |
| Financial assets | ||||
| Loans and receivables | ||||
| Trade receivables & others | 9,151 | — | — | 9,151 |
| Cash & cash equivalents | 16,326 | — | — | 16,326 |
| Long term receivables | 45,313 | — | — | 46,759 |
| Derivative financial assets | ||||
| Without a hedging relationship | — | — | — | — |
| With a hedging relationship | — | — | — | — |
| Reclassification to (–) / from held for sale | (115) | — | — | (115) |
| Financial liabilities | ||||
| At amortised cost | ||||
| Financial liabilities | 5,627 | — | — | 5,627 |
| Shareholder loans | — | — | — | — |
| Secured bank loans | 15,237 | 15,237 | ||
| Derivative financial liabilities | — | — | — | — |
| With a hedging relationship | — | — | — | — |
| Without a hedging relationship | — | — | — | — |
| Liabilities related to disposal group held for sale |
(6,388) | — | — | (6,388) |
| 39,838 | — | — | 39,838 |
| In thousands of € | 2010 | ||||
|---|---|---|---|---|---|
| CARRYING | IN ACCORDANCE WITH IAS 39 | FAIR | |||
| AMOUNT | FAIR VALUE RECOGNISED IN EQUITY |
FAIR VALUE RECOGNISED IN PROFIT OR LOSS |
VALUE | ||
| Financial assets | |||||
| Loans and receivables | |||||
| Trade receivables & others | 7,349 | — | — | 7,349 | |
| Cash & cash equivalents | 6,914 | — | — | 6,914 | |
| Long term receivables | — | — | — | — | |
| Derivative financial assets | — | ||||
| Without a hedging relationship | — | — | — | ||
| With a hedging relationship | — | — | — | — | |
| Reclassification to (–) / from held for sale | (5,221) | — | — | (5,221) | |
| Financial liabilities | — | ||||
| At amortised cost | |||||
| Financial liabilities | (12,011) | — | (12,011) | ||
| Shareholder loans | (71,803) | — | — | (73,974) | |
| Secured bank loans | (194,665) | — | — | (194,665) | |
| Derivative financial liabilities | — | ||||
| With a hedging relationship | (6,677) | (6,677) | (6,677) | ||
| Without a hedging relationship | (3,106) | — | (3,106) | (3,106) | |
| Liabilities related to disposal group held for sale |
150,493 | 5,919 | 3,106 | 150,493 | |
| (128,727) | (758) | — | (130,898) |
Following the respective sales of VGP CZ I and VGP CZ II there were no outstanding derivative financial liabilities as at 31December 2011. Total fair value net gains / (losses) on non hedging derivatives amounted to € 618k in 2010.
There were no gain / (losses) on non-financial assets and liabilities, financial liabilities at amortised costs.
Financial and non-financial assets amounting to € 673k in 2011 – excluding reclassifications to assets held for sale - (€ 4,161k in 2010) were pledged in favour of VGP's financing banks.
The following summarises the methods and assumptions used in estimating the fair values of financial instruments reflected in the table above:
The fair value of financial instruments is determined based on quoted prices in active markets. When quoted prices in active markets are not available, valuation techniques are used. Valuation techniques make maximum use of market inputs but are affected by the assumptions used, including discount rates and estimates of future cash flows. Such techniques include amongst others market prices of comparable investments and discounted cash flows.
The principal methods and assumptions used by VGP in determining the fair value of financial instruments are obtained from active markets or determined using, as appropriate, discounted cash flow models and option pricing models.
As at 31 December 2011, the Group held following financial instruments at fair value:
| In thousands of € | 31–Dec–11 | LEVEL 1 | LEVEL 2 | LEVEL 3 |
|---|---|---|---|---|
| Liabilities measured at fair value | ||||
| Financial liabilities at fair value through profit or loss | ||||
| Interest rate swaps – non-hedging | — | — | — | — |
| Foreign exchange contracts – non-hedging | — | — | — | — |
| Financial liabilities at fair value through equity | ||||
| Interest rate swaps - hedged | — | — | — | — |
| In thousands of € | 31–Dec–10 | LEVEL 1 | LEVEL 2 | LEVEL 3 |
|---|---|---|---|---|
| Liabilities measured at fair value | ||||
| Financial liabilities at fair value through profit or loss | ||||
| Interest rate swaps – non-hedging | 3,106 | — | 3,106 | — |
| Foreign exchange contracts – non-hedging | — | — | — | — |
| Financial liabilities at fair value through equity | ||||
| Interest rate swaps - hedged | 6,677 | — | 6,677 | — |
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
As at 31 December 2011, there were no outstanding financial instruments.
The Group had no post-employment benefit plans in place at the reporting date.
The Group has an incentive structure in place for selected member's of the Group's management which was set up after the initial public offering of December 2007 and whereby the existing shareholders VM Invest and Alsgard SA have transferred a number of VGP shares representing 5 percent of the aggregate number of shares in VGP NV into VGP MISV, a limited partnership controlled by Mr Jan Van Geet as managing partner ("beherend vennoot" / "associé commandité"). This structure does not have any dilutive effect on any existing or new shareholders.
VGP MISV is an independent company from the VGP Group companies. As a result VGP NV's financial statements are not in any way impacted by the operations and or existence of VGP MISV.
The Group has concluded a number of contracts concerning the future purchase of land. At 31 December 2011 the Group had future purchase agreements for land totalling 393,279 m² representing a commitment of € 14.8 million and for which deposits totalling € 1.2 million had been made.
At the end of December 2011 the Group had committed annualised rent income of € 4.73 million (€ 36.6 million as at December 2010), of which EUR 1.9 million was related to the disposal group held for sale. The significant decrease compared to 2010 is due to the VGP CZ I and VGP CZ II transactions.
The committed annual rent income represents the annualised rent income generated or to be generated by executed lease – and future lease agreements. This resulted in following breakdown of future lease income:
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Less than one year | 2,798 | 13,864 |
| Between one and five years | 10,579 | 51,206 |
| More than five years | 13,142 | 53,333 |
| Total | 26,520 | 118,403 |
As at 31 December 2011 the Group had contractual obligations to develop new projects for a total amount of € 19.1 million.
The Group has a related party relationship with its directors, executive officers and other companies controlled by its owners. The executive management consists of Jan Van Geet (CEO), Jan Procházka (COO) and Dirk Stoop (CFO). Jan Van Geet (CEO) and Jan Procházka (COO) are also reference shareholders.
The remuneration of the directors and executive managers are as follows:
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Directors | 104 | 94 |
| Executive managers | 718 | 514 |
| Total | 822 | 608 |
The remuneration paid to the executive managers are all short term remunerations.
The Group identified the following transactions with related parties in 2011 and 2010:
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Transactions with related parties | ||
| General management fees received from associates | 349 | — |
| Property management fees and similar income received from associates | 577 | — |
| Interest and similar income from associates | 1,848 | — |
| Rent paid to associates | (95) | — |
| Interest and similar expenses on shareholder loans | (2,338) | (5,109) |
| Services received from Jan Van Geet s.r.o. | (267) | (352) |
| Outstanding balances with related parties | ||
| Loans provided to associates | 45,313 | — |
| Other receivables from associates | 6,450 | — |
| Advances made to Jan Prochazka | — | 4 |
| Shareholder loans received from VM Invest NV |
— | (71,803) |
| Advances received from Jan Van Geet s.r.o. | (13) | (11) |
The Group rents offices from Jan Van Geet s.r.o. and from VGP CZ I a.s. for which it respectively concluded a 10 year and 4 year lease agreement. The leases expire on 29 July 2018 and 31 December 2015. The operating lease rentals are payable as follows:
| 2011 (thousands of €) | TOTAL | < 1 YEAR | > 1–5 YEARs | < 5 YEARs |
|---|---|---|---|---|
| Jan Van Geet s.r.o. | 436 | 66 | 265 | 105 |
| VGP CZ I a.s. |
381 | 95 | 286 | — |
| Total | 817 | 161 | 551 | 105 |
| 2010 (thousands of €) | TOTAL | < 1 YEAR | > 1–5 YEARs | < 5 YEARs |
|---|---|---|---|---|
| Jan Van Geet s.r.o. | 493 | 65 | 260 | 168 |
During the month of February 2012 VGP entered into a binding agreement with East Capital to sell its newly built logistics property of 40,000 m² located in Tallinn (Estonia). The assets will be acquired by East Capital Baltic Property Fund II, a new fund managed by East Capital and the transaction is expected to close by 15 May 2012. The transaction value is around EUR 24 million.
As at 31 December 2011 the consolidated accounts included a gross rental income for VGP Estonia of € 1.2 million and net financial expenses for VGP Estonia of € 0.3 million.
In addition in March 2012 VGP concluded a second agreement with Property Investors Special Opportunities, L.P. (EPISO) for the sale of an 80% equity interest in VGP CZ IV a.s. following the purchase by VGP CZ IV a.s. of the last remaining development land adjacent to the existing VGP Park Horni Pocernice (Prague) at the end of December 2011. It is expected that the transaction will be closed during the second quarter of 2012.
The aggregate price consideration of both transactions exceeds the unrealised gain on the property portfolio of VGP Estonia and VGP CZ IV as disclosed in the 31 December 2011 consolidated accounts.
In order to further optimise the capital structure of the Company and creating additional shareholder value the board of directors has decided to convene an Extraordinary Shareholders' Meeting to deliberate over an additional capital reduction in cash of € 15,052,270.50. This cash distribution would correspond to € 0.81 per share.
The audit fees for VGP NV and its subsidiaries amounted to € 51k. During the year, the statutory auditor and persons professionally related to him performed no additional services for fees.
COMPANIES FORMING PART OF THE GROUP AS AT 31 DECEMBER 2011 The following companies were included in the consolidation perimeter of the VGP Group.
| SUBSIDIARIES | ADDRESS | % |
|---|---|---|
| VGP CZ I a.s. (until 16 March 2011) |
Jenišovice u Jablonce nad Nisou,Czech Republic | 100 |
| VGP CZ II a.s. (until 9 November 2011) |
Jenišovice u Jablonce nad Nisou,Czech Republic | 100 |
| VGP CZ III a.s. |
Jenišovice u Jablonce nad Nisou,Czech Republic | 100 |
| VGP CZ IV a.s. |
Jenišovice u Jablonce nad Nisou,Czech Republic | 100 |
| VGP CZ V a.s. |
Jenišovice u Jablonce nad Nisou,Czech Republic | 100 |
| VGP CZ VI a.s. |
Jenišovice u Jablonce nad Nisou,Czech Republic | 100 |
| VGP CZ VII a.s. |
Jenišovice u Jablonce nad Nisou,Czech Republic | 100 |
| VGP CZ VIII s.r.o. |
Jenišovice u Jablonce nad Nisou,Czech Republic | 100 |
| VGP FM Services s.r.o. |
Jenišovice u Jablonce nad Nisou,Czech Republic | 100 |
| VGP DEUTSCHLAND GmbH |
Leipzig, Germany | 100 |
| VGP ESTONIA OÜ |
Tallinn, Estonia | 100 |
| VGP FINANCE NV |
Jette, Belgium | 100 |
| VGP -IND USTRI ÁLNÍ STAVBY s.r.o. |
Jenišovice u Jablonce nad Nisou,Czech Republic | 100 |
| VGP LATVIA s.i.a. |
Kekava, Latvia | 100 |
| VGP PAR K GYÖR Kft |
Györ , Hungary | 100 |
| VGP ROMANIA S.R.L. |
Timisoara, Romania | 100 |
| VGP SLOVA KIA a.s. |
Malacky, Slovakia | 100 |
| VGP POLS KA SP. z.o.o. |
Wroclaw, Poland | 100 |
In order to support its further growth the companies VGP CZ VI a.s., VGP CZ VII a.s. and VGP Polska Sp. z.o.o. were incorporated during 2011 and added to the consolidation perimeter of the VGP Group.
VGP CZ I a.s. left the Group's consolidation perimeter on 16 March 2011 following the completion of the VGP CZ I transaction and VGP CZ II a.s. left the Group's consolidation perimeter on 9 November 2011 following the completion of the VGP CZ II transaction.
During the year additional development land was acquired in the Czech Republic through a share deal whereby the company Somerville s.r.o. was acquired. The company changed its name to VGP CZ VIII s.r.o. and is currently in the process of becoming a limited ("a.s.") company.
| ASSOCIATES | ADDRESS | % |
|---|---|---|
| SNOW CRYSTAL S.a.r.l. |
Luxembourg, Grand Duchy of Luxembourg | 20 |
| SUN S.a.r.l. | Luxembourg, Grand Duchy of Luxembourg | 20 |
| VGP SUN s.r.o. |
Jenišovice u Jablonce nad Nisou,Czech Republic | 20 |
| VGP CZ I a.s. (as from 16 March 2011) |
Jenišovice u Jablonce nad Nisou,Czech Republic | 20 |
| VGP CZ II a.s. (as from 9 November 2011) |
Jenišovice u Jablonce nad Nisou,Czech Republic | 20 |
In order to support the VGP CZ I transaction Snow Crystal S.a.r.l. was created. Snow Crystal holds 100% of VGP CZ I a.s.
In order to support the VGP CZ II transaction SUN S.a.r.l. and VGP SUN s.r.o. were created. SUN S.a.r.l. holds 100% of VGP SUN s.r.o who in turn holds 100% of VGP CZ II a.s.
The financial statements of the parent company VGP NV, are presented below in a condensed form.
In accordance with Belgian company law, the directors' report and financial statements of the parent company VGP NV, together with the auditor's report, have been deposited at the National Bank of Belgium.
They are available on request from:
VGP NV
Greenland – Burgemeester Etienne Demunterlaan 5 | B-1090 Brussels | Belgium www.vgpparks.eu
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Other operating income | 1,226 | 1,258 |
| Operating profit or loss | (1,746) | (30) |
| Financial result | 6,032 | 5,508 |
| Extraordinary result | 5,397 | — |
| Current and deferred income taxes | (99) | (193) |
| Profit or loss for the year | 9,584 | 5,285 |
| In thousands of € | 2011 | 2010 |
|---|---|---|
| Formation expenses, intangible assets | — | — |
| Tangible fixed assets | — | 4 |
| Financial fixed assets | 132,861 | 253,448 |
| Total non-current assets | 132,861 | 253,452 |
| Trade and other receivables | 6,614 | 61 |
| Cash & cash equivalents | 14,538 | 2,025 |
| Total current assets | 21,152 | 2,086 |
| TOTAL ASSETS | 154,013 | 255,538 |
| Share capital | 135,408 | 175,361 |
| Non-distributable reserves | 1,143 | 664 |
| Retained earnings | 16,376 | 7,271 |
| Shareholders' equity | 152,927 | 183,296 |
| Amounts payable after one year | — | 71,803 |
| Amounts payable within one year | 1,086 | 438 |
| Creditors | 1,086 | 72,241 |
| TOTAL EQUITY AND LIABILITIES | 154,013 | 255,538 |
Valuation and foreign currency translation principles applied in the parent company's financial statements are based on Belgian accounting legislation.
The profit after tax for the year ended was € 9,584,226
At the General Meeting of Shareholders on 11 May 2012, the Board of Directors will propose that the above result be appropriated as follows:
| In € | 2011 | 2010 |
|---|---|---|
| Profit of the financial year | 9,584,226.30 | 5,285,181.62 |
| Profit carried forward | 7,270,751.95 | 2,249,829.91 |
| Transfer to legal reserves | (479,211.32) | (264,259.08) |
| Profit / (loss) to be carried forward | 16,375,766.93 | 7,270,751.95 |
| Profit to be distributed (gross dividend) | — | — |
In order to further optimise the capital structure of the Company and creating additional shareholder value the board of directors has decided to convene an Extraordinary Shareholders' Meeting to deliberate over an additional capital reduction in cash of € 15,052,270.50. This cash distribution would correspond to € 0.81 per share.
Statutory auditor's report on the consolidated financial statements for the year ended 31 December 2011 to the shareholders' meeting
As required by law and the company's articles of association, we are pleased to report to you on the audit assignment which you have entrusted to us. This report includes our opinion on the consolidated financial statements together with the required additional comment.
We have audited the accompanying consolidated financial statements of VGP NV ("the company") and its subsidiaries (jointly "the group"), prepared in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. Those consolidated financial statements comprise the consolidated balance sheet as at 31 December 2011, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, as well as the summary of significant accounting policies and other explanatory notes. The consolidated balance sheet shows total assets of 177.893 (000) EUR and the consolidated income statement shows a consolidated profit for the year then ended of 12.937 (000) EUR.
The board of directors of the company is responsible for the preparation of the consolidated financial statements. This responsibility includes among other things: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with legal requirements and auditing standards applicable in Belgium, as issued by the "Institut des Réviseurs d'Entreprises/Instituut van de Bedrijfsrevisoren". Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
In accordance with these standards, we have performed procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we have considered internal control relevant to the group's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the group's internal control. We have assessed the basis of the accounting policies used, the reasonableness of accounting estimates made by the company and the presentation of the consolidated financial statements, taken as a whole. Finally, the board of directors and responsible officers of the company have replied to all our requests for explanations and information. We believe that the audit evidence we have obtained provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements give a true and fair view of the group's financial position as of 31 December 2011, and of its results and its cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the EU and with the legal and regulatory requirements applicable in Belgium.
The preparation and the assessment of the information that should be included in the directors' report on the consolidated financial statements are the responsibility of the board of directors.
Our responsibility is to include in our report the following additional comment which does not change the scope of our audit opinion on the consolidated financial statements:
— The directors' report on the consolidated financial statements includes the information required by law and is in agreement with the consolidated financial statements. However, we are unable to express an opinion on the description of the principal risks and uncertainties confronting the group, or on the status, future evolution, or significant influence of certain factors on its future development. We can, nevertheless, confirm that the information given is not in obvious contradiction with any information obtained in the context of our appointment.
Kortrijk, 10 April 2012 The statutory auditor
DELOITTE Bedrijfsrevisoren / Reviseurs d'Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL Represented by Gino Desmet
VGP NV Greenland – Burgemeester E. Demunterlaan 5 B-1090 Brussels, België tel.: 0032 2 737 74 05 / fax: 0032 2 737 74 04
VGP Červený Dvůr, Jenišovice 59 468 33 Jenišovice, Czech Republic tel.: 00420 483 346 060 / fax: 00420 483 346 061
e-mail: [email protected] | www.vgpparks.eu
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.