RNS Number : 2640E
Bulgarian Property DevelopmentsPLC
25 September 2008
FOR RELEASE
07.00 am
25th SEPTEMBER 2008
BULGARIAN PROPERTY DEVELOPMENTS
("BPD" or "the Group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30th JUNE 2008
Six months ended30thJune Six months ended31stDecember 2007
2008
Turnover �708,000 �457,000
(Loss) on ordinary activities �(21,000) �(594,000)
before taxation
(Loss) for the period �(436,000) �(982,000)
Basic (Loss) per share (0.41p) (0.92p)
Key Points
* Value of the portfolio on a Current Value basis has increased by 9.4% to EUR82.09m on a like for like basis in the six month
period to 30 June 2008.
* Special Dividend of 19p per share paid on 17th July 2008, resulting in adjusted NAV on Current Value basis of 63.7p per share.
Sale and purchase of property following re-arrangement of Joint Ventures with Fairplay
* Exchanged contracts for the restructuring of its property portfolio, which included the sale of its 50% stake in Varna Logistics
Park for EUR15m.
* Restructuring will, when all the contracts complete, result in net cash of approximately EUR17m
Outlook
* If the increase in planning density at the Sofia Central Commercial site is approved the value of the site would increase by 79.4%
to EUR70.7m, equivalent to approximately 23p per share.
Chairman, Christian Williams, commented:
"We are pleased that Colliers CRE's June valuation indicated a 9.4% like for like increase in the portfolio's value. The sale of part of
BPD's portfolio provides evidence to reinforce the valuation by Colliers CRE dated 12th December 2007. I am confident that as BPD has a
strong balance sheet, it is well placed to continue creating value for shareholders despite continuing instability in global financial
markets."
Enquiries:
Bulgarian Property Developments
Ivo Hesmondhalgh (Joint Chief Executive) +44 (0) 20 7243 1336
Matrix Corporate Capital LLP (Nominated Adviser)
Stephen Mischler +44 (0) 20 3206 7203
Cubitt Consulting Ltd
James Verstringhe +44 (0) 20 7367 5100
Brian Coleman-Smith
BULGARIAN PROPERTY DEVELOPMENTS PLC
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30th JUNE 2008
CHAIRMAN'S STATEMENT
It gives me pleasure to report the Group's results for the six months ended 30 June 2008.
In line with the Board's expectation, the results for the period show a loss after tax of �436,000.
PAYMENT OF SPECIAL DIVIDEND OF �21 MILLION
Following the cancellation of the Company's share premium account and the Company having complied with its undertaking to the Court
regarding creditor protection, BPD paid a dividend of 19p per share on 17 July 2008 to shareholders who were on the share register on 11
July 2008.
This was in line with my letter to shareholders dated 7 January 2008 in which I announced that, subject to shareholder approval, the
Company would return up to 32p per share to shareholders. As foreshadowed in that letter, once sufficient distributable reserves and cash
have been generated from the sale of property, shareholders will be consulted as to whether they wish the balance of 13p per share to be
distributed.
INCREASE IN PORTFOLIO AND NET ASSET VALUE
I am pleased to report that, despite the weakening world economy, the portfolio has shown an increase in value from EUR75.02 million as
at 12 December 2007 to EUR85.99 million as at 30 June 2008. Deducting the effect of the increase in value as a result of the acquisitions of
the 50% shareholding in Sandanski Retail Centre OOD and 50% shareholding in Trakia Retail Centre OOD, which were acquired in the period, the
like for like portfolio was valued at EUR82.09 million. This is a like for like increase of 9.4% in the six months period to 30 June 2008
and reflects the fact that BPD's land acquisitions are well located and have, despite slow progress in some cases in obtaining planning
consent, in aggregate increased their values.
The effect of this is that the NAV at 30 June 2008 was 82.7p per share. Adjusted for the special dividend of 19p per share, this equates
to 63.7p per share.
The valuation assumes the current planning consent for the Group's major Sofia Central Commercial site (see below) of 130,000 square
metres. However, if the Group receives approval for its application to increase density on the site to in excess of 250,000 square metres
(see below), Colliers consider that such planning consent would increase the Current Value of the site from EUR39.4 million to EUR70.7
million (using a developer's margin of 40%), representing an increase of approximately 23p per share.
SALE AND PURCHASE OF PROPERTIES FOLLOWING RE-ARRANGEMENT OF JOINT VENTURES WITH FAIRPLAY
BPD has exchanged but not completed contracts for the sale of its 50% shareholding in Varna Logistics A.D to Fairplay and has
simultaneously exchanged and completed on the purchase of Fairplay's 50% shareholdings in Trakia Retail Centre OOD (in Plovdiv) and
Sandanski Retail Centre OOD. It has also exchanged contracts for the sale of the whole of the Trakia Retail Centre site to Postroy 2000 EOOD
for EUR6.0 million. The net effect of these transactions will, once they have been completed, be to generate cash of EUR17.1 million. The
Board believes that these transactions provide evidence to reinforce the valuation by Colliers CRE dated 12 December 2007.
Varna Logistics ("VL")
BPD has exchanged contracts for the sale of its 50% shareholding in VL to Fairplay for EUR15 million. Completion of the purchase is
expected to be on 7 December 2008. All loans to VL from Unicredit Bulbank remain the responsibility of VL.
This investment is carried in the audited accounts as at 31 December 2007 on a historical cost basis at EUR6.792 million and Colliers
CRE valued BPD's share of the land held by VL in December 2007 at EUR14.15 million.
Trakia Retail Centre ("TRC") situated in Plovdiv
BPD has purchased Fairplay's 50% shareholding in TRC for EUR3.0 million. The consideration for this has not been paid in cash but will
be offset against the amount that Fairplay will pay to BPD on completion of its purchase of VL.
BPD simultaneously exchanged contracts to sell the whole site to Prostroy 2000 EOOD at a price of EUR6.0 million. Completion of the
purchase is due on or before 1 December 2008.
This investment is carried in the audited accounts as at 31 December 2007 on a historical cost basis at EUR2.317 million and Colliers
CRE valued BPD's share of the land held by TRC in December 2007 at EUR3.740 million.
Sandanski Retail Centre ("SRC")
BPD purchased Fairplay's 50% shareholding in SRC for a price of EUR900,000. The consideration for this has not been paid in cash but
will be offset against the amount that Fairplay will pay to BPD on completion of its purchase of VL.
This investment is carried in the audited accounts as at 31 December 2007 on a historical basis at EUR484,000 and Colliers CRE valued
BPD's share of the land held by SRC in December 2007 at EUR450,000. Since that time, the site has been rezoned and access problems resolved
with the Department of Transport. BPD intends to commence work on this project before the end of the year.
THE PORTFOLIO
The Sofia Central Commercial Site
This is the Group's most important asset and represents almost half of the value of the Group's portfolio.
The Group has applied for permission to increase the permitted build area on the site from 130,000 square metres to in excess of 250,000
square metres. The rezoning process is under way and, in line with earlier expectations, the Directors believe that permission should be
granted for the increase in density by the end of the year. The effect of such an increase in density would be that the value of the site
would increase from the value ascribed to it by Colliers in June 2008 of EUR39.4 million to EUR70.7 million (using a developer's margin of
40%), equivalent to approximately 23p per share.
Sofia Ring Road Sites
Ring Road Site One
This is a site of approximately 92,000 square metres. Prices in the area have continued to rise and there are indications that,
following other developments in the area, the site could be used for a mixture of retail and warehousing rather than just warehousing, which
should enhance the site's value. Rezoning of this site has been halted until the new Sofia Masterplan comes into force.
Ring Road Site Two
Ring Road Site Two which is approximately 20,000 square metres has received rezoning from agricultural use to commercial use for the
front half of the site, which is adjacent to the ring road. Rezoning of the rear portion of the site has nearly been completed. The
application is now only awaiting signature by the planning authority.
The Group intends to build a warehouse and associated offices of approximately 11,000 square metres on the site. However, construction
has been held up by the failure of a local authority to provide electricity to the site. Every effort is being applied to resolve the
situation.
Sofia Airport
The Group owns two sites near the airport in Sofia, totalling 38,000 square metres. The masterplan for the airport area has still to be
completed and this has delayed the rezoning of the sites. However, the new airport terminal is now operational and work has now commenced on
an adjacent site belonging to Tishman and GE. These factors have contributed to a significant growth in site values in this area.
In my last statement I said that I believed that we would shortly be receiving planning permission on Airport Site One. Unfortunately,
shortly before permission was due to be granted a neighbouring owner commenced a court case against the local authority objecting to a road
that was proposed to pass through their property and on to our property. This case has delayed the granting of approval.
Ruse
The Group owns a 53,676 square metre plot of land in Ruse. Ruse is located in northern Bulgaria at a point where the strategically
important Pan European Transport Corridor 9 crosses the river Danube by a rail and road bridge. The transport corridor connects Romania and
north-eastern Europe with Bulgaria, Turkey and eastern Greece. This makes Ruse an excellent location for distribution warehousing.
The plot is in the new Ruse Industrial Park, approximately one kilometre from the bridge. Modern infrastructure is being provided by the
municipality of Ruse. This will reduce the cost of any development on the site.
The Group intends to construct two warehouses (with associated offices) totalling approximately 23,000 square metres on the site over
the next two years.
King Sturge has been appointed as the sole letting agent.
Plans have been submitted to Ruse municipality and a building permit has been granted.
The project managers have issued building tender documentation for the first phase of the development. Building costs are being analysed
and the design refined to allow for cost savings.
It is intended that building works commence towards the end of 2008.
Sandanski
The Group now owns 100% of the proposed development of a shopping centre in Sandanski, south west Bulgaria.
Sandanski is a regional hub for this part of Bulgaria. It is a prosperous small city and is a significant destination for Greek tourists
who are attracted by the healthy climate, the mineral waters and the cheap cost of living. The location of the site (on the E79 from Greece
to Sofia and opposite the turning to Sandanski) makes it convenient for both the inhabitants of Sandanski (and neighbouring towns) as well
as road traffic passing through on its way to Sofia or Greece.
The site is approximately 17,000 square metres on which it is proposed to build a shopping centre on three floors totaling approximately
15,000 square metres. The land was originally designated for agricultural purposes but change of zoning has now been approved. Detailed
consultations are in process over road access and the provision of utilities.
King Sturge have been appointed as consultants to the project. The Group is in the process of appointing letting agents.
Construction is anticipated to commence in early 2009.
Bansko
As I reported in my last statement, the Group has decided to mothball this site until the market in ski resorts improves. The cost to
the Group of the site is less than 1% of the Group's assets.
Pleven
The Group is part of a joint venture that purchased a plot of 36,500 square metres from the municipality of Pleven in October 2006 for
EUR1.618 million. The Group has a 38% share in the joint venture. Pleven is a busy town of 120,000 inhabitants in the north of Bulgaria. The
site has planning permission for retail use.
The project has been delayed, principally due to a change in the scale of the proposed development. As a result, Pleven municipality has
the right to impose certain penalties on the consortium. Negotiations are in progress with the municipality for these penalties to be waived
on the basis that the project is now significantly larger than originally proposed.
Vidin
The Group purchased a 50% stake on 19 June 2007 in the proposed development of a shopping centre in Vidin, north west Bulgaria from
Fairplay International for EUR1.555 million. The shopping centre will be developed in partnership with Fairplay Commercial who retain the
other 50% of the project. The size of the site is just under 12,000 square metres and is located close to the centre of Vidin.
A combination of a change of regional government and a successful court case by a neighbour has led to the planning status of this site
being revoked by the new administration and the possibility that part of the site may be used for a new road. For this reason the Board felt
it prudent to make an impairment provision for this property in the accounts to December 2007 of �729,000.
Negotiations are continuing with the local authority to resolve this issue.
SOFIA ESTATES DEVELOPMENT OOD ("SED")
The Group has purchased 50% of the share capital of a project management company, SED, a company managed by Bulgarian project management
veteran, Trifon Trifonov. The total cost of the purchase was EUR500,000.
SED has over 50 staff and is project managing the Group's developments in Ruse and Sandanski.
Since the financial statements of SED showed a negative net asset position as at 30 June 2008, the carrying value of this investment has
been written down to zero as at 30 June 2008.
STAFFING
The Group has continued to recruit staff at all levels. In particular, it has recruited a Bulgarian in-house lawyer, Anton Karlov. Anton
trained as a lawyer in the USA and, before returning to Bulgaria, had been working for a New York law firm.
OUTLOOK
As I write, there seems to be no immediate prospect of a return to normality in global financial market conditions.
The real estate sector is amongst those worst affected by the current turmoil. Nevertheless, I believe we may take some comfort from the
fact that our property in Bulgaria, which has been revalued in the last month, has increased in value.
Your Company has a strong balance sheet which reflects our focus on value, which is high, and our approach to risk, which is not high. I
believe that we will not only survive in the current economic conditions but continue to create value despite them.
Christian Williams
Chairman
CONSOLIDATED INCOME STATEMENT
for the six months ended 30 June 2008
Unaudited Audited
Six months ended 30 June 2008 Six months ended 31 December 2007
Interests Interests
in joint in joint
Notes Group ventures Total Group ventures Total
�'000 �'000 �'000 �'000 �'000 �'000
Revenue 462 246 708 347 110 457
Personnel expenses (277 ) (161 ) (438 ) (256 ) (28 ) (284 )
Management fees (407 ) - (407 ) (400 ) - (400 )
Depreciation (582 ) (6 ) (588 ) (3 ) (1 ) (4 )
Other expenses 4 (520 ) (282 ) (802 ) (1,240 ) (83 ) (1,323 )
Impairment of 5 (146 ) - (146 ) (75 ) (819 ) (894 )
investment properties
Foreign exchange 1,151 (2 ) 1,149 1,201 - 1,201
gains/(losses)
Operating loss (319 ) (205 ) (524 ) (426 ) (821 ) (1,247 )
Share of operating loss in (205 ) (821 )
joint ventures
Total operating loss: (524 ) (1,247 )
Group and share of joint
ventures
Investment revenues
Group 591 727
Joint ventures - -
591 727
Finance costs
Group - -
Joint ventures (88 ) (74 )
(88 ) (74 )
Loss before tax for the period (21 ) (594 )
Taxation
Group (406 ) (380 )
Joint ventures (9 ) (8 )
(415 ) (388 )
Loss for the period (436 ) (982 )
Attributable to:
Equity holders of the parent
company
(436 ) (982 )
Loss per share - basic and 7 (0.41p ) (0.92p )
diluted
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
At 30 June 2008
Equity
Share Share Special shares to Retained Total
capital premium reserve be issued earnings equity
�'000 �'000 �'000 �'000 �'000 �'000
Balance at 30 June 2007 26,698 31,351 - 201 (1,400 ) 56,850
Exchange differences on - - - - 2,740 2,740
translation of foreign
operations
Loss for the six months to - - - - (982 ) (982 )
31 December 2007
Total recognised income and - - - - 1,758 1,758
expense for the period
Share based payments - 26 - (26 ) - -
Issue of equity share capital 44 44 - - - 88
Costs of issue - (5 ) - - - (5 )
Balance at 31 December 2007 26,742 31,416 - 175 358 58,691
Exchange differences on - - - - 2,457 2,457
translation of foreign
operations
Loss for the six months to - - - - (436 ) (436 )
30 June 2008
Total recognised income and - - - - 2,021 2,021
expense for the period
Share based payments - 175 - (175 ) - -
Issue of equity share capital 318 382 - - - 700
Transfer to distributable - (31,973 ) 31,973 - - -
reserves following
restructure*
Balance at 30 June 2008 27,060 - 31,973 - 2,379 61,412
Attributable to:
Equity holdings of the parent 27,060 - 31,973 - 2,379 61,412
company
* At a General Meeting of the Company held on 7 April 2008 a special resolution to cancel the Company's Share Premium account was
approved. An application to the Courts was then made to create a Special Reserve which will be treated as distributable. The Court Order
became effective on 28 May 2008 subject to funds equal to outstanding creditors on 22 May 2008 being set up in a blocked trust bank account.
As at 30 June 2008, the blocked funds amounted to �200,944.
CONSOLIDATED BALANCE SHEET
At 30 June 2008
Unaudited Audited
30 June 2008 31 December 2007
Interests Interests
in joint in joint
Notes Group ventures Total Group ventures Total
�'000 �'000 �'000 �'000 �'000 �'000
26 27 60 87 9 17 26
- 6,855 (6,885 ) - 8,181 (8,181 ) -
32,709 27,012 1,492 28,504 24,777 7,932 32,709
621 - - - - 621 621
33,894 32,967
- 4,156 7,453 11,609 - - -
677 453 18 471 575 102 677
26,498 26,651 38 26,689 26,479 19 26,498
27,175 31,260 7,509 38,769 27,054 121 27,175
(1,158 ) (3,305 ) (2,192 ) (5,497 ) (948 ) (210 ) (1,158 )
(393 ) (437 ) (2 ) (439 ) (382 ) (11 ) (393 )
(1,551 ) (3,742 ) (2,194 ) (5,936 ) (1,330 ) (221 ) (1,551 )
27,518 25,724
(289 ) - (12 ) (12 ) - (289 ) (289 )
61,412 58,691
27,060 26,742
- 31,416
31,973 -
- 175
2,379 358
61,412 58,691
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 June 2008
Unaudited Audited
Six months ended Six months ended
30 June 31 December
2008 2007
�*000 �*000
Operating activities
Operating loss (319 ) (426 )
Investment revenues 591 727
Taxation (406 ) (380 )
Loss after tax (134 ) (79 )
Adjustments for:
Depreciation 582 3
Impairment of investment 146 75
property
Loss from joint venture 200 261
Taxation 39 311
Operating cash flow before 833 571
working capital changes
Decrease in trade and other 146 786
receivables
(Decrease)/increase in trade and (773 ) 551
other payables
Net cash flows from operating (627 ) 1,337
activities
Investing activities
Acquisition of investment (200 ) (261 )
Investment in joint ventures (392 ) (726 )
Payments to acquire property, (18 ) (2 )
plant and equipment
Payments to acquire investment (1,017 ) (1,906 )
properties
Net cash flows from investing (1,627 ) (2,895 )
activities
Effects of exchange rates on 893 105
cash and cash equivalents
Financing activities
Proceeds from issue of shares 700 21,327
Less issue costs * (5 )
Net cash flows from financing 700 21,322
activities
Increase in cash and cash 172 20,440
equivalents
Cash and cash equivalents at 26,479 6,039
beginning of year
Cash and cash equivalents at end 26,651 26,479
of year
NOTES TO THE INTERIM ACCOUNTS
for the six months ended 30 June 2008
1 This financial information does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985.
Statutory accounts for Bulgaria Property Developments Plc for the period ended 31 December 2007 reported under International Financial
Reporting Standards (IFRS) as adopted by the EU, on which the auditors gave an unqualified opinion and contained no statement under s237(2)
or s237(3), are available at the Registrar of Companies.
Copies of this statement will be posted to shareholders. Further copies are available free of charge on request from the Company Secretary
at the Company*s registered office, 443 Stroude Road, Virginia Water, Surrey GU25 4BU.
2 ACCOUNTING POLICIES
Basis of accounting
The financial information set out in these interim statements for the six months ended 30 June 2008 has been prepared in accordance with
IFRS and IAS 34 (Interim Financial Reporting) on the basis of the accounting policies set out in the statutory accounts of Bulgarian
Property Developments plc for the six months ended 31 December 2007, modified during the period ended 30 June 2008, in respect of
depreciation of buildings as set out below.
Change of accounting reference date and comparative information
The accounting reference date for Bulgarian Property Developments plc was changed in order to streamline reporting so that the balance sheet
date for the parent company, Bulgarian Property Developments plc, is co-terminus with that of the principal subsidiary Bulgarian Property
Developments EOOD and all of its subsidiaries and Joint Venture investments, given that the balance sheet date for entities incorporated in
Bulgaria must be 31 December each year. The comparative amounts for the income statement, statement of changes in equity, balance sheet,
cash flow statement and notes which have been included within these interim statements are derived from the audited statutory accounts of
the group for the six months to 31 December 2007. Accounts for the six months to 30 June 2007 were not prepared. The previously prepared
interim statements were for the six month period to 31 December 2006. In the opinion of the Directors, since Bulgarian Property Developments
plc is a property company, its business is not seasonally affected and the comparatives used are the most appropriate.
Basis of consolidation
The Group financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries)
prepared to 31 December each year with effect from 1 July 2007. Control is achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain benefits from its activities. In assessing control, potential voting rights
that are presently exercisable are taken into account.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective
date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those
used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
The Bulgarian Property Developments Group includes Bulgarian Property Developments Plc, its 100% Bulgarian subsidiary, Bulgarian Property
Developments EOOD and its 100% subsidiaries: Bulgarian Property Developments 1 EOOD, Bulgarian Property Developments 2 EOOD, Bulgarian
Property Developments 4 EOOD, Bulgarian Property Developments 5 EOOD and Bulgarian Property Developments Bansko EOOD. With effect from 9
June 2008, the entities Trakia Retail Centre OOD and Sandanski Retail Centre OOD were also 100% subsidiaries of Bulgarian Property
Developments EOOD, previously they were both 50% owned joint ventures. These transactions have been treated as an acquisition of land rather
than a business combination.
Investment properties
The group reviewed its property portfolio and strategy in December 2007. As a result of this review, all properties were reclassified from
inventory to investment properties.
Investment properties are those properties that are held by the Group or in joint ventures either to earn rental income or for capital
appreciation or both. Investment properties are measured at cost plus associated transaction costs as permitted by IAS 40. Properties are
treated as acquired at the point when the Group assumes title to ownership on completion and as disposed when the title is transferred to
the buyer on completion of the transaction. Additions to investment properties consist of costs of a capital nature.
When the Group redevelops an investment property for continued use as a development property, the property remains a development property
and is accounted for as such.
The cost of buildings is depreciated at 15% per annum on a straight line basis. The depreciation rate has been increased from 4% following a
review by the directors of the remaining useful lives of the buildings. Land is not depreciated. As the decision to reclassify the
properties to investment properties was made in December 2007, no depreciation was charged in the audited accounts for the six months ended
31 December 2007. Depreciation has been charged since 1 January 2008.
A professional valuation is made as of each reporting date, of each investment property. Where the professional valuation shows a value
lower than cost, the carrying value of that property within the accounts is reduced to the valuation. No account is taken of any fair value
gains in investment properties as a result of professional valuations.
Investment properties held for sale are classified as current assets under IFRS 5.
3 REVENUE
All revenue generated is from rental income in Bulgaria.
4 OTHER EXPENSES
Six months ended Six months ended
30 June 2008 31 December 2007
�*000 �*000
Administrative expenses 214 207
Potential fines at Pleven property * 92
Takeover defence costs * 680
Corporate finance costs 106 *
Loss from investment in Joint
Venture:
Sofia Estate Developments EOOD 200 261
520 1,240
5 IMPAIRMENT OF INVESTMENT PROPERTIES
Six months ended Six months ended
30 June 2008 31 December 2007
�*000 �*000
146 75
Impairment of investment properties 146 75
The impairment loss of �146,000 relates to the write down of the carrying value of Bansko to the value calculated by Colliers CRE as at
30 June 2008.
The impairment loss of �75,000 relates to the write down of the carrying value of Ruse to the value calculated by Colliers CRE as at 12
December 2007.
6 SEGMENTAL ANALYSIS
All of the Group's operations have occurred in Bulgaria and are in the same business sector.
7 LOSS PER SHARE
Six months ended Six months ended
30 June 2008 31 December 2007
�'000 �'000
Earnings for the purpose of (436 ) (982 )
basic and diluted earnings per
share being net loss
attributable to equity
shareholders
Loss for the period
Weighted average number of 107,406,746 106,892,732
ordinary shares for the purposes
of basic earnings per share
The diluted loss per share is identical to that used for basic loss per share as the exercise of options would have the effect of
reducing the loss per share and therefore is not dilutive under IAS 33 "Earnings per share".
8 INVESTMENTS
The Company*s investments at the balance sheet date are in the share capital of unlisted companies, all of which are involved in the
purchase and sale of properties, property management and development.
Country of Incorporation % holding
Owned directly by Bulgarian
Property Development Plc
Bulgarian Property Bulgaria 100
Developments EOOD
Owned directly by Bulgarian
Property Developments EOOD
Bulgarian Property Bulgaria 100
Developments Bansko EOOD
Bulgarian Property Bulgaria 100
Developments 1 EOOD
Bulgarian Property Bulgaria 100
Developments 2 EOOD
Bulgarian Property Bulgaria 100
Developments 4 EOOD
Bulgarian Property Bulgaria 100
Developments 5 EOOD
Trakia Retail Centre OOD Bulgaria 100
Varna Logistics AD Bulgaria 50
Vidin Retail Centre OOD Bulgaria 50
Pleven Retail Centre OOD Bulgaria 38
Sandanski Retail Centre OOD Bulgaria 100
Sofia Estates Developments OOD Bulgaria 50
Group
Joint ventures
As at 30 June 2008, the Group had the following interests in joint
ventures:
% holding
Varna Logistics AD 50
Vidin Retail Centre OOD 50
Pleven Retail Centre OOD 38
Sofia Estates Developments OOD 50
All joint ventures are involved in property development, property trading or property project management in Bulgaria.
On 3 July 2007, the Group acquired 50% of the share capital of Sandanski Retail Centre OOD at a price of Lev 416,000 to form a joint
venture with Fairplay International A.D. On 9 June 2008 the Group acquired the 50% shareholding of Fairplay International A.D. for a
consideration of EUR900,000.
On 15 November 2007, the Group acquired 32% of the share capital of Sofia Estates Developments OOD (SED) at a price of Lev 696,000. This
investment was treated as an associated company as at 31 December 2007 and a joint venture as at 30 June 2008 following the acquisition of a
further 18% of SED for a consideration of EUR209,000 on 15 January 2008. Since the financial statements available to the Group for SED
showed a negative net asset position as at 30 June 2008, the carrying value of this investment was written down to zero as at 30 June 2008.
On 9 June 2008 BPD EOOD approved the sale of its 50% interest in the shares of Varna Logistics AD to Fairplay International AD (FPI) at
the price of EUR15 million and preliminary agreement for this was concluded on 9 June 2008. Completion is expected on or before 9 December
2008.
Amounts owed by the joint venture operations to Bulgarian Property Developments EOOD as at 30 June 2008 were:
30 June 2008 31 December 2007
�*000 �*000
Varna Logistics 185 182
Vidin Retail Centre 14 8
Pleven Retail Centre 558 494
Sofia Estates Development OOD 37 *
All the joint ventures in Bulgaria have statutory accounting periods ending on 31 December. The Group's share of results has been based
on the joint ventures interim accounts for the period ended 30 June 2008.
9 ASSETS HELD FOR SALE
As at As at
30 June 2008 31 December 2007
�*000 �*000
4,156 *
Assets held for sale represents the carrying amount for the agreed sale of the 21,830 sq. m. plot of land at Plovdiv held by Trakia
Retail Centre OOD for EUR6 million. Completion is expected on or before
1 November 2008.
10 CALLED UP SHARE CAPITAL
As at As at
30 June 2008 31 December 2007
Ordinary Share Capital of 25p
Nominal Value:
Authorised (number) 200,000,000 200,000,000
Authorised (value) �50,000,000 �50,000,000
Allotted, issued and fully paid 108,238,914 106,966,187
(number)
Value �27,059,728 �26,741,547
Under an agreement dated 20 December 2005, the Company granted Fairfax I.S. Limited the right to subscribe for 1,272,727 ordinary shares
of 25p in the Company at an exercise price of 55p. This option was exercised on 28 April 2008.
11 CAPITAL COMMITMENTS
There were no capital commitments as at 30 June 2008.
12 RELATED PARTY TRANSACTIONS
On 15 September 2004, the Company entered into a Management Agreement with Bulgarian Property Management LLP, to provide certain
management services to the Company in consideration of the payment by the Company of an annual administration fee and an annual performance
fee. These obligations also include the provision of services to fulfil the Company's executive functions. These services represent the
executive requirements for the Company. The details of this arrangement were fully disclosed both in the admission document when the Company
was admitted to AIM and in the offer for subscription document dated 15 September 2004. This agreement was amended on 19 December 2005 to
provide for a change to the annual performance fee, where the hurdle rate was raised from the average 3 month Euribor rates to be a flat 8%
per annum.
On 27 March 2006, the agreement with Bulgarian Property Management LLP was terminated and a management agreement between the Company and
Bulgarian Property Management Limited was entered into on the same terms and conditions as the agreement with Bulgarian Property Management
LLP (as amended).
On 4 June 2007, this management agreement was amended to increase the annual return to be achieved by the Company before a performance
fee became payable to Bulgarian Property Management Limited from 8% per annum to 10% per annum and to change the annual administration fee
to a flat rate of 2% of the Group's audited net assets.
On 20 November 2007, the Company and Bulgarian Property Management Limited terminated the management agreement dated 27 March 2006 and
entered into a further management agreement. The only material change in the terms of the management agreement dated 20 November 2007
relates to the calculation of the performance fee payable to Bulgarian Property Management Limited in the event of termination of the
replacement management agreement.
Bulgarian Property Management LLP and Bulgarian Property Management Limited are controlled by Ivo Hesmondhalgh and Philip Pashov, who
are both directors of the Company.
In the six months to 30 June 2008, the Company was charged �407,000 by Bulgarian Property Management Limited (in the six month period to
31 December 2007, �400,000 was charged). At 30 June 2008 �23,000 was due from Bulgarian Property Management Limited to the Company (31
December 2007, �24,000).
For amounts owed by the Group's joint venture operations to Bulgarian Property Developments EOOD as at 30 June 2008, please refer to
Note 8. These balances represent short term loans, together with accrued interest on those loans.
Transactions between the Company and Bulgarian Property Developments EOOD, which is 100% owned by the Company in the period were as
follows:
Six months ended Six months ended
30 June 31 December 2007
2008
�*000 �*000
Transactions
Loan provided by Bulgarian Property * 1,756
Development plc to Bulgarian
Property Development EOOD
Interest charged by Bulgarian 525 32
Property Development plc to
Bulgarian Property Development EOOD
Management fee charged by Bulgarian 30 54
Property Development plc to
Bulgarian Property Development EOOD
30 June 31 December 2007
2008
�*000 �*000
Receivables
Loan from Bulgarian Property 13,314 1,756
Development plc to
Bulgarian Property Development EOOD
Interest 852 789
Management fee 95 65
14,261 2,610
13 SUBSEQUENT EVENTS
Following the cancellation of the Company's share premium account becoming effective and the Company having complied with its
undertaking to the Court regarding creditor protection, the Directors declared a dividend of 19p per share for shareholders. The shares
commenced trading ex dividend on 9 July 2008 and the dividend was paid on 17 July 2008 to shareholders on the register on 11 July 2008. The
total value of the dividend was �20,565,394. The payment of the dividend will be accounted for in the six months to 31 December 2008.
14 CONTINGENT LIABILITIES
There are court claims raised with respect to the title over certain plots of land acquired by Bulgarian Property Developments 2 EOOD.
As at the date of these interim statements, the outcome of the claims cannot be estimated reliably. The contingent liability related to
these claims is securitised by an amount of EUR400,000 in escrow as part of Bulgarian Property Developments 2 EOOD's purchase price of the
land.
As a result of a court resolution the borders and the area of the Regulated Land Plot III owned by Vidin Retail Centre (VRC) have been
reduced by 3,641 square metres (from an area of 11,660 square metres to 8,019 square metres) in Vidin quarter 515a, and also the purpose of
the plot has been reverted to that of a 'Theatre' from a 'Commercial complex'. As a result an impairment of the value of the property has
been booked.
The Municipality of Vidin has not sought to recover the ownership of the 3,641 square metres and evict VRC. In case of eviction by VRC,
of part or the entire area of the properties, on any grounds, Fairplay International AD (FPI) shall be obliged to pay to Bulgarian Property
Developments a monetary compensation amounting to a percentage of Bulgarian Property Development's buying price, equal to double the size of
the percent of reduction of the area of the Properties after the eviction. As there is no official eviction of VRC from any part of its
territory, no provision has been made or an asset for recovery from FPI accounted for.
VRC will reapply for planning permission on the site in the near future.
On 3 April 2008, the Municipality of Pleven registered a mortgage over the 36,515 square metres of land, owned by Pleven Retail Centre
OOD, in order to guarantee penalties due to them under the contract for sale dated 11 October 2006. The penalties due are for the
non-execution of investment obligations set out in the contract for sale. A provision of �92,000 in respect of possible penalties was made
in the audited accounts for the six months ended 31 December 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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