RNS Number : 2261D
Madara Bulgarian Property Fund
11 September 2008
11 September 2008
Madara Bulgarian Property Fund Limited
Unaudited interim results for the 6 months to 30 June 2008
Madara Bulgarian Property Fund Limited (the 'Fund') announces its unaudited interim results for the 6 months to 30 June 2008.
Key Highlights
Corporate highlights
* Negotiations continue on development partner for Black Sea Gardens project.
Financial highlights
* Loss per Ordinary Share of EUR0.02
* Book Value of EUR0.89 per Ordinary Share
* Adjusted NAV of EUR1.28 per Ordinary Share following an independent property valuation
Commenting on the results, Timothy Chadwick, Non-Executive Chairman of the Fund, said:
"Despite a difficult trading environment, Madara's assets remain fundamentally attractive, as is demonstrated by the level of interest
in the Black Sea Gardens project. The Fund continues with its strategy of seeking a joint venture partner and I am happy with the progress
made since publication of our year-end report and accounts."
Further information:
Timothy Chadwick, Chairman +44 (0)20 7534 3338
Milena Harrison, Corporate Communications +44 (0)20 7534 3338
Madara Bulgarian Property Fund Limited
Scott Perkins, Chief Executive +44 (0)20 7534 3338
Madara Capital LLP
Tom Griffiths / Paul Vanstone +44 (0) 20 7012 2000
Arbuthnot Securities Limited
Chairman's statement
Introduction
I am pleased to present Madara Bulgarian Property Fund's unaudited interim results for the 6 months to 30 June 2008. While there has
been steady progress in negotiations regarding the Black Sea Gardens project in the few weeks since my previous update to investors in the
Fund's year-end results, there is nothing concrete to report at this stage.
Portfolio
The Fund currently owns land totalling 408,341 square metres located near Byala on the central Black Sea coast, south of Varna. Foster +
Partners have completed the detailed masterplan for 200,000 square metres of buildable space in Byala as part of a 1.2 million square metre
total project in conjunction with our development partner, BBT Projects. The project entails luxury residential apartments, townhouses, and
villas along with a hotel, retail space and leisure facilities.
Negotiations continue with a number of parties interested in investment in the Black Sea Gardens project. The type and level of
investment varies across the parties. Colliers International EOOD is co-ordinating the negotiation process and whilst the progress of any
potential investment has been slower than originally anticipated, the Directors are confident of achieving a satisfactory conclusion,
although at this stage the timing of any deal is unclear.
The Fund has entered into a conditional agreement to acquire land totalling 124,000 square metres close to the centre of the established
ski resort of Borovets. The land in Borovets has taken longer than anticipated to complete, however progress is being made and we expect to
complete on around 40% of the land shortly. The Directors remain confident that this land will attract significant interest on the open
market.
Regarding the liquidity of the Fund, the loan on its balance sheet as at 30 June 2008 has subsequently been repaid in full following
receipt of the VAT recoverable in Bulgaria. The Directors of the Fund have considered various options to provide working capital for the
Fund and, following discussions with the Fund's major shareholders, and as announced separately today, have resolved to issue up to 3.7m new
shares by way of a pre-emptive rights issue to shareholders at a price of EUR0.68 per share. Letters containing further details of the right
issue are due to be sent to the Fund's shareholders later today.
Valuation of the Fund's real estate investments
The Fund has appointed Colliers International EOOD as independent valuer to provide a valuation of its property portfolio on a
semi-annual basis, which they provided as at 11 June 2008. Based on this Gross Development Value, the adjusted Net Asset Value per Ordinary
Share at 30 June 2008 was EUR1.28.
The structure and objectives of the Fund
The Fund is a Jersey incorporated company established in April 2006 with registered number 93301. The Fund's purpose is to make
investments in Bulgaria's property market, primarily in acquiring land capable of development in prime coastal, mountain resort or city
locations. The strategy is subsequently to develop such acquired land in accordance with its consented (regulated) use or to profitably
trade the acquired land with the benefit of such consent.
The Fund aims to provide shareholders with a total return, which is expected to comprise primarily capital growth with the potential for
dividends over the medium to long term. The level of any dividend which might become payable will depend on, amongst others, the rental and
other income (including realised capital gains) generated by the investments made by the Fund. The timing and amount of any rental or any
other income cannot be predicted, therefore there can be no guarantee as to the amount or timing of any dividend payable by the Fund.
The Fund will be dissolved and its affairs wound up no later than 30 June 2016 unless its life is extended by the passing of a special
resolution by its shareholders. Following the end of the tenth year of the Fund, or such later date as its life may be extended by special
resolution of shareholders, the proceeds of the sale of the property portfolio will be returned to shareholders in such manner as is
determined by the Directors.
Dividend policy
The Fund does not currently intend to pay dividends for the first five years of its life, during which period profits will be reinvested
into further property investments. However, thereafter the Directors will consider the payment of dividends subject to the prevailing market
conditions at the time and dependent upon the availability of distributable reserves of the Fund and on the availability of sufficient cash
resources.
The investment advisor
Madara Capital LLP is the investment advisor to the Fund. It is a limited liability partnership registered
in England and Wales with its head office located in London. The Investment Advisor comprises
seven principals (four executives and three non-executives), five of whom are Bulgarian nationals and residents. The four executives of the
investment advisor possess wide-ranging local knowledge
and contacts and have over 35 years' collective real estate related experience in Bulgaria.
Conclusion
The Fund's assets remain fundamentally attractive despite the market's scepticism of overseas property funds. I remain confident
regarding the second half of 2008 as I believe that we have the right blend of skills and experience required to take advantage of
identified opportunities to expand the Fund's assets and to generate returns which match or exceed the 20% minimum IRR target.
Timothy Chadwick
Chairman
11 September 2008
Group Income Statement
for the 6 months to 30 June 2008
6 months to 6 months to
30 June 2008 31 December
(unaudited) 2007 (audited)
EUR EUR
Continuing operations
Expenses
Administrative costs 862,022 778,914
Total operating expenses 862,022 778,914
Loss from operating activities (862,022) (778,914)
Finance income 3,129 37,367
Finance expense (2,422) -
Net finance income 707 37,367
Loss before tax (861,315) (741,547)
Corporate income tax expense (170) -
Current ordinary loss for the period (861,485) (741,547)
Loss per Ordinary Share (EUR) (0.023) (0.020)
Group Statement of Changes in Equity
for the 6 months to 30 June 2008 (unaudited)
Stated
Capital Retained
Account Earnings Total Equity
EUR EUR EUR
Balances at 1 January 2008 37,373,105 (2,907,517) 34,465,588
Expense of shares issued in 2007 (30,000) - (30,000)
Loss for the period - (861,485) (861,485)
Balances at 30 June 2008 37,343,105 (3,769,002) 33,574,103
6 months to 31 December 2007 (audited)
Stated
Capital Retained
Account Earnings Total Equity
EUR EUR EUR
Balances at 1 July 2007 37,373,105 (2,165,970) 35,207,135
Loss for the period - (741,547) (741,547)
Balances at 31 December 2007 37,373,105 (2,907,517) 34,465,588
Group Balance Sheet
as at 30 June 2008
As at As at
30 June 2008 (unaudited) 31 December 2007 (audited)
Notes EUR EUR
ASSETS
Non-current assets
Land acquired for development 27,095,763 27,095,763
Land acquisitions yet to 8,061,771 8,061,771
complete
Development costs 2 870,177 869,812
Total non-current assets 36,027,711 36,027,346
Current assets
Cash and cash equivalents 198,938 356,174
Other receivables 561,281 579,692
Total current assets 760,219 935,866
Total assets 36,787,930 36,963,212
SHAREHOLDERS' EQUITY AND LIABILITIES
Equity
Stated capital account 3 37,343,105 37,373,105
Retained earnings (3,769,002) (2,907,517)
Total equity 33,574,103 34,465,588
Current liabilities
Bank loan 4 492,000 -
Other liabilities and payables 2,721,827 2,497,624
Total current liabilities 3,213,827 2,497,624
Total equity and liabilities 36,787,930 36,963,212
Net asset value per Ordinary share 0.893 0.916
(EUR)
Group Cash Flow Statement
for the 6 months to 1 January 2008 to 30 June 2008
6 months to 6 months to
30 June 2008 31 December
(unaudited) 2007
(audited)
EUR EUR
Loss from operating activities (862,022) (778,914)
Changes in working capital:
Other payables 191,653 (621,831)
Other receivables 37,525 (142,089)
Net cash outflow from operating activities (632,844) (1,542,834)
Investing activities
Land acquisition and development expenditure (365) (797,480)
Loan advanced to related party (20,451) -
Interest received 4,424 35,253
Net cash outflow from investing activities (16,392) (762,227)
Financing activities
Proceeds of issues of share capital - 12,400
Repurchases of share capital - (84,000)
Expenses of share issues - (166,000)
Proceeds of borrowings 492,000 -
Net cash inflow/(outflow) from financing 492,000 (237,600)
activities
Net decrease in cash and cash equivalents (157,236) (2,542,661)
Cash and cash equivalents at start of period 356,174 2,898,835
Cash and cash equivalents at end of period 198,938 356,174
Notes to the Financial Statements
1. Principal accounting policies
The financial statements have been prepared in accordance
with the accounting policies of the Group, consistent with
these in the audited annual report for the 6 months to 31
December 2007, and compliant with International Financial
Reporting Standards (IFRSs and IFRIC interpretations)
issued by the International Accounting Standards Board
(IASB).
The following new standards and amendments to standards or
interpretations are mandatory for the first time for the
financial year beginning 1 January 2008 but are not
currently relevant for the Group.
* IFRIC 11, 'IFRS 2 - Group and treasury share transactions'
* IFRIC 12, 'Service concession arrangements'.
* IFRIC 14, 'IAS 19 - the limit on a defined benefit asset,
minimum funding requirements and their interaction'.
The following new standards, amendments to standards and
interpretations have been issued but are not yet effective
for the financial year beginning 1 January 2008 and have
not been early adopted:
* IFRS 8, 'Operating segments', effective for annual periods
beginning on or after 1 January 2009. IFRS 8 replaces IAS
14, 'Segment reporting', and requires a 'management
approach' under which segment information is presented on
the same basis as that used for internal reporting
purposes. There is no expected impact from this standard.
* IAS 23 (amendment), 'Borrowing costs', effective for
annual periods beginning on or after 1 January 2009.
Management is in the process of considering the impact of
this standard.
* IFRS 2 (amendment) 'Share-based payment', effective for
annual periods beginning on or after 1 January 2009. There
is no expected impact from this standard.
* IFRS 3 (amendment), 'Business combinations' and
consequential amendments to IAS 27, 'Consolidated and
separate financial statements', IAS 28, 'Investments in
associates' and IAS 31, 'Interest in joint ventures',
effective prospectively to business combinations for which
the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after 1 July
2009. Management are assessing the impact of the new
requirements regarding acquisition accounting,
consolidation and associates on the Group.
* IAS 1 (amendment), 'Presentation of financial statements',
effective for annual periods beginning on or after 1
January 2009. Management is in the process of considering
the impact of this standard.
* IAS 32 (amendment), 'Financial instruments: Presentation',
and consequent amendments to IAS 1, 'Presentation of
financial statements', effective for annual periods
beginning 1 January 2009. This is not relevant to the
Group, as the Group has no puttable instruments.
* IFRIC 13, 'Customer loyalty programmes', effective for
annual periods on or after 1 July 2008. This is not
relevant to the Group.
2 Development Costs
6 months to 6 months to
30 June 2008 31 December
EUR 2007
EUR
As at the beginning of the period 869,812 210,332
Additions at cost 365 667,480
VAT capitalised in prior period now recoverable - (8,000)
As at the end of the period 870,177 869,812
3 Stated capital account
The Articles of Association of the Fund give it the power to issue an unlimited number of Ordinary Shares of no par value, as permitted
by the Law.
Ordinary shares of no par As at As at
value 30 June 2008 31 December 2007
Number EUR Number EUR
Authorised, issued and fully 37,611,705 37,343,105 37,611,705 37,373,105
paid
During the period, expenses of EUR30,000 relating to the issue of shares in January 2007 were recognised against the stated capital
account.
4. Bank Loan
During the period, the Group was granted a short-term loan of EUR492,000 from Unicredit Bulbank AD for the purposes of providing
liquidity for normal operations of the Group. The loan was secured initially on land owned by the Group in Bulgaria and on the condition
that any receipts of the VAT recoverable in Bulgaria were applied to the repayment of the loan, until the loan was repaid in full. Interest
was set at 3% plus the Euribor one week Euro rate ruling at the date on which the loan agreement was signed. All of the VAT was received
during July 2008 and the loan was subsequently repaid in full.
5 Related party transactions
Throughout the 6 months to 30 June 2008, Moran Trade and Investment Inc ("Moran") held 18,721,205 of the 37,611,705 shares in issue of
the Fund, which represents a holding of 49.77% of the issued share capital. As such, Moran is the ultimate controlling party of the Fund.
During the whole of the period, the Fund has owed EUR1,724,966 to Moran in respect of purchases of land from Moran carried out during 2007.
This amount is included in current liabilities. Moran has confirmed that they will not call upon this amount due to them until the Group and
Fund has sufficient funds available.
Scott Perkins and Mark Smith, who are Directors of the Fund, are also partners of Madara Capital LLP, the investment advisor to the
Fund. Madara Capital LLP also holds 1,300,000 of the issued shares of the Fund. During the period, Madara Capital LLP charged asset and
property advisory fees of EUR 387,018 (6 months to 31 December 2007 - EUR 398,256) to the Fund, of which EUR 734,039 was outstanding at 30
June 2008 (31 December 2007 - EUR 579,021). Madara Capital LLP has confirmed that they will not call upon amounts due to them until the
Group and Fund has sufficient funds available. During the period, a Bulgarian subsidiary of the Fund loaned EUR20,451 to a Bulgarian
subsidiary of Madara Capital LLP at an interest rate of 7%. This loan and interest of EUR 545 earned from it during the period were
outstanding as at 30 June 2008.
Nigel Le Quesne, Philip Burgin and Stephen Burnett, who are Directors of the Fund, are all shareholders and directors of JTC Group
Limited of which JTC Management Limited is a wholly-owned subsidiary. JTC Management Limited, which is Company Secretary and a provider of
administration services to the Fund, charged fees totalling EUR 118,355 (6 months to 31 December 2007 - EUR 149,001) during the period, of
which EUR 39,559 was outstanding at 30 June 2008 (31 December 2007 - EUR 79,060).
6 Events after the balance sheet date
As stated in note 4, the bank loan was repaid in full in July 2008, following receipt of VAT recoverable.
In the opinion of the directors, no other events occurred after the balance sheet date which require to be disclosed.
7 Availability
Copies of this announcement are available from the Fund's registered office, Elizabeth House, 9 Castle Street, St Helier, Jersey, JE2
3RT, Channel Islands and on the Fund's website, www.madarafund.com.
This information is provided by RNS
The company news service from the London Stock Exchange
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