TIDMBLD
RNS Number : 5845O
Bulgarian Land Development PLC
10 March 2009
BULGARIAN LAND DEVELOPMENT PLC
Preliminary Audited Results statement for the year to 31 December 2008
Business Review
Bulgarian Land Development plc ("BLD" or "the Company"), the AIM listed
Bulgarian residential and commercial property development company, today
announces its Preliminary results for the year ending 31 December 2008.
Financial and Operational highlights
* BLD generated GBP6.6m of revenue in 2008 (2007: GBP0.1m)
* First income from sales of completed units
* Excellent diverse portfolio ranging from holiday homes on the Black Sea coast to
ski lodges in leading ski resorts and apartments and commercial property in
Sofia, coupled with land banking outside Sofia
* Net asset value of 98.6 pence per share (31 December 2007: 79.6p per share) -
share price 26.0p at close of business on 9 March 2009 at a74% discount to net
asset value at 31 December 2008
* At the year end, the Company and its subsidiaries ("the Group") had a portfolio
of developments with an estimated completed development value of EUR237m
* Measures being taken to reduce risk and costs
* Building of 180 holiday apartments and 22 villas completed at Harmony Hills,
Rogachevo completed in October 2008
* First commercial development at Printing House funded and commenced
* Parcels of land outside Sofia acquired and consolidated for future re-zoning
* Application for building permit at BLD Sofia Tower underway
Christo Iliev, Chief Executive of BLD, commented:
"Although 2008 was a year of challenging conditions for the real estate market
the Board has and will continue to prioritise the protection of asset value for
shareholders through reduced risk and costs. 2009 looks set to remain
challenging however the Board intends to keep a strong balance sheet and remain
alert to any opportunities that may arise and respond to them positively."
- ENDS -
For further information, please contact:
+------------------------------------------------------+-----------------------+
| Bulgarian Land Development | 0207 067 0700 |
+------------------------------------------------------+-----------------------+
| Christo Iliev, Chief Executive | |
+------------------------------------------------------+-----------------------+
| Andrew Daw, Finance Director | |
+------------------------------------------------------+-----------------------+
| | |
+------------------------------------------------------+-----------------------+
| Weber Shandwick Financial | 0207 067 0700 |
+------------------------------------------------------+-----------------------+
| Terry Garrett / Nick Dibden / James White / Katie | |
| Matthews | |
+------------------------------------------------------+-----------------------+
Chairman's Statement
Introduction
The Group took prompt action to reassess its strategy as a result of the
widespread turmoil affecting real estate markets worldwide since the latter half
of 2007. In August we announced that we would reduce risks and costs and also
committed to return some cash to shareholders. In October we announced the
settlement of the deferred land payable at Borovets by transferring to the
vendor unsold units at Harmony Hills. By taking this action Bulgarian Land
Development plc ("BLD" or "the Company") is in a strong position to take
advantage of opportunities that may arise in 2009 - 2010. The Company will
prepare an application to the Court to eliminate the Company's share premium,
which is the initial action to enable the Company to return some cash to
investors. The Directors will continue to review market opportunities and will
return some cash to shareholders if they believe it to be the best use of
shareholders' funds at the time.
One of the distinguishing features of the Group, that sets it apart from other
Eastern European AIM traded property companies, is the high calibre, local,
senior management team that has been assembled and is based in Sofia. The Group
also has access to the wide network of real estate agency outlets of A G Capital
through its Chief Executive Officer, Christo Iliev. This gives the Group a
substantial advantage in obtaining up to date market intelligence.
Overview of progress to date
Since the end of 2007 BLD has added selectively to the four development sites
owned at that time. As indicated in the 30 June 2008 interim statement the Group
has acquired two parcels of agricultural land near Sofia. In 2009 it will apply
to change the zoning to allow residential development to increase the value
ahead of either selling the land or developing part of it. The Group also
entered into a joint venture (to reduce risk) with Northridge Capital to acquire
the 29,000 square metres Printing House office block in a prestigious part of
Sofia with the intention of converting it into modern class A commercial space.
Construction is due to commence in the first half of 2009 now that the previous
owner has relocated. Completion is currently expected to be in September 2010.
The building of 180 holiday apartments and 22 houses was completed at Harmony
Hills, Rogachevo in September 2008 and electricity has recently been connected
to the site. Legal completion of 78 units took place in 2008 and the Group has
recognised a profit of GBP3.6m, GBP3.3m of which relates to the gain recognised
on settlement of the deferred liability at Borovets. Legal completion of the
remaining 124 units has been delayed until 2009 and the remaining profit,
estimated at GBP0.4m, will be taken this coming year and reported in the
Company's results for the year ending 31 December 2009.
Net asset value
Net asset value per share as at 31 December 2008 was 98.6 pence (31 December
2007: 79.6p). It should be noted that exchange movements in 2008 accounted for a
gain of 23.2 pence, had rates remained at 31 December 2007 levels the net asset
value per share would have been 75.4 pence. Savills (L&P) Ltd ("Savills") have
carried out an independent desk-top valuation of BLD's sites as at 31 December
2008, which shows a valuation of EUR47.8m (GBP46.7m). This valuation has not been
incorporated within the results. Had this been done, the net assets would have
increased in value to 122.2 pence per share, an uplift of 24% on the book value.
Risk and cost awareness
The Board has already announced that it is to reduce risk and costs going
forward. All decisions are made with those criteria in mind in order to protect
value for shareholders. Risk reduction has included cautiously adding value to
developments by re-zoning or obtaining building permits and reducing development
costs by settling deferred payments or postponing developments. Further
possibilities are to construct developments in smaller phases, funded in great
part by pre-sales deposits. All costs have been reviewed in the light of the
lower level of current and proposed development activity and, as always, with
respect to the value provided to shareholders. No bonuses have been awarded to
directors for 2008 and the level of director remuneration will also be reviewed
in 2009.
Board changes
In September 2008, Andrew Daw (Financial Director) and James Green (Non
Executive Director) joined the Board. I welcome them to the Board and look
forward to their assistance as we address the issues that confront us. I also
take this opportunity to thank John Dodwell and Ita McArdle for their work from
flotation in March 2006 until September 2008 and Vassil Vassilev for his
contribution from March 2007 until August 2008.
Outlook
The Board has had to react to the changing real estate market conditions and
prepare for further difficult conditions going forward. The Board's priority is
to manage BLD in a way that protects asset value for shareholders by reducing
both risks and costs. The Board will consider the sale of assets if financially
justified. Against this the Board will balance opportunities to acquire
investments at discounted prices and the Board is mindful of the need to
maintain a strong balance sheet to be able to take advantage of such
opportunities.
I should like to thank Christo Iliev, our CEO, Dimitar Savov, our Executive
Officer and the team in Bulgaria for their achievements and hard work in 2008.
The team is well placed to address the new challenges and opportunities of
market conditions in 2009.
Per Sjöberg
Chairman
10 March 2009
Chief Executive Officer's Review
Financial Review
BLD generated GBP6.6m of revenue in 2008 (2007: GBP0.1m), GBP6.2m of which
related to sales of 78 Harmony Hills units, 44 of which were transferred to the
vendor of the Borovets property. The Group's pre-tax result was a loss of
GBP1.8m (2007:GBP1.6m loss). We had hoped to be able to show all the income from
our first residential development at Harmony Hills, near the Black Sea coast,
during 2008 but a delay in the supply of electricity until February 2009 has
meant that some of the income will be recorded in the first half of 2009, once
meters are installed and testing has been completed. The current economic
climate means that we are taking a cautious approach to developing new sites and
we would not, therefore, expect to complete any further developments in 2009.
Further financial information is given in the Finance Director's Review and in
the Directors' Report.
Bulgaria - the economy and property markets
No economy has been immune from the worldwide economic downturn of 2008 and the
prospects of continuing problems in 2009. Insofar as Bulgaria is concerned the
rate of growth is forecast to slow sharply. The economy expanded by 6.3% in 2008
and is anticipated to grow by only 2% in 2009 (source: IMF). Salary and building
cost inflation is expected to decelerate from 24% in 2008 to 4.25% in 2009
(source: IMF) with unemployment increasing from 5.9% at the end of 2008 to 7.9%
by the end of 2009.
BLD's portfolio of developments means that it operates in a number of different
markets, each with its own characteristics:
* Commercial property (Printing House)
The total office stock in Sofia increased by 15% to slightly over 900,000 square
metres during 2008. More than half of this space is located in the suburban
areas. The vacancy rates varied between 4% in the suburbs to as low as 1% for
the Central Business District, where the Printing House is located (source:
Colliers International Bulgaria ("Colliers")). During the second half of 2008,
as a result of the increased supply of new office space (predominantly in
suburban areas) and the onset of the financial crisis in Bulgaria, monthly
rental rates have stabilised. In the midterm, Colliers forecasts consolidation
of rents for CBD office space and increasingly competitive levels for the
suburban office space as new projects are completed. The suburban areas will
continue to dominate the Sofia office market, due to the lack of available land
in the more central areas of the city.
* City centre, premium residential property (Sofia Tower)
Most of the buildings in the city centre of Sofia are very old and
poorly-maintained. There are several apartment complexes that fit in the luxury
segment, but their location is not central. Currently, the price level in the
area around Kempinski Hotel (one of the most prestigious quarters of Sofia)
varies between EUR2,500 and EUR3,500 per square metre for high quality new premises.
Despite the financial turmoil, due to the scarce supply the forecast for this
niche is a gradual and sustainable annual growth of between 3% and 5%.
* Suburban residential property (land to the south and west of Sofia)
The capital is the most densely populated and built-up area in the country,
whereas suburban villages in the Sofia region are among the country's most
sparsely inhabited areas. During 2007 and the first nine months of 2008, the
lack of available plots in Sofia, the subsequent high prices and the desire to
escape urban congestion and noise, encouraged many investors to set their sights
on areas around Sofia, according to Kapital, the Bulgarian weekly business
paper. According to the provisions of Sofia's new master plan, in 15 years' time
about one third of Sofians will live in the city's suburban areas and villages.
Land prices rose by up to 30% around Sofia in 2008 but most developments in the
suburbs have been temporarily suspended as a result of the reduction of
available credit.
* Ski resort second/holiday home property (Borovets)
The postponement of the Super Borovets master plan has resulted in a stagnation
in prices and many completed apartments in the area remained unsold for several
months, according to Index Imoti magazine.
* Coastal second/holiday home property (Harmony Hills and July Morning)
Following the withdrawal of British buyers from the Black Sea complexes, Russian
buyers currently represent more than 40% of the clients. According to Katia
Tzenova, CEO of Address Real Estate Agency, there is a growing number of middle
class buyers aged 28 - 35, who purchase the property for their own use during
the holiday season. In addition, many Russian clients view Bulgaria as one of
the most financially stable countries in Eastern Europe and buy holiday
properties in Bulgaria in order to preserve their savings. Prices on the
northern Black Sea coast reduced during the last quarter of 2008 and, according
to Index Imoti magazine, only the prices of finished apartments at excellent
locations are expected to hold firm. As buyers become more cautious and
selective, new projects will have to offer higher-quality construction and
finish.
Operational Review
During 2008 BLD continued to acquire agricultural land for re-zoning to
residential use and it also entered into a joint venture, with Northridge
Capital Limited to acquire and redevelop the Printing House in Sofia. The Group
now has a total of seven of its own developments covering commercial property
and both prime and mainstream residential property in the capital, Sofia, as
well as holiday or second homes in ski and coastal resorts. In addition, the
Group has continued working with other local developers at the five sites where
it had bought units off plan.
The Board has reviewed its strategy in 2008 in the light of the worsening of the
economic climate during the year. Banking facilities are already in place to
continue and complete the development of Printing House, which remains on target
for completion in late 2010. However, where facilities are not secured, the
Board has decided for the time being to scale back developments. Value will be
added and marketability improved where it can be done at relatively low cost and
with low risk - such as re-zoning. The Board will also consider whether proposed
developments can be reduced in size and funded by deposits on pre-sales as a
means of generating low risk income for the Group. Where pre-sales interest has
been low, sales activity has been stopped until the market starts to improve. As
has always been the case, building will not be commenced on a speculative basis.
At the year end, the Group had a portfolio of developments with an estimated
completed development value of EUR237m (GBP226m) (2007: EUR241m (GBP179m)). The
projects are described below.
Commercial property - Printing House
In April 2008 BLD announced its participation in a joint venture which has
bought the 29,000 square metres Dimitar Blagoev Printing House. Built in the
1950s, it is a historical landmark building, ten minutes from the Parliament and
close to Eagles' Bridge; it is on the main highway to the airport.
The site purchased forms five buildings out of eight on an island site; the key
owner - occupier of the other three buildings is the largest media and press
company in Bulgaria, owned by German WAZ. The five buildings will be converted
into modern class A commercial space comprising 23,500 square metres of office
accommodation and 3,500 square metres of retail space, together with 182
underground and 58 above ground parking spaces.
Total project costs, including the purchase price, are estimated at EUR50m
(GBP43m) while the gross development value is estimated at EUR70m (GBP61m). The
joint venturers each made an initial investment of EUR6.5m (GBP6.3m) as their
50/50 share in the joint venture and bank financing covering the remaining 75%
of the project costs was secured in March 2008. The completed project is
expected to attract first class tenants, on account of the unique location and
high end specification. Construction is expected to be completed in September
2010.
The joint venture is operated through BLD Printing House EAD, owned by BLD and
BLD's financial partner in this transaction, Northridge Capital Ltd., London.
("Northridge"). Northridge manages private client funds and has invested in a
number of property transactions worldwide. BLD will be the development manager.
Joining forces with Northridge on this project enables BLD to share the
development risk with a reputable and experienced partner and to earn project
management fees.
BLD has earned initial fees of EUR0.6m (GBP0.5m) for finding the site and
providing funding, which have been included in the consolidated results in 2008.
In addition, BLD will receive a project management fee, expected to total EUR0.6m
(GBP0.5m) over the development period. BLD's joint venture profit share will be
calculated on a rising scale, dependent on the level of profits.
BLD Sofia Tower
In September 2006, the Group acquired, off-market, the right to develop this
prime site on a small hill in the Lozenets area of central Sofia, adjacent to
the five star Kempinski Hotel. The site, which is 20 minutes from the
international airport, is zoned for residential use. BLD has been in discussions
with the local municipality about obtaining a building permit for a 13 storey
block. This would create a mixed development of 32,000 square metres of high
class luxury apartments with retail/office space on the lower levels and
underground car parking, with an estimated sale value of over EUR87m (GBP75m). The
Group finally received permission to apply for an initial building visa in
December 2008 for a 13,899 square metres development and is now applying for a
building permit. This will add value to the site at relatively low cost, should
the Board decide to sell the site, while allowing the Board to continue in its
plans to work towards obtaining permission to develop the site to the full
32,000 square metres.
The Board has reviewed its assumptions for both the build area and the timing of
the building work following delays in obtaining the permit, along with market
and credit conditions. The Board has therefore taken a conservative approach and
has assumed that the Group may only be able to develop 13,899 square metres and
that building work will commence in early 2010 for completion by the end of
2011. Under the terms of the acquisition agreement the consideration payable to
the owners is a share of the sale proceeds. These changes have been reflected in
the calculation of the liability for deferred payments on the development,
resulting in a net credit to the 2008 profit and loss account of GBP2.0m. The
financial impact of these changes is described in more detail in the Finance
Director's Review below.
Land acquisition, West and South of Sofia
In March 2008, BLD announced that it had made initial purchases of agricultural
land at two locations in the Sofia region. In the first case 38,146 square
metres were initially acquired at a cost of approximately EUR1.7m (GBP1.3m), EUR45
per square metre. Since then further parcels of land have been acquired, at a
similar cost per square metre, creating a total of 60,159 square metres. BLD
will seek to change the planning zoning to residential use. BLD expects this
area to be attractive to Bulgarians as there is a trend for relocating from the
city centre to the suburbs with its better standard of living, mountain views
and good access to main roads.
In the second case, BLD initially acquired 46,673 square metres of agricultural
land in an area with good development potential outside Sofia. The purchase
price was approximately EUR500,000, giving a price of approximately EUR10 per square
metre. Since then further plots have been purchased, at a similar price per
square metre, giving a total site area of 284,000 square metres. BLD will seek
to change the planning zoning to residential use. BLD expects this area to be
attractive to Sofia citizens and holiday home buyers as it is within a 45 minute
drive of Sofia. This location will combine the benefits of city residential
housing with easy access to golf courses, spa facilities and ski runs.
Riverland, Borovets
In December 2006, BLD paid an initial sum of EUR5.0m (GBP3.7m) for a 56,000 square
metre former meat processing factory with planning permission for residential
development. Further payments were also due on the ultimate sale of the
development. In October 2008 agreement was reached with the vendors to settle
the additional payment by making a cash payment of EUR0.6m (GBP0.4m) and
transferring to them the title of 44 unsold units at Harmony Hills. The
accounting for this transaction is described in the Finance Director's Review,
below.
The site is approximately 45 minutes from Sofia, near Borovets, Bulgaria's
oldest and most famous ski resort. It is also attractive in summertime. The
location provides easy access to the existing Borovets ski runs and other
facilities. Shortly after BLD bought the site, it was announced that the Super
Borovets ski based resort was to move ahead, developing 33 new ski runs,
although recently progress has been halted. The Directors consider that Super
Borovets would enhance the value of the Riverlands project.
The site master plan has been completed, a design contract was awarded in 2007
and a building permit for construction of Phase 1 and the local road servicing
the complex was received in May 2008. The Directors have decided not to add
further costs to the development and to cease marketing it until the delays to
Super Borovets have been overcome.
See www.riverland-bg.com
Harmony Hills, Rogachevo
Building work at this small development of 180 apartments and 22 villas was
completed in September 2008. During 2008 sales of 78 units were completed.
Deposits have been received on all 124 of the remaining units but, due to
unforeseen delays with the electricity connection, legal completion of these
units has been delayed until the first half of 2009. Sales of GBP6.2m and profit
of GBP3.6m were taken in 2008 (GBP4.8m of these sales and GBP3.3m of the profit
resulted from the elimination of the Borovets liability), sales of a further
GBP5.3m and profit of GBP0.4m are estimated for 2009, assuming all purchasers
who have paid deposits progress to completion.
See www.harmony-hills.com
July Morning Seaside Resort, Kavarna
BLD assembled part of this site in September 2006 through several off-market
purchases; it had seaside access but no road access. The Group then purchased
the intervening land to gain road access and so benefited from the "marriage
value". The whole site of 95,000 square metres had permission for agricultural
use and cost EUR4.3m (GBP3.2m). It is right beside the Black Sea, in the
Balchik-Kavarna area, one of the most exclusive areas along the coast. Three
internationally designed golf courses and a yacht marina are being built nearby.
After the development of a master plan, at a cost of EUR0.3m (GBP0.2m), a change
to residential zoning was granted in January 2008 that would enable BLD to
create an 80,000 square metre holiday complex, producing a development (to be
carried out in three phases of approximately equal size) with an ultimate sales
value of some EUR75m. Limited marketing began in September 2007, the building
permit was received in July 2008 and 53 units have been reserved.
The original intention was to commence building Phase 1, comprising 432 units,
in late 2008. However, as a result of limited pre-sales demand the Board is
re-evaluating options for the site, consistent with the aims of reducing risk
and costs, including a smaller Phase 1 predominantly funded by deposits from
acquirers. Further information about expected sales values and development costs
will be given as soon as they have been determined.
See www.July-morning.com
Underwriting off-plan apartments
In order to provide a wider spread of risk in BLD's portfolio and to produce
profits more quickly than from its own developments, BLD partnered with a local
Bulgarian developer in relation to projects which were in areas where BLD had no
involvement. This was done by underwriting the price at which units would sell,
in relation to some of the units in a development. The developer continued to
market all of the apartments in return for a share of the profit that would be
made. This was important for two reasons:it avoided buyer confusion as to who
was marketing the apartments and it gave the developer an incentive to sell
those apartments which BLD had underwritten.
This strategy has enabled BLD to generate profits without committing
considerable resources within BLD. The arrangements have worked well. In October
2006, BLD underwrote the sale of 146 units spread across three sites at Sozopol,
Bansko (Phase 1) and Pamporovo. The estimated completed value of the units was
EUR9.7m (GBP7.2m). In two cases, all of the units have been sold to third parties
and in the other case 10 units are still available. Bansko (Phase 1) obtained
its usage permit in December 2008, building work on the site in Sozopol is due
to be completed by the end of 2009.
In June 2007, BLD underwrote an additional 200 units spread across two sites at
Sozopol and Bansko (Phase 2). The estimated completed value of the units is EUR13m
(GBP9.6m). Of the 100 units at the coastal resort of Sozopol, 95 have been sold
to third parties and building work is due to be completed by the end of 2009. Of
the 100 units at Bansko, 26 have been sold to third parties and building work is
due to be completed by the end of April 2009.
The underwriting takes the form of BLD agreeing to pay 70% of the retail price
if the units are not sold by the time the building works are completed. If the
units are sold during construction, then the uplift from 70% to 100% is shared
between BLD and the developer. The total uplift to be shared is 43% of the 70%
underwritten price.
BLD made an initial payment of 20% of the underwritten price when the contracts
were signed; it was due to make another 20% payment as building works
progressed. When the units are sold to a third party, BLD receives back the
payments it had made to date.
The uplift split with the developer depends on how quickly third party buyers
are found. If this is before BLD has paid the second 20% instalment, then 30% of
the total uplift in value comes to BLD. If BLD has made that second payment,
then 50% of the uplift comes to BLD.
As a result of sales being made more quickly than expected, BLD's investment was
less than anticipated. Although this meant a lower share of profits, it enabled
BLD's investment to be returned sooner. While at Evridika Hills, Pamporovo
(Phase 1), a return of 44% on the equity invested was made in 2007, at the
Sozopol site within Phase 1, a return on equity of 100% is expected. Although
the actual profits are relatively small, they serve to demonstrate that BLD can
be flexible in implementing its investment strategy and can successfully seek
out profit streams.
Outlook
The impact of difficult markets in the US and Europe affected Bulgaria towards
the end of 2008. The Board has undertaken measures to reduce risk and costs and
will continue to husband its resources cautiously.
Christo Iliev
Chief Executive Officer
10 March 2009
Finance Director's Review
Consolidated income statement
Pre-tax Group loss was GBP1.454m (2007: pre-tax loss GBP1.606m) on turnover of
GBP6.618m (2007: GBP0.115m).
Of the total turnover, the major items were GBP6.225m arising from sales of 78
units at the Harmony Hills development (2007: nil) and GBP0.375m from management
fees at the Printing House development (2007: nil). The Group recorded no
underwriting income on apartments bought off plan in 2008 (2007:GBP0.115m) as
some units remain, which are expected to be sold in 2009. Gross profit on the
sales of the Harmony Hills units amounted to GBP3.334m, 53.6%, benefiting from
the agreement to eliminate the deferred liability at Borovets. The remaining 124
units are expected to generate GBP5.3m in sales and a profit of GBP0.4m in 2009.
The Borovets deferred liability increased from GBP3.603m at 31 December 2007 to
GBP5.203m at 31 October 2008 as a result of increases to the expected sales
proceeds from the development in the Savills June 2008 valuation (GBP0.982m),
unwinding of the amortisation of the liability (GBP0.383m) and an increase due
to exchange movements (GBP0.235m). In accordance with International Financial
Reporting Standards ("IFRS") the non-cash element of the settlement was credited
to the profit and loss account as revenue. Since the liability was satisfied by
the payment of EUR0.565m (GBP0.445m) in cash and the transfer of 44 units in the
Harmony Hills development the balance of GBP4.758m has been recognised as
revenue in the financial information in respect of these units. GBP1.467m of
turnover was recognised from the sale of the 34 other units sold on the
development.
Within the cost of sales of GBP22.342m, a charge of GBP19.715m for the
write-down of inventory at the Sofia Tower and Borovets developments and the
land holdings outside Sofia has been recognised.
In accordance with international accounting standards IFRS, the Group had
accounted for the deferred land payable liability on the Sofia Tower development
by adding to inventories the discounted value, EUR51,490m, (GBP23,760m at the
exchange rate then ruling) and simultaneously creating a similar liability for
the payment in non-current liabilities. The change of the assumptions regarding
the size and timing of the development resulted in a credit to the profit and
loss account of GBP18.983m. Because the carrying value of work in progress is
not altered by the reduction in the liability, effectively inflating it, when
compared with the independent, desk-top valuation carried out by Savills an
impairment charge of GBP16.941m was required. The net impact of the changed
assumptions was, therefore a credit to the profit and loss account of GBP2.042m.
In accordance with IFRS, the Group had accounted for the deferred land payable
liability on the Borovets development by adding to inventoriesthe discounted
value, EUR4.388m, (GBP2.972m at the exchange rate then ruling) and simultaneously
creating a similar liability for the payment in non-current liabilities. Because
the carrying value of work in progress is not altered by the elimination of the
liability, EUR4.388 (GBP3.453m at the exchange rate ruling on settlement) remains
in work in progress, effectively inflating it. In comparison with the
independent, desk-top valuation carried out by Savills the aggregate of the
carrying value exceeded valuation and the value of work in progress has been
impaired by GBP2.379m in accordance with the Group's accounting policy.
In summary the impact on the consolidated income statement of the elimination of
the deferred liability at Borovets was as follows:
+------------+----------+----------+----------+----------+
| | | GBP'000 | | |
+------------+----------+----------+----------+----------+
| | | | | |
+------------+----------+----------+----------+----------+
| Revenue | | 4,758 | | |
+------------+----------+----------+----------+----------+
| Cost of | | (1,424) | | |
| sales | | | | |
+------------+----------+----------+----------+----------+
| Net gain | | 3,334 | | |
| to | | | | |
| income | | | | |
| statement | | | | |
+------------+----------+----------+----------+----------+
| Write-down | | (2,379) | | |
| of | | | | |
| inventory | | | | |
+------------+----------+----------+----------+----------+
| Overall | | 955 | | |
| gain to | | | | |
| income | | | | |
| statement | | | | |
+------------+----------+----------+----------+----------+
| | | | | |
+------------+----------+----------+----------+----------+
In the announcement made on 10 October 2008 the Directors anticipated an
increase in net assets after the transaction of GBP2.3m including profit on the
entire Harmony Hills development. As noted above 124 units remain to be sold and
profit on those units is expected to amount to GBP0.4m. The overall gain of
approximately GBP1.4m will be lower than expected due to higher than anticipated
costs for connecting electricity to complete the development and a higher
write-down of inventory than expected.
Group overheads in the year amounted to GBP2.103m (2007: GBP2.231m). Average
employee numbers rose to 33 in 2008 from 18 in 2007, although numbers were
reduced to 28 towards the end of 2008 and are expected to fall further. Despite
the increase in numbers overall employment costs rose by only GBP0.032m as no
performance-related bonuses were paid to the Directors. Other costs reduced
marginally during the year despite the number of developments increasing. The
Directors have reviewed all costs and actions have been taken to reduce the
overheads in 2009 as activity reduces.
Interest income of GBP0.853m (2007: GBP0.967m) was earned on the Group's bank
and other deposits. This amount was lower than in 2007 due to both lower cash
balances on hand and the impact, towards the end of the year, of lower interest
rates. Gains on exchange amounted GBP0.397m (2007: GBP0.962m). Following the
Directors' agreement in principle to reduce development activity and the
announcement of the Group's commitment to return cash to shareholders deposits
were transferred into sterling, reducing exchange risk for shareholders.
Net imputed interest on land payables was GBP15.123m credit (2007: GBP1.419m
charge) comprising four elements:
+--------------------------------------------------------+----------+-----------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------------+----------+-----------+
| Change | | |
| in | | |
| carrying | | |
| value of | | |
| financial | | |
| liability | | |
+--------------------------------------------------------+----------+-----------+
| Sofia Tower | 18,983 | |
+--------------------------------------------------------+----------+-----------+
| Borovets | (982) | |
+--------------------------------------------------------+----------+-----------+
| | | 18,001 |
+--------------------------------------------------------+----------+-----------+
| Imputed | | |
| interest | | |
| (unwinding | | |
| of | | |
| discount) | | |
+--------------------------------------------------------+----------+-----------+
| Sofia | ( | |
| Tower | 2,495) | |
+--------------------------------------------------------+----------+-----------+
| Borovets | (383) | |
| (until | | |
| October) | | |
+--------------------------------------------------------+----------+-----------+
| | | (2,878) |
+--------------------------------------------------------+----------+-----------+
| Credit | | 15,123 |
| to | | |
| income | | |
| statement | | |
+--------------------------------------------------------+----------+-----------+
Group loss per share was 4.39 pence (2007: 4.65 pence loss per share). The Board
is unable to recommend a dividend.
Consolidated balance sheet
Included within current assets is GBP3.290m (2007: nil) as due from the
commercial property - Printing House - joint venture. As each of the
shareholders has loaned funds to the joint venture, the accounting treatment on
consolidation results in 50% of the Group's loan being shown in non-current
assets and 50% of Northridge's loan being shown in non-current liabilities
(GBP3.265m, 2007: nil).
The balance sheet shows cash balances of GBP10.252m (2007: GBP24.137m) with the
only loan, GBP5.961m, (2007: GBP2.130m relating to Borovets) remaining being the
Group's share of the development loan to the Printing House joint venture.
Facilities are in place to complete the development. The Directors' policy is to
add value where possible, at low cost, such as re-zoning land for development
and building work will only be carried out if it can be funded by pre-sales
deposits and without bank debt where possible. Although payments on account from
apartment buyers amount to GBP4.396m (2007: GBP1.876m) some GBP1.4m further cash
remains due on the completion of the Harmony Hills development.
At the end of 2008 the unamortised cost of deferred land payables shown as a
liability in the Group balance sheet is GBP11.830m (2007: GBP24.663m), all
relating to BLD Sofia Tower (2007: GBP3.603m related to Borovets and GBP21.060m
related to BLD Sofia Tower). The Directors estimate the deferred land payable by
applying certain assumptions to the ultimate sales proceeds from a development,
thereby calculating what deferred payment would be due to a vendor. The payment
is then discounted by applying assumptions as to the completion date of the
development and a discount rate appropriate to the cost of funds of the Group.
The net decrease of GBP9,230m in the BLD Sofia Tower liability from GBP21.060m
to GBP11,830m is a result of a reduction of GBP18.983m due to the reduction in
size of the development and the expected delay of six months in completion of
the development, an increase of GBP2.495m due to the unwinding of the
amortisation of the liability and an increase of GBP7.258m as a result of
exchange movements. The exchange movements on the retranslation of overseas
operations are shown in the foreign exchange reserve, other movements are
charged to the profit and loss account. The precise assumptions for the
calculation are commercially confidential and cannot therefore be disclosed. The
size of the development is based on the Directors' calculations of the
development potential of the site. The sale value per square metre of the
development is an estimate made by the Directors based on their knowledge of the
local market and supported by the desk-top valuation undertaken by Savills at
the balance sheet date. The split of sales revenue is subject to an agreement
between the Group and the vendors of the site. The Directors estimate that
building will commence in early 2010 for completion at by the end of 2011 -
these timings have been delayed by six months due to delays in the city master
plan and consequential delays in obtaining outline planning permission. The
discount rate used is 11%.
The rate of corporation tax in the Isle of Man is nil and therefore the Company
has no liability for tax payable there. The Group made a taxable profit of
GBP0.471m in Bulgaria, after allowance for brought forward losses and timing
differences, and a provision of GBP0.147m has been made for the payment of
Bulgarian tax (which is 10%). The timing differences noted above give rise to a
deferred tax asset of GBP0.251m but the Group has not recognised this asset due
to the uncertainty of future profits from the same source.
Bulgarian withholding tax is due on interest payable on loans and management
charges from the Company and a net charge of GBP0.131m (2007: GBP0.092m) has
been suffered in the year.
Net asset value and valuation
Audited net asset value per share as at 31 December 2008 ("NAV") was 98.6 pence,
a 19.0 pence increase from 2007's 79.6 pence, reflecting the net loss for the
year (4.4p reduction), the benefit from converting Euro assets and liabilities
held in Bulgaria into Sterling (23.2p gain) and the movement on share premium
account (0.2p gain).
Having instructed Savills to carry out a full valuation at 30 June 2008, the
Directors decided to instruct them to undertake a desk-top valuation of the
Group's property interests as at 31 December 2008. The Directors believe that
given the limited number of changes to developments in the intervening period
that the cost saving was of more value to shareholders than would be gained from
a full valuation. The Group intends to continue to commission site valuations
every six months with a full valuation occurring annually at most while
development activity remains low.
The 31 December valuation of the Group's incomplete investments amounted to
EUR47.88m (GBP46.72m) compared with EUR38.83m (GBP28.76m) as at 31 December 2007.
As the valuation relates to properties held in inventories - BLD is not a
property investment concern and so does not hold its properties in property,
plant and equipment - the revaluation surplus has not been incorporated in the
financial information.
Unaudited net asset value per share, after including the professional desk-top
valuation at as 31 December 2008 ("Adjusted NAV") was 122.2p, 3.2p above that
calculated at 31 December 2007.
As indicated above, the net asset value per share is very sensitive to the
movement in the exchange rate between sterling and the Euro. The rate moved from
GBP1/EUR1.35 as at 31 December 2007 to GBP1/EUR1.025 as at 31 December 2008.
GBP30.4m of the Group's net assets of GBP39.4m are in Euro or Euro pegged
assets. It is estimated that each 0.01 movement in the GBP/EUR exchange rate of
1.025 will mean an adjustment to the sterling net assets of 0.74 pence per
share.
No allowance has been made in the calculation of Adjusted NAV for any dilutive
effect which might arise from the award of shares through the Company's
management incentive arrangements ("the Plan"). The Plan applies only if total
shareholder return (being the increase in share price (above the 100p Placing
price) during the year plus dividends paid in the year) exceeds a hurdle rate of
10% of the share price at the beginning of the year; in such an event, 20% of
the surplus is payable as a performance fee (up to 50% (such percentage being
determined by the Directors) can be paid in cash with the rest being in shares).
Andrew Daw
Finance Director
10 March 2009
* In this report an exchange rate of GBP1/EUR 1.025 has been used to convert Euro
denominated assets and liabilities held at 31 December 2008 to Sterling. Income
and expenses have been converted in accordance with the Group's accounting
policy, based on exchange rates on the date of the transaction. An exchange rate
of GBP1/EUR1.15 has been used to convert estimates of future revenues and costs.
Revaluation Methodology and Assumptions
Net Asset Value per share
Savills revalued all of the property interests held by the Company as at 31
December 2008 in accordance with the Practice Statements contained in the RICS
Appraisal and Valuation Standards published by the Royal Institute of Chartered
Surveyors ("the Red Book") in May 2003.
The basis of the valuation is market value (at 31 December 2007, Sofia Tower had
been valued on a fair value basis) as defined in the Red Book. The figures from
the Savills' valuation report should be read in conjunction with the assumptions
and limitations of their report.
The adjusted unaudited net asset value per share has been arrived at by adding
the surplus of Savills' valuations over cost to the audited net assets of the
Company calculated in accordance with the Company's accounting policies as at 31
December 2008 and after making provision for Bulgarian tax (which is 10%) and
withholding tax on the surplus. The resultant sum has then been divided by the
40m shares currently in issue.
Consolidated Income Statement
For the year ended 31 December 2008
+----------------------------------+----------+-------------+------------+
| | | Year ended | Year ended |
+----------------------------------+----------+-------------+------------+
| | | 31 December | 31 |
| | | | December |
+----------------------------------+----------+-------------+------------+
| | | 2008 | 2007 |
+----------------------------------+----------+-------------+------------+
| | Notes | GBP'000 | GBP'000 |
+----------------------------------+----------+-------------+------------+
| | | | |
+----------------------------------+----------+-------------+------------+
| | | | |
+----------------------------------+----------+-------------+------------+
| Revenue | | 6,618 | 115 |
+----------------------------------+----------+-------------+------------+
| | | | |
+----------------------------------+----------+-------------+------------+
| Cost of sales | | | |
+----------------------------------+----------+-------------+------------+
| Before impairment of inventory | | (2,627) | - |
+----------------------------------+----------+-------------+------------+
| Impairment of inventory | | (19,715) | - |
+----------------------------------+----------+-------------+------------+
| | | | |
+----------------------------------+----------+-------------+------------+
| | | (22,342) | - |
+----------------------------------+----------+-------------+------------+
| | | | |
+----------------------------------+----------+-------------+------------+
| Gross (loss)/profit | | (15,724) | 115 |
+----------------------------------+----------+-------------+------------+
| | | | |
+----------------------------------+----------+-------------+------------+
| Administrative expenses | | (2,103) | (2,231) |
+----------------------------------+----------+-------------+------------+
| | | | |
+----------------------------------+----------+-------------+------------+
| Operating loss | | (17,827) | (2,116) |
+----------------------------------+----------+-------------+------------+
| | | | |
+----------------------------------+----------+-------------+------------+
| Finance income, being: | | | |
+----------------------------------+----------+-------------+------------+
| Bank and other interest | | 853 | 967 |
+----------------------------------+----------+-------------+------------+
| Gain on exchange | | 397 | 962 |
+----------------------------------+----------+-------------+------------+
| Imputed interest on deferred | | (2,878) | (2,557) |
| land payables | | | |
+----------------------------------+----------+-------------+------------+
| Change in carrying value of | | 18,001 | 1,138 |
| financial liability in respect | | | |
| of deferred land payables | | | |
+----------------------------------+----------+-------------+------------+
| Finance income | 4 | 16,373 | 510 |
+----------------------------------+----------+-------------+------------+
| | | | |
+----------------------------------+----------+-------------+------------+
| Loss before tax | | (1,454) | (1,606) |
+----------------------------------+----------+-------------+------------+
| Income tax expense | 18 | (300) | (113) |
+----------------------------------+----------+-------------+------------+
| Retained loss for the period | | (1,754) | (1,719) |
+----------------------------------+----------+-------------+------------+
| | | | |
+----------------------------------+----------+-------------+------------+
| Basic and diluted loss per share | | | |
| attributable | | | |
+----------------------------------+----------+-------------+------------+
| to the equity holders during the | | | |
| period | | | |
+----------------------------------+----------+-------------+------------+
| (expressed as pence per share) | 13 | | |
+----------------------------------+----------+-------------+------------+
| Basic loss per share | | (4.39) | (4.65) |
+----------------------------------+----------+-------------+------------+
| Diluted loss per share | | (4.39) | (4.65) |
+----------------------------------+----------+-------------+------------+
| | | | |
+----------------------------------+----------+-------------+------------+
Consolidated Balance Sheet
As at 31 December 2008
+----------------------------------+----------+--------------+------------+
| | | 2008 | 2007 |
+----------------------------------+----------+--------------+------------+
| | Notes | GBP'000 | GBP'000 |
+----------------------------------+----------+--------------+------------+
| | | | |
+----------------------------------+----------+--------------+------------+
| Assets | | | |
+----------------------------------+----------+--------------+------------+
| Property, plant and equipment | 9 | 150 | 129 |
+----------------------------------+----------+--------------+------------+
| Amount due from joint venture | | 3,290 | - |
+----------------------------------+----------+--------------+------------+
| | | | |
+----------------------------------+----------+--------------+------------+
| Total non-current assets | | 3,440 | 129 |
+----------------------------------+----------+--------------+------------+
| | | | |
+----------------------------------+----------+--------------+------------+
| Inventories | 10 | 50,576 | 34,906 |
+----------------------------------+----------+--------------+------------+
| Trade and other receivables | 11 | 2,109 | 1,832 |
+----------------------------------+----------+--------------+------------+
| Cash and cash equivalents | 12 | 10,252 | 24,137 |
+----------------------------------+----------+--------------+------------+
| Total current assets | | 62,937 | 60,875 |
+----------------------------------+----------+--------------+------------+
| Total assets | | 66,377 | 61,004 |
+----------------------------------+----------+--------------+------------+
| | | | |
+----------------------------------+----------+--------------+------------+
| Equity | | | |
+----------------------------------+----------+--------------+------------+
| Issued share capital | 13 | 400 | 400 |
+----------------------------------+----------+--------------+------------+
| Share premium reserve | | 35,359 | 35,280 |
+----------------------------------+----------+--------------+------------+
| Foreign currency translation | | 8,463 | (825) |
| reserve | | | |
+----------------------------------+----------+--------------+------------+
| Retained earnings | | (4,773) | (3,019) |
+----------------------------------+----------+--------------+------------+
| Total equity | | 39,449 | 31,836 |
+----------------------------------+----------+--------------+------------+
| | | | |
+----------------------------------+----------+--------------+------------+
| Non-current liabilities | | | |
+----------------------------------+----------+--------------+------------+
| Deferred tax liabilities | | - | 21 |
+----------------------------------+----------+--------------+------------+
| Deferred land payables | 15 | 11,830 | 24,663 |
+----------------------------------+----------+--------------+------------+
| Amount due to joint venture | | 3,265 | - |
+----------------------------------+----------+--------------+------------+
| Bank loans | 15 | 5,961 | - |
+----------------------------------+----------+--------------+------------+
| Total non-current liabilities | | 21,056 | 24,684 |
+----------------------------------+----------+--------------+------------+
| | | | |
+----------------------------------+----------+--------------+------------+
| Current liabilities | | | |
+----------------------------------+----------+--------------+------------+
| Trade and other payables | 16 | 5,562 | 2,263 |
+----------------------------------+----------+--------------+------------+
| Bank loans | | - | 2,130 |
+----------------------------------+----------+--------------+------------+
| Taxation | | 310 | 91 |
+----------------------------------+----------+--------------+------------+
| Total current liabilities | | 5,872 | 4,484 |
+----------------------------------+----------+--------------+------------+
| Total liabilities | | 26,928 | 29,168 |
+----------------------------------+----------+--------------+------------+
| Total equity & liabilities | | 66,377 | 61,004 |
+----------------------------------+----------+--------------+------------+
The financial information was approved and authorised for issue by the Board of
Directors on 10 March 2009
Christo Iliev Andrew Daw
Director Director
Company Balance Sheet
As at 31 December 2008
+----------------------------------+----------+--------------+------------+
| | | 2008 | 2007 |
+----------------------------------+----------+--------------+------------+
| | Notes | GBP'000 | GBP'000 |
+----------------------------------+----------+--------------+------------+
| Assets | | | |
+----------------------------------+----------+--------------+------------+
| Investment in subsidiaries | | 175 | 175 |
+----------------------------------+----------+--------------+------------+
| Total non-current assets | | 175 | 175 |
+----------------------------------+----------+--------------+------------+
| | | | |
+----------------------------------+----------+--------------+------------+
| Intragroup receivables | | 37,619 | 16,615 |
+----------------------------------+----------+--------------+------------+
| Trade and other receivables | 11 | 89 | 13 |
+----------------------------------+----------+--------------+------------+
| Cash and cash equivalents | 12 | 9,057 | 20,885 |
+----------------------------------+----------+--------------+------------+
| Total current assets | | 46,765 | 37,513 |
+----------------------------------+----------+--------------+------------+
| Total assets | | 46,940 | 37,688 |
+----------------------------------+----------+--------------+------------+
| | | | |
+----------------------------------+----------+--------------+------------+
| Equity | | | |
+----------------------------------+----------+--------------+------------+
| Issued share capital | 13 | 400 | 400 |
+----------------------------------+----------+--------------+------------+
| Share premium reserve | | 35,359 | 35,280 |
+----------------------------------+----------+--------------+------------+
| Retained earnings | | 11,094 | 1,611 |
+----------------------------------+----------+--------------+------------+
| Total equity | | 46,853 | 37,291 |
+----------------------------------+----------+--------------+------------+
| | | | |
+----------------------------------+----------+--------------+------------+
| Liabilities - current | | | |
| liabilities | | | |
+----------------------------------+----------+--------------+------------+
| Trade and other payables | 16 | 87 | 306 |
+----------------------------------+----------+--------------+------------+
| Taxation | | - | 91 |
+----------------------------------+----------+--------------+------------+
| Total current liabilities | | 87 | 397 |
+----------------------------------+----------+--------------+------------+
| Total liabilities | | 87 | 397 |
+----------------------------------+----------+--------------+------------+
| Total equity & liabilities | | 46,940 | 37,688 |
+----------------------------------+----------+--------------+------------+
The financial information was approved and authorised for issue by the Board of
Directors on 10 March 2009
Christo Iliev Andrew Daw
Director Director
Statements of Changes in Equity
For the year ended 31 December 2008
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
| | | | | Foreign | |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | currency | |
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| | Share | Share | Retained | translation | |
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| | capital | premium | earnings | reserve | Total |
+----------------------------------+----------+---------+----------+-------------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+----------+---------+----------+-------------+---------+
| GROUP | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Balance at 1 January 2008 | 400 | 35,280 | (3,019) | (825) | 31,836 |
+----------------------------------+----------+---------+----------+-------------+---------+
| Retained loss for the period | - | - | (1,754) | - | (1,754) |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Translation into presentation | | | | | |
| currency | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Translation of other net assets | - | - | - | 16,779 | 16,779 |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Variation arising from | | | | | |
| restatement of | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| brought forward deferred land | | | | | |
| payables | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| at the exchange rate ruling at | | | | | |
| the end | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| of the financial period | - | - | - | (7,491) | (7,491) |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Total recognised income and | | | | | |
| expense | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| for the period | - | - | (1,754) | 9,288 | 7,534 |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Share issue expenses recovered | - | 79 | - | - | 79 |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Balance as at 31 December 2008 | 400 | 35,359 | (4,773) | 8,463 | 39,449 |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| For the year ended 31 December | | | | | |
| 2007 | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Balance at 1 January 2007 | 250 | 20,939 | (1,300) | 110 | 19,999 |
+----------------------------------+----------+---------+----------+-------------+---------+
| Retained loss for the period | - | - | (1,719) | - | (1,719) |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Translation into presentation | | | | | |
| currency | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Translation of other net assets | - | - | - | 1,031 | 1,031 |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Variation arising from | | | | | |
| restatement of | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| brought forward deferred land | | | | | |
| payables | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| at the exchange rate ruling at | | | | | |
| the end | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| of the financial period | - | - | - | (1,966) | (1,966) |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Total recognised income and | | | | | |
| expense | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| for the period | - | - | (1,719) | (935) | (2,654) |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Shares issued in the period | 150 | 14,850 | - | - | 15,000 |
+----------------------------------+----------+---------+----------+-------------+---------+
| Share issue expenses | - | (509) | - | - | (509) |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Balance as at 31 December 2007 | 400 | 35,280 | (3,019) | (825) | 31,836 |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | Foreign | |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | currency | |
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| | Share | Share | Retained | translation | |
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| | capital | premium | earnings | reserve | Total |
+----------------------------------+----------+---------+----------+-------------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+----------+---------+----------+-------------+---------+
| COMPANY | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Balance at 1 January 2008 | 400 | 35,280 | 1,611 | - | 37,291 |
+----------------------------------+----------+---------+----------+-------------+---------+
| Retained profit for the period | - | - | 9,483 | - | 9,483 |
+----------------------------------+----------+---------+----------+-------------+---------+
| Total recognised income and | - | - | 9,483 | - | 9,483 |
| expense | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| for the period | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Share issue expenses recovered | - | 79 | - | - | 79 |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Balance as at 31 December 2008 | 400 | 35,359 | 11,094 | - | 46,853 |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| For the year ended 31 December | | | | | |
| 2007 | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Balance at 1 January 2007 | 250 | 20,939 | 63 | - | 21,252 |
+----------------------------------+----------+---------+----------+-------------+---------+
| Retained profit for the period | - | - | 1,548 | - | 1,548 |
+----------------------------------+----------+---------+----------+-------------+---------+
| Total recognised income and | - | - | 1,548 | - | 1,548 |
| expense | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| for the period | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
| Shares issued in the period | 150 | 14,850 | - | - | 15,000 |
+----------------------------------+----------+---------+----------+-------------+---------+
| Share issue expenses | - | (509) | - | - | (509) |
+----------------------------------+----------+---------+----------+-------------+---------+
| Balance as at 31 December 2007 | 400 | 35,280 | 1,611 | - | 37,291 |
+----------------------------------+----------+---------+----------+-------------+---------+
| | | | | | |
+----------------------------------+----------+---------+----------+-------------+---------+
Share capital - Amount subscribed for share capital at nominal value.
Share premium- Amount subscribed for share capital in excess of nominal value.
Retained earnings- Cumulative net gains and losses recognised in the
consolidated income statement.
Foreign currency translation reserve - Gains/losses arising on retranslating the
net assets of overseas operations into sterling.
Cash Flow Statements
For the year ended 31 December 2008
+--------------------------------------------+---------+----------+----------+---------+----------+
| | | | Restated: see |
| | | | note 2.12 |
+--------------------------------------------+---------+---------------------+--------------------+
| | | Year ended | Year ended |
+--------------------------------------------+---------+---------------------+--------------------+
| | | 31 December 2008 | 31 December |
| | | | 2007 |
+--------------------------------------------+---------+---------------------+--------------------+
| | | Group | Company | Group | Company |
+--------------------------------------------+---------+----------+----------+---------+----------+
| | Notes | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Cash flow from operating activities | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Profit/(loss) for the year | | (1,754) | 9,483 | (1,719) | 1,543 |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Adjustments for: | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Net financing (income)/expense | | (16,373) | (2,518) | (510) | (1,787) |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Taxation | | 300 | 131 | 113 | 91 |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Depreciation | 9 | 53 | - | 40 | - |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Impairment loss in respect of inventories | | 19,715 | - | - | - |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Operating profit/(loss) before changes | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| in working capital | | 1,941 | 7,096 | (2,076) | (153) |
+--------------------------------------------+---------+----------+----------+---------+----------+
| | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Increase in intragroup balances | | - | (19,691) | - | (1,970) |
+--------------------------------------------+---------+----------+----------+---------+----------+
| (Increase)/decrease in trade and other | | (2,436) | (76) | (640) | 444 |
| receivables | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Increase/(decrease) in trade and other | | 4,483 | (219) | (93) | 93 |
| payables | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| (Increase)/ decrease in inventories | | (22,058) | - | (1,634) | - |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Settlement of deferred land payable | | (445) | - | - | - |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Cash (used in) operations | | (18,515) | (12,890) | (4,443) | (1,586) |
+--------------------------------------------+---------+----------+----------+---------+----------+
| | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Tax (paid)/recovered | | (102) | - | (36) | 56 |
+--------------------------------------------+---------+----------+----------+---------+----------+
| | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Net cash flows from operating activities | | (18,617) | (12,890) | (4,479) | (1,530) |
+--------------------------------------------+---------+----------+----------+---------+----------+
| | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Cash flows from investing activities | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Acquisition of plant and equipment | 9 | (101) | - | (69) | - |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Proceeds from sale of plant and equipment | | 27 | - | - | - |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Interest received | | 853 | 586 | 967 | 1,786 |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Interest paid | | (354) | - | (39) | - |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Cash flows from investing activities | | 425 | 586 | 859 | 1,786 |
+--------------------------------------------+---------+----------+----------+---------+----------+
| | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Financing activities | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Proceeds from the issue of ordinary share | | - | - | 15,000 | 15,000 |
| capital | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Share issue expenses | | 79 | 79 | (509) | (509) |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Receipt from new bank loans | | 5,961 | - | 2,130 | - |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Repayment of bank loans | | (2,130) | - | - | - |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Cash flows generated from financing | | 3,910 | 79 | 16,621 | 14,491 |
| activities | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Net (decrease)/increase in cash and cash | | (14,282) | (12,225) | 13,001 | 14,747 |
| equivalents | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Effect of exchange fluctuations on cash | | 397 | 397 | 962 | (85) |
| held | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Cash and cash equivalents at 1 January | | 24,137 | 20,885 | 10,174 | 6,223 |
+--------------------------------------------+---------+----------+----------+---------+----------+
| Cash and cash equivalents at 31 December | | 10,252 | 9,057 | 24,137 | 20,885 |
+--------------------------------------------+---------+----------+----------+---------+----------+
| | | | | | |
+--------------------------------------------+---------+----------+----------+---------+----------+
Notes to the Consolidated Financial Information
For the year ended 31December 2008
1. GENERAL INFORMATION
Bulgarian Land Development plc ("the Company") and its subsidiaries (together
"the Group") is a property development group operating in Bulgaria, principally
involved in the development of residential and commercial property. The Group's
head office is in the Isle of Man and the main operating office is in Sofia,
Bulgaria.
The Company is registered in the Isle of Man, registration number 115921C and
its registered office is Top Floor, 14 Athol Street, Douglas, Isle of Man, IM1
1JA. The Company's shares are traded on the Alternative Investment Market of the
London Stock Exchange.
The financial information is extracted from the audited financial statements of
the Group for the year ended 31 December 2008 which were approved by the board
of directors on 10 March 2009. The Company's auditors, BDO Stoy Hayward LLP,
have reported on the accounts for the year ended 31 December 2008 under section
15 of the Isle of Man Companies Acts 1982 ("Act"). Their report was not
qualified within the meaning of the Act and did not contain a statement made
under sections 15(4) or section 15(6) of the Act.
Copies of the full financial statements for the year ended 31 December 2008 will
be posted to shareholders as soon as possible and will be available on the
Company's website www.bld.bg.
2. SIGNIFICANT ACCOUNTING POLICIES
This consolidated financial information has been prepared in accordance with
International Financial Reporting Standards ('IFRS') as adopted for use in the
European Union in accordance with Article 3 of the IAS Regulations (EC) no
1606/2000. The principal accounting policies adopted in the preparation of the
consolidated financial information are set out below.
New standards and interpretations
No IFRS have been issued that were effective for accounting periods beginning on
or after 1 January 2008.
In the current year, the Group has adopted IFRS 8 'Operating Segments' which is
effective for annual reporting periods beginning on or after 1 January 2009. The
impact of the adoption of IFRS 8 is to give an insight into information used by
management in taking past decisions and also help users to predict management's
actions and reactions to future events. The principal changes resulting from the
issue of IFRS 8 which replaces IAS 14 Segment Reporting is that the requirements
of the IFRS are based on the information about the components of the Group that
management uses to make decisions about operating matters. The IFRS requires
identification of operating segments on the basis of internal reports that are
regularly reviewed by management and also measurement of amounts reported for
each operating segment item to be the measure reported to management.
At the date of authorisation of this financial information, the following
Standards and Interpretations which have not been applied in this financial
information were in issue but not yet effective:
- Revision to IFRS 3 'Business Combinations'
- IAS 23 (Revised 2007) 'Borrowing Costs'
- Amendment to IFRS 2 'Share-based Payment' Vesting Conditions and Cancellations
- Amendments to IFRS 7 'Financial Instruments: Disclosures'
- Amendment to IAS 1 'Presentation of Financial Statements' A Revised
Presentation
- Amendments to IAS 39 and IFRS 7 'Reclassification of Financial Instruments'
- Amendments to IFRS 1 and IAS 27 Cost of an Investment in a subsidiary,
jointly-controlled
entity or associate
- IFRIC 15 'IAS 11 - Agreements for the Construction of Real Estate'
The directors are of the opinion that the adoption in future periods of the
other Standards and Interpretations noted above will have no material impact on
the financial information of the Group.
2.1 (a) Basis of presentation
The Group financial information has been prepared on the historical cost basis
and in accordance with the requirements set out in the Isle of Man Companies
Acts 1931 to 2004.
The accounting policies have been consistently applied to the results, gains and
losses, assets, liabilities and cash flows of entities included in the financial
information.
The preparation of financial information in conformity with IFRS requires the
Directors to make judgments, estimates and assumptions that affect the
application of policies and the reported amounts of assets, 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 of making the judgments
about carrying values of assets and liabilities that are not readily apparent
from other sources. 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 current and future
periods.
(b) Basis of consolidation
The consolidated financial information incorporates the financial information of
the Company and the entities controlled by the Company (its subsidiaries) made
up to 31 December each year. 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.
Where necessary, adjustments are made to the financial information 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.
(c) Business combinations
The consolidated financial information includes the acquisition of the Company's
subsidiary in 2006.
The Directors do not believe that the 2006 business combination met the
definitions of IFRS3 (as the Company did not constitute a business, as defined
in IFRS3). The directors have considered the guidance included in paragraphs 10
to 12 of International Accounting Standard ('IAS') 8 Accounting Policies,
Changes in Accounting Estimates and Errors. This requires, inter alia, that
where IFRS do not include guidance for a particular issue, the Directors should
consider the economic substance of the transaction in developing the accounting
policy.
The Directors have therefore incorporated the assets and liabilities of the
subsidiary at the amounts originally recorded in its books from the date that
the Company gained control. As economically there was no change in the business
or its prospects as a result of the combination, the Directors do not believe
that it was appropriate to recognise the significant amount of goodwill that
would have arisen.
2.2 Foreign currency translation
The functional currency of the Company is Pound Sterling. The functional
currency of the subsidiaries is Bulgarian Lev as this is the primary currency in
which the subsidiaries operate. For the purpose of this consolidated financial
information, the results and financial position are expressed in Sterling.
Monetary assets and liabilities denominated in foreign currencies as at the date
of this financial information are translated to Sterling at exchange rates
prevailing on that date. Realised and unrealised gains and losses on foreign
currency transactions are charged or credited to the income statement as foreign
currency gains and losses. Expenses are translated into Sterling based on
exchange rates on the date of the transaction.
Exchange differences arising on the settlement of monetary items, and on
retranslation of monetary items, are included in profit or loss for the period.
Balance sheet items are translated at the rate prevailing at the period end.
Income statement balances are translated using the average rate over the period.
Where balances in the subsidiary companies (including the carrying value of
deferred land payables) are brought forward at the beginning of a financial
period having been converted from Bulgarian Lev to Sterling at the exchange rate
ruling at the previous balance sheet date, they are reconverted at the exchange
rate ruling at the end of the current financial period and the difference is
taken to foreign currency translation reserve.
2.3 Cash and cash equivalents
Cash and cash equivalents comprise cash deposited with banks for periods of up
to one month.
2.4 Revenue recognition
(a) Revenue
Revenue comprises the fair value of the consideration received or receivable,
net of value added tax, rebates and discounts.
Revenue from property development and off-plan trading sales is recognised in
the income statement when the significant risks and rewards of ownership have
been transferred to the purchaser. Revenue in respect of the sale of residential
properties is recognised at the fair value of the consideration received or
receivable on legal completion. Provision is made for costs to be incurred post
completion in accordance with IAS 37 'Provisions, contingent liabilities and
contingent assets'.
(b) Customer deposits
Customer deposits are recorded as a liability within "payments on account by
apartment buyers" on receipt and are released to the income statement as revenue
upon legal completion.
2.5 Property, plant and equipment
Motor vehicles, plant and equipment are stated at cost less subsequent
depreciation. Depreciation is calculated using the straight-line method as
follows:
+---------------------+-------------+
| Motor vehicles: | 4 years |
+---------------------+-------------+
| Office equipment: | 4 years |
+---------------------+-------------+
| Computers: | 4 years |
+---------------------+-------------+
| Other: | 4 years |
+---------------------+-------------+
The estimated useful economic lives are reassessed at each balance sheet date as
are changes in current residual values. The effects of these changes in
estimates are accounted for prospectively.
2.6 Inventories
Land and properties held for development are carried at the lower of cost and
net realisable value. Cost includes all costs of purchase and development
(including interest) incurred in bringing the inventories to their condition at
the balance sheet date. Net realisable value is the estimated selling price in
the ordinary course of business less cost to complete the development and
selling costs.
Where the Group acquires land and buildings subject to deferred payments due
after more than one year, it is initially recognised at cost, being the fair
value of the future estimate contractual obligation. Where, through these
deferred purchase terms, the cost differs from the nominal amount that will
actually be paid in settling the liability, no adjustment is made to the cost of
the land, the difference being charged as a finance cost.
2.7 Trade payables
Trade payables on normal terms do not bear interest and are carried at their
nominal value.
Trade payables in respect of deferred land payables contractual payments are
recorded at their fair value at the date of acquisition of the asset to which
they relate. The discount to the nominal value which will be paid in settling
the deferred payment terms is amortised over the credit term and charged to
finance costs using the effective interest method.
Where changes in estimates relating to either the future amount to be paid or
the timing of payments arise, the difference in re-measuring the opening
carrying value at the original effective interest rate is recognised in profit
or loss during the year. The Group classifies these amounts as a component of
finance income or expense.
2.8 Taxation
The charge for current taxation is based on the results for the period as
adjusted for those items which are non-taxable or disallowed, using the rates
relevant for the period.
Deferred taxation is the tax expected to be payable or receivable on differences
between the carrying amounts of assets and liabilities in the financial
information and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from assets and liabilities in a transaction that affects
neither the tax profit nor the accounting profit. Deferred tax is not provided
on the initial recognition of assets or liabilities that affect neither taxable
nor accounting profit, other than in business combinations and differences
relating to investments in subsidiaries to the extent that they will probably
not reverse in the foreseeable future.
Deferred taxation is measured based upon tax rates that are expected to apply in
the period to which the temporary differences are expected to reverse using tax
rates that have been substantively enacted by the balance sheet date.
2.9 Share-based payments
Where share options are awarded to employees, the fair value of the options at
the date of grant is charged to the income statement over the vesting period.
Non-market vesting conditions are taken into account by adjusting the number of
equity instruments expected to vest at each balance sheet date so that,
ultimately, the cumulative amount recognised over the vesting period is based
upon the number of options that eventually vest. Market vesting conditions are
factored into fair value of the options granted, as long as all other vesting
conditions are satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition.
Where equity instruments are granted to persons other than employees, the income
statement is charged.
2.10 Joint ventures
Joint ventures are entities in which the Group holds an interest on a long-term
basis and which are jointly controlled by the Group and other venturers under a
contractual agreement. Jointly controlled entities are included in the financial
information using proportionate consolidation. The share of each of the jointly
controlled entity's assets, liabilities, income and expenses are combined on a
line-by-line basis with those of the group.
Profits and losses arising on transactions arising between the Group and the
jointly controlled entities are recognised only to the extent of unrelated
investors' interests in the entity. The Group's share in the jointly controlled
entity's profits and losses resulting from these transactions is eliminated
against the asset or liability of the jointly controlled entity arising on the
transaction.
2.11 Operating segments
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker, identified as Dimitar
B Savov, who is responsible for allocating resources and assessing performance
of the operating segments.
2.12 Restatement of cash flow statements
The 2007 cash flow statements have been restated to adjust for the impact of
foreign exchange on working capital movements and deferred land payables and for
the interest capitalised in inventories. The effect of these changes on the 2007
comparatives is as follows: previously reported increase in deferred land
payable of GBP1,419,000 has been reduced to nil, interest paid has been
increased from nil to GBP39,000 and working capital increases of GBP3,363,000 in
aggregate have been reduced to an increase of GBP2,367,000 in aggregate.
3. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the process of applying the Group's accounting policies, which are described
in note 2, the Directors have made the following judgments that have the most
significant effect on the amounts recognised in the financial information.
Basis of consolidation
Following a detailed review of the documentation and facts surrounding the Group
reorganisation and purchase of the entire share capital of the Company's
subsidiary immediately before the IPO in March 2006, the Directors believe that
the purchase method of accounting (without fair valuing the assets and
liabilities of the subsidiary on acquisition) most fairly reflects the substance
of the transaction.
Recoverability of amounts included in inventories
The Directors have carried out a detailed review of all the properties held by
the Group. In addition, the Directors have commissioned Savills to carry out a
desk-top valuation of each of the projects. Based on this work, the directors
have made significant judgments concerning the success, cash flows, timing and
resulting profitability of these projects and have recognised impairment
provisions against certain of the developments accordingly.
Deferred land payables
Where the Group has acquired sites with deferred payments due to the vendors
based on a percentage of the final sales value the discounted value of those
deferred payables are subject to estimate by the Directors. The variables
considered by the Directors in making the estimate are the ultimate sales value
achievable, the completion date for the development concerned and the discount
rate to be used. Following a detailed review of the Sofia Tower development, the
only remaining project where a deferred payable will become due, the Directors
believe that the assumptions that they have made in assessing the timing and
amount of the financial liability are appropriate.
4. FINANCE INCOME/COSTS
+-----------------------------------------+---------+---------+
| | Group | Group |
+-----------------------------------------+---------+---------+
| | 2008 | 2007 |
+-----------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+---------+---------+
| | | |
+-----------------------------------------+---------+---------+
| Bank and other interest income | 853 | 967 |
+-----------------------------------------+---------+---------+
| Gain on exchange | 397 | 962 |
+-----------------------------------------+---------+---------+
| | | |
+-----------------------------------------+---------+---------+
| Imputed interest on deferred land | (2,878) | (2,557) |
| payables | | |
+-----------------------------------------+---------+---------+
| Change in carrying value of financial | | |
| liability in respect of | | |
+-----------------------------------------+---------+---------+
| deferred land payables | 18,001 | 1,138 |
+-----------------------------------------+---------+---------+
| Total finance income | 16,373 | 510 |
+-----------------------------------------+---------+---------+
All external bank interest payable of GBP354,000 (2007: GBP39,000) has been
capitalised in inventories.
5. SEGMENT INFORMATION
The Group's developments are managed and reported on an individual basis.
Developments have been aggregated into reportable segments where they have
similar economic characteristics, products and customers. The reportable
segments are:
* Commercial property
* City centre, premium residential
* Suburban residential
* Ski resort second/holiday home
* Coastal resort second/holiday home
There are no transactions between the segments. The unallocated segment relates
to central overheads in the Isle of Man and Bulgaria, taxation, cash holdings
not allocated to developments and other assets and liabilities related to
central overheads.
Segment assets include primarily developments in progress, trade and
other receivables, cash and cash equivalents. Segment liabilities comprise
borrowings, other operating liabilities and deferred land payables, where
relevant.
All revenues are derived in Bulgaria and all non-current assets are located in
Bulgaria.
The segment results for the year ended 31 December 2008 are as follows:
+---------------+------------+----------+----------+----------+----------+----------+-------------+----------+
| | Commercial | City | Suburban | Ski | Coastal | Other | Unallocated | Total |
| | | centre | | resort | resort | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------+------------+----------+----------+----------+----------+----------+-------------+----------+
| | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+----------+
| Revenue | 375 | - | - | - | 6,225 | 18 | - | 6,618 |
+---------------+------------+----------+----------+----------+----------+----------+-------------+----------+
| | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+----------+
| Operating | 261 | (16,947) | (401) | (2,380) | 3,595 | (11) | (1,944) | (17,827) |
| profit/(loss) | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+----------+
| Finance | 221 | - | - | - | - | - | 1,029 | 1,250 |
| income | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+----------+
| Net | - | 16,488 | - | (1,365) | - | - | - | 15,123 |
| imputed | | | | | | | | |
| interest | | | | | | | | |
| on land | | | | | | | | |
| payables | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+----------+
| Profit/(loss) | 482 | (459) | (401) | (3,745) | 3,595 | (11) | (915) | (1,454) |
| before | | | | | | | | |
| taxation | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+----------+
| Taxation | - | - | - | - | - | - | (300) | (300) |
+---------------+------------+----------+----------+----------+----------+----------+-------------+----------+
| Retained | 482 | (459) | (401) | (3,745) | 3,595 | (11) | (1,215) | (1,754) |
| profit/(loss) | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+----------+
Other information at 31 December 2008:
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| | Commercial | City | Suburban | Ski | Coastal | Other | Unallocated | Total |
| | | centre | | resort | resort | | | |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| | | | | | | | | |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Assets | 6,641 | 14,157 | 5,864 | 8,097 | 12,359 | 482 | 10,211 | 57,811 |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Jointly | 8,566 | - | - | - | - | - | - | 8,566 |
| controlled | | | | | | | | |
| entity | | | | | | | | |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Total | 15,207 | 14,157 | 5,864 | 8,097 | 12,359 | 482 | 10,211 | 66,377 |
| assets | | | | | | | | |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| | | | | | | | | |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Liabilities | - | 11,833 | 7 | 27 | 4,657 | - | 1,102 | 17,626 |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Jointly | 9,302 | - | - | - | - | - | - | 9,302 |
| controlled | | | | | | | | |
| entity | | | | | | | | |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Total | 9,302 | 11,833 | 7 | 27 | 4,657 | - | 1,102 | 26,928 |
| liabilities | | | | | | | | |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
The segment results for the year ended 31 December 2007 are as follows:
+---------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| | Commercial | City | Suburban | Ski | Coastal | Other | Unallocated | Total |
| | | centre | | resort | resort | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Revenue | - | - | - | - | - | 115 | - | 115 |
+---------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Operating | - | (15) | - | - | - | 115 | (2,216) | (2,116) |
| profit/(loss) | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Finance | - | - | - | - | - | - | 1,929 | 1,929 |
| income | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Net | - | (1,062) | - | (357) | - | - | - | (1,419) |
| imputed | | | | | | | | |
| interest | | | | | | | | |
| on land | | | | | | | | |
| payables | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Profit/(loss) | - | (1,077) | - | (357) | - | 115 | (287) | (1,606) |
| before | | | | | | | | |
| taxation | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Taxation | | | | | | | (113) | (113) |
+---------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Retained | - | (1,077) | - | (357) | - | 115 | (400) | (1,719) |
| profit/(loss) | | | | | | | | |
+---------------+------------+----------+----------+----------+----------+----------+-------------+---------+
Other information at 31 December 2007:
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| | Commercial | City | Suburban | Ski | Coastal | Other | Unallocated | Total |
| | | centre | | resort | resort | | | |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| | | | | | | | | |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Assets | - | 21,238 | - | 6,919 | 6,733 | 16 | 26,098 | 61,004 |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| | | | | | | | | |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
| Liabilities | - | 21,060 | - | 3,603 | 4,015 | - | 490 | 29,168 |
+-------------+------------+----------+----------+----------+----------+----------+-------------+---------+
6. RELATED PARTY TRANSACTIONS
Brokers' fees and consulting services fees of GBP501,196 (2007:GBP3,000) were
paid to members of the AG Capital Group in Bulgaria of which Christo Iliev is
the chairman.
In the period from 1 January 2008 until 17 September 2008 Ita McArdle was also
a director of Simcocks Trust Limited ("STL"). During the period, an amount of
GBP51,534 (2007: GBP112,837) was charged by STL in their capacity as
administrators of the Company.
In the period from 1 January 2008 until 17 September 2008 Rolandon Securities
Limited (a company controlled by John Dodwell) was paid a fee of GBP5,500
(2007:GBP8,000) plus VAT for accounting work relating to the 2007 Report and
Accounts (2007: March 2007 Placing).
As at the balance sheet date, there was an intra-group balance of GBP37,618,877
(2007: GBP15,249,788) between the Company and its subsidiary. This amount is
eliminated on consolidation. These sums were lent to provide the subsidiary with
working capital. The amount of fixed interest charged in the year was
GBP1,534,745 (2007:GBP914,540).
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the
Group, is set out in note 8 in aggregate for each of the categories specified in
IAS 24 Related Party Disclosures.
7. EXPENSES BY NATURE
+-----------------------------------------+---------+---------+
| | | |
+-----------------------------------------+---------+---------+
| | 2008 | 2007 |
+-----------------------------------------+---------+---------+
| | Group | Group |
+-----------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+---------+---------+
| | | |
+-----------------------------------------+---------+---------+
| Within cost of sales | | |
+-----------------------------------------+---------+---------+
| Write-down of inventory to net | 19,715 | - |
| realisable value | | |
+-----------------------------------------+---------+---------+
| Cost of developments sold in the year | 2,627 | - |
+-----------------------------------------+---------+---------+
| | | |
+-----------------------------------------+---------+---------+
| Within administrative expenses | | |
+-----------------------------------------+---------+---------+
| Auditors' fees for audit services | 75 | 70 |
+-----------------------------------------+---------+---------+
| Depreciation | 53 | 40 |
+-----------------------------------------+---------+---------+
| Employee costs (see note 8) | 408 | 252 |
+-----------------------------------------+---------+---------+
| Directors' costs (see note 8) | 505 | 629 |
+-----------------------------------------+---------+---------+
| Foreign exchange gain | 397 | 962 |
+-----------------------------------------+---------+---------+
Included within audit fees above is an amount of GBP20,000 (2007: GBP4,000),
relating to fees payable to BDO AKERO Ltd., an affiliate of the Group's
auditors, for the audit of the subsidiaries.
8. EMPLOYEE COSTS
+-----------------------------------------+---------+---------+
| | 2008 | 2007 |
+-----------------------------------------+---------+---------+
| | Group | Group |
+-----------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+---------+---------+
| | | |
+-----------------------------------------+---------+---------+
| Wages and salaries (excluding | 363 | 226 |
| directors) | | |
+-----------------------------------------+---------+---------+
| Social security costs | 45 | 26 |
+-----------------------------------------+---------+---------+
The monthly average number of employees in the Group was 33 (2007: 18),
including executive directors. The executive directors are considered to be the
key management.
Details of the directors' remuneration are as follows:
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| | Year ended 31 December 2008 | Year ended 31 December 2007 |
+-----------+----------------------------------------+------------------------------------------------+
| | Basic | Compensation | Total | | Basic | Performance | Compensation | Total |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| | salary | for | | | salary | bonus | for | |
| | | loss | | | | | loss | |
| | | of | | | | | of | |
| | | office | | | | | office | |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| | GBP'000 | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| | | | | | | | | |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| P | 44 | - | 44 | | 37 | - | - | 37 |
| Sjöberg* | | | | | | | | |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| C Iliev | 167 | - | 167 | | 140 | 111 | - | 251 |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| D Savov | 99 | - | 99 | | 75 | 45 | - | 120 |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| A Daw* | 24 | - | 24 | | - | - | - | - |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| D Popov | 30 | - | 30 | | 30 | - | - | 30 |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| H Klotz | 20 | - | 20 | | 20 | - | - | 20 |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| J Green* | 6 | - | 6 | | - | - | - | - |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| J | 30 | 41 | 71 | | 47 | 31 | - | 78 |
| Dodwell* | | | | | | | | |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| I | 22 | 8 | 30 | | 37 | - | - | 37 |
| McArdle | | | | | | | | |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| V N | 14 | - | 14 | | 16 | - | - | 16 |
| Vassilev | | | | | | | | |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| E | - | - | - | | 8 | - | 10 | 18 |
| Olympitis | | | | | | | | |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| M | - | - | - | | 9 | - | 13 | 22 |
| Cassidy | | | | | | | | |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| | | | | | | | | |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
| Total | 456 | 49 | 505 | | 419 | 187 | 23 | 629 |
+-----------+----------+--------------+-----------+--+---------+-------------+--------------+---------+
* Payments were made to companies connected with them
9. PROPERTY, PLANT AND EQUIPMENT
+----------------------------------+----------+-----------+-----------+---------+---------+
| | Motor | Office | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| GROUP | vehicles | equipment | Computers | Other | Total |
| | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+----------+-----------+-----------+---------+---------+
| At cost | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| 1 January 2008 | 111 | 30 | 22 | 20 | 183 |
+----------------------------------+----------+-----------+-----------+---------+---------+
| | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Acquired in year | 71 | 2 | 14 | 14 | 101 |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Disposed of in year | (59) | - | (2) | - | (61) |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Total 31 December 2008 | 123 | 32 | 34 | 34 | 223 |
+----------------------------------+----------+-----------+-----------+---------+---------+
| | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Depreciation | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| At 1 January 2008 | (37) | (5) | (10) | (2) | (54) |
+----------------------------------+----------+-----------+-----------+---------+---------+
| | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Charge for year | (30) | (5) | (14) | (4) | (53) |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Disposed of in year | 32 | 0 | 2 | 0 | 34 |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Total 31 December 2008 | (35) | (10) | (22) | (6) | (73) |
+----------------------------------+----------+-----------+-----------+---------+---------+
| | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Net book value - 31 December | 88 | 22 | 12 | 28 | 150 |
| 2008 | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| For the year ended 31 December | | | | | |
| 2007 | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| | Motor | Office | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| GROUP | vehicles | equipment | Computers | Other | Total |
| | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+----------+-----------+-----------+---------+---------+
| At cost | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| 1 January 2007 | 80 | 19 | 7 | 8 | 114 |
+----------------------------------+----------+-----------+-----------+---------+---------+
| | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Acquired in year | 31 | 11 | 15 | 12 | 69 |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Total 31 December 2007 | 111 | 30 | 22 | 20 | 183 |
+----------------------------------+----------+-----------+-----------+---------+---------+
| | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Depreciation | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| At 1 January 2007 | (11) | (1) | (1) | (1) | (14) |
+----------------------------------+----------+-----------+-----------+---------+---------+
| | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Charge for year | (26) | (4) | (9) | (1) | (40) |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Total 31 December 2007 | (37) | (5) | (10) | (2) | (54) |
+----------------------------------+----------+-----------+-----------+---------+---------+
| | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
| Net book value - 31 December | 74 | 25 | 12 | 18 | 129 |
| 2007 | | | | | |
+----------------------------------+----------+-----------+-----------+---------+---------+
10. INVENTORIES
+-----------------------------------------+---------+---------+
| | 2008 | 2007 |
+-----------------------------------------+---------+---------+
| | Group | Group |
+-----------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+---------+---------+
| | | |
+-----------------------------------------+---------+---------+
| Inventories consist of: | | |
+-----------------------------------------+---------+---------+
| Interests in land held for development | 47,630 | 31,868 |
+-----------------------------------------+---------+---------+
| Developments in progress | 2,946 | 3,038 |
+-----------------------------------------+---------+---------+
| Total inventories | 50,576 | 34,906 |
+-----------------------------------------+---------+---------+
Included in inventories is GBP393,000 (2007:GBP 39,000) of bank interest.
11. TRADE AND OTHER RECEIVABLES
+----------------------+--------------+--------------+--------------+--------------+
| | 2008 | 2008 | 2007 | 2007 |
+----------------------+--------------+--------------+--------------+--------------+
| | Group | Company | Group | Company |
+----------------------+--------------+--------------+--------------+--------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------+--------------+--------------+--------------+--------------+
| Prepayments | 61 | 18 | 480 | 13 |
+----------------------+--------------+--------------+--------------+--------------+
| Trade and other | 1,328 | - | 1,352 | - |
| receivables | | | | |
+----------------------+--------------+--------------+--------------+--------------+
| Other taxes | 720 | 71 | - | - |
| recoverable | | | | |
+----------------------+--------------+--------------+--------------+--------------+
| | | | | |
+----------------------+--------------+--------------+--------------+--------------+
| Total | 2,109 | 89 | 1,832 | 13 |
+----------------------+--------------+--------------+--------------+--------------+
| | | | | |
+----------------------+--------------+--------------+--------------+--------------+
12. CASH AND CASH EQUIVALENTS
+----------------------+--------------+--------------+--------------+--------------+
| | 2008 | 2008 | 2007 | 2007 |
+----------------------+--------------+--------------+--------------+--------------+
| | Group | Company | Group | Company |
+----------------------+--------------+--------------+--------------+--------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------+--------------+--------------+--------------+--------------+
| Bank balances | | | | |
+----------------------+--------------+--------------+--------------+--------------+
| - in Sterling | 9,057 | 9,057 | 11,800 | 11,800 |
+----------------------+--------------+--------------+--------------+--------------+
| - in Euros | 1,072 | - | 12,221 | 9,085 |
+----------------------+--------------+--------------+--------------+--------------+
| - in Bulgarian Lev | 123 | - | 116 | - |
+----------------------+--------------+--------------+--------------+--------------+
| Cash and cash | 10,252 | 9,057 | 24,137 | 20,885 |
| equivalents | | | | |
+----------------------+--------------+--------------+--------------+--------------+
13. SHARE CAPITAL AND SHARE PREMIUM
+-----------------------------------------+------------------------+------------+
| | Number of ordinary | GBP'000 |
| | shares of GBP0.01p | |
| | each | |
+-----------------------------------------+------------------------+------------+
| Authorised at 31 December 2007 and 31 | 100,000,000 | 1,000 |
| December 2008 | | |
+-----------------------------------------+------------------------+------------+
| Issued at 31 December 2007 and 31 | 40,000,000 | 400 |
| December 2008 | | |
+-----------------------------------------+------------------------+------------+
Under a management incentive arrangement, the Company has entered into an
agreement with Real Estate International Solutions LLC ('REIS') (a company
controlled by Christo Iliev) whereby REIS is paid a performance fee calculated
by reference to shareholder total return in each of the five years following the
March 2006 flotation. The total return is calculated by reference to the
increase in the share price (above the 100p placing prices) during the twelve
month period ending on 27 March in each year plus any dividends paid in the
period. A performance fee becomes payable only once the total return for the
year exceeds 10%, with REIS being entitled to a fee equal to 20% of the excess.
The performance fee would be settled up to 50% in cash (the amount to be
determined by REIS, subject the Directors' approval in the light of the cash
resources and needs of the Group) with the balance payable by the issue of
shares (valued by reference to the average closing mid-market price over the
preceding 20 business days). No performance fee arises in the year ended 31
December 2008 (2007: nil).
14. BASIC LOSS AND DILUTED LOSS PER SHARE
Basic loss per share has been calculated by dividing the loss attributable to
equity holders of the Company by the weighted average number of ordinary shares
in issue during the period after taking into account the issue of 15 million
shares on 14 March 2007. This gives a weighted average number of 40,000,000
shares (2007: 37,000,000 shares). There are no dilutive shares, share options or
similar instruments in existence which might affect the calculation and
therefore the diluted earnings per share are the same as basic earnings per
share.
+-----------------------------------------+----------------------+--------------+
| | 2008 | 2007 |
+-----------------------------------------+----------------------+--------------+
| Group loss attributable to equity | (1,754) | (1,719) |
| holders of the Company (GBP'000) | | |
+-----------------------------------------+----------------------+--------------+
| Weighted number of ordinary shares in | 40,000 | 37,000 |
| issue (thousands) | | |
+-----------------------------------------+----------------------+--------------+
| Basic (loss) per share (p per share) | (4.39) | (4.65) |
+-----------------------------------------+----------------------+--------------+
| Diluted (loss) per share (p per share) | (4.39) | (4.65) |
+-----------------------------------------+----------------------+--------------+
15. NON CURRENT LIABILITIES
+----------------------+--------------+---------------+--------------+---------------+
| | | | | |
+----------------------+--------------+---------------+--------------+---------------+
| | 2008 | 2008 | 2007 | 2007 |
+----------------------+--------------+---------------+--------------+---------------+
| | Group | Company | Group | Company |
+----------------------+--------------+---------------+--------------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------+--------------+---------------+--------------+---------------+
| Deferred land | 11,830 | - | 24,663 | - |
| payables | | | | |
+----------------------+--------------+---------------+--------------+---------------+
| | | | | |
+----------------------+--------------+---------------+--------------+---------------+
All of the above deferred payments are to be settled in Euros out of the
proceeds of the sales of apartments to be built on the land. The Directors'
estimates of the amounts payable (before discounting to fair value) are EUR15.9m
(2007:EUR41.5m) (GBP15.5m at the exchange rate ruling at 31 December 2008,
GBP30.7m at the exchange rate ruling at 31 December 2007).
+----------------------+--------------+---------------+--------------+---------------+
| | 2008 | 2008 | 2007 | 2007 |
+----------------------+--------------+---------------+--------------+---------------+
| | Group | Company | Group | Company |
+----------------------+--------------+---------------+--------------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------+--------------+---------------+--------------+---------------+
| Bank loan | 5,961 | - | - | - |
+----------------------+--------------+---------------+--------------+---------------+
| | | | | |
+----------------------+--------------+---------------+--------------+---------------+
The bank loan is secured on the buildings and land at Printing House held by BLD
Office Park AD. It is repayable in instalments between 1 November 2010 and 28
March 2013, interest is charged at a rate of 3 month Euribor plus 1.9%.
16. TRADE AND OTHER PAYABLES
+----------------------+--------------+---------------+--------------+---------------+
| | 2008 | 2008 | 2007 | 2007 |
+----------------------+--------------+---------------+--------------+---------------+
| | Group | Company | Group | Company |
+----------------------+--------------+---------------+--------------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------+--------------+---------------+--------------+---------------+
| Social security and | 377 | - | - | - |
| other taxes | | | | |
+----------------------+--------------+---------------+--------------+---------------+
| Trade payables | 720 | 18 | 387 | 21 |
+----------------------+--------------+---------------+--------------+---------------+
| Accruals | 69 | 69 | - | 285 |
+----------------------+--------------+---------------+--------------+---------------+
| Payments on account | 768 | - | - | - |
| by apartment buyers- | | | | |
| refundable | | | | |
+----------------------+--------------+---------------+--------------+---------------+
| Payments on account | 3,628 | - | 1,876 | - |
| by apartment buyers- | | | | |
| non-refundable | | | | |
+----------------------+--------------+---------------+--------------+---------------+
| Total | 5,562 | 87 | 2,263 | 306 |
+----------------------+--------------+---------------+--------------+---------------+
17. EXCHANGE RATES
The following exchange rates were used to translate assets and liabilities into
the reporting currency at 31 December 2008.
+------------------+--------------+
| Bulgarian Lev | 0.4989 |
+------------------+--------------+
| Euro | 0.9758 |
+------------------+--------------+
18. TAXATION
Isle of Man
There is no taxation payable on the Company's results as it is based in the Isle
of Man where, since 6 April 2006, the Corporate Income Tax rate for Isle of Man
resident companies has been zero percent. Additionally, the Isle of Man does not
levy tax on capital gains.
Shareholders resident outside the Isle of Man will not suffer any income tax in
the Isle of Man on any distributions made to them.
Bulgaria
Subsidiaries of the Company incorporated in Bulgaria are taxed in accordance
with the applicable tax laws of Bulgaria. Bulgarian corporate tax for the year
was 10% (2007: 10%)
Withholding tax is levied on interest on inter-company loans and management
charges payable by the Bulgarian subsidiaries to the Company. The applicable
rate in the year was 10% (2007: 10%). As withholding tax cannot be utilised by
the Company it has been charged to the profit and loss account.
+-----------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+-----------------------------------------+--------------+--------------+
| | Group | Group |
+-----------------------------------------+--------------+--------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+--------------+--------------+
| Income tax expense | | |
+-----------------------------------------+--------------+--------------+
| Recognised in the income statement | | |
+-----------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------+--------------+--------------+
| Current tax expense: | | |
+-----------------------------------------+--------------+--------------+
| - Bulgarian corporation tax on profits | 188 | - |
| of the period | | |
+-----------------------------------------+--------------+--------------+
| - Adjustment in respect of prior year - | (39) | - |
| Bulgarian corporation tax | | |
+-----------------------------------------+--------------+--------------+
| - Current year - withholding tax | 222 | 92 |
+-----------------------------------------+--------------+--------------+
| - Adjustment in respect of prior year - | (91) | - |
| withholding tax | | |
+-----------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------+--------------+--------------+
| Deferred tax expense: | | |
+-----------------------------------------+--------------+--------------+
| - Origination of temporary difference | 20 | 21 |
+-----------------------------------------+--------------+--------------+
| Total income tax expense in the income | 300 | 113 |
| statement | | |
+-----------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------+--------------+--------------+
| Analysis of current tax expense | | |
+-----------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------+--------------+--------------+
| (Loss) on ordinary activities before | (1,454) | (1,606) |
| tax | | |
+-----------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------+--------------+--------------+
| Tax calculated at blended rates | 47 | (13) |
+-----------------------------------------+--------------+--------------+
| Income not taxable | (19) | - |
+-----------------------------------------+--------------+--------------+
| Expenses not deductible for tax | 199 | 15 |
| purposes | | |
+-----------------------------------------+--------------+--------------+
| Accelerated capital allowances | 1 | 2 |
+-----------------------------------------+--------------+--------------+
| Other timing differences | 8 | 68 |
+-----------------------------------------+--------------+--------------+
| Items in income statement subjected to | (31) | - |
| withholding tax | | |
+-----------------------------------------+--------------+--------------+
| Prior period losses utilised | (17) | (72) |
+-----------------------------------------+--------------+--------------+
| Current tax charge for the period | 188 | - |
+-----------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------+--------------+--------------+
19. FINANCIAL INSTRUMENTS
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk and price risk), credit risk, liquidity risk and cash
flow interest rate risk.
Categories of financial assets and financial liabilities
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| | | Group | Company | Group | Company | |
| | | 2008 | 2008 | 2007 | 2007 | |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| | | | | | | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Loans and receivables: | | | | | | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Intra group receivables | | - | 37,619 | - | 16,615 | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Trade and other receivables | | 1,328 | - | 1,352 | - | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Cash and cash equivalents | | 10,252 | 9,057 | 24,137 | 20,885 | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Total current financial assets | | 11,580 | 46,676 | 25,489 | 37,500 | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| | | | | | | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Total financial assets | | 11,580 | 46,676 | 25,489 | 37,500 | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| | | | | | | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Other financial liabilities | | | | | | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| | | | | | | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Current financial liabilities: | | | | | | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Trade and other payables | | 1,537 | 87 | 2,263 | 306 | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Bank loans | | - | - | 2,130 | - | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Total current financial | | 1,537 | 87 | 4,393 | 306 | |
| liabilities | | | | | | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| | | | | | | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Non-current financial | | | | | | |
| liabilities: | | | | | | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Deferred land payables | | 11,830 | - | 24,663 | - | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Bank loans | | 5,961 | - | - | - | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Total non-current financial | | 17,791 | - | 24,663 | - | |
| liabilities | | | | | | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| | | | | | | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| Total financial liabilities | | 19,328 | 87 | 29,056 | 306 | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
| | | |
+----------------------------------+----------+---------------+------------+-----------+------------+----+
Market risk
Property and property related assets are inherently difficult to value due to
the individual nature of each property. The current property market recession
could materially adversely affect the value of properties being developed by the
Group and, by inference, the estimate relating to the liability for deferred
land payables. Agreements which include a deferred land payable are drafted so
that in the event of a fall in property values the deferred liability would also
fall, albeit by a lower amount. A 5% change in the selling price of the
developed property would result in approximately a 7% change in the deferred
land payable.
Foreign exchange risk
Group
The Group's operations are conducted in jurisdictions which generate revenue,
expenses, assets and liabilities in currencies other than Sterling. As a result,
the Group is subject to the effects of exchange rate fluctuations with respect
to these currencies. The currencies giving rise to this risk are primarily
Bulgarian Lev and Euros. The Bulgarian Lev has been pegged at a rate of 1.95583
to the Euro since 1997.
The Group's real estate assets are valued in Euros and the Group's bank and
other borrowings are also denominated in Euros, thereby providing a natural
hedge. During the year ended 31 December 2008 the Group altered its policy from
placing 50% of temporarily surplus cash on deposit in Euros to placing it all in
Sterling to reduce risk ahead of the possibility of returning cash to
shareholders. The Directors do not at present think it appropriate to adopt any
currency hedging risk strategy.
The Bulgarian Lev amounts relate to cash, and other debtors and creditors.
The Euro amount relates to properties, deferred land payables and cash held on
deposit less a bank loan.
The Sterling amount relates to cash held on deposit.
The Board's strategy on foreign exchange risk is as follows. The Board considers
that shareholders are aware that the Group's principal activities take place in
Bulgaria and thus shareholders are aware that they are investing in a group
whose property assets are denominated in Euros. As the Group increases its
activities, more of its assets will be in Euro denominated assets. The Board
does not consider it appropriate to enter into Euro/Sterling hedging
arrangements, considering that this is a matter for shareholders to undertake if
they do not wish to have a currency rate exposure to the Euro.
An increase or reduction in the sterling/Euro exchange rate of EUR0.01 would
result in an exchange gain/loss of GBP0.297m.
Company
The intra group loans are all denominated in Euro to provide a natural hedge in
Bulgaria against currency movements as the property market is transacted in
Euros. This creates an exchange risk in the Company. An increase or reduction in
the sterling/Euro exchange rate of EUR0.01 would result in an exchange gain/loss
of GBP0.367m.
Price risk
The Group's policy on mitigating risk on property prices is explained in "market
risk" above.
Credit risk
The maximum exposure to credit risk is represented by the carrying amount of
each financial asset in the balance sheet. Management does not expect any
counterparty to fail to meet its obligations although it constantly reviews this
risk in the ongoing market conditions. The Board has chosen to use UK banking
groups during the year.
The Group does not provide credit to apartment purchasers after legal title has
passed. In the event of a forward purchaser of an apartment failing to meet its
contractual commitments the Group would retain the deposit (if a loss was
expected from a subsequent sale) and be able to place the apartment back on the
market. If the Group does not complete a development any initial deposit made by
a prospective purchaser would be refundable. The Group does not let any
properties and so has no credit risk exposure to tenants.
Liquidity risk
The Company maintains sufficient cash balances for working capital and obtains
secured bank loans to fund the development of properties.
The Board regularly reviews long term cash flow projections and is thus able to
consider if the Group has adequate cash resources for its proposed activities,
taking into account expected outgoings and expected receipts; in doing so, the
Board takes into account the need to pay overheads during development periods.
At 31 December 2008, the Group's share of the joint venture's bank loan amounted
to GBP5,961,0000, relating to and secured on its Printing House project (2007:
GBP2,130,000 Harmony Hills, repaid in full during 2008). The loan is repayable
between 1 November 2010 and 28 March 2013.
Loan and deferred land payables maturity
+--------------------------+------+----------+--------+----------+
| Group | | 2008 | | 2007 |
+--------------------------+------+----------+--------+----------+
| | | GBP'000 | | GBP'000 |
+--------------------------+------+----------+--------+----------+
| | | | | |
+--------------------------+------+----------+--------+----------+
| Less than one year | | - | | 2,130 |
+--------------------------+------+----------+--------+----------+
| 1-2 years | | 2,986 | | 1,595 |
+--------------------------+------+----------+--------+----------+
| 2-5 years | | 18,475 | | 29,146 |
+--------------------------+------+----------+--------+----------+
| Total | | 21,461 | | 32,871 |
+--------------------------+------+----------+--------+----------+
Interest rate risk
The Company is exposed to risks associated with the effects of fluctuations in
prevailing market interest rates on its cash balances and borrowings. Cash is
invested at short-term market interest rates.
The Group has an interest bearing development loan repayable out of sale
proceeds. The Group does not at present expect to have any long term investment
loans. The Group has decided at present not to cap interest rates or otherwise
seek to limit the adverse impact of an increase in interest rates. This strategy
will be kept under review.
If interest rates in the period under review had been 10% higher or lower, then
the effect on interest receivable would have been plus or minus GBP85,000.
Fair values
The carrying values of all financial assets and liabilities are not considered
to be materially different to their fair values.
Capital management
The Group manages its capital to ensure that the entities in the Group will be
able to continue as a going concern whilst seeking to maximise shareholder
value.
The capital structure of the Group at 31 December 2008 consists of cash and cash
equivalents and equity attributable to equity holders of the parent, comprising
issued share capital, reserves and retained earnings.
20. SUBSIDIARIES
At 31 December 2008, the Company had the following subsidiaries, all of which
are incorporated in Bulgaria:
+----------------------------------+-----------+-------------+----------------------------------------+
| Name of company | Holding | Proportion | Nature of business |
| | | held | |
+----------------------------------+-----------+-------------+----------------------------------------+
| | | | |
+----------------------------------+-----------+-------------+----------------------------------------+
| Bulgarian Land Development EAD | Ordinary | 100% | Residential property development |
| | Shares | | |
+----------------------------------+-----------+-------------+----------------------------------------+
| BLD Sofia Tower AD | Ordinary | 99.8% | Residential property development |
| | Shares | | |
+----------------------------------+-----------+-------------+----------------------------------------+
| BLD Borovets EAD | Ordinary | 100% | Residential property development |
| | Shares | | |
+----------------------------------+-----------+-------------+----------------------------------------+
| BLD Kavarna EAD | Ordinary | 100% | Residential property development |
| | Shares | | |
+----------------------------------+-----------+-------------+----------------------------------------+
| BLD Vladaya EAD | Ordinary | 100% | Residential property development |
| | Shares | | |
+----------------------------------+-----------+-------------+----------------------------------------+
| Iamiste Eko Selena EOOD | Ordinary | 100% | Residential property development |
| | Shares | | |
+----------------------------------+-----------+-------------+----------------------------------------+
| Palakaria Fauna EOOD | Ordinary | 100% | Residential property development |
| | shares | | |
+----------------------------------+-----------+-------------+----------------------------------------+
| Kalna Bara EOOD | Ordinary | 100% | Residential property development |
| | shares | | |
+----------------------------------+-----------+-------------+----------------------------------------+
| Redako Agro EOOD | Ordinary | 100% | Residential property development |
| | shares | | |
+----------------------------------+-----------+-------------+----------------------------------------+
| Mogilite Bio EOOD | Ordinary | 100% | Residential property development |
| | shares | | |
+----------------------------------+-----------+-------------+----------------------------------------+
21. JOINT VENTURE
During the year the Group took a 50% interest in a jointly controlled entity,
BLD Office Park AD, which has been accounted for by proportional consolidation.
The following amounts have been recognised in the Group's consolidated balance
sheet relating to this jointly controlled entity:
+----------------------------------+----------+-------------+
| | | 2008 |
+----------------------------------+----------+-------------+
| | | GBP'000 |
+----------------------------------+----------+-------------+
| Revenue | | - |
+----------------------------------+----------+-------------+
| Administrative expenses | | (114) |
+----------------------------------+----------+-------------+
| Operating loss | | (114) |
+----------------------------------+----------+-------------+
| Finance income | | 1 |
+----------------------------------+----------+-------------+
| Loss before and after taxation | | (113) |
+----------------------------------+----------+-------------+
| | | |
+----------------------------------+----------+-------------+
| Current assets | | 12,468 |
+----------------------------------+----------+-------------+
| | | |
+----------------------------------+----------+-------------+
| Current liabilities | | 6,556 |
+----------------------------------+----------+-------------+
| Non-current liabilities | | 6,037 |
+----------------------------------+----------+-------------+
| Total liabilities | | 12,593 |
+----------------------------------+----------+-------------+
| | | |
+----------------------------------+----------+-------------+
| Net liabilities | | (125) |
+----------------------------------+----------+-------------+
| | | |
+----------------------------------+----------+-------------+
22. INCOME STATEMENT OF THE PARENT COMPANY
In accordance with Section 3(5) (b) (ii) of the Companies Act 1982, the Company
is exempt from the requirement to present its own income statement. The retained
profit for the parent company for the year was GBP9,483,000 (2007:
GBP1,543,000).
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR CKCKNNBKBANK
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