26th Mar 2007 07:03
Plaza Centers N.V.26 March 2007 26 March 2007 PLAZA CENTERS N.V. PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 Plaza reports strong growth and progress with its portfolio of 21 current development schemes Plaza Centers N.V. ("Plaza" / "Company" / "Group"), a leading emerging marketsproperty developer, today announces preliminary results for the year ended 31December 2006. The Company successfully raised gross proceeds of £166 million in its IPO on theLondon Stock Exchange ("LSE") in October 2006. Financial highlights: * Gross revenues and net gains from sale and operating of real estate of €74 million (2005: €55.7 million) * Profit before tax of €16.3 million (2005: €35.2 million) owing to acquisitions of projects and funding of the Company's construction programme during the year * Cash position of €219 million (2005: €50 million) and working capital of €324 million (2005: €84 million) * A total of €105 million, representing 45% of the gross IPO proceeds has already been utilized; the Company expects to be fully invested within the next 12 months * Increase in value to €160 million of real estate trading properties developed for future sale * Total assets of €475 million (2005: €211 million) * Basic and diluted EPS of €0.27 Operational highlights in the reporting period: * Opening of the Novo Plaza shopping centre in Prague in March 2006 and sale of the centre in June 2006 at an asset value of €50 million and recording a net profit of €6.5 million for the Company * Receipt of an additional price adjustment payments of €13.7 million principally for the four Polish shopping centres previously sold in 2005 * Securing of the landmark Casa Radio project in Bucharest in November 2006, with an estimated post development value of US$1 billion * Purchase of two additional developments in the Czech Republic in the cities of Liberec (for 21,000 sqm gross lettable area ("GLA")) and Opava (for approximately14,200 sqm GLA) * Two additional development projects acquired in Poland in the cities of Suwalki (for approximately 16,000-18,000 sqm GLA) and Zgorzelec (for approximately 16,000 sqm GLA) * First transaction in India with a Joint Venture ("JV") project in Koregaon Park, Pune (for approximately 107,500 sqm Gross Built Area ("GBA") Key highlights since the year-end: * Acquisition of scheme for the development of a shopping centre project in the city of Torun, Poland (for approximately 30,000 sqm GLA) * Acquisition of additional project in Romania in Timisoara (for approximately 30,000 sqm GLA) and advanced negotiations for several other projects * A second JV deal in India was agreed for the development of a mixed used development (shopping centre, offices and serviced apartments) in the Kharadi district of Pune, totalling approximately 225,000 sqm GBA * Successful opening of the Rybnik Plaza in Rybnik, Poland on March 15 and expected opening of Sosnowiec Plaza in Sosnowiec, Poland scheduled for March 29. Both centres have been pre-sold to Klepierre * Successful ongoing deployment of the IPO proceeds, including €43 million spent on acquisitions of pipeline projects in Central and Eastern Europe ("CEE") and €23 million committed to expanding the Company's presence in India Commenting on the results, Mordechay Zisser, Chairman of Plaza Centers N.V.,said: "We continue to witness strong consumer and tenant demand for our high qualityretail and entertainment centres in Central and Eastern Europe ("CEE"), and weare ready to leverage our ten year track record and experience into othercountries in this region as well as new markets such as India. During 2006 wecontinued to invest in our existing portfolio and acquire a future pipeline ofassets, which we expect to bring to fruition during 2007. "In line with our strategy for 2007, we expect to open four shopping centres tothe public - three in Poland and one in Hungary. I am confident that the Companywill achieve these goals and anticipate delivering on our stated aim to completeat least four to five developments each year in order to expand our portfolioand therefore provide our shareholders with a strong potential for income andcapital growth. "In conclusion, Plaza has considerable opportunity and potential. With thebacking of an expert management team with a proven track record and highlysuccessful business model, sound financial foundations and an enviable portfolioof existing and pipeline assets, we look forward to the future with bothconfidence and excitement." For further details please contact: Plaza Mordechay Zisser, Chairman +972 3 6086000 Ran Shtarkman, President and CEO +36 1 462 7221 Roy Linden, CFO +36 1 462 7105 Financial Dynamics Stephanie Highett/ Dido Laurimore/ +44 20 7831 3113 Adam Leviton Notes to Editors Plaza Centers N.V. is a leading emerging markets developer of shopping andentertainment centres, focusing on constructing new centres and, where there issignificant redevelopment potential, redeveloping existing centres, in bothcapital cities and important regional centres. The Company is an indirectsubsidiary of Elbit Medical Imaging Ltd. ("EMI"), an Israeli public companywhose shares are traded on both the Tel Aviv Stock Exchange in Israel and theNASDAQ Global Market in the United States. Plaza Centers N.V. is a member of the Europe Israel Group of companies which iscontrolled by its founder, Mr. Mordechay Zisser. It has been present in realestate development in emerging markets for over 10 years. CHAIRMAN'S STATEMENT I am delighted to be writing my first statement on behalf of the board of PlazaCenters N.V. since the successful flotation of the Company on the London StockExchange in October 2006. Plaza is a leading emerging markets developer of shopping and entertainmentcentres, focusing on constructing new centres and, where there is significantredevelopment potential, redeveloping existing centres, in both capital citiesand important regional centres. The Company has been active in emerging markets in the CEE since 1996, when itopened the first western-style shopping and entertainment centre in Hungary andbegan to implement its vision of offering western-style retail and entertainmentfacilities to a growing middle class and an increasingly affluent consumer base.Over the past 10 years, the Company has expanded its operations in centralEurope and eastwards into Poland, the Czech Republic Romania, Latvia and Greeceand, more recently, India and has proven its ability to anticipate market trendsand deliver innovative large scale projects. India is a unique sub-continent, where the initial operating conditions are verysimilar to those we experienced in the CEE 10 years ago; high interest rates andheavy regulation and only a few international brands active in the retailmarket. With Plaza's 10 years of experience of penetrating and operating in suchmarkets, the Company can create significant competitive advantage. In India,there are approximately 250 million middle class people and it is our beliefthat this serves as a sound base for many years of Plaza operating profitably inthat emerging market. To date, the Company has developed, let and sold 21 shopping and entertainmentcentres. Seventeen of these centres were acquired by Klepierre, one of thelargest shopping centre owner/operators in Europe, which owns more than 230shopping centres in ten countries. An additional four shopping and entertainmentcentres were sold to the Dawnay Day Group, one of the leading UK institutionalproperty investors. As well as the 21 centres we have sold, an additional fourwere forward sold to Klepierre and will be delivered to them during 2007/8. Due to the Company's reputation for successful property development, "PlazaCenters" has become a widely recognised brand name. Following the acquisition ofthe shopping and entertainment centres by Klepierre and the Dawnay Day Group,the purchasers continue to use, under licence granted to them by the Company,the "Plaza Centers" Community and Hungarian trade marks. The gross proceeds of the Company's IPO were approximately £166 million(including the exercise of an over-allotment option). We were delighted to havesuccessfully completed the Offer and to be able to welcome a variedinternational institutional investor base to the Company. As a result of theIPO, our Company has a strong financial base from which it can continue both itsdevelopment of the assets in its existing portfolio and the ongoing acquisitionof sites and pipeline projects and Mega projects. With the Offer now successfully behind us, we look forward to building upon ourproven and successful business model to expand the Company's activities bothwithin the CEE region and in new territories such as India and thereby drivingincome and capital growth on behalf of our new shareholders. Strategic direction We look forward to capitalising on the skills of our experienced management teamand our local presence to deliver our initial development portfolio and tofurther diversify and grow the Company's portfolio through the development ofhigh quality retail and entertainment property assets across multiple geographicregions. As detailed in the Company's Admission Document, our strategy is to: * develop four to five modern western-style shopping and entertainment centres per year in the capital and regional cities of selected countries, primarily in CEE (focusing on the medium term in Poland, Czech Republic, Romania, Slovakia, Ukraine, Russia and Greece) and mixed use developments in India for the medium and long term; * acquire operating shopping centres that show significant redevelopment potential (either as individual assets or as portfolios) for refurbishment and subsequent re-sale; * pre-sell, where prevailing market and economic conditions are favourable, the centres prior to, or after, commencement of construction or redevelopment; and * where the opportunity exists in CEE and India, extend its developments beyond shopping and entertainment centres by leveraging its strengths and drawing upon the experience and skills of the Company's executive management team and the Europe Israel Group to participate in residential, hotel, offices and other development schemes where such developments form part of integrated large scale business and leisure developments. Examples include Dream Island, with 350,000 sqm GBA which will be developed as a major hotel, recreation, casino, business and leisure complex and is located on the southern end of Obuda Island in the Danube River in central Budapest. Another is the Casa Radio mixed use project which comprises a total of 360,000 sqm GBA in the city centre of Bucharest and will include one of the largest and prestigious shopping centres in the CEE. Results We ended 2006 with a net profit of €14.7 million, resulting mainly from the saleof our shopping centre in Prague and additional adjustment for the four Polishshopping centres we sold in 2005. Following our strategic decision to focus more on assets to be built for sale,2006 was a year of investing in existing assets under construction as well asacquiring a future pipeline. Our total investment in real estate inventoriesunder construction ("trading properties") increased to €160 million and weexpect to present significant revenues out of these inventories from 2007onwards. Our very successful IPO has provided a sound financial position which willenable us to expand our activities and investments for future growth and income.With a cash position of approximately €219 million at the year end, we have astrong foundation for fulfilling our potential, securing additional investmentpipeline projects and thereby creating substantial value for our shareholders. Portfolio progress 2006 was an exceptional year for the Company in which we made strong progresswith our portfolio of existing assets and made a number of exciting acquisitionsof pipeline projects. The Company currently owns 24 assets and projects under development locatedacross the Central and Eastern European region and, more recently, in India. Thecurrent location of the assets under development, as well as office buildings,is summarised as follows: Number of assets Location Under development Offices Hungary 4 2Poland 7 -Czech Republic 4 1Romania 2 -Latvia 1 -Greece 1 -India 2 - Total 21 3 Operational highlights during the year included: * The opening of the Novo Plaza shopping centre in Prague in March 2006 and its subsequent sale in June 2006 at an asset value of €50 million and net profit of €6.5 million. * Receipt of an additional overage payment of €13.7 million for the four Polish shopping centres previously sold in 2005 * Acquisition of the landmark Casa Radio project in Bucharest in November 2006, with an estimated post development value of US$1 billion * Purchase of two additional developments in the Czech Republic in the cities of Liberec (for approximately 21,000 sqm GLA) and Opava (for approximately 14,200 sqm GLA) * Two additional development projects acquired in Poland in the cities of Suwalki (for approximately 16,000-18,000 sqm GLA) and Zgorzelec (for approximately 16,000 sqm GLA) * First transaction in India with a JV project in Koregaon Park, Pune (for approximately 107,500 sqm GBA) The momentum of 2006 has continued strongly into 2007, with €43 million ofacquisitions already completed in the CEE, including retail development schemesin Torun, Poland (for approximately 30,000 sqm GLA) and Timisoara (forapproximately 30,000 sqm GLA) in Romania. In addition, we were pleased toannounce to shareholders on 26 February 2007 the agreement of a second jointventure project in India for the development of a mixed use development(shopping centre, offices and serviced apartments) in the Kharadi district ofPune, totalling approximately 225,000 sqm GBA. In addition, we also opened the Rybnik Plaza in Rybnik, Poland on March 15,which was 100% let to international and local tenants on opening. We also expectto complete and open the Sosnowiec Plaza in Sosnowiec on March 29 2007 and theLublin Plaza in Lublin in May. All three centres have been pre-sold toKlepierre. In late October we expect to open the Arena Plaza Mall in Budapestwhich will be one of the biggest in the CEE. To date, we have utilized approximately 45% of the gross IPO proceeds asfollows: Use EUR (m)Finance of current developments 20Acquisition of pipeline projects in the CEE 43Replace existing loan facilities that are 19incompatible Expand operations in India 23 Total 105 Dividend Policy As explained in the Company's Admission Document, the Directors intend to adopta dividend policy which will reflect the long-term earnings and cash flowpotential of the Group, taking into account the Group's capital requirements,while at the same time maintaining an appropriate level of dividend cover. Subject to all of these factors, and where it is otherwise appropriate to do so,the Directors intend to make distributions out of the annual net profits of theGroup starting with the 2007 financial year. Dividends are expected to be paidat the rate of 25% on the first €30 million of such annual net profits, andthereafter at the rate of between 20% and 25%, as determined by the Directors,on any additional annual net profits which exceed €30 million. The dividendswill be paid on or about 31 March following the publication of the financialresults on the basis of the aggregate of the annual net profits accumulatedduring the preceding financial year. The first dividend will be paid in 2008following the 2007 results. Outlook We continue to develop our existing assets, secure the acquisition of pipelineassets and work towards expanding our investment portfolio with additional highpotential assets. We continue to witness strong consumer and tenant demand for our high qualityretail and entertainment centres in Central and Eastern Europe ("CEE"), and weare ready to leverage our ten year track record and experience into othercountries in this region as well as new markets such as India. During 2006 wecontinued to invest in our existing portfolio and to acquire future pipeline ofassets, which we expect to bring to fruition in 2007 and onwards. In line with our strategy for 2007, we expect to open four shopping centres tothe public - three in Poland and one in Hungary. I am confident that the Companywill achieve these goals and anticipate delivering on our stated aim to completeat least four to five developments each year in order to expand our portfolioand therefore provide our shareholders with a strong potential for income andcapital growth. In conclusion, Plaza has considerable opportunity and potential. With thebacking of an expert management team with a proven track record and highlysuccessful business model, sound financial foundations and an enviable portfolioof existing and pipeline assets, we look forward to the future with bothconfidence and excitement. Mordechay ZisserChairman26 March 2007 Business overview During 2006, Plaza was involved in the development of 19 schemes, of which fourare located in Hungary, six in Poland, five in the Czech Republic, one inRomania, one in Latvia, one in Greece and one in India. The projects are at varied stages of the development cycle, from the purchase ofland through to the planning and completion of construction. In addition, Plazahas negotiated to purchase sites for the development of several additionalschemes throughout the CEE region and India (see updates in 2007 for additionalinformation). The assets and pipeline projects at year end 2006 are summarised in the tablebelow: Asset/ Location Nature of asset Size sqm Plaza Status Project (GLA) ownership % Arena Plaza Budapest, Retail and 66,000 100 Construction Hungary entertainment commenced in scheme 2006; completion scheduled for Q4 2007 Arena Plaza Budapest, Mixed use of 19,500 (for 100 Under planningextension Hungary Retail, rent and residential and sale) other Dream Island Budapest, Major business 350,000 (GBA) 30 Under Hungary and leisure (for rent and planning. (Obuda) resort sale) Construction will commence in mid 2007; completion scheduled for 2012 David House Budapest, Headquarters/ 2,000 100 Operational Hungary Office Duna Plaza Budapest, Office 12,000 100 Operational Offices Hungary Duna Plaza Budapest, Retail and 15,000 Development Under planningextension Hungary entertainment rights scheme Rybnik Plaza Rybnik, Retail and 18,000 100 Opened on 15 Poland entertainment March, 2007 scheme Sosnowiec Sosnowiec, Retail and 13,000 100 Opening on 29 Plaza Poland entertainment March, 2007 scheme Lublin Plaza Lublin, Retail and 26,000 50 Opening in Poland entertainment May, 2007 scheme Suwalki Suwalki, Retail and 16,000-18,000 100 Construction Plaza Poland entertainment will commence scheme in 2007; completion scheduled for 2009 Lodz Lodz, Retail and 29,000 100 Under Poland entertainment or planning, office/ construction residential scheduled to scheme commence in late 2007 Zgorzelec Zgorzelec, Retail and 16,000 100 Construction Plaza Poland entertainment will start in scheme 2007; completion scheduled for 2009 Plzen Plaza Plzen, Retail and 20,000 100 Construction Czech Rep. entertainment started in scheme 2006; completion scheduled for 2008 Prague 3 Prague, Office, for 61,600 (for 100 Currently Czech Rep. future use for sale) operational as residential an office building, re-zoning for future use for residential is in progress Opava Plaza Opava, Retail and 14,200 100 Construction Czech Rep. entertainment will start in scheme 2007; completion scheduled for 2009 Liberec Liberec, Retail and 21,000 100 Construction Plaza Czech Rep. entertainment will start in scheme 2007; completion scheduled for 2008 Casa Radio Bucharest, Mixed-use retail 360,000 (GBA) 75 Construction Romania and leisure plus will commence residential/ in 2007; office scheme completion scheduled during 2009-2012 Riga Plaza Riga, Retail and 47,000 50 Construction Latvia entertainment started in scheme 2007; completion scheduled for 2009 Helios Plaza Athens, Retail and 35,000 100 Under planning Greece entertainment or office scheme Koregaon Pune, Retail, 107,500 (GBA) 50 Construction park India entertainment started in and office 2007, expected scheme completion in 2009 Details of these activities by country are as follows: Hungary During 1996-2005, Plaza built, managed and eventually sold 16 shopping centresthroughout Hungary. During 2006, Plaza continued to develop the Arena Plaza, itslandmark shopping centre scheme in central Budapest, comprising approximately66,000 sqm GLA which will make it one of the biggest in the CEE. In addition, Plaza holds a 30% stake in Dream Island, an ambitious developmenton the Obuda Island in central Budapest, with land area of 320,000 sqm which isintended to be developed as a major resort area including hotels, recreationfacilities, casino, business and leisure complex with a development budget ofover • 1 billion and 350,000 sqm GBA. Preliminary design and excavation worksare already underway. Two further projects are in feasibility and planning stages, namely theextension of the Duna Plaza and the Arena Plaza, both of which are located incentral Budapest. The group continues to own its two office buildings in Budapest, the David houseon Andrassy ut and the Duna Plaza offices. Poland Between 2000 and 2005, Plaza built, managed and, in 2005, sold four shoppingcentres located across Poland. During 2006, the Company continued theconstruction of three shopping centres in Rybnik (approximately 18,000 sqm GLA),Sosnowiec (approximately 13,000 sqm GLA) and Lublin (50% held, approximately26,000 sqm GLA). All three were pre sold to Klepierre. In addition, Plaza continued the feasibility and planning of the development inLodz (designated for shopping centre or alternatively for residential/officeuse), as well as an acquisition of two additional plots of land for futureshopping centres in Suwalki (for approximately 16,000-18,000 sqm GLA) and inZgorzelec (for approximately 16,000 sqm GLA). Czech Republic In March 2006, Plaza opened the Novo Plaza in Prague (25,955 sqm GLA) and soldit in June for €50 million (inclusive of final price adjustment). During theyear, Plaza also purchased two plots of land in the cities of Liberec and Opavawith the aim to build shopping centres comprising approximately 21,000 sqm GLAand 14,200 sqm GLA, respectively. Construction of the Plzen Plaza mall(approximately 20,000 sqm GLA) commenced in February 2007 and is currentlyexpected to be completed at the beginning of 2008. The Company continued to ownan income-yielding office building in Prague which is designated to be re-zonedfor a scheme of 61,600 sqm of residential units. Romania In November 2006, Plaza acquired a 75% interest in a company which has enteredinto a public-private partnership agreement with the Government of Romania todevelop the approximately US$1 billion Casa Radio (Dambovica) scheme inBucharest, the largest development plot available in the city centre. TheRomanian Government will remain a 15% partner in the scheme. The development ofCasa Radio comprises approximately 360,000 sqm GBA, including a 110,000 sqm GLAshopping mall and leisure centre (one of the largest in Europe), residentialunits, offices, hotel, casino, hypermarket, convention and conference hall. Latvia Construction works started in March 2007 on the Riga Plaza project in Riga,Latvia (50% held, approximately 47,000 sqm GLA). The scheme is located on thewestern bank of the river Daugava by the Sala Bridge and Plaza expects thisproject to be completed at the beginning of 2009. Greece Plaza owns a 15,000 sqm plot of land centrally located in Piraeus Avenue,Athens. Plaza is currently working on securing building permits for theconstruction of a shopping centre, or alternatively an office complex totallingapproximately 35,000 sqm GLA. India As outlined in its Admission Document, Plaza has identified strong potential inemerging India and during the reporting period acquired a 50% stake in a jointventure with established local Indian developers to build a shopping centre witha gross built up area of approximately 75,500 sqm GBA and additional officespace of approximately 32,000 sqm GBA in Pune, India. Progress to date in 2007 A number of additional investments have already been made to broaden theCompany's portfolio in 2007: • Plaza secured an additional plot of land for the development of a future shopping centre in Torun, Poland (for approximately 30,000 sqm GLA). Advanced negotiations are underway for additional plots in Poland • Acquisition of additional plots for future shopping centres in Romania in Timisoara (for approximately 30,000 sqm GLA) and advanced negotiations for several others, emphasizing the strong penetration of Plaza in Romania with the aim to achieve a substantial number of landholdings within the next year • A second JV deal was finalized in India for a project in Kharadi, Pune for a mixed used development comprising a shopping centre (for approximately 120,000 sqm GBA), offices (for approximately 81,000 sqm GBA) and serviced apartments (for approximately 24,000 sqm GBA), totalling approximately 225,000 sqm GBA. Negotiations are already underway for securing additional sites in India • Rybnik Plaza in Rybnik, Poland was successfully opened to the public on 15 March 2007, the expected opening of Sosnowiec Plaza in Sosnowiec, Poland is scheduled for 29 March and the Lublin Plaza in Lublin is expected to be opened in May. All three centres have been pre-sold to Klepierre and are currently 100% let • Plaza is pleased to announce that it is experiencing strong demand from several international real estate funds to acquire the Arena shopping centre in Budapest and negotiations are advanced. Arena is scheduled to open to the public in Q4 2007 and all construction works are on schedule and within budget The Group continues to examine additional developments to acquire in its targetregion as well as examining other future emerging market opportunities, which weconsider to offer strong potential consumer demand for Plaza's developmentprojects. FINANCIAL REVIEW Results In line with the Group's commercial decision to focus its business more ondevelopment and sale of shopping and entertainment centres, the Group hasclassified its current projects under development as trading properties ratherthan investment properties. In accordance, revenues from the sale of tradingproperties are presented at gross amounts. Revenues for the year 2006 increased to €60.2 million (2005: €15 million),mainly due to the sale of the Novo Plaza shopping centre in Prague for a grossasset value of €50 million. Gains from the sale of investment property increased to €13.7 million (2005: €1million), mainly due to the final price adjustment on account of the Poznanshopping centre (€9 million) and additional price adjustment on account of thewaiving of offset rights due to electricity licences for Polish shopping centressold in 2005 (€5.4 million). The rapid increase in the cost of operations is attributable to the cost of NovoPlaza (• 44 million) mentioned above, which was classified as trading property(inventory). Administrative expenses increased to €8.2 million (2005: €6.6 million), mainlydue to non cash share based payments (€1.2 million) and increase in volume ofactivities. Operating profit before financing costs in 2006 was €16 million, well ahead ofexpectations although a decline compared with the €42.6 million of 2005. Thedecline reflects the exceptional level of gains in 2005 from the revaluation ofinvestment properties and sale of four of Plaza's shopping centres in Poland andother price adjustment payments for previously sold centres, amounting to €40.8million. Plaza expects to sell three to four shopping centres in 2007. Net finance was positive in 2006 at €0.7 million (2005: expenses of €7.6million) due to higher cash balances and more favourable lending terms achieved. Tax expenses continue to remain low at €1.6 million (2005: €5.9 million),reflecting 6.5% (2005: 16.6%) of profits before tax and resulting from thegroup's favourable tax structure. Profit for the year amounted to €14.7 million in 2006, above marketexpectations, compared to €29.3 million in 2005 and again reflected the decreasein operating income in 2006 as explained above. Basic earnings per share for 2006 were €0.27 per share. Balance sheet and cash flow The balance sheet as at 31 December 2006 showed net assets of €364.7 millioncompared to net assets of €96 million at the end of 2005. This rise primarilyresults from Plaza's net proceeds of €234.5 million from its share offering andlisting on the London Stock Exchange in October 2006. The cash position of cash and short term deposits increased to €219 million(2005: €50 million) due to the share issuance mentioned above and to the sale ofthe Novo Plaza and other price adjustments (proceeds of €23.3 million), havingdeducted investments in trading properties (€92 million). Other accounts receivables and prepayments increased to €29.2 million (2005:€4.8 million), mainly as a result of prepayment on account of the Casa Radioproject acquired in Bucharest (€19.4 million). Total bank borrowings (long and short term) decreased to €57.1 million (2005:€70.6 million) reflected by the repayment of the loan used to construct the NovoPlaza and its subsequent its sale. Related Party balances are presented gross (both in the assets and in theliabilities sections of the balance sheet) as the balances are with differentPlaza group subsidiaries and therefore netting was not possible under IFRS.However the net balance of the Plaza Group with its controlling shareholders isapproximately €6.8 million (liability), the majority of which was settled at thebeginning of 2007. Consolidated income statements For the year ended December 31, 2006 2005 Note • '000 • '000 Revenues 11 60,219 14,955 Gain from the sale of investment property, 12 13,715 1,089net Changes in fair value of investment property 257 39,726 74,191 55,770 Cost of operations 13 50,034 6,613 Gross profit 24,157 49,157 Administrative expenses 14 8,173 6,572 Operating profit 15,984 42,585 Finance income 4,000 972Finance expenses (3,336) (8,557)Finance income / (expenses), net 15 664 (7,585) Other income 287 394Other expenses (457) (233) Share in profit / (loss) of associate (150) 40 Profit before tax 16,328 35,201 Income tax expenses 16 1,608 5,859 Profit for the year 14,720 29,342 Basic and diluted earnings per share (in 10 0.27 16.17EURO) Consolidated balance sheets December 31, 2006 2005 Note • '000 • '000 ASSETS Current assets Cash and cash equivalents 2 212,683 46,699Restricted bank deposits 616 6,164Short-term deposits 6,154 2,977Trade accounts receivables, net 1,059 638Other accounts receivable and 3 29,222 4,802prepayments Other debtors and related parties 4 4,283 2,033Trading properties 5 159,961 104,717 413,978 168,030 Non Current assets Investment in associate 1,148 1,298Long-term balances and deposits 2,257 2,938Other debtors and related parties 4 22,027 3,512Property, plant and equipment 7,550 8,210Investment property 6 26,654 26,354Restricted bank deposits 350 349Other non-current assets 933 413 60,919 43,074 Total assets 474,897 211,104 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Interest bearing loans from banks 7 51,201 53,403Trade payables 15,703 6,532Other liabilities 3,088 7,099Amounts due to related parties 8 17,771 15,693Creditor due to selling of investment 8 2,418 1,648property 90,181 84,375Non-current liabilities Interest bearing loans from banks 7 5,875 17,244Amounts due to related parties 8 8,474 9,133Other long term liabilities 1,551 1,214Deferred tax liabilities 4,139 3,131 20,039 30,722 Share capital 2,923 18Translation reserve (1,895) (2,059)Other reserves 1,840 (181)Share premium 248,860 -Retained earnings 112,949 98,229Shareholders' equity 9 364,677 96,007 Total shareholders' equity and 474,897 211,104liabilities Consolidated cash flow statements For the year ended December 31, 2006 2005 • '000 • '000 Cash flows from operating activities Profit for the year 14,720 29,342Adjustments necessary to reflect cash flows used in operating activities: Depreciation 773 868Change in fair value of investment property (257) (39,726)Finance expenses / (income), net (595) 6,954Loss / (Gain) on sale of property plant and equipment 18 (69)Company's share in loss / (profit) of associate 150 (40)Gain on sale of investment property subsidiaries (13,630) (1,089)Gain on sale of trading property subsidiaries (7,008) -Income tax expenses 1,009 5,793Increase in trade accounts receivable (786) (2,055)Increase in other accounts receivable (6,087) (1,950)Payments on account for projects to be acquired (19,401) -Increase in trading properties (2006 - see also appendix A, (92,200) (44,889)Note 16) Increase / (decrease) in trade accounts payable 14,241 (291)Increase in other liabilities 3,187 490Net proceeds from selling of trading property subsidiaries (see appendix B, Note 16) 6,016 -Share based payment 1,186 -Net cash used in operating activities (98,664) (46,662) Cash from investing activities Purchase and development of investment property (2006 - (1,422) (24,131)other assets) Proceeds from sale of plant, property and equipment 167 204Investment in associate (115) (153)Acquisition of subsidiaries (2005 - see appendix A, Note 16) - 4,977Short term deposits, net 2,393 1,887Long term deposits decreased 1,047 13,271Long term deposits increased (2,374) (7,907)Net proceeds from disposal of other subsidiaries (see 17,297 77,427appendix B, Note 16) Long term loans granted to partners in Joint controlled (21) (2,663)company Net cash from investing activities 16,972 62,913Cash from financing activities Short term loans from banks, net 21,001 1,164Issuance of ordinary shares, net 234,501 -Long term loans received from banks - 61,117Long term loans repaid to banks (8,604) (3,922)Loans granted from (repaid to) related parties 778 (37,747)Net cash from financing activities 247,676 20,612 Increase in cash and cash equivalents during the year 165,984 36,863Cash and cash equivalents at the beginning of the year 46,699 9,836Cash and cash equivalents at the end of the year 212,683 46,699 Notes to the consolidated financial information: NOTE 1 - Basis of Accounting and Presentation of Financial Information The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards ("IFRS") and its interpretationsadopted by the European Union ("EU"). The auditors have reported on those accounts; their report was (i) unqualified,(ii) did not include references to any matters to which the auditors drewattention by way of emphasis without qualifying their reports. A full set of theconsolidated Financial Statements will follow. The financial information contained in this announcement does not constituteDutch statutory accounts which will be submitted in due course. NOTE 2 - CASH AND CASH EQUIVALENTS Interest rate as of December 31, December 31, 2006 2006 2005 • '000 • '000 Bank deposits - in EUR 2.5%-3.71% 209,292 43,402Bank deposits - in Hungarian approx. 6% 2,782 2,899Forints Bank deposits - in Polish Zlotys approx. 3.5% 416 186Bank deposits - in Czech Crowns approx. 1.5% 64 54Bank current accounts - in Mainly 0% 129 48U.S.Dollar Bank deposits - in other currencies - 110Balance at 31 December 212,683 46,699 NOTE 3 - OTHER ACCOUNTS RECEIVABLE AND PREPAYMENTS December 31, 2006 2005 • '000 • '000 Advance in respect of plot purchase (*) 19,401 -Prepaid expenses 1,314 1,307VAT authorities 7,561 2,694Partners in companies under joint venture 199 377Companies in the EMI Group and other related 168 284parties Others 579 140Balance at 31 December 29,222 4,802 (*) Advance payment for a purchase of plot of land in Bucharest in the amount ofEUR 19.4 million. NOTE 4 - OTHER DEBTORS AND RELATED PARTIES December 31, 2006 2005 • '000 • '000 Short term Debtor balances with: Klepierre group - due to sale of shopping 4,283 2,033centres Balance at 31 December 4,283 2,033 Long term Debtor balances with: Related party - EMI 18,226 -Partners in companies under joint venture 3,801 3,512Balance at 31 December 22,027 3,512 The above mentioned balances bear no interest (with the exception of EMI loan,linked to the EUR and bears interest of three months Libor plus a margin of1.8%), with no scheduled repayment date. In respect of the long term receivablefrom partners in companies under joint ventures the Group estimates thatrepayment will be received in 2007 or 2008. For EMI and EUL loans in credit,refer to note 8. NOTE 5 - TRADING PROPERTIES December 31, 2006 2005 • '000 • '000 Balance at 1 January 104,717 -Additions during the period 98,819 44,889Transfer from property under - 59,828construction Trading property sold (43,574) -Balance at 31 December 159,962 104,717 As of the balance sheet date, The Company has trading properties in Hungary,Poland, Czech Republic, Latvia, Greece and India. NOTE 6 - INVESTMENT PROPERTY December 31, 2006 2005 • '000 • '000 Balance at 1 January 26,354 175,884Additions 43 34Acquisitions in respect of business - 18,209combination Disposals - (886)Disposals of subsidiaries - (249,539)Transfer from property under - 42,926construction Fair value adjustments 257 39,726Balance at 31 December 26,654 26,354 Investment property at year end comprises mainly office buildings that areleased to third parties. Generally leases contain an initial period of 5 to 10years. Subsequent renewals are negotiated with the lessee. The contracts aredenominated in, or linked, to the EUR. NOTE 7 - INTEREST BEARING LOANS FROM BANKS Interest rate December 31, December 31, Maturity date 2006 2005 2006 • '000 • '000 Current maturities of long term loans In PLN 3,361 - WIBOR + 1.4% In EUR 47,840 53,188 EURIBOR + 1.65%-2.0% In USD - 215 N/A Total 51,201 53,403 Long term Credit In EUR 2015 5,875 14,380 EURIBOR + 1.75% In USD - 2,864 N/A 5,875 17,244 Total loans from banks 57,076 70,647 All loans outstanding are floating. Re-pricing is done on quarterly basis. Theaverage effective interest rate as at December 31, 2006 and as at December 31,2005 is 5.9%, and 5.2% per year respectively. Below is the repayment schedule of outstanding bank loans for each period: December 31, 2006 2005 • '000 • '000 First year - Current Maturity 51,201 53,403 Second year 459 2,683Third year 459 1,245Fourth year 459 1,260Fifth year 459 1,277Sixth year and thereafter 4,039 10,779 Total long term 5,875 17,244 Total 57,076 70,647 NOTE 8 - LOANS AND AMOUNTS DUE TO RELATED PARTIES AND OTHERS December 31, 2006 2005 Currency • '000 • '000 Short term EMI Group- ultimate parent EUR 7,655 1,563Company Other related parties (2) Mainly Indian 1,202 - Rupee EUL- parent Company (1) EUR 8,914 14,130 17,771 15,693Klepierre group EUR 2,418 1,648Total 20,189 17,341 Long term EUL- parent Company (4) EUR 7,975 8,520Other related parties (3) EUR 499 613 8,474 9,133 (1) The loans received from Elbit Ultrasound B.V. (the main shareholder) ("EUL"), bear interest at 3 month 3 months USD Libor (or 3 months EUR Euribor) plus a margin of between 1.5% and 2.0% (effective interest rate as of December 31, 2006, and for December 31, 2005 is 5.3% and 4.2% respectively). Loans are financing trading properties of the Group. (2) Other related parties in the short term include the liability to the Company's Indian partner in the joint venture company in India. (3) Other related parties in the long term include liability to the Control Centres group, a group of companies which provides project management services, controlled by the ultimate parent company controlling shareholder. (4) The loans received from Elbit Ultrasound B.V. (the main shareholder) ("EUL"), bear an interest of 3 month 3 months USD Libor (or 3 months EUR Euribor) plus a margin of between 1.5% and 2.0% (effective interest rate as of December 31, 2006, and for December 31, 2005 is 5.3% and 4.2% respectively). Loans are estimated to be repaid in the long term, as EUL has declared its intention not to demand earlier repayment. NOTE 9 - EQUITY December 31, 2006 2005 Remarks Number of shares Authorised: Ordinary shares of par value EUR See (1) below 1,000,000,000 1,815,1200.01 each Issued and fully paid: At the beginning of the period 1,815,120 1,815,120Issued for forgiveness of loan to -parent Company See (2) below 2,684,880 Issued for forgiveness of loan to -parent Company See (2) below 195,500,000 Issued for cash to the Public See (2) below 92,346,087 -At the end of the period 292,346,087 1,815,120 1) The number of shares authorized as of 31.12.05 was 40 (of 453.8 EUR par value).In September 2006 the authorized share capital was revised as follows: a) 40 shares of EUR 453.8 were subdivided into 1,815,120 shares of 0.01 EUR. b) The authorized share capital was increased to 1 milliard shares of 0.01 EUR. 2) In the course of the last quarter of 2006 the following share capital increases occurred: a) 2,684,880 shares of EUR 0.01 were issued to Elbit Ultrasound B.V, the parent company of the Company, on October 2006, upon the change of the Company from B.V status to N.V status. The capital increase was effected in exchange for the forgiveness of a loan, and the shares were issued at no share premium. b) 195.5 million Shares of EUR 0.01 were issued to Elbit Ultrasound B.V in October 2006, in order to create a share capital structure which will allow the Company to initiate the IPO. The capital increase was effected through the contribution of loans, and the shares were issued with a share premium of approximately EUR 15.3 million. c) 92,346,087 shares of EUR 0.01 were issued to the Public, in October and November 2006 (including the "Green Shoe" option exercised), as a result of the IPO which took place in the London Stock Exchange ("LSE") (see also note 30). The share premium recorded in the flotation (net of IPO costs) was EUR 233.6 million. d) The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets. Capital reserve due to share option plan Capital reserve created as a result of the Employee Share Option Plan which wasintroduced in October 2006 was recorded and totalled EUR 2.0 million, as atDecember 31, 2006. Translation reserve The translation reserve comprises all foreign exchange differences arising fromthe translation of the financial statements of foreign operations. NOTE 10 - EARNINGS PER SHARE Profit attributable to ordinary shareholders December 31, 2006 2005 • '000 • '000 Profit for the year 14,720 29,342 Profit attributable to ordinary shareholders 14,720 29,342 Weighted average number of ordinary shares In thousands of shares with a EUR 0.01 par value December 31, 2006 2005 Issued ordinary shares at 1 January 1,815 1,815Effect of shares issued in October 6th, 2006 633 -Effect of shares issued in October 24th, 2006 36,422 -Effect of shares issued in November 1st, 2006 14,090 -Effect of shares issued in November 24th, 2006 672 - Weighted average number of ordinary shares at 31 53,632 1,815December Diluted earning per share is the same as basic earnings per share since optionsor securities had no dilutive effect. NOTE 11 - REVENUES For the year ended December 31, 2006 2005 • '000 • '000 Revenue from selling trading 51,276 -properties (*) Rental income from tenants 3,766 9,262Management fees 284 3,013Operation of entertainment centres 3,980 2,617Other 913 63Total 60,219 14,955 (*) Includes mainly revenues from selling the Asset in Prague (Novo shoppingcentre) - EUR 50.3 million. NOTE 12 - GAIN FROM SALE OF INVESTMENT PROPERTY The gain from the sale of investment property, as reflected in the consolidatedincome statement (EUR 13.7 million) is comprised mainly of the following: • Part of the proceeds in the amount of EUR 5.4 million was subject to obtaining utilities licenses by the Company in respect of the sold centres and accordingly has been deferred for recognition in the financial statement for the year ended December 31, 2005. Within the framework of a settlement agreement signed between the Company and Klepierre on November 16, 2006 it was agreed that the Company shall be unconditionally and irrecoverably released from its obligations to obtain such utilities licenses and that Klepierre will assume full and sole responsibility for the obtaining of these utilities permits. Accordingly the Company recorded in these financial statements an additional gain of EUR 5.4 million. • Furthermore, the Company and Klepierre agreed to conclude a final purchase price adjustment in respect of the sold centres in accordance with the provisions set forth in the sale agreement and accordingly the Company recorded in these financial statements an additional gain of EUR 8.2 million which is mainly due to the Poznan shopping centre on account of the price adjustment, based on the updated gross rentals. NOTE 13 - COST OF OPERATIONS For the year ended December 31, 2006 2005 • '000 • '000 Direct expenses: Cost of sold trading properties 44,804 -(*) Salaries and related expenses 736 1,344Initiation costs 244 710Municipality taxes 8 107Property taxes 195 437Property operations and 2,968 3,564maintenance 48,955 6,162Other operating expenses 915 361 49,870 6,523 Depreciation and amortization 164 90 50,034 6,613 (*) Includes mainly cost of asset from selling the Asset in Prague (Bes Tesshopping centre) - EUR 43.9 million. NOTE 14 - ADMINISTRATIVE EXPENSES For the year ended December 31, 2006 2005 • '000 • '000 Selling and marketing expenses Advertising and marketing 889 943Salaries and relating expenses 757 26Doubtful debts 4 285Amortization of deferred charges 1 375 1,651 1,629 General and administrative expenses Salaries and related expenses (*) 2,661 1,883Depreciation and amortization 260 306Management fees 706 500Professional services 1,611 1,108Impairment - Other assets and debit - 283balances Travelling 591 200Offices 281 336Others 412 327 6,522 4,943 Total 8,173 6,572 (*) In 2006 - including salaries due to share option plan in the amount of EUR1.2 million. NOTE 15 - FINANCE INCOME (EXPENSES) For the year ended December 31, 2006 2005 • '000 • '000 Interest received on bank 2,595 894deposits and loans to related parties Foreign exchange gains 1,405 78Total finance income 4,000 972 Interest paid on bank loans (3,542) (3,475)Interest on loans from related (1,133) (1,864)parties Foreign exchange losses - (5,085)Other finance expenses (508) (639) (5,183) (11,063)Less- Finance expenses capitalized to 1,847 2,506properties under development Total finance expenses (3,336) (8,557) Total 664 (7,585) NOTE 16 - INCOME TAXES For the year ended December 31, 2006 2005 • '000 • '000 Current tax 170 67Deferred tax 1,009 5,792Prior year's taxes 429 -Total 1,608 5,859 The main tax laws imposed on the Group companies in their countries ofresidence: a. The Netherlands a. Companies resident in the Netherlands are subject to corporate income tax atthe general rate of 29.6% for the fiscal year of 2006. Starting 2007 the generalcorporate income tax rate has been reduced to 25.5%. Under the amended ruleseffective January 1 2007 tax losses may be carried forward and set of againstincome of the immediately preceding tax year and the nine subsequent tax years.Transitional rules apply for tax losses on account of tax years up through 2002which may be carried forward and set of against income up through 2011. b. Under the participation exemption rules income including dividends, capitalgains and capital losses derived by Netherlands companies in respect ofqualifying investments in the nominal paid up share capital of resident or nonresident investee companies, are exempt from Netherlands corporate income taxprovided the conditions as set under these rules have been satisfied. Theparticipation exemption rules and more particularly the statutory conditionsthere under have been amended with effect of January 1, 2007. Such amendedconditions require, among others, a minimum percentage ownership interest in theinvestee company and require the investee company to satisfy either of or boththe newly introduced 'assets' test and the amended 'subject to tax' test. b. Hungary The corporation tax rate imposed on the income of the subsidiaries incorporatedin Hungary is 16% (18% up to December 31, 2003). From 2007 capital gains can beconsidered exempted income provided that certain criteria are fulfilled. Aspecial solidarity tax is levied on companies starting September 1, 2006, whichis 4 percent of the accounting profit modified by certain items such asdividends received and donations. Dividends, interest and royalty paid out arenot subject to withholding tax. Losses in the first three years of operation (incase of companies which were established before June 1998 - losses for the firsttwo years) can be carried forward without limitation. Losses incurred afterwards(not start-up loss) can be carried forward for the period of five years, subjectto certain limitations. Losses arising in 2005 and later may be carried forwardindefinitely, subject to certain limitations. c. Czech Republic The corporation tax rate imposed on the income of the subsidiaries incorporatedin the Czech Republic (including capital gains) is currently 24% (the rate wasreduced from 26% in 2005). Tax losses can be carried forward up to seven yearsto offset future taxable income. Dividends paid out of net income are subject toa withholding tax of 25%, subject to the relevant double taxation treaty. d. Poland The corporation tax rate imposed on the income of the subsidiaries incorporatedin Poland (including capital gains) is currently 19% (27% until December 31,2003). Tax losses can be carried forward for the period of five years and only50% of a loss can be offset in any one year. Dividends paid out of net incomeare subject to a withholding tax of 20%, subject to the relevant double taxationtreaty. e. Romania The corporation tax rate imposed on the income of the subsidiaries incorporatedin Romania (including capital gains) is currently 16% (25% until December 31,2004). Tax losses can be carried forward and be offset against taxable income ofthe five years following the accounting year in which they were incurred.Dividends paid out of net income to the Netherlands are not subjected to anywithholding tax. f. Latvia The corporation tax rate imposed on the income of the subsidiaries incorporatedin Latvia (including capital gains) is currently 15% (2005 - the same). Taxlosses can be carried forward and be offset against taxable income of the fiveyears following the accounting year in which they were incurred. Dividends paidout of net income are subject to a withholding tax of 10%, subject to therelevant double taxation treaty or 0 % tax could be applied if the recipient isresident in another EU country. g. Greece The corporation tax rate imposed on the income of the subsidiary incorporated inthe Greece (including capital gains) is currently 29% (In 2005- 32%, from 2007onwards - 25%). Tax losses can be carried forward and be offset against taxableincome of the five years following the accounting year in which they wereincurred. Dividends paid out of net income are not subject to any withholdingtax. h. India The corporate income tax applicable to the income of Indian subsidiaries is33.66% with a minimum alternative tax of 11.2% on the accounting profits if thecompany does not have taxable profits. The paid amount will be credited if thecompany will have taxable profits in the following five years. Capital gains onsale of fixed assets and real estate assets are taxed at the rate of 21%provided that they were held for at least 36 months prior to the sale thereof or33.66% if they were held for less than 36 months. Capital gains taxes on thesale of shares by an Indian company are ranging from 10.4% up to 41.8% depend onthe nature of the assets sold and the time they were held prior to the salethereof. Dividends paid out of these profits are taxed at an additional 14%.Dividends distribution from India to Cyprus is exempt from withholding tax.Losses can be offset against taxable income for a period of eight years from theincurrence year end. i. Cyprus The taxation of companies is based on tax residence and all companies are taxedat the rate of 10%. A special levy of 10% is imposed on interest received anddeemed interest income in certain cases. Dividend income and profits from thesale of shares and other titles of companies are exempt from taxation. There isno withholding tax on payments of dividends to non-resident shareholders orshareholders that are companies resident in Cyprus. Payments of dividends toshareholders that are persons physically resident in Cyprus are subject to a 15%withholding tax. Companies which do not distribute 70% of their profits aftertax, as defined by the relevant tax law within two years after the end of therelevant tax year, will be deemed to have distributed as dividends 70% of theseprofits. A special levy at 115% will be payable on such deemed dividends to theextent that the shareholders (companies and individuals) are Cyprus taxresidents. The amount of deemed distribution is reduced by any actual dividendspaid out of the profits of the relevant year during the following two years.This special levy is payable for the account of the shareholders. NOTE 16- CASH FLOW APPENDICES For the year ended December 31, 2006 2005 • '000 • '000 Appendix A - Acquisition of subsidiaries (*) Cash and cash equivalents of subsidiaries acquired 22 342Working capital (excluding cash and cash equivalents) (6,809) (85)Investment property (2006 - trading property) 6,786 (15,401)Long-term loans and liabilities - 20,463Less- Cash and cash equivalents of subsidiaries acquired (22) (342)Acquisitions of subsidiaries, net of cash held (23) 4,977 Appendix B - Disposal of Subsidiaries Cash and cash equivalents of subsidiaries disposed 463 2,655Working capital (excluding cash and cash equivalents) 37,414 3,065Long-term deposits 1,047 3,588Investment property and other assets - 247,072Long-term loans and liabilities (42,600) (178,212)Net identifiable assets and liabilities disposed (3,676) 78,168Cash from sale of subsidiaries 23,776 80,082Less- Cash and cash equivalents of subsidiaries disposed (463) (2,655) 23,313 77,427Non cash activities Forgiveness of loans in consideration for issuance of 17,264 -ordinary shares Interest paid 2,867 3,265Interest received 1,857 788Income taxes paid 13 19 (*) In 2006 - Company holding trading Properties acquired. END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Plaza