Directors’ commentary
1. Distributable earnings
The Group has achieved consolidated distributable earnings of 8.35 EUR cents per share and, accordingly, the Board declared an interim dividend of 8.35 EUR cents per share in respect of the six month period ended 30 June 2010. This strong performance represents a 9.0% increase over the 7.66 EUR cents per share distributed for the comparable prior period.
2. Internalisation
During the period the Company internalised its investment advisor through the acquisition of all of the issued shares of NEPI Investment Management Limited (“NEPM”). The net purchase price of EUR5 881 943 was accounted for as an intangible asset in the consolidated statement of financial position. The Board expects that the management of the Group`s property portfolio going forward will be achieved more efficiently and cost effectively with the management team of NEPM being employed and incentivised directly by the Company. The internalisation is expected to result in better returns to NEPI shareholders and enhanced distributable earnings per share.
3. JSE Main Board listing
On 4 August 2010 the Company completed the transfer of its listing from the Alternative Exchange (“AltX”) of the JSE Limited (“JSE”) to the Main Board of the JSE in South Africa, which combined with the wider placement of shares completed during the period is expected to further extend the shareholder base and further improve liquidity in the trading of the Company`s shares. The Company currently also holds a listing on the AIM market of the London Stock Exchange.
4. Property acquisitions and development
The Group continued expanding its retail asset base in Romania through the acquisition of a retail park located in Pitesti, Romania (“Retail Park Auchan Pitesti”) leased to Auchan and Bricostore. The Company continues to pursue further investment opportunities in line with its investment strategy. The Group is also in discussions for the acquisition of a small but well located logistics facility in Bucharest. In view of existing market opportunities and the Group`s growing foothold in Romania, the Group has also pursued development opportunities through joint ventures with strong partners. One of these opportunities led to an agreement in relation to the development of a shopping centre in Bucharest. This project is currently in due diligence.
5. Debt
In June 2010 the Group successfully refinanced a loan facility in relation to Retail Park Auchan Pitesti with a more favorable new loan facility from Unicredit Bank and Banca Romaneasca. The new loan facility of EUR28 813 000 matures in December 2014 and carries an interest rate of 1 month Euribor plus 4.0%. Further, the Group took advantage of the low interest rate environment and capped the Euribor at 2.25% in relation to the new loan facility and reduced the cap strike levels to 2.25% on all the other outstanding variable interest rate loans, while the caps in relation to the NEPI Bucharest One and NEPI Bucharest Two loans were extended up to December 2014 which is beyond the respective loan facilities` maturities.
6. Prospects
Despite continued macroeconomic weakness in Romania, NEPI`s property portfolio continues to perform well supported by the predominance of long-term leases and tenants with strong corporate covenants. The Company established a solid property portfolio and investment pipeline in Romania and is well positioned to continue expanding its retail asset base in Romania.
By order of the Board
Martin Slabbert, Chief Executive Officer
Victor Semionov, Financial Director
6 August 2010
Consolidated statement of financial position
| Group Unaudited 30 Jun 10 EUR |
Group Audited 31 Dec 09 EUR |
Group Unaudited 30 Jun 09 EUR |
|
| ASSETS | |||
|---|---|---|---|
| Non-current assets | 211 084 981 | 151 470 854 | 87 794 134 |
| Investment property | 196 914 767 | 145 965 096 | 85 280 283 |
| Investment property at fair value | 189 752 881 | 139 222 255 | 78 676 715 |
| Investment property under | |||
| Development | 7 161 886 | 6 742 841 | 6 603 568 |
| Intangible assets | 5 881 943 | – | – |
| Goodwill | 6 908 608 | 4 414 804 | 2 386 463 |
| Financial assets at fair value through profit or loss | 1 379 663 | 1 090 954 | 127 388 |
| Current assets | 27 932 073 | 15 673 022 | 11 997 776 |
| Trade and other receivables | 4 465 634 | 3 396 479 | 2 313 505 |
| Cash and cash equivalents | 23 466 439 | 12 276 543 | 9 684 271 |
| Total assets | 239 017 054 | 167 143 876 | 99 791 910 |
| EQUITY AND LIABILITIES | |||
| Total equity attributable to equity holders | 114 862 261 | 72 719 463 | 49 815 481 |
| Share capital | 562 686 | 386 247 | 267 950 |
| Share premium | 119 042 233 | 76 731 744 | 52 487 190 |
| Share based payment reserve | 542 246 | 234 900 | 152 665 |
| Currency translation reserve | (3 318 045) | (2 650 069) | (2 591 223) |
| Accumulated loss | (1 966 859) | (1 983 359) | (501 101) |
| Non-current liabilities | 116 257 774 | 86 440 422 | 45 281 792 |
| Loans and borrowings | 105 223 417 | 77 970 398 | 40 283 172 |
| Financial liabilities at fair value through profit or loss | 1 081 710 | 1 081 710 | 934 866 |
| Deferred tax liabilities | 9 952 647 | 7 388 314 | 4 063 754 |
| Current liabilities | 7 879 019 | 7 983 991 | 4 694 637 |
| Trade and other payables | 6 335 216 | 6 027 605 | 3 057 850 |
| Loans and borrowings | 1 561 803 | 1 956 386 | 1 636 787 |
| Total equity and liabilities | 239 017 054 | 167 143 876 | 99 791 910 |
| Net asset value per share | 2.04 | 1.88 | 1.86 |
| Adjusted net asset value per share | 2.03 | 1.97 | 1.93 |
Consolidated statement of comprehensive income
| Group Unaudited 30 Jun 10 EUR |
Group Audited 31 Dec 09 EUR |
Group Unaudited 30 Jun 09 EUR |
|
| Net rental and related income | 7 797 115 | 8 270 884 | 3 520 962 |
| Contractual rental income and expense recoveries | 10 126 772 | 10 708 873 | 4 323 488 |
| Property operating expenses | (2 329 657) | (2 437 989) | (802 526) |
| Share based payments | (307 346) | (153 059) | (70 824) |
| Investment advisory fees | (679 627) | (670 725) | (275 574) |
| Administrative expenses | (461 517) | (1 543 992) | (274 508) |
| Foreign exchange gain | 421 927 | 1 811 011 | 1 723 780 |
| Fair value adjustment on investment property | – | 575 253 | – |
| Profit before net finance expense | 6 770 552 | 8 289 372 | 4 623 836 |
| Finance income | 196 896 | 261 512 | 134 523 |
| Finance expense | (4 023 933) | (3 707 436) | (2 286 056) |
| Net finance expense | (3 827 037) | (3 445 924) | (2 151 533) |
| Profit before tax | 2 943 515 | 4 843 448 | 2 472 303 |
| Tax | (9 813) | (2 121 193) | (342 729) |
| Profit for the period attributable to equity holders | 2 933 702 | 2 722 255 | 2 129 574 |
| Weighted average number of shares in issue | 47 255 904 | 29 397 896 | 26 795 000 |
| Diluted weighted average number of shares in issue | 49 444 271 | 30 877 071 | 28 150 000 |
| Basic weighted average earnings per share (EUR cents) | 6.21 | 9.26 | 7.95 |
| Diluted weighted average earnings per share (EUR cents) | 5.93 | 8.82 | 7.57 |
| Distributable earnings per share (EUR cents) | 8.35 | 15.77 | 7.66 |
| Headline earnings per share (EUR cents) | 7.62 | 13.74 | 14.79 |
| Diluted headline earnings per share (EUR cents) | 7.28 | 13.08 | 14.08 |
Statement of other comprehensive income
| Group Unaudited 30 Jun 10 EUR |
Group Audited 31 Dec 09 EUR |
Group Unaudited 30 Jun 09 EUR |
|
| Profit for the year attributable to equity holders | 2 933 702 | 2 722 255 | 2 129 574 |
| Other comprehensive income | (667 976) | (1 892 383) | (1 833 537) |
| – currency translation differences | (667 976) | (1 892 383) | (1 833 537) |
| Total comprehensive income for the period | 2 265 726 | 829 872 | 296 037 |
Statement of changes in equity
| Share capital | Share premium | Share based payments | |
| Group unaudited | EUR | EUR | EUR |
|---|---|---|---|
| Opening balance 1 January 2009 | 267 950 | 52 487 190 | 81 841 |
| Transactions with owners | – | – | 70 824 |
| – issue of shares | – | – | – |
| – issue cost recognised to equity | – | – | – |
| – share based payment reserve | – | – | 70 824 |
| – dividend distribution | – | – | – |
| Total comprehensive income | – | – | – |
| – other comprehensive income | – | – | – |
| – profit for the period | – | – | – |
| Balance at 30 June 2009 | 267 950 | 52 487 190 | 152 665 |
| Opening balance 1 July 2009 | 267 950 | 52 487 190 | 152 665 |
| Transactions with owners | 118 297 | 24 244 554 | 82 235 |
| – issue of shares | 118 297 | 24 263 927 | – |
| – issue cost recognised to equity | – | (19 373) | – |
| – share based payment reserve | – | – | 82 235 |
| – dividend distribution | – | – | – |
| Total comprehensive income | – | – | – |
| – other comprehensive income | – | – | – |
| – profit for the period | – | – | – |
| Balance at 31 December 2009 | 386 247 | 76 731 744 | 234 900 |
| Opening balance 1 January 2010 | 386 247 | 76 731 744 | 234 900 |
| Transactions with owners | 176 439 | 42 310 489 | 307 346 |
| – issue of 9 310 823 shares on 12/03/2010 | 93 109 | 20 856 243 | – |
| – issue of 5 882 352 shares on 01/04/2010 | 58 823 | 15 377 960 | – |
| – issue of 2 450 748 shares on 30/06/2010 | 24 507 | 6 298 422 | – |
| – issue cost recognised to equity | – | (222 136) | – |
| – share based payment reserve | – | – | 307 346 |
| – dividend distribution | – | – | – |
| Total comprehensive income | – | – | – |
| – foreign exchange loss | – | – | – |
| – profit for the period | – | – | – |
| Closing balance 30 June 2010 | 562 686 | 119 042 233 | 542 246 |
| Currency translation reserve | Accumulated loss | Total | |
| Group unaudited | EUR | EUR | EUR |
| Opening balance 1 January 2009 | (757 686) | (681 386) | 51 397 909 |
| Transactions with owners | – | (1 949 289) | (1 878 465) |
| – issue of shares | – | – | – |
| – issue cost recognised to equity | – | – | – |
| – share based payment reserve | – | – | 70 824 |
| – dividend distribution | – | (1 949 289) | (1 949 289) |
| Total comprehensive income | (1 833 537) | 2 129 574 | 296 037 |
| – other comprehensive income | (1 833 537) | – | (1 833 537) |
| – profit for the period | – | 2 129 574 | 2 129 574 |
| Balance at 30 June 2009 | (2 591 223) | (501 101) | 49 815 481 |
| Opening balance 1 July 2009 | (2 591 223) | (501 101) | 49 815 481 |
| Transactions with owners | – | (2 074 939) | 22 370 147 |
| – issue of shares | – | – | 24 382 224 |
| – issue cost recognised to equity | – | – | (19 373) |
| – share based payment reserve | – | – | 82 235 |
| – dividend distribution | – | (2 074 939) | (2 074 939) |
| Total comprehensive income | (58 846) | 592 681 | 533 835 |
| – other comprehensive income | (58 846) | – | (58 846) |
| – profit for the period | – | 592 681 | 592 681 |
| Balance at 31 December 2009 | (2 650 069) | (1 983 359) | 72 719 463 |
| Opening balance 1 January 2010 | (2 650 069) | (1 983 359) | 72 719 463 |
| Transactions with owners | – | (2 917 202) | 39 877 072 |
| – issue of 9 310 823 shares on 12/03/2010 | – | – | 20 949 352 |
| – issue of 5 882 352 shares on 01/04/2010 | – | – | 15 436 783 |
| – issue of 2 450 748 shares on 30/06/2010 | – | – | 6 322 929 |
| – issue cost recognised to equity | – | – | (222 136) |
| – share based payment reserve | – | – | 307 346 |
| – dividend distribution | – | (2 917 202) | (2 917 202) |
| Total comprehensive income | (667 976) | 2 933 702 | 2 265 726 |
| – foreign exchange loss | (667 976) | – | (667 976) |
| – profit for the period | – | 2 933 702 | 2 933 702 |
| Closing balance 30 June 2010 | (3 318 045) | (1 966 859) | 114 862 261 |
Abridged consolidated statement of cash flows
| Group Unaudited 30 Jun 10 EUR |
Group Audited 31 Dec 09 EUR |
Group Unaudited 30 Jun 09 EUR |
|
| Cash flows from operating activities* | 1 872 019 | 2 612 814 | 1 336 854 |
| Cash flows from financing activities | 18 346 688 | 12 537 009 | 4 323 247 |
| Cash flows from investing activities | (8 697 486) | (7 055 693) | (138 113) |
| Net increase in cash and cash equivalents | 11 521 221 | 8 094 130 | 5 521 988 |
| Cash and cash equivalents brought forward | 12 276 543 | 4 418 847 | 4 418 847 |
| Translation effect on cash and cash equivalents | (331 325) | (236 434) | (256 564) |
| Cash and cash equivalents carried forward | 23 466 439 | 12 276 543 | 9 684 271 |
* Includes interest paid on bank borrowings amounting to EUR 2 989 403 for the six months ended 30 June 2010, EUR 2 240 009 for the year ended 31 December 2009 and EUR 1 014 619 for the six months ended 30 June 2009.
Notes to the condensed consolidated unaudited interim financial statements
Basis of preparation
The condensed consolidated unaudited interim financial statements have been prepared in accordance with applicable Isle of Man law, International Financial Reporting Standards (IFRS), specifically IAS 34 Interim Financial Reporting, and the JSE Listings Requirements. The interim financial statements do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2009. The accounting policies are consistent with those applied for the prior periods except for the adoption of the revised IAS1.
The condensed consolidated interim financial statements have not been reviewed or reported on by the Company`s auditor.
Investment property
Investment properties are those held either to earn rental income or for capital appreciation or both. After initial recognition investment properties are measured at fair value. It is the Group`s policy to revalue investment properties in December.
Loans and borrowings as at 30 June 2010
| Borrower | Facility amount EUR |
Outstanding amount EUR |
Available for drawdown EUR |
Interest rate | Hedge |
| NEPI Bucharest One SRL | 7 300 000 | 6 240 000 | 1 060 000 | 1M Euribor +4.5% | 1M Euribor capped at 2.25% |
| NEPI Bucharest Two SRL | 6 824 800 | 5 800 000 | 1 024 800 | 1M Euribor +1.9% | 1M Euribor capped at 2.25% |
| General Investment SRL | 15 000 000 | 11 864 281 | – | Fixed at 6.23% | – |
| Premium Portfolio | 13 995 000 | 13 800 491 | – | Fixed at 5.17% | – |
| ERP Braila Retail Park | 40 000 000 | 40 000 000 | – | 3M Euribor +3.0% | 3M Euribor capped at 2.25% |
| Auchan Pitesti | 28 813 000 | 28 813 000 | – | 1M Euribor +4.0% | 1M Euribor capped at 2.25% |
Loans repayment profile (EUR)
| Year | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | Total |
| NEPI Bucharest One SRL | – | – | – | 6 240 000 | – | – | 6 240 000 |
| NEPI Bucharest Two SRL | – | 5 800 000 | – | – | – | – | 5 800 000 |
| General Investment SRL | 475 414 | 1 005 008 | 1 064 641 | 1 137 283 | 8 181 935 | – | 11 864 281 |
| Premium Portfolio | 110 495 | 239 173 | 240 192 | 333 284 | 175 460 | 12 701 887 | 13 800 491 |
| ERP Braila | – | – | 2 155 653 | 2 155 653 | 35 688 694 | – | 40 000 000 |
| Retail Park Auchan Pitesti | – | 216 098 | 2 139 365 | 1 899 257 | 1 450 254 | 23 108 026 | 28 813 000 |
| Total | 585 909 | 7 260 279 | 5 599 851 | 11 765 477 | 45 496 343 | 35 809 913 | 106 517 772 |
Reconciliation of profit for the period to distributable earnings
| Group 30 Jun 10 EUR |
Group 31 Dec 09 EUR |
Group 30 Jun 09 EUR |
|
| Profit for the period attributable to equity holders | 2 933 702 | 2 722 255 | 2 129 574 |
| Unrealised foreign exchange gain | (421 927) | (1 811 011) | (1 723 780) |
| Realised foreign exchange losses | – | (87 000) | – |
| Listing expenses | – | 905 048 | 905 048 |
| Acquisition fees | 332 839 | 286 211 | – |
| Share based payment fair value | 307 346 | 153 059 | 70 824 |
| Accrued interest on share based payments | 133 639 | 170 721 | 81 045 |
| Fair value adjustment | – | (575 253) | – |
| Financial assets at fair value | 701 291 | 855 754 | 392 176 |
| Amortisation of the financial assets | (159 600) | (117 288) | (39 777) |
| Deferred tax expense | – | 2 114 061 | 341 180 |
| Share issue cum distribution | 1 042 706 | 547 821 | – |
| Distributable earnings for the period | 4 869 996 | 5 164 378 | 2 156 290 |
| Number of shares entitled to distribution | 58 346 586* | 37 070 515* | 28 150 000 |
| Distributable earnings per share for the period (EUR cents) | 8.35 | 15.77 | 7.66 |
| Interim (EUR cents) | 8.35 | 7.66 | 7.66 |
| Final (EUR cents) | – | 8.11 | – |
* Total shares in issue less 3 587 148 vendor shares subject to lock in arrangements since 20 October 2009
Reconciliation of profit for the period to headline earnings
| Group 30 Jun 10 EUR |
Group 31 Dec 09 EUR |
Group 30 Jun 09 EUR |
|
| Profit for the period attributable to equity holders | 2 933 702 | 2 722 255 | 2 129 574 |
| Changes in currency translation reserve of foreign subsidiaries | 667 976 | 1 892 382 | 1 833 537 |
| Fair value adjustment of investment property | – | (575 253) | – |
| Headline earnings | 3 601 678 | 4 039 384 | 3 963 111 |
| Adjusted net asset value | 125 772 793 | 80 070 467 | 54 446 673 |
| Net asset value per the statement of financial position | 114 862 261 | 72 719 463 | 49 815 481 |
| Issued value of the shares in respect of the share incentive scheme | 13 748 436 | 4 377 494 | 2 953 900 |
| Deferred tax | 9 952 647 | 7 388 314 | 4 063 754 |
| Goodwill and intangible assets | (12 790 551) | (4 414 804) | (2 386 462) |
| Net asset value per share | 2.04 | 1.88 | 1.86 |
| Adjusted net asset value per share | 2.03 | 1.97 | 1.93 |
| Number of shares for net assets value per share purposes | 56 268 704 | 38 624 771 | 26 795 000 |
| Number of shares for adjusted net assets value per share purposes | 61 933 734 | 40 657 663 | 28 150 000 |
Lease expiry profile
| Year | Based on rental income | Based on rented area |
| 2010 | 0.1% | 0.0% |
| 2011 | 2.6% | 3.4% |
| 2012 | 3.9% | 4.8% |
| 2013 | 8.0% | 3.9% |
| 2014 | 18.6% | 16.8% |
| 2015 | 6.9% | 9.9% |
| 2016 | 14.8% | 7.3% |
| 2017 | 0.7% | 0.3% |
| 2018 | 2.5% | 0.8% |
| 2019 | 1.6% | 1.3% |
| >= 2020 | 40.3% | 51.5% |
Segmental analysis
| Group 30 Jun 10 EUR |
Group 31 Dec 09 EUR |
Group 30 Jun 09 EUR |
|
| Rental income | |||
|---|---|---|---|
| Retail | 7 108 561 | 4 807 694 | 1 362 511 |
| Industrial | 594 417 | 1 191 587 | 593 914 |
| Office | 2 423 794 | 4 709 592 | 2 367 062 |
| Total | 10 126 772 | 10 708 873 | 4 323 487 |
| Profit before net finance expense | |||
| Retail | 5 317 544 | 6 652 814 | 587 801 |
| Industrial | 474 707 | 179 460 | 685 768 |
| Office | 1 815 713 | 3 032 304 | 3 624 775 |
| Corporate | (837 412) | (1 575 206) | (274 508) |
| Total | 6 770 552 | 8 289 372 | 4 623 836 |
Payment of interim dividend
The board has approved and notice is hereby given of an interim dividend per share of 8.35 EUR cents for the six months ended 30 June 2010.
The salient dates for the dividend are set out below:
| Last day to trade (JSE) | Friday, 27 August 2010 |
|---|---|
| Ex-dividend date (JSE) | Monday, 30 August 2010 |
| Ex-dividend date (AIM) | Wednesday, 1 September 2010 |
| Record date | Friday, 3 September 2010 |
| Payment date | Thursday, 9 September 2010 |
No dematerialisation or rematerialisation of share certificates, nor transfer of shares between registers in the Isle of Man and South Africa will take place between Monday, 30 August 2010 and Friday, 3 September 2010, both dates inclusive.
Shareholders on the South African sub-register will receive dividends in South African Rand, based on the exchange rate to be obtained by the Company on 20 August 2010. A further announcement in this respect will be made on or before 20 August 2010.
Registered office:
Falcon Cliff, Palace Road, Douglas, Isle of Man IM2 4LB, British Isles (PO Box 75, Douglas, Isle of Man, IM99 1EP, British Isles)
Transfer secretaries and settlement agent:
Computershare Investor Services (Proprietary) Limited, 70 Marshall Street
Johannesburg 2001 South Africa
(PO Box 61051 Marshalltown 2107 South Africa)
Computershare Investor Services (Jersey) Limited, 2nd Floor, Queensway House, Hilgrove Street, St Helier, JE1 1ES, Jersey
Directors:
Dan Pascariu (Chairman)*, Desmond de Beer#, Michael Mills*, Steven Van Den Bossche*, Dewald Joubert*, Victor Semionov (Financial Director), Martin Slabbert (Chief Executive Officer), Jeffrey Zidel#
*Independent non-executive director, #Non-executive director
