Final Results
25 Marzo 2009 - 8:00AM
UK Regulatory
TIDMBPD
RNS Number : 4200P
Bulgarian Property DevelopmentsPLC
25 March 2009
FOR RELEASE
07.00 m
25 MARCH 2009
BULGARIAN PROPERTY DEVELOPMENTS PLC
("BPD", "the Company" or "the Group")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008
Key Points
* Portfolio valued at GBP54.8 million as at 27 February 2009
* NAV per share 65.1p at 31 December 2008
* EUR6.0m sale of Trakia Retail Centre
* Failure by Fairplay to complete EUR15 million purchase of BPD 50% stake in Varna
Logistics
* Special dividend of 19p per share (GBP21 million) paid 17 July 2008
Enquiries:
Bulgarian Property Developments
Ivo Hesmondhalgh (Joint Chief Executive) +44 (0) 20 7243 1336
Matrix Corporate Capital LLP (Nominated Adviser)
Stephen Mischler+44 (0) 20 3206 7203
Cubitt Consulting Ltd
James Verstringhe +44 (0) 20 7367 5100
Brian Coleman-Smith
Background Note:
BPD, which was incorporated in May 2004 and floated on AIM in January 2005, is
an owner and developer of land for commercial use across Bulgaria, in particular
for building distribution centres, retail centres and offices.
BPD's portfolio currently includes properties in Sofia, Plovdiv, Vidin, Ruse,
Burgas and Sandanski
http://www.bpdplc.com
Company No. 05118060
BULGARIAN PROPERTY DEVELOPMENTS PLC
REPORT OF THE DIRECTORS AND
CONSOLIDATED FINANCIAL STATEMENTS
For the year ended
31 December 2008
CONTENTS
+----------------------------------------------------------+--------------------+
| | Page |
+----------------------------------------------------------+--------------------+
| Company Information | 3 |
+----------------------------------------------------------+--------------------+
| Chairman's Statement | 4 |
+----------------------------------------------------------+--------------------+
| Report of the Directors | 6 |
+----------------------------------------------------------+--------------------+
| Independent Auditors' Report | 9 |
+----------------------------------------------------------+--------------------+
| Consolidated Income Statement | 11 |
+----------------------------------------------------------+--------------------+
| Consolidated Statement of Changes in Equity | 12 |
+----------------------------------------------------------+--------------------+
| Consolidated Balance Sheet | 13 |
+----------------------------------------------------------+--------------------+
| Consolidated Cash Flow Statement | 14 |
+----------------------------------------------------------+--------------------+
| Company Statement of Changes in Equity | 15 |
+----------------------------------------------------------+--------------------+
| Company Balance Sheet | 16 |
+----------------------------------------------------------+--------------------+
| Company Cash Flow Statement | 17 |
+----------------------------------------------------------+--------------------+
| Notes to the Financial Statements | 18 |
+----------------------------------------------------------+--------------------+
COMPANY INFORMATION
for the year ended 31 December 2008
+---------------+----------------+
| | |
+---------------+----------------+
| DIRECTORS: | C D L |
| | Williams |
| | (Non-Executive |
| | Chairman) |
+---------------+----------------+
| | I L G |
| | Hesmondhalgh |
| | (Executive |
| | Director) |
+---------------+----------------+
| | P A |
| | Pashov |
| | (Executive |
| | Director) |
+---------------+----------------+
| | K J |
| | Springall |
| | (Finance |
| | Director) |
+---------------+----------------+
| | J S |
| | Mackay |
| | (Non |
| | Executive) |
+---------------+----------------+
| | N K |
| | Galchev |
| | (Non |
| | Executive) |
+---------------+----------------+
| | R N |
| | Galtcheva |
| | (Alternate) |
+---------------+----------------+
| | |
+---------------+----------------+
| SECRETARY: | C R |
| | Delacombe |
+---------------+----------------+
| | |
+---------------+----------------+
| REGISTERED | 443 |
| OFFICE: | Stroude |
| | Road |
+---------------+----------------+
| | Virginia |
| | Water |
+---------------+----------------+
| | Surrey |
| | GU25 4BU |
+---------------+----------------+
| | |
+---------------+----------------+
| REGISTERED | 05118060 |
| NUMBER: | (England |
| | and |
| | Wales) |
+---------------+----------------+
| | |
+---------------+----------------+
| NOMINATED | Matrix |
| ADVISER: | Corporate |
| | Capital |
| | LLP |
+---------------+----------------+
| | One Vine |
| | Street |
+---------------+----------------+
| | London |
| | W1J OAH |
+---------------+----------------+
| | |
+---------------+----------------+
| TAX | Smith & |
| ADVISERS: | Williamson |
| | Limited |
+---------------+----------------+
| | 25 |
| | Moorgate |
+---------------+----------------+
| | London |
| | EC2R 6AY |
+---------------+----------------+
| | |
+---------------+----------------+
| SOLICITORS: | Field |
| | Fisher |
| | Waterhouse |
+---------------+----------------+
| | 35 Vine |
| | Street |
+---------------+----------------+
| | London |
| | EC2N 2AA |
+---------------+----------------+
| | |
+---------------+----------------+
| BANKERS: | Clydesdale |
| | Bank plc |
+---------------+----------------+
| | 88 Wood |
| | Street |
+---------------+----------------+
| | London |
| | EC2V 7QQ |
+---------------+----------------+
| | |
+---------------+----------------+
| REGISTRARS: | Neville |
| | Registrars |
| | Limited |
+---------------+----------------+
| | Neville |
| | House |
+---------------+----------------+
| | 18 |
| | Laurel |
| | Lane |
+---------------+----------------+
| | Halesowen |
| | |
+---------------+----------------+
| | West |
| | Midlands |
| | B63 3DA |
+---------------+----------------+
| | |
+---------------+----------------+
| AUDITORS: | Nexia |
| | Smith & |
| | Williamson |
+---------------+----------------+
| | Registered |
| | Auditors |
+---------------+----------------+
| | 25 |
| | Moorgate |
+---------------+----------------+
| | London |
| | EC2R 6AY |
+---------------+----------------+
| | |
+---------------+----------------+
| STOCKBROKERS: | Matrix |
| | Corporate |
| | Capital |
| | LLP |
+---------------+----------------+
| | One Vine |
| | Street |
+---------------+----------------+
| | London |
| | W1J 0AH |
+---------------+----------------+
CHAIRMAN'S STATEMENT
for the year ended 31 December 2008
Windsorville now majority shareholder
Before commenting upon the Group's results, I should say how saddened I am that
our recommendation to shareholders to reject Windsorville's cash offer has
largely been ignored. The cash offer of 16p per BPD share, valued the Company at
just GBP17.3 million as compared with an adjusted net asset value of 56p per BPD
share or GBP61 million (as per the defence document dated 3 March 2009), of
which cash represented GBP11.6 million including GBP2.9 million held in escrow.
We certainly live in unusual times.
Windsorville is now not just the largest shareholder but owns a majority of the
shares in the Company. I pointed out in my recent circular to shareholders the
risk of remaining as a shareholder in a Company that may well be delisted and
taken private. Given the risks associated with remaining a minority shareholder
in an unquoted company, your Directors advised shareholders on 20 March 2009 to
accept the Offer, as indeed they have done, or intend to, in respect of their
own shareholdings amounting to 967,936 BPD shares, representing approximately
0.9% of the issued share capital of the Company.
Windsorville has stated its intention to honour the existing employment rights
of all employees of the Bulgarian Property Developments Group. Windsorville
intends to seek the resignation or removal of all or the majority of the BPD
directors and the appointment of such other persons as directors of Bulgarian
Property Developments Plc ("BPD") as Windsorville considers appropriate.
Group Results
The results for the year ended 31 December 2008 show a loss after tax of
GBP357,000 which is in line with expectations. This result includes increased
rental income of GBP1.1 million (2007: GBP0.5 million) from the existing
buildings at the Sofia Central Commercial Site and at Varna. Depreciation on the
existing buildings has been charged in the year for the first time resulting in
a GBP1.4 million charge to expenses. Offsetting this were realised exchange
gains of GBP2.4 million from the conversion of Euros held back into Sterling in
order to pay for the GBP21 million Special dividend. Sterling weakened from
EUR1.36 as at 31 December 2007 to EUR1.02 as at 31 December 2008.
Payment of Special dividend of GBP21 million
Following the cancellation of the Company's share premium account and the
Company having complied with its undertaking to the Court regarding creditor
protection, BPD paid a dividend of 19p per share on 17 July 2008 to shareholders
who were on the share register on 11 July 2008.
Portfolio and Net Asset Value ("NAV")
The portfolio was valued on 31 December 2008 by Colliers CRE at GBP66.2 million.
However, as required under the Takeover Panel rules, BPD had its portfolio
revalued by Colliers CRE as at 27 February 2009 and the valuation at that date
was GBP54.8 million.
The effect of this is that the NAV at 31 December 2008 was 65.1p per share.
Full details of the portfolio are contained within the notes to the financial
statements.
CHAIRMAN'S STATEMENT (continued)
for the year ended 31 December 2008
Sale and purchase of properties with FairPlay and subsequent legal dispute
As shareholders will be aware, FairPlay Commercial EAD ("FPC") has failed to
complete its purchase of our 50% stake in Varna Logistics at the agreed price of
EUR15 million and has launched a court case either to have the contract declared
void and recover the EUR3.9 million deposit that it paid or to have the contract
price unilaterally reduced to EUR9.3 million. Full details of this dispute are set
out in note 25 of the financial statements. Suffice it to say, we are vigorously
resisting these actions and are hopeful of success.
The Sofia Central Commercial Site
This is the Group's most important asset and represents almost half of the value
of the Group's portfolio.
The Group has applied for permission to increase the permitted build area on the
site from 130,000 square metres to in excess of 290,000 square metres. The
rezoning process is substantially complete. The directors believe that
permission should be granted for the increase in density by the end of 2009. The
effect of such an increase in density would be that the value of the site would
increase from the value ascribed to it by Colliers in December 2008 of GBP32.6
million to GBP62.4 million, the increase being equivalent to approximately 27.5p
per BPD share (at year end exchange rate of GBP1: EUR1.026) or, using Colliers'
February valuation, from GBP26.8 million to GBP47.9 million, an increase of
GBP21.1 million or 19.5p per BPD share (at 27 February 2009 exchange rate of
GBP1: EUR1.121).
Sandanski Retail Centre OOD ("SRC")
The Group has acquired the 50% of shares of SRC, which it did not own for a
consideration of EUR900,000.
Trakia Retail Centre OOD ("TRC")
BPD purchased FairPlay International AD's 50% shareholding in TRC, which owned a
site in the city of Plovdiv for EUR3 million (GBP2.9 million) and then sold the
whole site for EUR6 million (GBP5.8 million) realising a gain of GBP0.7 million.
Christian Williams
Chairman
24 March 2009
REPORT OF THE DIRECTORS
for the year ended 31 December 2008
The directors present their report with the financial statements of the Group
for the year ended 31 December 2008.
Principal activity
The principal activity of the Group in the period under review was that of
property development and property trading in Bulgaria. The development of the
Group's business and future prospects are considered in the Chairman's statement
on page 4.
Results and dividends
The audited financial statements for the year ended 31 December 2008 are set out
on pages 11 to 54. The consolidated income statement showing the results for the
period is set out on page 11. Bulgarian Property Developments Plc paid a
dividend of 19p per share on 17 July 2008 to shareholders who were on the share
register on 11 July 2008.
Business review
Review of the Group's development and performance
The Chairman's Report on the preceding page 4 gives a comprehensive review and
assessment of the Group's activities during the period and its position at 31
December 2008 and prospects for the forthcoming year.
Business risk
The Group's returns may be subject to the risks associated with the development
of real estate projects. These risks include: risks relating to project
financing, that a developer becomes unable to fulfil its obligations, that a
suitable developer may not be available, that planning consents are delayed or
not obtained, that the management services from Bulgarian Property Management
Limited and the Group's management teams cease to continue, events affecting any
Joint Venture partner or difficulties in identifying and securing attractive
property investments in Bulgaria.
Other risks identified by the Group include: geographical and political risks
associated with Bulgaria, financial risks such as lack of available funds to
meet the Group's needs, interest rate risk and currency risk (See note 1).
The Group views effective risk management as integral to the day-to-day business
decisions and encourages all its managers to assess risk on a continuous basis.
Future development
Since 5 March, Windsorville is the controlling shareholder of BPD. It is the
current intention of the board of Windsorville that, now that the Offer becomes
unconditional in all respects, will explore options to raise additional capital
for BPD, which may be raised all or in part from Windsorville. The Group will
develop and improve its existing property portfolio.
Environment
The Group is committed to effective environmental management, and regards
regulatory compliance as a minimum standard. In the light of best practice in
the property development industry, the Group will seek to set policies that
match the Groups operations with the increasing need to manage environmental
performance of existing and new developments; including energy and water
consumption, waste management, water and air pollution, and contractor and
tenant awareness.
Key performance indicators (KPI's)
The Group's success is principally measured in terms of the adjusted Net Asset
Value per share. This is based upon the market value of the Group's property
portfolio as valued by a third party valuer, Colliers, London. This allows the
Group's management to monitor the growth in value created as projects are
developed.
The adjusted Net Asset Value is arrived at with reference to the Group's
property assets as valued by Colliers, London, reflecting the actual percentages
held by the Group. To this figure is added its non property assets minus its
total liabilities. In calculating the adjusted Net Asset Value, no provision is
made for tax that may arise on a sale at that value. Please refer to the
Chairman's statement for details of the Group's performance in respect of this
KPI.
REPORT OF THE DIRECTORS (continued)
for the year ended 31 December 2008
Directors
The directors during the period were:
C D L Williams
I L G Hesmondhalgh
P A Pashov
K J Springall
J S Mackay
N K Galchev
R N Galtcheva (alternate)
Following Windsorville Investments Limited becoming the owner of the majority of
the shares in the Company, it is expected that Mr. Richard McGuire and Mr. Marek
Piwek will be appointed as directors of the Company and that all, or the
majority, of the current board will step down. In accordance with the Company's
articles of association, it is expected that both Mr. Richard McGuire and Mr.
Marek Piwek will retire from office at the Annual General Meeting, being the
first such meeting following their appointment and, being eligible, each will
offer themselves for re-appointment.
The interests of the directors holding office at 31 December 2008 in the issued
share capital of the Company are as follows:
+---------------------------------------------+----------------+----+----------------+
| | 31 December | | 31 December |
| | 2008 | | 2007 |
+---------------------------------------------+----------------+----+----------------+
| | Ordinary 25p | | Ordinary 25p |
| | shares | | shares |
+---------------------------------------------+----------------+----+----------------+
| | | | |
+---------------------------------------------+----------------+----+----------------+
| C D L Williams | 125,000 | | 50,000 |
+---------------------------------------------+----------------+----+----------------+
| I L G Hesmondhalgh | | 383,375 | | 200,001 |
+---------------------------------------------+----------------+----+----------------+
| P A Pashov * | 212,001 | | 212,001 |
+---------------------------------------------+----------------+----+----------------+
| K J Springall | - | | - |
+---------------------------------------------+----------------+----+----------------+
| J S Mackay | 50,000 | | 50,000 |
+---------------------------------------------+----------------+----+----------------+
| N K Galchev | - | | - |
+---------------------------------------------+----------------+----+----------------+
| R N Galtcheva (alternate) | - | | - |
+---------------------------------------------+----------------+----+----------------+
| Of the above, 88,423 are held by family trusts or by Mrs Hesmondhalgh. * Of
the above, 12,000 are held in a family trust of which there are 4 trustees, one
of whom is the wife of Mr Pashov.
Related party transactions
For details of related party transactions, including transactions with
directors, please refer to note 24 of the financial statements.
Statement of directors' responsibilities
Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
Company and Group and of the profit or loss of the Company and Group for that
period. In preparing those financial statements, the directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgments and estimates that are reasonable and prudent;
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company and Group will continue in business;
and
* state where applicable accounting standards have been followed, subject to any
material departure disclosed and explained in the financials statements.
The directors are responsible for ensuring that the directors' report and other
information included in the annual report is prepared in accordance with law in
the United Kingdom. They are also responsible for ensuring that the annual
report includes information required by the AIM rules.
REPORT OF THE DIRECTORS (continued)
for the year ended 31 December 2008
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
entity and to enable them to ensure that the financial statements comply with
the Companies Act 1985. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Corporate governance
The directors are aware of the principles underlying the provisions of Section 1
of the Combined Code. The Company has an audit and remuneration committee and it
will continue to implement requirements of the Combined Code as the Company
develops. During the year, at the Board's request, KPMG Bulgaria resigned as
auditors of Bulgarian Property Developments EOOD and Ernst & Young Audit OOD was
appointed.
Financial risk management
Details of the Group's financial risk management objectives and policies and
their exposure to risks associated with the use of financial instruments are
disclosed in notes 1 and 21 to the financial statements.
Directors' and officers' liability insurance
The Company carries appropriate insurance cover in respect of possible legal
action being taken against its directors and senior employees.
Supplier payment policy
The Company's normal policy, which is also applied by the Group, is to pay
suppliers at the end of the month following that in which the supplier's invoice
is dated. This policy is made known to all suppliers on request. The creditor
days for the Company at 31 December 2008 were 21 days (31 December 2007: 68
days).
Subsequent events
For details of all subsequent events, please refer to note 25 to the financial
statements.
Charity
The Group supports the Bulgarian charity One Life (Year to 31 December 2008:
EUR10,000, Period to 31 December 2007: GBP5,000). One Life helps children
suffering from life shortening and life threatening diseases in Bulgaria. The
One Life Bulgaria charity is registered in Bulgaria in accordance with the Law
for Charitable Organisations Act in Sofia City Court File number 13378/2004,
BULSTAT 131359582.
Disclosure of information to the auditors
Each of the directors of the Company have confirmed that, in fulfilling their
duties as a director, they have:
* taken all necessary steps in order to make themselves aware of any information
relevant to the audit and to establish that the auditors are aware of that
information; and
* so far as they are aware, there is no relevant audit information of which the
auditors have not been made aware.
Auditors
A resolution to re-appoint the auditors, Nexia Smith & Williamson, will be
proposed at the next Annual General Meeting.
ON BEHALF OF THE BOARD:
Keith Springall
Director 24 March 2009
INDEPENDENT AUDITORS' REPORT
To the shareholders of Bulgarian Property Developments Plc
We have audited the Group and the parent company financial statements of
Bulgarian Property Developments Plc for the year ended 31 December 2008, which
comprise the Consolidated Income Statement, the Consolidated and Company Balance
Sheets, the Consolidated and Company Cash Flow Statements, the Consolidated and
Company Statement of Changes in Equity and the related notes 1 to 27. These
financial statements have been prepared under the accounting policies set out
therein.
This report is made solely to the Company's members, as a body, in accordance
with Section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the Company's members those matters we are required to
state to them in an auditors' report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report and the
financial statements in accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union applied
in accordance with the provisions of the Companies Act 1985 are set out in the
Statement of Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies Act
1985. We report to you whether in our opinion the information given in the
Directors' Report is consistent with the financial statements. The information
given in the Directors' Report includes that specific information presented in
the Chairman's Statement that is cross-referred from the Business Review section
of the Directors' Report. We also report to you if, in our opinion, the Company
has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if the information
specified by law regarding Directors' remuneration and transactions with the
Company is not disclosed.
We read other information contained in the Annual Report and consider whether it
is consistent with the audited financial statements. This other information
comprises only the Chairman's Statement and the Directors' Report. We consider
the implications for our report if we become aware of any apparent misstatements
or material inconsistencies with the financial statements. Our responsibilities
do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the Group's and Company's circumstances, consistently applied and adequately
disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
INDEPENDENT AUDITORS' REPORT (continued)
To the shareholders of Bulgarian Property Developments Plc
Opinion
In our opinion:
* the financial statements give a true and fair view, in accordance with IFRSs as
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