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(ATLS.L) Atlas Estates Ltd Buy/Sell
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| Date/Time | Headline | Source |
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| 15-03-10 | PRN |
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ATLAS ESTATES LIMITED (Registered in Guernsey - Number 44284) Registered Office: Martello Court, Admiral Park, St Peter Port, Guernsey, GY1 3HB __________________________ TELEPHONE: +44 1481 211000 FACSIMILE: +44 1481 211001 e-mail: fundcosec@intertrustgroup.com For immediate release 15 March 2010
AUDITED RESULTS FOR THE TWELVE MONTHS TO 31 DECEMBER 2009 Atlas Estates Limited, the Central and Eastern European ("CEE") property investment and development company, today reports full year results for the twelve months ended 31 December 2009. The consolidated financial statements and the Company financial statements for the 12 months ended 31 December 2009 are available on the Company's website at www.atlasestates.com. Financial summary * Revenue Euro47.3 million (2008: Euro51.9 million) * Loss after tax of Euro49.2 million (2008: Euro39.7 million) * Gross profit less administrative expenses Euro5.2 million (2008: Euro1.2 million) * Capital losses from investment properties, impairment on inventory and loss on disposal of joint venture interests of Euro53.0 million (2008: Euro5.3 million) * Net Asset Value per share at 31 December 2009 of Euro2.42 (31 December 2008: Euro 3.68) * Adjusted Net Asset Value per share at 31 December 2009 of Euro2.95 (31 December 2008 Euro4.42) * Bank loans at 31 December 2009 of Euro260.0 million (31 December 2008: Euro247.7 million) Operational summary * Completion of the construction of the Platinum Towers residential development in Warsaw with 396 apartments - apartment handovers commencing with 26 apartment sales in late 2009 * Construction activity on Capital Art Apartments stage 2 has been completed on time and in line with budgets * These two developments will bring 696 apartments to market in 2009 and 2010 with pre-sales to date of 560 apartments * Capital Art Apartments stage 1 sales completions of 206 out of 219 with revenue of Euro12.4 million recognised in 2009 (Euro13.0 million recognised in 2008) * Hilton performing ahead of the market in adverse trading conditions from reduced business travel * Poland the only economy in Europe to achieve growth in 2009. Other Atlas markets with GDP decline between 4% and 7% * Significant progress in renegotiating banking facilities in spite of material decreases in property values Commenting, Quentin Spicer, Chairman of Atlas, said: "This year has been extremely challenging for any real estate group with operations in Central and Eastern Europe. Atlas has made progress in the delivery of its corporate strategy. A significant milestone is the completion of the Platinum Towers residential development, with twin towers over 22 floors and situated alongside the Hilton Hotel, as part of a unique development in Warsaw. The development has 396 quality apartments including 16 penthouses, and a piazza with commercial area to be let. The Capital Art Apartments development in Warsaw is being completed in line with plans and providing another new development in the city. Recession has hit the region hard following the banking crisis and as a result the Group's adjusted net asset value has fallen by Euro68 million to Euro138 million. The Polish economy has shown resilience and it is Atlas's major market. The Company is well positioned in this economy and will benefit from any upturn in demand in the region" For further information contact: Atlas Management Company Limited Tel: +44 (0)20 7245 8666 Nahman Tsabar - Chief Executive Officer Michael Williamson - Chief Financial Officer Fairfax I.S.PLC, London Tel: +44 (0)20 7598 5368 David Floyd Rachel Rees
ATLAS ESTATES LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2009 Atlas Estates Limited PO Box 119 Martello Court Admiral Park St Peter Port Guernsey GY1 3HB Company number: 44284 Contents Page 3 Introduction 4 Financial Highlights 5 Chairman's Statement 10 Review of the Property Manager 22 Property Portfolio Information 24 Directors - Atlas Estates Limited 25 Directors and Senior Management - Property Manager, Atlas Management Company Limited 26 Advisors 27 Directors' Report 35 Remuneration Report 38 Declaration of the Board of Directors 39 Independent Auditor's Report 40 Financial Statements 46 Statement of Accounting Policies 56 Notes to the Consolidated Financial Statements 87 Principal subsidiary companies Introduction Atlas Estates Limited ("Atlas" or the "Company") is a Guernsey incorporated closed-ended investment company investing in real estate in Central and Eastern European countries ("CEE"). Atlas shares were admitted to trading on the Alternative Investment Market, a market operated by the London Stock Exchange plc ("AIM") on 1 March 2006 and on 12 February 2008 the Company was admitted to the Warsaw Stock Exchange (WSE). The Company and its subsidiary undertakings (the "Group") invest in real estate assets in CEE excluding the former USSR. The Group currently operates in the Polish, Hungarian, Romanian and Bulgarian real estate markets investing in yielding assets and development projects. The Company's assets are managed by Atlas Management Company Limited ("AMC"), a company whose sole purpose is to manage the Company property portfolio. AMC provides the Company with a management team with vast experience and knowledge of real estate investment and development. In particular AMC can demonstrate a good track record of investment, development and management of property in CEE markets. Financial Highlights
properties
shareholders
activities
to equity holders of the Company
(1) "Adjusted net asset value" includes valuation gains net of deferred tax on development properties held in inventory and land held under operating leases, but not recognised at fair value in the balance sheet.Chairman's Statement Dear shareholders, I am pleased to announce the consolidated financial results for Atlas Estates Limited and its subsidiary undertakings for the year ended 31 December 2009. Against a backdrop of very challenging conditions in the global markets, the Company has been able to achieve a number of key objectives. It has been a difficult business environment for the CEE region in 2009, as a direct consequence of the global economic and banking crisis. The majority of the economies in the region have been in recession and are reporting decreases in gross domestic product ("GDP"). As a result there have been large reductions in asset valuations and instability in CEE currencies. In this environment the objectives of the Company remain to retain cash for investment, realise value from disposals, control costs and ensure projects are completed on time and within budgets. The Company's portfolio is predominantly located in Poland with 75% of gross assets. The Polish economy has been widely reported as the top performer in Europe, achieving 1.5% growth in GDP and improved market conditions in the second half of 2009. The Company has achieved key milestones by focusing on its Warsaw properties, where the Group has completed the construction of the Platinum Towers residential development and received the permit to hand over apartments. It has also completed construction of the second stage of the Capital Art Apartments development with the first stage having been completed in 2008. In the second half of 2009 we have seen more stability in market conditions in Warsaw. A key area of focus for the implementation of the Company's strategy has been obtaining appropriate extensions and modifications of bank facilities and restructuring of debt facilities. The deterioration in the global credit markets has resulted in curtailed banking liquidity, which has led to reduced lending and few property transactions in the CEE region. In 2009 in this difficult environment the Company has completed the construction of the Platinum Towers and the Capital Art Apartments stage 2 developments having worked closely with two lenders to access the finance. Reported Results The Group has reported a large fall in adjusted net asset value of 33% from Euro 206 million at 31 December 2008 to Euro138 million at 31 December 2009 and a fall in basic net asset value of 34% from Euro174 million to Euro114 million. The fall in adjusted and basic net asset value principally arises from the following material capital movements: * Euro35.6 million fall in valuation of investment properties in 2009 as per the external valuations of King Sturge. These decreases in property valuation have arisen across all the markets in which the Company holds investment properties and reflects increasing yields, falling rentals and lower occupancy rates as well as the underlying weakness in each economy. * Euro10.8 million fall in valuation of property, plant and equipment in 2009 as per the external valuations of King Sturge. These decreases in property valuation for the hotels of the Group reflect the underlying weakness and uncertainty for the hospitality market in the CEE region as reflected in increasing yields as applied in the valuations. * Euro9.9 million for impairment of inventory in 2009 where the cost of inventory is higher than the valuations of King Sturge. These impairments reflect falling development lands and uncertainties in the economies in the CEE region. * Euro1.6 million for the loss on sale of joint venture interests in Eastfield Atlas, Slovakia and Euro5.9 million for the write down of assets held for sale to the net realisable value in Circle Slovakia. At the operating level the Group has reported an increase in gross profit less administrative expenses at Euro5.2 million for the year ended 31 December 2009 as compared to Euro1.2 million for the year ended 31 December 2008. This has arisen principally from a reduction in property manager fees, administrative expenses and property related expenses. Financing, Liquidity and Forecasts The Group has been in discussions with its banks and has refinanced or extended loans on several of its properties. Negotiations are difficult, due to the problems facing international banks and falling asset values. The Group continues to negotiate with lenders in respect of others. The Group has reported a loss before taxation for the year ended 31 December 2009 and a reduction in net asset value as at 31 December 2009. The Directors consider that although prospects are generally improving, there are challenges in the markets in which the Group operates due to reduced access to bank financing and economic uncertainty. The completion of the sale of the Group's interests in Slovakia, described in more detail below, will significantly improve the Group's overall cash position and reduce its borrowings and overheads. The Group has also recently received a loan in Hungary which will provide working capital for operations and the development of the portfolio. The Group's forecasts and projections have been prepared taking into account the economic environment and its challenges and mitigating factors. These forecasts take into account reasonable assumptions as to possible changes in trading performance, potential sales of properties and the future financing of the Group. While there will always remain some inherent uncertainty within the aforementioned cash flow forecasts, the Directors have a reasonable expectation that the Company and the Group will have adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the consolidated financial statements for the year ended 31 December 2009, as set out in accounting policies to the consolidated financial statements. InvestingPolicy The Company actively invests in a portfolio of real estate assets across a range of property types throughout CEE. The Company targets countries within the CEE which possess attractive investment fundamentals including political and economic stability, strong GDP growth and low inflation. The Company may also make investments in countries which attract increasing foreign direct investment from being part of, or from being expected to join, the EU. The Company shall not invest in states of the former USSR. The Company makes investments both on its own and, where appropriate, with joint venture partners in residential, industrial, retail, office and leisure properties in order to create an appropriately balanced portfolio of income-generating properties and development projects. There are no set restrictions on either sector or geographical spread of investments within the Company's stated investment region. The Company may employ leverage to enhance returns on equity although the extent of such leverage will vary on a property by property basis. Wherever possible, the Directors intend to seek financing on non-recourse, asset by asset basis. The Company has no set limit on its overall level of gearing, however it is anticipated that the Company will employ a gearing ratio of up to 75% of the total value of its interest in income-generating properties within its property portfolio. The Company seeks to provide Shareholders with an attractive overall return through a combination of income and long term appreciation of the Company's assets. The Board recognises that the current state of the credit markets and general downturn in the CEE economies in which the Company invests have had a negative effect on the overall value of the Group's portfolio, causing a decline in the Company's net asset value per share. In order for the Company to achieve its long term investing policy, the Board's short term investment strategy for 2009 and 2010 is cash focused with new development activity in relation to parts of its portfolio being selectively deferred but with current active projects displaying good sales being progressed on time and on budget and being brought to a conclusion to achieve intended returns. No dividends are expected to be paid in the short term. Disposal of interests in Slovakia and new loan in Hungary Atlas announced on 3 November 2009 that it had signed an agreement for the sale of its entire investment interests throughout Slovakia (the "Slovakia Portfolio"), comprising 3 sites: one in Bratislava and two in Kosice, which were held in a joint venture in which Atlas had a 50 per cent interest. The Group is expected to realise Euro8 million in net proceeds from the sale of the Slovakia Portfolio. The combined impact of ceasing to consolidate its share of debt in the joint venture and the receipt of the cash consideration will reduce the Group's overall debt by some Euro20.5 million pending any reinvestment of the cash proceeds. The Board intends to utilise the net proceeds to fund the development of the Group's remaining assets, with particular focus on the assets located in Warsaw, Poland, where the Group has a strong presence and is likely to realise value from development activity within the next two to three years. This contrasts with the projects in Slovakia, which would have required the investment of large amounts of capital with returns arising in the long term. The completion of the disposal of Atlas interests in Slovakia was to be in two stages. The first stage was completed in November 2009 and proceeds of Euro853,000 were received. The second stage was due for completion within 70 days of the signing of the contract, when a further Euro7,147,000 was due to be received. On 18 January the Company announced that due to delays by the purchaser in obtaining a relevant consent from the loan provider to the joint venture, the completion of the sale of investments in Slovakia did not take place by the due date. The parties to the contract still wish to proceed with the sale and purchase of the remainder of the portfolio and negotiations are taking place with a view to completing this transaction as soon as practicable. On 25 January 2010 the Company announced that its Hungarian subsidiary Cap East Kft, which owns the Metropol office building in Budapest, had signed a credit facility for Euro3.1 million with FHB Kereskedelmi Bank Zft. This loan will be utilised as working capital for operations and to fund the development of its portfolio. This new loan is a significant achievement in very tight credit conditions. It will provide increased liquidity and will enable the business to increase investment in projects, which are realising value. Amendment agreements with Erste Bank to the facility agreements for Millennium, Ligetvaros, Solaris and Voluntari As described in detail in the Review of the Property Manager, on 24 February 2010 the Group companies Atlas Estates (Millennium) Sp. z. o.o, Ligetvaros Kft, Atlas Solaris SRL and World Real Estate SRL signed an amendment agreement with Erste Bank. This agreement created a cross collateralisation arrangement between these four companies with respect to the loans provided by Erste Bank. In return for this cross collateralisation the bank agreed to waive any claims for any breaches of covenants which were in existence. A new covenant of interest service coverage has been included, with a priority of payments list, reduced margins on each loan and extension of maturity dates for the two Romanian land loans to 31 December 2012. This agreement provides the Group with major improvements in the loan terms on each of these four assets and overcomes breaches of covenants on three of the loans. As a result of this, loans of Euro88 million will be reclassified in future reporting periods from current liabilities due within one year to non-current liabilities due in after one year. Net Asset Value ("NAV") and Adjusted Net Asset Value ("Adjusted NAV") In the twelve months to 31 December 2009, NAV per share, as reported in the consolidated financial statements which have been prepared in accordance with International Financial Reporting Standards ("IFRS"), has decreased by 34% to Euro 2.42 per share from Euro3.68 per share at 31 December 2008. The adjusted NAV per share, which includes valuation gains, net of deferred tax on development properties held in inventory and land held under operating lease, but not recognised at fair value in the balance sheet, has decreased by 33% to Euro2.95 per share from Euro4.42 per share at 31 December 2008. An independent valuation of the entire property portfolio is carried out on a semi-annual basis. At 31 December 2009 this has been undertaken by King Sturge acting as independent experts. This assessed the total movement in value during the financial year and is included in the basis for the Property Manager's performance assessment and fee calculations. The change in value of the development land holdings over their book cost reflects the latent value within the project, which is over and above the book cost. These land holdings are valued on a residual value and comparative basis. Profit is taken upon completion of the project and when the risks and rewards of ownership of an apartment or property are transferred to the client. A key indicator of performance is the net asset value of the Group. The following table sets out the impact on NAV per share of the revaluation of land assets that cannot be reflected in the reported balance sheet due to accounting standards.
held under operating lease
included in total assets at cost
to the Group
partners
valuation of development landand
land held under operating lease
valuation of development land and
land held under operating lease
at local rates
sheet attributable to equity
holders of the Company
issue at
31 December 2009
share as at
31 December 2009
share as at
31 December 2008
(after costs) Further analysis of the Company's NAV is contained in the Property Manager's review below. Central and Eastern Europe In many of the markets throughout the CEE region, GDP levels have been in decline. Poland has been one of the most resilient economies in Europe with reported growth in GDP of 1.5%. Romania received Euro20 billion of IMF financial support and has reported a fall in GDP of 7%. Hungary has also received Euro15 billion of IMF financial support and reported a fall in GDP of 4% in 2009. The Slovakian economy declined by 5% in terms of GDP in 2009. These weak economic conditions have arisen with a slump in foreign investment and bank finance to the region. As a result, investment and development activity in the real estate market has been in decline. In the longer term the Company remains committed to its strategy of investment in this region, as we believe that the markets will continue to offer growth rates ahead of those to be offered in the more developed markets in Western Europe. The Company has benefited in previous years from the growth in these markets. It is now experiencing a reversal, but, as the Company operates in a cyclical business, the Directors are taking a longer term strategic view in managing the portfolio. This will allow the Company to benefit from the next positive stage in the property and economic cycle. Risks and uncertainties The Board and the Property Manager continually assess and monitor the key risks of the business. The principal risks and uncertainties that could have a material impact on the Group's performance are summarised in the Property Manager's Report on pages 20 and 21 below. Changes in Nominated Adviser, Non-executive Director and Administrator and Company Secretary On 17 March 2009 the Company announced that it had appointed Fairfax I.S. PLC as the Company's Nominated Adviser (NOMAD) and Broker. On 29 May 2009 the Company announced the resignation of Dr Helmut Tomanec from the Board of Directors. Dr Tomanec made a great contribution to the Company as a valued Non-executive Director and the Board wish to thank him for his efforts. On 26 November 2009 the Company announced that it had appointed Intertrust Fund Services (Guernsey) Limited as the Company's new Administrator and Company Secretary. Prospects As reported previously, the global economic crisis has had a very significant impact on the economies and prospects in the CEE region. Many economies in the region are experiencing a decline in GDP, as access to funding has become restricted and investment has been put on hold. There have been improvements in sales demand in recent months in Warsaw, as Poland confirms its position as the most resilient market in Europe. For 2010 and beyond there have been forecasts of stabilisation and recovery for certain markets in the CEE region. The timing and extent of recovery is uncertain and depends upon how the financial crisis in the global markets resolves itself. Therefore the directors and management of Atlas continue to adopt a prudent and measured approach to investment. Atlas has achieved significant progress with developments in Warsaw and is realising value from cash in-flows as apartments are sold. Bank refinancing and cash proceeds due from the sale of assets will provide the Group with the liquidity to develop further projects. The potential remains for the economies of the CEE region to revert in time to achieve growth rates outperforming those of most Western economies. Quentin Spicer
CHAIRMAN 15 March 2010 Review of the Property Manager In this review we present the financial and operating results for the twelve months ended 31 December 2009. Atlas Management Company Limited ("AMC") is the Property Manager appointed by the Company to oversee the operation and management of Atlas' portfolio and advise on new investment opportunities. At 31 December 2009, the Company held a portfolio of 21 properties comprising 10 investment properties of which eight are income yielding properties and two are held for capital appreciation, two hotels and nine development properties. As highlighted in the Chairman's Statement on page 6 Atlas signed an agreement for the sale of its entire investment interests throughout Slovakia (the "Slovakia Portfolio"), comprising three sites in Bratislava and Kosice. This will reduce the portfolio of assets by three properties going forward and will end the Company's interests in Slovakia. The Company has disposed of the two properties in Kosice, but awaits bank consent to complete the disposal of its property in Bratislava. Markets and Key Properties Poland This is the major market of operation for the Group, with 75% of the portfolio. The Polish economy has proven to be the most resilient in the CEE region with positive GDP growth of 1.5% for 2009. The Polish currency weakened substantially in the first half of 2009 in response to the economic uncertainty in the CEE region and recovered in the second half of the year. The forecasts for 2010 and 2011 are relatively positive in comparison to other markets. It is seen by many commentators as the growth market in Europe. Its capital, Warsaw, is forecast to be the key driver of growth due to its high employment levels and need for labour. The Group's major operations are in Warsaw with over half of the assets of the Group. Hilton Hotel, Warsaw The Hilton Hotel in the Wola district of Warsaw is the Group's most prestigious asset. The CEE region and the hotel market across Europe have been adversely impacted by the global economic downturn. Despite this difficult market occupancy rates for 2009 were at 64% compared to 65% in 2008. Hilton management have been able to overcome the decline in the market through competitive pricing and developing a customer base beyond the business sector in the local Polish market. Management have undertaken measures to mitigate the threats of the market and potential lower occupancy rates, through tight cost controls, overhead and headcount reductions. As a result operating margins have increased in the hotel operation to 33% in 2009 compared to 30% in 2008. The Company also lets areas of the property to Holmes Place health club, Olympic, the casino operator, and a number of smaller retailers. There have been no significant changes to report in these leases. Platinum Towers The Platinum Towers development, located adjacent to the Hilton, was completed in the third quarter in line with budget and according to schedule. A permit to commence the hand over of apartments was obtained and this process has started. There has been sales recognition in quarter 4 2009 for 26 apartments, with the majority of sales to be recognised in 2010. The completion of this development in the most adverse market and credit conditions is a significant achievement for the Group. In Warsaw many developers have had to put developments on hold due to restricted finance. The twin tower development provides 396 apartments and a retail and piazza area on the ground and first floors. This development alongside the Hilton Hotel will provide a unique development in Warsaw. It is planned to build an office tower in the future, which will enhance the attractiveness of this site. Pre-sales of 31 apartments were concluded in 2009. In total, pre-completion apartment sales are at 358 (apartments sold subject to completion). This development has been successfully completed with the support of Raiffeisen Bank and close cooperation between AMC management and the general contractor. Capital Art Apartments The Capital Art Apartments development in Warsaw is a significant development in the Wola district of Warsaw close to the city centre. It is a three stage development which will release 739 apartments with parking and amenities, including retail facilities. This project is being developed in three stages. Construction of the first stage was completed in the fourth quarter of 2008. The construction of the second stage was completed in 2009, meeting budgeted timelines and cost. For stage 1 the sale of 99 apartments were recognised as income for the first time in 2008. In 2009, a further 107 sales of apartments have been recognised as income. Revenue recognised in 2009 was Euro12.4 million and for the fourth quarter of 2008 was Euro13.0 million. The Company has sold to date 218 out of 219 apartments in stage 1. For stage 2 apartment pre sales have reached 202 out of 300 apartments available. The majority of apartments will be recognised as revenue on completion in 2010. Stage 3 construction is planned to commence at the end of 2010. Millennium Plaza The Company owns this retail and office complex situated in Warsaw city centre, a landmark tower with 28 floors. Trading conditions have been difficult in 2009, with the loss of tenants and falling rents as the retail and office markets have been under pressure. Occupancy levels have been maintained at 63% with replacement tenants offsetting leavers from the building. In second half of 2009 and in early 2010 the Company has secured new tenants for both the retail and office areas, which will increase occupancy levels. Other properties in Poland The Group's portfolio also contains valuable land assets in Warsaw, for which it has acquired or is in the process of acquiring zoning and permits for further development. There are two properties in Warsaw known as Zielono and Cybernetyki, which the Company would like to develop, subject to access to appropriate finance. Both properties have the zoning and permits. The land on the Wola site alongside the Hilton and the Platinum Towers office development has received approvals to extend the proposed office building to 40 floors. This is a significant milestone in the development options for this site. The Group has two properties in Gdansk. The Sadowa office building has had no significant changes in occupancy and remains close to fully let. The Kokoszki land has had no significant development this year. Hungary In Hungary, the Group portfolio comprises seven properties, all of which are located in Budapest. Five are income producing assets, including the Ikarus Business Park. It is anticipated that some of these properties may be redeveloped in the future. GDP for the Hungarian economy is reported as having declined by 4% in 2009 and it has suffered adversely from the global credit crisis and lack of liquidity available for development projects. As a result, Atlas has stopped development activity and, on its income yielding assets, has experienced client losses and pricing pressures. The weak economy has adversely affected rentals at the Ikarus Business Park with a loss of tenants and downward pressure on rental levels. These clients have included suppliers to the automotive industry. The Group continues to actively market the vacant space in its properties in difficult market conditions. Cost control measures have been undertaken. The Atrium Homes development property is a two-stage development. The construction of stage 1 has been delayed due to current economic conditions. There have been no other significant changes in the other properties, with tenancy levels being maintained in line with prior year levels. Romania The Group's portfolio contains three properties in Romania, including the Golden Tulip Hotel and two significant land banks. The Romanian economy has declined this year by 7% and IMF funding has been provided to support it. Forecasters are uncertain if IMF financing conditions will be met. As a result, property values have taken a dramatic fall in 2009. In difficult trading conditions, occupancy rates at the Golden Tulip have fallen to 57% in 2009 compared to 64% in 2008. The Group has undertaken cost control measures to mitigate the current loss of business at the hotel operation. Bulgaria The Group holds one rental property in Sofia. This office building has had no significant changes in tenancies during the period. GDP has declined by 6% in 2009 and expectations are that the downturn will continue and that IMF funding support will be required. Financial Review Portfolio valuation and valuation methods An independent valuation of the entire property portfolio is carried out on a semi-annual basis by independent valuation experts. Independent valuations may also be performed when a new property is acquired. The most recent valuation was performed at 31 December 2009 by independent real estate advisors, King Sturge. The properties in Slovakia were independently valued at 30 June 2009 by Colliers International. These valuations were used to determine the provision for the loss on disposal and the asset held for sale. No independent valuation was undertaken at 31 December 2009 on the Slovakian properties as a disposal price was agreed with a third party purchaser, which was used in the accounting for the asset held for sale to write the value down to net realisable value. The gross market value of the property assets within the Company's portfolio, including valuation gains on development properties held in inventory and land held under lease but not recognised at fair value in the balance sheet, and including minority interest, was Euro473 million as at 31 December 2009. This compares to the valuation at 31 December 2008 of Euro558 million. Loans As at 31 December 2009, the Company's share of bank debt associated with the portfolio of the Group was Euro260 million (31 December 2008: Euro248 million). Loans and valuations may be analysed as follows for those periods in which valuations were undertaken:
2009 2008
property
property in
construction
development
property
disclosed as
held for sale
The valuations in the table above differ from the values included in the consolidated balance sheet as at 31 December 2009 due to the treatment under IFRS of land held under operating leases and development property. Loans maturing within one year are Euro156.0 million at 31 December 2009 (excluding those classified as held for sale) compared to Euro95.7 million at 31 December 2008. The change has arisen from the maturing of debts and from the reclassification of four loans with breaches at 31 December 2009. Two of these loans, totalling Euro67.1 million in 2009, were in breach at 31 December 2008 and were also classified as bank loans and overdrafts due within one year or on demand at 31 December 2008. The other two breaches at 31 December 2009 relate to the non payment of interest on loans, for loans totalling Euro25.4 million. Also included within loans repayable on demand for 2009 (due within one year for 2008) is an amount of Euro9.0 million (2008: Euro8.4 million) and negotiations are on going with the bank on refinancing terms. The banks have been made aware of all these breaches and have not asked for repayment of the loans. Three of these loans are included in a recent cross collateralisation agreement with Erste Bank, which is detailed in the debt financing section below. Under this agreement the breaches under the three loans have been waived. However as the loans were in breach at 31 December 2009, the Company's reporting date, the loans have been classified as repayable on demand in the balance sheet as at 31 December 2009. Cash and cash equivalents was Euro13.1 million at 31 December 2009 (31 December 2008: Euro15.3 million). The gearing ratio is 218%, based upon net debt as a percentage of equity attributable to shareholders and is 69% based upon net debt as a percentage of total capital (net debt plus equity attributable to equity holders). The ratios were 135% and 57% respectively as at 31 December 2008. Debt financing During 2009 the Group's predominant focus has been on maintaining regular dialogue with its lending banks, assessing performance of the properties relative to covenant testing ratios. The Group has its principal facilities with Erste Bank, Investkredit Bank and Raiffeisen Bank. The financial covenants within the Group's secured debt facilities fall into two main categories: annual Loan to Value ("LTV") tests and interest (and debt) service cover ratios ("ISCR" and "DSCR") based on audited financial statements for each company. Management continue to have detailed discussions with its senior debt providers. The current status of each of these facilities with the banks is set out below and in note 24 to the financial statements. Erste Bank facilities The Group has four facilities with Erste Bank. 1. Euro65 million facility secured on the Millennium Plaza Building in Warsaw, Poland with a maturity date of 2016; 2. Euro4 million facility secured on the Ligetvaros Centre in Budapest, Hungary with a maturity date of 2021; 3. Euro12.5 million facility secured on the Voluntari land plot in Bucharest, Romania with a maturity date of December 2012 ( prior to cross-collaterisation agreement: December 2010); 4. Euro12.9 million facility secured on the Solaris land in Bucharest, Romania with a maturity date of December 2012 (prior to cross-collaterisation agreement: June 2010). The covenants were breached on three of the above loans (Millennium, Voluntari and Solaris) and as a result the Group entered into discussions with Erste to remedy these breaches. The solution proposed and agreed in February 2010 was to have a cross-collateralisation agreement with Erste Bank on all four loans. The terms of this amendment agreement to the four facilities included a bank waiver with respect to all previous breaches of covenants or default events under the facilities. New terms have been agreed, including a priority of payments schedule, reduced margins for each loan and new maturity dates. A new ISCR covenant is to be measured across the combination of all four assets. A new LTV covenant comes into effect from 1 January 2013. This is a significant step forward for the Group as this agreement overcomes the breaches of covenant and events of default on three properties and facilities. Investkredit Bank facilities The Group has had in operation five facilities with Investkredit Bank in 2009: 1. Polish Zloty 78 million facility for the construction of the Capital Art Apartments project stages 1 and 2 in Warsaw, Poland, with a maturity date of December 2010; 2. Euro65 million facility secured on the Hilton Hotel in Warsaw, Poland with a maturity date of 2015; 3. Polish Zloty 13 million facility secured on the Zielono land plot in Warsaw, Poland, with a maturity date of June 2010 4. Euro5.9 million facility secured on Atlas House office building in Sofia, Bulgaria, with a maturity date of 2017; 5. Euro25 million facility secured on the Vajnory land plot in Bratislava, Slovakia with a maturity date of March 2010. The construction facility was extended from Polish Zloty 45 million for stage 1 to Polish Zloty 78 million for the construction of stage 2 of the Capital Art Apartments development. The Zielono land loan matured in February 2009 and was successfully extended to December 2009 and then onto June 2010. The LTV covenant was breached on Atlas House, Sofia and the loan reclassified as a current liability. Discussions have been ongoing with the bank, the debt has been serviced and the bank have not requested repayment of the loan. The Vajnory land loan which matured in March 2009 was successfully extended for 12 months to March 2010. Bank consent under this loan agreement is required for the completion of the disposal of Atlas interests in Slovakia, as set out in the Chairman's Statement. There were no material changes to the facility for Hilton. Raiffeisen Bank facilities The Group has two facilities with Raiffeisen Bank: 1. Polish Zloty 174 million facility for the construction of the Platinum Towers residential twin towers project in Warsaw, Poland with a maturity date of June 2010; 2. Polish Zloty 35 million facility secured on the Kokoszki land plot in Gdansk, Poland which matured in September 2009 and for which the terms of a formal extension are still awaiting signature from the Company and the bank. The construction facility has been critical in the successful completion of the building work on the two towers and retail and piazza area for the Platinum Towers project. Discussions have been ongoing to secure an extension of the land loan for the Kokoszki plot in Gdansk. Terms are agreed in principal and the Company is awaiting final signature. There are 6 other facilities secured on 6 different properties. Discussions have been ongoing with each of the banks for these loans to secure extensions and agree new terms. Key changes in the terms of these facilities are set out below: The new Euro3.1 million 8 year facility with FHB Bank in Hungary for the Metropol Building, Budapest, Hungary was announced in January 2010 and as significant new financing is highlighted in the Chairman's Statement. With respect to the Euro14.9 million loan on the Ikarus Industrial Park in Budapest, Hungary with MKB Bank, a two year deferral of principal repayment was agreed, subject to the final approval, with the bank in February 2010, due to the difficult trading conditions being experienced at this industrial park in Budapest, Hungary. On the Euro3.6 million loan secured on the Golden Tulip Hotel in Bucharest, Romania a moratorium on principal repayments due to difficult trading conditions for the hotel, was agreed, subject to the final approval, with Alpha Bank in 2010. Discussions are in progress to extend the Euro6 million facility secured on the Volan site in Budapest, Hungary with Volksbank, which matured in February 2010. A signed agreement is expected in the coming months to extend the loan under new terms. The Polish Zloty 14 million land loan secured on the Cybernetki land plot in Warsaw, Poland was extended in January 2009 for 12 months under new terms. This land loan has been extended for a further 5 months in January 2010 until June 2010. There were no material changes to the facility for Sadowa. Summary of loans by bank at 31 December 2009 gross of joint venture share and adjusted for effects of the cross-collaterisation agreement:
EURIBOR
Immobul
Total
InvestKredit
EURIBOR
EURIBOR
Total Reiffeisen
EURIBOR
Sadowa
Cybernetyki
Ikarus
EURIBOR
Volan
Metropol
Golden Tulip
Vajnory Review of the operational performance and key items on the Income Statement The financial analysis of the income statement set out below reflects the monitoring of operational performance by segment as used by management.
operations
expenses
less
administrative
expenses
less administrative expenses % Revenue As the Company maintains a diversified portfolio of real estate investments, seasonality or cyclicality of yielded income or results is also highly diversified. The available portfolio of assets for lease, the systematic execution and sale of residential projects and the geographical reach of the Company's portfolio has, to a significant extent, resulted in stable levels of income being earned. Development Properties
expenses
administrative expenses Sales are only recognised when apartments have been handed over to new owners with the full price of the apartment received by the Group as a result. As a result the economic risks and rewards were transferred to the new owner and in accordance with the Group's accounting policy the revenue and associated costs of these apartment sales are recognised in the income statement. Apartment sales in developments in Warsaw
for sale
apartments to date
in 2008
in 2009
in 2010
completions
The Group has signed preliminary contracts to deliver 778 apartments with a total value of Euro131.6 million at its Platinum Towers and Capital Art Apartments projects in Warsaw. On stage 1 at Capital Art Apartments, for the year ended 31 December 2009, revenue of Euro12.4 million and gross profit of Euro0.4 million (2008: Euro13.0 million and Euro2.2 million respectively) have been recognised on the sales of 107 apartments. For Platinum Towers, for the year ended 31 December 2009, of the 396 available apartments completed sales were represented by 26 apartments. This resulted in sales of Euro4.9 million and a gross profit of Euro0.7 million being recognised in the income statement. Property Rental
expenses
administrative expenses The revenue of the Group has been affected principally by the loss of tenants and falling rental levels at its two largest properties the Millennium Plaza and Ikarus Industrial Park. A key objective in 2010 is to replace lost tenants in these buildings. Hotel operations
expenses
administrative expenses This decrease highlights the effect of the global economic crisis on business travel and conferencing. Management in response to these difficult trading conditions have mitigated the revenue shortfall by reducing overheads and costs and improved controls. The Hilton in Warsaw has seen occupancy rates recover in the second half of 2009 through marketing efforts, such that the occupancy level in the hotel was 64% for 2009 compared to 65% in 2008. The hotel's revenues are enhanced by income from the conferencing and banqueting facilities, together with the high quality Holmes Place fitness centre and the casino. The hotel is regarded as an ideal venue for corporate events in Central and Eastern Europe, with competitive room rates being offered in comparison to other countries in the region. For example, the hotel hosted the Financial Times' Central & Eastern European Property Conference, which attracted more than 1,000 delegates. 2009 was a very difficult year for the hotel industry in Bucharest with 5 star hotels cutting room rates to 4 star levels to attract customers. As a result occupancy rates at the Golden Tulip Hotel in Bucharest, Romania for the year ended 31 December 2009 have fallen in difficult trading conditions to 57% in 2009 compared to 65% in 2008. Cost of operations Cost of operations was Euro31.7 millionin the year ended 31 December 2009, of which Euro16.2 million relates to the cost of construction of the apartments sold during the year. Cost of operations for 2008 was Euro35.3 million, of which costs relating to apartment sales were Euro10.7 million. The resultant decline of Euro9.1 million in costs not relating to apartment sales between 2008 and 2009 includes the effect of depreciating currencies in the region of Euro4.3 million. The underlying cost of operations has decreased by Euro4.8 million, reflecting cost savings implemented by management. Administrative expenses A key focus of the management has been overhead costs and a number of cost reduction measures have been undertaken. As a result we can report that administrative expenses were Euro10.4 million compared to Euro15.4 million in 2008. This decline of Euro5.0 million includes the effect of depreciating currencies in the region of Euro1.0 million. The underlying administrative expenses have decreased by Euro4.0 million, reflecting extensive cost savings implemented by management and the effect of reduced management fees. Valuation movement The Group has reported a loss on valuation of investment properties of Euro35.6 million for 2009 (2008: Euro4.5 million loss on valuation) in the consolidated income statement. This decrease reflects the economic crisis and fall in valuations in properties in the CEE region. There is also included in reserves decreases on revaluation of properties reported as property, plant and equipment in the consolidated balance sheet of Euro10.9 million (2008: uplift on valuation of Euro11.1 million). Other operating income and expenses Other operating income and expenses are items that do not directly relate to the day-to-day activities of the Group. Such items include: income and expenses for items that are recharged to contractors and other suppliers at cost, and other such items. The following are also included in other operating expenses: Impairment of inventory Provisions for impairment of inventory of Euro9.9 million (2008: Euro0.8 million) have been reported in the consolidated income statement. These provisions arise on potential loss of value on sales contracts for apartment sales and parking spaces and due to the fair value less costs of sale of assets being less than the carrying value of inventory. These losses are due to the weakness in the CEE region markets for development property activity. Write down to net realisable value of assets held for sale A provision of Euro5.9 million has been made to show assets held for sale at their net realisable value (Circle, Slovakia) for loss expected to be incurred on the finalisation of the sale of the Company's interests in Circle Slovakia. This is the second stage in the Company's disposal of its interests in Slovakia. Loss on sale of joint venture interests The loss on sale of joint venture interests of Euro1.6 million arises from the completion of the first stage of the disposal of the Company's interests in Slovakia. Proceeds of Euro0.9 million were received in November 2009. Finance income and costs The income statement includes finance costs of Euro10.6 million for the year ended 31 December 2009, compared with Euro16.2 million in 2008, reflecting the effect of the reduced EURIBOR and other underlying inter-bank lending rates. Foreign exchange There have been significant fluctuations in exchange rates in the underlying currencies in the countries in which the Group operates and owns assets. A summary of exchange rates by country for average and closing rates against the reporting currency as applied in the financial statements are set out below.
Closing rates
2009
2008
Average rates
The above highlights the effect of the global financial crisis spread on currencies in the CEE region and how the currencies changed over the year. Slovakia entered the Eurozone in January 2009 and Bulgarian Lev is pegged to the Euro at an exchange rate of 1.95583 Lev to Euro. Other than as detailed above, there were no factors or events that significantly impacted the year ended 31 December 2009. Net Asset Value The Group's property assets are categorised into three classes, when accounted for in accordance with International Financial Reporting Standards. The recognition of changes in value from each category is subject to different treatment as follows: * Yielding assets let to paying tenants - classed as investment properties with valuation movements being recognised in the Income Statement; * Property, plant and equipment operated by the Group to produce income, such as the Hilton hotel or land held for development of yielding assets (PPE) - revaluation movements are taken directly to reserves, net of deferred tax; and * Property developments, including the land on which they will be built - held as inventory with no increase in value recognised in the financial statements. The Company sets out below the key measures relating to Net Asset Value (NAV) per share. This includes the NAV per share per the financial statements and the adjusted NAV per share as defined at IPO and previously disclosed by the Company.
2009 2008
2009 2008
increase
Notes: The number of shares in issue as at 31 December 2009 and 2008 is 46,852,014. Included in the income statement is a loss of Euro35.6 million (2008: Euro4.5 million) arising from the revaluation of the Group's investment properties. The total revaluation reserve of Euro6.9 million (2008: Euro15.6 million) represents the revaluation of the Hilton Hotel and the Golden Tulip Hotel. The Property Manager's basic and performance fees are determined by the adjusted NAV. For the twelve months to 31 December 2009 the combined fee payable to AMC was Euro4.1 million (Euro5.7 million to 31 December 2008). Ongoing activities The Company's property portfolio is constantly reviewed to ensure it remains in line with its stated strategy of creating a balanced portfolio that will provide future capital growth over the longer term, the potential to add value through active and innovative asset management programmes and the ability to deliver strong development margins. Financial management, operational management and material risks The management team continuously monitors the territories in which the Company is invested, analysing the economics of the region and the key measures of the sectors in which it operates to ensure that it maintains its strategy and does not become over-exposed to, or reliant on, any one particular area. At the same time, it evaluates the risks and rewards associated with a particular country, or sector, in order to maximise return on investment and therefore the return it can deliver to shareholders. A key management objective is controlling and reducing construction costs and schedules at its development projects, particularly in the light of global variations in commodity prices and the increase of labour costs in the region. Another key strategy that it continues to progress is the refinancing of the portfolio, the securing of construction loans and the evaluation of various fund raising opportunities. The Company has completed four years as a quoted company and is a dual-listed entity in Warsaw and London. In continuing to fulfil its obligations to its shareholders and the markets, together with maintaining its policy of maximum disclosure and timely reporting, it is continually improving and developing its financial management and operational infrastructure and capability. Finance teams are operating in each of its major territories, with support across all countries provided by an experienced group finance team. Experienced operational teams are in place in each country, where there is significant activity, otherwise a central operational team and investment committee monitor and control investments and major operational matters. As such, the management team continually reviews its operating structures to optimise the efficiency and effectiveness of its network, which is particularly important given the current environment. We continue to enhance our internal control and reporting procedures and IT systems in order to generate appropriate, timely management information for the ongoing assessment of the Group's performance. There is in operation a financial reporting system which provides the Group with the required reporting framework, financial management and internal control. Global economic conditions The Board and AMC closely monitor the effects that the current global economic conditions have on the business and have and will continue to take steps to mitigate, as far as possible, any adverse impact that may result for the business. The main financial risks that have affected the Company in 2009 are the effect of the global liquidity crisis on the Company's ability to access capital and to realise value from property disposals amid weakening in the economies in the CEE region. Among the demonstrations of the economic uncertainty are the variations in exchange rates of countries in the region, together with a reduction in demand for new apartments in Poland and Hungary, where we have projects under construction and transactions are taking longer to reach completion. AMC has been advising the Board on a regular basis with respect to financial performance and the effect of external factors on the business. Financing and liquidity Management has experienced a change in the approach and requirements of lenders for financing in the CEE region which has been reflected in the covenants that are applied to facilities, such as a reduction of loan to value ratio, increasing margins and an increase in levels of required pre-sales on development projects. Negotiation and completion of financing agreements is also taking longer than previously experienced. Although recent news regarding the willingness of banks in the CEE region to finance projects has been negative, AMC's management team, through its strong relationship management and connections, has been able to secure financing opportunities in the region. However, the management team see this as a potential risk to the ongoing development of the Company and as a result are devoting significant resource to the management of banking relationships and the monitoring of risk in this area. Despite the difficult conditions in the financial markets the Company has been able to refinance part of its portfolio and secured loans for the construction phase of its development projects. Cash is managed both at local and head office levels, ensuring that rent collection is prompt, surplus cash is suitably invested or distributed to other parts of the Group, as necessary, and balances are held in the appropriate currency. The allocation of capital and investment decisions are reviewed and approved by local operational management, the executive team, the central finance and operational teams, by the investment committee of AMC and, finally, by Atlas' Board. This approach provides the Company with a rigorous risk management framework. Where possible, the Company will use debt facilities to finance its projects, which the Company will look to secure at appropriate times and when available, depending on the nature of the asset - yielding or development. As at 31 December 2009, the Company's share of bank debt associated with the portfolio was Euro260 million, with cash and cash equivalents of Euro13.1 million. The gearing ratio is 218%, based upon net debt as a percentage of equity attributable to shareholders and is 69% based upon net debt as a percentage of total capital (net debt plus equity attributable to equity holders). The ratios were 135% and 57% respectively as at 31 December 2008. Where possible, we refinance properties where valuations have increased, thereby releasing equity for further investment. Currency and foreign exchange Foreign exchange and interest rate exposures are continually monitored. Foreign exchange risk is largely managed at a local level by matching the currency in which income and expenses are transacted and also the currencies of the underlying assets and liabilities. Most of the income from the Company's investment properties is denominated in Euros and our policy is to arrange debt to fund these assets in the same currency. Where possible, the Company looks to match the currency of the flow of income and outgoings. Some expenses are still incurred in local currency and these are planned for in advance. Development of residential projects has created receipts largely denominated in local currencies and funding facilities are arranged accordingly. "Free cash" available for distribution within the Company is identified and appropriate translation mechanisms put in place. Conclusions AMC's key strategic objective is the maximisation of value for the Company's shareholders, which it continues to work towards. Its teams are very experienced in the active management of investment and development property and provide the Company with a great deal of valuable local market knowledge and expertise. Good progress has been made with the construction of two key development projects in Warsaw, Platinum Towers and Capital Art Apartments and pre-sales and sales completion activity has been very successful, underpinning our confidence in the medium and long term market prospects. The Company's key objectives in the current economic climate remain the minimisation of financial risks, optimising cash retention and operational effectiveness and enhancing the Group's liquidity, which will enable it to progress its portfolio of developments. The Company has a portfolio of strong underlying assets and a development pipeline that we believe will enable us to continue to meet the ongoing demand for the quality and specification of the space that Atlas delivers. In turn, we believe that this will position us to preserve and, over the longer term, create value that we aim to deliver to the shareholders, once stability and more certain economic conditions return to the markets, both within our target territories and across the global economy as a whole. Nahman Tsabar Michael Williamson Chief Executive Officer Chief Financial Officer Atlas Management Company Limited Atlas Management Company Limited 15 March 2010 Property Portfolio Information
Poland
Capital Art 739 apartment three stage development with Stage 1 100% Apartments completed in 4th quarter 2008 with 218 out of 219 apartments pre sold. Stage 2 with the construction of 300 apartments completed in 2009. Stage 3 construction will follow. Location close to the central business district in Wola area of Warsaw.
Hungary
Romania
Hotel
Bulgaria
Directors - Atlas Estates Limited
Directors and Senior Management - Property Manager, Atlas Management Company Limited
Investment Committee Capital Markets & Financing, Global Head of Equity Linked
Investment Committee commercial and retail space in the USA, Israel and
Chief Executive Build-Own-Transfer/Build-Own-Operate ("BOT/BOO") projects
Registered office Atlas Estates Box 119 Martello Court Admiral Park St Peter Port Guernsey GY1 3HB Advisors
Secretary
Intertrust Fund Services (Guernsey)
Guernsey GY1 3HB
Solicitors to the Company as to English Registrar
Law
Law
Weil, Gotshal & Manges - Pawel Rymarz Sp
Poland
Directors' Report The Directors present their report and the audited financial statements for the twelve months ended 31 December 2009. Results and dividends The results for the Group for the year are set out in the consolidated income statement on page 40 and show a loss after tax attributable to equity shareholders of Euro48.7 million (2008: loss after tax of Euro39.7 million). The Company has not declared a dividend for 2009 (2008: Euronil). Activities and review of business The Company was admitted to the AIM market of the London Stock Exchange and commenced trading on 1 March 2006. In February 2008, the Company completed a listing on the Warsaw Stock Exchange. The Company is domiciled in Guernsey as a closed-ended investment company under Guernsey Law. The principal activity of the Company and the Group is property investment and development throughout Central and Eastern Europe, together with the management of its properties. The development of the Group's business and future prospects, including a description of material risk factors and threats and information on the degree of the Group's exposure to such risks or threats, is considered in the Chairman's Statement on pages 5 to 9 and the Review of the Property Manager on pages 10 to 21. On each of 1 January 2009 and 1 February 2009, the Group acquired an additional 5% of the share capital of its Kokoszki joint venture, Atlas Estates (Kokoszki) Sp. z o.o. (formerly Atlas Estates CF Plus 1 Sp. z o.o.) for a total cash consideration of PLN 300,000 (Euro68,483). At 31 December 2009, the Group's holding in Atlas Estates (Kokoszki) Sp. z o.o. was 100%. On 2 November 2009 the Company entered into an agreement to sell its entire portfolio held in Slovakia for a cash price of Euro8.0 million. Details of the disposal are presented in Notes 20 and 31. No other significant changes in the Company's organisational structure occurred in the year ended 31 December 2009. A list of the operating subsidiaries of the Company subject to consolidation is included within note 36 of the financial statements of this report, on pages 87 to 88. Investing Policy The Company actively invests in a portfolio of real estate assets across a range of property types throughout CEE. The Company targets countries within the CEE which possess attractive investment fundamentals including political and economic stability, strong GDP growth and low inflation. The Company may also make investments in countries which attract increasing foreign direct investment from being part of, or from being expected to join, the EU. The Company shall not invest in states of the former USSR. The Company makes investments both on its own and, where appropriate, with joint venture partners in residential, industrial, retail, office and leisure properties in order to create an appropriately balanced portfolio of income-generating properties and development projects. There are no set restrictions on either sector or geographical spread of investments within the Company's stated investment region. The Company may employ leverage to enhance returns on equity although the extent of such leverage will vary on a property by property basis. Wherever possible, the Directors intend to seek financing on non-recourse, asset by asset basis. The Company has no set limit on its overall level of gearing, however it is anticipated that the Company will employ a gearing ratio of up to 75 % of the total value of its interest in income-generating properties within its property portfolio. The Company seeks to provide Shareholders with an attractive overall return through a combination of income and long term appreciation of the Company's assets. The Board recognises that the current state of the credit markets and general downturn in the CEE economies in which the Company invests have had a negative effect on the overall value of the Group's portfolio, causing a decline in the Company's net asset value per share. In order for the Company to achieve its long term investing policy, the Board's short term investment strategy for 2009 and 2010 is cash focussed with new development activity in relation to parts of its portfolio being selectively deferred but with current active projects displaying good sales being progressed on time and on budget and being brought to a conclusion to achieve intended returns. No dividends are expected to be paid in the short term. Diversification In order to hedge against risks, the Group intends to maintain a diversified portfolio of real estate investments. The diversification will have three aspects: firstly, the Group intends to diversify its geographical reach by investing in various countries in the CEE region; secondly, the Group intends to diversify the type of investment (e.g. residential development, office, commercial, etc.); and thirdly, the Group intends to stagger the development phases of its various projects (e.g. the purchase of land, the design phase, the construction phase, the marketing and sale process) in order to maintain stable levels of income earned. As at 31 December 2009, the Company had investment assets in Poland, Romania, Slovakia, Hungary and Bulgaria, but the Company intends to use its experiences in other dynamically developing markets. This strategy will allow the Group to further geographically diversify its operations and achieve an appropriate scale of its operations. The Group also intends to continue its strategy of investing in non-capital cities in the countries in which it operates. Key performance Indicators Key performance indicators vary between the different areas of the Group's business. The success of developing and selling residential apartments will be measured in terms of the price achieved for each apartment, the profit margin earned over construction cost and as a proportion of sales and the overall rate of return from a development. Information on sales is detailed in the Review of the Property Manager on pages 10 to 21. All apartments to date have been sold at prices in excess of the initial budget. For yielding assets the measure of the yield of an asset relative to its cost to the Group is of key importance. Also the overall valuation of the portfolio will drive the value to the Company and ultimately the Company's share price. Details of total return targets and increases in net asset value per share are included within the Chairman's Statement and Review of the Property Manager. The key financial risk policies are stated within the financial sections of this report on pages 56 to 59. Going concern As described in the Chairman's Statement and in the Review of the Property Manager, the economic environment has been challenging and the Group has reported a loss from operations for the year ended 31 December 2009 and a significant fall in net asset value as at 31 December 2009. The directors consider that the outlook presents ongoing challenges in terms of the markets in which the Group operates, the effect of fluctuating exchange rates in the functional currencies of the Group and the availability of bank financing for the Group. As at 31 December 2009 the Group held land and building assets with a market value of Euro442 million, compared to external debt of Euro260 million. Subject to the time lag in realising the value in these assets in order to generate cash,this loan to value ratio gives a strong indication of the Group's ability to generate sufficient cash in order to meet its financial obligations as they fall due. Any land and building assets and associated debts which are ring-fenced in unique, specific, corporate vehicles, which are subject to any repossession by the bank on default of loan terms would clear the outstanding debt and not result in additional finance liabilities for the Company or for the Group. There are also unencumbered assets which could potentially be leveraged to raise additional finance. For the first time the Group has entered into a cross collateralisation agreement on four of its loans with one bank. This has been necessary due to technical covenant breaches. As a result of the amendment agreement the bank has agreed to a waiver of all prior covenant breaches and improved terms and conditions for the Group. In the preparation of the consolidated financial statements for the year ended 31 December 2009, the directors have reclassified four loans totaling Euro92.4 million within the financial statements from non current liabilities to current liabilities as bank loans and overdrafts due within one year or on demand, where covenant breaches or defaults on these loans arose. The banks are aware of the technical breaches and defaults and have not asked for repayment of the loans. Two of these loans, totalling Euro67.1 million in 2009, were in breach at 31 December 2008 and were classified as bank loans and overdrafts due within one year or on demand at 31 December 2008. The defaults on the other two loans result from non payment of interest. In addition there is one loan that is repayable on demand in the amount of Euro9.0 million (2008: Euro8.4 million due within one year). Negotiations are ongoing with the bank on refinancing terms. Loans maturing within one year total Euro156.0 million (excluding loans associated with assets held for sale) at 31 December 2009 compared to Euro95.7 million at 31 December 2008. Euro25.4 million of the Euro60.3 million increase from 31 December 2008 relates to the two defaults discussed above. The remaining increase of Euro 34.9 million has resulted from the natural maturing of the Group's debt. Discussions are currently in progress with the banks in relation to repayment of certain of these loans. In assessing the going concern basis of preparation of the consolidated financial statements for the year ended 31 December 2009, the directors have taken into account the status of current negotiations on loans. These are disclosed in note 24 as part of the bank loans note. The Company has also continued to provide funds to service interest and capital repayments on these loans on behalf of its subsidiary companies The Directors have also taken into account the disposal of the Group's interests in Slovakia as announced on 3 November 2009. This is discussed in notes 20 and 31 as part of the assets held for sale and the disposals note. On completion of this transaction, the combined impact of ceasing to consolidate its share of debt in the joint venture and the receipt of the cash consideration will reduce the Group's overall debt by some Euro20.5 million pending any reinvestment of the cash proceeds. The Group's forecasts and projections have been prepared taking into account the economic environment and its challenges and the mitigating factors referred to above. These forecasts take into account reasonably possible changes in trading performance, potential sales of properties and the future financing of the Group. They show that the Group will have sufficient facilities for its ongoing operations. While there will always remain some inherent uncertainty within the aforementioned cash flow forecasts, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the consolidated financial statements for the year ended 31 December 2009. The financial statements do not include any adjustments that would result if the going concern basis of preparation were to become no longer appropriate. Substantial shareholdings As of 12 March 2010, the Board was aware of the following direct or indirect interest in 3% or more of the Company's ordinary share capital (excluding treasury shares). All shares have equal voting rights.
Shareholders
Limited
Group Limited
(1) Mr Ron Izaki is the ultimate beneficial owner of 6,461,425 of the shares, representing 13.79% of the issued share capital of the Company. Purchase of own shares By a resolution passed on 24 June 2009, shareholders granted the Directors the authority to purchase a maximum of 14.99% of the Company's own shares. These may be purchased at a minimum of Euro0.01 per share and a maximum of no more than 5% above the average mid-market price as derived from the Daily Official List for the five business days preceding the purchase. This authority was not exercised during 2009. Directors and Directors' share interests The non-executive Directors who served during the year are detailed in Table 2 below. No Director had any direct interest in the share capital of the Company or any of its subsidiaries during the year or the preceding year. Mr Spicer acquired a beneficial interest in 14,785 shares in the Company in 2007.
Table 2 - Non-executive Directors
Spicer
Mason
Tomanec
Biographical details for all Directors are set out on page 24. The Directors retire by rotation and Mrs Shelagh Mason, being so entitled and willing, offers herself for re-election. The Board is of the view that non-executive appointments for a fixed term would be inappropriate for each of the non-executive Directors due the nature of the management of the Company. The Articles of the Company do provide for the retirement by rotation of a third of the Board each year. The Remuneration Report contains details of Directors' remuneration, terms of their appointment and those of the Property Manager and is set out on pages 35 to 37. No other Director had, during the accounting year or in the period to 15 March 2010, any material beneficial interest in any significant contract in the Group's business. Directors' Responsibilities Guernsey company law requires that Directors prepare financial statements for each financial period. These must give a true and fair view of the state of affairs of the Group as at the end of the financial period and of the results of the Group for that period. In preparing those financial statements, the Directors are required to: * Select suitable accounting policies and then apply them consistently; * Make judgements and estimates that are reasonable and prudent; * Ensure the financial statements comply with IFRS as adopted by the EU; and * Prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for ensuring that proper accounting records are maintained, which disclose with reasonable accuracy the financial position of the Group, and that the financial statements comply with Guernsey Law. They are also responsible for the system of internal control, for safeguarding the assets of the Group and hence for taking reasonable steps for the detection and prevention of fraud and other irregularities. Company website To provide a portal for investor information and in accordance with the requirements of AIM and WSE, the Company maintains a website accessed at www.atlasestates.com. The Directors are responsible for the maintenance and integrity of the website. There is, however, some uncertainty regarding the legal requirements of the website as information published on the internet is accessible in many countries with different legal requirements relating to the preparation and dissemination of financial statements. The work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Auditors The Directors confirm that as at 15 March 2010: * So far as they are aware, there is no relevant information (that is, information needed by the Group's auditors, in connection with preparing their report) of which the Group's auditors are unaware; * The Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Group's auditors are aware of that information; and * The auditing firm (qualified auditor of financial statements) who audited the consolidated annual financial statements has been selected in compliance with the provisions of the law and that this firm and the qualified auditors who performed the audit met the conditions to issue an impartial and independent opinion on the audited consolidated annual financial statements in accordance with the applicable provisions of national law. The consolidated financial statements of the Group for 2009 were audited by BDO LLP on the basis of a contract concluded on 9 December 2009. The consolidated financial statements of the Group for 2008 were audited by BDO LLP on the basis of a contract concluded on 5 December 2008. The total fees specified in the contract with the audit company, payable or paid for an audit and review of the financial statements and for other services are presented below: Table 3 - Audit Company - fees 2009 2008
statements
statements
A resolution concerning the re-appointment of BDO LLP as auditors and their remuneration will be submitted to the Annual General Meeting. Annual General Meeting The Annual General Meeting will be held on 16 June 2010. Information about court proceedings As of 12 March 2010, the Company was not aware of any proceedings instigated before a court, a competent arbitration body or a public administration authority concerning liabilities or receivables of the Company, or its subsidiaries, whose joint value constitutes at least 10% the Company's equity capital. Significant Agreements In addition to the Property Management Agreement detailed in the Remuneration Report, the Group had the following significant agreements. Agreement of 23 June 2008, between Capital Art Apartments and Eiffage Budownictwo MITEX S.A. as amended Under the above agreement, Eiffage Budownictwo MITEX S.A. agreed to carry out construction works, as the general contractor, with regard to the second stage of the Capital Art Apartments Project. The value of the agreement was agreed as equivalent to a lump sum of the amount of PLN 40,680,931 plus VAT (Euro9.9 million plus VAT) for part of the works, increased by a sum based on a costs plus fee (fee equal to 8%) formula for the remaining works within the general contractor works. The maximum value of the contract was agreed by the Parties at 78,000,000 PLN plus VAT (Euro19.0 million plus VAT). The works were completed in December 2009. Agreement of 4 September 2007, between Platinum Towers and HOCHTIEF Polska Sp. z o.o. Under the above agreement, HOCHTIEF Polska Sp. z o.o. agreed to carry out construction works with regard to the Platinum Towers Project. The value of the agreement is PLN 179,655,000. The works were completed in September 2009. Details of the bank financing agreements are disclosed as required in note 24 to the financial statements. Related party transactions Related party transactions are stated within note 32 of the financial statements of this report, on pages 85 to 86. Credit and loan facilities, guarantees and sureties Metropol financing On 25 January 2010 the Company announced that its Hungarian subsidiary Cap East Kft, which owns the Metropol office building in Budapest, had signed a credit facility for Euro3.1 million with FHB Kereskedelmi Bank Zft. This loan will be utilised as working capital for operations and to fund the development of its portfolio. Erste cross collateralisation agreement On 24 February 2010 the Atlas Group companies Atlas Estates (Millennium) Sp. z o.o., Ligetvaros Kft, Atlas Solaris SRL and World Real Estate SRL signed an amendment agreement with Erste Bank. This agreement created a cross collateralisation arrangement between these 4 companies with respect to the loans provided by Erste Bank. In return for this cross collateralisation the bank agreed to waive any claims for any breaches of covenants which were in existence. A new covenant of interest service coverage has been included, with a priority of payments list, reduced margins on each loan and extension of maturity dates for the two Romanian land loans to 31 December 2012. Atlas Investments B.V. An understanding was given to Investkredit Bank AG by Atlas Investments B.V. that invested money would not be withdrawn without prior approval of Investkredit Bank AG and to cover all costs not covered by the current sale proceeds or by the loan granted to the company Capital Art Apartments Sp. z o.o. Corporate governance review The Group aspires to apply the highest possible standards of corporate governance in all areas of its business. The Board and, where delegated, the Property Manager use a comprehensive system of controls, checks and reporting requirements that they consider provide the capability to maintain these standards. The systems mentioned are being designed to meet the requirements of the Company and its business and to assess and manage the opportunities and risks that may arise. Whilst the Board is mindful of the guidance of the Combined Code, its systems will be suitable for a Company of its size, the small number of Directors that form the Board and the external management function provided by the Property Manager. In accordance with the WSE Rules, the Board resolved in January 2008, to the extent practicable, to also comply with the majority of the corporate governance rules defined in the Code of Best Practices for WSE Listed Companies. However, the Company's compliance with certain principles is limited by the differences between Guernsey and Polish legal systems, procedures and accepted practices. Structure and membership of the Company's Board The Board of Directors comprises the non-executive Chairman and two further non-executive Directors. In May 2009 Dr. Helmut Tomanec resigned as a non-executive Director. There is a clear separation of the role of the Chairman and the Property Manager, governed by the Property Management Agreement that was entered into on 24 February 2006. The Board did not find it necessary to appoint a Senior Independent Director. The Board identifies all of its non-executive Directors as being independent of the Company based on their level of involvement with the founder shareholders prior to the formation of the Group and their involvement in the day to day management of the Group on an ongoing basis. They provide strategic management and act as the final Investment Committee for all investment/divestment decisions. The executive and day to day management is provided by the Property Manager whose role and responsibilities are clearly defined in the Property Management Agreement. The Board meets formally at least four times a year and regular contact is made between the Board and the Property Manager in the intervening periods. The Directors meet periodically without the Property Manager present and on occasion without the presence of the Chairman. A formal schedule of matters reserved specifically for the Board's decision is approved and reviewed on an ongoing basis by the Board. Such matters include, but are not limited to: * developing Group strategy and monitoring the progress towards objectives set for management; * reviewing the Company's capital, operating and management structures; * setting the system of internal and financial controls and accounting policies; * communicating the aims and objectives of the Company to shareholders; and * ensuring that the Group has effective risk management procedures in operation at all times. A formal schedule of matters reserved for the Board of the Property Manager is also approved and reviewed on an ongoing basis by the Board. All members of the Board have access to the advice and services of the Company's Administrator and full and timely access to all relevant information in an appropriate form and of sufficient quality to enable them to discharge their duties and responsibilities. Guidance is provided to Directors on obtaining independent professional advice when necessary and the Company maintains a comprehensive directors' and officers' liability insurance policy. Appointments to the Board are subject to a formal process of selection involving the Board as a whole. The Directors are appointed for indefinite terms and a third of the Board retire by rotation each year. Directors' terms of appointment provide for prior approval of the Board for the acceptance of any outside appointments. In the event of a request for approval the Director in question is asked to confirm and demonstrate that they can continue to commit sufficient time to the fulfilment of their duties. Board committees The Audit Committee comprises the whole of the Board and is chaired by Mr Stockwell. It meets at least three times a year to review the interim and year end financial statements prior to their submission to the Board and to review the appointment of the independent auditors and the scope, performance and remuneration of services provided by them. Procedures are in place for the approval of non-audit services provided by the Company's auditors. The auditors will not be awarded non-audit work unless the Company is satisfied, through enquiry, that the provision of such services would not prejudice the independence and objectivity of the auditor. The entire Board also forms the Investment Committee in order to appraise and approve or reject investment proposals made by the Property Manager. The Investment Committee meets as and when required. The Company has not formed a separate Remuneration or Nominations Committee as the Property Management Agreement provides for the remuneration of the Manager and the Board as a whole considers any further appointments.
Table 4 - Attendance at meetings
year
Stockwell
No Investment Committee meetings were held in the year because all discussions and decisions related to investment proposals were made during the Board meetings. Property Manager The Property Manager has also undertaken to maintain the highest standards of corporate governance in line with the direction set by the Board. Where delegated, the Property Manager has continued to put in place a comprehensive system of controls, checks and reporting requirements that they feel provides the ability to maintain these standards. The Property Manager has a board ("PM board") comprising of a non-executive Chairman and one non-executive director. It meets formally at least four times a year and more regularly when required to do so to review its requirements under the terms of the Property Management Agreement. A formal schedule of matters reserved for the decision of the PM board, derived from the role and responsibilities set out in the Agreement has been approved and is reviewed on an ongoing basis. The Property Manager has appointed an Investment Committee comprising two of its non-executive directors to review and approve those investment and divestment opportunities that are presented to the Company for its approval and completion. The PM board collectively approves the appointment of senior management within the Property Manager, details of which are then reported to the Company. Internal control The Directors assume overall responsibility for the Group's system of internal control designed to safeguard shareholders' investments and the Group's assets and for reviewing its effectiveness. The system is regularly reviewed by the Board and accords with the Internal Control Guidance for Directors on the Combined Code. The controls are designed to identify and manage risks faced by the Group and not to totally eliminate the risk of failure to achieve business objectives. To this end internal controls provide reasonable, but not absolute assurance against material misstatement or loss. The implementation and operation of such systems has been delegated to the Property Manager and the processes are communicated regularly to all of their staff who are made aware of the areas for which they are responsible. Such systems include strategic planning, the appointment of appropriately qualified staff, regular reporting and monitoring of performance and effective control over capital expenditure and investment. The Group's key internal controls are centred on a system of comprehensive reporting on all of its business activities. The Property Manager meets on a monthly basis to review the control systems and to assess the performance and position of the Group. A separate risk management process is operated that engages the Directors and senior management of the Company and Property Manager that is aimed at identifying areas of risk faced by the Group and assessing the likely impact on operating activities. Significant risks that are identified by this process are communicated to the Board with recommendations for actions to mitigate them. The Group uses independent agents to undertake any specialist analysis, investigation or action that is needed. The Board reports to shareholders at least annually that they have carried out a review of the system for internal controls. Internal financial controls centre on a clearly defined set of control procedures and a comprehensive monthly and quarterly reporting structure. Detailed revenue, cash flow and capital forecasts are prepared for each asset and updated regularly throughout the year and reviewed by the Property Manager and the Board. The Property Manager agreement sets out clearly defined guidelines for all asset transactions. These require the approval of the Investment Committee of the Property Manager and then of the Board within defined levels of authority and de-minimis thresholds. The Property Manager undertakes responsibility for the management of the Group's property portfolio, delegating this responsibility to appropriately qualified independent parties where it is deemed necessary. Terms of engagement for such appointments include the requirement for regular reports in an agreed form. The Audit Committee is responsible for reviewing the effectiveness of the system of internal financial control. A review of these processes is conducted on a regular basis and any significant issues raised by this review are communicated to the Board for their consideration. In accordance with the procedures outlined in this report, the Board has conducted a review of the effectiveness of the system of internal control for the year ended 31 December 2009. The review took account of material developments that have taken place since the year end and considered the need for an internal audit function. The Board resolved that due to the size of the Company an internal audit function would be inappropriate but will review this need on an annual basis. Shareholder relations The Board encourages active communication with all of the Company's shareholders. The Chief Executive and Chief Financial Officer of the Property Manager are the main points of contact for shareholders and they endeavour to respond to enquiries on a timely basis either verbally or in writing. Provision is made on the Company's website for enquiries to be made of Directors. As part of the communication process a series of meetings is held between the Property Manager and significant shareholders throughout the year. Directors are invited to attend these meetings and are available should shareholders request their attendance. All shareholders have at least twenty working days notice of the Annual General Meeting, at which all Directors and committee chairmen are introduced and available for questions. Throughout the year meetings are held with the Company's brokers and other corporate advisors to feed back information that they have gathered concerning shareholder opinion. Topics raised at other meetings are communicated to the Board and discussed at subsequent Board meetings. The non-executive directors have direct face-to-face contact with shareholders and are also regularly updated on major shareholder meetings and analysts or broker briefings. The rights of the shareholders are subject to Guernsey Law and the Articles of Association of the Company. The rules governing the change in the articles of the Company are subject to Guernsey Law and the Memorandum and Articles of Association of the Company. Performance evaluation The Property Manager agreement provides for a formal process of performance evaluation that is based on the collective performance of the Manager rather than on an individual's performance. These performance criteria are based on financial measures over the life of the Property Management Agreement. In addition, procedures are in place to review the approach and resources applied by the Property Manager and its performance throughout the year. Procedures are also in place that enables the Board to appraise the performance of and level of fees paid to the Administrator and the Company's professional advisors. Details of those Directors seeking re-election at the Company's Annual General Meeting can be found on page 30. Quentin Spicer Shelagh Mason Chairman Director 15 March 2010 Remuneration Report The Directors present their report on their remuneration and that of the Property Manager (the `Report') that has been prepared in a manner consistent with commonly accepted practice. The Report is to be approved at the Annual General Meeting of the Company at which the financial statements will be approved and a resolution to this effect will be proposed at the Meeting. Non-executive Directors All non-executive Directors have specific terms of appointment that include their membership of the Audit Committee and the fee payable to them for their services. Their remuneration is determined by the Board in accordance with the Articles of Association of the Company. Such fees are reviewed annually with regard to a Director's performance and those fees paid to non-executive directors of similar companies. Non-executive Directors do not participate in the Warrant Instrument. Details of the terms of appointment for those who served as non-executive Directors during the year are:
Table 5 - Non-executive Directors' service contracts
Stockwell
Property Manager On signing the Property Management Agreement, the Company looked to structure a remuneration package that combined a basic fee element with performance related rewards that motivate the Property Manager and align their interests with the performance and growth of the business and the long term enhancement of shareholder value. Basic fee In consideration of the services to be provided by AMC, AMC will receive an annual management fee of 2 per cent. of the previous year's closing adjusted NAV (less any un-invested net proceeds of the IPO or any subsequent equity capital raising). In addition, AMC is entitled to be reimbursed by the Company for all costs and expenses incurred by it in the performance of its obligations under the Property Management Agreement (not including its own internal operating costs). Performance fee In addition, AMC will receive a performance fee payable if the Total Shareholder Return in any year exceeds 12 per cent (adjusted to make up for any prior years where the Total Shareholder Return was negative - the "Hurdle Rate"). Once this threshold is exceeded, AMC is entitled to receive a fee equal to 25 per cent of the amount by which the Total Shareholder Return for the relevant financial period exceeds the Hurdle Rate for such period multiplied by the previous year's closing adjusted NAV after the deduction of any dividends declared or to be declared but not yet paid in respect of that period. One third of any performance fee payable to AMC under the agreement may, at the option of the Company be paid in the form of new Ordinary Shares issued to AMC at a price equal to the average closing price of the Company's shares for the 45 days prior to the date of issue of such shares. This option may not be exercised where it would trigger an obligation to make a mandatory offer for the Company pursuant to the City Code. AMC performance fee payment AMC's performance fee in respect of the financial years ended 31 December 2009 and 31 December 2008 was Euronil. Term and Termination The Property Management Agreement is to run for an initial seven year term from 24 February 2006 and may be terminated thereafter on 12 months' notice by either party. The agreement may be terminated at any time for reasons of material breach by either party not remedied within a 90 day period (21 days if the breach relates to non-payment of sums due to the Property Manager) or on the insolvency of either party. The Company may also terminate the Agreement in the event that any of the AMC Shareholders sells (other than to certain categories of intra-group permitted transferees) more than 49 per cent. of their respective shareholdings in AMC as at the date of Admission or in the event that the AMC Shareholders (or their permitted transferees) between them cease to own collectively at least 75 per cent of the issued share capital of AMC. The Company also has the right to terminate the agreement in the event that it becomes tax resident in the United Kingdom for any reason. Upon termination of this Agreement, the Manager shall be entitled to receive all fees and other moneys accrued to it (and unpaid) and a performance fee. Share schemes On 23 February 2006 the Company executed and adopted a Warrant Instrument providing for the issue of warrants over 5,114,153 ordinary shares. Following the exercise of the Greenshoe on 15 March 2006, an additional Warrant Instrument was executed and adopted to provide for the issue of warrants over a further 373,965 ordinary shares. The Warrants are exercisable during the period commencing 1 March 2007 and expiring on the earlier of: (i) 28 February 2013; or, (ii) upon an offeror becoming entitled to acquire the entire issued share capital of the Company. The exercise price of each of the Warrants is £3.41 (Euro3.85 as at 31 December 2009). The exercise price and number of Ordinary Shares relating to such Warrants will be subject to adjustment in respect of dilution events, including the payment by the Company of cash or special dividends, any amalgamation, reorganisation, reclassification, consolidation, merger or sale of all or substantially all of the Group's assets and other dilutive events. The Warrants are freely transferable. The total amounts for Directors' remuneration were as follows:
Non-executive
Directors
Stockwell
Table 7 - Warrants issued
Berber
Rajan
Management
Limited
The warrants have been issued at nil cost to the recipients with an exercise price of £3.41 per share. These warrants are exercisable at any time during the period commencing on admission to trading on AIM (1 March 2006) and ending on the seventh anniversary of such admission. There are no performance criteria for execution and execution can be undertaken on or after the date of exercise as detailed above or immediately upon a Change of Control of the Company. None of the terms and conditions of the warrants has been varied in the period. No Directors have been issued warrants over the shares in any other Group company. During the year to 31 December 2009, the market price of the ordinary shares ranged between £0.30 and £0.98 on AIM and PLN 1.85 and PLN 4.76 on WSE. Approval The Board approved the Remuneration Report without amendment. This report was approved by the Board of Directors on 15 March 2010 and signed on its behalf by: Quentin Spicer Director 15 March 2010 Declaration of the Board of Directors The Board of Directors of Atlas Estates Limited hereby declare that, to the best of their knowledge, the consolidated annual financial statements and report and the comparable information have been prepared in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market, with the rules of the Warsaw Stock Exchange, and with International Financial Reporting Standards ("IFRS") and IFRIC interpretations as adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation. The consolidated annual financial statements and report give a true, fair and clear view of the assets, liabilities, financial position and net result of the Group. The annual report includes a fair review of the development of the business and important events impacting it, as well as a description of the principal risks and uncertainties of the business. Quentin Spicer Chairman Michael Stockwell Director Shelagh Mason Director 15 March 2010 Independent Auditor's Report to the shareholders of Atlas Estates Limited We have audited the group financial statements of Atlas Estates Limited for the year ended 31 December 2009 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement, and the related notes. These financial statements have been prepared under the accounting policies set out therein. We have reported separately on the company financial statements of Atlas Estates Limited for the year ended 31 December 2009. Respective responsibilities of directors and auditors The directors' responsibilities for preparing the annual report and group financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union 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 have been properly prepared in accordance with The Companies (Guernsey) Law, 2008 and whether the information given in the directors' report is consistent with those financial statements. We also report to you if, in our opinion, the company has not kept proper accounting records or if we have not received all the information and explanations we require for our audit. We read other information contained in the consolidated financial statements and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the consolidated financial statements. This other information comprises the Financial Highlights, Chairman's Statement, Review of the Property Manager, Property Portfolio Information, Directors' Report, Remuneration Report and the Declaration of the Board of Directors. Our responsibilities do not extend to any other information. Our report has been prepared pursuant to the requirements of The Companies (Guernsey) Law, 2008 and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of The Companies (Guernsey) Law, 2008 or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability. 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 judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group'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. Opinion In our opinion:
BDO LLP Chartered Accountants and Registered Auditors London 15 March 2010 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)
CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2009
expenses
investment properties
relation to goodwill
on acquisitions
foreign exchange
Attributable to:
Company
share - basic (eurocents)
share - diluted (eurocents) All amounts relate to continuing operations. The notes on pages 46 to 88 form part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2009
2009 2008
Other comprehensive income:
and equipment
of tax)
Total comprehensive income attributable to:
The notes on pages 46 to 88 form part of these consolidated financial statements.
CONSOLIDATED BALANCE SHEET As at 31 December 2009
2009 2008
ASSETS
Non-current assets
Current assets
for sale
Current liabilities
non current assets held for sale
Non-current liabilities
The notes on pages 46 to 88 form part of these consolidated financial statements.
CONSOLIDATED BALANCE SHEET As at 31 December 2009
2009 2008
EQUITY
holders of the Company
The notes on pages 46 to 88 form part of these consolidated financial statements. The financial statements on pages 40 to 88 were approved by the Board of Directors on 15 March 2010 and signed on its behalf by: Quentin Spicer Shelagh Mason Chairman Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year ended 31 December 2009
income for the year
acquired in the year
(note 30)
year (note 27)
(note 28)
income for the year
(note 28)
CONSOLIDATED CASH FLOW STATEMENT Year ended 31 December 2009
2009 2008
operations
Investing activities
acquired
cash disposed
and equipment
activities
Financing activities
and cash equivalents in the year
the year
of the year
year
Cash and cash equivalents
Year ended 31 December 2009 Basis of preparation These consolidated financial statements have been prepared in accordance with applicable Guernsey law and International Financial Reporting Standards ("IFRS") and IFRIC interpretations adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation. The consolidated financial statements have been prepared on a going concern basis and on a historical cost basis as amended by the revaluation of land and buildings and investment property, and financial assets and financial liabilities at amortised cost. The principal accounting policies are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. As described in the Chairman's Statement and in the Review of the Property Manager, the economic environment has been challenging and the Group has reported a loss from operations for the year ended 31 December 2009 and a significant fall in net asset value as at 31 December 2009. The directors consider that the outlook presents ongoing challenges in terms of the markets in which the Group operates, the effect of fluctuating exchange rates in the functional currencies of the Group and the availability of bank financing for the Group. As at 31 December 2009 the Group held land and building assets with a market value of Euro442 million, compared to external debt of Euro260 million. Subject to the time lag in realising the value in these assets in order to generate cash, this loan to value ratio gives a strong indication of the Group's ability to generate sufficient cash in order to meet its financial obligations as they fall due. Any land and building assets and associated debts which are ring-fenced in unique, specific, corporate vehicles, which are subject to any repossession by the bank on default of loan terms would clear the outstanding debt and not result in additional finance liabilities for the Company or for the Group. There are also unencumbered assets which could potentially be leveraged to raise additional finance. For the first time the Group has entered into a cross collateralisation agreement on four of its loans with one bank. This has been necessary due to technical covenant breaches. As a result of the amendment agreement the bank has agreed to a waiver of all prior covenant breaches and improved terms and conditions for the Group. In the preparation of the consolidated financial statements for the year ended 31 December 2009, the directors have reclassified four loans totaling Euro92.4 million within the financial statements from non current liabilities to current liabilities as bank loans and overdrafts due within one year or on demand, where covenant breaches or defaults on these loans arose. The banks are aware of the technical breaches and defaults and have not asked for repayment of the loans. Two of these loans, totalling Euro67.1 million in 2009, were in breach at 31 December 2008 and were classified as bank loans and overdrafts due within one year or on demand at 31 December 2008. The defaults on the other two loans result from non payment of interest. In addition there is one loan that is repayable on demand in the amount of Euro9.0 million (2008: Euro8.4 million due within one year). Negotiations are ongoing with the bank on refinancing terms. Loans maturing within one year total Euro156.0 million (excluding loans associated with assets held for sale) at 31 December 2009 compared to Euro95.7 million at 31 December 2008. Euro25.4 million of the Euro60.3 million increase from 31 December 2008 relates to the two defaults discussed above. The rem More |
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| 28-01-10 | PRN |
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ATLAS ESTATES LIMITED (Registered in Guernsey - Number 44284) Registered Office: Martello Court, Admiral Park, St Peter Port, Guernsey, GY1 3HB __________________________ TELEPHONE: +44 1481 211000 FACSIMILE: +44 1481 211001 e-mail: fundcosec@intertrustgroup.com For immediate release 28 January 2010 Dates for releasing the interim reports in 2010 The Board of Directors of Atlas Estates Limited (the "Company"), in compliance with paragraph 103 section 1 of the Regulation of the Minister of Finance in Poland dated 19 February 2009 on current and interim reports published by issuers of securities and conditions for recognition as equivalent of information whose disclosure is required under the laws of a non-member state ("Regulation"), hereby advises of the dates of publication of the interim reports in 2010: 1. Consolidated quarterly financial statements:
2. Half year consolidated financial statements 2010 - 16 August 2010. 3. Stand alone and consolidated financial statements for 2009 - 15 March 2010. The Board of Directors of the Company represents further that, in accordance with paragraph 83 sections 1 and 3 of the Regulation, the Company intends to publish consolidated quarterly reports, containing quarterly financial information according to paragraph 87 of the Regulation and a consolidated half year report containing the condensed half year financial statements of the Company. Further information, please contact: Atlas Management Company Limited Nahman Tsabar / Michael Williamson Tel: +44 (0) 207 245 8672 Intertrust Fund Services (Guernsey) Limited Andre Le Prevost Tel: +44 (0) 1481 211 000 Fairfax I.S. PLC David Floyd / Rachel Rees Tel: +44 (0) 20 7598 5368
END More |
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| 25-01-10 | PRN |
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ATLAS ESTATES LIMITED (Registered in Guernsey - Number 44284) Registered Office: Martello Court, Admiral Park, St Peter Port, Guernsey, GY1 3HB __________________________ TELEPHONE: +44 1481 211000 FACSIMILE: +44 1481 211001 e-mail: fundcosec@intertrustgroup.com For immediate release 25 January 2010 Loan financing received by its Hungarian subsidiary Cap East Atlas Estates Limited (the "Company" or "Atlas") has investments in a portfolio of real estate properties in Central and Eastern Europe which are owned by subsidiary companies and joint ventures (the "Group"). The Group's portfolio currently comprises 20 properties including 12 investment properties (of which eight are income yielding properties and four are held for capital appreciation) two hotels and six development properties. Atlas announces that its Hungarian subsidiary Cap East Kft, which owns the Metropol office building in Budapest Hungary, has signed a credit facility agreement for the amount of Euro3,100,000 with FHB Kereskedelmi Bank Zrt. This is an 8 year bank loan and annual interest will be at 3 months Euribor plus a lender's margin. The Board intends to utilise the net proceeds from this loan as working capital for operations and to fund the development of its portfolio with particular focus on the properties located in Warsaw, Poland, where the Group has a strong presence and is seeking to realise value from development activity in the near term. Quentin Spicer, Chairman of Atlas Estates Limited commented "The Board is pleased to announce the completion of this financing with a Hungarian bank for one of its income yielding assets. It has proven difficult to access finance since the start of the credit crunch, therefore this new loan is a significant achievement in very tight credit conditions. It will provide increased liquidity and will enable the business to increase investment in projects which are realising value."
Further information, please contact:
Nahman Tsabar / Michael Williamson
Limited
Andre Le Prevost
David Floyd / Rachel Rees
END More |
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| 18-01-10 | PRN |
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ATLAS ESTATES LIMITED (Registered in Guernsey - Number 44284) Registered Office: Martello Court, Admiral Park, St Peter Port, Guernsey, GY1 3HB __________________________ TELEPHONE: +44 1481 211000 FACSIMILE: +44 1481 211001 e-mail: fundcosec@intertrustgroup.com For immediate release 18 January 2010 Update on the completion of the sale of investments in Slovakia Atlas Estates Limited, the Central European property fund, announced on 3 November 2009 that it had signed a contract for the disposal of its portfolio of property interests in Slovakia. Under the terms of the contract the consideration was to have been paid by close of business on Friday 15 January 2010. However, due to delays by the purchaser in obtaining a relevant consent from a bank, the completion did not take place by the due date. The parties to the contract still wish to proceed with the sale and purchase of the portfolio and negotiations are taking place with a view to completing the transaction as soon as practicable, although this could take several weeks. A further announcement will be made in due course. End - Further information, please contact:
Nahman Tsabar / Michael Williamson
David Floyd / Rachel Rees
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http://www.citynewsline.co.uk/index.htm
Atlas Estates Limited, the Central and Eastern European ("CEE") property investment and development company, today reported losses after tax of Euro49.2 million (2008: Euro39.7 million)and Net Asset Value per share at 31 December 2009 of Euro2.42 (31 December 2008: Euro 3.68)compared to a closing share price of 71.5p following a revaluation of its property portfolio by external valuers King Sturge. The Company and its subsidiary undertakings (the "Group") invest in real estate assets in CEE excluding the former USSR with a focus on Poland where 75% of gross assets are located. The Polish economy has been widely reported as the top performer in Europe, achieving 1.5% growth in GDP and improved market conditions in the second half of 2009. Additionally the Company has benefited from focusing on its Warsaw properties, where the Group has completed the construction of the Platinum Towers residential development. It has also completed construction of the second stage of the Capital Art Apartments development with the first stage having been completed in 2008. In the second half of 2009 the company claims to have seen more stability in market conditions in Warsaw. Commenting, Quentin Spicer, Chairman of Atlas, said: "This year has been extremely challenging for any real estate group with operations in Central and Eastern Europe. Atlas has made progress in the delivery of its corporate strategy. However, investors seeking a bargain should consider the financing risk. Atlas is breaching covenants on several of its bank loans and is dependent on the continuing support of its financiers. So far the banks havent pulled the plug. However, were they to do so, it is unlikely that Atlas would be able to realise these valuations. |
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i've shorted but there seems to be so low volumes and quite a lot of manipulation going on.
When some of the holders realise that this company is in a bit of trouble - Im sure they will all be selling. Main problem is it seems to be held by a group of buddies - there are one and half pages of related party disclosures in the recent statements - with all this money flowing around its not quite that clear whether the shareholder is getting a benefit. Further they are even lending money to minority shareholders - not quite sure at what interest rates this money is being lent at. |
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Any ideas what is going on with the share price ? Tiny volumes and massive movements in the price. Beware people, I've learnt the hard way, low volume
AIM companies are subject to a lot of nonsense movement and you can lose quite a lot of money quickly. |
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I'm staying away. Don't understand what they are doing and not impressed with the management actions (delisting.. oh no we're not - selling a major investment - oh no we're not). Commercial real estate looks a suicidal choice at the moment.
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They have not been approved or issued by Interactive Investor Trading Limited.
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