» Condensed Consolidated Unaudited Financial Statements for the Six Months Ended 30 June 2010

Condensed Consolidated Unaudited Financial Statements for the Six Months Ended 30 June 2010

Posted on: 6 August 2010


Directors' commentary

1. Distributable earnings

The Group has achieved consolidated distributable earnings of 8.35 EUR cents per share and, accordingly, the Board declared an interim dividend of 8.35 EUR cents per share in respect of the six month period ended 30 June 2010. This strong performance represents a 9.0% increase over the 7.66 EUR cents per share distributed for the comparable prior period.

2. Internalisation

During the period the Company internalised its investment advisor through the acquisition of all of the issued shares of NEPI Investment Management Limited ("NEPM"). The net purchase price of EUR5 881 943 was accounted for as an intangible asset in the consolidated statement of financial position. The Board expects that the management of the Group`s property portfolio going forward will be achieved more efficiently and cost effectively with the management team of NEPM being employed and incentivised directly by the Company. The internalisation is expected to result in better returns to NEPI shareholders and enhanced distributable earnings per share.

3. JSE Main Board listing

On 4 August 2010 the Company completed the transfer of its listing from the Alternative Exchange ("AltX") of the JSE Limited ("JSE") to the Main Board of the JSE in South Africa, which combined with the wider placement of shares completed during the period is expected to further extend the shareholder base and further improve liquidity in the trading of the Company`s shares. The Company currently also holds a listing on the AIM market of the London Stock Exchange.

4. Property acquisitions and development

The Group continued expanding its retail asset base in Romania through the acquisition of a retail park located in Pitesti, Romania ("Retail Park Auchan Pitesti") leased to Auchan and Bricostore. The Company continues to pursue further investment opportunities in line with its investment strategy. The Group is also in discussions for the acquisition of a small but well located logistics facility in Bucharest. In view of existing market opportunities and the Group`s growing foothold in Romania, the Group has also pursued development opportunities through joint ventures with strong partners. One of these opportunities led to an agreement in relation to the development of a shopping centre in Bucharest. This project is currently in due diligence.

5. Debt

In June 2010 the Group successfully refinanced a loan facility in relation to Retail Park Auchan Pitesti with a more favorable new loan facility from Unicredit Bank and Banca Romaneasca. The new loan facility of EUR28 813 000 matures in December 2014 and carries an interest rate of 1 month Euribor plus 4.0%. Further, the Group took advantage of the low interest rate environment and capped the Euribor at 2.25% in relation to the new loan facility and reduced the cap strike levels to 2.25% on all the other outstanding variable interest rate loans, while the caps in relation to the NEPI Bucharest One and NEPI Bucharest Two loans were extended up to December 2014 which is beyond the respective loan facilities` maturities.

6. Prospects

Despite continued macroeconomic weakness in Romania, NEPI`s property portfolio continues to perform well supported by the predominance of long-term leases and tenants with strong corporate covenants. The Company established a solid property portfolio and investment pipeline in Romania and is well positioned to continue expanding its retail asset base in Romania.

By order of the Board
Martin Slabbert, Chief Executive Officer
Victor Semionov, Financial Director
6 August 2010


Consolidated statement of financial position

Group
Unaudited
30 Jun 10
EUR
Group
Audited
31 Dec 09
EUR
Group
Unaudited
30 Jun 09
EUR
ASSETS
Non-current assets211 084 981 151 470 85487 794 134
Investment property196 914 767 145 965 09685 280 283
Investment property at fair value189 752 881139 222 255 78 676 715
Investment property under
Development 7 161 886 6 742 8416 603 568
Intangible assets5 881 943--
Goodwill6 908 6084 414 8042 386 463
Financial assets at fair value through profit or loss 1 379 6631 090 954 127 388
Current assets27 932 07315 673 02211 997 776
Trade and other receivables4 465 6343 396 4792 313 505
Cash and cash equivalents 23 466 43912 276 5439 684 271
Total assets239 017 054167 143 87699 791 910
EQUITY AND LIABILITIES
Total equity attributable to equity holders114 862 26172 719 463 49 815 481
Share capital562 686 386 247267 950
Share premium119 042 23376 731 744 52 487 190
Share based payment reserve542 246234 900152 665
Currency translation reserve (3 318 045)(2 650 069) (2 591 223)
Accumulated loss (1 966 859) (1 983 359)(501 101)
Non-current liabilities116 257 77486 440 422 45 281 792
Loans and borrowings 105 223 41777 970 39840 283 172
Financial liabilities at fair value through profit or loss1 081 710 1 081 710 934 866
Deferred tax liabilities9 952 6477 388 314 4 063 754
Current liabilities 7 879 019 7 983 9914 694 637
Trade and other payables 6 335 216 6 027 6053 057 850
Loans and borrowings1 561 803 1 956 386 1 636 787
Total equity and liabilities 239 017 054 167 143 87699 791 910
Net asset value per share2.04 1.88 1.86
Adjusted net asset value per share2.031.97 1.93

Consolidated statement of comprehensive income

Group
Unaudited
30 Jun 10
EUR
Group
Audited
31 Dec 09
EUR
Group
Unaudited
30 Jun 09
EUR
Net rental and related income7 797 115 8 270 884 3 520 962
Contractual rental income and expense recoveries 10 126 77210 708 8734 323 488
Property operating expenses (2 329 657)(2 437 989)(802 526)
Share based payments (307 346)(153 059)(70 824)
Investment advisory fees(679 627)(670 725)(275 574)
Administrative expenses (461 517)(1 543 992) (274 508)
Foreign exchange gain421 9271 811 0111 723 780
Fair value adjustment on investment property- 575 253-
Profit before net finance expense 6 770 552 8 289 372 4 623 836
Finance income196 896 261 512134 523
Finance expense (4 023 933) (3 707 436)(2 286 056)
Net finance expense(3 827 037)(3 445 924)(2 151 533)
Profit before tax2 943 515 4 843 4482 472 303
Tax(9 813) (2 121 193)(342 729)
Profit for the period attributable to equity holders2 933 7022 722 255 2 129 574
Weighted average number of shares in issue47 255 904 29 397 896 26 795 000
Diluted weighted average number of shares in issue49 444 271 30 877 071 28 150 000
Basic weighted average earnings per share (EUR cents)6.219.267.95
Diluted weighted average earnings per share (EUR cents) 5.938.827.57
Distributable earnings per share (EUR cents)8.35 15.77 7.66
Headline earnings per share (EUR cents)7.6213.7414.79
Diluted headline earnings per share (EUR cents)7.2813.0814.08

Statement of other comprehensive income

Group
Unaudited
30 Jun 10
EUR
Group
Audited
31 Dec 09
EUR
Group
Unaudited
30 Jun 09
EUR
Profit for the year attributable to equity holders2 933 702 2 722 2552 129 574
Other comprehensive income(667 976) (1 892 383) (1 833 537)
- currency translation differences(667 976)(1 892 383)(1 833 537)
Total comprehensive income for the period2 265 726829 872296 037

Statement of changes in equity

Share capitalShare premiumShare based payments
Group unaudited EUR EUR EUR
Opening balance 1 January 2009 267 950 52 487 190 81 841
Transactions with owners - - 70 824
- issue of shares - - -
- issue cost recognised to equity - - -
- share based payment reserve - - 70 824
- dividend distribution - - -
Total comprehensive income - - -
- other comprehensive income - - -
- profit for the period - - -
Balance at 30 June 2009 267 950 52 487 190 152 665
Opening balance 1 July 2009 267 950 52 487 190 152 665
Transactions with owners 118 297 24 244 554 82 235
- issue of shares 118 297 24 263 927 -
- issue cost recognised to equity - (19 373) -
- share based payment reserve - - 82 235
- dividend distribution - - -
Total comprehensive income - - -
- other comprehensive income - - -
- profit for the period - - -
Balance at 31 December 2009 386 247 76 731 744 234 900
Opening balance 1 January 2010 386 247 76 731 744 234 900
Transactions with owners 176 439 42 310 489 307 346
- issue of 9 310 823 shares on 12/03/2010 93 109 20 856 243 -
- issue of 5 882 352 shares on 01/04/2010 58 823 15 377 960 -
- issue of 2 450 748 shares on 30/06/2010 24 507 6 298 422 -
- issue cost recognised to equity - (222 136) -
- share based payment reserve - - 307 346
- dividend distribution - - -
Total comprehensive income - - -
- foreign exchange loss - - -
- profit for the period - - -
Closing balance 30 June 2010 562 686 119 042 233 542 246
Currency translation reserveAccumulated lossTotal
Group unaudited EUR EUR EUR
Opening balance 1 January 2009 (757 686) (681 386) 51 397 909
Transactions with owners - (1 949 289)(1 878 465)
- issue of shares - - -
- issue cost recognised to equity - - -
- share based payment reserve - - 70 824
- dividend distribution - (1 949 289)(1 949 289)
Total comprehensive income (1 833 537)2 129 574 296 037
- other comprehensive income (1 833 537)- (1 833 537)
- profit for the period - 2 129 574 2 129 574
Balance at 30 June 2009 (2 591 223) (501 101) 49 815 481
Opening balance 1 July 2009 (2 591 223)(501 101) 49 815 481
Transactions with owners - (2 074 939) 22 370 147
- issue of shares - - 24 382 224
- issue cost recognised to equity - - (19 373)
- share based payment reserve - - 82 235
- dividend distribution - (2 074 939)(2 074 939)
Total comprehensive income (58 846) 592 681 533 835
- other comprehensive income (58 846) - (58 846)
- profit for the period - 592 681 592 681
Balance at 31 December 2009 (2 650 069) (1 983 359) 72 719 463
Opening balance 1 January 2010 (2 650 069)(1 983 359)72 719 463
Transactions with owners - (2 917 202) 39 877 072
- issue of 9 310 823 shares on 12/03/2010 - - 20 949 352
- issue of 5 882 352 shares on 01/04/2010 - - 15 436 783
- issue of 2 450 748 shares on 30/06/2010 - - 6 322 929
- issue cost recognised to equity - - (222 136)
- share based payment reserve - - 307 346
- dividend distribution - (2 917 202) (2 917 202)
Total comprehensive income (667 976) 2 933 702 2 265 726
- foreign exchange loss (667 976) - (667 976)
- profit for the period - 2 933 702 2 933 702
Closing balance 30 June 2010 (3 318 045)(1 966 859) 114 862 261

Abridged consolidated statement of cash flows

Group
Unaudited
30 Jun 10
EUR
Group
Audited
31 Dec 09
EUR
Group
Unaudited
30 Jun 09
EUR
Cash flows from operating activities* 1 872 019 2 612 814 1 336 854
Cash flows from financing activities 18 346 688 12 537 009 4 323 247
Cash flows from investing activities (8 697 486)(7 055 693) (138 113)
Net increase in cash and cash equivalents 11 521 221 8 094 130 5 521 988
Cash and cash equivalents brought forward 12 276 543 4 418 847 4 418 847
Translation effect on cash and cash equivalents (331 325)(236 434) (256 564)
Cash and cash equivalents carried forward 23 466 439 12 276 543 9 684 271

* Includes interest paid on bank borrowings amounting to EUR 2 989 403 for the six months ended 30 June 2010, EUR 2 240 009 for the year ended 31 December 2009 and EUR 1 014 619 for the six months ended 30 June 2009.


Notes to the condensed consolidated unaudited interim financial statements

Basis of preparation

The condensed consolidated unaudited interim financial statements have been prepared in accordance with applicable Isle of Man law, International Financial Reporting Standards (IFRS), specifically IAS 34 Interim Financial Reporting, and the JSE Listings Requirements. The interim financial statements do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2009. The accounting policies are consistent with those applied for the prior periods except for the adoption of the revised IAS1.

The condensed consolidated interim financial statements have not been reviewed or reported on by the Company`s auditor.

Investment property

Investment properties are those held either to earn rental income or for capital appreciation or both. After initial recognition investment properties are measured at fair value. It is the Group`s policy to revalue investment properties in December.

Loans and borrowings as at 30 June 2010

BorrowerFacility amount
EUR
Outstanding amount
EUR
Available for drawdown
EUR
Interest rateHedge
Nepi Bucharest One SRL 7 300 0006 240 000 1 060 000 1M Euribor +4.5% 1M Euribor capped at 2.25%
Nepi Bucharest Two SRL 6 824 800 5 800 000 1 024 800 1M Euribor +1.9% 1M Euribor capped at 2.25%
General Investment SRL 15 000 000 11 864 281 - Fixed at 6.23% -
Premium Portfolio 13 995 000 13 800 491 - Fixed at 5.17% -
ERP Braila Retail Park40 000 000 40 000 000 - 3M Euribor +3.0% 3M Euribor capped at 2.25%
Auchan Pitesti 28 813 00028 813 000 - 1M Euribor +4.0% 1M Euribor capped at 2.25%

Loans repayment profile (EUR)

Year 2010 2011 2012 2013 2014 2015 Total
Nepi Bucharest One SRL - - - 6 240 000 - - 6 240 000
Nepi Bucharest Two SRL - 5 800 000 - - - - 5 800 000
General Investment SRL 475 414 1 005 008 1 064 641 1 137 283 8 181 935 - 11 864 281
Premium Portfolio 110 495 239 173 240 192 333 284 175 460 12 701 887 13 800 491
ERP Braila - - 2 155 653 2 155 653 35 688 694 - 40 000 000
Retail Park Auchan Pitesti - 216 098 2 139 365 1 899 257 1 450 254 23 108 026 28 813 000
Total 585 909 7 260 279 5 599 851 11 765 477 45 496 34335 809 913106 517 772

Reconciliation of profit for the period to distributable earnings

Group
30 Jun 10
EUR
Group
31 Dec 09
EUR
Group
30 Jun 09
EUR
Profit for the period attributable to equity holders 2 933 702 2 722 255 2 129 574
Unrealised foreign exchange gain (421 927) (1 811 011) (1 723 780)
Realised foreign exchange losses - (87 000) -
Listing expenses - 905 048 905 048
Acquisition fees 332 839 286 211 -
Share based payment fair value 307 346 153 059 70 824
Accrued interest on share based payments 133 639 170 721 81 045
Fair value adjustment - (575 253) -
Financial assets at fair value 701 291 855 754 392 176
Amortisation of the financial assets (159 600) (117 288) (39 777)
Deferred tax expense - 2 114 061 341 180
Share issue cum distribution 1 042 706 547 821 -
Distributable earnings for the period 4 869 996 5 164 378 2 156 290
Number of shares entitled to distribution 58 346 586* 37 070 515* 28 150 000
Distributable earnings per share for the period (EUR cents) 8.35 15.77 7.66
Interim (EUR cents) 8.35 7.66 7.66
Final (EUR cents) - 8.11 -

* Total shares in issue less 3 587 148 vendor shares subject to lock in arrangements since 20 October 2009


Reconciliation of profit for the period to headline earnings

Group
30 Jun 10
EUR
Group
31 Dec 09
EUR
Group
30 Jun 09
EUR
Profit for the period attributable to equity holders 2 933 702 2 722 255 2 129 574
Changes in currency translation reserve of foreign subsidiaries 667 976 1 892 382 1 833 537
Fair value adjustment of investment property - (575 253) -
Headline earnings 3 601 678 4 039 384 3 963 111
Adjusted net asset value 125 772 793 80 070 467 54 446 673
Net asset value per the statement of financial position114 862 261 72 719 463 49 815 481
Issued value of the shares in respect of the share incentive scheme 13 748 436 4 377 494 2 953 900
Deferred tax 9 952 647 7 388 314 4 063 754
Goodwill and intangible assets (12 790 551) (4 414 804) (2 386 462)
Net asset value per share 2.04 1.88 1.86
Adjusted net asset value per share 2.03 1.97 1.93
Number of shares for net assets value per share purposes 56 268 704 38 624 771 26 795 000
Number of shares for adjusted net assets value per share purposes 61 933 73440 657 663 28 150 000

Lease expiry profile

Year Based on rental income Based on rented area
2010 0.1% 0.0%
2011 2.6% 3.4%
2012 3.9% 4.8%
2013 8.0% 3.9%
2014 18.6% 16.8%
2015 6.9% 9.9%
2016 14.8% 7.3%
2017 0.7% 0.3%
2018 2.5% 0.8%
2019 1.6% 1.3%
>= 202040.3% 51.5%

Segmental analysis

Group
30 Jun 10
EUR
Group
31 Dec 09
EUR
Group
30 Jun 09
EUR
Rental income
Retail 7 108 5614 807 694 1 362 511
Industrial 594 417 1 191 587 593 914
Office 2 423 794 4 709 592 2 367 062
Total 10 126 772 10 708 873 4 323 487
Profit before net finance expense
Retail 5 317 544 6 652 814 587 801
Industrial 474 707 179 460 685 768
Office 1 815 713 3 032 304 3 624 775
Corporate (837 412) (1 575 206) (274 508)
Total 6 770 552 8 289 372 4 623 836

Payment of interim dividend

The board has approved and notice is hereby given of an interim dividend per share of 8.35 EUR cents for the six months ended 30 June 2010.

The salient dates for the dividend are set out below:

Last day to trade (JSE) Friday, 27 August 2010
Ex-dividend date (JSE) Monday, 30 August 2010
Ex-dividend date (AIM) Wednesday, 1 September 2010
Record date Friday, 3 September 2010
Payment date Thursday, 9 September 2010

No dematerialisation or rematerialisation of share certificates, nor transfer of shares between registers in the Isle of Man and South Africa will take place between Monday, 30 August 2010 and Friday, 3 September 2010, both dates inclusive.

Shareholders on the South African sub-register will receive dividends in South African Rand, based on the exchange rate to be obtained by the Company on 20 August 2010. A further announcement in this respect will be made on or before 20 August 2010.

Registered office:
Falcon Cliff, Palace Road, Douglas, Isle of Man IM2 4LB, British Isles (PO Box 75, Douglas, Isle of Man, IM99 1EP, British Isles)

Transfer secretaries and settlement agent:
Computershare Investor Services (Proprietary) Limited, 70 Marshall Street
Johannesburg 2001 South Africa
(PO Box 61051 Marshalltown 2107 South Africa)
Computershare Investor Services (Jersey) Limited, 2nd Floor, Queensway House, Hilgrove Street, St Helier, JE1 1ES, Jersey

Directors:
Dan Pascariu (Chairman)*, Desmond de Beer#, Michael Mills*, Steven Van Den Bossche*, Dewald Joubert*, Victor Semionov (Financial Director), Martin Slabbert (Chief Executive Officer), Jeffrey Zidel#
*Independent non-executive director, #Non-executive director