» Condensed Consolidated Unaudited Financial Statements for the Six Months Ended 30 June 2011

Condensed Consolidated Unaudited Financial Statements for the Six Months Ended 30 June 2011

Posted on: 30 June 2011


DIRECTORS' COMMENTARY

1 DISTRIBUTABLE EARNINGS

The Group has achieved consolidated distributable earnings of 9.77 euro cents per share and accordingly, the Board declared an interim dividend of 9.77 euro cents per share in respect of the six month period ended 30 June 2011. This strong performance represents a 17% increase over the 8.35 euro cents per share distributed for the comparable prior interim period.

2 OTHER HIGHLIGHTS

On 20 June 2011, the Company was admitted to trading on the regulated market of the Bucharest Stock Exchange. The Bucharest Stock Exchange is a regulated European market that makes the Company's shares accessible to Romanian investors, including Romanian institutional investors. Although the Romanian institutions do not have high levels of capital under management yet, this is expected to significantly change over time. Further, the regulated nature of the Bucharest Stock Exchange paves the way for a potential listing on a major European exchange.

In June 2011, the Company raised euro28.8 million through a private placement that was heavily oversubscribed. The proceeds will be used to fund the Group's investment and development pipeline. This private placement extended the Company's shareholder base.

Liquidity in the trading of the Company's shares has further improved during this period.

3 PROPERTY ACQUISITIONS AND DEVELOPMENT

As reported in the 2010 Annual Report following the year-end, the Group has acquired land adjacent to Carrefour Property's operating property in Ploiesti and has reached preliminary agreement with Carrefour Property to redevelop the combined properties into a 50,000 m2 regional shopping centre. Since then Carrefour Property's board has approved the transaction and significant progress has been made in securing bank financing and agreeing pre-leases with tenants.

The Group also acquired land adjacent to its retail asset in Brasov that borders a Carrefour hypermarket. The combined property is being redeveloped into a 5,300 m2 strip mall. Tenants have been secured and the re-development is under way. During the period, the Group exercised its option to acquire a 7,000 m2 underperforming galleria linked to Retail Park Auchan Pitesti that will be redeveloped into a value centre. As a significant step in the redevelopment plan, the Group concluded an agreement with Auchan to extend the hypermarket area by a further 3,500 m2, of which 1,042 m2 is related to the acquired galleria.

This extension will result in this hypermarket being one of the largest in Romania outside of the capital city. It is expected that this will strengthen Auchan's leading position in the Pitesti area and contribute to the re-generation of the galleria.

The Group finalised and opened the first phase of the extension of Promenada Mall Braila consisting of a 10 screen Cinema City complex and a large entertainment area including an ice rink (Cinema City is the largest cinema operator in Central and Eastern Europe). Further extensions and re-configurations are ongoing and are expected to include the addition of several large international fashion retailers.

In June 2011, the Group finalised the refurbishment of the Brasov office building and is currently in negotiations with three potential tenants to lease the refurbished property.

4 DEBT

In April 2011, the Group repaid the euro6.8 million Alpha Bank loan facility that was due for repayment and replaced this in June 2011 with a euro9.5 million revolving facility from Unicredit Bank. The new revolving facility carries an interest rate of 1 month Euribor plus 3.0% and matures on 31 May 2012 when, at the Group's option, the facility is convertible into a term loan repayable on 31 December 2014. The new facility remains undrawn.

5 PROSPECTS

NEPI's property portfolio continues to perform well supported by the length of its lease profile and tenants with strong corporate covenants. The Group is actively pursuing further acquisition and investment opportunities and is in negotiations to conclude three transactions, which include a sizeable office acquisition, a land acquisition and a joint venture shopping centre development.

By order of the Board

Martin Slabbert
Chief executive officer

Victor Semionov
Financial director

10 August 2011

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited
30 Jun 11
Audited
31 Dec 10
Unaudited
30 Jun 10
ASSETS
Non-current assets345 483 741328 991 707211 084 981
Investment property321 839 207313 755 281196 914 767
Investment property at fair value307 077 251300 899 292189 752 881
Investment property under development14 761 95612 855 9897 161 886
Goodwill13 849 88713 849 88712 790 551
Financial assets at fair value through profit or loss3 706 9831 386 5391 379 663
Loans6 087 664--
Current assets39 578 98631 185 52927 932 073
Trade and other receivables4 139 9757 338 2474 465 634
Cash and cash equivalents35 439 01123 847 28223 466 439
Total assets385 062 727360 177 236239 017 054
EQUITY AND LIABILITIES
Total equity attributable to equity holders190 900 189155 087 026114 862 261
Share capital808 328712 686562 686
Share premium188 019 113159 308 324119 042 233
Share based payment reserve7 179 934759 550542 246
Currency translation reserve(3 108 678)(2 964 825)(3 318 045)
Accumulated loss(1 998 508)(2 728 709)(1 966 859)
Total liabilities194 162 538205 090 210124 154 793
Non-current liabilities181 677 497185 374 433116 257 774
Interest bearing borrowings165 139 885168 564 379105 223 417
Deferred tax liabilities15 586 36215 586 3629 952 647
Financial liabilities at fair value through profit or loss951 2501 223 6921 081 710
Current liabilities12 485 04119 715 7777 897 019
Trade and other payables5 143 6217 656 8576 335 216
Loans and borrowings5 114 9119 847 1531 561 803
Tenant deposits2 226 5092 211 767-
Total equity and liabilities385 062 727360 177 236239 017 054
Net asset value per share2.302.182.04
Adjusted net asset value per share2.332.222.03


CONSOLIDATED STATEMENT OF INCOME
Unaudited
30 Jun 11
Audited
31 Dec 10
Unaudited
30 Jun 10
Net rental and related income11 996 80016 224 1967 797 115
Contractual rental income and expense recoveries16 184 73421 269 33810 126 772
Property operating expenses(4 187 934)(5 045 142)(2 329 657)
Share based payments(440 384)(524 650)(307 346)
Foreign exchange gain227 552178 175421 927
Investment advisory fees-(703 323)(679 627)
Administrative expenses(813 007)(1 991 478)(461 517)
Fair value adjustment on investment property-1 111 927-
Profit before net finance expense10 970 96114 294 8476 770 552
Net finance expense(3 809 261)(5 906 809)(3 827 037)
Finance income143 453581 765196 896
Finance expense(3 952 714)(6 488 574)(4 023 933)
Profit before tax7 161 7008 388 0382 943 515
Tax-(1 476 694)(9 813)
Profit for the period attributable to equity holders7 161 7006 911 3442 933 702
Weighted average number of shares in issue75 963 60252 388 74847 255 904
Diluted weighted average number of shares in issue81 628 63256 334 54949 444 271
Basic weighted average earnings per share (euro cents)9.4313.196.21
Diluted weighted average earnings per share (euro cents)8.7712.275.93
Distributable earnings per share (euro cents)9.7717.618.35
Headline earnings per share (euro cents)9.4311.077.62
Diluted headline earnings per share (euro cents)8.7710.297.28


ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
30 Jun 11
Audited
31 Dec 10
Unaudited
30 Jun 10
Cash flows from operating activities*8 755 5713 335 5241 872 019
Cash flows from financing activities11 708 12653 813 12918 346 688
Cash flows from investing activities(8 955 636)(45 441 330)(8 697 486)
Net increase in cash and cash equivalents11 508 06111 707 32311 521 221
Cash and cash equivalents brought forward23 847 28212 276 54312 276 543
Translation effect on cash and cash equivalents83 668(136 584)(331 325)
Cash and cash equivalents carried forward35 439 01123 847 28223 466 439
* Includes interest paid on bank borrowings in amount of euro 3 947 973 for the six months ended 30 June 2011, euro5 542 335 for the year ended 31 December 2010 and euro 2 989 403 for the six months ended 30 June 2010.


RECONCILIATION OF PROFIT FOR THE PERIOD TO DISTRIBUTABLE EARNINGS
Unaudited
30 Jun 11
Audited
31 Dec 10
Unaudited
30 Jun 10
Profit for the period attributable to equity holders7 161 7006 911 3442 933 702
Unrealised foreign exchange loss(227 552)(178 175)(421 927)
Acquisition fees-831 369332 839
Share based payment fair value440 384524 650307 346
Accrued interest on share based payments338 206491 064133 639
Fair value adjustment-(1 111 927)-
Financial assets at fair value23 166836 397701 291
Amortisation of the financial assets(464 722)(426 032)(159 600)
Deferred tax expense-1 460 883-
Share issue cum distribution1 022 5512 325 4431 042 706
Distributable earnings for the period8 293 73311 665 0164 869 996
Number of shares entitled to distribution84 910 83173 346 58658 346 586
Distributable earnings per share for the period (euro cents)9.7717.618.35
First interim dividend (euro cents)9.778.358.35
Second interim dividend (euro cents)-9.26-


STATEMENT OF OTHER COMPREHENSIVE INCOME
Unaudited
30 Jun 11
Audited
31 Dec 10
Unaudited
30 Jun 10
Profit for the period attributable to equity holders7 161 7006 911 3442 933 702
Other comprehensive income - currency translation differences(143 853)(314 756)(667 976)
Total comprehensive income for the period7 017 8476 596 5882 265 726


RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS
Unaudited
30 Jun 11
Audited
31 Dec 10
Unaudited
30 Jun 10
Profit for the period attributable to equity holders7 161 7006 911 3442 933 702
Changes in currency translation reserve of foreign subsidiaries--667 976
Fair value adjustment of investment property-(1 111 927)-
Headline earnings7 161 7005 799 4173 601 678


RECONCILIATION OF NET ASSET VALUE TO ADJUSTED NET ASSET VALUE
Unaudited
30 Jun 11
Audited
31 Dec 10
Unaudited
30 Jun 10
Adjusted net asset value206 385 100170 571 937125 772 793
Net asset value per the statement of financial position190 900 189155 087 026114 862 261
Loans in respect of the share purchase scheme13 748 43613 748 43613 748 436
Deferred tax15 586 36215 586 3629 952 647
Goodwill(13 849 887)(13 849 887)(12 790 551)
Net asset value per share2.302.182.04
Adjusted net asset value per share2.332.222.03
Number of shares for net asset value per share purposes82 832 94971 268 70456 268 704
Number of shares for adjusted net asset value per share purposes88 497 97976 933 73461 933 734


STATEMENT OF CHANGES IN EQUITY
Group unauditedShare capitalShare premiumShare based payments reserveCurrency translation reserveAccumulated lossTotal
Opening balance 1 January 2010386 24776 731 744234 900(2 650 069)(1 983 359)72 719 463
Transactions with owners176 43942 310 489307 346-(2 917 202)39 877 072
- issue of shares176 43942 532 625---42 709 064
- issue cost recognised to equity-(222 136)---(222 136)
- share based payment reserve--307 346--307 346
- dividend distribution----(2 917 202)(2 917 202)
Total comprehensive income---(667 976)2 933 7022 265 726
- other comprehensive income---(667 976)-(667 976)
- profit for the period----2 933 7022 933 702
Balance at 30 June 2010562 686119 042 233542 246(3 318 045)(1 966 859)114 862 261
Opening balance 1 July 2010562 686119 042 233542 246(3 318 045)(1 966 859)114 862 261
Transactions with owners150 00040 266 091217 304-(4 739 492)35 893 903
- issue of shares150 00040 417 268---40 567 268
- issue cost recognised to equity-(151 177)---(151 177)
- share based payment reserve--217 304--217 304
- dividend distribution----(4 739 492)(4 739 492)
Total comprehensive income---353 2203 977 6424 330 862
- other comprehensive income---353 220353 220
- profit for the period----3 977 6423 977 642
Balance at 31 December 2010712 686159 308 324759 550(2 964 825)(2 728 709)155 087 026
Opening balance 1 January 2011712 686159 308 324759 550(2 964 825)(2 728 709)155 087 026
Transactions with owners95 64228 710 7896 420 384-(6 431 499)28 795 316
- issue of shares95 64228 734 126---28 829 768
- issue cost recognised to equity-(23 337)---(23 337)
- share based payment reserve--6 420 384--6 420 384
- dividend distribution----(6 431 499)(6 431 499)
Total comprehensive income---(143 853)7 161 7007 017 847
- other comprehensive income---(143 853)-(143 853)
- profit for the period----7 161 7007 161 700
Balance at 30 June 2011808 328188 019 1137 179 934(3 108 678)(1 998 508)190 900 189


BANK LOANS AND BORROWINGS AS AT 30 JUNE 2011
Group unauditedFacility amountOutstanding amountAvailable for drawdownInterest rateHedge
Nepi Bucharest One SRL6 200 0006 200 000-1M Euribor+4.5%1M Euribor capped at 2.25%
General Investment SRL15 000 00010 892 282-Fixed at 6.23%-
Nepi Bucharest Two and Unique Delamode SRL9 500 000-9 500 0001M Euribor+3%1M Euribor capped at 2.25%
Premium Portfolio13 995 00013 448 858-Fixed at 5.17%-
Promenada Mall40 000 00040 000 000-3M Euribor+3.0%3M Euribor capped at 2.25%
Retail Park Auchan Pitesti28 813 00028 813 000-1M Euribor+4.0%1M Euribor capped at 2.25%
Floreasca Business Park77 000 00070 269 270-3M Euribor+2.5%3M Euribor capped at 2.00%
Total190 508 000169 623 4109 500 000


BANK LOANS REPAYMENT PROFILE
Borrower20112012201320142015Total
EuroEuroEuroEuroEuroEuro
Nepi Bucharest One SRL--6 200 000--6 200 000
General Investment SRL508 4221 064 6411 137 2838 181 936-10 892 282
Nepi Bucharest Two and/or Unique Delamode SRL --- ---
Premium Portfolio117 943241 105334 55012 755 260-13 448 858
Promenada Mall-2 155 6532 155 654 35 688 693-40 000 000
Retail Park Auchan Pitesti-2 204 1951 887 2512 247 41422 474 14028 813 000
Floreasca Business Park2 484 8754 399 69263 384 703 --70 269 270
Total3 111 24010 065 28675 099 441 58 873 30322 474 140169 623 410


LEASE EXPIRY PROFILE
YearTotal based on rental incomeTotal based on rented area
20110.2%1.0%
20124.2%1.9%
20134.2%6.9%
201417.4%14.3%
201521.4%16.2%
20164.2%3.9%
20174.6%3.4%
20183.3%1.6%
20191.2%1.1%
>=202039.3%49.7%
Total100%100%


SEGMENTAL ANALYSIS
Unaudited Audited Unaudited
30 Jun 11 31 Dec 10 30 Jun 10
Contractual rental income and expense recoveries
Retail7 437 887 13 636 990 7 108 561
Industrial 906 069 1 376 030 594 417
Office 7 840 778 6 256 318 2 423 794
Total 16 184 734 21 269 338 10 126 772
Profit before net finance expense
Retail 6 232 174 16 902 869 5 317 544
Industrial 775 367961 679 474 707
Office 4 989 415 (430 901) 1 815 713
Corporate (1 025 995) (3 138 800) (837 412)
Total 10 970 961 14 294 8476 770 552

NOTES TO THE CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

BASIS OF PREPARATION

The condensed unaudited consolidated financial statements have been prepared in accordance with the recognition and measurement criteria of the International Financial Reporting Standards (IFRS), its interpretations adopted by the International Accounting Standard Board (IASB), the presentation and the disclosure requirements of IAS 34 Interim Financial Reporting and the Listing Requirements of the JSE. The accounting policies adopted are consistent with those of the prior year. These condensed consolidated interim financial results have not been reviewed or reported on by the Company's auditor.

INVESTMENT PROPERTY

Investment property are those held either to earn rental income or for capital appreciation or both. After initial recognition investment property are measured at fair value. Fair value is determined annually by external independent professional valuators with appropriate and recognised professional qualifications and recent experience in the location and category of property being valued.

PAYMENT OF INTERIM DIVIDEND

The board has approved and notice is hereby given of a dividend per share of 9.77 euro cents for the six months ended 30 June 2011. The salient dates for the dividend are set out below:

Last day to trade (JSE)Friday, 2 September 2011
Ex-dividend date (JSE)Monday, 5 September 2011
Ex-dividend date (AIM and BVB)Wednesday, 7 September 2011
Record dateFriday, 9 September 2011
Payment dateMonday, 12 September 2011

No dematerialisation or rematerialisation of share certificates, nor transfer of shares between sub-registers in the Isle of Man, South Africa and Romania will take place between Monday, 5 September 2011 and Friday, 9 September 2011.

Shareholders on the South African sub-register will receive dividends in South African cents of 99.79078 per share, based on an exchange rate of 10.2140 South African Rand per euro.