ATLAS ESTATES LIMITED INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION HALF YEAR 2015

Transcription

1 INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION HALF YEAR 2015 Atlas Estates Limited Martello Court Admiral Park St Peter Port Guernsey GY1 3HB Company number: 44284

2 Contents Page 3 Financial Highlights 4 Chairman s Statement 7 Review of the Property Manager 16 Property Portfolio Information 18 Independent Review Report to Atlas Estates Limited 19 Declaration of the Board of Directors 20 Interim Condensed Consolidated Financial Information 26 Selected Notes to the Interim Condensed Consolidated Financial Information 2

3 Financial Highlights Selected Consolidated Financial Items Six months ended 30 June 2015 Year ended 31 December 2014 Six months ended 30 June Revenues 16,684 36,925 20,647 Gross profit 6,958 13,838 7,256 Decrease in value of investment properties (5,468) (27,620) (14,409) Loss from operations (1,992) (23,636) (10,531) Profit/ (Loss) before tax 20,320 (33,156) (13,926) Profit/ (Loss) for the period 21,085 (32,683) (14,037) Profit/ (Loss) attributable to owners of the parent 21,085 (32,683) (14,037) Cash flow from operating activities 7,846 10,637 8,323 Cash flow from investing activities (396) Cash flow from financing activities (7,097) (9,107) (5,528) Net increase in cash 760 1,240 2,973 Non-current assets 188, , ,121 Current assets 63,246 60,224 53,148 Total assets 262, , ,843 Current liabilities (172,553) (129,525) (46,811) Non-current liabilities (22,950) (87,315) (171,360) Total liabilities (195,503) (216,840) (218,171) Basic net assets 67,158 44,992 62,672 Number of shares outstanding 46,852,014 46,852,014 46,852,014 Profit/ (Loss) per share (eurocents) 45.0 (69.8) (30.0) Basic net asset value per share ( ) (1) Basic net assets represent net assets value as per the consolidated balance sheet. 3

4 Chairman s Statement Dear Shareholders, I am pleased to announce the financial results for Atlas Estates Limited ( Atlas or the Company ) and its subsidiary undertakings (together the Group ) for the six months ended 30 June In the current financial market conditions key priorities are enhancing liquidity, gaining access to capital as well as new land bank acquisitions. All of these objectives are vital for operations as they will underpin our drive to progress the projects we currently have under development through to completion, whilst at the same time supporting growth of the operations. Despite the challenging environment the Group was able to achieve several key objectives: - on 29 June 2015 the Group signed a new financing agreement for Hilton hotel to repay the existing bank facility of 52.8million maturing in September The final repayment date of the new loan is 30 June 2025; - on 30 June 2015 the Group completed restructuring of the portfolio of Romanian land bank loans. Based on the settlement reached with the bank the Group received 22.2 million discount on the repayment of the outstanding loan facilities (as described on page 10); - the residential projects that the Group is currently developing in Warsaw (Capital Art Apartments III & IV, Apartamenty przy Krasińskiego and Concept House) were successful and their sales are nearly complete,; - the above described success in the development sector has contributed to the full repayment of the loan facilities extended to all residential projects; - in July and August 2014, the Group has signed agreements on the purchase of the right of perpetual usufruct of real estate properties situated in Żoliborz and Wola districts of Warsaw, with a total area of 18,990 sqm, for use in future residential development projects. The Company estimates that approximately 410 apartments can be developed on these properties and is working on achieving valid building permits for their construction. Half Year Reported Results As of 30 June 2015 the Group has reported basic net assets of 67.2 million. The increase of basic net asset value by 22.2 million from 45.0 million as at 31 December 2014 is primarily a result of the above mentioned bank loan write off. On 30 June 2015 the Group reached a settlement with the bank financing its two projects in Romania (part of the portfolio of cross collateralised banking facilities) based on which the Group received 22.2 million discount on the repayment of the outstanding loan facilities. Profit after tax amounts to 21.1 million for the six months period ended 30 June 2015 as compared to loss after tax of 14.0 million for the six months period ended 30 June The increase amounting to 35.1 million is mainly attributable to: - the above described bank loan write off of 22.2 million resulting in finance income increased from 0.2 in the first half 2014 to 22.4 million in the first half of 2015; million decrease in the fair value losses on investment properties from 14.4 million in the first half 2014 to 5.5 million in the first half of This significant decrease recorded in 2014 was mainly impacted by the fair value losses on land banks in Romania; - favourable movements in the foreign currency exchange differences from loss of 0.7 million for the first half 2014 to gain of 1.9 million for the first half The foreign exchange gains occurred mainly as a result of appreciation of PLN against EUR in the first half of The foreign exchange losses occurred mainly as a result of depreciation HUF against EUR in the first half of

5 Financing, Liquidity and Forecasts The Directors consider that the current outlook presents operating as well as financing challenges in which the Group operates. The Group s forecasts and projections have been prepared taking into account the economic environment and its challenges and mitigating factors. These forecasts incorporate management s best estimate of future trading performance, potential sales of properties and the future financing requirements 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 have adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the interim condensed consolidated financial information for the six months ended 30 June 2015, as set out in note 1. Investing Policy Atlas mainly invests in Poland in a portfolio of real estate assets across a range of property types. The Group also operates in the Hungarian, Romanian and Bulgarian real estate markets. We actively target Poland, where the economy is believed to be the most attractive amongst CEE economies. We invest both on our 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. We may employ leverage to enhance returns on equity. Wherever possible, the Directors intend to seek financing on a 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 shall employ a gearing ratio of up to 80% of the total value of its interest in income-generating properties within its property portfolio. Given the positive prospects for the residential sector in Poland (and in Warsaw specifically), we currently attribute significant efforts in locating land on which we can develop residential projects. Net Asset Value ( NAV ) and Adjusted Net Asset Value ( Adjusted NAV ) The Company has used NAV per share and Adjusted NAV per share as key performance measures since its IPO. In the six months to 30 June 2015, NAV per share, as reported in the interim condensed consolidated financial information, which has been prepared in accordance with International Financial Reporting Standards ( IFRS ), has increased from the level of 1.0 per share as at 31 December 2014 to 1.4 per share 30 June As previously reported, 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, has not been included. The Adjusted NAV per share is calculated on an annual basis when the market valuation of the entire Group s assets portfolio takes place. For the interim accounts valuations of key assets (Hilton Hotel and Millennium Plaza- office building located in Warsaw) were performed by external experts. Additionally internal valuation was performed in respect of Metropol (Hungarian property) which was classified as held for sale. As of 30 June 2015 the following external independent qualified experts were engaged: - Jones Lang LaSalle responsible for the valuation of Millenium Plaza, - Wyceny i Ekspertyzy Sp. z o.o. dr inż. Andrzej Zalewski responsible for the valuation of Hilton hotel in Poland. Corporate Governance Atlas ensures that the Group applies a robust corporate governance structure, which is vital in the current economic conditions. This is important as there is a clear link between high quality corporate governance and shareholder value creation. The Group s annual financial statements for the year ended 31 December 2014 set out how Atlas applies the standards of corporate governance. 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 for the rest of the financial year 2015 are summarised in the Property Manager s Report on pages 14 and 15 below. 5

6 Prospects With the ongoing economic recovery in Poland we also focus on driving our sales activities in several residential projects in Warsaw as presented in the Review of the Property Manager. Andrew Fox CHAIRMAN 28 August

7 Review of the Property Manager In this review we present the financial and operating results for the six months ended 30 June 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 30 June 2015, the Company held a portfolio of twenty one properties comprising eleven investment properties of which five are income yielding properties, two are held for capital appreciation and four are held for sale, two hotels and eight development properties. It could be a long road to recovery for the real estate market in Central & Eastern Europe (CEE). As a result of these uncertainties and changing conditions, management has taken measures to mitigate risks across the portfolio. This has included reducing costs and staffing levels and putting on hold higher risk investment activity. Nevertheless, key development projects have been completed on time, several new developments are in progress and new projects are to commence. Markets and Key Properties Poland This is the major market of operation for the Group, with approximately 85% (by value as of 31 December 2014) of the Group s portfolio located there. The Polish economy has been one of the most resilient economies in Europe with expected GDP growth of 3.5% in 2015 (3.4% in 2014). Hilton Hotel, Warsaw The Hilton hotel in the Wola district of Warsaw is the Group s flagship asset. The hotel is continuously performing at an outstanding level. Platinum Towers and Atlas Estates Tower Platinum Towers - with its construction finished, all apartments and penthouses have been sold. This residential development alongside the Hilton hotel provides a unique development in the city. The plan is also to build a mixed use (residential and office) Atlas Estates Tower, on the neighbouring plot, which will enhance the attractiveness of this site. Capital Art Apartments The Capital Art Apartments project in Warsaw is another development in Warsaw close to the city centre. It is a four stage development with 784 apartments as well as parking and amenities, including retail facilities. With both the first and the second stage completed, the Company has, to date, sold or presold all of the 219 apartments in the first stage, with a further 297 out of 300 apartments in the second stage having been sold or presold. Construction of the third and fourth stages, comprising 265 apartments, was completed in the first quarter 2015 and as of 30 June 2015 the Company pre-sold 249 apartments. Concept House The Concept House project is a development in the Mokotów district of Warsaw. It consists of 160 apartments in the city with parking and amenities, including retail facilities. The construction of the development was completed in 2013 and as of 30 June 2015 only 7 apartments and 4 retail units are unsold. Apartamenty przy Krasińskiego (the first stage) and Apartamenty przy Krasińskiego II (the second stage) Apartamenty przy Krasińskiego project is a development in the Żoliborz district of Warsaw. The first stage of this development includes 303 apartments as well as parking and amenities and retail facilities. The construction of the first stage was completed in 2013 and as of 30 June 2015 only 3 apartments and 4 retail units are unsold. 7

8 Apartamenty przy Krasińskiego II is the second stage of this successful development project. This stage will release approximately 170 apartments as well as parking and retail facilities. Nakielska Apartments Project Nakielska Apartment Project is a residential development will be a two stage development which will release around 240 apartments as well as parking and retail facilities. Other properties in Poland The Group also owns two investment properties in Poland. The Millennium Plaza is a 32,700 sqm office and retail building centrally located in Warsaw with occupancy rate of 77% as of 30 June The Sadowa office building is a 6,550 sqm office building in Gdańsk. During the year its occupancy ratio remains high (100% as of 31 December 2014 and 30 June 2015). Hungary In Hungary, the Group s portfolio is comprised of six properties, all of which are located in Budapest. Five are income producing assets. Four of them have been classified as an asset held for sale as disclosed in note 16 of the interim condensed consolidated financial statements. The Hungarian economy has suffered from the global credit crisis and lack of liquidity available for development projects. As a result, Atlas has stopped development activity and has experienced client losses and pricing pressures affecting its income yielding assets. In 2014 GDP increase of 3.6% was noted (in 2015 an increase in GDP of 2.7% is expected). Romania The Group s portfolio contains three properties in Romania, including the Golden Tulip hotel and two significant land banks. The Romanian GDP increased by 2.9% in 2014 (in 2015 an increase in GDP of 2.7% is expected). Despite the difficult trading conditions, occupancy rates at the Golden Tulip improved from 54% for the six months ended 30 June 2014 to 64% for the six months ended 30 June Bulgaria The Group holds one property in Bulgaria, which is a ca. 3,500 sqm office building in Sofia. 8

9 Financial Review The on-going analysis of the economics of the region and the key measures of the sectors in which the Group operates are vital to ensure it does not become over exposed to, or reliant on, any one particular area. AMC evaluates the risks and rewards associated with a particular country, sector or asset class, in order to optimise the Company s return on investment and therefore the return that the Company is able to deliver to Shareholders over the longer term. Portfolio valuation and valuation methods An independent valuation of the entire property portfolio is carried out on an annual basis. For the interim semiannual accounts the valuation of selected assets was performed as described on page 5. Loans As at 30 June 2015, the Company s share of bank debt associated with the portfolio of the Group was 147 million (31 December 2014: 174 million; 30 June 2014: 185 million). Loans, valuations and Loan to Value ratios ( LTV ) for those periods in which valuations were undertaken may be analysed as follows: Loans millions Valuation Loan to Value Loan to Value Loan to Value Ratio Loans Valuation Ratio Loans Valuation Ratio 30 June December June 2014 millions % millions millions % millions millions % Investment property % % % Hotels % % % Development property in construction Total % % % The valuations in the table above differ from the values included in the consolidated balance sheet as at 30 June 2015, 31 December 2014 and 30 June 2014 due to the treatment under IFRS of land held under operating leases and development property. LTV ratio of investment property increased from 98% as of 30 June 2014 to 117% as of 31 December 2014 mainly due to the significant decrease in the valuation of Romanian land banks noted in LTV ratio of investment property decreased significantly in 2015 and amounted to 95% as of 30 June 2015 as a result of the settlement reached with the bank financing Romanian land bank investments (as disclosed on page 10). As of 30 June 2015 the LTV ratio of hotels amounted to 62% and remained at a similar level as compared to 31 December 2014 and 30 June The bank facilities extended to development projects in construction were repaid in 2014 and this impacted the decrease of LTV in this segment. The gearing ratio is 65% based upon net debt as a percentage of total capital (net debt plus equity attributable to equity holders). The ratio decreased significantly as compared to 31 December 2014 (73%) and 30 June 2014 (72%) mainly due to the settlement reached with bank financing Romanian land banks. Debt financing Hotel Hilton bank facility As of 30 June 2015 and 31 December 2014 the bank facility extended to Hilton hotel in Poland amounting to 52.8m (31 December 2014: 53.3m) is classified as a current liability as it is due in September On 29 June 2015 the Group signed a new financing agreement in order to repay this facility before its due date. The final repayment date of the new loan is 30 June

10 Portfolio of cross collateralised banking facilities On 30 June 2015 the Group reached a settlement with the bank financing its two projects in Romania (part of the portfolio of cross collateralised banking facilities) based on which the Group received a 22.2 million discount on the repayment of the outstanding Romanian loan facilities. The Group could be obliged to pay an additional amount to the bank in connection with this transaction upon closing of disposal of Millennium Plaza. The additional amount is calculated as follows: a. the amount by which net proceeds from the disposal of Millennium Plaza exceed the outstanding debt facility at the time of disposal constitute Excess Disposal Proceeds ; b. the additional amount shall be the sum of: - 100% of Excess Disposal Proceeds not exceeding 10.0 million, - 50% of Excess Disposal Proceeds exceeding 10.0 million. As of 30 June 2015, after the above settlement, the Group has two outstanding facilities that have been cross collateralised totalling 64.8 million. As at 30 June 2015 these loans have been classified as current liabilities since the waiver of covenants is effective till January The Company is in dialogue with the bank and is discussing restructuring of this loan portfolio. Repaid loans On 11 February 2014 and 10 December 2014 the loan facilities extended to Concept House and Capital Art Apartments residential developments were repaid. Other loans In the preparation of the consolidated financial statements as of 30 June 2015, the directors have classified the loan facility extended to a Hungarian subsidiary totalling 15.5 million as current since covenant breaches arose on this loan. The Company is in dialogue with the bank and is discussing restructuring of this loan. 10

11 Review of the operational performance The financial analysis of the income statement set out below reflects the monitoring of operational performance by segment as used by management. Six months ended Six months ended Property Rental Development Properties Hotel Operations Other 30 June June 2014 millions millions millions millions millions millions Revenue Cost of operations (2.8) (0.8) (6.1) - (9.7) (13.4) Gross profit Administrative expenses (0.5) (0.3) (1.7) (1.0) (3.5) (3.6) Gross profit less administrative expenses 3.0 (0.3) 1.8 (1.0) Gross profit % 56% 0% 36% 0% 42% 35% Gross profit less administrative expenses % 48% -38% 19% 0% 21% 17% Revenues and cost of operations Total revenues for the six months ended 30 June 2015 were 16.7 million compared to 20.6 million for the six months ended 30 June The Group s principal revenue streams are from its hotel operations, property rental income and income from the sale of the residential apartments that the Group develops. As the Group maintains a diversified portfolio of real estate investments, seasonality or cyclicality of yielded income or results is also highly diversified. Cost of operations were 9.7 million in the six months ended 30 June 2015 compared to 13.4 million for the six months ended 30 June million decrease is principally due to lower numbers of apartments handed over to new owners with notarial deeds signed in 2015 (30 June 2015: 6 apartments) as compared to 2014 (30 June 2014: 109 apartments). Development Properties Six months ended 30 June 2015 millions Six months ended 30 June 2014 millions Total change 2015 v 2014 millions Translation foreign exchange effect millions Operational change 2015 v 2014 millions Revenue (4.4) - (4.4) Cost of operations (0.8) (4.3) Gross profit (0.9) (0.9) Administrative expenses (0.3) (0.3) - - Gross profit less administrative expenses (0.3) 0.6 (0.9) (0.9) - Proceeds from the sale of residential apartments developed by the Group are only recognised when apartments have been handed over to new owners with notarial deed signed. At this moment the economic risks and rewards are transferred to the new owner and in accordance with the Group s accounting policy, the revenue and associated costs of these apartments are recognised in the income statement. Please note that for: - Capital Art Apartments III&IV projects: no sales and associated costs have been recognized in the income statement as no notarial deeds were signed as of 30 June However it should be noted that these projects demonstrate high level of presales amounting to 94% as of 30 June 2015; - Concept House is a joint venture project and therefore differently accounted for as compared to other development projects. The revenues and associated costs of this development are netted and disclosed separately as a single line item as total investment in equity accounted joint ventures on the consolidated income statement. 11

12 The decrease in gross profit realised by the development segment in 2015 as compared 2014 is mainly a result of above mentioned decrease in the number of apartments sold. Apartment sales in developments in Warsaw CAA stage 1 CAA stage 2 CAA stage 3&4 Platinum Towers Apartamenty przy Krasińskiego Concept House* Total apartments for sale Sales completions in Sales completions in Sales completions in Sales completions in Total sales completions Sales not completed as of 30 June 2015 (only preliminary agreements concluded) Apartments available for sale as of 30 June 2015 *Joint venture project Property Rental Six months ended 30 June 2015 millions Six months ended 30 June 2014 millions Total change 2015 v 2014 millions Translation foreign exchange effect millions Operational change 2015 v 2014 millions Revenue Cost of operations (2.8) (2.8) Gross profit Administrative expenses (0.5) (0.3) (0.2) - (0.2) Gross profit less administrative expenses In the first six months of 2015 the gross margin realized by the Property Rental segment remained stable as compared to the first six months of Hotels Six months ended 30 June 2015 millions Six months ended 30 June 2014 millions Total change 2015 v 2014 millions Translation foreign exchange effect millions Operational change 2015 v 2014 millions Revenue Cost of operations (6.1) (6.3) Gross profit Administrative expenses (1.7) (1.6) (0.1) - (0.1) Gross profit less administrative expenses In the first six months of 2015 the hotel operations improved as compared to the first six months of 2014 mainly due to improved occupancy ratios of both Hilton and Golden Tulip hotels in Warsaw and Bucharest. 12

13 Administrative expenses Administrative expenses decreased by 0.1 million as compared to the six months ended 30 June 2014 mainly due to decrease of property manager fee as a result of lower adjusted NAV (i.e. base of the performance manager fee). Valuation movement As of 30 June 2015 the decrease of the market value of the investment properties portfolio was of 5.5 million as compared to a decrease of 14.4 million as of 30 June This significant decrease in 2014 was mainly impacted by the valuation losses recognised in relation to the assets located in Romania as described in more detail in 2014 annual report (note 16). The decrease in 2015 was mainly due to the revaluation of Millenium Plaza. Finance income and costs Finance income increased by 22.2 million primarily due to a 22.2 million bank loan write back. On 30 June 2015 the Group reached a settlement with the bank financing its two projects in Romania (part of the portfolio of cross collateralised banking facilities) based on which the Group received 22.2 million discount on the repayment of the outstanding loan facilities. The income statement includes finance costs of 2.0 million for the six months ended 30 June 2015, compared with 2.9 million in comparative period in 2014, representing mainly interests on bank loans and related bank charges. The decrease of finance costs is mainly attributable to deconsolidation of one of the Polish subsidiaries in December Foreign exchange The fluctuations in exchange rates in the underlying currencies of the countries in which the Group operates and owns assets have resulted in large foreign exchange differences. In the six months ended 30 June 2015 the Group reported exchange gains of 1.9 million as compared to 0.7 million losses in the six months ended 30 June These gains and losses were due to the unrealised foreign exchange gains and losses on EUR denominated bank loans in Polish, Hungarian and Romanian subsidiaries. The foreign exchange gains occurred mainly as a result of appreciation of PLN against EUR in the first half of The foreign exchange losses occurred mainly as a result of depreciation of HUF against EUR in the first half of A summary of exchange rates by country for average and closing rates against the reporting currency as applied in the interim condensed consolidated financial information are set out below. Polish Zloty Hungarian Forint Romanian Lei Bulgarian Lev Closing rates 30 June December % Change -2% 0% 0% 0% 30 June December % Change 0% 4% -2% 0% Average rates 1 Jan- 30 June Year % Change -1% 0% 0% 0% 1 Jan- 30 June 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; 13

14 Property, plant and equipment operated by the Group to produce income, such as the Hilton hotel or land held for development of 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 unless where an increase represents the reversal of previously recognised deficit below cost. The Property Manager s basic fee and performance fee are determined by the annual adjusted NAV. For the six months to 30 June 2015 the basic fee payable to AMC was 0.7 million - based on the adjusted NAV as of 31 December 2014 ( 1.0 million for the six months period ended 30 June based on the adjusted NAV as of 31 December 2013). Ongoing activities During the first half of 2015, the Company continued to identify ways by which it can generate added value through the active management of its yielding asset portfolio. It has also continued to crystallise the value of development projects by the pre-selling of apartments under construction and by the completion of development property in the course of construction. The property portfolio is constantly reviewed to ensure it remains in line with the Company s stated strategy of creating a balanced portfolio that will provide: future capital growth; the potential to enhance investment value through active and innovative asset management programmes; and the ability to deliver strong development margins. A key management objective is to control and reduce construction costs at its development projects, particularly in the light of global variations in commodity prices. Another key objective is the refinancing of the portfolio, the securing of construction loans and the evaluation of various fund raising opportunities. Financial management, operational management and material risks 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. 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 and 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 the Property Manger closely monitor the effects that the current global economic conditions have on the business and will continue to take steps to mitigate, as far as possible, any adverse impact that may affect the business. An impact of the economic uncertainty is the fluctuations in exchange rates of countries in the region. 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. 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. 14

15 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. 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 Euro 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 and Prospects 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 local market knowledge and expertise. In the second quarter of 2015 the new financing for Hilton hotel was secured and successful restructuring of Romanian bank facilities was completed. Additionally good progress has been made with the sales of key development projects in Warsaw (Apartamenty przy Krasińskiego I, Concept House and Capital Art Apartments III&IV). In the first quarter of 2015 the constructions of Apartamenty przy Krasińskiego III&IV were completed. Moreover in the third quarter of 2014 the Company managed to purchase two plots in Warsaw for use in future residential development projects. Currently the management is focused on securing financing for these projects and obtaining all necessary permits to commence the construction. Reuven Havar Chief Executive Officer Atlas Management Company Limited 28 August 2015 Ziv Zviel Chief Financial Officer Atlas Management Company Limited 15

16 Property Portfolio Information Location/Property Description Company s ownership Poland Hilton Hotel Platinum Towers First Hilton Hotel in Poland a 4 star hotel with 314 luxury rooms, large convention centre, fitness club and spa Holmes Place Premium, casino and retail outlets. Location close to the central business district in Wola area of Warsaw. 396 apartments in two towers; the residential development has been completed in the 3 rd quarter of 2009 with two residential towers and a piazza. Location close to the central business district in Wola area of Warsaw. 100% 100% Atlas Estates Tower (former name: Platinum Towers offices) Land with zoning for an office/residential tower planned over 42 floors. 100% Galeria Platinum Towers Commercial area on the ground and first floors Platinum Towers with 1,842 square meters of gallery and 208 parking places almost fully let to tenants. 100% Capital Art Apartments 784 apartments, four stage development, with Stage 1 completed in 2008, Stage 2 in 2009, Stage 3 in January 2015 and Stage 4 in February Location close to the central business district in Wola area of Warsaw. As of 30 June 2015 only 19 apartments were available for sale. 100% Nakielska Apartment Project Apartamenty przy Krasińskiego, stage I Apartamenty przy Krasińskiego, stage II Millennium Tower Concept House Nakielska Apartment Project is a residential development in the Wola district of Warsaw. It will be a two stage development which will release 240 apartments with parking and amenities, including retail facilities. This project is an early planning phase. Residential project in Warsaw. The construction was completed in July The project released 303 apartments out of which 300 were sold or presold. The second stage of the successful development project in Warsaw. This stage is in an early planning phase and it is estimated that it will release approximately 170 apartments with underground parking and retail facilities. 32,700 square meters of office and retail space in the central business district of Warsaw with 6,100 square meters of retail and 26,600 square meters of office space. The construction of this residential project was completed in April Location in Mokotow district close to the central business district of Warsaw. As of 30 June 2015 only 7 apartments out of 160 apartments were still available for sale. 100% 100% 100% 100% 50% Sadowa office building 6,550 square meters office building with 100% occupancy close to the city centre of Gdansk. 100% 16

17 Location/Property Description Company s ownership Hungary Ikarus Business Park 283,000 square meters plot with 110,000 square meters of built business space and 70,000 of currently lettable, located in the 16 th district, a suburban area of Budapest 100% Metropol Office Centre 7,600 square meters office building in the 13 th district of central Budapest. (disclosed as held for sale as at 30 June 2015) Atrium Homes Two phase development of 22,000 square meters of 456 apartments with 235 apartments in phase 1 with building permits, located in the 13 th district in central Budapest. 100% 100% Ligetvaros Centre 6,300 square meters of office/retail space with rights to build extra 6,400 square meters, located in the 7 th district, a central district in Budapest. (disclosed as held for sale as at 30 June 2015) 100% Varosliget Centre 12,000 square meters plot in the 7 th district in central Budapest, with zoning for a mixed use development of 31,000 gross square meters. (disclosed as held for sale as at 30 June 2015) 100% Moszkva Square Romania Voluntari Solaris Project 600 square meters of office and retail space in the Buda district of Budapest. (disclosed as held for sale as at 30 June 2015) 86,861 square meters of land in three adjacent plots at the pre-zoning stage, in the north eastern suburbs of the city, known as Pipera. 32,000 square meters plot for re-zoning to mixed-use development in a central district of Bucharest. 100% 100% 100% Golden Tulip Hotel 4 star 83 room hotel in central Bucharest in the city centre of Bucharest. 100% Bulgaria The Atlas House Office building in Sofia s city centre with 3,472 square meters of lettable area. 100% 17

18 Independent Review Report on the Interim Condensed Consolidated Financial Information for the six month period ended 30 June 2015 To Atlas Estates Limited Introduction We have been engaged by the company to review the interim condensed consolidated and non-consolidated financial information in the half-yearly financial report for the six months ended 30 June 2015, which comprises the consolidated income statement, the consolidated and non-consolidated statements of comprehensive income, the consolidated and non-consolidated statements of financial position, the consolidated and non-consolidated statements of changes in equity, the consolidated and non-consolidated statements of cash flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim condensed consolidated and non-consolidated financial information. Directors responsibilities The half-yearly financial report is the responsibility of and has been approved by the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the rules of the Warsaw Stock Exchange. As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The interim condensed consolidated and non-consolidated financial information included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the interim condensed consolidated and nonconsolidated financial information in the half-yearly financial report based on our review. Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting its responsibilities in respect of the requirements of the rules of the Warsaw Stock Exchange 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 our terms of engagement 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. Scope of review We conducted our review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information performed by the Independent Auditor of the Entity. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the interim condensed consolidated and non-consolidated financial information in the half-yearly financial report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with IAS 34, as adopted by the European Union. BDO LLP, Chartered Accountants London, United Kingdom 28 August 2015 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 18

19 Declarations of the Board of Directors Declaration concerning accounting policies The Board of Directors of Atlas Estates Limited ( the Company ) confirms that, to the best of their knowledge, the interim condensed consolidated and non-consolidated financial statements together with comparative figures have been prepared in accordance with applicable accounting standards and give a true and fair view of the state of affairs and the financial result of the Group and the Company for the period. The Directors and Property Manger s Reports in this report give a true and fair view of the situation on the reporting date and of the developments during the period, and include a description of the major risks and uncertainties. Declaration concerning election of the Company s auditor for the interim condensed consolidated and nonconsolidated financial statements The Company s auditor has been elected according to applicable rules. The audit firm engaged in the review of the financial statements of Atlas Estates Limited meet the objectives to present an objective and independent report in accordance with applicable laws and professional regulations. Andrew Fox Chairman Mark Chasey Director Guy Indig Director 28 August

20 INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION CONSOLIDATED INCOME STATEMENT For the six months ended 30 June 2015 Six months ended Six months ended 30 June June 2014 Note Revenues 16,684 20,647 Cost of operations (9,726) (13,391) 4.1 Gross profit 6,958 7,256 Property manager fee (688) (1,023) Central administrative expenses (214) (200) Property related expenses (2,627) (2,453) Administrative expenses (3,529) (3,676) 4.2 Other operating income Other operating expense (409) (182) 5.2 Decrease in value of investment properties (5,468) (14,409) Loss from operations (1,992) (10,531) Finance income (including bank debt waiver of 22.2m) 22, Finance costs (1,990) (2,853) 6 Other gains/ (losses) foreign exchange 1,870 (665) 6 Share of profits/ (losses) from equity accounted joint ventures 58 (45) Profit/ (Loss) before taxation 20,320 (13,926) Tax credit/ (charge) 765 (111) 7 Profit/ (Loss) for the period 21,085 (14,037) Attributable to: Owners of the parent 21,085 (14,037) Non-controlling interests ,085 (14,037) Profit/ (Loss) per 0.01 ordinary share basic (eurocents) Profit/ (Loss) per 0.01 ordinary share diluted (eurocents) 45.0 (30.0) (30.0) 9 All amounts relate to continuing operations. The notes on pages 26 to 45 form part of this condensed consolidated financial information. 20

21 INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended 30 June 2015 Six months ended Six months ended 30 June June PROFIT/ (LOSS) FOR THE PERIOD 21,085 (14,037) Other comprehensive income: Items that will not be recycled through profit or loss Revaluation of buildings - 1,155 Total - 1,155 Items that may be recycled through profit or loss Exchange adjustments 1,242 (862) Deferred tax on exchange adjustments (161) 119 Total 1,081 (743) Other comprehensive income for the period (net of tax) 1, TOTAL COMPREHENSIVE INCOME/ (LOSS) FOR THE PERIOD 22,166 (13,625) Total comprehensive income/ (loss) attributable to: Owners of the parent 22,166 (13,625) Non-controlling interests ,166 (13,625) The notes on pages 26 to 45 form part of this condensed consolidated financial information. 21

22 INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June June December June Note ASSETS Non-current assets Intangible assets Land under operating lease - prepayments 11,398 11,287 11,633 Total investment in equity accounted joint ventures 1,112 1,286 2,192 Property, plant and equipment 79,939 79,815 80, Investment property 90,177 97, , Deferred tax asset 6,111 4,643 4, , , ,121 Current assets Inventories 35,310 34,030 24, Trade and other receivables 5,215 4,233 5,191 Cash and cash equivalents 22,721 21,961 23, ,246 60,224 53,148 Assets held within disposal groups classified as held for sale 10,575 6, ,821 67,004 53,722 TOTAL ASSETS 262, , ,843 Current liabilities Trade and other payables (38,351) (33,164) (17,846) Bank loans (134,152) (96,307) (28,922) 15 Derivative financial instruments (50) (54) (43) (172,553) (129,525) (46,811) Non-current liabilities Other payables (3,172) (3,144) (7,850) Bank loans (12,300) (77,542) (156,435) 15 Derivative financial instruments (100) (130) (135) Deferred tax liabilities (7,378) (6,499) (6,940) (22,950) (87,315) (171,360) TOTAL LIABILITIES (195,503) (216,840) (218,171) NET ASSETS 67,158 44,992 62,672 The notes on pages 26 to 45 form part of this consolidated financial information. 22

23 INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June June December June EQUITY Share capital account 6,268 6,268 6,268 Revaluation reserve 18,356 18,356 15,866 Other distributable reserve 194, , ,817 Translation reserve (8,833) (9,914) (8,390) Accumulated loss (143,450) (164,535) (145,889) Issued capital and reserves attributable to owners of the parent 67,158 44,992 62,672 Non-controlling interests TOTAL EQUITY 67,158 44,992 62,672 Basic net asset value per share The notes on pages 26 to 45 form part of this consolidated financial information. The condensed consolidated financial information on pages 20 to 45 was approved by the Board of Directors on 28 August 2015 and signed on its behalf by: Andrew Fox Mark Chasey Guy Indig Chairman Director Director 28 August

24 INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY As at 30 June 2015 Six months ended 30 June 2015 Share capital Revaluation Other distributable Translation Accumulated Non-controlling Total account reserve reserve reserve loss Total interest equity As at 1 January ,268 18, ,817 (9,914) (164,535) 44,992-44,992 Profit for the period ,085 21,085-21,085 Other comprehensive income for the period ,081-1,081-1,081 As at 30 June ,268 18, ,817 (8,833) (143,450) 67,158-67,158 Year ended 31 December 2014 Share capital Revaluation Other distributable Translation Accumulated Non-controlling Total account reserve reserve reserve loss Total interest equity (audited) As at 1 January ,268 14, ,817 (7,647) (131,852) 76,297-76,297 Loss for the period (32,683) (32,683) - (32,683) Other comprehensive income for the year - 3,645 - (2,267) - 1,378-1,378 As at 31 December ,268 18, ,817 (9,914) (164,535) 44,992-44,992 Six months ended 30 June 2014 Share capital Revaluation Other distributable Translation Accumulated Non-controlling Total account reserve reserve reserve loss Total interest equity As at 1 January ,268 14, ,817 (7,647) (131,852) 76,297-76,297 Loss for the period (14,037) (14,037) - (14,037) Other comprehensive income for the period - 1,155 - (743) As at 30 June ,268 15, ,817 (8,390) (145,889) 62,672-62,672 The notes on pages 26 to 45 form part of this condensed consolidated financial information. 24