Nanette Real Estate Group NV

"Nanette" or "the Group"

Interim Results for the 6 months ended 30 June 2008

Nanette Real Estate Group, the AIM quoted Central & Eastern European focused residential real estate developer is pleased to announce its interim results, for the 6 months ended 30 June 2008.

Financial Highlights 

• PBT: €5.2m (2007 €3.7m)

• Turnover €10.6m (€14.7m)

• €259m total assets (€244m)

• Consolidation of Polish portfolio to allow separate funding

• €39m net cash pre debentures and long term loans (€58m)

• Fully funded for all projects - all construction costs are covered for over 2 years

• €24.5m debenture fund raising on Tel-Aviv Stock Exchange

• €60m debt financing arranged for Polish projects

Operational Highlights

• 191 apartments sold in the period (2007: 325)

• 2,396 apartments sold in total

• Total land-bank not recognized to profit 20,801 units (14,639) 

• Increase in landbank with a focus on Hungary

• Continued development of multiple site portfolio in Poland, Hungary, Romania, Croatia and Ukraine

• Agreed operational funding arrangement with Lehman Brothers Real Estate LLP

• Constant evaluation of new projects

Shaul Lotan, Chairman, and Oscar Kazanelson said:

"Whilst we are currently seeing a general downturn in the European retail property market, we are confident that there is still a strong demand and a lack of supply of quality modern housing for the growing urban middle class. This can be seen by the fact that we are still successfully selling apartments throughout the region.

The downturn has provided us with an opportunity to acquire more land at a cheaper price than would have been the case previously. We feel sure that this investment will deliver strong growth, once the wider economy picks up.

In addition, all our active projects are fully funded, we have no need for further finance for the current development plan. We are therefore sitting on a highly valuable portfolio, which we are confident will be monetized as the economic conditions improve."

28 August 2008

Enquiries: 

  Chairman's statement 

Introduction

The operating environment for any real estate company in Europe has changed for the worse. This is impossible to deny. However, we at Nanette are confident that the fundamentals that drove us to create the company and attract investment from blue chip partners remain entirely unchanged.

Whilst there is a short term liquidity issue in Central and Eastern Europe, we believe that there is still a massive demand for high quality housing throughout the region. Growing urban populations caused by internal migration have created and sustained this demand throughout the past decade, and this trend is expected to continue. Nanette was created to and continues to exploit this demand through our unrivalled skill sets: we can manage a project through the entire chain: financing; acquisition of land; rezoning and planning; construction and finally sale.

Given the prevailing circumstances, we have looked to play to our strengths. By acquiring more land at cheaper prices, we believe that we have created significant value for our shareholders that will be realized over the coming years. It also pays to be positive. We are fully funded for all out developments through all construction; have continued to sell apartments across our portfolio and continue to consider new projects and territories. 

Financing

We are delighted to report that following our €24.5m debenture fund raising on Tel-Aviv Stock Exchange in June and the reorganization and debt financing of our Polish portfolio, all of our active projects are fully financed through development and construction. We have no need to return to the markets for our current projects, which we consider to be of considerable benefit for our shareholders.

Operations

Given the general slow down in the market, we are quietly pleased with our sales figures of 191 apartments sold across our portfolio in Hungary and Poland. We have now exchanged on a total of 2,396 apartments.

Our primary efforts in the period however were based around creating value by intelligent investment in new land in Hungary and Poland, in addition to reorganisation of our Polish portfolio.

The acquisition of a 22,000 sq. m. development site at the centre of Gdansk, Poland In January was a successful start to the year. In partnership with our key strategic partner Lehman Brothers, we expect to build approximately 630 apartments. Total costs are estimated at €70m and total sales proceeds are estimated at €88m.

The majority of our efforts in the later part of the period were based in Hungary. After acquiring a 153,000 sq.m. plot on the main road to the Airport at Budapest in April, Nanette has twice sold down stakes to other interested parties. These sales have resulted in profits of €337,500 and €750,000 on the transactions.

Post balance sheet, we have also acquired a 6,122 sq.m plot in the 11th district of Budapest. Total costs are estimated at €18m and total sales proceeds of 260 apartments are estimated at €23m.

Financial Performance

Whilst turnover and sales were down, due to the general industry conditions, we are very pleased to note the increased profit and asset figures, both of which have risen appreciably. This is due to our intelligent use of our portfolio as a trading asset, in addition to our belief that a larger landbank will prove highly profitable in the long term.

As in the previous year, the board approved a bonus plan for employees and directors, at the level of 6.5% of the net profit above €10m.

As previously stated, our financial position is secure. All projects are carried through development and construction. The Group's net cash position is €39m net cash pre debentures and long term loans.

Outlook

With a well balanced portfolio in Poland, Hungary, Romania, Croatia and Ukraine, Nanette is flexible enough to shift its focus throughout the region, depending on where prevailing conditions are most advantageous. 

We believe that there remains a massive and growing demand for good quality housing throughout the Central and Eastern European region. With our intelligent acquisition policy, and sophisticated operational and financial management, Nanette is very well positioned to take advantage of this demand, once the short term liquidity issues are out of the way.

With strong cash and asset balances, a top quality management team and blue chip partners in Lehman Brothers and Rothschild, we have every reason to believe that we will emerge from this short term slow down, and maintain our position as one of the leading CEE residential developers.

Interim Condensed Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETS

Euro in thousands

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

CONSOLIDATED BALANCE SHEETS

Euro in thousands