Kardan 30/11/2006
KARDAN: SUSTAINED POSITIVE TREND IN THIRD QUARTER 2006
PRESS RELEASE Amsterdam/Tel Aviv, 30 November 2006
Number of pages: 7
KARDAN: SUSTAINED POSITIVE TREND IN THIRD QUARTER 2006
• Growth in total assets and shareholders’ equity continues in third quarter
• Total operating result up 33.4% to USD 144.2 million in third quarter
• Real Estate activity expands: 17 new real estate sites acquired, and several projects completed in CEE since January, while one major project was acquired in China
• Increase of holdings in retail lending and asset management operations to capitalize on strong growth opportunities
Key figures 30 Sept. 2006 31 Dec. 2005 Change (%)
Total assets (x USD million) 2,702.7 1,768.6 52.8%
Shareholders’ equity (x USD million) 337.7 160.9 109.9%
Return on Equity 4.24 2.42 75.2%
Net Debt / (Net Cash) (x USD million) * (8) 78
* The definition of Net Debt as presented in this press release is broadened to include, in addition to interest bearing loans and borrowings less cash and cash equivalents, also debentures and convertible debentures less interest bearing receivables
(x USD 1,000) Q3 2006 Q3 2005 9M
2006 9M
2005
Net profit attributable to equity holders* 13,483 40,572 51,752 70,494
Of which:
Main businesses
Real Estate 2,911 3,608 53,779 10,681
Financial Services 7,483 38,555 11,192 48,320
Infrastructure 50 1,211 304 2,639
Other businesses 783 1,992 2,419 11,978
Other (mainly corporate activities) 2,256 (4,794) (15,942) (3,124)
* The above table shows the contribution of each of the businesses to the results of Kardan. As profits attributable to minority shareholders have already been deducted, these figures do not represent the full net profit realized in each segment.
“The positive first half of the year continued in the third quarter, with growth in total assets and shareholders equity, while operational performance improved compared to the third quarter last year. Our strategy to create platforms that will prosper from strong national economic growth works. In addition, the reorganization of our holdings in the financial services activities will allow Kardan to benefit from strong growth opportunities in these segments.” according to Mr. Ickovics of the Management Board of Kardan N.V.
Financial overview
International investment company Kardan N.V. (Kardan) increased its total third quarter 2006 revenues by 29.5% to USD 221.9 million (Q3 2005: USD 171.4 million). Main operations (Real Estate, Financial Services and Infrastructure) grew by 32.3% and contributed USD 213.8 million to Kardan’s revenues over the third quarter 2006 (Q3 2005: USD 161.6 million). The revenues include revaluation gains in the real estate segment of USD 119.4 million, compared to USD 46.6 million for the same period in 2005. Furthermore, the revenues in the third quarter 2005 included equity gains on disposal of assets, primarily from financial services activities, totalling USD 51.5 million, related to the sale of Omniasig and Tatry. In the third quarter of 2006, the equity gains in the financial services sector amounted to USD 12.2 million.
Total costs have decreased, mainly due to the sale of the Romanian insurance company Omniasig in 2005, which decreased operating expenses of the insurance activities . The increase in revenues, together with the lower costs, resulted in an increase of 33.4% of the total operating result to USD 144.2 million for the third quarter of 2006 (Q3 2005: USD 108.1 million). Main businesses contributed USD 143.1 million to the total operating result, an increase of 34.7% compared to USD 106.2 million in the third quarter of 2005.
Financial expenses for the third quarter of 2006 amounted to USD 45.8 million (Q3 2005: USD 17.3 million). The increase in financial expenses is attributable to the share price increases for Kardan and its listed group companies during the third quarter of 2006 and the corresponding appreciation of option rights to their fair values. This appreciation is required under IFRS and amounts to USD 25.2 million (Q3 2005: USD 7.3 million). Taxes for the third quarter of 2006 amounted to USD 28.2 million, compared to USD 9.0 million in the third quarter of 2005.
As a result of the higher financial expenses and taxes, total net profit for the third quarter of 2006 decreased to USD 70.2 million, compared to USD 81.8 million for the third quarter of 2005. The minorities’ share in the profit increased due to a combination of higher results of the Real Estate segment and the dilution of Kardan’s stake in GTC SA from a capital increase earlier this year. Net profit attributable to equity holders for the third quarter of 2006 decreased to USD 13.5 million (Q3 2005: USD 40.6 million). This represents a net profit per share of USD 0.16, compared to USD 0.53 for the third quarter of 2005.
Nine months
Total revenues in the first nine months of 2006 increased by 42.1% to USD 587.4 million, compared to USD 413.4 million for the same period last year. Operational results for the first nine months of 2006 increased by 72.6% to USD 351.9 million (same period 2005: USD 203.9 million). Net profit for the first nine months of 2006 amounted to USD 51.8 million, compared to USD 70.5 million for the same period last year.
Group value and outlook
Total assets grew by 52.8% year to date, from USD 1.77 billion to USD 2.70 billion per 30 September 2006. The increase in total assets was mainly the result of: (i) the increase in investment properties as several projects were completed and re-valued to fair market value from USD 759.6 million at year end 2005 to USD 824.2 million at 30 September 2006, (ii) the increase in cash primarily from the Kardan and GTC SA share issuance proceeds, as well as Wiener Städtische (WS) investment in Kardan Financial Services B.V. (KFS), the holding company of Kardan’s activities in the financial services sector and (iii) the investment in the Ukrainian bank by the financial services segment.
Kardan’s operations are developing positively and the accomplishments of the business year to date will strongly contribute to the growth of the Group going forward. Management is confident about the prospects of the group as a whole. The real estate operations have shown record profits and the fourth quarter has started successfully with the signing of numerous new transactions. The reorganization of the holdings in the Financial Services segment will allow Kardan to further increase focus on the high growth potential in retail lending and asset management operations. The Infrastructure segment is developing positively: the recent investment in a Turkish joint venture for water supply and sewage treatment is a result of the increased focus towards owning and investing in the asset side of the infrastructure business.
Divisional review
Real Estate
(x USD million) Q3 2006 Q3 2005 Change (%)
Revenues 157.5 71.9 119.1%
Operational profit 135.2 58.1 132.7%
The increase in revenues and operational profit compared to the third quarter of last year is mainly due to revaluation gains and expansion of activities. The operational profit includes a gain from the revaluation of investment properties of USD 119.4 million (Q3 2005: USD 46.6 million). Excluding this revaluation, the revenues increased from USD 25.3 million to USD 38.1 million. GTC SA achieved record profits over the third quarter of 2006 and the p