Trading Statement

RNS Number : 6217A

Equest Investments Balkans Ltd

05 August 2008

 



05 August 2008

EQUEST INVESTMENTS BALKANS LTD

Interim Trading and Strategy Update 

Equest Investments Balkans Limited ('EIB' or the 'Company') today announces an interim trading and strategy update ahead of its interim results which are expected to be released towards the end of September 2008. Highlights for period include:

• Internalisation of EIB management completed to create a more concentrated holding company structure; 

• Strategic review started for disposal of all non-core assets to raise cash for share buybacks and potential shareholder distributions; 

• Continued strong growth in TechnomarketDomo operations; IPO now scheduled for Q3/08, pending market conditions;

• Borovets, full scale business plan completed for a € 800m development program over 5 years, with estimated 25% IRR;

• Novera, ongoing review of investment and operations as a result of poor financial performance during period; and

• Uniqa (Bulgaria) and Avto Union, continued good performance. 

Strategy Update

During the period EIB's shareholders approved changing the Company from an investment fund to an industrial conglomerate structure. The internalisation process has been completed.  EIB has already outlined the staged disposal of its property assets, excluding Borovets.  Management is currently undertaking a further review of the Group's medium term strategy with a view to focusing the Group on selected key assets and disposing of other non-core activities. 

Kari Haataja and George Krumov, formerly part of the EIB investment management team, have joined the Board of the Company. Additional changes to the Board are expected to be made in due course to reflect the changed focus and structure of the Company.  

TechnomarketDomo (TMD) 

TechnomarketDomo, the newly established parent company of Technomarket's operations in Bulgaria and Domo's operations in Romania, has performed well during the period with aggregate sales for the 6 months ending 30 June 2008 17% ahead of the pro-forma aggregated sales for the comparable period in 2007. Also margins have been improved since the end of last year (Note: 75% shareholding in Domo was acquired in September 2007). 

TechnomarketDomo is in the final stage of preparation for an IPO on the Bucharest Stock Exchange and a GDR issue on the London Stock Exchange. The IPO is currently planned for Q3/08. The launch, however, still remains dependent on market conditions and associated regulatory approvals by the Dutch Financial Authorities. ING Bank has been appointed the sole bookrunner with Raiffeisen Centrobank and Cheuvreux acting as the joint lead managers. 

TechnomarketDomo is the market leader in electronics retail in the Balkan region and is 75% owned by EIB and 25% by the founders of Technomarket.

Borovets (Rila Samokov 2004 AD)

EIB holds an indirect 33.5% investment in the large-scale Borovets mountain resort development project, which is one of the largest property and infrastructure development projects in Bulgaria.

The investors in Borovets (Rila Samokov 2004 AD) have nominated a development syndicate to work in collaboration with the Samokov municipality, to create a sustainable development in Borovets. The advisors, including EC Harris (development management), KPMG (leisure & resort analysis, real estate consultancy), Fabel Maunsell (infrastructure development), MMD (communication strategy) and Denkstatt (environmental consultancy), were appointed to deliver a new business plan which complies with the high standards of environmental and ecological regulations. Preliminary indications are a total development cost of € 800 million, including financing costs, and a levered IRR of over 25% for the development of apartments, hotels and retail space as well as associated infrastructure, including the creation of an additional 36.5 km of ski runs. 

The investors are now focusing on securing the technical infrastructure and in proceeding with early works and key actions which will add value to the land, while at the same time working on optimizing the development program.  

Uniqa Bulgaria

The Bulgarian insurance market grew by 24.5% during H1 2008 and is expected to continue growing as the country continues to catch up with EU levels of insurance penetration and density. 

Uniqa Bulgaria, the 5th largest life and non-life insurance company in Bulgaria, outperformed the Bulgarian market growth during the period with combined growth in non life and life insurance premiums of 44%. Uniqa Bulgaria achieved second position in life insurance in Bulgaria during the period with a nearly 20% market share and over 80% growth in gross written premiums accounting. In non-life, the company grew by approximately 30%. 

EIB currently owns 37.72% of Uniqa.

Novera

The financial performance of Novera, the waste services operations in Bulgaria, has been disappointing during the first half of 2008 due to significantly higher than planned costs in operations resulting from increased fuel, salary and fleet maintenance costs coupled with higher expenditure in new trucks and equipment. Simultaneously, whilst waste collection volumes have increased according to plan the Company has not been able to push through inflation price rises with the Municipality of Sofia. As a result of its poor performance, Novera is currently in negotiations with its senior debt provider with a view to restructuring the debt as the company has breached certain of its debt covenants. Separately, the Novera has initiated a review of all operational costs, and positive discussions with select international waste management companies have been held in respect of a potential strategic partnership. 

EIB currently owns 94% of Novera.

Avto Union

The Bulgarian new car market continued to grow by around 17% during the first six months of the year, compared with the same period in 2007. EIB's automotive subsidiary, Avto Union, recorded above market growth during the period with 29% for cars sold with 2,044 vehicles contracted. 

Avto Union's 28,000 m2 flagship office and show room development, 'Avto Union Center', located near the Sofia International Airport was completed during the period and is currently in the letting process, with Avto Union companies as anchor tenants.

Commenting on these developments, Petri Karjalainen, Executive Director of Equest Investments Balkans said:

'The Company has made a significant change from an investment fund to an internally managed industrial conglomerate during the period in order to achieve a more concentrated holding company structure. We are pleased that these changes have been fully supported by our shareholders.  

'The principal focus of the management is currently on the pending IPO of TechmarketDomo, executing on the disposal program to raise capital (which could also be used for share buybacks) and potential distributions to shareholders as well as looking for strategic solutions for our Novera waste management operations.'

For further information please contact:

Equest Investments Balkans Limited

+ 44 20 7240 7600

Petri Karjalainen

Naomi Kora

Collins Stewart Europe Limited

+ 44 20 7523 8350

Hugh Field

Financial Dynamics

+ 44 20 7831 3113

Ed Gascoigne-Pees

Nick Henderson

Notes to Editors:

Equest Investments Balkans Limited is an AIM traded industrial conglomerate for the South East European region which was established in 2004. Today the Company has majority controlling stakes in companies including TechnomarketDomo, the market leader in electronics retail in the region, as well as Novera, a waste collection operation for the city of Sofia, and Avto Union, a leading automotive importer and distributor for Bulgaria. The Company is also a strategic partner with Austria's leading insurance company Uniqa jointly holding the 5th largest insurer in Bulgaria and a joint venture partner with a leading Gulf based sovereign wealth fund in the large scale Borovets mountain resort development project. Additionally the Company has select property investments and developments through its subsidiaries Pelican and Immofinance that are currently in a disposal program. 

 

END

 

 

TSTVZLFBVVBFBBL