Trading Statement

RNS Number : 7334H

Equest Investments Balkans Ltd

07 November 2008

 



7 November 2008

EQUEST INVESTMENTS BALKANS LTD

9 month Trading Update for the period ended 30 September 2008 and board change

Equest Investments Balkans Limited ('EIB' or the 'Company') today announces a 9 month trading update for the period ended 30 September 2008 and a change to its board.

Strategy Update

EIB has already outlined a disposal strategy of its property assets, excluding Borovets, which is in process, and select sales are expected to be completed within Q4 in 2008 and Q1 in 2009. In light of the current adverse developments in the global markets and the Company's stock market valuation, the management is also in the process of exploring options for partial or whole disposals of select other assets in order to improve liquidity for operations and to finance share buybacks.

TechnomarketDomo (TMD) 

TechnomarketDomo N.V., the parent company of Technomarket and Domo branded electronics retail operations in Bulgaria and Romania, has continued demonstrating growth in sales and profits and for the 9 months to 30 September 2008 had unaudited sales of EUR 275 million from the Bulgarian operations, approximately 16% ahead of the corresponding period in 2007, and EUR 137 million in sales from the Romanian operations, approximately 12% ahead of the corresponding period in 2007. 

Gross margins in the operations remain strong and in line with budgets and TMD is currently preparing for the very important Q4 peak season which historically has accounted for up to 40% of annual sales.

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

Novera

As previously announced on 17 September 2008, the financial performance of Novera continues to be disappointing. During the first 9 months of 2008, costs of operations were above budget due to increased fuel, salary and fleet maintenance costs. Waste collection volumes have increased in line with plan and sales for the 9 months reached EUR 17.3 million (up 22% over the corresponding period in 2007). However, the Company has not been able to push through inflation price rises with the Municipality of Sofia. As a result Novera continues to be loss making and remains in technical default with its debt covenants for its acquisition debt financing. Current outstanding debt in Novera is €12.5 million in senior debt and €21 million in mezzanine debt finance. The Company has prepared a work out plan for Novera, including the possible participation of a strategic partner in the operations, and is in negotiations with its debt providers with a view to agreeing a restructuring of Novera's indebtedness. It is hoped these negotiations will be concluded before the year end.

EIB owns 94% of the shares in Novera and has an equity investment of EUR 20.9 million. This was independently valued at cost in the interim results, representing approximately 5% of EIB's net asset value. Additionally EIB and its subsidiaries have provided additional loans to Novera for EUR 1.3 million.

Borovets (Rila Samokov 2004 AD)

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 world class resort development in Borovets. 

The project has currently been divided into six separate sub developments that can be individually developed, thus lowering the development risk of this large scale EUR 800 million project. The development syndicate continues to add value to the project by preparing full architectural master designs and a detailed market study for current demand of residential apartments. The investors will decide on further development commitments and timetable following the results of the updated market study. 

EIB currently indirectly owns 33.5% of Rila Samokov 2004 AD.

Uniqa Bulgaria

The Bulgarian insurance market grew by 22.6% during the first 8 months of 2008 and is showing continued growth in both life and non-life segments.

Uniqa Bulgaria, the 5th largest life and non-life insurance company in Bulgaria, also continued to outperform the Bulgarian market with growth in gross written premiums of 35% or EUR 52 million in unaudited premium income for the 8 month period to 31 August 2008. Uniqa Bulgaria holds second position in life insurance in Bulgaria during the period with a nearly 20% market share and 38% growth in gross written premiums compared to the same period last year. In non-life, the company grew gross written premiums by approximately 34%. 

EIB currently owns 37.72% of Uniqa.

Avto Union

EIB's automotive distribution subsidiary, Avto Union, recorded 40% growth in cars sold or 2,865 vehicles sold during the 9 month period compared with the corresponding period in 2007. Unaudited sales for the 9 month period reached EUR 52 million. Overall new car sales growth in Bulgaria over the last 9 months to 30 September 2008 has slowed to 15.9% versus 24.3% in the corresponding period in 2007.

Avto Union's 28,000 m2 flagship office and show room development, 'Avto Union Center', located near the Sofia International Airport has been completed and has the retail area of 6,700 m2 anchored by Avto Union as a tenant whilst the office section of 10,400 m2 is currently vacant and in a letting process. 

EIB currently owns 80% of Avto Union.

Resignation of an Executive Director

The Company also announces that Mr. Georgi Krumov resigned as an Executive Director of the Company with effect from 3 November 2008. Due to his resignation, the Company has suspended Mr. Krumov's existing services agreement dated 11 June 2008, and is in the process of discussing a consultancy arrangement between the Company and Mr. Krumov. The senior management functions previously performed by Mr. Krumov in his capacity as an executive of the Company, including with respect to Novera, have now been taken over by Mr. Kari Haataja, an Executive Director of the Company.

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

'We are pleased to note that the main operating companies namely, TechnomarketDomo, Uniqa and Avto Union, continue to perform well and have not to date been particularly affected by the adverse changes occurring throughout global markets and we are confident that these companies will continue to meet their budgets for 2008.'

 'EIB is in the process of disposing property holdings and has now extended its disposal program also to select other EIB non-core assets with the aim of improving liquidity for operations and possibly funding share buybacks, as permitted by the Company's constitution. The trading price of the Company's shares on the stock market has been severely affected by the current downturn in the listed company valuations as well as general concerns for the ongoing performance of companies operating in the Balkan region.' 

'Senior management is fully focused on continuing to improve operations in its operating companies, as well as ensuring that the Company's financial position is fairly reflected in the share price. To this end, the Company will seek to accelerate its asset disposal plan as well as other efforts for raising general liquidity. We are also focused on some of our holdings that require operational and potential debt restructuring, as is the case with Novera, noting that these companies represent a small part of the total assets of EIB.'

For further information please contact:

Equest Investments Balkans Limited

+ 44 20 7240 7600

Petri Karjalainen

Naomi Kora

Financial Dynamics

+ 44 20 7831 3113

Nick Henderson

David Cranmer 

Collins Stewart Europe Limited (Nomad)

+ 44 20 7523 8350

Hugh Field

KBC Peel Hunt Limited (Broker)

+ 44 20 7418 8900

Capel Irwin

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.

 

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