RNS Number : 7218Y
Bulgarian Land Development PLC
10 July 2008
10 July 2008
Bulgarian Land Development plc
(the "Company")
Posting of 2007 Report & Accounts
As announced on 27 June 2008 the publication and release of the Company's Annual Report and Accounts for the financial year ended 31
December 2007 were delayed after the Company's auditors advised the Directors in mid-June 2008, just prior to formal approval of the draft
2007 financial statements (and after the unaudited preliminary results had been published), that they had changed their view regarding the
Company's accounting treatment of changes in the discounted value of deferred payments to the vendors of land, where those payments are a
percentage of the ultimate sale proceeds of completed units. Although the auditors did not disagree with the accounting treatment used in
the audited 2006 financial statements; in the unaudited half year financial statements to 30 June 2007 and in the unaudited preliminary
statement of the financial results for the year ended 31 December 2007, they stated that they now believed that a different accounting
treatment should be applied. As a consequence the Company, in accordance with the AIM Rules, requested the temporary suspension of all of its Ordinary Shares pending the publication of its audited
financial statements for the year ended 31 December 2007 as the Annual Report and Accounts could not be published by 30 June 2008.
Previously the Company had discounted the future liabilities back from their anticipated payment date to the balance sheet date(s) to
arrive at the "fair value" to record them as a liability. As at December 2006, there was a matching entry in inventory. As at 30 June 2007
and 31 December 2007, the future liability was again discounted, this time over a shorter period. The resultant extra fair value liability
was added to creditors and the matching entry was again entered in inventory. It was the inventory entry that the auditors questioned and
the calculation of the future liability.
The Company has now agreed with the Auditors the treatment of the changes in the deferred payments in question. The Directors concluded,
in the light of advice received about the relevant International Accounting Standards, that the variations of the discount associated with
the change in the financial liability should have been charged to the Income Statement, rather than added to the cost of inventory. The
effect of variations arising from the translation of these liabilities into the Group's presentational currency (Sterling) are dealt with
within the foreign currency translation reserve. The Directors also have reviewed and altered the discount method used.
The Group emphasises that this change has no impact on cash or the profitability of the related property developments over their
lifetime.
This change means that sums which - but for the impact of the relevant International Accounting Standards - would have been treated as
part of the cost of development are now not treated as part of inventory. As a result, when the development is completed, reported profits
will be enhanced as there will be no charge for this element of the cost of land.
To this extent, the new accounting treatment represents a timing difference with what was charged in earlier years being recovered in
later years.
The Board considers it will be helpful to investors to report figures before and after the effect of this change which affects the
Income Statement and also the balance sheet.
The table below sets out the impact of the accounting changes mentioned
Impact on 2007 Income statement Impact on 2006 Income statement
Retained loss before the (�300,000) (�1.065m)
changes
Retained loss after the (�1.719m) (�1.540m)
changes
Variance � and % (�1.419m) 474% (�475,000) 45%
Earnings per share before the (0.81p) (4.26p)
changes
Earnings per share after the (4.65p) (6.16p)
changes
Variance pence and % (3.84p) 474% (1.90p) 45%
Impact on total Impact on total
equity (net assets) equity (net assets)
as at 31 December as at 31 December
2007 2006
Net assets before the changes �35.696m �20.474m
Net assets after the changes �31.836m �19.999m
Variance � and % �3.860m �475,000
11% 2%
Net book value per share 89.25p 81.9p
before the changes
Net book value per share after 78.5p 80.0p
the changes
Variance pence and % 10.75p 1.9p
12% 2%
Revalued net asset value per 130p 103p
share before the changes
Revalued net asset value per 119p 101p
share after the changes
Variance pence and % 11p 2p 2%
8.5%
No adjustment is needed to the net present value calculations in the unaudited preliminary statement already issued for the accounting
change as it is a non-cash item; net present value is a measure of discounted cash flows.
Attention is also drawn to the table below showing possible impacts on future financial statements from different types of change in
assessing the future carrying value of deferred land payables.
The Directors consider that the factors which can affect the changes in the deferred land payables and their impact on the financial
statements include the following:
Affecting factor Impact on Income Impact on total Impact on 2006 Impact on 2007
statement equity (net assets) restated financial financial statements
statements
Unwinding of the discount as Charge to the Income Reduction in total � 475,000 debit on �2.5m debit on the
the period reduces from the Statement equity the Income Statement Income Statement and
anticipated date of payment to and reduction in net reduction in net
the balance sheet date from equity equity
one financial period to the
next
Increase in expected sales Charge to the Income Reduction in total � Nil on the Income � Nil on the Income
value, leading to an increase Statement equity Statement and net Statement and net
in the potential liability equity equity
Improvement in planning Charge to the Income Reduction in total � Nil on the Income � Nil on the Income
permission, leading to an Statement equity Statement and net Statement and net
increase in expected sales equity equity
value, and thus to an increase
in the potential liability
Delay in project timetable, Credit to the Income Increase in total � Nil on the Income �1.1m credit on the
leading to a delay in the Statement equity Statement and net Income Statement and
expected payment date of the equity addition to net
actual liability and thus a equity
reduction in the value of the
discounted potential liability
Exchange rate changes None Weakening in � nil in net equity �1.966m reduction in
Sterling will mean a net equity
decrease in total
equity.
Strengthening in
Sterling will mean
an increase in net
equity
Opposite events * e.g.(a) a
decrease in expected sales
value or (b) a shortening in
the expected development
period * will have an opposite
impact to that stated above
Total effect on the Income �475,000 debit �1.4m debit
Statement
Total effect on net equity �475,000 reduction �3.4m reduction
The effect of these changes on the previously published 2006 comparative financial statements is as follows. Previously reported
inventory balances of �31.6m have been increased to �32.5m by �922,000 to take account of the new discount method. Previously reported
deferred land payables of �19.9m have been increased to �21.3m by �922,000 to take account of the new discount method and by a �475,000
finance charge for 2006. Group reserves have been reduced by �475,000.
In the unaudited preliminary announcement of the financial statements for the period ended 31 December 2007, deferred land payables had
increased by �4.064m during 2007 as result of the discounting being over a shorter period. The other side of this entry was to recognise
this same amount as inventory.
The effect on the 2007 financial statements has been a net �1.4m finance charge and a �2m charge to foreign exchange translation
reserve, meaning a total debit to group reserves of �3.4m. Over the two years, the effect has been to reduce group reserves by �3.9m
Copies of the altered Income Statement, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity and Cash Flow Statement
are annexed
The Annual Report and Accounts have now been finalised and are available from the Company's website http://www.bld.bg/en/ and are in the
process of printing and will be posted as soon as practicable.
- Ends -
For further information, please contact:
Bulgarian Land Development
John Dodwell Finance Director 020 7067 0700
Weber Shandwick Financial 020 7067 0700
Terry Garrett
Nick Dibden
James White
Collins Stewart Europe Limited 020 7523 8350
Hugh Field / Helen Goldsmith/James Cassley
Editors' note
BLD, the Bulgarian residential and commercial development company, was admitted to the AIM market in March 2006, following a share
placing which raised gross proceeds of �23m at 100p per share. In March 2007 an additional placing raised �15m. BLD only operates in
Bulgaria which is where its full time management is based.
Consolidated Income Statement
For the year ended 31 December 2007
(Re-stated:
see note 4)
Year ended Period from
31 December 17 March 2006
2007 to 31 December
2006
Group Group
Notes �'000 �'000
Revenue 115 -
Administrative expenses (2,231) (1,522)
Analysed as:
Other administrative expenses (2,231) (1,282)
Share based payment charge - (240)
Operating loss (2,116) (1,522)
Finance income, being:
Bank and other interest 967 340
Gain on exchange 962 152
Finance income 1,929 492
Finance costs
Net imputed interest on (1,419) (475)
deferred land payables
Loss before tax (1,606) (1,505)
Income tax expense (113) (35)
Retained loss for the period (1,719) (1,540)
Basic and diluted loss per
share attributable to
the equity holders during the 3
period (expressed as pence per
share)
Basic loss per share (4.65) (6.16)
Diluted loss per share (4.65) (6.16)
Consolidated Balance Sheet
As at 31 December 2007
(Restated:
see note 4):
2007 2006
�'000 �'000
Assets
Property, plant and equipment 129 100
Total non-current assets 129 100
Inventories 34,906 32,522
Trade and other receivables 1,832 913
Cash and cash equivalents 24,137 10,174
Total current assets 60,875 43,609
Total assets 61,004 43,709
Equity
Issued share capital 400 250
Share premium reserve 35,280 20,939
Foreign currency translation reserve (825) 110
Retained earnings (3,019) (1,300)
Total equity 31,836 19,999
Non current liabilities
Deferred tax liabilities 21 -
Deferred land payables 24,663 21,278
Total non current liabilities 24,684 21,278
Current liabilities
Trade and other payables 2,354 2,432
Bank loans 2,130 -
Total current liabilities 4,484 2,432
Total liabilities 29,168 23,710
Total equity & liabilities 61,004 43,709
Company Balance Sheet
As at 31 December 2007
2007 2006
�'000 �'000
Assets
Investment in subsidiaries 175 175
Total non-current assets 175 175
Intragroup receivables 16,615 14,645
Trade and other receivables 13 457
Cash and cash equivalents 20,885 6,223
Total current assets 37,513 21,325
Total assets 37,688 21,500
Equity
Issued share capital 400 250
Share premium reserve 35,280 20,939
Retained earnings 1,611 63
Total equity 37,291 21,252
Liabilities - current liabilities
Trade and other payables 397 248
Total current liabilities 397 248
Total liabilities 397 248
Total equity & liabilities 37,688 21,500
Statements of Changes in Equity
For the year ended 31 December 2007
Foreign currency
Share Share Retained translation
capital premium earnings Reserve Total
�'000 �'000 �'000 �'000 �'000
GROUP
Balance at 1 January 2007 250 20,939 (1,300) 110 19,999
Retained loss for the period - - (1,719) - (1,719)
Translation into presentation
currency:
Translation of other net - - - 1,031 1,031
assets
Variation arising from - - - (1,966) (1,966)
restatement of brought
forward deferred land
payables at the exchange
rate ruling at the end of
the financial period
Total recognised income and - - (1,719) (935) (2,654)
expense for the
period
Shares issued in the period 150 14,850 - - 15,000
Share issue expenses - (509) - - (509)
Balance as at 31 December 2007 400 35,280 (3,019) (825) 31,836
For the period from
incorporation on 17 March
2006 to 31 December 2006
(Re-stated: see
note 4)
On incorporation - - - - -
Retained loss for the period - - (1,540) - (1,540)
Translation into presentation - - - 110 110
currency
Total recognised income and - - (1,540) 110 (1,430)
expense for the
period
Shares issued in the period 250 23,033 - - 23,283
Share issue expenses - (2,094) - - (2,094)
Recognition of share based - - 240 - 240
payment charge
Balance as at 31 December 2006 250 20,939 (1,300) 110 19,999
Foreign currency
Share Share Retained translation
capital premium earnings Reserve Total
�'000 �'000 �'000 �'000 �'000
COMPANY
Balance at 1 January 2007 250 20,939 68 - 21,257
Retained profit for the period - - 1,543 - 1,543
Total recognised income and - - 1,543 - 1,543
expense for the
period
Shares issued in the period 150 14,850 - - 15,000
Share issue expenses - (509) - - (509)
Balance as at 31 December 2007 400 35,280 1,611 - 37,291
For the period from
incorporation on 17 March
2006 to 31 December 2006
On incorporation - - - - -
Retained loss for the period - - (177) - (177)
Total recognised income and - - (177) - (177)
expense for the
period
Shares issued in the period 250 23,033 - - 23,283
Share issue expenses - (2,094) - - (2,094)
Recognition of share based - - 240 - 240
payment charge
Balance as at 31 December 2006 250 20,939 63 - 21,252
Cash Flow Statements
For the year ended 31 December 2007
Year ended 31 December 2007 Period from 17 March 2006 to
31 December 2006
Company Group Company Group
�'000 �'000 �'000 �'000
Operating activities
Profit/(loss) for the period 1,543 (1,719) (177) (1,540)
Adjustments for:
Share based payment charge - - 240 240
Depreciation - 40 - 14
Finance income (1,787) (967) (839) (492)
Taxation 91 113 35 35
Operating loss before changes (153) (2,533) (741) (1,743)
in working capital
Increase in intragroup (1,970) - (14,645) -
balances
(Increase)/decrease in trade 444 (919) (457) (913)
and other receivables
Increase/(decrease) in trade 64 (260) 213 2,397
and other payables
Increase in deferred land - 1,419 - 21,278
payables
Increase in inventories - (2,384) - (32,522)
Cash used in operations (1,615) (4,677) (15,630) (11,503)
Investing activities
Interest received 1,786 967 839 492
Investment in subsidiary - - (175) -
Acquisition of property, plant - (69) - (114)
and equipment
Cash flows used in investing 1,786 898 664 378
activities
Financing activities
Proceeds from the issue of 15,000 15,000 23,283 23,283
ordinary share capital
Share issue expenses (509) (509) (2,094) (2,094)
Bank loans - 2,130 - -
Cash flows generated from 14,491 16,621 21,189 21,189
financing activities
Net increase in cash and cash 14,662 12,842 6,223 10,064
equivalents
Effect of exchange - 1,121 - 110
fluctuations on cash held
Cash and cash equivalents at 6,223 10,174 - -
31 December 2006
Cash and cash equivalents at 20,885 24,137 6,223 10,174
31 December 2007
Notes to the Financial Information given above
1. Accounting basis
Bulgarian Land Development plc (the "Company") is a company incorporated and domiciled in the Isle of Man for the purpose of investing
in the residential and commercial development property market in Bulgaria. The Company's registered office is 14 Athol Street, Douglas, Isle
of Man.
The financial information contained within announcement does not constitute the Group's or Company's statutory financial statements for
the year ended 31 December 2007. The financial statements, on which the auditors will issue their audit opinion, is available from the
Company's registered office.
The comparatives information contained in this preliminary announcement above do not constitute the Group's statutory accounts for the
period ended 31 December 2006. The figures for the period ended 31 December 2006 are extracted from the audited Group financial statements
("the financial statements") but have been restated as indicated above. A copy of the 2006 financial statements, on which the auditors
issued an unqualified report (and did not include references to any matters to which the auditors drew attention by way of emphasis without
qualifying their report) is available on the Company's website. The results for the period ended 31 December 2006 were prepared on the basis
of the accounting policies set out in the financial statements.
2. Significant accounting policies
The financial information contained within this preliminary announcement has been prepared in accordance with International Financial
Reporting Standards.
3. Basic Loss and Diluted Loss per share
Basic loss per share has been calculated by dividing the loss attributable to equity holders of the Company by the average number of
ordinary shares in issue during the period after taking into account the issue of 15 million shares on 14 March 2007. This gives a weighted
average number of 37,000,000 shares. Basic loss per share for the periods ended 31 December 2007 and 31 December 2006 has been calculated by
dividing the loss attributable to equity holders of the Company by the relevant number of shares in issue for the periods. There are no
dilutive shares, share options or similar instruments in existence which might affect the calculation and therefore the diluted earnings per
share are the same as basic earnings per share.
2007 2006
Group loss attributable to equity holders of the Company
After charge for inputed interest on deferred land payables (1,719) (1,540)
(�*000)
Weighted number of ordinary shares in issue (thousands) 37,000 25,000
Basic loss per share (p per share) (4.65) (6.16)
Diluted loss per share (p per share) (4.65) (6.16)
Before imputed interest on deferred land payables,
Group loss attributable to equity holders of the Company (300) (1,065)
was (�000)
Basic loss per share was (p per share) (0.81) (4.26)
Diluted loss per share was (p per share) (0.81) (4.26)
4. Correction of accounting error
The Directors have reviewed the accounting treatment of two separate contracts under which the Group has acquired land for development.
In each contract, part of the agreed acquisition consideration is in the form of deferred payments in cash to the vendors of land, with
those payments being a percentage of the ultimate sale proceeds of completed units.
At the date of the respective transactions, the Directors estimated the total deferred land payables (before discounting to fair value)
to be �28.140m (at the exchange rate as at 31 December 2006: �30.741m at the exchange rate ruling at 31 December 2007). The fair value of
these future payables was in the 2006 financial statements discounted over the period back from the date of anticipated payment to the
balance sheet date using a pre tax rate of 11% pa, resulting in an initial carrying value of �19.881m being incorporated in the 2006
financial statements, the other side of this entry being recognised as the cost of inventory acquired.. No adjustment was made to deferred
land payables over the period from the date of the transactions to the balance sheet date
The Directors have concluded that the effect of the discount associated with the change in the financial liability should have been
charged to the Income Statement, rather than added to the cost of inventory as was effectively done in the 2006 financial statements.
The Directors also have reviewed and altered the discount method used.
The effect of these errors on the 2006 comparatives is as follows. Previously reported inventory balances of �31.600m have been
increased to �32.522m by �922,000 to take account of the new discount method. Previously reported deferred land payables of �19.881m have
been increased to �21.278m by �922,000 to take account of the new discount method and by �475,000 by a charge for finance for 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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