- Highlights Q4 and 2019:
Following is a summary of net profit (loss) attributable to equity holders, by activity. Management evaluates performance of main segments by their operational result. Further information that includes detailed segment analysis can be found further in this report.
Kardan N.V.
12M 2019: €83.7 million net loss to equity holders (12M 2018: net loss of €36.8 million), mainly due to high interest (including interest in arrears) and FX expenses on the Company’s debentures and losses of discontinued operation (water infrastructure).
Real Estate
For the full year 2019 the net profit to equity holders of the real estate activities amounted to €11.5 million (12M 2018: net loss of €17.4 million), mostly as a result of delivery of apartments in both Europark Dalian and the residential JV projects and improved operation of the Galleria Dalian mall.
Discontinued operation (water infrastructure)
12M 2019: €32.2 million net loss attributable to equity holders (12M 2018: net profit of €0.1 million), impacted by a higher provision for doubtful debts, impairments and losses on projects and an impairment on investment in TGI in the amount of €1.2 million.
Kardan’s water infrastructure company - TGI, is currently in the midst of negotiations with the financing banks regarding the restructuring of their debts, which will include, among other things, continuing to provide credit to TGI. This credit includes guarantees required to advance projects and a cash credit line to support TGI’s working capital.
Other
The completion of the sale transaction of Avis Ukraine on March 14, 2019, resulted in a gain of €1.5 million in 12M 2019 (included as part of results from discontinued operations).
The Company did not repay the February 2018, February 2019 and February 2020 scheduled payments of principal and interest to the Company’s Debenture Holders (series A and B). As a result, starting February 2018 the Company is in default.
In April 2019, each of the assemblies of Debenture Holders (series A and B) approved of the understandings reached in relation to the balance payments; following which, in June 2019, the Company carried out a partial repayment of the balance payments to Debenture Holders B in the amount of approximately €36.5 million (NIS 145 million).
Ariel Hasson, CEO of Kardan NV:
“2019 was again a very difficult year for Kardan. Our results continue to be burdened by high interest expenses, a substantial negative foreign currency impact and the adverse developments of our Water Infrastructure activities. This has further enlarged the negative equity position of the company.
On the positive side, our Chinese real estate activities performed well. All areas of operation showed a positive development. Both the Galleria Dalian and the residential projects have been showing a positive trend on all operational parameters. However, this positive trend has been cruelly disturbed by the outbreak of the coronavirus in China, developing this year. Although the cities where we operate have seen little direct impact from the outbreak, the measures taken by the local government slowed the economic activity substantially. We have taken measures to mitigate the impact as much as possible. Although the region is gradually resuming business activities, it is yet too early to assess when we can expect substantial pick-up of our business activities.
For our Water Infrastructure activities, the year remained extremely harsh. Tahal has continued to struggle with delays in projects, partly in relation to financing. Tahal is currently in the midst of negotiations with its financing banks regarding a restructuring plan where the banks will continue supporting Tahal to allow the company to resume focus on operations.
The depreciation of the euro compared to the Israeli Shekel again had a very significant negative impact. This combined with the high interest expenses on our Company debentures, which includes accrual of penalty interest rates, and the impairment from the losses in our Water Infrastructure activities, resulted in a net loss of € 83.7 million.
We have continued with our efforts to reach a settlement with our Debenture Holders. The negotiations, on which little progress was made in 2019, were fully resumed by the beginning of 2020. We have proposed a settlement structure to our debenture holders, which is based on a debt-to-equity swap and issuance of shares which will constitute control over the company. Such settlement, if completed, will allow Kardan to restore its equity position, allow the Debenture Holders the proper representation in the company’s board and improve Kardan’s ability to divest its assets in parallel with working on improving the value of those assets. Such settlement is subject to various approvals, including the approval of Kardan’s AGM and approval of the assembly of the Debenture Holders. We are convinced that such settlement is the best way to enable the company to optimize its ability to service its debts and is accordingly in the best interest of all stakeholders.”
