“Kardan is reporting a loss of EUR 19 million over the second quarter 2013 for its equity holders and consequently a loss of nearly EUR 41 million for H1 2013. The main reasons for these losses are devaluations which have been recognized in the Central and (South) Eastern European real estate company GTC SA, of which we own 28%, and the sizeable foreign exchange loss which we reported on in Q1 of this year. Notwithstanding the net loss for H1 2013, we have seen improvements in operating results throughout the group. A strong focus on our core markets, cost efficiency measures and targeted risk management has resulted in a positive turnaround for our water infrastructure and banking activities. In the residential real estate sector, Kardan Land China has seen a significant pick up in the sale of apartments in H1of 2013 compared to the first half of last year. The results of the retail center Chengdu continue to grow and the development of the construction of Europark Dalian is on track, as is the progress of signing contracts with anchor tenants for the retail center which is planned to be completed by the end of 2014. Tahal Projects is reaping the fruits of the reorganization and is showing strong revenue growth and healthy margins. Tahal Assets, which mainly comprises the Kardan Water activities in China, was able to compensate its slower revenue development (following less construction activities) by stringent cost measures. Our banking and retail lending business has managed to improve the quality of its portfolios and take increasing deposits whilst simultaneously merging some of its business units to create synergetic effects; all leading to much improved operating results. GTC SA faced sluggish consumer sentiment, particularly in the South Eastern European countries, which has impacted the valuation of their retail assets in those countries. Excluding the devaluations, GTC SA reported sound operating results.

Although the operating results of the group are improving, Kardan continues to strongly focus on the generation of cash predominantly by repayment of shareholder loans by some of the Company’s subsidiaries and by selling assets in order to be able to repay our Debenture holders in the short to medium term. We are currently engaged in negotiations, both directly as through our subsidiaries, to accomplish this”, Shouky Oren, CEO of Kardan, stated.


Highlights segments H1 2013:

Real Estate Asia

Significant increase in delivery of apartments in Q2 (864) versus Q1 (110)
(H1 2013: 974 versus H1 2012: 1,113)
High number of apartments sold in Q2 (521) and Q1 2013 (575)
Substantial increase y-o-y: H1 2013 (1,096) versus H1 2012( 217)
Revaluation gain on retail center Europark Dalian
EUR 3.9 million profit in Q2 2013 leads to EUR 6.4 mn profit in H1 2013 (H1 2012: EUR 4.0 mn)


Real Estate Europe

Deconsolidation of GTC SA as of Q1 2013
GTC SA: Sound operating results but continued devaluations in challenging South Eastern European markets
GTC SA (100%) H1 2013: loss of EUR 65.1 mn for equity holders
(H1 2012: EUR 8.2 mn loss)
Real Estate Europe: EUR 15.7 mn loss attributable to Kardan (H1 2012: EUR 4.7 mn loss)


Water Infrastructure, Assets

Lower revenues primarily due to accounting effect of less construction activities
Improved gross profit margin to 47% (H1 2012: 41%)
EUR 1 mn profit in Q2 2013 leads to EUR 2.8 mn profit in H1 2013 (H1 2012: loss of EUR 0.8 mn)


Water Infrastructure, Projects

Continuing markedly higher revenues (Q2 / Q1 2013: up by 25%, H1 2013 y-o-y up by 50%)
Strong improvement of gross profit margin (H1 2013: 14%, H1 2012: 6%)
Gain on sale of real estate asset in Tel Aviv recognized in Q1 2013
EUR 4.3 mn profit (H1 2012: EUR 5.0 mn loss)


Banking and Retail Lending

Substantially higher revenues due to increasing new origination of loans
Strong decreasing trend of provisioning
One-off gain on recovery payment on former investment in Serbia
Impairment of the investment in Avis Ukraine in Q2 2013 on pending sale
H1 2013 EUR 4.4 mn loss (H1 2012: EUR 14.2 mn loss)

The financial statements of GTC SA, the Central and (South) Eastern European real estate developer in which Kardan holds a 28% stake, are no longer consolidated in the results of Kardan (see note 6 in the Financial Statements), but is accounted for as an associated company based on the Equity method. In addition, as of January 1, 2013, following the adoption of IFRS 11(Joint Arrangements), all the joint ventures which were previously proportionally consolidated in the financial results, are also presented as Equity earnings / (losses) in joint ventures and associated companies.

The comparative results have been adjusted to conform to these changes. The adoption of IFRS 11 affects the presentation of results of Real Estate Asia in particular.

The H1 2013 condensed interim consolidated income statement split into the different segments of Kardan N.V. is shown in the table below.