IMMOEAST Annual Report 2006/07

76 IMMOEAST Annual Report 2006/07
Highest increase in value
in Czech Republic
SEE profits from rise in value
of property sites
Decline in other operating
income due to development
of good will
Deduction of deferred tax
liabilities in determining
book value of CGU
The CEE segment recorded an impressive year-on-year increase of roughly 10% in the value of its
investment properties during 2006/07. In comparison with the prior year, revaluation results in this
segment rose by TEUR 138,826.8 or 148%. As explained above, the value of properties in Hungary
and Slovakia increased by a relatively low 2.8% and 4.4%, respectively, in relation to assets. The
strongest increase, both in percent and absolute value, was recorded by the Czech Republic with
18.6% or TEUR 146,145.4. This development was supported by the yield compression, which was
stronger here than in the other CEE countries and also continued after the end of the 2006/07 financial
year. Furthermore, the start of a redevelopment project in the CSOB portfolio led to an additional
revaluation gain of TEUR 40,410.5. The returns that are used in the valuation of investment
properties ranged between 6.5% and 5.25%. Transactions with returns below 5.0% were noted
after the balance sheet date on 30 April 2007, and indicate a further potential for an increase in the
value of properties in this segment during 2007/08.
The SEE segment recorded an increase of 53.4% in the value of its investment properties in relation
to the property portfolio. This represents a revaluation gain of TEUR 210,901.6, which includes
TEUR 151,835.5 from an increase in the value of property sites. The returns used in the valuation
ranged from 8.75% to 6.5%.
The CIS segment recognised an interim increase in value of 16% or TEUR 49,447.4, which resulted
primarily from the yield compression that has also started to take hold in Russia. The returns used
in the valuation ranged between 9.5% and 9.0%.
Other operating income
Other operating income is comprised primarily of gains on the sale of investment properties, the
reversal of negative goodwill, gains and losses on the translation of foreign currency items related
to operating activities, deconsolidation income and other positions.
The slight decline of 11% in other operating income from TEUR 51,334.4 in 2005/06 to TEUR 45,724.6
for the reporting year is the result of a decrease in negative goodwill, which represented 86% of
other operating income in the prior year but fell to 11% in 2006/07. This development resulted from
the use of the agreed transaction price for the recognition of properties at fair value on the acquisition
date, instead of a revaluation based on expert opinions. In addition, negative goodwill from the
acquisition of Salzburg Center S.A. was reversed because the returns defined in a forward purchase
contract exceeded the current market value.
Negative goodwill of TEUR 43,951.0 in the previous financial year resulted above all from the acquisition
of Center Invest kft., the owner of the STOP.SHOP. chain in Hungary (TEUR 12,768.2), as well
as the purchase of the remaining 90% of shares in Nowe Centrum sp. z o.o., the owner of the Silesia
City Center (TEUR 19,726.2).
Other operating income was positively influenced by foreign exchange effects of TEUR 15,411.4
relating to the operating business as well as the sale of the Europe Tower, which generated a
respectable gain of TEUR 14,053.1 on sale.
Depreciation and amortisation
This item is comprised chiefly of impairment charges to goodwill and depreciation on tangible
assets. Depreciation and amortisation rose by TEUR 5,609.8 or 37% over 2005/06. In contrast to
the prior year, the procedure followed in 2006/07 involved the deduction of deferred tax liabilities
in determining the book value of a cash-generating unit (CGU) and a comparison with the fair value
of the CGU. The fair value of deferred tax liabilities was set at zero in all cases because the deduc-