News Column

European Convergence Development Mothballs Investments As Loss Grows

June 18, 2014

Anthony Tshibangu

LONDON (Alliance News) - Property investors European Convergence Development Co PLC Wednesday said it believes it should refrain from investing in any new projects as it faces a number of issues in southeast Europe.

The company, which focuses on residential and retail schemes in countries including Romania and Bulgaria, posted a pretax loss of EUR1.2 million for 2013, compared with a EUR697,000 loss a year earlier.

European Convergence said Romania and Bulgaria continue to suffer badly from the global economic crisis in 2008. Although there has been signs of stability, any semblance of recovery has been thwarted by the Greek banking crisis in 2012, which has impacted the lending carried out by banks which the company would normally rely upon, and this limiting the credit available to it.

The company said it has been engaging with shareholders, and its talks suggests there is little or no enthusiasm for a reinvestment cycle in these regions.

"Therefore the directors believe that it is not in the best interests of the shareholders to invest in any new projects," European Convergence said.

The group also said recent events in Ukraine are a potential risk to foreign capital inflows into Romania and to the country's exports to Russia, given the depreciation of the rouble. It also said the upcoming presidential election in Romania may undermine the country's political stability. However, if these risks can be avoided, Romania's solid economic fundamentals should ensure "robust growth in the medium term".

On the back of this, the company maintained its policy of not paying a dividend and retaining its funds to protect its current investments.

At an operaing level, the company said it was a quiet year with few schemes to speak of. Only one grade-A office building was delivered in Bucharest, while three retail developments opened across Romania. The biggest of these was the Promenada scheme in Bucharest, developed by real-estate firm Raiffeisen Evolution.

No shopping centres were opened in Bulgaria during the year.

European Convergence shares were quoted down 4.4% at 0.0550 pence Wednesday morning.

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Source: Alliance News

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