News Column

Pactolus Hungarian Property Swings To Profit On Cost Cuts, But Outlook Weak

August 20, 2014

Steve McGrath

LONDON (Alliance News) - Pactolus Hungarian Property PLC Wednesday said it swung to a small profit in the first half of the year as it cut administration costs by 42%, but its rental income is set to continue falling as it sells properties, using the funds raised to reduce debt and buy back shares.

The company invests in freehold properties in affluent parts of Budapest, renovates them and then either lets them out or sells them. However, it has been hit hard by a weak property market in the country, with property prices and rental incomes continuing to decline.

In a statement, the company said the Hungarian residential property market remains depressed and it isn't clear about the outlook.

It swung to a net profit of EUR2,931 in the six months to June 30, compared with a loss of EUR68,114 a year earlier, as it cut administrative expenses to EUR96,119, from EUR164,869 in the first half of 2013.

However, rental income fell to EUR247,406, from EUR305,310 a year earlier, due to the sale of one property in the intervening period but also because of a weak rent book in the first quarter of the year.

"As mentioned in previous reports, reduced revenue income as the group sells further properties, coupled with relatively fixed direct costs makes it difficult for the group to make a positive contribution," it said.

Its reported net assets were EUR5.1 million at the end of June, equating to net asset value per share of 40 pence, down from 41 pence at the end of December. The figure was pulled down by the strength of sterling, costs and the adverse market conditions, but was pulled up by share buybacks.

It is buying back shares so that shareholders can exit what is an increasingly illiquid asset.

"Our strategy for the remainder of year is to continue to work on reducing the group's costs and to sell further properties from the portfolio, using the sales proceeds to reduce debt and buy back shares," it said.

Pactolus said it continues to be disappointed with its Hungarian property agent and has started talks with another agent with a view to attempting to maximise the returns from its estate.

Its shares were up 1.7% at 26.95 pence Wednesday afternoon.

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Source: Alliance News

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