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PREZENTACJA PLANÓW ROZWOJU FIRMY I WYNIKÓW FINANSOWYCH ZA 2006 ROK 1Warszawa, październik 2007r.
J.W. Construction Holding – presentation
J.W. Construction Holding – presentation
Poland's largest residential developer
The investment in reliable
foundations
Warsaw, October 2007
PRESENTATION of JW Construction Holding – October 2007 2
Presentation agenda
The Company in the background of the market – structure and positioning
The characteristics of developer activity
The description of essential investments
The characteristics of housing activity
The characteristics of hotel services
The financial standing
Appendix – the analysis of housing market in Poland
PREZENTACJA PLANÓW ROZWOJU FIRMY I WYNIKÓW FINANSOWYCH ZA 2006 ROK 3
The Company in the background of the market– structure and positioning
PRESENTATION of JW Construction Holding – October 2007
Business structure of JWCH Group
DEVELOPER
Activity
HOUSING
Activity
HOTEL SERVICES
Activity
Expanded “land bank” – new building plots and increasing scale of Company activity
Wide and diversified offer – popular flats, apartment and houses
Leading position in Warsaw market in respect of the largest number of implemented projects
Implementation of projects in other Polish towns with high growth potential i.e. Łódź, Katowice, Gdynia, Szczecin, Łeba
Housing activity carried out to implement the projects in the scope of developer activity and hotel services in the framework of the Group
General Contractor in almost 100% of implemented projects
Expansion of own auxiliary facilities in the scope of construction and transportation machinery
Commencement of the separation of housing activity and its transfer to a subsidiary
HOTELE 500 – network consisting of 5 two – star and three – star hotels in attractive localization
Assets of significant market value
Extension and modernization of the hotel “CZARNY POTOK” in Krynica to upgrade to the category „Resort & SPA”
JWHC position in comparison with competitors
Significant advantage over the remaining competitors on the Warsaw market is on the side of leading developer (J.W. Construction Holding) and the next one in the ranking (DOM Development)
The largest developers in Warsaw housing sector in respect of the number of apartments handed
over and planned in multi – family houses in the period 2005 – 2006 (share in market %)
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12%
Ebejot
Agroman
Edbud
PKO Inwestycje
Pirelli PEKAO RE
Dom Development
J .W. Construction
Source: Report on Housing Market in Warsaw 2005/ 2006 published by REAS KONSULTING
6
Competition on the housing market
The main competitors of JW Construction Holding in particular market segments:
Popular flats segment: Dom Development, Budimex Nieruchomości, Acciona
Nieruchomości, Dolcan (Warsaw market), Invest Comfort, Allcon Osiedla (3-City), BRE
Locum, Maxbud, Unibud (ŁÓdź), Profit Development, A.S.M Investycje, As Bau, Gant
Development (Wrocław)
Increased standard apartments segment: Dom Development, Echo Investment, ,
Marvipol, Pirelli Pekao Real Estate, Fadesa Prokom (Warsaw market), small entities
(all markets)
Single – family houses segment; GTC, Sedno (Warsaw market), large
group of small entities (all markets)
7
Competitive advantages
Own erection and assembling potential
Highly recognized brand
Assets owned by the Company enabling the conclusion of occasional contracts on sales of larger packages of flats with foreign institutional clients
Offer diversification – holiday apartments in Łeba
Complex credit service – flats purchase financing system favourable for the client – long term cooperation with the banks
8
Competitive advantages
The first Polish office selling the flats established in United Kingdom
Innovative sales systems 10/90 and 20/80
Effective costs control
Top standard of client service – short period between the first contact and transaction
finalization and professional Sales Department
Professional and stable team as well as wide experience and leading position in the
market
ISO systems and implemented SAP system
9
Strategic objectives
Extension of “land market” trough the purchase of new building lots on favourable
conditions – increase of the scale of activity and further dynamic development of the
Company
Consolidation of leader’s position – as the largest housing developer in Warsaw
market and vicinity
Expansion to the markets with high growth potential among others Łódź,
Katowice, Gdynia, Szczecin, Łeba and abroad (among others Russia and Bulgaria)
Consolidation in the scope of erection and assembling activity - commencement of
the process of its separation and transfer to a subsidiary in order to increase the
independence of external subcontractors
PREZENTACJA PLANÓW ROZWOJU FIRMY I WYNIKÓW FINANSOWYCH ZA 2006 ROK 10
Characteristics of developer activity
PRESENTATION of JW Construction Holding – October 2007
11
Growth in the scope of developer activity
In course of recent months, the Company initiated several activities in order to extend
the scale of activity
Warsaw market and vicinity
Purchase of new building lots –the area exceeding 40ha in Ożarów Mazowiecki
Consolidation of sales network – opening of new offices selling the apartments
Wide commercial offer in various market segments – flats, apartments and houses
Entering into the markets out of Warsaw
Purchase of new building lots out of Warsaw – finalization of building lot purchase in Łeba
Project of the erection of the highest building in Szczecin
Continuation of the investment in Łódź (commencement of 2nd phase of the project)
Commenced housing investment in Katowice
Presence on the market in Gdynia
Activity on foreign markets
Implementation of the project in Russia – continuation of the erection of Housing Estate in Kołomna
Establishing of sales office in United Kingdom – promotion and marketing activities
Establishing of cooperation with foreign partners (registration of a subsidiary in Bulgaria)
12
Growth in the scope of developer activity
JWC is the developer with the longest activity un Poland – up to the present time the Company
constructed 15 599 dwellings (as at the end of September 2007)
The Company significantly increased the scale of its activity
7 853 dwelling are actually under construction and sale
More than 8 500 dwellings are in course of preparation for the construction
Type of investment Total number of dwellings
Number of dwellings sold
Investments implemented 15 599 15 555
Investments being implemented (under
construction and sale)
7 853 6 621
TOTAL 23 452 22 176
Planned investments 8 525
13
Growth in the scope of developer activityThe land purchase process is continued by the Company – the new building lots have been purchased for attractive prices in Warsaw vicinity in recent months.
More than 111 million PLN including more than million PLN obtained from bonds emission have been spent by the Company for land purchase from January 2007 up to 5th October 2007.
Investment Date of land purchase
Surface area of lot / lots
Legal status of lots Planned number of flats
Ożarów Mazowiecki I May 2007 20 ha 2 392 m2Final agreement
1 973
Ożarów Mazowiecki II August 2007 7 ha 700 m2 Final agreement 700
Ożarów Mazowiecki III
September 2007
1 ha Final agreement 100
Ożarów Mazowiecki IV
September 2007
13 ha 9 976 m2 Final agreement 1300
Ul. Berensona (Warsaw Białołęka) August 2007 2 ha 2 039 m2 Final agreement 120
ul Aluzyjna (Warsaw Białołęka) September
20071 ha 2 880 m2
Preliminary
agreements -
ul. Odkryta (Warsaw Białołęka) October 2007 8 504 m2
Preliminary agreements
-
14
In case of revenue – the progress level must exceed 50% (the value of revenues
resulting from signed contracts/ the value of planned revenues)
In case of costs – the progress level must exceed 40% (the value of works
determined on the basis of works survey/ budget value)
Investment accounting method
Conservative method of investment accounting – ZERO METHOD
The valuation of projects established by the Company is based on the more conservative
“ZERO” method which equalizes the incurred costs with the revenue obtained in the
accounting period under consideration.
“ZERO” method is used by JW Construction in the first phase of the project being
implemented until the achievement of:
15
The investments under construction and sales – as at the end of September 2007
Investment Total number of dwellings
Number of dwelling sold
Scheduled date of
completion % to be
credited in
2007 Housing Estate „Górczewska” 1410 1410 XII 2007 Up to 100%
Housing Estate „Centrum” - Łódź
324 322 4th quarter 2007 Up to 100%
Housing Estate „Rezydencja na Skarpie IV”
261 256 4th quarter 2007 Up to 100%
Housing Estate „Willa Konstancin”
178 168 4th quarter 2007 Up to 100%
Housing Estate „Ludwinowska Aleja”
68 16 4th quarter 2007 Do 100%
Housing Estate „Leśne” - Gdynia
202 127 4th quarter 2008 70%
Housing Estate „Lazurowa” 669 635I phase 2nd quarter
2008II phase 3rd quarter
2008III phase 4th quarter
2008IV and V phase – 1st
quarter 2009
46%
Housing Estate „Osada Wiślana”
404 358 I phase 2nd quarter 2008
II and III phase 2nd quarter 2009
0%
Housing Estate „Rezydencja Quatro”
243 243 I/II quarter 2009 0%
Housing Estate „Górczewska Park”
890 307 II/III quarter 2009 40%
Katowice 25 0 I quarter 2008 0%
Housing Estate „Victoria Park” II Russia building A1
158 63 IV quarter 2008 0%
Investments in progress
16
The investments under construction and sales – construction scheduled on the turn of 2007/2008
Investment Total number of dwellings
Number of dwelling
sold
Date of building permit obtainment
% to be credited
in 2007
Housing Estate „Zielona Dolina”*
594 525 IV quarter 2007 0%
Housing Estate „Wiślana Aleja”
200 110 IV quarter 2007 0%
Housing Estate „Lewandów Park” I and II
1905 1816 XI 2007 – Lewandów II partially Lewandów
I
0%
Housing Estate „Bursztynowe”
322 265 I quarter 2008 0%
* dwellings released for sale – data as at the end of September 2007
Number of dwellings Number of dwelling sold Total dwellings under
construction and sales 7 853 6 621
Investments planned
17
The investments planned – data as at the end of September 2007
Investment Town/ quarter Market segment Number of dwellings / houses
Housing Estate „Lewandów Park” III
Warsaw / Białołęka Popular flats 465
Housing Estate „Zielona Dolina” (Zdziarska)
Warsaw/ Białołęka Popular flats 911*
Światowida Warsaw / Białołęka Popular flats 223
Housing Estate „Centrum” II - Łódź
Łódź Popular flats 432
Pogonowskiego – Łódź Łódź Popular flats 109
Uroczysko – Katowice Katowice Popular flats 563
Szczecin Szczecin Popular flats 400
Ożarów Mazowiecki I Ożarów Mazowiecki Popular flats 1 973
Ożarów Mazowiecki II Ożarów Mazowiecki Popular flats 700
Ożarów Mazowiecki III Ożarów Mazowiecki Popular flats 100
Ożarów Mazowiecki IV Ożarów Mazowiecki Popular flats 1 300
Łeba Łeba Popular flats 400
Berensona Warsaw / Białołęka Popular flats 120
Housing Estate „Marymoncka” II
Warsaw / Bielany Flats in increased standard 23
Housing Estate „Aleja Ludwinowska” II
Warsaw / Ursynów Flats in increased standard 24
Housing Estate „Victoria Park” II
Kołomna/ Rosja Popular flats 782
TOTAL 8.525
* Number of dwellings not included in the commercial offer
Investments planned
PREZENTACJA PLANÓW ROZWOJU FIRMY I WYNIKÓW FINANSOWYCH ZA 2006 ROK 18
Description of essential investments
PRESENTATION of JW Construction Holding – October 2007
19
Warsaw marketHousing Estate „Górczewska”
Secured residential object with service
areas and 1410 apartments and
parking places under the building. A
recreation area and housing estate
mall will be provided.
Investment Floorage of the
apartments Revenue Costs
Housing Estate „Górczewska” 74 729 319 372 204 617
20
Warsaw marketHousing Estate „Rezydencja na Skarpie”
The investment in Bukowińska Street
next to two projects implemented before
– Mokotów Plaza I and II. Total number
of high standard dwellings will amount
261
Investment Floorage of the
apartments Revenue Costs
Housing Estate „Rezydencja na
Skarpie”16 530 116 876 66 301
21
Investment Floorage of the
apartments Revenue Costs
Housing Estate „Lazurowa”
33 727 243 161 185 953
Housing Estate „Lazurowa”
Housing Estate in Lazurowa Street in
vicinity of planned underground station.
The project implemented in four phases.
Target number of increased standard
dwellings will amount 669.
Warsaw market
22
Investment Floorage of the
apartments Revenue Costs
Housing Estate „Górczewska
Park”44 929 426 872 244 579
Housing Estate„Górczewska Park”
Warsaw market
“Górczewska Park” project
consists of 12 multi – family
house localized in Górczewska
/ Olbrachta Street with 886 flats
and 4 service shops.
23
Investment Floorage of the
apartments Revenue Costs
Housing Estate „Ludwinowska
Aleja”7 877 59 118 28 350
Housing Estate „Ludwinowska Aleja”
Secured residential complex
consisting of 17 semi – detached
four – family houses in
Ludwinowska Street in Warsaw with
68 flats with garages and parking
places.
Warsaw market
24
Investment Floorage of the
apartments Revenue Costs
Housing Estate „Leśne”
12 871 82 136 45 558
Housing Estate „Leśne”
The second project implemented in
Gdynia in Parkowa Street, surrounded by
the forests in Trójmiejski Landscape
Park. Secured housing estate consists of
9 four-storey building encompassing 202
residential dwellings
Investments ower the Warsaw
25
Investment Floorage of the
apartments Revenue Costs
Housing Estate „Victoria Park” 58 196 443 967 254 628
Housing Estate „Victoria Park”
Secured housing estate
encompassing 6 multi-family projects
implemented in Kołomna Town in
vicinity of Moscow (Russia). The
project encompasses more than 1100
high standard apartments. The
completion of the whole project is
expected in 2012.
Foreign investments
PREZENTACJA PLANÓW ROZWOJU FIRMY I WYNIKÓW FINANSOWYCH ZA 2006 ROK 26
The characteristics of housing activity
PRESENTATION of JW Construction Holding – October 2007
27
Development of housing activity
High potential of own erection and assembling capabilities
JW Construction acts in the majority of projects being implemented as the
General Contractor
Permanent staff encompasses 333 skilled labourers
Long term cooperation with experienced contractors
The Company is in the possession of own construction machinery and plants
The Company spent 1,7 million EURO as the investment in the scope of modern
construction machinery and plants (concrete batching plants, tractors, dump
trucks, excavators – loaders and telescope loaders)
The works associated with launching of construction elements prefabrication
28
Separation of housing activity
JWC Holding is engaged into the group structure modification commencing the works associated with the separation of
housing and designing activity in order to enable further development
On 21st September 2007 two new divisions i.e. “BUDOWNICTWO” responsible for
erection and assembling activity and “Pracownia Architektoniczna” responsible for the
activity in the scope architecture and engineering were created in the framework of
the Company structure
On 26th September 2007 JW Construction SA has been established as 100%
subsidiary of JWC Holding – in future the company will continue the economic activity
in housing sector after the property transfer
the activity in the scope architecture and engineering concentrated in the division
“Pracownia Architektoniczna” has been relocated to the subsidiary Dremet
The purpose of the works associated with the separation of housing and designing activity inthe subsidiary is to increase the value of the Group
Advantages resulting from the separation of housing segment
Increased transparency of the Group
Possibility to achieve the valuation of the erection and assembling
segment and achievement higher financial transparency
Facilitating of the acquisition of the companies from building sector,
anticipated in future
Possibility to place the orders out of JWC Holding
Improvement of functioning efficiency of individual companies and
increase of their effectiveness by clear determination of
competences of individual entities
Separation of housing activity
29
PREZENTACJA PLANÓW ROZWOJU FIRMY I WYNIKÓW FINANSOWYCH ZA 2006 ROK 30
The characteristics of hotel services
PRESENTATION of JW Construction Holding – October 2007
31
Actually JW Construction Group is in the possession of
5 (two – and three – star) hotels localized in Zegrze,
Stryków, Cieszyn, Tarnowo Podgórne and Święta Lipka
The offer in the scope of hotel services is addressed
mainly to the institutional clients – companies and
institutions (conferences, trainings, seminaries) and to
individual clients – tourists
In 2005, the Company purchased “Czarny Potok”
tourism center in Krynica. Actually its modernization and
extension is continued in order to upgrade the object to
Resort & SPA category.
The hotel in Strykowo close to Łódź is situated in direct
vicinity of highway and hotel in Tarnowo Podgórne in
vicinity of international communication route A2
Development of hotel services
PREZENTACJA PLANÓW ROZWOJU FIRMY I WYNIKÓW FINANSOWYCH ZA 2006 ROK 32
Financial standing
PRESENTATION of JW Construction Holding – October 2007
33
The forecast of growth in 2007 in comparison with 2006:
revenue on sales by 12% (813.1 million PLN) gross profit on sales by more than 8% (244.6 million PLN) profit on operations EBIT (earning before income tax) by almost 11% net profit by 11%
Financial prognoses for 2007 Legend: 2006
Forecast 2007
gross profit on sales
revenue onsales
net profitEBIT
34
Financial results in 2003 – 2007 Revenue on sales
Profit on operations
Gross profit on sales
Net profit
forecast2007
forecast2007
forecast2007
forecast2007
35
Profitability
The profits of the Company increased
significantly in the period 2004-2006,
including EBIDTA from 28.1 million
PLN up to 190.8 million PLN
Gross margin on sales increased from
15.3% in 2004 up to 31.1% in 2006
The economies of scale have been
achieved in result of increased scale
of activity with maintained control over
costs increase.
Gross margin on sales
EBITDA margin
Net profit margin
36
Results after two quarters 2007Revenue on sales (million PLN) Gross margin on sales (%)
Profit on operations (million PLN) Net profit (million PLN)
first half-year 2006
first half-year 2006
first half-year 2006
first half-year 2006
first half-year 2007 first half-year 2007
first half-year 2007 first half-year 2007
37
Increase of sales value
The value of agreements signed in the first
half-year this year increased by 13% in
comparison with the same period in 2006
The value of agreements signed in the
period from January to July 2007 increased
by 25% in comparison with the same period
in 2006
The value of apartments sales in 2nd
quarter this year increased up to 351.1
million PLN i.e. by 4% in comparison with
the same period in 2006
After lower results achieved in 1st quarter, clearly visible acceleration hasbeen achieved in the next three months resulting in satisfactory growth on the end of the half-year.
Value of signed agreements withclients (million PLN)
1st quarter 2nd quarter first half-year
Legend:
38
30th June 2007 31st December 2006
30th June 2006
Planned revenues on current projects 3 494,5 3 567,8 3 567,8
Planned costs of current projects 2 376,5 2 337,0 2 337,0
Planned margin on projects being implemented 1 118,0 1 230,8 1 230,8
Accumulated revenues recognized in loss and gain account 191,5 665,6 347,2
Accumulated costs recognized in loss and gain account 132,9 454,0 245,6
Accumulated margin recognized in loss and gain account 58,5 211,6 101,5
Deferred margin 1 059,5 1 019,2 1 129,2
Planned margin on projects being implemented 32,1% 35,1% 35,1%
Percentage of deferred margin 94,8% 82,8% 91,7%
More than 1 billion margin will be obtained on the projects being implemented, which will be reflected in future financial results
Dynamics of financial indices
39
Financing structure
Achievement of optimal financing structure
Obtainment of gross revenues over 240 million PLN on new bonds
emission for land purchase
Withdrawal from the financing form used before – credit of up to 80% of
land purchase price
As a rule, the percentage of projects implemented using the bank
credits is not higher than 40% of the whole costs
Possibility of complete use of the bonds emission program in amount of
250 million PLN
PREZENTACJA PLANÓW ROZWOJU FIRMY I WYNIKÓW FINANSOWYCH ZA 2006 ROK 40
APPENDIXThe analysis of housing market in Poland
PRESENTATION of JW Construction Holding – October 2007
41
Source: Report on Housing Market in Warsaw 2005/ 2006, 2006/2007 published by REAS KONSULTING. www.tabelaofert.pl GUS
The largest developers (in respect of the number of apartments handed over and planned in the period 2005 – 2006)
The largest developers (in respect of the number of apartments handed over and planned in the period 2005 – 2006)
3455 3526 3540 3742
4879
7354 75008000
2500
3500
4500
5500
6500
7500
8500
2001 2002 2003 2004 2005 2006 I 2007 VI 2007
Demand vs. supply in the period 2000 – 2010Demand vs. supply in the period 2000 – 2010Average price of residential dwelling in Warsaw (PLN/m2)
Average price of residential dwelling in Warsaw (PLN/m2)
Number of apartments constructed for sales 2000 - 2006
Number of apartments constructed for sales 2000 - 2006
Warsaw
Warsaw
Supply
Demand
tho
usan
ds o
f un
its
42
Source: Report on Housing Market in Warsaw, 2006/2007 published by REAS KONSULTING. www.tabelaofert.pl GUS
The largest developers (projects completed or planned for construction in the period 2006 – 2007)
The largest developers (projects completed or planned for construction in the period 2006 – 2007)
2365 2366 2367 24392773 2900
44364900
6100
2000
3000
4000
5000
6000
7000
2000 2001 2002 2003 2004 2005 2006 I.2007 VI.2007
Demand vs. supply in the period 2000 – 2010Demand vs. supply in the period 2000 – 2010Average price of residential dwelling in ŁÓDŹ (PLN/m2)Average price of residential dwelling in ŁÓDŹ (PLN/m2)
Number of apartments constructed for sales 2000 - 2007
Number of apartments constructed for sales 2000 - 2007
Łódź
Supply
Demand
tho
usan
ds o
f un
its
43
Source: Report on Housing Market in Warsaw, 2006/2007 published by REAS KONSULTING. www.tabelaofert.pl GUS
The largest developers (projects completed or planned for construction in the period 2006 – 2007)
The largest developers (projects completed or planned for construction in the period 2006 – 2007)
Number of apartments constructed for sales 2000 - 2007
Number of apartments constructed for sales 2000 - 2007
2437 2561 2628 2536 2702
3477
5851 5900
7700
2000
3000
4000
5000
6000
7000
8000
2000 2001 2002 2003 2004 2005 2006 I.2007 VI.2007
Demand vs. supply in the period 1994 – 2010Demand vs. supply in the period 1994 – 2010Average price of residential dwelling in 3-CITY (PLN/m2)
Average price of residential dwelling in 3-CITY (PLN/m2)
3-City
Supply Demand
3-Cityth
ou
sand
s of u
nits
44
Source: Polish Banks Association
The value of housing credits granted in Poland (billion PLN)
Increasing market of housing credits
Significant growth in the scope of granted housing credits
Relatively low interest rates
Favourable and available credits offer proposed by the banks
Significant growth of global value of housing credits supporting the demand on housing market
Population debt ratio in the scope of housing credits in relation to GNP increased up to about 6% in Poland but is still very low in comparison with 49% achieved in fifteen EU countries
According to forecasts of Polish Banks Association, total debts in the scope of housing credits will achieve 134 billion PLN as the end of 2007.
45
Source: Report published by European Mortgage Federation, 2005
Debts in the scope of housing credits in relation to GNP in selected EU countries (%, 2005)
Debts in the scope of housing credits in relation to GNP in selected EU countries (%, 2005)
Increasing market of housing credits
Ho
llan
d
Un
ited
K
ing
do
m
Irel
and
Ger
man
y
Sp
ain
Bel
giu
m
Fra
nce
Gre
ece
Est
on
ia
Au
stri
a
Ital
y
Hu
ng
ary
Cze
ch
Rep
ub
lic
Po
lan
d
Slo
ven
ia
46
INVESTOR RELATION OFFICE - CONTACT DATA:
Małgorzata Szwarc-Sroka
Liquidity Management Director andInvestor Relations Office Director
ph.: 0 22 771 77 85
ph.: 0 22 771 75 10
e-mail: [email protected]