Impact Bucharest real estate developer posted $13.1 million (432.8bn ROL) turnover for the first nine months of this year, up 40% from the same time in 2002. The profit went down in real terms, though.
Impact made 127.5bn ROL net profit in the first three quarters of 2003, which is almost equal to the 124.5bn ROL profit made in the same time last year in nominal terms. Inflation throughout September 2002-September 2003 was of approximately 14%.
Ioan Popp, Impact’s chairman and main shareholder, says the company has seen substantial growth and that the fiscal profit was harmed by the change in accounting registration methods.
“Although we have more contracts concluded, and the construction business has grown 102% (in terms of square metres built), the accounting profit did not increase at the same pace, because the down payments made by clients are smaller and the revenues are registered when the instalments are actually paid,” Ioan Popp told Ziarul Financiar.
Impact closed $14 million’s worth in contracts in the first nine months of this year, up 62.5% from the same time last year.
Impact is the first Romanian real estate company that began selling villas in instalments several years ago. The accounting regulations allowed recording the profit upon conclusion of the contract last year. As of 2003, profit is only registered upon actual payment of the instalments, affecting the company’s financial statements, Popp explains.
Impact’s chairman says this situation was one of the reasons why a decision was made to break financing and construction operations apart in the medium run. “Only 20% of our clients get funding from banks. I would rather use the money for constructions, which may yield a 15-20% gain for me than borrow at 8% and lend at 14%, ” Popp specified.
In order to fund the construction of the residential complexes later sold in instalments, Impact has used banking loans and the capital markets as the main financing sources over the last few years. It also released a bond issue worth 1.5 million euros this year.
The company has big medium and long-term plans, albeit the analysts on the capital market have repeatedly expressed doubt about those plans being possible to further sustain by bond issues or share offerings and banking loans, saying Impact will need support from an investment fund or a strategic partner.
“We are considering either the sale of our credit portfolio to institutional investors or the separation of the client financing operations from the actual constructions business by establishing a publicly held mortgage credit company,” Ioan Popp specified.
He says Impact’s resources are enough to cover financing in the near future.
“Our indebtedness reaches only 26% or even 21% if considering the down payments on the loans, i.e. the credit granted to clients. Compared with the 65%, which is the acceptable level for this type of business, Impact may borrow at least $12 million more by issuing bonds or taking out new loans,” Popp concluded.
The company’s stock yesterday dropped 3.5% on the Bucharest Stock Exchange, as Impact announced profit below expectations for Q3, 2003.
laurentiu.ispir@zf.ro ; vlad.nicolaescu@zf.ro