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Results For The Six months To 30 June 2015

25 Aug 2015 07:00

RNS Number : 9364W
AFI Development PLC
25 August 2015
 

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION

IN OR INTO THE RUSSIAN FEDERATION, THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN

 

25 August 2015

 

AFI DEVELOPMENT PLC

("AFI DEVELOPMENT" OR "THE COMPANY")

 

RESULTS FOR THE SIX MONTHS TO 30 JUNE 2015 

Satisfactory operational results amidst continuing macroeconomic uncertainty

 

AFI Development, a leading real estate company focused on developing property in Russia, has today announced its financial results for the six months ended 30 June 2015.

H1 2015 financial highlights

· Revenues for the six months to 30 June 2015, including proceeds from the sale of trading properties, reached US$51.1 million:

- Rental and hotel operating income declined 33% year-on-year to US$50.4 million

- AFIMALL City contribution stood at US$38.5 million (H1 2014: US$56.6 million), down 32% year-on-year

· Gross profit for H1 2015 declined slightly to US$25.8 million (H1 2014: US$27.5 million)

· Net loss for H1 2015 was US$ 33.2 million, against a profit of US$3.7 million in H1 2014, largely due to valuation losses in Q2 2015

· Total gross value of portfolio of properties decreased marginally to US$1.98 billion at the end of Q2 2015, compared to US$1.99 billion at the end of Q1 2015

· Cash, cash equivalents and marketable securities as of 30 June 2015 were US$78.6 million

H1 2015 operational highlights

· AFIMALL City recorded revenue of US$38.5 million for H1 2015:

- NOI was US$29.1 million for the six months, compared to US$39.3 million in H1 2014

- Average monthly footfall in June 2015 was 19% higher than that in June 2014

· Over 90% of apartments at Odinburg Building 1 pre-sold (710 sale contracts signed as of 24 August 2015 in both Buildings 1 and 2)

Commenting on today's announcement, Lev Leviev, Executive Chairman of AFI Development, said:

"Amidst a challenging operating environment and in the face of continued macroeconomic uncertainty, our focus during the first half of the year was firmly on managing factors under our control. At AFIMALL City, we supported our tenants through a number of marketing initiatives which resulted in strong growth in footfall to the Mall, against a market-wide decline. At the same time, we reinforced our efforts aimed at reducing our operating costs, which led to a significant reduction in all of our expenses. Finally, development and marketing of non-yielding properties continues with steady progress across all projects."

 

H1 2015 results conference call:

AFI Development will hold a conference call for analysts and investors to discuss its H1 2015 financial results on Wednesday, 26 August 2015, following the publication of the Company's financial results.

The details for the conference call are as follows:

 

Date: Wednesday, 26 August 2015 

Time: 3pm BST (5pm Moscow)

Dial-in Tel: International: +44 (0) 20 3003 2666

UK toll free: 0808 109 0700

US toll-free: 1 866 966 5335

Russia toll-free: 8 10 8002 4902044

 

Password: AFI

 

Please dial in 5/10 minutes prior to the commencement time giving your name, company and stating that you are dialling into the AFI Development conference call quoting the reference AFI.

 

Prior to the conference call, the H1 2015 Investor Presentation of AFI Development will be published on the Company website at http://www.afi-development.com/en/investor-relations/reports-presentations on 26 August 2015 by 12am (noon) BST (2pm Moscow time).

 

 

- ends -

 

For further information, please contact:

 

AFI Development, Moscow +7 495 796 9988

Ilya Kutnov

Ekaterina Shubina

 

Citigate Dewe Rogerson, London +44 20 7638 9571

David Westover

Sandra NovakovShelly Chadda 

 

 

About AFI Development

AFI Development is one of the leading real estate development companies operating in Russia. Established in 2001, AFI Development is a publicly traded subsidiary of Africa Israel Investments Ltd.

AFI Development is listed on the Main Market of the London Stock Exchange and aims to deliver shareholder value through a commitment to innovation and continuous project development, coupled with the highest standards of design, construction and quality of customer service.

AFI Development focuses on developing and redeveloping high quality commercial and residential real estate assets across Russia, with Moscow being its main market. The Company's existing portfolio comprises commercial projects focused on offices, shopping centres, hotels and mixed-use properties, and residential projects. AFI Development's strategy is to sell the residential properties it develops and to either lease the commercial properties or sell them for a favourable return.

AFI Development is a leading force in urban regeneration, breathing new life into city squares and neighbourhoods and transforming congested and underdeveloped areas into thriving new communities. The Company's long-term, large-scale regeneration and city infrastructure projects establish the necessary groundwork for the successful launch of commercial and residential properties, providing a strong base for future.

 

Legal disclaimer

Some of the information in these materials may contain projections or other forward-looking statements regarding future events, the future financial performance of the Company, its intentions, beliefs or current expectations and those of its officers, directors and employees concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and business. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might" or the negative of such terms or other similar expressions. These statements are only predictions and that actual events or results may differ materially. Unless otherwise required by applicable law, regulation or accounting standard, the Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia and market change in the industries the Company operates in, as well as many other risks specifically related to the Company and its operations.

Executive Chairman's and Executive Director's combined statement

Our operating environment during the first half of 2015 remained challenging as a result of negative trends in Russia's macroeconomic indicators and continued currency volatility, which had an adverse effect on business activity and consumer purchasing power in our market.

In such an environment, we continued to focus on the profitability of our business. Our revenue in Q2 2015 increased by 9% to US$26.6 million compared to US$24.4 in Q1 2015. At the same time, operating expenses decreased further during the second quarter to US$9.7 million versus US$11.4 in Q1 2015. As a result, gross profit in Q2 2015 was 30% higher at US$14.6 million than in Q1 2015 (US$11.2 million). 

Gross profit for H1 2015 reached US$25.8 million (H1 2014: US$27.5 million), a moderately good operating result in the current environment.

The operating performance of AFIMALL City was also affected by the difficult conditions in the retail industry. Retail sales in Russia during the first half of the year were 8% lower in real terms against the same period of 2014 with footfall across Moscow's shopping centres at the lowest level since 2011. At the same time, rental agreements across the market have been subject to renegotiation due to the difficult trading conditions and the volatility of the Rouble against the US dollar.

As such, AFIMALL City experienced a higher level of tenant rotation during H1 2015, which in combination with temporary rent discounts led to a 32% revenue decline to US$38.5 million (H1 2014: US$56.6 million). However, the success of our marketing efforts is reflected in the positive trend in the Mall's footfall at the end of the six-month period.

Concurrently, development of our non-yielding assets continues with pre-sales at Building 1 of our Odinburg development nearly concluded and construction of Building 2 on track for completion to plan. Marketing of office space at our Aquamarine III development is also progressing with a number of high-profile tenants signed up, whilst preparations for construction and marketing of Paveletskaya Phase II and design works at Bolshaya Pochtovaya continue.

 Projects update

AFIMALL City

 

Due to above-mentioned market dynamics, AFIMALL City saw some tenant rotation in the second quarter. Encouragingly, however, the Mall's footfall improved by 19% in June 2015 compared to June 2014.

 

In May 2015, a "sales and discounts night" promotional event marked the fourth birthday of AFIMALL City, with most tenants offering significant discounts on their goods, while the shopping centre extended its trading hours for a period of three days

 

Odinburg

During Q2 2015, construction of Building 1 of the first phase of Odinburg (the "Korona" complex) entered its final stage, while construction of Building 2 continued. As of the date of publication of this report, more than 90% of apartments in Building 1 have been pre-sold with sales of Building 2 also progressing to plan (710 contracts for sales of apartments signed in both buildings at the date of this report's publication).

Aquamarine III (Ozerkovskaya III)

The Company continues to market office space in this property to potential buyers and tenants. Several tenants have already leased space in the complex, with the most recent addition being Brown-Forman, the Kentucky-based producer of Jack Daniel's whiskey, Finlandia vodka and other well-known spirits, who selected Aquamarine III for its Russian headquarters.

Paveletskaya Phase II

Preparations for construction and marketing of Paveletskaya Phase II continued during the second quarter as the project team prepared documentation for the general contractor tender. In parallel, negotiations regarding the financing of construction are underway with several banks.

Bolshaya Pochtovaya

The design works for Bolshaya Pochtovaya are currently ongoing. We are on track to obtain a construction permit for this development during 2015.

 

Market overview - general Moscow real estate

 

Macroeconomic environment

GDP decline in Russia during the second quarter of 2015 reached 3.4% (according to the Ministry of Economic Development), driven to a large extent by reduced government spending. Following a period of stabilisation during the first quarter of the year, the Rouble continued its decline against the US dollar, mainly as a result of a fall in oil prices in June and July.

As the federal budget deficit increased to 3.7% of GDP during the first five months of the year, the Government implemented a restrictive fiscal policy which is expected to continue into the third quarter of the year. Retail sales during the first half of the year were 8% lower in real terms against the same period of 2014. At the same time, inflation saw a significant decline during the second quarter and international reserves stabilised at around $355-$360 billion.

With a seasonal decline in the current account surplus and expected growth in external debt repayments, the pressure on both the Rouble and international reserves is expected to increase during the second half of the year.

Recovery in business activity also remains unlikely in the absence of further reduction in interest rates, with the key lending rate at 11% (as of today), more than 400 basis points above pre-crisis levels.

(Source: CBRE Russia Macroeconomic Report, Q2 2015, Ministry of Economic Development of the Russian Federation)

 

Moscow office market

Following a challenging 2014 and Q1 2015, the office market showed a more positive trend during the second quarter of the year.

The volume of new deliveries for the first half of the year totalled 224,300 sq.m., driven by a 47% increase during the second quarter when 66% of deliveries met Class A requirements.

Take up during the second quarter increased by 30% quarter-on-quarter and 120% year-on-year to 187,000 sq.m. with a significant increase in Class A take up driven by a small number of large scale deals. This trend played an important role in keeping overall vacancy rates stable with Class A vacancy levels recording a small decline, from 27.4% in the first quarter to 25.8% in the second.

Across 12% of available Class A space, rental rates declined during the second quarter - Class A Prime rents decreased by 5% to $820-950 per sq.m. whilst Class A rents in centrally-located office buildings saw a decline of between 0% and 7% to an average of $600-750 per sq.m. Rents for decentralised Class A office buildings and Class B buildings remained stable.

Looking to the second half of 2015, it is expected that about 1.1 million sq.m. of new office space will be supplied. This figure is 300,000 sq.m. lower than expected at the start of the year as a number of delivery dates have been postponed due to the current oversupply and limited demand.

(Source: Q2 2015 Office Market View, CBRE; Marketbeat Russia Q2 2015, Cushman & Wakefield)

 

Moscow retail market

During the first half of 2015, Moscow saw completion of five new shopping centres with a total GLA of 306,000 sq.m. These opened with anchor tenants and no more than 30% of gallery occupancy. The remainder of 2015 and 2016 are expected to see noticeably fewer new openings with no more than 1.3 million sq.m. of retail space in quality shopping malls delivered to the market. The majority of new shopping malls are expected to have soft openings with the leasing process expected to take up to two or three years from delivery.

Despite difficult market conditions, established shopping centres in Moscow have retained high occupancy levels with vacancy rates averaging around 2.17% versus a Moscow average rate of 8%. However, footfall has been at the lowest levels since 2011 due to the weakening purchasing power of consumers.

Following the strong correction of rental rates in late 2014, rents in the first half of 2015 remained relatively stable. Prime rents are estimated at around $3,800 per sq.m. with average rents at around $1,450 per sq.m.

The majority of lease contracts are denominated in roubles and valid for a short-term period with lease agreements in US dollars executed only in prime shopping centres in Moscow. Rental rates expressed as a percentage of turnover have also become more widespread. The differential between rents commanded by established and newly-opened shopping malls has increased further in 2015 leading to reduced relevance of the concept of average rental rates.

Looking ahead to the second half of 2015, there is a risk of vacancy rates rising to 11-12%. At the same time, given the weak retail sales and the high volume of new retail space delivered, average rental rates are expected to fall by a further 5-10% in US dollar terms by year-end.

(Source: Q2 2015 Office Market View, CBRE; Marketbeat Russia Q2 2015, Cushman & Wakefield; Moscow Shopping Centre Market Q2 2015, JLL)

 

Moscow and Moscow Region residential market

According to Mosgorstat, the volume of commissioned residential construction in Moscow for the first half of 2015 amounted to 1.8 million sq. m., which is 17.5% higher than in the same period last year.

By the end of June 2015, the weighted average asking price of new business-class residential construction in Moscow amounted to 283 thousand roubles per sq. m. (US$4,964). Compared with the end of June 2014, prices increased on average by 8%.

In the Moscow Region, as of June 2015, the average price per sq. m. in the business-class segment reached US$1,450, or RUR80,500.

(Source: IntemarkSavills, Peresvet)

  

 

 

Lev Leviev

Executive Chairman of the Board

Mark Groysman

Executive Director

 

 

ANNEX A 

30.6.2015 - Very significant property disclosure

 

 

1. AFIMALL City

 

 

(Data based on 100%. Share of the Company in the property - 100%)

 

Current quarter (Q2 2015)

Comparative data

 

Q2 2015

Q1 2015

Q4 2014

Q3 2014

Q2 2014

Value of the property (000'USD)

990,000

1,000,000

1,000,000

1,160,000

1,160,000

NOI in the period (000'US$)

15,395

13,686

18,641

25,007

22,501

Revaluation gains (losses) in the period (000'US$)

(28,970)

13,821

(3,655)

88,473

(35,442)

Average occupancy rate in the period (%)

77%

83%

85%

82%

82%

Rate of return (%)

5.9%

5.5%

8.3%

7.4%

6.8%

Average rent per sq.m. (US$/annum)

1,144

1,117

1,147

1,201

1,202

Average rent per sq.m. in agreements signed in the period (US$/annum)

1,399

832

1,035

1,667

1,286

 

 Balance sheet values of properties

Property[1]

Valuation 30/06/2015, US Dollars

Valuation 31/12/2014, US Dollars

Change in valuation, %

Balance sheet value 30/06/2015, US Dollars

Balance sheet value 31/12/2014, US Dollars

Investment property

1

H2O

 10 300 000

 12 100 000

-15%

 10 300 000

 12 100 000

2

Ozerkovskaya Phase III

 293 000 000

 300 000 000

-2%

 293 000 000

 300 000 000

3

Berezhkovskaya[2]

 15 762 000

 15 762 000

0%

 21 300 000

 21 300 000

4

AFIMALL City

 990 000 000

 1 000 000 000

-1%

 990 000 000

 1 000 000 000

5

Paveletskaya Phase I[3]

 16 462 220

 19 338 150

-15%

 16 600 000

 19 500 000

6

Plaza II

 14 100 000

 15 200 000

-7%

 14 100 000

 15 200 000

7

Plaza Ib

 4 700 000

 5 400 000

-13%

 4 700 000

 5 400 000

8

Sadovaya -Samotechnaya

 1 900 000

 1 916 234

-1%

 1 900 000

 1 916 234

Total

 1 346 224 220

 1 369 716 384

-2%

1 351 900 000

1 375 416 234

Investment property under development

9

Plaza Ic

 87 700 000

 87 700 000

0%

 87 700 000

 87 700 000

10

Plaza IIa

 3 600 000

 3 600 000

0%

 3 600 000

 3 600 000

11

Plaza IV[4]

 101 753 623

 101 753 623

0%

 107 109 076

 107 109 076

12

Paveletskaya Phase II[5]

 68 724 810

 66 840 580

3%

 69 300 000

 67 400 000

13

Kossinskaya

 45 500 000

 53 700 000

-15%

 45 500 000

 53 700 000

14

Bolshaya Pochtovaya

 108 300 000

 108 300 000

0%

 108 300 000

 108 300 000

Total

 415 578 433

 421 894 203

-1%

421 557 895

427 809 076

Trading property & Trading property under development

15

Odinburg

n/a

n/a

 

 143 852 448

 133 035 537

16

Four Winds Residential

n/a

n/a

 

 0

 624 284

17

Ozerkovskaya Phase II

n/a

n/a

 

 2 570 317

 2 355 115

Total

 

-

 

 146 422 765

 136 014 935

Inventory of real estate

18

Botanic Garden[6]

 19 440 000

 18 100 000

7%

 21 600 000

 20 111 111

Total

 19 440 000

 18 100 000

7%

 21 600 000

 20 111 111

Land Bank Properties

 

 

19

Ruza

n/a

n/a

 

 3 665 000

 3 665 000

20

Boryspol (Ukraine)

-

-

 

 -

 -

Total

-

-

 

 3 665 000

 3 665 000

Hotels

21

Aquamarine Hotel

n/a

n/a

 

 17 261 209

 17 343 063

22

Plaza Spa Hotel in Kislovodsk

n/a

n/a

 

 14 588 397

 14 414 050

23

Plaza Spa Hotel in Zheleznovodsk

n/a

n/a

 

 12 364 466

 12 249 094

24

Park Plaza hotel development in Kislovodsk

n/a

n/a

 

 4 295 010

 4 241 520

Total

-

-

 

 48 509 082

 48 247 727

Grand Total

 1 781 242 653

 1 809 710 586

-2%

 1 993 654 742

 2 011 264 084

 

 

ANNEX B

30.6.2015 - Very significant loans disclosure

 

 

Balance as of 30.06.2015

Lender type: Bank, Institutional etc.

Indexation/ currency exposure & interest rate

Liens and material legal restrictions on the property

Covenants

Cross default mechanism

Any other covenants or restriction that might increase the cost of debt

In-case it is a credit line facility - what are the terms&conditions for draw downs

The methods/way that the covenant is calculated

Covenant calculation results

The date of Q2 2015 financial statement were reported

The date that the lender is checking the borrower is line with the covenants

USD 296,385,605 and RUR 9,508,778,667(USD 173,809,938). Total amount in USD as of 30.06.2015 is USD 470,195,543

Specific project financed by VTB Bank JSC

RUR/USD loan provided in five tranches totalling RUR 21 billion. Each tranche can be drown down either in US Dollars or in Rubles (at Company's discretion). The loan facility has differentiated interest rates which are currency dependent: 9.5% for loans drawn down in Russian rubles and 3 months LIBOR + 5.02% for loans drawn down in US dollars. The interest on the loans is payable on a quarterly basis, throughout the term of the credit line. The principal is due to be fully repaid in April 2018. The RUR interest rate may be unilaterally increased by the lending bank, should one of the interest indicators stipulated by the Russian Central Bank and specified in the loan agreement be increased; the interest rate will be increased by the amount of the interest indicator increase.

1. Liens over all the Bellgate's shares2. AFI Development PLC company guarantee, limited to USD 1,000,0003. Mortgage over 100% of the premises of AFIMALL City4. Mortgage over the premises in the Parking owned by Bellgate, upon registration of Bellgate's rights to land plot under the Parking5. Permission to debit Bellgate's account held in the lending bank 6. Additional mortgage over the premises of the "Aquamarine" Hotel in Moscow, to be removed in case Bellgate (the borrower) redeems USD 20 million of the principal 7. Additional guarantee by Semprex LLC, a Russian Company - an indirect subsidiary of AFI Development Plc, to be removed in case Bellgate (the borrower) redeems USD 20 million of the principal

(1) Bellgate'(the Borrower) should have minumum quarterly revenues, ranging from RUR 651,000,000 in Q3 2012 to RUR 1,139,000,000 in Q1 2018. Penalty: 0.5% per annum extra charge to the interest rate applicable under the loan agreement- applicable only for the quarter when the aforesaid revenue threshold was not achieved;(2) Liquidation Value of the property should be higher than sum of the outstanding principal and six months interest. 

 

N/A

N/A

The loan is given in five tranches: 1st tranche drawn down on 29 June 2012, 2nd tranche drawn down on 3 August 2012 on the amount USD 69, 385,604.64 (RUR 2,252,000,000), 3rd tranche of RUR 1,300,000,000 drawn down on 01.02.2013, 4th tranche of RUR 1,333,333,333.33 drawn down on 28.02.2013 , 5th tranche of RUR 1,333,333,333.34 drawn down on 28.02.2014.

(1) The total of revenue, including VAT , calculated quarterly; (2) The Liquidation Value is determined by an external valuer appointed by the Bank.

(1) The minimum quarterly revenue for Q2 2015 was 1 037 million Roubles incl. VAT ; (2) Liquidation Value determined by an external valuer appointed by the Bank is USD 601.3 million/RUR 33.7 bln (VAT excluded)

25 August 2015

(1) Borrowers revenues are checked quarterly; (2) Liquidation value is checked twice a year, on December and on August.

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

For the period from 1 January 2015 to 30 June 2015

 

 

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

For the period from 1 January 2015 to 30 June 2015

 

 

C O N T E N T S

 

 

 

 

 

Independent auditors' report on review of condensed consolidated interim financial information

 

Condensed consolidated income statement

 

Condensed consolidated statement of comprehensive income

 

Condensed consolidated statement of changes in equity

 

Condensed consolidated statement of financial position

 

Condensed consolidated statement of cash flows

 

Notes to the condensed consolidated interim financial statements

 

 

Independent auditors' report on review of condensed consolidated interim financial information to the members of AFI DEVELOPMENT PLC

 

Introduction

 

We have reviewed the accompanying condensed consolidated statement of financial position of AFI Development PLC as at 30 June 2015, the condensed consolidated statements of income, comprehensive income, changes in equity and cash flows for the six-month period then ended and notes to the interim financial information ('the condensed consolidated interim financial information'). The Company's Board of Directors is responsible for the preparation and presentation of this condensed consolidated interim financial information in accordance with IAS 34 "Interim Financial Reporting". Our responsibility is to express a conclusion on this condensed consolidated interim financial information based on our review.

 

Scope of Review

 

We conducted our review in accordance with the International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information as at 30 June 2015 is not prepared, in all material respects, in accordance with IAS 34 "Interim Financial Reporting".

 

 

 

Maria H. Zavrou, FCCA

Certified Public Accountant and Register Auditor

 

For and on behalf of

 

KPMG Limited

Certified Public Accountants and Registered Auditors

 

14 Esperidon Street

1087 Nicosia, Cyprus

 

24 August 2015

 

 

CONDENSED CONSOLIDATED INCOME STATEMENT

 

For the period from 1 January 2015 to 30 June 2015

 

 

 

 

For the

three months ended

For the

six months ended

 

 

1/4/15-

1/4/14-

1/1/15-

1/1/14-

 

 

30/6/15

30/6/14

30/6/15

30/6/14

 

 

US$ '000

US$ '000

US$ '000

US$ '000

 

Note

 

 

 

 

 

 

 

 

 

 

Revenue

6

26,630

39,579

51,076

76,234

 

 

 

 

 

 

Other income

 

273

1,274

1,408

3,003

 

 

 

 

 

 

Operating expenses

6

(9,732)

(15,550)

(21,127)

(37,322)

Carrying value of trading properties sold

 

(635)

(1,047)

(635)

(1,047)

Administrative expenses

7

(2,214)

(3,646)

(4,928)

(11,050)

Other expenses

8

(622)

(663)

(1,019)

(2,924)

Total expenses

 

(13,203)

(20,906)

(27,709)

(52,343)

 

 

 

 

 

 

Share of the after tax profit of joint ventures

 

901

1,244

1,023

600

 

 

 

 

 

 

Gross Profit

 

14,601

21,191

25,798

27,494

 

 

 

 

 

 

Profit on disposal of investment in subsidiaries

 

-

-

-

61

 

 

 

 

 

 

Valuation (loss)/gain on properties

11,12

(63,781)

(46,818)

(42,337)

26,461

Impairment loss on inventory of real estate

 

(4)

(8,341)

(662)

(8,696)

 

 

(63,785)

(55,159)

(42,999)

 17,765

 

 

 

 

 

 

Results from operating activities

 

(49,184)

(33,968)

(17,201)

 45,320

 

 

 

 

 

 

Finance income

 

21,187

24,858

6,485

4,508

Finance costs

 

(12,101)

(14,187)

(23,432)

(43,888)

Net finance income/(costs)

9

9,086

10,671

(16,947)

(39,380)

 

 

 

 

 

 

(Loss)/profit before tax

 

(40,098)

(23,297)

(34,148)

5,940

Tax benefit/(expense)

10

892

2,767

942

(2,198)

 

 

 

 

 

 

(Loss)/profit for the period

 

(39,206)

(20,530)

(33,206)

3,742

 

 

 

 

 

 

(Loss)/profit attributable to:

 

 

 

 

 

Owners of the Company

 

(39,050)

(19,495)

(33,106)

4,524

Non-controlling interests

 

(156)

(1,035)

(100)

(782)

 

 

(39,206)

 (20,530)

(33,206)

3,742

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

Basic and diluted earnings per share (cent)

 

(3.73)

(1.86)

(3.16)

0.43

       

 

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

For the period from 1 January 2015 to 30 June 2015

 

 

For the

three months ended

For the

 six months ended

 

1/4/15-

1/4/14-

1/1/15-

1/1/14-

 

30/6/15

30/6/14

30/6/15

30/6/14

 

US$ '000

US$ '000

US$ '000

US$ '000

 

 

 

 

 

(Loss)/profit for the period

(39,206)

(20,530)

(33,206)

3,742

 

 

 

 

 

Other comprehensive income

Items that are or may be reclassified subsequently to profit or loss

 

 

 

 

Realised translation difference on disposal of subsidiaries transferred to income statement

-

-

 

(830)

 

(77)

Foreign currency translation differences for foreign operations

 

9,588

 28,869

 

4,671

 

(11,972)

Other comprehensive income for the period

9,588

 28,869

3,841

(12,049)

 

 

 

 

 

Total comprehensive income for the period

(29,618)

8,339

(29,365)

(8,307)

 

 

 

 

 

Total comprehensive income attributable to:

 

 

 

 

Owners of the parent

(29,488)

9,325

(29,371)

(7,508)

Non-controlling interests

(130)

(986)

6

(799)

 

 

 

 

 

 

(29,618)

8,339

(29,365)

(8,307)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

For the period from 1 January 2015 to 30 June 2015

 

 

 

 

 

Attributable to the owners of the Company

Non-controlling interests

 

Total

 

Share

 Share

Translation

Retained

 

 

 

 

Capital

Premium

Reserve

Earnings

Total

 

 

 

US$ '000

US$ '000

US$ '000

US$ '000

US$ '000

US$ '000

US$ '000

 

 

 

 

 

 

 

 

Balance at 1 January 2015

 1,048

1,763,409

(314,880)

(158,982)

1,290,595

(8,817)

1,281,778

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

 

 

 

 

Loss for the period

-

-

-

(33,106)

(33,106)

(100)

(33,206)

Other comprehensive income

-

-

3,735

-

3,735

106

3,841

Total comprehensive income for the period

 

-

 

-

 

3,735

 

(33,106)

 

(29,371)

 

  6

 

(29,365)

 

 

 

 

 

 

 

 

Transactions with owners of the Company

Contributions and distributions

 

 

 

 

 

 

 

Share option expense

-

-

-

1,275

1,275

-

1,275

 

 

 

 

 

 

 

 

Balance at 30 June 2015

 1,048

1,763,409

(311,145)

(190,813)

1,262,499

(8,811)

1,253,688

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2014

 1,048

1,763,409

(150,454)

 117,655

1,731,658

(2,179)

1,729,479

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

 

 

 

 

Profit for the period

-

-

-

4,524

4,524

(782)

3,742

Other comprehensive income

-

-

(12,032)

-

(12,032)

(17)

(12,049)

Total comprehensive income for the period

 

-

 

-

 

(12,032)

 

4,524

 

(7,508)

 

(799)

 

(8,307)

 

 

 

 

 

 

 

 

Transactions with owners of the Company

Contributions and distributions

 

 

 

 

 

 

 

Share option expense

-

-

-

2,385

2,385

-

2,385

 

 

 

 

 

 

 

 

Balance at 30 June 2014

 1,048

1,763,409

(162,486)

 124,564

1,726,535

(2,978)

1,723,557

          

 

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

AS AT 30 JUNE 2015

 

 

 

30/6/15

31/12/14

 

Note

US$ '000

US$ '000

Assets

 

 

 

Investment property

11

1,351,900

1,375,416

Investment property under development

12

425,223

431,474

Property, plant and equipment

13

35,088

35,101

Long-term loans receivable

 

15,821

18,071

Inventory of real estate

 

21,600

20,111

VAT recoverable

 

39

42

Non-current assets

 

1,849,671

1,880,215

 

 

 

 

Trading properties

14

2,570

2,979

Trading properties under construction

15

143,853

133,036

Other investments

16

27,070

6,499

Inventory

 

381

615

Short-term loans receivable

 

128

1

Trade and other receivables

17

43,653

38,961

Current tax assets

 

1,380

1,307

Cash and cash equivalents

18

51,578

86,756

Current assets

 

270,613

270,154

 

 

 

 

Total assets

 

2,120,284

2,150,369

 

 

 

 

Equity

 

 

 

Share capital

 

1,048

1,048

Share premium

 

1,763,409

1,763,409

Translation reserve

 

(311,145)

(314,880)

Retained earnings

 

(190,813)

(158,982)

Equity attributable to owners of the Company

19

1,262,499

1,290,595

Non-controlling interests

 

(8,811)

(8,817)

Total equity

 

1,253,688

1,281,778

 

 

 

 

Liabilities

 

 

 

Long-term loans and borrowings

20

629,702

455,097

Deferred tax liabilities

 

100,927

102,621

Deferred income

 

11,300

12,966

Non-current liabilities

 

741,929

570,684

 

 

 

 

Short-term loans and borrowings

20

46,110

231,684

Trade and other payables

21

23,154

28,216

Advances from customers

22

55,403

38,007

Current liabilities

 

124,667

297,907

 

 

 

 

Total liabilities

 

866,596

868,591

 

 

 

 

Total equity and liabilities

 

2,120,284

2,150,369

     

 

 

The condensed consolidated interim financial statements were approved by the Board of Directors on 24 August 2015.

 

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 

For the period from 1 January 2015 to 30 June 2015

 

 

 

1/1/15-

1/1/14-

 

 

30/6/15

30/6/14

 

Note

US$ '000

US$ '000

Cash flows from operating activities

 

 

 

(Loss)/profit for the period

 

(33,206)

3,742

Adjustments for:

 

 

 

Depreciation

13

493

886

Net finance costs

9

16,761

39,165

Share option expense

 

1,275

2,385

Net valuation loss/(gain) on properties

11,12

42,337

(26,461)

Impairment loss on inventory of real estate

 

662

8,696

Share of profit in joint ventures

 

(1,023)

(600)

Profit on disposal of investment in subsidiaries

 

-

(61)

Profit on sale of property, plant and equipment

 

-

(15)

Tax (benefit)/expense

10

(942)

2,198

 

 

26,357

29,935

Change in trade and other receivables

 

(663)

(3,278)

Change in inventories

 

234

39

Change in trading properties and trading properties under construction

 

 

(10,948)

 

(20,368)

Change in advances and amounts payable to builders of trading properties under construction

 

 

(7,011)

 

(6,341)

Changes in advances from customers

 

16,342

21,564

Change in trade and other payables

 

(5,086)

(17,779)

Change in VAT recoverable

 

2,625

231

Change in deferred income

 

(1,778)

301

Cash generated from operating activities

 

20,072

4,304

Taxes (paid)/received

 

(459)

(451)

Net cash from operating activities

 

19,613

3,853

 

 

 

 

Cash flows from investing activities

 

 

 

Net cash inflow from the disposal of subsidiaries

 

-

1,400

Proceeds from sale of other investments

 

1,172

-

Proceeds from sale of property, plant and equipment

 

1

33

Interest received

 

1,856

3,301

Change in advances and amounts payable to builders

 

(2,388)

3,052

Payments for construction of investment property under development

12

(2,632)

(39,558)

Payments for the acquisition/renovation of investment property

11

(1,576)

(39,540)

Dividends received from joint ventures

 

3,250

-

Change in VAT recoverable

 

2,828

1,948

Acquisition of property, plant and equipment

13

(20)

(240)

Acquisition of other investments

 

(20,551)

(1,019)

Taxes paid on disposal of investment property

 

-

(4,005)

Payments for loans receivable

 

(106)

-

Net cash used in investing activities

 

 (18,166)

 (74,628)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from loans and borrowings

20

10,000

36,986

Repayment of loans and borrowings

 

(23,000)

(13,000)

Interest paid

 

 (23,409)

 (28,157)

Net cash used in financing activities

 

 (36,409)

(4,171)

 

 

 

 

Effect of exchange rate fluctuations

 

(216)

(6,450)

 

 

 

 

Net decrease in cash and cash equivalents

 

(35,178)

(81,396)

Cash and cash equivalents at 1 January

 

86,756

193,330

Cash and cash equivalents at 30 June

18

51,578

111,934

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

For the period from 1 January 2015 to 30 June 2015

 

 

1. INCORPORATION AND PRINCIPAL ACTIVITY

AFI Development PLC (the "Company") was incorporated in Cyprus on 13 February 2001 as a limited liability company under the name Donkamill Holdings Limited. In April 2007 the Company was transformed into public company and changed its name to AFI Development PLC. The address of the Company's registered office is 165 Spyrou Araouzou Street, Lordos Waterfront Building, 5th floor, Flat/office 505, 3035 Limassol, Cyprus. The Company is a 64.88% subsidiary of Africa Israel Investments Ltd ("Africa-Israel"), which is listed in the Tel Aviv Stock Exchange ("TASE"). The remaining shareholding of "A" shares is held by a custodian bank in exchange for the GDRs issued and listed in the London Stock Exchange ("LSE"). On 5 July 2010 the Company issued by way of a bonus issue, 523,847,027 "B" shares, which were admitted to a premium listing on the Official List of the UK Listing Authority and to trading on the main market of LSE. On the same date, the ordinary shares of the Company were designated as "A" shares.

 

These condensed consolidated interim financial statements ("interim financial statements") of the Company as at and for the six months ended 30 June 2015 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in jointly controlled entities.

 

The principal activity of the Group is real estate investment and development. The principal activity of the Company is the holding of investments in subsidiaries and joint ventures.

 

2. basis of preparation

 

Statement of compliance

These interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 December 2014.

 

Functional and presentation currency

These consolidated financial statements are presented in United States Dollars which is the Company's functional currency. All financial information presented in United States Dollars has been rounded to the nearest thousand, except when otherwise indicated.

 

Foreign operations

Each entity of the Group determines its own functional currency and items included in the financial statements of each entity are measured using its functional currency. Where the functional currency of an entity of the Group is other than US Dollars, which is the presentation currency of the Group, then the financial statements of the entity are translated in accordance with IAS 21 'The effects of changes in foreign exchange rates".

 

The table below shows the exchange rates of Russian Roubles, which is the functional currency of the Russian subsidiaries of the Group, to the US Dollar which is the presentation currency of the Group:

 

 

Exchange rate

 

 

 

 

Russian Roubles

% change quarter

% change six months/ year

As of:

for US$1

 

 

30 June 2015

55.5240

(5.0)

(1.3)

31 March 2015

58.4643

3.9

 

31 December 2014

56.2584

 

71.9

30 June 2014

33.6306

 

2.8

Average rate during:

 

 

 

Six-month period ended 30 June 2015

57.3968

 

64.1

Three-month period ended 31 March 2015

62.1919

 

77.9

Six-month period ended 30 June 2014

34.9796

 

12.8

 

 

3. use of judgements and estimates

 

In preparing these interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

The significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2014.

 

a. Measurement of fair values

The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the CFO.

 

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified.

 

Significant valuation issues are reported to the Group Audit Committee.

 

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

 

· Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

· Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

 

If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

 

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

 

4. significant accounting policies

 

The accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 December 2014.

 

New standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2014, except for the adoption of new standards and interpretations effective as of 1 January 2015.

 

Several new standards and amendments apply for the first time in 2015. However, they do not impact the annual consolidated financial statements of the Group or the interim condensed consolidated financial statements of the Group.

 

Standards, amendments to standards, and interpretations issued but not yet endorsed by the EU

IFRS 15 - "Revenue from Contracts with Customers". The new standard provides a unified application that regulates the accounting treatment of revenue arising from contracts with customers. This standard supersedes IAS 18 "Revenue" and IAS 11 "Construction Contracts" and the accompanying interpretations thereof. The core principle of the standard is the recognition of revenue from the transfer of goods or services to customers in an amount that represents the economic benefits that the entity expects to receive in return for them. As such, the standard stipulates that the recognition of revenue will occur when the entity transfers the goods and/or services to the customer and the customer obtains control of those goods or services.

 

The standard is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted under IFRS. However since not endorsed by the EU yet, early adoption is not permitted by the Group.

 

 

5. OPERATING SEGMENTS

The Group has 5 reportable segments, as described below, which are the Group's strategic business units. The following summary describes the operation in each of the Group's reportable segments:

· Development Projects - Commercial projects: Include construction of property for future lease.

· Development Projects - Residential projects: Include construction and selling of residential properties.

· Asset Management: Includes the operation of investment property for lease.

· Hotel Operation: Includes the operation of Hotels.

· Other - Land bank: Includes the investment and holding of property for future development.

 

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group's management team. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm's length basis.

 

 

 

 

 

 

 

 

Development projects

Asset management

Hotel Operation

Other - land bank

Total

 

Commercial projects

Residential projects

 

 

 

 

       

 

 

30/6/1513

30/6/14

30/6/15

30/6/14

30/6/15

30/6/14

30/6/15

30/6/14

30/6/15

30/6/14

30/6/15

30/6/14

 

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

 

 

 

 

 

 

 

 

 

 

 

 

 

External revenues

-

1

668

1,343

42,118

62,086

5,736

8,037

2,554

4,767

51,076

76,234

 

 

 

 

 

 

 

 

 

 

 

 

 

Inter-segment revenue

226

1

377

1

2,465

-

40

8

707

221

3,815

231

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment (loss)/profit before tax

 

(243)

 

(1,603)

 

(1,569)

 

(473)

 

13,835

 

2,002

 

983

 

1,459

 

(5,122)

 

(11,565)

 

7,884

 

(10,180)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30/6/15

31/12/14

30/6/15

31/12/14

30/6/15

31/12/14

30/6/15

31/12/14

30/6/15

31/12/14

30/6/15

31/12/14

 

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment assets

203,233

360,275

196,229

197,844

1,339,003

1,578,882

28,051

53,598

248,814

392,075

2,015,330

2,582,674

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment liabilities

11,116

4,501

56,445

22,193

775,137

987,433

-

-

11,192

2,860

853,890

1,016,987

  

 

Reconciliation of reportable segment profit or loss

 

1/1/15-

30/6/15

1/1/14-

30/6/14

 

US$ '000

US$ '000

 

 

 

Total profit or loss for reportable segments

7,884

(10,180)

Other profit or loss

(56)

(2,306)

Share of the after tax profit of joint ventures

1,023

600

Profit on disposal of investment in subsidiaries

-

61

Valuation (loss)/gain on properties

 (42,337)

 26,461

Impairment loss on inventory of real estate

(662)

(8,696)

(Loss)/profit before tax

(34,148)

5,940

 

6. REVENUE AND OPERATING EXPENSES

 

The decrease of revenue and operating expenses in comparison with first half of 2014 of 33% and 43% respectively is mainly due to the change of the average rate of Rouble from first half of 2014 to first half of 2015. In addition the Company has offered temporary rent discounts to the tenants of the investment properties and in parallel has implemented a cost saving optimisation program. For more information on foreign exchange rates used refer to note 2 above.

 

7. ADMINISTRATIVE EXPENSES

 

For the

three months ended

For the

 six months ended

 

1/4/15-

30/6/15

1/4/14-

30/6/14

1/1/15-

30/6/15

1/1/14-

30/6/14

 

US$ '000

US$ '000

US$ '000

US$ '000

 

 

 

 

 

Consultancy fees

182

431

363

986

Legal fees

94

251

258

422

Auditors' remuneration

220

254

286

406

Valuation expenses

32

37

67

65

Directors' remuneration

476

357

728

1,308

Depreciation

20

45

50

92

Insurance

45

71

97

140

Provision for Doubtful Debts

(744)

(776)

(596)

1,687

Share option expense

618

1,165

1,275

2,385

Donations

702

1,301

1,412

2,588

Other administrative expense

569

510

988

971

 

2,214

3,646

4,928

 11,050

 

 

8. other expenses

 

For the

three months ended

For the

 six months ended

 

1/4/15-

30/6/15

1/4/14-

30/6/14

1/1/15-

30/6/15

1/1/14-

30/6/14

 

US$ '000

US$ '000

US$ '000

US$ '000

 

 

 

 

 

Prior year's VAT non recoverable

6

(109)

11

600

Sundries

616

55

1,008

1,607

Legal claim accrual

-

717

-

717

 

622

663

1,019

2,924

 

9. FINANCE COST AND FINANCE INCOME

 

For the

three months ended

For the

 six months ended

 

1/4/15-

30/6/15

1/4/14-

30/6/14

1/1/15-

30/6/15

1/1/14-

30/6/14

 

US$ '000

US$ '000

US$ '000

US$ '000

 

 

 

 

 

Interest income

999

1,359

1,759

4,045

Translation reserve reclassified upon disposal of subsidiary

 

-

 

-

 

830

 

-

Loans write off

6

-

79

-

Net foreign exchange gain

19,949

22,876

2,922

-

Net change in fair value of financial assets

233

623

895

463

Finance income

21,187

 24,858

6,485

4,508

 

 

 

 

 

Interest expense on loans and borrowings

(11,999)

(14,084)

(23,246)

(27,934)

Net foreign exchange loss

-

-

-

(15,017)

Other finance costs

(102)

(103)

(186)

(937)

Finance costs

 (12,101)

(14,187)

(23,432)

(43,888)

 

 

 

 

 

Net finance income/(costs)

9,086

 10,671

(16,947)

(39,380)

 

10. tAX (Benefit)/EXPENSE

 

For the

three months ended

For the

 six months ended

 

 

1/4/15-

30/6/15

1/4/14-

30/6/14

1/1/15-

30/6/15

1/1/14-

30/6/14

 

 

US$ '000

US$ '000

US$ '000

US$ '000

 

Current tax expense

 

 

 

 

 

Current year

155

193

356

389

 

Adjustment for prior years

-

49

-

105

 

 

155

242

356

494

 

Deferred tax (benefit)/expense

 

 

 

 

 

Origination and reversal of temporary differences

 

(1,047)

 

(3,009)

 

 (1,298)

 

1,704

 

 

Total income tax (benefit)/expense

 

(892)

 

(2,767)

 

(942)

 

2,198

      

 

 

 

11. INVESTMENT PROPERTY

 

Reconciliation of carrying amount

 

30/6/15

31/12/14

 

US$ '000

US$ '000

 

 

 

Balance 1 January

1,375,416

1,609,800

Reclassification to trading properties

-

(432)

Renovations/additional cost

1,576

6,814

Fair value adjustment

(31,554)

110,782

Effect of movement in foreign exchange rates

6,462

(351,548)

Balance 30 June / 31 December

1,351,900

1,375,416

 

The increase due to the effect of the foreign exchange rates is a result of the strengthening of the Rouble compared to the US Dollar by 1.3%, during the first half of 2015.

 

The investment property was revalued by independent appraisers on 30 June 2015 with an overall decrease in the carrying amount of the properties of US$23.516 thousand. The fair value adjustment is mainly a result of the effect of the Russian economic conditions on the real estate market and partly relates to the Rouble strengthening offsetting the increase thereof.

 

12. INVESTMENT PROPERTY UNDER DEVELOPMENT

 

30/6/15

31/12/14

 

US$ '000

US$ '000

 

 

 

Balance 1 January

431,474

635,266

Construction costs

2,632

83,820

Disposal

-

(1,400)

Fair value adjustment

(10,783)

(196,666)

Effect of movements in foreign exchange rates

1,900

(89,546)

Balance 30 June / 31 December

425,223

431,474

 

The increase due to the effect of the foreign exchange rates is a result of the strengthening of the Rouble compared to the US Dollar by 1.3%, during the first half of 2015. The investment property under development was revalued by independent appraisers on 30 June 2015 showing an overall decrease in the carrying amount of US$6,251 thousand. The fair value adjustment is mainly a result of the effect of the Russian economic conditions on the real estate market and partly relates to the Rouble strengthening offsetting the increase thereof.

 

 

 

13. PROPERTY, PLANT AND EQUIPMENT

 

30/6/15

31/12/14

 

US$ '000

US$ '000

 

 

 

Balance 1 January

35,101

69,735

Additions

20

593

Depreciation for the period / year

(493)

(1,595)

Disposals

(1)

(98)

Effect of movements in foreign exchange rates

461

(33,534)

Balance 30 June / 31 December

35,088

35,101

 

14. TRADING PROPERTIES

 

30/6/15

31/12/14

 

US$ '000

US$ '000

 

 

 

Balance 1 January

2,979

6,409

Reclassification from investment property

-

432

Disposals

(635)

(1,632)

Effect of movements in exchange rates

226

(2,230)

Balance 30 June / 31 December

2,570

2,979

 

Trading properties comprise unsold apartments and parking places.

 

15. TRADING PROPERTIES UNDER CONSTRUCTION

 

 

30/6/15

31/12/14

 

US$ '000

US$ '000

 

 

 

Balance 1 January

133,036

127,213

Construction costs

9,823

35,874

Effect of movements in exchange rates

994

 (30,051)

Balance 30 June / 31 December

143,853

133,036

 

Trading properties under construction comprise "Odinburg" project which involves primarily the construction of residential properties.

 

 16. OTHER INVESTMENTS

 

The increase in other investments is due to the investment in a $20 million portfolio of marketable securities using partly own funds and partly a loan from Bank Julius Baer & Co Ltd. For further details of the loan refer to note 20.

 

17. TRADE AND OTHER RECEIVABLES

 

30/6/15

31/12/14

 

US$ '000

US$ '000

 

 

 

Advances to builders

29,438

20,200

Amounts receivable from related parties (note 26)

310

387

Trade receivables net

4,271

6,014

Other receivables

4,136

3,540

VAT recoverable

1,602

7,141

Tax receivables

3,896

1,679

 

43,653

38,961

 

Trade receivables net

Trade receivables are presented net of an accumulated provision for doubtful debts of US$10,042 thousand (2014: US$12,753 thousand).

 

18. CASH AND CASH EQUIVALENTS

 

30/6/15

31/12/14

Cash and cash equivalents consist of:

US$ '000

US$ '000

 

 

 

Cash at banks

51,389

86,504

Cash in hand

189

252

 

51,578

86,756

 

19. SHARE CAPITAL AND RESERVES

 

30/6/15

31/12/14

1 Share capital

US$ '000

US$ '000

 

 

 

Authorised

 

 

2,000,000,000 shares of US$0.001 each

2,000

2,000

 

 

 

Issued and fully paid

 

 

523,847,027 A shares of US$0.001 each

523,847,027 B shares of US$0.001 each

524

524

524

524

 

1,048

  1,048

 

2 Employee Share option plan

There were no changes as to the employee share option plan during the six-month period ended 30 June 2015, apart from the fact that tranche 2 of the option has now vested in relation to 5,063,854 B shares of the Company.

 

3 Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations to the Group presentation currency and the foreign exchange differences on loans designated as loans to an investee company which are accounted for as part of the investor's investment (IAS21.15) as their repayment is not planned or likely to occur in the foreseeable future. These foreign exchange differences are recognised directly to Translation Reserve.

 

4 Retained earnings

The amount at each reporting date is available for distribution. No dividends were proposed, declared or paid during the six-month period ended 30 June 2015.

 

 

 

20. LOANS AND BORROWINGS

 

30/6/15

31/12/14

 

US$ '000

US$ '000

Non-current liabilities

 

 

Secured bank loans

 629,702

455,097

 

 

 

Current liabilities

 

 

Secured bank loans

45,798

231,297

Unsecured loans from other non-related companies

312

387

 

46,110

 231,684

 

The changes to the loans during the six-month period ended 30 June 2015 were the following:

 

The two year loan from VTB Bank which was received on 25 January 2013, with a maturity on 24 January 2015, by the Group's subsidiary Krown Investments LLC ("Krown") was reclassified to non-current liabilities. In January 2015, prior to maturity, the subsidiary signed an addendum to the loan facility agreement with VTB Bank OJSC ("the Bank), extending the term of the loan to 26 January 2018. In addition to extending the term of the loan, the new addendum amended the payment schedule, interest rate conditions and introduced new covenants. The payment schedule anticipates repayments of the principal starting from the 4th quarter of 2015, while the new covenants include a "Debt Service Coverage Ratio" of 1.2 also applicable as from the 4th quarter of 2015 and a "Loan to Value ratio" of 65% applicable from January 2015. In line with the addendum, on 26th January 2015 Krown paid US$10 million to the Bank, being a partial repayment of the outstanding loan amount, thus reducing the total to US$195 million. Approximately 90% of the principal is to be paid at maturity.

 

Taking into account the current market situation, the Company estimates that may not be in a position to meet DSCR covenant in the 4th quarter 2015. Under the agreement in case of breach of LTV and DSCR Covenants the Borrower shall repay the Principal Debt in the amount sufficient to reach the necessary Covenants not later than 90 calendar days from the Date the claim of the Bank had been submitted.

 

Based on recent independent valuation of the Ozerkovskaya III project, there is a risk that the borrower, Krown Investments LLC, will not meet the Loan-To-Value covenant and the lender, VTB Bank JSC, may require a partial repayment of the loan to reduce the outstanding loan amount. Based on this, the Company reclassified approximately US$4 million from non-current to current liabilities.

 

Company is now in advance negotiations with the bank for an additional grace period for covenants completion.

 

During the period, a subsidiary of the Group, AFID Finance S.A., obtained a short-term loan facility from Bank Julius Baer & Co Ltd, for an amount of US$10 million. The loan was used for the acquisition of marketable securities through an investment account with the same bank. The interest rate is equal to the bank refinancing rate plus 0.75% p.a. and the loan is repayable on demand. The loan is guaranteed with the portfolio of assets managed by the bank.

 

 

 

 

 

21. TRADE AND OTHER PAYABLES

 

30/6/15

31/12/14

 

US$ '000

US$ '000

 

 

 

Trade payables

7,609

8,654

Payables to related parties (note 26)

759

2,264

Amount payable to builders

6,982

7,626

VAT and other taxes payable

5,072

7,373

Other payables

2,732

2,299

 

23,154

28,216

 

Payables to related parties

Include an amount of US$29 thousand (31/12/14: US$1,465 thousand) payable to Danya Cebus Rus LLC, related party of the Group, for contracts signed in relation to the construction of Group's project.

 

22. ADVANCES FROM CUSTOMERS

The Group has continued its pre-sale in "Odinburg" residential project. During the period the Group has sold 141 properties and received additional down payments from customers.

 

 

 

 

 

 

 

23. FINANCIAL INSTRUMENTS

 

Carrying amounts and fair values

 

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels and the fair value hierarchy for financial instruments measured at fair value. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

 

Carrying amount

Fair value

 

Non-current assets

Current assets

 

 

 

 

 

 

 

Loans

Receivable

 

Trade and

other

receivables

Other

investments,

Including derivatives

 

Cash

and cash

 equivalents

 

 

Loans

receivable

 

 

 

Total

 

 

 

Level 1

 

 

 

Level 2

 

 

 

Level 3

 

 

 

Total

30 June 2015

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Financial assets measured at fair value

 

 

 

 

 

 

 

 

 

 

Investment in listed debt securities

-

-

27,050

-

-

-

27,050

-

-

27,050

Financial assets not measured at fair value

 

 

 

 

 

 

 

 

 

 

Loans receivable

15,821

-

-

-

128

15,949

 

 

 

 

Trade and other receivables

-

38,155

-

-

-

38,155

 

 

 

 

Cash and cash equivalents

-

-

-

51,578

-

51,578

 

 

 

 

 

15,821

38,155

27,050

51,578

128

 

 

 

 

 

31 December 2014

 

 

 

 

 

 

 

 

 

 

Financial assets measured at fair value

 

 

 

 

 

 

 

 

 

 

Investment in listed debt securities

-

-

6,499

-

-

6,499

6,499

-

-

6,499

Financial assets not measured at fair value

 

 

 

 

 

 

 

 

 

 

Loans receivable

18,071

-

-

-

1

18,072

 

 

 

 

Trade and other receivables

-

30,141

-

-

-

30,141

 

 

 

 

Cash and cash equivalents

-

-

-

86,756

-

86,756

 

 

 

 

 

18,071

30,141

6,499

86,756

1

141,468

 

 

 

 

 

 

 

Carrying amount

Fair value

 

Non-current liabilities

Current liabilities

 

 

Interest bearing

loans and borrowings

 Trade and

other

payables

Interest bearing loans and borrowings

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

30June 2015

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Financial liabilities

not measured at

fair value

 

 

 

 

 

 

 

 

Interest bearing

loans and borrowings

(629,702)

-

(46,110)

(675,812)

 

 

 

(716,982)

Trade and

other payables

-

(18,082)

-

(18,082)

 

 

 

 

 

(629,702)

(18,082)

(46,110)

(693,894)

 

 

 

 

31 December 2014

 

 

 

 

 

 

 

 

Financial liabilities

not measured at

fair value

 

 

 

 

 

 

 

 

Interest bearing

loans and borrowings

(455,097)

-

(231,684)

(686,781)

 

 

 

(735,004)

Trade and

other payables

-

(20,843)

-

(20,843)

 

 

 

 

 

(455,097)

(20,843)

(231,684)

(707,624)

 

 

 

 

 

24. CONTINGENCIES

 

There weren't any contingent liabilities as at 30 June 2015.

 

25. FINANCIAL RISK MANAGEMENT

 

The Group's financial risk management objectives and policies are consistent with that disclosed in the consolidated financial statements as at and for the year ended 31 December 2014.

 

Russian business and economic environment

The Group's operations are primarily located in the Russian Federation. Consequently, the Group is exposed to the economic and financial markets of the Russian Federation which display characteristics of an emerging market. The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with other legal and fiscal impediments contribute to the challenges faced by entities operating in the Russian Federation.

 

The Russian economy continued to be in a state of stagnation. The economic growth rate showed a 4.6% decrease in the second quarter of 2015 compared to a decrease of 2.2% in the first quarter of 2015. International sanctions and oil prices continue to affect the economy with a predicted growth between minus 2.5% to 3.8% for 2015 fiscal year. The rouble impaired between end of June and August 2015 more than circa 17% percent reaching the 64 rouble to a dollar mark in mid-August.

 

The interim financial statements reflect management's assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from management's assessment.

 

26. RELATED PARTIES

 

 

30/6/15

31/12/14

(i) Outstanding balances with related parties

US$ '000

US$ '000

Assets

 

 

Amounts receivable from joint ventures

12

20

Amounts receivable from ultimate holding company

203

203

Amounts receivable from other related companies

95

164

Long term loans receivable from joint ventures

15,711

17,962

Short term loan receivable from joint venture

127

-

 

 

 

Liabilities

 

 

Amounts payable to joint ventures

8

131

Amounts payable to ultimate holding company

492

433

Amounts payable to other related companies

259

1,700

Deferred income from related company

164

156

 

 

 

(ii) Transactions with the key management personnel

1/1/15-

30/6/15

1/1/14-

30/6/14

 

US$ '000

US$ '000

Key management personnel compensation

Short-term employee benefits

1,532

3,461

Share option scheme expense

 1,275

2,385

 

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. The person is a member of the key management personnel of the entity or its parent (includes the immediate, intermediate or ultimate parent). Key management is not limited to directors; other members of the management team also may be key management.

 

 

(iii) Other related party transactions

1/1/15-

30/6/15

1/1/14-

30/6/14

 

US$ '000

US$ '000

Revenue

 

 

Related companies - rental income

458

812

Joint venture - consulting services

77

-

Joint venture - interest income

725

1,027

 

Expenses

 

 

Ultimate holding company - operating expenses

172

221

Joint venture - operating expenses

31

86

 

(iv) Other related party transactions

1/1/15-

30/6/15

1/1/14-

30/6/14

 

US$ '000

US$ '000

Construction services capitalised or recognised in advances

to builders

 

 

Related company - construction services

935

610

 

27. SUBSEQUENT EVENTS

 

There were no events that took place after 30 June 2015 and up to the date of approval of these interim financial statements apart from the following:

 

· On 19 August 2015 the Company acquired remaining 10% share in Bioka Investments Limited, company holding development rights in the Botanic Garden project, and became 100% owner of the project. Total consideration of the transaction amounted to US$1.6 million.

 

 

 

 

[1] The project portfolio includes 50% owned joint ventures, which are accounted for by equity method

[2] Valuation figures represent Company's share (74%)

[3] Valuation figures represent Company's share (99.17%)

[4] Valuation figures represent Company's share (95%)

[5] Valuation figures represent Company's share (99.17%)

[6] Valuation figures represent Company's share (90%)

This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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