Annual Report • Apr 26, 2016
Annual Report
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| Officers and Professional Advisors | 1 |
|---|---|
| Declaration of the Members of the Board of Directors and the Company official responsible for the drafting of the consolidated financial statements |
2 |
| Board of Directors' Report | 3 - 7 |
| Independent Auditors' Report | 8 - 10 |
| Consolidated statement of profit or loss and other comprehensive income | 11 |
| Consolidated statement of financial position | 12 |
| Consolidated statement of changes in equity | 13 & 14 |
| Consolidated statement of cash flows | 15 & 16 |
| Notes to the consolidated financial statements | 17 - 94 |
| Board of Directors | Iurii Zhuravlov - Chief Executive Officer | ||
|---|---|---|---|
| Tamara Lapta - Deputy Chief Executive Officer | |||
| Larysa Orlova - Chief Financial Officer | |||
| Borys Supikhanov - Non-Executive Director | |||
| Volodymyr Kudryavtsev - Non-Executive Director | |||
| Audit Committee | Borys Supikhanov (Head of the Committee) | ||
| Volodymyr Kudryavtsev | |||
| Remuneration Committee | Borys Supikhanov (Head of the Committee) | ||
| Volodymyr Kudryavtsev | |||
| Secretary | Inter Jura Cy (Services) Limited | ||
| Independent Auditors | KPMG Limited | ||
| Legal Advisors | K. Chrysostomides & Co LLC | ||
| Registered office | 1 Lampousas Street 1095 Nicosia Cyprus |
In qccordance with afticle 9(3Xc) and (7) ofthe Transparency Requirements (Securities Listed for Trading on a Regulated Market) Law of2007 (the "Law,'), as amended from time to time, w€, the Members ofth; Board of Directors and ihe company official responsible for the drafting of the consolidated financial statements of Agroton Public Limited (the "Company,,) for the year ended 3l December 2015, confirm that to rhe besl ol our kno\'|ledge:
| Members of the Board ofDirectors: | |
|---|---|
| Iurii Zhuavlov | r ,ry |
| Tamara Lapta | r) |
| Larysa Orlova | fl//,r,L |
| Borys Supikhanov | lt uL/v ,t/ ffi1nt")""J |
| Volodymyr Kudryavtsev |
Company official responsible for the draftiag ofthe consolidated financial statements ofthe ComDany for the year ended 31 December 2015:
| Larysa Orlova | |
|---|---|
| Nicosia, 22 April2016 |
The Board of Directors of Agroton Public Limited (the "Company") presents to the members its annual report together with the audited consolidated financial statements of the Company and of its subsidiary companies (together with the Company, the "Group") for the year ended 31 December 2015.
The principal activities of the Group which remained the same as in the previous year, are grain and oil crops growing, agricultural products storage and sale, cattle breeding (milk cattle-breeding, poultry farming). The poultry farming business has been temporarily abandoned due to the military clashes and armed conflict in Eastern Ukraine.
The financial results of the Group for the year ended 31 December 2015 are set out in the consolidated statement of profit or loss and other comprehensive income on page 11 to the consolidated financial statements.
The loss for the year attributable to the owners of the Company amounted to USD 9 641 thousand (2014: loss USD 80 527 thousand).
The net asset position of the Group has increased from USD 44 638 thousand at 31 December 2014 to USD 46 021 thousand at 31 December 2015.
Despite the decrease in loss, the financial performance and position of the Group for the year, as presented in the consolidated financial statements is still not considered satisfactory.
The Board of Directors does not recommend the payment of a dividend (2014: USD nil).
The Board of Directors does not expect major changes in the principal activities of the Group in the foreseeable future.
The principal risks and uncertainties faced by the Group and the steps taken to manage these risks are described in note 36 to the consolidated financial statements.
The Group conducts its operations mainly in Ukraine. Ukraine's political and economic situation has deteriorated significantly since 2014. Following political and social unrest in early 2014, in March 2014, various events in Crimea led to the accession of the Republic of Crimea to the Russian Federation, which was not recognised by Ukraine and many other countries. This event resulted in a significant deterioration of the relationship between Ukraine and the Russian Federation. Following the instability in Crimea, regional tensions have spread to the Eastern regions of Ukraine, primarily Donetsk and Lugansk regions. In May 2014, protests in those regions escalated into military clashes and armed conflict between supporters of the self-declared republics of the Donetsk and Lugansk regions and the Ukrainian forces, which continued throughout the date of these financial statements. As a result of this conflict, part of the Donetsk and Lugansk regions remains under control of the self-proclaimed republics, and Ukrainian authorities are not currently able to fully enforce Ukrainian laws on this territory.
Political and social unrest combined with the military conflict in the Donetsk and Lugansk regions has deepened the ongoing economic crisis, caused a fall in the country's gross domestic product and foreign trade, deterioration in state finances, depletion of the National Bank of Ukraine's foreign currency reserves, significant devaluation of the national currency and a further downgrading of the Ukrainian sovereign debt credit ratings. Following the devaluation of the national currency, the National Bank of Ukraine introduced certain administrative restrictions on currency conversion transactions, which among others included restrictions on purchases of foreign currency by individuals and companies, the requirement to convert 75% of foreign currency proceeds to local currency, a ban on payment of dividends abroad, a ban on early repayment of foreign loans and restrictions on cash withdrawals from banks. These events had a negative effect on Ukrainian companies and banks, significantly limiting their ability to obtain financing on domestic and international markets.
The final resolution and the effects of the political and economic crisis are difficult to predict but may have further severe effects on the Ukrainian economy.
Whilst management believes it is taking appropriate measures to support the sustainability of the Group's business in the current circumstances, a continuation of the current unstable business environment could negatively affect the Group's results and financial position in a manner not currently determinable. These consolidated financial statements reflect management's current assessment of the impact of the Ukrainian business environment on the operations and the financial position of the Group. The future business environment may differ from management's assessment.
There were no changes in the share capital of the Company during the year.
The Board of Directors has adopted the Code of Corporate Governance (the "Code") of the Warsaw Stock Exchange ("WSE") which is available in the WSE website.
At present, the Corporate Governance Code is not fully implemented. There are specific provisions of the Code which cannot be adopted since they are either contrary to and/or do not accord with the provisions of the Articles of Association of the Company, or they cannot be adopted due to the recent developments in Eastern Ukraine. The Board of Directors will endeavor to remedy these as soon as practicable.
The Board of Directors ensures through effective internal audit and risk management procedures the collection of the necessary items for the preparation of the periodic reporting required for listed companies.
The Company is governed by the Board of Directors. Companies formed under the Cyprus Companies Law, Cap. 113, do not have supervisory board and management board. Cyprus companies have a Board of Directors, members of which are appointed to fill certain executive and non-executive positions. The management of the business and the conduct of the affairs of the Company are vested in the Board of Directors. The Board of Directors comprises five members, three of which are non-independent and the remaining two are independent. This is comply with the provisions of the Articles of Association of the Company, which requires that the Board of Directors comprise by at least two Directors, two of which shall be independent.
Directors are appointed at general meetings. There is no requirement in the Articles of Association for the retirement of Directors by rotation, thus all Directors continue in office, unless they resign or following an ordinary resolution from the Company shareholders.
The Company has an Audit Committee and a Remuneration Committee. Both committees comprise two members, both of which are non-executive. Analysis of their responsibilities is disclosed separately in this report.
The emoluments and other benefits of Directors of the Company are presented below:
| Emoluments | Other benefits | Total | ||
|---|---|---|---|---|
| USD | USD | USD | ||
| Iurii Zhuravlov | - | - | - | |
| Tamara Lapta | 10 032 | - | 10 032 | |
| Larysa Orlova | 9 059 | - | 9 059 | |
| Borys Supakhanov | - | - | - | |
| Volodymyr Kudryavtsev | - | - | - |
The interest in the Company's share capital held directly or indirectly by each member of the Board of Directors at 31 December 2015 and at 17 April 2016 (5 days before the date of approval of the financial statements by the Board of Directors) are disclosed separately in this report.
The shareholders holding directly or indirectly more than 5% interest in the Company's share capital at 31 December 2015 and at 16 April 2016 (5 days before the date of approval of the financial statements by the Board of Directors) are disclosed separately in this report.
There are currently no shares in issue holding special or limited rights.
The Board of Directors can proceed with the issue of shares following an ordinary resolution from the Company shareholders. For the repurchase of the Company shares a special resolution from the Company's shareholders is required, in accordance with the provisions of Section 57 of Cyprus Companies Law.
The Report on Corporate Governance has been prepared in accordance with the provisions of the Code and includes the above mentioned explanations, as well as the information required by the relevant Article of the Directive.
The shareholders holding directly or indirectly more than 5% interest in the Company's share capital at 31 December 2015 and at 16 April 2016 (5 days before the date of approval of the consolidated financial statements by the Board of Directors) were as follows:
| 31 December 2015 | ||
|---|---|---|
| % | % | |
| Iurii Zhuravlov | 67,40 | 68,52 |
| Other | 32,60 | 31,48 |
In accordance with Article 4(b) of the Cyprus Securities and Exchange Commission Directive the interest in the Company's share capital held directly or indirectly by each member of the Board of Directors at 31 December 2015 and at 17 April 2016 (5 days before the date of approval of the consolidated financial statements by the Board of Directors) were as follows:
| 31 December 2015 | 17 April 2016 | |
|---|---|---|
| % | % | |
| Iurii Zhuravlov | 67,40 | 68,52 |
| Tamara Lapta | - | - |
| Larysa Orlova | - | - |
| Borys Supikhanov | - | - |
| Volodymyr Kudryavtsev | - | - |
The members of the Board of Directors at 31 December 2015 and at the date of this report are presented on page 1.
There is no requirement in the Company's Articles of Association for the retirement of Directors by rotation, thus all Directors presently members of the Board continue in office.
There were no significant changes in the assignment of responsibilities and remuneration of the Board of Directors.
The Directors are responsible for formulating, reviewing and approving the Company's and its subsidiary companies strategies, budgets, certain items of capital expenditures and senior personnel appointments. Being a company listed on the Warsaw Stock Exchange, the Directors have established audit and remuneration committees to improve corporate governance.
The Audit Committee and Remuneration Committee, were established on 4 May 2010 both of which were in force during the year ended 31 December 2015 and continued in force at the date of this report.
The Audit Committee assists the Company's Board of Directors in discharging its responsibilities with regad to fmancial reporting, extemal and intemal audits and cont ols, including reviewing the annual consolidated financial statements, reviewing and rnonitoring the extent ofthe non-audit work undefiaken by ext€mal auditols, advising on the appointnent of extemal auditors and rcvi€wing the effectiveness of the intemal audit activities, intemal controls and risk management systems. The ultimate responsibility for reviewing and approving the annual consolidated financial statements and the half yearly financial statements rcmains with the Board ofDirectors. The Audit Committee ofthe Company, comprising ofMr. Borys Supikhanov and Mr. Volodymyr Kudryavstev and is chaired by Mr. Borys Supikhanov.
The Remuneration Committe€ assists the Board ofDirectors in discharging its responsibilities in.elation to rcmuneration, including making recommendations to the Board ofDirectors and/or the geneml meeting ofthe shareholders ofthe Company on the policy on executive remuneration, determining the individual remunemtion and benefits package of each of the Executive Directors and recommending and monitoring the remunemtion of senior management below Board level. The Remuneration Committee of the Company, comprising of Mr. Borys Supikhanov and Mr- Volodym),r Kudrya\,tsev (both Non-Executive Directors), and is chafued by lr4-r. Borys Supikhanov and sets and review the scale and structure of the Executive Directors' renuneration packages, including share options aDd the terms of their service conhacts.
Any significant events that occurred after the repofting period are described in note 38 to the consolidated financial statements.
The Group did not operate ihrough any registered branches during the y€ar ended 31 December 2015.
Disclosed in note 32 to the consolidated financial statements.
The independent auditors ofthe Company, KPMG Limited, have expressed their willingness to continue in office. A resolution giving authority io the Board of Directors to fix their remuneration will be proposed at dre next Annual General Meeting ofth€ Company.
Larysa
Nicosia,22 April2016
| N.G. Syriimis, A.K. Christofides, P.G. Loizou, A.M. Gregoriades, A.A. Damotriou, |
|---|
| D.S. Vakis, A.A. Apostolou, S.A. Loizidos, M.A. Loizides, S.G. Sofocleous, |
| M.M. Antoniades, C.V. Vasiliou, P.E. Antoniades, M.J. Ralios, M.P. Michael. |
| P.A. Peleties, G.V. Markidos, M.A. Papacusta, K.A. Paparicolagu, A.J. Shiammoutis, |
| G.N. Tziortzis, H.S. Charalambous, C.P. Anayiotos, I.P. Ghalanos, M.G. Gregoriades |
| H.A. Kakoullis, G.P. Savva, C.A. Kalias, C.N. Kaliis, M.H. Zavrou, P.S. Elia, |
| M.G. Lazaron 2.E. Hadigacharias, P.S. Theophantius, M.A. Kararitoni, C.A. Markides |
| C.V. Australia L.C. Mentalis, C.C. Printessing, A.E. Extra Jakue, C.N. Courses, T.J. Varianude |
(in USD thousand, unless otherwise stated)
| Note | 2015 | 2014 | |
|---|---|---|---|
| Continuing operations | |||
| Revenue | 5 | 42 150 | 58 968 |
| Cost of sales | 6 | (39 998) | (60 003) |
| Net change in fair value less cost to sell of biological assets and | |||
| agricultural produce | 7 | 16 307 | 19 789 |
| Gross profit | 18 459 | 18 754 | |
| Other operating income | 8 | 5 863 | 4 872 |
| Administrative expenses | 9 | (1 993) | (2 966) |
| Distribution expenses | 10 | (373) | (1 498) |
| Other operating expenses | 11 | (1 281) | (2 830) |
| Operating profit | 13 | 20 675 | 16 332 |
| Impairment losses | 12 | (7 619) | (46 279) |
| Gain on derecognition of notes | 7 234 | 4 955 | |
| Fair value losses on financial assets at fair value through profit or | |||
| loss | (88) | (155) | |
| 20 202 | (25 147) | ||
| Finance income | 14 | 3 813 | 3 130 |
| Finance costs | 14 | (33 603) | (58 365) |
| Net finance costs | (29 790) | (55 235) | |
| Loss before taxation | (9 588) | (80 382) | |
| Taxation | (1) | (2) | |
| Loss from continuing operations | (9 589) | (80 384) | |
| Discontinued operations | |||
| Loss from discontinued operations | 27 | (20) | (106) |
| Loss | (9 609) | (80 490) | |
| Other comprehensive income | |||
| Items that are or may be reclassified subsequently to profit or loss | |||
| Effect of translation into presentation currency | 10 992 | 4 215 | |
| Total comprehensive income/(expense) | 1 383 | (76 275) | |
| Loss attributable to: | |||
| Owners of the Company | (9 641) | (80 527) | |
| Non-controlling interests | 32 | 37 | |
| (9 609) | (80 490) | ||
| Total comprehensive income/(expense) attributable to: | |||
| Owners of the Company | 1 383 | (76 248) | |
| Non-controlling interests | - | (27) | |
| 1 383 | (76 275) | ||
| Profit/(loss) per share | |||
| Basic and fully diluted profit/(loss) per share (USD) | 31 | 0,06 | (3,51) |
| Profit/(loss) per share – continuing operations | |||
| Basic and fully diluted profit/(loss) per share (USD) | 31 | 0,06 | (3,51) |
The notes on pages 17 to 94 are an integral part of these consolidated financial statements.
(in USD thousand, unless othetwise stuted)
| Note | 2015 | 2014 | |
|---|---|---|---|
| Assets | |||
| Property, plant and equipment | 17 | 5 7 4 2 | 10 792 |
| Intangible assets | 18 | 8 8 5 1 | 12 686 |
| Biological assets | 19 | 1541 | 2489 |
| Other non-current assets | 22 | 8 7 3 1 | |
| Total non-current assets | 16 134 | 34 698 | |
| Inventories | 23 | 19803 | 19 9 32 |
| Biological assets | 19 | 5 0 8 6 | 5948 |
| Investments designated at fair value through profit or loss | 20 | 255 | 342 |
| Trade and other receivables | 24 | 3588 | 2046 |
| Loans receivable | 21 | 16336 | 29 795 |
| Assets held for sale | 27 | 20 | $-30$ |
| Cash and cash equivalents | 26 | 8575 | 5 2 0 6 |
| Total current assets | 53 663 | 63 299 | |
| Total assets | 69 797 | 97 997 | |
| Equity | |||
| Share capital | 28 | 661 | 661 |
| Share premium | 28 | 88 532 | 88 532 |
| Retained earnings | (48519) | (38878) | |
| Foreign currency translation reserve | 5 1 4 7 | (5877) | |
| Total equity attributable to owners of the Company | 45821 | 44 438 | |
| Non-controlling interests | 200 | 200 | |
| Total equity | 46 021 | 44 638 | |
| Liabilities | |||
| Loans and borrowings | 29 | 20 711 | 31 130 |
| Total non-current liabilities | 20 711 | 31 130 | |
| Loans and borrowings | 29 | 1899 | $\frac{1}{2}$ 1588 |
| Trade and other payables | 30 | 1 0 4 3 | 20 508 |
| Income tax liability | 112 | 112 | |
| Liabilities held for sale | 27 | 11 | 21 |
| Total current liabilities | 3 0 6 5 | 22 2 2 9 | |
| Total liabilities | 23 776 | 53 359 | |
| Total equity and liabilities | 69 797 | 97 997 | |
On 22 Apil 2016 the Board of Directors of Aqroton ial statements for issue, authorised these
The notes on pages l7 to 94 are a]l integral part ofthese consolidated financial statemenrs.
For the year ended 31 December 2015
(in USD thousand, unless otherwise stated)
| Attributable to owners of the Company | |||||||
|---|---|---|---|---|---|---|---|
| Share capital |
Share premium |
Retained earnings |
Foreign currency translation reserve |
Total | Non controlling interests |
Total equity |
|
| Balance at 1 January 2014 | 661 | 88 532 | 41 649 | (10 156) | 120 686 | 227 | 120 913 |
| Total comprehensive income | |||||||
| Loss for the year Other comprehensive income/(expense) |
- - |
- - |
(80 527) - |
- 4 279 |
(80 527) 4 279 |
37 (64) |
(80 490) 4 215 |
| Other comprehensive income/(expense) | - | - | (80 527) | 4 279 | (76 248) | (27) | (76 275) |
| Balance at 31 December 2014 | 661 | 88 532 | (38 878) | (5 877) | 44 438 | 200 | 44 638 |
| Balance at 1 January 2015 | 661 | 88 532 | (38 878) | (5 877) | 44 438 | 200 | 44 638 |
| Total comprehensive income | |||||||
| Loss for the year | - | - | (9 641) | - | (9 641) | 32 | (9 609) |
| Other comprehensive income/(expense) | - | - | - | 11 024 | 11 024 | (32) | 10 992 |
| Total comprehensive income/(expenses) for the year |
- | - | (9 641) | 11 024 | 1 383 | - | 1 383 |
| Balance at 31 December 2015 | 661 | 88 532 | (48 519) | 5 147 | 45 821 | 200 | 46 021 |
The notes on pages 17 to 94 are an integral part of these consolidated financial statements.
The above requirement of the Law is not applied in the case of the Company due to the fact that its owners are not residents in Cyprus for tax purposes.
(in USD thousand, unless otherwise stated)
| Note | 2015 | 2014 | |
|---|---|---|---|
| Cash flows from operating activities: | |||
| (Loss)/ Profit for the year | (9 609) | (80 490) | |
| Adjustments for: | |||
| Depreciation | 16 | 1 080 | 2 799 |
| Amortisation | 16 | 1 430 | 3 864 |
| Gain on derecognition of notes | (7 234) | (4 955) | |
| Fair value losses on financial assets at fair value through profit | |||
| or loss | 88 | 155 | |
| Impairment of inventories | 11,12 | 1 017 | 6 421 |
| Gain from changes in fair value less cost to sell of biological | |||
| assets and agriculture produce | 7 | (16 307) | (19 789) |
| Impairment of harvest failure | 11 | - | 222 |
| Impairment of trade and other receivables | 11,12 | 649 | 34 148 |
| Impairment of intangible assets | 12 | - | 673 |
| Impairment of biological assets | 12 | 19 | 353 |
| Impairment of other non-current assets | 12 | 5 644 | 519 |
| Impairment of property, plant and equipment | 12 | 1 043 | 6 574 |
| Reversal of provision for bad debts | 25 | (210) | (39) |
| Reversal of impairment of inventories | (1 540) | - | |
| Interest income | 14 | (3 813) | (3 130) |
| Interest expense | 14 | 1 991 | 2 474 |
| Trade payables written-off | 8 | (84) | (10) |
| Loss on disposal of property, plant and equipment | 11 | 2 | 80 |
| Loss on disposal of current assets | 11 | - | 5 |
| Gain/(loss) on disposal of subsidiaries | - | 43 | |
| Loss on disposal of intangible assets | 232 | - | |
| Foreign exchange loss | 14 | 31 612 | 55 813 |
| Income tax expense | 1 | 2 | |
| Cash flow from operations before working capital changes | 6 011 | 5 732 | |
| Decrease in inventories | 39 068 | 5 943 | |
| Decrease in biological assets | (31 052) | 333 | |
| Increase in trade and other receivables | (2 846) | (1 603) | |
| Increase in trade and other payables | (865) | (4 536) | |
| Net cash from operating activities | 10 316 | 5 869 | |
| Income tax paid | (1) | (2) | |
| Net cash from operating activities | 10 315 | 5 867 | |
| Cash flow from investing activities | |||
| Acquisition of property, plant and equipment | (626) | (478) | |
| Proceeds from disposal of property, plant and equipment | 8 | 12 | |
| Loans granted | (510) | (6 000) | |
| Loans repayment | - | 138 | |
| Interest received | 9 | - | |
| Disposals of subsidiaries, net of cash acquired | - | 48 | |
| Net cash used in investing activities | (1 119) | (6 280) |
The notes on pages 17 to 94 are an integral part of these consolidated financial statements.
(in USD thousand, unless otherwise stated)
| Note | 2015 | 2014 | |
|---|---|---|---|
| Cash flows from financing activities | |||
| Repayment of loans and borrowings | (4 865) | - | |
| Net cash used in financing activities | (4 865) | - | |
| Net decrease in cash and cash equivalents | 4 331 | (413) | |
| Cash and cash equivalents at the beginning of the year | 5 206 | 7 278 | |
| Effect from translation into presentation currency | (962) | (1 659) | |
| Cash and cash equivalents at the end of the year | 26 | 8 575 | 5 206 |
(in USD thousand, unless otherwise stated)
Agroton Public Limited (the "Company") was incorporated in Cyprus on 21 September 2009 as a public company with limited liability under the Cyprus Companies Law, Cap. 113. The Company was listed at the main market of Warsaw Stock Exchange on 8 November 2010.
The Company's registered office is at 1 Lampousas Street, 1095 Nicosia, Cyprus.
The principal activities of the Group are grain and oil crops growing, agricultural products storage and sale, cattle breeding (milk cattle-breeding, poultry farming) and milk processing. The poultry farming business has been temporarily abandoned due to the military clashes and armed conflict in Eastern Ukraine.
The Group's subsidiaries, country of incorporation, and effective ownership percentages are disclosed below:
| Company name Country of incorporation |
Ownership Interest 31.12.2015 |
Ownership Interest 31.12.2014 |
|
|---|---|---|---|
| Living LLC | Ukraine | 99,99 % |
99,99 % |
| PE Agricultural Production Firm Agro | Ukraine | 99,99 % |
99,99 % |
| Agroton PJSC | Ukraine | 99,99 % |
99,99 % |
| LLC Belokurakinskiy Elevator | Ukraine | 99,99 % |
99,99 % |
| Agro Meta LLC (i) | Ukraine | 99,99 % |
99,99 % |
| Rosinka-Star LLC | Ukraine | 99,99 % |
99,99 % |
| Etalon-Agro LLC (i) | Ukraine | 99,99 % |
99,99 % |
| ALLC Noviy Shlyah | Ukraine | 99,99 % |
99,99 % |
| ALLC Shiykivske | Ukraine | 94,58 % |
94,58 % |
| Agro-Chornukhinski Kurchata LLC | Ukraine | 99,89 % |
99,89 % |
| Agro-Svinprom LLC (ii) | Ukraine | 99,89 % |
99,89 % |
| Agroton BVI Limited | British Virgin Islands | 100,00 % |
100,00 % |
| Gefest LLC (i) | Ukraine | 100,00 % |
100,00 % |
| Alinco PE (iii) | Ukraine | - % |
100,00 % |
| LLC Lugastan | Ukraine | 99,99 % |
99,99 % |
(i) Agro Meta LLC, Etalon-Agro LLC, and Gefest LLC are in the process of liquidation.
(ii) In July 2011 the management of Living LLC resolved to dispose subsidiary of the Group namely Agro-Svinprom LLC engaged in the pig-breeding.
(iii) Alinco PE was liquidated on 27 October 2015.
The parent company of the Group is Agroton Public Limited with an issued share capital of 21 670 000 ordinary shares with nominal value € 0,021 per share.
(in USD thousand, unless otherwise stated)
The shares at 31 December 2015 and as at the date of issue of these consolidated financial statements were distributed as follows:
| 31 December 2015 | 22 April 2016 | |||
|---|---|---|---|---|
| Shareholder | Number of Shares |
Ownership interest, % |
Number of Shares |
Ownership interest, % |
| Mr. Iurii Zhuravlov | 14 606 310 | 67,40 % |
14 848 783 | 68,52 % |
| Others | 7 063 690 | 32,60 % |
6 821 217 | 31,48 % |
| 21 670 000 | 100,00 % |
21 670 000 | 100,00 % |
The consolidated financial statements of the Company as at and for the year ended 31 December 2015 comprise the financial statements of the Company and its subsidiaries (together with the Company, the ''Group'').
The Company has subsidiary undertakings and according to 142(1)(b) of the Cyprus Companies Law Cap.113 is required to prepare consolidated financial statements and present them before the members of the Company at the Annual General Meeting.
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS'), as adopted by the European Union ('EU'), and the requirements of the Cyprus Companies Law, Cap. 113, and are for the year ended 31 December 2015.
These consolidated financial statements have been prepared under the historical cost convention except for the following:
(in USD thousand, unless otherwise stated)
The functional currencies of the companies of the Group are the Ukrainian Hryvnia (UAH) and United States Dollar (USD). The currency of Cyprus is Euro, but the principal exposure of the parent undertaking is in US dollars, therefore the functional currency of the Company is considered to be USD. Transactions in currencies other than the functional currency of the Group's companies are treated as transactions in foreign currencies. The Group's management decided to use US dollar (USD) as the presentation currency for financial and management reporting purposes. Exchange differences arising are classified as equity and transferred to the translation reserve.
These consolidated financial statements have been prepared under the going concern basis, which assumes the realisation of assets and settlement of liabilities in the course of ordinary economic activity. Renewals of the Group's assets, and the future activities of the Group, are significantly influenced by the current and future economic environment in Ukraine. The Board of Directors and Management are closely monitoring the events in the current operating environment of the Group as described in note 34 to the consolidated financial statements and has assessed the current situation and there is no indication of adverse effects while at the same time are taking all the steps to secure Group's short and long term viability. To this effect, they consider that the Group is able to continue its operations as a going concern.
As from 1 January 2015, the Group adopted all changes to International Financial Reporting Standards (IFRSs) as adopted by EU which are relevant to its operations. This adoption did not have a material effect on the financial statements of the Group.
The following Standards, Amendments to Standards and Interpretations have been issued but are not yet effective for annual periods beginning on 1 January 2015. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these Standards early.
IAS 19 (Amendments) "Defined Benefit Plans: Employee Contributions" (effective for annual periods beginning on or after 1 February 2015).
These amendments clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, they permit a practical expedient if the amount of the contributions is independent of the number of years of service. The amendments are intended to provide relief in that entities are allowed to deduct contributions from service cost in the period in which the service is rendered. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
(in USD thousand, unless otherwise stated)
Annual Improvements to IFRSs 2010-2012 (effective for annual periods beginning on or after 1 February 2015).
These amendments impact seven standards. The amendments to IFRS 2 amend the definitions of 'vesting condition' and 'market condition' and add definitions for 'performance condition' and 'service condition' that previously formed part of the definition of 'vesting condition'. The amendments to IFRS 3 clarify that contingent consideration which is classified as an asset or a liability should be measured at fair value at each reporting date. The amendments to IFRS 8, require disclosure of judgments made by management in applying the aggregation criteria to operating segments. They also clarify that an entity is only required to provide reconciliations of the total of the reportable segments' assets to the entity's assets if the segment assets are reported regularly. Amendments to IFRS 13 clarify that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting if the effect of not discounting is immaterial. The amendments to IAS 16 and IAS 38 clarify that when an item of property, plant and equipment or an intangible asset is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount. Finally, the amendments to IAS 24 clarify that when an entity is providing key management personnel services to the reporting entity or to the parent of the reporting entity it is considered a related party of the reporting entity. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
IAS 27 (Amendments) ''Equity method in separate financial statements'' (effective for annual periods beginning on or after 1 January 2016).
The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
(in USD thousand, unless otherwise stated)
IAS 1 (Amendments): Disclosure Initiative (effective for annual periods beginning on or after 1 January 2016).
The amendments introduce changes in various areas. In relation to materiality the amendments clarify that information should not be obscured by aggregating or by providing immaterial information, that materiality considerations apply to all parts of the financial statements, and even when a standard requires a specific disclosure, materiality considerations do apply. In relation to the statement of financial position and statement of profit or loss and other comprehensive income, the amendments clarify that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant and provide additional guidance on subtotals in these statements. They also clarify that an entity's share of other comprehensive income of equityaccounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss. In relation to the notes to the financial statements the amendments add additional guidance of ordering the notes so as to clarify that understandability and comparability should be considered when determining the order of the notes in order to demonstrate that the notes need not be presented in the order so far listed in paragraph 114 of IAS 1. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
Annual Improvements to IFRSs 2012–2014 Cycle (effective for annual periods beginning on or after 1 January 2016)
The amendments impact four standards. IFRS 5 was amended to clarify that change in the manner of disposal (reclassification from 'held for sale' to 'held for distribution' or vice versa) does not constitute a change to a plan of sale ore distribution, and does not have to be accounted for as such. The amendment to IFRS 7 adds guidance to help management determine whether the terms of an arrangement to service a financial asset which has been transferred constitute continuing involvement, for the purposes of disclosures required by IFRS 7. The amendment also clarifies that the offsetting disclosures of IFRS 7 are not specifically required for all interim periods, unless required by IAS 34. The amendment to IAS 19 clarifies that for post-employment benefit obligations, the decisions regarding discount rate, existence of deep market in high-quality corporate bonds, or which government bonds to use as a basis, should be based on the currency that the liabilities are denominated in, and not the country where they arise. IAS 34 will require a cross reference from the interim financial statements to the location of 'information disclosed elsewhere in the interim financial report'. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
(in USD thousand, unless otherwise stated)
IAS 16 and IAS 38 (Amendments) ''Clarification of acceptable methods of depreciation and amortisation'' (effective for annual periods beginning on or after 1 January 2016).
In this amendment, the IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. However, in relation to intangible assets, the IASB stated that there are limited circumstances when the presumption can be overcome. This is applicable when the intangible asset is expressed as a measure of revenue and it can be demonstrated that revenue and the consumption of economic benefits of the intangible asset are highly correlated. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
IFRS 11 (Amendments) 'Accounting for acquisitions of interests in Joint Operations''' (Amendments) (effective for annual periods beginning on or after 1 January 2016).
This amends IFRS 11 such that the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in IFRS 3, is required to apply all of the principles of business combinations accounting in IFRS 3 and other IFRSs with the exception of those principles that conflict with the guidance in IFRS 11. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
IAS 16 and IAS 41 (Amendments) ''Bearer plants'' (effective for annual periods beginning on or after 1 January 2016).
The amendments change the financial reporting for bearer plants, such as grape vines, rubber trees and oil palms, which now should be accounted for in the same way as property, plant and equipment because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of IAS 16, instead of IAS 41. The produce growing on bearer plants will remain within the scope of IAS 41. The Group is currently evaluating the effect on its consolidated financial statements.
(in USD thousand, unless otherwise stated)
IFRS 14 ''Regulatory Deferral Accounts'' (effective for annual periods beginning on or after 1 January 2016).
IFRS 14 is expected to specify the financial reporting requirements for regulatory deferral account balances that arise when an entity provides good or services to customers at a price or rate that is subject to rate regulation. IFRS 14 will permit an entity which is a first-time adopter of International Financial Reporting Standards to continue to account, with some limited changes, for ''regulatory deferral account balances'' in accordance with its previous GAAP, both on initial adoption of IFRS and in subsequent financial statements. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
IFRS 10, IFRS 12 and IAS 28 (Amendments) "Investment Entities: Applying the Consolidation Exception" (effective for annual periods beginning on or after 1 January 2016).
The amendments will address issues that arose in the context of applying the consolidation exception for investment entities. The amendments confirm that the exemption from preparing consolidated financial statements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value. In addition, it clarifies that a subsidiary that provides services related to the parent's investment activities should not be consolidated if the subsidiary itself is an investment entity. Furthermore it is clarified that when applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries. Finally, it confirmed that an investment entity measuring all of its subsidiaries at fair value is required to provide disclosures relating to investment entities as required by IFRS 12. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
IAS 7 (Amendments) "Disclosure Initiative" (effective for annual accounting periods beginning on or after 1 January 2017).
The amendments are intended to clarify IAS 7 and improve information provided to users for an entity's financing activities. The amendments will require that the following changes in liabilities arising from financing activities are disclosed (to the extent necessary): (a) changes from financing cash flows; (b) changes arising from obtaining or losing control of subsidiaries or other businesses; (c) the effect of changes in foreign exchange rates; (d) changes in fair values; and (e) other changes. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
(in USD thousand, unless otherwise stated)
IAS 12 (Amendments) "Recognition of Deferred Tax Assets for Unrealised Losses" (effective for annual accounting periods beginning on or after 1 January 2017).
The amendments will give clarifications in relation to the recognition of a deferred tax asset that is related to a debt instrument measured at fair value. Additionally, it clarifies that the carrying amount of an asset does not limit the estimation of probable future taxable profits and that estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences. Finally, it clarifies that an entity assesses a deferred tax asset in combination with other deferred tax assets. Finally, where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
IFRS 15 ''Revenue from contracts with customers'' (effective for annual periods beginning on or after 1 January 2018).
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programs. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
IFRS 9 ''Financial Instruments'' (effective for annual periods beginning on or after 1 January 2018).
IFRS 9 replaces the existing guidance in IAS 39. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
IFRS 16 "Leases" (effective for annual periods beginning on or after 1 January 2019).
IFRS 16 will supersede IAS 17 and related interpretations. The new standard will bring most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however will remain largely unchanged and the distinction between operating and finance leases is retained. The Group does not expect the adoption of these amendments in future periods to have a material effect on its financial statements.
(in USD thousand, unless otherwise stated)
The Group has consistently applied accounting policies set out in this note to all years presented in these consolidated financial statements. Accounting policies of subsidiaries have been changed where necessary to achieve consistent application of the accounting policies applied by the Group.
Subsidiaries are entities controlled by the Group. Control exists where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The financial statements of subsidiaries acquired or disposed during the year are included in the consolidated statement of profit or loss from the date that control commences until the date control ceases.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring them in line with the accounting policies of the Group.
Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity as transactions with owners acting in their capacity as owners. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss.
When the Group loses control of a subsidiary, the resulting profit or loss is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. The resulting profit or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
(in USD thousand, unless otherwise stated)
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that:
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS.
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the 'measurement period' (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss.
When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date(i.e.the date when the Group obtains control) and the resulting gain or loss,if any,is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed.
(in USD thousand, unless otherwise stated)
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.
NCI is represented by interest in the subsidiaries not owned by the Group. It is determined at the reporting period as interest in the fair value of identified assets and liabilities of the subsidiary at the date of acquisition or creation of a new subsidiary, as well as interest in change in net assets of a subsidiary after the acquisition or creation of a new subsidiary.
The Group provides information on NCI in net assets of subsidiaries and companies not connected with formal structure and not having a common parent company separately from items of equity attributable to the owners of the parent company.
Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction.
Monetary assets and liabilities are translated into the functional currency of each company included into the Group, at the rates ruling at the reporting period. Foreign exchange gains and losses, arising from transactions in foreign currency, and also from translation of monetary assets and liabilities into the functional currency of each company included into the Group at the rate ruling at the end of the year, are recognised in profit or loss.
(in USD thousand, unless otherwise stated)
The exchange rates used in preparation of these consolidated financial statements, are as follows:
| Currency | 31 December 2015 |
Weighted average for the |
31 December 2014 |
Weighted average for the |
31 December 2013 |
|---|---|---|---|---|---|
| year 2015 | year 2014 | ||||
| US dollar - UAH | 24,0007 | 21,8290 | 15,7686 | 11,9090 | 7,9930 |
The empowerment of the USD against UAH has resulted in the reduction of various values disclosed in the consolidated financial statements of profit or loss and financial position. This reduction is applicable only in case of translation into presentation currency.
The foreign currencies may be freely convertible to the territory of Ukraine at the exchange rate which is close to the exchange rate established by the National Bank of Ukraine. At the moment, the Ukrainian Hryvnia is not a freely convertible currency outside the Ukraine.
The financial results and position of each subsidiary are translated into the presentation currency as follows:
Property plant and equipment is recognised by the Group as an asset only when:
(in USD thousand, unless otherwise stated)
Any subsequent expenses, increasing the future economic benefits from the asset, are treated as additions. Otherwise, the Group recognises subsequent expenses to profit or loss of the year, in which they are incurred. The Group divides all expenses, related to the property, plant and equipment, into the following types:
After initial recognition as an asset, the Group applies the model of accounting for the property, plant and equipment at historical cost, net of accumulated depreciation and any accumulated losses from impairment, taking into account estimated residual values of such assets at the end of their useful lives. Such cost includes the cost of replacing significant parts of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced from time to time, the Group recognises such parts as individual assets with specific estimated useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying value of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the profit or loss of the year in which they are incurred.
Depreciation of property, plant and equipment is calculated using the straight-line method over the estimated useful lives agreed upon with the technical personnel of the Group.
The estimated useful lives of property, plant and equipment are as follows:
| Construction in progress | Not depreciated |
|---|---|
| Buildings | 10-75 years |
| Machinery and equipment | 2-30 years |
| Vehicles | 2-15 years |
| Computers and office equipment | 1-10 years |
| Instruments, tools and other equipment | 1-10 years |
Residual values and useful lives of assets are reviewed at each reporting period and adjusted if appropriate.
The acquired asset is depreciated starting from the following month of the date of placing into operation and depreciation is fully accumulated when useful life ends.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying value of the asset) is included in profit or loss of the year in which the asset is derecognised.
(in USD thousand, unless otherwise stated)
At each reporting period the Group evaluates whether any indicators of possible impairment of an asset exist. If the recoverable value of an asset or a group of assets within property, plant and equipment is lower than their carrying (residual) value, the Group recognises such asset or group of assets as impaired, and accrues a provision for impairment of the amount of excess of the carrying value over the recoverable value of the asset. Impairment losses are recognised immediately in profit or loss.
Assets under construction comprise costs directly related to construction of property, plant and equipment including an appropriate allocation of directly attributable variable overheads that are incurred in construction. Construction in progress is not depreciated. Depreciation of the construction in progress, on the same basis as for other property, plant and equipment items, commences when the assets are available for use, i.e. when they are in the location and condition necessary for them to be capable of operating in the manner intended by the management.
For the purpose of preparation of the consolidated financial statements, the Group defines the following groups of the intangible assets: computer software and land lease rights.
Costs that are directly associated with identifiable and unique computer software products controlled by the Group and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible assets. Subsequently computer software is carried at cost less any accumulated amortisation and any accumulated impairment losses. Expenditure which enhances or extends the performance of computer software programs beyond their original specifications is recognised as a capital improvement and added to the original cost of the computer software. Costs associated with maintenance of computer software programs are recognised in profit or loss of the year in which they are incurred. Computer software are amortised on a straight-line basis over their useful lives, usually 5 years. Amortisation starts from the following year of the date of placing into operation and is fully accumulated when useful life ends.
Amortisation methods, useful lives and residual values are reviewed at each reporting period and adjusted accordingly.
Land lease rights acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Land lease rights acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, land lease rights acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as land lease rights acquired separately.
Amortisation of land lease rights is recognised on a straight-line basis over their estimated useful lives.
(in USD thousand, unless otherwise stated)
For land lease rights, the amortisation period is 10 years.
The amortisation period and the amortisation method for land lease rights are reviewed at least at the end of each reporting period, with the effect of any changes in estimate being accounted for prospectively.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss of the year in which the asset is derecognised.
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.
Trade and other receivables are initially recognised at fair value and are subsequently measured at amortised cost using the effective interest rate method. Trade and other receivables are stated after deducting the appropriate allowances for any impairment.
Payments received in advance on sale contracts for which no revenue has been recognised yet, are recorded as prepayments from clients as at the reporting date and carried under liabilities.
(iii) Loans granted
Loans originated by the Group by providing money directly to the borrower are categorised as loans and are carried at amortised cost. This is defined as the fair value of cash consideration given to originate those loans as is determined by reference to market prices at origination date. All loans are recognised when cash is advanced to the borrower.
An allowance for loan impairment is established if there is objective evidence that the Group will not be able to collect all amounts due according to the original contractual terms of loans. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows including amounts recoverable from guarantees and collateral, discounted at the original effective interest rate of loans.
(in USD thousand, unless otherwise stated)
Investments in securities are classified as financial assets at fair value through profit or loss and are presented at their fair value at the reporting period.
The fair value for investments in listed securities is considered to be the current bid prices and is calculated in accordance with the prices published by the Stock Exchange at the reporting period.
Realised and unrealised gains and losses arising from the change in the fair value of investments are recognised in profit or loss.
Borrowings are recorded initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.
Trade payables are initially recognised at fair value and are subsequently measured at amortised cost, using the effective interest rate method.
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:
Any interest in such derecognized financial assets that is created or retained by the Group is recognised as a separate asset or liability
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.
(in USD thousand, unless otherwise stated)
Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the consolidated statement of financial position.
The Group identifies the following types of inventories:
Work in progress includes the costs incurred during the period, but relating to the preparation of crop areas under sowing for future reporting periods.
Agricultural products derived from biological assets are measured at fair value less costs to sell at the point of harvest. Profit or loss arising upon initial recognition of agricultural products at fair value less estimated costs to sell is recorded in profit or loss as gain/(loss) from changes in value of biological assets and agricultural produce.
Inventories are measured at the lower of cost and net realisable value.
The cost of inventories is based on the first-in first-out (FIFO) principle and includes all expenses for acquiring the inventories, conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of work in progress and finished goods, cost includes an appropriate share of production overheads based on normal operating capacity.
Net realisable value is determined as the estimated selling price in the ordinary course of business less the estimated costs of completion and preliminary estimated distribution and selling costs.
The Group regularly reviews inventories to determine whether there are any indicators of damage, obsolescence, slow movement, or a decrease in net realisable price. When such events take place, the amount by which inventories are impaired, is reported in profit or loss.
(in USD thousand, unless otherwise stated)
Cost of inventories may be irrecoverable if the realisable value for such inventories has decreased due to their damage, whole or partial obsolescence or resulting from changes in market prices. Cost of inventories may be irrecoverable if possible costs for completion or sale have increased.
Raw and other materials in inventories are not written-off below cost, if finished goods, in which they will be included, will be sold at cost or above. However, when decrease in price for raw materials indicates that cost of finished goods will exceed the net realisable value, raw materials are written off to the net realisation value.
At each reporting period the Group analyses inventories to determine whether they are damaged, obsolete or slow-moving or whether their net realisable value has declined. If such situation occurred, the amount by which inventories are impaired is recorded in profit or loss.
The following groups of biological assets are distinguished by the Group:
(a) current – with useful life of 1 year, including:
Biological asset is an animal or plant which in the process of biological transformations can create agricultural products or additional biological assets, as well as bring economic benefits in other ways.
Biological assets are measured at fair value less estimated costs to sell, except in case where fair value cannot be determined reliably. Costs to sell include all costs that would be necessary to sell the assets, including transportation costs.
If there is an active market for a biological asset or agricultural produce, the Group determines the fair value of assets based on their quoted price in the market. If the Group has access to several markets, the definition of fair value is based on the market, which may be used by the Group with the highest probability.
In the absence of an active market, the Group uses one or more of the following indicators to determine the fair value of biological assets:
(in USD thousand, unless otherwise stated)
In case where there are no market prices or other value indicators to determine the fair value in respect of the biological asset at a particular time, the Group uses the discounted value of the asset's expected net cash flows, while applying a discount coefficient, calculated on the basis of current market conditions for cash flow before tax.
Where there is no information about market prices upon the initial recognition of biological asset, and alternative estimates of fair value are clearly unreliable, such biological asset is valued at cost less accumulated depreciation and impairment losses. Once there is the possibility to determine the fair value of biological assets with reasonable reliability, the biological asset is revalued at fair value less estimated costs to sell (this principle applies only at initial recognition of the biological asset). If the Group has previously valued the biological asset at fair value less estimated costs to sell, this biological asset is recorded at fair value less estimated costs to sell up to the moment of its disposal.
The difference between the fair value less estimated costs to sell and production cost of biological assets is recorded in profit or loss as gain/(loss) from changes in value of biological assets and agricultural products.
Cost of crops for future harvest consists of actual costs incurred in growing harvest (including lease expenses, costs of land preparation, planting, fertilising, processing, collection, storage). The fair value of winter crops at the end of the year is approximate to its cost due to a minor biological transformation of seeds at the end of the year, significant impact of cultivation quality, weather conditions and precipitation on future harvest, variations in market demand for future harvest. Crops for future harvest are measured at cost.
Cash and cash equivalents include cash at banks and in hand, cash in transit, issued letters of credit and call deposits.
The Group assesses at each reporting period the carrying value of its non-current assets to determine whether there is any objective evidence that non-current assets are impaired. If any such evidence exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). If it is not possible to estimate the recoverable amount of the individual asset, the Group shall determine the recoverable amount of the cash-generating unit to which the asset belongs (the asset's cashgenerating unit).
The expected recoverable amount of a cash-generating unit is the highest of the cash-generating unit's selling value and its value in use. In estimating value in use, the future cash flows are discounted to present value using a discount rate before taxation which reflects current market assessments of the time value of money and the risks specific to the asset.
(in USD thousand, unless otherwise stated)
If the expected recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying value, the carrying value of the asset (or cash-generating unit) shall be reduced to its recoverable amount. That reduction is an impairment loss, unless the asset is carried at revalued amount. Any impairment loss of a revalued asset shall be treated as a revaluation deficit. If the impairment loss is reversed subsequently, then carrying value of an asset (or cash-generating unit) increases to the revised and estimated amount of its recoverable amount, where increased carrying value does not exceed the carrying value which could be determined only in that case if impairment loss for an asset (or cashgenerating unit) was not recognised in the previous years. Reversal of the impairment loss is recognised in profit or loss.
Advances issued are recorded at nominal value less value added tax and any accumulated impairment losses. Other current assets are recorded at nominal cost less accumulated impairment losses.
Impairment of advances issued is recognised if there is objective evidence that repayment of the full amount of the debt does not occur within the contract terms, including the incoming information about substantial financial difficulties of the debtor, the possibility of recognition a debtor as a bankrupt, or probability of debtor's reorganisation, in case of refusal from delivery, etc. Impairment of advances issued and other non-financial current assets is reflected according to order described in subparagraph 'Impairment of Assets' of Note 12.
Advances issued under the contracts for the purchase of property, plant and equipment are recorded in section 'Other non-current assets' of consolidated statement of financial position.
In Ukraine VAT standard rate is 20% on imports and sale of goods and services in the territory of Ukraine and 0% rate for all exports and services rendered outside Ukraine.
The VAT liability is equal to the total amount of VAT accrued during the reporting period and arises at the earlier of goods shipment to the customer or at the date of receipt of payment from the client.
VAT credit is the amount by which a taxpayer is entitled to reduce his/her VAT liabilities in the reporting period. The right to VAT credit arises on the earlier of the date of payment to supplier or the date of receipt of goods by the Company.
(in USD thousand, unless otherwise stated)
The Group's agricultural entities apply the special VAT taxation treatment prescribed by the Tax Code of Ukraine, which entered into force on 1 January 2011, regarding the agricultural activities, which provides preferential VAT treatment to support agricultural producers. The Ukrainian government allows qualified agricultural producers which choose to apply the special VAT regime for the agricultural industry to retain the difference between the VAT that they charge on their agricultural products or services and the VAT that they pay on qualified items purchased for their operations, rather than remitting such amounts to the state budget. Agricultural producers qualify for this special VAT regime provided that the revenue received from the sales of agricultural goods produced during the preceding twelve months accounted for more than 75% of their gross revenue. The amounts retained by the Group can be used only for agricultural purposes.
For goods and services supplied at the 20% tax rate, revenue, expenses and assets are recognised net of VAT amount, unless:
For the Cyprus Company VAT of 19% (18% up to 12 January 2014) applies on expenses.
The Group classifies VAT recoverable arising from its operating activities and its capital expenditures. The balance of VAT recoverable may be realised by the Group either through a cash refund from the state budget or by sett off against VAT liabilities with the state budget in future periods.
The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated statement of financial position.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, by the reporting period, in the countries where the Group operates and generates taxable income.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or loss and other comprehensive income. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
(in USD thousand, unless otherwise stated)
The majority of Groups entities are registered as tax payers of fixed agricultural tax and therefore are not payers of corporate tax.
Revenue comprises the invoiced amount for the sale of goods and services net of Value Added Tax, returns, volume rebates and trade discounts. Revenues earned by the Group are recognised on the following bases:
Revenue is recognised when significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs of possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.
Sales of services are recognised in the accounting period in which the services are rendered by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.
Finance income comprises of interest income. Interest income is recognised as it accrues in profit or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings and bank charges.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, which necessarily requires significant time to be prepared for use in accordance with the Group's intentions or for sale, are capitalised as the part of initial value of such asset. All other borrowing costs are expensed in profit or loss in the period they were incurred. Borrowing costs include interest payments and other expenses incurred by the Group related to borrowings.
Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position.
(in USD thousand, unless otherwise stated)
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale or distribution rather than through continuing use, are classified as held for sale or distribution. Immediately before classification as held for sale or distribution, the assets, or components of a disposal group, are remeasured in accordance with the Group's accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property or biological assets, which continue to be measured in accordance with the Group's accounting policies. Impairment losses on initial classification as held for sale or distribution and subsequent gains and losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.
Once classified as held for sale or distribution, intangible assets and property, plant and equipment are no longer amortised or depreciated, and any equity-accounted investee is no longer equity accounted.
At inception of an arrangement, the Group determines whether an arrangement is or contains a lease.
At inception or on reassessment of an arrangement that contains a lease, the Group separates payments and other consideration required by the arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impractible to separate the payments reliably, then an asset and liability are recognised at an amount equal to the fair value of the underlying asset, subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognised using a Group's incremental borrowing rate.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The leases of the Group are classified as finance leases, if they transfer to the Group substantially all the risk and rewards incidental to ownership of an asset. The Group recognises a finance lease as an asset and liability at the lower of the fair value of the leased asset and the present value of minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset.
The payments are appointed between the finance expenses and the decrease of the finance lease obligations based on the effective interest method.
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
(in USD thousand, unless otherwise stated)
The amount payable to the Owners of the Company in the form of dividends is recognised in the financial statements of the Group in the period the dividends were approved by the Owners of the Company.
Contingent liabilities represent the possible commitments of the Group arising from past events, which existence will be confirmed only as a result of occurrence or non-occurrence of one or more future events, that are not under the full control of the Group, or current liabilities arising from past events not recognized in the financial statements in connection with the fact that the Group does not consider the outflow of resources providing economic benefits and required for liabilities settlements as expected ones, or the amount of liabilities cannot be reliably measured.
The Group does not recognize contingent liabilities in financial statements. The Group discloses information about contingent liabilities in the notes to the financial statements unless the probability of outflow of resources required to settle the liability, is unlikely.
Contingent assets represent the possible assets of the Group arising from past events, which existence will be confirmed only as a result of occurrence or non-occurrence of one or more future events that are not under the full control of the Group. The Group does not recognize contingent assets in the financial statements. The Group discloses information about contingent assets in the notes to financial statements, if the flow of economic benefits is likely to occur.
A provision is a liability of uncertain amount or timing. Provisions are recognised if as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the consolidated statement of profit or loss and other comprehensive income net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses and tax assets and liabilities.
The Group is organised by reportable segments and this is the primary format for segmental reporting. Each reportable segment provides products or services which are subject to risks and rewards that are different than those of other reportable segments.
(in USD thousand, unless otherwise stated)
The Group presents its geographical analysis for segmental revenue by customer location and for assets based on the asset's location. The Group operates mainly in Ukraine.
Classification as a discontinued operation occurs on disposal or when the operation meets the criteria to be classified as held for sale (see note 3.15), if earlier. When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative year
Ordinary shares are classified as equity. The difference between the fair value of the consideration received and the nominal value of share capital issued is taken to share premium. Incremental costs directly attributable to the issue of ordinary shares, net of any tax effects, are recognised as a deduction from equity.
The Group contributes to the State Pension Fund of Ukraine and the social insurance funds for the benefit of its employees (defined benefits). The Group's contributions are expensed as incurred.
Employee salaries are expensed in the reporting period in which such work is performed.
The Group adjusts the consolidated financial statements amounts if events after the reporting period demand adjustments. Events after the reporting period requiring adjustments of the consolidated financial statements amounts relate to the confirmation or contradiction of the circumstances prevailing at the reporting period, as well as estimates and judgments of management, which are made under conditions of uncertainty and incompleteness of information at the reporting period.
If non-adjusting events that occurred after the reporting period are significant, non-disclosure of information about them may affect the economic decisions of users which are made on the basis of these consolidated financial statements. Accordingly, the Group discloses the nature of such events and estimates of their financial effect or states the impossibility of such estimate for each material category of non-adjusting events that occurred after the reporting period.
(in USD thousand, unless otherwise stated)
The preparation of the consolidated financial statements in accordance with IFRS requires from management to exercise judgment, to make estimates and assumptions that influence the application of accounting principles and the reported amounts of assets, liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors that are deemed to be reasonable based on knowledge available at that time. Actual results may deviate from such estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognised in the consolidated financial statements are described below:
The Group estimates the remaining useful life of property, plant and equipment at least once a year at the end of the fiscal year. Should the expectations differ from previous estimates, changes are accounted for as changes in accounting estimates in accordance with IAS 8 'Accounting Policy, Changes in Accounting Estimates and Errors'. These estimates may have a significant effect on the carrying value of property, plant and equipment and depreciation recognised in profit or loss.
An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm's length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset's performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes.
The Group reviews its trade and other receivables for evidence of their recoverability. Such evidence includes the customer's payment record and the customer's overall financial position.
(in USD thousand, unless otherwise stated)
The Group provides for doubtful debts to cover potential losses when a customer may be unable to make necessary payments. In assessing the adequacy of provision for doubtful debts, management considers the current economic conditions in general, the age of accounts receivable, the Group's experience in writing off of receivables, solvency of customers and changes in conditions of settlements. Economic changes, industry situation or financial position of separate customers may result in adjustments related to the amount of provision for doubtful debts reflected in the consolidated financial statements as impairments of receivables.
Additionally a general provision for doubtful debts is provided on all receivables due for more than 365 days.
Bad debts which maturity has already expired are written-off from the consolidated statement of financial position along with a corresponding adjustment to the provision for doubtful debts.
Bad debts which are subsequently recovered are reversed in the consolidated financial statements through profit or loss.
The Group does not accrue provisions for doubtful debts on balances with related parties regardless of the origin date of current debt.
The Group's Management applies significant assumptions in the measurement and recognition of provisions for and risks of exposure to contingent liabilities related to existing legal proceedings and other unsettled claims, and also other contingent liabilities. Management's judgment is required in estimating the probability of a successful claim against the Group or the crystallising of a material obligation, and in determining the probable amount of the final settlement or obligation. Due to uncertainty inherent to the process of estimation, actual expenses may differ from the initial estimates. Such preliminary estimates may alter as new information is received, from internal specialists within the Group, if any, or from third parties, such as lawyers. Revision of such estimates may have a significant effect on the future results of operating activity.
At each reporting period the Group assesses the necessity to impair obsolete and surplus inventory. The Group analyses inventories to determine whether they are damaged, obsolete or slow-moving or whether their net realisable value has declined. If such necessity exists, the reserve is calculated and necessary adjustments are made.
(in USD thousand, unless otherwise stated)
Inventories are measured at the lower of cost and net realisable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is determined as the estimated selling price in the ordinary course of business less the estimated costs of completion and preliminary estimated distribution and selling costs. The Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at each reporting period.
Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective regions in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group companies' domicile.
Significant judgment is required in determining the provision for Cyprus direct and indirect taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the tax and deferred tax provisions in the period in which such determination is made.
In Management's opinion, the Company is in substantial compliance with the tax laws governing its operations. However, the risk remains that the relevant authorities could take different positions with regard to interactive issues and the effect could be significant.
The Company met the tax filing in Cyprus. To the best of Management's knowledge, no breaches of tax law have occurred. Thus, the Company has not recorded any provisions for potential impact of any such breaches at the reporting period.
Contingent liabilities are determined by the occurrence or non-occurrence of one or more future events. Measurement of contingent liabilities is based on management's judgments and estimates of the outcomes of such future events. In particular, the tax laws in Ukraine are complex and significant management judgement is required to interpret those laws in connection with the tax affairs of the Group, which is open to challenge by the tax authorities. Additionally, the economic and political situation in Ukraine may have an impact (note 34 to the consolidated financial statements).
(in USD thousand, unless otherwise stated)
Management classified VAT recoverable balance as current based on expectations that will be realised within twelve months from the reporting period. In addition management assessed whether the allowance for irrecoverable VAT needs to be created.
In making this assessment, management considers past history of receiving VAT refunds from the state budget. For VAT recoverable expected to be set off against VAT liabilities in future periods, management based its estimates on detailed projections of expected excess of VAT input over VAT output in the normal course of business.
A number of the Group's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
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 Board of Directors.
When measuring the fair value of an asset or a liability, the Group uses market observable 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.
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.
Further information about the assumptions made in measuring fair values is included in the relevant notes.
(in USD thousand, unless otherwise stated)
The Group conducts its operations mainly in Ukraine. Ukraine's political and economic situation has deteriorated significantly since 2014. Following political and social unrest in early 2014, in March 2014, various events in Crimea led to the accession of the Republic of Crimea to the Russian Federation, which was not recognised by Ukraine and many other countries. This event resulted in a significant deterioration of the relationship between Ukraine and the Russian Federation. Following the instability in Crimea, regional tensions have spread to the Eastern regions of Ukraine, primarily Donetsk and Lugansk regions. In May 2014, protests in those regions escalated into military clashes and armed conflict between supporters of the self-declared republics of the Donetsk and Lugansk regions and the Ukrainian forces, which continued throughout the date of these financial statements. As a result of this conflict, part of the Donetsk and Lugansk regions remains under control of the self-proclaimed republics, and Ukrainian authorities are not currently able to fully enforce Ukrainian laws on this territory.
Political and social unrest combined with the military conflict in the Donetsk and Lugansk regions has deepened the ongoing economic crisis, caused a fall in the country's gross domestic product and foreign trade, deterioration in state finances, depletion of the National Bank of Ukraine's foreign currency reserves, significant devaluation of the national currency and a further downgrading of the Ukrainian sovereign debt credit ratings. Following the devaluation of the national currency, the National Bank of Ukraine introduced certain administrative restrictions on currency conversion transactions, which among others included restrictions on purchases of foreign currency by individuals and companies, the requirement to convert 75% of foreign currency proceeds to local currency, a ban on payment of dividends abroad, a ban on early repayment of foreign loans and restrictions on cash withdrawals from banks. These events had a negative effect on Ukrainian companies and banks, significantly limiting their ability to obtain financing on domestic and international markets.
The final resolution and the effects of the political and economic crisis are difficult to predict but may have further severe effects on the Ukrainian economy.
Whilst management believes it is taking appropriate measures to support the sustainability of the Group's business in the current circumstances, a continuation of the current unstable business environment could negatively affect the Group's results and financial position in a manner not currently determinable. These consolidated financial statements reflect management's current assessment of the impact of the Ukrainian business environment on the operations and the financial position of the Group. The future business environment may differ from management's assessment.
| 2015 | 2014 | |
|---|---|---|
| Sales of goods | 41 366 | 56 847 |
| Rendering of services | 784 | 2 121 |
| Total | 42 150 | 58 968 |
(in USD thousand, unless otherwise stated)
Revenue generated from sale of goods was as follows:
| 2015 | 2014 | |
|---|---|---|
| Livestock and related revenue | 2 723 | 15 461 |
| Winter wheat | 18 077 | 19 233 |
| Sunflower | 18 482 | 19 038 |
| Corn in grain | 2 048 | 2 815 |
| Other agricultural crops | 36 | 300 |
| Total | 41 366 | 56 847 |
Sales volume for main agricultural products in tonnes was as follows:
| 2015 | 2014 | |
|---|---|---|
| tonnes | tonnes | |
| Winter wheat | 161 187 | 129 602 |
| Sunflower | 55 442 | 65 716 |
| Corn in grain | 16 067 | 24 763 |
| Total | 232 696 | 220 081 |
Sales volume for milk yield for the year ended 31 December 2015 was 11 050 thousand tonnes (2014: 10 654 thousand tonnes).
Revenue generated from rendering of services relates to storage and handling services granted to third parties.
Livestock and related revenue includes revenue from poultry and other livestock related products.
| 2015 | 2014 | |
|---|---|---|
| Livestock and related operations | 3 020 | 17 626 |
| Plant breeding and related operations | 36 313 | 41 657 |
| Other activities | 665 | 720 |
| Total | 39 998 | 60 003 |
(in USD thousand, unless otherwise stated)
| 2015 | 2014 | |
|---|---|---|
| Non-current biological assets | (257) | 1 075 |
| Current biological assets | 16 564 | 18 714 |
| Total | 16 307 | 19 789 |
The net change in fair value less costs to sell per type of biological asset was:
| 2015 | 2014 | |
|---|---|---|
| Animals in growing and fattening | (895) | 1 210 |
| Crops under cultivation (Note 19) | 17 202 | 18 579 |
| Total | 16 307 | 19 789 |
| 2014 | |
|---|---|
| 3 | |
| 3 958 | 4 631 |
| 210 | 39 |
| 1 540 | - |
| 84 | 10 |
| 71 | 189 |
| 5 863 | 4 872 |
| 2015 - |
| Note | 2015 | 2014 | |
|---|---|---|---|
| Personnel expenses | 15 | 869 | 1 521 |
| Amortisation of intangible assets | 16 | 3 | 5 |
| Depreciation charge | 16 | 29 | 62 |
| Transportation expenses | 152 | 257 | |
| Materials | 147 | 181 | |
| Insurance | 3 | 126 | |
| Professional fees | 318 | 499 | |
| Communication services | 37 | 32 | |
| Other expenses | 435 | 283 | |
| Total | 1 993 | 2 966 |
(in USD thousand, unless otherwise stated)
| Note | 2015 | 2014 | |
|---|---|---|---|
| Personnel expenses | 15 | 4 | 142 |
| Depreciation charge | 16 | 2 | 17 |
| Amortisation of the prepayment for ther immediate right to use | |||
| the elevator | 22 | - | 693 |
| Transportation expenses | 315 | 566 | |
| Marketing and advertising expenses | - | 7 | |
| Utilities | 2 | 39 | |
| Other expenses | 50 | 34 | |
| Total | 373 | 1 498 |
| Note | 2015 | 2014 | |
|---|---|---|---|
| Depreciation charge | 16 | 17 | 36 |
| Impairment of trade and other receivables | 25 | 605 | 669 |
| Loss on disposal of property, plant and equipment | 2 | 80 | |
| Loss on disposal of land lease rights | 232 | - | |
| Loss on disposal of current assets | 7 | 5 | |
| Impairment of inventories | 148 | 1 751 | |
| Impairment of harvest failure | 19 | - | 222 |
| Donations | 37 | 30 | |
| Other expenses | 233 | 37 | |
| Total | 1 281 | 2 830 | |
(in USD thousand, unless otherwise stated)
The Group's assets were impaired due to the military conflict in Eastern Ukraine. As a result, the Group has tested the related product lines for impairment and has recognised impairment losses for the following assets:
| Note | 2015 | 2014 | |
|---|---|---|---|
| Impairment of property plant and equipment | 17 | 1 043 | 6 574 |
| Impairment of non-current assets | 22 | 5 644 | 519 |
| Impairment of biological assets | 19 | 19 | 353 |
| Impairment of cash and equivalents | 26 | - | 11 |
| Impairment of trade and other receivables | 25 | 44 | 33 479 |
| Impairment of inventories | 23 | 869 | 4 670 |
| Impairment of intangible assets | 18 | - | 673 |
| Total | 7 619 | 46 279 |
Operating profit is stated after charging the following items:
| Note | 2015 | 2014 | |
|---|---|---|---|
| Depreciation of property, plant and equipment | 17 | 1 080 | 2 799 |
| Amortisation of intangible assets | 18 | 1 430 | 2 371 |
| Loss on disposal of property, plant and equipment | 11 | 2 | 80 |
| Personnel expenses | 15 | 5 435 | 9 315 |
| Independent auditors' remuneration for the statutory audit of | |||
| annual accounts | 41 | 75 |
(in USD thousand, unless otherwise stated)
| 2015 | 2014 | |
|---|---|---|
| Interest income Interest income on financial assets measured at amortised cost |
3 813 | 3 130 |
| Finance income | 3 813 | 3 130 |
| Interest on non-bank loans | (318) | (267) |
| Interest on notes | (1 673) | (2 207) |
| Bank charges | (78) | |
| Loss on foreign exchange differences | (31 612) | (55 813) |
| Finance costs | (33 603) | (58 365) |
| Net finance costs | (29 790) | (55 235) |
| 2015 | 2014 | |
|---|---|---|
| Wages and salaries | 4 001 | 6 802 |
| Contributions to state funds | 1 434 | 2 513 |
| Total | 5 435 | 9 315 |
Payroll and related taxes were presented as follows:
| Note | 2015 | 2014 | |
|---|---|---|---|
| Production personnel | 4 563 | 7 652 | |
| Administrative personnel | 9 | 868 | 1 521 |
| Distribution personnel | 10 | 4 | 142 |
| Total | 13 | 5 435 | 9 315 |
The number of employees were presented as follows:
| 2015 | 2014 | |
|---|---|---|
| Average number of employees, persons | 2 162 | 2 583 12 |
| Key management personnel | 12 |
(in USD thousand, unless otherwise stated)
| Note | 2015 | 2014 | |
|---|---|---|---|
| Depreciation charge: | |||
| Depreciation of production property, plant and equipment | 1 032 | 2 684 | |
| Administrative expenses | 9 | 29 | 62 |
| Distribution expenses | 10 | 2 | 17 |
| Other expenses | 11 | 17 | 36 |
| Total | 17 | 1 080 | 2 799 |
| Amortisation charge: Amortisation of land lease rights Amortisation of land lease rights prepayments Amortisation of the prepayment for the immediate right to use |
1 427 - |
2 366 800 |
|
| elevator | 10 | - | 693 |
| Amortisation of intangible assets | 9 | 3 | 5 |
| Total | 1 430 | 3 864 | |
| Total depreciation and amortisation | 2 510 | 6 663 |
(in USD thousand, unless otherwise stated)
| Construction in progress |
Buildings | Equipment | Vehicles | Computers and office equipment |
Instruments, tools and other equipment |
Total | |
|---|---|---|---|---|---|---|---|
| Cost | |||||||
| Balance at 1 January 2014 | 1 837 | 36 640 | 31 874 | 8 206 | 240 | 326 | 79 123 |
| Additions | 478 | - | - | - | - | - | 478 |
| Disposals | (1) | (17) | (899) | (791) | (10) | (9) | (1 727) |
| Transfers | (437) | 148 | 272 | 11 | 3 | 3 | - |
| Effect from translation into presentation currency | (917) | (18 100) | (15 563) | (3 856) | (116) | (159) | (38 711) |
| Balance at 31 December 2014 | 960 | 18 671 | 15 684 | 3 570 | 117 | 161 | 39 163 |
| Balance at 1 January 2015 | 960 | 18 671 | 15 684 | 3 570 | 117 | 161 | 39 163 |
| Additions | 102 | 131 | 364 | 23 | 4 | 2 | 626 |
| Disposals | - | - | (35) | (2) | (9) | (5) | (51) |
| Transfers | (31) | 31 | - | - | - | - | - |
| Effect from translation into presentation currency | (335) | (6 405) | (5 442) | (1 225) | (16) | (47) | (13 470) |
| Balance at 31 December 2015 | 696 | 12 428 | 10 571 | 2 366 | 96 | 111 | 26 268 |
(in USD thousand, unless otherwise stated)
| Construction in progress |
Buildings | Equipment | Vehicles | Computers and office equipment |
Instruments, tools and other equipment |
Total | |
|---|---|---|---|---|---|---|---|
| Accumulated depreciation and impairment losses | |||||||
| Balance at 1 January 2014 | - | 19 027 | 18 562 | 6 439 | 177 | 241 | 44 446 |
| Charge for the year | - | 940 | 1 641 | 192 | 12 | 14 | 2 799 |
| On disposals | - | (2) | (834) | (787) | (9) | (3) | (1 635) |
| Impairment | 106 | 4 402 | 1 867 | 189 | 5 | 5 | 6 574 |
| Effect from translation into presentation currency | (26) | (10 692) | (9 808) | (3 076) | (89) | (122) | (23 813) |
| Balance at 31 December 2014 | 80 | 13 675 | 11 428 | 2 957 | 96 | 135 | 28 371 |
| Balance at 1 January 2015 | 80 | 13 675 | 11 428 | 2 957 | 96 | 135 | 28 371 |
| Charge for the year | - | 302 | 685 | 79 | 8 | 6 | 1 080 |
| On disposals | - | - | (26) | (2) | (8) | (5) | (41) |
| Impairment | 351 | 610 | 76 | 3 | 2 | 1 | 1 043 |
| Effect from translation into presentation currency | (59) | (4 772) | (4 005) | (1 021) | (28) | (42) | (9 927) |
| Balance at 31 December 2015 | 372 | 9 815 | 8 158 | 2 016 | 70 | 95 | 20 526 |
| Carrying amounts: | |||||||
| As at 1 January 2014 | 1 837 | 17 613 | 13 312 | 1 767 | 63 | 85 | 34 677 |
| As at 31 December 2014 | 880 | 4 996 | 4 256 | 613 | 21 | 26 | 10 792 |
| As at 31 December 2015 | 324 | 2 613 | 2 413 | 350 | 26 | 16 | 5 742 |
(in USD thousand, unless otherwise stated)
The property, plant and equipment were impaired due to the military conflict in Eastern Ukraine. As a result, the Group has tested the related product lines for impairment and has recognised an impairment loss for property, plant and equipment of USD 1 043 thousand (2014: USD 6 574 thousand).
Due to political and economic developments and military conflict in Eastern Ukraine, the Group has temporarily suspended the investment plan for the upgrading of SJSC Khlib Ukraine Novoaydarskyy Elevator. The management has the intention to resume with the investment plan as soon as the conditions in Eastern Ukraine allow this. The total amount spent up to 31 December 2014 for the upgrading of the elevator amounted to USD 961 thousand.
Additionally, during 2015 due to raider attack the Group lost control over Novoaydarskyy Elevator, which has been lawfully rented by the Group from 2000. As a result the amount of USD 642 thousand of upgrading was impaired.
(in USD thousand, unless otherwise stated)
| Computer software |
Land lease rights |
Total | |
|---|---|---|---|
| Cost | |||
| Balance as at 1 January 2014 | 38 | 35 368 | 35 406 |
| Additions | - | - | - |
| Effect from translation into presentation currency | (19) | (17 440) | (17 459) |
| Balance as at 31 December 2014 | 19 | 17 928 | 17 947 |
| Reclassification from advances to land lease rights | - | 6 528 | 6 528 |
| Disposals | - | (406) | (406) |
| Effect from translation into presentation currency | (7) | (8 352) | (8 359) |
| Balance as at 31 December 2015 | 12 | 15 698 | 15 710 |
| Accumulated amortisation and impairment losses | |||
| Balance as at 1 January 2014 | 16 | 5 828 | 5 844 |
| Amortisation charge | 5 | 2 366 | 2 371 |
| Impairment | - | 673 | 673 |
| Effect from translation into presentation currency | (9) | (3 618) | (3 627) |
| Balance as at 31 December 2014 | 12 | 5 249 | 5 261 |
| Amortisation charge | 3 | 1 427 | 1 430 |
| Reclassification from advances to land lease rights | - | 3 441 | 3 441 |
| Disposals | - | (174) | (174) |
| Impairment | - | - | - |
| Effect from translation into presentation currency | (5) | (3 094) | (3 099) |
| Balance as at 31 December 2015 | 10 | 6 849 | 6 859 |
| Carrying amounts: | |||
| As at 1 January 2014 | 22 | 29 540 | 29 562 |
| As at 31 December 2014 | 7 | 12 679 | 12 686 |
| As at 31 December 2015 | 2 | 8 849 | 8 851 |
The ownership of land lease rights previously held by subsidiary companies Gefest LLC, Alinco PE, Tais-Abb PE and LLC Lugastan have been transferred to Agroton PJSC and PE Agricultural Production Firm Agro.
Additionally, the intangible assets were impaired due to the military conflict in Eastern Ukraine. As a result, the Group has tested the related product lines for impairment and has recognised in 2014 an impairment loss for intangible assets of USD 673 thousand.
(in USD thousand, unless otherwise stated)
Biological assets were presented as follows:
| 2015 | 2014 | |
|---|---|---|
| Crops under cultivation | 3 732 | 4 101 |
| Animals in growing and fattening | 1 354 | 1 847 |
| Total current biological assets | 5 086 | 5 948 |
| Cattle | 1 533 | 2 482 |
| Other | 8 | 7 |
| Total non-current biological assets | 1 541 | 2 489 |
| Total | 6 627 | 8 437 |
At 31 December 2015 and 31 December 2014 the crops under cultivation were presented as follows:
| 31 December 2015 | 31 December 2014 | |||
|---|---|---|---|---|
| Thousands of hectares |
Carrying values |
Thousands of hectares |
Carrying values |
|
| Winter wheat plantings | 36 | 3 659 | 42 | 4 070 |
| Other plantings | 1 | 73 | 1 | 31 |
| Total | 37 | 3 732 | 43 | 4 101 |
The reconciliation of crops under cultivation carrying value was presented as follows:
| 2015 | 2014 | |
|---|---|---|
| At 1 January | 4 101 | 2 455 |
| Increase in value as a result of capitalisation of cost | 28 071 | 37 865 |
| Decrease in value as a result of harvesting | (44 133) | (52 434) |
| Gain from presentation of biological assets at fair value (note 7) | 17 208 | 18 579 |
| Impairment of harvest failure (note 11) | - | (222) |
| Effect from translation into presentation currency | (1 515) | (2 142) |
| At 31 December | 3 732 | 4 101 |
(in USD thousand, unless otherwise stated)
The main crops harvested and the fair value at the time of harvesting was as follows:
| 31 December 2015 | 31 December 2014 | |||
|---|---|---|---|---|
| Volume, Amount, tonnes USD thousand |
Volume, tonnes |
Amount, USD thousand |
||
| Winter wheat | 149 634 | 19 141 | 160 031 | 24 035 |
| Sunflower | 67 570 | 21 780 | 73 848 | 22 654 |
| Corn | 17 498 | 1 987 | 26 492 | 3 275 |
| Other sowing | 70 807 | 1 225 | 81 540 | 2 470 |
| Total | 305 509 | 44 133 | 341 911 | 52 434 |
There are no impairment of harvest failure in 2015 (2014: USD 222 thousand is included in "Other operating expenses") (Note 11). The previous impairment identified was the result of bad weather conditions.
Expenses capitalised in biological assets mainly include fertilisers, fuel, seeds, labour and the operating lease rentals.
Non-current biological assets:
| 31 December 2015 | 31 December 2014 | |||
|---|---|---|---|---|
| Number, heads |
Fair value |
Number, heads |
Fair value |
|
| Cattle | 2 445 | 1 533 | 2 471 | 2 482 |
| Horses | 8 | 8 | 10 | 7 |
| Total | 1 541 | 2 489 |
Animals in growing and fattening:
| 31 December 2015 | 31 December 2014 | |||
|---|---|---|---|---|
| Number, heads |
Fair value |
Number, heads |
Fair value |
|
| Cattle | 3 204 | 1 354 | 3 296 | 1 841 |
| Horses | - | - | 14 | 6 |
| Total | 1 354 | 1 847 |
(in USD thousand, unless otherwise stated)
Reconciliation of non-current biological assets carrying value was presented as follows:
| 2015 | 2014 | |
|---|---|---|
| At 1 January | 2 489 | 3 162 |
| Decrease in value due to sale of assets | - | (1) |
| Increase in value as a result of capitalisation of cost | 2 084 | 3 247 |
| Decrease in value as a result of harvesting agricultural products | (2 001) | (3 223) |
| Gain/(loss) from presentation of biological assets at fair value | (257) | 1 075 |
| Transfer between group of assets | 70 | 75 |
| Effect from translation into presentation currency | (844) | (1 846) |
| At 31 December | 1 541 | 2 489 |
Expenses capitalised in biological assets of animals include mixed folder, electricity, labour, depreciation and other.
Reconciliation of animals in growing and fattening carrying value was presented as follows:
| 2015 | 2014 | |
|---|---|---|
| At 1 January | 1 847 | 3 576 |
| Increase in value as a result of asset acquisition | 20 | 171 |
| Increase in value as a result of capitalisation of cost | 1 189 | 11 363 |
| Decrease in value as a result of harvesting agricultural products | (10) | (10 692) |
| Decrease in value as a result of sale of assets | (305) | (107) |
| Mortality | - | (396) |
| Impairment of biological assets | (19) | (353) |
| Transfer between groups of assets | (80) | (75) |
| Other changes | (2) | - |
| Gain from presentation of biological assets at fair value | (639) | 135 |
| Effect from translation into presentation currency | (647) | (1 775) |
| At 31 December | 1 354 | 1 847 |
Due to the military conflict in Eastern Ukraine, the Group has temporarily abandoned the poultry farming business. As a result, the Group has recognised loss for biological assets of USD 19 thousand (2014: USD 353 thousand). The management will reassess the position when the political and economic environment in Eastern Ukraine will be amended.
(in USD thousand, unless otherwise stated)
Financial assets designated at fair value through profit or loss represents equity securities of Bank of Cyprus converted into shares after the decree issued by Central Bank of Cyprus on 29 March 2013. Based on that decree and the measurements for recapitalization of Bank of Cyprus, 47,5% of the uninsured deposits of the affected deposits have been converted into Bank of Cyprus shares.
In August 2013, pursuant to the above measurements, Bank of Cyprus, has issued to the Company 1 591 105 shares with nominal value €1,00 each. These shares have been identified, classified and measured according to the relevant provisions of IAS 39 "Financial instruments: Recognition and Measurement" and IFRS 13 "Fair Value Measurement".
Bank of Cyprus shares are marketable securities and are valued at market value at the close of business on 31 December by reference to the Cyprus Stock Exchange quoted bid prices. At 31 December 2015 the bid price was €0,147 per share (31 December 2014: €0,215 per share). Prior to 2014, following the decree on the rescue by own means of Bank of Cyprus issued by Central Bank of Cyprus, trading of Bank of Cyprus equity securities had been temporarily suspended by both the Cyprus Stock Exchange and the Athens Stock Exchange. Hence, the 2013 value of shares was estimated by the Company's management.
The exposure of the Company to market risk in relation to financial assets is reported in note 36 to the consolidated financial statements.
| Note | 2015 | 2014 | |
|---|---|---|---|
| Current assets | |||
| Loans to related parties | 32 | 12 930 | 26 933 |
| Loans to third parties | 3 406 | 2 862 | |
| Total | 16 336 | 29 795 |
(in USD thousand, unless otherwise stated)
On 1 October 2013, the Company has entered into a loan agreement with Hoyt Network Limited amounting to USD 10 million. The loan bears interest at a rate of 10% and expired on 1 October 2014. During 2014 the two parties agreed to further postpone the repayment to 1 October 2015. During 2015 the two parties agreed to further postpone the repayment date to 31 December 2016. The above loan is unsecured.
The exposure ot the Group to credit risk is reported in note 36 to the consolidated financial statements.
| 2015 | 2014 | |
|---|---|---|
| Advances | ||
| Advance for land lease | 8 000 | 8 000 |
| Less: provision for impairment | (1 313) | (519) |
| Less: amortisation | (3 600) | (3 600) |
| Less: transfer to land lease rights | (3 087) | - |
| Advance for land lease - net | - | 3 881 |
| Prepayments: | ||
| Prepayments for the immediate right to use the elevator | 10 000 | 10 000 |
| Less: Provisions for impairment | (7 922) | (3 072) |
| Less: amortisation | (2 078) | (2 078) |
| Prepayments for the immediate right to use elevator | - | 4 850 |
| Total | - | 8 731 |
On 20 July 2011, PE Agricultural Production Firm "Agro" entered into an investment agreement with SJSC Khlib Ukraine Novoaydarskyy Elevator, in respect of the Novoaydarskyy Elevator. Based on the agreement PE APF "Agro" undertakes to invest USD 1 155 thousand for the upgrading of the elevator until 20 July 2021 and upon completion of the project, "Agro" will become the 54% owner of the elevator while the remaining 46% will continue to be owned by the existing owner. In case "Agro" invests additional amounts in the upgrading of the elevator, its participation in the ownership rights will increase. The grain elevator with a total storage capacity of 130 000 tons was previously rented by the Group as part of its operations.
During the year 2011, Agroton Public Ltd made a prepayment of USD 10 000 thousand in relation to this investment agreement specifically for its rights to secure use of this elevator. The fair value of these rights was evaluated at USD 6 928 thousand hence an impairment loss of USD 3 072 thousand was accounted for in the consolidated statement of profit or loss.
The total amount spent by PE Agro for the upgrading of the elevator amounted to USD 961 thousand. The cost is included in construction in progress in property, plant and equipment.
(in USD thousand, unless otherwise stated)
Following the development in Eastern Ukraine, due to raider attack, the Company lost the control of the elevetor, hence an impairment loss of USD 4 850 thousand (representing the net book value) was recognised in profit or loss.
Additionally, the land lease rights were impaired due to the military conflict in Eastern Ukraine. As a result, the Group has test the related product lines for impairment and has recognised an impairment loss for advances for land lease rights of USD 794 thousand (2014: USD 519 thousand).
| 2015 | 2014 | |
|---|---|---|
| Raw materials | 898 | 686 |
| Work-in-progress | 2 942 | 3 905 |
| Agricultural produce | 15 111 | 14 658 |
| Finished goods | 2 | 28 |
| Other | 850 | 655 |
| Total | 19 803 | 19 932 |
Work in progress includes expenditure capitalised in respect of 99 thousand hectares (2014: 72 thousand hectares) of plough land prepared for sowing in the current or following year.
The main agricultural produce was as follows:
| 2015 | 2014 | |
|---|---|---|
| Winter wheat | 591 | 3 331 |
| Sunflower | 13 722 | 10 204 |
| Corn | 310 | 302 |
| Other agricultural crops | 488 | 821 |
| Total | 15 111 | 14 658 |
(in USD thousand, unless otherwise stated)
The main agricultural produce volume in tonnes was as follows:
| 2015 | 2014 | |
|---|---|---|
| Winter wheat | 149 635 | 29 849 |
| Sunflower | 67 570 | 44 812 |
| Corn | 17 498 | 3 508 |
| Total | 234 703 | 78 169 |
At 31 December 2015 there were no loans secured by inventories (2014: nil).
Inventories were impaired due to the military conflict in Eastern Ukraine. As a result, the Group has tested the related product lines for impairment and recognised an impairment loss for inventories of USD 869 thousand (2014: USD 4 670 thousand).
| Note | 2015 | 2014 | |
|---|---|---|---|
| Trade receivables Provision for impairment of receivables |
25 | 1 147 (349) |
1 494 (611) |
| Trade receivables, net | 798 | 883 | |
| Prepayments to suppliers | 2 706 | 1 098 | |
| Other receivables | 33 536 | 33 305 | |
| Provision for impairment of prepayments and other receivables | 25 | (33 650) | (33 566) |
| VAT recoverable | 198 | 326 | |
| Total | 3 588 | 2 046 |
On 29 June 2012, the Company entered into a preliminary agreement with Stiomi Agri Limited ('Seller') for the acquisition of 100% of the issued share capital of Private Enterprise 'Peredilske'. The parties agreed that the price for transfer of the company's shares amounting to USD 23 080 000.
On 26 December 2012, the Company entered into a preliminary agreement with Stiomi Agri Limited ('Seller') for the acquisition of 100% of the issued share capital of Limited Liability Company 'Skhid Potencial-Resurs'. The parties agreed that the price for transfer of the company's shares shall amount to USD 10 000 000.
On 3 September 2013 both agreements for the acquisition of PE "Peredilske" and of LLC "Skhid-Potencial-Resurs" have been cancelled. The parties agreed that the whole amount paid should be returned to the Company within twelve months of the signing of the cancellation agreements, either in cash and/or an equivalent market value's worth of agricultural goods.
(in USD thousand, unless otherwise stated)
Due to political and economic developments and military conflict in Eastern Ukraine, Stiomi Agri Limited is currently unable to repay this amount to the Group. It is highly probable that this amount will never be recovered, therefore an impairment loss for USD 33 080 thousand was recognised in 2014.
Additionally, the trade and other receivables were impaired due to the military conflict in Eastern Ukraine. As a result, the Group has recognised an impairment loss for trade and other receivables of USD 44 thousand (2014: USD 399 thousand).
The exposure of the Group to credit risk and impairment losses in relation to trade and other receivables is reported in note 36 to the consolidated financial statements.
The movement in the provision for doubtful debts in respect of trade and other receivables was as follows:
| Note | 2015 | 2014 | |
|---|---|---|---|
| At 1 January | 34 177 | 2 071 | |
| Provision for the year | 11 | 605 | 669 |
| Impairment losses | 12 | 44 | 33 479 |
| Reversal of provision for bad debts | 8 | (210) | (39) |
| Write-off of provision for bad debt from receivables | (58) | (963) | |
| Effect of translation into presentation currency | (559) | (1 040) | |
| At 31 December | 24 | 33 999 | 34 177 |
| 2015 | 2014 | |
|---|---|---|
| Fixed deposit | - | 717 |
| Cash at bank - USD | 5 438 | 2 192 |
| Cash at bank - UAH | 3 128 | 2 274 |
| Cash at bank - Euro | - | - |
| Cash in hand | 9 | 23 |
| Total | 8 575 | 5 206 |
The cash and cash equivalents, were impaired due to the military conflict in Eastern Ukraine. As a result, the Group has recognised in 2014 an impairment loss for the cash and cash equivalents of USD 11 thousand .
The exposure of the Group to credit risk and interest rate risk in relation to cash and cash equivalents is reported in note 36 to the consolidated financial statements.
(in USD thousand, unless otherwise stated)
The assets and liabilities of subsidiary companies Agro-Svinprom LLC and Belokurakinskiy livestock complex LLC, operating in pig-breeding, have been presented as held for sale following the Management decision in July 2011 and December 2013 respectively to dispose both companies.
In this respect the Management of the Group has advertised their intention for the sale of the two subsidiaries to the public media, for attraction of prospective new investors. Belokurakinskyi livestock complex LLC was disposed on 14 April 2014.
| 2015 | Agro Svinprom LLC |
Belokurakinskiy livestock complex LLC |
Total |
|---|---|---|---|
| Cost of sales | (10) | - | (10) |
| Gross loss | (10) | - | (10) |
| Administrative expenses | (10) | - | (10) |
| Operating loss for the year | (20) | - | (20) |
| Loss for the year | (20) | - | (20) |
| 2014 | Agro Svinprom LLC |
Belokurakinskiy livestock complex LLC |
Total |
| Administration expenses | (63) | - | (63) |
| Loss on disposal subsidiaries | (43) | - | (43) |
| Operating loss for the year | (106) | - | (106) |
| Loss on sale of discontinued operation | - | (43) | (43) |
| Loss for the year | (106) | - | (106) |
(in USD thousand, unless otherwise stated)
At 31 December 2015 the disposal group comprised the following assets and liabilities:
| Agro Svinprom LLC |
Belokurakinskiy livestock complex LLC |
Total | |
|---|---|---|---|
| Assets classified as held for sale | |||
| Property, plant and equipment | 20 | - | - |
| Total | 20 | - | - |
| Liabilities classified as held for sale | |||
| Trade and other payables | (11) | - | - |
| Total | (11) | - | - |
| Net assets | 9 | - | - |
At 31 December 2014 the disposal group comprised the following assets and liabilities:
| Agro-Svinprom LLC |
Belokurakinskiy livestock complex LLC |
Total | |
|---|---|---|---|
| Assets classified as held for sale | |||
| Property, plant and equipment | 30 | - | 30 |
| Total | 30 | - | 30 |
| Liabilities classified as held for sale | |||
| Trade and other payables | (21) | - | (21) |
| Total | (21) | - | (21) |
| Net assets | 9 | - | 9 |
In December 2013, the entity Belokuraninskiy livestock complex LLC was separated from Agro-Svinprom LLC for the purpose of subsequent sale.
(in USD thousand, unless otherwise stated)
| 2015 Number of shares |
2015 Nominal value, USD |
2014 Number of shares |
2014 Nominal value, USD |
|
|---|---|---|---|---|
| Authorised share capital: | ||||
| Ordinary shares of EUR 0,021 each | 47 619 048 | 1 321 500 | 47 619 048 | 1 321 500 |
| Number of shares |
Nominal value, USD |
Share premium, USD |
Total, USD |
|
| Issued and fully paid: | ||||
| At 1 January 2014 | 21 670 000 | 661 128 | 88 531 664 | 89 192 792 |
| At 31 December 2014 | 21 670 000 | 661 128 | 88 531 664 | 89 192 792 |
| At 31 December 2015 | 21 670 000 | 661 128 | 88 531 664 | 89 192 792 |
Global Depositary Receipts "GDRs" were issued against the 4 000 000 new shares by "The Bank of New York Mellon" for USD 9,72875 per each new share. The total consideration of the share capital issued was USD 38 915 000 out of which USD 123 715 is the total nominal value credited to the share capital account and USD 38 791 285 is the share premium reserve. Share issue expenses of USD 317 154 were deducted from the share premium reserve. GDRs are traded on the Open Market of the Frankfurt Stock Exchange since 12 November 2009.
iii The members of the Company held an Extraordinary General Meeting on 25 June 2010 where they authorized and approved the increase of the issued share capital of the Company from 16 000 000 ordinary shares of EUR 0,021 each amounting to EUR 336 000 (USD equivalent of USD 494 306) to 21 670 000 ordinary shares of nominal value of EUR 0,021, by the creation of 5 670 000 ordinary shares of a nominal value of EUR 0,021 each, ranking pari pasu with the existing shares of the Company.
(in USD thousand, unless otherwise stated)
On 29 October 2010 the Company proceeded and issued 5 670 000 ordinary shares of nominal value EUR 0,021 each, amounting to EUR 119.070 (equivalent to USD 166 822), at a premium of EUR 6,7595 per share amounting to a total share premium of EUR 38 326 365 (USD equivalent of USD 54 222 634). The issue price for shares in the Company's public offering was set at PLN 27 per share. The Company raised total gross proceeds of PLN 153 090 000 (USD equivalent of USD 54 389 456) from the public offering. Share issue expenses of USD 4 165 101 were deducted from the share premium reserve.
During the year 2010, the Board of Directors of the Company resolved to proceed with the initial public offering of 5 670 000 new ordinary shares of the Company and the application for the admission of the entire issued share capital of the company, including the Offer Shares to trading on the regulated market of the Warsaw Stock Exchange.
| 2015 | 2014 | |
|---|---|---|
| Non-current liabilities | ||
| Notes | 20 711 | 31 130 |
| 20 711 | 31 130 | |
| Current liabilities | ||
| Loan from owner | 1 899 | 1 588 |
| 1 899 | 1 588 | |
| Total loans and borrowings | 22 610 | 32 718 |
On 14 July 2011, the Company's issued USD 50 000 000 12,50% Notes due on 14 July 2014, have been admitted to the official list of the UK Listing authority and to the London Stock Exchange Plc and trading on the London Stock Exchange's regulated market.
The Notes bear interest at a rate of 12,50% per annum payable semi-annually in arrears on 14 January and 14 July in each year, commencing on 14 January 2012.
The Notes are recognised initially at fair value USD 50 000 000 net of issue costs equal to USD 2 777 014. The difference between the proceeds (net of issue costs) and the redemption value as at 14 July 2014 is recognised in the consolidated statement of profit or loss over the period of the issue.
(in USD thousand, unless otherwise stated)
On 8 August 2013 with the consent of the Noteholders the Company has amended the terms and conditions of the Notes as follow:
On 18 December 2013 the Company has secured a second consent of the Noteholders to amend the terms and conditions of the Notes as follow:
On 19 April 2014 the Company has purchased Notes in an aggregate principal amount of USD 22 100 000.
(in USD thousand, unless otherwise stated)
Notes (cont.)
On 15 December 2014 the Company has secured a third consent of the Noteholders to amend the terms and conditions of the Notes as follow:
On 28 October 2015 the Company has purchased Notes in an aggregate principal amount of USD 10 350 000.
On 11 January 2016 the Company has secured a fourth consent of the Noteholders to postpone to 14 January 2017 the interest payments that was due for payment to Noteholders on 14 January 2016.
The following subsidiaries are acting as surety providers:
In February 2013 subsidiary company AF named by Shevchenko has been sold to a third party and subsequently released from its suretyship in respect of the Notes.
The exposure of the Group to interest rate risk in relation to loans and borrowings is reported in Note 36 to the consolidated financial statements.
(in USD thousand, unless otherwise stated)
| 2015 | 2014 | |
|---|---|---|
| Trade payables | 184 | 1 305 |
| Payroll and related expenses accrued | 372 | 445 |
| Advances received | 13 | 61 |
| Liabilities for other taxes and mandatory payments | 156 | 49 |
| Payable for operating lease of land | 249 | 776 |
| Accrued expenses | 37 | 67 |
| Other provisions | 13 | 22 |
| Other liabilities | 19 | 17 783 |
| Total | 1 043 | 20 508 |
The exposure of the Group to liquidity risk in relation to trade and other payables is reported in Note 36 to the consolidated financial statements.
The calculation of basic profir/(loss) per share was based on the profit/(loss) attributable to the owners of the Company, and a weighted average number of ordinary shares as follows:
| 2015 | 2014 | |
|---|---|---|
| Profit/(loss) attributable to the owners of the Company (in USD'000): | ||
| Profit/(loss) from continuing operations attributable to the owners of | ||
| the Company | 1 403 | (76 142) |
| Loss from discontinued operations attributable to the owners of the | ||
| Company | (20) | (106) |
| Total profit/(loss) attributable to the owners of the Company | 1 383 | (76 248) |
| Weighted average number of ordinary shares: Weighted average number of ordinary shares at 31 December |
21 670 000 | 21 670 000 |
| Profit/(loss) per share from continuing operations (USD per share) |
0,06 | (3,51) |
| Total basic profit/(loss) per share (USD per share) | 0,06 | (3,51) |
Profit/(loss) per share is the profir/(loss) for the year after taxation attributable to the owners of the Company divided by weighted average number of shares in issue for each year.
There were no options or instruments convertible into shares and so basic and diluted earnings per share are the same.
(in USD thousand, unless otherwise stated)
As at 31 December 2015 and the date of this report, the Company is controlled by Mr. Iurii Zhuravlov, who holds directly 67,4% of the Company's share capital. The remaining 32,6% of the shares is widely held.
For the purposes of these consolidated financial statements, parties are considered to be related if one party has the ability to control the other party, is under common control, or can exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.
According to these criteria the related parties of the Group are divided into the following categories:
Salary costs of key management personnel for the years ended 31 December 2015 and 31 December 2014 were as follows:
| 2015 | 2014 | |
|---|---|---|
| Wages and salaries | 42 | 72 |
| Contributions to social funds | 16 | 25 |
| Total | 58 | 97 |
Key management personnel include Directors (Executive and Non-Executive), the Chief Financial Officer, the Chief Agronomist, the Head of the Food Production Division and the Head of the Livestock Division.
| 2015 | 2014 | |
|---|---|---|
| Number of key management personnel, persons | 12 | 12 |
For the year ended 31 December 2015
(in USD thousand, unless otherwise stated)
Outstanding balances with related parties:
| Loans receivable | 2015 | 2014 |
|---|---|---|
| d. Companies and individuals significantly influencing the Group and | ||
| having an interest in equity of Group's companies | ||
| Mr Iurii Zhuravlov - Chief Executive Officer | 12 930 | 26 933 |
| Total | 12 930 | 26 933 |
| Loans payable | ||
| d. Companies and individuals significantly influencing the Group and | ||
| having an interest in equity of Group's companies Mr Iurii Zhuravlov - Chief Executive Officer |
1 899 | 1 588 |
| Total | 1 899 | 1 588 |
| Other payable | ||
| d. Companies and individuals significantly influencing the Group and | ||
| having an interest in equity of Group's companies | ||
| Mr Iurii Zhuravlov - Chief Executive Officer | - | 17 659 |
| Total | - | 17 659 |
| The Group's transactions with related parties: | ||
| Finance income | 2015 | 2014 |
| d. Companies and individuals significantly influencing the Group and having an interest in equity of Group's companies |
||
| Mr Iurii Zhuravlov - Chief Executive Officer | 2 196 | 2 253 |
| Total | 2 196 | 2 253 |
| Expenses | ||
| c. Key management personnel | 58 | 97 |
| Total | 58 | 97 |
A reportable segment is a separable component of a business entity that produces goods or provides services to individuals (or groups of related products or services) in a particular economic environment that is subject to risks and generates revenues other than risks and income of those components that are peculiar to other reportable segments.
Reportable segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. All reportable segments' results are reviewed regularly by the Group's CEO to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.
(in USD thousand, unless otherwise stated)
The operating businesses are organised and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.
For the year ended 31 December 2015 the Group identified the following reportable segments, which include products and services, that differ by levels of risk and conditions of generation of income:
No operating segments have been aggregated to form the above reportable operating segments.
Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.
Management monitors the operating results of each of the unit separately for the purpose of making decisions about resources allocation and evaluation of operating results.
Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. Group financing (including finance expense and finance income) and income taxes, are managed on a group basis and are not allocated to operating segments.
The Group carries out its core financial and economic activities in the territory of Ukraine. Accordingly, the Group selects one geographical reportable segment.
(in USD thousand, unless otherwise stated)
Information by reportable segment is presented as follows:
| 2015 | Livestock | Plant breeding |
Other | Group level |
Total |
|---|---|---|---|---|---|
| Total revenue | 2 972 | 39 204 | 1 079 | - | 43 255 |
| Inter-segment sales | (249) | (561) | (295) | - | (1 105) |
| External revenues | 2 723 | 38 643 | 784 | - | 42 150 |
| Net change in fair value less cost to sell of | |||||
| biological assets and agricultural produce | (896) | 18 405 | (1 202) | - | 16 307 |
| Expenses (excluding depreciation and | |||||
| amortisation | (4 587) | (52 740) | (589) | - | (57 916) |
| Impairment losses | (44) | (7 575) | - | - | (7 619) |
| (Loss)/profit for the year (excluding | |||||
| depreciation and amortisation) | (2 804) | (3 267) | (1 007) | - | (7 078) |
| Depreciation and amortisation | (152) | (2 289) | (69) | - | (2 510) |
| (Loss)/profit before taxation from | |||||
| continuing operations | (2 956) | (5 556) | (1 076) | - | (9 588) |
| Reportable segment assets | 5 686 | 46 133 | 1 388 | 16 590 | 69 797 |
| Reportable segment liabilities | 68 | 21 676 | 1 920 | 112 | 23 776 |
| 2014 | Livestock | Plant | Other | Group | Total |
| breeding | level | ||||
| Total revenue | 15 863 | 42 148 | 3 307 | - | 61 318 |
| Inter-segment sales | (402) | (762) | (1 186) | - | (2 350) |
| External revenues | 15 461 | 41 386 | 2 121 | - | 58 968 |
| Net change in fair value less cost to sell of biological assets and agricultural produce |
1 210 | 18 579 | - | - | 19 789 |
| Expenses (excluding depreciation and | |||||
| amortisation) | (28 595) | (76 220) | (1 382) | - | (106 197) |
| Impairment losses (Loss)/profit for the year (excluding |
(7 491) (19 415) |
(38 788) (55 043) |
- 739 |
- - |
(46 279) (73 719) |
| depreciation and amortisation) | |||||
| Depreciation and amortisation | (2 346) | (4 257) | (60) | - | (6 663) |
| (Loss)/profit before taxation from | |||||
| continuing operations | (21 761) | (59 300) | 679 | - | (80 382) |
| Reportable segment assets | 10 140 | 55 889 | 1 831 | 30 137 | 97 997 |
(in USD thousand, unless otherwise stated)
The Cyprus economy has been adversely affected during the last few years by the economic crisis. The negative effects have to some extent been resolved, following the negotiations and the relevant agreements reached with the European Commission, the European Central Bank and the International Monetary Fund (IMF) for financial assistance which was dependent on the formulation and the successful implementation of an Economic Adjustment Program. The agreements also resulted in the restructuring of the two largest (systemic) banks in Cyprus through a "bail in".
The Cyprus Government has successfully completed earlier than anticipated the Economic Adjustments Program and exited the IMF program on 7 March 2016, after having recovered in the international markets and having only used €7,25 of the total €10 billion earmarked in the financial bailout. Under the new Euro area rules, Cyprus will continue to be under surveillance by its lenders with bi-annual postprogramme visits until it repays 75% of the economic assistance it received.
Although there are signs of improvement, especially in the macroeconomic environment of the country's economy, significant challenges remain that could affect the estimates of the Company's cash flows and its assessment of impairment of financial and non-financial assets.
The Company's management is unable to predict all developments which could have an impact on the Cyprus economy and consequently, what effect, if any, they could have on the future financial performance, cash flows and financial position of the Company.
On the basis of the evaluation performed, the Company's management has concluded that no provisions or impairment charges are necessary.
The Company's management believes that it is taking all the necessary measures to maintain the viability of the Company and the development of its business in the current business and economic environment.
The Group conducts its operations mainly in Ukraine. Ukraine's political and economic situation has deteriorated significantly since 2014. Following political and social unrest in early 2014, in March 2014, various events in Crimea led to the accession of the Republic of Crimea to the Russian Federation, which was not recognised by Ukraine and many other countries. This event resulted in a significant deterioration of the relationship between Ukraine and the Russian Federation. Following the instability in Crimea, regional tensions have spread to the Eastern regions of Ukraine, primarily Donetsk and Lugansk regions. In May 2014, protests in those regions escalated into military clashes and armed conflict between supporters of the self-declared republics of the Donetsk and Lugansk regions and the Ukrainian forces, which continued throughout the date of these financial statements. As a result of this conflict, part of the Donetsk and Lugansk regions remains under control of the self-proclaimed republics, and Ukrainian authorities are not currently able to fully enforce Ukrainian laws on this territory.
(in USD thousand, unless otherwise stated)
Political and social unrest combined with the military conflict in the Donetsk and Lugansk regions has deepened the ongoing economic crisis, caused a fall in the country's gross domestic product and foreign trade, deterioration in state finances, depletion of the National Bank of Ukraine's foreign currency reserves, significant devaluation of the national currency and a further downgrading of the Ukrainian sovereign debt credit ratings. Following the devaluation of the national currency, the National Bank of Ukraine introduced certain administrative restrictions on currency conversion transactions, which among others included restrictions on purchases of foreign currency by individuals and companies, the requirement to convert 75% of foreign currency proceeds to local currency, a ban on payment of dividends abroad, a ban on early repayment of foreign loans and restrictions on cash withdrawals from banks. These events had a negative effect on Ukrainian companies and banks, significantly limiting their ability to obtain financing on domestic and international markets.
The final resolution and the effects of the political and economic crisis are difficult to predict but may have further severe effects on the Ukrainian economy.
Whilst management believes it is taking appropriate measures to support the sustainability of the Group's business in the current circumstances, a continuation of the current unstable business environment could negatively affect the Group's results and financial position in a manner not currently determinable. These consolidated financial statements reflect management's current assessment of the impact of the Ukrainian business environment on the operations and the financial position of the Group. The future business environment may differ from management's assessment.
The dangers which may arise from unexpected external factors such as competition, and the further deterioration of the market conditions cannot be ignored. In addition the current financial position of the Group, the uncertain economic conditions in Cyprus and Ukraine, the unavailability of finance, the blockage of funds, together with the current instability of the banking system and the anticipated overall future economic recession may hinder the management's effort to sustain the group as a going concern. However having regard to the fact that with the consent of the Noteholders, the Company has amended the terms and conditions of the Notes with an extension of maturity date and postponement of interest payments, the Board of Directors believes that the Company will remain a going concern and that no indications of any kind of threat of liquidation exists in the foreseeable future.
The consolidated financial statements do not include any adjustments that would be necessary in case the Group was not able to continue operating as a going concern which could include:
(in USD thousand, unless otherwise stated)
The exposure of the Group to the economic environment and possible impact is disclosed in note 34 to the consolidated financial statements.
As a result of unstable economic enviroment in Ukraine, tax authorities in Ukraine pay more and more attention to the business cycles. In connection with this, tax laws in Ukraine are subject to frequent changes. Furthermore, there are cases of their inconsistent application, interpretation and execution. Noncompliance with laws and regulations may lead to severe fines and penalties.
The Company operates in the Cypriot tax jurisdiction and its subsidiaries in tax jurisdiction of the respective countries of incorporation. The Group's management must interpret and apply existing legislation to transactions with third parties and its own activities. Significant judgment is required in determining the provision for direct and indirect taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.The Group's uncertain tax positions are reassessed by management at every reporting period end. Liabilities are recorded for income tax positions that are determined by management as more likely than not to result in additional taxes being levied if the positions were to be challenged by the tax authorities.
The assessment is based on the interpretation of tax laws that have been enacted or substantively enacted by the reporting period and any known court or other rulings on such issues. Liabilities for penalties, interest and taxes other than on income are recognised based on management's best estimate of the expenditure required to settle the obligations at the reporting period.
In December 2010, the revised Tax Code of Ukraine was officially published. In its entirety, the Tax Code of Ukraine became effective on 1 January 2011, while some of its provisions took effect later. Apart from changes in CIT rates from 1 April 2011 and planned abandonment of VAT refunds for agricultural industry from 1 January 2018, respectively, the Tax Code also changes various other taxation rules.
The Group considers that it operates in compliance with tax laws of Ukraine, although, a lot of new laws about taxes and transactions in foreign currency have been adopted recently, and their interpretation is rather ambiguous.
In accordance with recent tax legislation changes, in 2016 the following VAT payment options will be applied:
(in USD thousand, unless otherwise stated)
Effective from 1 January 2016, the Group is applying the third VAT treatment option.
In the course of its economic activities, the Group is involved in legal proceedings with third parties. In most cases, the Group is the initiator of such proceedings with the purpose of preventing or mitigating of economic losses.
The Group's management considers that as at the reporting period, active legal proceedings on such matters will not have any significant influence on its financial position.
Most employees of the Group receive pension benefits from the Pension Fund, a Ukrainian Government organisation in accordance with the applicable laws and regulations of Ukraine. The Group is obliged to deduct and contribute a certain percentage of salaries to the Pension Fund to finance the benefits. The only obligation of the Group with respect to this pension plan is to make the specified contributions from salaries.
At 31 December 2015 and 31 December 2014 the Group's entities had no liabilities for any supplementary pensions, health care, insurance benefits or retirement indemnities to its current or former employees.
The Group had the following contractual obligations under land operating lease agreements as at 31 December 2015 and 31 December 2014:
| 2015 | 2014 | |
|---|---|---|
| Less than 1 year | 2 883 | 3 647 |
| Between 1 to 5 years | 6 889 | 9 087 |
| More than 5 years | 874 | 991 |
| Total | 10 646 | 13 725 |
Plough-land is leased by the Group from individuals. The total size of leased plough-land at 31 December 2015 is 122 thousand hectares (2014: 124 thousand hectares). The average rental payment for leased plough-land in the year ended 31 December 2015 ranges between 3% - 4% (year ended 31 December 2014: 3% - 6%) from the normative value of land.
(in USD thousand, unless otherwise stated)
The Group has exposure to the following risks arising from the use of financial instruments: (a) Credit risk
(b) Liquidity risk
(c) Market risk
(d) Operational risk
The Company's Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework.
The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group is not a finance company, thus it uses financial instruments as may be necessary in order to obtain finance for its activities, not for the purpose of receiving income. In the process of its activities the Group uses the following financial instruments: cash and cash equivalents, bank deposits, accounts receivable, bank loans, finance leases, accounts payable.
The Group is exposed to the following risks resulting from use of financial instruments: credit risk, liquidity risk and market risk (including foreign currency risk and interest rate risk of fair value) and operation risk. This explanation contains information relating to the Group's exposure to each of the risk types mentioned above, Group's objectives, its policy and procedures of these risks measurement and management.
Additional disclosures of quantitative information are presented in multiple other sections of these financial statements, including:
(in USD thousand, unless otherwise stated)
Credit risk is the risk of financial loss for the Group in case of non-fulfilment of financial obligations by a client or counterparty under the respective agreement. In the reporting period the Group's financial assets that are exposed to credit risk are represented as follows: cash and balances on bank accounts, trade and other accounts receivable (except for receivables that are not represented by financial assets), loans receivable.
The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer.The Group recognises impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting period was presented as follows:
| Note | 2015 | 2014 | |
|---|---|---|---|
| Financial assets | |||
| Fixed deposit | 26 | - | 717 |
| Loan to owner | 32 | 12 930 | 26 933 |
| Loans to third parties | 21 | 3 406 | 2 862 |
| Cash at bank | 26 | 8 575 | 4 466 |
| Trade receivables | 24 | 798 | 883 |
| Other receivables | 24 | 33 536 | 33 305 |
| Total | 59 245 | 69 166 |
The table below shows an analysis of the Group's cash balances on bank accounts by the credit rating of the bank in which they are held:
| Bank group based on credit ratings by Moody's | Note | 2015 | 2014 |
|---|---|---|---|
| A2 | 4 731 | - | |
| Baa1 | - | 2 191 | |
| Ca | 3 817 | 2 246 | |
| Caa2 | - | 22 | |
| Caa3 | 16 | 718 | |
| Unrated | 11 | 29 | |
| Total | 26 | 8 575 | 5 206 |
(in USD thousand, unless otherwise stated)
Credit quality of financial assets (cont.)
The ageing of trade receivables at the end of the reporting period that was not impaired was as follows:
| 2015 | 0-90 days | 91-180 days | 181-365 days | over one year | Total |
|---|---|---|---|---|---|
| Carrying amount of trade receivables |
604 | 84 | 110 | - | 798 |
| 2014 | 0-90 days | 91-180 days | 181-365 days | over one year | Total |
| Carrying amount of trade receivables |
808 | 39 | 36 | - | 883 |
The column '0-90 days' represents the amounts neither past due nor impaired.
The ageing of trade receivables at the end of the reporting period that was impaired was as follows:
| 2015 | 0-90 days | 91-180 days | 181-365 days | over one year | Total |
|---|---|---|---|---|---|
| Carrying amount of trade receivables |
- | - | - | 349 | 349 |
| 2014 | 0-90 days | 91-180 days | 181-365 days | over one year | Total |
| Carrying amount of trade receivables |
- | - | - | 611 | 611 |
As at 31 December 2015, an amount of USD 228 thousand and USD 211 thousand or 42% of the total carrying value of trade receivables is due from the two most significant debtors. For the year ended 31 December 2015, an amount of USD 15 569 thousand (36%) and USD 3 329 thousand (8%) from Group's revenue refers to the sales transactions carried out with two of the Group's clients.
As at 31 December 2014, an amount of USD 342 thousand and USD 257 thousand or 23% of the total carrying value of trade receivables is due from the two most significant debtors. For the year ended 31 December 2014, an amount of USD 13 563 (32%) and USD 12 681 (30%) from the Group's revenue refers to the sales transactions carried out with two of the Group's clients.
Liquidity risk is the risk of the Group's failure to fulfil its financial obligations at the date of maturity. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Group has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities.
(in USD thousand, unless otherwise stated)
The table below represents the expected maturity of components of working capital.
Exposure to liquidity risk
| 2015 | Note | Carrying | Contractual | 3 month or | 3-12 month | Between 1- | Over 5 |
|---|---|---|---|---|---|---|---|
| amounts | cash flows | less | 5 years | years | |||
| Loan from owner | 32 | 1 899 | 1 899 | - | - | 1 899 | - |
| Notes | 29 | 20 711 | 24 395 | 3 159 | 527 | 20 709 | - |
| Trade payables | 30 | 184 | 184 | - | 184 | - | - |
| Other payables | 30 | 268 | 268 | - | 268 | - | - |
| Total | 23 062 | 26 746 | 3 159 | 979 | 22 608 | - | |
| 2014 | Note | Carrying | Contractual | 3 month | 3-12 month | Between 1- | Over 5 |
| amounts | cash flows | or less | 5 years | years | |||
| Loan from owner | 32 | 1 588 | 1 588 | - | - | 1 588 | - |
| Notes | 29 | 31 130 | 38 781 | - | - | 38 781 | - |
| Trade payables Other payables |
30 30 |
1 305 18 559 |
1 305 18 559 |
- - |
1 305 18 559 |
- - |
- - |
Market risk is the risk of negative influence of changes in market prices, such as foreign exchange rates and interest rates, on revenue position of the Group or on the value of the Group's available financial instruments.
The objective of market risk management provides control over the Group's exposure to market risk, as well as keeping its level within reasonable limits.
Description of the Group's exposure to such market components as currency risk and interest risk is given below:
Foreign currency risk which represents a part of market risk is the risk of change in value of financial instruments due to changes in foreign exchange rates.
Management does not use derivative financial instruments to hedge foreign currency risks and does not follow the official policy for distribution of risks between liabilities in one or another currency. However, in the period of receiving new borrowings and loans, management uses its own estimates to take the decision as to which currency of the liability will be more favourable for the Group during the expected period till maturity.
(in USD thousand, unless otherwise stated)
The Group's exposure to foreign currency risk as at 31 December 2015 based on carrying amounts was as follows:
| (in conversion to USD thousand) | Russian Ruble |
United States Dollars |
Euro |
|---|---|---|---|
| Cash and cash equivalents | - | 692 | - |
| Trade and other receivables | - | 37 | - |
| Trade and other payables | - | - | - |
| Total carrying amount | - | 729 | - |
The Group's exposure to foreign currency risk at 31 December 2014 based on carrying amounts was as follows:
| (in conversion to USD thousand) | Russian United States Ruble Dollars |
Euro | |
|---|---|---|---|
| Cash and cash equivalents | - | - | - |
| Trade and other receivables | - | - | - |
| Trade and other payables | - | - | - |
| Total carrying amount | - | - | - |
Sensitivity analysis (foreign currency risk)
An increase of 100 basis points in foreign currency rates at 31 December would have decreased profit and equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. For a decrease of 100 basis points there would be an equal and opposite impact on the profit and equity.
| 2015 | 2014 | ||||
|---|---|---|---|---|---|
| Effect on profit before tax |
Effect on equity |
Effect on profit before tax |
Effect on equity |
||
| United States Dollars | 73 | 73 | - | - | |
| 73 | 73 | - | - |
(in USD thousand, unless otherwise stated)
Interest rate risk
Interest rate risk is the risk that expenditure or the value of financial instruments will fluctuate due to changes in market interest rates. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group's management monitors the interest rate fluctuations on a continuous basis and acts accordingly
At present, the Group's approach to limit the interest rate risk consists of borrowings at fixed interest rates.
The structure of interest financial instruments of the Group, grouped according to the types of interest rates, was presented as follows:
| 2015 | 2014 | |
|---|---|---|
| Fixed rate instruments | ||
| Financial assets | 16 336 | 30 512 |
| Financial liabilities | (22 610) | (32 718) |
| Total | (6 274) | (2 206) |
The Group's operations are subject to seasonal fluctuations as a result of weather conditions. In particular, the cultivation of crops is adversely affected by winter weather conditions, which occur primarily from January to March. The first half of the year typically results in lower revenues and results for cultivations.
The Group's agro-industrial business is subject to risks of outbreaks of various diseases that could result in mortality losses. Disease control measures were adopted by the Group to minimise and manage this risk. The Group's management is satisfied that its current existing risk management and quality control processes are effective and sufficient to prevent any outbreak of livestock diseases and related losses.
The Group's management follows the policy of providing a firm capital base which allows supporting the trust of investors, creditors and market and ensuring future business development.
(in USD thousand, unless otherwise stated)
The Group manages its capital to ensure that it will be able to continue as a going concern while increasing the return to owners through the strive to improve the debt to equity ratio. The Group's overall strategy remains unchanged from prior year. To manage capital, the Group's management, above all, uses calculations of financial leverage coefficient (ratio of leverage ratio) and ratio between net debt and EBITDA.
Financial leverage is calculated as a ratio between net debt and total amount of capital. This ratio measures net debt as a proportion of the capital of the Group, i.e. it correlates the debt with total equity and shows whether the Group is able to pay the amount of outstanding debts. An increase in this coefficient indicates an increase in borrowings relative to the total amount of the Group's capital. Monitoring this indicator is necessary to keep the optimal correlation between own funds and borrowings of the Group in order to avoid problems from over leverage. It is calculated as cumulative borrowings net of cash and cash equivalents. Total amount of capital is calculated as own capital reflected in the consolidated statement of financial position plus the amount of net debt.
For the ratio of net debt to EBITDA, the calculation of net debt is as above. EBITDA is an indicator of income before taxes, interest depreciation and amortisation. It is useful for the Group's financial analysis, since the Group's activity is connected with long-term investments in vessels, property, plant and equipment. EBITDA does not include depreciation, so that in the Group's opinion, it reflects the approximate cash flows deriving from the Group's income in a more reliable way.
(in USD thousand, unless otherwise stated)
Financial leverage ratio calculation (cont.)
The ratio of net debt to EBITDA gives an indication of whether income obtained from operating activities is sufficient to meet the Group's liabilities.
| 2015 | 2014 | |
|---|---|---|
| Notes | 20 711 | 31 130 |
| Loan from owner | 1 899 | 1 588 |
| Total amount of borrowings | 22 610 | 32 718 |
| Loans receivable | (16 336) | (29 795) |
| Cash and cash equivalents | (8 575) | (5 206) |
| Net debt | (2 301) | (2 283) |
| Share capital | 661 | 661 |
| Share premium | 88 532 | 88 532 |
| Retained earnings | (48 519) | (38 878) |
| Foreign currency translation reserve | 5 147 | (5 877) |
| Non-controlling interests | 200 | 200 |
| Total equity | 46 021 | 44 638 |
| Total amount of equity and net debt | 43 720 | 42 355 |
| Financial leverage coefficient | (5,3)% | (5,4)% |
For the year ended 31 December 2015 and 31 December 2014 the ratio of net debt to EBITDA amounted to:
| 2015 | 2014 | |
|---|---|---|
| Loss for the year | (9 609) | (80 490) |
| Income tax charge | 1 | 2 |
| Impairment losses | 7 619 | 46 279 |
| Finance income | (3 813) | (3 130) |
| Finance costs | 33 603 | 58 365 |
| EBIT (Earnings before interest and income tax) | 27 801 | 21 026 |
| Depreciation and amortisation | 2 510 | 6 663 |
| EBITDA (earnings before interest, income tax, depreciation and | ||
| amortisation) | 30 311 | 27 689 |
| Net debt /EBITDA | (0,1) | (0,1) |
During the year there were no changes in approaches to capital management. The Group is not subject to any external regulatory capital requirements.
(in USD thousand, unless otherwise stated)
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.
The different levels have been defined as follows:
Assumptions in assessing fair value of financial instruments and assessment of their subsequent recognition
As no readily available market exists for the Group's financial instruments, judgment is necessary in arriving at fair value, based on current economic conditions and specific risks attributable to the instruments. The estimates presented herein are not necessarily indicative of the amounts the Group could realize in a market exchange from the sale of its full holding of the particular instrument.
At 31 December 2015, the following methods and assumptions were used by the Group to estimate the fair value of each class of financial instruments for which it is practicable to estimate such value:
Application of the effective interest rate method for calculating carrying value of short - term receivables, interest free loans granted and received and payables has been applied to reflect fair values.
(in USD thousand, unless otherwise stated)
Assumptions in assessing fair value of non-financial instruments and assessment of their subsequent recognition
Biological assets of the Group are measured at fair value within level 3 of the fair value hierarchy, except for parent flock, cattle and horses that are measured using the market comparison technique based on market prices for livestock of similar age, breed and geographic location, which is measured at fair value within level 2 of the fair value hierarchy.
The Group has an established control framework with respect to the measurement of fair values. This framework includes a valuation team that reports directly to the Chief Financial Officer, and has overall responsibility for fair value measurement of biological assets.
The valuation team regularly reviews significant unobservable inputs and valuation adjustments. The valuation team assesses and documents the evidence obtained to support the conclusion that the valuation meets the requirements of IFRS, including the level in the fair value hierarchy. Significant valuation issues are reported to the Chief Financial Officer.
The Group's agro-industrial business is subject to risks of outbreaks of various diseases that could result in mortality losses. Disease control measures were adopted by the Group to minimise and manage this risk. The Group's management is satisfied that its current existing risk management and quality control processes are effective and sufficient to prevent any outbreak of livestock diseases and related losses.
The valuation requires management to make certain assumptions about unobservable inputs to the model of which the significant unobservable inputs are disclosed in the table below:
| Type | Valuation technique | Significant unobservable inputs |
Inter-relationship between key unobservable inputs and fair value measurement |
|---|---|---|---|
| Crops under cultivation |
As at 31 December 2015 the biological transformation is insignificant, the fair value approximate cost |
not applicable | not applicable |
(in USD thousand, unless otherwise stated)
The table below analyses biological assets measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorized. The different levels have been defined as follows:
| Level 1 | Level 2 | Level 3 | Total | |
|---|---|---|---|---|
| 31 December 2015 | ||||
| Non-financial assets | ||||
| Plants and plantation | - | - | 3 732 | 3 732 |
| Livestock | - | - | 2 895 | 2 895 |
| - | - | 6 627 | 6 627 | |
| Level 1 | Level 2 | Level 3 | Total | |
| 31 December 2014 | ||||
| Non-financial assets | ||||
| Plants and plantation | - | - | 4 101 | 4 101 |
| Livestock | - | - | 4 336 | 4 336 |
| - | - | 8 437 | 8 437 |
There were no transfers between any levels of the fair value hierarchy during the year 31 December 2015 and 31 December 2014.
Total gain or losses for the period as shown in the reconciliation (note 19) are presented on the face of the consolidated statement of comprehensive income as "Net change in fair value less costs to sell of biological assets and agricultural produce" (31 December 2014: USD 19 789 thousand).
(in USD thousand, unless otherwise stated)
The following table analyses the fair values of financial instruments not measured at fair value, by the levels in the fair value hierarchy into which such fair value measurement is categorized:
| Carrying amount | Fair value | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Designated at fair value |
Loans and receivables |
Available -for-sale |
Other financial liabilities |
Total | Level 1 |
Level 2 |
Level 3 |
Total | |
| 31 December 2015 | |||||||||
| Financial Assets measured at fair value | |||||||||
| Assets held for sale | - | - | 20 | - | 20 | - | - | 20 | 20 |
| Investments designated at fair value through profit or loss Financial assets not measured at fair value |
255 | - | - | - | - | 255 | - | - | 255 |
| Trade receivables | - | 798 | - | - | 798 | - | - | 798 | 798 |
| Loans receivable | - | 16 336 | - | - | 16 336 | - | - | 16 336 | 16 336 |
| Cash and cash equivalents | - | 8 575 | - | - | 8 575 | - | - | 8 575 | 8 575 |
| 255 | 25 709 | 20 | - | 25 984 | 255 | - | 25 729 | 25 984 | |
| Financial Liabilities not measured at fair value | |||||||||
| Notes | - | - | - | 20 711 | 20 711 | - | - | 20 711 | 20 711 |
| Loans payable | - | - | - | 1 899 | 1 899 | - | - | 1 899 | 1 899 |
| Trade payables | - | - | - | 184 | 184 | - | - | 184 | 184 |
| Other payables | - | - | - | 268 | 268 | - | - | 268 | 268 |
| - | - | - | 23 062 | 23 062 | - | - | 23 062 | 23 062 |
92
(in USD thousand, unless otherwise stated)
| Fair value | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Designated at fair value |
Loans and receivables |
Available -for-sale |
Other financial liabilities |
Total | Level 1 |
Level 2 |
Level 3 |
Total | |
| 31 December 2014 | |||||||||
| Financial Assets measured at fair value | |||||||||
| Assets held for sale | - | - | 30 | - | 30 | - | - | 30 | 30 |
| Investments designated at fair value through profit or loss |
342 | - | - | - | 342 | 342 | - | - | 342 |
| Financial assets not measured at fair value | |||||||||
| Trade receivables | - | 883 | - | - | 883 | - | - | 883 | 883 |
| Loans receivable | - | 29 795 | - | - | 29 795 | - | - | 29 795 | 29 795 |
| Cash and cash equivalents | - | 5 206 | - | - | 5 206 | - | - | 5 206 | 5 206 |
| 342 | 35 884 | 30 | - | 36 256 | 342 | - | 35 914 | 36 256 | |
| Financial Liabilities not measured at fair value | |||||||||
| Notes | - | - | - | 31 130 | 31 130 | - | - | 31 130 | 31 130 |
| Loans payable | - | - | - | 1 588 | 1 588 | - | - | 1 588 | 1 588 |
| Trade payables | - | - | - | 1 305 | 1 305 | - | - | 1 305 | 1 305 |
| Other payables | - | - | - | 18 559 | 18 559 | - | - | 18 559 | 18 559 |
| - | - | - | 52 582 | 52 582 | - | - | 52 582 | 52 582 |
(in USD thousand, unless otherwise stated)
The fair value of financial assets and financial liabilities, together with the carrying amounts in the consolidated statement of financial position as at 31 December 2015 and 31 December 2014, are as follows.
| 31 December 2015 | Carrying amount |
Fair value |
|---|---|---|
| Financial assets | ||
| Available for sale investments | 255 | 255 |
| Trade receivables | 798 | 798 |
| Cash and cash equivalents | 8 575 | 8 575 |
| Loans receivable | 16 336 | 16 336 |
| Financial liabilities | ||
| Notes | 20 711 | 20 711 |
| Loans payable | 1 899 | 1 899 |
| Trade payables | 184 | 184 |
| 31 December 2014 | Carrying | Fair value |
| amount | ||
| Financial assets | ||
| Available for sale investments | 342 | 342 |
| Trade receivables | 883 | 883 |
| Cash and cash equivalents | 5 206 | 5 206 |
| Loans receivable | 29 795 | 29 795 |
| Financial liabilities | ||
| Notes | 31 130 | 31 130 |
| Loans payable | 1 588 | 1 588 |
As at 31 December 2015, the fair value of the above financial instruments approximates to their carrying amount, except for notes whose fair value was USD 20 711 thousand (31 December 2014: USD 31 130).
(in USD thousand, unless otherwise stated)
Events referred to in note 34 to the consolidated financial statements will continue to influence the Group's operations in 2016. While the management believe it is taking all necessary measures to maintain the sustainability of the business in the current circumstances, a further deterioration of economic and political conditions in Ukraine could adversly affect the Group's results and financial position, so that it is currently impossible to predict.
On 11 January 2016 the Company has secured a fourth consent of the Noteholders to postpone to 14 January 2017 the interest payments that was due for payment to Noteholders on 14 January 2016.
On 22 April 2016 the Board of Directors of Agroton Public Limited approved and authorised these consolidated financial statements for issue.
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