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Frontier Development PLC — Earnings Release 2014
Aug 19, 2014
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Earnings Release
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RNS Number : 4498P
AFI Development PLC
19 August 2014
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION
IN OR INTO THE RUSSIAN FEDERATION, THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN
19 August 2014
AFI DEVELOPMENT PLC
("AFI DEVELOPMENT" OR "THE COMPANY")
RESULTS FOR THE SIX MONTHS TO 30 JUNE 2014
Strong growth in rental income
AFI Development, a leading real estate company focused on developing property in Russia, has today announced its financial results for the first six months of 2014 ended 30 June 2014.
H1 2014 financial highlights
· Revenues for the six months to 30 June 2014, including proceeds from the sale of trading properties, reached US$76.2 million:
- Rental and hotel operating income grew 9% year-on-year to US$74.8 million
- AFIMALL City contribution at US$56.6 million (H1 2013: US$48.0 million), up 18% year-on-year
· Gross profit reached US$27.49 million in H1 2014
· Net profit for H1 2014 was US$3.7 million
· Gross value of portfolio of properties largely unchanged at US$2.5 billion, compared to US$2.4 billion at the end of Q1 2014
· Cash, cash equivalents and marketable securities of US$123.4 million
H1 2014 operational highlights
· AFIMALL City operations continued to demonstrate positive dynamics with revenues rising 18% year-on-year to US$56.6 million
- NOI was US$39.3 million for the six months, representing growth of 27% year-on-year
- Average monthly footfall up 25% year-on-year in June 2014
- Occupancy levels at 82% of total leasable area (end-2013: 79%)
· Sales of apartments continue at Odinburg with 269 sale contracts signed (as of 19 August 2014)
· General contractor for Tverskaya Plaza Ic to be appointed shortly
Commenting on today's announcement, Lev Leviev, Executive Chairman of AFI Development, said:
"Whilst the second quarter of 2014 has been marked by political and macroeconomic uncertainty in Russia, we maintained our focus on delivering steady progress at our development projects and on continuously improving the operations of our completed properties. The 27% year-on-year increase in NOI generated by AFIMALL City is testament to the success of these efforts. At the same time, the sales of apartments at our Odinburg development are progressing well and construction at our Tverskaya Plaza Ic project is due to start imminently."
H1 2014 Results Conference Call:
AFI Development will hold a conference call for analysts and investors to discuss its H1 2014 financial results on Wednesday, 20 August 2014, following the publication of the Company's financial results.
The details for the conference call are as follows:
Date: Wednesday, 20 August 2014
Time: 3pm BST (6pm Moscow)
Dial-in Tel: International: +44 (0) 20 3003 2666
UK toll free: 0808 109 0700
US toll-free: 1 866 966 5335
Russia toll-free: 8 10 8002 4902044
Password: AFI
Please dial in 5/10 minutes prior to the commencement time giving your name, company and stating that you are dialling into the AFI Development conference call quoting the reference AFI.
A replay facility will be available for 1 week following the call. To access the recording, please dial +44 (0) 20 8196 1998 and enter access code 7100335.
Prior to the conference call, the H1 2014 Investor Presentation of AFI Development will be published on the Company website at http://www.afi-development.com/en/investor-relations/reports-presentations on 20 August 2014 by 11am BST (2pm Moscow time).
- ends -
For further information, please contact:
AFI Development, Moscow +7 495 796 9988
Ilya Kutnov
Ekaterina Shubina
Citigate Dewe Rogerson, London +44 20 7638 9571
David Westover
Sandra Novakov
Shelly Chadda
About AFI Development
AFI Development is one of the leading real estate development companies operating in Russia. Established in 2001, AFI Development is a publicly traded subsidiary of Africa Israel Investments Ltd.
AFI Development is listed on the Main Market of the London Stock Exchange and aims to deliver shareholder value through a commitment to innovation and continuous project development, coupled with the highest standards of design, construction and quality of customer service.
AFI Development focuses on developing and redeveloping high quality commercial and residential real estate assets across Russia, with Moscow being its main market. The Company's existing portfolio comprises commercial projects focused on offices, shopping centres, hotels and mixed-use properties, and residential projects. AFI Development's strategy is to sell the residential properties it develops and to either lease the commercial properties or sell them for a favourable return.
AFI Development is a leading force in urban regeneration, breathing new life into city squares and neighbourhoods and transforming congested and underdeveloped areas into thriving new communities. The Company's long-term, large-scale regeneration and city infrastructure projects establish the necessary groundwork for the successful launch of commercial and residential properties, providing a strong base for future.
Legal Disclaimer
Some of the information in these materials may contain projections or other forward-looking statements regarding future events, the future financial performance of the Company, its intentions, beliefs or current expectations and those of its officers, directors and employees concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and business. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might" or the negative of such terms or other similar expressions. These statements are only predictions and that actual events or results may differ materially. Unless otherwise required by applicable law, regulation or accounting standard, the Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia and market change in the industries the Company operates in, as well as many other risks specifically related to the Company and its operations.
Executive Chairman and Executive Director's Combined Statement
The first half of 2014 has been marked by uncertainty regarding the impact of recent geopolitical events in the region on Russia's macroeconomic development. Despite this, AFI Development remained focussed on delivering its strategy aimed at continued development and expansion of the Company's portfolio, and improvement in the operating performance of completed developments.
As a result of this focus, operations at AFIMALL City continued to improve with steady growth in rental revenues and occupancy. During the period, the Company welcomed several new tenants including NEXT Kids, KFC, Il Patio and UGG Australia. In June 2014, a two-level Fizika fitness club also opened its doors to the public, attracting additional footfall to the Mall.
During the second quarter of 2014, significant progress with projects in the development stage was made. Construction works at Odinburg are steadily progressing: in August 2014, construction reached the fourteenth floor of the first building and construction of the second building of the complex began. At the same time, the Company reached the final stages of approval of the general contractor for Tverskaya Plaza Ic where works are expected to begin imminently.
Projects update
AFIMALL City
The operating performance of AFIMALL City during the second quarter of 2014 demonstrated steady improvement. NOI for the first six months reached US$39.3 million, representing growth of 27% year-on-year. The average monthly footfall in June 2014 was 25% higher compared to June 2013.
During the second quarter, AFIMALL City welcomed new tenants including NEXT Kids, KFC, Il Patio and UGG Australia. TSUM Discount also extended its premises at the centre, leasing an additional 950 sq.m. At the same time, a 3,290 sq.m. two-level Fizika fitness club opened its doors to the public in June 2014, attracting additional footfall to the Mall.
On 23 May 2014, AFIMALL City celebrated its third birthday by welcoming its visitors with a 16 meter cake weighing 3 tons. Hundreds of thousands of guests visited the Mall during the 3-day birthday celebrations.
On 12 August 2014, the Company confirmed that the Prosecution Office of the Moscow Central District had filed a claim against the subsidiary which owns AFIMALL City, requesting that it eliminates fire safety hazards identified at AFIMALL City and that the Mall's operations be suspended until these hazards have been eliminated. AFI Development had previously received a report by the State Fire Safety Control Authorities which specified works to be undertaken to address minor fire safety issues at AFIMALL City. Part of these works are to be completed by 17 October 2014 and the remainder by 17 April 2015. In response to the submission by the Public Prosecution Office on the same subject, the Company confirmed that all works requested by the State Fire Safety Control Authorities would be completed by the specified deadlines.
According to the opinion of the Company management, which is based on the views of its internal legal advisors, the lawsuit has a low probability of being successful. This opinion takes into account the fact that the Company is working on addressing the fire safety issues identified in the report it received, in line with the prescribed schedule. The cost of works required to address these fire safety issues is estimated to be not significant. The Mall remains open, continuing its normal operations, and AFI Development confirms that there is currently no fire safety or other public safety hazards affecting customers within the Mall.
Odinburg
Construction at Odinburg is progressing steadily. In August 2014, construction reached the fourteenth floor of the first building, whilst at the same time the Company started construction of the second building within the complex.
As of the date of publication of this release, 269 contracts for sales of apartments have been signed.
Plaza H2O
In May 2014, the Company's subsidiary which owns and operates the Plaza H20 office complex in Moscow signed a 3-year lease with Troika D Bank for 1,755 sq.m. in the complex. The new tenant is a dynamically developing Russian banking organisation.
Market Overview - General Moscow Real Estate
Macroeconomic environment
The first half of 2014 has been a challenging period due to a combination of events including targeted sanctions, the continuing conflict in Ukraine and further unrest in Syria. Following real GDP growth of 0.8% during the first quarter of 2014, growth of 0.5% is forecast for the full year 2014. Despite this sentiment, however, construction activity is close to record levels due to a peak in the development cycle which remains unaffected by macroeconomic trends.
Positive factors include the absence of a seasonal decline in oil prices, stabilisation of the rouble exchange rate, low unemployment levels, continuing growth in industrial sectors and improvement in the consumer confidence index.
(Source: Cushman & Wakefield Report; Ministry of Economic Development; Economist Intelligence Unit Report)
Moscow office market
Despite new office construction in Q2 2014 recording the highest increase in the last four years at 323,700 sq. m, demand reacted to geopolitical events with the Moscow office market experiencing unusually low quarterly take-up at 84,400 sq. m. The area inside the Third Transport Ring (TTR) accounted for the highest level of take-up while the area beyond the TTR accounted for the highest level of new supply.
Driven by the considerable volume of new supply, the overall vacancy rate increased to 14.8%, from 13.9% in the previous quarter. Despite the negative political landscape in Russia, there has been no significant change in theaverage asking rental rates compared to Q1 2014 with rental rates for Class A buildings amounting to between $650 and $750 per sq. m. and $400-$450 per sq. m for Class B buildings.
The geopolitical situation in Russia remains uncertain, making it increasingly difficult to forecast market activity for 2015. Nevertheless, another 670,000 sq. m. of new office space is expected to be delivered in H2, resulting in total office stock in Moscow reaching 16.8 million sq. m. by the end of 2014.
(Source: CBRE Moscow Office Market View Q2 2014, JLL; Office Market Outlook Q2 2014)
Moscow Retail Market
The volume of new construction in the Russian retail space remained strong during the period with 18 new shopping centres with a total GLA of 683 thousand sq. m opening in Russia during H1 2014. In total, approximately 50 shopping centres with more than 2 million sq. m of GLA are expected to be delivered in 2014.
Stock per 1,000 inhabitants totalled 327 sq. m during the period but remained modest in comparison with the rest of Europe (Warsaw 690 sq. m, Paris 660 sq. m), though the anticipated high level of completions in 2014 will bring Moscow closer to the levels of St. Petersburg at 400 sq. m stock per inhabitant.
Vacancy rates at retail shopping malls were 3.1% during the second quarter, and are expected to increase further by the end of 2014 due to the high level of completions and large average area of new shopping centres. Despite the current economic situation, however, retailer demand has remained relatively strong with existing retailers looking to expand and experiment with new format types and 16 new brands opening their first stores in the region during the first six months of 2014.
(Source: CBRE Moscow Retail Property Market Q2 2014, JLL; Retail Market Outlook Q2 2014)
Moscow and Moscow Region Residential Market
The residential market has proven resilient in the face of a slowing economy with apartment sales increasing in response to geopolitical developments, as investors chose residential real estate as their safe haven given the high level of uncertainty regarding Russian securities and rouble stability. Despite a reduction in activity levels during the second quarter, which is seasonally weaker compared to the first three months of the year, underlying demand remains strong. As such, prices for residential real estate are expected to remain stable or show a slight increase in the short-term.
| Lev Leviev Executive Chairman of the Board |
Mark Groysman Executive Director |
ANNEX A
30.6.2014 - Very significant property disclosure
1. AFIMALL City
| (Data based on 100%. Share of the Company in the property - 100%) | Current quarter (Q2 2014) | Comparative data | |||
| Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | Q2 2013 | |
| Value of the property (000'USD) | 1,160,000 | 1,160,000 | 1,160,000 | 1,160,000 | 1,160,000 |
| NOI in the period (000'US$) | 22,501 | 16,807 | 20,669 | 17,003 | 16,704 |
| Revaluation gains (losses) in the period (000'US$) | (35,442) | 51,904 | 6,615 | (10,727) | 31,470 |
| Average occupancy rate in the period (%) | 82% | 83% | 79% | 77% | 75% |
| Rate of return (%) | 6,8% | 5.8% | 5.9% | 5.6% | 5.4% |
| Average rent per sq.m. (US$/annum) | 1,202 | 1,224 | 1,231 | 1,251 | 1,268 |
| Average rent per sq.m. in agreements signed in the period (US$/annum) | 1,286 | 673 | 529 | 1,038 | 1,127 |
ANNEX B
30.6.2014 - Very significant loans disclosure
| Balance as of 30.06.2014 | Lender type: Bank, Institutional etc. | Indexation/ currency exposure & interest rate | Liens and material legal restrictions on the property | Covenants | Cross default mechanism | Any other covenants or restriction that might increase the cost of debt | In-case it is a credit line facility - what are the terms & conditions for draw downs | The methods/way that the covenant is calculated | Covenant calculation results | The date of Q2 2014 financial statement were reported | The date that the lender is checking the borrower is line with the covenants |
| USD 309,385,605 and RUR 10,391,546,950(USD 308,990,828). Total amount in USD as of 30.06.2014 is USD 618,376,433 | Specific project financed by VTB Bank JSC | RUR/USD loan provided in five tranches totalling RUR 21 billion. Each tranche can be drown down either in US Dollars or in Rubles (at Company's discretion). The loan facility has differentiated interest rates which are currency dependent: 9.5% for loans drawn down in Russian rubles and 3 months LIBOR + 5.02% for loans drawn down in US dollars. The interest on the loans is payable on a quarterly basis, throughout the term of the credit line. The principal is due to be fully repaid in April 2018. The RUR interest rate may be unilaterally increased by the lending bank, should one of the interest indicators stipulated by the Russian Central Bank and specified in the loan agreement be increased; the interest rate will be increased by the amount of the interest indicator increase. | 1. Liens over all the Bellgate's shares 2. AFI Development PLC company guarantee, limited to USD 1,000,000 3. Mortgage over 100% of the premises of AFIMALL City 4. Mortgage over the premises in the Parking owned by Bellgate, upon registration of Bellgate's rights to land plot under the Parking 5. Permission to debit Bellgate's account held in the lending bank 6. Additional mortgage over the premises of the "Aquamarine" Hotel in Moscow, to be removed in case Bellgate (the borrower) redeems USD 20 million of the principal 7. Additional guarantee by Semprex LLC, a Russian Company - an indirect subsidiary of AFI Development Plc, to be removed in case Bellgate (the borrower) redeems USD 20 million of the principal |
(1) Bellgate'(the Borrower) should have minumum quarterly revenues, ranging from RUR 651,000,000 in Q3 2012 to RUR 1,139,000,000 in Q1 2018. Penalty: 0.5% per annum extra charge to the interest rate applicable under the loan agreement- applicable only for the quarter when the aforesaid revenue threshold was not achieved; (2) Liquidation Value of the property should be higher than sum of the outstanding principal and six months interest. |
N/A | N/A | The loan is given in five tranches: 1st tranche drawn down on 29 June 2012, 2nd tranche drawn down on 3 August 2012 on the amount USD 69, 385,604.64 (RUR 2,252,000,000), 3rd tranche of RUR 1,300,000,000 drawn down on 01.02.2013, 4th tranche of RUR 1,333,333,333.33 drawn down on 28.02.2013 , 5th tranche of RUR 1,333,333,333.34 drawn down on 28.02.2014. | (1) The total of revenue, including VAT , calculated quarterly; (2) The Liquidation Value is determined by an external valuer appointed by the Bank. | (1) The minimum quarterly revenue for Q2 2014 was 961 million Roubles ; (2) Liquidation Value determined by an external valuer appointed by the Bank is USD 866,6 million | 19 August 2014 | (1) Borrowers revenues are checked quarterly; (2) Liquidation value is checked twice a year, in December and in August. |
AFI DEVELOPMENT PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the period from 1 January 2014 to 30 June 2014
C O N T E N T S
Independent auditors' report on review of condensed consolidated interim financial information
Condensed consolidated income statement
Condensed consolidated statement of comprehensive income
Condensed consolidated statement of changes in equity
Condensed consolidated statement of financial position
Condensed consolidated statement of cash flows
Notes to the condensed consolidated interim financial statements
Independent auditors' report on review of condensed consolidated interim financial information tothe members of AFI DEVELOPMENT PLC
Introduction
We have reviewed the accompanying condensed consolidated statement of financial position of AFI Development PLC as at 30 June 2014, the condensed consolidated statements of income, comprehensive income, changes in equity and cash flows for the six-month period then ended and notes to the interim financial information ('the condensed consolidated interim financial information'). The Company's Board of Directors is responsible for the preparation and presentation of this condensed consolidated interim financial information in accordance with IAS 34 "Interim Financial Reporting". Our responsibility is to express a conclusion on this condensed consolidated interim financial information based on our review.
Scope of Review
We conducted our review in accordance with the International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information as at 30 June 2014 is not prepared, in all material respects, in accordance with IAS 34 "Interim Financial Reporting".
Marios G. Gregoriades CPA
Certified Public Accountant and Register Auditor
For and on behalf of
KPMG Limited
Certified Public Accountants and Registered Auditors
14 Esperidon Street
1087 Nicosia, Cyprus
18 August 2014
CONDENSED CONSOLIDATED INCOME STATEMENT
For the period from 1 January 2014 to 30 June 2014
| For the three months ended |
For the six months ended |
|||||
| 1/4/14- | 1/4/13- | 1/1/14- | 1/1/13- | |||
| 30/6/14 | 30/6/13 | 30/6/14 | 30/6/13 | |||
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | |||
| Note | ||||||
| Revenue | 5 | 39,579 | 90,528 | 76,234 | 123,893 | |
| Other income | 1,274 | 435 | 3,003 | 3,664 | ||
| Operating expenses | (15,550) | (17,802) | (37,322) | (39,226) | ||
| Carrying value of trading properties sold | (1,047) | (31,767) | (1,047) | (31,961) | ||
| Administrative expenses | 6 | (3,646) | (6,951) | (11,050) | (10,934) | |
| Other expenses | 7 | (663) | (825) | (2,924) | (2,602) | |
| Total expenses | (20,906) | (57,345) | (52,343) | (84,723) | ||
| Share of the after tax profit/(loss) of joint ventures | 1,244 | (123) | 600 | (760) | ||
| Gross Profit | 21,191 | 33,495 | 27,494 | 42,074 | ||
| Profit on disposal of investment in subsidiaries/joint ventures |
22 | - | - | 61 | 32,088 | |
| Valuation (loss)/gain on properties | 10,11 | (46,818) | 41,874 | 26,461 | 58,390 | |
| Impairment loss on inventory of real estate | 13 | (8,341) | (849) | (8,696) | (849) | |
| (55,159) | 41,025 | 17,765 | 57,541 | |||
| Results from operating activities | (33,968) | 74,520 | 45,320 | 131,703 | ||
| Finance income | 24,858 | 1,502 | 4,508 | 17,214 | ||
| Finance costs | (14,187) | (37,258) | (43,888) | (93,458) | ||
| Net finance income/(costs) | 8 | 10,671 | (35,756) | (39,380) | (76,244) | |
| (Loss)/profit before tax | (23,297) | 38,764 | 5,940 | 55,459 | ||
| Tax benefit/(expense) | 9 | 2,767 | (11,100) | (2,198) | (12,200) | |
| (Loss)/profit for the period | (20,530) | 27,664 | 3,742 | 43,259 | ||
| (Loss)/profit attributable to: | ||||||
| Owners of the Company | (19,495) | 26,427 | 4,524 | 41,735 | ||
| Non-controlling interests | (1,035) | 1,237 | (782) | 1,524 | ||
| (20,530) | 27,664 | 3,742 | 43,259 | |||
| Earnings per share | ||||||
| Basic and diluted earnings per share (cent) | (1.86) | 2.52 | 0.43 | 3.98 | ||
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period from 1 January 2014 to 30 June 2014
| For the three months ended |
For the six months ended |
|||
| 1/4/14- | 1/4/13- | 1/1/14- | 1/1/13- | |
| 30/6/14 | 30/6/13 | 30/6/14 | 30/6/13 | |
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | |
| (Loss)/profit for the period | (20,530) | 27,664 | 3,742 | 43,259 |
| Other comprehensive income Items that are or may be reclassified subsequently to profit or loss |
||||
| Realised translation difference on disposal of subsidiaries/joint ventures transferred to income statement | - | - | (77) | 30,288 |
| Foreign currency translation differences for foreign operations | 28,869 | (24,707) | (11,972) | (35,288) |
| Other comprehensive income for the period | 28,869 | (24,707) | (12,049) | (5,000) |
| Total comprehensive income for the period | 8,339 | 2,957 | (8,307) | 38,259 |
| Total comprehensive income attributable to: | ||||
| Owners of the parent | 9,325 | 1,650 | (7,508) | 36,808 |
| Non-controlling interests | (986) | 1,307 | (799) | 1,451 |
| 8,339 | 2,957 | (8,307) | 38,259 | |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period from 1 January 2014 to 30 June 2014
| Attributable to the owners of the Company | Non-controlling interests | Total | |||||||
| Share | Share | Translation | Retained | ||||||
| Capital | Premium | Reserve | Earnings | Total | |||||
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | |||
| Balance at 1 January 2013 | 1,048 | 1,763,409 | (144,610) | 9,661 | 1,629,508 | (2,976) | 1,626,532 | ||
| Total comprehensive income for the period | |||||||||
| Profit for the period | - | - | - | 41,735 | 41,735 | 1,524 | 43,259 | ||
| Other comprehensive income | - | - | (4,927) | - | (4,927) | (73) | (5,000) | ||
| Total comprehensive income for the period | - | - | (4,927) | 41,735 | 36,808 | 1,451 | 38,259 | ||
| Transactions with owners of the Company Contributions and distributions |
|||||||||
| Share option expense | - | - | - | 2,425 | 2,425 | - | 2,425 | ||
| Balance at 30 June 2013 | 1,048 | 1,763,409 | (149,537) | 53,821 | 1,668,741 | (1,525) | 1,667,216 | ||
| Balance at 1 January 2014 | 1,048 | 1,763,409 | (150,454) | 117,655 | 1,731,658 | (2,179) | 1,729,479 | ||
| Total comprehensive income for the period | |||||||||
| Profit for the period | - | - | - | 4,524 | 4,524 | (782) | 3,742 | ||
| Other comprehensive income | - | - | (12,032) | - | (12,032) | (17) | (12,049) | ||
| Total comprehensive income for the period | - | - | (12,032) | 4,524 | (7,508) | (799) | (8,307) | ||
| Transactions with owners of the Company Contributions and distributions |
|||||||||
| Share option expense | - | - | - | 2,385 | 2,385 | - | 2,385 | ||
| Balance at 30 June 2014 | 1,048 | 1,763,409 | (162,486) | 124,564 | 1,726,535 | (2,978) | 1,723,557 | ||
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2014
| 30/6/14 | 31/12/13 | |||
| Note | US$ '000 | US$ '000 | ||
| Assets | ||||
| Investment property | 10 | 1,600,400 | 1,609,800 | |
| Investment property under development | 11 | 686,565 | 635,266 | |
| Share of investment in joint ventures | 6,030 | 5,555 | ||
| Property, plant and equipment | 12 | 66,775 | 69,735 | |
| Long-term loans receivable | 22,472 | 21,652 | ||
| VAT recoverable | 70 | 430 | ||
| Non-current assets | 2,382,312 | 2,342,438 | ||
| Trading properties | 14 | 5,546 | 6,409 | |
| Trading properties under construction | 15 | 139,567 | 127,213 | |
| Other investments | 11,491 | 9,982 | ||
| Inventory | 518 | 574 | ||
| Short-term loans receivable | 749 | 774 | ||
| Trade and other receivables | 16 | 111,208 | 106,425 | |
| Current tax assets | 149 | - | ||
| Cash and cash equivalents | 17 | 111,934 | 193,330 | |
| Current assets | 381,162 | 444,707 | ||
| Total assets | 2,763,474 | 2,787,145 | ||
| Equity | ||||
| Share capital | 1,048 | 1,048 | ||
| Share premium | 1,763,409 | 1,763,409 | ||
| Translation reserve | (162,486) | (150,454) | ||
| Retained earnings | 124,564 | 117,655 | ||
| Equity attributable to owners of the Company | 18 | 1,726,535 | 1,731,658 | |
| Non-controlling interests | (2,978) | (2,179) | ||
| Total equity | 1,723,557 | 1,729,479 | ||
| Liabilities | ||||
| Long-term loans and borrowings | 19 | 592,376 | 778,909 | |
| Deferred tax liabilities | 127,123 | 125,260 | ||
| Deferred income | 21,770 | 22,048 | ||
| Non-current liabilities | 741,269 | 926,217 | ||
| Short-term loans and borrowings | 19 | 231,972 | 27,027 | |
| Trade and other payables | 20 | 44,143 | 100,248 | |
| Advances from customers | 21 | 22,533 | 107 | |
| Current tax liabilities | - | 4,067 | ||
| Current liabilities | 298,648 | 131,449 | ||
| Total liabilities | 1,039,917 | 1,057,666 | ||
| Total equity and liabilities | 2,763,474 | 2,787,145 | ||
The condensed consolidated interim financial statements were approved by the Board of Directors on 18 August 2014.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the period from 1 January 2014 to 30 June 2014
| 1/1/14- | 1/1/13- | ||
| 30/6/14 | 30/6/13 | ||
| Note | US$ '000 | US$ '000 | |
| Cash flows from operating activities | |||
| Profit for the period | 3,742 | 43,259 | |
| Adjustments for: | |||
| Depreciation | 12 | 886 | 999 |
| Net finance costs | 8 | 39,165 | 75,470 |
| Share option expense | 2,385 | 2,425 | |
| Net valuation gain on properties | 10,11 | (26,461) | (58,390) |
| Impairment loss on inventory of real estate | 13 | 8,696 | 849 |
| Share of (profit)/loss in joint ventures | (600) | 760 | |
| Profit on disposal of investment in subsidiaries/joint ventures | 22 | (61) | (32,088) |
| Profit on sale of property, plant and equipment | (15) | (39) | |
| Goodwill written off | - | 153 | |
| Tax expense | 9 | 2,198 | 12,200 |
| 29,935 | 45,598 | ||
| Change in trade and other receivables | (3,278) | (4,584) | |
| Change in inventories | 39 | 56 | |
| Change in trading properties and trading properties under construction | (20,368) | 25,274 | |
| Change in advances and amounts payable to builders of trading properties under construction | (6,341) | - | |
| Changes in advances from customers | 21,564 | - | |
| Change in trade and other payables | (17,779) | (71,139) | |
| Change in deferred income | 301 | 1,545 | |
| Cash generated from operating activities | 4,073 | (3,250) | |
| Taxes (paid)/received | (451) | (764) | |
| Net cash used in operating activities | 3,622 | (4,014) | |
| Cash flows from investing activities | |||
| Net cash inflow from the disposal of subsidiaries | 22 | 1,400 | 3,380 |
| Net cash outflow for the acquisition of assets and liabilities | - | (202,462) | |
| Proceeds from sale of property, plant and equipment | 33 | 300 | |
| Interest received | 3,301 | 1,849 | |
| Change in advances and amounts payable to builders | 3,052 | (8,737) | |
| Payments for construction of investment property under development | 11 | (39,558) | (4,257) |
| Payments for the acquisition/renovation of investment property | 10,20 | (39,540) | (55,967) |
| Change in VAT recoverable | 2,179 | 9,659 | |
| Acquisition of property, plant and equipment | 12 | (240) | (389) |
| Acquisition of other investments | (1,019) | - | |
| Taxes paid on disposal of investment property | (4,005) | - | |
| Net cash used in investing activities | (74,397) | (256,624) | |
| Cash flows from financing activities | |||
| Proceeds from loans and borrowings | 19 | 36,986 | 306,854 |
| Repayment of loans and borrowings | (13,000) | (12,891) | |
| Repayment of a loan from a related party | - | (14,354) | |
| Interest paid | (28,157) | (29,357) | |
| Net cash from financing activities | (4,171) | 250,252 | |
| Effect of exchange rate fluctuations | (6,450) | (3,089) | |
| Net decrease in cash and cash equivalents | (81,396) | (13,475) | |
| Cash and cash equivalents at 1 January | 193,330 | 174,849 | |
| Cash and cash equivalents at 30 June | 17 | 111,934 | 161,374 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the period from 1 January 2014 to 30 June 2014
1. INCORPORATION AND PRINCIPAL ACTIVITY
AFI Development PLC (the "Company") was incorporated in Cyprus on 13 February 2001 as a limited liability company under the name Donkamill Holdings Limited. In April 2007 the Company was transformed into public company and changed its name to AFI Development PLC. The address of the Company's registered office is 165 Spyrou Araouzou Street, Lordos Waterfront Building, 5th floor, Flat/office 505, 3035 Limassol, Cyprus. The Company is a 64.88% subsidiary of Africa Israel Investments Ltd ("Africa-Israel"), which is listed in the Tel Aviv Stock Exchange ("TASE"). The remaining shareholding of "A" shares is held by a custodian bank in exchange for the GDRs issued and listed in the London Stock Exchange ("LSE"). On the 5th of July 2010 the Company issued by way of a bonus issue, 523,847,027 "B" shares, which were admitted to a premium listing on the Official List of the UK Listing Authority and to trading on the main market of LSE. On the same date, the ordinary shares of the Company were designated as "A" shares.
These condensed consolidated interim financial statements of the Company for the period from 1 January 2014 to 30 June 2014 comprise of the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in jointly controlled entities.
The principal activity of the Group is real estate investment and development. The principal activity of the Company is the holding of investments in subsidiaries and joint ventures.
2. basis of preparation
Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 December 2013.
Use of judgements and estimates
In preparing these interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
The significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2013.
Measurement of fair values
The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values and reports directly to the CFO.
The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified.
Significant valuation issues are reported to the Group Audit Committee.
When measuring the fair value of an asset or a liability, the Group uses 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:
· Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
· Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
· Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
New standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2013, except for the adoption of new standards and interpretations effective as of 1 January 2014.
Several new standards and amendments apply for the first time in 2014. However, they do not impact the annual consolidated financial statements of the Group or the interim condensed consolidated financial statements of the Group.
Standards, amendments to standards, and interpretations issued but not yet endorsed by the EU
IFRS 15 - "Revenue from Contracts with Customers". The new standard provides a unified application that regulates the accounting treatment of revenue arising from contracts with customers. This standard supersedes IAS 18 "Revenue" and IAS 11 "Construction Contracts" and the accompanying interpretations thereof. The core principle of the standard is the recognition of revenue from the transfer of goods or services to customers in an amount that represents the economic benefits that the entity expects to receive in return for them. As such, the standard stipulates that the recognition of revenue will occur when the entity transfers the goods and/or services to the customer and the customer obtains control of those goods or services.
The standard is effective for annual periods beginning on or after 1 January 2017, with early adoption permitted under IFRS. However since not endorsed by the EU yet, early adoption is not permitted by the Group.
Functional and presentation currency
These consolidated financial statements are presented in United States Dollars which is the Company's functional currency. All financial information presented in United States Dollars has been rounded to the nearest thousand, except when otherwise indicated.
Foreign operations
Each entity of the Group determines its own functional currency and items included in the financial statements of each entity are measured using its functional currency. Where the functional currency of an entity of the Group is other than US Dollars, which is the presentation currency of the Group, then the financial statements of the entity are translated in accordance with IAS 21 'The effects of changes in foreign exchange rates".
The table below shows the exchange rates of Russian Roubles, which is the functional currency of the Russian subsidiaries of the Group, to the US Dollar which is the presentation currency of the Group:
Exchange rate % change % change
Russian Roubles quarter six months/
As of: for US$1 year
30 June 2014 33.6306 (5.8) 2.8
31 March 2014 35.6871 9.0
31 December 2013 32.7292 7.8
30 June 2013 32.7090 7.7
Average rate during:
Six-month period ended 30 June 2014 34.9796 12.8
Three-month period ended 31 March 2014 34.9591 14.9
Six-month period ended 30 June 2013 31.0169 1.2
3. significant accounting policies
The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 December 2013.
4. OPERATING SEGMENTS
The Group has 5 reportable segments, as described below, which are the Group's strategic business units. The following summary describes the operation in each of the Group's reportable segments:
· Development Projects - Commercial projects: Include construction of property for future lease.
· Development Projects - Residential projects: Include construction and selling of residential properties.
· Asset Management: Includes the operation of investment property for lease.
· Hotel Operation: Includes the operation of Hotels.
· Other - Land bank: Includes the investment and holding of property for future development.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group's management team. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm's length basis.
| Development projects | Asset management | Hotel Operation | Other - land bank | Total | ||||
| Commercial projects | Residential projects | |||||||
| 30/6/1413 | 30/6/13 | 30/6/14 | 30/6/13 | 30/6/14 | 30/6/13 | 30/6/14 | 30/6/13 | 30/6/14 | 30/6/13 | 30/6/14 | 30/6/13 | |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| External revenues | 1 | 54,377 | 1,343 | 915 | 62,086 | 52,435 | 8,037 | 8,650 | 4,767 | 7,516 | 76,234 | 123,893 |
| Inter-segment revenue | 1 | - | 1 | - | - | - | 8 | 9 | 221 | 244 | 231 | 253 |
| Reportable segment (loss)/profit before tax | (1,603) | 703 | (473) | (2,539) | 2,002 | (10,770) | 1,459 | 1,459 | (11,565) | (5,651) | (10,180) | (16,798) |
| 30/6/14 | 31/12/13 | 30/6/14 | 31/12/13 | 30/6/14 | 31/12/13 | 30/6/14 | 31/12/13 | 30/6/14 | 31/12/13 | 30/6/14 | 31/12/13 | |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| Reportable segment assets | 360,275 | 323,424 | 197,844 | 178,199 | 1,578,882 | 1,582,816 | 53,598 | 53,938 | 392,075 | 386,459 | 2,582,674 | 2,524,836 |
| Reportable segment liabilities | 4,501 | - | 22,193 | - | 987,433 | 1,014,608 | - | - | 2,860 | 1,420 | 1,016,987 | 1,016,028 |
Reconciliation of reportable segment profit or loss
| 1/1/14- 30/6/14 |
1/1/13- 30/6/13 |
|
| US$ '000 | US$ '000 | |
| Profit or loss | ||
| Total profit or loss for reportable segments | (10,180) | (16,798) |
| Other profit or loss | (2,306) | (16,612) |
| Share of the after tax profit/(loss) of joint ventures | 600 | (760) |
| Profit on disposal of investment in subsidiaries/joint ventures | 61 | 32,088 |
| Valuation gain on properties | 26,461 | 58,390 |
| Impairment loss on inventory of real estate | (8,696) | (849) |
| Consolidated profit before tax | 5,940 | 55,459 |
5. REVENUE
| For the three months ended |
For the six months ended |
|||
| 1/4/14- 30/6/14 |
1/4/13- 30/6/13 |
1/1/14- 30/6/14 |
1/1/13- 30/6/13 |
|
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | |
| Rental income | 33,692 | 30,647 | 66,770 | 59,876 |
| Proceeds from sale of trading properties | 1,427 | 55,048 | 1,427 | 55,292 |
| Hotel operation income | 4,460 | 4,786 | 8,037 | 8,649 |
| Construction consulting/management fees | - | 47 | - | 76 |
| 39,579 | 90,528 | 76,234 | 123,893 | |
6. ADMINISTRATIVE EXPENSES
| For the three months ended |
For the six months ended |
|||
| 1/4/14- 30/6/14 |
1/4/13- 30/6/13 |
1/1/14- 30/6/14 |
1/1/13- 30/6/13 |
|
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | |
| Consultancy fees | 431 | 661 | 986 | 1,156 |
| Legal fees | 251 | 293 | 422 | 554 |
| Auditors' remuneration | 254 | 157 | 406 | 379 |
| Valuation expenses | 37 | 65 | 65 | 105 |
| Directors' remuneration | 357 | 367 | 1,308 | 727 |
| Salaries and wages | 1 | 42 | 6 | 81 |
| Depreciation | 45 | 201 | 92 | 233 |
| Insurance | 71 | 81 | 140 | 188 |
| Provision for Doubtful Debts | (776) | 2,176 | 1,687 | 1,594 |
| Share option expense | 1,165 | 1,234 | 2,385 | 2,425 |
| Donations | 1,301 | 1,051 | 2,588 | 2,104 |
| Other administrative expense | 509 | 623 | 965 | 1,388 |
| 3,646 | 6,951 | 11,050 | 10,934 |
7. other expenses
| For the three months ended |
For the six months ended |
|||
| 1/4/14- 30/6/14 |
1/4/13- 30/6/13 |
1/1/14- 30/6/14 |
1/1/13- 30/6/13 |
|
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | |
| Prior year's VAT non recoverable | (109) | 185 | 600 | 850 |
| Compensation paid for fire damages | - | 132 | - | 832 |
| Sundries | 55 | 508 | 1,607 | 920 |
| Legal claim accrual | 717 | - | 717 | - |
| 663 | 825 | 2,924 | 2,602 | |
8. FINANCE COST AND FINANCE INCOME
| For the three months ended |
For the six months ended |
|||
| 1/4/14- 30/6/14 |
1/4/13- 30/6/13 |
1/1/14- 30/6/14 |
1/1/13- 30/6/13 |
|
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | |
| Interest income | 1,359 | 1,478 | 4,045 | 2,208 |
| Loans write off | - | - | - | 15,006 |
| Net foreign exchange gain | 22,876 | - | - | - |
| Net change in fair value of financial assets | 623 | 24 | 463 | - |
| Finance income | 24,858 | 1,502 | 4,508 | 17,214 |
| Interest expense on loans and borrowings | (1) | (1) | (2) | (158) |
| Interest expense on bank loans | (14,083) | (16,518) | (27,932) | (30,474) |
| Net change in fair value of financial assets | - | - | - | (27) |
| Translation reserve reclassified upon disposal of joint venture | - | - | - | (30,288) |
| Net foreign exchange loss | - | (19,544) | (15,017) | (28,728) |
| Other finance costs | (103) | (1,195) | (937) | (3,783) |
| Finance costs | (14,187) | (37,258) | (43,888) | (93,458) |
| Net finance income/(costs) | 10,671 | (35,756) | (39,380) | (76,244) |
9. tAX EXPENSE
| For the three months ended |
For the six months ended |
||||
| 1/4/14- 30/6/14 |
1/4/13- 30/6/13 |
1/1/14- 30/6/14 |
1/1/13- 30/6/13 |
||
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | ||
| Current tax expense | |||||
| Current year | 193 | 238 | 389 | 607 | |
| Adjustment for prior years | 49 | 191 | 105 | 191 | |
| 242 | 429 | 494 | 798 | ||
| Deferred tax (benefit)/expense | |||||
| Origination and reversal of temporary differences | (3,009) | 10,671 | 1,704 | 11,402 | |
| Total income tax (benefit)/expense | (2,767) | 11,100 | 2,198 | 12,200 | |
10. INVESTMENT PROPERTY
Reconciliation of carrying amount
| 30/6/14 | 31/12/13 | |
| US$ '000 | US$ '000 | |
| Balance 1 January | 1,609,800 | 1,292,300 |
| Transfer from investment property under development | - | 1,852 |
| Transfer to trading properties | (432) | - |
| Acquisitions | - | 388,254 |
| Disposal of investment property | - | (61,397) |
| Renovations/additional cost | 2,554 | 13,186 |
| Fair value adjustment | 11,031 | 42,455 |
| Effect of movement in foreign exchange rates | (22,553) | (66,850) |
| Balance 30 June / 31 December | 1,600,400 | 1,609,800 |
The decrease due to the effect of the foreign exchange rates is a result of the weakening of the Rouble compared to the US Dollar by 2.8%, during the first half of 2014. The fair value adjustment gain in investment property is partly related to this Rouble weakening.
The investment property was revalued by independent appraisers on 30 June 2014 with an overall decrease in the value of the properties of $9.4 million which is mainly due to the decrease of the market value of Tverskaya Plaza II property. The market value of AFIMALL City and other major properties did not materially change.
11. INVESTMENT PROPERTY UNDER DEVELOPMENT
| 30/6/14 | 31/12/13 | |
| US$ '000 | US$ '000 | |
| Balance 1 January | 635,266 | 567,737 |
| Construction costs | 39,558 | 17,050 |
| Disposal | (1,400) | - |
| Acquisition | - | 846 |
| Transfer to investment property | - | (1,852) |
| Fair value adjustment | 15,430 | 63,779 |
| Effect of movements in foreign exchange rates | (2,289) | (12,294) |
| Balance 30 June / 31 December | 686,565 | 635,266 |
During the period the Company disposed its 100% share in Keyiri Trade & Invest Limited with its Russian subsidiary Favorit LLC, holding rights to the St Petersburg project, of a book value of US$1,400 thousand. For further details refer to note 22.
The decrease due to the effect of the foreign exchange rates is a result of the rouble weakening compared to the US Dollar by 2.8% during the first half of 2014. The investment property under development was revalued by independent appraisers on 30 June 2014. Main difference in value of investment property under development results from the increase in value of Plaza 1c project in total amount of $25.4 million due to updated construction parameters which will reflect in the agreement with general contractor.
12. PROPERTY, PLANT AND EQUIPMENT
| 30/6/14 | 31/12/13 | |
| US$ '000 | US$ '000 | |
| Balance 1 January | 69.735 | 76.555 |
| Additions | 240 | 1,807 |
| Depreciation for the period / year | (886) | (1,874) |
| Disposals | (18) | (11) |
| Effect of movements in foreign exchange rates | (2,296) | (6,742) |
| Balance 30 June / 31 December | 66,775 | 69,735 |
13. INVENTORY OF REAL ESTATE
As previously announced, in August 2012 AFI Development wrote-off its rights to the project "Botanic Gardens" following initiation of bankruptcy proceedings against the "main investor" under the investment contract, Novoe Koltso Moskvy OJSC ("NKM"), while continuing its efforts to secure development rights to the project.
On 5 February and 21 February 2013, the Company reported that, as a result of negotiations with the Moscow city authorities, the Company's development rights to the project have been recognised through an addendum to the investment contract for the project. According to this addendum, NKM shall not have any claims to the investments made by AFI Development in the Botanic Garden project and its subsidiary, Nordservice LLC, became the only investor under the investment contract.
In May 2014, the Company made further progress towards restoring the Botanic Garden project on its balance sheet. As a creditor of NKM and a participant in its bankruptcy proceedings, Nordservice LLC purchased additional rights of claim against NKM for US$5.6 million. Since the project is currently written off based on the opinion of its legal advisers that any recovery of the Company's costs relating to its investments in the project was unlikely, those costs including other non-material other costs were impaired to profit or loss.
14. TRADING PROPERTIES
| 30/6/14 | 31/12/13 | |
| US$ '000 | US$ '000 | |
| Balance 1 January | 6,409 | 3,597 |
| Acquisition | - | 6,944 |
| Transfer from investment property | 432 | - |
| Transfer from trading properties under construction | - | 29,772 |
| Disposals | (1,047) | (32,623) |
| Effect of movements in exchange rates | (248) | (1,281) |
| Balance 30 June / 31 December | 5,546 | 6,409 |
Trading properties comprise unsold apartments and parking places.
15. TRADING PROPERTIES UNDER CONSTRUCTION
| 30/6/14 | 31/12/13 | |
| US$ '000 | US$ '000 | |
| Balance 1 January | 127,213 | 141,787 |
| Transfer to trading properties | - | (29,772) |
| Construction costs | 13,035 | 17,805 |
| Effect of movements in exchange rates | (681) | (2,607) |
| Balance 30 June / 31 December | 139,567 | 127,213 |
Trading properties under construction comprise "Odinburg" project which involves primarily the construction of residential properties.
16. TRADE AND OTHER RECEIVABLES
| 30/6/14 | 31/12/13 | |
| US$ '000 | US$ '000 | |
| Advances to builders | 45,503 | 40,241 |
| Amounts receivable from related parties (note 26) | 12,573 | 12,999 |
| Trade receivables net | 9,774 | 9,659 |
| Other receivables | 27,696 | 26,515 |
| VAT recoverable | 13,361 | 15,711 |
| Other tax receivables | 2,301 | 1,300 |
| 111,208 | 106,425 |
Trade receivables net
Trade receivables are presented net of an accumulated provision for doubtful debts of US$6,360 thousand (2013: US$12,658 thousand).
17. CASH AND CASH EQUIVALENTS
| 30/6/14 | 31/12/13 | |
| Cash and cash equivalents consist of: | US$ '000 | US$ '000 |
| Cash at banks | 111,680 | 193,027 |
| Cash in hand | 254 | 303 |
| 111,934 | 193,330 |
18. SHARE CAPITAL AND RESERVES
| 30/6/14 | 31/12/13 | |
| Share Capital | US$ '000 | US$ '000 |
| Authorised | ||
| 2,000,000,000 shares of US$0.001 each | 2,000 | 2,000 |
| Issued and fully paid | ||
| 523,847,027 A shares of US$0.001 each 523,847,027 B shares of US$0.001 each |
524 524 |
524 524 |
| 1,048 | 1,048 |
Employee Share option plan
There were no changes as to the employee share option plan during the six-month period ended 30 June 2014.
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations to the Group presentation currency and the foreign exchange differences on loans designated as loans to an investee company which are accounted for as part of the investor's investment (IAS21.15) as their repayment is not planned or likely to occur in the foreseeable future. These foreign exchange differences are recognised directly to Translation Reserve.
Retained earnings
The amount at each reporting date is available for distribution. No dividends were proposed, declared or paid during the six-month period ended 30 June 2014.
19. LOANS AND BORROWINGS
| 30/6/14 US$ '000 |
31/12/13 US$ '000 |
|
| Non-current liabilities | ||
| Secured bank loans | 592,376 | 778,909 |
| Current liabilities | ||
| Secured bank loans | 231,327 | 26,367 |
| Unsecured loans from other non-related companies | 645 | 660 |
| 231,972 | 27,027 |
There were no material changes to loans during the six-month period ended 30 June 2014 apart from the following:
During the period the Group received the fifth and final tranche, of total approx US$36,986 thousand (RUR 1,333 million), of the secured loan from VTB Bank designated for the payment of the fourth instalment to the City of Moscow, for the acquisition of the parking area under the AFIMALL City. In addition the Group made the first and second quarterly payments of US$6.5 million each on account of the principal of the loans as per the agreed loan facility.
The remaining amount of US$205 million of the loan from VTB Bank received on 25 January 2013 by the Group's subsidiary Krown Investments LLC was reclassified to current liabilities as its repayment is due within the next twelve months.
20. TRADE AND OTHER PAYABLES
| 30/6/14 | 31/12/13 | |
| US$ '000 | US$ '000 | |
| Trade payables | 11,953 | 11,175 |
| Payables to related parties (note 26) | 3,510 | 4,088 |
| Amount payable to builders | 12,219 | 9,556 |
| VAT and other taxes payable | 11,643 | 28,260 |
| Amount payable for the acquisition of properties | - | 39,967 |
| Other payables | 4,818 | 7,202 |
| 44,143 | 100,248 |
Payables to related parties
Include an amount of US$2,742 thousand (31/12/13: US$3,282 thousand) payable to Danya Cebus Rus LLC, related party of the Group, for contracts signed in relation to the construction of Group's project.
Amount payable for the acquisition of properties
During the period the Group paid the fourth and final installment for the acquisition of the parking area under the AFIMALL City using the loan tranche as described in note 19.
21. ADVANCES FROM CUSTOMERS
Represent advances received from customers for the sale of residential properties at "Odinburg" project.
22. DISPOSAL OF INVESTMENT IN SUBSIDIARIES/JOINT VENTURES
| 30/6/14 | 30/6/13 | |
| US$ '000 | US$ '000 | |
| The profit on disposal of investment in subsidiaries/ joint ventures consists of: |
||
| Profit on disposal of non-significant subsidiaries | 61 | - |
| Profit on disposal of Westec Four Winds Ltd | - | 32,088 |
| 61 | 32,088 |
The profit on disposal of non-significant subsidiaries comprises of Keyiri Trade and Invest Ltd together with its subsidiary OOO Favorit and OOO Sever Region K. The selling price of the disposal was $1,400 thousand. The resulting profit on sale amounting to US$61 thousand was recognised in the income statement.
The selling price of the disposal of Westec Four Winds Ltd was US$103,380 thousand. The resulting profit on sale amounting to US$32,088 thousand and a translation reserve of US$30,288 thousand was reclassified as a realised exchange loss in financing expenses of the income statement of first quarter 2013.
The above disposal had the following effect on the Group's assets and liabilities:
| 30/6/14 | |
| US$ '000 | |
| Investment property under development | (1,400) |
| Trade and other receivables | (14) |
| Current tax asset | (2) |
| Deferred tax assets | (1) |
| Trade and other payables | 1 |
| Net identifiable assets | (1,416) |
| Consideration received in cash/ Net cash inflow from the disposal of Non-significant subsidiaries |
1,400 |
23. FINANCIAL INSTRUMENTS
Carrying amounts and fair values
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels and the fair value hierarchy for financial instruments measured at fair value. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
| Carrying amount | Fair value | ||||||||
| Non-current assets | Current assets | ||||||||
| Loans Receivable |
Trade and other receivables |
Other investments, Including derivatives |
Cash and cash equivalents |
Loans receivable |
Total | Level 1 | Level 2 | Level 3 | Total |
| 30 June 2014 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Financial assets measured at fair value | ||||||||||
| Investment in listed debt securities | - | - | 11,491 | - | - | - | 11,491 | - | - | 11,491 |
| Financial assets not measured at fair value | ||||||||||
| Loans receivable | 22,472 | - | - | - | 749 | 23,221 | ||||
| Trade and other receivables | - | 95,546 | - | - | - | 95,546 | ||||
| Cash and cash equivalents | - | - | - | 111,934 | - | 111,934 | ||||
| 22,472 | 95,546 | 11,491 | 111,934 | 749 | ||||||
| 31 December 2013 | ||||||||||
| Financial assets measured at fair value | ||||||||||
| Investment in listed debt securities | - | - | 9,982 | - | - | - | 9,982 | - | - | 9,982 |
| Financial assets not measured at fair value | ||||||||||
| Loans receivable | 21,652 | - | - | - | 774 | 22,426 | ||||
| Trade and other receivables | - | 89,414 | - | - | - | 89,414 | ||||
| Cash and cash equivalents | - | - | - | 193,330 | - | 193,330 | ||||
| 21,652 | 89,414 | 9,982 | 193,330 | 774 |
Carrying amounts and fair values (continued)
| Carrying amount | Fair value | |||||||
| Non-current liabilities | Current liabilities | |||||||
| Interest bearing loans and borrowings |
Trade and other payables |
Interest bearing loans and borrowings | Total | Level 1 | Level 2 | Level 3 | Total | |
| 30 June 2014 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Financial liabilities not measured at fair value | ||||||||
| Interest bearing loans and borrowings | (592,376) | - | (231,972) | (824,348) | (855,717) | |||
| Trade and other payables | - | (55,033) | - | (55,033) | ||||
| (592,376) | (55,033) | (231,972) | ||||||
| 31 December 2013 | ||||||||
| Financial liabilities not measured at fair value | ||||||||
| Interest bearing loans and borrowings | (778,909) | - | (27,027) | (805,936) | (834,466) | |||
| Trade and other payables | - | (72,095) | - | (72,095) | ||||
| (778,909) | (72,095) | (27,027) |
24. CONTINGENCIES
There weren't any contingent liabilities as at 30 June 2014.
25. FINANCIAL RISK MANAGEMENT
The Group's financial risk management objectives and policies are consistent with that disclosed in the consolidated financial statements as at and for the year ended 31 December 2013.
Russian business and economic environment
Looking ahead to the remainder of 2014, the Group's focus will remain on progressing further with its development projects and continually improving the performance of its current assets. At the same time, the Group is closely monitoring the rate of slowdown in the Russian economy and the geo-political developments in Ukraine to determine what impact, if any, these may have on the Russian real estate market.
26. RELATED PARTIES
| 30/6/14 | 31/12/13 | |
| Outstanding balances with related parties | US$ '000 | US$ '000 |
| Assets | ||
| Amounts receivable from joint ventures | 16 | 16 |
| Amounts receivable from ultimate holding company | 203 | 203 |
| Amounts receivable from other related companies | 12,354 | 12,780 |
| Long term loan receivable from joint ventures | 22,231 | 21,438 |
| Liabilities | ||
| Amounts payable to joint ventures | 153 | 170 |
| Amounts payable to ultimate holding company | 434 | 435 |
| Amounts payable to other related companies | 2,923 | 3,483 |
| Deferred income from related company | 281 | 266 |
| Transactions with the key management personnel | 30/6/14 | 30/6/13 |
| US$ '000 | US$ '000 | |
| Key management personnel compensation Short-term employee benefits |
3,461 | 2,802 |
| Share option scheme expense | 2,385 | 2,425 |
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. The person is a member of the key management personnel of the entity or its parent (includes the immediate, intermediate or ultimate parent). Key management is not limited to directors; other members of the management team also may be key management.
| Other related party transactions | 30/6/14 | 30/6/13 |
| US$ '000 | US$ '000 | |
| Revenue | ||
| Related companies - rental income | 812 | 663 |
| Joint venture - interest income | 1,027 | 1,276 |
| Expenses | ||
| Ultimate holding company - administrative expenses | 221 | 193 |
| Joint venture - operating expenses | 86 | 102 |
| Construction services capitalised | ||
| Related company - construction services | 610 | 3,537 |
27. SUBSEQUENT EVENTS
· On 12 August 2014 the Company confirmed that the Prosecution Office of Moscow Central District filed a claim against the subsidiary, owning AFIMALL City, requesting that it eliminates fire safety hazards identified at AFIMALL City and to suspend the Mall's operations until these fire safety hazards have been eliminated. AFI Development PLC had previously received a report by the State Fire Safety Control Authorities which specified works to be undertaken to address minor fire safety issues at AFIMALL City. Part of these works are to be completed by 17 October 2014 and the remainder by 17 April 2015. In response to the submission by the Public Prosecution Office on the same subject, the Company had confirmed that all works requested by the State Fire Safety Control Authorities will be completed by the specified deadlines.
According to the opinion of the Company's management, which is based on the views of its internal legal advisors, the law suit has low probability of success. This opinion takes into account the fact that the Company is working on addressing the fire safety issues, identified in the report it received, in line with the prescribed schedule. The cost of works to address these fire safety issues is estimated to be not significant. The Mall is open, continues its normal operations and AFI Development confirms that there are currently no fire safety or other public safety hazards for customers within the Mall.
· Following the disclosure on property tax risks included in note 34 of its 2013 Annual Financial Statements, the Company updates that it successfully challenged the cadastral value for most of relevant properties: the special committee of the Moscow cadastral authorities has in July 2014 agreed to base the cadastral value on market value for most projects. The risk of significant increase in property tax for 2014 is now eliminated. The property tax payment for these assets for the second quarter was made using result of this challenge.
This information is provided by RNS
The company news service from the London Stock Exchange
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