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Frontier Development PLC — Interim / Quarterly Report 2015
Nov 24, 2015
7652_10-q_2015-11-24_3828155d-dc51-48a8-918d-ad18865dfc60.html
Interim / Quarterly Report
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RNS Number : 6957G
AFI Development PLC
24 November 2015
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION
IN OR INTO THE RUSSIAN FEDERATION, THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN
24 November 2015
AFI DEVELOPMENT PLC
("AFI DEVELOPMENT" OR "THE COMPANY")
RESULTS FOR THE NINE MONTHS TO 30 SEPTEMBER 2015
Continued focus on efficiency results in return to profitability in Q3 2015
AFI Development, a leading real estate company focused on developing property in Russia, has today announced its financial results for the nine months ended 30 September 2015.
9M 2015 financial highlights
· Revenue for 9M 2015, including proceeds from the sale of trading properties, reached US$72.2 million:
- Rental and hotel operating income declined 35% year-on-year to US$71.4 million, reflecting the difficult macroeconomic environment
- AFIMALL City contribution stood at US$54.7 million (9M 2014: US$82.7 million), down 34% year-on-year
· Gross profit declined by only 13% year-on-year to US$34.8 million (9M 2014: US$39.8 million), reflecting our focus on profitability and rigorous cost control
· Net loss for 9M 2015 was US$ 20.7 million, against a profit of US$27.9 million in 9M 2014, largely due to valuation losses in Q2 2015
- Q3 2015 was profitable, with net profit of US$12.5 million for the quarter
· Total gross value of portfolio of properties decreased marginally to US$1.97 billion at the end of Q3 2015, compared to US$1.98 billion at the end of Q2 2015
· Cash, cash equivalents and marketable securities as of 30 September 2015 were at US$62.5 million
9M 2015 operational highlights
· AFIMALL City recorded revenue of US$54.7 million for 9M 2015:
- NOI was US$41.0 million for the nine months, compared to US$64.2 million in 9M 2014
- Average monthly footfall in September 2015 was 17% higher than that in September 2014
· Over 95% of apartments at Odinburg Building 1 have been pre-sold (780 sale contracts signed as of 23 November 2015 in Buildings 1 and 2)
· The main construction stage of the Paveletskaya II project is ready to be started in December 2015, pre-sales of apartments are also planned to start in December
Commenting on today's announcement, Lev Leviev, Executive Chairman of AFI Development, said:
"The real estate market across Russia remains under pressure from continued challenging macroeconomic conditions and lack of visibility with respect to future economic recovery. In such an environment, we maintain our cautious approach focused on improving our profitability, enhancing operational efficiency of existing projects and preparing selected new projects for development. We are pleased to report a return to profitability in the third quarter of 2015 and hope to build on this positive development going forward."
9M 2015 results conference call:
AFI Development will hold a conference call for analysts and investors to discuss its 9M 2015 financial results on Wednesday, 25 November 2015, following the publication of the Company's financial results.
The details for the conference call are as follows:
Date: Wednesday, 25 November 2015
Time: 2pm GMT (5pm Moscow)
Dial-in Tel: International: +44 (0)20 3003 2666
UK toll free: 0808 109 0700
US toll-free: 1 866 966 5335
Russia toll-free: 8 10 8002 4902044
Password: AFI
Please dial in 5-10 minutes prior to the start time giving your name, company and stating that you are dialling into the AFI Development conference call quoting the reference AFI.
Prior to the conference call, the 9M 2015 Investor Presentation of AFI Development will be published on the Company website at http://www.afi-development.com/en/investor-relations/reports-presentations on 25 November 2015 by 11am GMT (2pm Moscow time).
- ends -
For further information, please contact:
AFI Development, Moscow +7 495 796 9988
Ilya Kutnov
Citigate Dewe Rogerson, London +44 20 7638 9571
David Westover
Sandra Novakov
Marina Zakharova de Calero
About AFI Development
AFI Development is one of the leading real estate development companies operating in Russia. Established in 2001, AFI Development is a publicly traded subsidiary of Africa Israel Investments Ltd.
AFI Development is listed on the Main Market of the London Stock Exchange and aims to deliver shareholder value through a commitment to innovation and continuous project development, coupled with the highest standards of design, construction and quality of customer service.
AFI Development focuses on developing and redeveloping high quality commercial and residential real estate assets across Russia, with Moscow being its main market. The Company's existing portfolio comprises commercial projects focused on offices, shopping centres, hotels and mixed-use properties, and residential projects. AFI Development's strategy is to sell the residential properties it develops and to either lease the commercial properties or sell them for a favourable return.
AFI Development is a leading force in urban regeneration, breathing new life into city squares and neighbourhoods and transforming congested and underdeveloped areas into thriving new communities. The Company's long-term, large-scale regeneration and city infrastructure projects establish the necessary groundwork for the successful launch of commercial and residential properties, providing a strong base for future.
Legal disclaimer
Some of the information in these materials may contain projections or other forward-looking statements regarding future events, the future financial performance of the Company, its intentions, beliefs or current expectations and those of its officers, directors and employees concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and business. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might" or the negative of such terms or other similar expressions. These statements are only predictions and that actual events or results may differ materially. Unless otherwise required by applicable law, regulation or accounting standard, the Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia and market change in the industries the Company operates in, as well as many other risks specifically related to the Company and its operations.
Executive Chairman's statement
Our operating environment during Q3 2015 remained challenging, characterised by reduced consumer spending, higher inflation and continued currency volatility. This resulted in decreasing revenues in our yielding properties, including AFIMALL City. At the same time, we continued to improve the profitability of our operations, focusing on operational efficiency, active development of existing projects (most notably Odinburg) and preparing new projects for construction.
The third quarter was profitable for the Company with net profit of US$12.5 million recorded for the quarter. However, largely due to valuation losses in Q2 2015, we recorded a net loss of US$20.7 million for 9M 2015. Gross profit for 9M 2015 reached US$34.8 million (9M 2014: US$39.8 million).
The third quarter saw a gradual stabilisation in the retail market with rental rates broadly unchanged compared to the previous quarter and fewer retailers suspending expansion plans. This wider trend is reflected in the operating performance of AFIMALL City, which saw an increase in footfall and signed notable lease agreements with new tenants. However, the Mall's revenue contribution remains below levels seen in the same period last year at US$54.7 million (9M 2014: US$82.7 million) due to continuing pressures in the general economy.
At the same time, we continue active development of residential projects. Pre-sales at Building 1 of Odinburg are nearly complete and construction of Building 2 is on track for completion. Main construction stage and marketing of Paveletskaya Phase II are due to start in December 2015 whilst the start of construction at Bolshaya Pochtovaya is planned for the second half of 2016.
Projects update
AFIMALL City
Amidst difficult conditions in the retail environment in Russia, AFIMALL City continues to demonstrate a positive trend in footfall: the Mall's average monthly footfall improved by 17% in September 2015 compared to September 2014.
A number of new tenants opened their outlets in AFIMALL City, including the US bakery café Upside Down Cake and Portuguese accessories brand Parfois. Additionally, AFIMALL City signed a lease agreement with one of the leading Russian children's goods brand Detsky Mir, who will lease about 900 sq.m. with a planned opening in December this year.
Odinburg
During Q3 2015, the works at Building 1 of the first phase of Odinburg were focused on the final fit-out, engineering systems installations and landscaping. The Company is on track to deliver the apartments in Building 1 to customers in December 2015.
The construction works at Building 2 continue to plan.
As of the date of publication of this report, more than 95% of apartments in Building 1 have been pre-sold with sales of Building 2 also progressing to plan (780 contracts for sales of apartments signed in both buildings at the date of this report's publication).
We continue to introduce new marketing initiatives to stimulate sales of apartments at Odinburg. In the third quarter we introduced a "trade-in" programme, where our brokers help potential buyers to dispose of their existing apartments to serve as partial payment towards the acquisition of a new apartment at Odinburg. In addition to mortgage programmes, AFI Development offers various financing options to its customers, including instalment payment plans, offered in partnership with VTB-Leasing.
Aquamarine III (Ozerkovskaya III)
AFI Development continues to market office space in the property to potential buyers and tenants.
Paveletskaya Phase II
The main construction stage of our Paveletskaya II residential project is scheduled for launch in December 2015. Pre-sales of apartments are to start simultaneously with the start of construction. The project will be marketed as AFI Residence Paveletskaya. The preliminary construction works started already in Q3 2015, which justified re-classification of the project from Investment properties under development category to Trading properties under construction category of assets on the balance sheet as of 30 September 2015.
The new business-class residential complex will be built on a land plot of 5.5 Ha and will feature several buildings of various height with a total GBA of 151,373 thousand sq.m. AFI Residence Paveletskaya will include a sports complex and commercial areas. The project is to be constructed in three phases.
Bolshaya Pochtovaya
The design works and preparations for construction at Bolshaya Pochtovaya continue. The Company plans to start construction of the project in H2 2016.
Botanic Garden
In light of the changing residential market environment, AFI Development is reviewing the planning and designs of the project.
Subsequent event
In November 2015 the Company received a notice from VTB Bank on decision of the bank to postpone the applicability of covenants in the loan agreement of Krown Investments Limited ("Krown") for the Ozerkovskaya III project. According to the decision, the Loan-To-Value covenant (currently applicable from Q1 2015 onwards) and the Debt Service Coverage Ratio covenant (currently applicable from Q4 2015 onwards), shall be both applicable starting from Q2 2017 onwards. AFI Development subsidiary owning and operating AFIMALL City, Bellgate Construction Limited, will provide a surety for the full amount of the loan of Krown, and AFIMALL City premises will be mortgaged in a secondary mortgage as additional collateral for the loan by Krown. This decision by the Bank will become legally binding with execution of addendum to the loan agreement and related documents.
| Lev Leviev Executive Chairman of the Board |
ANNEX A
30.9.2015 - Very significant property disclosure
1. AFIMALL City
| (Data based on 100%. Share of the Company in the property - 100%) | Current quarter (Q3 2015) | Comparative data | |||
| Q3 2015 | Q2 2015 | Q1 2015 | Q4 2014 | Q3 2014 | |
| Value of the property (000'USD) | 990,000 | 990,000 | 1,000,000 | 1,000,000 | 1,160,000 |
| NOI in the period (000'US$) | 11,943 | 15,395 | 13,686 | 18,641 | 25,007 |
| Revaluation gains (losses) in the period (000'US$) | 59,918 | (28,970) | 13,821 | (3,655) | 88,473 |
| Occupancy rate at the end of the period (%) | 76% | 77% | 83% | 85% | 82% |
| Rate of return (%) | 5.5% | 5.9% | 5.5% | 8.3% | 7.4% |
| Average rent per sq.m. (US$/annum)* | 1,057 | 1,144 | 1,117 | 1,147 | 1,201 |
| Average rent per sq.m. in agreements signed in the period (US$/annum) | 664 | 1,399 | 832 | 1,035 | 1,667 |
* Average rent is presented by main lease agreements, without temporary rent discounts provided to some tenants
ANNEX B
30.9.2015 - Very significant loans disclosure
| Balance as of 30.09.2015 | Lender type: Bank, Institutional etc. | Indexation/ currency exposure & interest rate | Liens and material legal restrictions on the property | Covenants | Cross default mechanism | Any other covenants or restriction that might increase the cost of debt | In-case it is a credit line facility - what are the terms&conditions for draw downs | The methods/way that the covenant is calculated | Covenant calculation results | The date of Q3 2015 financial statement were reported | The date that the lender is checking the borrower is line with the covenants |
| USD 289,885,605 and RUR 9,650,623,000(USD 145,699,031). Total amount in USD as of 30.09.2015 is USD 435,584,636 | 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 Q3 2015 was 1 037 millions Roubles incl. VAT ; (2) Liquidation Value determined by an external valuer appointed by the Bank is USD 601.3 million/RUR 33.7 bln (VAT not included) | 24 November 2015 | (1) Borrowers revenues are checked quarterly; (2) Liquidation value is checked twice a year, on December and on August. |
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the period from 1 January 2015 to 30 September 2015
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the period from 1 January 2015 to 30 September 2015
C O N T E N T S
Independent auditors' report on review of condensed consolidated interim financial information
Condensed consolidated income statement
Condensed consolidated statement of comprehensive income
Condensed consolidated statement of changes in equity
Condensed consolidated statement of financial position
Condensed consolidated statement of cash flows
Notes to the condensed consolidated interim financial statements
Independent auditors' report on review of condensed consolidated interim financial information to the members of AFI DEVELOPMENT PLC
Introduction
We have reviewed the accompanying condensed consolidated statement of financial position of AFI Development PLC as at 30 September 2015, the condensed consolidated statements of income, comprehensive income, changes in equity and cash flows for the nine-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 September 2015 is not prepared, in all material respects, in accordance with IAS 34 "Interim Financial Reporting".
Maria H. Zavrou, FCCA
Certified Public Accountant and Registered Auditor
For and on behalf of
KPMG Limited
Certified Public Accountants and Registered Auditors
14 Esperidon Street
1087 Nicosia, Cyprus
23 November 2015
CONDENSED CONSOLIDATED INCOME STATEMENT
For the period from 1 January 2015 to 30 September 2015
| For the three months ended |
For the nine months ended |
|||||
| 1/7/15- | 1/7/14- | 1/1/15- | 1/1/14- | |||
| 30/9/15 | 30/9/14 | 30/9/15 | 30/9/14 | |||
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | |||
| Note | ||||||
| Revenue | 6 | 21,123 | 35,296 | 72,199 | 111,530 | |
| Other income | 1,303 | 73 | 2,711 | 3,076 | ||
| Operating expenses | 6 | (9,288) | (11,464) | (30,415) | (48,786) | |
| Carrying value of trading properties sold | 8 | 39 | (627) | (1,008) | ||
| Administrative expenses | 7 | (2,308) | (7,138) | (7,236) | (18,188) | |
| Other expenses | 8 | (160) | (3,119) | (1,179) | (6,043) | |
| Total expenses | (11,748) | (21,682) | (39,457) | (74,025) | ||
| Share of the after tax loss of joint ventures | (1,612) | (1,345) | (589) | (745) | ||
| Gross Profit | 9,066 | 12,342 | 34,864 | 39,836 | ||
| Profit on disposal of investment in subsidiaries | - | - | - | 61 | ||
| Valuation gain on properties | 11,12 | 98,466 | 108,386 | 56,129 | 134,847 | |
| Impairment loss on inventory of real estate | - | (8,848) | (662) | (17,544) | ||
| 98,466 | 99,538 | 55,467 | 117,303 | |||
| Results from operating activities | 107,532 | 111,880 | 90,331 | 157,200 | ||
| Finance income | 714 | 1,151 | 3,447 | 5,196 | ||
| Finance costs | (89,627) | (78,857) | (109,307) | (122,282) | ||
| Net finance costs | 9 | (88,913) | (77,706) | (105,860) | (117,086) | |
| Profit/(loss) before tax | 18,619 | 34,174 | (15,529) | 40,114 | ||
| Tax expense | 10 | (6,146) | (9,989) | (5,204) | (12,187) | |
| Profit/(loss) for the period | 12,473 | 24,185 | (20,733) | 27,927 | ||
| Profit/(loss) attributable to: | ||||||
| Owners of the Company | 11,682 | 23,479 | (21,424) | 28,003 | ||
| Non-controlling interests | 791 | 706 | 691 | (76) | ||
| 12,473 | 24,185 | (20,733) | 27,927 | |||
| Earnings per share | ||||||
| Basic and diluted earnings per share (cent) | 1.12 | 2.24 | (2.04) | 2.67 | ||
The notes form an integral part of the condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period from 1 January 2015 to 30 September 2015
| For the three months ended |
For the nine months ended |
|||
| 1/7/15- | 1/7/14- | 1/1/15- | 1/1/14- | |
| 30/9/15 | 30/9/14 | 30/9/15 | 30/9/14 | |
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | |
| Profit/(loss) for the period | 12,473 | 24,185 | (20,733) | 27,927 |
| Other comprehensive income Items that are or may be reclassified subsequently to profit or loss |
||||
| Realised translation difference on disposal of subsidiaries transferred to income statement | 2,572 | - | 1,742 | (77) |
| Foreign currency translation differences for foreign operations | (20,176) | (66,855) | (15,505) | (78,827) |
| Other comprehensive income for the period | (17,604) | (66,855) | (13,763) | (78,904) |
| Total comprehensive income for the period | (5,131) | (42,670) | (34,496) | (50,977) |
| Total comprehensive income attributable to: | ||||
| Owners of the parent | (5,744) | (43,251) | (35,115) | (50,759) |
| Non-controlling interests | 613 | 581 | 619 | (218) |
| (5,131) | (42,670) | (34,496) | (50,977) | |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period from 1 January 2015 to 30 September 2015
| Attributable to the owners of the Company | Non-controlling interests | Total | |||||||||||||||||||
| Share | Share | Capital | Translation | Retained | |||||||||||||||||
| Capital | Premium | reserve | Reserve | Earnings | Total | ||||||||||||||||
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | ||||||||||||||
| Balance at 1 January 2015 | 1,048 | 1,763,409 | - | (314,880) | (158,982) | 1,290,595 | (8,817) | 1,281,778 | |||||||||||||
| Total comprehensive income for the period | |||||||||||||||||||||
| Loss for the period | - | - | - | - | (21,424) | (21,424) | 691 | (20,733) | |||||||||||||
| Other comprehensive income | - | - | - | (13,691) | - | (13,691) | (72) | (13,763) | |||||||||||||
| Total comprehensive income for the period | - | - | - - |
(13,691) | (21,424) | (35,115) | 619 | (34,496) | |||||||||||||
| Transactions with owners of the Company Contributions and distributions |
|||||||||||||||||||||
| Share option expense | - | - | - | - | 1,839 | 1,839 | - | 1,839 | |||||||||||||
| Changes in ownership interest | |||||||||||||||||||||
| Acquisition of non-controlling interests (note 24) | - | - | (9,201) | - | - | (9,201) | 7,601 | (1,600) | |||||||||||||
| Balance at 30 September 2015 | 1,048 | 1,763,409 | (9,201) | (328,571) | (178,567) | 1,248,118 | (597) | 1,247,521 | |||||||||||||
| 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 | - | - | - | - | 28,003 | 28,003 | (76) | 27,927 | |||||||||||||
| Other comprehensive income | - | - | - | (78,762) | - | (78,762) | (142) | (78,904) | |||||||||||||
| Total comprehensive income for the period | - | - | - | (78,762) | 28,003 | (50,759) | (218) | (50,977) | |||||||||||||
| Transactions with owners of the Company Contributions and distributions |
|||||||||||||||||||||
| Share option expense | - | - | - | - | 3,472 | 3,472 | - | 3,472 | |||||||||||||
| Balance at 30 September 2014 | 1,048 | 1,763,409 | - | (229,216) | 149,130 | 1,684,371 | (2,397) | 1,681,974 | |||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2015
| 30/9/15 | 31/12/14 | |||
| Note | US$ '000 | US$ '000 | ||
| Assets | ||||
| Investment property | 11 | 1,351,900 | 1,375,416 | |
| Investment property under development | 12 | 355,923 | 431,474 | |
| Property, plant and equipment | 13 | 29,228 | 35,101 | |
| Long-term loans receivable | 14,785 | 18,071 | ||
| Inventory of real estate | 18,276 | 20,111 | ||
| VAT recoverable | 35 | 42 | ||
| Non-current assets | 1,770,147 | 1,880,215 | ||
| Trading properties | 14 | 2,141 | 2,979 | |
| Trading properties under construction | 15 | 211,169 | 133,036 | |
| Other investments | 16 | 26,818 | 6,499 | |
| Inventory | 409 | 615 | ||
| Short-term loans receivable | 108 | 1 | ||
| Trade and other receivables | 17 | 37,798 | 38,961 | |
| Current tax assets | 1,498 | 1,307 | ||
| Cash and cash equivalents | 18 | 35,746 | 86,756 | |
| Current assets | 315,687 | 270,154 | ||
| Total assets | 2,085,834 | 2,150,369 | ||
| Equity | ||||
| Share capital | 1,048 | 1,048 | ||
| Share premium | 1,763,409 | 1,763,409 | ||
| Translation reserve | (328,571) | (314,880) | ||
| Capital reserve | (9,201) | - | ||
| Retained earnings | (178,567) | (158,982) | ||
| Equity attributable to owners of the Company | 19 | 1,248,118 | 1,290,595 | |
| Non-controlling interests | (597) | (8,817) | ||
| Total equity | 1,247,521 | 1,281,778 | ||
| Liabilities | ||||
| Long-term loans and borrowings | 20 | 593,242 | 455,097 | |
| Deferred tax liabilities | 115,030 | 102,621 | ||
| Deferred income | 9,210 | 12,966 | ||
| Non-current liabilities | 717,482 | 570,684 | ||
| Short-term loans and borrowings | 20 | 47,952 | 231,684 | |
| Trade and other payables | 21 | 19,863 | 28,216 | |
| Advances from customers | 22 | 53,016 | 38,007 | |
| Current liabilities | 120,831 | 297,907 | ||
| Total liabilities | 838,313 | 868,591 | ||
| Total equity and liabilities | 2,085,434 | 2,150,369 | ||
The condensed consolidated interim financial statements were approved by the Board of Directors on 23 November 2015.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the period from 1 January 2015 to 30 September 2015
| 1/1/15- | 1/1/14- | ||
| 30/9/15 | 30/9/14 | ||
| Note | US$ '000 | US$ '000 | |
| #### Cash flows from operating activities | |||
| (Loss)/profit for the period | (20,733) | 27,927 | |
| Adjustments for: | |||
| Depreciation | 13 | 734 | 1,199 |
| Net finance costs | 9 | 105,560 | 116,747 |
| Share option expense | 1,839 | 3,472 | |
| Net valuation gain on properties | 11,12 | (56,129) | (134,847) |
| Impairment loss on inventory of real estate | 662 | 17,544 | |
| Share of loss in joint ventures | 589 | 745 | |
| Profit on disposal of investment in subsidiaries | - | (61) | |
| Profit on sale of property, plant and equipment | - | (3) | |
| Tax expense | 10 | 5,204 | 12,187 |
| 37,726 | 44,910 | ||
| Change in trade and other receivables | 50 | 10,972 | |
| Change in inventories | 126 | 42 | |
| Change in trading properties and trading properties under construction | (19,430) | (35,576) | |
| Change in advances and amounts payable to builders of trading properties under construction | (11,304) | (7,403) | |
| Changes in advances from customers | 23,168 | 38,338 | |
| Change in trade and other payables | 1,617 | (18,348) | |
| Change in VAT recoverable | 2,367 | - | |
| Change in deferred income | (2,015) | (8) | |
| Cash generated from operating activities | 32,305 | 32,927 | |
| Taxes paid | (460) | (568) | |
| Net cash from operating activities | 31,845 | 32,359 | |
| Cash flows from investing activities | |||
| Net cash inflow from the disposal of subsidiaries | - | 1,400 | |
| Proceeds from sale of other investments | 1,318 | 486 | |
| Proceeds from sale of property, plant and equipment | 1 | 69 | |
| Interest received | 2,289 | 4,691 | |
| Change in advances and amounts payable to builders | (1,609) | (19,902) | |
| Payments for construction of investment property under development | 12 | (7,960) | (49,104) |
| Payments for the acquisition/renovation of investment property | 11 | (1,929) | (43,576) |
| Dividends received from joint ventures | 3,250 | - | |
| Change in VAT recoverable | 3,262 | 2,560 | |
| Acquisition of property, plant and equipment | 13 | (253) | (449) |
| Acquisition of other investments | (20,551) | (1,915) | |
| Taxes paid on disposal of investment property | - | (4,005) | |
| Payments for loans receivable | (106) | (591) | |
| Proceeds from repayment of loans receivable | - | 534 | |
| Net cash used in investing activities | (22,288) | (109,802) | |
| Cash flows from financing activities | |||
| Acquisition of non-controlling interests | 24 | (1,600) | - |
| Proceeds from loans and borrowings | 20 | 10,000 | 36,986 |
| Repayment of loans and borrowings | (29,500) | (19,500) | |
| Interest paid | (34,428) | (41,703) | |
| Net cash used in financing activities | (55,528) | (24,217) | |
| Effect of exchange rate fluctuations | (5,039) | (5,231) | |
| Net decrease in cash and cash equivalents | (51,010) | (106,891) | |
| Cash and cash equivalents at 1 January | 86,756 | 193,330 | |
| Cash and cash equivalents at 30 September | 18 | 35,746 | 86,439 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the period from 1 January 2015 to 30 September 2015
1. INCORPORATION AND PRINCIPAL ACTIVITY
AFI Development PLC (the "Company") was incorporated in Cyprus on 13 February 2001 as a limited liability company under the name Donkamill Holdings Limited. In April 2007 the Company was transformed into public company and changed its name to AFI Development PLC. The address of the Company's registered office is 165 Spyrou Araouzou Street, Lordos Waterfront Building, 5th floor, Flat/office 505, 3035 Limassol, Cyprus. The Company is a 64.88% subsidiary of Africa Israel Investments Ltd ("Africa-Israel"), which is listed in the Tel Aviv Stock Exchange ("TASE"). The remaining shareholding of "A" shares is held by a custodian bank in exchange for the GDRs issued and listed in the London Stock Exchange ("LSE"). On 5 July 2010 the Company issued by way of a bonus issue, 523,847,027 "B" shares, which were admitted to a premium listing on the Official List of the UK Listing Authority and to trading on the main market of LSE. On the same date, the ordinary shares of the Company were designated as "A" shares.
These condensed consolidated interim financial statements ("interim financial statements") of the Company as at and for the nine months ended 30 September 2015 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in jointly controlled entities.
The principal activity of the Group is real estate investment and development. The principal activity of the Company is the holding of investments in subsidiaries and joint ventures.
2. basis of preparation
Statement of compliance
These interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 December 2014.
Functional and presentation currency
These consolidated financial statements are presented in United States Dollars which is the Company's functional currency. All financial information presented in United States Dollars has been rounded to the nearest thousand, except when otherwise indicated.
Foreign operations
Each entity of the Group determines its own functional currency and items included in the financial statements of each entity are measured using its functional currency. Where the functional currency of an entity of the Group is other than US Dollars, which is the presentation currency of the Group, then the financial statements of the entity are translated in accordance with IAS 21 'The effects of changes in foreign exchange rates".
The table below shows the exchange rates of Russian Roubles, which is the functional currency of the Russian subsidiaries of the Group, to the US Dollar which is the presentation currency of the Group:
Exchange rate % change % change
Russian Roubles quarter year to date
As of: for US$1
30 September 2015 66.2367 19.29 17.74
30 June 2015 55.5240 (1.30)
31 March 2015 58.4643 3.92
31 December 2014 56.2584 71.89
30 September 2014 39.3866 17.12 20.34
Average rate during:
Nine-month period ended 30 September 2015 59.2777
Nine-month period ended 30 September 2014 35.3878
Three-month period ended 30 September 2015 62.9784
Three-month period ended 30 September 2014 36.1909
3. use of judgements and estimates
In preparing these interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
The significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2014.
a. Measurement of fair values
The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the CFO.
The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified.
Significant valuation issues are reported to the Group Audit Committee.
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
· Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
· Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
· Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
4. significant accounting policies
The accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 December 2014.
New standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2014, except for the adoption of new standards and interpretations effective as of 1 January 2015.
Several new standards and amendments apply for the first time in 2015. However, they do not impact the annual consolidated financial statements of the Group or the interim condensed consolidated financial statements of the Group.
Standards, amendments to standards, and interpretations issued but not yet endorsed by the EU
IFRS 15 - "Revenue from Contracts with Customers". The new standard provides a unified application that regulates the accounting treatment of revenue arising from contracts with customers. This standard supersedes IAS 18 "Revenue" and IAS 11 "Construction Contracts" and the accompanying interpretations thereof. The core principle of the standard is the recognition of revenue from the transfer of goods or services to customers in an amount that represents the economic benefits that the entity expects to receive in return for them. As such, the standard stipulates that the recognition of revenue will occur when the entity transfers the goods and/or services to the customer and the customer obtains control of those goods or services.
The standard is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted under IFRS. However since not endorsed by the EU yet, early adoption is not permitted by the Group.
5. OPERATING SEGMENTS
The Group has 5 reportable segments, as described below, which are the Group's strategic business units. The following summary describes the operation in each of the Group's reportable segments:
· Development Projects - Commercial projects: Include construction of property for future lease.
· Development Projects - Residential projects: Include construction and selling of residential properties.
· Asset Management: Includes the operation of investment property for lease.
· Hotel Operation: Includes the operation of Hotels.
· Other - Land bank: Includes the investment and holding of property for future development.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group's management team. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm's length basis.
| Development projects | Asset management | Hotel Operation | Other - land bank | Total | ||||
| Commercial projects | Residential projects | |||||||
| 30/9/15 | 30/9/14 | 30/9/15 | 30/9/14 | 30/9/15 | 30/9/14 | 30/9/15 | 30/9/14 | 30/9/15 | 30/9/14 | 30/9/15 | 30/9/14 | |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| External revenues | - | 2 | 804 | 1,611 | 59,182 | 90,901 | 8,476 | 11,974 | 3,737 | 7,042 | 72,199 | 111,530 |
| Inter-segment revenue |
303 | - | 541 | - | 3,460 | 3,592 | 58 | - | 1,001 | - | 5,363 | 3,592 |
| Segment (loss)/profit before tax |
3,026 | (4,016) | (1,500) | (809) | (75,052) | (58,933) | 4,091 | 4,030 | (1,499) | (10,336) | (70,934) | (70,064) |
| 30/9/15 | 31/12/14 | 30/9/15 | 31/12/14 | 30/9/15 | 31/12/14 | 30/9/15 | 31/12/14 | 30/9/15 | 31/12/14 | 30/9/15 | 31/12/14 | |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| Segment assets | 88,268 | 208,923 | 257,508 | 175,444 | 1,337,658 | 1,362,157 | 23,423 | 27,471 | 293,247 | 250,735 | 2,000,104 | 2,024,730 |
| Segment liabilities | 15,529 | 4,607 | 51,930 | 38,348 | 746,648 | 808,615 | - | - | 12,877 | 1,323 | 826,984 | 852,893 |
Reconciliation of reportable segment profit or loss
| 1/1/15- 30/9/15 |
1/1/14- 30/9/14 |
|
| US$ '000 | US$ '000 | |
| Total profit or loss for reportable segments | (70,934) | (70,064) |
| Other profit or loss | 527 | (6,441) |
| Share of the after tax loss of joint ventures | (589) | (745) |
| Profit on disposal of investment in subsidiaries | - | 61 |
| Valuation gain on properties | 56,129 | 134,847 |
| Impairment loss on inventory of real estate | (662) | (17,544) |
| (Loss)/profit before tax | (15,529) | 40,114 |
6. REVENUE AND OPERATING EXPENSES
The decrease of revenue and operating expenses in comparison with nine-month period of 2014 of 35% and 38% respectively is mainly due to the change of the average rate of Rouble from nine-month period of 2014 to nine-month period of 2015. In addition, the Company has offered temporary rent discounts to the tenants of the investment properties and in parallel has implemented a cost saving optimisation program. For more information on foreign exchange rates used, refer to note 2 above.
7. ADMINISTRATIVE EXPENSES
| For the three months ended |
For the nine months ended |
|||
| 1/7/15- 30/9/15 |
1/7/14- 30/9/14 |
1/1/15- 30/9/15 |
1/1/14- 30/9/14 |
|
| US$ '000 | US$ '000 | US$ '000 | US$000 | |
| Consultancy fees | 247 | 426 | 610 | 1,412 |
| Legal fees | 174 | 570 | 432 | 992 |
| Auditors' remuneration | 86 | 126 | 372 | 532 |
| Valuation expenses | 53 | 61 | 120 | 126 |
| Directors' remuneration | 379 | 363 | 1,107 | 1,671 |
| Depreciation | 33 | 42 | 83 | 134 |
| Insurance | 53 | 66 | 150 | 206 |
| Provision for Doubtful Debts | (327) | 2,629 | (923) | 4,316 |
| Share option expense | 564 | 1,087 | 1,839 | 3,472 |
| Donations | 699 | 1,195 | 2,111 | 3,783 |
| Other administrative expense | 347 | 573 | 1,335 | 1,544 |
| 2,308 | 7,138 | 7,236 | 18,188 |
8. other expenses
| For the three months ended |
For the nine months ended |
|||
| 1/7/15- 30/9/15 |
1/7/14- 30/9/14 |
1/1/15- 30/9/15 |
1/1/14- 30/9/14 |
|
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | |
| Prior year's VAT non-recoverable | 4 | 11 | 15 | 611 |
| Sundries | 156 | 2,372 | 1,164 | 3,979 |
| Legal claim provision | - | 736 | - | 1,453 |
| 160 | 3,119 | 1,179 | 6,043 |
9. FINANCE COST AND FINANCE INCOME
| For the three months ended |
For the nine months ended |
|||
| 1/7/15- 30/9/15 |
1/7/14- 30/9/14 |
1/1/15- 30/9/15 |
1/1/14- 30/9/14 |
|
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | |
| Interest income | 277 | 1,151 | 2,036 | 5,196 |
| Loans write off | (3) | - | 76 | - |
| Net change in fair value of financial assets | 440 | - | 1,335 | - |
| Finance income | 714 | 1,151 | 3,447 | 5,196 |
| Interest expense on loans and borrowings | (11,316) | (14,497) | (34,562) | (42,431) |
| Translation reserve reclassified upon disposal of subsidiary | (2,572) | - | (1,742) | - |
| Net change in fair value of financial assets | - | (468) | - | (5) |
| Net foreign exchange loss | (75,625) | (63,774) | (72,703) | (78,791) |
| Other finance costs | (114) | (118) | (300) | (1,055) |
| Finance costs | (89,627) | (78,857) | (109,307) | (122,282) |
| Net finance costs | (88,913) | (77,706) | (105,860) | (117,086) |
10. tAX EXPENSE
| For the three months ended |
For the nine months ended |
||||
| 1/7/15- 30/9/15 |
1/7/14- 30/9/14 |
1/1/15- 30/9/15 |
1/1/14- 30/9/14 |
||
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | ||
| Current tax expense | |||||
| Current year | 194 | 285 | 550 | 674 | |
| Adjustment for prior years | - | (1) | - | 104 | |
| 194 | 284 | 550 | 778 | ||
| Deferred tax expense | |||||
| Origination and reversal of temporary differences | 5,952 | 9,705 | 4,654 | 11,409 | |
| Total income tax expense | 6,146 | 9,989 | 5,204 | 12,187 | |
11. INVESTMENT PROPERTY
Reconciliation of carrying amount
| 30/9/15 | 31/12/14 | |
| US$ '000 | US$ '000 | |
| Balance 1 January | 1,375,416 | 1,609,800 |
| Reclassification to trading properties | - | (432) |
| Renovations/additional cost | 1,929 | 6,814 |
| Fair value adjustment | 48,379 | 110,782 |
| Effect of movement in foreign exchange rates | (73,824) | (351,548) |
| Balance 30 September / 31 December | 1,351,900 | 1,375,416 |
The investment property was revalued by independent appraisers on 30 June 2015. The cumulative adjustments, for all projects, are shown in line "Fair value adjustment" in the table above.
The decrease due to the effect of the foreign exchange rates is a result of the strengthening of the US Dollar compared to the Rouble by 18%, during the nine-month period ended 30 September 2015. The fair value adjustment gain is mostly related to the devaluation of the Russian Rouble.
Based on the management's opinion the fair value of the assets within the portfolio reported has not significantly changed since the valuation of 30 June 2015. The same applies for investment property under development in note 12 below.
12. INVESTMENT PROPERTY UNDER DEVELOPMENT
| 30/9/15 | 31/12/14 | |
| US$ '000 | US$ '000 | |
| Balance 1 January | 431,474 | 635,266 |
| Construction costs | 7,960 | 83,820 |
| Transfer to trading properties under construction (note 15) | (69,300) | - |
| Disposal | - | (1,400) |
| Fair value adjustment | 7,750 | (196,666) |
| Effect of movements in foreign exchange rates | (21,961) | (89,546) |
| Balance 30 September / 31 December | 355,923 | 431,474 |
On 30 September 2015 the Company transferred "Paveletskaya Phase II" project to trading properties under construction. The transfer was performed following the change in use evidenced by the commencement of development with a view to sale. The amount of US$69,300 thousand represents the fair value of the project at the date of the transfer. The fair value is based on the valuation provided by the independent appraisers on 30 June 2015 which according to management assessment is not significantly different from the fair value at the date of change in use.
The investment property under development was revalued by independent appraisers on 30 June 2015. The cumulative adjustments, for all projects, are shown in line "Fair value adjustment" in the table above.
The decrease due to the effect of the foreign exchange rates is a result of the rouble strengthening of the US Dollar compared to the Rouble by 18%, during the nine-month period ended 30 September 2015. The fair value adjustment gain is mostly related to the devaluation of the Russian Rouble.
13. PROPERTY, PLANT AND EQUIPMENT
| 30/9/15 | 31/12/14 | |
| US$ '000 | US$ '000 | |
| Balance 1 January | 35,101 | 69,735 |
| Additions | 253 | 593 |
| Depreciation for the period / year | (734) | (1,595) |
| Disposals | (1) | (98) |
| Effect of movements in foreign exchange rates | (5,391) | (33,534) |
| Balance 30 September / 31 December | 29,228 | 35,101 |
14. TRADING PROPERTIES
| 30/9/15 | 31/12/14 | |
| US$ '000 | US$ '000 | |
| Balance 1 January | 2,979 | 6,409 |
| Reclassification from investment property | - | 432 |
| Disposals | (627) | (1,632) |
| Effect of movements in exchange rates | (211) | (2,230) |
| Balance 30 September / 31 December | 2,141 | 2,979 |
Trading properties comprise unsold apartments and parking places.
15. TRADING PROPERTIES UNDER CONSTRUCTION
| 30/9/15 | 31/12/14 | |
| US$ '000 | US$ '000 | |
| Balance 1 January | 133,036 | 127,213 |
| Transfer from investment property under development (note 12) | 69,300 | - |
| Construction costs | 18,299 | 35,874 |
| Effect of movements in exchange rates | (9,466) | (30,051) |
| Balance 30 September / 31 December | 211,169 | 133,036 |
Trading properties under construction comprise "Odinburg" and "Paveletskaya Phase II" projects which involve primarily the construction of residential properties. For further details on the transfer of the "Pavaletskaya Phase II" project refer to note 12.
16. OTHER INVESTMENTS
The increase in other investments is due to the investment in a US$20 million portfolio of marketable securities using partly own funds and partly a loan from Bank Julius Baer & Co Ltd. For further details of the loan refer to note 20.
17. TRADE AND OTHER RECEIVABLES
| 30/9/15 | 31/12/14 | ||
| US$ '000 | US$ '000 | ||
| Advances to builders | 26,923 | 20,200 | |
| Amounts receivable from related parties (note 27) | 325 | 387 | |
| Trade receivables net | 3,353 | 6,014 | |
| Other receivables | 3,467 | 3,540 | |
| VAT recoverable | 729 | 7,141 | |
| Tax receivables | 3,001 | 1,679 | |
| 37,798 | 38,961 | ||
Trade receivables net
Trade receivables are presented net of an accumulated provision for doubtful debts of US$11,235 thousand (2014: US$12,753 thousand).
18. CASH AND CASH EQUIVALENTS
| 30/9/15 | 31/12/14 | |
| Cash and cash equivalents consist of: | US$ '000 | US$ '000 |
| Cash at banks | 35,607 | 86,504 |
| Cash in hand | 139 | 252 |
| 35,746 | 86,756 |
19. SHARE CAPITAL AND RESERVES
| 30/9/15 | 31/12/14 | |
| 1 Share capital | US$ '000 | US$ '000 |
| Authorised | ||
| 2,000,000,000 shares of US$0.001 each | 2,000 | 2,000 |
| Issued and fully paid | ||
| 523,847,027 A shares of US$0.001 each 523,847,027 B shares of US$0.001 each |
524 524 |
524 524 |
| 1,048 | 1,048 |
2 Employee Share option plan
There were no changes as to the employee share option plan during the nine-month period ended 30 September 2015, apart from the fact that tranche 2 of the options has now vested in relation to 4,889,239 B shares of the Company (the number of valid shares under the granted options was reduced due to resignation of one option holder in Q3 2015).
3 Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations to the Group presentation currency and the foreign exchange differences on loans designated as loans to an investee company which are accounted for as part of the investor's investment (IAS21.15) as their repayment is not planned or likely to occur in the foreseeable future. These foreign exchange differences are recognised directly to Translation Reserve.
4 Retained earnings
The amount at each reporting date is available for distribution. No dividends were proposed, declared or paid during the nine-month period ended 30 September 2015.
5 Capital reserve
Represents the effect of the acquisition of the 10% non-controlling interests in Bioka Investments Ltd and its subsidiary Nordservice LLC previously held at 90%. For further details refer to note 24.
20. LOANS AND BORROWINGS
| 30/9/15 | 31/12/14 | |
| US$ '000 | US$ '000 | |
| Non-current liabilities | ||
| Secured bank loans | 593,242 | 455,097 |
| Current liabilities | ||
| Secured bank loans | 47,690 | 231,297 |
| Unsecured loans from other non-related companies | 262 | 387 |
| 47,952 | 231,684 |
The changes to the loans during the nine-month period ended 30 September 2015 were the following:
(i) The two year loan from VTB Bank which was received on 25 January 2013, with a maturity on 24 January 2015, by the Group's subsidiary Krown Investments LLC ("Krown") was reclassified to non-current liabilities. In January 2015, prior to maturity, the subsidiary signed an addendum to the loan facility agreement with VTB Bank OJSC ("the Bank), extending the term of the loan to 26 January 2018. In addition to extending the term of the loan, the new addendum amended the payment schedule, interest rate conditions and introduced new covenants. The payment schedule anticipates repayments of the principal starting from the 4th quarter of 2015, while the new covenants include a "Debt Service Coverage Ratio" of 1.2 also applicable as from the 4th quarter of 2015 and a "Loan to Value ratio" of 65% applicable from January 2015. In line with the addendum, on 26th January 2015 Krown paid US$10 million to the Bank, being a partial repayment of the outstanding loan amount, thus reducing the total to US$195 million. Approximately 90% of the principal is to be paid at maturity.
Based on the latest independent valuation of the Ozerkovskaya III project, there is a risk that the borrower, Krown, may not meet the Loan to Value covenant and the Bank may require a partial repayment of the principal of the loan sufficient to rectify the breach of the covenants, within 90 calendar days from the date of the Bank notification. Based on this, the Company reclassified approximately US$4 million from non-current to current liabilities.
Subsequent to the period end date, 30 September 2015, and further to a Bank's written decision both covenants' applicability was postponed until 1 April 2017. In accordance with IFRSs this event was disclosed as non-adjusting event in note 28 "Subsequent events".
(ii) During the period, a subsidiary of the Group, AFID Finance S.A., obtained a short-term loan facility from Bank Julius Baer & Co Ltd, for an amount of US$10 million. The loan was used for the acquisition of marketable securities through an investment account with the same bank. The interest rate is equal to the bank refinancing rate plus 0.75% p.a. and the loan is repayable on demand. The loan is guaranteed with the portfolio of assets managed by the bank.
21. TRADE AND OTHER PAYABLES
| 30/9/15 | 31/12/14 | |
| US$ '000 | US$ '000 | |
| Trade payables | 6,717 | 8,654 |
| Payables to related parties (note 27) | 697 | 2,264 |
| Amount payable to builders | 4,686 | 7,626 |
| VAT and other taxes payable | 4,587 | 7,373 |
| Other payables | 3,176 | 2,299 |
| 19,863 | 28,216 |
Payables to related parties
Include an amount of US$28 thousand (31/12/14: US$1,465 thousand) payable to Danya Cebus Rus LLC, related party of the Group, for contracts signed in relation to the construction of Group's project.
22. ADVANCES FROM CUSTOMERS
The Group has continued its pre-sale in "Odinburg" residential project. During the nine month period the Group has sold 188 properties and received additional down payments from customers.
23. FINANCIAL INSTRUMENTS
Carrying amounts and fair values
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels and the fair value hierarchy for financial instruments measured at fair value. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
| Carrying amount | Fair value | ||||||||
| Non-current assets | Current assets | ||||||||
| Loans Receivable |
Trade and other receivables |
Other investments, including derivatives |
Cash and cash equivalents |
Loans receivable |
Total | Level 1 | Level 2 | Level 3 | Total |
| 30 September 2015 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Financial assets measured at fair value | ||||||||||
| Investment in listed debt securities | - | - | 26,797 | - | - | 26,797 | 26,797 | - | - | 26,797 |
| Financial assets not measured at fair value | ||||||||||
| Loans receivable | 14,785 | - | - | - | 108 | 14,893 | ||||
| Trade and other receivables | - | 7,145 | - | - | - | 7,145 | ||||
| Cash and cash equivalents | - | - | - | 35,746 | - | 35,746 | ||||
| 14,785 | 7,145 | 26,797 | 35,746 | 108 | 84,581 | |||||
| 31 December 2014 | ||||||||||
| Financial assets measured at fair value | ||||||||||
| Investment in listed debt securities | - | - | 6,499 | - | - | 6,499 | 6,499 | - | - | 6,499 |
| Financial assets not measured at fair value | ||||||||||
| Loans receivable | 18,071 | - | - | - | 1 | 18,072 | ||||
| Trade and other receivables | - | 9,941 | - | - | - | 9,941 | ||||
| Cash and cash equivalents | - | - | - | 86,756 | - | 86,756 | ||||
| 18,071 | 9,941 | 6,499 | 86,756 | 1 | 121,268 |
| Carrying amount | Fair value | |||||||
| Non-current liabilities | Current liabilities | |||||||
| Interest bearing loans and borrowings |
Trade and other payables |
Interest bearing loans and borrowings | Total | Level 1 | Level 2 | Level 3 | Total | |
| 30 September 2015 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Financial liabilities not measured at fair value | ||||||||
| Interest bearing loans and borrowings | (593,242) | - | (47,952) | (641,194) | (604,346) | |||
| Trade and other payables | - | (15,276) | - | (15,276) | ||||
| (593,242) | (15,276) | (47,952) | (656,470) | |||||
| 31 December 2014 | ||||||||
| Financial liabilities not measured at fair value | ||||||||
| Interest bearing loans and borrowings | (455,097) | - | (231,684) | (686,781) | (636,469) | |||
| Trade and other payables | - | (20,843) | - | (20,843) | ||||
| (455,097) | (20,843) | (231,684) | (707,624) |
24. ACQUISITION OF NON-CONTROLLIN INTERESTS (NCI)
In August 2015, the Group acquired an additional 10% interest in Bioka Investments Limited and its Russian subsidiary Nordservice LLC for US$1,600 thousand, increasing its ownership from 90% to 100%. The Group recognised:
· a decrease in the negative NCI of US$7,601 thousand;
· a decrease in equity of US$9,201 thousand which is presented as a negative capital reserve.
The carrying amount of Bioka Investment's and its subsidiary's net liabilities in the Group's financial statements on the date of acquisition was US$32,116 thousand.
The following table summarises the effect of changes in the Company's ownership interest in Bioka Investments and Nordservice LLC.
| US$'000 | |
| Company's ownership interest at 1 January | (32,582) |
| Effect of increase in Company's ownership interest | (7,601) |
| Company's ownership interest at 30 September 2015 | (40,183) |
25. CONTINGENCIES
There were not any contingent liabilities as at 30 September 2015.
26. FINANCIAL RISK MANAGEMENT
The Group's financial risk management objectives and policies are consistent with that disclosed in the consolidated financial statements as at and for the year ended 31 December 2014.
Russian business and economic environment
The Group's operations are primarily located in the Russian Federation. Consequently, the Group is exposed to the economic and financial markets of the Russian Federation which display characteristics of an emerging market. The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with other legal and fiscal impediments contribute to the challenges faced by entities operating in the Russian Federation.
During the first nine months the Russian economy has been contracting, with current negative GDP YY growth at 4.1%. The Russian Central Bank estimates the GDP contraction for 2015 at 3.9% to 4.4%. The inflation also remained at high levels, with current estimation for 2015 by the Central Bank at 15.6%. The spot RUR/US$ rate fluctuated between 49.2 and 70.8, following significant fluctuations in the oil prices.
The interim financial statements reflect management's assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from management's assessment.
27. RELATED PARTIES
| 30/9/15 | 31/12/14 | |
| (i) Outstanding balances with related parties | US$ '000 | US$ '000 |
| Assets | ||
| Amounts receivable from joint ventures | 24 | 20 |
| Amounts receivable from ultimate holding company | 203 | 203 |
| Amounts receivable from other related companies | 98 | 164 |
| Long term loans receivable from joint ventures | 14,692 | 17,962 |
| Short term loan receivable from joint venture | 107 | - |
| Liabilities | ||
| Amounts payable to joint ventures | 7 | 131 |
| Amounts payable to ultimate holding company | 413 | 433 |
| Amounts payable to other related companies | 277 | 1,700 |
| Deferred income from related company | 137 | 156 |
| (ii) Transactions with the key management personnel | 1/1/15- 30/9/15 |
1/1/14- 30/9/14 |
| US$ '000 | US$ '000 | |
| Key management personnel compensation Short-term employee benefits |
2,119 | 4,362 |
| Share option scheme expense | 1,839 | 3,472 |
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Director (whether executive or otherwise) of that entity. The person is a member of the key management personnel of the entity or its Parent (includes the immediate, intermediate or Ultimate Parent). Key management is not limited to Directors; other members of the management team also may be key management.
| (iii) Other related party transactions | 1/1/15- 30/9/15 |
1/1/14- 30/9/14 |
| US$ '000 | US$ '000 | |
| Revenue | ||
| Related companies - rental income | 619 | 1,152 |
| Joint venture - rental income | - | 1 |
| Joint venture - consulting services | 112 | 136 |
| Joint venture - interest income | 1,076 | 1,507 |
| Expenses | ||
| Ultimate holding company - administrative expenses | 251 | 667 |
| Joint venture - operating expenses | 46 | 137 |
| (iv) Other related party transactions | 1/1/15- 30/9/15 |
1/1/14- 30/9/14 |
| US$ '000 | US$ '000 | |
| Construction services capitalised or recognised in advances to builders |
||
| Related company - construction services | 981 | 18,335 |
28. SUBSEQUENT EVENTS
There were no events that took place after 30 September 2015 and up to the date of approval of these interim financial statements apart from the following:
· In November 2015, the Company received a notice from VTB Bank on decision of the bank to postpone the applicability of covenants in the loan agreement of Krown Investments Limited ("Krown") for the Ozerkovskaya III project. According to the decision, the Loan-To-Value covenant (currently applicable from first quarter 2015 onwards) and the Debt Service Coverage Ratio covenant (currently applicable from four quarter 2015 onwards), shall be both applicable starting from second quarter of the year 2017 onwards. AFI Development's subsidiary owning and operating AFIMALL City, Bellgate Construction Limited, will provide a guarantee for the full amount of the loan of Krown, and AFIMALL City premises will be mortgaged in a secondary mortgage as additional collateral for the loan by Krown. The decision of the Bank will become legally binding, following the execution of addendum to the loan agreement and related documents.
This information is provided by RNS
The company news service from the London Stock Exchange
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