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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Secure Property Development and Investment Limited | AQSE:SPDI.GB | Aquis Stock Exchange | Ordinary Share | CY0102102213 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 3.75 | 3.00 | 4.50 | 3.75 | 3.75 | 3.75 | 0.00 | 07:01:06 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSPDI
RNS Number : 4920K
Secure Property Dev & Inv PLC
22 September 2016
Secure Property Development & Invest PLC/ Index: AIM / Epic: SPDI / Sector: Real Estate
22 September 2016
Secure Property Development & Investment PLC ('SPDI' or 'the Company')
Interim Results
Secure Property Development & Investment PLC, the AIM quoted South Eastern European focused property company, is pleased to announce its unaudited half year results for the six months ended 30 June 2016.
Financial Highlights
-- EUR2.66 million rental income compared with EUR2.73 million in H1 2015 - demonstrating the portfolio's stable revenue generation capability
-- EUR0.62 million EBITDA (H1 2015: EUR0.84 million) showing, despite a reduction attributable to small price reductions to accelerate residential unit sales, the continuation for a third year of positive EBITDA
-- Strong asset backing behind the Company:
o Net Asset Value of EUR41.3 million as at 30 June 2016 (31 December 2015: EUR42.5 million) while NAV per share stands at EUR0.46 as at 30 June 2016 compared with EUR0.47 at 31 December 2015
o Loan to value ratio of 52% as at 30 June 2016 (H1 2015: 53%)
-- Enhanced management of portfolio costs:
o 20% reduction in administrative expenses to EUR1.18 million compared with EUR1.47 million in H1 2015, and
o 11% reduction in finance costs to EUR1.23 million (H1 2015: EUR1.39 million)
Operational Highlights
-- Active management of portfolio of seven income producing prime real estate properties in South Eastern Europe to maximise income generation and capital appreciation of each asset
-- Proposed sale of the Brovary Terminal in Ukraine with fixed four-year lease agreement (with an affiliate of the prospective buyer) raising the warehouse occupancy rate to 100% and generating US$150,000 of Net Operating Income ('NOI') per month until the sale is concluded
o Subject to completion, the Brovary Terminal sale is expected to generate a substantial net cash inflow for the Company of approximately EUR4m
-- Sale of the Linda residential portfolio in Bucharest for EUR660,000 (gross of debt)
Post Period End Highlights
-- Successful refinancing of retail property in Romania which included an extension of the lease to Praktiker, the blue chip regional DIY retailer for an additional 5.5 years until 2025
-- Settlement reached with Nestle on the early termination of its lease on the Innovations Logistics Terminal in Romania, including EUR1.4m in cash from Nestle, in exchange for SPDI agreeing to release Nestle from the remaining three years of its lease. Settlement equivalent to eighteen months of rent, and up to two years when other gains are taken into account
o Negotiations with Bank of Piraeus on the sale and lease back agreement on the Innovations Logistics Terminal are continuing
Lambros G. Anagnostopoulos, Chief Executive Officer, said, "Following a transformational 2015, which saw our portfolio of income producing properties let to blue chip tenants in South Eastern Europe more than double to seven, the six months under review has been a period of active portfolio management where the priority has been to extract as much income and value as possible from each asset. We are encouraged by the progress made which has seen the Brovary Terminal in Ukraine fully let, adding US$150,000 of Net Operating Income per month ahead of its proposed sale in the second half; the refinancing of a retail property in Bucharest which closed post period end; and the sale of a non-core residential portfolio in Bucharest, all of the above generating cash for the Company.
"In tandem with our on-going focus on generating value from our existing assets, we continue to evaluate new properties that match our strategic criteria of expanding into well located and underpriced income producing assets that will help the Company build a platform of stable cash flows based on long term visible income streams which is exposed to the significant capital uplift offered by the on-going European yield compression play over the short to medium term. I look forward to providing further updates on our progress as we deliver on our objective to transform SPDI into a leading income generating property play focused on Emerging Europe."
This announcement contains inside information.
* *S * *
For further information please visit www.secure-property.eu or contact:
Hot Features
Premium
Lambros Anagnostopoulos SPDI Tel: +357 22 030783
Constantinos Bitros
Andrew Emmott Strand Hanson Tel: +44 (0) 20
Ritchie Balmer Limited 7409 3494
Lottie Brocklehurst St Brides Partners Tel: +44 (0) 20
Frank Buhagiar Ltd 7236 1177
Notes to Editors
Secure Property Development and Investment plc is an AIM listed property development and investment company focused on the South East European markets. The Company's strategy is focused on generating healthy investment returns principally derived from: the operation of income generating commercial properties and capital appreciation through investment in high yield real estate assets. The Company is focused primarily on commercial and industrial property in populous locations with blue chip tenants on long term rental contracts. The Company's senior management consists of a team of executives that possess extensive experience in managing real estate companies both in the private and the publicly listed sector, in various European countries.
1. Management Report
In summary
The first half of 2016 was a period of consolidation
for SPDI following the fast growth of the previous
two years which saw the Company acquire multiple
properties, expand into three new South East
European countries and in the process triple
both the value of SPDI's Assets Under Management
and the Lease Income generated. The six months
under review saw the Company continue focus
on ensuring that each asset is managed with
a view to achieving our strategic objectives
of efficient income generation and value creation.
In Romania, the fastest growing economy in the
EU, we spent time and resources refinancing
the retail property leased to Praktiker, the
blue chip regional DIY retailer. The final agreement,
which included an extension of the lease to
Praktiker for an additional 5.5 years until
2025, was effected in July 2016. Nestle, the
previous anchor tenant of the Innovations Logistics
Terminal, informed us that following the sale
of its global ice cream business in 2015, it
would depart the Terminal. We agreed to release
Nestle from their remaining three year contract
obligations in exchange for receiving EUR1.4m
in cash (the equivalent of 18 months of rent)
and retaining the three month cash guarantee
as well as other capital additions in the warehouse
implemented by Nestle. In all the monetary value
of the settlement is equivalent to almost two
years' worth of rent. The settlement agreement
with Nestle was announced in mid-August, and
negotiations with Bank of Piraeus on the sales
and lease back agreement are continuing towards
what we hope will be a successful conclusion.
As part of the active management of our property
portfolio we have entertained third party interest
in a number of our assets with a view to realising
some of the value we have created over the last
few years. With this in mind, negotiations for
the sale of our Terminal Brovary Logistic Park
in Kiev ('Brovary') are at an advanced stage.
The terminal, which has some vacancy after tenants
departed following the collapse of the local
currency as well as the economy during the last
two years, attracted the interest of potential
investors, with Rozetka UA first leasing all
the remaining space and then negotiating to
sign a contract to acquire the whole terminal.
Should this deal be finalised (with the lender,
EBRD, and the Ukrainian antimonopoly commission
still needing to approve it) the sale will not
only produce a substantial cash inflow for the
Company (EUR4m), it will also generate substantial
profits, boosting SPDI's profitability for 2016.
Furthermore it will be the biggest property
transaction in the country so far this year.
Such a deal is indicative of the potential profit
and cash generating capacity of our Company
as it follows a strategy of investing prudently
in well located undervalued properties in South
East Europe.
We also continued with our strategy of generating
value from our non-core assets having sold our
portfolio of residential units in the Linda
Residence in Bucharest in May 2016 for EUR660,000
(gross of debt), whilst continuing to sell or
rent individual units in other properties at
beneficial prices. In parallel with this, we
are also in discussions with interested third
parties to join forces in realising value in
other non-core assets in our portfolio. This
would involve SPDI contributing land to potential
developments to capitalise on the expected pickup
in activity in residential markets in all of
the South Eastern European countries where we
have assets. Generating value from our existing
portfolio of assets, income producing or not,
is one of SPDI's top priorities.
The economic climate in South East Europe improved
further in the first half of 2016.
Romania continues its fast growth after recording
an annual rise of 4%. Bucharest boasts almost
no unemployment and its property market is picking
up fast with cap rates dropping (see graph below)
and new supply being developed.
H1
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Office 5,75% 7,50% 9,00% 8,50% 8,75% 9,00% 8,25% 8,00% 7,50% 7,50%
Retail 8,00% 9,75% 10,00% 9,50% 9,00% 9,25% 9,25% 8,00% 7,50% 7,25%
Industrial 7,00% 8,00% 11,25% 10,50% 10,25% 9,50% 9,50% 9,00% 8,75% 8,75%
Greece. Following the inauguration of the enlarged
Suez Canal last year, COSCO, the Chinese infrastructure
company that had been managing two of the three
container terminal piers at the port of Piraeus
near Athens (the deepest port in the Mediterranean
Sea) until 2052, signed an agreement in April
to acquire up to 67% of the whole port from
the Greek Government. Having increased the container
throughput of the terminal by a factor of seven
over the last four years, COSCO has announced
it intends to make Piraeus the main point of
entry for Chinese goods into the EU, which is
expected to result in a significant increase
in container traffic through Greece and the
wider South East European region in the near
future and create opportunities for SPDI.
Ukraine, albeit still in political turmoil with
its neighbour Russia, saw its political and
economic climate stabilise, leading to an uptick
in FDI interest, although there are no active
property developments or acquisitions yet.
Following SPDI's property acquisitions in the
last 24 months as well as the expected Terminal
Brovary sale, the Company's Gross Asset Value
("GAV") has increased significantly to EUR105
million (as at September 2016), compared to
EUR60 million for the same time two years ago
excluding Terminal Brovary and EUR78 million
including Terminal Brovary. This is presented
in the graph below. Our properties are located
mostly in Romania (55%) where there is high
economic potential and the property market is
on the rise and secondly in Bulgaria (17%) which
is also experiencing significant economic growth.
Greece accounts for 16%, with high economic
potential particularly with the Port of Piraeus
in mind as mentioned above, while Ukraine, still
in turmoil with its GDP growth lagging behind,
is now the smallest component (12%) of the Company's
portfolio of assets. The results of our strategy
to diversify out of our roots in Ukraine and
invest in undervalued assets in countries with
high growth potential, has not only just started
proving itself, but showed some initial concrete
results within the period.
As European yield compression gathers momentum
particularly in South Eastern Europe and as
the Company uplifts its efforts to increase
the profitability and the cash generating capacity
of its properties, SPDI expects to be well placed
to continue its growth path with a view to becoming
a leading institutional South Eastern European
income producing and dividend yielding property
company.
Gross Asset Value
--------------------------------------
EURm/% Sept 2016* 2015 2014
Ukraine 12 12% 24 21% 32 42%
Greece 17 16% 17 14% 17 21%
Romania 58 55% 58 49% 29 37%
Bulgaria 18 17% 18 16% 0%
Total 105 100% 117 100% 78 100%
----- ------ ---- ----- --- -----
* 2016 figure excludes Terminal Brovary
P&L
The table below presents the operating performance
in for the H1 2016 compared to H1 2015. Since
Terminal Brovary is expected to be sold within
H2 2016, its results are presented also separately:
P & L excluding P & L of
Terminal Terminal
EUR Total P & L Brovary Brovary
H1 H1
H1 2016 H1 2015 2016 H1 2015 2016 H1 2015
================== ============ ============ ============ ============ ========== ============
Rental
Income 2,662,556 2,734,392 2,090,383 1,542,539 572,173 1,191,853
Income
from Sale
of Asset
- Cost of
properties
sold (747,954) 201,518 (747,954) 201,518 - -
Income
from Operations
of Investments 1,914,602 2,935,910 1,342,429 1,744,057 572,173 1,191,853
Investment
property
operating
expenses (390,181) (446,829) (267,946) (293,443) (122,235) (153,386)
Net Opereting
Income from
Investment
Property 1,524,421 2,489,081 1,074,483 1,450,614 449,938 1,038,467
Share of
profits
from associates
(ex revaluation) 123,119 (177,796) 123,119 (177,796)
Net Income
from Avaliable
for Sale
assets (ex
revaluation) 154,362 - 154,362 -
Total Income 1,801,902 2,311,285 1,351,964 1,272,818 449,938 1,038,467
Administration
expenses (1,178,173) (1,474,564) (1,079,852) (1,350,542) (98,321) (124,022)
Operating
Result (EBITDA) 623,729 836,721 272,112 (77,724) 351,617 914,445
Finance
costs, net (1,226,897) (1,388,012) (778,365) (937,937) (448,532) (450,075)
Income
tax expense (45,507) (2,893) (45,507) (2,893) - -
Operating
Result after
finance
and tax
expenses (648,675) (554,184) (551,760) (1,018,554) (96,915) 464,370
Other income
/ (expenses),
net (17,826) 42,270 (15,268) (78,920) (2,558) 121,190
Other finance
costs (169,118) (221,187) (134,022) (22,290) (35,096) (198,897)
Gain realized
on acquisition
of subsidiaries - 2,181,834 - 2,181,834
Fair Value
(Losses)
/Gains from
investments 636,436 4,737,805 287,104 26,294 349,332 4,711,511
Foreign
exchange
losses,
net (1,057,555) (7,277,343) (667,212) (2,346,375) (390,343) (4,930,968)
(Loss)
/ Profit
for the
period (1,256,738) (1,090,805) (1,081,158) (1,258,) (175,580) 167,206
================== ============ ============ ============ ============ ========== ============
2. Regional Economic Developments
Romania
Strong domestic demand led Romania's GDP to
register an impressive 5.9% growth y-o-y in
Q2 2016, the highest among the EU28 countries.
Estimates for 2016 suggest the country's economy
growth will be 4.0% to 4.2% year on year, surpassing
the EU28 average growth rate for the fifth consecutive
year.
Annual consumer price deflation was 0.7% in
June, while the National Bank expects an average
annual inflation of 0.6% this year. The country's
overall unemployment rate fell to 6.4% in June,
0.3% lower than a year ago. Bucharest currently
has a 2% unemployment rate. Exchange rates
remained relatively stable throughout H1 2016
at RON 4.45 to 4.50 to the EUR.
The country's budget posted a smaller-than-expected
deficit of 0.5% of GDP for the first half, compared
to a surplus of 0.6% of GDP a year earlier.
The finance ministry had projected the first-half
shortfall at 1.9% of GDP. In the first five
months of the year, foreign direct investment
rose 15% y-o-y to EUR1.11 billion, while long-term
external debt at the end of May 2016 stood at
EUR69.9 billion, down 1% from the end of 2015.
Brexit is not expected to have a heavy impact
on Romania's growth potential as there are no
direct ties between the two countries. In addition,
the Romanian government is in favor of more
EU integration and is not part of the so called
Eurosceptic group, which means no similar referendum
is likely in the near-medium term. However,
it is the result of the pending parliamentary
elections in November 2016 that will decide
the country's stance for the years to come.
Bulgaria
Bulgaria's economy registered 3.0% growth in
Q2 2016, maintaining last year's performance.
Private consumption was the main driver this
quarter, augmented by net exports.
Bulgaria's first-half consolidated budget surplus
reached EUR1.57 billion, or 3.5% of the country's
GDP, compared to 1.0% of GDP in the same period
of 2015. The increase was mainly driven by tax
revenues and a concentration of EU fund inflows.
The flow of foreign direct investment dropped
by 34.4% year-on-year to EUR517.3 million in
the first five months of the year.
[1] Sources : Eurostat, EBRD, Elstat, Eurobank
Research, Focus Economics, IMF, National Institute
of Statistics- Romania, National Statistical
Institute -Republic of Bulgaria, National Institute
of Statistics - Ukraine, SigmaBleyzer.
EU-harmonized CPI stood at -1.9% year-on-year
in June, while the unemployment rate was 8.4%,
recording a drop of 1.2 percentage points compared
with a year ago. Exchange rates remained stable
throughout the first semester at BGN 1.96 to
the EUR.
Ukraine
The recent political crisis in Ukraine was eased
with the appointment of the new Cabinet of Ministers
in April. The new Ukrainian authorities have
reconfirmed their commitment to move the reform
agenda forward as was agreed during the formation
of the new parliamentary coalition. The turn
towards political stability was also depicted
in the macroeconomic indicators, as the Ukrainian
economy shows minor but still positive performance
of 0.1% y-o-y growth.
Due to improved tax collections and decelerating
growth of fiscal expenditures, the consolidated
budget deficit decreased to UAH 3.8 billion
(US$152m) or about 0.3% of GDP for the January-May
period.
Inflation stands at 7%, down from 43.3% almost
a year ago, mainly due to the sharp deceleration
in the growth of utility tariffs. The unemployment
rate showed a slight decrease to 9.2% from 9.6%
a year ago. Although reaching 27 UAH/USD in
Q1 2016, the exchange rate seemed to stabilise
at 25 UAH/USD in Q2.
The IMF mission that visited Kyiv in May 2016
concluded that Ukraine has made considerable
progress in restoring macroeconomic stability,
but that additional structural and institutional
reforms are required to turn the recent recovery
into sustainable growth. The government expects
to receive a partial borrowing disbursement
in late September / beginning of October 2016,
with another large disbursement by the end of
the year. Both of them should help further stabilise
the ailing currency.
Greece
In the last year the Greek economy has been
turning around however it still remains in recession.
GDP contracted by 0.7% in Q2 2016 amid plummeting
consumption and fixed investment.
Public debt was 176.3% of GDP in Q1 2016, while
discussions with the ESM and EU in relation
to debt restructuring are expected to start
in Q4 2016. Greek budget showed a primary surplus
of EUR2.7 billion in the January-June period
compared to a surplus of EUR1.3 billion in the
same period last year, mainly because the government
has effectively stopped paying the dues to third
party suppliers. The central government cash
balance recorded a deficit of EUR526 million
for the first six months of 2016, compared to
a deficit of EUR1.85 billion in the same period
in 2015.
Inflation remains in negative territory for
the fourth consecutive year, reaching a -0.7%
y-o-y rate in June. The unemployment rate edged
down to 23.3% in April, which marked the lowest
rate since March 2012.
In May 2016, the Greek Parliament adopted most
of the prior agreed actions for the first review,
as decided by the Eurogroup earlier in the year.
As a result, Greece received part of the second
tranche of the EUR86 billion European Stability
Mechanism (ESM) programme in mid-June. The second
evaluation begins in Q4 2016.
3. Real Estate Market Developments
3.1 Romania
General
The total investment volume registered in Romania
for H1 2016 recorded an 80% increase compared
to the same period last year, although almost
one third of it can be explained by a major
transaction in the retail sector.
Logistics Market
Total industrial and logistics stock in Romania
reached 2.3 million sq m, with 1.1 million sq
m is in Bucharest. Approximately 160,000 sq
m were delivered in H1 2016. Market performance
was mainly driven by logistics and retail industries.
Average prime rental rate grew slightly to EUR3.9
per sq m, the first increase in three years,
while the vacancy rate in the country continued
its decreasing trend, reaching 2.5% from 5%
at the end of 2015. In Bucharest, vacancy rate
dropped further to 1.5% from 3.3%. Yields remained
at 8.75% for prime properties.
Office Market
Bucharest's office space stock recorded a 5%
increase in H1 2016, compared to the end of
2015, reaching 2.49 million sq m in total. Currently,
approximately 0.23 million sq m are under construction
and scheduled for delivery by the end of 2016.
Total Leasing Activity ("TLA") in the first
six months of the year was 40% higher than the
same period in 2015. West sub-market earned
the lion's share in terms of TLA, as 40% of
it was transacted there. North sub-market and
Pipera followed with slightly more than 20%
each. Vacancy rate for all asset classes remained
at 11.9% since the end of 2015. Yield for prime
properties also remained unchanged at 7.5%.
Retails market
The total modern retail supply in Romania reached
approximately 3.3 million sq m at H1 2016 with
Bucharest's stock currently standing at just
over 1 million sq m. In Bucharest, prime rent
for shopping centres varies between EUR60-70
per sq m, for high street units between EUR50-60
per sq m and for retail parks rent stands at
EUR8.5 per sq m. According to the national statistics
office, retail sales rose by 16.8% y-o-y in
the first five months of 2016, encouraging retailers
to expand. The retail sector was the winner
as far as the property investment volume for
H1 2016 is concerned, as 45% of total volume
was invested in retail properties.
Residential market
On-going economic growth led to an increase
in both supply and demand for residential space.
Completed dwellings across Romania in H1 2016
increased by 23.4% and bank financing saw a
significant rise of 15.2% in comparison with
last year's figures. This upward trend in mortgages
was supported by the Prima Casa state-guaranteed
programme. Average price for apartments in Bucharest
is around EUR1,000/sq m.
In April, Romania's parliament approved a controversial
law allowing citizens to hand back homes in
exchange for release from mortgages (EUR250,000
limit on existing and new mortgages), a move
designed to ease citizens' debt burdens, excluding
the state loan-guarantee programme (Prima Casa)
for first-time buyers. As a response, most of
the banks lowered the loan to value component
for any new mortgage. Up until now, a limited
number of properties were returned to banks,
end-users' demand remains strong and the market
has found a new balance.
3.2 Bulgaria
General
The total value of closed transactions on the
investment market in Bulgaria in H1 2016 was
EUR117 million, 30% higher than in the same
period a year ago. Half of this volume stems
from deals for office properties.
Office market
During H1 2016, about 30,000 sq m of class A
offices were delivered. Sofia's office stock
increased slightly to 1.73 million sq m, almost
equally represented by Class A and Class B spaces.
The office pipeline under construction amounts
to 175,000 sq m. The total class A and B vacant
space in Sofia decreased to 210,000 sq m corresponding
to a vacancy rate of 12.1%, compared to 12.9%
at the end of 2015. Asking rents remained stable
ranging from EUR11 to EUR14 per sq m per month
for Class A offices and from EUR6.5 to EUR8.5
per sq m per month for Class B properties.
Retail market
Upon closing of the Galeria Plovdiv shopping
centre, opening of San Stefano Plaza in Sofia
and a revision of retail space in some secondary
cities, the total modern retail stock in Bulgaria
decreased to 830,000 sq m. Shopping centres
account for nearly 93% of the total stock. Vacancy
rate in Sofia stood at 13%, compared to 10%
at the end of 2015, while in the other major
cities it recorded a sharp increase of 7.2 %
to 19.6%, due to Carrefour's exit from some
of its key locations.
Residential market
A rise in sales, a sustained upward trend in
prices and strong interest in newly built homes
marked a strong start to the housing property
market in Sofia in 2016. The average price of
residential property in Sofia increased 8.4%
year-on-year in 2016 to EUR835/sq m. Half of
total sales so far this year were newly built
apartments or apartments under construction.
Apartments with two and three bedrooms had equal
share in sales and together accounted for 85%
of total sales in Sofia.
3.3 Ukraine
General
Despite the Ukrainian economy appearing to be
in recovery mode, many businesses are still
adopting a wait-and-see attitude in relation
to further activity in the country.
Logistics market
In H1 2016, Kiev's total stock remained at 1.79
million sq m. Signs of improvement in sentiment
in the real estate market were observed, as
warehouse space of almost 100,000 sq m was transacted
during the first half of the year. Due to mid-teen
yield levels and low rental rates in local currency,
local players are searching for prime properties
in order to boost profitability.
Office market
The total office take-up in Kiev was around
55,000 sq m of Gross Leasable Area ("GLA") in
H1 2016, almost 70% higher than the figure registered
in the same period a year ago. On the supply
side, there was no major change in the office
property market in Kiev and across Ukraine in
H1 2016. The total office stock in Kiev remained
stable at around 1.8 million sq m. As a result
of limited new supply, the office vacancy rate
in Kiev fell to 21%. During the first half of
2016, rents for all asset classes showed no
significant change.
3.4 Greece
General
The property market is relatively stagnant,
with investors adopting a wait-and-see stance.
The situation is unlikely to change unless there
are significant signs that Greece expects emerging
from the recessionary cycle. In terms of investment
interest, the most dynamic sector appears to
be that of hospitality, as a result of a large
growth in tourists visiting the country over
the last four years.
Logistics Market
The Industrial and Logistics market showed no
significant changes in the first half of 2016.
The successful privatisations of Piraeus Port
and National Railway and the announcement for
a tender regarding the Thriassio Freight Center
in Attica Prefecture are expected to trigger
higher demand for logistics space, mainly in
West Attica. Reputable international companies
as Cosco and British American Tobacco have already
started a cycle of new investments in the logistics
sector, confirming their confidence in the Greek
market.
Office Market
A single transaction was reported in the first
half of 2016 in the office sector - a 4,000
sq m office building in Athenian CBD changed
hands for around EUR11 million. However, the
appetite for investment in the sector appears
to continue to be low, as no further deals are
expected in the short term. Currently, construction
seems too risky to developers and the market
awaits signs of political and financial stability.
As a result, market indicators have remained
unchanged since the end of 2015.
4. Property Assets
4.1 EOS Business Park - Danone headquarters, Romania
Property description
The park consists of 5,000 sqm of land including
a class "A" office building of 3,386 sqm GLA
and 90 parking places. It is located next to
the Danone factory, in the North-Eastern part
of Bucharest with access to the Colentina Road
and the Fundeni Road. The Park is very close
to Bucharest's ring road and the DN 2 national
road (E60 and E85) and is also served by public
transportation. The park is highly energy efficient.
Current status
The Company acquired the office building in
November 2014. The complex is fully let to Danone
Romania, the French multinational food company,
until 2026.
4.2 Innovations Logistics Park, Romania
Property description
The Park incorporates approximately 8,470 sqm
of multipurpose warehousing space, 6,395 sqm
of cold storage and 1,705 sqm of office space.
It is located in the area of Clinceni, south
west of Bucharest centre, 200m from the city's
ring road and 6km from Bucharest-Pitesti (A1)
highway. Its construction was completed in 2008
and was tenant specific. It comprises four separate
warehouses, two of which offer cold storage.
Current status
The Company agreed to Nestle Ice Cream vacating
the premises, following their restructuring,
in late 2015. Such agreement was effected in
August 2016 for a EUR1.4 million cash settlement
payable by Nestle (which represents approximately
18 months of rent) plus the three months' rental
guarantee deposits and certain fixed assets
that Nestle had installed in the premises.
The Company is in discussions with the lender
of the property, Piraeus Bank Leasing, in order
to review the sale and leaseback agreement following
the settlement with Nestle and expects to reach
a conclusion shortly. In the meantime the Company
has identified potential replacement tenants
with whom it is having preliminary discussions.
The terminal was at the end of June 87% leased
(prior to Nestle's departure).
4.3 Praktiker Retail Center, Romania
Property description
The retail park consists of 21,860 sqm of land
including a retail BigBox of 9,385 sqm GLA and
280 parking places. It is located in Craiova,
on one of the main arteries of the city, along
with most of the DIY companies. Craiova is an
important city for the Romanian automotive industry
as Ford bought the Daewoo facilities in 2007
and produces two of its models from there. Ford
is committed to continue investing and it is
completing a brand new engine production facility.
Current status
As at half-year-end, the complex is fully let
to Praktiker Romania, a regional DIY retailer,
until 2020 and the Company negotiated the extension
of the Praktiker lease agreement until December
2025 for an annual rent of EUR600,000, which
was effected in July 2016. SPDI renegotiated
the outstanding debt facility in H1 2016 and
managed the outflows to match the timing and
magnitude of the inflows.
4.4 Delenco office building, Romania
Property description
The property is a 10,280 sqm office building,
which consists of two underground levels, a
ground floor and ten above-ground floors. The
building is strategically located in the very
centre of Bucharest, close to three main squares
of the city: Unirii, Alba Iulia and Muncii,
only 300m from the metro station.
Current status
The Company acquired 24.35% of the property
in May 2015. At the end of June 2016, the building
is 100% let, with ANCOM (the Romanian Telecommunications
Regulator) being the anchor tenant (69% of GLA).
4.5 Autounion office building, Bulgaria
Property description
A 19,476 sqm Class A office building which is
located in a prime business area of Sofia, very
close to the international airport and close
to the city centre. The building is BREEAM certified.
Current status
The Company acquired 20% of the property in
April 2015. As at the end of H1 2016 Autounion
is fully let to Eurohold Bulgaria, one of the
largest Bulgarian insurance companies, on a
long lease extending to 2027.
4.6 GED Logistics center, Athens Greece
Property description
The 17,756 sqm complex that consists of industrial
and office space is situated on a 44,268 sqm
land plot in the West Attica Industrial Area
(Aspropyrgos). It is located at exit 4 of Attiki
Odos (the Athens ring road) and is 10 minutes
from the port of Piraeus (where COSCO runs the
biggest container port in the Mediterranean
Sea) and the National Road connecting Athens
to the north of the country. The roofs of the
warehouse buildings house a photovoltaic park
of 1,000KWp.
Current status
The buildings are characterised by high construction
quality and state-of-the-art security measures.
The complex includes 100 car parking spaces,
as well as two central gateways (south and west).
The complex at the end of June 2016 is 100%
occupied, with the major tenant (approximately
70%) being the German transportation and logistics
company Kuehne + Nagel.
4.7 Terminal Brovary Logistic Park, Ukraine
Property description
The Brovary Logistic Park consists of a 49,180
sqm GLA Class A warehouse and associated office
space. The building has large facades to the
Brovary ring road, at the intersection of the
Brovary ( -95/ -01 highway) and Borispol ring
roads. It is located 10 km from the Kiev city
border and 5 km from Borispol international
airport.
The building is divided into six independent
sections (each at least 6,400 sqm), with internal
clear ceiling of 12m height and industrial
flooring constructed with an anti-dust overlay
quartz finish. The terminal accommodates 90
parking spaces for cars and trucks, as well
as 24 hour security.
Current status
In May 2016 the Company fully leased the warehouse
space to Rozetka UA. As of September 2016,
the Company is negotiating to sign an SPA with
Rozetka UA, the leading Ukrainian internet
retailer for the sale of the terminal. The
proposed sale is subject to EBRD as well as
the Ukrainian Antimonopoly Committee approval.
4.8 Residential portfolio
-- Romfelt Plaza (Doamna Ghica), Bucharest, Romania
Property description
Romfelt Plaza is a residential complex located
in Bucharest, Sector 2, relatively close to
the city centre, easily accessible by public
transport and nearby supporting facilities
and green areas.
Current status
At the end of June 2016, 19 apartments were
available while 13 of them were rented, indicating
an occupancy rate of 68%.
-- Monaco Towers, Bucharest, Romania
Property description
Monaco Towers is a residential complex located
in South Bucharest, Sector 4, enjoying good
car access due to the large boulevards, public
transportation, and a shopping mall (Sun Plaza)
reachable within a short driving distance or
easily accessible by subway.
Current status
At the end of June 2016, 22 units were available,
10 of them being rented indicating an occupancy
rate of 45%.
-- Blooming House, Bucharest, Romania
Property description
Blooming House is a residential development
property located in Bucharest, Sector 3, a
residential area with the biggest development
and property value growth in Bucharest, offering
a number of supporting facilities such as access
to Vitan Mall, kindergartens, café, schools
and public transportation (both bus and tram).
Current status
At the end of June 2016, 18 units were available
nine of them being rented indicating an occupancy
rate of 50%.
-- Green Lake, Bucharest, Romania
Property description
A residential compound of 40,500 sqm GBA, which
consists of apartments and villas, situated
on the banks of Grivita Lake, in the northern
part of the Romanian capital - the only residential
property in Bucharest with a 200 meter frontage
to a lake. The compound also includes facilities
such as one of Bucharest's leading private schools
(International School for Primary Education),
outdoor sports courts and a mini-market. Additionally
Green Lake includes land plots totaling 40,360
sqm. SPDI owns 43% of this property asset portfolio.
Current status
At the end of 2015 the portfolio consisted of
40 unsold apartments plus 37 unsold villas.
During the period, six apartments and villas
were sold while at the end of June 2016, of
the 71 units that were unsold 26 of them were
let (occupancy rate of 37% - 60% for apartments
and 14% for villas).
-- Boyana Residence, Sofia, Bulgaria
Property description
A residential compound, which consisted at acquisition
date (May 2015) of 67 apartments plus 83 underground
parking slots developed on a land surface of
5,700 sqm, situated in the Boyana high end suburb
of Sofia, at the foot of Vitosha mountain with
Gross Buildable Area ("GBA") totaling to 11,400
sqm. The complex includes adjacent land plots
with surface of 17,000 sqm with building permits
under renewal to develop GBA of 21,851 sqm.
Current status
During H1 2016, seven apartments were sold,
with 54 units remaining unsold at the end of
June.
-- Linda Residence, Bucharest, Romania
Property description
Linda Residence is a residential complex located
in Bucharest, Sector 3, close to subway transportation
which connects the property to all areas in
Bucharest in less than 30 minutes.
Current status
At the end of 2015, 22 apartments were available.
During the period and after four more units
were sold, the Company accepted an offer to
sell in bulk most of the remaining units (16)
it owned. At the end of June 2016, only two
apartments were still available, both having
been reserved for sale.
4.9 Land Assets
-- Aisi Bela - Bela Logistic Center, Odessa, Ukraine
Property description
The site consists of a 22.4 Ha plot of land
with zoning allowance to construct up to 103,000
sqm GBA industrial properties and is situated
on the main Kiev - Odessa highway, 20km from
Odessa port, in an area of high demand for logistics
and distribution warehousing.
Current status
The Company has hired a new security agency
to safeguard the premises and does not intend
to recommence construction in the near future.
-- Kiyanovskiy Lane - Kiev, Ukraine
Property description
The property consists of 0.55 Ha of land located
at Kiyanovskiy Lane, near Kiev city centre.
It is destined for the development of business
to luxury residences with beautiful protected
views overlooking the scenic Dnipro River, St.
Michaels' Spires and historic Podil.
Current status
Discussions with local developers who approached
the Company in late 2015 in order to explore
the possibility of co-development are in progress.
-- Tsymlyanskiy Lane - Kiev, Ukraine
Property description
The 0.36 Ha plot is located in the historic
and rapidly developing Podil District in Kiev.
The Company owns 55% of the plot, with one local
co-investor owning the remaining 45%.
Current status
During Q4 2015, a number of interested parties
approached the Company with a view to partnering
in the development of this property. Discussions
are on-going.
-- Balabino- Zaporozhye, Ukraine
Property description
The 26.38 Ha site is situated on the south entrance
of Zaporozhye city, 3km away from the administrative
border of Zaporozhye. It borders the Kharkov-Simferopol
Highway (which connects eastern Ukraine and Crimea
and runs through the two largest residential
districts of the city) as well as another major
artery accessing the city centre.
Current status
The site is zoned for retail and entertainment.
Development has been put on hold.
-- Rozny Lane - Kiev Oblast, Kiev, Ukraine
Property description
The 42 Ha land plot located in Kiev Oblast is
destined to be developed as a residential complex.
Current status
The Company is evaluating potential commercialisation
options to maximize the property's value.
-- Delia Lebada, Romania
Property description
The site consists of a 40,000 sqm plot of land
in east Bucharest situated on the shore of Pantelimon
Lake, opposite a famous Romanian hotel, the
Lebada Hotel. The lake itself, having a 360
Ha surface, is the largest lake of Bucharest
and accommodates many leisure activities such
as fishing, cycling, walking, etc. At the back
of the property there is a forest which transforms
the area into a very attractive habitat for
families and adds value to the residential units
to be developed.
Current status
The construction permit, which allows for 54,000
sqm to be built, was renewed in April 2014 but
the property has been on hold. The lending bank
(Bank of Cyprus) expressed its intention not
to renew the land acquisition loan, which the
Company inherited upon acquisition of the asset
as part of a portfolio in 2015 and which was
in default. As a result, the Company entered
into negotiations with the co-owner and the
financing bank to either acquire the associated
loan, or sell the property all together. In
the meantime the SPV owning the plot has entered
into an insolvency status. The Company expects
that the case will be amicably resolved in the
near future.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2016
Six months ended
Note 30 June 30 June
2016 2015
EUR EUR
Operating income 7 1.914.602 2.935.910
Valuation (losses)/gains from
Investment Property 7 636.436 4.737.805
------------ ------------
2.551.038 7.673.715
Administration expenses 8 (1.178.173) (1.474.564)
Investment property operating
expenses 9 (390.182) (446.829)
Gain realized on acquisition 15 - 2.181.834
of subsidiaries
Other operating income/(expenses),
net 10 (17.826) 42.270
Share of profits/(losses)
from associates 16 123.119 (177.796)
Operating profit / (loss) 1.087.976 7.798.630
Finance income 11 363.136 13.199
Interest expenses 11 (1.590.032) (1.401.209)
Other finance costs 11 (169.118) (221.188)
Foreign exchange (loss), net 12a (98.818) (4.976.537)
Profit / (Loss) before tax (406.856) 1.212.895
Income tax expense 13 (45.507) (2.893)
Profit/ (Loss) for the period (452.363) 1.210.002
Other comprehensive income
Exchange difference on I/C 12b (1.485.262) (7.323.715)
loans to foreign holdings
Exchange difference on translation
of foreign operations 23 526.525 5.022.908
Available-for-sale financial
assets - fair value gain 19 154.362 -
Total comprehensive income (1.256.738) (1.090.805)
for the period
Profit / (Loss) attributable
to:
Owners of the parent (309.941) 1.117.890
Non-controlling interests (142.422) 92.112
(452.363) 1.210.002
Total comprehensive income
attributable to:
Owners of the parent (1.095.116) (1.092.110)
Non-controlling interests (161.622) 1.305
(1.256.738) (1.090.805)
Earnings / (Losses) per share
(Euro cent per share): 30b
Basic earnings/(losses) for
the period attributable to
ordinary equity owners of
the parent (0,00) 0,02
Diluted earnings/(losses)
for the period attributable
to ordinary equity owners
of the parent (0,00) 0,02
CONSENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the six months ended 30 June 2016
Note 30 June 31 December 30 June
2016 2015 2015
EUR EUR EUR
ASSETS
Non--current assets
Investment properties 14.4a 91.947.652 94.340.471 93.479.543
Investment properties 14.4b 5.044.136 5.125.389 5.541.156
under development
Prepayments made for
investments 14.4c 100.000 100.000 2.334.337
Tangible and intangible
assets 17 146.232 164.617 201.318
Goodwill - - 43.269
Long-term receivables 251.187 252.916 253.027
Investments in associates 16 5.011.063 4.887.944 4.359.267
Available for sale financial 19 2.937.897 2.783.535 4.059.840
assets
105.438.167 107.654.872 110.271.757
Current assets
Inventories 18 10.397.364 11.300.000 12.300.000
Prepayments and other 20 5.563.906 4.795.223 5.325.967
current assets
Cash and cash equivalents 21 870.457 895.422 2.832.054
16.831.727 16.990.645 20.458.021
Total assets 122.269.894 124.645.517 130.729.778
EQUITY AND LIABILITIES
Issued share capital 22 900.145 900.145 756.899
Share premium 122.874.268 122.874.268 121.227.562
Foreign currency translation 23 7.179.548 6.653.023 3.701.890
reserve
Exchange difference 32.3 (34.884.775) (33.399.513) (27.069.826)
on I/C loans to foreign
holdings
Available for sale financial
assets - fair value
reserve 639.891 485.529 -
Accumulated losses (55.390.268) (55.080.327) (42.946.585)
Equity attributable 41.318.809 42.433.125 55.669.940
to equity holders of
the parent
Non-controlling interests 24 453.905 615.527 1.349.250
Total equity 41.772.714 43.048.652 57.019.190
Non--current liabilities
Borrowings 25 23.992.210 26.263.559 44.750.322
Finance lease liabilities 29 11.125.693 11.273.639 11.340.099
Trade and other payables 26 4.449.165 4.672.888 428.553
Deposits from tenants 27 789.660 623.770 638.519
40.356.728 42.833.856 57.157.493
Current liabilities
Borrowings 25 27.313.842 27.417.220 10.343.906
Trade and other payables 26 4.107.772 3.044.036 4.702.110
Taxes payable 28 926.023 822.005 862.229
Redeemable preference
shares 22.6 6.430.536 6.430.536 349.325
Provisions 28 724.219 724.445 -
Deposits from tenants 27 135.135 132.684 117.387
Finance lease liabilities 29 502.925 192.083 178.138
40.140.452 38.763.009 16.553.095
Total liabilities 80.497.180 81.596.865 73.710.588
Total equity and liabilities 122.269.894 124.645.517 130.729.778
Net Asset Value (NAV)
EUR per share: 30c
Basic NAV attributable
to equity holders of
the parent 0,46 0,47 0,74
Diluted NAV attributable
to equity holders of
the parent 0,40 0,41 0,45
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2016
Attributable to owners of the Company
-------------------------------------------------------------------------------------------------
Share Share Accumulated Exchange Foreign Available Total Non- Total
capital premium, losses, difference currency for controlling
Net(1) net of on I/C translation sale interest
non-controlling loans reserve(4) financial
interest(2) to foreign assets
holdings(3) - fair
value
reserve(5)
EUR EUR EUR EUR EUR EUR EUR EUR
Balance - 31
December
2014 338.839 97.444.044 (44.064.475) (19.746.111) (1.411.825) - 32.560.472 651.882 33.212.354
Profit for the - - 1.117.890 - - 1.117.890 92.112 1.210.002
period -
Exchange difference
on I/C loans to
foreign
holdings (Note 23) - - - (7.323.715) (7.323.715) - (7.323.715)
Foreign currency - - - - 5.113.715 - 5.113.715 (90.807) 5.022.908
translation
reserve
Issue of share 418.060 23.783.518 - - - 24.201.578 - 24.201.578
capital,
net (Note 22) -
Acquisition of
non-controlling
interest - - - - - - - 696.063 696.063 Balance 30 June 756.899 121.227.562 (42.946.585) (27.069.826) 3.701.890 55.669.940 1.349.250 57.019.190 2015 - Loss for the period - - (12.133.742) - - - (12.133.742) (686.849) (12.820.591) Exchange difference on I/C loans to foreign holdings (Note 23) - - - (6.329.687) - - (6.329.687) - (6.329.687) Foreign currency translation reserve - - - - 2.951.133 - 2.951.133 (46.874) 2.904.259 Fair value gain on available-for-sale financial assets (Note 19) - - - - - 485.529 485.529 - 485.529 Issue of share capital, net (Note 22) 143.246 1.646.706 - - - 1.789.952 - 1.789.952 Balance - 31 December 2015 900.145 122.874.268 (55.080.327) (33.399.513) 6.653.023 485.529 42.433.125 615.527 43.048.652 Loss for the period (309.941) - - - (309.941) (142.422) (452.363) Exchange difference - - - (1.485.262) - - (1.485.262) - (1.485.262) on I/C loans to foreign holdings (Note 23) Foreign currency translation reserve - - - - 526.525 - 526.525 (19.200) 507.325 Fair value gain on available-for-sale financial assets (Note 19) - - - - - 154.362 154.362 - 154.362 Balance - 30 June 2016 900.145 122.874.268 (55.390.268) (34.884.775) 7.179.548 639.891 41.318.809 453.905 41.772.714
1 Share premium is not available for distribution.
2 Companies which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two year-s after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special contribution for defense at 20% will be payable on such deemed dividends to the extent that the shareholders (companies and individuals) are Cyprus tax residents. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time. This special contribution for defense is payable on account of the shareholders.
3 Exchange differences on intercompany loans to foreign holdings arose as a result of devaluation of the Ukrainian Hryvnia during 2014, 2015 and for the six months period in 2016. The Group treats the mentioned loans as a part of the net investment in foreign operations (Note 32.3).
4 Exchange differences related to the translation from the functional currency of the Group's subsidiaries are accounted for directly to the foreign currency translation reserve. The foreign currency translation reserve represents unrealized profits or losses related to the appreciation or depreciation of the local currencies against the euro in the countries where the Company's subsidiaries own property assets.
5 Available For Sale financial assets are measured at fair value. Fair value changes on AFS assets are recognized directly in equity, through other comprehensive income.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2016
30 June 30 June
Note 2016 2015
EUR EUR
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) before tax (406.856) 1.212.895
Adjustments for:
(Gains)/losses on revaluation
of investment property 7 (636.436) (4.737.805)
Other non-cash movements 1.055 -
Other expenses/(income) 10 (32) (108.550)
Impairment of prepayments and
other current assets 772 -
Depreciation/ Amortization charge 8 24.162 6.979
Finance income 11 (363.136) (13.199)
Interest expense 11 1.590.033 1.401.209
Share of losses/ (profits) from
associates 16 (123.119) 177.796
Gain on acquisition of subsidiaries 15 - (2.181.834)
Change in tax provision (226) (68.253)
Effect of foreign exchange differences 12a 98.818 4.976.537
Net loss on the sale of investment
property 456.098
----------- -----------
Cash flows used in operations
before working capital changes 641.133 665.775
Change in inventories 18 902.636 -
Change in prepayments and other
current assets 20 (280.991) 1.718.119
Change in trade and other payables 26 836.354 (267.057)
Change in VAT and other taxes
receivable 20 (492.149) (6.059)
Change in other taxes payables 28 131.873 338.734
Increase in long term receivables - (127.118)
Change in deposits from tenants 27 165.925 (112.731)
----------- -----------
Cash generated from operations 1.904.781 2.209.663
Income tax paid (73.397) (198.353)
Net cash flows provided/(used) 2.011.310
in operating activities 1.831.384
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure on investment
property 14 - (110.539)
Prepayment made for acquisition
of investment property 14 - (1.786.934)
Acquisition of investment in
associates 16 - (4.059.839)
Sales proceeds on the sale of -
Investment Property and Inventory 1.627.761
Interest received 363.136 13.199
Net cash flows from / (used in) (5.944.113)
investing activities 1.990.897
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share
capital/shareholders advances 22 - 8.001.212
Net (repayment) of borrowings 25 (2.653.108) (313.676)
Interest and financial charges (1.338.553)
paid (1.357.034)
Decrease in financial lease liabilities 29 162.896 (126.739)
Repayment of preference shares 22 - (349.325)
Net cash flows from / (used in) 5.872.919
financing activities (3.847.246)
Net increase/(decrease) in cash 1.905.986
at banks (41.029)
Cash:
At beginning of the period 895.422 891.938
Effect of foreign exchange rates
on cash and cash equivalents (16.064) (34.130)
At end of the period 21 870.457 2.832.054
----------- -----------
Notes to the Condensed Consolidated Interim Financial Statements
For the six months ended 30 June 2016
1. General Information
Country of incorporation
SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC (the "Company") was incorporated in Cyprus on 23 June 2005 and is a public limited liability company, listed on the London Stock Exchange (AIM): ISIN CY0102102213. Its registered office is at Kyriakou Matsi 16, Eagle House, 10th floor, Agioi Omologites, 1082 Nicosia, Cyprus while its principal place of business in Cyprus is 11 Bouboulinas Street.
Principal activities
The principal activities of the Company, which are unchanged from last year, are to invest directly or indirectly in and/or manage real estate properties as well as real estate development projects in South East Europe (the "Region"). These include the acquisition, development, commercializing, operating and selling of property assets, in the Region.
The Group maintains offices in Nicosia, Cyprus, in Kyiv, Ukraine, in Bucharest, Romania and in Athens, Greece.
As at the reporting date, the companies of the Group employed and/or used the services of 27 Full Time Equivalent, (2015 à 27 people).
2. Adoption of new and revised Standards and Interpretations
The accounting policies adopted for the preparation of these condensed consolidated interim financial statements for the six months ended 30 June 2016 are consistent with those followed for the preparation of the annual financial statements for the year ended 31 December 2015.
3. Significant accounting policies
3.1 Statement of compliance
The condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap.113.
The condensed consolidated interim financial statements have been prepared under the historical cost convention as modified by the revaluation of investment property, investment property under construction and available for sale financial assets to fair value.
3.2 Basis of preparation
The condensed consolidated interim financial statements for the six months ended 30 June 2016 have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting".
Certain information and footnote disclosures normally included in the condensed consolidated interim financial statements prepared in accordance with the International Financial Reporting Standards ("IFRS") have been condensed or omitted. However, such information reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of the Group's Management, necessary to fairly state the results of interim periods.
Interim results are not necessarily indicative of the results to be expected for the full year.
The 31 December 2015 statement of financial position was derived from the audited consolidated financial statements.
3.3 Basis of consolidation
The condensed consolidated interim financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries).
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
The Company applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognized amounts of acquiree' s identifiable net assets.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized in profit or loss.
Any contingent consideration to be transferred by the group is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognized in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.
Business combinations that took place prior to 1 January 2010 were accounted for in accordance with the previous version of IFRS 3.
Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the group's accounting policies.
Changes in ownership interests in subsidiaries without change of control and Disposal of Subsidiaries
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.
3.4 Functional and presentation currency
Items included in the Group's financial statements are measured applying the currency of the primary economic environment in which the entities operate ("the functional currency"). The national currency of Ukraine, the Ukrainian Hryvnia, is the functional currency for all the Group's entities located in Ukraine, the Euro for all the Romanian, Bulgarian, Greek and Cypriot subsidiaries.
The condensed consolidated interim financial statements are presented in Euro, which is the Group's presentation currency.
As Management records the condensed consolidated interim financial information of the entities domiciled in Cyprus, Romania, Ukraine, Greece and Bulgaria in their functional currencies, in translating financial information of the entities domiciled in these countries into Euro for inclusion in the condensed consolidated interim financial statements, the Group follows a translation policy in accordance with International Accounting Standard No. 21, "The Effects of Changes in Foreign Exchange Rates", and the following procedures are performed:
-- All assets and liabilities are translated at closing rate; -- Equity of the Group has been translated using the historical rates;
-- Income and expense items are translated using exchange rates at the dates of the transactions, or where this is not practicable the average rate has been used;
-- All resulting exchange differences are recognized as a separate component of equity;
-- When a foreign operation is disposed of through sale, liquidation, repayment of share capital or abandonment of all, or part of that entity, the exchange differences deferred in equity are reclassified to the condensed consolidated interim statement of comprehensive income as part of the gain or loss on sale;
-- Monetary items receivable from foreign operations for which settlement is neither planned nor likely to occur in the foreseeable future and in substance are part of the Group's net investment in those foreign operations are recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the foreign operation.
The relevant exchange rates of the European and local central banks used in translating the financial information of the entities from the functional currencies into Euro are as follows:
Average for the period Closing as at
---------- ----------------------------------- --------------------------------
Currency 1 Jan 1 Jan 1 Jan 30 June 31 December 30 June
2016 - 2015 - 2015 - 2016 2015 2015
30 June 31 December 30 June
2016 2015 2015
---------- --------- ------------- --------- -------- ------------ --------
USD 1,1159 1,1095 1,1158 1,1102 1,0887 1,1189
---------- --------- ------------- --------- -------- ------------ --------
UAH 28,4201 24,2054 23,8303 27,5635 26,2231 23,5414
---------- --------- ------------- --------- -------- ------------ --------
RON 4,5218 4,4450 4,4479 4,5210 4,5245 4,4725
---------- --------- ------------- --------- -------- ------------ --------
BGN 1,9558 1,9558 1,9558 1,9558 1,9558 1,9558
---------- --------- ------------- --------- -------- ------------ --------
3.5 Investment Property at fair value
Investment property, comprising freehold and leasehold land, investment properties held for future development, warehouse and office properties as well as the residential property units, is held for long term rental yields and/or for capital appreciation and is not occupied by the Group. Investment property and investment property under construction are carried at fair value, representing open market value determined annually by external valuers. Changes in fair values are recorded in the statement of comprehensive income and are included in other operating income.
A number of the land leases (all in Ukraine) are held for relatively short terms and place an obligation upon the lessee to complete development by a prescribed date. It is important to note that the rights to complete a development may be lost or at least delayed if the lessee fails to complete a permitted development within the timescale set out by the ground lease.
In addition, in the event that a development has not commenced upon the expiry of a lease then the City Authorities are entitled to decline the granting of a new lease on the basis that the land is not used in accordance with the designation. Furthermore, where all necessary permissions and consents for the development are not in place, this may provide the City Authorities with grounds for rescinding or non-renewal of the ground lease. However Management believes that the possibility of such action is remote and was made only under limited circumstances in the past.
Management believes that rescinding or non-renewal of the ground lease is remote if a project is on the final stage of development or on the operating cycle. In undertaking the valuations reported herein, the valuer of Ukrainian properties CBRE have made the assumption that no such circumstances will arise to permit the City Authorities to rescind the land lease or not to grant a renewal.
Land held under operating lease is classified and accounted for as investment property when the rest of the definition is met. The operating lease is accounted for as if it were a finance lease.
Investment property under development or construction initially is measured at cost, including related transaction costs.
The property is classified in accordance with the intention of the management for its future use. Intention to use is determined by the Board of Directors after reviewing market conditions, profitability of the projects, ability to finance the project and obtaining required construction permits.
The time point, when the intention of the management is finalized is the date of start of construction. At the moment of start of construction, freehold land, leasehold land and investment properties held for a future redevelopment are reclassified into investment property under development or inventory in accordance to the final decision of management.
Initial measurement and recognition
Investment property is measured initially at cost, including related transaction costs. Investment properties are derecognized when either they have been disposed off or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in the condensed consolidated interim statement of comprehensive income in the period of retirement or disposal.
Transfers are made to investment property when, and only when, there is a change in use, evidenced by the end of owner occupation, or the commencement of an operating lease to third party. Transfers are made from investment property when, and only when, there is a change in use, evidenced by commencement of owner occupation or commencement of development with a view to sale.
If an investment property becomes owner occupied, it is reclassified as property, plant and equipment, and its fair value at the date of reclassification becomes its cost for accounting purposes. Property that is being constructed or developed for future use as investment property is classified as investment property under construction until construction or development is complete. At that time, it is reclassified and subsequently accounted for as investment property.
Subsequent measurement
Subsequent to initial recognition, investment property is stated at fair value. Gains or losses arising from changes in the fair value of investment property are included in the statement of comprehensive income in the period in which they arise.
If a valuation obtained for an investment property held under a lease is net of all payments expected to be made, any related liabilities/assets recognized separately in the statement of financial position are added back/reduced to arrive at the carrying value of the investment property for accounting purposes.
Subsequent expenditure is charged to the asset 's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the statement of comprehensive income during the financial period in which they are incurred.
Basis of valuation
The fair values reflect market conditions at the financial position date. These valuations are prepared annually by chartered surveyors (hereafter "appraisers"). The Group appointed valuers in 2014 which remain the same in 2015:
-- CBRE Ukraine, for all its Ukrainian properties, -- Real Act for all its Romanian, Greek and Bulgarian properties.
The valuations have been carried out by the appraisers on the basis of Market Value in accordance with the appropriate sections of the current Practice Statements contained within the Royal Institution of Chartered Surveyors ("RICS") Valuation - Professional Standards (2014) (the "Red Book") and is also compliant with the International Valuation Standards (IVS).
"Market Value", is defined as: "The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion".
In expressing opinions on Market Value, in certain cases the appraisers have estimated net annual rentals/income from sale. These are assessed on the assumption that they are the best rent/sale prices at which a new letting/sale of an interest in property would have been completed at the date of valuation assuming: a willing landlord/buyer; that prior to the date of valuation there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of the price and terms and for the completion of the letting/sale; that the state of the market, levels of value and other circumstances were, on any earlier assumed date of entering into an agreement for lease/sale, the same as on the valuation date; that no account is taken of any additional bid by a prospective tenant/buyer with a special interest; that the principal deal conditions assumed to apply are the same as in the market at the time of valuation; that both parties to the transaction had acted knowledgeably, prudently and without compulsion.
A number of properties are held by way of ground leasehold interests granted by the City Authorities. The ground rental payments of such interests may be reviewed on an annual basis, in either an upwards or downwards direction, by reference to an established formula. Within the terms of the lease, there is a right to extend the term of the lease upon expiry in line with the existing terms and conditions thereof. In arriving at opinions of Market Value, the appraisers assumed that the respective ground leases are capable of extension in accordance with the terms of each lease. In addition, given that such interests are not assignable, it was assumed that each leasehold interest is held by way of a special purpose vehicle ("SPV"), and that the shares in the respective SPVs are transferable.
With regard to each of the properties considered, in those instances where project documentation has been agreed with the respective local authorities, opinions of the appraisers of value have been based on such agreements.
In those instances where the properties are held in part ownership, the valuations assume that these interests are saleable in the open market without any restriction from the co-owner and that there are no encumbrances within the share agreements which would impact the sale ability of the properties concerned.
The valuation is exclusive of VAT and no allowances have been made for any expenses of realization or for taxation which might arise in the event of a disposal of any property.
In some instances the appraisers constructed a Discounted Cash Flow (DCF) model. DCF analysis is a financial modeling technique based on explicit assumptions regarding the prospective income and expenses of a property or business. The analysis is a forecast of receipts and disbursements during the period concerned. The forecast is based on the assessment of market prices for comparable premises, build rates, cost levels etc. from the point of view of a probable developer.
To these projected cash flows, an appropriate, market-derived discount rate is applied to establish an indication of the present value of the income stream associated with the property. In this case, it is a development property and thus estimates of capital outlays, development costs, and anticipated sales income are used to produce net cash flows that are then discounted over the projected development and marketing periods. The Net Present Value (NPV) of such cash flows could represent what someone might be willing to pay for the site and is therefore an indicator of market value. All the payments are projected in nominal US Dollar/Euro amounts and thus incorporate relevant inflation measures.
Valuation Approach
In addition to the above general valuation methodology, the appraisers have taken into account in arriving at Market Value the following:
Pre Development
In those instances where the nature of the 'Project' has been defined, it was assumed that the subject property will be developed in accordance with this blueprint. The final outcome of the development of the property is determined by the Board of Directors decision, which is based on existing market conditions, profitability of the project, ability to finance the project and obtaining required construction permits.
Development
In terms of construction costs, the budgeted costs have been taken into account in considering opinions of value. However, the appraisers have also had regard to current construction rates prevailing in the market which a prospective purchaser may deem appropriate to adopt in constructing each individual scheme. Although in some instances the appraisers have adopted the budgeted costs provided, in some cases the appraisers' own opinions of costs were used.
Post Development
Rental values have been assessed as at the date of valuation but having regard to the existing occupational markets taking into account the likely supply and demand dynamics during the anticipated development period. The standard letting fees were assumed within the valuations. In arriving at their estimates of gross development value ("GDV"), the appraisers have capitalized their opinion of net operating income, having deducted any anticipated non-recoverable expenses, such as land payments, and permanent void allowance, which has then been capitalized into perpetuity.
The capitalization rates adopted in arriving at the opinions of GDV reflect the appraisers' opinions of the rates at which the properties could be sold as at the date of valuation.
In terms of residential developments, the sales prices per sq. m. again reflect current market conditions and represent those levels the appraisers consider to be achievable at present. It was assumed that there are no irrecoverable operating expenses and that all costs will be recovered from the occupiers/owners by way of a service charge.
The valuations take into account the requirement to pay ground rental payments and these are assumed not to be recoverable from the occupiers. In terms of ground rent payments, the appraisers have assessed these on the basis of information available, and if not available they have calculated these payments based on current legislation defining the basis of these assessments. Property tax is not presently payable in Ukraine.
3.6 Investment Property under development
Property that is currently being constructed or developed, for future use as investment property is classified as investment property under development carried at cost until construction or development is complete, or its fair value can be reliably determined. This applies even if the works have temporarily being stopped.
3.7 Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or Groups of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss in the condensed consolidated statement of comprehensive income. An impairment loss recognized for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
3.8 Property, Plant and equipment and intangible assets
Property, plant and equipment and intangible non-current assets are stated at historical cost less accumulated depreciation and amortization and any accumulated impairment losses.
Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined and intangibles not inputted into exploitation, are carried at cost, less any recognized impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalized in accordance with the Group's accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Depreciation and amortization are calculated on the straight--line basis so as to write off the cost of each asset to its residual value over its estimated useful life. The annual depreciation rates are as follows:
Type % ----------------------------------------- Leasehold 20 ----------------------------------------- IT hardware 33 ----------------------------------------- Motor vehicles 25 ----------------------------------------- Furniture, fixtures and office equipment 20 ----------------------------------------- Machinery and equipment 15 ----------------------------------------- Software and Licenses 33 -----------------------------------------
No depreciation is charged on land.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.
The assets residual values and useful lives are reviewed, and adjusted, if appropriate, at each reporting date.
Where the carrying amount of an asset is greater than its estimated recoverable amount, the asset is written down immediately to its recoverable amount.
Expenditure for repairs and maintenance of tangible and intangible assets is charged to the statement of comprehensive income of the period/year in which it is incurred. The cost of major renovations and other subsequent expenditure are included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset.
An item of tangible and intangible assets is derecognized upon disposal or when no future economic benefits are expected to arise from the continuing use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the statement of comprehensive income.
3.9 Available for sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets, unless Management intends to dispose of the investment within twelve months of the reporting date.
Shares of a property holding corporate entity that are owned by the Company in lieu of owning a percentage of the asset itself, are considered under this classification even if the shares are not intended to be sold immediately but are intended to offer to the Company the said percentage of the revenue streams generated by the property asset itself.
Regular way purchases and sales of available-for-sale financial assets are recognized on trade-date which is the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognized in other comprehensive income are included in profit or loss as gains and losses on available-for-sale financial assets.
Interest on available-for-sale securities calculated using the effective interest method is recognized in the profit or loss. Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group's right to receive payments is established.
The Group assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets the cumulative loss which is measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss, is removed from equity and recognized in profit or loss.
In respect of available for sale equity securities, impairment losses previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under the heading of investments fair value reserve. In respect of available for sale debt securities, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.
3.10 Inventory
Inventory principally comprises land purchased for development and property under construction. Inventory is recognized initially at cost, including transaction costs, which represent its fair value at the time of acquisition. Costs related to the development of land are capitalized and recognized as inventory. Inventory is carried at the lower of cost and net realizable value.
3.11 Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period of the borrowings, using the effective interest method, unless they are directly attributable to the acquisition, construction or production of a qualifying asset, in which case they are capitalized as part of the cost of that asset.
Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extend there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment and amortized over the period of the facility to which it relates.
Borrowing costs are interest and other costs that the Group incurs in connection with the borrowing of funds, including interest on borrowings, amortization of discounts or premium relating to borrowings, amortization of ancillary costs incurred in connection with the arrangement of borrowings, finance lease charges and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, being an asset that necessarily takes a substantial period of time to get ready for its intended use or sale, are capitalized as part of the cost of that asset, when it is probable that they will result in future economic benefits to the Group and the costs can be measured reliably.
Borrowings are classified as current liabilities, unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.
3.12 Tenant security deposits
Tenant security deposits represent financial advances made by lessees as guarantees during the lease and are repayable by the Group upon termination of the contracts. Tenant security deposits are recognized at nominal value.
3.13 Financial liabilities and equity instruments
3.13.1 Classification as debt or equity
Debt and equity instruments issued by a Group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
3.13.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.
Ordinary shares are classified as equity. The difference between the fair value of the consideration received by the Company and the nominal value of the share capital being issued is taken to the share premium account.
Share premium account can only be resorted to for limited purposes, which don't include the distribution of dividends, and is otherwise subject to the provisions of the Cyprus Companies Law on reduction of share capital.
Repurchase of the Company's own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in the statement of comprehensive income on the purchase, sale, issue or cancellation of the Company's own equity instruments.
3.13.3 Financial liabilities
Financial liabilities are classified as either financial liabilities "at Fair Value Through Profit or Loss" or "other financial liabilities".
3.13.3.1 Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
-- it has been acquired principally for the purpose of repurchasing it in the near term; or
-- on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
-- such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
-- the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
-- it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is included in the "other gains and losses" line item in the condensed consolidated statement of comprehensive income.
3.13.3.2 Other financial liabilities
Other financial liabilities (including borrowings) are subsequently measured at amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Preference shares, which may be redeemable on a specific date, are classified as liabilities. The dividends, if any, on these preference shares are recognized in the income statement as interest expense.
3.13.3.3 De-recognition of financial liabilities
The Group derecognizes financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they are expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.
3.14 Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the condensed consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. This is not generally the case with master netting agreements and the related assets and liabilities are presented gross in the condensed consolidated statement of financial position.
3.15 Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment loss annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre--tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash--generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash--generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash--generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash--generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
3.16 Cash and Cash equivalents
Cash and cash equivalents include cash balances, call deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdraft that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
3.17 Share Capital
Ordinary shares are classified as equity.
3.18 Share premium
The difference between the fair value of the consideration received by the shareholders and the nominal value of the share capital being issued is taken to the share premium account.
3.19 Share-based compensation
The Group had in the past and intends in the future to operate a number of equity-settled, share-based compensation plans, under which the Company receives services from Directors and/or employees as consideration for equity instruments (options) of the Group. The fair value of the Director and employee cost related to services received in exchange for the grant of the options is recognized as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non-market service and performance vesting conditions. The total amount expensed is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At each financial position date, the Group revises its estimates on the number of options that are expected to vest based on the non-marketing vesting conditions. It recognizes the impact of the revision to original estimates, if any, in the statement of comprehensive income, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital and share premium when the options are exercised.
3.20 Provisions
Provisions are recognized when the Group has a present obligation (legal, tax or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. As at the reporting date the Group has settled all its construction liabilities.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
3.21 Leased assets
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the condensed consolidated statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Group's general policy on borrowing costs (see above).
Lease payments are analyzed between capital and interest components so that the interest element of the payment is charged to the statement of comprehensive income over the period of the lease and represents a constant proportion of the balance of capital repayments outstanding. The capital part reduces the amount payable to the lessor.
3.22 Non--current liabilities
Non--current liabilities represent amounts that are due in more than twelve months from the reporting date.
3.23 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. It is recognized to the extent that it is probable that the economic benefits associated with the transaction will flow to the Group and the revenue can be measured reliably. Revenue earned by the Group is recognized on the following bases:
3.23.1 Income from investing activities
Income from investing activities includes profit received from disposal of investments in the Company's subsidiaries and associates and income accrued on advances for investments outstanding as at the period/year end.
3.23.2 Dividend income
Dividend income from investments is recognized when the shareholders' right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably).
3.23.3 Interest income
Interest income is recognized on a time-proportion (accrual) basis, using the effective interest rate method.
3.23.4 Rental income
Rental income arising from operating leases on investment property is recognized on an accrual basis in accordance with the substance of the relevant agreements.
3.24 Service charges and expenses recoverable from tenants
Income arising from expenses recharged to tenants is recognized on an accrual basis.
3.25 Other property expenses
Irrecoverable running costs directly attributable to specific properties within the Group's portfolio are charged to the statement of comprehensive income. Costs incurred in the improvement of the assets which, in the opinion of the directors, are not of a capital nature are written off to the statement of comprehensive income as incurred.
3.26 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in the statement of comprehensive income in the period in which they are incurred as interest costs which are calculated using the effective interest rate method, net result from transactions with securities, foreign exchange gains and losses, and bank charges and commission.
3.27 Asset Acquisition Related Transaction Expenses
Expenses incurred by the Group for acquiring a subsidiary or associate company as part of an Investment Property and are directly attributable to such acquisition are recognized within the cost of the Investment Property and are subsequently accounted as per the Group's accounting Policy for Investment Property subsequent measurement.
3.28 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
3.28.1 Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the condensed consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
3.28.2 Deferred tax
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred tax.
Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same fiscal authority.
3.28.3 Current and deferred tax for the year
Current and deferred tax are recognized in the statement of comprehensive income, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
The operational subsidiaries of the Group are incorporated in Ukraine, Greece and Romania, while the Parent and some holding companies are incorporated in Cyprus. The Group's management and control is exercised in Cyprus.
The Group's Management does not intend to dispose of any asset, unless a significant opportunity arises. In the event that a decision is taken in the future to dispose of any asset it is the Group's intention to dispose of shares in subsidiaries rather than assets. The corporate income tax exposure on disposal of subsidiaries is mitigated by the fact that the sale would represent a disposal of the securities by a non--resident shareholder and therefore would be exempt from tax. The Group is therefore in a position to control the reversal of any temporary differences and as such, no deferred tax liability has been provided for in the financial statements.
3.28.4 Withholding Tax
The Group follows the applicable legislation as defined in all double taxation treaties (DTA) between Cyprus and any of the countries of Operations (Romania, Ukraine, Greece, Bulgaria). In the case of Romania, as the latter is part of the European Union, through the relevant directives the withholding tax is reduced to NIL subject to various conditions.
3.28.5 Dividend distribution
Dividend distribution to the Company's shareholders is recognized as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders.
3.29 Value added tax
VAT levied at various jurisdictions were the Group is active, was at the following rates, as at the end of the reporting period:
-- 20% on Ukrainian domestic sales and imports of goods, works and services and 0% on export of goods and provision of works or services to be used outside Ukraine.
-- 19% on Cyprus domestic sales and imports of goods, works and services and 0% on export of goods and provision of works or services to be used outside Cyprus.
-- 24% on Romanian domestic sales and imports of goods, works and services (reduced to 20% in 2016) and 0% on export of goods and provision of works or services to be used outside Romania.
-- 20% on Bulgarian domestic sales and imports of goods, works and services and 0% on export of goods and provision of services to taxable persons outside Bulgaria.
-- 24% on Greek domestic sales and imports of goods, works and services (increase to 24% from 1 June 2016) and 0% on export of goods and provision of works or services to be used outside Romania.
3.30 Operating segments analysis
Segment reporting is presented on the basis of Management's perspective and relates to the parts of the Group that are defined as operating segments. Operating segments are identified on the basis of their economic nature and through internal reports provided to the Group's Management who oversee operations and make decisions on allocating resources serve. These internal reports are prepared to a great extent on the same basis as these condensed consolidated interim financial statements.
For the reporting period the Group has identified the following material reportable segments, where the Group is active in acquiring, holding, managing and disposing:
Commercial-Industrial
-- Warehouse segment -- Office segment -- Retail segment
Residential
-- Residential segment
Land Assets
-- Land assets - the Group owns a number of land assets which are either available for sale or for potential development
The Group also monitors investment property assets on a Geographical Segmentation, namely the country were its property is located.
3.31 Earnings and Net Assets value per share
The Group presents basic and diluted earnings per share (EPS) and net asset value per share (NAV) for its ordinary shares.
Basic EPS amounts are calculated by dividing net profit/loss for the period/year, attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period/year. Basic NAV amounts are calculated by dividing net asset value as at period/year end, attributable to ordinary equity holders of the Company by the number of ordinary shares outstanding at the end of the period/year.
Diluted EPS is calculated by dividing net profit/loss for the period/year, attributable to ordinary equity holders of the parent, by the weighted average number of ordinary shares outstanding during the period/year plus the weighted average number of ordinary shares that would be issued on conversion of all the potentially dilutive ordinary shares into ordinary shares.
Diluted NAV is calculated by dividing net asset value as at period/year end, attributable to ordinary equity holders of the parent with the number of ordinary shares outstanding at period/year end plus the number of ordinary shares that would be issued on conversion of all the potentially dilutive ordinary shares into ordinary shares.
3.32 Comparative Period
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current period/year.
4. Critical accounting estimates and judgments
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and requires Management to exercise its judgment in the process of applying the Group's accounting policies. It also requires the use of assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on Management's best knowledge of current events and actions and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results though may ultimately differ from those estimates.
As the Group makes estimates and assumptions concerning the future the resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
-- Provision for impairment of receivables
The Group reviews its trade and other receivables for evidence of their recoverability. Such evidence includes the counter party's payment record, and overall financial position as well as the state's ability to pay its dues (VAT receivable). If indications of non-recoverability exist, the recoverable amount is estimated and a respective provision for impairment of receivables is made. The amount of the provision is charged through profit or loss. The review of credit risk is continuous and the methodology and assumptions used for estimating the provision are reviewed regularly and adjusted accordingly. As at the reporting date Management did not consider necessary to make a provision for impairment of receivables.
-- Fair value of investment property
The fair value of investment property is determined by using various valuation techniques. The Group selects accredited professional valuers with local presence to perform such valuations. Such valuers use their judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at each financial reporting date. The fair value has been estimated as at 31 December 2015 (Note 14).
-- Income taxes
Significant judgment is required in determining the provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
-- Impairment of tangible assets
Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
-- Provision for deferred taxes
Deferred tax is not provided in respect of the revaluation of the investment property and investment property under development as the Group is able to control the timing of the reversal of this temporary difference and the Management has intention not to reverse the temporary difference in the foreseeable future. The properties are held by subsidiary companies in Ukraine, Greece and Romania. Management estimates that the assets will be realized through a share deal rather than through an asset deal. Should any subsidiary be disposed of, the gains generated from the disposal will be exempt from any tax.
-- Application of IFRS 10
The Group has considered the application of IFRS 10 and concluded that the Company is not an Investment Entity as defined by IFRS 10 and it should continue to consolidate all of its investments. The reasons for such conclusion are among others that the Company:
a) is not an Investment Management Service provider to Investors,
b) actively manages its own portfolio (leasing, development, allocation of capital expenditure for its properties, marketing etc) in order to provide benefits other than capital appreciation and/or investment income,
c) has investments that are not bound by time in relation to the exit strategy nor to the way that are being exploited,
d) provides asset management services to its subsidiaries as well as loans and guarantees (directly or indirectly),
e) even though is using Fair Value metrics in evaluating its investments, this is being done primarily for presentation purposes rather that evaluating income generating capability and making investment decisions. The latter is being based on metrics like IRR, ROE and others.
5. Risk Management
5.1 Financial risk factors
The Group is exposed to operating country risk, real estate holding and development associated risks, market price risk, interest rate risk, credit risk, liquidity risk, currency risk, other market price risk, operational risk, compliance risk, litigation risk, reputation risk, capital risk management and other risks arising from the financial instruments it holds. The risk management policies employed by the Group to manage these risks are discussed below.
5.1.1 Operating Country Risks
The Group is exposed to country risk, stemming from the political and economic environment of countries in which it operates. Notably:
5.1.1.1 Ukraine
During 2015, the Ukrainian economy was going through a recession, the annual inflation rate reached 43,0%. Unfavorable conditions on markets where Ukraine's primary commodities where traded had negative impact on devaluation of the Ukrainian Hryvnia against major foreign currencies. During the period ended 30 June 2016 Ukrainian hryvnia further devaluated at 3,6% against USD in comparison to the end of 2015. Nevertheless the economy showed first signs of stabilization during reporting period with inflation rate slowing down to an annualized rate of 7% for the six month ended 30 June 2016 and industrial production increasing in February for the first time since 2012.
The National Bank of Ukraine (the "NBU") maintained its range of measures aimed at limiting the outflow of foreign currency from the country, inter alia, a mandatory sale of foreign currency earnings, and certain restrictions on purchases of foreign currencies on the interbank market and on usage of foreign currencies for settlement purposes, limitations on remittances abroad.
In 2015, the Government of Ukraine agreed with the IMF a four-year program for USD 17,500 million loan aimed at supporting the economic stabilization of Ukraine. The program defines economic reforms that must be undertaken by the Government of Ukraine to reinstate a sustainable economic growth in the midterm perspective. During the reporting period cooperation with IMF effectively was put on hold since laws required by the program could not be passed in the Parliament due to break up of ruling coalition. IMF showed its readiness to continue the program with the appointment of new government and a new financial support payment is expected to be received by Ukraine in Q4 2016.
During the period ended 30 June 2016, an armed conflict with separatists continuing in certain parts of Luhansk and Donetsk regions.
Political and economic relationships between Ukraine and the Russian Federation further deteriorated. On 1 January 2016, a free-trade element of Ukraine's association agreement with the European Union is coming into force. In late 2015, the Russian Federation denounced the free trade zone agreement with Ukraine and further trade and transit restrictions were announced by both countries. This led to a significant reduction in trade and economic cooperation between countries and undermined the ability to export goods from Ukraine to Central Asia countries.
Stabilization of the economic and political situation depends, to a large extent, upon the ability of the Ukrainian Government to continue reforms and the efforts of the NBU to further stabilize the banking sector, as well as upon the ability of the Ukrainian economy in general to respond adequately to changing markets.
5.1.1.2 Greece
During the period the Greek government continued discussions and finally agreed on May 24(th) , 2016 with the creditor institutions (EU/ECB/IMF/ESM) on the terms of the 3(rd) financial rescue package. Such financial agreement covers the next 3 years and has many milestones, on which future debt funding depends. However the main risks are around the implementation of the rescue program and the reforms included therein. The implementation of the program and its effects on the economy are beyond the Group's control.
Various risks emerge should the program is not implemented as planned, including restrictions on use of local bank deposits, liquidity of the financial sector and businesses, recoverability of receivables, impairment of assets, sufficiency of financing by the lending banks, serving of existing financing arrangements and/or compliance with existing terms and financial covenants of such arrangements. These and any possible further negative developments in Greece could impact the results and financial position of the Groups Greek operations to some extent, in a manner not currently determinable.
The Group has been closely assessing developments in Greece and preparing for a number of eventualities around the Greek crisis, in line with its established risk management policy in order to ensure that timely actions and response are undertaken so as to minimize any impact on the Group's business and operations.
5.1.2 Risks associated with property holding
Several factors may affect the economic performance and value of the Group's properties, including:
-- risks associated with construction activity at the properties, including delays, the imposition of liens and defects in workmanship;
-- the ability to collect rent from tenants , on a timely basis or at all, taking also into account the UAH rapid devaluation;
-- the amount of rent and the terms on which lease renewals and new leases are agreed being less favorable than current leases;
-- cyclical fluctuations in the property market generally;
-- local conditions such as an oversupply of similar properties or a reduction in demand for the properties;
-- the attractiveness of the property to tenants or residential purchasers; -- decreases in capital valuations of property;
-- changes in availability and costs of financing, which may affect the sale or refinancing of properties;
-- covenants, conditions, restrictions and easements relating to the properties;
-- changes in governmental legislation and regulations, including but not limited to designated use, allocation, environmental usage, taxation and insurance;
-- the risk of bad or unmarketable title due to failure to register or perfect our interests or the existence of prior claims, encumbrances or charges of which we may be unaware at the time of purchase;
-- the possibility of occupants in the properties, whether squatters or those with legitimate claims to take possession;
-- the ability to pay for adequate maintenance, insurance and other operating costs, including taxes, which could increase over time; and
-- political uncertainty, acts of terrorism and acts of nature, such as earthquakes and floods that may damage the properties.
5.1.3 Property Market price risk
Market price risk is the risk that the value of the Group's portfolio investments will fluctuate as a result of changes in market prices. The Group's assets are susceptible to market price risk arising from uncertainties about future prices of the investments. The Group's market price risk is managed through diversification of the investment portfolio, continuous elaboration of the market conditions and active asset management. To quantify the value of its assets and/or indicate the possibility of impairment losses, the Group commissioned internationally acclaimed valuers.
Valuations reported as at 31 December 2015 take into account the continuation of political instability in Ukraine. Given the nature of the Group's assets the most immediate effect would be the prolongation of the period needed to market and effectively sell an asset under such duress conditions.
The BoD is monitoring the situation to ensure that assets' value is preserved while at the same time through diversification according to the strategic plan of the Group, Ukrainian operations are gradually becoming a smaller part of a larger portfolio of assets.
5.1.4 Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates.
The Group's income and operating cash flows are substantially independent of changes in market interest rates as the Group has no significant interest--bearing assets apart from its cash balances that are mainly kept for liquidity purposes.
The Group is exposed to interest rate risk in relation to its borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. All of the Group's borrowings are issued at a variable interest rate. Management monitors the interest rate fluctuations on a continuous basis and acts accordingly.
5.1.5 Credit risk
Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets at hand at the end of the reporting period. Cash balances are held with high credit quality financial institutions and the Group has policies to limit the amount of credit exposure to any financial institution.
Management has been in continuous discussions with banking institutions monitoring their ability to extend financing as per the Group's needs. The sovereign debt crisis has affected the pan-European banking system during 2011 and 2012 imposing financing uncertainties for new development projects. The financial crisis in the European Union periphery has strained any remaining liquidity and the financial institutions in the region (including those that have Italian, Greek or Austrian parent) have entered into deleveraging programs.
5.1.6 Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates.
Currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the Group's functional currency. Excluding the transactions in Ukraine all of the Group's transactions, including the rental proceeds are denominated or pegged to EUR. In Ukraine even though some of the rental proceeds are denominated in USD, Management has been monitoring the rental market decoupling from the USD and switching to the UAH, which entails significant FX risks for the Group in the future. Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly, by limiting net exposures to a few days to 2 months. It should be noted that the current political uncertainty in Ukraine, and the currency devaluation may affect the Group's income streams indirectly also through affecting the financial condition of the tenants of the Group's properties their solvency and their income generating capacity.
Apart from liquidity maintained in local currency for operating reasons the Group's liquid assets are held in EUR denominated deposit accounts. Management is monitoring the situation closely and acts accordingly.
5.1.7 Capital risk management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to shareholders through the optimization of the debt and equity balance. The Group's core strategy is described in Note 35.1 of the condensed consolidated interim financial statements.
5.1.8 Compliance risk
Compliance risk is the risk of financial loss, including fines and other penalties, which arises from non--compliance with laws and regulations of each country the Group is present as well as from the stock exchange where the Company is listed. Although the Group is trying to limit such risk, the uncertain environment in which it operates in various countries increases the complexities handled by Management.
5.1.9 Litigation risk
Litigation risk is the risk of financial loss, interruption of the Group's operations or any other undesirable situation that arises from the possibility of non--execution or violation of legal contracts and consequentially of lawsuits. The risk is restricted through the contracts used by the Group to execute its operations .
5.1.10 Insolvency risk
Insolvency arises from situations where a company may not meet its financial obligations towards a lender as debts become due. Addressing and resolving any insolvency issues is usually a slow moving process in the Region. Management is closely involved in discussions with creditors when/if such cases arise in any subsidiary of the Company aiming to effect alternate repayment plans including debt repayment so as to minimize the effects of such situations on the Group's asset base.
5.2. Operational risk
Operational risk is the risk that derives from the deficiencies relating to the Group's information technology and control systems as well as the risk of human error and natural disasters. The Group's systems are evaluated, maintained and upgraded continuously.
5.3. Fair value estimation
The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the end of the reporting period. Valuations reported as at 31 December 2015 take into account past political developments in Ukraine which given the nature of the Group's assets the most immediate effect would be the prolongation of the period needed to market and effectively sell an asset under such duress conditions.
6. Investment in subsidiaries
The Company has direct and indirect holdings in other companies, collectively called the Group, that were included in the condensed consolidated interim financial statements, and are detailed below:
Holding %
---------------------------- ---------- ---------------- ----------------------------
Name Country Related as at as at as at
Asset 30 Jun 31 Dec 30 Jun
2016 2015 2015
---------------------------- ---------- ---------------- -------- -------- --------
SC SECURE Capital
Ltd Cyprus 100 100 100
---------------------------- ---------------------------- -------- -------- --------
Brovary
SL SECURE Logistics Logistics
Ltd Cyprus Park 100 100 100
---------------------------- ---------- ---------------- -------- -------- --------
LLC Aisi Brovary Ukraine 100 100 100
---------------------------- ---------------------------- -------- -------- --------
LLC Terminal
Brovary Ukraine 100 100 100
---------------------------- ---------------------------- -------- -------- --------
Kiyanovskiy
LLC Aisi Ukraine Ukraine Residence 100 100 100
---------------------------- ---------- ---------------- -------- -------- --------
LLC Retail Development
Balabino Ukraine 100 100 100
---------------------------- ---------------------------- -------- -------- --------
LLC Trade Center Ukraine 100 100 100
---------------------------- ---------------------------- -------- -------- --------
Tsymlianskiy
LLC Almaz--press--Ukrayina Ukraine Residence 55 55 55
---------------------------- ---------- ---------------- -------- -------- --------
Bela Logistic
LLC Aisi Bela Ukraine Park 100 100 100
---------------------------- ---------- ---------------- -------- -------- --------
Zaporizhia
LLC Interterminal Ukraine Retail Center 100 100 100
---------------------------- ---------- ---------------- -------- -------- --------
LLC Aisi Ilvo Ukraine 100 100 100
---------------------------- ---------------------------- -------- -------- --------
Innovations
Myrnes Innovations Logistics
Park Ltd Cyprus Park 100 100 100
---------------------------- ---------- ---------------- -------- -------- --------
Best Day Real
Estate SRL Romania 100 100 100
---------------------------- ---------------------------- -------- -------- --------
Yamano Holdings EOS Business
Ltd Cyprus Park 100 100 100
---------------------------- ---------- ---------------- -------- -------- --------
Secure Property
Development
and Investment
Srl Romania 100 100 100
---------------------------- ---------------------------- -------- -------- --------
N-E Real Estate
Park First Phase
Srl Romania 100 100 100
---------------------------- ---------------------------- -------- -------- --------
Victini Holdings
Ltd Cyprus GED Logistics 100 100 100
---------------------------- ---------- ---------------- -------- -------- --------
SPDI Logistics
S.A. Greece 100 100 100
---------------------------- ---------------------------- -------- -------- --------
Zirimon Properties
Ltd Cyprus Delea Nuova 100 100 100
---------------------------- ---------- ---------------- -------- -------- --------
Bluehouse Accession Praktiker
Project IX Ltd Cyprus Craiova 100 100 -
---------------------------- ---------- ---------------- -------- -------- --------
Bluehouse Accession
Project IV Ltd Cyprus 100 100 -
---------------------------- ---------------------------- -------- -------- --------
Bluebigbox 3
Srl Romania 100 100 -
---------------------------- ---------------------------- -------- -------- --------
SEC South East
Continent Unique
Real Estate
Investments
II Ltd Cyprus 100 100 100
---------------------------- ---------------------------- -------- -------- --------
SEC South East
Continent Unique
Real Estate
(Secured) Investments
Ltd Cyprus 100 100 100
---------------------------- ---------------------------- -------- -------- --------
Residential
Diforio Holdings and Land
Ltd Cyprus portfolio 100 100 100
---------------------------- ---------- ---------------- -------- -------- --------
Demetiva Holdings
Ltd Cyprus 100 100 100
---------------------------- ---------------------------- -------- -------- --------
Ketiza Holdings
Ltd Cyprus 90 90 45 ---------------------------- ---------------------------- -------- -------- -------- Frizomo Holdings Ltd Cyprus 100 100 100 ---------------------------- ---------------------------- -------- -------- -------- SecMon Real Estate SRL Romania 100 100 100 ---------------------------- ---------------------------- -------- -------- -------- SecVista Real Estate SRL Romania 100 100 100 ---------------------------- ---------------------------- -------- -------- -------- SecRom Real Estate SRL Romania 100 100 100 ---------------------------- ---------------------------- -------- -------- -------- Ketiza Real Estate SRL Romania 90 90 45 ---------------------------- ---------------------------- -------- -------- -------- Edetrio Holdings Ltd Cyprus 100 100 100 ---------------------------- ---------------------------- -------- -------- -------- Emakei Holdings Ltd Cyprus 100 100 100 ---------------------------- ---------------------------- -------- -------- -------- RAM Real Estate Management Ltd Cyprus 50 50 50 ---------------------------- ---------------------------- -------- -------- -------- Iuliu Maniu Ltd Cyprus 45 45 45 ---------------------------- ---------------------------- -------- -------- -------- Moselin Investments srl Romania 45 45 45 ---------------------------- ---------------------------- -------- -------- -------- Rimasol Enterprises Ltd Cyprus 44,24 44,24 44,24 ---------------------------- ---------------------------- -------- -------- -------- Rimasol Real Estate Srl Romania 44,24 44,24 44,24 ---------------------------- ---------------------------- -------- -------- -------- Ashor Ventures Ltd Cyprus 44,24 44,24 44,24 ---------------------------- ---------------------------- -------- -------- -------- Ashor Development Srl Romania 44,24 44,24 44,24 ---------------------------- ---------------------------- -------- -------- -------- Jenby Ventures Ltd Cyprus 44,30 44,30 44,24 ---------------------------- ---------------------------- -------- -------- -------- Jenby Investments Srl Romania 44,30 44,30 44,24 ---------------------------- ---------------------------- -------- -------- -------- Ebenem Ltd Cyprus 44,30 44,30 44,24 ---------------------------- ---------------------------- -------- -------- -------- Ebenem Investments Srl Romania 44,30 44,30 44,24 ---------------------------- ---------------------------- -------- -------- -------- Sertland Properties Ltd Cyprus 100 100 100 ---------------------------- ---------------------------- -------- -------- -------- Boyana Residence ood Bulgaria 100 100 100 ---------------------------- ---------------------------- -------- -------- -------- Mofben Investments Ltd Cyprus 100 100 100 ---------------------------- ---------------------------- -------- -------- -------- Delia Lebada Invest srl Romania 65 65 65 ---------------------------- ---------------------------- -------- -------- --------
During 2015 the Company completed a number of acquisitions: GED Warehouse, Praktiker Craiova and a part of the mixed portfolio including commercial, residential properties and land were categorized under "Investment Property" (Notes 14 & 15). Another part of the mixed portfolio (Delea Nuova office Building , Green Lake land has been categorized under "Associates" (Note 16). The 20% acquisition of Autounion has been recorded under "Available for Sale Financial Assets" (Note 19).
7. Operating Income
Operating income in the net amount of EUR1.914.602 for the period ended 30 June 2016 consists of:
a) rental income as well as service charges and utilities income collected from tenants as a result of the rental agreements concluded with tenants of Terminal Brovary (Ukraine), Innovations Logistics Park (Romania), EOS Business Park (Romania), Praktiker Craiova (Romania), and GED Logistics (Greece),
b) income from the sale of electricity by GED Logistics to the Greek Grid Administrator, c) rental income and service charges charged to tenants of the Residential Portfolio, and
d) income from the sale of several apartments and parking spaces minus the deduction of Cost of assets sold, representing the fair value as valued at 31/12/2015. The net income from sale of assets incudes both sales from Investment Property assets and assets classified as Inventory.
EUR 30 Jun 30 Jun
2016 2015
-------------------------------------- ------------ ----------
Rental income 2.345.038 2.319.351
-------------------------------------- ------------ ----------
Sale of electricity 164.607 135.140
-------------------------------------- ------------ ----------
Service charges and utilities income 152.911 279.901
-------------------------------------- ------------ ----------
Total income from rental contracts 2.662.556 2.734.392
-------------------------------------- ------------ ----------
Income from sale of assets 2.238.541 671.368
-------------------------------------- ------------ ----------
Cost of assets sold (2.986.495) (469.850)
-------------------------------------- ------------ ----------
Net Income from sale of assets (747.954) 201.518
-------------------------------------- ------------ ----------
Total Operating income 1.914.602 2.935.910
-------------------------------------- ------------ ----------
As announced on 9(th) of June 2016 the Company signed an agreement for the sale of the Terminal Brovary property involving the entities SL SECURE Logistics Limited, Aisi Brovary LLC, Terminal Brovary LLC. The Share Purchase Agreement is currently being negotiated and closing is subject to the EBRD and the Ukrainian Antimonopoly Committee approval. In case the transaction is effected, the table below presents the Group's Operating income excluding income from Terminal Brovary.
EUR 30 Jun 30 Jun
2016 2015
-------------------------------------- ------------ ----------
Rental income 1.826.083 1.177.612
-------------------------------------- ------------ ----------
Sale of electricity 164.607 229.788
-------------------------------------- ------------ ----------
Service charges and utilities income 99.693 135.139
-------------------------------------- ------------ ----------
Total income from rental contracts 2.090.383 1.542.539
-------------------------------------- ------------ ----------
Income from sale of assets 2.238.541 671.368
-------------------------------------- ------------ ----------
Cost of assets sold (2.986.495) (469.850)
-------------------------------------- ------------ ----------
Net Income from sale of assets (747.954) 201.518
-------------------------------------- ------------ ----------
Total Operating income 1.342.429 1.744.057
-------------------------------------- ------------ ----------
Occupancy rates in the various income producing assets of the Group as at 30 June 2016 were as follows:
Income producing assets
----------------------------------------------------
% 30 Jun 30 Jun
2016 2015
----------------------- --------- ------- -------
EOS Business Park Romania 100% 100%
----------------------- --------- ------- -------
Innovations Logistics
Park (Note 36.2) Romania 87% 87%
----------------------- --------- ------- -------
GED Logistics Greece 100% 100%
----------------------- --------- ------- -------
Terminal Brovary Ukraine 100% 72%
----------------------- --------- ------- -------
Praktiker Craiova Romania 100% -
----------------------- --------- ------- -------
Valuation gains /(losses) from investment property for the six month reporting period, excluding foreign exchange translation differences which are incorporated in the table of Note 14, are presented in the table below.
Property Name (EUR) Valuation gains/(losses)
---------------------------- ---------------------------
30 Jun 30 Jun
2016 2015
---------------------------- ----------- --------------
Brovary Logistic Park 349.332 4.711.511
---------------------------- ----------- --------------
Bela Logistic Center 145.991 1.371.425
---------------------------- ----------- --------------
Kiyanovskiy Lane 91.243 1.083.869
---------------------------- ----------- --------------
Tsymlyanskiy Lane 28.677 309.677
---------------------------- ----------- --------------
Balabino Lane 44.318 575.114
---------------------------- ----------- --------------
Rozny Lane (23.125) -
---------------------------- ----------- --------------
Innovations Logistics Park - -
---------------------------- ----------- --------------
EOS Business Park - -
---------------------------- ----------- --------------
Residential Portfolio - -
---------------------------- ----------- --------------
Green Lake - (3.313.791)
---------------------------- ----------- --------------
Pantelimon Lake - -
---------------------------- ----------- --------------
Praktiker Craiova - -
---------------------------- ----------- --------------
GED Logistics - -
---------------------------- ----------- --------------
Total 636.436 4.737.805
---------------------------- ----------- --------------
8. Administration Expenses
EUR 30 Jun 30 Jun
2016 2015
---------------------------------------- ------------ ------------
Salaries and Wages (480.484) (573.350)
---------------------------------------- ------------ ------------
Legal fees (44.123) (201.548)
---------------------------------------- ------------ ------------
Advisory fees (169.548) (243.398)
---------------------------------------- ------------ ------------
Corporate registration and maintenance
fees (89.765) (63.082)
---------------------------------------- ------------ ------------
Travelling and other office expenses (78.148) (66.524)
---------------------------------------- ------------ ------------
Directors' remuneration - (119.628)
---------------------------------------- ------------ ------------
Audit and accounting fees (74.758) (62.159)
---------------------------------------- ------------ ------------
Public group expenses (67.166) (71.970)
---------------------------------------- ------------ ------------
Depreciation/Amortization charge (24.162) (6.979)
---------------------------------------- ------------ ------------
Sundry expenses (150.019) (65.926)
---------------------------------------- ------------ ------------
Total Administration Expenses (1.178.173) (1.474.564)
---------------------------------------- ------------ ------------
Salaries and wages include the remuneration of the CEO, the CFO, the Group Commercial Director, the Group Investment Director and the Country Managers of Ukraine and Romania, as well as the salary cost of personnel employed in the region.
Legal fees represent legal expenses incurred by the Group in relation to asset operations (rentals, sales etc), ongoing legal cases in Ukraine, debt restructurings as well as its compliance with AIM listing.
Advisory fees are mainly related to outsourced human resources support on the basis of advisory contracts, capital raising advisory expenses and marketing expenses incurred by the Group.
Directors' remuneration represents the remuneration of all non-executive Directors and committee members (Note 32.1). For 2016, a decision was taken that the BOD receives no remuneration.
Audit and accounting expenses includes the audit fees and accounting fees for the Company and all the subsidiaries.
Public group expenses include fees paid to the London Stock Exchange (LSE) and the Nominated Advisor of the Company as well as other expenses related to the listing of the Company.
Depreciation/Amortization expense is mainly related to amortization of software (ERP - Navision) .
Sundry expenses include office expenses, travel expenses, communication expenses, D&O insurance and all other general expenses for Cypriot, Romanian, Ukrainian, Bulgarian and Greek operations.
9. Investment property operating expenses
The Group incurs expenses related to the proper operation and maintenance of all the income generating properties in Kiev, Bucharest, Athens, Sofia and Craiova. A part of these expenses is recovered from the tenants through the rental agreements (Note 7).
EUR 30 Jun 30 Jun
2016 2015
--------------------------------- ---------- ----------
Property management fees (72.376) (82.864)
--------------------------------- ---------- ----------
Property related taxes (121.707) (124.561)
--------------------------------- ---------- ----------
Expenses for utilities (97.170) (153.451)
--------------------------------- ---------- ----------
Property security (21.194) (10.522)
--------------------------------- ---------- ----------
Technical maintenance and other
operating expenses (26.581) (36.471)
--------------------------------- ---------- ----------
Leasing expenses (25.188) (34.684)
--------------------------------- ---------- ----------
Property insurance (25.965) (4.276)
--------------------------------- ---------- ----------
Total (390.181) (446.829)
--------------------------------- ---------- ----------
Property management fees relate to property management agreements with third party managers for Innovation Logistics Park, and Praktiker Craiova .
Property related taxes reflect local taxes related to land and building properties (in the form of land taxes, building taxes, garbage fees, etc).
Leasing expenses reflect expenses related to long term land leasing.
10. Other operating income/(expenses), net
EUR 30 Jun 30 Jun
2016 2015
------------------------------------ --------- ---------
Income from enforcement guarantees - 122.867
------------------------------------ --------- ---------
Other income - 122.867
------------------------------------ --------- ---------
Impairment (772)
------------------------------------ --------- ---------
Penalties (8.814) (1.559)
------------------------------------ --------- ---------
Other expenses (8.240) (79.038)
------------------------------------ --------- ---------
Other expenses (17.826) (80.597)
------------------------------------ --------- ---------
Total (17.826) 42.270
------------------------------------ --------- ---------
11. Finance costs and income
EUR 30 Jun 30 Jun
2016 2015
------------------------------ -------- -------
Finance income
------------------------------ -------- -------
Interest from non-bank loans 38.041 12.996
------------------------------ -------- -------
Bank Loan written off 324.695 -
------------------------------ -------- -------
Bank interest income 400 203
------------------------------ -------- -------
Total finance income 363.136 13.199
------------------------------ -------- -------
Finance costs
----------------------------------- ------------ ------------
Borrowing interest expenses (Note (1.320.634) (1.104.169)
25)
----------------------------------- ------------ ------------
Finance leasing interest expenses
(Note 29) (269.398) (297.040)
----------------------------------- ------------ ------------
Finance charges and commissions (72.070) (221.188)
----------------------------------- ------------ ------------
Other finance expenses (97.048) -
----------------------------------- ------------ ------------
Total finance costs (1.759.150) (1.622.397)
----------------------------------- ------------ ------------
Net finance result (1.396.014) (1.609.198)
----------------------------------- ------------ ------------
Interest from non-bank loans represents interest payable for shareholder's loans granted to entities owning properties in which the Company has partnerships.
Bank Loan written off represents a debt amount written off following complete sale of the of Linda Residence properties (Note 25).
Borrowing interest expense represents interest expense charged on bank and non-bank borrowings.
Finance leasing interest expenses relate to the sale and lease back agreements of the Group.
Finance charges and commissions include regular banking commissions, and various fees paid to the banks, including a fee paid to EBRD for the restructuring of the Terminal Brovary loan in 2015 amounting to EUR99.154.
Other finance expenses mainly represents the penalties that Piraeus Leasing bank charged to Best Day SRL for overdue installments during the period where the Company and Nestle were trying to get Piraeus Leasing agreement for the departure of Nestle from the Terminal. The Company claims that any and all delays were the fault of Piraeus Bank.
12. Foreign exchange profit / (losses)
a. Foreign exchange loss - non realised
Foreign exchange losses (non-realised) resulted from the loans and/or payables/receivables denominated in non EUR currencies when translated in EUR, mainly the EBRD loan (Note 25). The exchange income from continuing operations for the period ended 30 June 2016 amounted to EUR98.818 loss (30 June 2015: loss EUR4.976.537).
b. Exchange difference on intercompany loans to foreign holdings
The intercompany loans provided by SC Secure Capital Limited to Ukrainian subsidiaries (Note 32.3) incurred an exchange loss (non-realised) of EUR1.485.262, due to the UAH devaluation which took place during the reporting period (period ended 30 June 2015: loss EUR7.323.715).
13. Income Tax Expense
EUR 30 Jun 30 Jun
2016 2015
---------------------------------------- --------- --------
Current income and defense tax expense (45.507) (2.893)
---------------------------------------- --------- --------
Taxes (45.507) (2.893)
---------------------------------------- --------- --------
For period ended 30 June 2016, the corporate income tax rate for the Company's subsidiaries are as follows: in Ukraine 19%, in Romania 16%, in Greece 29% and in Bulgaria 10%. The corporate tax that is applied to the qualifying income of the Company and its Cypriot subsidiaries is 12,5%.
14. Investment Property
14.1 Investment Property Holdings
Investment Property consists of the following assets:
Income Producing Assets
-- Innovations Logistic Park is a 16.570 sqm gross leasable area logistics park located in Clinceni in Bucharest, which benefits from being on the Bucharest ring road. Its construction was tenant specific, was completed in 2008 and is separated in four warehouses, two of which offer cold storage (freezing temperature), the total area of which is 6.395 sqm. Innovations was acquired by the Group in May 2014 and was 87% leased at the end of the reporting period.
-- EOS Business Park is a 3.386 sqm gross leasable area Class A office Building in Bucharest, which is currently fully let to Danone Romania. EOS Business Park was acquired by the Group in October 2014.
-- GED Logistics is a 17.756 gross leasable sqm logistics park and has a net operating income ("NOI") of approximately EUR1,5 million per annum. It is fully let to the German multinational transportation and logistics company, Kuehne + Nagel (70%) and to a Greek commercial company trading electrical appliances GE Dimitriou SA (30%). The NOI also includes income from selling electric energy produced by the 1MW photovoltaic park installed on the roof of the property to the Greek Electric Grid.
-- Praktiker Craiova, a 9,385 sqm Gross Leasable Area DIY retail property, acquired by the Group in July 2015. Situated in a prime location in Craiova, Romania it is wholly let to Praktiker, a regional DIY retailer. Early in 2016 the tenant offered to extend the lease agreement for an additional 5,5 years until 2025, for an annual rent of EUR600k. Such offer has been accepted.
-- Terminal Brovary Logistic Park is a 49.180 sqm gross leasable area logistics park, situated on the junction of the main Kyiv - Moscow highway and the Borispil road. The facility is in operation since Q1 2010 and as at the end of the reporting period its warehouse space is 100% leased (90% occupancy). The property is currently under negotiation for sale ( Note 7).
Residential Assets
-- The Company owns a residential portfolio, consisting at the end of the reporting period of partly let and income producing 75 apartments and villas across five separate complexes (Residential portfolio: Romfelt, Linda, Monaco, Blooming House, Green Lake Residential: Green Lake Parcel K) located in different residential areas of Bucharest and Sofia. The Group acquired the portfolio properties partly in August 2014 and partly May 2015. Since that time the Company has been gradually disposing the properties. The aggregate residential portfolio is 43% let at the end of the reporting period.
Land Assets
-- Bela Logistic Center is a 22,4 Ha plot in Odessa situated on the main highway to Kyiv. Following the issuance of permits in 2008, below ground construction for the development of a 103.000 sqm GBA logistic center commenced. Construction was put on hold in 2009 following adverse macro-economic developments at the time.
-- Kiyanivsky Lane consists of four adjacent plots of land, totaling 0,55 Ha earmarked for a residential development, overlooking the scenic Dnipro River, St. Michael's Spires and historic Podil neighborhood.
-- Tsymlianskiy Lane, is a 0,36 Ha plot of land located in the historic Podil District of Kyiv and is designated for the development of a residential complex.
-- Rozny Lane is a 42 Ha land plot located in Kiev Oblast, designated for the development of a residential complex. It has been registered under the Group pursuant to a legal decision in July 2015. (Note 14.4c).
-- Balabino property is a 26,38 Ha plot of land situated on the south entrance of Zaporizhia, a city in the south of Ukraine with a population of 800.000 people. Balabino is zoned for retail and entertainment development.
-- Green Lake land is a 40.360 sqm plot and is adjacent to the Green Lake part of the Company's residential portfolio (classified under Associates). It is situated in the northern part of Bucharest on the bank of Grivita Lake in Bucharest. SPDI owns 44,24% of these plots and has effective management control.
-- Pantelimon Lake consists of a 40.000 sq m plot of land in east Bucharest situated on the shore of Pantelimon Lake, opposite to a famous Romanian hotel, the Lebada Hotel. The construction permit, which allows for 54.000 sqm residential space to be built, was renewed in April 2014.
14.2 Investment Property Movement during the reporting period
The table below presents a reconciliation of the Fair Value movements of the investment property during the reporting period broken down by property and by local currency vs. reporting currency.
The two components comprising the fair value movements are presented in accordance with the requirements of IFRS in the condensed consolidated statement of comprehensive income as follows:
a. The translation loss due to the devaluation of local currencies of EUR482.891 (a) is presented as part of the exchange difference on translation of foreign operations in other comprehensive income of the Profit and Loss Account and then carried forward in the Foreign currency translation reserve; and,
b. The fair value gain in terms of the local functional currencies amounting to EUR287.104 (b), is presented as Valuation gains/(losses) from investment properties under the Profit and Loss Account and is carried forward in Accumulated losses.
30 June 2016 Fair Value Asset Value at
(EUR) movements the Beginning of
the period or at
Acquisition/Transfer
date
----------------------------- ----------- -------------------------- ------------ --------------------------------------
Asset Type Carrying Foreign Fair Disposals Transfer Additions Carrying
Name amount exchange value from 2015 amount
30/06/2016 translation gain/(loss) prepayments as at
difference based made 31/12/2015
(a) on local for
currency investments
valuations
(b)
-------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------
Terminal
Brovary
Logistic
Park Warehouse 12.069.897 (543.759) 349.332 - - - 12.264.324
-------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------
Bela
Logistic
Center Land 5.044.136 (227.244) 145.991 - - - 5.125.389
-------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------
Kiyanivskiy
Lane Land 3.152.586 (142.025) 91.243 - - - 3.203.368
-------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ Tsymlyanskiy Lane Land 990.812 (44.637) 28.677 - - - 1.006.772 -------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ Balabino Land 1.531.256 (68.984) 44.318 - - - 1.555.922 -------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ Rozny Land 1.170.960 - (23.125) 1.194.085 Lane -------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ Total 23.959.647 (1.026.649) 636.436 - - - 24.349.860 Ukraine ----------------------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ Overall (390.213) - - - change in Ukraine ----------------------------- ----------- -------------------------- ------------ ------------ ---------- ------------ Innovations Warehouse 14.400.000 - - - - - 14.400.000 Logistics Park -------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ EOS Office 6.550.000 - - - - - 6.550.000 Business Park -------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ Residential Residential 4.638.141 - - (2.083.859) - - 6.722.000 portfolio -------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ Green Land 17.932.000 - - - - - 17.932.000 Lake -------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ Pantelimon Land 5.812.000 - - - - - 5.812.000 Lake -------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ Praktiker Retail 7.200.000 - - - - - 7.200.000 Craiova -------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ Total 56.532.141 - - (2.083.859) - - 58.616.000 Romania ----------------------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ GED Warehouse 16.500.000 - - - - - 16.500.000 Logistics -------------- ------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ Total 16.500.000 - - - - - 16.500.000 Greece ----------------------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------ Total 96.991.788 (1.026.649) 636.436 (2.083.859) - - 99.465.860 ----------------------------- ----------- ------------ ------------ ------------ ------------ ---------- ------------
14.3 Investment Property Valuations per asset
The table below presents the values of the individual assets as appraised by the appointed valuer.
Asset Description/ Principal Related Companies Carrying amount
Name Location Operation as at (EUR)
------------- ------------- ------------- ------------------ ------------------------
30 Jun 31 Dec
2016 2015
------------- ------------- ------------- ------------------ ----------- -----------
Terminal Brovary, Warehouse LLC TERMINAL 12.069.897 12.264.324
Brovary Kiev oblast BROVARY
Logistics LLC AISI BROVARY
Park SL LOGISTICS
LIMITED
------------- ------------- ------------- ------------------ ----------- -----------
Bela Odesa Land and LLC AISI BELA 5.044.136 5.125.389
Logistic Development
Center Works for
Warehouse
------------- ------------- ------------- ------------------ ----------- -----------
Kiyanivskiy Podil, Land for LLC AISI UKRAINE 3.152.586 3.203.368
Lane Kiev City residential
Center development
------------- ------------- ------------- ------------------ ----------- -----------
Tsymlianskiy Podil, Land for LLC ALMAZ PRES 990.812 1.006.772
Lane Kiev City residential UKRAINE
Center development
------------- ------------- ------------- ------------------ ----------- -----------
Balabino Zaporizhia Land for LLC INTERTERMINAL 1.531.256 1.555.922
retail LLC AISI Ilvo,
development
------------- ------------- ------------- ------------------ ----------- -----------
Rozhny Brovary Land for SC Secure Capital 1.170.960 1.194.085
Lane district, residential
Kyiv oblast Development
------------- ------------- ------------- ------------------ ----------- -----------
Total 23.959.647 24.349.860
Ukraine
------------- ------------- ------------- ------------------ ----------- -----------
Asset Description/ Principal Related Companies Carrying amount
Name Location Operation as at (EUR)
------------- ------------- -------------- --------------------- ------------------------
30 Jun 31 Dec
2016 2015
------------- ------------- -------------- --------------------- ----------- -----------
Innovations Clinceni, Warehouse MYRNES INNOVATIONS 14.400.000 14.400.000
Logistic Bucharest PARK LIMITED
Park BEST DAY REAL
ESTATE SRL
------------- ------------- -------------- --------------------- ----------- -----------
EOS Business Bucharest Office YAMANO LIMITED 6.550.000 6.550.000
Park building SPDI SRL,
N-E Real Estate
Park First
Phase Srl
------------- ------------- -------------- --------------------- ----------- -----------
Residential Bucharest Residential Secure Investment 4.638.141 6.722.000
Portfolio apartments II
(90 in Demetiva Limited
total in Diforio Limited
4 complexes) Frizomo Limited
Ketiza Limited
SecRom Srl
SecVista Srl
SecMon Srl
Ketiza Srl
------------- ------------- -------------- --------------------- ----------- -----------
Green Bucharest Residential Secure Investment 17.932.000 17.932.000
Lake apartments I
(14 in Edetrio Holdings
total) Limited
& Emakei Holdings
land for Limited
residential Iuliu Maniu
development Limited
Ram Real Estate
Management
Limited
Moselin Investments
srl
Rimasol Limited
Rimasol Real
Estate Srl
Ashor Ventures
Limited
Ashor Develpoment
Srl
Jenby Ventures
Limited
Jenby Investments
Srl
Ebenem Limited
Ebenem Investments
Srl
------------- ------------- -------------- --------------------- ----------- -----------
Pantelimon Bucharest Land for Secure Investment 5.812.000 5.812.000
Lake residential I
development Mofben Investments
Limited
Delia Lebada
Invest srl
------------- ------------- -------------- --------------------- ----------- -----------
Praktiker Craiova Big Box Bluehouse Accession 7.200.000 7.200.000
Craiova retail Project IX
Bluehouse Accession
Project IV
BlueBigBox
3 srl
------------- ------------- -------------- --------------------- ----------- -----------
Total 56.532.141 58.616.000
Romania
------------- ------------- -------------- --------------------- ----------- -----------
GED Logistics Athens Warehouse Victini Holdings 16.500.000 16.500.000
Limited.
SPDI Logistics
S.A.
-------------- ------- ---------- ----------------- ----------- -----------
Total 16.500.000 16.500.000
Greece
-------------- ------- ---------- ----------------- ----------- -----------
TOTAL 96.991.788 99.465.860
------------------------------------------------------ ----------- -----------
14.4 Investment Property analysis
a. Investment Properties
The following assets are presented under Investment Property: Innovations, EOS Business Park, GED Logistics Park, Craiova Praktiker, the Residential Portfolio (consisting of apartments in 4 complexes and Green Lake) as well as all the land assets namely Kiyanovskiy Lane, Tsymlyanskiy Lane, Balabino and Rozny in Ukraine, Pantelimon Lake and Green Lake in Romania.
EUR 30 Jun 31 Dec
2016 2015
-------------------------------------- ------------ ------------
As at the beginning of the reporting 94.340.471 53.533.187
period
-------------------------------------- ------------ ------------
Capital expenditure on investment - -
property
-------------------------------------- ------------ ------------
Acquisitions of investment property - 51.089.000
-------------------------------------- ------------ ------------
Disposal of investment Property (2.083.859) (1.902.500)
-------------------------------------- ------------ ------------
Transfer from prepayments made 1.518.480
-------------------------------------- ------------ ------------
Revaluation gain/(loss) on investment 490.445 (3.308.246)
property
-------------------------------------- ------------ ------------
Translation difference (799.405) (6.589.450)
-------------------------------------- ------------ ------------
As at the end of the reporting period 91.947.652 94.340.471
-------------------------------------- ------------ ------------
b. Investment Properties Under Development
As at 30 June 2016 investment property under development represents the carrying value of Bela Logistic Center property, which has reached the +10% construction level completion in late 2008 but it is stopped since then.
EUR 30 Jun 31 Dec
2016 2015
-------------------------------------- ---------- ------------
As at the beginning of the reporting
period 5.125.389 5.083.216
-------------------------------------- ---------- ------------
Revaluation on investment property 145.991 1.513.658
-------------------------------------- ---------- ------------
Foreign translation difference (227.244) (1.471.485)
-------------------------------------- ---------- ------------
As at the end of the reporting period 5.044.136 5.125.389
-------------------------------------- ---------- ------------
c. Prepayments made for Investments
From time to time, when the Company acquires a new property, it may proceed with down payment in order to facilitate such transactions. Movements of such prepayments are presented below for six months period of 2016 and 2015.
EUR 30 Jun 31 Dec
2016 2015
------------------------------------------- -------- ------------
As at the beginning of the reporting
period 100.000 2.674.219
------------------------------------------- -------- ------------
Advances for acquisition transferred
to Investment in subsidiary - (624.841)
------------------------------------------- -------- ------------
Translation difference - 9.761
------------------------------------------- -------- ------------
Transfer to Investment Property - (1.518.480)
------------------------------------------- -------- ------------
Advances for investments from acquisition
of subsidiaries - 100.000
------------------------------------------- -------- ------------
Impairment provision - (540.659)
------------------------------------------- -------- ------------
As at the end of the reporting period 100.000 100.000
------------------------------------------- -------- ------------
For 2015, advances for acquisition transferred to Investment in subsidiary reflects a down payment provided for the acquisition of GED logistics park in 2014 that has been closed upon transaction finalization in 2015.
Transfer to Investment Property relates to Kiev Oblast-Rozny Property. The Group made an advance payment of US$12mil for the acquisition of a property in Podil (Kyiv) in 2007. As of the end of the reporting period Management continues its effort to collect the original US $12mil as the seller defaulted but at the same time succeeded in enforcing the collateral (a 42ha land plot Kiev Oblast named Rozny-) after a protracted legal battle. Such asset was transferred to Investment Property at EUR1.518.480 when the Group took ownership (July 2015) while the amount of EUR540.659 represents the impairment at the date of transfer. The Group keeps pursuing legally the difference from the advance payment.
15. Investment Property Acquisitions
The fair value of identifiable assets and liabilities of acquired entities owning directly or indirectly properties during 2015 as of the date of their acquisition was as follows:
EUR GED Logistics SEC South Praktiker Total
East Craiova
ASSETS
Non-current assets
Investment property 16.400.000 24.619.000 10.070.000 51.089.000
Investments in associates - 6.132.516 - 6.132.516
Other non-current assets 29.911 69.536 - 99.447
Current assets
Inventories - 12.300.000 - 12.300.000
Prepayments and other
current assets 353.366 1.203.036 384.884 1.941.286
Cash and cash equivalents 160 777.247 26.425 803.832
Total assets 16.783.437 45.101.335 10.481.309 72.366.081
Non-current liabilities
Interest bearing borrowings 12.549.180 23.865.253 4.892.950 41.307.383
Deposits from tenants 211.243 - - 211.243
Current liabilities
Interest bearing borrowings 135.110 1.431.464 - 1.566.574
Trade and other payables 492.060 3.074.332 120.961 3.687.353
Taxes payable 56.776 252.033 - 308.809
Total liabilities 13.444.369 28.623.082 5.013.911 47.081.362
Net assets acquired 3.339.068 16.478.253 5.467.398 25.284.719
(including non-controlling
interest)
Non-controlling interest - (696.063) - (696.063)
Net assets acquired 3.339.068 15.782.190 5.467.398 24.588.656
attributable to shareholders
Financed by
Cash consideration 1.786.934 - - 1.786.934
paid
Issue of shares - 15.152.490 6.081.211 21.233.701
Total consideration 1.786.934 15.152.490 6.081.211 23.020.635
Gain realized on acquisition
Goodwill =Net Assets 1.552.134 629.700 - 2.181.834
- Total consideration - - (613.813) (613.813)
16. Investments in associates
In May 2015 by acquiring the mixed use Sec South portfolio (Note 15) the Group acquired participation in certain properties classified under Investments in Associates. The associates acquired are as follows:
a) Green Lake Development srl, is a residential compound company which consists as at end of the reporting period of 35 apartments plus 23 villas as well as 4 commercial use designated buildings (Phase A of Green Lake). The compound is situated on the banks of Grivita Lake, in the northern part of the Romanian capital. The compound includes also facilities such as private kindergarten, nautical club, outdoor sport courts, and restaurants. The Company has a 40,35% participation in this asset. The property as of the end of the reporting period was 45% let.
b) The Company acquired a 24,35% participation in the Delea Nuova office building property in Bucharest. The property is a 10.280 sqm office building, which consists of two underground levels, a ground floor and ten above-ground floors. As of the end of the reporting period, the building was 100% let, with ANCOM (the Romanian Telecommunications Regulator) being the anchor tenant (70% of GLA).The table below summarizes the movements in the carrying amount of the Group's investment in associates.
EUR 30 Jun 31 Dec
2016 2015
------------------------------------------- ---------- ------------
Cost of investment in associates
at the beginning of the period 4.887.944 6.132.516
------------------------------------------- ---------- ------------
Share of profits /(losses) from associates 123.119 (1.244.572)
------------------------------------------- ---------- ------------
Total 5.011.063 4.887.944
------------------------------------------- ---------- ------------
Share of profits/(losses) from associates reflects the post acquisition after tax profits of each associate derived from rental income, change in the fair value of properties, minus operational and financial expenses for the period ended 30 June 2016.
As at 30 June 2016, the Group's interests in its associates and their summarised financial information, including total assets at fair value, total liabilities, revenues and profit or loss, were as follows:
Property Associates Total Total Profit/ Holding% Share Country Asset
Name assets liabilities (loss) of profits type
(EUR) (EUR) (EUR) from
associates
(EUR)
---------- -------------- ------------ -------------- -------- --------- ------------ -------- ------
Lelar
Holdings
Limited
and S.C.
Delenco
Delea Construct
Nuova S.R.L. 24.460.529 (3.795.823) 436.187 24,35% 106.229 Romania Land
---------- -------------- ------------ -------------- -------- --------- ------------ -------- ------
Green Green
Lake Lake
- Phase Development
A Srl 17.072.722 (15.514.237) 41.858 40,35% 16.890 Romania Land
---------- -------------- ------------ -------------- -------- --------- ------------ -------- ------
Total 41.533.251 (19.310.060) 478.045 123.119
-------------------------- ------------ ------------- -------- --------- ------------ -------- ------
17. Tangible and intangible assets
As at 30 June 2016 the intangible assets were composed of the capitalized expenditure on the Enterprise Resource Planning system (Microsoft Dynamics-Navision) in the amount of EUR90.647. Amortization amounting to EUR15.106 was recognized during period as the system was already in use.
As at 30 June 2016 and 31 December 2015 the tangible non-current assets mainly consisted of the machinery and equipment used for the servicing the Group's investment properties in Ukraine and Romania.
18. Inventories
EUR 30 Jun 31 Dec
2016 2015
---------------------------- ----------- -----------
At 1 January 11.300.000 -
---------------------------- ----------- -----------
Sale of Inventory (902.636) -
---------------------------- ----------- -----------
Acquisition of subsidiaries - 11.300.000
---------------------------- ----------- -----------
At 30 June/31 December 10.397.364 11.300.000
---------------------------- ----------- -----------
In May 2015 by acquiring the mixed use Sec South portfolio (Note 15) the Group also acquired also 100% of a residential portfolio in Boyana, Sofia, Bulgaria which is classified as Inventory.
19. Available for sale financial assets
In April 2015 the Group completed the acquisition of a 20% interest in a fully let and income generating office building in Sofia, Autounion, for a cash consideration of EUR4.059.839 including the assignment of a loan amounting to EUR1.859.278 including accumulated interest up to the acquisition date (Note 20). The holding is classified as "Available for Sale Financial Assets" in conformity with IAS 39.
EUR 30 Jun 31 Dec
2016 2015
------------------------------------ ---------- ----------
At 1 January 2.783.535 -
------------------------------------ ---------- ----------
Acquisition cost of the investment - 2.298.006
------------------------------------ ---------- ----------
Fair Value gain 154.362 485.529
------------------------------------ ---------- ----------
At 30 June/31 December 2.937.897 2.783.535
------------------------------------ ---------- ----------
Autounion is a Class A BREEAM certified office building, located close to Sofia Airport. The building has a Gross Lettable Area of 19.476 square sqm over ten floors, includes underground parking and is fully let to one of the largest Bulgarian insurance companies on a long lease extending to 2027.
Fair value gain for the reporting period represents the difference between the fair value of the investment at acquisition date minus the fair value of investment at the reporting date.
20. Prepayments and other current assets
EUR 30 Jun 31 Dec
2016 2015
----------------------------------------- ---------- ----------
Prepayments and other receivables 2.059.715 792.565
----------------------------------------- ---------- ----------
Loan to Available for Sale Financial
Assets (Note 19) 1.939.246 1.905.933
----------------------------------------- ---------- ----------
Loan to associates (Note 16, Note
32.4) 261.248 254.718
----------------------------------------- ---------- ----------
VAT and other tax receivable 736.908 938.464
----------------------------------------- ---------- ----------
Deferred expenses 599.245 921.427
----------------------------------------- ---------- ----------
Receivables due from related parties - 3.384
----------------------------------------- ---------- ----------
Allowance for impairment of prepayments
and other current assets (32.456) (21.268)
----------------------------------------- ---------- ----------
Total 5.563.906 4.795.223
----------------------------------------- ---------- ----------
Prepayments and other receivables include receivables from tenants, as well as short term financial support to subsidiaries.
Loan to Available for Sale Financial Assets reflects a loan receivable from Bluehouse V, holding company of Autounion building.
Loan to associates reflects a loan receivable from Green Lake Development SRL, holding company of Green Lake Phase A.
VAT and other tax receivable is mainly VAT receivables. In 2015 the largest part was the VAT receivable of Terminal Brovary VAT receivable, to be offset from VAT charged over rental income during the next years.
Deferred expenses include legal, advisory, consulting and marketing expenses related to ongoing share capital increase and due diligence expenses related to the possible acquisition of investment properties in the near future.
21. Cash and cash equivalents
Cash and cash equivalents represent liquidity held at banks.
EUR 30 Jun 31 Dec
2016 2015
------------------------ -------- --------
Cash with banks in USD 22.671 25.205
------------------------ -------- --------
Cash with banks in EUR 326.013 214.177
------------------------ -------- --------
Cash with banks in UAH 108.548 40.505
------------------------ -------- --------
Cash with banks in RON 260.622 569.424
------------------------ -------- --------
Cash with banks in BGN 150.314 3.701
------------------------ -------- --------
Cash equivalents 2.289 42.410
------------------------ -------- --------
Total 870.457 895.422
------------------------ -------- --------
22. Share capital
Number of Shares
30 June 2016 31 Dec 2015
------------------------------------------------- ------------- ------------
Authorised
------------------------------------------------- ------------- ------------
Ordinary shares of EUR0,01 989.869.935 989.869.935
------------------------------------------------- ------------- ------------
Total equity 989.869.935 989.869.935
------------------------------------------------- ------------- ------------
Redeemable Preference Class A Shares of EUR0,01 785.000 785.000
------------------------------------------------- ------------- ------------
Redeemable Preference Class B Shares of EUR0,01 8.618.997 8.618.997
------------------------------------------------- ------------- ------------
Total 999.273.932 999.273.932
------------------------------------------------- ------------- ------------
Issued and fully paid
------------------------------------------------- ------------- ------------
Ordinary shares of EUR0,01 90.014.723 90.014.723
------------------------------------------------- ------------- ------------
Total equity 90.014.723 90.014.723
------------------------------------------------- ------------- ------------
Redeemable Preference Class A Shares of EUR0,01 392.500 392.500
------------------------------------------------- ------------- ------------
Redeemable Preference Class B Shares of EUR0,01 8.618.997 8.618.997
------------------------------------------------- ------------- ------------
Total 99.026.220 99.026.220
------------------------------------------------- ------------- ------------
Value (EUR)
EUR 30 June 2016 31 Dec 2015 ------------------------------------------------- ------------- ------------ Authorised ------------------------------------------------- ------------- ------------ Ordinary shares of EUR0,01 9.898.699 9.898.699 ------------------------------------------------- ------------- ------------ Total equity 9.898.699 9.898.699 ------------------------------------------------- ------------- ------------ Redeemable Preference Class A Shares of EUR0,01 7.850 7.850 ------------------------------------------------- ------------- ------------ Redeemable Preference Class B Shares of EUR0,01 86.190 86.190 ------------------------------------------------- ------------- ------------ Total 9.992.739 9.992.739 ------------------------------------------------- ------------- ------------ Issued and fully paid ------------------------------------------------- ------------- ------------ Ordinary shares of EUR0,01 900.145 900.145 ------------------------------------------------- ------------- ------------ Total equity 900.145 900.145 ------------------------------------------------- ------------- ------------ Redeemable Preference Class A Shares of EUR0,01 3.925 3.925 ------------------------------------------------- ------------- ------------ Redeemable Preference Class B Shares of EUR0,01 86.190 86.190 ------------------------------------------------- ------------- ------------ Total 990.260 990.260 ------------------------------------------------- ------------- ------------
22.1 Authorised share capital
Following the EGM dated 24 June 2015, the authorized share capital of the Company as at the end of 2015 had been increased to EUR9.992.739,35 divided into: (a) 989.869.935 ordinary shares of EUR 0,01 each; (b) 785.000 Redeemable Preference Shares Class A of EUR0,01 each; and (c) 8.618.997 Redeemable Preference Shares Class B of EUR0,01 each by the creation of 8.618.997 Redeemable Preference Shares Class B of EUR0,01 each
As at the end of the reporting period the authorized share capital of the Company is 989.869.935 Ordinary Shares of EUR0,01 nominal value each, 785.000 Redeemable Preference Class A Shares of EUR0,01 nominal value each and 8.618.997 Redeemable Preference Class B Shares of EUR0,01 nominal value each.
22.2 Issued Share Capital
As at the end of the 2015 and as the end of the reporting period the issued share capital of the Company is as follows:
a) 90.014.723 Ordinary Shares of EUR0,01 nominal value each,
b) 392.500 Redeemable Preference Class A Shares of EUR0,01 nominal value each, following the above described redemption which shall be officially finalized during 2016, and
c) 8.618.997 Redeemable Preference Class B Shares of EUR0,01 nominal value each.
22.3 Option schemes
A. Under the scheme adopted in 2007, each of the directors serving at the time, who is still a Director of the Company is entitled to subscribe for 2.631 Ordinary Shares exercisable as set out below:
Exercise Number
Price of
---------------------------- --------- -------
US$ Shares
---------------------------- --------- -------
Exercisable until 1 August
2017 57 1.754
---------------------------- --------- -------
Exercisable until 1 August
2017 83 877
---------------------------- --------- -------
B. Under a second scheme also adopted in 2007, director Franz M. Hoerhager is entitled to subscribe for 1.829 ordinary shares exercisable as set out below:
Exercise Number
Price of
---------------------------- --------- -------
GBP Shares
---------------------------- --------- -------
Exercisable until 1 August
2017 40 1.219
---------------------------- --------- -------
Exercisable until 1 August
2017 50 610
---------------------------- --------- -------
C. Under a scheme adopted in 2015, pursuant to an approval by the AGM of 31/12/2013, the Company proceeded in 2015 in issuing 590.000 options to its employees, as a reward for their effort and support during the previous year. Each option entitles the Option holder to one Ordinary Share. Exercise price stands at GBP 0,15. The Option holders lose and thus may not exercise any option from the moment they cease to offer their services to the Company. The CEO and the CFO of the Company did not receive any options.
a. 147.500 Options may be exercised within 2016. Out of the Options that may be exercised in 2016, none has been exercised until the reporting date.
b. 147.500 Options may be exercised within 2017, c. 295.000 Options may be exercised within 2018.
The Company considers that all option schemes are currently out of money and therefore has not made any relevant provision.
22.4 Class A Warrants issued
1.1 During 2015 the Company acquired the Sec South portfolio (Notes 14,15,16) in exchange of Ordinary shares (issued at GBP 0,65 each). To the sellers the Company also provided Class A Warrants giving the right to the Warrant holders to subscribe in cash at the Exercise Amount for the Ordinary Shares. The Company issued then two sets of Class A Warrants as follows:
1.2 1) 18.028.294 warrants corresponding to 18.028.294 ordinary shares, exercisable within 45 days from signing at an exercise price of GBP0,10 per ordinary share. By August 2015 (Note 22.2) , 14.324.627 out of a total of 18.028.294 warrants were exercised. All remaining warrants have lapsed.
1.3 2) 18.028.294 warrants corresponding to 18.028.294 ordinary shares, exercisable by 31 December 2016 at an exercise price of GBP0,45 per ordinary share. None of these warrants have been exercised as at the reporting date.
22.5 Class B Warrants issued
On 8 August 2011 the Company issued an amount of Class B Warrants for an aggregate equivalent to 12,5% of the issued share capital of the Company at the exercise date. Each Class B Warrant entitles the holder to receive one Ordinary Share. The Class B Warrants may be exercised at any time until 31(st) December 2016, pursuant to a decision by the AGM of 30/12/2013. The exercise price of the Class B Warrants will be the nominal value per Ordinary Share as at the date of exercise. The Class B Warrant Instruments have anti-dilution protection so that, in the event of further share issuances by the Company, the number of Ordinary Shares to which the holder of a Class B Warrant is entitled will be adjusted so that he receives the same percentage of the issued share capital of the Company (as nearly as practicable), as would have been the case had the issuances not occurred. This anti-dilution protection will freeze on the earlier of (i) the expiration of the Class B Warrants; and (ii) capital increase(s) undertaken by the Company generating cumulative gross proceeds in excess of US$100.000.000. As of the reporting date, the aggregate amount of class B warrant is 12.859.246.
22.6 Capital Structure as at the end of the reporting period
As at the reporting date the Company's share capital is as follows:
Number of (as at) 30 June 2016 (as at) 31 December 2015 ---------------------------- -------------------------- --------------------- ------------------------- Ordinary shares of EUR0,01 Issued and Listed in AIM 90.014.723 90.014.723 ---------------------------- -------------------------- --------------------- ------------------------- Class A Warrants 18.028.294 18.028.294 ---------------------------- -------------------------- --------------------- ------------------------- Class B Warrants 12.859.246 12.859.246 ---------------------------- -------------------------- --------------------- ------------------------- Total number of Shares Non-Dilutive Basis 90.014.723 90.014.723 ---------------------------- -------------------------- --------------------- ------------------------- Total number of Shares Full Dilutive Basis 102.873.969 102.873.969 ---------------------------- -------------------------- --------------------- ------------------------- Options 4.460 4.460 -------------------------------------------------------- --------------------- -------------------------
During the EGM dated 24 June 2015 the shareholders approved the issuance of 785.000 redeemable convertible preference SPDI shares of nominal value EUR0,01 each. The Preference Shares have no voting powers or rights to dividend. 392.500 of the Redeemable Preference Shares Class A were redeemed on 31 January 2015 ("Redemption Date 1") at a price of EUR0,89 each. The remaining 392.500 of the Preference Shares may be redeemed by 31 January 2016 (the "Redemption Date 2") at the price of EUR0,89. At any time prior to the Redemption Date the holders have the option to unilaterally convert the Preference Shares into ordinary shares of EUR0,01 each.
During the EGM dated 24 June 2015, the shareholders approved the reorganization of the Capital of the Company via the reclassification of the old Redeemable shares as Redeemable Preference Shares Class A and via the issuance of 8.618.997 Redeemable Preference Shares Class B of EUR0,01 for the purpose of acquiring Craiova asset in Romania. The above approval has effective date 1(st) July 2015.
Redeemable Preference Shares Class A
The Redeemable Preference Shares Class A do not have voting or dividend rights. The remaining 392.500 of the Redeemable Shares Class A may be redeemed by the Company at a price of EUR0,89 each. The holders of the Redeemable Preference Shares Class A have notified the Company for redemption and the Company has entered into discussions with them in order to setoff such redemption amount with rentals owed to Best Day srl by the holders.
Redeemable Preference Shares Class B (Note 36.1)
The Redeemable Preference Shares Class B, amounting to 8.618.997 and issued to BLUEHOUSE ACCESSION PROPERTY HOLDINGS III S.A.R.L which was the seller of Praktiker Craiova asset (Note 15) do not have voting rights but have economic rights at par with ordinary shares. The Redeemable Preference Shares Class B, if not converted into ordinary Shares, may be redeemed at the sole discretion of the holder of the Redeemable Preference Shares Class B by 1(st) July 2016 (the "Redemption Date") which may be prolonged by 3 months; the redemption price shall be EUR0,7056 per Redeemable Preference Share Class B. The Company has exercised its right to request three months' extension in July 2016 to 13 October 2016. The Redeemable Preference Shares Class B have priority on the winding-up of the Company, over any other shares or class of shares issued by the Company from time to time including without limitation the Redeemable Preference Shares Class A but otherwise rank pari passu with the ordinary shares in all other respects.
23. Foreign Currency Translation Reserve
Exchange differences related to the translation from the functional currency of the Group's subsidiaries are accounted by entries made directly to the foreign currency translation reserve. The foreign exchange translation reserve represents unrealized profits or losses related to the appreciation or depreciation of the local currencies against the EUR in the countries where the Company's subsidiaries' functional currencies are not EUR.
24. Non-Controlling Interests
Non-controlling interests represent the percentage participations in the respective entities not owned by the Group:
% Non-controlling
interest portion
--------------------------------------- --------------------
Group Company 30 Jun 31 Dec
2016 2015
--------------------------------------- --------- ---------
LLC Almaz-Press-Ukraine 45,00 45,00
--------------------------------------- --------- ---------
Ketiza Limited, Ketiza srl 10,00 10,00
--------------------------------------- --------- ---------
Ram Real Estate Management Limited 50,00 50,00
--------------------------------------- --------- ---------
Iuliu Maniu Ltd , Moselin Investments
Srl 55,00 55,00
--------------------------------------- --------- ---------
Rimasol Enterprises Ltd, Rimasol
Real Estate Srl 55,76 55,76
--------------------------------------- --------- ---------
Ashor Ventures Ltd, Ashor Development
Srl 55,76 55,76
--------------------------------------- --------- ---------
Jenby Ventures Ltd, Jenby Investments
Srl 55,70 55,70
--------------------------------------- --------- ---------
Ebenem Ltd, Ebenem Investments
Srl 55,70 55,70
--------------------------------------- --------- ---------
25. Borrowings
EUR Property 30 Jun 31 Dec
2016 2015
----------------------------------- ------------------------- ----------- -----------
Principal of bank Loans
----------------------------------- ------------------------- ----------- -----------
European Bank for Reconstruction Terminal
and Development ("EBRD") Brovary 11.574.472 12.164.107
----------------------------------- ------------------------- ----------- -----------
Banca Comerciala Romana Monaco Towers 924.562 1.210.962
----------------------------------- ------------------------- ----------- -----------
Bancpost SA Blooming
House 1.442.930 1.739.634
----------------------------------- ------------------------- ----------- -----------
Romfelt
Alpha Bank Romania Plaza 839.492 869.602
----------------------------------- ------------------------- ----------- -----------
Raiffeisen Bank Romania Linda Residence - 429.858
----------------------------------- ------------------------- ----------- -----------
Bancpost SA GreenLake
- Parcel
K 3.092.926 3.099.639
----------------------------------- ------------------------- ----------- -----------
Alpha Bank Bulgaria Boyana 3.155.667 3.460.813
----------------------------------- ------------------------- ----------- -----------
Alpha Bank Bulgaria Boyana/Sertland 719.912 736.864
----------------------------------- ------------------------- ----------- -----------
Bank of Cyprus Delia Lebada/Pantelimon 4.569.725 4.569.725
----------------------------------- ------------------------- ----------- -----------
Eurobank Ergasias SA GED Logistics 11.971.200 12.343.116
----------------------------------- ------------------------- ----------- -----------
Piraeus Bank SA GreenLake-Phase
2 2.520.000 2.525.938
----------------------------------- ------------------------- ----------- -----------
Marfin Bank Romania Praktiker
Craiova 4.592.128 4.839.149
----------------------------------- ------------------------- ----------- -----------
Loans by non-controlling
shareholders 2.740.459 2.713.458
----------------------------------- ------------------------- ----------- -----------
Overdrafts 397 26.516
-------------------------------------------------------------- ----------- -----------
Total principal of bank
loans 48.143.870 50.729.381
----------------------------------- ------------------------- ----------- -----------
Interest accrued on bank
loans 2.338.786 2.175.165
----------------------------------- ------------------------- ----------- -----------
Interests accrued on non-bank
loans 812.845 743.466
-------------------------------------------------------------- ----------- -----------
European Bank for Reconstruction
and Development ("EBRD") 10.551 32.767
-------------------------------------------------------------- ----------- -----------
Total 51.306.052 53.680.779
-------------------------------------------------------------- ----------- -----------
EUR 30 Jun 31 Dec
2016 2015
-------------------- ----------- -----------
Current portion 27.313.842 27.417.220
-------------------- ----------- -----------
Non-current portion 23.992.210 26.263.559
-------------------- ----------- -----------
Total 51.306.052 53.680.779
-------------------- ----------- -----------
EBRD loan related to Terminal Brovary
According to the agreement the loan is due 2022, with a balloon payment of US$3.633.333. The loan has an interest of 3 M LIBOR + 6,75%.
Under the current agreement the collaterals accompanying the existing loan facility are as follows:
1. LLC Terminal Brovary pledged all movable property with the carrying value more than US$25.000.
2. LLC Terminal Brovary pledged its Investment property, Brovary Logistics Centre the construction of which was finished in 2010 (Note 14), and all property rights on the center.
3. SPDI PLC pledged 100% corporate rights in SL SECURE Logistics Ltd, a Cyprus Holding Company which is the Shareholder of LLC Terminal Brovary, LLC Aisi Brovary.
4. SL SECURE Logistics Ltd pledged 99% corporate rights in LLC Aisi Brovary. 5. LLC Aisi Brovary pledged 100% corporate rights in LLC Terminal Brovary.
6. LLC Terminal Brovary pledged all current and reserve accounts opened by LLC Terminal Brovary in Unicreditbank Ukraine.
7. LLC Aisi Brovary entered into a call and put option agreement with EBRD, pursuant to which following an Event of Default (as described in the Agreement) EBRD has the right (Call option) to purchase at the Call Price from LLC Aisi Brovary, 20% of the Participatory Interest of LLC Terminal Brovary on the relevant Settlement Date.
8. LLC Terminal Brovary has granted EBRD a second ranking mortgage in relation to its own and LLC Aisi Brovary's obligations under the call and put option agreement.
9. LLC Terminal Brovary has pledged its rights arising in connection with the existing Lease agreements with Tenants.
10. LLC Aisi Brovary has entered with EBRD into a conditional assignment agreement of 20% and 80% corporate rights in LLC Terminal Brovary.
11. SL Secure Logistics Limited has entered with EBRD into a conditional assignment agreement of 99% corporate rights in LLC Aisi Brovary.
12. SPDI PLC has issued a corporate guarantee dated 12 January 2009 guaranteeing all liabilities and fulfilment of conditions under the existing loan agreement remains in force. The maturity of the guarantee is equal to the maturity of the loan.
The existing credit agreement with EBRD includes among others the following requirements for LLC Terminal Brovary and the Group as a whole:
1. At all times LLC Brovary Logistics shall maintain a balance in the Debt Service Reserve Amount (DSRA) account equal to not less than the sum of all payments of principal and interest on the Loan which will be due and payable during the next six months.
2. LLC Terminal Brovary shall achieve a "CNRI"(Contract Net Rental Income is the aggregate of monthly lease payments, net of value added tax, contracted by the Borrower pursuant to the Lease Agreements as of the relevant testing date and converted into Dollars at the official exchange rate established by the National Bank of Ukraine as of such testing date) according to the following schedule:
(1) on 31 December 2015, CNRI of USD 230.000 or more; and
(2) on 30 June and 31 December in each year commencing on the date of 30 June 2016, CNRI of USD 250.000 or more, in respect of the six month period commencing on any such date.
3. LLC Terminal Brovary shall achieve a "DSCR"(Debt Service Coverage Ratio is the sum of net income minus operating expenses plus amortization, divided with the sum of paid principal & interest) according to the following schedule:
i. in respect of the 6 months period ending on 30 June 2015 and 31 December 2015, the DSCR of more than 1,15x.
ii.in respect of the 6 months period ending on 30 June or 31 December in any year commencing on the date of 30 June 2016, the DSCR of more than 1,2x.
As certain of the covenants were breached as at the end of the reporting period and also Terminal Brovary LLC was late in repaying the March 2016 installments, the loan is classified as current. As of the reporting date all the March 2016 principal installments have been repaid but certain of the covenants remain in breach due to the overall economic climate in Ukraine. In addition during the reporting period the Company has entered into discussions to sell the Property (Note 7). Such discussion are expected to conclude during Q4 2016.
Other bank Borrowings
SecMon Real Estate Srl (2011) entered into a loan agreement with Banca Comerciala Romana for a credit facility for financing part of the acquisition of the Monaco Towers property apartments. As of the end of the reporting period the balance of the loan was EUR924.562 and bears interest of EURIBOR 3M plus 5%. The loan was repayable in October 2015 and the Company is in discussions for extension of its maturity. The loan is secured by all assets of SecMon Real Estate Srl as well as its shares.
Ketiza Real Estate Srl entered (2012) into a loan agreement with Bancpost S.A. for a credit facility for financing the acquisition of the Blooming House property and 100% of the remaining (without VAT) construction works Blooming House property. As of the end of the reporting period the balance of the loan was EUR1.442.930. The loan bears interest of EURIBOR 3M plus 3,5% and matures in May 2017. The bank loan is secured by all assets of Ketiza Real Estate Srl as well as its shares.
SecRom Real Estate Srl entered (2009) into a loan agreement with Alpha Bank- Romania for a credit facility for financing part of the acquisition of the Doamna Ghica property apartments. As of the end of the reporting period, the balance of the loan was EUR839.492, bears interest of EURIBOR 3M+5,25% and is repaid on the basis of investment property sales. The loan matures in October 2016 and the Company is in discussions for extension of its maturity. The loan is secured by all assets of SecRom Real Estate Srl as well as its shares.
SecVista Real Estate Srl entered (2011) into a loan agreement with Raiffeisen Bank- Romania for a credit facility for financing part of the acquisition of the Linda Residence property apartments. Following the sale of the majority of the Linda apartment is May 2015 the Company repaid the loan and wrote off EUR324.695. (Note 11).
Moselin Investments Srl (2010) entered into a construction loan agreement with Bancpost SA covering the construction works of Parcel K -Green Lake property. As of the end of the reporting period the balance of the loan was EUR3.092.926 and bears interest of EURIBOR 3M plus 5%. The loan is repayable from the sales proceeds while it matures in 2017. The loan is secured with the property itself and the shares of Moselin Investments Srl.
Boyana Residence ood entered (2011) into a loan agreement with Alpha Bank- Bulgaria for a construction loan related to the construction of the Boyana Residence apartment units (finished in 2014). As of the end of the reporting period the balance of the loan was EUR3.155.667 and bears interest of EURIBOR 3M plus 5,75%. The loan matures in 2017. The loan currently is being repaid through sales proceeds. The facility is secured through a mortgage over the property and a pledge over the company shares as well as those of Sertland Properties Limited.
Sertland Properties Limited entered (2008) into a loan agreement with Alpha Bank- Bulgaria for an acquisition loan related to the acquisition of 70% of Boyana Residence ood. As of the end of the reporting period the balance of the loan was EUR719.912 and bears interest of EURIBOR 3M plus 5,75%. The loan matures in 2017. The loan currently is being repaid through sales proceeds of Boyana Residence apartment sales. The loan is secured with a pledge on company's shares, and a corporate guarantee by SEC South East Continent Unique Real Estate (Secured) Investments Limited.
GED Logistics entered (April 2015) into a loan agreement with EUROBANK SA to refinance the then existing debt facility related to GED Logistics terminal. As of the end of the reporting period the balance of the loan is EUR11.971.200 and bears interest of EURIBOR 6M plus 3,2%+30% of the asset swap. The loan is repayable by 2022, has a balloon payment of EUR8.660.000 and is secured by all assets of GED Logistics as well as its shares.
SEC South East Continent Unique Real Estate (Secured) Investments Limited has a debt facility with Piraeus Bank (since 2007) for the acquisition of the Green Lake property land in Bucharest Romania. As of the end of the reporting period the balance of the loan was EUR2.520.000 and bears interest of EURIBOR 3M plus 4% plus the Greek law 128/78 0,6% contribution. The term of the loan facility extends to 2017.
BBB3 srl (Praktiker Craiova) has a loan agreement with Marfin Bank Romania. As of the end of the reporting period the balance of the loan was EUR4.592.128 and bears interest of EURIBOR 6M plus 5% and 3M plus 4,5%. Following restructuring agreed with the lending bank the loan is repayable by 2025 with a ballon of EUR2.189.128 is secured by the asset as well as the shares of the SPV.
Delia Lebada Invest Srl, a subsidiary, entered into a loan agreement with the Bank of Cyprus Limited in 2007 to effectively finance a leveraged buy-out of the subsidiary by the Company. The bank loan amounting to EUR4.830.000 is secured with a mortgage at 120% of the loan value and with a corporate guarantee by SEC South East Continent Unique Real Estate (Secured) Investments Limited. The loan bears 7% fixed interest while the interest is payable quarterly. The balance of the loan as at the end of the reporting period was EUR4.569.725 (without any accrued interest and default penalty). The loan is in default and the Bank has initiated insolvency procedures to take over the Pantelimon lake asset. The Company is currently in discussions with its partner and the bank in an effort to find an amicable settlement to the case.
Other non bank borrowing include borrowings from non-controlling interests. During the last six years and in order to support the Green Lake property the minority shareholders of Moselin and Rimasol ltd (other than the Company) have contributed their share of capital injections by means of shareholder loans. The loans bear interest between 5% and 7% annually and are repayable in 2016 and 2017. Management expects such loans not to be repaid in the foreseeable future, as these reflect mainly the equity consideration of the shareholders and will be repaid to them post project completions/sale.
26. Trade and other payables
The fair value of trade and other payables due within one year approximate their carrying amounts as presented below.
EUR 30 Jun 31 Dec
2016 2015
----------------------------------- ---------- ----------
Payables to related parties (Note
32.2) 1.329.585 743.200
----------------------------------- ---------- ----------
Payables due for construction 397.826 405.904
----------------------------------- ---------- ----------
Payables to third parties 5.991.009 6.209.235
----------------------------------- ---------- ----------
Deferred income from tenants 352.329 99.554
----------------------------------- ---------- ----------
Accruals 486.188 259.031
----------------------------------- ---------- ----------
Total 8.556.937 7.716.924
----------------------------------- ---------- ----------
EUR 30 Jun 31 Dec
2016 2015
---------------------- ---------- ----------
Current portion 4.107.772 3.044.036
---------------------- ---------- ----------
Non - current portion 4.449.165 4.672.888
---------------------- ---------- ----------
Total 8.556.937 7.716.924
---------------------- ---------- ----------
Payables to related parties represent amounts due to board of directors and committee members and accrued management remuneration as well as the balances with Secure Management Ltd and Grafton Properties (Note 32.2).
Payables for construction represent mainly amounts payable to a) the contractor of Bela Logistic Center in Odessa and b) the Boyana's constructor.
A) The settlement was reached in late 2011 on the basis of maintaining the construction contract in an inactive state (to be reactivated at the option of the Group), while upon reactivation of the contract or termination of it (because of the sale of the asset) the Group would have to pay an additional UAH5.400.000 (US$160.000) payable upon such event occurring. Since it is uncertain when the latter amount is to be paid, it has been discounted at the current discount rates in Ukraine and is presented as a non-current liability.
B) Payables for construction include an amount of EUR245.000 payable to Boyana's constructor which has been withheld as Good Performance Guarantee.
Payables to third parties represent shareholder payable balances owed to minority partners of the property assets acquired within the period as well as amounts payable to various service providers including auditors, legal advisors, consultants and third party accountants related to the current operations of the Group.
Deferred income from tenants represents advances from tenants which will be used as future rental income and utilities charges.
Accruals mainly include the accrued audit fees, administration fees and accounting fees.
27. Deposits from Tenants
EUR 30 Jun 31 Dec
2016 2015
----------------------------------- -------- --------
Deposits from tenants non-current 789.660 623.770
----------------------------------- -------- --------
Deposits from tenants current 135.135 132.684
----------------------------------- -------- --------
Total 924.795 756.454
----------------------------------- -------- --------
Deposits from tenants appearing under current and non-current liabilities include the amounts received from the tenants of Innovations, EOS Business Park, Craiova Praktiker, GED Logistics and companies representing residential segment as advances/guarantees and are to be reimbursed to these clients at the expiration of the leases agreements.
28. Provisions and Taxes Payables
EUR 30 Jun 31 Dec
2016 2015
-------------------------------------- ---------- ----------
Corporate income 479.419 482.389
-------------------------------------- ---------- ----------
Defense tax 29.918 24.920
-------------------------------------- ---------- ----------
Other taxes including VAT payable 416.686 314.696
-------------------------------------- ---------- ----------
Provision (Note 33) 724.219 724.445
-------------------------------------- ---------- ----------
Total Provisions and Tax Liabilities 1.650.242 1.546.450
-------------------------------------- ---------- ----------
Corporate income tax represents taxes payable in Cyprus and Romania.
Other taxes represent local property taxes and VAT payable in Ukraine, Romania, Greece, Bulgaria and Cyprus.
29. Finance Lease Liabilities
As at the reporting date the finance lease liabilities consist of the non-current portion of EUR11.125.693 and the current portion of EUR502.925 (31 December 2015: EUR 11.273.639 and EUR 192.083, accordingly).
30 Jun 2016 (EUR) Note Minimum lease
payments Interest Principal
---------------------- ------- --------------- ----------- ------------
35.2
&
Less than one year 35.6 1.085.844 851.184 234.661
---------------------- ------- --------------- ----------- ------------
Between two and 3.627.728 2.107.796 1.519.931
five years
---------------------- ------- --------------- ----------- ------------
More than five years 11.831.819 2.250.981 9.580.838
---------------------- ------- --------------- ----------- ------------
16.545.391 5.209.961 11.335.430
---------------------- ------- --------------- ----------- ------------
Accrued Interest 293.188
------------------------------------------------ ----------- ------------
Total Finance Lease 11.628.618
Liabilities
------------------------------------------------ ----------- ------------
29. Finance Lease Liabilities (continued)
31 Dec 2015(EUR) Note Minimum lease
payments Interest Principal
---------------------- ------- -------------- ----------- ------------
35.2
&
Less than one year 35.6 775.146 586.626 188.520
---------------------- ------- -------------- ----------- ------------
Between two and 3.592.679 2.169.534 1.423.145
five years
---------------------- ------- -------------- ----------- ------------
More than five years 12.373.657 2.573.824 9.799.833
---------------------- ------- -------------- ----------- ------------
16.741.482 5.329.984 11.411.498
---------------------- ------- -------------- ----------- ------------
Accrued Interest 54.224
------------------------------- -------------- ----------- ------------
Total Finance Lease 11.465.722
Liabilities
------------------------------- -------------- ----------- ------------
29.1 Land Plots Financial Leasing
The Group rents in Ukraine land plots classified as finance leases. Lease obligations are denominated in UAH. The fair value of lease obligations approximate to their carrying amounts as presented above. Following the appropriate discounting finance lease liabilities are carried at EUR43.863 under current and non-current portion. The Group's obligations under finance leases are secured by the lessor's title to the leased assets.
29.2 Sale and Lease Back Agreements
A. Innovations Logistic Park
In May 2014 the Group concluded the acquisition of Innovations Logistics Park in Bucharest, owned by Best Day Srl, through a lease back agreement with Piraeus Leasing Romania SA. As of the end of the reporting period the balance was EUR7.365.404, bearing interest rate at 3M Euribor plus 4,45% margin, being repayable in monthly tranches until 2026 with a balloon of EUR5.244.926. At the maturity of the lease agreement Best Day will become owner of the asset. An amount of EUR273.576,90 was overdue that has been repaid by 15/8/2016 (Note 36.2).
Under the current finance lease agreement the collaterals for the facility are as follows:
1. Best Day pledged its future receivables from its tenants. 2. Best Day pledged its shares. 3. Best Day pledged all current and reserved accounts opened in Piraeus Leasing, Romania.
4. Best Day has provided a cash collateral in the amount of EUR250.000 in Piraeus Leasing Romania.
5. SPDI provided a corporate guarantee in favor of the bank towards the liabilities of Best Day arising from the sale and lease back agreement.
B. EOS Business Park
In October 2014 the Group concluded the acquisition of EOS Business Park in Bucharest, owned by First Phase Srl, through a sale and lease back agreement with Alpha Bank Romania SA. As of the end of the reporting period the balance is EUR3.889.870 bearing interest rate at 3M Euribor plus 5,25% margin, being repayable in monthly tranches until 2024 with a balloon of EUR2.653.600. At the maturity of the lease agreement First Phase will become owner of the asset.
Under the current finance lease agreement the collaterals for the facility are as follows:
1. First Phase pledged its future receivables from its tenants. 2. First Phase pledged Bank Guarantee receivables from its tenants. 3. Best Day pledged its shares. 4. First Phase pledged all current and reserved accounts opened in Alpha Bank Romania SA.
5. First Phase is obliged to provide cash collateral in the amount of EUR300.000 in Alpha Bank Romania SA, starting from October 2019.
6. SPDI provided a corporate guarantee in favor of the bank towards the liabilities of First Phase arising from the sales and lease back agreement.
30. Earnings and net assets per share attributable to equity holders of the parent
a. Weighted average number of ordinary shares
30 Jun 2016 31 Dec 2015 30 Jun 2015
--------------------------------------------------- ------------ ------------ ------------
Issued ordinary shares capital 90.014.723 90.014.723 75.690.096
--------------------------------------------------- ------------ ------------ ------------
Weighted average number of ordinary shares (Basic) 90.014.723 69.460.155 51.191.365
--------------------------------------------------- ------------ ------------ ------------
Diluted weighted average number of ordinary shares 102.873.969 82.631.610 64.480.647
--------------------------------------------------- ------------ ------------ ------------
b. Basic diluted and adjusted earnings per share
Earnings per share 30 Jun 2016 30 Jun 2015
-------------------------------------------------------------- ------------ ------------
EUR EUR
-------------------------------------------------------------- ------------ ------------
Profit/(loss) after tax attributable to owners of the parent (309.941) 1.117.890
-------------------------------------------------------------- ------------ ------------
Basic (0,00) (0,02)
-------------------------------------------------------------- ------------ ------------
Diluted (0,00) (0,02)
-------------------------------------------------------------- ------------ ------------
c. Net assets per share
Net assets per share 30 Jun 2016 31 Dec 2015 30 Jun 2015
--------------------------------------------------------- ------------ ------------ ------------
EUR EUR EUR
--------------------------------------------------------- ------------ ------------ ------------
Net assets attributable to equity holders of the parent 41.318.809 42.433.125 55.669.940
--------------------------------------------------------- ------------ ------------ ------------
Number of ordinary shares 90.014.723 90.014.723 75.690.096
--------------------------------------------------------- ------------ ------------ ------------
Diluted number of ordinary shares 102.873.969 102.873.969 122.559.555
--------------------------------------------------------- ------------ ------------ ------------
Basic 0,46 0,47 0,74
--------------------------------------------------------- ------------ ------------ ------------
Diluted 0,40 0,41 0,45
--------------------------------------------------------- ------------ ------------ ------------
31. Segment information
All commercial and financial information related to the properties held directly or indirectly by the Group is being provided to members of executive management who report to the Board of Directors. Such information relates to rentals, valuations, income, costs and capital expenditures. The individual properties are aggregated into segments based on the economic nature of the property. For the reporting period the Group has identified the following material reportable segments:
Commercial-Industrial
-- Warehouse segment -- Office segment -- Retail segment
Residential
-- Residential segment
Land Assets
-- Land assets
There are no sales between the segments.
Segment assets for the investment properties segments represent investment property (including investment properties under development and prepayments made for the investment properties). Segment liabilities represent interest bearing borrowings, finance lease liabilities and deposits from tenants.
Profit and Loss for the period ended 30 June 2016
EUR Warehouse Office Retail Residential Land Total
Plots
--------------------------- ---------- --------- --------- ------------ --------- ------------
Segment profit
--------------------------- ---------- --------- --------- ------------ --------- ------------
Rental income 1.692.365 287.789 304.356 60.528 - 2.345.038
--------------------------- ---------- --------- --------- ------------ --------- ------------
Service charges
and utilities
income 105.753 28.938 6.201 12.019 - 152.911
--------------------------- ---------- --------- --------- ------------ --------- ------------
Sale of electricity 164.608 - - - - 164.608
--------------------------- ---------- --------- --------- ------------ --------- ------------
Sales income - - - 2.238.541 - 2.238.541
--------------------------- ---------- --------- --------- ------------ --------- ------------
Cost of sales - - - (2.986.496) - (2.986.496)
--------------------------- ---------- --------- --------- ------------ --------- ------------
Valuation gains/(losses)
from investment
property 349.332 - - - 287.104 636.436
--------------------------- ---------- --------- --------- ------------ --------- ------------
Share of profits/(losses)
from associates - 106.229 - - 16.890 123.119
--------------------------- ---------- --------- --------- ------------ --------- ------------
Investment
properties
operating expenses (214.915) (26.489) (40.605) (81.716) (26.457) (390.182)
--------------------------- ---------- --------- --------- ------------ --------- ------------
Segment profit 2.097.143 396.467 269.952 (757.124) 277.537 2.283.975
--------------------------- ---------- --------- --------- ------------ --------- ------------
Administration
expenses (1.178.173)
--------------------------- ---------- --------- --------- ------------ --------- ------------
Other (expenses)/income,
net (17.826)
--------------------------- ---------- --------- --------- ------------ --------- ------------
Finance income 363.136
--------------------------- ---------- --------- --------- ------------ --------- ------------
Interest expenses (1.590.032)
--------------------------- ---------- --------- --------- ------------ --------- ------------
Other finance
costs (169.118)
--------------------------- ---------- --------- --------- ------------ --------- ------------ Foreign exchange losses, net (98.818) --------------------------- ---------- --------- --------- ------------ --------- ------------ Income tax expense (45.507) --------------------------- ---------- --------- --------- ------------ --------- ------------ Exchange difference on I/C loan to foreign holdings (1.485.262) --------------------------- ---------- --------- --------- ------------ --------- ------------ Exchange difference on translation foreign holdings 526.525 --------------------------- ---------- --------- --------- ------------ --------- ------------ Available for sale financial assets gains 154.362 --------------------------- ---------- --------- --------- ------------ --------- ------------ Total Comprehensive Income (1.256.738) --------------------------- ---------- --------- --------- ------------ --------- ------------
Profit and Loss for the period ended 30 June 2015
EUR Warehouse Office Residential Land Total
Plots
------------------------------ ---------- ---------- ------------ ---------- ------------
Segment profit
------------------------------ ---------- ---------- ------------ ---------- ------------
Sales income - - 671.368 - 671.368
------------------------------ ---------- ---------- ------------ ---------- ------------
Cost of sales - - (469.850) - (469.850)
------------------------------ ---------- ---------- ------------ ---------- ------------
Rental income 1.976.449 233.594 109.308 - 2.319.351
------------------------------ ---------- ---------- ------------ ---------- ------------
Service charges
and utilities income 241.788 38.113 - - 279.901
------------------------------ ---------- ---------- ------------ ---------- ------------
Income from electricity
production 135.140 - - - 135.140
------------------------------ ---------- ---------- ------------ ---------- ------------
Investment properties
operating expenses (396.943) (33.480) (16.406) - (446.829)
------------------------------ ---------- ---------- ------------ ---------- ------------
Investment Property 4.711.511 - - 3.340.085 8.051.596
related gains FX
related
------------------------------ ---------- ---------- ------------ ---------- ------------
Gain realized on 1.552.134 - - - 1.552.134
acquisition of subsidiaries
(Note 15)
------------------------------ ---------- ---------- ------------ ---------- ------------
Share of profits
from associates - (100.747) - (77.049) (177.796)
------------------------------ ---------- ---------- ------------ ---------- ------------
Segment profit 8.220.079 137.480 294.420 3.263.036 11.915.015
------------------------------ ---------- ---------- ------------ ---------- ------------
Gain realized on
acquisition of subsidiaries
(Note 15) 629.700
------------------------------ ---------- ---------- ------------ ---------- ------------
Administration expenses (1.474.564)
------------------------------ ---------- ---------- ------------ ---------- ------------
Other (expenses)/income,
net 42.270
------------------------------ ---------- ---------- ------------ ---------- ------------
Finance Income 13.199
------------------------------ ---------- ---------- ------------ ---------- ------------
Finance costs (1.622.397)
------------------------------ ---------- ---------- ------------ ---------- ------------
Foreign exchange (4.976.537)
losses, net
------------------------------ ---------- ---------- ------------ ---------- ------------
Management provision (3.313.791)
on Investment Property
acquired
------------------------------ ---------- ---------- ------------ ---------- ------------
Income tax expense (2.893)
------------------------------ ---------- ---------- ------------ ---------- ------------
Exchange difference
on I/C loan to foreign
holdings (7.323.715)
------------------------------ ---------- ---------- ------------ ---------- ------------
Exchange difference
on translation foreign
holdings 5.022.908
------------------------------ ---------- ---------- ------------ ---------- ------------
Total Comprehensive
Income (1.090.805)
------------------------------ ---------- ---------- ------------ ---------- ------------
Balance Sheet as at 30 June 2016
EUR Warehouse Office Retail Residential Land Total
plots
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Assets
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Investment
properties 42.969.898 6.550.000 7.200.000 4.638.141 30.589.613 91.947.652
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Investment
property under
development - - - - 5.044.136 5.044.136
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Prepayments
made for investments 100.000 - - - - 100.000
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Long-term
receivables 250.000 - - 311 876 251.187
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Investments
in associates - 4.994.173 - - 16.890 5.011.063
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Available-for-sale
financial
assets - 2.937.897 - - - 2.937.897
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Inventories - - - 6.990.150 3.407.214 10.397.364
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Segment assets 43.319.898 14.482.070 7.200.000 11.628.602 39.058.729 115.689.299
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Tangible and
intangible
assets 146.232
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Prepayments
and other
current assets 5.563.906
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Cash and cash
equivalents 870.457
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Total assets 122.269.894
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Interest bearing
borrowings 23.740.609 - 4.609.505 3.245.998 19.709.940 51.306.052
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Finance lease
liabilities 7.745.827 3.838.928 - - 43.863 11.628.618
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Deposits from
tenants 783.769 - - 35.954 105.072 924.795
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Redeemable
preference
shares 349.325 - 6.081.211 - - 6.430.536 --------------------- ----------- ---------- ----------- ---------- ----------- ------------ Segment liabilities 32.619.530 3.838.928 10.690.716 3.281.952 19.858.875 70.290.001 --------------------- ----------- ---------- ----------- ---------- ----------- ------------ Trade and other payables 8.556.937 --------------------- ----------- ---------- ----------- ---------- ----------- ------------ Taxes payables 1.650.242 --------------------- ----------- ---------- ----------- ---------- ----------- ------------ Total liabilities 80.497.180 --------------------- ----------- ---------- ----------- ---------- ----------- ------------
Balance Sheet as at 31 December 2015
EUR Warehouse Office Retail Residential Land Total
plots
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Assets
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Investment 43.164.324 6.550.000 7.200.000 6.847.538 30.578.609 94.340.471
properties
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Investment - - - - 5.125.389 5.125.389
property under
development
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Prepayments
made for investments 100.000 - - - - 100.000
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Goodwill - - - - - -
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Long-term
receivables 250.000 - - 1.185 1.731 252.916
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Investments - 4.887.943 - - 1 4.887.944
in associates
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Available-for-sale - 2.783.535 - - - 2.783.535
financial
assets
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Inventories - - - 6.990.150 4.309.850 11.300.000
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Segment assets 43.514.324 14.221.478 7.200.000 13.838.873 40.015.580 118.790.255
----------------------- ----------- ----------- ---------- ------------ ----------- ------------
Tangible and
intangible
assets 164.617
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Prepayments 4.795.223
and other
current assets
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Cash and cash
equivalents 895.422
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Total assets 124.645.517
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Interest bearing 24.539.925 - 4.839.149 4.586.129 19.715.576 53.680.779
borrowings
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Finance lease 7.508.988 3.889.870 - - 66.864 11.465.722
liabilities
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Deposits from
tenants 614.018 - - 37.444 104.992 756.454
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Redeemable 349.325 - 6.081.211 - - 6.430.536
preference
shares
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Segment liabilities 33.012.256 3.889.870 10.920.360 4.623.573 19.887.432 72.333.491
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Trade and 7.716.924
other payables
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Taxes payables 1.546.450
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Total liabilities 81.596.865
--------------------- ----------- ---------- ----------- ---------- ----------- ------------
Geographical information
Operating income from 3(rd) parties 30 Jun 30 Jun (EUR) 2016 2015 ---------------------------------------- ------------ ------------ Ukraine 572.173 1.191.853 ---------------------------------------- ------------ ------------ Romania 891.808 1.310.316 ---------------------------------------- ------------ ------------ Greece 740.921 432.185 ---------------------------------------- ------------ ------------ Bulgaria (290.300) 1.556 ---------------------------------------- ------------ ------------ Total 1.914.602 2.935.910 ---------------------------------------- ------------ ------------ Carrying amount of assets (investment properties, associates, inventory and available for Sale) ---------------------------------------- ------------ ------------ Ukraine 23.959.647 24.349.860 ---------------------------------------- ------------ ------------ Romania 61.543.204 63.503.944 ---------------------------------------- ------------ ------------ Greece 16.600.000 16.600.000 ---------------------------------------- ------------ ------------ Bulgaria 13.335.261 14.083.535 ---------------------------------------- ------------ ------------ Total 115.438.112 118.537.339 ---------------------------------------- ------------ ------------
32. Related Party Transactions
The following transactions were carried out with related parties:
32.1 Expenses /Income
32.1.1 Expenses
EUR 30 Jun 30 Jun
2016 2015
------------------------- -------- --------
Board of Directors - 119.628
------------------------- -------- --------
Management Remuneration 360.317 467.030
------------------------- -------- --------
Total 360.317 586.658
------------------------- -------- --------
Board of Directors expense represents the remuneration of all the non-executive members of the Board and committees pursuant to the decision of the Remuneration Committee. For 2016 a decision was taken that the BOD receives no remuneration.
Name Position 30 June 30 June
2016 Remuneration 2015 Remuneration
(EUR) (EUR)
----------------------- ------------------------ -------------------- -------------------
Paul Ensor Chairman - 14.057
----------------------- ------------------------ -------------------- -------------------
Non-Executive Director
Antonios Achilleoudis until 22 July 2015 - 14.584
----------------------- ------------------------ -------------------- -------------------
Barseghyan Non-Executive Director - -
Vagharshak since 22 July 2015
----------------------- ------------------------ -------------------- -------------------
Ian Domaille Non-Executive Director - 19.152
----------------------- ------------------------ -------------------- -------------------
Franz Horhager Non-Executive Director - 14.057
----------------------- ------------------------ -------------------- -------------------
Antonios Kaffas Non-Executive Director - 16.165
----------------------- ------------------------ -------------------- -------------------
Kalypso Maria Non-Executive Director - -
Nomikou since 22 July 2015
----------------------- ------------------------ -------------------- -------------------
Alvaro Portela Non-Executive Director - 14.057
----------------------- ------------------------ -------------------- -------------------
Non-Executive Director
Robert Sinclair until 22 July 2015 - 13.499
----------------------- ------------------------ -------------------- -------------------
Harin Thaker Non-Executive Director - 14.057
----------------------- ------------------------ -------------------- -------------------
Total - 119.628
------------------------------------------------- ------------------- -------------------
Management remuneration includes the remuneration of the CEO, the CFO the Group Commercial Director, the Group Investment Director and that of the Country Managers of Ukraine and Romania pursuant to the decisions of the remuneration committee.
32.1.2 Income
EUR 30 Jun 30 Jun
2016 2015
----------------------------------------- ------- -------
Interest Income from loan to associates 4.670 -
----------------------------------------- ------- -------
Interest Income from loan to Available
for sale investment 33.313 12.996
----------------------------------------- ------- -------
Total 37.983 12.996
----------------------------------------- ------- -------
32.2 Payables to related parties
30 Jun 31 Dec
2016 2015
----------------------------------- ---------- --------
EUR EUR
----------------------------------- ---------- --------
Directors 475.389 475.389
----------------------------------- ---------- --------
Grafton Properties 123.549 123.549
----------------------------------- ---------- --------
SECURE Management Ltd, Narrowpeak 403.800 1.062
----------------------------------- ---------- --------
Management Remuneration 326.847 143.200
----------------------------------- ---------- --------
Total 1.329.585 743.200
----------------------------------- ---------- --------
32.2.1 Board of Directors
The amount payable represents remuneration payable to non-Executive Directors until the end of the reporting period. The members of the Board of Directors pursuant to a recommendation by the remuneration committee and in order to facilitate the Company's cash flow, will receive their payment in exchange for shares in the Company's capital. This was also approved by the Annual General Meeting of the Company's shareholders.
32.2.2 Loan payable to Grafton Properties
Under the Settlement Agreement of July 2011, the Company undertook the obligation to repay to certain lenders who had contributed funds for the operating needs of the Company between 2009-2011, by lending to AISI Realty Capital LLC, the total amount of US$450.000. As of the reporting date the liability towards Grafton Properties, representing the Lenders, was US$150.000, which is contingent on the Company raising US $50m of capital in the markets.
32.2.3 Payable to Secure Management Ltd and Narrowpeak Ltd
Payable to Secure Management and Narrowpeak represents short term financing as well as back office fees and expenses.
32.2.4 Management Remuneration
Management Remuneration represents deferred amounts payable to the CEO and CFO of the Company, as well as the Group Commercial Director, the Group Investment Director and the Country Managers for Romania and Ukraine.
32.3 Loans from SC Secure Capital Ltd to the Company's subsidiaries
SC Secure Capital Ltd, the finance subsidiary of the Company provided capital in the form of loans to the Ukrainian subsidiaries of the Company so as to support the acquisition of assets, development expenses of the properties, as well as various operational costs.
Borrower Limit Principal Principal
as of as of
30 Jun 31 Dec
2016 2015
-------------------------- ------------ ----------- -----------
EUR EUR EUR
-------------------------- ------------ ----------- -----------
LLC "TERMINAL BROVARY" 29.007.908 26.468.419 26.798.804
-------------------------- ------------ ----------- -----------
LLC "AISI UKRAINE" 23.062.351 12.275 12.275
-------------------------- ------------ ----------- -----------
LLC "ALMAZ PRES UKRAINE" 8.236.554 140.021 140.021
-------------------------- ------------ ----------- -----------
Total 26.620.715 26.951.100
---------------------------------------- ----------- -----------
All loans from SC Secure Capital Limited to the Company's subsidiaries are USD denominated and in 2015 they generated a foreign exchange loss totaling EUR13.653.402 as a result of the devaluation of the Ukrainian Hryvnia during the reporting period. Apart from the loan to LLC "TERMINAL BROVARY" which is expected to be settled pursuant to the sale of the property (Note 7) the settlement of the other loans is not likely to occur in the foreseeable future and in substance is part of the Group's net investment in its foreign operations, the foreign exchange loss is recognised in other comprehensive income.
The Loan agreement between SC Secure Capital Limited (old Aisi Capital Limited) (Lender) and Limited Liability Company "Terminal Brovary" (Borrower) was signed on 19 December 2006 and originally had a Repayment Date of 19 December 2012. Under this agreement the Lender agrees to provide USD 30.000.000 to the Borrower with the interest rate to be Libor (3 months) plus 7,5% per annum. The Borrower has the obligation to repay the Loan in full on the Repayment Date together with the accrued interest. In 2015 no interest was calculated for this loan.
A potential Ukrainian Hryvnia weakening/strengthening by 30% against the US dollar with all other variables held constant, would result in an exchange difference on I/C loans to foreign holdings of (EUR8.085.330)/ EUR 8.996.341 respectively, estimated on balances held at 31 December 2015.
32.4 Loans to associates
EUR 30 Jun 31 Dec
2016 2015
------------------------------------- -------- --------
Loans to Green Lake Development SRL 261.248 254.718
------------------------------------- -------- --------
Total 261.248 254.718
------------------------------------- -------- --------
33. Contingent Liabilities
33.1 Tax Litigation
The Group performed during the reporting period a part of its operations in the Ukraine, within the jurisdiction of the Ukrainian tax authorities. The Ukrainian tax system can be characterized by numerous taxes and frequently changing legislation, which may be applied retroactively, open to wide and in some cases, conflicting interpretation. Instances of inconsistent opinions between local, regional, and national tax authorities and between the National Bank of Ukraine and the Ministry of Finance are not unusual. Tax declarations are subject to review and investigation by a number of authorities, which are authorized by law to impose severe fines and penalties and interest charges. Any tax year remains open for review by the tax authorities during the three subsequent calendar years; however, under certain circumstances a tax year may remain open for longer.
The Group performed during the reporting period part of its operations also in Romania, Greece and Bulgaria. In respect of Romanian, Bulgarian and Greek taxation systems all are subject to varying interpretation and to constant changes, which may be retroactive. In certain circumstances the tax authorities can be arbitrary in certain cases.
These facts create tax risks which are substantially more significant than those typically found in countries with more developed tax systems. Management believes that it has adequately provided for tax liabilities, based on its interpretation of tax legislation, official pronouncements and court decisions. However, the interpretations of the relevant authorities could differ and the effect on these condensed consolidated interim financial statements, if the authorities were successful in enforcing their interpretations, could be significant.
At the same time the Group's entities are involved in court proceedings with tax authorities; Management believes that the estimates provided within the financial statements present a reasonable estimate of the outcome of these court cases.
33.2 Construction related litigation
There are no material claims from contractors due to the postponement of construction/development projects or delayed delivery other than those disclosed in the financial statements.
33.3 Delia Lebada srl debt towards Bank of Cyprus
Sec South East Continent Unique Real Estate Investment ltd has provided in 2007 a corporate guarantee to the Bank of Cyprus in respect to the loan provided by the latter to its subsidiary Delia Lebada srl, the owner of the Pantelimon Lake plot (Note 14). As the loan is in default, the bank has initiated an insolvency procedure. Depending on the final outcome of the procedure (that may include an auctioning of the plot), the Bank may call the difference between the price received from the auction and EUR4.569.725 (without any accrued interest and default penalty) which is the total liability. The Group is in discussions with the bank and its partner in the Delia Lebada srl to find an amicable settlement to the case. Management believes that the case has been adequately provided for.
33.4 Other Litigation
The Company has a number of legal cases pending. Management does not believe that the result of these will have a substantial overall effect on the Group's financial position. Consequently no such provision is included in the current financial statements.
33.5 Other Contingent Liabilities
The Group had no other contingent liabilities as at 30 June 2016.
34. Commitments
The Group had no other commitments as at 30 June 2016.
35. Financial Risk Management
35.1 Capital Risk Management
The Group manages its capital to ensure that it will be able to implement its stated growth strategy in order to maximize the return to stakeholders through the optimization of the debt-equity structure and value enhancing actions in respect of its portfolio of investments. The capital structure of the Group consists of borrowings (Note 25), trade and other payables (Note 26) deposits from tenants (Note 27), financial leases (Note 29), taxes payable (Note 28) and equity attributable to ordinary or preferred shareholders. The Group is not subject to any externally imposed capital requirements.
Management reviews the capital structure on an on-going basis. As part of the review Management considers the differential capital costs in the debt and equity markets, the timing at which each investment property requires funding and the operating requirements so as to proactively provide for capital either in the form of equity (issuance of shares to the Group's shareholders) or in the form of debt. Management balances the capital structure of the Group with a view of maximizing the shareholder's Return on Equity (ROE) while adhering to the operational requirements of the property assets and exercising prudent judgment as to the extent of gearing.
35.2 Categories of Financial Instruments
Note 30 Jun 31 Dec
2016 2015
----------------------------------- ------ ----------- -----------
EUR EUR
----------------------------------- ------ ----------- -----------
Financial Assets
----------------------------------- ------ ----------- -----------
Cash and cash equivalents 21 870.457 895.422
----------------------------------- ------ ----------- -----------
Long Term Receivables 251.187 252.916
----------------------------------- ------ ----------- -----------
Prepayments made for investments 14.4c 100.000 100.000
----------------------------------- ------ ----------- -----------
Prepayments and other receivables 20 5.563.906 4.795.223
----------------------------------- ------ ----------- -----------
Available for sale investments 19 2.937.897 2.783.535
----------------------------------- ------ ----------- -----------
Total 9.723.447 8.827.096
----------------------------------- ------ ----------- -----------
Financial Liabilities
----------------------------------- ------ ----------- -----------
Borrowings 25 51.306.052 53.680.779
----------------------------------- ------ ----------- -----------
Trade and other payables 26 8.556.937 7.716.924
----------------------------------- ------ ----------- -----------
Deposits from tenants 27 924.795 756.454
----------------------------------- ------ ----------- -----------
Finance lease liabilities 29 11.628.618 11.465.722
----------------------------------- ------ ----------- -----------
Taxes payable and provisions 28 1.650.242 1.546.450
----------------------------------- ------ ----------- -----------
Redeemable preference shares 22.6 6.430.536 6.430.536
----------------------------------- ------ ----------- -----------
Total 80.497.180 81.596.865
----------------------------------- ------ ----------- -----------
35.3 Financial Risk Management Objectives
The Group's Treasury function provides services to its various corporate entities, coordinates access to local and international financial markets, monitors and manages the financial risks relating to the operations of the Group, mainly the investing and development functions. Its primary goal is to secure the Group's liquidity and to minimize the effect of the financial asset price variability on the cash flow of the Group. These risks cover market risks including foreign exchange risks and interest rate risk as well as credit risk and liquidity risk.
The above mentioned risk exposures may be hedged using derivative instruments whenever appropriate. The use of financial derivatives is governed by the Group's approved policies which indicate that the use of derivatives is for hedging purposes only. The Group does not enter into speculative derivative trading positions. The same policies provide for the investment of excess liquidity. As at the end of the reporting period, the Group had not entered into any derivative contracts.
35.4 Economic Market Risk Management
The Group operates in Romania, Bulgaria, Greece and Ukraine. The Group's activities expose it primarily to financial risks of changes in currency exchange rates and interest rates. The exposures and the management of the associated risks are described below. There has been no change in the way the Group to the Group's manner in which it measures and manages risks.
Foreign Exchange Risk
Currency risk arises when commercial transactions and recognized financial assets and liabilities are denominated in a currency that is not the Group's functional currency. Most of the Group's financial assets are denominated in the functional currency. Management is monitoring the net exposures and adopts policies to contain them so that the net effect of devaluation is minimized.
Interest Rate Risk
The Group's income and operating cash flows are substantially independent of changes in market interest rates as the Group has no significant interest-bearing assets. On June 30(th) , 2016, cash and cash equivalent financial assets amounted to EUR 763.907 (31 December 2015: EUR 895.422) of which approx. EUR2.000 in UAH, EUR260.000 in RON and EUR150.000 in BGN (Note 21) while the remaining are mainly denominated in either USD or EUR.
The Group is exposed to interest rate risk in relation to its borrowings amounting to EUR 36.569.398 (31 December 2015: EUR53.680.779) as they are issued at variable rates tied to the Libor or Euribor. Management monitors the interest rate fluctuations on a continuous basis and evaluates hedging options to align the Group's strategy with the interest rate view and the defined risk appetite. Although no hedging has been applied for the reporting period, such may take place in the future if deemed necessary in order to protect the cash flow of a property asset through different interest rate cycles. Upon sale of Terminal Brovary (Note 8) the debt exposure of the Group is expected to be reduced by EUR11m.
The Group's exposures to financial risk are discussed also in Note 5.
Management monitors the interest rate fluctuations on a continuous basis and evaluates hedging options to align the Group's strategy with the interest rate view and the defined risk appetite. Although no hedging has been applied for the reporting period, such may take place in the future if deemed necessary in order to protect the cash flow of a property asset through different interest rate cycles.
As at 30 June 2016 the average interest rate for all the interest bearing borrowing and financial leases of the Group stands at 4,96% (31 December 2015: 5%).
The sensitivity analysis for LIBOR and EURIBOR changes applying to the interest calculation on the borrowings principal outstanding as at 30 June 2016 is presented below:
as at 30.06.2016 +100 bps +200 bps
--------------------- ----------------- ---------- ------------
Weighted average
interest rate 4,96% 5,96% 6,96%
--------------------- ----------------- ---------- ------------
Influence on yearly - (625.174) (1.250.348)
finance costs
--------------------- ----------------- ---------- ------------
The Group's exposures to financial risk are discussed also in Note 5.
35.5 Credit Risk Management
The Group has no significant credit risk exposure. The credit risk emanating from the liquid funds is limited because the Group's counterparties are banks with high credit-ratings assigned by international credit rating agencies. The Credit risk of receivables is reduced as the majority of the receivables represent VAT to be offset through VAT income in the future. In respect of receivables from tenants these are kept to a minimum of 2 months and are monitored closely.
35.6 Liquidity Risk Management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which applies a framework for the Group's short, medium and long term funding and liquidity management requirements. The Treasury function of the Group manages liquidity risk by preparing and monitoring forecasted cash flow plans and budgets while maintaining adequate reserves. The Treasury function is also in discussions with the various lending institutions which have provided debt to several of the Company's property acquisitions to free as much cash us possible. Pursuant to the financial crisis of the last few years, lending institutions have tightened their control over property cash flows in order to secure their debt holdings and as a result they allow only minor percentage of the properties' cash inflows to the Company. The following table details the Group's contractual maturity of its financial liabilities. The tables below have been drawn up based on the undiscounted contractual maturities including interest that will be accrued.
30 June 2016 Carrying Total Less than From one More
amount Contractual one year to than
Cash two years two years
Flows
----------------------- ----------- ------------- ----------- ----------- -----------
EUR EUR EUR EUR EUR
----------------------- ----------- ------------- ----------- ----------- -----------
Financial assets
----------------------- ----------- ------------- ----------- ----------- -----------
Cash and cash
equivalents 870.457 870.457 870.457 - -
----------------------- ----------- ------------- ----------- ----------- -----------
Prepayments and 5.563.906 5.563.906
other receivables 5.563.906 - -
----------------------- ----------- ------------- ----------- ----------- -----------
Available for 2.937.897 2.937.897
sale investments 2.937.897 - -
----------------------- ----------- ------------- ----------- ----------- -----------
Long Term Receivables 251.187 251.187 251.187 - -
----------------------- ----------- ------------- ----------- ----------- -----------
Prepayments made
for investments 100.000 100.000 100.000 - -
----------------------- ----------- ------------- ----------- ----------- -----------
Total Financial 9.723.447 9.723.447
assets 9.723.447 - -
----------------------- ----------- ------------- ----------- ----------- -----------
Financial liabilities
----------------------- ----------- ------------- ----------- ----------- -----------
Borrowings 51.306.052 52.800.151 24.689.413 11.912.000 16.198.738
----------------------- ----------- ------------- ----------- ----------- -----------
Trade and other
payables 8.556.937 8.556.937 4.107.772 - 4.449.165
----------------------- ----------- ------------- ----------- ----------- -----------
Deposits from
tenants 924.795 924.795 135.135 - 789.660
----------------------- ----------- ------------- ----------- ----------- -----------
Finance lease
liabilities 11.628.618 16.545.391 1.085.844 905.625 14.553.922
----------------------- ----------- ------------- ----------- ----------- -----------
Redeemable preference
shares 6.430.536 6.430.536 6.430.536 - -
----------------------- ----------- ------------- ----------- ----------- -----------
Taxes payable 926.023 926.023 926.023 - -
----------------------- ----------- ------------- ----------- ----------- -----------
Total Financial
liabilities 79.772.961 86.183.833 37.374.723 12.817.625 35.991.485
----------------------- ----------- ------------- ----------- ----------- -----------
Total net liabilities 70.049.514 76.460.386 27.651.276 12.817.625 35.991.485
----------------------- ----------- ------------- ----------- ----------- -----------
31 December 2015 Carrying Total Less than From one More
amount Contractual one year to than
Cash two years two years
Flows
----------------------- ----------- ------------- ----------- ----------- -----------
EUR EUR EUR EUR EUR
----------------------- ----------- ------------- ----------- ----------- -----------
Financial assets
----------------------- ----------- ------------- ----------- ----------- -----------
Cash and cash
equivalents 895.422 895.422 895. 422 - -
----------------------- ----------- ------------- ----------- ----------- -----------
Prepayments and 4.795.223 4.795.223
other receivables 4.795.223
----------------------- ----------- ------------- ----------- ----------- -----------
Available for 2.783.535 2.783.535
sale investments 2.783.535
----------------------- ----------- ------------- ----------- ----------- -----------
Long Term Receivables 252.916 252.916 252.916
----------------------- ----------- ------------- ----------- ----------- -----------
Prepayments made
for investments 100.000 100.000 100.000
----------------------- ----------- ------------- ----------- ----------- -----------
Total Financial 8.827.096 8.827.096
assets 8.827.096
----------------------- ----------- ------------- ----------- ----------- -----------
Financial liabilities - -
----------------------- ----------- ------------- ----------- ----------- -----------
Borrowings 53.680.779 56.037.869 24.198.982 14.649.577 17.189.310
----------------------- ----------- ------------- ----------- ----------- -----------
Trade and other
payables 7.716.924 7.716.924 3.044.036 - 4.672.888
----------------------- ----------- ------------- ----------- ----------- -----------
Deposits from
tenants 756.454 756.454 132.684 - 623.770
----------------------- ----------- ------------- ----------- ----------- -----------
Finance lease
liabilities 11.465.722 16.741.482 775.146 840.158 15.126.178
----------------------- ----------- ------------- ----------- ----------- -----------
Redeemable preference
shares 6.430.536 6.430.536 6.430.536 - -
----------------------- ----------- ------------- ----------- ----------- -----------
Taxes payable 1.546.450 1.546.450 1.546.450 - -
----------------------- ----------- ------------- ----------- ----------- -----------
Total Financial
liabilities 81.596.865 89.229.715 36.127.834 15.489.735 37.612.146
----------------------- ----------- ------------- ----------- ----------- -----------
Total net liabilities 72.069.769 80.402.619 27.300.738 15.489.735 37.612.146
----------------------- ----------- ------------- ----------- ----------- -----------
35.7 Net Current Liabilities
The current liabilities amounting to EUR40.140.452 exceed current assets amounting to EUR16.831.727 by EUR23.308.725. This difference is primarily a result of the bank borrowings related to the residential portfolio EUR11.117.514 that are repayable by ongoing sales proceeds, whenever these occur, which according to the IFRS appear to be repayable within the next 12 months. In addition the EBRD Terminal Brovary debt, amounting to EUR11.574.472 which is also presented as a current liability due to the breach of certain covenants should be viewed as under transfer upon completion of the sale of Terminal Brovary (Note 7).
Considering the above current assets are lower than current liabilities by EUR616.739
36. Events after the end of the reporting period
36.1 Redeemable Convertible Shares Class B
On 28/7/2016 the Company announced that it had exercised its right to request a three-month extension to the Redemption Date of the Redeemable Convertible Preference Shares Class B ( ote 22.6) which were issued in July 2015 to the vendor of BLUEBIGBOX 3 S.R.L.. The property, which is fully let to the European DIY retailer Praktiker, the Romanian operations of which are now owned by MINIERA SUD EST and Susli Omer, was purchased by the Company for a total consideration of EUR6,1 million, which was settled by the issue of 8.618.997 Redeemable Convertible Preference Shares to the vendor. Under the terms of the sale and purchase agreement, the RCPS's were to be either converted to an equal number of ordinary shares or redeemed for EUR0,7056 per RCPS on 13 July 2016, subject to SPDI's right of extension. Further to the extension, the RCPSs will either be redeemed or converted by 13 October 2016 at the discretion of the holder of the RCPSs.
36.2 Nestle - Bank of Piraeus
On 11/8/2016 SPDI announced that it had received a mutually agreed EUR1,39 million fee from Nestlé Romania in settlement of the early termination of its rental contract (due to expire in September 2018) for the Company's Innovations Logistics Park in Bucharest, Romania, due to Nestle Ice Cream unit wider global restructuring plans. In addition, Nestle Romania agreed to forego the rental deposit guarantee of approximately EUR0,28 million and will leave certain fixtures and fittings, including storage racks to the ownership of the Company. The cash component of the settlement received of EUR1,39 million represents approximately 1,5 years' worth of rental income that would have been due from Nestlé Romania in the event it had not terminated the lease.
Pursuant to the agreement with Nestle and following a payment of all sale & lease back overdue instalments the Company has entered into discussions with the lending institution, Bank of Piraeus Leasing, for restructuring the sale and lease back agreement.
36.3 Delia Lebada-BoC
Delia Lebada Invest Srl, a subsidiary, entered into a loan agreement with the Bank of Cyprus Limited in 2007 to effectively finance a leveraged buy-out of the subsidiary by Sec South. The bank loan amounting to EUR4.830.000 is secured with a mortgage and a corporate guarantee by SEC South. The balance of the loan as at 31 December 2015 is EUR4.569.725 (without any accrued interest and default penalty). Following acquisition by the Group in mid 2015, and as the loan was already in default and the Bank initiated insolvency procedures to take over the Pantelimon lake asset. The insolvency procedure may culminate in auctioning off the land plot within the second half of 2016. The Group is currently in discussion with its partner and the bank in an effort to find an amicable settlement,
36.4 Change of NOMAD
On 5/8/2016 the Company announced that it has appointed Strand Hanson Limited as its Nominated Adviser and Broker.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFIRAFILFIR
(END) Dow Jones Newswires
September 22, 2016 02:00 ET (06:00 GMT)
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