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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Mirland Dev. | LSE:MLD | London | Ordinary Share | CY0100141015 | ORD USD0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.25 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMMLD
RNS Number : 9876M
Mirland Development Corporation PLC
13 May 2015
13 May 2015
MIRLAND DEVELOPMENT CORPORATION PLC
("MirLand" / the "Company")
UNAUDITED INTERIM CONSOLIDATED REPORT FOR THE
THREE MONTHS ENDED 31 MARCH 2015
MirLand, one of the leading international residential and commercial property developers in Russia, announces its results for the three months ended 31 March 2015.
Financial Highlights:
-- Total revenues up 42% to US$39.1 million (31 March 2014: US$27.6 million) due to an increase in income from the sale of residential units;
-- Net operating income ("NOI") from investment properties (Company's share) down to US$6.0 million (31 March 2014: US$10.5 million), mainly due to movement in the Russian real estate market;
-- Gross profit remains positive at US$6.4 million (31 March 2014: US$10.2 million); -- EBITDA remains positive at US$3.1 million (31 March 2014: US$6.2 million);
-- Loss of US$12.0 million (31 March 2014: net income of US$10.9 million) due to the ongoing impact of adverse conditions in the Russian economy, which resulted in the negative fair value adjustment of investment properties of approximately US$17 million following a decrease in projected NOI. In addition, the Company recorded net foreign exchange losses of US$6.4 million. This was partly offset by a positive fair value adjustment of investment properties of US$16.6 million following an appreciation of the US Dollar against the Rouble of approximately 4%, resulting in the nominal appreciation of commercial assets at the same rate;
-- Total assets amounted to US$719.2 million, of which 88% are property and land assets (31 December 2014: US$756.6 million);
-- Total equity of US$123.7 million (31 December 2014: US$141.4 million), equating to 17% of total assets;
-- Net leverage stands at 60.0% of total assets (31 December 2014: 57%);
-- The Company is continuing its discussions with the trustees of the Series A-F bondholders to agree a restructuring of its debt and will update the market in due course.
Operational Highlights
Residential:
Triumph Park, St. Petersburg
Sales rates continue to remain high with prices of later phases increasing ahead of inflation:
-- Phase II: Handover of final apartments to owners on track to complete in the first half of 2015;
-- Phase III: Sales momentum continuing with an additional 31 sales since 1 January 2015. In total 898 apartments out of 1,346 have been pre-sold, totalling circa 67% of the scheme and representing sales of approximately US$64 million;
-- Phase IV: Construction of 1,244 units began in Q3 2014, followed by the commencement of sales in Q1 2015. Approximately 175 units were pre-sold off plan during the initial three months of sales.
Western Residence, Perkhushkovo, Moscow
-- Sales of a further six houses at our Western Residence development in Perkhushkovo, Moscow, have completed since 1 January 2015, taking the total number of units sold to 47 of the 77 houses in the scheme.
Retail:
-- Satisfactory performance achieved despite pressures on rents and occupancy rates during the first quarter, with quarterly NOI of US$3.5 million from the Vernissage Mall and Triumph Mall compared to US$6.5 million last year;
-- Occupancy rates remain high at circa 98%;
-- An agreement to sell land for the construction of a 15,000 sqm extension of the Vernissage Mall, which will house an international DIY retailer, was signed during the period. The store is expected to be open and trading within a year and the Board expects the introduction of the retailer to increase the attractiveness of the Mall as a retail destination.
Offices:
-- Occupancy rates slightly decreased at the MirLand Business Centre, and stand at 82% - in line with the market trend. NOI has reduced to US$2.5 million in the first quarter of 2015.
Nigel Wright, Chairman, commented:
"The Company continued to face significant challenges during the first quarter due to testing macro-economic conditions in the Russian market beyond our control. Against the extremely difficult backdrop, our core business has proved resilient. The significant increase in total revenues, mainly due to the continuing success of our St. Petersburg residential project as buyers seek refuge from a falling Rouble in bricks and mortar, is particularly pleasing to note. We did, however, suffer a significant fall in net operating income during the period, largely as a result of our strategy to seek to maintain high occupancy rates at our income producing properties through offering rental concessions to key occupiers. We believe that offering such support to tenants caught in the pincer of falling Rouble incomes and high US dollar denominated rents will pay dividends in the long term.
"In the meantime, negotiations with our existing bondholders continue in a positive vein and we are hopeful of achieving a satisfactory outcome for all parties. We will keep the market fully updated on developments in this regard.
"There have been some moderately encouraging signs in both the Russian economy and the real estate markets recently. A stronger oil price and improved exchange rate, combined with some evidence of increased levels of real estate investment by both domestic and foreign investors, can only be helpful. However, overall net capital outflows continue, albeit at a reduced rate. It is too early to predict the sustainability of these indicators.
"I do not underestimate the continuing challenges faced by the Company but feel we are taking all available steps to mitigate identified risk factors and maintain our cash resources.
"Longer term, we remain positive about both our business and Russia as a whole and I am hopeful that MirLand will be well placed to capitalise on any upturn when it arrives due to the prudent measures we have taken to date."
For further information, please contact:
MirLand Development Corporation plc +7 495 787 4962 Roman Rozental, CEO +7 499 130 31 roman@mirland-development.com 09 Yevgeny Steklov, CFO +7 903 628 24 yevgeny@mirland-development.com 50 FTI Consulting Dido Laurimore /Ellie Sweeney /Tom Gough dido.laurimore@fticonsulting.com ellie.sweeney@fticonsulting.com +44 20 3727 tom.gough@fticonsulting.com 1000 Investec Bank plc Jeremy Ellis / David Anderson +44 20 7597 4000
FINANCING
The challenging economic environment has continued to have a substantial impact on the valuation of the Company's real estate portfolio. This saw the value marked down by approximately 36% during 2014 and an additional 4% during the first quarter of 2015, resulting in net leverage increasing further to 60.0% of total assets at 31 March 2015 from 56.9% at 31 December 2014. Total net borrowings amounted to US$432.3 million (31 December 2014: US$430.1 million).
As reported at the time of the Full Year results in March 2015, the Company is in negotiation with the trustees of the Series A-F bondholders to agree a restructuring of its debt which addresses the challenges posed by the current instability in the Russian economy for the benefit of all the Company's creditors and shareholders.
Discussions are continuing and, during this period, the Company has agreed not to undertake certain transactions which would involve incurring any material obligations without giving the Trustees the agreed prior notice (the "Interim Period").
Furthermore, the Company's controlling shareholders, Jerusalem Economy Ltd., Industrial Buildings Corporation Ltd. and Darban Investments Ltd., as well as Dunchoille Holdings Ltd. (a subsidiary wholly owned by the Company), have undertaken that, during the interim period, no disposal will be made of any of the Company's debentures held by them, unless they give the Trustees prior written notice specifying the particulars of the transaction.
The Company will update the market further on this in due course.
OPERATIONAL UPDATE
Good progress continues to be achieved in the pre-sale, build and delivery of Triumph Park in St. Petersburg, the Company's BREEAM certified sustainable residential project. Following the successful conclusion of Phase II with all flats sold, the Company is now handing over the final flats to the buyers, which is expected to be completed by the end of June 2015. Sales have continued to be strong in Phase III of the scheme, with 898 (67% of the scheme) apartments now pre-sold. The Company is continuing to achieve sale prices in these later phases ahead of the rate of inflation, underpinning the strong levels of profitability for the project.
The construction of Phase IV of the project, representing a further 1,244 units, commenced in Q3 2014, and 175 units were pre-sold during the first three months of sales.
The Western Residence residential development scheme at Perkhushkovo, Moscow, has also maintained momentum with six further houses sold since the beginning of the year. This now takes the number sold to 47 of a total of 77 houses in the scheme.
Our Vernissage Mall and Triumph Mall assets remain over 97% let, with footfall high at both. An agreement to sell the land for the construction of a 15,000 sqm extension to of the Vernissage Mall, which will house an international DIY retailer, was signed during the period. It is expected to be trading within a year and the retailer should increase the attractiveness of the Mall. The Company estimates on the basis of available information, correct as of the date of this report, that the sale of the property and said lease of the additional land (instead of developing the unit by the Company as originally planned) which is subject to, amongst other things, bank financing approval and the purchaser receiving the rights to a lien on the property. This is expected to generate a free cash flow of approximately 180 million Roubles (approximately US$3.4 million) prior to the repayment of the loan principal to the financing bank which may need to be carried out, depending on its requirements.
Occupancy at the MirLand Business Centre remains high at circa 82% of the total lettable area, which is in line with the market average.
On account of the challenging economic environment, the Company has been providing certain discounts and limitation agreements on the exchange rate to its retail and office tenants, which led to a substantial decrease in its NOI in the first quarter of 2015.
MARKET UPDATE
The Rouble has gained 15% since the beginning of the second quarter after losing about half of its value in 2014. Oil prices have been one of the drivers for the Rouble's recovery. The Central Bank expects the volatility of the Rouble to reduce by the summer, returning to levels seen in the Autumn of 2014, before the regulator switched the currency to a free float regime in November.
The price of Urals oil reduced to an average of US$54.82/bbl in March 2015, down US$2.80/bbl from February 2015.
The interest rate in Russia has averaged 6.66% from 2003 until 2015, reaching an all-time high of 17% in December 2014, and declining gradually since to 12.5% (as at 30 April 2015).
Net capital outflow during the period was US$32.5bn (US$48.6 billion 1Q2014), the Central Bank forecast for 2015 is currently US$118bn.
By the end of 2014 the most relevant economic forecast was from the Russian Central Bank which is predicting oil prices to increase to US$60/bbl, and GDP to contract by 4.5% in 2015, with recovery starting around 2017. This compares with a recorded GDP growth in 1Q2015 of 0.4%.
Most analysts believe the current inflation spike of 16.9% y/y to be transitory due to the effects of exchange rate depreciation and an expectation that the import ban will be removed in the short term. Year-to-date inflation was 7.5% by the end of 1Q2015.
The unemployment rate increased to 5.9% in March 2015 from 5.3% in December 2014 (a record low of 4.8% was seen in August 2014).
Real Estate market
Prime yields in 1Q 2015 were 11% for offices, 11% for prime retail, and 13% for warehouses, the same as in the previous quarter.
The total volume of investments in 1Q2015 in commercial real estate was US$0.7bn. US$322 million and US$385 million were invested by domestic and foreign companies, respectively. The share of foreign companies' investments exceeded 50%. Despite the volatile global and domestic economic environment, the forecast for investments is US$2.5bn by the end of [2015]. As usual, Moscow attracted the majority of the investments at US$632 million (89%). Only US$55 million (8%) was invested in commercial real estate in St. Petersburg.
Offices
The total volume of investments in the office segment was US$470 million in 1Q 2015 (66% of total investments), including US$447 million invested in Moscow and US$22 million invested in St. Petersburg.
The average rental rates for class A premises are now US$611 and US$287 (triple net) for class B. Since 4Q2014 the average rental rates have decreased by 20% in Class A and 40% in Class B to (31 March 2015).
The average vacancy rate has increased to 17.5%: 30.9% in Class A (2015F - 35.7%), and 13.5% Class B (2015F - 14.7%). The vacancy rate is growing largely due to existing premises rather than new supply being delivered to the market.
Retail
1Q2015 saw low volumes invested in retail - with just US$96 million invested (14% of total investments).
Six new shopping centres with a total GLA of 348,700 sqm were opened in the regions, compared to 11 new shopping centres in 2014 with a total GLA of 410,383 sqm and three in Moscow.
In prime Moscow shopping malls the average vacancy rate remains below 2%. Footfall in Moscow shopping malls remains at the same level as in 1Q 2014 and is considered to be stable.
The prime rental rate indicator decreased from US$3,500 to US$3,200.
Residential
The mortgage lending market is decreasing: circa153.5bn RUB of mortgages were granted in January and February 2015, which is 23% lower than the same period last year.
The average lending rate at the beginning of March 2015 was 14.7% (2.1% higher than in December 2014), the highest since 2010 according to the Agency for Housing Mortgage Lending. The increase has already led to a slowing of residential construction by 10% over the first two months of this year.
1Q 2015 delivery of new residential projects to the market totalled in circa890k sqm., 6% less than in 4Q 2014. Most of the delivery to the market remains in the mass-market segment (c860k sqm). 1Q 2015 demand amounted to 800k sqm, which is 51% lower than 4Q 2014 and 39% less than 1Q 2014. Against this supply and demand dynamics, housing prices slightly increased by 1.8% in economy and business classes during 1Q2015 compared with the beginning of the year.
Industrial
Total investment volume in the segment was US$120 million in 1Q 2015. New construction in Moscow accounted for 260,000 sqm of industrial space.
The vacancy rate increased from 7% to 9.5% in Class A, and from 5% to 6% in Class B. 90% of the vacant space marketed with Rouble lease rates. The average lease length is less than five years.
Nigel Wright Roman Rozental Chairman Chief Executive 12 May 2015 12 May 2015
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Hot Features
Premium
31 March 31 December
----------------
2015 2014 2014
------- ------- -----------
Unaudited Audited
---------------- -----------
U.S. dollars in thousands
-----------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 28,311 62,556 40,646
Restricted cash 11,159 - -
Trade receivables 2,540 1,549 1,502
Accounts receivables 6,302 8,213 6,530
VAT receivable 4,262 4,575 4,438
Inventories of buildings for
sale 144,809 179,420 169,297
------- ------- -----------
197,383 256,313 222,413
------- ------- -----------
NON-CURRENT ASSETS:
Investment properties 361,300 488,524 383,800
Investment properties under
construction 38,300 50,999 30,800
Inventories of buildings for
sale 90,656 97,759 88,917
VAT receivable 316 360 314
Fixed assets, net 1,179 1,387 1,231
Other long term receivables 18,736 7,189 18,558
Prepaid expenses 510 537 517
Deferred taxes 10,815 5,393 10,056
------- ------- -----------
521,812 652,148 534,193
------- ------- -----------
TOTAL ASSETS 719,195 908,461 756,606
======= ======= ===========
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
31 March 31 December
-------------------
2015 2014 2014
--------- -------- -----------
Unaudited Audited
------------------- -----------
U.S. dollars in thousands
--------------------------------
EQUITY AND LIABILITIES
CURRENT LIABILITIES:
Long-term loans from banks
which classified for short-term 212,659 - 181,588
Credit from banks and others - 19,717 -
Current maturities of long-term
credit from banks 15,906 64,922 15,445
Current maturities of debentures 60,007 - 57,298
Credit from banks for financing
of inventory of buildings
for sale 9,437 11,309 3,300
Long-term Debentures which
classified for short-term 173,787 - 178,316
Trade payables 6,715 9,881 8,262
Deposits from tenants 2,248 3,675 2,762
Advances from buyers 72,072 71,927 88,471
Other accounts payable 2,930 7,587 2,847
--------- -------- -----------
555,761 189,018 538,289
--------- -------- -----------
NON-CURRENT LIABILITIES:
Loans from banks and others - 173,767 34,847
Debentures - 205,314 -
Other non-current liabilities 11,959 17,327 12,562
Deferred taxes 27,761 - 29,461
--------- -------- -----------
39,720 396,408 76,870
--------- -------- -----------
TOTAL LIABILITIES 595,481 585,426 615,159
--------- -------- -----------
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT:
Issued capital 1,036 1,036 1,036
Share premium 359,803 359,803 359,803
Capital reserve for share-based
payment transactions 12,545 12,427 12,530
Capital reserve for transactions
with controlling shareholders 8,556 8,556 8,556
Foreign currency translation
reserve (179,137) (78,633) (174,197)
Accumulated deficit (102,430) (10,283) (89,757)
--------- -------- -----------
TOTAL EQUITY ATTRIBUTABLE
TO EQUITY HOLDERS OF THE PARENT 100,373 292,906 117,971
Non-controlling interest 23,341 30,129 23,476
--------- -------- -----------
Total equity 123,714 323,035 141,447
--------- -------- -----------
TOTAL EQUITY AND LIABILITIES 719,195 908,461 756,606
========= ======== ===========
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONSOLIDATED INCOME STATEMENTS
Three months
ended Year ended
31 March 31 December
------------------
2015 2014 2014
-------- -------- ------------
Unaudited Audited
------------------ ------------
U.S. dollars in thousands
(except earnings (loss)
per share data)
--------------------------------
Rental income from investment
properties 8,623 11,716 52,525
Revenues from sale of residential
units 29,843 15,504 29,796
Revenues from management fees 677 357 3,938
-------- -------- ------------
Total revenues 39,143 27,577 86,259
-------- -------- ------------
Cost of sales and maintenance
of residential units 27,938 13,630 28,974
Cost of maintenance and management 3,726 3,717 18,228
-------- -------- ------------
Gross profit before provision
for impairment 7,479 10,230 39,057
Impairment of inventory 1,086 - -
-------- -------- ------------
Gross profit 6,393 10,230 39,057
-------- -------- ------------
General and administrative
expenses 3,009 3,299 13,043
Marketing expenses 1,747 1,610 4,053
Fair value adjustments of
investment properties and
investment properties under
construction (438) 31,749 84,802
Other expense, net 21 1,696 1,992
Group's share in earnings
of companies accounted for
using the equity method and
gain from obtaining control
in company previously accounted
for using the equity method - 4,009 4,009
-------- -------- ------------
Operating income (loss) 1,220 39,383 108,780
Finance income 550 276 1,521
Finance expenses (8,632) (8,281) (36,942)
Net foreign exchange differences (6,384) (23,719) (149,361)
-------- -------- ------------
Profit (loss) before taxes
on income (13,246) 7,659 (76,002)
Tax benefit (1,269) (3,188) (13,125)
-------- -------- ------------
Net income (loss) (11,977) 10,847 (62,877)
======== ======== ============
Attributable to:
Equity holders of the parent (12,673) 8,161 (71,313)
Non-controlling interests 696 2,686 8,436
-------- -------- ------------
(11,977) 10,847 (62,877)
======== ======== ============
Basic and diluted net earnings
(loss) per share (US Dollars)
attributable to equity holders
of the parent (0.1) 0.08 (0.69)
======== ======== ============
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three months
ended Year ended
31 March 31 December
------------------
2015 2014 2014
-------- -------- ------------
Unaudited Audited
------------------ ------------
U.S. dollars in thousands
--------------------------------
Net profit (11,977) 10,847 (62,877)
-------- -------- ------------
Other comprehensive income
(loss) (net of tax effect):
Other comprehensive income
to be reclassified to profit
or loss in subsequent periods:
Transfer of currency translation
reserve to income statement
for obtaining control in companies
previously accounted for using
the equity method - 6,624 6,624
Exchange differences on translation
of foreign operations (5,771) (22,886) (130,853)
Group's share of net other
comprehensive loss of companies
accounted for the equity method - (3,298) (3,298)
Total other comprehensive
loss (5,771) (19,560) (127,527)
-------- -------- ------------
Total comprehensive loss (17,748) (8,713) (190,404)
======== ======== ============
Attributable to:
Equity holders of the parent (17,613) (8,949) (183,987)
Non-controlling interest (135) 236 (6,417)
-------- -------- ------------
(17,748) (8,713) (190,404)
======== ======== ============
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Capital Total
reserve equity
for
Capital transactions Foreign attributable
reserve to equity Non-
for with currency
Issued Share share-based controlling translation Accumulated holders of controlling Total
capital premium payments shareholders reserve deficit the parent interest equity
------- ------- ----------- ------------ ----------- ----------- ------------ ----------- --------
Unaudited
U.S. dollars in thousands
At 1 January
2015 1,036 359,803 12,530 8,556 (174,197) (89,757) 117,971 23,476 141,447
Net profit
(loss) for
the year - - - - - (12,673) (12,673) 696 (11,977)
Other
comprehensive
loss - - - - (4,940) - (4,940) (831) (5,771)
------- ------- ----------- ------------ ----------- ----------- ------------ ----------- --------
Total
comprehensive
income (loss) - - - - (4,940) (12,673) (14,957) (135) (17,748)
Share-based
payments - - 15 - - - 15 - 15
------------ ----------- --------
At 31 March 31,
2015 1,036 359,803 12,545 8,556 (179,137) (102,430) (179,137) 23,341 123,714
======= ======= =========== ============ =========== =========== ============ =========== ========
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Capital Total
reserve equity
for
Capital transactions Foreign attributable
reserve to equity Non-
for with currency
Issued Share share-based controlling translation Accumulated holders of controlling Total
capital premium payments shareholders reserve deficit the parent interest equity
------- ------- ----------- ------------ ----------- ----------- ------------ ----------- --------
Unaudited
U.S. dollars in thousands
At 1 January
2014 (audited) 1,036 359,803 12,396 8,556 (61,523) (18,444) 301,824 29,893 331,717
Net profit for
the year - - - - - 8,161 8,161 2,686 10,847
Other
comprehensive
loss - - - - (17,110) - (17,110) (2,450) (19,560)
------- ------- ----------- ------------ ----------- ----------- ------------ ----------- --------
Total
comprehensive
income
(loss) (17,110) 8,161 (8,949) 236 8,713
Share-based
payments - - 31 - - - 31 - 31
------------ ----------- --------
At 31 March
2014 1,036 359,803 12,427 8,556 (78,633) (10,283) 292,906 30,129 323,035
======= ======= =========== ============ =========== =========== ============ =========== ========
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Capital Total
reserve equity
for
Capital transactions Foreign attributable
reserve to equity Non-
for with currency
Issued Share share-based controlling translation Accumulated holders of controlling Total
capital premium payments shareholders reserve deficit the parent interest equity
------- ------- ----------- ------------ ----------- ----------- ------------ ----------- ---------
U.S. dollars in thousands
At 1 January
2014 1,036 359,803 12,396 8,556 (61,523) (18,444) 301,824 29,893 331,717
Net profit
(loss) for
the year - - - - - (71,313) (71,313) 8,436 (62,877)
Other
comprehensive
loss - - - - (112,674) - (112,674) (14,853) (127,527)
------- ------- ----------- ------------ ----------- ----------- ------------ ----------- ---------
Total
comprehensive
income (loss) - - - - (112,674) (71,313) (183,987) (6,417) (190,404)
Share-based
payments - - 134 - - - 134 - 134
------------ ----------- ---------
At 31 December
2014 1,036 359,803 12,530 8,556 (174,197) (89,757) 117,971 23,476 141,447
======= ======= =========== ============ =========== =========== ============ =========== =========
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months
ended Year ended
31 March 31 December
------------------
2015 2014 2014
-------- -------- ------------
Unaudited Audited
------------------ ------------
U.S. dollars in thousands
--------------------------------
Cash flows from operating
activities:
Net profit (11,977) 10,847 (62,877)
-------- -------- ------------
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Adjustments to the profit
or loss items:
Deferred taxes, net (1,598) (4,037) (14,824)
Depreciation and amortization 35 44 201
Finance expenses, net 14,466 31,724 184,782
Share-based payment 15 31 134
Fair value adjustment of investment
properties and investment
properties under construction 438 (31,749) (84,802)
Group's share in earnings
of companies accounted for
using the equity method and
gain from obtaining control
in company previously accounted
for using the equity method - (4,009) (4,009)
13,356 7,996 81,482
-------- -------- ------------
Working Capital adjustments:
Decrease (increase) in trade
receivables (597) 1,456 1,879
Decrease in VAT receivable
and others (623) (999) (3,022)
Increase (decrease) in inventories
of buildings for sale 14,536 (11,157) (78,763)
Increase in trade payables 606 760 6,957
Decrease (increase) in other
accounts payable (12,498) 1,834 62,724
-------- -------- ------------
1,424 (8,106) (10,225)
-------- -------- ------------
Interest paid (5,057) (6,173) (36,730)
Interest received 98 88 231
Taxes paid (244) (310) (2,046)
(5,203) (6,395) (38,545)
-------- -------- ------------
Net cash flows from used in
operating activities (2,400) (11,650) (30,165)
-------- -------- ------------
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months
ended Year ended
31 March 31 December
-----------------
2015 2014 2014
------- -------- ------------
Unaudited Audited
----------------- ------------
U.S. dollars in thousands
-------------------------------
Cash flows from investing
activities:
Additions to investment properties - - (3,529)
Additions to investment properties
under construction (916) (1,327) (3,418)
Purchase of fixed assets - (36) (625)
Loans granted to related parties - (140) (10,684)
Cash from obtaining control
in companies previously accounted
for using the equity method
(a) - (18,640) (21,140)
-
Net cash flows used in investing
activities (916) (20,143) (39,396)
------- -------- ------------
Cash flows from financing
activities:
Issuance of debenture, net - - 39,152
Repayment of debentures - - (32,211)
Receipt of loans from banks
and others, net from origination
costs 8,908 41,931 155,630
Repayment of loans from banks
and others (6,884) (12,609) (109,667)
------- -------- ------------
Net cash flows generated from
financing activities 2,024 29,322 52,904
------- -------- ------------
Exchange differences on balances
of cash and cash equivalents 116 (1,127) (8,851)
Decrease in cash and cash
equivalents (1,176) (3,598) (25,508)
Cash and cash equivalents
at the beginning of the period 40,646 66,154 66,154
------- -------- ------------
Cash and cash equivalents
and restricted cash at the
end of the period 39,470 62,556 40,646
======= ======== ============
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months
ended Year ended
31 March 31 December
---------------
2015 2014 2014
----- -------- ------------
Unaudited Audited
--------------- ------------
U.S. dollars in thousands
-----------------------------
(a) Cash generated from obtaining
control in companies accounted
for the equity method:
The subsidiaries' assets
and liabilities at date
of sale:
Working capital (excluding
cash and cash equivalents) - 146 136
Investment properties - (93,673) (109,800)
Other receivables - (49) (49)
Fixed assets, net - (313) (313)
Deferred taxes - (20) 16,107
Loans from banks - 21,419 21,419
Other non-current liabilities - 12,700 12,700
Indemnification asset - (5,737) (5,737)
Payables on account of obtaining
control in company preciously
accounted for using equity
method - 2,500 -
Foreign currency translation
reserve - 6,624 6,624
Profit (loss) from obtaining
control in companies previously
accounted for using the
equity method - 702 702
Investment in associates - 33,727 33,727
Loans granted to associates - 3,334 3,344
- (18,640) (21,140)
===== ======== ============
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:- GENERAL
a. These interim consolidated financial statements have been prepared in a condensed format as of 31 March 2015 and for the three-month period then ended ("interim condensed consolidated financial statements"). These financial statements should be read in connection with the Company's annual financial statements and accompanying notes as of 31 December 2014 and for the year then ended ("annual financial statements").
b. 1. During 2014, mainly in the second half of the year, the Russian economy was subject to sanctions imposed on it by the west and in the last quarter of 2014, the Russian economy experienced a serious deterioration which resulted, Inter Alia, in the weakening of Russian Ruble in relation to the U.S. dollar by about 79% up to date. In the second half of 2014 and principally in December of that year, due to the decline in oil prices, the aggravation of the sanctions imposed by the West due to Geopolitical instability in the East Ukraine and the devaluation of the Russian Ruble, the Central Bank of Russia raised the interbank interest rate from 5.5% in January 2014 to 17% as of March 31, 2015. International rating agencies (S&P Moody's and Fitch Ratings) gradually lowered Russia's credit rating to BB+/Baa3 with a negative outlook. After the balance sheet date through the date of signing the financial statements, the Ruble dropped another 9% in its value in relation to the U.S dollar. During February, March and April 2015 the Central Bank of Russia lowered the interbank interest to 12.5%. After the balance sheet date and up to date the Russia Ruble appreciated by approximately 13% against the US Dollar.
2. On December 18, 2014, the trustees of the holders of the Company's debentures (series A-F) called for a meeting for obtaining reports from the Company's representatives regarding the developments in the Company's business affairs and for discussing and deciding on actions to be taken to protect the rights of the creditors.
On the same date and following the announcement of the trustees of the holders of the Company's debentures, the Company announced that in view of the fluctuations in the Russian markets, the scheduled meeting of the holders of debentures and their appeals to the Company, the Company's Board decided to defer the principal and interest payments to the holders of debentures (series A-B) which were due on December 31, 2014.
In addition on the same date, the rating agencies (S&P Maalot and Midroog) announced the lowering of the Company's rating to ilCC and B1 with negative outlooks, respectively, this among others, following the Company's announcement of deferring the debenture payments of December 2014.
In the meeting of holders of debentures held on December 22, 2014, the Company announced that it requires time until the general situation in Russia and the Company's specific business affairs become clear. In early January 2015, the Company announced the results of the voting of the holders of debentures (series A-F) which resolved to temporarily defer the maturity dates of the principal and interest payments to the holders of debentures (series A-B) to February 1, 2015 (as well as authorizing the trustee to extend this date by an overall 60-day period) subject to depositing $ 11 million in an escrow account in favor of the Company (reflecting the payment that was due in December 2014) and provided that the Company initiate an immediate, consecutive and intensive dialog with the trustees of the debentures (who have been authorized to negotiate with the Company for reaching an arrangement) and the Company will sign a Stand Still letter and subject to the signing of the stand still letter by controlling shareholders of the Company, Jerusalem Economic Corporation Ltd., and Industrial Buildings Ltd., as long as the amount of the deposit is held in trust account, they will not sell the bonds (series A and B) held Biden to a third party.
On January 22, 2015, the Company signed a "standstill commitment" towards the trustees and the holders of the debentures in which it undertook, among others, to the following principals according to the specified in the "standstill commitment": not to make any material payments to its financial creditors in respect of any debt, whether in or outside of Israel beyond the amortization schedule settled with them, but due notice trustees, not to make any payments to the controlling shareholders in the Company, not to dispose of any material assets, not to distribute any dividends only with a prior notice to the trustees and also other commitments as detailed in the "standstill commitment"
During the first 4 months of 2015, the trustee of the series A-B decided to defer the maturity dates of the principal and interest payments to June 7, 2015.
On February 2, 2015, S&P announced another lowering of the Company's rating to D- with a negative outlook since the Company failed to meet its liabilities to the holders of debentures (series A and B) in the 30-day period following the original maturity date and given its intention to refinance the debt on the all the debenture series.
On February 10, 2015, the Company's Board decided to announce the deferral of payments to holders of all the series of debentures until negotiations with them are concluded.
During the first 4 months of 2015, the trustee of the debentures (series C) decided to defer the maturity dates of the interest payments to June 7, 2015.
In addition, the trustee of the debentures (series E) decided to defer the maturity dates of the interest payments to May 31, 2015.
On March 30, 2015 the Company published the arrangement principals which were agreed with the trustees and include, inter alia, increase of interest to all the series, certain liabilities of the parent Companies and issuance of shares and options to the holders of debentures.
The Company continues negotiations with the trustees of the holders of the debentures in order to achieve a comprehensive arrangement.
As a result, the Company classified the outstanding debentures in an amount of $ 173.8 million as current liabilities in its financial statements as of March 31, 2015.
3. In the context of financing agreements with lending banks in Russia, certain financial covenants were determined with which the Company is not in compliance as of March 31, 2015 which include, among others, a certain LTV ratio, minimum occupancy rates and debt coverage and interest ratios. As a result, the Company classified in its financial statements as of March 31, 2015 loans from banks, in which the Company breaches its covenants, in an amount of $ 212.7 million as current liabilities.
4. The Group has a working capital deficiency of approximately $ 358.4 million as of March 31, 2015, a loss of approximately $ 12 million, total comprehensive loss of approximate $ 17.7 million for the quarter then ended and negative cash flows from operating activities of approximately $ 2.4 million for the quarter then ended.
The Company continues to monitor the economic developments in Russia which are external to the Group and beyond its control and is continuing taking steps to minimize its exposure to the situation. In view of all of the aforementioned, there is a material uncertainty which may cast significant doubt as to the Group's ability to continue to operate as a going concern. The financial statements do not include any adjustments to the carrying amounts of assets and liabilities and their classification which might be required if the Company is unable to continue to operate as a going concern.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES a. Basis of preparation of the interim financial statements:
The interim condensed consolidated financial statements have been prepared in accordance with the International Financial Reporting Standard IAS 34 ("Interim Financial Reporting").
b. New standards, interpretations and amendments adopted by the Company:
The significant accounting policies and methods of computation followed in the preparation of the interim condensed consolidated financial statements are identical to those followed in the preparation of the latest annual financial statements.
NOTE 3:- FINANCIAL INSTRUMENTS
Set out below is a comparison of the carrying amounts and fair values of financial instruments as of March 31, 2015:
Carrying Fair
amount Value
--------- ------
U.S. dollars in
thousands
-----------------
Financial liabilities:
Debentures (series A) 4,022 2,236
Debentures (series B) 18,264 6,560
Debentures (series C) 33,702 11,791
Debentures (series D) 41,338 15,205
Debentures (series E) 99,329 33,801
Debentures (series F) 37,139 12,904
233,794 82,497
========= ======
The fair value of the bonds is measured based on quoted market prices, according to Level 1 of the fair value hierarchy.
There is no material change in the fair value of bank loans in compare to the value presented in the annual financial statements.
NOTE 4:- SEGMENTS
Commercial Residential Total
---------- ----------- --------
Unaudited
---------------------------------
Three months ended
31 March 2015: U.S. dollars in thousands
---------------------------------
Segment revenues 9,300 29,843 39,143
========== =========== ========
Segment results 4,577 (1,214) 3,633
========== ===========
Unallocated income (2,143)
Finance costs, net (14,466)
Profit before taxes
on income (13,246)
========
Commercial Residential Total
---------- ----------- --------
Unaudited
---------------------------------
Three months ended
31 March 2014: U.S. dollars in thousands
---------------------------------
Segment revenues 12,073 15,504 27,577
========== =========== ========
Segment results 38,859 212 39,071
========== ===========
Unallocated income 312
Finance costs,
net (31,724)
Profit before taxes
on income 7,659
========
Commercial Residential Total
---------- ----------- ---------
U.S. dollars in thousands
----------------------------------
Year ended 31 December
2014:
Segment revenues 56,463 29,796 86,259
========== =========== =========
Segment results 121,905 (4,944) 116,961
========== =========== ---------
Unallocated expenses (8,181)
Finance expenses,
net (184,782)
Income before taxes
on income (76,002)
=========
NOTE 5: - SUBSEQUENT EVENTS
1. On the 7(th) of April 2015, it was decided by the Trustee of the bondholders (Series C) upon a technical deferral of the date of the payment of principal and interest on the securities which was scheduled for 14.04.2015, such that the determinant date will fall on 15.04.2015, this is without introducing any changes to the set date of payment on 30.04.15.
2. On the 12(th) of April 2015, it was decided by the Trustee of the bondholders (Series A and B) upon a technical deferral of the date of the payment of principal and interest on the securities which was scheduled for 30.04.2015, such that the determinant date will fall on 20.04.2015 and the date of payment will fall on 06.05.2015.
3. On the 14(th) of April 2015, it was decided by the Trustee of the bondholders (Series C) upon a deferral of principal and interest to 07.06.2015.
4. At the Bondholders' (Series A and B) meeting held on 15(th) April 2015, it was decided upon a deferral of the principal and interest payments to 07.06.2015.
5. On the 16(th) of April 2015, the Trustee of the bondholders (Series F) announced the deferral of the principal and interest payments to 31.05.2015.
6. In April, 2015, a sub-subsidiary of the Company (Global 1 LLC) ("Sub-subsidiary") which holds the rights of the Yaroslavl Project (Vernissage Mall Project) contracted into a series of agreements that obligate the Sub-subsidiary to sell an area of land of about 20,800 square metres to an International chain that is involved in the "Do-It-Yourself industry" ("The Chain") for consideration of approximately 400 Million Rubles, including VAT (approximately US Dollar 7.7 million). The chain has taken upon itself the construction obligations of the shop (Big Box) on the land through an undertaking to open the shop on a date no later than 30 June 2016. Additionally, the sub-subsidiary will lease to the chain additional land of about 6,070 square metres for a period of 49 years and will allow the chain access to other areas of the land for the purpose of building the shop. The sub-subsidiary will be responsible for removing all encumbrances and liens on the land before the rights are transferred to the chain, and similarly to establish the necessary infrastructure for running the shop.
The company estimates on the basis of available information, correct to date, that the sale of the property and said lease of the additional land (instead of building the shop by the company as planned) which is subject, among other things, to bank financing approval and them receiving the rights to a lien on the property. This is expected to generate a free cash flow of approximately 180 million Rubles (approximately US Dollar 3.4 million) prior to the loan principal repayment to the financing bank that may need to be carried out according to its requirements.
7. On the 12(th) of May 2015, the Trustee of the bondholders (Series C and D) announced the deferral of the principal and interest payments to 30.06.2015. For additional details see the Immediate Reports of the company from 12 May 2015 (Reference No. 2015-01-017544 and 2015-01-017550).
- - - - - - - - - - - - - - - - - - -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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