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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 : 5330Y
Mirland Development Corporation PLC
18 May 2016
18 May 2016
MIRLAND DEVELOPMENT CORPORATION PLC
("MirLand" / the "Company")
UNAUDITED INTERIM CONSOLIDATED REPORT FOR THE
THREE MONTHSED 31 MARCH 2016
MirLand, one of the leading international residential and commercial property developers in Russia, announces its results for the three months ended 31 March 2016.
Financial Highlights:
-- Net operating income ("NOI") from investment properties of US$4.6 million (31 March 2015: US$6.6 million), mainly due to depreciation in the Russian Rouble quarterly average rate against the US Dollar and due to negative movement in the Russian real estate market;
-- Gross profit remains positive at US$1.3 million (31 March 2015: US$6.4 million); -- EBITDA remains positive at US$1.2 million (31 March 2015: US$3.1 million);
-- Loss of US$14.6 million (31 March 2015: loss of US$12 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$18.7 million, mainly due to the appreciation of the Russian Rouble against the US Dollar as of March 31 2016 and a decrease in projected NOI.
-- Total assets amounted to US$602.5 million, of which 88% are property and land assets (31 December 2015: US$577.8 million);
-- Total negative equity of US$27.3 million (31 December 2015: negative US$19.3 million); -- Net leverage stands at 81% of total assets (31 December 2015: 82.3%);
-- The Company is continuing its discussions with the trustees of the Series A-F bondholders and its financing banks to agree a restructuring of its debt and will update the market in due course;
-- Following the period end the Company announced that Saydam Salaheddin has replaced Nigel Wright as Chairman, following his decision to step down from the Board for personal reasons. Eliezer Fishman has also stepped down from the Board.
Operational Highlights
Residential:
Triumph Park, St. Petersburg
-- Phase III: Sales momentum continuing with an additional 157 sales since 1 January 2016. In total 1,163 apartments out of 1,346 have been pre-sold, totalling circa 90% of the scheme and representing sales of approximately US$80 million;
-- Phase IV: Sales momentum continuing with an additional 143 sales since 1 January 2016. In total 572 apartments out of 1,244 have been pre-sold, totalling circa 46% of the scheme and representing sales of approximately US$36.5 million;
Western Residence, Perkhushkovo, Moscow
-- Sales of a further three houses at our Western Residence development in Perkhushkovo, Moscow, have completed since 1 January 2016, taking the total number of units sold to 55 of the 77 houses in the scheme.
Retail:
-- Satisfactory performance achieved despite pressures on rents and occupancy rates in addition to further depreciation of the quarterly average rate of the Russian Rouble against the US Dollar during the first quarter, with quarterly NOI of US$2.9 million from the Vernissage Mall and Triumph Mall compared to US$3.5 million last year;
-- Occupancy rates remain high at circa 98%;
Offices:
-- Occupancy rates slightly decreased at the MirLand Business Centre, and stand at 75% - in line with the market trend. NOI has reduced to US$1.8 million in the first quarter of 2016.
Roman Rozental, CEO commented:
"Political and economic headwinds continue to create a challenging operating environment for the Company and whilst we are taking appropriate management actions to address the issues, many of the difficulties are beyond the Company's control. During the period we have continued to progress negotiations with both our Bondholders and our Russian domestic banks."
For further information, please contact:
MirLand Development Corporation plc Roman Rozental, CEO roman@mirland-development.com +7 495 787 4962 Yevgeny Steklov, CFO +7 499 130 31 09 yevgeny@mirland-development.com +7 903 628 24 50 FTI Consulting Dido Laurimore /Ellie Sweeney /Tom Gough dido.laurimore@fticonsulting.com ellie.sweeney@fticonsulting.com tom.gough@fticonsulting.com +44 20 3727 1000 Investec Bank plc Jeremy Ellis / David Anderson +44 20 7597 4000
MirLand, one of the leading international residential and commercial property developers in Russia, today announces its results for the three months ended 31 March 2016.
FINANCING
The challenging economic environment has continued to have a substantial impact on the valuation of the Company's real estate portfolio, which saw its value marked down by approximately 33% during 2015. Encouragingly we have witnessed a slight improvement of approximately 3% during the first quarter of 2016, resulting in net leverage decreasing to 81% of total assets at 31 March 2016 from 82.3% at 31 December 2015. Total net borrowings amounted to US$487.7 million (31 December 2015: US$475.7 million).
The Company has been in negotiation with the trustees ("Trustees") of the Series A-F bonds ("Bonds") 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.
The Trustees of the Bondholders have proposed a restructuring of the Bonds as follows:
(a) approximately USD$180m of the debt owed to the Bondholders will be converted into equity in the Company, leaving approximately US$45m of outstanding bonds (the "Remaining Debt");
(b) Jerusalem Economic Ltd., Industrial Building Corporation Ltd. and Darban Investments Ltd. (the "Majority Shareholders") will be asked to commit to providing funding of US$25m in aggregate (including US$6 million which has previously been provided to the Company) in return for approximately a 40% interest in the Company's equity. Of this US$25 million, US$5 million is to be paid to the Bondholders (excluding the Majority Shareholders and members of the Fishman family) pro rata to their holdings of bonds in the Company;
(c) the Bondholders will have approximately a 60% interest in the Company's equity; and
(d) the Remaining Debt will remain unsecured and will be restructured on the following basis: (1) repayment of the Remaining Debt will commence in 2021 with three equal annual instalments, (2) the Remaining Debt will bear an annual interest of 1% which will start to be paid in December 2017, (3) the Company will have the right to repay the Remaining Debt at any time and at its sole discretion without incurring any fees or penalty, (4) there will be no limitation or restriction on the Company raising any additional secured debt and (5) events of default will only be in accordance with Israeli securities law.
The Bondholders of Series C-E, who represent the majority of Bondholders by value, have voted in favour of these principles. The Board is considering the above terms and negotiations are ongoing.
OPERATIONAL UPDATE
Sales Momentum at Triumph Park, St. Petersburg continues to remain strong. On Phase III, an additional 157 sales have taken place since 1 January 2016. In total 1,163 apartments out of 1,346 have been pre-sold, totalling circa 90% of the scheme and representing sales of approximately US$80 million. On phase IV there have been an additional 143 sales since 1 January 2016. In total 572 apartments here out of a total of 1,244 have been pre-sold, totalling circa 46% of the scheme and representing sales of approximately US$36.5 million;
The Western Residence residential development scheme at Perkhushkovo, Moscow has maintained sales momentum with a further three houses sold since the beginning of the year. This now takes the number sold to 55 of the total 77 houses in the scheme.
Our Vernissage Mall and Triumph Mall assets remain over 96% let, with footfall high at both.
Occupancy at the MirLand Business Centre remains high at circa 75% of the total lettable area, which is in line with the market average.
On account of the challenging economic environment, the Company has continued to provide certain discounts and limitation agreements on the exchange rate to its retail and office tenants. This together with record high quarterly average rate of the Russian Rouble against the US Dollar led to a substantial decrease in the Company's NOI in the first quarter of 2016.
MARKET UPDATE
According to the World Bank, Russian GDP is expected to contract by 1.9% instead of 0.7 % as previously estimated for 2016.
The price of Urals oil reduced to an average of US$39.6/bbl in March 2016, the average price between January-May 2016 was US$35.84/bbl and the average price for the whole of 2015 was US$52.32/bbl. The Rouble/USD exchange rate was at 67.60 at the end of the first quarter 2016 and averaged 72.27 Rouble/USD between January and May 2016.
The Bank of Russia has kept its interest rate unchanged at 11% since the end of July 2015. The interest rate in Russia has averaged 6.66% from 2003 until 2015, reaching an all-time high of 17% in December 2014.
According to the Central Bank of Russia, the net capital outflow from Russia fell to US$5.9bn for January- February 2016, a fifth of the US$29.2bn outflow for the same period in 2015. In February, the CBR estimated that the outflow of capital from Russia in 2016 could fall to US$30bn-US$40bn if oil prices were in the range of US$25-US$35 per barrel.
Inflation in 1Q 2016 was at 7.3%, and the annual inflation forecast by the Ministry of Economics is 7.6%.
The unemployment rate was recorded at 6% in March 2016, up from 5.8% in 4Q15, the highest rate since January 2013.
Real Estate market
Capitalization rates in 1Q 2016 were the same as in 4Q 2015: offices 10.5%, prime retail 11% and warehouses 12.75%.
Investment volume in 1Q 2016 amounted to US$1.9 bn (Rouble 142 bn), being 4.5 times higher than 1Q 2015. Taking into account the volume of deals in 1Q 2016 and current deals under negotiations, CBRE has upgraded its forecasts for the total volume of deals for 2016 to US$4.5 bn from US$2.8 bn. The share of foreign investments decreased to 4% (US$82mln) in 1Q 2016, from 30% in 2015. Moscow accounted for 67% of investments, 25% were in the regions and 8% in St. Petersburg.
Offices
In 1Q 2016 the total volume of investments in the office segment was US$1.04bn.
Completions for the 1Q 2016 were at the lowest quarterly value for the last 10 years and amounted to 63,000 sqm of new office space, which is 30% less than in 1Q 2015. It is estimated that in 2016 there will be no more than 0.5 million sqm of new starts, which is 40% less than was constructed in 2015 and almost three times less than in 2014.
Rental rates remained stable in 1Q 2016, at Rouble 19,000 - 25,000 / sqm /year for Class A, Rouble 13,000/ sqm / year for Class B, net of operating expenditure and VAT.
1Q 2016 the overall vacancy rate in Moscow was high at 19.3% (28.9% in Class A and 16.3% in Class B). The expected average vacancy rate for good quality offices in 2016 is circa 19%, and this is not likely to decrease significantly within the next two to three years.
Retail
US$95 million was invested in retail, out of total investment volume of US$1.9bn in 1Q 2016.
Despite the challenging economic conditions, 40 new retailers entered the Moscow market in 2015 with only 11 leaving. In 1Q 2016, eight new international brands opened their first store in Moscow and six announced their plans to enter the market during 2016, they were Walt Disney, Newby London, Lillapois, NYX, Hunkemöller and Undiz.
At the end of 1Q 2016 the average vacancy rate in prime Moscow shopping malls was 2.5% (2% in 4Q 2015) . This is forecast to increase to 3% by the end of 2016. Overall, however, the vacancy rate in Moscow for 1Q 2016 was 9.2%, down from 9.4% in 4Q 2015.
Residential
Circa Rouble 250 bn of mortgages were granted during 1Q 2016, which is 34% higher than 1Q 2015. The average lending rate in 1Q 2016 decreased to 12.1% compared to 12.3% in 4Q 2015.
In 1Q 2016, 51 new projects (20% less than 4Q 2015) providing circa 1.06 million sqm of space were delivered to the market, which is 7% less than 4Q 2015. 93% of the delivery (in '000 units) to the market attributed to the mass-market segment. As of 1Q 2016 there are 575 projects for sale in St. Petersburg which is 1.4% higher than 4Q 2015.
In 1Q 2016, mass market prices in Rouble remained at the same level as 4Q 2015 (economy class prices decreased by 0.3%) and demand amounted to 1.09m sqm, which is 6% lower than 4Q 2015, mostly focused on the mass market (1.02 million sqm).
Industrial
Total investment volume was US$202 million in 1Q 2016. New construction in the Moscow area accounted for 47,000 sqm of Class A industrial space, with no new construction in Class B.
The vacancy rate was 10% in Class A, and 8% in Class B, the same as 2015.
Class A rental rates decreased to Rouble 4,000/sqm from Rouble 4,150/sqm in 2015. Class B rental rates decreased to Rouble 3,700/sqm from Rouble 3,800/sqm in 2015.
BOARD CHANGES
Following the period end, at the Company's Annual General Meeting, MirLand announced that Nigel Wright, the Company's Chairman stepped down from the Board for personal reasons.
Following this change and with immediate effect, Saydam Salaheddin was appointed Chairman of the Board of Directors and Elias Eliades was appointed to the Audit Committee. Both Mr Salaheddin and Mr Eliades are existing Independent Non-executive Directors of the Company.
MirLand also announces that Eliezer Fishman stepped down as a Director of the Company with effect from the close of the AGM.
The Board of Directors of the Company would like to take this opportunity to thank Mr Wright and Mr Fishman for their significant contributions to the Company.
Roman Rozental
Chief Executive
18 May 2016
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Hot Features
Premium
31 March 31 December
----------------
2016 2015 2015
------- ------- -----------
Unaudited Audited
---------------- -----------
U.S. dollars in thousands
-----------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 3,298 28,311 5,097
Cash in escrow account 11,259 11,159 11,159
Trade receivables 2,772 2,540 2,274
Accounts receivables 8,729 6,302 7,885
VAT receivable 3,411 4,262 3,321
Inventories of buildings for sale 187,874 144,809 171,240
------- ------- -----------
217,343 197,383 200,976
------- ------- -----------
NON-CURRENT ASSETS:
Investment properties 261,800 361,300 260,200
Investment properties under construction 18,800 38,300 19,000
Inventories of buildings for sale 69,381 90,656 68,298
VAT receivable 330 316 290
Fixed assets, net 991 1,179 969
Other long term receivables 14,968 18,736 14,709
Prepaid expenses 455 510 455
Deferred taxes 18,416 10,815 12,944
------- ------- -----------
385,141 521,812 376,865
------- ------- -----------
TOTAL ASSETS 602,484 719,195 577,841
======= ======= ===========
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
31 March 31 December
--------------------
2016 2015 2015
--------- --------- -----------
Unaudited Audited
-------------------- -----------
U.S. dollars in thousands
---------------------------------
EQUITY AND LIABILITIES
CURRENT LIABILITIES:
Long-term loans from banks which classified
for short-term 196,594 212,659 196,328
Current maturities of long-term credit
from banks 18,253 15,906 19,575
Current maturities of debentures 123,063 60,007 115,672
Credit from banks for financing of
inventory of buildings for sale 24,076 9,437 24,845
Long-term Debentures which classified
for short-term 140,319 173,787 135,523
Trade payables 7,788 6,715 6,361
Deposits from tenants 1,950 2,248 2,033
Advances from buyers 92,106 72,072 73,783
Other accounts payable 2,404 2,930 2,382
Loan from parent company 750 - -
--------- --------- -----------
-----
607,303 555,761 576,502
--------- --------- -----------
NON-CURRENT LIABILITIES:
Other non-current liabilities 9,098 11,959 9,077
Deferred taxes 13,359 27,761 11,519
--------- --------- -----------
22,457 39,720 20,596
--------- --------- -----------
TOTAL LIABILITIES 629,760 595,481 597,098
--------- --------- -----------
EQUITY (DEFICIT IN 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 12,592 12,545 12,586
Capital reserve for transactions with
controlling shareholders 12,556 8,556 10,556
Foreign currency translation reserve (171,701) (179,137) (175,193)
Accumulated deficit (257,456) (102,430) (242,865)
--------- --------- -----------
TOTAL EQUITY (DEFICIT IN EQUITY) ATTRIBUTABLE
TO EQUITY HOLDERS OF THE PARENT (43,170) 100,373 (34,077)
Non-controlling interest 15,894 23,341 14,820
--------- --------- -----------
Total equity (Deficit in equity) (27,276) 123,714 (19,257)
--------- --------- -----------
TOTAL EQUITY (DEFICIT IN EQUITY) AND
LIABILITIES 602,484 719,195 577,841
========= ========= ===========
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
--------------------
2016 2015 2015
--------- --------- ------------
Unaudited Audited
-------------------- ------------
U.S. dollars in thousands
(except earnings (loss) per
share data)
----------------------------------
Rental income from investment properties 6,483 8,623 32,271
Revenues from sale of residential units 499 29,843 51,206
Revenues from management fees 609 677 2,808
--------- --------- ------------
Total revenues 7,591 39,143 86,285
--------- --------- ------------
Cost of sales and maintenance of residential
units 687 27,938 47,265
Cost of maintenance and management 2,454 3,726 12,914
--------- --------- ------------
Gross profit before provision for impairment 4,450 7,479 26,106
Impairment of inventory 3,151 1,086 4,330
--------- --------- ------------
Gross profit 1,299 6,393 21,776
--------- --------- ------------
General and administrative expenses 2,914 3,009 12,578
Bond settlement expenses 112 - 2,276
Marketing expenses 276 1,747 4,300
Fair value negative adjustments of
investment properties and investment
properties under construction 18,702 438 56,152
Other expense, net (24) 21 3,471
Operating income (loss) (20,681) 1,220 (57,001)
Finance income 304 550 271
Finance expenses (8,943) (8,632) (35,035)
Net foreign exchange differences 11,596 (6,384) (84,716)
--------- --------- ------------
Loss before taxes on income (17,724) (13,246) (176,481)
Tax benefit (3,062) (1,269) (19,004)
--------- --------- ------------
Loss (14,662) (11,977) (157,477)
========= ========= ============
Attributable to:
Equity holders of the parent (14,591) (12,673) (153,108)
Non-controlling interests (71) 696 (4,369)
--------- --------- ------------
(14,662) (11,977) (157,477)
========= ========= ============
Basic and diluted loss per share (US
Dollars) attributable to equity holders
of the parent (0.14) (0.1) (1.48)
========= ========= ============
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
--------------------
2016 2015 2015
--------- --------- ------------
Unaudited Audited
-------------------- ------------
U.S. dollars in thousands
----------------------------------
Loss (14,662) (11,977) (157,477)
--------- --------- ------------
Other comprehensive income (loss) (net
of tax effect):
Other comprehensive income to be reclassified
to profit or loss in subsequent periods:
Exchange differences on translation
of foreign operations 4,637 (5,771) (5,283)
Total other comprehensive loss 4,637 (5,771) (5,283)
--------- --------- ------------
Total comprehensive loss (10,025) (17,748) (162,760)
========= ========= ============
Attributable to:
Equity holders of the parent (11,099) (17,613) (154,104)
Non-controlling interest 1,074 (135) (8,656)
--------- --------- ------------
(10,025) (17,748) (162,760)
========= ========= ============
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
2016 1,036 359,803 12,586 10,556 (175,193) (242,865) (34,077) 14,820 (19,257)
Loss - - - - (14,591) (14,591) (71) (14,662)
Other
comprehensive
profit
(loss) - - - 3,492 - 3,492 1,145 4,637
------- ------- ----------- ------------ ----------- ----------- ------------ ----------- --------
Total
comprehensive
income
(loss) - - - - 3,492 (14,591) (11,099) 1,074 (10,025)
Transaction
with
controlling
shareholders - - - 2,000 - - 2,000 - 2,000
Share-based
payments (Note
19) - - 6 - - - 6 6
------------ ----------- --------
At 31 March 31,
2016 1,036 359,803 12,592 12,556 (171,701) (257,456) (43,170) 15,894 (27,276)
======= ======= =========== ============ =========== =========== ============ =========== ========
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
------- ------- ----------- ------------ ----------- ----------- ------------ ----------- ---------
Audited
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
loss - - - - - (153,108) (153,108) (4,369) (157,477)
Other
comprehensive
profit
(loss) - - - - (996) - (996) (4,287) (5,283)
------- ------- ----------- ------------ ----------- ----------- ------------ ----------- ---------
Total
comprehensive
income
(loss) - - - - (996) (153,108) (154,104) (8,656) (162,760)
Transaction
with
controlling
shareholders - - - 2,000 - - 2,000 - 2,000
Share-based
payments (Note
19) - - 56 - - 56 - 56
------------ ----------- ---------
At 31 December
2015 1,036 359,803 12,586 10,556 (175,193) (242,865) (34,077) 14,820 (19,257)
======= ======= =========== ============ =========== =========== ============ =========== =========
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
--------------------
2016 2015 2015
--------- --------- ------------
Unaudited Audited
-------------------- ------------
U.S. dollars in thousands
----------------------------------
Cash flows from operating activities:
Loss (14,662) (11,977) (157,477)
--------- --------- ------------
Adjustments to reconcile loss to net
cash provided by (used in) operating
activities:
Adjustments to the profit or loss items:
Deferred taxes, net (3,199) (1,598) (20,367)
Depreciation and amortization 46 35 156
Finance expenses, net (2,957) 14,466 119,480
Share-based payment 6 15 56
Fair value negative adjustment of investment
properties and investment properties
under construction, net 18,702 438 55,152
Gain from sale of investment property - - 1,000
--------- --------- ------------
12,598 13,356 155,477
--------- --------- ------------
Working Capital adjustments:
Impairment of inventory 3,151 1,086 4,330
Impairment of financial assets - - 3,200
increase in trade receivables (560) (597) (599)
increase in VAT receivable and others (320) (623) (430)
Decrease (increase) in inventories
of buildings for sale (4,715) 13,450 (20,789)
Increase (decrease) in trade payables (545) 606 1,603
Increase (decrease) in other accounts
payable 11,055 (12,498) 3,997
--------- --------- ------------
8,066 1,424 (8,688)
Interest paid (3,549) (5,057) (21,301)
Interest received 20 98 217
Taxes paid (258) (244) (1,229)
--------- --------- ------------
(3,787) (5,203) (22,313)
Net cash flows generated from (used
in) operating activities 2,215 (2,400) (33,001)
--------- --------- ------------
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
--------------------
2016 2015 2015
--------- --------- ------------
Unaudited Audited
-------------------- ------------
U.S. dollars in thousands
----------------------------------
Cash flows from investing activities:
Additions to investment properties (33) - (1,778)
Additions to investment properties
under construction (210) (916) (2,852)
Proceeds from sale of investment property
under construction - - 3,170
Net cash flows used in investing activities (243) (916) (1,460)
--------- --------- ------------
Cash flows from financing activities:
Receipt of loans from banks and others,
net from origination costs 3,596 8,908 42,028
Repayment of loans from banks and others (9,841) (6,884) (33,966)
Receipt of funds from controlling shareholders 2,000 2,038
Net cash flows generated from (used
in) financing activities (4,245) 2,024 10,100
--------- --------- ------------
Exchange differences on balances of
cash and cash equivalents 574 116 (29)
Decrease in cash and cash equivalents (1,699) (1,176) (24,390)
Cash and cash equivalents at the beginning
of the period 16,256 40,646 40,646
--------- --------- ------------
Cash and cash equivalents and restricted
cash at the end of the period 14,557 39,470 16,256
========= ========= ============
The accompanying notes are an integral part of the 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 2016 and for the three-month period then ended ("interim condensed consolidated financial statements"). These financial statements should be read in conjunction with the Company's annual financial statements and accompanying notes as of 31 December 2015 ("annual financial statements").
b. 1. Further to that stated in Note 1(b) to the annual financial statements regarding the further decline in the state of the Russian economy, the negative trend continued during 2016. However, through March 31(st) 2016, the Russian Ruble strengthened relative to the U.S. Dollar by approximately 8%, to a rate of 67.6 Ruble to the Dollar. Following the balance-sheet period, a further appreciation of the Ruble to the Dollar of approximately 3% was recorded. The Russian economy continues to present a decline in GDP and there are no signs of a foreseeable recovery of the Russian market.
2. As a result of the further decline of the Russian economy, as explained above, at the end of 2015, the Company approached the trustees of the bondholders (series A-F) on February 1(st) 2016 with the purpose of assessing the implications of the decline of the feasibility of the restructuring program as was previously approved by the bondholders. On April 14(th) 2016, the Company reported that the bondholders of series C, D and E which represent the majority in value of the bondholders, have resolved to authorize the trustees of such series to enter negotiations with the Company in order to amend the restructuring program based on the following principles:
1. Approximately USD$180m of the debt owed to the Bondholders will be converted into equity in the Company, leaving approximately US$45m of outstanding bonds (the "Remaining Debt");
2. The Controlling Shareholders will be asked to commit to providing funding of US$25m in aggregate (including US$6 million that has previously been provided to the Company) in return for approximately a 40% interest in the Company's equity. Of this US$25 million, US$5 million is to be paid to the Bondholders (excluding the Majority Shareholders and members of the Fishman family) pro rata to their holdings of bonds in the Company;
3.The Bondholders will have approximately a 60% interest in the Company's equity; and
4. The Remaining Debt will remain unsecured and will be restructured on the following basis: (1) repayment of the Remaining Debt will commence in 2021 with three equal annual instalments, (2) the Remaining Debt will bear an annual interest of 1% which will start to be paid in December 2017, (3) the Company will have the right to repay the Remaining Debt at any time and at its sole discretion without incurring any fees or penalty, (4) there will be no limitation or restriction on the Company raising any additional secured debt and (5) events of default will only be in accordance with Israeli securities law.
5. Bonds held by the Controlling Shareholders and the Fishman family will not be subordinated to the existing bonds held by other bondholders (other than that specified in subsection 2 above). The bonds of the Company, held by subsidiaries of the Company will be written off;
In parallel, on April 14th 2016 the Company announced that the bondholders of series A, B and F resolved to not authorize the trustee to enter negotiations based on the above principles.
Additionally, in the period prior to the publication of the financial statements, the trustees of the bondholders of series E and F resolved to defer the dates of repayment of the principal and interest to June 30(th) 2016 and to defer the final maturity date and interest of series A and B to June 5(th) 2016.
Similarly, on May 1(st) 2016, the Company announced that it had received a total of $ 6.1 million from the controlling shareholder companies. the receipt of the funds by the Company is an advance provided by the controlling shareholder companies as part of the original re-settlement plan as was approved but not completed.
3. Certain financing agreements with lending banks in Russia contain various financial covenants which as of March 31(st) 2016, the Company is largely not in compliance. These include, inter alia, a certain LTV ratio, minimum occupancy rates and debt coverage and interest ratios. As of the day of this report the Company is in default of $ 1.25 million out of a total of $ 4 million that was due to a financing bank which financed three yielding projects of the company in Russia. The Company is in negotiations with the financing bank in order to formulate a new framework for the payment of loans provided by it (approximately $ 214.8 million).
As a result, the Company classified in its financial statements of March 31(st) 2016, loans from lending banks, in which the Company is in breach of its covenants, an amount of $ 196.6 million as current liabilities.
4. The Company has a working capital deficiency of approximately $ 390 million as of March 31, 2016, a loss attributable to the shareholders of approximately $ 14.6 million for the quarter then ended and a total loss of approximately $ 11.1 million for the quarter then ended. Similarly, for the quarter ending on 31 March 2016 there was a capital reduction attributable to the shareholders of the Company of a total of $ 9.1 million, such that true to 31 March 2016 negative capital attributable to the shareholders of approximately $ 43.2 million. Similarly, the Company has capital balances to the date of signing of this statement of $ 14.6 million. In the view of Company management, the cash balances available to the Company provide adequate coverage for the Company's obligations for a 12 month period from the date of signing the financial statements, presuming neither payments to the bondholders are executed nor principal payments to some of the financing banks in Russia during the said period.
The Company continues to closely monitor the economic developments in Russia which are external to the Group and beyond its control and is continuing taking steps, to the extent possible, to minimize its exposure to the economic situation. These measures include, among others, the establishment of a maximum exchange rate to tenants of the Company's properties and conducting negotiations with financing bodies for the purpose of postponing the dates of payment of the loans until the stabilization of the economic situation.
As a result of the continued negotiations with the bondholders and the fact that a new settlement agreement has not been reached with the bondholders, the Company will presumably continue to defer payments to the banks financing its activities in Russia.
In view of all of the aforementioned, there is a material uncertainty that 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, 2016:
Carrying Fair
amount Value
--------------- ----------
U.S. dollars in thousands
---------------------------
Financial liabilities:
Debentures (series A) 4,481 1,007
Debentures (series B) 18,688 6,891
Debentures (series C) 38,239 7,604
Debentures (series D) 46,513 9,570
Debentures (series E) 113,477 23,253
Debentures (series F) 41,984 9,125
263,382 57,450
=============== ==========
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
2016: U.S. dollars in thousands
---------------------------------
Segment revenues 7,092 499 7,591
========== =========== ========
Segment results (14,695) (4,397) (19,092)
========== ===========
Unallocated income (1,589)
Finance costs, net 2,957
Profit before taxes on income (17,724)
========
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
---------- ----------- ---------
U.S. dollars in thousands
----------------------------------
Year ended 31 December 2015:
Segment revenues 35,079 51,206 86,285
========== =========== =========
Segment results (38,298) (8,256) (46,554)
========== =========== ---------
Unallocated expenses (10,447)
Finance expenses, net (119,480)
Loss before taxes on income (176,481)
=========
NOTE 5: - MATERIAL EVENTS DURING THE PERIOD
On February 15, 2016 the Company Board approved the receipt of a further advance of $ 2 million from the controlling shareholder companies. The advance is part of the future payments that the Company is supposed to receive in accordance with the proposed settlement agreement between the Company and its holders of debentures. No interest amount was set for the loan and no repayment date has yet been set. The loan is valued at fair market rate. In light of the fact that the accrued interest of the loan is valued as a negligible amount and the benefit from the controlling shareholders is valued at $ 2 and was recorded in the equity as Capital reserve for transactions with controlling shareholders.
NOTE 6: - SUBSEQUENT EVENTS
1. On the 10(th) of April 2016, at the general meeting of the holders of debentures of the Company (Series A-F), a report was given by the Company's representatives regarding the Company's financial state, including an update on the status of negotiations with the financing bank in Russia, as well as the Company's assessment, including a timeline of events in the case that a new framework between the financing bank in Russia and the Company for the payment of loans provided by it has not been achieved, as well as a report by representatives of the Company and the holders of debentures' representatives and the trustees, regarding the actions from the date of the holders of debentures' meetings held on 18.10.2015 until the date of the meetings.
2. On the 14(th) of April, 2016, the Company reported that Clal Insurance Company Ltd. ("Clal") has been a substantial shareholder of the Company as of 31.1.2013, the date that the Company became aware of Clal's status as a substantial shareholder was the 14(th) of April 2016.
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This information is provided by RNS
The company news service from the London Stock Exchange
END
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May 18, 2016 02:00 ET (06:00 GMT)
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