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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Raven Russia | LSE:RUS | London | Ordinary Share | GB00B0D5V538 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 45.50 | 45.60 | 46.80 | 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
TIDMRUS
RNS Number : 2140Z
Raven Russia Limited
13 March 2017
13 March 2017
Raven Russia Limited ("Raven Russia" or the "Company")
Results for the year ended 31 December 2016
The Board of Raven Russia releases the results for the year ended 31 December 2016.
Highlights
-- IFRS profit after tax $7.7 million (2015: Loss of $192.4 million); -- Underlying earnings after tax of $47.1 million (2015: $54.6 million); -- Basic underlying earnings per share 7.17 cents (2015: 8.17 cents); -- IFRS basic earnings per share 1.17 cents (2015: Loss per share 28.81 cents); -- Year end cash balance of $198.6 million (2015: $202.3 million); -- Diluted net asset value per share 71 cents (2015: 70 cents); and -- Distribution of 2p (2015: 1p) by way of tender offer buy back of 1 in 26 shares at 52p.
CEO Glyn Hirsch said "Local markets feel like they are bouncing along the bottom and we have backed that belief through seeking acquisition opportunities. We are beginning to feel more confident and look forward to improving macro conditions and hard evidence of improved trading on the ground."
Enquiries
Raven Russia Limited Tel: + 44 (0) 1481 712955
Anton Bilton
Glyn Hirsch
Novella Communications Tel: +44 (0) 203 151 7008
Tim Robertson
Toby Andrews
N+1 Singer Tel: +44 (0) 20 7496 3000
Corporate Finance - James Maxwell / Liz Yong
Sales - Alan Geeves / James Waterlow
Ravenscroft Tel: +44 (0) 1481 729100
Semelia Hamon
This announcement contains forward-looking statements that involve risk and uncertainties. The Group's actual results could differ materially from those estimated or anticipated in the forward-looking statements as a result of many factors. Information contained in this announcement relating to the Company should not be relied upon as a guide to future performance.
About Raven Russia
Raven Russia was founded in 2005 to invest in class A warehouse complexes in Russia and lease to Russian and International tenants. Its Ordinary Shares, Preference Shares and Warrants are listed on the Main Market of the London Stock Exchange and admitted to the official list of The International Stock Exchange Authority ("TISEA"). Its Convertible Preference Shares are admitted to the official list of the TISEA and trading on SETSqx market of the London Stock Exchange. The company has a market capitalisation of approximately GBP335 million and the capital value of all of its listed instruments is GBP610 million. The Company operates out of offices in Guernsey, Moscow and Cyprus and has to date completed a portfolio of circa 1.5million square metres of Grade "A" warehouses in Moscow, St Petersburg, Rostov-on-Don and Novosibirsk. For further information visit the Company's website: www.ravenrussia.com
Chairman's Message
As with my message at the half year, I continue on a more positive note. Our short term objective of improving our balance sheet and seeking acquisitions has been successful and results for the year have exceeded our expectations.
Underlying earnings for the year have remained healthy at $47 million (2015: $55 million) with the foreign exchange environment improving for us. Property values have fallen but only slightly, resulting in a deficit of $43 million for the year, driven by the drop in estimated rental values ("ERVs") (2015: loss of $257 million). This has had a marked effect on our IFRS earnings and we have recorded a much improved post tax profit of $7.7 million in 2016 following an after tax loss in 2015 of $192.4 million.
The issue of new convertible preference shares in July, raising GBP109 million, has allowed us to reduce our secured, amortising debt and the cost of that amortisation. We have repaid $165 million of secured debt and amortisation in the year.
Included in this was the payment of $16 million for the release from existing bank facilities of $31 million, resulting in a $15 million book profit.
Following this restructuring, we still had almost $200 million of cash at the year end and have since announced the conditional acquisition of three properties in St Petersburg for $83 million at an initial yield of over 16%. We expect to complete this transaction in the next month. We have cash of $215 million today and are continuing to assess potential acquisitions.
This positive progress is tempered by the fact that our average occupancy levels remained at 81% over the year although this belies our efforts dealing with maturities and securing new lettings.
As the percentage of our Rouble denominated leases increased, this translated into a drop in US Dollar denominated net operating income ("NOI") from $174 million in 2015 to $152 million in 2016. Rouble rents now account for 26% (2015: 21%) of our warehouse gross lettable area ("GLA").
This gives basic underlying earnings per share of 7.17 cents (2015: 8.17 cents), basic IFRS earnings per share of 1.17 cents (2015: loss per share 28.81 cents) and diluted NAV per share of $0.71 (2015: $0.70).
Whilst a number of macroeconomic and political factors have positively contributed to Russian sentiment in the last 12 months and particularly since the year end, we still remain wary and our occupancy levels reflect the continuing caution in the market. That said, we intend to distribute 2p by way of a tender offer buy back of 1 share in every 26 at 52p, making 2.5p for the year.
We are again extremely grateful for the continued support of our shareholders over the last twelve months.
Richard Jewson
Chairman
12 March 2017
Strategic Report
Chief Executive's Report
Dear Shareholders,
Let's make Raven Russia great again!
That's what we were working flat out on all last year with little macro help. Hard times call for hard work and it has been a year of decisive action and execution.
We are pleased with our results after such a hectic and difficult period. Diluted NAV per share was $0.71 at the year end (2015: $0.70) and IFRS profit before tax, after some one-off profit and further write downs on the portfolio, was $22.2 million (2015: loss of $205.1 million). Basic underlying earnings per share were 7.2 cents (2015: 8.2 cents). With $199 million of year end cash balances, we feel it appropriate to distribute the equivalent of 2p per share, making 2.5p for the year (2015: 2p) by way of a tender offer buy back of 1 in 26 shares at 52p per share.
Facing the increasing "Roubilisation" of our business we are embracing that change and ensuring all new rouble rents benefit from attractive annual indexation which varies between 5-7% per annum. In 2016 we let 167,000sqm of space and our average vacancy rate ran at 19%.
In order to strengthen our balance sheet and provide funding for opportunistic acquisitions we were delighted by shareholder support for our GBP109 million issue of convertible preference shares. Those supporters have already been rewarded with 3.2p in dividends and a 16% price rise on their 100p investment.
Key employees continue to fight very hard in a difficult business environment for every Dollar, Pound or Rouble of value and we are pleased to have held the team together.
We have put our additional liquidity to good use with $108 million being applied to reorganise the Group's banking. Maturities have been extended, amortisation reduced and covenants adjusted. All this whilst maintaining an average cost of debt of 7.5% (2015: 7.3%) for the Group.
In particular we managed to make a $15 million profit by opportunistically negotiating a release from $31 million of loans for a payment of $16 million. (Not everyone has the same view of the future).
We also sold a small land plot in St Petersburg for a profit of $3.8 million.
Local markets feel like they are bouncing along the bottom and we have backed that belief through seeking acquisition opportunities. We are in the process of investing $83 million to buy a portfolio of income producing properties on a passing yield of 16% and at a price that's below the replacement cost of the assets. The additional annual income of $13 million will flow straight to the bottom line. We continue our quest for more acquisitions.
It was disappointing to suffer a small drop in the portfolio valuation at the year end. Hopefully we have seen the last of the falls in ERV and look forward to some hardening of yields.
Agents' reports predict a reduction in warehouse supply and increasing take up. We hope they are right as that can only be positive.
With the oil price higher, the Rouble stronger and Trump in the Oval Office we are beginning to feel more confident and look forward to improving macro conditions and more hard evidence of improved trading on the ground.
The Russian economy appears to be stabilising and inflation is falling. Further reductions in Rouble interest rates also have the potential to increase the attraction of our high yielding assets.
We have been through a storm yet there's the chance of clear skies on the distant horizon.
Glyn Hirsch
Chief Executive Officer
12 March 2017
Business Model
Our Strategy
We continue with our strategy of building and maintaining an investment portfolio of Grade A logistics warehouses in Russia with the aim of producing rental income that delivers progressive distributions to our shareholders.
Following the rapid drop in oil prices at the end of 2014 and the effect that had on our market with the related depreciation of the Rouble exchange rate, the last two years were focussed on maintaining the integrity of our existing portfolio. The restructuring of our balance sheet in the second half of last year and the recent relative stability in the market has now allowed us to return to a more progressive business model.
Business Model
Our business model continues to adapt to underlying Rouble denominated leases rather than the US Dollar pegged model that existed until the beginning of 2015. The issue of convertible preference shares during the year and the use of the proceeds to reduce secured amortising debt facilities means that income generated from the existing portfolio supports on-going cash flow obligations. With a cash surplus we can now return to building our top line by acquisition and build to suit opportunities. We are currently considering a variety of different earnings enhancing projects and a variety of different fund raising structures, including the issue of convertible preference shares. Due diligence is being completed on potential warehouse acquisitions with passing rents varying between $10 million and $15 million and initial yields of circa 15%.
At the year end, 24% of our warehouse income was denominated in Roubles. These leases represent 26% of the Gross Lettable Area ("GLA") of our warehouse portfolio.
As well as managing this transition in our business model fundamentals, we remain focussed on the other elements of our model, being:
- Tenant size and covenant; - Tenant concentration; - SPV structure; and - Conservative gearing.
Even after the turmoil of the last two years, we continue to have relatively high occupancy in our portfolio and tenants meet their contractual obligations when due. Our tenants tend to be large domestic or international groups with strong covenants which allow them to take large lettings. Our average letting size by tenant is 11,240sqm (2015: 9,500sqm). We do not have one tenant with more than 11% (2015: 11%) of our portfolio's GLA and the top ten tenants account for 46% (2015: 45%) of our portfolio in GLA terms and 58% (2015: 56%) in income terms.
Each of our projects sits in a special purpose vehicle ("SPV") with debt secured on individual assets, no cross collateralisation and minimal recourse to the holding company. As our debt was previously reasonably highly amortised, historically, our gearing has remained manageable, even at times of trough valuations. The partial repayment programme completed during the year has increased covenant headroom. Our asset specific debt represents 55% (2015: 65%) loan to value at the year end and consolidated balance sheet gearing is 56% (2015: 58.%) [note 35d].
Key Performance Indicators ('KPIs')
We continue to focus on occupancy KPIs together with the mix of Rouble and US Dollar denominated income and how that is likely to change over the medium term. The components of our balance sheet gearing and our operating cash flows after interest and debt amortisation as a measure of debt service cover were key in our decision to issue new convertible preference shares in the year. .
The ability to distribute to ordinary shareholders from cash covered underlying earnings and operating cash-flows after interest remains our focus when determining distribution policy.
Portfolio Review
Leasing and maturities
Warehouse Moscow St Petersburg Regions ----------------- ------------ -------------- ---------- Space (000 sqm) 1,077 (73%) 184 (12%) 222 (15%) NOI ($m) 112 (76%) 18 (12%) 17 (12%) ----------------- ------------ -------------- ---------- Office Moscow St Petersburg Regions ----------------- ------------ -------------- ---------- Space (000 sqm) - 16 (100%) - NOI ($m) - 5 (100%) - ----------------- ------------ -------------- ----------
The geographical split for warehouse space and income has not varied in the year.
Average vacancy has remained stable at 19%, although this does not mean we haven't been busy in leasing, re-negotiating leases and renewing expiring contracts with our customers.
'000 sqm 2016 2017 2018 2019 2020-2027 Total -------------------- ----- ----- ----- ----- ---------- ------ Maturity profile at 1 January 2016 228 210 131 225 429 1,223 Lease extensions 81 44 20 12 0 157 Vacated/terminated 147 17 23 0 0 187 Remaining lease maturity profile 0 149 88 213 429 879 -------------------- ----- ----- ----- ----- ---------- ------
157,000sqm of existing leases have been renegotiated and extended in the financial year. Space vacated on maturity and early terminations of weaker covenants totalled 187,000sqm which, together with existing vacant space, gives 295,700sqm of vacancy at 31 December 2016. The result is a new lease maturity profile as follows:
'000 sqm 2017 2018 2019 2020-2027 Total -------------------------- ----- ----- ----- ---------- ------ Remaining lease maturity profile 149 88 213 429 879 Maturity profile of lease extensions 50 42 21 44 157 New leases 16 35 18 98 167 Maturity profile at 31 December 2016 215 165 252 571 1,203 -------------------------- ----- ----- ----- ---------- ------
This reflects 167,000sqm of new leases signed in the year in addition to the 157,000sqm of existing lease renegotiations. There are also potential breaks in the portfolio of 70,500sqm in 2017 and 33,100sqm in 2018. Since the year end, a further 16,500sqm of renewals and new lettings have been completed and letters of intent on 4,800sqm signed.
During the year we have successfully defended claims from tenants in various levels of the Russian courts and the International Commercial Arbitration Court in Moscow seeking to undermine our signed lease contracts. Whilst we always seek to find compromise if possible, the strength of our contracts has protected us in these litigation challenges.
We managed to resolve our dispute with Dixy at Noginsk with both parties agreeing to settle their differences and Dixy leasing 43,000sqm on a new eight year lease at market rent.
Our historic long term US Dollar contracts to strong covenants still underpin our NOI, but where space is vacant and available to let we have taken a market lead strategy of leasing to a broader cross section of tenants on varying lease terms to create cash-flow in the short term. By their nature these leases are generally less than five years, contain breaks, are denominated in Roubles and have indexation based on Russian CPI.
At the year end 50% of our warehouse GLA had US Dollar denominated leases with an average warehouse rental level of $125 per sqm and a weighed average term to maturity of 3.0 years. Rouble denominated or capped leases account for 26% of our total warehouse space with an average warehouse rent of Roubles 5,120 per sqm and weighted average term to maturity of 4.0 years. Rouble leases have an average minimum annual indexation of 7.7%.
Hot Features
Premium
Currency exposure of warehouse space USD USD/RUB cap RUB EUR Vacant Total
-------------------------------------- ------ ------------ ------ ------ ------- ------
sqm sqm sqm sqm Sqm sqm
'000 '000 '000 '000 '000 '000
-------------------------------------- ------ ------------ ------ ------ ------- ------
745 79 313 50 296 1,483
-------------------------------------- ------ ------------ ------ ------ ------- ------
% of total 50% 5% 21% 4% 20% 100%
-------------------------------------- ------ ------------ ------ ------ ------- ------
Currency exposure of NOI USD USD/RUB cap RUB EUR Total
-------------------------- ---- ------------ ---- ---- ------
$m $m $m $m $m
-------------------------- ---- ------------ ---- ---- ------
107 9 26 6 148
-------------------------- ---- ------------ ---- ---- ------
% of total 72% 6% 18% 4% 100%
-------------------------- ---- ------------ ---- ---- ------
Investment Portfolio
Moscow
In Moscow there are nine projects totalling 1,077,000sqm, producing income of $112 million and with 79% of space let.
Warehouse complex Space (000 sqm) NOI ($m) Occupancy ------------------- ---------------- --------- ---------- Pushkino 213 17 78% Istra 206 21 88% Noginsk 204 26 84% Klimovsk 158 19 82% Krekshino 118 15 91% Nova Riga 67 2 24% Lobnya 52 8 100% Sholokhovo 45 3 48% Southern 14 1 80% ------------------- ---------------- --------- ----------
The Moscow portfolio had a net reduction of 17,900sqm during the year reflecting the highly competitive market around the capital and optimisation of supply chains by tenants following lease expiries.
St Petersburg and Regions
Warehouse complex Space ('000 sqm) Annualised NOI ($m) Occupancy
------------------- ----------------- -------------------- ----------
St Petersburg
Shushary 148 15 98%
Pulkovo 36 3 68%
------------------- ----------------- -------------------- ----------
Regions
Novosibirsk 121 10 78%
Rostov 101 7 67%
------------------- ----------------- -------------------- ----------
Office
------------------- ----------------- -------------------- ----------
St Petersburg
Constanta 16 5 100%
------------------- ----------------- -------------------- ----------
The regional markets of St Petersburg, Rostov and Novosibirsk have fared better in 2016. These markets certainly feel under less pressure than Moscow as the amount of speculative new development has historically been less. In Rostov and Novosibirsk we are seeing good interest from major occupiers for larger areas of space which we hope to covert into new lettings during the course of the next six months.
Tenant Mix
Warehouse Distribution Retail Manufacturing Third Party Logistics operators Other
Tenant Type
-------------------- ------------- ------------ -------------- -------------------------------- ---------
Space ('000 sqm) 135 (11%) 347 (29%) 177 (15%) 523 (44%) 6 (1%)
-------------------- ------------- ------------ -------------- -------------------------------- ---------
Portfolio Yields
Warehouse Moscow (%) St Petersburg (%) Regions (%) ----------- ----------- ------------------ ------------ 2015 12.0 13.25 14.5 2016 11 - 12.5 13.25 14.5 ----------- ----------- ------------------ ------------
The investment properties and additional phases of existing projects were valued by Jones Lang LaSalle ("JLL") at the year end, in accordance with the RICS Valuation and Appraisal guidelines, and are carried at a market value of $1.36 billion (see notes 11 & 12 to the financial statements). This has resulted in a decrease of $43.6 million in portfolio value since the end of 2015.
Yields have remained stable during the year, although JLL have now taken to quoting a range for yield across all sectors to reflect the difference in quality of assets, leases and differing currencies. The yields used for the portfolio fall within this range. Estimated rental values (ERVs) fell at the start of the year and through the summer, but have now stabilised, albeit at the level where development returns are extremely marginal.
No speculative development is planned at the current time although there is 26 hectares at Noginsk on which 134,000sqm of space can be built and at Nova Riga there is the potential to add a further 130,000sqm on the additional 25 hectares of land. Our regional land bank is also attracting interest from some of the largest retailers who are looking to expand their regional distribution hubs, although we would only start development with a long term pre-let agreement signed.
Land Bank
Location Property/Warehouse Land plot size
Complex (ha)
------------------------ ---------- -------------------- ---------------
Additional phases
of completed property Moscow Noginsk 26
------------------------
Nova Riga 25
Lobnya 6
Regions Rostov-On-Don 27
---------- --------------------------------------------- ---------------
Land bank Regions Chelyabinsk 59
Omsk 19
Omsk 2 9
Ufa 48
Novgorod 44
-------------------------------------------------------- ---------------
Total 263
---------------------------------------------------------- ---------------
The Market
The warehouse market remains a Rouble denominated business with the highest level of demand from major retailers improving their supply chains across Russia. Completion of new space in the Moscow region was at its lowest level since 2012 at circa 770,000sqm and since the middle of 2016 the market vacancy rate has improved to 12.2%, with the final quarter of the year seeing the highest take up in market history. Total take up for the year was circa 1.2 million sqm, although a considerable amount of this reflected build to suit properties delivered to end users requirements.
Rents have stabilised in the second half of the year at between 3,500 and 4,000 Roubles per sqm which at the year end exchange rate to the US Dollar reflect $58-$66 per sqm. At this level, development remains a very marginal return business, unless a tenant has signed a pre-lease agreement.
In St Petersburg and our two regional hubs of Rostov and Novosibirsk the level of new supply has dwindled and the vacancy rates are less than 10%. Rents and occupancy have generally held up better than in Moscow, with prime rental levels at similar rates to Moscow having traditionally been 10-15% less.
Investment volumes in the year increased to $4.2 billion, with 80% of this in Moscow. Over 90% of all deals were funded by Russian capital, with a concentration on the office market and only $239 million in the warehouse sector. JLL indicate prime yields in the range of 11-12.5% for Moscow warehouses.
Looking forward to 2017, vacancy rates are expected to fall, although not substantially and rents stabilise or begin to increase. The supply of new developments will continue to be subdued.
Finance Review
The theme for this year has been one of adapting our balance sheet to properly support our income profile in today's market. We have also benefited from a more benign macro economic environment following the volatility of the first quarter of 2016.
Underlying earnings together with operating cash-flows after interest are the KPIs we use when assessing our ability to make covered distributions. The former also allows a comparison of operating results before mark to market valuation movements. The reconciliation between underlying and IFRS earnings is given in note 9 to the accounts.
Underlying Earnings 2016 2015
(Adjusted non IFRS measure) $'000 $'000
--------------------------------------------- --------- -------------------
Net rental and related income 151,741 174,123
Administrative expenses (24,221) (26,361)
Long term incentives (3,133) -
Bad debt provision (22) (3,720)
Foreign exchange gains 18,079 1,223
Share of profits of joint ventures 1,780 2,518
--------- -------------------
Operating profit 144,224 147,783
Net finance charge (81,923) (82,836)
--------- -------------------
Underlying profit before tax 62,301 64,947
Tax (15,179) (10,389)
Underlying profit after tax 47,122 54,558
--------- -------------------
Basic underlying earnings per share (cents) 7.17 8.17
--------------------------------------------- --------- -------------------
Net rental and related income continues to reduce as maturing leases move from US Dollar pegged to Rouble denominated with a drop of $22.4 million over the year.
Administrative expenses reduce following a switch of costs from standard employment to a long term incentive charge. Success in recovery of bad debts has also meant no significant charge arose during the year (2015: $3.7 million).
Foreign exchange movements continued the theme from the interim results, weak Sterling and strengthening Rouble boosting the US Dollar value of cash and income and reducing the US Dollar value of our Sterling preference shares. This contributed an $18.1 million gain (2015: $1.2 million) to underlying profits and $10.9 million (2015: loss of $1.8 million) to net assets, going some way to recover the significant foreign exchange losses that arose in the income statement in 2014.
Finance costs remained flat over the year at $85.4 million (2015: $85.7 million) although the balance sheet mix changed in the second half as we used the proceeds from our convertible preference share issue to reduce our secured amortising debt. Finance income from cash balances held increased to $3.4 million (2015: $2.9 million).
Underlying tax increased to $15.2 million (2015: $10.4 million) and we expect this to be a continuing trend as new tax rules are introduced limiting the offset of tax losses in the future. Actual tax paid, after the offset of losses, was $7.7 million (2015: $8.7 million).
With the support of an improving foreign exchange environment, underlying earnings have held up well in the year at $47.1 million (2015: $54.6 million) giving Basic Underlying Earnings per Share of 7.2 cents (2015: 8.2 cents).
IFRS Earnings 2016 2015
$'000 $'000
------------------------------------------ --------- --------------------
Net rental and related income 151,741 174,123
Administrative expenses (25,322) (26,775)
Bad debt provision (22) (3,720)
Share based payments and other long term
incentives (9,077) (3,594)
Foreign exchange profits 18,079 1,223
Share of joint venture profits 1,780 2,518
--------- --------------------
Operating profit 137,179 143,775
Loss on revaluation (43,324) (256,548)
Profit on disposal 3,807 -
Net finance charge (75,416) (92,283)
IFRS profit/(loss) before tax 22,246 (205,056)
--------- --------------------
Tax (14,527) 12,697
--------- --------------------
IFRS profit/(loss) after tax 7,719 (192,359)
------------------------------------------ --------- --------------------
IFRS earnings reflect a number of positive events in the year.
Asset valuations continue to align with market ERVs but at a significantly reduced rate compared to 2015. The revaluation loss for the year is $43.3 million (2015: loss of $256.5 million).
We also sold a land plot at Pulkovo in St Petersburg generating $3.8 million profit and negotiated a release from bank facilities with HSH Nordbank, generating a $15.4 million profit which is included in Finance Income.
Share based payments and other long term incentive charges have increased following the introduction of the new remuneration scheme in the year with some offset against underlying employment costs.
This all resulted in a significant improvement in IFRS earnings from a loss of $192.4 million in 2015 to a profit of $7.7 million in 2016.
Investment Properties
The market value of our investment property fell during the year but at a significantly reduced rate compared to 2015. This was driven by a small reduction in expected ERVs. The year end market value was $1.324 billion (2015: $1.357 billion). After cost additions of $7.1 million during the year this generated a revaluation loss of $40.4 million (2015: $251.6 million).
Investment properties under construction including our land bank are valued at $40.8 million (2015: $38.1 million) a revaluation loss of $3.1 million offset by additional costs incurred and positive foreign exchange movements. As noted above we also disposed of land in St Petersburg, generating a profit of $3.8 million.
Cash and Debt
Cash flow Summary 2016 2015
$'000 $'000
---------------------------------------------- ---------- ----------
Net cash generated from operating activities 118,012 136,152
Net cash (used)/generated/in investing
activities (992) 12,868
Net cash used in financing activities (120,759) (110,300)
Net (decrease)/increase in cash and cash
equivalents (3,739) 38,720
Effect of foreign exchange rate changes 69 (7,812)
---------- ----------
(Decrease)/increase in cash (3,670) 30,908
---------- ----------
Closing cash and cash equivalents 198,621 202,291
---------------------------------------------- ---------- ----------
The summary of cash and debt reflects the work undertaken to reorganise the Group balance sheet. The cash balance movement was minimal in the year but this is after the repayment of secured debt facilities of $164.5 million including amortisation, funded by the issue of convertible preference shares which generated $128.3 million of cash. As part of this exercise, the maturity of secured debt facilities was extended and future amortisation costs reduced.
Apart from annual amortisation, we now have no significant debt maturities until 2019 and our weighted average term to maturity has been extended by almost two years to 4.7 years at 31 December 2016.
Our cost of debt has increased slightly to 7.5% (2015: 7.3%) as LIBOR increases remain below our cap levels.
Debt 2016 2015
$m $m
---------------------------------------- ------ ------
Fixed rate debt 131 260
Debt hedged with swaps 112 212
Debt hedged with caps 469 456
------ ------
712 928
Unhedged debt 37 -
------ ------
749 928
Unamortised loan origination costs and
accrued interest (9) (9)
Total debt 740 919
------ ------
Undrawn facilities - -
------ ------
Weighted average cost of debt 7.48% 7.26%
------ ------
Weighted average term to maturity 4.7 4.0
---------------------------------------- ------ ------
The quantum and number of facilities maturing each year is shown below.
Year 2017 2018 2019 2020 2021 2022 2023-2024 --------------------------- ----- ----- ----- ----- ----- ----- ---------- Debt maturing ($ million) 0 14 149 39 258 201 88 --------------------------- ----- ----- ----- ----- ----- ----- ---------- Percentage of total debt maturing (%) 0 2 20 5 34 27 12 --------------------------- ----- ----- ----- ----- ----- ----- ---------- Number of maturing facilities 0 1 3 2 4 3 2 --------------------------- ----- ----- ----- ----- ----- ----- ----------
As referred to earlier, we have now cleared our facilities with HSH Nordbank which were secured on the Konstanta office block in St Petersburg. This was precipitated by the proposed sale of part of their debt book which was publically announced last year and involved us repaying the majority of one facility and our release from the second, generating a profit of $15 million when compared to the carrying value of the loans of $31 million.
Since the year end, we have completed the refinancing of another of our higher amortising loans, repaying the existing bank $75 million of principal and drawing $80 million under the new loan which matures in 2024. The cost of debt is on similar terms to the previous facility but with a much reduced amortisation profile.
Subsidiaries
The Group's trading subsidiaries have again performed well in the year. Raven Mount contributed $2.1 million of profit (2015: $3.9 million) even in this environment of depressed Sterling exchange rates.
Our third party logistics subsidiary, Roslogistics, continues to grow its underlying Rouble turnover and has increased its warehouse space by 26,000sqm, now operating out of 129,000sqm in total.
Outlook
There has been a significant amount of effort from all areas of the business this year, not only to maintain the occupancy levels of our assets and the integrity of our leases but in fundraising in an uncertain market and then applying those funds to secure significant benefit to our on-going cash flows and balance sheet security. The hard work has also left us in a strong position to take advantage of high yielding opportunities as evidenced by the recent announcement on the acquisition of three assets in St Petersburg.
Risk Report
Risk Appetite
The risks facing the business have been at the top of the Board's agenda over the last 24 months and have necessitated rapid changes in our approach.
Our risk profile fundamentally remains the same. We invest in a lower risk asset class with historic structural undersupply in a higher risk jurisdiction. As explained in last year's Annual Report, external events meant that our market moved from income streams pegged to the US Dollar to Rouble denominated contracts. In a weak Rouble environment, this can mean progressively lower US Dollar income as current leases mature and are renewed on market terms.
The first nine months of this year were focussed on restructuring the Group balance sheet to support the market changes whilst maintaining occupancy levels in the existing portfolio. With this achieved we are now focussed on rebuilding our Net Operating Income through the acquisition of market rented assets or build to suit development projects. Therefore after two years of a defensive position our risk appetite is once again aligned to supporting growth.
Risk Management and Internal Controls
The business is of a size and culture where risks are discussed and reviewed, formally and informally, at all levels. The Board is responsible for the management of risk and regularly carries out a robust assessment of the principal risks and uncertainties affecting the business, discusses how these impact operations, performance and solvency and what mitigating actions, if any, can be taken. Executive Board members are actively involved in all day to day operational and decision making processes of the business.
The Audit Committee is responsible for ensuring that the internal control procedures are robust and that risk management processes are appropriate. A fuller explanation of the processes is given in the Audit Committee Report.
At an operational level, weekly meetings are held with the eight heads of department, the two members of Senior Management and two Executive Board members to discuss all business matters including the risk environment. A sub committee of seven of this group including the two Executive Board members, together with the Company Secretary, form a separate Risk Committee which meets bi-monthly to formally review the Group and Company's risk profile and reports to the Audit Committee twice a year.
The Audit Committee has not identified any significant failings or weaknesses in the internal control and risk assessment procedures during the year. The introduction of a formal property database management system will be completed early in the second quarter of this year and our financial reporting has adapted to run a three year profile of our contracted Net Operating Income which is updated on a weekly basis.
Principal Risks and Uncertainties
We have set out in the following table the principal risks and uncertainties that face our business, our view on how those risks have changed during the year and a description of how we mitigate or manage those risks. We have also annotated those risks that have been considered as part of the viability assessment.
There are no significant changes in the principal risks supported by the sustained period of higher oil prices and stronger Rouble.
Financial Risk
Risk Impact Mitigation Change
--------------------- ----------------------- --------------------------------- --------
Oil price ð
and Foreign
Exchange This leads to While the majority of new
(Viability further falls leases now being signed
Statement in US Dollar are Rouble denominated
Risk) equivalent income with Russian inflationary
and an increase indexation, we still have
Oil price in the credit a high proportion of US
volatility risk of those Dollar pegged rents.
returns in tenants who remain
the medium in US Dollar The logistics market continues
term leading pegged leases. to be undersupplied at
to a weakening current levels of consumer
Rouble. demand. A lack of projected
investment in new projects
Reduced consumer has led to market reports
demand reduces forecasting that vacancy
appetite for levels will remain low.
new lettings,
renewal of existing
leases and restricts
rental growth.
--------------------- ----------------------- --------------------------------- --------
Interest rates ð
(Viability
Statement Cost of debt The majority of our variable
Risk) increases and cost of debt is hedged
Group profitability with the use of swaps and
Increases and debt service caps on US LIBOR or fixed
in US LIBOR cover reduce. rate facilities.
--------------------- ----------------------- --------------------------------- --------
Bank Covenants
(Viability The likelihood ò
Statement of debt facility We have part prepaid secured,
Risk) covenant breaches amortising debt facilities
increases. during the year, increasing
The significant covenant headroom.
drop in market
rents impacts There is very little recourse
on both loan to the holding company
to value ("LTV") and no cross collateralisation
and debt service between projects on events
cover ratio of default.
("DSCR") covenants.
--------------------- ----------------------- --------------------------------- --------
Property Investment
Acquisitions
Immature investment ñ
market where Where acquisitions We have an internal management
legacy issues are possible, team with both international
are common with legacy issues and Russian experience
Russian acquisitions. may erode earnings allowing possible legacy
enhancement and and integration issues
integration into to be identified prior
our existing to acquisition; and
systems may involve
excessive management External advisers undertake
resource. full detailed due diligence.
------------------------ ----------------------- --------------------------------- ---------
Russian Domestic Risk
Risk Impact Mitigation Change
--------------------- ----------------------------- ----------------------------------- ---------
Legal Framework
ð
The legal The large volume We have an experienced
framework of new legislation in house legal team including
in Russia from various a litigation specialist.
is in the state bodies We use a variety of external
early stages is open to interpretation, legal advisors when appropriate.
of its development. puts strain on
the judicial Our lease agreements have
system and can been challenged and have
be open to abuse. proven to be robust in
This could both ICAC arbitration and
encourage Increased litigation in Russian Courts.
tenants to on existing leases
attack lease in an attempt
terms where to renegotiate
they now perceive US Dollar denominated
those to be leases or seek
unfavourable. early termination
of contracts.
--------------------- ----------------------------- ----------------------------------- ---------
Russian Taxation
ñ
Russian tax Tax treaties The key tax treaty for
code is changing may be renegotiated the Group is with Cyprus
in line with and new legislation and this was renegotiated
global taxation may increase between the two countries
trends in the Group's tax during 2013 with no significant
areas such expense. impact on the business;
as transfer
pricing and Changes in capital gains
capital gains tax rules have led to a
tax. change in our calculation
of Adjusted Diluted NAV
per share; and
Russia remains a relatively
low tax jurisdiction with
20% Corporation tax.
--------------------- ----------------------------- ----------------------------------- ---------
Personnel Risks
Risk Impact Mitigation Change
-------------- ------------------------ ------------------------------------- --------
Key Personnel
ð
Failing to Strategy becomes The Remuneration Committee
retain key more difficult and Executives review remuneration
personnel. to flex or implement. packages against comparable
market information;
Employees have regular
appraisals and documented
development plans and targets;
and
A new incentive scheme
was approved at the last
AGM with a focus on retention.
-------------- ------------------------ ------------------------------------- --------
Political and Economic Risk
Risk Impact Mitigation Change
------------------- ------------------- ------------------------------------------------------------------ --------
Ukraine and
sanctions ð
Continued It is difficult to mitigate
The Minsk isolation against the worst case
agreement of Russia from scenario if escalation
is not implemented international were to close Russia's
satisfactorily markets and borders to Western markets.
and sanctions exacerbation However, we have:
against Russia of the slow down
remain in in the Russian * Maximised cash reserves held at holding company
place for economy. level;
the foreseeable
future and
are potentially * An organisational structure that would allow us to
increased. continue to operate the Russian business autonomously
if necessary; and
* A special purpose vehicle ("SPV") structure that
protects the holding company assets (principally
cash) in a worst case scenario.
With political events in
the West, following Brexit
and the US elections and
with upcoming elections
in other EU countries,
market sentiment has, for
the time being at least,
improved towards Russia.
------------------- ------------------- ------------------------------------------------------------------ --------
Change key
ñ Increased risk in the period
ðStable risk in the period
òDecreased risk in the period
Going Concern
The financial position of the Group, its cash flows, liquidity position and borrowings are described in the Financial Review and the notes to the accompanying financial statements. In addition, in note 35 to the financial statements there is a description of the Group's objectives and policies for managing its capital, financial instruments and hedging activities and its exposure to credit and liquidity risk.
The Board receives monthly updates on future cash flow projections and has regular working capital reports presented, in particular, as part of the half year and full year reporting process. After making appropriate enquiries and examining sensitivities that could give rise to financial exposure, the Board has a reasonable expectation that the Company and the Group have adequate resources to continue operations for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparation of these financial statements.
Directors' Responsibility Statement
The Statement of Directors' Responsibilities below has been prepared in connection with the Company's full Annual Report and Accounts for the year ended 31 December 2016.
The Board confirms to the best of its knowledge:
The financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole;
The strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
The Annual Report and Accounts, taken as a whole, are fair balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 12 March 2017 and is signed on its behalf by:
Mark Sinclair Colin Smith
Chief Financial Officer Chief Operating Officer
GROUP INCOME STATEMENT
For the year ended
31 December 2016
2016 2015
Capital Capital
Underlying and Underlying and
earnings other Total earnings other Total
Notes $'000 $'000 $'000 $'000 $'000 $'000
4 /
Gross revenue 5 195,294 - 195,294 219,704 - 219,704
Property operating expenditure
and cost of sales (43,553) - (43,553) (45,581) - (45,581)
Net rental and related
income 151,741 - 151,741 174,123 - 174,123
----------- --------- --------- ----------- ---------- ----------
4 /
Administrative expenses 6 (24,243) (1,101) (25,344) (30,081) (414) (30,495)
Share-based payments
and other long term
incentives 32 (3,133) (5,944) (9,077) - (3,594) (3,594)
Foreign currency profits 18,079 - 18,079 1,223 - 1,223
Operating expenditure (9,297) (7,045) (16,342) (28,858) (4,008) (32,866)
----------- --------- --------- ----------- ---------- ----------
Share of profits of
joint ventures 16 1,780 - 1,780 2,518 - 2,518
Operating profit / (loss)
before profits and losses
on investment property 144,224 (7,045) 137,179 147,783 (4,008) 143,775
Unrealised loss on
revaluation of investment
property 11 - (40,192) (40,192) - (251,198) (251,198)
Profit on disposal
of investment property
under construction 12 - 3,807 3,807 - - -
Unrealised loss on
revaluation of investment
property under construction 12 - (3,132) (3,132) - (5,350) (5,350)
----------- --------- --------- ----------- ---------- ----------
Operating profit /
(loss) 4 144,224 (46,562) 97,662 147,783 (260,556) (112,773)
Finance income 7 3,436 18,086 21,522 2,909 1,584 4,493
Finance expense 7 (85,359) (11,579) (96,938) (85,745) (11,031) (96,776)
----------- --------- --------- ----------- ---------- ----------
Profit / (loss) before
tax 62,301 (40,055) 22,246 64,947 (270,003) (205,056)
Tax 8 (15,179) 652 (14,527) (10,389) 23,086 12,697
----------- --------- --------- ----------- ---------- ----------
Profit / (loss) for
the year 47,122 (39,403) 7,719 54,558 (246,917) (192,359)
----------- --------- --------- ----------- ---------- ----------
Earnings per share: 9
Basic (cents) 1.17 (28.81)
Diluted (cents) 1.16 (28.81)
Underlying earnings
per share: 9
Basic (cents) 7.17 8.17
Diluted (cents) 6.81 7.93
The total column of this statement represents the Group's
Income Statement, prepared in accordance with IFRS as
adopted by the EU. The "underlying earnings" and "capital
and other" columns are both supplied as supplementary
information permitted by IFRS as adopted by the EU. Further
details of the allocation of items between the supplementary
columns are given in note 9.
All items in the above statement
derive from continuing operations.
All income is attributable to the equity holders
of the parent company. There are no non-controlling
interests.
The accompanying notes are an integral
part of this statement.
GROUP STATEMENT OF COMPREHENSIVE
INCOME
For the year ended
31 December 2016
2016 2015
$'000 $'000
Profit / (loss) for
the year 7,719 (192,359)
Other comprehensive
income, net of tax
Items to be reclassified to profit
or loss in subsequent periods:
Foreign currency translation on
consolidation 10,942 (1,753)
Total comprehensive income for
the year, net of tax 18,661 (194,112)
-------- ----------
All income is attributable to the equity holders of the
parent company. There are no non-controlling interests.
The accompanying notes are an
integral part of this statement.
GROUP BALANCE SHEET
As at 31 December
2016
2016 2015
Notes $'000 $'000
Non-current assets
Investment property 11 1,300,643 1,333,987
Investment property
under construction 12 41,253 39,129
Plant and equipment 3,044 3,141
Goodwill 14 1,882 2,245
Investment in joint
ventures 16 9,731 14,968
Other receivables 17 3,724 6,145
Derivative financial
instruments 19 5,012 5,585
Deferred tax assets 26 27,451 25,523
1,392,740 1,430,723
----------------- ----------
Current assets
Inventory 771 1,381
Trade and other receivables 18 52,669 50,264
Derivative financial
instruments 19 358 233
Cash and short term
deposits 20 198,621 202,291
252,419 254,169
----------------- ----------
Total assets 1,645,159 1,684,892
----------------- ----------
Current liabilities
Trade and other payables 21 65,408 53,384
Derivative financial
instruments 19 943 2,097
Interest bearing loans
and borrowings 22 40,787 104,724
107,138 160,205
----------------- ----------
Non-current liabilities
Interest bearing loans
and borrowings 22 699,038 814,021
Preference shares 23 131,703 156,558
Convertible preference
shares 24 119,859 -
Other payables 25 25,259 31,653
Derivative financial
instruments 19 67 1,794
Deferred tax liabilities 26 61,869 55,619
1,037,795 1,059,645
----------------- ----------
Total liabilities 1,144,933 1,219,850
----------------- ----------
Net assets 500,226 465,042
----------------- ----------
Equity
Share capital 27 12,578 12,776
Share premium 216,938 224,735
Warrants 28 1,161 1,167
Own shares held 29 (7,449) (52,101)
Convertible preference
shares 24 8,453 -
Capital reserve (245,426) (210,176)
Translation reserve (177,199) (188,141)
Retained earnings 691,170 676,782
----------------- ----------
Total equity 30 / 31 500,226 465,042
----------------- ----------
Net asset value per
share (cents): 31
Basic 76 72
Diluted 71 70
Adjusted net asset
value per share (cents): 31
Basic 71 72
Diluted 68 70
----------------- ----------
The financial statements were approved by the Board of
Directors on 12 March 2017 and signed on its behalf by:
Mark Sinclair Colin Smith
Chief Operating
Chief Financial Officer Officer
The accompanying notes are an
integral part of this statement.
GROUP STATEMENT OF
CHANGES IN EQUITY
For the year ended
31 December 2016
Own
Share Share Shares Capital Translation Retained
Convertible
Preference
Capital Premium Warrants Held Shares Reserve Reserve Earnings Total
For the year
ended 31
December
2015 Notes $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2015 13,623 267,992 1,195 (63,649) - 16,597 (186,388) 647,919 697,289
Loss for
the year - - - - - - - (192,359) (192,359)
Other comprehensive
income - - - - - - (1,753) - (1,753)
-------- --------- --------- --------- ------------ ---------- ------------ ---------- ----------
Total comprehensive
income for the
year - - - - - - (1,753) (192,359) (194,112)
-------- --------- --------- --------- ------------ ---------- ------------ ---------- ----------
27
Warrants /
exercised 28 7 198 (28) - - - - - 177
Own shares
acquired 29 - - - (76) - - - - (76)
Own shares
allocated 29 - - - 7,932 - - - (9,145) (1,213)
Ordinary 27
shares /
cancelled 29 (854) (43,455) - 3,692 - - - - (40,617)
Share-based
payments 32d - - - - - - - 3,594 3,594
Transfer in respect
of capital losses - - - - - (226,773) - 226,773 -
-------- --------- --------- --------- ------------ ---------- ------------ ---------- ----------
At 31
December
2015 12,776 224,735 1,167 (52,101) - (210,176) (188,141) 676,782 465,042
-------- --------- --------- --------- ------------ ---------- ------------ ---------- ----------
For the year ended
31 December 2016
Profit for
the year - - - - - - - 7,719 7,719
Other comprehensive
income - - - - - - 10,942 - 10,942
-------- --------- --------- --------- ------------ ---------- ------------ ---------- ----------
Total comprehensive
income for the
year - - - - - - 10,942 7,719 18,661
-------- --------- --------- --------- ------------ ---------- ------------ ---------- ----------
27
Warrants /
exercised 28 2 41 (6) - - - - - 37
Convertible
preference
shares
issued 24 - - - - 8,453 - - - 8,453
Own shares
acquired 29 - - - (133) - - - - (133)
Own shares
disposed 29 - - - 43,161 - - - (28,549) 14,612
Own shares
allocated 29 - - - 1,543 - - - (1,441) 102
Ordinary 27
shares /
cancelled 29 (200) (7,838) - 81 - - - - (7,957)
Share-based
payments 32d - - - - - - - 1,409 1,409
Transfer in respect
of capital losses - - - - - (35,250) - 35,250 -
-------- --------- --------- --------- ------------ ---------- ------------ ---------- ----------
At 31
December
2016 12,578 216,938 1,161 (7,449) 8,453 (245,426) (177,199) 691,170 500,226
-------- --------- --------- --------- ------------ ---------- ------------ ---------- ----------
The accompanying notes are an integral part
of this statement.
GROUP CASH FLOW STATEMENT
For the year ended 31
December 2016
2016 2015
Notes $'000 $'000
Cash flows from operating
activities
Profit / (loss) before
tax 22,246 (205,056)
Adjustments for:
Depreciation 6 1,101 1,599
Provision for bad debts 6 22 3,720
Share of profits of joint
ventures 16 (1,780) (2,518)
Finance income 7 (21,522) (4,493)
Finance expense 7 96,938 96,776
Profit on disposal of investment
property under construction 12 (3,807) -
Loss on revaluation of
investment property 11 40,192 251,198
Loss on revaluation of investment
property under construction 12 3,132 5,350
Foreign exchange profits (18,079) (1,223)
Share-based payments and other
long term incentives 32 5,944 3,594
---------- ----------
124,387 148,947
Changes in operating working
capital
Decrease / (increase)
in operating receivables 4,419 (4,892)
Decrease / (increase) in other
operating current assets 391 (159)
Decrease in operating
payables (8,026) (2,967)
---------- ----------
121,171 140,929
Receipts from joint ventures 4,521 3,954
Tax paid (7,680) (8,731)
---------- ----------
Net cash generated from
operating activities 118,012 136,152
---------- ----------
Cash flows from investing
activities
Payments for investment property and
investment property under construction (9,163) (20,028)
Refunds of VAT on construction 493 4,877
Release of restricted
cash - 25,392
Proceeds from disposal of investment
property under construction 12 4,595 -
Purchase of plant and
equipment (653) (755)
Loans repaid 337 473
Interest received 3,399 2,909
---------- ----------
Net cash (used in) / generated
from investing activities (992) 12,868
---------- ----------
Cash flows from financing
activities
Proceeds from long term
borrowings - 80,944
Repayment of long term
borrowings (108,150) -
Loan amortisation (56,343) (57,787)
Bank borrowing costs paid (66,808) (69,465)
27 /
Exercise of warrants 28 37 177
Preference shares purchased (713) -
27 /
Ordinary shares purchased 29 (7,988) (41,906)
Ordinary shares sold 29 14,612 -
Dividends paid on preference
shares (15,088) (17,156)
Dividends paid on convertible
preference shares (4,349) -
Issue of convertible preference
shares 24 128,327 -
Premium paid for derivative
financial instruments (4,296) (5,107)
---------- ----------
Net cash used in financing
activities (120,759) (110,300)
---------- ----------
Net (decrease) / increase in
cash and cash equivalents (3,739) 38,720
Opening cash and cash
equivalents 202,291 171,383
Effect of foreign exchange
rate changes 69 (7,812)
---------- ----------
Closing cash and cash
equivalents 20 198,621 202,291
---------- ----------
The accompanying notes are an integral
part of this statement.
NOTES TO THE FINANCIAL
STATEMENTS
For the year ended
31 December 2016
1. General information
Raven Russia Limited (the "Company") and its subsidiaries
(together the "Group") is a property investment group specialising
in commercial real estate in Russia.
The Company is incorporated and domiciled in Guernsey under
the provisions of the Companies (Guernsey) Law, 2008. The
Company's registered office is at La Vieille Cour, La Plaiderie,
St Peter Port, Guernsey GY1 6EH.
The audited financial statements of the Group for the year
ended 31 December 2016 were authorised by the Board for
issue on 12 March 2017.
2. Accounting policies
Basis of preparation
The Company has taken advantage of the exemption conferred
by the Companies (Guernsey) Law, 2008, section 244, not
to prepare company financial statements as Group financial
statements have been prepared for both current and prior
periods. The Group financial statements are presented in
US Dollars and all values are rounded to the nearest thousand
dollars ($'000) except where otherwise indicated.
The principal accounting policies adopted in the preparation
of the Group financial statements are set out below. The
policies have been consistently applied to all years presented,
unless otherwise indicated.
The preparation of financial statements in conformity with
IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in
the process of applying the accounting policies. The areas
involving a high degree of judgement or complexity, or areas
where assumptions and estimates are significant to the financial
statements, are disclosed in note 3.
Going concern
The financial position of the Group, its cash flows, liquidity
position and borrowings are described in the Financial Review
and the notes to these financial statements. After making
appropriate enquiries and examining sensitivities that could
give rise to financial exposure, the Board has a reasonable
expectation that the Group has adequate resources to continue
operations for the foreseeable future. Accordingly, the
Group continues to adopt the going concern basis in the
preparation of these financial statements.
Statement of compliance
The financial statements of the Group have been prepared
in accordance with International Financial Reporting Standards
adopted for use in the European Union ("IFRS") and the Companies
(Guernsey) Law, 2008.
Changes in accounting policies
The accounting policies adopted are consistent with those
of the previous financial year. The Group has adopted new
and amended IFRS and IFRIC interpretations as of 1 January
2016, which had no impact on the financial position or performance
of the Group.
Certain new standards, interpretations and amendments to
existing standards have been published that are mandatory
for later accounting periods and which have not been adopted
early. Of these the only three thought to have a possible
impact on the Group are:
IFRS 9 Financial Instruments (effective 1 January 2018)
IFRS 15 Revenue from Contracts with Customers (effective
1 January 2018)
IFRS 16 Leases (effective 1 January 2019)
The Group is currently assessing the impact of these changes
on its financial statements and the effect of this, if any,
has yet to be determined.
The standards, amendments or revisions are effective for
annual periods beginning on or after the dates noted above.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company, its subsidiaries and the special
purpose vehicles ("SPVs") controlled by the Company, made
up to 31 December each year. Control is achieved where the
Company is exposed, or has rights, to variable returns from
its involvement with or ownership of the investee entity
and has the ability to affect those returns through its
power over the investee.
The Group has acquired investment properties through the
purchase of SPVs. In the opinion of the Directors, these
transactions did not meet the definition of a business combination
as set out in IFRS 3 "Business Combinations". Accordingly
the transactions have not been accounted for as an acquisition
of a business and instead the financial statements reflect
the substance of the transactions, which is considered to
be the purchase of investment property and investment property
under construction.
The results of subsidiaries acquired or disposed of during
the year are included in the Income Statement from the effective
date of acquisition or up to the effective date of disposal,
as appropriate.
Where necessary, adjustments are made to the financial statements
of entities acquired to bring the accounting policies into
line with those used by the Group.
All intra-group transactions, balances, income and expenditure
are eliminated on consolidation.
Joint ventures
A joint venture is a contractual arrangement whereby the
parties that have joint control of the arrangement have
rights to the net assets of the joint venture. Joint control
is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the activities require
unanimous consent of the contracting parties for strategic
financial and operating decisions.
The Group's investments in joint ventures are accounted
for using the equity method. Under the equity method, the
investment in a joint venture is initially recognised at
cost. The carrying value of the investment is adjusted to
recognise changes in the Group's share of net assets of
the joint venture since the acquisition date. Any premium
paid for an interest in a joint venture above the fair value
of the Group's share of identifiable assets, liabilities
and contingent liabilities is determined as goodwill. Goodwill
relating to a joint venture is included in the carrying
amount of the investment and is neither amortised nor individually
tested for impairment.
The aggregate of the Group's share of profit or loss of
joint ventures is shown on the face of the Income Statement
within Operating Profit and represents the profit or loss
after tax.
Revenue recognition
(a) Property investment
Rental income from operating leases is recognised in income
on a straight-line basis over the lease term. Rental increases
calculated with reference to an underlying index and the
resulting rental income ("contingent rents") are recognised
in income as they are determined.
Incentives for lessees to enter into lease agreements are
spread evenly over the lease term, even if the payments
are not made on such a basis. The lease term is the non-cancellable
period of the lease, together with any further term for
which the tenant has the option to continue the lease, where,
at the inception of the lease, the directors are reasonably
certain that the tenant will exercise that option.
Premiums received to terminate leases are recognised in
the Income Statement as they arise.
(b) Roslogistics
Logistics revenue, excluding value added tax, is recognised
as services are provided.
(c) Raven Mount
The sale of completed property and land is recognised on
legal completion.
Taxation
The Company is a limited company registered in Guernsey,
Channel Islands, and is exempt from taxation. The Group
is liable to Russian, UK and Cypriot tax arising on the
results of its Russian, UK and Cypriot operations.
The tax expense represents the sum of the tax currently
payable and deferred tax.
(a) Current tax
The tax currently payable is based on taxable profit for
the year. Taxable profit differs from net profit (or loss)
as reported in the Income Statement because it excludes
items of income and expenditure that are taxable or deductible
in other years and it further excludes 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 balance sheet date.
(b) Tax provisions
A current tax provision is recognised when the Group has
a present obligation as a result of a past event and it
is probable that the Group will be required to settle that
obligation. A provision for uncertain taxes is recorded
within current tax payable (see note 21).
(c) Deferred tax
Deferred tax is the tax expected to be payable or recoverable
on differences between the carrying amount of assets and
liabilities in the financial statements and the corresponding
tax bases used in the computation of taxable profit, and
is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities
are not recognised if the temporary difference arises from
goodwill or from the initial recognition (other than in
a business combination) of other assets and liabilities
in a transaction that affects neither the taxable profit
nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at
each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will
be available to allow all or part of the asset to be recovered.
Unrecognised deferred tax assets are reassessed at each
balance sheet date and are recognised to the extent that
it has become probable that future taxable profit will allow
the deferred tax asset to be recovered.
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the liability is settled or
the asset realised, based on tax rates that have been enacted
or substantively enacted at the reporting date. Deferred
tax is charged or credited in the Income Statement, except
when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with
in equity.
Deferred tax assets and deferred tax liabilities are offset,
if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred
income taxes relate to the same taxable entity and the same
taxation authority.
(d) Value added tax
Revenue, expenditure, assets and liabilities are recognised
net of the amount of value added tax except:
Where the value added tax incurred on a purchase of assets
or services is not recoverable from the taxation authority,
in which case the value added tax is recognised as part
of the cost of acquisition of the asset or as part of the
expenditure item as applicable; and
Receivables and payables that are stated with the amount
of value added tax included.
The net amount of value added tax recoverable from, or payable
to, the taxation authority is included as part of receivables
or payables, as appropriate, in the Balance Sheet.
Investment property and investment property under construction
Investment property comprises completed property and property
under construction held to earn rentals or for capital appreciation
or both. Investment property comprises both freehold and
leasehold land and buildings.
Investment property is measured initially at its cost, including
related transaction costs. After initial recognition, investment
property is carried at fair value. The Directors assess
the fair value of investment property based on independent
valuations carried out by their appointed property valuers
or on independent valuations prepared for banking purposes.
The Group has appointed Jones Lang LaSalle as property valuers
to prepare valuations on a semi-annual basis. Valuations
are undertaken in accordance with appropriate sections of
the current Practice Statements contained in the Royal Institution
of Chartered Surveyors Appraisal and Valuation Standards,
2014 Edition (the "Red Book"). This is an internationally
accepted basis of valuation. Gains or losses arising from
changes in the fair value of investment property are included
in the Income Statement in the period in which they arise.
For the purposes of these financial statements, in order
to avoid double counting, the assessed fair value is reduced
by the present value of any tenant incentives and contracted
rent uplifts that are spread over the lease term and increased
by the carrying amount of any liability under a head lease
that has been recognised in the balance sheet.
Borrowing costs that are directly attributable to the construction
of investment property are included in the cost of the property
from the date of commencement of construction until construction
is completed.
Leasing (as lessors)
Leases where the Group does not transfer substantially all
the risks and benefits incidental to ownership of the asset
are classified as operating leases. All of the Group's properties
are leased under operating leases and are included in investment
property in the Balance Sheet.
Financial assets
The Group classifies its financial assets into one of the
categories discussed below, depending upon the purpose for
which the asset was acquired. The Group has not classified
any of its financial assets as held to maturity.
(a) Fair value through profit or loss
This category comprises only in-the-money derivatives (see
financial liabilities policy for out-of-the-money derivatives),
which are carried at fair value with changes in the fair
value recognised in the Income Statement in finance income
or finance expense.
(b) Loans and receivables
These are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market.
In the case of the Group, loans and receivables comprise
trade and other receivables, loans, security deposits, restricted
cash and cash and short term deposits.
Loans and receivables are initially recognised at fair value,
plus transaction costs that are directly attributable to
their acquisition or issue, and are subsequently carried
at amortised cost using the effective interest rate method,
less provision for impairment.
If there is objective evidence that an impairment loss has
been incurred, the amount of the loss is measured as the
difference between the asset's carrying amount and the present
value of estimated future cash flows. The amount of the
impairment loss is recognised in administrative expenses.
If in a subsequent period the amount of the impairment loss
decreases and the decrease can be related objectively to
an event occurring after the impairment is recognised, the
previously recognised impairment loss is reversed. Any such
reversal of an impairment loss is recognised in the Income
Statement.
Cash and short term deposits include cash in hand, deposits
held at call with banks and other short term highly liquid
investments with original maturities of three months or
less.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements
entered into.
The Group classifies its financial liabilities into one
of the categories listed below.
(a) Fair value through profit or loss
This category comprises only out-of-the-money derivatives,
which are carried at fair value with changes in the fair
value recognised in the Income Statement in finance income
or finance expense.
(b) Other financial liabilities
Other financial liabilities include interest bearing loans,
trade payables (including rent deposits and retentions under
construction contracts), preference shares and other short-term
monetary liabilities. Trade payables and other short-term
monetary liabilities are initially recorded at fair value
and subsequently carried at amortised cost using the effective
interest rate method.
Interest bearing loans and preference shares are initially
recorded at fair value net of direct issue costs and subsequently
carried at amortised cost using the effective interest rate
method. Finance charges, including premiums payable on settlement
or redemption and direct issue costs, are charged to the
Income Statement using the effective interest rate method.
An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all
of its liabilities. The Group considers the convertible
preference shares to be a compound financial instrument
in that they have a liability and equity component. On the
issue of convertible preference shares the fair value of
the liability component is determined and the balance of
the proceeds of issue is deemed to be equity. The Group's
other equity instruments are its ordinary shares and warrants.
Own shares held
Own equity instruments which are acquired are recognised
at cost and deducted from equity. No gain or loss is recognised
in the Income Statement on the purchase, sale, issue or
cancellation of the Group's own equity instruments. Any
difference between the carrying amount and the consideration
is recognised in retained earnings.
Share-based payments and other long term incentives
The Group rewards its key management and other senior employees
by a variety of means many of which are settled by ordinary,
preference shares or convertible preference shares of the
Company, these include the Executive Share Option Schemes,
the Combined Bonus and Long Term Incentive Scheme 2015 to
2017 ("CBLTIS 2015") and the 2016 Retention Scheme.
Awards linked to or that may be settled by ordinary shares
These are accounted for as equity-settled transactions in
accordance with IFRS 2 Share-based Payment. The cost of
equity-settled transactions is measured by reference to
the fair value at the date at which they are granted. Fair
value is determined by an external valuer, using an appropriate
pricing model. In valuing equity-settled transactions, no
account is taken of any service and performance conditions
(vesting conditions), other than performance conditions
linked to the price of the shares of the Company (market
conditions). Any other conditions, which are required to
be met in order for an employee to become fully entitled
to an award are considered to be non-vesting conditions.
Like market conditions, non-vesting conditions are taken
into account in determining the fair value at grant date.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period
in which the performance and service conditions are fulfilled.
The cumulative expense that is recognised at each reporting
date until the vesting date, reflects the extent to which
the vesting period has expired and the Group's best estimate
of the number of equity instruments that will ultimately
vest. The income statement expense or credit for a period
represents the movement in cumulative expense recognised
at the beginning and end of that period. Where all of the
conditions are communicated to the recipient of the award
at the outset, the Group recognises the share-based payment
expense on a graded basis.
No expense is recognised for awards that do not ultimately
vest, except for equity-settled transactions where vesting
is conditional upon a market or non-vesting condition, which
are treated as vesting irrespective of whether or not the
market or non-vesting condition is satisfied, provided that
all other performance and service conditions are satisfied.
Where an equity-settled award is cancelled, it is treated
as if it vested on the date of cancellation, and any expense
not yet recognised for the award is recognised immediately.
This includes any award where non-vesting conditions within
the control of either the entity or the employee are not
met.
The CBLTIS 2015 and the share component of the 2016 Retention
Scheme have been accounted for in this way.
Awards not linked to or settled by ordinary shares
These awards are accounted for in accordance with IAS 19
Employee Benefits whereby the Group estimates the cost of
awards using the projected unit credit method, which involves
estimating the future value of the preference shares or
convertible preference shares, as appropriate, at the vesting
date and the probability of the awards vesting. The resulting
expense is charged to the Income Statement over the performance
period and the liability is remeasured at each Balance Sheet
date.
The cash component of the 2016 Retention Scheme has been
accounted for in this way.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each Group
entity are measured in the currency of the primary economic
environment in which the entity operates (the "functional
currency"). For the Company the directors consider this
to be Sterling. The presentation currency of the Group is
United States Dollars, which the directors consider to be
the key currency for the Group's operations as a whole.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation
at the year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the
Income Statement. Non-monetary assets and liabilities are
translated using exchange rates at the date of the initial
transaction or when their fair values are reassessed.
(c) On consolidation
The results and financial position of all the Group entities
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
(i) assets and liabilities for each Balance Sheet are translated
at the closing rate at the date of the Balance Sheet;
(ii) income and expenditure for each Income Statement are
translated at the average exchange rate prevailing in the
period unless this does not approximate the rates ruling
at the dates of the transactions in which case they are
translated at the transaction date rates; and
(iii) all resulting exchange differences are recognised
in Other Comprehensive Income.
On consolidation, the exchange differences arising from
the translation of the net investment in foreign entities
are recognised in Other Comprehensive Income. When a foreign
entity is sold, such exchange differences are recognised
in the Income Statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities
of the foreign entity and translated at the closing rate.
Dividends
Dividends to the Company's ordinary shareholders are recognised
when they become legally payable. In the case of interim
dividends, this is when declared by the directors. In the
case of final dividends, this is when they are approved
by the shareholders at an AGM.
3. Critical accounting estimates and judgements
The Group makes certain estimates and judgements regarding
the future. Estimates and judgements are continually evaluated
and are based on historical experience as adjusted for current
market conditions and other factors. The resulting accounting
estimates will, by definition, seldom equal the related
actual results. The estimates and judgements that have a
significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are outlined below.
Judgements other than estimates
In the process of applying the Group's accounting policies
the following are considered to have the most significant
effect on the amounts recognised in the consolidated financial
statements:
(a) Acquisitions
Properties can be acquired through the corporate acquisition
of a subsidiary company. At the time of acquisition, the
Group considers whether the acquisition represents the acquisition
of a business. The Group accounts for the acquisition as
a business combination where an integrated set of activities
is acquired in addition to the property. More specifically,
consideration is made of the extent to which significant
processes are acquired and the extent of ancillary services
provided by the subsidiary.
When the acquisition of a subsidiary does not represent
a business, it is accounted for as an acquisition of a group
of assets and liabilities. The cost of the acquisition is
allocated to the assets and liabilities acquired based on
their relative fair values, and no goodwill or deferred
tax is recognised. There were no acquisitions in 2015 or
2016.
(b) Recognition of deferred tax assets
The recognition of deferred tax assets is based upon whether
it is probable that sufficient and suitable taxable profits
will be available in the future, against which the reversal
of temporary differences can be deducted. Recognition, therefore,
involves judgement regarding the future financial performance
of the particular legal entity or tax group in which the
deferred tax asset has been recognised.
Estimates
(a) Valuation of investment property and investment property
under construction
The best evidence of fair value is current prices in an
active market for similar lease and other contracts. In
the absence of such information, the Group determines the
amount within a range of reasonable, fair value estimates.
In making its estimation the Group considers information
from a variety of sources and engages external, professional
advisers to carry out third party valuations of its properties.
The external valuations are completed in accordance with
appropriate sections of the current Practice Statements
contained in the Royal Institution of Chartered Surveyors
Appraisal and Valuation Standards, 2014 Edition (the "Red
Book"). This is an internationally accepted basis of valuation
and is consistent with the requirements of IFRS 13. In our
market, where transactional activity is minimal, the valuers
are required to use a greater degree of estimation or judgement
than in a market where comparable transactions are more
readily available. For the valuations at 31 December 2016
and 31 December 2015 the valuer has highlighted that as
a result of market conditions at the valuation date it was
necessary to make more judgements than is normally required.
The significant methods and assumptions used in estimating
the fair value of investment property and investment property
under construction are set out in note 13, along with detail
of the sensitivities of the valuations to changes in the
key inputs.
(b) Income tax
As part of the process of preparing its financial statements,
the Group is required to estimate the provision for income
tax in each of the jurisdictions in which it operates. This
process involves an estimation of the actual current tax
exposure, together with assessing temporary differences
resulting from differing treatment of items for tax and
accounting purposes. These differences result in deferred
tax assets and liabilities, which are included in the Balance
Sheet.
Russian tax legislation is subject to varying interpretations
and changes, which may occur frequently. New legislation
and clarifications have been introduced over the last 12
months, but it remains unclear as to how these will be applied
in practice. The interpretation of the legislation that
the Group adopts for its transactions and activities may
be challenged by the relevant regional and federal authorities
from time to time. Additionally, there may be inconsistent
interpretation of tax regulations by each local authority,
creating uncertainties in the correct application of the
taxation regulations in Russia. Fiscal periods remain open
to review by the authorities for the three calendar years
preceding the years of review and in some circumstances
may cover a longer period. Additionally, there have been
instances where new tax regulations have been applied retrospectively.
The Group is and has been subject to tax reviews which are
worked through with the relevant authorities to resolve.
The Group, in making its tax provision judgements, is confident
that an appropriate level of management and control is exerted
in each of the jurisdictions in which it operates, all companies
are tax resident in their relevant jurisdictions and are
the beneficial owners of any income they receive. Local
management use their in house tax knowledge and previous
experience as well as independent professional experts when
assessing tax risks and the resultant provisions required.
For the current year, the Group has specifically reviewed
the potential impact that new regulations may have on its
financing arrangements and the provision reflects probabilities
of between 20% and 100% of possible outcomes.
4. Segmental information
The Group has three operating segments, which are managed
and report independently to the Board. These comprise:
Property Investment - acquire, develop and lease commercial
property in Russia;
Roslogistics - provision of warehousing, transport, customs
brokerage and related services in Russia; and
Raven Mount - sale of residential property in the UK.
Financial information relating to Property Investment is
provided to the Board on a property by property basis. The
information provided is gross rentals, operating costs,
net operating income, revaluation gains and losses and where
relevant the profit or loss on disposal of an investment
property. The individual properties have similar economic
characteristics and are considered to be a single reporting
segment.
Roslogistics is an independently managed business and the
Board is presented with turnover, cost of sales and operating
profits or losses after deduction of administrative expenses.
Information about Raven Mount provided to the Board comprises
the gross sale proceeds, inventory cost of sales and gross
profit, including the share of profits or losses of its
joint venture.
Administrative expenses and foreign currency gains or losses
are reported to the Board by segment. Finance income and
finance expense are not reported to the Board on a segment
basis. Sales between segments are eliminated prior to provision
of financial information to the Board.
For the Balance Sheet, segmental information is provided
in relation to investment property, inventory, cash balances
and borrowings. Whilst segment liabilities includes loans
and borrowings, segment loss does not include the related
finance costs. If such finance costs were included in segment
profit or loss, the profit from Property Investment would
have decreased by $68,631k (2015: $71,571k).
(a) Segmental information for the
year ended and as at 31 December
2016
Year ended 31
December
2016 Property Raven Segment Central
Investment Roslogistics Mount Total Overhead Total
$'000 $'000 $'000 $'000 $'000 $'000
Gross revenue 175,661 17,806 1,827 195,294 - 195,294
Operating costs
/ cost of sales (35,023) (7,991) (539) (43,553) - (43,553)
----------- --------------- ------------ ------------- ------------ -----------
Net operating
income 140,638 9,815 1,288 151,741 - 151,741
Administrative
expenses
Running general and
administration expenses (13,887) (1,355) (920) (16,162) (8,081) (24,243)
Other acquisition
/ abortive project
costs - - - - - -
Depreciation (823) (278) - (1,101) - (1,101)
Share-based payments
and other long term
incentives (2,224) - - (2,224) (6,853) (9,077)
Foreign currency
profits /
(losses) 18,136 (38) (19) 18,079 - 18,079
----------- --------------- ------------ ------------- ------------ -----------
141,840 8,144 349 150,333 (14,934) 135,399
Profit on disposal of
investment property
under construction 3,807 - - 3,807 - 3,807
Unrealised loss on revaluation
of investment property (40,192) - - (40,192) - (40,192)
Unrealised loss on revaluation
of investment property
under construction (3,132) - - (3,132) - (3,132)
Share of profits
of joint ventures - - 1,780 1,780 - 1,780
----------- --------------- ------------ ------------- ------------ -----------
Segment profit
/ (loss) 102,323 8,144 2,129 112,596 (14,934) 97,662
----------- --------------- ------------ ------------- ------------ -----------
Finance income 21,522
Finance expense (96,938)
Profit before
tax 22,246
-----------
As at 31
December
2016 Property Raven
Investment Roslogistics Mount Total
$'000 $'000 $'000 $'000
Assets
Investment
property 1,300,643 - - 1,300,643
Investment
property
under
construction 41,253 - - 41,253
Investment in
joint ventures - - 9,731 9,731
Inventory - - 771 771
Cash and short
term deposits 192,995 1,014 4,612 198,621
------------
Segment assets 1,534,891 1,014 15,114 1,551,019
------------ ------------- ------------ -----------
Other
non-current
assets 41,113
Other current
assets 53,027
Total assets 1,645,159
-----------
Segment
liabilities
Interest bearing
loans and
borrowings 739,825 - - 739,825
------------ ------------- ------------ -----------
Capital
expenditure
Payments for investment property
and investment property under construction 9,163 - - 9,163
------------ ------------- ------------ -----------
(b) Segmental information for the
year ended and as at 31 December
2015
Year ended 31
December
2015 Property Raven Segment Central
Investment Roslogistics Mount Total Overhead Total
$'000 $'000 $'000 $'000 $'000 $'000
Gross revenue 202,286 15,267 2,151 219,704 - 219,704
Operating costs
/ cost of sales (39,609) (6,295) 323 (45,581) - (45,581)
----------- --------------- ------------ ------------- ------------ -----------
Net operating
income 162,677 8,972 2,474 174,123 - 174,123
Administrative
expenses
Running general and
administration expenses (21,722) (1,243) (1,123) (24,088) (5,993) (30,081)
Other acquisition /
abortive project costs 1,185 - - 1,185 - 1,185
Depreciation (1,352) (244) (3) (1,599) - (1,599)
Share-based payments
and other long term
incentives (1,425) - - (1,425) (2,169) (3,594)
Foreign currency profits
/(losses) 1,227 (4) - 1,223 - 1,223
----------- --------------- ------------ ------------- ------------ -----------
140,590 7,481 1,348 149,419 (8,162) 141,257
Profit on disposal of
investment property
under construction - - - - - -
Unrealised loss on revaluation
of investment property (251,198) - - (251,198) - (251,198)
Unrealised loss on revaluation
of investment property
under construction (5,350) - - (5,350) - (5,350)
Share of profits
of joint ventures - - 2,518 2,518 - 2,518
----------- --------------- ------------ ------------- ------------ -----------
Segment (loss)
/ profit (115,958) 7,481 3,866 (104,611) (8,162) (112,773)
----------- --------------- ------------ ------------- ------------ -----------
Finance income 4,493
Finance expense (96,776)
Loss before
tax (205,056)
-----------
As at 31
December
2015 Property Raven
Investment Roslogistics Mount Total
$'000 $'000 $'000 $'000
Assets
Investment
property 1,333,987 - - 1,333,987
Investment property
under construction 39,129 - - 39,129
Investment in
joint ventures - - 14,968 14,968
Inventory - - 1,381 1,381
Cash and short
term deposits 196,861 691 4,739 202,291
------------ ------------- ------------
Segment assets 1,569,977 691 21,088 1,591,756
------------ ------------- ------------ -----------
Other
non-current
assets 42,639
Other current
assets 50,497
Total assets 1,684,892
-----------
Segment
liabilities
Interest bearing loans
and borrowings 918,745 - - 918,745
------------ ------------- ------------ -----------
Capital
expenditure
Payments for investment property
and investment property under construction 20,028 - - 20,028
------------ ------------- ------------ -----------
5. Gross revenue 2016 2015
$'000 $'000
Rental and
related
income 175,661 202,286
Proceeds from the sale
of inventory property 1,827 2,151
Logistics 17,806 15,267
195,294 219,704
------------ -----------
The Group's leases typically include annual rental increases
("contingent rents") based on a consumer price index in
Russia, Europe or the USA, which are recognised in income
as they arise. Contingent rents included in rental income
for the year amounted to $2,135k (2015: $2,148k).
Details of the Group's contracted future minimum lease receivables
are detailed in note 38.
The Group recognised revenue of $24.6 million (2015: $23.6
million) from a single tenant of the property investment
segment that amounted to more than 10% of Group revenue.
6.
Administrative
expenses
2016 2015
(a) Total
administrative
expenses $'000 $'000
Employment costs 11,700 14,607
Directors'
remuneration 4,882 3,502
Bad debts 22 3,720
Office running costs
and insurance 3,218 4,039
Travel costs 1,540 1,430
Auditors'
remuneration 617 851
Abortive project
costs - (1,185)
Legal and
professional 1,814 1,430
Depreciation 1,101 1,599
Registrar costs and
other administrative
expenses 450 502
25,344 30,495
------------ -----------
(b) Fees for audit and other services
provided by the Group's auditor
2016 2015
$'000 $'000
Audit services 508 686
Audit related
assurance
services 65 73
573 759
------------ -----------
Other fees:
Taxation
services 44 12
Other services - 80
44 92
------------ -----------
Total fees 617 851
------------ -----------
Ernst & Young also provide audit and taxation services for
various SPVs that form part of the property operating costs.
Charges for the audit of SPVs in the year amounted to $306k
(2015: $345k) and the fees for taxation services were $170k
(2015: $73k).
7. Finance income
and expense 2016 2015
$'000 $'000
Finance income
Total interest income on financial
assets not at fair value through
profit or loss
Income from cash
and short term
deposits 3,399 2,909
Interest
receivable
from joint
ventures 37 -
Other finance
income
Profit on purchase and cancellation
of loans and borrowings 15,365 -
Change in fair value of open interest
rate derivative financial instruments 169 1,373
Change in fair value of foreign
currency embedded derivatives 2,552 211
Finance income 21,522 4,493
------------ -----------
Finance expense
Interest expense on loans and borrowings
measured at amortised cost 68,631 71,570
Interest expense
on preference
shares 16,518 18,628
Interest expense on convertible
preference shares 7,475 -
------------ -----------
Total interest expense on financial liabilities
not at fair value through profit or loss 92,624 90,198
Change in fair value of open forward
currency derivative financial instruments 2,324 2,531
Change in fair value of open interest
rate derivative financial instruments 1,990 4,047
Finance expense 96,938 96,776
------------ -----------
On 20 December 2016, the Group agreed to pay $16.3 million
to HSH Nordbank to fully repay and discharge $31.7 million
of loans secured on the Konstanta office block, generating
a profit for the Group of $15.4 million in the year.
Included in the interest expense on loans and borrowings
is $3.8 million (2015: $3.8 million) relating to amortisation
of costs incurred in originating the loans. Included in
the interest expense on preference shares is $0.6 million
(2015: $0.6 million) relating to the accretion of premiums
payable on redemption of preference shares and amortisation
of costs incurred in issuing preference shares. Included
in the interest expense on convertible preference shares
is $2.8 million relating to the accretion of premiums payable
on redemption and amortisation of costs incurred in issuing
the convertible preference shares of $0.1 million.
8. Tax 2016 2015
$'000 $'000
The tax expense for
the year comprises:
Current taxation 10,816 11,151
Deferred
taxation
(note 26)
On the origination and reversal
of temporary differences 3,694 (22,662)
On unrealised foreign exchange
movements in loans 17 (1,203)
Adjustments recognised in
the period for tax of prior
periods - 17
Tax charge /
(credit) 14,527 (12,697)
------------ -----------
The charge / (credit) for the year can be reconciled
to the profit / (loss) per the Income Statement as
follows:
2016 2015
$'000 $'000
Profit / (loss)
before tax 22,246 (205,056)
Tax at the Russian corporate
tax rate of 20% 4,449 (41,011)
Tax effect of income not subject
to tax and non-deductible
expenses 16,170 44,659
Tax on dividends and other
inter company gains 1,235 2,333
Tax effect of
financing
arrangements 15,300 (30,478)
Movement on
deferred
tax assets (26,544) 8,783
Movement in
tax provisions 3,917 3,000
Adjustments recognised in the period
for current tax of prior periods - 17
14,527 (12,697)
------------ -----------
The majority of income not subject to tax and non-deductible
expenses relates to income and expenditure arising in Guernsey.
As explained in note 7, income in Guernsey this year included
the one-off waiver of a loan from HSH Nordbank.
The tax effect of financing arrangements includes inter
company financing arrangements and the effect of foreign
currency loans entered into by the Group's Russian subsidiaries.
Unrealised foreign exchange gains and losses are taxable
or tax deductible in Russia. Therefore the movement in each
year is a factor of the related movement in underlying exchange
rates, principally the US Dollar / Rouble rate.
9. Earnings measures
In addition to reporting IFRS earnings the Group also reports
its own underlying earnings measure. The Directors consider
underlying earnings to be a key performance measure, as
this is the measure used by Management to assess the return
on holding investment assets for the long term and the Group's
ability to declare covered distributions. As a consequence
the underlying earnings measure excludes investment property
revaluations, gains or losses on the disposal of investment
property, intangible asset movements, gains and losses on
derivative financial instruments, share-based payments and
other long term incentives (to the extent not settled in
cash), the accretion of premiums payable on redemption of
preference shares and convertible preference shares, material
non-recurring items, depreciation and amortisation of loan
origination costs, together with any related tax.
The calculation of basic and diluted earnings
per share is based on the following data: 2016 2015
$'000 $'000
Earnings
Net profit / (loss) for the
year prepared under IFRS 7,719 (192,359)
Adjustments to arrive
at underlying earnings:
Profit on disposal of investment
property under construction (3,807) -
Unrealised loss on revaluation
of investment property 40,192 251,198
Unrealised loss on revaluation of
investment property under construction 3,132 5,350
Change in fair value of open forward currency
derivative financial instruments (note
7) 2,324 2,531
Change in fair value of open interest
rate derivative financial instruments
(note 7) 1,821 2,674
Change in fair value of foreign
currency embedded derivatives (note
7) (2,552) (211)
Movement on
deferred
tax thereon 212 (24,562)
Abortive project
costs (note
6a) - (1,185)
Share-based payments and other
long term incentives 5,944 3,594
Premium on redemption of preference
shares and amortisation of issue
costs (note 7) 562 614
Premium on redemption of convertible preference
shares and amortisation of issue costs
(note 7) 2,892 -
Depreciation
(note 6a) 1,101 1,599
Profit on purchase and cancellation
of loans and borrowings (note
7) (15,365) -
Amortisation of loan
origination costs (note
7) 3,811 3,839
Tax on unrealised foreign
exchange movements in loans (864) 1,476
Underlying
earnings 47,122 54,558
------------ -----------
2016 2015
Weighted Weighted
average average
Earnings shares EPS Earnings shares EPS
No.
IFRS $'000 '000 Cents $'000 No. '000 Cents
Basic 7,719 657,468 1.17 (192,359) 667,758 (28.81)
Effect of dilutive
potential ordinary
shares:
Warrants (note
28) - 7,651 - -
LTIP (note 32) - 1,294 - -
2016 Retention
scheme
(note 32) - 1,009 - -
CBLTIS 2015
(note 32) - 275 - -
CBLTIS 2012
(note 32) - - - -
ERS (note 32) - 21 - -
Convertible
preference
shares (note 24) - - - -
Diluted 7,719 667,718 1.16 (192,359) 667,758 (28.81)
----------- --------------- ------------- ------------
2016 2015
Weighted Weighted
average average
Earnings shares EPS Earnings shares EPS
Underlying No.
earnings $'000 '000 Cents $'000 No. '000 Cents
Basic 47,122 657,468 7.17 54,558 667,758 8.17
Effect of dilutive
potential ordinary
shares:
Warrants (note
28) - 7,651 - 11,727
LTIP (note 32) - 1,294 - 2,478
2016 Retention
scheme
(note 32) - 1,009 - -
CBLTIS 2015
(note 32) - 275 - 2,994
CBLTIS 2012
(note 32) - - - 1,926
ERS (note 32) - 21 - 300
Convertible
preference
shares (note 24) 4,584 91,851 - -
Diluted 51,706 759,569 6.81 54,558 687,183 7.93
----------- --------------- ------------- ------------
The finance expense for the period relating to the convertible
preference shares is greater than IFRS basic earnings per
share and thus the convertible preference shares are not
dilutive for IFRS diluted earnings per share. In the case
of underlying earnings per share the convertible preference
shares are dilutive and have been incorporated into the
calculation of diluted underlying earnings per share.
10. Ordinary
dividends
The Company did not declare a final dividend for the year
ended 31 December 2015 or an interim dividend for 2016 and
instead implemented two tender offer buy backs of ordinary
shares.
In the place of a final dividend for 2015 the Company implemented
a tender offer buy back of ordinary shares on the basis
of 1 in every 40 shares held at a tender price of 40 pence
per share, the equivalent of a final dividend of 1 pence
per share. Instead of an interim dividend for 2016 the Company
implemented a tender offer buy back of ordinary shares on
the basis of 1 in every 80 shares at a tender price of 40
pence per share, the equivalent of a dividend of 0.5 pence
per share.
11. Investment
property
Asset class Logistics Logistics Logistics Office
St St
Location Moscow Petersburg Regions Petersburg 2016
Fair value
hierarchy Level Level Level Level
* 3 3 3 3 Total
$'000 $'000 $'000 $'000 $'000
Market value at
1 January 2016 1,043,952 139,106 148,649 25,140 1,356,847
Property improvements and
movement in completion provisions 4,906 2,022 378 (179) 7,127
Unrealised (loss)
/ profit on
revaluation (43,409) 303 2,819 (143) (40,430)
--------------- ------------ ------------- ------------ -----------
Market value at
31 December 2016 1,005,449 141,431 151,846 24,818 1,323,544
Tenant incentives and
contracted rent uplift
balances (17,495) (5,332) (1,372) (154) (24,353)
Head lease
obligations
(note 25) 1,452 - - - 1,452
Carrying value at
31 December 2016 989,406 136,099 150,474 24,664 1,300,643
--------------- ------------ ------------- ------------ -----------
Revaluation movement in the
year ended 31 December 2016
Gross
revaluation (43,409) 303 2,819 (143) (40,430)
Effect of tenant incentives
and contracted rent uplift
balances (948) - (54) 1,240 238
Revaluation reported
in the Income Statement (44,357) 303 2,765 1,097 (40,192)
--------------- ------------ ------------- ------------ -----------
Asset class Logistics Logistics Logistics Office
St St
Location Moscow Petersburg Regions Petersburg 2015
Fair value
hierarchy Level Level Level Level
* 3 3 3 3 Total
$'000 $'000 $'000 $'000 $'000
Market value at
1 January 2015 1,222,101 170,074 191,576 28,852 1,612,603
Property improvements and
movement in completion provisions (2,768) (1,194) 114 (266) (4,114)
Unrealised loss
on revaluation (175,381) (29,774) (43,041) (3,446) (251,642)
--------------- ------------ ------------- ------------ -----------
Market value at
31 December 2015 1,043,952 139,106 148,649 25,140 1,356,847
Tenant incentives and
contracted rent uplift
balances (16,547) (5,332) (1,318) (1,394) (24,591)
Head lease
obligations
(note 25) 1,731 - - - 1,731
Carrying value at
31 December 2015 1,029,136 133,774 147,331 23,746 1,333,987
--------------- ------------ ------------- ------------ -----------
Revaluation movement in the
year ended 31 December 2015
Gross
revaluation (175,381) (29,774) (43,041) (3,446) (251,642)
Effect of tenant incentives
and contracted rent uplift
balances (236) (433) 1,005 108 444
-----------
Revaluation reported
in the Income Statement (175,617) (30,207) (42,036) (3,338) (251,198)
--------------- ------------ ------------- ------------ -----------
*Classified in accordance with the fair value hierarchy,
see note 36. There were no transfers between fair value
hierarchy in 2015 or 2016.
At 31 December 2016 the Group has pledged investment property
with a value of $1,288 million (2015: $1,348 million) to
secure banking facilities granted to the Group (note 22).
12. Investment property
under construction
Assets under
Asset class construction Land Bank
St
Location Moscow Regions Petersburg Regions 2016
Fair value
hierarchy Level Level Level Level
* 3 3 Sub-total 3 3 Sub-total Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Market value at 1
January 2016 27,700 7,300 35,000 413 2,714 3,127 38,127
Costs incurred 2,353 33 2,386 49 355 404 2,790
Disposal - - - (543) - (543) (543)
Effect of foreign
exchange rate
changes 1,774 1,072 2,846 81 593 674 3,520
Unrealised loss on
revaluation (2,227) (905) (3,132) - - - (3,132)
----------- ----------- --------------- ------------ ------------- ------------ ----------
Market value at 31
December 2016 29,600 7,500 37,100 - 3,662 3,662 40,762
Head lease
obligations
(note 25) 491 - 491 - - - 491
----------- --------------- ------------ ------------- ------------
Carrying value at
31 December 2016 30,091 7,500 37,591 - 3,662 3,662 41,253
----------- ----------- --------------- ------------ ------------- ------------ ----------
Assets under
Asset class construction Land Bank
St
Location Moscow Regions Petersburg Regions 2015
Fair value
hierarchy Level Level Level Level
* 3 3 Sub-total 3 3 Sub-total Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Market value at 1
January 2015 34,000 9,500 43,500 - 3,216 3,216 46,716
Costs incurred 789 - 789 413 283 696 1,485
Disposal - - - - - - -
Effect of foreign
exchange rate
changes (2,369) (1,570) (3,939) - (785) (785) (4,724)
Unrealised loss on
revaluation (4,720) (630) (5,350) - - - (5,350)
----------- ----------- --------------- ------------ ------------- ------------ ----------
Market value at 31
December 2015 27,700 7,300 35,000 413 2,714 3,127 38,127
Head lease
obligations
(note 25) 1,002 - 1,002 - - - 1,002
----------- ----------- ------------ ------------- ------------ ----------
Carrying value at
31 December 2015 28,702 7,300 36,002 413 2,714 3,127 39,129
----------- ----------- --------------- ------------ ------------- ------------ ----------
*Classified in accordance with the fair value hierarchy,
see note 36. There were no transfers between fair value
hierarchy in 2015 or 2016.
During the year the Group sold a land plot in St Petersburg
for $4.6 million, generating a profit of $3.8 million after
costs.
No borrowing costs were capitalised in the year (2015: $nil).
At 31 December 2016 the Group has pledged investment property
under construction with a value of $37.1 million (2015:
$35.0 million) to secure banking facilities granted to the
Group (note 22).
13. Investment property and investment
property under construction - Valuation
It is the Group's policy to carry investment property and
investment property under construction at fair value in
accordance with IFRS 13 "Fair Value Measurement" and IAS
40 "Investment Property":
- investment property consists of the completed, income
producing, portfolio; and
- investment property under construction consists of potential
development projects and land bank.
The latter is sub-categorised as:
- assets under construction - current development projects
and the value of land on additional phases of existing investment
property; and
- land bank - land held for potential development.
For the purposes of IFRS 13 disclosure, we have analysed
these categories by the geographical market they are located
in being Moscow, St Petersburg and the Regions (the other
Russian regional cities). These form distinct markets for
valuation purposes as the fundamentals differ in each.
The fair value of the Group's investment property and assets
under construction at 31 December 2016 has been arrived
at on the basis of market valuations carried out by Jones
Lang LaSalle ("JLL"), external valuers to the Group. JLL
have consented to the use of their name in these financial
statements.
The Group's land bank in St Petersburg and the Regions is
valued by the Directors.
Valuation process
The executive management team members responsible for property
matters determine the valuation policies and procedures
for property valuations in consultation with the Chief Executive
Officer and Chief Financial Officer.
The Group has four qualified RICS members on the management
team, one of whom is the Chairman of RICS in Russia and
the CIS. All have relevant valuation and market experience
and are actively involved in the valuation process. They
also regularly meet with agents and consultants to obtain
additional market information.
The effectiveness and independence of the external valuer
is reviewed each year. The criteria considered include market
knowledge, reputation, independence and professional standards.
The Audit Committee also meets the external valuer at least
once a year. Executive management and the Directors have
determined that the external valuer is experienced in the
Russian market and acts as an "External Valuer" as defined
in the "RICS Valuation - Professional Standards".
The external valuers perform their valuations in accordance
with the "RICS Valuation - Professional Standards", the
2014 Edition (the "Red Book"). This is an internationally
accepted basis of valuation and is consistent with the principles
of IFRS 13.
For investment properties and assets under construction,
the executive team members consult with the external valuers
and the valuers then determine:
- whether a property's fair value can be reliably determined;
- which valuation method should be applied for each asset;
and
- the assumptions made for unobservable inputs that are
used in valuation methods.
The land bank is valued by the Directors. The process followed
includes regular site inspections, meetings with local real
estate experts, comparison to any local land sale information
and comparison to transactions in other regional cities
including those where the Group has income producing assets.
Updated acquisition appraisals and any indication of value
for alternative use are also considered.
Valuations are prepared on a biannual basis. At each valuation
date the executive team members review the information prepared
by the property department for valuation purposes being
submitted to the external valuers. Each property valuation
is then reviewed and discussed with the external valuer
in detail, adjustments made as necessary and results discussed
with the Chief Executive Officer and Chief Financial Officer.
The executive management also present the valuation results
to the Audit Committee and hold discussions with the Group's
auditors. Both the Audit Committee and the auditors also
have discussions with the external valuers.
Valuation assumptions
and key inputs
Class of Carrying
property amount Valuation Input Range
2016 2015 technique 2016 2015
$'000 $'000
Completed
investment
property
Long term
ERV per sqm
Moscow - Income for existing $85 to $90 to
Logistics 989,406 1,029,136 capitalisation tenants $105 $110
Short term
ERV per sqm
for vacant
space Rub4,000 Rub4,500
2.0% 11.2%
Initial yield to 16.0% to 14.9%
Equivalent 10.7% 10.8%
yield to 12.2% to 12.7%
9% to 13.9%
Vacancy rate 77% to 100.0%
Passing rent $70 to $62 to
per sqm $158 $158
Passing rent Rub3,500 Rub4,500
per sqm to to
Rub6,744 Rub6,300
Long term
ERV per sqm
St Petersburg Income for existing
- Logistics 136,099 133,774 capitalisation tenants $80 $75
Short term
ERV per sqm
for vacant
space Rub3,700 Rub4,000
11.3% 13.3%
Initial yield to 13.2% to 14.1%
Equivalent 12.3% 12.7%
yield to 12.6% to 13.3%
3% to 11.7%
Vacancy rate 31% to 40.0%
Passing rent $105 $80 to
per sqm to $138 $133
Passing rent Rub3,500 Rub3,060
per sqm to to
Rub4,500 Rub4,600
Long term
ERV per sqm
Regional - Income for existing
Logistics 150,474 147,331 capitalisation tenants $80 $75
Short term
ERV per sqm
for vacant
space Rub3,700 Rub4,000
9.0% 12.2%
Initial yield to 12.4% to 13.1%
Equivalent 12.4%
yield to 12.5% 12.7%
22% to 13.0%
Vacancy rate 33% to 21.0%
Passing rent $102 $101 to
per sqm to $129 $128
Passing rent Rub3,900 Rub3,060
per sqm to to
Rub6,547 Rub4,600
St Petersburg Income
- Office 24,664 23,746 capitalisation ERV per sqm $235 $235
Initial yield 20.0% 15.8%
Equivalent
yield 13.0% 13.0%
Vacancy rate 0% 0%
Passing rent
per sqm Rub19,545 Rub18,848
Range
Other key
information Description 2016 2015
Moscow - Land plot 34% - 31% -
Logistics ratio 65% 65%
2 to 1 to 11
Age of building 12 years years
Outstanding costs (US$'000) 6,803 6,931
St Petersburg Land plot 51% - 51% -
- Logistics ratio 57% 57%
2 to 1 to 7
Age of building 8 years years
Outstanding costs (US$'000) 1,102 743
Regional - Land plot 48% - 48% -
Logistics ratio 61% 61%
Age of building 7 years 6 years
Outstanding costs (US$'000) 665 81
St Petersburg Land plot
- Office ratio 320% 320%
Age of building 10 years 9 years
Outstanding costs (US$'000) - 53
Carrying
amount Valuation Input Range
Investment
property
under
construction 2016 2015 technique 2016 2015
$'000 $'000
Moscow - Value per $0.29 $0.29
Logistics 30,091 28,702 Comparable ha ($m) - $0.61 - $0.61
Regional - Value per
Logistics 7,500 7,300 Comparable ha ($m) $0.29 $0.29
The fair value of investment property is determined using
the income capitalisation method where a property's fair
value is estimated based on the normalised net operating
income of the asset divided by the capitalisation (discount)
rate. Each income stream from every tenant is valued based
on capitalising the contracted rent for the term of the
lease, including any fixed increases in rent but excluding
any future indexation. Allowance at lease end is made for
any potential letting void and an assessment is made of
the estimated rental value on re-letting (ERV). These elements
are determined based on current market conditions and values.
Assets under construction (development projects) are valued
on a residual value basis using the future anticipated
costs to complete construction, a provision for letting
costs, a letting void period and an assessment of ERV.
Depending on the status of the development, and how much
of development process has been completed an allowance
will also be made for developer's profit.
Assets under construction (additional phases of existing
sites) are valued on a comparable basis. The value of these
plots is estimated based on comparable transactions in
the same market. This approach is based on the principle
that a buyer will not pay more for an asset than it will
cost to buy a comparable substitute property. The unit
of comparison applied is the price per square metre.
All of the above valuations are completed by JLL.
The land bank is valued by the Directors using the comparable
basis.
Sensitivity analysis of significant changes in unobservable
inputs within Level 3 of the hierarchy
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value
hierarchy of the entity's portfolio of investment property
are:
- ERV;
- Void period on re-letting;
- Initial yield; and
- Specific to property under development: construction
costs, letting void, construction period and development
profit.
In preparing their valuations at 31 December 2016 and 31
December 2015, JLL have specifically referred to the uncertainty
in the market caused by sanctions and by an oil price that
is low compared with recent history. The Rouble exchange
rate exhibited both volatility and further weakness, inflation
remained a concern and debt is comparatively expensive.
Investment in all sectors of the economy is depressed.
There is a resulting lack of clarity as to pricing levels
and market drivers. JLL comment that prices agreed during
negotiation are typically reduced prior to exchange of
contracts as purchasers bring to bear their greater negotiating
position and ability to complete transactions in an uncertain
market. They further say that in this environment, prices
and values are going through a period of heightened volatility
and as a result there is less certainty with regard to
valuations and that market values can change rapidly in
the current conditions. Where the numbers of genuine third
party, arm's length, transactions are severely limited
it is challenging to draw conclusions on current market
yields and to accurately assess ERVs where landlord and
tenants are continuing to negotiate to find the new equilibrium
due to the Rouble devaluation. This corresponds to the
Group's experience.
Further significant increases (or decreases) in any of
the main inputs to the valuation, being yield, ERV (per
sqm p.a.) and letting void, would result in a significantly
lower (or higher) fair value measurement.
14. Goodwill
$'000
Balance at 1
January 2015 2,375
Effect of foreign
exchange rate changes (130)
Balance at 31
December 2015 2,245
Effect of foreign
exchange rate changes (363)
Balance at 31
December 2016 1,882
-------------
Goodwill acquired through the Raven Mount business combination
has been allocated for impairment purposes to its operating
segment. This represents the lowest level within the Group
at which goodwill is monitored for internal management
purposes. The recoverable amount of goodwill has been determined
based on value in use calculations using cash flow projections
and project appraisals approved for internal management
reporting and discounted at rates appropriate to the segment.
15. Investment in
subsidiary
undertakings
The principal subsidiary undertakings of Raven Russia Limited,
all of which have been included in these consolidated financial
statements, are as follows:
Country
of Proportion of ownership
Name incorporation interest
2016 2015
CJSC Kulon Development Russia 100% 100%
Fenix LLC Russia 100% 100%
Petroestate
LLC Russia 100% 100%
EG Logistics
LLC Russia 100% 100%
CJSC Kulon Istra Russia 100% 100%
Soyuz-Invest
LLC Russia 100% 100%
CJSC Noginsk
Vostok Russia 100% 100%
Resource Economia
LLC Russia 100% 100%
Kulon Spb LLC Russia 100% 100%
Logopark Don
LLC Russia 100% 100%
Logopark Ob
LLC Russia 100% 100%
Delta LLC Russia 100% 100%
CJSC Toros Russia 100% 100%
Dorfin Limited Cyprus 100% 100%
League LLC Russia 100% 100%
Raven Russia Holdings
Cyprus Limited Cyprus 100% 100%
Roslogistics Holdings
(Russia) Limited Cyprus 100% 100%
Avalon Logistics
Company LLC Russia 100% 100%
Raven Mount
Group Limited England 100% 100%
Raven Russia Property
Advisors Limited England 100% 100%
Raven Russia (Service
Company) Limited Guernsey 100% 100%
The Group's investment property and investment property
under construction are held by its subsidiary undertakings.
16. Investment
in joint ventures
The principal joint ventures of the Group are as follows:
Proportion of ownership
Name Country of incorporation interest
2016 2015
Coln Park LLP England 50% 50%
Coln Park Construction
LLP England 50% 50%
Coln Park LLP and Coln Park Construction LLP are the entities
through which the Group undertakes its second home development
activity in the UK. In addition, the Group has a number
of other small joint ventures associated with the second
home development activity. The Group's interest in each
joint venture has been accounted for using the equity method.
None of the Group's joint ventures are individually material.
Summarised aggregated financial information of the joint
ventures, prepared under IFRS, and a reconciliation with
the carrying amount of the investments in the consolidated
financial statements are set out below:
2016 2015
Summarised
Balance
Sheet $'000 $'000
Non-current
assets 4,141 4,833
Inventory 10,960 16,262
Cash and short
term deposits 2,558 2,289
Other current
assets 1,625 505
Current liabilities (8,432) (4,221)
Net assets 10,852 19,668
------------- -------------
Investment in
joint ventures
Goodwill on
acquisition 4,305 5,134
Share of net
assets at 50% 5,426 9,834
------------- -------------
Carrying value 9,731 14,968
------------- -------------
Carrying value
at 1 January 14,968 17,355
Share of profit
for the year 1,780 2,518
Share of distributions
paid (4,521) (3,954)
Effect of foreign
exchange rate
changes (2,496) (951)
Carrying value
at 31 December 9,731 14,968
------------- -------------
2016 2015
Summarised Income
Statement $'000 $'000
Gross revenue 25,430 18,575
Cost of sales (19,807) (12,628)
Administrative
expenses (1,932) (943)
Finance expense (125) -
------------- -------------
Profit before
tax 3,566 5,004
Tax (5) 32
Profit for the
year 3,561 5,036
------------- -------------
Group's share of
profit for the
year 1,780 2,518
------------- -------------
The joint ventures had no contingent liabilities or capital
commitments as at 31 December 2016 and 2015. The joint ventures
cannot distribute their profits until they obtain the consent
from the joint venture partners.
The Group charged its joint ventures $97k (2015: $92k) for
services rendered to them during the year. The joint ventures
recharged certain costs back to the Group that for the year
amounted to $146k (2015: $104k) of which $9k (2015: $10k)
was included in payables at the balance sheet date. In addition
to the investment shown above the Group has provided a loan
to Coln Park LLP of $342k (2015: $368k) generating interest
income of $37k (2015: $nil).
17. Other
receivables 2016 2015
$'000 $'000
Loans receivable 611 606
VAT recoverable 2,982 3,024
Security deposits - 2,391
Prepayments and
other receivables 131 124
3,724 6,145
------------- -------------
VAT recoverable arises from the payment of value added tax
on construction of investment property, which will be recovered
through the offset of VAT paid on future revenue receipts
or repayment direct from the taxation authority. VAT recoverable
has been split between current and non-current assets based
on the Group's assessment of when recovery will occur.
18. Trade and
other receivables 2016 2015
$'000 $'000
Trade receivables 37,732 38,682
Prepayments 4,257 3,149
Security deposits 2,393 2,041
VAT recoverable 4,893 4,482
Other receivables 319 202
Tax recoverable 3,075 1,708
52,669 50,264
------------- -------------
19. Derivative
financial
instruments 2016 2015
$'000 $'000
Interest rate
derivative
financial
instruments
Non-current
assets 4,694 2,900
Current assets 95 12
Non-current
liabilities - (210)
Current liabilities (25) (413)
Forward currency
derivative
financial instruments
Non-current
assets 269 2,685
Current assets 8 184
Foreign currency
embedded
derivatives
Non-current
assets 49 -
Current assets 255 37
Non-current
liabilities (67) (1,584)
Current liabilities (918) (1,684)
The Group has entered into a series of interest rate derivative
financial instruments to manage the interest rate and resulting
cash flow exposure from the Group's banking facilities.
At 31 December 2016 the instruments have a notional value
of $581 million (2015: $667 million) and a weighted average
fixed or capped rate of 1.51% (2015: 1.51%).
The Group had also entered into a series of forward currency
derivative financial instruments to hedge interest payments
due to preference shareholders against sterling strengthening.
The instruments have a notional amount of $55.8 million
(2015: $91.0 million), a weighted average capped rate of
$1.55 to GBP1 (2015: $1.57 to GBP1) and quarterly maturities
with the final instruments maturing on 18 December 2019
(2015: 18 December 2019).
Several of the Group's leases incorporate collars and caps
on US Dollar and Russian Rouble exchange rates. These have
been categorised as embedded derivatives and their fair
values calculated resulting in the liability disclosed above.
20. Cash and short
term deposits 2016 2015
$'000 $'000
Cash at bank
and on call 74,708 84,732
Short term deposits 123,913 117,559
198,621 202,291
------------- -------------
Cash at bank and on call attracts variable interest rates,
whilst short term deposits attract fixed rates but mature
and re-price over a short period of time. The weighted average
interest rate at the balance sheet date is 2.50% (2015:
1.21%).
21. Trade and
other payables 2016 2015
$'000 $'000
Trade and other
payables 8,667 5,196
Construction
payables 5,905 3,913
Advanced rentals 28,304 25,801
Other payables 3,770 2,165
Current tax
payable 9,471 5,217
Other tax payable 9,283 11,080
Head leases
(note 25) 8 12
65,408 53,384
------------- -------------
22. Interest
bearing
loans and
borrowings 2016 2015
$'000 $'000
Bank loans
Loans due for
settlement
within 12 months 40,787 104,724
Loans due for
settlement
after 12 months 699,038 814,021
739,825 918,745
------------- -------------
The Group's borrowings have
the following maturity profile:
On demand or
within one year 40,787 104,724
In the second
year 53,292 162,222
In the third
to fifth years 440,432 527,861
After five years 205,314 123,938
739,825 918,745
------------- -------------
The amounts above include unamortised loan origination costs
of $12.3 million (2015: $11.3 million) and interest accruals
of $3.8 million (2015: $2.3 million).
The principal terms of the Group's interest bearing
loans and borrowings on a weighted average basis are
summarised below:
As at 31 December
2016 Interest Maturity
Rate (years) $'000
Secured on investment property
and investment property under
construction 7.5% 4.7 725,123
Unsecured facility of
the Company 8.9% 3.7 14,702
739,825
-------------
As at 31 December
2015
Secured on investment property
and investment property under
construction 7.2% 4.0 894,995
Unsecured facility
of the Company 8.5% 4.7 23,750
918,745
-------------
The interest rates shown above are the weighted average
cost, including US LIBOR, as at the Balance Sheet dates.
The table above reflects the impact of the total of $108.2
million of debt which was prepaid in the year across the
portfolio to extend the various maturity dates of the loans
and reduce amortisation payable. This amount included the
$16.3 million paid to fully repay and discharge the loans
secured on Konstanta (see note 7).
On 19 January 2017, the Group refinanced the debt secured
on the Klimovsk project, drawing down $80 million under
the new facility and repaying the old facility of $75 million
in full.
The Group has entered into hedging arrangements in respect
of its exposure to interest rates (note 19). $112 million
(2015: $212 million) of Group bank borrowings have been
swapped into fixed rates with 3 months remaining (2015:
one year) at a weighted average swap rate of 1.08% (2015:
1.44%), $469 million (2015: $456 million) capped at 1.61%
(2015: 1.55%) for two years (2015: two years) and $131 million
(2015: $260 million) are fixed rate loans with a weighted
average rate of 7.10% (2015: 7.21%) for six years (2015:
four years). This gave a weighted average cost of debt to
the Group of 7.5% (2015: 7.3%) at the year end.
In December 2016 the Group entered into a six year cap to
hedge floating interest rates and a four year forward dated
cap starting in June 2017 to extend an existing hedging
arrangement.
23. Preference
shares 2016 2015
$'000 $'000
Issued share
capital:
At 1 January 156,558 164,300
Purchased in
the year (713) -
Premium on redemption of preference
shares and amortisation of issue
costs 562 614
Scrip dividends 614 643
Effect of foreign
exchange rate
changes (25,318) (8,999)
At 31 December 131,703 156,558
------------- -------------
2016 2015
Number Number
Issued share
capital:
At 1 January 98,328,017 98,012,427
Purchased in
the year (450,000) -
Scrip dividends 387,310 315,590
At 31 December 98,265,327 98,328,017
------------- -------------
Shares in issue 98,752,376 98,365,066
Held by the Company's
Employee Benefit
Trusts (487,049) (37,049)
At 31 December 98,265,327 98,328,017
------------- -------------
The preference shares entitle the holders to a cumulative
annual dividend of 12 pence per share.
24. Convertible
preference shares 2016 2015
$'000 $'000
Issued share
capital:
At 1 January - -
Issued in the year
(net of issue
costs) 138,705 -
Allocated to
equity (8,453) -
Acquired by Company's
Employee Benefit Trust (10,378) -
Reissued in
the year 2,779 -
Premium on redemption of preference
shares and amortisation of issue
costs 2,892 -
Movement on
accrual
for preference
dividends 24
Effect of foreign
exchange rate
changes (5,710) -
At 31 December 119,859 -
------------- -------------
2016 2015
Number Number
Issued share
capital:
At 1 January - -
Issued in the
year 108,689,501 -
Acquired by Company's
Employee Benefit Trust (8,000,000) -
Reissued in
the year 2,148,375
At 31 December 102,837,876 -
------------- -------------
Shares in issue 108,689,501 -
Held by the Company's
Employee Benefit Trust (5,851,625) -
At 31 December 102,837,876 -
------------- -------------
On 7 July 2016 the Company created and issued 108,689,501
convertible preference shares at a subscription price of
GBP1 per share. The convertible preference shares entitle
the holders to a cumulative annual dividend of 6.5 pence
per share and are redeemable by the Company on 6 July 2026
at GBP1.35 per share. The convertible preference shares
are convertible to ordinary shares at the holder's request
at any time prior to redemption at a rate of 1.818 ordinary
shares for each convertible preference share.
One of the Company's Employee Benefit Trusts subscribed
for 8,000,000 convertible preference shares and has subsequently
transferred 2,148,375 to participants of the 2016 Retention
Scheme (see note 32).
In applying its accounting policies the Group has determined
that the convertible preference shares are a compound financial
instruments in that it has a liability component and an
equity component. The Group has determined the fair value
of the liability component, which is reflected above, and
the residual amount of the fair value of the consideration
received on issue is equity. The fair value of the liability
component has been calculated using a discounted cash flow
model.
25. Other
payables 2016 2015
$'000 $'000
Rent deposits 23,324 28,932
Head leases 1,935 2,721
25,259 31,653
------------- -------------
The Group has leasehold properties that it classifies as
investment property and investment property under construction.
Minimum lease payments due over the remaining term of the
leases totalled $5.9 million (2015: $8.5 million) and have
a present value at 31 December 2016, as reflected above
and in note 21, of $1.9 million (2015: $2.7 million).
26. Deferred
tax
Tax
losses Other Total
(a) Deferred
tax assets $'000 $'000 $'000
Balance at 1
January 2015 35,783 (17) 35,766
Effect of foreign
exchange rate
changes (7,750) - (7,750)
(Charge) / credit
for the year (2,554) 61 (2,493)
Balance at 31
December 2015 25,479 44 25,523
Effect of foreign
exchange rate
changes 4,838 - 4,838
(Charge) / credit
for the year (3,517) 607 (2,910)
Balance at 31
December 2016 26,800 651 27,451
------------ ------------- -------------
The Group has tax losses in Russia of $346 million (2015:
$417 million) and tax losses in the UK of $87 million (2015:
$117 million) for which deferred tax assets have not been
recognised. The losses in the UK do not have an expiry date.
Previously losses in Russia expired after 10 years, however
following a change in tax law in the year, the losses can
now be carried forward indefinitely. There is, however,
a restriction on the use of losses in that taxable profits
cannot be reduced by more than 50% in any one year.
Accelerated Revaluation
of
tax investment
allowances property Total
(b) Deferred
tax liabilities $'000 $'000 $'000
Balance at 1
January 2015 33,868 55,250 89,118
Effect of foreign
exchange rate
changes (7,158) - (7,158)
Charge / (credit)
for the year 3,435 (29,776) (26,341)
Balance at 31
December 2015 30,145 25,474 55,619
Effect of foreign
exchange rate
changes 5,448 - 5,448
Charge / (credit)
for the year 5,069 (4,267) 802
Balance at 31
December 2016 40,662 21,207 61,869
------------ ------------- -------------
27. Share capital
2016 2015
$'000 $'000
Issued share
capital:
At 1 January 12,776 13,623
Issued in the year for cash
on warrant exercises (note
28) 2 7
Repurchased and
cancelled in the
year (200) (854)
At 31 December 12,578 12,776
------------- -------------
2016 2015
Number Number
Issued share
capital:
At 1 January 682,560,376 737,598,353
Issued in the year for cash
on warrant exercises (note
28) 114,084 457,589
Repurchased and
cancelled in the
year (14,705,997) (55,495,566)
At 31 December 667,968,463 682,560,376
------------- -------------
Of the authorised ordinary share capital of 1,500,000,000
at 31 December 2016 (2015: 1,500,000,000), 24,894,739 (2015:
25,008,823) are reserved for warrants.
Details of own shares held are given in note 29.
28. Warrants 2016 2015
$'000 $'000
At 1 January 1,167 1,195
Exercised in
the year (note
27) (6) (28)
At 31 December 1,161 1,167
------------- -------------
2016 2015
Number Number
At 1 January 25,008,823 25,466,412
Exercised in
the year (note
27) (114,084) (457,589)
At 31 December 24,894,739 25,008,823
------------- -------------
The Company has issued warrants, which entitle each holder
to subscribe for ordinary shares in the Company at an exercise
price of 25 pence per share. The warrants expire on 25 March
2019.
66,193 warrants have been exercised in the period since
31 December 2016.
29. Own shares
held 2016 2015
$'000 $'000
At 1 January (52,101) (63,649)
Acquisitions (133) (76)
Disposal 43,161 -
Cancelled 81 3,692
Allocation to satisfy
ERS options exercised
(note 32a) 68 258
Allocation to satisfy
LTIP options exercised
(note 32a) 598 901
Allocation to satisfy CBLTIS
2012 awards vesting (note
32b) - 6,773
Allocation to satisfy CBLTIS
2015 awards vesting (note
32c) 877 -
At 31 December (7,449) (52,101)
------------- -------------
2016 2015
Number Number
At 1 January 38,456,594 49,048,873
Acquisitions 282,468 98,040
Disposal (30,937,631) -
Cancelled (64,987) (3,395,130)
Allocation to satisfy
ERS options exercised
(note 32a) (62,756) (237,146)
Allocation to satisfy LTIP
options exercised (note
32a) (500,000) (828,515)
Allocation to satisfy CBLTIS
2012 awards vesting (note
32b) - (6,229,528)
Allocation to satisfy CBLTIS
2015 awards vesting (note
32c) (729,608) -
At 31 December 6,444,080 38,456,594
------------- -------------
Allocations are transfers by the Company's Employee Benefit
Trusts to settle CBLTIS awards that vest and to satisfy
ERS and LTIP options exercised in the year following the
vesting of the options. The amounts shown for share movements
are net of the Trustees' participation in tender offers
during the period from grant to exercise. Details of outstanding
ERS and LTIP options, which are vested but unexercised,
are given in note 32a.
30. Equity
The following describes the nature and
purpose of each component within equity:
Component Description
and purpose
Share capital The amount subscribed for
ordinary share capital at
nominal value.
Share premium The amount subscribed for ordinary
share capital in excess of the
nominal value.
Warrants The consideration attributed to the
subscription of warrants less associated
costs of issuance.
Own shares held The cost to the Company of acquiring the own
shares held by the Company and its subsidiary
undertakings or Employee Benefit Trusts.
Convertible The amount subscribed for convertible
preference shares preference shares which the Directors
consider to be Equity.
Capital reserve The amount of any capital profits and losses,
including gains and losses on the disposal
of investment properties (after taxation),
increases and decreases in the fair value of
investment properties held at each period end,
foreign exchange profits and losses on capital
items, profits and losses on forward currency
financial instruments relating to capital items
and deferred taxation on the increase in fair
value of investment properties.
Translation The amount of any gains or losses arising
reserve on the retranslation of net assets of
overseas operations.
Retained earnings The amount of any profit or loss for the year
after payment of dividend, together with the
amount of any equity-settled share-based payments,
and the transfer of capital items described
above. Retained earnings also includes distributable
reserves created when in 2005 and 2006 the
Company applied to the Royal Court of Guernsey
to cancel its share premium at that time and
create a reserve which is distributable.
31. Net asset
value per share
As well as reporting IFRS net asset value and net asset
value per share, the Group also reports its own adjusted
net asset value and adjusted net asset value per share measure.
The Directors consider that the adjusted measure provides
more relevant information to shareholders as to the net
asset value of a property investment group with a strategy
of long term investment. The adjustments remove or adjust
assets and liabilities, including goodwill and amounts relating
to irredeemable preference shares, that are not expected
to crystallise in normal circumstances.
2016 2015
$'000 $'000
Net asset value 500,226 465,042
Goodwill (1,882) (2,245)
Goodwill in
joint ventures (4,305) (5,134)
Unrealised foreign exchange
(profits) / losses on preference
shares (20,362) 4,956
Fair value of interest rate
derivative financial instruments
(note 19) (4,764) (2,289)
Fair value of
embedded
derivatives (note
19) 681 3,231
Fair value of foreign exchange
derivative financial instruments
(note 19) (277) (2,869)
------------- -------------
Adjusted net
asset value 469,317 460,692
Assuming exercise / vesting
of all dilutive potential
ordinary shares
- Convertible
preference
shares (note 24) 119,859 -
- Warrants (note
28) 7,691 9,215
- ERS (note
32) - -
- LTIP (note
32) 1,196 1,611
- 2016 Retention
scheme (note 32) 1,498 -
- CBLTIS 2015
(note 32) - -
Adjusted fully
diluted
net asset value 599,561 471,518
------------- -------------
Number of ordinary
shares (note 27) 667,968,463 682,560,376
Less own shares
held (note 29) (6,444,080) (38,456,594)
------------- -------------
661,524,383 644,103,782
Assuming exercise / vesting
of all dilutive potential
ordinary shares
- Convertible
preference
shares (note 24) 186,959,259 -
- Warrants (note
28) 24,894,739 25,008,823
- ERS (note
32) - 75,000
- LTIP (note
32) 3,872,973 4,372,973
- 2016 Retention
scheme (note 32) 10,897,650 -
- CBLTIS 2015
(note 32) - 2,993,670
Number of ordinary shares assuming exercise
of all potential ordinary shares 888,149,004 676,554,248
------------- -------------
2016 2015
Cents Cents
Net asset value
per share 76 72
Fully diluted net
asset value per
share 71 70
Adjusted net asset
value
per share 71 72
Adjusted fully diluted
net asset value per
share 68 70
------------- -------------
As the preference shares are considered to be capital for
capital risk management (see note 35d) unrealised foreign
exchange movements on these have been adjusted when calculating
adjusted NAV per share. As explained in note 24 the convertible
preference shares are a compound financial instrument and
their carrying value is split between non-current liabilities
and equity. Further more the convertible preference shares
have a finite life and thus no adjustment has been made
for unrealised foreign exchange gains and losses in calculating
the Group's adjusted NAV.
The number of potential ordinary shares is the total number
of ordinary shares assuming the exercise of all potential
ordinary shares less those not expected to vest.
32. Share-based payments and other long term incentives
The Group utilises a number of different Share Schemes to
reward and incentivise the Group's executives and senior
staff. The Share Schemes operated in the year are as follows:
Executive Share Option Schemes ("ESOS")
The Group operated two ESOS, the Employee Retention Scheme
("ERS") and the Long Term Incentive Plan ("LTIP"). Both
schemes involved the grant of options over the Company's
ordinary shares by the Company's Employee Benefit Trusts.
The ERS vested in full on the publication of the audited
financial statements of the Company for the year ended 31
December 2010 and the ERS options did not have an exercise
price. The LTIP options vested in three equal tranches,
subject to performance criteria, on 24 March 2012, 2013
and 2014. The LTIP options have an exercise price of 25p
per option and have vested in full. Both the ERS and LTIP
schemes are closed and further awards cannot be made under
either scheme. Awards made under the ERS and LTIP have been
accounted for in accordance with the Group's accounting
policy for Share-based payments.
Combined Bonus and Long Term Incentive Scheme 2015 to 2017
("CBLTIS 2015")
During 2015 the Group implemented the CBLTIS 2015. Contingent
awards were made in respect of 35 million ordinary shares,
which covered the calendar years 2015 to 2017. The awards
are subject to performance criteria; three quarters of the
award had performance conditions linked to operating cash
flows and the remainder had a share price target. The awards
made have been accounted for in accordance with the Group's
accounting policy for share-based payments. During the year
the executive directors and certain senior managers waived
their entitlement to rewards under this scheme. Additionally
after the initial vesting in 2016 the scheme was cancelled.
In accordance with the Group's accounting policy the charge
to the income statement in respect of the share price tranche
was accelerated following cancellation of the scheme.
2016 Retention Scheme
During the year the Group terminated the CBLTIS 2015 and
the Company's shareholders approved the introduction of
the 2016 Retention scheme. Awards under the scheme have
been made to the executive directors of the Company and
two senior managers of the Group. The award entitles the
participants to three equal payments each equivalent to
150% of their basic salary. The first instalment was payable
upon approval of the scheme and the second and third instalments
will be payable on 31 December 2017 and 31 March 2019. The
sole condition for each instalment being paid is the continuing
employment of the participant at the relevant payment date.
Participants will receive payment of an instalment in a
combination of the Company's listed securities and cash.
The numbers of listed securities to be issued to satisfy
such payments will be calculated with reference to the average
price of the relevant security prior to the payment date.
On 13 July 2016 an employment benefit trust of the Company
transferred 2,148,375 convertible preference shares (see
note 24) to participants of the scheme in satisfaction of
the fist instalment. It is intended that convertible preference
shares held by an employment benefit trust will also be
used to satisfy the proportion of the second and third instalments
that are to be settled in listed securities.
(a) Movements in
Executive
Share Option Schemes 2016 2015
Weighted Weighted
average average
No of exercise No of exercise
options price options price
Outstanding at the
beginning of the
year 4,447,973 25p 5,708,784 24p
Exercised during
the year
- ERS (75,000) 0p (250,000) 0p
- LTIP (500,000) 25p (1,010,811) 25p
Outstanding at the
end of the year 3,872,973 25p 4,447,973 25p
----------- ------------ ------------- -------------
Represented
by:
- ERS - 75,000
- LTIP 3,872,973 4,372,973
3,872,973 4,447,973
----------- -------------
Exercisable at the
end of the year 3,872,973 25p 4,447,973 25p
The weighted average remaining contractual life of options
was 1 year (2015: 2 years).
(b) Movements in Combined Bonus and Long
Term Incentive Scheme 2012 Awards
2016 2015
No of No of
award award
shares shares
Awards of
Ordinary
shares:
- Outstanding at
the beginning of
the year - 7,401,158
- Granted during
the year - -
- Lapsed during
the year - -
- Vested during
the year - (7,401,158)
- Outstanding at
the end of the
year - -
------------- -------------
(c) Movements in Combined Bonus and Long
Term Incentive Scheme 2015 Awards
2016 2015
No of No of
award award
shares shares
Awards of
Ordinary
shares:
- Outstanding at
the beginning of
the year 34,800,000 -
- Granted during
the year - 34,800,000
- Unvested awards
waived during the
year (18,750,000)
- Vested during the year (of which
entitlement to 2,150,626 was waived) (2,942,060)
- Lapsed during
the year (6,207,940) -
- Cancelled
during the year (6,900,000) -
- Outstanding at
the end of the
year - 34,800,000
------------- -------------
2016 2015
(d) Income
Statement
charge for the
year $'000 $'000
CBLTIS 2012 - (39)
CBLTIS 2015 1,409 3,633
2016 Retention
scheme 7,668 -
9,077 3,594
------------- -------------
To be satisfied
by allocation
of:
Ordinary shares
(IFRS 2 expense) 1,409 3,594
Convertible preference
shares (IFRS 2 expense) 4,535 -
Cash 3,133 -
9,077 3,594
------------- -------------
Of the IFRS 2 expense for the year $1.5 million is included
in current liabilities.
The fair values at grant of the CBLTIS 2015 awards were
assessed using valuation models. Details of the fair values,
models used and key inputs thereto are set out in the table
below:
Tranche
with Tranche
operating with
share
cash flow price
targets target
Fair value at
grant date 62p 18p
Expected volatility 26% 27%
Risk free rate 1.05% 1.51%
Dividend yield 0% 0%
Black Monte
Model used Scholes Carlo
33. Capital commitments
The Group has committed to fund the construction of certain
additional investment property. At 31 December 2016, $1.2
million of funding was required (2015: $2.6 million), excluding
VAT.
34. Related party transactions
Transactions between the Company and its subsidiaries, which
are related parties, have been eliminated on consolidation
and are not disclosed in this note. Further disclosures
concerning transactions with the Company's directors are
made in the Remuneration Report and note 6. There are no
loan balances with directors.
Remuneration of Directors
and other key management
personnel 2016 2015
$'000 $'000
Short term employee
benefits 6,821 6,287
Post employment
benefits 288 322
Share-based payments
and other long term
incentives 7,668 2,582
14,777 9,191
------------- -------------
35. Financial instruments - risk management
The Group's activities expose it to a variety of financial
risks in relation to the financial instruments it uses:
market risk (including currency risk, price risk and cash
flow interest rate risk), credit risk and liquidity risk.
The financial risks relate to the following financial instruments:
trade receivables, cash and short term deposits, trade and
other payables, borrowings, preference shares, convertible
preference shares and derivative financial instruments.
Risk management parameters are established by the Board
on a project by project basis and overseen by management
in conjunction with professional advisers. Reports are provided
to the Board formally on a weekly basis and also when authorised
changes are required.
(a) Market risk
Currency risk
The Group operates internationally and is exposed to foreign
exchange risk arising from a variety of currency exposures,
primarily with respect to US Dollars, Sterling and Russian
Rouble. Foreign exchange risk arises from future commercial
transactions (including lease receivables), recognised monetary
assets and liabilities and net investments in foreign entities.
The majority of the Group's transactions are denominated
in US Dollars, which is also the reporting currency for
the Group. The functional currency of the Company is Sterling,
however the functional currencies of the Company's subsidiaries
vary. The analysis that follows considers the impact of
Russian Rouble and Sterling on the Group.
Russian Rouble
The rapid depreciation of the Rouble since November 2014
has heightened the Group's currency risk. New leases are
now predominantly Rouble denominated rather than pegged
to US Dollars, which will increase the Group's foreign currency
risk when servicing US Dollar denominated debt.
The Group holds sufficient Rouble currency to cover Rouble
denominated overheads and any future construction cost commitments.
The weak Rouble also has an impact on property values as
explained in note 13 to the accounts and increased credit
risk as explained below.
Sterling
The Group's exposure to Sterling is primarily driven by
the Sterling denominated preference shares and convertible
preference shares and the related quarterly dividends, but
also head office costs and ordinary share distributions.
Whilst there are no Sterling foreign exchange gains and
losses arising in the parent company itself, in preparing
the Group financial statements these Sterling amounts are
translated to the Group's US Dollar presentation currency
and the resulting exchange gains and losses are included
in the translation reserve.
The table below summarises the currency in which the Group's
financial instruments are denominated:
Russian
As at 31 December
2016 US Dollar Sterling Rouble Other Total
$'000 $'000 $'000 $'000 $'000
Non-current
assets
Loans receivable - 611 - - 611
Security deposits - - - - -
Restricted cash - - - - -
Derivative financial
instruments 4,694 269 49 - 5,012
Current assets
Trade receivables 29,489 38 6,068 2,137 37,732
Security deposits 2,393 - - - 2,393
Derivative financial
instruments 95 8 255 - 358
Other current
receivables - 98 217 3 318
Cash and short
term deposits 61,846 19,841 116,287 647 198,621
98,517 20,865 122,876 2,787 245,045
---------- ----------- ------------ ------------- -------------
Non-current
liabilities
Interest bearing
loans and
borrowings 699,038 - - - 699,038
Preference shares - 131,703 - - 131,703
Convertible
preference shares - 119,859 - - 119,859
Derivative financial
instruments - - 67 - 67
Rent deposits 21,264 - 1,432 628 23,324
Other payables 23 - 1,912 - 1,935
Current
liabilities
Interest bearing
loans and
borrowings 40,787 - - - 40,787
Derivative financial
instruments 25 - 918 - 943
Rent deposits 5,375 - 1,265 - 6,640
Other payables - 2,769 6,078 22 8,869
766,512 254,331 11,672 650 1,033,165
---------- ----------- ------------ ------------- -------------
Russian
As at 31 December
2015 US Dollar Sterling Rouble Other Total
$'000 $'000 $'000 $'000 $'000
Non-current
assets
Loans receivable - 606 - - 606
Security deposits 2,391 - - - 2,391
Derivative financial
instruments 2,900 2,685 - - 5,585
Current assets
Trade receivables 32,519 6 6,157 - 38,682
Security deposits 2,041 - - - 2,041
Derivative financial
instruments 49 184 - - 233
Other current
receivables - 76 126 - 202
Cash and short
term deposits 155,996 14,286 28,771 3,238 202,291
195,896 17,843 35,054 3,238 252,031
---------- ----------- ------------ ------------- -------------
Non-current
liabilities
Interest bearing
loans and
borrowings 814,021 - - - 814,021
Preference shares - 156,558 - - 156,558
Derivative financial
instruments 210 - 1,584 - 1,794
Rent deposits 27,366 - 1,126 440 28,932
Other payables - - 2,721 - 2,721
Current
liabilities
Interest bearing
loans and
borrowings 104,724 - - - 104,724
Derivative financial
instruments 413 - 1,684 - 2,097
Rent deposits 6,676 - 151 - 6,827
Other payables - 1,814 4,254 22 6,090
953,410 158,372 11,520 462 1,123,764
---------- ----------- ------------ ------------- -------------
The sensitivity analyses below are based on a change in
an assumption while holding all other assumptions constant.
In practice this is unlikely to occur and changes in some
of the assumptions may be correlated, for example a change
in interest rate and a change in foreign currency exchange
rates. The Group principally manages foreign currency risk
on a project by project basis. The sensitivity analysis
prepared by management of foreign currency risk illustrates
how changes in the fair value or future cash flows of a
financial instrument will fluctuate because of changes in
foreign exchange rates.
The table below shows the impact on consolidation if the
US Dollar weakened or strengthened by 10% against the Russian
Rouble or Sterling, with all other variables in each case
remaining constant, then:
2016 2015
Post tax profit
or loss would
change
by: $'000 $'000
Russian Rouble 6,619 412
Sterling 1,455 10,502
Net asset value
would change by:
Russian Rouble 11,121 2,355
Sterling 22,967 11,184
The majority of sterling sensitivity relates to the retranslation
of the value of preference shares and convertible preference
shares.
Accounting standards also require disclosure of monetary
assets and liabilities that are denominated in currencies
different from the functional currency of the specific subsidiary
or entity in the Group. These are set out in the tables
below.
Russian
As at 31 December
2016 US Dollar Sterling Rouble Other
$'000 $'000 $'000 $'000
Current assets
Trade receivables 5,767 - - -
Cash and short
term deposits 35,501 - 79,660 -
41,268 - 79,660 -
----------- ------------ ------------- -------------
Current
liabilities
Interest bearing
loans and
borrowings 63 - - -
Rent deposits 5,375 - - -
5,438 - - -
----------- ------------ ------------- -------------
Non-current
liabilities
Interest bearing
loans and
borrowings 15,000 - - -
Rent deposits 21,264 - - -
36,264 - - -
----------- ------------ ------------- -------------
Russian
As at 31 December
2015 US Dollar Sterling Rouble Other
$'000 $'000 $'000 $'000
Current assets
Trade receivables 5,257 - - -
Cash and short
term deposits 128,769 - - 2,508
134,026 - - 2,508
----------- ------------ ------------- -------------
Current
liabilities
Interest bearing
loans and
borrowings 5,020 - - -
Rent deposits 6,676 - - -
11,696 - - -
----------- ------------ ------------- -------------
Non-current
liabilities
Interest bearing
loans and
borrowings 18,466 - - -
Rent deposits 27,366 - - -
45,832 - - -
----------- ------------ ------------- -------------
The Group's interest rate risk arises from long-term borrowings
(note 22), which include preference shares issued (note
23) and convertible preference shares (note 24). Borrowings
issued at variable rates expose the Group to cash flow interest
rate risk, whilst borrowings issued at a fixed rate expose
the Group to fair value risk. The Group's cash flow and
fair value risk is reviewed monthly by the Board. The cash
flow and fair value risk is approved monthly by the Board.
The Group analyses its interest rate exposure on a dynamic
basis. It takes on exposure to the effects of fluctuations
in the prevailing levels of market interest rates on its
financial position and cash flows. Interest costs may increase
as a result of such changes. They may reduce or create losses
in the event that unexpected movements arise. Various scenarios
are simulated taking into consideration refinancing, renewal
of existing positions, alternative financing and hedging.
Based on these scenarios the Group calculates the impact
on profit and loss of a defined interest rate shift. The
simulation is run on an on-going basis to verify that the
maximum potential impact is within the parameters expected
by management. Formal reporting to the Board on cash flows
is made on a monthly basis.
To date the Group has sought to fix its exposure to interest
rate risk on borrowings through fixed rate debt facilities,
the use of a variety of interest rate derivatives and the
issue of preference shares and convertible preference shares
at a fixed coupon. This gives certainty over future cash
flow but exposure to fair value movements, which amounted
to an accumulated unrealised loss of $12.4 million at 31
December 2016 (2015: loss of $10.6 million).
Sensitivity analysis on the Group's interest rate borrowings,
net of interest bearing deposits, indicate that a 1% increase
in LIBOR rates would decrease the profit for the year and
decrease net assets by $2.1 million (2015: $2.0 million).
If LIBOR rates were to drop to zero then there would be
an increase in the profit for the year and an increase in
net assets of $4.2 million (2015: increase of $2.8 million)
as the loss on income from cash would be greater than gains
on interest expense because of the low LIBOR rates prevailing
at this time and the interest rate hedges in place.
(b) Credit risk
The Group's principal financial assets are cash and short
term deposits, trade and other receivables and derivative
financial instruments.
Credit risk associated with the Group's trade and other
receivables has increased during the year. The Group historically
transacted with tenants using US dollar pegged leases, passing
foreign exchange risk on to the tenant in exchange for lower
US CPI indexation. The rapid weakening of the rouble has
meant that the foreign exchange risk carried by tenants
has increased significantly. This may result in some tenants
struggling to meet rental obligations. The Group has policies
in place to ensure that rental contracts are made with tenants
meeting appropriate Balance Sheet covenants, supplemented
by rental deposits or bank guarantees from international
banks. No significant doubtful receivables existed at the
year end and the amounts presented in the Balance Sheet
are net of allowances for doubtful receivables. An allowance
for impairment is made where there is objective evidence
that the Group will not be able to collect all amounts due
according to the terms of the receivables concerned. Details
of the movements in provision for impairment of trade receivables
is provided in the table below.
2016 2015
$'000 $'000
At 1 January 4,311 591
Effect of foreign
exchange rate
changes 254 -
Charge for the
year 742 3,720
Utilised in
the year - -
Unused amounts
reversed (721) -
At 31 December 4,586 4,311
------------- -------------
At 31 December 2016 there were no significant amounts of
unimpaired trade receivables that were past due for collection
(2015: $ nil).
The Group has VAT recoverable of $7.9 million (2015: $7.5
million). The timing of recovery of these balances is subject
to future revenue receipts and application to the Russian
Courts. The Group forecasts the recovery of these balances
based upon the timing of future revenue receipts and its
experience of successful application to the Russian Courts.
No balances are considered past due or impaired at 31 December
2016 (2015: $nil) based upon this assessment of the timing
of future cash receipts. The Group believes its only exposure
is in relation to the timing of recovery.
The credit risk of the Group's cash and short term deposits
and derivative financial instruments is limited to the Group's
policy of monitoring counterparty exposures.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient
cash, the availability of funding through an adequate amount
of committed credit facilities and the ability to close
out market positions. The Board and its advisers seek to
have appropriate credit facilities in place on a project
by project basis, either from available cash resources or
from bank facilities.
Management monitor the Group's liquidity position on a daily
basis and formal liquidity reports are issued from all jurisdictions
on a weekly basis and are reviewed monthly by the Board,
along with cash flow forecasts. A summary table with maturity
of financial liabilities is presented below.
All amounts shown are gross undiscounted cash flows.
Financial
liabilities Years
Years
As at 31 December Year 3 to 6 to
2016 Total Current 2 5 10
$'000 $'000 $'000 $'000 $'000
Interest bearing
loans and
borrowings 964,900 96,014 106,721 542,826 219,339
Preference shares 145,711 14,571 14,571 43,713 72,856
Convertible
preference shares 254,153 8,260 8,260 24,780 212,853
Derivative financial
instruments 1,010 943 67 - -
Head leases 1,447 145 145 434 723
Trade and other
payables 38,832 15,509 5,471 15,496 2,356
1,406,053 135,442 135,235 627,249 508,127
---------- ----------- ------------ ------------- -------------
As at 31 December
2015
Interest bearing
loans and
borrowings 1,136,455 167,551 214,778 613,384 140,742
Preference shares 173,977 17,398 17,398 52,193 86,988
Derivative financial
instruments 3,891 2,097 284 1,510 -
Head leases 2,083 208 208 625 1,042
Trade and other
payables 41,850 12,917 6,521 19,007 3,405
1,358,256 200,171 239,189 686,719 232,177
---------- ----------- ------------ ------------- -------------
Details of the interest rates applicable to the Group's
long term borrowings, preference shares and convertible
preference shares are given in notes 22, 23 and 24. The
Group is subject to interest costs in perpetuity in respect
of preference shares, which have no contractual maturity
date. The table above does not show cash flows beyond 10
years.
The Group monitors its risk to a shortage of funds by forecasting
cash flow requirements for future years. The Group's objective
is to maintain a balance between continuity of funding and
flexibility through the use of short term borrowing facilities,
bank loans and equity fund raisings.
Fair values
Set out below is a comparison by class of the carrying amounts
and fair value of the Group's financial instruments in the
financial statements.
2016 2015
Carrying Fair Carrying Fair
Value Value Value Value
$'000 $'000 $'000 $'000
Non-current
assets
Loans receivable 611 577 606 567
Security deposits - - 2,391 2,391
Derivative financial
instruments 5,012 5,012 5,585 5,585
Current assets
Trade receivables 37,732 37,732 38,683 38,683
Security deposits 2,393 2,393 2,041 2,041
Other current
receivables 318 318 202 202
Derivative financial
instruments 358 358 233 233
Cash and short
term deposits 198,621 198,621 202,291 202,291
Non-current
liabilities
Interest bearing
loans and
borrowings 699,038 706,682 814,021 821,999
Preference shares 131,703 165,140 156,558 184,705
Convertible
preference shares 119,859 143,596 - -
Derivative financial
instruments 67 67 1,794 1,794
Rent deposits 23,324 19,838 28,932 21,999
Other payables 1,935 1,935 2,721 2,721
Current
liabilities
Interest bearing
loans and
borrowings 40,787 45,458 104,724 108,013
Derivative financial
instruments 943 943 2,097 2,097
Rent deposits 6,640 6,640 6,827 6,827
Other payables 8,869 8,869 6,090 6,090
The fair values of loans receivable and borrowings have
been calculated based on a discounted cash flow model using
a discount rate based on the Group's weighted average cost
of capital. The valuation technique falls within level 3
of the fair value hierarchy (see note 36 for definition).
The fair value of short term deposits, other assets, trade
and other receivables, trade and other payables is assumed
to approximate to their book values. The fair value of preference
shares and convertible preference shares are assumed to
be their last quoted price, which is considered to be level
1 of the fair value hierarchy. The fair value of derivatives
is determined by a model with market based inputs.
(d) Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern to provide
returns to shareholders and benefits for other stakeholders
and to maintain an optimal capital structure to reduce the
cost of capital.
For capital risk management, the Directors consider both
the ordinary and preference shares to be permanent capital
of the Company, with similar rights as to cancellation.
To maintain or adjust the capital structure, the Group may
adjust the amount of dividends paid to shareholders, undertake
tender offers, return capital to shareholders, issue new
shares or sell assets to reduce debt. Consistent with others
in its industry, the Group monitors capital on the basis
of its gearing ratio. This ratio is calculated as net debt
divided by total capital. Net debt is calculated as total
liabilities but excluding provisions, head lease obligations
and preference shares, which for capital risk management
is considered to be capital rather than debt, less cash
and short term deposits. Total capital is calculated as
equity, as shown in the balance sheet, plus preference shares
and net debt. Where the Group has a net cash position, the
gearing ratio will be zero.
2016 2015
$'000 $'000
Non-current
liabilities 904,157 900,366
Current liabilities 107,130 160,193
Total borrowings 1,011,287 1,060,559
Less: cash and
short
term deposits 198,621 202,291
Net debt 812,666 858,268
------------- -------------
Equity 500,226 465,042
Preference shares 131,703 156,558
Total capital 1,444,595 1,479,868
------------- -------------
Gearing ratio 56.26% 58.00%
------------- -------------
36. Fair value measurement
The following table provides the fair value measurement
hierarchy* of the Group's assets and liabilities.
Total
Fair
Level Level Level
1 2 3 Value
As at 31 December
2016 $'000 $'000 $'000 $'000
Assets measured
at fair value
Investment property - - 1,300,643 1,300,643
Investment
property
under
construction - - 41,253 41,253
Derivative financial
instruments - 5,370 - 5,370
Liabilities
measured at
fair value
Derivative financial
instruments - 1,010 - 1,010
----------- ------------ ------------- -------------
As at 31 December
2015
Assets measured
at fair value
Investment property - - 1,333,987 1,333,987
Investment
property
under
construction - - 39,129 39,129
Derivative financial
instruments - 5,818 - 5,818
Liabilities
measured at
fair value
Derivative financial
instruments - 3,891 - 3,891
----------- ------------ ------------- -------------
*Explanation of
the fair value
hierarchy:
Level 1 - Quoted prices in active markets for identical
assets or liabilities that can be accessed at the balance
sheet date.
Level 2 - Use of a model with inputs that are directly or
indirectly observable market data.
Level 3 - Use of a model with inputs that are not based
on observable market data.
The Group's foreign currency derivative financial instruments
are call options and are measured based on spot exchange
rates, the yield curves of the respective currencies as
well as the currency basis spreads between the respective
currencies. The Group's interest rate derivative financial
instruments comprise swap contracts and interest rate caps.
These contracts are valued using a discounted cash flow
model and where not cash collateralised consideration is
given to the Group's own credit risk.
There have been no transfers between level 1 and level 2
during the year or the prior year.
37. Subsequent events
On 19 January 2017 the Group entered into a conditional
agreement to acquire a portfolio of three properties in
St Petersburg. The agreement provided for entities in the
Group to acquire a warehouse and two office buildings for
a total consideration of Rub4.9 billion, subject to the
satisfaction of certain escrow arrangements. The acquisitions
have yet to complete and have a long stop date of 31 March
2017, with the option to extend this date for a further
twenty business days.
38. Operating lease arrangements
The Group earns rental income by leasing its investment
properties to tenants under non-cancellable operating leases,
which are discussed in detail in the Strategic Report and
note 13. At the Balance Sheet date the Group had contracted
with tenants for the following future minimum lease payments:-
2016 2015
$'000 $'000
Within one year 127,962 136,416
In the second
year 113,400 113,410
In the third
to fifth year
(inclusive) 209,100 208,901
After five years 56,379 59,127
506,841 517,854
------------- -------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAEDAFLPXEAF
(END) Dow Jones Newswires
March 13, 2017 03:01 ET (07:01 GMT)
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