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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Raven Property Group Limited | LSE:RAV | 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% | 3.82 | 3.95 | 4.01 | 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
TIDMRAV
RNS Number : 5461X
Raven Property Group Limited
01 September 2020
1 September 2020
Raven Property Group Limited ("Raven" or the "Company")
2020 Interim Results
Raven today announces its unaudited results for the six months ended 30 June 2020.
Highlights
-- Occupancy at 30 June 2020 increased to 93% (31 December 2019: 90%) with 142,000sqm of new lettings and 176,000sqm of maturity extensions in the period;
-- Underlying earnings of GBP13.4 million (30 June 2019: GBP13.4 million) before unrealised foreign exchange movements;
-- Unrealised foreign exchange losses of GBP23.8 million (30 June 2019: profit GBP18.9 million) on weaker Rouble;
-- IFRS loss of GBP31.7 million (30 June 2019: profit GBP26.2 million) after these unrealised foreign exchange movements and loss on revaluation of GBP12.5 million (30 June 2019: profit GBP18.2 million);
-- Cash balance of GBP85.0 million (31 December 2019: GBP68.1 million); -- Rouble value of investment property portfolio down by only 0.3% since 31 December 2019; -- Diluted net asset value per share of 58p (31 December 2019: 75p) on the weaker Rouble; -- Re-designation of convertible preference shares to complete on 30 September 2020; and
-- Payment of final distribution for 2019 of 2.25p by way of tender offer buy back of 1 in 16 ordinary shares at 36p per share confirmed.
Glyn Hirsch CEO said "It looks like global interest rates will stay low for some time and with reliable investment yields likely to become an increasingly scarce commodity, it is reasonable to expect high quality yielding assets to increase in value. We own a high quality portfolio of assets in the best real estate class in the world, with a fifteen year track record of reliable cash flows. These assets are currently valued on a yield of 11% with underlying income in Roubles and annual indexation of around 5%. Russia is not for everyone but on an objective financial analysis, it is one of the strongest and least leveraged economies in the world today. We look forward to the future with confidence."
Enquiries
Raven Property Group Limited Tel: + 44 (0) 1481 712955 Anton Bilton Glyn Hirsch Novella Communications Tel: +44 (0) 203 151 7008 Tim Robertson Fergus Young N+1 Singer Tel: +44 (0) 20 7496 3000 Corporate Finance - James Maxwell / James Moat/Alex Bond Sales - Alan Geeves / James Waterlow Numis Securities Limited Tel: + 44 (0) 207 260 1000 Alex Ham / Jamie Loughborough / Alasdair Abram Renaissance Capital (South Africa) Tel: +27 (11) 750 1448 Yvette Labuschagne Renaissance Capital (Moscow) Tel: + 7 495 258 7770 David Pipia Ravenscroft Tel: + 44 (0) 1481 729100 Emma Ozanne
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 Property Group Limited
Raven Property Group Limited was founded in 2005 to invest in class A warehouse complexes in Russia and lease to Russian and International tenants. Its Ordinary Shares and Preference Shares are listed on the Main Market of the London Stock Exchange and admitted to the Official List of the UK Listing Authority and the Official List of The International Stock Exchange ("TISE"). Its Ordinary Shares also have a secondary listing on the main board of the Johannesburg Stock Exchange and the Moscow Stock Exchange. Its Convertible Preference shares are admitted to the Official List of TISE and to trading on the SETSqx market of the London Stock Exchange. The Group operates out of offices in Guernsey, Moscow and Cyprus and has an investment portfolio of circa 1.9 million square metres of Grade "A" warehouses in Moscow, St Petersburg, Rostov-on-Don, Novosibirsk and Nizhny Novgorod and 49,000 square metres of commercial office space in St Petersburg. For further information visit the Company's website: www.theravenpropertygroup.com
Financial Summary
Hot Features
Premium
Income Statement for the 6 months ended: 30 June 2020 30 June 2019
Net rental and related income (GBPm) 59.6 64.3
------------- -------------
Underlying earnings after tax and before unrealised
foreign currency movements (GBPm) 13.4 13.4
------------- -------------
Underlying (loss)/ earnings after unrealised
foreign exchange movements (GBPm) (10.4) 32.4
------------- -------------
Revaluation (deficit)/surplus (GBPm) (12.5) 18.2
------------- -------------
IFRS (loss)/earnings (GBPm) (31.7) 26.2
------------- -------------
Balance Sheet at: 30 June 2020 31 December
2019
Investment Property Market Value (GBPm) 1,297 1,388
------------- -------------
Diluted NAV per share (pence) 58 75
------------- -------------
Letting Summary
Warehouse Portfolio Maturities
Maturities '000 sqm 2020 2021 2022 2023 2024-2032 Total
Maturity profile at 1 January
2020 235 316 253 262 633 1,699
----- ----- ----- ----- ---------- ------
Renegotiated and extended (64) (89) (14) (1) (5) (173)
----- ----- ----- ----- ---------- ------
Maturity profile of renegotiations 5 17 2 10 139 173
----- ----- ----- ----- ---------- ------
Breaks exercised 11 - - (3) (8) -
----- ----- ----- ----- ---------- ------
Vacated/terminated (63) (1) (3) - - (67)
----- ----- ----- ----- ---------- ------
New lettings 18 52 2 1 68 1 41
----- ----- ----- ----- ---------- ------
Maturity profile at 30 June 1,7
2020 1 42 295 240 269 827 73
----- ----- ----- ----- ---------- ------
Maturity profile with breaks 234 538 204 289 508 1,773
----- ----- ----- ----- ---------- ------
Office Portfolio Maturities
Maturities '000 sqm 2020 2021 2022 2023 2024-2032 Total
Maturity profile at 1 January
2020 4 1 16 8 17 46
----- ----- ----- ----- ---------- ------
Renegotiated and extended - - - - (3) (3)
----- ----- ----- ----- ---------- ------
Maturity profile of renegotiations - - - - 3 3
----- ----- ----- ----- ---------- ------
Breaks exercised - - - - - -
----- ----- ----- ----- ---------- ------
Vacated/terminated (3) - - - - (3)
----- ----- ----- ----- ---------- ------
New lettings - - - - 1 1
----- ----- ----- ----- ---------- ------
Maturity profile at 30 June
2020 1 1 16 8 18 44
----- ----- ----- ----- ---------- ------
Maturity profile with breaks 1 3 20 7 13 44
----- ----- ----- ----- ---------- ------
Lease Currency Mix
USD RUB EUR Vacant Total
Sqm 14% 76% 3% 7% 100%
---- ---- ---- ------- ------
Secured debt currency profile
USD RUB EUR Total
Debt portfolio 0% 59% 41% 100%
---- ---- ---- ------
Chairman's Message
It is with a sense of déjà vu that I issue another foreword overshadowed by the influence of macro events. Since the crisis of 2009 we have had to deal with the impact of international sanctions, oil price crashes, currency devaluations and now the unprecedented impact of a global pandemic. As you will read later, our priority in recent months has been the safety and welfare of our staff, assisting tenants experiencing genuine cash flow problems and securing our own liquidity position.
We have been fortunate that our assets have continued in operation throughout the period of lockdown, logistics networks being an essential part of the supply chain, allowing supermarkets, their suppliers and e-commerce arms to continue to operate. The Russian government introduced compulsory rental deferral schemes, mostly targeted at the non-essential retail and hospitality industries, which have not had a significant impact on our portfolio, but we will continue to work with all tenants who have genuine difficulties in meeting rental payments.
The Russian national balance sheet appears to be in a significantly better position than was the case at the time of the last oil crash which precipitated the free float of the Rouble. Today, the government's national and external sovereign debt levels are one of the lowest globally and its financial reserves are at their highest levels. This should mean that it is well placed to support recovery.
The Group's underlying trading in the six months has been strong. Occupancy at the end of June was 93% with cash reserves of GBP85 million. We have no near term debt maturities today. However the weaker Rouble exchange rates have generated unrealised foreign exchange losses, reducing reported Sterling earnings and our net asset value per share.
On shareholder matters, the Board was pleased to report the approval for the re-designation of our convertible preference shares at the General Meeting on 31 July 2020. The re-designation to ordinary and preference shares will complete on 30 September 2020. However, the conditional agreement between the Company and Invesco for the purchase of Invesco's ordinary and preference shares has now lapsed, a victim of the uncertainty resulting from Covid-19. We will continue our dialogue with Invesco in the meantime and remain keen to find a solution to the perceived stock overhang. This may be by way of a syndication of the Company and its executive management acquiring Invesco's holding.
I am also pleased to report that the Nominations Committee intends to meet with two potential candidates for Non Executive Director positions when circumstances allow and we hope to make positive announcements on the Board composition later this year.
Given the performance of the Group through these difficult times I am pleased to confirm that we now intend to make the final distribution to ordinary shareholders for 2019. The amount, equivalent to 2.25p per share will be distributed by way of a tender offer of 1 in 16 shares at 36p per share.
F inally, I would like to extend my gratitude to the Group's employees for all of their continuing efforts in very difficult circumstances and I look forward to a time when we can celebrate their hard work together.
Sir Richard Jewson
Chairman
31 August 2020
Chief Executive's Review
Dear Shareholders,
We are delighted with the Group's operating performance for the period. We have maintained a high level of occupancy and suffered minimal rental deferral. In the period we have completed 142,000sqm of new lettings and agreed prolongations on a significant amount of space where leases were due to expire in the short term.
Although we continue to trade through a difficult period we have seen an excellent level of rent payment and as in other countries, a shift to e-commerce has benefitted us too. We expect this trend to continue and are working actively with tenants to assist in their e-commerce requirements.
With the Central Bank of Russia key interest rate falling by 325 basis points since 30 June 2019 it's unsurprising that the Rouble valuation of our portfolio has remained stable and we remain optimistic that these falling rates, combined with the resilience of our sector globally, will lead to a re-rating in due course. Our balance sheet remains strong and we are actively looking for new investment opportunities.
The Sterling presentation of our results has been adversely affected by the weak Rouble but the majority of these losses are unrealised and can easily reverse.
As explained in our 2019 Annual Report we deferred the payment of the final distribution for 2019 due to the global uncertainty. We now feel it is appropriate to make this payment in recognition of the 2019 financial performance. Distribution will be by way of tender offer on the basis of 1 in 16 shares at 36p per share. No over allocation will be permitted. Our market is stabilising but we think it prudent that in relation to 2020 we will announce one distribution at the time of the issue of our annual results.
Our employees have made a tremendous effort during this difficult period and we thank them for that.
Property Update
At 30 June 2020, our warehouse portfolio comprised 1.89 million sqm and our office portfolio, 49,000sqm of space. Average occupancy for the six months ran at 92% compared to 90% for the same period last year. At 30 June 2020, occupancy levels were 93%.
Warehouse Portfolio
New warehouse lettings in the six months to 30 June 2020 totalled 140,649sqm with a further 172,419sqm of existing leases renegotiated and extended, including the renewal of 76,000sqm to X5 Retail Group in Moscow and the simultaneous new letting to the same tenant of 25,000sqm, both for ten years. Tenants vacated 66,243sqm of space including one major tenant vacating 18,326sqm in March.
As at 30 June 2020 we had 141,896sqm of warehouse leases maturing in the second half of the year and 92,018sqm of potential lease breaks. Of those, we expect 121,076sqm of maturing tenants and 9,874sqm of breaks to vacate, including a large block of 66,275sqm in Pushkino, Moscow. We have already successfully re-let 43,693sqm of this space to Wildberries on a short term basis for e-commerce fulfilment.
Since the period end, in addition to the Wildberries lease, we have let a further 11,564 sqm of vacant warehouse space and renegotiated and extended 9,403 sqm of maturing leases. A further 17,309 sqm of space is subject to letters of intent or lease renewal negotiations.
Rental levels for dry warehouse space remain in the region of Rouble 4,000 - Rouble 4,100 per sqm and demand appears to remain strong. Prime yields remain in the range 11% to 12%.
Currency Mix
Rouble denominated leases accounted for 76% (31 December 2019: 71%) of the total warehouse space at the period end and US Dollar leases 14% (31 December 2019: 16%). The average Rouble rent at 30 June 2020 was 4,833 per sqm (31 December 2019: 4,922 per sqm) and the average US Dollar rent was $160 per sqm (31 December 2019: $158 per sqm). Rouble denominated leases had a weighted average term to maturity of 4.2 years (31 December 2019: 4.1 years) and US Dollar leases 1.6 years (31 December 2019: 1.9 years).
Office Portfolio
Our St Petersburg office portfolio has performed extremely well given the impact of Covid-19 and during the first six months of 2020 we have let 1,169sqm of vacant space with maturities of 2,631sqm vacating, including a single tenant from 1,742sqm. Average Rouble rent at the period end was Roubles 14,641 per sqm (31 December 2019: 13,988 per sqm).
Since the period end, we have let 3,437sqm of vacant space in the office portfolio to one major tenant for 10 years. Occupancy now stands at 98%.
Finance Review
The Group's underlying Rouble trading has been strong in the first six months of the year. Occupancy increased to 93% (31 December 2019: 90%) and we continue the unwinding of our legacy US Dollar pegged leases. The Covid-19 pandemic has not had a significant impact on rental recovery, with over 99% of rents received in the first six months. The indirect impact of the pandemic on our results has been the effect of the oil price crash, leading to a weakening of the Rouble exchange rate over the period. This has been exacerbated by a strong Euro and a perceived heightened risk of US sanctions in the run up to US elections.
The weaker Rouble influences our results and our primary statements in a number of ways:
Income Statement
-- In the income statement Rouble weakness causes an increased cost in the servicing of our Euro denominated debt and Sterling preference shares and an unrealised foreign exchange movement on the translation of balance sheet Euro debt in our Russian property owning subsidiaries; and
-- On the translation to our Sterling presentation, a reduction in the Sterling equivalent of our Rouble income offset by a reduction in Rouble costs such as bank interest.
Balance Sheet
-- The greatest impact on our results is the presentation translation of our Rouble denominated net assets to Sterling. This is principally the translation of our investment property value, net of related Rouble denominated debt, generating an exchange movement through our balance sheet reserves and volatility in our Sterling net asset value per share.
Net Rental and Related Income
Net rental and related income drops to GBP59.6 million in the six months (30 June 2019: GBP64.3 million). The continued unwinding of foreign currency leases, 17% of the portfolio now pegged to currency leases compared to 22% at 30 June 2019, accounting for roughly half of the decrease. The remainder is due to the weaker average Rouble exchange rate of 87.3 (30 June 2019: 84.5) in the six months when translating to Sterling presentation.
Administrative Expenses
Underlying administrative costs reduce to GBP10.0 million (30 June 2019: GBP11.4 million). This is driven by lower employment costs as there was no bonus expensed in the six months to 30 June 2020.
Net Finance Costs
Underlying net finance costs reduce to GBP32.7 million (30 June 2019: GBP35.9 million). As explained above, there will be some increase in the cost for servicing of Euro debt in the Russian subsidiaries but as the proportion of our Rouble denominated debt continues to increase, 59% at the period end (30 June 2019: 37%), this more than offsets the Euro impact. The Central Bank of Russia has reduced its key rate to the lowest level since the Soviet collapse, 4.25% today (30 June 2019: 7.5%) with expectations that this will continue to fall. We also have the positive impact on translating to Sterling.
Underlying Earnings
Underlying profit before tax and unrealised foreign exchange movements of GBP16.8 million (30 June 2019: GBP17.6 million) illustrates the reduction in overheads and interest cost offsetting the drop in net operating income. The unrealised foreign exchange loss in the period of GBP23.8 million (30 June 2019: profit of GBP18.9 million) represents the biggest swing in underlying results. As explained, the majority relates to the unrealised movement in the carrying value of our Euro debt in our Russian subsidiaries and moves us to an underlying loss before tax of GBP7.0 million (30 June 2019: profit of GBP36.6 million).
IFRS Earnings
We continue to use underlying earnings as the best comparative measure for the Group's results. The reconciliation between underlying and IFRS earnings is shown in note 6 to the Report. Principal differences relate to depreciation, unrealised movements in property valuations, mark to market of derivative instruments and the convertible preference share redemption premium. The IFRS loss before tax for the period is GBP26.7 million (30 June 2019: profit GBP33.6 million). In addition to the unrealised foreign exchange movements noted previously, the larger IFRS movements were a loss on the revaluation of investment property of GBP12.5 million (30 June 2019: gain of GBP18.2 million) and a finance expense of GBP6.5 million (30 June 2019: expense of GBP19.3 million). The finance expense includes the amortisation premium on our convertible preference shares of GBP3.6 million in each period and a loss on mark to market of derivative instruments of GBP1.7 million (30 June 2019: a loss of GBP13.9 million). The latter is a factor of the reducing Russian Central Bank key rate.
Taxation
The underlying tax charge of GBP3.4 million (30 June 2019: GBP4.2 million) principally relates to corporate tax due in our Russian subsidiaries and withholding tax payments. The IFRS tax charge of GBP5.1 million (30 June 2019: GBP7.4 million) also includes deferred tax movements in relation to the investment property valuations.
We are awaiting the release of the full text of the new double tax treaty signed between Russia and Cyprus and will assess the impact on the Group, if any, once we have had the opportunity to review this.
Earnings Per Share
The unrealised foreign exchange loss in the income statement swings our underlying basic earning per share to a loss of 2.16p for the period (30 June 2019: earnings of 5.31p) and the unrealised loss on revaluation of investment properties contributing to a basic IFRS loss per share of 6.59p (30 June 2019: earnings of 4.30p).
Investment Properties
Our investment property portfolio valuation has not moved significantly in Rouble terms since 31 December 2019, reducing by 0.30%. Together with property improvements of GBP8.8 million, the revaluation loss for the period is GBP16.2 million before accounting for tenant incentives. The largest movement on the property valuation is on translation to Sterling, the weaker Rouble closing exchange rate of 86.4 (31 December 2019: 81.2) contributing a reduction in Sterling asset value of GBP83.7 million. The investment property carrying value at 30 June 2020 is GBP1.25 billion (31 December 2019: GBP1.34 billion) and Investment property under construction GBP31.5 million (31 December 2019: GBP33.8 million).
Cash and Rent Recovery
We held the Sterling equivalent of GBP85.0 million at the period end (31 December 2019: GBP68.1 million). Due to the Covid-19 crisis, we had postponed any conditional cash outflows within our control, the largest being the final ordinary share distribution for 2019. Rent collection rates have remained high, over 99% of rents due being collected in the six months to 30 June 2020.
In July, 1.21% of rent was subject to deferral agreements and 0.12% given in discounts. All other rent due has been received. Deferrals in August dropped to 0.66% of rent due with a similar outcome on receipts expected. Contracted deferrals for the year total Roubles 119 million with Roubles 87.7 million of that to be collected before the end of the year.
Discounts given on the portfolio will total Roubles 22.8 million for the financial year.
Debt
Net proceeds from re-financings in the period totalled GBP20.5 million after loan amortisation of GBP16.2 million. GBP21.2 million of loans due within one year relate to one project where maturity has been extended for two years since the period end. The majority of the remainder of short term payments relate to standard loan amortisation.
We continue to focus on increasing the Rouble weighting of our debt which at 30 June 2020 was 59% Rouble (31 December 2019: 58%) and Euro 41% (31 December 2019: 42%). The weighted average term to maturity of loans was 4.3 years (31 December 2019: 4.7 years) and the weighted average interest rate in the six months 5.77% (30 June 2019: 7.39%).
The loan to value ratio on secured debt at 30 June 2020 was 54% (31 December 2019: 50%).
Net Asset Value
Diluted Net Asset Value per share at the period end is 58p (31 December 2019: 75p per share). The weak Sterling/Rouble exchange rate is the principal reason for the movement, a translation exchange loss of GBP54.8 million reducing reserves and the unrealised foreign exchange movement of GBP23.8 million reducing profit in the period.
Re-designation of Convertible Preference Shares
On 31 July 2020 shareholders approved the re-designation of the Company's convertible preference shares into a ratio of ordinary shares and preference shares. On 30 September 2020, up to 121,046,430 ordinary shares and 115,913,650 preference shares will be admitted to trading. The Company issued a prospectus for the admission of these new shares on 14 July 2020, a copy of which is available on the Company's website, which included a pro forma illustration of the effect of the re-designation on the Company's income statement and balance sheet.
Glyn Hirsch
Chief Executive Officer
31 August 2020
Corporate Governance
Principal risks and uncertainties
The principal risks and uncertainties affecting the Group and how these are mitigated or managed and our approach to risk appetite are set out in the Risk Report on pages 40 to 43 of the Annual Report for the year ended 31 December 2019.
Covid-19
The impact of the pandemic has tested a number of our key controls and has had direct and indirect implications for our business. Our priorities were, and continue to be, the well being of our employees, support for our tenants and stakeholders where required and cash flow management.
The most immediate challenge we faced was our ability to deal with the potential business interruption issues. Our Group structure and management oversight procedures have always been dependent on the remote operation of key controls, underpinned by the appropriate communication, security and support structures. These are used daily by the executive directors, senior management team and other key operational staff. Prior to official lock down, all business travel for the Group, both domestic and international, was cancelled and virtual meeting rooms for all of the operational committees introduced to facilitate home working. Members of the executive and key members of the senior management team had daily virtual meetings to monitor the situation and the wider senior management team met three times a week to ensure Group policies were being followed and adapted as the external environment changed. The various business committees met at least weekly as usual to deal with operational matters and the Risk Committee convened twice during lockdown to assess the changing risks and approve Group policy.
Our warehouse properties have remained in operation throughout the pandemic as a large proportion of our tenants serve the essential retail supply chains. We set up secure space within the sites for the small number of our staff who were required on site, with face to face meetings with tenants restricted. Our tenants also took the appropriate approach to their own employee safety to ensure that they could continue to operate.
As lockdown eases in each jurisdiction we have taken a cautious approach to a return to the various offices. We continue to encourage working from home where appropriate. In the Russian offices, each department is permitted up to half of their team in the office on a two week rotation. If employees want to take advantage of this then we arrange a virus test and confirmation of a negative test must be forwarded to the HR department before entry to the office at the beginning of the week. Similarly, Cyprus can operate with up to half of staff in the office at any time with temperature tests taken before entry. Guernsey is now officially Covid free however staff can continue to work from home if required. A social distancing regime continues in all offices.
Principal Risks
We believe the principal risks faced by the business remain the same as reported in the 2019 Annual Report. The indirect impact of the pandemic has heightened a number of these risks. The oil price crash in March had a knock on effect on the strength of the Rouble but the fact that our warehouses remained operational has dampened the effect of the crisis so far. Having weathered both the 2009 global crisis and the more localised impact of the oil price collapse of 2015/16, which precipitated the Rouble free float, we can point to some positive outcomes that have served us well through the current crisis. We continue to reduce our balance sheet foreign exchange exposure, diminishing the impact of any Rouble volatility on cash flows; we have built cure mechanisms into our financing facilities to manage potential covenant breaches; and all of these crises emphasised the importance of our asset specific financing structure in isolating individual asset issues.
The Group's principal risks are grouped into five categories: Political and Economic; Financial; Property Investment; Russian Domestic; and Personnel. We have illustrated in the table below how we believe that these risks have changed in the six months to 30 June 2020, principally due to the effects of Covid-19.
Risk Change Since Commentary
the Year End
Political Increased The fall in oil prices has had a knock on effect on
and Economic Rouble exchange rates. The upcoming US election has
also heightened the risk of the introduction of further
sanctions against Russian entities and individuals.
The Russian national budget however is less vulnerable
than at the time of the last crisis, with low levels
of national and external sovereign debt and financial
reserves at a new high and it appears that they are
better placed to deal with a recovery programme.
-------------- --------------------------------------------------------------
Financial Increased The weaker Rouble puts pressure on our ability to service
foreign currency debt. We continue to increase our
exposure to Rouble denominated debt and with Central
Bank of Russia's key rate being at the lowest level
on record the Group balance sheet is now in a stronger
position to deal with variable foreign currency cash
flows.
-------------- --------------------------------------------------------------
Property No change The pandemic has increased uncertainty over property
Investment valuations but including the year end exercise, we
have had three external valuations of the portfolio
in the first six months of the year with no significant
movement. Occupancy and rent collections remain high.
-------------- --------------------------------------------------------------
Russian Increased The Russian authorities are renegotiating double tax
Domestic treaties with a number of jurisdictions. This could
increase the tax cost of the Group in the future. We
will review the potential impact when the text of the
new treaties is issued.
-------------- --------------------------------------------------------------
Personnel No change As explained above, staff welfare has been a priority
during the crisis. We have retained our workforce throughout
lockdown.
-------------- --------------------------------------------------------------
We continue to monitor our risk profile closely and remain cautious. Uncertainty still prevails in the market place and new outbreaks of the virus can quickly change the business environment.
Going concern
The financial position of the Group, its cash flows, liquidity and borrowings and the impact of Covid-19 are described in the Chief Executive's Review. The changes the pandemic has caused to our business risks are summarised in the Principal Risks and Uncertainties section.
The Board regularly reviews and approves the financial position of the Group with a three year forecast model supporting the Viability Statement in the Annual Report, an updated model for Interim Results, an annual budget with quarterly reforecasts and monthly management information which includes a 12 month rolling cash flow forecast. All of these models include stress testing similar to that applied for the Viability Statement to consider "severe but credible scenarios". In addition, this year, a full working capital exercise was undertaken in support of the Prospectus issued to shareholders on 14 July 2020 for the re-designation of the Company's convertible preference shares. The working capital model and sensitivities applied, including those relevant to Covid-19, were reviewed by Ernst and Young and our broker, Nplus1 Singer to confirm the working capital statement made by the directors in the prospectus.
In assessing going concern and the impact of Covid-19 the directors have considered:
- The high level of rent collections during lockdown and subsequently; - Finance facility covenant headroom after applying sensitivities; - The potential impact on speculative warehouse letting income should demand decline; - The maturity profile of existing finance facilities; - The continued availability of bank financing in the market; and - The results of the independent portfolio valuations undertaken this year.
Having made the appropriate enquiries and examining major areas that could give rise to significant uncertainty and financial exposure, including the uncertainties arising from the pandemic, the Board has a reasonable expectation that the Company and the Group have adequate resources to continue its operations for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in the preparation of the accompanying interim financial statements.
Directors' Responsibility Statement
The Board confirms to the best of its knowledge:
The condensed financial statements have been prepared in accordance with IAS 34 as adopted by the European Union, and that the half year report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.
The names and functions of the Directors of Raven Property Group Limited are disclosed in the 2019 Annual Report of the Group.
This responsibility statement was approved by the Board of Directors on the 31 August 2020 and is signed on its behalf by
Mark Sinclair Colin Smith Chief Financial Officer Chief Operating Officer
INDEPENT REVIEW REPORT TO RAVEN PROPERTY GROUP LIMITED
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the six months ended 30 June 2020 which comprises the Condensed Unaudited Group Income Statement, the Condensed Unaudited Group Statement of Comprehensive Income, the Condensed Unaudited Group Balance Sheet, the Condensed Unaudited Group Statement of Changes in Equity, the Condensed Unaudited Group Cash Flow Statement and the related notes 1 to 19. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six months ended 30 June 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
31 August 2020
Condensed Unaudited Group Income Statement
For the six months
ended
30 June 2020
Six months Six months
ended ended
30 June 30 June
2020 2019
Underlying Capital Underlying Capital
Notes earnings & other Total earnings & other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------ ----------- ----------- --------- ----------- ----------- ---------
Gross revenue 2 80,627 - 80,627 87,731 - 87,731
Property operating
expenditure
and cost of sales (21,008) - (21,008) (23,429) - (23,429)
----------- --------- ----------- ---------
Net rental and
related
income 2 59,619 - 59,619 64,302 - 64,302
----------- ----------- --------- ----------- ----------- ---------
Administrative
expenses 3 (9,996) (889) (10,885) (11,419) (953) (12,372)
Share-based payments
and other long term
incentives 16b - - - - (873) (873)
Foreign currency
(loss)
/ profit (23,769) - (23,769) 18,943 - 18,943
----------- ----------- --------- ----------- ----------- ---------
Operating expenditure (33,765) (889) (34,654) 7,524 (1,826) 5,698
Share of (losses) /
profits of joint
ventures (77) - (77) 701 - 701
Operating profit /
(loss)
before profits and
losses
on investment
property 25,777 (889) 24,888 72,527 (1,826) 70,701
----------- ----------- --------- ----------- ----------- ---------
Unrealised (loss) /
profit on
revaluation
of investment
property 7 - (12,103) (12,103) - 18,073 18,073
Unrealised (loss) /
profit on
revaluation
of investment
property
under construction 8 - (360) (360) - 92 92
----------- ----------- --------- ----------- ----------- ---------
Operating profit /
(loss) 2 25,777 (13,352) 12,425 72,527 16,339 88,866
----------- ----------- --------- ----------- ----------- ---------
Finance income 4 1,843 153 1,996 1,281 - 1,281
Finance expense 4 (34,583) (6,495) (41,078) (37,227) (19,298) (56,525)
(Loss) / profit
before
tax (6,963) (19,694) (26,657) 36,581 (2,959) 33,622
----------- ----------- --------- ----------- ----------- ---------
Tax 5 (3,413) (1,638) (5,051) (4,195) (3,212) (7,407)
-----------
(Loss) / profit for
the period (10,376) (21,332) (31,708) 32,386 (6,171) 26,215
=========== =========== ========= =========== =========== =========
Earnings per share: 6
Basic (pence) (6.59) 4.30
Diluted (pence) (6.59) 3.89
Underlying earnings
per share: 6
Basic (pence) (2.16) 5.31
Diluted (pence) (2.16) 4.16
=========== ===========
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.
Further details of the allocation of items between the supplementary columns
are given in note 6.
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.
Condensed Unaudited Group Statement Of Comprehensive Income
For the six months ended 30 June
2020
Six months
Six months ended ended
30 June 2020 30 June 2019
GBP'000 GBP'000
(Loss) / profit for the period (31,708) 26,215
Other comprehensive income, net
of tax
Items to be reclassified to profit or loss
in subsequent periods:
Foreign currency translation on
consolidation (54,783) 85,406
Total comprehensive income for the period,
net of tax (86,491) 111,621
================== =============
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.
Condensed Unaudited Group Balance Sheet
As at 30 June 2020
30 June 31 December
2020 2019
Notes GBP'000 GBP'000
Non-current assets
Investment property 7 1,252,553 1,337,682
Investment property under construction 8 31,451 33,846
Plant and equipment 5,582 6,150
Investment in joint ventures 100 189
Other receivables 3,219 3,414
Derivative financial instruments 2,983 2,621
Deferred tax assets 21,505 24,290
1,317,393 1,408,192
========== ============
Current assets
Inventory 473 358
Trade and other receivables 37,255 41,595
Cash and short term deposits 84,983 68,138
122,711 110,091
========== ============
Total assets 1,440,104 1,518,283
========== ============
Current liabilities
Trade and other payables 46,544 51,691
Interest bearing loans and borrowings 10 53,664 60,173
100,208 111,864
========== ============
Non-current liabilities
Interest bearing loans and borrowings 10 643,698 623,168
Preference shares 11 110,709 110,324
Convertible preference shares 12 221,104 217,482
Other payables 17,293 18,623
Deferred tax liabilities 67,785 71,024
1,060,589 1,040,621
========== ============
Total liabilities 1,160,797 1,152,485
========== ============
Net assets 279,307 365,798
========== ============
Equity
Share capital 13 4,898 4,898
Share premium 51,463 51,463
Own shares held 14 (4,582) (4,582)
Convertible preference shares 12 11,212 11,212
Capital reserve (244,854) (234,519)
Translation reserve (26,595) 28,188
Retained earnings 487,765 509,138
Total equity 279,307 365,798
========== ============
Net asset value per share (pence): 15
Basic 58 76
Diluted 58 75
The accompanying notes are an integral part of
this statement.
Condensed Unaudited Group Statement
Of Changes In Equity
For the six months ended
30 June 2020
Own Convertible
Share Share Shares Preference Capital Translation Retained
Capital Premium Warrants Held shares Reserve Reserve Earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2019 6,233 103,144 98 (5,965) 11,212 (281,001) (48,830) 510,403 295,294
Profit for the
period - - - - - - - 26,215 26,215
Other comprehensive
income - - - - - - 85,406 - 85,406
Total comprehensive
income for the period - - - - - - 85,406 26,215 111,621
-------- --------- --------- -------- ------------ ---------- ------------ --------- ---------
Warrants exercised 17 486 (69) - - - - - 434
Warrants lapsed - - (29) - - - - 29 -
Ordinary shares
cancelled (245) (10,801) - 151 - - - - (10,895)
Own shares acquired - - - (106) - - - - (106)
Own shares allocated - - - 1,338 - - - (830) 508
Transfer in respect
of capital profits - - - - - 17,967 - (17,967) -
At 30 June 2019 6,005 92,829 - (4,582) 11,212 (263,034) 36,576 517,850 396,856
======== ========= ========= ======== ============ ========== ============ ========= =========
At 1 January 2020 4,898 51,463 - (4,582) 11,212 (234,519) 28,188 509,138 365,798
Loss for the period - - - - - - - (31,708) (31,708)
Other comprehensive
income - - - - - - (54,783) - (54,783)
Total comprehensive
income for the period - - - - - - (54,783) (31,708) (86,491)
-------- --------- --------- -------- ------------ ---------- ------------ --------- ---------
Transfer in respect
of capital losses - - - - - (10,335) - 10,335 -
At 30 June 2020 4,898 51,463 - (4,582) 11,212 (244,854) (26,595) 487,765 279,307
======== ========= ========= ======== ============ ========== ============ ========= =========
The accompanying notes are an
integral part of this statement.
Condensed Unaudited Group Cash Flow
Statement
For the six months ended 30 June
2020
Six months Six months
ended ended
30 June 2020 30 June 2019
Notes GBP'000 GBP'000
Cash flows from operating activities
(Loss) / profit before tax (26,657) 33,622
Adjustments for:
Depreciation 3 550 822
Provision for bad debts 3 (2) -
Share of losses / (profits) of joint
ventures 77 (701)
Finance income 4 (1,996) (1,281)
Finance expense 4 41,078 56,525
Loss / (profit) on revaluation of
investment property 7 12,103 (18,073)
Loss / (profit) on revaluation of investment
property under construction 8 360 (92)
Foreign exchange loss / (profit) 23,769 (18,943)
Non-cash element of share-based payments
and other long term incentives 16b - 873
------------- -------------
49,282 52,752
Changes in operating working capital
Decrease in operating receivables 4,047 1,391
Increase in other operating current
assets (106) (2)
Decrease in operating payables (6,028) (8,304)
------------- -------------
47,195 45,837
Tax paid (5,843) (4,122)
Net cash generated from operating
activities 41,352 41,715
============= =============
Cash flows from investing activities
Payments for property improvements (4,719) (2,971)
Refund of VAT on acquisition of investment
property - 3,920
Acquisition of subsidiaries - (187)
Acquisition of investment property / payment of deferred
consideration on acquisition of investment property - (12,255)
Purchase of plant and equipment (205) (1,224)
Investment in joint ventures - (14)
Loans granted - (75)
Loans repaid - 30
Interest received 1,185 1,258
Net cash used in investing activities (3,739) (11,518)
============= =============
Cash flows from financing activities
Proceeds from long term borrowings 45,232 35,309
Repayment of long term borrowings (8,544) (1,308)
Loan amortisation (16,150) (12,396)
Bank borrowing costs paid (24,136) (27,188)
Exercise of warrants - 434
Ordinary shares purchased - (10,826)
Dividends paid on preference shares (5,807) (5,650)
Dividends paid on convertible preference
shares (6,364) (6,367)
Proceeds from disposal of derivative
financial instruments 131 2,363
Premium paid for derivative financial
instruments (2,203) (7)
Net cash used in financing activities (17,841) (25,636)
============= =============
Net increase in cash and cash equivalents 19,772 4,561
============= =============
Opening cash and cash equivalents 68,138 73,450
Effect of foreign exchange rate changes (2,927) 5,001
Closing cash and cash equivalents 84,983 83,012
============= =============
The accompanying notes are an integral part
of this statement.
Notes to the Condensed Unaudited Group Financial
Statements
For the six months ended 30 June
2020
1. Basis of accounting
Basis of preparation
The condensed unaudited financial statements have been prepared using accounting
policies consistent with International Financial Reporting Standards adopted
for use in the European Union ("IFRS") and have been prepared in accordance
with International Accounting Standard 34 Interim Financial Reporting.
The condensed financial statements do not include all the information and disclosures
required in annual financial statements and should be read in conjunction with
the Group's financial statements for the year ended 31 December 2019.
Significant accounting policies
The accounting policies adopted in the preparation of the condensed financial
statements are consistent with those followed in the preparation of the Group's
financial statements for the year ended 31 December 2019, except for the adoption
of new standards that became effective as of 1 January 2020. The Group has
not adopted early any standard, interpretation or amendment that has been issued
but is not yet effective.
Several amendments and interpretations apply for the first time in 2020, but
do not have an impact on the condensed financial statements of the Group.
Going concern
The financial position of the Group, its cash flows and liquidity position
are described in detail in the corporate governance section of this Interim
Report. 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.
Foreign currency
The results and financial position of all the Group entities that a have functional
currency different from the Group's presentation currency (Sterling) are translated
into the presentation currency using the following rates:
30 June 31 December
2020 2019
Balance Sheet
- Roubles 86.3619 81.1460
- United States Dollar 1.2346 1.3108
- Euro 1.0976 1.1703
30 June 30 June
2020 2019
Income Statement *
- Roubles 87.3027 84.5079
- United States Dollar 1.2612 1.2934
- Euro 1.1441 1.1447
* These are the average rates for the six months ended 30 June 2019 and 2020,
which are used unless this does not approximate the rates ruling at the dates
of the relevant transactions in which case the item of income or expenditure
is translated at the transaction date rate.
2. Segmental information
The Group has three operating segments, which are managed and report independently
to the Board of Directors. These comprise:
Property investment - acquire, develop and lease commercial property in Russia
Roslogistics - provision of warehousing, transport, customs brokerage and related
services in Russia
Raven Mount - sale of residential property in the UK.
(a) Segmental information for the six months
ended and as at 30 June 2020
For the six months ended
30 June 2020 Property Raven Segment Central
Investment Roslogistics Mount Total Overhead Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross revenue 73,542 7,084 1 80,627 - 80,627
Operating costs / cost
of sales (17,727) (3,281) - (21,008) - (21,008)
Net rental and related
income 55,815 3,803 1 59,619 - 59,619
----------- ------------- -------------- ------------- -------------- ------------
Administrative expenses
Running general and
administration
expenses (6,555) (861) (126) (7,542) (2,454) (9,996)
Aborted project costs - - - - (339) (339)
Depreciation (383) (167) - (550) - (550)
Foreign currency losses (23,767) (2) - (23,769) - (23,769)
----------- ------------- -------------- ------------- -------------- ------------
25,110 2,773 (125) 27,758 (2,793) 24,965
Unrealised loss on
revaluation
of investment property (12,103) - - (12,103) - (12,103)
Unrealised loss on
revaluation
of investment property
under construction (360) - - (360) - (360)
Share of losses of joint
ventures - (77) - (77) - (77)
----------- -------------- --------------
Segment profit / (loss) 12,647 2,696 (125) 15,218 (2,793) 12,425
=========== ============= ============== ============= ============== ============
Finance income 1,996
Finance expense (41,078)
Loss before tax (26,657)
============
As at 30 June 2020 Property Raven
Investment Roslogistics Mount Total
GBP'000 GBP'000 GBP'000 GBP'000
Assets
Investment property 1,252,553 - - 1,252,553
Investment property
under
construction 31,451 - - 31,451
Investment in joint
ventures - 100 - 100
Inventory - - 473 473
Cash and short term deposits 82,710 1,432 841 84,983
-------------- ------------- --------------
Segment assets 1,366,714 1,532 1,314 1,369,560
============== ============= ============== ============
Other non-current assets 33,289
Other current assets 37,255
Total assets 1,440,104
============
Segment liabilities
Interest bearing loans and borrowings 697,362 - - 697,362
============== ============= ============== ============
Capital expenditure
Corporate acquisitions - - - -
Other acquisition - - - -
Property improvements 4,719 - - 4,719
4,719 - - 4,719
============== ============= ============== ============
(b) Segmental information for the six months
ended and as at 30 June 2019
Property Raven Segment Central
Investment Roslogistics Mount Total Overhead Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross revenue 79,516 8,155 60 87,731 - 87,731
Operating costs / cost
of sales (19,304) (4,097) (28) (23,429) - (23,429)
Net rental and related
income 60,212 4,058 32 64,302 - 64,302
----------- ------------- -------------- ------------- -------------- ------------
Administrative expenses
Running general and
administration
expenses (7,847) (994) (183) (9,024) (2,395) (11,419)
Aborted project costs (131) - - (131) - (131)
Depreciation (659) (162) (1) (822) - (822)
Share-based payments
and other long term
incentives (90) - - (90) (783) (873)
Foreign currency profits 18,941 2 - 18,943 - 18,943
----------- ------------- -------------- ------------- --------------
70,426 2,904 (152) 73,178 (3,178) 70,000
Unrealised profit on
revaluation of
investment
property 18,073 - - 18,073 - 18,073
Unrealised profit on
revaluation of
investment
property
under construction 92 - - 92 - 92
Share of profits of
joint
ventures - (197) 898 701 - 701
Segment profit / (loss) 88,591 2,707 746 92,044 (3,178) 88,866
=========== ============= ============== ============= ============== ============
Finance income 1,281
Finance expense (56,525)
Profit before tax 33,622
============
For the six months ended 30 June
2019 Property Raven
Investment Roslogistics Mount Total
GBP'000 GBP'000 GBP'000 GBP'000
Capital expenditure
Corporate acquisitions 187 - - 187
Payments for property improvements 2,971 - - 2,971
Payment of deferred consideration on acquisition
of investment property 12,255 - - 12,255
15,413 - - 15,413
============== ============= ============== ============
(c) Segmental information as at
31 December 2019
Property Raven
Investment Roslogistics Mount Total
GBP'000 GBP'000 GBP'000 GBP'000
Assets
Investment property 1,337,682 - - 1,337,682
Investment property under
construction 33,846 - - 33,846
Investment in joint
ventures - 189 - 189
Inventory - - 358 358
Cash and short term deposits 62,449 1,069 4,620 68,138
Segment assets 1,433,977 1,258 4,978 1,440,213
============== ============= ============== ============
Other non-current assets 36,475
Other current assets 41,595
Total assets 1,518,283
============
Segment liabilities
Interest bearing loans
and borrowings 683,341 - - 683,341
============== ============= ============== ============
Capital expenditure
Corporate acquisitions 169 - - 169
Other acquisition 11,924 - - 11,924
Property improvements 11,939 - - 11,939
24,032 - - 24,032
============== ============= ============== ============
3. Administrative
expenses Six months Six months
ended ended
30 June 30 June
2020 2019
GBP'000 GBP'000
Employment costs 5,255 6,713
Directors' remuneration 1,247 1,248
Bad debts (2) -
Office running costs and insurance 1,491 1,295
Travel costs 404 686
Auditors' remuneration 478 355
Legal and professional 738 771
Broker, PR and analyst costs 226 183
Aborted project costs 339 131
Depreciation 550 822
Registrar costs and other administrative expenses 159 168
10,885 12,372
============== ============
4. Finance income and expense Six months Six months
ended ended
30 June 30 June
2020 2019
Finance income GBP'000 GBP'000
Total interest income on financial assets
not at fair value through profit or loss
Income from cash and short term
deposits 1,186 1,258
Interest receivable from joint
ventures 15 23
Other interest income 642 -
Other finance income
Change in fair value of open interest rate
derivative financial instruments 153 -
Finance income 1,996 1,281
============== ============
Finance expense
Interest expense on loans and borrowings measured
at amortised cost 23,224 26,477
Interest expense on preference shares 6,192 6,162
Interest expense on convertible
preference shares 9,987 9,990
-------------- ------------
Total interest expense on financial liabilities
not at fair value through profit or loss 39,403 42,629
Change in fair value of open forward currency
derivative financial instruments - 20
Change in fair value of open interest rate
derivative financial instruments 1,675 13,876
Finance expense 41,078 56,525
============== ============
5. Taxation Six months Six months
ended ended
30 June 30 June
2020 2019
The tax charge for the period can be reconciled to
the profit per the Income Statement as follows: GBP'000 GBP'000
(Loss) / profit before
tax (26,657) 33,622
-------------- ------------
Tax at the Russian corporate tax
rate of 20% (5,331) 6,724
Tax effect of financing arrangements 1,548 (66)
Tax effect of fair value movement on open
interest rate derivative financial instruments 143 2,743
Tax effect of non deductible preference share
interest 3,236 3,230
Tax effect of foreign exchange movements 3,689 (3,003)
Movement in provision for uncertain
tax positions (1,779) (1,992)
Tax effect of other income not subject to
tax and non-deductible expenses 546 1,210
Tax effect of property depreciation
on revaluations 1,021 (2,982)
Tax on dividends and other inter
company gains 1,105 1,594
Net movement in unprovided deferred
tax assets 873 (51)
5,051 7,407
============== ============
The tax effect of financing arrangements reflects the impact of intra group
funding in each jurisdiction. Foreign exchange movements on intra group financing
are taxable or tax deductible in Russia but not in other jurisdictions. In
accordance with its accounting policy, the Group is required to estimate its
provision for uncertain tax positions and the movement in the provision is
reflected above. Other income and expenditure not subject to tax arises in
Cyprus and Guernsey.
6. 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 one of the measures 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, depreciation and amortisation of
loan origination costs (as these represent non-cash expenses that do not affect
the ability to declare covered distributions); and material non-recurring items,
together with any related tax.
The Group is also required to report Headline earnings per share as required
by the listing requirements of the Johannesburg Stock Exchange.
Six months Six months
ended ended
30 June 30 June
The calculation of basic and diluted earnings
per share is based on the following data: 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Earnings
Net (loss) / profit for the period prepared
under IFRS (31,708) 26,215
Adjustments to arrive at underlying
earnings:
Administrative expenses
Depreciation 550 822
Aborted project costs 339 131
-------------- --------------
889 953
Share-based payments and other long term incentives - 873
Unrealised (profit) / loss on revaluation
of investment property 12,103 (18,073)
Unrealised profit on revaluation of investment
property under construction 360 (92)
Finance income
Change in fair value of open interest rate
derivative financial instruments (153) -
Finance expense
Change in fair value of open forward currency
derivative financial instruments - 20
Change in fair value of open interest rate
derivative financial instruments 1,675 13,876
Premium on redemption of preference shares
and amortisation of issue costs 181 181
Premium on redemption of convertible preference
shares and amortisation of issue costs 3,622 3,623
Amortisation of loan origination
costs 1,017 1,598
-------------- --------------
6,495 19,298
Tax
Movement on deferred tax arising on depreciation
and revaluation of investment property 856 3,293
Tax on unrealised foreign exchange
movements in loans 782 (81)
-------------- --------------
1,638 3,212
Underlying earnings (10,376) 32,386
============= ============
Six months Six months
ended ended
30 June 30 June
2020 2019
Calculation of Headline
earnings GBP'000 GBP'000
Net (loss) / profit for the period
prepared under IFRS (31,708) 26,215
Adjustments to arrive at Headline
earnings:
Unrealised loss / (profit) on
revaluation
of investment property 12,103 (18,073)
Unrealised loss/(profit) on revaluation of
investment property under construction 360 (92)
Movement on deferred tax arising on revaluation
of investment property (2,128) 198
Headline earnings (21,373) 8,248
------------- ------------
30 June 30 June
2020 2019
Weighted Weighted
average average
Earnings shares EPS Earnings shares EPS
IFRS GBP'000 No. '000 Pence GBP'000 No. '000 Pence
Basic (31,708) 480,828 (6.59) 26,215 610,057 4.30
Effect of dilutive
potential
ordinary shares:
Warrants - - - 603
LTIP (note 16) - - - 197
2016 Retention scheme
(note 16) - - - 2,047
Five Year Performance
Plan (note 16) - - - -
Convertible preference
shares (note 12) - - 9,990 318,047
Diluted (31,708) 480,828 (6.59) 36,205 930,951 3.89
----------- ------------- ------------- --------------
30 June 30 June
2020 2019
Weighted Weighted
average average
Earnings shares EPS Earnings shares EPS
Underlying earnings GBP'000 No. '000 Pence GBP'000 No. '000 Pence
Basic (10,376) 480,828 (2.16) 32,386 610,057 5.31
Effect of dilutive
potential
ordinary shares:
Warrants - - - 603
LTIP (note 16) - - - 197
2016 Retention scheme
(note 16) - - - 2,047
Five Year Performance
Plan (note 16) - - - -
Convertible preference
shares (note 12) - - 6,367 318,047
Diluted (10,376) 480,828 (2.16) 38,753 930,951 4.16
----------- ------------- ------------- --------------
Weighted Weighted
average average
Earnings shares EPS Earnings shares EPS
Headline earnings GBP'000 No. '000 Pence GBP'000 No. '000 Pence
Basic (21,373) 480,828 (4.45) 8,248 610,057 1.35
Effect of dilutive
potential
ordinary shares
Warrants - - - 603
LTIP (note 16) - - - 197
2016 Retention scheme
(note 16) - - - 2,047
Five Year Performance
Plan (note 16) - - - -
Convertible preference
shares (note 12) - - - -
Diluted (21,373) 480,828 (4.45) 8,248 612,904 1.35
----------- ------------- ------------- --------------
7. Investment property
Asset class Logistics Logistics Logistics Office 30 June
Location Moscow St Petersburg Regions St Petersburg 2020
Fair value hierarchy Level
* Level 3 Level 3 3 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Market value at 1 January 2020 945,326 171,990 171,360 65,786 1,354,462
Property improvements 7,232 (16) 1,277 338 8,831
Unrealised (loss) / profit on
revaluation (15,996) 529 (817) 479 (15,805)
On translation to presentation
currency (57,021) (10,387) (10,335) (3,969) (81,712)
------------- -------------- ------------- -------------- ------------
Market value at 30 June 2020 879,541 162,116 161,485 62,634 1,265,776
Tenant incentives and contracted
rent uplift balances (8,712) (3,673) (869) (1,021) (14,275)
Head lease obligations 1,052 - - - 1,052
-------------
Carrying value at 30 June 2020 871,881 158,443 160,616 61,613 1,252,553
------------- -------------- ------------- -------------- ------------
Revaluation movement in the period
ended 30 June 2020
Gross revaluation (15,996) 529 (817) 479 (15,805)
Movements of tenant incentives and
contracted rent uplift balances 3,319 119 298 (10) 3,726
Impact of translation to presentation
currency (78) 178 (63) (61) (24)
Revaluation reported in the Income
Statement (12,755) 826 (582) 408 (12,103)
------------- -------------- ------------- -------------- ------------
Asset class Logistics Logistics Logistics Office 31 December
Location Moscow St Petersburg Regions St Petersburg 2019
Fair value hierarchy Level
* Level 3 Level 3 3 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Market value at 1 January 2019 840,613 147,978 144,843 60,402 1,193,836
Property improvements 4,214 751 3,115 274 8,354
Unrealised profit / (loss) on
revaluation 25,771 10,104 10,532 (304) 46,103
On translation to presentation
currency 74,728 13,157 12,870 5,414 106,169
------------- -------------- -------------
Market value at 31 December 2019 945,326 171,990 171,360 65,786 1,354,462
Tenant incentives and contracted
rent uplift balances (12,031) (3,792) (1,167) (1,011) (18,001)
Head lease obligations 1,221 - - - 1,221
Carrying value at 31 December 2019 934,516 168,198 170,193 64,775 1,337,682
------------- -------------- ------------- -------------- ------------
Revaluation movement in the year ended 31
December 2019
Gross revaluation 25,771 10,104 10,532 (304) 46,103
Movements of tenant incentives and
contracted rent uplift balances 1,643 254 89 (535) 1,451
Impact of translation to presentation
currency 179 (44) 97 34 266
Revaluation reported in the Income
Statement 27,593 10,314 10,718 (805) 47,820
------------- -------------- ------------- -------------- ------------
*Classified in accordance with the fair value hierarchy. There were no transfers
between fair value hierarchy in 2019 or 2020.
At 30 June 2020 the Group has pledged investment property with a value of GBP1,266
million (31 December 2019: GBP1,345 million) to secure banking facilities granted
to the Group (note 10).
8. Investment property under
construction
Asset class Assets under construction Land Bank 30 June
Location Moscow Regions Regions 2020
Fair value hierarchy * Level 3 Level 3 Sub-total Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Market value at 1 January 2020 21,625 9,146 30,771 2,714 33,485
Costs incurred 4 - 4 - 4
On translation to presentation
currency (1,307) (552) (1,859) (164) (2,023)
Unrealised (loss) / profit on
revaluation (474) 114 (360) - (360)
------------- -------------- ------------- --------------
Market value at 30 June 2020 19,848 8,708 28,556 2,550 31,106
Head lease obligations 345 - 345 - 345
-------------- ------------- --------------
Carrying value at 30 June 2020 20,193 8,708 28,901 2,550 31,451
------------- -------------- ------------- -------------- ------------
Asset class Assets under construction Land Bank 31 December
Location Moscow Regions Regions 2019
Fair value hierarchy
* Level 3 Level 3 Sub-total Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Market value at 1 January 2019 19,342 8,335 27,677 2,537 30,214
Costs incurred 138 44 182 - 182
On translation to presentation
currency 1,721 740 2,461 177 2,638
Unrealised profit on revaluation 424 27 451 - 451
Market value at 31 December 2019 21,625 9,146 30,771 2,714 33,485
Head lease obligations 361 - 361 - 361
Carrying value at 31 December 2019 21,986 9,146 31,132 2,714 33,846
------------- -------------- ------------- -------------- ------------
*Classified in accordance with the fair value hierarchy. There were no transfers
between fair value hierarchy in 2019 or 2020.
No borrowing costs were capitalised in the period (31 December 2019: GBPnil).
At 30 June 2020 the Group has pledged investment property under construction
with a value of GBP28.6 million (31 December 2019: GBP30.8 million) to secure
banking facilities granted to the Group (note 10).
9. Valuation assumptions and key inputs
In preparing their valuations at 30 June 2020, JLL have specifically referred
to the uncertainty caused in the Russian real estate market by Covid-19 and
a low oil price. JLL comment that until there is more certainty and market
evidence it is prudent not to impose too much judgement on what may or may
not happen and pricing should be based on the current situation. In this environment,
prices and values are going through a period of heightened volatility with
the result that market values can change frequently. JLL consider that, as
at the valuation date, they can attach less weight to previous market experience
for comparison purposes to inform opinions of value.
Class of
property
Carrying amount Valuation Input Range
30 June 31 December technique 30 June 31 December
2020 2019 2020 2019
GBP'000 GBP'000
Completed investment
property
Rub 3,700 to
Moscow - Discounted ERV per Rub 3,700 to Rub
Logistics 871,881 934,516 cash flow sqm Rub 4,500 4,500
ERV growth 5.00% to 5.00% to
7.00% 7.00%
Discount 8.50% to 10.80% to
rate 12.0% 12.10%
Exit cap 10.25% to 10.25% to
rate 11.25% 11.25%
Vacancy
rate 0% to 36% 1% to 59%
Passing
rent per
sqm $103 to $174 $100 to $174
Passing Rub 3,150 to
rent per Rub 3,307 to Rub
sqm Rub 9,479 8,999
Passing
rent per
sqm EUR 126 EUR 122
Rub 3,900 to
St Petersburg Discounted ERV per Rub 3,900 to Rub
- Logistics 158,443 168,198 cash flow sqm Rub 4,150 4,150
5.00% to 5.00% to
ERV growth 7.00% 7.00%
Discount 12.40% to 12.10% to
rate 12.60% 12.30%
Exit cap
rate 11.5% 11.50%
Vacancy
rate 1% to 15% 1% to 15%
Passing
rent per
sqm $126 to $141 $111 to $137
Passing Rub 3,276 to
rent per Rub 3,450 to Rub
sqm Rub 5,429 5,628
Rub 3,800 to
Regional - Discounted ERV per Rub 3,800 to Rub
Logistics 160,616 170,193 cash flow sqm Rub 4,200 4,200
5.00% to 5.00% to
ERV growth 7.00% 7.00%
Discount 10.75% to 11.80% to
rate 12.50% 12.30%
Exit cap
rate 11.50% 11.50%
Vacancy
rate 0% to 4% 0% to 10%
Passing
rent per
sqm $148 $143
Passing Rub 3,850 to
rent per Rub 3,000 to Rub
sqm Rub 21,153 21,153
Rub 11,500 Rub 11,789
St Petersburg Discounted ERV per to to
- Office 61,613 64,775 cash flow sqm Rub 12,294 Rub 12,491
2.00% to 2.00% to
ERV growth 4.00% 4.00%
Discount 12.00% to 11.75% to
rate 12.25% 12.00%
Exit cap 11.00% to 11.00% to
rate 12.00% 12.00%
Vacancy
rate 0% to 5% 0% to 13%
Passing Rub 7,596 to
rent per Rub 6,255 to Rub
sqm Rub 23,244 18,319
Range
Other key
information Description 30 June 31 December
2020 2019
Moscow -
Logistics Land plot ratio 34% - 65% 34% - 65%
2 to 15 2 to 15
Age of building years years
Outstanding costs
(GBP'000) - 1,262
St Petersburg
- Logistics Land plot ratio 48% - 57% 48% - 57%
5 to 11 5 to 11
Age of building years years
Outstanding costs
(GBP'000) - 97
Regional -
Logistics Land plot ratio 48% - 61% 48% - 61%
Age of building 10 years 10 years
Outstanding costs
(GBP'000) - 663
St Petersburg 148% to
- Office Land plot ratio 496% 148% to 496%
11 to 13 11 to 13
Age of building years years
Outstanding costs
(GBP'000) - 57
Carrying amount Valuation Input Range
30 June 31 December technique 30 June 31 December
2020 2019 2020 2019
Investment
property under
construction GBP'000 GBP'000
Rub Rub
Moscow - Value per 30.6m-Rub 19.5m-Rub
Logistics 20,193 21,986 Comparable ha 33.8m 33.8m
Rub
Regional - Value per 10.51-Rub Rub 9.5m-Rub
Logistics 8,708 9,146 Comparable ha 20.9m 20.6m
10. Interest bearing loans and
borrowings 30 June 31 December
2020 2019
Bank loans GBP'000 GBP'000
Loans due for settlement within
12 months 53,664 60,173
Loans due for settlement after
12 months 643,698 623,168
-------------- -------------
697,362 683,341
============== =============
30 June 31 December
2020 2019
GBP'000 GBP'000
The Group's borrowings have
the following maturity profile:
On demand or within one year 53,664 60,173
In the second year 23,453 28,656
In the third to fifth
years 556,199 497,578
After five years 64,046 96,934
-------------
697,362 683,341
============== =============
The amounts above include unamortised loan origination costs of GBP7.1 million
(31 December 2019: GBP6.8 million) and interest accruals of GBP0.8 million
(31 December 2019: GBP0.9 million).
The Group's interest bearing loans and borrowings have a weighted average interest
rate of 5.77% (31 December 2019: 6.52%) and a weighted average term to maturity
of 4.3 years (31 December 2019: 4.7 years).
11. Preference shares 30 June 31 December
2020 2019
GBP'000 GBP'000
Issued share capital:
At 1 January 110,324 109,271
Premium on redemption of preference shares and
amortisation of issue costs 181 362
Scrip dividends 204 691
At 30 June / 31 December 110,709 110,324
============== =============
30 June 31 December
2020 2019
Number Number
Issued share capital:
At 1 January 100,068,218 99,556,534
Scrip dividends 152,134 511,684
At 30 June / 31 December 100,220,352 100,068,218
============== =============
30 June 31 December
2020 2019
Number Number
Shares in issue 100,277,220 100,125,086
Held by the Company's Employee Benefit
Trusts (56,868) (56,868)
At 30 June / 31 December 100,220,352 100,068,218
============== =============
12. Convertible preference shares 30 June 31 December
2020 2019
GBP'000 GBP'000
Issued share capital:
At 1 January 217,482 206,116
Reissued in the period / year - 4,132
Converted to ordinary shares (note 13) - (11)
Premium on redemption of preference shares and
amortisation of issue costs 3,622 7,245
At 30 June / 31 December 221,104 217,482
============== =============
30 June 31 December
2020 2019
Number Number
Issued share capital:
At 1 January 195,929,647 192,388,886
Reissued in the period / year - 3,552,907
Converted to ordinary shares
(note 13) - (12,146)
At 30 June / 31 December 195,929,647 195,929,647
============== =============
30 June 31 December
2020 2019
Number Number
Shares in issue 198,176,868 198,176,868
Held by the Company's Employee
Benefit Trusts (2,247,221) (2,247,221)
At 30 June / 31 December 195,929,647 195,929,647
============== =============
On 31 July 2020 the Company's shareholders approved the re-designation of the
convertible preference share capital into new ordinary shares and new preference
shares. Under the re-designation holders of convertible preference shares will
receive 0.6108 new ordinary shares and 0.5849 new preference shares for each
convertible preference share held. The re-designation is effective on 30 September
2020.
13. Share capital 30 June 31 December
2020 2019
GBP'000 GBP'000
Issued share capital:
At 1 January 4,898 6,233
Issued in the period / year for cash
on warrant exercises - 17
Repurchased and cancelled in the period
/ year by tender offer - (361)
Repurchased and cancelled in the period
/ year from WIM / IAM - (991)
At 30 June / 31 December 4,898 4,898
============== =============
30 June 31 December
2020 2019
Number Number
Issued share capital:
At 1 January 489,746,016 623,269,434
Issued in the period / year for cash
on warrant exercises - 1,734,577
On conversion of convertible preference
shares (note 12) - 18,425
Repurchased and cancelled in the period
/ year by tender offer - (36,131,442)
Repurchased and cancelled in the period / year
from WIM / IAM - (99,144,978)
At 30 June / 31 December 489,746,016 489,746,016
============== =============
Details of own shares held are given in note 14.
14. Own shares held 30 June 31 December
2020 2019
GBP'000 GBP'000
At 1 January (4,582) (5,965)
Other acquisitions - (106)
Allocation to satisfy Annual Performance Incentive
/ other staff bonuses (note 16) - 647
Cancelled - 151
Allocation to satisfy LTIP options
exercised (note 16a) - 691
At 30 June / 31 December (4,582) (4,582)
============== =============
30 June 31 December
2020 2019
Number Number
At 1 January 8,918,186 10,760,656
Other acquisitions - 253,679
Allocation to satisfy Annual Performance Incentive
/ other staff bonuses (note 16) - (876,000)
Cancelled - (298,039)
Allocation to satisfy LTIP options
exercised (note 16a) - (922,110)
At 30 June / 31 December 8,918,186 8,918,186
============== =============
Allocations to satisfy LTIP options exercised in 2019 were transfers by the
Company's Employee Benefit Trusts upon the exercise of fully vested options.
The amounts shown for share movements are net of the Trustees' participation
in tender offers during the period from grant to exercise.
15. Net asset value per share 30 June 31 December
2020 2019
Number Number
Number of ordinary shares
(note 13) 489,746,016 489,746,016
Less own shares held
(note 14) (8,918,186) (8,918,186)
480,827,830 480,827,830
============ ==============
30 June 31 December
2020 New asset 2019 Net asset
Net asset Ordinary value Net asset Ordinary value
value shares per share value shares per share
GBP'000 No. '000 Pence GBP'000 No. '000 Pence
Net asset value per share 279,307 480,828 58 365,798 480,828 76
Effect of dilutive potential
ordinary shares:
Convertible preference
shares (note 12) - - 217,482 297,225
Five Year Performance
Plan - - - -
Fully diluted net asset
value per share 279,307 480,828 58 583,280 778,053 75
========== ============ ========== ==============
The carrying value of the convertible preference shares at 30 June 2020 (see
note 12) when divided by the number of ordinary shares that would be issued
on conversion, is greater than basic net asset value per share and thus the
convertible preference shares are not dilutive at 30 June 2020.
16. Share-based payments and other long Six months ended 30 Six months ended
term incentives June 2020 30 June 2019
No of options Weighted No of options Weighted
(a) Movements in Executive Share Option
Schemes average average
exercise exercise
price price
Outstanding at the beginning
of the period - - 1,062,162 25p
Exercised during the period
- LTIP - - (1,062,162) 25p
Outstanding at the end of the
period - - p - - p
============== ========== ============== =============
Six months Six months
ended ended
(b) Income statement charge 30 June 30 June
for the period 2020 2019
GBP'000 GBP'000
2016 Retention Scheme - 541
Other staff bonuses - 332
Annual Performance Incentive
2019 - -
Five Year Performance Plan - -
- 873
============== =============
To be satisfied by allocation
of:
Ordinary shares (IFRS 2 expense) - 332
Convertible preference shares
(IFRS 2 expense) - 541
Cash - -
- 873
============== =============
Certain bonuses awarded to employees below executive level for performance
in 2018 were settled in ordinary shares of the Company in 2019.
17. Ordinary dividends
Instead of a final ordinary dividend for the year ended 31 December 2019, the
Company proposes the final distribution of 2.25p per ordinary share to be effected
by a tender offer buy back of 1 in every 16 ordinary shares in issue at 36p
per ordinary share (2018: 2 in every 51 ordinary shares at 45p, the equivalent
of 1.75p per ordinary share).
18. Fair value measurement
Set out below is a comparison of the carrying amounts and fair value
of the Group's financial instruments as at the balance sheet date:
30 June 2020 31 December 2019
Carrying Fair Carrying Fair
Value Value Value Value
GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Loans receivable 42 39 67 63
Derivative financial instruments 2,983 2,983 2,621 2,621
Current assets
Trade receivables 24,191 24,191 26,475 26,475
Restricted cash 1,772 1,772 3,026 3,026
Other current receivables 3,723 3,723 3,653 3,653
Cash and short term deposits 84,983 84,983 68,138 68,138
Non-current liabilities
Interest bearing loans and borrowings 643,698 652,134 623,168 632,014
Preference shares 110,709 115,319 110,324 131,590
Convertible preference shares 221,104 171,423 217,482 202,787
Rent deposits 14,756 11,100 15,779 12,403
Other payables 2,537 2,537 2,844 2,844
Current liabilities
Interest bearing loans and borrowings 53,664 53,664 60,173 60,173
Rent deposits 4,980 4,980 6,364 6,364
Other payables 8,210 8,210 3,356 3,356
Fair value hierarchy
The following table provides the fair value measurement hierarchy*
of the Group's assets and liabilities.
Total Fair
Level 1 Level 2 Level 3 Value
As at 30 June 2020 GBP'000 GBP'000 GBP'000 GBP'000
Assets measured at fair value
Investment property - - 1,252,553 1,252,553
Investment property under construction - - 31,451 31,451
Derivative financial instruments - 2,983 - 2,983
As at 31 December 2019
Assets measured at fair value
Investment property - - 1,337,682 1,337,682
Investment property under construction - - 33,846 33,846
Derivative financial instruments - 2,621 - 2,621
* 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 interest rate derivative financial instruments comprise interest rate caps. These contracts are valued using a discounted cash flow model and consideration is given to the Group's own credit risk.
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END
IR FLFETTVILVII
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September 01, 2020 02:00 ET (06:00 GMT)
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