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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Secure Property Development & Investment Plc | LSE:SPDI | London | Ordinary Share | CY0102102213 | ORD EUR0.01 (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.25 | -6.25% | 3.75 | 3.50 | 4.00 | 4.00 | 3.75 | 4.00 | 178,025 | 09:20:32 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2020 to Apr 2025
TIDMSPDI
RNS Number : 7922N
SPDI Secure Property Dev&Inv PLC
12 September 2013
12 September 2013
Secure Property Development & Investment PLC
(the "Company" )
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2013
CONTINUED STRONG PROGRESS IN IMPROVING PERFORMANCE AND PREPARING FOR FUTURE GROWTH
Secure Property Development & Investment PLC, (AIM: SPDI), a South Eastern European focused property and investment company, today announces results for the six months ended 30 June 2013. The results show substantially improved numbers and continued progress by the new management in improving operational performance, and a considerable strengthening of the Company's capital base in preparation for the implementation of its growth plan.
Financial highlights:
-- 135% increase in operational income to $1.8 million (30 June 2012: $757,502 and 30 June 2011: $184,633) primarily driven by improved occupancy at Terminal Brovary, the Company's key income producing asset in Kiev.
-- 35% reduction in overall operating expenses to $1.4 million (30 June 2012: $2.1 million and 30 June 2011: $2.6 million).
-- Operating Profit of $0.24 million (30 June 2012: loss of $1.6 million).
-- Loss before tax reduced by 74% to $0.57 million (June 2012: $2.2 million and June 2011: $16.6 million).
-- 90% improvement in basic and diluted loss per share to $0.02 compared to $0.23 in June 2012 (30 June 2011: $4.01).
-- Net Equity increased by 63% to $50.1 million (30 June 2012: $30.6 million and June 2011: $8.4 million.
-- Balance sheet significantly strengthened with cash balance increasing by 93 times to $14.5 million (June 2012: $155.000).
-- Total liabilities excluding bank and bond debt reduced by 38% to $3.9m (June 2012: $6.3m).
-- Fully diluted NAV per share decreased to $1.71 compared to $2.60 as at 30 June 2012 (a result of a 152% increase in the number of ordinary shares in issue following capital raising initiatives during the period).
Operational highlights:
-- Occupancy at Terminal Brovary increased by over 20% to an average of 87% (June 2012: 72%).
-- Average rent levels for the reporting period increased by 11.5% compared to H1 2012.
-- Average lease length increased from 1.5 years in H1 2012 to 2.5 years in H1 2013.
-- Continued progress with implementing a new growth strategy, including building a pipeline of potential income yielding acquisition opportunities in-line with the Company's strategy of increasing cash flow, reducing development exposure and widening geographic diversity across South East Europe.
Lambros Anagnostopoulos, Chief Executive Officer at SPDI, commented:
"The first half of the year has seen us make excellent progress against our strategic goals and once again deliver strong operational improvements from the business, with significantly increased income, improved efficiencies and reduced cost. We have also strengthened our financial position, through the issue of equity, and are now well positioned to deliver on our strategy to grow the business, and I look forward to continuing to build on this momentum in the second half of the year."
Further information can be found on SPDI website www.secure-property.eu or from:
SECURE PROPERTY Development & Investment PLC + 380 44 459 3000
Lambros Anagnostopoulos www.secure-property.eu
Constantinos Bitros
Liberum Capital Limited (Nomad and Broker) +44 20 3100 2222
Chris Bowman
Richard Bootle
FTI Consulting +44 20 7831 3113
Richard Sunderland
Will Henderson
Faye Walters
1. Management Report
1.1. Corporate Overview & Financial Performance
During the first half of 2013, the management In summary has focused on retaining the high level of sustainable and recurring revenues generated by Terminal Brovary, eliminating one of the last remaining "legacy liabilities" (those predating the Company's restructuring in August 2011), addressing a number of legal claims against the business and finalizing the refinancing of the EBRD loan amortization. In parallel, management has devoted considerable efforts to progressing the pipeline of income yielding acquisition targets in line with the Company's strategic growth plan and to raising debt and equity capital to effect this plan. The economic climate in Europe, despite no major improvements, appears to have stabilized and sentiment across the continent is improving. Greece, Italy and Spain are still in challenging circumstances, but their respective governments are pushing forward with their financial stability and reform plans. Unemployment remains the key concern and social unrest, despite being subdued, remains a background risk. As a consequence of the slow recovery, bank lending remains constrained, with deleveraging plans restricting liquidity in all countries including those in which the Company operates in or plans to enter. As per its stated growth plan, the Company is progressing several potential acquisitions in the greater South East European region, and specifically in Romania and Bulgaria. Target assets have been identified and are under due diligence with a view to finalizing a transaction during H2-2013. At the same time the Company is progressing discussions with various banks in the region for securing debt financing at competitive terms for these transactions. In parallel with these due diligence and the debt raising activities, the Company successfully completed a further equity raising with seven investors contributing a total of $17 million in February 2013. The Company aims to raise further capital in order to support the realization of its acquisition plan. Operationally, the Company increased gross revenues from Terminal Brovary by 135% in comparison with last year to $1.8 million. At the same time the legacy liability to Altis (General Contractor of Terminal Brovary), has been settled and paid. While the operational optimization process continues, the management has also focused on the restructuring of the EBRD loan amortization so as to match Company inflows with outflows for the foreseeable future. The process being substantially progressed, the Company expects to conclude this soon and will make a further announcement in due course. The Remuneration Committee concluded its assessment Remuneration and forwarded to the Board, which subsequently Committee approved, its proposal on the Directors and Management remuneration plan. The share option portion of the remuneration plan will be brought to a vote of the shareholders of the Company at the Annual General Meeting prior to implementation. The first half of the year saw, yet again, an Financial performance increase in revenues, compared to the same period last year. During the period there was a 35% reduction in overall operating expenses, which fell to $1.4 million from $2.1 million in H1 2012. As a result of this and the operational efficiency improvements, the operating profit for H1 2013 reached $239,130 compared to a loss of $1,584,478 in H1 2012. During the period, seven investors contributed Capital Raising a total of $17.05 million as a part of the ongoing capital raise in the Company (http://www.secure-property.eu/wp-content/uploads/2013/02/13-02-28-SECURE-PROPERTY-Completion- of-Placing-of-17.05-million.pdf ). The Group continues its prudent and optimal Liquidity Management cash flow management in line with liquidity needs and, at the end of the period, the Company had $15 million in immediate cash liquidity to be used for implementing its growth plan as well as for working capital purposes. As part of its active cash management, the Company transferred most of its cash out of the Cypriot home bank (CPB) just weeks before CPB went bust, eliminating almost entirely the effects of the collapse of the Cypriot economy. In fact the Cypriot banking crisis resulted in only a $135,000 loss for the Company (not recognized during the period in view of the expected receipt of BoC shares instead). As part of the EBRD loan restructuring process, the Company repaid $1.04 million of the EBRD- Terminal Brovary loan during the reporting period. The outstanding loan amount currently stands at $15.3 million, including the previous restructuring fees and interest. 2. Regional Economic Developments(1) In Ukraine GDP dropped to -1.1% year-on-year Ukraine in Q1 2013 (-0.8% in Q4 2012 and -2% in Q3 2012). However, in quarter-on-quarter terms GDP increased slightly by 0.7%, following a series of consecutive declines. Industry contracted by 5% in Q1 2013, while the construction sector slumped by 16.8%. On the other hand, household demand still supports the economy, while real wages increased by 9.9% in Q1 and retail sales grew significantly by 13.4%. Moreover, net exports' contribution to GDP became positive for the first time since Q1 2010. Agriculture grew by 5.8% during the period from January to March 2013. In June 2013, the National Bank of Ukraine cut interest rates by 0.5% to 7%, a decision primarily driven by the close-to-zero inflationary levels, the deposit growth in the banking sector, as well as the diminishing cost of funds. The government is showing a dedication to implement reform policies, which should help to support an IMF deal. On the positive side Ukraine, continues to repay current foreign debt through international refinancing. However, Ukraine may be forced by the wide current account gap and the growing limited access to global markets to reach an agreement with the IMF by September 2013. The main discussion points for implementation of an IMF deal are the hikes in gas prices, UAH depreciation and fiscal consolidation measures. Romania has made progress with its economic Romania reforms. The Excessive Deficit Procedure led by the EU was closed to Romania, since the country's deficit was reduced below 3% of GDP. Moreover, the seventh and eighth IMF reviews of Romania's performance under its economic program were successfully completed, a fact that makes an additional amount of approximately EUR520.74 million available for disbursement. According to the IMF's release, although downside risks still exist, core inflation remains low, and the fiscal and current account balances are sustainable. GDP growth is forecast to reach 2.2% in 2013 up from just 0.7% in 2012. One of the positive trends is the strength of the export market, which is a result of the broadening of Romania's export base, particularly in the automotive sector (40% of total exports) despite the recession in the EU. Particularly, exports increased by 7.2% in April 2013 from 1.9% in H2 2012, while imports inched up by just 0.5% in April 2013 from -2.1% in H2 2012, partly as a result of weak domestic demand. The 12-month rolling Current Account Deficit has already narrowed to a low of 2.6% of GDP in April, backed by the narrower trade deficit (0.7% of GDP). An increase in risk aversion towards the Emerging Market assets over the past month resulted in pressures for leu depreciation, which reached an eight month high at 4.5503 EUR/RON in early June. Although inflation stood at 5.3% in March (above the 1.5 - 3.5% target band), the Central Romania Bank has taken the decision to cut the policy rate by 0.25% to 5%. GDP growth stood at 0.4% in Q1 2013, slightly Bulgaria improved from 0.1% in Q4 2012. Collective consumption contributed to the growth by increasing more than 3%, while imports and exports grew by 5.6% and 10.8% respectively. The budget execution data reveals that Bulgaria outperformed its 2012 full year deficit target. The general government deficit (cash basis) declined by 78% to BGN350 million. The debt to GDP ratio is expected to drop at 14% by year end from 14.75% in January 2013. Total expenditure per household surged by 15.2% year-on-year, which is in line with the 20.6% rise in wages and salaries that constitute more than half of household income. Generally, private consumption is expected to rise, because of the lower levels of inflation (2% in May 2013) and looser income policies, but at the same time remains hindered by tight credit conditions. Bulgaria's new Socialist-led government won a parliamentary vote of confidence on 29 of May. The government is backed by the BSP party and the Turkish minority party MRF, while it is one seat short of a parliamentary majority and relies on support from the nationalist Ataka party. However, the situation remains fragile. [1] Sources : UniCredit Group - research Division, Eurobank Research, NBG Strategy and Economic Research Division, National Institute of Statistics- Romania, National Statistical Institute - Republic of Bulgaria. 3. Real Estate Market Developments(2)
3.1. Ukraine
Hot Features
Premium
In 2012, approximately $580 million of investment General
transactions were registered. In 2013, prime
yields are expected to remain unchanged and
investment volumes are likely to stay moderate.
In 2012, vacancy rates in the logistics sector Logistics Market
dropped from 17% to 10% and are expected to
decrease further during 2013. Simultaneously,
a slowing of take-up is forecasted, due to uncertainty
in respect of future economic developments.
The office market vacancy rate increased to Office Market
16.8% from 13.5%, due to office stock increase
of 12%. Another 170,000 sq m of office space
is expected to be delivered in 2013, 70% of
which will be Grade A office buildings. Consequently,
headline rents are predicted to remain flat
if not experiencing downward pressures.
In 2012 and during the first quarter of 2013,
premium fashion brands such as Dolce & Gabana Retail Market
and Tom Ford opened their first mono-brand boutiques
in Kiev. Moreover, Ukraine is expected to experience
double-digit growth in shopping center floor
space in the next 12-18 months, which translate
into 520,000-1.1 million sq m of GLA.
3.2. Romania
Real estate transactions in Romania grew by General
up to 32% in April 2013, while the real estate
investments increased by 18% in Q1 2013.
Carrefour's 45,000 sq m lease in the Europolis Logistics Market
Logistics Park has been renewed, while the total
take up for Q1 2013 was 65,000 sq m, being the
largest aggregate transaction volume in Romania
since 2007. Investors' interest seems to spread
in Bucharest and other emerging markets such
as Timisoara and Constanta. Apart from the traditional
occupiers, there are some new industries such
as manufacturing companies seeking to benefit
from Romania's attractive production costs.
In Q1 2013, there was only 17,600 sq m of logistics
space under construction.
Over the first quarter of 2013, 72,000 sq m Office Market
of new office space was delivered and, with
46% already secured under pre-let agreements,
the vacancy rate only slightly increased to
15.4%. Take-up reached 62,500 sq m and while
some new leases were signed, the bulk of activity
is being driven by renewals or space consolidations
due to cost reductions. The office pipeline
is an estimated 147,000 sq m of which 23% is
pre-let and approximately 51,600 sq m is expected
to be completed in 2013.
The first quarter of 2013 saw the addition of Retail Market
a single shopping center of 15,000 sq m of GLA,
with Uvertura City Mall opening its doors in
downtown Botosani, in northern Romania. In the
same period, the most important transaction
was the purchase of the 50% share of Intercora's
retail portfolio by Mitiska Ventures, consisting
of eight stores.
3.3. Bulgaria
According to the Bulgarian Registry Agency, General
the number of real estate deals increased by
23% in Q1 2013.
Prime logistics yields moved around the 11.75% Logistics Market
range, in a market characterized by a lack of
high quality, accessible space. Although investors
remain cautious, the vacancy rate dropped to
4% in Sofia, whereas Q4 2012 saw the highest
absorption (40,700 sq m) in a year and half.
The office sector did not experience any significant Office Market
investment transactions. However, investors
continue to monitor the prime market, where
space is becoming scarcer. Key players are companies
from the IT and Business Process Outsourcing
sectors. Headline rents have maintained their
levels, supported by incentive packages, while
prime CBD yields are now in the region of 9.5%.
The first leisure and retail center in Sofia, Retail Market
Paradise Center, opened up in Q1 2013. The project
is estimated to have cost EUR150 million and
has more than 200,000 sq m built-up area, including
82,000 sq m for retail outlets, while 80% of
already let to tenants including Zara, Marks
& Spencer, H&M, and GAP. Prime yields and prime
rent stood at 9.25% and EUR40 /month/sq m respectively
in Q1 2013.
2 Sources : Jones Lang LaSalle, DTZ Research,
CBRE Research, Colliers International, Cushman
& Wakefield, MBL Research.
4. Property Assets
4.1. Aisi Brovary - Terminal Brovary Logistic Park (Kiev)
The Brovary Logistics Park consists of a 49,180 Project description sq m GLA Class A warehouse and associated office space. The building has large facades overlooking the Brovary ring road, at the intersection of Brovary ( -95/ -01 highway), and the Boryspil ring road. It is strategically located 10 km from Kiev city border and 5 km from Borispol international airport. The building is divided into six independent sections (each at least 6,400 sq m), with internal clear ceiling of 12m height and industrial flooring constructed with anti-dust overlay quartz finish. The terminal accommodates 90 parking spaces for cars and trucks, as well as 24 hour security and municipal provided sewage, water and garbage collection. The property is fully let as far as the warehouse Current status space is concerned, although a small space (circa 1.500 sq m) was empty for part of the period. However, due to its small size, this space is now being rented on a short term basis by existing tenants who need to expand. Average rent for the reporting period increased by 11.5% compared to H1 2012 with parallel increase at the average lease length from 1.5 years to 2.5 years.
4.2. Aisi Bela - Bela Logistic Center (Odessa)
The site consists of a 22.4 ha plot of land Project description with zoning allowance to construct industrial properties of up to 103,000 sq m GBA. It is situated on the main Kiev - Odessa highway, 20km from Odessa port and in an area of high demand for logistics and distribution warehousing. Following the completion of planning and issuance Current status of permits in 2008, construction commenced with column foundation and peripheral walls for 100,000 sq m being completed in 2009. Development was then put on hold due to lack of funding and deteriorating market conditions.
4.3. Kiyanovsky Lane - Land for Residential Complex
The project consists of 0.55 ha of land located Project description at Kiyanovskiy, near Kiev city centre. Current plans are for the development of residential properties with beautiful protected views overlooking the scenic Dnipro River, St. Michael's Spires and historic Podil, when market conditions allow for it. The Company is evaluating its options for the Current status scheme, which include, inter alia, progressing with the development of the plot. In early 2012, the Company concluded geotechnical studies showing that the soft ground necessitates retaining walls prior to construction.
4.4. Tsymlyanski Lane - Land for Residential Complex
The 0.36 ha plot, is located in the historic Project description and rapidly developing Podil District in Kiev. The Company owns 55% of the plot, while one local co-owner has the remaining 45%. In 2009, all necessary documents were submitted to the relevant authorities for the approval and the issuance of a construction permit. The plan was to develop circa 10,000 sq m GBA of Current status 40 high end residential units and sq. m of office space on lower floors, as well as 41 parking spaces in three underground levels. Since then, the project has been frozen and the land lease fee to the state was not paid last year. The Company is evaluating its options for the scheme, which include, inter alia, an outright sale as well as a contribution in kind to a larger development.
4.5. Balabino-Land for Retail/Entertainment Development
The 26.38 ha land site is situated on the south Project description entrance of Balabino city, 3 km away from the administrative border of Zaporozhye. It borders the Kharkov-Simferopol Highway (which connects eastern Ukraine and Crimea and runs through the two largest residential districts of the city) as well as another major artery accessing the city centre. The site is zoned for retail and entertainment Current status and various development options are being evaluated as per the market's needs.
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2013
Note Six month ended
---------------------------
30 June
30 June 2013 2012
US$ US$
Operational income 7 1.784.299 757.502
Administration expenses 8 (1.393.092) (2.134.528)
Investment property operating expenses 9 (378.927) (254.716)
Other operating income, net 10 226.850 47.264
Operating profit/(loss) 239.130 (1.584.478)
Finance costs, net 11 (809.109) (647.381)
Loss before tax (569.979) (2.231.859)
Income tax expense 12 - -
Loss for the period (569.979) (2.231.859)
Other comprehensive income
Exchange difference on translation
of foreign operations 17 43.777 1.491
Total comprehensive loss for the period (526.202) (2.230.368)
Loss attributable to:
Owners of the parent (565.692) (2.225.695)
Non-controlling interests (4.287) (6.164)
------------- ------------
(569.979) (2.231.859)
------------- ------------
Total comprehensive loss attributable
to:
Owners of the parent (521.915) (2.226.841)
Non-controlling interests (4.287) (3.527)
------------- ------------
(526.202) (2.230.368)
------------- ------------
Losses per share ($USD per share): 6
Basic loss for the period attributable
to ordinary equity owners of the parent (0,02) (0,23)
Diluted loss for the period attributable
to ordinary equity owners of the parent (0,02) (0,23)
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2013
30 June 31 December 30 June
Note 2013 2012 2012
US$ US$ US$
ASSETS
Non-current assets
Investment property 13b 39.270.576 39.230.000 35.987.103
Investment property under construction 13a 8.353.161 8.353.161 8.130.029
Advances for investments 13c 5.000.000 5.000.000 5.000.000
Property, plant and equipment 163.577 96.331 14.867
--------------- ------------- -------------
52.787.314 52.679.492 49.132.000
Current assets
Prepayments and other current 14
assets 5.035.303 5.448.173 4.589.394
Cash and cash equivalents 15 14.463.850 256.447 154.672
19.499.153 5.704.620 4.744.066
Total assets 72.286.467 58.384.112 53.876.066
EQUITY AND LIABILITIES
Issued share capital 16 5.728.918 5.531.191 5.518.970
Share premium 121.388.224 104.779.503 103.788.196
Reserve -Shareholder's Advances 16 - - 130.000
Translation difference reserve 17 (1.205.749) (1.249.526) (1.238.870)
Accumulated losses (75.735.952) (75.170.260) (77.527.690)
--------------- ------------- -------------
Equity attributable to equity
holders of the parent 50.175.441 33.890.908 30.670.606
Non-controlling interests 18 1.034.508 1.038.795 1.086.925
Total equity 51.209.949 34.929.703 31.757.531
Non-current liabilities
Interest bearing borrowings 19 1.872.630 1.777.680 -
Finance lease liabilities 23 526.169 565.973 637.877
Trade and other payables 20 671.004 664.899 496.892
Deposits from tenants 21 427.918 427.918 78.662
--------------- ------------- -------------
3.497.721 3.436.470 1.213.431
Current liabilities
Interest bearing borrowings 19 15.302.805 16.563.976 15.813.857
Trade and other payables 20 1.371.500 2.561.736 3.893.586
Taxes payable 22 460.197 529.827 818.493
Provisions for taxes 22 416.641 334.552 348.734
Finance lease liabilities 23 27.654 27.848 30.434
--------------- ------------- -------------
17.578.797 20.017.939 20.905.104
Total liabilities 21.076.518 23.454.409 22.118.535
Total equity and liabilities 72.286.467 58.384.112 53.876.066
US$ Net Asset Value (NAV) per share:
6
Basic NAV attributable to equity
holders of the parent 1,95 3,05 3,01
Diluted NAV attributable to equity
holders of the parent 1,71 2,67 2,60
On 10(th) September 2013 the Board of Directors of SECURE PROPERTY DEVELOPMENT AND INVESTMENT PLC authorised these financial statements for issue.
Lambros Anagnostopoulos Paul Ensor Constantinos Bitros
Director & Chief Executive Director & Chairman Chief Financial Officer
Officer of the Board
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2013
Attributable to equity holders
of the Parent
Share Share Accumulated Reserve-Shareholder's Foreign Total Non- Total
capital premium, losses, net advances currency controlling
net of translation interests
non-controlling reserve
interest
US$ US$ US$ US$ US$ US$ US$ US$
Balance - 31 December 5 102.447.925 (75.301.995) - ( 1.230.671) 31.422.535 1.083.398 32.505.933
2011 .507.276
Profit/(Loss) for the - - (2.225.695) - - (2.225.695) (6.164) (2.231.859)
period
Issue of share capital 11.694 1.340.271 - - - 1.351.965 - 1.351.965
Reserve-Shareholder's
advances - - - 130.000 130.000 - 130.000
Foreign currency
translation
reserve - - - - (8.200) (8.200) 9.691 1.491
Balance - 30 June 2012 5.518.970 103.788.196 (77.527.690) 130.000 (1.238.870) 30.670.606 1.086.925 31.757.531
Profit/(Loss) for the - - 2.357.430 - - 2.357.430 (64.021) (2.293.409)
period
Issue of share capital 12.221 991.307 - - - 1.003.528 - 1.003.528
Reserve-Shareholder's
advances - - - (130.000) (130.000) - (130.000)
Foreign currency
translation
reserve - - - - (10.656) (10.656) 15.891 5.235
Balance - 31 December 5.531.191 104.779.503 (75.170.260) - (1.249.526) 33.890.908 1.038.795 34.929.703
2012
Profit/(Loss) for the
period - - (565.692) - - (565.692) (4.287) (569.979)
Issue of share 197.727 16.608.721 - - - 16.806.448 - 16.806.448
capital,
net (note 16)
Foreign currency
translation
reserve - - - - 43.777 43.777 - 43.777
Balance - 30 June 2013 5.728.918 121.388.224 (75.735.952) - (1.205.749) 50.175.441 1.034.508 51.209.949
Companies which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two years after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special contribution for defence at 20% will be payable on such deemed dividends to the extent that the shareholders (companies and individuals) are Cyprus tax residents. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time. This special contribution for defence is payable on account of the shareholders.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2013
Note 30 June 30 June
2013 2012
US$ US$
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax and non-controlling interest (569.979) (2.231.859)
Adjustments for:
Impairment loss/(reversal) of prepayments
and current assets 10 8.161 (54.881)
Accounts payable written off 10 (339.207) -
Depreciation of property, plant and equipment 5.795 8.125
Other expenses/(income) 82.089 (48.200)
Interest expense 11 674.372 569.796
Interest income 11 (46.630) (767)
Effect of foreign exchange difference 11 25.399 12.709
Cash flows used in operations before working (160.000) (1.745.077)
capital changes
(Increase)/Decrease in prepayments and
other current assets 14 (157.191) 329.767
Decrease in VAT recoverable 14 289.589 141.622
Increase/(Decrease) in trade and other
payables 20 (577.775) 136.557
Change in other taxes and duties (3.545) 3.416
Increase in deposit from tenants - 14.855
Income tax paid (66.085) -
Net Working Capital Changes (515.007) 626.217
Net cash flows used in operating activities (675.007) (1.118.860)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in payables for construction 20 (218.007) (300.384)
Capital expenditures on investment property 13 (40.576) (80.133)
Decrease in financial lease liabilities 23 (39.998) (11.594)
Changes of property, plant and equipment (73.041) (1.204)
Interest received 46.630 767
Net cash flows used in investing activities (324.992) (392.548)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital / 16 17.045.000 1.481.965
shareholders advances, gross
Repayment of borrowings (1.216.177) -
Interest and financial charges paid (603.342) (570.481)
Net cash flow from financing activities 15.225.481 911.484
Effect of foreign exchange rates on cash (18.079) (44)
Net increase/(decrease) in cash at banks 15 14.207.403 (599.968)
Cash:
At beginning of the period 256.447 754.640
At end of the period 14.463.850 154.672
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 30 June 2013
1. General Information
Country of incorporation
SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC (the "Company", formerly AISI REALTY PUBLIC LTD) was incorporated in Cyprus on 23 June 2005 and is a public limited liability company, listed on the London Stock Exchange (AIM): ISINCY0102102213. Its registered office is at Kyriakou Matsi 16, Eagle House, 10(th) floor, Agioi Omologites, 1082 Nicosia, Cyprus.
Principal activities
The principal activities of the Group, which are unchanged, are directly or indirectly to invest in and/or manage real estate properties as well as real estate development projects in Central, East and South East Europe (the "Region"). These include the acquisition, development, operation and selling of property assets, in major population centres in the Region.
The Group maintains offices in Kiev, Ukraine and Nicosia, Cyprus, while it has an affiliate in Bucharest, Romania.
As at the reporting date, the Group has 12 Full Time Equivalent (FTEs) employed persons, including the CEO and the CFO (December 2012 à 13, June 2012 à 16, December 2011 à 19, December 2010à 28).
2. Adoption of new and revised Standards and Interpretations
The accounting policies adopted for the preparation of these interim condensed consolidated financial statements for the six months ended 30 June 2013 are consistent with those followed for the preparation of the annual financial statements for the year ended 31 December 2012.
3. Significant accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the six months ended 30 June 2013 have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting".
Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with the International Financial Reporting Standards ("IFRS") have been condensed or omitted. However, such information reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of the Group's Management, necessary to fairly state the results of interim periods.
Interim results are not necessarily indicative of the results to be expected for the full year.
The 31 December 2012 statement of financial position was derived from the audited consolidated financial statements.
Basis of consolidation
The interim condensed consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries).
The Group's consolidated financial statements comprise of the financial statements of the parent company, SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC and the financial statements of the following subsidiaries:
Name Country Related Asset Holding %
of
------------------------------- --------------- ------------------- ------------------------------------
incorporation as at 30.06.2013 as at 30.06.2012
--------------------------- --------------- ------------------- ----------------- -----------------
SECURE Capital Limited
(ex AISI CAPITAL) Cyprus 100 100
------------------------------- ------------------------------------ ----------------- -----------------
SECURE Logistics Limited Brovary Logistics
(ex AISI LOGISTICS) Cyprus Park 100 100
------------------------------- --------------- ------------------- ----------------- -----------------
Brovary Logistics
LLC Aisi Brovary Ukraine Park 100 100
------------------------------- --------------- ------------------- ----------------- -----------------
Brovary Logistics
LLC Terminal Brovary Ukraine Park 100 100
------------------------------- --------------- ------------------- ----------------- -----------------
Kiyanovskiy
LLC Aisi Ukraine Ukraine Residence 100 100
------------------------------- --------------- ------------------- ----------------- -----------------
Kiyanovskiy
LLC Trade Center Ukraine Residence 100 100
------------------------------- --------------- ------------------- ----------------- -----------------
Tsymlianskiy
LLC Almaz--pres--Ukrayina Ukraine Residence 55 55
------------------------------- --------------- ------------------- ----------------- -----------------
Bela Logistic
LLC Aisi Bela Ukraine Park 100 100
------------------------------- --------------- ------------------- ----------------- -----------------
Zaporozyia
LLC Mirelium Investments Ukraine Retail Center 100 100
------------------------------- --------------- ------------------- ----------------- -----------------
Zaporozyia
LLC Interterminal Ukraine Retail Center 100 100
------------------------------- --------------- ------------------- ----------------- -----------------
LLC Aisi Outdoor Ukraine 100 100
------------------------------- ------------------------------------ ----------------- -----------------
LLC Aisi Vida Ukraine 100 100
------------------------------- ------------------------------------ ----------------- -----------------
LLC Aisi Val Ukraine 100 100
------------------------------- ------------------------------------ ----------------- -----------------
LLC Aisi Ilvo Ukraine 100 100
------------------------------- ------------------------------------ ----------------- -----------------
LLC Aisi Consta Ukraine 100 100
------------------------------- ------------------------------------ ----------------- -----------------
LLC Aisi Roslav Ukraine 100 100
------------------------------- ------------------------------------ ----------------- -----------------
LLC Aisi Donetsk Ukraine 100 100
------------------------------- ------------------------------------ ----------------- -----------------
LLC Retail Development
Balabino Ukraine Retail 100 100
------------------------------- --------------- ------------------- ----------------- -----------------
As of the reporting date the subsidiaries as LLC Mirelium Investments,
LLC Aisi Outdoor, LLC Aisi Vida, LLC Aisi Val, LLC Aisi Consta,
LLC Aisi Roslav and LLC Aisi Donetsk were under the merging process
to LLC Aisi Ilvo. The reorganization (merger) process is expected
to be finished in H2 2013.
Functional and presentation currencies
The Management believes that the US Dollar reporting reflects
better the economic substance of the underlying events and circumstances
relevant to the Group itself. Consequently the Group's Management
has determined that the Group's functional currency is the US
Dollar.
The interim condensed consolidated financial statements are presented
in US Dollar, which is the Group's presentation currency.
As Management records the consolidated financial information
of the entities domiciled in Ukraine in Hryvnia, in translating
financial information of the entities domiciled in Ukraine into
US Dollars for incorporation in the consolidated financial information,
the Group follows a translation policy in accordance with International
Accounting Standard No. 21, "The Effects of Changes in Foreign
Exchange Rates", and the following procedures are performed:
* All assets and liabilities are translated at closing
rate;
* Income and expense items are translated using
exchange rates at the dates of the transactions, or
where this is not practicable the average rate has
been used;
* All resulting exchange differences are recognized as
a separate component of equity;
* When a foreign operation is disposed of through sale,
liquidation, repayment of share capital or
abandonment of all, or part of that entity, the
exchange differences deferred in equity are
reclassified to the consolidated statement of
comprehensive income as part of the gain or loss on
sale.
Average for the first 6 months 30 June
ended
---------- --------------------------------- ---------------
Currency 2013 2012 2013 2012
---------- --------------- ---------------- ------ -------
US$ 7,993 7,9891 7,993 7,9925
---------- --------------- ---------------- ------ -------
The relevant exchange rates of the Central Bank of Ukraine used
in translating the financial information of the entities domiciled
in Ukraine into US Dollars are as follows:
4. Financial risk Management
4.1 Financial risk factors
The Group is exposed to country risk, real estate holding and
development associated risks, market price risk, interest rate
risk, credit risk, liquidity risk, currency risk, other market
price risk, operational risk, compliance risk, litigation risk,
reputation risk, capital risk management and other risks arising
from the financial instruments it holds. The risk management
policies employed by the Group to manage these risks remain
consistent with those used and described in the Group's annual
financial statements for the year ended 31 December 2012. Financial
Risk Management is also described in note 27 of the financial
statements.
4.1.1 Operating Country Risks
The Group is exposed to country risk, stemming from the political
and economic environment of every country in which it operates.
4.1.1.1 Ukraine
In recent years, the Ukrainian economy has been characterised
by a number of features that contribute to economic instability,
including a relatively weak banking system providing limited
liquidity to Ukrainian enterprises, significant capital outflows,
and low wages for a large portion of the Ukrainian population.
The implementation of reforms has been partially impeded by
lack of political consensus, controversies over privatisation,
the restructuring of the energy sector, the removal of exemptions
and privileges for certain state-owned enterprises or for certain
industry sectors, the limited extent of cooperation with international
financial institutions and non-stable taxing environment.
Although Ukraine has made significant progress in increasing
its gross domestic product, decreasing inflation, stabilising
its currency, increasing real wages and improving its trade
balance, these gains may not be sustainable over the longer
term and may be reversed unless Ukraine undertakes certain important
structural reforms in the near future while continuing to exercise
restrictive monetary policies.
Ukraine's internal debt market remains illiquid and underdeveloped
as compared to markets in most western countries. Unless the
international capital markets or syndicated loan markets open
up to Ukraine, the Government will have to continue to rely
to a significant extent on official or multilateral borrowings
to finance part of the budget deficit, fund its payment obligations
under domestic and international borrowings and support foreign
exchange reserves. These borrowings may be conditioned on Ukraine
satisfying certain requirements, which may include, among other
things, implementation of strategic, institutional and structural
reforms; reduction of overdue tax arrears; absence of increase
of budgetary arrears; improvement of sovereign debt credit ratings;
and reduction of overdue indebtedness for electricity and gas.
Negative developments on these may result in Ukraine not finding
adequate financing which could, in its turn put pressure on
Ukraine's budget and foreign exchange reserves and have a material
adverse effect on the Ukrainian economy as a whole, and thus,
on the Group's business prospects.
Any major adverse changes in Ukraine's relations with Russia,
in particular any such changes adversely affecting supplies
of energy resources from Russia to Ukraine and/or Ukraine's
revenues derived from transit charges for Russian oil and gas,
would likely have negative effects on certain sectors of the
Ukrainian economy which could under certain conditions affect
the Group's business.
The Ukrainian legal system has also been developing to support
this market-based economy. Ukraine's legal system is, however,
in transition and is, therefore, subject to greater risks and
uncertainties than a more mature legal system. In particular,
risks associated with the Ukrainian legal system include, but
are not limited to:
(i) inconsistencies between and among the Constitution of Ukraine
and various laws, presidential decrees, governmental, ministerial
and local orders, decisions, resolutions and other acts;
(ii) provisions in the laws and regulations that are ambiguously
worded or lack specificity and thereby raise difficulties when
implemented or interpreted;
(iii) difficulty in predicting the outcome of judicial application
of Ukrainian legislation; and
(iv) the fact that not all Ukrainian resolutions, orders and
decrees and other similar acts are readily available to the
public or available in understandably organised form.
Furthermore, several fundamental Ukrainian laws either have
only relatively recently become effective or are still pending
hearing or adoption by the Parliament. The recent origin of
much of Ukrainian legislation, the lack of consensus about the
scope, content and pace of economic and political reform and
the rapid evolution of the Ukrainian legal system in ways that
may not always coincide with market developments, place the
enforceability and underlying constitutionality of laws in doubt,
and result in ambiguities, inconsistencies and anomalies.
In addition, Ukrainian legislation often contemplates implementing
regulations. Often such implementing regulations have either
not yet been promulgated, leaving substantial gaps in the regulatory
infrastructure, or have been promulgated with substantial deviation
from the principal rules and conditions imposed by the respective
legislation, which results in a lack of clarity and growing
conflicts between companies and regulatory authorities.
Tax laws are changing and compared to more developed market
economies are in a non mature level thus creating often an unclear
tax environment of unusual complexity. This particularly affects
negatively the ability of the Group to recuperate VAT paid and/or
to utilize operating losses as a carry forward tax shield.
Emerging economies such as Ukraine's are subject to rapid change
and the information set out in these financial statements may
become outdated relatively quickly.
Many of the imbalances mentioned above need to be addressed
in the course of the next few years should Ukraine want to pursue
integration with the EU. Most notably defending the UAH, which
has come at an increasingly high cost, needs to be addressed
urgently. So far, there has been no sign of a relaxation of
the fixed exchange-rate regime, presumably at an increasing
cost to reserves and economic growth. However, the government's
readiness to assume a more conservative approach to the budget
should improve Ukraine's relations with the IMF. In turn, this
should allow a resumption in multilateral lending, which was
suspended since late 2010 owing to non-compliance with loan
conditions.
4.1.1.2 Cyprus
The indebtedness of the Cypriot Republic and its two main banks
Bank of Cyprus and Cyprus Popular Bank (Laiki) creates the basis
for the country to be part of a financial rescue plan under
the supervision of the IMF, the ECB and the European Union.
Such plan which has been discussed throughout 2012 may result
in a changing economic and financial environment.
At the same time, the recent discovery of potentially significant
natural gas and oil deposits within the boundaries of the Cypriot
exclusive economic zone perplexes the geographic and political
relationships and developments as Cyprus is in the crossroad
of 3 continents.
During the past 10 years Cyprus has become an established financial
center taking advantage of favourable double tax treaties with
various countries around the world, most importantly with Eastern
European countries where the Company operates. Due to the world
financial crisis erupting in 2008 and the ensuing debt crisis
which had a liquidity effect of the Cypriot banking system as
in all of the south and east European countries, following the
restructuring of the Greek public debt certain of the Cypriot
banks have taken a blow to their solvency (write off of EUR4,5bn
of Greek debt) and have requested the support of the ECB through
the ELA mechanism.
The Ministry of Finance has estimated that Cyprus could need
about EUR17bn between 2012 and 2016, of which EUR10bn would
be used to shore up the banking sector and the remainder would
be used to cover the government's financing needs.
Any failure to effect and implement an economic restructuring
plan, may have a devastating effect on the financials of the
Cypriot economy that could lead to a default and the abandonment
of the Euro currency. Such result may have a distabilizing effect
on the operations of the Company at the corporate level.
On that note, the Company had proactively evaluated the probable
effect of the measures in relation to the levy on deposits and
the restrictions on capital movement applied to Cyprus based
financial institutions. The Company held most of its liquidity
with non-Cypriot owned banking institutions, partly in Cyprus
and partly outside Cyprus. Liquidity used for operational reasons
was held partly in Ukraine, with a non-Cypriot banking institution,
and partly in Cyprus, predominately with a Cyprus bank, Laiki
Bank (now Bank of Cyprus).
The latter was the only part of the Company's liquidity that,
according to the decisions taken by the European and Cypriot
authorities, was at any risk. The impact of the measures is
estimated at US$135.000, or less than 1% of the Company's liquidity
and appears as receivable within the present financial statements
subject to finalisation of Laiki Bank restructuring and the
possible receipt of shares in Bank of Cyprus.
4.1.2 Risks associated with property holding
Several factors may affect the economic performance and value
of the Group's properties, including:
* risks associated with construction activity at the
properties, including delays, the imposition of liens
and defects in workmanship;
* the ability to collect rent from tenants, on a timely
basis or at all;
* the amount of rent and the terms on which lease
renewals and new leases are agreed being less
favourable than current leases;
* cyclical fluctuations in the property market
generally;
* local conditions such as an oversupply of similar
properties or a reduction in demand for the
properties;
* the attractiveness of the property to tenants or
residential purchasers;
* decreases in capital valuations of property;
* changes in availability and costs of financing, which
may affect the sale or refinancing of properties;
* covenants, conditions, restrictions and easements
relating to the properties;
* changes in governmental legislation and regulations,
including but not limited to designated use,
allocation, environmental usage, taxation and
insurance;
* the risk of bad or unmarketable title due to failure
to register or perfect our interests or the existence
of prior claims, encumbrances or charges of which we
may be unaware at the time of purchase;
* the possibility of occupants in the properties,
whether squatters or those with legitimate claims to
take possession;
* the ability to pay for adequate maintenance,
insurance and other operating costs, including taxes,
which could increase over time; and
* terrorism and acts of nature, such as earthquakes and
floods that may damage the properties.
4.1.3 Property Market price risk
Market price risk is the risk that the value of the Company's
portfolio investments will fluctuate as a result of changes
in market prices. The Group's assets are susceptible to market
price risk arising from uncertainties about future prices of
the investments. The Group's market price risk is managed through
diversification of the investment portfolio, continuous elaboration
of the market conditions and active asset management.
The prevailing global economic conditions throughout 2008-2010
and the ensuing Euro zone Sovereign Debt crisis have had a considerable
effect on the market prices of the current portfolio investments
of the Group.
In cases that the Board of Directors deemed necessary, it has
taken provisions on the assets' valuation in order to ensure
that the asset value is presented within the financial statements
of the Group in such a way as to take into account various uncertainties.
To quantify the value of its assets and/or indicate the possibility
of impairment losses, the Company commissioned internationally
acclaimed valuers.
4.1.4 Interest rate risk
Interest rate risk is the risk that the value of financial instruments
will fluctuate due to changes in market interest rates.
The Group's income and operating cash flows are substantially
independent of changes in market interest rates as the Group
has no significant interest--bearing assets apart from its cash
balances that are mainly kept for liquidity purposes.
The Group is exposed to interest rate risk in relation to its
borrowings. Borrowings issued at variable rates expose the Group
to cash flow interest rate risk. Borrowings issued at fixed
rates expose the Group to fair value interest rate risk. All
of the Group's borrowings are issued at a variable interest
rate. Management monitors the interest rate fluctuations on
a continuous basis and acts accordingly.
4.1.5 Credit risk
Credit risk arises when a failure by counter parties to discharge
their obligations could reduce the amount of future cash inflows
from financial assets at hand at the end of the reporting period.
Cash balances are held with high credit quality financial institutions
and the Group has policies to limit the amount of credit exposure
to any financial institution. Analysis for risks related to
deposits with Cypriot based banking institutions is presented
in note 4.1.1.2.
Management has been in continuous discussions with banking institutions
monitoring their ability to extend financing as per the Group's
needs. The sovereign debt crisis has affected the pan-European
banking system during 2011 and 2012 imposing financing uncertainties
for new development projects. The financial crisis in the European
Union periphery has strained any remaining liquidity and the
financial institutions in the region (including those that have
Italian, Greek or Austrian parent) are contemplating deleveraging
programmes.
4.1.6 Currency risk
Currency risk is the risk that the value of financial instruments
will fluctuate due to changes in foreign exchange rates.
Currency risk arises when future commercial transactions and
recognized assets and liabilities are denominated in a currency
that is not the Group's functional currency. Most of the Group's
transactions, including the rental proceeds are denominated
in the functional currency (USD). For the rest of the foreign
exchange exposure Management monitors the exchange rate fluctuations
on a continuous basis and acts accordingly.
As a precaution against probable depreciation of local currencies,
and especially of the UAH, the majority of the Group's liquid
assets are held in USD and EUR denominated deposit accounts.
4.1.7 Capital risk management
The Group manages its capital to ensure that it will be able
to continue as a going concern while maximizing the return to
shareholders through the optimization of the debt and equity
balance. The Group's core strategy is described in note 27 of
the financial statements.
4.1.8 Compliance risk
Compliance risk is the risk of financial loss, including fines
and other penalties, which arises from non--compliance with
laws and regulations of the state.
Although the Group is trying to limit such risk, the uncertain
environment in which it operates in various countries increases
the complexities handled by Management. The Group's exposures
are discussed under note 27.
4.1.9 Litigation risk
Litigation risk is the risk of financial loss, interruption
of the Group's operations or any other undesirable situation
that arises from the possibility of non--execution or violation
of legal contracts and consequentially of lawsuits. The risk
is restricted through the contracts used by the Group to execute
its operations and is discussed in note 25.
4.1.10 Reputation risk
The risk of loss of reputation arising from the negative publicity
relating to the Group's operations (whether true or false) may
result in a reduction of its clientele, reduction in revenue
and legal cases against the Group. Following the Group's restructuring
in 2011, the settlement of its liabilities, the letting of the
Terminal Brovary warehouse and the first capital raise of the
Company post 2010, Management expects the Company to be receiving
positive publicity.
4.2. Operational risk
Operational risk is the risk that derives from the deficiencies
relating to the Group's information technology and control systems
as well as the risk of human error and natural disasters. The
Group's systems are evaluated, maintained and upgraded continuously.
4.3. Fair value estimation
The fair values of the Group's financial assets and liabilities
approximate their carrying amounts at the end of the reporting
period.
5. Critical accounting estimates and judgments
The accounting estimates and judgments used in the preparation
of the interim condensed consolidated financial statements are
consistent with those followed in the preparation of the Group's
annual financial statements for the year ended 31 December 2012.
6. Earnings and net assets per share attributable to equity holders of the parent
a. Weighted average number of ordinary shares
H1 2013 H1 2012
--------------------------------------------------- ----------- -----------
Issued ordinary shares capital 25.680.817 10.172.975
--------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares (Basic) 22.770.720 9.621.375
--------------------------------------------------- ----------- -----------
Diluted weighted average number of ordinary shares 26.402.559 11.243.760
--------------------------------------------------- ----------- -----------
b. Basic diluted and adjusted earnings per share
30/06/2013 30/06/2012
------------------------------------------------------- ----------- ------------
US$ US$
------------------------------------------------------- ----------- ------------
(Loss) after tax attributable to owners of the parent (565.692) (2.225.695)
------------------------------------------------------- ----------- ------------
Basic (0,02) (0,23)
------------------------------------------------------- ----------- ------------
Diluted (0,02) (0,23)
------------------------------------------------------- ----------- ------------
c. Net assets per share
30/06/2013 31/12/2012
--------------------------------------------------------- ----------- -----------
US$ US$
--------------------------------------------------------- ----------- -----------
Net assets attributable to equity holders of the parent 50.175.441 33.890.908
--------------------------------------------------------- ----------- -----------
Number of ordinary shares 25.680.817 11.111.975
--------------------------------------------------------- ----------- -----------
Diluted number of ordinary shares 29.349.505 12.699.400
--------------------------------------------------------- ----------- -----------
Basic 1,95 3,05
--------------------------------------------------------- ----------- -----------
Diluted 1,71 2,67
--------------------------------------------------------- ----------- -----------
7. Operational income
Operational income represents rental, service charged and utilities income generated during the reporting period by the rental agreements concluded with tenants of the Terminal Brovary Logistics Park. Vacancy rate of the Terminal was 16% as at the reporting date.
8. Administration Expenses
H1 2013 H1 2012
------------------------------- ---------- ----------
US$ US$
------------------------------- ---------- ----------
Salaries and Wages 528.421 838.300
------------------------------- ---------- ----------
Legal fees 206.305 406.901
------------------------------- ---------- ----------
Travelling expenses 159.853 144.062
------------------------------- ---------- ----------
Consulting fees 138.751 305.009
------------------------------- ---------- ----------
Directors' remuneration 105.000 110.000
------------------------------- ---------- ----------
Audit and accounting fees 63.634 83.612
------------------------------- ---------- ----------
Public group expenses 56.563 93.480
------------------------------- ---------- ----------
Office expenses 56.506 66.090
------------------------------- ---------- ----------
Taxes and duties 21.039 27.228
------------------------------- ---------- ----------
Security 13.649 26.132
------------------------------- ---------- ----------
Depreciation 5.795 8.125
------------------------------- ---------- ----------
Other expenses 37.576 25.589
------------------------------- ---------- ----------
Total Administration Expenses 1.393.092 2.134.528
------------------------------- ---------- ----------
Salaries and Wages include personnel remuneration as well as remuneration for the Management of the Company including the CEO, CFO, Commercial Director and VP-Finance Ukraine.
Travelling expenses represent mainly expenses incurred in relation to the on going share capital increase of the Company.
Legal and Consulting fees represent expenses of the Company in the various legal and tax cases it has in Ukraine. Management estimates that contrary to what happened in 2012, in 2013 the total annual amount will be weighted toward H2-2013.
9. Investment property operating expenses
On 20 December 2011 the Company entered into a three year Maintenance and Property Management Agreement with DTZ Consulting Limited Liability Company. Operating expenses also include utility expenses, insurance premiums, as well as various other expenses needed for the proper operation of the complex.
10. Other operating income/(expenses), net
H1 2013 H1 2012
------------------------------ --------- --------
US$ US$
------------------------------ --------- --------
Accounts payable written off 339.207 -
------------------------------ --------- --------
Penalties (16.133) (1.999)
------------------------------ --------- --------
Other income/(expenses), net (96.224) 49.263
------------------------------ --------- --------
Total 226.850 47.264
------------------------------ --------- --------
Accounts payable written off mainly represent the amount of Altis Holding's (the general constructor of Terminal Brovary) guarantee reserve payable written off (US$ 311.390) as a result of negotiations and settlement during the reporting period.
Penalties recognized in the first half of 2013 relate to Terminal Brovary LLC which were accrued by the tax authority on the land leased in Brovary.
Other expenses mainly consist of agency fees related to the letting of Terminal Brovary amounting to US$ 25.598 and VAT receivable written off amounting to US$ 38.409.
11. Finance costs/ (income), net
H1 2013 H1 2012
-------------------------------------------- --------- --------
US$ US$
-------------------------------------------- --------- --------
Borrowing interest expenses (notes 19, 24) 780.041 570.563
-------------------------------------------- --------- --------
Finance charges and commissions 50.299 64.876
-------------------------------------------- --------- --------
Foreign exchange losses, net 25.399 12.709
-------------------------------------------- --------- --------
Bank interest income (46.630) (767)
-------------------------------------------- --------- --------
Net finance result 809.109 647.381
-------------------------------------------- --------- --------
Borrowing interest represents interest paid on the borrowings of the Group for EBRD facility (note 19) and the interest expense accrued on a related party loan (note 24).
Finance charges and commissions include mainly financial fees paid to the banks and financial lease interest.
12. Tax
The corporate income tax rate for the Company's Ukrainian subsidiaries is 19% for the six months ended 30/06/2013. The corporate tax that is applied to the qualifying income of the Company and its Cypriot subsidiaries is 10% for the six months ended 30 June 2013.
13. Investment Property (all)
Investment Property consists of the following assets:
Terminal Brovary Logistic Park consists of a 49.180 sq m Class A warehouse and associated office space, situated on the junction of the main Kiev - Moscow highway and the Borispil road. The facility is in operation since Q1 2010 and as at the end of the reporting period is 84% leased.
Bela Logistic Center is a 22,4Ha plot in Odessa situated on the main highway to Kiev. Following the issuance of permits in 2008, below ground construction for the development of a 103.000 sq m GBA logistic center commenced. Construction was put on hold in 2009 following adverse macro-economic developments at the time.
Kiyanovsky Laneconsists of four adjacent plots of land, totaling 0,55 Ha earmarked for a residential development, overlooking the scenic Dnipro River, St. Michael's Spires and historic Podil neighbourhood.
Tsymlianskiy Lane,is a 0,36 Ha plot of land located in the historic Podil District of Kiev and is destined for the development of a residential complex.
Balabino projectis a 26,38 ha plot of land situated on the south entrance of Zaporozhye, a city in the south of Ukraine with a population of 800.000 people. Balabino is zoned for retail and entertainment development.
Asset Name Description/ Principal Related Companies Carrying Carrying
Location activities/ amount as amount as
Operations at 30/06/2013 at 31/12/2012
US$ US$
-------------- ------------- --------------------- ------------------ --------------- ---------------
Terminal Brovary, Warehouse TERMINAL 25.155.576 25.115.000
Brovary Kiev Oblast BROVARY
Logistics AISI BROVARY
Park AISI LOGISTICS
-------------- ------------- --------------------- ------------------ --------------- ---------------
Bela Logistic Odessa Land and Development AISI BELA 8.353.161 8.353.161
Center Works for
Warehouse
-------------- ------------- --------------------- ------------------ --------------- ---------------
Kiyanovskiy Podil, Land for residential AISI UKRAINE 7.435.000 7.435.000
Lane Kiev City development TORGOVIY
Center CENTR
-------------- ------------- --------------------- ------------------ --------------- ---------------
Tsymlianskiy Podil, Land for residential ALMAZ PRES 2.360.000 2.360.000
Lane Kiev City development UKRAINE
Center
-------------- ------------- --------------------- ------------------ --------------- ---------------
Balabino Zaporozhie Land for retail INTERTERMINAL 4.320.000 4.320.000
development MERELIUM
INVESTMENTS
-------------- ------------- --------------------- ------------------ --------------- ---------------
TOTAL 47.623.737 47.583.161
-------------- ------------- --------------------- ------------------ --------------- ---------------
Carrying amounts of the properties stated in these interim condensed consolidated financial statements remain the same as were presented in the Group's audited consolidated financial statements as of 31 December 2012, except for Terminal Brovary for which some expenses have been capitalised, increasing the carrying amount of the property.
a. Investment Property Under Construction
H1 2013
-------------------------------------------- ----------
US$
-------------------------------------------- ----------
At 1 January 8.353.161
-------------------------------------------- ----------
Capital expenditures on investment property -
-------------------------------------------- ----------
Revaluation on investment property -
-------------------------------------------- ----------
Translation difference -
-------------------------------------------- ----------
At 30 June 8.353.161
-------------------------------------------- ----------
As at 30 June 2013 investment property under construction represents the carrying value of Bela Logistic Center project, which has reached the +10% construction in late 2008 but it is stopped since then. The Company's external valuer has appraised the property's value at US$8.500.000 as at 31 December 2012.
b. Investment Property
H1 2013
------------------------------------------------ -----------
US$
------------------------------------------------ -----------
At 1 January 39.230.000
------------------------------------------------ -----------
Capital expenditure on investment property 40.576
------------------------------------------------ -----------
Revaluation gain/(loss) on investment property -
------------------------------------------------ -----------
Translation difference -
------------------------------------------------ -----------
At 30 June 39.270.576
------------------------------------------------ -----------
Terminal Brovary, Kiyanovskiy Lane, Tsymlyanskiy Lane and Balabino Village are included in the Investment Property category. Movement within capital expenditure on investment property represents some expenses of Terminal Brovary which have been capitalised.
c. Advances for Investments
30/6/2013 31/12/2012
--------------------------------------- ------------ ------------
US$ US$
--------------------------------------- ------------ ------------
Advances for investments 11.840.547 11.840.547
--------------------------------------- ------------ ------------
Impairment provision (cumulative as of (6.840.547) (6.840.547)
the reporting period)
--------------------------------------- ------------ ------------
Total 5.000.000 5.000.000
--------------------------------------- ------------ ------------
The Group has made an advance payment of USD$12mil. (representing principal plus interest) for the acquisition of a project in Podol (Kiev) in 2007. As of the end of the reporting period the Management does not expect such acquisition to proceed while the seller has already defaulted on his credit to the Group.
As a consequence, the Group has commenced legal proceedings for the transfer of the collateral (land plot of 42 ha in Kiev Oblast) in the Group's name as well legal proceeding against the company which collected the original USD$12mil. payment.
14. Prepayments and other current assets
30/06/2013 31/12/2012
--------------------------------------------- ----------- -----------
US$ US$
--------------------------------------------- ----------- -----------
Prepayments and other current assets 636.137 709.249
--------------------------------------------- ----------- -----------
VAT and other tax receivable 3.966.835 4.256.424
--------------------------------------------- ----------- -----------
Deferred expenses 453.796 495.804
--------------------------------------------- ----------- -----------
Impairment of prepayments and other current
assets (21.465) (13.304)
--------------------------------------------- ----------- -----------
Total 5.035.303 5.448.173
--------------------------------------------- ----------- -----------
Prepayments and other current assets mainly include prepayments made for services as well as the amount of US$135.000 which is the blocked amount by Cyprus authorities subject to finalisation of Laiki Bank restructuring and the possible receipt of shares in Bank of Cyprus.
VAT and other tax receivable represent the current portion of the Terminal Brovary VAT receivable, to be offset from VAT charged over rental income during the next years.
As at the reporting date deferred expenses include due diligence expenses related to the possible acquisition of investment properties. The amount of US$238.552 of deferred expenses actually paid in 2012 and recognized as of 31/12/2012 which were incurred in connection to the share capital increase effected in H1 2013 were deducted from the capital increase proceeds (note 16).
15. Cash and cash equivalents
Cash and cash equivalents represent liquidity held at banks.
30/06/2013 31/12/2012
---------------------- ----------- -----------
US$ US$
---------------------- ----------- -----------
Cash at banks in USD 9.788.148 32.546
---------------------- ----------- -----------
Cash at banks in EUR 4.461.805 9.086
---------------------- ----------- -----------
Cash at banks in UAH 213.897 214.815
---------------------- ----------- -----------
Total 14.463.850 256.447
---------------------- ----------- -----------
16. Share capital
Number of Shares (as at) 31/12/2012 1/2/2013 27/2/2013 30/6/2013
--------------------------------- ------------ -------------------------- -------------------------- ------------
Increase of Share Capital Increase of Share Capital
--------------------------------- ------------ -------------------------- -------------------------- ------------
Authorised
--------------------------------- ------------ -------------------------- -------------------------- ------------
Ordinary shares of EUR0,01 each 989.869.935 - - 989.869.935
--------------------------------- ------------ -------------------------- -------------------------- ------------
Ordinary shares of EUR1 each - - - -
--------------------------------- ------------ -------------------------- -------------------------- ------------
Ordinary Shares of EUR0,92 each 1 - - 1
--------------------------------- ------------ -------------------------- -------------------------- ------------
Deferred Shares of EUR0,99 each 4.142.727 - - 4.142.727
--------------------------------- ------------ -------------------------- -------------------------- ------------
Total 994.012.663 - - 994.012.663
================================= ============ ========================== ========================== ============
Issued and fully paid
--------------------------------- ------------ -------------------------- -------------------------- ------------
Ordinary shares of EUR0,01 each 11.111.975 14.389.926 178.916 25.680.817
--------------------------------- ------------ -------------------------- -------------------------- ------------
Ordinary shares of EUR1 each - - - -
--------------------------------- ------------ -------------------------- -------------------------- ------------
Ordinary Shares of EUR0,92 each 1 - - 1
--------------------------------- ------------ -------------------------- -------------------------- ------------
Deferred Shares of EUR0,99 each 4.142.727 - - 4.142.727
--------------------------------- ------------ -------------------------- -------------------------- ------------
Total 15.254.703 14.389.926 178.916 29.823.545
================================= ============ ========================== ========================== ============
Value (as at) 31/12/2012 1/2/2013 27/2/2013 30/6/2013
--------------------------------- ----------- -------------------------- -------------------------- -----------
Increase of Share Capital Increase of Share Capital
--------------------------------- ----------- -------------------------- -------------------------- -----------
Authorised (EUR)
--------------------------------- ----------- -------------------------- -------------------------- -----------
Ordinary shares of EUR0,01 each 9.898.699 - - 9.898.699
--------------------------------- ----------- -------------------------- -------------------------- -----------
Ordinary shares of EUR1 each - - - -
--------------------------------- ----------- -------------------------- -------------------------- -----------
Ordinary Shares of EUR0,92 each 0.92 - - 0.92
--------------------------------- ----------- -------------------------- -------------------------- -----------
Deferred Shares of EUR0,99 each 4.101.300 - - 4.101.300
--------------------------------- ----------- -------------------------- -------------------------- -----------
Total 14.000.000 - - 14.000.000
================================= =========== ========================== ========================== ===========
Issued and fully paid ($)
--------------------------------- ----------- -------------------------- -------------------------- -----------
Ordinary shares of EUR0,01 each 5.531.191 195.320 2.407 5.728.918
--------------------------------- ----------- -------------------------- -------------------------- -----------
Ordinary shares of EUR1 each - - - -
--------------------------------- ----------- -------------------------- -------------------------- -----------
Ordinary Shares of EUR0,92 each - - - -
--------------------------------- ----------- -------------------------- -------------------------- -----------
Deferred Shares of EUR0,99 each - - - -
--------------------------------- ----------- -------------------------- -------------------------- -----------
Total 5.531.191 195.320 2.407 5.728.918
================================= =========== ========================== ========================== ===========
As at the end of the reporting period the authorized share capital of the Company is 989.869.935 Ordinary Shares of EUR0,01 nominal value each, 1 Ordinary Share of EUR0,92 nominal value and 4.142.727 Deferred Shares of EUR0,99 nominal value each.
16.1 Issued Share Capital
Since the start of 2013 and pursuant to the Annual General Meeting of 26th November 2012, the Company has raised US$17.045.000 from placing regular shares with new investors. This capital raise which follows the recapitalisation and restructuring of the Company in August 2011 and the successful completion of various stabilising initiatives during 2012 provides funding for the Company to commence its strategy for growth through the acquisition of income producing assets in Central and South Eastern Europe in order to build a more geographically diverse portfolio of income yielding assets, whilst maintaining its emphasis on efficient asset management to create and enhance value. The Board has allotted 14.568.842 new ordinary shares at a price of GBP0, 74 per share following the raising of the US$17.045.000.
During 2012 the Company paid for legal, advisory, consulting and marketing services related to share capital increase an amount of US$238.552. These expenses were capitalized and recognized as deferred expenses as of 31/12/2012 (note 14). In H1 2013 when the share capital increase was effected, this amount was set off against capital proceeds.
16.2 Director's Option scheme
Under the said scheme each of the directors serving at the time, which is still a Director of the Company is entitled to subscribe for 2.631 Ordinary Shares exercisable as set out below:
Exercise Price Number of
-------------------------------- --------------- ----------
US$ Shares
-------------------------------- --------------- ----------
Exercisable till 1 August 2017 57 1.754
-------------------------------- --------------- ----------
Exercisable till 1 August 2017 83 877
-------------------------------- --------------- ----------
Director Franz M. Hoerhager Option scheme, 12/10/2007
Under the said scheme, director Franz M. Hoerhager is entitled to subscribe for 1.829 ordinary shares exercisable as set out below:
Exercise Price Number of
-------------------------------- --------------- ----------
GBP Shares
-------------------------------- --------------- ----------
Exercisable till 1 August 2017 40 1.219
-------------------------------- --------------- ----------
Exercisable till 1 August 2017 50 610
-------------------------------- --------------- ----------
16.3 Warrants issued
On 8 August 2011 the Company has issued an amount of Class B Warrants for an aggregate equivalent to 12,5% of the issued share capital of the Company at the time of the exercise. The Class B Warrants may be exercised at any time until the third anniversary of the issuance date of the Class B Warrant Instrument. The exercise price of the Class B Warrants will be the nominal value per Ordinary Share as at the date of exercise. The Class B Warrant Instruments have anti-dilution protection so that, in the event of further share issuances by the Company, the number of Ordinary Shares to which the holder of a Class B Warrant is entitled will be adjusted so that he receives the same percentage of the issued share capital of the Company (as nearly as practicable), as would have been the case had the issuances not occurred. This anti-dilution protection will lapse on the earlier of (i) the expiration of the Class B Warrants; and (ii) capital increase(s) undertaken by the Company generating cumulative gross proceeds in excess of US$100.000.000.
16.4 Capital Structure as at the end of the reporting period
As at the reporting date the Company's share capital is as follows:
Number of (as at) 30/06/2013 (as at) 31/12/2012 ---------------------------- --------------------- ------------------- ------------------- Ordinary shares of EUR0,01 Listed in AIM 25.680.817 11.111.975 ---------------------------- --------------------- ------------------- ------------------- Class B Warrants 3.668.688 1.587.425 ---------------------------- --------------------- ------------------- ------------------- Total number of Shares Non Dilutive Basis 25.680.817 11.111.975 ---------------------------- --------------------- ------------------- ------------------- Total number of Shares Full Dilutive Basis 29.349.505 12.699.400 ---------------------------- --------------------- ------------------- ------------------- Ordinary Share EUR0,92 1 1 --------------------------------------------------- ------------------- ------------------- Options 4.460 4.460 --------------------------------------------------- ------------------- -------------------
17. Foreign Currency Translation Reserve
Exchange differences related to the translation from the functional currency of the Group's subsidiaries are accounted by entries made directly to the foreign currency translation reserve. The foreign exchange translation reserve represents unrealized profits or losses related to the appreciation or depreciation of the local currencies against the USD in the countries where the Company's subsidiaries own property assets.
18. Non-Controlling Interests
Non-controlling interests represent the equity value of 45% shareholding in LLC Almaz-pres-Ukraina, which is being held by ERI Trading & Investments Co. Limited.
19. Borrowings
30/06/2013 31/12/2012
----------------------------------------- ----------- -----------
US$ US$
----------------------------------------- ----------- -----------
Principal EBRD loan 14.488.235 15.529.412
----------------------------------------- ----------- -----------
Principal payable to related parties 1.700.000 1.700.000
(note 24)
----------------------------------------- ----------- -----------
Other Borrowing - 175.000
----------------------------------------- ----------- -----------
Restructuring fees and interest payable
to EBRD 785.098 785.098
----------------------------------------- ----------- -----------
Interests payable to related parties
(note 24) 172.630 77.680
----------------------------------------- ----------- -----------
Interests accrued on bank loans 29.472 74.466
----------------------------------------- ----------- -----------
Total 17.175.434 18.341.656
----------------------------------------- ----------- -----------
19.1 EBRD
Following the restructuring of the EBRD loan for the construction of Terminal Brovary in June 2011 and the lapse of the relevant grace period on the principal repayments in September 2012, the Company commenced discussions with EBRD in an effort to restructure the loan repayment plan so as to match the cash inflows with the principal and interest payments as well as the Company's operational expenses. Discussions with EBRD, on a new restructuring are nearly complete. In view of these discussions the Company repaid USD$1.041.177 of principal during the six months ended 30 June 2013 representing the first 2 instalments under the existing agreement. The loan bears interest of 6.75% over LIBOR.
19.2 Other Borrowings
The amount represents short term borrowing to repay part of the UVK settlement amount (note 20). The loan was contracted in December 2012 and fully repaid by end of January 2013.
20. Trade and other payables
30/06/2013 31/12/2012
------------------------------------------ ----------- -----------
US$ US$
------------------------------------------ ----------- -----------
Payables to related parties (note 24) 962.760 1.057.983
------------------------------------------ ----------- -----------
Payables for construction, non-current 414.819 414.819
------------------------------------------ ----------- -----------
Payables for construction, current 24.826 24.826
------------------------------------------ ----------- -----------
Deferred income from tenants 256.185 250.080
------------------------------------------ ----------- -----------
Guarantee reserve on construction works,
current 213.621 743.018
------------------------------------------ ----------- -----------
Payables for services 110.551 351.611
------------------------------------------ ----------- -----------
Accruals 59.742 84.298
------------------------------------------ ----------- -----------
Provision for reimbursements - 300.000
------------------------------------------ ----------- -----------
Total 2.042.504 3.226.635
------------------------------------------ ----------- -----------
The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above.
Payables for construction represent amounts payable to the contractor of Bela Logistic Center in Odessa. The settlement was reached in late 2011 on the basis of maintaining the construction contract in an inactive state (to be reactivated at the option of the Group), while upon reactivation of the contract or termination of it (because of the sale of the asset) the Group would have to pay an additional UAH5.400.000 (US$ 700.000) payable upon such event occurring. Since it is uncertain when the latter amount is to be paid it has been discounted at the current discount rates in Ukraine and is presented as a non-current liability.
Deferred Income from Tenants represents advances from tenants which will be used as future rental income & utilities charges.
Guarantee reserve on construction works, represents the portion of the performance guarantee amount payable to the contractor of Brovary Logistic Park upon finalization of the works and of the snagging list. In H1 2013 the Management negotiated with Altis Holding to reduce the amount of the guarantee reserve payable by US$ 311.390 that was recognized as income from payables written off (note 10) and consequently US$ 218.007 were paid. The remaining amount as at the reporting date was fully repaid in July 2013. At the same time the Company hired a third party to conclude the remaining works and part of the snagging list.
Payables for services represent amounts payable to various service providers including auditors, legal advisors, consultants and third party accountants.
21. Deposits from Tenants
Deposits from tenants appearing under non-current liabilities include the amounts received from the tenants of LLC Terminal Brovary as advances/guarantees and are to be reimbursed to these clients at the expiration of the leases agreements.
22. Taxes payable & Provisions for taxes
30/06/2013 31/12/2012
------------------------------ ----------- -----------
US$ US$
------------------------------ ----------- -----------
Corporate Income tax payable 453.554 519.639
------------------------------ ----------- -----------
Other taxes payable 6.643 10.188
------------------------------ ----------- -----------
Provisions for taxes 416.641 334.552
------------------------------ ----------- -----------
Total Tax Liability 876.838 864.379
------------------------------ ----------- -----------
Corporate Income tax represents taxes payable in Cyprus.
Other taxes represent local property taxes payable in Ukraine.
Provision represents a Management estimate on potential land tax payable for Bela LLC and land lease payment Terminal Brovary LLC accrued by the Tax Authority (note 25).
23. Finance lease liabilities
The Group rents land plots classified as finance lease. Lease obligations are denominated in UAH. The fair value of lease obligations approximate to their carrying amounts. Following the appropriate discounting finance lease liabilities are carried at USD $553.823 under current and non-current portion. The Group's obligations under finance leases are secured by the lessor's title to the leased assets.
24. Related Party Transactions
The following represent transactions with related parties:
24.1 Expenses
H1 2013 H1 2012
-------------------------------------------- -------- --------
US$ US$
-------------------------------------------- -------- --------
Management Remuneration 209.600 198.400
-------------------------------------------- -------- --------
Board of Directors & Committees 105.004 110.000
-------------------------------------------- -------- --------
Back office - SECURE Management Ltd 88.953 190.751
-------------------------------------------- -------- --------
Interest expenses to Narrowpeak loan (note 98.105 -
11)
-------------------------------------------- -------- --------
Total 501.662 499.151
-------------------------------------------- -------- --------
Management remuneration represents the H1 2013 remuneration of the CEO and the CFO pursuant to the decision of the Remuneration Committee.
Board of Directors and Committees expense represents the H1 2013 remuneration of all the non-executive members of the board pursuant to the decision of the Remuneration Committee.
Back office expenses represent expenses incurred by the Group for part time expert personnel of SECURE Management Ltd, a real estate project and asset management company, seconded to the Company to cover various non-permanent positions, variations of the work flow in finance and administration functions and/or specialized advisory and consultancy needs.
Interest expense represents the interest from the loan granted on 21(st) September 2012 from Narrowpeak Consultants Ltd and other parties, in order to facilitate the Group's cash flow. The loan to the Company is of up to US$2.500.000 bearing interest at 12% per annum and is repayable on 31(st) December 2014. The loan is collateralised against the Odessa land plot.
24.2 Payables to related parties
30/06/2013 31/12/2012
--------------------------------- ----------- -----------
US$ US$
--------------------------------- ----------- -----------
Grafton Properties 150.000 150.000
--------------------------------- ----------- -----------
Secure Management Ltd 45.000 30.000
--------------------------------- ----------- -----------
Board of Directors & Committees 329.615 291.050
--------------------------------- ----------- -----------
Management Remuneration 438.145 586.933
--------------------------------- ----------- -----------
Total 962.760 1.057.983
--------------------------------- ----------- -----------
24.2.1 Board of Directors & Committees
The amount payable represents mainly fees payable to non Executive Directors and members of Committees covering a period from August 2011 to June 2013. Pursuant to the AGM approval, the members of the Board of Directors have agreed in order to facilitate the Company's cash flow, to release their fees covering the period from August 2011 to December 2012 in exchange of shares in the Company's capital.
24.2.2 Loan payable to Grafton Properties
Under the Settlement Agreement of July 2011, the Company undertook the obligation to repay to certain lenders who had contributed certain funds for the operating needs of the Company between 2009-2011, by lending to AISI Realty Capital LLC, the total amount of US$450.000. As of the reporting date the liability towards Grafton Properties, representing the Lenders, was US$150.000, which is contingent to the Company raising US $50m of capital in the markets.
24.2.3 Payable to Secure Management
Payable represents payable to Secure Management for expert personnel seconded by SECURE Management Ltd, covering unpaid fees for Q2 2013.
24.2.4 Management Remuneration
Management Remuneration represents fees payable a) to the CEO of the Company covering the period from May 2012 to June 2013, which the CEO has willingly agreed not to receive in order to facilitate the Company's cash flow, and b) to the CFO of the Company covering the period from May 2012 to December 2012.
24.3 Borrowings from related parties
30/06/2012 31/12/2012
------------------------- ----------- -----------
US$ US$
------------------------- ----------- -----------
Narrowpeak Ltd (note 19) 1.872.630 1.777.680
------------------------- ----------- -----------
Total 1.872.630 1.777.680
------------------------- ----------- -----------
On 21st September 2012 and in order to facilitate the Group's cash flow Narrowpeak Consultants Ltd and other parties, have provided a loan to the Company of up to US$2.500.000 bearing interest at 12% per annum and is repayable on 31(st) December 2014. The loan is collateralized against the Odessa land plot.
24.4 Loans from AISI Capital Ltd to the Company's subsidiaries
SECURE CAPITAL LTD, the finance subsidiary of the Company has proceeded to provide capital in the form of loans to the Ukrainian subsidiaries of the Company so as to support the acquisition of assets, development expenses of the projects, as well as various operational costs.
Borrower Repayment Limit Outstanding Outstanding
Date -US$ amount, as of amount, as of
30/06/2013 - 31/12/2012-
US$ US$
--------------------- ------------ ------------ ---------------- ---------------
LLC "TERMINAL 19/12/2014 35.000.000 33.282.634
BROVARY" 35.000.000 34.432.771
--------------------- ------------ ------------ ---------------- ---------------
LLC "AISI BROVARY" 09/10/2014 40.000.000 - 4.275.000
--------------------- ------------ ------------ ---------------- ---------------
LLC "AISI UKRAINE" 18/10/2014 28.000.000 14.903 9.867.859
--------------------- ------------ ------------ ---------------- ---------------
LLC "ALMAZ PRES
UKRAINE" 21/3/2014 10.000.000 170.000 170.000
--------------------- ------------ ------------ ---------------- ---------------
LLC " ISI OUTDOOR" 21/8/2014 5.000.000 - 2.160.000
--------------------- ------------ ------------ ---------------- ---------------
LLC "AISI VIDA" 15/10/2014 10.000.000 - 310.000
--------------------- ------------ ------------ ---------------- ---------------
LLC "AISI VAL" 15/10/2014 7.000.000 - 210.000
--------------------- ------------ ------------ ---------------- ---------------
LLC "AISI ROSLAV" 15/10/2014 10.000.000 - 310.000
--------------------- ------------ ------------ ---------------- ---------------
LLC " SI KONSTA" 15/10/2014 8.000.000 - 610.000
--------------------- ------------ ------------ ---------------- ---------------
LLC "AISI ILVO" 15/10/2014 10.000.000 - 610.000
--------------------- ------------ ------------ ---------------- ---------------
LLC "AISI DONETSK" 19/11/2014 40.000.000 - 930.000
--------------------- ------------ ------------ ---------------- ---------------
LLC "TORGOVI CENTR" 18/10/2014 10.000.000 - 120.000
--------------------- ------------ ------------ ---------------- ---------------
During the reporting period the Company has proceeded in share capital increase effected on certain of its Ukrainian subsidiaries which in turn returned the funds back to SECURE Capital Limited (ex AISI CAPITAL) in the form of loan repayment (loans have been provided throughout 2007-2012 period). The total loan amount repaid is US$ 25million including principal and interest payment. This repayment is expected to have a substantial positive material impact on the tax position of the Company going forward.
25. Contingent liabilities
The Group is involved in various legal proceedings in the ordinary course of its business.
25.1 Tax litigation
The Group performed during the reporting period most of its operations in Ukraine and therefore within the jurisdiction of the Ukrainian tax authorities. The Ukrainian tax system can be characterized by numerous taxes and frequently changing legislation, which may be applied retroactively, open to wide interpretation and in some cases, is conflicting. Instances of inconsistent opinions between local, regional, and national tax authorities and between the National Bank of Ukraine and the Ministry of Finance are not unusual. Tax declarations are subject to review and investigation by a number of authorities, that are enacted by law to impose severe fines and penalties and interest charges. A tax year remains open for review by the tax authorities during the three subsequent calendar years, however, under certain circumstances a tax year may remain open for longer. These facts create tax risks which are substantially more significant than those typically found in countries with more developed tax systems. Management believes that it has adequately provided for tax liabilities, based on its interpretation of tax legislation, official pronouncements and court decisions. However, the interpretations of the relevant authorities could differ and the effect on these consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant.
25.2 Construction related litigation
There are no material claims from contractors due to the postponement of projects or delayed delivery other than those appearing in the financial statements.
25.3 Other Litigation
Following the restructuring of the Group, a former employee of the Company (the previous acting Director for a number of the Ukrainian subsidiaries) has taken the Group to the Ukrainian courts. Management does not believe that the result of any legal proceedings will have a material effect on the Group's financial position or the results of its operations other than the one already provided for, within the financial statements.
25.4 Other Contingent Liabilities
The Group had no other contingent liabilities as at 30 June 2013.
26. Commitments
26.1 Capital commitments
The Group has two (2) construction agreements:
a) for the construction of Brovary Logistics Park (note 20)
b) for the construction of Bela Logistics Center (note 20)
26.2 Operational commitments
In December 2011 the Company entered into a three year Property Management and Maintenance Service Agreement with DTZ Consulting Limited Liability Company. The Agreement stipulates a range of services that were outsourced by Terminal Brovary to DTZ (billing, servicing, maintaining) so as to both reduce cost and improve quality. The Company has the right to terminate the Agreement with DTZ unilaterally before its expiration date subject to prior written notice to DTZ for 90 days before the desired date of termination.
27. Financial Risk Management
27.1 Capital Risk Management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the debt-equity structure and value enhancing actions in respect of its portfolio of investments. The capital structure of the Group consists of borrowings (note 19), cash and cash equivalents (note 15), receivables (note 14) and equity attributable to ordinary shareholders (issued capital, reserves and retained earnings).
The Group is not subject to any externally imposed capital requirements.
Management reviews the capital structure on an on-going basis. As part of the review Management considers the differential capital costs in the debt and equity markets, the timing at which each investment project requires funding and the operating requirements so as to proactively provide for capital either in the form of equity (issuance of shares to the Group's shareholders) or in the form of debt. Management balances the capital structure of the Group with a view of maximizing the shareholder's Return on Equity (ROE) while adhering to the operational requirements of the property assets and exercising prudent judgment as to the extent of gearing.
27.2 Significant Accounting Policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis on which income and expenses are recognized, in respect of each class of financial asset, financial liabilities and equity instruments are disclosed in note 3 of the financial statements.
27.3 Categories of Financial Instruments
Financial Assets Note 30/06/2013 31/12/2012
----------------------------- ----- ----------- -----------
US$ US$
----------------------------- ----- ----------- -----------
Cash at Bank 15 14.463.850 256.447
----------------------------- ----- ----------- -----------
Total 14.463.850 256.447
----------------------------- ----- ----------- -----------
Financial Liabilities Note 30/06/2013 31/12/2012
----------------------------- ----- ----------- -----------
US$ US$
----------------------------- ----- ----------- -----------
Interest bearing borrowings 19 17.175.435 18.341.656
----------------------------- ----- ----------- -----------
Trade and other payables 20 2.042.504 3.226.635
----------------------------- ----- ----------- -----------
Deposits from tenants 21 427.918 427.918
----------------------------- ----- ----------- -----------
Finance lease liabilities 23 553.823 593.821
----------------------------- ----- ----------- -----------
Taxes payable 22 876.838 864.379
----------------------------- ----- ----------- -----------
Total 21.076.518 23.454.409
----------------------------- ----- ----------- -----------
27.4 Financial Risk Management Objectives
The Group's Treasury function provides services to its various corporate entities, coordinates access to local and international financial markets, monitors and manages the financial risks relating to the operations of the Group, mainly the investing and development functions. Its primary goal is to secure the Group's liquidity and to minimize the effect of the financial asset price variability on the cash flow of the Group. These risks cover market risks including foreign exchange risks and interest rate risk as well as credit risk and liquidity risk.
The above mentioned risk exposures may be hedged using derivative instruments whenever appropriate. The use of financial derivatives is governed by the Group's approved policies which indicate that the use of derivatives is for hedging purposes only. The Group does not enter into speculative derivative trading positions. The same policies provide for the investment of excess liquidity. As at 30 June 2013, the Group had not entered into any derivative contracts.
Post August 2011, the priority on cash use and management was set on settling all past liabilities (eliminating thus the relevant legal and financial risks) while maintaining a minimum liquidity to allow for the future development of the Group's strategy.
27.5 Economic Market Risk Management
The Group operates in the Region. The Group's activities expose it primarily to financial risks of changes in currency exchange rates and interest rates. The exposures and the management of the associated risks are described below. There has been no change to the Group's manner in which it measures and manages risks.
Foreign Exchange Risk
Currency risk arises when commercial transactions and recognized financial assets and liabilities are denominated in a currency that is not the Group's functional currency. Most of the Group's financial assets are denominated in the functional currency.
Interest Rate Risk
The Group's income and operating cash flows are substantially independent of changes in market interest rates as the Group has no significant interest-bearing assets. On June 30th, 2013, cash and cash equivalent financial assets amounted to US$14.463.850 (31/12/2012:US $256.447).
The Group is exposed to interest rate risk in relation to its borrowings amounting to US$14.488.235 (31/12/2012: US$15.529.412) as they are issued at variable rates tied to the Libor. Management monitors the interest rate fluctuations on a continuous basis and evaluates hedging options to align the Group's strategy with the interest rate view and the defined risk appetite. Although no hedging has been applied for the reporting period, such may take place in the future if deemed necessary in order to protect the cash flow of a property asset through different interest rate cycles.
The Group's exposures to financial risk are discussed also in note 4.
27.6 Credit Risk Management
The Group has no significant credit risk exposure. The credit risk emanating from the liquid funds is limited because the Group's counterparties are banks with high credit-ratings assigned by international credit rating agencies. The Credit risk of receivables is reduced as the majority of the receivables represent VAT to be offset through VAT income in the future.
27.7 Liquidity Risk Management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which applies a framework for the Group's short, medium and long term funding and liquidity management requirements. The Treasury function of the Group manages liquidity risk by preparing and monitoring forecasted cash flow plans and budgets while maintaining adequate reserves. The following table details the Group's contractual maturity of its financial liabilities. The tables below have been drawn up based on the undiscounted contractual maturities including interest that will be accrued.
30 June 2013 Carrying Total Less than From one More than
amount one year to two years
two years
----------------------------- ----------- ----------- ----------- ----------- -----------
US$ US$ US$ US$ US$
----------------------------- ----------- ----------- ----------- ----------- -----------
Financial assets
----------------------------- ----------- ----------- ----------- ----------- -----------
Cash at Bank 14.463.850 14.463.850 14.463.850 - -
----------------------------- ----------- ----------- ----------- ----------- -----------
Financial liabilities
----------------------------- ----------- ----------- ----------- ----------- -----------
Interest bearing borrowings 17.175.435 17.175.435 15.302.805 - 1.872.630
----------------------------- ----------- ----------- ----------- ----------- -----------
Trade and other payables 2.042.504 2.042.504 1.371.500 - 671.004
----------------------------- ----------- ----------- ----------- ----------- -----------
Deposits from tenants 427.918 427.918 - - 427.918
----------------------------- ----------- ----------- ----------- ----------- -----------
Finance lease liabilities 553.823 2.323.558 104.404 104.404 2.114.750
----------------------------- ----------- ----------- ----------- ----------- -----------
Taxes payable 876.838 876.838 876.838 - -
----------------------------- ----------- ----------- ----------- ----------- -----------
31 December 2012 Carrying Total Less than From one More than
amount one year to two years
two years
----------------------------- ----------- ----------- ----------- ----------- -----------
US$ US$ US$ US$ US$
----------------------------- ----------- ----------- ----------- ----------- -----------
Financial assets
----------------------------- ----------- ----------- ----------- ----------- -----------
Cash at Bank 256.447 256.447 256.447 - -
----------------------------- ----------- ----------- ----------- ----------- -----------
Financial liabilities
----------------------------- ----------- ----------- ----------- ----------- -----------
Interest bearing borrowings 18.341.656 18.341.656 16.563.976 - 1.777.680
----------------------------- ----------- ----------- ----------- ----------- -----------
Trade and other payables 3.226.635 3.226.635 2.561.736 - 664.899
----------------------------- ----------- ----------- ----------- ----------- -----------
Deposits from tenants 427.918 427.918 - - 427.918
----------------------------- ----------- ----------- ----------- ----------- -----------
Finance lease liabilities 593.821 2.429.651 104.404 104.404 2.220.843
----------------------------- ----------- ----------- ----------- ----------- -----------
Taxes payable 864.379 864.379 864.379 - -
----------------------------- ----------- ----------- ----------- ----------- -----------
28. Events after the end of the reporting period
After the end of the reporting period there were no material events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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