TIDMSPDI
RNS Number : 3924C
Secure Property Dev & Inv PLC
28 September 2018
Secure Property Development & Invest PLC/ Index: AIM / Epic:
SPDI / Sector: Real Estate
28 September 2018
Secure Property Development & Investment PLC ('SPDI' or 'the
Company')
Half-Year Report
Secure Property Development & Investment PLC, the AIM quoted
South Eastern European focused property company, is pleased to
announce its unaudited half-year report for the period ended 30
June 2018.
Highlights
-- Delivering on strategy to build a low cost, asset-backed
company focused on the fast-growing economies and strategic
intercontinental trade routes of South Eastern Europe
-- Progress made in ongoing non-core asset disposal programme
whilst simultaneously sourcing partnerships for value creation to
bolster core income producing South Eastern European property
portfolio
o Advanced discussions to sell BigBlueBox in Romania with a view
to generating EUR2.5 million cash
o Sale of seven residential units in Romania and Bulgaria for a
total gross consideration of EUR0.5 million
-- Finalised rationalisation of capital structure with a view to
be able to distribute dividends to shareholders and/or adopt a
share buy-back programme in the future
o Shares currently trading at a substantial +60% discount to NAV
per share
-- Continual successful cost reduction plan with asset operating
expenses reduced by 29% and administration expenses reduced by
16%
-- Recurring EBITDA at EUR620k compared with H1 2017 at EUR820k,
when excluding the Terminal Brovary sale completed in H1 2017
-- Continued growth in regional economic environments in South Eastern Europe
o Romania leading the EU in terms of pace of growth
o Greece exited the EU-ECB-IMF support program in August
2018
o Ukraine continues showing strong signs of recovery
o Bulgaria also showing robust growth
-- Bolstered the Board of Directors with a number of new appointments
o Michael Beys, a highly renowned US attorney with a significant
real estate background, appointed as new Chairman - replaces Paul
Ensor who remains as a Non-Executive Director
o Colin Chapin, former CFO and Secretary for a TSX listed public
real estate holding company Trizec Canada Inc., appointed as a
Non-Executive Director
o Harin Thacker, previously a Non-Executive Director of SPDI,
appointed as Non-Executive Vice Chairman
Lambros G. Anagnostopoulos, Chief Executive Officer, said,
"Following a highly successful and profitable FY 2017 due to the
sale of land in Bucharest and our primary Ukrainian asset (Terminal
Brovary), during the first half of 2018 we have been focused on
capitalising on this success and finalising the rationalisation of
the Company's capital structure with a view, subject to the Company
having sufficient resources, to being able to distribute dividends
and/or consider buying back our own shares as they are currently
trading at +60% discount to NAV per share.
"In the meantime, we have also strengthened our Board of
Directors and are delighted to have appointed NYC based Michael
Beys as our new Chairman, as well as Toronto based Colin Chapin as
a new member and look forward to benefitting from the wealth of
their real estate experience."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
* *S * *
For further information please visit www.secure-property.eu or
contact:
Lambros Anagnostopoulos SPDI Tel: +357 22 030783
Rory Murphy Strand Hanson Limited Tel: +44 (0) 20 7409 3494
Ritchie Balmer
Jack Botros
Jon Belliss Novum Securities Limited Tel: +44 (0) 207 399 9400
Lottie Wadham St Brides Partners Ltd Tel: +44 (0) 20 7236 1177
Frank Buhagiar
Notes to Editors
Secure Property Development and Investment plc is an AIM listed
property development and investment company focused on the South
East European markets. The Company's strategy is focused on
generating healthy investment returns principally derived from: the
operation of income generating commercial properties and capital
appreciation through investment in high yield real estate assets.
The Company is focused primarily on commercial and industrial
property in populous locations with blue chip tenants on long term
rental contracts. The Company's senior management consists of a
team of executives that possess extensive experience in managing
real estate companies both in the private and the publicly listed
sector, in various European countries.
1. Management Report
In Summary
SPDI's core property asset portfolio consists of South Eastern
European prime commercial and industrial real estate, the majority
of which is let to blue chip tenants on long leases. During the
first half of 2018, management continued to focus on its strategy
to dispose of non-core assets (land and residential assets in
Romania, Bulgaria and Ukraine, as well as assets not located in
capital cities or assets where the Company does not own the
majority), while at the same time continue to source partnerships
which are able to effectively set the grounds for further value
creation.
With this in mind, during the period and after the Company
continues to be in discussions to sell the BigBlueBox which is
situated in a prime location in Craiova, Romania, with a view to
generating more than EUR2,5m in cash. SPDI acquired the property in
July 2015 and fully let it to Praktiker, a regional DIY
retailer.
In the first half of 2018, the regional economic environment in
South Eastern Europe where the Company operates remained unchanged.
Romania continues to lead the European Union in terms of pace of
growth while unemployment remains at minimum levels. The country is
bustling with property developments as increasing demand far
outstrips existing supply, while international investors and
developers are moving back in the market.
Greece has managed to exit the bail-out programme with its
international lenders showing simultaneous strong signs of economic
growth. International investors have started showing increased
interest in the country, especially in the hospitality and tourism
sector, which has grown rapidly during the previous and current
period.
The Ukrainian economy shows strong signs of recovery with the
local currency appreciating substantially against major currencies
during the first half of the year. Business sentiment has also
increased and local investors are back in the market.
Bulgaria continues to show robust growth, mainly due to
increased private consumption, while unemployment rates remain low.
Increased European Union funding is expected to help the economy
keep up the pace, attracting international investors and developers
at the same time.
During the first half of 2018 the Company finalised the
restructuring of its capital structure by obtaining the relevant
approvals of Authorities to offset carried forward losses
(generated before 2011, when the current management took over)
against part of its share premium. This will allow the Board to
elect to distribute dividends to shareholders in the future, as
well as adopt a share buy-back programme. At the same time, the
optimisation of the Company's corporate structure in Romania by
merging low activity corporate entities to reduce administrative
costs continues. One merger has now been approved by the
Authorities, while another is anticipated to be approved during the
third quarter of the year. Following this, management is planning
to optimise its corporate structure in Cyprus, aiming again to
decrease administration costs further.
P&L
The table below presents the operating performance for H1 2018
compared to H1 2017.
Following the successful sale of Terminal Brovary in H1 2017
which had a positive impact on the Company's income for that
period, EBITDA showed a decrease to EUR0,6m. in H1 2018 from EUR1,7
m in H1 2017 (EUR820k, when excluding the Terminal Brovary sale
completed in H1 2017). However, asset operating expenses were
reduced by 29% and administration expenses were reduced by 16%,
highlighting the continuing successful cost reduction plan
implemented by the Company.
EUR P & L
H1 2018 H1 2017
======================================== =================== ======================
Rental, Utilities, Management &
Sale of electricity Income 1,466,157 2,913,509
Net Income from Sale of Assets less
of Cost of Assets sold 162,731 88,601
Income from Operations of Investments 1,628,888 3,002,110
Asset operating expenses (258,208) (361,608)
Net Operating Income from Investments 1,370,680 2,640,502
Share of profits from associates 138,637 173,935
Total Income 1,509,317 2,814,437
Administration expenses (889,544) (1,064,671)
Operating Result (EBITDA) 619,773 1,749,766
Interest cost (1,004,764) (1,014,860)
Interest income 454,056 -
Income tax expense (47,287) (21,085)
Depreciation / Amortization (11,120) (27,012)
Operating Result after finance,
tax and depreciation /amortization
expenses for the period 10,658 686,809
Other income / (expenses), net 26,567 (665)
Gain / (Loss) realized on acquisition
/ disposal of subsidiaries - (206,797)
Allowance recognised for investment -
property (1,298,769)
Other Fair Value Adjustments from
investments (789,465) (509,343)
Foreign exchange differences, net 879,308 230,654
Profit /(Loss) for the period (1,171,701) 200,658
2. Regional Economic Developments
Romania
Romania was one of the best performing economies in the EU in
2017, with GDP growth of 6,9%. Private consumption was the main
driver of growth, supported by a pro-cyclical fiscal policy, strong
wage growth and low unemployment. Investment started to pick up in
the second half of 2017, driven by increased absorption of EU
funds.
The GDP increased in H1 2018 by 4% annualised against H1 2017
and by 4,2% non-annualised adjusted series. In Q2 2018 the GDP grew
by 1,4% against the previous quarter. As compared to Q2 2017, the
growth was 4,1%.
Consumer spending appears to have regained some steam,
benefiting from tight labour market conditions and wage gains, as
retail sales were solid in April and May. Moreover, exports
expanded at a solid pace in the same two months.
Inflation declined from June's 5,4%, which was a multi-year
high, to 4,6% in July, a six-month low. The macro-economic forecast
for Romania continues to be positive, despite some recent
concerns.
The country was the EU's top performer in 2017 and is expected
to hold this position in 2018 as well, with GDP increase forecast
at over 5%.
Greece
The second quarter growth was reported at 1,8%, slightly lower
than the expected 2%, as had been forecasted by most international
institutions and state authorities. However, GDP growth is
projected to rise to 2,3% in 2019. Exports which rose by 20,9% will
be the main driver of growth, benefitting from rising external
demand and improved competitiveness. Investment and private
consumption (the component with the highest contribution to GDP at
70%) are set to recover in 2019 as confidence rebuilds, following
improved fiscal credibility, which in turn will trigger lower
interest rates for the state and ultimately the end users. However,
continuing high excess capacity will limit price and wage
pressures, as statistically observed by August's reported low
inflation figures (1%).
In 2018, the budget surplus will out-perform the medium-term
target, through restrained expenditure and improved tax collection,
but then decline towards the target in 2019. Still, public debt
remains high. Reducing it will require sustained pro-growth
reforms, high primary surpluses and additional debt restructuring.
Commitment to full reform implementation is key to strengthening
inclusive growth. Investment has risen considerably in 2018, along
with the important construction activity indicator (14,6% y-o-y)
but their growth remains volatile and low.
The unemployment rate improved from a low of 27,8% in 2013,
falling to 19,1% in June 2018. Although the Greek labour market
cannot be called positive, the peak of the employment crisis has
passed. Tight access to finance continues to constrain business
investment. The stock of NPLs is diminishing rapidly though it
remains high. The roll-out of e-auctions is key to meeting banks'
reduction targets for such loans.
It is worth noting that tourism will, and has, played a
significant role in the growth scenario. The number of
international tourists grew from 14,9 million in 2009 to well over
30 million in 2018. Recorded highs, year after year, are positively
affecting both mainland and island property prices.
Bulgaria
The economy grew robustly in Q2 2018 compared to the same
quarter in 2017, although at a slightly slower pace than in Q1,
according to a preliminary estimate released by the Statistical
Institute. This report estimated that the economy grew 3,4% on an
annual basis in the second quarter, marginally down from the
revised 3,6% year-on-year expansion recorded in the first quarter
(previously reported: +3,5% year-on-year).
An increase in total consumption, which grew at the fastest rate
in two-and-a-half years, drove growth. This was partly due to an
over 6% increase in real household incomes, which benefited from
higher wages and salaries on the back of a tightening labour
market. Meanwhile, fixed investment expanded at a solid pace in Q2,
although less than in Q1, supported by low interest rates and
economic optimism among businesses. On the external front, as
imports of goods and services increased faster than exports, the
external sector weighed slightly on overall economic growth in Q2.
In July, the unemployment rate remained at June's multi-decade low,
which is likely to support household spending, while on the other
hand business confidence fell for the first time in nearly two
years.
The unemployment rate fell from a peak of 13% at the end of 2013
to just above 6% in the first half of 2018. Activity and employment
rates increased substantially in the last few years, recovering
from the sharp drop during the crisis period. However, there is
still a sizeable potential labour force. Labour market prospects
are expected to remain positive but to moderate somewhat in 2018
and 2019 due to limited and specialised labour supply.
Household spending should benefit from lower unemployment and
strong wage growth this year. Increased EU funding is expected to
complement fixed investment, which should see further support from
an improved business climate and low interest rates. Sound fiscal
policy should also secure stronger FDI inflows.
Bulgaria faces the two inter-related challenges of raising
productivity and addressing the country's rapid demographic change.
Higher productivity growth is critical to accelerating convergence,
as Bulgaria's income per capita is only 47% of the EU average, the
lowest in the EU.
Ukraine
The monthly data for June 2018 demonstrated that the economy is
continuing its recovery. In fact, in June, agricultural production
climbed by 36% y-o-y, following a 2,6% y-o-y increase in May. The
industrial sector continued to grow, but at a more moderate rate of
2,2% y-o-y. Retail trade turnover continued to show improvements,
with a growth rate of 5,8% y-o-y in June 2018, partly due to an
increase in real monthly wages by 13% y-o-y.
In June both the central and local governments incurred budget
deficits, which led to a consolidated budget deficit of UAH 4,2
billion for the month. Nevertheless, from the beginning of the
year, the cumulative consolidated budget balance remained positive
at UAH 10,4 billion in the first half of 2018 (a surplus of 0,3% of
period GDP).
Consumer inflation posted a significant deceleration for the
second consecutive month in June. The all items index dropped 1,8
percentage points to 9,9% y-o-y.
In July, the Verhovna Rada passed amendments to the
Anti-Corruption Court Law according to which all ongoing cases of
the National Anticorruption Bureau will be transferred to the new
Anticorruption Court. This amendment was required by the IMF
Programme and should ensure renewed international financial
support.
The IMF has indicated that an IMF mission will be visiting Kyiv
to discuss recent economic developments and next steps, including
further financial assistance from the Fund.
3. Real Estate Market Developments
3.1 Romania
General
For H1 2018, the property investment volume for Romania is
estimated at circa EUR205 million, almost half of the value
registered in the same period of 2017 (EUR481 million). However,
there are a number of transactions in different stages of
negotiations that will most likely be concluded during the
remainder of 2018. The number of transactions decreased, however,
the average deal size increased, standing at approximately EUR40
million. Bucharest accounted for over 78% of the total investment
volume, mainly due to a very large office transaction which was
closed in Q2. Market volumes were dominated by office transactions
(88%), while retail accounted for ca.12%.
Logistics Market
Approximately 330.000 sqm in modern warehouse spaces were
delivered in H1 2018, more than double the level in H1 2017. The
first part of 2018 has led to an interesting shift, as Bucharest
accounted for little over a third of the total compared to around
half for the whole of 2017; in the capital, interest continues to
be heavily geared towards western and northern areas, while the
various cities in Transylvania nearly add up to the overall
deliveries in Bucharest; Pitesti and Ploiesti are also high up on
the list. This dynamic is in tune with the general trend of
regional cities outpacing the capital in terms of economic growth
over the medium term as migration patterns and business interest
shift towards other parts of the country. The ultra-low vacancy
rate and steady rise in overall costs in recent years - related to
construction and wage costs, alongside potential delays in bringing
projects to market due to the tight labour market - continue to
pressure rents.
Office Market
The first half of the year was fairly modest in terms of
deliveries on the Bucharest office market, with just 33.000 sqm in
new office spaces in H1 2018 (29.000 sqm coming from the second
building of Globalworth's Campus). Still, the second half of the
year will more than make up for this, as it could see deliveries of
little over 150.000 sqm. New spaces continue to be mostly geared
towards the Center West and central submarkets, which have seen
interest both from developers in the last couple of years and
tenants; in total around 60.000 sqm will be delivered this year in
the central areas, which is similar to the total for Center West.
Regional cities were much more active than Bucharest, with
Timisoara and Cluj-Napoca adding some 72.000 sqm in new modern
office spaces in H1, with the four big regional office markets
(ClujNapoca, Timisoara, Iasi and Brasov) set to expand at a similar
pace during H2. Vacancy continued to move lower, ending H1 at just
under 9% from around 9,75% end-2017.
Retail Market
The first half of 2018 saw the delivery of just a couple of new
modern retail schemes (Bistrita Retail Park - 15.000 sqm; Focsani
Value Center - 6.400 sqm), though the second half of the year
should be much more prolific, with nearly 168.000 sqm in new
GLA.
A large part of the supply continues to come mostly from a
handful of players (largely NEPI and Prime Kapital/MAS REI, which
add up to around two thirds of 2018's pipeline).
Residential Market
The evolution of the residential market in the first six months
of 2018 confirms expectations for a slowdown in price rises. After
a 1,2% decrease in June, the average asking price is at a value of
EUR 1.200 per sqm. This figure is only 3,1% higher than the one
recorded at the beginning of the year, a growth rate slower than in
the same period last year.
The prices in Bucharest have so far had a more moderate growth
rate than other cities (Cluj-Napoca or Timisoara), and higher
incomes and residential demand here are thought to support future
price rises. In Q2 2018 there were 318 large and medium-size
residential projects for sale in Bucharest, with 217 under
construction and 101 already concluded.
3.2 Greece
General
A number of projects, from privatizations to long term leases of
infrastructure, moved ahead in 2017 and into 2018, revitalizing a
subdued sector, which is deemed instrumental in disengaging the
state's resources and attracting privately held funds, local and
international alike. They are expected to contribute in a tangible
way to the recovery of the Greek economy but also to the recovery
of the local real estate market.
The total Grade A and B office stock in Athens is estimated at
2,2-2,4m sqm. The main submarkets are the CBD and its periphery,
the Athens North, the Athens South and the Athens West. The vacancy
rate is steadily declining and is currently estimated at circa
6%-8% for Grade A and 15%-18% for Grade B buildings. Achievable
rents have remained stable and are higher for prime properties in
the CBD, in the order of EUR16-EUR20 per sqm/month in the CBD while
in the second most attractive submarket (Athens North) prime
properties are leased for EUR9-EUR13 per sqm/month, although recent
deals in the area were signed at EUR15 per sqm/month.
As an investment, offices attracted considerable interest in
2018, accentuating the pace witnessed in 2017. A considerable
number of transactions took place, indicating that the perception
of the market participants regarding the outlook of office
properties was clearly positive. Among those were the transactions
completed by Greek Real Estate Investment Companies (REICs), such
as Trastor, Grivalia, Briq Properties, etc.
Given figures recorded in tourism during the past years, some
owners have chosen to convert offices into hotels in order to take
advantage of the extremely positive trend in tourism. Additionally,
demand was also recorded for spaces which had a high potential for
upgrades, at a reasonable cost in terms of time and money.
Logistics Market
Rents remain quite stable for Class A facilities at a range
between 3,75 - 4,25 euros /m2. Class B facilities can be leased at
below 3 euros/m2. Vacancy levels for Class A register a maximum 7%
and falling, while for Class B can run up to 17%, all depending on
accessibility and location.
3.3 Bulgaria
General
Office and retail are the segments likely to show high
investment potential by the end of the year; transaction volume in
2018 is not expected to exceed the 2017 level, due to the scarcity
of large assets for sale. Investment volumes registered in 2017
indicate improved market liquidity, making Bulgaria more attractive
to new investors in 2018. The available debt capital for real
estate acquisitions will likely remain stable. Continuing strong
tenant demand will likely determine a further expansion of the
development pipeline and more property acquisitions.
Residential Market
During the first half of 2018 the supply in the mid-plus and
high-end residential market registered a 3% increase compared to
year-end 2017, reaching 8.200 residential units. The number of
projects under active construction continued to grow: 2.900
residential units or a 14% increase compared to the previous
period. The shortage of completed projects led to a surge in sales
of residential properties under construction, representing over 70%
of the total transaction volume. The share of clients buying
property for investment purposes expanded significantly, from 25%
to 45%. A sentiment survey by Colliers, together with AFI Europe
and Montecanal Bulgaria, revealed that parking, maintenance of the
common areas and security have grown in importance to buyers in
2018 compared to 2014. Residential property sale prices have firmed
during the first six months of 2018, mostly evidenced by concluded
transactions in the centre of Sofia. Average prices by category
were at 900-1.000 euros per sqm for newly constructed two bedroom
apartments, 1.000 - 1.250 euros for three bedrooms, and between
1.800 - 2.000 euros for independent houses, all categories being
either in the city centre or in close proximity to it. As a result
of the increasing demand and the development of the infrastructure
of Sofia, new promising zones for positioning luxury properties
were established. The supply of luxury properties is still lagging
behind the corresponding demand, but the market will move towards
better balance with the new projects planned for 2018. Construction
activity is high and together with the well-known and established
neighbourhoods, more and more buildings are emerging in new luxury
zones preferred by the buyers.
3.4 Ukraine
General
A dynamic upturn in business activity over the first six months
of 2018 pushed occupiers to pursue varied expansion strategies
within the Kyiv office market. In H1 2018 take-up reached 81.000
sqm, which was a +36% y-o-y uplift that confirmed a maturing phase
of the market. Total leasing activity in H1 2018 equalled to
approx. 101.000 sqm. The average vacancy rate registered a decrease
of 5pp from 17% to 12% at the end of H1 2018, as a result of
limited new completions and accelerating leasing activity. Asking
rental rates posted an increase of 10% to 20% during the first six
months of the year, owing to the strengthening in leasing activity.
Across three key submarkets, asking rental rates for A class
properties varied in the $15-$35/ sqm/ month range, whereas asking
rents for B class were ranging between $10-$25/ sqm/ month.
In Q2 2018, new supply in the warehousing and logistics property
sector in the Greater Kyiv area consisted of three properties of
cumulative area of around 11.660 sqm. There were no new properties
delivered in the sector during Q1 2018, whilst the annual figure
for 2017 amounted to only around 36.500 sqm and was largely
comprised of built-to-suit projects. Low development activity
combined with strengthening of occupier demand led to a decrease in
vacancy and upward pressure on effective occupational costs in the
most sought after properties during Q2 2018. As such, at the end of
June 2018 primary vacancy in the sector fell to 3,2%, whilst
monthly asking rents for prime warehousing space increased to USD
3,3-5,0 per sqm, net of VAT and service charge.
The residential market is showing signs of improvement
especially considering the depreciation of the currency and the
view that real estate assets are considered a natural hedge.
4. Property Assets
4.1 Victini (ex GED) Logistics center, Athens Greece
Property description
The 17.756 sqm complex that consists of industrial and office
space is situated on a 44.268 sqm land plot in the West Attica
Industrial Area (Aspropyrgos) of Athens. It is located at exit 4 of
Attiki Odos (the Athens ring road) and is 20 minutes from the port
of Piraeus (where Cosco runs a container port handling +4 million
containers a year) and the National Road connecting Athens to the
north of the country. The roof of the warehouse buildings houses a
photovoltaic park of 1,000KWp.
The buildings are characterised by high construction quality and
state-of-the-art security measures. The complex includes 100 car
parking spaces, as well as two central gateways (south and
west).
Current status
During December 2017 the Company finalised its discussions with
Dimitriou and Kuehne & Nagel (the German transportation and
logistics company), the two existing tenants, in order for the
latter to lease all the warehouse space and almost all of the
office space that Dimitriou used to lease, with Dimitriou remaining
as a tenant for only a small office area. The Kuehne & Nagel
lease agreement is extended until 2023 and as at period end the
complex is 100% occupied.
4.2 EOS Business Park - Danone headquarters, Romania
Property description
The park consists of 5.000 sqm of land including a class "A"
office building of 3.386 sqm GLA and 90 parking places. It is
located next to the Danone factory, in the North-Eastern part of
Bucharest with access to the Colentina Road and the Fundeni Road.
The Park is very close to Bucharest's ring road and the DN 2
national road (E60 and E85) and is also served by public
transportation. The park is highly energy efficient.
Current status
The Company acquired the office building in November 2014. The
complex is fully let to Danone Romania, the French multinational
food company, until 2025.
4.3 Praktiker Retail Center, Romania
Property description
The retail park consists of 21.860 sqm of land including a
retail BigBox of 9.385 sqm GLA and 280 parking places. It is
located in Craiova, on one of the main arteries of the city, along
with most of the DIY companies. Craiova is an important city for
the Romanian automotive industry as Ford bought the Daewoo
facilities in 2007 and produces two of its models from there. Ford
is committed to continue investing and it is completing a brand new
engine production facility.
Current status
The complex is fully let to Praktiker Romania, a member of
Kingfisher plc network, until December 2028, and the Company is
currently in discussions with regards to the sale of the
property.
4.4 Delenco office building, Romania
Property description
The property is a 10.280 sqm office building, which consists of
two underground levels, a ground floor and ten above-ground floors.
The building is strategically located in the very centre of
Bucharest, close to three main squares of the city: Unirii, Alba
Iulia and Muncii, only 300m from the metro station.
Current status
The Company acquired 24,35% of the property in May 2015. As at
the end of June 2018, the building is 100% let, with ANCOM (the
Romanian Telecommunications Regulator) being the anchor tenant (70%
of GLA).
4.5 Innovations Logistics Park, Romania
Property description
The park incorporates approximately 8.470 sqm of multipurpose
warehousing space, 6.395 sqm of cold storage and 1.705 sqm of
office space. It is located in the area of Clinceni, south west of
the centre of Bucharest, 200m from the city's ring road and 6km
from Bucharest-Pitesti (A1) highway. Its construction was completed
in 2008 and was tenant specific. It comprises four separate
warehouses, two of which offer cold storage.
Current status
In April 2017, the Company signed a lease agreement with Aquila
srl, a large Romanian logistics operator, for 5.740 sqm of ambient
space in the warehouse which expired during April 2018 without
being extended. During Q3 2018 the Company signed a short term
lease agreement for 2.000 sqm of ambient space with Chipita, one of
the fastest growing regional food companies, and is in discussions
with potential tenants that have expressed their interest for the
remaining areas of the building. As at date of this report, the
terminal's ambient space is 68% let while overall the terminal is
37% leased.
4.6 Residential portfolio
-- Romfelt Plaza (Doamna Ghica), Bucharest, Romania
Property description
Romfelt Plaza is a residential complex located in Bucharest,
Sector 2, relatively close to the city centre, easily accessible by
public transport and nearby supporting facilities and green
areas.
Current status
During H1 2018, four units were sold and, at the end of June
2018, 10 apartments were available with two of them being
rented.
-- Monaco Towers, Bucharest, Romania
Property description
Monaco Towers is a residential complex located in South
Bucharest, Sector 4, enjoying good car access due to the large
boulevards, public transportation, and a shopping mall (Sun Plaza)
reachable within a short driving distance or easily accessible by
subway.
Current status
At the end of June 2018, 22 apartments were available while four
of them were rented. Following extended negotiations for the last
18 months with the company which acquired Monaco's loan, the SPV
holding Monaco units entered into insolvency status in order to
protect itself from its creditors.
-- Blooming House, Bucharest, Romania
Property description
Blooming House is a residential development project located in
Bucharest, Sector 3, a residential area with the biggest
development and property value growth in Bucharest, offering a
number of supporting facilities such as access to Vitan Mall,
kindergartens, café, schools and public transportation (both bus
and tram).
Current status
At the end of June 2018, 13 apartments were available while
three were rented.
-- Green Lake, Bucharest, Romania
Property description
A residential compound of 40.500 sqm GBA, which consists of
apartments and villas, situated on the banks of Grivita Lake, in
the northern part of the Romanian capital - the only residential
property in Bucharest with a 200-metre frontage to a lake. The
compound also includes facilities such as one of Bucharest's
leading private schools (International School for Primary
Education), outdoor sports courts and a mini-market. Additionally,
Green Lake includes land plots totalling 40.360 sqm. SPDI owns 43%
of this property asset portfolio.
Current status
During H1 2018, three apartments and villas were sold while at
the end of June, of the 53 units that were unsold, 13 of them were
let.
-- Boyana Residence, Sofia, Bulgaria
Property description
A residential compound, which consisted at acquisition date (May
2015) of 67 apartments plus 83 underground parking slots developed
on a land surface of 5.700 sqm, situated in the Boyana high end
suburb of Sofia, at the foot of Vitosha mountain with Gross
Buildable Area ("GBA") totalling 11.400 sqm. The complex includes
adjacent land plots available for sale or development of 22.000 sqm
of gross buildable area.
Current status
During H1 2018 three apartments were sold, with 34 remaining
unsold at the end of June 2018.
4.7 Land Assets
-- Aisi Bela - Bela Logistic Center, Odessa, Ukraine
Property description
The site consists of a 22,4 Ha plot of land with zoning
allowance to construct up to 103.000 sqm GBA industrial properties
and is situated on the main Kiev - Odessa highway, 20km from Odessa
port, in an area of high demand for logistics and distribution
warehousing.
Current status
The Company does not intend to recommence construction in the
near future.
-- Kiyanovskiy Lane - Kiev, Ukraine
Property description
The property consists of 0,55 Ha of land located at Kiyanovskiy
Lane, near Kiev city centre. It is destined for the development of
businesses and luxury residences with beautiful protected views
overlooking the scenic Dnipro River, St. Michaels' Spires and
historic Podil.
Current status
Following non completion of the conditional sale of the plot
announced in July 2017, discussions are on-going with interested
parties for its effective disposal.
-- Tsymlyanskiy Lane - Kiev, Ukraine
Property description
The 0,36 Ha plot is located in the historic and rapidly
developing Podil District in Kiev. The Company owns 55% of the
plot, with a local co-investor owning the remaining 45%.
Current Status
Discussions are on-going with interested parties with a view to
dispose of the plot or partnering in its development.
-- Balabino- Zaporozhye, Ukraine
Property description
The 26,38 Ha site is situated on the south entrance of
Zaporozhye city, 3km 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.
Current status
The site is zoned for retail and entertainment. Development has
been put on hold.
-- Rozny Lane - Kiev Oblast, Kiev, Ukraine
Property description
The 42 Ha land plot located in Kiev Oblast is destined to be
developed as a residential complex. Following a protracted legal
battle, it has been registered under the Company pursuant to a
legal decision in July 2015.
Current status
The Company is evaluating potential commercialisation options to
maximise the property's value.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2018
Six months ended
Note 30 June 30 June
2018 2017
EUR EUR
Income 7 1.466.157 2.913.509
Asset operating expenses 8 (258.208) (361.608)
Net Operating Income 1.207.949 2.551.901
Administration expenses 9 (900.664) (1.091.683)
Share of profits from associates 19 138.637 173.935
Valuation (losses) from Investment
Property 10 (610.163) (381.499)
Net loss on disposal of Inventory 11a (13.555) (43.874)
Net (loss)/ gain on disposal of Investment
Property 11b (3.016) 4.631
Allowance recognized for investment 12 (1.298.769) -
property
Result on disposal of subsidiaries 18 - (221.990)
Gain realized on acquisition of assets - 15.193
Other operating income/(expenses),
net 13 26.567 (665)
Operating profit / (loss) (1.453.014) 1.005.949
Finance income 14 454.056 9.841
Finance cost 14 (1.004.764) (1.024.701)
Foreign exchange (loss), net 15a (15.680) (1.733.039)
Foreign exchange transfer on disposal 15b - (37.567.055)
of foreign operation
Profit / (Loss) before tax (2.019.402) (39.309.005)
Income tax expense 16 (47.287) (21.085)
Profit / (Loss) for the period (2.066.689) (39.330.090)
Other comprehensive income
Exchange difference on I/C loans to
foreign holdings 15b 14.449 37.567.055
Exchange difference on translation
of foreign operations 26 880.539 1.963.693
Total comprehensive income for the
period (1.171.701) 200.658
Profit / (Loss) attributable to:
Owners of the parent (1.996.707) (39.285.649)
Non-controlling interests (69.982) (44.441)
(2.066.689) (39.330.090)
Total comprehensive income attributable
to:
Owners of the parent (1.033.479) 269.277
Non-controlling interests (138.222) (68.619)
(1.171.701) 200.658
Earnings / (Losses) per share (Euro
cent per share): 35b
Basic earnings/(losses) for the period
attributable to ordinary equity owners
of the parent (0,02) (0,44)
Diluted earnings/(losses) for the
period attributable to ordinary equity
owners of the parent (0,02) (0,38)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the six months ended 30 June 2018
Note 30 June 2018 31 December 30 June 2017
2017
EUR EUR EUR
ASSETS
Non--current assets
Investment properties 17.4a 72.139.016 74.732.502 81.352.640
Investment properties under 17.4b 4.717.790 4.586.009 4.644.234
development
Tangible and intangible assets 20 59.705 70.504 89.195
Long-term receivables and
prepayments 21 279.144 316.788 296.814
Investments in associates 19 5.211.669 5.115.587 5.345.226
82.407.324 84.821.390 91.728.109
Current assets
Inventories 22 4.604.044 4.812.550 4.812.550
Prepayments and other current 23 6.513.465 5.846.584 3.908.851
assets
Available for sale financial
assets 12 124.959 - -
Cash and cash equivalents 24 920.742 831.124 1.852.546
12.163.210 11.490.258 10.573.947
Total assets 94.570.534 96.311.648 102.302.056
EQUITY AND LIABILITIES
Issued share capital 25 1.272.702 1.035.893 1.035.893
Share premium 71.396.259 123.126.328 123.093.334
Foreign currency translation 26 10.243.355 9.294.576 12.125.164
reserve
Exchange difference on I/C
loans to foreign holdings (203.221) (217.670) -
Accumulated losses (45.315.981) (96.888.569) (96.729.669)
Equity attributable to equity 37.393.114 36.350.558 39.524.722
holders of the parent
Non-controlling interests 27 8.263.192 8.401.414 7.170.082
Total equity 45.656.306 44.751.972 46.694.804
Non--current liabilities
Borrowings 28 27.587.387 25.324.378 21.373.207
Finance lease liabilities 33 10.237.563 10.435.241 10.635.551
Bonds issued 29 1.033.842 1.033.842 -
Trade and other payables 30 439.680 417.791 437.805
Taxes payables 32 602.201 602.200 -
Provision on taxes 32 399.450 399.450 -
Deposits from tenants 31 221.426 187.976 215.526
40.521.549 38.400.878 32.662.089
Current liabilities
Borrowings 28 2.099.426 5.162.087 15.996.238
Bonds issued 29 54.281 20.495 -
Trade and other payables 30 5.303.026 6.920.308 4.888.555
Taxes payable 32 486.147 613.859 945.165
Provisions on taxes 32 51.040 51.047 742.098
Finance lease liabilities 33 398.759 391.002 373.107
8.392.679 13.158.798 22.945.163
Total liabilities 48.914.228 51.559.676 55.607.252
Total equity and liabilities 94.570.534 96.311.648 102.302.056
Net Asset Value (NAV) EUR
per share: 35c
Basic NAV attributable to
equity holders of the parent 0,29 0,35 0,38
Diluted NAV attributable to
equity holders of the parent 0,29 0,35 0,38
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2018
Share Share premium, Accumulated Exchange Foreign Total Non- Total
capital Net(1) losses, difference currency controlling
net of on I/C loans translation interest
non-controlling to foreign reserve(4)
interest(2) holdings(3)
EUR EUR EUR EUR EUR EUR EUR EUR
Balance - 31 December
2016 900.145 122.874.268 (57.444.020) (37.567.055) 10.161.471 38.924.809 7.237.827 46.162.636
Loss for the period - - (1.718.594) - - (1.718.594) (44.441) (1.763.035)
Exchange difference on
I/C
loans to foreign holdings
(Note 15b) - - (37.567.055) 37.567.055 - - - -
Foreign currency
translation
reserve - - - - 1.963.693 1.963.693 (24.178) 1.939.515
Non-controlling interest
acquired - - - - - - 874 874
Issue of share capital,
net
(Note 25) 135.748 219.066 - - - 354.814 - 354.814
Balance - 30 June 2017 1.035.893 123.093.334 (96.729.669) - 12.125.164 39.524.722 7.170.082 46.694.804
Loss for the period - - (373.032) - - (373.032) 956.716 583.684
Exchange difference on
I/C
loans to foreign
holdings
(Note 15b) - - - (3.538) - (3.538) - (3.538)
Foreign currency
translation
reserve - - - - (2.830.588) (2.830.588) 274.616 (2.555.972)
Exchange difference on
I/C
loans to foreign
holdings
which disposed (Note
15b) - - 214.132 (214.132) - - - -
Fair value gain on
available-for-sale
financial assets - - - - - - - -
Issue of share capital,
net
(Note 25) - 32.994 - - - 32.994 - 32.994
Balance - 31 December
2017 1.035.893 123.126.328 (96.888.569) (217.670) 9.294.576 36.350.558 8.401.414 44.751.972
Loss for the period - - (1.996.707) - - (1.996.707) (69.982) (2.066.689)
Exchange difference on
I/C
loans to foreign
holdings
(Note 15b) - - - 14.449 - 14.449 - 14.449
Foreign currency
translation
reserve - - - - 948.779 948.779 (68.240) 880.539
Share premium set-off
against
accumulated losses (53.569.295) 53.569.295 - - - - -
Issue of share capital,
net
(Note 25) 236.809 1.839.226 - - - 2.076.035 - 2.076.035
Balance - 30 June 2018 1.272.702 71.396.259 (45.315.981) (203.221) 10.243.355 37.393.114 8.263.192 45.656.306
(1) Share premium is not available for distribution.
(2) 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 defense 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 defense is payable on account of the
shareholders.
(3) Exchange differences on intercompany loans to foreign
holdings arose as a result of devaluation of the Ukrainian Hryvnia
during previous years. The Group treats the mentioned loans as a
part of the net investment in foreign operations (Note 37.3).
(4) Exchange differences related to the translation from the
functional currency of the Group's subsidiaries are accounted for
directly to the foreign currency translation reserve. The foreign
currency translation reserve represents unrealized profits or
losses related to the appreciation or depreciation of the local
currencies against the euro in the countries where the Group's
subsidiaries own property assets.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2018
30 June 30 June
Note 2018 2017
EUR EUR
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) before tax (2.019.402) (39.309.005)
Adjustments for:
(Gains)/losses on revaluation of investment
property 10 610.163 381.499
Account payables write off 13 (84) (1.250)
Provision for impairment of prepayments
and other current assets 13 - (4.390)
Provision for impairment of investment
property 12 1.298.769 -
Depreciation/ Amortization charge 9 11.120 27.012
Finance income 14 (454.056) (6.399)
Interest expense 14 988.862 983.191
Share of losses/ (profits) from associates 19 (138.637) (173.935)
Gain on acquisition of subsidiaries - (15.193)
Change in tax provision - (68)
Effect of foreign exchange differences 15.a 15.680 1.733.039
Foreign exchange transfer on disposal of 15.b - 37.567.055
foreign operations
Net gain/(loss) on the sale of investment
property 11.b 3.016 (4.631)
Loss on disposal of subsidiaries 18 - 221.990
----------- --------------
Cash flows used in operations before working 315.431 1.398.915
capital changes
Change in inventories 22 208.506 215.704
Change in prepayments and other current
assets 23 (389.542) (780.545)
Change in trade and other payables 30 (1.583.986) (1.852.325)
Change in VAT and other taxes receivable 23 53.678 96.115
Change in other taxes payables 32 (76.283) (61.718)
Change in deposits from tenants 31 35.081 31.970
----------- --------------
Cash generated from operations (1.437.115) (951.884)
Income tax paid (94.035) (130.615)
Net cash flows provided/(used) in operating (1.531.150)
activities (1.082.499)
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash flow for the disposal of subsidiary 18 - 2.844.494
Cash outflow from acquisition of assets - (1.249.807)
Capital expenditure on tangible and intangible
assets - (7.005)
Dividend received from associate - 109.595
Sales proceeds on the sale of Investment
Property 283.976 135.393
Increase in long term receivables 21 37.644 (45.633)
Interest received 454.055 1.754
Loan granted for property acquisition 23 (350.000) -
Net cash flows from / (used in) investing 425.675
activities 1.788.791
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital/shareholders
advances 25 2.076.035 354.814
Repayment of principle amount of borrowings 28 (756.769) (1.106.933)
Proceeds from bank and nonbank loans 947.595 1.414.530
Interest and financial charges paid (881.847) (1.078.815)
Decrease in financial lease liabilities 33 (189.921) (138.349)
Net cash flows from / (used in) financing
activities 1.195.093 (554.753)
Net increase/(decrease) in cash at banks 89.618 151.539
Cash:
At beginning of the period 831.124 1.701.007
At end of the period 24 920.742 1.852.546
=========== ==============
Notes to the Condensed Consolidated Interim Financial
Statements
For the six months ended 30 June 2018
1. General Information
Country of incorporation
SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC (the "Company")
was incorporated in Cyprus on 23 June 2005 and is a public limited
liability company, listed on the London Stock Exchange (AIM): ISIN
CY0102102213. Its registered office is at Kyriakou Matsi 16, Eagle
House, 10th floor, Agioi Omologites, 1082 Nicosia, Cyprus while its
principal place of business is in Cyprus at 11 Bouboulinas Street,
4th floor, office No.48, 1060 Nicosia, Cyprus.
Principal activities
The principal activities of the Group, which are unchanged from
last year, are to invest directly or indirectly in and/or manage
real estate properties as well as real estate development projects
in South East Europe (the "Region"). These include the acquisition,
development, commercializing, operating and selling of property
assets, in the Region.
The Group maintains offices in Nicosia, Cyprus, in Kiev,
Ukraine, in Bucharest, Romania and in Athens, Greece.
As at the reporting date, the companies of the Group employed
and/or used the services of 18 Full Time Equivalent people, (2016 Ã
26 full time equivalent people).
2. Adoption of new and revised Standards and Interpretations
The accounting policies adopted for the preparation of these
condensed consolidated interim financial statements for the six
months ended 30 June 2018 are consistent with those followed for
the preparation of the annual financial statements for the year
ended 31 December 2017.
3. Significant accounting policies
3.1 Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union (EU) and the requirements of the
Cyprus Companies Law, Cap.113.
The consolidated financial statements have been prepared under
the historical cost convention as modified by the revaluation of
investment property, investment property under construction and
available for sale financial assets to fair value.
3.2 Basis of preparation
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all years presented in
these consolidated financial statements unless otherwise
stated.
Local statutory accounting principles and procedures differ from
those generally accepted under IFRS. Accordingly, the consolidated
financial information, which has been prepared from the local
statutory accounting records for the entities of the Group
domiciled in Cyprus, Romania, Ukraine, Greece and Bulgaria reflects
adjustments necessary for such consolidated financial information
to be presented in accordance with IFRS.
3.3 Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities (including special purpose
entities) controlled by the Company (its subsidiaries).
Subsidiaries are all entities (including structured entities)
over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity.
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair values of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date. The Group recognizes any non-controlling interest
in the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest's proportionate share
of the recognized amounts of acquiree's identifiable net
assets.
If the business combination is achieved in stages, the
acquisition date carrying value of the acquirer's previously held
equity interest in the acquiree is re-measured to fair value at the
acquisition date; any gains or losses arising from such
re-measurement are recognized in profit or loss.
Any contingent consideration to be transferred by the Group is
recognized at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognized in accordance with
IAS 39 either in profit or loss or as a change to other
comprehensive income. Contingent consideration that is classified
as equity is not re-measured, and its subsequent settlement is
accounted for within equity.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the
items for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period (see above), or
additional assets or liabilities are recognized, to reflect new
information obtained about facts and circumstances that existed at
the acquisition date that, if known, would have affected the
amounts recognized at that date.
Business combinations that took place prior to 1 January 2010
were accounted for in accordance with the previous version of IFRS
3.
Inter-company transactions, balances and unrealized gains on
transactions between group companies are eliminated. Unrealized
losses are also eliminated. When necessary, amounts reported by
subsidiaries have been adjusted to conform with the Group's
accounting policies.
Changes in ownership interests in subsidiaries without change of
control and Disposal of Subsidiaries
Transactions with non-controlling interests that do not result
in loss of control are accounted for as equity transactions - that
is, as transactions with the owners in their capacity as owners.
The difference between fair value of any consideration paid and the
relevant share acquired of the carrying value of net assets of the
subsidiary is recorded in equity. Gains or losses on disposals to
non-controlling interests are also recorded in equity.
When the Group ceases to have control, any retained interest in
the entity is re-measured to its fair value at the date when
control is lost, with the change in carrying amount recognized in
profit or loss. The fair value is the initial carrying amount for
the purposes of subsequently accounting for the retained interest
as an associate, joint venture or financial asset. In addition, any
amounts previously recognized in other comprehensive income in
respect of that entity are accounted for as if the Group had
directly disposed of the related assets or liabilities. This may
mean that amounts previously recognized in other comprehensive
income are reclassified to profit or loss.
3.4 Functional and presentation currency
Items included in the Group's financial statements are measured
applying the currency of the primary economic environment in which
the entities operate ("the functional currency"). The national
currency of Ukraine, the Ukrainian Hryvnia, is the functional
currency for all the Group's entities located in Ukraine, the
Romanian leu is the functional currency for all Group's entities
located in Romania, the Bulgarian lev is the functional currency
for all Group's entities in Bulgaria and the Euro is the functional
currency for all the Greek and Cypriot subsidiaries.
The consolidated financial statements are presented in Euro,
which is the Group's presentation currency.
As Management records the consolidated financial information of
the entities domiciled in Cyprus, Romania, Ukraine, Greece and
Bulgaria in their functional currencies, in translating financial
information of the entities domiciled in these countries into Euro
for inclusion in the consolidated financial statements, 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;
-- Equity of the Group has been translated using the historical rates;
-- 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;
-- Monetary items receivable from foreign operations for which
settlement is neither planned nor likely to occur in the
foreseeable future and in substance are part of the Group's net
investment in those foreign operations are recongised initially in
other comprehensive income and reclassified from equity to profit
or loss on disposal of the foreign operation.
The relevant exchange rates of the European and local central
banks used in translating the financial information of the entities
from the functional currencies into Euro are as follows:
Average for the period Closing as at
Currency 1 Jan 2018 1 Jan 2017 1 Jan 2017 30 June 31 December 30 June
- 30 June - 31 December - 30 June 2018 2017 2017
2018 2017 2017
----------- --------------- ----------- -------- ------------ --------
USD 1,2108 1,1293 1,0830 1,1658 1,1993 1,1412
----------- --------------- ----------- -------- ------------ --------
UAH 32,4092 30,0129 28,9372 30,5680 33,4954 29,7868
----------- --------------- ----------- -------- ------------ --------
RON 4,6538 4,5681 4,5362 4,6611 4,6597 4,5539
----------- --------------- ----------- -------- ------------ --------
BGN 1,9558 1,9558 1,9558 1,9558 1,9558 1,9558
----------- --------------- ----------- -------- ------------ --------
3.5 Investment Property at fair value
Investment property, comprising freehold and leasehold land,
investment properties held for future development, warehouse and
office properties as well as the residential property units, is
held for long term rental yields and/or for capital appreciation
and is not occupied by the Group. Investment property and
investment property under construction are carried at fair value,
representing open market value determined annually by external
valuers. Changes in fair values are recorded in the statement of
comprehensive income and are included in other operating
income.
A number of the land leases (all in Ukraine) are held for
relatively short terms and place an obligation upon the lessee to
complete development by a prescribed date. It is important to note
that the rights to complete a development may be lost or at least
delayed if the lessee fails to complete a permitted development
within the timescale set out by the ground lease.
In addition, in the event that a development has not commenced
upon the expiry of a lease then the City Authorities are entitled
to decline the granting of a new lease on the basis that the land
is not used in accordance with the designation. Furthermore, where
all necessary permissions and consents for the development are not
in place, this may provide the City Authorities with grounds for
rescinding or non-renewal of the ground lease. However Management
believes that the possibility of such action is remote and was made
only under limited circumstances in the past.
Management believes that rescinding or non-renewal of the ground
lease is remote if a project is on the final stage of development
or on the operating cycle. In undertaking the valuations reported
herein, the valuer of Ukrainian properties CBRE has made the
assumption that no such circumstances will arise to permit the City
Authorities to rescind the land lease or not to grant a
renewal.
Land held under operating lease is classified and accounted for
as investment property when the rest of the definition is met. The
operating lease is accounted for as if it were a finance lease.
Investment property under development or construction initially
is measured at cost, including related transaction costs.
The property is classified in accordance with the intention of
the management for its future use. Intention to use is determined
by the Board of Directors after reviewing market conditions,
profitability of the projects, ability to finance the project and
obtaining required construction permits.
The time point, when the intention of the management is
finalized is the date of start of construction. At the moment of
start of construction, freehold land, leasehold land and investment
properties held for a future redevelopment are reclassified into
investment property under development or inventory in accordance to
the final decision of management.
Initial measurement and recognition
Investment property is measured initially at cost, including
related transaction costs. Investment properties are derecognized
when either they have been disposed off or when the investment
property is permanently withdrawn from use and no future economic
benefit is expected from its disposal. Any gains or losses on the
retirement or disposal of an investment property are recognized in
the consolidated statement of comprehensive income in the period of
retirement or disposal.
Transfers are made to investment property when, and only when,
there is a change in use, evidenced by the end of owner occupation,
or the commencement of an operating lease to third party. Transfers
are made from investment property when, and only when, there is a
change in use, evidenced by commencement of owner occupation or
commencement of development with a view to sale.
If an investment property becomes owner occupied, it is
reclassified as property, plant and equipment, and its fair value
at the date of reclassification becomes its cost for accounting
purposes. Property that is being constructed or developed for
future use as investment property is classified as investment
property under construction until construction or development is
complete. At that time, it is reclassified and subsequently
accounted for as investment property.
Subsequent measurement
Subsequent to initial recognition, investment property is stated
at fair value. Gains or losses arising from changes in the fair
value of investment property are included in the statement of
comprehensive income in the period in which they arise.
If a valuation obtained for an investment property held under a
lease is net of all payments expected to be made, any related
liabilities/assets recognized separately in the statement of
financial position are added back/reduced to arrive at the carrying
value of the investment property for accounting purposes.
Subsequent expenditure is charged to the asset's carrying amount
only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can
be measured reliably. All other repairs and maintenance costs are
charged to the statement of comprehensive income during the
financial period in which they are incurred.
Basis of valuation
The fair values reflect market conditions at the financial
position date. These valuations are prepared annually by chartered
surveyors (hereafter "appraisers"). The Group appointed valuers in
2014 which remain the same in 2017:
-- CBRE Ukraine, for all its Ukrainian properties,
-- Real Act for all its Romanian, Greek and Bulgarian properties.
The valuations have been carried out by the appraisers on the
basis of Market Value in accordance with the appropriate sections
of the current Practice Statements contained within the Royal
Institution of Chartered Surveyors ("RICS") Valuation - Global
Standards (2017) (the "Red Book") and is also compliant with the
International Valuation Standards (IVS).
"Market Value", is defined as: "The estimated amount for which a
property should exchange on the date of valuation between a willing
buyer and a willing seller in an arm's-length transaction after
proper marketing wherein the parties had each acted knowledgeably,
prudently and without compulsion".
In expressing opinions on Market Value, in certain cases the
appraisers have estimated net annual rentals/income from sale.
These are assessed on the assumption that they are the best
rent/sale prices at which a new letting/sale of an interest in
property would have been completed at the date of valuation
assuming: a willing landlord/buyer; that prior to the date of
valuation there had been a reasonable period (having regard to the
nature of the property and the state of the market) for the proper
marketing of the interest, for the agreement of the price and terms
and for the completion of the letting/sale; that the state of the
market, levels of value and other circumstances were, on any
earlier assumed date of entering into an agreement for lease/sale,
the same as on the valuation date; that no account is taken of any
additional bid by a prospective tenant/buyer with a special
interest; that the principal deal conditions assumed to apply are
the same as in the market at the time of valuation; that both
parties to the transaction had acted knowledgeably, prudently and
without compulsion.
A number of properties are held by way of ground leasehold
interests granted by the City Authorities. The ground rental
payments of such interests may be reviewed on an annual basis, in
either an upwards or downwards direction, by reference to an
established formula. Within the terms of the lease, there is a
right to extend the term of the lease upon expiry in line with the
existing terms and conditions thereof. In arriving at opinions of
Market Value, the appraisers assumed that the respective ground
leases are capable of extension in accordance with the terms of
each lease. In addition, given that such interests are not
assignable, it was assumed that each leasehold interest is held by
way of a special purpose vehicle ("SPV"), and that the shares in
the respective SPVs are transferable.
With regard to each of the properties considered, in those
instances where project documentation has been agreed with the
respective local authorities, opinions of the appraisers of value
have been based on such agreements.
In those instances where the properties are held in part
ownership, the valuations assume that these interests are saleable
in the open market without any restriction from the co-owner and
that there are no encumbrances within the share agreements which
would impact the sale ability of the properties concerned.
The valuation is exclusive of VAT and no allowances have been
made for any expenses of realization or for taxation which might
arise in the event of a disposal of any property.
In some instances the appraisers constructed a Discounted Cash
Flow (DCF) model. DCF analysis is a financial modeling technique
based on explicit assumptions regarding the prospective income and
expenses of a property or business. The analysis is a forecast of
receipts and disbursements during the period concerned. The
forecast is based on the assessment of market prices for comparable
premises, build rates, cost levels etc. from the point of view of a
probable developer.
To these projected cash flows, an appropriate, market-derived
discount rate is applied to establish an indication of the present
value of the income stream associated with the property. In this
case, it is a development property and thus estimates of capital
outlays, development costs, and anticipated sales income are used
to produce net cash flows that are then discounted over the
projected development and marketing periods. The Net Present Value
(NPV) of such cash flows could represent what someone might be
willing to pay for the site and is therefore an indicator of market
value. All the payments are projected in nominal US Dollar/Euro
amounts and thus incorporate relevant inflation measures.
Valuation Approach
In addition to the above general valuation methodology, the
appraisers have taken into account in arriving at Market Value the
following:
Pre Development
In those instances where the nature of the 'Project' has been
defined, it was assumed that the subject property will be developed
in accordance with this blueprint. The final outcome of the
development of the property is determined by the Board of Directors
decision, which is based on existing market conditions,
profitability of the project, ability to finance the project and
obtaining required construction permits.
Development
In terms of construction costs, the budgeted costs have been
taken into account in considering opinions of value. However, the
appraisers have also had regard to current construction rates
prevailing in the market which a prospective purchaser may deem
appropriate to adopt in constructing each individual scheme.
Although in some instances the appraisers have adopted the budgeted
costs provided, in some cases the appraisers' own opinions of costs
were used.
Post Development
Rental values have been assessed as at the date of valuation but
having regard to the existing occupational markets taking into
account the likely supply and demand dynamics during the
anticipated development period. The standard letting fees were
assumed within the valuations. In arriving at their estimates of
gross development value ("GDV"), the appraisers have capitalized
their opinion of net operating income, having deducted any
anticipated non-recoverable expenses, such as land payments, and
permanent void allowance, which has then been capitalized into
perpetuity.
The capitalization rates adopted in arriving at the opinions of
GDV reflect the appraisers' opinions of the rates at which the
properties could be sold as at the date of valuation.
In terms of residential developments, the sales prices per sq.
m. again reflect current market conditions and represent those
levels the appraisers consider to be achievable at present. It was
assumed that there are no irrecoverable operating expenses and that
all costs will be recovered from the occupiers/owners by way of a
service charge.
The valuations take into account the requirement to pay ground
rental payments and these are assumed not to be recoverable from
the occupiers. In terms of ground rent payments, the appraisers
have assessed these on the basis of information available, and if
not available they have calculated these payments based on current
legislation defining the basis of these assessments. Property tax
is not presently payable in Ukraine.
3.6 Investment Property under development
Property that is currently being constructed or developed, for
future use as investment property is classified as investment
property under development carried at cost until construction or
development is complete, or its fair value can be reliably
determined. This applies even if the works have temporarily being
stopped.
3.7 Goodwill
Goodwill arising on an acquisition of a business is carried at
cost as established at the date of acquisition of the business less
accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to
each of the Group's cash-generating units (or Groups of
cash-generating units) that is expected to benefit from the
synergies of the combination.
A cash-generating unit to which goodwill has been allocated is
tested for impairment annually, or more frequently when there is
indication that the unit may be impaired. If the recoverable amount
of the cash-generating unit is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of
any goodwill allocated to the unit and then to the other assets of
the unit pro rata based on the carrying amount of each asset in the
unit. Any impairment loss for goodwill is recognized directly in
profit or loss in the consolidated statement of comprehensive
income. An impairment loss recognized for goodwill is not reversed
in subsequent periods.
On disposal of the relevant cash-generating unit, the
attributable amount of goodwill is included in the determination of
the profit or loss on disposal.
3.8 Property, Plant and equipment and intangible assets
Property, plant and equipment and intangible non-current assets
are stated at historical cost less accumulated depreciation and
amortization and any accumulated impairment losses.
Properties in the course of construction for production, rental
or administrative purposes, or for purposes not yet determined and
intangibles not inputted into exploitation, are carried at cost,
less any recognized impairment loss. Cost includes professional
fees and, for qualifying assets, borrowing costs capitalized in
accordance with the Group's accounting policy. Depreciation of
these assets, on the same basis as other property assets, commences
when the assets are ready for their intended use.
Depreciation and amortization are calculated on the
straight--line basis so as to write off the cost of each asset to
its residual value over its estimated useful life. The annual
depreciation rates are as follows:
Type %
Leasehold 20
IT hardware 33
Motor vehicles 25
Furniture, fixtures and office equipment 20
Machinery and equipment 15
Software and Licenses 33
No depreciation is charged on land.
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets or, where
shorter, the term of the relevant lease.
The assets residual values and useful lives are reviewed, and
adjusted, if appropriate, at each reporting date.
Where the carrying amount of an asset is greater than its
estimated recoverable amount, the asset is written down immediately
to its recoverable amount.
Expenditure for repairs and maintenance of tangible and
intangible assets is charged to the statement of comprehensive
income of the year in which it is incurred. The cost of major
renovations and other subsequent expenditure are included in the
carrying amount of the asset when it is probable that future
economic benefits in excess of the originally assessed standard of
performance of the existing asset will flow to the Group. Major
renovations are depreciated over the remaining useful life of the
related asset.
An item of tangible and intangible assets is derecognized upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on
the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognized in
the statement of comprehensive income.
3.9 Available for sale financial assets
Available-for-sale financial assets are non-derivatives that are
either designated in this category or not classified in any of the
other categories. They are included in non-current assets, unless
Management intends to dispose of the investment within twelve
months of the reporting date.
Shares of a property holding corporate entity that are owned by
the Group in lieu of owning a percentage of the asset itself, are
considered under this classification even if the shares are not
intended to be sold immediately but are intended to offer to the
Group the said percentage of the revenue streams generated by the
property asset itself.
Regular way purchases and sales of available-for-sale financial
assets are recognised on trade-date which is the date on which the
Group commits to purchase or sell the asset. Investments are
initially recognised at fair value plus transaction costs.
Financial assets are derecognised when the rights to receive cash
flows from the financial assets have expired or have been
transferred and the Group has transferred substantially all risks
and rewards of ownership. Available-for-sale financial assets are
subsequently carried at fair value.
When securities classified as available-for-sale are sold or
impaired, the accumulated fair value adjustments recognised in
other comprehensive income are included in profit or loss as gains
and losses on available-for-sale financial assets.
Interest on available-for-sale securities calculated using the
effective interest method is recognised in the profit or loss.
Dividends on available-for-sale equity instruments are recognised
in profit or loss when the Group's right to receive payments is
established.
The Group assesses at each reporting date whether there is
objective evidence that a financial asset or a group of financial
assets is impaired. In the case of equity securities classified as
available for sale, a significant or prolonged decline in the fair
value of the security below its cost is considered as an indicator
that the securities are impaired. If any such evidence exists for
available-for-sale financial assets the cumulative loss which is
measured as the difference between the acquisition cost and the
current fair value, less any impairment loss on that financial
asset previously recognised in profit or loss, is removed from
equity and recognised in profit or loss.
In respect of available for sale equity securities, impairment
losses previously recognised in profit or loss are not reversed
through profit or loss. Any increase in fair value subsequent to an
impairment loss is recognised in other comprehensive income and
accumulated under the heading of investments fair value reserve. In
respect of available for sale debt securities, impairment losses
are subsequently reversed through profit or loss if an increase in
the fair value of the investment can be objectively related to an
event occurring after the recognition of the impairment loss.
3.10 Inventory
Inventory principally comprises of residential property.
Inventory is recognized initially at cost, including transaction
costs, which represent its fair value at the time of acquisition.
Costs related to the development of land are capitalised and
recognized as inventory. Inventory is carried at the lower of cost
and net realizable value.
3.11 Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption value is recognized in profit
or loss over the period of the borrowings, using the effective
interest method, unless they are directly attributable to the
acquisition, construction or production of a qualifying asset, in
which case they are capitalized as part of the cost of that
asset.
Fees paid on the establishment of loan facilities are recognized
as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this case,
the fee is deferred until the draw-down occurs. To the extend there
is no evidence that it is probable that some or all of the facility
will be drawn down, the fee is capitalized as a prepayment and
amortised over the period of the facility to which it relates.
Borrowing costs are interest and other costs that the Group
incurs in connection with the borrowing of funds, including
interest on borrowings, amortization of discounts or premium
relating to borrowings, amortization of ancillary costs incurred in
connection with the arrangement of borrowings, finance lease
charges and exchange differences arising from foreign currency
borrowings to the extent that they are regarded as an adjustment to
interest costs.
Borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset,
being an asset that necessarily takes a substantial period of time
to get ready for its intended use or sale, are capitalised as part
of the cost of that asset, when it is probable that they will
result in future economic benefits to the Group and the costs can
be measured reliably.
Borrowings are classified as current liabilities, unless the
Group has an unconditional right to defer settlement of the
liability for at least twelve months after the reporting date.
3.12 Tenant security deposits
Tenant security deposits represent financial advances made by
lessees as guarantees during the lease and are repayable by the
Group upon termination of the contracts. Tenant security deposits
are recognized at nominal value.
3.13 Financial liabilities and equity instruments
3.13.1 Classification as debt or equity
Debt and equity instruments issued by a Group entity are
classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements and
the definitions of a financial liability and an equity
instrument.
3.13.2 Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recognized
at the proceeds received, net of direct issue costs.
Ordinary shares are classified as equity. The difference between
the fair value of the consideration received by the Company and the
nominal value of the share capital being issued is taken to the
share premium account.
Share premium account can only be resorted to for limited
purposes, which don't include the distribution of dividends, and is
otherwise subject to the provisions of the Cyprus Companies Law on
reduction of share capital.
Repurchase of the Company's own equity instruments is recognized
and deducted directly in equity. No gain or loss is recognized in
the statement of comprehensive income on the purchase, sale, issue
or cancellation of the Company's own equity instruments.
3.13.3 Financial liabilities
Financial liabilities are classified as either financial
liabilities "at Fair Value Through Profit or Loss" or "other
financial liabilities".
3.13.3.1 Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the
financial liability is either held for trading or it is designated
as at FVTPL.
A financial liability is classified as held for trading if:
-- it has been acquired principally for the purpose of repurchasing it in the near term; or
-- on initial recognition it is part of a portfolio of
identified financial instruments that the Group manages together
and has a recent actual pattern of short-term profit-taking; or
-- it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for
trading may be designated as at FVTPL upon initial recognition
if:
-- such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would otherwise
arise; or
-- the financial liability forms part of a group of financial
assets or financial liabilities or both, which is managed and its
performance is evaluated on a fair value basis, in accordance with
the Group's documented risk management or investment strategy, and
information about the grouping is provided internally on that
basis; or
-- it forms part of a contract containing one or more embedded
derivatives, and IAS 39 Financial Instruments: Recognition and
Measurement permits the entire combined contract (asset or
liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with
any gains or losses arising on re-measurement recognized in profit
or loss. The net gain or loss recognized in profit or loss
incorporates any interest paid on the financial liability and is
included in the "other gains and losses" line item in the
consolidated statement of comprehensive income.
3.13.3.2 Other financial liabilities
Other financial liabilities (including borrowings) are
subsequently measured at amortized cost using the effective
interest method.
The effective interest method is a method of calculating the
amortized cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or (where appropriate) a shorter period, to
the net carrying amount on initial recognition.
Preference shares, which may be redeemable on a specific date,
are classified as liabilities. The dividends, if any, on these
preference shares are recognized in the income statement as
interest expense.
3.13.3.3 De-recognition of financial liabilities
The Group derecognizes financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they are
expired. The difference between the carrying amount of the
financial liability derecognized and the consideration paid and
payable is recognized in profit or loss.
3.14 Offsetting financial instruments
Financial assets and financial liabilities are offset and the
net amount reported in the consolidated statement of financial
position if, and only if, there is a currently enforceable legal
right to offset the recognized amounts and there is an intention to
settle on a net basis, or to realize the asset and settle the
liability simultaneously. This is not generally the case with
master netting agreements and the related assets and liabilities
are presented gross in the consolidated statement of financial
position.
3.15 Impairment of tangible and intangible assets other than
goodwill
At the end of each reporting period, the Group reviews the
carrying amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs. Where a reasonable and consistent basis of
allocation can be identified, corporate assets are also allocated
to individual cash-generating units, or otherwise they are
allocated to the smallest group of cash-generating units for which
a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible
assets not yet available for use are tested for impairment loss
annually, and whenever there is an indication that the asset may be
impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre--tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash--generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash--generating unit) is reduced to its
recoverable amount. An impairment loss is recognized immediately in
profit or loss, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash--generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognized
for the asset (cash--generating unit) in prior years. A reversal of
an impairment loss is recognized immediately in profit or loss,
unless the relevant asset is carried at a revalued amount, in which
case the reversal of the impairment loss is treated as a
revaluation increase.
3.16 Cash and Cash equivalents
Cash and cash equivalents include cash balances and call
deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group's cash management are included as a
component of cash and cash equivalents for the purpose of the
statement of cash flows.
3.17 Share Capital
Ordinary shares are classified as equity.
3.18 Share premium
The difference between the fair value of the consideration
received by the shareholders and the nominal value of the share
capital being issued is taken to the share premium account.
3.19 Share-based compensation
The Group had in the past and intends in the future to operate a
number of equity-settled, share-based compensation plans, under
which the Group receives services from Directors and/or employees
as consideration for equity instruments (options) of the Group. The
fair value of the Director and employee cost related to services
received in exchange for the grant of the options is recognized as
an expense. The total amount to be expensed is determined by
reference to the fair value of the options granted, excluding the
impact of any non-market service and performance vesting
conditions. The total amount expensed is recognized over the
vesting period, which is the period over which all of the specified
vesting conditions are to be satisfied. At each financial position
date, the Group revises its estimates on the number of options that
are expected to vest based on the non-marketing vesting conditions.
It recognizes the impact of the revision to original estimates, if
any, in the statement of comprehensive income, with a corresponding
adjustment to equity. The proceeds received net of any directly
attributable transaction costs are credited to share capital and
share premium when the options are exercised.
3.20 Provisions
Provisions are recognized when the Group has a present
obligation (legal, tax or constructive) as a result of a past
event, it is probable that the Group will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. As at the reporting date the Group has settled all its
construction liabilities.
The amount recognized as a provision is the best estimate of the
consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and
uncertainties surrounding the obligation. When a provision is
measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash
flows (where the effect of the time value of money is
material).
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, a
receivable is recognized as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
3.21 Leased assets
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Assets held under finance leases are recognized as assets of the
Group at their fair value at the inception of the lease or, if
lower, at the present value of the minimum lease payments. The
corresponding liability to the lessor is included in the
consolidated statement of financial position as a finance lease
obligation. Lease payments are apportioned between finance charges
and reduction of the lease obligation so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance
charges are charged to profit or loss, unless they are directly
attributable to qualifying assets, in which case they are
capitalized in accordance with the Group's general policy on
borrowing costs (see above).
Lease payments are analyzed between capital and interest
components so that the interest element of the payment is charged
to the statement of comprehensive income over the period of the
lease and represents a constant proportion of the balance of
capital repayments outstanding. The capital part reduces the amount
payable to the lessor.
3.22 Non--current liabilities
Non--current liabilities represent amounts that are due in more
than twelve months from the reporting date.
3.23 Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable. Revenue is reduced for estimated customer
returns, rebates and other similar allowances. It is recognized to
the extent that it is probable that the economic benefits
associated with the transaction will flow to the Group and the
revenue can be measured reliably. Revenue earned by the Group is
recognized on the following bases:
3.23.1 Income from investing activities
Income from investing activities includes profit received from
disposal of investments in the Company's subsidiaries and
associates and income accrued on advances for investments
outstanding as at the year end.
3.23.2 Dividend income
Dividend income from investments is recognized when the
shareholders' right to receive payment has been established
(provided that it is probable that the economic benefits will flow
to the Group and the amount of income can be measured
reliably).
3.23.3 Interest income
Interest income is recognized on a time-proportion (accrual)
basis, using the effective interest rate method.
3.23.4 Rental income
Rental income arising from operating leases on investment
property is recognized on an accrual basis in accordance with the
substance of the relevant agreements.
3.24 Service charges and expenses recoverable from tenants
Income arising from expenses recharged to tenants is recognized
on an accrual basis.
3.25 Other property expenses
Irrecoverable running costs directly attributable to specific
properties within the Group's portfolio are charged to the
statement of comprehensive income. Costs incurred in the
improvement of the assets which, in the opinion of the directors,
are not of a capital nature are written off to the statement of
comprehensive income as incurred.
3.26 Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale.
Investment income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in the statement of
comprehensive income in the period in which they are incurred as
interest costs which are calculated using the effective interest
rate method, net result from transactions with securities, foreign
exchange gains and losses, and bank charges and commission.
3.27 Asset Acquisition Related Transaction Expenses
Expenses incurred by the Group for acquiring a subsidiary or
associate company as part of an Investment Property and are
directly attributable to such acquisition are recognized within the
cost of the Investment Property and are subsequently accounted as
per the Group's accounting Policy for Investment Property
subsequent measurement.
3.28 Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
3.28.1 Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the
consolidated statement of comprehensive income because of items of
income or expense that are taxable or deductible in other years and
items that are never taxable or deductible. The Group's liability
for current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the reporting
period.
3.28.2 Deferred tax
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements.
Currently enacted tax rates are used in the determination of
deferred tax.
Deferred tax assets are recognized to the extent that it is
probable that future taxable profit will be available against which
the temporary differences can be utilized.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when the deferred taxes relate to the
same fiscal authority.
3.28.3 Current and deferred tax for the year
Current and deferred tax are recognized in the statement of
comprehensive income, except when they relate to items that are
recognized in other comprehensive income or directly in equity, in
which case, the current and deferred tax are also recognized in
other comprehensive income or directly in equity respectively.
Where current tax or deferred tax arises from the initial
accounting for a business combination, the tax effect is included
in the accounting for the business combination.
The operational subsidiaries of the Group are incorporated in
Ukraine, Greece, Bulgaria and Romania, while the Parent and some
holding companies are incorporated in Cyprus. The Group's
management and control is exercised in Cyprus.
The Group's Management does not intend to dispose of any asset,
unless a significant opportunity arises. In the event that a
decision is taken in the future to dispose of any asset it is the
Group's intention to dispose of shares in subsidiaries rather than
assets. The corporate income tax exposure on disposal of
subsidiaries is mitigated by the fact that the sale would represent
a disposal of the securities by a non--resident shareholder and
therefore would be exempt from tax. The Group is therefore in a
position to control the reversal of any temporary differences and
as such, no deferred tax liability has been provided for in the
financial statements.
3.28.4 Withholding Tax
The Group follows the applicable legislation as defined in all
double taxation treaties (DTA) between Cyprus and any of the
countries of Operations (Romania, Ukraine, Greece, Bulgaria). In
the case of Romania, as the latter is part of the European Union,
through the relevant directives the withholding tax is reduced to
NIL subject to various conditions.
3.28.5 Dividend distribution
Dividend distribution to the Company's shareholders is
recognized as a liability in the Group's financial statements in
the period in which the dividends are approved by the Company's
shareholders.
3.29 Value added tax
VAT levied at various jurisdictions were the Group is active,
was at the following rates, as at the end of the reporting
period:
-- 20% on Ukrainian domestic sales and imports of goods, works
and services and 0% on export of goods and provision of works or
services to be used outside Ukraine.
-- 19% on Cyprus domestic sales and imports of goods, works and
services and 0% on export of goods and provision of works or
services to be used outside Cyprus.
-- 19% on Romanian domestic sales and imports of goods, works
and services (decreased from 20% from 1 January 2017) and 0% on
export of goods and provision of works or services to be used
outside Romania.
-- 20% on Bulgarian domestic sales and imports of goods, works
and services and 0% on export of goods and provision of services to
taxable persons outside Bulgaria.
-- 24% on Greek domestic sales and imports of goods, works and
services (increased from 23% from 1 June 2016) and 0% on export of
goods and provision of works or services to be used outside
Romania.
3.30 Operating segments analysis
Segment reporting is presented on the basis of Management's
perspective and relates to the parts of the Group that are defined
as operating segments. Operating segments are identified on the
basis of their economic nature and through internal reports
provided to the Group's Management who oversee operations and make
decisions on allocating resources serve. These internal reports are
prepared to a great extent on the same basis as these consolidated
financial statements.
For the reporting period the Group has identified the following
material reportable segments, where the Group is active in
acquiring, holding, managing and disposing:
Commercial-Industrial
-- Warehouse segment
-- Office segment
-- Retail segment
Residential
-- Residential segment
Land Assets
-- Land assets - the Group owns a number of land assets which
are either available for sale or for potential development
The Group also monitors investment property assets on a
Geographical Segmentation, namely the country where its property is
located.
3.31 Earnings and Net Assets value per share
The Group presents basic and diluted earnings per share (EPS)
and net asset value per share (NAV) for its ordinary shares.
Basic EPS amounts are calculated by dividing net profit/loss for
the year, attributable to ordinary equity holders of the Company by
the weighted average number of ordinary shares outstanding during
the year. Basic NAV amounts are calculated by dividing net asset
value as at year end, attributable to ordinary equity holders of
the Company by the number of ordinary shares outstanding at the end
of the year.
Diluted EPS is calculated by dividing net profit/loss for the
year, attributable to ordinary equity holders of the parent, by the
weighted average number of ordinary shares outstanding during the
year plus the weighted average number of ordinary shares that would
be issued on conversion of all the potentially dilutive ordinary
shares into ordinary shares.
Diluted NAV is calculated by dividing net asset value as at year
end, attributable to ordinary equity holders of the parent with the
number of ordinary shares outstanding at year end plus the number
of ordinary shares that would be issued on conversion of all the
potentially dilutive ordinary shares into ordinary shares.
3.32 Comparative Period
Where necessary, comparative figures have been adjusted to
conform to changes in presentation in the current year.
4. Critical accounting estimates and judgments
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates and
requires Management to exercise its judgment in the process of
applying the Group's accounting policies. It also requires the use
of assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. These estimates
are based on Management's best knowledge of current events and
actions and other factors, including expectations of future events
that are believed to be reasonable under the circumstances. Actual
results though may ultimately differ from those estimates.
As the Group makes estimates and assumptions concerning the
future, the resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below:
-- Provision for impairment of receivables
The Group reviews its trade and other receivables for evidence
of their recoverability. Such evidence includes the counter party's
payment record, and overall financial position as well as the
state's ability to pay its dues (VAT receivable). If indications of
non-recoverability exist, the recoverable amount is estimated and a
respective provision for impairment of receivables is made. The
amount of the provision is charged through profit or loss. The
review of credit risk is continuous and the methodology and
assumptions used for estimating the provision are reviewed
regularly and adjusted accordingly. As at the reporting date
Management did not consider necessary to make a provision for
impairment of receivables.
-- Fair value of investment property
The fair value of investment property is determined by using
various valuation techniques. The Group selects accredited
professional valuers with local presence to perform such
valuations. Such valuers use their judgment to select a variety of
methods and make assumptions that are mainly based on market
conditions existing at each financial reporting date. The fair
value has been estimated as at 31 December 2017 (Note 17).
-- Income taxes
Significant judgment is required in determining the provision
for income taxes. There are transactions and calculations for which
the ultimate tax determination is uncertain during the ordinary
course of business. The Group recognizes liabilities for
anticipated tax audit issues based on estimates of whether
additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded,
such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made.
-- Impairment of tangible assets
Assets that are subject to depreciation are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss
is recognized for the amount by which the asset's carrying amount
exceeds its recoverable amount. The recoverable amount is the
higher of an asset's fair value less costs to sell and value in
use. For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable
cash flows (cash-generating units).
-- Provision for deferred taxes
Deferred tax is not provided in respect of the revaluation of
the investment property and investment property under development
as the Group is able to control the timing of the reversal of this
temporary difference and the Management has intention not to
reverse the temporary difference in the foreseeable future. The
properties are held by subsidiary companies in Ukraine, Greece and
Romania. Management estimates that the assets will be realized
through a share deal rather than through an asset deal. Should any
subsidiary be disposed of, the gains generated from the disposal
will be exempt from any tax.
-- Application of IFRS 10
The Group has considered the application of IFRS 10 and
concluded that the Company is not an Investment Entity as defined
by IFRS 10 and it should continue to consolidate all of its
investments, as in 2016. The reasons for such conclusion are among
others that the Company continues:
a) not to be an Investment Management Service provider to Investors,
b) to actively manages its own portfolio (leasing, development,
allocation of capital expenditure for its properties, marketing
etc) in order to provide benefits other than capital appreciation
and/or investment income,
c) to have investments that are not bound by time in relation to
the exit strategy nor to the way that are being exploited,
d) to provide asset management services to its subsidiaries as
well as loans and guarantees (directly or indirectly),
e) even though is using Fair Value metrics in evaluating its
investments, this is being done primarily for presentation purposes
rather that evaluating income generating capability and making
investment decisions. The latter is being based on metrics like
IRR, ROE and others.
5. Risk Management
5.1 Financial risk factors
The Group is exposed to operating country risk, real estate
property holding and development associated risks, property 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 and
other risks arising from the financial instruments it holds. The
risk management policies employed by the Group to manage these
risks are discussed below.
5.1.1 Operating Country Risks
The Group is exposed to risks stemming from the political and
economic environment of countries in which it operates.
Notably:
5.1.1.1 Ukraine
The economic situation began to stabilize in 2016, which
resulted in GDP growth for the year ended 31 December 2017 by 2%
and stabilization of Ukrainian hryvna. During six months ended 30
June 2018 annual inflation rate decreased to 9,9% (2017: 14%). In
the second quarter of 2018, GDP expanded by 3,6% yoy, compared to
3,1% yoy in the first quarter of the year. This growth rate was the
highest rate achieved since 2016, and was supported both by higher
domestic consumption and investments. In turn, domestic consumption
was stimulated by increases in nominal and real monthly wages
(24,9% yoy and 14,7% yoy, respectively as of July), and declining
inflation rates. Similarly, capital investments expanded by 26,5%
in January-July 2018, compared to the same period in 2017. Monthly
data for July indicate that the Ukrainian economy has continued to
growth at a solid pace. The industrial sector grew at a rate of
2,9% yoy in July, compared to 2,2% yoy in June. Retail trade
turnover accelerated to 6,6% yoy and the construction sector
expanded by 10,6% yoy. But agricultural output declined by 11,2%
yoy in July, due principally to bad weather with high
temperatures.
All these allowed the National Bank of Ukraine to ease some
foreign exchange restrictions imposed during 2014-2015, including
decrease of the required share of foreign currency proceeds sale to
50% and permission of dividends remittance. However, certain other
restrictions were prolonged. Significant external financing is
required to support the economy.
On September 6(th) 2018, an IMF mission started its work in Kyiv
to assess the current status of the program. It is expected that
the main actions that Ukraine will need to implement in order to
unblock cooperation with the Fund are increases in gas tariffs for
households to international parity level, acceleration of the
privatization program, and agreement on a sustainable fiscal
budget, including pension reform.
Further stabilization of the economic and political situation
depends, to a large extent, upon success of the Ukrainian
government's efforts.
Overall following the sale of Terminal Brovary the exposure of
the Group in Ukraine was significantly reduced.
5.1.1.2 Greece
Greek economy showed signs of recovery during 2017, with
positive GDP growth, lower unemployment rate, and strong primary
surplus.
Following the agreement with the credit institutions
(EU/ECB/IMF/ESM), Greek economy finally terminated the relevant
support program in August 2018, since the government completed the
last main creditor-mandated measures, including privatizations, and
energy market reforms. In addition, debt relief negotiations
continue, although a final decision has not yet been taken by the
creditors.
ECB has already released the last assessment of the banking
sector stress tests, which provided clean results. Such results
could allow 20bn euros in bailout funds set aside for the banking
sector, to be used for other purposes, which would be very positive
news for future economic policy. As a result of these tests,
capital controls and restrictions imposed in the Banking sector in
June 2015 have been substantially relieved within 2018, while
lending activity on behalf of the Banks has been re-started with
positive impact on domestic business activity.
The result of debt relief negotiations, given the clean exit of
the support program, remain critical to the economy's long-term
prospects. The expected favorable outcome will have a direct
positive impact, by allowing Greece to go to the markets in order
to fund its needs, and by boosting the overall economic activity.
On the other hand, any possible negative developments will have an
impact on economic recovery, which will be slower, or even in risk.
In such a case, the results and financial position of Group's Greek
operations could be negatively affected to some extent, in a manner
not currently determinable.
5.1.1.3 Romania
Romanian economy continuous in 2017 to be the top GDP growth
performer in European Union following strong performance of the
previous years. Main growth drivers recorded as private
consumption, investment, and indirect tax cuts, supported by wage
hikes. Such performance continued also during H1 2018.
The economy maintains balanced economic variables with current
deficit around 3% of GDP, public debt less than 40% of GDP and
stabilized inflation rate. Unemployment rate of 4,9% is the lowest
it has been for the past 20 years, driving wages up, but still
labor cost is one of the lowest in European Union (ranked 27 out of
28, and 74% below EU average) attracting continuously foreign
investment in production and services sectors. Fixed investment is
expected to higher levels in the near future due to rising European
Union funds.
Possible overheating of the economy in the future may emerge
risks, as economic activity will slow down, prices will drop, and
the local activities of the Group could be negatively affected. The
Group monitors closely the performance of the Romanian economy, and
the local political and fiscal developments, in order to detect
negative signs and being able to adjust effectively its local
strategy and its operations in the country.
5.1.2 Risks associated with property holding and development
associated risks
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, taking also into account the UAH rapid devaluation;
-- the amount of rent and the terms on which lease renewals and
new leases are agreed being less favorable 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
-- political uncertainty, acts of terrorism and acts of nature,
such as earthquakes and floods that may damage the properties.
5.1.3 Property Market price risk
Market price risk is the risk that the value of the Group'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. To quantify
the value of its assets and/or indicate the possibility of
impairment losses, the Group commissioned internationally acclaimed
valuers.
Valuations reported as at 31 December 2017 take into account the
continuation of political instability in Ukraine. Given the nature
of the Group's assets the most immediate effect would be the
prolongation of the period needed to market and effectively sell an
asset under such duress conditions.
The BoD is monitoring the situation to ensure that assets' value
is preserved while at the same time through diversification
according to the strategic plan of the Group, Ukrainian operations
are gradually becoming a smaller part of a larger portfolio of
assets.
5.1.4 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.
5.1.5 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.
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) have entered into
deleveraging programs.
5.1.6 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. Excluding the
transactions in Ukraine all of the Group's transactions, including
the rental proceeds are denominated or pegged to EUR. In Ukraine
even though some of the rental proceeds are denominated in USD,
Management has been monitoring the rental market decoupling from
the USD and switching to the UAH, which entails significant FX
risks for the Group in the future. Management monitors the exchange
rate fluctuations on a continuous basis and acts accordingly, by
limiting net exposures to a few days to 2 months. It should be
noted that the current political uncertainty in Ukraine, and the
currency devaluation may affect the Group's income streams
indirectly also through affecting the financial condition of the
tenants of the Group's properties their solvency and their income
generating capacity.
Management is monitoring foreign exchange fluctuations closely
and acts accordingly.
5.1.7 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 40.1 of the
consolidated financial statements.
5.1.8 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 each country the Group is present as well as
from the stock exchange where the Company is listed. 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.
5.1.9 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.
5.1.10 Insolvency risk
Insolvency arises from situations where a company may not meet
its financial obligations towards a lender as debts become due.
Addressing and resolving any insolvency issues is usually a slow
moving process in the Region. Management is closely involved in
discussions with creditors when/if such cases arise in any
subsidiary of the Group aiming to effect alternate repayment plans
including debt repayment so as to minimize the effects of such
situations on the Group's asset base.
5.2. 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.
5.3. 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.
6. Investment in subsidiaries
The Company has direct and indirect holdings in other companies,
collectively called the Group, that were included in the condensed
consolidated interim financial statements, and are detailed
below:
Holding %
Name Country Related Asset as at as at as at
30 June 31 Dec 30 June
2018 2017 2017
---------- --------------------- --------- -------- ---------
SC SECURE Capital
Ltd Cyprus 100 100 100
--------------------------------- --------- -------- ---------
Kyianovskiy
LLC Aisi Ukraine Ukraine Residence 100 100 100
---------- --------------------- --------- -------- ---------
LLC Retail Development
Balabino Ukraine 100 100 100
--------------------------------- --------- -------- ---------
LLC Trade Center Ukraine 100 100 100
--------------------------------- --------- -------- ---------
Tsymlianskiy
LLC Almaz--press--Ukrayina Ukraine Residence 55 55 55
---------- --------------------- --------- -------- ---------
Bela Logistic
LLC Aisi Bela Ukraine Center 100 100 100
---------- --------------------- --------- -------- ---------
LLC Interterminal Ukraine Balabyne 100 100 100
---------- --------------------- --------- -------- ---------
LLC Aisi Ilvo Ukraine 100 100 100
--------------------------------- --------- -------- ---------
Myrnes Innovations Innovations
Park Ltd Cyprus Logistics Park 100 100 100
---------- --------------------- --------- -------- ---------
Best Day Real Estate
SRL Romania 100 100 100
--------------------------------- --------- -------- ---------
Yamano Holdings EOS Business
Ltd Cyprus Park 100 100 100
---------- --------------------- --------- -------- ---------
Secure Property
Development and
Investment Srl Romania 100 100 100
--------------------------------- --------- -------- ---------
N-E Real Estate
Park First Phase
Srl Romania 100 100 100
--------------------------------- --------- -------- ---------
Victini Holdings
Ltd Cyprus Victini Logistics 100 100 100
---------- --------------------- --------- -------- ---------
VICTINI Logistics
Park S.A. (ex SPDI
Logistics S.A.) Greece 100 100 100
--------------------------------- --------- -------- ---------
Zirimon Properties Delea Nuova
Ltd Cyprus (Delenco) 100 100 100
---------- --------------------- --------- -------- ---------
Bluehouse Accession
Project IX Ltd Cyprus Praktiker Craiova 100 100 100
---------- --------------------- --------- -------- ---------
Bluehouse Accession
Project IV Ltd Cyprus 100 100 100
--------------------------------- --------- -------- ---------
Bluebigbox 3 Srl Romania 100 100 100
--------------------------------- --------- -------- ---------
SPDI Real Estate
SRL Romania Kindergarten 50 50 -
---------- --------------------- --------- -------- ---------
SEC South East Continent
Unique Real Estate
Investments II Ltd Cyprus 100 100 100
--------------------------------- --------- -------- ---------
SEC South East Continent
Unique Real Estate
(Secured) Investments
Ltd Cyprus 100 100 100
--------------------------------- --------- -------- ---------
Diforio Holdings Residential
Ltd Cyprus and Land portfolio 100 100 100
---------- --------------------- --------- -------- ---------
Demetiva Holdings
Ltd Cyprus 100 100 100
--------------------------------- --------- -------- ---------
Ketiza Holdings
Ltd Cyprus 90 90 90
--------------------------------- --------- -------- ---------
Frizomo Holdings
Ltd Cyprus 100 100 100
--------------------------------- --------- -------- ---------
SecMon Real Estate
SRL Romania - 100 100
--------------------------------- --------- -------- ---------
SecVista Real Estate
SRL Romania 100 100 100
--------------------------------- --------- -------- ---------
SecRom Real Estate
SRL Romania 100 100 100
--------------------------------- --------- -------- ---------
Ketiza Real Estate
SRL Romania 90 90 90
--------------------------------- --------- -------- ---------
Edetrio Holdings
Ltd Cyprus 100 100 100
--------------------------------- --------- -------- ---------
Emakei Holdings
Ltd Cyprus 100 100 100
--------------------------------- --------- -------- ---------
RAM Real Estate
Management Ltd Cyprus 50 50 50
--------------------------------- --------- -------- ---------
Iuliu Maniu Ltd Cyprus 45 45 45
--------------------------------- --------- -------- ---------
Moselin Investments
srl Romania 45 45 45
--------------------------------- --------- -------- ---------
Rimasol Enterprises
Ltd Cyprus 44,24 44,24 44,24
--------------------------------- --------- -------- ---------
Rimasol Real Estate
Srl Romania 44,24 44,24 44,24
--------------------------------- --------- -------- ---------
Ashor Ventures Ltd Cyprus 44,24 44,24 44,24
--------------------------------- --------- -------- ---------
Ashor Development
Srl Romania 44,24 44,24 44,24
--------------------------------- --------- -------- ---------
Jenby Ventures Ltd Cyprus 44,30 44,30 44,30
--------------------------------- --------- -------- ---------
Jenby Investments
Srl Romania 44,30 44,30 44,30
--------------------------------- --------- -------- ---------
Ebenem Ltd Cyprus 44,30 44,30 44,30
--------------------------------- --------- -------- ---------
Ebenem Investments
Srl Romania 44,30 44,30 44,30
--------------------------------- --------- -------- ---------
Sertland Properties
Ltd Cyprus 100 100 100
--------------------------------- --------- -------- ---------
Boyana Residence
ood Bulgaria 100 100 100
--------------------------------- --------- -------- ---------
Mofben Investments
Ltd Cyprus 100 100 100
--------------------------------- --------- -------- ---------
Delia Lebada Invest
srl Romania - - 65
--------------------------------- --------- -------- ---------
SPDI Management
SRL Romania 100 100 100
--------------------------------- --------- -------- ---------
During the reporting period the Group did not proceed with any
acquisitions. A restructuring was implemented at Greenlake project
during 2017 and the Kindergarten together with one villa were
passed to another SPV, namely SPDI REAL ESTATE SRL. As far as
disposals is concerned during the reporting period the Group did
not proceed with any while during 2017 concluded successfully the
sale of its Terminal Brovary in Ukraine as well as the sale of
Delia land plot in Bucharest, Romania (Note 18).
Following extended but unsuccessful negotiations for more than
18 months with Tonescu Finance SRL, the company which has acquired
Monaco property's loan, Secmon SRL entered voluntarily in January
2018 into insolvency process, in order to protect its interests
against its creditor, given that the value of the assets is higher
than the value of the relevant loan. The entering of SEC MON in the
insolvency process means loss of control as per the definition of
IFRS 10. As such Sec Mon Srl is not consolidated in the present
financial statements.
7. Income
Income for the period ended 30 June 2018 represents:
a) rental income as well as service charges and utilities income
collected from tenants as a result of the rental agreements
concluded with tenants of Innovations Logistics Park (Romania), EOS
Business Park (Romania), Praktiker Craiova (Romania), Kindergarten
(Romania), and Victini Logistics (Greece),
b) income from the sale of electricity by Victini Logistics to the Greek grid,
c) rental income and service charges by tenants of the Residential Portfolio, and;
d) income from third parties and /or partners for consulting and managing real estate.
Income for H1 2017 includes further to the above, income derived
from services related to the sale of Terminal Brovary logistics
park.
30 June 30 June
2018 2017
EUR EUR
---------- ----------
Rental income 1.247.683 1.609.640
---------- ----------
Sale of electricity 152.618 162.806
---------- ----------
Service charges and utilities income 64.773 93.335
---------- ----------
Service and property management income 1.083 1.047.728
---------- ----------
Total income 1.466.157 2.913.509
---------- ----------
Occupancy rates in the various income producing assets of the
Group as at 30 June 2018 were as follows:
Income producing assets
% 30 June 30 June
2018 2017
--------- -------- --------
EOS Business Park Romania 100% 100%
--------- -------- --------
Innovations Logistics
Park Romania 37% 60%
--------- -------- --------
Victini Logistics Greece 100% 100%
--------- -------- --------
Praktiker Craiova Romania 100% 100%
--------- -------- --------
Kindergarten Romania 100% -
--------- -------- --------
8. Asset operating expenses
The Group incurs expenses related to the proper operation and
maintenance of all properties in Kiev, Bucharest, Athens, Sofia and
Craiova. A part of these expenses is recovered from the tenants
through the service charges and utilities recharge (Note 7). The
effective reduction between 2018 and 2017 is partially attributed
to the sale of Terminal Brovary Logistics Park (Terminal Brovary
expenses in 2017 were EUR34.580).
30 June 30 June
2018 2017
EUR EUR
---------- ----------
Property related taxes (134.873) (139.949)
---------- ----------
Utilities (36.953) (59.892)
---------- ----------
Property management fees - (59.951)
---------- ----------
Repairs and technical maintenance (30.649) (47.042)
---------- ----------
Property security (16.342) (24.863)
---------- ----------
Property insurance (19.508) (23.612)
---------- ----------
Land Leasing expenses (19.883) (6.299)
---------- ----------
Total (258.208) (361.608)
---------- ----------
Property related taxes reflect local taxes related to land and
building properties (in the form of land taxes, building taxes,
garbage fees, etc).
Property Management fees relate to Property Management
Agreements for Innovation Logistics Park, Victini Logistics Park
and Praktiker Craiova with third party managers outsourcing the
related services.
Leasing expenses reflect expenses related to long term land
leasing.
9. Administration Expenses
30 June 30 June
2018 2017
EUR EUR
---------- ------------
Salaries and Wages (287.522) (438.066)
---------- ------------
Legal fees (100.305) (69.498)
---------- ------------
Advisory fees (169.010) (133.875)
---------- ------------
Corporate registration and maintenance fees (70.924) (105.006)
---------- ------------
Corporate operating expenses (105.969) (166.896)
---------- ------------
Audit and accounting fees (69.031) (66.781)
---------- ------------
Public entity expenses (86.783) (84.549)
---------- ------------
Depreciation/Amortization charge (11.120) (27.012)
---------- ------------
Total Administration Expenses (900.664) (1.091.683)
---------- ------------
Salaries and wages include the remuneration of the CEO, the CFO,
the Group Commercial Director, the Group Investment Director (until
his departure in April 2017) and the Country Managers of Ukraine
and Romania who have accepted a temporary reduction in their
remuneration, as well as the salary cost of personnel employed in
the various Company's offices in the region which has been reduced
following the completion of Terminal Brovary sale in Ukraine.
Advisory fees are mainly related to outsourced human resources
support on the basis of advisory contracts, capital raising
advisory expenses and marketing expenses incurred by the Group in
relation to Cypriot, Ukrainian, Romanian, Bulgarian and Greek
operations.
Audit and accounting expenses include the audit fees and
accounting fees for the Company and all the subsidiaries.
Public group expenses include among others fees paid to the AIM:
London stock exchange and the Nominated Adviser of the Company as
well as other expenses related to the listing of the Company.
Corporate registration and maintenance fees represent fees
charged for the annual maintenance of the Company and its
subsidiaries as well as fees and expenses related to the normal
operation of the companies including charges by the relevant local
authorities.
Legal fees represent legal expenses incurred by the Group in
relation to asset operations (rentals, sales, etc), ongoing legal
cases in Ukraine and compliance with AIM listing.
Corporate operating expenses include office expenses, travel
expenses, (tele)communication expenses, D&O insurance and all
other general expenses for Cypriot, Romanian, Ukrainian, Bulgarian
and Greek operations.
10. Valuation gains /(losses) from investment properties
Following the Group's accounting policy which prescribes the
yearly valuation of the investment properties, the Group did not
perform valuation of its assets as at 30 June 2018. At the same
time, the Group decided to keep the value of its investment
properties at the same level as of 31 December 2017 and in the same
currencies in which the valuations were performed (EUR for Romanian
subsidiaries and USD for Ukrainian ones). Since during H1 2018 the
rate of functional currencies of the Romanian and Ukrainian
subsidiaries changed against EUR and USD, respectively, the
resulting effect was recognized as a valuation gain/loss in the
consolidated financial statements.
Valuation gains /(losses) from investment property for the
reporting period resulted from the aforementioned change in
parities, excluding foreign exchange translation differences which
are incorporated in the table of Note 17.2, are presented in the
table below.
Property Name Valuation gains/(losses)
30 June 30 June
2018 2017
------------- ------------
EUR EUR
------------- ------------
Bela Logistic Center (289.945) (157.983)
------------- ------------
Kyianivskiy Lane (168.695) (104.328)
------------- ------------
Tsymlianskiy Lane (57.989) (32.789)
------------- ------------
Balabyne Lane (84.348) (47.693)
------------- ------------
Rozny Lane (23.298) (86.887)
------------- ------------
Innovations Logistics Park 3.008 31.039
------------- ------------
EOS Business Park 2.166 19.357
------------- ------------
Residential Portfolio 763 12.345
------------- ------------
Greenlake 5.404 50.563
------------- ------------
Pantelimon Lake - 13.714
------------- ------------
Praktiker Craiova 2.256 21.163
------------- ------------
Greenlake - kindergarten 515 -
------------- ------------
Victini Logistics - (100.000)
------------- ------------
Total (610.163) (381.499)
------------- ------------
11. Gain/(Loss) from disposal of properties
During the reporting period the Group proceeded with selling
properties classified under either Investment Property (Romanian
residential assets) or Inventory (Bulgarian residential assets),
both designated as non-core assets. The gain/ (losses) form
disposal of such properties are presented below:
11.a Inventory
During the reporting period, the Group sold 3 apartments in
Bulgaria (H1-2017 3 apartments).
30 June 30 June
2018 2017
EUR EUR
---------- ----------
Income from sale of inventory 194.951 171.834
---------- ----------
Cost of inventory (Note 22) (208.506) (215.708)
---------- ----------
Gain/(Loss) from disposal of inventory (13.555) (43.874)
---------- ----------
11.b Investment property
During the reporting period the Group sold 4 apartments in
Romfelt while during H1 2017 the Group sold 2 apartments in
Romfelt.
30 June 30 June
2018 2017
EUR EUR
---------- ----------
Income from sale of investment property 283.976 135.393
---------- ----------
Cost of investment property (Note 17.2) (286.992) (130.762)
---------- ----------
Gain/(Loss) from disposal of investment property (3.016) 4.631
---------- ----------
12. Allowance recognized for investment property
Allowance recognized for investment property includes an amount
of EUR1.000.000 impairment which refers to Praktiker Craiova
property, following discussions that Company has for the possible
sale of the asset.
Allowance recognized in P&L for Praktiker (1.000.000)
Craiova property (A)
Furthermore allowance includes also EUR297.200 for Monaco for
which following the court decision for entering into insolvency in
January 2018, the Company lost temporary the control over the asset
(Note 6) and as such it was classified as available for sale
financial asset as per table below (where the fair value of the
property was adjusted at 80% of its value):
Unadjusted Adjusted
ASSETS EUR EUR
------------ ------------
Non-current assets
------------ ------------
Investment property 1.486.000 1.188.800
------------ ------------
Current assets
------------ ------------
Prepayments and other current assets 20.447 20.447
------------ ------------
Cash and cash equivalents 10.321 10.321
------------ ------------
Total assets 1.516.768 1.219.568
------------ ------------
Current liabilities
------------ ------------
Borrowings (1.075.176) (1.075.176)
------------ ------------
Other liabilities (19.433) (19.433)
------------ ------------
Intercompany loans (1.845.700) -
------------ ------------
Total liabilities (2.940.309) (1.094.609)
------------ ------------
Total Net equity (excluding IC) 422.159 124.959
------------ ------------
Available for sale financial assets recognized
in balance sheet 124.959
------------ ------------
Allowance recognized in P&L for Monaco (Adjusted
less Unadjusted Nav) (B) (297.200)
------------ ------------
Forex impact on Allowance recognized in P&L
(C) (1.569)
Total Allowance recognized for investment property (1.298.769)
(A + B + C)
13. Other operating income/ (expenses), net
30 June 30 June
2018 2017
EUR EUR
-------- --------
Accounts payable write off 84 1.250
-------- --------
Provision for impairment of prepayments and
other current assets - 4.390
-------- --------
Other income 29.499 -
-------- --------
Other income 29.583 5.640
-------- --------
Penalties (3.016) (1.584)
-------- --------
Other expenses/(income) - (4.721)
-------- --------
Other expenses (3.016) (6.305)
-------- --------
Total 26.567 (665)
-------- --------
14. Finance costs and income
30 June 30 June
2018 2017
EUR EUR
-------- --------
Finance income
-------- --------
Interest income from non-bank loans (Notes
37.1 and 23) 453.891 4.645
-------- --------
Bank interest income 165 1.754
-------- --------
Other finance income - 3.442
-------- --------
Total finance income 454.056 9.841
-------- --------
Finance costs
Borrowing interest expenses (698.730) (715.065)
------------ ------------
Finance leasing interest expenses (256.345) (268.126)
------------ ------------
Finance charges and commissions (15.902) (41.510)
------------ ------------
Bonds interest expenses (33.787) -
------------ ------------
Total finance costs (1.004.764) (1.024.701)
------------ ------------
Net finance result (550.708) (1.014.860)
------------ ------------
Interest income from non-bank loans, reflects income from loans
granted by the Group for financial assistance of associates. For H1
2018 this amount includes also interest on Loan receivables from
3(rd) parties provided as an advance payment for acquiring a
participation in an investment property portfolio (Olympians
portfolio) in Romania (Note 23). The loan provided under an
agreement incorporating a convertibility option exercisable until
28 February 2018. Such option was not exercised and the loan is
payable in a 12 month period from the exercise date or the relevant
notification date, bearing a fixed interest rate of 10% and secured
by relevant corporate guarantees, while the Company is in the
process of getting agreed security in the form of pledge of shares
following the relevant process provided in the Loan Agreement. Such
interest calculated in H1 2018 for all amounts withdrawn under this
loan agreement and their respective interest periods.
Borrowing interest expense represents interest expense charged
on bank and non-bank borrowings (Note 28).
Finance leasing interest expenses relate to the sale and lease
back agreements of the Group (Note 33).
Finance charges and commissions include regular banking
commissions, and various fees paid to the banks.
Bonds interest represent interest calculated for the bonds
issued by the Company during 2017 (Note 29).
15. Foreign exchange profit / (losses)
a. Foreign exchange loss - non realised
Foreign exchange losses (non-realised) resulted from the loans
and/or payables/receivables denominated in non EUR currencies when
translated in EUR. The exchange loss from continuing operations for
the period ended 30 June 2018 amounted to EUR15.680 (30 June 2017:
loss EUR1.733.039).
b. Exchange difference on intercompany loans to foreign holdings
The Company has loans receivable from foreign group subsidiaries
which are considered as part of the Group's net investments in
those foreign operations (Note 37.3). For these intercompany loans
the foreign exchange differences are recognized initially in other
comprehensive income and in a separate component of equity. During
H1 2017 upon disposal of such foreign operations, namely Terminal
Brovary (Note 18), the accumulated foreign exchange difference
amounting to EUR37.567.055 was transferred to the Consolidated
Profit or Loss for the year.
16. Income Tax Expense
30 June 30 June
2018 2017
EUR EUR
--------- ---------
Income and defense tax expense (47.287) (21.085)
--------- ---------
Taxes (47.287) (21.085)
--------- ---------
For period ended 30 June 2018, the corporate income tax rate for
the Group's subsidiaries are as follows: in Ukraine 18%, in Romania
16%, in Greece 29% and in Bulgaria 10%. The corporate tax that is
applied to the qualifying income of the Company and its Cypriot
subsidiaries is 12,5%.
17. Investment Property
17.1 Investment Property Holdings
Investment Property consists of the following assets:
Income Producing Assets
-- VICTINI Logistics (ex GED) is a logistics park comprising
17.756 gross leasable sqm. It is fully let to the German
multinational transportation and logistics company, Kuehne &
Nagel and to a Greek commercial company trading electrical
appliances GE Dimitriou SA. On the roof of the warehouse there is a
1MW photovoltaic park installed with the electricity generated
being sold to Greek Electric Grid on a long term contract.
-- EOS Business Park consists of 3.386 sqm gross leasable area
and includes a Class A office Building in Bucharest, which is
currently fully let to Danone Romania until 2025.
-- Praktiker Craiova, a DIY retail property was acquired by the
Group in July 2015. The Bluebigbox is situated in a prime location
in Craiova, Romania and it is fully let to Praktiker, a regional
DIY retailer. The property has a gross lettable area of 9.385 sqm
and is 100% rented until 2028.
-- Innovations Logistic Park is a 16.570 sqm gross leasable area
logistics park located in Clinceni in Bucharest, which benefits
from being on the Bucharest ring road. Its construction was tenant
specific, was completed in 2008 and is separated in four
warehouses, two of which offer cold storage (freezing temperature),
the total area of which is 6.395 sqm. Innovations was acquired by
the Group in May 2014 and was 37% leased at the end of the
reporting period.
-- During 2017 the Company proceeded with an internal
reorganization and the Kindergarten asset of Greenlake which was
under the ownership of the associate Greenlake Development Srl was
acquired by a separate entity (SPDI Real Estate). The Kindergaden
is fully let to one of Bucharest's leading private schools and
produces an annual rent inflow of EUR115.000.
Residential Assets
-- The Company owns a residential portfolio, consisting at the
end of the reporting period of partly let 38 apartments and villas
across four separate complexes located in different residential
areas of Bucharest (Residential portfolio: Romfelt, Blooming House,
Greenlake Residential: Greenlake Parcel K, SPDI REAL ESTATE villa
P1). During 2017 Tonescu Finance (the company which acquiredthe
Monaco related loan) commenced against SECMON legal proceedings and
in order for SECMON to protect itself it entered voluntarily into
insolvency process in January 2018 (Note 6). The entering of SEC
MON in the insolvency process means loss of control as per the
definition of IFRS 10. As such Sec Mon Srl is not consolidated in
the present financial statements.
Land Assets
-- Bela Logistic Center is a 22,4 Ha 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
sqm GBA logistic center commenced. Construction was put on hold in
2009.
-- Kiyanovskiy Lane consists 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 neighborhood.
-- 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.
-- Rozhny Lane is a 42 Ha land plot located in Kiev Oblast,
destined for the development of a residential complex. It has been
registered under the Group pursuant to a legal decision in
2015.
-- Balabyne project is a 26,38 Ha plot of land situated on the
south entrance of Zaporizhia, a city in the south of Ukraine with a
population of 800.000 people. Balabino is zoned for retail and
entertainment development.
-- Greenlake land is a 40.360 sqm plot and is adjacent to the
Greenlake part of the Company's residential portfolio, which is
classified under Investments in Associates (Note 19). It is
situated in the northern part of Bucharest on the bank of Grivita
Lake in Bucharest. SPDI owns 44% of these plots, but has effective
management control.
-- Boyana Land: The complex of Boyana Residence includes
adjacent land plots available for sale or development of 22.000 sqm
of gross buildable area.
17.2 Investment Property Movement during the reporting
period
The table below presents a reconciliation of the Fair Value
movements of the investment property during the reporting period
broken down by property and by local currency vs. reporting
currency.
30 June 2018 (EUR) Fair Value movements Asset Value at the Beginning
of the period or at
Acquisition/Transfer
date
Asset Name Type Carrying Foreign Fair value Disposals Transfer Additions Carrying
amount exchange gain/(loss) and change from 30/06/2018 amount
30/06/2018 translation based in prepayments as at
difference on local allowance made for 31/12/2017
(a) currency for investments
valuations investment
(b) property
for 1H2018
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Bela Logistic
Center Land 4.717.790 421.726 (289.945) - - - 4.586.009
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Kyianovskiy
Lane Land 2.744.895 245.367 (168.695) - - - 2.668.223
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Tsymlianskiy
Lane Land 943.558 84.345 (57.989) - - - 917.202
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Balabyne Land 1.372.448 122.685 (84.348) - - - 1.334.111
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Rozny Lane Land 1.115.114 54.446 (23.298) - - - 1.083.966
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Total Ukraine 10.893.805 928.569 (624.275) - - - 10.589.511
------------ ------------ ------------ ------------ ------------ ----------- ------------
Innovations
Logistics
Park Warehouse 10.000.000 (3.008) 3.008 - - - 10.000.000
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
EOS Business
Park Office 7.200.000 (2.166) 2.166 - - - 7.200.000
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Residential
portfolio Residential 2.257.001 (763) 763 (1.765.999) - - 4.023.000
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Greenlake Land 17.963.000 (5.404) 5.404 - - - 17.963.000
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Pantelimon Land - - - - - - -
Lake
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Praktiker
Craiova Retail 7.500.000 (2.256) 2.256 - - - 7.500.000
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Greenlake
-kindergarten Commercial 1.713.000 (515) 515 - - 1.713.000
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Total Romania 46.633.001 (14.112) 14.112 (1.765.999) - 48.399.000
------------ ------------ ------------ ------------ ------------ ----------- ------------
Boyana Land 4.230.000 - - - - - 4.230.000
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Total Bulgaria 4.230.000 - - - - - 4.230.000
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Victini Warehouse 16.100.000 - - - - - 16.100.000
Logistics
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Total Greece 16.100.000 - - - - - 16.100.000
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Allowance (1.000.000) - - (1.000.000)
(Note 12)
------------- ------------ ------------ ------------ ------------ ------------ ----------- ------------
Total 76.856.806 914.457 (610.163) (2.765.999) - - 79.318.511
------------ ------------ ------------ ------------ ------------ ----------- ------------
30 June 2017 (EUR) Fair Value movements Asset Value at the Beginning
of the period or at
Acquisition/Transfer
date
Asset Name Type Carrying Foreign Fair value Disposals Transfer Additions Carrying
amount exchange gain/(loss) 30/06/2017 from 30/06/2017 amount
30/06/2017 translation based prepayments as at
difference on local made for 31/12/2016
(a) currency investments
valuations
(b)
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Terminal Warehouse (14.900.000) - - 14.900.000
Brovary
Logistics
Park
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Bela Logistic
Center Land 4.644.234 (225.769) (157.983) - - - 5.027.986
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Kyianovskiy
Lane Land 3.066.946 (149.094) (104.328) - - - 3.320.368
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Tsymlianskiy
Lane Land 963.898 (46.857) (32.789) - - - 1.043.544
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Balabyne Land 1.402.033 (68.157) (47.693) - - - 1.517.883
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Rozny Lane Land 1.051.525 - (86.887) - - - 1.138.412
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Total Ukraine 11.128.636 (489.877) (429.680) (14.900.000) - - 26.948.193
----------- ------------ ------------ ------------- ------------ ----------- ------------
Innovations
Logistics
Park Warehouse 11.000.000 (31.039) 31.039 - - - 11.000.000
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
EOS Business
Park Office 6.860.000 (19.357) 19.357 - - - 6.860.000
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Residential
portfolio Residential 4.244.238 (12.345) 12.345 (130.762) - - 4.375.000
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Greenlake Land 17.919.000 (50.563) 50.563 - - - 17.919.000
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Pantelimon
Lake Land 4.860.000 (13.714) 13.714 - - - 4.860.000
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Praktiker
Craiova Retail 7.500.000 (21.163) 21.163 - - - 7.500.000
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Greenlake Commercial 1.265.000 - - - - 1.265.000 -
-kindergarten
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Total Romania 53.648.238 (148.181) 148.181 (130.762) - 1.265.000 52.514.000
----------- ------------ ------------ ------------- ------------ ----------- ------------
Boyana Land 4.720.000 - - - - - 4.720.000
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Total Bulgaria 4.720.000 - - - - - 4.720.000
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Victini
Logistics Warehouse 16.500.000 - (100.000) - - 100.000 16.500.000
------------- ----------- ------------ ------------ ------------- ------------ ----------- ------------
Total Greece 16.500.000 - (100.000) - - 100.000 16.500.000
----------- ------------ ------------ ------------- ------------ ----------- ------------
Total 85.996.874 (638.058) (381.499) (15.030.762) - 1.365.000 100.682.193
----------- ------------ ------------ ------------- ------------ ----------- ------------
17.3 Investment Property Valuations per asset
The table below presents the values of the individual assets as
appraised by the 2017 appointed valuer.
Asset Name Description/ Principal Related Companies Carrying amount
Location Operation as at (EUR)
30 June 31 Dec
2018 2017
-------------- --------------------- ------------------------ ----------- -----------
Bela Logistic Odesa Land and LLC AISI BELA 4.717.790 4.586.009
Center Development
Works for
Warehouse
-------------- --------------------- ------------------------ ----------- -----------
Kiyanovskiy Podil, Land for LLC AISI UKRAINE 2.744.895 2.668.223
Lane Kiev City residential LLC Trade Center
Center development
-------------- --------------------- ------------------------ ----------- -----------
Podil, Land for
Tsymlianskiy Kiev City residential
Lane Center Development LLC ALMAZ PRES UKRAINE 943.558 917.202
-------------- --------------------- ------------------------ ----------- -----------
Balabino Zaporizhia Land for LLC INTERTERMINAL 1.372.448 1.334.111
retail development LLC AISI Ilvo
-------------- --------------------- ------------------------ ----------- -----------
Rozhny Lane Brovary Land for SC Secure Capital 1.115.114 1.083.966
district, residential Ltd
Kiev oblast Development
-------------- --------------------- ------------------------ ----------- -----------
Total Ukraine 10.893.805 10.589.511
----------- -----------
Innovations Clinceni, Warehouse MYRNES INNOVATIONS 10.000.000 10.000.000
Logistic Park Bucharest PARK LIMITED
BEST DAY REAL ESTATE
SRL
EOS Business Bucharest Office building YAMANO LIMITED 7.200.000 7.200.000
Park SPDI SRL,
N-E Real Estate Park
First Phase Srl
----------- ---------------------- ----------------------------- ------------ ------------
Residential Bucharest Residential Secure Investment 2.257.001 4.023.000
Portfolio II
Demetiva Limited
Diforio Limited
Frizomo Limited
Ketiza Limited
SecRom Srl
SecVista Srl
Ketiza Srl
SecMon Srl (for 31/12/2017)
----------- ---------------------- ----------------------------- ------------ ------------
Greenlake Bucharest Residential Secure Investment 17.963.000 17.963.000
apartments I
(14 in total) Edetrio Holdings
& Limited
land for residential Emakei Holdings Limited
development Iuliu Maniu Limited
Ram Real Estate Management
Limited
Moselin Investments
srl
Rimasol Limited
Rimasol Real Estate
Srl
Ashor Ventures Limited
Ashor Develpoment
Srl
Jenby Ventures Limited
Jenby Investments
Srl
Ebenem Limited
Ebenem Investments
Srl
----------- ---------------------- ----------------------------- ------------ ------------
Praktiker Craiova Craiova Big Box retail Bluehouse Accession 7.500.000 7.500.000
Project IX
Bluehouse Accession
Project IV
BlueBigBox 3 srl
----------- ---------------------- ----------------------------- ------------ ------------
Kindergarten Bucharest Retail SPDI Real Estate 1.713.000 1.713.000
SRL
----------- ---------------------- ----------------------------- ------------ ------------
Total Romania 46.633.001 48.399.000
----------- ---------------------- ----------------------------- ------------ ------------
Boyana Sofia Land Boyana Residence 4.230.000 4.230.000
ood,
Sertland Properties
Limited
----------- ---------------------- ----------------------------- ------------ ------------
Total Bulgaria 4.230.000 4.230.000
----------- ---------------------- ----------------------------- ------------ ------------
Victini Logistics Athens Warehouse Victini Holdings 16.100.000 16.100.000
Limited.
Victini Logistics
Park SA
----------- ---------------------- ----------------------------- ------------ ------------
Total Greece 16.100.000 16.100.000
----------- ---------------------- ----------------------------- ------------ ------------
Allowance (Note (1.000.000) (1.000.000)
12)
----------- ---------------------- ----------------------------- ------------ ------------
TOTAL 76.856.806 79.318.511
----------- ---------------------- ----------------------------- ------------ ------------
17.4 Investment Property analysis
a. Investment Properties
The following assets are presented under Investment Property:
Innovations Logistic park, EOS Business Park, Victini Logistics,
Praktiker Craiova, Kindergarten of Greenlake, the Residential
Portfolio (consisting of apartments in 2 complexes) and Greenlake
parcel K as well as all the land assets namely Kiyanovskiy Lane,
Tsymlyanskiy Lane, Balabyne and Rozny in Ukraine, Greenlake in
Romania as well as the land in Sofia, Bulgaria (Boyana).
30 June 31 Dec
2018 2017
EUR EUR
------------ -------------
As at the beginning of the reporting period 74.732.502 95.654.207
------------ -------------
Acquisitions of investment property (Note 17.2) - 1.265.000
------------ -------------
Disposal and reclassification from investment
Property (Note 17.2) (1.772.992) (20.119.619)
------------ -------------
Transfer from Inventory/prepayments made (Note
17.2) - 100.000
------------ -------------
Revaluation gain/(loss) on investment property (320.218) (29.614)
------------ -------------
Impairment allowance for investment property (1.000.000) -
------------ -------------
Translation difference 499.724 (2.137.472)
------------ -------------
As at the end of the reporting period 72.139.016 74.732.502
------------ -------------
b. Investment Properties Under Development
As at 30 June 2018 investment property under development
represents the carrying value of Bela Logistic Center property,
which has reached the +10% construction level completion in late
2008 but it is stopped since then.
30 June 31 Dec
2018 2017
EUR EUR
---------- ----------
As at the beginning of the reporting period 4.586.009 5.027.986
---------- ----------
Revaluation on investment property (289.945) 356.575
---------- ----------
Translation difference 421.726 (798.552)
---------- ----------
As at the end of the reporting period 4.717.790 4.586.009
---------- ----------
18. Disposal of subsidiaries
During the reporting period the Group did not proceed with any
disposal while during H1 2017 concluded successfully the sale of
its Terminal Brovary in Ukraine.
On 27 January 2017 the SL Logistics Group (Terminal Brovary
related) was sold to Temania Enterprises Ltd (company related to
Rozetka Group). The transaction was concluded at a Gross Asset
Value of EUR15 million (before the deduction of the outstanding
EBRD loan, which was transferred to the buyer, while the SPDI
guarantee to EBRD loan was cancelled). The transaction generated a
profit for SPDI of EUR2,7 million, already included in the 2016
financial statements by way of presenting the property at a fair
value equal to the transaction value, as well as a cash inflow of
EUR3million. As part of the transaction the Group also sold SL
SECURE Logistics Ltd, and thus transferred its loan towards
Terminal Brovary to the buyer.
The Company had loans receivable from foreign group subsidiaries
which are considered as part of the Group's net investments in
those foreign operations (Note 37.3). For these intercompany loans
the foreign exchange differences are recognized initially in other
comprehensive income and in a separate component of equity. Upon
disposal of such foreign operations and thus of Terminal Brovary
during 2017, the accumulated foreign exchange difference amounting
to EUR37.352.923 is transferred to the Consolidated Profit or Loss
for the year.
The table below shows the Balance Sheet of the Terminal Brovary
Group at the disposal date.
ASSETS EUR
Non-current assets
------------
Investment property 14.900.000
------------
Tangibles and intangibles assets 43.240
------------
Current assets
------------
Prepayments and other current
assets 40.740
------------
Cash and cash equivalents 4.693
------------
Total assets 14.988.673
------------
Non-current liabilities
------------
Finance lease liability 235.560
------------
Current liabilities
------------
Borrowings 11.370.804
------------
Trade and other payables 46.366
------------
Deposits from tenants 264.547
------------
Finance lease liability 219
------------
Total liabilities 11.917.496
------------
Net assets disposed (3.071.177)
------------
Financed by
------------
Cash consideration received 2.849.187
------------
Total result from Terminal
Brovary disposal (221.990)
------------
On 26 July 2017 the Company announced the disposal of Delia
Lebada , a 40.000 sqm (4 hectare) plot of land in east Bucharest on
the shore of Pantelimon Lake in which SPDI owned a 65% stake. The
sale price was EUR2,4 million and simultaneously, the associated
property loan (principal and interest) totalling EUR6.594.396 with
Bank of Cyprus was settled through a liquidation process, and the
associated corporate guarantee was released (Note 38.3). The loan
was repaid at a rate of 45 cents / Euro (totalling EUR2,95 million)
using a combination of the Land Disposal proceeds (EUR2,4 million)
and an additional payment of EUR550.000.
Overall the transaction had a positive result of EUR1.705.727 in
the Consolidated Statement of Comprehensive Income, EUR761.197
being attributed to the equity holders of the Company.
ASSETS EUR
Non-current assets
------------
Investment property 4.860.000
------------
Current assets
------------
Prepayments and other current
assets 92.990
------------
Cash and cash equivalents 106
------------
Total assets 4.953.096
------------
Current liabilities
------------
Borrowings 4.569.725
------------
Interest due on borrowings 2.024.671
------------
Other liabilities 1.057.357
------------
Total liabilities 7.651.753
------------
Net assets disposed (2.698.657)
------------
Non-controlling interest -
------------
Gain on disposal of subsidiaries 2.698.657
------------
Write off intercompany loans
of SPDI group to Delia (992.930)
------------
Total result from Delia disposal 1.705.727
------------
Non-controlling interest 944.530
------------
Net effect of Delia disposal
for SPDI equity holders 761.197
------------
19. Investments in associates
30 June 31 Dec
2018 2017
EUR EUR
---------- ----------
Cost of investment in associates at the beginning
of the period 5.115.587 5.217.310
---------- ----------
Share of profits from associates 138.637 390.217
---------- ----------
Dividend Income - (231.363)
---------- ----------
Foreign exchange difference (42.555) (260.577)
---------- ----------
Total 5.211.669 5.115.587
---------- ----------
Dividend Income reflects dividends received from Delenco srl,
owner of the Delea Nuova building, where the Group maintains a
24,35% participation.
The share of profit from the associate Greenlake Development Srl
was limited up to the interest of the Group in the associate.
As at 30 June 2018, the Group's interests in its associates and
their summarised financial information, including total assets at
fair value, total liabilities, revenues and profit or loss, were as
follows:
Property Associates Total Total Profit/ Holding Share of Country Asset
Name assets liabilities (loss) profits type
from
associates
EUR EUR EUR % EUR
--------------- ------------ -------------- -------- -------- -------------- -------- ------------
Lelar Holdings
Limited
and S.C.
Delenco
Delea Construct Office
Nuova S.R.L. 25.144.408 (2.744.771) 569.257 24,35% 138.637 Romania building
--------------- ------------ -------------- -------- -------- -------------- -------- ------------
Greenlake Greenlake
- Phase Development Residential
A Srl 9.850.899 (11.491.790) 31.766 40,35% - Romania assets
--------------- ------------ -------------- -------- -------- -------------- -------- ------------
Total 34.995.307 (14.236.561) 601.023 138.637
------------ ------------- -------- -------- -------------- -------- ------------
As at 30 June 2017, the Group's interests in its associates and
their summarised financial information, including total assets at
fair value, total liabilities, revenues and profit or loss, were as
follows:
Property Associates Total Total Profit/ Holding Share of Country Asset
Name assets liabilities (loss) profits type
from
associates
EUR EUR EUR % EUR
--------------- ------------ --------------- -------- -------- -------------- -------- ------------
Lelar Holdings
Limited
and S.C.
Delenco
Delea Construct Office
Nuova S.R.L. 25.144.135 (3.196.096) 714.194 24,354% 173.935 Romania building
--------------- ------------ --------------- -------- -------- -------------- -------- ------------
Green
Lake - Green Lake
Phase Development Residential
A Srl 12.466.198 (13.235.565) 62.356 40,35% - Romania assets
--------------- ------------ --------------- -------- -------- -------------- -------- ------------
Total 37.610.333 (16.431.661) 776.550 173.935
------------ -------------- -------- -------- -------------- -------- ------------
20. Tangible and intangible assets
As at 30 June 2018 the intangible assets were composed of the
capitalized expenditure on the Enterprise Resource Planning system
(Microsoft Dynamics-Navision) in the amount of EUR103.380.
Accumulated amortization as at the reporting date amounts to
EUR98.721 as the system was already in use.
As at 30 June 2018 the tangible non-current assets mainly
consisted of the machinery and equipment used for the servicing the
Group's investment properties in Ukraine and Romania amounting to
EUR128.443. Accumulated depreciation as at the reporting date
amounts to EUR73.397.
21. Long Term Receivables and prepayments
30 June 31 Dec
2018 2017
EUR EUR
-------- --------
Long term receivable 279.144 316.788
-------- --------
Total 279.144 316.788
-------- --------
Long term receivables mainly include the cash collateral
existing in favor of Piraeus Leasing.
22. Inventories
30 June 31 Dec
2018 2017
EUR EUR
---------- ----------
As at the beginning of the reporting period 4.812.550 5.028.254
---------- ----------
Sale of Inventory (208.506) (215.704)
---------- ----------
As at the end of the reporting period 4.604.044 4.812.550
---------- ----------
The residential portfolio in Boyana, Sofia, Bulgaria is
classified as Inventory.
During 2016 after a decision of the Board of Directors of Boyana
to change the initial plan for construction in the land and hold
this land for capital appreciation, EUR4.686.000 which related to
the land that was transferred to Investment Properties and since
then is treated under IAS 40.
23. Prepayments and other current assets
30 June 31 Dec
2018 2017
EUR EUR
---------- ----------
Trade and other receivables 665.055 741.691
---------- ----------
Loan to associates (Note 37.4) 278.121 273.476
---------- ----------
Loan receivables from 3(rd) parties 5.146.511 4.345.000
---------- ----------
VAT and other tax receivable 221.768 275.446
---------- ----------
Deferred expenses 237.835 222.797
---------- ----------
Receivables from related parties 15.119 14.459
---------- ----------
Allowance for impairment of prepayments and
other current assets (50.944) (26.285)
---------- ----------
Total 6.513.465 5.846.584
---------- ----------
Trade and other receivables mainly include receivables from
tenants (including the Greek electricity grid administrator) and
prepayments made for services.
Loan to associates reflects a loan receivable from Greenlake
Development SRL, holding company of Greenlake Phase A (Notes 19 and
37.4).
Loan receivables from 3(rd) parties include an amount of
EUR4.580.000 as principal provided as an advance payment for
acquiring a participation in an investment property portfolio
(Olympians portfolio) in Romania as well as associated interest of
EUR446.764. The loan provided under an agreement incorporating a
convertibility option exercisable until 28 February 2018. Such
option was not exercised and the loan is payable in a 12 month
period from the exercise date or the relevant notification date,
bearing a fixed interest rate of 10%, and secured by relevant
corporate guarantees, while the Company is in the process of
getting agreed security in the form of pledge of shares following
the relevant process provided in the Loan Agreement.
Loans receivables from 3(rd) parties also include an amount of
EUR115.000 provided to the SPV that acquired Delia Lebada asset, as
part of the process of obtaining a 5% stake on the property.
VAT receivable represent VAT which is refundable in Romania,
Bulgaria, Greece, Cyprus and Ukraine.
Deferred expenses include legal, advisory, consulting and
marketing expenses related to ongoing share capital increase and
due diligence expenses related to the possible acquisition of
investment properties.
Receivable from related parties represents loan receivable from
affiliated entities.
24. Cash and cash equivalents
Cash and cash equivalents represent liquidity held at banks.
EUR 30 June 31 Dec
2018 2017
EUR EUR
-------- --------
Cash with banks in USD 17.400 68.007
-------- --------
Cash with banks in EUR 320.844 365.736
-------- --------
Cash with banks in UAH 669 2.021
-------- --------
Cash with banks in RON 579.769 389.123
-------- --------
Cash with banks in BGN 2.060 6.237
-------- --------
Total 920.742 831.124
-------- --------
25. Share capital
Number of Shares
30 June 2018 31 Dec 2017
Authorised
-------------- ------------
Ordinary shares of EUR0,01 989.869.935 989.869.935
-------------- ------------
Total ordinary shares 989.869.935 989.869.935
-------------- ------------
RCP Class A Shares of EUR0,01 - 785.000
-------------- ------------
RCP Class B Shares of EUR0,01 8.618.997 8.618.997
-------------- ------------
Total redeemable shares 8.618.997 9.403.997
-------------- ------------
Issued and fully paid
------------
Ordinary shares of EUR0,01 127.270.481 103.589.550
-------------- ------------
Total ordinary shares 127.270.481 103.589.550
-------------- ------------
Total 127.270.481 103.589.550
-------------- ------------
Nominal Value (EUR)
30 June 2018 31 Dec 2017
EUR EUR
------------- ------------
Authorised
------------- ------------
Ordinary shares of EUR0,01 9.898.699 9.898.699
------------- ------------
Total ordinary 9.898.699 9.898.699
------------- ------------
RCP Class A Shares of EUR0,01 - 7.850
------------- ------------
RCP Class B Shares of EUR0,01 86.190 86.190
------------- ------------
Total redeemable 86.190 94.040
------------- ------------
Issued and fully paid
------------- ------------
Ordinary shares of EUR0,01 1.272.702 1.035.893
------------- ------------
Total ordinary 1.272.702 1.035.893
------------- ------------
Total 1.272.702 1.035.893
------------- ------------
25.1 Authorised share capital
As at the end of 2017, the authorized share capital of the
Company was 989.869.935 Ordinary Shares of EUR0,01 nominal value
each, 785.000 Redeemable Preference Class A Shares of EUR0,01
nominal value each and 8.618.997 Redeemable Preference Class B
Shares of EUR0,01 nominal value each.
The Company cancelled the Redeemable Preference Class A Shares
following the AGM decision of 29 December 2017 and the subsequent
court approval obtained during H1 2018 while Redeemable Preference
Class B Shares (Note 25.6) remain to be cancelled.
Following the cancellation of the Redeemable Preference Class A
Shares completed within H1 2018 the authorised share capital of the
Company as at the end of the reporting period is as follows:
a) 989.869.935 Ordinary Shares of EUR0,01 nominal value
each,
b) 8.618.997 Redeemable Preference Class B Shares of EUR0,01
nominal value each, (Note 25.6).
25.2 Issued Share Capital
.
As at the end of 2017 the issued share capital of the Company
was as follows:
a) 103.589.550 Ordinary Shares of EUR0,01 nominal value
each,
b) 392.500 Redeemable Preference Class A Shares of EUR0,01
nominal value each, subject to cancellation which was completed
during 2018 as per the Annual General Meeting decision of 29
December 2017 (Note 25.6),
c) 8.618.997 Redeemable Preference Class B Shares of EUR0,01
nominal value each, (Note 25.6).
In respect of the Redeemable Preference Class A Shares, issued
in connection to the Innovations acquisition and the Redeemable
Preference Class B Shares, issued in connection to the acquisition
of Craiova Praktiker, following the holders of such shares
notifying the Company of their intent to redeem within 2016, the
Company:
- actually proceeded with full redemption of the Redeemable
Preference Class A Shares (392.500) which was finalized in Q1-2017
while it obtained during the Annual General Meeting of 29 December
2017 the necessary approval for cancelling them during 2018.
- for the Redeemable Preference Class B Shares, in lieu of
redemption the Company gave its 20% holding in Autounion (Note
25.6) in October 2016, to the Craiova Praktiker seller BLUEHOUSE
ACCESSION PROPERTY HOLDINGS III S.A.R.L and has been negotiating
the resulting difference (if any) for a final settlement. As soon
as the case is settled, the Company will proceed with the
cancellation of the Redeemable Preference Class B Shares.
On 26(th) January 2018 the Company announced that 17.066.560
Class A warrants (at a price of GBP0,10 per warrant) have been
exercised and accordingly, 17.066.560 new ordinary shares were
issued and admitted to trading on AIM. The consideration for these
shares was paid during 2017 (Notes 30 and 37.2).Furthermore the
Company proceeded with the issue of 344.371 new Ordinary Shares to
the Non-Executive Directors of the Company who were in office in
2016 in lieu of fees accrued in 2016 as well as the issue of 10.000
new Ordinary Shares to an ex-employee of the Company, who exercised
10.000 options held over Ordinary Shares (exercisable at GBP0,15
per share) and 6.260.000 new Ordinary Shares (at an average price
of GBP0,10 per new Ordinary Share) to certain advisers in lieu of
cash fees for services offered to the Company for raising capital
and facilitating capital markets strategies.
The Company proceeded during H1 2018 with the necessary actions,
ie court applications, in order to implement the decisions of the
AGM of 29 December 2017 for the cancellation of the 785.000
Redeemable Preference Class A Shares of EUR0,01 each, namely
777.150 Redeemable Preference Class A Shares of EUR0,01 each in the
name of Myrian Nes Ltd and 7.850 Redeemable Preference Class A
Shares of EUR0,01 each in the name of Theandrion Estates.
Following shares issuance completed within H1 2018 as well as
cancellation of Redeemable Preference Class A Shares the issued
share capital of the Company as at the reporting date is as
follows:
a) 127.270.481 Ordinary Shares of EUR0,01 nominal value
each,
b) 8.618.997 Redeemable Preference Class B Shares of EUR0,01
nominal value each, (Note 25.6).
25.3 Option schemes
A. Under the scheme adopted in 2007, each of the directors
serving at the time, who 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 until 1 August 2017 57 1.754
--------------- ----------
Exercisable until 1 August 2017 83 877
--------------- ----------
The Company received no notice for exercising the options and as
a result as of the date of issuance of this report the options have
expired.
B. Under a second scheme also adopted in 2007, 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 until 1 August 2017 40 1.219
--------------- ----------
Exercisable until 1 August 2017 50 610
--------------- ----------
The Company received no notice for exercising the options and as
a result as of the date of issuance of this report the options have
expired.
C. Under a scheme adopted in 2015, pursuant to an approval by
the AGM of 31/12/2013, the Company proceeded in 2015 in issuing
590.000 options to its employees, as a reward for their effort and
support during the previous year. Each option entitles the Option
holder to one Ordinary Share. Exercise price stands at GBP 0,15.
The Option holders lose and thus may not exercise any option from
the moment they cease to offer their services to the Company. The
CEO and the CFO of the Company did not receive any options.
a. 147.500 Options were exercisable within 2016 and none were exercised.
b. 147.500 Options were exercisable within 2017, out of which
10.000 options were exercised by an ex-employee of the Company
while the rest have lapsed.
c. 295.000 Options may be exercised within 2018 and as at the
date this report none have been exercised.
The Company considers that all option schemes are currently out
of the money and consequently has not made any relevant
provision.
25.4 Class A Warrants issued
The Company in order to acquire up to a 50% interest in a
portfolio of fully let logistics properties in Romania, the
Olympians Portfolio, (Note 23) issued during 2017 a financial
instrument, 35% of which consists of a convertible bond and 65% of
which is made up of a warrant. Pursuant to issuing the instrument,
the Company issued 17.066.560 Class A warrants which were exercised
during 2017 at an exercise price of GBP0,10 per ordinary share and
the Company proceeded beginning of 2018 with the issuance of
17.066.560 new ordinary shares corresponding to these warrants.
There are no Class A warrants in circulation as at the issuance
date of the financial statements.
25.5 Class B Warrants issued
On 8 August 2011 the Company issued an amount of Class B
Warrants for an aggregate corresponding to 12,5% of the issued
share capital of the Company after the exercise date. Further to
the resolution approved at the AGM of 30 December 2016 the exercise
period of the Class B Warrants was extended until 30 June 2017, at
an exercise price of 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
freeze 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 USD
100.000.000.
As at 30 June 2017 there were 12.948.694 warrants in circulation
corresponding to an equal amount of ordinary shares (1:1) and the
Company received during 2017 valid notices from holders of Class B
warrants for the full exercise of their warrants and proceeded with
the issue of 12.948.694 new ordinary shares.
There are no Class B warrants in circulation.
25.6 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 June 2018 (as at) 31 December 2017
Ordinary shares of EUR0,01 Issued and Listed in AIM 127.270.481 103.589.550
------------------------- --------------------- -------------------------
Class A Warrants - -
------------------------- --------------------- -------------------------
Class B Warrants - -
------------------------- --------------------- -------------------------
Total number of Shares Non-Dilutive Basis 127.270.481 103.589.550
------------------------- --------------------- -------------------------
Total number of Shares Full Dilutive Basis 127.270.481 103.589.550
------------------------- --------------------- -------------------------
Redeemable Preference Class A Shares
The Redeemable Preference Class A Shares which do not have
voting or dividend rights where issued as part of the Innovations
acquisition consideration. As at the reporting date all of the
Redeemable Preference Class A Shares have been redeemed and the
Company, following the approval received by the AGM on 29 December
2017, proceeded in their cancellation within 2018.
Redeemable Preference Class B Shares
The Redeemable Preference Class B Shares, issued to BLUEHOUSE
ACCESSION PROPERTY HOLDINGS III S.A.R.L as part of the Praktiker
Craiova asset acquisition do not have voting rights but have
economic rights at par with ordinary shares. As at the reporting
date all of the Redeemable Preference Class B Shares have been
redeemed but the Company is in discussions with the vendor in
respect of a final settlement (Note 30).
25.7 Other share capital related matters
Pursuant to decisions taken by the AGM of December 30(th) 2016,
the Board has been authorised and empowered to:
- issue up to 200.000.000 ordinary shares of EUR0,01 each at an
issue price as the Board may from time to time determine (with such
price being at a discount to the net asset value per share) so as
to facilitate the profitable growth of the Group. Such explicit
authority for the issuance of such shares expires on 31 December
2018. Since 31 December 2016 and until the date
of this report, the Board had issued 37.255.758 shares under its
mandated authority.
- issue Class A Warrants, to subscribe for up to 350% of the
outstanding ordinary shares at the time of issuance of the Class A
Warrants, upon such terms and conditions as may be determined by
the Board (with such price being at a discount to the net asset
value per share). Such Class A Warrants may be offered to various
third-party entities a) for participating in the capital raising of
the Company, b) for their contribution in creating value for the
Group and c) for their assistance with fundraising. Such explicit
authority for the issuance of such warrants expires on 31 December
2018. The Company issued 17.066.560 Class A warrants under this
authority during 2017 which were also exercised.
Pursuant to decisions taken by the AGM of December 29(th) 2017,
the Company proceeded with the following actions during H1
2018:
- The balance of the share premium account of the Company
reduced by EUR53.569.295 and was set off against carried forward
losses of the Company amounting to EUR53.569.295.
- The balance of the share premium account of the Company
reduced by EUR698.650 and that the said amount was set off against
any outstanding balances between the Company, Myrian Nes Ltd and
Theandrion Estates Ltd related to the Redeemable Preference Class A
Shares.
- The authorised share capital of the Company as well as the
issued share capital of the Company each reduced, by the
cancellation of 785.000 Redeemable Preference Class A Shares of
EUR0,01 each, namely 777.150 Redeemable Preference Class A Shares
of EUR0,01 each in the name of Myrian Nes Ltd and 7.850 Redeemable
Preference Class A Shares of EUR0,01 each in the name of Theandrion
Estates Ltd and the amount reduced will be set off against any
outstanding balances between the Company, Myrian Nes Ltd and
Theandrion Estates Ltd.
- The articles of association of the Company were amended by
adding the following new Regulation 3.10 after Regulation 3.9:
"Subject to the provisions of the Law, the Company may purchase
its own shares (including any redeemable shares)."
26. Foreign Currency Translation Reserve
Exchange differences related to the translation from the
functional currency of the Group's subsidiaries to EUR 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 EUR in the
countries where the Company's subsidiaries' functional currencies
are not EUR.
27. Non-Controlling Interests
Non-controlling interests represent the percentage
participations in the respective entities not owned by the
Group:
Non-controlling interest
portion
Group Company 30 June 2018 31 Dec 2017
------------- ------------
% %
------------- ------------
LLC Almaz-Press-Ukraine 45,00 45,00
------------- ------------
Ketiza Limited 10,00 10,00
------------- ------------
Ketiza Srl 10,00 10,00
------------- ------------
Ram Real Estate Management Limited 50,00 50,00
------------- ------------
Iuliu Maniu Limited 55,00 55,00
------------- ------------
Moselin Investments Srl 55,00 55,00
------------- ------------
Rimasol Enterprises Limited 55,76 55,76
------------- ------------
Rimasol Real Estate Srl 55,76 55,76
------------- ------------
Ashor Ventures Limited 55,76 55,76
------------- ------------
Ashor Development Srl 55,76 55,76
------------- ------------
Jenby Ventures Limited 55,70 55,70
------------- ------------
Jenby Investments Srl 55,70 55,70
------------- ------------
Ebenem Limited 55,70 55,70
------------- ------------
Ebenem Investments Srl 55,70 55,70
------------- ------------
SPDI Real Estate SRL 50,00 50,00
------------- ------------
28. Borrowings
Property 30 June 31 Dec
2018 2017
EUR EUR
------------------- ----------- -----------
Banca Comerciala Romana /Tonescu
Finance Monaco Towers - 924.562
------------------- ----------- -----------
Bancpost SA Blooming House 1.080.834 1.080.834
------------------- ----------- -----------
Alpha Bank Romania Romfelt Plaza 498.547 686.693
------------------- ----------- -----------
EOS Business
Alpha Bank Romania Park 656.599 828.599
------------------- ----------- -----------
Bancpost SA Greenlake -
Parcel K 3.249.926 3.249.926
------------------- ----------- -----------
Alpha Bank Bulgaria Boyana 2.258.128 2.404.187
------------------- ----------- -----------
Alpha Bank Bulgaria Boyana/Sertland 666.474 678.162
------------------- ----------- -----------
Eurobank Ergasias SA SPDI Logistics 10.989.740 11.235.480
------------------- ----------- -----------
Piraeus Bank SA Greenlake-Phase
2 2.525.938 2.525.938
------------------- ----------- -----------
Marfin Bank Romania Praktiker Craiova 4.178.128 4.298.128
------------------- ----------- -----------
Kindergarten
Bancpost SA - SPDI RE 889.040 912.790
------------------- ----------- -----------
Loans from other 3(rd) parties
and related parties (Note 37.5) 1.686.337 738.742
----------- -----------
Overdrafts 18.051 6.581
----------- -----------
Total principal of bank and non-bank
Loans 28.697.742 29.570.622
------------------- ----------- -----------
Interest accrued on bank loans 858.369 698.200
----------- -----------
Interests accrued on non-bank
loans 130.702 217.643
----------- -----------
Total 29.686.813 30.486.465
----------- -----------
30 June 31 Dec
2018 2017
EUR EUR
----------- -----------
Current portion 2.099.426 5.162.087
----------- -----------
Non-current portion 27.587.387 25.324.378
----------- -----------
Total 29.686.813 30.486.465
----------- -----------
SecMon Real Estate Srl entered (2011) into a loan agreement with
Banca Comerciala Romana for a credit facility for financing part of
the acquisition of the Monaco Towers Project apartments. As at the
end of the reporting period the balance of the loan was EUR924.562
and bears interest of EURIBOR 3M plus 5%. In June 2016, Banca
Comerciala Romana has assigned the loan, all rights and securities
to Tonescu Finance SRL. The loan, which is currently expired, is
secured by all assets of SecMon Real Estate Srl as well as its
shares. During 2017 Tonescu Finance commenced against SecMon legal
proceedings and in order for SecMon to protect itself entered
voluntarily into an insolvency process in January 2018. The
entering of SecMon in the insolvency process means loss of control
as per the definition of IFRS 10. As such Sec Mon Srl is not
consolidated in the present financial statements (Note 6).
Ketiza Real Estate Srl entered (2012) into a loan agreement with
Bancpost SA for a credit facility for financing the acquisition of
the Blooming House Project and 100% of the remaining (without VAT)
construction works of Blooming House project. As at the end of the
reporting period the balance of the loan was EUR1.080.834. The loan
bears interest of EURIBOR 3M plus 3,5% and matures in 2019. The
bank loan is secured by all assets of Ketiza Real Estate Srl as
well as its shares and is being repaid through sales proceeds.
SecRom Real Estate Srl entered (2009) into a loan agreement with
Alpha Bank Romania for a credit facility for financing part of the
acquisition of the Doamna Ghica Project apartments. As at the end
of the reporting period, the balance of the loan was EUR498.547,
bears interest of EURIBOR 3M+4.25% and is repayable on the basis of
investment property sales. The loan had a maturity date in March
2017 and the Group has been in discussions with the lender for a
restructuring. Following an agreement with the bank the loan was
extended in Q1-2017 for another 4 years until 2021. The loan is
secured by all assets of SecRom Real Estate Srl as well as its
shares and is being repaid through sales proceeds.
Moselin Investments Srl entered (2010) into a construction loan
agreement with Bancpost SA covering the construction works of
Parcel K Greenlake project. As at the end of the reporting period
the balance of the loan was EUR3.249.926 and bears interest of
EURIBOR 3M plus 2,5%. Following restructuring implemented during
2017 the loan maturity was extended to 2022. The loan is secured
with the property itself and the shares of Moselin Investments Srl
and is being repaid through sales proceeds.
Boyana Residence ood entered (2011) into a loan agreement with
Alpha Bank Bulgaria for a construction loan related to the
construction of the Boyana Residence project (finished in 2014). As
at the end of the reporting period the balance of the loan was
EUR2.258.128 and bears interest of EURIBOR 3M plus 5,75%. The loan
maturity was extended following negotiation with the bank to March
2019. The loan currently is being repaid through sales proceeds.
The facility is secured through a mortgage over the property and a
pledge over the company's shares as well as those of Sertland
Properties Limited. The Company has provided corporate guarantees
for this loan.
Sertland Properties Limited entered (2008) into a loan agreement
with Alpha Bank Bulgaria for an acquisition loan related to the
acquisition of 70% of Boyana Residence ood. As at the end of the
reporting period the balance of the loan was EUR666.474 and bears
interest of EURIBOR 3M plus 5,75%. The loan maturity was extended
following negotiation with the bank to March 2019. The loan
currently is being repaid through sales proceeds of Boyana
Residence apartments. The loan is secured with a pledge on
company's shares, and a corporate guarantee by SEC South East
Continent Unique Real Estate (Secured) Investments Limited.
Victini Logistics SA entered (April 2015) into a loan agreement
with EUROBANK SA to refinance the existing debt facility related to
VICTINI Logistics terminal. As at the end of the reporting period
the balance of the loan is EUR10.989.740 and bears interest of
EURIBOR 6M plus 3,2%+30% of the asset swap. The loan is repayable
by 2022, has a balloon payment of EUR8.660.000 and is secured by
all assets of Victini Logistics SA as well as its shares.
SEC South East Continent Unique Real Estate (Secured)
Investments Limited has a debt facility with Piraeus Bank (since
2007) for the acquisition of the Greenlake land in Bucharest
Romania. As at the end of the reporting period the balance of the
loan was EUR2.525.938 (without any accrued interest and default
penalty) and bears interest of EURIBOR 3M plus 4% plus the Greek
law 128/78 0,6% contribution. The loan matured in February 2017,
the bank has agreed to prolong the maturity of the loan to 2022 and
the Group currently finalizes with the bank the prolongation
agreement of the facility.
BlueBigBox3 Srl (Praktiker Craiova) has a loan agreement with
Marfin Bank Romania. As at the end of the reporting period the
balance of the loan was EUR4.178.128 and bears interest of EURIBOR
6M plus 5% and 3M plus 4,5%. The loan which is repayable by 2025
with a balloon payment of EUR2.159.628, is secured by the asset as
well as the shares of BlueBigBox3 srl.
N-E Real Estate Park First Phase Srl entered in 2016 into a loan
agreement with Alpha Bank Romania for a credit facility of
EUR1.000.000 for working capital purposes. As at the end of the
reporting period, the balance of the loan was EUR656.599, bears
interest of EURIBOR 1M+4,5% and is repayable from the free cash
flow resulting from the rental income of the related property. The
loan matures in April 2024 and is secured by a second rank mortgage
over assets of SecRom SRL, which is currently under merger process
with First Phase, as well as its shares.
SPDI Real Estate Srl (Kindergarten) has a loan agreement with
Bancpost SA Romania. As at the end of the reporting period the
balance of the loan was EUR889.040 and bears interest of Euribor 3m
plus 4,6% per annum. The loan is repayable by 2027.
Delia Lebada Invest Srl, a subsidiary, entered into a loan
agreement with the Bank of Cyprus Limited in 2007 to effectively
finance a leveraged buy-out of the subsidiary by the Group. The
principal balance of the loan as at the end of 2016 was
EUR4.569.725 (without any accrued interest and default penalty). As
the loan was in default the bank initiated insolvency procedures to
take over the Pantelimon lake asset. The Company has provided
corporate guarantees for this loan. As of July 2017 the debt has
been settled and the guarantee has been released.
Loans from other 3(rd) parties and related parties includes
borrowings from non-controlling interests. During the last eight
years and in order to support the Greenlake project the
non-controlling shareholders of Moselin, Rimasol Limited and SPDI
Real Estate (other than the Group) have contributed their share of
capital injections by means of shareholder loans. The loans bear
interest between 5% and 7% annually and are repayable in 2018 and
2019.
Loans from other 3(rd) parties and related parties includes also
loans from related parties provided as bridge financing for future
property acquisitions :
) Loans from Directors reflects loans provided from 4 Directors
as bridge financing for future property acquisitions. The loans
bear interest 8% annually and are repayable on 30 September
2018.
) PM Capital Inc., one of the Company's largest shareholders
lent the Company in January 2018 EUR1m to be used for general
working capital purposes and for staged payments towards the
acquisition of up to a 50% interest in a portfolio of fully let
logistics properties in Romania, the Olympians Portfolio. The Loan
expires at the end of September 2018, attracts interest initially
at a rate of 8,5% until the end of Q1 2018, then increases to 11%
until the end of Q2 2018 and then increases to 13% until term
expiry.
29. Bonds
The Company in order to acquire up to a 50% interest in a
portfolio of fully let logistics properties in Romania, the
Olympians Portfolio, (Notes 23 and 25.4) issued during 2017 a
financial instrument, 35% of which consists of a convertible bond
and 65% of which is made up of a warrant. The convertible loan
element of the instrument which was in the value of EUR1.033.842
bears a 6,5% coupon, has a 7 year term and is convertible into
ordinary shares of the Company at the option of the holder at 25p.
starting from 1 January 2018.
30. Trade and other payables
The fair value of trade and other payables due within one year
approximate their carrying amounts as presented below.
30 June 31 Dec
2018 2017
EUR EUR
---------- ----------
Payables to third parties 4.184.864 3.640.233
---------- ----------
Payables to related parties (Note 37.2) 695.094 2.673.808
---------- ----------
Deferred income from tenants 40.144 39.431
---------- ----------
Accruals 270.262 459.690
---------- ----------
Payables due for construction 424.447 408.436
---------- ----------
Pre sale advances 127.895 116.501
---------- ----------
Total 5.742.706 7.338.099
---------- ----------
30 June 31 Dec
2018 2017
EUR EUR
---------- ----------
Current portion 5.303.026 6.920.308
---------- ----------
Non - current portion 439.680 417.791
---------- ----------
Total 5.742.706 7.338.099
---------- ----------
Payables to third parties represents: a) payables due to
Bluehouse Capital as a result the Redeemable Convertible Class B
share redemption (Note 25) which is under discussions for a final
settlement and b) amounts payable to various service providers
including auditors, legal advisors, consultants and third party
accountants related to the current operations of the Group.
Payables to related parties represent amounts due to directors
and accrued management remuneration as well as the balances with
Secure Management Ltd and Grafton Properties (Note 37.2).
Furthermore as of 31/12/2017 an amount of EUR1.916.392 represents
advances received by the investors who participated in the warrant
instrument issued by the Company in 2017 and for which shares were
issued during January 2018 (Note 25.4).
Deferred income from tenants represents advances from tenants
which will be used as future rental income and utilities
charges.
Accruals mainly include the accrued, administration fees,
accounting fees, facility management and other fees payable to
third parties.
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 UAH 5.400.000 (USD 160.000) 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. Payables for
construction also include an amount of EUR245.000 payable to
Boyana's constructor which has been withheld as Good Performance
Guarantee.
Pre sale advances reflect the advance received in relation to
Kiyanovskiy pre sale agreement which upon non closing of the said
sale part of which will be returned to the prospective buyer.
31. Deposits from Tenants
30 June 31 Dec
2018 2017
EUR EUR
-------- --------
Deposits from tenants non-current 221.426 187.976
-------- --------
Total 221.426 187.976
-------- --------
Deposits from tenants appearing under non-current liabilities
include the amounts received from the tenants of Innovations
Logistics Park, EOS Business Park, Craiova Praktiker, Victini
Logistics and companies representing residential segment as
advances/guarantees and are to be reimbursed to these clients at
the expiration of the lease agreements.
32. Provisions and Taxes Payables
30 June 31 Dec
2018 2017
EUR EUR
---------- ----------
Corporate income tax - non-current 602.201 489.019
---------- ----------
Defense tax - current 28.145 24.373
---------- ----------
Other taxes including VAT payable - non current - 88.808
---------- ----------
Tax provision - non-current 399.450 399.450
---------- ----------
Corporate income tax - current 31.338 195.040
---------- ----------
Other taxes including VAT payable - current 426.664 418.819
---------- ----------
Provisions - current 51.040 51.047
---------- ----------
Total Provisions and Tax Liabilities 1.538.838 1.666.556
---------- ----------
Corporate income tax represents taxes payable in Cyprus and
Romania.
Other taxes represent local property taxes and VAT payable in
Ukraine, Romania, Greece, Bulgaria and Cyprus.
Non-current amounts represent the part of the settlement plan
agreed with the Cyprus tax authorities to be paid within the next
five years.
33. Finance Lease Liabilities
As at the reporting date the finance lease liabilities consist
of the non-current portion of EUR10.237.563 and the current portion
of EUR398.759 (31 December 2017: EUR10.435.241 and EUR391.002,
accordingly).
30 Jun 2018 (EUR) Note Minimum lease
payments Interest Principal
EUR EUR EUR
--------- -------------- ----------- ------------
40.2
Less than one year & 40.6 897.962 499.226 398.736
--------- -------------- ----------- ------------
Between two and five years 3.607.985 1.789.090 1.818.895
--------- -------------- ----------- ------------
More than five years 9.278.651 860.992 8.417.659
--------- -------------- ----------- ------------
13.784.598 3.149.308 10.635.290
--------- -------------- ----------- ------------
Accrued Interest 1.032
-------------- ----------- ------------
Total Finance Lease Liabilities 10.636.322
-------------- ----------- ------------
31 Dec 2017 (EUR) Note Minimum lease
payments Interest Principal
EUR EUR EUR
--------- -------------- ----------- ------------
40.2
Less than one year & 40.6 899.834 508.853 390.981
--------- -------------- ----------- ------------
Between two and five years 3.583.886 1.832.599 1.751.287
--------- -------------- ----------- ------------
More than five years 9.747.325 1.064.231 8.683.094
--------- -------------- ----------- ------------
14.231.045 3.405.683 10.825.362
--------- -------------- ----------- ------------
Accrued Interest 881
-------------- ----------- ------------
Total Finance Lease Liabilities 10.826.243
-------------- ----------- ------------
33.1 Land Plots Financial Leasing
The Group holds land plots in Ukraine under leasehold agreements
which in terms of the accounts are classified as finance leases.
Lease obligations are denominated in UAH. The fair value of lease
obligations approximate to their carrying amounts as included
above. Following the appropriate discounting, finance lease
liabilities are carried at EUR36.670 under current and non-current
portion. The Group's obligations under finance leases are secured
by the lessor's title to the leased assets.
33.2 Sale and Lease Back Agreements
A. Innovations Logistic Park
In May 2014 the Group concluded the acquisition of Innovations
Logistics Park in Bucharest, owned by Best Day Srl, through a sale
and lease back agreement with Piraeus Leasing Romania SA. As at the
end of the reporting period the balance is EUR7.082.475, bearing
interest rate at 3M Euribor plus 4,45% margin, being repayable in
monthly tranches until 2026 with a balloon payment of EUR5.244.926.
At the maturity of the lease agreement Best Day SRL will become
owner of the asset.
Under the current finance lease agreement the collaterals for
the facility are as follows:
1. Best Day SRL pledged its future receivables from its tenants.
2. Best Day SRL pledged its shares.
3. Best Day SRL pledged all current and reserved accounts opened in Piraeus Leasing, Romania.
4. Best Day SRL was obliged to provide cash collateral in the
amount of EUR250.000 in Piraeus Leasing Romania, which had been
deposited as follows, half in May 2014 and half in May 2015.
5. SPDI provided a corporate guarantee in favor of the bank
towards the liabilities of Best Day SRL arising from the sale and
lease back agreement.
In late February 2017 the Group finally agreed and signed
(following twelve months of discussions) an amended sale and lease
back agreement with Piraeus Leasing Romania for Innovations
Logistics Park in Bucharest, governing the allocation of the Nestle
Romania, early termination fee of EUR1,6 million payable to
SPDI.
B. EOS Business Park
In October 2014 the Group concluded the acquisition of EOS
Business Park in Bucharest, owned by N-E Real Estate Park First
Phase SRL, through a sale and lease back agreement with Alpha Bank
Romania SA. As at the end of the reporting period the balance is
EUR3.517.177 bearing interest rate at 3M Euribor plus 5,25% margin,
being repayable in monthly tranches until 2024 with a balloon
payment of EUR2.546.600. At the maturity of the lease agreement by
N-E Real Estate Park First Phase SRL will become owner of the
asset.
Under the current finance lease agreement the collaterals for
the facility are as follows:
1. N-E Real Estate Park First Phase SRL pledged its future receivables from its tenants.
2. N-E Real Estate Park First Phase SRL pledged Bank Guarantee receivables from its tenants.
3. N-E Real Estate Park First Phase SRL pledged its shares.
4. N-E Real Estate Park First Phase SRL pledged all current and
reserved accounts opened in Alpha Bank Romania SA.
5. N-E Real Estate Park First Phase SRL is obliged to provide
cash collateral in the amount of EUR300.000 in Alpha Bank Romania
SA in equal annual installments starting with the 5(th) year of the
agreement.
6. SPDI provided a corporate guarantee in favor of the bank
towards the liabilities of N-E Real Estate Park First Phase SRL
arising from the sales and lease back agreement.
34. Restructuring of the business
During 2016 the non-controlling shareholders of the companies
related to Greenlake project (Moselin, Iuliu Maniu, Ram, Rimasol
Ltd, Rimasol SRL, Ashor Limited, Ashor SRL, Ebenem Limited, Ebenem
SRL, Jenby Limited and Jenby SRL) in agreement with the Group
capitalized the bigger part of their capital injections by means of
shareholder loans and payables effected from 2008 onwards. An
amount of EUR6.641.997 from such loans and payables have been
transferred to the equity section while the process of
capitalization was partially finalised in 2017 with the remaining
to be finalised within 2018.
35. Earnings and net assets per share attributable to equity
holders of the parent
a. Weighted average number of ordinary shares
30 June 2018 31 Dec 2017 30 Jun 2017
Issued ordinary shares capital 127.270.481 103.589.550 103.589.550
------------- ------------ ------------
Weighted average number of ordinary shares (Basic) 123.981.462 96.991.423 90.246.672
------------- ------------ ------------
Diluted weighted average number of ordinary shares 123.981.462 103.326.122 103.056.840
------------- ------------ ------------
b. Basic diluted and adjusted earnings per share
Earnings per share 30 Jun 2018 30 Jun 2017
EUR EUR
------------ -------------
Profit/(loss) after tax attributable to owners of the parent (1.996.707) (39.285.649)
------------ -------------
Basic (0,02) (0,44)
------------ -------------
Diluted (0,02) (0,38)
------------ -------------
c. Net assets per share
Net assets per share 30 June 2018 31 Dec 2017 30 Jun 2017
EUR EUR
------------- ------------ ------------
Net assets attributable to equity holders of the parent 37.393.114 36.350.558 39.524.722
------------- ------------ ------------
Number of ordinary shares 127.270.481 103.589.550 103.589.550
------------- ------------ ------------
Diluted number of ordinary shares 127.270.481 103.589.550 103.589.550
------------- ------------ ------------
Basic 0,29 0,35 0,38
------------- ------------ ------------
Diluted 0,29 0,35 0,38
------------- ------------ ------------
36. Segment information
All commercial and financial information related to the
properties held directly or indirectly by the Group is being
provided to members of executive management who report to the Board
of Directors. Such information relates to rentals, valuations,
income, costs and capital expenditures. The individual properties
are aggregated into segments based on the economic nature of the
property. For the reporting period the Group has identified the
following material reportable segments:
Commercial-Industrial
-- Warehouse segment - Victini Logistics, Innovations Logistics
Park, Terminal Brovary Logistics Park
-- Office segment - Eos Business Park - Delea Nuova (Associate)
-- Retail segment - Craiova Praktiker and Kindergarten of Greenlake
Residential
-- Residential segment
Land Assets
-- Land assets
There are no sales between the segments.
Segment assets for the investment properties segments represent
investment property (including investment properties under
development and prepayments made for the investment properties).
Segment liabilities represent interest bearing borrowings, finance
lease liabilities and deposits from tenants.
Profit and Loss for the period ended 30 June 2018
Warehouse Office Retail Residential Land Plots Total
EUR EUR EUR EUR EUR EUR
---------- --------- ------------ ------------ ----------- ------------
Segment profit
---------- --------- ------------ ------------ ----------- ------------
Rental income 554.541 297.578 371.977 23.587 - 1.247.683
---------- --------- ------------ ------------ ----------- ------------
Service charges and
utilities income 26.406 36.717 - 1.650 - 64.773
---------- --------- ------------ ------------ ----------- ------------
Property management
income - - - 1.083 1.083
---------- --------- ------------ ------------ ----------- ------------
Sale of electricity 152.618 - - - 152.618
---------- --------- ------------ ------------ ----------- ------------
Net gain/(loss) on
disposal of Investment
Property - - - (3.016) - (3.016)
---------- --------- ------------ ------------ ----------- ------------
Net loss on disposal
of Inventory - - - (13.555) - (13.555)
---------- --------- ------------ ------------ ----------- ------------
Valuation gains/(losses)
from investment property 3.008 2.166 2.772 763 (618.872) (610.163)
---------- --------- ------------ ------------ ----------- ------------
Share of profits/(losses)
from associates - 138.637 - - - 138.637
---------- --------- ------------ ------------ ----------- ------------
Asset operating expenses (81.876) (36.651) (53.036) (12.634) (74.011) (258.208)
---------- --------- ------------ ------------ ----------- ------------
Impairment allowance
for the investment
properties - - (1.001.569) (297.200) - (1.298.769)
---------- --------- ------------ ------------ ----------- ------------
Segment EBITDA 654.697 438.447 (679.856) (299.322) (692.883) (578.917)
---------- --------- ------------ ------------ ----------- ------------
Administration expenses (900.664)
---------- --------- ------------ ------------ ----------- ------------
Other (expenses)/income,
net 26.567
---------- --------- ------------ ------------ ----------- ------------
Finance income 454.056
---------- --------- ------------ ------------ ----------- ------------
Finance costs (1.004.764)
---------- --------- ------------ ------------ ----------- ------------
Foreign exchange losses,
net (15.680)
---------- --------- ------------ ------------ ----------- ------------
Income tax expense (47.287)
---------- --------- ------------ ------------ ----------- ------------
Results from disposal
of subsidiary -
---------- --------- ------------ ------------ ----------- ------------
Exchange difference
on I/C loan to foreign
holdings 14.449
---------- --------- ------------ ------------ ----------- ------------
Exchange difference
on translation foreign
holdings 880.539
---------- --------- ------------ ------------ ----------- ------------
Total Comprehensive
Income (1.171.701)
---------- --------- ------------ ------------ ----------- ------------
Profit and Loss for the period ended 30 June 2017
Warehouse Office Retail Residential Land Plots Total
EUR EUR EUR EUR EUR EUR
---------- --------- --------- ------------ ----------- ------------
Segment
---------- --------- --------- ------------ ----------- ------------
Rental income 941.287 290.636 300.342 75.205 2.170 1.609.640
---------- --------- --------- ------------ ----------- ------------
Service charges and
utilities income 50.033 36.503 - - 6.799 93.335
---------- --------- --------- ------------ ----------- ------------
Property management
income 928.698 - - 119.030 - 1.047.728
---------- --------- --------- ------------ ----------- ------------
Sale of electricity 162.806 - - - - 162.806
---------- --------- --------- ------------ ----------- ------------
Valuation gains/(losses)
from Investment Property - - - 4.631 - 4.631
---------- --------- --------- ------------ ----------- ------------
Net loss on disposal
of Inventory - - -- (43.874) - (43.874)
---------- --------- --------- ------------ ----------- ------------
Valuation gains/(losses)
from investment property (68.961) 19.357 21.163 12.345 (365.403) (381.499)
---------- --------- --------- ------------ ----------- ------------
Gain on acquisition
of the asset - - - 15.193 - 15.193
---------- --------- --------- ------------ ----------- ------------
Share of profits/(losses)
from associates - 173.935 - - - 173.935
---------- --------- --------- ------------ ----------- ------------
Asset operating expenses (176.209) (36.109) (50.347) (24.983) (73.960) (361.608)
---------- --------- --------- ------------ ----------- ------------
Segment EBITA 1.837.654 484.322 271.158 157.547 (430.394) 2.320.287
---------- --------- --------- ------------ ----------- ------------
Administration expenses (1.091.683)
---------- --------- --------- ------------ ----------- ------------
Other (expenses)/income,
net (665)
---------- --------- --------- ------------ ----------- ------------
Finance income 9.841
---------- --------- --------- ------------ ----------- ------------
Interest expenses (983.192)
---------- --------- --------- ------------ ----------- ------------
Other finance costs (41.509)
---------- --------- --------- ------------ ----------- ------------
Foreign exchange
losses, net (1.733.039)
---------- --------- --------- ------------ ----------- ------------
Income tax expense (21.085)
---------- --------- --------- ------------ ----------- ------------
Results from disposal
of subsidiary (221.990)
---------- --------- --------- ------------ ----------- ------------
Exchange difference
on I/C loan to foreign
holdings -
---------- --------- --------- ------------ ----------- ------------
Exchange difference
on translation foreign
holdings 1.963.693
---------- --------- --------- ------------ ----------- ------------
Total Comprehensive
Income 200.658
---------- --------- --------- ------------ ----------- ------------
Balance Sheet as at 30 June 2018
Warehouse Office Retail Residential Land plots Corporate Total
EUR EUR EUR EUR EUR EUR EUR
----------- ----------- ---------- ------------ ----------- ---------- -----------
Assets
----------- ----------- ---------- ------------ ----------- ---------- -----------
Investment
properties 26.100.000 7.200.000 8.213.000 2.229.989 28.396.027 - 72.139.016
----------- ----------- ---------- ------------ ----------- ---------- -----------
Investment
property under
development - - - - 4.717.790 - 4.717.790
----------- ----------- ---------- ------------ ----------- ---------- -----------
Long-term receivables 270.000 - - 271 - 8.873 279.144
----------- ----------- ---------- ------------ ----------- ---------- -----------
Investments
in associates - 5.211.669 - - - - 5.211.669
----------- ----------- ---------- ------------ ----------- ---------- -----------
Inventories - - - 4.604.044 - - 4.604.044
----------- ----------- ---------- ------------ ----------- ---------- -----------
Available for
sale assets - - - 124.959 - - 124.959
----------- ----------- ---------- ------------ ----------- ---------- -----------
Segment assets 26.370.000 12.411.669 8.213.000 6.959.263 33.113.817 8.873 87.076.622
----------- ----------- ---------- ------------ ----------- ---------- -----------
Tangible and
intangible
assets 59.705
Prepayments
and other current
assets 6.513.465
----------- ---------- ---------- ---------- ---------- ---------- -----------
Cash and cash
equivalents 920.742
----------- ---------- ---------- ---------- ---------- ---------- -----------
Total assets 94.570.534
----------- ---------- ---------- ---------- ---------- ---------- -----------
Interest bearing
borrowings 10.989.740 656.771 5.266.385 7.398.200 3.757.485 1.618.232 29.686.813
----------- ---------- ---------- ---------- ---------- ---------- -----------
Finance lease
liabilities 7.082.475 3.517.177 - - 36.670 - 10.636.322
----------- ---------- ---------- ---------- ---------- ---------- -----------
Deposits from
tenants 216.160 - - 5.266 - - 221.426
----------- ---------- ---------- ---------- ---------- ---------- -----------
Segment liabilities 18.288.375 4.173.948 5.266.385 7.403.466 3.794.155 1.618.232 40.544.561
----------- ---------- ---------- ---------- ---------- ---------- -----------
Trade and other
payables 5.742.706
----------- ---------- ---------- ---------- ---------- ---------- -----------
Taxes payables 1.538.838
----------- ---------- ---------- ---------- ---------- ---------- -----------
Bonds 1.088.123
----------- ---------- ---------- ---------- ---------- ---------- -----------
Total liabilities 48.914.228
----------- ---------- ---------- ---------- ---------- ---------- -----------
Balance Sheet as at 31 December 2017
Warehouse Office Retail Residential Land plots Corporate Total
EUR EUR EUR EUR EUR EUR EUR
----------- ----------- ---------- ------------ ----------- ---------- -----------
Assets
----------- ----------- ---------- ------------ ----------- ---------- -----------
Investment properties 26.100.000 7.200.000 9.213.000 4.023.000 28.196.502 74.732.502
----------- ----------- ---------- ------------ ----------- ---------- -----------
Investment properties
under development 4.586.009 4.586.009
----------- ----------- ---------- ------------ ----------- ---------- -----------
Long-term receivables 315.636 301 - 851 316.788
----------- ----------- ---------- ------------ ----------- ---------- -----------
Investments
in associates 5.115.587 - 5.115.587
----------- ----------- ---------- ------------ ----------- ---------- -----------
Inventories 4.812.550 - 4.812.550
----------- ----------- ---------- ------------ ----------- ---------- -----------
Segment assets 26.415.636 12.315.587 9.213.000 8.835.851 32.782.511 851 89.563.436
----------- ----------- ---------- ------------ ----------- ---------- -----------
Tangible and
intangible assets 70.504
Prepayments
and other current
assets 5.846.584
----------- ---------- ---------- ---------- ---------- -------- -----------
Cash and cash
equivalents 831.124
----------- ---------- ---------- ---------- ---------- -------- -----------
Total assets 96.311.648
----------- ---------- ---------- ---------- ---------- -------- -----------
Borrowings 11.263.690 828.797 5.412.006 8.745.351 3.642.295 594.326 30.486.465
----------- ---------- ---------- ---------- ---------- -------- -----------
Finance lease
liabilities 7.157.476 3.629.853 - - 38.914 - 10.826.243
----------- ---------- ---------- ---------- ---------- -------- -----------
Deposits from
tenants 180.621 - - 7.355 - - 187.976
----------- ---------- ---------- ---------- ---------- -------- -----------
Segment liabilities 18.601.787 4.458.650 5.412.006 8.752.706 3.681.209 594.326 41.500.684
----------- ---------- ---------- ---------- ---------- -------- -----------
Trade and other
payables - - - - - 7.338.099
----------- ---------- ---------- ---------- ---------- -------- -----------
Taxes payable - - - - - 1.666.556
----------- ---------- ---------- ---------- ---------- -------- -----------
Bonds 1.054.337
----------- ---------- ---------- ---------- ---------- -------- -----------
Total liabilities 51.559.676
----------- ---------- ---------- ---------- ---------- -------- -----------
Geographical information
Income (Note 7) 30 June 30 June
2018 2017
EUR EUR
---------- ----------
Ukraine - 1.083.028
---------- ----------
Romania 864.744 1.060.503
---------- ----------
Greece 543.575 761.009
---------- ----------
Bulgaria 697 8.969
---------- ----------
Cyprus 57.141
---------- ----------
Total 1.466.157 2.913.509
---------- ----------
Loss from disposal of inventory (Note 11a) 30 June 30 June
2018 2017
---------- ----------
EUR EUR
---------- ----------
Bulgaria (13.555) (43.874)
---------- ----------
Total (13.555) (43.874)
---------- ----------
Loss from disposal of investment properties 30 June 30 June
(Note 11b) 2018 2017
---------- ----------
Romania (3.016) (43.874)
---------- ----------
Total (3.016) (43.874)
---------- ----------
30 June 31 Dec
2018 2017
EUR EUR
----------- -----------
Carrying amount of assets (investment properties,
associates, inventory and available for sale
investments)
----------- -----------
Ukraine 10.893.805 10.589.511
----------- -----------
Romania 50.969.629 53.514.587
----------- -----------
Greece 16.100.000 16.100.000
----------- -----------
Bulgaria 8.834.044 9.042.550
----------- -----------
Total 86.797.478 89.246.648
----------- -----------
37. Related Party Transactions
The following transactions were carried out with related
parties:
37.1 Income/ Expense
37.1.1 Income
30 June 30 June
2018 2017
EUR EUR
-------- --------
Interest Income from loan to associates 4.645 4.645
-------- --------
Total 4.645 4.645
-------- --------
Interest income from associates relates to interest income from
Greenlake Development SRL.
37.1.2 Expenses
30 June 30 June
2018 2017
EUR EUR
-------- --------
Management Remuneration 202.746 319.621
-------- --------
Interest expenses- Related Party loans (Note
37.5) 64.870 7.022
-------- --------
Total 267.616 326.643
-------- --------
Management remuneration includes the remuneration of the CEO,
the CFO, the Group Commercial Director, the Group Investment
Director (until his departure in April 2017) and that of the
Country Managers of Ukraine and Romania pursuant to the decisions
of the remuneration committee.
37.2 Payables to related parties
30 June 31 Dec
2018 2017
EUR EUR
-------- ----------
Board of Directors & Committees 80.297 231.461
-------- ----------
Grafton Properties 123.549 123.549
-------- ----------
Secure Management Services Ltd 13.341 13.341
-------- ----------
Management Remuneration 477.907 387.464
-------- ----------
Advances for warrants and options exercise - 1.917.993
-------- ----------
Total 695.094 2.673.808
-------- ----------
37.2.1 Board of Directors & Committees
The amount payable represents remuneration payable to
Non-Executive Directors until the end of the reporting period. The
members of the Board of Directors pursuant to a recommendation by
the remuneration committee and in order to facilitate the Company's
cash flow, will receive part of their payment in shares of the
Company. During 2018 the directors received 344.371 ordinary shares
in lieu of their 2016 H1 remuneration amounting to GBP 120.530.
37.2.2 Loan payable to Grafton Properties
During the Company restructuring in 2011 and under the
Settlement Agreement of July 2011, the Company undertook the
obligation to repay to certain lenders who had contributed funds
for the operating needs of the Company between 2009-2011, by
lending to AISI Realty Capital LLC as was the SC Secure Capital Ltd
name then, the total amount of USD 450.000. As at the reporting
date the liability towards Grafton Properties, representing the
Lenders, was USD 150.000, which is contingent on the Group raising
USD 50m of capital in the markets.
37.2.3 Management Remuneration
Management Remuneration represents deferred amounts payable to
the CEO and the CFO of the Company, the Group Commercial Director,
and the Country Managers of Romania and Ukraine.
37.2.4 Advances for warrants and options exercise
During 2017 (Note 25.4) the Company issued a warrant instrument
and received by investors the amount of EUR1.916.392 for which it
issued 17.066.560 ordinary shares during 2018. The Company issued
also 10.000 shares to an ex-employee for exercise of his option for
the amount of EUR1.601.
37.3 Loans from SC Secure Capital Ltd to the Company's
subsidiaries
SC Secure Capital Ltd, the finance subsidiary of the Group
provided 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 Limit Principal Principal
as of as of
30 Jun 2018 31 Dec 2017
EUR EUR EUR
----------- ------------- -------------
LLC "AISI UKRAINE" 23.062.351 12.768 12.488
----------- ------------- -------------
LLC "ALMAZ PRES UKRAINE" 8.236.554 59.973 58.656
----------- ------------- -------------
LLC "AISI ILVO" 148.966 128.821 66.897
----------- ------------- -------------
Total 201.562 138.041
----------- ------------- -------------
A potential Ukrainian Hryvnia weakening/strengthening by 10%
against the US dollar with all other variables held constant, would
result in an exchange difference on I/C loans to foreign holdings
of (EUR20.156)/ EUR20.156 respectively, estimated on balances held
at 30 June 2018.
37.4 Loans to associates
30 June 31 Dec
2018 2017
EUR EUR
-------- --------
Loans to Greenlake Development SRL 278.121 273.476
-------- --------
Total 278.121 273.476
-------- --------
The loan was given to Greenlake Development SRL from Edetrio
Holdings Limited. The agreement was signed on 17 February 2012 and
bears interest 5%. The maturity date is 30 April 2019.
37.5 Loans from related parties
30 June 31 Dec
2018 2017
EUR EUR
---------- --------
Loan from Narrowpeak Consultants 2.647 55.032
---------- --------
Loan from Directors 500.000 500.000
---------- --------
Loan from PM CAPITAL 1.000.000 -
---------- --------
Interest accrued on loans from related parties 92.168 27.298
---------- --------
Total 1.594.815 582.330
---------- --------
Loans from Directors reflects loans provided from 4 Directors as
bridge financing for future property acquisitions. The loans bear
interest 8% annually and are repayable on 30 September 2018.
PM Capital Inc., one of the Company's largest shareholders lent
the Company in January 2018 EUR1m to be used for general working
capital purposes and for staged payments towards the acquisition of
up to a 50% interest in a portfolio of fully let logistics
properties in Romania, the Olympians Portfolio. The Loan expires at
the end of September 2018, attracts interest initially at a rate of
8,5% until the end of Q1 2018, then increases to 11% until the end
of Q2 2018 and then increases to 13% until term expiry.
38. Contingent Liabilities
38.1 Tax Litigation
The Group performed during the reporting period a part of its
operations in the Ukraine, 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 and in some cases, conflicting
interpretation. 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, which are authorised by law to impose severe fines and
penalties and interest charges. Any tax year remains open for
review by the tax authorities during the three following subsequent
calendar years; however, under certain circumstances a tax year may
remain open for longer. Overall following the sale of Terminal
Brovary the exposure of the Group in Ukraine was significantly
reduced.
The Group performed during the reporting period part of its
operations also in Romania, Greece and Bulgaria. In respect of
Romanian, Bulgarian and Greek tax regimes, all are subject to
varying interpretation and to constant changes, which may be
retroactive. In certain circumstances the tax authorities may also
act arbitrary.
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 enforced by the relevant authorities could
differ and therefore affect the consolidated financial
statements.
38.2 Construction related litigation
There are no material claims from contractors due to the
postponement of projects or delayed delivery other than those
disclosed in the financial statements.
38.3 Delia Lebada SRL debt towards Bank of Cyprus
Sec South East Continent Unique Real Estate (SECURED) Investment
Ltd has provided in 2007 a corporate guarantee to Bank of Cyprus in
respect to the loan provided by the latter to its subsidiary Delia
Lebada SRL, the owner of the Pantelimon Lake plot (Note 17). As the
loan was in default, the bank had initiated an insolvency
procedure. In July 2017 the Company concluded its discussions with
the bank and settled all debts and guarantees following successful
disposal of Delia Leabada plot (Note 18). Provision was taken by
management in 2015 for EUR700.000 while finally the Company as part
of the sale of the asset and cancellation of the corporate
guarantee transaction paid EUR550.000 and as such the difference of
EUR150.000 was reversed in 2017.
38.4 Other Litigation
The Group has a number of legal cases pending. Management does
not believe that the result of these will have a substantial
overall effect on the Group's financial position. Consequently, no
such provision is included in the current financial statements.
38.5 Other Contingent Liabilities
The Group had no other contingent liabilities as at 30 June
2018.
39. Commitments
The Group had no other commitments as at 30 June 2018.
40. Financial Risk Management
40.1 Capital Risk Management
The Group manages its capital to ensure adequate liquidity will
be able to implement its stated growth strategy in order to
maximize 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 28), bonds (Note 29), trade and other
payables (Note 30) deposits from tenants (Note 31), financial
leases (Note 33), taxes payable (Note 32) and equity attributable
to ordinary or preferred shareholders.
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.
40.2 Categories of Financial Instruments
Note 30 June 31 Dec
2018 2017
EUR EUR
----- ----------- -----------
Financial Assets
----- ----------- -----------
Cash at Bank 24 920.742 831.124
----- ----------- -----------
Long-term Receivables and prepayments 21 279.144 316.788
----- ----------- -----------
Prepayments and other receivables 23 6.513.465 5.846.584
----- ----------- -----------
Total 7.713.351 6.994.496
----- ----------- -----------
Financial Liabilities
----- ----------- -----------
Borrowings 28 29.686.813 30.486.465
----- ----------- -----------
Trade and other payables 30 5.742.706 7.338.099
----- ----------- -----------
Deposits from tenants 31 221.426 187.976
----- ----------- -----------
Finance lease liabilities 33 10.636.322 10.826.243
----- ----------- -----------
Taxes payable and provisions 32 1.538.838 1.666.556
----- ----------- -----------
Bonds issued 29 1.088.123 1.054.337
----- ----------- -----------
Total 48.914.228 51.559.676
----- ----------- -----------
40.3 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 the end of the reporting period, the Group had not
entered into any derivative contracts.
40.4 Economic Market Risk Management
The Group operates in Romania, Bulgaria, Greece and Ukraine. 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 in the way the Group 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.
Management is monitoring the net exposures and adopts policies to
encounter them so that the net effect of devaluation is
minimized.
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 30(th) , 2018, cash
and cash equivalent financial assets amounted to EUR920.742 (31
December 2017: EUR 831.124) of which approx. EUR700 in UAH,
EUR580.000 in RON and EUR20.000 in BGN (Note 24) while the
remaining are mainly denominated in either USD or EUR.
The Group is exposed to interest rate risk in relation to its
borrowings amounting to EUR29.686.813 (31 December 2017:
EUR30.486.465) as they are issued at variable rates tied to the
Libor or Euribor. 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 5.
As at 30 June 2018 the average interest rate for all the
interest bearing borrowing and financial leases of the Group stands
at 4,29% (31 December 2017: 4,67%).
The sensitivity analysis for LIBOR and EURIBOR changes applying
to the interest calculation on the borrowings principal outstanding
as at 30 June 2018 is presented below:
as at 30.06.2018 +100 bps +200 bps
Weighted average interest
rate 4,29% 5,29% 6,29%
----------------- ---------- ----------
Influence on yearly finance
costs - (392.974) (785.948)
----------------- ---------- ----------
The sensitivity analysis for LIBOR and EURIBOR changes applying
to the interest calculation on the borrowings principal outstanding
as at 31 December 2017 is presented below:
Actual +100 bps +200 bps
as at 31.12.2017
Weighted average interest
rate 4,67% 5,67% 6,67%
------------------ ---------- ----------
Influence on yearly finance
costs - (403.580) (807.159)
------------------ ---------- ----------
40.5 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. In respect of
receivables from tenants these are kept to a minimum of 2 months
and are monitored closely.
40.6 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 2018 Carrying Total Less than From one More than
amount Contractual one year to two years
Cash Flows two years
EUR EUR EUR EUR EUR
----------- ------------- ----------- ----------- -----------
Financial assets
----------- ------------- ----------- ----------- -----------
Cash and cash equivalents 920.742 920.742 920.742 - -
----------- ------------- ----------- ----------- -----------
Prepayments and other
receivables 6.513.465 6.513.465 6.513.465 - -
----------- ------------- ----------- ----------- -----------
Long Term Receivables
and prepayments 279.144 279.144 - - 279.144
----------- ------------- ----------- ----------- -----------
Total Financial assets 7.713.351 7.713.351 7.434.207 - 279.144
----------- ------------- ----------- ----------- -----------
Financial liabilities
----------- ------------- ----------- ----------- -----------
Borrowings 29.686.813 32.303.940 5.144.017 5.650.079 21.509.844
----------- ------------- ----------- ----------- -----------
Trade and other payables 5.742.706 5.742.706 5.303.026 - 439.680
----------- ------------- ----------- ----------- -----------
Deposits from tenants 221.426 221.426 - - 221.426
----------- ------------- ----------- ----------- -----------
Finance lease liabilities 10.636.322 13.784.598 897.962 863.217 12.023.419
----------- ------------- ----------- ----------- -----------
Bonds 1.088.123 1.504.240 67.200 67.200 1.369.840
----------- ------------- ----------- ----------- -----------
Taxes payable 1.538.838 1.538.838 537.187 1.001.651 -
----------- ------------- ----------- ----------- -----------
Total Financial liabilities 48.914.228 55.095.748 11.949.392 7.582.147 35.564.209
----------- ------------- ----------- ----------- -----------
Total net liabilities 41.200.877 47.382.397 4.515.185 7.582.147 35.285.065
----------- ------------- ----------- ----------- -----------
31 December 2017 Carrying Total Less than From one More than
amount Contractual one year to two years
Cash Flows two years
EUR EUR EUR EUR EUR
----------- ------------- ----------- ----------- -----------
Financial assets
----------- ------------- ----------- ----------- -----------
Cash at Bank 831.124 831.124 831.124 - -
----------- ------------- ----------- ----------- -----------
Prepayments and other
receivables 5.846.584 5.846.584 5.846.584 - -
----------- ------------- ----------- ----------- -----------
Long-term Receivables
and prepayments 316.788 316.788 - - 316.788
----------- ------------- ----------- ----------- -----------
Total Financial assets 6.994.496 6.994.496 6.677.708 - 316.788
----------- ------------- ----------- ----------- -----------
Financial liabilities
----------- ------------- ----------- ----------- -----------
Borrowings 30.486.465 30.486.465 5.162.087 4.072.514 21.251.864
----------- ------------- ----------- ----------- -----------
Trade and other payables 7.338.099 7.338.099 6.920.308 - 417.791
----------- ------------- ----------- ----------- -----------
Deposits from tenants 187.976 187.976 - - 187.976
----------- ------------- ----------- ----------- -----------
Finance lease liabilities 10.826.243 14.231.045 899.834 880.913 12.450.298
----------- ------------- ----------- ----------- -----------
Bonds issued 1.054.337 1.054.337 20.495 - 1.033.842
----------- ------------- ----------- ----------- -----------
Taxes payable and
provisions 1.666.556 1.666.556 664.906 1.001.650 -
----------- ------------- ----------- ----------- -----------
Total Financial liabilities 51.559.676 54.964.478 13.667.630 5.955.077 35.341.771
----------- ------------- ----------- ----------- -----------
Total net liabilities 44.565.180 47.969.982 6.989.922 5.955.077 35.024.983
----------- ------------- ----------- ----------- -----------
41. Events after the end of the reporting period
There were no material events after the reporting period, which
have a bearing on the understanding of the financial
statements.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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