TIDMARO
RNS Number : 0799C
Arricano Real Estate PLC
27 September 2018
Arricano Real Estate plc
("Arricano" or the "Company" or, together with its subsidiaries,
the "Group")
Interim Results for the 6 months ended 30 June 2018
Arricano is one of the leading real estate developers and
operators of shopping centres in Ukraine. Today, Arricano owns and
operates five completed shopping centres comprising 147,100 sqm of
gross leasable area, a 49.9% shareholding in Assofit and land for a
further three sites under development.
Highlights:
-- Total revenues increased 15% to USD14.8 million (30 June
2017: USD 12.9 million)
-- Excluding revaluation gains profit before tax increased by
129% to USD 6.4 million (30 June 2017: USD 2.8 million)
-- Total fair valuation of the Company's portfolio increased by
USD 19.1 million to USD 240.4 million as at 30 June 2018 (31
December 2017: USD 221.2 million)
-- Occupancy increased to 99.7 % as at 30 June 2018 (30 June
2017: 98.8%)
-- Borrowings remain conservative at the property level with a
loan to investment property ratio of 16 % as at 30 June 2018 (30
June 2017: 23.8%)
-- Net asset value USD 74.3 million (31 December 2017: USD 52.2
million)
-- Signed 68 new lease agreements during H1 2018 compared to 52
in H1 2017
Mykhailo Merkulov, CEO of Arricano, commented:
"This has been a good period for the business delivering
increases in revenue, underlying profitability and the value of our
portfolio. While this is a very satisfying result, we continue to
push the business in all areas, a key focus in this year has been
to achieve a greater understanding of what the visitors to shopping
centres are looking for, so that we can better anticipate their
needs thereby making a visit to an Arricano shopping centre, a
premium experience."
For further information please contact:
Arricano Real Estate plc Tel: +380 44 569 6708
Mykhailo Merkulov, CEO
Nominated Adviser and Broker Tel: +44 (0)20 7131 4000
Smith & Williamson Corporate Finance Limited
Azhic Basirov
Financial PR Tel: +44 (0)20 3151 7008
Novella Communications
Tim Robertson/Toby Andrews
Chief Executive's Statement
Introduction
I am pleased to be able to report that in the first six months
of 2018 the Company delivered a 15% increase in revenue together
with an underlying profit before tax of USD 16.2 million (6 months
ended 30 June 2017: USD 18.4 million). In the context of increasing
competition from online sales and the challenging political and
economic environment in Ukraine, this has been a very successful
six months and positions the business well for the full year.
We are now very close to being fully let with occupancy at
99.7%. This is an excellent achievement, however, we remain focused
continuing to improve the appeal of our malls and to that end a key
focus in 2018 has been on increasing our understanding of visitors,
in particular, why they come and what they are looking for.
Government actions in Ukraine continue to point towards the
reduction of corruption which can only be positive for Arricano.
Also in the period, the Hryvna improved against the US Dollar which
has helped support consumer confidence and has improved commercial
borrowing costs.
Results
Revenues for the six months to 30 June 2018 increased by 15% to
USD 14.8 million, compared with the same period last year, with net
operating income (excluding revaluation gains) from the operating
properties increasing by 32% to USD 11.0 million compared to USD
8.3 million in H1 2017.
The Company reported an increase in pre-tax profit (excluding
revaluation gains) of USD 3.6 million (30 June 2017: USD 2.8
million)
The Company recorded a gain on the revaluation of investment
properties of USD 9.8 million (30 June 2017: gain of USD 15.6
million).
Net profit after tax for the six months to 30 June 2018 was USD
13.9 million (30 June 2017: USD 15.9 million) giving earnings per
share of USD 0.13 (30 June 2017: USD 0.15).
The portfolio of property assets was independently valued as at
30 June 2018 by Expandia LLC, (part of the CBRE Affiliate Network)
at USD 240.4 million (31 December 2017: USD 221.3 million). The
valuation uplift came from an increase in rental rates, positive
currency movement, increased occupancy and improvement in tenant
mix further helped by an improving general economy.
Bank debt at the half-year end was USD 39.5 million, with the
majority of borrowings at the project level at an average rate of
11.5 %. Loans mature between 2018 and 2020 and the Company's loan
to investment property value ratio is comparatively low at 16 % as
at 30 June 2018. In addition, the Company had USD 4 million of cash
and cash equivalents, and non-bank loans of USD 57.8 million as at
30 June 2018.
Operational Review
In 2018 we have again made good progress in enhancing the appeal
and style of our shopping malls. A key focus has been to develop
ways to gain a greater understanding of visitors so that we can
then shape our retail spaces to best suit their needs.
Historically, retailers and owners of shopping malls have relied on
customer surveys which overtime have proven to be highly
inaccurate.
With the help of technological advances, in 2018 we are now in a
position to use our digital channels such as Facebook, Instagram
and YouTube through which we have audiences of tens of thousands to
help us better understand what visitors are looking for when they
come to an Arricano mall. Findings from these channels is proving
valuable and are steering the way we develop our retail spaces.
As part of increasing the appeal of the portfolio, in the second
quarter of 2018, the management team has focused on strengthening
Arricano's position in the key retail categories of fashion and IT.
In total, Arricano signed 68 new leases in the first six months of
2018. This was a good performance increasing occupancy and
achieving an average rental rate (excluding hypermarkets) of USD
18.5 per sq.m. The incoming tenants are all of good quality which
will further help to increase the appeal of the shopping
centres.
A principal task set for 2018 has been for the Arricano team to
implement targeted business solutions aimed at supporting the
growth in turnover of our tenants.
The consumer relations team are working successfully to attract
affluent visitors to Arricano's shopping malls. Alongside focusing
on promoting awareness of the comfortable social spaces for
visitors to take advantage of when shopping in an Arricano mall.
B2C communications on all aspects of the shopping experience is
taking place both offline and online where consumers' are sharing
opinions and providing interesting and valuable feedback.
The three development sites covering 14 ha. In Lukianivka
(Kyiv), Petrivka (Kyiv), and Rozumovska (Odesa) continue to be
progressed.
Regarding the 49.9% shareholding in Assofit Holdings Limited
("Assofit"), a holding company, which held the Sky Mall shopping
centre, the Company continues to pursue Stockman Interhold S.A.
("Stockman") concerning the ownership of Assofit. The Company
announced in January 2018 that the High Court of Justice in London
(the "High Court") had dismissed an application made by Stockman
for permission to appeal the High Court's earlier judgement in
which it dismissed Stockman's various challenges to the Fourth,
Fifth and Seventh Awards (the "LCIA Awards") rendered in the London
Court of International Arbitration proceedings between Arricano and
Stockman.
People
This has been another successful period for the ompany which is
down to the consistent efforts of the entire Arricano team and on
behalf of the Board I would like to thank all employees and
stakeholders for their commitment and hard work so far in 2018.
Outlook
Arricano has completed a successful first six months and is well
placed to achieve a good result for the full year. Today, each
Arricano shopping mall is either fully occupied or very nearly so
and we believe this reflects positively on the appeal of our sites
amongst the domestic and international retail community.
Maintaining this appeal is the key objective for our business and
we continue to differentiate ourselves by taking a collaborative
approach to working with our tenants and viewing their success as
interlinked with our success. While the political and economic
progress in Ukraine remains slow, Arricano continues to
outperform.
Mykhailo Merkulov
Chief Executive Officer
26 September 2018
INDEPENT AUDITORS' REPORT ON REVIEW OF CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
TO ARRICANO REAL ESTATE PLC
Introduction
We have reviewed the accompanying consolidated interim condensed
statement of financial position of Arricano Real Estate PLC and its
subsidiaries ("the Group") as at 30 June 2018, the consolidated
interim condensed statements of comprehensive income, changes in
equity and cash flows for the six- month period then ended, and
notes to the interim financial statements ("the consolidated
interim condensed financial statements"). Management is responsible
for the preparation and presentation of these consolidated interim
condensed financial statements in accordance with IAS34 "Interim
Financial Reporting". Our responsibility is to express a conclusion
on these consolidated interim condensed financial statements based
on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements 2410, "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity." A
review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the accompanying consolidated interim
condensed financial statements do not present fairly, in all
material respects, the financial position of the Group as at 30
June 2018, and of its financial performance and its cash flows for
the six-month period then ended in accordance with IAS 34 "Interim
Financial Reporting".
Emphasis of matter
Without qualifying our conclusion we draw you attention to the
following:
1. Note 1(b) to the consolidated interim condensed financial
statements, which describes the political and social unrest and
regional tensions in Ukraine that started in November 2013 and
escalated in 2014 and afterwards. The events referred to in Note
1(b) have adversely affected the Group and could continue to
adversely affect the Group's results and financial position in a
manner not currently determinable.
2. Note 2(d) to the consolidated interim condensed financial
statements, which describes that as at 30 June 2018 the Group's
current liabilities exceed current assets by USD 74,327 thousand.
This condition, along with the other matters described in Note
2(d), indicate the existence of a material uncertainty that may
cast significant doubt about the Group's ability to continue as a
going concern.
John C. Nicolaou, CPA
Certified Public Accountant and Registered Auditor
for and on behalf of
KPMG Limited
Certified Public Accountants and Registered
Auditors
11, June 16th 1943 Street
3022 Limassol
Cyprus
Limassol, 26 September 2018
Arricano Real Estate PLC
Consolidated interim condensed financial statements as
at and for the six months ended 30 June 2018
Consolidated interim condensed statement of financial position
as at 30 June 2018
Note 30 June 31 December
2018
(unaudited) 2017 *
(in thousands of USD)
Assets
Non-current assets
Investment property 4 240,390 221,265
Long-term VAT receivable 1,054 1,016
Property and equipment 125 146
Intangible assets 62 42
Total non-current assets 241,631 222,469
Current assets
Trade and other receivables 1,119 2,364
Loans receivable 320 296
Prepayments made and other assets 478 427
VAT receivable 1,065 1,011
Assets classified as held for sale 1,651 1,541
Cash and cash equivalents 4,015 2,609
Income tax receivable 263 228
Total current assets 8,911 8,476
Total assets 250,542 230,945
The consolidated interim condensed statement of financial
position is to be read in conjunction with the notes to, and
forming part of, the consolidated interim condensed financial
statements set out on pages 10 to 39.
Arricano Real Estate PLC
Consolidated interim condensed financial statements as
at and for the six months ended 30 June 2018
Consolidated interim condensed statement of financial position
as at 30 June 2018 (continued)
Note 30 June 31 December
2018
(unaudited) 2017*
(in thousands of USD)
Equity and Liabilities
Equity 5
Share capital 67 67
Share premium 183,727 183,727
Non-reciprocal shareholders contribution 59,713 59,713
Retained earnings 14,734 834
Other reserves (61,983) (61,983)
Foreign currency translation differences (121,947) (130,176)
Total equity 74,311 52,182
Non-current liabilities
Long-term loans and borrowings 6 54,485 58,765
Advances received 41 125
Finance lease liability 7,616 7,037
Trade and other payables 7 5,244 9,885
Other long-term liabilities 8 20,097 20,091
Deferred tax liability 5,510 5,091
Total non-current liabilities 92,993 100,994
Current liabilities
Short-term loans and borrowings 6 42,802 39,891
Trade and other payables 7 26,437 25,258
Taxes payable 1,088 1,429
Advances received 5,675 4,922
Current portion of finance lease
liability 2 2
Other liabilities 8 7,234 6,267
Total current liabilities 83,238 77,769
Total liabilities 176,231 178,763
Total equity and liabilities 250,542 230,945
* The Group has initially applied IFRS 15 and IFRS 9 at 1
January 2018. Under the transition methods chosen, comparative
information is not restated. See Note 3.
These consolidated interim condensed financial statements were
approved by the Board of Directors on 26 September 2018 and were
signed on its behalf by:
Director Director
Arricano Real Estate PLC
Consolidated interim condensed financial statements as
at and for the six months ended 30 June 2018
Consolidated interim condensed statement of profit or loss
and other comprehensive income for the six months ended
30 June 2018
Note Six months Six months
ended 30 ended 30
June 2018 June 2017*
(unaudited) (unaudited)
(in thousands of USD, except for
earnings per share)
Revenue 9 14,810 12,933
Other income 489 325
Gain on revaluation of investment
property 4 9,765 15,631
Goods, raw materials and services
used (455) (399)
Operating expenses (2,533) (3,380)
Employee costs (1,230) (1,062)
Depreciation and amortisation (46) (74)
Profit from operating activities 20,800 23,974
Finance income 10 1,682 1,748
Finance costs 10 (6,282) (7,281)
Profit before income tax 16,200 18,441
Income tax expense 11 (2,300) (2,532)
Profit for the period 13,900 15,909
Items that may be reclassified
to profit or loss:
Foreign exchange gains on monetary
items that form part of net investment
in the foreign operation, net of
tax effect 21,666 13,352
Foreign currency translation differences (13,437) (8,101)
Total items that may be reclassified
to profit or loss 8,229 5,251
Other comprehensive income 8,229 5,251
Total comprehensive income for
the period 22,129 21,160
Weighted average number of shares
(in shares) 5 103,270,637 103,270,637
Basic and diluted earnings per
share, USD 0.13 0.15
* The Group has initially applied IFRS 15 and IFRS 9 at 1
January 2018. Under the transition methods chosen, comparative
information is not restated. See Note 3.
Arricano Real Estate PLC
Consolidated interim condensed financial statements as
at and for the six months ended 30 June 2018
Consolidated interim condensed statement of cash flows
for the six months ended 30 June 2018
Note Six months Six months
ended ended
30 June 2018 30 June 2017*
(unaudited) (unaudited)
(in thousands of USD)
Cash flows from operating activities
Profit before income tax 16,200 18,441
Adjustments for:
Interest income 10 (108) (134)
Finance costs 10 6,282 7,281
Gain on revaluation of investment
property 4 (9,765) (15,631)
Depreciation and amortisation 46 74
Unrealised foreign exchange
gain (1,574) (1,609)
Reversal of allowance for bad (11) -
debts
Write-off of liabilities - (325)
Operating cash flows before
changes in working capital 11,070 8,097
Change in trade and other receivables
and prepayments made and other
assets 1,368 142
Change in VAT receivable 46 378
Change in trade and other payables (397) 201
Change in advances received 316 60
Change in other liabilities 6 (485)
Change in taxes payable (430) (102)
Income tax paid (498) (655)
Interest paid (2,330) (2,623)
Cash flows from operating activities 9, 151 5,013
Cash flows from investing activities
Acquisition of investment property
and settlements of payables
due to constructors (3,612) (2,369)
Acquisition of property and
equipment and intangible assets (33) (101)
Disposal of property and equipment - 5
Interest received 108 134
Cash flows used in investing
activities (3,537) (2,331)
Arricano Real Estate PLC
Consolidated interim condensed financial statements as
at and for the six months ended 30 June 2018
Consolidated interim condensed statement of cash flows
for the six months ended 30 June 2018 (continued)
Note Six months Six months
ended ended 30
30 June 2018 June 2017*
(unaudited) (unaudited)
(in thousands of USD)
Cash flows from financing activities
Financial aid granted - (92)
Repayment of borrowings (4,165) (3,272)
Finance lease payments (268) (255)
Cash flows used in financing activities (4,433) (3,619)
Net increase (decrease) in cash
and cash equivalents 1,181 (937)
Cash and cash equivalents at 1
January 2,609 4,953
Effect of movements in exchange
rates on cash and cash equivalents 225 175
Cash and cash equivalents at 30
June 4,015 4,191
* The Group has initially applied IFRS 15 and IFRS 9 at 1
January 2018. Under the transition methods chosen, comparative
information is not restated. See Note 3.
Arricano Real Estate PLC
Consolidated interim condensed financial statements as at and for the
six months ended 30 June 2018
Notes to the consolidated interim condensed financial statements
Attributable to equity holders of the parent
------------------------------------------------------------------------------------------------------
Foreign
Non-reciprocal currency
Share Share shareholders Accumulated Other translation
capital premium contribution deficit reserves differences Total
(in thousands
of
USD)
Balances at 1
January
2017 67 183,727 59,713 (24,973) (61,983) (132,371) 24,180
Total
comprehensive
income for the
period
Profit for the
period
(unaudited) - - - 15,909 - - 15,909
Foreign
exchange
gains on
monetary
items that
form part
of net
investment
in the
foreign
operation,
net of tax
effect
(unaudited) - - - - - 13,352 13,352
Foreign
currency
translation
differences
(unaudited) - - - - - (8,101) (8,101)
Total other
comprehensive
income
(unaudited) - - - - - 5,251 5,251
Total
comprehensive
income for
the period
(unaudited) - - - 15,909 - 5,251 21,160
Balances at 30
June
2017
(unaudited) 67 183,727 59,713 (9,064) (61,983) (127,120) 45,340
Arricano Real Estate PLC
Consolidated interim condensed financial statements as at and for
the six months ended 30 June 2018
Notes to the consolidated interim condensed financial statements
Attributable to equity holders of the parent
------------------------------------------------------------------------------------------------------
Foreign
Non-reciprocal currency
Share Share shareholders Retained Other translation
capital premium contribution earnings reserves differences Total
(in thousands
of USD)
Balances at 1
January 2018* 67 183,727 59,713 834 (61,983) (130,176) 52,182
Total
comprehensive
income for the
period
Profit for the
period
(unaudited) - - - 13,900 - - 13,900
Foreign
exchange
gains on
monetary
items that
form
part of net
investment
in the
foreign
operation,
net
of tax effect
(unaudited) - - - - - 21,666 21,666
Foreign
currency
translation
differences
(unaudited) - - - - - (13,437) (13,437)
Total other
comprehensive
income
(unaudited) - - - - - 8,229 8,229
Total
comprehensive
income for
the
period
(unaudited) - - - 13,900 - 8,229 22,129
Balances at 30
June 2018
(unaudited) 67 183,727 59,713 14,734 (61,983) (121,947) 74,311
* The Group has initially applied IFRS 15 and IFRS 9 at 1
January 2018. Under the transition methods chosen, comparative
information is not restated. See Note 3.
1 Background
(a) Organisation and operations
Arricano Real Estate PLC (Arricano, the Company or the Parent
Company) is a public company that was incorporated in Cyprus and is
listed on the AIM Market of the London Stock Exchange. The Parent
Company's registered address is office 1002, 10(th) floor, Nicolaou
Pentadromos Centre, Thessalonikis Street, 3025 Limassol, Cyprus.
Arricano and its subsidiaries are referred to as the Group, and
their principal place of business is in Ukraine.
The main activities of the Group are investing in the
development of new properties in Ukraine and leasing them out. As
at 30 June 2018, the Group operates five shopping centres in Kyiv,
Simferopol, Zaporizhzhya and Kryvyi Rig with a total leasable area
of over 147,100 square meters and is in the process of development
of two new investment projects in Kyiv and Odesa, with one more
project to be consequently developed.
(b) Ukrainian business environment
The Group's operations are primarily located in Ukraine. The
political and economic situation in Ukraine has been subject to
significant turbulence in recent years and demonstrates
characteristics of an emerging market. Consequently, operations in
the country involve risks that do not typically exist in other
markets.
An armed conflict in certain parts of Lugansk and Donetsk
regions, which started in spring 2014, has not been resolved and
part of the Donetsk and Lugansk regions remains under control of
the self-proclaimed republics, and Ukrainian authorities are not
currently able to fully enforce Ukrainian laws on this territory.
Various events in March 2014 led to the accession of the Republic
of Crimea to the Russian Federation, which was not recognised by
Ukraine and many other countries. This event resulted in a
significant deterioration of the relationship between Ukraine and
the Russian Federation.
Ukraine's economic situation deteriorated significantly since
2014 as a result of the fall in trade with the Russian Federation
and military tensions in Eastern Ukraine. Although instability
continued throughout 2016 and 2017, Ukrainian economy showed first
signs of recovery with inflation rate slowing down, lower
depreciation of hryvnia against major foreign currencies, growing
international reserves of the National Bank of Ukraine (the "NBU")
and general revival in business activity.
Starting from 2016, the NBU made certain steps to provide a
relief to the currency control restrictions introduced in
2014-2015. In particular, the required share of foreign currency
proceeds subject to mandatory sale on the interbank market was
gradually decreased, while the settlement period for export-import
transactions in foreign currency was increased. Also, the NBU
allowed Ukrainian companies to pay dividends abroad with a certain
monthly limitation.
The banking system remains fragile due to low level of capital
and weak asset quality and the Ukrainian companies and banks
continue to suffer from the lack of funding from domestic and
international financial markets.
The International Monetary Fund continued to support the
Ukrainian government under the four-year Extended Fund Facility
Programme approved in March 2015. Other international financial
institutions have also provided significant technical support in
recent years to help Ukraine restructure its external debt and
launch various reforms (including anticorruption, corporate law,
and gradual liberalization of the energy sector).
In August 2017 Moody's upgraded Ukraine's credit rating to Caa2,
with a positive outlook, reflecting government reforms and improved
foreign affairs. Further stabilization of economic and political
environment depends on the continued implementation of structural
reforms and other factors.
As at 30 June 2018, the carrying value of the Group's investment
property located in Simferopol, the administrative centre of the
Republic of Crimea, amounted to
USD 47,100 thousand (unaudited) (31 December 2017: USD 46,800
thousand). The ultimate effect of above developments in the
Republic of Crimea on the Group's ability to continue operations in
this region, to realise its related assets and to maintain and
secure its ownership rights cannot yet be determined.
Whilst management believes it is taking appropriate measures to
support the sustainability of the Group's business in the current
circumstances, a continuation of the current unstable business
environment could further negatively affect the Group's results and
financial position in a manner not currently determinable. These
consolidated interim condensed financial statements reflect
management's current assessment of the impact of the Ukrainian
business environment on the operations and the financial position
of the Group. The future business environment may differ from
management's assessment.
(c) Cyprus business environment
The Cyprus economy has been adversely affected during the last
few years by the economic crisis. The negative effects have to some
extent been resolved, following the negotiations and the relevant
agreements reached with the European Commission, the European
Central Bank and the International Monetary Fund (IMF) for
financial assistance which was dependent on the formulation and the
successful implementation of an Economic Adjustment Program. The
agreements also resulted in the restructuring of the two largest
(systemic) banks in Cyprus through a "bail in".
The Cyprus Government has successfully completed earlier than
anticipated the Economic Adjustments Program and exited the IMF
program on 7 March 2016, after having recovered in the
international markets and having only used EUR 7,25 billion of the
total EUR 10 billion earmarked in the financial bailout. Under the
new Euro area rules, Cyprus will continue to be under surveillance
by its lenders with bi-annual post-program visits until it repays
75% of the economic assistance received.
Although there are signs of improvement, especially in the
macroeconomic environment of the country's economy including growth
in GDP and reducing unemployment rates, significant challenges
remain that could affect the estimates of the Company's cash flows
and its assessment of impairment of financial and non-financial
assets.
The Group's management believes that it is taking all the
necessary measures to maintain the viability of the Group and the
development of its business in the current business and economic
environment and that no adverse impact on the Group's operations is
expected.
(d) Russian business environment
The Group's operations are also carried in the Russian
Federation. Consequently, the Group is exposed to the economic and
financial markets of the Russian Federation which display
characteristics of an emerging market. The legal, tax and
regulatory frameworks continue development, but are subject to
varying interpretations and frequent changes which together with
other legal and fiscal impediments contribute to the challenges
faced by entities operating in the Russian Federation. These
condensed consolidated interim financial statements reflect
management's assessment of the impact of the Russian business
environment on the operations and the financial position of the
Group. The future business environment may differ from management's
assessment.
2 Basis of preparation
(a) Statement of compliance
These consolidated interim condensed financial statements have
been prepared in accordance with IAS 34 Interim Financial Reporting
as adopted by the European Union (EU) and should be read in
conjunction with the Group's last annual consolidated financial
statements as at and for the year ended 31 December 2017 ("last
annual financial statements"). Selected explanatory notes are
included to explain events and transactions that are significant to
an understanding of the changes in financial position and
performance of the Group since the last annual financial statements
as at and for the year ended 31 December 2017. These consolidated
interim condensed financial statements do not include all the
information required for full annual financial statements prepared
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union (EU).
This is the first set of the Group's financial statements where
IFRS 15 and IFRS 9 have been applied. Changes to significant
accounting policies are described in Note 3.
The results for the six-month period ended 30 June 2018 are not
necessarily indicative of the results expected for the full
year.
(b) Judgments and estimates
Preparing the consolidated interim condensed financial
statements requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense
and the disclosure of contingent assets and liabilities. Actual
results may differ from these estimates.
In preparing these consolidated interim condensed financial
statements, significant judgments made by management in applying
the Group's accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the consolidated
financial statements as at and for the year ended 31 December 2017,
except for valuation of loans receivable and investment in Filgate
Credit Enterprises Limited and valuation of trade and other
receivables, which are no longer considered significant areas of
estimation uncertainty or critical judgement.
(c) Functional and presentation currency
The functional currency of Arricano Real Estate PLC is the US
dollar (USD). The majority of Group entities are located in Ukraine
and in the Russian Federation and have the Ukrainian Hryvnia (UAH)
and Russian Rouble (RUB) as their functional currencies since
substantially all transactions and balances of these entities are
denominated in the mentioned currencies.The Group entities located
in Cyprus, Estonia, Isle of Man and BVI have the US dollar as their
functional currency, since substantially all transactions and
balances of these entities are denominated in US dollar.
For the benefits of principal users, the management chose to
present the consolidated interim condensed financial statements in
USD, rounded to the nearest thousand.
In translating the consolidated interim condensed financial
statements into USD the Group follows a translation policy in
accordance with International Financial Reporting Standard
IAS 21 The Effects of Changes in Foreign Exchange Rates and the
following rates are used:
-- Historical rates: for the equity accounts except for net
profit or loss and other comprehensive income (loss) for the
year.
-- Year-end rate: for all assets and liabilities.
-- Rates at the dates of transactions: for the statement of
profit or loss and other comprehensive income and for capital
transactions.
UAH and RUB are not freely convertible currencies outside
Ukraine and the Russian Federation, and, accordingly, any
conversion of UAH and RUB amounts into USD should not be construed
as a representation that UAH and RUB amounts have been, could be,
or will be in the future, convertible into USD at the exchange rate
shown, or any other exchange rate.
The principal USD exchange rates used in the preparation of
these consolidated interim condensed financial statements are as
follows:
Currency 30 June 2018 31 December 2017
UAH 26.19 28.07
RUB 62.76 57.60
Average USD exchange rates for the six months period ended 30
June are as follows:
Currency 2018 2017
UAH 26.77 26.77
RUB 59.47 57.84
As at the date that these consolidated interim condensed
financial statements are authorised for issue, 26 September 2018,
the exchange rate is UAH 28,06 to USD 1.00 and
RUB 65,8 to USD 1.00.
(d) Going concern
As at 30 June 2018, the Group's current liabilities exceed
current assets by
USD 74,327 thousand (unaudited). This condition indicates the
existence of a material uncertainty that may cast significant doubt
about the Group's ability to continue as a going concern.
At the same time, the Group has positive equity of USD 74,311
thousand (unaudited) as at
30 June 2018, generated net profit of USD 13,900 (unaudited)
thousand and positive cash flows from operating activities of USD
9,151 thousand (unaudited) for the six months then ended.
Management is undertaking the following measures in order to
ensure the Group's continued operation on a going concern
basis:
-- The Group has financial support from the ultimate controlling
party. Based on representations received in writing from the
entities under common control, management believes that the Group
will not be required to settle the outstanding loans, accrued
interest, other liabilities and other payables to related parties
in the amount of USD 18,917 thousand (unaudited) plus any accruing
interest thereon at least until 30 June 2019.
-- The Group will be able to draw on existing facilities granted
from entities under common control, should this be required for
operational and other needs of the Group.
-- In August 2018, the Group has received a waiver from
Barleypark Limited, waiving repayment of the loan during twelve
months ending 30 June 2019, amounting to USD 21,195 thousand
(unaudited), which is payable on demand and presented as short-
term liability as at 30 June 2018.
-- During the six months ended 30 June 2018, management was able
to conclude a number of new tenancy agreements and increase
occupancy rate of its shopping centres. Besides, the Group managed
to gradually increase its rental rates during the year for existing
tenants.
-- Subsequent to the reporting date, the Group entered into the
loan agreement, in order to obtain a loan, in particular to
refinance loans from PJSC "Bank "St. Petersburg" amounting to USD
15,187 thousand as at 30 June 2018 with contractual maturity in
2018-2020,
short-term part of which amounts to USD 4,147 thousand (Note
15).
Management believes that the measures that it undertakes, as
described above, will allow the Group to maintain positive working
capital and operate on a going concern basis in the foreseeable
future.
These consolidated interim condensed financial statements are
prepared on a going concern basis, which contemplates the
realisation of assets and the settlement of liabilities in the
normal course of business.
(e) Measurement of fair values
A number of the Group's accounting policies and disclosures
require the measurement of fair values, for both financial and
non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the
Group uses market observable data as far as possible. Fair values
are categorised into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques as
follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a
liability might be categorised in different levels of the fair
value hierarchy, then the fair value measurement is categorised in
its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire
measurement.
The Group recognises transfers between levels of the fair value
hierarchy at the end of the reporting period during which the
change has occurred.
Further information about the assumptions made in measuring fair
values is included in the following notes:
-- Note 4(b) - investment property; and
-- Note 12(a) - fair values.
(f) Segment reporting
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to
transactions with any of the Group's other components. Management
believes that during the six months ended 30 June 2018 and the year
ended 31 December 2017, the Group operated in and was managed as
one operating segment, being property investment, with all
investment properties located in Ukraine and the Republic of
Crimea.
The Board of Directors, which is considered to be the chief
operating decision maker of the Group for IFRS 8 Operating Segments
purposes, receives semi-annually management accounts that are
prepared in accordance with IFRS as adopted by the EU and which
present aggregated performance of all the Group's investment
properties.
(g) Change in presentation
Management made some minor amendments to comparative information
in a way that it conforms with the current year presentation.
3 Changes in significant accounting policies
Except as described below, the accounting policies applied in
these consolidated interim condensed financial statements are the
same as those applied in the Group's consolidated financial
statements as at and for the year ended 31 December 2017.
The changes in accounting policies are also expected to be
reflected in the Group's consolidated financial statements as at
and for the year ending 31 December 2018.
The Group has initially adopted IFRS 15 Revenue from Contracts
with Customers (see A) and IFRS 9 Financial Instruments (see B)
from 1 January 2018. A number of other new standards are effective
from 1 January 2018. None of these standards have a material effect
on the Group's consolidated interim condensed financial
statements.
A. IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. It replaced IAS
18 Revenue, IAS 11 Construction Contracts and related
interpretations.
Revenue of the Group is mainly represented by rental income
recognised in accordance with
IAS 17 Leases.
For revenue from services in respect of exploitation of common
parts and other services
the Group has adopted IFRS 15 Revenue from Contracts with
Customers using the cumulative effect method (without practical
expedients). As there were no differences in the amounts of revenue
resulting from the adoption of IFRS 15 as at 1 January 2018, the
information presented for 2017 generally reflects the requirements
of IFRS 15.
The details of the new significant accounting policies and the
nature of the changes to previous accounting policies in relation
to the Group's services are set out below.
Under IFRS 15, revenue is recognised when a customer obtains
control of the goods or services. Determining the timing of the
transfer of control - at a point in time or over time - requires
judgement.
Nature, timing of satisfaction of
performance obligations, significant
Type of service payment terms Nature of change in accounting policy
----------------------------------- --------------------------------------- ----------------------------------------
Common parts exploitation services Revenue is recognised over time as IFRS 15 did not have a significant
those services are provided. Invoices impact on the Group's accounting
for revenue from policies.
common parts exploitation services are
issued on a monthly basis and are
usually payable within
5-15 days.
Under IFRS 15, the total consideration
in the service contracts that are
partially within
the scope of this Standard and
partially within the scope of
IAS 17 Leases is allocated to all
services based on their stand-alone
selling prices. The
stand-alone selling price is
determined based on contractually
stated price that is defined
separately for each obligation.
----------------------------------- --------------------------------------- ----------------------------------------
Marketing services Revenue is recognised over time as IFRS 15 did not have a significant
those services are provided. Invoices impact on the Group's accounting
for marketing services policies.
are issued on a monthly basis and are
usually payable within 5-15 days.
Under IFRS 15, the total consideration
in the service contracts is allocated
to all services
based on their stand-alone selling
prices. The stand-alone selling price
is determined based
on the list prices at which the Group
sells the services in separate
transactions.
----------------------------------- --------------------------------------- ----------------------------------------
B. IFRS 9 Financial Instruments
IFRS 9 sets out requirements for recognising and measuring
financial assets, financial liabilities and some contracts to buy
or sell non-financial items. This standard replaces IAS 39
Financial Instruments: Recognition and Measurement.
The details of new significant accounting policies and the
nature and effect of the changes to previous accounting policies
are set out below.
(i) Classification and measurement of financial assets and financial liabilities
IFRS 9 largely retains the existing requirements in IAS 39 for
the classification and measurement of financial liabilities.
However, it eliminates the previous IAS 39 categories for financial
assets held to maturity, loans and receivables and available for
sale.
The adoption of IFRS 9 has not had a significant effect on the
Group's accounting policies related to financial liabilities and
derivative financial instruments. The impact of IFRS 9 on the
classification and measurement of financial assets is set out
below.
Under IFRS 9, on initial recognition, a financial asset is
classified as measured at: amortised cost; FVOCI - debt investment;
FVOCI - equity investment; or FVTPL. The classification of
financial assets under IFRS 9 is generally based on the business
model in which a financial asset is managed and its contractual
cash flow characteristics. Derivatives embedded in contracts where
the host is a financial asset in the scope of the standard are
never separated. Instead, the hybrid financial instrument as a
whole is assessed for classification.
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated as at FVTPL:
-- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
-- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
A financial asset (unless it is a trade receivable without a
significant financing component that is initially measured at the
transaction price) is initially measured at fair value plus, for an
item not at FVTPL, transaction costs that are directly attributable
to its acquisition.
Subsequently, financial assets at amortised cost are measured at
amortised cost using the effective interest method. The amortised
cost is reduced by impairment losses (see B.(ii) below). Interest
income, foreign exchange gains and losses and impairment are
recognised in profit or loss. Any gain or loss on derecognition is
recognised in profit or loss.
The following table and the accompanying notes below explain the
original measurement categories under IAS 39 and the new
measurement categories under IFRS 9 for each class of the Group's
financial assets as at 1 January 2018.
Original
(in thousands of classification New classification Original carrying New carrying amount
USD) under IAS 39 under IFRS 9 amount under IAS 39 under IFRS 9
-------------------- ------------------------ ------------------- -------------------
Financial assets
Trade and other Loans and
receivables receivables Amortised cost 2,364 2,364
Loans and
Loans receivable receivables Amortised cost 296 296
Cash and cash Loans and
equivalents receivables Amortised cost 2,609 2,609
Total financial assets 5,269 5,269
=================== ===================
(ii) Impairment of financial assets
IFRS 9 replaces the 'incurred loss' model in IAS 39 with an
'expected credit loss' (ECL) model. The new impairment model
applies to financial assets measured at amortised cost, contract
assets and debt investments at FVOCI, but not to investments in
equity instruments. Under IFRS 9, credit losses are recognised
earlier than under IAS 39.
The financial assets at amortised cost consist of trade and
other receivables, cash and cash equivalents and loans
receivable.
Under IFRS 9, loss allowances are measured on either of the
following bases:
-- 12-month ECLs: these are ECLs that result from possible
default events within the 12 months after the reporting date;
and
-- lifetime ECLs: these are ECLs that result from all possible
default events over the expected life of a financial
instrument.
The Group measures loss allowances at an amount equal to
lifetime ECLs, except for bank balances for which credit risk (i.e.
the risk of default occurring over the expected life of the
financial instrument) has not increased significantly since initial
recognition, for which loss allowances are measured as 12-month
ECLs.
When determining whether the credit risk of a financial asset
has increased significantly since initial recognition and when
estimating ECLs, the Group considers reasonable and supportable
information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information
and analysis, based on the Group's historical experience and
informed credit assessment.
The Group considers a financial asset to be in default when:
-- the borrower is unlikely to pay its credit obligations to the
Group in full, without recourse by the Group to actions such as
realising security (if any is held); or
-- the financial asset is more than 90 days past due.
The maximum period considered when estimating ECLs is the
maximum contractual period over which the Group is exposed to
credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses.
Credit losses are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to the
entity in accordance with the contract and the cash flows that the
Group expects to receive).
ECLs are discounted at the effective interest rate of the
financial asset.
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial
assets carried at amortised cost are credit-impaired. A financial
asset is 'credit-impaired' when one or more events that have a
detrimental impact on the estimated future cash flows of the
financial asset have occurred.
Presentation of impairment
Loss allowances for financial assets measured at amortised cost
are deducted from the gross carrying amount of the assets.
Impairment losses related to trade and other receivables are
presented under 'operating expenses' and impairment losses on other
financial assets are presented under 'finance costs', similar to
the presentation under IAS 39, and not presented separately in the
consolidated interim condensed statement of profit or loss and
other comprehensive income due to materiality considerations.
As at 31 December 2017, there was no change in the allowance for
impairment for the Group's financial assets due to implementation
of IFRS 9.
(iii) Transition
Changes in accounting policies resulting from the adoption of
IFRS 9 have been applied retrospectively, except as described
below.
-- The Group has taken an exemption not to restate comparative
information for prior periods with respect to classification and
measurement (including impairment) requirements. Therefore,
comparative periods have not been restated. Further, as there were
no differences in the carrying amounts of financial assets and
financial liabilities resulting from the adoption of IFRS 9 as at 1
January 2018, the information presented for 2017 generally reflects
the requirements of IFRS 9.
-- The determination of the business model within which
financial assets are held has been made on the basis of the facts
and circumstances that existed at the date of initial
application.
(a) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and
interpretations are not yet effective for the six-month period
ended 30 June 2018, and have not been applied in preparing these
consolidated interim condensed financial statements. Of these
pronouncements, potentially the following will have an impact on
the Group's operations. The Group plans to adopt these standards
and interpretations when they become effective.
The Group has the following updates to information provided in
the last annual financial statements about the standards issued but
not yet effective that may have a significant impact on the Group's
consolidated financial statements.
IFRS 16 Leases
IFRS 16 replaces existing leases guidance, including IAS 17
Leases, IFRIC 4 Determining whether an Arrangement contains a
Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating
the Substance of Transactions Involving the Legal Form of a
Lease.
The standard is effective for annual periods beginning on or
after 1 January 2019. Early adoption is permitted.
IFRS 16 introduces a single, on-balance sheet lease accounting
model for lessees. A lessee recognises a right-of-use asset
representing its right to use the underlying asset and a lease
liability representing its obligation to make lease payments. There
are recognition exemptions for short-term leases and leases of
low-value items. Lessor accounting remains similar to the current
standard - i.e. lessors continue to classify leases as finance or
operating leases.
The Group has completed an initial assessment of the potential
impact on its consolidated financial statements but has not yet
completed its detailed assessment. The actual impact of applying
IFRS 16 on the consolidated financial statements in the period of
initial application will depend on future economic conditions,
including the Group's borrowing rate at
1 January 2019, the composition of the Group's lease portfolio
at that date, the Group's latest assessment of whether it will
exercise any lease renewal options and the extent to which the
Group chooses to use practical expedients and recognition
exemptions.
Thus far, the most significant impact identified is that the
Group will recognise new assets and liabilities for its operating
leases.
In addition, the nature of expenses related to those leases will
now change because IFRS 16 replaces the straight-line operating
lease expense with a depreciation charge for right-of-use assets
and interest expense on lease liabilities.
Transition
As a lessee, the Group can either apply the standard using
a:
-- retrospective approach; or
-- modified retrospective approach with optional practical expedients.
The lessee applies the election consistently to all of its
leases.
The Group plans to apply IFRS 16 initially on 1 January 2019,
using a modified retrospective approach. Therefore, the cumulative
effect of adopting IFRS 16 will be recognised as an adjustment to
the opening balance of retained earnings at 1 January 2019, with no
restatement of comparative information.
When applying a modified retrospective approach to leases
previously classified as operating leases under IAS 17, the lessee
can elect, on a lease-by-lease basis, whether to apply a number of
practical expedients on transition. The Group is assessing the
potential impact of using these practical expedients.
The Group is not required to make any adjustments for leases in
which it is a lessor except where it is an intermediate lessor in a
sub-lease.
4 Investment property
(a) Movements in investment property
Movements in investment properties for the six months ended 30
June 2018 are as follows:
Prepayment for
Land held on Land held on investment Property under
freehold leasehold Buildings property construction Total
(in thousands of
USD)
At 1 January 2018 6,300 46,547 158,290 16 10,112 221,265
Additions
(unaudited) - 75 - - 605 680
Fair value gain
on revaluation
(unaudited) 348 (2,633) 12,050 - - 9,765
Currency
translation
adjustment
(unaudited) (348) 3,337 4,950 1 740 8,680
At 30 June 2018
(unaudited) 6,300 47,326 175,290 17 11,457 240,390
Movements in investment properties for the six months ended 30
June 2017 are as follows:
Prepayment for
Land held on Land held on investment Property under
freehold leasehold Buildings property construction Total
(in thousands of
USD)
At 1 January 2017 5,800 43,054 116,700 20 10,089 175,663
Additions
(unaudited) - 92 - - 202 294
Disposals
(unaudited) - - - (3) (634) (637)
Fair value gain
on revaluation
(unaudited) (169) (1,314) 17,114 - - 15,631
Currency
translation
adjustment
(unaudited) 169 1,801 4,586 1 362 6,919
At 30 June 2017
(unaudited) 5,800 43,633 138,400 18 10,019 197,870
As at 30 June 2018, in connection with loans and borrowings, the
Group pledged as security investment property with a carrying value
of USD 134,490 thousand (unaudited)
(31 December 2017: USD 117,790 thousand) (refer to Note
13(a)).
(b) Determination of fair value
The fair value measurement, developed for determination of fair
value of the Group's investment property, is categorised within
Level 3 category due to significance of unobservable inputs to the
entire measurement, except for certain land held on the leasehold
which is not associated with completed property and is therefore
categorised within Level 2 category. As at 30 June 2018, the fair
value of investment property categorised within Level 2 category is
USD 29,300 thousand (unaudited) (31 December 2017: USD 29,100
thousand). To assist with the estimation of the fair value of the
Group's investment property as at 30 June 2018, which is
represented by the shopping centres, management engaged registered
independent appraiser Expandia LLC, part of the CBRE Affiliate
network, having a recognised professional qualification and recent
experience in the location and categories of the projects being
valued.
The fair values are based on the estimated rental value of
property. A market yield is applied to the estimated rental value
to arrive at the gross property valuation. When actual rents differ
materially from the estimated rental value, adjustments are made to
reflect actual rents. The valuation is prepared in accordance with
the practice standards contained in the Appraisal and Valuation
Standards published by the Royal Institution of Chartered Surveyors
("RICS") or in accordance with International Valuation Standards
published by the International Valuation Standards Council.
Valuations reflect, when appropriate, the type of tenants
actually in occupation or responsible for meeting lease commitments
or likely to be in occupation after letting vacant accommodation,
the allocation of maintenance and insurance responsibilities
between the Company and the lessee, and the remaining economic life
of the property. When rent reviews or lease renewals are pending
with anticipated reversionary increases, it is assumed that all
notices, and when appropriate counter-notices, have been served
validly and within the appropriate time.
Land parcels are valued based on market prices for similar
properties.
As at 30 June 2018, the estimation of fair value is made using a
net present value calculation based on certain assumptions, the
most important of which are as follows (unaudited):
-- monthly rental rates, ranging from USD 2.1 to USD 160.9 per
sq.m., which are based on contractual and market rental rates,
adjusted for discounts or fixation of rental rates in Ukrainian
hryvnia at a pre-agreed exchange rate, occupancy rates ranging from
98.6% to 100%, capitalisation rates ranging from 12.3% to 16.0%
p.a., and discount rate of 22% which represent key unobservable
inputs for determination of fair value.
-- all relevant licenses and permits, to the extent not yet
received, will be obtained, in accordance with the timetables as
set out in the investment project plans.
As at 31 December 2017, the estimation of fair value is made
using a net present value calculation based on certain assumptions,
the most important of which are as follows:
-- monthly rental rates, ranging from USD 2.00 to USD 150.00 per
sq.m., which are based on contractual and market rental rates,
adjusted for discounts or fixation of rental rates in Ukrainian
hryvnia at a pre-agreed exchange rate, occupancy rates ranging from
95.4% to 100.0% and capitalisation rates ranging from 12.5% to
16.0% p.a., and discount rate of 22% which represent key
unobservable inputs for determination of fair value.
-- all relevant licenses and permits, to the extent not yet
received, will be obtained, in accordance with the timetables as
set out in the investment project plans.
The reconciliation from the opening balances to the closing
balances for Level 3 fair value measurements is presented in note
4(a).
As at 30 June 2018, fair value of investment property,
denominated in functional currency amounted to UAH 4,562,153
thousand (unaudited) and RUB 2,955,831 thousand (unaudited) (31
December 2017: UAH 4,120,268 thousand and RUB 2,695,689 thousand).
The increase in fair value of investment property results from
increased rental payments invoiced in Ukrainian hryvnia and Russian
Rouble due to the increase in the exchange rates applied to the USD
equivalent of rental rates fixed in the rental contracts.
Sensitivity at the date of valuation
The valuation model used to assess the fair value of investment
property as at 30 June 2018 is particularly sensitive to
unobservable inputs in the following areas:
-- If rental rates are 1% less than those used in valuation
models, the fair value of investment properties would be USD 1,906
thousand (unaudited) (31 December 2017: USD 1,738 thousand) lower.
If rental rates are 1% higher, then the fair value of investment
properties would be USD 1,906 thousand (unaudited) (31 December
2017: USD 1,738 thousand) higher.
-- If the discount rate applied is 1% higher than that used in
the valuation models, the fair value of investment properties would
be USD 13,384 thousand (unaudited) (31 December 2017: USD 11,973
thousand) lower. If the discount rate is 1% less, then the fair
value of investment properties would be USD 15,598 thousand
(unaudited) (31 December 2017:
USD 13,907 thousand) higher.
-- If the occupancy rate is 1% higher than that used in the
valuation model for shopping centers in Simferopol and Kryvyi Rig
and is assumed to be 100% for other shopping centers, the fair
value of investment properties would be USD 1,347 thousand
(unaudited) higher
(31 December 2017: if the occupancy rate is 1% higher than that
used in the valuation model for shopping center "Prospekt" and are
assumed to be 100% for other shopping centers, the fair value of
investment properties would be USD 668 thousand higher). If the
occupancy rates are 1% less, then the fair value of investment
properties would be USD 1,703 thousand (unaudited) (31 December
2017: USD 1,539 thousand) lower.
5 Equity
Share capital is as follows:
2018 2018 2018 2017 2017 2017
Number Number
of shares US dollars EUR of shares US dollars EUR
Issued and fully
paid
At 1 January
and 30 June
(unaudited) 103,270,637 66,750 51,635 103,270,637 66,750 51,635
Authorised
At 1 January
and 30 June
(unaudited) 106,000,000 68,564 53,000 106,000,000 68,564 53,000
Par value, EUR - - 0.0005 - - 0.0005
All shares rank equally with regard to the Parent Company's
residual assets. The holders of ordinary shares are entitled to
receive dividends as declared from time to time, and are entitled
to one vote per share at meetings of the Parent Company.
During the six months ended 30 June 2018 and 30 June 2017, the
Parent Company did not declare any dividends.
Earnings per share
The calculation of basic earnings per share for the six-month
period ended 30 June 2018 was based on the profit for the six-month
period ended 30 June 2018 attributable to ordinary shareholders of
USD 13,900 thousand (unaudited) and a weighted average number of
ordinary shares outstanding as at 30 June 2018 of 103,270,637
(unaudited) (30 June 2017 (unaudited): USD 15,909 thousand and
103,270,637 shares).
The Group has no potential dilutive ordinary shares.
6 Loans and borrowings
This note provides information about the contractual terms of
loans.
(in thousands of USD) 30 June 31 December
2017
2018
(unaudited)
Non-current
Secured bank loans 29,237 33,502
Unsecured loans from related parties 25,248 25,263
54,485 58,765
Current
Secured bank loans (current portion
of secured long-term bank loans) 10,262 9,616
Unsecured loans from related parties
(including current portion of long-term
loans from related parties) 11,322 9,855
Unsecured loans from third parties 21,218 20,420
42,802 39,891
97,287 98,656
Terms and debt repayment schedule
As at 30 June 2018, the terms and debt repayment schedule of
bank loans are as follows (unaudited):
(in thousands of USD) Currency Nominal interest rate Contractual year of maturity Carrying value
Secured bank loans
PJSC "Bank "St.Petersburg" USD 10.50% 2018-2020 15,187
EBRD USD 1m LIBOR + 7.50% 2018-2020 10,785
Raiffeisen Bank Aval UAH 18.00% 2018-2020 7,308
EBRD USD 3m LIBOR + 8.00% 2018-2020 6,219
39,499
Unsecured loans from related
parties
Retail Real Estate OU USD 12.00% 2018-2020 24,249
Retail Real Estate OU USD 10.50% 2018-2019 11,856
Retail Real Estate OU USD 10.00% 2018-2019 218
Loans from other related
parties UAH/USD 0% -3.20% 2018 247
36,570
Unsecured loans from third
parties
Barleypark Limited USD 10.55% 2018 21,195
Loans from other third parties USD 3.20% 2018 23
21,218
97,287
As at 31 December 2017, the terms and debt repayment schedule of
bank loans are as follows:
Currency Nominal interest rate Contractual year of maturity Carrying value
(in thousands of USD)
Secured bank loans
PJSC "Bank "St.Petersburg" USD 10.50% 2018-2020 16,062
EBRD USD 1M LIBOR + 7.50% 2018-2020 12,679
Raiffeisen Bank Aval UAH 18.00% 2018-2020 7,358
EBRD USD 3M LIBOR + 8.00% 2018-2020 7,019
43,118
Unsecured loans from related
parties
Retail Real Estate OU USD 12.00% 2018-2020 23,288
Retail Real Estate OU USD 10.50% 2018-2019 11,382
Retail Real Estate OU USD 10.00% 2018-2019 200
Loans from other related parties UAH/USD 0%-3.20% 2018 248
35,118
Unsecured loans from third parties
Barleypark Limited USD 10.55% 2018 20,420
20,420
98,656
LIBOR for USD is as follows:
30 June 2018 31 December
2017
LIBOR USD 3M 2.32% 1.50%
LIBOR USD 1M 2.01% 1.38%
PJSC "Bank "St.Petersburg"
During the six months ended 30 June 2018, the Group signed
amendments to the loan agreements with PJSC "Bank "St.Petersburg"
stipulating a decrease in the amount of loan principal payable for
the period from March 2018 till June 2018 by USD 730 thousand.
As at 30 June 2018 (unaudited) and 31 December 2017, the Group
has not fulfilled an obligation to replace the existing pledge of
investment property by other investment properties acceptable to
PJSC "Bank "St.Petersburg", which was considered as the event of
default under the loan agreements concluded with the bank. In
addition, the Group has not replenished the deposit pledged as a
collateral for the amount of USD 1,200 thousand within the time
period required by the loan agreement. In June 2018 management
obtained the letter from PJSC "Bank "St.Petersburg" waving the
above breaches of loan covenants.
In August 2018, the loans payable due to PJSC "Bank
"St.Petersburg" was fully repaid and pledge of investment property
of PrJSC Livoberezhzhiainvest in the amount of
USD 39,390 thousand as at 30 June 2018 (unaudited), pledge of
investment in
PrJSC Livoberezhzhiainvest and pledge in respect of property
rights under the Investment Agreement between PrJSC Grandinvest,
PrJSC Livoberezhzhiainvest and Voyazh-Krym LLC under pledge
agreements with PJSC "Bank "St.Petersburg" were terminated (see
Note 15).
Retail Real Estate OU
As at 30 June 2018, the undrawn credit facilities from this
related party amount to
USD 9,607 thousand (unaudited) (31 December 2017: USD 9,607
thousand).
Barleypark Limited
Based on the terms of the loan agreement the loan is repayable
on demand but not later than the final repayment date. Subsequent
to the reporting period end, the Group obtained the letter from the
lender waiving the right to demand repayment of the loan during
twelve months ending 30 June 2019.
7 Trade and other payables
Trade and other payables are as follows:
30 June 2018 31 December
2017
(unaudited)
(in thousands of USD)
Non-current liabilities
Payables for construction works 5,244 9,877
Trade and other payables to third
parties - 8
5,244 9,885
Current liabilities
Payables for construction works 22,629 21,124
Trade and other payables to related
parties 1,108 1,137
Trade and other payables to third
parties 2,700 2,997
26,437 25,258
31,681 35,143
As at 30 June 2018, included in payables for construction works
are USD denominated payables with the nominal value of USD 4,349
thousand (unaudited) with maturity on
30 June 2021 (31 December 2017: USD 4,349 thousand) and bearing
an interest rate of
10.00 % per annum.
Also, included in payables for construction works as at 30 June
2018 are EUR denominated payables under a commission agreement
concluded with a third party with the nominal value of USD 1,603
thousand (unaudited) (31 December 2017: USD 2,039 thousand) with
maturity on 15 September 2019. As at 30 June 2018 and 31 December
2017, these payables relate to construction works performed at
shopping centre "Prospekt", are presented in accordance with their
contractual maturity and measured at amortised cost under the
effective interest rate of 6.01% (unaudited) (31 December 2017:
6.54%) per annum.
Further, included in payables for construction works as at 30
June 2018 are accrued financial charges under construction
agreements with third parties amounting to USD 14,299 thousand
(unaudited) (31 December 2017: USD 16,838 thousand). Part of
charges payable in the amount of USD 11,154 thousand (unaudited)
(31 December 2017: USD 12,153 thousand) matures on 31 December
2018, part (including interest accrued) of USD 218 thousand
(unaudited)
(31 December 2017: USD 1,893 thousand) mature on 30 June 2021
and bear an interest rate of 10.00%, and the remaining part of
charges payable of USD 2,927 thousand (unaudited)
(31 December 2017: USD 2,792 thousand) with the nominal value of
USD 3,220 thousand mature on 30 June 2019 and is measured at
amortised cost under the effective interest rate of 10.00% per
annum.
8 Other liabilities
As at 30 June 2018, other long-term liabilities comprise mainly
the amount of principal and other current liabilities comprise the
amount of interest of the deferred consideration that is payable in
respect of the acquisition of Wayfield Limited and its subsidiary
Budkhol LLC, amounting to USD 20,000 thousand (unaudited) and USD
7,234 thousand (unaudited), respectively (31 December 2017: USD
20,000 thousand and USD 6,267 thousand, respectively).
9 Revenue
The Group's operations are those described in the last annual
financial statements. The major amount of the Group's revenue is
represented by rental income from investment properties that falls
within the requirements of IAS 17 Leases and amounts to USD 11,900
thousand (unaudited) for the six months ended 30 June 2018 (six
months ended 30 June 2017 (unaudited): USD 10,284 thousand).
For the six months ended 30 June 2018, 11 % of the Group's
rental income was earned from two tenants (6% and 5%, respectively)
(unaudited) (six months ended 30 June 2017: 14%; 11% and 3%,
respectively (unaudited)).
The Group rents out premises in the shopping centres to tenants
in accordance with lease agreements predominantly concluded for a
period of 11- 42 months, save for the hypermarkets and large
network retails chains, which enter into long term lease
agreements. In accordance with lease agreements, rental rates are
usually established in USD and are settled in Ukrainian hryvnias
and Russian Roubles using the exchange rates established by the
National Bank of Ukraine and Central Bank of the Russian
Federation, as applicable. However, taking into account the current
market conditions, the Group provides temporary discounts to some
of its tenants by applying lower exchange rates than those
established by the National Bank of Ukraine, in arriving to the
rent payment for the particular month.
Management believes that these measures will allow the Group to
maintain occupancy rates in the shopping centres at a relatively
high level during the current deteriorated period in Ukrainian
business environment. Management continued to turn gradually the
lower exchange rates used into the exchange rates established by
the NBU.
The Group's lease agreements with tenants usually include 2-45
months cancellation clause. The Group believes that execution of
the option to prolong the lease period upon expiration of
non-cancellable period on the terms different to those agreed
during the non-cancellable period, is not substantiated.
Accordingly, upon calculation of rental income for the period the
Group does not take into account rent payments, which are
prescribed by the agreements upon expiration of the period during
which the agreement cannot be cancelled.
All other types of services are derived from contracts with
customers and fall within the scope of IFRS 15. The nature and
effect of initially applying IFRS 15 on the Group's consolidated
interim condensed financial statements are disclosed in Note 3.
(a) Disaggregation of revenue
In the following table revenue for the six months ended 30 June
is disaggregated by major service lines. All below types of the
Group's revenue are represented by services transferred over
time.
2018 2017
(in thousands of USD) (unaudited) (unaudited)
Common parts exploitation services 2,797 2,540
Marketing services 113 109
2,910 2,649
10 Finance income and finance costs
Finance income and finance costs for the six months ended 30
June are as follows:
2018 2017
(unaudited) (unaudited)
(in thousands of USD)
Interest income 108 134
Foreign exchange gain 1,574 1,614
Finance income 1,682 1,748
Interest expense (4,842) (4,943)
Interest expense on deferred consideration (967) (967)
Other finance costs (473) (1,371)
Finance costs (6,282) (7,281)
Net finance costs (4,600) (5,533)
11 Income tax expense
(a) Income tax expense
Income taxes for the six months ended 30 June are as
follows:
2018 2017
(unaudited) (unaudited)
(in thousands of USD)
Current tax expense 447 680
Deferred tax expense 1,853 1,852
Total income tax expense 2,300 2,532
Corporate profit tax rate for the entities operating under the
laws of Ukraine is fixed at 18%.
The applicable tax rate for the entities operating under the
laws of the Russian Federation
is 20%.
The applicable tax rates are 12.5% for Cyprus companies, 20% for
Estonian companies, and nil tax for companies incorporated in the
Isle of Man and British Virgin Islands.
(b) Reconciliation of effective tax rate
The difference between the total expected income tax expense for
the six months ended 30 June computed by applying the Ukrainian
statutory income tax rate to profit before tax and the reported tax
expense is as follows:
2018 % 2017 %
(unaudited) (unaudited)
(in thousands of USD)
Profit before income tax 16,200 100% 18,441 100%
1,537
============= ======= ============= =======
Income tax expense at statutory
rate 2,916 18% 3,319 18%
Effect of lower tax rates
on taxable profit in foreign
jurisdictions (1,343) (8%) (1,242) (7%)
Non-deductible expenses 2,472 15% 1,615 9%
Change in unrecognised deferred
tax assets (2,053) (13%) (1,725) (9%)
Foreign currency translation
difference 308 2% 565 3%
Effective income tax expense 2,300 14% 2,532 14%
In accordance with existing Ukrainian legislation tax losses can
be carried forward and utilised indefinitely. As at 30 June 2018,
management has not recognised deferred tax assets amounting to USD
15,293 thousand (unaudited) (31 December 2017: USD 21,362 thousand)
mainly in respect of tax losses carried forward because of
significant uncertainties regarding their realisation.
During the six months ended 30 June 2018, deferred tax benefit
for the amount of
USD 1,128 thousand (unaudited) was recognised in other
comprehensive income (six months ended 30 June 2017 (unaudited):
USD 1,899 thousand).
12 Financial risk management
During the six months ended 30 June 2018, the Group had no
significant changes in financial risk management policies as
compared to 31 December 2017.
(a) Fair values
Estimated fair values of the financial assets and liabilities
have been determined using available market information and
appropriate valuation methodologies. However, considerable judgment
is required in interpreting market data to produce the estimated
fair values. Accordingly, the estimates are not necessarily
indicative of the amounts that could be realised in a current
market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the
estimated fair values.
The estimated fair values of financial assets and liabilities
are determined using discounted cash flow and other appropriate
valuation methodologies, at year-end, and are not indicative of the
fair value of those instruments at the date these consolidated
interim condensed financial statements are prepared or distributed.
These estimates do not reflect any premium or discount that could
result from offering for sale at one time the Group's entire
holdings of a particular financial instrument. Fair value estimates
are based on judgments regarding future expected cash flows,
current economic conditions, risk characteristics of various
financial instruments and other factors.
Fair value estimates are based on existing financial instruments
without attempting to estimate the value of anticipated future
business and the value of assets and liabilities not considered
financial instruments. In addition, tax ramifications related to
the realisation of the unrealised gains and losses can have an
effect on fair value estimates and have not been considered.
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy. It does not include fair value
information for financial assets and financial liabilities not
measured at fair value if the carrying amount is a reasonable
approximation of fair value:
30 June 2018 (unaudited) 31 December 2017
Fair value Fair value
Carrying amount Level 2 Carrying amount Level 2
(in thousands of USD)
Financial liabilities not measured at fair value
Non -current
Secured bank loans 29,237 30,517 33,502 34,602
Unsecured loans from related parties 25,248 27,051 25,263 26,145
Deferred consideration 20,000 21,317 20,000 21,692
74,485 78,885 78,765 82,439
Current
Secured bank loans (current portion of long-
term bank loans) 10,262 10,740 9,616 9,923
Unsecured loans from related parties
(including current portion of long-term
loans from related parties) 11,322 12,060 9,855 10,127
Unsecured loans from third parties 21,218 21,218 20,420 20,420
Deferred consideration 7,234 7,710 6,267 6,797
50,036 51,728 46,158 47,267
124,521 130,613 124,923 129,706
13 Commitments and contingencies
(a) Pledged assets
In connection with loans and borrowings, the Group pledged the
following assets:
30 June 31 December
2018 (unaudited) 2017
(in thousands of USD)
Investment property (note 4(a)) 134,490 117,790
Call deposits 1,469 1,153
Bank balances 78 29
136,037 118,972
As at 30 June 2018 (unaudited) and 31 December 2017, the Group
has also pledged the following:
-- Future rights on income of Prisma Alfa LLC and Comfort Market
Luks LLC under all lease agreements and rights on future income of
PrJSC Ukrpangroup under agreement with anchor tenant;
-- Investments in the following subsidiaries: PrJSC Ukrpangroup,
Comfort Market Luks LLC and PrJSC Livoberezhzhiainvest;
-- Property rights under the Investment Agreement between PrJSC
Grandinvest, PrJSC Livoberezhzhiainvest and Voyazh-Krym LLC.
(b) Construction commitments
The Group entered into contracts with third parties to construct
a shopping centre in Kyiv and a shopping centre in Odesa for the
total amount of USD 20,177 thousand as at 30 June 2018 (unaudited)
(31 December 2017: USD 19,209 thousand).
(c) Operating lease commitments
The Group as lessor
The Group entered into lease agreements on its investment
property portfolio that consists of five operating shopping
centres. These non-cancellable lease agreements have remaining
terms up to forty five months. All agreements include a clause to
enable upward revision of the rent rate on an annual basis
according to prevailing market conditions.
The future minimum lease payments under non-cancellable leases
are as follows:
(in thousands of USD) 30 June 31 December
2018 (unaudited) 2017
Less than one year 5,327 4,816
Between one and five years 3,978 4,318
More than five years 2,518 3,125
11,823 12,259
(d) Litigations
In the ordinary course of business, the Group is subject to
legal actions and complaints.
(i) Legal case in respect of Assofit Holdings Limited
Starting from November 2010 the Group has been involved in an
arbitration dispute with Stockman Interhold S.A. (Stockman), which
was the majority shareholder of Assofit Holdings Limited (Assofit),
regarding invalidation of the Call Option Agreement dated
25 February 2010. In accordance with this Call Option Agreement,
Arricano was granted the option to acquire the shareholding of
Stockman being equal to 50.03 per cent in the share capital of
Assofit during the period starting from 15 November 2010 up to 15
March 2011. In November 2010, the Company sought to exercise the
option granted by the Call Option Agreement, however the buy-out
was suspended by legal and arbitration proceedings that were
initiated by Stockman in relation to the validity of the
termination of the agreement relating to the call option under the
Call Option Agreement.
In the seventh award delivered on 5 May 2016, the tribunal of
the London Court of International Arbitration has found that
Stockman is in breach of the Call Option Agreement and has taken
"steps deliberately to dissipate and misappropriate Assofit's
assets". As a result, the tribunal has ordered Stockman to
transfer, or procure the transfer of, the Option Shares to Arricano
within 30 days of the award. Upon registration of the transfer,
Arricano shall pay to Stockman the Option Price minus damages,
which when netted out brings the balance to nil. In the event that
Stockman does not transfer, or procure the transfer of the Option
Shares, Arricano may elect instead to claim damages in lieu of the
share transfer.
In its latest award, being the eighth award, made on 17 August
2016, the tribunal of the London Court of International Arbitration
has awarded the costs of approximately USD 0.9 million to be paid
by Stockman to Arricano. During the six months ended 30 June 2018
the Group received settlement in the amount of USD 478 thousand
(unaudited). No receivable for the remaining amount was recognised
in these consolidated interim condensed financial statements, as
recoverability of the related asset is not certain.
In July 2017, the hearing regarding challenges of the fifth, the
sixth and the seventh award by Stockman has taken place. By
judgement dated 30 November 2017, the High Court of England and
Wales dismissed the claims filed by Stockman challenging the
fourth, fifth and seventh awards, and subsequently, on 5 January
2018, dismissed Stockman's application to appeal such
judgement.
As at the date that these consolidated interim condensed
financial statements are authorised for issuance, a number of
related legal cases are under the consideration of the District
Court of Nicosia.
In September 2014, Assofit Holdings Limited transferred the
shares of Prizma Beta LLC to Financial and Investment Solutions BV,
a company registered in the Netherlands, despite the fact that an
Interim Receiver was appointed in Assofit at that period of time
with the responsibility of collecting and safeguarding Assofit's
assets. Further in September 2014,
Joint-Stock Bank Pivdeniy PJSC, Ukraine, which had an
outstanding mortgage loan due from Prizma Beta LLC of USD 32,000
thousand, exercised its right to recover the abovementioned loan by
means of reposession of ownership rights to the Sky Mall shopping
centre which was pledged to secure this loan in September 2014. As
at the date that these consolidated interim condensed financial
statements are authorised for issuance, shares of Prizma Beta LLC
and ownership rights for the Sky Mall shopping centre remain to be
alienated.
As at 30 June 2018 (unaudited) and 31 December 2017, the Group
holds 49.97% of nominal voting rights in Assofit without retaining
significant influence. In prior years' consolidated financial
statements of the Group until 31 December 2013, investment in
Assofit was recognised in the statement of financial position as
available-for-sale financial asset at its carrying amount of USD
20,727 thousand. Due to loss of the legal control over the major
operating asset being the Sky Mall shopping centre in September
2014, management believes that investment in Assofit is fully
impaired as at 30 June 2018 (unaudited) and
31 December 2017.
Management is unaware of any other significant actual, pending
or threatened claims against the Group.
(e) Taxation contingencies
(i) Ukraine
The Group performs most of its operations in Ukraine and
therefore within the jurisdiction of the Ukrainian tax authorities.
The Ukrainian tax system can be characterised by numerous taxes and
frequently changing legislation which may be applied retroactively,
open to wide interpretation and in some cases are conflicting.
Instances of inconsistent opinions between local, regional, and
national tax authorities and between the Ministry of Finance and
other state authorities are not unusual. Tax declarations are
subject to review and investigation by a number of authorities that
are enacted by law to impose severe fines, penalties and interest
charges. A tax year remains open for review by the tax authorities
during the three subsequent calendar years, however under certain
circumstances a tax year may remain open longer. These facts create
tax risks substantially more significant than typically found in
countries with more developed systems.
Management believes that it has adequately provided for tax
liabilities based on its interpretation of tax legislation and
official pronouncements. However, the interpretations of the
relevant authorities could differ and the effect on these
consolidated interim condensed financial statements, if the
authorities were successful in enforcing their interpretations,
could be significant. No provisions for potential tax assessments
have been made in these consolidated interim condensed financial
statements.
(ii) Republic of Crimea
As a result of the events described in note 1(b), Ukrainian
authorities are not currently able to enforce Ukrainian laws on the
territory of the Republic of Crimea. Starting from April 2014, this
territory is subject to the transitional provisions of tax rules
established by the Russian government to ensure gradual
introduction of federal laws into the territory. Although these
transitional provisions were thought to put certain relief on the
entities registered in the Republic of Crimea, interpretations of
these provisions by the tax authorities may be different from the
tax payers' view.
Effective from 1 January 2015, the territory of the Republic of
Crimea is subject to general legislation of the Russian Federation.
The taxation system in the Russian Federation continues to evolve
and is characterised by frequent changes in legislation, official
pronouncements and court decisions, which are sometimes
contradictory and subject to varying interpretation by different
tax authorities.
Taxes are subject to review and investigation by a number of
authorities, which have the authority to impose severe fines,
penalties and interest charges. A tax year generally remains open
for review by the tax authorities during the three subsequent
calendar years; however, under certain circumstances a tax year may
remain open longer. Recent events within the Russian Federation
suggest that the tax authorities are taking a more assertive and
substance-based position in their interpretation and enforcement of
tax legislation.
In addition, a number of new laws introducing changes to the
Russian tax legislation have been recently adopted. In particular,
starting from 1 January 2015 changes aimed at regulating tax
consequences of transactions with foreign companies and their
activities were introduced, such as concept of beneficial ownership
of income, etc. These changes may potentially impact the Group's
tax position and create additional tax risks going forward. This
legislation is still evolving and the impact of legislative changes
should be considered based on the actual circumstances.
These circumstances may create tax risks in the Russian
Federation that are substantially more significant than in other
countries. Management believes that it has provided adequately for
tax liabilities based on its interpretations of applicable Russian
tax legislation, official pronouncements and court decisions.
However, the interpretations of the tax authorities and courts,
especially due to reform of the supreme courts that are resolving
tax disputes, could differ and the effect on these consolidated
interim condensed financial statements, if the authorities were
successful in enforcing their interpretations, could be
significant.
(iii) Republic of Cyprus
During the prior years, the Group incurred certain foreign legal
expenses, where the VAT accounted for on these expenses was fully
claimed. Management believes that the Group properly claimed the
VAT accounted for on these expenses, on the basis of the plans to
further collect reimbursement of the said expenses, being purely of
legal nature, from respective parties in full. Since as at the date
of issue of these consolidated interim condensed financial
statements the management has just started to implement its plans,
the transactions will not be complete in the view of VAT
authorities, and the Group may be liable to pay VAT of
approximately USD 1,893 thousand plus related interest and
penalties.
No provision for VAT liability or related penalties is made in
these consolidated interim condensed financial statements as
management believes that it is not probable that such VAT liability
will materialise, as the Group will proceed with the implementation
of the plan on the reimbursement of expenses.
14 Related party transactions
(a) Control relationships
The Group's largest shareholders are Retail Real Estate OU,
Dragon - Ukrainian Properties and Development plc, Deltamax Group
OU, Rauno Teder and Jüri Põld. The Group's ultimate controlling
party is Estonian individual Hillar Teder. Hillar Teder indirectly
controls 55.45% of the voting shares of the Parent Company. Apart
from this, the adult son of Hillar Teder,
Mr. Rauno Teder, controls 15.82% of the voting shares of the
Parent Company.
(b) Transactions with management and close family members
Key management remuneration
Key management compensation included in the consolidated interim
condensed statement of profit or loss and other comprehensive
income for the six months ended 30 June 2018 is represented by
salary and bonuses of USD 538 thousand (unaudited) (six months
ended
30 June 2017: USD 384 thousand (unaudited)).
(c) Transactions and balances with entities under common control
Outstanding balances with entities under common control are as
follows:
(in thousands of USD) 30 June 31 December
2018 (unaudited) 2017
Short-term loans receivable 10,809 10,669
Trade receivables 14 13
Other receivables 8,160 8,160
Provision for impairment of loans receivable
and trade and other receivables (18,968) (18,827)
15 15
Long-term loans and borrowings 25,248 25,263
Short-term loans and borrowings 11,322 9,855
Trade and other payables 1,108 1,137
Advances received 26 24
Other liabilities 27,234 26,267
64,938 62,546
None of the balances are secured. The terms and conditions of
significant transactions and balances with entities under common
control are described in Notes 6, 7 and 8.
Expenses incurred and income earned from transactions with
entities under common control for the six months ended 30 June are
as follows:
2018 2017
(unaudited) (unaudited)
(in thousands of USD)
Other income - 34
Interest expense (2,409) (3,208)
Operating expenses (1) (9)
Prices for related party transactions are determined on an
ongoing basis.
(d) Guarantees received
The Group's related parties issued guarantees securing loans
payable by Ukrainian subsidiaries of Arricano Real Estate PLC to
the EBRD (loan payable by UkrPanGroup PrJSC) and
PJSC "Bank "St.Petersburg" (loans payable by
Livoberezhzhiainvest PrJSC). The guarantees cover the total amount
of outstanding liabilities in relation to the EBRD as at 30 June
2018 of
USD 6,219 thousand (unaudited) (31 December 2017: USD 7,022
thousand) and in relation to PJSC "Bank "St.Petersburg" as at 30
June 2018 of USD 15,187 thousand (unaudited)
(31 December 2017: USD 16,062 thousand).
15 Subsequent events
(a) Changes in loan agreements
On 30 July 2018, the Group entered into the syndicated loan
agreement with
TASCOMBANK JSC, VS Bank PJSC and Universal Bank PJSC to
refinance loan from PJSC "Bank "St.Petersburg" amounting to USD
15,187 thousand as at 30 June 2018. The credit facility of new loan
obtained amounts to USD 15,200 thousand, bears an interest rate of
11.25% during the period from July 2018 until December 2019 and of
13.00% during the period from January 2020 until July 2023. On 14
August 2018, the credit facility under the new loan agreement was
increased by USD 800 thousand to USD 16,000 thousand. Along with
the loan agreement, the Group signed pledge agreements in respect
of investment property of PrJSC Livoberezhzhiainvest in the amount
of USD 39,390 thousand as at 30 June 2018 (unaudited) and
investment in PrJSC Livoberezhzhiainvest.
In August 2018, the loan payable due to PJSC "Bank
"St.Petersburg" was fully repaid and pledge of investment property
of PrJSC Livoberezhzhiainvest in the amount of
USD 39,390 thousand as at 30 June 2018 (unaudited), pledge of
investment in
PrJSC Livoberezhzhiainvest and pledge in respect of property
rights under the Investment Agreement between PrJSC Grandinvest,
PrJSC Livoberezhzhiainvest and Voyazh-Krym LLC under pledge
agreements with PJSC "Bank "St.Petersburg" were terminated
(unaudited).
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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