TIDMRUS
RNS Number : 3390H
Raven Russia Limited
12 March 2018
12 March 2018
Raven Russia Limited ("Raven Russia" or the "Company")
Results for the year ended 31 December 2017
The Board of Raven Russia releases the results for the year
ended 31 December 2017.
Highlights
-- IFRS profit after tax $57.7 million (2016: profit of $7.7 million);
-- Underlying earnings after tax of $56.8 million (2016: $47.1 million);
-- Basic underlying earnings per share 8.56 cents (2016: 7.17 cents);
-- IFRS basic earnings per share 8.69 cents (2016: 1.17 cents);
-- Year end cash balance of $266.7 million (2016: $198.6 million);
-- Diluted net asset value per share 80 cents (2016: 71 cents);
-- Completed $209 million of acquisitions in the year; and
-- A 50% increase in distributions to 3p (2016: 2p) by way of
tender offer buy back of 1 in 17 shares at 52p.
CEO Glyn Hirsch said "We are delighted with the overall results
for 2017. NOI is up 10% to $166.7 million, underlying earnings per
share are up 19% to 8.56 cents and diluted net asset value per
share is up 13% to 80 cents. The distribution of 4p for the year is
a 60% increase over the 2.5p in 2016."
Enquiries
Raven Russia Limited Tel: + 44 (0) 1481 712955
Anton Bilton
Glyn Hirsch
Novella Communications Tel: +44 (0) 203 151 7008
Tim Robertson
Toby Andrews
N+1 Singer Tel: +44 (0) 207 496 3000
Corporate Finance - James Maxwell / Liz Yong
Sales - Alan Geeves / James Waterlow
Numis Securities Limited Tel: + 44 (0) 207 260 1000
Alex Ham / Jamie Loughborough / Alasdair Abram
Ravenscroft Tel: +44 (0) 1481 729100
Jade Cook
This announcement contains forward-looking statements that
involve risk and uncertainties. The Group's actual results could
differ materially from those estimated or anticipated in the
forward-looking statements as a result of many factors. Information
contained in this announcement relating to the Company should not
be relied upon as a guide to future performance.
About Raven Russia
Raven Russia was founded in 2005 to invest in class A warehouse
complexes in Russia and lease to Russian and International tenants.
Its Ordinary Shares, Preference Shares and Warrants are listed on
the Main Market of the London Stock Exchange and admitted to the
Official List of The International Stock Exchange ("TISE"). Its
Convertible Preference Shares are admitted to the Official List of
TISE and trading on the SETSqx market of the London Stock Exchange.
The Group operates out of offices in Guernsey, Moscow and Cyprus
and has an investment portfolio of circa 1.8 million square metres
of Grade "A" warehouses in Moscow, St Petersburg, Rostov-on-Don and
Novosibirsk and 49,000 square metres of commercial office space in
St Petersburg. For further information visit the Company's website:
www.ravenrussia.com
Chairman's Message
I am delighted to report that the results for the year have
exceeded our expectations and that we are achieving our objective
of an acquisition driven business model. In addition, and through a
doggedly tenacious approach to planning, we have won various
planning consents on our legacy UK land bank and achieved large
gains which have added further gloss to the year. I take this
opportunity to applaud the executive team for their hard efforts in
this regard.
We were successful in completing two acquisition projects in the
year, an office portfolio and a warehouse in St Petersburg in April
and a large logistics complex in Moscow in November. Consideration
for the acquisitions totalled $209 million and should generate a
minimum of $24 million of net operating income ("NOI") in the
current year.
The acquisitions were part funded by a second issue of
convertible preference shares in July 2017, raising $126
million.
With significant cash reserves and the potential to secure
finance on the last acquisition, we are actively pursuing further
income producing acquisitions in a number of different asset
classes.
Underlying earnings have increased to $56.8 million (2016: $47.1
million) and basic underlying earnings per share to 8.56 cents
(2016: 7.17 cents). With a revaluation gain of $38.2 million (2016:
loss of $43.3 million), the first gain in our portfolio values
since 2013, our IFRS earnings increased to $57.7 million (2016:
$7.7 million) and diluted net asset value per share to 80 cents
(2017: 71 cents).
We are proposing a final distribution of 3p, paid by way of a
tender offer buy back of 1 share in every 17 at 52p. This will give
a total distribution of 4p for the year.
We are again extremely grateful for the continued support of our
shareholders over the last twelve months.
Richard Jewson
Chairman
11 March 2018
Strategic Report
Chief Executive's Report
Dear Shareholders,
We are delighted with the overall results for 2017. NOI is up
10% to $166.7 million, underlying earnings per share are up 19% to
8.56 cents and diluted net asset value per share is up 13% to 80
cents.
With year end cash balances of $266.7 million, we are increasing
the distribution per share by 50% to 3p per share. As usual this
distribution will be made by way of a tender offer buy back of
shares, this time for 1 in 17 shares held at a price of 52 pence
per share. We intend to allow shareholders to subscribe for more
than their pro rata entitlement.
We took advantage of the strong UK housing market by selling
most of our UK strategic land holdings. This generated a profit of
$20.2 million and cash of $21.6 million for Raven Mount in the
year. These assets were acquired with Raven Mount PLC in 2008 for
$0.7 million.
In relation to our joint venture with the Russian CoOp we are at
the early planning stage of a pilot project. This has potential
both for property returns and for our third party logistics
operator, Roslogistics, in managing the sites.
Our core business of logistics warehousing has performed well.
We still fight the medium term "Roubilisation" of rents through
letting space (187,100sqm in 2017) and by strategic
acquisitions.
Favourable market conditions gave us the opportunity to acquire
four properties in two transactions in Moscow and St Petersburg for
a combined consideration of RUR11.989 billion ($209 million). Both
purchases represent attractive prices per sqm relative to
replacement cost.The St Petersburg acquisition of three separate
properties was completed in April and added 87,000sqm of Grade A
warehousing and 33,000sqm of offices for a total consideration of
RUR4.9 billion ($86 million) at an initial yield of 16%. The
properties were 98% leased at acquisition to 68 tenants including
Otis, Oracle, YIT, Schenker and Maersk. In November we completed
the acquisition of Logopark Sever, a new Grade A warehouse complex
of 195,000sqm to the north of Moscow. The property was 73% leased
at completion to major tenants including Obi, Okey, Major Logistics
and Miratorg and is 83% let today. Total consideration based on
letting of the vacant space over the next 18 months is estimated at
RUR7.089 billion ($123 million) which would produce a yield of
11.38% and a reversionary yield of 12.51%.
These acquisitions contributed $10 million of NOI to the 2017
results and should contribute at least $24 million of NOI in
2018.
As previously indicated, at this stage of the Russian property
cycle and in a quest for income, we have successfully broadened our
focus into property sectors other than logistics warehousing. We
anticipate that this will continue as our strategy of seeking high
quality income producing acquisitions continues alongside active
management of the existing portfolio. The Group's significant cash
balance provides us with the financial resource to achieve this. We
expect further news during the year.
Longstanding shareholders know that our business can, and has
been, significantly affected by geo-political events. Fortunately,
2017 was a year of relative stability.
The Rouble/Dollar remained within a range of 55 to 60. The oil
price has slowly improved and now stands at $64 per barrel. The
Russian economy has stabilised and returned to growth despite
sanctions. 2017 GDP growth was 1.5%, inflation fell from 5.4% to
2.5% and central bank rates have fallen from 10% to 7.5%. Although
we will not rely on it, most commentators forecast further
improvements in 2018 and beyond. With some fair economic winds and
the continued implementation of our strategy of acquisitions,
alongside organic growth, we believe that shareholders will be
rewarded.
We would like to thank our shareholders for their continued
support and encouragement, particularly those who do not delegate
their voting responsibilities to voting agencies. Compliance,
regulation and political correctness are time consuming issues for
businesses and we continue to deal with them with our customary
professionalism and sense of humour.
Glyn Hirsch
Chief Executive Officer
11 March 2018
Business Model
Our Strategy
We continue with our strategy of acquiring and maintaining our
core investment portfolio of Grade A logistics warehouses in Russia
with the aim of producing rental income that delivers progressive
distributions to our shareholders.
But whilst we remain focussed on the logistics market we will
consider alternative asset class acquisitions if the property and
financial metrics are attractive.
As our lease terms convert from US Dollar pegged to Rouble
income, our evolving acquisition strategy is bearing fruit in
supporting our net operating income through that transition.
Business Model
The fundamentals of our business model have not changed. We have
a portfolio of assets with a high yield to cost of circa 12% and
bank financing costs of approximately 7%. The significant change in
that model has been our exposure to foreign currency risk. Prior to
2015, we operated a US Dollar model and today we continue our
transition to a Rouble model.
At the year end, 46% of our warehouse income was denominated in
Roubles (2016: 24%). These leases represent 47% of the Gross
Lettable Area ("GLA") of our warehouse portfolio (2016: 26%). Our
banking facilities remain predominately US Dollar denominated and
over the past two years we have reduced and restructured facilities
to increase covenant headroom and build in a safety margin on debt
service should exchange rates move against us. Each of the
facilities secured on our warehouse assets sits in a special
purpose vehicle ("SPV") structure to minimise recourse to the
overall portfolio and holding company. At the year end, asset
specific debt represented 53% loan to value (2016: 55%).
Our office portfolio has a different currency mix. 49% of income
is Rouble denominated, 39% Euro and 12% US Dollar. Two of the
assets have sole tenants and we have refinanced the portfolio of
three assets with a Euro loan.
As Russian Central Bank rates continue to reduce, the plan for
the next stage of adapting our business model is to move banking
facilities to a Rouble/currency mix. This will start the process of
reducing our foreign currency risk while managing the cost of debt.
Ultimately, the Russian Central Bank rates do not have far to fall
before we consider moving to full Rouble facilities and if market
commentary is correct, we may not have long to wait for that to be
the case. We are having an open dialogue with all of our banking
partners on this transition process.
Our average letting size by tenant is 8,760sqm (2016:
11,240sqm). We do not have one tenant with more than 11% (2016:
11%) of our portfolio's GLA and the top ten tenants account for 41%
(2016: 46%) of our portfolio in GLA terms and 54% (2016: 58%) in
income terms.
Key Performance Indicators ('KPIs')
We continue to focus on occupancy KPIs together with the
currency mix of income and how that is likely to change over the
medium term. Cash flows after interest and debt amortisation, a
measure of debt service cover, influenced our decision to
restructure our existing bank facilities and issue new convertible
preference shares.
The ability to distribute to ordinary shareholders from cash
covered underlying earnings and operating cash-flows after interest
remains our focus when determining distribution policy.
All of the above underpin financial targets set for annual bonus
incentives.
Portfolio Review
Leasing and maturities
Warehouse Moscow St Petersburg Regions
----------------- ------------ -------------- ----------
Space (000 sqm) 1,274 (72%) 270 (15%) 222 (13%)
NOI ($m) 101 (75%) 19 (14%) 16 (11%)
----------------- ------------ -------------- ----------
Office Moscow St Petersburg Regions
----------------- ------------ -------------- ----------
Space (000 sqm) - 49 (100%) -
NOI ($m) - 9 (100%) -
----------------- ------------ -------------- ----------
During the year we made two significant acquisitions, three
properties in St Petersburg and Logopark Sever, a warehouse complex
north of Moscow, for a total consideration of $209 million. The
acquisition of Logopark Sever did not have a material impact in
2017 as this was completed in November but we expect it to
contribute $13.8 million of NOI during 2018.
Vacancy has remained stable on a like for like basis and stands
at 19% including acquisitions. Although the statistics have
remained broadly static there has been a considerable amount of
activity in the portfolio.
'000 sqm 2017 2018 2019 2020 2021-2027 Total
-------------------------- ------ ----- ----- ----- ---------- ------
Maturity profile at 1
January 2017 215 165 252 179 392 1,203
Maturities profile of
the acquired assets 44 31 21 19 147 262
Subtotal 259 196 273 198 539 1,465
Lease extensions (97) (79) (22) 0 0 (198)
Vacated/terminated (162) (14) (4) 0 0 (180)
Remaining lease maturity
profile 0 103 247 198 539 1,087
-------------------------- ------ ----- ----- ----- ---------- ------
198,100sqm of existing leases have been renegotiated and
extended in the financial year. Space vacated on maturity and early
terminations of weaker covenants totalled 179,600sqm which,
together with existing vacant space, gives 342,900sqm of vacancy at
31 December 2017. The result is a new lease maturity profile as
follows:
'000 sqm 2018 2019 2020 2021-2027 Total
--------------------------------- ----- ----- ----- ---------- ------
Remaining lease maturity
profile 103 247 198 539 1,087
Maturity profile of lease
extensions 51 0 78 69 198
New leases 15 17 32 123 187
Maturity profile at 31 December
2017 169 264 308 731 1,472
--------------------------------- ----- ----- ----- ---------- ------
This reflects 187,100sqm of new leases signed in the year in
addition to the 198,100sqm of existing lease renegotiations. There
are also potential breaks in the portfolio of 78,300sqm in 2018 and
79,000sqm in 2019. Significant new lettings include 27,200sqm to
Makita in Moscow, 8,000sqm to Mars in Rostov and Wildberries (one
of the largest Russian internet retailers) doubling their space to
10,000sqm in Novosibirsk.
Since the year end, a further 53,000sqm of renewals, 21,000sqm
of new lettings have been completed. In addition, letters of intent
on vacant space of 38,000sqm and lease extensions of 8,400sqm have
been signed.
The warehouse and office markets in which we operate are now
almost exclusively Rouble denominated and although we still have
historic long term contracts in US Dollars and Euros these are
continuing to unwind. New lease terms are shorter, generally
contain breaks and are Rouble denominated but they have the benefit
of annual indexation linked to Russian CPI.
At the year end 31% (2016: 50%) of our warehouse GLA had US
Dollar denominated leases with an average warehouse rental level of
$143 per sqm (2016: $125 per sqm) and a weighted average term to
maturity of 3.0 years (2016: 3.0 years). Rouble denominated or
capped leases account for 47% (2016: 26%) of our total warehouse
space with an average warehouse rent of Roubles 5,200 per sqm
(2016: 5,120 per sqm) and weighted average term to maturity of 3.6
years (2016: 4 years). Rouble leases have an average minimum annual
indexation of 6.8% (2016: 7.7%). Average rents on new lettings
during the year were Roubles 3,870 per sqm and for renewals Roubles
5,250 per sqm.
Currency exposure of warehouse space USD USD/RUB cap RUB EUR Vacant Total
-------------------------------------- ------ ------------ ------ ------ ------- ------
sqm sqm sqm sqm Sqm sqm
'000 '000 '000 '000 '000 '000
-------------------------------------- ------ ------------ ------ ------ ------- ------
551 37 785 50 343 1,766
-------------------------------------- ------ ------------ ------ ------ ------- ------
% of total 31% 2% 45% 3% 19% 100%
-------------------------------------- ------ ------------ ------ ------ ------- ------
Currency exposure of NOI USD USD/RUB cap RUB EUR Total
-------------------------- ---- ------------ ---- ---- ------
% of total 62% 5% 27% 6% 100%
-------------------------- ---- ------------ ---- ---- ------
Investment Portfolio
Moscow
We have ten projects in Moscow, including Logopark Sever,
totalling 1,274,000sqm, and with 78% of space let at the year
end.
Year end
Warehouse complex Space (000 sqm) NOI ($m) Occupancy
------------------- ---------------- --------- -----------
Pushkino 214 12 80%
Istra 206 24 94%
Noginsk 204 26 80%
Sever 195 1 83%
Klimovsk 158 15 68%
Krekshino 118 15 99%
Nova Riga 68 1 29%
Lobnya 52 6 88%
Sholokhovo 45 0 6%
Southern 14 1 77%
------------------- ---------------- --------- -----------
The Moscow portfolio had a net reduction in occupied area of
23,600sqm during the year as lease expiries ran at a faster rate
than new lettings. Moscow remains the most competitive market in
which we operate, although the reduction in the amount of new space
being built means the market has certainly stabilised.
St Petersburg and Regions
Year end
Warehouse complex Space ('000 sqm) NOI ($m) Occupancy
------------------- ----------------- --------- -----------
St Petersburg
Shushary 148 13 97%
Gorigo 85 3 82%
Pulkovo 37 3 79%
------------------- ----------------- --------- -----------
Regions
Novosibirsk 121 10 94%
Rostov 101 6 73%
------------------- ----------------- --------- -----------
Office
------------------- ----------------- --------- -----------
St Petersburg
Kellerman 22 3 99%
Constanta 16 3 100%
Primium 11 3 100%
------------------- ----------------- --------- -----------
Occupancy in the regional markets of St Petersburg and
Novosibirsk continues to be better than in Moscow, driven by demand
from retailers and a lack of over supply because of less historic
speculative development. Although Rostov was more competitive in
2016 and 2017, since the year end we have secured additional
lettings of 9,600sqm and we are now 83% let. We have signed long
term agreements with both Metro in Novosibirsk and Mars in Rostov
where we have adapted premises to incorporate temperature
controlled sections of the warehouse for the storage of specialist
goods.
Since the acquisition of the St Petersburg portfolio we have
worked hard to extend and enhance the income profile. At Kellerman
we have signed a new six year lease without break with the largest
tenant and increased the area they occupy and rental level by 33%
and 35% respectively. We are in discussions with various other
tenants on similar deals.
Tenant Mix
Warehouse Distribution Retail Manufacturing Third Party Logistics operators Other
Tenant Type
-------------------- ------------- ------------ -------------- -------------------------------- ----------
Space ('000 sqm) 291 (21%) 402 (28%) 172 (12%) 512 (36%) 46 (3%)
-------------------- ------------- ------------ -------------- -------------------------------- ----------
Portfolio Yields
Warehouse Moscow (%) St Petersburg (%) Regions (%)
----------- ------------- ------------------ ------------
2016 12 - 13 13.25 13.25
2017 11.25 - 12.5 12.5 12.5
----------- ------------- ------------------ ------------
The investment properties and additional phases of existing
projects were valued by Jones Lang LaSalle ("JLL") at the year end,
in accordance with the RICS Valuation and Appraisal guidelines, and
are carried at a market value of $1.63 billion (see notes 11 &
12 to the financial statements). This has resulted in a net profit
on revaluation of $38.2 million in portfolio value during the
year.
Overall JLL have sharpened their yield assumptions for the
portfolio although in general they still quote a range for yield
across all sectors to reflect the difference in quality of assets,
leases and differing currencies. The yields used for the portfolio
fall within this range.
Estimated rental values ("ERVs") have remained static during the
year, although the consensus is that they have now found their
floor and the next move will be upwards, albeit gradually.
In the property investment market it is clear that the there is
a two way tension. On the one hand the Central Bank of Russia has
reduced its key lending rate from 10% to 7.5% since the start of
2017. Although this does not have a direct and immediate impact on
the prices investors will pay for assets it is clear the risk
premium for property assets has become more attractive. The cost of
borrowing in Roubles has also fallen, making local currency funding
increasingly attractive. On the other hand there are a number of
forced or distressed sellers who wish to leave the market. This is
primarily a function of the negative view of Russia in the Western
press and a number of funds set up in 2007 and 2008 reaching the
end of their life. This means there is not yet a clear trend for
prices, although domestic buyers remain the most active.
Land Bank
Location Property/Warehouse Land plot size
Complex (ha)
------------------------ ---------- -------------------- ---------------
Additional phases
of completed property Moscow Noginsk 26
------------------------
Nova Riga 25
Lobnya 6
Regions Rostov-On-Don 27
---------- --------------------------------------------- ---------------
Land bank Regions Omsk 19
Omsk 2 9
Ufa 48
Novgorod 44
-------------------------------------------------------- ---------------
Total 204
---------------------------------------------------------- ---------------
We continue to hold just over 50ha of land in Moscow for future
development where we could build an additional 250,000sqm, although
for the foreseeable future we do not anticipate starting
development unless we secure pre-lets.
Our 6ha of development land at Lobnya, Moscow have been affected
by recent changes in local highway planning. Since the year end
these changes have been upheld by the court and as a consequence we
have written down the carrying value of the land.
The Market
As indicated a year ago, the level of new development in the
warehouse sector in the Moscow region has reduced during the year
with new supply almost halving to just over 500,000sqm. Take up was
almost 1.2 million sqm and as a result the vacancy rate in the
market has fallen to around 9%. Demand was strongest from retail
and distribution businesses who accounted for 39% and 19% of the
take up respectively. The warehouse market is now almost without
exception denominated in Roubles and rents are in the range of
Roubles 3,600 per sqm to Roubles 4,000 per sqm for Grade A
space.
Vacancy in our portfolio, especially in Moscow, remains higher
than the general market as existing leases expire and new letting
activity fails to keep pace. There are still a number of other
developers who are leasing space at rents which we feel are below
real market levels which is something we will resist doing as we
believe it destroys value. As the economy stabilises we expect to
see an improvement in letting activity in our portfolio during the
year. This is already being reflected in the activity we have seen
since the year end.
In St Petersburg and our two regional hubs of Rostov and
Novosibirsk rental levels are broadly the same, although the lack
of completion and tighter markets mean they are more often at the
higher end of this range.
Investment volumes in the year increased to $4.6 billion, with
79% of this in Moscow. Over 80% of all deals were funded by Russian
capital, and only 8% of the total capital or $370m went into the
warehouse sector. JLL indicate prime yields in the range of
11-12.5% for Moscow warehouses.
There is certainly a general market view that 2018 will be a
year of continued improvement on all fronts, including rents,
yields and occupancy driven by a general improvement in the wider
economy, lower central bank rates and market forces in the property
sector.
Finance Review
We continue to assess our ability to make covered distributions
with reference to underlying earnings and operating cash-flows
after interest. The former also allows a comparison of operating
results before mark to market valuation movements. The
reconciliation between underlying and IFRS earnings is given in
note 9 to the accounts.
Underlying Earnings 2017 2016
(Adjusted non IFRS measure) $'000 $'000
--------------------------------------------- --------- -------------------
Net rental and related income 166,729 151,741
Administrative expenses (25,343) (24,221)
Long term incentives (1,635) (3,133)
Bad debt provision - (22)
Foreign exchange gains 9,229 18,079
Share of profits of joint ventures 2,074 1,780
--------- -------------------
Operating profit 151,054 144,224
Net finance charge (78,087) (81,923)
--------- -------------------
Underlying profit before tax 72,967 62,301
Tax (16,157) (15,179)
Underlying profit after tax 56,810 47,122
--------- -------------------
Basic underlying earnings per share (cents) 8.56 7.17
--------------------------------------------- --------- -------------------
Our investment portfolio, including the contribution from
Roslogistics, shows the continuing effect of the transition from US
Dollar pegged to Rouble leases. On a like for like basis, NOI has
dropped from $172 million in 2015, to $150 million in 2016 and $136
million for 2017 but our acquisition strategy to counteract this
fall in income is bearing fruit. We purchased two investment
portfolios during the year, one in April and one in November, which
contributed $10 million to NOI, giving investment income for the
year of $146 million including the contribution from Roslogistics
(see note 4). A full year of acquisition income should more than
compensate for any additional drop in revenues from the existing
portfolio in the current year.
In addition to the positive impact of acquisitions we have been
successful in selling off part of the legacy land bank that we hold
in the UK. This generated $21 million of income after costs and
boosted our NOI for the year to $167 million.
Underlying administrative expenses increased during the year,
predominantly due to general salary costs increasing on a
strengthening Rouble and cash bonuses paid in the year. Bonuses in
2016 had a larger share based element.
As we hold an increasing amount of our free cash in Roubles the
strengthening currency created a positive foreign exchange movement
in US Dollar terms. This was countered by strengthening sterling at
the end of the year increasing the US Dollar value of our
preference share liabilities. This resulted in a foreign exchange
gain of $9 million in the income statement (2016: profit of $18
million) and a foreign currency loss through reserves of $24.7
million (2016: gain of $10.9 million).
Underlying earnings increased to $56.8 million (2016: $47.1
million) giving Basic Underlying Earnings per Share of 8.56 cents
(2016: 7.17 cents).
IFRS Earnings 2017 2016
$'000 $'000
------------------------------------------ --------- ---------
Net rental and related income 166,729 151,741
Administrative expenses (28,547) (25,344)
Share based payments and other long term
incentives (4,545) (9,077)
Foreign exchange profits 9,229 18,079
Share of joint venture profits 2,074 1,780
--------- ---------
Operating profit 144,940 137,179
Profit/(Loss) on revaluation 38,152 (43,324)
Profit on disposal - 3,807
Net finance charge (92,445) (75,416)
IFRS profit before tax 90,647 22,246
--------- ---------
Tax (32,961) (14,527)
--------- ---------
IFRS profit after tax 57,686 7,719
------------------------------------------ --------- ---------
IFRS earnings are bolstered by the revaluation gain on the
portfolio offset against other mark to market movements on
derivatives, amortisation and depreciation charges and an increased
deferred tax liability of $16.7 million on the gains. We also
impaired the remaining goodwill of $2 million carried against the
Raven Mount subsidiary following the sale of the strategic land
bank and this is included in administrative expenses.
Finance costs increased with the issue of new convertible
preference shares during the year, the proceeds being used for the
acquisition completed at the end of the year. Finance income from
cash balances held increased to $7.2 million (2016: $3.4 million)
reflecting the higher proportion of Rouble cash generating a better
interest return. 2016 also had a one off gain of $15.4 million on
the redemption of a loan at below book value which was not repeated
this year.
Investment Properties
A tightening of yields and stable ERVs resulted in a revaluation
gain of $38.2 million for our investment properties during the
year. Together with acquisitions this increases the carrying value
of investment properties to $1.57 billion. The carrying value of
land held for development reduced by $2.8 million, the majority
relating to one small site where changes in local highway planning
has reduced the possibility of new development on this site. This
gives a carrying value of investment properties under construction
of $38.4 million.
Debtors and Creditors
Debtors and creditors are inflated by the most recent
acquisition, creditors including a provision for deferred
consideration which is dependent on the leasing of vacant space on
the asset and debtors including VAT recoverable on the
consideration paid to date. Tax payable is also increased by
uncertain tax provisions made in the year.
Cash and Debt
Cash flow Summary 2017 2016
$'000 $'000
---------------------------------------------- ---------- ----------
Net cash generated from operating activities 125,487 118,012
Net cash used in investing activities (199,733) (992)
Net cash generated/(used) in financing
activities 127,298 (120,759)
Net increase/(decrease) in cash and cash
equivalents 53,052 (3,739)
Effect of foreign exchange rate changes 14,993 69
---------- ----------
Increase/(decrease) in cash 68,045 (3,670)
---------- ----------
Closing cash and cash equivalents 266,666 198,621
---------------------------------------------- ---------- ----------
Cash balances increase by $68 million with a refinancing
straddling the year end, a new facility of $62.3 million being
drawn on 29 December 2017 but the old facility of the same amount
not repaid until 9 January 2018. This artificially increases cash
and debt repayable within one year at the balance sheet date.
In essence, adjusting for above, cash balances are flat for the
year, acquisition expenditure of $190 million being financed from
the issue of new convertible preference shares and profits
generated.
Bank Debt 2017 2016
$m $m
---------------------------------------- ------ ------
Fixed rate debt 191 131
Debt hedged with swaps - 112
Debt hedged with caps 651 469
------ ------
842 712
Unhedged debt 14 37
------ ------
856 749
Unamortised loan origination costs and
accrued interest (9) (9)
Total debt 847 740
------ ------
Undrawn facilities - -
------ ------
Weighted average cost of debt 7.62% 7.48%
------ ------
Weighted average term to maturity 4.5 4.7
---------------------------------------- ------ ------
The quantum and number of facilities maturing each year is shown
below.
Year 2018 2019 2020 2021 2022 2023-2024
------------------------------- ----- ----- ----- ----- ----- ----------
Debt maturing ($ million) 76 138 15 197 163 267
------------------------------- ----- ----- ----- ----- ----- ----------
Percentage of total debt
maturing (%) 9 16 2 23 19 31
------------------------------- ----- ----- ----- ----- ----- ----------
Number of maturing facilities 2 3 1 3 2 5
------------------------------- ----- ----- ----- ----- ----- ----------
We continue to extend the maturity dates of our secured
facilities, 50% of debt now maturing after 2021. The effective loan
to value ratio on theses facilities is 53% (2016: 55%).
Our cost of debt has increased slightly to 7.62% (2016: 7.48%)
with increases in underlying US LIBOR.
Taxation
The tax charge for the year increases with a deferred tax
liability charge on the property revaluations. Tax paid in cash
terms rose to $14.4 million (2016: $7.7 million), the majority a
result of the introduction of the new tax ruling last year,
limiting the offset of deferred tax assets to 50% of profits.
Subsidiaries
Raven Mount contributed significantly to profits during the
year, generating $24.3 million on the sale of legacy land plots
held in the UK which had a book value of $0.7 million.
Roslogistics operated out of 112,700sqm of warehouse space at
the year end and has increased its Rouble NOI by 10% to Roubles 724
million. We are keen to develop this business in the medium term
and increased administration costs include investment into the
on-going strategy for operations.
Outlook
Our acquisition strategy is supporting our transition to Rouble
rents. Over the coming year we will start to align our foreign
currency risk by introducing elements of Rouble debt into our
secured facilities. Should the Central Bank of Russia continue with
its reduction in the Central Bank rate then this exercise will be
accelerated.
Risk Report
Risk Appetite
The Group continues to adapt its balance sheet to meet the risks
of the market in which we operate. The key financial risks continue
to be foreign exchange driven, our income model now predominantly
Rouble based but our financing US Dollar and Sterling based. Our
approach is threefold:
-- In the short term we have reduced our amortising US Dollar
debt facilities and extended the period of amortisation to build in
sufficient covenant headroom to manage adverse foreign exchange
movements;
-- We have embarked on an acquisition strategy to build our
Rouble income streams as our US Dollar pegged income continues to
decline; and
-- With Russian Central Bank rates reducing, we expect all new
and maturing financing facilities to have an increasing proportion
of Rouble denominated debt, reducing our exposure to US Dollar
financing over the medium term.
With a certain stability returning to the Russian market in
2017, our risk appetite has increased as we seek income enhancing
acquisition opportunities.
Risk Management and Internal Controls
The Board is responsible for the management of risk and
regularly carries out a robust assessment of the principal risks
and uncertainties affecting the business, discusses how these may
impact on operations, performance and solvency and what mitigating
actions, if any, can be taken. The Audit Committee is responsible
for ensuring that the internal control procedures are robust and
that risk management processes are appropriate. A fuller
explanation of the processes is given in the Audit Committee
Report.
The business recruited additional senior managers in both our
Cyprus and Moscow offices this year. Together with our acquisition
and growth plans it became evident that the current operational
review structure would become less effective with the increased
senior team. Each department now holds its own weekly meeting to
review risks and issues and reports to an operational oversight
Group of eight members comprising two executive directors, two
directors of the intermediate Cypriot holding board and four senior
managers. This group also meets weekly. At least one of the
oversight Group sits on each departmental committee. Departmental
meetings cover the day to day operating issues and refer key issues
to the oversight Group where appropriate. The oversight Group also
discusses business wide issues and risks and reports into the
Executive Board at the formal bi monthly Board meetings. With the
addition of the Company Secretary, the oversight Board also acts as
the Risk Committee, reporting to the Audit Committee.
The risk management process is designed to identify, evaluate
and mitigate any significant risk the Group faces. The process aims
to manage rather than eliminate risks and can only provide
reasonable and not absolute assurance.
The Audit Committee has not identified any significant failings
or weaknesses in the internal control and risk assessment
procedures during the year.
Principal Risks and Uncertainties
We have set out in the following tables the principal risks and
uncertainties that face our business, our view on how those risks
have changed during the year and a description of how we mitigate
or manage those risks. We have also annotated those risks that have
been considered as part of the viability assessment.
Financial Risk
Risk Impact Mitigation Change
in
2017
---------------------- ---------------------- ------------------------------------ -------
Oil price
(Viability ->
Statement This leads to The percentage of US Dollar
Risk) further falls pegged leases continues
in US Dollar to decline now the market
Oil price equivalent income is predominately Rouble
volatility and an increase based.
returns in in the credit
the medium risk of those With little or no speculative
term leading tenants who remain development in the market,
to a weakening in US Dollar research continues to forecast
Rouble. pegged leases. a drop in vacancy level.
Reduced consumer
demand has an
impact on appetite
for new lettings,
the renewal of
existing leases
and restricts
rental growth.
---------------------- ---------------------- ------------------------------------ -------
Interest rates
(Viability ->
Statement Cost of debt The majority of our variable
Risk) increases and cost of debt is hedged
Group profitability with the use of swaps and
Increases and debt service caps on US LIBOR or fixed
in US LIBOR cover reduce. rate facilities.
With Russian Central Bank
Rates now falling we are
also considering moving
away from US Dollar debt
in the medium term.
---------------------- ---------------------- ------------------------------------ -------
Foreign Exchange
(Viability
Statement A weakening of The high yield that we
Risk) the Rouble against generate on assets has
those currencies cushioned the impact of
The move to reduces our ability severe Rouble depreciation.
a Rouble denominated to service US
rental market Dollar debt, Our acquisition strategy
increases Sterling preference is also allowing us to
foreign exchange share coupon re-build our profitability
risk as our and Sterling with Rouble denominated
debt and capital distributions. market rental income.
bases are
US Dollar The intention is for all
and Sterling new and maturing bank facilities
denominated to have an increasing element
respectively. of Rouble denominated funding
to reduce our US Dollar
exposure over the medium
term.
---------------------- ---------------------- ------------------------------------ -------
Bank Covenants
(Viability The likelihood
Statement of debt facility We have completed a restructuring
Risk) covenant breaches of debt facilities, extending
increases. amortisation periods and
The significant reducing the principal
drop in US outstanding to create additional
Dollar equivalent covenant headroom.
rents impacts
on both loan There is very little recourse
to value ("LTV") to the holding company
and debt service and other than the new
cover ratio office portfolio acquisition,
("DSCR") covenants no cross collateralisation
on US Dollar between projects on events
debt facilities. of default.
---------------------- ---------------------- ------------------------------------ -------
Property Investment
Risk Impact Mitigation Change
in
2017
---------------------------- ----------------------- ----------------------------------- -------
Acquisitions
(Viability Statement
Risk) Legacy issues We have increased our senior
Our acquisition may erode earnings management resource in
activity has enhancement and the year with both international
increased significantly integration into and Russian experience
and we operate our existing in real estate acquisitions.
in an immature systems may involve --
investment market excessive management External advisers undertake
where legacy resource. full detailed due diligence
issues are common on any acquisition projects.
with Russian --
acquisitions. --
-------------------------- ------------------------- ----------------------------------- -------
Sector focus Lack of experience We have recruited management
Investment in the new sectors resource with the appropriate
is made in may increase expertise and are familiar
new real estate acquisition risks with the external advisors
sectors (such and lead to higher specialising in those sectors.
as office transaction costs
and retail). and use of excessive
management resource.
-------------------------- ------------------------- ----------------------------------- -------
Leases This can lead Proactive property management
(Viability to uncertainty and continued open dialogue
Statement of annualised with tenants.
Risk) income due to
Market practice lease break clauses. Dedicated resources assigned
increasingly to fit-out obligations
incorporates Additional landlord under leases, project management
lease break risk on delivery and management oversight.
requirements of tenant fit-out
and landlord requirements.
fit-out obligations.
-------------------------- ------------------------- ----------------------------------- -------
Joint Ventures
NEW
Growth plans This could lead Any joint venture will
could include to reliance on be governed by a joint
entering into third parties venture agreement and each
joint venture to help deliver joint venture party will
arrangements business outcomes. be required to sign up
in certain to Raven Russia's code
parts of the of conduct. Senior management
business. resource has been enhanced
to ensure proper oversight
and experience of any joint
venture arrangements entered
into.
-------------------------- ------------------------- ----------------------------------- -------
Russian Domestic Risk
Risk Impact Mitigation Change
in 2017
------------------ ----------------------------- ----------------------------------- ---------
Legal Framework
->
The legal The large volume We have an experienced
framework of new legislation in house legal team including
in Russia from various a litigation specialist.
continues state bodies We use a variety of external
to develop is open to interpretation, legal advisors when appropriate.
with a number puts strain on
of new and the judicial Our lease agreements have
proposed laws system and can been challenged and have
expected to be open to abuse. proven to be robust in
come into both ICAC arbitration and
force in the in Russian Courts.
near future.
------------------ ----------------------------- ----------------------------------- ---------
Russian Taxation
Russian tax Tax treaties The key tax treaty for ->
code is changing may be renegotiated the Group is between Russia
in line with and new legislation and Cyprus and this was
global taxation may increase renegotiated during 2013
trends in the Group's tax with no significant impact
areas such expense. on the business;
as transfer
pricing and Changes in capital gains
capital gains tax rules have led to a
tax. change in our calculation
of Adjusted Diluted NAV
per share; and
Russia remains a relatively
low tax jurisdiction with
20% Corporation tax.
------------------ ----------------------------- ----------------------------------- ---------
Personnel Risks
Risk Impact Mitigation Change
in
2017
-------------- ------------------------ ------------------------------------- -------
Key Personnel
->
Failing to Strategy becomes The Remuneration Committee
retain key more difficult and Executives review remuneration
personnel. to flex or implement. packages against comparable
market information;
Employees have regular
appraisals and documented
development plans and targets;
and
A new incentive scheme
was approved at the last
AGM.
-------------- ------------------------ ------------------------------------- -------
Political and Economic Risk
Risk Impact Mitigation Change
in
2017
--------------------- ------------------------ --------------------------------- -------
Sanctions
->
The use of Continued isolation The local market has accepted
economic sanctions of Russia from the inevitability of long
by the US international term economic sanctions
and EU continues markets and a and this has played its
for the foreseeable return to a declining part in the fundamental
future. Russian economy. changes to the Russian
economy. We have adapted
our business model to secure
our position in the market.
However, the risk of increased
sanctions remains.
--------------------- ------------------------ --------------------------------- -------
Change key
Increased risk in the period
-> Stable risk in the period
Decreased risk in the period
Signed for and on behalf of the Board
Colin Smith
Director
11 March 2018
Directors' Responsibility Statement
The Statement of Directors' Responsibilities below has been
prepared in connection with the Company's full Annual Report and
Accounts for the year ended 31 December 2017.
The Board confirms to the best of its knowledge:
The financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by the EU,
give a true and fair view of the assets, liabilities, financial
position and profit and loss of the Company and the undertakings
included in the consolidation taken as a whole;
The strategic report includes a fair review of the development
and performance of the business and the position of the Company and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face; and
The Annual Report and Accounts, taken as a whole, are fair
balanced and understandable and provide the information necessary
for shareholders to assess the Company's performance, business
model and strategy.
This responsibility statement was approved by the Board of
Directors on 11 March 2018 and is signed on its behalf by:
Mark Sinclair Colin Smith
Chief Financial Officer Chief Operating Officer
GROUP INCOME STATEMENT
For the year ended
31 December 2017
2017 2016
Underlying Capital Underlying Capital
and and
earnings other Total earnings other Total
Notes $'000 $'000 $'000 $'000 $'000 $'000
Gross revenue 4/5 228,083 - 228,083 195,294 - 195,294
Property operating
expenditure and cost
of sales (61,354) - (61,354) (43,553) - (43,553)
Net rental and related
income 166,729 - 166,729 151,741 - 151,741
----------- --------- ---------- ----------- --------- ---------
Administrative expenses 4/6 (25,343) (3,204) (28,547) (24,243) (1,101) (25,344)
Share-based payments
and other long term
incentives 32 (1,635) (2,910) (4,545) (3,133) (5,944) (9,077)
Foreign currency profits 9,229 - 9,229 18,079 - 18,079
Operating expenditure (17,749) (6,114) (23,863) (9,297) (7,045) (16,342)
----------- --------- ---------- ----------- --------- ---------
Share of profits of
joint ventures 16 2,074 - 2,074 1,780 - 1,780
Operating profit /
(loss) before profits
and losses on investment
property 151,054 (6,114) 144,940 144,224 (7,045) 137,179
Unrealised profit
/ (loss) on revaluation
of investment property 11 - 42,320 42,320 - (40,192) (40,192)
Profit on disposal
of investment property
under construction 12 - - - - 3,807 3,807
Unrealised loss on
revaluation of investment
property under construction 12 - (4,168) (4,168) - (3,132) (3,132)
----------- --------- ---------- ----------- --------- ---------
Operating profit /
(loss) 4 151,054 32,038 183,092 144,224 (46,562) 97,662
Finance income 7 7,248 914 8,162 3,436 18,086 21,522
Finance expense 7 (85,335) (15,272) (100,607) (85,359) (11,579) (96,938)
----------- --------- ---------- ----------- --------- ---------
Profit / (loss) before
tax 72,967 17,680 90,647 62,301 (40,055) 22,246
Tax 8 (16,157) (16,804) (32,961) (15,179) 652 (14,527)
----------- --------- ---------- ----------- --------- ---------
Profit / (loss) for
the year 56,810 876 57,686 47,122 (39,403) 7,719
----------- --------- ---------- ----------- --------- ---------
Earnings per share: 9
Basic (cents) 8.69 1.17
Diluted (cents) 8.30 1.16
Underlying earnings
per share: 9
Basic (cents) 8.56 7.17
Diluted (cents) 7.41 6.81
The total column of this statement represents the Group's
Income Statement, prepared in accordance with IFRS as adopted
by the EU. The "underlying earnings" and "capital and other"
columns are both supplied as supplementary information permitted
by IFRS as adopted by the EU. Further details of the allocation
of items between the supplementary columns are given in
note 9.
All items in the above statement
derive from continuing operations.
All income is attributable to the equity
holders of the parent company. There are
no non-controlling interests.
The accompanying notes
are an integral part of
this statement.
GROUP STATEMENT OF COMPREHENSIVE
INCOME
For the year ended 31 December
2017
2017 2016
$'000 $'000
Profit for the year 57,686 7,719
Other comprehensive income,
net of tax
Items to be reclassified to profit
or loss in subsequent periods:
Foreign currency translation
on consolidation (24,712) 10,942
Total comprehensive income for
the year, net of tax 32,974 18,661
----------- --------
All income is attributable to the equity holders of
the parent company. There are no non-controlling interests.
The accompanying notes are an
integral part of this statement.
GROUP BALANCE SHEET
As at 31 December 2017
2017 2016
Notes $'000 $'000
Non-current assets
Investment property 11 1,568,126 1,300,643
Investment property under
construction 12 38,411 41,253
Plant and equipment 4,248 3,044
Goodwill 14 - 1,882
Investment in joint ventures 16 9,983 9,731
Other receivables 17 5,625 3,724
Derivative financial instruments 19 7,948 5,012
Deferred tax assets 26 34,629 27,451
1,668,970 1,392,740
----------------- ----------
Current assets
Inventory 423 771
Trade and other receivables 18 78,946 52,669
Derivative financial instruments 19 445 358
Cash and short term deposits 20 266,666 198,621
346,480 252,419
----------------- ----------
Total assets 2,015,450 1,645,159
----------------- ----------
Current liabilities
Trade and other payables 21 107,357 65,408
Derivative financial instruments 19 35 943
Interest bearing loans
and borrowings 22 106,697 40,787
214,089 107,138
----------------- ----------
Non-current liabilities
Interest bearing loans
and borrowings 22 740,485 699,038
Preference shares 23 146,458 131,703
Convertible preference
shares 24 269,031 119,859
Other payables 25 34,566 25,259
Derivative financial instruments 19 - 67
Deferred tax liabilities 26 81,063 61,869
1,271,603 1,037,795
----------------- ----------
Total liabilities 1,485,692 1,144,933
----------------- ----------
Net assets 529,758 500,226
----------------- ----------
Equity
Share capital 27 12,479 12,578
Share premium 207,746 216,938
Warrants 28 441 1,161
Own shares held 29 (5,742) (7,449)
Convertible preference
shares 24 14,497 8,453
Capital reserve (217,782) (245,426)
Translation reserve (201,911) (177,199)
Retained earnings 720,030 691,170
----------------- ----------
Total equity 30 / 31 529,758 500,226
----------------- ----------
Net asset value per share
(cents): 31
Basic 81 76
Diluted 80 71
Adjusted net asset value
per share (cents): 31
Basic 78 71
Diluted 77 68
----------------- ----------
The financial statements were approved by the Board
of Directors on 11 March 2018 and signed on its behalf
by:
Colin
Mark Sinclair Smith
Chief Operating
Chief Financial Officer Officer
The accompanying notes are an integral
part of this statement.
GROUP STATEMENT OF
CHANGES IN EQUITY
For the year
ended
31 December
2017
Own Convertible
Share Share Shares Preference Capital Translation Retained
Capital Premium Warrants Held Shares Reserve Reserve Earnings Total
For the year
ended
31 December
2016 Notes $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2016 12,776 224,735 1,167 (52,101) - (210,176) (188,141) 676,782 465,042
Profit for the
year - - - - - - - 7,719 7,719
Other
comprehensive
income - - - - - - 10,942 - 10,942
-------- --------- --------- --------- ------------ ---------- ------------ --------- ---------
Total
comprehensive
income for
the
year - - - - - - 10,942 7,719 18,661
-------- --------- --------- --------- ------------ ---------- ------------ --------- ---------
Warrants
exercised 27/28 2 41 (6) - - - - - 37
Convertible
preference
shares issued 24 - - - - 8,453 - - - 8,453
Conversion of
convertible
preference
shares 24/27 - - - - - - - - -
Own shares
acquired 29 - - - (133) - - - - (133)
Own shares
disposed 29 - - - 43,161 - - - (28,549) 14,612
Own shares
allocated 29 - - - 1,543 - - - (1,441) 102
Ordinary
shares
cancelled 27/29 (200) (7,838) - 81 - - - - (7,957)
Share-based 32
payments c - - - - - - - 1,409 1,409
Transfer in
respect
of capital
losses - - - - - (35,250) - 35,250 -
-------- --------- --------- --------- ------------ ---------- ------------ --------- ---------
At 31 December
2016 12,578 216,938 1,161 (7,449) 8,453 (245,426) (177,199) 691,170 500,226
-------- --------- --------- --------- ------------ ---------- ------------ --------- ---------
For the year
ended
31 December
2017
Profit for the
year - - - - - - - 57,686 57,686
Other
comprehensive
income - - - - - - (24,712) - (24,712)
-------- --------- --------- --------- ------------ ---------- ------------ --------- ---------
Total
comprehensive
income for
the
year - - - - - - (24,712) 57,686 32,974
-------- --------- --------- --------- ------------ ---------- ------------ --------- ---------
Warrants
exercised 27/28 180 5,037 (720) - - - - - 4,497
Convertible
preference
shares issued 24 - - - - 6,067 - - - 6,067
Conversion of
convertible
preference
shares 24/27 6 348 - - (23) - - - 331
Own shares
acquired 29 - - - (158) - - - - (158)
Own shares
disposed 29 - - - - - - - - -
Own shares
allocated 29 - - - 1,818 - - - (1,182) 636
Ordinary
shares
cancelled 27/29 (285) (14,577) - 47 - - - - (14,815)
Share-based
payments 32 - - - - - - - - -
Transfer in
respect
of capital
losses - - - - - 27,644 - (27,644) -
-------- --------- --------- --------- ------------ ---------- ------------ --------- ---------
At 31 December
2017 12,479 207,746 441 (5,742) 14,497 (217,782) (201,911) 720,030 529,758
-------- --------- --------- --------- ------------ ---------- ------------ --------- ---------
The accompanying notes
are an integral part
of this statement.
GROUP CASH FLOW STATEMENT
For the year ended 31 December
2017
2017 2016
Notes $'000 $'000
Cash flows from operating
activities
Profit before tax 90,647 22,246
Adjustments for:
Impairment of goodwill 6 2,061 -
Depreciation 6 1,143 1,101
Provision for bad debts 6 (93) 22
Share of profits of joint
ventures 16 (2,074) (1,780)
Finance income 7 (8,162) (21,522)
Finance expense 7 100,607 96,938
Profit on disposal of investment
property under construction 12 - (3,807)
(Profit) / loss on revaluation
of investment property 11 (42,320) 40,192
Loss on revaluation of investment
property under construction 12 4,168 3,132
Foreign exchange profits (9,229) (18,079)
Non-cash element of share-based
payments and other long term
incentives 32 2,910 5,944
---------- ----------
139,658 124,387
Changes in operating working
capital
(Increase) / decrease in
operating receivables (1,148) 4,419
Decrease in other operating
current assets 429 391
Decrease in operating payables (1,449) (8,026)
---------- ----------
137,490 121,171
Receipts from joint ventures 16 2,711 4,521
Tax paid (14,714) (7,680)
---------- ----------
Net cash generated from
operating activities 125,487 118,012
---------- ----------
Cash flows from investing
activities
Payments for property improvements (14,793) (9,163)
Refunds of VAT on construction - 493
Acquisition of subsidiaries 39 (86,606) -
Cash acquired with subsidiaries 39 4,088 -
Acquisition of investment
property 11 (107,481) -
Proceeds from disposal of investment
property under construction 12 - 4,595
Purchase of plant and equipment (2,196) (653)
Loans repaid - 337
Interest received 7,255 3,399
---------- ----------
Net cash used in investing
activities (199,733) (992)
---------- ----------
Cash flows from financing
activities
Proceeds from long term
borrowings 271,457 -
Repayment of long term
borrowings (125,371) (108,150)
Loan amortisation (38,322) (56,343)
Bank borrowing costs paid (64,171) (66,808)
Exercise of warrants 27 / 28 4,497 37
Preference shares purchased 23 (112) (713)
Ordinary shares purchased 27 / 29 (14,337) (7,988)
Ordinary shares sold 29 - 14,612
Dividends paid on preference
shares (14,732) (15,088)
Dividends paid on convertible
preference shares (13,143) (4,349)
Issue of convertible preference
shares 24 126,402 128,327
Premium paid for derivative
financial instruments (4,870) (4,296)
---------- ----------
Net cash generated from / (used
in) financing activities 127,298 (120,759)
---------- ----------
Net increase / (decrease) in
cash and cash equivalents 53,052 (3,739)
Opening cash and cash equivalents 198,621 202,291
Effect of foreign exchange
rate changes 14,993 69
---------- ----------
Closing cash and cash equivalents 20 266,666 198,621
---------- ----------
The accompanying notes are an integral
part of this statement.
NOTES TO THE FINANCIAL
STATEMENTS
For the year
ended 31 December
2017
1. General information
Raven Russia Limited (the "Company") and its subsidiaries
(together the "Group") is a property investment group specialising
in commercial real estate in Russia.
The Company is incorporated and domiciled in Guernsey under
the provisions of the Companies (Guernsey) Law, 2008. The
Company's registered office is at La Vieille Cour, La Plaiderie,
St Peter Port, Guernsey GY1 6EH.
The audited financial statements of the Group for the year
ended 31 December 2017 were authorised by the Board for
issue on 11 March 2018.
2. Accounting policies
Basis of preparation
The Company has taken advantage of the exemption conferred
by the Companies (Guernsey) Law, 2008, section 244, not
to prepare company financial statements as group financial
statements have been prepared for both current and prior
periods. The group financial statements are presented in
US Dollars and all values are rounded to the nearest thousand
dollars ($'000) except where otherwise indicated.
The principal accounting policies adopted in the preparation
of the group financial statements are set out below. The
policies have been consistently applied to all years presented,
unless otherwise indicated.
The preparation of financial statements in conformity with
IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in
the process of applying the accounting policies. The areas
involving a high degree of judgement or complexity, or areas
where assumptions and estimates are significant to the financial
statements, are disclosed in note 3.
Going concern
The financial position of the Group, its cash flows, liquidity
position and borrowings are described in the Financial Review
and the notes to these financial statements. After making
appropriate enquiries and examining sensitivities that could
give rise to financial exposure, the Board has a reasonable
expectation that the Group has adequate resources to continue
operations for the foreseeable future. Accordingly, the
Group continues to adopt the going concern basis in the
preparation of these financial statements.
Statement of compliance
The financial statements of the Group have been prepared
in accordance with International Financial Reporting Standards
adopted for use in the European Union ("IFRS") and the Companies
(Guernsey) Law, 2008.
Changes in accounting policies
The accounting policies adopted are consistent with those
of the previous financial year. The Group has adopted new
and amended IFRS and IFRIC interpretations as of 1 January
2017, which had no impact on the financial position or performance
of the Group.
Certain new standards, interpretations and amendments to
existing standards have been published that are mandatory
for later accounting periods and which have not been adopted
early. Of these the five thought to have a possible impact
on the Group are:
IFRS 9 Financial Instruments (effective 1 January 2018)
IFRS 2 Classification and Measurement of Share-based Payment
Transactions (Amendments to IFRS 2 effective 1 January 2018)
IAS 40 Transfer of Investment Property (Amendments to IAS
40 effective 1 January 2018)
IFRS 15 Revenue from contracts with customers (effective
1 January 2018)
IFRS 16 Leases (effective 1 January 2019)
The Group has assessed the impact of these changes and does
not expect them to significantly impact on the financial
position or performance of the Group. There may, however,
be changes to disclosures within the financial statements.
The standards, amendments or revisions are effective for
annual periods beginning on or after the dates noted above.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company, its subsidiaries and the special
purpose vehicles ("SPVs") controlled by the Company, made
up to 31 December each year. Control is achieved where the
Company is exposed, or has rights, to variable returns from
its involvement with or ownership of the investee entity
and has the ability to affect those returns through its
power over the investee.
The Group has acquired investment properties through the
purchase of SPVs. In the opinion of the Directors, these
transactions did not meet the definition of a business combination
as set out in IFRS 3 "Business Combinations". Accordingly
the transactions have not been accounted for as an acquisition
of a business and instead the financial statements reflect
the substance of the transactions, which is considered to
be the purchase of investment property and investment property
under construction.
The results of subsidiaries acquired or disposed of during
the year are included in the Income Statement from the effective
date of acquisition or up to the effective date of disposal,
as appropriate.
Where necessary, adjustments are made to the financial statements
of entities acquired to bring the accounting policies into
line with those used by the Group.
All intra-group transactions, balances, income and expenditure
are eliminated on consolidation.
Joint ventures
A joint venture is a contractual arrangement whereby the
parties that have joint control of the arrangement have
rights to the net assets of the joint venture. Joint control
is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the activities require
unanimous consent of the contracting parties for strategic
financial and operating decisions.
The Group's investments in joint ventures are accounted
for using the equity method. Under the equity method, the
investment in a joint venture is initially recognised at
cost. The carrying value of the investment is adjusted to
recognise changes in the Group's share of net assets of
the joint venture since the acquisition date. Any premium
paid for an interest in a joint venture above the fair value
of the Group's share of identifiable assets, liabilities
and contingent liabilities is determined as goodwill. Goodwill
relating to a joint venture is included in the carrying
amount of the investment and is neither amortised nor individually
tested for impairment.
The aggregate of the Group's share of profit or loss of
joint ventures is shown on the face of the Income Statement
within Operating Profit and represents the profit or loss
after tax.
Revenue recognition
(a) Property investment
Rental income from operating leases is recognised in income
on a straight-line basis over the lease term. Rental increases
calculated with reference to an underlying index and the
resulting rental income ("contingent rents") are recognised
in income as they are determined.
Incentives for lessees to enter into lease agreements are
spread evenly over the lease term, even if the payments
are not made on such a basis. The lease term is the non-cancellable
period of the lease, together with any further term for
which the tenant has the option to continue the lease, where,
at the inception of the lease, the directors are reasonably
certain that the tenant will exercise that option.
Premiums received to terminate leases are recognised in
the Income Statement as they arise.
(b) Roslogistics Logistics revenue, excluding value added
tax, is recognised as services are provided.
(c) Raven Mount. The sale of completed property and land
is recognised on legal completion.
Taxation
The Company is a limited company registered in Guernsey,
Channel Islands, and is exempt from taxation. The Group
is liable to Russian, UK and Cypriot tax arising on the
results of its Russian, UK and Cypriot operations.
The tax expense represents the sum of the tax currently
payable and deferred tax.
(a) Current tax
The tax currently payable is based on taxable profit for
the year. Taxable profit differs from net profit (or loss)
as reported in the Income Statement because it excludes
items of income and expenditure that are taxable or deductible
in other years and it further excludes items that are never
taxable or deductible. The Group's liability for current
tax is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date.
(b) Tax provisions
A current tax provision is recognised when the Group has
a present obligation as a result of a past event and it
is probable that the Group will be required to settle that
obligation. A provision for uncertain taxes is recorded
within current tax payable (see note 21).
(c) Deferred tax
Deferred tax is the tax expected to be payable or recoverable
on differences between the carrying amount of assets and
liabilities in the financial statements and the corresponding
tax bases used in the computation of taxable profit, and
is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities
are not recognised if the temporary difference arises from
goodwill or from the initial recognition (other than in
a business combination) of other assets and liabilities
in a transaction that affects neither the taxable profit
nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at
each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will
be available to allow all or part of the asset to be recovered.
Unrecognised deferred tax assets are reassessed at each
balance sheet date and are recognised to the extent that
it has become probable that future taxable profit will allow
the deferred tax asset to be recovered.
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the liability is settled or
the asset realised, based on tax rates that have been enacted
or substantively enacted at the reporting date. Deferred
tax is charged or credited in the Income Statement, except
when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with
in equity.
Deferred tax assets and deferred tax liabilities are offset,
if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred
income taxes relate to the same taxable entity and the same
taxation authority.
(d) Value added tax
Revenue, expenditure, assets and liabilities are recognised
net of the amount of value added tax except:
Where the value added tax incurred on a purchase of assets
or services is not recoverable from the taxation authority,
in which case the value added tax is recognised as part
of the cost of acquisition of the asset or as part of the
expenditure item as applicable; and
Receivables and payables that are stated with the amount
of value added tax included.
The net amount of value added tax recoverable from, or payable
to, the taxation authority is included as part of receivables
or payables, as appropriate, in the Balance Sheet.
Investment property and investment property under construction
Investment property comprises completed property and property
under construction held to earn rentals or for capital appreciation
or both. Investment property comprises both freehold and
leasehold land and buildings.
Investment property is measured initially at its cost, including
related transaction costs. After initial recognition, investment
property is carried at fair value. The Directors assess
the fair value of investment property based on independent
valuations carried out by their appointed property valuers
or on independent valuations prepared for banking purposes.
The Group has appointed Jones Lang LaSalle as property valuers
to prepare valuations on a semi-annual basis. Valuations
are undertaken in accordance with appropriate sections of
the current Practice Statements contained in the Royal Institution
of Chartered Surveyors Appraisal and Valuation Standards,
2014 Edition (the "Red Book"). This is an internationally
accepted basis of valuation. Gains or losses arising from
changes in the fair value of investment property are included
in the Income Statement in the period in which they arise.
For the purposes of these financial statements, in order
to avoid double counting, the assessed fair value is reduced
by the present value of any tenant incentives and contracted
rent uplifts that are spread over the lease term and increased
by the carrying amount of any liability under a head lease
that has been recognised in the Balance Sheet.
Borrowing costs that are directly attributable to the construction
of investment property are included in the cost of the property
from the date of commencement of construction until construction
is completed.
Leasing (as lessors)
Leases where the Group does not transfer substantially all
the risks and benefits incidental to ownership of the asset
are classified as operating leases. All of the Group's properties
are leased under operating leases and are included in investment
property in the Balance Sheet.
Financial assets
The Group classifies its financial assets into one of the
categories discussed below, depending upon the purpose for
which the asset was acquired. The Group has not classified
any of its financial assets as held to maturity.
(a) Fair value through profit or loss
This category comprises only in-the-money derivatives (see
financial liabilities policy for out-of-the-money derivatives),
which are carried at fair value with changes in the fair
value recognised in the Income Statement in finance income
or finance expense.
(b) Loans and receivables
These are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market.
In the case of the Group, loans and receivables comprise
trade and other receivables, loans, security deposits, restricted
cash and cash and short term deposits.
Loans and receivables are initially recognised at fair value,
plus transaction costs that are directly attributable to
their acquisition or issue, and are subsequently carried
at amortised cost using the effective interest rate method,
less provision for impairment.
If there is objective evidence that an impairment loss has
been incurred, the amount of the loss is measured as the
difference between the asset's carrying amount and the present
value of estimated future cash flows. The amount of the
impairment loss is recognised in administrative expenses.
If in a subsequent period the amount of the impairment loss
decreases and the decrease can be related objectively to
an event occurring after the impairment is recognised, the
previously recognised impairment loss is reversed. Any such
reversal of an impairment loss is recognised in the Income
Statement.
Cash and short term deposits include cash in hand, deposits
held at call with banks and other short term highly liquid
investments with original maturities of three months or
less.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements
entered into.
The Group classifies its financial liabilities into one
of the categories listed below.
(a) Fair value through profit or loss
This category comprises only out-of-the-money derivatives,
which are carried at fair value with changes in the fair
value recognised in the Income Statement in finance income
or finance expense.
(b) Other financial liabilities
Other financial liabilities include interest bearing loans,
trade payables (including rent deposits and retentions under
construction contracts), preference shares, convertible
preference shares and other short-term monetary liabilities.
Trade payables and other short-term monetary liabilities
are initially recorded at fair value and subsequently carried
at amortised cost using the effective interest rate method.
Interest bearing loans, convertible preference shares and
preference shares are initially recorded at fair value net
of direct issue costs and subsequently carried at amortised
cost using the effective interest rate method. Finance charges,
including premiums payable on settlement or redemption and
direct issue costs, are charged to the Income Statement
using the effective interest rate method.
An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all
of its liabilities. The Group considers the convertible
preference shares to be a compound financial instrument,
that is they have a liability and equity component. On the
issue of convertible preference shares the fair value of
the liability component is determined and the balance of
the proceeds of issue is deemed to be equity. The Group's
other equity instruments are its ordinary shares and warrants.
Own shares held
Own equity instruments which are acquired are recognised
at cost and deducted from equity. No gain or loss is recognised
in the Income Statement on the purchase, sale, issue or
cancellation of the Group's own equity instruments. Any
difference between the carrying amount and the consideration
is recognised in retained earnings.
Share-based payments and other long term incentives
The Group rewards its key management and other senior employees
by a variety of means many of which are settled by ordinary,
preference shares or convertible preference shares of the
Company.
Awards linked to or that may be settled by ordinary shares
The share component of the 2016 Retention Scheme may be
settled in any of the Company's listed securities, including
ordinary shares, and as a consequence falls within the scope
of IFRS 2 Share-based payments. To date the instalments
have been settled by preference shares and convertible preference
shares and therefore are cash-settled transactions. The
cost of cash-settled transactions is recognised as an expense
over the vesting period, measured by reference to the fair
value of the corresponding liability, which is recognised
on the Balance Sheet. The liability is remeasured at fair
value at each balance sheet date until settlement, with
changes in the fair value recognised in the Income Statement.
Awards not linked to or settled by ordinary shares
These awards are accounted for in accordance with IAS 19
Employee Benefits whereby the Group estimates the cost of
awards using the projected unit credit method, which involves
estimating the future value of the preference shares or
convertible preference shares, as appropriate, at the vesting
date and the probability of the awards vesting. The resulting
expense is charged to the Income Statement over the performance
period and the liability is remeasured at each Balance Sheet
date.
The cash component of the 2016 Retention Scheme has been
accounted for in this way.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each Group
entity are measured in the currency of the primary economic
environment in which the entity operates (the "functional
currency"). For the Company the directors consider this
to be Sterling. The presentation currency of the Group is
United States Dollars, which the directors consider to be
the key currency for the Group's operations as a whole.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation
at the year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the
Income Statement. Non-monetary assets and liabilities are
translated using exchange rates at the date of the initial
transaction or when their fair values are reassessed.
(c) On consolidation
The results and financial position of all the Group entities
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
(i) assets and liabilities for each Balance Sheet are translated
at the closing rate at the date of the Balance Sheet;
(ii) income and expenditure for each Income Statement are
translated at the average exchange rate prevailing in the
period unless this does not approximate the rates ruling
at the dates of the transactions in which case they are
translated at the transaction date rates; and
(iii) all resulting exchange differences are recognised
in Other Comprehensive Income.
On consolidation, the exchange differences arising from
the translation of the net investment in foreign entities
are recognised in Other Comprehensive Income. When a foreign
entity is sold, such exchange differences are recognised
in the Income Statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities
of the foreign entity and translated at the closing rate.
Dividends
Dividends to the Company's ordinary shareholders are recognised
when they become legally payable. In the case of interim
dividends, this is when declared by the directors. In the
case of final dividends, this is when they are approved
by the shareholders at an AGM.
3. Critical accounting estimates and judgements
The Group makes certain estimates and judgements regarding
the future. Estimates and judgements are continually evaluated
and are based on historical experience as adjusted for current
market conditions and other factors. The resulting accounting
estimates will, by definition, seldom equal the related
actual results. The estimates and judgements that have a
significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are outlined below.
Judgements other than estimates
In the process of applying the Group's accounting policies
the following are considered to have the most significant
effect on the amounts recognised in the consolidated financial
statements:
(a) Acquisitions
Properties can be acquired through the corporate acquisition
of a subsidiary company. At the time of acquisition, the
Group considers whether the acquisition represents the acquisition
of a business. The Group accounts for the acquisition as
a business combination where an integrated set of activities
is acquired in addition to the property. More specifically,
consideration is made of the extent to which significant
processes are acquired and the extent of ancillary services
provided by the subsidiary.
When the acquisition of a subsidiary does not represent
a business, it is accounted for as an acquisition of a group
of assets and liabilities. The cost of the acquisition is
allocated to the assets and liabilities acquired based on
their relative fair values, and no goodwill or deferred
tax liabilities are recognised. As detailed in note 39,
the Group purchased Gorigo Logistics Park, Primium Business
Centre and Kellerman Business Centre by acquiring all of
the issued share capital of the corporate vehicles that
owned the properties.
(b) Recognition of deferred tax assets
The recognition of deferred tax assets is based upon whether
it is probable that sufficient and suitable taxable profits
will be available in the future, against which the reversal
of temporary differences can be deducted. Recognition, therefore,
involves judgement regarding the future financial performance
of the particular legal entity or tax group in which the
deferred tax asset has been recognised.
Estimates
(a) Valuation of investment property and investment property
under construction
The best evidence of fair value is current prices in an
active market for similar lease and other contracts. In
the absence of such information, the Group determines the
amount within a range of reasonable, fair value estimates.
In making its estimation the Group considers information
from a variety of sources and engages external, professional
advisers to carry out third party valuations of its properties.
The external valuations are completed in accordance with
appropriate sections of the current Practice Statements
contained in the Royal Institution of Chartered Surveyors
Appraisal and Valuation Standards, 2014 Edition (the "Red
Book"). This is an internationally accepted basis of valuation
and is consistent with the requirements of IFRS 13. In our
market, where transactional activity is minimal, the valuers
are required to use a greater degree of estimation or judgement
than in a market where comparable transactions are more
readily available. For the valuation at 31 December 2016
the valuer highlighted that as a result of market conditions
at the valuation date it was necessary to make more judgements
than is normally required. Following the improvement in
the Russian economy and commercial property market and an
increase in activity in the investment market, they no longer
highlight this uncertainty.
The significant methods and assumptions used in estimating
the fair value of investment property and investment property
under construction are set out in note 13, along with detail
of the sensitivities of the valuations to changes in the
key inputs.
(b) Income tax
As part of the process of preparing its financial statements,
the Group is required to estimate the provision for income
tax in each of the jurisdictions in which it operates. This
process involves an estimation of the actual current tax
exposure, together with assessing temporary differences
resulting from differing treatment of items for tax and
accounting purposes. These differences result in deferred
tax assets and liabilities, which are included in the Balance
Sheet.
Russian tax legislation is subject to varying interpretations
and changes, which may occur frequently. New legislation
and clarifications have been introduced over recent years,
but it remains unclear as to how these will be applied in
practice. The interpretation of the legislation that the
Group adopts for its transactions and activities may be
challenged by the relevant regional and federal authorities
from time to time. Additionally, there may be inconsistent
interpretation of tax regulations by each local authority,
creating uncertainties in the correct application of the
taxation regulations in Russia. Fiscal periods remain open
to review by the authorities for the three calendar years
preceding the years of review and in some circumstances
may cover a longer period. Additionally, there have been
instances where new tax regulations have been applied retrospectively.
The Group is and has been subject to tax reviews which are
worked through with the relevant authorities to resolve.
The Group, in making its tax provision judgements, is confident
that an appropriate level of management and control is exerted
in each of the jurisdictions in which it operates, all companies
are tax resident in their relevant jurisdictions and are
the beneficial owners of any income they receive. Local
management use their in house tax knowledge and previous
experience as well as independent professional experts when
assessing tax risks and the resultant provisions required.
For the current year, the Group has specifically reviewed
the potential impact that new regulations may have on its
financing arrangements and the provision reflects probabilities
of between 25% and 100% of possible outcomes.
4. Segmental information
The Group has three reportable segments, which are managed
and report independently to the Board. These comprise:
Property Investment - acquire or develop and lease commercial
property in Russia;
Roslogistics - provision of warehousing, transport, customs
brokerage and related services in Russia; and
Raven Mount - sale of residential property in the UK.
Financial information relating to Property Investment is
provided to the Board on a property by property basis. The
information provided is gross rentals, operating costs,
net operating income, revaluation gains and losses and where
relevant the profit or loss on disposal of an investment
property. The individual properties have similar economic
characteristics and are considered to be a single reporting
segment.
Roslogistics is an independently managed business and the
Board is presented with turnover, cost of sales and operating
profits or losses after deduction of administrative expenses.
Information about Raven Mount provided to the Board comprises
the gross sale proceeds, inventory cost of sales and gross
profit, including the share of profits or losses of its
joint venture.
Administrative expenses and foreign currency gains or losses
are reported to the Board by segment. Finance income and
finance expense are not reported to the Board on a segment
basis. Sales between segments are eliminated prior to provision
of financial information to the Board.
For the Balance Sheet, segmental information is provided
in relation to investment property, inventory, cash balances
and borrowings. Whilst segment liabilities includes loans
and borrowings, segment profit does not include the related
finance costs. If such finance costs were included in segment
profit or loss, the profit from Property Investment would
have decreased by $62,918k (2016: $68,631k).
(a) Segmental information for the year
ended and as at 31 December 2017
Year ended 31
December 2017 Property Raven Segment Central
Investment Roslogistics Mount Total Overhead Total
$'000 $'000 $'000 $'000 $'000 $'000
Gross revenue 179,986 23,145 24,952 228,083 - 228,083
Operating costs
/ cost of sales (46,710) (10,775) (3,869) (61,354) - (61,354)
----------- ------------- ----------- ------------- --------- ----------
Net operating
income 133,276 12,370 21,083 166,729 - 166,729
Administrative
expenses
Running general
& administration
expenses (16,407) (2,204) (851) (19,462) (5,881) (25,343)
Impairment
of goodwill - - (2,061) (2,061) - (2,061)
Depreciation (697) (446) - (1,143) - (1,143)
Share-based payments
and other long
term incentives (775) - - (775) (3,770) (4,545)
Foreign currency
profits 9,225 4 - 9,229 - 9,229
----------- ------------- ----------- ------------- --------- ----------
124,622 9,724 18,171 152,517 (9,651) 142,866
Profit on disposal
of investment
property under
construction - - - - - -
Unrealised profit
on revaluation
of investment
property 42,320 - - 42,320 - 42,320
Unrealised loss
on revaluation
of
investment property
under construction (4,168) - - (4,168) - (4,168)
Share of profits
of joint ventures - - 2,074 2,074 - 2,074
----------- ------------- ----------- ------------- --------- ----------
Segment
profit /
(loss) 162,774 9,724 20,245 192,743 (9,651) 183,092
----------- ------------- ----------- ------------- --------- ----------
Finance
income 8,162
Finance
expense (100,607)
Profit before
tax 90,647
----------
As at 31 December
2017 Property Raven
Investment Roslogistics Mount Total
$'000 $'000 $'000 $'000
Assets
Investment
property 1,568,126 - - 1,568,126
Investment property
under construction 38,411 - - 38,411
Investment in
joint ventures - - 9,983 9,983
Inventory - - 423 423
Cash and short
term deposits 258,908 907 6,851 266,666
----------- ------------- ---------
Segment
assets 1,865,445 907 17,257 1,883,609
----------- ------------- --------- ----------
Other non-current
assets 52,450
Other current
assets 79,391
Total assets 2,015,450
----------
Segment
liabilities
Interest bearing loans
and borrowings 847,182 - - 847,182
----------- ------------- --------- ----------
Capital
expenditure
Corporate
acquisitions 86,173 - - 86,173
Other acquisition 122,730 - - 122,730
Property
improvements 16,286 - - 16,286
225,189 - - 225,189
----------- ------------- --------- ----------
(b) Segmental information for the year
ended and as at 31 December 2016
Year ended 31
December 2016 Property Raven Segment Central
Investment Roslogistics Mount Total Overhead Total
$'000 $'000 $'000 $'000 $'000 $'000
Gross revenue 175,661 17,806 1,827 195,294 - 195,294
Operating costs
/ cost of sales (35,023) (7,991) (539) (43,553) - (43,553)
----------- ------------- ----------- ------------- --------- ----------
Net operating
income 140,638 9,815 1,288 151,741 - 151,741
Administrative
expenses
Running general
& administration
expenses (13,887) (1,355) (920) (16,162) (8,081) (24,243)
Impairment
of goodwill - - - - - -
Depreciation (823) (278) - (1,101) - (1,101)
Share-based payments
and other long
term incentives (2,224) - - (2,224) (6,853) (9,077)
Foreign currency
profits/(losses) 18,136 (38) (19) 18,079 - 18,079
----------- ------------- ----------- ------------- --------- ----------
141,840 8,144 349 150,333 (14,934) 135,399
Profit on disposal
of investment
property under
construction 3,807 - - 3,807 - 3,807
Unrealised loss
on revaluation
of investment
property (40,192) - - (40,192) - (40,192)
Unrealised loss
on revaluation
of
investment property
under construction (3,132) - - (3,132) - (3,132)
Share of profits
of joint ventures - - 1,780 1,780 - 1,780
----------- ------------- ----------- ------------- --------- ----------
Segment
profit /
(loss) 102,323 8,144 2,129 112,596 (14,934) 97,662
----------- ------------- ----------- ------------- --------- ----------
Finance
income 21,522
Finance
expense (96,938)
Profit before
tax 22,246
----------
As at 31 December
2016 Property Raven
Investment Roslogistics Mount Total
$'000 $'000 $'000 $'000
Assets
Investment
property 1,300,643 - - 1,300,643
Investment property
under construction 41,253 - - 41,253
Investment in
joint ventures - - 9,731 9,731
Inventory - - 771 771
Cash and short
term deposits 192,995 1,014 4,612 198,621
----------- ------------- ---------
Segment
assets 1,534,891 1,014 15,114 1,551,019
----------- ------------- --------- ----------
Other non-current
assets 41,113
Other current
assets 53,027
Total assets 1,645,159
----------
Segment
liabilities
Interest bearing
loans and borrowings 739,825 - - 739,825
----------- ------------- --------- ----------
Capital
expenditure
Property
improvements 7,127 - - 7,127
----------- ------------- --------- ----------
5. Gross
revenue 2017 2016
$'000 $'000
Rental and related
income 179,986 175,661
Proceeds from the sale
of inventory property 24,952 1,827
Logistics 23,145 17,806
228,083 195,294
--------- ----------
The Group's leases typically include annual rental increases
("contingent rents") based on a consumer price index in
Russia, Europe or the USA, which are recognised in income
as they arise. Contingent rents included in rental income
for the year amounted $10k (2016: $172k).
Details of the Group's contracted future minimum lease receivables
are detailed in note 37.
The Group recognised revenue of $25.9 million (2016: $24.6
million) from a single tenant of the property investment
segment that amounted to more than 10% of Group revenue.
6. Administrative
expenses
2017 2016
(a) Total administrative
expenses $'000 $'000
Employment
costs 13,341 11,700
Directors'
remuneration 3,073 4,882
Bad debts (93) 22
Office running
costs and insurance 4,057 3,218
Travel costs 1,944 1,540
Auditors'
remuneration 711 617
Impairment of
goodwill (note
14) 2,061 -
Legal and
professional 1,931 1,814
Depreciation 1,143 1,101
Registrar costs and
other administrative
expenses 379 450
28,547 25,344
--------- ----------
(b) Fees for audit and other services
provided by the Group's auditor
2017 2016
$'000 $'000
Audit services 535 508
Audit related assurance
services 62 65
597 573
--------- ----------
Other fees:
Taxation
services 72 44
Other services 42 -
114 44
--------- ----------
Total fees 711 617
--------- ----------
The Group engaged Ernst & Young to undertake due diligence
in respect of the investment property acquisitions in the
year, incurring $403k (2016: $nil) of fees, which were included
in the cost of the relevant investment property.
Ernst & Young also provide audit and taxation services for
various SPVs that form part of the property operating costs.
Charges for the audit of SPVs in the year amounted to $303k
(2016: $306k) and the fees for taxation services were $75k
(2016: $170k).
7. Finance income
and expense 2017 2016
$'000 $'000
Finance
income
Total interest income on financial
assets not at fair value through profit
or loss
Income from cash and
short term deposits 7,218 3,399
Interest receivable
from joint ventures 29 37
Other finance
income
Profit on purchase and cancellation
of loans and borrowings - 15,365
Change in fair value of open
interest rate derivative financial
instruments 48 169
Change in fair value of foreign
currency embedded derivatives 867 2,552
Finance
income 8,162 21,522
--------- ----------
Finance
expense
Interest expense on loans
and borrowings measured at
amortised cost 62,918 68,631
Interest expense on
preference shares 15,825 16,518
Interest expense on
convertible preference
shares 20,058 7,475
--------- ----------
Total interest expense on financial
liabilities not at fair value through
profit or loss 98,801 92,624
Change in fair value of open forward
currency derivative financial instruments 156 2,324
Change in fair value of open interest
rate derivative financial instruments 1,650 1,990
Finance
expense 100,607 96,938
--------- ----------
In 2016, the Group agreed to pay $16.3 million to HSH Nordbank
to fully repay and discharge $31.7 million of loans secured
on the Konstanta office block, generating a profit for the
Group of $15.4 million.
Included in the interest expense on loans and borrowings
is $5.5 million (2016: $3.8 million) relating to amortisation
of costs incurred in originating the loans. Included in
the interest expense on preference shares is $0.5 million
(2016: $0.6 million) relating to the accretion of premiums
payable on redemption of preference shares and amortisation
of costs incurred in issuing preference shares. Included
in the interest expense on convertible preference shares
is $7.1 million (2016: $2.8 million) relating to the accretion
of premiums payable on redemption and amortisation of costs
incurred in issuing the convertible preference shares of
$0.3 million (2016: $0.1 million).
8. Tax 2017 2016
$'000 $'000
The tax expense for
the year comprises:
Current
taxation 19,346 10,816
Deferred taxation
(note 26)
On the origination and reversal
of temporary differences 15,228 3,694
On unrealised foreign exchange
movements in loans 191 17
Over provision
in prior year (1,804) -
Tax charge 32,961 14,527
--------- ----------
The charge for the year can be reconciled to the profit
per the Income Statement as follows:
2017 2016
$'000 $'000
Profit before
tax 90,647 22,246
Tax at the Russian corporate
tax rate of 20% 18,129 4,449
Tax effect of financing
arrangements (4,977) 12,524
Tax effect of non deductible
preference share coupon 7,177 4,841
Tax effect of foreign
exchange movements 1,150 10,959
Tax effect of debt repurchase
not subject to tax - (2,990)
Movement in provision
for uncertain tax positions 7,038 3,917
Tax effect of other income
not subject to tax and non-deductible
expenses 4,525 1,738
Tax effect of property
depreciation on revaluations 2,878 4,397
Tax on dividends and
other inter company
gains 3,473 1,235
Movement on previously unprovided
deferred tax assets (4,628) (26,543)
Over provision
in prior year (1,804) -
32,961 14,527
--------- ----------
The tax effect of financing arrangements reflects the impact
of intra group funding in each jurisdiction. Foreign exchange
movements on intra group financing are taxable or tax deductible
in Russia but not in other jurisdictions. In accordance
with its accounting policy, the Group is required to estimate
its provision for uncertain tax positions. During the year
the provision has increased, as shown in the reconciliation
above, as a consequence of tax clarifications and interpretations.
Other income and expenditure not subject to tax arises in
Guernsey.
9. Earnings measures
In addition to reporting IFRS earnings the Group also reports
its own underlying earnings measure. The Directors consider
underlying earnings to be a key performance measure, as
this is the measure used by Management to assess the return
on holding investment assets for the long term and the Group's
ability to declare covered distributions. As a consequence
the underlying earnings measure excludes investment property
revaluations, gains or losses on the disposal of investment
property, intangible asset movements, gains and losses on
derivative financial instruments, share-based payments and
other long term incentives (to the extent not settled in
cash), the accretion of premiums payable on redemption of
preference shares and convertible preference shares, material
non-recurring items, depreciation and amortisation of loan
origination costs, together with any related tax.
The calculation of basic and diluted
earnings per share is based on the
following data: 2017 2016
$'000 $'000
Earnings
Net profit for the year
prepared under IFRS 57,686 7,719
Adjustments
to arrive
at underlying
earnings:
Impairment of goodwill
(note 6a) 2,061 -
Depreciation
(note 6a) 1,143 1,101
Share-based payments and other
long term incentives (note
32c) 2,910 5,944
Unrealised (profit) / loss
on revaluation of investment
property (42,320) 40,192
Profit on disposal of investment
property under construction - (3,807)
Unrealised loss on revaluation
of investment property under
construction 4,168 3,132
Profit on purchase and cancellation
of loans and borrowings (note
7) - (15,365)
Change in fair value of open
forward currency derivative
financial
instruments
(note 7) 156 2,324
Change in fair value of open interest
rate derivative financial instruments
(note 7) 1,602 1,821
Change in fair value of foreign
currency embedded derivatives
(note 7) (867) (2,552)
Premium on redemption of preference
shares and amortisation of issue costs
(note 23) 537 562
Premium on redemption of convertible preference
shares and amortisation of issue costs (note
24) 7,448 2,892
Amortisation of loan
origination costs (note
7) 5,481 3,811
Movement on deferred
tax thereon 16,718 212
Tax on unrealised foreign
exchange movements in loans 86 (864)
Underlying
earnings 56,809 47,122
--------- ----------
2017 2016
Weighted Weighted
average average
Earnings shares EPS Earnings shares EPS
IFRS $'000 No. '000 Cents $'000 No. '000 Cents
Basic 57,686 663,493 8.69 7,719 657,468 1.17
Effect of dilutive potential
ordinary shares:
Warrants
(note 28) - 7,669 - 7,651
LTIP (note
32) - 1,382 - 1,294
2016 Retention
Scheme (note 32) - 2,513 - 1,009
CBLTIS 2015
(note 32) - - - 275
ERS (note
32) - - - 21
Convertible preference
shares (note 24) 20,058 261,369 - -
Diluted 77,744 936,426 8.30 7,719 667,718 1.16
----------- ------------- ------------- ---------
2017 2016
Weighted Weighted
average average
Earnings shares EPS Earnings shares EPS
Underlying
earnings $'000 No. '000 Cents $'000 No. '000 Cents
Basic 56,809 663,493 8.56 47,122 657,468 7.17
Effect of dilutive potential
ordinary shares:
Warrants
(note 28) - 7,669 - 7,651
LTIP (note
32) - 1,382 - 1,294
2016 Retention
Scheme (note 32) - 2,513 - 1,009
CBLTIS 2015
(note 32) - - - 275
ERS (note
32) - - - 21
Convertible preference
shares (note 24) 12,610 261,369 4,584 91,851
Diluted 69,419 936,426 7.41 51,706 759,569 6.81
----------- ------------- ------------- ---------
The finance expense for 2016 relating to the convertible
preference shares was greater than IFRS basic earnings per
share and thus the convertible preference shares were not
dilutive for IFRS fully diluted earnings per share. This
was not the case in 2017 nor for underlying earnings per
share where the convertible preference shares are dilutive
and have been incorporated into the calculation of diluted
earnings per share.
10. Ordinary
dividends
In the place of a final dividend for 2016 the Company implemented
a tender offer buy back of ordinary shares on the basis
of 1 in every 26 shares held at a tender price of 52 pence
per share, the equivalent of a final dividend of 2 pence
per share. Instead of an interim dividend for 2017 the Company
implemented a tender offer buy back of ordinary shares on
the basis of 1 in every 52 shares at a tender price of 52
pence per share, the equivalent of a dividend of 1 pence
per share.
11. Investment
property
Asset class Logistics Logistics Logistics Office
St St
Location Moscow Petersburg Regions Petersburg 2017
Fair value Level Level Level Level
hierarchy* 3 3 3 3 Total
$'000 $'000 $'000 $'000 $'000
Market value at
1 January 2017 1,005,449 141,431 151,846 24,818 1,323,544
Corporate
acquisitions
(note 39) - 35,994 - 50,179 86,173
Other
acquisition 122,730 - - - 122,730
Property
improvements 11,155 1,738 3,081 312 16,286
Unrealised
profit
on revaluation 16,346 16,872 4,477 6,834 44,529
---------- ----------- ---------- ----------- ----------
Market value at
31 December
2017 1,155,680 196,035 159,404 82,143 1,593,262
Tenant incentives and
contracted rent uplift
balances (18,552) (5,749) (1,711) (550) (26,562)
Head lease
obligations
(note 25) 1,426 - - - 1,426
----------
Carrying value
at 31 December
2017 1,138,554 190,286 157,693 81,593 1,568,126
---------- ----------- ---------- ----------- ----------
Revaluation movement in
the year ended 31 December
2017
Gross
revaluation 16,346 16,872 4,477 6,834 44,529
Effect of tenant incentives
and contracted rent uplift
balances (1,057) (417) (339) (396) (2,209)
Revaluation reported in
the Income Statement 15,289 16,455 4,138 6,438 42,320
---------- ----------- ---------- ----------- ----------
Asset class Logistics Logistics Logistics Office
St St
Location Moscow Petersburg Regions Petersburg 2016
Fair value
hierarchy Level Level Level Level
* 3 3 3 3 Total
$'000 $'000 $'000 $'000 $'000
Market value at
1 January 2016 1,043,952 139,106 148,649 25,140 1,356,847
Property
improvements 4,906 2,022 378 (179) 7,127
Unrealised
(loss)
/ profit on
revaluation (43,409) 303 2,819 (143) (40,430)
---------- ----------- ---------- ----------- ----------
Market value at
31 December
2016 1,005,449 141,431 151,846 24,818 1,323,544
Tenant incentives and
contracted rent uplift
balances (17,495) (5,332) (1,372) (154) (24,353)
Head lease
obligations
(note 25) 1,452 - - - 1,452
----------
Carrying value
at 31 December
2016 989,406 136,099 150,474 24,664 1,300,643
---------- ----------- ---------- ----------- ----------
Revaluation movement in
the year ended 31 December
2016
Gross
revaluation (43,409) 303 2,819 (143) (40,430)
Effect of tenant incentives
and contracted rent uplift
balances (948) - (54) 1,240 238
----------
Revaluation reported in
the Income Statement (44,357) 303 2,765 1,097 (40,192)
---------- ----------- ---------- ----------- ----------
*Classified in accordance with the fair value hierarchy,
see note 36. There were no transfers between fair value
hierarchy in 2016 or 2017.
During the year the Group acquired four new investment
properties. As corporate acquisitions it acquired Gorigo
Logistics Park, Kellerman Business Centre and Primium Business
Centre (see note 39) and also, as a direct purchase of
real estate, Logopark Sever a newly completed logistics
park in Moscow.
At 31 December 2017 the Group has pledged investment property
with a value of $1,435 million (2016: $1,288 million) to
secure banking facilities granted to the Group (note 22).
12. Investment property
under construction
Assets under
Asset class construction Land Bank
St
Location Moscow Regions Petersburg Regions 2017
Fair value Level Level Level Level
hierarchy* 3 3 Sub-total 3 3 Sub-total Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Market value
at 1 January
2017 29,600 7,500 37,100 - 3,662 3,662 40,762
Costs incurred 57 12 69 - - - 69
Disposal - - - - - - -
Effect of
foreign
exchange rate
changes 686 341 1,027 - 206 206 1,233
Unrealised loss
on revaluation (3,643) (253) (3,896) - (272) (272) (4,168)
--------- --------- ---------- ----------- ---------- ----------- ----------
Market value
at 31 December
2017 26,700 7,600 34,300 - 3,596 3,596 37,896
Head lease
obligations
(note 25) 515 - 515 - - - 515
--------- ---------- ----------- ---------- -----------
Carrying value
at 31 December
2017 27,215 7,600 34,815 - 3,596 3,596 38,411
--------- --------- ---------- ----------- ---------- ----------- ----------
Assets under
Asset class construction Land Bank
St
Location Moscow Regions Petersburg Regions 2016
Fair value Level Level Level Level
hierarchy* 3 3 Sub-total 3 3 Sub-total Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Market value
at 1 January
2016 27,700 7,300 35,000 413 2,714 3,127 38,127
Costs incurred 2,353 33 2,386 49 355 404 2,790
Disposal - - - (543) - (543) (543)
Effect of
foreign
exchange rate
changes 1,774 1,072 2,846 81 593 674 3,520
Unrealised loss
on revaluation (2,227) (905) (3,132) - - - (3,132)
--------- --------- ---------- ----------- ---------- ----------- ----------
Market value
at 31 December
2016 29,600 7,500 37,100 - 3,662 3,662 40,762
Head lease
obligations
(note 25) 491 - 491 - - - 491
--------- --------- ----------- ---------- ----------- ----------
Carrying value
at 31 December
2016 30,091 7,500 37,591 - 3,662 3,662 41,253
--------- --------- ---------- ----------- ---------- ----------- ----------
*Classified in accordance with the fair value hierarchy,
see note 36. There were no transfers between fair value
hierarchy in 2016 or 2017.
In 2016 the Group sold a land plot in St Petersburg for
$4.6 million, generating a profit of $3.8 million after
costs.
No borrowing costs were capitalised in the year (2016:
$nil).
At 31 December 2017 the Group has pledged investment property
under construction with a value of $34.3 million (2016:
$37.1 million) to secure banking facilities granted to
the Group (note 22).
13. Investment property and investment
property under construction - Valuation
It is the Group's policy to carry investment property and
investment property under construction at fair value in
accordance with IFRS 13 "Fair Value Measurement" and IAS
40 "Investment Property":
- investment property consists of the completed, income
producing, portfolio; and
- investment property under construction consists of potential
development projects and land bank.
The latter is sub-categorised as:
- assets under construction - current development projects
and the value of land on additional phases of existing investment
property; and
- land bank - land held for potential development.
For the purposes of IFRS 13 disclosure, we have analysed
these categories by the geographical market they are located
in being Moscow, St Petersburg and the Regions (the other
Russian regional cities). These form distinct markets for
valuation purposes as the fundamentals differ in each.
The fair value of the Group's investment property and assets
under construction at 31 December 2017 has been arrived
at on the basis of market valuations carried out by Jones
Lang Lasalle ("JLL"), external valuers to the Group. JLL
have consented to the use of their name in these financial
statements.
The Group's land bank in St Petersburg and the Regions is
valued by the Directors.
Valuation process
The executive management team members responsible for property
matters determine the valuation policies and procedures
for property valuations in consultation with the Chief Executive
Officer and Chief Financial Officer.
The Group has four qualified RICS members on the management
team, one of whom was a former Chairman of RICS in Russia
and the CIS. All have relevant valuation and market experience
and are actively involved in the valuation process. They
also regularly meet with agents and consultants to obtain
additional market information.
The effectiveness and independence of the external valuer
is reviewed each year. The criteria considered include market
knowledge, reputation, independence and professional standards.
The Audit Committee also meets the external valuer at least
once a year. Executive management and the Directors have
determined that the external valuer is experienced in the
Russian market and acts as an "External Valuer" as defined
in the "RICS Valuation - Professional Standards".
The external valuers perform their valuations in accordance
with the "RICS Valuation - Professional Standards", the
2014 Edition (the "Red Book"). This is an internationally
accepted basis of valuation and is consistent with the principles
of IFRS 13.
For investment properties and assets under construction,
the executive team members consult with the external valuers
and the valuers then determine:
- whether a property's fair value can be reliably determined;
- which valuation method should be applied for each asset;
and
- the assumptions made for unobservable inputs that are
used in valuation methods.
The land bank is valued by the Directors. The process followed
includes regular site inspections, meetings with local real
estate experts, comparison to any local land sale information
and comparison to transactions in other regional cities
including those where the Group has income producing assets.
Updated acquisition appraisals and any indication of value
for alternative use are also considered.
Valuations are prepared on a biannual basis. At each valuation
date the executive team members review the information prepared
by the property department for valuation purposes being
submitted to the external valuers. Each property valuation
is then reviewed and discussed with the external valuer
in detail, adjustments made as necessary and results discussed
with the Chief Executive Officer and Chief Financial Officer.
The executive management also present the valuation results
to the Audit Committee and hold discussions with the Group's
auditors. Both the Audit Committee and the auditors also
have discussions with the external valuers.
Valuation assumptions
and key inputs
Class of
property Carrying amount Valuation Input Range
2017 2016 technique 2017 2016
$'000 $'000
Completed investment
property
Long term ERV
Moscow - per sqm for existing Rub 4,500- $85 to
Logistics 1,138,554 989,406 Income tenants Rub 4,896 $105
Short term ERV
per sqm for vacant Rub 3,500-
capitalisation space Rub 3,800 Rub4,000
2.5% to 2.0% to
Initial yield 15.45% 16.0%
10.54% 10.7%
Equivalent yield to 12.04% to 12.2%
1% to 9% to
Vacancy rate 94% 77%
Passing rent $110 to $70 to
per sqm $166 $158
Passing rent Rub 3,104 Rub3,500
per sqm to to
Rub 11,847 Rub6,744
St Petersburg Long term ERV
- Logistics 190,286 136,099 Income per sqm Rub 4,320- $80
for existing
capitalisation tenants Rub 4,608
Short term ERV
per sqm
for vacant space Rub 3,800 Rub3,700
5.96% 11.3%
Initial yield to 13.42% to 13.2%
12.11% 12.3%
Equivalent yield to 13.4% to 12.6%
3% to 3% to
Vacancy rate 19% 31%
Passing rent $69 to $105 to
per sqm $140 $138
Passing rent Rub 2,339 Rub3,500
per sqm to to
Rub 4,916 Rub4,500
Long term ERV
Regional per sqm for existing
- Logistics 157,693 150,474 Income tenants Rub 4,608 $80
Short term ERV
per sqm for vacant
capitalisation space Rub 3,800 Rub3,700
8.99% 9.0% to
Initial yield to 11.33% 12.4%
12.14% 12.4%
Equivalent yield to 12.53% to 12.5%
6% to 22% to
Vacancy rate 27% 33%
Passing rent $104 to $102 to
per sqm $133 $129
Passing rent Rub 3,720 Rub3,900
per sqm to to
Rub 6,707 Rub6,547
St Petersburg $173 to
- Office 81,593 24,664 Income ERV per sqm $215 $235
12.53%
capitalisation Initial yield to 24.25% 20.0%
11.0%
Equivalent yield to 12.25% 13.0%
0% to
Vacancy rate 1% 0%
Passing rent
per sqm $388 Rub19,545
Passing rent
per sqm EUR390 n/a
Passing rent Rub 8,124
per sqm to n/a
Rub 16,271
Range
Other key
information Description 2017 2016
Land
Moscow - plot 34% - 34% -
Logistics ratio 65% 65%
Age of 1 to 13 2 to 12
building years years
Outstanding
costs (US$'000) 9,436 6,803
Land
St Petersburg plot 48% - 51% -
- Logistics ratio 57% 57%
Age of 3 to 9 2 to 8
building years years
Outstanding
costs (US$'000) 826 1,102
Land
Regional plot 48% - 48% -
- Logistics ratio 61% 61%
Age of
building 8 year 7 years
Outstanding
costs (US$'000) 154 665
Land
St Petersburg plot 148% to
- Office ratio 496% 320%
Age of 9 to 11
building years 10 years
Outstanding
costs (US$'000) 81 -
Carrying amount Valuation Input Range
Investment
property
under construction 2017 2016 technique 2017 2016
$'000 $'000
Moscow - Value per ha $0.32 $0.29
Logistics 27,215 30,091 Comparable ($m) - $0.53 - $0.61
Regional Value per ha
- Logistics 7,600 7,500 Comparable ($m) $0.30 $0.29
The fair value of investment property is determined using
the income capitalisation method where a property's fair
value is estimated based on the normalised net operating
income of the asset divided by the capitalisation (discount)
rate. Each income stream from every tenant is valued based
on capitalising the contracted rent for the term of the
lease, including any fixed increases in rent but excluding
any future indexation. Allowance at lease end is made for
any potential letting void and an assessment is made of
the estimated rental value on re-letting (ERV). These elements
are determined based on current market conditions and values.
Assets under construction (development projects) are valued
on a residual value basis using the future anticipated costs
to complete construction, a provision for letting costs,
a letting void period and an assessment of ERV. Depending
on the status of the development, and how much of development
process has been completed an allowance will also be made
for developer's profit.
Assets under construction (additional phases of existing
sites) are valued on a comparable basis. The value of these
plots is estimated based on comparable transactions in the
same market. This approach is based on the principle that
a buyer will not pay more for an asset than it will cost
to buy a comparable substitute property. The unit of comparison
applied is the price per square metre.
All of the above valuations are completed by JLL.
The land bank is valued by the Directors using the comparable
basis.
Sensitivity analysis of significant changes in unobservable
inputs within Level 3 of the hierarchy
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value
hierarchy of the entity's portfolio of investment property
are:
- ERV;
- Void period on re-letting;
- Initial yield; and
- Specific to property under development: construction costs,
letting void, construction period and development profit.
In preparing their valuations in prior periods JLL specifically
referred to the uncertainty in the market caused by sanctions,
economic contraction and an oil price that was low compared
with recent history and the difficulties this caused in
drawing conclusions as to market yields and ERVs. Following
the improvement in the Russian economy and commercial property
market and an increase in activity in the investment market,
they no longer highlight this uncertainty.
Further significant increases (or decreases) in any of the
main inputs to the valuation, being yield, ERV (per sqm
p.a.) and letting void, would result in a significantly
lower (or higher) fair value measurement.
14. Goodwill $'000
Balance at 1 January
2016 2,245
Effect of foreign exchange
rate changes (363)
Balance at 31
December
2016 1,882
Effect of foreign
exchange rate
changes 179
Impairment of
goodwill (2,061)
Balance at 31
December
2017 -
-------------
As a consequence of the sale of the majority of Raven Mount's
land bank in the year, goodwill has been impaired.
15. Investment in subsidiary
undertakings
The principal subsidiary undertakings of Raven Russia Limited,
all of which have been included in these consolidated financial
statements, are as follows:
Country Proportion of ownership
Name of incorporation interest
2017 2016
Dorfin
Limited Cyprus 100% 100%
Raven Russia
Holdings
Cyprus Limited Cyprus 100% 100%
Roslogistics
Holdings
(Russia) Limited Cyprus 100% 100%
Raven Mount Group
Limited England 100% 100%
Raven Russia
Property
Advisors Limited England 100% 100%
Raven Russia
(Service
Company) Limited Guernsey 100% 100%
Avalon Logistics
Company LLC Russia 100% 100%
Delta LLC Russia 100% 100%
EG Logistics
LLC Russia 100% 100%
Fenix LLC Russia 100% 100%
Gorigo
LLC Russia 100% -
CJSC Kulon
Development Russia 100% 100%
CJSC Kulon
Istra Russia 100% 100%
Kulon Spb
LLC Russia 100% 100%
League
LLC Russia 100% 100%
Logopark
Don LLC Russia 100% 100%
Logopark
Ob LLC Russia 100% 100%
CJSC Noginsk
Vostok Russia 100% 100%
Pervomayskay
Zarya LLC Russia 100% -
Petroestate
LLC Russia 100% 100%
Primium
LLC Russia 100% -
Resource Economia
LLC Russia 100% 100%
Sever Estate
LLC Russia 100% -
Soyuz-Invest
LLC Russia 100% 100%
CJSC Toros Russia 100% 100%
The Group's investment property and investment property
under construction are held by its subsidiary undertakings.
16. Investment
in joint ventures
The principal joint ventures of the Group are as follows:
Proportion of ownership
Name Country of incorporation interest
2017 2016
Coln Park
LLP England 50% 50%
Coln Park
Construction
LLP England 50% 50%
Coln Park LLP and Coln Park Construction LLP are the entities
through which the Group undertakes its second home development
activity in the UK. In addition, the Group has a number
of other small joint ventures associated with the second
home development activity. The Group's interest in each
joint venture has been accounted for using the equity method.
None of the Group's joint ventures are individually material.
Summarised aggregated financial information of the joint
ventures, prepared under IFRS, and a reconciliation with
the carrying amount of the investments in the consolidated
financial statements are set out below:
2017 2016
Summarised Balance
Sheet $'000 $'000
Non-current
assets 4,355 4,141
Inventory 8,330 10,960
Cash and short
term deposits 4,780 2,558
Other current
assets 2,656 1,625
Current
liabilities (6,094) (4,686)
Non-current
liabilities (3,484) (3,746)
Net assets 10,543 10,852
-------------- -------------
Investment in
joint ventures
Goodwill on
acquisition 4,712 4,305
Share of net
assets at 50% 5,271 5,426
-------------- -------------
Carrying
value 9,983 9,731
-------------- -------------
Carrying value
at 1 January 9,731 14,968
Share of profit
for the year 2,074 1,780
Share of
distributions
paid (2,711) (4,521)
Effect of foreign
exchange rate
changes 889 (2,496)
Carrying value
at 31 December 9,983 9,731
-------------- -------------
2017 2016
Summarised Income
Statement $'000 $'000
Gross revenue 30,758 25,430
Cost of
sales (24,060) (19,807)
Administrative
expenses (2,305) (1,932)
Finance
expense (236) (125)
-------------- -------------
Profit
before
tax 4,157 3,566
Tax (10) (5)
--------------
Profit
for the
year 4,147 3,561
-------------- -------------
Group's share of profit
for the year 2,074 1,780
-------------- -------------
The joint ventures had no contingent liabilities or capital
commitments as at 31 December 2017 and 2016. The joint ventures
cannot distribute their profits until they obtain the consent
from the joint venture partners.
The Group charged its joint ventures $93k (2016: $97k) for
services rendered to them during the year. The joint ventures
recharged certain costs back to the Group that for the year
amounted to $175k (2016: $146k) of which $9k (2016: $9k)
was included in payables at the balance sheet date. In addition
to the investment shown above the Group has provided a loan
to Coln Park LLP of $406k (2016: $342k) generating interest
income of $30k (2016: $37k).
17. Other
receivables 2017 2016
$'000 $'000
Loans receivable 665 611
Security
deposits 1,305 -
VAT recoverable 3,337 2,982
Prepayments and
other receivables 318 131
5,625 3,724
-------------- -------------
VAT recoverable arises from the payment of value added tax
on construction or purchase of investment property, which
will be recovered through the offset of VAT paid on future
revenue receipts or repayment direct from the taxation authority.
VAT recoverable has been split between current and non-current
assets based on the Group's assessment of when recovery
will occur.
18. Trade and other
receivables 2017 2016
$'000 $'000
Trade receivables 44,315 37,732
Prepayments 5,397 4,257
Security
deposits - 2,393
VAT recoverable 23,429 4,893
Other receivables 284 319
Tax recoverable 5,521 3,075
78,946 52,669
-------------- -------------
19. Derivative financial
instruments 2017 2016
$'000 $'000
Interest rate
derivative
financial
instruments
Non-current
assets 7,729 4,694
Current
assets 303 95
Non-current
liabilities - -
Current
liabilities - (25)
Forward currency derivative
financial instruments
Non-current
assets 123 269
Current
assets 17 8
Foreign currency embedded
derivatives
Non-current
assets 96 49
Current
assets 125 255
Non-current
liabilities - (67)
Current
liabilities (35) (918)
The Group has entered into a series of interest rate derivative
financial instruments to manage the interest rate and resulting
cash flow exposure from the Group's banking facilities.
At 31 December 2017 the instruments have a notional value
of $651 million (2016: $581 million) and a weighted average
fixed or capped rate of 1.61% (2016: 1.51%).
The Group had also entered into a series of forward currency
derivative financial instruments to hedge interest payments
due to preference shareholders against sterling strengthening.
The instruments have a notional amount of $37.2 million
(2016: $55.8 million), a weighted average capped rate of
$1.55 to GBP1 (2016: $1.55 to GBP1) and quarterly maturities
with the final instruments maturing on 18 December 2019
(2016: 18 December 2019).
Several of the Group's leases incorporate collars and caps
on US Dollar and Russian Rouble exchange rates. These have
been categorised as embedded derivatives and their fair
values calculated resulting in the assets or liabilities
disclosed above.
20. Cash and short
term deposits 2017 2016
$'000 $'000
Cash at bank
and on call 173,244 74,708
Short term
deposits 93,422 123,913
266,666 198,621
-------------- -------------
Cash at bank and on call attracts variable interest rates,
whilst short term deposits attract fixed rates but mature
and re-price over a short period of time. The weighted average
interest rate on short term deposits at the balance sheet
date is 5.04% (2016: 5.06%).
21. Trade and
other payables 2017 2016
$'000 $'000
Trade and other
payables 6,762 8,667
Construction
payables 10,497 5,905
Advanced
rentals 26,467 28,304
Deferred consideration
on property acquisition 24,166 -
Other payables 6,949 3,770
Current
tax payable 19,829 9,471
Other tax
payable 12,678 9,283
Head leases
(note 25) 9 8
107,357 65,408
-------------- -------------
22. Interest bearing loans
and borrowings 2017 2016
$'000 $'000
Bank loans
Loans due for settlement
within 12 months 106,697 40,787
Loans due for settlement
after 12 months 740,485 699,038
847,182 739,825
-------------- -------------
The Group's borrowings
have the following maturity
profile:
On demand or within one
year 106,697 40,787
In the
second
year 148,390 53,292
In the third
to fifth years 383,582 440,432
After five
years 208,513 205,314
847,182 739,825
-------------- -------------
The amounts above include unamortised loan origination costs
of $10.6 million (2016: $12.3 million) and interest accruals
of $1.7 million (2016: $3.8 million).
The principal terms of the Group's interest bearing
loans and borrowings on a weighted average basis are
summarised below:
As at 31 December
2017 Interest Maturity
Rate (years) $'000
Secured on investment property and investment
property under construction 7.6% 4.5 832,405
Unsecured facility
of the Company 8.9% 2.7 14,777
847,182
-------------
As at 31 December
2016
Secured on investment property
and investment property under
construction 7.5% 4.7 725,123
Unsecured facility
of the Company 8.9% 3.7 14,702
739,825
-------------
The interest rates shown above are the weighted average
cost, including US LIBOR and Euribor, as at the Balance
Sheet dates.
There were a number of refinancings completed during the
year. On 19 January 2017 the Group refinanced a secured
debt facility, drawing down $80 million under the new facility
and repaying $74.8 million on the old facility. The new
facility has a seven year term. A second secured debt facility
was refinanced, drawing $50.6 million on 21 September 2017
and a further $14.5 million on 26 October 2017, repaying
the old facility of $50.6 million on the initial draw. The
new facility has a term of seven years. A third refinancing
straddled the year end, $62.3 million was drawn on 29 December
2017 and the old facility of the same amount repaid on 9
January 2018. Again the term is seven years.
The Group entered into two new secured debt facilities towards
the end of the year. On 9 November 2017 the Group entered
into one facility drawing EUR21.6 million and then EUR42.8
million in two tranches drawn on 20 December 2017 and 5
January 2018 on the second facility. Both of these facilities
have a seven year term.
In June 2017 the Group entered into two four year forward
dated caps to extend existing hedging arrangements on expiry.
In October 2017 the Group entered into a four year forward
dated cap starting in March 2018 to extend existing hedging
arrangements on expiry. In December 2017 the Group entered
into three interest rate caps to hedge floating interest
rates on three facilities drawn in the year. In February
2018 the Group sold a cap hedging the facility that was
fully repaid in January 2018.
As at 31 December 2017 the Group had interest rate hedges
for $651 million of borrowings (2016: $469 million) capped
at 1.61% (2016: 1.61%) for three years (2016: two years)
and $191 million of fixed rate loans (2016: $131 million)
with a weighted average rate of 6.90% (2016: 7.10%) for
five years (2016: six years). At 31 December 2017 the Group
had no interest rate swaps (2016: $112 million with 3 months
remaining at a weighted average swap rate of 1.08%). This
gave a weighted average cost of debt to the Group of 7.6%
(2016: 7.5%) at the year end.
23. Preference
shares 2017 2016
$'000 $'000
Issued share
capital:
At 1 January 131,703 156,558
Purchased in
the year (112) (713)
Reissued in
the year 961 -
Premium on redemption of preference shares
and amortisation of issue costs 537 562
Scrip dividends 863 614
Effect of foreign exchange
rate changes 12,506 (25,318)
At 31 December 146,458 131,703
-------------- -------------
2017 2016
Number Number
Issued share
capital:
At 1 January 98,265,327 98,328,017
Purchased in
the year (56,866) (450,000)
Reissued in
the year 487,047 -
Scrip dividends 447,684 387,310
At 31 December 99,143,192 98,265,327
-------------- -------------
Shares
in issue 99,200,060 98,752,376
Held by the Company's Employee
Benefit Trusts (56,868) (487,049)
At 31 December 99,143,192 98,265,327
-------------- -------------
The preference shares entitle the holders to a cumulative
annual dividend of 12 pence per share.
24. Convertible
preference shares 2017 2016
$'000 $'000
Issued share
capital:
At 1 January 119,859 -
Issued
in the
year 130,290 138,705
Allocated
to equity (6,067) (8,453)
Acquired by Company's Employee
Benefit Trust (3,888) (10,378)
Reissued in
the year 4,376 2,779
Converted to ordinary shares
(note 27) (331) -
Premium on redemption of preference shares
and amortisation of issue costs 7,448 2,892
Movement on accrual for
preference dividends 22 24
Effect of foreign exchange
rate changes 17,322 (5,710)
At 31 December 269,031 119,859
-------------- -------------
2017 2016
Number Number
Issued share
capital:
At 1 January 102,837,876 -
Issued
in the
year 89,766,361 108,689,501
Acquired by Company's Employee
Benefit Trust (2,631,578) (8,000,000)
Reissued in
the year 2,683,075 2,148,375
Converted to
ordinary
shares (note 27) (266,848) -
At 31 December 192,388,886 102,837,876
-------------- -------------
Shares
in issue 198,189,014 108,689,501
Held by the Company's Employee
Benefit Trust (5,800,128) (5,851,625)
At 31 December 192,388,886 102,837,876
-------------- -------------
On 4 July 2017 the Company created and issued a further
89,766,361 convertible preference shares at a placing price
of 114p per share. The new convertible preference shares
rank pari passu with the existing convertible preference
shares in issue. One of the Company's Employee Benefit Trusts
participated in the placing and subscribed for a further
2,631,578 convertible preference shares.
The convertible preference shares entitle the holders to
a cumulative annual dividend of 6.5 pence per share and
are redeemable by the Company on 6 July 2026 at GBP1.35
per share. The convertible preference shares are convertible
to ordinary shares at the holder's request at any time prior
to redemption at a rate that is currently 1.759 ordinary
shares for each convertible preference share.
In applying its accounting policies the Group has determined
that the convertible preference shares are a compound financial
instruments in that it has a liability component and an
equity component. The Group has determined the fair value
of the liability component, which is reflected above, and
the residual amount of the fair value of the consideration
received on issue is equity. The fair value of the liability
component has been calculated using a discounted cash flow
model.
25. Other
payables 2017 2016
$'000 $'000
Rent deposits 22,626 23,324
Deferred consideration
on property acquisition 10,008 -
Head leases 1,932 1,935
34,566 25,259
-------------- -------------
The Group has leasehold properties that it classifies as
investment property and investment property under construction.
Minimum lease payments due over the remaining term of the
leases totalled $5.9 million (2016: $5.9 million) and have
a present value at 31 December 2017, as reflected above
and in note 21, of $1.9 million (2016: $1.9 million).
26. Deferred
tax
Tax losses Other Total
(a) Deferred
tax assets $'000 $'000 $'000
Balance at 1 January
2016 25,479 44 25,523
Effect of foreign exchange
rate changes 4,838 - 4,838
(Charge) / credit
for the year (3,517) 607 (2,910)
Balance at 31
December
2016 26,800 651 27,451
Effect of foreign exchange
rate changes 1,682 - 1,682
Credit
for the
year 3,207 433 3,640
On acquisition
(note 39) 1,856 - 1,856
Balance at 31
December 2017 33,545 1,084 34,629
------------ -------------- -------------
The Group has tax losses in Russia of $353 million (2016:
$346 million) and tax losses in the UK of $72 million (2016:
$87 million) for which deferred tax assets have not been
recognised. The losses in the UK do not have an expiry date.
The losses in Russia can be carried forward indefinitely,
however there is a restriction on the use of losses in that
taxable profits cannot be reduced by more than 50% in any
one year.
Accelerated Revaluation
tax of investment
allowances property Total
(b) Deferred
tax liabilities $'000 $'000 $'000
Balance at 1 January
2016 30,145 25,474 55,619
Effect of foreign exchange
rate changes 5,448 - 5,448
Charge / (credit)
for the year 5,069 (4,267) 802
Balance at 31
December
2016 40,662 21,207 61,869
Effect of foreign exchange
rate changes 1,937 - 1,937
Charge
for the
year 6,749 10,508 17,257
Balance at 31
December
2017 49,348 31,715 81,063
------------ -------------- -------------
27. Share
capital
2017 2016
$'000 $'000
Issued share
capital:
At 1 January 12,578 12,776
Issued in the year for
cash on warrant exercises
(note 28) 180 2
On conversion of convertible
preference shares (note
24) 6 -
Repurchased and cancelled
in the year (285) (200)
At 31 December 12,479 12,578
-------------- -------------
2017 2016
Number Number
Issued share
capital:
At 1 January 667,968,463 682,560,376
Issued in the year for
cash on warrant exercises
(note 28) 13,946,387 114,084
On conversion of convertible
preference shares (note
24) 474,722 -
Repurchased and cancelled
in the year (21,817,729) (14,705,997)
At 31 December 660,571,843 667,968,463
-------------- -------------
Of the authorised ordinary share capital of 1,500,000,000
at 31 December 2017, 10,948,352 (2016: 24,894,739) are reserved
for warrants.
Details of own shares held are given in note 29.
28. Warrants 2017 2016
$'000 $'000
At 1 January 1,161 1,167
Exercised in the
year (note 27) (720) (6)
At 31 December 441 1,161
-------------- -------------
2017 2016
Number Number
At 1 January 24,894,739 25,008,823
Exercised in the
year (note 27) (13,946,387) (114,084)
At 31 December 10,948,352 24,894,739
-------------- -------------
The Company has issued warrants, which entitle each holder
to subscribe for ordinary shares in the Company at an exercise
price of 25 pence per share. The warrants expire on 25 March
2019.
315 warrants have been exercised in the period since 31
December 2017 (2016: 66,193).
29. Own shares
held 2017 2016
$'000 $'000
At 1 January (7,449) (52,101)
Acquisitions (158) (133)
Disposal - 43,161
Cancelled 47 81
Allocation to satisfy ERS
options exercised (note
32a) - 68
Allocation to satisfy LTIP
options exercised (note
32a) 1,818 598
Allocation to satisfy CBLTIS
2015 awards vesting (note
32b) - 877
At 31 December (5,742) (7,449)
-------------- -------------
2017 2016
Number Number
At 1 January 6,444,080 38,456,594
Acquisitions 257,703 282,468
Disposal - (30,937,631)
Cancelled (39,472) (64,987)
Allocation to satisfy ERS
options exercised (note
32a) - (62,756)
Allocation to satisfy LTIP
options exercised (note
32a) (1,512,189) (500,000)
Allocation to satisfy CBLTIS
2015 awards vesting (note
32b) - (729,608)
At 31 December 5,150,122 6,444,080
-------------- -------------
Allocations are transfers by the Company's Employee Benefit
Trusts to settle CBLTIS awards that vest and to satisfy
ERS and LTIP options exercised in the year following the
vesting of the options. The amounts shown for share movements
are net of the Trustees' participation in tender offers
during the period from grant to exercise. Details of outstanding
LTIP options, which are vested but unexercised, are given
in note 32a.
30. Equity
The following describes the nature and
purpose of each component within equity:
Description and
Component purpose
The amount subscribed for ordinary
Share capital share capital at nominal value.
The amount subscribed for ordinary
share capital in excess of the nominal
Share premium value.
The consideration attributed to the
subscription of warrants less associated
Warrants costs of issuance.
Own shares The cost to the Company of acquiring the own shares
held held by the Company and its subsidiary undertakings
or Employee Benefit Trusts.
Convertible The amount subscribed for convertible
preference preference shares which the Directors
shares consider to be Equity.
Capital The amount of any capital profits and losses, including
reserve gains and losses on the disposal of investment
properties (after taxation), increases and decreases
in the fair value of investment properties held
at each period end, foreign exchange profits and
losses on capital items, profits and losses on
forward currency financial instruments relating
to capital items and deferred taxation on the increase
in fair value of investment properties.
Translation The amount of any gains or losses arising
reserve on the retranslation of net assets
of overseas operations.
Retained The amount of any profit or loss for the year after
earnings payment of dividend, together with the amount of
any equity-settled share-based payments, and the
transfer of capital items described above. Retained
earnings also includes distributable reserves created
when in 2005 and 2006 the Company applied to the
Royal Court of Guernsey to cancel its share premium
at that time and create a reserve which is distributable.
31. Net asset value
per share
As well as reporting IFRS net asset value and net asset
value per share, the Group also reports its own adjusted
net asset value and adjusted net asset value per share measure.
The Directors consider that the adjusted measure provides
more relevant information to shareholders as to the net
asset value of a property investment group with a strategy
of long term investment. The adjustments remove or adjust
assets and liabilities, including goodwill and amounts relating
to irredeemable preference shares, that are not expected
to crystallise in normal circumstances.
2017 2016
$'000 $'000
Net asset
value 529,758 500,226
Goodwill - (1,882)
Goodwill in
joint ventures (4,712) (4,305)
Unrealised foreign exchange
profits on preference shares (7,856) (20,362)
Fair value of interest rate
derivative financial instruments
(note 19) (8,032) (4,764)
Fair value of embedded
derivatives (note 19) (186) 681
Fair value of foreign exchange
derivative financial instruments
(note 19) (140) (277)
-------------- -------------
Adjusted net
asset value 508,832 469,317
-------------- -------------
Number Number
Number of ordinary
shares (note 27) 660,571,843 667,968,463
Less own shares
held (note 29) (5,150,122) (6,444,080)
-------------- -------------
655,421,721 661,524,383
-------------- -------------
2017 2016
Net
Net asset asset
value
Net asset Ordinary value per Net asset Ordinary per
value shares share value shares share
No.
IFRS $'000 '000 Cents $'000 No. '000 Cents
Net asset value
per share 529,758 655,422 81 500,226 661,524 76
Effect of dilutive
potential ordinary
shares:
Convertible
preference
shares (note 24) 269,031 338,412 119,859 186,959
Warrants
(note 28) 3,703 10,948 7,691 24,895
LTIP (Note
32) 633 1,873 1,196 3,873
2016 Retention
Scheme (note 32) 1,714 4,616 1,498 10,898
Fully diluted net
asset value per
share 804,839 1,011,271 80 630,470 888,149 71
------------------ ---------- ------------ --------------
2017 2016
Net
Net asset asset
value
Net asset Ordinary value per Net asset Ordinary per
value shares share value shares share
No.
Adjusted $'000 '000 Cents $'000 No. '000 Cents
Net asset value
per share 508,832 655,422 78 469,317 661,524 71
Effect of dilutive
potential ordinary
shares:
Convertible
preference
shares (note 24) - - 119,859 186,959
Warrants
(note 28) 3,703 10,948 7,691 24,895
LTIP (Note
32) 633 1,873 1,196 3,873
2016 Retention
Scheme (note 32) 1,714 4,616 1,498 10,898
Fully diluted net
asset value per
share 514,882 672,859 77 599,561 888,149 68
------------------ ---------- ------------ --------------
As the preference shares are considered to be capital for
capital risk management (see note 35d) unrealised foreign
exchange movements on these have been adjusted when calculating
adjusted NAV per share. As explained in note 24 the convertible
preference shares are a compound financial instrument and
their carrying value is split between non-current liabilities
and equity. Further more the convertible preference shares
have a finite life and thus no adjustment has been made
for unrealised foreign exchange gains and losses in calculating
the Group's adjusted NAV.
The balance sheet carrying value of the liability portion
of the convertible preference shares divided by the number
of ordinary shares that would be issued on their conversion
is greater than the adjusted NAV per share and thus the
convertible preference shares are not dilutive for adjusted
diluted NAV per share. In the case of IFRS NAV per share
the convertible preference shares are dilutive and have
been incorporated into the calculation of IFRS diluted NAV
per share.
The number of potential ordinary shares is the total number
of ordinary shares assuming the exercise of all potential
ordinary shares less those not expected to vest.
32. Share-based payments and other long term incentives
The Group has utilised a number of different share schemes
to reward and incentivise the Group's executives and senior
staff.
Share Option Schemes ("SOS")
The Group operated two SOS, the Employee Retention Scheme
("ERS") and the Long Term Incentive Plan ("LTIP"). Both
schemes involved the grant of options over the Company's
ordinary shares by the Company's Employee Benefit Trusts.
The ERS vested in full on the publication of the audited
financial statements of the Company for the year ended 31
December 2010 and the ERS options did not have an exercise
price. The LTIP options vested in three equal tranches,
subject to performance criteria, on 24 March 2012, 2013
and 2014. The LTIP options have an exercise price of 25p
per option and have vested in full. Both the ERS and LTIP
schemes are closed and further awards cannot be made under
either scheme. Awards made under the ERS and LTIP have been
accounted for in accordance with the Group's accounting
policy for Share-based payments.
Combined Bonus and Long Term Incentive Scheme 2015 to 2017
("CBLTIS 2015")
During 2015 the Group implemented the CBLTIS 2015. Contingent
awards were made in respect of 35 million ordinary shares,
which covered the calendar years 2015 to 2017. The awards
are subject to performance criteria; three quarters of the
award had performance conditions linked to operating cash
flows and the remainder had a share price target. The awards
made were accounted for in accordance with the Group's accounting
policy for share-based payments. During 2016 the executive
directors and certain senior managers waived their entitlement
to rewards under this scheme. Additionally after the initial
vesting in 2016 the scheme was cancelled. In accordance
with the Group's accounting policy the charge to the Income
Statement in respect of the share price tranche was accelerated
following cancellation of the scheme.
2016 Retention Scheme
During 2016 the Group terminated the CBLTIS 2015 and the
Company's shareholders approved the introduction of the
2016 Retention Scheme. Awards under the scheme were made
to the executive directors of the Company and two senior
managers of the Group. The awards entitled the participants
to three equal payments each equivalent to 150% of their
basic salary. The first instalment was paid on approval
of the scheme and the second on 31 December 2017. The third
instalment will be paid on 31 March 2019. The sole condition
for each instalment being paid is the continuing employment
of the participant at the relevant payment date.
Participants will receive payment of an instalment in a
combination of the Company's listed securities and cash.
The numbers of listed securities to be issued to satisfy
such payments will be calculated with reference to the average
price of the relevant security prior to the payment date.
On 13 July 2016 an employment benefit trust ("EBT") of the
Company transferred 2,148,375 convertible preference shares
to participants of the scheme in satisfaction of the first
instalment. On 31 December 2017 the EBT transferred 487,049
preference shares and 1,957,775 convertible preference shares
in respect of the second instalment. It is intended that
convertible preference shares held by the EBT will also
be used to satisfy the third instalment.
(a) Movements in
Share Option Schemes 2017 2016
Weighted Weighted
average average
No of exercise No of exercise
options price options price
Outstanding at the beginning
of the year 3,872,973 25p 4,447,973 25p
Exercised during
the year
- ERS - 0p (75,000) 0p
- LTIP (2,000,000) 25p (500,000) 25p
Outstanding at
the end of the
year 1,872,973 25p 3,872,973 25p
------------ ------------ -------------- -------------
Represented
by:
- LTIP 1,872,973 3,872,973
1,872,973 3,872,973
------------ --------------
Exercisable at
the end of the
year 1,872,973 25p 3,872,973 25p
The weighted average remaining contractual life of options
was 1 year (2016: 2 year).
(b) Movements in Combined Bonus and Long
Term Incentive Scheme 2015 Awards
2017 2016
No of No of
award award
shares shares
Awards of Ordinary
shares:
- Outstanding at the beginning
of the year - 34,800,000
- Granted during
the year - -
- Unvested awards waived
during the year - (18,750,000)
- Vested during the year (of
which entitlement to 2,150,626
was waived) - (2,942,060)
- Lapsed during
the year - (6,207,940)
- Cancelled
during the year - (6,900,000)
- Outstanding at
the end of the
year - -
-------------- -------------
2017 2016
(c) Income Statement charge
for the year $'000 $'000
CBLTIS
2015 - 1,409
2016 Retention
scheme 4,545 7,668
4,545 9,077
-------------- -------------
To be satisfied
by allocation of:
Ordinary shares
(IFRS 2 expense) - 1,409
Convertible preference shares
/ preference shares (IFRS 2
expense) 2,910 4,535
Cash 1,635 3,133
4,545 9,077
-------------- -------------
Of the IFRS 2 expense for the year $1.5 million (2016: $1.5
million) is included in current liabilities.
33. Capital commitments
The Group had no significant capital commitments at 31 December
2016 and 2017.
34. Related party transactions
Transactions between the Company and its subsidiaries, which
are related parties, have been eliminated on consolidation
and are not disclosed in this note. Further disclosures
concerning transactions with the Company's directors are
made in the Remuneration Report and note 6. There are no
loan balances with directors.
Remuneration of Directors and
other key management personnel 2017 2016
$'000 $'000
Short term employee
benefits 3,933 6,821
Post employment
benefits 282 288
Share-based payments and other
long term incentives 4,545 7,668
8,760 14,777
-------------- -------------
35. Financial instruments - risk management
The Group's activities expose it to a variety of financial
risks in relation to the financial instruments it uses:
market risk (including currency risk, price risk and cash
flow interest rate risk), credit risk and liquidity risk.
The financial risks relate to the following financial instruments:
trade receivables, cash and short term deposits, trade and
other payables, borrowings, preference shares, convertible
preference shares and derivative financial instruments.
Risk management parameters are established by the Board
on a project by project basis and overseen by management
in conjunction with professional advisers. Reports are provided
to the Board formally on a weekly basis and also when authorised
changes are required.
(a) Market
risk
Currency risk
The Group operates internationally and is exposed to foreign
exchange risk arising from a variety of currency exposures,
primarily with respect to US Dollars, Sterling, Russian
Rouble and Euro. Foreign exchange risk arises from future
commercial transactions (including lease receivables), recognised
monetary assets and liabilities and net investments in foreign
entities.
The majority of the Group's transactions are denominated
in US Dollars, which is also the reporting currency for
the Group. The functional currency of the Company is Sterling,
however the functional currencies of the Company's subsidiaries
vary. The analysis that follows considers the impact of
Russian Rouble, Sterling and Euro on the Group.
Russian Rouble
The rapid depreciation of the Rouble since November 2014
has heightened the Group's currency risk. New leases are
now predominantly Rouble denominated rather than pegged
to US Dollars, which will increase the Group's foreign currency
risk when servicing US Dollar denominated debt.
The Group holds sufficient Rouble currency to cover Rouble
denominated overheads and any future construction cost commitments.
The weak Rouble also has an impact on property values and
increased credit risk as explained below.
Sterling
The Group's exposure to Sterling is primarily driven by
the Sterling denominated preference shares and convertible
preference shares and the related quarterly dividends, but
also head office costs and ordinary share distributions.
Whilst there are no Sterling foreign exchange gains and
losses arising in the parent company itself, in preparing
the group financial statements these Sterling amounts are
translated to the Group's US Dollar presentation currency
and the resulting exchange gains and losses are included
in the translation reserve.
The table below summarises the currency in which the Group's
financial instruments are denominated:
Russian
As at 31 December
2017 US Dollar Sterling Rouble Euro Total
$'000 $'000 $'000 $'000 $'000
Non-current
assets
Loans receivable - 665 - - 665
Security
deposits 1,305 - - - 1,305
Derivative financial
instruments 6,345 123 96 1,384 7,948
Current
assets
Trade receivables 21,989 4,397 15,536 2,393 44,315
Security
deposits - - - - -
Derivative financial
instruments 303 17 125 - 445
Other current
receivables 677 118 546 168 1,509
Cash and short
term deposits 112,440 11,795 99,945 42,486 266,666
143,059 17,115 116,248 46,431 322,853
---------- ------------ ------------ -------------- -------------
Non-current
liabilities
Interest bearing
loans and
borrowings 680,555 - - 59,930 740,485
Preference
shares - 146,458 - - 146,458
Convertible
preference shares - 269,031 - - 269,031
Derivative
financial
instruments - - - - -
Rent deposits 17,718 - 4,908 - 22,626
Other payables - - 1,932 - 1,932
Current
liabilities
Interest bearing
loans and
borrowings 103,906 - - 2,791 106,697
Derivative financial
instruments - - 35 - 35
Rent deposits 4,765 - 1,857 - 6,622
Other payables - 6,051 11,382 22 17,455
806,944 421,540 20,114 62,743 1,311,341
---------- ------------ ------------ -------------- -------------
Russian
As at 31 December US
2016 Dollar Sterling Rouble Euro Total
$'000 $'000 $'000 $'000 $'000
Non-current
assets
Loans receivable - 611 - - 611
Security
deposits - - - - -
Restricted
cash - - - - -
Derivative financial
instruments 4,694 269 49 - 5,012
Current
assets
Trade receivables 29,489 38 6,068 2,137 37,732
Security
deposits 2,393 - - - 2,393
Derivative financial
instruments 95 8 255 - 358
Other current
receivables - 98 217 3 318
Cash and short
term deposits 61,846 19,841 116,287 647 198,621
98,517 20,865 122,876 2,787 245,045
---------- ------------ ------------ -------------- -------------
Non-current
liabilities
Interest bearing loans
and borrowings 699,038 - - - 699,038
Preference
shares - 131,703 - - 131,703
Convertible
preference
shares - 119,859 - - 119,859
Derivative financial
instruments - - 67 - 67
Rent deposits 21,264 - 1,432 628 23,324
Other payables 23 - 1,912 - 1,935
Current
liabilities
Interest bearing loans
and borrowings 40,787 - - - 40,787
Derivative financial
instruments 25 - 918 - 943
Rent deposits 5,375 - 1,265 - 6,640
Other payables - 2,769 6,078 22 8,869
766,512 254,331 11,672 650 1,033,165
---------- ------------ ------------ -------------- -------------
The sensitivity analyses below are based on a change in
an assumption while holding all other assumptions constant.
In practice this is unlikely to occur and changes in some
of the assumptions may be correlated, for example a change
in interest rate and a change in foreign currency exchange
rates. The Group principally manages foreign currency risk
on a project by project basis. The sensitivity analysis
prepared by management of foreign currency risk illustrates
how changes in the fair value or future cash flows of a
financial instrument will fluctuate because of changes in
foreign exchange rates.
The table below shows the impact on consolidation if the
US Dollar weakened or strengthened by 10% against the Russian
Rouble, Sterling or Euro, with all other variables in each
case remaining constant, then:
2017 2016
Post tax profit or loss
would change by: $'000 $'000
Russian
Rouble 5,156 6,619
Sterling 896 1,455
Euro 4,488 214
Net asset value
would change by:
Russian
Rouble 6,196 11,121
Sterling 39,960 22,967
Euro 1,631 214
The sterling sensitivity relates to the retranslation of
the value of preference shares and convertible preference
shares.
Accounting standards also require disclosure of monetary
assets and liabilities that are denominated in currencies
different from the functional currency of the specific subsidiary
or entity in the Group. These are set out in the tables
below.
Russian
As at 31 December
2017 US Dollar Sterling Rouble Euro
$'000 $'000 $'000 $'000
Current
assets
Trade receivables 2,399 - - -
Cash and short
term deposits 12,797 - 54,998 42,486
15,196 - 54,998 42,486
------------ ------------ -------------- -------------
Current
liabilities
Interest bearing loans
and borrowings 67 - - 2,791
Rent deposits 4,765 - -
4,832 - - 2,791
------------ ------------ -------------- -------------
Non-current
liabilities
Interest bearing
loans and
borrowings 15,000 - - 59,930
Rent deposits 17,719 - -
32,719 - - 59,930
------------ ------------ -------------- -------------
Russian
As at 31 December
2016 US Dollar Sterling Rouble EUR
$'000 $'000 $'000 $'000
Current
assets
Trade receivables 5,767 - - -
Cash and short
term deposits 35,501 - 79,660 -
41,268 - 79,660 -
------------ ------------ -------------- -------------
Current
liabilities
Interest bearing
loans and borrowings 63 - - -
Rent deposits 5,375 - - -
5,438 - - -
------------ ------------ -------------- -------------
Non-current
liabilities
Interest bearing
loans and borrowings 15,000 - - -
Rent deposits 21,264 - - -
36,264 - - -
------------ ------------ -------------- -------------
The Group's interest rate risk arises from long-term borrowings
(note 22), which include preference shares issued (note
23) and convertible preference shares (note 24). Borrowings
issued at variable rates expose the Group to cash flow interest
rate risk, whilst borrowings issued at a fixed rate expose
the Group to fair value risk. The Group's cash flow and
fair value risk is reviewed monthly by the Board. The cash
flow and fair value risk is approved monthly by the Board.
The Group analyses its interest rate exposure on a dynamic
basis. It takes on exposure to the effects of fluctuations
in the prevailing levels of market interest rates on its
financial position and cash flows. Interest costs may increase
as a result of such changes. They may reduce or create losses
in the event that unexpected movements arise. Various scenarios
are simulated taking into consideration refinancing, renewal
of existing positions, alternative financing and hedging.
Based on these scenarios the Group calculates the impact
on profit and loss of a defined interest rate shift. The
simulation is run on an on-going basis to verify that the
maximum potential impact is within the parameters expected
by management. Formal reporting to the Board on cash flows
is made on a monthly basis.
To date the Group has sought to fix its exposure to interest
rate risk on borrowings through fixed rate debt facilities,
the use of a variety of interest rate derivatives and the
issue of preference shares and convertible preference shares
at a fixed coupon. This gives certainty over future cash
flow but exposure to fair value movements, which amounted
to an accumulated unrealised loss of $14.0 million at 31
December 2017 (2016: loss of $12.4 million).
Sensitivity analysis on the Group's interest rate borrowings,
net of interest bearing deposits, indicate that a 1% increase
in benchmark rates would increase the loss for the year
and decrease net assets by $2.6 million (2016: $2.1 million).
If benchmark rates were to drop to zero then there would
be a decrease in the loss for the year and an increase in
net assets of $8.6 million (2016: increase of $4.2 million)
as the loss on income from cash would be greater than gains
on interest expense because of the low rates prevailing
at this time and the interest rate hedges in place.
(b) Credit
risk
The Group's principal financial assets are cash and short
term deposits, trade and other receivables and derivative
financial instruments.
Credit risk associated with the Group's trade and other
receivables has increased over recent years. The Group historically
transacted with tenants using US dollar pegged leases, passing
foreign exchange risk on to the tenant in exchange for lower
US CPI indexation. The rapid weakening of the rouble has
meant that the foreign exchange risk carried by tenants
has increased significantly. This may result in some tenants
struggling to meet rental obligations. The Group has policies
in place to ensure that rental contracts are made with tenants
meeting appropriate Balance Sheet covenants, supplemented
by rental deposits or bank guarantees from international
banks. No significant doubtful receivables existed at the
year end and the amounts presented in the Balance Sheet
are net of allowances for doubtful receivables. An allowance
for impairment is made where there is objective evidence
that the Group will not be able to collect all amounts due
according to the terms of the receivables concerned. Details
of the movements in provision for impairment of trade receivables
is provided in the table below.
2017 2016
$'000 $'000
At 1 January 4,586 4,311
Effect of foreign exchange
rate changes 128 254
Charge
for the
year 105 742
Unused amounts
reversed (198) (721)
At 31 December 4,621 4,586
-------------- -------------
At 31 December 2017 there were no significant amounts of
unimpaired trade receivables that were past due for collection
(2016: $ nil).
The Group has VAT recoverable of $26.8 million (2016: $7.9
million). The timing of recovery of these balances is subject
to future revenue receipts and application to the Russian
Courts. The Group forecasts the recovery of these balances
based upon the timing of future revenue receipts and its
experience of successful application to the Russian Courts.
No balances are considered past due or impaired at 31 December
2017 (2016: $ nil) based upon this assessment of the timing
of future cash receipts. The Group believes its only exposure
is in relation to the timing of recovery.
The credit risk of the Group's cash and short term deposits
and derivative financial instruments is limited to the Group's
policy of monitoring counterparty exposures.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient
cash, the availability of funding through an adequate amount
of committed credit facilities and the ability to close
out market positions. The Board and its advisers seek to
have appropriate credit facilities in place on a project
by project basis, either from available cash resources or
from bank facilities.
Management monitor the Group's liquidity position on a daily
basis and formal liquidity reports are issued from all jurisdictions
on a weekly basis and are reviewed monthly by the Board,
along with cash flow forecasts. A summary table with maturity
of financial liabilities is presented below.
All amounts shown are gross undiscounted cash flows.
Financial
liabilities Years
Years
As at 31 December Year 3 to 6 to
2017 Total Current 2 5 10
$'000 $'000 $'000 $'000 $'000
Interest bearing
loans and
borrowings 1,072,072 166,325 197,846 478,065 229,836
Preference
shares 160,943 16,094 16,094 48,283 80,472
Convertible
preference shares 495,150 16,917 16,917 50,751 410,565
Derivative
financial
instruments 35 35 - - -
Head leases 1,553 155 155 466 777
Trade and other
payables 46,705 24,078 7,736 13,981 910
1,776,458 223,604 238,748 591,546 722,560
---------- ------------ ------------ -------------- -------------
As at 31 December
2016
Interest bearing
loans and
borrowings 964,900 96,014 106,721 542,826 219,339
Preference
shares 145,711 14,571 14,571 43,713 72,856
Convertible
preference shares 254,153 8,260 8,260 24,780 212,853
Derivative
financial
instruments 1,010 943 67 - -
Head leases 1,447 145 145 434 723
Trade and other
payables 38,832 15,509 5,471 15,496 2,356
1,406,053 135,442 135,235 627,249 508,127
---------- ------------ ------------ -------------- -------------
Details of the interest rates applicable to the Group's
long term borrowings, preference shares and convertible
preference shares are given in notes 22, 23 and 24. The
Group is subject to interest costs in perpetuity in respect
of preference shares, which have no contractual maturity
date. The table above does not show cash flows beyond 10
years.
The Group monitors its risk to a shortage of funds by forecasting
cash flow requirements for future years. The Group's objective
is to maintain a balance between continuity of funding and
flexibility through the use of short term borrowing facilities,
bank loans and equity fund raisings.
Fair values
Set out below is a comparison by class of the carrying amounts
and fair value of the Group's financial instruments in the
financial statements.
2017 2016
Carrying Fair Carrying Fair
Value Value Value Value
$'000 $'000 $'000 $'000
Non-current
assets
Loans receivable 665 621 611 577
Security
deposits 1,305 1,220 - -
Derivative
financial
instruments 7,948 7,948 5,012 5,012
Current
assets
Trade receivables 44,315 44,315 37,732 37,732
Security
deposits - - 2,393 2,393
Other current
receivables 1,509 1,509 318 318
Derivative
financial
instruments 445 445 358 358
Cash and short
term deposits 266,666 266,666 198,621 198,621
Non-current
liabilities
Interest bearing loans
and borrowings 740,485 743,488 699,038 706,682
Preference
shares 146,458 195,816 131,703 165,140
Convertible
preference
shares 269,031 317,521 119,859 143,596
Derivative financial
instruments - - 67 67
Rent deposits 22,626 19,838 23,324 19,838
Other payables 1,932 1,932 1,935 1,935
Current
liabilities
Interest bearing loans
and borrowings 106,697 106,697 40,787 45,458
Derivative
financial
instruments 35 35 943 943
Rent deposits 6,622 6,622 6,640 6,640
Other payables 17,455 17,455 8,869 8,869
The fair values of loans receivable and borrowings have
been calculated based on a discounted cash flow model using
a discount rate based on the Group's weighted average cost
of capital. The valuation technique falls within level 3
of the fair value hierarchy (see note 36 for definition).
The fair value of short term deposits, other assets, trade
and other receivables, trade and other payables is assumed
to approximate to their book values. The fair value of preference
shares and convertible preference shares are assumed to
be their last quoted price, which is considered to be level
1 of the fair value hierarchy. The fair value of derivatives
is determined by a model with market based inputs.
(d) Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern to provide
returns to shareholders and benefits for other stakeholders
and to maintain an optimal capital structure to reduce the
cost of capital.
For capital risk management, the Directors consider both
the ordinary and preference shares to be permanent capital
of the Company, with similar rights as to cancellation.
To maintain or adjust the capital structure, the Group may
adjust the amount of dividends paid to shareholders, under
take tender offers, return capital to shareholders, issue
new shares or sell assets to reduce debt. Consistent with
others in its industry, the Group monitors capital on the
basis of its gearing ratio. This ratio is calculated as
net debt divided by total capital. Net debt is calculated
as total liabilities but excluding provisions, head lease
obligations and preference shares, which for capital risk
management is considered to be capital rather than debt,
less cash and short term deposits. Total capital is calculated
as equity, as shown in the balance sheet, plus preference
shares and net debt. Where the Group has a net cash position,
the gearing ratio will be zero.
2017 2016
$'000 $'000
Non-current
liabilities 1,123,213 904,157
Current
liabilities 214,080 107,130
Total borrowings 1,337,293 1,011,287
Less: cash and
short term deposits 266,666 198,621
Net debt 1,070,627 812,666
-------------- -------------
Equity 529,758 500,226
Preference
shares 146,458 131,703
Total capital 1,746,843 1,444,595
-------------- -------------
Gearing
ratio 61.29% 56.26%
-------------- -------------
36. Fair value measurement
The following table provides the fair value measurement
hierarchy* of the Group's assets and liabilities.
Total
Fair
Level Level
Level 1 2 3 Value
As at 31 December
2017 $'000 $'000 $'000 $'000
Assets measured
at fair value
Investment
property - - 1,568,126 1,568,126
Investment property
under construction - - 38,411 38,411
Derivative financial
instruments - 8,393 - 8,393
Liabilities
measured at
fair value
Derivative
financial
instruments - 35 - 35
------------ ------------ -------------- -------------
As at 31 December
2016
Assets measured
at fair value
Investment
property - - 1,300,643 1,300,643
Investment property
under construction - - 41,253 41,253
Derivative
financial
instruments - 5,370 - 5,370
Liabilities
measured at
fair value
Derivative
financial
instruments - 1,010 - 1,010
------------ ------------ -------------- -------------
* Explanation of
the fair value
hierarchy:
Level 1 - Quoted prices in active markets for identical
assets or liabilities that can be accessed at the balance
sheet date.
Level 2 - Use of a model with inputs that are directly or
indirectly observable market data.
Level 3 - Use of a model with inputs that are not based
on observable market data.
The Group's foreign currency derivative financial instruments
are call options and are measured based on spot exchange
rates, the yield curves of the respective currencies as
well as the currency basis spreads between the respective
currencies. The Group's interest rate derivative financial
instruments comprise swap contracts and interest rate caps.
These contracts are valued using a discounted cash flow
model and where not cash collateralised consideration is
given to the Group's own credit risk.
There have been no transfers between level 1 and level 2
during the year or the prior year.
37. Operating lease arrangements
The Group earns rental income by leasing its investment
properties to tenants under non-cancellable operating leases,
which are discussed in detail in the Strategic Report and
note 13. At the Balance Sheet date the Group had contracted
with tenants for the following future minimum lease payments:-
2017 2016
$'000 $'000
Within
one year 153,733 124,505
In the
second
year 129,165 108,852
In the third to
fifth year
(inclusive) 191,718 196,800
After five
years 43,466 53,140
518,082 483,297
-------------- -------------
38. Reconciliation of liabilities
arising from financing activities
Non-cash changes
Cash Foreign
2016 flows Fair value exchange Other 2017
$'000 $'000 $'000 $'000 $'000 $'000
Interest bearing
loans and
borrowings 739,825 103,175 - (143) 4,325 847,182
Preference
shares 131,703 (112) - 12,506 2,361 146,458
Convertible
preference shares 119,859 126,402 - 17,322 5,448 269,031
Derivative
financial
instruments (5,041) (4,870) 1,758 (19) - (8,172)
986,346 224,595 1,758 29,666 12,134 1,254,499
------------------ ---------- ------------ ------------ -------------- -------------
2017
Cash flows relating to interest
bearing loans and borrowings
comprise: $'000
Proceeds from long
term borrowings 271,457
Repayment of long
term borrowings (125,371)
Loan amortisation (38,322)
Bank borrowing
costs paid (64,171)
Add: Interest
paid 59,583
------------
Loan origination
costs incurred (4,589)
103,175
--------------
Other non-cash changes include amortisation of origination
costs, movements in interest accruals, accretion of premiums
payable on redemption of preference and convertible preference
shares and the allocation to equity on issue of convertible
preference shares.
39. Acquisitions in the period
The Group made three corporate acquisitions in the period;
Gorigo Logistics Park, Primium Business Centre and Kellerman
Business Centre from the same investment fund. The Group
purchased the properties by acquiring all of the issued
share capital of the corporate vehicles that owned the properties.
In accordance with its accounting policy, the Group considered
each acquisition in turn, assessing whether an integrated
set of activities had been acquired in addition to the property.
In each case it was concluded a business had not been purchased
but rather the acquisition of a group of assets and related
liabilities.
Analyses of the consideration payable for the properties
and the incidental assets and liabilities are provided below:
Offices
Primium Kellerman Total Gorigo Total
$'000 $'000 $'000 $'000 $'000
Non-current
assets
Investment property
(note 11) 29,216 20,963 50,179 35,994 86,173
Deferred tax
assets (note
26a) - - - 1,856 1,856
Current
assets
Trade and other
receivables 234 440 674 282 956
Cash and short
term deposits 1,930 1,016 2,946 1,142 4,088
Current
liabilities
Trade and other
payables (1,983) (2,523) (4,506) (1,961) (6,467)
29,397 19,896 49,293 37,313 86,606
---------- ------------ ------------ -------------- -------------
Discharged
by:
Cash consideration
paid 85,778
Acquisition
costs 828
86,606
-------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAFDFFDDPEAF
(END) Dow Jones Newswires
March 12, 2018 03:00 ET (07:00 GMT)
Raven Property (LSE:RAV)
Historical Stock Chart
From Apr 2024 to May 2024
Raven Property (LSE:RAV)
Historical Stock Chart
From May 2023 to May 2024