1st Quarter Results

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION

IN OR INTO THE RUSSIAN FEDERATION, THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN

28 May 2019

AFI DEVELOPMENT PLC

("AFI DEVELOPMENT" OR "THE COMPANY")

RESULTS FOR THE THREE MONTHS TO 31 MARCH 2019 

Residential presales drive performance

AFI Development, a leading real estate company focused on developing property in Russia, has today announced its financial results for the three months ended 31 March 2019.

Q1 2019 financial highlights[1]

· Revenue for Q1 2019 was US$94.0 million, including proceeds from the sale of trading properties:

- Rental and hotel operating income decreased to US$30.8 million

- AFIMALL City contribution stood at US$21.7 million

- Sale of residential properties contributed US$62.5 million to total revenue

· Gross profit was US$35.2 million

· Net profit for Q1 2019 amounted to US$6.0 million

· Total gross value of portfolio of properties was US$1.26 billion

· Cash, cash equivalents and marketable securities as of 31 March 2019 was US$137.5 million

Q1 2019 operational highlights

· Building 6 at Odinburg was delivered in May 2019, with the transfer of apartments to customers currently underway. The construction and presale of apartments in Building 3 (Phase I) and Building 3 (Phase II) also continues. As of 20 May 2019, the number of signed sale contracts stood at 719 (78% of total) in Building 3 (Phase I), 26 (2% of total) in Building 3 (Phase II) and 211 (94% of total) in Building 6.

· At AFI Residence Paveletskaya, Phase II was delivered in May 2019. The transfer of apartments to customers is ongoing. The construction and presale of apartments at Phase III is currently ongoing. As of 20 May 2019, 567 contracts for the sales and pre-sales of apartments and "special units" had been signed (90% of Phase I and Phase II combined).

· At Bolshaya Pochtovaya, construction and marketing of the project is progressing to plan. In Q1 2019, the Company launched presales of Phase III apartments. As of 20 May 2019, 274 apartments (44% of Phases I, II and III combined) had been pre-sold to customers.

· The construction and pre-sale of properties at Botanic Garden are ongoing. As of 20 May 2019, 355 apartments (44% of Phase I) had been pre-sold to customers.

· In Q1 2019, the Company started construction works at the Tverskaya Plaza Ic, with construction works beginning at Tverskaya Plaza IV in Q2 2019. Both projects are grade A office developments in central Moscow.

· At AFIMALL City, the NOI for Q1 2019 was broadly flat year-on-year at US$16.6 million.

Commenting on today's announcement, Eli Avrahampour, Chairman of AFI Development, said:

"AFI Development has had a confident start to the year, owing largely to residential presales recognition and stable performance of the yielding portfolio.

At the same time, we remain mindful of the ongoing macroeconomic uncertainty in Russia as well as of potential negative influence of the new escrow schemes and launch of the state-funded housing programme on the Moscow residential development market. These factors are expected to place downward pressure on revenues and profitability of our projects."

Q1 2019 Results Conference Call:

AFI Development will hold a conference call for analysts and investors to discuss its Q1 2019 financial results on Wednesday, 29 May 2019.

Details for the conference call are as follows:

Date: Wednesday, 29 May 2019

Time: 3pm BST (5pm Moscow)

Dial-in Tel: International: +44 (0)20 3003 2666

 UK toll free: 0808 109 0700

Password: AFID

To take part in the conference call, please dial in approximately 5 minutes before the start of the event.

The Q1 2019 investor presentation will be published on the Company's website: http://www.afi-development.com/en/investor-relations/reports-presentations by 11.00 UK (13.00 Moscow) on 29 May 2019.

- ends -

For further information, please contact:

AFI Development, +7 495 796 9988

Ilya Kutnov, Corporate Affairs/Investments Director

(Responsible for arranging the release of this announcement)

Citigate Dewe Rogerson, London +44 20 7638 9571

Sandra Novakov

Lucy Eyles

This announcement contains inside information.

About AFI Development

Established in 2001, AFI Development is one of the leading real estate development companies operating in Russia.

AFI Development is listed on the Main Market of the London Stock Exchange and aims to deliver shareholder value through a commitment to innovation and continuous project development, coupled with the highest standards of design, construction and quality of customer service.

AFI Development focuses on developing and redeveloping high quality commercial and residential real estate assets across Russia, with Moscow being its main market. The Company's existing portfolio comprises commercial projects focused on offices, shopping centres, hotels and mixed-use properties, and residential projects. AFI Development's strategy is to sell the residential properties it develops and to either lease the commercial properties or sell them for a favourable return.

AFI Development is a leading force in urban regeneration, breathing new life into city squares and neighbourhoods and transforming congested and underdeveloped areas into thriving new communities. The Company's long-term, large-scale regeneration and city infrastructure projects establish the necessary groundwork for the successful launch of commercial and residential properties, providing a strong base for the future.

Legal disclaimer

Some of the information in these materials may contain projections or other forward-looking statements regarding future events, the future financial performance of the Company, its intentions, beliefs or current expectations and those of its officers, directors and employees concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and business. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might" or the negative of such terms or other similar expressions. These statements are only predictions and that actual events or results may differ materially. Unless otherwise required by applicable law, regulation or accounting standard, the Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia and market change in the industries the Company operates in, as well as many other risks specifically related to the Company and its operations. 

Chairman's statement

We are pleased to report year-on-year growth in both revenue and profit in the first quarter of 2019. This is owing largely to residential presales recognition that was responsible for approximately 64% of our total revenue, which amounted US$94.0 million, However, international sanctions have triggered a slowdown in the growth of the Russian economy which has impacted the performance of other areas of the business, particularly the commercial segment.

The level of our residential presales recognition is attributable to the advanced construction stage of our four projects under development (namely, Odinburg, AFI Residence Paveletskaya, Bolshaya Pochtovaya and Botanic Garden). As a result, our gross profit for the quarter was US$35.2 million.

Rental and hotel operating income has decreased to US$30.8 million. 

Finally, we are pleased to report that we have started the delivery of pre-sold apartments in Building 6 (Phase II) at Odinburg and of Phase II at AFI Residence Paveletskaya, following state commissioning in May 2019. The construction works and pre-sales at our other residential projects, Bolshaya Pochtovaya and Botanic Garden, are also progressing.

Projects update

AFIMALL City

Due to several lease expirations, occupancy at the AFIMALL decreased to 90%, from 92% at the end-2018. Although the footfall to the mall continues to grow, the revenue does not grow at the same pace.

Odinburg

At the Odinburg residential development, Building 6 (Phase II) was state commissioned in May 2019 and its presold apartments are now being delivered to customers. We have also recently started marketing apartments at Building 3 (Phase II). Currently, construction works are focused on Building 3 (Phases I) and Building 3 (Phase II). As of 20 May 2019, the number of signed sale contracts stood at 719 (78% of total) in Building 3 (Phase I), 26 (2% of total) in Building 3 (Phase II) and 211 (94% of total) in Building 6.

AFI Residence Paveletskaya

In May 2019, Phase II of the AFI Residence Paveletskaya development was commissioned and delivery of apartments to customers commenced. Meanwhile, construction works and marketing of Phase III apartments continue. As of 20 May 2019, 567 contracts for the sales and pre-sales of apartments and "special units" had been signed (90% of Phase I and Phase II combined).

Bolshaya Pochtovaya

During Q1 2019, we launched presales at Phase III, following the start of construction at the end of last year. Construction and marketing of the project are progressing to schedule and as of 20 May 2019, 274 apartments (44% of Phases I, II and III combined) had been sold and pre-sold to customers.

Botanic Garden

Construction works and pre-sales are also progressing at Botanic Garden. As of 20 May 2019, 355 apartments (44% of Phase I) had been pre-sold to customers.

Aquamarine III (Ozerkovskaya III)

In April 2019, the Company agreed to dispose of the last remaining building in the office complex, together with its respective underground parking, for RUR 4.45 million. Upon completion of this transaction, the Company will have fully exited the Aquamarine III development.

Subsequent events

On 23 April 2019, AFI Development announced that it had agreed to sell Building 3 at the completed Aquamarine III Business Centre in Moscow for a total cash consideration of RUR4.45 billion (circa US$69.5 million), net of the applicable Russian VAT. As at the publication date of the current report, the full consideration has been received by the Company.

On 26 April 2019, the Company announced that it had entered into an employment contract with Mr Lev Leviev effective from 1 May 2019.

On 20 May 2019, AFI Development announced that it had agreed with its lender, VTB Bank PJSC, to partially repay loans relating to the Plaza Spa Kislovodsk and Plaza Spa Zheleznovodsk projects, in the total amount of circa EUR35 million. As at the publication date of the current report, the EUR37.73 million repayment was made.

NOT REVIEWED BY AUDITORS

SUMMARY OF FINANCIAL RESULTS

For the period from 1 January 2019 to 31 March 2019

UNAUDITED CONSOLIDATED INCOME STATEMENT

For the period from 1 January 2019 to 31 March 2019

The unaudited summary of financial results was approved by the Board of Directors on 27 May 2019.

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 March 2019

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

For the period from 1 January 2019 to 31 March 2019

NOTES TO THE UNAUDITED SUMMARY OF FINANCIAL RESULTS

For the period from 1 January 2019 to 31 March 2019

1. SUMMARY OF OPERATION

Incorporation and principal activity

AFI Development PLC (the "Company") was incorporated in Cyprus on 13 February 2001 as a limited liability company under the name Donkamill Holdings Limited. In April 2007 the Company was transformed into public company and changed its name to AFI Development PLC. The address of the Company's registered office is 165 Spyrou Araouzou Street, Lordos Waterfront Building, 5th floor, Flat/office 505, 3035 Limassol, Cyprus. As of 7 September 2016 the Company is a 64.88% subsidiary of Flotonic Limited, a private holding company registered in Cyprus, 100% owned by Mr Lev Leviev. Prior to that, the Company was a 64.88% subsidiary of Africa Israel Investments Ltd ("Africa-Israel"), which is listed on the Tel Aviv Stock Exchange ("TASE"). The remaining shareholding of "A" shares is held by a custodian bank in exchange for the GDRs issued and listed in the London Stock Exchange ("LSE"). On 5 July 2010 the Company issued by way of a bonus issue 523,847,027 "B" shares, which were admitted to a premium listing on the Official List of the UK Listing Authority and to trading on the main market of LSE. On the same date, the ordinary shares of the Company were designated as "A" shares.

This summary of financial results comprises the Company and its subsidiaries (together referred to as the "Group"). The principal activity of the Group is real estate investment and development.

The summary of financial results was not audited. The amounts are based on the Group's financial information, which is prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union ("EU") and the Group's accounting policy, while the disclosures and presentation are not in compliance with IFRSs, specifically with IAS 34 "Interim Financial Reporting" and IAS 1 "Presentation of Financial Statements".

Exchange rates

The table below shows the exchange rates of Russian Rubles, which is the functional currency of the Russian subsidiaries of the Group, to the US Dollar, which is the presentation currency of the Group:

Russian Rubles % change % change

As of: for US$1 three months year

31 March 2019 64.7347 (6.8) 13.0

31 December 2018 69.4706 17.6

31 March 2018 57.2649 1.6

Average rate during:

Three-month period ended 31 March 2019 66.1271 5.5

Three-month period ended 31 March 2018 56.8803 (2.5)

2. REVENUE

3. OPERATING EXPENSES

4. ADMINISTRATIVE EXPENSES

5. FINANCE COST AND FINANCE INCOME

6. TAX EXPENSE / (BENEFIT)

7. INVESTMENT PROPERTY

Reconciliation of carrying amount

(*) The Group has adopted IFRS 16 Leases from 1 January 2019.

The fair value adjustment in investment property is mainly related to the strengthening of the Russian Rouble to the US Dollar by 6.8% during the three months of 2019.

The Company assessed that the fair value of the properties has not materially changed since 31 December 2018, when a valuation by external appraisers took place, as there were no significant changes in the macroeconomic conditions in Russia. The same applies for investment property under development. See note 0 below.

8. INVESTMENT PROPERTY UNDER DEVELOPMENT

Reconciliation of carrying amount

(*) The Group has adopted IFRS 16 Leases from 1 January 2019.

The fair value adjustment in investment property is mainly related to the strengthening of the Russian Rouble to the US Dollar by 6.8% during the three months of 2019.

The Company assessed that the fair value of the properties has not materially changed since 31 December 2018, when a valuation by external appraisers took place, as there were no significant changes in the macroeconomic conditions in Russia.

9. PROPERTY, PLANT AND EQUIPMENT

10. TRADING PROPERTIES

Trading properties comprise unsold apartments and parking spaces. The transfer from trading properties under construction represents the completion of the construction of a number of flats, offices and parking places of "AFI Residence Paveletskaya" project, phase 1, during 2018.

11. TRADING PROPERTIES UNDER CONSTRUCTION

\* The Group has adopted IFRS 15 Revenue from Contracts with Customers as from 1 January 2018.

Trading properties under construction comprise "Odinburg", "AFI Residence Paveletskaya", "Botanic Garden" and "Bolshaya Pochtovaya" projects that involve primarily the construction of residential properties.

The amount recognised to cost of sales of trading properties, represents the cost incurred to date for the construction of the apartments and flats which were sold but not yet completed based on the standard IFRS 15 adopted as from 1 January 2018.

12. TRADE AND OTHER RECEIVABLES

Trade receivables net

Trade receivables are presented net of an accumulated provision for doubtful debts and unrecognised revenue of US$6,798 thousand (31/12/2018: US$7,686 thousand).

13. CASH AND CASH EQUIVALENTS

14. OTHER INVESTMENTS

By 31 March 2019 Other investments comprised US$13,647 thousand, whereas US$5,244 thousand were invested in long-term equity instruments and US$8,403 were invested in short-term easily convertible into cash instruments. Listed debt securities have been matured in February 2019.

15. Right-of-use-assets / LEASE LIABILITIES

The Group has adopted IFRS 16 Lease from 1 January 2019. The Group as a lessee recognizes a right-of-use assets representing its right to use the underlying assets and a lease liability representing its obligation to make lease payments.

16. LOANS AND BORROWINGS

There were no changes to the loans during the three-month period ended 31 March 2019.

17. TRADE AND OTHER PAYABLES

18. SUBSEQUENT EVENTS

On 23 April 2019, AFI Development announced that it had agreed to sell Building 3 at the completed Aquamarine III Business Centre in Moscow for a total cash consideration of RUR4.45 billion (circa US$69.5 million), net of the applicable Russian VAT. As at the publication date of the current report, the full consideration has been received by the Company.

On 26 April 2019, the Company announced that it had entered into an employment contract with Mr Lev Leviev effective from 1 May 2019.

On 20 May 2019, AFI Development announced that it had agreed with its lender, VTB Bank PJSC, to partially repay loans relating to the Plaza Spa Kislovodsk and Plaza Spa Zheleznovodsk projects, in the total amount of circa EUR35 million. As at the publication date of the current report, the EUR37.73 million repayment was made.