14th Mar 2011 07:00
14 March 2010
Raven Russia Limited ("Raven Russia" or the "Company")
Results for the period to 31 December 2010
The Board of Raven Russia releases below the results for the year ended 31 December 2010.
Highlights
·; Reported NOI for the year up 22% from $50 million to $61 million;
·; Profit before tax of $56 million (2009: loss $148 million);
·; Adjusted fully diluted NAV per share 105 cents (2009: 99 cents), based on a portfolio ERV yield of 12.8%;
·; 220,000 sqm of space let in 2010, generating $23.3 million of annualised NOI;
·; Currently, annualised NOI of $96.6 million (including PLAs and LOIs) with a further $17.5 million under active negotiation;
·; Positive operating cashflow of $33 million;
·; Current cash balance of $132 million;
·; Gearing of 35.6% net of cash;
·; 1p final dividend proposed.
Richard Jewson, Chairman, said "A good performance in the year and a strong balance sheet means that we are well placed to take advantage of opportunities in our market, whether by existing portfolio management, acquisition or new development."
Glyn Hirsch, Chief Executive, said "Market dynamics are moving in our favour. Vacancy rates in Moscow have dropped significantly, supply of new warehouse space is limited and demand is increasing. We look forward to 2011 with optimism."
Enquiries
Raven Russia Limited Tel: + 44 (0) 1481 712955
Anton Bilton
Glyn Hirsch
Cardew Group Tel: + 44 (0) 207 930 0777
Tim Robertson
Catherine Maitland
Singer Capital Markets Limited (NOMAD) Tel: +44 (0) 203 205 7500
Corporate Finance- James Maxwell
Sales - Alan Geeves / James Waterlow
Matrix Corporate Capital LLP Tel: +44 (0) 203 026 7000 Corporate Finance - Malcolm Le May / Roger Clarke
Sales- Carl Gough
Chairman's Statement
The Board of Raven Russia Limited ("Raven Russia") announces the Group's results for the year ended 31st December 2010.
The key operational focus last year was letting. We have made continued progress in an improving market.
Reported net operating income ("NOI") increased by $11 million in the year to $61 million (2009: $50 million). With a stable overhead base, this gives a straight contribution to operating profit which increased to $25 million (2009: $13 million) and is also reflected in strong operating cash inflows for the year which more than doubled to $33 million (2009: $15 million).
Following the sale of our Baltia project, generating a profit of $12 million after costs, and a revaluation surplus on our property portfolio of $79 million (2009: loss of $108 million), we have recorded a healthy profit before tax of $56 million (2009: loss of $148 million).
Today, of our total finished portfolio of 975,000 sqm, 321,000 sqm (33%) stands vacant, 94,000 sqm (10%) of which is subject to PLAs and LOIs and we are in active discussions on 157,000 sqm (16%) of the remaining space. On average, we suffer a cost of $40 per sqm servicing vacant space whilst continuing with our letting programme.
We have maintained our strong balance sheet with gearing of 35.6% as calculated in note 35 to the financial statements and a cash position today of $132 million.
We completed the sale of our Baltia project at an equivalent yield of 10% in the year, recording a profit on sale of $12 million and generating cash of $21 million after costs.
Adjusted fully diluted NAV per share was 105c at the year end, compared to 99c at 31 December 2009.
We remain bemused by the valuation of our portfolio. Whilst accepting the sparsity of comparable transactions, we are still roughly at replacement cost and on an overall ERV yield of 12.8% (2009: 14.3%).
There must come a time when valuers don't simply discount Polish/Czech Republic/Hungarian yields by 2% points to UK/French/German yields; and then discount by a further 3% points for Russia! Someone will wake up to the growth and dynamism of the Russian economy when compared to the declining nature of those Western European economies and value well let Grade A Russian buildings accordingly. The old paradigm must shift and we must all begin to accept the "new normal".
As promised, we moved our ordinary shares and warrants onto the Official List in August 2010. All of our listed instruments have performed well in the year, ordinary shares with a year end price of 62.5p (2009:45p), warrants at 37.5p (2009:24p) and preference shares at 129.25p (2009:93p).
Due to the continuing progress in NOI and our strong balance sheet we intend to declare a final dividend of 1p per share. This is in addition to the tender offer made during the year, where we purchased and cancelled ordinary shares, with a cost equivalent to 1p per share.
We are continuing our progress with letting and financing and maintaining a strong liquid balance sheet. Both ordinary and preference shareholders have received good returns and we are well placed for this to continue.
I would like to take this opportunity to thank our shareholders, employees and advisors for their support during the year.
Richard Jewson
Chairman
Chief Executive's Report
Letting space has remained our key focus and the progress of the first half has been maintained. We let 220,000 sqm of space to third parties during the year on top of the 189,124 sqm let in 2009. (That's 4,400,000 square feet in 24 months for our British audience).
At 31 December 2010, annualised NOI was running at $83.8million and additional PLAs and LOIs totalled $4.2 million. At today's date the $83.8 million has increased to $85.7 million and additional PLAs and LOIs have increased to $10.9 million. On top of this we have a further 157,000 sqm under active negotiation which could add $17.5 million to LOIs.
So if all of this converts we could reach the big figure of $114 million of annualised NOI. This would leave us 93% let and heading towards $121 million of annualised NOI.
The high level of space under negotiation gives some indication of how strong the occupier market is today. Although this category has the possibility to disappoint, with some good luck we are well on the way to making significant inroads into our vacant space.
The market is continuing to improve generally and particularly in Moscow, Jones Lang LaSalle ("JLL") now reports that there is a 3.9% vacancy in Grade A Moscow warehouses. There is virtually no new development and vacant space is leasing fast. Rents have started to rise.
Quite why a portfolio of finished buildings that can produce income of over $120 million is valued at only $943 million is hard to fathom. There have been few investment transactions to demonstrate yield compression for valuation purposes. Despite our best efforts and cash we have found it difficult to find anything to buy.
However, we did announce on 28 February, the conditional acquisition of the Southgate warehouse project, near Domodedova airport, South of Moscow. The project comprises a completed warehouse of 76,550 sqm, mainly let to John Deere and 88 hectares of permitted land, allowing the potential development of a further 440,000 sqm of warehouse space. Existing minority shareholders have 30 business days from date of announcement to match our offer. So we will wait to see if we get it.
As our portfolio matures and we can demonstrate the high quality of our rental income, I do believe that our valuations will continue to improve. High quality, growing income from world class assets is becoming increasingly hard to find, we are certainly in the right place, with healthy tenant demand and a dynamic and growing macro-economic environment.
The simple income statement I ran through last year has now changed a bit, but is not fundamentally different. As a result of new financings, annual interest cost now runs at $34 million (but we have more cash) and at today's exchange rate, our preference share coupon runs at $27 million. We have broken down our overheads to show the split between running the portfolio and our central overheads ($13 million and $6 million per annum respectively). The central overheads which support our listing requirements also support our Guernsey and Cyprus offices which more than pay for themselves in the associated reduced tax burden, both now and in the future.
Roslogistics and Raven Mount each have an overhead base of $3 million but the former should now generate sufficient profits to support its rental obligations of $10 million and we expect Raven Mount to at least break even in the income statement as we liquidate its stock.
In terms of growth we are working hard on new leasing and managing existing tenants' leases to benefit from increasing rental levels.
We have started building 55,000 sqm at Klimovsk. As all infrastructure is in place we estimate a further investment of $34 million to complete. If we achieve rents of $120 per sqm then this will give an excellent return.
All the components are falling into place for us to commence further new development. With a focus on Moscow, this will happen this year. Klimovsk is underway and if we complete Southgate we will start there too. We also have some other good potential land acquisitions. This will also answer the "what are you doing with all that cash?" question, as well as improving overall returns by putting this cash to work.
In summary, we have a strong balance sheet with plenty of cash ($132 million at today's date) for earnings enhancing acquisitions or profitable development. We will soon have a clearly visible and growing dividend and there is still lots of potential for NAV growth from revaluations.
The oil price is well over $100 a barrel and the Russian consumer is spending money. Russia will host the winter Olympics in 2014 in Sochi, a new Russian Grand Prix is planned and the World Cup arrives in 2018, and the government has committed to major infrastructure upgrades to facilitate events like this. At the macro level, all of these facts are beneficial to the country we operate in. At the property level there is virtually no new supply becoming available in Moscow and the vacancy rate is falling in all of our other markets. Demand is strong and rents should grow during the course of the year.
Our main objective remains to lease the remaining space on the best terms possible to the strongest tenants and to take advantage of market opportunities, either by building new space or acquisition.
The achievements of 2010 have been overshadowed by the death of our colleague and friend Oleg Tomin in the bombing of Domodedovo, Moscow airport on 24th January 2011. This tragedy puts a new perspective on our efforts and has saddened us all greatly.
Glyn Hirsch
Chief Executive Officer
Property Review
2010 was a year of significant progress for the Company. Most importantly, we completed 220,000sqm (2.4 million square feet) of new lettings to third parties across the portfolio, generating an additional $23.3 million of annual rental income plus full operating cost recovery on the space. We are now firmly the market leader in our sector and are very well placed to continue our growth through new leasing on our vacant space and also selective development.
Property has always been a cyclical business particularly because of the long lead time from any project's conception to its realisation. The market in Russia has been down over the past couple of years as a result of the global financial crisis, over supply and a lack of tenant demand. That all seems to be changing now and very quickly.
The investment properties were valued by JLL at the period end, in accordance with the RICS Valuation and Appraisal guidelines, at an aggregate gross value of $943 million. This resulted in an increase of $62 million in portfolio value, on a like for like basis, compared to 31 December 2009, reflecting our progress in leasing and the improvement in the market.
Investment Portfolio
In Moscow we have six completed projects totalling 561,000 sqm and producing an annualised income of $53.2 million at year end. These properties were 76% let at year end with the largest element of vacancy (95,000 sqm) being at Noginsk. During the year we let 112,000 sqm in Moscow, and have seen a steady increase in rents. Prime Moscow rents are now around $105-$115 per sqm and we expect this level to continue to rise during 2011.
At the project level we have completed the buyout of our development partner at Klimovsk. Phase 1 of this project only has 8,000 sqm vacant and we have a signed LOI in place. We have therefore taken the decision to start work on Phase 2 which will deliver 55,000 sqm of Grade A space in the first half of 2012. The improvement in the leasing market and increased levels of tenant demand coupled with a competitive build cost of around $650 per sqm, due to the infrastructure investment we have already made in Phase 1, should make this a highly profitable investment.
At Istra, only 13,000 sqm remains vacant and we are in discussion with a number of potential occupiers. Phase 5 of the project was completed at the end of December and has been let to Rusklimat, as DSV failed to fulfil their obligations under the pre lease agreement.
Tenant demand has been the slowest in the east of Moscow and this has affected our Noginsk project where 95,000 sqm remains vacant. The property has a working rail link and is one of the few projects in Moscow where it is now possible to lease over 30,000 sqm in one building. We are confident we will make significant progress in leasing in the next 6 months. The disappointment and the delay in letting this space is offset in part by the fact we are now talking to tenants at significantly better rents than a year ago. Ultimately shareholders will benefit from leasing at higher rents and the effect this has on value once rents are capitalised.
Elsewhere in Moscow our projects are 100% full save for a small amount of space at Southern. On inspection the vast majority of our tenants' space looks full and many are reporting an improvement in business and are willing to discuss expansion.
During the last quarter we completed on the sale of Baltia, Moscow. This building had been fully leased since we acquired it in 2005 at a yield of 12.5%. All the three main tenants in the building were keen to expand their operations and we were successful in moving one of them to Istra where they took 13,000 sqm on a new five year lease. In St Petersburg, at our Shushari project, we have secured a couple of notable lettings during the year including 12,000 sqm to Johnson Controls and 33,000 sqm to Dixy, the Russian retailer, both on long term leases. The remaining space at Shushari is attracting interest from tenants and whilst supply is higher than in Moscow and demand less we still expect to lease the majority of the remaining vacant space during the coming year. In total, in St Petersburg including our Pulkovo property, we have leased 66,000 sqm during the year.
Tenant demand in Rostov and Novosibirsk has been improving, driven by mainly Russian companies including retailers. In total we have leased an additional 41,000 sqm during the past 12 months. Average demand in the regions is 5,000 sqm-7,500 sqm which is smaller than in Moscow but which gives us a broader tenant base.
Lettings to third parties have been offset by the consolidation of our Roslogistics subsidiary, where we took back 58,000 sqm of space in St Petersburg and the Regions. The business now operates out of 77,000 sqm of our space and we expect a full contribution to rent on this space in 2011.
Land Bank
At the year end JLL also valued the Phase 2 development land at Noginsk, Klimovsk, Rostov and Kiev, a total of 87 ha. These projects benefit from existing infrastructure and utilities and should the Company choose, development could commence on them in short order.
The company holds an additional 290 ha of land in Kiev, Ukraine, Minsk, Belarus and in various regional cities of Russia that has longer term potential. We still do not envisage any speculative development on these sites, although all remain available on a Build to Suit basis or as parcelled land sales.
The Market
Evidence of an improving rental market and also renewed investor interest has been helpful to JLL in producing the year end valuations. Equivalent yields in Moscow for Grade A, well let, rack rented warehouses are now in the region of 11.5%. This isn't demanding and provides an investor with substantial positive cashflow if he is able to secure debt at a 60% LTV and a margin over US Libor of 500bps. With these financial dynamics, and the potential for rents to rise, then so should valuations.
As mentioned earlier property is a cyclical business and the strategy we have followed over the past five years has protected us when the market dipped in 2008 and 2009. In Moscow, especially, we are now into a different part of the cycle. Supply has been eaten up over the past 12 months, so much so that JLL report a year end vacancy rate of only 3.9%. Demand has been very strong, particularly from the local retailers and pharmaceutical groups. Rents are on the rise and we know of at least one deal that has been signed at a rent of over $120 per sqm for a 10,000 sqm letting.
In Moscow, where almost 60% of our portfolio is located, the lack of new supply caused by the absence of debt and equity should see the market move more towards Build to Suit, where the tenant shares some of the development risk. Tenants who need space immediately will have less and less choice and will have to pay up or choose secondary properties.
Financial Review
The 2010 financial year has been the first year with a fully completed portfolio and no significant construction projects. As the Chairman and Chief Executive have said, the focus has been firmly on leasing space.
Income
Investment Portfolio
The warehouse portfolio generated $50.4 million of NOI (2009: $46 million) from third party tenants and after absorbing the cost of servicing vacant space of $20.8 million (2009: $16.5 million). This cost will reduce in 2011 as new lettings commence.
Roslogistics
We have completed the consolidation of the Roslogistics business in the year. When we bought out our partners in late 2009, the business had leased or pre let 135,000 sqm of our portfolio, 106,000 sqm of which was in St Petersburg and the Regional cities. We have now reduced this space to a more manageable 76,600 sqm, 72% of which is in Moscow and St Petersburg. We have assisted in rationalising the business, terminating loss making contracts and focussing the management on operational efficiencies. The business has shown the results of this moving from a negligible contribution to NOI in 2008 and $2.5m in 2009 to $5.7m in 2010. 2011 should see the full benefit of the reorganisation and an improving market for third party logistics operators.
Raven Mount
With a contribution to NOI of $4.9 million (2009: $1.8 million), we continue to liquidate Raven Mount stock at above acquisition cost. Gross sales of residential stock in the year totalled $8.8 million (2009: $8.3 million) and our share of the Coln joint venture contributed a further $9 million (2009: $6.7 million) of sales. This achieved against the backdrop of an extremely difficult market for first time buyers and second homes in the UK.
Overheads
Overheads for the investment portfolio were $13.2 million (2009: $14.9 million) and central overheads, which support our listing and our Guernsey/Cyprus tax structure, $6.1 million (2009: $7.4 million). Roslogistics and Raven Mount reduced to $3.4 million (2009: $4.5 million) and $3.1 million (2009: $5.4 million) respectively before depreciation, following the integration of both into the Group. In addition, the cost of moving to the Official List was $2 million and Roslogistics had a cost of $1.4 million to close a loss making site. There was a cost for share based payments of $6.4 million (2009: $0.2 million) as the various share incentive schemes began to vest. This cost is dependent on the share price on the day of vesting and is reversed through reserves, so no effect on reported NAV.
Financing
Debt service costs totalled $35.7 million (2009: $37 million) including amortisation of costs of $3 million (2009: $5.5 million) . Our year end debt level, excluding preference shares, was $432 million (2009: $446 million) with a weighted average cost of debt of 7.0% (2009: 6.9%) and average term to maturity of 3 years (2009: 3.5 years).
As disclosed in last year's annual financial statements, we successfully rolled over our one remaining construction facility on the Noginsk project with HSH Nordbank. The debt team are currently working on a number of options to refinance this during 2011.
In February, we completed the syndication on our Novosibirsk project, drawing an additional $10 million. A further $10 million was drawn in October on the Aareal Bank facility, secured on the Istra project.
At the end of the summer we completed on the final syndicated tranche of $10 million of the $40 million IFC facility on our Rostov project.
We have also increased and drawn on an existing, short term Barclays' facility of £7.5 million at a cost of 2.5% over UK LIBOR. This gave additional cash of £5 million and is secured on certain assets of Raven Mount and a short term, $10 million Group facility from RBSI was rolled over to January 2012 at a margin of 2.85%.
Since the year end, we have completed on one further debt transaction with Marfin Bank. This was a 7 year term dollar loan to partially refinance the equity used to construct the now completed and fully let Lobyna project in northern Moscow. This has generated $30 million of additional funding.
The Group has met all covenants on its debt facilities during the period.
The dollar value of our preference shares was $217 million (2009: $219 million) at 31 December 2010. The unrealised foreign exchange loss since issue is $9.4 million (2009: $14.1 million) and is included in the translation reserve. As we consider the preference shares to be capital instruments for our performance ratios, we have adjusted for unrealised foreign exchange movements on these when calculating adjusted NAV per share. The coupon paid during the year of $27.7 million (2009: $20.1 million) is included in finance expense. Our weighted cost of debt and gearing level, including preference shares as debt, is 8.4% (2009: 8.6%) and 53% (2009: 57%) respectively.
Hedging
It is the Group's policy to hedge the cost of debt secured on completed assets and this is hedged using a mixture of caps and swaps. $117 million (2009: $39 million) is capped at 3.64% and $225 million (2009: $237 million) swapped at an average of 3.10% both with two and a half years remaining.
Cash flow hedges are operated through the lease mechanisms which are mainly US dollar pegged and in holding sufficient Sterling cash reserves to cover preference share coupon and dividend commitments.
Cashflow
The strong letting performance in the year more than doubled our operating cash inflows to $33 million (2009: $14 million). This, together with new financings, covered our bank debt interest and amortisation obligations in the year. We were then able to pay out $42 million (2009: $23 million) on our various capital instruments, encompassing ordinary dividends, preference share coupon, a warrant buy back and a tender offer, and still hold over $100 million in cash at the year end.
Net Asset Value and Dividends
Our Net Assets have increased from $546 million at 31 December 2009 to $580 million at the year end. This gives an Adjusted Basic NAV per share of $1.20 (2009: $1.17) and Adjusted Fully Diluted NAV per share of $1.05 (2009: 97c).
It is the Board's intention to pay a 1p final dividend (2009: 0.5p) and this will be proposed at the AGM.
Mark Sinclair
Chief Financial Officer
Directors Responsibility Statement
The statement of Directors' responsibilities below has been prepared in connection with the Company's full Annual Report for the year ended 31 December 2010. Certain parts of the Annual Report have not been included in this announcement.
The Board confirms to the best of its knowledge:
The financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, gives a true and fair view of the assets, liabilities, financial position and profit and loss of the Group.
The business review, which is incorporated into the Directors' Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
This responsibility statement was approved by the board of directors on the 13 March 2011 and is signed on its behalf by
Mark Sinclair Colin Smith
Chief Financial Officer Chief Operating Officer
GROUP INCOME STATEMENT For the year ended 31 December 2010 | |||||||
2010 | 2009 | ||||||
Notes | Revenue | Capital | Total | Revenue | Capital | Total | |
US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | ||
Gross revenues | 4 / 5 | 130,628 | - | 130,628 | 112,204 | - | 112,204 |
Property operating expenditure and | |||||||
cost of sales | (69,553) | - | (69,553) | (61,880) | - | (61,880) | |
Net rental and related income | 61,075 | - | 61,075 | 50,324 | - | 50,324 | |
Administrative expenses | 4 / 6 | (31,364) | - | (31,364) | (33,662) | - | (33,662) |
Share-based payments | 32 | (6,427) | - | (6,427) | (190) | - | (190) |
Foreign currency profits / (losses) | 1,985 | - | 1,985 | 1,020 | (4,117) | (3,097) | |
Operating expenditure | (35,806) | - | (35,806) | (32,832) | (4,117) | (36,949) | |
Operating profit / (loss) before profits | |||||||
and losses on investment property | 25,269 | - | 25,269 | 17,492 | (4,117) | 13,375 | |
Profit on disposal of investment property | - | 12,178 | 12,178 | - | - | - | |
Unrealised profit / (loss) on revaluation of | |||||||
investment property | 11 | - | 62,798 | 62,798 | - | (57,933) | (57,933) |
Unrealised profit / (loss) on revaluation of | |||||||
investment property under construction | 12 | - | 16,453 | 16,453 | - | (50,544) | (50,544) |
Operating profit / (loss) | 25,269 | 91,429 | 116,698 | 17,492 | (112,594) | (95,102) | |
Finance income | 7 | 2,483 | 1,370 | 3,853 | 3,952 | 866 | 4,818 |
Finance expense | 7 | (64,839) | - | (64,839) | (57,120) | (892) | (58,012) |
(Loss) / profit before tax | (37,087) | 92,799 | 55,712 | (35,676) | (112,620) | (148,296) | |
Tax | 8 | (1,838) | (12,389) | (14,227) | 6,914 | 2,103 | 9,017 |
(Loss) / profit for the year | (38,925) | 80,410 | 41,485 | (28,762) | (110,517) | (139,279) | |
Earnings per share: | 9 | ||||||
Basic (cents) | 8.41 | (28.49) | |||||
Diluted (cents) | 7.40 | (28.49) | |||||
Adjusted (EPRA) earnings per share: | 9 | ||||||
Basic (cents) | (7.68) | (7.04) | |||||
Diluted (cents) | (7.68) | (7.04) | |||||
The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS as adopted by the EU. | |||||||
The revenue and capital columns are both supplied as supplementary information permitted by IFRS as adopted by the EU. 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 2010 | |||||
2010 | 2009 | ||||
US$'000 | US$'000 | ||||
Profit / (loss) for the year | 41,485 | (139,279) | |||
Change in fair value of available for sale financial assets | - | 753 | |||
Foreign currency translation | 2,661 | (45,279) | |||
Deferred tax relating to foreign currency translation | 661 | 3,693 | |||
Other comprehensive income, net of tax | 3,322 | (40,833) | |||
Total comprehensive income for the year, net of tax | 44,807 | (180,112) | |||
All income is attributable to the equity holders of the parent company. There are no non-controlling | |||||
interests. | |||||
The accompanying notes are an integral part of this statement. | |||||
GROUP BALANCE SHEET | |||||
As at 31 December 2010 | |||||
Notes | 2010 | 2009 | |||
US$'000 | US$'000 | ||||
Non-current assets | |||||
Investment property | 11 | 942,950 | 878,775 | ||
Investment property under construction | 12 | 106,741 | 101,280 | ||
Plant and equipment | 6,682 | 7,663 | |||
Intangible assets | 13 | 13,498 | 13,442 | ||
Other receivables | 16 | 15,522 | 18,214 | ||
Derivative financial instruments | 19 | 347 | 195 | ||
Deferred tax assets | 26 | 61,219 | 61,176 | ||
1,146,959 | 1,080,745 | ||||
Current assets | |||||
Inventory | 17 | 56,341 | 61,403 | ||
Trade and other receivables | 18 | 34,737 | 68,815 | ||
Available for sale financial assets | - | 4,232 | |||
Derivative financial instruments | 19 | 102 | - | ||
Cash and short term deposits | 20 | 107,641 | 123,710 | ||
198,821 | 258,160 | ||||
Disposal group assets classified as held | |||||
for sale | 21 | - | 51,654 | ||
Total assets | 1,345,780 | 1,390,559 | |||
Current liabilities | |||||
Trade and other payables | 22 | 47,938 | 62,852 | ||
Derivative financial instruments | 19 | 1,682 | 474 | ||
Interest bearing loans and borrowings | 23 | 89,845 | 97,597 | ||
139,465 | 160,923 | ||||
Non-current liabilities | |||||
Interest bearing loans and borrowings | 23 | 342,205 | 347,973 | ||
Preference shares | 24 | 217,425 | 219,444 | ||
Other payables | 25 | 25,168 | 34,249 | ||
Derivative financial instruments | 19 | 4,439 | 6,166 | ||
Deferred tax liabilities | 26 | 36,714 | 24,267 | ||
625,951 | 632,099 | ||||
Liabilities associated with disposal | |||||
groups classified as held for sale | 21 | - | 51,654 | ||
Total liabilities | 765,416 | 844,676 | |||
Net assets | 580,364 | 545,883 | |||
Equity | |||||
Share capital | 27 | 10,196 | 9,924 | ||
Share premium | 55,119 | 46,858 | |||
Warrants | 28 | 6,033 | 8,584 | ||
Own shares held | 29 | (12,241) | (13,841) | ||
Special reserve | 852,802 | 870,692 | |||
Capital reserve | (71,152) | (151,562) | |||
Translation reserve | (109,354) | (112,676) | |||
Retained earnings | (151,039) | (112,096) | |||
Total equity | 30 | 580,364 | 545,883 | ||
Net asset value per share (dollars): | 31 | ||||
Basic | 1.16 | 1.14 | |||
Diluted | 1.01 | 0.97 | |||
Adjusted net asset value per share (dollars): | 31 | ||||
Basic | 1.20 | 1.17 | |||
Diluted | 1.05 | 0.99 | |||
The financial statements were approved by the Board of Directors on 13 March 2011 and signed on its | |||||
behalf by: | |||||
Mark Sinclair Colin Smith | |||||
The accompanying notes are an integral part of this statement. | |||||
GROUP CASH FLOW STATEMENT | ||||||
For the year ended 31 December 2010 | ||||||
2010 | 2009 | |||||
Notes | US$'000 | US$'000 | ||||
Cash flows from operating activities | ||||||
Profit / (loss) before tax | 55,712 | (148,296) | ||||
Adjustments for: | ||||||
Depreciation | 6 | 2,188 | 1,344 | |||
Finance income | 7 | (3,853) | (4,818) | |||
Finance expense | 7 | 64,839 | 58,012 | |||
Profit on disposal of investment property | (12,178) | - | ||||
(Profit) / loss on revaluation of investment property | 11 | (62,798) | 57,933 | |||
(Profit) / loss on revaluation of investment property under construction | 12 | (16,453) | 50,544 | |||
Foreign exchange (profits) / losses arising from | ||||||
non-operating activities | (1,985) | 3,097 | ||||
Recognised share-based payments | 32 | 6,427 | 190 | |||
31,899 | 18,006 | |||||
Increase in operating receivables | 5,456 | (9,365) | ||||
Decrease / (increase) in other operating current assets | 8,163 | (224) | ||||
(Decrease) / increase in operating payables | (9,420) | 7,006 | ||||
36,098 | 15,423 | |||||
Tax paid | (2,960) | (514) | ||||
Net cash generated from operating activities | 33,138 | 14,909 | ||||
Cash flows from investing activities | ||||||
Payments for investment property under construction | (35,669) | (138,345) | ||||
Decrease in VAT recoverable on construction | 26,646 | 46,495 | ||||
Proceeds from disposal of investment property | 43,451 | - | ||||
Cash disposed with subsidiary undertakings | (3,534) | - | ||||
Capital expenditure | - | (1,113) | ||||
Acquisition of subsidiary undertakings | - | (3,578) | ||||
Cash acquired with subsidiary undertakings | - | 31,211 | ||||
Loans repaid | 722 | - | ||||
Settlement of maturing forward currency financial | ||||||
instruments | 7 | 409 | (892) | |||
Interest received | 7 | 2,483 | 2,043 | |||
Net cash generated from / (used in) investing | ||||||
activities | 34,508 | (64,179) | ||||
Cash flows from financing activities | ||||||
Proceeds from long term borrowings | 53,594 | 115,791 | ||||
Repayment of long term borrowings | (63,622) | (110,784) | ||||
Repayment of other borrowings | - | (5,713) | ||||
Borrowing costs paid | (31,611) | (27,069) | ||||
Proceeds from issue of preference shares and | ||||||
warrants | - | 106,999 | ||||
Exercise of warrants | 27 / 28 | 1,606 | - | |||
Purchase of warrants | 28 | (5,467) | - | |||
Purchase of ordinary shares | 27 | (8,047) | - | |||
Dividends paid on preference shares | (24,599) | (19,226) | ||||
Ordinary dividends paid | 10 | (3,949) | (4,048) | |||
Net cash (used in) / generated from financing | ||||||
activities | (82,095) | 55,950 | ||||
Net (decrease) / increase in cash and cash equivalents | (14,449) | 6,680 | ||||
Opening cash and cash equivalents | 123,782 | 108,435 | ||||
Effect of foreign exchange rate changes | (1,692) | 8,667 | ||||
Closing cash and cash equivalents | 39 | 107,641 | 123,782 | |||
The accompanying notes are an integral part of this statement. | ||||||
GROUP STATEMENT OF CHANGES IN EQUITY | ||||||||||
For the year ended 31 December 2010 | ||||||||||
Share | Share | Own Shares | Special | Capital | Translation | Retained | ||||
Notes | Capital | Premium | Warrants | Held | Reserve | Reserve | Reserve | Earnings | Total | |
For the year ended 31 December 2009 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
At 1 January 2009 | 9,921 | 46,791 | - | - | 870,692 | (41,798) | (71,090) | (79,476) | 735,040 | |
Loss for the year | - | - | - | - | - | - | - | (139,279) | (139,279) | |
Other comprehensive income | - | - | - | - | - | 753 | (41,586) | - | (40,833) | |
- | ||||||||||
Total comprehensive income for the year | - | - | - | - | - | 753 | (41,586) | (139,279) | (180,112) | |
Warrants issued | 28 | - | - | 8,593 | - | - | - | - | - | 8,593 |
Warrants exercised | 27 / 28 | 3 | 67 | (9) | - | - | - | - | - | 61 |
Own shares acquired | 29 | - | - | - | (13,841) | - | - | - | - | (13,841) |
Ordinary dividends paid | 10 | - | - | - | - | - | - | - | (4,048) | (4,048) |
- | ||||||||||
Share-based payment expense | 32 | - | - | - | - | - | - | - | 190 | 190 |
Transfer in respect of capital losses | - | - | - | - | - | (110,517) | - | 110,517 | - | |
At 31 December 2009 | 9,924 | 46,858 | 8,584 | (13,841) | 870,692 | (151,562) | (112,676) | (112,096) | 545,883 | |
For the year ended 31 December 2010 | ||||||||||
Profit for the year | - | - | - | - | - | - | - | 41,485 | 41,485 | |
Other comprehensive income | - | - | - | - | - | - | 3,322 | - | 3,322 | |
Total comprehensive income for the year | - | - | - | - | - | - | 3,322 | 41,485 | 44,807 | |
Warrants exercised | 27 / 28 | 71 | 1,820 | (285) | - | - | - | - | - | 1,606 |
Warrant offer | 27 / 28 | 340 | 14,349 | (2,266) | - | (17,890) | - | - | - | (5,467) |
Own shares disposed | 29 | - | - | - | 1,600 | - | - | - | 1,809 | 3,409 |
Ordinary shares cancelled | 27 | (139) | (7,908) | - | - | - | - | - | - | (8,047) |
Ordinary dividends paid | 10 | - | - | - | - | - | - | - | (3,949) | (3,949) |
Share-based payment expense | 32 | - | - | - | - | - | - | - | 2,122 | 2,122 |
Transfer in respect of capital profits | - | - | - | - | - | 80,410 | - | (80,410) | - | |
At 31 December 2010 | 10,196 | 55,119 | 6,033 | (12,241) | 852,802 | (71,152) | (109,354) | (151,039) | 580,364 | |
The accompanying notes are an integral part of this statement. | ||||||||||
NOTES TO THE FINANCIAL STATEMENTS | |
For the year ended 31 December 2010 | |
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 1 Le Truchot, St Peter Port, Guernsey GY1 6EH. | |
The audited financial statements of the Group for the year ended 31 December 2010 comprise the Company and its subsidiaries and were authorised by the Board for issue on 13 March 2011. | |
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. | |
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, except that the Group has adopted the following new and amended IFRS and IFRIC intepretations as of 1 January 2010: | |
IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) | |
IAS 17 Leases (Amendment) | |
The principal effects of these changes on the financial statements of the Group are as follows: | |
IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) | |
The revised standards are effective prospectively for business combinations effected in financial periods beginning on or after 1 July 2009. | |
IFRS 3 (Revised) introduces a number of changes that could impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results. Insofar as the Group is concerned the principal change is that direct costs associated with an acquisition will be expensed as incurred whereas previously the Group included such costs in the calculation of goodwill. | |
IAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as an equity transaction. Therefore, any such transaction would no longer give rise to goodwill or a gain or loss. | |
The adoption of these amendments and revisions did not have any impact on the financial position or performance of the Group. | |
IAS 17 Leases (Amendment) | |
The amendment requires that in determining whether the lease of land (either separately or in combination with other property) is an operating or a finance lease, the same criteria are applied as for any other asset. Depending on the circumstances of the particular lease this may mean that disposals of land via a long lease are treated as a disposal under a finance lease rather than the issue of an operating lease. The adoption of this amendment did not have any impact on the financial position or performance of the Group. | |
The IASB also issued various other interpretations and amendments to standards that did not have any effect on the financial performance or financial position of the Group and in many cases did not have any relevance to the activities of the Group. These were: | |
IFRS 2 Share-based Payment: Group Cash-settled Share-based Payment Transactions | |
IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items | |
IFRIC 17 Distributions of Non-cash Assets to Owners | |
IFRIC 18 Transfers of Assets from Customers | |
Improvements to IFRSs (April 2009) | |
Certain new interpretations and amendments or revisions to existing standards, which may be relevant to the Group, have been published that are mandatory for later accounting periods and which have not been adopted early. These are: | |
IAS 24 Related Party Disclosures (Revised) effective 1 January 2011 | |
IFRS 9 Financial Instruments effective 1 January 2013 | |
IAS 32 Financial Instruments: Presentation - Classification of rights issues (Amendment) effective 1 February 2010 | |
IFRIC 14 Prepayments of a minimum funding requirement (Amendment) effective 1 January 2011 | |
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments effective 1 July 2010 Improvements to IFRSs (2010) | |
The Group is currently assessing the impact of these changes on its financial statements. | |
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 has the power to govern the financial and operating policies of an investee entity so as to obtain benefit from its activities. | |
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. | |
Goodwill | |
Goodwill represents the excess of the cost of a business combination over the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair values of assets given, liabilities assumed and equity instruments issued. For business combinations after 1 January 2010, transaction costs associated with an acquisition are expensed as incurred. | |
Goodwill is capitalised with any impairment in carrying value being charged to the Income Statement. Impairment tests on goodwill are undertaken annually at the financial year end. Impairment charges are included in the administrative expenses line item in the Income Statement. An impairment loss recognised for goodwill is not reversed. | |
Where the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired exceeds the cost of the combination, the resulting negative goodwill is recognised immediately in the Income Statement. | |
Joint ventures | |
A joint venture is a contractual arrangement whereby two or more parties undertake economic activity that is subject to joint control. The Group undertakes its joint ventures through jointly controlled entities. The group financial statements include the Group's proportionate share of these entities' assets, liabilities, income and expenditure on a line by line basis from the date on which joint control commences to the date on which joint control ceases. Any premium paid for an interest in a jointly controlled entity above the fair value of the Group's share of identifiable assets, liabilities and contingent liabilities is accounted for in accordance with the goodwill accounting policy. | |
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 sales of completed properties and land are recognised on legal completion. | |
Where property is under development and agreement has been reached to sell such property when construction is complete, the Directors consider whether the contract comprises: | |
a contract to construct a property; or | |
a contract for the sale of a completed property. | |
All of the Group's contracts of this type are considered to be contracts for construction of property and revenue is recognised using the percentage to complete method as construction progresses. The percentage of work completed is measured based on costs incurred up until the end of the reporting period as a proportion of total costs expected to be incurred. | |
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) 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. | |
(c) 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, 6th 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. | |
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. | |
Where properties are acquired through corporate acquisitions and there are no significant assets or liabilities other than property, the acquisition is treated as an asset acquisition. In all other cases the acquisition is accounted for as a business combination, in which case, the assets and liabilities of a subsidiary or joint venture are measured at their estimated fair value at the date of acquisition. | |
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. | |
Inventory | |
Inventory is stated at the lower of cost and net realisable value. Such inventory includes land, work in progress and completed units that are available for sale. As residential development is speculative by nature, most inventory is not covered by forward sale contracts. | |
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 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. | |
(c) Available-for-sale financial investments | |
These comprise the Group's investment in unquoted equity securities and are presented as available for sale financial assets on the balance sheet. | |
Available-for-sale financial investments are carried at fair value with changes in the fair value recognised as other comprehensive income in the capital reserve until the investment is disposed of, at which time the cumulative gain or loss is recognised in other operating income. | |
Financial liabilities and equity | |
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity comprises ordinary shares and listed warrants. | |
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 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 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 method. | |
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. | |
Own shares held | |
Own equity instruments which are reacquired 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 | |
The Group makes equity-settled share-based payments to certain employees (including senior executives) and service providers. | |
The cost of equity-settled transactions is measured by reference to the fair value at the date at which they are granted. Fair value is determined by an external valuer, using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any service and performance conditions (vesting conditions), other than performance conditions linked to the price of the shares of the Company (market conditions). Any other conditions, which are required to be met in order for an employee to become fully entitled to an award are considered to be non-vesting conditions. Like market conditions, non-vesting conditions are taken into account in determining the fair value at grant date. | |
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and service conditions are fulfilled. The cumulative expense is recognised at each reporting date until the vesting date, reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognised at the beginning and end of that period. | |
No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and service conditions are satisfied. | |
Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. | |
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; 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 it is 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. | |
(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 judgement the Group considers information from a variety of sources and engages external, professional advisers to carry out third party valuations of its properties. These are completed in accordance with appropriate sections of the current Practice Statements contained in the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards, 6th Edition (the "Red Book"). This is an internationally accepted basis of valuation. | |
In completing these valuations, the valuers use their market knowledge and professional judgement and consider the following: | |
(i) current prices in an active market for properties of a different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences; | |
(ii) recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions occurred at those prices; and | |
(iii) discounted cash flow projections based on reliable estimates of future cash flows, derived from the terms of any existing lease or other contracts and (where possible) from external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of cash flows. | |
All of the above require the valuers to make estimations and assumptions. In a 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 readily available. | |
(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. The interpretation of legislation which the Group applies to its transactions and activities may be challenged by the relevant regional and federal authorities. Additionally there may be inconsistent interpretation of tax regulations by various authorities, creating uncertainties in the taxation environment 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 tax regulations have taken effect retrospectively. | |
Significant judgement is required in determining the provision for income tax and the recognition of deferred tax assets and liabilities. | |
(c) 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. | |
(d) Acquisitions of investment property | |
The consideration payable in respect of each acquisition is dependent upon certain future events. In calculating the cost of each acquisition the Group has assessed the most probable outcome as at the balance sheet date. These amounts are reconsidered annually at each year end. The assessments include consideration of the future rental levels and costs of construction of a property as well as the terms of the legal agreements governing each acquisition. Based on these factors management will consider whether a liability or a contingent liability should be recognised or disclosed at the balance sheet date. | |
(e) Classification of a joint venture or subsidiary undertaking | |
The Group's investment property and investment property under construction is typically held in a property specific SPV, which may be legally structured as a joint venture with a development partner, though in substance reflects the Group's investment in a wholly owned subsidiary. | |
In assessing whether a particular SPV is accounted for as a subsidiary or joint venture, the Group considers all of the contractual terms of the arrangement, including the extent to which the responsibilities and parameters of the development are determined in advance of the joint venture agreement being agreed between the two parties. The Group will then consider whether it has the power to govern the financial and operating policies of the SPV, so as to obtain benefits from its activities, and the existence of any legal disputes or challenges to this control in order to conclude on the classification of the SPV as a joint venture or subsidiary undertaking. | |
(f) Inventory | |
The Group is required to allocate site wide development costs between units being built or completed in the current period and those for future periods. In making such assessments and allocations, there is a degree of inherent estimation uncertainty. The Group has established internal controls designed to effectively assess and review inventory carrying values and ensure the appropriateness of the estimates made. | |
4. | Segmental information |
The Group has three operating segments, which are managed and report independently to the Board of the Group. These comprise: | |
Property investment - acquire, develop and lease commercial property in Russia and the CIS | |
Roslogistics - provision of warehousing, transport, customs brokerage and related services in Russia and the CIS | |
Raven Mount - construct and sell residential property in the UK | |
Financial information relating to investment property 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 aggregated into a single reporting segment. | |
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. | |
Roslogistics is a discrete business and the Board is presented with turnover, cost of sales and operating profits or losses after deduction of administrative expenses. | |
Administrative expenses are reported to the Board by segment. Foreign currency gains or losses, 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. | |
The segmental information reported reflects the management information provided to the Board, previously property investment income and logistics revenues were reported net of associated direct costs. Comparative amounts have been restated accordingly. | |
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 loss does not include the related finance costs. If such finance costs were included in segment loss, the loss from investment property would have increased by US$36,504k (2009: US$35,249k) and the loss from Raven Mount by US$13,520k (2009: US$9,617k). Aggregate segment loss would have increased by US$50,024k (2009: US$44,866k). | |
Year ended 31 December 2010 | Property | Raven | Segment | Central | ||||||
Investment | Roslogistics | Mount | Total | Overhead | Total | |||||
US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |||||
Gross income | 91,236 | 21,584 | 17,808 | 130,628 | - | 130,628 | ||||
Operating costs / cost of sales | (40,877) | (15,816) | (12,860) | (69,553) | - | (69,553) | ||||
Net operating income | 50,359 | 5,768 | 4,948 | 61,075 | - | 61,075 | ||||
Administrative expenses | ||||||||||
Running general & administration expenses | (13,216) | (3,377) | (3,060) | (19,653) | (6,149) | (25,802) | ||||
Listing costs | - | - | - | - | (2,017) | (2,017) | ||||
Closure costs | - | (1,357) | - | (1,357) | - | (1,357) | ||||
Depreciation | (573) | (1,599) | (16) | (2,188) | - | (2,188) | ||||
Share-based payments | (1,310) | - | - | (1,310) | (5,117) | (6,427) | ||||
Foreign currency profits | - | - | - | - | 1,985 | 1,985 | ||||
Operating profit / (loss) before profits | ||||||||||
on investment property | 35,260 | (565) | 1,872 | 36,567 | (11,298) | 25,269 | ||||
Profit on disposal of investment property | 12,178 | - | - | 12,178 | - | 12,178 | ||||
Unrealised profit on revaluation of | ||||||||||
investment property | 62,798 | - | - | 62,798 | - | 62,798 | ||||
Unrealised profit on revaluation of | ||||||||||
investment property under construction | 16,453 | - | - | 16,453 | - | 16,453 | ||||
Segment profit / (loss) | 126,689 | (565) | 1,872 | 127,996 | (11,298) | 116,698 | ||||
Finance income | 3,853 | |||||||||
Finance expense | (64,839) | |||||||||
Profit before tax | 55,712 | |||||||||
As at 31 December 2010 | Property | Raven | |||||||
Investment | Roslogistics | Mount | Total | ||||||
US$'000 | US$'000 | US$'000 | US$'000 | ||||||
Assets | |||||||||
Investment property | 942,950 | - | - | 942,950 | |||||
Investment property under construction | 106,741 | - | - | 106,741 | |||||
Inventory | - | - | 56,341 | 56,341 | |||||
Cash and short term deposits | 102,463 | 2,306 | 2,872 | 107,641 | |||||
Segment assets | 1,152,154 | 2,306 | 59,213 | 1,213,673 | |||||
Other non-current assets | 97,268 | ||||||||
Other current assets | 34,839 | ||||||||
Total assets | 1,345,780 | ||||||||
Segment liabilities | |||||||||
Interest bearing loans and borrowings | 422,738 | - | 9,312 | 432,050 | |||||
Capital expenditure | |||||||||
Payments for investment property under construction | 35,669 | - | - | 35,669 | |||||
Year ended 31 December 2009 | Property | Raven | Segment | Central | ||||||
Investment | Roslogistics | Mount | Total | Overhead | Total | |||||
US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |||||
Gross income | 80,763 | 16,427 | 15,014 | 112,204 | - | 112,204 | ||||
Operating costs / cost of sales | (34,647) | (14,022) | (13,211) | (61,880) | - | (61,880) | ||||
Net operating income | 46,116 | 2,405 | 1,803 | 50,324 | - | 50,324 | ||||
Administrative expenses | ||||||||||
Running general & administration expenses | (14,944) | (4,526) | (5,411) | (24,881) | (7,437) | (32,318) | ||||
Listing costs | - | - | - | - | - | - | ||||
Other exceptional items | - | - | - | - | - | - | ||||
Depreciation | (316) | (1,010) | (18) | (1,344) | - | (1,344) | ||||
Share-based payments | (190) | - | - | (190) | - | (190) | ||||
Foreign currency losses | - | - | - | - | (3,097) | (3,097) | ||||
Operating profit / (loss) before losses | ||||||||||
on investment property | 30,666 | (3,131) | (3,626) | 23,909 | (10,534) | 13,375 | ||||
Unrealised loss on revaluation of | ||||||||||
investment property | (57,933) | - | - | (57,933) | - | (57,933) | ||||
Unrealised loss on revaluation of | - | |||||||||
investment property under construction | (50,544) | - | - | (50,544) | - | (50,544) | ||||
Segment loss | (77,811) | (3,131) | (3,626) | (84,568) | (10,534) | (95,102) | ||||
Finance income | 4,818 | |||||||||
Finance expense | (58,012) | |||||||||
Loss before tax | (148,296) | |||||||||
As at 31 December 2009 | Property | Raven | |||||||
Investment | Roslogistics | Mount | Total | ||||||
US$'000 | US$'000 | US$'000 | US$'000 | ||||||
Assets | |||||||||
Investment property | 878,775 | - | - | 878,775 | |||||
Investment property under construction | 101,280 | - | - | 101,280 | |||||
Inventory | - | - | 61,403 | 61,403 | |||||
Cash and short term deposits | 96,168 | 220 | 27,322 | 123,710 | |||||
Segment assets | 1,076,223 | 220 | 88,725 | 1,165,168 | |||||
Other non-current assets | 100,690 | ||||||||
Other current assets | 73,047 | ||||||||
Total assets | 1,338,905 | ||||||||
Segment liabilities | |||||||||
Interest bearing loans and borrowings | 434,269 | - | 11,301 | 445,570 | |||||
Capital expenditure | |||||||||
Payments for investment property under construction | 138,345 | - | - | 138,345 | |||||
In 2010 there were no single customers accounting for more than 10% of Group revenues. In 2009 there were two customers of the property investment segment, which exceeded this threshold. The Group derived revenues of US$13.3 million and US$11.1 million from these customers. |
5. | Gross revenue | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
Rental and related income | 91,236 | 80,763 | |||||||
Proceeds from the sale of inventory property | 17,808 | 15,014 | |||||||
Logistics | 21,584 | 16,427 | |||||||
130,628 | 112,204 | ||||||||
The Group's leases typically include annual rental increases ("contingent rents") based on a consumer price index in Russia, Europe and USA, which are recognised in income as they arise. Contingent rents included in rental income for the year amounted to US$337k (2009: US$950k). | |||||||||
Details of the Group's contracted future minimum lease receivables are detailed in note 38. | |||||||||
6. | Administrative expenses | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
Employment costs | 12,363 | 14,716 | |||||||
Directors' remuneration | 3,275 | 3,116 | |||||||
Office running costs and insurance | 4,315 | 4,105 | |||||||
Travel costs | 1,557 | 1,334 | |||||||
External administrator fees | 385 | 1,172 | |||||||
Auditors' remuneration - audit services | 539 | 693 | |||||||
- non-audit services | 230 | 1,030 | |||||||
Legal and professional | 2,195 | 2,656 | |||||||
Abortive project costs | - | 313 | |||||||
Depreciation | 2,188 | 1,344 | |||||||
Listing costs | 2,017 | - | |||||||
Closure costs | 1,357 | - | |||||||
Registrar costs and other administrative | |||||||||
expenses | 754 | 2,279 | |||||||
Share of operating expenditure of joint | |||||||||
ventures | 189 | 904 | |||||||
31,364 | 33,662 | ||||||||
7. | Finance income and expense | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
Finance income | |||||||||
Income from cash and short term deposits | 1,249 | 2,043 | |||||||
Interest income on loans receivable | 1,234 | 380 | |||||||
Total interest income on financial assets not at fair value through profit or loss | 2,483 | 2,423 | |||||||
Change in fair value of open forward currency derivative financial | |||||||||
instruments | 961 | 866 | |||||||
Change in fair value of open interest rate derivative financial instruments | - | 1,529 | |||||||
Profit on maturing forward currency derivative financial instruments | 409 | - | |||||||
Finance income | 3,853 | 4,818 | |||||||
Finance expense | |||||||||
Interest expense on loans and borrowings measured at amortised cost | 35,740 | 37,043 | |||||||
Interest expense on preference shares | 27,735 | 20,077 | |||||||
Total interest expense on financial liabilities not at fair value through profit or loss | 63,475 | 57,120 | |||||||
Loss on maturing forward currency derivative financial instruments | - | 892 | |||||||
Change in fair value of open interest rate derivative financial instruments | 1,333 | - | |||||||
Loss on closure of interest rate derivative financial instruments | 31 | - | |||||||
Finance expense | 64,839 | 58,012 | |||||||
8. | Tax | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
The tax expense for the year comprises: | |||||||||
Current taxation | 1,752 | 2,690 | |||||||
Increase in deferred tax asset (note 26) | (303) | (16,093) | |||||||
Increase in deferred tax liability (note 26) | 12,778 | 4,386 | |||||||
Tax charge / (credit) | 14,227 | (9,017) | |||||||
The charge / (credit) for the year can be reconciled to the profit / (loss) per the income statement as follows: | |||||||||
2010 | 2009 | ||||||||
US$'000 | US$'000 | ||||||||
Profit / (loss) before tax | 55,712 | (148,296) | |||||||
Tax at the Russian corporate tax rate of 20% | 11,142 | (29,659) | |||||||
Tax effect of income not subject to tax and non-deductible expenses | 5,116 | 27,409 | |||||||
Tax on dividends and other inter company gains | 771 | 1,987 | |||||||
Tax effect of financing arrangements | (22,335) | (12,986) | |||||||
Movement on unprovided deferred tax on tax losses | 20,385 | 5,000 | |||||||
Over provision in prior year | (852) | (768) | |||||||
14,227 | (9,017) | ||||||||
9. | Earnings per share |
In addition to reporting IFRS earnings per share the Group has decided to adopt the European Public Real Estate Association ("EPRA") earnings measure, as set out in their Best Practice Policy Recommendations document issued in October 2010. The EPRA earnings measure excludes investment property revaluations, impairments, gains and losses on disposal of investment property, intangible asset movements, gains and losses on derivative financial instruments and related taxation. |
The calculation of basic and diluted earnings per share is based on the | 2010 | 2009 | |||||||
following data: | US$'000 | US$'000 | |||||||
Earnings | |||||||||
Earnings for the purposes of basic and diluted earnings per share being the | |||||||||
net profit / (loss) for the year | 41,485 | (139,279) | |||||||
Adjustments to arrive at EPRA earnings: | |||||||||
Profit on disposal of investment property | (12,178) | - | |||||||
Unrealised (profit) / loss on revaluation of investment property | (62,798) | 57,933 | |||||||
Unrealised (profit) / loss on revaluation of investment property under construction | (16,453) | 50,544 | |||||||
(Profit) / loss on maturing foreign currency derivative financial instruments | (409) | 892 | |||||||
Change in fair value of open forward currency derivative financial | |||||||||
instruments | (961) | (866) | |||||||
Loss on closure of interest rate derivative financial instruments | 31 | - | |||||||
Change in fair value of open interest rate derivative financial instruments | 1,333 | (1,529) | |||||||
Movement on deferred tax thereon | 12,095 | (2,103) | |||||||
Adjusted EPRA earnings | (37,855) | (34,408) | |||||||
2010 | 2009 | ||||||||
Number of shares | No '000 | No '000 | |||||||
Weighted average number of ordinary shares for the purposes of basic EPS | |||||||||
and basic EPRA EPS (excluding own shares held) | 493,100 | 488,906 | |||||||
Effect of dilutive potential ordinary shares: | |||||||||
Listed warrants (note 28) | 61,285 | - | |||||||
ERS (note 32) | 3,388 | - | |||||||
LTIP (note 32) | 2,611 | - | |||||||
Weighted average number of ordinary shares for the purposes of diluted | |||||||||
EPS and diluted EPRA EPS (excluding own shares held) | 560,384 | 488,906 | |||||||
2010 | 2009 | ||||||||
Cents | Cents | ||||||||
EPS basic | 8.41 | (28.49) | |||||||
Effect of dilutive potential ordinary shares: | |||||||||
Listed warrants | (0.93) | - | |||||||
ERS | (0.05) | - | |||||||
LTIP | (0.03) | - | |||||||
Diluted EPS (cents) | 7.40 | (28.49) | |||||||
EPRA EPS basic (cents) | (7.68) | (7.04) | |||||||
Effect of dilutive potential ordinary shares: | |||||||||
Listed warrants | - | - | |||||||
ERS | - | - | |||||||
LTIP | - | - | |||||||
EPRA EPS diluted (cents) | (7.68) | (7.04) | |||||||
10. | Ordinary dividends | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
Declared and paid during the year on ordinary shares: | |||||||||
Final dividend for 2009 0.5 pence (2008: nil pence) | 3,949 | - | |||||||
Interim dividend for 2010 nil pence (2009: 0.5 pence) | - | 4,048 | |||||||
3,949 | 4,048 | ||||||||
Instead of an interim dividend for 2010 the Directors implemented a tender offer buy back of 1 in 62 ordinary shares at 58 pence, the equivalent of a dividend of 1 pence per share (see note 27). The Directors are proposing to declare a final dividend for 2010 of 1 pence per share. |
11. | Investment property | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
Balance at 1 January | 878,775 | 453,750 | |||||||
Transfer from investment property under construction (note 12) | 25,533 | 515,354 | |||||||
Transfer to disposal assets classified as held for sale (note 21) | - | (37,489) | |||||||
Movement in completion provisions | 4,688 | 5,093 | |||||||
Disposals | (28,844) | - | |||||||
Unrealised profit / (loss) on revaluation | 62,798 | (57,933) | |||||||
Balance at 31 December | 942,950 | 878,775 | |||||||
It is the Group's policy to carry investment property at fair value in accordance with IAS 40 "Investment Property". The fair value of the Group's investment property at 31 December 2010 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 valuations used by the Directors in these financial statements have been carried out in accordance with The Royal Institution of Chartered Surveyors Valuation Standards, Sixth Edition (the "Red Book"). The definition of market value is "the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and willing seller in an arms length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion". |
The following assumptions were used in determining the valuations, which were specific to the Group: |
No allowances have been made for any expenses of realisation or for taxation which might arise in the event of a disposal of a property; |
The market values reported are gross of purchasers' costs, which would be incurred on the sale of assets as this is the recognised valuation approach in Russia; and |
No account is taken of the future effect of any index based rent uplifts. |
At 31 December 2010 the Group has pledged investment property with a value of US$673 million (2009: US$658 million) to secure banking facilities granted to the Group (note 23). |
12. | Investment property under construction | Additional | ||||||||
Assets | Phases of | |||||||||
Under | Completed | |||||||||
Construction | Property | Landbank | Total | |||||||
US$'000 | US$'000 | US$'000 | US$'000 | |||||||
Balance at 1 January 2009 | 397,044 | 21,451 | 25,158 | 443,653 | ||||||
Costs incurred | 210,696 | 12,265 | 39,067 | 262,028 | ||||||
Effect of foreign exchange rate changes | (26,391) | (560) | (1,309) | (28,260) | ||||||
Transfer to investment property (note 11) | (515,354) | - | - | (515,354) | ||||||
Transfer to disposal assets classified as held for sale (note 21) | (10,243) | - | - | (10,243) | ||||||
Unrealised loss on revaluation | (39,240) | (1,000) | (10,304) | (50,544) | ||||||
Balance at 31 December 2009 | 16,512 | 32,156 | 52,612 | 101,280 | ||||||
Costs incurred | 16,324 | 958 | 1,716 | 18,998 | ||||||
Disposals | - | - | (3,821) | (3,821) | ||||||
Effect of foreign exchange rate changes | (106) | (104) | (426) | (636) | ||||||
Transfer to investment property (note 11) | (17,793) | (7,740) | - | (25,533) | ||||||
Unrealised gain on revaluation | 363 | 16,090 | - | 16,453 | ||||||
Balance at 31 December 2010 | 15,300 | 41,360 | 50,081 | 106,741 | ||||||
Borrowing costs capitalised in the year amounted to US$0.4 million (2009: US$10.5 million). | |
Assets under construction have been valued by JLL using the residual value method and additional phases of completed investment property on a comparable basis, based on recent real estate transactions with similar characteristics and location to those assets. | |
The Directors have valued land based on the amounts they consider they can achieve for permitted land and land with access and infrastructure. The Directors also considered updated acquisition appraisals, the key assumptions being developer's required returns, market rents and yields on completed properties. On this basis the Directors' consider the fair value of the land bank to be US$50 million, which equates to an average price of US$17 per square metre. | |
At 31 December 2010 the Group has pledged investment property under construction with a carrying value of US$11 million (2009: US$40 million) to secure banking facilities granted to the Group (note 23). |
13. | Intangible assets | Goodwill | |||||||
US$'000 | |||||||||
Balance at 1 January 2009 | - | ||||||||
On acquisition of Raven Mount Group plc (note 36) | 8,059 | ||||||||
On change in financing arrangements for Roslogistics (note 36) | 5,383 | ||||||||
Balance at 31 December 2009 | 13,442 | ||||||||
Effect of foreign exchange rate changes | 56 | ||||||||
Balance at 31 December 2010 | 13,498 | ||||||||
Goodwill acquired through the Raven Mount and Roslogistics business combinations has been allocated for impairment purposes to their operating segments. These represent the lowest level within the Group at which goodwill is monitored for internal management purposes. The recoverable amount of goodwill has been determined based on value in use calculations using cash flow projections and project appraisals approved for internal management reporting and discounted at rates appropriate to each of the segments. |
14. | 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: |
Name | Country of incorporation | Proportion of ownership interest | ||||||||
2010 | 2009 | |||||||||
CJSC Kulon Estates | Russia | - | 100% | |||||||
CJSC Kulon Development | Russia | 100% | 100% | |||||||
Fenix LLC | Russia | 100% | 100% | |||||||
Petroestate LLC | Russia | 100% | 100% | |||||||
EG Logistics LLC | Russia | 100% | 100% | |||||||
CSJC Kulon Istra | Russia | 100% | 100% | |||||||
Soyuz-Invest LLC | Russia | 100% | 100% | |||||||
Reserv-Invest LLC | Russia | 100% | 100% | |||||||
Real-Invest LLC | Russia | 100% | 100% | |||||||
CSJC Noginsk Vostok | Russia | 100% | 100% | |||||||
Resource Economia LLC | Russia | 100% | 100% | |||||||
Kulon Spb LLC | Russia | 100% | 100% | |||||||
AKM Logistics LLC | Russia | - | 100% | |||||||
Megalogix Limited | Cyprus | 100% | 100% | |||||||
Logopark Don LLC | Russia | 100% | 100% | |||||||
Logopark Ob LLC | Russia | 100% | 100% | |||||||
Roslogistics Holdings (Russia) Limited | Cyprus | 100% | 100% | |||||||
Avalon Logistics Company LLC | Russia | 100% | 100% | |||||||
Raven Mount Group plc | England | 100% | 100% | |||||||
Raven Russia Property Advisers Limited | England | 100% | 100% | |||||||
Raven Russia (Service Company) Limited | Guernsey | 100% | 100% | |||||||
During the year the Group disposed of the properties and related assets held in the SPVs, CJSC Kulon Estates and AKM Logistics LLC (see note 21). | |
The Group's investment property and investment property under construction are held by its subsidiary undertakings. |
15. | Investment in joint ventures | |||||||||||
The principal jointly controlled entity of the Group is as follows: | ||||||||||||
| ||||||||||||
Name | Country of incorporation | Proportion of ownership interest |
| |||||||||
2010 | 2009 |
| ||||||||||
| ||||||||||||
Coln Park LLP | England | 50% | 50% |
| ||||||||
The Group's interest in each jointly controlled entity has been accounted for by proportionate consolidation. The aggregate amounts recognised in the balance sheet and income statement were: |
2010 | 2009 | ||||||||
US$'000 | US$'000 | ||||||||
Non-current assets | 29 | 4 | |||||||
Current assets | 15,864 | 14,782 | |||||||
Current liabilities | (10,159) | (10,921) | |||||||
Net assets / (liabilities) | 5,734 | 3,865 | |||||||
Income | 8,749 | 13,558 | |||||||
Expenditure | (6,831) | (12,169) | |||||||
1,918 | 1,389 | ||||||||
The income and expenditure amounts for 2009 include amounts for Megalogix Limited, Roslogistics Holdings (Russia) Limited and Ambridge Consultancy Limited for the period up until the Group acquired the remaining 50% of the shares in each. |
16. | Other receivables | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
Loans receivable | 1,017 | 13 | |||||||
VAT recoverable | 5,946 | 7,402 | |||||||
Security deposit | 1,722 | 1,722 | |||||||
Prepayments and other receivables | 6,837 | 9,077 | |||||||
15,522 | 18,214 | ||||||||
VAT recoverable arises through the payment of value added tax on construction 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. |
17. | Inventory | Land held for | Housing | |||||||
development | stock | Total | ||||||||
US$'000 | US$'000 | US$'000 | ||||||||
Balance at 1 January 2009 | - | - | - | |||||||
On acquisition of Raven Mount Group plc (note 36) | 2,402 | 60,590 | 62,992 | |||||||
Costs incurred in the year | 694 | 7,787 | 8,481 | |||||||
Cost of sales | - | (11,066) | (11,066) | |||||||
Effect of foreign exchange rate changes | 38 | 958 | 996 | |||||||
Balance at 31 December 2009 | 3,134 | 58,269 | 61,403 | |||||||
Costs incurred in the year | 449 | 8,468 | 8,917 | |||||||
Cost of sales | - | (12,793) | (12,793) | |||||||
Effect of foreign exchange rate changes | (99) | (1,087) | (1,186) | |||||||
Balance at 31 December 2010 | 3,484 | 52,857 | 56,341 | |||||||
The Group has pledged inventory with a carrying value of US$42 million (2009: US$50 million) to secure banking facilities granted to the Group (note 23). |
| |||||||||
18. | Trade and other receivables | 2010 | 2009 | |||||||
US$'000 | US$'000 | |||||||||
Trade receivables | 15,828 | 12,641 | ||||||||
Prepayments | 4,888 | 11,221 | ||||||||
VAT recoverable | 6,384 | 35,806 | ||||||||
Tax recoverable | 2,397 | 3,564 | ||||||||
Loans receivable | 642 | 2,422 | ||||||||
Accrued income | 236 | 905 | ||||||||
Other receivables | 4,362 | 2,256 | ||||||||
34,737 | 68,815 | |||||||||
19. | Derivative financial instruments | 2010 | 2009 | |||||||
US$'000 | US$'000 | |||||||||
Interest rate derivative financial instruments | ||||||||||
Non-current assets | 347 | 195 | ||||||||
Non-current liabilities | (4,439) | (5,781) | ||||||||
Current liabilities | (1,682) | - | ||||||||
Forward currency derivative financial instruments | ||||||||||
Current assets | 102 | - | ||||||||
Non-current liabilities | - | (385) | ||||||||
Current liabilities | - | (474) | ||||||||
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. The instruments have a notional value of US$302 million (2009: US$276 million) and a weighted average fixed or capped rate of 3.3% (2009: 3.3%). | |
The Group has also entered into a series of forward currency derivative financial instruments to hedge rentals received under leases denominated in euros. At 31 December 2010 there were open contracts to sell euros amounting to €5.1 million (2009: €11.9 million) and buy US Dollars amounting to US$6.9 million (2009: US$16.2 million) at an average rate of 1.36 (2009: 1.36). |
20. | Cash and short term deposits | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
Cash at bank and on call | 76,808 | 43,675 | |||||||
Short term deposits | 30,833 | 80,035 | |||||||
107,641 | 123,710 | ||||||||
Included within cash and short term deposits is US$1.3 million (2009: US$3.6 million) which is held as security for the Group's foreign currency derivative financial instruments (note 19) and is thus restricted in the use to which it can be put by the Group. | |
The Group has also pledged short term deposits with a carrying value of US$25.1 million (2009: US$25.5 million) as security for a loan facility granted to the Group (note 23). US$11 million of the loan was outstanding at 31 December 2010 (2009: US$ 11 million). | |
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 at the balance sheet date is 1.08% (2009: 1.16%). | |
21. | Disposal group |
The disposal group represented an investment property, adjacent land and related assets and liabilities on the AKM project in St Petersburg. This included a loan facility with Nomos Bank, of US$44 million with a margin over US LIBOR of 12% and a term remaining of 4 years, secured on the property and land. As the asset would not generate sufficient income to service the debt, Nomos accepted the property and related assets, net of the liabilities, in consideration for the repayment of all outstanding amounts due under the bank facility. | |
The Group completed the transfer of assets and liabilities to Nomos Bank on 5 August 2010. | |
Details of the disposal group assets and liabilities at 31 December 2009 are provided in the table below. |
US$'000 | |||||||||
Non-current assets | |||||||||
Investment property | 37,489 | ||||||||
Investment property under construction | 10,243 | ||||||||
Plant and equipment | 45 | ||||||||
Other receivables | 186 | ||||||||
Deferred tax asset | 2,796 | ||||||||
50,759 | |||||||||
Current assets | |||||||||
Trade and other receivables | 823 | ||||||||
Cash and short term deposits | 72 | ||||||||
895 | |||||||||
Total assets | 51,654 | ||||||||
Current liabilities | |||||||||
Trade and other payables | 3,045 | ||||||||
Interest bearing loans and borrowings | 47,817 | ||||||||
50,862 | |||||||||
Non-current liabilities | |||||||||
Deferred tax | 792 | ||||||||
Total liabilities | 51,654 | ||||||||
22. | Trade and other payables | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
Investment property acquisition obligations | 621 | - | |||||||
Trade and other payables | 9,402 | 13,075 | |||||||
Construction payables | 14,757 | 26,731 | |||||||
Advanced rentals | 11,350 | 8,478 | |||||||
Tax payable | 6,396 | 9,242 | |||||||
Other payable | 5,412 | 5,326 | |||||||
47,938 | 62,852 | ||||||||
23. | Interest bearing loans and borrowings | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
(a) Bank loans | |||||||||
Loans due for settlement within 12 months | 82,194 | 93,273 | |||||||
Loans due for settlement after 12 months | 340,366 | 339,900 | |||||||
422,560 | 433,173 | ||||||||
(b) Other interest bearing loans | |||||||||
Loans due for settlement within 12 months | 7,651 | 4,324 | |||||||
Loans due for settlement after 12 months | 1,839 | 8,073 | |||||||
9,490 | 12,397 | ||||||||
Totals | |||||||||
Loans due for settlement within 12 months | 89,845 | 97,597 | |||||||
Loans due for settlement after 12 months | 342,205 | 347,973 | |||||||
432,050 | 445,570 | ||||||||
The Group's borrowings have the following maturity profile: | |||||||||
On demand or within one year | 89,845 | 97,597 | |||||||
In the second year | 161,736 | 29,776 | |||||||
In the third to fifth years | 122,865 | 252,240 | |||||||
After five years | 57,605 | 65,957 | |||||||
432,050 | 445,570 | ||||||||
The principal terms of the Group's interest bearing loans and borrowings on a weighted average basis are summarised below: | |||||||||
As at 31 December 2010 | Interest | Maturity | |||||||
Rate % | (years) | US$'000 | |||||||
Secured on: | |||||||||
Investment property and investment property under construction | 7.20% | 3.1 | 402,515 | ||||||
Inventory | 2.42% | 0.2 | 9,042 | ||||||
Cash | 2.85% | 1.1 | 11,003 | ||||||
Unsecured | 11.6% | 1.0 | 9,490 | ||||||
432,050 | |||||||||
As at 31 December 2009 | |||||||||
Secured on: | |||||||||
Investment property and investment property under construction | 7.20% | 3.9 | 410,720 | ||||||
Inventory | 2.38% | 0.5 | 11,301 | ||||||
Cash | 2.95% | 1.1 | 11,152 | ||||||
Unsecured | 12.4% | 1.0 | 12,397 | ||||||
445,570 | |||||||||
During the year the Group successfully extended or drew down on a number of its debt facilities. As reported in the 2009 financial statements, the euro denominated construction facility of US$62.3 million equivalent was extended and converted into a US dollar loan. The Group also completed the syndication of term debt secured on its two regional investment properties, drawing a further US$10 million under each of the facilities. Finally the Group drew the remaining US$10 million undrawn on the Istra project and increased and extended the short term facility secured on its inventory property in the UK, releasing a further £5 million of cash. | |
The Group repaid US$19.3 million of debt secured on its Baltia project, upon completion of the sale of the project in the year. | |
Since the year end the Group has completed and fully drawn on a US$30 million facility secured on its Lobnya project. The facility was provided by Marfin Bank, has a 7 year term and a margin over US LIBOR of 6.75%. | |
The Group has entered into hedging arrangements in respect of its interest rate exposure (note 19). US$225 million (2009: US$237 million) of Group bank borrowings have been fixed with two years remaining (2009: three years) at a weighted average swap rate of 3.10% (2009: 3.29%) and US$117 million (2009: US$39 million) capped at 3.64% (2009: 5.50%) for three years (2009: three years). This gave a weighted average cost of debt to the Group of 7.0% (2009: 6.4%) at the year end. |
24. | Preference shares | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
Authorised share capital | |||||||||
400,000,000 (2009: 400,000,000) preference shares of 1p each | 5,981 | 5,981 | |||||||
2010 | 2009 | ||||||||
Number | Number | ||||||||
Issued share capital: | |||||||||
At 1 January | 143,315,179 | - | |||||||
Issued in the year for cash | - | 76,155,000 | |||||||
On acquisition of Raven Mount Group plc (note 36) | - | 66,409,478 | |||||||
Scrip dividends | 1,041,977 | 750,701 | |||||||
At 31 December | 144,357,156 | 143,315,179 | |||||||
The Company has issued preference shares, which entitle the holders to a cumulative preference dividend of 12% based on a par value per share of £1. |
25. | Other payables | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
Investment property acquisition obligations | 7,287 | 13,838 | |||||||
Rent deposits | 11,803 | 9,238 | |||||||
Deferred revenue | - | 49 | |||||||
Retentions under construction contracts | 5,838 | 8,692 | |||||||
Other payables | 240 | 2,432 | |||||||
25,168 | 34,249 | ||||||||
26. | Deferred tax | |||||||||
Tax losses | Other | Total | ||||||||
(a) Deferred tax assets | US$'000 | US$'000 | US$'000 | |||||||
Balance at 1 January 2009 | 34,436 | 394 | 34,830 | |||||||
Recognised on business combination (note 36) | 2,917 | - | 2,917 | |||||||
Recognition on settlement of contracts | 6,214 | - | 6,214 | |||||||
Effect of foreign exchange rate changes | 225 | - | 225 | |||||||
Transfer to disposal group classified as held for sale (note 21) | (2,796) | - | (2,796) | |||||||
Credit to income | 16,090 | 3 | 16,093 | |||||||
Credit to equity | 3,693 | - | 3,693 | |||||||
Balance at 31 December 2009 | 60,779 | 397 | 61,176 | |||||||
Effect of foreign exchange rate changes | (597) | - | (597) | |||||||
On disposal of SPV | (324) | - | (324) | |||||||
Credit / (charge) to income | 501 | (198) | 303 | |||||||
Credit to equity | 661 | - | 661 | |||||||
Balance at 31 December 2010 | 61,020 | 199 | 61,219 | |||||||
The Group has tax losses of US$236 million (2009: US$138 million) for which deferred tax assets have not been recognised. |
Amounts credited to equity arise on the translation of loans, which comprise part of the net investment of the Group in foreign entities. |
Revaluation | ||||||||||
Accelerated tax | of investment | |||||||||
allowances | property | Total | ||||||||
(b) Deferred tax liabilities | US$'000 | US$'000 | US$'000 | |||||||
Balance at 1 January 2009 | 5,856 | 10,564 | 16,420 | |||||||
Recognised on business combination (note 36) | 916 | - | 916 | |||||||
Recognition on settlement of contracts | 1,974 | - | 1,974 | |||||||
Transfer to liabities associated with disposal groups classified as held | ||||||||||
for sale (note 21) | (792) | - | (792) | |||||||
Effect of foreign exchange rate changes | 1,363 | - | 1,363 | |||||||
Charge / (credit) to income | 6,489 | (2,103) | 4,386 | |||||||
Balance at 31 December 2009 | 15,806 | 8,461 | 24,267 | |||||||
Effect of foreign exchange rate changes | (302) | - | (302) | |||||||
On disposal of SPV | (29) | - | (29) | |||||||
Charge to income | 683 | 12,095 | 12,778 | |||||||
Balance at 31 December 2010 | 16,158 | 20,556 | 36,714 | |||||||
27. | Share capital | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
Authorised ordinary share capital | |||||||||
1,500,000,000 (2009: 1,500,000,000) ordinary shares of 1p each | 27,469 | 27,469 | |||||||
2010 | 2009 | ||||||||
Number | Number | ||||||||
Issued share capital: | |||||||||
At 1 January | 512,697,594 | 512,552,915 | |||||||
Issued in the year for cash on warrant exercises | 4,512,713 | 144,679 | |||||||
Issued under the warrant offer (see note 28) | 21,740,807 | - | |||||||
Cancelled under the tender offer | (8,677,910) | - | |||||||
At 31 December | 530,273,204 | 512,697,594 | |||||||
On 25 October 2010 the Company completed the purchase of 8,677,910 ordinary shares under the terms of a tender offer, for a cash consideration of £5 million. The shares repurchased were cancelled. | |
Of the authorised ordinary share capital at 31 December 2010, 115,897,016 (2009: 154,810,632) are reserved for options and warrants. | |
Details of own shares held are given in note 29. |
28. | Warrants | 2010 | 2009 | ||||||
Number | Number | ||||||||
At 1 January | 142,419,799 | - | |||||||
Issued in the year for cash | - | 76,155,000 | |||||||
On acquisition of Raven Mount Group plc (note 36) | - | 66,409,478 | |||||||
Exercised in the year | (4,512,713) | (144,679) | |||||||
Cancelled under the warrant offer | (36,256,016) | - | |||||||
At 31 December | 101,651,070 | 142,419,799 | |||||||
2010 | 2009 | ||||||||
US$'000 | US$'000 | ||||||||
At 1 January | 8,584 | - | |||||||
Issued in the year for cash | - | 4,416 | |||||||
On acquisition of Raven Mount Group plc (note 36) | - | 4,177 | |||||||
Exercised in the year | (285) | (9) | |||||||
Cancelled under the warrant offer | (2,266) | - | |||||||
At 31 December | 6,033 | 8,584 | |||||||
The Company has issued warrants, which entitle each holder to subscribe for ordinary shares in the Company at an exercise price of 25p per share. The warrants expire on 25 March 2019. | |
The warrants issued on acquisition of Raven Mount Group plc include 8.1 million warrants (US$502k) issued to settle a liability of Raven Mount Group plc. | |
On 28 July 2010 the Company purchased and cancelled 36,256,016 warrants under an open offer to all warrantholders. The consideration for the purchase was settled partly in cash, £3.5 million, and partly through the issue of 21,740,807 ordinary shares. | |
In the period since 31 December 2010 657,071 warrants have been exercised. |
29. | Own shares held | 2010 | 2009 | ||||||
Number | Number | ||||||||
At 1 January | 34,035,054 | - | |||||||
Acquired in the year | - | 5,000,000 | |||||||
On acquisition of Raven Mount Group plc (note 36) | - | 29,035,054 | |||||||
Disposals in the year (note 32) | (5,635,000) | - | |||||||
At 31 December | 28,400,054 | 34,035,054 | |||||||
30. | Equity | |||
The following describes the nature and purpose of each component within equity: | ||||
Component | Description and purpose | |||
Share capital | The amount subscribed for ordinary share capital at nominal value. | |||
Share premium | The amount subscribed for ordinary share capital in excess of the nominal value. | |||
Warrants | The consideration attributed to the subscription of warrants less associated costs of issuance. | |||
Own shares held | The cost to the Company of acquiring the own shares held by the Company and its subsidiary undertakings. | |||
Special reserve | During 2005 and 2006 the Company applied to the Royal Court of Guernsey to reduce its share capital by cancellation of its share premium at that time and creation of a special reserve, which is an additional distributable reserve to be used for all purposes permitted under Guernsey Company law, including buy back of shares and the payment of dividends. | |||
Capital reserve | The amount of any capital profits and losses, including 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 and deferred taxation on the increase in fair value of investment properties. | |||
Translation reserve | The amount of any gains or losses arising on the retranslation of net assets of overseas operations. | |||
Retained earnings | The amount of any profit or loss for the year after payment of dividend, together with the amount of any equity-settled share-based payments, and the transfer of capital items described above. | |||
31. | Net asset value per share | 2010 | 2009 | ||||||
US$'000 | US$'000 | ||||||||
Net asset value | 580,364 | 545,883 | |||||||
Intangible assets - goodwill | (13,498) | (13,442) | |||||||
Deferred tax on revaluation gains | 20,556 | 8,461 | |||||||
Unrealised foreign exchange losses on preference shares | 9,372 | 14,125 | |||||||
Fair value of interest rate derivative financial instruments | 5,774 | 5,586 | |||||||
Adjusted net asset value | 602,568 | 560,613 | |||||||
Assuming exercise of all dilutive potential ordinary shares | |||||||||
- Listed warrants (note 28) | 39,789 | 56,843 | |||||||
- ERS (note 32) | - | - | |||||||
- LTIP (note 32) | 3,619 | 407 | |||||||
Adjusted fully diluted net asset value | 645,976 | 617,863 | |||||||
Number of ordinary shares (note 27) | 530,273,204 | 512,697,594 | |||||||
Less own shares held (note 29) | (28,400,054) | (34,035,054) | |||||||
501,873,150 | 478,662,540 | ||||||||
Assuming exercise of all dilutive potential ordinary shares | |||||||||
- Listed warrants (note 28) | 101,651,070 | 142,419,799 | |||||||
- ERS (note 32) | 5,000,000 | 1,775,000 | |||||||
- LTIP (note 32) | 9,245,946 | 1,020,000 | |||||||
Number of ordinary shares assuming exercise of all potential | |||||||||
ordinary shares | 617,770,166 | 623,877,339 | |||||||
2010 | 2009 | ||||||||
US$ | US$ | ||||||||
Net asset value per share | 1.16 | 1.14 | |||||||
Fully diluted net asset value per share | 1.01 | 0.97 | |||||||
Adjusted net asset value per share | 1.20 | 1.17 | |||||||
Adjusted fully diluted net asset value per share | 1.05 | 0.99 | |||||||
As the preference shares are considered to be capital for capital risk management (see note 35 d) unrealised foreign exchange movements on these have been adjusted when calculating adjusted NAV per share. The comparative information has been restated to reflect this change. | |
32. | Share-based payments |
(a) Terms | |
In 2005, as part consideration for the services offered by Cenkos Securities Limited and Kinmont Limited under the Placing Agreement, options were granted to these companies pursuant to which they have the right to subscribe for 1,530,000 and 382,500 ordinary shares respectively at £1.00 per share. The options expired in 2010. | |
Also in 2005, to incentivise personnel of the Company's former Property Adviser involved in providing advice to the Group, the Company granted to the trustee of the Raven Mount Employee Benefit Trust an option to acquire up to 7.5% of its issued ordinary share capital from time to time less up to 100,000 ordinary shares under option to Adrian Collins, the Company's former Chairman. The options vested in three tranches and were exercisable over a period of 4 to 12 years following the Company's admission to AIM dependent upon cumulative performance criteria of between 9% and 12% total share return having been met. | |
The first tranche of options held by the trustee and Adrian Collins lapsed as the associated performance criteria were not met. Upon the Company's acquisition of the Property Advisor the remaining options held by the trustee were cancelled and the Company agreed to grant replacement options to certain employees and former employees of the Property Advisor's group. These replacement options were issued in 2009 and 2010 and comprise the Employee Retention Scheme ("ERS") and Long Term Incentive Plan ("LTIP") more fully explained in the Remuneration Report. | |
The second and third tranche of options held by Adrian Collins lapsed as the associated performance criteria were not met. | |
Finally in 2005, the Company issued warrants to the Property Advisor pursuant to which the Property Advisor was granted the right to subscribe for 7,650,000 ordinary shares in the Company at £1 per ordinary share. These warrants were transferred by the Property Advisor to its then parent company, Raven Mount Group plc, immediately prior to the Company's acquisition of the Property Advisor. These warrants are now held by the Group following the Company's acquisition of Raven Mount Group plc during 2009. |
2010 | 2009 | ||||||||
Weighted | No of | Weighted | |||||||
average | options | average | |||||||
No of | exercise | and | exercise | ||||||
options | price | warrants | price | ||||||
Outstanding at the beginning of the period | 4,740,833 | 46p | 9,629,166 | 100p | |||||
Issued during the year | |||||||||
- ERS | 3,225,000 | 0p | 1,775,000 | 0p | |||||
- LTIP | 8,225,946 | 25p | 1,020,000 | 25p | |||||
Lapsed during the year | (1,945,833) | 100p | (33,333) | 100p | |||||
Repurchased through business combination | - | - | (7,650,000) | 100p | |||||
Outstanding at the end of the period | 14,245,946 | 16p | 4,740,833 | 46p | |||||
Exercisable at the end of the period | - | - | 1,912,500 | 100p | |||||
| The weighted average remaining contractual life of options was 7 years (2009: 4 years). | |||||||||
| ||||||||||
| (b) Share-based payment charge | |||||||||
| ||||||||||
| The options granted in the period under the ERS were valued using the Black-Scholes option pricing model. The options granted under the LTIP were valued using a Monte Carlo simulation model. The key inputs to these models are: | |||||||||
ERS | LTIP |
| ||||||||
| ||||||||||
Share price on grant | 40.25p | 40.25p |
| |||||||
Exercise price | 0.0p | 25.0p |
| |||||||
Dividend yield | 0.75% | 0.75% |
| |||||||
Risk free rate | 0.56% | 1.20% |
| |||||||
Expected volatility | 38% | 41% |
| |||||||
Expected volatility was calculated as the median volatility of the Company's ordinary share price for periods commensurate with the lives of the options. The risk free rate is based on the yield of UK sovereign bonds with maturities close to the expected expiry dates of the options. | |
The Group recognised a total share-based payment expense as a result of the ERS and LTIP awards of US$2.1 million (2009: US$0.2 milion) for the year. Also, and as set out in the Directors' Remuneration Report approved by shareholders, the Company utlised 5.6 million of ordinary shares held (note 29) to satisfy bonuses to the Executive Directors and senior management. This resulted in a charge of US$4.3 million (2009: US$ nil) for the year. | |
33. | Capital commitments |
The Group has commited to fund the construction of certain additional investment property. At 31 December 2010, US$ 5.7 million of funding was required (2009: US$12.2 million), excluding VAT. | |
34. | Related party transactions |
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Further disclosures concerning transactions with the Company's directors are made in the Remuneration Report and note 6. There are no loan balances with directors. | |
Ozannes | |
David Moore is a partner in Ozannes, Advocates and Notaries Public. Ozannes provide independent legal advice to the Group. Total legal fees paid to Ozannes during the year amounted to £1,194 (2009: £58,070). | |
Joint Ventures | |
The Group has leased investment property to Avalon Logistics Company LLC, the operating subsidiary of Roslogistics Holdings (Russia) Limited, and provided loan finance to three joint venture vehicles, which the Group acquired out right in 2009. A summary of the Income Statement and Balance Sheet impact of these transactions in the period prior to them becoming subsidiary undertakings of the Group is as follows: |
2010 | 2009 | ||||||||
US$'000 | US$'000 | ||||||||
Net rental income | - | 1,505 | |||||||
Loan interest receivable | - | 240 | |||||||
Trade receivables | - | - | |||||||
Loan receivable | - | - | |||||||
Impairment of loan receivable | - | - | |||||||
Remuneration of key management personnel | 2010 | 2009 | |||||||
US$'000 | US$'000 | ||||||||
Short term employee benefits | 4,699 | 4,314 | |||||||
Post employment benefits | 297 | 262 | |||||||
Share-based payment | 6,196 | 100 | |||||||
11,192 | 4,676 | ||||||||
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, available for sale financial investments, cash and short term deposits, trade and other payables, borrowings, preference shares and derivative financial instruments. | |
The tables and analyses below exclude financial instruments included within the disposal group (note 21) as they were expected to be settled within 12 months. 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 construction contracts and 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. | |
In some cases underlying construction contracts on the Group's development projects are denominated in Russian Roubles. Non deliverable forwards were taken out to hedge against the US Dollar / Russian Rouble cash flow exposure, when considered necessary, during the prinicipal phase of construction of each project. All of these contracts have now matured as the Group's prinicipal construction activities are now substantially complete. Whilst the table below indicates the exposure of the Group to monetary items in foreign currency, the largest foreign currency swings will occur during construction periods. The fact some of the Group's property owning subsidiaries have a functional currency of Russian Rouble and a presentation currency of US Dollars means that both the Balance Sheet and Income Statement are exposed to unrealised exchange movements on translation to presentation currency. | |
During construction periods it is likely that the subsidiary companies will hold larger Rouble denominated cash balances to fund construction contracts, which will also increase exposure to fluctuations in currency rates. | |
At holding company level, the Group's exposure to Sterling is primarily driven by the need to pay a quarterly preference dividend, but also head office costs and ordinary dividends. | |
The table below summarises the Group's currency profile at 31 December: |
As at 31 December 2010 | US Dollar | Sterling | Russian Rouble | Other | Total | |||||
US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | ||||||
Non-current assets | ||||||||||
Loans receivable | 4 | 1,013 | - | - | 1,017 | |||||
Derivative financial instruments | 347 | - | - | - | 347 | |||||
Current assets | - | |||||||||
Trade receivables | 8,724 | 1,106 | 5,991 | 7 | 15,828 | |||||
Loans receivable | - | 578 | 63 | - | 641 | |||||
Derivative financial instruments | 102 | - | - | - | 102 | |||||
Other current receivables | 2,112 | 1,483 | 1,487 | 1 | 5,083 | |||||
Cash and short term deposits | 55,124 | 30,804 | 20,144 | 1,569 | 107,641 | |||||
66,413 | 34,984 | 27,685 | 1,577 | 130,659 | ||||||
Non-current liabilities | ||||||||||
Interest bearing loans and borrowings | 331,309 | 10,896 | - | - | 342,205 | |||||
Preference shares | - | 217,425 | - | - | 217,425 | |||||
Derivative financial instruments | 4,439 | - | - | - | 4,439 | |||||
Rent deposits | 8,903 | - | 2,353 | 547 | 11,803 | |||||
Investment property acquisition obligations | 7,287 | - | - | - | 7,287 | |||||
Retentions under construction contracts | - | - | 5,838 | - | 5,838 | |||||
Other payables | - | - | 240 | - | 240 | |||||
Current liabilities | ||||||||||
Interest bearing loans and borrowings | 80,425 | 9,420 | - | - | 89,845 | |||||
Derivative financial instruments | 1,682 | - | - | - | 1,682 | |||||
Other payables | 90 | 4,431 | 15,627 | 21 | 20,169 | |||||
434,135 | 242,172 | 24,058 | 568 | 700,933 | ||||||
Russian | ||||||||||
As at 31 December 2009 | US Dollar | Sterling | Rouble | Other | Total | |||||
US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | ||||||
Non-current assets | ||||||||||
Loans receivable | 13 | - | - | - | 13 | |||||
Derivative financial instruments | 195 | - | - | - | 195 | |||||
Current assets | ||||||||||
Trade receivables | 4,331 | 557 | 3,157 | 1,231 | 9,276 | |||||
Loans receivable | 64 | - | - | - | 64 | |||||
Other current receivables | 336 | 4,622 | 5,194 | 91 | 10,243 | |||||
Available for sale financial assets | - | 4,232 | - | - | 4,232 | |||||
Cash and short term deposits | 31,235 | 68,973 | 20,071 | 3,431 | 123,710 | |||||
36,174 | 78,384 | 28,422 | 4,753 | 147,733 | ||||||
Non-current liabilities | ||||||||||
Interest bearing loans and borrowings | 336,783 | 11,190 | - | - | 347,973 | |||||
Preference shares | - | 219,444 | - | - | 219,444 | |||||
Derivative financial instruments | 6,166 | - | - | - | 6,166 | |||||
Rent deposits | 6,866 | - | 2,371 | - | 9,237 | |||||
Investment property acquisition obligations | 13,838 | - | - | - | 13,838 | |||||
Retentions under construction contracts | - | - | 2,891 | 5,801 | 8,692 | |||||
Other payables | - | - | 66 | - | 66 | |||||
Current liabilities | ||||||||||
Interest bearing loans and borrowings | 23,443 | 11,263 | 3 | 62,888 | 97,597 | |||||
Derivative financial instruments | 474 | - | - | - | 474 | |||||
Other payables | 2,994 | 12,326 | 10,617 | 382 | 26,319 | |||||
390,564 | 254,223 | 15,948 | 69,071 | 729,806 | ||||||
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 tables above present financial assets and liabilities denominated in foreign currencies held by the Group in 2010 and 2009. 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: |
2010 | 2009 | ||||||||
Post tax profit or loss would change by: | US$'000 | US$'000 | |||||||
Russian Rouble | 182 | 643 | |||||||
Sterling | 4,011 | 2,140 | |||||||
Euro | - | - | |||||||
Net asset value would change by: | |||||||||
Russian Rouble | 46 | 1,247 | |||||||
Sterling | 21,145 | 17,584 | |||||||
Euro | 75 | 6,432 | |||||||
The majority of sterling sensitivity relates to the retranslation of the value of irredeemable preference shares. | |
Cash flow and fair value interest rate risk | |
The Group has significant interest-bearing cash resources, the majority of which are held in business accounts with its principal bankers. | |
The Group's interest rate risk arises from long-term borrowings (note 23), which include preference shares issued (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 the use of a variety of interest rate derivatives and the issue of preference shares at a fixed coupon. This gives certainty over future cash flow but exposure to fair value movements, which amounted to an unrealised loss of US$7.4 million at 31 December 2010 (2009: loss of US$6.0 million). Sensitivity analysis on the Group's interest rate borrowings, net of interest bearing deposits, indicate that a 1% increase in the relevant underlying rate would decrease the profit for the year and net assets by US$900,000 (2009: US$700,000). If the various LIBORs were to drop to zero then there would be an decrease in the profit for the year and in net assets of US$100,000 (2009: US$600,000) as the loss on income from cash would be greater than gains on interest expense because of the low LIBOR rates prevailing at this time and the interest rate hedges in place. | |
(b) Credit risk | |
The Group's principal financial assets are cash and short term deposits, trade and other receivables and derivative financial instruments. | |
Credit risk associated with the Group's trade and other receivables is considered low due to the Group having policies in place to ensure that rental contracts are made with tenants meeting appropriate balance sheet covenants, supplemented by rental deposits or bank guarantees from international banks. The amounts presented in the Balance Sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is objective evidence that the Group will not be able to collect all amounts due according to the terms of the receivables concerned. Details of the movements in provision for impairment of trade receivables is provided in the table below. |
2010 | 2009 | ||||||||
US$'000 | US$'000 | ||||||||
At 1 January | 377 | - | |||||||
Charge for the year | - | 1,000 | |||||||
Utilised in the year | - | (623) | |||||||
Unused amounts reversed | - | - | |||||||
At 31 December | 377 | 377 | |||||||
At 31 December 2010 there were no significant amounts of trade receivables that were past due for collection. | |
The Group has VAT recoverable of US$12 million (2009: US$43 million). The timing of recovery of these balances is subject to future revenue receipts and application to the Russian Courts. The Group forecasts the recovery of these balances based upon the timing of future revenue receipts and its experience of successful application to the Russian Courts. No balances are considered past due or impaired at 31 December 2010 (2009: US$ 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 on 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. 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. | |
Interest bearing loans and borrowings show the gross undiscounted cash flows. |
Financial liabilities | ||||||||||
As at 31 December 2010 | Total | Current | Year 2 | Years 3 to 5 | Years 5 to 10 | |||||
US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | ||||||
Interest bearing loans and borrowings | 513,051 | 116,845 | 183,736 | 145,865 | 66,605 | |||||
Preference shares | 271,223 | 27,122 | 27,122 | 81,367 | 135,612 | |||||
Derivative financial instruments | 6,121 | 1,682 | - | 4,439 | - | |||||
Trade and other payables | 45,337 | 45,337 | - | - | - | |||||
835,732 | 190,986 | 210,858 | 231,671 | 202,217 | ||||||
As at 31 December 2009 | ||||||||||
Interest bearing loans and borrowings | 445,696 | 97,627 | 29,807 | 252,286 | 65,976 | |||||
Preference shares | 274,550 | 27,455 | 27,455 | 82,365 | 137,275 | |||||
Derivative financial instruments | 6,640 | 474 | 385 | 5,781 | - | |||||
Trade and other payables | 58,153 | 58,153 | - | - | - | |||||
785,039 | 183,709 | 57,647 | 340,432 | 203,251 | ||||||
Details of the interest rates applicable to the Group's long term borrowings and preference shares are given in notes 23 and 24. The Group is subject to interest costs in perpetuity in respect of preference shares, which have no contractual maturity date. The table above does not show cash flows beyond 10 years. | |
The Group monitors its risk to a shortage of funds by forecasting cash flow requirements for future years. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and other short term borrowing facilities, bank loans and equity fund raisings. | |
Fair values | |
Set out below is a comparison by class of the carrying amounts and fair value of the Group's financial instruments in the financial statements. |
2010 | 2009 | |||||||||
Carrying | Fair | Carrying | Fair | |||||||
Value | Value | Value | Value | |||||||
US$'000 | US$'000 | US$'000 | US$'000 | |||||||
Non-current assets | ||||||||||
Loans receivable | 1,017 | 959 | 13 | 13 | ||||||
Derivative financial instruments | 347 | 347 | 195 | 195 | ||||||
Current assets | ||||||||||
Trade receivables | 15,828 | 15,828 | 9,276 | 9,276 | ||||||
Loans receivable | 641 | 641 | 64 | 64 | ||||||
Other current receivables | 5,083 | 5,083 | 10,243 | 10,243 | ||||||
Available for sale financial assets | - | - | 4,232 | 4,232 | ||||||
Derivative financial instruments | 102 | 102 | - | - | ||||||
Cash and short term deposits | 107,641 | 107,641 | 123,710 | 123,710 | ||||||
Non-current liabilities | ||||||||||
Interest bearing loans and borrowings | 342,205 | 287,322 | 347,973 | 229,656 | ||||||
Preference shares | 217,425 | 292,132 | 219,444 | 212,776 | ||||||
Derivative financial instruments | 4,439 | 4,439 | 6,166 | 6,166 | ||||||
Rent deposits | 11,803 | 11,803 | 9,238 | 9,238 | ||||||
Investment property acquisition obligations | 7,287 | 7,287 | 13,838 | 13,838 | ||||||
Retentions under construction contracts | 5,838 | 5,838 | 8,692 | 8,692 | ||||||
Other payables | 240 | 240 | 66 | 66 | ||||||
Current liabilities | ||||||||||
Interest bearing loans and borrowings | 89,845 | 89,845 | 97,597 | 97,597 | ||||||
Derivative financial instruments | 1,682 | 1,682 | 474 | 474 | ||||||
Other payables | 20,169 | 20,169 | 26,319 | 26,319 | ||||||
Fair values have been calculated by using market values at the balance sheet date. The market values of loans receivable and borrowings have been calculated by discounting the expected future cash flows at prevailing interest rates. The fair value of short term deposits, VAT recoverable and other assets, trade and other receivables, trade and other payables is assumed to approximate to their book values. The fair value of preference shares is assumed to be their last quoted price. The fair value of derivatives is determined by a model with market based inputs. | |
Fair value hierarchy | |
The following table shows an analysis of the fair values of financial instruments recognised in the balance sheet by level of the fair value hierarchy*: |
Total Fair | ||||||||||
Level 1 | Level 2 | Level 3 | Value | |||||||
As at 31 December 2010 | US$'000 | US$'000 | US$'000 | US$'000 | ||||||
Assets measured at fair value | ||||||||||
Derivative financial instruments | - | 449 | - | 449 | ||||||
Liabilities measured at fair value | ||||||||||
Derivative financial instruments | - | 6,121 | - | 6,121 | ||||||
As at 31 December 2009 | ||||||||||
Assets measured at fair value | ||||||||||
Derivative financial instruments | - | 195 | - | 195 | ||||||
Available for sale financial assets | - | - | 4,232 | 4,232 | ||||||
Liabilities measured at fair value | ||||||||||
Derivative financial instruments | - | 6,640 | - | 6,640 | ||||||
* 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 | |
(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. | |
To maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the 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 borrowings (including borrowings and trade and other payables as shown in the balance sheet) but excluding 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. |
2010 | 2009 | ||||||||
US$'000 | US$'000 | ||||||||
Non-current liabilities (excluding preference shares) | 408,526 | 412,655 | |||||||
Current liabilities | 139,465 | 160,923 | |||||||
Liabilities associated with disposal groups classified as held for sale | - | 51,654 | |||||||
Total borrowings | 547,991 | 625,232 | |||||||
Less: cash and short term deposits (including disposal groups) | 107,641 | 123,783 | |||||||
Net debt | 440,350 | 501,449 | |||||||
Equity | 580,364 | 545,883 | |||||||
Preference shares | 217,425 | 219,444 | |||||||
Total capital | 1,238,139 | 1,266,776 | |||||||
Gearing ratio | 35.57% | 39.58% | |||||||
36. | Business combinations |
(a) 2009 combination - Raven Mount Group plc ("Raven Mount") | |
On 8 May 2009 the Company's acquisition of Raven Mount was pronounced unconditional. The Group considered Raven Mount to comprise a single cash generating unit. Prior to its acquisition Raven Mount was considered a related party to the Group. The acquisition of Raven Mount was in respect of 100% of its issued share capital. | |
Details of the fair values of identifiable assets and liabilities acquired, purchase consideration and goodwill are as | |
follows: |
Book | Fair | ||||||||
Value | Adjustment | Value | |||||||
US$'000 | US$'000 | US$'000 | |||||||
Non-current assets | |||||||||
Property, plant and equipment | 59 | - | 59 | ||||||
Deferred tax assets | 1,398 | - | 1,398 | ||||||
Current assets | |||||||||
Inventories | 66,171 | (3,179) | 62,992 | ||||||
Trade and other receivables | 4,920 | - | 4,920 | ||||||
Available for sale investments | 15,731 | - | 15,731 | ||||||
Cash and cash equivalents | 29,914 | - | 29,914 | ||||||
Current liabilities | |||||||||
Trade and other payables | (21,082) | - | (21,082) | ||||||
Interest bearing loans and borrowings | (6,189) | - | (6,189) | ||||||
Non-current liabilities | |||||||||
Deferred tax liabilities | (916) | - | (916) | ||||||
Net asset value | 90,006 | (3,179) | 86,827 | ||||||
Goodwill (note 13) | 8,059 | ||||||||
94,886 | |||||||||
Discharged by: | |||||||||
Issue of preference shares (note 24) | 88,198 | ||||||||
Issue of warrants (note 28) | 3,675 | ||||||||
Acquisition costs | 3,013 | ||||||||
94,886 | |||||||||
Included in the US$8 million of goodwill recognised above are certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. These items include the expected value of synergies. |
| ||||||||||
| |||||||||||
Available for sale investments acquired with Raven Mount included 29 million own shares, see note 29. |
| ||||||||||
| |||||||||||
From the date of acquisition to 31 December 2009, Raven Mount contributed US$3,531k to the Group's loss for the year. Had the combination taken place at the beginning of 2009, the Group's loss before tax would have increased by US$1,271k and gross revenue from continuing operations would have increased by US$9,261k. |
| ||||||||||
| |||||||||||
(b) 2009 combination - Roslogistics Holdings (Russia) Limited ("Roslogistics") |
| ||||||||||
| |||||||||||
Following a change to the financing arrangements of the Group's logistics joint venture, Roslogistics, the Group considers the substance of the arrangement to be that of a parent and subsidiary. The change was deemed effective from 1 May 2009. The Group considers Roslogistics to be a single cash generating unit. |
| ||||||||||
| |||||||||||
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows: |
| ||||||||||
Book | Fair | ||||||||||
Value | Adjustment | Value | |||||||||
US$'000 | US$'000 | US$'000 | |||||||||
Non-current assets | |||||||||||
Property, plant and equipment | 2,372 | - | 2,372 | ||||||||
Intangible assets | 323 | (323) | - | ||||||||
Deferred tax assets | 1,519 | - | 1,519 | ||||||||
Current assets | |||||||||||
Trade and other receivables | 2,304 | - | 2,304 | ||||||||
Cash and cash equivalents | 299 | - | 299 | ||||||||
Current liabilities | |||||||||||
Trade and other payables | (3,994) | - | (3,994) | ||||||||
Interest bearing loans and borrowings | - | - | - | ||||||||
Non-current liabilities | - | ||||||||||
Interest bearing loans and borrowings | (10,437) | 3,119 | (7,318) | ||||||||
Net asset value | (7,614) | 2,796 | (4,818) | ||||||||
Goodwill (note 12) | 5,383 | ||||||||||
565 | |||||||||||
Discharged by: | |||||||||||
Cash consideration paid | 500 | ||||||||||
Acquisition costs | 65 | ||||||||||
565 | |||||||||||
Included in the US$5 million of goodwill recognised above are certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. These items include the expected values of synergies and an assembled workforce. | |
From 1 May 2009 to 31 December 2009, Roslogistics contributed US$709k to the Group's loss for the year. Had the combination taken place at the beginning of 2009, the Group's loss before tax would have increased by US$2,427k and gross revenues from continuing operations would have increased by US$13,710k. | |
37. | Subsequent events |
On 28 February 2011 the Group entered into a conditional Sale and Purchase Agreement to purchase the Southgate warehouse project in Moscow. The provisional purchase price for the acquisition is US$54.5 million, the gross value of the property and land being US$99.3 million. Existing debt facilities of US$43.5 million will be acquired with the project. The consideration will be satisfied partly by the issue of up to 25.9 million ordinary shares in Raven Russia, at the election of the vendors, and the balance in cash. The principal condition of the acquisition involves the right of a minority owner of the project to match any formal offer for the purchase by a third party. | |
Details of post year end re-financings are set out in note 23 and post year end warrant exercises are set out in note 28. |
38. | Operating lease arrangements | ||||||||
The Group earns rental income by leasing its investment properties to tenants under non-cancellable operating leases. | |||||||||
At the balance sheet date the Group had contracted with tenants for the following future minimum lease payments:- | |||||||||
2010 | 2009 | ||||||||
US$'000 | US$'000 | ||||||||
Within one year | 65,856 | 64,846 | |||||||
In the second year | 65,592 | 61,929 | |||||||
In the third to fifth year (inclusive) | 182,429 | 176,798 | |||||||
After five years | 86,483 | 82,659 | |||||||
400,360 | 386,232 | ||||||||
39. | Cash and cash equivalents | ||||||||
2010 | 2009 | ||||||||
Cash and cash equivalents included in the cash flow statement comprise: | US$'000 | US$'000 | |||||||
Cash and short term deposits per balance sheet | 107,641 | 123,710 | |||||||
Cash included within disposal group assets (note 21) | - | 72 | |||||||
107,641 | 123,782 | ||||||||
Related Shares:
RAV.L