14th Aug 2013 07:00
14 August 2013
MIRLAND DEVELOPMENT CORPORATION PLC
("MirLand" / "Company")
UNAUDITED INTERIM CONSOLIDATED REPORT FOR THE
SIX MONTHS ENDED 30 JUNE 2013
MIRLAND BUILDS MOMENTUM WITH STRONG SALES ACROSS RESIDENTIAL DEVELOPMENT PROGRAMME
MirLand Development Corporation, one of the leading international residential and commercial property developers in Russia, announces its interim results for the six months ended 30 June 2013.
Financial Highlights:
· Total revenues up 19.0% to US$23.8 million (30 June 2012: US$20.0 million) due to high occupancy in the investment portfolio (approximately 99%) and positive impact of rental indexation
· Net operating income ("NOI") from investment properties (Company's share) up 21.1% to US$15.5 million (six months ended 30 June 2012: US$12.8 million)
· Gross profit up 92.8% to US$13.3 million (30 June 2012: US$6.9 million)
· EBITDA increased 23.2% to US$6.9 million (30 June 2012: US$5.6 million)
· Net profit of US$4.0 million (30 June 2012: loss of US$0.7 million) due to increased operational profitability and fair value adjustments of investment properties
· Total assets up 10.7% to US$823.0 million (31 December 2012: US$743.7 million), of which 92% are property and land assets
· Total equity increased by 3.6% to US$328.8 million (31 December 2012: US$317.3 million), equating to 40% of total assets
· Net leverage reduced to 39.9% of total assets (31 December 2012: 40.9%)
· In May 2013, the Company undertook a private placement of new D Series Bonds to two institutional investors; the Bonds raised additional NIS debt of approximately US$17.2 million, before expenses
· In July 2013 the Company issued approximately US$67.2 million in NIS, before expenses of new E Series Bonds in a public offering
Operational Highlights
Residential:
Triumph Park in St. Petersburg
On-going high rate of sales indicating prospect of solid future income:
· Phase I: 505 out of 510 apartments pre-sold to date (484 at 31 December 2012), indicating a projected income of approximately US$66 million to be recognized during the second half of 2013 in accordance with IFRS standards; occupancy permit received from the government authorities and accordingly the delivery of flats will commence at the beginning of September
· Phase II: Launched in Q3 2012, 432 out of 630 units were pre-sold - sales (to 13 August 2013) totalling circa 69% of the scheme. This represents sales of approximately US$58 million
· Phase III: Planning ongoing with marketing of approximately 1,350 units on track to commence in Q4 2013
Retail:
· Both regional shopping centres, Vernissage Mall in Yaroslavl and Triumph Mall in Saratov, are fully occupied and report high level of footfall. Half year NOI up 18% to US$9.4 million, compared to the first half of 2012;
· In April 2013 an agreement for the sale of land, designated for development of a commercial center in the city of Penza, was signed for a consideration of approximately US$4million dollars. The net profit recognized amounted to approximately US$0.5 million
Offices:
· 98% average occupancy rate across all office projects, located in Moscow's business district at he MirLand Business Center. Half year NOI up 25% to US$6.2 million, compared to the first half of 2012.
Nigel Wright, Chairman, commented:
"Against the backdrop of a Russian economy that continues to show growth, albeit at a slightly lower level than last year, we have achieved strong residential sales momentum which we are optimistic will be maintained for the rest of the year and beyond.
"Furthermore, having made good progress in terms of diversifying the Company's funding sources and refinancing historic debt, we are well positioned to deliver value, not only from our existing portfolio but also through further developing our pipeline portfolio and seeking new opportunities. In light of the success of our flagship residential development, Triumph Park, we continue to assess potential acquisition opportunities where we can apply our rigorous assessment and development skills, with the aim of delivering long term shareholder value."
For further information, please contact:
MirLand Development Corporation plc Roman Rozental, CEO Yevgeny Steklov, CFO
| +7 495 787 4962 +7 499 130 31 09
+7 903 628 24 50 |
FTI Consulting Dido Laurimore / Will Henderson | +44 20 7831 3113 |
Investec Bank plc Jeremy Ellis / David Anderson | +44 20 7597 4000
|
MirLand has delivered a strong first half with improvements in a wide range of key performance indicators against the backdrop of a Russian economy that continues to show growth. We have made further progress in successfully delivering the business plan and strategy:
· to maximize returns from our existing diversified portfolio of assets;
· to successfully complete those projects currently under construction; and
· to activate pipeline projects and selectively seek new projects subject to availability of appropriate funding and market demand.
In addition, due to improved market conditions and the growing availability of financing sources, MirLand continues to identify and assess opportunities for new investments that have the potential to enhance long term shareholder value. The Company is seeing a growing number of potentially attractive deals becoming available in the market.
FINANCIAL REVIEW
Balance Sheet
Total assets as at 30 June 2013 increased to US$823.0 million (31 December 2012: US$743.7 million). Total equity accounted for US$328.8 million as at 30 June 2013 (31 December 2012: US$317.3 million). Cash amounted to US$45.8 million.
MirLand's assets are externally valued semi-annually on 30 June and 31 December by Cushman & Wakefield. Based on the June 2013 valuation, investment properties and investment properties under construction increased in value to US$441.2 million as at 30 June 2013 (31 December 2012: US$354.3), mainly due to the full consolidation of the Century Project in the valuation and the improved operational performance of the Company's commercial assets. In carrying out the valuations, no change was made in the discount and capitalization rates by Cushman & Wakefield.
Inventories of buildings for sale increased from US$269.9 million as at 31 December 2012 to US$283.9 million (30 June 2013) due to further investment made during the period being compensated for by the appreciation of the US$ against the Rouble.
Equity and Liabilities
Total equity as at 30 June 2013 was US$328.8 million, including minority rights, an increase on the US$317.3 million reported for 31 December 2012. Shareholders' equity comprises 40% of total assets.
Net Financial liabilities as at 30 June 2013 were US$328.5 million in comparison to US$304.2 million at 31 December 2012. As at 30 June 2012, net financial liabilities comprise 39.9% of MirLand's total assets.
Income Statement
Over the period, rental income, income from the sale of inventories and revenues from management fees amounted to US$23.8 million, up from US$20.0 million in H1 2012, an increase of 19%. This increase is largely attributable to the improvement in occupancy rates and further rent indexation at MirLand's yielding assets.
In accordance with IAS 40, the Company has revalued its investment properties and investment properties under construction for the financial period ending 30 June 2013 and has recognized the resulting movement in valuation through its income statement as fair value adjustments. The fair value adjustment during the period amounted to US$35.9 million (H1 2012: US$5.9 million) and was mainly attributed to appreciation of the US Dollar against the Rouble of approximately 7.7% which resulted in nominal appreciation of commercial assets at the same rate.
The cost of maintenance and management of the Company increased from US$7.6 million in H1 2012 to US$8.9 million in H1 2013 due to the full consolidation of the Century Project. On a like for like basis, there was no material change in the costs, despite substantial growth in rented areas, following further efficiency measures implemented by the Company.
The Company's gross profit for the period increased to US$13.3 million compared to US$6.9 million in the same period in 2012.
General and administrative expenses for the period decreased to US$6.4 million in comparison to US$6.9 million in the same period in 2012, again due to improved management efficiencies.
Net financing costs for the period amounted to US$14.9 million in comparison to US$11.3 million in the same period of 2012, due to the raising of additional funds. Foreign exchange differences resulted in a loss of US$27.3 million due to the appreciation of the US$ against the Rouble of approximately 7.7%, compared to a gain of US$1.9 million in H1 2012.
Net profit of US$4.0 million was recorded by the Company compared to loss of US$0.7 million in H1 2012.
Net Asset Value
The Company's adjusted net asset value as at 30 June 2013 amounted to US$554.2 million, in comparison to US$544.8 million as at December 2012, an increase of 1.7%. As of 30 June 2013, the portfolio was valued at US$966.3 million, of which MirLand's share is US$870.5 million (December 2012: US$868.0 million). The value of the units sold in Triumph Park, Saint Petersburg are not included in the current valuation. Adding future proceeds from these units as yet unrecognized in the profit and loss statement will bring Mirland's share in the portfolio value to US$950 million.
The valuation of each asset in MirLand's real estate portfolio at 30 June 2013 is set out in the following table:
Ref. | City | Property Name and Address | Portfolio Market Value as of 30th of June 2013 (Rounded) | Percentage Owned by MirLand | MirLand Market Value as of 30th of June 2013 (Rounded) | Total sqm of Land | Projected Net Leasable / Saleable Area in sqm upon Completion (excl. Parking) |
001 | Moscow | Hydromashservice | $71,800,000 | 100% | $71,800,000 | 12,237 | 16,696 |
002 | Moscow | MAG | $82,100,000 | 100% | $82,100,000 | 21,940 | 18,535 |
003 | Moscow Region | Western Residence, Perkhushkovo | $58,100,000 | 100% | $58,100,000 | 225,300 | 56,876 |
004 | Saratov | Triumph Mall | $126,600,000 | 100% | $126,600,000 | 22,000 | 27,305 |
005 | Moscow | Skyscraper | $0 | 100% | $0 | n/a | n/a |
006 | Saint Petersburg | Triumph Park, Residential | $323,000,000 | 100% | $323,000,000 | 326,651 | 534,368 |
007 | Saint Petersburg | Triumph Park, Trade Center | $31,600,000 | 100% | $31,600,000 | 81,663 | 117,775 |
008 | Yaroslavl | Vernissage Mall | $98,500,000 | 50.5% | $49,700,000 | 120,000 | 34,092 |
009 | Yaroslavl | Phase II | $9,100,000 | 50.5% | $4,600,000 | 180,000 | 55,245 |
010 | Moscow | Tamiz Building | $44,500,000 | 100% | $44,500,000 | 4,500 | 11,737 |
011 | Moscow | Century Buildings | $95,900,000 | 51%/61% | $53,390,000 | 5,800 | 20,904 |
012 | Kazan | Triumph House | $9,000,000 | 100% | $9,000,000 | 22,000 | 31,480 |
013 | Saratov | Logistics Complex | $7,300,000 | 100% | $7,300,000 | 260,000 | 104,000 |
014 | Novosibirsk | Logistics Complex | $8,800,000 | 100% | $8,800,000 | 406,752 | 180,000 |
Total | $966,300,000 | $870,490,000 | |||||
The full valuation report is published on the Company's website (www.mirland-development.com).
We strongly believe in the quality of the assets owned by the Company and that the portfolio will deliver an attractive yield to our investors over the long term as the market continues to improve.
Cash flow
During H1 2013, the Company invested US$29.2 million in new assets in comparison with US$21.1 million in H1 2012. Cash flow used in operating activities amounted to US$2.2 million, compared to US$2.5 in H1 2012. Cash flow provided by financing activities during the period amounted to US$24.5 million.
FINANCING
During the period, net leverage decreased to 39.9% of total assets (31 December 2012: 40.9%). Total net borrowings amounted to US$316.8 million (31 December 2012: US$304.2 million).
In May 2013, Mashinostroenie & Hydravlika OJSC ("MAG") entered into a loan agreement with SberBank of Russia ("Sberbank") under which Sberbank will grant the subsidiary a credit line in an aggregate amount of up to US$19 million, for the purpose of refinancing MAG building 26. The building has now been fully renovated and has been let to a single tenant on a five year lease. The loan is for a period of approximately 6.5 years and bears fixed annual dollar interest at the rate of 8.75%, payable quarterly, in addition to other commissions as set out in the Loan agreement. There will be a final balloon payment of approximately 36%. Of the aforementioned credit line, an amount of US$10 million has already been obtained by the Company and the balance of US$9 million will be made available within a period of 11 months.
In May 2013, the Company carried out a private placement of new D Series Bonds with two institutional investors (the "Bonds"). The Bonds raised additional debt of NIS 62 million (approximately US$17.2 million, before expenses). They were issued on identical terms to the existing D Series bonds and were rated as "ilBaa1/Stable" on a local Israeli scale by Midroog, a subsidiary of Moody's Investor Services.
In July 2013, following the publication of an amendment to the Company's shelf prospectus and shelf offering report, the Company issued new debentures (Series E) in the total amount of NIS 240 million (approximately US$67.2 million). The debentures (Series E) bear annual fixed interest of 7.21% and have been rated by Midroog at "ilBaa1/Stable". The debentures are repayable in five unequal annual payments, the first payment is 10% of the principal and each of the second to the fifth payments is 22.5% of the principal, payable on 31 May of each of the years 2016 through 2020 (inclusive).
In August 2013, a wholly owned subsidiary of the Company, Limited liability Company Investicionno-Ipotechnaya Kompaniya ("IIK"), entered into the US$95 million loan agreement with Sberbank for a seven year term, at fixed interest rate of 7%, payable quarterly. The loan refinances IIK's existing debt of US$36 million and allows the business to release additional funds. The loan is secured by various mortgages, charges, pledges and other customary security interests for the benefit of the bank which have been entered into by both IIK and the Company. The loan will be repaid within seven years through regular quarterly payments and a final balloon payment of 53% at the end of the term.
On 6 August 2013 and 13 August 2013 the Company partly repaid the short-term loans from banks which are secured by non-cancelable bank guarantees of the controlling shareholders with the total amount of US$25 million.
The net proceeds of the Bonds D and E issuances as well as loans obtained by subsidiaries will be applied for general working capital purposes and repayment of certain financial liabilities including, inter alia, bank loans guaranteed by Parent Companies, Bonds and loans provided to subsidiaries in Russia.
The recent fundraisings support our strategy to diversify funding sources whilst keeping long term leverage at a relatively low level, with net leverage currently representing 39.9%.
OPERATIONAL UPDATE
The Company's progress in the pre-sale and delivery of its BREEAM certified Green residential project, Triumph Park in St. Petersburg, continues. A further 19 apartments have been sold from the first phase taking it close to being fully sold and sales on Phase II are progressing very well. The government authorities have issued the required occupancy permit for Phase 1 of the scheme, allowing delivery to buyers to proceed at the beginning of September. The Company has now finalised the detailed design with regard to Phase III and is taking the final steps in obtaining a construction permit with the intention of launching it to the market in Q4 2013.
In April 2013, Tamiz, a 100% subsidiary of the Company, completed the sale of land designated for the development of a commercial center in the city of Penza, Central Russia, for a consideration of approximately US$4 million. Following the sale, the Company recognized a gain of approximately US$0.5 million in its Financial Statements.
On 4 January 2013, the Company agreed with its partners in Inomotor LLC and Avtoprioriet LLC ("The Century Companies") that they would waive their pre-existing option to acquire 1% of the Century Companies. In consideration for this waiver, the Company has agreed to pay its partners US$600,000, which is to be entirely offset against a loan presently outstanding to one of the partners of US$1 million and the repayment date of the loan was extended by six months to 16 August 2014. The purpose of these amended agreements is to ensure that the Company secures overall control of the Century Companies. The parties have also agreed to amend the existing Management Agreement to give the Company overall control of the project.
The fully occupied Vernissage Mall in Yaroslavl and the Triumph Mall in Saratov continued to enjoy high footfall. Occupancy rates in the MirLand Business Centre office buildings are at 98% average.
MARKET UPDATE
The Russian economy showed modest signs of improvement, exhibiting slower but positive growth of 1.8% during the first five months of the year. This is forecast to increase to 2.4% by the year end. Consumer markets remained strong (11.4% nominal growth) and unemployment is relatively low at 5.2%. Inflation is at 6.8% currently and is forecast to rise to 7% by the year end. The gentle upward trend in the oil price has benefitted the economy, remaining above the US$100 per barrel level. Having been raised to 8.25% in September 2012, the Central Bank Refinancing Rate has since remained unchanged, the authorities having taken into account the outlook for inflation and the overall economy. Unemployment remains low by historic standards at 5.2%. Capital outflows continue to cast a shadow with a full year outflow forecast at circa US$50 billion. The Government maintains a very substantial contingency reserve fund in excess of US$500 billion.
Real Estate market
The Real Estate market remains generally positive across Russia in general with Moscow still undersupplied with quality stock. The total volume of investments in H1 2013 accounted for US$4.63 billion. The majority of this is attributable to Russian investors, who were responsible for 71% of the volume, and the forecast total level for 2013 is US$8 billion.
Landmark investment transactions during the year have included Morgan Stanley acquiring the Metropolis shopping centre in Moscow for US$1.2 billion and O1 Properties (a Russian company) acquiring the White Square business center for US$1 billion.
Regional investment volumes continue to be relatively low, only circa 2%, as investment activity tends to concentrate around developed markets such as Moscow and St. Petersburg (80-85% of investments absorbed in Moscow).
Office segment
The total volume of investments in the office segment in Moscow in H1 2013 was US$1.71 billion (US$4.63 billion). The average vacancy rate has increased from 12.14% in Q1 2013 to 13.15% (19.1% in Class A and 11.5% in Class B) in Q2 2013. Despite the increase in the overall vacancy rate, rental rates showed growth in Q2 2013: the Class A average rate has grown from US$850/sqm to US$870/sqm. Class B average modestly increased to US$500/sqm from US$490/sqm in Q1 2013. H1 2013 take up in high quality space was at a high level, the same as Q4 2012, with 451,000 sqm leased or sold. The forecast for new construction remains at 700,000 sqm.
Retail segment
Demand for quality space is steady, and the vacancy rate in Moscow remains low at less than 1%
In Q2 2013 rental rates for gallery space in Moscow (US$500-3,800/sqm per year) and the regions were stable (30-60% below Moscow levels). Forecasts indicate that rental rate growth will not exceed 5%.
New supply in 2013 is expected to amount to 3.1 million sqm, with 90 quality retail centers planned for delivery all over Russia.
Residential segment
Demand for residential real estate remains strong and has been supported by mortgage affordability.
The mortgage interest rate was at 12.9% at the beginning of the year, and decreased to 12.7% in Q2 2013. The 2013 forecast is for a reduction to 12.6%. New mortgages extended in Russia since the beginning of 2013 (January to May) were over RUB441.3 billion (RUB32.4 billion in St. Petersburg), which is 10% higher than the same period last year. The projection of the CBR for 2013 is RUB 1,050 ‐ 1,200 billion.
According to the European Mortgage Federation, Russia has one of the lowest levels of living space per capita compared to other European countries, at 23 sqm per person. It is expected to grow to 31 sqm by 2020.
Industrial segment
Despite the slowdown in GDP growth, demand for warehouse facilities remains high. In H1 2013 more than 310,000 sqm of quality warehouse space was delivered in the Moscow region and 186,000 sqm to the other regions across Russia. Traditionally, the basis of demand is mainly formed by companies in the retail trade segment and distribution, which represent about 41% of market share (Q3 2012 to Q2 2013).
OUTLOOK
Against the backdrop of a Russian economy that continues to show growth, albeit at a slightly slower level than last year, we have achieved strong residential sales momentum which we are optimistic will be maintained for the rest of the year and beyond. We are also encouraged by the high occupancy exhibited by our investment assets and the increasing net operating income-flow derived from them.
Furthermore, having made good progress in terms of diversifying the Company's funding sources and refinancing historic debt, we feel well positioned to deliver value, not only from our existing portfolio, but also through further developing our pipeline portfolio and seeking new opportunities. In light of the success of our flagship residential development Triumph Park, we continue to assess potential acquisition opportunities where we can apply our rigorous assessment and development skills, with the aim of delivering long term shareholder value.
Nigel Wright Roman Rozental
Chairman Chief Executive
14 August 2013 14 August 2013
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
30 June | 31 December | ||||||
2013 | *) 2012 | *) 2012 | |||||
Unaudited | Audited | ||||||
U.S. dollars in thousands | |||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | 45,757 | 23,290 | 25,669 | ||||
Restricted bank deposits | 287 | 1,706 | 1,119 | ||||
Trade receivables | 878 | 1,290 | 2,476 | ||||
Other receivables | 7,874 | 3,790 | 7,627 | ||||
VAT receivable | 4,508 | 6,380 | 4,801 | ||||
Inventories of buildings for sale | 219,602 | 171,594 | 190,821 | ||||
Loans granted to associates | 3,184 | - | 9,070 | ||||
282,090 | 208,050 | 241,583 | |||||
NON-CURRENT ASSETS: | |||||||
Investment properties | 390,664 | 278,357 | 302,789 | ||||
Investment properties under construction | 50,523 | 80,222 | 51,552 | ||||
Inventories of buildings for sale | 64,329 | 67,368 | 79,100 | ||||
VAT receivable | 390 | 212 | 226 | ||||
Fixed assets, net | 923 | 881 | 825 | ||||
Other long-term receivables | 1,929 | 3,866 | 3,038 | ||||
Prepaid expenses | 635 | 541 | 541 | ||||
Deferred taxes | 3,620 | 3,618 | 2,350 | ||||
Investments in associates | 27,873 | 54,433 | 61,650 | ||||
Loans granted to associates | - | 12,747 | - | ||||
540,886 | 502,245 | 502,071 | |||||
TOTAL ASSETS | 822,976 | 710,295 | 743,654 | ||||
*) Restated, see Note 2b.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
30 June | 31 December | |||||
2013 | *) 2012 | *) 2012 | ||||
Unaudited | Audited | |||||
U.S. dollars in thousands | ||||||
EQUITY AND LIABILITIES | ||||||
CURRENT LIABILITIES: | ||||||
Credit from banks and others | 78,407 | 68,671 | 68,523 | |||
Current maturities of long-term loans from banks and debentures | 48,565 | 41,594 | 50,360 | |||
Credit from banks for financing of inventory of buildings for sale | 13,140 | 20,626 | 15,421 | |||
Government authorities | 2,210 | 2,383 | 2,679 | |||
Trade payables | 9,114 | 8,524 | 7,294 | |||
Deposits from tenants | 2,900 | 1,793 | 2,663 | |||
Advances from buyers | 99,813 | 30,423 | 77,321 | |||
Other accounts payable | 1,223 | 864 | 2,211 | |||
255,372 | 174,878 | 226,472 | ||||
NON-CURRENT LIABILITIES: | ||||||
Loans from banks and others | 97,829 | 57,980 | 81,385 | |||
Debentures | 136,314 | 135,809 | 114,169 | |||
Other non-current liabilities | 4,653 | 3,714 | 4,281 | |||
238,796 | 197,503 | 199,835 | ||||
TOTAL LIABILITIES | 494,168 | 372,381 | 426,307 | |||
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT: | ||||||
Issued capital | 1,036 | 1,036 | 1,036 | |||
Share premium | 359,803 | 359,803 | 359,803 | |||
Capital reserve for share-based payment transactions | 12,186 | 11,969 | 12,186 | |||
Capital reserve for transactions with controlling | ||||||
shareholders | 8,391 | 6,565 | 8,391 | |||
Foreign currency translation reserve | (61,878) | (61,282) | (42,286) | |||
Retained earnings (accumulated deficit) | (20,791) | 19,823 | (21,783) | |||
TOTAL EQUITY CONTRIBUTABL TO EQUITY PARENT | 298,747 | 337,914 | 317,347 | |||
Non controlling interest | 30,061 | - | - | |||
TOTAL EQUITY | 328,808 | 337,914 | 317,347 | |||
TOTAL EQUITY AND LIABILITIES | 822,976 | 710,295 | 743,654 | |||
*) Restated, see Note 2b.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Six months ended 30 June | Year ended 31 December | |||||
2013 | *) 2012 | *) 2012 | ||||
Unaudited | Audited | |||||
U.S. dollars in thousands | ||||||
Rental income from investment properties | 22,207 | 15,448 | 32,231 | |||
Income from sale of inventories | 931 | 3,711 | 8,079 | |||
Revenues from management fees | 689 | 825 | 1,641 | |||
Total revenues | 23,827 | 19,984 | 41,951 | |||
Cost of sales and maintenance of inventories | (1,639) | (5,487) | (12,833) | |||
Cost of maintenance and management | (8,928) | (7,628) | (14,874) | |||
Gross profit before deductions | 13,260 | 6,869 | 14,244 | |||
Impairment of inventory of buildings for sale | - | - | (8,041) | |||
Gross profit | 13,260 | 6,869 | 6,203 | |||
General and administrative expenses | (6,432) | (6,920) | (14,607) | |||
Marketing expenses | (1,793) | (732) | (2,102) | |||
Fair value adjustments of investment properties and investment properties under construction | 35,942 | 5,949 | (31,554) | |||
Other expense, net | (705) | (979) | (1,832) | |||
Group's share in earnings of associates | 4,607 | 3,885 | 6,340 | |||
Operating profit (loss) | 44,879 | 8,072 | (37,552) | |||
Finance income | 534 | 999 | 1,382 | |||
Finance expenses | (15,476) | (12,317) | (24,941) | |||
Net foreign exchange differences | (27,339) | 1,857 | 19,892 | |||
Profit (loss) before taxes | 2,598 | (1,389) | (41,219) | |||
Taxes on income (tax benefit) | (1,402) | (693) | 1,083 | |||
Net profit (loss) | 4,000 | (696) | (42,302) | |||
Attributable to: | ||||||
Equity holders of the parent | 992 | (696) | (42,302) | |||
Non-controlling interest | 3,008 | - | - | |||
Basic and diluted net earnings (loss) per share attributable to equity holders of the parent (US dollars) | 0.01 | (0.01) | (0.41) | |||
*) Restated, see Note 2b.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Six months ended 30 June | Year ended 31 December | |||||||
2013 | *) 2012 | *) 2012 | ||||||
Unaudited | Audited | |||||||
U.S. dollars in thousands | ||||||||
Net profit (loss) | 4,000 | (696) | (42,302) | |||||
Other comprehensive income (loss) (net of tax effect): | ||||||||
Other comprehensive income to be reclassified to profit or loss in subsequent periods: | ||||||||
Transfer of currency translation reserve to income statement for obtaining control in companies accounted for the equity method | 244 | - | - | |||||
Exchange differences on translation of foreign operations | (19,860) | (8,642) | 8,178 | |||||
Group's share of net other comprehensive income (loss) of companies accounted for the equity method | (2,481) | (514) | 1,662 | |||||
Total other comprehensive income (loss) | (22,097) | (9,156) | 9,840 | |||||
Total comprehensive loss | (18,097) | (9,852) | (32,462) | |||||
Attributable to: | ||||||||
Equity holders of the parent | (18,600) | (9,852) | (32,462) | |||||
Non controlling interest | 503 | - | - | |||||
(18,097) | (9,852) | (32,462) | ||||||
*) Restated, see Note 2b.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Capital | |||||||||||||||||||
Capital | reserve for | Total | |||||||||||||||||
reserve for | transactions | Retained | Foreign | equity | |||||||||||||||
share-based | with | earnings | currency | attributable | Non | ||||||||||||||
Issued | Share | payment | controlling | (accumulated | translation | to equity | Controlling | Total | |||||||||||
capital | premium | transactions | shareholders | deficit) | reserve | parent | interest | equity | |||||||||||
U.S. dollars in thousands | |||||||||||||||||||
At 1 January 2013 | 1,036 | 359,803 | 12,186 | 8,391 | (21,783) | (42,286) | 317,347 | - | 317,347 | ||||||||||
Net loss for the year | - | - | - | - | 992 | 992 | 3,008 | 4,000 | |||||||||||
Other comprehensive loss | - | - | - | - | (19,592) | (19,592) | (2,505) | (22,097) | |||||||||||
Total comprehensive income (loss), net | - | - | - | - | 992 | (19,592) | (18,600) | 503 | (18,097) | ||||||||||
Obtaining control in companies accounting in the equity method | - | - | - | - | - | - | - | 29,558 | 29,558 | ||||||||||
At 30 June 2013 (unaudited) | 1,036 | 359,803 | 12,186 | 8,391 | (20,791) | (61,878) | 298,747 | 30,061 | 328,808 | ||||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Capital | Capital reserve for | |||||||||||||
reserve for | transactions | Foreign | ||||||||||||
share-based | with | currency | ||||||||||||
Issued | Share | payment | controlling | translation | Retained | |||||||||
capital | premium | transactions | shareholders | reserve | earnings | Total | ||||||||
U.S. dollars in thousands | ||||||||||||||
At 1 January 2012 | 1,036 | 359,803 | 11,341 | 6,565 | (52,126) | 20,519 | 347,138 | |||||||
Net profit for the year | - | - | - | - | - | (696) | (696) | |||||||
Other comprehensive loss | - | - | - | - | (9,156) | - | (9,156) | |||||||
Total comprehensive loss, net | - | - | - | - | (9,156) | (696) | (9.852) | |||||||
Share-based payment transactions | - | - | 628 | - | - | - | 628 | |||||||
At 30 June 2012 (unaudited) | 1,036 | 359,803 | 11,969 | 6,565 | (61,282) | 19,823 | 337,914 | |||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Capital | |||||||||||||||
Capital | reserve for | ||||||||||||||
reserve for | transactions | Foreign | Retained | ||||||||||||
share-based | with | currency | earnings | ||||||||||||
Issued | Share | payment | controlling | translation | (accumulated | Total | |||||||||
capital | premium | transactions | shareholders | reserve | deficit) | equity | |||||||||
U.S. dollars in thousands | |||||||||||||||
1,036 | 359,803 | 11,341 | 6,565 | (52,126) | 20,519 | 347,138 | |||||||||
At 1 January 2012 | |||||||||||||||
Net loss for the year | - | - | - | - | - | (42,302) | (42,302) | ||||||||
Other comprehensive income | - | - | - | - | 9,840 | - | 9,840 | ||||||||
Total comprehensive income (loss), net | - | - | - | - | 9,840 | (42,302) | (32,462) | ||||||||
Equity component of transaction with controlling shareholders (1) | - | - | - | 1,826 | - | - | 1,826 | ||||||||
Share-based payment transactions | - | - | 845 | - | - | - | 845 | ||||||||
At 31 December 2012 | 1,036 | 359,803 | 12,186 | 8,391 | (42,286) | (21,783) | 317,347 | ||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended 30 June | Year ended 31 December | |||||||||
2013 | *) 2012 | *) 2012 | ||||||||
Unaudited | Audited | |||||||||
U.S. dollars in thousands | ||||||||||
Net profit (loss) | 4,000 | (696) | (42,302) | |||||||
Adjustments to reconcile net profit (loss) to net cash provided by (used in) operating activities: | ||||||||||
Adjustments to the profit or loss items: | ||||||||||
Deferred taxes, net | (1,515) | (996) | 705 | |||||||
Depreciation and amortization | 136 | 206 | 491 | |||||||
Finance expenses, net | 42,281 | 9,461 | 3,667 | |||||||
Share-based payment | - | 628 | 845 | |||||||
Fair value adjustment of investment properties and investment properties under construction | (35,942) | (5,949) | 31,554 | |||||||
Group's share in earnings of associates | (4,607) | (3,885) | (6,340) | |||||||
Loss from obtaining control in company accounted for equity method | 244 | - | - | |||||||
Gain from sale of investment property | (548) | - | ||||||||
49 | (535) | 30,922 | ||||||||
Working capital adjustments: | ||||||||||
Decrease (increase) in trade receivables | 2,193 | (746) | (4,095) | |||||||
Decrease (increase) in VAT receivable and others | (292) | 963 | 2,991 | |||||||
Increase in inventories of buildings for sale | (24,087) | (15,830) | (32,544) | |||||||
Increase (decrease) in trade payables | (65) | 62 | (59) | |||||||
Increase (decrease) in other accounts payable | 28,542 | 23,642 | 70,319 | |||||||
6,291 | 8,091 | 36,612 | ||||||||
Interest paid | (12,200) | (11,880) | (23,851) | |||||||
Interest received | - | 2,711 | 4,291 | |||||||
Taxes paid | (321) | (220) | (629) | |||||||
(12,521) | (9,389) | (20,189) | ||||||||
Net cash provided by (used in) operating activities | (2,181) | (2,529) | 5,043 | |||||||
*) Restated, see Note 2b.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended 30 June | Year ended 31 December | ||||||||
2013 | *) 2012 | *) 2012 | |||||||
Unaudited | Audited | ||||||||
U.S. dollars in thousands | |||||||||
Cash flows from investing activities: | |||||||||
Acquisition of additional interest in jointly controlled entity | - | (1,500) | (1,500) | ||||||
Additions to investment properties | (4,011) | (4,618) | (7,881) | ||||||
Additions to investment properties under construction | (1,036) | (91) | (2,277) | ||||||
Purchase of fixed assets | (166) | (216) | (279) | ||||||
Settlement of restricted deposit | 832 | - | 620 | ||||||
Repayment of loans granted to related parties | - | 250 | 250 | ||||||
Loans granted to related parties | (217) | (1,446) | (1,630) | ||||||
Proceeds from repayment of loans granted to associates | - | 10,017 | 12,088 | ||||||
Cash from obtaining control in companies accounted for the equity method | 86 | - | - | ||||||
Proceeds from sale of investment property under construction | 3,973 | - | - | ||||||
Net cash provided by (used in) investing activities | (523) | 2,396 | (609) | ||||||
Cash flows from financing activities: | |||||||||
Repayment of debentures | - | - | (26,456) | ||||||
Issuance of debentures | 16,852 | - | - | ||||||
Receipt of loans from banks and others | 33,333 | 19,361 | 91,118 | ||||||
Receipt of loans from shareholders | - | - | 12,422 | ||||||
Repayment of loans from shareholders | - | (5,567) | (18,306) | ||||||
Repayment of loans from banks and others | (25,696) | (22,264) | (69,268) | ||||||
Net cash provided by (used in) financing activities | 24,489 | (8,470) | (10,490) | ||||||
Exchange differences on balances of cash and cash equivalents | (1,697) | 417 | 249 | ||||||
Increase (decrease) in cash and cash equivalents | 20,088 | (8,186) | (5,807) | ||||||
Cash and cash equivalents at the beginning of the period | 25,669 | 31,476 | 31,476 | ||||||
Cash and cash equivalents at the end of the period | 45,757 | 23,290 | 25,669 | ||||||
*) Restated, see Note 2b.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended 30 June | Year ended 31 December | ||||||
2013 | 2012 | 2012 | |||||
Unaudited | Audited | ||||||
U.S. dollars in thousands | |||||||
(a) | Cash generated from obtaining control in companies accounted for using the equity method: | ||||||
The subsidiaries' assets and liabilities at date of sale: | |||||||
Working capital (excluding cash and cash equivalents) | 2,793 | - | - | ||||
Investment properties | (85,760) | - | - | ||||
Other receivables | (71) | - | - | ||||
Deferred taxes | (119) | - | - | ||||
Loans from banks | 10,849 | - | - | ||||
Other non-current liabilities | 866 | - | - | ||||
Loans from related party | 5,973 | - | - | ||||
Foreign currency translation reserve | 244 | - | - | ||||
Non-controlling interests | 29,558 | - | - | ||||
Loss from obtaining control in companies accounted for using the equity method | (244) | - | - | ||||
Investment in associate | 35,997 | - | - | ||||
86 | - | - | |||||
(b) | Significant non-cash transactions: | ||||||
Obtaining control in companies accounted for using the equity method against offset of previously granted loans | 600 | - | - | ||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:- GENERAL
a. These interim consolidated financial statements have been prepared in a condensed format as of 30 June 2013 and for the six months then ended ("interim condensed consolidated financial statements"). These financial statements should be read in conjunction with the Company's annual financial statements and accompanying notes as of 31 December 2012 and for the year then ended ("annual financial statements").
b. Based on management plans and as reflected in the Company's forecasted cash flows, the Company expects to finance its activities in the next 12 months after the balance sheet date, inter alia, by obtaining loans from banks in Russia which will be secured by properties which are presently unsecured with a fair value as of 30 June 2013 amounting to approximately US$ 69 million (for additional loan provided after the balance sheet date, see note 8b), revenues from sales of building projects that have been completed during 2013 and issuance of bonds (see Note 8a).
In addition, the short-term loans from banks amounting to approximately US$ 69 million are secured by non-cancelable bank guarantees of the controlling shareholders until the full repayment of the loans (for repayment of part of these loans after the balance sheet date - see note 8c).
In respect of the management expectations, based on the above, the Company expected to comply with all of its liabilities.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation of the interim financial statements:
The interim condensed consolidated financial statements have been prepared in accordance with the International Financial Reporting Standard IAS 34 ("Interim Financial Reporting").
b. New standards, interpretations and amendments adopted by the Company:
The significant accounting policies and methods of computation followed in the preparation of the interim condensed consolidated financial statements are identical to those followed in the preparation of the latest annual financial statements, except as noted below:
IFRS 10, IFRS 11, IAS 28R - Consolidated Financial Statements Joint Arrangements, Investments in Associates and Jointly Controlled Entities
IFRS 10 - Consolidated Financial Statements
IFRS 10 replaces the parts of previous existing IAS 27 Consolidated and Separate Financial Statements that dealt with consolidated financial statements.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The initial adoption of IFRS 10 had no impact on the Company's consolidated financial statements.
IFRS 11- Joint Arrangements
IFRS 11 replaces IAS 31 interests in Joint Ventures.
The main effect of IFRS 11 arises from joint ventures of the Group in Inomotor and Avtoprioriet ("Century companies") and Inverton which previously, under IAS 31, were recognized using the proportionate consolidation method and under IFRS 11 are accounted for at equity method. During January 2013, the Company obtained control over Century companies and since then started to consolidate them, see Note 3.
Under the equity method, the investment in the associate is presented at cost with the addition of post-acquisition changes in the Group's share of net assets, including other comprehensive income of the associate. Profits and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.
The equity method is applied until the loss of significant influence or classification as an asset held-for-sale.
IAS 28R, "Investments in Associates and Joint Ventures"
IAS 28R ("IAS 28R") supersedes IAS 28. The main changes included in IAS 28R compared to IAS 28 address the accounting treatment of investments in joint ventures using the equity method.
Amendments to IFRS 10, IFRS 11, IFRS 12 - Consolidated Financial Statements, Joint Arrangements, Disclosure of Interests in Other Entities ("the Amendments")
In July 2012, the IASB issued Amendments to the above Standards which provide reliefs with respect to the transition provisions and allow restatement of comparative amounts for one year only. The restatement of comparative amounts for earlier periods is optional.
The Company began to apply the amendment in the financial statements as of 1 January 2013.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Below is the effect of the change in accounting policies as a result of the initial adoption of IFRS 11 on the Company's financial statements:
In the statements of financial position
As of 30 June 2012 (unaudited) | As reported in the past | Influence of IFRS 11 | As presented in these financial statements | |||
U.S. dollars in thousands | ||||||
CURRENT ASSETS | ||||||
Cash and cash equivalents | 25,388 | (2,098) | 23,290 | |||
Restricted bank deposits | 1,706 | - | 1,706 | |||
Trade receivables | 1,492 | (202) | 1,290 | |||
Other receivables | 3,974 | (184) | 3,790 | |||
VAT receivables | 6,654 | (274) | 6,380 | |||
Inventories of building for sale | 171,594 | - | 171,594 | |||
210,808 | (2,758) | 208,050 | ||||
NON-CURRENT ASSETS | ||||||
Investments properties | 367,507 | (89,150) | 278,357 | |||
Investments properties under construction | 80,222 | - | 80,222 | |||
Inventories of buildings for sale | 67,368 | - | 67,368 | |||
Loans granted to related parties | 4,413 | (4,413) | - | |||
VAT receivables | 212 | - | 212 | |||
Fixed assets, net | 1,058 | (177) | 881 | |||
Other long-term receivables | 3,866 | - | 3,866 | |||
Prepaid expenses | 541 | - | 541 | |||
Deferred taxes | 3,618 | - | 3,618 | |||
Investments in associates | - | 54,433 | 54,433 | |||
Loans granted to associates | - | 12,747 | 12,747 | |||
528,805 | (26,560) | 502,245 | ||||
739,613 | (29,318) | 710,295 | ||||
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
As reported in the past | Influence of IFRS 11 | As presented in these financial statements | ||||
U.S. dollars in thousands | ||||||
CURRENT LIABILITIES | ||||||
Credit from banks | 68,671 | - | 68,671 | |||
Current maturities of long-term loans from banks and debentures | 44,608 | (3,014) | 41,594 | |||
Credit from banks for financing of inventory of buildings for sale | 20,626 | - | 20,626 | |||
Government authorities | 2,829 | (446) | 2,383 | |||
Trade payables | 9,020 | (496) | 8,524 | |||
Deposits from tenants | 2,637 | (844) | 1,793 | |||
Advances from buyers | 30,423 | - | 30,423 | |||
Other accounts payable | 988 | (124) | 864 | |||
179,802 | (4,924) | 174,878 | ||||
NON CURRENT LIABILITIES | ||||||
Loans from banks and others | 76,406 | (18,426) | 57,980 | |||
Debentures | 135,809 | - | 135,809 | |||
Other non-current liabilities | 9,682 | (5,968) | 3,714 | |||
221,897 | (24,394) | 197,503 | ||||
EQUITY ATTRIBUTSBLE TO EQUITY HOLDERS OF THE PARENT | ||||||
Issued capital | 1,036 | - | 1,036 | |||
Share premium | 359,803 | - | 359,803 | |||
Capital reserve for share based payment transactions | 11,969 | - | 11,969 | |||
Capital reserve for transactions with controlling shareholders | 6,565 | - | 6,565 | |||
Foreign currency translation reserve | (61,282) | - | (61,282) | |||
Retained earnings | 19,823 | - | 19,823 | |||
TOTAL EQUITY | 337,914 | - | 337,914 | |||
TOTAL EQUITY AND LIABILITIES | 739,613 | (29,318) | 710,295 | |||
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
As reported in the past | Influence of IFRS 11 | As presented in these financial statements | ||||
U.S. dollars in thousands | ||||||
As of 31 December 2012 (audited) | ||||||
CURRENT ASSETS | ||||||
Cash and cash equivalents | 26,685 | (1,016) | 25,669 | |||
Restricted bank deposits | 1,119 | - | 1,119 | |||
Trade receivables | 2,713 | (237) | 2,476 | |||
Other receivables | 7,746 | (119) | 7,627 | |||
VAT receivables | 5,111 | (310) | 4,801 | |||
Loans granted to related parties | 3,665 | (3,665) | - | |||
Inventories of building for sale | 190,821 | - | 190,821 | |||
Loans granted to associates | - | 9,070 | 9,070 | |||
237,860 | 3,723 | 241,583 | ||||
NON-CURRENT ASSETS | ||||||
Investments properties | 396,865 | (94,076) | 302,789 | |||
Investments properties under construction | 51,552 | - | 51,552 | |||
Inventories of buildings for sale | 79,100 | - | 79,100 | |||
VAT receivables | 226 | - | 226 | |||
Fixed assets, net | 1,015 | (190) | 825 | |||
Other long-term receivables | 3,038 | - | 3,038 | |||
Prepaid expenses | 541 | - | 541 | |||
Deferred taxes | 2,437 | (87) | 2,350 | |||
Investments in associates | - | 61,650 | 61,650 | |||
534,774 | (32,703) | 502,071 | ||||
772,634 | (28,980) | 743,654 | ||||
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
As reported in the past | Influence of IFRS 11 | As presented in these financial statements | ||||
U.S. dollars in thousands | ||||||
CURRENT LIABILITIES | ||||||
Credit from banks | 68,523 | - | 68,523 | |||
Current maturities of long-term loans from banks and debentures | 53,493 | (3,133) | 50,360 | |||
Credit from banks for financing of inventory of buildings for sale | 15,421 | - | 15,421 | |||
Government authorities | 3,677 | (998) | 2,679 | |||
Trade payables | 7,463 | (169) | 7,294 | |||
Deposits from tenants | 3,636 | (973) | 2,663 | |||
Advances from buyers | 77,321 | - | 77,321 | |||
Other accounts payable | 2,346 | (135) | 2,211 | |||
231,880 | (5,408) | 226,472 | ||||
NON CURRENT LIABILITIES | ||||||
Loans from banks | 98,700 | (17,315) | 81,385 | |||
Debentures | 114,169 | - | 114,169 | |||
Other non-current liabilities | 10,538 | (6,257) | 4,281 | |||
223,407 | (23,572) | 199,835 | ||||
455,287 | (28,980) | 426,307 | ||||
EQUITY ATTRIBUTSBLE TO EQUITY HOLDERS OF THE PARENT | ||||||
Issued capital | 1,036 | - | 1,036 | |||
Share premium | 359,803 | - | 359,803 | |||
Capital reserve for share based payment transactions | 12,186 | - | 12,186 | |||
Capital reserve for transactions with controlling shareholders | 8,391 | - | 8,391 | |||
Foreign currency translation reserve | (42,286) | - | (42,286) | |||
Accumulated deficit | (21,783) | - | (21,783) | |||
TOTAL EQUITY | 317,347 | - | 317,347 | |||
TOTAL EQUITY AND LIABILITIES | 772,634 | (28,980) | 743,654 | |||
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In the consolidated income statement and consolidated statement of comprehensive income
As reported in the past | Influence of IFRS 11 | As presented in these financial statements | ||||
For the six months ended 30 June 2012 (unaudited) | U.S. dollars in thousands (except per share data) | |||||
Rental income from investment properties | 25,168 | (9,720) | 15,448 | |||
Income from sale of inventories | 3,711 | - | 3,711 | |||
Revenue from management fees | 1,825 | (1,000) | 825 | |||
Total revenues | 30,704 | 10,720 | 19,984 | |||
Cost of sales and maintenance of inventories | (5,487) | - | (5,487) | |||
Cost of maintenance and management | (9,256) | 1,628 | (7,628) | |||
Gross profit | 15,961 | (9,092) | 6,869 | |||
General and administrative expenses | (7,103) | 183 | (6,920) | |||
Marketing expenses | (775) | 43 | (732) | |||
Fair value adjustments of investments properties and investment properties under construction | 2,263 | 3,686 | 5,949 | |||
Other expenses, net | (722) | (257) | (979) | |||
Group's share in earnings of associates operating loss | - | 3,885 | 3,885 | |||
Operating profit | 9,624 | (1,552) | 8,072 | |||
Finance income | 708 | 291 | 999 | |||
Finance expenses | (13,645) | 1,328 | (12,317) | |||
Net foreign exchange differences | 1,924 | (67) | 1,857 | |||
Loss before taxes on income | (1,389) | - | (1,389) | |||
Tax benefit | (693) | - | (693) | |||
Loss | (696) | - | (696) | |||
Basic and diluted loss per share attributable to equity holders of the parent | (0.01) | - | (0.01) | |||
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
As reported in the past | Influence of IFRS 11 | As presented in these financial statements | ||||
For the year ended 31 December 2012 (audited) | U.S. dollars in thousands (except per share data) | |||||
Rental income from investment properties | 47,267 | (15,036) | 32,231 | |||
Income from sale of inventories | 8,079 | - | 8,079 | |||
Revenue from management fees | 3,689 | (2,048) | 1,641 | |||
Total revenues | 59,035 | (17,084) | 41,951 | |||
Cost of sales and maintenance of inventories | (12,833) | - | (12,833) | |||
Cost of maintenance and management | (18,396) | 3,522 | (14,874) | |||
Gross profit before deduction | 27,806 | (13,562) | 14,244 | |||
Impairment of inventory of buildings for sale | (8,041) | - | (8,041) | |||
Gross profit | 19,765 | (13,562) | 6,203 | |||
General and administrative expenses | (14,898) | 291 | (14,607) | |||
Marketing expenses | (2,291) | 189 | (2,102) | |||
Fair value adjustments of investments properties and investment properties under construction | (37,258) | 5,704 | (31,554) | |||
Other expenses, net | (1,664) | (168) | (1,832) | |||
Group's share in earnings of associates operating loss | - | 6,340 | 6,340 | |||
Operating loss | (36,346) | (1,206) | (37,552) | |||
Finance income | 1,007 | 375 | 1,382 | |||
Finance expenses | (26,760) | 1,819 | (24,941) | |||
Net foreign exchange differences | 21,675 | (1,783) | 19,892 | |||
Loss before taxes on income | (40,424) | (795) | (41,219) | |||
Taxes on income | 1,878 | (795) | 1,083 | |||
Loss | (42,302) | - | (42,302) | |||
Basic and dilute loss per share attributable to equity holders of the parent | (0.41) | - | (0.41) | |||
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In the consolidated statement of changes in equity
As reported in the past | Influence of IFRS 11 | As presented in these financial statements | ||||
U.S. dollars in thousands | ||||||
As of 1 January 2012 (audited) | ||||||
Retained earnings | 20,519 | - | 20,519 | |||
In the consolidated statements of cash flows
As reported in the past | Influence of IFRS 11 | As presented in these financial statements | ||||
U.S. dollars in thousands | ||||||
For the six months ended 30 June 2012 (unaudited) | ||||||
From operating activities | 5,199 | (7,728) | (2,529) | |||
From investing activities | (2,822) | 5,218 | 2,396 | |||
From financing activities | (9,710) | 1,240 | (8,470) | |||
As reported in the past | Influence of IFRS 11 | As presented in these financial statements | ||||
U.S. dollars in thousands | ||||||
For the year ended 31 December 2012 (audited) | ||||||
From operating activities | 15,213 | (10,170) | 5,043 | |||
From investing activities | (8,671) | 8,062 | (609) | |||
From financing activities | (12,488) | 1,998 | (10,490) | |||
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
IFRS 13, "Fair Value Measurement":
IFRS 13 establishes guidance for the measurement of fair value, to the extent that such measurement is required according to IFRS. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value takes into account the market participant's ability to generate economic benefits by using the asset in its highest and best use. IFRS 13 also specifies the characteristics of market participants and the assumptions that market participants would use when measuring fair value. The provisions of IFRS 13 are applied prospectively and they do not apply to comparative figures.
The initial adoption of IFRS 13 did not have a material effect on the Company's financial statements.
The fair value of the financial assets and liabilities is not significantly different from the value presented in the annual financial statements, except as mentioned in Note 4.
Disclosure Of New Standards In The Period Prior To Their Adoption
Amendments to IAS 36 - Impairment of Assets:
In May 2013, the IASB issued amendments to IAS 36, "Impairment of Assets" ("the Amendments") regarding the disclosure requirements of fair value less costs of disposal. The Amendments include additional disclosure requirements of the recoverable amount and fair value. The additional disclosures will be based on the fair value hierarchy, the valuation techniques and changes therein, the discount rates and the principal assumptions underlying the valuations.
The Amendments are effective for annual periods beginning on or after 1 January 2014. Earlier application is permitted.
The required disclosures will be included in the Company's financial statements upon the first-time adoption of the Amendments.
IFRIC 21 - Levies:
In May 2013, the IASB issued IFRIC 21, "Levies", regarding levies imposed by governments through legislation. According to IFRIC 21, the liability to pay a levy will only be recognized upon the existence of a present obligation as a result of a past event.
IFRIC 21 is effective for annual periods beginning on or after 1 January 2014. Earlier application is permitted.
The Company is evaluating the possible impact of the adoption of the amendments to IAS 32 but is presently unable to assess the effects, if any, on its financial statements.
NOTE 3:- BUSINESS COMBINATIONS
On 4 January 2013, the Company entered into an agreement with its partners in Inomotor LLC and Avtoprioriet LLC ("the Century Companies") according to which the partners will waive the option previously granted to them for the acquisition of 1% of the Century Companies in consideration of 600 thousand US dollars. The parties agreed that such amount will be set off against the balance of the loan previously granted to one of the partners. In addition, the repayment date of the loan was extended by six months.
Simultaneously, the Company amended its joint control agreements with the partners in the Century Companies in such a way that from the date of the amendment the Company obtained control over the Century Companies.
Before the date of obtaining control, the Century Companies were accounted for at equity.
In a business combination achieved in stages, equity interests in the acquiree that had been held by the acquirer prior to obtaining control are measured at the acquisition date fair value while recognizing a gain or loss resulting from the revaluation of the prior investment on the date of achieving control. Accordingly, the Company recognized a loss from the realization of exchange differences in the amount of 244 thousand US dollars.
The Group has elected to measure the non-controlling interests in the Century Companies at the proportionate share of the non-controlling interests in the acquired identifiable net assets.
NOTE 3:- BUSINESS COMBINATIONS (Cont.)
Fair value | ||
U.S. dollars in thousands | ||
Cash and cash equivalents | 86 | |
Trade receivables | 38 | |
Other receivables | 38 | |
VAT receivables | 254 | |
Investment properties | 85,760 | |
Deferred taxes | 119 | |
Other long-term receivables | 71 | |
86,366 | ||
Trade payables | (228) | |
Loans from bank and others | (12,854) | |
Government authorities | (111) | |
Deposits from tenants | (779) | |
Other non-current liabilities | (866) | |
Loans from related parties | (5,973) | |
(20,811) | ||
Net identifiable assets | 65,555 | |
Non-controlling interests | (29,558) | |
Total acquisition cost | 35,997 |
The total acquisition cost was 36,597 thousand US dollars including waiver of an option previously granted to the partner in the amount of 600 thousand US dollars, which reflected the fair value of the existing investment in the Century Companies on the date when control was obtained.
Cost of acquisition
Fair value | ||
U.S. dollars in thousands | ||
Cash paid | - | |
Waiver of option (1%) previously granted to the sellers, at fair value | 600 | |
Fair value of existing investment on acquisition date | 35,997 | |
Total | 36,597 | |
Cash flow on the acquisition | ||
Cash and cash equivalents in the Century Companies on acquisition date | 86 | |
Cash paid | - | |
Net cash | 86 |
NOTE 3:- BUSINESS COMBINATIONS (Cont.)
From the date of acquisition, the Century Companies have contributed 7,019 thousand US dollars to the consolidated net income and 4,608 thousand US dollars to the consolidated revenues.
NOTE 4:- FINANCIAL INSTRUMENTS
Set out below is a comparison of the carrying amounts and fair values of financial instruments as of June 30, 2013:
Carrying amount | Fair value | |||
U.S. dollars in thousands | ||||
Financial liabilities: | ||||
Debentures (series A) | 6,420 | 6,494 | ||
Debentures (series B) | 26,416 | 26,481 | ||
Debentures (series C) | 73,911 | 75,792 | ||
Debentures (series D) | 60,796 | 60,770 | ||
167,543 | 173,605 | |||
NOTE 5:- SEGMENTS
General
As discussed in the annual consolidated financial statements, the Group has the following operating segments:
1. Commercial real estate segment.
2. Residential real estate segment.
Segments performance is evaluated based on the operating profit or loss which, in certain cases, as explained in the following table, is measured differently from operating profit or loss in the consolidated financial statements.
Jointly controlled entities, which are accounted for using the equity method, are presented as part of the results of the commercial real estate segment.
The Group's financing (including finance costs and finance income) and taxes on income are managed on a group basis and are not allocated to segments.
NOTE 5:- SEGMENTS (Cont.)
Commercial | Residential | Total | ||||
U.S. dollars in thousands | ||||||
Six months ended 30 June 2013 (unaudited): | ||||||
Segment revenues | 22,896 | 931 | 23,827 | |||
Segment results | 51,514 | (2,689) | 48,825 | |||
Unallocated expenses | (3,946) | |||||
Finance expenses, net | (42,281) | |||||
Loss before taxes on income | 2,598 | |||||
Commercial | Residential | Total | ||||
U.S. dollars in thousands | ||||||
Six months ended 30 June 2012 (unaudited) *): | ||||||
Segment revenues | 16,273 | 3,711 | 19,984 | |||
Segment results | 16,073 | (2,667) | 13,406 | |||
Unallocated expenses | (5,334) | |||||
Finance expenses, net | (9,461) | |||||
Loss before taxes on income | (1,389) | |||||
Commercial | Residential | Total | ||||
U.S. dollars in thousands | ||||||
Year ended 31 December 2012 (audited) *): | ||||||
Segment revenues | 33,872 | 8,079 | 41,951 | |||
Segment results | (10,572) | (16,789) | (27,361) | |||
Unallocated expenses | (10,191) | |||||
Finance expenses, net | (3,667) | |||||
Loss before taxes on income | (41,219) | |||||
*) Reclassified, see Note 2b.
NOTE 6:- DISCLOSURE OF JOINTLY CONTROLLED ENTITY ACCOUNTED FOR USING THE EQUITY METHOD OF ACCOUTING
Summarized data for jointly controlled entity accounted for using the equity method of accounting, for all reported periods
The Group's share in the Summarized data of the financial statements of the associates:
Summarized financial information of financial position:
30 June | 31 December |
| ||||||
2013 | 2012 | 2012 |
| |||||
Unaudited | Audited |
| ||||||
U.S. dollars in thousands | ||||||||
| ||||||||
CURRENT ASSETS: |
| |||||||
Cash and cash equivalents | 1,803 | 1,776 | 927 |
| ||||
Trade receivables | 219 | 203 | 216 |
| ||||
Other receivables | - | 144 | 96 |
| ||||
VAT receivable | 194 | 145 | 169 |
| ||||
| ||||||||
2,216 | 2,268 | 1,408 |
| |||||
| ||||||||
NON-CURRENT ASSETS: |
| |||||||
Investment properties | 46,733 | 45,178 | 46,396 |
| ||||
Fixed assets, net | 175 | 177 | 190 |
| ||||
Other long term receivables | 80 | 62 | 15 |
| ||||
| ||||||||
46,988 | 45,417 | 46,601 |
| |||||
| ||||||||
CURRENT LIABILITIES: |
| |||||||
Current maturities of long-term loans from banks | 1,382 | 1,382 | 1,382 |
| ||||
Government authorities | 725 | 351 | 936 |
| ||||
Trade payables | 72 | 70 | 40 |
| ||||
Deposits from tenants | 323 | 464 | 532 |
| ||||
Other accounts payable | 147 | 124 | 106 |
| ||||
| ||||||||
2,649 | 2,391 | 2,996 |
| |||||
| ||||||||
NON-CURRENT LIABILITIES: |
| |||||||
Loans from banks | 10,006 | 11,389 | 10,697 |
| ||||
Loans from related parties | 2,867 | 4,878 | 2,786 |
| ||||
Other non-current liabilities | 5,844 | 5,609 | 5,839 |
| ||||
| ||||||||
18,717 | 21,876 | 19,322 |
| |||||
| ||||||||
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT: | 27,838 | 23,418 | 25,691 |
| ||||
NOTE 6:- DISCLOSURE OF JOINTLY CONTROLLED ENTITY ACCOUNTED FOR USING THE EQUITY METHOD OF ACCOUTING (Cont.)
Summarized financial information of comprehensive income
Six months ended 30 June | Year ended 31 December | ||||||
2013 | 2012 | 2012 | |||||
Unaudited | Audited | ||||||
U.S. dollars in thousands | |||||||
Rental income from investment properties | 2,936 | 2,751 | 5,679 | ||||
Revenues from management fees | 1,032 | 967 | 1,995 | ||||
Total revenues | 3,968 | 3,718 | 7,674 | ||||
Cost of sales and maintenance of inventories | (1,099) | (1,022) | (2,114) | ||||
Gross profit | 2,869 | 2,696 | 5,560 | ||||
General and administrative expenses | (138) | (139) | (152) | ||||
Fair value adjustments of investment properties and investment properties under construction | 3,810 | (59) | (2,354) | ||||
Other income, net | - | 278 | 132 | ||||
Operating profit | 6,541 | 2,776 | 3,186 | ||||
Finance expenses | (636) | (738) | (1,477) | ||||
Net foreign exchange differences | (1,080) | (306) | 956 | ||||
Profit before taxes | 4,825 | 1,732 | 2,665 | ||||
Taxes on income | 216 | - | 795 | ||||
Net profit | 4,609 | 1,732 | 1,870 | ||||
Other comprehensive income (loss) | (2,481) | (514) | 1,662 | ||||
Total comprehensive income (loss) | 2,128 | 1,218 | 3,532 | ||||
The Company does not attach the financial statements of Inverton Enterprises Limited, a company which accounted for the equity method, since the Company's management believes that the disclosure of the financial statements will not add significant information to that already included in the Company's' financial statements.
NOTE 7:- SIGNIFICANT EVENTS DURING THE REPORTING PERIOD
a. On 23 January 2013, an indirect subsidiary of the Company, which holds the leasehold rights to a project known as the "Skyscraper" in Moscow, received a letter from the Department of Land Resources of the Moscow Government, notifying it of the termination of its lease agreement. During February 2013, the Company filed an objection to the letter, claiming that the lease agreement had been unlawfully terminated by the Moscow Government since any alleged breach of its terms had been due to the actions and omissions on the part of the Moscow Government itself.
The objection of the Company was denied by the Moscow Government, based mainly on procedural arguments. Following the Company's objection, the subsidiary of the Company filed a claim against the Moscow Government to cancel the above mentioned decision. The first court hearing was held in June 2013. A second court hearing is scheduled for September 2013. The intention of the Company is to continue to take all measures, including legal steps, in order to protect its rights.
The Company has fully impaired the project value as of 31 December 2012.
b. On 25 February 2013, Midroog announced that the rating of the Company's debentures
(Series A, B and D) in circulation was increased from Baa2 to Baa1.
c. During the reporting period, a subsidiary of the Company entered into an agreement with an investment house which is an unrelated party ("the investment house") for the provision of a short-term credit line in the amount of NIS 37 million (approximately 10 million US dollars). As of June 30, 2013, the Company has used NIS 32 million (approximately 8.8 million US dollars) of the credit line. The loan bears interest at the rate of Israeli Prime + 2% payable quarterly. For the purpose of ensuring repayment of the loan, the Company provided an unlimited guarantee. Additionally, the subsidiary pledged Series D debentures of the Company owned by the subsidiary, in favor of the investment house. Within the framework of the agreement, a financial covenant was set whereby the ratio of the outstanding loan to the value of the debentures (held by the subsidiary) will not be greater than 1.
As of 30 June 2013, the Company is in compliance with the above financial covenant.
As to the repayment of the credit see Note 8d.
d. On 22 April 2013, Tamiz, a 100% owned subsidiary of the Company, completed the sale of land designated for the development of a commercial center in the city of Penza, Russia, in consideration of approximately 4 million US dollars. As a result, the Company recognized profit in the financial statements of approximately 500 thousand US dollars. As of the balance sheet date the Company received full consideration from the buyers.
e. In May 2013, the Company received commitments from several investors to purchase debentures (Series D) of the Company in private placements with par value of NIS 60,000,000 ("the new debentures").
The issuance of the new debentures was carried out by way of a series expansion at a price of NIS 104.08 per NIS 100 par value, which reflects a discount on the debenture value on the issuance date.
NOTE 7:- SIGNIFICANT EVENTS DURING THE REPORTING PERIOD (Cont.)
After the consummation of the aforementioned private placements, the par value of the debentures (Series D) is NIS 272,089,500.
The total proceeds that the Company received from the issuance of the new debentures amount to approximately NIS 62,448 thousand (17,563 thousand US dollars) (approximately NIS 61,930 thousand (17,419 thousand US dollars), net).
The effective interest rate of the new debentures is 7.86%.
f. On 19 May 2013, Mashinostroenie & Hydravlika OJSC ("the subsidiary") entered into a loan agreement with SberBank of Russia ("the Bank") under which the Bank will grant the subsidiary a credit line in an aggregate amount of up to 19 million US dollars ("the Loan"), for the purpose of refinancing one of the subsidiary's projects.
Out of aforementioned credit line, an amount of 10 million US dollars had been obtained by the Company and the balance of 9 million US dollars will be made available within a period of 11 months.
The Loan is for a period of approximately 6.5 years and bears fixed dollar interest at the rate of 8.75% per annum, payable quarterly, in addition to other commissions as set out in the Loan agreement.
To secure the repayment of the Loan, the Company and the subsidiary gave the Bank the following securities: a pledge over the entire holdings in the project; the Company's guarantee for the repayment of the debt and the full and complete fulfillment of the entire undertakings of the subsidiary, and a pledge over the loans between the Company and the subsidiary.
In addition, the Company undertook that the LTV ratio of the project will not exceed 70%.
As of 30 June 2013, the Company is in compliance with the above financial covenant.
g. The Company evaluated the immediate influence of the debt crisis in Cyprus. The Company has deposits in Cyprus banks in insignificant amounts, and therefore the influence on the financial statements is immaterial. The Company is monitoring and will continue to monitor the above mentioned issue.
NOTE 8: - SUBSEQUENT EVENTS
a. On 25 July 2013, the Company issued new debentures (Series E) in the total amount of NIS 240 million (approximately 67.2 million US dollars). The debentures (Series E) bear annual interest of 7.21% and were rated by Midroog Moody's at "ilBaa1/Stable".
The debentures are repayable in five unequal annual payments, the first payment is 10% of the principal and each of the second to the fifth payments is 22.5% of the principal, payable on May 31 of each of the years 2016 through 2020 (inclusive).
b. A wholly owned subsidiary of the Company, Limited liability Company Investicionno-ipotechnaya kompaniya ("IIK") has entered into a US$95 million loan agreement, at fixed interest of 7%, payable quarterly. The Loan refinances IIK existing debt of 36 million US dollars and allows the business to release additional funds which will be used by the Company for working capital purposes.
The Loan is secured by various mortgages, charges, pledges and other customary security interests for the benefit of the Bank, provided by both IIK and the Company. The Loan will be repaid within seven years through regular quarterly payments and a final balloon payment of 53% at the end of the term.
c. On August 6 and 13, 2013 the Company has partly repaid the short-term loans from banks which are secured by non-cancelable bank guarantees of the controlling shareholders with the total amount of 25 million US dollar.
d. At the beginning of August 2013 the Company has repaid the loan which was granted to the Company during the first quarter 2013 by the investment house which is an unrelated party in the amount of NIS 32 million (approximately 8.8 million US Dollar).
- - - - - - - - - - - - - - - - - - -
Related Shares:
MLD.L