5th Sep 2007 07:01
Raven Russia Limited05 September 2007 5 September 2007 RAVEN RUSSIA LIMITED ("Raven Russia" or the "Company") INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 Raven Russia (AIM: RUS.L), the Guernsey registered AIM listed property investment company focussed on Russia, announces its Interim Results for the sixmonths ended 30 June 2007. HIGHLIGHTS • Pre tax profit £32.1 million (30 June 2006: £4.5 million)• EPS 6.21 pence (30 June 2006: 1.67 pence)• Proposed interim dividend increased by 25% to 2.5 pence per share (30 June 2006: 2.0pence)• NAV per share increased from 106 pence to 110 pence after dividends and deferred tax (115 pence pre dividends and deferred tax)• A total of $1.9 billion committed to all projects, equating to over 200% of the Company's equity capital• Four fully let investment properties comprising 171,800 sq m - $28.2 million annualised income from investment property portfolio - Average, ungeared, yield on cost of 13% on investment portfolio• Investment properties valued at $265 million, a 22% increase on cost• $178 million debt finance facilities agreed with third party providers for the four investment properties• 14 joint venture development projects comprising 1.8 million sq m for all phases• Outline terms agreed on $503 million of development finance• Opportunity, subject to shareholder approval, to enter into a phased development joint venture in Ukraine comprising 20 ha with 40% pre-let Commenting on the results, Richard Jewson, Chairman, said:"The outlook for the Russian economy remains positive and the business environment in which we operate continues to improve. "Raven Russia has made significant progress in the half year, continuing to build the team in Moscow and transact business on favourable terms. We are demonstrating clearly that we are building an excellent business in one of the world's most dynamic economies." Enquiries to: Jeremy Carey/Rachel Drysdale, Tavistock Communications Tel: +44 (0)207 920 3150 Bruce Garrow, Numis Securities Tel: +44 (0)207 260 1000 Investec Administration Services Limited Tel: +44 (0)1481 750507 CHAIRMAN'S STATEMENT Results We are pleased to announce the Company's positive results for the six months ended 30 June 2007. Significant progress has been made over the period . The Company owns an investment portfolio with annual net income of $28.2 million andhas concluded a further 14 development joint ventures with a forecast end development cost of $1.7 billion and anticipated annual net income of $211 million once fully developed and let.This gives a total expected, ungeared, portfolio yield of 12.4% which the Property Adviser expects to increase to over 13% once development profits and interest are accounted for. In the six months to 30 June 2007, the Company made a pre-tax profit of £32.1million (30 June 2006: £4.5 million) equating to earnings per share of 6.21pence. Portfolio Following a formal revaluation by Jones Lang LaSalle ("JLL"), our investmentportfolio of four properties has a net value of $ 265 million against a cost of$217 million, an increase of 22%. We hold our development projects at costrather than their market value and on this basis the Company's net asset valuewas 110 pence per share as at 30 June 2007 (up 4 % since the year end, afterdeferred tax on revaluation reserves and dividends). Dividend We are continuing to build a high quality, focused investment portfolio whichshould meet our objective of paying a dividend of 9 pence per share once fullyincome producing, representing a yield of 9% on the initial flotation. Torecognise this progress and the distributable profits earned in the period andto continue our progressive dividend policy, we intend to pay an interimdividend of 2.5 pence per share to shareholders on the register as at 12September 2007. This represents an increase of 25% on the interim dividend paidfor 2006. The Company will again offer a full scrip alternative so that shareholders havethe option of receiving interim cash dividends or increasing their shareholdingswith minimal transaction costs. Financing facilities The outlook for the Russian economy remains very positive and the businessenvironment in which the Company operates continues to improve. We arecontinuing to transact on good terms and bank finance is available at rateswhich enhance returns for shareholders. External finance is an important tool tomaximise shareholder returns. We have agreed un-drawn finance facilities on our four investment properties of$178 million with HSH Nordbank and Hypo Real Estate Bank International AG. Weare currently negotiating to increase these facilities to a total of $192million with the intention of drawing down on these in the last quarter of theyear on clearance of the final conditions precedent. Assuming these facilitiesare drawn down in full, the refinancing will represent 88% of the original costof the investment property portfolio. On behalf of the Company, Raven Russia Property Management Limited ("theProperty Adviser") has also negotiated term sheets for the larger developmentprojects with three separate international banks and is confident of announcinga further $303 million of construction financing facilities by the end of theyear. The Property Adviser is also in the process of securing competitive terms forMegalogix, the regional development joint venture. VTB Bank Europe Plc haveconfirmed outline terms to support the construction of the first two regionalsites in Rostov and Novosibirsk and have confirmed their willingness to considerfinancing further development sites in other regional cities in Russia. Theterms for the first two sites give the potential to provide senior debt of $200million for all phases of construction. Avalon Logistics Avalon Logistics is the logistics operating business owned by our partner in theMegalogix joint venture and which has agreed to pre let space in the Megalogixregional centres as they are developed. Since the period end, Raven Russia haspurchased a 50 per cent interest in this business for $2 million with eachpartner agreeing to fund a further $9 million each to meet capital investmentneeds. We believe that this investment will bring significant benefits in thearea in which we operate and has the potential for substantial financial returnas, with our partner, we build a leading pan-Russia logistics service company. Ukraine Joint Venture initiative As a result of our growing reputation in the region, we have been offered anattractive deal in Kiev, Ukraine. The proposal is to develop jointly a site ofaround 20 ha with an experienced local partner into a Grade A logistics park ofaround 100,000 sq m with a pre-let of at least 40% of the proposed floor space.Construction finance has also been negotiated. The market in the Ukraine is not dissimilar to Russia and we believe there isthe potential to make other complementary acquisitions in the short term. AsUkraine is outside of the Company's original geographical remit, a proposal isto be put before shareholders at an EGM to approve the widening of the Company'sinvestment mandate before the transaction becomes unconditional. A detailed update on the Company's progress is set out in the Property Adviser'saccompanying report Currency The Company continues to transact predominantly in US Dollars. The Boardratified the translation of the majority of the remaining Sterling cashresources to Dollars in July, achieving an average exchange rate of just over$2. This also means that from July onwards the Company's reporting currency willchange to US Dollars and this will be reflected in the year end financialstatements. Share buy back The Company has previously been granted the authority to buy back shares in themarket in order to enhance shareholders returns. The Board continues actively tomonitor share buy back opportunities, but is equally conscious of conservingexisting cash resources for its development commitments. Outlook There are now over 50 people in Moscow working out of the Property Adviser'snew, larger office, dedicated to meeting the Company's investment objectives. Inaddition, the Megalogix joint venture has its own offices and resource in thecities in which it has active sites. Tenant demand remains strong and investordemand is continuing to drive yields down further. Together, with the resultsfor the period, your Board believes that this demonstrates we are building anexcellent business in one of the world's most dynamic and vibrant economies. Consistent with the Company's stated strategy, the focus continues to be tobuild a high quality, focused investment portfolio which will meet the Company'sobjective of delivering value to shareholders through a progressive dividendpolicy and share price growth. Richard JewsonChairman5 September 2007 PROPERTY REVIEW In the period ended 30 June 2007, Raven Russia signed four deals, excluding anyMegalogix projects, with a potential end value of $341 million, giving theCompany a potential portfolio of $1.9 billion including the Megalogix jointventure projects. These transactions are a mixture of investment acquisitions, forward fundingsand joint venture developments, all in accordance with the Company's statedinvestment strategy. The first was the acquisition of a 15,800 sq m office block in St Petersburg ,fully let on a 10 year lease. The second is a development joint venture with EGLHoldings to build 55,000 sq m of Grade A warehouse space to the north of Moscow.Construction is now underway and EG Logistics, a subsidiary of EGL Holdings, haspre-let 60% of the space on a 5 year lease. The end value of the site isestimated at $56 million, generating an expected 13% initial yield to RavenRussia. In addition, conditional contracts were exchanged in June 2007 to forward fund104,000sq m of Grade A warehousing to the south of Moscow with RDI, anexperienced commercial and residential property developer. The anticipated endvalue of the site is $117 million, generating an expected initial yield of 13%. Finally, the Company also completed a forward funding contract with SKF, aRussian construction services group, to develop a 109,000sq m site to the southof Moscow. The anticipated end value is $112 million with an expected initialyield of 12.3%. Construction is planned to start in the next month. The Company now has a unique, high quality investment portfolio and a series ofdevelopment joint ventures which, in total, will ultimately comprise 1.9 millionsq m of Grade A warehouse space with an estimated end value, based on agreed oranticipated acquisition terms, of $1.9 billion. Investment Portfolio The Company's four investment properties comprising a total of 171,800 sq mproduce an annual net income of $28.2 million on a cost of $217 million,inclusive of acquisition costs. This represents a yield on cost of 13 %. Theseproperties are all fully let (save for small areas of parking). The averageweighted unexpired lease term as at the period end was 7 years. The four properties have been revalued by JLL at $265 million representing asurplus on cost of $48 million, a 22% increase. Development Portfolio Including the 50% share in the Megalogix Joint Venture, the Company has a totalof 14 development projects where it is possible to build a total of 1.8 millionsq m. At present, work has started on site at Istra, Moscow; EG Logistics,Moscow; and Shushari, St Petersburg comprising a total of 400,000 sq m. Of this,49% or 198,000 sq m is either pre-let or subject to letters of intent fromprospective tenants. Construction will commence within the next month, at Noginsk, Moscow; Pulkovo,St Petersburg; and SKF, Moscow where it is possible to build a total of 485,000sq m. Development at the majority of these sites will be undertaken in phases based ontenant demand. Megalogix Joint Venture The Megalogix Joint Venture is 50% owned by Raven Russia with the objective ofdeveloping logistics warehouses in 15 major cities across Russia and the CIS. Sites have either been acquired or allocated to Megalogix by the Municipalitiesin five cities, comprising a total of 210 ha on which it would be possible tobuild a total of 1 million sq m of warehousing. We have obtained industrial status and initial permits to start ground works andbegin construction at the Rostov Site. Phase 1 of the project is anticipated tobe 102,000 sq m of which 32,000 sq m is pre-let. Work is anticipated to commenceon site in September 2007. Similarly, at the Novosibirsk site, we have also obtained industrial status andinitial permits to start ground works and begin construction. As with Rostov, itis intended to build a total of 102,000 sq m in one phase of which 32,000 sq mis pre-let. Work is anticipated to commence on site in September 2007. Other Megalogix sites Acquired/Allocated A site of 44ha with industrial use has been acquired in Nizhny Novgorod by ourpartner in Megalogix. It is anticipated work will commence in spring 2008 oncepermits have been obtained. Conditional contracts have been exchanged for a 54 ha site in Omsk which iscurrently being rezoned to industrial use. In Khabarovsk, a site of 24ha with industrial use has been allocated toMegalogix by the local administration. A second Novosibirsk site which is a municipal land plot with industrial use hasbeen allocated to Megalogix. It is anticipated a lease agreement will be signedby the end of November 2007. By the end of 2007, it is expected that sites will either be acquired orallocated in 10 cities (11 sites) comprising a total of 440 ha on which it isanticipated it would be possible to build up to 2 million sq m. Deal Pipeline In addition to these projects, we are actively considering or are in detailednegotiations on a number of other transactions which meet the Company'sinvestment objectives. We estimate the end value of these projects to be inexcess of $2 billion. The Company's development projects that are on site are witness to the highlevels of tenant demand with approximately 49% pre-let. JLL estimate a vacancyrate in Moscow of less than 1% at the period end for Grade A warehouses. Market Overview The Company's investment portfolio has seen a positive uplift in value duringthe past six months. JLL has valued at an average initial cap rate of 10.2%..JLLestimate prime Moscow yields on offices of between 8% and 8.5%, retail between8.5% and 9% and warehousing between 10% and 10.5% and most agents expect apositive trend to continue, particularly for well-let Grade A investments of thetype the Company is investing in and developing. As the Company commences development across its numerous projects, we willmanage risk by standardising specifications, using common design, bulkpurchasing of materials and portfolio based marketing. In virtually all cases,we will build in phases to minimise development risk and maximise equityreturns. Outlook We are now in a phase where our efforts on behalf of the Company are directed tosourcing and closing new deals, working with the development partners to buildnew properties, leasing that space and then managing the built and letproperties Raven Russia Property Management LimitedProperty Adviser5 September 2007 Consolidated Income StatementFor the period to 30 June 2007 Period 01/01/07-30/06/07 Period 01/01/07-30/06/07 Notes Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 -------- -------- -------- -------- -------- -------- Gross rental income 7,835 - 7,835 2,441 - 2,441Property operating expenditure (2,618) - (2,618) (851) - (851) -------- -------- -------- -------- -------- --------Net rental income 5,217 - 5,217 1,590 - 1,590 Selling, general andadministrative expenses (2,628) - (2,628) (1,538) - (1,538) Other gains 14 - 14 - - - Net foreign currencygains/(losses) 133 - 133 (21) - (21) -------- -------- -------- -------- -------- -------- Operating expenditure (2,481) - (2,481) (1,559) - (1,559) -------- -------- -------- -------- -------- --------Operating profitbefore gains oninvestment properties 2,736 - 2,736 31 - 31 -------- -------- -------- -------- -------- --------Unrealised gains onrevaluation ofinvestment properties - 20,017 20,017 - - - -------- -------- -------- -------- -------- --------Operating profit 2,736 20,017 22,753 31 - 31 -------- -------- -------- -------- -------- --------Investment income 6,054 - 6,054 - - - Bank interest receivable 2,592 - 2,592 4,954 - 4,954 Loan interest receivable 1,041 - 1,041 47 - 47 Bank borrowing costs (372) - (372) (524) - (524) -------- -------- -------- -------- -------- --------Finance income 9,315 - 9,315 4,477 - 4,477 -------- -------- -------- -------- -------- --------Profit before tax 12,051 20,017 32,068 4,508 - 4,508 -------- -------- -------- -------- -------- --------Tax (840) (4,804) (5,644) (370) - (370) -------- -------- -------- -------- -------- --------Net profit forthe period 11,211 15,213 26,424 4,138 - 4,138 ======== ======== ======== ======== ======== ========Earnings pershare -basic 2 6.21p 1.67p ======== ======== Earnings pershare -diluted 2 6.20p 1.67p ======== ======== All income is attributable to the equity holders of the parent company. There are no minority interests. The accompanying notes are an integral part of this statement. Condensed Consolidated Balance SheetAs at 30 June 2007 30/6/07 31/12/06 Notes £'000 £'000 ------ --------- --------- Non-current assets Investment property 3 132,364 70,010Investment property under construction 4 43,153 25,835Deferred tax asset 553 510Other receivables 21,267 10,903 --------- --------- 197,337 107,258 --------- ---------Current assetsTrade and other receivables 28,112 6,945Forward currency derivatives 284 -Cash and cash equivalents 293,728 376,117 --------- --------- 322,124 383,062 ========= =========Total assets 519,461 490,320 --------- --------- Non-current liabilities Interest bearing loans and borrowings 2,487 8,615Deferred tax liability 8,107 2,744Other payables 1,385 2,588 --------- --------- 11,979 13,947 --------- ---------Current liabilities Trade and other payables 31,444 22,096Dividend payable 8,517 -Interest bearing loans and borrowings - 1,429 --------- --------- 39,961 23,525 --------- --------- Total liabilities 51,940 37,472 --------- --------- Net assets 467,521 452,848 ========= ========= Equity Share capital 5 4,259 4,247Share premium 6 1,388 -Special reserve 439,165 439,165Capital reserve 19,308 4,095Warrant reserve 1,279 1,279Share options reserve 1,883 1,231Share based payment reserve - 1,400Retained earnings 10,405 7,711Translation reserve (10,166) (6,280) --------- ---------Total equity 467,521 452,848 ========= ========= Net asset value per share 7 110p 106p ========= ========= The accompanying notes are an integral part of this statement. Consolidated Statement of Changes in EquityFor the period to 30 June 2007 Share Share Based Share Share Special Capital Warrant Options Translation Payment Retained Capital Premium Reserve Reserve Reserve Reserve Reserve Reserve Earnings Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2006 1,530 - 143,374 1,450 1,279 523 - - (1,268) 146,888 Translation onconsolidation - - - - - - (1,538) - - (1,538) Net profit forthe period - - - - - - - - 4,138 4,138 ------- ------- ------- ------- ------- ------- ------- ------- ------- -------Totalrecognisedincome for the year 1,530 - 143,374 1,450 1,279 523 (1,538) - (1,268) 145,350 ------- ------- ------- ------- ------- ------- ------- ------- ------- -------Issue costsincurred - - (12) - - - - - - (12) Issue ofordinary sharecapital, netof issue costs 2,696 297,308 - - - - - - - 300,004 Issue inrespect ofPropertyAdviser's fees 21 2,429 - - - - - - - 2,450 Conversion ofshare premiumaccount - (299,737) 299,737 - - - - - - - Recognition inrespect ofshare basedpayments - - - - - 228 - - - 228 PropertyAdviser's feesto be settledby postbalance sheetissue ofshares - - - - - - - 700 - 700 ------- ------- ------- ------- ------- ------- ------- ------- ------- -------At 30 June 2006 5,777 - 586,473 2,900 2,558 1,274 (3,076) 700 1,602 598,208 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- At 1 January2007 4,247 - 439,165 4,095 1,279 1,231 (6,280) 1,400 7,711 452,848 Translation onconsolidation - - - - - - (3,886) - - (3,886) Net profit forthe period - - - - - - - - 26,424 26,424 ------- ------- ------- ------- ------- ------- ------- ------- ------- -------Totalrecognisedincome for theyear 4,247 - 439,165 4,095 1,279 1,231 (10,166) 1,400 34,135 475,386 ------- ------- ------- ------- ------- ------- ------- ------- ------- -------Issue inrespect ofPropertyAdviser's fees 12 1,388 - - - - - (1,400) - - Dividendsdeclared - - - - - - - - (8,517) (8,517) Transfer inrespect ofgains oninvestmentproperties - - - 15,213 - - - - (15,213) - Recognition inrespect ofshare basedpayments - - - - - 652 - - - 652 ------- ------- ------- ------- ------- ------- ------- ------- ------- -------At 30 June 2007 4,259 1,388 439,165 19,308 1,279 1,883 (10,166) - 10,405 467,521 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- The accompanying notes are an integral part of this statement. Consolidated Cash Flow StatementFor the period to 30 June 2007 For the six months ended 30 June 2007 £'000 £'000Cash flows from operating activitiesOperating profit for the period 22,753 31 Adjustments for:Gains on revaluation of investment properties (20,017) -Recognised share based payments 235 228(Increase)/decrease in operating trade and otherreceivables (26,204) 1Increase/(decrease) in operating trade and otherpayables 8,145 (853) ---------------- -------------- (15,088) (593) Investment income received 8,363 4,944Loan interest received 1,041 65Bank borrowing costs paid (372) (389)Tax paid (324) (285) ---------------- --------------Net cash (used in)/from operating activities (6,380) 3,742 ---------------- -------------- Cash flows from investing activitiesPurchase of investment properties (30,842) -Payments for investment properties under construction (29,796) (43,053)Loans advanced (15,226) (4,505)Loans repaid 8,014 463 ---------------- --------------Net cash used in investing activities (67,850) (47,095) ---------------- -------------- Cash flows from financing activitiesProceeds from the issue of share capital - 310,000Issue costs - (10,009)Repayments of borrowings (7,557) (1,143) ---------------- --------------Net cash (used in)/from financing activities (7,557) 298,848 ================ ============== Net increase in cash and cash equivalents (81,787) 255,495 ================ ============== Opening cash and cash equivalents 376,117 141,069 Effect of foreign exchange rate changes (602) (84) Closing cash and cash equivalents 293,728 396,480 ================ ============== The accompanying notes are an integral part of this statement. Notes to the Condensed Consolidated financial statementsFor the six months ended 30 June 2007 1. Basis of accounting Basis of preparationThe condensed financial statements have been prepared using accounting policies consistent with International FinancialReporting Standards and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting. The Condensed financial statements do not include all the information and disclosures required in annual financialstatements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December2006. Significant accounting policies The condensed financial statements have been prepared under historical cost convention, except for the revaluation ofinvestment properties and forward currency derivatives. The same accounting policies, presentation and methods of computation are followed in these condensed financial statements as those followed in the preparation of the Group's annual financial statements for the year ended 31December 2006, except for the adoption of new Standards and Interpretations, noted below. Adoption of these Standardand Interpretations did not have any effect on the financial position or performance of the Group. IFRIC 9 Reassessment of Embedded DerivativesIFRIC 10 Condensed Financial Reporting and Impairment 2. Earnings per share Period Period 01/01/07-30/06/2007 01/01/06-30/06/2006The calculation of the basic and diluted earnings per share is basedon the following data: £'000 £'000 Earnings for the purposes of basic and diluted earnings per share beingnet profit for the period 26,424 4,138 ============= ============= Number of ordinary shares 30 June 2007 30 June 2006 No '000 No '000Weighted average number of ordinary shares for the purposes ofbasic earnings per share 425,211 247,383 Effect of dilutive potential ordinary shares: Options 266 2Warrants 1,062 10Other equity based payments - 612 -------------- --------------Weighted average number of ordinary shares for the purposes ofdiluted earnings per share 426,539 248,007 ============= ============= The Company has issued 25,088,757 options (2006: 25,058,189), vesting of which is based on share price performancecriteria. At 30 June 2007 the performance criteria had not been met and accordingly the options have not been included in the calculation of diluted earnings per share. Since the balance sheet date the Company has issued a further 622,536 ordinary shares. 3. Investment property 30 June 2007 31 December 2006 £'000 £'000 As at 1 January 70,010 27,902 Effect of foreign exchange rate changes (1,990) (3,395) Investment property acquired 30,842 - Transfer from investment property under construction 13,485 42,023 -------------- -------------- 112,347 66,530 Unrealised gains on revaluation of investment properties 20,017 3,480 -------------- --------------Balance as at 30 June/31 December 132,364 70,010 ============= ============= 4. Investment property under construction 30 June 2007 31 December 2006 £'000 £'000 As at 1 January 25,835 - Costs incurred 31,666 70,076 Effect of foreign exchange rate changes (863) (2,218) Transfer to investment property (13,485) (42,023) -------------- --------------Balance as at 30 June/31 December 43,153 25,835 ============== ============== 5. Share capital Issued share capital: 30 June 2007 31 December 2006 No No As at 1 January 424,663,711 153,000,000 Issued (ordinary shares of 1p each) 1,222,841 271,663,711 -------------- --------------Balance as at 30 June/31 December 425,886,552 424,663,711 ============= ============= 6. Share premium 30 June 2007 31 December 2006 £'000 £'000 As at 1 January - - Premium arising on issue of ordinary shares 1,388 307,304 Issue in respect of Property Adviser's fees - 2,429 Transaction costs on issue of ordinary shares - (10,022) Conversion to special distributable reserve - (299,711) -------------- --------------Balance as at 30 June/31 December 1,388 - ============= ============= 7. Net asset value per share 30 June 2007 31 December 2006 £'000 £'000 Net asset value 467,521 452,848 Net asset value attributable to future issues of shares - (1,400) -------------- --------------Adjusted net asset value 467,521 451,448 ============= ============= Number of ordinary shares at 30 June/31 December 425,886,552 424,663,711 Net asset value per share 110p 106p ============= ============= 8. Dividends During the period, a dividend of 2p per share was approved for payment by members at the company's Annual GeneralMeeting. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RAV.L