TIDMAFRB TIDMAFID
RNS Number : 1847Z
AFI Development PLC
30 August 2018
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR
DISTRIBUTION
IN OR INTO THE RUSSIAN FEDERATION, THE UNITED STATES, CANADA,
AUSTRALIA OR JAPAN
30 August 2018
AFI DEVELOPMENT PLC
("AFI DEVELOPMENT" OR "THE COMPANY")
RESULTS FOR THE SIX MONTHS TO 30 JUNE 2018
Robust performance supported by strong contribution from
residential segment
AFI Development, a leading real estate company focused on
developing property in Russia, today announces its financial
results for the six months ended 30 June 2018.
H1 2018 financial highlights
-- Revenue for H1 2018 increased by 34% year-on-year to US$142.0
million, including proceeds from the sale of trading
properties:
- Rental and hotel operating income increased by 12% year-on-year to US$62.7 million
- AFIMALL City contribution grew by 9% year-on-year to US$43.6
million (H1 2017: US$39.8 million)
- Sale of residential properties made a strong contribution of
US$78.7 million to total revenue (US$49.8 million in H1 2017), a
58% increase year-on-year, mostly due to revenue recognition from
delivery of apartments in AFI Residence Paveletskaya in Q2 2018 and
the implementation of IFRS 15[1]
-- Gross profit increased by 88% year-on-year to US$55.8 million (H1 2017: US$29.7 million)
-- Net profit for H1 2018 amounted to US$76.7 million (including
US$42.6 million valuation gain and US$16.6 million forex gain),
compared to US$7.9 million in H1 2017
-- Total gross value of portfolio of properties stood at US$1.34
billion (versus US$1.42 billion as of end-2017)
-- Cash, cash equivalents and marketable securities as of 30
June 2018 amounted to US$108.0 million (versus US$106.0 million at
end- 2017)
H1 2018 operational highlights
-- Delivery of apartments sold to customers in Phase 1 of AFI
Residence Paveletskaya close to completion; marketing progressing
well with 457 pre-sale contracts (73% of total) signed as of 20
August 2018
-- At Odinburg, construction works and pre-sales continue at
Building 3 (phase I) and Building 6 (phase II)
- As of 20 August 2018, the number of signed sale contracts
stood at 677 (96% of total) in Building 2, 281 (31% of total) in
Building 3 and 161 (72% of total) in Building 6
-- At Bolshaya Pochtovaya, construction and pre-sale progressing to plan
- As of 20 August 2018, 156 apartments (84% of Phase I) pre-sold
-- The construction and pre-sale of properties at Botanic Garden remain on track
- As of 20 August 2018, 213 apartments (27% of Phase I) pre-sold
-- AFIMALL City continues to record solid NOI growth, up 15%
year-on-year to US$32.8 million in H1 2018, from US$28.5 million in
H1 2017
Commenting on today's announcement, Lev Leviev, Executive
Chairman of AFI Development, said:
"Although we have reported good results for H1 2018, we are
concerned with ongoing weakening of the rouble against the dollar,
which started in the second quarter 2018 and accelerated in the
third. If weakening of the rouble continues, it may negatively
affect the value of our property portfolio and the revenue from
residential sales, which in turn may cause a negative effect on our
results for the current financial year."
H1 2018 Results Conference Call:
AFI Development will hold a conference call for analysts and
investors to discuss its H1 2018 financial results on Friday, 31
August 2018.
Details for the conference call are as follows:
Date: Friday, 31 August
2018
Time: 3pm BST (5pm Moscow)
Dial-in Tel: International: +44 (0)20 3003 2666
UK toll free: 0808 109 0700
US toll-free: 1 866 966 5335
Russia toll-free: 8 10 8002 4902044
Password: AFI
Please dial in 5-10 minutes prior to the start time giving your
name, company and stating that you are dialling into the AFI
Development conference call quoting the reference AFI.
Prior to the conference call, the H1 2018 Investor Presentation
of AFI Development will be published on the Company website at
http://www.afi-development.com/en/investor-relations/reports-presentations
on 31 August 2018 by 11am BST (1pm Moscow time).
- ends -
For further information, please contact:
AFI Development, +7 495 796 9988
Ilya Kutnov, Corporate Affairs/Investments Director (Responsible
for arranging the release of this announcement)
Citigate Dewe Rogerson, London +44 20 7638 9571
Sandra Novakov
Lucy Eyles
This announcement contains inside information.
About AFI Development
Established in 2001, AFI Development is one of the leading real
estate development companies operating in Russia.
AFI Development is listed on the Main Market of the London Stock
Exchange and aims to deliver shareholder value through a commitment
to innovation and continuous project development, coupled with the
highest standards of design, construction and quality of customer
service.
AFI Development focuses on developing and redeveloping high
quality commercial and residential real estate assets across
Russia, with Moscow being its main market. The Company's existing
portfolio comprises commercial projects focused on offices,
shopping centres, hotels and mixed-use properties, and residential
projects. AFI Development's strategy is to sell the residential
properties it develops and to either lease the commercial
properties or sell them for a favourable return.
AFI Development is a leading force in urban regeneration,
breathing new life into city squares and neighbourhoods and
transforming congested and underdeveloped areas into thriving new
communities. The Company's long-term, large-scale regeneration and
city infrastructure projects establish the necessary groundwork for
the successful launch of commercial and residential properties,
providing a strong base for the future.
Legal disclaimer
Some of the information in these materials may contain
projections or other forward-looking statements regarding future
events, the future financial performance of the Company, its
intentions, beliefs or current expectations and those of its
officers, directors and employees concerning, among other things,
the Company's results of operations, financial condition,
liquidity, prospects, growth, strategies and business.
You can identify forward looking statements by terms such as
"expect", "believe", "anticipate", "estimate", "intend", "will",
"could," "may" or "might" or the negative of such terms or other
similar expressions. These statements are only predictions and that
actual events or results may differ materially. Unless otherwise
required by applicable law, regulation or accounting standard, the
Company does not intend to update these statements to reflect
events and circumstances occurring after the date hereof or to
reflect the occurrence of unanticipated events. Many factors could
cause the actual results to differ materially from those contained
in projections or forward-looking statements of the Company,
including, among others, general economic conditions, the
competitive environment, risks associated with operating in Russia
and market change in the industries the Company operates in, as
well as many other risks specifically related to the Company and
its operations.
Executive Chairman's statement
While the general macroeconomic environment in Russia continued
to stabilise during Q2 2018, the recent threat of new US sanctions
against Russia had a negative effect on the rouble and overshadowed
the otherwise improving economic outlook.
AFI Development reported strong growth in revenue and profits,
supported by a significant increase in residential sales. The
rental and hotel operating income increased 12% year-on-year to
US$62.7 million for the six months, reflecting the strong
performance of AFIMALL City. Sales revenue from our residential
segment saw a 58% year-on-year increase to US$78.7 million,
reflecting our move to IFRS 15 reporting and the delivery of
apartments to customers in Phase I of AFI Residence
Paveletskaya.
Our gross profit for the first half of the year increased by 88%
year-on-year to US$55.8 million, reflecting strong residential
revenue and higher profitability of our residential projects in
Moscow (relative to Odinburg, which accounted for all of our
recognised residential sales revenue in 2017). We recorded a net
profit of US$76.7 million for the six-month period, up
significantly from US$7.9 million in H1 2017.
We remain cautiously optimistic regarding the market environment
for both our commercial and residential projects. We believe that
with our high-quality, competitive projects, we are well placed to
generate solid revenue and profits in the coming years.
Projects update
AFIMALL City
Continued improvement in the performance of AFIMALL City is
reflected in the 9% year-on-year increase in revenue to US$43.6
million for the quarter, and 15% year-on-year increase in NOI to
US$32.8 million. Occupancy at the end of the second quarter was
90%.
Odinburg
At the Odinburg residential development, Building 3 (Phase 1)
and Building 6 (Phase II) are under construction and currently
being marketed to customers. The last remaining apartments at the
delivered Building 2 of Phase I are in the process of being
sold.
As of 20 August 2018, 677 apartments (96% of total) were sold in
Building 2, 281 (31% of total) in Building 3 and 161 (72% of total)
in Building 6.
AFI Residence Paveletskaya
In Q2 2018 we virtually completed the delivery of apartments to
customers who bought apartments in Phase I. Meanwhile, construction
works and marketing of apartments and special units in Phase II
continue to plan. As of 20 August 2018, 457 contracts for pre-sales
of both apartments and "special units" have been signed (73% of
Phase I and Phase II combined).
Bolshaya Pochtovaya
During H1 2018 the construction and marketing of the project
progressed according to plan and as of 20 August 2018, 156
apartments (84% of Phase I) had been pre-sold to customers.
Botanic Garden
The construction and pre-sales are also progressing at Botanic
Garden. As of 20 August 2018, 213 apartments (27% of Phase I) have
been pre-sold to customers.
Aquamarine III Business Centre (Ozerkovskaya III)
In Q1 2018 the Company successfully completed the disposal of
Buildings 2 and 4 to one of the leading Russian banks for circa
US$135 million.
Following the disposal and the restructuring of the loans of
Aquamarine III and AFIMALL City with VTB Bank PJSC, the Aquamarine
III loan was fully repaid in January 2018.
AFI Development currently owns one remaining building in the
complex (GBA 18,805 sq.m including underground parking), which is
leased to Deutsche Bank, Brown-Forman and other tenants. The
occupancy of the building as of the end of H1 2018 was 89%.
Aquamarine Hotel
In July 2018 the Company concluded a franchising agreement with
Intercontinental Hotel Group to allow the Aquamarine Hotel to be
rebranded as Crowne Plaza. The Company believes that, in light of
increasing competition in central Moscow, branding is crucial to
successful long-term competitiveness of the Hotel and its financial
performance. The Hotel will be renamed "Crowne Plaza
Tretyakovskaya".
Subsequent events
On 29(th) August 2018 the Board of Directors of the Company
approved granting of a loan in the maximum amount of EUR5 million
to Grosolim Ltd, a Company controlled by Mr Leviev. The loan will
be provided at Euribor + 5.2% annual interest rate, the interest
will be paid quarterly while the principal amount will be paid at
5-year maturity. The loan will be secured by a personal guarantee
of Mr Lev Leviev.
On 29(th) August 2018 the Board has accepted resignation of Mr
Lev Leviev from the position of Executive Chairman of the Company
effective from 31(st) August 2018. The Board appointed Mr David
Tahan as non-executive Chairman of the Company effective from 1(st)
September 2018. The Board has also appointed Mr Mark Groysman as an
executive director: Mr Groysman will serve as a Board member for an
interim period till a new Board member is appointed.
Market overview - general Moscow real estate
Macroeconomic environment
The Organisation for Economic Co-operation and Development
("OECD") has maintained its 2018 GDP forecast for Russia at
+1.5%.
In Q2 2018, the rouble/dollar spot exchange rate fluctuated
within a higher range relative to Q1 2018, between 57.4 and 64.0.
The rate at 30.06.2018 was RUR62.76 (versus RUR57.26 on 31.03.2018)
for 1 US dollar.
During the second quarter, the Central Bank of Russia ("CBR")
maintained its key lending rate at 7.25% (unchanged since March
2018). Drastic reductions in the key lending rate are not expected
in light of an unstable external environment and the threat of new
US sanctions against Russia.
Annualised consumer price inflation was 2.4% in July 2018, well
below the CBR target of 4%.
(Source: OECD, the Bank of Russia, RBC)
Moscow office market
A 40% increase in take up in H1 2018 to 633 thousand sq.m
relative to H1 2017 was driven mainly by the manufacturing and
retail sectors.
Only one small office development was delivered in Q2 2018, the
2,300 sq.m Nikolin Park in New Moscow. In total, according to Jones
Lang LaSalle ("JLL"), 39,000 sq.m of new office space was delivered
in H1 2018 (compared to 21,000 sqm in H1 2017).
Vacancy rates in class A and B offices are in slow decline.
According to JLL, in Class A properties the average vacancy rate
recorded in Q2 2018 was 12.9% (versus 14.0 % in Q2 2017) with Class
B properties at 14.3% (versus 14.7% in Q1 2017). The overall
vacancy rate within the office real estate market was 12.0% (versus
15% in Q2 2017).
Rental rates remained relatively stable throughout H1 2018.
Asking rents for Class A prime central premises stood at US$600-750
per sq.m per year. Asking rents for Class A office buildings were
US$420-700 and for Class B $210-440. Rouble denominated rents
continue to prevail, with Class B properties being let almost
exclusively in roubles.
(Source: JLL, C&W)
Moscow retail market
Whilst development activity in the retail segment remains at
historically low levels, three new shopping centres were opened in
Moscow in H1 2018 (total GBA of 98,500 sq.m), with Kashirskaya
Plaza being the largest (71,000 sq.m).
Six new brands entered the market in H1 2018, most from the
premium fashion segment. Notable debuts include the monobrand
boutiques of Karl Lagerfeld and Coach.
The vacancy rate across Moscow shopping centres as of the end of
H1 2018 was at 5.2% (JLL).
The most common lease structure continues to include a
combination of a low minimum rent coupled with turnover rent, with
fixed exchange rates commonly offered to tenants.
(Source: JLL, C&W, CBRE)
Moscow and Moscow Region residential market
Moscow
At the end of Q2 2018, supply to the "Old Moscow" primary
residential market (excluding "apartments") was about 2.48 million
sq.m (c. 37,600 residential units), a 14% decrease versus Q1 2018.
Supply to the "New Moscow" market was about 407.0 thousand sq.m, a
3% increase versus Q1 2018.
By the end of Q2 2018, the weighted average asking price in the
newly built business class residential market in Moscow amounted to
RUR245,800 per sq.m p.a. (circa US$3,964). This represents a 2%
increase versus Q1 2018 in rouble terms. In the comfort class, the
weighted average asking price was RUR160.3 per sq.m (circa
US$2,585).
The Moscow region
The primary market supply (newly built residential units) in the
Moscow region amounted to 2.6 million sq.m in Q2 2018.
The weighted average price per sq.m in the Moscow region as of
end-June 2018 was RUR75,800 (circa US$1,223).
(Source: Miel Real Estate, Azbuka Zhilya)
Lev Leviev
Executive Chairman of the Board
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the period from 1 January 2018 to 30 June 2018
C O N T E N T S
Independent auditors' report on review of condensed consolidated
interim financial information
Condensed consolidated income statement
Condensed consolidated statement of comprehensive income
Condensed consolidated statement of changes in equity
Condensed consolidated statement of financial position
Condensed consolidated statement of cash flows
Notes to the condensed consolidated interim financial
statements
Independent auditors' report on review of condensed consolidated
interim financial information to the members of AFI DEVELOPMENT
PLC
Introduction
We have reviewed the accompanying condensed consolidated
statement of financial position of AFI Development PLC as at 30
June 2018, the condensed consolidated statements of income,
comprehensive income, changes in equity and cash flows for the
six-month period then ended, and notes to the interim financial
statements ('the condensed consolidated interim financial
statements'). The Company's Board of Directors is responsible for
the preparation and presentation of these condensed consolidated
interim financial statements in accordance with IAS 34 "Interim
Financial Reporting". Our responsibility is to express a conclusion
on these condensed consolidated interim financial statements based
on our review.
Scope of Review
We conducted our review in accordance with the International
Standard on Review Engagements 2410, "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity". A
review of interim financial statements consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the accompanying condensed consolidated
interim financial statements as at 30 June 2018 are not prepared,
in all material respects, in accordance with IAS 34 "Interim
Financial Reporting".
Marios G. Gregoriades, CPA
Certified Public Accountant and Register Auditor
For and on behalf of
KPMG Limited
Certified Public Accountants and Registered Auditors
14 Esperidon Street
1087 Nicosia, Cyprus
29 August 2018
CONDENSED CONSOLIDATED INCOME STATEMENT
For the period from 1 January 2018 to 30 June 2018
For the For the
six months six months
ended ended
30/6/18 30/6/17
US$ '000 US$ '000
Note
Revenue 6 142,021 106,069
Other income 781 542
Operating expenses 8 (30,421) (26,422)
Cost of sales of trading properties 14,15 (50,415) (47,303)
Administrative expenses 7 (2,576) (3,122)
Other expenses (3,627) (2,063)
Total expenses (87,039) (78,910)
Share of the after-tax profit
of joint ventures - 1,957
Gross Profit 55,763 29,658
Gain on 100% acquisition of
previously held interest in
a joint venture - 7,532
Increase/(decrease) in fair
value of properties 11,12 42,567 (927)
Results from operating activities 98,330 36,263
Finance income 17,365 5,713
Finance costs (19,212) (24,774)
Net finance (costs)/income 9 (1,847) (19,061)
Profit before tax 96,483 17,202
Tax expense 10 (19,815) (9,270)
Profit for the period 76,668 7,932
Profit attributable to:
Owners of the Company 76,452 7,637
Non-controlling interest 216 295
76,668 7,932
Earnings per share
Basic and diluted earnings per
share (cent) 7.30 0.73
The notes form an integral part of the condensed consolidated
interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period from 1 January 2018 to 30 June 2018
For the For the
six months six months
ended ended
30/6/18 30/6/17
US$ '000 US$ '000
Profit for the period 76,668 7,932
Other comprehensive income
Items that are or may be reclassified
subsequently to profit or loss
Realised translation differences on
100% acquisition of previously held
interest in a joint venture transferred
to income statement - (4,271)
Foreign currency translation differences
for foreign operations (41,108) 6,537
Other comprehensive income for the
period (41,108) 2,266
Total comprehensive income for the
period 35,560 10,198
Total comprehensive income attributable
to:
Owners of the parent 35,332 9,938
Non-controlling interests 228 260
35,560 10,198
The notes form an integral part of the condensed consolidated
interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period from 1 January 2018 to 30 June 2018
Attributable to the owners of the Company Non-controlling Total
interests equity
Share Share Capital Translation Retained
Capital Premium Reserve Reserve Earnings Total
US$ US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ US$ '000
'000 '000
Balance at 1
January
2018 as
reported
previously 1,048 1,763,409 (19,333) (301,287) (672,719) 771,118 (171) 770,947
Adjustment on
initial
application of
IFRS
15 net of tax - - - 581 13,885 14,466 73 14,539
Adjusted balance
at 1 January
2018 1,048 1,763,409 (19,333) (300,706) (658,834) 785,584 (98) 785,486
Total
comprehensive
income for the
period
Profit for the
period - - - - 76,452 76,452 216 76,668
Other
comprehensive
income - - - (41,120) - (41,120) 12 (41,108)
Total
comprehensive
income for the
period - - - (41,120) 76,452 35,332 228 35,560
Balance at 30
June
2018 1,048 1,763,409 (19,333) (341,826) (582,382) 820,916 130 821,046
Balance at 1
January
2017 1,048 1,763,409 (9,201) (311,331) (667,801) 776,124 (3,827) 772,297
Total
comprehensive
income for the
period
Profit for the
period - - - - 7,637 7,637 295 7,932
Other
comprehensive
income - - - 2,301 - 2,301 (35) 2,266
Total
comprehensive
income for the
period - - - 2,301 7,637 9,938 260 10,198
Transactions with owners of the
Company Changes in ownership
interests
Acquisition of
non-controlling
interests - - (10,145) - - (10,145) 3,435 (6,710)
Balance at 30
June
2017 1,048 1,763,409 (19,346) (309,030) (660,164) 775,917 (132) 775,785
The notes form an integral part of the condensed consolidated
interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
30/6/18 31/12/17
Note US$ '000 US$ '000
Assets
Investment property 11 818,060 818,060
Investment property under development 12 163,240 163,240
Property, plant and equipment 13 72,845 77,633
Long-term loans receivable 3,492 1,669
Intangible assets 540 204
VAT recoverable 36 48
Other investments 18 5,075 -
Non-current assets 1,063,288 1,060,854
Trading properties 14 29,300 10,792
Trading properties under construction 15 264,484 349,735
Other investments 18 19,924 10,515
Inventories 1,104 1,318
Short-term loans receivable 608 1,090
Trade and other receivables 16 64,772 70,402
Current tax assets 1,520 4,114
Cash and cash equivalents 17 88,026 95,468
Current assets 469,738 543,434
Total assets 1,533,026 1,604,288
Equity
Share capital 1,048 1,048
Share premium 1,763,409 1,763,409
Translation reserve (341,826) (301,287)
Capital reserve (19,333) (19,333)
Retained earnings (582,382) (672,719)
Equity attributable to owners of the
Company 19 820,916 771,118
Non-controlling interests 130 (171)
Total equity 821,046 770,947
Liabilities
Long-term loans and borrowings 20 520,585 492,484
Deferred tax liabilities 62,851 42,652
Deferred income 13,052 12,641
Non-current liabilities 596,488 547,777
Short-term loans and borrowings 20 16,932 86,775
Trade and other payables 21 41,942 65,106
Advances from customers 23 54,041 123,766
Current tax liabilities 2,577 9,917
Current liabilities 115,492 285,564
Total liabilities 711,980 833,341
Total equity and liabilities 1,533,026 1,604,288
The condensed consolidated interim financial statements were
approved by the Board of Directors on 29 August 2018.
The notes form an integral part of the condensed consolidated
interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the period from 1 January 2018 to 30 June 2018
1/1/18- 1/1/17-
30/6/18 30/6/17
Note US$ '000 US$ '000
Cash flows from operating activities
Profit/(loss) for the period 76,668 7,932
Adjustments for:
Depreciation 13 463 409
Net finance costs 9 947 18,672
(Increase)/Decrease in fair value of
properties 11,12 (42,567) 927
Share of profit in joint ventures - (1,957)
Gain on 100% acquisition of previously
held interest in a joint venture - (7,532)
Tax expense 10 19,815 9,270
55,326 27,721
Change in trade and other receivables 13,314 1,192
Change in inventories 112 98
Change in trading properties and trading
properties under construction (9,832) 3,854
Change in advances and amounts payable
to builders of trading properties under
construction (9,764) (5,157)
Change in advances from customers 23 12,605 (6,062)
Change in trade and other payables (24,200) 3,208
Change in VAT recoverable 5,871 (1,661)
Change in deferred income 1,533 555
Cash generated from operating activities 44,965 23,748
Taxes paid (10,304) (909)
Net cash from operating activities 34,661 22,839
Cash flows from investing activities
Acquisition of subsidiary net of cash
acquired - (786)
Proceeds from sale of other investments 5,752 5,944
Proceeds from sale of property, plant
and equipment 55 55
Interest received 561 314
Change in advances and amounts payable
to builders 16,21 (235) 2,483
Payments for construction of investment
property under development 12 (1,320) (1,711)
Payments for the acquisition/renovation
of investment property 11 (383) (291)
Change in VAT recoverable (355) 389
Acquisition of property, plant and equipment 13 (639) (88)
Acquisition of other investments (21,241) (6,051)
Acquisition of intangible assets (930) -
Proceeds from repayments of loans receivable 447 4,178
Payments for loans receivable (2,023) (1,784)
Net cash from investing activities (20,311) 2,652
The notes form an integral part of the condensed consolidated
interim financial statements.
1/1/18- 1/1/17-
30/6/18 30/6/17
Note US$ '000 US$ '000
Cash flows from financing activities
Acquisition of non-controlling interests - (1,369)
Proceeds from loans and borrowings 20 542,873 13,737
Repayment of loans and borrowings 20 (548,196) (4,944)
Interest paid (16,980) (24,462)
Net cash used in financing activities (22,303) (17,038)
Effect of exchange rate fluctuations 511 158
Net (decrease)/increase in cash and cash
equivalents (7,442) 8,611
Cash and cash equivalents at 1 January 95,468 10,619
Cash and cash equivalents at 30 June 17 88,026 19,230
The notes form an integral part of the condensed consolidated
interim financial statements.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the period from 1 January 2018 to 30 June 2018
1. INCORPORATION AND PRINCIPAL ACTIVITY
AFI Development PLC (the "Company") was incorporated in Cyprus
on 13 February 2001 as a limited liability company under the name
Donkamill Holdings Limited. In April 2007 the Company was
transformed into public company and changed its name to AFI
Development PLC. The address of the Company's registered office is
165 Spyrou Araouzou Street, Lordos Waterfront Building, 5(th)
floor, Flat/office 505, 3035 Limassol, Cyprus. As of 7 September
2016 the Company is a 64.88% subsidiary of Flotonic Limited, a
private holding company registered in Cyprus, 100% owned by Mr Lev
Leviev. Prior to that, the Company was a 64.88% subsidiary of
Africa Israel Investments Ltd ("Africa-Israel"), which is listed in
the Tel Aviv Stock Exchange ("TASE"). The remaining shareholding of
"A" shares is held by a custodian bank in exchange for the GDRs
issued and listed in the London Stock Exchange ("LSE"). On 5 July
2010 the Company issued by way of a bonus issue 523,847,027 "B"
shares, which were admitted to a premium listing on the Official
List of the UK Listing Authority and to trading on the main market
of LSE. On the same date, the ordinary shares of the Company were
designated as "A" shares.
These condensed consolidated interim financial statements
("interim financial statements") as at and for the six months ended
30 June 2018 comprise the Company and its subsidiaries (together
referred to as the "Group") and the Group's interest in jointly
controlled entities.
The principal activity of the Group is real estate investment
and development. The principal activity of the Company is the
holding of investments in subsidiaries and joint ventures.
2. basis of Accounting
i. Going concern basis of accounting
The Group had experienced, during the several past years,
difficult trading conditions driven by macro-economic and
geopolitical developments affecting the Russian economy as a whole
and a deterioration in demand for real estate assets across the
country. Whilst the general economy has shown some signs of
stabilisation during the year 2016 and 2017 with higher oil prices,
strengthening of the Rouble and inflation on a downward trend, the
performance of the real estate sector remains weak. In the first
half of 2018 Russia's economic recovery continued amidst relatively
high oil prices, enhanced macroeconomic stability, gradual monetary
loosening, and ongoing momentum in global economic growth.
The Group has recognised a net profit after tax of US$76.7
million for the six-month period ended 30 June 2018, and due to the
disposal of two building of Ozerkovskaya III at the end of 2017,
its cash and cash equivalents and marketable securities improved to
US$108.0 million. Its current liabilities decreased to US$115.5
million due to final repayment of Ozerkovskaya III loan in January
2018 (note 20) and recognition of revenue from sales of trading
property in accordance with the new IFRS 15 (note 4).
The management estimates that the Group will continue to
generate sufficient operating cash flows from yielding properties
such as AFI Mall, the hotels and BC Ozerkovskaya III so as to meet
loan interest and principal payments of the new loans. The disposal
of two buildings of Ozerkovskaya III in December 2017 generated
sale proceeds for partial debt repayment of Ozerkovskaya III loan
and refinancing of the outstanding amount by AFIMALL City loan for
a 5-year term (note 20). The management succeeded in reducing debt
and refinancing loans at lower interest rates and allowing
repayment of the principal and securing further operational
existence for the foreseeable future. Based on cash flow projection
for a year period the management reached a conclusion that the
Group is in a position to secure further financing for its projects
under construction by sales proceeds to generate enough cash to
cover its working capital requirements in order to continue its
operations in the foreseeable future.
Considering all the above conditions and assumptions, management
concluded that the Group had adequate resources to continue in
operational existence for the foreseeable future and adopted the
going concern basis in preparing the interim consolidated financial
statements.
ii. Statement of compliance
These interim financial statements have been prepared in
accordance with IAS 34 "Interim Financial Reporting" and should be
read in conjunction with the Group's last annual consolidated
financial statements as at and for the year ended 31 December 2017
('last annual financial statements'). They do not include all of
the information required for a complete set of IFRS financial
statements. However, selected explanatory notes are included to
explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and
performance since the last financial statements.
This is the first set of the Group's financial statements where
IFRS 15 and IFRS 9 have been adopted. Changes to significant
accounting policies are described in Note 4.
iii. Functional and presentation currency
These consolidated financial statements are presented in United
States Dollars which is the Company's functional currency. All
financial information presented in United States Dollars has been
rounded to the nearest thousands, except when otherwise
indicated.
Foreign operations
Each entity of the Group determines its own functional currency
and items included in the financial statements of each entity are
measured using its functional currency. Where the functional
currency of an entity of the Group is other than US Dollars, which
is the presentation currency of the Group, then the financial
statements of the entity are translated in accordance with IAS 21
'The effects of changes in foreign exchange rates".
The table below shows the exchange rates of Russian Roubles,
which is the functional currency of the Russian subsidiaries of the
Group, to the US Dollar which is the presentation currency of the
Group:
Exchange rate % change % change
Russian Roubles six months year
As of: for US$1
30 June 2018 62.7565 9.0
31 December 2017 57.6002 (5.0)
30 June 2017 59.0855 (2.6)
Average rate during:
Six-month period ended 30 June 2018 59.3536 2.4
Six-month period ended 30 June 2017 57.9862 (17.5)
3. use of judgements and estimates
In preparing these interim financial statements, management has
made judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expenses. Actual results may
differ from these estimates.
The significant judgments made by management in applying the
Group's accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the consolidated
financial statements as at and for the year ended 31 December 2017,
except for new significant judgements and key sources of estimation
uncertainty related to the application of IFRS 15, which are
disclosed in Note 4.
a. Measurement of fair values
The Group has an established control framework with respect to
the measurement of fair values. This includes a valuation team that
has overall responsibility for overseeing all significant fair
value measurements, including Level 3 fair values, and reports
directly to the chief financial officer.
The valuation team regularly reviews significant unobservable
inputs and valuation adjustments. If third party information, such
as broker quotes or pricing services, is used to measure fair
values, then the valuation team assesses the evidence obtained from
the third parties to support the conclusion that these valuations
meet the requirements of IFRS, including the level in the fair
value hierarchy in which such valuations should be classified.
Significant valuation issues are reported to the group audit
committee.
When measuring the fair value of an asset or a liability, the
Group uses market observable data as far as possible. Fair values
are categorised into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques as
follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a
liability might be categorised in different levels of the fair
value hierarchy, then the fair value measurement is categorised in
its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire
measurement.
The Group recognises transfers between levels of the fair value
hierarchy at the end of the reporting period during which the
change has occurred.
4. CHANGES IN significant accounting policies
Except as described below, the accounting policies applied in
these interim financial statements are the same as those applied in
the Group's consolidated financial statements as at and for the
year ended 31 December 2017.
The changes in accounting policies are also expected to be
reflected in the Group's consolidated financial statements as at
and for the year ending 31 December 2018.
The Group has initially adopted IFRS 15 Revenue from Contracts
with Customers as from 1 January 2018. A number of other new
standards, including IFRS 9 Financial Instruments, are effective
from 1 January 2018 but they do not have a material effect on the
Group's financial statements.
The effect of initially applying this standard, IFRS 15, is
mainly attributed to the following:
- Earlier recognition of revenue from sales of residential
properties under DDU contracts (see below)
- Recognition of significant financial component on payments
received in advance from customers for residential properties under
DDU contracts (see below)
IFRS 15 establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. It replaces
existing revenue recognition guidance, including IAS 18 Revenue,
IAS 11 Construction Contracts and related interpretations.
The Group has adopted IFRS 15 using the cumulative effect method
(without practical expedients), with the effect of initially
applying these standards recognised at the date of initial
application (i.e. 1 January 2018). Accordingly, the information
presented for 2017, has not been restated, i.e. it is presented, as
previously reported, under IAS 18 and related interpretations.
The following table summarises the impact, net of tax, of
transition to IFRS 15 on retained earnings and Non-controlling
interests at 1 January 2018.
Impact of adopting
IFRS 15 at
1 January 2018
US$ '000
Retained earnings
Profit from sales of trading properties
before tax 17,357
Related tax (3,472)
Impact on 1 January 2018 13,885
Non-controlling interests
Profit from sales of trading properties
before tax 91
Related tax (18)
Impact on 1 January 2018 73
Translation reserve
Net profit from sales of trading properties 581
Impact on 1 January 2018 581
The following table summarises the impacts of adopting IFRS 15
on the Group's interim statement of financial position as at 30
June 2018 and its interim statement of profit or loss and other
comprehensive income for the six months then ended for each of the
line items affected. There was no material impact on the Group's
interim statement of cash flows for the six-month period ended 30
June 2018.
Impact on the condensed consolidated interim statement of profit
or loss
For the six months ended Amounts without
30 June 2018 adoption
As reported Adjustments of IFRS 15
US$ '000 US$ '000 US$ '000
Revenue 142,021 (12,187) 129,834
Cost of sales of trading
properties (50,415) 3,251 (47,164)
Total expenses (87,039) 3,251 (83,788)
Gross Profit 55,763 (8,936) 46,827
Results from operating
activities 98,330 (8,936) 89,394
Net finance (costs)/income (1,847) - (1,847)
Profit before tax 96,483 (8,936) 87,547
Tax expense (19,815) 1,787 (18,028)
Profit for the period 76,668 (7,149) 69,519
Impact on the condensed consolidated interim statement of
financial position
30 June 2018 Amounts without
adoption
As reported Adjustments of IFRS 15
US$ '000 US$ '000 US$ '000
Assets
Non-current assets 1,063,288 - 1,063,288
Trading properties under
construction 264,484 56,943 321,427
Current assets 469,738 56,943 526,681
Total assets 1,533,026 56,943 1,589,969
Equity
Translation reserve (341,826) 3,951 (337,875)
Retained earnings (582,382) (21,035) (603,417)
Equity attributable to
owners of the Company 820,916 (17,084) 803,832
Non-controlling interests 130 (24) 106
Total equity 821,046 (17,108) 803,938
Liabilities
Deferred tax liabilities 62,851 (4,909) 57,942
Non-current liabilities 596,488 (4,909) 591,579
Advances from customers 54,041 78,960 133,001
Current liabilities 115,492 78,960 194,452
Total liabilities 711,980 74,051 786,031
Total equity and liabilities 1,533,026 56,943 1,589,969
The details of the new accounting policy and the nature of the
changes to previous accounting policy in relation to the Group's
revenue from sales of trading properties under DDU contracts is set
below. The adoption of IFRS 15 did not have a significant impact on
the accounting policies in relation to the remaining sources of
revenue.
Type of product Nature, timing of satisfaction Nature of change in
of performance obligations, accounting policy
significant payment terms
------------------ ---------------------------------- ----------------------
Sales of trading The revenue from the contracts Under IAS 18, revenue
properties under with customers for sale from these contracts
DDU contracts of trading properties under and associated costs
DDU contracts is recognised were recognised when
over period of time as risks and rewards
the construction progresses. of ownership were
The Group has determined transferred to the
that this results in revenue customer (i.e. when
and associated costs to act of transfer was
fulfil the contracts being signed).
recognised over time, i.e.
before the ownership of
flats is actually transferred
to the customer. The transaction
price for such contract
is determined by adjusting
the promised amount of
consideration which is
received in advance, for
the effect of significant
finance component. The
contract liability is presented
in the statement of financial
position as Advances from
customers.
Under IFRS 15, revenue is recognised when a customer obtains
control of the goods or services. Determining the timing of the
transfer of control - at a point in time or over time - requires
judgement.
Standards issued but not yet effective
A number of new standards and amendments to standards are
effective for annual periods beginning after 1 January 2019 and
earlier application is permitted; however, the Group has not early
adopted any new or amended standards in preparing these condensed
consolidated interim financial statements.
The Group has no updates to information provided in the
consolidated financial statements as at and for the year ended 31
December 2017 about the standards issued but not yet effective that
may have a significant impact on the Group's consolidated financial
statements.
5. OPERATING SEGMENTS
The Group has 5 reportable segments, as described below, which
are the Group's strategic business units. The following summary
describes the operation in each of the Group's reportable
segments:
-- Development Projects - Residential projects: Include
construction and selling of residential properties.
-- Asset Management: Includes the operation of investment property for lease.
-- Hotel Operation: Includes the operation of Hotels.
-- Land bank: Includes the investment and holding of property for future development.
-- Other: Includes the management services provided for the projects.
Information regarding the results of each reportable segment is
included below. Performance is measured based on segment profit
before income tax, as included in the internal management reports
that are reviewed by the Group's management team. Segment profit is
used to measure performance as management believes that such
information is the most relevant in evaluating the results of
certain segments relative to other entities that operate within
these industries. Inter-segment pricing is determined on an arm's
length basis.
Development projects Asset management Hotel Operation Land bank Other Total
Residential
projects
30/6/18 30/6/17 30/6/18 30/6/17 30/6/18 30/6/17 30/6/18 30/6/17 30/6/18 30/6/17 30/6/18 30/6/17
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
External
revenues 78,759 49,912 45,601 41,629 16,076 13,446 1,026 1,035 3 47 141,465 106,069
--------- ---------- --------- --------- -------- --------- --------- --------- ---------- ---------- ---------- ----------
Inter-segment
revenue 1 9,305 2,714 3,164 3 2 15 13 4,386 4,964 7,119 17,448
--------- ---------- --------- --------- -------- --------- --------- --------- ---------- ---------- ---------- ----------
Segment
profit/(loss)
before tax 27,162 (1,090) 60,298 9,822 3,649 4,869 8,350 8,258 (2,780) (4,528) 96,679 17,331
--------- ---------- --------- --------- -------- --------- --------- --------- ---------- ---------- ---------- ----------
30/6/18 31/12/17 30/6/18 31/12/17 30/6/18 31/12/17 30/6/18 31/12/17 30/6/18 31/12/17 30/6/18 31/12/17
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Segment assets 362,720 418,891 852,193 866,433 78,799 81,487 195,892 196,326 1,493 1,270 1,491,097 1,564,407
--------- ---------- --------- --------- -------- --------- --------- --------- ---------- ---------- ---------- ----------
Segment
liabilities 86,624 145,918 560,173 622,352 59,816 61,360 3,313 1,646 1,395 1,409 711,321 832,685
--------- ---------- --------- --------- -------- --------- --------- --------- ---------- ---------- ---------- ----------
Reconciliation of reportable segment profit or loss
1/1/18- 1/1/17-
30/6/18 30/6/17
US$ '000 US$ '000
Total profit before tax for reportable segments 96,679 17,331
Unallocated amounts:
Other profit or loss (196) (9,618)
Gain on 100% acquisition of previously held
interest in a
joint venture - 7,532
Share of profit of joint ventures, net of tax - 1,957
Profit before tax 96,483 17,202
Reconciliation of reportable segment revenue
1/1/18- 1/1/17-
30/6/18 30/6/17
US$ '000 US$ '000
Total revenue for reportable segments 141,465 106,069
Unallocated revenue:
Non-core activity revenue 556 -
Revenue 142,021 106,069
6. REVENUE
For the For the
six six
months months
ended ended
30/6/18 30/6/17
US$ '000 US$ '000
Investment property rental income 46,661 42,691
Revenue from sale of trading properties -
transferred at a point in time (note 4) 3,974 49,783
Revenue from sale of trading properties -
transferred over time 74,751 -
(note 4)
Hotel operation income 16,076 13,446
Non-core activity revenue 556 -
Construction consulting/management fees 3 149
142,021 106,069
7. ADMINISTRATIVE EXPENSES
For the For the
six six
months months
ended ended
30/6/18 30/6/17
US$ '000 US$ '000
Consultancy fees 217 189
Legal fees 814 882
Auditors' remuneration 212 340
Valuation expenses 33 37
Directors' remuneration 658 666
Depreciation 54 57
Insurance 76 75
Provision for Doubtful Debts (292) 40
Donations 5 15
Other administrative expense 799 821
2,576 3,122
8. OPERATING EXPENSES
For the six For the
months ended six
months
ended
30/6/18 30/6/17
US$ '000 US$ '000
Maintenance, utility and security expenses 10,444 9,316
Agency and brokerage fees 1,234 644
Advertising expenses 3,709 2,261
Salaries and wages 7,542 7,373
Consultancy fees 1,269 282
Depreciation 408 352
Insurance 216 278
Rent 665 960
Property and other taxes 4,897 4,926
Other operating expenses 37 30
30,421 26,422
The increase in comparison with the respective period of prior
year is mainly due to increase in maintenance, agency, advertising
and consultancy expenses, which correlates with the increase in
revenue.
9. FINANCE COST AND FINANCE INCOME
For the For the
six six
months months
ended ended
30/6/18 30/6/17
US$ '000 US$ '000
Interest income 756 500
Net foreign exchange gain 16,609 5,209
Net change in fair value of financial assets - 4
Finance income 17,365 5,713
Interest expense on loans and borrowings (16,773) (24,385)
Net foreign exchange loss - -
Net change in fair value of financial assets (1,537) -
Other finance costs (902) (389)
Finance costs (19,212) (24,774)
Net finance cost (1,847) (19,061)
10. tAX EXPENSE
For the For the
six six
months months
ended ended
30/6/18 30/6/17
US$ '000 US$ '000
Current tax expense
Current year 4,099 2,244
Deferred tax expense
Origination and reversal of temporary differences 15,716 7,026
Total income tax expense 19,815 9,270
11. INVESTMENT PROPERTY
Reconciliation of carrying amount
30/6/18 31/12/17
US$ '000 US$ '000
Balance 1 January 818,060 915,350
Renovations/additional cost 383 998
Disposals (1,319) (140,026)
Fair value adjustment 34,810 18,218
Effect of movement in foreign exchange rates (33,874) 23,520
Balance 30 June / 31 December 818,060 818,060
The decrease due to the effect of the foreign exchange
fluctuation is a result of the Rouble weakening compared to the US
Dollar by 9% during the first half of 2018. The fair value
adjustment is mainly related to this Rouble weakening. Based on the
management's assessment the fair value of the properties within the
portfolio reported has not significantly changed since 31 December
2017 when a valuation by external appraisers took place. The same
applies for investment property under development. See note 12
below.
12. INVESTMENT PROPERTY UNDER DEVELOPMENT
30/6/18 31/12/17
US$ '000 US$ '000
Balance 1 January 163,240 232,900
Construction costs 1,320 4,865
Transfer to trading properties under construction
(note 15) - (74,100)
Fair value adjustment 7,757 (6,648)
Effect of movements in foreign exchange
rates (9,077) 6,223
Balance 30 June / 31 December 163,240 163,240
The decrease due to the effect of the foreign exchange
fluctuation is a result of the Rouble weakening compared to the US
Dollar by 9% during the first half of 2018. The fair value
adjustment is mainly related to this Rouble weakening. Based on the
management's assessment the fair value of the properties within the
portfolio reported has not significantly changed since 31 December
2017, when a valuation by external appraisers took place.
13. PROPERTY, PLANT AND EQUIPMENT
30/6/18 31/12/17
US$ '000 US$ '000
Balance 1 January 77,633 31,215
Effect of acquisition of subsidiary - 45,580
Additions 639 484
Depreciation for the period / year (463) (846)
Disposals (55) (137)
Effect of movements in foreign exchange
rates (4,909) 1,337
Balance 30 June / 31 December 72,845 77,633
14. TRADING PROPERTIES
30/6/18 31/12/17
US$ '000 US$ '000
Balance 1 January 10,792 6,854
Transfer from trading properties under
construction (note 15) 22,842 63,202
Cost of sales of trading properties (3,382) (59,747)
Effect of movements in exchange rates (952) 483
Balance 30 June / 31 December 29,300 10,792
Trading properties comprise unsold apartments and parking
spaces. The transfer from trading properties under construction
represents the completion of the construction of a number of flats,
offices and parking places of AFI Residence Paveletskaya project
during the six months period of 2018, and of "Odinburg" project
during the year 2017.
The amount recognised to cost of sales of trading properties
represents the sale of completed flats or parking places recognised
at a point in time. For the year ended 31 December 2017 this amount
represents the amount transferred to the income statements upon
transferring of the rights to the buyers according to the signed
acts of transfer in accordance with the previous accounting policy
as per IAS18.
15. TRADING PROPERTIES UNDER CONSTRUCTION
30/6/18 31/12/17
US$ '000 US$ '000
Balance 1 January as previously reported 349,735 243,327
Effect of adoption of IFRS 15 as at 1 January (59,801) -
2018*
Restated balance at 1 January 289,934 243,327
Transfer from investment property under
development (note 12) - 74,100
Transfer to trading properties (note 14) (22,842) (63,202)
Construction costs 55,942 96,481
Finance cost capitalised 4,276 -
Cost of sales of trading properties (47,033) -
Impairment - (9,548)
Effect of movements in exchange rates (15,793) 8,577
Balance 30 June / 31 December 264,484 349,735
Trading properties under construction comprise "Odinburg",
"Paveletskaya Phase II", "AFI Residence Botanic Garden" and
"Bolshaya Pochtovaya" projects which involve primarily the
construction of residential properties.
The amount recognised to cost of sales of trading properties,
represents the cost incurred to date for the construction of the
apartments and flats which were sold but not yet completed based on
the new standard IFRS 15 adopted as from 1 January 2018.
*The Group has initially adopted IFRS 15 Revenue from Contracts
with Customers as from 1 January 2018. For more details please
refer to Note 4.
16. TRADE AND OTHER RECEIVABLES
30/6/18 31/12/17
US$ '000 US$ '000
Advances to builders 43,555 29,313
Amounts receivable from related parties (note
25) 132 109
Trade receivables, net 5,051 3,458
Other receivables 7,599 21,713
VAT recoverable 3,867 9,889
Tax receivables 4,568 5,920
64,772 70,402
Trade receivables net
Trade receivables are presented net of an accumulated provision
for doubtful debts and unrecognised revenue of US$8,896 thousand
(31/12/2017: US$10,522 thousand).
17. CASH AND CASH EQUIVALENTS
30/6/18 31/12/17
Cash and cash equivalents consist of: US$ '000 US$ '000
Cash at banks 87,791 95,102
Cash in hand 235 366
88,026 95,468
18. OTHER INVESTMENTS
During the current period the Group continued the implementation
the Board's decision to invest in various debt and equity
instruments. During the period the company invested in total
US$21,241 thousand in a private company's shares, in investments in
funds and debt securities.
19. SHARE CAPITAL AND RESERVES
30/6/18 31/12/17
1. Share capital US$ '000 US$ '000
Authorised
2,000,000,000 shares of US$0.001 each 2,000 2,000
Issued and fully paid
523,847,027 A shares of US$0.001 each 524 524
523,847,027 B shares of US$0.001 each 524 524
1,048 1,048
2. Translation reserve
The translation reserve comprises all foreign currency
differences arising from the translation of the financial
statements of foreign operations to the Group presentation currency
and the foreign exchange differences on loans designated as loans
to an investee company which are accounted for as part of the
investor's investment (IAS21.15) as their repayment is not planned
or likely to occur in the foreseeable future. These foreign
exchange differences are recognised directly to Translation
Reserve.
3. Retained earnings
Retained earnings are available for distribution at each
reporting date. No dividends were proposed, declared or paid during
the six-month period ended 30 June 2018.
4. Capital reserve
Represents the effect of the acquisition, in 2015, of the 10%
non-controlling interests in Bioka Investments Ltd and its
subsidiary Nordservice LLC previously held at 90% and the effect of
the acquisitions during the period of the 5% non-controlling
interests in Beslaville Management Limited and its subsidiary
Zheldoruslugi LLC previously held at 95% and of the 26%
non-controlling interest in Bizar LLC previously held at 74%.
20. LOANS AND BORROWINGS
30/6/18 31/12/17
US$ '000 US$ '000
Non-current liabilities
Secured bank loans 520,585 492,484
Current liabilities
Secured bank loans 16,649 86,468
Unsecured loans from other non-related
companies 283 307
16,932 86,775
The following changes to the loans took place during the
six-month period ended 30 June 2018:
A new loan facility was acquired by one of the Group's
subsidiaries, Bellgate Construction Ltd ("Bellgate"), based on a
loan agreement signed on the 28 December 2017. This new loan
facility was used to refinance the previous loan from VTB Bank JSC
("VTB") signed on 22 June 2012 with a maturity date in April 2018
and was also used to repay the remainder amount of US$83 million,
of Ozerkovskaya III loan which expired in January 2018. Bellgate
received the new loan in five tranches, during January and February
2018, in Euros and in Russian Rubles. The blended interest rate on
the new loan is circa 5.6% (assuming current EUR/RUR exchange rate
and current Russian Central Bank key lending rate). The interest
and the principal of the new loan are to be paid quarterly, while
the term of the loan is 5 years.
In January 2018, the Company's subsidiary MKPK PJSC (the owner
of the AFI Residence Paveletskaya Project) received a loan from VTB
Bank PJSC in the amount of RUR711 million to refinance the
previously incurred costs for the construction of the project. The
loan bears floating interest rate of the Russian Central Bank key
lending rate + 1.5%. The principal on the loan is payable monthly,
while the interest is payable quarterly. The loan was fully repaid
in June 2018.
21. TRADE AND OTHER PAYABLES
30/6/18 31/12/17
US$ '000 US$ '000
Trade payables 10,201 13,756
Payables to related parties (note 25) 238 183
Amount payable to builders 14,953 8,510
Provision 6,320 6,830
VAT and other taxes payable 5,535 28,982
Other payables 4,695 6,845
41,942 65,106
Provision represents the estimated cost of construction of
common use areas of the Odinburg project such as hospital and
school which is an obligation of the Group to build and make
available for use by the residents.
22. FINANCIAL INSTRUMENTS
A. Accounting classifications and fair values
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels and the fair value hierarchy for financial instruments
measured at fair value. It does not include fair value information
for financial assets and financial liabilities not measured at fair
value if the carrying amount is a reasonable approximation of fair
value.
Carrying amount Fair value
------------------------------------------------------------------------------- -------------------------------------
Trade Cash Other
Loans and Other and cash financial
Receivable other investments equivalents liabilities Total Level Level Level Total
receivables 1 2 3
------------ ------------ ------------- ------------ ------------ -------- ------- -------- -------- --------
30 June 2018 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Financial
assets
measured at
fair value
Investment
in listed
debt
securities - - 10,493 - - 10,493 10,493 - - 10,493
Investment
in equity - - 14,506 - - 14,506 - - 14,506 14,506
------------- -------- -------- -------- -------- ---------- ---------- -------- -------- ---------- ----------
24,999 24,999
------------- -------- -------- -------- -------- ---------- ---------- -------- -------- ---------- ----------
Financial
assets not
measured
at fair
value
Loans
receivable 4,100 - - - - 4,100
Trade and
other
receivables - 12,780 - - - 12,780
Cash and
cash
equivalents - - - 88,026 - 88,026
------------- -------- -------- -------- -------- ---------- ---------- -------- -------- ---------- ----------
4,100 12,780 88,026 - 104,906
------------- -------- -------- -------- -------- ---------- ---------- -------- -------- ---------- ----------
Financial
liabilities
not measured
at fair
value
Interest
bearing
loans and
borrowings - - - - (537,517) (537,517) - - (525,341) (525,341)
Trade and
other
payables - - - - (14,896) (14,896)
------------- -------- -------- -------- -------- ---------- ---------- -------- -------- ---------- ----------
(552,413) (552,413)
------------- -------- -------- -------- -------- ---------- ---------- -------- -------- ---------- ----------
Carrying amount Fair value
-------------------------------------------------------------------------------- ------------------------------------
Trade Cash Other
Loans and Other and cash financial
Receivable other investments equivalents liabilities Total Level Level Level Total
receivables 1 2 3
------------ ------------- ------------- ------------ ------------ -------- ------- ------- -------- --------
31 December US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
2017
Financial
assets
measured at
fair value
Investment
in listed
debt
securities - - 5,255 - - 5,255 5,255 - - 5,255
Investment
in fund - - 5,240 - - 5,240 - - 5,240 5,240
- - 10,495 - - 10,495
-------- -------- -------- -------- ---------- -----------
Financial
assets not
measured
at fair
value
Loans
receivable 2,759 - - - - 2,759
Trade and
other
receivables - 25,280 - - - 25,280
Cash and
cash
equivalents - - - 95,468 - 95,468
-------- -------- -------- -------- ---------- -----------
2,759 25,280 - 95,468 - 123,507
-------- -------- -------- -------- ---------- -----------
Financial
liabilities
not measured
at fair
value
Interest
bearing
loans and
borrowings - - - - (579,259) (579,259) - - (579,415) (579,415)
Trade and
other
payables - - - - (25,230) (25,230)
- - - - (604,489) (604,489)
-------- -------- -------- -------- ---------- -----------
A. Measurement of fair values
Valuation technics and significant unobservable inputs
The following table shows the valuation techniques used in
measuring Level 3 fair values at 30 June 2018 and 31 December 2017
for financial instruments measured in fair value in the statement
of financial positions, as well as the significant unobservable
inputs used.
Inter-relationship
Significant between key
unobservable unobservable
Type Valuation technique inputs inputs and fair
value measurement
----------- ---------------------------------- --------------- -------------------
Investment The securities and other Not applicable Not applicable
in fund assets of each Segregated
Portfolio are valued by
the Fund based on market
quotations. If market quotations
are not readily available,
or if the Investment manager
determines that special
circumstances exist which
effect the value of a security,
the valuation of those
securities and other assets
will be determined in good
faith by the Investment
manager, whose determination
will be final, conclusive
and binding on all parties.
23. ADVANCES FROM CUSTOMERS
30/6/18 31/12/17
US$ '000 US$ '000
Balance 1 January as previously reported 123,766 51,301
Effect of adoption of IFRS 15 as at 1 January (77,877) -
2018*
Restated balance at 1 January 45,889 51,301
Customer advances during period/year 81,095 110,490
Effect of recognition of revenue (68,490) (41,647)
Effect of movements in exchange rates (4,453) 3,622
Balance 30 June / 31 December 54,041 123,766
*The Group has initially adopted IFRS 15 Revenue from Contracts
with Customers as from 1 January 2018. For more details please
refer to Note 4.
24. FINANCIAL RISK MANAGEMENT
The Group's financial risk management objectives and policies
are consistent with that disclosed in the consolidated financial
statements as at and for the year ended 31 December 2017.
Russian business and economic environment
The Group's operations are primarily located in the Russian
Federation. Consequently, the Group is exposed to the economic and
financial markets of the Russian Federation which display
characteristics of an emerging market. The legal, tax and
regulatory frameworks continue development, but are subject to
varying interpretations and frequent changes which together with
other legal and fiscal impediments contribute to the challenges
faced by entities operating in the Russian Federation.
The Russian economy continues to recover despite financial
market volatility. The GDP is forecasted to grow by 1.5% in 2018
year-on-year.
Standard & Poor's credit rating for Russia stands at BBB-
with a stable outlook, while Moody's (Ba1) and Fitch's (BBB-)
credit ratings for Russia were set with positive outlook.
The Central Bank of Russia announced a pause in rate cuts and
kept the key rate at the level of 7.25% since March 2018. The
consumer prices inflation in July 2018 was at 2.5% (annualised)
(with CBR target at 4%). Retail turnover entered a recovery stage
with a 3% annualised growth in June.
In H1 2018 total investment volume amounted to US$1.4 billion
with domination of residential sites and office transactions
accounting for 34% and 32% correspondingly. Foreign investors
accounted for 27% of the investment volume in H1 2018.
The interim financial statements reflect management's assessment
of the impact of the Russian business environment on the operations
and the financial position of the Group. The future business
environment may differ from management's assessment.
25. RELATED PARTIES
30/6/18 31/12/17
(i) Outstanding balances with related US$ '000 US$ '000
parties
Assets
Amounts receivable from other related
companies (note 16) 132 109
30/6/18 31/12/17
(i) Outstanding balances with related US$ '000 US$ '000
parties (continued)
Liabilities
Amounts payable to other related companies
(note 21) 238 183
Deferred income from related company 25 101
(ii) Transactions with the key management 1/1/18- 1/1/17-
personnel 30/6/18 30/6/17
US$ '000 US$ '000
Key management personnel compensation
Short-term employee benefits 1,387 1,342
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including any
director (whether executive or otherwise) of that entity. The
person is a member of the key management personnel of the entity or
its parent (includes the immediate, intermediate or ultimate
parent). Key management is not limited to directors; other members
of the management team also may be key management.
1/1/18- 1/1/17-
(iii) Other related party transactions 30/6/18 30/6/17
US$ '000 US$ '000
Revenue
Related companies - rental income 166 234
Related companies - other income - 1
Joint venture - consulting services - 31
Joint venture - interest income - 211
Expenses
Joint venture - operating expenses - 10
26. SUBSEQUENT EVENTS
There were no material events that took place after the
six-month period and until the date of the approval of these
interim financial statements by the Board of Directors on 29 August
2018, except of the following:
On 29 August 2018 the Board of Directors of the Company approved
granting of a loan in the maximum amount of EUR5 million to
Grosolim Ltd, a Company controlled by Mr Leviev. The 5-year loan
will be provided at Euribor plus 5.2% annual interest rate, the
interest will be paid quarterly while the principal amount will be
paid at maturity. The loan will be secured by a personal guarantee
of Mr Lev Leviev.
On 29 August 2018 the Board has accepted resignation of Mr Lev
Leviev from the position of Executive Chairman of the Company
effective as of 31 August 2018. The Board appointed Mr David Tahan
as non-executive Chairman of the Company effective as of 1
September 2018. The Board has also appointed Mr Mark Groysman as an
executive director.
[1] AFI Development has adopted IFRS 15 Revenue from Contracts
with Customers from 1 January 2018. The "sale of residential
properties" figure includes the revenue from sales of residential
properties transferred over time calculated under IFRS 15.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FKCDQPBKDQFB
(END) Dow Jones Newswires
August 30, 2018 02:00 ET (06:00 GMT)
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