Interim Results

RNS Number : 6185A
Secure Property Dev & Inv PLC
30 September 2015
 

 

Secure Property Development & Invest PLC/ Index: AIM / Epic: SPDI / Sector: Real Estate

30 September 2015

Secure Property Development & Investment PLC ('SPDI' or 'the Company')

Interim Results

 

Secure Property Development & Investment PLC, the AIM quoted South Eastern European focused property and investment company, is pleased to announce its interim results for the period ended 30 June 2015.

 

Financial Highlights

·    103% increase in total asset value to €134 million (31 December 2014: €66million) reflecting the transformational property acquisitions made during the period across the region

·    77% increase in rental income to €2.3 million (H12014: €1.3million)

·    EBITDA turned positive to €1.5 million compared to a loss of €0.4million for H12014

·    €8 million cash raised via Open Offer in March 2015

·    84% increase in Net Asset Value to €59 million (31 December 2014: €32 million) due to share capital increase via Open Offer and issue of shares in settlement of asset acquisitions

·    The loan to value ratio as at 30 June 2015 stands at 53% (31 December 2014: 48%) demonstrating strong asset backing behind the Company

 

Operational Highlights

·    Successfully implemented strategy to expand the geographic spread of the portfolio to encompass fast growing South Eastern European countries which offer high yields and capital growth

·    Acquired three income producing assets in Romania, Greece and Bulgaria that, combined, generate ~€3 million of Net Operating Income ('NOI') annually, increasing the Company's annualised NOI by ~73% to ~€7 million by the end of H12015;

o NOI now stands at c. ~€8 million following the completion of the acquisition in Craiova post period end

·    Blue chip tenants on long leases in acquired properties including: multinational logistics company Kuehne and Nagel; Pratiker; and the Romanian Telecoms Regulator - long lease terms provide revenue visibility

·    Acquisitions add a combined ~€64.5 million of gross asset value since year end, increasing total Assets under Management ('AuM') to ~€126 million

·    Provides further geographic diversification of portfolio, and ensures SPDI's position as a South Eastern Europe  regional property company

·    Cash generative and asset backed platform in place to take advantage of highly positive South Eastern European property market fundamentals and the ongoing European yield compression play

 

Lambros G. Anagnostopoulos, Chief Executive Officer, said, "Thanks to the acquisition of a further five properties, the six months under review has seen excellent progress made towards delivering on our objective to build a diversified portfolio of prime properties in South Eastern Europe with visible income streams and significant capital growth potential.  The numbers speak for themselves: we now have a portfolio of six income producing property assets in four countries in the region as well as residential and land non-core assets; our AuM now stands at €126 million; while our annualised NOI totals c. €8m. As a result we now have a cash generative, asset backed platform in place which will allow us to accelerate the roll-out of our strategy through the acquisition of additional properties that fit our investment criteria: prime locations; strong covenants with blue chip tenants on long term rental contracts; secured at attractive high yields.

 

"We believe we are in the right market at the right time.  The supply and demand dynamics of the region's commercial property markets remain favourable in terms of future rental growth and potential capital uplift.  Meanwhile the commencement of the ECB's quantitative easing programme earlier in the year provides a significant tailwind to the ongoing European yield compression play which in our view has a long way to run further, particularly in our core area of focus.  Backed by a strong team of non-executive directors, seasoned executives and experienced staff and advisers, which has proven its ability to identify and secure prime properties at attractive prices, Secure is ideally placed to deliver on its goal to create the leading institutional South Eastern European income producing and dividend yielding property company."

 

* * ENDS * *

 

For further information please visit www.secure-property.eu or contact:

 

Lambros Anagnostopoulos

SPDI

Tel: +30-210-7226470

Constantinos Bitros

Tercel Moore

SPDI

SP Angel Corporate Finance LLP

Tel: +30-210-7226470

Tel: +44 (0) 20 3463 2260

Jeff Keating

SP Angel Corporate Finance LLP

Tel: +44 (0) 20 3463 2260

Lottie Brocklehurst

St Brides Partners Ltd

Tel: +44 (0) 20 7236 1177

Frank Buhagiar

St Brides Partners Ltd

Tel: +44 (0) 20 7236 1177

 

 

 

1.            Management Report

In summary

The first half of 2015 saw SPDI complete the first phase of its expansion and diversification plan. By the end of June 2015, the Company owned assets in Romania, Bulgaria, Greece and Ukraine, the four largest (by population) countries of South East Europe, attaining three distinct stated goals:

 

a) diversifying its asset base with no-one country presenting more than 50% of its AUM.

b) growing to more than EUR 100m of Assets under Management, and

c) building up a strong Operating Revenue stream that would facilitate both return to its shareholders as well as further asset growth.

 

To achieve these goals, management's efforts in the first months of 2015 were focused on both the efficient raising of capital and the acquisition of assets, which meet our investment criteria. SPDI raised more than EUR 10m of new capital through an open offer to its shareholders in March 2015 and through the execution of warrants in July 2015. In parallel SPDI concluded or signed the agreement for the acquisition of the following assets:

 

1.     A fully let 17.000 sqm logistics park west of Athens, the majority of which is let to the German logistics operator Kuehne + Nagel, generating ~EUR 1,5 net operating income. The logistics centre also has a 1MW photovoltaic park installation on its roof generating and selling electricity to the grid,

2.     A fully let 19.000 sqm office building in Sofia (20% ownership) let to one of Bulgaria's largest insurance companies, generating EUR 2,9m net operating income,

3.     A fully let 9.000 sqm retail property in Craiova, Romania, rented to  Praktiker, a leading European DIY retailer,  generating EUR 1m of net operating income,

4.     A fully let 10.000 sqm office building in Bucharest (24,35% ownership) mostly let to Romania's Telecom Regulatory Authority generating EUR 1,75m net operating income, and

5.     A portfolio of residential properties in Bucharest and Sofia, the majority of which are currently let, generating more than EUR 0,3m annual rental revenues. These properties are for sale.

 

True to our strategy to grow the Company with the lowest possible cash outlay, the last three assets were acquired by SPDI in exchange for newly issued shares in the Company.  This has not only facilitated the task of surpassing the EUR 100m AUM mark and ending the period with EUR 126m AUM, but has also brought onto the Company's shareholder register a number of highly respected institutional investors in the region who share the Company's vision and strategy to build the prime professional real estate company in the region. In addition, the acquisitions increased the Company's annualized Net Operating Income by EUR 3m.

 

While the economic climate in Europe improved further in the first half of 2015, Greece lapsed back into political turmoil with the new Government elected in January 2015 abandoning the path prescribed by the agreements between the old government and its EU creditors. By August 2015, and after various failed attempts to change course and a July referendum, a new agreement with the creditors had been signed, indicating signs of stabilization, needed for the country to return to a growth path following six years of harsh recession.  At the same time, Ukraine continued its path towards taking political stabilization measures, even though the economic recession that has followed the 2014 war with Russia and the ensuing large devaluation of the local currency has taken a bigger bite of the economy than the semester before hand. Even though the IMF and other international bodies are working with the Ukrainian government to minimize the effects of such recession, the country's economy is not expected to pick up within 2015. On the contrary, Romania's economy continues its fast ascent, with GDP growth above 3,4%,  low unemployment and FDI picking up, making Romania a high growth economy target for the next few years. It is this fundamental macroeconomic environment that guided SPDI's growth pattern that has left the Company at the end of the period with its highest property exposure in Romania (58%) and much lower in Greece (16%), Ukraine (35%) or Bulgaria (17%).

 

  The global macroeconomic picture has also provided a positive tailwind over the review period.   In March 2015, Europe entered a period of Quantitative Easing which signals the continuation of the low interest rate environment while the US is expected to turn the corner with interest rates picking up.  As a result, European Real Estate is becoming more and more attractive for global investors, particularly South East Europe where asset prices are low. This is the macro environment in which the Company expects to prevail for the next 12 months and plans to take advantage of for the benefit of its shareholders.  As a result, and following the success of the Open Offer to shareholders and the ensuing property asset acquisitions, the Company engaged a small number of advisers - brokers on both sides of the Atlantic to facilitate further growth, as per its vision guided strategy.

 

As at period end, all our income generating properties have prime locations, generate substantial income from blue chip tenants, provide immediate stable cash flows with long term visibility, and offer scope for significant capital uplift over the short to medium term, as the on-going European yield compression play gathers momentum across the continent. Thanks to the progress made during the six months, Secure has a highly cash generative platform from which to accelerate the roll-out of its strategy to grow its portfolio of prime real estate, and in the process build the leading institutional South Eastern European income producing and dividend yielding property company. 

 

 

P&L

The table below presents the operating performance in the last 3 years:

 

2015 1H

2014 1H

2013 1H

 

 

 

Rental Income

2.319.351

1.272.609

1.371.162

Sevice charges and utilities Income

279.901

133.520

-

Income from sale of electricity

135.140

-

-

Property Operating expenses

(287.584)

(254.857)

(291.190)

Share of profits from associates

354.949

 

 

Net Income from Investment properties

2.801.757

1.151.272

1.079.972

 

 

 

 

Sales of assets

671.368

 

-

Cost of sale of assets

(469.850)

-

-

Net Income from sale of assets

201.518

-

-

 

 

 

 

 Income from operations

3.003.275

1.151.272

1.079.972

 

 

 

 

 Administration expenses

(1.599.125)

(1.543.497)

(1.070.535)

 Other income/ (expenses), net

42.270

(16.624)

174.325

 

 

 

 

 Operating profit

1.446.420

(408.849)

183.762

 

 

 

 

 Gains on acquisitions

5.237.790

391.205

-

 Finance costs, net

(1.643.882)

(565.132)

(602.250)

 

 

 

 

 Profit/(loss) before tax

5.040.328

(582.776)

(418.488)

 

 

 

 

 Income tax expense

(2.894)

(12.931)

-

 

 

 

 

 Profit /(Loss)  for the year

5.037.434

(595.707)

(418.488)

 

 

 

 

 Investment property related gains (Note1)

4.737.805

13.225.535

-

 Foreign exchange losses, net (Note 2)

(4.976.537)

(14.590.388)

(19.518)

 

 

 

 

  Profit / (Loss)  for the year

4.798.702

(1.960.560)

(438.006)

 

 

 

 

 

Note 1: this includes a) the upward revaluation of Ukrainian assets caused by the foreign exchange difference between the US$ and the EUR (in itself mostly negated by the devaluation of the UAH) minus b) a precautionary provision that management has taken on the recently acquired assets.

Note 2: these relate to the EBRD loan towards Terminal Brovary (mostly hedged due to the USD denominated income) and to various intercompany loans for which any associated losses, (predominately paper), are caused by the devaluation of the UAH from 8 at the beginning of the year to 23 to the US$ by the end of the reporting period (a drop of ~65%).

 

 

2.            Regional Economic Developments 1

Romania

Romania's GDP expanded by a real 3,7% yoy in H1 2015, as per the indication provided by the country's statistics office. In Q2 2015, GDP grew by 3,2% yoy, one of the highest in EU-28. According to recent reports, this growing trend is expected to continue throughout the rest of 2015, forecasting a yoy GDP growth of 3,4% overall.

 

CPI is negative at 1,7% so far for the year while the recent VAT rate decreasing for all food products from 24% to 9% has contributed another -0,2% for June. The unemployment rate was 6,8% at the end of June, remaining stable compared with a year ago, while the industrial output index for the first seven months of 2015 registered a 2,6% increase yoy.

 

In May, the National Bank of Romania decreased the monetary policy rate to a record low of 1,75%. Exchange rates remained stable over the first 6 months, fluctuating between RON 4,40 to RON 4,48 to the EUR. Government debt decreased below 38,5% of GDP, the third lowest in the EU, while foreign direct investments in H1 2015 totaled EUR 1,66 billion, 39% higher than last year.

 

 

Macroeconomic data and forecasts

 

 

2011

2012

2013

2014

2015f

 

GDP (EUR bn)

131,4

131,8

142,2

149,3

156,0

 

Population (mn)

20,1

20,0

19,9

19,9

19,9

 

GDP (constant prices y-o-y %)

2,2

0,7

3,4

2,9

3,4

 

CPI (average, y-o-y %)

5,8

3,4

4,0

1,1

-0,5

 

Unemployment rate (%)

7,4

7,0

7,1

6,8

6,5

 

Net FDI (EUR bn)

1,8

2,2

2,6

2,5

3,1

 

 Sources : IMF, National Sources, Eurobank EFG, European Comission

 

 

 

 

Bulgaria  

The pace of growth in Q1 2015 (2% yoy) was the strongest since Q2 2011 increasing by 2,2% year-on-year with the strongest contribution coming from net exports.

 

Bulgaria posted a consolidated budget surplus of EUR 455 million for H1 2015 or 1,1% of the country's projected GDP, compared to a deficit of EUR 509 million for the same period last year.

 

CPI in June 2015 stood at -0,6% yoy. Foreign direct investment for the period January-May 2015 amounted to EUR 617 million, compared to the EUR 622 million for the same period in 2014. The unemployment rate was 9,6% in June, matching EU's average rate, while the country's industrial output rose by 5,7% yoy. Exchange rates remained stable over the first 6 months at BGN 1,96 to the EUR.

 

Macroeconomic data and forecasts

 

 

2011

2012

2013

2014

2015f

 

GDP (EUR bn)

38,5

39,7

39,9

40,4

40,9

 

Population (mn)

7,3

7,3

7,3

7,2

7,2

 

GDP (constant prices y-o-y %)

1,8

0,8

0,9

1,7

1,8

 

CPI (average, y-o-y %)

4,2

3,0

1,4

-1,6

0,2

 

Unemployment rate (%)

11,2

12,3

12,9

11,7

9,8

 

Net FDI (EUR bn)

1,2

1,2

1,1

1,2

1,5

 

 Sources : IMF, National Sources, Eurobank EFG, European Comission

 

 

 

 

Ukraine

The ongoing conflict in the Eastern border and sharp depreciation of the hryvnya in Q1 2015, have led the economy into a deep recession without signs of clear stabilization as of yet. In accordance with the preliminary estimates of the Ministry of Economic Development and Trade of Ukraine, in the first half of 2015 real GDP contracted by -16,3% yoy. If this is sustained through the year the aggregate recession in Ukraine since late 2013 is expected to exceed 50% in USD terms.

 

The official exchange rate was 15,78 UAH / USD at the start of 2015 and reached its record of 30 UAH/USD in February 2015. By the end of the first quarter of 2015 the official exchange rate stabilized at around 23 UAH/USD and during the second quarter of 2015 it was largely stable, varying in the range of 20,5-22 UAH/USD.

 

In January-June 2015, consumer price inflation reached 48,1% year-on-year, compared to 5,8% in the first half of 2014, with the main contributor being the sharp depreciation of the UAH and the resultant increase in prices for imported goods, increase of the state-regulated tariffs and high inflation expectations.

 

Currently Ukraine remains dependant on the USD 17,5 billion IMF loan. After the review of the authorities' performance under the programme, IMF allocated the second tranche amounting to USD 1,7 billion in early August 2015 and discussions for a restructuring of the debt including a write off are fully fledged at the moment.

 

Macroeconomic data and forecasts

 

 

2011

2012

2013

2014

2015f

 

GDP (USD bn)

163,4

176,2

177,4

127,6

115,8

 

Population (mn)

45,6

45,6

45,5

42,7

42,5

 

GDP (constant prices y-o-y %)

5,2

0,2

0,0

-6,0

-9,2

 

CPI (average, y-o-y %)

8,0

0,6

-0,2

12,1

51,0

 

ILO Unemployment rate (%)

7,9

7,5

7,4

10,5

11,0

 

Net FDI (USD bn)

7,0

6,6

3,3

0,2

0,5

 

 Sources : IMF, National Sources, European Comission, Oxford Economics

 

 

 

 

Greece

After bailout talks between the Greek government and foreign lenders broke down during the last weekend of June, the European Central Bank froze vital ELA funding support to Greek banks, leaving Athens with little choice but to shut down the system to keep the banks from collapsing by imposing capital controls.  As a result of these actions the Athens Stock Exchange closed from June 26 to August 3.

On July 13, Eurozone leaders reached a unanimous agreement over a third Greek bailout. The Greek government managed to pass the measures by parliamentary majority on August 14, so Greece will be able to benefit from the ~EUR 86 bln of bailout loans. Following that, the government resigned and announced early elections for September 20, which resulted in the same government coalition.

Amidst a very negative environment Greece's GDP grew 0,8% in Q2 2015, mainly driven by the ongoing tourist season and higher private consumption during the days of capital controls as people feared losing their money and preferred to spend it!

Assuming that the elections will facilitate the formation of a coalition government that will actively pursue fulfilling the prerequisites of the bailout program the Greek economy is expected to be slowly back on track within 2016.

 

Macroeconomic data and forecasts

 

 

2011

2012

2013

2014e

2015f

 

GDP (EUR bn)

208,5

193,4

182,1

179,1

175,2

 

Population (mn)

10,8

11,1

11,0

11,0

10,9

 

GDP (constant prices y-o-y %)

-1,1

-6,6

-3,9

-0,9

-0,8

 

CPI (average, y-o-y %)

4,2

3,0

0,9

-1,4

-0,3

 

Unemployment rate (%)

17,9

24,5

27,5

26,6

25,0

 

Net FDI (EUR bn)

0,8

1,4

1,6

1,0

0,0

 

 Sources : IMF, National Sources, Eurobank EFG, European Comission

 

 

 

 

[1] Sources : World Bank Group, Eurostat, National Bank of Greece, Elstat, Eurobank Research, and Economic Research Division, National Institute of Statistics- Romania, National Statistical Institute -Republic of Bulgaria, National Institute of Statistics - Ukraine, Bank of Serbia.

 

 

3.            Real Estate Market Developments2

3.1    Romania

General

The total investment volume registered in Romania in the first six months of 2015 was modest compared to H1 2015, recording a 78% decrease, but the low level of investment volume can be explained by the effervescence registered at the end of 2014.

 

Logistics Market

In H1 2015, the industrial property stock increased by 100.000 sqm to approximately 2.000.000 sqm., of which half is in Bucharest with another 160.000sqm  yet to be added by year end.   But still take up is very high levels with vacancy in Bucharest being less than 9% (outside Bucharest 10-12%) while prime rents remained relatively stable at EUR 3,5-4 per sqm.

 

Office Market

Total stock of office space reached 2,25 million sqm in H1 2015, with new deliveries accounting for approx. 50.000 sqm. In Q1 2015, 37% from total leasing activity (56.000 sqm) was dominated by transactions performed by tenants from the IT&C sector. This trend continued even stronger in the second quarter, reaching 72% of TLA (75.000 sqm). Vacancy rates continue to be uneven between sub-markets, which is also reflected in the evolution of the rental levels. While in South, Baneasa and Pipera North vacancy rates are above 30%, the vacancy rate in Dimitrie Pompeiu, Floreasca Barbu Vacarescu, North, Central-North, CBD and West is below 10%. Overall vacancy stands at 13%, slightly decreased from 14% at the end of 2014. Headline rent remains at ~EUR 18,5 per sqm.

 

Retail Market

Modern retail stock reached the 3 million sqm mark with some 120.000 sqm GLA delivered in H1 2015. Two important shopping centers opened so far this year: Coresi Shopping Resort in Brasov and Mega Mall in Bucharest. During the first six months of 2015, at least 30 new retailers have entered the local market targeting mainly Bucharest. Prime rent in Bucharest for retail parks is ~EUR 8,5 per sqm and 60-70 per sqm for shopping centres.

 

Residential Market

During H1 2015, prices for residential projects remained relatively stable as in 2014 but demand has picked up as the spending capacity of Romanians improves. Some new projects targeted more affluent purchasers, in contrast with previous years' focus on low income products. Both local and international developers sought to finalize one and two bedroom apartments in semi-central locations, or in the vicinity of popular office districts. Romanian authorities issued 18.229 building permits for residential projects in H1 2015, up 3,1% year-on-year, according to the national statistics office.

 

3.2    Bulgaria

 

General

The total value of closed transactions on the investment market in Bulgaria in the first half of 2015 was slightly above EUR 90 mln. It is expected by the end of the year the total sales transactions volume will be similar or higher than in 2014 (EUR ~220 mln).

 

Office Market

Office stock in Sofia has increased to 1,64 million sqm, as new deliveries for H1 2015 amounted to 14.000 sqm. Development of several projects have commenced, increasing the active construction to 198.600 sqm. Overall office market vacancy rates continued to decline to 14,2% in H1 2015 from 15,4% in Q4 2014, a new 4 year low. Market demand continues to be driven primarily by the IT sector. Rental rates for class A offices have increased to EUR 11,5 per sqm, while in CBD (Central Business District) properties the average rate is EUR 13,7 per sqm.

 

Retail Market

Total modern retail stock in Bulgaria is 844.000 sqm with shopping centers accounting for 95%. The vacancy rate in Sofia dropped to 11% (from 12% in 2014). No new project openings are expected by the end of the year. Retail activity will be concentrated on the repositioning of existing shopping centers and unfreezing projects at the development stage.

 

Residential Market

A total of 2.100 residential building permits were issued in H1 2015. Sofia represents the major part of approved projects with 37% of the total. The market appears to be absorbing the new supply with developers reporting a significant amount of sales, increased by 8% compared to last year. Average sales prices in Sofia are around EUR 770 per sqm almost 50% lower than the pre-crisis pricing level.

 

3.3    Ukraine

 

General

Due to the deepening of the economic recession in Ukraine, many businesses were adopting a wait-and-see attitude in relation to further activity in the country, whilst the purchasing power of the country's population further decreased.

 

Logistics Market

In late June 2015, total stock of modern warehousing and logistics space in the Greater Kiev area amounted to ~1.778.000 sqm. Overall development activity in the Greater Kiev area remains very low. During H1 2015 vacancy in the sector increased, reaching 12% in late June 2015 with asking rents dropping to the range of USD 2,5-5 per sqm for prime warehousing space in the Greater Kiev area, while for B-class properties average monthly rent was at around USD 2 per sqm.

 

Office Market

The total office stock in Kiev reached over 1,7 million sqm at the end of June 2015. In the first half of 2015 a majority of tenants decided to stay in their current properties and as a result, lease renewals and renegotiations accounted for almost 77% of total office take-up during the first six months of 2015. During the first half of 2015, vacancy in the office property sector in Kiev hovered at 23%. The indicative prime rent declined by 8% on average from USD 25 to USD 23 per sqm per month.

 

Retail Market

Total modern retail stock in Kiev amounted to around 1,55 million sqm in late June 2015. As of August 2015, DTZ estimates that presently around 560.000 sqm (GLA) of new 'modern' retail space in Kiev are actively in either the planning or construction stages. In late June 2015, average monthly rents in quality retail schemes in Kiev varied in the range of USD 45-65 per sqm for premises of 100-250 sqm. The retail premises in high street locations in Kiev commanded monthly rents of USD 30-50 per sqm. 

3.4    Greece

 

General

The property market is expected to recover gradually, assuming Greece will emerge from the recession cycle. In terms of investment interest, the most dynamic sectors appear to be that of hospitality, as a result of a projected substantial growth in tourism.

 

Logistics Market

The market is characterised by the absence of activity with very few leasing deals occurring, linked to the economic uncertainty shrouding the Greek market. Deals that are closing stem from existing occupiers taking advantage of the weak fundamentals and either moving to secure better price space or indeed renegotiating their existing leases to be more flexible and at a lower rent. Prime rents are EUR 3-4 per sqm for logistic space, stable for the last 12 months.

 

Office Market

Prime supply levels in the office sector have stabilized as weaker demand and the lack of new developments balance each other out. There is no pipeline of new or refurbished projects in most markets and this is not expected to change over the short to medium term, with most developers unwilling to commit to new construction. In prime office locations, rental rates have been stable between EUR 8- 15 per sqm.

 

2 Sources : National Bank of Greece, Bank of Greece, Eurobank, Jones Lang LaSalle, DTZ Research, CBRE Research, Colliers International, Cushman & Wakefield, MBL Research.

 

4.      Property Assets

4.1       Aisi Brovary - Terminal Brovary Logistic Park , Ukraine

Project description

 

The Brovary Logistic Park consists of a 49.180 sqm GLA Class A warehouse and associated office space. The building has large facades to Brovary ring road, at the intersection of the Brovary (Е-95/М-01 highway) and Borispil ring roads. It is located 10 km from Kiev city border and 5 km from Borispol international airport.

 

The building is divided into six independent sections (each at least 6.400 sqm), with internal clear ceiling of 12m height and industrial flooring constructed with an anti-dust overlay quartz finish. The terminal accommodates 90 parking spaces for cars and trucks, as well as 24 hour security and municipal provided sewage, water and garbage collection.

 

Current status

As of the end of June, the park remained 72% leased, with 79% of its warehouse capacity leased.

4.2       Innovations Logistics Park, Romania

Project description

The Park incorporates approximately 8.470 sqm of multipurpose warehousing space, 6.395 sqm of cold storage and 1.705 sqm of office space. It is located in the area of Clinceni, south west of Bucharest center, 200m from the city's ring road and 6km from Bucharest-Pitesti (A1) highway. Its construction was tenant specific, was completed in 2008 and it comprises four separate warehouses, two of which offer cold storage.

 

Current status

As of the end of June the warehouse was 87% leased with Nestle Ice Cream Romania being the anchor tenant (100% of cold space and 79% of total NOI).

4.3       EOS Business Park - Danone headquarters, Romania

Project description

The park consists of 5.000 sqm of land including a class "A" office building of 3.386 sqm GLA and 90 parking places. It is located next to the Danone factory, in the North-Eastern part of Bucharest with access to the Colentina Road and the Fundeni Road.  The Park is very close to Bucharest's ring road and the DN 2 national road (E60 and E85) and is also serviced by public transportation. The park is highly energy efficient.

 

Current status

The Company acquired the asset in November 2014. The complex at the end of June is fully let to Danone Romania, the French multinational food company, until 2026.

4.4       Praktiker Retail Center, Romania

Project description

The retail park consists of 21.860 sqm of land including a retail BigBox of 9.385 sqm GLA and 280 parking places. It is located in Craiova, on one of the main arteries of the city, along with most of the DIY companies.

 

Current status

The Company has reached a binding agreement in May 2015 for the acquisition of the asset which was finalised in July 2015. The complex at the end of June is fully let to Praktiker Romania, a leading DIY retailer, until 2020.

4.5       Delenco office building, Romania

Project description

The property is a 10.280 sqm office building, which consists of two underground levels, a ground floor and ten above-ground floors. The building is strategically located in the very center of Bucharest, close to three main squares of the city: Unirii, Alba Iulia and Muncii, only 300m from the metro station.

 

Current status

The Company acquired 24,35% of the property in May 2015. As of the end of June, the building is 100% let, with ANCOM (the Romanian Telecommunications Regulator) being the anchor tenant (70% of GLA).

4.6       Autounion office building, Bulgaria

Project description

A 19.476 sqm Class A office building which is located in a prime business area of Sofia, very close to the international airport and close to the city center. The building is BREEAM certified. 

 

Current status

The Company acquired 20% of the property in April 2015. Autounion at the end of H1 2015 is fully let to Eurohold Bulgaria, a leading Bulgarian insurance company, on long lease extending to 2027.

4.7       GED Logistics Park and Photovoltaic Park, Greece

Project description

The 17.756 sqm complex that consists of industrial and office space is situated on a 44.268 sqm land plot in the West Attica Industrial Area (Aspropyrgos). It is located at exit 4 of Attiki Odos (the Athens ring road) and is 10 minutes from the port of Piraeus (where COSCO runs two of the three piers of one of the biggest container port in the Mediterranean Sea) and the National Road connecting Athens to the north of the country. The roofs of the warehouse buildings house a photovoltaic park of 1.000KWp.

 

The buildings are characterized by high construction quality and state-of-the-art security measures. The complex includes 100 car parking spaces, as well as two central gateways (south and west).

Current status

The complex at the end of June is 100% occupied, while the major tenant (approximately 70%) being the German transportation and logistics company Kuehne + Nagel.

4.8       Residential portfolio

·           Romfelt Plaza (Doamna Ghica), Bucharest, Romania

Project description

Romfelt Plaza is a residential complex located in Bucharest, Sector 2, relatively close to the city center, easily accessible by public transport and nearby supporting facilities and green areas.

The residential unit portfolio acquired by the Company comprised 2.990 sqm across nine studios, six  two bed apartments and thirteen three bed apartments, all located in buildings A, D, E, F, and I.

 

Current status

During the period, 2 apartments were sold while as of the end of June total existing leases stood at 16 indicating an occupancy rate of 64%.

·           Linda Residence, Bucharest, Romania

Project description

Linda Residence is a residential complex located in Bucharest, Sector 3, close to subway transportation which connects the project to all areas in Bucharest in less than 30 minutes.

The 2.642 sqm residential portfolio acquired by the Company comprised twenty seven apartments including two studios, fifteen two bed, eight three bed and two four bed apartments, as well as 27 storage spaces, and 20 surface parking spaces.

 

Current status

During the period, 2 apartments were sold while as of the end of June there are a total of 2 existing leases indicating an occupancy rate of approximately 8%.

·           Monaco Towers, Bucharest, Romania

Project description

Monaco Towers is a residential complex located in South Bucharest, Sector 4, enjoying good car access due to the large boulevards, public transportation, and a shopping mall (Sun Plaza) reachable within a short driving distance or easily accessible by subway.

The residential portfolio acquired by the Company comprised forty apartments, twenty five two-room apartments and fifteen three-room apartments, totaling 3.609 sqm.

 

Current status

During the period, 5 apartments were sold while as of the end of June the total existing leases stood at 22 indicating an occupancy rate of 63%.

·           Blooming House, Bucharest, Romania

Project description

Blooming House is a residential development project located in Bucharest, Sector 3, a residential area with the biggest development and property value growth in Bucharest, offering a number of supporting facilities such as access to Vitan Mall, kindergartens, café, schools and public transportation (both bus and tram).

The residential unit portfolio acquired by the Company comprised twenty seven apartments, comprising twelve two bed, fourteen three bed, and one five bed, totaling 2.387 sqm, plus 28 parking spaces, 13 above ground, 15 underground.

Current status

During the period, 2 apartments were sold while at the end of June the total existing leases stood at 13 indicating an occupancy rate of approximately 52%.

·           Green Lake, Bucharest, Romania

Project description

A residential compound of 40.500 sqm GBA, which at the end of June consisted of 35 unsold apartments plus 23 unsold villas, situated on the banks of Grivita Lake, in the northern part of the Romanian capital. The compound also includes facilities such as Bucharest's leading private kindergarten, outdoor sport courts and restaurants. Additionally the plot includes a 48.360 sqm land area with a Gross Buildable Area of ~82.250 sqm (63.400 sqm above ground). SPDI owns ~40% of this property asset portfolio.

 

Current status

During the period, 4 apartments and villas were sold while at the end of June, 82 units were unsold with the occupancy rate being ~41% (64% for apartments and 16% for villas).

·           Boyana Residence, Sofia, Bulgaria

Project description

A residential compound, which consists of 67 apartments plus 83 underground parking slots developed on a land surface of 5.700 sqm, situated in the Boyana high end suburb of Sofia, at the foot of Vitosha mountain with GBA totaling to 11.400 sqm. The complex includes adjacent land plots with surface of 17.000 sqm with building permits to develop GBA of 21.851 sqm.

 

Current status

During the period, 6 apartments were sold while at the end of June 61 units remained unsold.

4.9       Land Bank

·           Aisi Bela - Bela Logistic Center , Odessa, Ukraine

Project description

The site consists of a 22,4 ha plot of land with zoning allowance to construct up to 103.000 sqm GBA industrial properties and is situated on the main Kiev - Odessa highway, 20km from Odessa port, in an area of high demand for logistics and distribution warehousing.

 

Current status

Following the completion of planning and issuance of permits in 2008, construction commenced, with column foundation and peripheral walls for 100.000 sqm completed in 2009. Development was then put on hold, due to lack of funding and deteriorating market conditions.

·           Kiyanovskiy Lane - Kiev, Ukraine

Project description

The project consists of 0,55 ha of land located at Kiyanovskiy Lane, near Kiev city centre. It is destined for the development of business to luxury residences with beautiful protected views overlooking the scenic Dnipro River, St. Michaels' Spires and historic Podil.

 

Current status

The concept design of the project is under review with the proposed development to include residential apartments (GBA of circa 21.000 sqm) and 100 parking spaces across two basement levels.

·           Tsymlyanskiy Lane - Kiev, Ukraine

Project description

The 0,36 ha plot is located in the historic and rapidly developing Podil District in Kiev. The Company owns 55% of the plot, with one local co-investor owning the remaining 45%.

 

Current status

In 2009, all necessary documents were submitted to relevant authorities for approval and issuance of a construction permit. The plan was to develop approximately 10.000 sqm GBA of 40 high end residential units and office spaces on lower floors, as well as 41 parking spaces over three underground levels. Since then, the project has been on hold. In 2014 the company renewed its holding permit.

·           Balabino- Zaporozhye, Ukraine

Project description

The 26,38 site is situated on the south entrance of Zaporozhye city, three km away from the administrative border of Zaporozhye. It borders the Kharkov-Simferopol Highway (which connects eastern Ukraine and Crimea and runs through the two largest residential districts of the city) as well as another major artery accessing the city centre.

 

Current status

The site is zoned for retail and entertainment and various development options are being evaluated as per the market's needs.

·           Delia Lebada, Romania

Project description

The site consists of a ~40.000 sqm plot of land in east Bucharest situated on the shore of Pantelimon Lake, opposite to a famous Romanian hotel, the Lebada Hotel. The lake itself, having a 360 hectare surface, is the largest lake of Bucharest and provides for many leisure activities like fishing, cycling, walking, etc. At the back of the property there is a forest which transforms the area into a very attractive habitat for families and adds value to the residential units to be developed.

 

Current status

The construction permit, which allows for ~54.000 sqm to be built, was renewed in April 2014 and since then, the project has been on hold.

 

For the six months ended 30 June 2015

 

 

Note

Six month ended

 

 

30 June 2015

 

 

30 June 2014

Restated*

 

 

 

 

 

 

 

 

Operational income

8

2.935.910

 

1.406.129

Investment Property related gains

15 d

4.737.805

 

13.225.535

 

 

 

 

 

Administration expenses

9

(1.599.125)

 

(1.543.497)

Investment property operating expenses

10

(287.584)

 

(254.857)

Other operating income/(expenses), net

11

42.270

 

(16.624)

Gain realized on acquisition

16

5.237.790

 

391.205

Share of profits from associates

17

354.949

 

-

 

 

 

 

 

Operating profit

 

11.422.015

 

13.207.891

 

 

 

 

 

Finance income

12

13.199

 

52.915

Finance costs

12

(1.657.081)

 

(618.047)

Foreign exchange loss

13 a

(4.976.537)

 

(3.966.512)

 

 

 

 

 

Income/(loss) before tax

 

4.801.596

 

8.676.247

 

 

 

 

 

Income tax expense

14

(2.894)

 

(12.931)

 

 

 

 

 

Profit/(loss) for the period

 

4.798.702

 

8.663.316

 

 

 

 

 

Other comprehensive (loss)/income

 

 

 

 

 

 

 

 

 

Exchange difference on intercompany loans to foreign holdings

13 b, 28.3

(7.323.715)

 

(10.623.876)

Exchange difference on translation of foreign operations

21

5.022.908

 

1.358.894

 

 

 

 

 

Total comprehensive Profit/ (loss) for the period

 

2.497.895

 

(601.666)

 

 

 

 

 

Profit/(loss) attributable to:

 

 

 

 

Owners of the parent

 

4.706.590

 

8.690.773

Non-controlling interests

 

92.112

 

(27.457)

 

 

4.798.702

 

8.663.316

 

 

 

 

 

Total comprehensive Profit/(loss) attributable to:

 

 

 

 

Owners of the parent

 

2.496.590

 

(574.209)

Non-controlling interests

 

1.305

 

(27.457)

 

 

2.497.895

 

(601.666)

 

 

 

 

 

Profit/(loss) per share (EUR per share):

6

 

 

 

Basic Profit/(loss) for the period attributable to ordinary equity owners of the parent

 

0,09

 

0,31

Diluted Profit/(loss)  for the period attributable to ordinary equity owners of the parent

 

0,07

 

0,27

 

*Note 13

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2015

 

 

Note

30 June

 2015

 

31 December 2014

 

30 June

2014

 

 

 

 

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Investment properties

15b

105.779.543

 

53.533.187

 

42.296.658

Investment property under construction

15a

5.541.156

 

5.083.216

 

6.634.330

Prepayments made for investments

15c

2.334.337

 

2.674.219

 

3.685.739

Tangible and intangible assets

 

201.318

 

200.203

 

64.684

Goodwill

 

43.269

 

43.269

 

-

Long-term receivables

 

253.027

 

125.909

 

126.437

Investments in associates

17

12.007.807

 

-

 

-

 

 

126.160.457

 

61.660.003

 

52.807.848

Current assets

 

 

 

 

 

 

Prepayments and other current assets

18

5.325.967

 

4.251.489

 

3.082.991

Cash and cash equivalents

19

2.832.054

 

891.938

 

3.100.367

 

 

8.158.021

 

5.143.427

 

6.183.358

Total assets

 

134.318.478

 

66.803.430

 

58.991.206

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

72.035.042

 

 

Issued share capital

20

756.899

 

338.839

 

4.389.185

Share premium

 

121.227.562

 

97.444.044

 

92.815.992

Translation difference reserve

21

3.701.890

 

(1.411.825)

 

(8.957.084)

Exchange difference on intercompany loans to foreign holdings

 

(27.069.826)

 

(19.746.111)

 

(10.623.876)

Accumulated losses

 

(39.357.885)

 

(44.064.475)

 

(40.402.340)

Equity attributable to equity holders of the parent

 

59.258.640

 

32.560.472

 

37.221.877

 

 

 

 

 

 

 

Non-controlling interests

22

1.349.250

 

651.882

 

921.174

Total equity

 

60.607.890

 

33.212.354

 

38.143.051

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Interest bearing borrowings

23

44.750.322

 

12.255.716

 

-

Finance lease liabilities

27

11.340.099

 

11.463.253

 

7.362.229

Redeemable preference shares

20

-

 

349.325

 

-

Trade and other payables

24

428.553

 

214.685

 

326.626

Deposits from tenants

25

638.519

 

499.831

 

434.067

 

 

57.157.493

 

24.782.810

 

8.122.922

Current liabilities

 

 

 

 

 

 

Interest bearing borrowings

23

10.343.906

 

5.960.706

 

10.930.710

Trade and other payables

24

4.702.110

 

1.654.852

 

933.863

Taxes payable

26

862.229

 

431.828

 

206.361

Redeemable preference shares

20

349.325

 

349.325

 

-

Provisions

26

-

 

68.253

 

81.800

Deposits from tenants

25

117.387

 

161.579

 

119.781

Finance lease liabilities

27

178.138

 

181.723

 

452.718

 

 

16.553.095

 

8.808.266

 

12.725.233

 

 

 

 

 

 

 

Total liabilities

 

73.710.588

 

33.591.076

 

20.848.155

 

 

 

 

 

 

 

Total equity and liabilities

 

134.318.478

 

66.803.430

 

58.991.206

 

EUR € Net Asset Value (NAV) per share:                   6

 

 

 

Basic NAV attributable to equity holders of the parent

0,78

0,96

1,30

Diluted NAV attributable to equity holders of the parent

0,48

0,84

1,14

 

On 25th September 2015 the Board of Directors of SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC authorised these financial statements for issue.

 

Lambros Anagnostopoulos

Paul Ensor

Constantinos Bitros

Director & Chief Executive Officer

Director & Chairman of the Board

Chief Financial Officer

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2015

 

 

 

Attributable to owners of the Company

 

 

 

Share capital

Share premium, net(1)

 

Accumulated losses, net of non-controlling interest(2)

 

Exchange difference on intercompany loans to foreign holdings(3)

Foreign currency translation reserve(4)

Total

Non- controlling interests

Total

 

 

Balance - 31 December 2013

4.383.018

92.704.841

(49.093.113)

 

-

(10.315.978)

37.678.768

948.631

38.627.399

Profit/(loss) for the period

-

-

8.690.773

 

-

 -

8.690.773

(27.457)

8.663.316

Issue of share capital

6.167

111.151

-

 

-

-

117.318

-

117.318

Exchange difference on intercompany loans to foreign holdings

-

-

-

 

(10.623.876)

-

(10.623.876)

-

(10.623.876)

Foreign currency translation reserve

-

-

-

 

-

1.358.894

1.358.894

-

1.358.894

Balance - 30 June 2014

4.389.185

92.815.992

(40.402.340)

 

(10.623.876)

(8.957.084)

37.221.877

921.174

38.143.051

Profit/(loss) for the period

-

-

(7.763.436)

 

-

-

(7.763.436)

68.209

(7.695.227)

Issue of share capital

50.955

4.628.052

-

 

-

-

4.679.007

-

4.679.007

Reduction of share capital

(4.101.301)

-

4.101.301

 

-

-

-

-

-

Exchange difference on intercompany loans to foreign holdings

-

-

-

 

(9.122.235)

-

(9.122.235)

-

(9.122.235)

Foreign currency translation reserve

-

-

-

 

-

7.545.259

7.545.259

(337.501)

7.207.758

Balance - 31 December 2014

338.839

97.444.044

(44.064.475)

 

(19.746.111)

(1.411.825)

32.560.472

651.882

33.212.354

Profit/(loss) for the period

-

-

4.706.590

 

-

-

4.706.590

92.112

4.798.702

Issue of share capital, net (note 20)

418.060

23.783.518

-

 

-

-

24.201.578

-

24.201.578

Exchange difference on intercompany loans to foreign holdings

-

-

-

 

(7.323.715)

-

(7.323.715)

-

(7.323.715)

Foreign currency translation reserve

-

-

-

 

-

5.113.715

5.113.715

(90.807)

5.022.908

Acquisition of subsidiary including Non-Controlling Interest

-

-

-

 

-

-

-

696.063

696.063

Balance - 30 June 2015

756.899

121.227.562

(39.357.885)

 

(27.069.826)

3.701.890

59.258.640

1.349.250

60.607.890

 

1Share premium is not available for distribution

2Companies which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two years after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special contribution for defense at 20% will be payable on such deemed dividends to the extent that the shareholders (companies and individuals) are Cyprus tax residents. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time. This special contribution for defense is payable on account of the shareholders.

3 Exchange differences on intercompany loans to foreign holdings arose as a result of devaluation of the Ukrainian Hryvnia. The Group treats the mentioned loans as a part of the net investment in foreign operations.

4 Exchange differences related to the translation from the functional currency of the Group's subsidiaries are accounted for directly to the foreign currency translation reserve. The foreign currency translation reserve represents unrealized profits or losses related to the appreciation or depreciation of the local currencies against the € in the countries where the Company's subsidiaries own property assets.

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2015

 

Note

30 June 2015

 

30 June 2014

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Profit/(Loss) before tax and non-controlling interest

 

4.801.596

 

8.676.247

Adjustments for:

 

 

 

 

 

 

 

 

 

Depreciation of property, plant and equipment

9

6.979

 

5.940

Other expenses/(income)

 

(108.550)

 

(5.926)

Interest expense

12

1.435.894

 

579.501

Interest income

12

(13.199)

 

(52.915)

Change in tax provisions

 

(68.253)

 

(38.806)

Foreign exchange loss/(gain)

13

4.976.537

 

3.966.512

Investment property related loss/  (gain)

15 d

(4.737.805)

 

(13.225.535)

Loss/ (Gain) realized on acquisition

16

(5.237.790)

 

(391.205)

Share of loss / (profit) from associates

17

(354.949)

 

-

Cash flows used in operations before working capital changes

 

700.460

 

(486.187)

 

 

 

 

 

 

Decrease/(increase) in prepayments and other current assets

18

1.718.119

 

(560.644)

Increase in VAT recoverable

18

(6.059)

 

121.773

Decrease in trade and other payables

24

(267.057)

 

(345.682)

Change in other taxes and duties

 

338.734

 

27.233

Decrease in deposit from tenants

 

(112.731)

 

151.984

Increase in long-term receivables

 

(127.118)

 

-

Income tax paid

 

(198.353)

 

(262.128)

Net Working Capital Changes

 

1.345.535

 

(867.464)

 

 

 

 

 

Net cash flows used in operating activities

 

        2.045.995

 

(1.353.651)

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Acquisition of investment in associates

17

(4.059.839)

 

-

Capital expenditures on investment property and prepayment on acquisition

 

(110.539)

 

(422)

Interest received

 

13.199

 

52.915

Payment for the acquisition of subsidiary

 

(1.786.934)

 

(4.332.624)

 

 

 

 

 

Net cash flows used in investing activities

 

(5.944.113)

 

(4.280.131)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from issue of share capital

20

8.001.212

 

-

Repayment of preference shares

 

(349.325)

 

-

Repayment of borrowings

 

(313.676)

 

(218.948)

Repayment of finance leases

 

(126.739)

 

(8.169)

Interest and financial charges paid

 

(1.373.238)

 

(695.146)

 

 

 

 

 

Net cash flow from financing activities

 

        5.838.234

 

(922.263)

 

 

 

 

 

Effect of foreign exchange rates on cash

 

(34.130)

 

(11.848)

Net increase/(decrease) in cash at banks

 

1.905.986

 

(6.556.045)

 

 

 

 

 

Cash:

 

 

 

 

At beginning of the period

19

891.938

 

9.668.260

At end of the period

 

2.832.054

 

3.100.367

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2015

 

1. General Information

 

Country of incorporation

 

SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC (the ''Company'') was incorporated in Cyprus on 23 June 2005 and is a public limited liability company, listed on the London Stock Exchange (AIM): ISIN CY0102102213. Its registered office is at Kyriacou Matsi 16, Eagle House, 10th floor, Agioi Omologites, 1082 Nicosia, Cyprus.

 

Principal activities

 

The principal activities of the Group, which are unchanged from last year, are directly or indirectly to invest in and/or manage real estate properties as well as real estate development projects in Central, East and South East Europe (the "Region").  These include the acquisition, development, operation and selling of property assets, in the Region.

 

The Group maintains offices in Nicosia, Cyprus; Kiev, Ukraine; and Bucharest, Romania.

 

As at the reporting date, the Group had 24 Full Time Equivalent (FTEs: 9 in Ukraine and 10 in Romania, 5 in Cyprus) employed persons, including the CEO and the CFO (December 2014 à 19).

 

2.  Adoption of new and revised Standards and Interpretations

 

The accounting policies adopted for the preparation of these condensed consolidated interim financial statements for the six months ended 30 June 2015 are consistent with those followed for the preparation of the annual financial statements for the year ended 31 December 2014.

 

3. Significant accounting policies

 

Basis of preparation

 

The condensed consolidated interim financial statements for the six months ended 30 June 2015 have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting".

 

Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with the International Financial Reporting Standards ("IFRS") have been condensed or omitted. However, such information reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of the Group's Management, necessary to fairly state the results of interim periods.

 

Interim results are not necessarily indicative of the results to be expected for the full year.

 

The 31 December 2014 statement of financial position was derived from the audited consolidated financial statements.

 

Basis of consolidation

 

The condensed consolidated interim financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries).

 

The Group's condensed consolidated interim financial statements comprise the financial statements of the parent company, SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC and the financial statements of the following subsidiaries:

 

 

 

 

 

Holding %

Name

Country of incorporation

Related Asset

as at 30.06.2015

as at 31.12.2014

as at 30.06.2014

SC SECURE Capital Limited

Cyprus

 

100

100

100

SL SECURE Logistics Limited

Cyprus

Brovary Logistics Park

100

100

100

LLC Aisi Brovary

Ukraine

100

100

100

LLC Terminal Brovary

Ukraine

100

100

100

LLC Aisi Ukraine

Ukraine

Kiyanovskiy Residence

100

100

100

LLC Retail Development Balabyno

Ukraine

100

100

100

LLC Trade Center

Ukraine

100

100

100

LLC Almaz‑press‑Ukrayina

Ukraine

Tsymlianskiy Residence

55

55

55

LLC Aisi Bela

Ukraine

Bela Logistic Park

100

100

100

LLC Merelium Investments

Ukraine

Merged

-

100

100

LLC Interterminal

Ukraine

Zaporizhia Retail Center

100

100

100

LLC Aisi Outdoor

Ukraine

Merged

-

100

100

LLC Aisi Vida

Ukraine

Merged

-

-

100

LLC Aisi Val

Ukraine

Merged

-

-

100

LLC Aisi Ilvo

Ukraine

 

100

100

100

LLC Aisi Consta

Ukraine

Merged

-

-

100

LLC Aisi Roslav

Ukraine

Merged

-

-

100

LLC Aisi Donetsk

Ukraine

Merged

-

100

100

Myrnes Innovations Park Limited

Cyprus

Innovations Logistics Park

100

100

100

Best Day Real Estate SRL

Romania

100

100

100

Yamano Holdings Limited

Cyprus

EOS Business Park

100

100

-

Secure Property Development and Investment Srl

Romania

100

100

-

N-E Real Estate Park First Phase Srl

Romania

100

100

-

SEC South East Continent Unique Real Estate Investments II Limited

Cyprus

Residential Portfolio

100

100

-

Diforio Holdings Limited

Cyprus

100

100

-

Demetiva Holdings Limited

Cyprus

100

100

-

Ketiza Holdings Limited

Cyprus

45

45

-

Frizomo Holdings Limited

Cyprus

100

100

-

SecMon Real Estate SRL

Romania

100

100

-

SecVista Real Estate SRL

Romania

100

100

-

SecRom Real Estate SRL

Romania

100

100

-

Ketiza Real Estate SRL

Romania

90

45

-

Victini Holdings Limited

Cyprus

GED Warehouse

100

-

-

GED Logistics S.A.

Greece

100

-

-

SEC South East Continent Unique Real Estate (Secured) Investments Limited

Cyprus

 

100

-

-

Edetrio Holdings Limited

Cyprus

 

Residential Portfolio and Land

 

100

-

-

Emakei Holdings Limited

Cyprus

100

-

-

RAM Real Estate Management Limited

Cyprus

50

-

-

Iuliu Maniu Limited

Cyprus

45

-

-

Moselin Investments srl

Romania

45

-

-

Rimasol Enterprises Limited

Cyprus

44,24

-

-

Rimasol Real Estate Srl

Romania

44,24

-

-

Ashor Ventures Limited

Cyprus

44,24

-

-

Ashor Development Srl

Romania

44,24

-

-

Jenby Ventures Limited

Cyprus

44,24

-

-

Jenby Investments Srl

Romania

44,24

-

-

Ebenem Limited

Cyprus

44,24

-

-

Ebenem Investments Srl

Romania

44,24

-

-

Sertland Properties Limited

Cyprus

100

-

-

Boyana Residence ood

Bulgaria

100

-

-

Mofben Investments Limited

Cyprus

Pantelimon Lake

100

-

-

Delia Lebada Invest srl

Romania

65

-

-

Zirimon Properties Limited

Cyprus

Delea Nuova

100

-

-

 

 

 

Within the reporting period the subsidiaries LLC Aisi Outdoor, LLC Merelium Investments and LLC Aisi Donetsk were under merged to LLC Aisi Ilvo. The reorganization (merger) process was finished in June 2015.

 

During the reporting period the Company realized a number of acquisitions namely of GED Warehouse and a mixed portfolio including commercial, residential properties and land (notes 15 & 16).

 

 

Functional and presentation currencies

 

Items included in the Group's financial statements are measured applying the currency of the primary economic environment in which the entities operate (''the functional currency''). The national currency of Ukraine, the Ukrainian Hryvnia, is the functional currency for all the Group's entities located in Ukraine, the Euro for all the Romanian, Bulgarian and Greek subsidiaries, while the parent company and its Cyprus based subsidiaries use either the Euro or the US dollar as the functional currency.

 

The condensed consolidated interim financial statements are presented in Euro which is the Group's presentation currency.

 

 

As Management records the condensed consolidated interim financial information of the entities domiciled in Cyprus, Romania and Ukraine in their functional currencies, in translating financial information of the entities domiciled in these countries into Euro for inclusion in the condensed consolidated interim financial statements, the Group follows a translation policy in accordance with International Accounting Standard No. 21, "The Effects of Changes in Foreign Exchange Rates", and the following procedures are performed:

 

 

·      All assets and liabilities are translated at closing rate;

·      Income and expense items are translated using exchange rates at the dates of the transactions, or where this is not practicable the average rate has been used;      

·      All resulting exchange differences are recognized as a separate component of equity;

·      When a foreign operation is disposed of through sale, liquidation, repayment of share capital or abandonment of all, or part of that entity, the exchange differences deferred in equity are reclassified to the consolidated statement of comprehensive income as part of the gain or loss on sale.

 

 

The relevant exchange rates for the entities domiciled in countries where the Group operates into Euro are as follows:

 

 

 

Average

As at

Currency

01/01/2015 -30/06/2015

2014

01/01/2014

-30/06/2014

30/06/2015

31/12/2014

30/06/2014

USD

1,1115

1,3285

1,3703

1,1189

1,2141

1,3566

UAH

23,8303

15,6833

14,0973

23,5414

19,2329

16,0868

RON

4,4479

4,4446

4,4643

4,4725

4,4821

4,3830

BGN

1,9558

-

1,9558

1,9558

-

1,9558

 

             

 

4. Financial risk Management

 

4.1 Financial risk factors

 

The Group is exposed to operating country risk, real estate holding and development associated risks, market price risk, interest rate risk, credit risk, liquidity risk, currency risk, other market price risk, operational risk, compliance risk, litigation risk, reputation risk, capital risk management and other risks arising from the financial instruments it holds. The risk management policies employed by the Group to manage these risks are discussed below. Financial Risk Management is also described in note 31 of the condensed consolidated interim financial statements.

 

4.1.1 Operating Country Risks

 

The Group is exposed to country risk, stemming from the political and economic environment of countries in which it operates. Notably:

 

4.1.1.1 Cyprus

 

During the past 10 years Cyprus has become an established financial center taking advantage of favorable double tax treaties with various countries around the world, most importantly with Eastern European countries where the Group operates. Due to the world financial crisis erupting in 2008 and the ensuing debt crisis which had a liquidity effect of the Cypriot banking system as in all of the south and east European countries, following the restructuring of the Greek public debt certain of the Cypriot banks have taken a blow to their solvency (write off of €4,5bn of Greek debt) and have requested the support of the ECB through the ELA mechanism.

 

Thus, the indebtedness of the Cypriot Republic and its two main banks Bank of Cyprus and Cyprus Popular Bank (Laiki) created the basis for the country to be part of a financial rescue plan under the supervision of the IMF, the ECB and the European Union in early 2013, a moment when the Cypriot State stopped being able to borrow from the international debt markets.

 

 

At the same time, the recent discovery of potentially significant natural gas and oil deposits within the boundaries of the Cypriot exclusive economic zone perplexes the geographic and political relationships and developments as Cyprus is in the crossroad of 3 continents.

 

Any failure to effect and implement an economic restructuring plan, may have a significant negative effect on the financials of the Cypriot economy that could lead to a default and the abandonment of the Euro currency. Such result would have a destabilizing effect on the operations of the Company at the corporate level.  Cyprus has achieved within the first half of 2015 to return to the international debt markets which signifies a return to normality.

 

On that note, the Company had proactively evaluated the probable effect of the measures in relation to the levy on deposits and the restrictions on capital movement applied to Cyprus based financial institutions. The Company held most of its liquidity with non-Cypriot owned banking institutions, partly in Cyprus and partly outside Cyprus and to this date all operations of the Group's throughout Ukraine continued to be carried out normally.

 

4.1.1.2 Ukraine

 

Nearly two years after the clashes that resulted in the fall of the incumbent government in November 2013, the deterioration and finally breaking off of Russia-Ukraine relations and the loss of part of Ukraine's geographic area, the situation remains particularly volatile. The social and geopolitical instability continues to affect not only Ukraine's economic and political well-being, but also relations between Russia and the rest of the world, as the international financial markets remain volatile.

 

Although Ukraine had made significant progress in increasing its gross domestic product, decreasing inflation, stabilizing its currency, increasing real wages and improving its trade balance between 2011 and 2013 these gains have already being reversed as a result of the current tough relations  with Russia which has plunged the country into a state of  war and separatism.

 

The implementation of reforms has been impeded by lack of political consensus, controversies over privatization, the restructuring of the energy sector, the removal of exemptions and privileges for certain state-owned enterprises or for certain industry sectors, the limited extent of cooperation with international financial institutions and non-stable taxing environment. Ukraine has engaged in broad discussion with its lender including IMF, for a restructuring of its foreign debt. Such discussions are crucial for the future economic development of the country.  Overall, the future remains uncertain for the country, even though steps have been made towards European integration Should the IMF reforms are implemented and the foreign debt is restructured as well as political stability reemerges the country's economy has the potential to boom. As Ukraine's government relies to a significant extent on official or multilateral borrowings to avoid bankruptcy, finance its budget deficit, fund its payment obligations under domestic and international borrowings and support foreign exchange reserves on the current debt discussions are critical for  Ukraine's ability to achieve a stable political environment to implement strategic, institutional and structural reforms but seems to be mainly depending on how long and how severe the current geopolitical conflict will last.

 

In the first quarter of 2015, real GDP decreased by (-17,2%) year-on-year. In January-June 2015, consumer price inflation reached 48,1% year-on-year, compared to 5,8% inflation in the first half of 2014. Major sources of price inflation during the first six months of 2015 were sharp depreciation of the hryvnya and the resultant increase in prices for imported goods, growth of the state-regulated tariffs and high inflation expectations. The basic consumer price index, which reflects demand pressure, increased by 40,6% in January-June 2015, compared to the 4% growth in the first half of 2014.

 

Apart from the international and internal political turmoil, Ukraine's legal system continuous to be in transition and is, therefore, subject to greater risks and uncertainties than a more mature legal system.  In particular, risks associated with the Ukrainian legal system include, but are not limited to:

(i) inconsistencies between and among the Constitution of Ukraine and various laws, presidential decrees, governmental, ministerial and local orders, decisions, resolutions and other acts;

(ii) provisions in the laws and regulations that are ambiguously worded or lack specificity and thereby raise difficulties when implemented or interpreted;

(iii) difficulty in predicting the outcome of judicial application of Ukrainian legislation; and

(iv) the fact that not all Ukrainian resolutions, orders and decrees and other similar acts are readily available to the public or available in understandably organized form. 

 

Furthermore, several fundamental Ukrainian laws either have only relatively recently become effective or are still pending hearing or adoption by the Parliament.  The recent origin of much of Ukrainian legislation, the lack of consensus about the scope, content and pace of economic and political reform and the rapid evolution of the Ukrainian legal system in ways that may not always coincide with market developments, place the enforceability and underlying constitutionality of laws in doubt, and result in ambiguities, inconsistencies and anomalies. 

 

In addition, Ukrainian legislation often contemplates implementing regulations. Often such implementing regulations have either not yet been promulgated, leaving substantial gaps in the regulatory infrastructure, or have been promulgated with substantial deviation from the principal rules and conditions imposed by the respective legislation, which results in a lack of clarity and growing conflicts between companies and regulatory authorities.

 

Tax laws are changing and compared to more developed market economies are in a non-mature level thus creating often an unclear tax environment of unusual complexity. This particularly may affect negatively the ability of the Group to recuperate VAT paid and/or to utilize operating losses as a carry forward tax shield.

 

During the year from the first quarter of 2014, the Ukrainian hryvnya was subject to significant devaluation. Starting from 7,99 UAH / USD in February 2014, the official exchange rate depreciated to 15,78 UAH / USD at the end of 2014 and reached its record low of 30 UAH/USD in February 2015. By the end of the first quarter of 2015 the official exchange rate stabilized at around 23 UAH/USD. As a result the National Bank of Ukraine, among other measures, imposed certain temporary restrictions to the Banks on processing client payments and on purchasing foreign currencies on the inter-banking market as well as certain capital controls towards foreign payments. 

 

The final resolution and impact of the political crisis are difficult to predict and the ongoing crisis may further adversely affect Ukrainian economy. Subsequent to 30th of June 2015 the Group has been operating in the normal course of business and the Management of the Group believes that it has undertaken all necessary measures to maintain the economic stability of the Group under these circumstances.

 

4.1.1.3 Greece

 

During the period the Hellenic Republic continued discussions with the creditor institutions (EU/ECB/IMF/ESM) resulting in retaining the risk of political and economic instability of the country. Failure to reach agreement at the end of June led to the implementation of capital controls in the banking sector, a 3-week bank holiday on 27 June, as well as the lapse of the existing economic support program for the country which led to the failure of the Hellenic Republic to repay an instalment to the IMF on 30 June.

 

Following a referendum on a deal proposed by international institutions and further negotiations, a preliminary agreement was reached on 12 July for a 3-year €86 billion support package, which was followed in August by the signing of a related  agreement and the ratifications by Greek and a number of EU member country parliaments of this agreement in August, signaling the commitment of Greece to remain in the Eurozone and effect any necessary reforms requested by the creditor institutions as a prerequisite to capital deployment. As such and following elections in September which secured another tenure for the government that reached this agreement, political and economic instability seems to be withdrawing.

 

Overall, the program has an aim to reduce the risk of economic instability in Greece; however there is still risk around implementation of the program. The implementation of the program and its effects on the economy are beyond the Group's control.

 

Various risks emerge should the program not be implemented as planned, including restrictions on use of local bank deposits, liquidity of the financial sector and businesses, recoverability of receivables, impairment of assets, sufficiency of financing by the lending banks, serving of existing financing arrangements and/or compliance with existing terms and financial covenants of such arrangements. These and any possible further negative developments in Greece could impact the results and financial position of the Group΄s Greek operations to some extent, in a manner not currently determinable.

 

The Group has been closely assessing developments in Greece and preparing for a number of eventualities around the Greek crisis, in line with its established risk management policy in order to ensure that timely actions and response are undertaken so as to minimize any impact on the Group's business and operations.

 

4.1.2 Risks associated with property holding

 

Several factors may affect the economic performance and value of the Group's properties, including: 

·      risks associated with construction activity at the properties, including delays, the imposition of liens and defects in workmanship;  

·      the ability to collect rent from tenants , on a timely basis or at all, taking also into account the UAH rapid devaluation;

·      the amount of rent and the terms on which lease renewals and new leases are agreed being less favorable than current leases;  

·      cyclical fluctuations in the property market generally;  

·      local conditions such as an oversupply of similar properties or a reduction in demand for the properties;

·      the attractiveness of the property to tenants or residential purchasers;  

·      decreases in capital valuations of property;  

·      changes in availability and costs of financing, which may affect the sale or refinancing of properties;

·      covenants, conditions, restrictions and easements relating to the properties;  

·      changes in governmental legislation and regulations, including but not limited to designated use, allocation, environmental usage, taxation and insurance;  

·      the risk of bad or unmarketable title due to failure to register or perfect our interests or the existence of prior claims, encumbrances or charges of which we may be unaware at the time of purchase;  

·      the possibility of occupants in the properties, whether squatters or those with legitimate claims to take possession;   

·      the ability to pay for adequate maintenance, insurance and other operating costs, including taxes, which could increase over time; and

·      political uncertainty, acts of terrorism and acts of nature, such as earthquakes and floods that may damage the properties.

 

4.1.3 Property Market price risk

 

Market price risk is the risk that the value of the Company's portfolio investments will fluctuate as a result of changes in market prices. The Group's assets are susceptible to market price risk arising from uncertainties about future prices of the investments. The Group's market price risk is managed through diversification of the investment portfolio, continuous elaboration of the market conditions and active asset management. To quantify the value of its assets and/or indicate the possibility of impairment losses, the Company commissioned internationally acclaimed valuers.

 

Valuations reported as at 31 December 2014 take into account recent political developments in Ukraine. Given the nature of the Group's assets the most immediate effect would be the prolongation of the period needed to market and effectively sell an asset under such duress conditions.

 

The BoD is monitoring the situation to ensure that assets value is preserved while at the same time through diversification according to the strategic plan of the Company, Ukrainian operations are gradually becoming part of a larger structure.

 

4.1.4 Interest rate risk

 

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates.

 

The Group's income and operating cash flows are substantially independent of changes in market interest rates as the Group has no significant interest‑bearing assets apart from its cash balances that are mainly kept for liquidity purposes.

 

The Group is exposed to interest rate risk in relation to its borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. All of the Group's borrowings are issued at a variable interest rate. Management monitors the interest rate fluctuations on a continuous basis and acts accordingly.

 

4.1.5 Credit risk

 

Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets at hand at the end of the reporting period. Cash balances are held with high credit quality financial institutions and the Group has policies to limit the amount of credit exposure to any financial institution.

 

Management has been in continuous discussions with banking institutions monitoring their ability to extend financing as per the Group's needs. The sovereign debt crisis has affected the pan-European banking system during 2011 and 2012 imposing financing uncertainties for new development projects.  The financial crisis in the European Union periphery has strained any remaining liquidity and the financial institutions in the region (including those that have Italian, Greek or Austrian parent) have entered into deleveraging programs.

 

4.1.6 Currency risk

 

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates.

 

Currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the Group's functional currency. Most of the Group's transactions, including the rental proceeds are denominated in € or pegged to € or USD (the latter being the case of Ukraine). For the rest of the foreign exchange exposure Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly, by limiting net exposures to a few days to 2 months.

 

Apart from liquidity maintained in local currency for operating reasons the Group's liquid assets are held in EUR denominated deposit accounts while most of the inflows of the company are pegged to the €/USD It should be noted that the current political uncertainty in Ukraine, and the currency devaluation may affect the Group's income streams indirectly through affecting the financial condition of the tenants of the Group's properties their solvency and their income generating capacity. Management is monitoring the situation closely and acts accordingly.

 

4.1.7 Capital risk management

 

The Group manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to shareholders through the optimization of the debt and equity balance. The Group's core strategy is described in note 31 of the condensed consolidated interim financial statements.

 

4.1.8 Compliance risk

 

Compliance risk is the risk of financial loss, including fines and other penalties, which arises from non‑compliance with laws and regulations of the state. Although the Group is trying to limit such risk, the uncertain environment in which it operates in various countries increases the complexities handled by Management.

 

4.1.9 Litigation risk

 

Litigation risk is the risk of financial loss, interruption of the Group's operations or any other undesirable situation that arises from the possibility of non‑execution or violation of legal contracts and consequentially of lawsuits. The risk is restricted through the contracts used by the Group to execute its operations and is discussed in note 29.

 

4.2.  Operational risk

 

Operational risk is the risk that derives from the deficiencies relating to the Group's information technology and control systems as well as the risk of human error and natural disasters. The Group's systems are evaluated, maintained and upgraded continuously.

 

4.3. Fair value estimation

 

The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the end of the reporting period. Valuations reported as at 31 December 2014 take into account past political developments in Ukraine which given the nature of the Group's assets the most immediate effect would be the prolongation of the period needed to market and effectively sell an asset under such duress conditions.

 

5. Critical accounting estimates and judgments

 

The accounting estimates and judgments used in the preparation of the condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2014.

 

 

6. Earnings and net assets per share attributable to equity holders of the parent

 

 

a.     Weighted average number of ordinary shares

 

30 June 2015

 

30 June 2014

Issued ordinary shares

75.690.096

 

28.788.559

Weighted average number of ordinary shares (Basic)

51.191.365

 

28.192.277

Diluted weighted average number of ordinary shares

64.480.647

 

32.304.928

 

 

b.    Basic diluted and adjusted earnings per share

 

30 June 2015

 

30 June 2014

 

 

Profit/(loss) after tax attributable to owners of the parent

4.706.590

 

8.690.773

Basic

0,09

 

0,31

Diluted

0,07

 

0,27

 

 

c.     Net assets per share

 

30 June 2015

 

31 December 2014

 

 

Net assets attributable to equity holders of the parent

59.258.640

 

32.560.472

Number of ordinary shares

75.690.096

 

33.884.054

Diluted number of ordinary shares

122.559.555

 

38.866.775

Basic

0,78

 

0,96

Diluted

0,48

 

0,84

 

7. Segment information

 

All commercial and financial information related to the properties held directly or indirectly by the Group is being provided to members of executive Management who report to the Board of Directors.  Such information relates to rentals, valuations, income, costs and capital expenditures. The individual properties are aggregated into segments based on the economic nature of the property.  For the reporting period the Group has identified the following material reportable segments:

 

Industrial

·              Warehouse segment - the Group acquires, develops, operates and disposes warehouses

 

       Commercial

·              Office segment - the Group acquires, develops, operates and disposes offices

 

Residential

·              Residential segment - the Group is in the process of disposing residential properties

 

        Land Assets

·              Land assets - the Group owns a number of land assets which are either available for sale or for potential development

 

There are no sales between the segments.

 

Segment assets for the investment properties segments represent investment property (including investment properties under construction and prepayments made for the investment properties). Segment liabilities represent interest bearing borrowings, finance lease liabilities and deposits from tenants.

 

For the six months 30 June 2015  (€)

Warehouse

Office

Residential

Land Assets

Total

Segment profit

 

 

 

 

 

Sales income

-

-

671.368

-

671.368

Cost of sales

-

-

(469.850)

-

(469.850)

Rental income

1.976.449

233.594

109.308

-

2.319.351

Service charges and utilities income

241.788

38.113

-

-

279.901

Income from electricity production

135.140

-

-

-

135.140

Investment properties operating expenses

(237.698)

(33.480)

(16.406)

 

(287.584)

Investment property related gains FX related

4.711.511

-

-

3.340.085

8.051.596

Gain realized on acquisition of subsidiaries (note 16)

1.552.134

-

-

-

1.552.134

Share of profits from associates (note 17)

-

43.390

-

311.559

354.949

Segment profit

8.379.324

281.617

294.420

3.651.644

12.607.005

Management provision on Investment Property acquired (note 15 d)

 

 

 

 

(3.313.791)

Gain realized on acquisition of subsidiaries

 

 

 

 

3.685.656

Administration expenses

 

 

 

 

(1.599.125)

Other income/(expenses), net

 

 

 

 

42.270

Finance income

 

 

 

 

13.199

Finance costs

 

 

 

 

(1.657.081)

Foreign exchange losses, net

 

 

 

 

(4.976.537)

Profit before tax

 

 

 

 

4.801.596

 

 

For the period 1 January 2014 to 30 June 2014, the Group had income only from the warehouse segment.

 

 

30 June 2015 (€)

Warehouse

Office

Residential

Land Assets

Provision on Acquired Assets

(note 15 d)

Total

Assets

 

 

 

 

 

 

Investment properties

49.447.093

6.400.000

20.889.348

32.356.893

(3.313.791)

105.779.543

Investment property under construction

-

-

-

5.541.156

 

5.541.156

Prepayments made for investments

100.000

-

-

2.234.337

 

2.334.337

Goodwill

-

43.269

-

-

 

43.269

Long-term receivables

250.104

-

1.193

1.730

 

253.027

Investments in associates

-

7.033.963

-

4.973.844

 

12.007.807

Segment assets

49.797.197

13.477.232

20.890.541

45.107.960

(3.313.791)

125.959.139

Tangible and intangible assets

 

 

 

 

 

201.318

Prepayments and other current assets

 

 

 

 

 

5.325.967

Cash and cash equivalents

 

 

 

 

 

2.832.054

Total assets

 

 

 

 

 

134.318.478

Liabilities

 

 

 

 

 

 

Interest bearing borrowings

25.114.894

-

11.506.239

18.473.095

 

55.094.228

Finance lease liabilities

7.528.668

3.934.972

-

54.597

 

11.518.237

Deposits from tenants

717.898

-

38.008

-

 

755.906

Redeemable preference shares

349.325

-

-

-

 

349.325

Segment liabilities

33.710.785

3.934.972

11.544.247

18.527.692

 

67.717.696

Trade and other payables

 

 

 

 

 

5.130.663

Taxes payable

 

 

 

 

 

862.229

Total liabilities

 

 

 

 

 

73.710.588

 

 

 

31 December 2014 (€)

Warehouse

Office

Residential

Land Assets

Total

Assets

 

 

 

 

 

Investment properties

31.463.310

6.400.000

8.373.000

7.296.877

53.533.187

Investment property under construction

 

-

-

5.083.216

5.083.216

Prepayments made for investments

624.841

-

-

2.049.378

2.674.219

Goodwill

 

43.269

 

 

43.269

Long-term receivables

125.909

 

 

 

125.909

Segment assets

32.214.060

6.443.269

8.373.000

14.429.471

61.459.800

Tangible and intangible assets

 

 

 

 

200.203

Prepayments and other current assets

 

 

 

 

4.251.489

Cash and cash equivalents

 

 

 

 

891.938

Total assets

 

 

 

 

66.803.430

 

Liabilities

 

 

 

 

 

Interest bearing borrowings

11.756.612

-

6.459.810

-

18.216.422

Finance lease liabilities

7.594.863

3.981.252

-

68.861

11.644.976

Deposits from tenants

621.129

-

40.281

-

661.410

Redeemable preference shares

698.650

-

-

-

698.650

Provision

-

-

-

68.253

68.253

Segment liabilities

20.671.254

3.981.252

6.500.091

137.114

31.289.711

Trade and other payables

 

 

 

 

1.869.537

Taxes payable

 

 

 

 

431.828

Total liabilities

 

 

 

 

33.591.076

 

 

Geographical information

 

Revenue (€)

30 June 2015

30 June 2014

Ukraine

1.191.853

1.241.528

Romania

1.310.316

164.601

Greece

432.185

-

Bulgaria

1.556

-

Total

2.935.910

1.406.129

 

 

30 June 2015

31 December 2014

Carrying amount of investment property, including under construction and prepayments made for investments (€)

 

 

Ukraine

34.766.288

31.892.781

Romania

53.392.000

28.773.000

Greece

16.510.539

624.841

Bulgaria

12.300.000

-

Provision on Acquired Assets (note 15 d)

(3.313.791)

 

Total

113.655.036

61.290.622

 

The increase in value of investment properties, including under construction in Ukraine is due to the foreign currency exchange rates fluctuations. While for the purpose of these condensed consolidated interim financial statements the valuation results are expressed in USD (and are the same as of 31/12/2014) the resulting increase presented in the above table is derived from the devaluation of the EUR against the USD.

 

8. Operational income

 

Operational income in the amount of €2.935.910 for the period ended 30 June 2015 represents rental income as well as service charges and utilities income collected from tenants generated during the reporting periods as a result of the rental agreements concluded with tenants of the Terminal Brovary Logistic Park, Innovations Logistics Park, EOS Business Park, GED Logistics and sales or rental agreements for  Residential Portfolio while for the period ended 30 June 2014 it was only generated by Terminal Brovary and Innovations Logistics Park.

 

 

30 June 2015

30 June 2014

 

Income from sales of assets

671.368

-

Cost of assets sold

(469.850)

-

Rental income

2.319.351

1.272.609

Service charges and utilities income

279.901

133.520

Sales of electricity

135.140

-

Total Revenues

2.935.910

1.406.129

 

Income and Cost from sales of assets reflects figures associated with the sales of residential units.

 

Rental income and service charges and utilities income represent inflows for the rental agreements that the Company has with various tenants that rent space in its properties (mainly commercial and industrial). Vacancy rates in the various income producing assets of the company as at 30 June 2015 are as follows:

 

Income producing assets

%

 

30 June 2015

30 June 2014

EOS Business Park

Romania

0

n/a

Innovations Logistics Park

Romania

13

0

GED Logistics

Greece

0

n/a

Terminal Brovary

Ukraine

28

0

 

Income from sales of assets represents several apartments and parking spaces sold in Residential Portfolio while Cost of assets sold represents the acquisition value of the apartment and parking space reduced by the related depreciation amount until the finalisation of the sale.

 

The income from electricity is generated at GED Logistics using the alternative energy sources and sold to the Greek Electric Grid.

 

 

9. Administration Expenses

 

 

30 June 2015

30 June 2014

 

Salaries and Wages

573.350

365.513

Advisory fees

243.398

636.877

Legal fees

201.548

133.271

Travelling and other office expenses

129.606

142.219

Property Taxes and duties

125.505

12.380

Directors' remuneration

119.628

84.395

Public group expenses

71.970

52.450

Audit and accounting fees

62.159

54.375

Depreciation

6.979

5.940

Sundry expenses

64.982

56.077

Total Administration Expenses

1.599.125

1.543.497

 

Salaries and wages include the remuneration:

 

                a) of the CEO, the CFO, the Group Commercial Director and the Managing Directors Ukraine and Romania

                b) of personnel employed in Ukraine, Romania and Cyprus

 

Legal and advisory fees mainly represent expenses of the Company regarding the various legal and tax cases it has in Ukraine as well as fees for the normal operation of the Group.

 

Property taxes and duties reflect mainly property taxes and fees paid for Ukrainian and Romanian land plots and residential assets.

 

Directors' remuneration represents the remuneration of all non-executive Directors and committee members (note 28).

 

Public group expenses include among others fees paid to the AIM: LSE stock exchange and the Nominated Advisor of the Company related to the listing of the Company.

 

10. Investment property operating expenses

 

 

30 June 2015

30 June 2014

 

Property management, utility expenses and other property costs

287.584

 254.857

 

The Group has Maintenance and Property Management Agreements in respect of the servicing of Terminal Brovary Logistics Park, Innovation Logistics Park and GED Logistics Park. The Group is also incurring property operating expenses including utility expenses, insurance premiums, land and building taxes as well as various other expenses needed for the proper operation of the income generating properties in Kiev and in Bucharest. Part of these expenses are recovered from the tenants through the rental agreements.

 

11. Other operating income/ (expenses), net

 

 

30 June 2015

30 June 2014

 

Income from enforcement of guarantees

122.867

-

Penalties

(1.559)

(8.241)

Other expenses, net

(79.038)

(8.383)

Total

42.270

(16.624)

 

Income from enforcement of guarantees relates to the income from the tenants of Terminal Brovary LLC for the early termination of the lease agreements.

 

Penalties recognized in the period ended 30 June 2015 and 30 June 2014 relate to Terminal Brovary LLC which were accrued by the tax authority on the land leased in Brovary.

 

Other expenses for the period ended 30 June 2015 mainly consist of maintenance and repair expenses at the operating companies of the Group representing residential, warehouse and office segments, as well as other operating expenses concerning the functioning of the Group.

 

 

12. Finance costs and income

 

Finance income

30 June 2015

30 June 2014

 

Bank interest income

13.199

52.915

Net finance result

13.199

52.915

 

Finance costs

30 June 2015

30 June 2014

 

Borrowing interest expenses (note 23)

1.104.169

529.384

Finance leasing interest expenses (note 27)

331.725

50.117

Finance charges and commissions

221.187

38.546

Net finance result

1.657.081

618.047

 

Borrowing interest represents interest expense charged on bank borrowings (note 23) as well as on loans granted to associate companies (note 17).

 

Finance leasing interest expenses relate to the sales and lease back agreements of the Group with Piraeus Leasing Romania for Innovations Logistics Park and with Alpha Bank for EOS Business Park as well as to the land lease agreements of Ukrainian entities of the Group signed with the municipal authorities in Kiev (note 27).

 

Finance charges and commissions include fees paid to the banks, including a fee payable to EBRD for the restructuring of the Terminal Brovary loan.

 

13. Foreign exchange profit/ (losses)

 

a.     Foreign exchange loss

 

Foreign exchange losses (non-realised) resulted from the loans and /or payables denominated in non EUR currencies when translated in EUR, mainly the EBRD loan (note 23) The exchange loss for the period end 30 June 2015 amounted to €4.976.537.

 

b.    Exchange difference on intercompany loans to foreign holdings

 

The intercompany loans provided by SC Secure Capital Limited to Ukrainian subsidiaries (note 28.3) incurred an exchange loss  (non-realised) of €7.323.715, due to the UAH devaluation which took place during the reporting period.

 

The foreign exchange loss for the period as reported in the financial statements of June 2014 amounting to €14.590.388 have been restated in order to reflect the split between the foreign exchange loss and the exchange difference on intercompany loans to foreign holdings. As a result the foreign exchange loss for the reporting period ending 30th June 2016 are presented as €3.966.512 and the remaining  €10.623.876 are presented under exchange difference on intercompany loans to foreign holdings. The restatement was made in order to better reflect the devaluation of UAH during 2014 which is took place at 31 December 2014 on and had an effective date 1 January 2014 (note 28.3).

 

14. Income Tax expense

 

The corporate income tax rate for the Company's Ukrainian subsidiaries is 19%, for the Romanian subsidiaries is 16% , for the Greek subsidiary 26% and for the Bulgarian subsidiaries 20% for the six months ended 30 June 2015. The corporate tax that is applied to the qualifying income of the Company and its Cypriot subsidiaries is 12.5% for the six months ended 30 June 2015.

 

 

15. Investment Property (all)

 

Investment Property consists of the following assets:

 

·      Terminal Brovary Logistic Park consists of a 49.180 sqm Class A warehouse and associated office space, situated on the junction of the main Kiev - Moscow highway and the Borispil road. The facility is in operation since Q1 2010 and as at the end of the reporting period is 72% leased.

·      Innovations Logistic Park is a 16.570 sqm gross leasable area logistics park located in Clinceni in Bucharest, which benefits from being on the Bucharest ring road. Its construction was tenant specific, was completed in 2008 and is separated in four warehouses, two of which offer cold storage, the total area of which being 6.395 sqm. Innovations was acquired by the Company in May 2014 and as of the end of the reporting period is 87% leased.

·      EOS Business Park is a 3.386 sqm gross leasable area and includes a Class A office Building in Bucharest, which is currently fully let to Danone Romania, the French multinational food company. EOS Business Park was acquired by the Group in October 2014.

·      GED Logistics is a logistics park comprising 17.756 leasable sq m and has a net operating income ("NOI") of approximately €1.5 million. It is fully let 70% to the German multinational transportation and logistics company, Kuehne + Nagel and 30% to a Greek commercial company trading electrical appliances GE Dimitriou SA. The NOI also includes income from selling electric energy produced by the 1MW photovoltaic park installed on the roof of the warehouse property to the Greek Electric Grid.

·      Residential portfolio is an income producing residential portfolio in Bucharest, Romania consisting as of end of June of 184 apartments and villas across six separate complexes (Romfelt, Linda, Monaco, Blooming House, Moselin - Green Lake Parcel K and Boyana) located in different residential areas of Bucharest and Sofia. The Group acquired it partly in August 2014 and partly May 2015. The aggregate residential portfolio is ~30% let at the end of June.

 

·      Bela Logistic Center is a 22,4 ha plot in Odessa situated on the main highway to Kiev. Following the issuance of permits in 2008, below ground construction for the development of a 103.000 sq m GBA logistic center commenced. Construction was put on hold in 2009 following adverse macro-economic developments at the time.

·      Kiyanovsky Lane consists of four adjacent plots of land, totaling 0,55 Ha earmarked for a residential development, overlooking the scenic Dnipro River, St. Michael's Spires and historic Podil neighbourhood.

·      Tsymlianskiy Lane, is a 0,36 ha plot of land located in the historic Podil District of Kiev and is destined for the development of a residential complex.

·     Balabino project is a 26,38 ha plot of land situated on the south entrance of Zaporizhia, a city in the south of Ukraine with a population of 800.000 people. Balabino is zoned for retail and entertainment development.

·     Pantelimon Lake consists of a ~40.000 sq m plot of land in east Bucharest situated on the shore of Pantelimon Lake, opposite to a very famous Romanian hotel, the Lebada Hotel. The construction permit, which allows for ~54.000 sqm residential space to be built, was renewed in April 2014.

·     Boyana Land The complex of Boyana Residence includes adjacent land plots with surface of 17.000 sqm with building permits to develop GBA of 21.851 sqm.

·     Green Lake land Green Lake land plot includes a 48.360m2 land area with a Gross Buildable Area of ~82.250 sqm (63.400 sqm above ground). The Green Lake project is situated in the northern part of Bucharest on the bank of Grivita Lake in Bucharest. SPDI owns 44,24% of these plots.

 

Asset Name

 

Description/ Location

Principal Operation

Related Companies

Carrying amount (€) as at

 

 

 

 

30 June 2015

31 December 2014

Terminal Brovary Logistics Park

Brovary,

Kiev oblast

 

Warehouse

LLC TERMINAL BROVARY

LLC AISI BROVARY

SL LOGISTICS LIMITED

19.036.554

17.463.310

Bela Logistic Center

 

Odesa

Land and Development Works for Warehouse

LLC AISI BELA

5.541.156

5.083.216

Kiyanovskiy Lane

 

Podil,

Kiev City Center

 

Land for residential development

 

LLC AISI UKRAINE

LLC TORGOVIY CENTR

RETAIL DEVELOPMENT BALABYNO

4.379.301

4.017.381

Tsymlianskiy Lane

Podil,

Kiev City Center

Land for residential

development

LLC ALMAZ PRES UKRAINE

1.251.229

1.147.823

Balabino

 

Zaporizhia

 

Land for retail development

LLC INTERTERMINAL

 

2.323.711

2.131.673

Total Ukraine

 

 

 

32.531.951

29.843.403

Innovations Logistic Park

Clinceni, Bucharest

Warehouse

MYRNES INNOVATIONS PARK LIMITED

BEST DAY REAL ESTATE SRL

14.000.000

14.000.000

EOS Business Park

Bucharest

Office building

YAMANO LIMITED

SPDI SRL,

N-E Real Estate Park First Phase Srl

6.400.000

6.400.000

Residential Portfolio

Bucharest

Residential apartments

Secure Investment  II

Demetiva Ltd

Diforio Limited

Frizomo Limited Ketiza Limited

Sec Rom Srl

Sec Vista Srl

Sec Mon Srl

Ketiza Srl

8.373.000

8.373.000

Green Lake

Bucharest

Residential apartments

land for residential development

Edetrio Holdings Limited

Emakei Holdings Limited

Iuliu Maniu Limited

Moselin Investments srl

Rimasol Limited

Rimasol Real Estate Srl

Ashor Ventures Limited

Ashor Develpoment Srl

Jenby Ventures Limited

Jenby Investments Srl

Ebenem Limited

Ebenem Investments Srl

18.797.000

-

Pantelimon Lake

Bucharest

Land for residential development

Mofben Investments Limited

Delia Lebada Invest srl

5.822.000

-

Total Romania

 

 

 

53.392.000

28.773.000

Boyana Project

Sofia

Residential apartments and

land for residential development

Sertland Properties Limited

Boyana Residence ood

12.300.000

-

Total Bulgaria

 

 

 

12.300.000

-

GED Logistics

Athens

Warehouse

Victini Holdings Limited.

GED Logistics S.A.

16.410.539

-

Total Greece

 

 

 

16.410.539

-

Provision on acquired Investment Properties

(3.313.791)

 

TOTAL

 

 

 

111.320.699

58.616.403

 

Carrying amounts of the properties owned as of 30 June 2015 stated in these condensed consolidated interim financial statements remain the same as were presented in the Group's audited consolidated financial statements as of 31 December 2014 for the assets the Company owned at the time and at the fair value at acquisition for assets acquired during the period; the carrying amounts of Ukrainian properties remain the same in terms of their value in US$ as provided by CBRE an external valuer. The exchange gains related to the Ukrainian assets of €8.051.596 presented in these condensed consolidated interim financial statements arose from UAH devaluation as well as the translation from the valuation currency (US$) to the reporting currency (€) which took place during the reporting period.

 

c.     Investment Property Under Construction 

 

As at 30 June 2015 investment property under construction represents the carrying value of Bela Logistic Center project, which has reached the +10% construction in late 2008 but it is stopped since then. The Company's external valuer has appraised the property's value at US$6.200.000 as at 31 December 2014.

 

d.    Investment Property

 

 

 

30 June 2015

 

At 1 January

53.533.187

Capital expenditure on investment property

10.539

Revaluation gain/(loss) on investment property

3.366.380

Acquisition of investment property

53.329.539

Translation difference

(4.460.102)

At 30 June

105.779.543

 

Terminal Brovary, Kiyanovskiy Lane, Tsymlyanskiy Lane, Balabino, Innovations, EOS Business Park, Residential Portfolio, (note 15 above), Pantelimon Lake land, Green Lake land, Boyana land and GED Logistics S.A. are included in the Investment Property category.

 

e.     Prepayment made for Investments

 

The Group has made an advance payment of ~US$12mil. (representing principal plus interest) for the acquisition of a project in Podil (Kiev) in 2007. As of the end of the reporting period the Management does not expect such acquisition to proceed while the seller has already defaulted on his credit to the Group.

 

As a consequence, the Group has progressed the legal proceedings initiated in 2013, for the transfer of the collateral (land plot of 42 ha in Kiev Oblast) in the Group's name as well as legal proceeding against the company which collected the original US$12mil. payment. As the collateral's value, as valued by CBRE, has been reduced the Group has reduced the amount of the receivable to the value of the collateral having a carrying value of € 2.049.378.

 

f.      Investment property related gains

 

 

30 June 2015

30 June 2014

 

Gain as a result of functional currency devaluation

8.051.596

13.225.535

Provision on acquired Investment Properties

(3.313.791)

-

Investment Property related gains

4.737.805

13.225.535

 

Gain as a result of functional currency devaluation is the revaluation of Ukrainian assets attributable to the foreign exchange difference between the US$ and the EUR (to a great extent negated by the devaluation of the UAH).

 

Management has taken a provision of €3.313.791 in relation to the non-core (residential and adjacent land plots) property assets included in the portfolio acquired during the period, so as to reflect the consideration paid rather than the Fair Value of the assets acquired. Such provision is to be reviewed at year end by taking into account the valuations then as well as the operational performance of the assets under the SPDI management.

 

16. Investment Property Acquisitions

 

During the reporting period the Group completed the acquisition of an income producing logistics park (the "Park"), located in the West Attica Industrial Area of Athens, Greece. The Park comprises a fully let 17.756 leasable sqm warehouse property which has a photovoltaic alternative energy production facility installed on its roof. 70% of the space is let to the multinational transportation and logistics Company Kuehne + Nagel, with the remaining 30% let to GE Dimitriou SA, a Greek company which trades electrical appliances.

 

During the reporting period the Group acquired a number of prime property assets in Romania and Bulgaria. The acquisition is in line with the Company's strategy to build a diversified portfolio of prime commercial real estate in East and Southeast Europe, which generates cash flow from blue chip tenants and offers substantial potential for capital growth. The acquired investment properties include Green Lake (residential and land), Pantelimon Lake (land) and Boyana (residential and land) projects.

 

The fair value of identifiable assets and liabilities of acquired projects as of the date of their acquisition was as follows:

 

GED Logistics

SEC South East

Total

ASSETS

 

 

 

Non-current assets

 

 

 

Investment property

16.400.000

36.919.000

53.319.000

Investments in associates

-

7.958.336

7.958.336

Other non-current assets

29.911

69.536

99.447

 

 

 

 

Current assets

 

 

 

Prepayments and other current assets

353.366

2.433.172

2.786.538

Cash and cash equivalents

160

777.247

777.407

 

 

 

 

Total assets

16.783.437

48.157.291

64.940.728

 

 

 

 

Non-current liabilities

 

 

 

Interest bearing borrowings

12.549.180

23.865.253

36.414.433

Deposits from tenants

211.243

-

211.243

 

 

 

 

Current liabilities

 

 

 

Interest bearing borrowings

135.110

1.431.464

1.566.574

Trade and other payables

492.060

3.074.332

3.566.392

Taxes payable

56.776

252.033

308.809

 

 

 

 

Total liabilities

13.444.369

28.623.082

42.067.451

 

 

 

 

Net assets acquired (net of non-controlling interest)

3.339.068

18.838.146

22.177.214

Non-controlling interest

-

696.063

696.063

 

 

 

 

Gain realized on acquisition (Net Assets - Total consideration)

1.552.134

3.685.656

5.237.790

 

 

 

 

Financed by

 

 

 

Cash consideration paid

1.786.934

-

1.786.934

Issue of shares

-

15.152.490

15.152.490

Total consideration

1.786.934

15.152.490

16.939.424

 

During the reporting period the Company acquired the mixed Portfolio of Sec South, which includes investment properties and investment in associates, (notes 15, 16, 17) via in kind contribution to the vendors by issuing 18.028.294 ordinary shares of €0,01 and 2 equivalent set of warrants as described below (note 20).The shares were issued at a price of 0.65 GBP per share while the first set of warrants had an exercise price of £0,10 and the second £0,45. In parallel the Company in exchange of these shares wrote off a past liability of the portfolio of €0,2m and took over via assignment a loan that had been contributed by a partner of a project  amounting to €838.561.

 

17. Investments in associates

 

In April 2015 the Company completed the acquisition of an interest in a fully let and income generating office building in Sofia. The Company has acquired 20% of the corporate entity owning the building for a cash consideration of 4.059.839. Autounion is a Class A BREEAM certified office building, located to close to Sofia Airport. The building has a Gross Lettable Area of 19.476 square sqm over ten floors, includes underground parking and is fully let to a leading Bulgarian insurance company on a long lease extending to 2027.

 

In May 2015 the Group acquired a number of prime property assets in Romania and Bulgaria (in exchange of shares - note 20) some of them being investment properties (notes 15, 16) and some of them being associates. The associates acquired are as follows:

 

a)   Green Lake Development is residential compound which consists as of end of June of 44 apartments plus 24 villas as well as 4 commercial designated buildings, situated on the banks of Grivita Lake, in the northern part of the Romanian capital. The compound includes also facilities such as private kindergarten, nautical club, outdoor sport courts, and restaurants. The Company has a 40,35% participation in this asset. The project as of the end of June was 50% let.

b)   The Company acquired a 24,35% participation in the Delea Nuova Project in Bucharest. The project is a 10.280 sqm office building, which consists of two underground levels, a ground floor and ten above-ground floors. As of the end of June, the building is 100% let, with ANCOM (the Romanian Telecommunications Regulator) being the anchor tenant (70% of GLA).

 

The table below summarizes the movements in the carrying amount of the Group's investment in associates.

30 June 2015

At 1 January

-

Acquisition of participation interest

12.018.175

Share of profits from associates

354.949

Dividend Received

(365.317)

At 30 June

12.007.807

 

Share of profits from associates reflects the post aquisition after tax proifts of each associate derived from rental income minus operational and financial expenses for the period ended 30 June 2015.

As at 30 June 2015, the Group's interests in its associates and their summarised financial information, including total assets, liabilities, revenues and profit or loss, were as follows:

Project Name

Associates

Total assets

Total liabilities

Profit/

(loss)

Holding

Share of profits from associates

Country

Asset type

 

 

%

 

 

Autounion Project

Bluehouse Accession Project V

24.090.574

23.401.587

197.241

20,00

39.448

Bulgaria

Office building

Delea Nuova Project

Lelar Holdings Limited

8.628.492

3.637.013

16.186

24,35

3.942

Romania

Office building

Green Lake Project - Phase A

GreenLake Development Srl

14.414.863

16.503.089

772.140

40,35

311.559

Romania

Residential assets and land for development

Total

 

47.133.929

43.541.689

985.567

 

354.949

 

 

 

18. Prepayments and other current assets

 

 

30 June 2015

31 December 2014

 

Prepayments and other receivables

3.060.078

922.115

VAT and other tax receivable

1.235.116

1.229.057

Deferred expenses

1.024.490

2.100.317

Receivables from related parties

6.283

-

Total

5.325.967

4.251.489

 

Prepayments and other receivables reflect prepayments of clients (~€743.000),receivables from associate companies (~€1.458.000) and pre-payments made for the acquisition of assets and/or share capital increases (~€458.000). 

 

VAT and other tax receivable mainly represents the current portion of the Terminal Brovary VAT receivable (€ 745.944), to be offset from VAT charged over rental income during the next years. The remaining is VAT income to be collected from tenant and residential unit buyers.

 

Deferred expenses include legal, advisory, consulting and marketing expenses related to the ongoing share capital increases and due diligence expenses related to the possible acquisition of investment.

 

19. Cash and cash equivalents

 

Cash and cash equivalents represent liquidity held at banks.

 

 

30 June 2015

31 December 2014

 

Cash at banks in USD

84.812

43.612

Cash at banks in EUR

1.867.993

495.052

Cash at banks in UAH

81.095

150.029

Cash at banks in RON

497.716

201.984

Cash at banks in BGN

201.562

-

Cash equivalents

98.876

1.261

Total

2.832.054

891.938

 

 

 

20. Share capital

 

Number of Shares (as at)

31 December 2014

13 March 2015

31 May 2015

29 June 2015

30 June 2015

 

 

Increase of Share Capital

Increase of Share Capital

Repayment of redeemable preference shares

 

Authorised

 

 

 

 

 

Ordinary shares of €0,01

989.869.935

-

-

-

989.869.935

Total equity

989.869.935

-

-

-

989.869.935

Redeemable preference shares of €0,01

785.000

-

-

-

785.500

Total

990.654.935

-

-

-

990.654.935

 

 

 

 

 

 

Issued and fully paid

 

 

 

 

 

Ordinary shares of €0,01 each

33.884.054

23.777.748

18.028.294

-

75.690.096

Total equity

33.884.054

23.777.748

18.028.294

-

75.690.096

Redeemable preference shares of 0,01

785.000

-

-

(392.500)

392.500

Total

34.669.054

23.777.748

18.028.294

(392.500)

76.082.596

 

 

Value (as at)

(€)

31 December 2014

13 March 2015

31 May 2015

29 June 2015

30 June 2015

 

 

Increase of Share Capital

Increase of Share Capital

Repayment of redeemable preference shares

 

Authorised

 

 

 

 

 

Ordinary shares of €0,01

9.898.699

-

-

-

9.898.699

Total equity

9.898.699

-

-

-

9.898.699

Redeemable preference shares of €0,01

7.850

-

-

-

7.850

Total

9.906.549

-

-

-

9.906.549

 

 

 

 

 

 

Issued and fully paid

 

 

 

 

 

Ordinary shares of €0,01

338.839

237.777

180.283

-

756.899

Total equity

338.839

237.777

180.283

-

756.899

Redeemable preference shares of €0,01

7.850

-

-

(3.925)

3.925

Total

346.689

237.777

180.283

(3.925)

760.824

 

20.1 Authorised Share Capital

 

As at the end of 2014 the authorized share capital of the Company was 989.869.935 Ordinary Shares of €0,01 nominal value each and 785.000 Preference Shares of €0,01 nominal value each.

 

As at the end of the reporting period the authorized share capital of the Company is 989.869.935 Ordinary Shares of €0,01 nominal value each and 785.000 Preference Shares of €0,01 nominal value each.

 

During the EGM dated 24 June 2015, it was approved by the shareholders of the Company that the authorized share capital of the Company will be increased to €9.992.739,35 divided into: (a) 989.869.935 ordinary shares of € 0,01 each; (b) 785.000 Redeemable Preference Shares Class A of €0,01 each; and (c) 8.618.997 Redeemable Preference Shares Class B of €0,01 each by the creation of 8.618.997 Redeemable Preference Shares Class B of €0,01 each. The above approval has effective date 1 July 2015. The reorganization of the capital was mandated by the acquisition growth plan of the Company since the creation of the Redeemable Preference Shares Class B was necessary to be issued to BLUEHOUSE ACCESSION PROPERTY HOLDINGS III S.A.R.L which was the seller of the income producing real estate asset in Craiova, Romania, which the Company acquired in July 2015 (note 32).

 

20.2 Issued Share Capital

 

As at the end of 2014 the issued share capital of the Company was 33.884.054 Ordinary Shares of €0,01 nominal value each,  and 785.000 Preference Shares of €0,01 nominal value each.

 

Further to the resolutions approved at the AGM of 31 December 2014 the Board has proceeded in allocating shares as follows:

 

1.     On 13/3/2015, the allotment of 23.777.748 ordinary shares of €0,01 each for the purpose of capital raising of €8.000.000 in the Company by its existing shareholders.

2.     On 31/5/2015, the allotment of 18.028.294 ordinary shares of €0,01 each for the purpose of an in kind contribution of mixed Portfolio acquisition and (notes 15,16,17).

Furthermore the Company proceeded on 29/6/2015 with payment of half of the issued convertible shares (392.500) but the cancellation of these shares within the appropriate authorities will be completed in second semester of 2015.

 

As at the end of the reporting period the issued share capital of the Company is as follows:

a) 75.690.096 Ordinary Shares of €0, 01 nominal value each and

b) 392.500 Convertible Shares of €0, 01 nominal value each, following the above described redemption which shall be officially finalized in second semester of 2015.

 

20.3 Director's Option scheme

 

Under the said scheme each of the directors serving at the time, which is remain a Director of the Company is entitled to subscribe for 2.631 Ordinary Shares exercisable as set out below:

 

 

Exercise Price

Number of

 

US$

Shares

Exercisable till 1 August 2017

57

1.754

Exercisable till 1 August 2017

83

877

 

The Company considers the said options well out of the money (as the share price at the reporting date is USD 0,46), thus the possibility of exercising them is remote and therefore no provision has been made in respect of this.

 

Director Franz M. Hoerhager Option scheme, 12 October 2007

 

Under the said scheme, director Franz M. Hoerhager is entitled to subscribe for 1.829 ordinary shares exercisable as set out below:

 

 

Exercise Price

Number of

 

GBP

Shares

Exercisable till 1 August 2017

40

1.219

Exercisable till 1 August 2017

50

610

 

The Company considers the said options well out of the money (as the share price at the reporting date is GBP 0, 30), thus the possibility of exercising them is remote and therefore no provision has been made in respect of this.

 

20.4 Class A Warrants issued

During the period ended 30 June 2015 the Company acquired the Sec South portfolio (notes 16,17) in exchange of Ordinary shares (issued at GBP0.65 each ) and of Class A Warrants  giving the right to the Warrant holders to subscribe in cash at the Exercise Amount for the Ordinary Shares. The Company issued two sets of Warrants as follows:

The shares that will be received under the above warrants bear a lock-in period of 12 months.

 

20.5 Class B Warrants issued

 

On 8 August 2011 the Company issued an amount of Class B Warrants for an aggregate equivalent to 12,5% of the issued share capital of the Company at the exercise date. Each Class B Warrant entitles the holder to receive one Ordinary Share.  The Class B Warrants may be exercised at any time until 31st December 2016, pursuant to a decision by the AGM of 30/12/2013. The exercise price of the Class B Warrants will be the nominal value per Ordinary Share as at the date of exercise.  The Class B Warrant Instruments have anti-dilution protection so that, in the event of further share issuances by the Company, the number of Ordinary Shares to which the holder of a Class B Warrant is entitled will be adjusted so that he receives the same percentage of the issued share capital of the Company (as nearly as practicable), as would have been the case had the issuances not occurred. This anti-dilution protection will lapse on the earlier of (i) the expiration of the Class B Warrants; and (ii) capital increase(s) undertaken by the Company generating cumulative gross proceeds in excess of US$100.000.000. As of the reporting date, the aggregate amount of class B warrant is 10.812.871.

 

20.6 Capital Structure as at the end of the reporting period

 

As at the reporting date the Company's share capital is as follows:

 

Number of

 

(as at) 30 June 2015

(as at) 31 December 2014

Ordinary shares of €0,01

Issued and Listed in AIM

75.690.096

33.884.054

Class A Warrants

 

36.056.588

-

Class B Warrants

 

10.812.871

4.840.579

Total number of Shares

Non-Dilutive Basis

75.690.096

33.884.054

Total number of Shares

Full Dilutive Basis

122.559.555

38.724.633

Options

 

4.460

4.460

 

20.7 Redeemable Preference Shares

 

During the reporting period the Company repaid half of 785.000 preference SPDI shares of nominal value €0, 01 each, pending finalization of the process in the second semester of 2015. The Preference Shares have no voting powers or rights to dividend. The remaining 392.500 of the Preference Shares may be redeemed by 31 January 2016 (the "Redemption Date 2") at the price of €0, 89. At any time prior to the Redemption Dates the holders shall have the option to unilaterally reconvert the Preference Shares into ordinary shares of €0, 01 each.

 

During  the EGM dated 24 June 2015,the shareholders approved the reorganization of the Capital of the company (note 20.1)  via the reclassification of the old Redeemable shares as Redeemable Preference Shares Class A and via the issuance of  8.618.997 Redeemable Preference Shares Class B of €0.01 for the purpose of acquiring Craiova asset in Romania (note 32). The above approval has effective date 1 July 2015.

Redeemable Preference Shares Class A

 

The Redeemable Preference Shares Class A do not have voting or dividend rights. The 392.500 of the Redeemable Preference Shares Class A were redeemed on 31 January 2015 ("Redemption Date 1") at a price of €0,89 each and the remaining 392.500 of the Redeemable Shares Class A may be redeemed by the Company on 31 January 2016 at a price of €0,89 each or the holders of the Redeemable Preference Shares Class A shall have the option to immediately convert the Redeemable Preference Shares Class A into ordinary Shares of €0,01 each.

 

Redeemable Preference Shares Class B

 

The Redeemable Preference Shares Class B shall not have voting rights and shall have economic rights at par with ordinary shares. The Redeemable Preference Shares Class B, if not converted into ordinary Shares, may be redeemed at the sole discretion of the holder of the Redeemable Preference Shares Class B on the expiration of the 12th month following the date of issue of the Redeemable Preference Shares Class B (the "Redemption Date"); the redemption price shall be €0,7056 per Redeemable Preference Share Class B.  The Redeemable Preference Shares Class B shall have priority on the winding-up of the Company, over any other shares or class of shares issued by the Company from time to time including without limitation the Redeemable Preference Shares Class A but otherwise rank pari passu with the ordinary  shares in all respects.

 

21. Foreign Currency Translation Reserve

 

Exchange differences related to the translation from the functional currency of the Group's subsidiaries are accounted by entries made directly to the foreign currency translation reserve. The foreign exchange translation reserve represents unrealized profits or losses related to the appreciation or depreciation of the local currencies against the EUR in the countries where the Company's subsidiaries' functional currencies are not EUR.

 

 

22. Non-Controlling Interests

 

Non-controlling interests represent the equity value of shareholdings not owned by the Group:

 

%

Non-controlling interest portion

Group Company

30 June 2015

31 December 2014

LLC Almaz-Press-Ukraine

45,00

45,00

Ketiza Limited

10,00

55,00

Ketiza srl

10,00

55,00

Ram Real Estate Management Limited

50,00

-

Iuliu Maniu Limited

55,00

-

Moselin Investments Srl

55,00

-

Rimasol Enterprises Limited

55,76

-

Rimasol Real Estate Srl

55,76

-

Ashor Ventures Limited

55,76

-

Ashor Development Srl

55,76

-

Jenby Ventures Limited

55,76

-

Jenby  Investments Srl

55,76

-

Ebenem Limited

55,76

-

Ebenem Investments Srl

55,76

-

 

23. Interest bearing borrowings

 

 

30 June 2015

31 December 2014

 

Principal of bank Loans

 

 

Principal EBRD loan

12.559.955

11.808.915

Banca Comerciala Romana

1.615.529

1.783.826

Bancpost SA

2.088.583

2.157.501

Alpha Bank Romania

1.103.753

1.184.688

Raiffeisen Bank Romania

1.004.819

1.093.176

Bancpost SA

3.091.754

-

Alpha Bank Bulgaria

1.781.266

-

Alpha Bank Bulgaria

3.720.418

 

Bank of Cyprus

4.569.725

-

Eurobank Ergasias SA

12.522.728

-

Piraeus Bank SA

2.800.000

-

Loans by non-controlling shareholders

6.063.693

-

Total Principal of Bank Loans

52.922.223

18.028.106

Restructuring fees and interest payable to EBRD

32.211

29.685

Interest accrued on bank loans

1.482.011

240.619

Interests accrued on non-bank loans

657.783

-

Prepaid fees to EBRD

-

(81.988)

Total

55.094.228

18.216.422

 

 

30 June 2015

31 December 2014

 

Current portion

10.343.906

5.960.706

Non-current portion

44.750.322

12.255.716

Total

55.094.228

18.216.422

 

EBRD loan related to Terminal Brovary

 

In February 2015 the restructuring of the Brovary construction loan with the EBRD which was signed in December 2014 was effected. According to the agreement the loan repayment is being extended to 2022, with a balloon payment of US$3.633.333. The loan has an interest of 3 M LIBOR + 6.75% and the capital repayments are scheduled as follows: 2015-$900.000 2016-$1.000.000 2017-$1.220.000 2018-$1.350.000 2019-$1.500.000 2020-$1.650.000 2021-$1.800.000 2022-$4.983.333, 32.

 

Under the current agreement the collaterals accompanying the existing loan facility are as follows:

1.   LLC Terminal Brovary pledged all movable property with the carrying value more than US$25.000.

2.   LLC Terminal Brovary pledged its Investment property, Brovary Logistics Centre the construction of which was finished in 2010 (note 15), and all property rights on the center.

3.   SPDI PLC pledged 100% corporate rights in SL SECURE Logistics Ltd, a Cyprus Holding Company which is the Shareholder of LLC Terminal Brovary, LLC Aisi Brovary.

4.   SL SECURE Logistics Ltd pledged 99% corporate rights in LLC Aisi Brovary.

5.   LLC Aisi Brovary pledged 100% corporate rights in LLC Terminal Brovary.

6.   LLC Terminal Brovary pledged all current and reserved accounts opened by LLC Terminal Brovary in Unicreditbank Ukraine.

7.   LLC Aisi Brovary entered into a call and put option agreement with EBRD, pursuant to which following an Event of Default (as described in the Agreement) EBRD has the right (Call option) to purchase at the Call Price from LLC Aisi Brovary, 20% of the Participatory Interest of LLC Terminal Brovary on the relevant Settlement Date.

8.   LLC Terminal Brovary has granted EBRD a second ranking mortgage in relation to its own and LLC Aisi Brovary's obligations under the call and put option agreement.

9.   LLC Terminal Brovary has pledged its rights arising in connection with the existing Lease agreements with Tenants.

10. LLC Aisi Brovary has entered with EBRD into a conditional assignment agreement of 20% and 80% corporate rights in LLC Terminal Brovary.

11. SL Secure Logistics Limited has entered with EBRD into a conditional assignment agreement of 99% corporate rights in LLC Aisi Brovary.

 

The issued corporate guarantee dated 12 January 2009 guaranteeing all liabilities and fulfilment of conditions under the existing loan agreement remains in force. The maturity of the guarantee is equal to the maturity of the loan.

 

The existing credit agreement with EBRD includes among others the following requirements for LLC Terminal Brovary and the Group as a whole:

 

1.   At all times LLC Brovary Logistics shall maintain a balance in the Debt Service Reserve Amount (DSRA) account equal to not less than the sum of all payments of principal and interest on the Loan which will be due and payable during the next six months. 

2.   LLC Terminal Brovary shall achieve a "CNRI"(Contract Net Rental Income is the aggregate of monthly lease payments, net of value added tax, contracted by the Borrower pursuant to the Lease Agreements as of the relevant testing date and converted into Dollars at the official exchange rate established by the National Bank of Ukraine as of such testing date) according to the following schedule:

(1) on 31 December 2014, CNRI of USD 200,000 or more;

(2) on 30 June 2015, CNRI of USD 220,000 or more;

                        (3) on 31 December 2015, CNRI of USD 230,000 or more; and

(4) on 30 June and 31 December in each year commencing on the date of 30 June 2016, CNRI of USD 250,000 or more, in respect of the six month period commencing  on any such date. 

3.   LLC Terminal Brovary shall achieve a "DSCR"(Debt Service Coverage Ratio is the sum of net income minus operating expenses plus amortization, divided with the sum of paid principal & interest) according to the following schedule:

i.  in respect of the 6 months period ending on 31 December 2014, the DSCR of more than 1,10x.

ii. in respect of the 6 months period ending on 30 June 2015 and 31 December 2015, the DSCR of more than 1,15x.

iii. in respect of the 6 months period ending on 30 June or 31 December in any year commencing on the date of 30 June 2016, the DSCR of more than 1,2x.

 

Other bank Borrowings (related to residential projects)

 

SecRom Real Estate Srl entered (2009) into a loan agreement with Alpha Bank- Romania for a credit facility for financing part of the acquisition of the Doamna Ghica Project apartments. As of the end of the reporting period, the balance of the loan is €1.103.753, bears interest of EURIBOR 3M+5,25% and is repaid on the basis of investment property sales. The loan matures in October 2016 and is secured by all assets of SecRom Real Estate Srl as well as its shares.

 

Ketiza Real Estate Srl entered (2012) into a loan agreement with Bancpost S.A. for a credit facility for financing the acquisition of the Blooming House Project and 100% of the remaining (without VAT) construction works Blooming House project. As of the end of the reporting period the balance of the loan is €2.088.583. The loan bears interest of EURIBOR 3M plus 3,5% and matures in May 2017.  The bank loan is secured by all assets of Ketiza Real Estate Srl as well as its shares.

 

SecVista Real Estate Srl entered (2011) into a loan agreement with Raiffeisen Bank- Romania for a credit facility for financing part of the acquisition of the Linda Residence Project apartments. As of the end of the reporting period the balance of the loan is €1.004.819. The loan bears interest of EURIBOR 1M+5,2% and is currently under restructuring negotiation. The loan is secured by all assets of SecVista Real Estate Srl as well as its shares.

 

SecMon Real Estate Srl (2011) entered into a loan agreement with Banca Comerciala Romana for a credit facility for financing part of the acquisition of the Monaco Towers Project apartments. As of the end of the reporting period the balance of the loan is €1.615.529 and bears interest of EURIBOR 3M plus 5%. The loan is repayable in October 2015 and is secured by all assets of SecMon Real Estate Srl as well as its shares.

 

GED Logistics SA entered (April 2015) into a loan agreement with EUROBANK SA to refinance the existing debt facility. As of the end of the reporting period the balance of the loan is €12.522.728 and bears interest of EURIBOR 6M plus 3,2%. The loan is repayable by 2022, has a balloon payment of €8.660.000 and is secured by all assets of GED Logistics SA as well as its shares.

 

SEC South East Continent Unique Real Estate (Secured) Investments Limited has a debt facility with Piraeus Bank (since 2007) for the acquisition of the Green Lake project land in Bucharest Romania. As of the end of the reporting period the balance of the loan is €2.800.000 and bears interest of EURIBOR 3M plus 4% plus the Greek law 128/78 0, 6% contribution. The term of the loan facility has expired but the Company has agreed with the Bank a prolongation of the maturity until 2017 to be implemented in Q3-2015.

 

Moselin Investments Srl (2010) entered into a construction loan agreement with Bancpost SA covering the construction works of Parcel K -Green Lake project. As of the end of the reporting period the balance of the loan is €3.091.754 and bears interest of EURIBOR 3M plus 5%. The loan is repayable from the sales proceeds while it matures in 2017.  The loan is secured as follows with the property itself and the shares of Moselin Investments Srl.

 

Other Borrowings from acquisitions

 

Delia Lebada Invest Srl, a subsidiary, entered into a loan agreement with the Bank of Cyprus Limited to effectively finance a leveraged buy-out of the subsidiary by the Company. The bank loan amounting to €4.830.000 is secured with a mortgage at 120% of the loan value and with a corporate guarantee. The loan bears 7% fixed interest while interest is payable quarterly. The balance of the loan as of end of the period ended 30 June 2015 is €4.569.725. The Company is currently in discussion with its partner to sell the asset and with the bank for the loan restructuring at the same time. In the meantime Delia Lebada Invest Srl has entered into protection from creditor's procedure.

 

Sertland Properties Limited entered (2008) into a loan agreement with Alpha Bank- Bulgaria for an acquisition loan related to the acquisition of 70% of Boyana Residence ood. As of the end of the reporting period the balance of the loan is €1.781.266 and bears interest of EURIBOR 3M plus 5,75%. The loan matures in 2017 and discussions have been initiated with the bank for a prolongation. The loan is secured with a   pledge on company's shares, and a corporate guarantee by SEC South East Continent Unique Real Estate (Secured) Investments Limited

 

Boyana Residence ood entered (2011) into a loan agreement with Alpha Bank- Bulgaria for a construction loan related to the constructions of the Boyana Residence projects (finished in 2014). As of the end of the reporting period the balance of the loan is €3.720.418 and bears interest of EURIBOR 3M plus 5,75%. The loan matures in 2017 and discussions have been initiated with the bank for a prolongation. The loan currently is being repaid through sales proceeds. The facility is secured through a mortgage over the property and a pledge over the company shares as well as those of Sertland Properties Limited.

 

Other bank borrowing include as well borrowing from non-controlling interests. During the last five years and in order to support of Parcel K of Green Lake project and Boyana project the shareholders of Moselin and Boyana (other than the Company) have contributed their share by means of shareholder loans. The loans bear interest at 7% annually and are repayable in 2016.

 

24. Trade and other payables

 

 

30 June 2015

31 December 2014

 

Payables to related parties (note 28.2)

1.789.720

335.004

Payables for construction, non-current

406.150

202.200

Other payables

2.829.685

916.827

Deferred income from tenants, non-current

22.403

12.485

Deferred income from tenants, current

34.402

132.782

Accruals

48.303

270.239

Total

5.130.663

1.869.537

 

 

30 June 2015

31 December 2014

 

Current portion

4.702.110

1.654.852

Non - current portion                                                       

428.553

214.685

Total

5.130.663

1.869.537

 

The fair values of trade and other payables due within one year approximate their carrying amounts as presented above.

 

Payables to related parties represent the balances with Secure Management Ltd and Grafton Properties as well as amounts due to board of directors and committee members and accrued management remuneration (note 28.2).

 

Payables for construction represent amounts payable to the contractor of Bela Logistic Center in Odessa. The settlement was reached in late 2011 on the basis of maintaining the construction contract in an inactive state (to be reactivated at the option of the Group), while upon reactivation of the contract or termination of it (because of the sale of the asset) the Group would have to pay an additional UAH5.400.000 (~US$ 450.000) payable upon such event occurring. Since it is uncertain when the latter amount is to be paid it has been discounted at the current discount rates in Ukraine and is presented as a non-current liability. Payables for construction includes as well €~245.000 amount payable to Boyana's constructor which has been withheld as Good Performance Guarantee.

 

Other payables mainly represent shareholder loan balances owned to minority partners of the property assets acquired within the period.

 

Deferred income from tenants represents advances from tenants which will be used as future rental income and utilities charges.

                                        

Payables for services include payables to non-controlling shareholders in the amount of €1.003.168. The rest of payables and accruals for services represent amounts payable to various service providers including auditors, legal advisors, consultants and third party accountants related to the current operations of the Group as well as with due diligence related expenses incurred in preparation of new acquisitions.

 

 

 

25. Deposits from Tenants

 

Deposits from tenants appearing under current and non-current liabilities include the amounts received from the tenants of LLC Terminal Brovary, Best Day SRL, GED Logistics S.A. and companies representing residential segment as advances/guarantees and are to be reimbursed to these clients at the expiration of the leases agreements.

 

26. Taxes payable & Provisions for taxes

 

 

30 June 2015

31 December 2014

 

Corporate income and defense tax

379.568

356.929

Other taxes including VAT payable

482.661

74.899

Provisions for taxes in Ukraine

-

68.253

Total Tax Liability

862.229

500.081

 

Corporate income tax represents taxes payable in Cyprus and Romania.

 

Other taxes represent local property taxes and VAT payable in Ukraine, Romania, Greece, Bulgaria and Cyprus.

 

27. Finance lease liabilities

 

As at the reporting date the finance lease liabilities consist of the non-current portion of €11.340.099 and the current portion of € 178.138 (31 December 2014: € 11.463.253 and € 181.723, accordingly).

 

30 June 2015

(€)

Minimum lease payments

 

Interest

 

Principal

Less than one year

760.565

592.214

168.351

Between two and five years

3.461.289

2.155.663

1.305.626

More than five years

12.709.921

2.723.358

9.986.563

 

16.931.775

5.471.235

11.460.540

Accrued Interest

 

 

57.697

 

 

 

11.518.237

 

31 December 2014

(€)

Minimum lease payments

 

Interest

 

Principal

Less than one year

766.289

584.677

181.612

Between two and five years

3.424.203

2.205.329

1.218.874

More than five years

13.285.643

3.094.876

10.190.767

 

17.476.135

5.884.882

11.591.253

Accrued Interest

 

 

53.723

 

 

 

11.644.976

 

27.1 Land Plot Financial Leasing 

 

The Group rents land plots classified as finance lease. Lease obligations are denominated in UAH. The fair value of lease obligations approximate to their carrying amounts as presented above. Following the appropriate discounting finance lease liabilities are carried at € 152.479 under current and non-current portion. The Group's obligations under finance leases are secured by the lessor's title to the leased assets.

 

27.2 Sale and Lease Back Agreement

 

A.    Innovations Logistic Park

 

In May 2014 the Group concluded the acquisition of Innovations Logistics Park in Bucharest, owned by Best Day Srl, through a lease back agreement with Piraeus Leasing Romania SA. As of the end of the reporting period the balance is €7.400.470 bearing interest rate at 3M Euribor plus 4,45% margin, being repayable in monthly tranches until 2026. At the maturity of the lease agreement Best Day will become owner of the asset.

 

Under the current finance lease agreement the collaterals for the facility are as follows:

 

1.     Best Day pledged its future receivables from its tenants.

2.     Best Day pledged its shares.

3.     Best Day pledged all current and reserved accounts opened in Piraeus Leasing, Romania.

4.     Best Day is obliged to provide cash collateral in the amount of €250.000 in Piraeus Leasing Romania, which had been be deposited as follows, half in May 2014 and half in May 2015.

5.     SPDI provided a corporate guarantee in favor of the bank towards the liabilities of Best Day arising from the sales and lease back agreement.

 

 

B.    EOS Business Park

 

In October 2014 the Group concluded the acquisition of EOS Business Park in Bucharest, owned by First Phase Srl, through receiving debt from Alpha Bank Romania SA in the form of a sale and lease back agreement. As of the end of the reporting period the balance is €3.934.972 bearing interest rate at 3M Euribor plus 5,25% margin, being repayable in monthly tranches until 2024. At the maturity of the lease agreement First Phase will become owner of the asset.

 

Under the current finance lease agreement the collaterals for the facility are as follows:

 

1.     First Phase pledged its future receivables from its tenants.

2.     First Phase pledged Bank Guarantee receivables from its tenants.

3.     Best Day pledged its shares.

4.     First Phase pledged all current and reserved accounts opened in Alpha Bank Romania SA.

5.     First Phase is obliged to provide cash collateral in the amount of €300.000 in Alpha Bank Romania SA, starting from October 2019.

6.     SPDI provided a corporate guarantee in favor of the bank towards the liabilities of First Phase arising from the sales and lease back agreement.

 

28. Related Party Transactions

 

The following represent transactions with related parties:

 

28.1 Expenses

 

The below expenses were recognized during the reporting period:

 

 

30 June 2015

30 June 2014

 

Management Remuneration

467.030

174.714

Board of Directors & Committees

119.628

84.395

SECURE Management Ltd

-

35.176

Total

586.658

294.285

 

Management remuneration includes the remuneration of the CEO, CFO the Commercial Director and that of the country directors of Ukraine and Romania pursuant the decisions of the remuneration committee.

 

Board of Directors expense represents the remuneration of all the non-executive members of the Board pursuant to the decision of the Remuneration Committee.

 

28.2 Payables to related parties

 

The amounts below were payables as at the end of the reporting period:

 

 

30 June 2015

31 December 2014

 

Grafton Properties

123.548

123.548

Secure Management Ltd

1.189.966

18.244

Board of Directors & Committees

316.204

193.212

Management Remuneration

160.002

-

Total

1.789.720

335.004

 

 

28.2.1 Board of Directors & Committees

The amount payable represents remuneration payable to non-Executive Directors and members of Committees covering the period ended 30 June 2015 remuneration. The members of the Board of Directors have agreed in order to facilitate the Company's cash flow, to exchange part of their fees related to prior years for shares in the Company's capital. This was approved by the Annual General Meeting of the Company's shareholders.

 

28.2.2 Loan payable to Grafton Properties

Under the Settlement Agreement of July 2011, the Company undertook the obligation to repay to certain lenders who had contributed funds for the operating needs of the Company between 2009-2011, by lending to AISI Realty Capital LLC, the total amount of US$450.000. As of the reporting date the liability towards Grafton Properties, representing the Lenders, was US$150.000, which is contingent to the Company raising US $50m of capital in the markets.

 

28.2.3 Payable to Secure Management

Payable to Secure Management represents a liability existing at the time of acquisition of the mixed portfolio of Sec South related to accrued management fee, which is under negotiation for eventual write down or off.

 

28.2.4 Management Remuneration

Management Remuneration represents deferred amounts payable to the CEO and CFO of the Company, as well as the Commercial Director and the Country Managers for Romania and Ukraine.

 

28.3 Loans from SC Secure Capital Ltd to the Company's subsidiaries

 

SC Secure Capital Ltd, the finance subsidiary of the Company has proceeded to provide capital in the form of loans to the Ukrainian subsidiaries of the Company so as to support the acquisition of assets, development expenses of the projects, as well as various operational costs.

 

Borrower (€)

 Limit

Principal as of

30 June 2015

Principal as of

31 December 2014

LLC "TERMINAL BROVARY"

28.827.932

26.882.801

27.578.265

LLC "AISI UKRAINE"

23.062.351

12.275

12.275

LLC "ALMAZ PRES UKRAINE"

8.236.554

140.021

140.021

Total

 

27.035.097

27.730.561

 

All loans from SC Secure Capital Limited to the Company's subsidiaries are USD denominated and in 2014 they generated a forex loss totaling €19.746.111 as a result of devaluation of the Ukrainian Hryvnia during the reporting period.

 

29. Contingent liabilities 

 

The Group is involved in various legal proceedings in the ordinary course of its business.

 

29.1 Tax litigation

 

The Group performed during the reporting period a part of its operations in the Ukraine and therefore within the jurisdiction of the Ukrainian tax authorities. The Ukrainian tax system can be characterized by numerous taxes and frequently changing legislation, which may be applied retroactively, open to wide interpretation and in some cases, conflicting. Instances of inconsistent opinions between local, regional, and national tax authorities and between the National Bank of Ukraine and the Ministry of Finance are not unusual. Tax declarations are subject to review and investigation by a number of authorities, which are authorised by law to impose severe fines and penalties and interest charges.

 

Any tax year remains open for review by the tax authorities during the three subsequent calendar years; however, under certain circumstances a tax year may remain open for longer. These facts create tax risks which are substantially more significant than those typically found in countries with more developed tax systems. Management believes that it has adequately provided for tax liabilities, based on its interpretation of tax legislation, official pronouncements and court decisions. However, the interpretations of the relevant authorities could differ and the effect on these consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant.

 

At the same time the Group's entities are involved in court proceedings with tax authorities; Management believes that the estimates provided within the financial statements present a reasonable estimate of the outcome of these court cases.

 

29.2 Construction related litigation

 

There are no material claims from contractors due to the postponement of projects or delayed delivery other than those disclosed in the financial statements.

 

29.3 Other Litigation

 

The Company has a number of legal cases pending. Management does not believe that the result of these will have a substantial overall effect (in excess of €0,5m) on the Group's financial position. Consequently no such provision is included in the current financial statements.

 

29.4 Other Contingent Liabilities

 

The Group had no other contingent liabilities as at 30 June 2015.

 

30. Commitments

 

The Group had no commitments as at 30 June 2015.

 

31. Financial Risk Management

 

31.1 Capital Risk Management

 

The Group manages its capital to ensure that it will be able to implement its stated growth strategy in order to maximize the return to stakeholders through the optimization of the debt-equity structure and value enhancing actions in respect of its portfolio of investments. The capital structure of the Group consists of borrowings (note 23), trade and other payables (note 24) deposits from tenants (note 25), taxes payable (note 26) and equity attributable to ordinary shareholders (note 20, issued capital, reserves and retained earnings) as well as to preferred shareholders (note 20.7).

 

The Group is not subject to any externally imposed capital requirements.

 

Management reviews the capital structure on an on-going basis. As part of the review Management considers the differential capital costs in the debt and equity markets, the timing at which each investment project requires funding and the operating requirements so as to proactively provide for capital either in the form of equity (issuance of shares to the Group's shareholders) or in the form of debt. Management balances the capital structure of the Group with a view of maximizing the shareholder's Return on Equity (ROE) while adhering to the operational requirements of the property assets and exercising prudent judgment as to the extent of gearing.

 

31.2 Significant Accounting Policies

 

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis on which income and expenses are recognized, in respect of each class of financial asset, financial liabilities and equity instruments are disclosed in note 3 of the condensed consolidated interim financial statements.

 

31.3 Categories of Financial Instruments

 

 

Note

30 June 2015

31 December 2014

 

 

Financial Assets

 

 

 

Cash at Bank

19

2.832.054

891.938

Total

 

2.832.054

891.938 

 

 

 

 

Financial Liabilities

 

 

 

Interest bearing borrowings

23

55.094.228

 18.216.422

Trade and other payables

24

5.130.663

 1.869.537

Deposits from tenants

25

755.906

 661.410

Finance lease liabilities

27

11.518.237

 11.644.976

Taxes payable

26

862.229

431.828

Redeemable preference shares

20

349.325

698.650

Total

 

73.710.588

 33.522.823

 

31.4 Financial Risk Management Objectives

 

The Group's Treasury function provides services to its various corporate entities, coordinates access to local and international financial markets, monitors and manages the financial risks relating to the operations of the Group, mainly the investing and development functions. Its primary goal is to secure the Group's liquidity and to minimize the effect of the financial asset price variability on the cash flow of the Group. These risks cover market risks including foreign exchange risks and interest rate risk as well as credit risk and liquidity risk.

 

The above mentioned risk exposures may be hedged using derivative instruments whenever appropriate. The use of financial derivatives is governed by the Group's approved policies which indicate that the use of derivatives is for hedging purposes only. The Group does not enter into speculative derivative trading positions. The same policies provide for the investment of excess liquidity. As at 30 June 2015, the Group had not entered into any derivative contracts.

 

31.5 Economic Market Risk Management

 

The Group operates in Romania, Bulgaria Greece and Ukraine. The Group's activities expose it primarily to financial risks of changes in currency exchange rates and interest rates. The exposures and the management of the associated risks are described below. There has been no change to the Group's manner in which it measures and manages risks.

 

Foreign Exchange Risk

Currency risk arises when commercial transactions and recognized financial assets and liabilities are denominated in a currency that is not the Group's functional currency. Most of the Group's financial assets are denominated in the functional currency. Management is monitoring the net exposures and enacts policies to contain them so that the net effect of devaluation is minimized.

 

Interest Rate Risk

The Group's income and operating cash flows are substantially independent of changes in market interest rates as the Group has no significant interest-bearing assets. On June 30th, 2015, cash and cash equivalent financial assets amounted to 2.832.054 (31 December 2014: € 891.938).

 

The Group is exposed to interest rate risk in relation to its borrowings amounting to €55.094.228 (31 December 2014: 18.216.422) as they are issued at variable rates tied to the Libor or Euribor. Management monitors the interest rate fluctuations on a continuous basis and evaluates hedging options to align the Group's strategy with the interest rate view and the defined risk appetite. Although no hedging has been applied for the reporting period, such may take place in the future if deemed necessary in order to protect the cash flow of a property asset through different interest rate cycles.

 

The Group's exposures to financial risk are discussed also in note 4.

 

31.6 Credit Risk Management

 

The Group has no significant credit risk exposure. The credit risk emanating from the liquid funds is limited because the Group's counterparties are banks with high credit-ratings assigned by international credit rating agencies. The Credit risk of receivables is reduced as the majority of the receivables represent VAT to be offset through VAT income in the future.

 

31.7 Liquidity Risk Management

 

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which applies a framework for the Group's short, medium and long term funding and liquidity management requirements. The Treasury function of the Group manages liquidity risk by preparing and monitoring forecasted cash flow plans and budgets while maintaining adequate reserves.  The following table details the Group's contractual maturity of its financial liabilities. The tables below have been drawn up based on the undiscounted contractual maturities including interest that will be accrued.

 

 

30 June 2015

Carrying amount

Total

Less than

one year

From one to

two years

More than two years

Financial assets

 

 

 

 

 

Cash at Bank

2.832.054

2.832.054

2.832.054

-

-

Financial liabilities

 

 

 

 

 

Interest bearing borrowings

55.094.228

62.870.420

14.873.728

16.671.853

31.324.839

Trade and other payables

5.130.663

5.130.663

4.702.110

188.759

239.794

Deposits from tenants

755.906

755.906

117.387

80.346

558.173

Finance lease liabilities

11.518.237

16.931.775

760.565

768.414

15.402.796

Redeemable preference shares

349.325

349.325

349.325

-

-

Taxes payable

862.229

862.229

862.229

-

-

Total

73.710.588

86.900.318

21.665.344

17.709.372

47.525.602

Total net liabilities

70.878.534

84.068.264

18.833.290

17.709.372

47.525.602

 

31 December 2014

Carrying amount

Total

Less than

one year

From one to

two years

More than two years

Financial assets

 

 

 

 

 

Cash at Bank

891.938

891.938

891.938

-

-

Financial liabilities

 

 

 

 

 

Interest bearing borrowings

18.216.422

22.319.389

6.665.533

2.743.797

12.910.059

Trade and other payables

1.869.537

1.869.537

1.654.852

73.841

140.844

Deposits from tenants

661.410

661.410

161.579

68.973

430.858

Finance lease liabilities

11.644.976

17.476.135

766.289

769.922

15.939.924

Redeemable preference shares

698.650

698.650

349.325

349.325

-

Taxes payable

431.828

431.828

431.828

-

-

Total

33.522.823

43.456.949

10.029.406

4.005.858

29.421.685

Total net liabilities

32.630.885

42.565.011

9.137.468

4.005.858

29.421.685

 

31.8 Net Current Liabilities

 

The current liabilities amounting to €16.553.095 exceed current assets amounting to €8.158.021 by €8.395.074. As this difference is primarily result of certain of the bank borrowings being repayable with the next 12 months, the Company has entered into discussions with the lenders to restructure such borrowings. In the event that these discussions do not lead to debt restructuring, the Company may need to seek alternative funding solutions.

 

32. Events after the reporting period

 

A.    Romanian DIY Retail Property Acquisition

 

Subsequent to the reporting the Group completed the acquisition of 100% interest in BLUEBIGBOX 3 S.R.L ('BLUEBIGBOX'), a DIY retail property in a prime location in Craiova, Romania wholly let to Praktiker, a leading European DIY retailer. The building produces an annualised net operating income ('NOI') of ~€1 million and has a Gross Lettable Area ('GLA') of 9.385 square metres.

 

The acquisition has been affected through the issuance of 8.618.997 Redeemable Convertible Preference shares ('RCPS') to the vendors which will be either converted to an equal number of ordinary shares or redeemed for €0,7056 per RCPS on 13 July 2016.

 

B.    Change of Authorised Share Capital

 

In the EGM dated 24 June 2015,the shareholders approved that the authorized share capital of the Company which is currently € 9.906.549.35 divided into: (a) 989.869.935 ordinary shares of € 0,01 each; and (b) 785.000 Redeemable Preference Shares class A of €0,01 each, be increased to €9.992.739,35 divided into: (a) 989.869.935 ordinary shares of € 0,01 each; (b) 785.000 Redeemable Preference Shares Class A of €0,01 each; and (c) 8.618.997 Redeemable Preference Shares Class B of €0,01 each by the creation of 8.618.997 Redeemable Preference Shares Class B of €0,01 each. The above approval has effective date 1 July 2015.

 

C.     Board of directors changes

 

On 22 July the Company announced the appointment to the Board of Ms. Calypso Nomikos and Mr. Vagharshak Barseghyan as Non-Executive Directors with immediate effect and further announced that Mr. Antonios Achilleoudis and Mr. Robert Sinclair have resigned as non-executive Directors to pursue other business interests.

 


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