REG - Mirland Dev Corp PLC - Half Yearly Report <Origin Href="QuoteRef">MLD.L</Origin> <Origin Href="QuoteRef">MPI.L</Origin> - Part 2
29/10/2014 12:23
- Part 2: For the preceding part double click ID:nRSM9642Oa
Total comprehensive income (loss), net - - - - 992 (19,592) (18,600) 503 (18,097)
Obtaining control in companies accounting in the equity method - - - - - - - 29,558 29,558
At 30 June 2013 (unaudited) 1,036 359,803 12,186 8,391 (20,791) (61,878) 298,747 30,061 328,808
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Capital Total
reserve for equity
Capital transactions Foreign attributable
reserve for with currency to equity Non-
Issued Share share-based controlling translation Accumulated holders of controlling Total
capital premium payments shareholders reserve deficit the parent interest equity
U.S. dollars in thousands
1,036 359,803 12,186 8,391 (42,286) (21,783) 317,347 - 317,347
At 1 January 2013
Net profit for the year - - - - - 3,339 3,339 2,867 6,206
Other comprehensive loss - - - - (19,237) - (19,237) (2,532) (21,769)
Total comprehensive income (loss) - - - - (19,237) 3,339 (15,898) 335 (15,563)
Obtaining control in companies previously accounted for using the equity method (Note 3) - - - - - - - 29,558 29,558
Equity component of transaction with controlling shareholders ( Note 12) - - - 165 - - 165 - 165
Share-based payments (Note 19) - - 210 - - - 210 - 210
At 31 December 2013 1,036 359,803 12,396 8,556 (61,523) (18,444) 301,824 29,893 331,717
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended30 June Year ended31 December
2014 2013 2013
Unaudited Audited
U.S. dollars in thousands
Net profit 324 4,000 6,206
Adjustments to reconcile net profit (loss) to net cash provided by (used in) operating activities:
Adjustments to the profit or loss items:
Deferred taxes, net (208) 4,747*) 10,779*)
Depreciation and amortization 91 136 230
Finance expenses, net 22,637 42,281 65,332
Share-based payment 62 - 210
Fair value adjustment of investment properties and investment properties under construction (8,776) (42,204)*) (55,212)*)
Group's share in earnings of associates (4,009) (4,607) (7,591)
Loss from obtaining control in company accounted for equity method - 244 244
Gain from sale of investment property - (548) (548)
9,797 49 13,444
Working capital adjustments:
Decrease (increase) in trade receivables (1,842) 2,193 2,491
Increase in VAT receivable and others (1,440) (292) (36)
Increase in inventories of buildings for sale (29,877) (24,087) (16,767)
Increase (decrease) in trade payables 331 (65) 450
Increase in other accounts payable 23,537 28,542 5,558
(9,291) 6,291 (8,304)
Interest paid (17,504) (12,200) (28,247)
Interest received 123 - 430
Taxes paid (372) (321) (344)
(17,753) (12,521) (28,161)
Net cash used in operating activities (16,923) (2,181) (16,815)
*) Restated. See Note 2d.
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended30 June Year ended31 December
2014 2013 2013
Unaudited Audited
U.S. dollars in thousands
Cash flows from investing activities:
Additions to investment properties - (4,011) (6,466)
Additions to investment properties under construction (1,546) (1,036) (1,125)
Purchase of fixed assets (760) (166) (389)
Settlement of restricted deposit, net - 832 1,119
Loans granted to related parties (726) (201) (890)
Cash from obtaining control in companies previously accounted for using the equity method (a) (21,140) 86 86
Proceeds from sale of investment property under construction - 3,973 3,973
Advance paid for the acquisition of subsidiary - - (3,000)
Net cash flows used in investing activities (24,172) (523) (6,692)
Cash flows from financing activities:
Issuance of debenture, net - 16,852 125,267
Repayment of debentures - - (28,685)
Receipt of loans from banks and others, net from origination costs 120,962 33,333 124,456
Repayment of loans from banks and others (61,557) (25,696) (156,768)
Net cash flows generated from financing activities 59,405 24,489 64,270
Exchange differences on balances of cash and cash equivalents (1,314) (1,697) (278)
Increase in cash and cash equivalents 16,996 20,088 40,485
Cash and cash equivalents at the beginning of the period 66,154 25,669 25,669
Cash and cash equivalents at the end of the period 83,150 45,757 66,154
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended30 June Year ended31 December
2014 2013 2013
Unaudited Audited
U.S. dollars in thousands
(a) Cash generated from obtaining control in companies accounted for using the equity method:
The subsidiaries' assets and liabilities at date of sale:
Working capital (excluding cash and cash equivalents) 146 2,793 2,793
Investment properties (109,800) (94,972) (94,972)
Fixed assets, net (313) - -
Other receivables (49) (71) (71)
Deferred taxes 16,107 9,093 9,093
Loans from banks 21,419 10,849 10,849
Other non-current liabilities 12,700 866 866
Loans from related party - 5,973 5,973
Indemnification assets (5,737) - -
Foreign currency translation reserve 6,624 244 244
Non-controlling interests - 29,558 29,558
Loss from obtaining control in companies accounted for using the equity method 702 (244) (244)
Investment in associate 33,727 35,997 35,997
Loans granted to associates 3,344 - -
(21,140) 86 86
(b) Significant non-cash transactions:
Obtaining control in companies accounted for using the equity method against offset of previously granted loans - 600 600
Additions to investment property and investment property under construction - - 83
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
NOTE 1:- GENERAL
a. These interim consolidated financial statements have been prepared in
a condensed format as of 30 June 2014 and for the three-month period then
ended ("interim condensed consolidated financial statements"). These financial
statements should be read in conjunction with the Company's annual financial
statements and accompanying notes as of 31 December 2013 and for the year then
ended ("annual financial statements").
b. Based on management plans and as reflected in the Company's
forecasted cash flows, the Company expects to finance its activities in 2014,
inter alia, by revenues from sales of buildings in the Saint Petersburg
project and free cash flow from commercial projects.
In respect of the management expectations, based on the above, the Company
expected to comply with all of its liabilities.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation of the interim financial statements:
The interim condensed consolidated financial statements have been prepared in
accordance with the International Financial Reporting Standard IAS 34
("Interim Financial Reporting").
b. New standards, interpretations and amendments adopted by the
Company:
The significant accounting policies and methods of computation followed in the
preparation of the interim condensed consolidated financial statements are
identical to those followed in the preparation of the latest annual financial
statements, except as mentioned below:
Amendments to IAS 32, "Financial Instruments: Presentation", regarding
offsetting financial assets and financial liabilities:
The IASB issued amendments to IAS 32 ("the amendments to IAS 32") regarding
the offsetting of financial assets and financial liabilities. The amendments
to IAS 32 clarify, among others, the meaning of "currently has a legally
enforceable right of set-off".
The effect of the adoption of the amendments to IAS 32 on the Company's
financial statements was immaterial
c. Disclosure of new IFRS standards in the period prior to their
adoption:
IFRS 15, "Revenue from Contracts with Customers":
IFRS 15 ("the Standard") was issued by the IASB in May 2014.
IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts, and the
related Interpretations: IFRIC 13, "Customer Loyalty Programs", IFRIC 15,
"Agreements for the Construction of Real Estate", IFRIC 18, "Transfers of
Assets from Customers" and SIC-31, "Revenue - Barter Transactions Involving
Advertising Services".
The Standard introduces the following five-step model that applies to revenue
from contracts with customers:
Step 1: Identify the contract(s) with a customer, including reference to
contract consolidation and accounting for contract modifications.
Step 2: Identify the distinct performance obligations in the contract
Step 3: Determine the transaction price, including reference to variable
consideration, financing components that are significant to the contract,
non-cash consideration and any consideration payable to the customer.
Step 4: Allocate the transaction price to the separate performance obligations
on a relative stand-alone selling price basis using observable information, if
it is available, or by making estimates and assessments.
Step 5: Recognize revenue when (or as) the entity satisfies a performance
obligation over time or at a point in time.
IFRS 15 also establishes the accounting treatment of incremental costs
involving obtaining a contract and the costs directly related to fulfilling a
contract.
The Standard will apply retrospectively to annual periods beginning on or
after January 1, 2017. Early adoption is permitted. The Standard may be
applied to existing contracts beginning with the current period and
thereafter. No restatement of the comparative periods will be required as long
as comparative disclosures about the current period's revenues under existing
IFRS are included.
The Company is evaluating the possible impact of the adoption of IFRS 15 but
is presently unable to assess their effect, if any, on the financial
statements.
d. Changes in accounting policy:
In July 2014, the IFRIC issued a resolution regarding the recognition of
deferred taxes in respect of temporary differences relating to asset companies
when an entity expects the reversal of the temporary difference to be in the
form of sale of shares in the asset company rather than the sale of the asset
itself. Based on said IFRIC resolution and given the provisions of IAS 12, the
Company is required to recognize deferred taxes both with respect to inside
differences arising from the gap between the asset tax base and its carrying
amount and with respect to outside differences arising from the gap between
the shares' tax base and the investor's share of the net assets of the
investee in the consolidated financial statements.
Prior to the date of issuance of said resolution, according to the Company's
accounting policy, it recorded deferred taxes in respect of temporary
differences based on the tax implications and tax rate applicable to the sale
of the shares in the asset company and not to the sale of the asset itself.
The effect of the change in accounting policy in view of the above IFRIC
resolution on the Company's financial statements is as follows:
In the consolidated statements of financial position as of 31 December, 2013:
As previously reported Restatement Ascurrently presented
U.S. dollars in thousands
Non-current assets:
Investment properties 397,683 33,817 431,500
Investment properties under construction 52,814 6,286 59,100
Non-current liabilities:
Deferred taxes (699) (40,103) (40,802)
Total Equity 331,717 - 331,717
In the consolidated statements of financial position as of 30 June, 2013:
As previously reported Restatement Ascurrently presented
U.S. dollars in thousands
Non-current assets:
Investment properties 390,664 30,236 420,900
Investment properties under construction 50,523 6,177 56,700
Non-current liabilities:
Deferred taxes - (36,413) (36,413)
Total Equity 328,808 - 328,808
In the consolidated statements of income for the year ended 31 December,
2013:
As previously reported Restatement Ascurrently presented
U.S. dollars in thousands
Fair value adjustments of investment properties and investment properties under construction 45,085 10,127 55,212
Taxes on income (1,141) (10,127) (11,268)
In the consolidated statements of income for the six months ended 30 June,
2013:
As previously reported Restatement Ascurrently presented
U.S. dollars in thousands
Fair value adjustments of investment properties and investment properties under construction 35,942 6,262 42,204
Taxes on income 1,402 (6,262) (4,860)
NOTE 3:- BUSINESS COMBINATIONS
On December 23, 2013, the Company signed an agreement ("the agreement") for
the purchase of 49.5% of the shares of Inverton Enterprises Limited
("Inverton" and "the purchased shares", respectively) in which the Company
holds 50.5% and which owns Global LLC from the partner in Inverton ("the
seller").
According to the agreement, the Company paid the seller an advance of 3
million US dollars on December 24, 2013. The outstanding consideration of $
25.6 million was paid on March 4, 2014 and an additional amount of $ 2.5
million was paid in April 2014. The closing of the transaction was in March
2014, the joint venture agreement between the Company and the seller was
terminated and as a result, the Company obtained control in Inverton and
started to consolidate its financial statements.
As part of the transaction for obtaining control, the seller undertook to pay
its share of the liability to the municipality of Yaroslavl if this payment is
demanded in the next four years. As a result, an indemnification asset in a
total of $ 5,737 thousand was recognized.
The fair value of the identifiable assets and liabilities of Inverton on the
acquisition date:
Fair value
US dollars in thousands
Cash and cash equivalents 7,009
Other assets 2,119
Investment properties 109,800
118,928
Loan from bank 21,419
Other liabilities 1,926
Deferred taxes 16,127
Other non-current liabilities 12,700
Loans from related parties 5,948
58,120
Net identifiable assets 60,808
Assignment of loans from related parties to the Company 2,614
Profit from obtaining control (7,326)
Total acquisition cost 56,096
The fair value of investment property was determined by external appraiser. A
loan from bank was received close to the balance sheet date; therefore the
carrying amount is equal to its fair value. The balances of cash and cash
equivalents, trade receivables and other receivables, trade payables and other
payables are approximate their fair value.
The total cost of the business combination amounted to $ 56,096 thousand and
comprised a cash payment of $ 31,149 thousand (of which an amount of $ 3
million was paid in December 2013), less an indemnification asset receivable
from the seller in a total of $ 5,737 thousand and an amount of $ 30,684
thousand which reflects the fair value of the existing investment in the
acquire on the date of obtaining control.
Cost of acquisition:
Fair value
US dollars in thousands
Cash paid 31,149
Fair value of existing investment at acquisition date 30,684
Indemnification asset (5,737)
Total 56,096
Cash flow on the acquisition:
Cash and cash equivalents in Inverton at the acquisition date 7,009
Cash paid during the period (28,149)
Cash from obtaining control paid during the period (21,140)
Cash paid during 2013, as advance (3,000)
Net cash (24,140)
From the date of obtaining control, Inverton has contributed to the
consolidated net income and the consolidated revenues an amount of $4,019 and
$3,891 thousands, respectively. If the business combination had taken place at
the beginning of the year, the consolidated net income and the consolidated
revenues turnover would have amounted to $ 3,300 thousand and $ 50,187
thousand, respectively. The gain from obtaining control in Inverton amounted
to $ 702 thousand and included a gain from a bargain purchase of $ 7,326
thousand and a loss of $ 6,624 thousand from the release of a foreign currency
translation reserve accumulated on the investment on the date of obtaining
control.
NOTE 4:- FINANCIAL INSTRUMENTS
Set out below is a comparison of the carrying amounts and fair values of
financial instruments as of June 30, 2014:
Carrying amount Fair Value
U.S. dollars in thousands
Financial liabilities:
Debentures (series A) 4,518 4,676
Debentures (series B) 17,589 17,608
Debentures (series C) 58,194 61,495
Debentures (series D) 63,691 68,668
Debentures (series E) 112,782 122,217
256,774 274,664
NOTE 5:- SEGMENTS
Commercial Residential Total
Unaudited
Six months ended 30 June 2014: U.S. dollars in thousands
Segment revenues 28,547 17,752 46,299
Segment results 30,309 (2,145)
Unallocated expenses (4,109)
Finance costs, net (22,637)
Profit before taxes on income 1,418
Commercial Residential Total
U.S. dollars in thousands
Six months ended 30 June 2013 (unaudited):
Segment revenues 22,896 931 23,827
Segment results 57,776 (2,689) 55,087
Unallocated expenses (3,946)
Finance expenses, net (42,281)
Profit before taxes on income 8,860
Commercial Residential Total
Unaudited
Year ended 31 December 2013 U.S. dollars in thousands
Segment revenues 47,760 56,050 103,810
Segment results 88,689 2,925 91,614
Unallocated expenses (8,807)
Finance expenses, net (65,332)
Profit before taxes on income 17,474
NOTE 6: - MATERIAL EVENTS DURING THE PERIOD
a. Following the matters discussed in Note 25b to the Company's annual
financial statements, in relation to certain events which have occurred
between Russia and the Ukraine and may have a significant impact on the
Russian economy which cannot be foreseen at this stage. Since the beginning of
the year, various western countries have imposed sanctions on Russia, all of
which have impacted the Russian economy, thus making it unpredictable. As of
the date of the financial statements, Russia's credit risk rating was
decreased by Standard & Poor's which resulted in the raising of the interbank
interest rate by the Central Bank of Russia. From the beginning of the year,
the Russian Ruble weakened in relation to the US dollar by about 3%. After the
balance sheet date and until the publishing of the financial statements, the
Russian Ruble weakened in relation to the US dollar by additional 7%. The
continued devaluation of the Ruble might have a negative effect on the
Company's equity.
b. On March 30, 2014 the Company's sub-subsidiary Global 1 LLC entered
into loan agreement with the Bank of Moscow ("Bank"), pursuant to which the
bank will provide credit to the sub-subsidiary up to the amount of $ 49
million for the purpose of refinancing of Vernissage Mall project. The loan is
for the period of seven years, after which it will be possible to extend the
loan period by three years. The loan principal is to be paid in quarterly
installments, with the last payment representing 49% of the loan balance. The
loan bears fixed annual interest rate of 7.75%, which is to be payable on
quarterly basis.
The loan is secured by various mortgages, charges, pledge of lease area in
Vernissage Mall, pledges and other customary security interests for the
benefit of the bank. Additional terms of the loan include the securities and a
guarantee provided by the Company.
The Company undertook to maintain an LTV for the project of no more than 70%
and an occupancy rate of more than 90%, in order to comply with the debt
service coverage ratio, which shall be no less than 1.35.
As of June 30, 2014 the Company is in compliance with the above financial
covenants.
c. On March 14, 2014 the limited liability company Inomotor, a 61% owned
subsidiary of the Company, has entered into the $ 18 million loan refinancing
agreement with SberBank (the "Bank"). The loan bears a fixed annual interest
rate of 7.7%, payable quarterly. The Loan will be repaid within seven years
through regular quarterly payments and a final balloon payment of 50% at the
end of the term. The Company needs to comply with LTV of 60%.
The Loan is secured by various mortgages, charges, pledge of 10,000sqm office
development investment asset in Moscow, pledges and other customary security
interests for the benefit of the Bank and entered into by both Inomotor and
the Company.
As of June 30, 2014 the Company is in compliance with the above financial
covenant.
d. On May 7, 2014 the limited liability company Avtoprioritet, a 51%
owned subsidiary of the Company, has entered into the $ 26 million loan
refinancing agreement with Nordea Bank (the "Bank"). The loan bears a variable
annual interest rate of Libor + 6.85%, payable quarterly. The Loan will be
repaid within five years through regular quarterly payments and a final
balloon payment of 73% at the end of the term. The Company needs to comply
with LTV of 65% and DSCR of not less than 1.2.
The Loan is secured by various mortgages, charges, pledge of 11,000sqm office
development investment asset in Moscow, pledges and other customary security
interests for the benefit of the Bank and entered into by both Avtoprioritet
and the Company.
As of June 30, 2014 the Company is in compliance with the above financial
covenants.
e. On May 12, 2014, the Company fully repaid credit from banks, secured
through irrevocable guarantees of the controlling shareholders in an amount of
approximately $20 million.
f. Further to that set forth in the Company's financial statements as of
December 31, 2013, in connection with the cancellation of the Skyscraper
Project's long-term lease agreement, it should be noted that after the
Company's sub-subsidiary, which owns the rights to the project, took all
reasonable actions available to it, including legal actions to defend its
position regarding the cancellation of the long-term lease agreement, all such
claims which were filed with various levels of courts were denied.
The Company has fully deducted the asset from its financial statements as of
December 31, 2012.
NOTE 7: - SUBSEQUENT EVENTS
On July 7, 2014 Maalot S&P re-approved the rating of the Company as BBB+
Stable.
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