REG - Secure Property Dev - Final Results <Origin Href="QuoteRef">SPDI.L</Origin> - Part 5
28/06/2017 07:06
- Part 5: For the preceding part double click ID:nRSb3360Jd
(80.188)
Exchange difference on I/C loan to foreign holdings (Note 10b) (13.653.402)
Exchange difference on translation foreign holdings (Note 22) 8.064.848
Available for sale financial assets gains (Note 18) 485.529
Total Comprehensive Income (16.713.614)
Balance Sheet as at 31 December 2016
Warehouse Office Retail Residential Land plots Corporate Total
E E E E E E
Assets
Investment properties 42.400.000 6.860.000 7.500.000 4.375.000 34.519.207 - 95.654.207
Investment properties under development - - - - 5.027.986 - 5.027.986
Long-term receivables and prepayments 350.000 - - 309 - 872 351.181
Investments in associates - 5.217.310 - - - - 5.217.310
Inventory - - - 5.028.254 - - 5.028.254
Segment assets 42.750.000 12.077.310 7.500.000 9.403.563 39.547.193 872 111.278.938
Tangible and intangible assets 129.396
Prepayments and other current assets 2.778.361
Cash and cash equivalents 1.701.007
Total assets 115.887.702
Borrowings 23.308.195 991.176 4.518.976 3.063.513 16.219.462 374.132 48.475.454
Finance lease liabilities 7.550.279 3.782.735 - - 49.774 11.382.788
Deposits from tenants 451.640 - - 36.707 - 488.347
Redeemable preference shares - - - - - -
Segment liabilities 31.310.114 4.773.911 4.518.976 3.100.220 16.269.236 374.132 60.346.589
Trade and other payables - - - - - 7.489.293
Taxes payable and provisions - - - - - 1.889.184
Total liabilities 31.310.114 4.773.911 4.518.976 3.100.220 16.269.236 374.132 69.725.066
Balance Sheet as at 31 December 2015
Warehouse Office Retail Residential Land plots Total
E E E E E E
Assets
Investment properties 43.164.324 6.550.000 7.200.000 6.847.538 30.578.609 94.340.471
Investment properties under development - - - - 5.125.389 5.125.389
Long-term receivables and prepayments 350.000 - - 1.185 1.731 352.916
Goodwill - - - - - -
Investments in associates - 4.887.943 - - 1 4.887.944
Available-for-sale financial assets - 2.783.535 - - - 2.783.535
Inventory - - - 6.990.150 4.309.850 11.300.000
Segment assets 43.514.324 14.221.478 7.200.000 13.838.873 40.015.580 118.790.255
Tangible and intangible assets 164.617
Prepayments and other current assets 4.795.223
Cash and cash equivalents 895.422
Total assets 124.645.517
Borrowings 24.539.925 - 4.839.149 4.586.129 19.715.576 53.680.779
Finance lease liabilities 7.508.988 3.889.870 - - 66.864 11.465.722
Deposits from tenants 614.018 - - 37.444 104.992 756.454
Redeemable preference shares 349.325 - 6.081.211 - - 6.430.536
Segment liabilities 33.012.256 3.889.870 10.920.360 4.623.573 19.887.432 72.333.491
Trade and other payables - - - - - 7.716.924
Taxes payable and provisions - - - - - 1.546.450
Total liabilities 33.012.256 3.889.870 10.920.360 4.623.573 19.887.432 81.596.865
Geographical information
Income from Rental Contracts (Note 2) 31 Dec 2016 31 Dec 2015
E E
Ukraine 1.559.878 1.835.181
Romania 3.031.037 2.449.009
Greece 1.478.702 1.163.832
Bulgaria 1.323 938
Total 6.070.940 5.448.960
Loss from disposal of inventory (Note 6a)
E E
Bulgaria (368.907) (51.359)
Total (368.907) (51.359)
Loss from disposal of investment properties(Note 6b)
Romania (438.516) (266.964)
Total (438.516) (266.964)
31 Dec 2016 31 Dec 2015
E E
Carrying amount of assets (investment properties, associates, inventory and available for sale investments)
Ukraine 26.948.193 24.349.860
Romania 57.731.310 63.503.944
Greece 16.500.000 16.600.000
Bulgaria 9.748.254 14.083.535
Total 110.927.757 118.537.339
32. Related Party Transactions
The following transactions were carried out with related parties:
32.1 Income/ Expense
32.1.1 Income
31 Dec 2016 31 Dec 2015
E E
Interest income on loan to related parties 52.533 46.675
Interest Income from loan to associates 9.392 2.055
Total 61.925 48.730
Interest income on loan to related parties relates to interest income from Bluehouse V until October 2016 when the
investment was disposed and interest income from associates relates to interest income from GreenLake Development SRL.
32.1.2 Expenses
31 Dec 2016 31 Dec 2015
E E
Board of Directors 140.779 278.417
Management Remuneration 721.305 863.810
Interest expenses on Narrowpeak and Secure Management Limited loan 14.996 -
Back office expenses 24.560 8.874
Total 901.640 1.151.100
Board of Directors expense includes the remuneration of all Non-Executive Directors and committee members for H1-2016.
Following a BOD decision the Directors will receive no remuneration thereon.
Name Position 2016 Remuneration (E) 2015 Remuneration(E)
Paul Ensor Chairman 16.352 33.132
Barseghyan Vagharshak Non-Executive Director 16.352 16.921
Ian Domaille Non-Executive Director 22.280 45.141
Franz Horhager Non-Executive Director 16.352 33.132
Antonios Kaffas Non-Executive Director 18.805 38.101
Kalypso Maria Nomikou Non-Executive Director 16.352 16.921
Alvaro Portela Non-Executive Director 16.352 33.132
Harin Thaker Non-Executive Director 17.934 34.055
Antonios Achilleoudis Non-Executive Director until 22 July 2015 - 14.383
Robert Sinclair Non-Executive Director until 22 July 2015 - 13.499
Management remuneration includes the remuneration of the CEO, the CFO, the Group Commercial Director, the Group Investment
Director and that of the Country Managers of Ukraine and Romania pursuant to the decisions of the remuneration committee.
32.2 Payables to related parties (Note 25)
31 Dec 2016 31 Dec 2015
E E
Board of Directors & Committees 619.562 475.389
Grafton Properties 123.549 123.549
Secure Management Services Ltd 15.179 -
SECURE Management Ltd 1.062 1.062
Management Remuneration 386.798 143.200
Total 1.146.150 743.200
32.2.1 Board of Directors & Committees
The amount payable represents remuneration payable to Non-Executive Directors until the end of the reporting period. The
members of the Board of Directors pursuant to a recommendation by the remuneration committee and in order to facilitate the
Company's cash flow, will receive part of their payment in exchange for shares in the Company's capital.
32.2.2 Loan payable to Grafton Properties
During the Company restructuring in 2011 and 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 as the SC Secure Capital Ltd was named then, the total amount of USD 450.000. As of
the reporting date the liability towards Grafton Properties, representing the Lenders, was USD 150.000, which is contingent
on the Group raising USD 50m of capital in the markets.
32.2.3 Management Remuneration
Management Remuneration represents deferred amounts payable to the CEO and CFO of the Company, as well as the Group
Commercial Director, the Group Investment Director and the Country Managers for Romania and Ukraine.
32.3 Loans from SC Secure Capital Ltd to the Group's subsidiaries
SC Secure Capital Ltd, the finance subsidiary of the Group provided 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 -as of 31 Dec 2016 Principal as of 31 Dec 2016 Principal as of 31 Dec 2015
E E E
LLC "TERMINAL BROVARY" 30.724.931 30.724.931 26.798.804
LLC "AISI UKRAINE" 23.062.351 14.257 12.275
LLC "ALMAZ PRES UKRAINE" 8.236.554 162.633 140.021
Total 30.901.821 26.951.101
All loans from SC Secure Capital Ltd to the Group's subsidiaries are USD denominated and in 2016 they generated a foreign
exchange loss totaling E4.167.542 as a result of the devaluation of the Ukrainian Hryvnia during the reporting period. As
settlement of these loans is not likely to occur in the foreseeable future and in substance is part of the Group's net
investment in its foreign operations, the foreign exchange loss is recognised in other comprehensive income.
In that context SC Secure Capital Ltd has provided a loan to Limited Liability Company "Terminal Brovary" whose outstanding
capital at the reporting date was E30.724.931. This loan was transferred to SL SECURE Logistics Limited by the end of 2016.
This loan is expected to be transferred together with the sale of Terminal Brovary to the buyer (Note 36a).
A potential Ukrainian Hryvnia weakening/strengthening by 10% against the US dollar with all other variables held constant,
would result in an exchange difference on I/C loans to foreign holdings of (E3.090.182)/ E3.090.182 respectively, estimated
on balances held at 31 December 2016.
32.4 Loans to associates
31 Dec 2016 31 Dec 2015
E E
Loans to Greenlake Development SRL 264.110 254.718
Total 264.110 254.718
The loan was given to GreenLake Development SRL from Edetrio Holdings Limited. The agreement was signed on 17 February 2012
and bears interest 5%. The maturity date is 30 April 2018.
33. Contingent Liabilities
33.1 Tax Litigation
The Group performed during the reporting period a part of its operations in the Ukraine, 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 and in some cases, conflicting interpretation. 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.
The Group performed during the reporting period part of its operations also in Romania, Greece and Bulgaria. In respect of
Romanian, Bulgarian and Greek taxation systems all are subject to varying interpretation and to constant changes, which may
be retroactive. In certain circumstances the tax authorities can be arbitrary in certain cases.
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.
33.2 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.
33.3 Delia Lebada SRL debt towards Bank of Cyprus
Sec South East Continent Unique Real Estate (SECURED) Investment Ltd has provided in 2007 a corporate guarantee to the Bank
of Cyprus in respect to the loan provided by the latter to its subsidiary Delia Lebada SRL, the owner of the Pantelimon
Lake plot (Note 12). As the loan is in default, the bank has initiated an insolvency procedure. Depending on the final
outcome of the procedure (that may include an auctioning of the plot), the Bank may call the difference between the price
received from the auction and E6.594.396 which is the total liability (out of which E4.569.725 is the principal and the
remaining relates to interest, overdues and penalties). The Group is in discussions with the bank and its partner in the
project to find an amicable settlement to the case. Management believes that the case has been adequately being provided
for.
33.4 Other Litigation
The Group has a number of legal cases pending. Management does not believe that the result of these will have a substantial
overall effect on the Group's financial position. Consequently no such provision is included in the current financial
statements.
33.5 Other Contingent Liabilities
The Group had no other contingent liabilities as at 31 December 2016.
34. Commitments
The Group had no other commitments as at 31 December 2016.
35. Financial Risk Management
35.1 Capital Risk Management
The Group manages its capital to ensure adequate liquidity will being 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 24), trade and
other payables (Note 25) deposits from tenants (Note 26), financial leases (Note 28), taxes payable (Note 27) and equity
attributable to ordinary or preferred shareholders. The Group is not subject to any externally imposed capital
requirements, but certain of its cash balances are restricted (Note 20).
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.
35.2 Categories of Financial Instruments
Note 31 Dec 2016 31 Dec 2015
E E
Financial Assets
Cash at Bank 20 1.701.007 895.422
Long-term Receivables and prepayments 16 351.181 352.916
Prepayments and other receivables 19 2.778.361 4.795.223
Available for sale investments 18 - 2.783.535
Total 4.830.549 8.827.096
Financial Liabilities
Borrowings 24 48.475.454 53.680.779
Trade and other payables 25 7.489.293 7.716.924
Deposits from tenants 26 488.347 756.454
Finance lease liabilities 28 11.382.788 11.465.722
Taxes payable and provisions 27 1.889.184 1.546.450
Redeemable preference shares 21 - 6.430.536
Total 69.725.066 81.596.865
35.3 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 the end of the reporting period, the Group had not entered into any derivative contracts.
35.4 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 in the way the Group 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 adopts 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 December 31st, 2016, cash and cash equivalent financial assets amounted to
E1.701.007 (2015: E895.422) of which approx. E32.000 in UAH and E1.320.000 in RON (Note 20) while the remaining are mainly
denominated in either USD or E.
The Group is exposed to interest rate risk in relation to its borrowings amounting to E48.475.454 (31 December 2015:
E53.680.779) 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.
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.
As at 31 December 2016 the weighted average interest rate for all the interest bearing borrowing and financial leases of
the Group stands at 5,32% (31 December 2015: 5,00%). Considering the finalization of Terminal Brovary sale, the weighted
average interest rate for all the interest bearing borrowing and financial leases of the Group would be 4,67%.
The sensitivity analysis for LIBOR and EURIBOR changes applying to the interest calculation on the borrowings principal
outstanding as at 31 December 2016 is presented below:
Actual as at 31.12.2016 +100 bps +200 bps
Weighted average interest rate 5,32% 6,32% 7,32%
Influence on yearly finance costs - (567.770) (1.135.541)
The sensitivity analysis for LIBOR and EURIBOR changes applying to the interest calculation on the borrowings principal
outstanding as at 31 December 2015 is presented below:
Actual as at 31.12.2015 +100 bps +200 bps
Weighted average interest rate 5,00% 6,00% 7,00%
Influence on yearly finance costs - (648.116) (1.296.232)
35.5 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.
In respect of receivables from tenants these are kept to a minimum of 2 months and are monitored closely.
35.6 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.
31 December 2016 Carrying amount Total Contractual Cash Flows Less than one year From one to two years More than two years
E E E E E
Financial assets
Cash at Bank 1.701.007 1.701.007 1.701.007 - -
Prepayments and other receivables 2.778.361 2.778.361 2.778.361 - -
Long-term Receivables and prepayments 351.181 351.181 - - 351.181
Total Financial assets 4.830.549 4.830.549 4.479.368 - 351.181
Financial liabilities
Borrowings 48.475.454 48.475.454 31.580.299 1.597.840 15.297.315
Trade and other payables 7.489.293 7.489.293 7.038.170 - 451.123
Deposits from tenants 488.347 488.347 271.019 - 217.328
Finance lease liabilities 11.382.788 16.538.973 961.744 930.592 14.646.637
Taxes payable and provisions 1.889.184 1.889.184 1.889.184 - -
Total Financial liabilities 69.725.066 74.881.251 41.740.416 2.528.432 30.612.403
Total net liabilities 64.894.517 70.050.702 37.261.048 2.528.432 30.261.222
31 December 2015 Carrying amount Total Contractual Cash Flows Less than one year From one to two years More than two years
E E E E E
Financial assets
Cash at Bank 895.422 895.422 895.422 - -
Prepayments and other receivables 4.795.223 4.795.223 4.795.223 - -
Available for sale investments 2.783.535 2.783.535 2.783.535 - -
Long-term Receivables and prepayments 352.916 352.916 - - 352.916
Total Financial assets 8.827.096 8.827.096 8.474.180 - 352.916
Financial liabilities - -
Borrowings 53.680.779 56.037.869 24.198.982 14.649.577 17.189.310
Trade and other payables 7.716.924 7.716.924 3.044.036 - 4.672.888
Deposits from tenants 756.454 756.454 132.684 - 623.770
Finance lease liabilities 11.465.722 16.741.482 775.146 840.158 15.126.178
Redeemable preference shares 6.430.536 6.430.536 6.430.536 - -
Taxes payable and provisions 1.546.450 1.546.450 1.546.450 - -
Total Financial liabilities 81.596.865 89.229.715 36.127.834 15.489.735 37.612.146
Total net liabilities 72.769.769 80.402.619 27.653.654 15.489.735 37.259.230
35.7 Net Current Liabilities
The current liabilities amounting to E41.080.081 exceed current assets amounting to E9.507.622 by E31.572.459. This
difference is primarily a result of:
a) the EBRD Terminal Brovary debt, amounting to E11.580.922 which is presented as a current liability due to the
breach of certain covenants should be viewed as under transfer upon completion of the sale of Terminal Brovary (Note 36a).
b) the bank borrowings related to the residential portfolio E6.369.466 that are repayable by ongoing sales proceeds,
which according to the IFRS appear to be repayable within the next 12 months. Most of these loans have been or are under
the process to be extended for 2-5 years.
c) an amount of E6.594.396, registered as the total liability to the Bank of Cyprus, currently under final
settlement
d) an aggregate amount of E3.624.319, registered as the total liability of the Group towards Alpha Bank in respect to
the Boyana project which was under restructuring that has been signed in March 2017 (Note 36g)
e) an aggregate amount of E2.661.592 registered as the total liability of the Group towards the Bank of Piraeus in
respect to the Green Lake project which is under restructuring.
Based on the above, current liabilities are higher than current assets by E741.764.
36. Events after the end of the reporting period
a. Sale of Terminal Brovary
In late January 2017 the Group completed the sale transaction of the Terminal Brovary Logistics Park to Temania Enterprises
Ltd (company related to Rozetka Group). The transaction was concluded at a Gross Asset Value of over USD 16 (or ~E15)
million (before the deduction of the outstanding EBRD loan, which was transferred to the buyer, while the SPDI guarantee to
EBRD loan was cancelled. The transaction generated a profit for SPDI of ~E2,7 million, already included in the 2016
financial statements by way of presenting the property at a fair value equal to the transaction value, as well as a cash
inflow of more than ~E3million. As part of the transaction the Group also sold SL SECURE Logisitcs Ltd, thus transferring
its loan towards Terminal Brovary to the buyer (Note 32.3).
b. Amendment of the Sale & Leaseback of Romanian Logistics Park
In late February 2017 the Group agreed to an amended Sale and Leaseback agreement ("SLB") with the Bank of Piraeus Romania
("BoP") regarding the Group's Innovations Logistics Park in Bucharest. The agreement which followed SPDI's agreement with
the previous anchor tenant, Nestle Romania, of the Innovations Logistics Park for an early termination of their tenancy
agreement for an agreed fee of E1,39 million payable to SPDI, stipulated the allocation of the termination fee.
c. Appointment of Joint Broker
In March 2017 the Group appointed Beaufort Securities Ltd as the Group's Joint Broker.
d. Directors Buying shares
The directors proceeded in March 2017 with the acquisition of 438.939 ordinary shares of the Company.
e. New lease Agreement for Innovations Logistics Park
In the middle of April 2017 the Group signed a lease agreement with Aquila SRL a large Romanian logistics operator, for
5.740 sqm of ambient space in the Group's Innovations Logistics Park in Bucharest, Romania. Under the terms of the
Agreement, the annual rent payable by Aquila to the Group is ~E300.000.
f. Issuance of shares
In the middle of May 2017 the Company announced the issue of new ordinary shares to the Non-Executive Directors of the
Company who were in office in 2015 in lieu of fees accrued in 2015. The new shares were issued at GBP 0,35 per share, which
represented a 100% premium to the closing share price on 12 May 2017. The Company has also issued a number of new ordinary
shares to an adviser in lieu of fees for services offered in 2017. As a result a total of 626.133 new ordinary shares have
been issued, of which Non-Executive Directors received 519.474 shares and third party advisers and former directors
received 106.659 shares.
g. Debt restructuring
SecRom Real Estate Srl (Doamna Ghica Project) has signed a restructuring of its loan (E809.919) with Alpha Bank Romania,
extending its maturity to 2020. All other terms remain substantially the same.
Boyana Residence ood has signed a restructuring of its loan (E2.680.492) with Alpha Bank SA, extending its maturity to
2019. All other terms remain substantially the same.
Sertland Properties Limited (Boyana land) has signed a restructuring of its loan (E693.514) with Alpha Bank SA extending
its maturity to 2019. All other terms remain substantially the same.
This information is provided by RNS
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