REG - Secure Property Dev - Half-Year Report <Origin Href="QuoteRef">SPDI.L</Origin> - Part 5
28/09/2017 15:08
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(221.990)
Exchange difference on I/C loan to foreign holdings -
Exchange difference on translation foreign holdings 1.963.693
Total Comprehensive Income 200.658
Profit and Loss for the period ended 30 June 2016
Warehouse Office Retail Residential Land Plots Total
E E E E E E
Segment
Rental income 1.692.365 287.789 304.356 60.528 - 2.345.038
Service charges and utilities income 105.753 28.938 6.201 12.019 - 152.911
Sale of electricity 164.608 - - - - 164.608
Sales income - - - 2.238.541 - 2.238.541
Cost of sales - - - (2.986.496) - (2.986.496)
Valuation gains/(losses) from investment property 349.332 - - - 287.104 636.436
Share of profits/(losses) from associates - 106.229 - - 16.890 123.119
Investment properties operating expenses (214.915) (26.489) (40.605) (81.716) (26.457) (390.182)
Segment EBITA 2.097.143 396.467 269.952 (757.124) 277.537 2.283.975
Administration expenses (1.178.173)
Other (expenses)/income, net (17.826)
Finance income 363.136
Interest expenses (1.590.032)
Other finance costs (169.118)
Foreign exchange losses, net (98.818)
Income tax expense (45.507)
Exchange difference on I/C loan to foreign holdings (1.485.262)
Exchange difference on translation foreign holdings 526.525
Available for sale financial assets gains 154.362
Total Comprehensive Income (1.256.738)
Balance Sheet as at 30 June 2017
Warehouse Office Retail Residential Land plots Corporate Total
E E E E E E E
Assets
Investment properties 27.500.000 6.860.000 7.500.000 2.090.166 37.402.474 81.352.640
Investment property under development 4.644.234 4.644.234
Long-term receivables 295.636 1.178 - 296.814
Investments in associates 5.345.226 5.345.226
Inventories 4.812.550 4.812.550
Segment assets 27.750.636 12.205.226 7.500.000 6.903.894 42.046.708 - 96.451.464
Tangible and intangible assets 89.195
Prepayments and other current assets 3.908.851
Cash and cash equivalents 1.852.546
Total assets 102.302.056
Interest bearing borrowings 11.481.220 882.599 4.415.937 4.038.719 16.064.817 486.153 37.369.445
Finance lease liabilities 7.232.476 3.723.584 52.600 11.008.660
Deposits from tenants 180.620 34.906 215.526
Redeemable preference shares - - - - - - -
Segment liabilities 18.894.316 4.606.183 4.415.937 4.073.625 16.117.417 486.153 48.593.631
Trade and other payables 5.326.360
Taxes payables 1.687.261
Total liabilities 55.607.252
Balance Sheet as at 31 December 2016
Warehouse Office Retail Residential Land plots Corporate Total
E 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
Geographical information
Income (Note 7) 30 June 2017 30 June 2016
E E
Ukraine 1.083.028 572.173
Romania 1.060.503 1.347.906
Greece 761.009 740.921
Bulgaria 8.969 1.556
Total 2.913.509 2.662.556
Loss from disposal of inventory (Note 11a)
E E
Bulgaria (43.874) (291.856)
Total (43.874) (291.856)
Loss from disposal of investment properties(Note 11b)
Romania 4.631 (456.098)
Total 4.631 (456.098)
30 June 2017 31 Dec 2016
E E
Carrying amount of assets (investment properties, associates, inventory and available for sale investments)
Ukraine 11.128.636 26.948.193
Romania 58.993.464 57.731.310
Greece 16.500.000 16.500.000
Bulgaria 9.532.550 9.748.254
Total 96.154.650 110.927.757
36. Related Party Transactions
The following transactions were carried out with related parties:
36.1 Income/ Expense
36.1.1 Income
30 June 2017 30 June 2016
E E
Interest Income from loan to associates 4.645 4.670
Interest Income from loan to Available for sale investment - 33.313
Total 4.645 37.983
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.
36.1.2 Expenses
30 June 2017 30 June 2016
E E
Management Remuneration 319.621 360.317
Interest expenses- Related Party loans 7.022 -
Total 326.643 360.317
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.
36.2 Payables to related parties
30 June 2017 31 Dec 2016
E E
Board of Directors & Committees 228.185 619.562
Grafton Properties 123.549 123.549
Secure Management Services Ltd 25.393 15.179
SECURE Management Ltd 130.000 1.062
Management Remuneration 368.898 386.798
Total 876.025 1.146.150
36.2.1 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. The Company
proceeded during H1 2017 with settling part of the directors remuneration related to 2014 in the amount of GBP 90.900 with
a remaining liability to be settled for 2014 in the amount of GBP 47.300 while for 2015 remuneration (GBP 201.647) the
directors were issued within H1 2017 576.133 new ordinary shares.
36.2.2 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.
36.2.3 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.
36.3 Loans from SC Secure Capital Ltd to the Company's subsidiaries
SC Secure Capital Ltd, the finance subsidiary of the Company 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 properties, as well as
various operational costs.
Borrower Limit Principal as of 30 Jun 2017 Principal as of 31 Dec 2016
E E E
LLC "TERMINAL BROVARY" - - 30.724.931
LLC "AISI UKRAINE" 23.062.351 13.058 14.257
LLC "ALMAZ PRES UKRAINE" 8.236.554 148.953 162.633
LLC "AISI ILVO" 148.966 32.770
Total 194.781 30.901.821
In that context SC Secure Capital Ltd has provided a loan to Limited Liability Company "Terminal Brovary. This loan was
transferred to SL Secure Logistics Limited by the end of 2016. This loan was transferred together with the sale of Terminal
Brovary to the buyer (Note 17).
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 (E19.248)/ E19.248 respectively, estimated on
balances held at 30 June 2017.
36.4 Loans to associates
30 June 2017 31 Dec 2016
E E
Loans to Green Lake Development SRL 268.755 264.110
Total 268.755 264.110
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.
36.5 Loans from related parties
30 June 2017 31 Dec 2016
E E
Loan from Narrowpeak Consultants 59.134 59.134
Loan from Secure Management Limited 30.000 300.000
Loan from Directors 375.000 -
Total 464.134 359.134
Loans from Directors reflects loans provided from 3 Directors as bridge financing for future property acquisitions. The
loans bear interest 8% annually and are repayable on 30 April 2018.
37. Contingent Liabilities
37.1 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 authorized 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 condensed consolidated interim 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.
37.2 Construction related litigation
There are no material claims from contractors due to the postponement of construction/development projects or delayed
delivery other than those disclosed in the financial statements.
37.3 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 17). As the loan is in default, the bank has initiated an insolvency procedure. In July 2017 the Company
concluded its discussions with the bank and settled all debts and guarantees (Note 40.1). The final cost has been fully
provided for as per management earlier estimates.
37.4 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 on the Group's financial position. Consequently no such provision is included in the current
financial statements.
37.5 Other Contingent Liabilities
The Group had no other contingent liabilities as at 30 June 2017.
38. Commitments
The Group had no other commitments as at 30 June 2017.
39. Financial Risk Management
39.1 Capital Risk Management
The capital structure of the Group consists of borrowings (Note 28), trade and other payables (Note 29) deposits from
tenants (Note 30), financial leases (Note 32), taxes payable (Note 31) and equity attributable to ordinary or preferred
shareholders. 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 property 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.
39.2 Categories of Financial Instruments
Note 30 June 2017 31 Dec 2016
E E
Financial Assets
Cash at Bank 24 1.852.546 1.701.007
Long-term Receivables and prepayments 20 296.814 351.181
Prepayments and other receivables 23 3.908.851 2.778.361
Total 6.058.211 4.830.549
Financial Liabilities
Borrowings 28 37.369.445 48.475.454
Trade and other payables 29 5.326.360 7.489.293
Deposits from tenants 30 215.526 488.347
Finance lease liabilities 32 11.008.658 11.382.788
Taxes payable and provisions 31 1.687.264 1.889.184
Total 55.607.253 69.725.066
39.3 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.
39.4 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 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 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 June 30th, 2016, cash and cash equivalent financial assets amounted to
E763.907 (31 December 2015: E 895.422) of which approx. E2.000 in UAH, E260.000 in RON and E150.000 in BGN (Note 21) 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 E37.369.455 (31December 2016:
E48.475.454) 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.
Following the sale of Terminal Brovary (Note 17) the debt exposure of the Group has been reduced reduced by E11m.
The Group's exposures to financial risk are discussed also in Note 5.
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 30 June 2017 the average interest rate for all the interest bearing borrowing and financial leases of the Group
stands at 4,70% (31 December 2016: 5,32%).
The sensitivity analysis for LIBOR and EURIBOR changes applying to the interest calculation on the borrowings principal
outstanding as at 30 June 2017 is presented below:
as at 30.06.2017 +100 bps +200 bps
Weighted average interest rate 4,70% 5,70% 6,70%
Influence on yearly finance costs (483.255) (966.510)
The sensitivity analysis for LIBOR and EURIBOR changes applying to the interest calculation on the borrowings principal
outstanding as at 31December 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 Group's exposures to financial risk are discussed also in Note 5.
39.5 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.
39.6 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 Treasury function is also in discussions with the various lending institutions which have provided debt to
several of the Company's property acquisitions to free as much cash us possible. Pursuant to the financial crisis of the
last few years, lending institutions have tightened their control over property cash flows in order to secure their debt
holdings and as a result they allow only minor percentage of the properties' cash inflows to the Company. 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 2017 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 and cash equivalents 1.852.546 1.852.546 1.852.546
Prepayments and other receivables 3.908.851 3.908.851 3.908.851
Long Term Receivables and prepayments 296.814 296.814 296.814
Total Financial assets 6.058.211 6.058.211 6.058.211
Financial liabilities
Borrowings 37.369.445 40.205.957 17.376.113 6.604.526 16.225.318
Trade and other payables 5.326.360 5.326.360 4.888.555 437.805
Deposits from tenants 215.526 215.526 215.526
Finance lease liabilities 11.008.658 14.677.038 893.003 896.804 12.887.231
Taxes payable 945.163 945.163 945.163
Total Financial liabilities 54.865.154 61.370.043 24.102.834 7.501.330 29.765.880
Total net liabilities (48.806.943) (55.311.833) (18.044.623) (7.501.330) (29.765.880)
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)
39.7 Net Current Liabilities
The current liabilities amounting to E22.945.163 exceed current assets amounting to E10.573.947 by E12.371.216. This
difference is primarily a result of the bank borrowings related to:
a) the residential portfolio E5.863.425 that are repayable by ongoing sales proceeds, whenever these occur but according to
the IFRS appear to be repayable within the next 12 months,
b) an amount of E6.594.396, registered as the total liability to the Bank of Cyprus (Delia Lebada Invest Srl loan).
Considering the above current assets are higher than current liabilities by E86.605.
40. Events after the end of the reporting period
40.1 Profitable Disposal of Delia Lebada Land in Bucharest
On 26th July the Company announced the disposal of Delia Lebada ("the Disposal"), a ~40,000 sqm (4 hectare) plot of land in
east Bucharest on the shore of Pantelimon Lake in which SPDI owned a 65%. The attributable sale proceeds are approximately
E2,5 million and simultaneously, the associated property loan (principal and interest) totaling more than E6,5 million with
the Bank of Cyprus was settled through a liquidation process, and the associated corporate guarantee was released. The loan
was repaid at a rate of 45 cents / Euro (totalling ~E3 million) using a combination of the Land Disposal proceeds (E2,5
million) and an additional payment of approximately E550.000. Following completion of the process the Company will retain a
5% interest in the Special-Purpose Vehicle ("SPV") which will hold the land asset post disposal debt free.
40.2 Conditional Sale of Kiyanovski Land in Kiev, Ukraine
On 4th July the Company announced the conditional sale of its Kiyanovski land asset ('Kiyanovski') in central Kiev, in
Ukraine to Riverside Developments ('Riverside'), a large Ukrainian developer, for a price to be finally determined at
closing but will be in excess of US$3 million (which reflects approximately the valuation at the year-end accounts). As
part of a pre-Sale and Purchase Agreement ('the Agreement') signed by both parties, Riverside paid SPDI a total down
payment of US$150.000, out of which an amount of US$100.000 is non-refundable deposit, in exchange for being granted a
period of four months during which it will seek to obtain a construction permit to develop Kiyanovski. Subject to the
issue of the permit and other relevant authorisations, both parties will sign a Sale and Purchase Agreement covering the
sale of Kiyanovski.
40.3 Finance director appointment
The board wants to thank the CFO, Bitros Constantinos, for his long standing services to the Company as these would be the
last financial statements he will be preparing. Constantinos Bitros will continue offering his services to the Company in
the asset management context. From now on the financial statements will be prepared by Mr. Theofanis Antoniou, Finance
Director, who has acted as the finance director of several companies including two property companies active in the South
East Europe region (with emphasis in Greece and Bulgaria) as well as of the parent company of an AIM listed company active
in the IT sector.
This information is provided by RNS
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