ANNUAL REPORT
2014
Table of Contents
SECTION A- Annual Report
1.
Letter to the Shareholders
2. Management Report
2.1. Corporate Overview & Financial Performance
2.2. Property Holdings
2.3. Financial and Risk Management
2.4. 2015 and beyond
3. Regional Economic Developments
4. Real Estate Market Developments
4.1. Ukraine
4.2. Romania
4.3. Bulgaria
4.4. Greece
5. Property Assets
5.1. Aisi Brovary – Terminal Brovary Logistic Park , Ukraine
5.2. Innovations Logistics Park, Romania
5.3. GED Warehouse and Photovoltaic Park, Greece
5.4. EOS Business Park – Danone headquarters, Romania
5.5. Residential portfolio
a) Romfelt Plaza (Doamna Ghica), Bucharest, Romania
b) Linda Residence, Bucharest, Romania
c) Monaco Towers, Bucharest, Romania
d) Blooming House, Bucharest, Romania
5.6. Land Bank
a) Aisi Bela – Bela Logistic Center
b) Kiyanovskiy Lane – Land for Residential Complex
c) Tsymlyanskiy Lane – Land for Residential Complex
d) Balabino-Land for Retail/Entertainment Development
SECTION B- Financial Statements
4
6
6
7
11
11
13
16
16
16
17
17
19
19
19
20
20
21
21
21
21
22
22
22
22
23
23
ANNUAL REPORT 2014|2
SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC
Key Figures
31 Dec 2013
31 Dec 2014
Change
Total Assets (€million):
Number of Assets:
Bank Debt(€million):
39
5
11
61
8
30
Operational Gearing
28%
48%
Rental Income (€million):
2.7
3.6
57%
60%
172%
71%
33%
EBITDA*(€million):
Net Equity**(€million):
0.2
0.8
300%
37.6
32.5
-13%
Issued Shares:
28.171.833
33.884.054
20%
NAV per share(£):
1,13
0,75
-
* Before revaluation of properties.
** Attributable to the shareholders.
This report may contain forward-looking statements about the Company. Such statements are predictive in nature and depend upon or refer to future
events or conditions and may include such words as ‘‘expects’’, ‘‘plans’’, ‘‘anticipates’’, ‘‘believes’’, ‘‘estimates’’ or other similar expressions. In addition,
any statement regarding future performances, strategies, prospects, actions or plans is also a forward-looking statement. Forward-looking statements
are subject to known and unknown risks and uncertainties and other factors that may cause actual results, events, activities and achievements to differ
materially from those expressed or implied by such statements. Such factors include general economic, political and market conditions, interest and
foreign exchange rates, regulatory or judicial proceedings, technological change and catastrophic events. You should consider these and other factors
carefully before making any investment decisions and before relying on forward-looking statements.
ANNUAL REPORT 2014|3
1. Letter to the Shareholders
Dear Shareholders,
26 May 2015
2014 was the year that the Company’s strategy of diversifying regionally and acquiring high yielding income
producing assets was kicked off in earnest. SPDI started the year, as it had always done in the past, as a
wholly Ukraine based company, and by year-end it owned and managed more properties in other countries
in terms of Asset Value.
The directors of SPDI embarked on its growth and diversification strategy with a view to identifying ways to
acquire undervalued income producing assets and extending its reach beyond its traditional one country.
The Company then moved forward to identify and negotiate to acquire a number of portfolios of assets, all
class A with substantial income generation capacity and capital appreciation potential, while at the same
time it moved to identify a number of investors that would want to contribute assets or capital. By year end
the Company had identified key participants on both efforts, having signed preliminary agreements. The
stage was set to take a big step forward.
During the year, SPDI acquired four income producing assets. The logistics park that Nestle is using in
Bucharest, Romania , the headquarters of Danone also in Bucharest, Romania, a residential portfolio of let
apartments in the same city and the logistics park leased to Kuehne+Nagel in Athens, Greece (transaction
completed in 2015). These new assets, generate annually ~€3,6 million of Net Operating Income (‘NOI’),
increasing the Company’s annual running NOI by ~230%. To underpin its asset management capability in
the new regions it invested in, the Company hired a small number of seasoned executives in Bucharest that
can help its effort to grow further in Romania. By year end, the Company is well poised to grow as it
attracts more investor shareholders who share the Company’s vision of creating the leading institutional
property company in the region.
Set against the macroeconomic environment and geopolitical events that unfolded during the year, our
growth and diversification strategy has been vindicated. For much of the year, Eastern Europe was
growing fast and hopes were high that it would contribute to a regeneration of European GDP growth that
was in the making. By year-end though, the mood and the facts were not as positive. The crisis in Ukraine
continued unabated, despite the election of the new president in May and the new government in October,
with more intensive fighting in the East of the country and the Hryvnia spiralling down as the country’s
economy was moving closer to collapse. Greece, which had been expected to be able to regain market
access and had seen its government bond rates dropping substantially close to those of other EU nations by
mid year, experienced a marked setback with snap elections being called for January 2015, which created
political and economic instability. Romania, among the countries we gained exposure to during the year,
experienced solid economic growth through the year, had the fastest GDP growth rate of any EU country in
Q3 2014 and showed signs of even faster growth by year end. At the same time, Europe as a whole was
inching to recession with the ECB deciding to commence a QE package of its own, mirroring what the Fed
did in the US three years earlier.
In addition to growing and rebalancing our portfolio of assets, the year under review also saw considerable
progress made with regards to strengthening our balance sheet. In December 2014, twenty months after
having finalised negotiations with the European Bank for Reconstruction and Development (“EBRD”) on
rescheduling the amortisation plan of the Brovary construction loan and twelve months after having
received the written agreement of the ‘B’ Lender on the restructuring, we finally managed to sign all legal
documents and eliminate the pending legacy balance sheet risk factor by formalising the loan agreement.
ANNUAL REPORT 2014|4
The 2014 accounts show a much better and more different operational picture than any prior ones. If we
disregard the asset revaluation and FX losses as a result of the Ukrainian Crisis, the operating results are
positive and promising. It is the first year in the history of the Company that our revenues topped €3,6
million, while our EBITDA surpassed €0,8 million, more than quadrupling in comparison to 2013. Finally the
Company has profits after tax of ~€1 million indicating an even better year to come.
Having successfully put the Company on a solid foundation, both financially and operationally, against the
backdrop of the global economic and financial sector issues between 2010 – 2013 (including the Cypriot
economic crisis in 2013 and the Ukrainian crisis in 2014), we are highly confident that 2014 was a
turnaround year for SPDI. With property assets and people on the ground now in the capitals of the three
largest economies/countries in South East Europe, SPDI is well positioned to take the necessary steps
forward that the shareholders have mandated us to perform. Even though some of these countries are
going through considerable change, their property markets are in need of international investors and
capital to grow. We plan to play our part in assisting them to do just that. With the support of our
shareholders and partners that share our vision, we plan to exert every effort in achieving our common
goals.
Best regards,
Lambros G. Anagnostopoulos
Chief Executive Officer
ANNUAL REPORT 2014|5
2. Management Report
2.1. Corporate Overview & Financial Performance
In 2014 the Company’s management focused on diversifying its asset base into more
than one regional country. The Company acquired four assets:
Summary
The Innovations Logistics Park located on Bucharest’s ring road in Romania, a
15.862 sqm gross leasable area logistics center that is primarily let to Nestle
Romania (72% of its income).
The Danone headquarters office building (EOS) in Bucharest, Romania. The
3.386 sqm gross leasable office is built next to Danone’s production and
warehousing facility close to Bucharest ring road and is fully let to Danone.
A portfolio of let apartments as part of four separate residential developments
in Bucharest. The 122 apartments are 60% let and are generating income both
from lettings as well as from sales now that the market in Bucharest is picking
up.
The GED Logistics park in Athens, Greece, mostly let to Kuehne + Nagel (70%
of its warehouse income). The 17.756 sqm logistics center also has a 1MW
photovoltaic installation on its roof generating and selling electricity to the grid.
This transaction was completed in early 2015.
At the same time, management also spent time and resources in identifying various
acquisition opportunities so as to create a strong pipeline of suitable targets. We
entered negotiations for a number of these during the period, moved into thorough
due diligence on some of them and, by the year end, were able to bring four to a
position where they are ready for closing subject equity capital availability.
On that front, the Company scanned the equity markets and identified a small number
of potential cornerstone investors that would be interested in supporting the growth
plan of the Company.
Finally, the Company continued focusing on efficient operations and addressing the
Ukrainian economic deterioration that caused substantial Hryvnia devaluation. All the
tenants of our Brovary logistics terminal have US$ based lease agreement but
nonetheless they are operating in a market that undergoes serious issues and their
bottom line is hit by the local currency devaluation. As such they have requested and
we plan to extend to them some rental relief as they go through this very tough period.
In parallel, the Company maintained its overall lean and strict operations management,
keeping the annual operating and administrative costs to ~€2,3 million even though a
number of new assets have been added to the portfolio while increasing the Company’s
net annual rental income by 33% to €3,6 million.
The political instability in Ukraine continues and until this is resolved it is hard to predict
the final impact on the country’s economy.
As Terminal Brovary is in Kiev and all its tenancy agreements are in US$, there is
minimal imminent risk. On the other hand, in view of the serious bottom line loss its
tenants are being faced with, we plan to offer lease incentives to maintain the low or
zero vacancy.
During 2014 and for a short period there were capital controls imposed in the country,
at which time it was difficult to export the rental income we had received. We used
such period to re-pay a higher amount of the EBRD loan capital, ensuring that the
Company does not suffer from such controls that had been stopped by year-end.
Ukrainian
Political and
Financial
Developments
ANNUAL REPORT 2014|6
In an effort to further streamline its operations, the Company has progressed with
finalizing the merger of many of its Ukrainian non-operational, idle entities, thus
lowering administrative costs. Further optimization is to be expected by further
consolidating operating companies and eliminating intercompany loans so as to
decrease the Ukrainian operation’s dependency on equity support.
Optimizing
Corporate
Structure
Furthermore, by introducing the new leveraged acquisitions the Company moves
towards meeting its target leveraged capital structure of 50-55% LTV.
The Audit Committee has met on a few occasions during the year in order to effectively
monitor potential conflicts of interest of the directors and senior managers as well as to
discuss with the auditors the affairs of the Company. The Audit Committee in its role of
overseeing the financial reporting and internal controls of the Company ensures proper
corporate governance in this respect.
Audit
Committee
The Remuneration Committee pursuant to its responsibility to determine the policy for
the remuneration of the Directors and Executive Management of the Company has met
a few times throughout the year to review the practices of the Company and engaged
with management to ensure that all issues under its supervision are resolved. The
Remuneration Committee has proposed to the BoD the application of the Employee
Stock Option plan, following the decision of the December 2013 AGM. Such share
options will be distributed to the employees for the first time in 2015.
Remuneration
Committee
The Board is ultimately responsible for the Group’s financial reporting, internal control
and risk management systems and ensures that the Finance Department prepares
detailed budgets and cash flow projections, which are approved annually and updated
regularly throughout the year. Ongoing financial control is a responsibility of the
management which reports to the BoD in order to maintain a tight liquidity control.
Internal Audit
and Control
2014 showed the turnaround of the Company as achieved through the intensive
2012-2013 restructuring. Most notably, the Company more than quadrupled its
EBITDA to €0,8m (2013:€0,2m) and passed to net operational profitability of ~€1m
(2013:-€0,1m). Income from Operations grew by 33%.
Financial
performance
2.2. Property Holdings
The Company's portfolio, consists of commercial income producing and residential
properties in Romania, Greece and Ukraine as well as four development projects at
different development stages in Ukraine.
Property
Assets
ANNUAL REPORT 2014|7
Commercial-Industrial
Terminal Brovary Logistic Park consists of a 49.180 sq.m. Class A warehouse and
associated office space, situated on the junction of the main Kiev – Moscow highway
and the Borispil road which was fully completed in 2012. The facility has been 85%
leased (warehouse space was 94% leased) at the end of the reporting period.
Innovations Terminal Logistic Park consists of a 16.570 sqm gross leasable Class A
warehouse and associated office space, situated on the west side of Bucharest’s
ringroad. Its construction, 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 was 100% leased at
the end of the reporting period, 61% to Nestle and 39% to other local companies.
GED Logistic Park consists of a 17.756 sq.m. gross leasable area industrial and
associated office space, situated on the west side of Athens, close to the Port of
Piraeus. The facility has been in operation since 2010 and as at the end of the reporting
period was 100% leased to Kuehne + Nagel (70%) and GE Dimitriou SA (30%). The
park also has a photovoltaic alternative energy production facility installed on its roof.
The said asset is to be consolidated within the Company’s accounts in 2015 as the
closing of the transaction was effected in March 2015.
EOS Business Park which serves Danone Head Quarters in Romania, is a 3.386 sqm
GLA Class A office building, situated in the North Eastern Part of Bucharest. The
building is fully let to Danone.
Land Bank
Bela Logistic Centre 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 due to the global economic crisis.
Kiyanovskiy Lane consists of four adjacent plots of land, totaling 0.55 ha earmarked
for a residential development, which are well located, overlooking the scenic Dnipro
River, St. Michael’s Spires and historic Podil neighborhood. During 2014, management
held discussions with a number of interested parties with regard to a possible
development of this asset should the market developments allow for such action.
Tsymlyanskiy Lane is a 0.36 ha plot of land located in the historic Podil District of
Kiev earmarked for the development of a residential complex.
Balabino project is a 26.38 ha plot of land situated on the south entrance of
Zaporozhye, a city in the south of Ukraine with a population of 800.000 people.
Balabino is zoned for retail and entertainment development.
Residential portfolio
This consists of a portfolio of 122 apartments units, situated on four distinct locations
in the city of Bucharest. By year end 60% of the apartments units were let while during
the year 7 units were sold.
In 2014, the Company continued with RICS accredited CBRE Ukraine as its valuer for
the Ukrainian Assets and also appointed RICS accredited Property Partners as the
valuer for the Romanian assets. The valuations have been carried out by the appraisers
on the basis of Market Value in accordance with the appropriate sections of the current
Practice Statements contained within the Royal Institution of Chartered Surveyors
(“RICS”) Valuation – Professional Standards (2014) (the “Red Book”) and is also
compliant with the International Valuation Standards (IVS).
At the year-end, the Company’s property assets were valued at €61 million, an increase
of 57% from the December 2013 valuation due to acquisitions effected throughout
2014. It should be noted that the fair value of the Ukrainian assets has been reduced
by ~€8 million (representing a reduction of ~20% in EUR denominated values or
~30% in USD denominated values) due to the continuing crisis.
Property Asset
Valuations
ANNUAL REPORT 2014|8
During the year the Company’s asset portfolio became more diversified in terms of
geography as well as asset class. At the end of the reporting period, 54% of the
company’s portfolio is outside Ukraine while with the addition of GED Logistics in March
2015, Ukraine falls to 43% and by the reporting date only 26% of the Gross Asset
Value is attributable to the said country. The same applies to the income generation
ability of the Company which at the reporting date depends on Ukraine by 28%.
Excluding the revaluation losses that are attributable to the reduction of asset prices in
Ukraine as well as the foreign exchange losses either associated with the EBRD loan to
Terminal Brovary, mostly hedged due to the USD denominated income, and the
intercompany loans that have been affected on paper by the devaluation of the UAH
from 8 to the USD, to 33 to the USD by the end of the reporting period, the table below
presents the comparable for the operating performance in the last 3 years:
P&L
ANNUAL REPORT 2014|9
2014notes2013notes2012notesEUR Operational income 3.591.903 1 2.717.166 1.650.897 Administration expenses (2.743.723) 2 (2.475.720) (2.523.734) Investment property operating expenses (660.263) (543.217) (431.414) Other (expenses)/ income, net (136.058) 495.774 3 407.933 3 Gain realized on acquisition of subsidiary 766.221 4 - - Operating profit 818.080 194.003 (896.318) Finance costs, net (1.414.400) (1.034.456) (1.677.544) Profit/(loss) before tax (596.320) (840.453) (2.573.862) Income tax expense (220.476) (125.722) (65.259) (Loss) / Profit for the year (816.796) (966.175) (2.639.121) Valuation gains/(losses) from investment property 9.297.525 635.067 2.687.028 Foreign exchange losses, net (7.512.640) 201.952 - (Loss) / Profit for the year 968.089 (129.156) 47.907 Notes1. includes 6months income from Innovations and 4months from EOS Business Park2. includes one off legal expences3. includes legacy liabilities write off4. refers to acquisition of asset below market value
The Net Equity attributable to the shareholders as at 31 December 2014 stood at €32
million representing a 13% decrease over the 2013 Net Asset Value due to revaluation
of the Ukrainian assets.
Net Equity
The table below presents the contribution of each of the holdings of the Company at
the end of the reporting period to its Net Asset Value.
Asset
Contribution
to Net Asset
Value
The NAV per share as at 31 December 2014 stood at GBP 0.75; lower than a year
before, due to the new shares issued as a result of a capital increase and the valuation
decrease of the Ukrainian assets, while the discount of the Market Value against the
NAV decreased to 26%. Due to a drop in share price in the first quarter of 2015, this
discount reached by the reporting date 43%.
Net Asset
Value per
share
ANNUAL REPORT 2014|10
2013 €m GAV Debt NAV NAV InnovationsRom14,07,46,6EosRom6,44,32,1Terminal BrovaryUkr17,411,85,68,0Residential unitsRom8,46,22,2Land bankingUkr14,914,922,0Total Property Value61,129,731,429,9Other Assets minus Other Liabilities1,21,27,8 Net Asset Value total 32,637,7Mcap 31/12/2014 (Share price at £0,56)24,1Mcap 26/5/2015 (Share price at £0,31)18,5Discount as of the reposrting date vs NAV 31/12/2014-43%2014
2.3. Financial and Risk Management
The Group’s overall bank debt exposure at the end of the reporting period consisted of
€30 million including:
Leverage
a. the €11,8m construction loan to Terminal Brovary from EBRD. The loan was
originally restructured in June 2011 and was again under a restructuring
process which concluded in December 2014 and effectively matched the then
current cash inflows from the asset with the debt amortization plan.
b. the €4,3m lease of the EOS business park with Alpha Bank.
c. the €7,4m lease of the Innovations park with Bank of Piraeus.
d. with the remaining being the residential project loans
Overall, the Group's Loan to Value ratio at the end of 2014 stands at 48%.
Throughout 2014 the Company continued to preserve liquidity and optimize its cash
flow in a difficult credit environment. By maintaining a tight cash flow schedule, the
Company has been able to manage its liabilities while making progress towards
implementing its growth strategy by acquiring income producing assets.
Liquidity
Management-
Cash Flow
Risk
General
The Company
Most importantly, during the year the Company mitigated the effects of the Ukrainian
hryvnia devaluation to a large extent, by minimizing the cash available in Ukraine and
transferring all excess cash out of the country by repaying either the EBRD or the
intercompany loans, thus protecting the shareholder’s value.
2.4. 2015 and beyond
Going into 2015, the Company is poised to grow by acquiring new income producing
assets in Romania, Bulgaria and/or Greece. To effect that, more capital needs to be
raised, and as first step the Company executed an open offer for new shares to its
existing shareholders raising €8m in March 2015. Political turmoil in Greece and
military one in Ukraine will necessitate even more prudence on actions taken but will
also create an environment full of opportunities when such turmoil abates.
In early March 2015 the Company concluded the GED warehouse acquisition in Greece,
while in April 2015 the Company proceeded in acquiring 20% of the Autounion, a Class
A office building in Sofia, Bulgaria. The acquisition, which is the Company’s first in
Bulgaria, is in line with its strategy to build a diversified portfolio of prime commercial
real estate in East and Southeast Europe, which is fully let to blue chip tenants on long
leases, generate high yields and have the potential for capital growth.
In May 2015 the Company acquired two portfolios of assets consisting of:
100% of a DIY retail property in a prime location in Craiova, Romania. The
building of a Gross Lettable Area (‘GLA’) of 9.385 sqm is wholly let to Praktiker,
a leading DIY brand and produces an annualised NOI of ~€1 million
a 24,35% interest in Delea Nuova, a Class A office building in a prime
business location in Bucharest - the building is fully let mainly to the
telecommunications regulator of Romania, produces an annualized NOI of
€1,9 million and has a GLA of 10.280sqm over ten floors and includes
underground parking
a small portfolio of newly built income producing residential assets, located on
Grivita Lake in north Bucharest and on the slopes of Boyana in South Sofia.
They generate an annualized income of €300.000, as they are mostly let - the
Company intends to sell these to generate substantial near term cash for
reinvestment
ANNUAL REPORT 2014|11
As a result of these acquisitions the Gross Asset Value of the Company is now
diversified as follows:
Furthermore, the annualized Net Operating Income, considering also the newly
acquired assets is estimated as follows:
As such, our focus in 2015 is a) to improve even further the Company’s operating
results, b) leading to a dividend distribution for the first time in its history in 2016,
while at the same time to attract more like minded investors and grow the Company’s
balance sheet with both new capital and assets in other countries in the South East
Europe region, while safeguarding our position and income in Ukraine.
ANNUAL REPORT 2014|12
Ukraine
3. Regional Economic Developments 1
Nearly one year after the clashes that resulted in the fall of the incumbent government,
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. Ukraine engaged in a loan agreement
with the IMF before the summer, having already received two tranches of the loan for
ongoing fiscal consolidation. The future remains uncertain for the country, even
though the two elections (the presidential in May and the Parliamentary in October)
have resulted in a pro-European government.
Gross Domestic Product continued to decrease for yet another quarter and it is
expected to close for 2014 at -6,0% from 0% growth in the previous year, as domestic
demand, investments and consumption have been severely hit. Another factor that will
negatively contribute to economic activity is the current situation in the Donetsk and
Lugansk Region, where almost 75% of Ukraine’s steel production comes from. Steel
production levels reached the ones of the 2008 crisis.
The devaluation of the Ukrainian Hryvnia which peaked at 34 UAH to the USD (from 8
UAH to the USD in late 2013) and the deterioration in imports and exports have led to
a favorable current account balance in 2014. Specifically, the current account deficit in
H1 2014 contracted to 1,8% of GDP from 3,1% in H1 2013, as the trade deficit
decreased accordingly. Inflationary pressures led to a CPI index of 11% in the period
January-November 2014 compared to -0,3% in January-November 2013.
While fiscal finances have deteriorated, the IMF deal has provided some stability. The
fiscal deficit in the period January-September widened to 4,8% of GDP from 3,2% in
January-September 2013, as expenditures shot up to 53,1% from 34,2% in the same
periods. Revenues, however, also increased to 48,6% of GDP in January-September
from 31% in January-September 2014.
As far as interest rates are concerned, the National Bank of Ukraine hiked its key rate
by 150 bp to 14% in November. The interest rate move was apparently motivated by
the accelerating inflation in the last few months. Given basically non-functioning
monetary transmission mechanism, NBU interest rate decision is mostly symbolic and
will have no much impact on other interest rates and economic dynamics.
Romania’s preliminary GDP results recorded a 3,3% year-on-year increase in Q3 2014,
from 2,2% in Q2 2014 and 3,6% in Q3 2013.
Romania
In the first eight months of 2014, the Current Account Deficit was 0,6% of GDP
compared to 0,4% of GDP in January-August 2013, as per the adoption of the new
calculation methodology, as the primary income deficit widened. The external sector
1 Sources: Eurobank Research, NBG Research, National Statistical Services, National Central Banks, Eurostat,
European Central Bank, International Monetary Fund, Raiffeisen Research, Bloomberg, World Bank
ANNUAL REPORT 2014|13
2011201220132014e2015fGDP (USD bn)163,4176,2177,4127,695,0Population (mn)45,645,645,542,742,5GDP (constant prices y-o-y %)5,20,20,0-6,0-5,5CPI (average, y-o-y %)8,00,6-0,212,133,5ILO Unemployment rate (%)7,97,57,410,511,5Net FDI (USD bn)7,06,63,30,21,0Sources : IMF, Raiffeisen Research, National Sources, Eurobank EFG, European ComissionMacroeconomic data and forecasts
remains relatively firm, as the RON is stable and until now imports and exports have
not been hit by the ongoing crisis in Ukraine and Russia. In addition, public finances
have improved significantly in 2014, as in the first nine months the fiscal balance
turned to a surplus of 0,1% of GDP compared to a deficit of 1,3% in
January-September last year, as public expenditures have declined. According to the
updated data and the new calculation methodology, the external debt in the first nine
months decreased to 64,5% of GDP from 69,5% in 2013. Both short-term and
long-term debt were limited.
Inflation has fallen to historically low levels since September 2013 (1,4% in October
2014), as a result of the abundant agricultural harvest, taxes imposed during last year
and declining food prices. The latest forecast for average inflation in 2014 is 1,5%.
The National Bank of Romania continued its cycle of monetary easing by cutting its rate
to 2,75%, with the aggregate cuts since December 2013 totaling 100 bps. It has also
reduced
the minimum reserve requirement ratios on Romanian Leu and
FX-denominated debt to 10% and 14% from 12% and 18% respectively, thus allowing
banks to build up their reserves.
S&P upgraded in mid-May Romania’s long-term and short-term foreign and local
currency sovereign credit ratings to “BBB-/A-3” from “BB+/B”, with stable outlook. This
move brings S&P’s rating on par with the other two major rating agencies, Moody’s and
Fitch, which both rate Romania investment grade.
Bulgaria continues to show signs of a steady recovery, as real GDP remains very stable
although below its long-term average. GDP grew by 1,6% year-on-year in Q3 2014
from a slightly higher increase of 1,8% in Q2 2014 and a lower 1,1% in Q3 2013. The
revision of the national accounts to convert to the ESA 2010 methodology brought up
real GDP in 2013 to 0,9% compared to the previous 0,7% value.
Bulgaria
The Current Account balance decreased to 2,0% of the GDP for the period of January
to August from 3,1% in the same period last year, mainly due to the increase of the
trade deficit. The Bulgarian economy has been on a deflationary path since September
2013. Reduction in the administratively set energy prices and a strong harvest (leading
to lower food prices) made prices trend sharply downward. Indicatively, inflation in the
first ten months of 2014 averaged -1,5% from 1,4% in the same period last year, as
most of the consumer price index constituents either declined or slowed down.
The fiscal deficit in the first nine months widened to 1,9% of GDP from 0,4% in
January-September last year, due to an increase in public expenditures. This number
however is well below the maximum of 3,0% providing the necessary stability to the
country.
The government successfully resorted on June 27 to the international markets with the
planned €1,5bn September 2024 Eurobond sale. The said issue attracted strong as well
as diversified demand in reflection of ongoing as well as broad-based investor
confidence towards Bulgarian assets. Total bids reportedly amounted to ca €3,7bn and
the auction produced an average accepted yield of 3,055% or 160bps over mid-swaps.
ANNUAL REPORT 2014|14
2011201220132014e2015fGDP (EUR bn)131,4131,8142,2149,3153,0Population (mn)20,120,019,919,919,9GDP (constant prices y-o-y %)2,20,73,42,92,7CPI (average, y-o-y %)5,83,44,01,41,0Unemployment rate (%)7,47,07,16,86,7Net FDI (EUR bn)1,82,22,62,43,0Sources : IMF, Raiffeisen Research, National Sources, Eurobank EFG, European ComissionMacroeconomic data and forecasts
On the political front, a fragmented new parliament emerged from the early
parliamentary elections in Bulgaria on October 5th. Eight parties, the highest number
in the post-Communist era, accomplished to surpass the 4% threshold in order to enter
the parliament. The new coalition government successfully managed to deal with one
major issue; the resolution of Corporate Commercial Bank.
Greece
The confirmation by Eurostat of the 2013 primary budget surplus and the redistribution
of part of that surplus to a number of social groups, reinforced the credibility of the
Greek fiscal consolidation, boosted consumer confidence and stabilized household
spending. 2014 was going to be the first year after 6 recession years with an overall
GDP increase but elections declared in December 2014 have taken a heavy toll and
have thrown the country’s economy back into recession. In addition to the economics
the country’s credibility is being severely damaged.
In the first nine months of 2014, Greece’s GDP level was higher by 0,6%, compared
with the corresponding period of last year, when it had fallen by 4,3%. This was mainly
due to higher international tourist arrivals during the summer period, leading to the
strongest growth in the exports of goods since the 2004 Olympic Games.
Total domestic consumption increased by 1,2% in the first nine months of 2014, after a
contraction by 4,2% in the same period a year earlier and 6 consecutive negative
years. Again, in the second part of the year consumption started to show signs of
further improvement before collapsing in November and December due to the
elections announcement.
With exports rising faster than imports, the deficit of the external sector has been
reduced by 9,7% over the first half of the previous year, at €2,6 billion (3,4% of the
GDP), while during the same period of 2013 that deficit had shrank much faster (-
43,1%).
Bank of Greece recorded a net deposit outflow of ~€11bn that extended to €35bn by
end of March 2015 bringing the banking crisis under severe liquidity stress. For the
moment the slack is being picked up by the ECB through the ELA. Deposits are at an
all-time low of €135bn from €250 in 2008.
ANNUAL REPORT 2014|15
20112012201320142015fGDP (EUR bn)38,539,739,940,440,7Population (mn)7,37,37,37,27,2GDP (constant prices y-o-y %)1,80,80,91,71,2CPI (average, y-o-y %)4,23,01,4-1,6-0,5Unemployment rate (%)11,212,312,911,710,9Net FDI (EUR bn)1,21,21,11,21,5Sources : IMF, Raiffeisen Research, National Sources, Eurobank EFG, European ComissionMacroeconomic data and forecasts2011201220132014e2015fGDP (EUR bn)208,5193,4182,1179,1175,2Population (mn)10,811,111,011,010,9GDP (constant prices y-o-y %)-1,1-6,6-3,9-0,9-0,8CPI (average, y-o-y %)4,23,00,9-1,4-0,3Unemployment rate (%)17,924,527,526,625,0Net FDI (EUR bn)0,81,41,61,00,0Sources : IMF, Raiffeisen Research, National Sources, Eurobank EFG, European ComissionMacroeconomic data and forecasts
4. Real Estate Market Developments 2
4.1. Ukraine
Ongoing tensions in the East along with fundamental economic problems, have taken
their toll on the country’s real estate market during the first half of the year. Since then,
the situation seems to stabilize with businesses largely adopting a wait-and-see
attitude.
In 2014, the new supply of logistics space reached 144.000 sqm, nearly 7% increased
in comparison with 2013, leading to a total stock of 1,72 million sqm in the Greater Kiev
area. Compared to the same period in 2013, take-up has decreased by 60%, reaching
approximately 118.000 sqm. This drop in demand along with the delivery of several
relatively sizeable schemes during the period against the background of extremely
suppressed business dynamics in the country, led to rent contraction by 15-25%.
Growing supply and low business activity have made downward correction of market
rents, by 50-100bp.
The cumulative new office supply in 2014 in Kyiv reached approximately 155.000 sqm
and was around 18% higher than at the end of 2013 and only 1% less than in 2012.
There was approximately 1,71 million sqm of speculatively delivered office stock in Kyiv
at the end of 2014, excluding government buildings and offices constructed by
owner-occupiers. The vacancy rate in Kiev remains the highest among the European
capitals and in the end of the reporting period was standing at 23,5%. Devaluation and
prevailing supply in the market balance is the reason behind the drop and the wide
range in rental rates, especially in class A offices. According to preliminary estimates,
take-up did not exceed 50.000 sqm by year end results, mainly driven from
manufacturing and IT companies.
In 2014, total stock amounted to around 1,44 million sqm, approximately 8% higher
than in 2013. At the first half of the year, some retailers decided to leave the Ukrainian
market, but in the second half new brands like Nespresso, Intimissimi and Calzedonia
decided to enter the market. New supply on the market, loss of tenants and a low
occupancy rate of some new objects on the market led to a vacancy rate of 10%.
These rates along with the devaluation of the local currency put downward pressure on
rental rates, which dropped at USD 50-80/sqm for shopping centers and USD
150-200/sqm for high street shops.
4.2. Romania
The investment volume in Romania in 2014 rose by 254% compared to 2013, reaching
€1,3 billion (including owner-occupied and residential transactions). This represents
the highest volume recorded in Romania since 2007.
The modern stock in Bucharest remains constant at approximately 1 million sqm.
During the year, Romanian industrial market experienced its largest ever transaction
involving a single asset, with CA Immo selling a 215.000 sqm logistic park. Gross
take-up amounted to approximately 210.000 sqm, the highest figure in the last five
years. Considering the recent transactions and the absence of speculative
development, the vacancy rate dropped from 11-13% to ca. 8% in Bucharest and Ilfov
areas and it remained at the same level in the rest of the country. Yield slightly
compressed from 10% to 9,5%, while rental rates showed no significant change
throughout the year.
General
Logistics
Market
Office Market
Retail Market
General
Logistics
Market
Take-up in 2014 reached a total of 223.000 sqm, the highest figure registered since
2008. The modern office stock in Bucharest stands at around 2,21 million sqm.
Office Market
2 Sources : Jones Lang LaSalle, DTZ Research, CBRE Research, The Advisers/Knight Frank, Forton International, MBL
Research, Colliers International
ANNUAL REPORT 2014|16
Currently there is 215.900 sqm of space under construction, of which 28% has already
been secured under pre-let agreements and, with an anticipated improvement in
demand will help to lower the vacancy rate which at the end of the year was 14,3%,
the sharpest year on year change (370bp) after the financial crisis. Prime headline
rents increased slightly to €18,5/sqm, while the increasing interest from investors for
prime properties in Bucharest encouraged a yield compression by 25 bps, now at 7,75
%.
The modern retail stock in Romania increased slightly at 2,9 million sqm as only three
new retail schemes were built during the year. After a weak performance in 2013, retail
sales recorded a 7% year-on-year growth in 2014. The gap between prime and
secondary stock continues to be significant. Yield and rental rates are stable since 2013
while vacancy rates remain at low levels, due to the lack of new supply.
Retail Market
After a timid market recovery in 2012, and a more active 2013, the first half of 2014
saw a reduction in the number of vacant units in previously completed residential
projects. The revival of the market is also indicated by the expansion of
well-performing projects. As in previous years, the Prima Casa government program is
still a major driver of demand. Between 2008 and H1 2014, c. 119.200 Prima Casa
loans were approved, with a total value of over €4,5 billion, helping the market to pick
up quickly.
Residential
Market
4.3. Bulgaria
The Bulgarian Real Estate market remains stable with signs of sector improvement in
the office and residential assets classes. The relative stability of the Bulgarian economy
and the reduced residential prices at levels 50% to the 2008 peak have fueled a sizable
increase in transactions.
Total modern stock in 2014 increased by 5% year-on-year to 757.000 sqm, while
take-up activity hardly reached 12.000 until the end of Q3. Prime rents slightly
increased -for the first time after the recession- to €3,75/sqm. (7% year-on-year),
while yields remained relatively stable for one more year at 11,75%.
During 2014, only 20.000 sqm of class A offices were delivered. As a consequence, the
Sofia office stock increased only by 1,8% at 1,68 million sqm. The overall market
vacancy rate registered a decrease for a second consecutive year. The total class A and
B vacant space amounted to approximately 255.000 sqm, or an aggregate 15% of the
total class A and B inventory. The pipeline showed a further 40% decrease
year-on-year reaching 100.000. The take-up of class A and B space reached 71.000
sqm on a year-on-year basis, showing a 9% increase. Yields are at 9%, recording a
slight drop of 50bp year-on-year.
After the closure of The Strand in Burgas and Mega Mall Ruse in the second half of
2014, the total volume of modern retail space of shopping centers in Bulgaria reached
783.000 sqm,, while demand remains relatively healthy and rental rates increased 6%
year-on-year in shopping malls. Vacancy rates in Sofia remained stable at 12%.
However, good news comes from international retailers, who are either returning or
entering the Bulgarian market for the first time, indicating imminent decrease in
vacancy rates.
General
Logistics
Market
Office Market
Retail Market
4.4. Greece
The outlook for the Greek economy which has been much improved in the first 3
quarters of 2014, after seven years of recession, has deteriorated rapidly in the last
quarter of the year. Risks are now greater than ever to the recovery story and yet more
negative shock have affected market performance driving transaction to a collapse in
late 2014.
General
ANNUAL REPORT 2014|17
As of Q3, €50 million exchanged hands, more than double the total seen in 2013.
Investors struggle to balance risk and price especially given the subdued occupational
market and fragile economy. Value-add funds and Greek REICs are likely to be the first
to act if the right asset comes to market, spurred on partially by the recent reduction of
transfer tax to a flat rate of 3,00%. Prime rents are stable at €2,60/sqm for
manufacturing in Athens and €4,00/sqm for logistics. Yields dropped 200 bps, now
standing at 11% on average.
Development finance is very limited and no significant schemes were constructed in
Athens during 2014. Some projects that have broken ground were postponed by their
developers, who decided to wait for when fundamentals are more robust. Total office
deals reached approximately €28 million as of Q3. The high vacancy rate is heavily
linked with the lack of demand. Prime rents in Athens CBD have seen a 5% drop
year-on-year. Yields recorded a drop of 100bps, now at 8,5%.
During the period of recession there was a distortion of rent levels on existing lease
agreements versus new leases. Consequently, the same area can see a large gap
between rent levels. Upward pressure on prime rents, especially for these small and
medium size units, continued and double-digit growth was recorded in Athens and
Thessaloniki’s high streets, ranging from 5% to 30% year-on-year. Supply for prime
space has been tightening, however, vacancies are still on the rise in secondary areas.
Yields have contracted slightly since last year, standing at 7-8% for high streets shops
and a little over 8% for shopping centers.
Logistics
Market
Office Market
Retail Market
ANNUAL REPORT 2014|18
5. Property Assets
5.1. Aisi Brovary – Terminal Brovary Logistic Park , Ukraine
The Brovary Logistic Park consists of a 49.180 sq m 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.
Project
description
The building is divided into six independent sections (each at least 6.400 sq m), 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.
As of the end of December, the park remained 85% leased, with 94% of its warehouse
capacity leased.
Current status
5.2. Innovations Logistics Park, Romania
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.
Project
description
As of the end of December the warehouse was 100% leased with Nestle Ice Cream
Romania being the anchor tenant (100% of cold space and 72% of total NOI),
following the recent renewal of its lease .
Current status
ANNUAL REPORT 2014|19
5.3. GED Warehouse and Photovoltaic Park, Greece
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
and the National Road. The roofs of the warehouse buildings house a photovoltaic park
of 1.000KWp.
Project
description
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).
The Company reached a binding agreement in August 2014 for the acquisition of the
asset which was expected to be concluded upon the transfer of the asset from previous
owner to a newly formed company, and completion of certain other conditions which
were finalized in March 2015. The complex at the end of December is 100% occupied,
while the major tenant (approximately 70%) is the international transportation and
logistics company Kuehne + Nagel.
Current status
5.4. EOS Business Park – Danone headquarters, Romania
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.
Project
description
The Company has reached a binding agreement in August 2014 for the acquisition of
the asset which was finalised in November 2014. The complex at the end of December
is fully let to Danone Romania, the French multinational food company, until 2026.
Current status
ANNUAL REPORT 2014|20
5.5. Residential portfolio
a)
Romfelt Plaza (Doamna Ghica), Bucharest, Romania
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.
Project
description
by
residential unit portfolio
The
acquired
Company
the
comprises 2.990 sqm across nine
studios, six two bed apartments
and
bed
apartments, all located in buildings
A, D, E, F, and I.
thirteen
three
As of the end of December total existing leases stood at 20 indicating an occupancy
rate of 74%.
Current status
b)
Linda Residence, Bucharest, Romania
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.
Project
description
by
the
twenty
The 2.642 sqm residential portfolio
Company
acquired
seven
comprises
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.
As of the end of December there are a total of 5 total existing leases indicating an
occupancy rate of approximately 23%.
Current
status
c)
Monaco Towers, Bucharest, Romania
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.
Project
description
The residential portfolio acquired
by the Company comprises forty
apartments, twenty five two-room
apartments and fifteen three-room
apartments, totaling 3.609 sqm.
As of the end of December the total existing leases stood at 31 indicating an occupancy
rate of 78%.
Current status
ANNUAL REPORT 2014|21
d)
Blooming House, Bucharest, Romania
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).
Project
description
by
The residential unit portfolio
the
acquired
Company comprises twenty
seven
apartments,
comprising twelve two bed,
forteen three bed, and one
five bed,
totaling 2.387
sqm, plus 28 parking
spaces, 13 above ground,
15 underground.
At the end of December the total existing leases stood at 17 indicating an occupancy
rate of approximately 63%.
Current status
5.6. Land Bank
a)
Aisi Bela – Bela Logistic Center
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.
Project
description
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.
Current status
b)
Kiyanovskiy Lane – Land for Residential Complex
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.
Project
description
ANNUAL REPORT 2014|22
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.
Current status
c)
Tsymlyanskiy Lane – Land for Residential Complex
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%.
Project
description
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.
Current status
d)
Balabino-Land for Retail/Entertainment Development
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.
Project
description
The site is zoned for retail and entertainment and various development options are
being evaluated as per the market’s needs.
Current status
ANNUAL REPORT 2014|23
ANNUAL REPORT 2014|24
CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2014
CONSOLIDATED FINANCIAL STATEMENTS
31 December 2014
CONTENTS
Corporate Information
Chairman’s Statement
Declaration
Report of the Board of Directors
Independent Auditor’s Report
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
PAGE
27
28
29
30
33
35
36
37
38
39-76
CONSOLIDATED FINANCIAL STATEMENTS 2014|26
Corporate Information
Board of Directors
Alvaro Portela
Antonios Achilleoudis
Antonios Kaffas
Franz Hoerhager
Harin Thaker
Registered Address
16, Kyriakou Matsi Avenue
Eagle House, 10th floor, PC 1082,
Agioi Omologites, Nicosia, Cyprus
Principal Places of Business
Lambros Anagnostopoulos
Ian Domaille
Paul Ensor
Robert Sinclair
16, Kyriakou Matsi Avenue
Eagle House, 10th floor, PC 1082,
Agioi Omologites, Nicosia,
Cyprus
Prytys'ko-Mykilska 5
Kiev 04070,
Ukraine
49-51 Sfintii Voievozi Street,
1st floor, apartment no 6
Interior 006, district 1, Bucharest
Romania PC 010965
Company Secretary
Chanteclair Secretarial Ltd
16, Kyriakou Matsi Avenue
Eagle House, 10th floor, PC 1082, Nicosia, Cyprus
Nominated Adviser and Broker
S. P. Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street London W1S 2PP
Registrars
Computershare Investor Services PLC
The Pavillions, Bridgewater Road
Bristol BS99 7NH, UK
Cymain Registrars Limited
P.O. Box 25719
1311 Nicosia Cyprus
Main Collaborating Banks
European Bank for Reconstruction and Development
One Exchange Square
London EC2A 2JN, United Kingdom
Unicredit Bank
14A Yaloslav Val Str, Kyiv
Ukraine, 01034
Bank of Cyprus
P.O. Box 22032
Nicosia, 1598 Cyprus
UNIVERSAL Bank
54/19, Avtozavodska str., 04114
Kiev, Ukraine
ALPHA BANK Bulgaria
99, Tsarigradsko Shosse Blvd.
1113 Sofia, Bulgaria
Eurobank EFG Cyprus Ltd
41 Makarios Avenue, 5th floor,
1065 Nicosia, CYPRUS
Alpha Bank Romania
Neocity 2 Building, 237B, Calea Dorobantilor Str.
District 1, Bucharest, Romania
Piraeus Leasing Romania
B-dul Nicolae Titulescu, nr. 29 - 31, etaj 5
Sector 1, Bucuresti, Romania
Solicitors
WTS Tax Legal Consulting LLC
5, Pankivska Str., 5th floor
Kyiv, Ukraine, 01033
Drakopoulos Law Firm
332, Kifissias Avenue, 152 33 Halandri,
Athens, Greece
Drakopoulos Law Firm
7 David Praporgescu, District 2, 020965
Bucharest, Romania
Auditors
Baker Tilly Klitou and Partners Limited
Corner C Hatzopoulou & 30 Griva Digheni Avenue
1066 Nicosia, Cyprus
Reed Smith LLP
The Broadgate Tower20 Primrose Street
London EC2A 2RS, United Kingdom
Georgiades & Pelides LLC
Kyriakou Matsi Avenue
Eagle House, 10th floor, PC 1082, Nicosia, Cyprus
CONSOLIDATED FINANCIAL STATEMENTS 2014|27
Chairman’s Statement
2014 was a pivotal year for SPDI, as the Company embarked upon its acquisition strategy in earnest. The logic
behind this strategy remains unchanged: to take advantage of the low prices of commercial property on offer in
South East Europe with strong tenants and competitively priced financing. The objective is to build a diversified
portfolio of fully let prime commercial real estate, which generates high levels of income from a blue chip tenant base
on long leases, and at the same time offers the potential for significant capital growth.
With the above in mind, the year under review has seen excellent progress made. The numbers speak for
themselves: 57% increase in total assets to €61 million (2013: €39million), a reflection of the transformational
acquisitions made during the year across the region; a 33% increase in rental income to €3,6 million (2013:
€2,7million); and a 300% increase in EBITDA to €0,8 million (2013:€0,2million). We have ended the year with a Net
Asset Value of £0,75 per share (2013: £1,13) which, even after taking into account the new shares issued during
2015, remains substantially higher than our current market valuation and provides us with considerable asset
backing.
Finding the right properties across Europe to meet our strict investment criteria against a backdrop of a property
market that is on a rising trend, requires a management team with a proven track record. The year under review
has demonstrated that SPDI has one such team, and as a result we believe that we are very well positioned to
continue to source a strong pipeline of suitable opportunities due to our wealth of experience and contacts, as we
look to add to our growing number of properties owned and managed across the region.
Indeed post period end we have done just that. In April 2015, we announced the acquisition of an interest in a fully
let and income generating office building in Sofia, while in May we followed this up by announcing the acquisition of
a series of prime property assets in Romania and Bulgaria, including a 100% interest in a prime location big box
retail property in Craiova, Romania (wholly let to Praktiker) as well as a 24,35% interest in Delea Nuova, a Class A
office building in Bucharest city centre, which is fully let mainly to the telecommunications regulator of Romania.
With a running annualized NOI of €8 million, a portfolio of seven income producing properties covering four countries
we now have a cash generative platform from which to accelerate the roll-out of our strategy to build a portfolio of
prime real estate in Southeastern Europe. We continue to evaluate additional opportunities that fit the Company’s
investment criteria of high yields and blue chip tenants in Southeastern European population hubs, as we look to
expose our shareholders to both immediate cash flows with long term visibility, as well as the potential for significant
capital uplift, as the on-going European yield compression play gathers momentum across the continent.
The very low interest rates across Europe should work in favour of continued yield compression in commercial
property, and we remain confident that we are very well positioned to make 2015 another year of carefully
structured acquisitions of undervalued property assets and improving financial performance.
Paul Ensor
Chairman of the Board
CONSOLIDATED FINANCIAL STATEMENTS 2014|28
DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND
THE PERSON RESPONSIBLE FOR THE PREPARATION OF THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY
We, the Members of the Board of Directors and the person responsible for the preparation of the consolidated
financial statements of SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC for the year ended 31 December
2014, based on our opinion, which is a result of diligent and scrupulous work, declare that the elements written in
the consolidated financial statements are true and complete.
Board of Directors members:
Antonios Achilleoudis
Lambros Anagnostopoulos
Ian Domaille
Paul Ensor
Franz M. Hoerhager
Antonios Kaffas
Harin Thaker
Alvaro Portela
Robert Sinclair
Person responsible for the preparation of the consolidated financial statements for the year ended 31 December
2014:
Constantinos Bitros
CONSOLIDATED FINANCIAL STATEMENTS 2014|29
REPORT OF THE BOARD OF DIRECTORS
The Board of Directors presents its report and the audited consolidated financial statements of SECURE PROPERTY
DEVELOPMENT & INVESTMENT PLC (“SPDI” or “SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC” or the
“Company”) and its subsidiaries (the “Group”) for the year ended 31 December 2014.
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.
Review of current position, future developments and significant risks
Throughout the year Management has worked towards identifying growth opportunities in the form of property
acquisition in South East Europe. During the year the Company completed 3 such transactions, namely the
acquisitions of Innovations Park, a warehouse in Bucharest Romania, of EOS Business Park and Office building in
Bucharest Romania and 122 apartments from 4 different residential compounds also in Bucharest. The Company has
also signed an agreement to acquire GED Logistics complex in Athens Greece, a transaction which was completed in
March 2015. In parallel the Company has completed due diligence related to assets that are in the pipeline to be
acquired in 2015.
On the operational side the Group’s running Net Operating Income exceeds €6.5m on an annualized basis while its
exposure to Ukraine both in terms of assets and NOI is well below 50%. On the same note the Group has signed the
restructuring of the legacy EBRD construction loan for Terminal Brovary which matures in 2022 and has a balloon of
25%.
The Board of Directors expects that the organic growth of the Group together with the proceeds from 2015
acquisitions will allow the Company to offer its first dividend distribution in 2016.
The most significant risks faced by the Group and the steps taken to manage these risks are described in Notes 4
and 30 of the consolidated financial statements.
Results and Dividends
The Group's results for the year are set out on page 11. The net loss for the year is carried forward.
Share Capital
Authorised share capital
Pursuant to the cancelation of 4.142.727 deferred shares of €0,99 nominal value and 1 old (2011 restructuring
related) ordinary share of €0,92 nominal value effected on 20/3/2014, the Company's authorised share capital at the
end of the reporting period amounted to 989.869.935 ordinary shares of €0,01 nominal value and 785.000
redeemable preferred shares of €0,01 nominal value.
Issued share capital
As of 31 December 2013 the total amount of outstanding ordinary shares was 27.171.833 shares.
Within the reporting year the Company has effected:
a) On 20/3/2014, following the approval of the Annual General Meeting of 30/12/2013, the cancellation of 1
ordinary share of €0,92 and 4.142.727 deferred shares of €0,99 each for the purpose of writing off losses of
the Company (Note 20).
b) On 16/5/2014, following the approval of the Extraordinary General Meeting of 5/5/2014, the allotment of
785.000 redeemable preference shares €0,01 each for the purpose of acquiring Innovation Park (Note 20).
c) On 24/6/2014, following the approval of the Annual General Meeting of 30/12/2013, the allotment of
116.726 ordinary shares of €0,01 each to its Directors, who converted their 2013 annual fees (Notes 20 and
28) into equity.
d) On 24/6/2014, following the approval of the Annual General Meeting of 30/12/2013, the allotment of
500.000 ordinary shares of €0,01 each to the Directors, Management, Employees and Advisors of the
Company in order to reward them for their continued commitment to the Company (Note 20).
CONSOLIDATED FINANCIAL STATEMENTS 2014|30
REPORT OF THE BOARD OF DIRECTORS
e) On 28/8/2014, following the approval of the Annual General Meeting of 30/12/2013, the allotment of
3.934.853 ordinary shares of €0,01 each for the purpose of the in kind contribution of Residential Portfolio
(Note 20).
f) On 30/10/2014, following the approval of the Annual General Meeting of 30/12/2013, the allotment of
1.160.642 ordinary shares of €0,01 each for the purpose of capital raising in the Company by new
shareholders (Note 20).
As at the end of the reporting period the issued share capital of the Company is 33.884.054 Ordinary Shares of €0,01
nominal value each and 785.000 Convertible Shares of €0,01 nominal value each.
Board of Directors
The members of the Company's Board of Directors as at 31 December 2014 and at the date of this report are
presented on page 3.
In accordance with the Company's Articles of Association, during the Annual General Meeting held on 31st December
2014, Mr. Harin Thaker, Mr. Franz Hoerhager and Mr. Antonios Kaffas being eligible, retired by rotation, offered
themselves for re-election and were re-elected.
There were no changes in the assignment of responsibilities of the Board of Directors.
Board Committees
The Board has constituted two committees, the audit committee and the remuneration committee. The membership
of both committees remains unchanged from last year.
Remuneration Policy
The remuneration policy for the Board (non-executive members) and the senior management of the Company which
includes a monetary portion, as well as equity like instruments to further incentivize the recipients and further align
their interests with those of the shareholders, remains unchanged. Such equity like instruments and the respective
granting terms have been approved by the Annual General Meeting of December, 30th 2013 and of December 31st ,
2014.
As far as the Board's remuneration is concerned, this remains unchanged. The said remuneration plan relates to
payments through shares which are locked up for the lesser of two years from the date of issue or the date following
which the 30 day average traded value exceeds GBP 70.000.
Options currently held by Board Members
Following the share capital restructuring of the Company, the existing option schemes are as follows:
Director's Option scheme, allotted on 25/7/2007
Under the said scheme each of the directors serving at the time, who is still a Director of the Company, is entitled to
subscribe for 2.631 ordinary shares exercisable as set out below:
Exercisable until 1 August 2017
Exercisable until 1 August 2017
Director Franz M. Hoerhager Option scheme, 12/10/2007
Exercise Price
US$
57
83
Number of
Shares
1.754
877
Under the said scheme, director Franz M. Hoerhager is entitled to subscribe for 1.829 ordinary shares exercisable as
set out below:
Exercisable until 1 August 2017
Exercisable until 1 August 2017
Exercise Price
GBP
40
50
Number of
Shares
1.219
610
The above option schemes were approved, by the shareholders of the Company in General Meeting on 31st March
2008. As at 31 December 2014 the Company considers that the options are well out of the money.
CONSOLIDATED FINANCIAL STATEMENTS 2014|31
REPORT OF THE BOARD OF DIRECTORS
Directors and Management Holdings in the Company
As at the end of the reporting period the following Directors and Management hold shares of the Company:
Name
Paul Ensor
Antonios Achilleoudis
Franz Horhager
Ian Domaille
Robert Sinclair
Harin Thaker
Alvaro Portela
Antonios Kaffas
Lambros Anagnostopoulos
Constantinos Bitros
Warrants issued and exercised
Position
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Executive Director and CEO
Chief Financial Officer
Amount of Shares held
147.495
89.345
121.474
70.921
57.374
44.742
44.742
62.980
238.937
92.357
All Class B Warrants are yet to be exercised with the exercise period ending 31 December 2016.
Other share capital related matters
Pursuant to decisions taken by the AGM of December 31st 2014, the Board is authorised and empowered to:
-
-
issue up to 200.000.000 ordinary shares of €0.01 each at an issue price as the Board may from time to time
determine (with such price being at a discount to the net asset value per share in the Company which is in
issue immediately prior to the issue of the shares) so as to facilitate the profitable growth of the Company.
issue Class A Warrants, to subscribe for up to 350% of the outstanding ordinary shares at the time of
issuance of the Class A Warrants, upon such terms and conditions as may be determined by the Board (with
such price being at a discount to the net asset value per share in the Company which is in issue immediately
prior to the issue of the Class A Warrants). Such Class A Warrants may be offered to various third party
entities a) for participating in the capital raising of the Company, b) for their contribution in creating value
for the Company and c) for their assistance with the fundraising.
Events after the end of the reporting period
Any significant events that occurred after the end of the reporting period are described in Note 31 to the financial
statements.
Independent auditors
The independent Auditors, Baker Tilly Klitou and Partners Limited, have expressed their willingness to continue in
office.
The Audit Committee will be proposing to the Board the appointment of the Independent Auditors for 2015,
authorizing the CEO and the CFO to negotiate their remuneration so as to present a relevant proposal to the Annual
General Meeting of the Shareholders of the Company.
By order of the Board of Directors,
Constantinos Bitros
Chief Financial Officer
CONSOLIDATED FINANCIAL STATEMENTS 2014|32
Baker Tilly Klitou and Partners Ltd
Corner C Hatzopoulou &
30 Griva Digheni Avenue
CY-1066 Nicosia
P.O. Box 27783, CY-2433 Nicosia
Cyprus
T: +357 22 458500
F: +357 22 751648
info@bakertillyklitou.com
Independent Auditor’s Report
To the Members of Secure Property Development & Investment Plc
Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of Secure Property Development & Investment
Plc (the “Company”) and its subsidiaries (together with the Company, the "Group"), which comprise the consolidated
statement of financial position as at 31 December 2014, and the consolidated statements of comprehensive income,
changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other
explanatory information.
Board of Directors’ responsibility for the consolidated financial statements
The Board of Directors is responsible for the preparation of consolidated financial statements that give a true and fair
view in accordance with International Financial Reporting Standards as adopted by the European Union and the
requirements of the Cyprus Companies Law, Cap. 113, and for such internal control as the Board of Directors
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of
consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as
at 31 December 2014, and of its financial performance and its cash flows for the year ended in accordance with
International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus
Companies Law, Cap113.
Associated offices:
Cyprus: Nicosia T: +357 22 458500, Cyprus: Limassol T: +357 25 591515, Cyprus: Larnaca T: +357 24 663299
Romania: Bucharest T: +40 21 3156100, Bulgaria: Sofia T: +359 2 9580980, Moldova: Chisinau T: +373 22 233003
Registered in Cyprus (Reg. No. 156870). List of directors can be found at the Company’s Registered Office.
Independent Auditor’s Report (continued)
Emphasis of matters
We draw attention to Notes 3, 4 and 15 to the consolidated financial statements, which describe the following matters:
Valuation of investment properties
(a)
The fair value of the investment properties as indicated in Notes 3 and 15 to the consolidated financial statements is
based on valuations performed by independent valuators. The fair value is determined by selecting a variety of
methods and making assumptions that are mainly based on conditions existing at the end of each reporting period. In
the event that any of the assumptions do not materialize the fair values of the Group’s Investment Properties will be
affected accordingly.
Ownership of investment properties.
(b)
As stated in Note 3, a number of the Group’s land leases in Ukraine are held for relatively short terms and place an
obligation upon the Group to complete development by a prescribed date. It is important to note that the rights to
complete a development may be lost or at least delayed if the Group fails to complete a permitted development within
the timescale set out by the ground lease. In addition, in the event that a development has not commenced upon the
expiry of a lease then the City Authorities are entitled to decline the granting of a new lease on the basis that the land
is not used in accordance with the designation. Furthermore, where all necessary permissions and consents for the
development are not in place, this may provide the City Authorities with grounds for rescinding or non-renewal of the
ground lease. The management of the Group believes that the possibility of such action in the future is remote.
Therefore, the assumption that the leases which expire will be renewed remains valid and the fair values of investment
properties as of the end of the reporting period are not affected.
Operating environment in Ukraine
(c)
We draw attention to Note 4 to the consolidated financial statements, which describes the political and social unrest
and regional tensions in Ukraine, which could adversely affect the Group’s results and financial position in a manner
not currently determinable. The Group has diversified its geographical exposure in 2014 by expansion in Romania and
in 2015 by expansion in Greece, Bulgaria and further expansion in Romania (Note 31) and thus reduced any possible
adverse effect of Ukrainian operations on the Group as a whole.
Our opinion is not qualified in respect of these matters.
Report on other legal requirements
Pursuant to the additional requirements of the Auditors and Statutory Audits of Annual and Consolidated Accounts
Laws of 2009 and 2013, we report the following:
• We have obtained all the information and explanations we considered necessary for the purposes of our audit.
•
In our opinion, proper books of account have been kept by the Company, so far as appears from the examination
of those books.
The consolidated financial statements are in agreement with the books of account.
In our opinion and to the best of our information and according to the explanations given to us, the consolidated
financial statements give the information required by the Companies Law, Cap. 113, in the manner so required.
In our opinion, the information given in the report of the Board of Directors is consistent with the consolidated
financial statements.
•
•
•
Other matter
This report, including the opinion, has been prepared for and only for the Company's members as a body in
accordance with Section 34 of the Auditors and Statutory Audits of Annual and Consolidated Accounts Laws of 2009
and 2013 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other
purpose or to any other person to whose knowledge this report may come to.
Andreas Pittakas
Certified Public Accountant and Registered Auditor
for and on behalf of
Baker Tilly Klitou
Certified Public Accountants and Registered Auditors
Corner C Hatzopoulou and 30 Griva Digheni Avenue
1066 Nicosia, Cyprus
Nicosia, 26 May 2015
1. Consolidated Statement of Comprehensive Income
For the year ended 31 December 2014
Operating income
Valuation gains from investment property
Administration expenses
Investment property operating expenses
Gain on acquisition of subsidiaries
Other (expenses)/income, net
Operating profit
Net finance costs
Foreign exchange (losses)/income, net
Profit/(loss) before tax
Income tax expense
Profit/(loss) for the year
Other comprehensive (loss)/income
Note
2014
€
2013
€
8
8
9
10
16
11
12
13
3.591.903
9.297.525
12.889.428
(2.743.723)
(660.263)
766.221
(136.058)
2.717.166
635.067
3.352.233
(2.475.720)
(543.217)
-
495.774
10.115.605
829.070
(1.414.400)
(7.512.640)
(1.034.456)
201.952
1.188.565
(3.434)
14
(220.476)
(125.722)
968.089
(129.156)
Exchange difference on I/C loans to foreign holdings
Exchange difference on translation of foreign operations
28.4
21
(19.746.111)
8.904.153
-
(1.424.354)
Total comprehensive (loss)/income for the year
(9.873.869)
(1.553.510)
Profit /(Loss) attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
927.337
40.752
968.089
(139.408)
10.253
(129.155)
(9.577.120)
(296.749)
(9.873.869)
(1.561.681)
8.171
(1.553.510)
Earnings/(losses) per share (Euro cent per share):
Basic earnings/(losses) for the year attributable to ordinary
equity owners of the parent
Diluted earnings/(losses) for the year attributable to ordinary
equity owners of the parent
6
0,03
0,03
(0,01)
(0,00)
The notes on pages 39 to 76 form an integral part of these consolidated financial statements
CONSOLIDATED FINANCIAL STATEMENTS 2014|35
2. Consolidated Statement of Financial Position
For the year ended 31 December 2014
ASSETS
Non-current assets
Investment properties
Investment property under construction
Prepayments made for investments
Tangible and intangible assets
Goodwill
Long-term receivables
Current assets
Prepayments and other current assets
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Issued share capital
Share premium
Foreign currency translation reserve
Exchange difference on I/C loans to foreign holdings
Accumulated losses
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
Non-current liabilities
Interest bearing borrowings
Finance lease liabilities
Redeemable preference shares
Trade and other payables
Deposits from tenants
Current liabilities
Interest bearing borrowings
Trade and other payables
Taxes payable
Redeemable preference shares
Provisions
Deposits from tenants
Finance lease liabilities
Total liabilities
Total equity and liabilities
Note
2014
€
2013
€
2012
€
15
15
15
17
16
18
19
20
21
28.4
22
23
27
20.6
24
25
23
24
26
20.6
26,29
25
27
53.533.187
5.083.216
2.674.219
200.203
43.269
125.909
61.660.003
4.251.489
891.938
5.143.427
66.803.430
338.839
97.444.044
(1.411.825)
(19.746.111)
(44.064.475)
32.560.472
651.882
33.212.354
12.255.716
11.463.253
349.325
214.685
499.831
24.782.810
5.960.706
1.654.852
431.828
349.325
68.253
161.579
181.723
8.808.266
33.591.076
28.714.379
6.525.995
3.625.553
103.443
-
-
29.733.212
6.331.030
3.789.601
73.011
-
-
38.969.370 39.926.854
4.129.281
3.595.741
194.366
9.668.260
13.264.001
4.323.647
52.233.371 44.250.501
4.212.421
4.383.018
79.176.629
92.704.841
(8.891.624)
(10.315.978)
-
-
(49.093.113)
(48.953.705)
37.678.768 25.543.721
930.207
38.627.399 26.473.928
948.631
-
387.400
-
480.458
315.604
1.183.462
1.347.340
428.962
-
503.940
324.328
2.604.570
11.077.240
779.688
423.539
-
119.023
-
23.020
12.554.173
1.941.592
401.567
-
253.564
-
21.107
12.422.510 15.172.003
13.605.972 17.776.573
66.803.430
52.233.371 44.250.501
Net Asset Value (NAV) € per share:
Basic NAV attributable to equity holders of the parent
Diluted NAV attributable to equity holders of the parent
6
0,96
0,84
1,34
1,17
2,30
2,01
On 26 May 2015 the Board of Directors of SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC
authorised these financial statements for issue.
Lambros Anagnostopoulos
Director & Chief Executive Officer
Paul Ensor
Director & Chairman of the Board
Constantinos Bitros
Chief Financial Officer
The notes on pages 39 to 76 form an integral part of these consolidated financial statements
CONSOLIDATED FINANCIAL STATEMENTS 2014|36
3. Consolidated Statement of Changes in Equity
For the year ended 31 December 2014
€
Share
capital
Share
premium,
Net1
Accumulated
losses, net of
non-controlling
interest2
Exchange
difference on I/C
loans to foreign
holdings3
Foreign currency
translation
reserve4
Total
Non-
controlling
interests
Total
Balance - 31 December 2012
4.212.421
79.176.629
(48.953.705)
Profit/(Loss) for the period
-
-
(139.408)
Issue of share capital, net (Note 20)
170.597
13.528.212
Foreign currency translation reserve
-
-
-
-
Balance - 31 December 2013
4.383.018
92.704.841
(49.093.113)
Profit for the period
-
-
927.337
Issue of share capital, net (Note 20)
57.122
4.739.203
Reduction of share capital (Note 20.2)
(4.101.301)
Exchange difference on I/C loans to
foreign holdings (Note 28.4)
Foreign currency translation reserve
-
-
-
-
-
-
4.101.301
-
-
-
-
-
-
-
-
(8.891.624)
25.543.721
930.207
26.473.928
-
-
(139.408)
10.253
(129.155)
13.698.809
-
13.698.809
(1.424.354)
(1.424.354)
8.171
(1.416.183)
(10.315.978)
37.678.768
948.631
38.627.399
-
-
-
927.337
40.752
4.796.325
-
-
-
968.089
4.796.325
-
-
-
(19.746.111)
-
-
8.904.153
(19.746.111)
8.904.153
-
(337.501)
(19.746.111)
8.566.652
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
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 during 2014. The Group treats the mentioned loans as a part of the net investment in foreign
operations (Note 28.4).
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 euro in the countries where the Company’s subsidiaries own property assets.
The notes on pages 39 to 76 form an integral part of these consolidated financial statements
CONSOLIDATED FINANCIAL STATEMENTS 2014|37
4. Consolidated Statement of Cash Flows
For the year ended 31 December 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) before tax and non-controlling interests
Adjustments for:
Profit/(loss) on revaluation of investment property
Other non-cash movements
Prepayments and other current assets impairment loss/(reversal)
Trade and other payables written off
Depreciation of property, plant and equipment
Interest income
Interest expense
Gain on acquisition of subsidiaries
Provisions
Effect of foreign exchange differences
Cash flows used in operations before working capital changes
Change in prepayments and other current assets
Change in trade and other payables
Change in VAT recoverable
Change in other taxes and duties
Increase in deposits from tenants
Income tax paid
Working capital changes
Net cash flows used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure on investment property
Prepayment made for acquisition of investment property
Decrease in payables for construction
Changes in property, plant and equipment
Interest received
Cash outflow on acquisition of subsidiaries
Net cash flows from / (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital/shareholders advances
Net (repayment) of borrowings
Interest and financial charges paid
Decrease in financial lease liabilities
Net cash flows from / (used in) financing activities
Effect of foreign exchange rates on cash and cash equivalents
Net increase/(decrease) in cash at banks
Cash:
At beginning of the year
At end of the year
Note
2014
€
2013
€
1.188.565
(3.434)
8
11
11
9
12
12
16
26
13
18
24
18
26
25
15
15
24
16
20
23
27
(9.297.525)
(593.717)
3.973
(12.422)
17.897
(80.895)
1.385.223
(766.221)
(50.770)
7.512.640
(693.252)
(1.754.061)
(710.064)
1.408.353
(49.029)
211.228
(284.153)
(635.067)
(409.563)
(10.017)
(266.771)
12.163
(100.013)
1.022.841
-
(128.310)
(201.951)
(720.122)
(87.782)
(529.208)
466.210
(4.626)
5.521
(80.230)
(1.177.726)
(1.870.978)
(230.115)
(950.237)
(60.155)
(624.841)
-
-
80.895
(6.210.254)
(6.814.355)
(130.567)
-
(324.997)
(47.045)
100.013
-
(402.596)
1.727.691
(565.389)
(1.170.847)
(82.444)
12.834.124
(1.109.377)
(877.080)
(20.940)
(90.989)
(179.750)
10.826.727
(76.641)
(8.956.072)
9.397.253
19
9.668.260
891.938
194.366
9.668.260
The notes on pages 39 to 76 form an integral part of these consolidated financial statements
CONSOLIDATED FINANCIAL STATEMENTS 2014|38
5. Notes to the Consolidated Financial Statements
For the year ended 31 December 2014
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 Kyriakou 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, in Kyiv, Ukraine, and in Bucharest, Romania.
As at the reporting date, the Group 19 Full Time Equivalent (FTEs, 10 in Ukraine and 6 in Romania) employed persons,
including the CEO and the CFO (December 2013 13)
2. Adoption of new and revised Standards and Interpretations
As from 1 January 2014, the Group adopted all changes to International Financial Reporting Standards (IFRSs) as
adopted by EU which are relevant to its operations. This adoption did not have a material effect on the financial
statements of the Group.
The following Standards, Amendments to Standards and Interpretations have been issued but are not yet effective for
annual periods beginning on 1 January 2014. Those which may be relevant to the Group are set out below. The Group
does not plan to adopt these Standards early.
(i) Standards and Interpretations adopted by the EU
•
IAS 19 (Amendments) ''Defined Benefit Plans: Employee Contributions'' (effective for annual periods beginning
on or after 1 July 2014).
Improvements to IFRSs 2010-2012 (effective for annual periods beginning on or after 1 July 2014).
•
• 2011-2013 (effective for annual periods beginning on or after 1 July 2014).
(ii) Standards and Interpretations not adopted by the EU
•
•
•
•
•
•
•
•
IFRS 14 ''Regulatory Deferral Accounts'' (effective for annual periods beginning on or after 1 January 2016).
IFRS 10, IFRS 12 and IAS 28 (Amendments): Investment Entities: Applying the Consolidation Exception
(effective for annual periods beginning on or after 1 January 2016).
IFRS 11 'Accounting for acquisitions of interests in Joint Operations''' (Amendments) (effective for annual
periods beginning on or after 1 January 2016).
IAS 1 (Amendments): Disclosure Initiative (effective for annual periods beginning on or after 1 January 2016).
IFRS 10 and IAS 28 (Amendments): Sale or Contribution of Assets between an Investor and its Associate or
Joint Venture (effective for annual periods beginning on or after 1 January 2016).
IAS 27 (Amendments) ''Equity method in separate financial statements'' (effective for annual periods
beginning on or after 1 January 2016).
IAS 16 and IAS 41 (Amendments): ''Bearer plants'' (effective for annual periods beginning on or after 1
January 2016).
IAS 16 and IAS 38 (Amendments) ''Clarification of acceptable methods of depreciation and amortisation''
(effective for annual periods beginning on or after 1 January 2016).
• Annual Improvements to IFRSs 2012–2014 Cycle (effective the latest as from the commencement date of its
first annual period beginning on or after 1 January 2016).
IFRS 15 ''Revenue from contracts with customers'' (effective for annual periods beginning on or after 1
January 2017).
IFRS 9 ''Financial Instruments'' (effective for annual periods beginning on or after 1 January 2018).
•
•
The Board of Directors expects that the adoption of these standards or interpretations in future periods will not have a
material effect on the consolidated financial statements of the Group.
CONSOLIDATED FINANCIAL STATEMENTS 2014|39
3. Significant accounting policies
3.1 Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law,
Cap.113.
The consolidated financial statements have been prepared under the historical cost convention as modified by the
revaluation of investment property and investment property under construction to fair value.
3.2 Basis of preparation
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out
below. These policies have been consistently applied to all years presented in these consolidated financial statements
unless otherwise stated.
Local statutory accounting principles and procedures differ from those generally accepted under IFRS. Accordingly, the
consolidated financial information, which has been prepared from the local statutory accounting records for the entities
of the Group domiciled in Cyprus, Romania and Ukraine, reflects adjustments necessary for such consolidated financial
information to be presented in accordance with IFRS.
3.3 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including
special purpose entities) controlled by the Company (its subsidiaries).
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an
entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the group. They are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the
acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition
date. The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable
net assets.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held
equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such
re-measurement are recognized in profit or loss.
Any contingent consideration to be transferred by the group is recognized at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is
recognized in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income.
Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for
within equity.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those
provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are
recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that,
if known, would have affected the amounts recognized at that date.
Business combinations that took place prior to 1 January 2010 were accounted for in accordance with the previous
version of IFRS 3.
Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated.
Unrealized losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to
conform with the group’s accounting policies.
3.3.1. Changes in ownership interests in subsidiaries without change of control and Disposal of Subsidiaries
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions
- that is, as transactions with the owners in their capacity as owners. The difference between fair value of any
consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in
equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
CONSOLIDATED FINANCIAL STATEMENTS 2014|40
3. Significant accounting policies (continued)
3.3 Basis of consolidation (continued)
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date
when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial
carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or
financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity
are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts
previously recognized in other comprehensive income are reclassified to profit or loss.
The Group’s consolidated financial statements comprise the financial statements of the parent company, SECURE
PROPERTY DEVELOPMENT & INVESTMENT PLC and the financial statements of the following subsidiaries:
Name
SC SECURE Capital Limited
SL SECURE Logistics Limited
LLC Aisi Brovary
LLC Terminal Brovary
LLC Aisi Ukraine
LLC Trade Center
LLC Almaz-press-Ukrayina
LLC Aisi Bela
LLC Merelium Investments
LLC Interterminal
LLC Aisi Outdoor
LLC Aisi Vida
LLC Aisi Val
LLC Aisi Ilvo
LLC Aisi Consta
LLC Aisi Roslav
LLC Aisi Donetsk
LLC Retail Development Balabino
Myrnes Innovations Park Limited
Best Day Real Estate SRL
Yamano Holdings Limited
Secure Property Development and
Investment Srl
N-E Real Estate Park First Phase Srl
SEC South East Continent Unique Real
Estate Investments II Limited
Diforio Holdings Limited
Demetiva Holdings Limited
Ketiza Holdings Limited
Frizomo Holdings Limited
SecMon Real Estate SRL
Sec Vista Real Estate SRL
Sec Rom Real Estate SRL
Ketiza Real Estate SRL
Country of
incorporation
Cyprus
Cyprus
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Cyprus
Romania
Cyprus
Romania
Related Asset
N/A
Brovary Logistics Park
Kiyanovskiy Residence
Tsymlianskiy Residence
Bela Logistic Park
Zaporizhia Retail Center
Under merger
Merged
Merged
N/A
Merged
Merged
Under merger
N/A N/A l
Innovations Logistics
Park
EOS Business Park
Holding %
as at
31.12.2014
100
100
100
100
100
100
55
100
100
100
100
-
-
100
-
-
100
100
100
100
100
100
as at
31.12.2013
100
100
100
100
100
100
55
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
Romania
Cyprus
Cyprus
Cyprus
Cyprus
Cyprus
Romania
Romania
Romania
Romania
Residential Portfolio
Sec South East
Continent Unique Real
Estate Investments II
Ltd
100
100
100
100
45
100
100
100
100
45
-
-
-
-
-
-
-
-
-
-
During the reporting period the subsidiaries LLC Merelium Investments, LLC Aisi Outdoor, LLC Aisi Vida, LLC Aisi Val,
LLC Aisi Consta, LLC Aisi Roslav and LLC Aisi Donetsk were under the merging process to LLC Aisi Ilvo. The
reorganization (merger) process was completed in 2014 for the companies LLC Aisi Vida, LLC Aisi Val, LLC Aisi Consta
and LLC Aisi Roslav and for the remaining 3 companies (LLC Merelium Investments, LLC Aisi Outdoor and LLC Aisi
Donetsk) the process is expected to be finished in H1 2015.
During the reporting period the Company acquired Innovations Logistics Park (through acquiring Myrnes Innovations
Park Limited in Cyprus), EOS Business Park (through acquiring N-E Real Estate Park First Phase Srl in Romania) and a
Residential Portfolio in Bucharest, Romania (through acquiring Sec South East Continent Unique Real Estate
Investments II Ltd) (Note 16).
CONSOLIDATED FINANCIAL STATEMENTS 2014|41
3. Significant accounting policies (continued)
3.3 Basis of consolidation (continued)
3.3.2 Functional currency
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
subsidiaries, while the parent company and its Cyprus based subsidiaries use either the Euro or the US dollar as the
functional currency.
3.3.3 Presentation currency
These consolidated financial statements are presented in Euro (“€”), which is the Group’s presentation currency. The €
has replaced USD as the presentation currency for the Group as of January 2014 mainly due to:
(a) since implementation of the decision to acquire investment property assets in South-Eastern Europe the
Management of the Group shifted to manage business risks and exposures and measure the
performance of its businesses in Euro;
(b) by the reporting date the majority of its gross property asset holdings of the Group is Euro denominated.
As Management records the consolidated 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 consolidated 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;
Equity of the Group has been translated using the historical rates;
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 of the European and local central banks used in translating the financial information of
the entities from the functional currencies into Euro are as follows:
Average
31 December
2014
1.3285
15.6833
4.4446
2013
1.3281
10.2670
4.4190
2014
1.2141
19.2329
4.4821
2013
1.3791
11.0231
4.4847
2012
1.3194
10.5460
4.4287
Currency
USD
UAH
RON
3.4 Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of
cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently
when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less
than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated
to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit.
Any impairment loss for goodwill is recognized directly in profit or loss in the consolidated statement of comprehensive
income. An impairment loss recognized for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination
of the profit or loss on disposal.
3.5 Non-current assets held for sale
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of
that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the
Group will retain a non-controlling interest in its former subsidiary after the sale.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous
carrying amount and fair value less costs to sell.
CONSOLIDATED FINANCIAL STATEMENTS 2014|42
3. Significant accounting policies (continued)
3.6 Operating segments analysis
Segment reporting is presented on the basis of Management’s perspective and relates to the parts of the Group that
are defined as operating segments. Operating segments are identified on the basis of their economic nature and
through internal reports provided to the Group’s Management who oversee operations and make decisions on
allocating resources serve. These internal reports are prepared to a great extent on the same basis as these
consolidated financial statements.
For the reporting period the Group has identified the following material reportable segments:
Commercial-Industrial
• Warehouse segment – the Group acquires, develops operates and disposes warehouses
• Office segment – the Group acquires, develops operates and disposes offices
Residential
•
Land Assets
•
Residential segment – the Group operates and disposes residential properties
Land assets – the Group owns a number of land assets which are either available for sale or for potential
development
The Group also monitors investment property assets on a Geographical Segmentation, namely the country were its
property is located.
3.7 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated
customer returns, rebates and other similar allowances. It is recognized to the extent that it is probable that the
economic benefits associated with the transaction will flow to the Group and the revenue can be measured reliably.
Revenue earned by the Group is recognized on the following bases:
3.7.1 Income from investing activities
Income from investing activities includes profit received from disposal of investments in the Company’s subsidiaries
and associates and income accrued on advances for investments outstanding as at the year end.
3.7.2 Dividend income
Dividend income from investments is recognized when the shareholders’ right to receive payment has been established
(provided that it is probable that the economic benefits will flow to the Group and the amount of income can be
measured reliably).
3.7.3 Interest income
Interest income is recognized on a time-proportion (accrual) basis, using the effective interest rate method.
3.7.4 Rental income
Rental income arising from operating leases on investment property is recognized on an accrual basis in accordance
with the substance of the relevant agreements.
3.8 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of
those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in the statement of comprehensive income in the period in which they are
incurred as interest costs which are calculated using the effective interest rate method, net result from transactions
with securities, foreign exchange gains and losses, and bank charges and commission.
3.9 Other property expenses
Irrecoverable running costs directly attributable to specific properties within the Group's portfolio are charged to the
statement of comprehensive income. Costs incurred in the improvement of the assets which, in the opinion of the
directors, are not of a capital nature are written off to the statement of comprehensive income as incurred.
CONSOLIDATED FINANCIAL STATEMENTS 2014|43
3. Significant accounting policies (continued)
3.10 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
3.10.1 Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible
in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using
tax rates that have been enacted or substantively enacted by the end of the reporting period.
3.10.2 Deferred tax
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the
determination of deferred tax.
Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when the deferred taxes relate to the same fiscal authority.
3.10.3 Current and deferred tax for the year
Current and deferred tax are recognized in the statement of comprehensive income, except when they relate to items
that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax
are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax
arises from the initial accounting for a business combination, the tax effect is included in the accounting for the
business combination.
The operational subsidiaries of the Group are incorporated in Ukraine and Romania, while the Parent and some holding
companies are incorporated in Cyprus. The Group’s management and control is exercised in Cyprus.
The Group’s Management does not intend to dispose of any asset. However, in the event that a decision is taken in the
future to dispose of any asset it is the Group’s intention to dispose of shares in subsidiaries rather than assets. The
corporate income tax exposure on disposal of development companies in Ukraine is mitigated by the fact that the sale
would represent a disposal of the securities by a non-resident shareholder and therefore would be exempt from tax.
The Group is therefore in a position to control the reversal of any temporary differences and as such, no deferred tax
liability has been provided for in the financial statements.
3.10.4 Withholding Tax
The Group follows the applicable legislation as defined in all double taxation treaties (DTA) between Cyprus and any
of the countries of Operations (Ukraine and Romania. In the case of Romania, as the latter is part of the European
Union, through the relevant directives the withholding tax is reduced to NIL subject to various conditions.).
3.10.5 Dividend distribution
Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s financial statements in
the period in which the dividends are approved by the Company’s shareholders.
3.11 Tangible and intangible assets
Tangible and intangible non-current assets are stated at historical cost less accumulated depreciation and amortization
and any accumulated impairment losses.
Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet
determined and intangibles not inputted into exploitation, are carried at cost, less any recognized impairment loss. Cost
includes professional fees and, for qualifying assets, borrowing costs capitalized in accordance with the Group's
accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the
assets are ready for their intended use.
CONSOLIDATED FINANCIAL STATEMENTS 2014|44
3. Significant accounting policies (continued)
3.11 Tangible and intangible assets (continued)
Depreciation and amortization are calculated on the straight-line basis so as to write off the cost of each asset to its
residual value over its estimated useful life. The annual depreciation rates are as follows:
Type
Leasehold
Citylights
Software and hardware
Motor vehicles
Furniture, fixtures and office equipment
Machinery and equipment
No depreciation is charged on land.
%
20
20
33
25
20
15
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets
or, where shorter, the term of the relevant lease.
The assets residual values and useful lives are reviewed, and adjusted, if appropriate, at each reporting date.
Where the carrying amount of an asset is greater than its estimated recoverable amount, the asset is written down
immediately to its recoverable amount.
Expenditure for repairs and maintenance of tangible and intangible assets is charged to the statement of
comprehensive income of the year in which it is incurred. The cost of major renovations and other subsequent
expenditure are included in the carrying amount of the asset when it is probable that future economic benefits in
excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major
renovations are depreciated over the remaining useful life of the related asset.
An item of tangible and intangible assets is derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item
of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount
of the asset and is recognized in the statement of comprehensive income.
3.12 Share-based compensation
The Group had in the past and intends in the future to operate a number of equity-settled, share-based compensation
plans, under which the Company receives services from Directors and/or employees as consideration for equity
instruments (options) of the Group. The fair value of the Director and employee cost related to services received in
exchange for the grant of the options is recognized as an expense. The total amount to be expensed is determined by
reference to the fair value of the options granted, excluding the impact of any non-market service and performance
vesting conditions. The total amount expensed is recognized over the vesting period, which is the period over which all
of the specified vesting conditions are to be satisfied. At each financial position date, the Group revises its estimates on
the number of options that are expected to vest based on the non-marketing vesting conditions. It recognizes the
impact of the revision to original estimates, if any, in the statement of comprehensive income, with a corresponding
adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share
capital and share premium when the options are exercised.
3.13 Leased assets
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognized as assets of the Group at their fair value at the inception of the lease
or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included
in the consolidated statement of financial position as a finance lease obligation. Lease payments are apportioned
between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are charged to profit or loss, unless they are directly attributable to
qualifying assets, in which case they are capitalized in accordance with the Group's general policy on borrowing costs
(see above).
Lease payments are analyzed between capital and interest components so that the interest element of the payment is
charged to the statement of comprehensive income over the period of the lease and represents a constant proportion
of the balance of capital repayments outstanding. The capital part reduces the amount payable to the lessor.
CONSOLIDATED FINANCIAL STATEMENTS 2014|45
3. Significant accounting policies (continued)
3.14 Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if
any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis
of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they
are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can
be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment
loss annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognized for the asset
(cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss,
unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated
as a revaluation increase.
3.15 Investment properties
Investment property (Note 15), comprising freehold and leasehold land, investment properties held for future
development, warehouse and office properties as well as the residential property units, is held for long term rental
yields and/or for capital appreciation and is not occupied by the Group. Investment property and investment property
under construction are carried at fair value, representing open market value determined annually by external valuers.
Changes in fair values are recorded in the statement of comprehensive income and are included in other operating
income.
A number of the land leases (all in Ukraine) are held for relatively short terms and place an obligation upon the lessee
to complete development by a prescribed date. It is important to note that the rights to complete a development may
be lost or at least delayed if the lessee fails to complete a permitted development within the timescale set out by the
ground lease.
In addition, in the event that a development has not commenced upon the expiry of a lease then the City Authorities
are entitled to decline the granting of a new lease on the basis that the land is not used in accordance with the
designation. Furthermore, where all necessary permissions and consents for the development are not in place, this
may provide the City Authorities with grounds for rescinding or non-renewal of the ground lease. However
Management believes that the possibility of such action is remote and was made only under limited circumstances in
the past.
Management believes that rescinding or non-renewal of the ground lease is remote if a project is on the final stage of
development or on the operating cycle. In undertaking the valuations reported herein, the valuer of Ukrainian
properties CBRE have made the assumption that no such circumstances will arise to permit the City Authorities to
rescind the land lease or not to grant a renewal.
Land held under operating lease is classified and accounted for as investment property when the rest of the definition
is met. The operating lease is accounted for as if it were a finance lease.
Investment property under development or construction initially is measured at cost, including related transaction
costs.
The property is classified in accordance with the intention of the management for its future use. Intention to use is
determined by the Board of Directors after reviewing market conditions, profitability of the projects, ability to finance
the project and obtaining required construction permits.
CONSOLIDATED FINANCIAL STATEMENTS 2014|46
3. Significant accounting policies (continued)
3.15 Investment properties (continued)
The time point, when the intention of the management is finalized is the date of start of construction. At the moment
of start of construction, freehold land, leasehold land and investment properties held for a future redevelopment are
reclassified into investment property under development or inventory in accordance to the final decision of
management.
3.15.1 Initial measurement and recognition
Investment property is measured initially at cost, including related transaction costs. Investment properties are
derecognized when either they have been disposed of or when the investment property is permanently withdrawn
from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or
disposal of an investment property are recognized in the consolidated statement of comprehensive income in the
period of retirement or disposal.
Transfers are made to investment property when, and only when, there is a change in use, evidenced by the end of
owner occupation, or the commencement of an operating lease to third party. Transfers are made from investment
property when, and only when, there is a change in use, evidenced by commencement of owner occupation or
commencement of development with a view to sale.
If an investment property becomes owner occupied, it is reclassified as property, plant and equipment, and its fair
value at the date of reclassification becomes its cost for accounting purposes. Property that is being constructed or
developed for future use as investment property is classified as investment property under construction until
construction or development is complete. At that time, it is reclassified and subsequently accounted for as investment
property.
3.15.2 Subsequent measurement
Subsequent to initial recognition, investment property is stated at fair value. Gains or losses arising from changes in
the fair value of investment property are included in the statement of comprehensive income in the period in which
they arise.
If a valuation obtained for an investment property held under a lease is net of all payments expected to be made, any
related liabilities/assets recognized separately in the statement of financial position are added back/reduced to arrive at
the carrying value of the investment property for accounting purposes.
Subsequent expenditure is charged to the assets’ carrying amount only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other
repairs and maintenance costs are charged to the statement of comprehensive income during the financial period in
which they are incurred.
3.15.3 Basis of valuation
The fair values reflect market conditions at the financial position date. These valuations are prepared annually by
chartered surveyors (hereafter “appraisers”). In 2014, the Company appointed as its valuers:
•
•
CBRE Ukraine, for all its Ukrainian properties, same as last year,
Property Partners Valuation Consulting for all its Romanian properties.
The valuations have been carried out by the appraisers on the basis of Market Value in accordance with the
appropriate sections of the current Practice Statements contained within the Royal Institution of Chartered Surveyors
(“RICS”) Valuation – Professional Standards (2014) (the “Red Book”) and is also compliant with the International
Valuation Standards (IVS).
“Market Value”, is defined as: “The estimated amount for which a property should exchange on the date of valuation
between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties
had each acted knowledgeably, prudently and without compulsion”.
In expressing opinions on Market Value, in certain cases the appraisers have estimated net annual rentals/income from
sale. These are assessed on the assumption that they are the best rent/sale prices at which a new letting/sale of an
interest in property would have been completed at the date of valuation assuming: a willing landlord/buyer; that prior
to the date of valuation there had been a reasonable period (having regard to the nature of the property and the state
of the market) for the proper marketing of the interest, for the agreement of the price and terms and for the
completion of the letting/sale; that the state of the market, levels of value and other circumstances were, on any
earlier assumed date of entering into an agreement for lease/sale, the same as on the valuation date; that no account
is taken of any additional bid by a prospective tenant/buyer with a special interest; that the principal deal conditions
assumed to apply are the same as in the market at the time of valuation; that both parties to the transaction had
acted knowledgeably, prudently and without compulsion.
CONSOLIDATED FINANCIAL STATEMENTS 2014|47
3. Significant accounting policies (continued)
3.15 Investment properties (continued)
A number of properties are held by way of ground leasehold interests granted by the City Authorities. The ground
rental payments of such interests may be reviewed on an annual basis, in either an upwards or downwards direction,
by reference to an established formula. Within the terms of the lease, there is a right to extend the term of the lease
upon expiry in line with the existing terms and conditions thereof. In arriving at opinions of Market Value, the
appraisers assumed that the respective ground leases are capable of extension in accordance with the terms of each
lease. In addition, given that such interests are not assignable, it was assumed that each leasehold interest is held by
way of a special purpose vehicle (“SPV”), and that the shares in the respective SPVs are transferable.
With regard to each of the properties considered, in those instances where project documentation has been agreed
with the respective local authorities, opinions of the appraisers of value have been based on such agreements.
In those instances where the properties are held in part ownership, the valuations assume that these interests are
saleable in the open market without any restriction from the co-owner and that there are no encumbrances within the
share agreements which would impact the sale ability of the properties concerned.
The valuation is exclusive of VAT and no allowances have been made for any expenses of realization or for taxation
which might arise in the event of a disposal of any property.
In some instances the appraisers constructed a Discounted Cash Flow (DCF) model. DCF analysis is a financial
modeling technique based on explicit assumptions regarding the prospective income and expenses of a property or
business. The analysis is a forecast of receipts and disbursements during the period concerned. The forecast is based
on the assessment of market prices for comparable premises, build rates, cost levels etc. from the point of view of a
probable developer.
To these projected cash flows, an appropriate, market-derived discount rate is applied to establish an indication of the
present value of the income stream associated with the property. In this case, it is a development property and thus
estimates of capital outlays, development costs, and anticipated sales income are used to produce net cash flows that
are then discounted over the projected development and marketing periods. The Net Present Value (NPV) of such cash
flows could represent what someone might be willing to pay for the site and is therefore an indicator of market value.
All the payments are projected in nominal US Dollar/Euro amounts and thus incorporate relevant inflation measures.
Valuation Approach
In addition to the above general valuation methodology, the appraisers have taken into account in arriving at Market
Value the following:
Pre Development
In those instances where the nature of the ‘Project’ has been defined, it was assumed that the subject property will be
developed in accordance with this blueprint. The final outcome of the development of the property is determined by
the Board of Directors decision, which is based on existing market conditions, profitability of the project, ability to
finance the project and obtaining required construction permits.
Development
In terms of construction costs, the budgeted costs have been taken into account in considering opinions of value.
However, the appraisers have also had regard to current construction rates prevailing in the market which a
prospective purchaser may deem appropriate to adopt in constructing each individual scheme. Although in some
instances the appraisers have adopted the budgeted costs provided, in some cases the appraisers’ own opinions of
costs were used.
Post Development
Rental values have been assessed as at the date of valuation but having regard to the existing occupational markets
taking into account the likely supply and demand dynamics during the anticipated development period. The standard
letting fees were assumed within the valuations. In arriving at their estimates of gross development value (“GDV”), the
appraisers have capitalized their opinion of net operating income, having deducted any anticipated non-recoverable
expenses, such as land payments, and permanent void allowance, which has then been capitalized into perpetuity.
The capitalization rates adopted in arriving at the opinions of GDV reflect the appraisers’ opinions of the rates at which
the properties could be sold as at the date of valuation.
In terms of residential developments, the sales prices per sq. m. again reflect current market conditions and represent
those levels the appraisers consider to be achievable at present. It was assumed that there are no irrecoverable
operating expenses and that all costs will be recovered from the occupiers/owners by way of a service charge.
The valuations take into account the requirement to pay ground rental payments and these are assumed not to be
recoverable from the occupiers. In terms of ground rent payments, the appraisers have assessed these on the basis of
information available, and if not available they have calculated these payments based on current legislation defining
the basis of these assessments. Property tax is not presently payable in Ukraine.
CONSOLIDATED FINANCIAL STATEMENTS 2014|48
3. Significant accounting policies (continued)
3.16 Non-current liabilities
Non-current liabilities represent amounts that are due in more than twelve months from the reporting date.
3.17 Asset Acquisition Related Transaction Expenses
Expenses incurred by the Group for acquiring a subsidiary or associate company as part of an Investment Property and
are directly attributable to such acquisition are recognized within the cost of the Investment Property and are
subsequently accounted as per the Group’s accounting Policy for Investment Property subsequent measurement
(Note 3.16.2).
3.18 Provisions
Provisions are recognized when the Group has a present obligation (legal, tax or constructive) as a result of a past
event, it is probable that the Group will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. As at the reporting date the Group has settled all its construction liabilities.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation
at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a
provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the
present value of those cash flows (where the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
3.19 Financial liabilities and equity instruments
3.19.1 Classification as debt or equity
Debt and equity instruments issued by a Group entity are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity
instrument.
3.19.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.
Ordinary shares are classified as equity. The difference between the fair value of the consideration received by the
Company and the nominal value of the share capital being issued is taken to the share premium account.
Share premium account can only be resorted to for limited purposes, which don’t include the distribution of dividends,
and is otherwise subject to the provisions of the Cyprus Companies Law on reduction of share capital.
Repurchase of the Company's own equity instruments is recognized and deducted directly in equity. No gain or loss is
recognized in the statement of comprehensive income on the purchase, sale, issue or cancellation of the Company's
own equity instruments.
3.19.3 Financial liabilities
Financial liabilities are classified as either financial liabilities “at Fair Value Through Profit or Loss” or “other financial
liabilities”.
3.19.3.1 Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as
at FVTPL.
A financial liability is classified as held for trading if:
•
•
it has been acquired principally for the purpose of repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together
and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
CONSOLIDATED FINANCIAL STATEMENTS 2014|49
3. Significant accounting policies (continued)
3.19 Financial liabilities and equity instruments (continued)
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition
if:
•
•
•
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and
its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management
or investment strategy, and information about the grouping is provided internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments:
Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at
FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement
recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the
financial liability and is included in the “other gains and losses” line item in the consolidated statement of
comprehensive income.
3.19.3.2 Other financial liabilities
Other financial liabilities (including borrowings) are subsequently measured at amortized cost using the effective
interest method.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash payments (including all fees and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where
appropriate) a shorter period, to the net carrying amount on initial recognition.
Preference shares, which may be redeemable on a specific date, are classified as liabilities. The dividends, if any, on
these preference shares are recognized in the income statement as interest expense.
3.19.3.3 De-recognition of financial liabilities
The Group derecognizes financial liabilities when, and only when, the Group's obligations are discharged, cancelled or
they expire. The difference between the carrying amount of the financial liability derecognized and the consideration
paid and payable is recognized in profit or loss.
3.20 Value added tax
VAT is levied at the following rates:
•
•
•
20% on Ukrainian domestic sales and imports of goods, works and services and 0% on export of goods and
provision of works or services to be used outside Ukraine.
19% on Cyprus domestic sales and imports of goods, works and services and 0% on export of goods and
provision of works or services to be used outside Cyprus.
24% on Romanian domestic sales and imports of goods, works and services and 0% on export of goods and
provision of works or services to be used outside Romania.
A taxpayer’s VAT liability equals the total amount of VAT collected within a reporting period, and arises on the earlier
of the date of shipping goods to a customer or the date of receiving payment from the customer. A VAT credit is the
amount that a taxpayer is entitled to offset against his VAT liability in a reporting period. Rights to VAT credit arise on
the earlier of the date of payment to the supplier or the date goods are received. The part of VAT credit expected to
be recovered in the long-term prospective is classified as non-current being discounted for reflecting principal market
assumptions as to projects realization. Initial loss on discounting VAT credit, non-current was recognized as part of
finance costs.
3.21 Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of
financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there
is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. This is not
generally the case with master netting agreements, and the related assets and liabilities are presented gross in the
consolidated statement of financial position.
3.22 Earnings and Net Assets value per share
The Group presents basic and diluted earnings per share (EPS) and net asset value per share (NAV) for its ordinary
shares.
CONSOLIDATED FINANCIAL STATEMENTS 2014|50
3. Significant accounting policies (continued)
3.22 Earnings and Net Assets value per share (continued)
Basic EPS amounts are calculated by dividing net profit/loss for the year, attributable to ordinary equity holders of the
Company by the weighted average number of ordinary shares outstanding during the year. Basic NAV amounts are
calculated by dividing net asset value as at year end, attributable to ordinary equity holders of the Company by the
number of ordinary shares outstanding at the end of the year.
Diluted EPS is calculated by dividing net profit/loss for the year, attributable to ordinary equity holders of the parent,
by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of
ordinary shares that would be issued on conversion of all the potentially dilutive ordinary shares into ordinary shares.
Diluted NAV is calculated by dividing net asset value as at year end, attributable to ordinary equity holders of the
parent with the number of ordinary shares outstanding at year end plus the number of ordinary shares that would be
issued on conversion of all the potentially dilutive ordinary shares into ordinary shares.
4. Financial risk management
4.1 Financial risk factors
The Group is exposed to 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 30 of the consolidated 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 one year 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.
CONSOLIDATED FINANCIAL STATEMENTS 2014|51
4. Financial risk management (continued)
4.1 Financial risk factors (continued)
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 engaged recently in a loan agreement with the IMF, having already received two tranches of the
loan for ongoing fiscal consolidation. The future remains uncertain for the country, even though the two elections (the
presidential in May and the Parliamentary in October) have resulted in a pro-European government. Should the IMF
reforms are implemented, the country’s economy has the potential to boom. In any event 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. These
borrowings will be conditioned on 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; Further negative developments on these fronts may result in Ukraine not finding adequate
financing which could have a material adverse effect on the Ukrainian economy as a whole, and thus, on the Group’s
business prospects.
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.
It should also be noted that during the last twelve months the Ukrainian Hryvnia lost value against the major foreign
currencies and 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 31 December 2014
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.
4.1.2 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;
CONSOLIDATED FINANCIAL STATEMENTS 2014|52
4. Financial risk management (continued)
4.1 Financial risk factors (continued)
•
•
•
•
•
•
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.
CONSOLIDATED FINANCIAL STATEMENTS 2014|53
4. Financial risk management (continued)
4.1 Financial risk factors (continued)
Apart from liquidity maintained in local currency for operating reasons the Group’s liquid assets are held in USD/€
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 result in effecting the Group’s
income streams indirectly through affecting the financial condition of the tenants of the Group’s properties.
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 30 of the consolidated 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. The Group's exposures are discussed under Notes 29 & 30.
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 preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates
and requires Management to exercise its judgment in the process of applying the Group's accounting policies. It also
requires the use of assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. These estimates are based on Management's best knowledge of current events and actions and
other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Actual results though may ultimately differ from those estimates.
As the Group makes estimates and assumptions concerning the future the resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
discussed below:
Provision for impairment of receivables
•
The Group reviews its trade and other receivables for evidence of their recoverability. Such evidence includes the
counter party's payment record, and overall financial position as well as the state's ability to pay its dues (VAT
receivable). If indications of non-recoverability exist, the recoverable amount is estimated and a respective provision
for impairment of receivables is made. The amount of the provision is charged through profit or loss. The review of
credit risk is continuous and the methodology and assumptions used for estimating the provision are reviewed
regularly and adjusted accordingly. As at the reporting date Management did not consider necessary to make a
provision for impairment of receivables.
Fair value of investment property
•
The fair value of investment property is determined by using various valuation techniques. The Group selects highly
reputed international companies with local presence to effect such valuations. Such valuers use their judgment to
select a variety of methods and make assumptions that are mainly based on market conditions existing at each
financial reporting date. The fair value has been estimated as at 31 December 2014 (Note 4.3 & 15).
CONSOLIDATED FINANCIAL STATEMENTS 2014|54
5. Critical accounting estimates and judgments (continued)
Income taxes
•
Significant judgment is required in determining the provision for income taxes. There are transactions and calculations
for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes
liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final
tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact
the income tax and deferred tax provisions in the period in which such determination is made.
Impairment of tangible assets
•
Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which
the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair
value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating units).
Provision for deferred taxes
•
Deferred tax is not provided in respect of the revaluation of the investment property and investment property under
construction as the Group is able to control the timing of the reversal of this temporary difference and the
Management has intention not to reverse the temporary difference in the foreseeable future. The properties are held
by subsidiary companies in Ukraine and Romania. Management estimates that the assets will be realized through a
share deal rather than through an asset deal. Should any subsidiary be disposed of, the gains generated from the
disposal will be exempt from any tax.
Application of IFRS 10
•
The Group has considered the application of IFRS 10 and concluded that the Company is not an Investment Entity as
defined in IFRS 10 and it should continue to consolidate all of its investments. The reasons for such conclusion are
among others that the Company:
a) is not an Investment Management Service provider to Investors,
b) actively manages its own portfolio (leasing, development, allocation of capital expenditure for its properties,
marketing etc) in order to provide benefits other than capital appreciation and/or investment income
c) has investments that are not bound by time in relation to the exit strategy nor to the way that are being
exploited
d) provides asset management services to its subsidiaries as well as loans and guarantees (directly or indirectly)
e) even though is using Fair Value metrics in evaluating is investments, this is being done primarily for
presentation purposes rather that evaluating income generating capability and making investment decisions.
The latter is being based on metrics like IRR, ROE and others.
6. Earnings and net assets per share attributable to equity holders of the parent
a. Weighted average number of ordinary shares
Issued ordinary shares capital
Weighted average number of ordinary shares (Basic)
Diluted weighted average number of ordinary shares
b.
Basic diluted and adjusted earnings per share
Earnings per share (€)
Profit/(loss) after tax attributable to owners of the parent
Basic
Diluted
c.
Net assets per share
Net assets per share (€)
Net assets attributable to equity holders of the parent
Number of ordinary shares
Diluted number of ordinary shares
Basic
Diluted
2014
33.884.054
30.037.571
34.204.860
2014
927.337
0,03
0,03
2013
28.171.833
24.790.668
28.765.486
2013
(139.408)
(0,01)
(0,00)
31/12/2014
31/12/2013
32.560.472
33.884.054
38.866.775
0,96
0,84
37.678.768
28.171.833
32.196.381
1,34
1,17
CONSOLIDATED FINANCIAL STATEMENTS 2014|55
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:
Commercial-Industrial
•
•
Warehouse segment – the Group acquires, develops operates and disposes warehouses
Office segment – the Group acquires, develops operates and disposes offices
Residential
•
Residential segment – the Group operates and disposes 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. These are the only liabilities to the
Board on the segmental basis.
For the year 2014 (€)
Segment profit
Sales income
Cost of sales
Rental income
Service charges and utilities income
Valuation gains/(losses) from
investment property
Segment profit
Gain realized on acquisition of
subsidiaries (Note 16)
Investment properties operating
expenses
Administration expenses
Other (expenses)/income, net
Finance costs (net)
Foreign exchange losses, net
Profit before tax
31/12/2014 (€)
Assets
Investment properties
Investment property under construction
Prepayments made for investments
Goodwill
Long-term receivables
Segment assets
Tangible and intangible assets
Prepayments and other current assets
Cash and cash equivalents
Total assets
Interest bearing borrowings
Finance lease liabilities
Deposits from tenants
Redeemable preference shares
Provision
Segment liabilities
Trade and other payables
Taxes payable
Total liabilities
Warehouse
Office Residential Land Plots
Total
-
-
2.857.904
506.599
-
-
46.601
6.971
107.917
(93.459)
159.370
-
10.328.525
13.693.028
550.000
(1.581.000)
603.572 (1.407.172)
-
-
-
(598.328)
-
-
-
-
13.094.700
(38.869)
-
-
-
-
(23.066)
-
-
-
-
564.703 (1.430.238)
-
-
-
-
107.917
(93.459)
3.063.875
513.570
-
9.297.525
- 12.889.428
-
-
-
-
-
-
-
766.221
(660.263)
(2.743.723)
(136.058)
(1.414.400)
(7.512.640)
1.188.565
Warehouse
Office Residential
Land plots
Total
8.373.000
-
-
-
-
6.400.000
-
-
43.269
-
31.463.310
-
624.841
-
125.909
53.533.187
5.083.216
2.674.219
43.269
125.909
32.214.060 6.443.269 8.373.000 14.429.471 61.459.800
200.203
-
4.251.489
-
-
891.938
66.803.430
7.296.877
5.083.216
2.049.378
-
-
-
-
-
-
-
-
-
-
-
-
3.981.252
-
-
-
11.756.612
7.594.863
621.129
698.650
-
6.459.810
-
40.281
-
-
20.671.254 3.981.252 6.500.091
-
-
-
-
-
-
-
68.861
-
-
68.253
18.216.422
11.644.976
661.410
698.650
68.253
137.114 31.289.711
1.869.537
-
-
431.828
33.591.076
CONSOLIDATED FINANCIAL STATEMENTS 2014|56
7. Segment information (continued)
For 2013, the Group had income only from the warehouse segment and only from Ukraine. Also in 2013 the Group had
the same land properties as in 2014 (in Ukraine only).
Geographical information
Revenue from external customers (€)
Ukraine
Romania
Total
Carrying amount of investment property, including under
construction and prepayments made for investments (€)
Ukraine
Romania
Greece
Total
8. Revenues
2014
2.439.780
1.152.123
3.591.903
2013
2.717.166
-
2.717.166
31/12/2014
31/12/2013
31.076.390
28.773.000
624.841
60.474.231
38.865.927
-
-
38.865.927
Operational income in the amount of €3.591.903 for the year ended 31 December 2014 represents rental and sales
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 as well as Residential Portfolio while for 2013 it was only generated by Terminal Brovary.
€
Sales income
Cost of sales
Rental income
Service charges and utilities income (Note 10)
Total Revenues
2014
107.917
(93.459)
3.063.875
513.570
3.591.903
2013
-
-
2.137.448
579.718
2.717.166
Warehouse space vacancy rate of the Terminal Brovary was at 6% as at 31 December 2014 (Note 15). As of the end
of the reporting period Innovations was 100% leased, EOS Business Park was 100% leased and Residential Portfolio
was 60% leased.
Sales income represent several apartments and parking spaces sold in Residential Portfolio while Costs of sales
represent the acquisition value of the apartment and parking space reduced by the related depreciation amount until
the finalisation of the sale.
Valuation gains/(losses) from investment property for the reporting period are presented in the table below. This table
needs to be read in conjunction with Note 15 which incorporates foreign exchange translation differences.
Project Name
(€)
Brovary Logistic Park
Bela Logistic Center
Kiyanovskiy Lane
Tsymlyanskiy Lane
Balabino
Rozhny Lane
Innovations Logistics Park
EOS Business Park
Residential Portfolio
Total
Valuation gains/(losses)
2014
8.512.454
1.646.852
1.155.225
184.450
269.744
(2.440.200)
1.000.000
550.000
(1.581.000)
9.297.525
2013
(66.546)
486.894
(26.346)
30.109
210.956
-
-
-
-
635.067
CONSOLIDATED FINANCIAL STATEMENTS 2014|57
9. Administration Expenses
(€)
Salaries and Wages
Legal fees
Advisory fees
Administrative expenses
Directors remuneration
Audit and accounting fees
Public group expenses
Taxes and duties
Depreciation
Other expenses
Total Administration Expenses
2014
807.714
410.394
380.525
238.431
171.197
143.261
101.780
76.199
17.897
396.325
2.743.723
2013
761.317
525.919
487.564
152.731
168.573
110.968
166.899
89.586
12.163
-
2.475.720
Salaries and wages include the remuneration:
a) of the CEO, the CFO, the Group Commercial Director and the Managing Directors of Ukraine and Romania
b) of personnel employed in Ukraine and Romania
Legal and Advisory fees relate to expenses incurred by the Company in relation to Ukrainian and Romanian operations,
as well as to capital raising and corporate matters.
Administrative expenses included office expenses for Cyprus, Romania and Ukraine.
Directors’ remuneration represents the remuneration of all non-executive Directors and committee members.
Public group expenses include among others fees paid to the AIM: LSE stock exchange and the Nominated Advisor of
the Company as well as marketing and other expenses related to the listing of the Company.
Other expenses include due diligence costs for projects which have not been acquired and which were presented
previously under deferred expenses category (Note 18). Such expense has been recorded at the moment of the
decision not to proceed with the acquisition of the said assets.
10. Investment property operating expenses
(€)
Property management, utility expenses and other property costs
2014
2013
660.263
543.217
The Group has Maintenance and Property Management Agreements in respect of the servicing of Terminal Brovary
Logistics Park and the Innovation 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 (Note 8).
11. Other expenses/(income), net
(€)
Accounts payable written off
Provision on prepayments and other current assets impairment/(reversal)
Penalties
Other expenses/(income), net
Total
2014
(12.422)
3.973
10.168
134.339
136.058
2013
(395.081)
(10.017)
63.202
(153.878)
(495.774)
Accounts payable written off represents the total amount of payables written off as a result of negotiations
and settlement during the reorganization of the Group that started in August 2011.
Provision for prepayments and other current assets impairment - reversal represents difference between
allowances for prepayments and other current assets estimated previously by the Management and the
amounts which have been finally settled.
Penalties incurred by the Group were mainly caused as a result of delayed payments of its liabilities due to
negotiations.
Other income net in 2013 includes a provisional income of US$200.000 for advisory services, one off
agency related expenses for the letting of Terminal Brovary and previous year expense write offs. In 2014,
other income includes one off agency fees related for the letting of Terminal Brovary as well as other
extraordinary one off expenses.
CONSOLIDATED FINANCIAL STATEMENTS 2014|58
12. Finance costs, net
Borrowing interest expenses (Note 23, 27)
Finance lease interest expenses
Finance charges and commissions
Bank interest income
Other finance expense
Net finance cost
2014
€
1.091.474
293.749
68.744
(80.895)
41.328
1.414.400
2013
€
1.029.898
57.643
46.928
(100.013)
-
1.034.456
Borrowing interest expenses represents interest paid on the borrowings of the Group for EBRD facility of Terminal
Brovary as well as for Residential Portfolio (Note 23).
Finance leasing interest expenses relate to the sales and lease back agreement 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 (Note 27).
Finance charges and commissions include fees paid to the banks.
13. Foreign exchange losses, net
The foreign exchange losses, net in 2014 derived mainly from the USD-denominated interest bearing borrowing
provided by EBRD to the Group’s Ukrainian subsidiary LLC Terminal Brovary (Note 23). The loss was caused by the
huge devaluation of UAH against USD through 2014.
14. Tax
Current income and defence tax expense
Taxes
2014
€
2013
€
220.476
220.476
125.722
125.722
The income tax rate for the year ended 31/12/2014 for the Company’s Ukrainian subsidiaries is 19%, for the Romanian
subsidiaries is 16% and for the Company and its Cypriot subsidiaries is 12.5%.
The tax on the Group's results differs from the theoretical amount that would arise using the applicable tax rates as
follows:
Profit / (loss) before tax
Tax calculated on applicable rates
Expenses not recognized for tax purposes
Tax effect of allowances and income not subject to tax
Tax effect on tax losses for the year
Tax effect on tax losses brought forward
10% additional tax
Defence tax
Overseas tax in excess of credit claim used during the year
Prior year tax
Total Tax
2014
€
2013
€
1.188.565
(3.434)
318.134
941.488
(139.164)
(882.377)
(43.807)
13.989
2.656
6.598
2.959
220.476
(429)
292.166
(162.031)
-
(31.070)
10.032
17.054
-
-
125.722
As from 1 January 2008, deferred tax is not provided in respect of the revaluation of the investment property and
investment property under construction as the Group is able to control the timing of the reversal of this temporary
difference and the Management has intention not to reverse the temporary difference in the foreseeable future, the
properties are held by subsidiary companies in Ukraine. Management estimates that the assets will be realized through
a share deal rather than through an asset deal. Should any subsidiary be disposed of, the gains generated from the
disposal will be exempted from any tax. The respective reversal of previously accrued Deferred Tax Liabilities has been
made in 2008.
CONSOLIDATED FINANCIAL STATEMENTS 2014|59
15. Investment Property
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 its warehouse space is 94% leased.
Innovations Logistic Park is a 15.750 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 Group in May 2014 and is 100% leased at the end
of the reporting period.
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.
• Residential portfolio is an income producing residential portfolio in Bucharest, Romania consisting of 122
apartments totalling approximately 11.700 sqm across four separate complexes (Romfelt, Linda, Monaco,
Blooming House) located in different residential areas of Bucharest. The Group acquired it in August 2014 and
the portfolio is 60% let at the year end.
• Bela Logistic Center is a 22,4Ha 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 sqm 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 neighborhood.
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.
• GED Logistic Park is an income producing logistics park in Athens, Greece. The property comprises a fully
let 17.756 sqm warehouse property which also has a photovoltaic alternative energy production facility
installed on its roof. As at 31 December 2014 the Group made a prepayment for the asset in the amount of
€624.841. The acquisition of the asset was concluded in March 2015.
(€)
Type
Carrying
amount
31/12/2014
Foreign
Exchange
Translation
difference
(9.382.086)
Fair Value
gain/(loss)
Additions/
acquisitions
2014
Carrying
amount
31/12/2013
8.512.454
60.155
18.272.787
Industrial
17.463.310
Asset Name
Terminal
Brovary Logistic
Park
Bela Logistic
Center
Kiyanovskiy
Lane
Tsymlyanskiy
Lane
Balabino
Sub total
Total Ukraine
Innovations
Logistics Park
EOS Business
Park
Residential
portfolio
Total Romania
TOTAL
Land
Land
Land
Land
Industrial
5.083.216
(3.089.631)
1.646.852
4.017.381
(2.503.662)
1.155.225
1.147.823
(776.892)
184.450
2.131.673
29.843.403
14.000.000
(1.473.579)
269.743
(17.225.850) 11.768.724
(5.457.126)
-
1.000.000
-
-
-
-
6.525.995
5.365.818
1.740.265
3.335.509
60.155
13.000.000
35.240.374
-
Office
6.400.000
Residential
8.373.000
-
-
550.000
5.850.000
(1.581.000)
9.954.000
-
-
28.773.000
58.616.403
(31.000)
(5.488.126)
28.804.000
28.864.155
-
35.240.374
The fair value of the properties held by the Group in Ukraine has decreased as a result of the political uncertainty by
€7.897.325 including a €2.440.200 write-off of a down payment for the acquisition of a property in 2008 (Note 15c).
The functional currencies of the subsidiaries are the currencies of their primary local economic environments and in
terms of local currencies the fair values have increased (Note 8), even though the equivalent of these fair values
compared to the Group’s presentation currency are actually less due to the devaluation of the local currency.
CONSOLIDATED FINANCIAL STATEMENTS 2014|60
15. Investment Property (continued)
The above two components comprising the fair value loss are presented in accordance with the requirements of IFRS
in the consolidated statement of comprehensive income as follows:
a. The fair value gain in terms of the local functional currencies of €9.297.525 , is presented as Valuation
gains/(losses) from investment properties is carried forward in Accumulated losses; and,
b. The translation loss due to the devaluation of local currencies of €17.225.850 is presented as part of the
exchange difference on translation of foreign operations in other comprehensive income and then carried
forward in the Foreign currency translation reserve.
Carrying amounts of the properties represent fair value estimates as of 31 December 2014 as provided by CBRE
Ukraine and Property Partners Valuation Consulting, the external valuers.
a. Investment Property Under Construction
(€)
At 1 January
Revaluation on investment property
Translation difference
At 31 December
2014
6.525.995
1.646.852
2013
6.331.030
487.041
(3.089.631)
(292.076)
5.083.216
6.525.995
As at 31 December 2014 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.
b. Investment Property
(€)
At 1 January
Capital expenditure on investment property
Acquisitions of investment property
Revaluation gain/(loss) on investment property
Translation difference
At 31 December
2014
2013
28.714.379
29.733.212
60.155
130.657
28.744.000
10.090.872
-
148.027
(14.076.219)
(1.297.517)
53.533.187
28.714.379
Terminal Brovary, Kiyanovskiy Lane, Tsymlyanskiy Lane, Balabino, Innovations Logistics Park, EOS Business Park and
Residential Portfolio are included in the Investment Property category.
c. Prepayment made for Investments
(€)
Advances for investments
Impairment provision (cumulative as of the reporting period)
Total
31/12/2014
31/12/2013
10.377.372
8.585.706
(7.703.153)
(4.960.153)
2.674.219
3.625.553
The Group has made an advance payment of ~US$12mil. (representing principal plus interest) for the acquisition of a
project in Podil (Kyiv) in 2007. As of the end of the reporting period Management continues on its effort to collect the
original US $12mil and to enforce on the collateral (land plot of 42 ha in Kiev Oblast) by transferring it in the Group’s
name. 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.
In respect of the Fair Value of Investment Properties the following table represents an analysis based on the various
valuation methods. The different levels have been defined as follows:
-
-
-
Level 1 relates to quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 relates to inputs other than quoted prices that are observable for the asset or liability indirectly (that
is, derived from prices). Level 2 fair values of investment properties have been derived using the market value
approach by comparing the subject asset with similar assets for which price information is available. Under
this approach the first step is to consider the prices for transactions of similar assets that have occurred
recently in the market. The most significant input into this valuation approach is price per square meter.
Level 3 relates to inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs). Level 3 valuations have been performed by the external valuer using the income
approach (discounted cash flow) due to the lack of similar sales in the local market (unobservable inputs).
CONSOLIDATED FINANCIAL STATEMENTS 2014|61
15. Investment Property (continued)
To derive Fair Values the Group has adopted a combination of income and market approach weighted according to the
predominant local market and economic conditions.
Fair value measurements at 31 December 2014 (€)
(Level 1) (Level 2)
(Level 3)
Total
Recurring fair value measurements
Balabino- Zaporizhia
Tsymlyanskiy – Podil, Kyiv City Center
Bela Logistics Center- Odessa
Terminal Brovary Logistics Park- Brovary Kyiv Oblast
Kiyanovskiy Lane – Podil, Kyiv City Center
Innovations Logistics Park – Bucharest
EOS Business Park – Bucharest, City Center
Residential Portfolio - Bucharest
-
-
-
-
-
-
-
-
2.131.671
-
2.131.671
-
1.147.823
1.147.823
5.083.216
-
5.083.216
- 17.463.310
17.463.310
-
4.017.381
4.017.381
- 14.000.000
14.000.000
-
6.400.000
6.400.000
8.373.000
-
8.373.000
Fair value measurements at 31 December 2013 (€)
(Level 1) (Level 2)
(Level 3)
Total
Recurring fair value measurements
Balabino- Zaporizhia
Tsymlyanskiy – Podil, Kyiv City Center
Bela Logistics Center- Odessa
Terminal Brovary Logistics Park- Brovary Kyiv Oblast
Kiyanovskiy Lane – Podil, Kyiv City Center
-
-
-
-
-
3.335.509
-
3.335.509
-
1.740.265
1.740.265
6.525.995
-
6.525.995
- 18.272.787
18.272.787
-
5.365.818
5.365.818
The table below shows yearly adjustments for Level 3 investment property valuations:
Level 3 Fair value
measurements at
31/12/14 (€)
Opening balance
Terminal
Brovary
Logistics Park
18.272.787
Kiyanovskiy
Lane
Tsymlyan
skiy
Innovations
Logistics
Park
EOS
Business
Park
Total
5.365.818 1.740.265
-
-
25.378.870
Acquisitions
Additions
Disposals
-
60.155
-
-
-
-
-
-
-
13.000.000
5.850.000
18.850.000
-
-
-
-
60.155
-
Profit on revaluation
8.512.454
1.155.225
184.450
1.000.000
550.000
11.402.129
Translation
difference
Closing balance
(9.382.086)
17.463.310
(2.503.662)
4.017.381 1.147.823
(776.892)
-
-
14.000.000 6.400.000
(12.662.640)
43.028.514
Level 3 Fair value
measurements at
31/12/13 2013 (€)
Opening balance
Transfer to level 2 due to
change of valuation
methods
Profit on revaluation
Terminal
Brovary
Logistics Park
19.035.168
Kiyanovskiy
Lane
Tsymlyanskiy Bela Logistic
Total
Center
5.635.137
1.788.692
6.331.030
32.790.027
-
64.001
-
(26.353)
-
30.118
(6.289.557)
-
(6.289.557)
67.766
Translation difference
(826.382)
(242.966)
(78.545)
(41.473)
(1.189.366)
Closing balance
18.272.787
5.365.818
1.740.265
-
25.378.870
CONSOLIDATED FINANCIAL STATEMENTS 2014|62
15. Investment Property (continued)
Information about Level 3 Fair Values is presented below:
(€)
Terminal Brovary
Logistics Park-
Brovary Kiev
Oblast
Kiyanovskiy Lane
– Podil Kiev City
Center
Tsymlyanskiy –
Podil Kiev City
Center
Innovations
Logistics Park –
Bucharest
EOS Business
Park – Bucharest,
City Center
Fair value at
31 December
2014
17.463.310
Fair value at
31 December
2013
19.035.168 Combined
Valuation
technique
market and
income
approach
4.017.381
1.147.823
5.635.137 Combined
market and
income
approach
1.788.692 Combined
14.000.000
6.400.000
market and
income
approach
Income
approach
Income
approach
-
-
Unobservable
inputs
Future rental
income and
costs for 11
months, yield
rate
Future rental
income and
costs for 4 years
Relationship of
unobservable inputs to
fair value
The higher the estimated
price of rental income the
higher the fair value. The
higher the yield rate, the
lower fair value
The higher the price of
sales/rental income the
higher the fair value
Future rental
income and
costs for 4 years
The higher the price of
sales/rental income the
higher the fair value
Future rental
income and
costs for 10
years
Future rental
income and
costs for 10
years
The higher the price of
sales/rental income the
higher the fair value
The higher the price of
sales/rental income the
higher the fair value
16. Investment Property Acquisitions
In May 2014, the Group acquired 100% of the shares of Myrnes Innovations Park Limited (“Myrnes”), a Cyprus
registered company which in turns owns 100% of the shares of Best Day Real Estate SRL (“Best Day”), a Romanian
entity, owner of a multipurpose warehousing space in South Bucharest, Romania. The purchase price was funded by
€4,4 million of the Company’s existing cash resources and by issuance of 785.000 redeemable preference shares to the
sellers of the asset. The then existing leasing contracted with the Bank of Piraeus Romania and associated with the
asset of €7.500.000 remained (Note 27).
The acquisition of Residential Portfolio was completed in August 2014. The Company acquired all the shares of SEC
South East Continent Unique Real Estate Investments II Ltd in exchange for 3.702.910 of the Company’s shares. No
cash consideration was paid for this acquisition. Lambros Anagnostopoulos (a director and the CEO of the Company)
and Constantinos Bitros (the CFO of the Company) had small stakes in the Portfolio (less than 5% in aggregate) and
received 133.437 and 33.357 SPDI shares respectively.
The acquisition of EOS Business Park in Bucharest was completed in October 2014. SECURE PROPERTY DEVELOPMENT
& INVESTMENT Srl a subsidiary of the Company acquired the shares of NE REAL ESTATE PARK FIRST PHASE Srl,
owner of the property. The acquisition price was €5,85 million with €1,85 million being the cash consideration with the
remainder funded by a sales and lease back with Alpha Bank Romania (Note 27).
The fair value of identifiable assets and liabilities of acquired subsidiaries as of the date of their acquisition was as
follows:
(€)
ASSETS
Non-current assets
Investment property
Tangible and intangible assets
Other non-current assets
Current assets
Cash and cash equivalents
Trade and other receivables
Total assets
Innovations
Logistics Park
Residential
Portfolio
EOS Business
Park
Total
13.000.000
-
124.396
13.124.396
9.894.000
5.701
510
9,900,211
30.823
-
30.823
13.155.219
134.667
178.176
312.843
10.213.054
5.850.000
7.584
-
5.857.584
83.864
2.445.863
2.529.727
8.387.311
28.744.000
13.285
124.906
28.882.191
249.354
2.624.039
2.873.393
31.755.584
CONSOLIDATED FINANCIAL STATEMENTS 2014|63
16. Investment Property Acquisitions (continued)
(€)
LIABILITIES
Non-current liabilities
Interest bearing borrowings
Finance lease liabilities
Deposits from tenants
Current liabilities
Interest bearing borrowings
Finance lease liabilities
Trade and other payables
Total liabilities
Innovations
Logistics Park
Residential
Portfolio
EOS Business
Park
Total
-
7.414.992
-
7.414.992
85.008
192.592
277,600
7.692.592
6.311.417
-
57.749
6.369.166
75.560
-
574.118
649.678
7.018.844
-
3.905.656
-
3.905.656
-
85.954
41.336
127.290
4.032.946
6.311.417
11.320.648
57.749
17.689.814
75.560
170.962
808.046
1.054.568
18.744.382
Net assets acquired
Non-controlling interest
5.462.627
-
3.194.210
248.668
4.354.365
-
13.011.202
248.668
Financed by
Cash consideration paid
Issuance of redeemable-convertible
shares
Issuance of ordinary shares
Accounts receivable swap (netting)
Total consideration
4.372.000
698.650
-
-
5.070.650
-
-
3.068.634
-
3.068.634
2.087.608
6.459.608
-
-
2.310.026
4.397.634
698.650
3.068.634
2.310.026
12.536.918
Gain realized on acquisition
Goodwill
391.977
-
374.244
-
-
43.269
766.221
43.269
Cash outflow/(inflow) on
acquisition
17. Tangible and intangible assets
4.341.177
(134.667)
2.003.744
6.210.254
As at 31 December 2014 (2013: nil) the intangible assets were composed of the capitalized expenditure on the
Enterprise Resource Planning system in the amount of € 53.784. No amortization has been recognized as the system is
under implementation.
As at 31 December 2014 and 2013 the tangible non-current assets mainly consisted of the machinery and equipment
used for the servicing the Group's investment properties in Ukraine and Romania.
18. Prepayments and other current assets
(€)
Prepayments and other current assets
VAT and other tax receivable
Deferred expenses
Total
31/12/2014
31/12/2013
922.115
1.229.057
2.100.317
4.251.489
566.443
2.637.409
391.889
3.595.741
Prepayments and other current assets as at the end of the reporting period mainly reflects the payments made in
respect to share capital increases and due diligence services.
VAT and other tax receivable is mainly represented the current portion of the Terminal Brovary VAT receivable, to be
offset from VAT charged over rental income during the next years. The decrease is mainly attributable to the UAH
devaluation during the reporting period as well as set off through VAT charged to Terminal Brovary tenants through
rental invoicing.
Deferred expenses include legal, advisory, consulting and marketing expenses related to the ongoing share capital
increase, due diligence expenses related to the possible acquisition of investment properties and prepayments made
for investment properties acquisition.
CONSOLIDATED FINANCIAL STATEMENTS 2014|64
19. Cash and cash equivalents
Cash and cash equivalents represent liquidity held at banks.
(€)
Cash with banks in USD
Cash with banks in €
Cash with banks in UAH
Cash with banks in RON
Cash equivalents
Total
31/12/2014
31/12/2013
43.612
495.052
150.029
201.984
1.261
891.938
6.037.350
3.376.832
147.271
-
106.807
9.668.260
Cash equivalents as at 31 December 2013 include the aggregate amount withheld in the form of restricted
deposits with Bank of Cyprus after the collapse of Laiki-Marfin Bank as a result of the financial rescue plan
of Cyprus agreed between the IMF, the EU and the ECB. The funds were released in 2014.
20. Share capital
Number of Shares
(as at)
31 December
2013
20 March
2014
Reduction of
Share Capital
16 May
2014
24 June
2014
28 August
2014
30 October
2014
31 December
2014
Increase of Share Capital
Authorised
Ordinary shares of €0,01
Ordinary Shares of €0,92
Deferred Shares of €0,99
Total equity
Redeemable Preference
Shares of €0,01
Total
Issued and fully paid
Ordinary shares of €0,01
Ordinary Shares of €0,92
Deferred Shares of €0,99
Total equity
Redeemable Preference
Shares of €0,01
Total
989.869.935
1
-
(1)
4.142.727
(4.142.727)
994.012.663
(4.142.728)
-
-
-
-
-
-
785.000
994.012.663
(4.142.728) 785.000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
989.869.935
-
-
989.869.935
785.000
990.654.935
28.171.833
-
-
616.726
3.934.853
1.160.642
33.884.054
1
4.142.727
32.314.561
(1)
(4.142.727)
(4.142.728)
-
-
-
-
-
-
- 616.726 3.934.853
-
-
1.160.642
-
-
33.884.054
-
32.314.561
-
(4.142.728) 785.000 616.726 3.934.853
785.000
-
-
-
1.160.642
785.000
34.669.054
Value (as at)
(€)
31 December
2013
20 March 2014
16 May
2014
24 June
2014
28 August
2014
30 October
2014
31 December
2014
Reduction of
Share Capital
Increase of Share Capital
Authorised
Ordinary shares of €0,01
Ordinary Shares of €0,92
Deferred Shares of €0,99
Total equity
Redeemable Preference
Shares of €0,01
Total
Issued and fully paid
Ordinary shares of €0,01
Ordinary Shares of €0,92
Deferred Shares of €0,99
Total equity
Redeemable Preference
Shares of €0,01
Total
9.898.699
1
-
(1)
4.101.300
(4.101.300)
14.000.000
(4.101.301)
-
-
-
-
-
14.000.000
-
(4.101.301)
7.850
7.850
-
-
-
-
-
-
-
-
-
-
-
-
281.717
1
4.101.300
4.383.018
-
(1)
(4.101.300)
(4.101.301)
-
-
-
-
6.167
-
-
6.167
39.349
-
-
39.349
-
4.383.018
-
(4.101.301)
7.850
7.850
-
6.167
-
39.349
-
-
-
-
-
-
11.606
-
-
11.606
-
11.606
9.898.699
-
-
9.898.699
7.850
9.906.549
338.839
-
-
338.839
7.850
346.689
CONSOLIDATED FINANCIAL STATEMENTS 2014|65
20. Share capital (continued)
20.1 Authorised share capital
As at the end of 2013 the authorised share capital of the Company was 989.869.935 Ordinary Shares of €0,01 nominal
value each, 1 Ordinary Share of €0,92 nominal value and 4.142.727 Deferred Shares of €0,99 nominal value each.
On March 20, 2014 following the approval of the Annual General Meeting of 30/12/2013 the authorised share capital of
the Company was reduced to €9.898.699,35 divided into 989.869.935 ordinary shares of €0,01 each and such
reduction was effected by the cancellation of 1 ordinary share of €0,92 and 4.142.727 deferred shares of €0,99 each
for the purpose of writing off losses of the Company.
On May 16, 2014 following the approval of the Extraordinary General Meeting of 5/5/2014 the authorised share capital
of the Company was increased by €7.850 and such increase was effected by the issuance of 785.000 redeemable
preference shares of €0,01 each (Note 20.6) for the purpose of in kind contribution of Innovation Park acquisition
(Note 16).
As at the end of the reporting period the authorised share capital of the Company is 989.869.935 Ordinary Shares of
€0,01 nominal value each and 785.000 Convertible Shares of €0,01 nominal value each.
20.2 Issued Share Capital
As at the end of 2013 the issued share capital of the Company was 28.171.833 Ordinary Shares of €0,01 nominal value
each, 1 Ordinary Share of €0,92 nominal value and 4.142.727 Deferred Shares of €0,99 nominal value each.
Further to the resolutions approved at the AGM of 30 December 2013 and at the EGM of 5 May 2014 the Board has
proceeded with:
1. On 20/3/2014, following the approval of the Annual General Meeting of 30/12/2013, the cancellation of 1
ordinary share of €0,92 and 4.142.727 deferred shares of €0,99 each for the purpose of writing off losses of
the Company.
2. On 16/5/2014, following the approval of the Extraordinary General Meeting of 5/5/2014, the allotment of
785.000 redeemable preferred shares €0,01 each for the purpose of acquiring Innovations Park (Notes 16,
20.6).
3. On 24/6/2014, following the approval of the Annual General Meeting of 30/12/2013, the allotment of 116.726
ordinary shares of €0,01 each to its Directors, who thus converted their 2013 annual fees amounting to GBP
86.375 into equity (Note 28).
4. On 24/6/2014, following the approval of the Annual General Meeting of 30/12/2013, the allotment of 500.000
ordinary shares of €0,01 each to the Directors, Management, Employees and Advisors of the Company for
their efforts in assisting the Group’s turnaround since August 2011 as well as in working towards achieving its
investment strategies and goals.
5. On 28/8/2014, following the approval of the Annual General Meeting of 30/12/2013, the allotment of
3.934.853 ordinary shares of €0,01 each for the purpose of an in kind contribution of Residential Portfolio
acquisition and advisory related to this acquisition (Note 20).
6. On 30/10/2014, following the approval of the Annual General Meeting of 30/12/2013, the allotment of
1.160.642 ordinary shares of €0,01 each for the purpose of capital raising in the Company by new
shareholders.
As at the end of the reporting period the issued share capital of the Company is 33.884.054 Ordinary Shares of €0,01
nominal value each and 785.000 Convertible Shares of €0,01 nominal value each.
20.3 Director's Option scheme
Under the said scheme each of the directors serving at the time, which is still a Director of the Company is entitled to
subscribe for 2.631 Ordinary Shares exercisable as set out below:
Exercisable until 1 August 2017
Exercisable until 1 August 2017
Exercise Price
US$
57
83
Number of
Shares
1.754
877
The Company considers the said options well out of money (as the share price at the reporting date is USD 0,46), thus
the possibility of exercising them is remote and therefore has not any provision on them.
CONSOLIDATED FINANCIAL STATEMENTS 2014|66
20. Share capital (continued)
20.3 Director's Option scheme (continued)
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:
Exercisable until 1 August 2017
Exercisable until 1 August 2017
Exercise Price
GBP
40
50
Number of
Shares
1.219
610
The Company considers the said options well out of money (as the share price at the reporting date is GBP 0,30), thus
the possibility of exercising them is remote and therefore has not any provision on them.
20.4 Warrants issued
On 8 August 2011 the Company has 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; (ii) capital increase(s) undertaken by the Company generating
cumulative gross proceeds in excess of US$100.000.000 by the time such warrants are exercised; and (iii) the exercise
of such warrants. As of the reporting date, the aggregate amount of class B warrants would result in the issuance of
4.840.579 ordinary shares if exercised.
20.5 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
Ordinary shares of €0,01
Class B Warrants
corresponding in ordinary
shares if exercised
Total number of Shares
Total number of Shares
Options
Issued and Listed in AIM
33.884.054
28.171.833
(as at) 31/12/2014
(as at) 31/12/2013
Non-Dilutive Basis
Full Dilutive Basis
4.840.579
4.024.548
33.884.054
28.171.833
38.724.633
4.460
32.196.381
4.460
20.6 Redeemable Preference Shares description
During the reporting period the Company has issued 785.000 redeemable convertible shares of nominal value €0,01
each. The redeemable convertible shares have no voting powers or rights to dividend. 392.500 of the Convertible
Shares can be redeemed out of profits by the Company after 31 January 2015 (the “Redemption Date 1”) at the price
of €0,89 each and the rest 392.500 of the Convertible Shares can be redeemed out of profits by the Company after 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 Convertible Shares into ordinary shares of €0,01 each. As of
Redemption Date 1 no shares have been either redeemed or converted.
21. Foreign Currency Translation Reserve
Exchange differences related to the translation from the functional currency of the Group’s subsidiaries are accounted
directly in 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 € in the countries where
the Company’s subsidiaries own property assets.
CONSOLIDATED FINANCIAL STATEMENTS 2014|67
22. Non-Controlling Interests
Non-controlling interests represent the equity value of 45% shareholding in LLC Almaz-press-Ukraine, which is being
held by ERI Trading & Investments Co. Limited and 55% of shareholding in Ketiza Ltd and Ketiza Srl. The Group
exercises full operational control over Ketiza Ltd and Ketiza Srl.
23. Borrowings
Principal EBRD loan
Other bank borrowings
Banca Comerciala Romana
Bancpost SA
Alpha Bank Romania
Raiffeisen Bank Romania
Restructuring fees and interest payable to EBRD
Interest accrued on bank loans
Prepaid fees to EBRD
Interest due to related parties (Note 28.3)
Total
Current portion
Non-current portion
Total
EBRD loan related to Terminal Brovary
31/12/2014
€
31/12/2013
€
11.808.915
6.219.191
1.783.826
2.157.501
1.184.688
1.093.176
29.685
240.619
(81.988)
-
18.216.422
10.319.084
-
-
-
-
-
569.282
23.275
-
165.599
11.077.240
31/12/2014
€
5.960.706
12.255.716
18.216.422
31/12/2013
€
11.077.240
-
11.077.240
In December 2014 the Company has agreed with the EBRD the rescheduling of the amortization plan of the Brovary
construction loan, following two years of deliberations partly because of the Cyprus crisis and the ensuing issues that
the then defaulted Laiki Bank at the beginning and later the Bank of Cyprus (after taking over Laikis’s portion of the
Loan) acting as the B Lender were unable to approve such restructuring, despite the fact that SPDI has been
observing the capital repayments under an agreement with the EBRD since May 2013. According to the agreement the
loan repayment is being extended to 2022, with a balloon payment of US$3.633.333.
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 fulfillment 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:
CONSOLIDATED FINANCIAL STATEMENTS 2014|68
23. Borrowings (continued)
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 month.
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)
In October 2009, Sec Rom Real Estate entered 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 €1.184.688, bears interest of EURIBOR 3M+5,25% and is repaid on the basis of investment
property sale. The loan matures on October 2016 and is secured by all assets of Sec Rom as well as its shares.
On January 31st, 2012, Ketiza Real Estate entered into a loan agreement with Bancpost 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 €2.157.501. The loan bears interest of
EURIBOR 3M plus 3,5% and the Company negotiates its prolongation until May 2017 as it expires in April 2015. The
bank loan is secured by all assets of Ketiza as well as its shares (Note 31).
In January 2011, Sec Vista Real Estate entered 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 €1.093.176. The loan bears interest of EURIBOR 1M+5,2% and is currently under
restructuring negotiation. The loan is secured by all assets of Sec Vista as well as its shares.
On October 13th, 2011, SecMon Real Estate 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 €1.783.826 and bears interest of EURIBOR 3M plus 5%. The loan is repayable in
October 2015 and is secured by all assets of SecMon as well as its shares.
24. Trade and other payables
(€)
Payables to related parties (Note 28.2)
Payables for construction, non-current
Payables for services
Deferred income from tenants non-current
Deferred income from tenants current
Accruals
Total
(€)
Current portion
Non - current portion
Total
31/12/2014
31/12/2013
335.004
202.200
916.827
12.485
132.782
270.239
1.869.537
575.216
293.994
121.159
186.463
-
83.314
1.260.146
31/12/2014
31/12/2013
1.654.852
214.685
1.869.537
779.688
480.458
1.260.146
The fair values of trade and other payables due within one year approximate to their carrying amounts as presented
above.
CONSOLIDATED FINANCIAL STATEMENTS 2014|69
24. Trade and other payables (continued)
Payables for construction represent amounts payable to the contractor of Bella 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 UAH
5.400.000 (€ 280.769) 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 of 20% in Ukraine and is presented as a
non-current liability.
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 non-current
Deposits from tenants current
Total
31/12/2014
31/12/2013
499.831
161.579
661.410
315.604
-
315.604
Deposits from tenants appearing under current and non-current liabilities include the amounts received from the
tenants of LLC Terminal Brovary, Best Day Srl, First Phase and Residential Portfolio as advances/guarantees and are to
be reimbursed to these clients at the expiration of the leases agreements.
26. Taxes Payable
(€)
Corporate income and defence tax
Other taxes including VAT payable
Provision for taxes in Ukraine
Total Tax Liability
31/12/2014
31/12/2013
356.929
74.899
68.253
500.081
420.606
2.932
119.023
542.561
Income tax represents taxes payable in Cyprus and Romania for past periods.
Other taxes represent taxes and VAT payable in Ukraine and Romania. All income producing assets of the
Company except Terminal Brovary are net VAT payers.
27. Finance Lease Liabilities
As at the reporting date the Finance Lease liabilities consist of the non-current portion of € 11.463.253 and
the current portion of € 181.723 (31/12/2013: € 387.400 and € 23.020, accordingly).
2014
(€)
Less than one year
Between two and five years
More than five years
Accrued Interest
Total Finance Lease Liabilities
2013
(€)
Less than one year
Between two and five years
More than five years
Accrued Interest
Total Finance Lease Liabilities
27.1 Land Plots Financial Leasing
Note
27.1
&
27.2
Minimum lease
payments
766.289
3.424.203
13.285.643
17.476.135
Minimum lease
payments
75.704
321.263
1.289.094
1.686.061
Interest
584.677
2.205.329
3.094.876
5.884.882
Interest
68.492
213.075
1.103.833
1.385.400
Principal
181.612
1.218.874
10.190.767
11.591.253
53.723
11.644.976
Principal
7.212
108.188
185.261
300.661
109.759
410.420
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.
CONSOLIDATED FINANCIAL STATEMENTS 2014|70
27. Finance Lease Liabilities (continued)
27.2 Sale and Lease Back Agreements
A.
Innovations Logistic Park
In May 2014 the Group concluded the acquisition of Innovations Logistics Park in Bucharest (Note 16), owned by Best
Day Srl, through receiving debt from Piraeus Leasing Romania SA in the form of a sale and lease back agreement. The
financed amount was €7.500.000 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
shall 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 (Note 16), owned by First
Phase Srl, through receiving debt from Alpha Bank Romania SA in the form of a sale and lease back agreement. The
financed amount was €4.000.000 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 transactions were carried out with related parties:
28.1 Expenses
(€)
Board of Directors
Management Remuneration
Back office - SECURE Management Ltd
Narrowpeak Consultants Ltd
Total
2014
2013
171.197
553.379
70.289
-
168.573
464.096
142.580
120.998
794.865
896.247
Board of Directors expense represents the annual remuneration for 2014 of all the non-executive members of the
Board pursuant to the decision of the Remuneration Committee. For 2013 an amount of US$63.825 was paid in cash
while for the remaining amount payable to the directors they received shares in 2014 (Note 20.2).
Management remuneration represents the annual remuneration payable to the CEO, the CFO, pursuant to the decision
of the Remuneration Committee as well as the Commercial Director and the Country Managers for Romania and
Ukraine.
Back office expenses represents expenses incurred by the Group for part time expert personnel of SECURE
Management Ltd, a real estate Project and Asset Management Company, seconded to the Company to cover various
non-permanent positions, variations of the work flow in finance and administration functions and/or specialized
advisory and consultancy needs.
Interest expense represents the interest from the loan granted on 21st September 2012 from Narrowpeak Consultants
Ltd and other parties, in order to facilitate the Group’s cash flow. The loan to the Company is of up to US$2.500.000
bearing interest at 12% per annum and was repayable on 31st December 2014. Within 2013 the loan amount totaling
to US$1.700.000 was converted into equity and the lenders received 2.310.190 shares.
CONSOLIDATED FINANCIAL STATEMENTS 2014|71
28. Related Party Transactions (continued)
28.2 Payables to related parties
(€)
Board of Directors & Committees
Grafton Properties
Secure Management Ltd
Management Remuneration
Total
28.2.1 Board of Directors
31/12/2014
31/12/2013
193.212
123.548
18.244
-
335.004
115.665
108.767
-
350.784
575.216
The amount payable represents remuneration payable to non-Executive Directors as well as to the Remuneration and
Audit Committee members for 2014.
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 certain 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 payable for services expert personnel seconded by Secure Management Ltd
(note 28.1). As of the end of the reporting period the balance was €18.245.
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 Borrowings from related parties
(€)
Narrowpeak Consultants Ltd
Total
31/12/2014
31/12/2013
-
-
165.599
165.599
On 21st September 2012, and in order to facilitate the Group’s cash flow, Narrowpeak Consultants Ltd and
other parties, have provided a loan to the Company of up to US$2.500.000 bearing interest at 12% per
annum which was repayable by 31 December 2014. Within 2013 the loan amount totaling to US$1.700.000
was converted into equity and the lenders received 2.310.190 shares. The amount payable at the end of
2013 period represents the interest payable from the convertible loan which was settled within 2014.
28.4 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 (€)
LLC “TERMINAL BROVARY”
LLC “AISI UKRAINE”
LLC “ALMAZ PRES UKRAINE”
Total
Limit –as of
31/12/2014
Principal as of
31/12/2014
Principal as of
31/12/2013
28.827.932
23.062.351
8.236.554
27.578.265
12.275
140.021
27.730.561
24.278.712
10.806
123.269
24.412.787
Terminal Brovary entered into the loan agreement with the total limit of US$30.000.000 with Secure Capital Ltd on
19 December 2006 maturing on 19 December 2014 and is under discussion to be extended. Current interest rate is 3
months LIBOR plus 2.5%. On 18 July 2011 the total limit of the loan agreement was increased up to US$35.000.000.
The purpose of financing was the construction of Terminal Brovary Logistics Park and coverage of working capital
needs.
All loans from SC Secure Capital Ltd to the Company’s subsidiaries are USD denominated and in 2014 they generated a
forex loss totalling to €19.746.111 as a result of devaluation of the Ukrainian Hryvnia during the reporting period.
A potential Ukrainian Hryvnia weakening/strengthening by 30% against the US dollar with all other
variables held constant, would result in an exchange difference on I/C loans to foreign holdings of (€
9.081.127)/ € 9.081.127 respectively, estimated on balances held at 31/12/2014.
CONSOLIDATED FINANCIAL STATEMENTS 2014|72
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 most 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, is
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 enacted 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
As of the reporting period there are no material claims from constructors other than those appearing and provided for
in the financial statements.
29.3 Other Contingent Liabilities
The Group had no other contingent liabilities as at 31 December 2014.
30. Financial Risk Management
30.1 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 & 27),
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 20.6).
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.
30.2 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 financial statements.
CONSOLIDATED FINANCIAL STATEMENTS 2014|73
30. Financial Risk Management (continued)
30.3 Categories of Financial Instruments
(€)
Financial Assets
Cash at Bank
Total
Financial Liabilities
Interest bearing borrowings
Trade and other payables
Deposits from tenants
Finance lease liabilities
Taxes payable
Redeemable preference shares
Total
Note
31/12/2014
31/12/2013
19
23
24
25
27
26
20
891.938
891.938
9.668.260
9.668.260
18.216.422
1.869.537
661.410
11.644.976
431.828
698.650
33.522.823
11.077.240
1.260.146
315.604
410.420
423.539
-
13.486.949
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.
30.4 Categories of Financial Instruments
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 31 December 2014, the Group had not entered into any derivative
contracts.
30.5 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 functional currency of the subsidiary where such asset or liability is recognized.
In the particular case of Ukrainian income which is denominated in USD contractually, currency risk arises in the form
of such income being paid in local currency and exchanged in USD for repaying USD denominated liabilities. Romanian
income is pegged to the €.
In respect of Group’s financial assets and liabilities are denominated in the functional currency of the subsidiary which
holds them. In respect of Ukraine, where the local currency devaluated by 90% against USD in 2014, the balances of
borrowings in foreign currency, related interest due and cash balance in US dollars are substantially sensitive to
movement in UAH/USD exchange rate because these financial instruments are denominated foreign currency. If the
Ukrainian Hryvnia weakens/strengthens by 30% against the US dollar with all other variables held constant, the
Group’s results would decrease/increase by € (3.260.717)/ 3.260.717 respectively. Management is monitoring the net
exposures and acts accordingly to contain them so that the net effect of devaluation is minimized.
Balances of other financial assets and liabilities are no substantially sensitive to movement in UAH/USD exchange rate
because these financial instruments are denominated in the local currency.
Interest Rate Risk on cash and cash equivalents
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, 2014, cash and cash equivalent financial assets
amounted to € 891.938 (2013: € 9.668.260) of which € approx. € 150.000 in UAH and € 200.000 in RON (Note 19)
while the remaining are denominated in either USD or €.
Interest Rate Risk on financial liabilities
The Group is exposed to interest rate risk in relation to its borrowings amounting to € 29.453.352 (2013:
€ 10.319.084) as they are issued at variable rates.
The Group has a debt exposure toward the EBRD which is dependent on Libor whereas all the rest of the borrowings
are dependent to the Euribor.
CONSOLIDATED FINANCIAL STATEMENTS 2014|74
30. Financial Risk Management (continued)
30.5 Economic Market Risk Management (continued)
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 2014 the average interest rate for all the interest bearing borrowing and financial leases of the
Group stands at 5,77% (31 December 2013: 6,99%).
The sensitivity analysis for LIBOR and EURIBOR changes applying to the interest calculation on the borrowings
principal outstanding as at 31 December 2014 is presented below:
Weighted average interest rate
Influence on yearly finance costs
5,77%
-
6,77%
(296.194)
7,77%
(592.388)
Actual
as at 31.12.2014
+100 bps
+200 bps
The Group’s exposures to financial risk are discussed also in Note 4.
30.6 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.
30.7 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.
31 December 2014
(€)
Financial assets
Cash at Bank
Financial liabilities
Interest bearing borrowings
Trade and other payables
Deposits from tenants
Finance lease liabilities
Redeemable preference shares
Taxes payable
Total
Total net liabilities
31 December 2013
(€)
Financial assets
Cash at Bank
Financial liabilities
Interest bearing borrowings
Trade and other payables
Deposits from tenants
Finance lease liabilities
Taxes payable
Total
Total net liabilities
Carrying
amount
Total
Contractual
Cash Flows
Less than
one year
From one to
two years
More than
two years
891.938
891.938
891.938
-
-
18.216.422 22.319.389
1.869.537
661.410
1.869.537
661.410
11.644.976 17.476.135
698.650
431.828
33.522.823 43.456.949
32.630.885 42.656.011
698.650
431.828
Carrying
amount
Total
Contractual
Cash Flows
6.665.533
1.654.852
161.579
766.289
349.325
431.828
10.029.40
9.137.468
2.743.797
73.841
12.910.059
140.844
68.973
769.922
349.325
-
430.858
15.939.924
-
-
4.005.858 29.421.685
4.005.858 29.421.685
Less than
one year
From one to
two years
More than
two years
9.668.260
9.668.260
9.668.260
-
-
11.077.240 11.077.240
1.260.146
315.604
410.420
423.539
1.260.146
315.604
1.686.061
423.539
13.486.949 14.752.590
5.094.330
3.818.689
11.077.240
779.688
-
75.704
423.539
12.356.171
2.687.911
-
-
190.375
75.704
-
266.079
266.079
-
480.458
125.229
1.534.653
-
2.140.340
2.140.340
CONSOLIDATED FINANCIAL STATEMENTS 2014|75
31. Events after the end of the reporting period
A. GED Logistics and Photovoltaic Park Acquisition
The Company has completed the acquisition of an income producing logistics park that includes warehouse space as
well as an alternative energy production facility of photovoltaic park (the “Complex”), located in the West Attica
Industrial Area, Greece, from a Greek company listed in Athens Stock Exchange.
The Complex comprises 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 photovoltaic park installed on the roof of the warehouse property to the Greek Electric
Grid. The consideration paid is ~€1.800.000 reflecting an agreed value for the Complex of €15.000.000 and the
assumption of associated debt of €13.000.000 as well as some other liabilities.
B. Open offer and share capital increase
The Company has raised in March 2015 €8 million (before expenses), having received valid applications in respect of
23.777.748 new ordinary shares (the "New Ordinary Shares") at a price of 25 pence per New Ordinary Share, following
the Open Offer addressed to its existing shareholders that closed on Wednesday 11th March.
According to the Open Offer the net proceeds of the Open Offer would be primarily be deployed in acquiring, or
securing the acquisition of, income generating industrial, retail and commercial property assets in Bulgaria, Romania
and Greece.
The New Ordinary Shares were credited to CREST accounts on 19 March 2015. Following admission of the new
Ordinary Shares, the Company's total issued and voting share capital is 57.661.802 ordinary shares.
C. Autounion 20% acquisition
Secure Property Development & Investment PLC, acquired in April 2015 a 20% interest in Autounion, a Class A
BREEAM certified, fully let and income generating office building in Sofia. The acquisition, which was the Company’s
first in Bulgaria, is in line with its strategy to build a diversified portfolio of prime commercial real estate in East and
Southeast Europe. The office building, which is fully let to a leading Bulgarian insurance company on a long lease
extending to 2027, produces an annualized Net Operating Income of €2,9 million. The Company has acquired the
20% of the corporate entity owning the building for a cash consideration of €4,06 million.
The acquisition widens the Company’s investment activity to four countries. The consideration was funded from the
Company’s cash reserves, which were boosted by the Open Offer.
D. CRAIOVA Acquisition
In May 2015 the Company acquired 100% interest in BLUEBIGBOX 3 S.R.L, a DIY retail property in a prime location in
Craiova, Romania. The building has a gross lettable area of 9.385 sqm, is wholly let to Praktiker, a leading European
DIY retailer and produces an annualized NOI of ~€1 million. The Purchase Price was €6,1 million while the property
has debt amounting to €5m. The Purchase price will be through issuance to the Seller of 8.618.997 redeemable
convertible preference shares. The transaction will be completed following an EGM by the Company approving the
terms of the redeemable convertible shares.
E. SEC South East Continent Unique Real Estate Investment Ltd Acquisition
In May 2015 the Company acquired all the shares of SEC South East Continent Unique Real Estate Investments Ltd
(“Sec South”) in exchange for 18.028.294 SPDI shares. The Net Asset Value of the acquired entity was €16,9 million
while the Gross Asset value was €42,3 million. Sec South has a 24,35% interest in Delea Nuova, a Class A office
building in a prime business location in Bucharest - the building is fully let mainly to the telecommunications regulator
of Romania, produces an annualized NOI of €1,9 million and has a GLA of 10.280 square meters over ten floors and
includes underground parking. Sec South also has a small portfolio of newly built income producing residential assets,
located on Grivita Lake in north Bucharest and on the slopes of Boyana in South Sofia. They generate an annualised
income of €300.000, as they are mostly let. In addition Sec South has land assets in Bucharest and Sofia. Except from
the income producing properties the Company intends to sell these to generate substantial near term cash for
reinvestment.
F. Bancpost SA loan on Bloominghouse (Ketiza srl)
Bancpost S.A. has extended the loan facility granted to Ketiza srl, for financing the construction of Bloominghouse
residential project (Note 23) until mid-June 2015, in order for the discussions that will allow the restructuring the said
loan from being a construction one to an investment to be concluded. Management believes that such agreement will
be in place within the said timeframe.
CONSOLIDATED FINANCIAL STATEMENTS 2014|76