ANNUAL REPORT
2016
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 2017 and beyond
3. Regional Economic Developments
4. Real Estate Market Developments
• 4.1 Romania
• 4.2 Bulgaria
• 4.3 Greece
• 4.4 Ukraine
5. Property Assets
5.1 GED Logistics center, Athens Greece
5.2 EOS Business Park – Danone headquarters, Romania
5.3 Praktiker Retail Center, Romania
5.4 Delenco office building, Romania
5.5 Innovations Logistics Park, Romania
5.6 Terminal Brovary Logistic Park, Ukraine
5.7 Residential portfolio
• Romfelt Plaza (Doamna Ghica), Bucharest, Romania
• Monaco Towers, Bucharest, Romania
• Blooming House, Bucharest, Romania
• Green Lake, Bucharest, Romania
• Boyana Residence, Sofia, Bulgaria
5.8 Land Assets
• Aisi Bela – Bela Logistic Center, Odessa, Ukraine
• Kiyanovskiy Lane – Kiev, Ukraine
• Tsymlyanskiy Lane – Kiev, Ukraine
• Balabino- Zaporozhye, Ukraine
• Rozny Lane – Kiev Oblast, Kiev, Ukraine
• Delia Lebada, Romania
SECTION B- Financial Statements
SECURE PROPERTY DEVELOPMENT AND INVESTMENT PLC
KIRIAKOU MATSI 16, AG. OMOLOGITES,1082, NICOSIA,CYPRUS
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ANNUAL REPORT 2016|2
SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC
Key Figures
31 Dec 2016
31 Dec 2015
Change
Total Assets (€million):
116
125
-7%
Number of income producing
6
7
-14%
commercial Properties:
Average occupancy rate of income
88%
90%
-3%
producing assets:
Operational Gearing:
46%
52%
-12%
Average borrowing cost:
5.32%
5.00%
6%
Operating Income*(€million):
6.4
EBITDA*(€million):
2.5
5.9
2.5
8%
0%
Net Equity**(€million):
38.9
42.5
-9%
Issued Shares:
90,014,723
90,014,723
0%
NAV per share (€):
0.43
0.47
-9%
* Table 1- Excluding fair value related impact.
** 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 2016|3
1.
Letter to the Shareholders
Dear Shareholders,
27 June 2017
2016 has been a year of active portfolio management, as we continue with our strategy to transform
SPDI into a leading London listed property company focused on selected South East European
countries. In early 2017, our Company secured both a profitable exit from its main Ukraine income
producing asset (Terminal Brovary) and a cash generating agreement based on the departure of
the main tenant in its Romanian logistics terminal (the Innovations Park). The result of the two
deals was to generate substantial cash and profits, albeit with a reduction of the income producing
capacity of the Company at the same time. Finalising these deals took up most of 2016 and, as a
result, the Company not only had to wait both for the cash inflow to be realised, but, more
importantly, to roll out the next steps of our growth strategy that were to follow completion of the
two deals. With the two deals completed, we are now ready for 2017 and beyond and look forward
to the remainder of the year with optimism.
Underpinning our confidence is the continuing progress being made by the markets in which the
Company is active. In 2016, Romania maintained its position as the fastest growing economy of
the European Union and saw property prices rise across all sectors. While property development
picked up for the first time since the crisis that hit Europe in 2008/9, the Company managed to sell
an increased number of non-core residential assets as the South Eastern European property market
improved markedly.
Greece experienced a normalisation of its economic indices along with its relations with its lenders
(the EU, the ECB and the IMF) hinting to a possible pick up of the economic cycle that has been
lacking in recent years. Meanwhile, Ukraine’s economy proved resilient despite relations with Russia
remaining tense. The local residential market in particular saw a substantial pick-up in development
activity.
In addition to an increased pace of sales of non-core residential units in both Romania and Bulgaria,
the Company fully let the Brovary terminal, the occupancy of which had been impacted by the war
and the resulting 70% + depreciation of the local currency (UAH) in Ukraine, and eventually
succeeded in selling it for a substantial profit. On the other hand, it was unable to market the space
vacated by Nestle in the Terminal Innovations Logistics Park in Bucharest due to complications with
the lease termination deal linked with the lending bank. Ultimately, the Company agreed with Nestle
to effect their departure in August 2016, at a fee equal to eighteen months’ rent. However, the
extended period it took for the lending bank to sign off on the deal meant marketing the
Innovation’s empty space was not possible during the year. In parallel, a bigger deal with Blue
House, the property private equity group from whom SPDI acquired two buildings in 2015, was
shelved. Although SPDI had also secured an option to buy the remaining stake of the property
ANNUAL REPORT 2016|4
bought in 2015 in Bulgaria, the Company decided not to exercise that option and to return the 20%
stake in the Sofia office building Autounion, choosing to consolidate its assets in the faster growing
Romania instead.
Finally, the Company continued generating value from its existing assets via refinancings, including
the Praktiker let property in Romania. Here the tenant agreed to extend its lease by five additional
years to 2025, while the lending bank agreed to a refinancing scheme that extends the maturity of
the loan, and reduces the annual amortisation by ~70%.
2016 saw SPDI consolidate and prepare for the next phase of growth in 2017 and beyond. Despite
the impressive results of the last three years, there is much more to go for, particularly in growing
our net operating income to where we want it to be. SPDI’s Directors and Management remain
focussed on achieving this so that 2017 can be yet another trend setting year for SPDI.
Best regards,
Lambros G. Anagnostopoulos
Chief Executive Officer
ANNUAL REPORT 2016|5
2.
Management Report
2.1 Corporate Overview & Financial Performance
In 2016 the Company’s management focused on executing a) the profitable sale of its
Summary
logistics Terminal Brovary in Ukraine and b) the cash generating termination of Nestle’s
lease agreement for its logistics Innovations Terminal. In parallel, the Company picked
up the pace of disposing of non-core assets to take advantage of rising market prices;
restructured the operations and financing of core assets to generate further value; and
prepared the ground for the next phase of growth by creating a strong pipeline of
potential acquisitions.
The political instability in Ukraine appears to have tapered off, even though the country
still experiences some war like conditions on its border with Russia in the East. As the
economy demonstrated signs of improvement, the Company not only managed to fully
Ukrainian
Political and
economic
Developments
let its main logistics asset in the country (which it later sold) but also entertained sale
proposals with a view to reducing its presence in this region of South East Europe
which has been in constant turmoil since 2014.
Greece continues to be in an adverse economic situation of austerity and debt. As the
current staff review1 has been successfully completed in mid June 2017, the ensuing
agreement with the EU, the IMF and the ESM will facilitate the country’s return to
economic normality that will allow GDP growth. Should the current debt be reduced in
terms of the Net Present Value sometime in the near future, this will further enhance
the potential for growth and will stimulate the country’s productive force after 10 years
of recession during which 30% of the GDP has been lost.
During 2016, the Company proceeded with capitalizing various shareholder loans that
have been provided by itself and its minority partners to Green Lake in the past.
At the same time, the Company devoted significant time and effort in restructuring its
debt to long term, an effort that is expected to bear fruits within 2017, while the sale
of Terminal Brovary will result in further deleveraging of the Company. At the same
time, the said sale will bring the annual average cost of servicing the debt down to
~4.7% as the EBRD loan was the most expensive loan for the Company.
Going forward, the said transaction will also facilitate the simplification of the annual
financial reporting as the Ukrainian foreign exchange variation (and to a far lesser
degree the EUR/USD one) that has been having a considerable effect on the annual
results will practically be taken out of the equation.
Greek Political
and economic
developments
Capital
Structure
1 Current staff review is the official designation of the paper prepared by the staff of the 3 institutions that is submitted to
Eurogroup for approval.
ANNUAL REPORT 2016|6
Optimizing
Corporate
Structure
Optimizing
Cost structure
Corporate
Governance
Financial
performance
In 2016, the Company continued optimizing its corporate structure by merging or
closing down low activity SPV corporate entities, an effort that will continue in 2017.
Taking advantage of its recently installed new ERP system, based on Microsoft
Dynamics (Navision), the Company expects 2017 to show both the real-time monitoring
of income and expenses across all countries as well as a reduction in operating
expenses related to such tasks.
As management was focused on executing the two main deals, the sale of Terminal
Brovary and closing the Nestle departure from the Innovations Park, and in view of the
pending reduction in Net Operating Income as a result of the former, it allocated time
to plan for a more efficient cost structure. Being active in four countries, registered in
a fifth (Cyprus) and listed in a sixth one (UK), the Company has a cost base that can
be deemed to be misaligned with the size of its property asset portfolio. As such
Management, together with the Board, planned and commissioned a restructuring plan
that would see the corporate costs of the Company drop in 2017 by ~30% vis a vis
2015 to no more than €2m. A number of senior executives decided to contribute to
such effort by deferring part of their salary, while the directors decided to relinquish
their own. Consequently, the Company continues to benefit from high quality human
assets despite its income pool shrinking following the sale of its key income generating
asset.
The Company enjoys the support of a large number of active experienced directors
who have been guiding the Company without receiving any monetary remuneration.
SPDI increased operating income by ~10% in 2016, even though its primary Ukrainian
asset, Terminal Brovary, was partially empty in the first quarter of the year. An
increase in non-core asset sales as well as the settlement with Nestle for breaking its
contract at Innovations warehouse, more than compensated for such lost income,
while EoS Business Park in Romania and GED warehouse in Greece recorded stable
income. The Company also managed to extend the Praktiker lease for another 5 years,
stabilising the asset, albeit at a lower annual rental income. As a result, the Company’s
annual operating income2 (including non-core asset sales) increased by ~8% to €6.4m
in 2016 compared with €5.9m in 2015.
2 The operating income does not include the % participation by the Company of the operating income of the properties that
the Company maintains a minority participation in, which is reported as income from associates, but includes net income
resulting from on-going sales of residential assets (sales income minus the cost of the asset sold).
ANNUAL REPORT 2016|7
In terms of the income stemming from SPDI’s core income producing assets, the
Company recorded ~€6m including the Nestle break fee (of an aggregate ~€1.7 or 18
months of rental income plus 3 months guarantee) vs €5.2m in 2015.
EBITDA from operations remained at the same levels with 2015 to ~€2.5m in 2016,
mainly as a result of the Nestle break fee as well as of the reduced corporate and
property costs and even though the Company has lost its income from Autounion.
Interest costs were reduced by 16% to ~€3.2m vs ~€3.7m in 2015 and are expected
to further decrease towards ~€2.5m following completion of the Terminal Brovary sale
and the ensuing repayment of the EBRD ~€12m debt which will bring the average debt
servicing cost to ~4.7% in 2017.
Table 1
ANNUAL REPORT 2016|8
1.152.123 4.151.339 4.794.993 411.472 1.219.483 2.717.166 2.439.780 1.835.181 1.559.881 - 1.000.000 2.000.000 3.000.000 4.000.000 5.000.000 6.000.000 7.000.000201120122013201420152016Operating Income (€)OtherUkraine€411.472€1.219.483€2.717.166€3.591.903€5.986.520€6.354.874EUR20162015 Rental, Utilities, Management & Sale of electricity Income 6.070.9405.448.960 Income from Sale of Asset less Cost of properties sold 283.934537.560 Income from Operations of Investments 6.354.874 5.986.520 Asset operating expenses (992.441) (1.124.583) Net Operating Income from Investments 5.362.433 4.861.937 Share of profits from associates (ex revaluation) 247.720 166.863 Net Income from Available for Sale assets (ex revaluation) (485.529) 485.529 Total Income 5.124.624 5.514.329 Administration expenses (2.614.188) (3.013.942) Operating Result (EBITDA) 2.510.436 2.500.387 Finance costs, net (3.181.625) (3.771.100) Income tax expense (174.315) (80.188) Operating Result after finance and tax expenses for the year (845.504) (1.350.901) Other income / (expenses), net (1.304.304) 653.856 Other finance (costs) / income and interest write off 595.917 (603.495) Gain realized on acquisition of subsidiaries - 2.181.834 Fair Value (Losses) from investments (36.549) (6.935.306) Disposal of Autounion (206.491) Foreign exchange losses, net (1.700.333) (10.659.602) Result for the year (3.497.264) (16.713.614)
Excluding a) the revaluation losses attributable mostly to the situation in Ukraine, b)
the foreign exchange losses (related to the EBRD Terminal Brovary loan or the
intercompany loans that have been affected on paper by the devaluation of the UAH)
and c) any one off gains/losses, costs or impairments/provisions related to the
properties acquired during the previous period the table above compares the
performance of the last 2 operating periods with operating result after finance
expenses and tax being improved by 37% from minus €1.3m to a negative €850k.
2.2 Property Holdings
The Company's portfolio at year end consists of commercial income producing and
Property
residential properties in Romania, Greece, Bulgaria and Ukraine as well as land plots in
Assets
Ukraine, Bulgaria and Romania.
Commercial
Land &
Residential
ANNUAL REPORT 2016|9
Commercial PropertyLocationGED Logistics TerminalAthens, GreeceGross Leasable Area:17,756 sqmAnchor Tenant:Kuehne + Nagel and GE Dimitriou SAOccupancy Rate:100%EOS Business ParkBucharest, RomaniaGross Leasable Area:3,386 sqmAnchor Tenant:Danone Romania lease runs to 2026Occupancy Rate:100%Praktiker CraiovaCraiova, RomaniaGross Leasable Area:9,385 sqmAnchor Tenant:Praktiker lease runs to 2025Occupancy Rate:100%Delenco (SPDI has a 24.35% interest)Bucharest, RomaniaGross Leasable Area:10,280 sqmAnchor Tenant:ANCOM (Romanian telecoms regulator)Occupancy Rate:100%Innovations Terminal Logistic ParkBucharest, RomaniaGross Leasable Area:16,570 sqmAnchor Tenant:Aquila srl (large Romanian logistics operator)Occupancy Rate:~60% (25% at year end)Terminal Brovary Kiev, UkraineGross Leasable Area:49,180 sqm(Sale completed in January 2017)Anchor Tenant:Rozetka UA (leading Ukrainian internet retailer)Occupancy Rate:100%Key FeaturesLand & Residential AssetsLocationBela Logistic CentreOdessa, UkrainePlot of land (~ th. sqm):224Kiyanovskiy LaneKiev, UkrainePlot of land (~ th. sqm):6Tsymlyanskiy LaneKiev, UkrainePlot of land (~ th. sqm):4Balabino projectZaporozhye, UkrainePlot of land (~ th. sqm):264Rozny LaneKiev, UkrainePlot of land (~ th. sqm):420Pantelimon LakeBucharest, RomaniaPlot of land (~ th. sqm):40Boyana LandSofia, BulgariaPlot of land (~ th. sqm):20Green Lake land (SPDI has a ~44% interest)Bucharest, RomaniaPlot of land (~ th. sqm):40Romfelt, Linda, Monaco, Blooming, Green Lake, BoyanaRomania & BulgariaSold units during 2016:62Romfelt, Monaco,Blooming, Green Lake, BoyanaRomania & BulgariaAvailable units (end 2016):166Key Features
Autounion consists of 19,476 sqm of gross leasable office area, situated in a prime
Divestments
business area near the International Airport of Sofia. The BREEAM-certified building
was completed in 2008 and is fully leased to Eurohold, one of the largest Bulgarian
insurance companies, until 2027. The Company has returned its 20% holding to the
seller Bluehouse Capital as part of settling the amounts owning under the redeemable
convertible shares issued to Bluehouse Capital following the acquisition of Praktiker in
2015. The Company is still in negotiation with Bluehouse Capital as to whether any
further amount is payable and the method of payment.
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, where the Company owned 22 apartments (2,165 sqm) at the end of 2015.
During 2016, the Company sold all of the apartments with the proceeds from the sale
being ~€660,000 and repaid the associated debt at a 26% discount which generated
a net cash flow for the Company of ~€450,000.
In 2016, the Company’s accredited valuers, namely CBRE Ukraine for the Ukrainian
Assets, and Real Act for the Romanian, Bulgarian and Greek Assets remained
Property Asset
Valuations
appointed. The valuations have been carried out by the appraisers on the basis of
Market Value in accordance with 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, and following the increase in the pace of selling non-core assets, the
Company’s participation in property assets was valued at ~€100m. Excluding Terminal
Brovary which was successfully sold early 2017, the remaining assets are valued at
~€85m. It should be noted that in most cases the fair value of the Company’s
properties has increased as a result of improving market conditions while the decrease
of the Innovations valuation due to its high vacancy at year end was countered by the
recognition of Terminal Brovary at its agreed sale value.
In recent years, following the successful implementation of the Company’s strategy,
SPDI’s portfolio became even more diversified in terms of geography as well as asset
class. At the end of the reporting period, taking into account the % participation in the
properties that the Company holds directly, Romania is the prime country of operations
(47%) in terms of Gross Asset Value, which following the sale of Terminal Brovary has
increased further to 55% of the Company’s GAV with the exposure to Ukraine being
reduced to 14%.
ANNUAL REPORT 2016|10
In respect of the Company’s rental income generation capacity, Romania is the prime
source with 51%. Excluding Terminal Brovary in the Ukraine, NOI sources are split
between Greece (34%) and Romania (66%).
Annualised Net Operating Income includes NOI from Terminal Brovary logistics, Innovations logistics, GED logistics park, EOS office building,
Praktiker retail center, Residential units as well as Delenco office building (in which the Company has ~24.35% participation)
2016* figure excludes Terminal Brovary
The table below summarises the main financial position of each of the Company’s
assets (representing the Company’s participation in each asset) at the end of the
reporting period.
Table 2
Asset
Contribution
to Net Asset
Value
ANNUAL REPORT 2016|11
27%17%47%10%2016 -GAV % allocation by CountryUkraineGreeceRomaniaBulgaria14%19%55%12%2016 -GAV % allocation by Country (excluding Terminal Brovary)UkraineGreeceRomaniaBulgaria Property Country GAV* Debt (principal)* NAV InnovationsRom11,07,33,7EosRom6,94,82,1Delenco Rom6,10,85,2Praktiker Rom7,54,53,0GED logisticsGr16,511,74,8Terminal BrovaryUkr14,911,63,3Residential unitsRom & Bul 11,47,14,3Land bankingRom & Ukr & Bul25,96,219,7Total Value100,15446Other balance sheet items, net **-7,3 Net Asset Value total 38,9Mcap 31/12/2016 (Share price at £0,15)15,8Mcap 26/6/2017 (Share price at £0,20)21,4Discount as of the reporting date vs NAV 31/12/2016-59%* Reflects the Company’s participation at each asset**Refer to balance sheet and related notes of the financial statements2016€m
The Net Equity attributable to the shareholders as at 31 December 2016 stood at
Net Equity
~€38.9m vs €42.5m in 2015, with the decrease attributed mostly to one off items for
the Company. Following the sale of Terminal Brovary, the highest income generating
property asset, the Company has now fewer income producing assets than in 2016
generating less income than in 2016. The Company has an operational structure
capable of managing many more assets and needs to grow its property base
accordingly.
The NAV per share as at 31 December 2016 stood at GBP 0.37 and the discount of the
Market Value vis a vis the Company’s NAV increased to 59% at year end.
Net Asset
Value per
share
2.3 Financial and Risk Management
The Group’s overall bank principal debt exposure at the end of the reporting period
Leverage
was ~€53m (including only property assets fully owned by the Company) and
comprised the following:
a) €11.6m construction debt due to EBRD in respect of Terminal Brovary. This loan is
denominated in US$ and stands at ~$12m at the end of the reporting period. This
debt was taken out of the Company’s balance sheet as the sale of Terminal Brovary
was effected in January 2017.
b) €3.8m finance lease of the EOS business park with Alpha Bank Leasing Romania
and a €1m facility received by First Phase from Alpha Bank Romania.
c) €7.3m finance lease of the Innovations park with Bank of Piraeus Romania.
d) €11.7m debt financing of the GED Logistics park and photovoltaic with Eurobank.
e) €4.5m debt financing of the Praktiker Craiova with Marfin Bank Romania.
f) €7.1m being the Company’s portion on the residential portfolio debt financing.
g) €6.2m being the Company’s portion on land plot related debt financing in Romania
and Bulgaria.
Overall, the Group's Loan to Value ratio at the end of 2016 stood at 46%.
ANNUAL REPORT 2016|12
63%67%42%26%29%59%£0,80£0,62£0,65£0,56£0,25£0,15 - 0,10 0,20 0,30 0,40 0,50 0,60 0,70 0,80 0,900,00%10,00%20,00%30,00%40,00%50,00%60,00%70,00%80,00%Discount of Market Share Price over NAV at the end of the yearDiscountShare Price20122013201420152011201659%
Throughout 2016 the Company focused on managing and preserving liquidity through
cash flow optimisation so as to secure the Company’s future. With the sale of Terminal
Brovary and the closure of the Nestle / Bank of Piraeus negotiation for the break of the
former’s contract at Innovation, the Company is to focus more on expanding its asset
Liquidity
Management-
Cash Flow Risk
base so as to establish growth.
2.4 2017 and beyond
At the start of 2017, SPDI effected the closing of the two major deals it pursued last
General
year. As a result it has less involvement in Ukraine and generates less operating income
overall. Consequently 2017 is the year that SPDI will focus on picking up its growth
pace, as was evident in 2014/15, in order to pursue the shareholders’ and directors’
vision to become a large institutional and professionally managed regional property
company. With the directors and management committed to succeeding, in an
environment that shows signs of substantial improvement, 2017, promises to be the
year of breakthrough, during which SPDI will manage to realise the opportunities it has
identified.
ANNUAL REPORT 2016|13
3.
Regional Economic Developments 3
Economic growth in Romania accelerated further, from 3.8% in 2015 to 4.8% in 2016,
Romania
amongst the highest in the European Union (EU), on the back of domestic demand.
The contribution of private consumption to growth was higher than expected, on the
back of improved income prospects driven by low inflation and wage hikes, as well as
fiscal easing. Consumption will be pushed further up by the wage hike for the entire
health sector and cut in employees’ social security contribution by mid-2017. Private
investments had a positive contribution to growth, on the back of historically low cost
of funding and improved industrial confidence and this continues into 2017.
Government spending is likely to remain subdued due to the end of the previous EU-
funding period, despite higher staff costs. Meanwhile, slightly improved economic
prospects of Romania’s trade partners should support further net exports. Overall,
growth is forecasted to reach 3.8% in 2017.
In terms of risks the focus has now shifted to the budget execution, which may put
the government on a collision course with EU institutions. The consolidated
government balance in cash terms switched to a marginal deficit in February down
from a marginal surplus in January 2017 with total revenues down by -1.4% yoy in
Jan-Feb compared to the full year target of +13.9% a trend which may continue as
further tax cuts have come into force since the beginning of the year. At the same
time total expenditures have started expanding as the budget implementation
incorporated the ruling coalition's electoral program for further generous hikes.
According to the latest IMF forecast, the fiscal deficit is expected to increase to 3.7%
of GDP in 2017 and further up to 3.9% in 2018.
The National Bank of Romania stands out in the region for proactively encouraging
NPL sales and write-offs. Also, previous threats to financial stability from potentially
damaging laws have lessened after recent decisions of the constitutional court. While
overall credit growth has been sluggish, mortgage lending has grown primarily due to
the government’s Prima Casa guarantee program.
Romania has made considerable gains in the fight against corruption. Lower corruption
and strong institutions are associated with multiple economic benefits: it helps raise
tax collections, improve the allocation of scarce public resources, and attract both
domestic and foreign investment. Maintaining the momentum will require effective
implementation of the national anti-corruption strategy, preventing conflict of interest
in public procurement, and strengthening the management of seized assets.
3 Sources: World Bank Group, Eurostat, EBRD, National Bank of Greece, Elstat, Eurobank Research, and Economic
Research Division, National Institute of Statistics- Romania, National Statistical Institute –Republic of Bulgaria,
National Institute of Statistics – Ukraine, SigmaBleyzer.
ANNUAL REPORT 2016|14
Following a 3.6% nominal growth in 2015, driven by net exports, the Bulgarian
Bulgaria
economy grew by 3.4% in 2016, with a shift of growth drivers towards domestic
demand. While private consumption grew on the back of 10.5% in minimum wage
increase as of January 2016 and better labour market conditions, government
spending remained subdued due to transition to the new EU funds programming
period. In 2017, domestic demand will remain as the driver of growth, supported by
improved income prospects, on the back of almost 9.5% hike in minimum wages and
wage improvement for teachers as of 2017, as well as lower cost of funding, on the
back of financial sector stabilization. However, the contribution of net exports to
growth will remain limited due to strong domestic demand. Overall, growth is expected
to stand above 3.0% in 2017.
Bulgaria's external and fiscal position is strong, the banking sector capital position is
solid and the buffers (fiscal and foreign exchange reserves) are sizeable. Budget
execution outperformed the target by a wide margin in 2016 (+1.6% of GDP surplus
vs. a target of a - 2.0% deficit). The current account balance is in surplus for the fourth
consecutive year. Sustained labor market improvement coupled with positive real wage
growth supported final consumption recovery throughout 2016. The unemployment
rate declined further to 7.1% in 2016 as the economy adds new jobs in the areas of
specialized services. Eurobank's GDP growth forecast for 2017 stands currently at
3.3%, above the recently released BNB quarterly economic review forecast of 2.8%.
The Greek economy experienced a marginal nominal GDP drop in 2016, partly as a
Greece
result of base effects from the upturn in consumer spending in the first half of 2015.
The only positive signs in 2016 have been the contribution of gross fixed capital
formation to growth and the yet record year for tourism with tourist arrivals growing
7.6% yoy but other parts of the national accounts, including private consumption,
government consumption and net exports, turned downwards again.
ANNUAL REPORT 2016|15
20122013201420152016eGDP (EUR bn)131,8142,2149,3160,0170,0Population (mn)20,019,919,919,919,9Real GDP (y-o-y %)0,73,42,93,84,8CPI (average, y-o-y %)3,44,01,1-0,7-1,6Unemployment rate (%)7,07,16,86,75,9Net FDI (EUR bn)2,22,62,53,03,9Sources : IMF, National Sources, Eurobank EFG, Eurostat, EBRDMacroeconomic data and forecasts20122013201420152016eGDP (EUR bn)39,741,042,044,046,5Population (mn)7,37,37,27,37,3Real GDP (y-o-y %)0,80,91,72,93,4CPI (average, y-o-y %)3,01,4-1,6-1,1-0,8Unemployment rate (%)12,312,911,510,07,1Net FDI (EUR bn)1,21,11,21,60,7Sources : IMF, National Sources, Eurobank EFG, EurostatMacroeconomic data and forecasts
Regarding Greece’s 2017 growth outlook, it is surrounded by a very high degree of
uncertainty, not least because of the delays encountered in reaching a staff level
agreement on the 2nd programme review. In any case, the markets are growing
increasingly concerned about the future and the uncertainty has already started to
take its toll on the domestic economy. Therefore, a swift agreement with official
creditors is key for averting a renewed deterioration in domestic economic conditions,
amid heightening market jitters ahead of the heavy debt service payments falling due
in July 2017. Against this backdrop, current forecasts for real GDP growth this year fall
within the 1.5%-2.0% range, contingent on the assumed timeline for securing an
agreement on the pending programme review.
Ukraine’s economy experienced growth in 2016 after around 16% cumulative real GDP
Ukraine
contraction in the past two years. However, the pace of recovery was slower than
anticipated amid weak reform momentum in the aftermath of a government reshuffle
as well as lack of foreign investment. Helped by a low comparison base of the previous
year, GDP grew by an estimated 0.8% yoy in the first half of 2016. Inflation declined
(from 48.7% yoy in 2015 to 7.9% yoy in September 2016) on the back of exchange
rate stabilisation, subdued domestic demand and prudent fiscal and monetary policies.
After a year-long delay, the IMF completed the second programme review on 14
September 2016 and released a US$ 1 billion tranche. This helped to restore calm in
the foreign exchange market and cleared the way for international assistance from
other donors. Tight capital controls introduced in 2014-2015 remain mostly in place,
although the National Bank of Ukraine continued their gradual relaxation. EBRD
forecasts GDP growth for 2017 at 2.0%.
ANNUAL REPORT 2016|16
20122013201420152016eGDP (EUR bn)193,4182,1179,1176,0177,0Population (mn)11,111,011,010,910,9Real GDP (y-o-y %)-6,6-3,90,7-0,2-0,1CPI (average, y-o-y %)3,0-0,9-1,4-1,70,0Unemployment rate (%)24,527,526,624,623,4Net FDI (EUR bn)1,41,61,00,00,0Sources : IMF, National Sources, Eurobank EFG, European Commission, EBRDMacroeconomic data and forecasts20122013201420152016GDP (USD bn)176,2177,4127,698,093,3Population (mn)45,645,542,742,542,5Real GDP (y-o-y %)0,20,0-6,0-9,92,3CPI (average, y-o-y %)0,6-0,224,943,312,4Unemployment rate (%)7,57,410,59,49,7Net FDI (USD bn)6,63,30,22,33,2Sources : IMF, National Sources, European Commission, Oxford Economics, SigmaBleyzer, EBRDMacroeconomic data and forecasts
4.
Real Estate Market Developments4
4.1 Romania
2016 maintained a comfortable market liquidity, marking a total investment volume of
General
€910m, up from €820m in 2015. Although the growing investment activity has already
put pressure on pricing, the risk-return yield that Romania offers remains very
attractive both by Eurozone and CEE standards. The current yield levels are 7.5% for
office, 7% for retail and slightly below 9% for industrial.
New deliveries of industrial spaces during 2015 stood at 150,000 sqm, and the market
remained very bullish in 2016 as well. During 2016, new deliveries stood at 350,000
sqm, of which 60% were in Bucharest. By early 2017, the total stock of industrial space
stood at 3,000,000 sqm.
Total take-up of industrial spaces during 2016 stood at 350,000 sqm, of which
approximately 60,000 sqm were geared towards speculative developments. The
largest generator of demand is the FMCG (Fast Moving Consumer Goods) sector (in
the past 2 years, their demand reached approx. 200,000 sqm in the main cities of
Romania), followed by e-commerce, electro-IT companies, and logistics companies.
The vacancy rate in Bucharest has decreased to 2% by the end of 2016 (down from
5% in the previous year), while the vacancy rate for the rest of the country stood at
5%. This decline in the vacancy rate is remarkable when taking into account the large
volume of new deliveries. Market rates for logistics remained broadly unchanged
Logistics
Market
during 2016, ranging between 3.8 €/sqm and 4.25 €/sqm.
The stock of modern office spaces in Bucharest reached 2.1m sqm, after registering
Office Market
new deliveries of 230,000 sqm during 2016. In fact, the volume of new deliveries
marks the fastest pace of expansion since 2009 and is 112% more than the yearly
average of deliveries in the post-crisis period.
In terms of geographical distribution, the highest contributors to the stock are
Floreasca-Barbu Vacarescu (42% of total deliveries), Dimitrie Pompeiu (26% of total
deliveries) and the Central West Area (24% of total deliveries). In total, these zones
accounted for 92% of the total deliveries in the market.
Total take-up in the market for 2016 reached 369,000 sqm, up by 52% from the
previous year. IT and BPO/SSC (Business Process Outsourcing and Shared Service
Center) were the main drivers behind this expansion and accounted for a total of 50%
of the transactions. It is clear that tenants continue to have the upper-hand. Net take-
up during 2016 reached 166,600 sqm, which covers 73% of the area delivered to the
market in the same period. We expect supply to continue outpacing demand during
2017 as well, which will invariably increase competition in the market.
Rental rates for Class A office space are ranging from €10/sqm/month in North Pipera
to €18/sqm/month in a prime CBD like Piata Victoriei.
4 Sources : Danos Research, Eurobank, Jones Lang LaSalle, DTZ Research, CBRE Research, Colliers International,
Cushman & Wakefield, MBL Research.
ANNUAL REPORT 2016|17
2016 saw the delivery of a series of new retail projects, with Bucharest acting as the
Retail Market
main point of attention for developers. Total deliveries of new stock stood at 240,000
sqm of GLA, out of which Bucharest accounted for more than 40%.
There are no new projects announced for delivery in Bucharest during 2017 – 2018.
Within this period, we expect the existing shopping centers to focus on consolidating
their market position in order to maximize the centers’ attraction. Several shopping
centers already announced extensions aimed at creating additional space for anchor
tenants and/or entertainment areas.
Overall, Bucharest’s ratio of retail stock increased from 573 sqm per 1,000 capita in
2015 and currently stands at 626 sqm per 1,000 capita, however still behind the CEE
markets.
Rent levels remained broadly unchanged (€55-65/sqm/month) in 2016, as the market
was able to absorb organically the newly released supply in retail centers. Although
the performance of the retailers continued to increase in 2016, they were rather
conservative during the negotiation process and signed contracts for constant base
rent levels, compensating with turnover rents in the case of very successful locations.
Residential
Market
2016 was the best year in terms of residential market performance in the past 10
years, continuing a trend that began in 2015, when the market showed clear signs of
revival. The apartment supply in Bucharest has decreased to 7,000–8,000 units, 35%
lower than in 2015, and most of this is represented by projects finalized before 2015.
There was a 20% increase in deliveries in 2016.
Most demand is still generated through the Prima Casa program, for mass market
dwellings, however due to economic improvements and wage growth, there is also
increased demand in the mid-market segment. In addition, in 2016 there was a clear
switch of preferences towards new apartments rather than older ones. Second-hand
apartments still account for the majority of transactions, as their locations and general
infrastructure are often preferable to new apartments and they are generally more
affordable.
ANNUAL REPORT 2016|18
Prices started to pick up in Bucharest, especially for old apartments, although prices
for new apartments were relatively stable at €800–1,000/usable sqm for mass market
apartments and €1,000–1,700/usable sqm for mid-market apartments.
4.2 Bulgaria
The total value of completed investment deals in 2016 was slightly above €262m. The
General
biggest share of investment volume involved hotels (27%), followed by industrial and
logistics space (20%), the third position is split between office and retail properties
(18%).
Total stock of class A and B office space in nearing the 2,000,000 sqm mark, expected
Office Market
to be surpassed in 2017. Vacancy rate is 10-12% as the take up rate has increased in
2016, due to demand from IT and the services sectors. Rental levels remain stable at
€12-13/sqm from class A buildings and €7-8 for class B. As another 115-150,000 sqm
of class A building are coming to the market, rents may phase a downward pressure
throughout 2017, but as demand is strong, such reduction will be temporary.
In 2016 Sofia residential market experienced a 5% increase in the number of
completed residential projects. Total supply reached 7,048 units (apartments, row or
single houses), concentrated in 57 projects. The neighborhoods in the southern parts
of Sofia and at the foot of the Vitosha Mountain remained the most popular.
The trend towards pre-sales continued over the year. The share of these transactions
grew significantly from 37% in 2015 to 57% in 2016. Insufficient supply of completed
quality residential product saw this pre-sale proportion grow. The higher level of
comfort that buyers now have when buying real estate from experienced developers
added to the momentum.
Asking prices for mid-plus and high-end residential units registered a 9% yoy growth
in 2016. These were in the range of € 900 - 1,550 per sqm including VAT, depending
on the characteristics of the compound and the specific negotiated terms.
4.3 Greece
Residential
Market
The markets are under strain due to the ongoing uncertainty in which they operate,
General
as a result of the protracted negotiations for the completion of the 2nd review of the
bailout programme as well as the sharp increase in the tax burden in 2017. This is
reflected in the weakening of the economic climate and the sharp drop in consumer
confidence, in February 2017.
The industrial market in Greece had a relatively good year in spite of the weak
economic climate. According to the latest study of National Bank of Greece, the
logistics sector proved resilient in the crisis bringing its contribution to GDP to 2.9% in
2016 from 2.5% in 2008 and showing signs of convergence with European standards.
Prime rents were stable in Q1 2017 at €4.0/sqm/month with significant increase in
demand for high quality space which is in major shortage especially of large
warehouses that meet the requirements of occupiers in terms of quality.
Logistics
Market
ANNUAL REPORT 2016|19
Focusing on the future outlook of the industry, the momentum would be maintained
and demand for industry services is expected to grow over the next five years (based
on increased trend of outsourcing). At the same time, expected favorable impact of a
series of external factors that would act as accelerators for the industry over the next
five years - mainly participation in wider networks 4PL and the upscale presence of
COSCO.
4.4 Ukraine
2016 was characterised by an increase in the number of office lease transactions in
General
Grade А and В business centers. Due to a steady increase in the demand for high
quality office spaces vacancy levels dropped by 3,1% compared to the previous year.
Some of the main trends for the warehouse market in Kyiv region in 2016 were: a mild
growth in demand among tenants, a slight increase in the number of large purchase
deals, as well as a moderate reduction in vacancy rates and their stabilization.
ANNUAL REPORT 2016|20
5. Property Assets
5.1 GED Logistics center, Athens 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
Project
description
exit 4 of Attiki Odos (the Athens ring road) and is 20 minutes from the port of Piraeus
(where COSCO runs a container port handling ~4m containers a year) and the National
Road connecting Athens to the north of the country. The roof of the warehouse
buildings house a photovoltaic park of 1,000KWp.
The buildings are characterized by high construction quality and state-of-the-art
security measures. The complex includes 100 car parking spaces, as well as two central
gateways (south and west).
The complex at the end of 2016 is 100% occupied, with the major tenant
Current status
(approximately 70%) being the German transportation and logistics company Kuehne
+ Nagel.
5.2 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 served by public transportation. The park is highly energy efficient.
Project
description
The Company acquired the office building in November 2014. The complex is fully let
Current status
to Danone Romania, the French multinational food company, until 2026.
ANNUAL REPORT 2016|21
5.3 Praktiker Retail Center, Romania
The retail park consists of 21,860 sqm of land including a retail BigBox of 9,385 sqm
GLA and 280 parking places. It is located in Craiova, on one of the main arteries of the
city, along with most of the DIY companies. Craiova is an important city for the
Romanian automotive industry as Ford bought the Daewoo facilities in 2007 and
produces two of its models from there. Ford is committed to continue investing and it
is completing a brand new engine production facility.
Project
description
As at year-end, the complex is fully let to Praktiker Romania, a regional DIY retailer,
Current status
until 2020 and the Company negotiated the extension of the Praktiker lease agreement
until December 2025 for an annual rent of ~€600,000, which was effected in July 2016.
SPDI renegotiated the outstanding debt facility in H1 2016 and managed the outflows
to match the timing and magnitude of the inflows.
5.4 Delenco office building, Romania
The property is a 10,280 sqm office building, which consists of two underground levels,
a ground floor and ten above-ground floors. The building is strategically located in the
very centre of Bucharest, close to three main squares of the city: Unirii, Alba Iulia and
Project
description
Muncii, only 300m from the metro station.
The Company acquired 24.35% of the property in May 2015. At the end of 2016, the
Current status
building is 100% let, with ANCOM (the Romanian Telecommunications Regulator)
being the anchor tenant (70% of GLA).
5.5 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 centre, 200m from the city’s ring road and 6km from
Project
description
ANNUAL REPORT 2016|22
Bucharest-Pitesti (A1) highway. Its construction was completed in 2008 and was tenant
specific. It comprises four separate warehouses, two of which offer cold storage.
The Company signed with Nestle Ice Cream an agreement vacating the premises, in
Current status
July 2016. Such agreement was effected in August 2016 for a €1.4m cash settlement
payable by Nestle, which represents approximately 18 months of rent plus the three
months’ rental guarantee deposits and certain fixed assets that Nestle had installed in
the premises. At the same time the Company was in extensive discussions through
2016 with the lender of the property, Piraeus Bank Leasing, in order to review the sale
and leaseback agreement following the settlement with Nestle finally managing to
strike an agreement in February 2017. Based on the amended agreement the
Innovations Park is subject to a sale and lease Back for a period of nine years and
during this period SPDI is free to lease out spaces of the Innovations Park at its own
discretion. In April 2017 the Company signed a lease agreement with Aquila srl, a large
Romanian logistics operator, for 5,740 sqm of ambient space in the warehouse, which
produces an annual rent payable by Aquila of~€300,000. As at the issuance date of
this report the terminal is 60% leased.
5.6 Terminal Brovary Logistic Park, Ukraine
The Brovary Logistic Park consists of a 49,180 sqm GLA Class A warehouse and
associated office space. The building has large facades to the Brovary ring road, at the
intersection of the Brovary (Е-95/М-01 highway) and Borispol ring roads. It is located
10 km from the Kiev city border and 5 km from Borispol international airport.
The building is divided into six independent sections (each at least 6,400 sqm), with
internal clear ceiling of 12m height and industrial flooring constructed with an anti–
dust overlay quartz finish. The terminal accommodates 90 parking spaces for cars and
trucks, as well as 24 hour security.
Project
description
ANNUAL REPORT 2016|23
In May 2016 the Company fully leased the warehouse space to Rozetka UA, the leading
Current status
Ukrainian internet retailer. In September 2016, the Company signed a sale and
purchase agreement with Temania Enterprises Ltd (company related to Rozetka UA)
for the sale of its Terminal Brovary warehouse at a gross asset value of over US$16
million (before the deduction of the outstanding EBRD). The sale was completed
successfully at the end of January 2017, generating for the Company a net cash inflow
of over US$3m.
5.7 Residential portfolio
• 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
Project
description
and green areas.
During 2016 two units were sold and
Current status
at the end of 2016, 18 apartments
were available while 13 of them
were
rented,
indicating
an
occupancy rate of 72%.
• 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
Project
description
subway.
During 2016 four units were sold and
Current status
at the end of 2016, 22 apartments
were available while 9 of them were
rented, indicating an occupancy rate
of 41%.
ANNUAL REPORT 2016|24
• 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
During 2016 seven units were sold
Current status
and at
the end of 2016, 15
apartments were available while 6 of
them were rented, indicating an
occupancy rate of 40%.
• Green Lake, Bucharest, Romania
A residential compound of 40,500 sqm GBA, which consists of apartments and villas,
situated on the banks of Grivita Lake, in the northern part of the Romanian capital –
the only residential property in Bucharest with a 200 meter frontage to a lake. The
compound also includes facilities such as one of Bucharest’s leading private schools
(International School for Primary Education), outdoor sports courts and a mini-market.
Additionally Green Lake includes land plots totaling 40,360 sqm. SPDI owns ~43% of
this property asset portfolio.
Project
description
At the end of 2015 the portfolio consisted of 40 unsold apartments plus 37 unsold
Current status
villas. During 2016, six apartments and villas were sold while at the end of 2016, of
the 71 units that were unsold 26 of them were let (occupancy rate of ~37%).
• Boyana Residence, Sofia, Bulgaria
A residential compound, which consisted at acquisition date (May 2015) of 67
apartments plus 83 underground parking slots developed on a land surface of 5,700
sqm, situated in the Boyana high end suburb of Sofia, at the foot of Vitosha mountain
with Gross Buildable Area (“GBA”) totaling to 11,400 sqm. The complex includes
adjacent land plots with building permits under renewal to develop GBA of 21,851 sqm.
Project
description
ANNUAL REPORT 2016|25
During 2016, twenty one apartments were sold, with 40 units remaining unsold at the
Current status
end of 2016.
5.8 Land Assets
• Aisi Bela – Bela Logistic Center, Odessa, Ukraine
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
Project
description
distribution warehousing.
The Company does not intend to recommence construction in the near future.
Current status
• Kiyanovskiy Lane – Kiev, Ukraine
The property 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
Project
description
beautiful protected views overlooking the scenic Dnipro River, St. Michaels’ Spires and
historic Podil.
Discussions with local developers who approached the Company in order to explore
Current status
possibilities of value generation are in progress.
• Tsymlyanskiy Lane – Kiev, Ukraine
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
Project
description
45%.
Discussions are on-going with interested parties with a view to partnering in the
Current status
development of this property.
• Balabino- Zaporozhye, Ukraine
The 26.38 Ha site is situated on the south entrance of Zaporozhye city, 3km away from
the administrative border of Zaporozhye. It borders the Kharkov-Simferopol Highway
Project
description
(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.
The site is zoned for retail and entertainment. Development has been put on hold.
Current status
ANNUAL REPORT 2016|26
• Rozny Lane – Kiev Oblast, Kiev, Ukraine
The 42 Ha land plot located in Kiev Oblast is destined to be developed as a residential
complex. Following protracted legal battle it has been registered under the Company
Project
description
pursuant to a legal decision in July 2015.
The Company is evaluating potential commercialization options to maximize the
Current status
property’s value.
• Delia Lebada, Romania
The site consists of a ~40,000 sqm plot of land in east Bucharest situated on the shore
of Pantelimon Lake, opposite a famous Romanian hotel, the Lebada Hotel. The lake
itself, having a 360 Ha surface, is the largest lake of Bucharest and accommodates
many leisure activities such as fishing, cycling, walking, etc. At the back of the property
there is a forest which transforms the area into a very attractive habitat for families
Project
description
and adds value to the residential units to be developed.
The construction permit, which allows for ~54,000 sqm to be built, was renewed in
Current status
April 2014 but the property has been on hold. Following the SPV owning the plot
entering into an insolvency status the lending bank (Bank of Cyprus) entered into
discussions with the Company and its partners in respect to the future of the defaulted
loan. Such discussions are expected to be concluded within Q3-2017 and result into an
amicable solution for all involved parties.
ANNUAL REPORT 2016|27
ANNUAL REPORT 2016|28
CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2016
CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2016
CONTENTS
Corporate Information
Chairman’s Statement
Declaration
Management Report
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
31
32
33
34
37
40
41
42
43
44-91
CONSOLIDATED FINANCIAL STATEMENTS 2016| 30
Corporate Information
Board of Directors
Lambros Anagnostopoulos
Vagharshak Barseghyan
Ian Domaille
Paul Ensor
Franz Hoerhager
Registered Address
16, Kyriakou Matsi Avenue,
Eagle House, 10th floor, PC 1082,
Agioi Omologites, Nicosia, Cyprus
Principal Places of Business
Antonios Kaffas
Kalypso Maria Nomikou
Alvaro Portela
Harin Thaker
11, Bouboulinas Street,
4th floor, Office No. 48,
1060 Nicosia, Cyprus
68-72 Polona Street, Polona 68
Business Center, entrance 2,
3rd floor, 1st District,
Bucharest, Romania ,PC 010505
Rigillis 30
Athens 10674,
Greece
Prytys'ko-Mykilska 5
Kiev 04070,
Ukraine
Company Secretary
Chanteclair Secretarial Ltd
16, Kyriakou Matsi Avenue
Eagle House, 10th floor, PC 1082, Nicosia, Cyprus
Nominated Adviser and Joint Broker
Strand Hanson Ltd
26 Mount Row, Mayfair,
London WIK3SQ, United Kingdom
Registrars
Computershare Investor Services PLC
The Pavillions, Bridgewater Road
Bristol BS99 7NH, UK
Main Collaborating Banks
Beaufort Securities Ltd
63 St Mary Axe
London, EC3A 8AA, United Kingdom
Cymain Registrars Limited
P.O. Box 25719
1311 Nicosia, Cyprus
European Bank for Reconstruction and Development
One Exchange Square
London EC2A 2JN, United Kingdom
UNIVERSAL Bank
54/19, Avtozavodska str., 04114
Kiev, Ukraine
Bank of Cyprus
P.O. Box 21472
1599 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
Kiev, 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
Eurobank Ergasias S.A.
8, Othonos st, 105 57
Athens, Greece
Eurobank EFG Cyprus Ltd
41, Makarios Avenue, 5th floor,
1065 Nicosia, Cyprus
Reed Smith LLP
The Broadgate Tower 20 Primrose Street
London EC2A 2RS, United Kingdom
Georgiades & Pelides LLC
Kyriakou Matsi Avenue
Eagle House, 10th floor, PC 1082, Nicosia, Cyprus
Lex Consulting Ltd
103 James Baucher Blvd., floor 2, office 5
Lozenetz quarter, Sofia, Bulgaria
CONSOLIDATED FINANCIAL STATEMENTS 2016| 31
Chairman’s Statement
While 2016 was in many respects a year of consolidation, we are hopeful that 2017 will be a year of growth. SPDI’s strategy for the
past few years has been to capitalise on favourable market dynamics of Romania, Bulgaria and selectively Greece while reducing
exposure to Ukraine. In 2016 with the agreed profitable sale of the Group’s principal Ukrainian asset, Terminal Brovary, we achieved
a major goal consistent with this allocation strategy, generating cash for new investments planned in target countries in 2017.
During the year the favourable fundamentals of our target markets continued to prevail, and as economic growth picked up across
the Eurozone in the latter part of 2016 and early 2017, we remain convinced that will continue to lead to even faster economic growth
in Romania and Bulgaria, with a more stable outlook for Greece.
Property markets in our region have continued to experience a steady yield compression as the global search for yield has forced
funds to deploy new allocations of cash to these markets as the more established CEE (Poland, Czech, Hungary) property markets
have become increasingly crowded with foreign buyers.
The Board remains confident that SPDI is in the right place, at the right time. We are grateful to our shareholders for their continued
support in 2016, and look forward capitalising upon the significant opportunities that we can see for the Group in 2017.
Paul Ensor
Chairman of the Board
CONSOLIDATED FINANCIAL STATEMENTS 2016| 32
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 2016, 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:
Lambros Anagnostopoulos
Vagharshak Barseghyan
Ian Domaille
Paul Ensor
Franz M. Hoerhager
Antonios Kaffas
Kalypso Maria Nomikou
Alvaro Portela
Harin Thaker
Person responsible for the preparation of the consolidated financial statements for the year ended 31 December 2016:
Constantinos Bitros
CONSOLIDATED FINANCIAL STATEMENTS 2016| 33
MANAGEMENT REPORT
The Board of Directors presents its report and the audited consolidated financial statements of SECURE PROPERTY DEVELOPMENT &
INVESTMENT PLC (“SPDI” or the “Company”) and its subsidiaries (the “Group”) for the year ended 31 December 2016.
Principal activities
The principal activities of the Group, which are unchanged from last year, are to invest directly or indirectly in and/or manage real
estate properties as well as real estate development projects in 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
2016 has been for the Group a year focused on consolidation. January 2017 saw the Group agreeing to both a profitable exit from its
main Ukrainian income producing asset and a cash generating agreement for the departure of the main tenant in its Romanian
logistics terminal Innovations. As a result the Group devoted considerable time in closing these two transactions during 2016. The
pace of selling non-core assets has been increased as the residential market climate in the Region improved. In parallel the Group
worked in identifying and securing the transactions that would lead its next stage of growth.
On the operational side, the Group’s gross income increased from ~€7,2m in 2015 to ~€9,2m reflecting the increased pace of non-
core asset selling. Gross Rental Income increased from €5,5m to €6,1m, with average occupancy exceeding 85%, while income from
sales of properties was recorded at €3,2m from €1,7m. Despite such increase in the sale income the Group still incurred losses (Note
7).
Asset Operating expenses (Note 8) decreased reflecting tighter management while corporate costs (Note 9) have been reduced by
13% and are expected to be reduced further in 2017 following extensive cost cutting efforts by Management.
The valuation of the Group’s assets for 2016 increased marginally (Note 10), on a like for like basis (Note 17). Such increase reflects
the slight improvement in market conditions.
As a result of the diversification effort, the income of the Group is less exposed to Ukraine (~25%) and from 2017, the Group will
maintain only land exposure to the country, with a view to take advantage of future capital appreciation. Exposure to Ukraine in terms
of Gross Asset Value was at ~27% at the end of 2016 and was further decreased after the sale of Terminal Brovary.
The Directors expect that the Group will continue selling non-core assets, generating supportive cash flow while further containing its
expenses and preparing for its next stage of growth.
The most significant risks faced by the Group and the steps taken to manage these risks are described in Notes 5 and 40 of the
consolidated financial statements.
Results and Dividends
The Group's results for the year are set out on page 40. No dividends were declared during the year.
Share Capital
Authorised share capital
As at the end of 2015 the authorized share capital of the Company was 989.869.935 Ordinary Shares of €0,01 nominal value each,
785.000 Redeemable Preference Class A Shares of €0,01 nominal value each and 8.618.997 Redeemable Preference Class B Shares
of €0,01 nominal value each (Note 26.1).
No changes were effected during the reporting period as far as the authorized share capital of the Company is concerned and therefore
at the end of the reporting period the authorised share capital of the Company remained at 989.869.935 Ordinary Shares of €0,01
nominal value each, 785.000 Redeemable Preference Class A Shares of €0,01 nominal value each and 8.618.997 Redeemable
Preference Class B Shares of €0,01 nominal value each (Note 26.1). Yet the Company is in the process to cancel the Class A and Class
B Redeemable Preference Shares (Note 26.6) a process that will be completed in 2017.
Issued share capital
As at the end of 2015 the issued share capital of the Company was as follows:
a) 90.014.723 Ordinary Shares of €0,01 nominal value each,
b) 392.500 Redeemable Preference Class A Shares of €0,01 nominal value each,
c) 8.618.997 Redeemable Preference Class B Shares of €0,01 nominal value each.
No changes were effected throughout the reporting period in respect of the issued share capital of the Company and as at the end
of the reporting period the issued share capital of the Company remained as follows:
a) 90.014.723 Ordinary Shares of €0,01 nominal value each,
b) 392.500 Redeemable Preference Class A Shares of €0,01 nominal value each, subject to cancelation during 2017 (Note 26.6),
c) 8.618.997 Redeemable Preference Class B Shares of €0,01 nominal value each, subject to cancelation during 2017 (Note 26.6).
In respect of the Class A Redeemable Preference Shares, issued in connection to the Innovations acquisition and the Class B
Redeemable Preference Shares, issued in connection to the acquisition of Craiova Praktiker, following the holders of such shares
notifying the Company of their intent to redeem within 2016, the Company:
- actually proceeded with full redemption of the Class A shares (392.500) which was finalized in Q1-2017 while the process
of cancelling them will be concluded within 2017
- for the Class B Redeemable Preference Shares, in lieu of redemption the Company gave its 20% holding in Autounion
(Note 26.6) in October 2016, to the Craiova Praktiker seller BLUEHOUSE ACCESSION PROPERTY HOLDINGS III S.A.R.L
and has been negotiating the resulting difference (if any) for a final settlement. As soon as the case is settled, the
Company will proceed with the cancellation of the Class B Redeemable Preference Shares.
CONSOLIDATED FINANCIAL STATEMENTS 2016| 34
MANAGEMENT REPORT
Board of Directors
The members of the Company's Board of Directors as at 31 December 2016 and at the date of this report are presented on page 31.
In accordance with the Company's Articles of Association, during the Annual General Meeting held on 30st December 2016, Mr.
Hoerhager, Mr. Kaffas and Mr. Ensor who 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 and the responsibilities of both committees remained unchanged during the reporting period:
- Audit Committee: Mr. Domaille (Chairman) and Mr. Kaffas
- Remuneration Committee: Mr. Domaille (Chairman) and Mr.Thaker
Remuneration Policy
The remuneration policy for the Board (non-executive members) 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/or of December, 31st 2014.
During the reporting period there were no new shares issued to the Board members or the Management as part of their remuneration.
As far as the Board's remuneration is concerned, this has been adjusted to the growth of the Gross Asset Value of the Company as
mandated by the policy. It should be noted that the said policy relates to payments through shares which are locked up for the earlier
of two years from the date of issue or the date following which the 30 day average traded value exceeds GBP 70.000. Since 1st of
July 2017, the BoD has decided to forego any payment.
The remuneration of the senior management is described in Note 37.1.2.
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 Director 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
USD
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 2016 the Company considers that as the options are well out of the money, these will not be exercised and will lapse.
Options currently held by employees
As approved by the Annual General Meeting on 30th December 2013 the Company proceeded in 2015 in issuing 590.000 options to
its employees corresponding to potentially 590.000 ordinary shares. The terms of the options and the related holdings are analyzed
in Note 26.3. As at the reporting date no options have been exercised. The Company considers these options as being also out of the
money.
Directors and Management Holdings in the Company
The table below presents Directors and Management shareholding in the Company as at the end of the reporting period:
Name
Paul Ensor
Barseghyan Vagharshak
Ian Domaille
Franz Horhager
Antonios Kaffas
Kalypso Maria Nomikou
Alvaro Portela
Harin Thaker
Lambros Anagnostopoulos
Constantinos Bitros
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
-
133.132
121.474
62.980
-
44.742
44.742
448.092
296.271
CONSOLIDATED FINANCIAL STATEMENTS 2016| 35
MANAGEMENT REPORT
As at the date of issuance of the financial statements and following acquisition of shares done within H1 2017 the Director’s holdings
changed (Note 41d) as follows :
Name
Paul Ensor
Barseghyan Vagharshak
Ian Domaille *
Franz Horhager
Antonios Kaffas
Kalypso Maria Nomikou
Alvaro Portela
Harin Thaker
Lambros Anagnostopoulos
Constantinos Bitros
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
271.597
35.484
379.475
245.575
205.709
35.484
168.844
170.780
448.092
296.271
*includes a number of 83.196 shares as non-beneficial owner
Warrants issued and exercised
Class A warrants
18.028.294 warrants corresponding to 18.028.294 ordinary shares (Note 26.4) that were exercisable by 31 December 2016 at an
exercise amount of £0,45 per ordinary share, were not exercised and therefore have lapsed.
There are no other Class A warrants in circulation as at the issuance date of the financial statements.
Class B warrants
Class B Warrants (Note 26.5) in circulation are yet to be exercised. As at the reporting date there are 12.859.246 warrants in circulation
corresponding to an equal amount of ordinary shares (1:1). Further to the resolution approved at the AGM of 30 December 2016 the
exercise period of the Class B Warrants has extended until 30 June 2017. The exercise price of the Class B warrants is €0,01.
Other share capital related matters
Pursuant to decisions taken by the AGM of December 30st 2016, the Board has been 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) so as to facilitate the profitable growth of the Group.
Such explicit authority for the issuance of such shares expires on 31 December 2018. Since 31 December 2016 and until
the date of this report, the Board had issued 626.133 shares under its mandated authority.
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). 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 Group and c) for their assistance with
fundraising. Such explicit authority for the issuance of such warrants expires on 31 December 2018. No Class A warrants
have been issued as at the date of this report.
Events after the end of the reporting period
The significant events that occurred after the end of the reporting period are described in Note 41 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 2016, 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 Group.
By order of the Board of Directors,
Constantinos Bitros
Chief Financial Officer
CONSOLIDATED FINANCIAL STATEMENTS 2016| 36
Independent Auditor’s Report
Baker Tilly Klitou & Partners Ltd
Corner C. Hatzopoulou & 30 Griva Digheni Avenue
1066 Nicosia, Cyprus
P.O. Box 27783, 2433 Nicosia, Cyprus
T: +357 22 458500 | F: +357 22 751648
info@bakertillyklitou.com
www.bakertillyklitou.com
To the Members of Secure Property Development & Investment Plc
Report on the Audit of the Financial Statements
Opinion
We have audited the consolidated financial statements of Secure Property Development & Investment Plc (the “Company”) and its
subsidiaries (the “Group”), which are presented in pages 40 to 91 and comprise the consolidated statement of financial position as at
31 December 2016, and the consolidated statement of comprehensive income, changes in equity and cash flow for the year then ended,
and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of
the Group as at 31 December 2016, and of its consolidated financial performance and its consolidated cash flows for the year then
ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the requirements
of the Cyprus Companies Law, Cap. 113.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are
independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional
Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements
in Cyprus, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
Valuation of investment properties and investment properties under development
Refer to Note 3 - Significant accounting policies and Note 17 -
Investment Property.
How our audit addressed the key audit matter
Our audit procedures included assessment of the valuers
qualifications and expertise and considered their engagement
with the Group to determine whether there were any matters
that might have affected their objectivity or may have imposed
scope limitations upon their work.
We obtained and read the CBRE and Real Act valuation reports
for every property. We determined, based on our expertise and
experience, that the valuation approach for each was appropriate
and suitable for use in determining the fair value for the
consolidated financial statements.
We have also evaluated the mathematical precision of the
methodologies used and the relevance of the key assumptions
used, comparing with general economic expectations to assess
whether the assumptions used were reasonable.
The Group’s investment properties and investment property
under development were carried at €100.7m as at 31 December
2016. A loss on disposal of investment property of €0,5m and a
net fair value movement loss of €1m was recognised in the
Group’s consolidated statement of comprehensive income for the
year. We focused in this area due to the existence of significant
judgement, coupled with the fact that only a small percentage
difference in individual property valuations when aggregated
could result in material misstatement.
The valuation of the Group’s properties is inherently subjective
due to unique nature, location and expected future prospects of
each property. The methodology applied in determining the fair
values is set out in Note 17 of the consolidated financial
statements. Valuations, as disclosed in Note 3, are carried out by
third party valuers, CBRE Ltd and Real Act (the “Valuers”). The
Valuers performed their work in accordance with the Royal
Institute of Chartered Surveyors
(“RICS”) Valuation –
Professional Standards, taking into account property specific
information.
Offices:
Cyprus Greece Bulgaria Romania Moldova
Nicosia T: +357 22 458500 Athens, Thessaloniki Sofia T: +359 2 9580980 Bucharest T: +40 21 3156100 Chisinau T: +373 22 233003
Limassol T: +357 25 591515 T: +30 215 500 6060
Larnaca T: +357 24 663299
Registered in Cyprus (Reg. No. 156870) List of Directors can be found at the Company's Registered
Office.
Independent Auditor’s Report (continued)
Material uncertainty related to going concern
We draw attention to Note 40.7 to the consolidated financial statements which indicates that the Group’s current liabilities exceeded
the current assets by €31.572.459 as at 31 December 2016. The Group incurred a net loss amounting to €2.352.641 during the year
ended 31 December 2016. These conditions indicate the existence of a material uncertainty which casts significant doubt as to the
Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Other information
The Board of Directors is responsible for the other information. The other information comprises the Annual Report, the Chairman’s
Statement and the Management Report. The other information does not include the consolidated financial statements and our auditor’s
report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors 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.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The Board of Directors is responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the
audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the Board of Directors.
Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves a
true and fair view.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
Independent Auditor’s Report (continued)
We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit
of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
Emphasis of matters
We draw attention to Notes 3, 5, 17, 22, 29 and 38.3 to the consolidated financial statements, which describe the following matters:
(a) The fair value of the investment properties and investment properties under development, and the net realizable value of inventory
as indicated in Notes 3, 17 and 22 to the consolidated financial statements are based on valuations performed by independent valuators.
The values are 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 and investment properties under development, and the carrying value of inventory will be affected accordingly.
(b) We draw attention to Note 5 to the consolidated financial statements, which describe 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.
(c) We draw attention to Notes 29 and 38.3 to the consolidated financial statements which describe that the loan payable to Bank of
Cyprus by the Group’s subsidiary Delia Lebada Srl is currently in default and the Bank has initiated insolvency procedures. The Group
is currently in discussion with its partner and the bank in an effort to settle the case.
Our opinion is not qualified in respect of these matters.
Report on Other Legal Requirements
Pursuant to the additional requirements of the Auditors Law of 2017, we report the following:
In our opinion, the management report has been prepared in accordance with the requirements of the Cyprus Companies Law,
Cap. 113 and the information given is consistent with the consolidated financial statements.
In our opinion, and in the light of the knowledge and understanding of the Group and its environment obtained in the course
of the audit, we have not identified material misstatements in the management report.
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
69 of the Auditors Law of 2017 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.
The engagement partner on the audit resulting in this independent auditor’s report is Andreas Pittakas.
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, 27 June 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2016
Income
Asset operating expenses
Net Operating Income
Administration expenses
Share of profits/(losses) from associates
Valuation gains/(losses) from Investment Property
Net loss on disposal of inventory
Net loss on disposal of investment property
Result on disposal of available for sale financial assets
Impairment allowance for inventory and provisions
Gain realized on acquisition of subsidiaries
Other operating income/(expenses), net
Goodwill impairment
Operating profit / (loss)
Finance income
Finance costs
Foreign exchange (loss), net
Loss before tax
Income tax expense
Loss for the year
Other comprehensive income
Note
7
8
9
19
10
11
11
23
12
18a
13
18b
14
14
15a
2016
€
6.070.940
(992.441)
5.078.499
(2.614.188)
469.248
896.793
(368.907)
(438.516)
(206.491)
(63.513)
-
(1.304.304)
-
2015
€
5.448.960
(1.124.583)
4.324.377
(3.013.942)
(1.244.572)
(2.335.247)
(51.359)
(266.964)
-
(1.675.659)
2.181.834
653.856
(657.082)
1.448.621
(2.084.758)
1.153.243
(3.738.951)
(1.041.239)
63.596
(4.438.191)
(5.071.048)
(2.178.326)
(11.530.401)
16
(174.315)
(80.188)
(2.352.641)
(11.610.589)
Exchange difference on I/C loans to foreign holdings
Exchange difference on translation of foreign operations
Available-for-sale financial assets – fair value gain
Available-for-sale financial assets – Gains recycled to loss for the year
15b
27
23
23
(4.167.542)
3.508.448
-
(485.529)
(13.653.402)
8.064.848
485.529
-
Total comprehensive income for the year
(3.497.264)
(16.713.614)
Loss attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
(2.363.693)
11.052
(2.352.641)
(11.015.852)
(594.737)
(11.610.589)
(3.477.567)
(19.697)
(3.497.264)
(15.981.196)
(732.418)
(16.713.614)
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
35b
(0,03)
(0,02)
(0,16)
(0,13)
The notes on pages 44 to 91 form an integral part of these consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS 2016|40
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the year ended 31 December 2016
ASSETS
Non-current assets
Investment properties
Investment properties under development
Tangible and intangible assets
Long-term receivables and prepayments
Investments in associates
Available for sale financial assets
Current assets
Inventory
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
Available for sale financial assets – fair value reserve
Accumulated losses
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
Non-current liabilities
Borrowings
Finance lease liabilities
Trade and other payables
Deposits from tenants
Current liabilities
Borrowings
Trade and other payables
Taxes payable
Redeemable preference shares
Provisions
Deposits from tenants
Finance lease liabilities
Total liabilities
Total equity and liabilities
Net Asset Value (NAV) € per share:
Basic NAV attributable to equity holders of the parent
Diluted NAV attributable to equity holders of the parent
Note
17.4a
17.4b
20
21
19
23
22
24
25
26
27
36.3
28
29
33
30
31
29
30
32
26.6
32
31
33
35c
2016
€
2015
€
95.654.207
5.027.986
129.396
351.181
5.217.310
___________-
106.380.080
5.028.254
2.778.361
1.701.007
9.507.622
115.887.702
94.340.471
5.125.389
164.617
352.916
4.887.944
____2.783.535
107.654.872
11.300.000
4.795.223
895.422
16.990.645
124.645.517
900.145
122.874.268
10.161.471
(37.567.055)
-
(57.444.020)
38.924.809
900.145
122.874.268
6.653.023
(33.399.513)
485.529
(55.080.327)
42.433.125
7.237.827
615.527
46.162.636
43.048.652
16.895.155
11.081.379
451.123
217.328
28.644.985
31.580.299
7.038.170
1.147.018
-
742.166
271.019
301.409
41.080.081
69.725.066
26.263.559
11.273.639
4.672.888
623.770
42.833.856
27.417.220
3.044.036
822.005
6.430.536
724.445
132.684
192.083
38.763.009
81.596.865
115.887.702
124.645.517
0,43
0,38
0,47
0,41
On 27 June 2017 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 44 to 91 form an integral part of these consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS 2016|41
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2016
Attributable to owners of the Company
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
Available for
sale financial
assets – fair
value reserve5
Total
Non-
controlling
interest
Total
€
€
€
€
Balance - 31 December 2014
338.839
97.444.044
(44.064.475)
(19.746.111)
(1.411.825)
Loss for the year
Exchange difference on I/C loans to
foreign holdings (Note 15b)
Foreign currency translation reserve
Fair value gain on available-for-sale
financial assets (Note 23)
Acquisition of non-controlling interest
Issue of share capital, net (Note 26)
-
-
-
-
-
-
-
-
561.306
-
-
25.430.224
Loss for the year
Exchange difference on I/C loans to
foreign holdings (Note 15b)
Foreign currency translation reserve
Available-for-sale financial assets –
Gains recycled to loss for the year
(Note 23)
Restructuring of the business (Note 34)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(11.015.852)
-
-
(13.653.402)
-
-
8.064.848
-
-
-
-
32.560.472
651.882
33.212.354
(11.015.852
)
(13.653.402
)
8.064.848
(594.737)
(11.610.589)
-
(137.681)
(13.653.402)
7.927.167
-
-
-
-
-
-
485.529
-
-
485.529
-
25.991.530
-
696.063
-
485.529
696.063
25.991.530
(2.363.693)
-
-
(4.167.542)
-
-
3.508.448
-
-
-
(2.363.693)
11.052
(2.352.641)
(4.167.542)
3.508.448
-
(30.749)
(4.167.542)
3.477.699
-
-
(485.529)
-
(485.529)
-
6.641.997
(485.529)
6.641.997
Balance - 31 December 2015
900.145
122.874.268
(55.080.327)
(33.399.513)
6.653.023
485.529
42.433.125
615.527
43.048.652
Balance - 31 December 2016
900.145
122.874.268
(57.444.020)
(37.567.055)
10.161.471
-
38.924.809
7.237.827
46.162.636
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 2015 and 2016. The Group treats the mentioned loans as a part of the net investment in foreign operations (Note 37.3).
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 Group’s subsidiaries own property assets.
5 Available For Sale financial assets are measured at fair value. Fair value changes on AFS assets are recognized directly in equity, through other comprehensive income.
The notes on pages 44 to 91 form an integral part of these consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS 2016|42
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax and non-controlling interests
Adjustments for:
(Gains)/losses on revaluation of investment property
Net loss on disposal of investment property
Other non-cash movements
Write offs of prepayments
Impairment of assets
Accounts payable written off
Depreciation/ Amortization charge
Interest income
Interest expense
Share of losses/(profit) from associates
Gain on acquisition of subsidiaries
Results on disposal of available for sale assets
Impairment of inventory
Goodwill impairment
Effect of foreign exchange differences
Cash flows from/(used in) operations before working capital changes
Change in inventory
Change in prepayments and other current assets
Change in trade and other payables
Change in VAT and other taxes receivable
Change in Provisions
Change in other taxes payables
Increase in deposits from tenants
Cash generated from operations
Income tax paid
Net cash flows provided in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Sales proceeds from disposal of investment property
Prepayment made for acquisition of investment property
Cash outflow on available for sales financial assets
Capital expenditure on property plant and equipment
Dividend received from associates
Interest received
Increase in long term receivables
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
Proceeds from bank loans
Repayment of borrowings
Interest and financial charges paid
Decrease in financial lease liabilities
Increase in Non-controlling interest
Repayment of preference shares
Net cash flows from / (used in) financing activities
Note
2016
€
2015
€
(2.178.326)
(11.530.401)
10
11b
13
13
13
9
14
14
19
18a
23
12
18b
15a
22
24
30
24
32
32
31
11b
17
18
26
29
29
33
26
(896.793)
438.516
(1.367)
6.701
-
(109.602)
58.491
(1.153.243)
3.571.387
(469.248)
-
206.491
63.513
-
1.041.239
577.759
1.522.234
(380.280)
(2.134.760)
560.009
17.721
157.026
(268.107)
51.602
(2.879)
2.335.247
266.964
35.071
47.316
342.280
(1.197.740)
40.823
(63.596)
3.834.696
1.244.572
(2.181.834)
-
975.659
657.082
5.071.048
(122.813)
24.341
(659.770)
1.131.688
(290.593)
656.192
87.524
(117.497)
709.072
(238.616)
48.723
470.456
2.043.055
-
-
(23.266)
127.570
886
1.734
-
2.149.979
-
1.000.000
(2.881.423)
(3.716.433)
(82.934)
4.287.673
-
(1.393.117)
1.635.615
(100.000)
(2.298.006)
-
-
63.596
(1.786.934)
(2.485.728)
10.839.040
-
(5.672.198)
(2.619.506)
(179.255)
(349.325)
2.018.756
Net increase/(decrease) in cash at banks
797.092
(203.603)
Cash:
At beginning of the year
Effect of foreign exchange rates on cash and cash equivalents
895.422
(8.493)
891.938
(207.086)
At end of the year
25
1.701.007
895.422
The notes on pages 44 to 91 form an integral part of these consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS 2016|43
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
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 while its principal place of business is in Cyprus at 11 Bouboulinas
Street, 4th floor, office No.48, 1060 Nicosia, Cyprus.
Principal activities
The principal activities of the Group, which are unchanged from last year, are to invest directly or indirectly in and/or manage real
estate properties as well as real estate development projects in South East Europe (the "Region").These include the acquisition,
development, commercializing, operating and selling of property assets, in the Region.
The Group maintains offices in Nicosia, Cyprus, in Kiev, Ukraine, in Bucharest, Romania and in Athens, Greece.
As at the reporting date, the companies of the Group employed and/or used the services of 26 Full Time Equivalent people, (2015
27 full time equivalent people).
2. Adoption of new and revised Standards and Interpretations
Adoption of new and revised International Financial Reporting Standards and Interpretations as adopted by the
European Union (EU)
As from 1 January 2016, 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.
(i) Standards and Interpretations adopted by the EU
IFRS 9 “Financial Instruments” (effective for annual periods beginning on or after 1 January 2018).
IFRS 9 replaces the existing guidance in IAS 39. IFRS 9 includes revised guidance on the classification and measurement of financial
instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting
requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS
39.Management does not expect that the change in the standard would have any implication to the financial statements.
IFRS 15 “Revenue from contracts with customers” (effective for annual periods beginning on or after 1 January 2018).
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces
existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty
Programs.Management does not expect that the change in the standard would have any implication to the financial statements.
(ii) Standards and Interpretations not adopted by the EU
IAS 7 (Amendments) “Disclosure Initiative” (effective for annual accounting periods beginning on or after 1 January 2017).
The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from
financing activities, including both changes arising from cash flow and non-cash changes. Management does not expect that the
change in the standard would have any implication to the financial statements.
IAS 12 (Amendments) “Recognition of Deferred Tax Assets for Unrealised Losses” (effective for annual accounting periods
beginning on or after 1 January 2017).
The amendments clarify the accounting for deferred tax assets for unrealised losses on debt instruments measured at fair value.
Management does not expect that the change in the standard would have any implication to the financial statements.
Annual Improvements to IFRSs 2014-2016 Cycle (effective for annual periods beginning on or after 1 January 2017 (IFRS 12) and
1 January 2018 (IFRS 1 and IAS 28)).
The annual improvements impact three standards. The amendments to IFRS 1 remove the outdated exemptions for first-time
adopters of IFRS. The amendments to IFRS 12 clarify that the disclosure requirements for interest in other entities also apply to
interests that are classified as held for sale or distribution. The amendments to IAS 28 clarify that the election to measure at fair
value through profit or loss an investment in associate or a joint venture that is held by an entity that is a venture capital
organisation, or other qualifying entity, is available for each investment in an associate or joint venture on an investment-by-
investment basis, upon initial recognition. Management does not expect that the change in the standard would have any implication
to the financial statements.
CONSOLIDATED FINANCIAL STATEMENTS 2016|44
2. Adoption of new and revised Standards and Interpretations (continued)
IFRS 2 (Amendments) “Classification and Measurement of Share-based Payment Transactions” (effective for annual periods
beginning on or after 1 January 2018).
The amendments cover three accounting areas: a) measurement of cash-settled share-based payments; b) classification of share-
based payments settled net of tax withholdings; and c) accounting for a modification of a share-based payment from cash-settled
to equity-settled. The new requirements could affect the classification and/or measurements of these arrangements – and
potentially the timing and amount of expense recognised for new and outstanding awards. Management does not expect that the
change in the standard would have any implication to the financial statements.
IFRS 4 (Amendments) “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts” (effective for annual periods
beginning on or after 1 January 2018).
The amendments intend to address concerns about the different effective dates of IFRS 9 and the forthcoming new insurance
contracts standard (expected as IFRS 17). The amendments provide two options for entities that issue insurance contracts within
the scope of IFRS 4: a) an option permitting entities to reclassify from profit or loss to other comprehensive income some of the
income or expenses arising from designated financial assets (overlay approach) or b) an optional temporary exemption from
applying IFRS 9 whose predominant activity is issuing contracts within the scope of IFRS 4 (deferral approach). Management does
not expect that the change in the standard would have any implication to the financial statements.
IFRS 15 (Clarifications) “Revenue from Contracts with Customers” (effective for annual periods beginning on or after 1 January
2018).
The amendments in Clarifications to IFRS 15 address three of the five topics identified i.e. identifying performance obligations,
principal versus agent considerations, and licensing. The clarifications provide some transition relief for modified contracts and
completed contracts. Additionally, the IASB concluded that it was not necessary to amend IFRS 15 with respect to the collectability
or measuring non-cash consideration. Management does not expect that the change in the standard would have any implication
to the financial statements.
IAS 40 (Amendments) “Transfers of Investment Property” (effective for annual periods beginning on or after 1 January 2018).
The amendments clarify when a company should transfer a property asset to, or from, investment property. A transfer is made
when, and only when, there is an actual change in use i.e. an asset meets or ceases to meet the definition of investment property
and there is evidence of the change in use. A change in management intention alone does not support a transfer. In addition, it is
clarified that the revised examples of evidence of a change in use in the amended version of IAS 40 are not exhaustive. Management
does not expect that the change in the standard would have any implication to the financial statements.
IFRIC 22 “Foreign Currency Transactions and Advance Consideration” (effective for annual periods beginning on or after 1 January
2018).
The interpretation clarifies that the transaction date is the date on which the company initially recognises the prepayment or
deferred income arising from the advance consideration. For transactions involving multiple payments or receipts, each payment
or receipt gives rise to a separate transaction date. Management does not expect that the change in the standard would have any
implication to the financial statements.
IFRS 16 “Leases” (effective for annual periods beginning on or after 1 January 2019).
IFRS 16 introduces a single, on-balance sheet leasee accounting model for lessees. A lessee recognises a right-of-use asset
representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There
are optional exemptions for short-term leases and leases of low value items. Lessor accounting remains similar to the current
standard – i.e. lessors continue to classify leases as finance or operating leases.
IFRS 16 replaces existing leases guidance including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease,
SIC-15 Operating Leases—Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
Management does not expect that the change in the standard would have any implication to the financial statements.
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, investment property under construction and available for sale financial assets 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, Ukraine, Greece and Bulgaria reflects adjustments necessary for such consolidated financial information to be
presented in accordance with IFRS.
CONSOLIDATED FINANCIAL STATEMENTS 2016|45
3. Significant accounting policies (continued)
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.
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.
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.
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.
3.4 Functional and presentation 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 Romanian leu is the functional currency for all Group’s entities located in Romania, the
Bulgarian lev is the functional currency for all Group’s entities in Bulgaria and the Euro is the functional currency for all the Greek and
Cypriot subsidiaries.
The consolidated financial statements are presented in Euro, which is the Group’s presentation currency.
As Management records the consolidated financial information of the entities domiciled in Cyprus, Romania, Ukraine, Greece and
Bulgaria 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;
CONSOLIDATED FINANCIAL STATEMENTS 2016|46
3. Significant accounting policies (continued)
3.4 Functional and presentation currency (continued)
Monetary items receivable from foreign operations for which settlement is neither planned nor likely to occur in the foreseeable
future and in substance are part of the Group’s net investment in those foreign operations are recongised initially in other
comprehensive income and reclassified from equity to profit or loss on disposal of the foreign operation.
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
Currency
USD
UAH
RON
BGN
2016
1,1069
28,2854
4,4908
1,9558
2015
1,1095
24,2054
4,4450
1,9558
2016
1,0541
28,4226
4,5411
1,9558
2015
1,0887
26,2231
4,5245
1,9558
2014
1,2141
19,1446
4,4821
1,9558
3.5 Investment Property at fair value
Investment property, 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 has 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.
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.
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 off 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.
CONSOLIDATED FINANCIAL STATEMENTS 2016|47
3. Significant accounting policies (continued)
3.5 Investment Property at fair value (continued)
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 asset ’s 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.
Basis of valuation
The fair values reflect market conditions at the financial position date. These valuations are prepared annually by chartered surveyors
(hereafter “appraisers”). The Group appointed valuers in 2014 which remain the same in 2016:
CBRE Ukraine, for all its Ukrainian properties,
Real Act for all its Romanian, Greek and Bulgarian 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.
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.
CONSOLIDATED FINANCIAL STATEMENTS 2016|48
3. Significant accounting policies (continued)
3.5 Investment Property at fair value (continued)
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.
3.6 Investment Property under development
Property that is currently being constructed or developed, for future use as investment property is classified as investment property
under development carried at cost until construction or development is complete, or its fair value can be reliably determined. This
applies even if the works have temporarily being stopped.
3.7 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.
3.8 Property, Plant and equipment and intangible assets
Property, plant and equipment 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 2016|49
3. Significant accounting policies (continued)
3.8 Property, Plant and equipment 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
IT hardware
Motor vehicles
Furniture, fixtures and office equipment
Machinery and equipment
Software and Licenses
No depreciation is charged on land.
%
20
33
25
20
15
33
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.
3.9 Available for sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other
categories. They are included in non-current assets, unless Management intends to dispose of the investment within twelve months of
the reporting date.
Shares of a property holding corporate entity that are owned by the Group in lieu of owning a percentage of the asset itself, are
considered under this classification even if the shares are not intended to be sold immediately but are intended to offer to the Group
the said percentage of the revenue streams generated by the property asset itself.
Regular way purchases and sales of available-for-sale financial assets are recognised on trade-date which is the date on which the
Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs. Financial assets
are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group
has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in other
comprehensive income are included in profit or loss as gains and losses on available-for-sale financial assets.
Interest on available-for-sale securities calculated using the effective interest method is recognised in the profit or loss. Dividends on
available-for-sale equity instruments are recognised in profit or loss when the Group's right to receive payments is established.
The Group assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is
impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the
security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale
financial assets the cumulative loss which is measured as the difference between the acquisition cost and the current fair value, less
any impairment loss on that financial asset previously recognised in profit or loss, is removed from equity and recognised in profit or
loss.
In respect of available for sale equity securities, impairment losses previously recognised in profit or loss are not reversed through
profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and
accumulated under the heading of investments fair value reserve. In respect of available for sale debt securities, impairment losses
are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an
event occurring after the recognition of the impairment loss.
CONSOLIDATED FINANCIAL STATEMENTS 2016|50
3. Significant accounting policies (continued)
3.10 Inventory
Inventory principally comprises of residential property. Inventory is recognized initially at cost, including transaction costs, which
represent its fair value at the time of acquisition. Costs related to the development of land are capitalised and recognized as inventory.
Inventory is carried at the lower of cost and net realizable value.
3.11 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost.
Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period
of the borrowings, using the effective interest method, unless they are directly attributable to the acquisition, construction or production
of a qualifying asset, in which case they are capitalized as part of the cost of that asset.
Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that
some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extend there is no
evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment and amortised
over the period of the facility to which it relates.
Borrowing costs are interest and other costs that the Group incurs in connection with the borrowing of funds, including interest on
borrowings, amortization of discounts or premium relating to borrowings, amortization of ancillary costs incurred in connection with the
arrangement of borrowings, finance lease charges and exchange differences arising from foreign currency borrowings to the extent
that they are regarded as an adjustment to interest costs.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, being an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale, are capitalised as part of the cost of that asset,
when it is probable that they will result in future economic benefits to the Group and the costs can be measured reliably.
Borrowings are classified as current liabilities, unless the Group has an unconditional right to defer settlement of the liability for at
least twelve months after the reporting date.
3.12 Tenant security deposits
Tenant security deposits represent financial advances made by lessees as guarantees during the lease and are repayable by the Group
upon termination of the contracts. Tenant security deposits are recognized at nominal value.
3.13 Financial liabilities and equity instruments
3.13.1 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.
3.13.2 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.
3.13.3 Financial liabilities
Financial liabilities are classified as either financial liabilities “at Fair Value Through Profit or Loss” or “other financial liabilities”.
3.13.3.1 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 2016|51
3. Significant accounting policies (continued)
3.13 Financial liabilities and equity instruments (continued)
3.13.3.1 Financial liabilities at FVTPL (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.
3.13.3.2 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.
3.13.3.3 De-recognition of financial liabilities
The Group derecognizes financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they are expired.
The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized
in profit or loss.
3.14 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.
3.15 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.
CONSOLIDATED FINANCIAL STATEMENTS 2016|52
3. Significant accounting policies (continued)
3.16 Cash and Cash equivalents
Cash and cash equivalents include cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral
part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of
cash flows.
3.17 Share Capital
Ordinary shares are classified as equity.
3.18 Share premium
The difference between the fair value of the consideration received by the shareholders and the nominal value of the share capital
being issued is taken to the share premium account.
3.19 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 Group 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.
3.20 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.
3.21 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.
3.22 Non-current liabilities
Non-current liabilities represent amounts that are due in more than twelve months from the reporting date.
3.23 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:
CONSOLIDATED FINANCIAL STATEMENTS 2016|53
3. Significant accounting policies (continued)
3.23 Revenue recognition (continued)
3.23.1 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.
3.23.2 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).
3.23.3 Interest income
Interest income is recognized on a time-proportion (accrual) basis, using the effective interest rate method.
3.23.4 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.
3.24 Service charges and expenses recoverable from tenants
Income arising from expenses recharged to tenants is recognized on an accrual basis.
3.25 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.
3.26 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.
3.27 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.
3.28 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
3.28.1 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.
3.28.2 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.
CONSOLIDATED FINANCIAL STATEMENTS 2016|54
3. Significant accounting policies (continued)
3.28 Taxation (continued)
3.28.3 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, Greece 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, unless a significant opportunity arises. 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 subsidiaries 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.
3.28.4 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 (Romania, Ukraine, Greece, Bulgaria). 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.
3.28.5 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.
3.29 Value added tax
VAT levied at various jurisdictions were the Group is active, was at the following rates, as at the end of the reporting period:
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.
20% 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.
20% on Bulgarian domestic sales and imports of goods, works and services and 0% on export of goods and provision of
services to taxable persons outside Bulgaria.
23% on Greek domestic sales and imports of goods, works and services (increased to 24% from 1 June 2016) and 0% on
export of goods and provision of works or services to be used outside Romania.
3.30 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, where the Group is active in acquiring,
holding, managing and disposing:
Commercial-Industrial
Warehouse segment
Office segment
Retail segment
Residential
Residential segment
Land Assets
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 where its property is located.
3.31 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.
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.
CONSOLIDATED FINANCIAL STATEMENTS 2016|55
3. Significant accounting policies (continued)
3.31 Earnings and Net Assets value per share (continued)
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.
3.32 Comparative Period
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.
4. 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 accredited professional
valuers with local presence to perform 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 2016 (Note 17).
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 development 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, Greece 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 by IFRS
10 and it should continue to consolidate all of its investments, as in 2015. The reasons for such conclusion are among others that the
Company continues:
a) not to be an Investment Management Service provider to Investors,
b) to 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) to have investments that are not bound by time in relation to the exit strategy nor to the way that are being exploited,
d) to provide 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 its 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.
CONSOLIDATED FINANCIAL STATEMENTS 2016|56
5. Risk Management
5.1 Financial risk factors
The Group is exposed to operating country risk, real estate property holding and development associated risks, property 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 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.
5.1.1 Operating Country Risks
The Group is exposed to risks stemming from the political and economic environment of countries in which it operates. Notably:
5.1.1.1 Ukraine
The ongoing political and economic instability in Ukraine which commenced at the end of 2013 and led to a deterioration of State
finances, volatility of financial markets, illiquidity on capital markets, higher inflation and depreciation of the national currency against
major foreign currencies has continued in 2016, though to a much lesser extent as compared to 2014–2015.
The conflict in the parts of Eastern Ukraine which started in spring 2014 has not been resolved to date. The relationships between
Ukraine and the Russian Federation remained strained.
On 1 January 2016, the agreement on the free trade area between Ukraine and the EU came into force. Just after that the Russian
government implemented a trading embargo on many key Ukrainian export products. In response, the Ukrainian government
implemented similar measures against Russian products.
The inflation rate in Ukraine during 2016 reduced to 12% (as compared to 43% in 2015), while GDP returned to nominal growth of 1%
(after 9% decline in 2015).
Devaluation during 2016 has been moderated. In 2016 the National Bank of Ukraine (“NBU”) has made certain steps to ease the
currency control restrictions introduced in 2014–2015. The central bank of Ukraine prolonged these restrictions several times during
the years 2015 – 2017 and the current restrictions are effective until rescinded by the NBU (with minor exceptions, including mandatory
conversion of foreign currency proceeds, which are set to expire on 16 June 2017). In particular, the share of receipts in foreign
currencies subject to obligatory sale at interbank market was decreased from 75% to 65% starting from 9 June 2016 and to 50%
starting from 5 April 2017 and the settlement period for export-import transactions in foreign currency was increased from 90 to 120
days starting from 28 July 2016. Also starting from 13 June 2016, the NBU allowed Ukrainian companies to pay dividends to non-
residents with a limit of USD 5 million per month.
The IMF continued to support the Ukrainian government under the four-year Extended Fund Facility (“EFF”) Programm approved in
March 2015, providing the third tranche of approximately USD 1 billion in September 2016. Further disbursements of IMF tranches
depend on the continued implementation of Ukrainian government reforms, and other economic, legal and political factors.
The banking system remains fragile due to its weak level of capital, low asset quality caused by the economic situation, currency
depreciation, changing regulations and other factors.
Despite certain improvements in 2016, the final resolution and the ongoing effects of the political and economic situation are difficult
to predict but they may have further severe effects on the Ukrainian economy.
5.1.1.2 Greece
During the reporting period the Greek government continued discussions with the creditor institutions (EU/ECB/IMF/ESM) resulting in
continuations of higher political and economic instability for the country. The country operated throughout the year under capital
controls and restrictions imposed by the government in the banking sector on 27 June 2015.
Following an Agreement with the creditor institutions (EU/ECB/IMF/ESM) in August 2015 and the ensuing elections in September 2015
discussions were reenacted aiming to the conclusion of the appraisal of the rescue program. Such discussions have resulted in the 1st
appraisal or the rescue program being concluded in June 2016. The 2nd appraisal that begun in September 2016 has just been concluded
at the issuance date, pursuant to which Greece will receive further funding. As such uncertainty although decreased during the last
months, it is still apparent especially as far as the implementation of the rescue program and the reforms included therein are concerned.
The implementation of the program and its effects on the economy are beyond the Group's control.
Various risks emerge should the program is not implemented as planned, including restrictions on use of local bank deposits, liquidity
of the financial sector and businesses, recoverability of receivables, impairment of assets, sufficiency of financing by the lending banks,
serving of existing financing arrangements and/or compliance with existing terms and financial covenants of such arrangements. These
and any possible further negative developments in Greece could impact the results and financial position of the Group’s Greek operations
to some extent, in a manner not currently determinable.
The Group has been closely assessing developments in Greece and preparing for a number of eventualities around the Greek crisis, in
line with its established risk management policy in order to ensure that timely actions and response are undertaken so as to minimize
any impact on the Group’s business and operations.
CONSOLIDATED FINANCIAL STATEMENTS 2016|57
5. Risk Management (continued)
5.1 Financial risk factors (continued)
5.1.2 Risks associated with property holding and development associated risks
Several factors may affect the economic performance and value of the Group's properties, including:
risks associated with construction activity at the properties, including delays, the imposition of liens and defects in
workmanship;
the ability to collect rent from tenants , on a timely basis or at all, taking also into account the UAH rapid devaluation;
the amount of rent and the terms on which lease renewals and new leases are agreed being less favorable than current
leases;
cyclical fluctuations in the property market generally;
local conditions such as an oversupply of similar properties or a reduction in demand for the properties;
the attractiveness of the property to tenants or residential purchasers;
decreases in capital valuations of property;
changes in availability and costs of financing, which may affect the sale or refinancing of properties;
covenants, conditions, restrictions and easements relating to the properties;
changes in governmental legislation and regulations, including but not limited to designated use, allocation, environmental
usage, taxation and insurance;
the risk of bad or unmarketable title due to failure to register or perfect our interests or the existence of prior claims,
encumbrances or charges of which we may be unaware at the time of purchase;
the possibility of occupants in the properties, whether squatters or those with legitimate claims to take possession;
the ability to pay for adequate maintenance, insurance and other operating costs, including taxes, which could increase over
time; and
political uncertainty, acts of terrorism and acts of nature, such as earthquakes and floods that may damage the properties.
5.1.3 Property Market price risk
Market price risk is the risk that the value of the Group’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 Group commissioned
internationally acclaimed valuers.
Valuations reported as at 31 December 2016 take into account the continuation of political instability 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 Group, Ukrainian operations are gradually becoming a smaller part of a larger portfolio of assets.
5.1.4 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.
5.1.5 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.
CONSOLIDATED FINANCIAL STATEMENTS 2016|58
5. Risk Management (continued)
5.1 Financial risk factors (continued)
5.1.6 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. Excluding the transactions in Ukraine all of the Group’s transactions, including the rental proceeds are
denominated or pegged to EUR. In Ukraine even though some of the rental proceeds are denominated in USD, Management has been
monitoring the rental market decoupling from the USD and switching to the UAH, which entails significant FX risks for the Group in the
future. Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly, by limiting net exposures to
a few days to 2 months. It should be noted that the current political uncertainty in Ukraine, and the currency devaluation may affect
the Group’s income streams indirectly also through affecting the financial condition of the tenants of the Group’s properties their solvency
and their income generating capacity.
Management is monitoring foreign exchange fluctuations closely and acts accordingly.
5.1.7 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 40.1 of the consolidated financial
statements.
5.1.8 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 each country the Group is present as well as from the stock exchange where the Company is listed. 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.
5.1.9 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.
5.1.10 Insolvency risk
Insolvency arises from situations where a company may not meet its financial obligations towards a lender as debts become due.
Addressing and resolving any insolvency issues is usually a slow moving process in the Region. Management is closely involved in
discussions with creditors when/if such cases arise in any subsidiary of the Group aiming to effect alternate repayment plans including
debt repayment so as to minimize the effects of such situations on the Group’s asset base.
5.2. 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.
5.3. 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.
CONSOLIDATED FINANCIAL STATEMENTS 2016|59
6. Investment in subsidiaries
The Company has direct and indirect holdings in other companies, collectively called the Group, that were included in the consolidated
financial statements, and are detailed below. The Group is planning to streamline its structure in Cyprus and Romania throughout 2017.
Name
SC SECURE Capital Limited
SL SECURE Logistics Limited
LLC Aisi Brovary
LLC Terminal Brovary
LLC Aisi Ukraine
LLC Retail Development Balabino
LLC Trade Center
LLC Almaz-press-Ukrayina
LLC Aisi Bela
LLC Interterminal
LLC Aisi Ilvo
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
Victini Holdings Limited
SPDI Logistics S.A.
Zirimon Properties Limited
Bluehouse Accession Project IX Limited
Bluehouse Accession Project IV Limited
Bluebigbox 3 Srl
SEC South East Continent Unique Real
Estate Investments II Limited
SEC South East Continent Unique Real
Estate (Secured) Investments Limited
Diforio Holdings Limited
Demetiva Holdings Limited
Ketiza Holdings Limited
Frizomo Holdings Limited
SecMon Real Estate SRL
SecVista Real Estate SRL
SecRom Real Estate SRL
Ketiza Real Estate SRL
Edetrio Holdings Limited
Emakei Holdings Limited
RAM Real Estate Management Limited
Iuliu Maniu Limited
Moselin Investments srl
Rimasol Enterprises Limited
Rimasol Real Estate Srl
Ashor Ventures Limited
Ashor Development Srl
Jenby Ventures Limited
Jenby Investments Srl
Ebenem Limited
Ebenem Investments Srl
Sertland Properties Limited
Boyana Residence ood
Mofben Investments Limited
Delia Lebada Invest srl
Country of
incorporation
Cyprus
Cyprus
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Cyprus
Romania
Cyprus
Romania
Romania
Cyprus
Greece
Cyprus
Cyprus
Cyprus
Romania
Cyprus
Cyprus
Cyprus
Cyprus
Cyprus
Cyprus
Romania
Romania
Romania
Romania
Cyprus
Cyprus
Cyprus
Cyprus
Romania
Cyprus
Romania
Cyprus
Romania
Cyprus
Romania
Cyprus
Romania
Cyprus
Bulgaria
Cyprus
Romania
Related Asset
Brovary Logistics Park
Kiyanovskiy Residence
Tsymlianskiy Residence
Bela Logistic Park
Zaporizhia Retail Center
Innovations Logistics Park
EOS Business Park
GED Logistics
Delea Nuova
Praktiker Craiova
Residential and Land
portfolio
Holding %
as at
31 Dec 2016
100
100
100
100
100
100
100
55
100
100
100
100
100
100
as at
31 Dec 2015
100
100
100
100
100
100
100
55
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
90
100
100
100
100
90
100
100
50
45
45
44,24
44,24
44,24
44,24
44,30
44,30
44,30
44,30
100
100
100
65
100
100
100
100
100
100
100
100
100
100
100
100
90
100
100
100
100
90
100
100
50
45
45
44,24
44,24
44,24
44,24
44,30
44,30
44,30
44,30
100
100
100
65
During the reporting period the Group did not proceed with any acquisitions. In 2015 it realized a number of acquisitions: GED
Warehouse, Praktiker Craiova and a part of the mixed portfolio including commercial, residential properties and land which were
categorized under “Investment Property” (Notes 17 & 18). Another part of the mixed portfolio (Delea Nuova office Building, Green Lake
land) has been categorized under “Associates” (Note 19). The 20% acquisition of Autounion has been recorded under “Available for
Sale Financial Assets” (Note 23).
CONSOLIDATED FINANCIAL STATEMENTS 2016|60
7. Income
Income for the year ended 31 December 2016 represents:
a) rental income as well as service charges and utilities income collected from tenants as a result of the rental agreements concluded
with tenants of the Terminal Brovary Logistic Park (Ukraine), Innovations Logistics Park (Romania), EOS Business Park (Romania),
Praktiker Craiova (Romania), and GED Logistics (Greece),
b) the income from Nestle (~€1,6m) pursuant to the agreement to early termination of their rental contract at Innovations Logistics
Park (Romania),
income from the sale of electricity by GED Logistics to the Greek grid,
c)
d) rental income and service charges by tenants of the Residential Portfolio, and;
e)
income from third parties and /or partners for managing real estate properties in Romania.
Rental income
Sale of electricity
Service charges and utilities income
Service and property management income
Total income
31 Dec 2016
€
5.262.607
315.599
458.648
34.086
6.070.940
31 Dec 2015
€
4.605.022
297.962
545.976
-
5.448.960
Occupancy rates in the various income producing assets of the Group as at 31 December 2016 were as follows:
Income producing assets
%
EOS Business Park
Innovations Logistics Park (Note 41b)
GED Logistics
Terminal Brovary (Note 41a)
Praktiker Craiova
8. Asset operating expenses
Romania
Romania
Greece
Ukraine
Romania
31 Dec 2016
31 Dec 2015
100
25
100
100
100
100
87
100
47
100
The Group incurs expenses related to the proper operation and maintenance of all the income generating properties in Kiev, Bucharest,
Athens, Sofia and Craiova. A part of these expenses is recovered from the tenants through the rental agreements (Note 7). The effective
reduction between 2015 and 2016 is attributed in part to cost optimizing and in part to reduced occupancy at Innovations Logistics
Park.
Property related taxes
Utilities
Property management fees
Repairs and technical maintenance
Property security
Property insurance
Leasing expenses
Other operating expenses
Total
31 Dec 2016
€
(283.193)
(207.086)
(173.363)
(101.325)
(86.574)
(49.622)
(89.335)
(1.943)
(992.441)
31 Dec 2015
€
(363.080)
(274.149)
(253.060)
(70.247)
(55.688)
(48.258)
(30.861)
(29.240)
(1.124.583)
Property related taxes reflect local taxes related to land and building properties (in the form of land taxes, building taxes, garbage fees,
etc).
Property Management fees relate to Property Management Agreements for Terminal Brovary Logistics Park, Innovation Logistics Park
and Praktiker Craiova with third party managers outsourcing the related services.
Leasing expenses reflect expenses related to long term land leasing.
9. Administration Expenses
Salaries and Wages
Advisory fees
Audit and accounting fees
Public group expenses
Corporate registration and maintenance fees
Directors’ remuneration
Legal fees
Depreciation/Amortization charge
Corporate operating expenses
Total Administration Expenses
31 Dec 2016
€
(977.304)
(403.185)
(192.514)
(146.047)
(185.772)
(140.779)
(127.926)
(58.491)
(382.170)
(2.614.188)
31 Dec 2015
€
(1.108.614)
(323.232)
(191.230)
(155.766)
(226.326)
(278.417)
(241.092)
(40.823)
(448.442)
(3.013.942)
CONSOLIDATED FINANCIAL STATEMENTS 2016|61
9. Administration Expenses (continued)
Salaries and wages include the remuneration of the CEO, the CFO, the Group Commercial Director, the Group Investment Director and
the Country Managers of Ukraine and Romania who have accepted a reduction in their remuneration, as well as the salary cost of
personnel employed in the region.
Advisory fees are mainly related to outsourced human resources support on the basis of advisory contracts, capital raising advisory
expenses and marketing expenses incurred by the Group in relation to Cypriot, Ukrainian, Romanian, Bulgarian and Greek operations.
Audit and accounting expenses include the audit fees and accounting fees for the Company and all the subsidiaries.
Public group expenses include among others fees paid to the AIM:LSE stock exchange and the Nominated Adviser of the Company as
well as other expenses related to the listing of the Group.
Corporate registration and maintenance fees represent fees paid for the annual maintenance of the Company and its subsidiaries as
well as fees and expenses related to the normal operation of the companies including charges by the relevant local authorities.
Directors’ remuneration represents the remuneration of all non-executive Directors and committee members for H1-2016 (Note 37.1.2).
Following a BOD decision the Directors will receive no remuneration thereafter.
Legal fees represent legal expenses incurred by the Group in relation to asset operations (rentals, sales, etc), ongoing legal cases in
Ukraine and compliance with AIM listing.
Corporate operating expenses include office expenses, travel expenses, communication expenses, D&O insurance and all other general
expenses for Cypriot, Romanian, Ukrainian, Bulgarian and Greek operations.
10. Valuation gains /(losses) from investment properties
Valuation gains /(losses) from investment property for the reporting period, excluding foreign exchange translation differences which
are incorporated in the table of Note 17.2, are presented in the table below.
Property Name (€)
Brovary Logistic Park
Bela Logistic Center
Kiyanivskiy Lane
Tsymlyanskiy Lane
Balabyne Lane
Rozny Lane
Innovations Logistics Park
EOS Business Park
Residential Portfolio
Green Lake
Pantelimon Lake
Praktiker Craiova
GED Logistics
Boyana - Land
Total
Valuation gains/(losses)
31 Dec 2016
31 Dec 2015
€
€
3.561.403
283.654
356.023
111.893
77.597
(55.673)
(3.384.853)
337.684
133.130
53.139
(941.179)
329.975
-
34.000
896.793
(589.179)
1.513.658
278.302
178.669
(8.143)
(865.054)
400.000
150.000
251.500
(865.000)
(10.000)
(2.870.000)
100.000
-
(2.335.247)
11. Gain/(Loss) from disposal of properties
During the reporting period the Group progressed with selling properties classified under either Investment Property (Romanian
residential assets) or Inventory (Bulgarian residential assets), designated as non-core assets. The sales proceed from sale of apartments
and parking spaces minus the cost of assets sold, representing the fair value of the previous year of the apartments and parking spaces
sold in 2016 is presented below.
11a Inventory (Note 22)
Income from sale of inventory
Cost of inventory
Gain/(Loss) from disposal of inventory
31 Dec 2016
€
1.153.326
(1.522.233)
(368.907)
31 Dec 2015
€
89.711
(141.070)
(51.359)
CONSOLIDATED FINANCIAL STATEMENTS 2016|62
11. Gain/(Loss) from disposal of properties (continued)
11b Investment property
A large part of sold properties during 2016 represent the bulk sale of all the apartments held by the Group at the Linda Residence
project. This sale resulted in €660.000 of income vs the carrying value of €1.014.000 reflecting the 2015 stated fair value. During the
sale process the financing bank agreed to provide a discount of €326.937 against the one off repayment of the associated debt (Note
14). The net cash proceeds from the sale were ~€450k.
Income from sale of investment property
Cost of investment property
Gain/(Loss) from disposal of investment property
12. Impairment allowance for inventory and provisions
Impairment of Inventory
Provisions (Notes 32, 38.3)
Total
Impairment of Inventory relates to Boyana residence (Note 22).
Provisions reflect potential contingent liabilities from legal cases (Notes 32, 38.3).
13. Other operating income/(expenses), net
Break fees received
Accounts payable written off
Other income
Impairment of assets
Impairment of prepayments and other current assets
Transaction costs written off
Penalties
Other expenses
Other expenses
31 Dec 2016
€
2.043.055
(2.481.571)
(438.516)
31 Dec 2015
€
1.635.615
(1.902.579)
(266.964)
31 Dec 2016
€
(63.513)
-
(63.513)
31 Dec 2015
€
(975.659)
(700.000)
(1.675.659)
31 Dec 2016
€
-
109.602
109.602
31 Dec 2015
€
182.638
1.197.740
1.380.378
-
(6.701)
(506.837)
(521.595)
(378.773)
(1.413.906)
(342.280)
(47.316)
(287.999)
(16.753)
(32.174)
(726.522)
Other operating income/(expenses), net
(1.304.304)
653.856
Break fees received represents extraordinary income due to early break fees of tenancy agreements by tenants in Terminal Brovary.
Accounts payable written off in 2015 represent a write off of management fees associated with SEC South East Continent Unique Real
Estate (SECURED) Investments Ltd charged by a related party, Secure Management Ltd, which has accepted to forgo any claim on such
payable amount.
Impairment of assets in 2015 represents an amount paid by a subsidiary 8 years ago for acquiring an option to buy properties which
has not been exercised.
Transaction costs represent due diligence costs, previously held under deferred expenses, for properties that were considered for
acquisition which at the end were not acquired (in 2016 mainly Bluehouse assets).
Penalties in 2016 mainly represents penalties associated with the 20% share disposal in Autounion (Note 23).
Other income/(expenses) in 2016 includes €246.337 of transaction expenses related to Terminal Brovary sale and €109.654 reflects a
non realized loss due to amounts related with non-controlling interest restructuring of the Group.
14. Finance costs and income
Finance income
Income associated to partial write off of bank loans
Interest received from non-bank loans (Note 37.1)
Interest (non-bank) written off
Interest income associated with banking accounts
Total finance income
31 Dec 2016
€
326.937
61.925
763.481
900
1.153.243
31 Dec 2015
€
-
48.730
-
14.866
63.596
CONSOLIDATED FINANCIAL STATEMENTS 2016|63
14. Finance costs and income (continued)
Income associated to partial write off of bank loans reflects the amount foregone by the Raiffeisen Bank reflecting a discount of 26%
of the principal amount (at the time of the agreement in 2015), upon complete sale of all the Linda Residence units (Note 11b) (effected
in 2016) and full repayment of the remaining associated debt.
Interest received from non-bank loans, reflects income from loans granted by the Group for financial assistance of associates or available
for sale properties.
Interest (non-bank) written off, represents accrued interest expense associated to one of the projects where the Company maintains a
partnership participation and is under consolidation, whereas the shareholders have agreed to write off the interest and capitalize the
shareholders’ loan principal.
Finance costs
Interest expenses (bank)
Interest expenses (non-bank) (Note 37.1)
Finance leasing interest expenses
Finance charges and commissions
Default interest
Other finance expenses
Total finance costs
Net finance result
31 Dec 2016
€
(2.970.765)
(14.996)
(585.626)
(123.413)
-
(44.151)
(3.738.951)
31 Dec 2015
€
(3.283.056)
-
(551.640)
(258.493)
(325.707)
(19.295)
(4.438.191)
(2.585.708)
(4.374.595)
Interest expense (bank) represents interest expense charged on bank borrowings.
Interest expense (non-bank) represents interest expense charged on non-bank borrowings, mainly from related parties. (Note 37.1).
Finance leasing interest expenses relate to the sale and lease back agreements of the Group (Note 33).
Finance charges and commissions include regular banking commissions and various fees paid to the banks.
Default interest in 2015 relates to interest charged by Bank of Cyprus in relation to the loan over Delia Lebada Invest srl.
15. Foreign exchange profit / (losses)
a. Foreign exchange loss – non realised
Foreign exchange losses (non-realised) resulted from the loans and/or payables/receivables denominated in non EUR currencies when
translated in EUR, mainly the EBRD loan (Note 29). The exchange loss for the year ended 31 December 2016 amounted to €1.041.239
(2015: loss €5.071.048).
b. Exchange difference on intercompany loans to foreign holdings
The intercompany loans provided by SC Secure Capital Limited to Ukrainian subsidiaries (Note 37.3) incurred an exchange loss (non-
realised) of €4.167.542, due to the UAH devaluation which took place during the reporting period (2015: loss €13.653.402). Settlement
of these loans is not planned to occur in the foreseeable future and in substance is part of the Group’s net investment in its foreign
operations.
16. Income Tax Expense
Current income and defence tax expense
Taxes
31 Dec 2016
€
(174.315)
(174.315)
31 Dec 2015
€
(80.188)
(80.188)
For the year ended 31 December 2016, the corporate income tax rate for the Group’s subsidiaries are as follows: in Ukraine 18%, in
Romania 16%, in Greece 29% and in Bulgaria 10%. The corporate tax that is applied to the qualifying income of 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 of group tax relief
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
31 Dec 2016
€
(1.483.129)
31 Dec 2015
€
(11.530.401)
410.850
2.923.266
(2.530.411)
(51.711)
190.224
(776.537)
6.657
17
1.044
916
174.315
(3.340.505)
483.029
(248.073)
(8.573)
3.181.833
(822)
7.200
2.092
166
3.841
80.188
CONSOLIDATED FINANCIAL STATEMENTS 2016|64
17. Investment Property
17.1 Investment Property Presentation
Investment Property consists of the following assets:
Income Producing Assets
GED Logistics is a logistics park comprising 17.756 gross leasable sqm. It is fully let to the German multinational
transportation and logistics company, Kuehne + Nagel (70%) and to a Greek commercial company trading electrical
appliances GE Dimitriou SA (30%). On the roof of the warehouse there is a 1MW photovoltaic park installed with the electricity
generated being sold to Greek Electric Grid on a long term contract.
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. EOS Business Park was acquired by the Group in October 2014.
Praktiker Craiova, a DIY retail property was acquired by the Group in July 2015. Situated in a prime location in Craiova,
Romania and it is fully let to Praktiker, a regional DIY retailer. The property has a gross lettable area of 9.385 sqm and is
100% rented until 2025.
Innovations Logistic Park is a 16.570 sqm gross leasable area logistics park located in Clinceni in Bucharest, which benefits
from being on the Bucharest ring road. Its construction was tenant specific, was completed in 2008 and is separated in four
warehouses, two of which offer cold storage (freezing temperature), the total area of which is 6.395 sqm. Innovations was
acquired by the Group in May 2014 and was 25% leased at the end of the reporting period. As at the date of issuance of the
financial statements occupancy stands at ~60% (Note 41b).
Terminal Brovary Logistic Park consists of a 49.180 sqm gross leasable 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 100% leased. The Company has agreed to sell the property
and the sale concluded beginning of 2017 (Note 41a).
Residential Assets
The Company owns a residential portfolio, consisting at the end of the reporting period of partly let and income producing
69 apartments and villas across four separate complexes located in different residential areas of Bucharest (Residential
portfolio: Romfelt, Monaco, Blooming House, Green Lake Residential: Green Lake Parcel K). The Group acquired the portfolio
partly in August 2014 and partly May 2015 (Note 18) and in May 2016 proceeded in full divestment from Linda Residences.
The aggregate residential portfolio is ~40% let at the end of the reporting period.
Land Assets
Bela Logistic Center is a 22,4 Ha plot in Odessa situated on the main highway to Kiev. Following the issuance of permits
in 2008, below ground construction for the development of a 103.000 sqm GBA logistic center commenced. Construction was
put on hold in 2009.
Kiyanivsky 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.
Rozny Lane is a 42 Ha land plot located in Kiev Oblast, destined for the development of a residential complex. It has been
registered under the Group pursuant to a legal decision in 2015.
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.
Green Lake land is a 40.360 sqm plot and is adjacent to the Green Lake part of the Company’s residential portfolio, which
is classified under Investments in Associates (Note 19). It is situated in the northern part of Bucharest on the bank of Grivita
Lake in Bucharest. SPDI owns ~44% of these plots, but has effective management control.
Pantelimon Lake consists of a ~40.000 sqm plot of land in east Bucharest situated on the shore of Pantelimon Lake,
opposite to a famous Romanian hotel, the Lebada Hotel. The construction permit, which allows for ~54.000 sqm residential
space to be built, is under renewal.
Boyana Land: The complex of Boyana Residence includes adjacent land plots with building permits to develop gross buildable
area of 21,851 sqm (Note 22).
CONSOLIDATED FINANCIAL STATEMENTS 2016|65
17. Investment Property (continued)
17.2 Investment Property Movement during the reporting period
The table below presents a reconciliation of the Fair Value movements of the investment property during the reporting period broken
down by property and by local currency vs. reporting currency.
2016 (€)
Asset Name
Type
Fair Value movements
Carrying
amount as at
31/12/2016
Foreign
exchange
translation
difference
(a)
Fair value
gain/(loss)
based on
local
currency
valuations
(b)
Terminal Brovary
Logistics Park
Warehouse
14.900.000
(925.726)
3.561.403
Bela Logistic Center
Land
5.027.986
(381.057)
283.654
Disposals
2016
Asset Value at the Beginning of the period
or at Acquisition/Transfer date
Transfer
from
Inventory
Additions
2016
Carrying
amount as at
31/12/2015
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12.264.323
5.125.389
3.203.368
1.006.773
1.555.922
1.194.085
24.349.860
14.400.000
6.550.000
6.722.000
17.932.000
5.812.000
7.200.000
58.616.000
-
-
16.500.000
16.500.000
99.465.860
Kiyanivskiy Lane
Tsymlyanskiy Lane
Balabyne
Rozny Lane
Total Ukraine
Overall change
in Ukraine
Innovations
Logistics Park
EOS Business Park
Residential portfolio
Green Lake
Pantelimon Lake
Praktiker Craiova
Total Romania
Boyana
Total Bulgaria
GED Logistics
Total Greece
TOTAL
2015 (€)
Land
Land
Land
Land
3.320.368
1.043.544
1.517.883
1.138.412
(239.023)
(75.122)
(115.636)
356.023
111.893
77.597
-
(1.736.564)
(55.673)
4.334.897
26.948.193
2.598.333
Warehouse
11.000.000
(15.147)
(3.384.853)
-
-
Office
Residential
Land
Land
Retail
Land
Warehouse
6.860.000
4.375.000
17.919.000
4.860.000
7.500.000
52.514.000
4.720.000
4.720.000
16.500.000
16.500.000
(27.684)
1.440
(66.139)
(10.821)
(29.975)
(148.326)
-
-
-
-
337.684
133.130
53.139
(941.179)
329.975
(3.472.104)
34.000
34.000
-
-
-
(2.481.570)
-
-
-
(2.481.570)
-
-
-
-
-
-
-
-
4.686.000
4.686.000
-
-
100.682.193
(1.884.890)
896.793
(2.481.570)
4.686.000
Asset Name
Type
Carrying
amount
31/12/2015
Foreign
exchange
translation
difference
(a)
Disposals
2015
Fair value
gain/(loss)
based on
local
currency
valuations
(b)
Warehouse
12.264.323
(4.609.808)
(589.179)
Terminal Brovary
Logistics Park
Bela Logistic Center
Kiyanivskiy Lane
Tsymlyanskiy Lane
Balabyne
Rozny Lane
Total Ukraine
Overall change in
Ukraine
Innovations Logistics
Park
EOS Business Park
Land
Land
Land
Land
Land
Office
Residential portfolio
Residential
Green Lake
Pantelimon Lake
Praktiker Craiova
Total Romania
GED Logistics
Total Greece
Land
Land
Retail
Warehouse
5.125.389
(1.471.485)
1.513.658
3.203.368
(1.092.315)
1.006.773
1.555.922
1.194.085
(319.719)
(567.608)
278.302
178.669
(8.143)
-
(8.060.935)
(324.395)
1.048.912
24.349.860
(7.012.023)
Warehouse
14.400.000
6.550.000
6.722.000
17.932.000
5.812.000
7.200.000
58.616.000
16.500.000
16.500.000
-
-
-
-
-
-
-
-
-
400.000
150.000
251.500
(865.000)
(10.000)
(2.870.000)
(2.943.500)
100.000
100.000
(1.902.500)
(1.902.500)
-
-
-
-
-
-
-
-
-
-
Transfer
from
prepayme
nts made
for
investmen
ts (Note
17.4c)
-
-
-
-
-
1.518.480
-
1.518.480
Additions
2015
Carrying
amount as at
31/12/2014
-
-
-
-
-
-
-
-
-
18.797.000
5.822.000
10.070.000
34.689.000
16.400.000
16.400.000
17.463.310
5.083.216
4.017.381
1.147.823
2.131.673
-
29.843.403
14.000.000
6.400.000
8.373.000
-
-
-
28.773.000
-
-
Fair Value movements
Asset Value at the Beginning of the period
or at Acquisition/Transfer date
TOTAL
99.465.860
(8.060.935)
(1.794.588)
(1.902.500)
1.518.480
51.089.000
58.616.403
CONSOLIDATED FINANCIAL STATEMENTS 2016|66
17. Investment Property (continued)
17.2 Investment Property Movement during the reporting period (continued)
The two components comprising the fair value movements are presented in accordance with the requirements of IFRS in the
consolidated statement of comprehensive income as follows:
a. The translation loss due to the devaluation of local currencies of €1.884.890 (a) is presented as part of the exchange difference
on translation of foreign operations in other comprehensive income in the statement of comprehensive income and then
carried forward in the Foreign currency translation reserve; and,
b. The fair value gain in terms of the local functional currencies amounting to €896.793 (b), is presented as Valuation
gains/(losses) from investment properties in the statement of comprehensive income and is carried forward in Accumulated
losses.
In respect of the main fair value changes of the various properties as at the reporting date:
- Terminal Brovary valuation reflects the price of which the property was sold in January 2017 (Note 41a).
- The decrease in the valuation of Innovations reflect the low occupancy of the property.
- The fair value of the unsold units of the Residential portfolio as at the end of the reporting period has increased by €133.130 compared
to the 2015 valuation (which was used for discharging the units sold during the period).
17.3 Investment Property Carrying Amount per asset as at the reporting date
The table below presents the values of the individual assets as appraised by the appointed valuer as at the reporting date.
Asset Name
Location
Principal Operation
Related Companies
Carrying amount as at
Warehouse
Land and Development
Works for Warehouse
LLC Terminal Brovary
LLC Aisi Brovary
SL Logistics Limited
LLC Aisi Bela
Land for residential
development
LLC Aisi Ukraine
LLC Trade Center
31 Dec 2016
€
14.900.000
31 Dec 2015
€
12.264.323
5.027.986
5.125.389
3.320.368
3.203.368
Land for residential
development
LLC Almaz Pres Ukraine
1.043.544
1.006.773
Land for retail
development
LLC Interterminal
LLC Aisi Ilvo,
1.517.883
1.555.922
Brovary
district, Kiev
Land for residential
Development
SC Secure Capital Limited
1.138.412
1.194.085
Terminal Brovary
Logistics Park
Brovary,
Kiev oblast
Bela Logistic Center
Odesa
Kiyanivskiy Lane
Tsymlyanskiy Lane
Balabyne
Rozny Lane
Podil,
Kiev City
Center
Podil,
Kiev City
Center
Zaporizhia
Total Ukraine
Innovations
Logistics Park
EOS Business Park
Clinceni,
Bucharest
Bucharest
Warehouse
Myrnes Innovations Park Limited
Best Day Real Estate Srl
Office building
Praktiker Craiova
Craiova
Big Box retail
Residential Portfolio
Bucharest
Residential apartments
(55 in total in 3
complexes)
Green Lake
Bucharest
Residential villas (14
villas)
&
land for residential
development
Pantelimon Lake
Bucharest
Land for residential
development
Yamano Limited
SPDI SRL,
N-E Real Estate Park First Phase Srl
Bluehouse Accession Project IX Limited
Bluehouse Accession Project IV Limited
BlueBigBox 3 srl
Secure Investments II Limited
Demetiva Limited
Diforio Limited
Frizomo Limited
Ketiza Limited
SecRom Srl
SecVista Srl
SecMon Srl
Ketiza Srl
Secure Investments I Limited
Edetrio Holdings Limited
Emakei Holdings Limited
Iuliu Maniu Limited
Ram Real Estate Management Limited
Moselin Investments srl
Rimasol Limited
Rimasol Real Estate Srl
Ashor Ventures Limited
Ashor Develpoment Srl
Jenby Ventures Limited
Jenby Investments Srl
Ebenem Limited
Ebenem Investments Srl
Secure Investments I Limited
Mofben Investments Limited
Delia Lebada Invest srl
Total Romania
Boyana
Total Bulgaria
GED Logistics
Total Greece
TOTAL
Sofia
Land
Boyana Residence ood,
Sertland Properties Limited
Athens
Warehouse
Victini Holdings Limited.
SPDI Logistics S.A.
26.948.193
11.000.000
24.349.860
14.400.000
6.860.000
6.550.000
7.500.000
7.200.000
4.375.000
6.722.000
17.919.000
17.932.000
4.860.000
5.812.000
52.514.000
4.720.000
4.720.000
16.500.000
58.616.000
transferred from
Inventory
16.500.000
16.500.000
16.500.000
100.682.193
99.465.860
CONSOLIDATED FINANCIAL STATEMENTS 2016|67
17. Investment Property (continued)
17.4 Investment Property analysis
a.
Investment Properties
The following assets are presented under Investment Property: Terminal Brovary Logistics Park, Innovations Logistic park, EOS Business
Park, GED Logistics, Praktiker Craiova, the Residential Portfolio (consisting of apartments in 3 complexes) and Green Lake parcel K as
well as all the land assets namely Kiyanivskiy Lane, Tsymlyanskiy Lane, Balabyne and Rozny in Ukraine, Pantelimon Lake and Green
Lake in Romania as well as the land in Sofia, Bulgaria (Boyana) which has been reclassified from Inventory.
At 1 January
Acquisitions of investment property
Disposal of investment Property
Transfer from Inventory/prepayments made
Revaluation gain/(loss) on investment property
Translation difference
At 31 December
31 Dec 2016 31 Dec 2015
€
€
94.340.471 53.533.187
51.089.000
(1.902.500)
1.518.480
(3.308.246)
(6.589.450)
95.654.207 94.340.471
-
(2.481.570)
4.686.000
613.139
(1.503.833)
b.
Investment Properties Under Development
As at 31 December 2016 investment property under development represents the carrying value of Bela Logistic Center property, which
has reached the +10% construction in late 2008 but it is stopped since then.
At 1 January
Revaluation on investment property
Translation difference
At 31 December
c. Prepayments made for Investments
31 Dec 2016 31 Dec 2015
€
€
5.125.389
283.654
(381.057)
5.027.986
5.083.216
1.513.658
(1.471.485)
5.125.389
From time to time, when the Group acquires a new property, it may proceed with down payment in order to facilitate such transactions.
Movements of such prepayments are presented below for 2016 and 2015.
At 1 January
Advances for acquisition transferred to Investment in subsidiary
Translation difference
Transfer to Investment Properties
Transfer to long term receivables and prepayments of investments (Note 21)
Advances for investments from acquisition of subsidiaries
Impairment provision
At 31 December
17.5 Investment Property valuation method presentation
31 Dec 2016
€
31 Dec 2015
€
100.000
-
-
-
(100.000)
-
-
-
2.674.219
(624.841)
9.761
(1.518.480)
-
100.000
(540.659)
100.000
In respect of the Fair Value of Investment Properties the following table represents an analysis based on the various valuation methods.
The different levels as defined by IFRS have been defined as follows:
-
-
-
Level 1 relates to quoted prices (unadjusted) in active and liquid 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 sqm.
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 2016|68
17. Investment Property (continued)
17.5 Investment Property valuation method presentation (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 Dec 2016 (€)
(Level 1)
(Level 2)
(Level 3)
Total
Recurring fair value measurements
Balabyne - Zaporizhia
Tsymlyanskiy Lane – Podil, Kiev City Center
Bela Logistics Center- Odessa
Terminal Brovary Logistics Park - Brovary Kiev Oblast
Kiyanivskiy Lane – Podil, Kiev City Center
Rozny Lane – Brovary district, Kiev oblast
Innovations Logistics Park – Bucharest
EOS Business Park – Bucharest, City Center
Residential Portfolio (ex Green Lake) – Bucharest
Green Lake – Bucharest
Pantelimon Lake – Bucharest
Praktiker - Craiova
GED Logistics – Athens
Boyana- Land
Totals
1.517.883
-
1.043.544
-
-
-
14.900.000
-
3.320.368
-
1.138.412
-
-
-
-
-
4.375.000
-
-
17.919.000
-
4.860.000
-
-
-
-
-
4.720.000
- 53.794.207
-
-
5.027.986
-
-
-
11.000.000
6.860.000
-
1.517.883
1.043.544
5.027.986
14.900.000
3.320.368
1.138.412
11.000.000
6.860.000
4.375.000
17.919.000
4.860.000
7.500.000
16.500.000
4.720.000
46.887.986 100.682.193
-
7.500.000
16.500.000
-
Fair value measurements at 31 Dec 2015 (€)
(Level 1)
(Level 2)
(Level 3)
Total
Recurring fair value measurements
Balabyne - Zaporizhia
Tsymlyanskiy Lane – Podil, Kiev City Center
Bela Logistics Center- Odessa
Terminal Brovary Logistics Park - Brovary Kiev Oblast
Kiyanivskiy Lane – Podil, Kiev City Center
Rozny Lane – Brovary district, Kiev oblast
Innovations Logistics Park – Bucharest
EOS Business Park – Bucharest, City Center
Residential Portfolio (ex Green Lake) – Bucharest
Green Lake – Bucharest
Pantelimon Lake – Bucharest
Praktiker - Craiova
GED Logistics – Athens
Totals
1.555.922
-
1.006.773
-
-
-
-
-
3.203.368
-
1.194.085
-
-
-
-
-
6.722.000
-
-
17.932.000
-
5.812.000
-
-
-
16.500.000
- 53.926.148
-
-
5.125.389
12.264.323
-
-
14.400.000
6.550.000
-
-
7.200.000
-
45.539.712
1.555.922
1.006.773
5.125.389
12.264.323
3.203.368
1.194.085
14.400.000
6.550.000
6.722.000
17.932.000
5.812.000
7.200.000
16.500.000
99.465.860
The table below shows yearly adjustments for Level 3 investment property valuations:
Level 3 Fair value
measurements at
31 Dec 2016 (€)
Bela
Logistics
Center
Innovations
Logistics
Park
EOS
Business
Park
Praktiker
Craiova
GED
Logistics
Total
Opening balance
Transfer to and from
level 2 due to change
of valuation methods
Acquisitions
Additions
Disposals
Profit/(loss) on
revaluation
Translation difference
Closing balance
5.125.389
14.400.000
6.550.000
7.200.000
-
33.275.389
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16.500.000
-
-
-
16.500.000
-
-
-
283.654
(3.384.853)
337.684
329.975
-
(2.433.540)
(381.057)
5.027.986
(15.147)
11.000.000
(27.684)
6.860.000
(29.975)
7.500.000
-
16.500.000
(453.863)
46.887.986
CONSOLIDATED FINANCIAL STATEMENTS 2016|69
17. Investment Property (continued)
17.5 Investment Property valuation method presentation (continued)
Level 3 Fair value
measurements at
31 Dec 2015 (€)
Terminal
Brovary
Logistics Park
Kiyanivskiy
Lane
Tsymlyanskiy
Lane
Bela
Logistic
Center
Innovations
Logistics
Park
EOS
Business
Park
Praktiker
Craiova
Total
Opening balance
Transfer to and
from level 2 due to
change of
valuation methods
Acquisitions
Additions
Disposals
Profit/(loss) on
revaluation
Translation
difference
Closing balance
17.463.310
4.017.381
1.147.823
-
14.000.000
6.400.000
- 43.028.514
-
-
-
-
(4.017.381)
-
-
-
(1.147.823)
-
-
-
5.083.216
-
-
-
-
-
-
-
-
-
-
-
-
(81.988)
10.070.000 10.070.000
-
-
-
-
(589.179)
(4.609.808)
12.264.323
-
-
-
-
-
-
1.513.658
400.000
150.000
(2.870.000) (1.395.521)
(1.471.485)
5.125.389
-
14.400.000
-
6.550.000
- (6.081.293)
7.200.000 45.539.712
Information about Level 3 Fair Values is presented below:
Fair value at
31 Dec 2016
Fair value at
31 Dec 2015
Valuation
technique
Unobservable
inputs
Relationship of unobservable
inputs to fair value
Bela Logistic Center
– Odessa
€
5.027.986
€
5.125.389
€
Combined market
and cost approach
€
€
Percentage of
development works
completion,
deterioration rate
The higher the percentage of
completion the higher the fair
value. The higher the deterioration
rate the lower the fair value
-
12.264.323
Combined market
and income
approach
Future rental income
and costs for 14
months, discount
rate
The higher the rental income the
higher the fair value. The higher
the discount rate, the lower fair
value
Terminal Brovary
Logistics Park-
Brovary Kiev
Oblast
Innovations
Logistics Park –
Bucharest
EOS Business Park
– Bucharest, City
Center
11.000.000
14.400.000
Income approach
6.860.000
6.550.000
Income approach
Praktiker Craiova
7.500.000
7.200.000
Income approach
GED Logistics
16.500.000
-
Income approach
Total
46.887.986
45.539.712
18. Investment Property Acquisitions and Goodwill Movement
a. Investment Property Acquisitions
Future rental income
and costs for 10
years, discount rate
The higher the rental income the
higher the fair value. The higher
the discount rate, the lower fair
value
Future rental income
and costs for 10
years, discount rate
Future rental income
and costs for 10
years, discount rate
Future rental income
and costs for 10
years, discount rate
for real estate
property and for
Photovoltaic 25 + 6
years for PV
The higher the rental income the
higher the fair value. The higher
the discount rate, the lower fair
value
The higher the rental income the
higher the fair value. The higher
the discount rate, the lower fair
value
The higher the rental/PV income
the higher the fair value. The
higher the discount rate, the lower
fair value
In March 2015 the Group completed the acquisition of an income producing logistics park (the “GED Logistics”), located in the West
Attica Industrial Area of Athens, Greece (Note 17.1).
In July 2015 the Group acquired Praktiker Craiova, a DIY retail property (Note 17.1). The acquisition was effected through the issuance
of Class B Redeemable Convertible Preference Shares (‘RCPS’) to the vendors (Note 26.6). The Company is in discussion with the vendor
vis a vis the finalization of the redemption process (Note 23).
CONSOLIDATED FINANCIAL STATEMENTS 2016|70
18. Investment Property Acquisitions and Goodwill Movement (continued)
During 2015 the Group acquired the mixed use portfolio of Sec South, a private equity entity, which included investment properties,
inventories and investment in associates, (Notes 17, 18, 19) via in kind contribution by the vendors and in exchange of 18.028.294
ordinary shares of €0,01 and two equivalent sets of warrants as described below (Note 26.4 and 26.5).The shares were issued at a
price of GBP 0,65 per share while the first set of warrants had an exercise price of GBP 0,10 and the second of GBP 0,45. Out of the
1st set of 18.028.294 warrants, 14.324.627 were exercised in 2015 and an equal amount of ordinary shares was issued (Note 26.2)
while the 2nd set has expired without being exercised (Note 26.2). The vendors of the Sec South included Ionian Equity Participations
Limited, a substantial shareholder in the Company, holding then in excess of 10% of the Company’s issued share capital, as well as an
entity in which Lambros Anagnostopoulos (a director of the Company and the CEO) had a majority stake and Constantinos Bitros (the
CFO of the Company) with stakes in Sec South of less than 20%, 4% and 1% respectively. Sec South transferred properties in SPDI,
the net equity of which was €15.782.190 (fair value at acquisition).
The fair value of identifiable assets and liabilities of acquired projects during 2015 as of the date of their acquisition was as follows:
€
ASSETS
Non-current assets
Investment property
Investments in associates
Other non-current assets
Current assets
Inventories
Prepayments and other current assets
Cash and cash equivalents
GED
Logistics
SEC South
East
Praktiker
Craiova
Total
16.400.000
-
29.911
24.619.000
6.132.516
69.536
10.070.000
-
-
51.089.000
6.132.516
99.447
-
353.366
160
12.300.000
1.203.036
777.247
-
384.884
26.425
12.300.000
1.941.286
803.832
Total assets
16.783.437
45.101.335
10.481.309
72.366.081
Non-current liabilities
Interest bearing borrowings
Deposits from tenants
Current liabilities
Interest bearing borrowings
Trade and other payables
Taxes payable
12.549.180
211.243
23.865.253
-
4.892.950
-
41.307.383
211.243
135.110
492.060
56.776
1.431.464
3.074.332
252.033
-
120.961
-
1.566.574
3.687.353
308.809
Total liabilities
13.444.369
28.623.082
5.013.911
47.081.362
Net assets acquired (including non-controlling
interest)
3.339.068
16.478.253
5.467.398
25.284.719
Non-controlling interest
-
(696.063)
-
(696.063)
Net assets acquired attributable to equity holders
Financed by
Cash consideration paid
Issue of shares
Total consideration
3.339.068
15.782.190
5.467.398
24.588.656
1.786.934
-
1.786.934
-
15.152.490
15.152.490
-
6.081.211
6.081.211
1.786.934
21.233.701
23.020.635
Gain realized on acquisition
Goodwill =Net Assets – Total consideration
1.552.134
-
629.700
-
-
(613.813)
2.181.834
(613.813)
b. Goodwill Movement
Management decided to fully impair the goodwill resulting mainly from the 2015 acquisitions and to a lesser extent from the 2014
acquisitions as they expect that the future cash flows to be generated from the related properties, based on year end valuations and
sales price expectations do not validate any more. The total impairment was €657.082.
CONSOLIDATED FINANCIAL STATEMENTS 2016|71
19. Investments in associates
In May 2015 by acquiring the mixed use Sec South portfolio (Note 18) the Group acquired participation in certain properties classified
under Investments in Associates. The associates acquired were as follows:
a) Green Lake Development srl, is a residential compound company which consists as at end of the reporting period of 35
apartments plus 22 villas as well as 4 commercial use designated buildings (Phase A of Green Lake project). The compound
is situated on the banks of Grivita Lake, in the northern part of the Romanian capital. The compound includes also facilities
such as private kindergarten, nautical club, outdoor sport courts, and restaurants. The Company has a 40,35% participation
in this asset. The property as of the end of the reporting period was 46% let.
b) The Group acquired a 24,35% participation in the Delea Nuova office building property in Bucharest. The property is a 10.280
sqm office building, which consists of two underground levels, a ground floor and ten above-ground floors. As of the end of
the reporting period, the building was 100% let, with ANCOM (the Romanian Telecommunications Regulator) being the anchor
tenant (70% of GLA). The table below summarizes the movements in the carrying amount of the Group’s investment in
associates.
€
Cost of investment in associates at the beginning of the period
Share of profits /(losses) from associates
Dividend Income
Foreign exchange difference
Total
31 Dec 2016
31 Dec 2015
4.887.944
469.248
(127.569)
(12.313)
5.217.310
6.132.516
(1.244.572)
-
-
4.887.944
As at 31 December 2016, the Group’s interests in its associates and their summarised financial information, including total assets at fair
value, total liabilities, revenues and profit or loss, were as follows:
Project
Name
Associates Total assets
Total
liabilities
Profit/
(loss)
Holding
Country Asset type
Share of
profits from
associates
€
€
€
%
€
Delea
Nuova
Project
GreenLake
Project –
Phase A
Total
Lelar Holdings
Limited and
S.C. Delenco
Construct
S.R.L.
GreenLake
Development
Srl
24.887.951
(3.461.850)
1.926.778 24,354%
469.248 Romania
13.867.862
(14.698.363)
(1.563.486)
40,35%
- Romania
38.755.813 (18.160.213)
363.292
469.248
Office
building
Residential
assets
The share of profit from the associate GreenLake Delevopment Srl was limited up to the interest of the Group in the associate.
As at 31 December 2015, the Group’s interests in its associates and their summarised financial information, including total assets at fair
value, total liabilities, revenues and profit or loss, were as follows:
Project
Name
Associates Total assets
Total
liabilities
Profit/
(loss)
Holding
Country Asset type
Share of
profits from
associates
€
€
€
%
€
Delea
Nuova
Project
GreenLake
Project –
Phase A
Total
Lelar Holdings
Limited and
S.C. Delenco
Construct
S.R.L.
GreenLake
Development
Srl
24.232.215
(4.158.521)
(2.895.756) 24,354%
(705.232) Romania
15.651.396
(16.080.270)
(2.374.548)
40,35%
(539.340) Romania
39.883.611 (20.238.791) (5.270.304)
(1.244.572)
Office
building
Residential
assets
CONSOLIDATED FINANCIAL STATEMENTS 2016|72
20. Tangible and intangible assets
As at 31 December 2016 the intangible assets were composed of the capitalized expenditure on the Enterprise Resource Planning
system (Microsoft Dynamics-Navision) in the amount of €96.183. Accumulated amortization as at the reporting date amounts to €62.270
as the system was already in use.
As at 31 December 2016 and 2015 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.
21. Long Term Receivables and prepayments
Long Term Receivable
Prepayment for Investments
Total
Long term receivable mainly includes the cash collateral from Piraeus Leasing.
22. Inventory
€
At 1 January
Sale of Inventories
Transfer to Investment Property
Acquisition of subsidiaries
Impairment of inventory
At 31 December
31 Dec 2016
€
251.181
100.000
351.181
31 Dec 2015
€
252.916
100.000
352.916
30 Dec 2016
11.300.000
(1.522.233)
(4.686.000)
-
(63.513)
5.028.254
31 Dec 2015
-
-
-
12.300.000
(1.000.000)
11.300.000
In May 2015 by acquiring the mixed use Sec South portfolio (Note 18) the Group acquired 100% of a residential portfolio in Boyana, in
Sofia, Bulgaria which is classified as Inventory.
After a decision of the Board of Directors of Boyana to change the initial plan for construction in the land and hold this land for capital
appreciation, €4.686.000 which related to the land that was transferred to Investment Properties (Note 17.2) and from now on will be
treated under IAS 40.
23. Available for sale financial assets
In April 2015 the Group completed the acquisition of a 20% interest in a fully let and income generating office building in Sofia,
Autounion, for a cash consideration of €4.059.839 including the assignment of a loan amounting to €1.859.278 together with
accumulated interest up to the acquisition date (Note 24). The holding was classified as “Available for Sale Financial Assets” in conformity
with IAS 39. Autounion is a Class A BREEAM certified office building, located close to the Sofia Airport. The building has a Gross Lettable
Area of 19.476 sqm over ten floors, includes underground parking and is fully let to one of the largest Bulgarian insurance companies
on a long lease extending to 2027.
In Q3-2016, as a result of the vendor (BLUEHOUSE ACCESSION PROPERTY HOLDINGS III S.A.R.L) of BIGBLUEBOX 3 (Praktiker Craiova)
requesting redemption of the 8.618.997 Secured Redeemable Convertible Preference Class B Shares (“RCPS”), the Company transferred,
the security, its 20% participation over Autounion to the said vendor. Although there is a difference appearing as a liability to the vendor
(Note 30), the Group is in negotiation as to the final settlement amount and the method of payment.
Fair value gain for the period represents the difference between the fair value of the investment at acquisition date minus the fair value
of investment at the reporting date.
At 1 January
Acquisition cost of the investment
Fair Value gain
Disposal of AFS investment
At 31 December
31 Dec 2016 31 Dec 2015
€
2.783.535
-
-
(2.783.535)
-
€
-
2.298.006
485.529
-
2.783.535
As a result of Autounion transfer a net loss of €206.491 was recognized in the Group’s consolidated statement of comprehensive income
for 2016. The amount reflects the aggregate book value of 20% interest in Autounion €2.783.535 plus the assigned loan including
accumulated interest up to the disposal date amounting to €1.968.486 minus the accumulated fair value gain in the amount of €485.529
that was initially recognised in equity and recycled to the loss of the year as of the disposal date minus a pledged value of €4.060.000.
The total remaining liability recognized at the reporting date to the vendor amounts to €2.521.211 (Note 30).
CONSOLIDATED FINANCIAL STATEMENTS 2016|73
24. Prepayments and other current assets
Trade and other receivables
VAT and other taxes receivable
Deferred expenses
Receivables due from related parties
Loan receivable from 3rd parties
Loan to associates (Note 37.4)
Loan to Available for Sale Financial Assets (Note 23)
Allowance for impairment of prepayments and other current assets
Total
31 Dec 2016 31 Dec 2015
€
992.482
378.455
159.866
7.284
1.000.000
264.110
-
(23.836)
2.778.361
€
792.565
938.464
921.427
3.384
-
254.718
1.905.933
(21.268)
4.795.223
Trade and other receivables mainly include receivables from tenants (including the Greek electricity grid administrator) and prepayments
made for services.
VAT receivable represent VAT which is refundable in Romania, Cyprus and Ukraine.
Deferred expenses include legal, advisory, consulting and marketing expenses related to ongoing share capital increase and due
diligence expenses related to the possible acquisition of investment properties in the near future.
Loan receivable from 3rd party represents an amount provided as an advance payment for acquiring a participation into an investment
property and has a maturity date 30 June 2018.
Loan to associates reflects a loan receivable from Greenlake Development SRL, holding company of Greenlake Phase A (Note 19, Note
37.4).
Loan to Available for Sale Financial Assets reflects a loan receivable from Bluehouse V, holding company of Autounion building disposed
in 2016 (Note 23).
25. Cash and cash equivalents
Cash and cash equivalents represent liquidity held at banks.
Cash with banks in USD
Cash with banks in EUR
Cash with banks in UAH
Cash with banks in RON
Cash with banks in BGN
Cash equivalents
Total
31 Dec 2016 31 Dec 2015
€
17.670
152.742
31.744
1.319.686
179.165
-
1.701.007
€
25.205
214.177
40.505
569.424
3.701
42.410
895.422
An amount of ~€1,1m held in accounts related to properties that carry debt facilities is restricted cash, as the lending banks control its
usage to conform to contractual obligations.
CONSOLIDATED FINANCIAL STATEMENTS 2016|74
26. Share capital
Number of Shares during 2016 and 2015
31
December
2014
989.869.935
989.869.935
785.000
990.654.935
31
December
2014
9.898.699
9.898.699
7.850
-
9.906.549
Authorised
Ordinary shares of €0,01
Total equity
RCP Class A Shares of €0,01
RCP Class B Shares of €0,01
Total
Issued and fully paid
Ordinary shares of €0,01
Total equity
RCP Class A Shares of €0,01
RCP Class B Shares of €0,01
Total
€
Authorised
Ordinary shares of €0,01
Total equity
RCP Class A Shares of €0,01
RCP Class B Shares of €0,01
Total
Issued and fully paid
Ordinary shares of €0,01
Total equity
RCP Class A Shares of €0,01
(Note 26.6)
RCP Class B Shares of €0,01
(Note 26.6)
Total
13 March
2015
31 May
2015
29 June
2015
1 July
2015
27 July
2015
12 August
2015
31 December
2015
13 October
2016
31 December
2016
Increase
of share
capital
Increase
of share
capital
Repayment
RCPS
Increase of
share capital
Exercise of
warrants
Exercise of
warrants
Redemption of
redeemable
shares
33.884.054 23.777.748 18.028.294
33.884.054 23.777.748 18.028.294
785.000
-
-
(392.500)
8.785.580
8.785.580
5.539.047
5.539.047
34.669.054 23.777.748 18.028.294
(392.500)
8.618.997
8.618.997
8.785.580
5.539.047
Nominal value (€) for 2016 and 2015
989.869.935
989.869.935
785.000
8.618.997
999.273.932
90.014.723
90.014.723
392.500
8.618.997
99.026.220
(392.500)
(8.618.997)
(99.026.220)
989.869.935
989.869.935
785.000
8.618.997
999.273.932
90.014.723
90.014.723
-
-
90.014.723
13 March
2015
31 May
2015
29 June
2015
1 July
2015
27 July
2015
12 August
2015
31 December
2015
13 October
2016
31 December
2016
Increase
of share
capital
Increase
of share
capital
Repayment
RCPS
Increase of
share capital
Exercise of
warrants
Exercise of
warrants
Redemption of
redeemable
shares
338.839
338.839
237.777
237.777
180.283
180.283
87.856
87.856
55.390
55.390
(3.925)
7.850
-
86.190
86.190
(86.190)
346.689
237.777
180.283
(3.925)
86.190
87.856
55.390
990.260
(990.190)
9.898.699
9.898.699
7.850
86.190
9.992.739
900.145
900.145
3.925
(3.925)
9.898.699
9.898.699
7.850
86.190
9.992.739
900.145
900.145
-
-
-
CONSOLIDATED FINANCIAL STATEMENTS 2016|75
8.618.997
8.618.997
86.190
86.190
26. Share capital (continued)
26.1 Authorised share capital
As at the end of 2015 the authorized share capital of the Company was 989.869.935 Ordinary Shares of €0,01 nominal value each,
785.000 Redeemable Preference Class A Shares of €0,01 nominal value each and 8.618.997 Redeemable Preference Class B Shares of
€0,01 nominal value each.
No changes were effected during the reporting period as far as the authorized share capital of the Company is concerned and therefore
at the end of the reporting period the authorized share capital of the Company remained at 989.869.935 Ordinary Shares of €0,01
nominal value each, 785.000 Redeemable Preference Class A Shares of €0,01 nominal value each and 8.618.997 Redeemable Preference
Class B Shares of €0,01 nominal value each. Yet the Company is in process to cancel the Class A and Class B Redeemable Preference
Shares (Note 26.6), a process that will be completed in 2017.
26.2 Issued Share Capital
As at the end of 2015 the issued share capital of the Company was as follows:
a) 90.014.723 Ordinary Shares of €0,01 nominal value each,
b) 392.500 Redeemable Preference Class A Shares of €0,01 nominal value each,
c) 8.618.997 Redeemable Preference Class B Shares of €0,01 nominal value each.
No changes were effected throughout the reporting period in respect of the issued share capital of the Company and as at the end of
the reporting period the issued share capital of the Company remained as follows:
a) 90.014.723 Ordinary Shares of €0,01 nominal value each,
b) 392.500 Redeemable Preference Class A Shares of €0,01 nominal value each, subject to cancellation during 2017 (Note 26.6),
c) 8.618.997 Redeemable Preference Class B Shares of €0,01 nominal value each, subject to cancellation during 2017 (Note 26.6).
In respect of the Class A Redeemable Preference Shares, issued in connection to the Innovations acquisition and the Class B Redeemable
Preference Shares, issued in connection to the acquisition of Craiova Praktiker, following the holders of such shares notifying the
Company on their intent to redeem within 2016, the Company:
- actually proceeded in effecting full redemption of the Class A shares (392.500) which was finalized in Q1-2017 while the
process of cancelling them will be concluded within 2017
- for the Class B Redeemable Preference Shares, in lieu of redemption the Company gave its 20% holding in Autounion (Note
23) in October 2016, to the Craiova Praktiker seller BLUEHOUSE ACCESSION PROPERTY HOLDINGS III S.A.R.L and has
been negotiating the resulting difference (if any) for a final settlement. As soon as the case is settled, the Company will
proceed with the cancelation of the Class B Redeemable Preference Shares
26.3 Option schemes
A. Under the scheme adopted in 2007, 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
Exercise Price
USD
57
83
Number of
Shares
1.754
877
B. Under a second scheme also adopted in 2007, 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
C. Under a scheme adopted in 2015, pursuant to an approval by the AGM of 31/12/2013, the Company proceeded in 2015 in issuing
590.000 options to its employees, as a reward for their effort and support during the previous year. Each option entitles the Option
holder to one Ordinary Share. Exercise price stands at GBP 0,15. The Option holders lose and thus may not exercise any option
from the moment they cease to offer their services to the Company. The CEO and the CFO of the Company did not receive any
options.
a.
b.
c.
147.500 Options may be exercised within 2016. Out of the Options that may be exercised in 2016, none has been
exercised until the reporting date,
147.500 Options may be exercised within 2017,
295.000 Options may be exercised within 2018.
The Company considers that all option schemes are currently out of money and therefore has not made any relevant provision.
CONSOLIDATED FINANCIAL STATEMENTS 2016|76
26. Share capital (continued)
26.4 Class A Warrants issued
The Company acquired the Sec South portfolio in 2015 (Notes 17,18) in exchange of Ordinary shares which were issued at GBP 0,65
each. The sellers were also provided certain Class A Warrants giving the right to the Warrant holders to subscribe in cash at the Exercise
price for additional Ordinary Shares in the Company. The Company issued then two sets of Class A Warrants as follows:
1) 18.028.294 warrants corresponding to 18.028.294 ordinary shares, exercisable within 45 days from signing at an exercise price of
GBP 0,10 per ordinary share. 14.324.627 out of these warrants were exercised by August 2015 (Notes 26.2). The remaining
warrants have lapsed.
2) 18.028.294 warrants corresponding to 18.028.294 ordinary shares, were exercisable by 31 December 2016 at an exercise price of
GBP 0,45 per ordinary share. None of these warrants were exercised by 31 December 2016 and thus the warrants have lapsed.
26.5 Class B Warrants issued
On 8 August 2011 the Company issued an amount of Class B Warrants for an aggregate corresponding to 12,5% of the issued share
capital of the Company after the exercise date. The Class B Warrants may be exercised at any time until 30 June 2017. 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
freeze on the earlier of (i) the expiration of the Class B Warrants; and (ii) capital increase(s) undertaken by the Company generating
cumulative gross proceeds in excess of USD 100.000.000. As at the financial statements issue date none of the Class B Warrants have
been exercised. As of the reporting date, the aggregate amount of Class B Warrant is 12.859.246.
26.6 Capital Structure as at the end of the reporting period
As at the reporting date the Company's share capital is as follows:
Number of
Ordinary shares of €0,01
Class A Warrants
Class B Warrants
Total number of Shares
Total number of Shares
Options
Issued and Listed in AIM
Non-Dilutive Basis
Full Dilutive Basis
(as at) 31 December
2016
90.014.723
-
12.859.246
90.014.723
102.873.969
4.460
(as at) 31 December
2015
90.014.723
18.028.294
12.859.246
90.014.723
102.873.969
4.460
Redeemable Preference Class A Shares
The Redeemable Preference Class A Shares which do not have voting or dividend rights where issued as part of the Innovation
acquisition purchase consideration. As at the reporting date all of the Redeemable Shares Class A shares have been redeemed and the
Company will proceed in their cancellation within 2017.
Redeemable Preference Class B Shares
The Redeemable Preference Class B Shares, issued to BLUEHOUSE ACCESSION PROPERTY HOLDINGS III S.A.R.L as part of the Praktiker
Craiova asset acquisition (Note 18) do not have voting rights but have economic rights at par with ordinary shares. As at the reporting
date all of the Redeemable Shares Class B have been redeemed (Note 26) but the Company is in discussions with the vendor in respect
of a final settlement (Note 23).
27. Foreign Currency Translation Reserve
Exchange differences related to the translation from the functional currency of the Group’s subsidiaries are accounted by entries made
directly to the foreign currency translation reserve. The foreign exchange translation reserve represents unrealized profits or losses
related to the appreciation or depreciation of the local currencies against the EUR in the countries where the Company’s subsidiaries’
functional currencies are not EUR.
CONSOLIDATED FINANCIAL STATEMENTS 2016|77
28. Non-Controlling Interests
Non-controlling interests represent the percentage participations in the respective entities not owned by the Group:
%
Group Company
LLC Almaz-Press-Ukraine
Ketiza Limited
Ketiza srl
Ram Real Estate Management Limited
Iuliu Maniu Limited
Moselin Investments Srl
Rimasol Enterprises Limited
Rimasol Real Estate Srl
Ashor Ventures Limited
Ashor Development Srl
Jenby Ventures Limited
Jenby Investments Srl
Ebenem Limited
Ebenem Investments Srl
Delia Lebada Invest Srl
29. Borrowings
Non-controlling interest
portion
31 Dec 2016
45,00
10,00
10,00
50,00
55,00
55,00
55,76
55,76
55,76
55,76
55,70
55,70
55,70
55,70
35,00
31 Dec 2015
45,00
10,00
10,00
50,00
55,00
55,00
55,76
55,76
55,76
55,76
55,70
55,70
55,70
55,70
35,00
Project
31 Dec 2016
€
31 Dec 2015
€
Principal of bank Loans
European Bank for Reconstruction and Development (“EBRD”)
Banca Comerciala Romana /Tonescu Finance
Bancpost SA
Alpha Bank Romania
Alpha Bank Romania
Raiffeisen Bank Romania
Bancpost SA
Alpha Bank Bulgaria
Alpha Bank Bulgaria
Bank of Cyprus
Eurobank Ergasias SA
Piraeus Bank SA
Marfin Bank Romania
Loans by non-controlling shareholders
Loans from other 3rd parties
Overdrafts
Total principal of bank and non-bank Loans
Restructuring fees and interest payable to EBRD
Interest accrued on bank loans
Interests accrued on non-bank loans
Total
Terminal Brovary
Monaco Towers
Blooming House
Romfelt Plaza
EOS Business Park
Linda Residence
GreenLake – Parcel K
Boyana
Boyana/Sertland
Delia Lebada/Pantelimon
SPDI Logistics
GreenLake-Phase 2
Praktiker Craiova
Current portion
Non-current portion
Total
EBRD loan related to Terminal Brovary
11.551.023
924.562
1.245.657
809.919
991.000
-
3.092.926
2.680.492
693.514
4.569.725
11.726.960
2.525.938
4.502.128
-
359.134
2.062
45.675.040
29.898
2.723.889
46.627
48.475.454
12.164.107
1.210.962
1.739.634
869.602
-
429.858
3.099.639
3.460.813
736.864
4.569.725
12.343.116
2.525.938
4.839.149
2.713.458
-
26.516
50.729.381
32.767
2.175.165
743.466
53.680.779
31 Dec 2016
€
31 Dec 2015
€
31.580.299
16.895.155
48.475.454
27.417.220
26.263.559
53.680.779
According to the agreement the loan expires in 2022 and has a balloon payment of USD 3.633.333. The loan bears interest of 3 M
LIBOR + 6,75%. Such loan has a maturity date in 2022 and following Terminal Brovary sale (Note 41a), the Company sold LLC Terminal
Brovary with its assets and liabilities (EBRD loan included).
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 USD 25.000.
2. LLC Terminal Brovary pledged its Investment property, Brovary Logistics Centre the construction of which was finished in
2010 (Note 17), 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 and 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.
CONSOLIDATED FINANCIAL STATEMENTS 2016|78
29. Borrowings (continued)
6. LLC Terminal Brovary pledged all current and reserve 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 Ltd has entered with EBRD into a conditional assignment agreement of 99% corporate rights in LLC
Aisi Brovary.
12. SPDI PLC has issued a corporate guarantee dated 12 January 2009 guaranteeing all liabilities and fulfilment of conditions
under the existing loan agreement remains in force. The maturity of the guarantee is equal to the maturity of the loan.
The existing credit agreement with EBRD includes among others the following requirements for LLC Terminal Brovary and the Group as
a whole:
1. At all times LLC Brovary Logistics shall maintain a balance in the Debt Service Reserve Amount (DSRA) account equal to
not less than the sum of all payments of principal and interest on the Loan which will be due and payable during the next
six months.
2. LLC Terminal Brovary shall achieve a "CNRI"(Contract Net Rental Income is the aggregate of monthly lease payments,
net of value added tax, contracted by the Borrower pursuant to the Lease Agreements as of the relevant testing date and
converted into Dollars at the official exchange rate established by the National Bank of Ukraine as of such testing date)
according to the following schedule:
(1) on 31 December 2015, CNRI of USD 230.000 or more; and
(2) 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 30 June 2015 and 31 December 2015, the DSCR of more than 1,15x.
ii.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
SecMon Real Estate Srl (2011) entered into a loan agreement with Banca Comerciala Romana for a credit facility for financing part of
the acquisition of the Monaco Towers Project apartments. As of the end of the reporting period the balance of the loan was €924.562
and bears interest of EURIBOR 3M plus 5%. In June 2016, Banca Comerciala Romana has assigned the loan, all rights and securities to
Tonescu Finance SRL. The loan, which is currently expired, is secured by all assets of SecMon Real Estate Srl as well as its shares. The
Group is in discussion with Tonescu Finance SRL for a potential restructuring.
Ketiza Real Estate Srl entered (2012) into a loan agreement with Bancpost SA for a credit facility for financing the acquisition of the
Blooming House Project and 100% of the remaining (without VAT) construction works of Blooming House project. As of the end of the
reporting period the balance of the loan was €1.245.657. The loan bears interest of EURIBOR 3M plus 3,5% and matures in May 2017.
The Group is in discussion for extending the loan to 2020. The bank loan is secured by all assets of Ketiza Real Estate Srl as well as its
shares and is being repaid through sales proceeds.
SecRom Real Estate Srl entered (2009) into a loan agreement with Alpha Bank Romania for a credit facility for financing part of the
acquisition of the Doamna Ghica Project apartments. As of the end of the reporting period, the balance of the loan was €809.919, bears
interest of EURIBOR 3M+5% and is repayable on the basis of investment property sales. The loan has a maturity date in March 2017
and the Group has been in discussions with the lender for a restructuring. Following an agreement with the bank the loan was extended
in Q1-2017 for another 3 years. The loan is secured by all assets of SecRom Real Estate Srl as well as its shares and is being repaid
through sales proceeds.
SecVista Real Estate Srl entered (2011) into a loan agreement with Raiffeisen Bank Romania for a credit facility for financing part of the
acquisition of the Linda Residence Project apartments. Due to a bulk sale of all the apartment units of the said project in 2016, the loan
was fully repaid in May 2016 and an amount of €326.937 was written off (Note 11b and 14).
Moselin Investments Srl (2010) entered into a construction loan agreement with Bancpost SA covering the construction works of Parcel
K Green Lake project. As of the end of the reporting period the balance of the loan was €3.092.926 and bears interest of EURIBOR 3M
plus 5%. The loan is repayable from the sales proceeds while it matures in June 2017. The Group is in discussion for extending the loan
to 2022. The loan is secured with the property itself and the shares of Moselin Investments Srl and is being repaid through sales
proceeds.
Boyana Residence ood entered (2011) into a loan agreement with Alpha Bank Bulgaria for a construction loan related to the construction
of the Boyana Residence project (finished in 2014). As of the end of the reporting period the balance of the loan was €2.680.492 and
bears interest of EURIBOR 3M plus 5,75%. The loan maturity was extended following negotiation with the bank to March 2019. The
loan currently is being repaid through sales proceeds. The facility is secured through a mortgage over the property and a pledge over
the company‘s shares as well as those of Sertland Properties Limited. The Company has provided corporate guarantees for this loan.
CONSOLIDATED FINANCIAL STATEMENTS 2016|79
29. Borrowings (continued)
Sertland Properties Limited entered (2008) into a loan agreement with Alpha Bank Bulgaria for an acquisition loan related to the
acquisition of 70% of Boyana Residence ood. As of the end of the reporting period the balance of the loan was €693.514 and bears
interest of EURIBOR 3M plus 5,75%. The loan maturity was extended following negotiation with the bank to March 2019. The loan
currently is being repaid through sales proceeds of Boyana Residence apartments. The loan is secured with a pledge on company's
shares, and a corporate guarantee by SEC South East Continent Unique Real Estate (Secured) Investments Limited.
Delia Lebada Invest Srl, a subsidiary, entered into a loan agreement with the Bank of Cyprus Limited in 2007 to effectively finance a
leveraged buy-out of the subsidiary by the Group. The principal balance of the loan as at the end of the reporting period was €4.569.725
(without any accrued interest and default penalty). As the loan is in default the bank has initiated insolvency procedures to take over
the Pantelimon lake asset. The Group is currently in discussion with its partner and the bank in an effort to find an amicable settlement
to the case. The Company has provided corporate guarantees for this loan.
SPDI Logistics SA entered (April 2015) into a loan agreement with EUROBANK SA to refinance the existing debt facility related to GED
Logistics terminal. As of the end of the reporting period the balance of the loan is €11.726.960 and bears interest of EURIBOR 6M plus
3,2%+30% of the asset swap. The loan is repayable by 2022, has a balloon payment of €8.660.000 and is secured by all assets of
SPDI Logistics SA as well as its shares.
SEC South East Continent Unique Real Estate (Secured) Investments Limited has a debt facility with Piraeus Bank (since 2007) for the
acquisition of the Green Lake project land in Bucharest Romania. As of the end of the reporting period the balance of the loan was
€2.525.938 (without any accrued interest and default penalty) and bears interest of EURIBOR 3M plus 4% plus the Greek law 128/78
0,6% contribution. The loan matured in February 2017 and the Group is in discussions with the bank for prolongation of the term of
facility to 2022. The Company has provided corporate guarantees for this loan.
BlueBigBox3 srl (Praktiker Craiova) has a loan agreement with Marfin Bank Romania. As of the end of the reporting period the balance
of the loan was €4.502.128 and bears interest of EURIBOR 6M plus 5% and 3M plus 4,5%. The loan which is repayable by 2025 with
a balloon payment of €2.159.628 and is secured by the asset as well as the shares of BlueBigBox3 srl.
N-E Real Estate Park First Phase SRL entered in 2016 into a loan agreement with Alpha Bank Romania for a credit facility of €1.000.000
for working capital purposes. As of the end of the reporting period, the balance of the loan was €991.000, bears interest of EURIBOR
1M+4,5% and is repayable from the free cash flow resulting from the rental income of the related property. The loan matures in April
2024 and is secured by a second rank mortgage over assets of N-E Real Estate Park First Phase SRL as well as its shares.
Other non-bank borrowing includes borrowings from non-controlling interests. During the last eight years and in order to support the
GreenLake project the non-controlling shareholders of Moselin and Rimasol Limited (other than the Group) have contributed their share
of capital injections by means of shareholder loans. The loans bear interest between 5% and 7% annually and were repayable in 2016
and 2017. An amount of €~2,7m from such loans as presented in 2015 financial statements has been agreed to be capitalized (the
process is to be concluded within 2017) and therefore appears under equity section.
30. Trade and other payables
The fair value of trade and other payables due within one year approximate their carrying amounts as presented below.
Payables to third parties
Payables to related parties (Note 37.2)
Deferred income from tenants current
Accruals
Payables due for construction
Total
Current portion
Non-current portion
Total
31 Dec 2016
€
31 Dec 2015
€
4.734.924
1.146.150
635.240
536.160
436.819
7.489.293
6.209.235
743.200
99.554
259.031
405.904
7.716.924
31 Dec 2016
€
31 Dec 2015
€
7.038.170
451.123
7.489.293
3.044.036
4.672.888
7.716.924
Payables to third parties represents: a) payable balances to third party shareholders of entities where the Group maintains a
participation. An amount of €~4m has been been agreed to be capitalized during 2016 (the process is to be concluded within 2017)
and therefore has been transferred under equity section, b) payables due to Bluehouse Capital as a result the Redeemable Convertible
Class B share redemption (Note 23) that are under negotiation for a final settlement and c) amounts payable to various service providers
including auditors, legal advisors, consultants and third party accountants related to the current operations of the Group.
Payables to related parties represent amounts due to board of directors and board committee members and accrued management
remuneration as well as the balances with Secure Management Ltd and Grafton Properties (Note 37.2).
Deferred income from tenants represents advances from tenants which will be used as future rental income and utilities charges.
Accruals mainly include the accrued, administration fees, accounting fees, facility management and other fees payable to third parties
for the year 2016 (expenses not invoiced within 2016) as well as legal fees for the sale of Terminal Brovary logistics which was finalized
at the beginning of 2017.
CONSOLIDATED FINANCIAL STATEMENTS 2016|80
30. Trade and other payables (continued)
Payables for construction represent amounts payable to the contractor of Bela Logistic Center in Odessa. The settlement was reached
in late 2011 on the basis of maintaining the construction contract in an inactive state (to be reactivated at the option of the Group),
while upon reactivation of the contract or termination of it (because of the sale of the asset) the Group would have to pay an additional
UAH 5.400.000 (~USD 160.000) payable upon such event occurring. Since it is uncertain when the latter amount is to be paid, it has
been discounted at the current discount rates in Ukraine and is presented as a non-current liability. Payables for construction also
include an amount of ~€245.000 payable to Boyana’s constructor which has been withheld as Good Performance Guarantee.
31. Deposits from Tenants
Deposits from tenants non-current
Deposits from tenants current
Total
31 Dec 2016
€
217.328
271.019
488.347
31 Dec 2015
€
623.770
132.684
756.454
Deposits from tenants appearing under current and non-current liabilities include the amounts received from the tenants of Terminal
Brovary Logistics, Innovations Logistics Park, EOS Business Park, Craiova Praktiker, GED Logistics and companies representing
residential segment as advances/guarantees and are to be reimbursed to these clients at the expiration of the lease agreements.
32. Provisions and Taxes Payables
Corporate income tax
Defence tax
Other taxes including VAT payable
Provision (Notes 12, 38.3)
Total Provisions and Tax Liabilities
31 Dec 2016
€
648.825
29.918
468.275
742.166
1.889.184
31 Dec 2015
€
482.389
24.920
314.696
724.445
1.546.450
Corporate income tax represents taxes payable in Cyprus and Romania.
Other taxes represent local property taxes and VAT payable in Ukraine, Romania, Greece, Bulgaria and Cyprus.
33. Finance Lease Liabilities
As at the reporting date the finance lease liabilities consist of the non-current portion of €11.081.379 and the current portion of €301.409
(31 December 2015: €11.273.639 and €192.083, accordingly).
31 Dec 2016
Less than one year
Between two and five years
More than five years
Accrued Interest
Total Finance Lease Liabilities
31 Dec 2015
Less than one year
Between two and five years
More than five years
Accrued Interest
Total Finance Lease Liabilities
33.1 Land Plots Financial Leasing
Note
40.2
&
40.6
Note
40.2
&
40.6
Minimum lease
payments
€
961.744
3.754.280
11.822.949
16.538.973
Minimum lease
payments
€
775.146
3.592.679
12.373.657
16.741.482
Interest
€
665.796
2.138.258
2.477.889
5.281.943
Interest
€
586.626
2.169.534
2.573.824
5.329.984
Principal
€
295.948
1.616.022
9.345.060
11.257.030
125.758
11.382.788
Principal
€
188.520
1.423.145
9.799.833
11.411.498
54.224
11.465.722
The Group rents in Ukraine land plots classified as finance leases. 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 €291.322 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 2016|81
33. Finance Lease Liabilities (continued)
33.2 Sale and Lease Back Agreements
A.
Innovations Logistic Park
In May 2014 the Group concluded the acquisition of Innovations Logistics Park in Bucharest, owned by Best Day Srl, through a sale and
lease back agreement with Piraeus Leasing Romania SA. As of the end of the reporting period the balance is €7.308.731, bearing
interest rate at 3M Euribor plus 4,45% margin, being repayable in monthly tranches until 2026 with a balloon payment of €5.244.926.
At the maturity of the lease agreement Best Day SRL will become owner of the asset.
Under the current finance lease agreement the collaterals for the facility are as follows:
1. Best Day SRL pledged its future receivables from its tenants.
2. Best Day SRL pledged its shares.
3. Best Day SRL pledged all current and reserved accounts opened in Piraeus Leasing, Romania.
4. Best Day SRL is obliged to provide cash collateral in the amount of €250.000 in Piraeus Leasing Romania, which had been
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 SRL arising from the sale and
lease back agreement.
In late February 2017 the Group finally agreed and signed (following twelve months of discussions) an amended sale and lease back
agreement with the Piraeus Leasing Romania for Innovations Logistics Park in Bucharest, governing the allocation of the Nestle Romania,
early termination fee of ~€1,6 million payable to SPDI (Note 41b).
B. EOS Business Park
In October 2014 the Group concluded the acquisition of EOS Business Park in Bucharest, owned by N-E Real Estate Park First Phase
SRL, through a sale and lease back agreement with Alpha Bank Romania SA. As of the end of the reporting period the balance is
€3.782.735 bearing interest rate at 3M Euribor plus 5,25% margin, being repayable in monthly tranches until 2024 with a balloon
payment of €2.546.600. At the maturity of the lease agreement by N-E Real Estate Park First Phase SRL will become owner of the asset.
Under the current finance lease agreement the collaterals for the facility are as follows:
1. N-E Real Estate Park First Phase SRL pledged its future receivables from its tenants.
2. N-E Real Estate Park First Phase SRL pledged Bank Guarantee receivables from its tenants.
3. N-E Real Estate Park First Phase SRL pledged its shares.
4. N-E Real Estate Park First Phase SRL pledged all current and reserved accounts opened in Alpha Bank Romania SA.
5. N-E Real Estate Park First Phase SRL 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 N-E Real Estate Park First Phase SRL arising
from the sales and lease back agreement.
34. Restructuring of the business
During 2016 the non-controlling shareholders of Moselin, Iuliu Maniu, Ram, Rimasol Ltd, Rimasol SRL, Ashor Limited, Ashor SRL, Ebenem
Limited, Ebenem SRL, Jenby Limited and Jenby SRL (in agreement with the Group) agreed to capitalize the bigger part of their capital
injections by means of shareholder loans and payables effected from 2008 onwards. An amount of €6.641.997 from such loans and
payables have been transferred to the equity section while the process of capitalization will be finalized within 2017.
35. 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
Loss after tax attributable to owners of the parent
Basic
Diluted
31 Dec 2016
90.014.723
90.014.723
102.873.969
31 Dec 2015
90.014.723
69.460.155
82.631.610
31 Dec 2016
€
(2.363.693)
(0,03)
(0,02)
31 Dec 2015
€
(11.015.852)
(0,16)
(0,13)
CONSOLIDATED FINANCIAL STATEMENTS 2016|82
35. Earnings and net assets per share attributable to equity holders of the parent (continued)
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
36. Segment information
31 Dec 2016
€
31 Dec 2015
€
38.924.809
90.014.723
102.873.969
0,43
0,38
42.433.125
90.014.723
102.873.969
0,47
0,41
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 – GED Logistics, Innovations Logistics Park, Terminal Brovary Logistics Park
Office segment - Eos Business Park – Delea Nuova (Associate)
Retail segment - Craiova Praktiker
Residential
Residential segment
Land Assets
Land assets
There are no sales between the segments.
Segment assets for the investment properties segments represent investment property (including investment properties under
development and prepayments made for the investment properties). Segment liabilities represent interest bearing borrowings, finance
lease liabilities and deposits from tenants.
Profit and Loss for the year 2016
Segment profit
Property Sales income (Note 11)
Cost of Property sold (Note 11)
Rental income (Note 7)
Service charges and utilities income
(Note 7)
Sale of electricity (Note 7)
Asset Management fees (Note 7)
Valuation gains/(losses) from investment
property (Note 10)
Share of profits/(losses) from associates
(Note 19)
Result on disposal of available for sale
financial assets (Note 23)
Asset operating expenses (Note 8)
Impairment of inventory and provisions
(Note 12)
Segment profit
Administration expenses (Note 9)
Other (expenses)/income, net (Note 13)
Finance income(Note 14) (Note 11)
Interest expenses (Note 14)
Other finance costs (Note 14)
Foreign exchange losses, net (Note 15a)
Income tax expense (Note 16)
Exchange difference on I/C loan to
foreign holdings (Note 15b)
Exchange difference on translation
foreign holdings (Note 27)
Available-for-sale financial assets – Profit
transferred to net profit due to disposal
Total Comprehensive Income
Warehouse
€
Office
€
Retail
€
Residential Land Plots
€
€
Total
€
-
-
4.022.457
374.497
315.599
-
-
-
579.894
66.784
-
-
-
-
545.564
3.196.381
(4.003.804)
114.692
-
-
-
17.367
-
34.086
-
-
-
-
-
-
3.196.381
(4.003.804)
5.262.607
458.648
315.599
34.086
176.550
337.684
329.975
133.131
(80.547)
896.793
469.248
-
-
-
469.248
-
(530.020)
(206.491)
(71.045)
-
(111.500)
-
(80.429)
-
(199.447)
(206.491)
(992.441)
-
4.359.083 1.176.074
-
-
764.039
(63.513)
-
(652.089) (279.994)
(63.513)
5.367.113
(2.614.188)
(1.304.304)
1.153.243
(3.571.387)
(167.564)
(1.041.239)
(174.315)
(4.167.542)
3.508.448
(485.529)
(3.497.264)
CONSOLIDATED FINANCIAL STATEMENTS 2016|83
36. Segment information (continued)
Profit and Loss for the year 2015
Segment profit
Property Sales income (Note 11)
Cost of sales (Note 11)
Rental income (Note 7)
Service charges and utilities income (Note 7)
Sale of electricity (Note 7)
Valuation gains/(losses) from investment
property (Note 10)
Gain realized on acquisition of subsidiaries
(Note 18)
Share of profits/(losses) from associates
(Note 19)
Asset operating expenses (Note 8)
Impairment of inventory and provisions
(Note 12)
Goodwill impairment (Note 18b)
Segment profit
Gain realized on acquisition of subsidiaries
(Note 18)
Administration expenses (Note 9)
Other (expenses)/income, net (Note 13)
Finance income (Note 14)
Interest expenses (Note 14)
Other finance costs (Note 14)
Foreign exchange losses, net (Note 15a)
Income tax expense (Note 16)
Exchange difference on I/C loan to foreign
holdings (Note 15b)
Exchange difference on translation foreign
holdings (Note 27)
Available for sale financial assets gains (Note
23)
Total Comprehensive Income
Warehouse
€
Office
€
Retail
€
Residential Land Plots
€
€
Total
€
-
-
3.627.698
470.413
297.962
-
-
523.013
75.563
-
-
1.725.326
- (2.043.649)
196.120
-
-
258.191
-
-
-
-
-
-
-
1.725.326
(2.043.649)
4.605.022
545.976
297.962
(89.178)
150.000
(2.870.000)
251.500
222.431
(2.335.247)
1.552.134
-
-
-
-
1.552.134
(622.699)
-
5.236.330
(705.232)
(155.931)
-
(31.010)
-
(156.863)
(539.340)
(158.080)
(1.244.572)
(1.124.583)
-
(43.269)
-
(613.813)
(155.856) (3.256.632)
- (1.675.659)
(27.566) (2.150.648)
(1.675.659)
(657.082)
(354.372)
629.700
(3.013.942)
653.856
63.596
(3.834.696)
(603.495)
(5.071.048)
(80.188)
(13.653.402)
8.064.848
485.529
(16.713.614)
Balance Sheet as at 31 December 2016
Warehouse
€
Office
€
Retail
€
Residential
€
Land plots Corporate
€
Total
€
42.400.000
6.860.000
7.500.000
4.375.000
34.519.207
-
-
350.000
-
-
-
5.217.310
-
-
-
-
-
42.750.000 12.077.310 7.500.000
-
5.027.986
309
-
5.028.254
-
-
-
9.403.563 39.547.193
Assets
Investment properties
Investment properties under
development
Long-term receivables and
prepayments
Investments in associates
Inventory
Segment assets
Tangible and intangible assets
Prepayments and other current
assets
Cash and cash equivalents
Total assets
Borrowings
Finance lease liabilities
Deposits from tenants
Redeemable preference shares
Segment liabilities
Trade and other payables
Taxes payable and provisions
Total liabilities
23.308.195
7.550.279
451.640
-
31.310.114
-
-
31.310.114
991.176
3.782.735
-
-
4.773.911
-
-
4.773.911
4.518.976
-
-
-
4.518.976
-
-
4.518.976
3.063.513
-
36.707
-
16.219.462
49.774
-
-
3.100.220 16.269.236
-
-
3.100.220 16.269.236
-
-
-
-
95.654.207
5.027.986
872
-
-
351.181
5.217.310
5.028.254
872 111.278.938
129.396
2.778.361
1.701.007
115.887.702
374.132
48.475.454
11.382.788
488.347
-
374.132 60.346.589
7.489.293
1.889.184
374.132 69.725.066
CONSOLIDATED FINANCIAL STATEMENTS 2016|84
36. Segment information (continued)
Balance Sheet as at 31 December 2015
Assets
Investment properties
Investment properties under
development
Long-term receivables and
prepayments
Goodwill
Investments in associates
Available-for-sale financial assets
Inventory
Segment assets
Tangible and intangible assets
Prepayments and other current
assets
Cash and cash equivalents
Total assets
Borrowings
Finance lease liabilities
Deposits from tenants
Redeemable preference shares
Segment liabilities
Trade and other payables
Taxes payable and provisions
Total liabilities
Geographical information
Warehouse
€
Office
€
Retail
€
Residential
€
Land plots
€
Total
€
43.164.324
6.550.000
7.200.000
6.847.538
30.578.609
94.340.471
-
-
350.000
-
-
-
-
-
-
4.887.943
2.783.535
-
-
-
-
-
-
-
43.514.324 14.221.478 7.200.000
-
5.125.389
5.125.389
1.185
-
-
-
6.990.150
13.838.873
1.731
-
1
-
4.309.850
40.015.580
352.916
-
4.887.944
2.783.535
11.300.000
118.790.255
24.539.925
7.508.988
614.018
349.325
33.012.256
-
-
33.012.256
-
3.889.870
-
-
4.839.149
-
-
6.081.211
3.889.870 10.920.360
-
-
3.889.870 10.920.360
-
-
164.617
4.795.223
895.422
124.645.517
53.680.779
11.465.722
756.454
6.430.536
72.333.491
7.716.924
1.546.450
81.596.865
4.586.129
-
37.444
-
4.623.573
-
-
4.623.573
19.715.576
66.864
104.992
-
19.887.432
-
-
19.887.432
Income from Rental Contracts (Note 7)
Ukraine
Romania
Greece
Bulgaria
Total
Loss from disposal of inventory (Note 11a)
Bulgaria
Total
Loss from disposal of investment properties (Note 11b)
Romania
Total
Carrying amount of assets (investment properties, associates, inventory and available for
sale investments)
Ukraine
Romania
Greece
Bulgaria
Total
31 Dec 2016
€
1.559.878
3.031.037
1.478.702
1.323
6.070.940
31 Dec 2015
€
1.835.181
2.449.009
1.163.832
938
5.448.960
€
(368.907)
(368.907)
€
(51.359)
(51.359)
(438.516)
(438.516)
(266.964)
(266.964)
31 Dec 2016 31 Dec 2015
€
€
26.948.193
57.731.310
16.500.000
9.748.254
24.349.860
63.503.944
16.600.000
14.083.535
110.927.757 118.537.339
CONSOLIDATED FINANCIAL STATEMENTS 2016|85
37. Related Party Transactions
The following transactions were carried out with related parties:
37.1 Income/ Expense
37.1.1 Income
Interest income on loan to related parties
Interest Income from loan to associates
Total
31 Dec 2016
€
52.533
9.392
61.925
31 Dec 2015
€
46.675
2.055
48.730
Interest income on loan to related parties relates to interest income from Bluehouse V until October 2016 when the investment was
disposed and interest income from associates relates to interest income from GreenLake Development SRL.
37.1.2 Expenses
Board of Directors
Management Remuneration
Interest expenses on Narrowpeak and Secure Management Limited loan
Back office expenses
Total
31 Dec 2016
€
140.779
721.305
14.996
24.560
901.640
31 Dec 2015
€
278.417
863.810
-
8.874
1.151.100
Board of Directors expense includes the remuneration of all Non-Executive Directors and committee members for H1-2016. Following a
BOD decision the Directors will receive no remuneration thereon.
Name
Position
2016 Remuneration
(€)
2015 Remuneration
(€)
Paul Ensor
Barseghyan Vagharshak
Ian Domaille
Franz Horhager
Antonios Kaffas
Kalypso Maria Nomikou
Alvaro Portela
Harin Thaker
Antonios Achilleoudis
Robert Sinclair
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director until 22 July 2015
Non-Executive Director until 22 July 2015
16.352
16.352
22.280
16.352
18.805
16.352
16.352
17.934
-
-
33.132
16.921
45.141
33.132
38.101
16.921
33.132
34.055
14.383
13.499
Management remuneration includes the remuneration of the CEO, the CFO, the Group Commercial Director, the Group Investment
Director and that of the Country Managers of Ukraine and Romania pursuant to the decisions of the remuneration committee.
37.2 Payables to related parties (Note 30)
Board of Directors & Committees
Grafton Properties
Secure Management Services Ltd
SECURE Management Ltd
Management Remuneration
Total
31 Dec 2016
€
619.562
123.549
15.179
1.062
386.798
1.146.150
31 Dec 2015
€
475.389
123.549
-
1.062
143.200
743.200
37.2.1 Board of Directors & Committees
The amount payable represents remuneration payable to Non-Executive Directors until the end of the reporting period. The members
of the Board of Directors pursuant to a recommendation by the remuneration committee and in order to facilitate the Company’s cash
flow, will receive part of their payment in exchange for shares in the Company’s capital.
37.2.2 Loan payable to Grafton Properties
During the Company restructuring in 2011 and under the Settlement Agreement of July 2011, the Company undertook the obligation
to repay to certain lenders who had contributed funds for the operating needs of the Company between 2009-2011, by lending to AISI
Realty Capital LLC as the SC Secure Capital Ltd was named then, the total amount of USD 450.000. As of the reporting date the liability
towards Grafton Properties, representing the Lenders, was USD 150.000, which is contingent on the Group raising USD 50m of capital
in the markets.
37.2.3 Management Remuneration
Management Remuneration represents deferred amounts payable to the CEO and CFO of the Company, as well as the Group Commercial
Director, the Group Investment Director and the Country Managers for Romania and Ukraine.
CONSOLIDATED FINANCIAL STATEMENTS 2016|86
37. Related Party Transactions (continued)
37.3 Loans from SC Secure Capital Ltd to the Group’s subsidiaries
SC Secure Capital Ltd, the finance subsidiary of the Group provided capital in the form of loans to the Ukrainian subsidiaries of the
Company so as to support the acquisition of assets, development expenses of the projects, as well as various operational costs.
Borrower
LLC “TERMINAL BROVARY”
LLC “AISI UKRAINE”
LLC “ALMAZ PRES UKRAINE”
Total
Limit –as of
31 Dec 2016
€
30.724.931
23.062.351
8.236.554
Principal as of
31 Dec 2016
€
Principal as of
31 Dec 2015
€
30.724.931
14.257
162.633
30.901.821
26.798.804
12.275
140.021
26.951.101
All loans from SC Secure Capital Ltd to the Group’s subsidiaries are USD denominated and in 2016 they generated a foreign exchange
loss totaling €4.167.542 as a result of the devaluation of the Ukrainian Hryvnia during the reporting period. As settlement of these loans
is not likely to occur in the foreseeable future and in substance is part of the Group’s net investment in its foreign operations, the foreign
exchange loss is recognised in other comprehensive income.
In that context SC Secure Capital Ltd has provided a loan to Limited Liability Company “Terminal Brovary” whose outstanding capital at
the reporting date was €30.724.931. This loan was transferred to SL Secure Logistics Limited by the end of 2016. This loan is expected
to be transferred together with the sale of Terminal Brovary to the buyer (Note 41a).
A potential Ukrainian Hryvnia weakening/strengthening by 10% against the US dollar with all other variables held constant, would result
in an exchange difference on I/C loans to foreign holdings of (€3.090.182)/ €3.090.182 respectively, estimated on balances held at 31
December 2016.
37.4 Loans to associates
Loans to Greenlake Development SRL
Total
31 Dec 2016
€
264.110
264.110
31 Dec 2015
€
254.718
254.718
The loan was given to GreenLake Development SRL from Edetrio Holdings Limited. The agreement was signed on 17 February 2012
and bears interest 5%. The maturity date is 30 April 2018.
38. Contingent Liabilities
38.1 Tax Litigation
The Group performed during the reporting period a part of its operations in the Ukraine, within the jurisdiction of the Ukrainian tax
authorities. The Ukrainian tax system can be characterized by numerous taxes and frequently changing legislation, which may be applied
retroactively, open to wide and in some cases, conflicting interpretation. Instances of inconsistent opinions between local, regional, and
national tax authorities and between the National Bank of Ukraine and the Ministry of Finance are not unusual. Tax declarations are
subject to review and investigation by a number of authorities, which are authorised by law to impose severe fines and penalties and
interest charges. Any tax year remains open for review by the tax authorities during the three subsequent calendar years; however,
under certain circumstances a tax year may remain open for longer.
The Group performed during the reporting period part of its operations also in Romania, Greece and Bulgaria. In respect of Romanian,
Bulgarian and Greek taxation systems all are subject to varying interpretation and to constant changes, which may be retroactive. In
certain circumstances the tax authorities can be arbitrary in certain cases.
These facts create tax risks which are substantially more significant than those typically found in countries with more developed tax
systems. Management believes that it has adequately provided for tax liabilities, based on its interpretation of tax legislation, official
pronouncements and court decisions. However, the interpretations of the relevant authorities could differ and the effect on these
consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant.
At the same time the Group’s entities are involved in court proceedings with tax authorities; Management believes that the estimates
provided within the financial statements present a reasonable estimate of the outcome of these court cases.
38.2 Construction related litigation
There are no material claims from contractors due to the postponement of projects or delayed delivery other than those disclosed in
the financial statements.
38.3 Delia Lebada SRL debt towards Bank of Cyprus
Sec South East Continent Unique Real Estate (SECURED) Investment Ltd has provided in 2007 a corporate guarantee to the Bank of
Cyprus in respect to the loan provided by the latter to its subsidiary Delia Lebada SRL, the owner of the Pantelimon Lake plot (Note
17). As the loan is in default, the bank has initiated an insolvency procedure. Depending on the final outcome of the procedure (that
may include an auctioning of the plot), the Bank may call the difference between the price received from the auction and €6.594.396
which is the total liability (out of which €4.569.725 is the principal and the remaining relates to interest, overdues and penalties). The
Group is in discussions with the bank and its partner in the project to find an amicable settlement to the case. Management believes
that the case has been adequately being provided for.
CONSOLIDATED FINANCIAL STATEMENTS 2016|87
38. Contingent Liabilities (continued)
38.4 Other Litigation
The Group has a number of legal cases pending. Management does not believe that the result of these will have a substantial overall
effect on the Group’s financial position. Consequently no such provision is included in the current financial statements.
38.5 Other Contingent Liabilities
The Group had no other contingent liabilities as at 31 December 2016.
39. Commitments
The Group had no other commitments as at 31 December 2016.
40. Financial Risk Management
40.1 Capital Risk Management
The Group manages its capital to ensure adequate liquidity will being able to implement its stated growth strategy in order to maximize
the return to stakeholders through the optimization of the debt-equity structure and value enhancing actions in respect of its portfolio
of investments. The capital structure of the Group consists of borrowings (Note 29), trade and other payables (Note 30) deposits from
tenants (Note 31), financial leases (Note 33), taxes payable (Note 32) and equity attributable to ordinary or preferred shareholders.
The Group is not subject to any externally imposed capital requirements, but certain of its cash balances are restricted (Note 25).
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.
40.2 Categories of Financial Instruments
Financial Assets
Cash at Bank
Long-term Receivables and prepayments
Prepayments and other receivables
Available for sale investments
Total
Financial Liabilities
Borrowings
Trade and other payables
Deposits from tenants
Finance lease liabilities
Taxes payable and provisions
Redeemable preference shares
Total
40.3 Financial Risk Management Objectives
Note
31 Dec 2016
€
31 Dec 2015
€
25
21
24
23
29
30
31
33
32
26
1.701.007
351.181
2.778.361
-
4.830.549
895.422
352.916
4.795.223
2.783.535
8.827.096
48.475.454
7.489.293
488.347
11.382.788
1.889.184
-
69.725.066
53.680.779
7.716.924
756.454
11.465.722
1.546.450
6.430.536
81.596.865
The Group’s Treasury function provides services to its various corporate entities, coordinates access to local and international financial
markets, monitors and manages the financial risks relating to the operations of the Group, mainly the investing and development
functions. Its primary goal is to secure the Group’s liquidity and to minimize the effect of the financial asset price variability on the cash
flow of the Group. These risks cover market risks including foreign exchange risks and interest rate risk as well as credit risk and liquidity
risk.
The above mentioned risk exposures may be hedged using derivative instruments whenever appropriate. The use of financial derivatives
is governed by the Group’s approved policies which indicate that the use of derivatives is for hedging purposes only. The Group does
not enter into speculative derivative trading positions. The same policies provide for the investment of excess liquidity. As at the end of
the reporting period, the Group had not entered into any derivative contracts.
40.4 Economic Market Risk Management
The Group operates in Romania, Bulgaria, Greece and Ukraine. The Group’s activities expose it primarily to financial risks of changes in
currency exchange rates and interest rates. The exposures and the management of the associated risks are described below. There has
been no change in the way the Group measures and manages risks.
CONSOLIDATED FINANCIAL STATEMENTS 2016|88
40. Financial Risk Management (continued)
40.4 Economic Market Risk Management (continued)
Foreign Exchange Risk
Currency risk arises when commercial transactions and recognized financial assets and liabilities are denominated in a currency that is
not the Group's functional currency. Most of the Group’s financial assets are denominated in the functional currency. Management is
monitoring the net exposures and adopts policies to contain them so that the net effect of devaluation is minimized.
Interest Rate Risk
The Group's income and operating cash flows are substantially independent of changes in market interest rates as the Group has no
significant interest-bearing assets. On December 31st, 2016, cash and cash equivalent financial assets amounted to €1.701.007 (2015:
€895.422) of which approx. €32.000 in UAH and €1.320.000 in RON (Note 25) while the remaining are mainly denominated in either
USD or €.
The Group is exposed to interest rate risk in relation to its borrowings amounting to €48.475.454 (31 December 2015: €53.680.779) as
they are issued at variable rates tied to the Libor or Euribor. Management monitors the interest rate fluctuations on a continuous basis
and evaluates hedging options to align the Group’s strategy with the interest rate view and the defined risk appetite. Although no
hedging has been applied for the reporting period, such may take place in the future if deemed necessary in order to protect the cash
flow of a property asset through different interest rate cycles.
The Group’s exposures to financial risk are discussed also in Note 5.
Management monitors the interest rate fluctuations on a continuous basis and evaluates hedging options to align the Group’s strategy
with the interest rate view and the defined risk appetite. Although no hedging has been applied for the reporting period, such may take
place in the future if deemed necessary in order to protect the cash flow of a property asset through different interest rate cycles.
As at 31 December 2016 the weighted average interest rate for all the interest bearing borrowing and financial leases of the Group
stands at 5,32% (31 December 2015: 5,00%). Considering the finalization of Terminal Brovary sale, the weighted average interest rate
for all the interest bearing borrowing and financial leases of the Group would be 4,67%.
The sensitivity analysis for LIBOR and EURIBOR changes applying to the interest calculation on the borrowings principal outstanding as
at 31 December 2016 is presented below:
Actual
as at 31.12.2016
+100 bps
+200 bps
Weighted average interest rate
Influence on yearly finance costs
5,32%
-
6,32%
(567.770)
7,32%
(1.135.541)
The sensitivity analysis for LIBOR and EURIBOR changes applying to the interest calculation on the borrowings principal outstanding as
at 31 December 2015 is presented below:
Weighted average interest rate
Influence on yearly finance costs
5,00%
-
6,00%
(648.116)
7,00%
(1.296.232)
Actual
as at 31.12.2015
+100 bps
+200 bps
The Group’s exposures to financial risk are discussed also in Note 5.
40.5 Credit Risk Management
The Group has no significant credit risk exposure. The credit risk emanating from the liquid funds is limited because the Group’s
counterparties are banks with high credit-ratings assigned by international credit rating agencies. The Credit risk of receivables is
reduced as the majority of the receivables represent VAT to be offset through VAT income in the future. In respect of receivables from
tenants these are kept to a minimum of 2 months and are monitored closely.
40.6 Liquidity Risk Management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which applies a framework for the Group’s short,
medium and long term funding and liquidity management requirements. The Treasury function of the Group manages liquidity risk by
preparing and monitoring forecasted cash flow plans and budgets while maintaining adequate reserves. The following table details the
Group’s contractual maturity of its financial liabilities. The tables below have been drawn up based on the undiscounted contractual
maturities including interest that will be accrued.
CONSOLIDATED FINANCIAL STATEMENTS 2016|89
40. Financial Risk Management (continued)
40.6 Liquidity Risk Management (continued)
31 December 2016
Financial assets
Cash at Bank
Prepayments and other receivables
Long-term Receivables and
prepayments
Total Financial assets
Financial liabilities
Borrowings
Trade and other payables
Deposits from tenants
Finance lease liabilities
Taxes payable and provisions
Total Financial liabilities
Total net liabilities
31 December 2015
Financial assets
Cash at Bank
Prepayments and other receivables
Available for sale investments
Long-term Receivables and
prepayments
Total Financial assets
Financial liabilities
Borrowings
Trade and other payables
Deposits from tenants
Finance lease liabilities
Redeemable preference shares
Taxes payable and provisions
Total Financial liabilities
Total net liabilities
40.7 Net Current Liabilities
Carrying
amount
€
Total
Contractual
Cash Flows
€
1.701.007
2.778.361
1.701.007
2.778.361
351.181
4.830.549
351.181
4.830.549
Less than
one year
From one to
two years
More than two
years
€
1.701.007
2.778.361
-
4.479.368
€
-
-
-
-
€
-
-
351.181
351.181
48.475.454
7.489.293
488.347
11.382.788
1.889.184
69.725.066
64.894.517
48.475.454
7.489.293
488.347
16.538.973
1.889.184
74.881.251
70.050.702
31.580.299
7.038.170
271.019
961.744
1.889.184
41.740.416
37.261.048
1.597.840
-
-
930.592
-
2.528.432
2.528.432
15.297.315
451.123
217.328
14.646.637
-
30.612.403
30.261.222
Less than
one year
From one to
two years
More than two
years
Carrying
amount
€
Total
Contractual
Cash Flows
€
895.422
4.795.223
2.783.535
352.916
895.422
4.795.223
2.783.535
352.916
€
895.422
4.795.223
2.783.535
-
8.827.096
8.827.096
8.474.180
53.680.779
56.037.869
24.198.982
7.716.924
756.454
11.465.722
6.430.536
1.546.450
81.596.865
72.769.769
7.716.924
756.454
16.741.482
6.430.536
1.546.450
89.229.715
80.402.619
3.044.036
132.684
775.146
6.430.536
1.546.450
36.127.834
27.653.654
€
-
-
-
-
-
-
14.649.577
-
-
840.158
-
-
15.489.735
15.489.735
€
-
-
-
352.916
352.916
-
17.189.310
4.672.888
623.770
15.126.178
-
-
37.612.146
37.259.230
The current liabilities amounting to €41.080.081 exceed current assets amounting to €9.507.622 by €31.572.459. This difference is
primarily a result of:
a)
b)
the EBRD Terminal Brovary debt, amounting to €11.580.922 which is presented as a current liability due to the breach of
certain covenants should be viewed as under transfer upon completion of the sale of Terminal Brovary (Note 41a).
the bank borrowings related to the residential portfolio €6.369.466 that are repayable by ongoing sales proceeds, which
according to the IFRS appear to be repayable within the next 12 months. Most of these loans have been or are under the
process to be extended for 2-5 years.
an amount of €6.594.396, registered as the total liability to the Bank of Cyprus, currently under final settlement
c)
d) an aggregate amount of €3.624.319, registered as the total liability of the Group towards Alpha Bank in respect to the Boyana
project which was under restructuring that has been signed in March 2017 (Note 41g)
e) an aggregate amount of €2.661.592 registered as the total liability of the Group towards the Bank of Piraeus in respect to
the Green Lake project which is under restructuring.
Based on the above, current liabilities are higher than current assets by €741.764.
CONSOLIDATED FINANCIAL STATEMENTS 2016|90
41. Events after the end of the reporting period
a. Sale of Terminal Brovary
In late January 2017 the Group completed the sale transaction of the Terminal Brovary Logistics Park to Temania Enterprises Ltd
(company related to Rozetka Group). The transaction was concluded at a Gross Asset Value of over USD 16 (or ~€15) million (before
the deduction of the outstanding EBRD loan, which was transferred to the buyer, while the SPDI guarantee to EBRD loan was cancelled.
The transaction generated a profit for SPDI of ~€2,7 million, already included in the 2016 financial statements by way of presenting
the property at a fair value equal to the transaction value, as well as a cash inflow of more than ~€3million. As part of the transaction
the Group also sold SL SECURE Logisitcs Ltd, thus transferring its loan towards Terminal Brovary to the buyer (Note 37.3).
b. Amendment of the Sale & Leaseback of Romanian Logistics Park
In late February 2017 the Group agreed to an amended Sale and Leaseback agreement (“SLB”) with the Bank of Piraeus Romania
(“BoP”) regarding the Group’s Innovations Logistics Park in Bucharest. The agreement which followed SPDI’s agreement with the
previous anchor tenant, Nestle Romania, of the Innovations Logistics Park for an early termination of their tenancy agreement for an
agreed fee of €1,39 million payable to SPDI, stipulated the allocation of the termination fee.
c. Appointment of Joint Broker
In March 2017 the Group appointed Beaufort Securities Ltd as the Group’s Joint Broker.
d. Directors Buying shares
The directors proceeded in March 2017 with the acquisition of 438.939 ordinary shares of the Company.
e. New lease Agreement for Innovations Logistics Park
In the middle of April 2017 the Group signed a lease agreement with Aquila SRL a large Romanian logistics operator, for 5.740 sqm of
ambient space in the Group’s Innovations Logistics Park in Bucharest, Romania. Under the terms of the Agreement, the annual rent
payable by Aquila to the Group is ~€300.000.
f.
Issuance of shares
In the middle of May 2017 the Company announced the issue of new ordinary shares to the Non-Executive Directors of the Company
who were in office in 2015 in lieu of fees accrued in 2015. The new shares were issued at GBP 0,35 per share, which represented a
100% premium to the closing share price on 12 May 2017. The Company has also issued a number of new ordinary shares to an adviser
in lieu of fees for services offered in 2017. As a result a total of 626.133 new ordinary shares have been issued, of which Non-Executive
Directors received 519.474 shares and third party advisers and former directors received 106.659 shares.
g. Debt restructuring
SecRom Real Estate Srl (Doamna Ghica Project) has signed a restructuring of its loan (€809.919) with Alpha Bank Romania, extending
its maturity to 2020. All other terms remain substantially the same.
Boyana Residence ood has signed a restructuring of its loan (€2.680.492) with Alpha Bank SA, extending its maturity to 2019. All other
terms remain substantially the same.
Sertland Properties Limited (Boyana land) has signed a restructuring of its loan (€693.514) with Alpha Bank SA extending its maturity
to 2019. All other terms remain substantially the same.
CONSOLIDATED FINANCIAL STATEMENTS 2016|91