TIDMAREO
RNS Number : 0452X
Argo Real Estate Opportunities Fd
08 February 2012
AIM code: AREO
08.02.11
Argo Real Estate Opportunities Fund Limited
(the "Company"/ "AREOF" / "Group")
Final Results for the year ended 30 September 2011
Argo Real Estate Opportunities Fund Limited, the closed-ended
investment company formed for the purpose of investing primarily in
the commercial property markets of Central and Eastern Europe,
today announces its results for the year ended 30 September
2011.
Key Points:
-- Audited NAV per share of EUR0.1081(2) (2010: EUR0.0802).
-- Adjusted NAV per share(1) of EUR0.1241(2) (2010:
EUR0.0875).
-- Profits in the year of EUR31.2m (30 September 2010 losses
EUR10.2m) including the gain arising from the appreciation of the
investment property values of EUR16.8m.
-- The acquisition in September 2011 of a further two shopping
parks in Romania, by way of the issue of a further 298 million
ordinary shares in full consideration, made the Company the largest
listed owner and operator of shopping parks in the country.
-- The Company is currently finalising a major asset management
initiative on its Sibiu Shopping City retail park to attract
further leading international tenants and strengthen its income
deriving from this asset.
-- Banking terms have been successfully renegotiated during the
year with several of the asset lending banks whereby amortization
and covenant holidays have been agreed to assist the Company while
income and asset values recover in the region.
-- Negotiations aimed at the restructuring of the Proton Bank
loan facility have been initiated.
Notes:
1. Adjusted NAV is calculated before any deferred tax liability
2. Based on ordinary shares in issue, of which an additional 298
million were issued in the period
Further information:
Argo Real Estate Opportunities Fund
Limited
David Clark, Chairman
Nominated Adviser and Broker +44 (0)1481 735 540
finnCap Limited
Henrik Persson
Matthew Robinson
Joint Broker
Shore Capital
Edward Mansfield
Financial Public Relations
Bishopsgate Communications +44 (0) 207 220 0571
Deepali Schneider / Natalie Quinn
/ +44 (0) 207 408 4090
Lynne Goulding
argo@bishopsgatecommunications.com +44 (0) 207 562 3350
ARGO REAL ESTATE OPPORTUITIES FUND LIMITED - 30 September
2011
CHAIRMAN'S STATEMENT
The Company and its objective
Argo Real Estate Opportunities Fund Limited (the "Company"/
"AREOF" / "Group") was formed and listed on AIM on 16 August 2006
for the purpose of investing primarily in the commercial property
markets of Central and Eastern Europe.
The Group's primary markets of operation are Romania, Ukraine
and Moldova. Its investment objective is to provide investors with
a high level of risk adjusted total returns derived principally
from rental income and capital appreciation from the acquisition,
development and active asset management of its retail and mixed-use
property investments.
Financial performance
This report sets out the results of AREOF for the year ended 30
September 2011 along with the ongoing development and active asset
management of its retail and mixed-use commercial property
investments.
The audited NAV per share and adjusted NAV per share at 30
September 2011 is EUR0.1081 (2010: EUR0.0802) and EUR0.1241 (2010:
EUR0.0875), reflecting a increase of EUR0.0279 and EUR0.0366
respectively in the year; this increase arises principally from an
improvement in the property values notably at Rivera in Ukraine and
to a lesser extent at the Company's four sites in Romania.
The financial statements for the year to 30 September 2011 show
a profit for the year attributable to equity shareholders of
EUR27.4m which includes gains on investment properties of EUR16.8m
and negative goodwill of EUR14.8m arising on acquisitions in the
year taken to the income statement.
The Group's deferred tax liability calculation of EUR12.3m has
been prepared on a full provision basis. We consider it unlikely
that this liability will crystallise, since if Group companies
rather than properties are sold, previously provided deferred tax
provisions may not result in actual liabilities.
Dividend
The Board has resolved that the Company will not declare a
dividend but will instead retain the funds within the Group for
further reinvestment.
Operating activities
The Group has operated over the last year in a particularly
challenging and difficult environment in which regional and global
property markets have remained weak despite some initial signs of
recovery and the economic and financing background has been most
uncertain.
Tenants have continued to seek rent concessions, albeit at a
slightly reduced level from the previous year, which while provided
on a time limited basis, in practice reflect the lower level of
sustainable market rents in the current economic climate. The lower
level of rental incomes continues to impact the Group's cash flow
which, while being proactively managed, continues to put pressure
on the Group's loan covenants and in the instances where covenant
breaches have occurred the effects of the trading environment
difficulties have been fully recognised by the relevant banks who
continue to fully support the Group's activities by providing time
limited amortisation and covenant holidays.
Despite this difficult trading environment the Company's first
investment in the 47,000 sqm Sibiu Shopping City, Romania along
with its subsequent 30,000 sqm Phase 3 extension continues to trade
strongly.
The first of a two part asset improvement project in Sibiu
Shopping Centre in Romania has been completed whereby a new gallery
linking the Real and Carrefour hypermarkets together with the
relocation of several tenants making way for the likes of C&A,
Domo and other strong covenanted retailers to establish their
presence in the fashion mall. The second part of the project to
construct a new external entrance lobby for the mall is being
completed in the first quarter of 2012.
The Company's Romanian investment property, being the 50,000 sqm
development undertaken on the Suceava Shopping City, has been
similarly impacted by the difficult trading environment along with
strong competition within the city. However, tenancy occupancy
levels remain at 98%, which again is a strong result in this
market.
The Company's first Ukrainian investment property, the 83,000
sqm Riviera Shopping City, Odessa, completed in phases throughout
2009/10 and includes a 14,000 sqm Obi DIY store, key anchor tenants
including Real Hypermarket, Inditex fashion brands (Zara,
Stradivarius, Bershka, Pull & Bear) as well as offering a
12-lane City Bowling leisure complex and a nine-screen IMAX
multiplex cinema. Since opening the centre has won several property
awards and has become an attractive and important regional retail
destination, which is reflected in the current near 100% tenant
occupancy level.
The Group's previously acquired land assets in Nikolaev, Ukraine
and also in and around Chisinau, Moldova, continue to be land
banked as development under current economic conditions is not
financially viable. Nonetheless, opportunities continue to be
sought and appraised in respect of these assets in order to
maximize shareholder value.
Comprehensive details of all the projects entered into by the
Company are further explained in the Investment Manager's report on
page 8.
Acquisitions
In September 2011, the Group completed the purchase of Huincas
Properties Limited, which controls the ERA Shopping Park, Oradea,
and Omelit Limited, which controls the ERA Shopping Park Iasi.
Following the purchase of these assets in Romania, the Company
became the largest listed owner and operator of retail parks in the
country. The Board believes the enhanced scale of the Company will
make it more marketable to international investors over the
long-term.
The ERA Shopping Park Oradea has a gross lettable area of 65,700
sqm and is anchored by well known tenants such as Carrefour,
Bricostore and Mobexpert. In addition, to the existing retail park,
a 20,000 sqm shopping mall is under construction and is expected to
be completed sometime in the first quarter of 2012.
The ERA Shopping Park, Iasi has a gross lettable area of 49,800
sqm and is anchored by prominent international tenants such as
Praktiker, Decathlon and Carrefour. A planned expansion of the
centre will take its size to some 78,000 sqm and is scheduled for
completion in phases by the end of 2012 and the spring of 2013.
Financing Facilities
The Group has successfully renegotiated and agreed terms with
its existing banks on several of its loans.
Alpha Bank has agreed a time limited amortisation holiday and
covenant waiver through to April 2012 in order to assist the
reduced level of trading income cash flow from Suceava Shopping
City to meet its loan obligations. 6
KBC has agreed a time limited amortisation holiday throughout
2011 and covenant waivers for a maximum period up to December 2012.
This has provided development cash flow to allow the Group to
undertake targeted asset management initiatives that would improve
the future tenant cash flow at Sibiu Shopping City.
Marfin Bank has as a result of the strong cashflow being
generated by the Riviera Shopping City, Odessa asset agreed to a
further one year amortisation holiday when the existing
amortisation holiday, agreed at the time of completion of the
centre, expired during the year.
Proton Bank agreed to extend its loan facility that was
originally to mature in December 2010 for a further 2 year period
and provided a further bridge facility to cover the interest while
the renegotiated terms were being documented.
Restructured terms with the syndicated banks of EFG, Bank of
Greece, Bank of Cyprus, Banca Romaneasca have been agreed for both
Era Shopping Parks in Oradea and Iasi that will provide the funding
to complete the shopping malls of both centres.
In December 2011, the Board, on the advice of the Manager, took
the decision to withhold the payment of interest on the Group's EUR
25m debt facility with Proton Bank. The step was taken for
strategic reasons and aims to enable a restructuring of the Proton
facility. The Company is currently in negotiations with Proton Bank
and is confident that it can complete a consensual restructuring of
its obligations to the bank.
Further information on the status of the Company's various loans
can be found in note 14 of the consolidated financial
statements.
Accounting practices
The Group has continued to apply International Financial
Reporting Standards as endorsed for use in the European Union
("IFRS") in the following consolidated financial statements. The
Group's reporting currency is the euro.
Shareholder communication
The Manager aims to keep shareholders and other interested
parties informed of developments through its website,
www.argocapitalproperty.com, which is constantly upgraded for
enhanced communication.
Outlook
The current turmoil in the Eurozone, which has caused ongoing
uncertainty and associated volitility in the financial markets of
Greece, Ireland, Portugal, Spain and Italy, has inevitably impacted
the Eastern European property market in which the Group operates.
The hoped for improvement in the availability of debt finance did
not come to pass in 2011. As a consequence, few large property
transactions took place in the region and prices remained depressed
although above their 2009 lows.
Nevertheless, the economies of both Romania and Ukraine, the
Company's principal markets, experienced a solid recovery in
growth. This is forecast to accelerate in 2012 helping both
economies to outperform their western European counterparts and
could potentially lead to a modest advance in property prices.
The Group's focus in the immediate future remains the
improvement of the quality of its cash flows by way of selective
and carefully targeted asset management initiatives. Such measures
aim to reinforce the dominance of the Company's retail parks within
the regions in which they operate and leave them well positioned to
benefit from improvements in asset prices.
The economic conditions of the markets in which the Company
operates are constantly reviewed by Management with the aim of
mitigating, as far as is possible, the effects of any negative
trends on the Group and maximizing shareholder value. However,
risks remain and these are fully explained in the Investment
Manager's report on page 8.
Robert Provine left the Investment Manager in September 2011 to
rejoin a former employer and and the important contribution he made
towards the Group's development since it was formed is fully
acknowledged by the Board. He has been replaced by Dennis Selinas
who brings with him extensive experience of investing in Eastern
Europe's property sector.
Finally, I would like to take the opportunity to express my
gratitude for the
ongoing support the Company has received from its shareholders
during what has been a challenging period.
David Clark
Chairman
7 February 2012
ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED - 30 September
2011
INVESTMENT MANAGER'S REPORT
The Investment Manager implements a focused strategy on behalf
of AREOF to create institutional quality retail property assets in
leading primary and secondary cities in Central and Eastern Europe
with a particular focus on Romania, Ukraine and Moldova.
Since its inception in August 2006, the Group has committed and
invested all of its original EUR96m equity capital (net of listing
costs) to projects, including the acquisition and subsequent
extension of the 80,000 sqm Carrefour, Real and Baumaxx anchored
European Retail Park Sibiu, the development of the 50,000 sqm
Carrefour and Baumaxx anchored Suceava Shopping City and the
construction of the 83,000 sqm Real and Obi anchored Riviera
Shopping City in Odessa, Ukraine. In September 2011, the Group
completed the purchase of the ERA Shopping Park Oradea and the ERA
Shopping Park Iasi. Following the purchase of these assets in
Romania, the Company became the largest listed owner and operator
of retail parks in the country.
During the 12 month period to 30 September 2011, the economic
environment in which the Group operates continued to stabilise
enjoying a modest improvement on that seen in 2010. Ukraine proved
to be a more promising market than Romania during the period due to
the scarcer supply of modern shopping centres in Ukraine.
Nevertheless, we anticipate Romania to enjoy a pick-up in trade in
2012 as the economy's return to growth feeds through to the retail
sector.
Rental concessions to certain tenants were necessary once again
in 2011 and these inevitably had a negative impact on the Company's
cash flow. Such concessions are in the main contractually
time-limited and are described in greater detail in the Transaction
Overviews section. As stated in the previous report, it remains the
view of the Investment Manager that the only viable way to increase
income from the current levels, and in some cases to protect
existing rental income, is the implementation of targeted asset
management initiatives. Such initiatives are always carefully
budgeted for so as to maximise the financial benefit to the Company
while the extra square meterage is pre-leased where possible to
minimise the risk. As described in the Group's Interim Report, the
first major initiative was commenced in February 2011 in Sibiu,
with the connection of two phases of the project, creation of three
new large units to be occupied by strong international retailers
and the redesign and reconfiguration of the shopping centre
entrance. A further asset management initiative has been identified
in Odessa where support from its lending bank is allowing the
Investment Manager to pursue this income enhancing development.
In Eastern Europe, Poland and the Czech Republic have recently
enjoyed the strongest recovery in property prices. Risk aversion
and a lack of debt financing continued to weigh on prices in
Romania and the Ukraine. Nevertheless, opportunistic investors were
evident during the course of the year in both markets which bodes
well for the coming years. As property prices in countries like
Poland and the Czech Republic catch up with those in western
Europe, it is the Investment Manager's belief that institutional
investors will increasingly look to "next frontier" countries in
South Eastern Europe like Romania and Ukraine in search of better
returns. Following September's purchase of the malls in the cities
of Iasi and Oradea, the Company is the largest stock exchange
listed operator of shopping centres in Romania and as such is well
placed to benefit from such a trend.
During 2011 the Company successfully negotiated terms with its
asset-lenders in Sibiu, Suceava and Odessa which provide covenant
and cash flow relief for a maximum period up to December 2012. This
provides additional time for the assets to recover and enable
various cash-generative asset management initiatives to be carried
out and completed. In addition, banking arrangements of the newly
acquired ERA Shopping Park Oradea and ERA Shopping Park Iasi were
successfully renegotiated with their lending banks during the year
allowing the balance of their loan facilities to be drawn in order
to allow completion of the planned development of these
projects.
In December 2011, the Manager advised the Company not to make
payment of the interest that fell due to Proton Bank under its
EUR25m debt facility as a strategic move to facilitate
restructuring discussions of the facility in order to improve the
immediate cash flow position of the Group. Discussions with Proton
Bank are ongoing and the Manager is confident that a consensual
outcome will be achieved leading to a restructuring of this
debt.
The headline reported gross rental income in the year shows a
small reduction year on year from EUR21.0m in 2010 to EUR19.2m in
the 2011 reflecting adjustments required under IFRS whereby the
effect of tenant incentives that have been granted in the year are
spread evenly over the remaining term of the tenant's lease.
Without this reporting adjustment actual rental income in the year
grew from EUR15.8m in 2010 to EUR18.9m in 2011, the increase
arising largely from the result of a full year's trading and
stabilisation of rental income at the Riviera Shopping City,
Odessa.
The year has seen an improvement in the value of the Group's
assets, resulting in a NAV attributable to equity holders as of 30
September 2011 of EUR65.7m. The Group has obtained third party
valuations from independent valuers on the portfolio of its
property assets as at 30 September 2011, the results of which are
reflected in the NAV, and shown in the consolidated financial
statements.
The primary drivers of the NAV during the year were:
i) the general stabilisation and modest improvement of the
Company's markets of operation, and
ii) the change in fair/market value of the Company's property
assets as follows:
- Sibiu Shopping City: an increase in value of EUR4.2m,
- Sibiu Phase 3: the write down in value of EUR1.1m,
- Suceava Shopping City: an increase of EUR5.6m of which the
Group's share amounted to EUR2.8m,
- Riviera Shopping City, Odessa: an increase in value of
EUR8.4m,
- Moldova related assets: an increase in value of EUR1.2m,
- Nikolaev asset: the write down in value of EUR0.3m,
- Era Shopping Park, Iasi: a write down of EUR0.2m, and
- Era Shopping Park, Oradea: a write down of EUR0.9m.
iii) the effects of negative goodwill of EUR14.8m arising on the
acquisitions during the year of the companies owning the Era
Shopping Park, Oradea and Era Shopping Park, Iasi, whereby this
negative goodwill was taken to the income statement in the
year.
In the current commercial environment, the Investment Manager
continues to focus on the proactive asset management of the
existing properties, the completion of the development of the newly
acquired shopping centre assets and the management of existing cash
flow and implementing targeted asset management initiatives, in
co-operation with our lending banks.
Under current market conditions the following risks continue to
exist for the Company:
i) While a successful outcome to the discussions of the default
of interest payment to Proton Bank is expected, should this not
occur the Bank has the right by way of a share pledge over the
Company's immediate subsidiary to acquire the asset owning
subsidiary companies;
ii) Although certain of the project subsidiary companies remain
cash flow positive, principally as a result of lender concessions
by way of amortisation holidays, the restrictive use of any surplus
funds under the terms and conditions of these banking arrangements,
means that the negative situation of the Company continues. Further
equity or other infusion of cash will be required in 2012;
iii) continued challenges in the local retail environments
causing existing tenants to have trading difficulties which will
lead once again to requests for reductions in rent which will
reduce the level of the Group's income, albeit that this is
expected to be at a lower level than the prior year.
Despite the challenging environment the Company continues to
consider and pursue discrete asset and strategic disposal
discussions where there are any credible indications of
interest.
Transaction Overviews
European Retail Park Sibiu, Romania
AREOF's initial investment in European Retail Park Sibiu,
subsequently renamed Sibiu Shopping City, was made in November
2006, and the Company continues to actively manage this asset.
The retail park was expanded both in 2007 and 2008, with a
number of extensions and reconfigurations (known as "Phases 2 and
3").
Specifically, since opening, Sibiu Shopping City has been
extended by a total of 30,000 sqm and further fortified its
position as the dominant and most successful shopping centre in
central Romania.
The Company is currently completing on the implementation of an
extensive asset management initiative for the property, whereby the
stand alone Phase 1 & 3 are now connected. As part of the
redesign under this initiative tenant leases have been signed with
leading international operators such as C&A, Domo/Toyplex as
well as current discussions with the likes of H&M. The
re-design of the mall entrance is currently under development and
will be completed in the next couple of months. These initiatives
are being successfully completed by way of partial funding from the
KBC-led senior lending syndicate along with a EUR1.3m euro loan
from the Argo Group.
Current financing arrangements include EUR66.5m of debt from KBC
Bank, fully swapped until loan maturity in November 2013 along with
a syndicated, five year investment loan of EUR27.8m from KBC,
Investkredit and Marfin/Laiki Bank.
As with the prior year 2011 saw a constrained market environment
resulting in the need to concede an extension of tenant lease
discounts, which are, if annualised, some EUR1.4m in 2011 (for
Phase 1, 2 & 3). Current tenant occupancy is at some 93% and
would be higher but for the impact while the asset management
initiative is completed. We expect that 2012 will be a challenging
environment for trading activity but expect that the signs of
improvement will strengthen as the year progresses.
The fair/market value of the property as at 30 September 2011
was EUR82.1m on Phase 1, against a 30 September 2010 valuation of
EUR76.5m; and a valuation of EUR33.7m on Phase 3, against a
comparative September 2010 valuation of EUR34.5m.
Suceava Shopping City, Suceava, Romania
The 50,000 sqm centre, a leading shopping centre in the city,
remains 98% let despite the significant amount of retail
competition in the City. As in prior years the depressed market
conditions have required the Investment Manager to maintain the
majority of temporary lease discounts for the shopping centre in
order to maintain a high tenant occupancy level. 11
Rental discounts for 2011 were approximately EUR1m and it is
anticipated that this will not materially increase during 2012 as
the local market remains particularly competitive with five
competing centres in the immediate vicinity, albeit that this
centre remains a principal retail site in the city. However, the
overall situation is very fluid with approximately a third of the
tenant leases up for renewal over the coming 18 month period.
The current plan remains: to continue stabilising the centre
with the DTZ Centre Management team and begin to explore several
asset management initiatives to build upon the centre's notable
successes such as the opening of a 1,000 sqm fashion unit for New
Yorker.
The project has in place a EUR50m three year facility with Alpha
Bank of Greece. The Company entered into an agreement with Alpha
Bank in January 2011 to restructure the facility which waives its
loan covenants and provides an amortization holiday up until April
2012.
The 30 September 2011 fair/market value was EUR65.2m against a
30 September 2010 valuation of EUR59.3m.
Era Shopping Park, Oradea, Romania
The recently acquired Era Shopping Park, Oradea comprises some
65,000 sqm of retail park which opened Phase 1 of its development
in March 2009 with leading anchor tenants Carrefour, Altex, and
Bricostore. Phase 1 of the project has now reached almost full
occupancy and there is ever improving traffic and sales for the key
anchor stores. Average customer traffic is 12% higher for 2011,
compared to the previous year. Carrefour have successfully run a
number of marketing initiatives that produced improved sales making
this store one of their best for year on year sales growth.
With the opening of Phase 1 coinciding with the financial crisis
the gallery opened with a low level of occupancy and the syndicated
lending banks of EFG, Banca Romanesca, Bancpost and Bank of Cyprus
prevented drawing of the remaining EUR10m of the EUR62.5m
construction finance facility. Lengthy negotiations to reopen the
project finance were carried out in 2010 and into 2011 and these
were successfully concluded and documented in September 2011 since
when the remaining proportion of the facility has been drawn to
complete the 20,000 sqm shopping mall.
The 8,000 sqm Mobexpert unit was handed over for tenant fit out
in September 2011 and is expected to open in spring 2012. Phase 2
of the Mall totalling approximately 12,000 sqm was completed in
early December with Phase 3 of approximately 4,500 sqm to be
delivered in accordance with specific tenant requirements.
While the leasing market in Oradea remains challenging with
competition from two existing projects, tenants are requiring
greater concessions from landlords, resulting in more protracted
negotiation periods. Despite the increased competition, Phase 2 of
the Mall has secured additional anchor tenants including such
retailers as Fox (fashion), Flanco (electrical) and Elvila
(furniture). Despite difficult market conditions there has been an
increase of tenant interest since completion with the leasing level
of Phase 2 exceeding 50% and a number of units are under active
negotiations.
The fair/market value of the property was EUR80.3m as at 30
September 2011. 12
Era Shopping Park, Iasi, Romania
The recently acquired Era Shopping Park, Iasi comprises some
49,000 sqm of retail park of which Phase 1 of some 33,000 sqm
comprising Carrefour, Praktiker and the Gallery was completed in
September 2008. The Gallery was extended in September 2009 with the
addition of a 8,000 sqm Mobexpert furniture store and in May 2010
Decathlon purchased a 2.4 hectare site for the construction of
their 3,000 sqm store.
The next phase of the project is the development of the 28,000
sqm Mall which will link into the existing Gallery. The project
also comprises a further 8 hectares of land available for sale to
owner occupiers or the development of big box units. In addition,
there is a further 15 hectares of adjacent greenfield land acquired
as part of the Group's acquisition, for longer term
development.
A EUR77m development facility provided by EFG, Banca Romanesca,
Bancpost and Bank of Cyprus is in place for the construction
finance of which EUR60m has been drawn to date. The remaining
proportion of this facility to finance the Mall construction has
been subject to an ongoing restructuring, however, terms have now
been agreed and the syndicate of lenders are in the process of
obtaining credit committee approvals; it is expected to have all
approvals in place shortly and to have the facility reopened by
March 2012. The Mall has been fully designed and tenders have been
received from a number of contractors with costs in line with the
agreed budget. The current construction program envisages delivery
of Phase 1, 15,000 sqm by the end of 2012 and Phase 2 of 13,000 sqm
by March 2013.
Tenants have continued to request rental concessions throughout
2011, which has impacted project cash flows and rental discounts
are likely to continue throughout 2012, although on a reducing
basis and it is expected that a large part will be eliminated once
further phases of the Mall are open.
Customer traffic has again increased by approximately 13% in
2011 largely due to the successful marketing campaigns run by the
Manager. The three main anchors of Carrefour, Altex and Mobexpert
are pleased with their 2011 turnover, however not all the gallery
tenants have witnessed a corresponding increase in sales due either
to their specific Mall location or their own operational matters. A
number of asset management initiatives are currently being pursued
to improve circulation and strengthen tenant mix by relocating a
number of tenants within the Gallery. Occupancy for the Park
remains at 96%.
The fair/market value of the property was EUR82.1m as at 30
September 2011.
Riviera Shopping City, Odessa, Ukraine
The Company successfully opened Phase 2 of the 83,000 sqm
Riviera Shopping City in Odessa on 16 October 2009 featuring a
12,500 sqm Real Hypermarket, Inditex fashion brands Zara,
Stradivarius, Bershka and Pull & Bear along with many others.
Attendance and retailer sales have exceeded estimates since opening
providing comfort to the Company that this location is and will
continue to develop as an important and sustainable regional retail
destination.
Phase 1 of the centre opened in February 2009 with the launch of
the 14,000 sqm Obi DIY Store and the second and final phase
completed in 2010 with the successful opening of the City Bowling
and Leisure Complex along with the Imax Multiplex Cinema.
The leasing situation has materially improved and the
attractiveness of the centre now that it has become fully
established in the local area has led to strong demand amongst
retailers for space in the centre which has resulted in the
occupancy level being near 100%. 13
Following approval by the Board in September 2011 an asset
management initiative is currently underway to create an attractive
fashion gallery in space previous occupied by an underperforming
tenant. This initiative is expected to be completed in May 2012 and
when fully let is anticipated to add a further increase to net
revenue of approximately EUR0.5m.
The Group has fully drawn the EUR68m Marfin construction
facility, which in accordance with the original agreement,
converted into a five year investment facility on 17 December 2009.
Under the agreed terms of the investment facility there was an
eighteen month amortisation holiday while the centre stabilised and
it has subsequently been agreed with the Bank that this
amortisation holiday be extended for a further twelve month period
through to June 2012. Given the steadily improving performance of
the centre as initial tenant incentives have expired and rental
incomes stabilise and are added to through management initiatives,
the Company expects be able to fully cover both interest and
amortisation after June 2012.
The fair/market value of the property of EUR88.5m as at 30
September 2011 compares to the EUR79.2m as at 30 September
2010.
Nikolaev, Ukraine, Freehold Development Site
The 20 hectare freehold plot is located about 5 km's outside of
the city centre on the primary motorway from Odessa and near a
future intersection with the planned Nikolaev ring road.
The Company currently has no immediate development plans for
this site but continually appraises development opportunities as
the market begins to strengthen and it is felt that this site could
accommodate a logistic warehouse park site servicing this important
port city or an out of town factory outlet retail project.
The freehold land is in ownership of the Company with a
fair/market value at 30 September 2011 of EUR0.76m against the
comparative 30 September 10 valuation of EUR1.0m.
Moldova Retail and Mixed Use Development Sites, Chisinau,
Republic of Moldova
In conjunction with a local partner, the Group is completing the
assembly of a retail and mixed-use development site in the historic
city centre of Chisinau, the Republic of Moldova's capital.
The Group also owns two further potential out-of-town retail and
mixed-use sites on prominent motorway locations on the periphery of
Chisinau.
Although Moldova did successfully carry out parliamentary
elections in November 2010, the new government has yet to appoint
all of the key city and municipal officials which are critical to
the planning and permitting process relating to land and buildings.
The Investment Manager has entered into a commercial relationship
with a local partner for the exploitation of the Company's land
assets with the goal of realising equity proceeds from the country
over the next 12 months.
The Moldovan asset fair/market values as at 30 September 2011,
totalled EUR4.4m against their 30 September 2010 fair/market values
of EUR2.4m.
Proton Corporate Loan
The Company and Proton Bank contracted a two year extension of
the EUR25m loan facility, until December 2012, at terms similar to
those previously in place. The completed loan documentation for
this facility extended beyond the original 20 December maturity
date as a result of which Proton Bank agreed to provide a
short-term extension facility of EUR0.9m. 14
As referred to earlier in this report a strategic decision was
taken to refrain from paying the interest due to Proton Bank in
December 2011 in order to pursue restructuring discussions. While
non-payment of this interest created an event of default under the
loan terms it is believed by the Manager that the conclusion of
ongoing discussions will result in a consensual resolution to this
matter which the Manager believes will be beneficial to Group
cashflows.
Outlook
The Manager does not expect any significant improvement in
property prices in the region over the next 12 months.
Nevertheless, the two principal countries in which the Group
operates - Romania and Ukraine - are expected to build on the solid
growth they achieved in 2011 and continue to outperform their
western European counterparts. This may lead to a modest increase
in asset prices. As such, we believe that the current asset
valuations underpinning the Group's NAV are well supported by the
economic fundamentals of Romania and Ukraine.
As was the case last year, the primary challenge for the Company
remains operating with reduced cash flows caused by the need for
the Group to grant rental concessions to select tenants. Lower cash
flows continue to put pressure on a number of the Group's debt
covenants.
The Manager believes that the enhancement of the Group's size
following the acquisition of the ERA Shopping Park, Oradea and ERA
Shopping Park, Iasi will make it a significantly more attractive
proposition to international institutional investors looking for
exposure to the region. Since the acquisition the Company has held
talks with a number of such investors with a view to them injecting
fresh capital into the Company and strengthening its balance sheet.
Furthermore, the Manager is monitoring a number of new acquisition
opportunities in its target region. As in the case of the purchase
of the centres in Iasi and Oradea, acquisitions are likely to be
financed by the use of the Company's shares as currency.
Since the middle of 2011 the Group has received strong
indicative interest for its Riviera Shopping City centre in Odessa.
However, the Manager has taken the view that due to current market
conditions offers received significantly undervalue the asset which
is near fully let and performing above expectations.
The next 12 months will see the Manager focus on initiatives to
maximize cash flow from its existing assets as well as on
opportunities to increase the size of the Company's portfolio and
strengthen its balance sheet.
Dennis Selinas Graeme Daniel
Fund Manager Finance Director
On behalf of Argo Capital Management Property Limited
7 February 2012
ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED - 30 September
2011
INDEPENDENT AUDITOR'S REPORT
Independent auditor's report to the members of Argo Real Estate
Opportunities Fund Limited
We have audited the consolidated financial statements of Argo
Real Estate Opportunities Fund Limited for the year ended 30
September 2011 which comprise the consolidated statement of
comprehensive income, consolidated statement of financial position,
the consolidated statement of changes in equity, the consolidated
cash flow statement and the related notes 1 to 27. The financial
reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
This report is made solely to the company's members, as a body,
in accordance with Section 262 of The Companies (Guernsey) Law,
2008. Our audit work is undertaken so that we might state to the
group's members those matters we are required to state to them in
an auditors' report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the group and the group's members as a body, for
our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of the Directors and Auditor
As explained more fully in the Directors' Responsibilities
Statement within the Directors' Report, the Directors are
responsible for the preparation of the consolidated financial
statements and for being satisfied that they give a true and fair
view.
Our responsibility is to audit and express an opinion on the
consolidated financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
(APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the group's circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we read all
the financial and non-financial information in the Director's
Report to identify material inconsistencies with the audited
financial statements. If we become aware of any apparent
misstatements or inconsistencies we consider the implications for
our report.
Opinion on the financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the group's affairs
as at 30 September 2011 and of group's surplus for the year then
ended;
-- have been properly prepared in accordance with IFRSs as adopted by the European Union; and
-- have been properly prepared in accordance with the
requirements of the Companies (Guernsey) Law, 2008.
Emphasis of matter - going concern
In forming our opinion on the consolidated financial statements,
which are not qualified, we have considered the adequacy of the
disclosure made in note 2a to the consolidated financial statements
concerning the Group's ability to continue as a going concern.
Note 2a to the financial statements explains that the Group
requires additional working capital for the foreseeable future and
that this is being and continues to be provided by the Investment
Manager or funds advanced by a fellow subsidiary of the Investment
Manager's parent company. The Directors continue to review the
various options available to the Group including asset sales,
additional bank borrowings and a further issue of capital. Whilst
the Directors are confident that sufficient working capital finance
will be available no plans have yet been finalised.
As disclosed in notes 2a and 14 to the consolidated financial
statements, the Group has borrowing arrangements which are subject
to banking covenants, some of which are currently in breach and on
which discussions are ongoing. The risk of further loan covenant
breaches in the foreseeable future when previously agreed covenant
holidays expire remains a possibility given the current trading
environment and the effects it is having on rental income levels
and could have on future property values. As such the ongoing
support of the lending banks is critical to the ongoing activity of
the Group and its future development.
The above matters indicate the existence of material
uncertainties which may cast significant doubt about the Group's
ability to continue as a going concern. The financial statements do
not include the adjustments that would result if the Group was
unable to continue as a going concern.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion:
-- proper accounting records have not been kept by the company; or
-- the financial statements are not in agreement with the accounting records; or
-- we have failed to obtain all the information and
explanations, which, to the best of our knowledge and belief, are
necessary for the purposes of our audit.
BDO Limited
Chartered Accountants
Place du Pre
Rue du Pre
St Peter Port
Guernsey
7 February 2012
ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2011
Note Year ended Year ended
30 September 30 September
2011 2010
--------------------------------------- ----- -------------- --------------
EUR'000 EUR'000
--------------------------------------- ----- -------------- --------------
Continuing operations
--------------------------------------- ----- -------------- --------------
Gross rental income 19,160 20,970
--------------------------------------- ----- -------------- --------------
Related services income 6,400 5,757
--------------------------------------- ----- -------------- --------------
Property operating expenses (8,066) (7,326)
--------------------------------------- ----- -------------- --------------
Net rental and related income 17,494 19,401
--------------------------------------- ----- -------------- --------------
Administrative expenses (3,415) (3,155)
--------------------------------------- ----- -------------- --------------
Changes in fair value of investment
property 16,760 (17,184)
--------------------------------------- ----- -------------- --------------
Changes in fair value of financial
assets 116 (39)
--------------------------------------- ----- -------------- --------------
Negative goodwill arising on 14,840 -
acquisition
--------------------------------------- ----- -------------- --------------
Operating profit 45,795 (977)
--------------------------------------- ----- -------------- --------------
Finance Income 619 1,243
--------------------------------------- ----- -------------- --------------
Finance Expense (16,400) (14,784)
--------------------------------------- ----- -------------- --------------
Fair value gain on swap contract 2,303 1,314
--------------------------------------- ----- -------------- --------------
Net foreign exchange gain 27 1,698
--------------------------------------- ----- -------------- --------------
Profit/(loss) before tax 32,344 (11,506)
--------------------------------------- ----- -------------- --------------
Taxation (charge)/credit 5 (1,097) 1,280
--------------------------------------- ----- -------------- --------------
Profit/(loss) for the year 31,247 (10,226)
--------------------------------------- ----- -------------- --------------
Foreign exchange gains/(losses)
on translation of foreign operations 218 (69)
--------------------------------------- ----- -------------- --------------
Total comprehensive income/(expense) 31,465 (10,295)
--------------------------------------- ----- -------------- --------------
Profit/(loss) attributable
to :
--------------------------------------- ----- -------------- --------------
Equity shareholders 27,390 (8,337)
--------------------------------------- ----- -------------- --------------
Non-controlling interest 3,857 (1,889)
--------------------------------------- ----- -------------- --------------
31,247 (10,226)
--------------------------------------- ----- -------------- --------------
Total comprehensive income/(expense)
attributable to :
--------------------------------------- ----- -------------- --------------
Equity shareholders 27,569 (8,415)
--------------------------------------- ----- -------------- --------------
Non-controlling interest 3,896 (1,880)
--------------------------------------- ----- -------------- --------------
31,465 (10,295)
--------------------------------------- ----- -------------- --------------
Basic and diluted earnings
per ordinary share 6 0.086 (0.028)
--------------------------------------- ----- -------------- --------------
ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2011
Note 30 September 30 September
2011 2010
----------------------------------- ----- ------------- --------------------------
EUR'000 EUR'000
----------------------------------- ----- ------------- --------------------------
ASSETS
----------------------------------- ----- ------------- --------------------------
Non-current assets
----------------------------------- ----- ------------- --------------------------
Investment properties 9 433,264 243,870
----------------------------------- ----- ------------- --------------------------
Property, plant and equipment 10 215 152
----------------------------------- ----- ------------- --------------------------
Tax receivables 6,399 8,869
----------------------------------- ----- ------------- --------------------------
Trade and other receivables 11 6,098 3,330
----------------------------------- ----- ------------- --------------------------
Total non current assets 445,976 256,221
----------------------------------- ----- ------------- --------------------------
Current assets
----------------------------------- ----- ------------- --------------------------
Trade and other receivables 11 9,021 8,100
----------------------------------- ----- ------------- --------------------------
Tax receivables 2,570 1,631
----------------------------------- ----- ------------- --------------------------
Financial assets 12 10,039 9,610
----------------------------------- ----- ------------- --------------------------
Cash and cash equivalents 13 12,185 4,416
----------------------------------- ----- ------------- --------------------------
Total current assets 33,815 23,757
----------------------------------- ----- ------------- --------------------------
Total assets 479,791 279,978
----------------------------------- ----- ------------- --------------------------
EQUITY
----------------------------------- ----- ------------- --------------------------
Capital and reserves attributable
to equity holders of the parent
company
----------------------------------- ----- ------------- --------------------------
Share capital 18 6,080 3,100
----------------------------------- ----- ------------- --------------------------
Share premium 18 18,159 7,859
----------------------------------- ----- ------------- --------------------------
Other reserve 19 95,096 95,096
----------------------------------- ----- ------------- --------------------------
Translation Reserve (1,476) (1,655)
----------------------------------- ----- ------------- --------------------------
Retained earnings (52,149) (79,539)
----------------------------------- ----- ------------- --------------------------
Total equity attributable
to equity holders of the parent
company 65,710 24,861
----------------------------------- ----- ------------- --------------------------
Non-controlling interest 15,503 11,607
----------------------------------- ----- ------------- --------------------------
Total equity 81,213 36,468
----------------------------------- ----- ------------- --------------------------
LIABILITIES
----------------------------------- ----- ------------- --------------------------
Non-current liabilities
----------------------------------- ----- ------------- --------------------------
Loans and borrowings 14 288,021 151,290
----------------------------------- ----- ------------- --------------------------
Deferred income tax 15 12,250 4,396
----------------------------------- ----- ------------- --------------------------
Total non-current liabilities 300,271 155,686
----------------------------------- ----- ------------- --------------------------
Current liabilities
----------------------------------- ----- ------------- --------------------------
Loans and borrowings 14 72,917 75,357
----------------------------------- ----- ------------- --------------------------
Trade and other payables 16 22,872 7,488
----------------------------------- ----- ------------- --------------------------
Financial liabilities 17 2,513 4,816
----------------------------------- ----- ------------- --------------------------
Current income tax 5 163
----------------------------------- ----- ------------- --------------------------
Total current liabilities 98,307 87,824
----------------------------------- ----- ------------- --------------------------
Total equity and liabilities 479,791 279,978
----------------------------------- ----- ------------- --------------------------
The financial statements were approved and authorised for issue
by the Board of Directors on
7 February 2012 and signed on its behalf by David Clark and
Robert Brown.
ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2011
Group
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
Amount attributable to Parent Company Equity Holders
----------------- ---------------------------------------------------------------------------------------------------
Share Share Other Translation Retained Total Non-controlling Total
Capital Premium Reserve Reserve Earnings Interest
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
At 1 October
2009 1,000 - 95,096 (1,577) (71,202) 23,317 13,487 36,804
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
Foreign exchange
gains/(losses)
on translation
of foreign
operations - - - (78) - (78) 9 (69)
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
Other
comprehensive
income - - - (78) - (78) 9 (69)
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
Result for the
year - - - - (8,337) (8,337) (1,889) (10,226)
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
Total
comprehensive
income for the
period - - - (78) (8,337) (8,415) (1,880) (10,295)
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
Shares issued
in the year 2,100 7,859 - - - 9,959 - 9,959
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
At 30 September
2010 3,100 7,859 95,096 (1,655) (79,539) 24,861 11,607 36,468
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
Foreign exchange
gains on
translation
of foreign
operations - - - 179 - 179 39 218
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
Other
comprehensive
income - - - 179 - 179 39 218
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
Result for the
year - - - - 27,390 27,390 3,857 31,247
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
Total
comprehensive
income for the
period - - - 179 27,390 27,569 3,896 31,465
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
Shares issued
in the year
(note
18) 2,980 10,300 - - - 13,280 - 13,280
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
At 30 September
2011 6,080 18,159 95,096 (1,476) (52,149) 65,710 15,503 81,213
----------------- --------- ---------- --------- ------------ ------------ -------- ---------------- ---------
ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 September 2011
Note Year ended Year ended
30 September 30 September
2011 2010
------------------------------------------- ----- ------------------------- -------------------------
EUR'000 EUR'000
------------------------------------------- ----- ------------------------- -------------------------
OPERATING ACTIVITIES
------------------------------------------- ----- ------------------------- -------------------------
Profit/(loss) for the year 31,247 (10,226)
------------------------------------------- ----- ------------------------- -------------------------
Adjustments for :
------------------------------------------- ----- ------------------------- -------------------------
Depreciation 37 32
------------------------------------------- ----- ------------------------- -------------------------
Changes in fair value of investment
property 9 (16,760) 17,184
------------------------------------------- ----- ------------------------- -------------------------
Impairment of financial assets (116) 39
------------------------------------------- ----- ------------------------- -------------------------
Negative goodwill arising on acquisition (14,840) -
------------------------------------------- ----- ------------------------- -------------------------
Finance income (2,922) (2,556)
------------------------------------------- ----- ------------------------- -------------------------
Finance expense 16,336 14,275
------------------------------------------- ----- ------------------------- -------------------------
Exchange translation movements 179 (78)
------------------------------------------- ----- ------------------------- -------------------------
Taxation 5 1,097 (1,280)
------------------------------------------- ----- ------------------------- -------------------------
Operating cash flows before movements
in working capital 14,258 17,390
------------------------------------------- ----- ------------------------- -------------------------
Movements in working capital :
------------------------------------------- ----- ------------------------- -------------------------
Decrease/(increase) in operating trade
and other receivables 2,180 (5,899)
------------------------------------------- ----- ------------------------- -------------------------
Decrease in operating trade and other
payables (978) (4,756)
------------------------------------------- ----- ------------------------- -------------------------
Cash generated from operations 15,460 6,735
------------------------------------------- ----- ------------------------- -------------------------
Interest received 338 403
------------------------------------------- ----- ------------------------- -------------------------
Interest paid (14,588) (15,916)
------------------------------------------- ----- ------------------------- -------------------------
Taxation paid (11) (12)
------------------------------------------- ----- ------------------------- -------------------------
Cash generated from/(used in) operating
activities 1,199 (8,790)
------------------------------------------- ----- ------------------------- -------------------------
INVESTING ACTIVITIES
------------------------------------------- ----- ------------------------- -------------------------
Acquisition of subsidiaries, net of
cash acquired 21 5,209 -
------------------------------------------- ----- ------------------------- -------------------------
Purchase of investment properties 9 (3,946) (1,028)
------------------------------------------- ----- ------------------------- -------------------------
Purchase of property, plant and equipment 10 (46) (5,618)
------------------------------------------- ----- ------------------------- -------------------------
Proceeds from sale of property, plant 10 -
and equipment
------------------------------------------- ----- ------------------------- -------------------------
Loans advanced (12) (24)
------------------------------------------- ----- ------------------------- -------------------------
Loans repaid - 393
------------------------------------------- ----- ------------------------- -------------------------
Cash flows from investing activities 1,215 (6,277)
------------------------------------------- ----- ------------------------- -------------------------
FINANCING ACTIVITIES
------------------------------------------- ----- ------------------------- -------------------------
Proceeds from ordinary shares issued - 9,959
------------------------------------------- ----- ------------------------- -------------------------
Drawdown of bank loans including costs 5,004 3,900
------------------------------------------- ----- ------------------------- -------------------------
Drawdown of other loan borrowings 1,300 -
------------------------------------------- ----- ------------------------- -------------------------
Bank loans repaid (903) (3,854)
------------------------------------------- ----- ------------------------- -------------------------
Cash flows from financing activities 5,401 10,005
------------------------------------------- ----- ------------------------- -------------------------
Increase/(decrease) in cash and cash
equivalents 7,815 (5,062)
------------------------------------------- ----- ------------------------- -------------------------
Net foreign losses on cash and cash
equivalents (46) (1,710)
------------------------------------------- ----- ------------------------- -------------------------
7,769 (6,772)
------------------------------------------- ----- ------------------------- -------------------------
Cash and cash equivalents at start
of year 4,416 11,188
------------------------------------------- ----- ------------------------- -------------------------
Cash and cash equivalents at 30 September
2011 12,185 4,416
------------------------------------------- ----- ------------------------- -------------------------
12,185
------------------------------------------- ----- ------------------------- -------------------------
0
------------------------------------------- ----- ------------------------- -------------------------
ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED - 30 September
2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
The Company is a limited liability, closed-ended investment
company incorporated in Guernsey. The shares of the Company have
been admitted to trading on the Alternative Investment Market of
the London Stock Exchange. The Company invests in commercial
property in Central and Eastern Europe which is held through its
subsidiary companies. The consolidated financial statements of the
Group for the year ended 30 September 2011 comprise the financial
statements of the Company and its subsidiaries (together referred
to as the "Group").
2. SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies, all of which
have been applied consistently throughout the year, is set out
below.
a. Basis of preparation
The financial statements of the Group have been prepared in
accordance with IFRS, which comprise standards and interpretations
approved by the International Accounting Standards Board ("IASB"),
the International Financial Reporting Interpretations Committee
("IFRIC"), the International Accounting Standards and Standards
Interpretations Committee Interpretations approved by the
International Accounting Standards Committee ("IASC") that remain
in effect, and to the extent that they have been adopted by the
European Union.
Going concern
The financial statements have been prepared on a going concern
basis which assumes that the Group will be able to meet its
liabilities as they fall due, for the foreseeable future.
The recent breach of the Proton loan covenants, as more fully
explained in note 14, gives the right to the lending bank to
accelerate the repayment of the debt which if effected would impact
the going concern of the Group. However, the Company is having
discussions with the Bank with a view to reaching a consensual
restructuring of this debt. Cross default clauses contained in the
terms and conditions of certain other bank loans within the Group
could create events of default, however, the Company has a good
relationship with its long term relationship banks and is seeking
to get formal waiver by the banks to such events.
While trading conditions in the local markets in which the Group
operates continue to remain subdued, the need to grant material
tenant discounts has resulted in reduced project level cashflows
which the Investment Manager has sought, and continues to seek, to
alleviate by renegotiating where possible existing bank loan
facilities to minimise short term cash commitments whilst rental
income stabilises and tenant discounts can be phased out. While
these actions have helped to improve the immediate and future cash
position, the cash flow forecasts prepared by the Investment
Manager for the next 12 months indicate that the Group requires
additional working capital for the foreseeable future; this
requirement is currently being provided by the Investment Manager
or funds advised by a fellow subsidiary of the Investment Manager's
parent company. Firstly, by its agreement to defer receiving its
management fee as and when it becomes due; secondly, in providing a
short term loan facility to assist with specific project funding
needs and thirdly, by providing an undertaking to provide
additional working capital over the
next 12 months, as and when this is required.
In order to meet the liabilities and those specifically falling
due to the Investment Manager's and/or its related companies'
provision of ongoing support to the Group, as well as to enhance
working capital, the Company is looking at a number of sources
including asset sales, additional or further restructuring of bank
borrowings and the issue of additional equity capital.
In reviewing the forecasts the Directors have taken into account
material risks and uncertainties, which in addition to those
outlined above regarding the successful conclusion to the Proton
Bank discussions, also include the following:
-- Certain surplus cash funds are held in project subsidiary
companies and the release of these funds for use of the Group's
working capital needs in general would in some circumstances
require the support of the specific lending banks financing these
projects.
-- The continuing uncertain trading environment and its impact
on tenants and their ability to pay their contractual rent
obligations in a timely manner. With tenant negotiations ongoing
the continued downward pressure on rental income is likely to
impact on certain bank loan covenants particularly as agreed loan
amortisation holidays and covenant waivers that had previously been
put in place expire in 2012 and this will require further
negotiation and ongoing support of the Group's lending banks.
The above represents a material uncertainty which may cast
significant doubt on the Group's ability to continue as a going
concern. In the Directors' view discussions are continuing on the
above satisfactorily and they have therefore concluded that it is
appropriate to prepare these financial statements on a going
concern basis. The financial statements do not include the
adjustments that would result if the Group was unable to continue
as a going concern.
Principal accounting policies
The principal accounting policies adopted are set out below.
Changes in Accounting Policies
None of the new standards, interpretations and amendments,
effective for the first time from 1 October 2010, have had a
material effect on the financial statements.
New standards and interpretations not applied Effective date
(periods commencing) IAS 12 Amendment Income Taxes 1 January 2012
IAS 24 Revised Related Party Disclosures - revised definition of
related parties 1 January 2011 IAS 27 Consolidated and Separate
Financial Statements 1 January 2013 IAS 28 Investment in Asoociated
and Joint Ventures 1 January 2013 IFRS 9 Financial Instruments 1
January 2015 IFRS 10 Consolidated Financial Statements 1 January
2013 IFRS 11 Joint Arrangements 1 January 2013 IFRS 12 Disclosures
of Interest in Other Entities 1 January 2013 International
Accounting Standards (IAS/IFRS)
None of the new standards and interpretations noted above, which
are effective for accounting periods beginning on or after 1
October 2011 and which have not been early adopted, are expected to
have a material impact on the Group's future financial
statements.
b. Basis of consolidation
Subsidiaries are those entities controlled by the Company.
Control exists where the Company has the power, directly or
indirectly, to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. All
inter-company loan balances, receivables, payables, income,
expenses and investments are eliminated on consolidation.
The Group financial statements consolidate the financial
statements of the Company and its subsidiary undertakings drawn up
to 30 September 2011. The results of the subsidiary undertakings
are accounted for in the consolidated statement of comprehensive
income from the effective date of acquisition.
The cost of investment in a subsidiary is eliminated against the
Group's share in net assets at the date of acquisition.
Subsidiaries are fully consolidated from the date of acquisition,
being the date on which the Group obtains control, and will
continue to be consolidated until the date that such control
ceases.
c. Acquisitions and Goodwill
Acquired companies are included in the consolidated financial
statements using the acquisition method of accounting when, and
only when, the transaction can be identified as a business
combination. When determining if an acquisition qualified as a
business combination or not, management consider if the transaction
includes the acquisition of supporting infrastructure, employees,
service provider agreements and major input and output processes,
as well as active lease agreements.
The companies acquired during the year have been included in the
consolidated financial statements as business combinations.
Goodwill arising on a business combination represents the excess of
the cost of a business combination over, the total acquisition date
fair value of the identifiable assets, liabilities and contingent
liabilities acquired.
Cost comprises the fair value of assets given, liabilities
assumed and equity instruments issued, plus the amount of any
non-controlling interest in the acquiree, plus, if the business
combination is achieved in stages, the fair value of the existing
equity interest in the acquiree. Contingent consideration is
included in cost at its acquisition fair value and, in the case of
contingent consideration classified as a financial liability,
remeasured subsequently through profit or loss. The direct costs
incurred in the acquisition are recognised immediately as an
expense.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of the
identifiable assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is credited in
full to the consolidated statement of comprehensive income on the
acquisition date.
d. Foreign currency translation
The functional and presentational currency of the parent company
is the euro and as such the Group financial statements have
similarly been presented in the same currency.
The individual statements of each Group company are presented in
the currency of the primary economic environment in which it
operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each Group company are expressed in euros.
Transactions in currencies other than the entity's functional
currency are recorded at rates of exchange prevailing on the
transaction date. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet date.
On consolidation, the results of overseas operations are
translated into euros at rates approximating to those ruling when
the transactions took place. All assets and liabilities of overseas
operations are translated at the rate ruling at the balance sheet
date. Exchange differences arising on translating the opening net
assets at opening rate and the results of overseas operations at
actual rate are recognised in other comprehensive income and
accumulated in equity (the "translation reserve").
e. Revenue recognition
Interest receivable is included in the consolidated financial
statements on an accruals basis under the effective interest
method. Rental income from investment property leased out under
operating leases is recognised in the consolidated statement of
comprehensive income on a straight-line basis over the term of the
lease. When the Group provides incentives to its customers, the
cost of incentives is recognised over the lease-term, on a
straight-line basis, as a reduction of rental revenue. Revenue from
rendering services is recognised on an accruals basis over the
period to which the services relate.
f. Expenses
Expenses are accounted for on an accruals basis and are charged
through the consolidated statement of comprehensive income in the
period in which they are incurred. The costs associated with
acquiring investment property are capitalised with the cost of the
investment in accordance with IAS 40 Investment Property.
g. Taxation
i) Income taxes
The Group is subject to income taxes in different jurisdictions.
Significant estimates are required in determining the worldwide
provision for income taxes. Local taxation which is payable in the
jurisdictions in which the Group operates is charged to the
consolidated statement of comprehensive income as it arises. The
current tax payable is based on the taxable profit of the period
for the local companies. Taxable profit differs from net profit as
reported in the consolidated statement of comprehensive income
because it excludes certain items of income and expense that may
not be taxable or deductible in the local jurisdiction. The Group's
liability for current tax is calculated based on rates and laws
that have been enacted or substantively enacted.
ii) Deferred taxation
Deferred income tax is provided using the balance sheet
liability method. Full provision for deferred tax liabilities is
recognised in the consolidated financial statements in accordance
with IAS 12: Income Taxes.
Deferred income tax is recognised on all temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements except:
(i) where the temporary difference arises from the initial
recognition of goodwill or of an asset or liability in a
transaction that is not a business combination that at the time of
the transaction affects neither accounting nor taxable profit or
loss;
(ii) in respect of taxable temporary differences associated with
investments in subsidiaries where the timing of the reversal of the
temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future;
and
(iii) that deferred tax assets are only recognised to the extent
that it is probable that taxable profit will be available against
which the deductible temporary differences, carried forward tax
credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an
undiscounted basis at the tax rates that are expected to apply to
the year when the related asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted
or substantively enacted at the balance sheet date.
h. Dividends
Interim dividends are recognised in the period in which they are
paid. Final dividends are recognised once they are paid or approved
by shareholders.
i. Investment properties
Investment properties are those which are held to earn rental
income and/or capital appreciation. They are initially recognised
at cost, being the fair value of consideration given, including the
transaction costs associated with the property. Subsequent to
initial recognition, investment properties are stated at fair value
and will be revalued at least annually by independent valuers,
calculated in accordance with IAS 40: Investment Property and the
practice statements of the RICS Appraisal and Valuation Manual 7th
Edition, adapted as necessary to reflect individual market
considerations and practices.
Land held for development is initially recognised at cost, being
the fair value of consideration given, including the transaction
costs associated with acquiring the property. Subsequent to initial
recognition, land is stated at fair value and is revalued at least
annually by independent valuers, calculated in accordance with the
practice statements of the RICS Appraisal and Valuation Manual 7th
Edition, adapted as necessary to reflect individual market
considerations and practices.
Gains or losses arising from revaluation of investment property
to fair value are included in the consolidated statement of
comprehensive income for the period in which they arise.
Properties are treated as acquired when the Group assumes the
significant risks and returns of ownership. Disposals are
recognised at date of realisation with profits and losses arising
being included in the consolidated statement of comprehensive
income; the profit or loss on disposal is determined as the
difference between the sales proceeds and the carrying amount of
the asset disposed of.
j. Financial instruments
Financial assets and financial liabilities are recognised in the
consolidated statement of financial position when the Group becomes
party to the contractual provisions of the instrument. The Group
offsets financial assets and financial liabilities if the Group has
a legally enforceable right to set off the recognised amounts and
interests and intends to settle on a net basis.
(i) Financial assets
The Group's financial assets fall into the categories discussed
below, with the allocation depending on the purpose for which the
assets were acquired. Although the Group uses derivative financial
instruments in economic hedges of economic risk, it does not hedge
account for these transactions. The Group has not classified any of
its financial assets as held to maturity or as available for sale.
Unless otherwise indicated, the carrying amounts of the Group's
financial assets are a reasonable approximation of their fair
values.
Loans receivables
These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They
are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest rate method.
Impairment provisions are recognised when there is objective
evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables. If any
indication of impairment of the value of these assets exists, the
recoverable amount of the asset is assessed by comparing the net
carrying amount with the present value of future expected cash
flows associated with the impaired receivable. An impairment loss
is recognised in the consolidated statement of comprehensive income
whenever the carrying amount of the asset exceeds its recoverable
amount.
Trade and other receivables
Trade and other receivables are non-interest bearing and are
recognised at invoice date initially at fair value and subsequently
measured at amortised cost using the effective interest method,
less provision for impairment. A provision for impairment of trade
receivables is established when there is objective evidence that
the Group will not be able to collect all amounts due according to
the original terms of the receivable. The amount of the provision
is the difference between the asset's carrying amount and the
present value of estimated future cash flows, discounted at the
original effective interest rate. The carrying amount of the asset
is reduced through the use of a provision account, and the amount
of the loss is recognised in the consolidated statement of
comprehensive income within 'Property operating expenses'.
When a trade receivable is uncollectible it is written off
against the provision account for trade receivables. Subsequent
recoveries of amounts previously written off are credited against
'Property operating expenses' in the consolidated statement of
comprehensive income.
Tax receivables
Tax receivables arise principally from Value Added Tax
attributable to the invoiced costs of construction that are not
readily recoverable from the relevant tax authorities in certain of
the jurisdictions within which the Group operates, but rather the
attributable Value Added Tax is carried forward and used to offset
against future Value Added Tax liabilities. These assets are
initially recognised at fair value and subsequently at amortized
cost. Their future recoverability is appraised in the preparation
of the financial statements and a provision for impairment is made
where there is objective evidence that the Group will not be able
to fully collect the full amount of these receivables.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, bank deposits
held at call and other short term bank deposits with an original
maturity of three months or less.
Financial assets at fair value through profit or loss
This category comprises loans advanced and 'in the money'
interest rate derivatives. They are carried in the balance sheet at
fair value with changes in fair value recognised in the
consolidated statement of comprehensive income. Other than these
loans and derivative financial instruments, the Group does not have
any assets held for trading nor has it designated any other
financial instruments as being at fair value through profit or
loss.
(ii) Financial liabilities
The Group classifies its financial liabilities into the
categories discussed below, depending on the purpose for which the
liability was issued and its characteristics. Although the Group
uses derivative financial instruments in economic hedges of
economic risk, it does not hedge account for these transactions.
Unless otherwise indicated, the carrying amounts of the Group's
financial assets are a reasonable approximation of their fair
values.
Trade and other payables
Trade and other payables are not interest-bearing and are
recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method.
Interest bearing bank loans and borrowings
All bank loans and borrowings including preference shares are
initially recognised at fair value net of any transaction costs
directly attributable to the issue of the instrument. After initial
recognition, all interest-bearing liabilities are subsequently
measured at amortised cost using the effective interest method.
Amortised cost is calculated by taking into account any discount or
premium on settlement.
Borrowing costs directly attributable to the acquisition or
construction of property are added to the costs of those assets
until such time as the assets are substantially ready for their
intended use.
All other borrowing costs are recognised in the consolidated
statement of comprehensive income in the period in which they are
incurred.
Financial liabilities at fair value through profit or loss
This category comprises only 'out of the money' interest rate
derivatives. They are carried in the balance sheet at fair value
with changes in fair value recognised in the consolidated statement
of comprehensive income. Other than these derivative financial
instruments, the Group does not have any liabilities held for
trading nor has it designated any other financial instruments as
being at fair value through profit or loss.
IFRS 7 fair value measurement hierarchy
IFRS 7 requires certain disclosures which require the
classification of financial assets and financial liabilities
measured at fair value using a fair value hierarchy that reflects
the significance of the inputs used in making the fair value
measurement. The fair value hierarchy has the following levels:
(a) Quoted prices (unadjusted) in active markets for identical
assets and liabilities (Level 1);
(b) Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices) (Level 2); and
(c) Inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (Level 3).
The level in the fair value hierarchy within which the financial
asset or liability is categorised is determined on the basis of the
lowest level input that is significant to the fair value
measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the three levels.
k. Property, plant and equipment
Property, plant and equipment comprises machinery and
equipment.
Depreciation on property, plant and equipment is calculated
using the straight-line method to allocate their cost less
estimated residual values over their estimated useful lives, as
follows:
Machinery and equipment 4-5 years
The assets' residual values and useful lives are reviewed and
adjusted, if appropriate, at each balance sheet date.
l. Use of assumptions and estimates
The application of Group's accounting policies requires
judgements, estimates and assumptions to be made concerning the
future and these can have a material effect on the carrying amounts
of assets and liabilities reported in the consolidated financial
statements. 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 outlined below.
Property and land valuations
The Group engages external, professional advisors to carry out
third party valuations to determine the fair value of its
properties and land. These are carried out in accordance with the
requirements of the Appraisal and Valuation Manual, 7(th) Edition
published by the Royal Institution of Chartered Surveyors.
In completing these valuations the valuers consider the
following:
(i) discounted cash flow projections based on reliable estimates
of future cash flows, derived from the terms of an existing lease
and other contracts and using discount rates that reflect current
market assessments of the uncertainty in the amount and timing of
the cash flows;
(ii) current prices in an active market for properties of a
similar nature or of a different nature, condition or location
adjusted to reflect those differences; and
(iii) recent prices of similar properties in less active
markets, with adjustments to reflect any changes in economic
conditions since the date of the transactions at those prices.
Income and deferred taxes
The Group is subject to income and capital gains taxes in
different jurisdictions. Significant judgements are required in
determining the total provision for income and deferred taxes.
There are some transactions and calculations for which the ultimate
tax determination is uncertain. The Group recognises liabilities
for anticipated tax 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 the determination is made.
The Group's investment properties are carried at fair value and
revalued in accordance with IAS 40 Investment Property. In the
Group's jurisdictions, the revaluation of the investment property
does not affect taxable profit in the period of the revaluation
and, consequently, the tax base of the asset is not adjusted.
Nevertheless, the future recovery of the carrying amount will
result in a taxable flow of economic benefits to the entity and the
amount that will be deductible for tax purposes will differ from
the amount of those economic benefits. The difference between the
carrying amount of a revalued asset and its tax base is a temporary
difference and gives rise to a deferred tax liability or asset.
3. SEGMENTAL REPORTING
IFRS 8 requires operating segments to be identified on the basis
of internal financial reports about components of the Group that
are regularly reviewed by the chief operating decision maker (which
in the Group's case is its Board comprising the five non-executive
directors) in order to allocate resources to the segments and to
assess their performance.
The Group's primary format for segmental reporting is based on
geographic segments. On a primary basis, the Group operates in
Romania, Ukraine and Moldova. The above geographic areas represent
separate geographic segments. The Group's segmental investment
property and gross property income for the year are presented
below:
Carrying value Fair Value
--------- ---------------------------------------- ----------------------------------------
2011 2010 2010 2010
--------- ------------------- ------------------- ------------------- -------------------
EUR'000 EUR'000 EUR'000 EUR'000
--------- ------------------- ------------------- ------------------- -------------------
Romania 346,331 167,163 351,438 170,680
--------- ------------------- ------------------- ------------------- -------------------
Ukraine 84,424 75,256 89,268 80,190
--------- ------------------- ------------------- ------------------- -------------------
Moldova 2,509 1,451 2,509 1,451
--------- ------------------- ------------------- ------------------- -------------------
433,264 243,870 443,215 252,321
--------- ------------------- ------------------- ------------------- -------------------
Income
---------------------- ------------------- ------------------- ------------------- -------------------
Gross Rental Income Profit/(loss) before
tax
---------------------- ---------------------------------------- ----------------------------------------
2011 2010 2011 2010
---------------------- ------------------- ------------------- ------------------- -------------------
EUR'000 EUR'000 EUR'000 EUR'000
---------------------- ------------------- ------------------- ------------------- -------------------
Romania 10,513 13,994 26,598 (7,698)
---------------------- ------------------- ------------------- ------------------- -------------------
Ukraine 8,647 6,976 9,943 2,067
---------------------- ------------------- ------------------- ------------------- -------------------
Moldova - - 1,244 (1,093)
---------------------- ------------------- ------------------- ------------------- -------------------
Other group segments - - (5,441) (4,782)
---------------------- ------------------- ------------------- ------------------- -------------------
19,160 20,970 32,344 (11,506)
---------------------- ------------------- ------------------- ------------------- -------------------
4. OPERATING PROFIT
Operating profit is stated after charging:
2011 2010
-------------- ----------------- -----------------
EUR'000 EUR'000
-------------- ----------------- -----------------
Depreciation 37 32
-------------- ----------------- -----------------
5. TAXATION
The Company has obtained exempt company status in Guernsey under
the terms of the Income Tax (Exempt Bodies) (Guernsey) Ordinance,
1989 as amended and accordingly is subject to an annual fee,
currently GBP600. The Company as a collective investment scheme
will be able to continue to apply for exempt tax status under the
revised company income tax regime that came into effect on 1
January 2008.
The Group's Romanian and Ukrainian subsidiaries are subject to
their jurisdiction's income tax on income arising on investment
properties, after the deduction of debt financing costs, allowable
expenses and capital allowances.
The fair value adjustment of the investment property results in
a temporary difference between the carrying value of the properties
and their tax basis. The Group recognised a deferred tax charge of
EUR1.2m (2010: deferred tax credit of EUR1.38m) giving rise to a
total current and deferred tax credit in the year as shown in the
consolidated statement of comprehensive income.
2011 2010
-------------------------------------- ----------------- -----------------
EUR'000 EUR'000
-------------------------------------- ----------------- -----------------
Current tax (credit)/charge for the
year (104) 95
-------------------------------------- ----------------- -----------------
Deferred tax charge/(credit) for the
year 1,201 (1,375)
-------------------------------------- ----------------- -----------------
Tax charge/(credit) for the year 1,097 (1,280)
-------------------------------------- ----------------- -----------------
AREOF is a registered offshore company exempt from taxes. Its
offshore subsidiaries did not incur any taxable profits during the
period except as listed below:
The current income tax (credit)/charge
represents tax charges on profit arising
in :
------------------------------------------- ------ -----------------
Cyprus (at corporate income tax rates
of 10%) (156) 79
------------------------------------------- ------ -----------------
Luxembourg (at corporate income tax
rates of 20%) 40 3
------------------------------------------- ------ -----------------
Netherlands (at corporate income tax 4 -
rates of 20%)
------------------------------------------- ------ -----------------
Romania (at corporate income tax rates
of 16%) 8 13
------------------------------------------- ------ -----------------
Total tax (credit)/charge for the year (104) 95
------------------------------------------- ------ -----------------
The Group's profit/(loss) before taxation upon which the tax
charge for the year arises from:
2011 2010
--------------------------- ----------------- -----------------
EUR'000 EUR'000
--------------------------- ----------------- -----------------
Taxable jurisdictions 22,529 (5,811)
--------------------------- ----------------- -----------------
Non-taxable jurisdictions 9,815 (5,695)
--------------------------- ----------------- -----------------
32,344 (11,506)
--------------------------- ----------------- -----------------
- -
--------------------------- ----------------- -----------------
The Group's taxation charge for the year is made up of:
2011 2010
----------------------------------------- ----------------- -----------------
EUR'000 EUR'000
----------------------------------------- ----------------- -----------------
Profit/(loss) before taxation 32,344 (11,506)
----------------------------------------- ----------------- -----------------
(Profit)/loss at average country rate
of 19.9% (2010: 12.5%) (6,440) 1,438
----------------------------------------- ----------------- -----------------
Profits/(losses) arising in nil tax
jurisdictions 1,954 (575)
----------------------------------------- ----------------- -----------------
Permanent differences 460 1,329
----------------------------------------- ----------------- -----------------
Profits/(losses) upon which no deferred
tax recognised in the year 2,909 (1,052)
----------------------------------------- ----------------- -----------------
Differences in local tax rates 20 140
----------------------------------------- ----------------- -----------------
(1,097) 1,280
----------------------------------------- ----------------- -----------------
- -
----------------------------------------- ----------------- -----------------
Losses where no deferred tax has been recognised in the year
occur in jurisdictions where it is not expected that taxable
profits will arise in the foreseeable future against which losses
could be utilised.
6. BASIC AND DILUTED EARNINGS PER SHARE
The basic and diluted earnings per ordinary share are based on
the profit for the year attributable to the equity shareholders of
EUR27.4m (2010: loss EUR8.3m and 297.3 million ordinary shares) and
on 319 million ordinary shares, being the weighted average number
of shares in issue during the period.
There were no dilutive interests as at 30 September 2011 (2010 -
nil).
7. NET ASSET VALUE PER SHARE
The Net Asset Value per share is based on shareholders' equity
at the year end as follows:
2011 2010
---------------------------------------------- ------------------ ------------------
EUR'000 EUR'000
---------------------------------------------- ------------------ ------------------
Net Asset Value 65,710 24,861
---------------------------------------------- ------------------ ------------------
Add back deferred tax provision attributable
to equity shareholders 9,729 2,257
---------------------------------------------- ------------------ ------------------
Adjusted Net Assets 75,439 27,118
---------------------------------------------- ------------------ ------------------
Number of ordinary shares in issue 608 million 310 million
---------------------------------------------- ------------------ ------------------
Net Asset Value per share EUR0.1081 EUR0.0802
---------------------------------------------- ------------------ ------------------
Adjusted Net Asset Value per share EUR0.1241 EUR0.0875
---------------------------------------------- ------------------ ------------------
The adjustment added back to arrive at the Adjusted Net Asset
Value has been made to reflect the likely value of the Group given
that the deferred tax liability provided is unlikely to crystallise
in full as the Group is likely to dispose of the property holding
companies rather than the properties themselves.
8. DIVIDENDS
No dividends have been declared or paid to date.
9. INVESTMENT PROPERTY
2011 2010
------------------------------------------ ------------------ ------------------
EUR'000 EUR'000
------------------------------------------ ------------------ ------------------
At 1 October 2010 243,870 181,504
------------------------------------------ ------------------ ------------------
Acquisition of subsidiaries 168,688 -
------------------------------------------ ------------------ ------------------
Reclassification of development property - 77,268
------------------------------------------ ------------------ ------------------
Capital expenditure during the year 3,946 1,028
------------------------------------------ ------------------ ------------------
Reclassification of lease incentives - (2,700)
------------------------------------------ ------------------ ------------------
Land Acquisitions - 3,954
------------------------------------------ ------------------ ------------------
Fair value uplift/(write down) 16,760 (17,184)
------------------------------------------ ------------------ ------------------
At 30 September 2011 433,264 243,870
------------------------------------------ ------------------ ------------------
Adjustment from fair value to carrying
value
------------------------------------------ ------------------ ------------------
Fair value 443,215 252,321
------------------------------------------ ------------------ ------------------
Adjustment for rent recognised in
advance (9,951) (8,451)
------------------------------------------ ------------------ ------------------
Carrying value at 30 September 2010 433,264 243,870
------------------------------------------ ------------------ ------------------
Total borrowing costs capitalized in the year were EUR0.1m
(2010: EUR2.5m).
The fair value of the Group's investment properties at 30
September 2011 has been arrived at on an open market value basis,
carried out by independent valuers, Colliers International, Jones
Lang LaSalle and DTZ, in accordance with the requirements of the
Appraisal and Valuation Manual, 7(th) Edition published by the
Royal Institution of Chartered Surveyors.
Open market value, deemed to be fair value, is determined by
reference to market based evidence, which is the amount for which
the asset could be exchanged between a knowledgeable willing buyer
and seller, in an arms' length transaction. The valuation
methodology involves the discounted cash flow of the future rental
income streams and a reversionary value discounted to a present
value estimate. It also includes an assessment of the recent open
market sales and investments within the Central and Eastern
European regions.
10. PROPERTY, PLANT AND EQUIPMENT
EUR'000 EUR'000 EUR'000
--------------------------------- --------------------- --------------------- -----------------
Buildings Machinery Total
& Construction & equipment
--------------------------------- --------------------- --------------------- -----------------
Cost or valuation
--------------------------------- --------------------- --------------------- -----------------
At 1 October 2009 67,499 158 67,657
--------------------------------- --------------------- --------------------- -----------------
Reclassification as investment
property (77,268) - (77,268)
--------------------------------- --------------------- --------------------- -----------------
Additions 9,769 81 9,850
--------------------------------- --------------------- --------------------- -----------------
At 30 September 2010 - 239 239
--------------------------------- --------------------- --------------------- -----------------
Depreciation
--------------------------------- --------------------- --------------------- -----------------
At 1 October 2009 - 55 55
--------------------------------- --------------------- --------------------- -----------------
Charge for period - 32 32
--------------------------------- --------------------- --------------------- -----------------
At 30 September 2010 - 87 87
--------------------------------- --------------------- --------------------- -----------------
Carrying amount at 30 September
2010 - 152 152
--------------------------------- --------------------- --------------------- -----------------
EUR'000 EUR'000 EUR'000
--------------------------------- --------------------- -------------------- --------------------
Buildings Machinery Total
& Construction & equipment
--------------------------------- --------------------- -------------------- --------------------
Cost or valuation
--------------------------------- --------------------- -------------------- --------------------
At 1 October 2010 - 239 239
--------------------------------- --------------------- -------------------- --------------------
Acquisition of subsidiaries - 162 162
--------------------------------- --------------------- -------------------- --------------------
Additions - 46 46
--------------------------------- --------------------- -------------------- --------------------
Disposals - (43) (43)
--------------------------------- --------------------- -------------------- --------------------
At 30 September 2011 - 404 404
--------------------------------- --------------------- -------------------- --------------------
Depreciation
--------------------------------- --------------------- -------------------- --------------------
At 1 October 2010 - 87 87
--------------------------------- --------------------- -------------------- --------------------
Acquisition of subsidiaries - 98 98
--------------------------------- --------------------- -------------------- --------------------
Charge for period - 37 37
--------------------------------- --------------------- -------------------- --------------------
Disposals - (33) (33)
--------------------------------- --------------------- -------------------- --------------------
At 30 September 2011 - 189 189
--------------------------------- --------------------- -------------------- --------------------
Carrying amount at 30 September
2011 - 215 215
--------------------------------- --------------------- -------------------- --------------------
11. TRADE AND OTHER RECEIVABLES
2011 2010
-------------------------------------- -------------------- --------------------
EUR'000 EUR'000
-------------------------------------- -------------------- --------------------
Trade receivables 4,115 2,056
-------------------------------------- -------------------- --------------------
Tenant lease incentives 9,950 8,451
-------------------------------------- -------------------- --------------------
Prepayments and other accrued income 1,054 923
-------------------------------------- -------------------- --------------------
Total trade and other receivables 15,119 11,430
-------------------------------------- -------------------- --------------------
Less: non-current portion - Tenant
lease incentives (6,098) (3,330)
-------------------------------------- -------------------- --------------------
Current portion 9,021 8,100
-------------------------------------- -------------------- --------------------
All trade receivables over 2 months old have been provided
against and the movement with regard to bad debt provisions made
and carried forward against trade receivables is as follows :
2011 2010
----------------------------- -------------------- --------------------
EUR'000 EUR'000
----------------------------- -------------------- --------------------
Bad debt provisions
----------------------------- -------------------- --------------------
At 1 October 2010 975 543
----------------------------- -------------------- --------------------
Acquisition of subsidiaries 2,367 -
----------------------------- -------------------- --------------------
Charge for period 415 432
----------------------------- -------------------- --------------------
At 30 September 2011 3,757 975
----------------------------- -------------------- --------------------
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
12. FINANCIAL ASSETS
2011 2010
------------------------------------- ------------------- -------------------
EUR'000 EUR'000
------------------------------------- ------------------- -------------------
Loans receivable 11,213 10,902
------------------------------------- ------------------- -------------------
Recoverability impairment provision (1,174) (1,292)
------------------------------------- ------------------- -------------------
Total 10,039 9,610
------------------------------------- ------------------- -------------------
Loans receivable represents advances, deposits and related
accrued interest for purchases of land in Moldova of EUR2.22m
(2010: EUR2.17m), secured on land assets, together with a loan in
Romania of EUR8.99m (2010: EUR8.73m) unsecured. Full valuations
arrived at on an open market value basis, carried out by
independent valuers, Colliers International, have been carried out
on the land assets in Moldova as a result of which provision has
been made of EUR1.17m (2010: EUR1.29m) for the shortfall between
the fair value of the secured land assets and the loans
receivable.
The Moldovan loans bear interest at the rate of 6% and the
Romanian loan bears interest at a variable rate linked to 3 month
Euribor plus a margin of 1.75%. The Moldova loans include interest
accrued of EUR0.15m of which EUR0.12m has been provided for as
being non-recoverable.
13. CASH AND CASH EQUIVALENTS
2011 2010
-------------------------- ------------------- -------------------
EUR'000 EUR'000
-------------------------- ------------------- -------------------
Cash at bank and in hand 4,059 1,783
-------------------------- ------------------- -------------------
Short term bank deposits 8,126 2,633
-------------------------- ------------------- -------------------
Total 12,185 4,416
-------------------------- ------------------- -------------------
The fair value of short-term deposits approximates to the
carrying amount due to the short maturity of these financial
instruments. The remainder of the cash and cash equivalents
represent cash deposits.
14. LOANS AND BORROWINGS
2011 2010
------------------------------ ------------------- -------------------
EUR'000 EUR'000
------------------------------ ------------------- -------------------
Non-current
------------------------------ ------------------- -------------------
Bank loans 281,367 151,290
------------------------------ ------------------- -------------------
Related party loans 1,532 -
------------------------------ ------------------- -------------------
Redeemable preference shares 5,122 -
------------------------------ ------------------- -------------------
288,021 151,290
------------------------------ ------------------- -------------------
Current
------------------------------ ------------------- -------------------
Bank loans 69,061 75,357
------------------------------ ------------------- -------------------
Related party loans 3,856 -
------------------------------ ------------------- -------------------
72,917 75,357
------------------------------ ------------------- -------------------
Total loans and borrowings 360,938 226,647
------------------------------ ------------------- -------------------
2011 2010
-------------------------------------- ------------------- -------------------
EUR'000 EUR'000
-------------------------------------- ------------------- -------------------
Total gross borrowings outstanding 362,286 227,414
-------------------------------------- ------------------- -------------------
Deferred loan costs (1,348) (767)
-------------------------------------- ------------------- -------------------
Total 360,938 226,647
-------------------------------------- ------------------- -------------------
Represented by :
-------------------------------------- ------------------- -------------------
Net borrowings repayable : within
one year 72,917 75,357
-------------------------------------- ------------------- -------------------
Net borrowings repayable : within
one to two years 81,147 61,747
-------------------------------------- ------------------- -------------------
Net borrowings repayable : within
two to five years 151,830 65,547
-------------------------------------- ------------------- -------------------
Net borrowings repayable : over five
years 55,044 23,996
-------------------------------------- ------------------- -------------------
Total 360,938 226,647
-------------------------------------- ------------------- -------------------
Loans outstanding at 30 September 2011 comprise:
2011 2010
-------------------------------- ------------- ---------- ------------------- -------------------
Interest
Rate Maturity EUR'000 EUR'000
-------------------------------- ------------- ---------- ------------------- -------------------
Bank Loans
-------------------------------- ------------- ---------- ------------------- -------------------
Alpha Bank 5.2% Nov'12 46,510 47,143
-------------------------------- ------------- ---------- ------------------- -------------------
EFG, Bank of Greece, greater Apr'18 60,568 -
Bank of Cyprus, Banca Euribor
Romaneasca (Era Iasi) +2.15% or
5%
-------------------------------- ------------- ---------- ------------------- -------------------
EFG, Bank of Greece, greater Mch'17 59,662 -
Bank of Cyprus, Banca Euribor
Romaneasca (Era Oradea) +4.0% or
5%
-------------------------------- ------------- ---------- ------------------- -------------------
KBC Bank (Sibiu 1) 6.055% Nov'13 59,328 60,016
-------------------------------- ------------- ---------- ------------------- -------------------
KBC Bank (Sibiu 2) 4.755% Jun'16 27,409 27,255
-------------------------------- ------------- ---------- ------------------- -------------------
Euribor
Marfin Popular Bank +8.0% Dec'14 68,007 68,000
-------------------------------- ------------- ---------- ------------------- -------------------
Piraeus Bank Euribor Nov'11 4,392 -
+6.0%
-------------------------------- ------------- ---------- ------------------- -------------------
Euribor
Proton Bank +7.1% Dec'12 25,900 25,000
-------------------------------- ------------- ---------- ------------------- -------------------
351,776 227,414
-------------------------------- ------------- ---------- ------------------- -------------------
Related Party Loans
-------------------------------- ------------- ---------- ------------------- -------------------
Argo Capital Partners
Fund Limited 10% Sept'17 1,517 -
-------------------------------- ------------- ---------- ------------------- -------------------
Argo Capital Partners Euribor Nov'11 800 -
Fund Limited +3.75%
-------------------------------- ------------- ---------- ------------------- -------------------
Argo Distressed Credit
Fund Limited 22.50% on demand 1,300 -
-------------------------------- ------------- ---------- ------------------- -------------------
Millenary Limited 10% on demand 1,000 -
-------------------------------- ------------- ---------- ------------------- -------------------
Ankus Limited 10% on demand 500 -
-------------------------------- ------------- ---------- ------------------- -------------------
Priceton Limited 6% July'12 200 -
-------------------------------- ------------- ---------- ------------------- -------------------
Argo Global Special Situations
Fund Limited 10% on demand 56 -
-------------------------------- ------------- ---------- ------------------- -------------------
SPS Linea Cyprus Limited none Dec'12 15 -
-------------------------------- ------------- ---------- ------------------- -------------------
5,388 -
-------------------------------- ------------- ---------- ------------------- -------------------
Preference Shares Dividend
-------------------------------- ------------- ---------- ------------------- -------------------
NEF 3 (Cayman) 1 Limited 25% compound Sept'13 2,277 -
-------------------------------- ------------- ---------- ------------------- -------------------
NEF 3 (Cayman) 3 Limited 25% compound Sept'13 2,845 -
-------------------------------- ------------- ---------- ------------------- -------------------
5,122 -
-------------------------------- ------------- ---------- ------------------- -------------------
Total loans and borrowings 362,286 227,414
-------------------------------- ------------- ---------- ------------------- -------------------
All bank loans are secured on the assets of Group subsidiary
companies.
The fair value of fixed and floating rate loan borrowings
approximate to their carrying values at the balance sheet date as
the impact of discounting is not significant. The fair values are
based on cash flows discounted using rates based on equivalent
fixed and floating rates as at the end of the period.
The acquired companies Huincas Properties Limited and Omelit
Limited (note 21) issued on 14 September 2010 1.8 million and 2.25
million fully paid redeemable preference shares to NEF 3 (Cayman) 1
Limited and NEF 3 (Cayman) 3 Limited respectively for a
consideration of EUR1 per share. These shares carry a preferred
return of 25% compound per annum payable on redemption of the
preference shares. Under an option agreement entered into on the
issue date the preferred shareholders have the right to exercise
the redemption of their shares at or any date after the third
anniversary while the issuing company holds the right to redeem
these shares at or any date after the second anniversary.
The fair value of the preference shares is considered to be
equal to their carrying values at the balance sheet date.
Interest rate Swaps
The Group is required under its financing agreements with KBC
Bank to fix the rate at which it borrows during the period of the
loan. The Bank has undertaken variable to fixed rate swaps with
third parties which on the EUR59.3m and EUR27.4m KBC Bank loans
give effective interest rates of 6.055% and 4.755%
respectively.
The Group is not party to the swap agreements but via the
financing agreements the Group has all the risks and rewards of the
swap as, should the loan be repaid early, the Group would be
required to pay the swap break costs or alternatively accrue a swap
benefit as capital reduction depending on the value of the
underlying swap at that point in time. The interest rate swap is
valued by reference to the Bank's redemption notices of amounts due
if the Group repaid its borrowings at the balance sheet date.
A similar swap financing arrangement in place with Alpha Bank at
the beginning of the year was replaced by fixed rate of interest
terms under restructuring arrangements put in place with the Bank
during the year; the fair value of the swap at the time was
incorporated as part of the restructured terms of the loan.
Loan Covenants and Restructurings
(i) Alpha Bank - the ongoing requirement to provide short term
tenant incentives for 2010 and into 2011 resulted in the continued
temporary reduction of normalised income levels resulting in a
breach of its debt service ratio and its loan to value ratio under
the Group's loan with Alpha Bank. However, through negotiations
with the Bank completed in January 2011 a covenant and capital
repayment holiday has been concluded through to April 2012, subject
to a quarterly cash sweep of any monies held and a parent company
guarantee to pay the unfunded instalments from any future
fundraising.
(ii) KBC Bank (Sibiu 1 and 2) - in order to strengthen the
underlying income and attractiveness of the Sibiu shopping centre
to customers and tenants alike, the first stage of a proposed asset
management initiative has been undertaken during the year whereby
the Bank agreed to fund a 4 quarter amortisation holiday for 2011
amounting to some EUR2.5m whereby quarterly amortisation amounts
due are paid into a blocked account for use towards construction
costs. In addition, the financial covenants under the terms of the
loan agreement were waived for a period up to the end of 2012.
As part of the agreed financing terms the Company was obliged to
provide an initial equity input amounting to some EUR1.8m to fund
the initial part of the project and this was provided partly from
within the Group and partly from a loan of EUR1.3m from funds
managed by an associate of the Manager, Argo Capital Management
Property Limited.
The final part of the asset management initiative to provide a
new front entrance to the shopping centre has been deferred for
strategic reasons and as this was outside the original terms of the
agreement made with KBC. Negotiations are taking place for an
extension of the facility terms into 2012.
(iii) Marfin Popular Bank - Under the original investment loan
agreement with the Bank there was a capital repayment holiday for
the first 18 months of the loan term up until June 2011. It has
subsequently been agreed with the Bank that this will be extended
for a further 12 month period up until June 2012 on terms
consistent with the original loan agreement.
(iv) Proton Bank - the original loan agreement made with the
Bank matured in December 2010 and it was agreed with the Bank for
this loan to be extended for a further 2 years. It was agreed under
the terms of this loan that interest would be paid on an annual
basis at the same rate as the original loan and by way of security
the Bank took a share pledge over the shares of the Group company
immediately below the parent company. As completion of
documentation of the agreed loan terms extended beyond the maturity
date of the original loan a bridge loan facility of EUR0.9m was
made available in February 2011 to settle the interest accruing
between maturity of the original loan and completion of
documentation; the interest terms are the same as the main loan and
the loan is repayable at the end of 12 months.
At the end of December 2011, the Company took the decision to
refrain from paying approximately EUR1.9m of interest due to Proton
Bank under its main EUR25m loan agreement. As a result of this the
Group is in default on this facility along with the associated
EUR0.9m debt facility and is engaged in discussions with the Bank
aimed at completing a consensual restructuring of all its
obligations to the Bank.
(v) EFG, Bank of Greece, Bank of Cyprus, Banca Romaneasca (Era
Iasi) - a syndicated Bank facility of EUR79.5m was put in place in
October 2007 for the construction of the Era Shopping Park, Iasi
but due to a breach of certain conditions and covenants further
funding from the Banks have ceased, although revised terms upon
which the remaining funding under the facility will be made
available have been agreed since the year end and documentation is
being finalised. Due to the breach of covenants at the year end the
whole of loan borrowings have been classified under current
liabilities.
(vi) EFG, Bank of Greece, Bank of Cyprus, Banca Romaneasca (Era
Oradea) - a syndicated Bank facility of EUR62.25m was put in place
in August 2008 for the construction of the Era Shopping Park,
Oradea. Agreement was reached with the Banks in mid September
following certain covenant breaches following which further
drawdowns under the facility have been made toward completion of
construction of the centre.
(vii) Piraeus Bank - a Bank facility of some EUR79.5m was made
available in April 2008 for the purchase of development land
adjacent to Era Shopping Park, Iasi. This agreement expired after
the year end and an extension to April 2012 has subsequently been
agreed.
15. DEFERRED INCOME TAX
Deferred tax is calculated in full on temporary differences
under the liability method using tax rates applicable to each
individual territory.
The movement on the deferred tax account is as shown below:
DEFERRED TAX LIABILITY
------------------------------------------- ------------------- -------------------
2011 2010
------------------------------------------- ------------------- -------------------
EUR'000 EUR'000
------------------------------------------- ------------------- -------------------
At 1 October 2010 4,396 5,771
------------------------------------------- ------------------- -------------------
Acquisition of subsidiaries 6,653 -
------------------------------------------- ------------------- -------------------
Charge/(credit) to consolidated statement
of comprehensive income 1,201 (1,375)
------------------------------------------- ------------------- -------------------
At 30 September 2011 12,250 4,396
------------------------------------------- ------------------- -------------------
The movements in deferred tax assets and liabilities during the
period are shown below:
Accelerated Revaluation Total
tax depreciation and fair
value adjustments
on acquisition
----------------------------- -------------------- ------------------- -------------------
EUR'000 EUR'000 EUR'000
----------------------------- -------------------- ------------------- -------------------
Deferred tax liabilities
----------------------------- -------------------- ------------------- -------------------
At 1 October 2009 73 5,698 5,771
----------------------------- -------------------- ------------------- -------------------
Charged to consolidated
statement of comprehensive
income - (1,375) (1,375)
----------------------------- -------------------- ------------------- -------------------
At 30 September 2010 73 4,323 4,396
----------------------------- -------------------- ------------------- -------------------
Acquisition of subsidiaries - 6,653 6,653
----------------------------- -------------------- ------------------- -------------------
Charged to consolidated
statement of comprehensive
income - 1,201 1,201
----------------------------- -------------------- ------------------- -------------------
At 30 September 2011 73 12,177 12,250
----------------------------- -------------------- ------------------- -------------------
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax assets and liabilities relate
to taxes levied by the same taxation authority on either the same
taxable Group company or different Group entities where there is
the intention to settle the balances on a net basis.
A deferred tax asset has not been recognised on unused tax
losses of EUR5.0 million (2010: EUR4.6 million).
16. TRADE AND OTHER PAYABLES
2011 2010
------------------------------ ------------------- -------------------
EUR'000 EUR'000
------------------------------ ------------------- -------------------
Trade creditors 3,748 1,341
------------------------------ ------------------- -------------------
Bank & loan interest payable 3,710 976
------------------------------ ------------------- -------------------
Other payables 8,104 3,196
------------------------------ ------------------- -------------------
Other accruals 7,310 1,975
------------------------------ ------------------- -------------------
Total 22,872 7,488
------------------------------ ------------------- -------------------
17. FINANCIAL LIABILITIES
2011 2010
------------------------------ ------------------- -------------------
EUR'000 EUR'000
------------------------------ ------------------- -------------------
Interest rate swap (note 14) 2,513 4,816
------------------------------ ------------------- -------------------
18. SHARE CAPITAL
No. of Share Share Total
shares capital premium
---------------------- --------- ------------------- ------------------- -------------------
millions EUR'000 EUR'000 EUR'000
---------------------- --------- ------------------- ------------------- -------------------
Called up, allotted
and fully paid
---------------------- --------- ------------------- ------------------- -------------------
At 30 September 2010 310 3,100 7,859 10,959
---------------------- --------- ------------------- ------------------- -------------------
Proceeds from shares
issued 298 2,980 10,300 13,280
---------------------- --------- ------------------- ------------------- -------------------
___ ____ ____ ____
---------------------- --------- ------------------- ------------------- -------------------
At 31 September 2011 608 6,080 18,159 24,239
---------------------- --------- ------------------- ------------------- -------------------
___ ____ ____ ____
---------------------- --------- ------------------- ------------------- -------------------
The total number of authorised shares is 1 billion (2010: 450
million) with a par value of EUR0.01 each (2010: EUR0.01 each). All
issued shares are fully paid.
The Company has only one class of ordinary shares which carry no
right to fixed income.
In September 2011 298,041,718 new ordinary shares of EUR0.01 per
share were issued to the shareholders of Huincas Properties Limited
and Omelit Limited as purchase consideration for 100% of each
company's share capital. The fair value of the shares issued
amounted to EUR13.4m (EUR0.045 per share). The related transaction
costs amounting to EUR0.13m have been netted off with the deemed
proceeds.
19. RESERVES
The movement in the reserves for the Group is shown on page
25.
Share Premium
The share premium represents the difference between the price at
which shares have been issued over the par value of each ordinary
share of EUR0.01. Related costs of issuing shares have been written
off against the share premium account.
Other Reserve
On 16 August 2006 the Royal Court of Guernsey confirmed the
reduction of capital by way of cancellation of the amount standing
to the credit of its share premium account on that date. The amount
was transferred to the other reserve. The other reserve is a
distributable reserve to be used for all purposes permitted under
Guernsey company law, including the buyback of shares and payment
of dividends.
Translation Reserve
The translation reserve contains exchange differences arising on
consolidation of the Group's overseas operations. This reserve
represents unrealised gains and losses and is therefore not
distributable.
Retained Earnings
Any surplus or deficit on net profit or loss after tax is taken
to this reserve and any surplus balance can be utilised for the
buyback of shares and payment of dividends.
20. SUBSIDIARIES
The Directors consider that to give full particulars of all
subsidiary undertakings would lead to excessive length of
disclosures and not add to an understanding of the consolidated
financial statements. The following information relates to those
wholly owned subsidiaries whose results or financial position, in
the opinion of the Directors, principally affected the financial
affairs of the Group at 30 September 2011:
Culture Holding Sarl (Luxembourg) NREOF Finance BV
(Netherlands)
NREOF Cuza Sarl (Luxembourg) NREOF Moldova BV (Netherlands)
NREOF Holding Sarl (Luxembourg) Melandra Finance BV
(Netherlands)
NREOF Leopold Sarl (Luxembourg) NREOF Holding LP (Caymans)
NREOF Sibiu Sarl (Luxembourg) Park Avenue Invest Srl
(Moldova)
Central Park Invest Cyprus Ltd (Cyprus) Retail Land West Srl (Moldova)
Retail Land West Invest Cyprus Ltd (Cyprus) Retail Land East Srl (Moldova)
Huincas Properties Limited (Cyprus) NRE Sibiu Shopping City Srl
(Romania)
Omelit Limited (Cyprus) Ermes Holding Srl (Romania)
Triton Holdings LLC (Ukraine) Omilos Oradea Srl (Romania)
Novi Biznes Poglyady LLC (Ukraine) Suceava Shopping City Srl
(Romania)
Parkcity LLC (Ukraine) Belrom Trei Srl (Romania)
Biznescapital LLC (Ukraine) Tora Brand Srl (Romania)
These companies are 100% controlled within the Group, the
ultimate parent being Argo Real Estate Opportunities Fund Limited,
with the exceptions of Suceava Shopping City Srl which is a 50%
controlling interest and Park Avenue Invest Srl which is a 90%
controlling interest. Although the Group only owns 50% of Suceava
Shopping City Srl, control over operational and financial decisions
is exercised through a shareholder agreement.
21. ACQUISITIONS OF SUBSIDIARIES
On 13 September 2011 the Group acquired 100% of the share
capital of Huincas Properties Limited and Omelit Limited. Huincas
Properties Limited through its 100% owned subsidiary Omilos Oradea
Srl owns the 65,700 sqm Era Shopping Park, Oradea. Omelit Limited
through its 100% owned Ermes Holding Srl owns the 49,800 sqm Era
Shopping Park, Iasi, and in addition, through its 100% owned Tora
Brand Srl owns a 17 hectare undeveloped adjacent land plot.
This acquisition was made with the primary objective of becoming
the dominant developer, owner and operator of international quality
retail parks and shopping centres in Romania and the region,
thereby making the Company a significantly more attractive
proposition to institutional investors looking for exposure to the
region which in turn would provide the Company with a future source
of capital for future growth.
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill are as follows:
Book Value Fair Value
------------------------------- ------------------- -------------------
EUR'000 EUR'000
------------------------------- ------------------- -------------------
Investment property 128,781 168,688
------------------------------- ------------------- -------------------
Property, plant and equipment 64 64
------------------------------- ------------------- -------------------
Trade and other receivables 4,524 4,524
------------------------------- ------------------- -------------------
Cash and cash equivalents 5,209 5,209
------------------------------- ------------------- -------------------
Bank loans (120,241) (120,241)
------------------------------- ------------------- -------------------
Related party loans (3,881) (3,881)
------------------------------- ------------------- -------------------
Preference shares (5,063) (5,063)
------------------------------- ------------------- -------------------
Deferred Tax - (6,653)
------------------------------- ------------------- -------------------
Trade and other payables (13,994) (14,395)
------------------------------- ------------------- -------------------
Total net assets (4,601) 28,252
------------------------------- ------------------- -------------------
EUR'000
------------------------------- ------------------- -------------------
Consideration paid
------------------------------- ------------------- -------------------
Ordinary shares 13,412
------------------------------- ------------------- -------------------
Negative goodwill 14,840
------------------------------- ------------------- -------------------
The fair value of the consideration shares issued was determined
by reference to the quoted market price of EUR0.045 per share at
the date of acquisition. When the consideration shares were listed
on the market the same quoted market price of EUR0.045 per share
applied.
Negative goodwill is attributable to various risks associated
with the shopping centres acquired including the completion of the
centres in accordance with the original budget and the values of
the properties on acquisition being based on expected market rental
incomes which in practice could differ from those achieved when the
development completes.
The book and fair values of the trade and other receivables on
acquisition are equal to the gross contractual amounts
receivable.
Acquisition costs of EUR0.08m have been expensed against income
in the year.
Since the acquisition date, the companies acquired as described
above have contributed EUR0.3m to the gross rental income and
EUR3.6m of losses to the Group. If the acquisition had occurred on
1 October 2010, these companies would have contributed EUR5.9m to
the gross rental income and EUR1.8m of losses to the Group.
There were no acquisitions in the year ended 30 September
2010.
22. RELATED PARTY TRANSACTIONS
The Group is managed by its Board of Directors. The Directors of
the Company are the key management personnel of the Group. However,
the Company had entered into an asset management agreement with
Argo Capital Management Property Limited to provide property
investment advice and property management services to the Group.
Consequently, the directors of Argo Capital Management Property
Limited can also be considered as key management personnel of the
Group. Fees paid under the asset management agreement are disclosed
below.
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the other party in making financial or operational
decisions. Argo Capital Management Property Limited is the
Investment Adviser to the Company under the terms of the Investment
Advisory Agreement and is thus considered a related party of the
Company for the year. Argo Capital Management Property Limited is a
wholly owned subsidiary of Argo Group Limited which through one of
its subsidiaries manages Funds that acquired a major interest in
the shares of the Company arising from the issue of new ordinary
shares.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
The Directors, who were the only management of the Company,
received fees for their services and further details are provided
in the Directors' Report on page 16. The total charge to the income
statement during the year of EUR0.14m comprises fees and related
expenses due to the Directors of both the Company and the Group's
subsidiaries, including those outstanding at the period end.
Management Fee
The Manager, under its contractual service contract with the
Company, receives a quarterly management fee (exclusive of any
applicable taxes) equal to a 1/4 of 2 per cent of the gross
proceeds of the original Placing. During the year management fees
of EUR2 million (2010: EUR2 million) have been incurred of which
EUR1.5 million (2010: EUR0.3 million) is accrued at the year
end.
Performance Fee
The Manager is also entitled to a performance fee in respect of
each property investment made by the Company equal to 20 per cent
of the realised profits, as defined in the management contract,
attributable to such property investment on its realisation,
provided that AREOF achieves an annualised return, as defined in
the management contract, in excess of 10%. No properties have been
disposed of during the period and on the basis of the return
achieved to date it is unlikely that a Manager's performance fee
will be payable in the foreseeable future and as such no fee
accrual has been made in the accounts.
Acquisition of Subsidiaries
The subsidiaries acquired during the year as detailed in note 21
were purchased from Funds managed by Argo Capital Management Cyprus
Limited which is a wholly owned subsidiary of Argo Group limited
and as such is an associate of the Manager. The Funds from which
the subsidiaries were acquired have their own investors who are the
beneficiaries of the assets of the Funds, however, Argo Capital
Management Cyprus Limited has full discretionary control over these
Funds and retains all voting rights over the investments in the
portfolios of the Funds.
Related Party Loans
Various loans as shown in note 14 have been made to subsidiaries
in the Group by Funds managed by Argo Capital Management Cyprus
Limited which as explained above is related to The Manager.
23. OPERATING LEASE COMMITMENTS
The Group leases its investment properties under non-cancellable
operating lease agreements. The leases have varying terms,
escalation clauses and renewal rights. Rental income from operating
leases is recognised as rental income on a straight line basis over
the term of the relevant lease.
The future anticipated lease receipts under non-cancellable
operating leases which are not recognised as an asset at 30
September 2011 are as follows:
2011 2010
---------------------------------------- ------------------- -------------------
EUR'000 EUR'000
---------------------------------------- ------------------- -------------------
Within 1 year 27,557 22,348
---------------------------------------- ------------------- -------------------
After 1 year and no later than 5 years 103,312 79,238
---------------------------------------- ------------------- -------------------
After 5 years 110,720 94,163
---------------------------------------- ------------------- -------------------
241,589 195,749
---------------------------------------- ------------------- -------------------
24. CONTINGENCIES
In Ukraine, the subsidiary Novi Biznes Poglyady LLC has several
ongoing disputes with the tax authorities covering the period
January 2008 to date. The disputed transactions relate firstly, to
the classification of the Odessa property land asset and the
applicable land tax rate and secondly, to the allowability of prior
period foreign exchange losses for use as offset against taxable
profits.
The Company and its local legal and tax advisers see these
claims as unfounded and inconsistent actions by the Ukrainian tax
authorities to maximize revenues, such activities being commonplace
and expected as part of the normal course of business in Ukraine.
The Company has never in the past had a material claim successfully
enforced against it and is rigorously contesting and defending its
position and is confident of the successful resolution of these
matters through the due legal process.
The maximum potential liability of the Company for additional
tax and penalties in the unexpected event of being unsuccessful in
the appeal process would be some Eur 3.5m, a part of which is
recoverable from tenants through service charge. However, as it is
considered highly unlikely that this liability will crystallize no
provision or adjustment has been made in the consolidated financial
statements in relation to these issues.
25. COMMITMENTS
The Group has entered into construction related contracts
through its operating subsidiaries as a result of which capital
expenditure contracted for at 30 September 2011 but not yet
incurred is as follows:
2011 2010
------------------------------- ------------------- -------------------
EUR'000 EUR'000
------------------------------- ------------------- -------------------
Investment properties 7,451 -
------------------------------- ------------------- -------------------
Property, plant and equipment - 44
------------------------------- ------------------- -------------------
7,451 44
------------------------------- ------------------- -------------------
26. EVENTS AFTER THE BALANCE SHEET DATE
Bank Financing
In December 2011 the Company decided not to pay its interest due
to Proton Bank which created a default on its loan facility as more
fully explained in note 14.
27. TREASURY POLICIES AND FINANCIAL RISK MANAGEMENT
Treasury policies
The objective of the Group's treasury policies is to manage the
Group's financial risk, secure cost effective funding for the
Group's operations and to minimise the adverse effects of
fluctuations in the financial markets on the value of the Group's
financial assets and liabilities on reported profitability and on
cash flows of the Group.
The Group finances its activities with a combination of equity
and bank loans. Other financial assets and liabilities, such as
trade receivables and payables, arise directly from the Group's
operating activities. The Group may also enter into derivative
transactions, principally interest rate swaps, to manage the
interest rate risk arising from the Group's operations and its
sources of finance. The Group does not trade in financial
instruments.
The main risks associated with the Group's financial assets and
liabilities are set out below, together with the policies currently
applied by the Board for their management. Derivative instruments
may be used to change the economic characteristics of financial
instruments in accordance with the Group's treasury policies.
The Group is exposed to market risk, interest rate risk, credit
risk, liquidity risk and currency risk arising from the financial
instruments it holds. The risk management policies employed by the
Group to manage these risks are discussed below.
Market risk
(a) Interest rate risk
The Group's policy is to manage its cost of borrowing using a
mix of fixed and variable rate debt. The Group does not seek to
predict interest rate fluctuations and accordingly where it has
material exposure to variable rate debt it seeks to minimise this
risk by using hedging instruments, notably floating to fixed
interest rate swaps (see note 14).
Most fixed rate interest-bearing debt is not exposed to cash
flow interest rate risk so there is no opportunity for the Group to
enjoy a reduction in borrowing costs in markets where rates are
falling or suffer an increase when they rise. In addition, the fair
value risk of fixed rate borrowing, being the risk of the Group
paying rates in excess of current market rates, means that the
Group is exposed to unplanned costs should debt be restructured or
repaid early.
In contrast, whilst floating rate borrowings are not exposed to
changes in fair value, the Group is exposed to cash flow risks as
costs increase if market interest rates rise.
The interest rate profile of the Group at 30 September 2011 was
as follows:
Total Fixed Variable Non interest Weighted
EUR'000 rate rate EUR'000 bearing avg. rate
EUR'000 EUR'000 %
----------------------- --------- --------- -------------- ----------------- -----------
Financial assets
----------------------- --------- --------- -------------- ----------------- -----------
Loans receivable 10,039 1,050 8,989 - 3.6
----------------------- --------- --------- -------------- ----------------- -----------
Trade and other
receivables 4,115 - - 4,115 -
----------------------- --------- --------- -------------- ----------------- -----------
Cash and cash
equivalents 12,185 - 8,126 4,059 3.8
----------------------- --------- --------- -------------- ----------------- -----------
Total financial
assets 26,339 1,050 17,115 8,174 3.1
----------------------- --------- --------- -------------- ----------------- -----------
Total Fixed Variable Non interest Weighted
EUR'000 rate rate EUR'000 bearing avg. rate
EUR'000 EUR'000 %
----------------------- --------- --------- -------------- ----------------- -----------
Financial liabilities
----------------------- --------- --------- -------------- ----------------- -----------
Bank loans 350,428 132,999 217,429 - 6.4
----------------------- --------- --------- -------------- ----------------- -----------
Other loans 5,388 4,573 800 15 12.1
----------------------- --------- --------- -------------- ----------------- -----------
Preference shares 5,135 5,135 - - 25.0
----------------------- --------- --------- -------------- ----------------- -----------
Interest rate
swap 2,513 2,513 - - 3.9
----------------------- --------- --------- -------------- ----------------- -----------
Trade and other
payables 19,144 - - 19,144 -
----------------------- --------- --------- -------------- ----------------- -----------
Total financial
liabilities 382,608 145,220 218,229 19,159 6.4
----------------------- --------- --------- -------------- ----------------- -----------
The interest rate profile of the Group at 30 September 2010 was
as follows:
Financial assets
----------------------- --------- --------- -------------- ------------- -----------
Loans receivable 9,610 879 8,731 - 2.9
----------------------- --------- --------- -------------- ------------- -----------
Trade and other
receivables 2,056 - - 2,056 -
----------------------- --------- --------- -------------- ------------- -----------
Cash and cash
equivalents 4,416 - 2,633 1,783 9.1
----------------------- --------- --------- -------------- ------------- -----------
Total financial
assets 16,082 879 11,364 3,839 4.2
----------------------- --------- --------- -------------- ------------- -----------
Total Fixed Variable Non interest Weighted
EUR'000 rate rate EUR'000 bearing avg. rate
EUR'000 EUR'000 %
----------------------- --------- --------- -------------- ------------- -----------
Financial liabilities
----------------------- --------- --------- -------------- ------------- -----------
Bank loans 226,647 133,909 92,738 - 6.8
----------------------- --------- --------- -------------- ------------- -----------
Interest rate
swap 4,816 4,816 - - 3.9
----------------------- --------- --------- -------------- ------------- -----------
Trade and other
payables 6,258 - - 6,258 -
----------------------- --------- --------- -------------- ------------- -----------
Total financial
liabilities 237,721 138,725 92,738 6,258 6.6
----------------------- --------- --------- -------------- ------------- -----------
For the Group an increase of 100 basis points in interest rates
would result in an increase of the post tax profit (2010 loss) for
the year of EUR0.86m (2010: EUR0.88m). A decrease of 100 basis
points in interest rates would result in a decrease of the post tax
profit (2010 loss) for the year of EUR0.86m (2010: EUR0.88m).
The sensitivity analyses above are based on a change in an
assumption while holding all other assumptions constant; in
practice, this is unlikely to occur and changes in some assumptions
may be correlated.
(b) Currency risk
The Group operates in Europe and is exposed to foreign exchange
risk arising from various currency exposures, primarily with
respect to the Romanian Ron, Moldovan Leu and the Ukrainian
Hryvnia. Foreign exchange risk arises from future commercial
transactions, recognised monetary assets and liabilities and net
investments in foreign operations.
In the year covered by these consolidated financial statements
the Group has not entered into any currency hedging
transactions.
The table below summarises the Group's exposure to foreign
currency risk at 30 September 2011.
The Group's assets and liabilities at carrying amounts are
included in the table, categorised by the currency at their
carrying amount.
2011 EUR RON MDL UAH Total
----------------------------- --------------- --------------- --------------- --------------- ---------------
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------------------------- --------------- --------------- --------------- --------------- ---------------
Trade and other receivables 78 9,548 10 5,483 15,119
----------------------------- --------------- --------------- --------------- --------------- ---------------
Financial assets 8,989 - 1,050 - 10,039
----------------------------- --------------- --------------- --------------- --------------- ---------------
Cash and cash equivalents 58 8,636 13 3,478 12,185
----------------------------- --------------- --------------- --------------- --------------- ---------------
Total financial assets 9,125 18,184 1,073 8,961 37,343
----------------------------- --------------- --------------- --------------- --------------- ---------------
Bank loans 350,428 - - - 350,428
----------------------------- --------------- --------------- --------------- --------------- ---------------
Other loans 15,486 - - - 15,486
----------------------------- --------------- --------------- --------------- --------------- ---------------
Preference shares 5,135 - - - 5,135
----------------------------- --------------- --------------- --------------- --------------- ---------------
Trade and other payables 7,330 14,512 65 965 22,872
----------------------------- --------------- --------------- --------------- --------------- ---------------
Financial liabilities 2,513 - - - 2,513
----------------------------- --------------- --------------- --------------- --------------- ---------------
Total financial liabilities 380,892 14,512 65 965 396,434
----------------------------- --------------- --------------- --------------- --------------- ---------------
Net balance sheet currency
position (371,767) 3,672 1,008 7,996 (359,091)
----------------------------- --------------- --------------- --------------- --------------- ---------------
2010 EUR RON MDL UAH Total
----------------------------- --------------- --------------- --------------- --------------- ---------------
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------------------------- --------------- --------------- --------------- --------------- ---------------
Trade and other receivables 74 5,720 7 5,629 11,430
----------------------------- --------------- --------------- --------------- --------------- ---------------
Financial assets 8,731 - 879 - 9,610
----------------------------- --------------- --------------- --------------- --------------- ---------------
Cash and cash equivalents 1,221 984 41 2,170 4,416
----------------------------- --------------- --------------- --------------- --------------- ---------------
Total financial assets 10,026 6,704 927 7,799 25,456
----------------------------- --------------- --------------- --------------- --------------- ---------------
Bank loans 226,647 - - - 226,647
----------------------------- --------------- --------------- --------------- --------------- ---------------
Trade and other payables 889 3,781 65 2,753 7,488
----------------------------- --------------- --------------- --------------- --------------- ---------------
Financial liabilities 4,816 - - - 4,816
----------------------------- --------------- --------------- --------------- --------------- ---------------
Total financial liabilities 232,352 3,781 65 2,753 238,951
----------------------------- --------------- --------------- --------------- --------------- ---------------
Net balance sheet currency
position (222,326) 2,923 862 5,046 (213,495)
----------------------------- --------------- --------------- --------------- --------------- ---------------
If the euro weakened/strengthened by 10% against the Romanian
Ron with all other variables held constant, post tax profit (2010
loss) for the year would have been EUR367k higher/lower (2010 :
EUR293k higher/lower).
If the euro weakened/strengthened by 10% against the Moldovan
Leu with all other variables held constant, post tax profit (2010
loss) for the year would have been EUR101k lower/higher (2010 :
EUR86k lower/higher).
If the euro weakened/strengthened by 10% against the Ukrainian
Hryvnia with all other variables held constant, post tax profit
(2010 loss) for the year would have been EUR800k lower/higher
(2010: EUR1,554k lower/higher).
The sensitivity analyses above are based on a change in an
assumption while holding all other assumptions constant; in
practice, this is unlikely to occur and changes in some assumptions
may be correlated, for example a change of interest rates and a
change of foreign exchange rates.
(c) Credit risk
Credit risk arises from cash and cash equivalents as well as
credit exposures with respect to rental customers, including
outstanding receivables and committed transactions; the failure by
counterparties to discharge their obligations could reduce the
amount of future cash flows from financial assets on hand at the
balance sheet date. Credit risk is managed on a local and group
basis with control of exposure to a single counterparty, or groups
of counterparty, and to geographical locations.
In the event of a default by an occupational tenant, the Group
will suffer a rental shortfall and incur additional costs,
including legal expenses in maintaining, insuring and re-letting
the property until it is re-let. General economic conditions may
affect the financial stability of tenants and prospective tenants
and/or the demand for and value of real estate assets. Where
possible rental contracts are made with potential tenants with an
appropriate credit history and existing tenants are monitored on an
ongoing basis in order to anticipate, and minimise the impact of
default by occupational tenants. Where possible, tenants risk is
mitigated through rental deposits or guarantees.
Trade and other receivables that are less than three months
overdue are not considered impaired. The ageing of trade
receivables is as follows:
2011 2010
--------------- ------------------- -------------------
EUR'000 EUR'000
--------------- ------------------- -------------------
0 to 3 months 4,115 2,056
--------------- ------------------- -------------------
Over 3 months - -
--------------- ------------------- -------------------
Total 4,115 2,056
--------------- ------------------- -------------------
Further disclosure regarding the Group's exposure to credit risk
in respect of its trade receivables is provided in note 11.
The Group policy is to maintain its cash and cash equivalent
balances with a reasonable diversity of banks. The Group monitors
the placement of cash balances on a regular basis and has policies
to limit the amount of credit exposure to any financial
institution.
The Directors have sought where possible to minimise the credit
risk on loans and advances made by securing these with bank
guarantees, mortgages on specific land assets and/or a pledge over
assets of guarantors (see note 12).
The Group's exposure to credit risk, where the carrying value of
financial assets is unsecured, is as shown below for each class of
asset:
2011 2011
--------------------------- -------------------- --------------------
EUR'000 EUR'000
--------------------------- -------------------- --------------------
Carrying Maximum
value exposure
(unsecured)
--------------------------- -------------------- --------------------
Loans receivable 10,039 8,989
--------------------------- -------------------- --------------------
Trade receivables 4,115 -
--------------------------- -------------------- --------------------
Cash and cash equivalents 12,185 12,185
--------------------------- -------------------- --------------------
Total 26,339 21,174
--------------------------- -------------------- --------------------
2010 2010
--------------------------- -------------------- --------------------
EUR'000 EUR'000
--------------------------- -------------------- --------------------
Carrying Maximum
value exposure
(unsecured)
--------------------------- -------------------- --------------------
Loans receivable 9,610 8,733
--------------------------- -------------------- --------------------
Trade receivables 2,056 -
--------------------------- -------------------- --------------------
Cash and cash equivalents 4,416 4,416
--------------------------- -------------------- --------------------
Total 16,082 13,149
--------------------------- -------------------- --------------------
Loans receivable consist of loans advanced to third parties,
including both principal and accrued interest thereon, some of
which are secured on land assets and have been impaired as
explained in note 12. The maximum exposure of the carrying value of
these secured loans has not been separately identified but may be
subject to further impairment depending on the future land
valuations of the underlying security.
(d) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient
cash, the availability of funding through an adequate amount of
committed credit facilities and the ability to close out market
positions.
The Group's objective is to maintain a balance between
continuity of funding and flexibility through the use of bank
loans. The current and future property development and investment
of the Group is reliant on bank funding continuing to be made
available at commercially attractive terms in order to fulfil such
property transactions. The terms of the Group's borrowings entitle
the lender to require early repayment should the Group breach any
of the covenants placed on it by its banks (see note 14).
Due to the dynamic nature of the underlying business, the
Investment Manager aims to maintain flexibility in funding by
keeping cash and committed credit lines available. The Group's
liquidity position is monitored on an ongoing basis by management
and is reviewed at least quarterly by the Board of Directors. A
summary with maturity of the Group's financial assets and
liabilities is as set out below:
2011 2010
------------------------------------- ------------------- -------------------
EUR'000 EUR'000
------------------------------------- ------------------- -------------------
Financial assets - current
------------------------------------- ------------------- -------------------
Trade and other receivables 4,115 2,056
------------------------------------- ------------------- -------------------
Loans receivable 10,039 9,610
------------------------------------- ------------------- -------------------
Cash and cash equivalents 12,185 4,416
------------------------------------- ------------------- -------------------
Total 26,339 16,082
------------------------------------- ------------------- -------------------
Financial liabilities - non-current
borrowings
------------------------------------- ------------------- -------------------
Between 1 and 2 years:
------------------------------------- ------------------- -------------------
Bank loans 81,240 61,991
------------------------------------- ------------------- -------------------
Between 2 and 5 years:
------------------------------------- ------------------- -------------------
Bank loans 147,333 65,793
------------------------------------- ------------------- -------------------
Related party loans 15 -
------------------------------------- ------------------- -------------------
Preference shares 5,122 -
------------------------------------- ------------------- -------------------
Over 5 years:
------------------------------------- ------------------- -------------------
Bank loans 53,858 24,149
------------------------------------- ------------------- -------------------
Related party loans 1,517 -
------------------------------------- ------------------- -------------------
289,085 151,933
------------------------------------- ------------------- -------------------
Financial liabilities - current
------------------------------------- ------------------- -------------------
Bank loans 69,345 75,481
------------------------------------- ------------------- -------------------
Related party loans 3,856 -
------------------------------------- ------------------- -------------------
Interest swap 2,513 4,816
------------------------------------- ------------------- -------------------
Trade and other payables 19,144 6,258
------------------------------------- ------------------- -------------------
94,858 86,555
------------------------------------- ------------------- -------------------
The interest rate swap liabilities designated at fair value
through the statement of comprehensive income are defined as level
2, in accordance with IFRS 7, as they are derived from inputs other
than quoted prices.
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns to shareholders and benefits for other stakeholders
and to maintain an optimal capital structure to reduce the cost of
capital.
In order to maintain or adjust the capital structure, the Group
may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce
debt.
Consistent with others in the industry, the Group monitors
capital on the basis of the gearing ratio. The ratio is calculated
as net debt divided by total capital. Net debt is calculated as
total borrowings as shown in the consolidated balance sheet less
cash and cash equivalents. Total capital is calculated as equity,
as shown in the consolidated balance sheet, plus net debt.
During 2011, the Group's strategy, which was unchanged from
2010, was to seek to achieve a gearing ratio at around 70%. The
gearing ratio at 30 September 2011 and 2010 were as follows:
2011 2010
---------------------------------- ------------------- -------------------
EUR'000 EUR'000
---------------------------------- ------------------- -------------------
Total borrowings 360,938 226,647
---------------------------------- ------------------- -------------------
Less : cash and cash equivalents (12,185) (4,416)
---------------------------------- ------------------- -------------------
Net debt 348,753 222,231
---------------------------------- ------------------- -------------------
Total equity 65,710 24,861
---------------------------------- ------------------- -------------------
Total capital 414,463 247,092
---------------------------------- ------------------- -------------------
Gearing ratio 84.1% 89.9%
---------------------------------- ------------------- -------------------
The decrease in leverage in the year is predominantly due to the
effect of the slightly lower
gearing of the acquired subsidiaries and their effect on the
overall Group position
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BKFDNNBKDKBK
Argo Real Est. (LSE:AREO)
過去 株価チャート
から 2 2025 まで 3 2025
Argo Real Est. (LSE:AREO)
過去 株価チャート
から 3 2024 まで 3 2025
