TIDMAURR
RNS Number : 2696E
Aurora Russia Limited
17 December 2009
17 December 2009
Aurora Russia Limited ("Aurora Russia" or the "Company")
Results for the 6 months ended 30 September 2009
Investee companies well positioned to grow market share as Russia's economy
improves
Successful fundraising of GBP15 million
Financial highlights
* Net asset value at 30 September 2009 up 2.0% to GBP81.43 million or 108.6p per
share, compared to GBP79.86 million or 106.5p per share at 31 March 2009
* Cash and cash equivalents as at 30 September 2009 were GBP3.49 million, compared
to GBP4.12 million as at 31 March 2009
* Consolidated net profit for the period of GBP1.99 million (GBP1.08 million for 6
months to 30 September 2008)
* Consolidated earnings per share for the period of 2.65p per share (1.44p per
share for 6 months to 30 September 2008)
Operational highlights - Focus on cost efficiency whilst pursuing market share
gains
Fully invested with GBP64.2million in five companies, three of which are leaders
in their field
OSG
* OSG remains the largest records management company in Russia, Ukraine and
Kazakhstan
* For the period to 30 September 2009, revenues in Russia grew 33% year-on-year in
RUR terms while Poland grew 44% year-on-year in PLN terms
* EBITDA was GBP1.1m up 21% year-on-year
Unistream Bank
* Continues to build on position as one of the largest money transfer companies in
Russia through c.280 of its own money transfer offices
* Revenue for the 9 month period to 30 September 2009 reduced by 5% in RUR terms
at GBP35 million, compared to the prior year period, due to the impact of the
financial crisis on the construction industry
* Operating income before fixed expenses during the period increased 9%
year-on-year to GBP15.7 million due to growth in foreign exchange commissions
and an increase in the share of own points of sale in the total volume
transferred
Superstroy
* Solid performance through focus on operational efficiencies and cost reduction,
with all 45 stores expected to be profitable in 2009
* EBITDA improved by 188% year-on-year with the company maintaining its market
position which, based on estimated turnover figures, ranks the company as 4th
among all chain DIY retailers operating in Russia (up from 7th in 2007)
Kreditmart and Flexinvest
* Due to the financial crisis, Kreditmart has shifted focus on insurance and
consumer loans until the mortgage market returns to Russia
* Management achieved a decrease in monthly cash burn of 71% through cost-cutting
and reduction of headcount by 53%
* Both Kreditmart and Flexinvest Bank together have net cash of GBP6.7 million and
GBP20 million in assets as at 30 September 2009
Successful fundraising of GBP15 million
* On 17 December 2009, the Company announced a Placing of GBP15 million of newly
issued shares
* GBP12.4 million will be used to purchase an additional 43.5% of OSG's shares
bringing the shareholding in OSG to 93.6% and to invest new money into OSG to
part fund a large warehouse facility
* Balance of proceeds of the Placing to be used to pay costs associated with the
Placing and retained by the Company as working capital
Detailed results for the investee companies are contained in the investment
management report
Commenting, Dan Koch, Chairman of Aurora Russia, said:
"While the global operating environment over the period has been challenging,
the investee companies have taken prudent measures to ensure that they are
positioned for growth. Three of the five investments are market leaders and I
believe that they are well-positioned for exit either through a strategic sale
or IPO.
I am encouraged that the Rouble is gaining strength and that currency stability
will likely support growth in consumption. Russia's reserves of over $400
billion remain one of the world's largest and should allow Russia to recover
faster than most world economies."
Enquiries:
Aurora Russia Limited
James Cook, Moscow+7 (495) 644 1662
John McRoberts, London +44 (0) 207 8397112
Investec Investment Banking
Patrick Robb +44 (0) 20 7597 4000
Martin Smith +44 (0) 20 7597 4000
Financial Dynamics
Ed Gascoigne-Pees +44 (0) 20 7269 7132
Kat Bloom +44 (0) 20 7269 7223
Chairman's Statement
Introduction
I am pleased to present the results of Aurora Russia Limited for the 6 months
ended 30 September 2009. While the past 12 months have been challenging for
companies not only in Russia, but throughout the world, our companies have made
prudent decisions to adapt to the changing environment while seeking to increase
market share and prepare themselves to resume growth once the market begins to
grow again.
I am encouraged by the recent trends being seen in Russia and believe that the
services sectors which the Company is targeting will benefit as the economy
improves. According to the Ministry of Economic Development, Russia's
seasonally-adjusted GDP grew 0.6% in the third quarter compared to the second
quarter, with the Russian Government predicting that the economy will grow 3-4%
in the fourth quarter of 2009. A recent report by Unicredit is also encouraging
when it states that the Russian middle class is expected to double over the next
five years. The key drivers contributing to this growth include an increase in
productivity and a decline in the working-age population. This trend over the
next five years will likely support the growth of migrant labour, low
unemployment and robust growth of disposable income. All of these factors are
likely to drive the growth of the services sector in Russia and our investee
companies in particular.
For the period to 30 September 2009, Aurora Russia Limited recorded a profit of
GBP1.99 million or 2.65p per share, based on the unaudited consolidated
statement of comprehensive income. Despite the difficult global operating
environment, the net asset value of the Company as at 30 September 2009 was
GBP81.43 million resulting in a Net Asset Value per share of 108.6 p.
Investment Review
Aurora Russia has invested a total of GBP64.2 million in five companies:
- OSG Records Management, a regional market leader in records management.
- Unistream Bank, a leading Russian money transfer company.
- Superstroy, one of the leading DIY retailers in Russia.
- Kreditmart, a finance company distributing financial services products such as
mortgages, insurance, consumer loans, and pension funds.
- Flexinvest Bank, a retail bank offering banking services.
For all of the investee companies, the focus over the past 12 months has been on
conserving cash, mitigating risk, reducing costs to drive efficiency, improving
margins, and seeking opportunities to grow market share as competitors scale
back. In contrast to much of the competition, the investee companies have
relatively low levels of debt. As a result all of the companies are well
positioned to grow market share as the economy improves. While the operating
environment continues to remain difficult, I am encouraged by the first signs of
stabilization and growth in the recent monthly performance of the investee
companies.
OSG, Unistream and Superstroy have maintained their leading market positions and
I believe that although Kreditmart is at an early stage in its development it
now appears to be the leading broker of financial products in the market due to
its main competitors either having left the market or reduced their size.
Portfolio Valuation
A valuation of the investment portfolio was performed at 30 September 2009,
resulting in an increase in value from GBP74.8 million to GBP77.8 million or 4%.
This valuation, recommended by the Valuation Committee of the Board, was
prepared by the Manager using methodology consistent with prior periods and was
formally adopted by the Board on 8 December 2009. These valuations are prepared
for accounting purposes only and comply with the International Private Equity
and Venture Capital Association ('IPEVCA') guidelines. The resultant valuations
of investments included in the Company's financial statements may not
necessarily reflect the value that a third party would be prepared to pay for
these businesses.
The current valuation reflects changes to the valuation performed as of 31 March
2009 as follows: Superstroy has been increased by GBP1.6 million to GBP14.8
million, an increase of 12%. Unistream Bank has been increased by GBP4.7 million
to GBP29.7 million, an increase of 19%. OSG Records Management has been
decreased by GBP0.7 million to GBP12.9 million, a decrease of 5%. The valuation
of Kreditmart and Flexinvest Bank have been decreased by 11% from GBP23.0
million to GBP20.4 million, reflecting the current uncertain market conditions
and lower values being placed on mortgage broking businesses.
The Placing
The Company also announces today a proposed issue of 37,500,000 new ordinary
shares (subject to approval by shareholders at an extraordinary general meeting)
at an issue price of 40p per share. It is proposed that GBP12.4 million of the
proceeds of the share issue will be used to purchase an additional 43.5% of
OSG's shares bringing the shareholding in OSG to 93.6% (on a fully diluted basis
and assuming all convertible loans in OSG held by the Company are converted),
and to invest new money into OSG to part fund a large warehouse facility in
Moscow. The balance of the proceeds will be used to pay costs associated with
the share issue and retained by the Company as working capital.
The balance of OSG's 6.4% shares are held in an option pool, with approximately
2.0% held by previous employees who may wish to exercise and sell the shares to
the Company. If such option shares are purchased by the Company, the net amount
payable to the option holders will be GBP0.18 million which will increase the
Company's shareholding in OSG to 95.5%. However, the Company expects to increase
the management pool by an additional 3.6% resulting in its overall holding in
OSG being approximately 92%.
The Company is delighted to have been successful in securing commitments for
this placing from both existing and new shareholders resulting in the company
widening its investor base. I believe that the benefit to the Company and its
shareholders outweighs the dilutive effect the placing has on shareholders not
participating. Taking control of OSG and investing in a warehouse in Moscow will
no doubt improve the future stability of the business, and improve operational
and financial efficiencies resulting in higher growth for OSG and a more
attractive and certain exit.
Speaking of shareholder value, I believe that by undertaking this fundraising
process the Directors are able to better understand the investor market and what
investors are looking for from the Company. A major concern was that no strategy
has ever been formally announced as to what the Company will do with sale
proceeds of each investment albeit the Company does have a dividend policy. The
Board has therefore announced that the Company will return cash to shareholders
as each of its portfolio companies are sold. Following the receipt of cash from
a disposal of any of its portfolio companies, it will return to Shareholders an
amount up to a maximum of the lesser of the total net proceeds received on a
realisation of a portfolio company and 1.5 times the total amount invested in
that portfolio company plus the pro-rata allocation of costs of the Company to
date until the Company has returned a total of GBP105 million to Shareholders.
Any proceeds in excess of this amount should be retained by the Company for
re-investment purposes.
However if the amount received on the disposal of a portfolio company is less
than 1.5 times the total amount invested in such company plus Allocated Costs,
it is anticipated that the total funds received from the sale of the portfolio
company (net of disposal expenses) will be returned to Shareholders.
Furthermore, in the event that the Board believes that the Company needs to
retain any portion of the cash proceeds on the sale of any portfolio company to
satisfy its status as a going concern, for general working capital purposes or
for the purposes of future investments in existing portfolio companies that are
deemed necessary by the Board, it will do so.
The Board has also agreed to amend the option deed to keep the Manager
incentivised to continue to manage the investments that the company has made.
Details are outlined in Note 17 to these accounts and in the Circular to
Shareholders dated 17 December 2009.
I would like to take this opportunity to confirm that following the Placing, it
is not the intention of the Board to raise additional capital by issuing further
shares at a discount to the prevailing NAV per share in the near to medium term
future. Nonetheless, the Board also recognise that it may, at any time, be in
the interests of the Company to raise additional capital and it may be necessary
to issue further shares on a pre-emptive basis or otherwise and, potentially, at
a discount to the prevailing NAV per share.
Outlook
While the global operating environment over the period has been challenging, the
investee companies have taken prudent measures to ensure that they are
positioned for growth. Three of the five investments are market leaders and I
believe that they are well-positioned for exit either through a strategic sale
or IPO. While Kreditmart and Flexinvest Bank have been the most affected by the
financial crisis, they are well positioned to benefit as the mortgage market
recovers in Russia. My feelings arising from a recent visit to Moscow are that
confidence is growing and there is improvement in general business sentiment. As
challenging as the crisis has been over the past several months, it also
provided an opportunity for companies to review how they have operated and to
put in place more efficient systems to grow. As a result, the strongest
companies have survived and are positioned to benefit as the economy improves. I
am encouraged that the Rouble is gaining strength and that currency stability
will likely support growth in consumption. Russia's reserves of over $400
billion remain one of the world's largest and should allow Russia to recover
faster than most world economies.
I am pleased to report the performance of the investee companies of Aurora
Russia Limited and look forward to the future with confidence.
Dan Collinson Koch
Chairman of the Board
Aurora Russia Limited
17 December 2009
Investment Manager's Report
Overview
The six months to 30 September 2009 was a challenging time for companies
worldwide as a result of the worldwide financial crisis. While our investee
companies focused on conserving cash, cutting overhead, and mitigating risk
during this period they also pursued opportunities to gain market share. Aurora
Investment Advisors (the 'Manager') provided considerable hands-on operational
and strategic support to assist them during this period which we believe will
result in long-term value for shareholders.
Since the Company's IPO in March 2006, Aurora Russia Limited has invested a
total of GBP64.2 million in five companies. The companies are valued at 30
September 2009 at GBP77.8 million, representing an increase of 4% since 31 March
2009. Aurora Russia Limited owns 26% of Unistream Bank, 100% of Kreditmart, 100%
of Flexinvest Bank, 24.3% of SuperStroy's holding company, and 39.4% of OSG
Records Management plus a convertible loan.
Three of our five investments continue to be the market leaders in their
sectors. OSG Records Management continues to have a commanding market lead in
records management and services in its key markets of Russia, Ukraine, and
Kazakhstan. In addition, OSG continues to have a strong position in the Polish
and Bulgarian records management sector. Unistream Bank continues to be a leader
in the outbound Russian money transfer market. Unistream continues to build its
market share by targeting the underserved inter-Russia money transfer segment as
well as opening new money transfer corridors. SuperStroy remains the leading DIY
retailer in the Urals region of Russia and is one of the largest independent DIY
retailers in Russia. Kreditmart has adapted its strategy to address the downturn
in the mortgage market by reducing its cost base and by diversifying its product
offering. The company has focused on building its distribution of insurance
products and consumer loans and remains positioned to benefit from the untapped
potential of Russia's mortgage market. Flexinvest Bank moved its headquarters to
central Moscow and is working with Kreditmart to build its distribution of
mortgages, consumer loans, and deposit products to its customers.
OSG Records Management
We are delighted with the performance of OSG Records Management during the
period despite the worldwide financial crisis. OSG remains the largest records
management company in Russia, Ukraine and Kazakhstan. It is the second largest
in Poland and is considered a regional market leader. OSG continues to provide
cost-effective total records management, document storage, data security,
document scanning and confidential data destruction solutions. OSG has a first
mover advantage in Central and Eastern Europe which is still underserved. OSG's
management estimates that Russia, OSG's largest market, has a vended ratio of
under 2%. The market offers enormous growth opportunities and it is expected
that the vended portion of the market will increase from approximately US$20
million in 2008 to approximately US$200 million in 2012 reaching the current
levels seen in Latin America (vended portion of approximately 20%).
As at 30 September 2009, the company's revenues in Russia have grown 33%
year-on-year in RUR terms while Poland grew 44% year-on-year in PLN terms.
However, due to exchange rate differences, revenue remained by and large flat in
US Dollar (the reporting currency) terms. For the period to 30 September 2009,
OSG reported revenues1 of GBP7.6 million compared to GBP7.7 million as of the
same period in 2008. For the same period EBITDA1 was GBP1.1 million up 21%
year-on-year.
The valuation of our investment (equity and debt) in OSG at 30 September 2009
resulted in a decrease of GBP0.7 million to GBP12.9 million compared to the
valuation at 31 March 2009 of GBP13.6 million.
Recognising the high growth prospects of OSG, Aurora Russia Limited has
announced that it will invest an additional GBP12.4 million to purchase the
shares of the other non-management shareholders as well as to finance the down
payment on a mega-warehouse facility in Moscow. This investment will bring
Aurora Russia Limited's shareholding in OSG to 93.6% (on a fully diluted basis
and assuming all convertible loans in OSG held by Aurora Russia Limited are
converted). The balance of OSG's shares are held in a management option pool of
6.4%, with approximately 2.0% of these held by previous employees who may wish
to exercise and sell the shares. If these option shares are purchased by Aurora
Russia Limited, the net amount payable to the option holders will be GBP0.18
million which will increase its shareholding in OSG to 95.6%. However, Aurora
Russia Limited expects to increase the management option pool by an additional
3.6% resulting in its fully diluted holding in OSG being approximately 92%.
The additional investment will allow the company to consolidate some of its
warehouses in Moscow to provide enhanced operational efficiency, improved
EBITDA, and will provide Aurora Russia Limited with full control. It will result
in greater transparency to shareholders since the company will now be fully
consolidated into the financials of Aurora Russia Limited. We believe that this
transaction is in the interests of the company and will improve both the
long-term market position of the company as well as greater value over time for
Aurora Russia Limited's shareholders.
Unistream Bank
Unistream Bank continues to build on its position as one of the largest money
transfer companies in Russia by providing competitive money transfer and foreign
exchange products through c.280 of its own money transfer offices throughout
Russia. It is regulated by the Central Bank of Russia ("CBR") and has a banking
licence to receive and send money transfers, open bank accounts for corporate
entities and accept loan payments through its points of sale.
Unistream's primary customers are migrant construction workers who migrate from
the former Commonwealth of Independent States (CIS) to work in Russia's growing
construction industry. The events of the past year have clearly impacted the
construction industry and Unistream has felt this impact as its customers have
either lost their jobs in construction or have reduced the amount of money
transferred. According to the Central Bank of Russia, outbound transfers for Q2
2009 were down 31% year-on-year in USD terms. Unistream's revenue for the 9
month period to 30 September 2009 was 5% lower in RUR terms at GBP35 million2
compared to the same period in the prior year, while operating income before
fixed expenses during the period increased 9% year-on-year to GBP15.7 million2
due to growth in foreign exchange commissions and an increase in the share of
own points of sale in the total volume transferred.
In 2008, Russia had one of the fastest growth rates for outbound money transfer
volumes in the world. Unistream has a commanding lead in the Russian outbound
money transfer market and management believes that it can gain market share on
the intra-Russia money transfer market as well as expanding in other money
transfer corridors.
Russia has committed to invest $1.1 trillion over the next five years to improve
its infrastructure. This commitment, along with Russia's declining working-age
population, should encourage further growth in migrant labour working in Russia,
low unemployment, and robust wage and disposable income growth. All of these
factors should benefit the further growth and expansion of Unistream.
Since 2006, Unistream Bank has increased its annual volume of money transfers
from approximately US$1.84 billion to approximately US$3.68 billion in 2007 and
US$4.91 billion in 2008 (an increase of 33% over 2007). In 2008, Unistream
posted revenues2 of GBP51.0 million up from GBP29.5 million in 2007.
The valuation of our 26% stake in Unistream Bank at 30 September 2009 resulted
in an uplift of GBP4.7 million to GBP29.7 million compared to the valuation at
31 March 2009 of GBP25.0 million.
Kreditmart
Kreditmart commenced operations in March 2007 and distributes a wide range of
financial services products through its seven locations in Moscow, St.
Petersburg, Tyumen, Yekaterinburg, Kazan, and Rostov-on-Don as well as the
internet.
Kreditmart, a wholly owned subsidiary of Aurora Russia Limited, distributes
mortgages, equity release loans, insurance, auto loans, pension funds, mutual
funds, and other consumer finance products.
While the global financial crisis has impacted Russia, Kreditmart has continued
to operate while shifting its focus on insurance and consumer loans until the
mortgage market returns. Management decreased monthly cash burn by 71% through
aggressive cost-cutting measures and a reduction of headcount by 53%.
Kreditmart broker revenue fell 38% compared to the same period in 2008 to GBP0.2
million. However, month-on-month revenues have begun to rebound with 26% growth
in September. In light of the current market, the valuation of Kreditmart
(including Flexinvest- see below) at 30 September 2009 resulted in a write down
of GBP2.6 million to GBP20.4 million compared to the valuation at 31 March 2009
of GBP23.0 million.
Since mortgage penetration in Russia remains at less than 3% of GDP and total
consumer debt at c.10% of GDP, Russia represents one of the most attractive
growth markets in Europe for financial services. Through its established
distribution system, Kreditmart is well-positioned to capitalize on this growth.
Flexinvest Bank
Flexinvest Bank ("Flexinvest") was acquired in May 2008 through Flexinvest
Limited, a wholly owned subsidiary for a consideration of GBP5.1 million (RUR
237 million). Additional funds of GBP1.2 million (RUR 57 million) were invested
into the bank by Flexinvest to cover post-acquisition infrastructure costs and
fund ongoing operations.
As of 30 September 2009, both Kreditmart and Flexinvest had GBP20 million in
assets. Flexinvest Bank distributes short-term Rouble consumer loans as well as
offering a range of deposit and banking products including deposit boxes,
currency exchange and money transfer.
Despite recent concerns about the increase in non-performing loans, Russia
continues to be an attractive market for retail banking in a medium to long term
and recently saw banks like HSBC start its retail operations in Russia.
The Manager remains confident that Flexinvest Bank will have opportunities to
grow its assets and will continue benefiting from the already established
distribution platform of Kreditmart.
Kreditmart and Flexinvest Bank together reported net cash of GBP6.7 million as
at 30 September 2009.
SuperStroy
Superstroy showed solid performance during the period by focusing on the
improvement of operational efficiencies and cost reduction. All 45 stores are
expected to be profitable in 2009. RosBusinessConsulting estimates that the
overall DIY market in Russia will be down by 25-36% in USD terms in 2009.
For the 9 months ended 30 September 2009, the company's revenues have declined
11% year-on-year in local currency terms to GBP91.5 million2 with most of the
decline due to its wholesale operations while retail sales were down by only 3%.
In 2008, it posted revenues of approximately GBP142.4 million2 up on 2007
revenues of GBP95.6 million2.
While the company temporarily put its expansion plans on hold during the crisis,
it improved EBITDA by 188% year-on-year to GBP2.2 million2 and increased margins
while maintaining its market position.
Based on estimated turnover figures, Superstroy ranks fourth among all chain DIY
retailers operating in Russia up from being seventh in 2007.
Superstroy is the only company in Aurora Russia Limited's portfolio that has any
debt of any substance. It has a credit line with Sberbank of RUR 800 million
(GBP16.5 million) and ZAO Uralprivat bank of RUR 60 million (GBP1.2 million). At
30 September 2009, the outstanding balance on the two facilities was RUR c.0.49
billion (approximately GBP10.2 million). The interest rate (before fees) is
charged at between 16.0% and 16.5% per annum however Sberbank recently approved
a reduction in the rate to 14.25% per annum.
Given a general rebound in the valuation multiples of public retailers and DIY
retailers, in particular, the valuation of SuperStroy as at 30 September 2009
resulted in an uplift of GBP1.6 million for our 24.3% stake to GBP14.8 million
compared to the valuation at 31 March 2009 of GBP13.2 million.
Conclusion
Despite the challenges of the global financial crisis, the value of the
portfolio grew by 4% during the period. The Manager remains positive about the
growth prospects for the services sectors in Russia. While the Russian economy
has historically been dependent on the price of commodities, the economy is
becoming more diversified. The services sector should benefit from the continued
diversification away from commodities and grow at a faster rate. We remain very
positive about all of Aurora Russia Limited's investments and we believe that
all five are positioned to benefit from the growth of the services sector and to
gain market share.
The Russian market continues to provide opportunities for growth for
well-managed companies. Due to the low penetration and vast market potential in
the sectors we invest in, our portfolio companies are positioned to grow further
over the coming period. We will continue to identify and target the niches where
our companies can gain a competitive advantage while securing our current market
position for continued growth.
Aurora Investment Advisors Limited
December 2009
1 Translated at September 30 2009 spot rate of 0.63 GBP/USD
2 Translated at September 30 2009 spot rate of 47.7 RUR/GBP
Independent Review Report to Aurora Russia Limited
We have been engaged by the Company to review the unaudited condensed set of
financial statements in the half yearly financial report for the six months
ended 30 September 2009 which comprise the unaudited condensed consolidated
statement of comprehensive income, the unaudited condensed company statement of
comprehensive income, the unaudited condensed consolidated statement of
financial position, the unaudited condensed company statement of financial
position, the unaudited condensed consolidated statement of changes in equity,
the unaudited condensed consolidated statement of cash flows and related
explanatory notes. We have read the other information contained in the half
yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the unaudited
condensed set of financial statements.
This report is made solely to the Company, in accordance with the terms of our
engagement letter dated 30 September 2009. Our work has been undertaken so that
we might state to the Company those matters we are required to state to them in
an independent review 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 Company, for our review work, for this report, or for the conclusions we
have reached.
Directors' responsibilities
The half yearly financial report is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the half yearly
financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 2, the annual financial statements of the Company are
prepared in accordance with International Financial Reporting Standards
("IFRS"). The unaudited condensed set of financial statements included in this
half yearly financial report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on the unaudited
condensed set of financial statements in the half yearly financial report based
on our review.
Scope of Review
We conducted our review in accordance with International Standards on Review
Engagements (UK and Ireland) ISRE 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the unaudited condensed set of financial statements in the half yearly
financial report for the six months ended 30 September 2009 is not prepared, in
all material respects, in accordance with International Accounting Standard 34.
KPMG Channel Islands Limited
PO Box 20
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St. Peter Port
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17 December 2009
Unaudited Condensed Half Year Consolidated Statement of Comprehensive Income
For the 6 month period 1 April 2009 to 30 September 2009
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | 1 April | | 1 April |
| | | | | 2009 | | 2008 |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | to 30 September | to 30 |
| | | | | 2009 | September |
| | | | | | 2008 |
+--+---------------------------------------+-------+---+---------------------+--------------+
| | |Notes | | GBP'000 | | GBP'000 |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | Revenue | | | 1,078 | | 1,470 |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | - Fees | | | 120 | | 244 |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | - Interest on long term mortgages and | | | 505 | | 707 |
| | other loans | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | - Loan interest | | | 214 | | 118 |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | - Bank interest | | | 120 | | 401 |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | - Dividend income | | | 119 | | - |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | Administration and operating expenses | 3 | | (3,373) | | (5,565) |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | Fair value movements on revaluation | 10 | | 5,081 | | 5,567 |
| | of investments | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | Fair value movements on derivatives | | | - | | 3 |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | Impairment of loan receivable | | | - | | (370) |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | Exchange (losses)/gains | | | (728) | | 912 |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | Operating profit before tax | | | 2,058 | | 2,017 |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | Finance costs | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | Interest expense | | | (5) | | (10) |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | Profit before tax | | | 2,053 | | 2,007 |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | Tax | 4 | | (63) | | (927) |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | Profit and total comprehensive income | | | 1,990 | | 1,080 |
| | for the period | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | Profit per share - basic and diluted | | | 2.65p | | 1.44p |
+--+---------------------------------------+-------+---+--------------+------+--------------+
| | | | | | | |
+--+---------------------------------------+-------+---+--------------+------+--------------+
All items in the above statement derive from continuing operations.
The accompanying notes on pages 16 to 26 form an integral part of these
financial statements.
Unaudited Condensed Half Year Company Statement of Comprehensive Income
For the 6 month period 1 April 2009 to 30 September 2009
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | | | | | | |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | | | | 1 April | | 1 April 2008 |
| | | | | 2009 | | |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | | | | to 30 September | to 30 |
| | | | | 2009 | September |
| | | | | | 2008 |
+--+----------------------------------------+--------+----+---------------------+---------------+
| | | Notes | | GBP'000 | | GBP'000 |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | | | | | | |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | Revenue | | | 338 | | 316 |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | - Loan interest | | | 214 | | 118 |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | - Bank interest | | | 5 | | 198 |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | - Dividend income | | | 119 | | - |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | Administration and operating expenses | 3 | | (1,536) | | (1,695) |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | Fair value movements on revaluation of | 10 | | 2,478 | | 3,453 |
| | investments | | | | | |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | Fair value movements on derivatives | | | - | | 3 |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | Impairment of loan receivable | | | - | | (370) |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | Exchange (losses)/gains | | | (9) | | 56 |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | | | | | | |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | Operating profit before tax | | | 1,271 | | 1,763 |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | | | | | | |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | Tax | 4 | | - | | - |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | | | | | | |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | | | | | | |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | Profit and total comprehensive income | | | 1,271 | | 1,763 |
| | for the period | | | | | |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | | | | | | |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | | | | | | |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | Profit per share - basic and diluted | | | 1.69p | | 2.35p |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | | | | | | |
+--+----------------------------------------+--------+----+--------------+------+---------------+
| | | | | | | |
+--+----------------------------------------+--------+----+--------------+------+---------------+
All items in the above statement derive from continuing operations.
The accompanying notes on pages 16 to 26 form an integral part of these
financial statements.
Unaudited Condensed Half Year Consolidated Statement of Financial Position
As at 30 September 2009
+--+----------------------------------------+-------+---+----------+--------+---+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | 30 September 2009 | | 31 |
| | | | | | | March |
| | | | | | | 2009 |
+--+----------------------------------------+-------+---+-------------------+---+-----------+
| | |Notes | | GBP'000 | | GBP'000 |
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Non-current assets | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Goodwill | 5 | | - | | - |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Other intangible assets | 6 | | 2,299 | | 2,273 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Plant and equipment | 7 | | 818 | | 1,019 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Investments - at fair value through | 10 | | 57,436 | | 51,833 |
| | profit and loss | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Loans and advances to customers | 11 | | 8,853 | | 9,569 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Deferred tax assets | | | 170 | | 191 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | 69,576 | | 64,885 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Current assets | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Trade and other receivables | | | 677 | | 1,711 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Cash and cash equivalents | | | 10,205 | | 12,022 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Assets classified as held for sale | 8 | | 191 | | - |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | 11,073 | | 13,733 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Total assets | | | 80,649 | | 78,618 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Current liabilities | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Derivative liabilities | 12 | | - | | 46 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Trade and other payables | 13 | | 448 | | 742 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Total liabilities | | | 448 | | 788 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Total net assets | | | 80,201 | | 77,830 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Equity | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Share capital | | | 750 | | 750 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Special reserve | | | 70,750 | | 70,750 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Share options reserve | | | 2,120 | | 1,820 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Revenue reserve | | | 7,310 | | 5,320 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Translation reserve | | | (729) | | (810) |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Total equity | | | 80,201 | | 77,830 |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Net asset value per share - basic and | | | 106.9p | | |
| | diluted | | | | | 103.8p |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | The accounts on pages 10 to 26 were approved by the Board of Directors on 17 |
| | December 2009 and signed on its behalf by: |
+--+----------------------------------------------------------------------------------------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | John Whittle | | | Ben | | |
| | | | | Morgan | | |
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Director | | | Director | | |
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | Date | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | | | | | | |
+--+----------------------------------------+-------+---+----------+------------+-----------+
| | The accompanying notes on pages 16 to 26 form an integral part of these financial |
| | statements. |
+--+----------------------------------------+-------+---+----------+--------+---+-----------+
Unaudited Condensed Half Year Company Statement of Financial Position
As at 30 September 2009
+--+-----------------------------------------+--+-----+--+-----------+--+----+------------+
| | | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | 30 | | 31 March |
| | | | | September | | 2009 |
| | | | | 2009 | | |
+--+-----------------------------------------+--------+--+-----------+-------+------------+
| | | Notes | | GBP'000 | | GBP'000 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Non-current assets | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Investment in subsidiaries - at fair | 9 | | 20,400 | | 23,000 |
| | value through profit and loss | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Investments - at fair value through | 10 | | 57,400 | | 51,800 |
| | profit and loss | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | 77,800 | | 74,800 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Current assets | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Trade and other receivables | | | 224 | | 1,112 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Cash and cash equivalents | | | 3,488 | | 4,123 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | 3,712 | | 5,235 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Total assets | | | 81,512 | | 80,035 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Current liabilities | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Derivative liabilities | 12 | | - | | 46 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Trade and other payables | 13 | | 80 | | 129 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Total liabilities | | | 80 | | 175 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Total net assets | | | 81,432 | | 79,860 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Equity | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Share capital | | | 750 | | 750 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Special reserve | | | 70,750 | | 70,750 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Share options reserve | | | 2,120 | | 1,820 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Revenue reserve | | | 7,812 | | 6,540 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Total equity | | | 81,432 | | 79,860 |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | Net asset value per share - basic and | | | 108.6p | | 106.5p |
| | diluted | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | | | | | | |
+--+-----------------------------------------+--------+--+--------------+----+------------+
| | The accounts on pages 10 to 26 were approved by the Board of Directors on 17 |
| | December 2009 and signed on its behalf by: |
+--+--------------------------------------------------------------------------------------+
| | | | | | | |
+--+--------------------------------------------+-----+--+--------------+----+------------+
| | | | | | | |
+--+--------------------------------------------+-----+--+--------------+----+------------+
| | John Whittle | | | Ben Morgan | | |
| | | | | | | |
+--+--------------------------------------------+-----+--+--------------+----+------------+
| | Director | | | Director | | |
+--+--------------------------------------------+-----+--+--------------+----+------------+
| | | | | | | |
+--+--------------------------------------------+-----+--+--------------+----+------------+
| | Date | | | | | |
+--+--------------------------------------------+-----+--+--------------+----+------------+
| | | | | | | |
+--+--------------------------------------------+-----+--+--------------+----+------------+
| | The accompanying notes on pages 16 to 26 form an integral part of these financial |
| | statements. |
+--+-----------------------------------------+--+-----+--+-----------+--+----+------------+
Unaudited Condensed Half Year Consolidated Statement of Changes in Equity
For the 6 month period 1 April 2009 to 30 September 2009
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | Share | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | Share | | Special | | Options | | Revenue | | Translation |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+----------------------+
| | | | Capital | | Reserve | | Reserve | | Reserve | | Reserve | | Total |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 |
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| For the period 1 April 2008 to 30 September 2008 | | | | | | | | |
+--------------------------------------------------------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| At 1 April 2008 | | 750 | | 70,750 | | 1,220 | | 4,894 | | (5) | | 77,609 |
+-------------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| Net profit for the | | - | | - | | - | | 1,080 | | - | | 1,080 |
| period | | | | | | | | | | | | |
+-------------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| Recognition of share-based | - | | - | | 300 | | - | | - | | 300 |
| payments | | | | | | | | | | | |
+---------------------------------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| Foreign currency | | - | | - | | - | | - | | (114) | | (114) |
| translation reserve | | | | | | | | | | | | |
+-------------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| At 30 September 2008 | | 750 | | 70,750 | | 1,520 | | 5,974 | | (119) | | 78,875 |
+-------------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| For the period 1 October 2008 to 31 | | | | | | | | | | |
| March 2009 | | | | | | | | | | |
+-------------------------------------------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| At 1 October 2008 | | 750 | | 70,750 | | 1,520 | | 5,974 | | (119) | | 78,875 |
+-------------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| Net loss for the period | | - | | - | | - | | (654) | | - | | (654) |
| | | | | | | | | | | | | |
+-------------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| Recognition of share-based | - | | - | | 300 | | - | | - | | 300 |
| payments | | | | | | | | | | | |
+---------------------------------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| Foreign currency | | - | | - | | - | | - | | (691) | | (691) |
| translation reserve | | | | | | | | | | | | |
+-------------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| At 31 March 2009 | | 750 | | 70,750 | | 1,820 | | 5,320 | | (810) | | 77,830 |
+-------------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| For the period 1 April 2009 to 30 September 2009 | | | | | | | | |
+--------------------------------------------------------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| At 1 April 2009 | | 750 | | 70,750 | | 1,820 | | 5,320 | | (810) | | 77,830 |
+-------------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| Net profit for the | | - | | - | | - | | 1,990 | | - | | 1,990 |
| period | | | | | | | | | | | | |
+-------------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| Recognition of share-based | - | | - | | 300 | | - | | - | | 300 |
| payments | | | | | | | | | | | |
+---------------------------------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| Foreign currency | | - | | - | | - | | - | | 81 | | 81 |
| translation reserve | | | | | | | | | | | | |
+-------------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| At 30 September 2009 | | 750 | | 70,750 | | 2,120 | | 7,310 | | (729) | | 80,201 |
+-------------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
| | |
+--+----------------------+-------+---------+--+---------+--+---------+--+---------+--+---------+--+---------+
The accompanying notes on pages 16 to 26 form an integral part of these
financial statements.
Condensed Consolidated Statement of Cash Flows
For the 6 month period 1 April 2009 to 30 September 2009
+----------------------------------+-------------------+----------------+-------------------+
| | Notes | 1 April 2009 | 1 April 2008 |
| | | to 30 | to 30 September |
| | | September 2009 | 2008 |
+----------------------------------+-------------------+----------------+-------------------+
| Cash flows from | | GBP'000 | GBP'000 |
| operating activities | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Profit before tax | | 2,053 | 2,007 |
+----------------------------------+-------------------+----------------+-------------------+
| Loan interest | | (214) | (118) |
+----------------------------------+-------------------+----------------+-------------------+
| Interest on long | | (505) | (707) |
| term mortgages | | | |
| and other loans | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Bank interest | | (120) | (401) |
+----------------------------------+-------------------+----------------+-------------------+
| Dividend income | | (119) | - |
+----------------------------------+-------------------+----------------+-------------------+
| Adjustments for | | 1,095 | 781 |
| movements in working | | | |
| capital: | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Decrease in | | 1,019 | 47 |
| operating trade | | | |
| and other | | | |
| receivables | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Decrease in operating | | (429) | (24) |
| trade and other | | | |
| payables | | | |
| Adjust for: | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Revaluation of | 10 | (5,081) | (5,567) |
| investments | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Recognised share | | 300 | 300 |
| based payments | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Fair value | | - | (3) |
| movements on | | | |
| revaluation of | | | |
| derivatives | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Exchange | | 728 | (912) |
| losses/(gains) | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Interest expense | | 5 | 10 |
+----------------------------------+-------------------+----------------+-------------------+
| Impairment of | | - | 370 |
| loan receivable | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Loss on property, | | 87 | - |
| plant and | | | |
| equipment written | | | |
| off | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Depreciation and | | 161 | 218 |
| amortisation | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Provision for | | (428) | 105 |
| loan losses | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Interest paid | | (5) | (10) |
+----------------------------------+-------------------+----------------+-------------------+
| Taxation paid | | - | (86) |
+----------------------------------+-------------------+----------------+-------------------+
| Dividend income | | 119 | - |
+----------------------------------+-------------------+----------------+-------------------+
| Bank and loan interest | | 681 | 424 |
| received | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Loss on forex contract | | (46) | - |
| closed out | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Increase in | 8 | (191) | - |
| non-current assets | | | |
| held for sale | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Loans advanced to | | 407 | 6,389 |
| customers | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Net cash | | (1,578) | 2,042 |
| (outflow)/inflow from | | | |
| operating activities | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Cash flows from | | | |
| investing activities | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Acquisition of | | - | (3,110) |
| subsidiary net of cash | | | |
| acquired | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Acquisition of | | - | (15) |
| investments | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Acquisition of plant | 7 | (47) | (152) |
| and equipment | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Loans advanced to | | (307) | - |
| associated company | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Increase/(decrease) in | | 112 | (1,638) |
| deposits | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Net cash outflow from | | (242) | (4,915) |
| investing activities | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Net decrease in cash | | | |
| and cash equivalents | | | |
+ + +----------------+-------------------+
| | | (1,820) | (2,873) |
+----------------------------------+-------------------+----------------------------------+-------------------+
| Opening cash and cash | | 12,022 | 17,806 |
| equivalents | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Effect of exchange | | 3 | 1,671 |
| rate changes | | | |
+----------------------------------+-------------------+----------------+-------------------+
| Closing cash and cash | | 10,205 | 16,604 |
| equivalents | | | |
+----------------------------------+-------------------+----------------+-------------------+
The accompanying notes on pages 16 to 26 form an integral part of these
financial statements.
Notes to the Unaudited Condensed Half Year Consolidated Financial Statements
For the 15 month period from 1 January 2007 to 31 March 2 For the 6 month period
1 April 2009 to 30 September 2009
1. General information
The consolidated financial statements of the Company and its subsidiaries ('the
Group') are available upon request from the Company's registered office or at
www.aurorarussia.com.
2. Accounting Policies
2.1 Basis of preparation
These unaudited interim condensed financial statements have been consolidated
and prepared in accordance with International Accounting Standard (IAS) 34
"Interim Financial Reporting" and with applicable legal and regulatory
requirements of Guernsey Law and of AIM.
The condensed interim financial statements do not include all the information
and disclosures required in the annual financial statements, and should be read
in conjunction with Aurora Russia Limited's audited report and financial
statements for the year ended 31 March 2009. The condensed interim financial
statements were approved by the Board of Directors on 8 December 2009.
2.2 Accounting period
The comparative numbers used for the condensed half year consolidated statement
of comprehensive income, condensed half year consolidated statement of changes
in equity and condensed half year consolidated statement of cash flows are that
of the half year period ended 30 September 2008, which is considered a
comparable period as defined per IAS 34. The comparatives used in the condensed
half year consolidated and company statements of financial position are that of
the previous financial year end, 31 March 2009.
2.3 Significant accounting policies
The same accounting policies, presentation and methods of computation are
followed in these condensed interim financial statements as those followed in
the preparation of the Company's and Group's audited financial statements for
the year ended 31 March 2009, except for the adoption of new Standards and
Interpretations effective as of 1 January 2009, noted below:
- IAS 1 Presentation of Financial Statements
The revised Standard separates owner and non-owner changes in equity. The
statement of changes in equity includes only details of transactions with
owners, with non-owner changes in equity presented as a single line. In
addition, the Standard introduces a statement of comprehensive income: it
presents all items of recognised income and expense, either in one single
statement, or in two linked statements. The Group has elected to present one
statement.
- IFRS 8 Operating Segments
This standard requires disclosure of information about the Group's operating
segments and replaces the requirement to determine primary (business) and
secondary (geographical) reporting segments of the Group. Adoption of this
Standard did not have any effect on the financial position or performance of the
Group. Additional disclosures about each of these segments are shown in note 14,
including revised comparative information.
2.4 Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the Chief Operating Decision Maker. The Chief Operating
Decision Maker, who is responsible for allocating resources, assessing
performance of the operating segments and making strategic decisions, has been
identified as the Board of Directors of Aurora Russia Limited.
2.5 Investments
Unquoted investments, including investments in subsidiaries, are designated as
fair value through profit and loss. Investments are initially recognised at fair
value. The investments are subsequently re-measured at fair value, which is
determined by the Directors on the recommendation of the Valuation Committee,
utilising the International Private Equity and Venture Capital Association
("IPEVCA") guidelines. Unrealised gains and losses arising from the revaluation
of investments are taken directly to the statement of comprehensive income.
Investments deemed to be denominated in a foreign currency are revalued in
Pounds Sterling terms even if there is no revaluation of the investment in its
currency of denomination.
Investments are held in Russian Roubles, which the Directors believe best
reflect the underlying nature of the currency exposure of the investee
companies. The investments are translated into Pounds Sterling at period end,
which is the functional currency of the Group and presentation currency of the
consolidated financial statements. Unrealised gains and losses arising from the
translation of investments are taken directly to the statement of comprehensive
income.
The Group has taken advantage of the exemption available to it under IAS 28,
"Investments in associates" and is accounting for the investments in
Whitebrooks, Unistream and Grindelia at fair value through profit and loss,
which normally as a result of the size of the stake in these two companies would
potentially qualify as associated companies and are required to be equity
accounted.
2.6 Impairment of tangible and intangible assets excluding goodwill
At each reporting date, the Group reviews the carrying amounts of its tangible
and intangible assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of
the impairment loss. Recoverable amount is the higher of fair value less costs
to sell and value in use. Where an impairment loss subsequently reverses, the
carrying amount of the asset is increased to the revised estimate of its
recoverable amount, so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been
recognised for the asset in prior years. Impairment losses and reversals of
impairment losses are recognised immediately in the statement of comprehensive
income.
2.7 Intangible assets
An intangible asset is regarded as having an indefinite useful life when, based
on all relevant factors, there is no foreseeable limit to the period over which
the asset is expected to generate net cash inflows for the Group. Amortisation
is not provided for these intangible assets. Intangible assets with indefinite
useful lives are tested for impairment at each reporting date by determining the
recoverable amount of the assets either individually or at the cash-generating
unit level. Where this assessment is performed at the cash-generating unit
level, the impairment is determined by assessing the recoverable amount of the
cash-generating unit to which the intangible asset relates. In such instances,
the recoverable amount is determined as the value-in-use of the cash-generating
unit by estimating the expected future cash flows in the unit and choosing a
suitable discount rate in order to calculate the present value of those cash
flows.
Where the recoverable amount is less than the carrying amount of the asset or
the cash-generating unit, an impairment loss is recognised in the statement of
comprehensive income.
The useful life of an intangible asset with an indefinite life is reviewed at
each reporting date to determine whether the indefinite life assessment
continues to be supportable. If not, the change in the useful life assessment is
made prospectively.
2.8 Goodwil
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets and liabilities of a subsidiary at the date of acquisition. Goodwill is
initially recognised as an asset at cost and is subsequently measured at cost
less any accumulated impairment losses. Goodwill which is recognised as an asset
is reviewed for impairment at least at each reporting date or if there is an
indication of impairment. Any impairment is recognised immediately in the
statement of comprehensive income and is not subsequently reversed.
2.9 Loans and advances to customers
Loans granted by the Group are initially recognised at fair value plus related
transaction costs. Where the fair value of consideration given does not equal
the fair value of the loan, for example where the loan is issued at lower than
market rates, the difference between the fair value of consideration given and
the fair value of the loan is recognised as a loss on initial recognition of the
loan and included in the consolidated statement of comprehensive income
according to the nature of these losses. Subsequently, loans are carried at
amortised cost. Loans to customers are carried net of any impairment losses.
All loans are secured against the property of the borrower, with adequate
provisions calculated and managed by the Risk Management Department of
Kreditmart and Flexinvest.
2.10 Use of estimates
The preparation of the Group's financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities and contingencies at the time of the Group's financial statements,
and revenue and expenses during the reporting period. Actual results could
differ from those estimated. Significant estimates in the Group's financial
statements include the amounts recorded for the fair value of the investments
and the impairment loss allowance on loans to customers. By their nature, these
estimates and assumptions are subject to measurement uncertainty and the effect
on the Group's financial statements of changes in estimates in future periods
could be significant.
The significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the consolidated financial statements for the year ended 31
March 2009.
2.11 Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method.
3. Administration and operating expenses
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | 1 April | 1 April |
| | | | | | | | 2009 to 30 | 2008 to |
| | | | | | | | September | 30 |
| | | | | | | | 2009 | September |
| | | | | | | | | 2008 |
+--+---------------------------+--+---------+--+---------+--+------------+-----------+
| | | | | | | | GBP'000 | | GBP'000 |
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | Company | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | Investment management fee | | | | | | 876 | | 902 |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | Auditors' remuneration | | | | | | 22 | | 37 |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | Directors' remuneration | | | | | | 94 | | 102 |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | Share-based payments | | | | | | 300 | | 300 |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | Other operating and administrative | | | | 244 | | 354 |
| | expenses | | | | | | |
+--+----------------------------------------+--+---------+--+---------+--+-----------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | 1,536 | | 1,695 |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | Kreditmart | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | Auditors' remuneration | | | | | | 25 | | 4 |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | Directors' remuneration | | | | | | 15 | | 53 |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | 3,385 |
| | Other operating and administrative | | | | 1,354 | | |
| | expenses | | | | | | |
+--+----------------------------------------+--+---------+--+---------+--+-----------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | 3,442 |
| | | | | | | | 1,394 | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | Flexinvest Limited | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | 12 |
| | Auditors' remuneration | | | | | | 27 | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | 416 |
| | Other operating and administrative | | | | 416 | | |
| | expenses | | | | | | |
+--+----------------------------------------+--+---------+--+---------+--+-----------+
| | | | | | | | 443 | | 428 |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
| | Total for the Group | | | | | | 3,373 | | 5,565 |
+--+---------------------------+--+---------+--+---------+--+---------+--+-----------+
4.Tax
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | Group | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | Kreditmart | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | Current tax charge | | | | | | (49) | | (21) |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | Deferred tax (charge) | | | | | | - | | (935) |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | | | | | | | (49) | | (956) |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | Flexinvest Limited | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | Current tax charge | | | | | | 2 | | (7) |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | Deferred tax | | | | | | (16) | | 36 |
| | (charge)/credit | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | | | | | | | (14) | | 29 |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | Net tax charge to the statement of comprehensive | | (63) | | (927) |
| | income | | | | |
+--+-----------------------------------------------------+--+---------+--+--------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
The Company is exempt from Guernsey taxation on income derived outside Guernsey
and bank interest earned in Guernsey.
The Group is liable to pay tax at a rate of 20% (2008: 24%) arising on its
activities in Russia.
The Group is liable to pay tax at a rate of 10% (2008: 10%) arising on its
activities in Cyprus.
+--+---------------------------+--+---------+--+-------------+--+---------+--+---------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+-------------+--+---------+--+---------+
| | Group | | 30 | 30 | 30 | 31 |
| | 2009 | | September | September | September | March |
| | | | 2009 | 2009 | 2009 | 2009 |
+--+---------------------------+--+------------+----------------+------------+---------+
| | Deferred tax | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 |
| | asset/(liability) comprises: | | | | | | | |
+--+------------------------------+---------+--+-------------+--+---------+--+---------+
| | | | Assets | | Liabilities | | Net | | Net |
+--+---------------------------+--+---------+--+-------------+--+---------+--+---------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+-------------+--+---------+--+---------+
| | Loans to customers | | 6 | | - | | 6 | | 2 |
+--+---------------------------+--+---------+--+-------------+--+---------+--+---------+
| | Other assets | | 75 | | - | | 75 | | 45 |
+--+---------------------------+--+---------+--+-------------+--+---------+--+---------+
| | Other liabilities | | - | | (56) | | (56) | | (45) |
+--+---------------------------+--+---------+--+-------------+--+---------+--+---------+
| | Tax loss carry-forwards | | 145 | | - | | 145 | | 189 |
+--+---------------------------+--+---------+--+-------------+--+---------+--+---------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+-------------+--+---------+--+---------+
| | | | 226 | | (56) | | 170 | | 191 |
+--+---------------------------+--+---------+--+-------------+--+---------+--+---------+
5.Goodwill
+--+---------------------------+--+---------+--+---------+--+---------+--+---------+
| | Group | | | | | | 30 | 31 |
| | | | | | | | September | March |
| | | | | | | | 2009 | 2009 |
+--+---------------------------+--+---------+--+---------+--+------------+---------+
| | | | | | | | GBP'000 | | GBP'000 |
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+---------+
| | Opening balance | | | | | | - | | 169 |
+--+---------------------------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+---------+
| | Exchange gain for the | | | | | | - | | 67 |
| | year | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+---------+
| | Impairment | | | | | | - | | (236) |
+--+---------------------------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+---------+
| | Closing balance | | | | | | - | | - |
+--+---------------------------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+---------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+---------+
In accordance with the valuation at 31 March 2009 performed in respect of
Kreditmart by an independant valuer, the goodwill acquired was impaired in full.
This is as a result of significant decreases in the Russian mortgage market
which resulted in the reduction in value of the consumer loans.
6. Other intangible assets
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
|. | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | Cost: | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | Recognised on acquistion of Volzski Universalny | | 2,680 | | 2,680 |
| | Bank ('VUB') | | | | |
+--+-----------------------------------------------------+--+---------+--+--------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | Currency revaluation | | | | | | (381) | | (407) |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | Closing balance | | | | | | 2,299 | | 2,272 |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | | | | | | | | | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
| | |
+--+---------------------------+--+---------+--+---------+--+---------+--+--------+
Intangible assets consist of banking licences acquired from VUB. These banking
licences have an indefinite useful life.
No impairment losses have been recognised in respect of these intangibles in the
6 month period ended 30 September 2009.
7. Plant and equipment
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
|. | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | | | | | Fixtures | Furniture and |
| | | | | | and | |
+--+---------------------------+-+---------+-+------------+---------------------+
| | Group | | | | fittings | | equipment | Total |
| | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+-----------+---------+
| | | | | | GBP'000 | | GBP'000 | | GBP'000 |
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | Cost: | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | At 1 April 2009 | | | | 429 | | 1,153 | | 1,582 |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | Additions | | | | - | | 47 | | 47 |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | Disposals | | | | (161) | | (53) | | (214) |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | Exchange movements on | | | | 1 | | (5) | | (4) |
| | disposals | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | At 30 September 2009 | | | | 269 | | 1,142 | | 1,411 |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | Accumulated depreciation: | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | At 1 April 2009 | | | | (259) | | (304) | | (563) |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | Charge for the period | | | | (64) | | (97) | | (161) |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | Disposals | | | | 103 | | 24 | | 127 |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | Exchange movements on | | | | 2 | | 2 | | 4 |
| | disposals | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | At 30 September 2009 | | | | (218) | | (375) | | (593) |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | Net book value: | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | At 1 April 2009 | | | | 170 | | 849 | | 1,019 |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | At 30 September 2009 | | | | 51 | | 767 | | 818 |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | The useful lives of the assets are estimated as | | | | |
| | follows: | | | | |
+--+----------------------------------------------------+-+---------+-+---------+
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | Fixtures and fittings | | | | | | 3-4 | | |
| | | | | | | | years | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | Furniture | | | | | | 5 years | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | Equipment | | | | | | 3 years | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
| | | | | | | | | | |
+--+---------------------------+-+---------+-+----------+-+---------+-+---------+
8 Assets classified as held for sale
+---+------------------------------------+---+------------+-------+----------------+---+--------------+
| . | | | | 30 September | | 31 March |
| | | | | 2009 | | 2009 |
+---+----------------------------------------+------------+-------+----------------+---+--------------+
| | Group | | | | GBP'000 | | GBP'000 |
+---+------------------------------------+---+------------+-------+----------------+---+--------------+
| | | | | | | | |
+---+------------------------------------+---+------------+-------+----------------+---+--------------+
| | At 1 April 2009 | | | | - | | - |
+---+------------------------------------+---+------------+-------+----------------+---+--------------+
| | | | | | | | |
+---+------------------------------------+---+------------+-------+----------------+---+--------------+
| | Additions | | | | 191 | | - |
+---+------------------------------------+---+------------+-------+----------------+---+--------------+
| | | | | | | | |
+---+------------------------------------+---+------------+-------+----------------+---+--------------+
| | | | | | | | |
+---+------------------------------------+---+------------+-------+----------------+---+--------------+
| | At 30 September 2009 | | | | 191 | | - |
+---+------------------------------------+---+------------+-------+----------------+---+--------------+
| | | | | | | | |
+---+------------------------------------+---+------------+-------+----------------+---+--------------+
Assets classified as held for sale are the property (flat, cottage and land
plot) received after mortgage foreclosure. The assets are available for
immediate sale in their present condition. A potential buyer has been found for
the flat, and Kreditmart expects to sell the other assets within one year. The
assets are recognised at fair value less costs to sell.
9. Investment in subsidiaries
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | Company | | | | | 30 September | | 31 March |
| | | | | | | 2009 | | 2009 |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | | | | | | GBP'000 | | GBP'000 |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | | | | | | | | |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | Kreditmart | | | | | | | |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | Opening balance | | | | | 16,549 | | 27,972 |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | Additions | | | | | - | | - |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | Fair value revaluation * | | | | | (2,600) | | (11,423) |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | Closing balance | | | | | 13,949 | | 16,549 |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | | | | | | | | |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | Flexinvest Limited | | | | | | | |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | | | | | | | | |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | Opening and closing balance | | | | | 6,451 | | 6,451 |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | | | | | | | | |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | | | | | | | | |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
| | | | | | | 20,400 | | 23,000 |
+---+-------------------------------+----------+---+----------+---+------------------+---+--------------+
* The revaluation performed on Kreditmart includes the value of Flexinvest
Limited as at 30 September 2009, and as such, no revaluation was performed on
Flexinvest Limited.
The Valuation Committee approves the valuations at each period/year end. The
valuation of the subsidiaries and investments at 30 September 2009 was performed
by Aurora Investment Advisors Limited, whom the Valuation Committee considers to
have the necessary expertise. At each 31 March year end, the valuation is
performed by an independent reputable valuer with the necessary experience in
valuing investments of this nature.
The financial statements of the Group consolidate the results, assets and
liabilities of the subsidiary companies listed below:
+--+-----------------------+--------+--+--------+--+--------+--+----------+--------+--------------+
| | Name of subsidiary | Country of | | Class | % of | Principal |
| | undertaking | incorporation | | of | class | activity |
| | | | | share | held | |
+--+-----------------------+--------------------------------+--+----------+--------+--------------+
| | Kreditmart Finance | | | Cyprus | | Ordinary | 100.0% | Consumer |
| | Limited | | | | | | | finance |
+--+-----------------------+--------+--+--------------------+--+----------+--------+--------------+
| | Flexinvest Limited | | | | | Cyprus | | Ordinary | 100.0% | Investment |
| | | | | | | | | | | holding |
+--+-----------------------+--------+--+--------+--+--------+--+----------+--------+--------------+
| | Volzhski Universalny Bank | | | | Russia | | Ordinary | 100.0% | Banking and |
| | ("VUB") Limited* | | | | | | | | finance |
+--+-----------------------+--------+--+--------+--+--------+--+----------+--------+--------------+
* VUB is held directly by Kreditmart and Flexinvest and is an indirectly held
subsidiary of Aurora Russia Limited.
10. Investments - at fair value through profit and loss
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | 30 | 30 | 31 | 31 |
| | | | | | | September | September | March | March |
| | | | | | | 2009 | 2009 | 2009 | 2009 |
+--+-----------------------+--------+--+--------+--+------------+------------+------------+-----------+
| | | | | | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 |
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | Group | | Company | | Group | | Company |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | Whitebrooks Investments Limited | 12,900 | | 12,900 | | 13,600 | | 13,600 |
| | ('Whitebrooks') (OSG) - see note below | | | | | | | |
+--+-----------------------------------------------+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | Unistream Bank | | | | | 29,700 | | 29,700 | | 25,000 | | 25,000 |
| | Limited | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | Grindelia Holdings Limited | | | | 14,800 | | 14,800 | | 13,200 | | 13,200 |
| | (SuperStroy) | | | | | | | | | | |
+--+--------------------------------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | Quoted investments | | | | | 36 | | - | | 33 | | - |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | Total investments at fair value through | | 57,436 | | 57,400 | | 51,833 | | 51,800 |
| | profit and loss | | | | | | | | |
+--+--------------------------------------------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | Change in fair value of investments at fair value | | | | | | |
| | through profit and loss | | | | | | |
+--+---------------------------------------------------------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | 1 April | 1 April | 1 April | 1 |
| | | | | | | 2009 to | 2009 to | 2008 to | April |
| | | | | | | 30 | 30 | 30 | 2008 |
| | | | | | | September | September | September | to 30 |
| | | | | | | 2009 | 2009 | 2008 | September |
| | | | | | | | | | 2008 |
+--+-----------------------+--------+--+--------+--+------------+------------+------------+-----------+
| | | | | | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 |
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | Group | | Company | | Group | | Company |
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | Whitebrooks (OSG) (excluding drawdown and | (1,222) | | (1,222) | | 471 | | 471 |
| | interest on loan) - see note below | | | | | | | |
+--+-----------------------------------------------+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | Unistream Bank | | | | | 4,700 | | 4,700 | | 2,839 | | 2,839 |
| | Limited | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | Grindelia Holdings Limited | | | | 1,600 | | 1,600 | | 2,266 | | 2,266 |
| | (SuperStroy) | | | | | | | | | | |
+--+--------------------------------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | Quoted investments | | | | | 3 | | - | | (9) | | - |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | Kreditmart and Flexinvest (see | | | | - | | (2,600) | | - | | (2,123) |
| | note 9) | | | | | | | | | | |
+--+--------------------------------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | Total unrealised | | | | | 5,081 | | 2,478 | | 5,567 | | 3,453 |
| | gains | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+---------+--+---------+--+---------+--+-----------+
Whitebrooks loan:
The Company acquired a 40.3% stake in Whitebrooks on 24 July 2006, diluted to
37.1% after the agreement of a management option scheme. In addition to its
investment in the shares of Whitebrooks, the Company has provided the investee
company with a loan facility of US$5 million. The drawn down tranches of the
loan are each repayable within twelve months of the drawdown date. If not repaid
on the due date the lender has the option to convert the amount outstanding into
ordinary shares of the borrower. On 27 December 2007 the loan principal amount
drawn down on 27 December 2006 plus accrued interest was converted into ordinary
shares in accordance with the facility agreement. The conversion resulted in an
increase in the diluted holding as at 31 December 2007 to 39.1% and was further
increased to 39.4% as a result of the buyback of shares by Whitebrooks from the
former chief executive. The Company decided that the loans drawn down by
Whitebrooks on the 5th March 2007 as well as on the 18th May 2007 will not be
converted into shares of the borrower and will be treated as non current
liabilities.
On 22 December 2008, the Board of Directors of Aurora Russia Limited approved a
further US$1 million convertible loan facility to Whitebrooks Investments
Limited. Interest accrues daily at a rate of 13% p.a. on a 360 day year basis,
and is capitalised monthly. The loan is repayable within 12 months. Per the
agreement, the Company will have the option to convert all outstanding principal
and accrued interest into equity of the borrower at the valuation of $28
million. This replaces the conversion valuation in the existing loan facility.
Because of the change in the conversion rate, in April 2009 an additional 692
shares in Whitebrooks were issued to Aurora Russia Limited in respect of the
conversion of the loan into equity in December 2007. The drawn down amounts on
the loan are repayable within one year of the date of drawdown. In the event of
default, a default interest premium of 1% shall accrue on the overdue amount.
$500,000 of this facility was advanced to the borrower on 30 March 2009 with the
remaining $500,000 advanced on 26 August 2009.
The further loan facility of US$1 million to Whitebrooks includes options which
if exercised would give the Company over 50% ownership of Whitebrooks Limited.
The Company's ability to exercise these options is subject to certain trigger
events including the sale of OSG and as such does not give the Company control
of Whitebrooks Limited. As such the Directors consider the nature of this loan
to be quasi equity in nature and have reclassified this loan as part of
Investments and is valued on this basis.
11.Loans and advances to customers
+--+-----------------------+--------+--+--------+--+--------+--+--------+--+--------+--+--+---------+
| | | | | | | | | | | Group |
+--+-----------------------+--------+--+--------+--+--------+--+--------+--+------------------------+
| | | | | | | | | | | 30 | | 31 |
| | | | | | | | | | | September | | March |
| | | | | | | | | | | 2009 | | 2009 |
+--+-----------------------+--------+--+--------+--+--------+--+--------+--+-----------+--+---------+
| | | | | | | | | | | GBP'000 | | GBP'000 |
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+--------+--+--------+--+-----------+--+---------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+--------+--+--------+--+-----------+--+---------+
| | Residential mortgages | | | | | | | | | 8,853 | | 9,569 |
+--+-----------------------+--------+--+--------+--+--------+--+--------+--+-----------+--+---------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+--------+--+--------+--+-----------+--+---------+
| | Reconciliation of impairment loss allowance on loans | | | | | | |
| | to customers: | | | | | | |
+--+--------------------------------------------------------+--+--------+--+-----------+--+---------+
| | | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+--------+--+--------+--+-----------+--+---------+
| | Balance at beginning of the | | | | | | | | 1,912 | | 195 |
| | year/period | | | | | | | | | | |
+--+--------------------------------+--+--------+--+--------+--+--------+--+-----------+--+---------+
| | Movement in allowance for loan | | | | | | | | (428) | | 1,722 |
| | losses | | | | | | | | | | |
+--+--------------------------------+--+--------+--+--------+--+--------+--+-----------+--+---------+
| | Translation | | | | | | | | | - | | (5) |
| | differences | | | | | | | | | | | |
+--+-----------------------+--------+--+--------+--+--------+--+--------+--+-----------+--+---------+
| | | | | | | | | | | 1,484 | | 1,912 |
+--+-----------------------+--------+--+--------+--+--------+--+--------+--+--------+--+--+---------+
The mortgages are secured over borrowers' private residences, are repayable in
equal monthly instalments and have an average maturity of 28 years. Interest is
charged at fixed rates, at an average interest rate of 11.77%.
12.Derivative liabilities
The Group utilises currency options and forward foreign exchange contracts to
hedge its exposure to monetary assets and liabilities.
+-----------------------------+--------+--+--------+--+--------+--+---------+--+-----------+
| | | | | | | | Group and Company |
+-----------------------------+--------+--+--------+--+--------+--+------------------------+
| | | | | | | | 30 | 31 March |
| | | | | | | | September | 2009 |
| | | | | | | | 2009 | |
+-----------------------------+--------+--+--------+--+--------+--+------------+-----------+
| | | | | | | | GBP'000 | GBP'000 |
+-----------------------------+--------+--+--------+--+--------+--+------------+-----------+
| Current derivative | | | | | | | | | |
| liabilities | | | | | | | | | |
+-----------------------------+--------+--+--------+--+--------+--+---------+--+-----------+
| Sterling/US dollar forward foreign exchange | | | | - | | (46) |
| contracts | | | | | | |
+--------------------------------------------------+--+--------+--+---------+--+-----------+
| | | | | | | | | | |
+-----------------------------+--------+--+--------+--+--------+--+---------+--+-----------+
There are no outstanding foreign exchange contracts at period end
13. Trade and other payables
+-------------------------+--------+--+------------+-----------+------------+----------+
| | | | 30 | 30 | 31 | 31 |
| | | | September | September | March | March |
| | | | 2009 | 2009 | 2009 | 2009 |
+-------------------------+--------+--+------------+-----------+------------+----------+
| | | | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------------+--------+--+------------+-----------+------------+----------+
| | | | Group | Company | Group | Company |
+-------------------------+--------+--+------------+-----------+------------+----------+
| | | | | | | |
+-------------------------+--------+--+------------+-----------+------------+----------+
| Expense accruals and | | | 448 | 80 | 742 | 129 |
| sundry | | | | | | |
+-------------------------+--------+--+------------+-----------+------------+----------+
| | | | | | | |
+-------------------------+--------+--+------------+-----------+------------+----------+
| | | | 448 | 80 | 742 | 129 |
+-------------------------+--------+--+------------+-----------+------------+----------+
14. Segmental information
The Board of Directors of Aurora Russia Limited decide on the strategic resource
allocations of the Group. The operating segments of the Group are the business
activities that earn revenue or incur expenses, whose operating results are
regularly reviewed by the Board of Directors of Aurora Russia Limited, and for
which discrete financial information is available. The Board of Directors
considers the Group to be made up of 2 segments, which are reflective of the
business activities of the Group and the information used for internal
decision-making:
- Aurora Russia Limited (parent company)
- Kreditmart Finance Limited, Flexinvest Limited and Volzhski Universalny Bank
("VUB") Limited (subsidiaries)
The Group is engaged in investment in small and mid-sized companies in Russia
and in one principal geographical area, being Russia. The Investment Manager's
Report provides more information on Aurora Russia Limited's business and the
operations of each investment.
The parent company derives its revenues from its investments by way of interest
and dividends.
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | | 1 April | 1 April 2009 | 1 April | 1 April | 1 April | 1 April |
| | | 2009 to | to 30 | 2009 to | 2008 to 30 | 2008 to 30 | 2008 to |
| | | 30 | September | 30 | September | September | 30 |
| | | September | 2009 | September | 2008 | 2008 | September |
| | | 2009 | | 2009 | | | 2008 |
+--+---------------------------+------------+-----------------+-------------+-------------+----------------+-----------+
| | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | | Aurora | | Kreditmart/ | | Total | | Aurora | | Kreditmart/ | | Total |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | | Flexinvest/VUB | | Flexinvest/VUB |
| | | | | |
+--+---------------------------+----------------------------------------+---+------------------------------------------+
| | | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Revenue | 338 | | 735 | | 1,073 | | 316 | | 1,144 | | 1,460 |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | - Fees | - | | 120 | | 120 | | - | | 244 | | 244 |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | - Interest on long | - | | 505 | | 505 | | - | | 707 | | 707 |
| | term mortgages and | | | | | | | | | | | |
| | other loans | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | - Loan interest | 214 | | - | | 214 | | 118 | | - | | 118 |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | - Bank interest | 5 | | 110 | | 115 | | 198 | | 193 | | 391 |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | - Dividend income | 119 | | - | | 119 | | - | | - | | 0 |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Administration and | (1,536) | | (1,837) | | (3,373) | | (1,695) | | (3,870) | | (5,565) |
| | operating expenses | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Fair value | 2,478 | | 3 | | 2,481 | | 3,453 | | (9) | | 3,444 |
| | movements on | | | | | | | | | | | |
| | revaluation of | | | | | | | | | | | |
| | investments | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | - | (2,600) | | - | | (2,600) | | (2,123) | | - | | (2,123) |
| | Kreditmart/Flexinvest/VUB | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | - Whitebrooks (OSG) | (1,222) | | - | | (1,222) | | 471 | | - | | 471 |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | - Unistream | 4,700 | | - | | 4,700 | | 2,839 | | - | | 2,839 |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | - Grindelia | 1,600 | | - | | 1,600 | | 2,266 | | - | | 2,266 |
| | (SuperStroy) | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | - Quoted | - | | 3 | | 3 | | - | | (9) | | (9) |
| | investments | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Fair value | - | | - | | - | | 3 | | - | | 3 |
| | movements on | | | | | | | | | | | |
| | derivatives | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Impairment of loan | - | | - | | - | | (370) | | - | | (370) |
| | receivable | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Exchange | (9) | | (719) | | (728) | | 56 | | 856 | | 912 |
| | (losses)/gains | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Operating | 1,271 | | (1,818) | | (547) | | 1,763 | | (1,879) | | (116) |
| | profit/(loss) | | | | | | | | | | | |
| | before tax | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Tax | - | | (63) | | (63) | | - | | (927) | | (927) |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Net segment | 1,271 | | (1,881) | | (610) | | 1,763 | | (2,806) | | (1,043) |
| | profit/(loss) | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Reconciliation of segment profit/(loss) to consolidated statement of | 1 April | 1 April |
| | comprehensive income | 2009 to 30 | 2008 to |
| | | September | 30 |
| | | 2009 | September |
| | | | 2008 |
+--+--------------------------------------------------------------------------------------+----------------+-----------+
| | | | | | | | | | | GBP'000 | | GBP'000 |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Total net segment | | | | | | | | | (610) | | (1,043) |
| | loss | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Adjustment for fair value | | | | | | | | | | |
| | movements on | | | | | | | | | | |
+--+-------------------------------------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Kreditmart/Flexinvest/VUB | | | | | | | | | 2,600 | | 2,123 |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | | | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
| | Net profit for the period | | | | | | | | 1,990 | | 1,080 |
| | for the Group | | | | | | | | | | |
+--+---------------------------+---------+--+-------------+---+---------+---+---------+---+-------------+--+-----------+
+--+-----------------------+---------+--+------------+--+--+--+-+---------+--+---------+--+------------+--+--+--+---------+
| | | 30 | 30 | 30 | 31 | 31 | 31 |
| | | September | September | September | March | March | March |
| | | 2009 | 2009 | 2009 | 2009 | 2009 | 2009 |
+--+-----------------------+------------+---------------------+--------------+------------+---------------------+---------+
| | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 |
+--+-----------------------+---------+--+---------------+-------+---------+--+---------+--+---------------+-----+---------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+---------------+-------+---------+--+---------+--+---------------+-----+---------+
| | | Aurora | | Kreditmart/ | | Total | | Aurora | | Kreditmart/ | | Total |
+--+-----------------------+---------+--+---------------+-------+---------+--+---------+--+---------------+-----+---------+
| | | Flexinvest/VUB | | Flexinvest/VUB |
| | | | | |
+--+-----------------------+----------------------------------------------+--+--------------------------------------------+
| | Total segments assets | | | | | | | | | | | |
| | include: | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Investments in | 20,400 | | - | | 20,400 | | 23,000 | | - | | 23,000 |
| | subsidiaries | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Financial assets at | 57,400 | | 36 | | 57,436 | | 51,800 | | 33 | | 51,833 |
| | fair value through | | | | | | | | | | | |
| | profit or loss | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | - Whitebrooks (OSG) | 12,900 | | - | | 12,900 | | 13,600 | | - | | 13,600 |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | - Unistream | 29,700 | | - | | 29,700 | | 25,000 | | - | | 25,000 |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | - Grindelia | 14,800 | | - | | 14,800 | | 13,200 | | - | | 13,200 |
| | (SuperStroy) | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | - Quoted investments | - | | 36 | | 36 | | - | | 33 | | 33 |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Cash and cash | 3,488 | | 6,717 | | 10,205 | | 4,123 | | 7,899 | | 12,022 |
| | equivalents | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Intangible assets | - | | 2,680 | | 2,680 | | - | | 2,680 | | 2,680 |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Property, plant and | - | | 818 | | 818 | | - | | 1,019 | | 1,019 |
| | equipment | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Assets classified as | - | | 191 | | 191 | | - | | - | | - |
| | held for sale | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Loans and advances to | - | | 8,853 | | 8,853 | | - | | 9,569 | | 9,569 |
| | customers | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Other assets | 224 | | 814 | | 1,038 | | 1,112 | | 987 | | 2,099 |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Segment assets | 81,512 | | 20,109 | | 101,621 | | 80,035 | | 22,187 | | 102,222 |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Total segment | (80) | | (559) | | (639) | | (175) | | (810) | | (985) |
| | liabilities | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Reconciliation of segment assets and liabilities to consolidated | 30 | 31 |
| | statement of financial position | September | March |
| | | 2009 | 2009 |
+--+--------------------------------------------------------------------------------------+------------------+------------+
| | | | | | | | | | | GBP'000 | | GBP'000 |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Segment assets for reportable | | | | | | | | 101,621 | | 102,222 |
| | segments | | | | | | | | | | |
+--+---------------------------------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Exchange loss on translation | | | | | | | | (381) | | (407) |
| | of intangibles | | | | | | | | | | |
+--+---------------------------------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Investment in | | | | | | | | | (20,400) | | (23,000) |
| | subsidiaries | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Intercompany debtors | | | | | | | | | (191) | | (197) |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Total assets for the | | | | | | | | | 80,649 | | 78,618 |
| | Group | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Segment liabilities for reportable | | | | | | (639) | | (985) |
| | segments | | | | | | | | |
+--+-------------------------------------------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Intercompany | | | | | | | | | 191 | | 197 |
| | creditors | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | Total liabilities for | | | | | | | | | (448) | | (788) |
| | the Group | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+-----+--------------+--+---------+--+------------+-----+------------+
| | | | | | | | | | | | | |
+--+-----------------------+---------+--+------------+--+--+--+-+---------+--+---------+--+------------+--+--+--+---------+
15.Related party transactions
The Company (Aurora Russia Limited) has three subsidiaries: Kreditmart Finance
Limited, Flexinvest Limited and Volzhski Universalny Bank Limited (see note 9).
Details of the investments in Whitebrooks Investment Limited, Unistream Bank,
and Grindelia Holdings are presented in note 10.
Balances owing between the Company and any subsidiaries which are related
parties have been eliminated on consolidation. This includes a loan receivable
from Flexinvest Limited (see note 14).
The terms of the loan to Whitebrooks is highlighted in note 10. The loan is
considered as quasi equity in nature and is included as part of the investment
in Whitebrooks at fair value. The balance of the principal and interest in
respect of the loan is GBP3,412,822 at 30 September 2009 (31 March 2009:
GBP3,221,334). Interest received on this loan of GBP214,255 is separately
disclosed on the face of the statement of comprehensive income (6 month period
ended 30 September 2008: GBP117,864).
The Company pays fees to Aurora Investment Advisors Limited ('AIAL') for its
services as investment manager and advisor. The total charge to the statement of
comprehensive income during the period was GBP876,430 (6 month period ended 30
September 2008: GBP902,661). There were no outstanding fees at the period/year
end. AIAL performed the valuation of the subsidiaries and investments as at 30
September 2009.
On 10 March 2009, an amendment was made to the Management Agreement between the
Manager, Aurora Investment Advisors Limited ('AIAL'), and the Company, Aurora
Russia Limited. With effect from 1 January 2009, the Manager is free to provide
investment advice or other equivalent services to persons other than the
Company. The Company shall be entitled to co-investment rights in relation to
any investments made by a new fund that the Manager proposes to establish after
January 2009 in any securities which could otherwise be acquired by the Company
in accordance with the Investment Policy ("Co-Investments").
John McRoberts and James Cook each hold 47.5% of the ordinary share capital and
36.25% of the non-voting preference share capital of AIAL at period end.
The Company pays fees to Close Fund Services Limited ('CFSL') for its services
as administrator. The total charge to the statement of comprehensive income
during the period was GBP50,451 (6 month period ended 30 September 2008:
GBP32,515), of which GBP15,452 (31 March 2009: GBPNIL) was outstanding at the
period end. John Whittle was appointed a director of the Company on 17 January
2008. He was also a director of CFSL until 31 May 2009.
The Directors of the Company and of Kreditmart OOO, other than John McRoberts
and James Cook, received fees for their services. The total charge to the
statement of comprehensive income during the period was GBP94,279 (6 month
period ended 30 September 2008: GBP101,773), of which GBP3,330 (31 March 2009:
GBP4,776) was outstanding at the year end.
16.Reclassification of comparatives
Loan interest, bank interest, as well as dividend income, have been reclassified
from "Finance income" to "Revenue" in the Consolidated and Company statement of
comprehensive income, statement of cash flows and related notes thereto. The
reason for this change is that the ordinary activities of the Company is to earn
income on its investments. This is consistent with the 31 March 2009 annual
financial statements.
Furthermore, "Taxation Paid" in the statement of cash flows was reclassified
from "Investing Activities" to "Operating Activities" in order to comply with
IAS 7 "Statements of Cash Flows".
17. Events after the balance sheet date
On 30 June 2009, the Company entered into an agreement with Grindelia Holdings
Limited to borrow RUR 5,832,000 on 20 February 2010 for 1 year with an interest
rate of 1% per annum.
Contemporaneous to the issue of these accounts the Company announced a proposed
issue of 37,500,000 new ordinary shares at an issue price of 40p per share
(subject to shareholder approval at an extraordinary general meeting). GBP12.4
million of the proceeds of the share issue will be used to purchase an
additional 43.5% of OSG's shares bringing the shareholding in OSG to 93.6% (on a
fully diluted basis and assuming all convertible loans in OSG held by the
Company are converted), and to invest new money into OSG to part fund a large
warehouse facility in Moscow. The balance of the proceeds will be used to pay
costs associated with the share issue and retained by the Company as working
capital.
The balance of OSG's shares are held in an option pool of 6.4%, with
approximately 2.0% held by previous employees who may wish to exercise and sell
the shares to the Company. If such option shares are purchased by the Company,
the net amount payable to the option holders will be GBP0.18 million which will
increase the Company's shareholding in OSG to 95.5%. However, the Company
expects to increase the management pool by an additional 3.6% resulting in its
overall holding in OSG being approximately 92%.
At the same time the Board has announced that the Company will return cash to
shareholders as each of its portfolio companies are sold. Following the receipt
of cash from a disposal of any of its portfolio companies, it will return to
Shareholders an amount up to a maximum of the lesser of the total net proceeds
received on a realisation of a portfolio company and 1.5 times the total amount
invested in that portfolio company plus the pro-rata allocation of costs of the
Company to date until the Company has returned a total of GBP105 million to
Shareholders. Any proceeds in excess of this amount should be retained by the
Company for re-investment purposes.
Should the amount received on the disposal of a portfolio company be less than
1.5 times the total amount invested in such company plus Allocated Costs, it is
anticipated that the total funds received from the sale of the portfolio company
(net of disposal expenses) will be returned to Shareholders.
However, in the event that the Board believes that the Company needs to retain a
portion of the cash proceeds on the sale of any portfolio company to satisfy its
status as a going concern, for general working capital purposes or for the
purposes of future investments in existing portfolio companies that are deemed
necessary by the Board, it will do so.
The Board has also agreed to amend the option deed to keep the Manager
incentivised to continue to manage the investments that the company has made.
The option deed was intended to provide a carry mechanism similar to that used
in a typical private equity fund structure. However, because the Option Deed did
not contemplate the issuance of shares at a discount to the IPO placing price,
the pre-condition for exercise is based on an increase in the price per share
rather than an increase in the value of the Company, as would be the case in a
typical private equity fund. Particularly given the current market conditions it
is unlikely that the Manager will ever be in a position to exercise its option
over the initial 18,750,000 share options, or over further share options.
Therefore the Company has agreed with the manager to amend the Option Deed, so
that the formula used in the condition allows for new Ordinary Shares to be
issued at above or below the IPO placing price to more accurately reflect the
value of the Company. This amendment will mean that the 12% hurdle rate will be
based upon the total funds raised by the Company across all shares issued for
cash.
There were no other material subsequent events after the year end.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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