TIDMAURR
RNS Number : 2885U
Aurora Russia Limited
20 December 2011
20 December 2011
Aurora Russia Limited ("Aurora Russia" or the "Company")
Results for the six months ended 30 September 2011
-- The Board and the Manager are focused on ensuring optimal exits from the investee companies
-- Continued strong growth in underlying companies
Financial highlights
-- Net asset value per share as at 30 September 2011 of 70.1p
per share (Net asset value GBP78.9m) down from 83.6p per share at
31 March 2011.
-- Cash and cash equivalents as at 30 September 2011 were
GBP1.6m (GBP4.1m cash within the Group)
Portfolio highlights
OSG
-- Revenues for the 6 months ended 30 September 2011 were
GBP9.16m compared to GBP6.82m for the same period in 2010.
-- EBITDA up 17% to GBP1.08m as at 30 September 2011
-- Equity valuation of Aurora Russia's stake in OSG at 30
September 2011 was GBP30.7m compared to the valuation at 31 March
2011 of GBP28.8m
Unistream Bank
-- Unistream's share in the Russia-outbound transfer market is
estimated at 16.7% as at Q2 2011
-- Revenues for the nine month period ended 30 September 2011 were RUR 1.7bn, up 11.6% YoY
-- PBT for the nine months to 30 September 2011 was RUR71m up
from a loss of RUR24.6m for the same period last year.
-- Equity valuation of Aurora Russia's stake in Unistream at 30
September 2011 was GBP14.9m, compared to the valuation at 31 March
2011 of GBP18.7m
Superstroy
-- Revenues grew by 31% YoY for the nine months ended 30 September 2011 to RUR6.5bn
-- EBITDA of RUR45m
-- Equity valuation of Aurora Russia's stake in Superstroy at 30
September 2011 was GBP15.0m, compared to the valuation at 31 March
2011 of GBP24.5m
Flexinvest and Kreditmart
-- Flexinvest launched a new retail strategy with a credit card
as its main loan product financed by retail deposits
-- After a strategic review, the decision was taken to sell
Kreditmart for a nominal price to stop its cash burn.
-- As at 30 September 2011, Flexinvest and Kreditmart had
GBP15.5m in net assets down from GBP17.6m as at 31 March 2011
-- Equity valuation of Aurora Russia's stake in Kreditmart/
Flexinvest Bank at 30 September 2011 was GBP16.3m, compared to the
valuation at 31 March 2011 of GBP18.5m
Commenting, Geoff Miller, Chairman of Aurora Russia, said:
"While we are now facing challenging times in Europe which are
having a knock-on effect on Russia, oil and commodity prices remain
robust and the fundamentals in Russia continue to outperform
Western economies. We expect to see continued strong growth in the
underlying companies in which we are invested and therefore we
remain confident that we can deliver value for shareholders from
these assets. The Company's strategy remains focused on ensuring
optimal exits from our investee companies on a two year horizon. I
would hope that we can make significant progress in this regard
during 2012."
Enquiries:
Aurora Russia Limited
Geoff Miller +44 (0) 7408 830719
Numis Securities Limited
Nominated Adviser: Hugh Jonathan +44 (0)20 7260 1000
Corporate Broking: Rupert Krefting /
Nathan Brown
Financial Dynamics
Ed Gascoigne-Pees +44 (0) 20 7269 7132
Jack Hickey
Chairman's Statement
Introduction
I am pleased to present the results of Aurora Russia Limited
(the "Company" or "Aurora Russia") for the 6 months ended 30
September 2011.
The past six months, since the year end results to 31 March 2011
were announced, have seen a number of changes in both the economic
environment and within the Company. We are now facing challenging
times in Europe which is having a knock-on effect in Russia.
However, oil and commodity prices remain robust and although
sentiment has cooled in Russia the fundamentals continue to
outperform the economies of the West. The Government of Russia
predicts 2012 GDP growth to be 3.7% with the community of analysts
focusing on the Russian market predicting a range of between 2.5%
and 4%.
Since taking over as Chairman in August 2011, my focus has been
to ensure that the Board reflects the viewpoints of all
shareholders, that the corporate governance framework within the
Company is appropriate for its size and strategy and that the
strategy of the Company is clearly articulated to the market.
The Board has recently completed a visit to all of the portfolio
companies, and had presentations from the management of each of the
companies, before agreeing the valuations within these accounts.
The meetings have reinforced the view of all of us on the Board
that these are high quality businesses with strong management,
added to which three out of four have leading market positions. The
companies have shown good growth in revenues, increasing
profitability and each has a clear strategy for future growth. The
fact that our investee businesses are in good shape significantly
increases our options when seeking exits.
The first statement made by the Company after I was appointed
Chairman was a clear, unambiguous commitment to realising value for
shareholders from the Company's investments on a two year time
horizon. This remains the strategy and the Board and the Company's
Manager are focused on ensuring optimal exits from our investee
companies. I would hope that we can make significant progress in
this regard during 2012.
Results
For the 6 months to 30 September 2011, Aurora Russia recorded a
loss of GBP15.2 million or 13.48p per share, calculated based on
the unaudited Company statement of comprehensive income. The net
asset value ("NAV") of the Company as at 30 September 2011 was
GBP78.9 million or 70.1p per share. This decline in value, which is
detailed further below, derives in largely from adverse stock
market and currency movements. Cash and cash equivalents at 30
September 2010 were GBP1.6 million.
Administration and operating expenses of GBP12.4 million include
Company costs of GBP1.6 million or 2% of the current NAV. Operating
costs of the Company's wholly owned subsidiaries were GBP10.8
million.
The Annual General Meeting
I would like to take this opportunity to thank our shareholders
for their support at the AGM on 28 September 2011 for the
re-constituted board and the re-election of all of the Board
members including myself.
Composition of the Board
On 1 August this year, the Board said farewell to Dan Koch, the
Chairman since 8 September 2008, Alexandr Dumnov who served on the
board from 17 June 2010 to 1 August 2011 and Ben Morgan who served
on the Board from the listing of the Company in March 2006 to 28
September 2011. The Board welcomes Gilbert Chalk and Tim Slesinger
as Directors and looks forward to working with them to bring value
to shareholders. I believe that we have a strong Board with a
diversity of experience and specialist knowledge that greatly adds
to the quality of our debate and, I believe, our decision
making.
James Cook also left the board on 17 June 2011 and on 11
November 2011 resigned from the Manager. Michael Hough who has been
a minority shareholder in the Manager will now be fully integrated
into the Manager and will work with John McRoberts, Andrey Gurin
and Mikhail Shorokhov who will continue to manage the portfolio and
seek exits for each of the investee companies over the coming
months. The Manager has the full support of the Board. The Board
believes the Manager is in the best position to bring value to
shareholders over the next two years.
I would like to thank all of the members of the Board, past and
present, for their considerable contributions to the Company over
the period. Despite significant changes to the Board, the focus on
delivering shareholder value has remained throughout. Members of
the Board have been asked to take on greater levels of
responsibility and in some cases to assist in communication with
shareholders, which they have done willingly, and our interaction
with the market will continue to be as high as we can make it, so
as to ensure that the market better understands the workings of the
Board.
Investment Review
The Company has sold Kreditmart for a nominal consideration, but
has retained an option to acquire 10% of the purchasing entity into
which Kreditmart will be integrated and which currently operates an
early stage mortgage and consumer loan brokerage. Athough the
company is small it has a good management team. The rationale for
entering into this transaction was to stop the cash burn at
Kreditmart which continued to undermine the NAV of the Company and
consequently value for our shareholders.
The Company has four remaining investments:
-- 94.04% of OSG, a regional market leader in records
management;
-- 24.3% of SuperStroy, one of the leading DIY retailers in
Russia
-- 26% of Unistream Bank, a leading Russian money transfer
company; and
-- 100% of Fleixinvest Bank which provides retail banking
services;
In all of our investee companies the local management and staff
have remained loyal and committed through this period and I would
like to thank them for their hard work and dedication.
Portfolio Valuation
A valuation of the investment portfolio was performed at 30
September 2011, resulting in a decrease in value from GBP90.5
million to GBP76.9 million. This interim valuation, recommended by
the Valuation Committee of the Board was prepared by the Manager
and formally adopted by the Board on 19 December 2011. These
valuations are prepared for accounting purposes only and comply
with International Private Equity and Venture Capital Association
("IPEVCA") guidelines. The resultant valuations of investments
included in the Company's financial statements will not necessarily
reflect the market value that a third party would be prepared to
pay for these businesses.
"The current valuation of Aurora Russia's shareholdings reflects
changes to the prior year end valuation performed for March 2011 as
follows:
-- the value of 94.04% of OSG's equity has increased by GBP1.9
million to GBP30.7 million, an increase of 7%
-- the value of the Company's 24.3% shareholding in SuperStroy
has decreased by GBP9.5 million to GBP15 million, a decrease of
39%.
-- the value of the Company's 26% stake in Unistream Bank has
decreased by GBP3.8 million to GBP14.9 million, a decrease of 20%;
and
-- the value of Flexinvest Bank and Kreditmart has decreased by
GBP2.2 million to GBP16.3 million, a decrease of 12%."
It is important to note that over the period there was an
approximate 9% favorable movement in the GBP/RUR exchange rate. In
addition the RTS (Russian Trading System, denominated in US
Dollars) Index comprising 15 of the largest most liquid stocks
dropped 34% and the broader MICEX (which is measured in Roubles)
comprising over 230 stocks dropped 25%. Therefore the movement of
values may be distorted by currency translation effects and the
drop in listed comparable companies both in Russia and abroad and
may not be the best reflection of the performance of an underlying
asset during the reporting period.
Outlook
In March 2012 the Russian Presidential elections will take
place. There is widespread belief that following the victory,
albeit with a reduced majority, of Vladimir Putin's United Russia
Party in the Duma elections on 4 December 2011, he will almost
definitely be elected to lead Russia and the administration will
seek to foster stability in Government in Russia. It is to be hoped
that the fact that support for United Russia has fallen may
encourage the Government to pay more attention to reform issues,
which could lay the groundwork for a stronger economy. With entry
into the WTO and potentially membership to the OECD to follow,
international investment companies and the strategic investor
community which so far have been cautious to commit to Russia's
growing market may have a change of heart leading to an increase in
foreign direct investment not only into Russian listed stocks but
also into private businesses such as the Company's portfolio
companies.
Notwithstanding a difficult global macro economic backdrop, we
expect to see continued strong growth in the underlying companies
in which we are invested and therefore we remain confident that we
can deliver value for shareholders from these assets.
Geoffrey Miller
Chairman of the Board
Aurora Russia Limited
Date: 19 December 2011
Investment Manager's Report
Overview
As we write this report we are once again in a period of
economic uncertainty particularly with respect to the European
market. However analysts predict that the Russian economy will grow
at 4.1% in 2011 with the official forecast for 2012 at 3.7%. We
remain cautiously optimistic about the macroeconomic situation, but
do have some concern about the potential effects that the European
debt crisis may have on commodity prices, particularly on the oil
price. Nonetheless commodity prices remain robust for the time
being and we expect that domestic demand will continue to grow in
Russia thereby providing opportunities for our investee companies
to continue to increase in value.
Aurora Russia's investments comprise OSG, Superstroy and
Unistream all of which have grown well over the period and
Flexinvest Bank which has progressed well in implementing its
revised retail banking strategy. Aurora Russia exited Kreditmart,
its loan brokerage business, in early December. The company was
sold for a nominal sum to a competitor as it continued to lose
money and undermine shareholder value. Aurora Russia did however
retain a 10% non-dilutable interest in the combined business
through a 10 year call option at a nominal strike price.
Despite our remaining portfolio companies performing well over
the period, at 30 September 2011 they were valued at GBP76.9
million, 15% lower than the valuation at 31 March 2011 which was
GBP90.5 million. The reduced value has been driven primarily by the
depreciation in the Rouble verses Pounds Sterling, our reporting
currency, of approximately 9% and a significant decline in the
value of most of the listed companies that served as proxies in the
valuation of our portfolio companies.
Superstroy, Unistream and Flexinvest Bank currently report on a
calendar year basis so the updates below for are for the nine
months ended September 2011. OSG however has the same reporting
cycle as Aurora Russia and therefore its updates are for the six
months ended 30 September 2011.
OSG Records Management
OSG had another record month in September 2011 in terms of
revenues, which were GBP1.6 million, up 26% from the prior year
period. The company's contractual storage business showed a solid
performance during the first six months of current financial year
with storage revenue up 22% while services business grew 43%. At
the end of September 2011 the number of boxes in storage reached
approximately 3 million, an increase of 31% over September
2010.
The share of services revenue of total revenues for the period
increased from 50% to 55% compared to the same period last year.
Acceleration in the growth of services revenue generally occurs
when clients feel more optimistic about the future. OSG continues
to maintain double digit growth rates through the conversion of
so-called "unvended" opportunities into "vended" by promoting the
outsourcing of document and archive management.
For the six months to 30 September 2011, OSG reported revenues
of GBP9.18 million compared to GBP6.82 million for the same period
in 2010. EBITDA was GBP1.08 million up 17% year-on-year ("YoY") for
the same period. The growth in profitability has however been
impacted by a decrease in the average storage capacity utilization
as OSG expanded capacity in its flagship Moscow facility in Q4 2010
for an additional 0.5 million boxes. In Russia and Poland, OSG has
been able to finance the purchase of warehouse racking and vehicles
through finance leases and bank loans. At 30 September 2011, the
outstanding balance on its lease financing and bank loans was
GBP4.2 million.
The valuation of the investment in OSG at 30 September 2011
resulted in an uplift of GBP1.9 million to GBP30.7 million compared
to the valuation at 31 March 2011 of GBP28.8 million. Its valuation
proxy was one of the few companies that ended the six month period
to 30 September with a similar share price as at the 31 March 2011
but most of the increase in value came from growth in the business
partly offset by an increase in net debt of GBP1.3 million. OSG's
reporting currency is in Pounds Sterling, as it has businesses in a
number of countries, and therefore the drop in the value of the
Rouble verses Pounds Sterling did not have a direct effect on the
valuation.
Unistream Bank
According to the Central Bank of Russia, the money transfer
market continued to recover with outbound transfers in the six
months period to 30 June 2011 up by 43.5% YoY in US Dollar terms.
Russia's inbound transfers grew 33.9% in the same time period.
Based on these figures management estimates that Unistream's
share of the Russia-outbound remittances market has declined from
18.7% in Q4 2010 to 16.7% in Q2 2011. Unistream's share in the
Russia inbound remittances also declined from 14.3% in Q4 2010 to
10.4% in Q2 2011. The primary reason for this drop in market share
has been that Unistream is focusing on its profitability, rather
than pricing to maintain its market share in what has become a very
competitive market place. We believe that because the company is
profitable and has its own network of approximately 200 outlets it
is in a strong position versus its competitors. We are pleased to
report that total volumes are up 16% YoY for the company for the
nine months to 30 September, but more importantly volumes through
its own locations are up 26% over the same period beating plan by
9%. In our view this is a key dynamic as the company is able now to
offer its customers better service due to its control over its own
locations.
Unistream continued to distribute its loyalty cards and by the
end of September 0.9 million customers were issued with loyalty
cards (this reached 1.1 million by the end of November). The main
benefit to a customer is through reduced transaction time and
sms-notification services that inform the customer first when a
transfer is sent and again when it is picked up by the
receiver.
The company is now putting in place human resources to focus on
leveraging its own network and loyalty card data to earn additional
non-money transfer revenues. We believe that in the next six months
we will see some traction in this area.
Unistream continues signing up new bank agents. As of September
2011, seven of its agents had more than RUR80 million monthly
outbound transfer volumes each versus just three a year ago.
Unistream's remittance volume for the nine month period to 30
September 2011 was RUR97.7 billion compared to RUR84 billion for
the same period in 2010 with revenue of RUR1.7 billion up 11.6%
YoY. At the same time, due to a focus on profit, its profit before
tax for the nine months to 30 September 2011 was RUR71 million up
from a loss of RUR 24.6 million for the same period last year.
The valuation of the 26% stake in Unistream Bank at 30 September
2011 resulted in a write down of GBP3.8 million to GBP14.9 million
compared to the valuation at 31 March 2011 of GBP18.7 million. 9%
of this change was due to the depreciation of the currency and 15%
due to its valuation proxy experiencing a reduction in its trading
multiples. Approximately 4% was recovered through Unistream's
growth.
Flexinvest Bank
For the nine months to September 2011 Flexinvest Bank had been
implementing its new retail strategy with a credit card as its main
loan product financed by retail deposits. At the end of September
the bank issued and tested its first cards and began sales and
marketing of its card and deposits. Potential customers can apply
for a credit card with a maximum limit of RUR200,000 either through
the internet or through the call centre. The instant credit
decision is based on the scoring model's output and a credit
history check. Approved applicants need to come to the branch once
to pick up their credit cards and sign the required documents.
During the months of October and November, the bank received 191
and 369 credit card applications respectively. Out of this number
it approved 61 applications which correspond to an approval rate of
approximately 11%. During the same period the bank issued 48 credit
cards for a total of RUR8.4 million of approved overdraft limit.
The average percentage rate charged varies for purchases paid with
a card versus cash withdrawals and is now at 21.9% for the former
and 39.9% for the latter. The deposit-taking marketing effort
brought deposits of RUR17.3 million. Flexinvest Bank pays from as
low as 7% for 90-day deposits up to 10% for 1-year deposits.
The bank has recently enhanced functionalities of its web site
www.flexbank.ru allowing customers submit on-line applications and
launched a new trade mark "FLEX BANK" making its brand easier to
remember and recognize.
Flexinvest's interest and fee income decreased 6% compared to
the prior year period and reached GBP0.7 million for the nine
months ended 30th September 2011. The share of interest income from
its existing mortgage portfolio has decreased while fee income has
grown by 38% for the same period last year.
As of 30 September 2011, Flexinvest and Kreditmart (which we
value together) had GBP15.5 million in net assets down from GBP17.6
million as of 31 March 2011. The valuation of Flexinvest and
Kreditmart at 30 September 2011 resulted in a write down of GBP2.2
million to GBP16.3 million compared to the valuation at 31 March
2011 of GBP18.5 million. We attribute GBP1.1 million of this change
to the depreciation of the Rouble against Pounds Sterling, GBP0.7
million to the cash burn in Kreditmart and Flexinvest Bank, and
GBP0.4 million net change due to an increase in provisioning
including GBP0.2 million provision for the exit costs related to
the sale of Kreditmart.
SuperStroy
Superstroy is the largest DIY retailer in the Urals Region of
Russia.
The DIY market in Russia in 2010 was estimated by Ros Business
Consulting ("RBC") to be approximately US$13.9 billion up
approximately 18% YoY. Same source estimates show that the market
will grow 16 to 17% in 2011 in US Dollar terms. The top 10 chains
have increased their market share from approximately 32.5% in 2009
to 34.1% in 2010. RBC analysts expect further consolidation in the
sector in 2011 with the share of top 10 players reaching 36% by
year-end. Based on turnover figures estimated by RBC, Superstroy
ranks #6 among all DIY retailers operating in Russia, or #2 as far
as Russian DIY retailers are concerned. The top 5 DIY retailers are
Leroy Merlin, OBI, Castorama, Kesko and one Russian chain,
Maxidom.
Superstroy's expansion in 2011 consisted of opening one
hypermarket, which was the largest it ever opened, and one
supermarket resulting in increase in its trade space by 25.5%. In
addition to opening these two new stores it completely renovated
three of its existing stores where it also managed to enlarge the
trade space of the stores by 88% adding 3.9% to total trade space.
Superstroy also moved one store to a new location increasing the
trade space of that store by 57%. The company closed one small
store with trade space of 0.9% of the total current trade space
where a rent increase made it unprofitable. As of September 2011
Superstroy's total trade space was approximately 111,000 sqm, up
28.4% as of 2010 year-end.
For the nine months ended 30 September 2011, Superstroy's
revenues have increased 31% YoY in local currency terms to RUR6.46
billion with wholesale revenues generating growth of 50% while
retail sales were up 25%. Like-for-like growth September YTD
reached 16%. Opening its largest hypermarket depressed the
company's gross margin in 2011, resulting in EBITDA of RUR45
million or 61% lower as compared to the same period of 2010.
However, adjusting for new store preopening and renovation costs,
adjusted EBITDA for the period was RUR122 million.
At 30 September 2011, the net debt of the company was RUR786
million (approximately GBP15.8 million).
Although Superstroy is having its best year to date growing its
monthly sales by 34% YoY from March to September it has been
severely affected by a large reduction in the valuations of similar
businesses, used as valuation proxies; these have caused a decline
of approximately 30% in the value of Superstroy. Adding the effects
of the 9% decrease in the value of the Rouble verses Pounds
Sterling resulted in the business being valued 39% lower than at 31
March 2011.
The valuation of Superstroy as at 30 September 2011 resulted in
a write down of GBP9.5 million for Aurora Russia's 24.3% stake to
GBP15.0 million compared to the valuation at 31 March 2011 of
GBP24.5 million.
Kreditmart
In early December we sold Kreditmart to a competitor in the
market for a nominal value in order to stop its cash burn. The
buyer will combine Kreditmart with its existing mortgage and
consumer loan brokerage that it set up in June 2010. The buyer will
benefit from the existing partner relationships and a known brand
while Aurora Russia will retain a 10% non-dilutable option in the
combined business valid for 10 years with a nominal strike
price.
The valuation of Aurora Russia's portfolio included a provision
of GBP0.2 million relating to the exit of Kreditmart as indicated
above.
Conclusion
The Manager is committed to exit the Company's investments and
is working hard to identify the optimal avenues through which to
achieve this. We have been discussing Aurora Russia's investments
with strategic investors as well as with stock market participants
with a view to potentially listing OSG, Superstroy and Unistream.
There has been some encouraging feedback in both areas.
Regarding Flexinvest Bank, we have been making good progress
with its revised strategy and will report to the market on its
status regularly.
Aurora Investment Advisors Limited
December 2011
Independent Review Report to Aurora Russia Limited
We have been engaged by the Company to review the unaudited
condensed set of consolidated financial statements in the half year
financial report for the six months ended 30 September 2011 which
comprise the unaudited condensed half year consolidated statement
of comprehensive income, the unaudited condensed half year company
statement of comprehensive income, the unaudited condensed half
year consolidated statement of financial position, the unaudited
condensed half year company statement of financial position, the
unaudited condensed half year consolidated statement of changes in
equity, the unaudited condensed half year consolidated statement of
cash flows and related explanatory notes. We have read the other
information contained in the half year financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the unaudited
condensed set of consolidated financial statements.
This report is made solely to the Company, in accordance with
the terms of our engagement letter dated 25 October 2011. 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 year financial report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the half year 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
consolidated financial statements included in this half year
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 consolidated financial statements in
the half year 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
consolidated financial statements in the half year financial report
for the six months ended 30 September 2011 is not prepared, in all
material respects, in accordance with International Accounting
Standard 34.
KPMG Channel Islands Limited
PO Box 20
20 New Street
St Peter Port
Guernsey
GY1 4AN
Date: 19 December 2011
Unaudited Condensed Half Year Consolidated Statement of
Comprehensive Income
For the 6 month period 1 April 2011 to 30 September 2011
1 April 2011 1 April 2010
to 30 September to 30 September
2011 2010
Notes GBP'000 GBP'000
Revenue 10,110 7,905
---------------- ----------------
- Fees 286 372
- Storage 4,119 3,382
- Warehousing, transport, data processing
& other 5,064 3,435
- Interest on long term mortgages
and other loans 408 503
- Interest 137 102
- Dividends 96 111
---------------- ----------------
Administration and operating expenses 3 (12,420) (10,115)
Fair value movements on revaluation
of investments 10 (13,351) (2,806)
Exchange losses (523) (979)
Operating loss from continued operations (16,184) (5,995)
---------------- ----------------
Interest expense (413) (285)
Loss from operations (16,597) (6,280)
Income tax expense 4 (163) (47)
Loss for the period (16,760) (6,327)
---------------- ----------------
Other comprehensive income
Foreign currency translation differences
for foreign operations (2,140) (651)
Total comprehensive loss for the
period (18,900) (6,978)
================ ================
Loss attributable to:
Owners of the Company (16,739) (6,322)
Non-controlling interest (21) (5)
Loss for the period (16,760) (6,327)
================ ================
Total comprehensive loss attributable
to:
Owners of the Company (18,862) (6,964)
Non-controlling interest (38) (14)
Total comprehensive loss for the
period (18,900) (6,978)
================ ================
Basic and diluted loss per share (14.88p) (5.62p)
================ ================
All items in the above statement derive from continuing
operations.
The accompanying notes on pages 17 to 28 form an integral part
of these consolidated financial statements.
Unaudited Condensed Half Year Company Statement of Comprehensive
Income
For the 6 month period 1 April 2011 to 30 September 2011
1 April 2011 1 April 2010
to 30 September to 30 September
2011 2010
Notes GBP'000 GBP'000
Revenue 104 120
---------------- ----------------
- Interest 8 9
- Dividends 96 111
---------------- ----------------
Administration and operating expenses 3 (1,616) (2,030)
Fair value movements on revaluation
of investments 10 (13,600) (4,100)
Exchange losses (55) (30)
Operating loss before tax (15,167) (6,040)
---------------- ----------------
Income tax expense - -
Loss and total comprehensive loss
for the period (15,167) (6,040)
================ ================
Basic and diluted loss per share (13.48p) (5.37p)
================ ================
All items in the above statement derive from continuing
operations.
The accompanying notes on pages 17 to 28 form an integral part
of these consolidated financial statements.
Unaudited Condensed Half Year Consolidated Statement of
Financial Position
As at 30 September 2011
30 September 31 March
2011 2011
Notes GBP'000 GBP'000
Non-current assets
Goodwill 5 13,274 14,164
Other intangible assets 6 9,788 10,793
Plant and equipment 7 8,992 8,782
Investments - at fair value through
profit and loss 10 32,940 45,805
Loans and advances to customers 11 6,531 7,787
Deferred tax assets 4 - 236
71,525 87,567
------------- ---------
Current assets
Trade and other receivables 4,835 4,404
Corporate Loans 596 434
Cash and cash equivalents 4,104 6,739
Assets classified as held for sale 8 614 657
10,149 12,234
------------- ---------
Total assets 81,674 99,801
------------- ---------
Non-current liabilities
Finance Leases 2,327 1,777
Deferred tax liability 4 1,548 1,792
3,875 3,569
------------- ---------
Current liabilities
Customer accounts and deposits 592 1,016
Tax payable 695 74
Trade and other payables 12 5,508 5,297
6,795 6,387
------------- ---------
Total liabilities 10,670 9,956
------------- ---------
Total net assets 71,004 89,845
============= =========
Equity
Share capital 1,125 1,125
Special reserve 84,073 84,073
Share options reserve 183 128
(Accumulated loss)/ Retained earnings (12,724) 4,015
Non-controlling interest 639 673
Translation reserve (2,292) (169)
Total equity 71,004 89,845
============= =========
Net asset value per share - basic
and diluted 63.1p 79.9p
============= =========
The accounts on pages 11 to 28 were approved by the Board of
Directors on 19 December 2011 and signed on its behalf by:
John Whittle Geoffrey Miller
Director Director
Date: 19 December 2011
The accompanying notes on pages 17 to 28 form an integral part
of these consolidated financial statements.
Unaudited Condensed Half Year Company Statement of Financial
Position
As at 30 September 2011
30 September 31 March
2011 2011
Notes GBP'000 GBP'000
Non-current assets
Investment in subsidiaries - at
fair value through profit and loss 9 47,000 47,300
Investments - at fair value through
profit and loss 10 29,900 43,200
76,900 90,500
------------- ---------
Current assets
Trade and other receivables 724 30
Cash and cash equivalents 1,558 3,794
2,282 3,824
------------- ---------
Total assets 79,182 94,324
------------- ---------
Current liabilities
Trade and other payables 12 264 236
Total liabilities 264 236
------------- ---------
Total net assets 78,918 94,088
============= =========
Equity
Share capital 1,125 1,125
Special reserve 84,073 84,073
Share options reserve - -
(Accumulated loss)/ Retained earnings (6,280) 8,890
Total equity 78,918 94,088
============= =========
Net asset value per share - basic
and diluted 70.1p 83.6p
============= =========
The accounts on pages 11 to 28 were approved by the Board of
Directors on 19 December 2011 and signed on its behalf by:
John Whittle Geoffrey Miller
Director Director
Date: 19 December 2011
The accompanying notes on pages 17 to 28 form an integral part
of these consolidated financial statements.
Unaudited Condensed Half Year Consolidated Statement of Changes
in Equity
For the 6 month period 1 April 2011 to 30 September 2011
(Accumulated
Share loss)/ Non-
Share Special Options Retained Translation controlling
Capital Reserve Reserve earnings Reserves Total Interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the period 1
April 2010 to 30
September
2010
Balance as at 1
April 2010 1,125 84,073 2,437 5,857 (463) 93,029 500 93,529
Total
comprehensive loss
for the period
Loss for the
period - - - (6,322) - (6,322) (5) (6,327)
Other
comprehensive loss
for the period
Foreign currency
translation loss - - - - (642) (642) (9) (651)
Transactions with
owners, recorded
directly
in equity
Contributions and
distributions to
owners
Recognition of
share-based
payments - - 331 - - 331 1 332
At 30 September
2010 1,125 84,073 2,768 (465) (1,105) 86,396 487 86,883
========= ========= ========= ============= ============ ========= ============= =========
For the period 1
April 2011 to 30
September
2011
Balance as at 1
April 2011 1,125 84,073 128 4,015 (169) 89,172 673 89,845
Total
comprehensive loss
for the period
Loss for the
period - - - (16,739) - (16,739) (21) (16,760)
Other
comprehensive loss
for the period
Foreign currency
translation loss - - - - (2,123) (2,123) (17) (2,140)
Transactions with
owners, recorded
directly
in equity
Contributions and
distributions to
owners
Recognition of
share-based
payments - - 55 - - 55 4 59
At 30 September
2011 1,125 84,073 183 (12,724) (2,292) 70,365 639 71,004
========= ========= ========= ============= ============ ========= ============= =========
The accompanying notes on pages 17 to 28 form an integral part
of these consolidated financial statements.
Unaudited Condensed Half Year Consolidated Statement of Cash
Flows
For the 6 month period 1 April 2011 to 30 September 2011
1 April 2011 1 April 2010
to 30 September to 30 September
Notes 2011 2010
Cash flows from operating activities GBP'000 GBP'000
Loss before tax (16,597) (6,280)
Interest on long term mortgages
and other loans (408) (503)
Interest income (137) (102)
Dividend income (96) (111)
---------------- ----------------
(17,238) (6,996)
Adjustments for movements in working
capital:
(Increase)/ decrease in operating
trade and other receivables (566) 122
Decrease in operating trade and
other payables (432) (1,048)
Adjust for:
Revaluation of investments 10 13,351 2,806
Recognised share-based payments 59 332
Exchange losses 427 897
Interest expense 413 285
Loss on property, plant and equipment
written off 197 4
Depreciation and amortisation 960 835
Provision for loan losses (4) (315)
Reserve for aged recievables 69 (56)
Interest paid (13) (22)
Taxation rebate/ (paid) 8 (23)
Dividends received 96 111
Bank and loan interest received 539 610
Loans advanced to customers 958 455
Net cash outflow from operating
activities (1,176) (2,003)
---------------- ----------------
Cash flows from investing activities
(Acquisition)/ disposal of Bonds (744) 36
Acquisition of plant and equipment (204) (686)
Proceeds on sale of assets classified
as held for sale 8 43 -
Increase in deposits 188 29
Net cash outflow from investing
activities (717) (621)
---------------- ----------------
Cash flows from financing activities
Movement on intercompany short term
loans 183 -
Financial lease payments - principal (507) (431)
Financial lease payments - interest (398) (272)
Net cash outflow from financing
activities (722) (703)
---------------- ----------------
Net decrease in cash and cash equivalents (2,615) (3,327)
---------------- ----------------
Opening cash and cash equivalents 6,739 13,242
Effect of exchange rate changes (20) (170)
Closing cash and cash equivalents 4,104 9,745
================ ================
The accompanying notes on pages 17 to 28 form an integral part
of these consolidated financial statements.
Notes to the Unaudited Condensed Half Year Consolidated
Financial Statements
For the 6 month period 1 April 2011 to 30 September 2011
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 condensed half year 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
per Alternative Investment Market of the London Stock Exchange
('AIM').
The condensed half year 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 annual report and financial statements for the
year ended 31 March 2011.
2.2 Accounting period
The comparative numbers used for the condensed half year
consolidated statement of comprehensive income, condensed half year
company 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 2010, 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 2011.
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 2011. The following standards, amendments to standards and
interpretations, effective in future accounting periods, and which
are relevant to the Company and the Group, have not been early
adopted in these financial statements:
-- IAS 27 Separate Financial Statements (Revised) - for
accounting periods commencing on or after 1 January 2013
As a consequence of the new IFRS 10 and IFRS 12, what remains in
IAS 27 is limited to accounting for subsidiaries, jointly
controlled entities and associates in separate financial
statements. These amendments are as a result of improvements to the
Standards and are not expected to have a significant impact on the
Company's or Group's financial statements.
-- IAS 28 Investments in Associates and Joint Ventures (Revised)
- for accounting periods commencing on or after 1 January 2013
As a consequence of IFRS 11 and IFRS 12 (see below), IAS 28 has
been renamed IAS 28 Investments in Associates and Joint Ventures,
and describes the application of the equity method to investments
in joint ventures in addition to associates. These amendments are
as a result of improvements to the Standards and are not expected
to have a significant impact on the Company's or Group's financial
statements.
-- IFRS 7 Financial Instruments - for accounting periods
commencing on or after 1 July 2011
The amendment requires additional disclosure about financial
assets that have been transferred but not derecognised to enable
the user of the Company's financial statements to understand the
relationship with those assets that have not been derecognised and
their associated liabilities. In addition, the amendment requires
disclosures about continuing involvement in derecognised assets to
enable the user to evaluate the nature of, and risks associated
with, the entity's continuing involvement in those derecognised
assets. The amendment affects disclosure only and has no impact on
the Company's or Group's financial position or performance.
-- IFRS 9 Financial Instruments: Clarification and Measurement -
for accounting periods commencing on or after 1 January 2013
IFRS 9 deals with classification and measurement of financial
assets and its requirements represent a significant change from the
existing requirements in IAS 39 in respect of financial assets:
amortised cost and fair value. Financial assets are measured at
amortised cost when the business model is to hold assets in order
to collect contractual cash flows. All other financial assets are
measured at fair value with changes recognised in profit or loss.
For an investment in an equity instrument that is not held for
trading, an entity may on initial recognition elect to present all
fair value changes from the investment in other comprehensive
income. IFRS 9 will be adopted for the first time for the year
ending 31 March 2014 and will be applied retrospectively, subject
to certain transitional provisions. The Company is currently in the
process of evaluating the potential effect of this standard. The
standard is not expected to have a significant impact on the
financial statements since all of the Company's financial assets
are designated at fair value through profit and loss.
-- IFRS 10 Consolidated Financial Statements - for accounting
periods commencing on or after 1 January 2013
The objective of IFRS 10 is to establish principles for the
presentation and preparation of consolidated financial statements
when an entity controls one or more other entities. It replaces the
consolidation requirements in SIC-12 Consolidation-Special Purpose
Entities and IAS 27 Consolidated and Separate Financial Statements
and is effective for annual periods beginning on or after 1 January
2013. IFRS 10 builds on existing principles by identifying the
concept of control as the determining factor in whether an entity
should be included within the consolidated financial statements of
the parent company. The standard provides additional guidance to
assist in the determination of control where this is difficult to
assess. The Company is currently in the process of evaluating the
effect of this standard.
-- IFRS 11 Joint arrangements - for accounting periods
commencing on or after 1 January 2013
The core principle of IFRS 11 is that a party to a joint
arrangement determines the type of joint arrangement in which it is
involved by assessing its rights and obligations and accounts for
those rights and obligations in accordance with that type of joint
arrangement. IFRS 11 Joint Arrangements provides for a more
realistic reflection of joint arrangements by focusing on the
rights and obligations of the arrangement, rather than its legal
form (as is currently the case). The standard addresses
inconsistencies in the reporting of joint arrangements by requiring
a single method to account for interests in jointly controlled
entities. The Company is currently in the process of evaluating the
effect of this standard and it is not expected to have a
significant impact.
-- IFRS 12 Disclosure of interest in other entities - for
accounting periods commencing on or after 1 January 2013
IFRS 12, Disclosure of Interests in Other Entities, applies to
entities that have an interest in a subsidiary, a joint
arrangement, an associate or an unconsolidated structured entity.
The objective of IFRS 12 is to mandate disclosures such that users
of financial statements can evaluate the nature of, and risks
associated with, an entity's interests in other entities, and the
effects of those interests on its financial position, financial
performance, and cash flows. To meet those goals, an entity is
required to disclose the significant judgments and assumptions it
has made in determining the nature of its interest in another
entity or arrangement, and in determining the type of joint
arrangement in which it has an interest. It is also expected to
provide detailed information about its interests in any
subsidiaries, joint arrangements, associates or unconsolidated
structured entities that is not required by other IFRSs but is
required to meet these goals. The Company is currently in the
process of evaluating the effect of this standard and it is not
expected to have a significant impact.
-- IFRS 13 Fair value measurement - for accounting periods
commencing on or after 1 January 2013
IFRS 13 establishes a single source of guidance under IFRS for
all fair value measurements. IFRS 13 does not change when an entity
is required to use fair value, but rather provides guidance of how
to measure fair value under IFRS when fair value is required or
permitted. The Company is currently in the process of evaluating
the effect of this standard and it is not expected to have a
significant impact.
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 or 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
Valuation ('IPEV') Board's guidelines. Unrealised gains and losses
arising from the revaluation of investments are taken directly to
profit or loss. 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 Company and presentation currency of the consolidated financial
statements. Unrealised gains and losses arising from the
translation of investments are taken directly to other
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 Unistream and Grindelia at fair value through profit
or loss, which normally as a result of the size of the equity
interest in these two companies would potentially qualify as
associated companies and would be 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.
The estimated useful lives for the current and comparative
periods are as follows:
Software 10 years
Customer base - large customers 15 years
Customer base - small customers 10 years
Trademark and banking licence Indefinite
2.8 Goodwill
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 2011.
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.
A deferred tax asset is recognised to the extent that is
probable that future taxable profits will be available against
which the temporary difference can be utilised. Deferred tax assets
are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be
realised.
1 April 2011
to
30 September 1 April 2010 to
2011 30 September 2010
GBP'000 GBP'000
3. Administration and operating expenses
Company
Investment management fee 886 990
Auditors' remuneration * 226 317
Directors' remuneration 94 87
Share-based payments - 300
Other operating and administrative
expenses
- Administration fees 35 37
- Professional fees 204 171
- Marketing Costs 52 53
- Other 119 75
1,616 2,030
-------------- -------------------
Kreditmart
Directors' remuneration - 39
Other operating and administrative
expenses
- Professional fees 6 7
- Marketing costs 108 155
- Personnel 408 697
- Premises 72 178
- Depreciation 3 103
- Credit losses and LLP (8) (405)
- Other 272 74
861 848
-------------- -------------------
Flexinvest
Auditors' remuneration 11 26
Directors' remuneration 73 73
Other operating and administrative
expenses
- Professional fees 42 8
- Marketing costs 4 14
- Personnel 406 261
- Premises 112 90
- Depreciation 35 33
- Credit losses and LLP 4 85
- Other 164 105
851 695
-------------- -------------------
OSGRME
Directors' remuneration 258 170
Share-based payments 59 32
Other operating and administrative
expenses
- Professional fees - 124
- Marketing Costs 116 107
- Personnel 3,435 2,623
- Operating lease expense 2,122 1,645
- Depreciation 921 699
- Other 2,181 1,142
9,092 6,542
-------------- -------------------
Total for the Group 12,420 10,115
============== ===================
* Following the acquisition of OSG the Board of the Company have
decided to meet the Group audit costs of its subsidiaries.
4. Tax
1 April 2011 1 April 2010
to to
30 September 30 September
2011 2010
Group
Kreditmart
Current tax charge (12) (54)
(12) (54)
-------------- --------------
Flexinvest
Current tax credit/ (charge) 4 (3)
Deferred tax (charge)/ credit (223) 54
(219) 51
-------------- --------------
OSGRME
Current tax (charge) (64) (28)
Deferred tax credit/ (charge) 132 (16)
68 (44)
-------------- --------------
Net tax credit/ (charge) to the statement
of comprehensive income (163) (47)
============== ==============
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% (2010: 20%)
arising on its activities in Russia.
The Group is liable to pay tax at a rate of 10% (2010: 10%)
arising on its activities in Cyprus.
The Group is liable to pay tax at a rate of 19% (2010: 19%)
arising on its activities in Poland.
The Group is liable to pay tax at a rate of 25%, 20%, 20% and
10% arising on its activities in Ukraine, Kazakhstan, Armenia and
Bulgaria respectively.
Group
30 September 30 September 30 September 31 March
Kreditmart and Flexinvest 2011 2011 2011 2011
Deferred tax asset/(liability)
comprises: GBP'000 GBP'000 GBP'000 GBP'000
Assets Liabilities Net Net
-
Investments 7 - 7 -
Loans to customers 5 - 5 9
Other assets 57 - 57 45
Other liabilities 15 - 15 7
Tax loss carry-forwards (84) - (84) 175
- - - 236
============= ============= ============= =========
OSG Records Management (Europe) 30 September 30 September 30 September 31 March
Limited 2011 2011 2011 2011
Deferred tax liability comprises: GBP'000 GBP'000 GBP'000 GBP'000
Assets Liabilities Net Net
Finance leases - (208) (208) (300)
Intangibles - (1,340) (1,340) (1,492)
- (1,548) (1,548) (1,792)
================================================== ============= ============= =========
Group deferred tax asset - 236
============= =========
Group deferred tax liability (1,548) (1,792)
============= =========
5. Goodwill
30 September
Group 2011 31 March 2011
GBP'000 GBP'000
Opening balance 14,164 14,164
-
Effect of movements in foreign exchange
rate (890) -
Closing balance 13,274 14,164
============= ==============
No impairment of goodwill on acquisition of OSGRME was necessary
at 30 September 2011 based on the increase in the valuation of
OSGRME.
In accordance with the valuation at 31 March 2011 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 loans.
No impairment losses have been recognised in respect of these
intangibles in the 6 month period ended 30 September 2011.
6. Intangible assets
30 September
2011 31 March 2011
GBP'000 GBP'000
Cost:
Opening balance 10,793 11,078
Currency revaluation Flexinvest Bank (234) 284
Currency revaluation Intagibles OSG (482) -
Amortisation of intangibles (289) (569)
Closing balance 9,788 10,793
============= ==============
Reconciliation of intangibles
Banking Internally OSGRME Customer Customer
licence generated Trademark base - large base - small Total
software
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost:
At 1 April 2011 2,760 146 598 7,258 600 11,362
Exchange movements (234) (7) (38) (406) (31) (716)
At 30 September
2011 2,526 139 560 6,852 569 10,646
-------- ----------- ---------- ------------- ------------- --------
Amortisation:
At 1 April 2011 - (15) - (492) (62) (569)
-
Charge for the
period - (8) - (250) (31) (289)
At 30 September
2011 - (23) - (742) (93) (858)
-------- ----------- ---------- ------------- ------------- --------
Carrying amount:
At 30 September
2011 2,526 116 560 6,110 476 9,788
======== =========== ========== ============= ============= ========
Carrying amount:
At 31 March 2011 2,760 131 598 6,766 538 10,793
======== =========== ========== ============= ============= ========
The valuation of the banking licence was considered by the
Valuation Committee and independent reputable valuer and based on
fair market values less costs to sell, it was determined that no
impairment was required.
The fair valuation of the intangibles at acquisition date of
OSGRME was determined by an independent 3rd party using various
valuation methods: the Cost Approach (using historcial costs and
consumer price inflation), and the Income Approach (using the
Multiple Excess Earnings method and Discounted Cash Flow
Analysis).
The banking licence and the trademark are both considered by the
Directors to have an indefinite useful life. They are expected to
generate value indefinitely. The banking licence is registered in
Moscow and the OSGRME trademark is registered in Russia, Poland and
Ukraine. Furthermore, there were no impairment indicators
identified by the Directors in respect of the other intangibles
that were subject to amortisation.
7. Plant and equipment
Fixtures Furniture
Vehicles and and
Group fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost:
At 1 April 2011 1,207 7,274 1,876 10,357
Additions 299 1,115 465 1,879
Disposals - (2) (540) (542)
Exchange movements (95) (610) (94) (799)
At 30 September 2011 1,411 7,777 1,707 10,895
--------- --------- ---------- --------
Accumulated depreciation:
At 1 April 2011 (247) (646) (682) (1,575)
Charge for the period (140) (341) (189) (670)
Disposals - - 342 342
At 30 September 2011 (387) (987) (529) (1,903)
--------- --------- ---------- --------
Net book value:
At 1 April 2011 960 6,628 1,194 8,782
--------- --------- ---------- --------
At 30 September 2011 1,024 6,790 1,178 8,992
========= ========= ========== ========
The useful lives of the assets are
estimated as follows:
Vehicles:
Trucks (included under vehicles) 7 years
Cars (included under vehicles) 5 years
Fixtures and fittings:
Fixtures and fittings 3-4 years
Warehouse equipment & racks 5-20 years
Furniture & equipment:
Office equipment 5-10 years
Furniture 5 years
Equipment 3 years
Hardware 2-5 years
8. Assets classified as held for sale
30 September 2011 31 March 2011
Group GBP'000 GBP'000
At beginning of period 657 845
Additions - 43
Disposals (43) (231)
At end of period 614 657
------------------ --------------
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 2011 31 March 2011
GBP'000 GBP'000
OSG Records Management (Europe)
Limited
At beginning of period 28,800 28,100
Fair value revaluation 1,900 700
At end of period* 30,700 28,800
------------------ --------------
Kreditmart
At beginning of period 12,049 15,749
Fair value revaluation * (2,200) (3,700)
At end of period* 9,849 12,049
------------------ --------------
Flexinvest Limited
Opening and closing balance 6,451 6,451
------------------ --------------
47,000 47,300
================== ==============
* The revaluation performed on Kreditmart includes the value of
Flexinvest Limited as at 30 September 2011, 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 2011 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.
Methodologies and assumptions used in valuing investments and
investments in subsidiaries:
1) Market Approach:
The market comparable method indicates the market value of the
ordinary shares of a business by comparing it to publicly traded
companies in similar lines of business. The conditions and
prospects of companies in similar lines of business depend on
common factors such as overall demand for their products and
services. An analysis of the market multiples of companies engaged
in similar businesses yields insight into investor perceptions and,
therefore, the value of the subject company.
In the market approach, recent sales and listings of comparable
assets are gathered and analysed. After identifying and selecting
the comparable publicly traded companies, their business and
financial profiles are analysed for relative similarity.
All valuations of unquoted investments and investments in
subsidiaries (collectively referred to as the "portfolio") were
performed using either an enterprise value/revenue or enterprise
value/EBITDA multiple (except for Kreditmart and Flexinvest where a
Net Asset Approach ie adjusted net assets approach was used). 21%,
by value at period end, of the portfolio was valued using adjusted
net assets approach (31 March 2011: 20%) with the remaining 79% (31
March 2011: 80%) of the portfolio being valued using an enterprise
value/revenue multiple and enterprise value/EBITDA multiple
approach.
The key assumptions in the valuations were as follows:
- Liquidity discount: 15%-20% (31 March 2011: 15%-20%)
2) Income Approach:
The income approach methodology is used a a cross-check for the
Market Approach and indicates the market value of a business
enterprise based on the present value of the cash flows that the
business can be expected to generate in the future. Such cash flows
are discounted at a discount rate that reflects the time value of
money and the risks associated with the cash flows.
The financial statements of the Group consolidate the results,
assets and liabilities of the subsidiary companies listed
below:
Country Class of % of class
Name of subsidiary undertaking of incorporation share held at Principal activity
30 September
2011
OSG Records Management (Europe)
Limited Cyprus Ordinary 94.0% Financing
Document storage,
data security
and records
OSG Records Management Center management
Limited Liability Company* Russia Ordinary 100.0% services
OSG Polska Limited Liability
Company* Poland Ordinary 100.0%
OSG Records Management Limited
Liability Company* Ukraine Ordinary 100.0%
OSG Records Management Limited
Liability Company* Kazakhstan Ordinary 100.0%
OSG Records Management Limited
Liability Company* Armenia Ordinary 100.0%
OSG Records Management Limited
Liability Company* Bulgaria Ordinary 100.0%
Kreditmart Finance Limited Cyprus Ordinary 100.0% Consumer finance
Investment
Flexinvest Limited Cyprus Ordinary 100.0% holding
Banking and
Flexinvest Bank Limited** Russia Ordinary 100.0% finance
* Direct subsidiaries of OSG Records Management (Europe) Limited
and indirect subsidiaries of the Company.
** Flexinvest Bank is held directly by Kreditmart and Flexinvest
and is an indirectly held subsidiary of the Company.
10. Investments - at fair value through profit and loss
30September 30September 31 March 31 March
2011 2011 2011 2011
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Unistream Bank 14,900 14,900 18,700 18,700
Grindelia Holdings 15,000 15,000 24,500 24,500
Quoted investments 3,040 - 2,605 -
Total investments at fair
value through profit and
loss 32,940 29,900 45,805 43,200
============ ============ ========= =========
Change in fair value of investments at fair value through profit
and loss
1 April 1 April 1 April
2011 to 1 April 2011 2010 to 2010
30 September to 30 September 30 September to 30 September
2011 2011 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
OSG Records Management
(Europe) Limited (see
note 9) - 1,900 - 600
Unistream Bank (3,800) (3,800) (2,600) (2,600)
Grindelia Holdings (9,500) (9,500) (200) (200)
Quoted investments (51) - (6) -
Kreditmart and Flexinvest
(see note 9) - (2,200) - (1,900)
Total unrealised (losses)/
gains (13,351) (13,600) (2,806) (4,100)
============== ================= ============== ==================
On 30 March 2010, GBP0.6 million share capital injection was
made by the Company into OSGRME for 'racking', 1,822 shares were
issued by OSGRME in this regard, which thus increased the Company's
overall holding in OSGRME to approximately 95.52%. In the first
quarter of 2011, the option pool was increased by a further 938
shares, which reduced the Company's overall holding in OSGRME to
approximately 94.04%.
As a result of the size of the stakes in these two companies,
Unistream (and OSGRME up to 12 January 2010 when a controlling
interest was acquired) could potentially qualify as associated
companies, which would normally require that they be equity
accounted in the books of the Company. However, the Company has
taken advantage of the exemption available to it under IAS 28, and
hence accounts for these as investments at fair value through
profit or loss.
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. The Company
receives quarterly payments in advance of Grindelia Holdings
Limited declaring a dividend.
In the view of the Valuation Committee, the value of the
investment in Unistream Bank and Grindelia Holdings Limited as at
30 September 2011 was estimated at GBP 14.9 million (31 March 2011:
GBP 18.7 million), and GBP 15 million (31 March 2011: GBP 24.5
million) respectively. Independent valuations are performed by
Deloitte on an annual basis.
11. Loans and advances to customers
Group
30September 31March
2011 2011
GBP'000 GBP'000
Residential mortgages 6,531 7,787
============ ========
Reconciliation of impairment loss allowance
on loans to customers:
Balance at beginning of the year/period 670 938
Movement in allowance for loan losses (38) (268)
632 670
============ ========
There are currently 75 private loans (mortgages). The Mortgages
are secured over borrowers' private residences, are repayable in
equal monthly installments and have an average maturity of 25.5
years. Interest is charged at fixed rates, at an average interest
rate of 11.84%.
There are currently 55 consumer loans, repayable monthly by
equal instalments which have an average maturity period of 0.5
years. Interest is charged at an average rate of 30.43%.
12. Trade and other payables
30September 30September 31March 31March
2011 2011 2011 2011
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Vat & Social Tax payable - - 253 -
Expense accruals and sundry 3,854 264 3,422 236
Income Received in Advance 1,654 - 1,622 -
5,508 264 5,297 236
============ ============ ========= ===========
13. 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 3 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 ("Flexinvest Bank") Limited (subsidiaries)
- OSG Records Management (Europe) Limited ("OSGRME")
(subsidiary)
The Group is engaged in investment in small and mid-sized
companies in Russia and in one principal geographical area, being
Russia.
Kreditmart Finance Limited, Flexinvest Limited and Volzhski
Universalny Bank ("Flexinvest Bank") Limited (subsidiaries)
disburse mortgage and consumer loans for private clients, place
deposits, and render other services (money transfers, safe boxes).
Kreditmart provides private clients with consultaions on mortgage,
consumer loans, vehicle insurance, and other financial
services.
The OSG Group consists of six legal entities: OSG Records
Management (Europe) Ltd (Cyprus), OSG Records Management Center
(Russia), OSG Polska (Poland), OSG Records Management (Ukraine),
OSG Records Management (Armenia), OSG Records Management (Bulgaria)
and OSG Records Management (Kazakhstan). OSG Records Management
(Europe) Ltd (Cyprus) is a parent company for OSG Group which owns
100% of shares of 6 operating units in Russia (being the largest
operation), Poland, Ukraine, Kazakhstan, Armenia and Bulgaria. The
OSG Group provides records management services (document storage
and other services) through its 100% owned operating subsidiaries.
More than half of sales revenues are earned through providing
document storage services. The remaining revenues come from the
following warehouse services, transportation of documents; archive
services, data processing services and destruction of documents and
tapes. Approximately 70% of the operating income is derived from
Russia, with the bulk of the remaining portion being derived from
Poland.
The main customers of Kreditmart, Flexinvest and Flexinvest Bank
are private clients and the main customers of OSGRME are financial
institutions, telecom and other companies.
The Investment Manager's Report provides more information on the
Company'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 1 April 1 April 1 April 1 April
2011 to 1 April 2011 to 2011 to 2010 to 1 April 2010 to 2010 to
30 2011 to 30 30 30 30 2010 to 30 30
September September September September September 30 September September September
2011 2011 2011 2011 2010 2010 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Aurora Kreditmart/ Total Aurora Kreditmart/ OSGRME Total
Flexinvest/Flexinvest Flexinvest/Flexinvest
Bank OSGRME Bank
Revenue 104 847 9,159 10,110 120 964 6,821 7,905
---------- ---------------------- ---------- ---------- ---------- ---------------------- ---------- ----------
- Fees - 286 - 286 - 372 - 372
- Storage - - 4,119 4,119 - - 3,382 3,382
- Warehousing, data processing,
transport & other - - 5,064 5,064 - - 3,435 3,435
- Interest on long term mortgages
and other loans - 408 - 408 - 503 - 503
- Loan Interest - 30 (30) - - - - -
- Bank interest 8 123 6 137 9 89 4 102
- Dividend income 96 - - 96 111 - - 111
---------- ---------------------- ---------- ---------- ---------- ---------------------- ---------- ----------
Administration and operating
expenses (1,616) (1,674) (8,171) (11,461) (2,030) (1,406) (5,843) (9,279)
- Depreciation and amortisation - (38) (921) (959) - (137) (699) (836)
- Interest expense - (15) (398) (413) - (13) (272) (285)
Fair value movements on
revaluation
of investments (13,600) (51) - (13,651) (4,100) (6) - (4,106)
---------- ---------------------- ---------- ----------------------
-
Kreditmart/Flexinvest/Flexinvest
Bank (2,200) - - (2,200) (1,900) - - (1,900)
- Whitebrooks (OSG) 1,900 - - 1,900 600 - - 600
- Unistream (3,800) - - (3,800) (2,600) - - (2,600)
- Grindelia (SuperStroy) (9,500) - - (9,500) (200) - - (200)
- Quoted investments - (51) - (51) - (6) - (6)
---------- ---------------------- ---------- ---------- ---------- ---------------------- ---------- ----------
Exchange losses (55) (373) (95) (523) (30) (865) (84) (979)
Loss from discontinued operations - - - -
Operating profit/(loss) before
tax (15,167) (1,304) (426) (16,897) (6,040) (1,463) (77) (7,580)
---------- ---------------------- ---------- ---------- ---------- ---------------------- ---------- ----------
Tax - (231) 68 (163) - (3) (44) (47)
Net segment loss (15,167) (1,535) (358) (17,060) (6,040) (1,466) (121) (7,627)
========== ====================== ========== ========== ========== ====================== ========== ==========
1 April 1 April
2011 to 2010 to
30 September 30 September
Reconciliation of segment loss to consolidated statement of comprehensive income 2011 2010
GBP'000 GBP'000
Total net segment loss (17,060) (7,627)
Adjustment for fair value movements on
Kreditmart/Flexinvest/Flexinvest Bank and OSGRME 300 1,300
Net loss for the period for the Group (16,760) (6,327)
-------------- --------------
30 30 30 30
September September September September 31 March 31 March 31 March 31 March
2011 2011 2011 2011 2011 2011 2011 2011
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Kreditmart/ Kreditmart/
Flexinvest/ Flexinvest/
Flexinvest Flexinvest
Aurora Bank OSGRME Total Aurora Bank OSGRME Total
Total
segments
assets
include:
Investments
in
subsidiaries 47,000 - - 47,000 47,300 - - 47,300
Financial
assets at
fair value
through
profit or
loss 29,900 3,040 - 32,940 43,200 2,605 - 45,805
------------ ------------ ------------ ------------ --------- ------------- --------- ---------
- Unistream 14,900 - - 14,900 18,700 - - 18,700
- Grindelia
(SuperStroy) 15,000 - - 15,000 24,500 - - 24,500
- Quoted
investments - 3,040 - 3,040 - 2,605 - 2,605
------------ ------------ ------------ ------------ --------- ------------- --------- ---------
Cash and cash
equivalents 1,558 2,190 356 4,104 3,794 2,718 227 6,739
Intangible
assets - 2,526 20,536 23,062 - 2,760 22,198 24,958
Property,
plant and
equipment - 308 8,684 8,992 - 418 8,364 8,782
Assets
classified
as held for
sale - 614 - 614 - 657 - 657
Loans and
advances to
customers - 6,531 - 6,531 - 7,787 - 7,787
Other assets 724 1,186 3,521 5,431 30 1,430 3,613 5,073
Segment
assets 79,182 16,395 33,097 128,674 94,324 18,375 34,402 147,101
------------ ------------ ------------ ------------ --------- ------------- --------- ---------
Total segment
liabilities (264) (891) (8,175) (9,330) (236) (760) (7,469) (8,465)
------------ ------------ ------------ ------------ --------- ------------- --------- ---------
Reconciliation of segment assets and
liabilities to consolidated statement 30 September 31 March
of financial position 2011 2011
GBP'000 GBP'000
Segment assets for reportable segments 128,674 147,101
Investment in subsidiaries (47,000) (47,300)
Total assets for the Group 81,674 99,801
------------- ---------------
Segment liabilities for reportable segments (9,330) (8,465)
Deferred taxation adjustment on acquisition
of OSGRME (1,340) (1,491)
Total liabilities for the Group (10,670) (9,956)
------------- ---------------
14. Related party transactions
The Company has 3 subsidiaries, OSG Records Management (Europe)
Limited, Kreditmart Finance Limited and Flexinvest Bank Limited
(see note 9). Details of the investments in 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.
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 GBP 885,840 (6 month period ended 30 September 2010: GBP
989,860). There were no outstanding fees at the period/year end. On
18 November 2011, the Company made an advance payment of GBP450,000
in relation to management fees for the 6 month period ending 30
September 2012.
Mr G Miller holds 100,000 ordinary shares, Mr G Chalk holds
50,000 ordinary shares and Mr T Slesinger 14,310,977 ordinary
shares in the Company. Mr G Cameron is a Director of Investec
Global Managed Fund, which holds 750,000 shares in the Company and
Advocate B Morgan is a partner at Carey Olsen, which provides legal
services to the Company.
15. Contingencies and capital commitments
The Group had no contingencies and capital commitments
outstanding at the reporting date.
16. Events after the reporting date
The Company sold OOO Kreditmart, a wholly owned subsidiary of
Kreditmart Finance Limited, recently to Lespender Limited, which
currently operates a mortgage and consumer loan brokerage for a
nominal consideration. The Company also entered into an option
agreement to acquire of 10% of the purchasing company for GBP200
($330) to be used anytime over a 10 year period from closing. The
option is non-dilutable. After completion of the sale, Kreditmart
Finance Limited will be able to release funds of GBP2.5m that were
being held in the Kreditmart structure, for future expansion.
There were no further material post balance events to
report.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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