TIDMAURR
RNS Number : 8307T
Aurora Russia Limited
18 December 2012
This announcement replaces the Aurora Russia release from
11/12/12 under RNS: 1951T.
There are two changes under the section entitled "Portfolio
Highlights" at the front of the announcement, as follows:
-- OSG Revenues for the 6 months ended 30 September 2012 were
GBP11.0m compared to GBP9.2m for the same period in 2011, instead
of, as stated in the previous release, GBP10.8m compared to
GBP9.16m for the same period in 2011.
-- The valuation of Flexbank was incorrectly stated as GBP16.2m, instead of GBP13.2m.
All other details remain unchanged. The full announcement is
repeated below.
11 December 2012
Aurora Russia Limited ("Aurora Russia" or the "Company")
Results for the six months ended 30 September 2012
-- 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 2012 of 62.3p
per share (Net asset value GBP70m) down from 66.8p per share at 31
March 2012.
-- Cash and cash equivalents as at 30 September 2012 were
GBP0.9m (GBP2.2m cash within the Group)
Portfolio highlights
OSG
-- The Board has agreed to prepare OSG to be demerged from
Aurora Russia and admitted to trading on the Alternative Investment
Market of the London Stock Exchange following publication of its
audited accounts for the financial year ending 31 March 2013.
-- Revenues for the 6 months ended 30 September 2012 were GBP11m
compared to GBP9.2m for the same period in 2011.
-- EBITDA up 42% to GBP1.7m as at 30 September 2012
-- Equity valuation of Aurora Russia's stake in OSG at 30
September 2012 was GBP29.9m compared to the valuation at 31 March
2012 of GBP28.2m
Unistream Bank
-- Unistream's share in the Russia-outbound transfer market is estimated at 23% as at H1 2012
-- Revenues for the nine month period ended 30 September 2012 were RUR 1.8bn, up 7% YoY
-- PBT for the nine months to 30 September 2012 was RUR8.8
million up from RUR71m for the same period last year.
-- Equity valuation of Aurora Russia's stake in Unistream at 30
September 2012 was GBP13.6m, compared to the valuation at 31 March
2012 of GBP16.3m
Superstroy
-- Revenues grew by 10% YoY for the nine months ended 30 September 2012 to RUR7.1billion
-- EBITDA of RUR302million
-- Equity valuation of Aurora Russia's stake in Superstroy at 30
September 2012 was GBP14.3m, compared to the valuation at 31 March
2012 of GBP15m
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 2012, Flexinvest and Kreditmart had
GBP12.5m in net assets down from GBP15.1m as at 31 March 2012
-- Equity valuation of Aurora Russia's stake in Kreditmart/
Flexinvest Bank at 30 September 2012 was GBP13.2m, compared to the
valuation at 31 March 2012 of GBP15.1m
Commenting, Geoff Miller, Chairman of Aurora Russia, said:
"While I have concerns about the global economy, I am cautiously
optimistic about the future for Russia and Aurora Russia's
investments. The oil price has remained strong and there is an
expectation that this should continue to be the case, which
provides stability for the Rouble and the Russian economy. There
has been much discussion about diversifying the economy away from
oil and Russia's wealth of other natural resources, and although
there has been some progress in this regard, Russia remains heavily
dependent on its natural resources to drive its growth. Our
investee companies should all continue to benefit from this growth
which in turn should attract investors looking for exposure to
expanding markets and companies in a year where we expect to
realize value for our shareholders."
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 2012.
Over the past six months we have been working with the Manager
to secure exits for each of the investments in the portfolio in
line with the wishes of shareholders. It appears that the market
generally has improved and we are seeing a great deal more interest
in our assets than at any time since I took over as Chairman.
I am pleased to announce that the Board has agreed to prepare
OSG to be demerged from Aurora Russia and admitted to trading on
the Alternative Investment Market of the London Stock Exchange
following publication of its audited accounts for the financial
year ending 31 March 2013. OSG has many features which make it a
compelling candidate for a separate quotation on AIM, including an
exceptional management team with a strong track record of organic
growth and cash generation; a leading position in Russia and in
other fast-growing eastern European markets; and a stable base of
recurring contracted revenues from blue chip clients. Following a
competitive pitch process, the Board has agreed to appoint N+1
Singer to advise OSG on its AIM admission and to act as Broker and
NOMAD to OSG.
The Board has also been working with the Manager to secure
interest for the remaining assets and in this regard has appointed
Lincoln International to seek investors for Flex Bank. Although we
still have nothing concrete to report in this regard, there is some
interest being shown in the bank, but we expect that it will take
some time before any transaction is completed. Regarding our
minority stakes in Unistream and Superstroy, we have also been in
discussions to dispose of these assets and I hope that before the
Company's year-end results are announced we will have concrete news
to report in this regard.
In addition to securing exits, it is critical that the Manager
focuses on the performance of each of the companies in our
portfolio. All of the companies are growing, details of which are
in the Manager's Report. There has been a reduction in the value of
the assets from GBP74.6 million to GBP71.0 million due primarily to
further depreciation in the Rouble versus Sterling and in the
valuation of comparative companies. The performance of our investee
companies, both in absolute terms or relative to their peers, has
been encouraging.
Results
For the 6 months to 30 September 2012, Aurora Russia recorded a
loss of GBP3.1 million or 2.74p per share, calculated based on the
unaudited condensed half year Company statement of comprehensive
income. The net asset value ("NAV") of the Company as at 30
September 2012 was GBP72 million or 64p per share. This decline in
value, which is detailed further below, derives largely from
adverse stock market and currency movements. Cash and cash
equivalents at 30 September 2012 were GBP0.9 million.
Administration and operating expenses of GBP13.3 million include
Company costs of GBP0.94 million or 1.46% of the current NAV.
Operating costs of the Company's wholly owned subsidiaries were
GBP12.36 million.
The Annual General Meeting
I would like to take this opportunity to thank our shareholders
for their support at the AGM on 3 October 2012 and the re-election
of Gilbert Chalk and Grant Cameron to the board.
Investment Review
The Company has four remaining investments:
-- 92.8% of OSG, a regional market leader in records
management;
-- 24.3% of Superstroy, one of the leading DIY retailers in
Russia
-- 26.0% of Unistream Bank, a leading Russian money transfer
company; and
-- 100.0% of Flexinvest 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 2012, resulting in a decrease in value from GBP74.6
million to GBP71.0 million. This interim valuation, recommended by
the Valuation Committee of the Board, was prepared by the Manager
and formally adopted by the Board on 10 December 2012. These
valuations are prepared for accounting purposes only and comply
with the International Private Equity and Venture Capital Board's
valuation 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 previous year valuation performed for March 2012 as
follows:
-- the value of 92.8% of OSG's equity has increased by GBP1.7
million to GBP29.9 million, an increase of 6%;
-- the value of the Company's 24.3% shareholding in Superstroy
has decreased by GBP0.7 million to GBP14.3 million, a decrease of
5%;
-- the value of the Company's 26.0% stake in Unistream Bank has
decreased by GBP2.7 million to GBP13.6 million, a decrease of 16%;
and
-- the value of Flexinvest Bank and Kreditmart has decreased by
GBP1.9 million to GBP13.2 million, a decrease of 12.5%.
It is important to note that over the period there was an
approximately 6.5% unfavourable movement in the GBP/RUR exchange
rate. Therefore the movement of values may be distorted by currency
translation effects.
Outlook
While I have concerns about the global economy, I am cautiously
optimistic about the future for Russia and Aurora Russia's
investments. The oil price has remained strong and there is an
expectation that this should continue to be the case, which
provides stability for the Rouble and the Russian economy. There
has been much discussion about diversifying the economy away from
oil and Russia's wealth of other natural resources, and although
there has been some progress in this regard, Russia remains heavily
dependent on its natural resources to drive its growth. Our
investee companies should all continue to benefit from this growth
which in turn should attract investors looking for exposure to
expanding markets and companies in a year where we expect to
realise value for our shareholders.
Geoffrey Miller
Chairman of the Board
Aurora Russia Limited
Date: 10 December 2012
Investment Manager's Report
Overview
According to the World Bank, the Eurozone crisis continues to
adversely affect global growth as well as growth in the Russian
economy. It has recently revised its global GDP estimates downwards
to 2.3% from 2.5% in 2012 and to 2.5% from 3% in 2013. It also
revised its estimates for Russian GDP growth to 3.5% (in June, the
forecast was 3.8%). It is predicting 3.6% growth for 2013,
previously estimated at 4.2%. Despite these predictions, the
portfolio companies continue to perform well growing revenues well
in excess of Russian GDP.
Portfolio performance highlights:
-- OSG continues to grow and for the first six months of its
financial year 1 April 2012 to 30 September
2012 it showed an increase in revenues of 29% in local
currencies and 19% in Pounds Sterling;
-- For the nine months ended 30 September 2012 Unistream
delivered 12% growth in volume from
RUR97.7 billion (c. GBP1.95 billion) to RUR109.5 billion (c.
GBP2.2 billion). However, its average revenue per
transaction dropped from 1.72% to 1.64% and its profit before
tax declined compared to 2011.
-- For the nine months ended 30 September 2012 Superstroy grew
its revenues at 10% however it did
not open any new stores and therefore for the period its EBITDA
grew from RUR45 million (c. GBP1
million) to RUR302 million (c. GBP6 million);
-- For the nine months ended 30 September 2012 Flex Bank grew
its credit card portfolio from RUR20.2
million to RUR508.1 million;
-- Total portfolio valuation of GBP71.0 million, down 4.8% from
March 2012 and 7.7% down from September
2011.
Our outlook for the rest of the company's financial year is
generally optimistic on the performance of all our four companies
based on their financial and operational performance
year-to-date.
As detailed in the Chairman's Statement, OSG has agreed to
appoint N+1 Singer to prepare OSG for admission to trading on AIM
following the publication of its year end results. Having visited a
number of brokers before making the final decision to appoint N+1
Singer, we were encouraged by the enthusiasm for OSG and the
expectation that it will provide investors with an opportunity to
invest into a growth company in a market whose growth is expected
to outperform growth in Europe over the next five years.
Over the period, the Manager has focused on building value in
the underlying investments and has been working with the Board to
release value to investors. We are seeing an increased interest in
all our portfolio companies and expect that we will deliver value
to Aurora Russia's shareholders in the timeframe set out by the
board.
OSG Records Management
In 2012 OSG continued its expansion and in October the number of
items in storage crossed the four million mark showing 32% growth
year-over-year. It took 12 months to grow from three million to
four million items, while growing from two million to three million
items took approximately 19 months.
OSG's management accounts for the half-year ended 30 September
2012 show an increase in revenues over the same period in 2011 of
19% from GBP9.2 million to GBP11.0 million. EBITDA grew
year-over-year from GBP1.2 million to GBP1.7 million, an increase
of 42%. The Company sees continued strong demand for
records-management outsourcing in its major markets of Russia,
Poland, Ukraine and Kazakhstan and looks forward to achieving
strong double-digit growth over the medium term.
In order to minimise the cost of financing its growth, OSG has
concentrated on securing loan financing as an alternative to the
more expensive financial leases that it has used historically to
finance the purchase of racking for its warehouses. During the
first half of its reporting period ended 30 September, the company
was able to raise an additional RUR80 million (cGBP1.7 million) of
loan financing from a Russian bank to finance the purchase of
racking systems for its class A warehouse facilities in Russia. OSG
is in advanced discussions to secure long term loan financing.
The equity valuation of Aurora Russia's stake in OSG at 30
September 2012 was GBP29.9 million. This is net of the liability
associated with the management options in OSG valued at GBP1.3
million and net of third party debt and financial leases less cash
of GBP5.5 million. This valuation is an increase of 6% on the
equity value as at 31 March 2012 of GBP28.2 million.
SuperStroy
Superstroy performed well for the nine months ended 30 September
2012. Based on the management accounts for the period, the
company's sales grew year on year by 10% from RUR6.5 billion to
RUR7.1 billion, and EBITDA grew to RUR302 million from RUR45
million over the same period in 2011.
EBITDA growth was driven primarily by strong gross margin growth
from 28.6% to 30% and effective cost control management. During the
first nine months of 2012 the company has renovated four stores
adding 5,000 sqm of trade space. The company has achieved good
results sourcing from China and Europe and expects to join the
ARENA buying group (the leading worldwide DIY buying group) by the
end of the year.
The equity valuation of Aurora Russia's stake in Superstroy at
30 September 2012 was marked down to GBP14.3 million, a decrease of
4.6% on the valuation at 31 March 2012 of GBP15.0 million. The
movement in value is principally due to the depreciation of the
Rouble against Sterling.
Unistream Bank
According to the Central Bank of Russia ("CBR") the volume of
Russian outbound transfers in H1 2012 grew 16% over H1 2011.
Russian inbound transfers in H1 2012 grew 23% over H1 2011. Based
on these statistics, Unistream had approximately 15.0% of the
outbound money transfer ("MT") market and 10.8% of the inbound MT
market compared to the 16.9% and 9.7% respectively for the same
period in 2011.
Unistream has now distributed approximately 1.6 million loyalty
cards to its customers and has broadened its current network by
entering the retail market, distributing its money transfer product
through retail chains such as Megafon. Megafon operates 1,889 of
its own retail stores in Russia which, including its agents,
increases Unistream's retail footprint to a potential total of
4,000 retail outlets.
In the first nine months of 2012 volumes continued to grow at
12% from RUR97.7 billion to RUR109.5 billion. Total revenues were
RUR1,792 million increasing 7% compared to the prior year period.
For the first nine months of the year the company showed a small
profit before tax of RUR8.8 million compared to a profit before tax
of RUR68.0 million over the same period in 2011. The lacklustre
profit before tax figure is primarily due to increased competition
in the market, where competitors are focussed on gaining market
share rather than profitability.
The equity valuation of Aurora Russia's stake in Unistream at 30
September 2012 was marked down to GBP13.6 million, a decrease of
16.0% on the valuation at 31 March 2012 of GBP16.3 million. The
movement in principally is partly due to the depreciation of the
Rouble against Sterling and the lower than expected profitability
for the period.
Flexinvest Bank
Flex Bank's new strategy of taking deposits and issuing credit
cards continues to be a success.
All of Flex Bank's credit card (Mastercard) customers are
sourced through the internet with applications filled out on
http://www.flexbank.ru/. The bank's credit card book net of
reserves reached RUR508.1 million at 30 September 2012 up from
RUR20.2 million at the beginning of 2012. Retail deposits reached
RUR415.4 million at 30 September 2012 rising from RUR41.7 million
at the beginning of 2012.
The bank has recently reviewed its funding strategy and not only
is it funding its credit card book with retail savings deposits but
it is now attracting corporate deposits as an alternative source of
funding.
When valuing the bank, we adjust its assets to its fair value.
As of 30 September 2012, Flex Bank had an adjusted book value of
GBP13.2 million, down 12.5% from GBP15.1 million as of 30 September
2012. Assets at 30 September 2012 include: 1) a net mortgage book
of GBP4.9 million; 2) a net credit card book of GBP9.8 million; 3)
the banking licence valued at GBP3.1 million; 4) GBP2.0 million of
cash and cash equivalents; and 5) other assets of GBP2.4 million.
Liabilities at 30 September 2012 include customer accounts and
deposits of GBP8.4 million, and other liabilities of GBP0.7
million. The movement in value is partly due to the depreciation of
the Rouble against Sterling but also due to a distribution of cash
to Aurora Russia.
In June this year GBP1.0 million of cash was repatriated to
Aurora Russia to cover operating cash flow needs followed by GBP0.4
million of cash returned recently post the September balance sheet
date. Due to its new business strategy Flex Bank's non-core
mortgage book will be disposed of in due course with a portion of
the proceeds transferred to Aurora Russia.
Conclusion
The period ended 30 September 2012 has seen growth in all of the
investee companies and indications are that this will continue.
Although the global economy remains uncertain, Russia remains a
market where GDP growth is outstripping that of its European
neighbours and good companies operating there should continue to
show robust results in the year ahead.
Aurora Investment Advisors Limited
December 2012
Independent Review Report to Aurora Russia Limited
We have been engaged by the Company to review the unaudited
condensed half year consolidated financial statements in the half
year financial report for the six months ended 30 September 2012
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 17 October 2012. 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 half year
consolidated financial statements included in this half year
financial report have 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 half year 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 half year
consolidated financial statements in the half year financial report
for the six months ended 30 September 2012 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: 10 December 2012
Unaudited Condensed Half Year Consolidated Statement of
Comprehensive Income
For the 6 month period 1 April 2012 to 30 September 2012
1 April 2012 1 April 2011
to 30 September to 30 September
2012 2011
Notes GBP'000 GBP'000
Revenue 12,748 10,110
------------------------ ----------------
- Fees 378 286
- Storage 5,124 4,119
- Warehousing, transport, data processing
& other 5,857 5,064
- Interest on long term mortgages
and other loans 1,303 408
- Interest 86 137
- Dividends - 96
------------------------ ----------------
Administration and operating expenses 3 (13,303) (12,420)
Fair value movements on revaluation
of investments 10 (3,398) (13,351)
Exchange losses (157) (523)
Operating loss from continued operations (4,110) (16,184)
------------------------ ----------------
Interest expense (919) (413)
Loss from operations (5,029) (16,597)
Income tax expense 4 (65) (163)
Loss for the period (5,094) (16,760)
------------------------ ----------------
Other comprehensive income
Foreign currency translation differences
for foreign operations (1,737) (2,140)
Total comprehensive loss for the
period (6,831) (18,900)
======================== ================
Loss attributable to:
Owners of the Company (5,090) (16,739) (6,322)
Non-controlling interest (4) (21) (5)
Loss for the period (5,094) (16,760) (6,327)
======================== ================ ========
Total comprehensive loss attributable
to:
Owners of the Company (6,741) (18,862) (6,964)
Non-controlling interest (90) (38) (14)
Total comprehensive loss for the
period (6,831) (18,900) (6,978)
======================== ================ ========
Basic and diluted loss per share (4.52p) (14.88p) (5.62p)
======================== ================ ========
All items in the above statement derive from continuing
operations.
The accompanying notes on pages 16 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 2012 to 30 September 2012
1 April 2012 1 April 2011
to 30 September to 30 September
2012 2011
Notes GBP'000 GBP'000
Profit on part disposal of Flexinvest 14 766 -
Revenue 1 104
-------------------------- ----------------
- Interest 1 8
- Dividends - 96
-------------------------- ----------------
Administration and operating expenses 3 (943) (1,616)
Fair value movements on revaluation
of investments 10 (2,966) (13,600)
Exchange gains/losses 58 (55)
Operating loss before tax (3,084) (15,167)
-------------------------- ----------------
Income tax expense - -
Loss and total comprehensive loss
for the period (3,084) (15,167)
========================== ================
Basic and diluted loss per share (2.74p) (5.37p)
========================== ================
All items in the above statement derive from continuing
operations.
The accompanying notes on pages 16 to 28 form an integral part
of these consolidated financial statements.
Unaudited Condensed Half Year Consolidated Statement of
Financial Position
As at 30 September 2012
30 September
2012 31 March 2012
Notes GBP'000 GBP'000
Non-current assets
Goodwill 5 13,143 13,909
Other intangible assets 6 9,169 10,011
Plant and equipment 7 10,424 10,666
Investments at fair value through
profit and loss 10 27,908 32,294
Loans and advances to customers 11 4,369 4,910
Deferred tax assets 4 4 7
----------------------- ------------------------
65,017 71,797
----------------------- ------------------------
Current assets
Investments 496 -
Trade and other receivables 6,194 5,057
Loans and advances to customers 11 10,747 3,892
Due from banks 613 302
Cash and cash equivalents 2,117 5,576
Assets classified as held for sale 8 709 725
----------------------- ------------------------
20,876 15,552
----------------------- ------------------------
Total assets 85,893 87,349
----------------------- ------------------------
Non-current liabilities
Finance Leases 3,359 2,245
Interest bearing borrowings - 719
Loans payable to investee companies 13 456 491
Deferred tax liability 4 1,708 1,839
----------------------- ------------------------
5,523 5,294
----------------------- ------------------------
Current liabilities
Customer accounts and deposits 8,356 1,497
Tax payable 756 872
Trade and other payables 12 6,922 8,599
----------------------- ------------------------
16,034 10,968
----------------------- ------------------------
Total liabilities 21,557 16,262
----------------------- ------------------------
Total net assets 64,336 71,087
======================= ========================
Equity
Share capital 1,125 1,125
Special reserve 84,073 84,073
Share options reserve 350 276
(Accumulated loss)/ Retained earnings (19,758) (14,668)
Non-controlling interest 631 715
Translation reserve (2,085) (434)
----------------------- ------------------------
Total equity 64,336 71,087
======================= ========================
Net asset value per share - basic
and diluted 57.2p 63.2p
======================= ========================
The accounts on pages 10 to 28 were approved by the Board of
Directors on 10 December 2012 and signed on its behalf by:
Director: John Whittle Director: Geoffrey
Miller
Date: 10 December 2012
The accompanying notes on pages 16 to 28 form an integral part
of these consolidated financial statements
Unaudited Condensed Half Year Company Statement of Financial
Position
As at 30 September 2012
30 September
2012 31 March 2012
Notes GBP'000 GBP'000
Non-current assets
Investment in subsidiaries - at
fair value through profit and loss 9 43,100 43,300
Investments - at fair value through
profit and loss 10 27,900 31,300
------------------- --------------
71,000 74,600
------------------- --------------
Current assets
Trade and other receivables 948 494
Cash and cash equivalents 879 873
------------------- --------------
1,827 1,367
------------------- --------------
Total assets 72,827 75,967
------------------- --------------
Non-current liabilities
Loans payable to investee companies 13 456 491
------------------- --------------
Current liabilities
Trade and other payables 12 324 344
------------------- --------------
Total liabilities 780 835
------------------- --------------
Total net assets 72,047 75,132
=================== ==============
Equity
Share capital 1,125 1,125
Special reserve 84,073 84,073
(Accumulated loss)/ Retained earnings (13,151) (10,066)
------------------- --------------
Total equity 72,047 75,132
=================== ==============
Net asset value per share - basic
and diluted 64.0p 66.8p
=================== ==============
The accounts on pages 10 to 28 were approved by the Board of
Directors on 10 December 2012 and signed on its behalf by:
Director: John Whittle Director: Geoffrey
Miller
Date: 10 December 2012
The accompanying notes on pages 16 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 2012 to 30 September 2012
(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
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
========= ========= ========= ============= ============ ========= ============= =========
For the period 1
April
2012 to 30
September
2012
Balance as at 1
April
2012 1,125 84,073 276 (14,668) (434) 70,372 715 71,087
Total
comprehensive
loss for the
period
Loss for the
period - - - (5,090) - (5,090) (4) (5,094)
Other
comprehensive
loss for the
period
Foreign currency
translation
loss - - - - (1,651) (1,651) (86) (1,737)
Transactions with
owners,
recorded directly
in
equity
Contributions and
distributions
to owners
Recognition of
share-based
payments - - 74 - - 74 6 80
At 30 September
2012 1,125 84,073 350 (19,758) (2,085) 63,705 631 64,336
========= ========= ========= ============= ============ ========= ============= =========
The accompanying notes on pages 16 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 2012 to 30 September 2012
1 April 2012 1 April 2011
to 30 September to 30 September
Notes 2012 2011
Cash flows from operating activities GBP'000 GBP'000
Loss before tax (5,029) (16,597)
Interest income (86) (137)
Dividend income - (96)
---------------- ----------------
(5,115) (17,238)
Adjustments for movements in working
capital:
(Increase) in operating trade and
other
receivables (1,328) (566)
Increase/ (decrease) in operating
trade and other
payables 432 (432)
Adjust for:
Revaluation of investments 10 3,398 13,351
Recognised share-based payments 80 59
Exchange losses 140 427
Interest expense 919 413
Loss on property, plant and equipment
written off - 197
Depreciation and amortisation 6, 7 1,038 960
Provision for loan losses / (recoveries) 644 (4)
Increase in fair value of loan (36) -
Loss on loans sold 78 -
(Profit) on sale of assets classified
as assets held for
sale (40) -
Reserve for aged receivables 192 69
Interest paid (40) (13)
Taxation (paid) / rebate (111) 8
Dividends received - 96
Bank and loan interest received (193) 539
Proceeds from sale of financial
instruments at fair value through
profit or loss 424 -
Increase in customer accounts 4,263 -
(Decrease) in due from banks (311) -
(Decrease) / increase in loans advanced
to customers (7,383) 958
Net cash outflow from operating
activities (2,949) (1,176)
---------------- ----------------
Cash flows from investing activities
Disposal of Bonds - (744)
Proceeds from disposal of loans 260 -
Acquisition of plant and equipment (983) (204)
Proceeds on sale of assets classified
as held for sale 8 164 43
Bank interest received 1 -
Increase in deposits - 188
Net cash outflow from investing
activities (558) (717)
---------------- ----------------
Cash flows from financing activities
Interest income - long term loans 3 -
Movement on intercompany short term
loans 1,167 183
Financial lease payments - principal (750) (507)
Financial lease payments - interest (344) (398)
---------------- ----------------
Net cash inflow / (outflow) from
financing activities 76 (722)
---------------- ----------------
Net decrease in cash and cash equivalents (3,431) (2,615)
---------------- ----------------
Opening cash and cash equivalents 5,576 6,739
Effect of exchange rate changes (28) (20)
Closing cash and cash equivalents 2,117 4,104
================ ================
The accompanying notes on pages 16 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 2012 to 30 September 2012
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
the 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 2012.
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 2011, 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 2012.
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 2012. 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:
New standards:
-- IFRS 9 Financial Instruments- for accounting periods
commencing on or after 1 January 2015
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 2016 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 Group and 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
IFRS 10 supersedes IAS 27 Consolidated and Separate Financial
Statements (IAS 27) and SIC 12 Consolidation - Special Purpose
Entities. It revised the definition of control together with
accompanying guidance to identify an interest in a subsidiary.
However, the requirements and mechanics of consolidation and the
accounting for any non-controlling interests and changes in control
remain the same. The impact of this standard on the financial
statements of the Group has not yet been assessed.
-- IFRS 12 Disclosure of Interests in Other Entities (effective
from 1 January 2013)
This standard combines, in a single standard, the disclosure
requirements for subsidiaries, associates and joint arrangements,
as well as unconsolidated structured entities. The required
disclosures aim to provide information to enable user to evaluate
the nature of, and risks associated with, an entity's interests in
other entities and the effects of those interests on the entity's
financial position, financial performance and cash flows. The
adoption of the new standard will increase the level of disclosure
provided for the entity's interests in subsidiaries, joint
arrangements, associates and structured entities. This standard may
impact the disclosure to be provided by the Group and Company, but
will have to be assessed based on IFRS 10 and IFRS 11 conclusions.
The impact of this standard on the financial statements of the
Group has not yet been assessed
-- IFRS 13: Fair Value Measurement for annual accounting periods
beginning on or after 1 January 2013
IFRS 13 explains how to measure fair value and aims to enhance
fair value disclosures. The guidance includes enhanced disclosure
requirements that could result in significantly more work for
reporting entities. These requirements are similar to those in IFRS
7, 'Financial instruments: Disclosures', but apply to all assets
and liabilities measured at fair value, not just financial ones.
IFRS 13 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 material impact on the financial statements
of the Group and Company.
Revised and amended standards:
-- IAS 1 Presentation of Items of Other Comprehensive Income
(effective from 1 July 2012)
This amendment requires that an entity present separately the
items of other comprehensive income (OCI) that would be
reclassified to profit or loss in the future if certain conditions
are met from those that would never be reclassified to profit or
loss; and change the title of the statement of comprehensive income
to the statement of profit or loss and other comprehensive income.
However, an entity is still allowed to use other titles. IAS 1 will
be adopted for the first time for the year ending 31 March 2013.
There is no significant impact on the financial statements as this
amendment will only require additional disclosure.
-- IAS 27 Separate Financial Statements (2011) supersedes IAS 27
(2008) and is effective for year-ends commencing on or after 1
January 2013. IAS 27 (2011) carries forward the existing accounting
and disclosure requirements for separate financial statements, with
some minor clarifications. The standard is not expected to have a
material impact on the financial statements of the Company.
2.4 Revenue
Revenue from the sale of services is measured at the fair value
of the consideration received or receivable, net of returns,
allowances and trade discounts. Revenue from services rendered is
recognized in the statement of comprehensive income when it is
probable that the economic benefits associated with the transaction
will flow to the Group and the amount of revenue can be measured
reliably. Sales of services are recognized in the accounting period
in which the services are rendered, by reference to stage of
completion of the specific transaction assessed on the basis of the
actual service provided as a proportion of the total services to be
provided.
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset's net carrying amount. Interest income on
deposits and on loans to customers is accrued on the effective
yield basis. Dividend income from investments is recognized when
the right to receive payment has been established, which is the
last date of registration.
2.5 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.
2.6 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
('IPEV') Board's valuation 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.
2.7 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.
2.8 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
2.9 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.
2.10 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.
2.11 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 2012.
2.12 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 2012
to
30 September 1 April 2011 to
2012 30 September 2011
GBP'000 GBP'000
3. Administration and operating expenses
Company
Investment management fee 478 886
Auditors' remuneration * 187 226
Directors' remuneration 84 94
Other operating and administrative
expenses
- Administration fees 35 35
- Professional fees 76 204
- Marketing Costs 33 52
- Other 50 119
943 1,616
-------------- -------------------
Kreditmart
Other operating and administrative
expenses
- Professional fees 6 6
- Marketing costs - 108
- Personnel - 408
- Premises - 72
- Depreciation 2 3
- Credit losses and LLP 5 (8)
- Other 5 272
18 861
-------------- -------------------
Flexinvest
Auditors' remuneration 13 11
Directors' remuneration 67 73
Other operating and administrative
expenses
- Professional fees 42 42
- Marketing costs 25 4
- Personnel 448 406
- Premises 114 112
- Depreciation 51 35
- Credit losses and LLP 678 4
- Credit Card costs 324 52
- Other 178 112
1,940 851
-------------- -------------------
OSGRME
Directors' remuneration 352 258
Share-based payments 80 59
Other operating and administrative
expenses
- Marketing Costs 111 116
- Personnel 3,698 3,435
- Operating lease expense 2,414 2,122
- Depreciation 986 921
- Repairs and maintenance 674 358
- Materials 561 522
- Transportation 323 269
- IT & Telecom 87 67
- Other 1,116 965
10,402 9,092
-------------- -------------------
Total for the Group 13,303 12,420
============== ===================
* 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 2012 1 April 2011
to to
30 September 30 September
2012 2011
Group
Kreditmart
Current tax charge / (credit) 1 (12)
1 (12)
-------------- --------------
Flexinvest
Current tax (charge) / credit (14) 4
Deferred tax charge - (223)
(14) (219)
-------------- --------------
OSGRME
Current tax charge (78) (64)
Deferred tax credit 26 132
(52) 68
-------------- --------------
Net tax charge to the statement of comprehensive
income (65) (163)
============== ==============
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% (2011: 20%)
arising on its activities in Russia.
The Group is liable to pay tax at a rate of 10% (2011: 10%)
arising on its activities in Cyprus.
The Group is liable to pay tax at a rate of 19% (2011: 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.
The Group is liable to pay tax at a rate of 24% (2011: 24%)
arising on its activities in Belarus.
Group
30 September 30 September 30 September 31 March
Kreditmart and Flexinvest 2012 2012 2012 2012
Deferred tax asset/(liability)
comprises: GBP'000 GBP'000 GBP'000 GBP'000
Assets Liabilities Net Net
Investments 1 - 1 -
Loans to customers - (4) (4) (2)
Other assets 8 - 8 51
Other liabilities 14 - 14 (40)
Other - (15) (15) (2)
23 (19) 4 7
================= ============= ============= =========
The Flexinvest subsidiary has a calculated loss of GBP648,155
(2011: GBP1,027,941) for which no deferred tax asset
has been recognised in the current year due to the uncertainty
of the timing of taxable income against which the
loss can be utilised.
OSG Records Management (Europe) 30 September 30 September 30 September 31 March
Limited 2012 2012 2012 2012
Deferred tax liability comprises: GBP'000 GBP'000 GBP'000 GBP'000
Assets Liabilities Net Net
Finance leases - (486) (486) 490
Intangibles - (1,222) (1,222) 1,349
- (1,708) (1,708) 1,839
================================================== ============= ============= =========
Group deferred tax asset 4 7
============= =========
Group deferred tax liability (1,708) 1,839
============= =========
5. Goodwill
30 September 31 March
Group 2012 2012
GBP'000 GBP'000
Opening balance 13,909 14,164
Effect of movements in foreign exchange
rate (766) (255)
Closing balance 13,143 13,909
============== ==========
No impairment losses have been recognised in respect of these
intangibles in the 6 month period ended 30 September 2012.
6. Intangible assets
30 September 31 March
2012 2012
GBP'000 GBP'000
Cost:
Opening balance 10,011 10,793
Exchange rate movements (578) (221)
Amortisation of intangibles (264) (561)
Closing balance 9,169 10,011
============== ==========
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 2012 2,680 144 587 7,139 591 11,141
Exchange movements (174) (6) (32) (340) (26) (578)
At 30 September
2012 2,506 138 555 6,799 565 10,563
-------- ----------- ---------- ------------- ------------- --------
Amortisation:
At 1 April 2012 - (30) - (977) (123) (1,130)
-
Charge for the
period - (7) - (228) (29) (264)
At 30 September
2012 - (37) - (1,205) (152) (1,394)
-------- ----------- ---------- ------------- ------------- --------
Carrying amount:
At 30 September
2012 2,506 101 555 5,594 413 9,169
======== =========== ========== ============= ============= ========
Carrying amount:
At 31 March 2012 2,680 114 587 6,162 468 10,011
======== =========== ========== ============= ============= ========
The valuation of the banking licence was considered by the
Valuation Committee and performed by Aurora Investment Advisors
Limited, who are considered to have the necessary experience in
valuing investments of this nature, 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 historical 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 and 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 2012 1,537 9,503 2,088 13,128
Additions 239 573 311 1,123
Disposals (19) (30) (17) (66)
Exchange movements (55) (427) (103) (585)
At 30 September 2012 1,702 9,619 2,279 13,600
--------- --------- ---------- --------
Accumulated depreciation:
At 1 April 2012 (510) (1,229) (723) (2,462)
Charge for the period (169) (382) (223) (774)
Disposals 18 25 17 60
At 30 September 2012 (661) (1,586) (929) (3,176)
--------- --------- ---------- --------
Net book value:
At 1 April 2012 1,027 8,274 1,365 10,666
--------- --------- ---------- --------
At 30 September 2012 1,041 8,033 1,350 10,424
========= ========= ========== ========
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
2012 31 March 2012
Group GBP'000 GBP'000
At beginning of period 725 657
Additions 133 111
Disposals (149) (43)
-------------- ---------------
- Proceeds (164) (43)
- Profit on sale 15 -
-------------- ---------------
At end of period 709 725
-------------- ---------------
Assets classified as held for sale are properties received after
mortgage foreclosure. The assets are available for immediate sale
in their present condition.
9. Investment in subsidiaries
30 September 31 March
Company 2012 2012
GBP'000 GBP'000
OSG Records Management (Europe)
Limited
At beginning of period 28,200 28,800
Fair value revaluation 1,700 (600)
At end of period* 29,900 28,200
-------------- ----------
Kreditmart
At beginning of period 8,649 12,049
Fair value revaluation * (1,266) (3,400)
At end of period* 7,383 8,649
-------------- ----------
Flexinvest Limited
At beginning of period 6,451 6,451
Sale of shares to KFML (6,158 shares)
(refer to note 14 for further detail) (462) -
Sale of shares to KFML (2,463 shares)
(refer to note 14 for further detail) (172) -
-------------- ----------
At end of period* 5,817 6,451
-------------- ----------
43,100 43,300
============== ==========
* The revaluation performed on Kreditmart includes the value of
Flexinvest Limited as at 30 September 2012, 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 2012 and 31 March 2012 was performed by Aurora
Investment Advisors Limited, whom the Valuation Committee considers
to have the necessary expertise. Both were approved by the
Valuation Committee.
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, listings of comparable
assets and such other factors as the Board deems relevant are
gathered and analysed. After identifying and selecting the
comparable publicly traded companies, their business and financial
profiles are analysed for relative similarity. Price or EV
multiples of the publicly traded companies are calculated and then
adjusted for factors such as relative size, growth, profitability,
risk, and return on investment. The adjusted multiples are then
applied to the relevant element of the subject company's
business.
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 i.e. adjusted net assets approach was used).
18.6%, by value at period end, of the portfolio was valued using
adjusted net assets approach (31 March 2012: 21%) with the
remaining 81.4% (31 March 2012: 79%) 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%-30% (31 March 2012: 15%-30%)
2) Income Approach:
The income approach methodology is used 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
2012
OSG Records Management (Europe) 92.8%
Limited Cyprus Ordinary 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%
OSG Records Management Limited
Liability Company* Belarus 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
30 September 30 September 31 March 31 March
2012 2012 2012 2012
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Unistream Bank 13,600 13,600 16,300 16,300
Grindelia Holdings 14,300 14,300 15,000 15,000
Quoted investments 8 - 994 -
Total investments at fair
value through profit and
loss 27,908 27,900 32,294 31,300
================================ ============== ========== ==========
Change in fair value of investments at fair value through profit
and loss
1 April 1 April 1 April
2012 to 1 April 2012 2011 to 2011 to
30 September to 30 September 30 September 30 September
2012 2012 2011 2011
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
OSG Records Management
(Europe) Limited (see
note 9) - (1,700) - 1,900
Unistream Bank (2,700) (2,700) (3,800) (3,800)
Grindelia Holdings (700) (700) (9,500) (9,500)
Quoted investments 2 - (51) -
Kreditmart and Flexinvest
(see note 9) - (1,266) - (2,200)
Total unrealised (losses)/
gains (3,398) (2,966) (13,351) (13,600)
============== ================= ============== ==============
The valuation of the investments at 30 September 2012 and 31
March 2012 was performed by Aurora Investment Advisors Limited who
is considered to have the necessary experience in valuing
investments of this nature, and was approved by the Valuation
Committee. The methods and assumptions used in determining the
valuations of investments are discussed in note 9.
In the view of the Valuation Committee, the value of the
investment in OSGRME, Unistream Bank, Grindelia Holdings and
Kreditmart and Flexinvest Limited as at 30 September 2012 was
estimated at GBP29.9 million (31 March 2012: GBP28.2 million),
GBP13.6 million (31 March 2012: GBP16.3 million), GBP14.3 million
(31 March 2012: GBP15 million) and GBP13.2 million (31 March 2012:
GBP15.1 million) respectively, resulting in a decrease of the value
of total investments from prior year.
11. Loans and advances to customers
Group
30 September 31 March
2012 2012
GBP'000 GBP'000
Receivable within >1 year 4,369 4,910
Receivable within <1 year 10,747 3,892
------------- ----------------------
Loans and advances to customers 15,116 8,802
============= ======================
Secured 5,352 5,927
Unsecured 9,764 2,875
------------- ----------------------
15,116 8,802
============= ======================
Reconciliation of impairment loss allowance
on loans to customers:
Balance at beginning of the year/period 670 938
Movement in allowance for loan losses 440 (268)
1,110 670
============= ======================
For secured loans, the mortgages are secured upon borrowers'
private residences, are repayable in equal monthly instalments and
mature between 2014 and 2038 (average maturity of 24.7 years).
Interest is charged at fixed rates at an average annual interest
rate of 11.82% (range between 10.5% and 14.9% depending on each
borrower).
For unsecured loans and advances to customers for the Group, the
interest rates are 31.8% and 31.83% on consumer loans and credit
cards respectively.
12. Trade and other payables
30 September 30 September 31 March 31 March
2012 2012 2012 2012
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Finance lease 961 - - -
Expense and sundry accruals 3,308 324 3,366 344
Income Received in Advance 1,849 - 1,679 -
Short term loans payable 804 - - -
Amount due from customers - - 3,554 -
6,922 324 8,599 344
============== ============== ========== ==========
13. Loans payable to investees
30 September 30 September 31 March 31 March
2012 2012 2012 2012
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Loans payable - Grindelia 453 453 489 489
Interest payable - Grindelia 3 3 3 3
Total 456 456 491 491
============== ============== ========== ==========
The loan payable to Grindelia is repayable with interest no
later than 20 February 2015 and 37% of the loan
balance attracts interest at a rate of 0.1% and the remaining
63% is repayable with interest at a rate of 0.01%.
14. Sale of Flexinvest shares to Kreditmart
Group
30 September 31 March
2012 2012
GBP'000 GBP'000
Cost of Investment 634 -
Profit on sale 766 -
------------- ------------------
Proceeds on sale 1,400 -
============= ==================
Aurora Russia Limited transferred 6,158 shares of its investment
in Flexinvest Limited to Kreditmart Finance
Limited for a consideration of GBP 1,000,059 on 6 June 2012. The
cash was received on 20 June 2012.
Aurora Russia Limited sold 2,463 shares of its investment in
Flexinvest Limited to Kreditmart Finance Limited
for a consideration of GBP 399,991 on 30 September 2012. The
proceeds from the sale of shares has not yet
been received at 30 September 2012 (proceeds were received 10
October 2012) and therefore an accrual has
been raised. This accrual was eliminated upon consolidation. The
Group's effective holding in Flexinvest has
not changed due to the intercompany sale..
15. 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 (together "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 Flexinvest
Bank ("FIB") Limited (subsidiaries) disburse mortgage and consumer
loans for private clients, place deposits, and render other
services (money transfers, safe boxes).
The OSG Group consists of seven 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 7 operating units in Russia (being the largest
operation), Poland, Ukraine, Kazakhstan, Armenia, Belarus 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 Flexinvest and FIB 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
2012 to 1 April 2012 to 2012 to 2011 to 1 April 2011 to 2011 to
30 2012 to 30 30 30 2011 to 30 30
September 30 September September September September 30 September September September
2012 2012 2012 2012 2011 2011 2011 2011
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
Profit on disposal
of Kreditmart 766 - - 766 - - - -
Revenue 1 1,814 10,933 12,748 104 847 9,159 10,110
---------- ---------------------- ---------- ---------- ---------- ---------------------- ---------- ----------
- Fees - 378 - 378 - 286 - 286
- Storage - - 5,124 5,124 - - 4,119 4,119
- Warehousing,
data processing,
transport &
other - - 5,857 5,857 - - 5,064 5,064
- Interest
on long term
mortgages and
other loans - 1,303 - 1,303 - 408 - 408
- Loan Interest - 51 (51) - - 30 (30) -
- Bank interest 1 82 3 86 8 123 6 137
- Dividend
income - - - - 96 - - 96
---------- ---------------------- ---------- ---------- ---------- ---------------------- ---------- ----------
Administration
and operating
expenses (943) (1,905) (9,416) (12,264) (1,616) (1,674) (8,171) (11,461)
- Depreciation
and amortisation - (53) (986) (1,039) - (38) (921) (959)
- Interest
expense - (412) (507) (919) - (15) (398) (413)
Fair value
movements on
revaluation
of investments (2,966) 2 - (2,964) (13,600) (51) - (13,651)
---------- ---------------------- ---------- ----------------------
-
Kreditmart/Flexinvest/Flexinvest
Bank (1,266) - - (1,266) (2,200) - - (2,200)
- Whitebrooks
(OSG) 1,700 - - 1,700 1,900 - - 1,900
- Unistream (2,700) - - (2,700) (3,800) - - (3,800)
- Grindelia
(SuperStroy) (700) - - (700) (9,500) - - (9,500)
- Quoted investments - 2 - 2 - (51) - (51)
---------- ---------------------- ---------- ---------- ---------- ---------------------- ---------- ----------
Exchange gains/(losses) 58 (185) (30) (157) (55) (373) (95) (523)
Loss from discontinued
operations - - - - - - - -
Operating profit/(loss)
before tax (3,084) (739) (6) (3,829) (15,167) (1,304) (426) (16,897)
---------- ---------------------- ---------- ---------- ---------- ---------------------- ---------- ----------
Tax - (13) (52) (65) - (231) 68 (163)
(3,084) (752) (58) (3,894) (15,167) (1,535) (358) (17,060)
========== ====================== ========== ========== ========== ====================== ========== ==========
1 April 1 April
2012 to 2011 to
30 September 30 September
Reconciliation of segment loss to consolidated statement of comprehensive income 2012 2011
GBP'000 GBP'000
Total net segment loss (3,894) (17,060)
Adjustment for fair value movements on
Kreditmart/Flexinvest/Flexinvest Bank and OSGRME (434) 300
Elimination of profit on sale of Flexinvest (766) -
Net loss for the period for the Group (5.094) (16,760)
-------------- --------------
30 30 30 31
September September September 30 September March 31 March 31 March 31 March
2012 2012 2012 2012 2012 2012 2012 2012
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 43,100 - - 43,100 43,300 - - 43,300
Financial
assets
at fair
value
through
profit
or loss 27,900 8 - 27,908 31,300 994 - 32,294
---------- ------------ ------------ -------------- -------- -------------- ----------- ---------
- Unistream 13,600 - - 13,600 16,300 - - 16,300
- Grindelia
(SuperStroy) 14,300 - - 14,300 15,000 - - 15,000
- Quoted
investments - 8 - 8 - 994 - 994
---------- ------------ ------------ -------------- -------- -------------- ----------- ---------
- -
Cash and cash
equivalents 879 1,479 372 2,730
Intangible
assets - 2,506 19,806 22,312 873 4,481 524 5,878
Property,
plant
and
equipment - 305 10,119 10,424 - 2,680 21,240 23,920
Assets
classified
as held for
sale - - - - - 351 10,315 10,666
Loans and
advances
to customers - 15,116 - 15,116 - 8,802 - 8,802
Other assets 948 2,086 5,360 8,394 494 341 4,230 5,065
Segment
assets 72,827 21,500 35,657 129,984 75,967 18,374 36,309 130,650
---------- ------------ ------------ -------------- -------- -------------- ----------- ---------
Total segment
liabilities (780) (9,045) (12,723) (22,548) (835) (3,850) (10,229) (14,914)
---------- ------------ ------------ -------------- -------- -------------- ----------- ---------
Reconciliation of segment assets and
liabilities to consolidated statement 30 September 31 March
of financial position 2012 2012
GBP'000 GBP'000
Segment assets for reportable segments 127,973 130,649
Investment in subsidiaries (43,100) (43,300)
Elimination of intercompany accrued income (400) -
Elimination of intercompany loan (591) -
Total assets for the Group 85,893 87,349
------------- ---------
Segment liabilities for reportable segments (22,548) (14,914)
Deferred taxation adjustment on acquisition
of OSGRME - (1,348)
Elimination of intercompany payable 400 -
Elimination of intercompany loan 591 -
Total liabilities for the Group (21,557) (16,262)
------------- ---------
16. Related party transactions
The Company has 4 direct subsidiaries, OSG Records Management
(Europe) Limited, Kreditmart Finance Limited, Flexinvest 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 from Flexinvest Limited to Kreditmart Finance
Limited as well as the loan between OSG and Flexinvest.
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 478,110 (6 month period ended 30 September 2011: GBP
885,840). There were no outstanding fees at the period/year
end.
Michael Hough, who is a director of Aurora Investment Advisors
Limited, holds 100,000 (31 March 2012:
100,000) of the shares in Aurora Russia Limited as at 30
September 2012.
John McRoberts, who is a director of Aurora Investment Advisors
Limited, holds 300,000 (31 March 2012:
300,000) of the shares in Aurora Russia Limited as at 30
September 2012.
Aurora Russia Investment Advisors Limited, holds 3,786,534 (31
March 2012: 3,970,841) of the shares in
Aurora Russia Limited as at 30 September 2012.
Geoff Miller holds 250,000 ordinary shares (31 March 2012:
250,000); Gilbert Chalk holds 50,000 ordinary
shares (31 March 2012: 50,000) and Tim Slesinger 14,310,977
ordinary shares (31 March 2012: 14,310,977) in
the Company. Grant Cameron is a director of Investec Global
Managed Fund, which held 510,000 shares as at
30 September 2012 (31 March 2012: 750,000) in the Company.
17. Contingencies and capital commitments
The Group had no contingencies and capital commitments
outstanding at the reporting date.
18. Events after the reporting date
On 10 December 2012, the Board approved in principle the
demerger and admission to trading of OSG on the Alternative
Investment Market of the London Stock Exchange and to appoint N+1
Singer, subject to contractual terms to be determined, to advise
OSG on its AIM admission and to subsequently act as its broker and
NOMAD.
No further material post balance sheet events were noted.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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