TIDMRAV
RNS Number : 0978T
Raven Property Group Limited
18 March 2019
18 March 2019
Raven Property Group Limited ("Raven" or the "Company" or the
"Group")
Results for the year ended 31 December 2018
The Board of Raven Property Group release results for the year
ended 31 December 2018.
Highlights
-- A good trading performance adversely affected by currency movements;
-- Occupancy up from 81% to 89% at 31 December 2018 and 90% today;
-- Two warehouse acquisitions completed in the second half of the year;
-- Rouble valuation of the investment portfolio up 8% but
falling by 10% after currency exchange losses;
-- Secured debt facilities moving to Roubles;
-- Underlying earnings of GBP20.0 million and IFRS loss of
GBP120.7 million after revaluation currency loss;
-- Tender offer buy back of 2 in 51 shares at 45p, equating to
1.75p per share, giving full year distribution of 3p.
CEO Glyn Hirsch said "Local market conditions are improving.
Vacancy rates are down, rents are rising and the overall
performance of the Russian economy is strengthening. Annoyingly the
low year end Rouble exchange rate has not allowed this to be
reflected once translated into Sterling."
Enquiries
Raven Property Group Limited Tel: + 44 (0) 1481 712955
Anton Bilton
Glyn Hirsch
Novella Communications Tel: +44 (0) 203 151 7008
Tim Robertson
Toby Andrews
N+1 Singer Tel: +44 (0) 20 7496 3000
Corporate Finance - James Maxwell
/ James Moat
Sales - Alan Geeves / James Waterlow
Numis Securities Limited Tel: + 44 (0) 207 260 1000
Alex Ham / Jamie Loughborough /
Alasdair Abram
Renaissance Capital (South Africa) Tel: +27 (11) 750 1448
Yvette Labuschagne
Renaissance Capital (Moscow) Tel: + 7 495 258 7770
David Pipia
Ravenscroft Tel: + 44 (0) 1481 729100
Jade Cook
About Raven Property Group
Raven was founded in 2005 to invest in class A warehouse
complexes in Russia and lease to Russian and International tenants.
Its Ordinary Shares, preference shares and warrants are listed on
the Main Market of the London Stock Exchange and admitted to the
Official List of the UK Listing Authority and the Official List of
The International Stock Exchange ("TISE"). Its Ordinary Shares also
have a secondary listing on the main board of the Johannesburg
Stock Exchange and the Moscow Stock Exchange. Its convertible
preference shares are admitted to the Official List of TISE and to
trading on the SETSqx market of the London Stock Exchange. The
Group operates out of offices in Guernsey, Cyprus and Moscow and
has an investment portfolio of circa 1.9 million square metres of
Grade "A" warehouses in Moscow, St Petersburg, Rostov-on-Don,
Novosibirsk and Nizhny Novgorod and 49,000 square metres of
commercial office space in St Petersburg. For further information
visit the Company's website: www.theravenpropertygroup.com
Chairman's Message
I am pleased to report that we have made significant progress in
the year. We now consider ourselves a Rouble operating business and
our balance sheet exposure to US Dollar liabilities has greatly
reduced.
The market fundamentals in the warehouse market have steadily
improved and our warehouse occupancy levels have increased from 81%
at 1 January 2018 to 89% at 31 December 2018 with a further
increase to 90% today.
In 2018 we completed two further acquisitions of grade A
warehouse space, totalling 123,200sqm, for Roubles 5.3 billion,
which should generate an additional Roubles 580 million of income
per annum. Since April 2017 we have acquired Roubles 14.6 billion
of new assets and, together with increased occupancy, this has
supported our top line as legacy US Dollar pegged leases
mature.
Our exposure to US Dollar financing facilities has reduced from
92% at the beginning of the year to 34% of the Group's secured debt
at 31 December 2018. We still have some work to do but we are
confident that 2019 will see the residue of US Dollar balance sheet
exposure disappear.
The certainty of a long term Rouble rental market and the shift
away from a US Dollar financing model has led us to reconsider a
number of currency related issues. For the first time our valuers
have applied Rouble estimated rental values ("ERVs") in the
valuation model of our investment portfolio and as at 31 December
2018 all of our investment properties are valued in Roubles rather
than US Dollars. This has precipitated a review of both the balance
sheet functional currency of our subsidiaries and also the
presentation currency we use in our Annual Report. The most obvious
change being that we have reverted to a Sterling presentation
policy for our Annual Report, the currency of our share capital and
preference shares.
The weak Rouble exchange rate at 31 December 2018 has had a
detrimental impact on our property valuations. Rouble valuations of
the investment portfolio improved in the year but exchange losses
caused a revaluation loss on translation. Underlying earnings of
GBP20.0 million support our distribution for the year. IFRS losses
of GBP120.7 million reflect the impact of the weak Rouble on
valuation movements.
We welcome Michael Hough to the Board. Michael joined as a non
executive director on 9 October 2018 and has a strong commercial
pedigree and previous experience of the Russian market. We are sad
to say that Stephen Coe will step down from the Board following
this year's AGM. Stephen has been an invaluable member of the non
executive team for many years and will be missed. We wish him well.
Michael will take over the role of Audit Committee Chairman
following Stephen's retirement. This signals the resumption of our
succession planning for the Board. We had put this on hold
following the turbulence of the oil and Rouble collapse in late
2014 and expect to make an ordered rotation over the next three
years.
We have successfully completed two secondary listings of our
ordinary shares on the Johannesburg Stock Exchange ("JSE") and the
Moscow Stock Exchange ("MOEX") during the year and we hope that
this will provide an opportunity to widen our shareholder base in
the future.
It has been another busy year and as always, we are grateful for
the support of our shareholders.
Richard Jewson
Chairman
17 March 2019
Strategic Report
Chief Executive's Report
Dear Shareholders,
We have nearly completed our transition to a Rouble business and
in Rouble terms we are performing well. Annoyingly the low year end
Rouble exchange rate has not allowed this to be reflected once
translated into Sterling. On 1 January 2018 the Rouble/Sterling
exchange rate was 77.88. At 31 December 2018 that rate had fallen
13.4% to 88.35. Today it is 86.12.
Local market conditions are improving. Vacancy rates are down,
rents are rising and the overall performance of the Russian economy
is strengthening.
In our own portfolio we have seen occupancy rise from 81% to 89%
in the year with a further increase to 90% today.
Rents have firmed consistently through the year and Moscow rents
are now at 3,800 - 4,000 Roubles per sqm for standard space. Our
average warehouse rental rates are Roubles 4,900 per sqm after
taking into account higher tenant specification, office and
mezzanine content. We expect these rates to continue to improve as
demand and supply is out of balance and there are exceptionally low
levels of speculative development.
At the year end the portfolio revaluation in Roubles has shown
an increase of 8%.
We have made good acquisitions in the period and look forward to
their full year contribution to results in 2019. We have also
invested close to GBP19 million in Rouble interest rate hedging,
capping our Rouble cost of debt at a rate of 8.25% for periods of
five to seven years. We are nearly out of dollar debt and by
refinancing in Roubles and Euros have maintained a cost of debt of
7.69%. The portfolio valuation yields were between 11% and 12.5% at
the year end.
In the meantime the Russian e-commerce sector continues to
develop successfully with some impressive players emerging. We
anticipate that they will soon start to make a significant impact
on the logistics real estate market.
Frustratingly, since the US sanctions in August, the Rouble fall
has resulted in Sterling fully diluted NAV per share dropping to
48p at 31 December 2018
We are pleased to be making a final distribution of 1.75p by way
of tender offer buy back of 2 shares in every 51 at 45p, meaning we
will have distributed a total of 3p for the year.
The business is now well positioned as a local market leader in
one of the world's most appealing property sectors. We are close to
having restructured our balance sheet so are in a strong position
to benefit from a continued improvement in our market and at some
point a significant change in valuations.
Our prospects look better than they have at any time since 2014
and we are confident about the future.
Glyn Hirsch
Chief Executive Officer
17 March 2019
Business Model
Our Strategy
We continue with our strategy of holding an investment portfolio
of Grade A logistics warehouses in Russia for the long term, with
the aim of producing rental income that delivers progressive
distributions to our shareholders. We will consider other asset
classes in the region if the property and financial metrics are
attractive and we have a small office portfolio in St Petersburg
which we also intend to hold for long term income returns.
Business Model
We acquire investment assets typically with yields of between
11% and 14% and have bank financing costs across the Group of
7.69%. We now run a Rouble operating model but continue to have
legacy US Dollar pegged leases which will mature over the next
three years. As explained in last year's Annual Report, our aim was
to adapt our business model, moving the Group's secured banking
facilities out of US Dollars and to a Rouble/Euro mix to reduce our
foreign currency exposure whilst managing the cost of debt. This
process is now well underway.
At the year end, US Dollar leases account for 26% of the Gross
Lettable Area ("GLA") of our warehouse portfolio (2017: 31%). Our
office portfolio has a currency exposure to Euro on 20% (2017: 23%)
of its GLA and 9% to US Dollar (2017: 9%).
The Group's secured banking facilities are 31% (2017: 0%) Rouble
denominated, 35% (2017: 8%) Euro and 34% (2017: 92%) of US Dollar,
at year end exchange rates. We expect to convert all remaining US
Dollar facilities in the current year.
Each of the facilities secured on our property assets sits in a
special purpose vehicle ("SPV") structure to minimise recourse to
the overall portfolio. At the year end, asset specific debt
represented 54.1% loan to value (2017: 53%).
Our average letting size by tenant is 9,000sqm (2017: 8,760sqm).
We do not have one tenant with more than 8% (2017: 11%) of our
portfolio's GLA and the top ten tenants account for 42% (2017: 41%)
of our portfolio in GLA terms and 53% (2017: 54%) in income
terms.
Key Performance Indicators ('KPIs')
Occupancy levels and average Rouble rental levels achieved are
our primary operating focus.
The ability to distribute to ordinary shareholders from cash
covered underlying earnings and operating cash flows after interest
remains our focus when determining distribution policy.
All of the above underpin financial targets set for annual bonus
incentives.
Portfolio Review
Leasing and maturities
Warehouse Moscow St Petersburg Regions
------------ --------------
Space (000sqm) 1,331 (70%) 272 (15%) 287 (15%)
NOI (GBPm) 81 (80%) 9 (9%) 11 (11%)
---------------- ------------ -------------- ----------
Office Moscow St Petersburg Regions
---------------- ------------ -------------- ----------
Space (000sqm) - 49 (100%) -
NOI (GBPm) - 9 (100%) -
---------------- ------------ -------------- ----------
During the year we completed two acquisitions; the final phase
of Logopark Sever, a warehouse complex north of Moscow, and
Logopark Volga, a warehouse complex with development land in Nizhny
Novgorod. In aggregate these were acquired for a total
consideration of Roubles 5.3 billion for 123,200sqm at a blended
initial annualised yield of 12.4% assuming the leasing of vacant
space. The acquisitions did not have a material impact on income in
2018 but we expect them to contribute Roubles 580 million of NOI
during 2019.
Occupancy has improved considerably during the year and stands
at 90% today with a further 1% covered by letters of intent
("LOIs").
'000sqm 2018 2019 2020 2021 2022-2032 Total
--------------------------------- ------ ----- ----- ----- ---------- ------
Maturity profile at 1 January
2018 169 264 308 236 495 1 472
Acquisitions - 4 - - 107 111
Subtotal 169 268 308 236 602 1 583
Renegotiated and extended (102) (64) (50) - (37) (253)
Maturity profile of lease
extensions - 41 10 84 118 253
Vacated/terminated (67) (5) (4) - (16) (92)
New Lettings - 15 1 39 186 241
Maturity profile at 31 December
2018 - 255 265 359 853 1 732
--------------------------------- ------ ----- ----- ----- ---------- ------
253,000sqm of existing leases have been renegotiated and
extended in the financial year and 241,000sqm of new leases signed.
Significant new lettings include 11,800sqm to Accord Post,
16,000sqm to Mir Instrumenta, 16,200sqm to Cotton Club and
18,200sqm to Perspectiva, all in Moscow.
Space vacated on maturity, breaks exercised and early
terminations totalled 92,000sqm which, together with existing
vacant space, gives 206,000sqm of vacancy in our warehouse
portfolio at 31 December 2018. There are also potential breaks in
the portfolio of 91,600sqm in 2019 and 199,900sqm in 2020. For 2019
we currently expect tenants who occupy circa 17,000sqm to exercise
their breaks and vacate.
Since the year end we have signed a further 31,850sqm of deals
of which 23,000sqm were new lettings and 8,850sqm were renewals or
extensions. We currently have 79,800sqm of LOI's for renewals,
extensions and new lettings. If these are signed vacancy will
reduce by a further 24,250sqm.
At the year end 26% (2017: 31%) of our warehouse GLA had US
Dollar denominated leases with an average warehouse rental level of
$148 per sqm (2017: $143 per sqm) and a weighted average term to
maturity of 2.1 years (2017: 3.0 years). Rouble denominated leases
account for 61% (2017: 47%) of our total warehouse space with an
average warehouse rent of Roubles 4,900 per sqm (2017: 5,200 per
sqm) and weighted average term to maturity of 4.5 years (2017: 3.6
years). Rouble leases have an average minimum annual indexation of
5.9% (2017: 6.8%).
Currency exposure of warehouse space USD RUB EUR Vacant Total
sqm sqm sqm Sqm sqm
'000 '000 '000 '000 '000
------ ------ ------ ------- ------
485 1,149 50 206 1,890
------ ------ ------ ------- ------
% of total 26% 61% 2% 11% 100%
------ ------ ------ ------- ------
Currency exposure of NOI USD RUB EUR Total
% of total 51% 42% 7% 100%
---- ---- ---- ------
The currency split is based on the year end Sterling
presentation so will be somewhat volatile, a weak Rouble, as was
the case last year, will increase the contribution of US Dollar
pegged leases, a stronger Rouble will reduce that contribution.
Investment Portfolio
Moscow
We have ten warehouse projects in Moscow totalling 1,331,000sqm
with 88% of space let at the year end, excluding LOIs, up from 78%
at the beginning of the year.
2018 Year end
Warehouse complex Space (000 sqm) NOI (GBPm) Occupancy
---------------- ------------
Sever 253 8.0 87%
Pushkino 214 11.6 94%
Istra 206 17.5 93%
Noginsk 204 18.0 77%
Klimovsk 157 11.2 97%
Krekshino 118 12.3 99%
Nova Riga 68 1.1 50%
Lobnya 52 0.2* 99%
Sholokhovo 45 0.1 80%
Southern 14 0.5 79%
------------------- ---------------- ------------ -----------
*Excludes space let to Roslogistics
Occupancy has improved in the Moscow portfolio with a net, like
for like, increase in occupied area of 132,500sqm during the year,
a combination of new letting and successful lease renewals. The
Moscow market has seen vacancy decrease and record take up in the
past year reflected in a hardening of rents. The market is well set
for rental growth in 2019. We expect occupancy to remain in the low
90%'s during the year, held back slightly by over 90,000sqm
expiring in Krekshino towards the end of June. We are already
working to mitigate this by pro-actively leasing space prior to
expiry.
St Petersburg and Regions
2018 Year end
Warehouse complex Space ('000sqm) NOI (GBPm) Occupancy
---------------- ------------
St Petersburg
Shushary 148 5.0* 100%
Gorigo 87 2.6 67%
Pulkovo 37 1.8 88%
------------------- ---------------- ------------ -----------
Regions
Novosibirsk 121 6.6* 97%
Rostov 102 4.5* 91%
Nizhny Novgorod 64 0.1 100%
------------------- ---------------- ------------ -----------
*Excludes space let to Roslogistics
Warehouse occupancy in the regional markets of St Petersburg,
Rostov and Novosibirsk has strengthened and we have seen a lot of
activity. Vacancy has reduced in all three markets as at today's
date and rents have begun to grow, particularly in Novosibirsk
where we are now commanding over Roubles 4,000 per sqm.
Tenant Mix
Warehouse Distribution Retail Manufacturing Third Party Logistics E-commerce Other
Tenant Type operators
------------- ---------- -------------- ------------------------------- -----------
Space ('000sqm) 322 (19%) 519 (31%) 212 (13%) 559 (33%) 45 (3%) 27 (1%)
------------------- ------------- ---------- -------------- ------------------------------- ----------- --------
Office Portfolio
We have continued implementing our asset management strategy in
the St Petersburg office properties. At Kellerman, we have
undertaken cosmetic improvements to the common areas, restructured
leases and re-let space at enhanced rents. There is more work to
do, but the market is strong and we expect to make additional
improvements in value and income. In Primium where the lease of the
sole tenant expires in the summer, we have already put in place a
comprehensive re-letting plan which will mean we suffer little or
no vacancy on expiry, including recently signing a new lease with
Tele2 on 4,000sqm.
Office Space ('000sqm) NOI (GBPm) Occupancy
---------------- -----------
St Petersburg
Kellerman 22 3.1 99%
Constanta 16 1.8 100%
Primium 11 3.8 91%
--------------- ---------------- ----------- ----------
Portfolio Yields
Use/Year Moscow (%) St Petersburg (%) Regions (%)
------------ ------------------
Warehouse
2017 11.25-12.5 12.5 12.5
2018 11.00-12.6 12.30-12.5 12.25-12.5
Office
2017 - 11.00-12.25 -
2018 - 12.00-12.25 -
----------- ------------ ------------------ ------------
The investment properties and additional phases of existing
projects were valued by Jones Lang LaSalle ("JLL") at the year end,
in accordance with the RICS Valuation and Appraisal guidelines, and
are carried at a market value of GBP1.2 billion (see notes 11 &
12 to the financial statements). This has resulted in a net loss on
revaluation of GBP121 million in portfolio value during the year,
although in Rouble terms the value of the properties has increased
by 8%.
All significant yield inputs have remained static for the year
reflecting a reasonably stable market place. JLL still quote a
range of yields across all sectors to reflect the difference in
quality of assets, leases and differing currencies. The yields used
for the portfolio fall within this range.
The property investment market had a very slow year in 2018 with
the volume of transactions dropping by around 40%. The political
environment and additional sanctions conspired to make many
investors sit on their hands, either waiting for things to get
better (sellers) or get worse (buyers). Domestic buyers remain the
largest part of the market with western capital almost non
existent, foreign investment instead coming from China and the
Middle East. The cost of finance has remained broadly flat during
the year although the Central Bank of Russia did raise its key
lending rate marginally to combat inflation.
Land Bank
Location Property/Warehouse Land plot size
Complex (ha)
---------- --------------------
Additional phases of
completed property Moscow Noginsk 26
Nova Riga 25
Lobnya 6
Regions Rostov-On-Don 27
Nizhny Novgorod 22
------------------------------------------------------ ---------------
Land bank Regions Omsk 19
Omsk 2 9
Nizhny Novgorod 44
------------------------------------------------------ ---------------
Total 178
-------------------------------------------------------- ---------------
In Moscow, as the market tightens, we are considering developing
up to an additional 75,000sqm at Nova Riga, subject to pre lets or
Build to Suit requests.
The Market
Demand in 2018 was at record levels in Moscow and the Moscow
region where we have the majority of our assets. Take up in 2018
was 1,600,000sqm with new supply at 918,000sqm, causing the vacancy
rate to shrink. Demand was strongest from the retail and
distribution businesses which accounted for 40% and 14%
respectively. E-commerce is now an increasing area of demand with
total space of 208,000sqm taken by the sector in 2018. This is a
strengthening trend and already in 2019 we have seen Ozon lease
122,000sqm in Moscow and Yandex negotiating for up to 80,000sqm. We
expect take up from the e-commerce sector to accelerate over the
next few years, mirroring other European markets.
The vacancy rate in the market is now around 5% and rents have
clearly started to grow. Whilst there are still specific sub
markets where demand is weaker and rents lower, the general
consensus is that the market is poised for another strong year. A
lot will depend on the supply side and the volume of build to suit
projects ("BTS") that are actually delivered. Preliminary estimates
show that new delivery will be circa 990,000sqm and demand expected
to be circa 1,400,000sqm. Of that only 416,000sqm or 42% will be
speculative. History tells us the supply side is generally over
estimated or delayed, so all things being equal rents should
continue to grow. Construction cost inflation is starting to
develop, driven partly by the currency effect of imported
specialist materials and also by rising labour costs. This will
result in less space being built or rents increasing as developers
look to maintain their profit levels.
Last year prime rents were in a range from Roubles 3,600 per sqm
to Roubles 4,000 per sqm for Grade A space. Today the bottom end of
that range has increased to closer to Roubles 3,800 per sqm and the
top end is pushing above Roubles 4,000 per sqm. We are already
negotiating deals around Roubles 4,000 per sqm and as vacancy
continues to decline tenants will be faced with less choice
hopefully causing rents to rise further. In St Petersburg and our
two regional hubs of Rostov and Novosibirsk rental levels are
broadly the same as in Moscow.
Investment volumes in the year decreased to $2.9 billion, with
66% of this in Moscow. Over 72% of all deals were funded by Russian
capital, and only 14% of the total capital or $400 million went
into the warehouse sector. JLL predict prime yields in the range of
10.75-12.25% for Moscow warehouses. We are seeing a number of new
acquisition opportunities, although our preference is to acquire
newly completed or recently let properties as these generally offer
the best long term prospects for value appreciation and sustainable
cash flows.
2019 has started positively and all local indicators seem to
point to improvements in occupancy and rents. Yields will remain a
function of interest rates and the strength of investor appetite,
but if rents begin to grow then yields should certainly begin to
adjust downwards to reflect the potential of rental growth from
under rented leases expiring. In any other European market yields
would be considerably lower than we see today, and in the medium
term this must be an opportunity.
Finance Review
Asset acquisitions and increased occupancy in the investment
portfolio have supported our net rental income. The second half of
the year has also seen a concerted effort to reduce our exposure to
US Dollar financing, moving to a Rouble/Euro mix. The balance sheet
at 31 December 2018 gives a snapshot of the business part way
through that process and we are very pleased with progress so far.
In the current year we expect to convert all remaining US Dollar
debt facilities and then move steadily to a Rouble balance sheet in
the medium term, with an eye on managing the dynamic between the
cost of debt and currency exposure as we go along.
At 31 December 2018, JLL have undertaken Rouble valuations of
our investment portfolio for the first time, rather than US Dollar.
Combined with the Group's balance sheet debt transitioning out of
US Dollars, this has triggered a review of all of the functional
currencies of our subsidiaries. Where previously some of our asset
owning subsidiaries had a mix of Rouble and US Dollar functional
currency, they are now wholly Rouble functional currency from 31
December 2018. As the US Dollar has a reducing impact on both our
operating results and balance sheet, we have also made the decision
to revert to Sterling as our presentation currency, being the
currency of our capital instruments.
Income Statement
We continue to assess our ability to make covered distributions
with reference to underlying earnings and operating cash flows
after interest. The former also allows a comparison of operating
results before mark to market valuation movements. The
reconciliation between underlying and IFRS earnings is given in
note 9 to the accounts.
Underlying Earnings 2018 2017
(Adjusted non IFRS measure) GBP'000 GBP'000
--------------------------------------------- --------- ---------
Net rental and related income 118,285 129,696
Administrative expenses (22,714) (19,688)
Long term incentives - (1,257)
Foreign exchange (losses)/gains (2,480) 6,132
Share of profits of joint ventures 1,630 1,611
--------- ---------
Operating profit 94,721 116,494
Net finance charge (68,510) (60,592)
--------- ---------
Underlying profit before tax 26,211 55,902
Tax (6,197) (12,524)
Underlying profit after tax 20,014 43,378
---------
Basic underlying earnings per share (cents) 3.12p 6.54p
--------------------------------------------- --------- ---------
When comparing to 2017, this year's results are distorted by two
items. Firstly, the one off income of GBP16.4 million generated
from UK land bank sales in 2017 and a negative swing of GBP8.6
million on unrealised foreign exchange movements, the latter being
the effect of the weak Rouble rate at 31 December 2018 of 88.3 to
GBP1 (31 December 2017: 77.9). This masks the improved performance
of our underlying investment portfolio.
Net Rental and Related Income
2018 2017
GBP'000 GBP'000
Acquisitions 18,152 8,304
--------- ---------
Existing Investment Portfolio 91,632 95,418
--------- ---------
RosLogistics 8,124 9,601
--------- ---------
UK Land Sales 377 16,373
--------- ---------
Net rental and related income 118,285 129,696
--------- ---------
The table above illustrates the impact of acquisitions and the
proceeds from the UK land sales in 2017 on our net rental income
over the last two years.
The majority of the movement on the existing investment
portfolio is simply the translation to Sterling presentation, the
weaker average Rouble/Sterling rate in 2018 of 83.7 (2017: 75.2)
reducing equivalent Sterling amounts. The existing investment
portfolio actually generated increased Rouble income of 7.7 billion
in 2018 compared to 7.2 billion 2017, higher occupancy matching any
step down to market rents, and we expect a full year of income from
acquisitions in 2019 to contribute Roubles 1.9 billion.
Underlying Administrative Expenses
Underlying administrative expenses increase primarily as a
result of bonuses paid in early 2018 in relation to 2017
performance targets. Legal and professional expenses increased in
the year for various reasons including an increase in valuation
fees with the change in valuation approach, PR costs and finance
related costs.
Underlying Net Finance Charge
Net finance costs increase with a full year of preference share
coupon on the tranche raised in 2017, the refinancing of
acquisitions and a reduction in interest received as our average
cash balances reduced.
IFRS Earnings
IFRS Earnings 2018 2017
GBP'000 GBP'000
----------------------------------------------------- ---------- ---------
Net rental and related income 118,285 129,696
Administrative expenses (25,150) (22,099)
Share based payments and other long term incentives (2,853) (3,517)
Foreign exchange (loss)/profits (2,480) 6,132
Share of joint venture profits 1,630 1,611
---------- ---------
Operating profit 89,432 111,823
(Loss)/Profit on revaluation (121,009) 28,235
Net finance charge (83,311) (71,737)
---------- ---------
IFRS (loss)/profit before tax (114,888) 68,321
Tax (5,793) (25,182)
---------- ---------
IFRS (loss)/ profit after tax (120,681) 43,139
----------------------------------------------------- ---------- ---------
The difference between underlying earnings and IFRS earnings is
principally down to mark to market movements on various items, the
most obvious being the property revaluation loss of GBP121 million
in the year (see comments below). New interest hedging arrangements
on Russian Central Bank rates generated increased volatility on
mark to market movements and the amortisation of loan origination
costs and premiums payable on preference shares also has an impact
(see note 7). Administration expenses include GBP1.6 million of
abortive deal costs relating to one potential acquisition project
and the final charge for the Retention Scheme is also expensed in
share based payments.
Investment Properties
Our investment properties valuation (note 11) harbours the
majority of the foreign exchange impact on our Sterling net asset
value. The Rouble valuation movement on the portfolio was positive
as ERVs and yields began to tighten, giving a Rouble 8.9 billion
uplift in the year. However, the change in functional currency from
US Dollars to Roubles at a time of Rouble weakness, the year end US
Dollar rate being 69.4 compared to an average of 62.8 in the year,
gives a significant foreign exchange loss as part of the
revaluation movement. This is partly offset by a presentational
currency gain through reserves when switching to Sterling
presentation. The allocation of these unrealised foreign exchange
gains and losses is down to accounting convention but the
fundamentals do not change. The underlying Rouble metrics are
improving but a weak year end Rouble rate means our Net Assets at
31 December 2018 reduce when converted to the reporting
currency.
Debtors and Creditors
Larger movements in debtors and creditors relate to financing
and acquisition costs. Derivative financial instruments increase to
GBP22.3 million following the acquisition of interest caps on
Russian Central Bank rates. Trade and other receivables reduce on
receipt of deferred consideration on the UK Land sales completed in
2017 and the recovery of VAT on asset acquisitions. Deferred
consideration on acquisitions falls to GBP12.2 million from GBP25.3
million in 2017, reducing Trade and other payables and long term
other payables. Construction payables reduce following the
completion of a one off project at Pushkino.
Cash and Debt
The profile of our cash and debt has changed significantly over
the last 24 months and it is simpler to look at the combined cash
flows over the last two years to better understand how the various
elements interact. This also deals with the distortion of a
refinancing which straddled the 2017 year end.
Cash Flow Summary 24 months
to 31 December
2018
GBP'000
------------------------------------------------------------- ----------------
Operating cash generated after net interest paid 58,480
Ordinary shares purchased in tender offers (39,533)
----------------
18,947
----------------
Property improvements and plant and equipment (24,133)
Acquisition cash flows (210,837)
Convertible preference shares issued and warrants exercised 103,309
Debt financing and related costs 35,299
----------------
(72,229)
----------------
Net decrease in cash and cash equivalents (77,415)
Cash and cash equivalents at 1 January 2017 160,559
Effect of foreign exchange rate changes (9,694)
----------------
Cash and cash equivalents at 31 December 2018 73,450
------------------------------------------------------------- ----------------
The Group has used a combination of the convertible preference
share issue, debt refinancing and existing cash reserves to fund
acquisitions and other capital requirements. Tender offer
distributions are funded from operating cash after interest,
including preference share coupon paid.
Bank Debt 2018 2017
GBPm GBPm
--------------------------------------------------------- ------ -----
Fixed rate debt - 141
Debt hedged with caps 543 481
------ -----
543 622
Unhedged debt 106 10
------ -----
649 632
Unamortised loan origination costs and accrued interest (6) (7)
Total debt 643 625
------
Weighted average cost of debt 7.69% 7.62%
------ -----
Weighted average term to maturity 4.0 4.5
--------------------------------------------------------- ------ -----
Significant progress has been made moving secured debt
facilities out of US Dollar and increasing Rouble exposure to match
the Group's changing income profile.
The currency profile of secured debt at 31 December 2018
was:
$ millions EUR millions RUB millions
31 December 2018 $276.7 EUR247.3 17,523.4
----------- ------------- -------------
31 December 2017 $777.2 EUR53.2 -
----------- ------------- -------------
At the year end, the Group had 15 separate secured facilities,
five US Dollar denominated, three Euro denominated and seven, a
blended mix of Rouble and Euro. The average split on the blended
facilities is 61% Rouble, 39% Euro. Higher US LIBOR and the effect
of the Rouble loans have increased our weighted average cost of
debt to 7.69% from 7.62%. The Group also had one small unsecured
facility.
The debt maturity profile at the year end is:
2019 2020 2021 2022 2023 2024 2025
Debt maturing GBP million 55 - 163 94 88 206 43
----- ----- ----- ----- ----- ----- -----
Percentage maturing 9% - 25% 14% 13% 32% 7%
----- ----- ----- ----- ----- ----- -----
Number of facilities 3 - 4 1 2 5 1
----- ----- ----- ----- ----- ----- -----
Of the three facilities maturing in the current year, one was
extended in January and we are finalising terms on the remaining
two. Of the five US Dollar facilities remaining, one has been
converted since the year end and we have agreed terms on the
conversion of the others and expect the majority to have switched
to a Rouble/Euro mix by the half year. We have refinanced all of
the projects acquired in the last two years except for Nizhny
Novgorod. That is now at document stage and will be a Rouble
facility.
The wholesale change in the secured facility profile has meant
that we have adapted our interest hedge cover, purchasing a series
of caps with terms of between 5 and 7 years. The total cost of this
exercise was GBP18.7 million, the majority of cost for capping
Rouble facilities at a strike of 8.25bps for the Central Bank Rate.
Since the year end, we have sold existing US LIBOR hedging
instruments for GBP2.3 million.
Taxation
Tax paid reduces in the year, partly a function of exchange
rates when converting the Rouble expense and no significant
deferred tax liability movements when compared to 2017. In cash
terms, GBP7.3 million was paid in the year (2017:GBP11.0
million).
Net Asset Value
With our change in presentation currency we include 3 years of
balance sheets in our primary statement. This illustrates the
impact of the Rouble volatility on our equivalent Sterling Net
Asset Value this year. A reasonably benign year of exchange
volatility in 2017 meant no significant foreign exchange hit to net
assets but as explained in the investment property section above,
the weakening Rouble in the last quarter of 2018 had a detrimental
impact on our Sterling Diluted Net Asset Value per share, dropping
from 59p to 48p in the year.
Subsidiaries
Roslogistics' underlying Rouble results were slightly down on
prior year with transport reducing contribution and overheads up
slightly. The majority of the variance to 2017 however is the
conversion to Sterling with the weaker Rouble.
Raven Mount was effectively dormant this year after the flurry
of land sales in 2017. The joint venture at "The Lakes" continues
to make a steady contribution of GBP1.6 million to profit and
GBP3.0 million in dividends in the year.
Risk Report
Risk Appetite
As explained in last year's annual report, the Group is adapting
its balance sheet to deal with the heightened foreign exchange risk
that followed the depreciation of the Rouble in late 2014:
- We reduced existing US Dollar gearing to dampen the effects of
Rouble exchange rate volatility on secured debt covenant
requirements;
- We have completed a number of acquisitions to enhance our Rouble income streams; and
- We are now converting all of our US Dollar secured debt into a Rouble/Euro mix of facilities.
We are well into the last stage of this transition and expect to
completely eliminate any exposure to US Dollar facilities in the
current year. As well as re-balancing our currency risk we believe
that this will also reduce our exposure to future sanctions
risks.
The fundamentals of our market have stabilised and there is a
distinct possibility of a continued tightening in supply putting
pressure on ERVs and property yields. We intend to continue with
our acquisition and growth strategy to take advantage of the
opportunities that will arise.
Risk Management and Internal Controls
Risk assessment is built into the Group's operating model and
performed throughout the organisation as part of day to day
operations. The Board is ultimately responsible for the management
of risk and regularly carries out a robust assessment of the
principal risks and uncertainties affecting the business, discusses
how these may impact on operations, performance and solvency and
what mitigating actions, if any, can be taken. The Audit Committee
is responsible for ensuring that the internal control procedures
are robust and that risk management processes are appropriate. A
fuller explanation of the process is given in the Audit Committee
Report. The Cypriot holding company is an important part of the day
to day management of the Group's operational risks through its
authorisation procedures and management oversight duties. It has
also recently engaged an outsourced, internal audit function to
assist with its responsibilities in managing and monitoring the
effectiveness of the internal control systems in place between
Cyprus and Russia. The weekly operational committee meetings for
each department within the Group allow operational and management
information to flow through the Group's risk matrix in a timely
manner.
The risk management process is designed to identify, evaluate
and mitigate any significant risk the Group faces. The process aims
to manage rather than eliminate risks and can only provide
reasonable and not absolute assurance.
No significant failings or weaknesses in the internal control
and risk assessment procedures have been identified during the
year.
Principal Risks and Uncertainties
We have set out in the following tables the principal risks and
uncertainties that face our business, our view on how those risks
have changed during the year and a description of how we mitigate
or manage those risks. We have also annotated those risks that have
been considered as part of the viability assessment.
Political and Economic Risk
Risk Impact Mitigation Change
in 2018
Oil and Gas dependent
economy Reduced consumer demand
(Viability Statement has an impact on our ->
Risk) customer base, reducing With little or no speculative
appetite for new lettings, development in the market, research
Oil price volatility the renewal of existing continues to forecast a drop in
returns leading leases and restricting vacancy and a tightening of rental
to a weakening rental growth. This levels.
Rouble also leads to impaired
asset values. We are reducing the balance sheet
reliance on foreign currency debt
The weak Rouble increases and this will continue in the
the cost of servicing current year.
foreign currency debt.
------------------------------- ----------------------------------------- ---------
Sanctions
The use of economic Continued isolation The local market has accepted ->
sanctions by the of Russia from international the inevitability of long term
US and EU continues markets and a return economic sanctions and this has
for the foreseeable to a declining Russian played its part in the fundamental
future. economy. changes to the Russian economy.
We have adapted our business model
to secure our position in the
market. However, the risk of increased
sanctions remains.
------------------------------- ----------------------------------------- ---------
Financial Risk
Risk Impact Mitigation Change
in 2018
Foreign Exchange
(Viability Statement
Risk) A weakening of the We have significantly reduced
Rouble against those our exposure to foreign currency
At the year end, foreign currencies secured debt facilities and will
26% of warehouse reduces our ability continue to do so in the current
GLA and 69% of to service debt and year.
secured debt had reduces our profitability.
foreign currency Our acquisition strategy and higher
exposure. US Dollar pegged leases occupancy support our rental income
contribute above market levels with market level Rouble
rental income. As income.
those leases mature,
rental income will
drop.
----------------------------- -------------------------------------- ---------
Interest rates ->
(Viability Statement
Risk) The cost of debt increases The majority of our variable cost
and Group profitability of debt is hedged with the use
Increases in Central and debt service cover of caps with terms matching the
Bank Rates and reduce. debt maturity profile
financing benchmarks.
----------------------------- -------------------------------------- ---------
Property Investment
Risk Impact Mitigation Change
in 2018
Acquisitions
(Viability Statement ->
Risk) Legacy issues may We have a strong senior management
Our acquisition erode earnings enhancement team in both our Cyprus and Moscow
activity has increased and integration into offices with international and
significantly and our existing systems Russian experience in real estate
we operate in an may involve excessive acquisitions.
immature investment management resource. --
market where legacy External advisers undertake full
issues are common detailed due diligence on any
with Russian acquisitions. acquisition projects.
--
--
-------------------------------- ----------------------------------------- ---------
Leases This can lead to uncertainty We have a proactive property management ->
(Viability Statement of on going annualised team and continued open dialogue
Risk) income due to lease with tenants.
Market practice break clauses.
increasingly incorporates We have a dedicated project management
lease break requirements There is additional resource assigned to construction
and landlord fit-out landlord risk attached and fit-out obligations under
obligations. to the delivery of leases.
tenant fit-out requirements.
Market conditions are improving
with rents increasing and vacancy
dropping. Lease breaks are less
likely to be exercised in this
market and tenants are signing
longer leases on new lettings.
-------------------------------- ----------------------------------------- ---------
Capital Expenditure Properties become We have put in place a capital NEW
(Viability Statement less attractive to expenditure programme to maintain
Risk) prospective tenants our properties at a Grade A level.
or lower rental values These works should protect or
As 75% of our are achieved. even enhance levels of rent achievable.
warehouse portfolio
was built between
2007 and 2009
some elements
of the buildings
require replacement
or modernisation.
-------------------------------- ----------------------------------------- ---------
Russian Domestic Risk
Risk Impact Mitigation Change
in 2018
Legal Framework ->
The legal framework The large volume of We have an experienced in house
in Russia continues new legislation from legal team including a litigation
to develop with various state bodies specialist. We use a variety of
a number of new is open to interpretation, external legal advisors when appropriate.
and proposed laws puts strain on the
expected to come judicial system and Our lease agreements have been
into force in can be open to abuse. challenged and have proven to
the near future. be robust in both ICAC arbitration
and in Russian Courts.
------------------------------- -------------------------------------------- ---------
Russian Taxation
Russian tax code Tax treaties may be Our business is a significant ->
is changing in renegotiated and new contributor to inward investment
line with global legislation or clarification in the Russian logistics sector.
taxation trends of existing practice Our structure has developed to
in areas such may increase the Group's deal with the commercial risks
as transfer pricing, tax expense. of operating in Russia rather
beneficial ownership than to take advantage of tax
of cross border benefits. Management and control
cash flows and is exerted as appropriate in each
capital gains jurisdiction and the skills and
tax. experience of staff in each office
reflect that commercial requirement.
Ultimately, Russia remains a relatively
low tax jurisdiction with 20%
Corporation tax.
------------------------------- -------------------------------------------- ---------
Personnel Risks
Risk Impact Mitigation Change
in 2018
Key Personnel
->
Failing to retain Strategy becomes more The Remuneration Committee and
key personnel. difficult to flex Executives review remuneration
or implement. packages against comparable market
information;
Employees have regular appraisals
and documented development plans
and targets; and
We are continually addressing
succession issues where they arise.
------------------------ -------------------------------------- ---------
Change key
Increased risk in the period
-> Stable risk in the period
Decreased risk in the period
Signed for and on behalf of the Board
Colin Smith
Director
17 March 2019
Directors' Responsibility Statement
The Statement of Directors' Responsibilities below has been
prepared in connection with the Company's full Annual Report and
Accounts for the year ended 31 December 2018.
The Board confirms to the best of its knowledge:
The financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by the EU,
give a true and fair view of the assets, liabilities, financial
position and profit and loss of the Company and the undertakings
included in the consolidation taken as a whole;
The strategic report includes a fair review of the development
and performance of the business and the position of the Company and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face; and
The Annual Report and Accounts, taken as a whole, are fair
balanced and understandable and provide the information necessary
for shareholders to assess the Company's performance, business
model and strategy.
This responsibility statement was approved by the Board of
Directors on 17 March 2019 and is signed on its behalf by:
Mark Sinclair Colin Smith
Chief Financial Officer Chief Operating Officer
GROUP INCOME STATEMENT
For the year ended 31 December
2018
2018 2017
Underlying Capital Underlying Capital
earnings and other Total earnings and other Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross revenue 4 / 5 162,639 - 162,639 177,000 - 177,000
Property operating expenditure
and cost of sales (44,354) - (44,354) (47,304) - (47,304)
Net rental and related income 118,285 - 118,285 129,696 - 129,696
----------- ---------- ---------- ----------- ---------- ---------
Administrative expenses 4 / 6 (22,714) (2,436) (25,150) (19,688) (2,411) (22,099)
Share-based payments and other
long term incentives 31 - (2,853) (2,853) (1,257) (2,260) (3,517)
Foreign currency (losses)
/ profits (2,480) - (2,480) 6,132 - 6,132
Operating expenditure (25,194) (5,289) (30,483) (14,813) (4,671) (19,484)
----------- ---------- ---------- ----------- ---------- ---------
Share of profits of joint
ventures 15 1,630 - 1,630 1,611 - 1,611
Operating profit / (loss)
before profits and losses
on investment property 94,721 (5,289) 89,432 116,494 (4,671) 111,823
Unrealised (loss) / profit
on revaluation of investment
property 11 - (121,764) (121,764) - 31,284 31,284
Unrealised profit / (loss)
on revaluation of investment
property under construction 12 - 755 755 - (3,049) (3,049)
----------- ---------- ---------- ----------- ---------- ---------
Operating profit / (loss) 4 94,721 (126,298) (31,577) 116,494 23,564 140,058
Finance income 7 3,286 1,583 4,869 5,627 710 6,337
Finance expense 7 (71,796) (16,384) (88,180) (66,219) (11,855) (78,074)
----------- ---------- ---------- ----------- ---------- ---------
Profit / (loss) before tax 26,211 (141,099) (114,888) 55,902 12,419 68,321
Tax 8 (6,197) 404 (5,793) (12,524) (12,658) (25,182)
----------- ---------- ---------- ----------- ---------- ---------
Profit / (loss) for the year 20,014 (140,695) (120,681) 43,378 (239) 43,139
----------- ---------- ---------- ----------- ---------- ---------
Earnings per share: 9
Basic (pence) (18.81) 6.50
Diluted (pence) (18.81) 6.27
Underlying earnings per share: 9
Basic (pence) 3.12 6.54
Diluted (pence) 3.08 5.68
The total column of this statement represents the Group's Income Statement,
prepared in accordance with IFRS as adopted by the EU. The "underlying earnings"
and "capital and other" columns are both supplied as supplementary information
permitted by IFRS as adopted by the EU. Further details of the allocation
of items between the supplementary columns are given in note 9.
All items in the above statement derive from continuing
operations.
All income is attributable to the equity holders of the
parent company. There are no non-controlling interests.
The accompanying notes are an integral
part of this statement.
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December
2018
2018 2017
GBP'000 GBP'000
(Loss) / profit for the year (120,681) 43,139
Other comprehensive income,
net of tax
Items to be reclassified to profit or loss in subsequent
periods:
Foreign currency translation
on consolidation 49,854 (53,722)
Total comprehensive income for the year,
net of tax (70,827) (10,583)
---------- ---------
All income is attributable to the equity holders of the parent company. There
are no non-controlling interests.
The accompanying notes are an integral part
of this statement.
GROUP BALANCE SHEET
As at 31 December 2018
2018 2017 2016
Notes GBP'000 GBP'000 GBP'000
Non-current assets
Investment property 11 1,175,440 1,159,172 1,052,547
Investment property under
construction 12 30,548 28,608 33,553
Plant and equipment 3,574 3,147 2,462
Goodwill - - 1,523
Investment in joint ventures 15 6,566 7,380 7,874
Other receivables 16 15,535 4,118 2,998
Derivative financial instruments 18 21,953 5,875 4,056
Deferred tax assets 25 24,405 25,611 22,075
1,278,021 1,233,911 1,127,088
--------------- ---------- ----------
Current assets
Inventory 356 313 624
Trade and other receivables 17 43,658 58,386 42,518
Derivative financial instruments 18 349 329 290
Cash and short term deposits 19 73,450 197,137 160,559
117,813 256,165 203,991
--------------- ---------- ----------
Total assets 1,395,834 1,490,076 1,331,079
--------------- ---------- ----------
Current liabilities
Trade and other payables 20 66,192 79,427 52,667
Derivative financial instruments 18 1 26 763
Interest bearing loans and
borrowings 21 75,565 78,871 33,007
141,758 158,324 86,437
--------------- ---------- ----------
Non-current liabilities
Interest bearing loans and
borrowings 21 567,865 547,371 565,701
Preference shares 22 109,271 108,263 106,582
Convertible preference shares 23 206,116 198,870 96,997
Other payables 24 17,797 25,565 20,312
Derivative financial instruments 18 - - 54
Deferred tax liabilities 25 57,400 59,845 49,730
958,449 939,914 839,376
--------------- ---------- ----------
Total liabilities 1,100,207 1,098,238 925,813
--------------- ---------- ----------
Net assets 295,627 391,838 405,266
--------------- ---------- ----------
Equity
Share capital 26 6,233 6,606 6,680
Share premium 103,144 124,568 131,537
Warrants 27 98 438 996
Own shares held 28 (5,965) (3,652) (4,692)
Convertible preference shares 23 11,212 11,212 6,536
Capital reserve (281,001) (166,494) (186,957)
Translation reserve (48,887) (98,741) (45,019)
Retained earnings 510,793 517,901 496,185
--------------- ---------- ----------
Total equity 29 / 30 295,627 391,838 405,266
--------------- ---------- ----------
Net asset value per share
(pence): 30
Basic 48 60
Diluted 48 59
The financial statements were approved by the Board of Directors
on 17 March 2018 and signed on its behalf by:
Mark Sinclair Colin Smith
Chief Financial Officer Chief Operating Officer
The accompanying notes are an integral part of this
statement.
GROUP CASH FLOW STATEMENT
For the year ended 31 December
2018
2018 2017
Notes GBP'000 GBP'000
Cash flows from operating activities
(Loss) / profit before tax (114,888) 68,321
Adjustments for:
Impairment of goodwill 6 - 1,523
Depreciation 6 811 888
Provision for bad debts 6 (58) (72)
Share of profits of joint ventures 15 (1,630) (1,611)
Finance income 7 (4,869) (6,337)
Finance expense 7 88,180 78,074
Loss / (profit) on revaluation of investment property 11 121,764 (31,284)
(Profit) / loss on revaluation of investment property
under construction 12 (755) 3,049
Foreign exchange losses / (profits) 2,480 (6,132)
Non-cash element of share-based payments and other
long term incentives 31 2,853 2,260
---------- ----------
93,888 108,679
Changes in operating working
capital
(Increase) / decrease in operating
receivables 8,212 (848)
Decrease in other operating
current assets (43) 311
Decrease in operating payables (1,627) (1,222)
---------- ----------
100,430 106,920
Receipts from joint ventures 15 3,000 2,105
Tax paid (7,344) (10,988)
---------- ----------
Net cash generated from operating
activities 96,086 98,037
---------- ----------
Cash flows from investing activities
Payments for property improvements (8,611) (11,642)
Refund of VAT on acquisition of investment property 12,754 -
Acquisition of subsidiaries 38 (33,826) (68,940)
Cash acquired with subsidiaries 38 1,235 3,266
Acquisition of investment property / payment of
deferred consideration on acquisition of investment
property 11 (44,054) (80,739)
Loans granted (194) -
Loans repaid 34 -
Purchase of plant and equipment (2,262) (1,618)
Investment in joint ventures 15 (533) -
Interest received 3,254 5,631
---------- ----------
Net cash used in investing activities (72,203) (154,042)
---------- ----------
Cash flows from financing activities
Proceeds from long term borrowings 155,628 206,641
Repayment of long term borrowings (153,152) (98,167)
Loan amortisation (23,279) (29,684)
Bank borrowing costs paid (50,000) (49,475)
26 /
Exercise of warrants 27 2,125 3,487
Preference shares purchased 22 - (84)
26 /
Ordinary shares purchased 28 (28,258) (11,275)
Dividends paid on preference
shares (11,327) (11,234)
Dividends paid on convertible
preference shares (12,716) (9,776)
Issue of convertible preference
shares 23 - 97,781
Premium paid for derivative financial instruments (18,848) (3,680)
---------- ----------
Net cash generated from / (used) in financing activities (139,827) 94,534
---------- ----------
Net (decrease) / increase in cash and cash equivalents (115,944) 38,529
Opening cash and cash equivalents 197,137 160,559
Effect of foreign exchange rate
changes (7,743) (1,951)
---------- ----------
Closing cash and cash equivalents 19 73,450 197,137
---------- ----------
The accompanying notes are an integral part of this statement.
GROUP STATEMENT OF CHANGES
IN EQUITY
For the year ended
31 December 2018
Own Convertible
Share Share Shares Preference Capital Translation Retained
Capital Premium Warrants Held Shares Reserve Reserve Earnings Total
For the year ended
31 December 2017 Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2017 6,680 131,537 996 (4,692) 6,536 (186,957) (45,019) 496,185 405,266
Profit for the
year - - - - - - - 43,139 43,139
Other
comprehensive
income - - - - - - (53,722) - (53,722)
--------- --------- --------- -------- ------------ ---------- ------------ ------------ ------------
Total
comprehensive
income for the
year - - - - - - (53,722) 43,139 (10,583)
--------- --------- --------- -------- ------------ ---------- ------------ ------------ ------------
26
Warrants exercised / 27 139 3,905 (558) - - - - - 3,486
Convertible
preference
shares issued 23 - - - - 4,693 - - - 4,693
Conversion of
convertible 23
preference shares / 26 5 262 - - (17) - - - 250
Own shares
acquired 28 - - - (124) - - - - (124)
Own shares
allocated 28 - - - 1,134 - - - (960) 174
Ordinary shares 26
cancelled / 28 (218) (11,136) - 30 - - - - (11,324)
Transfer in
respect
of capital losses - - - - - 20,463 - (20,463) -
--------- --------- --------- -------- ------------ ---------- ------------ ------------ ------------
At 31 December
2017 6,606 124,568 438 (3,652) 11,212 (166,494) (98,741) 517,901 391,838
--------- --------- --------- -------- ------------ ---------- ------------ ------------ ------------
For the year ended
31 December 2018
Loss for the year - - - - - - - (120,681) (120,681)
Other
comprehensive
income - - - - - - 49,854 - 49,854
--------- --------- --------- -------- ------------ ---------- ------------ ------------ ------------
Total
comprehensive
income for the
year - - - - - - 49,854 (120,681) (70,827)
--------- --------- --------- -------- ------------ ---------- ------------ ------------ ------------
26
Warrants exercised / 27 85 2,380 (340) - - - - - 2,125
Convertible
preference
shares issued 23 - - - - - - - - -
Conversion of
convertible 23
preference shares / 26 - - - - - - - - -
Own shares
acquired 28 - - - (4,235) - - - - (4,235)
Own shares
allocated 28 - - - 1,886 - - - (934) 952
Ordinary shares 26
cancelled / 28 (458) (23,804) - 36 - - - - (24,226)
Transfer in respect of
capital losses - - - - - (114,507) - 114,507 -
--------- --------- --------- -------- ------------ ---------- ------------ ------------ ------------
At 31 December
2018 6,233 103,144 98 (5,965) 11,212 (281,001) (48,887) 510,793 295,627
--------- --------- --------- -------- ------------ ---------- ------------ ------------ ------------
The accompanying notes are an integral part
of this statement.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December
2018
1. General information
Raven Property Group Limited (the "Company") and its subsidiaries (together
the "Group") is a property investment group specialising in commercial real
estate in Russia.
The Company is incorporated and domiciled in Guernsey under the provisions
of the Companies (Guernsey) Law, 2008. The Company's registered office is at
La Vieille Cour, La Plaiderie, St Peter Port, Guernsey GY1 6EH.
The audited financial statements of the Group for the year ended 31 December
2018 were authorised by the Board for issue on 17 March 2019.
2. Accounting policies
Basis of preparation
The Company has taken advantage of the exemption conferred by the Companies
(Guernsey) Law, 2008, section 244, not to prepare company financial statements
as group financial statements have been prepared for both current and prior
periods. The Group financial statements are presented in Sterling and all values
are rounded to the nearest thousand pounds (GBP'000) except where otherwise
indicated.
The principal accounting policies adopted in the preparation of the group financial
statements are set out below. The policies have been consistently applied to
all years presented, unless otherwise indicated.
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the accounting policies.
The areas involving a high degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements, are
disclosed in note 3.
Going concern
The financial position of the Group, its cash flows, liquidity position and
borrowings are described in the Financial Review and the notes to these financial
statements. After making appropriate enquiries and examining sensitivities
that could give rise to financial exposure, the Board has a reasonable expectation
that the Group has adequate resources to continue operations for the foreseeable
future. Accordingly, the Group continues to adopt the going concern basis in
the preparation of these financial statements.
Statement of compliance
The financial statements of the Group have been prepared in accordance with
International Financial Reporting Standards adopted for use in the European
Union ("IFRS") and the Companies (Guernsey) Law, 2008.
Changes in accounting policies
The Group has changed the currency in which it presents its consolidated financial
statements from US Dollars to Sterling. A change in presentation currency is
a change in accounting policy which is accounted for retrospectively. The Group's
results for 2017, which were previously reported in US Dollars, have been restated
into Sterling as follows:
- assets and liabilities were translated into Sterling at the closing rates
of exchange on 31 December 2017;
- income and expenditure were translated into Sterling at the average rates
prevailing in 2017; and
- non-Sterling equity items were translated to Sterling at the historic rates
prevailing at the dates of the relevant equity transactions.
The US Dollar Sterling exchange rates used were as follows:
2017 2016
Closing rate 1.3528 1.2357
Average rate 1.2888 1.3549
Other than the change in presentation currency, the accounting policies adopted
are consistent with those of the previous financial year. The Group has adopted
new and amended IFRS and IFRIC interpretations as of 1 January 2018. The Group
applies for the first time, IFRS 15 Revenue from Contracts with Customers and
IFRS 9 Financial Instruments.
IFRS 15 does not affect the financial performance or financial position of
the Group but it does require additional disclosures to be made. IFRS 15 does
not apply to lease income, so the additional disclosures only relate to the
Group's revenues generated by its Roslogistics and Raven Mount reporting segments
and provide information as to how the nature, amount, timing and uncertainty
of cash flows from these revenues are affected by economic factors. These disclosures
are provided in note 4.
The Group has assessed the impact of IFRS 9 and concluded that it does not
affect the financial performance or financial position of the Group or the
disclosures made in its financial statements.
Certain new standards, interpretations and amendments to existing standards
have been published that are mandatory for later accounting periods and which
have not been adopted early. Of these the six thought to have a possible impact
on the Group are:
IFRS 16 Leases (effective 1 January 2019)
IFRIC Interpretation 23 Uncertainty over Income Tax Treatments (effective 1
January 2019)
AIP IAS 12 Income Taxes - Income tax consequences of payments on financial
instruments classified as equity (effective 1 January 2019)
AIP IAS 23 Borrowing Costs - Borrowing costs eligible for capitalisation (effective
1 January 2019)
The Conceptual Framework for Financial Reporting (effective 1 January 2020)
IFRS 17 Insurance Contracts (effective 1 January 2021)
The Group has assessed the impact of these changes and does not expect them
to significantly impact on the financial position or performance of the Group.
There may, however, be changes to disclosures within the financial statements.
The standards, amendments or revisions are effective for annual periods beginning
on or after the dates noted above.
Basis of consolidation
The consolidated financial statements incorporate the financial statements
of the Company, its subsidiaries and the special purpose vehicles ("SPVs")
controlled by the Company, made up to 31 December each year. Control is achieved
where the Company is exposed, or has rights, to variable returns from its involvement
with or ownership of the investee entity and has the ability to affect those
returns through its power over the investee.
The Group has acquired investment properties through the purchase of SPVs.
In the opinion of the Directors, these transactions did not meet the definition
of a business combination as set out in IFRS 3 "Business Combinations". Accordingly
the transactions have not been accounted for as an acquisition of a business
and instead the financial statements reflect the substance of the transactions,
which is considered to be the purchase of investment property and investment
property under construction.
The results of subsidiaries acquired or disposed of during the year are included
in the Income Statement from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of entities
acquired to bring the accounting policies into line with those used by the
Group.
All intra-group transactions, balances, income and expenditure are eliminated
on consolidation.
Joint ventures
A joint venture is a contractual arrangement whereby the parties that have
joint control of the arrangement have rights to the net assets of the joint
venture. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the activities require
unanimous consent of the contracting parties for strategic financial and operating
decisions.
The Group's investments in joint ventures are accounted for using the equity
method. Under the equity method, the investment in a joint venture is initially
recognised at cost. The carrying value of the investment is adjusted to recognise
changes in the Group's share of net assets of the joint venture since the acquisition
date. Any premium paid for an interest in a joint venture above the fair value
of the Group's share of identifiable assets, liabilities and contingent liabilities
is determined as goodwill. Goodwill relating to a joint venture is included
in the carrying amount of the investment and is neither amortised nor individually
tested for impairment.
The aggregate of the Group's share of profit or loss of joint ventures is shown
on the face of the Income Statement within Operating Profit and represents
the profit or loss after tax.
Revenue recognition
(a) Property investment
Rental income from operating leases is recognised in income on a straight-line
basis over the lease term. Rental increases calculated with reference to an
underlying index and the resulting rental income ("contingent rents") are recognised
in income as they are determined.
Incentives for lessees to enter into lease agreements are spread evenly over
the lease term, even if the payments are not made on such a basis. The lease
term is the non-cancellable period of the lease, together with any further
term for which the tenant has the option to continue the lease, where, at the
inception of the lease, the directors are reasonably certain that the tenant
will exercise that option.
Premiums received to terminate leases are recognised in the Income Statement
as they arise.
(b) Roslogistics
Logistics revenue, excluding value added tax, is recognised as services are
provided.
(c) Raven Mount
The sale of completed property and land is recognised on legal completion.
Taxation
The Company is a limited company registered in Guernsey, Channel Islands, and
is exempt from taxation. The Group is liable to Russian, Cypriot and UK tax
arising on the results of its Russian, Cypriot and UK operations.
The tax expense represents the sum of the tax currently payable and deferred
tax.
(a) Current tax
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit (or loss) as reported in the Income Statement
because it excludes items of income and expenditure that are taxable or deductible
in other years and it further excludes items that are never taxable or deductible.
The Group's liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet date.
(b) Tax provisions
A current tax provision is recognised when the Group has a present obligation
as a result of a past event and it is probable that the Group will be required
to settle that obligation. A provision for uncertain taxes is recorded within
current tax payable (see note 20).
(c) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amount 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. Deferred tax
liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition (other than
in a business combination) of other assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be recovered.
Unrecognised deferred tax assets are reassessed at each balance sheet date
and are recognised to the extent that it has become probable that future taxable
profit will allow the deferred tax asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised, based on tax rates
that have been enacted or substantively enacted at the reporting date. Deferred
tax is charged or credited in the Income Statement, except when it relates
to items charged or credited directly to equity, in which case the deferred
tax is also dealt with in equity.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable
right exists to set off current tax assets against current tax liabilities
and the deferred income taxes relate to the same taxable entity and the same
taxation authority.
(d) Value added tax
Revenue, expenditure, assets and liabilities are recognised net of the amount
of value added tax except:
Where the value added tax incurred on a purchase of assets or services is not
recoverable from the taxation authority, in which case the value added tax
is recognised as part of the cost of acquisition of the asset or as part of
the expenditure item as applicable; and
Receivables and payables that are stated with the amount of value added tax
included.
The net amount of value added tax recoverable from, or payable to, the taxation
authority is included as part of receivables or payables, as appropriate, in
the Balance Sheet.
Investment property and investment property under construction
Investment property comprises completed property and property under construction
held to earn rentals or for capital appreciation or both. Investment property
comprises both freehold and leasehold land and buildings.
Investment property is measured initially at its cost, including related transaction
costs. After initial recognition, investment property is carried at fair value.
The Directors assess the fair value of investment property based on independent
valuations carried out by their appointed property valuers or on independent
valuations prepared for banking purposes. The Group has appointed Jones Lang
LaSalle as property valuers to prepare valuations on a semi-annual basis. Valuations
are undertaken in accordance with appropriate sections of the current Practice
Statements contained in the Royal Institution of Chartered Surveyors Valuation
- Global Standards, 2017 (the "Red Book"). These are internationally accepted
standards of valuation. Gains or losses arising from changes in the fair value
of investment property are included in the Income Statement in the period in
which they arise. For the purposes of these financial statements, in order
to avoid double counting, the assessed fair value is reduced by the present
value of any tenant incentives and contracted rent uplifts that are spread
over the lease term and increased by the carrying amount of any liability under
a head lease that has been recognised in the Balance Sheet.
Borrowing costs that are directly attributable to the construction of investment
property are included in the cost of the property from the date of commencement
of construction until construction is completed.
Leasing (as lessors)
Leases where the Group does not transfer substantially all the risks and benefits
incidental to ownership of the asset are classified as operating leases. All
of the Group's properties are leased under operating leases and are included
in investment property in the Balance Sheet.
Financial assets
The Group classifies its financial assets into one of the categories discussed
below, depending upon the purpose for which the asset was acquired.
(a) Fair value through profit or loss
This category comprises only in-the-money derivatives (see financial liabilities
policy for out-of-the-money derivatives), which are carried at fair value with
changes in the fair value recognised in the Income Statement in finance income
or finance expense.
(b) Loans and receivables
These are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. In the case of the Group, loans and
receivables comprise trade and other receivables, loans, security deposits,
restricted cash and cash and short term deposits.
Loans and receivables are initially recognised at fair value, plus transaction
costs that are directly attributable to their acquisition or issue, and are
subsequently carried at amortised cost using the effective interest rate method,
less provision for impairment.
If there is objective evidence that an impairment loss has been incurred, the
amount of the loss is measured as the difference between the asset's carrying
amount and the present value of estimated future cash flows. The amount of
the impairment loss is recognised in administrative expenses. If in a subsequent
period the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment is recognised,
the previously recognised impairment loss is reversed. Any such reversal of
an impairment loss is recognised in the Income Statement.
Cash and short term deposits include cash in hand, deposits held at call with
banks and other short term highly liquid investments with original maturities
of three months or less.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into.
The Group classifies its financial liabilities into one of the categories listed
below.
(a) Fair value through profit or loss
This category comprises only out-of-the-money derivatives, which are carried
at fair value with changes in the fair value recognised in the Income Statement
in finance income or finance expense.
(b) Other financial liabilities
Other financial liabilities include interest bearing loans, trade payables
(including rent deposits and retentions under construction contracts), preference
shares, convertible preference shares and other short-term monetary liabilities.
Trade payables and other short-term monetary liabilities are initially recorded
at fair value and subsequently carried at amortised cost using the effective
interest rate method.
Interest bearing loans, convertible preference shares and preference shares
are initially recorded at fair value net of direct issue costs and subsequently
carried at amortised cost using the effective interest rate method. Finance
charges, including premiums payable on settlement or redemption and direct
issue costs, are charged to the Income Statement using the effective interest
rate method.
An equity instrument is any contract that evidences a residual interest in
the assets of the Group after deducting all of its liabilities. The Group considers
the convertible preference shares to be a compound financial instrument, that
is they have a liability and equity component. On the issue of convertible
preference shares the fair value of the liability component is determined and
the balance of the proceeds of issue is deemed to be equity. The Group's other
equity instruments are its ordinary shares and warrants.
Own shares held
Own equity instruments which are acquired are recognised at cost and deducted
from equity. No gain or loss is recognised in the Income Statement on the purchase,
sale, issue or cancellation of the Group's own equity instruments. Any difference
between the carrying amount and the consideration is recognised in retained
earnings.
Share-based payments and other long term incentives
The Group rewards its key management and other senior employees by a variety
of means many of which are settled by ordinary, preference shares or convertible
preference shares of the Company.
Awards linked to or that may be settled by ordinary shares
The share component of the 2016 Retention Scheme may be settled in any of the
Company's listed securities, including ordinary shares, and as a consequence
falls within the scope of IFRS 2 Share-based payments. To date the instalments
have been settled by preference shares and convertible preference shares and
therefore are cash-settled transactions. The cost of cash-settled transactions
is recognised as an expense over the vesting period, measured by reference
to the fair value of the corresponding liability, which is recognised on the
Balance Sheet. The liability is remeasured at fair value at each balance sheet
date until settlement, with changes in the fair value recognised in the Income
Statement. Also, to the extent the Five Year Performance Plan vests in March
2023, the resulting entitlements will be settled in ordinary shares and thus
will fall within the scope of IFRS 2.
Awards not linked to or settled by ordinary shares
These awards are accounted for in accordance with IAS 19 Employee Benefits
whereby the Group estimates the cost of awards using the projected unit credit
method, which involves estimating the future value of the preference shares
or convertible preference shares, as appropriate, at the vesting date and the
probability of the awards vesting. The resulting expense is charged to the
Income Statement over the performance period and the liability is remeasured
at each Balance Sheet date.The cash component of the 2016 Retention Scheme
has been accounted for in this way.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each Group entity are measured
in the currency of the primary economic environment in which the entity operates
(the "functional currency"). For the Company the directors consider this to
be Sterling. The group financial statements are presented in Sterling and all
values are rounded to the nearest thousand pounds (GBP'000) except where otherwise
indicated and prior years have been restated as described earlier. Following
a move to Rouble valuations of investment property, the Russian subsidiaries
that hold investment property have changed their functional currency from US
Dollars to Roubles.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from
the translation at the year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Income Statement. Non-monetary
assets and liabilities are translated using exchange rates at the date of the
initial transaction or when their fair values are reassessed.
(c) On consolidation
The results and financial position of all the Group entities that have a functional
currency different from the presentation currency are translated into the presentation
currency as follows:
(i) assets and liabilities for each Balance Sheet are translated at the closing
rate at the date of the Balance Sheet;
(ii) income and expenditure for each Income Statement are translated at the
average exchange rate prevailing in the period unless this does not approximate
to the rates ruling at the dates of the transactions in which case they are
translated at the transaction date rates; and
(iii) all resulting exchange differences are recognised in Other Comprehensive
Income.
The exchange differences arising from the translation of the net investment
in foreign entities are recognised in Other Comprehensive Income. When a foreign
entity is sold, such exchange differences are recognised in the Income Statement
as part of the gain or loss on sale. Goodwill and fair value adjustments arising
on the acquisition of a foreign entity are treated as assets and liabilities
of the foreign entity and translated at the closing rate.
The results and financial position of all the Group entities that have a functional
currency different from the Group's presentation currency (Sterling) are translated
into the presentation currency using the following rates:
2018 2017
Balance
Sheet
- Roubles 88.3524 77.8800
- United States
Dollar 1.2736 1.3528
- Euro 1.1142 1.1266
2018 2017
Income
Statement
*
- Roubles 83.6890 75.1859
- United States
Dollar 1.3350 1.2888
- Euro 1.1304 1.1415
* These are the average rates for the twelve months ended 31 December 2017
and 2018, which are used unless this does not approximate the rates ruling
at the dates of the relevant transactions in which case the item of income
or expenditure is translated at the transaction date rate.
Dividends
Dividends to the Company's ordinary shareholders are recognised when they become
legally payable. In the case of interim dividends, this is when declared by
the directors. In the case of final dividends, this is when they are approved
by the shareholders at an AGM.
3. Critical accounting estimates and judgements
The Group makes certain estimates and judgements regarding the future. Estimates
and judgements are continually evaluated and are based on historical experience
as adjusted for current market conditions and other factors. The resulting
accounting estimates will, by definition, seldom equal the related actual results.
The estimates and judgements that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year are outlined below.
Judgements other than estimates
In the process of applying the Group's accounting policies the following are
considered to have the most significant effect on the amounts recognised in
the consolidated financial statements:
(a) Acquisitions
Properties can be acquired through the corporate acquisition of a subsidiary
company. At the time of acquisition, the Group considers whether the acquisition
represents the acquisition of a business. The Group accounts for the acquisition
as a business combination where an integrated set of activities is acquired
in addition to the property. More specifically, consideration is made of the
extent to which significant processes are acquired and the extent of ancillary
services provided by the subsidiary.
When the acquisition of a subsidiary does not represent a business, it is accounted
for as an acquisition of a group of assets and liabilities. The cost of the
acquisition is allocated to the assets and liabilities acquired based on their
relative fair values, and no goodwill or deferred tax liabilities are recognised.
As detailed in note 38, the Group purchased Volga Logistics Park by acquiring
all of the issued share capital of the corporate vehicles that owned the property.
(b) Recognition of deferred tax assets
The recognition of deferred tax assets is based upon whether it is probable
that sufficient and suitable taxable profits will be available in the future,
against which the reversal of temporary differences can be deducted. Recognition,
therefore, involves judgement regarding the future financial performance of
the particular legal entity or tax group in which the deferred tax asset has
been recognised.
Estimates
(a) Valuation of investment property and investment property under construction
The best evidence of fair value are current prices in an active market for
similar properties. In the absence of such information, the Group determines
the amount within a range of reasonable, fair value estimates. In making its
estimation the Group considers information from a variety of sources and engages
external, professional advisers to carry out third party valuations of its
properties. The external valuations are completed in accordance with appropriate
sections of the current Practice Statements contained in the Royal Institution
of Chartered Surveyors Valuation - Global Standards, 2017 (the "Red Book").
These are internationally accepted standards of valuation and are consistent
with the requirements of IFRS 13. In our market, where transactional activity
is minimal, the valuers are required to use a greater degree of estimation
or judgement than in a market where comparable transactions are more readily
available.
The significant methods and assumptions used in estimating the fair value of
investment property and investment property under construction are set out
in note 13, along with detail of the sensitivities of the valuations to changes
in the key inputs.
(b) Income tax
As part of the process of preparing its financial statements, the Group is
required to estimate the provision for income tax in each of the jurisdictions
in which it operates. This process involves an estimation of the actual current
tax exposure, together with assessing temporary differences resulting from
differing treatment of items for tax and accounting purposes. These differences
result in deferred tax assets and liabilities, which are included in the Balance
Sheet.
Russian tax legislation is subject to varying interpretations and changes,
which may occur frequently. New legislation and clarifications have been introduced
over recent years, but it remains unclear as to how these will be applied in
practice. The interpretation of the legislation that the Group adopts for its
transactions and activities may be challenged by the relevant regional and
federal authorities from time to time. Additionally, there may be inconsistent
interpretation of tax regulations by each local authority, creating uncertainties
in the correct application of the taxation regulations in Russia. Fiscal periods
remain open to review by the authorities for the three calendar years preceding
the years of review and in some circumstances may cover a longer period. Additionally,
there have been instances where new tax regulations have been applied retrospectively.
The level of tax reviews and court activity is increasing. The Group is, and
has been, subject to tax reviews which are worked through with the relevant
authorities to resolve.
The Group, in making its tax provision judgements, is confident that an appropriate
level of management and control is exerted in each of the jurisdictions in
which it operates, all companies are tax resident in their relevant jurisdictions
and are the beneficial owners of any income they receive. Local management
use their in house tax knowledge and previous experience as well as independent
professional experts when assessing tax risks and the resultant provisions
required. For the current year, the Group has specifically reviewed the potential
impact that new regulations may have on its financing arrangements and the
provision reflects probabilities of between 0% and 100% of possible outcomes.
It is reasonably possible that outcomes within the next financial year are
different from the assumptions made and could require an adjustment to the
carrying amount of the provision.
4. Segmental information
The Group has three reportable segments, which are managed and report independently
to the Board. These comprise:
Property Investment - acquire or develop and lease commercial property in Russia
Roslogistics - provision of warehousing, transport, customs brokerage and related
services in Russia - IFRS 15 revenue - services are provided to customers over
time and invoiced at appropriate intervals in accordance with the relevant
contract terms, with payment typically due within 10 to 45 days of invoicing;
and Raven Mount - sale of residential property in the UK - IFRS 15 revenue
- the transfer of land or property to the purchaser occurs on legal completion
of the sale contract, with payment typically due upon completion, though in
some cases a deferral may be agreed.
Financial information relating to Property Investment is provided to the Board
on a property by property basis. The information provided comprises gross rentals,
operating costs, net operating income, revaluation gains and losses and where
relevant the profit or loss on disposal of an investment property. The individual
properties have similar economic characteristics and are considered to be a
single reporting segment.
Information about Raven Mount provided to the Board comprises the gross sale
proceeds, inventory cost of sales and gross profit, including the share of
profits or losses of its joint venture.
Roslogistics is an independently managed business and the Board is presented
with turnover, cost of sales and operating profits or losses after deduction
of administrative expenses.
Administrative expenses and foreign currency gains or losses are reported to
the Board by segment. Finance income and finance expense are not reported to
the Board on a segment basis. Sales between segments are eliminated prior to
the provision of financial information to the Board.
For the Balance Sheet, segmental information is provided in relation to investment
property, inventory, cash balances and borrowings. Whilst segment liabilities
include loans and borrowings, segment profit does not include the related finance
costs. If such finance costs were included in segment profit or loss, the profit
from Property Investment would have decreased by GBP51.1 million (2017: GBP48.8
million).
(a) Segmental information for the year ended and as
at 31 December 2018
Year ended 31 December
2018 Property Raven Segment Central
Investment Roslogistics Mount Total Overhead Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross revenue 146,106 16,402 131 162,639 - 162,639
Operating costs / cost
of sales (36,322) (8,278) 246 (44,354) - (44,354)
----------- ------------- -------------- --------------- ------------- ----------
Net rental and related
income 109,784 8,124 377 118,285 - 118,285
Administrative expenses
Running general &
administration
expenses (14,535) (1,989) (419) (16,943) (5,771) (22,714)
Abortive project costs (1,625) - - (1,625) - (1,625)
Depreciation (491) (318) (2) (811) - (811)
Share-based payments and
other long term incentives (350) - - (350) (2,503) (2,853)
Foreign currency (losses)
/ profits (2,483) 3 - (2,480) - (2,480)
----------- ------------- -------------- --------------- ------------- ----------
90,300 5,820 (44) 96,076 (8,274) 87,802
Unrealised loss on revaluation
of investment property (121,764) - - (121,764) - (121,764)
Unrealised profit on
revaluation
of
investment property under
construction 755 - - 755 - 755
Share of profits of joint
ventures - - 1,630 1,630 - 1,630
----------- ------------- -------------- --------------- ------------- ----------
Segment (loss) / profit (30,709) 5,820 1,586 (23,303) (8,274) (31,577)
----------- ------------- -------------- --------------- ------------- ----------
Finance income 4,869
Finance expense (88,180)
Loss before tax (114,888)
----------
As at 31 December 2018 Property Raven
Investment Roslogistics Mount Total
GBP'000 GBP'000 GBP'000 GBP'000
Assets
Investment property 1,175,440 - - 1,175,440
Investment property under
construction 30,548 - - 30,548
Investment in joint ventures - 369 6,197 6,566
Inventory - - 356 356
Cash and short term deposits 69,605 1,358 2,487 73,450
-------------- --------------- -------------
Segment assets 1,275,593 1,727 9,040 1,286,360
-------------- --------------- ------------- ----------
Other non-current assets 65,467
Other current assets 44,007
Total assets 1,395,834
----------
Segment liabilities
Interest bearing loans
and borrowings 643,430 - - 643,430
-------------- --------------- ------------- ----------
Capital expenditure
Corporate acquisition 33,249 - - 33,249
Other acquisition 27,239 - - 27,239
Property improvements 2,741 - - 2,741
63,229 - - 63,229
-------------- --------------- ------------- ----------
(b) Segmental information for the year ended
and as at 31 December 2017
Year ended 31 December
2017 Property Raven Segment Central
Investment Roslogistics Mount Total Overhead Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross revenue 139,659 17,964 19,377 177,000 - 177,000
Operating costs / cost
of sales (35,937) (8,363) (3,004) (47,304) - (47,304)
----------- ------------- -------------- --------------- ------------- ----------
Net rental and related
income 103,722 9,601 16,373 129,696 - 129,696
Administrative expenses
Running general &
administration
expenses (12,750) (1,711) (661) (15,122) (4,566) (19,688)
Impairment of goodwill - - (1,523) (1,523) - (1,523)
Depreciation (542) (346) - (888) - (888)
Share-based payments and
other long term incentives (589) - - (589) (2,928) (3,517)
Foreign currency profits 6,129 3 - 6,132 - 6,132
----------- ------------- -------------- --------------- ------------- ----------
95,970 7,547 14,189 117,706 (7,494) 110,212
Unrealised profit on revaluation
of investment property 31,284 - - 31,284 - 31,284
Unrealised loss on revaluation
of
investment property under
construction (3,049) - - (3,049) - (3,049)
Share of profits of joint
ventures - - 1,611 1,611 - 1,611
----------- ------------- -------------- --------------- ------------- ----------
Segment profit / (loss) 124,205 7,547 15,800 147,552 (7,494) 140,058
----------- ------------- -------------- --------------- ------------- ----------
Finance income 6,337
Finance expense (78,074)
Profit before tax 68,321
----------
As at 31 December 2017 Property Raven
Investment Roslogistics Mount Total
GBP'000 GBP'000 GBP'000 GBP'000
Assets
Investment property 1,159,172 - - 1,159,172
Investment property under
construction 28,607 - - 28,607
Investment in joint ventures - - 7,380 7,380
Inventory - - 313 313
Cash and short term deposits 191,402 671 5,064 197,137
Segment assets 1,379,181 671 12,757 1,392,609
-------------- --------------- ------------- ----------
Other non-current assets 38,752
Other current assets 58,715
Total assets 1,490,076
----------
Segment liabilities
Interest bearing loans and
borrowings 626,242 - - 626,242
-------------- --------------- ------------- ----------
Capital expenditure
Corporate acquisitions 68,593 - - 68,593
Other acquisition 90,663 - - 90,663
Property improvements 12,640 - - 12,640
171,896 - - 171,896
-------------- --------------- ------------- ----------
5. Gross revenue 2018 2017
GBP'000 GBP'000
Rental and related income 146,106 139,659
Proceeds from the sale of
inventory property 131 19,377
Logistics 16,402 17,964
162,639 177,000
------------- ----------
The Group's leases typically include annual rental increases ("contingent
rents") based on a consumer price index in Russia, Europe or the USA, which
are recognised in income as they arise. Contingent rents, being amounts recorded
in excess of minimum contracted increases, are included in rental income for
the year amounted GBP12k (2017: GBP8k).
Details of the Group's contracted future minimum lease receivables are detailed
in note 36.
The Group recognised revenue of GBP19 million (2017: GBP20 million) from a
single tenant of the property investment segment that amounted to more than
10% of Group revenue.
6. Administrative expenses
2018 2017
(a) Total administrative
expenses GBP'000 GBP'000
Employment costs 12,079 10,366
Directors' remuneration 2,900 2,386
Bad debts (58) (72)
Office running costs and
insurance 3,261 3,160
Travel costs 1,321 1,507
Auditors' remuneration 596 553
Impairment of goodwill - 1,523
Legal and professional 2,070 1,494
Abortive project costs 1,625 -
Depreciation 811 888
Registrar costs and other administrative
expenses 545 294
25,150 22,099
------------- ----------
(b) Fees for audit and other services provided by
the Group's auditor
2018 2017
GBP'000 GBP'000
Audit services 461 417
Audit related assurance
services 50 48
511 465
------------- ----------
Other fees:
Taxation services 47 56
Other services 38 32
85 88
------------- ----------
Total fees 596 553
------------- ----------
The Group engaged Ernst & Young to undertake due diligence in respect of the
investment property acquisitions in the year, incurring GBP103k (2017: GBP313k)
of fees, which were included in the cost of the relevant investment property
and a further GBP537k (2017: GBPnil) incurred in respect of aborted projects.
Ernst & Young also provide audit and taxation services for various SPVs that
form part of the property operating costs. Charges for the audit of SPVs in
the year amounted to GBP265k (2017: GBP235k) and the fees for taxation services
were GBP147k (2017: GBP59k).
7. Finance income and expense 2018 2017
GBP'000 GBP'000
Finance income
Total interest income on financial assets not at fair
value through profit or loss
Income from cash and short term deposits 3,254 5,604
Interest receivable from joint ventures 32 23
Other finance income
Change in fair value of open interest rate
derivative financial instruments 1,583 37
Change in fair value of foreign currency
embedded derivatives - 673
Finance income 4,869 6,337
------------- ----------
Finance expense
Interest expense on loans and borrowings
measured at amortised cost 51,092 48,808
Interest expense on preference shares 12,335 12,289
Interest expense on convertible preference
shares 19,963 15,576
------------- ----------
Total interest expense on financial liabilities not
at fair value through profit or loss 83,390 76,673
Change in fair value of open forward currency derivative
financial instruments 83 121
Change in fair value of open interest rate
derivative financial instruments 4,566 1,280
Change in fair value of foreign currency
embedded derivatives 141 -
----------
Finance expense 88,180 78,074
------------- ----------
Included in the interest expense on loans and borrowings is GBP3.93 million
(2017: GBP4.25 million) relating to amortisation of costs incurred in originating
the loans. Included in the interest expense on preference shares is GBP0.42
million (2017: GBP0.42 million) relating to the accretion of premiums payable
on redemption of preference shares and amortisation of costs incurred in issuing
preference shares. Included in the interest expense on convertible preference
shares is GBP6.95 million (2017: GBP5.56 million) relating to the accretion
of premiums payable on redemption and amortisation of costs incurred in issuing
the convertible preference shares of GBP0.30 million (2017: GBP0.22 million).
8. Tax 2018 2017
GBP'000 GBP'000
The tax expense for the year comprises:
Current taxation 5,731 15,001
Deferred taxation (note 25)
On the origination and reversal of
temporary differences 72 11,431
On unrealised foreign exchange movements
in loans (10) 149
Over provision in prior
year - (1,399)
Tax charge 5,793 25,182
------------- ----------
The charge for the year can be reconciled to the loss per the Income
Statement as follows:
2018 2017
GBP'000 GBP'000
(Loss) / profit before tax (114,888) 68,321
Tax at the Russian corporate tax
rate of 20% (22,978) 13,664
Tax effect of financing arrangements (1,964) (3,865)
Tax effect of non deductible preference share
coupon 6,460 5,573
Tax effect of foreign exchange movements (2,186) 1,099
Movement in provision for uncertain
tax positions (1,924) 5,450
Tax effect of other income not subject to
tax and non-deductible expenses 5,310 3,431
Tax effect of property depreciation
on revaluations 17,179 2,127
Tax on dividends and other inter
company gains 2,571 2,696
Movement on previously unprovided
deferred tax assets 3,325 (3,594)
Over provision in prior
year - (1,399)
5,793 25,182
------------- ----------
The tax effect of financing arrangements reflects the impact of intra group
funding in each jurisdiction. Foreign exchange movements on intra group financing
are taxable or tax deductible in Russia but not in other jurisdictions. In
accordance with its accounting policy, the Group is required to estimate its
provision for uncertain tax positions and the movement in the provision is
reflected above. Other income and expenditure not subject to tax arises in
Guernsey.
9. Earnings measures
In addition to reporting IFRS earnings the Group also reports its own underlying
earnings measure. The Directors consider underlying earnings to be a key performance
measure, as this is the measure used by Management to assess the return on
holding investment assets for the long term and the Group's ability to declare
covered distributions. As a consequence the underlying earnings measure excludes
investment property revaluations, gains or losses on the disposal of investment
property, intangible asset movements; gains and losses on derivative financial
instruments, share-based payments and other long term incentives (to the extent
not settled in cash), the accretion of premiums payable on redemption of preference
shares and convertible preference shares, depreciation and amortisation of
loan origination costs (as these represent non-cash expenses that do not affect
the ability to declare covered distributions); and material non-recurring
items, together with any related tax.
The Group is also required to report Headline earnings per share as required
by the listing requirements of the Johannesburg Stock Exchange.
The calculation of basic and diluted earnings
per share is based on the following data: 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
Earnings
Net (loss) / profit for the year
prepared under IFRS (120,681) 43,139
Adjustments to arrive at
underlying earnings:
Administrative expenses
Impairment of goodwill (note
6a) - 1,523
Depreciation (note 6a) 811 888
Aborted project costs (note
6a) 1,625 -
-------------- -------------
2,436 2,411
Share-based payments and other long term
incentives (note 31b) 2,853 2,260
Unrealised loss / (profit) on revaluation
of investment property 121,764 (31,284)
Unrealised (profit) / loss on revaluation
of investment property under construction (755) 3,049
Finance income
Change in fair value of open interest rate
derivative financial instruments (note 7) 1,583 37
Change in fair value of foreign currency
embedded derivatives (note 7) - 673
-------------- -------------
(1,583) (710)
Finance expense
Change in fair value of open forward currency
derivative financial
instruments (note 7) 83 121
Change in fair value of open interest rate
derivative financial instruments (note 7) 4,566 1,280
Change in fair value of foreign currency
embedded derivatives (note 7) 141 -
Premium on redemption of preference shares
and amortisation of issue costs (note 22) 417 417
Premium on redemption of convertible preference
shares and amortisation of issue costs (note
23) 7,246 5,784
Amortisation of loan origination
costs (note 7) 3,931 4,253
-------------- -------------
16,384 11,855
Tax
Movement on deferred tax arising on depreciation
and revaluation of investment property (619) 12,591
Tax on unrealised foreign exchange movements
in loans 215 67
-------------- -------------
(404) 12,658
Underlying earnings 20,014 43,378
--------------- ----------
2018 2017
Calculation of Headline earnings GBP'000 GBP'000
Net (loss) / profit for the year prepared under IFRS (120,681) 43,139
Adjustments to arrive at Headline earnings:
Impairment of goodwill - 1,523
Unrealised loss / (profit) on revaluation of investment
property 121,764 (31,284)
Unrealised (profit) / loss on revaluation of investment
property under construction (755) 3,049
Movement on deferred tax arising on revaluation of
investment property (6,502) 7,772
Headline earnings (6,174) 24,199
--------------- ----------
2018 2017
Weighted Weighted
average average
Earnings shares EPS Earnings shares EPS
IFRS GBP'000 No. '000 Pence GBP'000 No. '000 Pence
Basic (120,681) 641,588 (18.81) 43,139 663,493 6.50
Effect of dilutive potential
ordinary shares:
Warrants (note 27) - - - 7,669
LTIP (note 31) - - - 1,382
2016 Retention Scheme (note
31) - - - 2,513
Convertible preference shares
(note 23) - - 15,576 261,369
Diluted (120,681) 641,588 (18.81) 58,715 936,426 6.27
----------- ------------- --------------- -------------
2018 2017
Weighted Weighted
average average
Earnings shares EPS Earnings shares EPS
Underlying earnings GBP'000 No. '000 Pence GBP'000 No. '000 Pence
Basic 20,014 641,588 3.12 43,378 663,493 6.54
Effect of dilutive potential
ordinary shares:
Warrants (note 27) - 2,641 - 7,669
LTIP (note 31) - 612 - 1,382
2016 Retention Scheme (note
31) - 4,535 - 2,513
Convertible preference shares
(note 23) - - 9,792 261,369
Diluted 20,014 649,376 3.08 53,170 936,426 5.68
----------- ------------- --------------- -------------
2018 2017
Weighted Weighted
average average
Earnings shares EPS Earnings shares EPS
Headline earnings GBP'000 No. '000 Pence GBP'000 No. '000 Pence
Basic (6,174) 641,588 (0.96) 24,199 663,493 3.65
Effect of dilutive potential
ordinary shares:
Warrants (note 27) - - - 7,669
LTIP (note 31) - - - 1,382
2016 Retention Scheme (note
31) - - - 2,513
Convertible preference shares
(note 23) - - - -
Diluted (6,174) 641,588 (0.96) 24,199 675,057 3.58
----------- ------------- --------------- -------------
The finance expense relating to the convertible preference shares was greater
than IFRS, underlying and headline basic earnings per share and thus the convertible
preference shares are not dilutive. This was not the case in 2017 where the
convertible preference shares were dilutive and were incorporated into the
calculation of diluted IFRS and underlying earnings per share.
10. Ordinary dividends
In the place of a final dividend for 2017 the Company implemented a tender
offer buy back of ordinary shares on the basis of 1 in every 17 shares held
at a tender price of 52 pence per share, the equivalent of a final dividend
of 3 pence per share. Instead of an interim dividend for 2018 the Company
implemented a tender offer buy back of ordinary shares on the basis of 1 in
every 44 shares at a tender price of 55 pence per share, the equivalent of
a dividend of 1.25 pence per share.
11. Investment property
Asset class Logistics Logistics Logistics Office
St
Location Moscow St Petersburg Regions Petersburg 2018
Level
Fair value hierarchy * 3 Level 3 Level 3 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Market value at 1 January 2018 854,288 144,910 117,871 60,682 1,177,751
Corporate acquisition (note 38) - - 30,805 - 30,805
Other acquisition 27,239 - - - 27,239
Property improvements 1,430 293 504 514 2,741
Unrealised loss on revaluation (97,641) (6,468) (10,795) (4,686) (119,590)
On translation to presentation currency 55,297 9,243 6,458 3,892 74,890
------------- -------------- --------------- ------------- ----------
Market value at 31 December 2018 840,613 147,978 144,843 60,402 1,193,836
Tenant incentives and contracted
rent uplift balances (13,674) (4,046) (1,256) (476) (19,452)
Head lease obligations (note
24) 1,056 - - - 1,056
-------------
Carrying value at 31 December 2018 827,995 143,932 143,587 59,926 1,175,440
------------- -------------- --------------- ------------- ----------
Revaluation movement in the year
ended 31 December 2018
Gross revaluation (97,641) (6,468) (10,795) (4,686) (119,590)
Movement on tenant incentives and
contracted rent uplift balances 41 203 8 (70) 182
Less impact of translation to presentation
currency (1,626) (532) (150) (48) (2,356)
Revaluation reported in
the Income Statement (99,226) (6,797) (10,937) (4,804) (121,764)
------------- -------------- --------------- ------------- ----------
Asset class Logistics Logistics Logistics Office
St
Location Moscow St Petersburg Regions Petersburg 2017
Level
Fair value hierarchy * 3 Level 3 Level 3 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Market value at 1 January
2017 813,667 114,454 122,882 20,084 1,071,087
Corporate acquisitions (note
38) - 28,589 - 40,004 68,593
Other acquisition 90,663 - - - 90,663
Property improvements 8,688 1,329 2,391 232 12,640
Unrealised profit on revaluation 12,090 12,475 3,304 5,048 32,917
On translation to presentation currency (70,820) (11,937) (10,706) (4,686) (98,149)
------------- -------------- --------------- ------------- ----------
Market value at 31 December
2017 854,288 144,910 117,871 60,682 1,177,751
Tenant incentives and contracted
rent uplift balances (13,715) (4,249) (1,264) (406) (19,634)
Head lease obligations (note
24) 1,055 - - - 1,055
Carrying value at 31 December
2017 841,628 140,661 116,607 60,276 1,159,172
------------- -------------- --------------- ------------- ----------
Revaluation movement in the year
ended 31 December 2017
Gross revaluation 12,090 12,475 3,304 5,048 32,917
Movement on tenant incentives and
contracted rent uplift balances 444 65 (154) (282) 73
Less impact of translation to presentation
currency (1,226) (373) (96) (11) (1,706)
Revaluation reported in the Income
Statement 11,308 12,167 3,054 4,755 31,284
------------- -------------- --------------- ------------- ----------
*Classified in accordance with the fair value hierarchy, see note 35. There
were no transfers between fair value hierarchy in 2017 or 2018.
During the year the Group acquired two new investment properties. As a corporate
acquisition it acquired Volga Logistics Park (see note 38) and, as a direct
purchase of real estate, it acquired a further phase of Logopark Sever.
At 31 December 2018 the Group has pledged investment property with a value
of GBP1,153 million (2017: GBP1,061 million) to secure banking facilities
granted to the Group (see note 21).
12. Investment property under construction
Asset class Assets under construction Land Bank
Location Moscow Regions Regions 2018
Level
Fair value hierarchy * 3 Level 3 Sub-total Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Market value at 1 January
2018 19,736 5,618 25,354 2,873 28,227
Costs incurred 18 10 28 - 28
Corporate acquisition (note 38) - 2,444 2,444 - 2,444
On translation to presentation currency (268) (636) (904) (336) (1,240)
Unrealised (loss) / profit on revaluation (144) 899 755 - 755
------------- -------------- --------------- ------------- ----------
Market value at 31 December
2018 19,342 8,335 27,677 2,537 30,214
Head lease obligations (note 24) 334 - 334 - 334
-------------- --------------- -------------
Carrying value at 31 December
2018 19,676 8,335 28,011 2,537 30,548
------------- -------------- --------------- ------------- ----------
Asset class Assets under construction Land Bank
Location Moscow Regions Regions 2017
Level
Fair value hierarchy * 3 Level 3 Sub-total Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Market value at 1 January
2017 23,954 6,069 30,023 3,128 33,151
Costs incurred 20 9 29 - 29
On translation to presentation
currency (1,578) (273) (1,851) (53) (1,904)
Unrealised loss on revaluation (2,660) (187) (2,847) (202) (3,049)
------------- -------------- --------------- ------------- ----------
Market value at 31 December
2017 19,736 5,618 25,354 2,873 28,227
Head lease obligations (note
24) 381 - 381 - 381
------------- -------------- ------------- ----------
Carrying value at 31 December 2017 20,117 5,618 25,735 2,873 28,608
------------- -------------- --------------- ------------- ----------
*Classified in accordance with the fair value hierarchy, see note 35. There
were no transfers between fair value hierarchy in 2017 or 2018.
No borrowing costs were capitalised in the year (2017: GBPnil).
At 31 December 2018 the Group has pledged investment property under construction
with a value of GBP25.3 million (2017: GBP25.4 million) to secure banking
facilities granted to the Group (see note 21).
13. Investment property and investment property
under construction - Valuation
It is the Group's policy to carry investment property and investment property
under construction at fair value in accordance with IFRS 13 "Fair Value Measurement"
and IAS 40 "Investment Property":
- investment property consists of the completed, income producing, portfolio;
and
- investment property under construction consists of potential development
projects and land bank.
The latter is sub-categorised as:
- assets under construction - current development projects and the value
of land on additional phases of existing investment property; and
- land bank - land held for potential development.
For the purposes of IFRS 13 disclosure, we have analysed these categories
by the geographical market they are located in being Moscow, St Petersburg
and the Regions (the other Russian regional cities). These form distinct markets
for valuation purposes as the fundamentals differ in each.
The fair value of the Group's investment property and assets under construction
at 31 December 2018 has been arrived at on the basis of market valuations
carried out by Jones Lang Lasalle ("JLL"), external valuers to the Group.
JLL have consented to the use of their name in these financial statements.
The Group's land bank in the Regions is valued by the Directors.
Valuation process
The Group has four qualified RICS members on the management team, one of whom
was a former Chairman of RICS in Russia and the CIS. Three have relevant valuation
and market experience and are actively involved in the valuation process.
They also regularly meet with agents and consultants to obtain additional
market information.
The effectiveness and independence of the external valuers is reviewed each
year. The criteria considered include market knowledge, reputation, independence
and professional standards. The Audit Committee also meets the external valuers
at least once a year. The Group's management team have determined that the
external valuers are experienced in the Russian market and acts as an "External
Valuer" as defined in the RICS Valuation - Global Standards, 2017.
The Group has continued to use the income capitalisation approach in assessing
its opinion of value but has moved to a discounted cash flow methodology in
line with changes in market practice internationally and in Russia, and is
accepted practice under RICS Valuation - Global Standards, 2017. The RICS
Valuation - Global Standards, 2017 are internationally accepted standards
of valuation and are consistent with the principles of IFRS 13.
For investment properties and assets under construction, the executive team
members consult with the external valuers and the valuers then determine:
- whether a property's fair value can be reliably determined;
- which valuation method should be applied for each asset; and
- the assumptions made for unobservable inputs that are used in valuation
methods.
The land bank is valued by the Directors. The process followed includes site
inspections, meetings with local real estate experts, comparison to any local
land sale information and comparison to transactions in other regional cities
including those where the Group has income producing assets. Updated acquisition
appraisals and any indication of value for alternative use are also considered.
Valuations are prepared on a biannual basis. At each valuation date the executive
team members review the information prepared by the property department for
valuation purposes being submitted to the external valuers. Each property
valuation is then reviewed and discussed with the external valuers in detail
and adjustments made as necessary.
The executive management also present the valuation results to the Audit Committee
and hold discussions with the Group's auditors. Both the Audit Committee and
the auditors also have discussions with the external valuers.
Valuation assumptions and
key inputs
Class of
property Carrying amount Valuation Input Range
2018 2017 technique 2018 2017
GBP'000 GBP'000
Completed investment property
Rub 3,500 Rub 3,500
Moscow - Logistics 827,995 841,628 Discounted ERV per sqm to Rub 3,800 to Rub 3,800
4.00% to
cash flow ERV growth 7.00% 5.00%
10.75% to 11.20% to
Discount rate 12.60% 12.90%
10.50% to 10.50% to
Exit cap rate 11.50% 11.50%
Vacancy rate 1% to 50% 1% to 94%
Passing rent $113 to $110 to
per sqm $170 $166
Passing rent Rub 3,000 Rub 3,104
per sqm to to
Rub 12,315 Rub 11,847
St Petersburg -
Logistics 143,932 140,661 Discounted ERV per sqm Rub 3,800 Rub 3,800
cash flow ERV growth 6.00% 4.00%
12.30% to 12.15% to
Discount rate 12.50% 12.48%
Exit cap rate 11.75% 11.75%
Vacancy rate 0% to 29% 3% to 19%
Passing rent $109 to
per sqm $133 $69 to $140
Passing rent Rub 2,456 Rub 2,339
per sqm to to
Rub 5,260 Rub 4,916
Regional - Logistics 143,587 116,607 Discounted ERV per sqm Rub 3,800 Rub 3,800
cash flow ERV growth 6.00% 4.00%
12.25% to 12.45% to
Discount rate 12.50% 12.50%
Exit cap rate 11.75% 11.75%
Vacancy rate 0% to 9% 6% to 27%
Passing rent $107 to $104 to
per sqm $138 $133
Passing rent Rub 3,750 Rub 3,720
per sqm to to
Rub 7,300 Rub 6,707
Passing rent
per sqm EUR88 n/a
St Petersburg - Rub 10,976 Rub 9,965
Office 59,926 60,276 Discounted ERV per sqm to Rub 12,366 to Rub 12,384
2.00% to
cash flow ERV growth 4.00% 0.00%
12.00% to 11.00% to
Discount rate 12.25% 12.25%
11.25% to 11.00% to
Exit cap rate 12.25% 12.25%
Vacancy rate 1% to 8% 0% to 1%
Passing rent
per sqm $408 $388
Passing rent EUR410 to
per sqm EUR413 EUR390
Passing rent Rub 4,384 Rub 8,124
per sqm to to
Rub 17,570 Rub 16,271
Range
Other key
information Description 2018 2017
Moscow - Logistics Land plot ratio 34% - 65% 34% - 65%
1 to 14 1 to 13
Age of building years years
Outstanding costs
(GBP'000) 2,290 6,980
St Petersburg -
Logistics Land plot ratio 48% - 57% 48% - 57%
4 to 10
Age of building years 3 to 9 years
Outstanding costs
(GBP'000) 282 611
Regional - Logistics Land plot ratio 48% - 61% 48% - 61%
Age of building 9 years 8 years
Outstanding costs
(GBP'000) 363 114
St Petersburg - 148% to 148% to
Office Land plot ratio 496% 496%
10 to 12 9 to 11
Age of building years years
Outstanding costs
(GBP'000) 23 60
Carrying amount Valuation Input Range
Investment property
under construction 2018 2017 technique 2018 2017
GBP'000 GBP'000
Value per Rub 17.9m - $0.31m -
Moscow - Logistics 19,676 20,117 Comparable ha Rub 33.6m $0.53m
Value per Rub 9.7m -
Regional - Logistics 8,335 5,618 Comparable ha Rub 20.6m $0.29m
The fair value of investment property is determined using the income capitalisation
method where a property's fair value is estimated based on the present value
of net cash flows generated from each property, plus the reversionary value
based on the final year's income capitalised using an all-risks exit yield.
Allowance is made for a potential letting void and an assessment is made of
the estimated rental value on re-letting (ERV). These elements are determined
based on current market conditions and values.
Assets under construction (development projects) are valued on a residual value
basis using the future anticipated costs to complete construction, a provision
for letting costs, a letting void period and an assessment of ERV, which is
capitalised at the prevailing market yield. Depending on the status of the
development, and how much of development process has been completed an allowance
will also be made for developer's profit. There were no active development
projects at 31 December 2018 or 2017.
Assets under construction (additional phases of existing sites) are valued
on a comparable basis. The value of these plots is estimated based on comparable
transactions in the same market. This approach is based on the principle that
a buyer will not pay more for an asset than it will cost to buy a comparable
substitute property. The unit of comparison applied is the price per square
metre.
All of the above valuations are completed by JLL.
The land bank is valued by the Directors using the comparable basis.
Sensitivity analysis of significant changes in unobservable inputs within Level
3 of the hierarchy
The significant unobservable inputs used in the fair value measurement categorised
within Level 3 of the fair value hierarchy of the entity's portfolio of investment
property are:
- ERV;
- ERV growth;
- Void period on re-letting;
- Discount rate;
- Exit capitalisation yield; and
- Specific to property under development: construction costs, letting void,
construction period and development profit.
Further significant increases (or decreases) in any of the main inputs to the
valuation, being discount rate, exit capitalisation yield, ERV (per sqm p.a.),
ERV growth and letting void, would result in a significantly lower (or higher)
fair value measurement.
14. Investment in subsidiary
undertakings
The principal subsidiary undertakings of Raven Property Group Limited, all
of which have been included in these consolidated financial statements, are
as follows:
Name Country of incorporation Proportion of ownership interest
2018 2017
Raven Russia Holdings Cyprus
Limited Cyprus 100% 100%
Dorfin Limited Cyprus 100% 100%
Roslogistics Holdings
(Russia) Limited Cyprus 100% 100%
Raven Mount Group
Limited England 100% 100%
Raven Russia Property Advisors
Limited England 100% 100%
Raven Russia (Service Company)
Limited Guernsey 100% 100%
Avalon Logistics
Company
LLC Russia 100% 100%
Delta LLC Russia 100% 100%
EG Logistics LLC Russia 100% 100%
Fenix LLC Russia 100% 100%
Gorigo LLC Russia 100% 100%
Kstovo Industrial
Park 1 LLC Russia 100% -
JSC Kulon Development Russia 100% 100%
JSC Kulon Istra Russia 100% 100%
Kulon Spb LLC Russia 100% 100%
League LLC Russia 100% 100%
Logopark Don LLC Russia 100% 100%
Logopark Ob LLC Russia 100% 100%
JSC Noginsk Vostok Russia 100% 100%
Pervomayskay Zarya
LLC Russia 100% 100%
Petroestate LLC Russia 100% 100%
Primium LLC Russia 100% 100%
Resource Economia
LLC Russia 100% 100%
Sever Estate LLC Russia 100% 100%
Soyuz-Invest LLC Russia 100% 100%
JSC Toros Russia 100% 100%
The Group's investment property and investment property under construction
are held by its subsidiary undertakings.
15. Investment in joint ventures
The principal joint ventures of the Group are as follows:
Name Country of incorporation Proportion of ownership interest
2018 2017
Coln Park LLP England 50% 50%
Coln Park Construction
LLP England 50% 50%
Coln Park LLP and Coln Park Construction LLP are the entities through which
the Group undertakes its second home development activity in the UK. In addition,
the Group has a number of other small joint ventures primarily associated with
the second home development activity. The Group's interest in each joint venture
has been accounted for using the equity method. None of the Group's joint ventures
are individually material. Summarised aggregated financial information of the
joint ventures, prepared under IFRS, and a reconciliation with the carrying
amount of the investments in the consolidated financial statements are set
out below:
2018 2017
Summarised Balance Sheet GBP'000 GBP'000
Non-current assets 3,634 3,221
Inventory 3,425 6,157
Cash and short term deposits 3,597 3,533
Other current assets 1,874 1,963
Current liabilities (3,659) (2,575)
Non-current liabilities (3,051) (4,505)
Net assets 5,820 7,794
-------------- -------------
Investment in joint ventures
Goodwill on acquisition 3,694 3,483
Share of net assets 2,872 3,897
-------------- -------------
Carrying value 6,566 7,380
-------------- -------------
Carrying value at 1 January 7,380 7,874
Investment in the year 533 -
Share of total comprehensive income
for the year 1,630 1,611
Share of distributions paid (3,000) (2,105)
On translation to presentation currency 23 -
Carrying value at 31 December 6,566 7,380
-------------- -------------
2018 2017
Summarised Statement of comprehensive income GBP'000 GBP'000
Gross revenue 27,708 23,886
Cost of
sales (22,329) (18,684)
Administrative expenses (2,017) (1,790)
Finance expense (216) (183)
-------------- -------------
Profit before tax 3,146 3,229
Tax 20 (8)
-------------- -------------
Profit for the year 3,166 3,221
-------------- -------------
Other comprehensive income 53 -
Total comprehensive income 3,219 3,221
-------------- -------------
Group's share of total comprehensive
income for the year 1,630 1,611
-------------- -------------
The joint ventures had no contingent liabilities or capital commitments as
at 31 December 2018 and 2017. The joint ventures cannot distribute their profits
until they obtain the consent from the joint venture partners.
The Group charged its joint ventures GBP244k (2017: GBP73k) for services rendered
to them during the year, of which GBP81k (2017: nil) was included in payables
at the balance sheet date. The joint ventures recharged certain costs back
to the Group that for the year amounted to GBP51k (2017: GBP136k) of which
GBP7k (2017: GBP7k) was included in payables at the balance sheet date. The
Group has advanced loans to its joint ventures of GBP491k (2017: GBP300k) generating
interest income of GBP32k (2017: GBP23k).
16. Other receivables 2018 2017
GBP'000 GBP'000
Loans receivable 676 491
Restricted cash 12,249 965
VAT recoverable 2,538 2,468
Prepayments and other receivables 72 194
15,535 4,118
-------------- -------------
VAT recoverable arises from the payment of value added tax on construction
or purchase of investment property, which will be recovered through the offset
of VAT paid on future revenue receipts or repayment direct from the taxation
authority. VAT recoverable has been split between current and non-current assets
based on the Group's assessment of when recovery will occur.
17. Trade and other receivables 2018 2017
GBP'000 GBP'000
Trade receivables 27,803 32,773
Prepayments 3,524 3,985
Restricted cash 1,792 -
VAT recoverable 7,084 17,328
Other receivables 317 210
Tax recoverable 3,138 4,090
43,658 58,386
-------------- -------------
18. Derivative financial instruments 2018 2017
GBP'000 GBP'000
Interest rate derivative financial
instruments
Non-current assets 21,953 5,713
Current assets 329 223
Forward currency derivative financial
instruments
Non-current assets - 91
Current assets 20 13
Foreign currency embedded derivatives
Non-current assets - 71
Current assets - 93
Current liabilities (1) (26)
The Group has entered into a series of interest rate derivative financial instruments
to manage the interest rate and resulting cash flow exposure from the Group's
banking facilities. At 31 December 2018 the instruments have a notional value
of GBP543 million (2017: GBP481 million) and a weighted average fixed or capped
rate of 3.90% (2017: 1.61%).
The Group had also entered into a series of forward currency derivative financial
instruments to hedge interest payments due to preference shareholders against
sterling strengthening. The instruments have a notional amount of GBP12 million
(2017: GBP24 million), a weighted average capped rate of $1.55 to GBP1 (2017:
$1.55 to GBP1) and quarterly maturities with the final instruments maturing
on 18 December 2019 (2017: 18 December 2019).
Several of the Group's leases incorporate collars and caps on US Dollar and
Rouble exchange rates. These have been categorised as embedded derivatives
and their fair values calculated resulting in the assets or liabilities disclosed
above.
19. Cash and short term deposits 2018 2017
GBP'000 GBP'000
Cash at bank and on
call 45,153 128,079
Short term deposits 28,297 69,058
73,450 197,137
-------------- -------------
Cash at bank and on call attracts variable interest rates, whilst short term
deposits attract fixed rates but mature and re-price over a short period of
time. The weighted average interest rate at the balance sheet date is 5.50%
(2017: 5.04%).
20. Trade and other payables 2018 2017
GBP'000 GBP'000
Trade and other payables 4,900 4,998
Construction payables 2,958 7,764
Advanced rentals 20,840 19,574
Deferred consideration on property
acquisitions 12,197 17,874
Other payables 4,392 5,172
Current tax payable 11,369 14,656
Other tax payable 9,518 9,382
Head leases (note 24) 18 7
66,192 79,427
-------------- -------------
21. Interest bearing loans
and borrowings 2018 2017
GBP'000 GBP'000
Bank loans
Loans due for settlement within
12 months 75,565 78,871
Loans due for settlement after
12 months 567,865 547,371
643,430 626,242
-------------- -------------
The Group's borrowings have the following
maturity profile:
On demand or within one year 75,565 78,871
In the second year 20,730 109,636
In the third to fifth years 333,862 283,816
After five years 213,273 153,919
643,430 626,242
-------------- -------------
The amounts above include unamortised loan origination costs of GBP7.1 million
(2017: GBP7.8 million) and interest accruals of GBP1.3 million (2017: GBP1.2
million).
The Group's interest bearing loans and borrowings have a weighted average interest
rate of 7.69% (2017: 7.62%) and a weighted average term to maturity of 4 years
(2017: 4.5 years).
The interest rates shown above are the weighted average cost, including the
relevant benchmark rate, as at the Balance Sheet dates.
There have been a number of changes to the Group's financing arrangements in
the year. The Group drew down EUR86.0 million and Rub 5.7 billion on new and
existing debt facilities, repaying $108 million of existing debt. In addition
existing facilities of $306 million were extended and / or converted into Rouble
/ Euro blended facilities of Rub 11.9 billion and EUR113 million.
Since the year end, the Group has drawn a further Rub 358 million and EUR13
million of new bank debt, whilst repaying $13 million of existing debt.
As at 31 December 2018 the Group had interest rate hedges for GBP396.8 million
of borrowings (2017: GBP349.6 million) capped at 3.90% (2017: 1.61%) for a
weighted average of 4 years (2017: 3 years). None of the Group's borrowings
have fixed interest rates (2017: GBP141.2 million).
22. Preference shares 2018 2017
GBP'000 GBP'000
Issued share capital:
At 1 January 108,263 106,582
Purchased in the year - (84)
Reissued in the year - 710
Premium on redemption of preference shares and
amortisation of issue costs 417 417
Scrip dividends 591 638
At 31 December 109,271 108,263
-------------- -------------
2018 2017
Number Number
Issued share capital:
At 1 January 99,143,192 98,265,327
Purchased in the year - (56,866)
Reissued in the year - 487,047
Scrip dividends 413,342 447,684
At 31 December 99,556,534 99,143,192
-------------- -------------
Shares in issue 99,613,402 99,200,060
Held by the Company's Employee Benefit Trusts (56,868) (56,868)
At 31 December 99,556,534 99,143,192
-------------- -------------
The preference shares entitle the holders to a cumulative annual dividend of
12 pence per share.
23. Convertible preference shares 2018 2017
GBP'000 GBP'000
Issued share capital:
At 1 January 198,870 96,997
Issued in the year - 100,788
Allocated to equity - (4,693)
Acquired by Company's Employee Benefit
Trust - (3,007)
Reissued in the year - 3,235
Converted to ordinary shares (note
26) - (250)
Premium on redemption of preference shares and
amortisation of issue costs 7,246 5,784
Movement on accrual for preference
dividends - 16
At 31 December 206,116 198,870
-------------- -------------
2018 2017
Number Number
Issued share capital:
At 1 January 192,388,886 102,837,876
Issued in the year - 89,766,361
Acquired by Company's Employee Benefit
Trust - (2,631,578)
Reissued in the year - 2,683,075
Converted to ordinary shares
(note 26) - (266,848)
At 31 December 192,388,886 192,388,886
-------------- -------------
Shares in issue 198,189,014 198,189,014
Held by the Company's Employee
Benefit Trust (5,800,128) (5,800,128)
At 31 December 192,388,886 192,388,886
-------------- -------------
The convertible preference shares entitle the holders to a cumulative annual
dividend of 6.5 pence per share and are redeemable by the Company on 6 July
2026 at GBP1.35 per share. The convertible preference shares are convertible
to ordinary shares at the holder's request at any time prior to redemption
at a rate that is currently 1.617 ordinary shares for each convertible preference
share.
In applying its accounting policies the Group has determined that the convertible
preference shares are a compound financial instruments in that it has a liability
component and an equity component. The Group has determined the fair value
of the liability component, which is reflected above, and the residual amount
of the fair value of the consideration received on issue is equity. The fair
value of the liability component has been calculated using a discounted cash
flow model.
24. Other payables 2018 2017
GBP'000 GBP'000
Rent deposits 16,425 16,734
Deferred consideration on property
acquisitions - 7,402
Head leases 1,372 1,429
17,797 25,565
-------------- -------------
The Group has leasehold properties that it classifies as investment property
and investment property under construction. Minimum lease payments due over
the remaining term of the leases totalled GBP3.9 million (2017: GBP4.3 million)
and have a present value at 31 December 2018, as reflected above and in note
20, of GBP1.4 million (2017: GBP1.4 million).
25. Deferred tax
Tax losses Other Total
(a) Deferred tax assets GBP'000 GBP'000 GBP'000
Balance at 1 January 2017 21,551 524 22,075
On translation to presentation currency (770) - (770)
Credit for the year 2,488 336 2,824
On acquisition (note 38) 1,482 - 1,482
Balance at 31 December 2017 24,751 860 25,611
On translation to presentation
currency (2,852) (40) (2,892)
Credit for the year 237 (41) 196
On acquisition (note 38) 1,490 - 1,490
Balance at 31 December 2018 23,626 779 24,405
------------ -------------- -------------
The Group has tax losses in Russia of GBP265 million (2017: GBP261 million)
and tax losses in the UK of GBP53 million (2017: GBP53 million) for which deferred
tax assets have not been recognised. The losses in the UK do not have an expiry
date. The losses in Russia can be carried forward indefinitely, however there
is a restriction on the use of losses in that taxable profits cannot be reduced
by more than 50% in any one year.
Accelerated Revaluation
tax of investment
allowances property Total
(b) Deferred tax liabilities GBP'000 GBP'000 GBP'000
Balance at 1 January 2017 32,568 17,162 49,730
On translation to presentation
currency (1,404) (1,486) (2,890)
Charge for the year 5,233 7,772 13,005
Balance at 31 December 2017 36,397 23,448 59,845
On translation to presentation currency (4,161) 1,458 (2,703)
Charge / (credit) for the year 6,760 (6,502) 258
Balance at 31 December 2018 38,996 18,404 57,400
------------ -------------- -------------
26. Share capital
2018 2017
GBP'000 GBP'000
Issued share capital:
At 1 January 6,606 6,680
Issued in the year for cash on warrant
exercises (note 27) 85 139
On conversion of convertible preference
shares (note 23) - 5
Repurchased and cancelled in
the year (458) (218)
At 31 December 6,233 6,606
-------------- -------------
2018 2017
Number Number
Issued share capital:
At 1 January 660,571,843 667,968,463
Issued in the year for cash on warrant
exercises (note 27) 8,500,126 13,946,387
On conversion of convertible preference
shares (note 23) - 474,722
Repurchased and cancelled
in the year (45,802,535) (21,817,729)
At 31 December 623,269,434 660,571,843
-------------- -------------
Of the authorised ordinary share capital of 1,500,000,000 at 31 December 2018,
2,448,226 (2017: 10,948,352) are reserved for warrants.
Details of own shares held are given in note 28.
27. Warrants 2018 2017
GBP'000 GBP'000
At 1 January 438 996
Exercised in the year (note
26) (340) (558)
At 31 December 98 438
-------------- -------------
2018 2017
Number Number
At 1 January 10,948,352 24,894,739
Exercised in the year (note
26) (8,500,126) (13,946,387)
At 31 December 2,448,226 10,948,352
-------------- -------------
The Company has issued warrants, which entitle each holder to subscribe for
ordinary shares in the Company at an exercise price of 25 pence per share.
The warrants expire on 25 March 2019.
565,543 warrants have been exercised in the period since 31 December 2018 (2017:
315).
28. Own shares held 2018 2017
GBP'000 GBP'000
At 1 January (3,652) (4,692)
Acquired under a tender offer (4,160) -
Other acquisitions (75) (124)
Allocation to satisfy Annual Performance
Incentive (note 31) 1,278 -
Cancelled 36 30
Allocation to satisfy LTIP options
exercised (note 31a) 608 1,134
At 31 December (5,965) (3,652)
-------------- -------------
2018 2017
Number Number
At 1 January 5,150,122 6,444,080
Acquired under a tender offer 8,000,000 -
Other acquisitions 173,958 257,703
Allocation to satisfy Annual Performance Incentive
(note 31) (1,704,000) -
Cancelled (48,613) (39,472)
Allocation to satisfy LTIP options
exercised (note 31a) (810,811) (1,512,189)
At 31 December 10,760,656 5,150,122
-------------- -------------
Allocations are transfers by the Company's Employee Benefit Trusts to satisfy
LTIP options exercised in the year and certain of the 2017 Annual Performance
Incentives to directors. The amounts shown for share movements are net of the
Trustees' participation in tender offers during the period from grant to exercise.
Details of outstanding LTIP options, which are vested but unexercised, are
given in note 31a.
29. Equity
The following describes the nature and purpose
of each component within equity:
Component Description and purpose
Share capital The amount subscribed for ordinary share capital
at nominal value.
Share premium The amount subscribed for ordinary share capital in excess
of the nominal value.
Warrants The consideration attributed to the subscription of warrants
less associated costs of issuance.
Own shares The cost to the Company of acquiring the own shares held by the Company
held and its subsidiary undertakings or Employee Benefit Trusts.
Convertible The amount subscribed for convertible preference shares which
preference the Directors consider to be Equity.
shares
Capital The amount of any capital profits and losses, including gains and
reserve losses on the disposal of investment properties (after taxation),
increases and decreases in the fair value of investment properties
held at each period end, foreign exchange profits and losses on capital
items, profits and losses on forward currency financial instruments
relating to capital items and deferred taxation on the increase in
fair value of investment properties.
Translation The amount of any gains or losses arising on the retranslation of
reserve net assets of overseas operations.
Retained The amount of any profit or loss for the year after payment of dividend,
earnings together with the amount of any equity-settled share-based payments,
and the transfer of capital items described above. Retained earnings
also includes distributable reserves created when in 2005 and 2006
the Company applied to the Royal Court of Guernsey to cancel its
share premium at that time and create a reserve which is distributable.
30. Net asset value per share
The Group no longer reports its own adjusted net asset value and adjusted net
asset value per share. With the change in presentation currency from US Dollars
to Sterling the most significant adjustment, being the unrealised foreign exchange
gains and losses on irredeemable preference shares, is no longer relevant.
2018 2017
Number Number
Number of ordinary shares
(note 26) 623,269,434 660,571,843
Less own shares held (note
28) (10,760,656) (5,150,122)
-------------- --------------
612,508,778 655,421,721
-------------- --------------
2018 2017
Net asset Net asset
value
Net asset Ordinary value per Net asset Ordinary per
value shares share value shares share
GBP'000 No. '000 Pence GBP'000 No. '000 Pence
Net asset value per
share 295,627 612,509 48 391,838 655,422 60
Effect of dilutive potential
ordinary shares:
Convertible preference
shares (note 23) - - 198,870 338,412
Warrants (note 27) 612 2,448 2,737 10,948
LTIP (Note 31) 266 1,062 468 1,873
2016 Retention Scheme
(note 31) 2,095 4,998 1,267 4,616
Fully diluted net
asset value per share 298,600 621,017 48 595,180 1,011,271 59
------------ -------------- ------------ --------------
The balance sheet carrying value of the liability portion of the convertible
preference shares divided by the number of ordinary shares that would be issued
on their conversion is greater than the NAV per share and thus the convertible
preference shares are not dilutive.
The number of potential ordinary shares is the total number of ordinary shares
assuming the exercise of all potential ordinary shares less those not expected
to vest.
31. Share-based payments and other long term incentives
The Group has utilised a number of different share schemes to reward and incentivise
the Group's executives and senior staff.
Long Term Incentive Plan ("LTIP")
The LTIP options vested in three equal tranches, subject to performance criteria,
on 24 March 2012, 2013 and 2014. The LTIP options have an exercise price of
25p per option and have vested in full. The LTIP is closed and further awards
cannot be made. Awards made under the LTIP have been accounted for in accordance
with the Group's accounting policy for Share-based payments.
2016 Retention Scheme
During 2016 the Group terminated the CBLTIS 2015 and the Company's shareholders
approved the introduction of the 2016 Retention Scheme. Awards under the scheme
were made to the executive directors of the Company and two senior managers
of the Group. The awards entitled the participants to three equal payments
each equivalent to 150% of their basic salary. The first instalment was paid
on approval of the scheme and the second on 31 December 2017. The third instalment
will be paid on 31 March 2019. The sole condition for each instalment being
paid is the continuing employment of the participant at the relevant payment
date.
Participants will receive payment of an instalment in a combination of the
Company's listed securities and cash. The numbers of listed securities to be
issued to satisfy such payments will be calculated with reference to the average
price of the relevant security prior to the payment date. On 13 July 2016 an
employment benefit trust ("EBT") of the Company transferred 2,148,375 convertible
preference shares to participants of the scheme in satisfaction of the first
instalment. On 31 December 2017 the EBT transferred 487,049 preference shares
and 1,957,775 convertible preference shares in respect of the second instalment.
It is intended that convertible preference shares held by the EBT will also
be used to satisfy the third instalment.
Five Year Performance Plan ("FYPP")
The FYPP is a long term incentive scheme which is open to the executive directors
and two senior managers. The scheme allows each participant to invest into
the FYPP a number of the listed securities in the Company that they hold and
those that they receive on 31 March 2019 under the 2016 Retention Scheme. All
securities invested in the FYPP must continue to be retained by the participant
until 31 March 2023. On 31 March 2023, based on annual compound TSR calculations,
the participants will be entitled to receive up to three times the value of
the securities in the FYPP. Vested entitlements will be settled in the Company's
ordinary shares, with a value based on the average price of the Company's ordinary
shares for March 2023.
The performance period for the FYPP runs from 31 March 2018 to 31 March 2023.
Below an annual compound equivalent TSR of 4% the Plan will lapse, at an annual
compound TSR of 12% the Plan will vest in full and a sliding scale will apply
for a TSR between 4% and 12%.
The maximum aggregate investment in the FYPP is GBP12 million and the potential
participants will be required to confirm their participation and the amount
of their investment once the final payment under the 2016 Retention Scheme
has been made on 31 March 2023.
Annual Performance Incentive
As noted in the letter from the Remuneration Committee in the Group's 2017
Annual Report, two of the Company's directors accepted their Annual Performance
Incentive in the Company's ordinary shares rather than in cash.
(a) Movement in LTIP options
2018 2017
No of No of
options options
Outstanding at the beginning
of the year 1,872,973 3,872,973
Exercised during the year
- LTIP (810,811) (2,000,000)
Outstanding at the end of the year 1,062,162 1,872,973
----------- ------------ --------------
The options expire in March 2019.
2018 2017
(b) Income Statement charge
for the year GBP'000 GBP'000
Annual Performance Incentive 750 -
2016 Retention scheme 2,103 3,517
Five Year Performance Plan - -
2,853 3,517
-------------- -------------
To be satisfied by allocation of:
Ordinary shares (IFRS 2 expense) 750 -
Convertible preference shares / preference shares
(IFRS 2 expense) 2,103 2,260
Cash - 1,257
2,853 3,517
-------------- -------------
Of the IFRS 2 expense for the year GBP2.1 million (2017: GBP1.3 million) is
included in current liabilities.
32. Capital commitments
The Group had no significant capital commitments at 31 December 2017 and 2018.
33. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties,
have been eliminated on consolidation and are not disclosed in this note. Further
disclosures concerning transactions with the Company's directors are made in
the Remuneration Report and note 6. There are no loan balances with directors.
Remuneration of Directors and other key management
personnel 2018 2017
GBP'000 GBP'000
Short term employee benefits 4,247 3,052
Post employment benefits 224 219
Share-based payments and other long
term incentives 2,853 3,527
7,324 6,798
-------------- -------------
34. Financial instruments - risk management
The Group's activities expose it to a variety of financial risks in relation
to the financial instruments it uses: market risk (including currency risk,
price risk and cash flow interest rate risk), credit risk and liquidity risk.
The Group has the following financial instruments on its balance sheet: loans
receivable, restricted cash, trade receivables, cash and short term deposits,
trade and other payables, interest bearing loans and borrowings, preference
shares, convertible preference shares and derivative financial instruments.
Risk management parameters are established by the Board and overseen by management
in conjunction with professional advisers. Reports are provided to the Board
weekly basis and also when changes in risk parameters are required.
(a) Market risk
Currency risk
The Group operates internationally and is exposed to foreign exchange risk
arising from a variety of currency exposures, primarily with respect to Euro,
Sterling and US Dollar against the predominate functional currency of its subsidiaries
of Roubles. Foreign exchange risk arises from future commercial transactions
(including lease receivables), recognised monetary assets and liabilities and
net investments in foreign entities.
The majority of the Group's transactions are denominated in Roubles. The functional
currency of the Company is Sterling, which is also the presentation currency
of the Group. The analysis that follows considers the impact of these currencies
on the Group.
Rouble
The majority of the Group's transactions in Russia are undertaken in Roubles.
The Group's debt profile however is a mix of currencies and a weakening in
the Rouble exchange rate can put pressure on the Group's ability to service
foreign currency debt facilities. This risk has reduced over the last year
as the Group moves to a greater proportion of Rouble denominated debt.
A weak Rouble also has an impact on reported earnings per share and net asset
value per share when translated to the Group's presentation currency of Sterling.
Sterling
The Group's exposure to Sterling relates to the Company's preference shares,
convertible preference shares and ordinary shares, together with head office
administrative expenses. As the presentation currency of the Group, there will
also be foreign currency movements through the Group's translation reserve
when restating opening balances on consolidation.
Euro
The Group has exposure to Euro debt facilities and a small number of Euro pegged
leases. As noted above, a weak Rouble may reduce the Group's ability to service
that debt. A weak Rouble will however increase Rouble income on Euro pegged
leases.
US Dollar
Currency risk to US Dollars is now significantly reduced as the Group moves
away from US Dollar debt facilities. It is expected that there will be no US
Dollar facilities by the end of 2019. The Group still has a proportion of its
leases pegged to the US Dollar and these will mature over the next three years.
A weakening Rouble relative to the US Dollar will put pressure on debt servicing
of the remaining US Dollar debt but also generate increased Rouble income on
US Dollar pegged leases.
Accounting standards require disclosure of monetary assets and liabilities
that are denominated in currencies different from the functional currency of
the specific subsidiary or entity in the Group. These are set out in the tables
below.
As at 31 December 2018 Rouble Euro US Dollar Sterling ZAR
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Restricted cash - - 630 - -
Derivative financial instruments 7,236 4,782 - - -
7,236 4,782 630 - -
-------------- ----------- ------------ -------------- -------------
Current assets
Rent receivable - 1 2,476 - -
Restricted cash - - 1,006 - -
Derivative financial instruments - - 20 - -
Other current receivables 15 971 84 37 -
Cash and short term deposits 8,835 3,236 984 26 100
8,850 4,208 4,570 63 100
-------------- ----------- ------------ -------------- -------------
Non-current liabilities
Interest bearing loans and
borrowings 122,717 95,821 - - -
Rent deposits - - 9,935 - -
122,717 95,821 9,935 - -
-------------- ----------- ------------ -------------- -------------
Current liabilities
Interest bearing loans and
borrowings 27,250 27,122 - - -
Rent deposits - 88 5,799 - -
Other payables 68 436 40 349 -
27,318 27,646 5,839 349 -
-------------- ----------- ------------ -------------- -------------
As at 31 December 2017 Rouble Euro US Dollar Sterling ZAR
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Restricted cash - - 226 - -
Derivative financial instruments - 1,842 48 - -
- 1,842 274 - -
-------------- ----------- ------------ -------------- -------------
Current assets
Rent receivable - 1 2,153 - -
Restricted cash - - - - -
Derivative financial instruments - - 7 - -
Other current receivables 38 1,230 4 17 -
Cash and short term deposits 40,649 30,908 8,928 69 -
40,687 32,139 11,092 86 -
-------------- ----------- ------------ -------------- -------------
Non-current liabilities
Interest bearing loans and
borrowings - 44,302 64,389 - -
Rent deposits - - 13,292 - -
- 44,302 77,681 - -
-------------- ----------- ------------ -------------- -------------
Current liabilities
Interest bearing loans and
borrowings 10,524 - 2,063 - -
Rent deposits 3,543 - - - -
Other payables 58 - 400 - -
14,125 - 2,463 - -
-------------- ----------- ------------ -------------- -------------
The sensitivity analyses below are based on a change in an assumption while
holding all other assumptions constant. In practice this is unlikely to occur
and changes in some of the assumptions may be correlated, for example a change
in interest rate and a change in foreign currency exchange rates. The Group
principally manages foreign currency risk on a project by project basis.
The table below shows the impact on profits if US Dollar, Euro, Rouble or Sterling
weakened or strengthened by 10% against the functional currency of the specific
subsidiary or entity in the Group, with all other variables in each case remaining
constant, then:
2018 2017
Post tax profit or loss would
change by: GBP'000 GBP'000
US Dollar 1,104 8,032
Russian Rouble 13,395 4,069
Sterling 28 4
Euro 11,699 1,278
The Group's interest rate risk arises from its long-term borrowings (note 21),
preference shares (note 22) and convertible preference shares (note 23). Borrowings
issued at variable rates expose the Group to cash flow interest rate risk,
whilst borrowings issued at a fixed rate expose the Group to fair value risk.
The Group's cash flow and fair value risk is reviewed monthly by the Board.
The cash flow and fair value risk is approved monthly by the Board.
The Group analyses its interest rate exposure on a dynamic basis. It takes
on exposure to the effects of fluctuations in the prevailing levels of market
interest rates on its financial position and cash flows. Interest costs may
increase as a result of such changes. They may reduce or create losses in the
event that unexpected movements arise. Various scenarios are simulated taking
into consideration refinancing, renewal of existing positions, alternative
financing and hedging. Based on these scenarios the Group calculates the impact
on profit and loss of a defined interest rate shift. The simulation is run
on an on-going basis to verify that the maximum potential impact is within
the parameters expected by management. Formal reporting to the Board on cash
flows is made on a monthly basis.
To date the Group has sought to fix its exposure to interest rate risk on borrowings
through fixed rate debt facilities, the use of a variety of interest rate derivatives
and the issue of preference shares and convertible preference shares at a fixed
coupon. This gives certainty over future cash flow but exposure to fair value
movements, which amounted to an accumulated unrealised loss of GBP13.8 million
at 31 December 2018 (2017: loss of GBP10.9 million).
We have diversified our debt exposure and, hence, interest rate exposure. The
Group is now less exposed now to US LIBOR and more sensitive to EURIBOR and
Central Bank of Russia Key rate movements. Sensitivity to all benchmark rates
is presented in the table below.
2018 2017
Increase Decrease Increase Decrease
100 bps 100 bps 100 bps 100 bps
GBP'000 GBP'000 GBP'000 GBP'000
US LIBOR (81) 344 (1,923) 4,532
EURIBOR (1,499) - (317) -
Central Bank of Russia Key
rate (704) 1,680 - -
(b) Credit
risk
Credit risk refers to the risk that a counterparty will default on their contractual
obligations resulting in financial loss to the Group. The Group's principal
financial assets are cash and short term deposits and trade receivables.
Cash and short term deposits are placed with a variety of financial institutions
in order to spread the counterparty risk and in accordance with limits approved
by the Board. The Group considers the credit rating of its counterparties when
assessing whether a particular financial institution is suitable. Deposits
and liquidity requirements are considered by management weekly.
The Group reviews the creditworthiness of potential tenants prior to entering
into a lease. Based on this assessment the Group will require a cash deposit
or guarantee as collateral for the tenant's obligations under the lease. The
collateral typically represents three months rent but may be shorter or longer
as required. The Group has a relatively large number of different tenants and
as disclosed in note 5 there is only a single tenant that accounts for in excess
of 10% of Group revenue.
Taking these factors into account and having examined the Group's historical
credit loss ratio, the risk to the Group of individual tenant default is considered
low. An allowance for impairment of trade receivables is made with reference
to the Group's assessment of expected credit loss or where there is objective
evidence that the Group will not be able to collect all amounts due. Details
of the movements in provision for impairment of trade receivables is provided
in the table below.
2018 2017
GBP'000 GBP'000
At 1 January 3,416 3,711
Effect of foreign exchange
rate changes (240) (223)
Charge for the year - 82
Utilised in the year (238) -
Unused amounts reversed (58) (154)
At 31 December 2,880 3,416
-------------- -------------
At 31 December 2018 there were no significant amounts of unimpaired trade receivables
that were past due for collection (2017: GBP nil).
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash, the
availability of funding through an adequate amount of committed credit facilities
and the ability to close out market positions. The Board and its advisers seek
to have appropriate credit facilities in place on a project by project basis,
either from available cash resources or from bank facilities.
Management monitor the Group's liquidity position on a daily basis and formal
liquidity reports are issued from all jurisdictions on a weekly basis and are
reviewed monthly by the Board, along with cash flow forecasts. A summary table
with maturity of financial liabilities is presented below.
All amounts shown are gross undiscounted cash flows.
Financial liabilities Years
Years 3
As at 31 December 2018 Total Current Year 2 to 5 6 to 10
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing loans and
borrowings 814,184 124,230 64,568 401,318 224,068
Preference shares 119,537 11,954 11,954 35,861 59,768
Convertible preference shares 353,514 12,505 12,505 37,516 290,988
Derivative financial instruments 1 1 - - -
Head leases 1,150 115 115 345 575
Trade and other payables 28,927 12,503 5,396 8,147 2,881
1,317,313 161,308 94,538 483,187 578,280
-------------- ----------- ------------ -------------- -------------
As at 31 December 2017
Interest bearing loans and
borrowings 792,484 122,949 146,249 353,389 169,897
Preference shares 118,971 11,897 11,897 35,691 59,486
Convertible preference shares 366,018 12,505 12,505 37,516 303,492
Derivative financial instruments 26 26 - - -
Head leases 1,149 115 115 345 574
Trade and other payables 34,525 17,799 5,718 10,335 673
1,313,173 165,291 176,484 437,276 534,122
-------------- ----------- ------------ -------------- -------------
Details of the interest rates applicable to the Group's long term borrowings
and preference shares are given in notes 21 and 22. The Group is subject to
interest costs in perpetuity in respect of preference shares, which have no
contractual maturity date. The table above does not show cash flows beyond
10 years.
The Group monitors its risk to a shortage of funds by forecasting cash flow
requirements for future years. The Group's objective is to maintain a balance
between continuity of funding and flexibility through the use of short term
borrowing facilities, bank loans and equity fund raisings.
Fair values
Set out below is a comparison by class of the carrying amounts and fair value
of the Group's financial instruments in the financial statements.
2018 2017
Carrying Fair Carrying Fair
Value Value Value Value
GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Loans receivable 676 627 491 459
Restricted
cash 12,249 12,249 965 902
Derivative financial instruments 21,953 21,953 5,875 5,875
Current assets
Trade receivables 27,803 27,803 32,773 32,773
Restricted cash 1,792 1,792 - -
Other current receivables 907 907 1,116 1,116
Derivative financial instruments 349 349 329 329
Cash and short term deposits 73,450 73,450 197,137 197,137
Non-current liabilities
Interest bearing loans and
borrowings 567,865 561,076 547,371 549,592
Preference shares 109,271 130,494 108,263 144,749
Convertible preference shares 206,116 226,057 198,870 234,714
Derivative financial instruments - - - -
Rent deposits 16,425 13,130 16,734 14,150
Deferred consideration - - 7,402 7,402
Other payables 1,372 1,372 1,428 1,428
Current liabilities
Interest bearing loans and
borrowings 75,565 75,565 78,871 78,871
Derivative financial instruments 1 1 26 26
Rent deposits 7,242 7,242 4,895 4,895
Deferred consideration 12,197 12,197 17,874 17,874
Other payables 5,262 5,262 12,903 12,903
The fair values of loans receivable and borrowings have been calculated based
on a discounted cash flow model using a discount rate based on the Group's
weighted average cost of capital. The valuation technique falls within level
3 of the fair value hierarchy (see note 35 for definition). The fair value
of short term deposits, other assets, trade and other receivables, trade and
other payables is assumed to approximate to their book values. The fair value
of preference shares and convertible preference shares are assumed to be their
last quoted price, which is considered to be level 1 of the fair value hierarchy.
The fair value of derivatives is determined by a model with market based inputs.
(d) Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability
to continue as a going concern to provide returns to shareholders and benefits
for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
For capital risk management, the Directors consider both the ordinary and preference
shares to be permanent capital of the Company, with similar rights as to cancellation.
To maintain or adjust the capital structure, the Group may adjust the amount
of dividends paid to shareholders, under take tender offers, return capital
to shareholders, issue new shares or sell assets to reduce debt. Consistent
with others in its industry, the Group monitors capital on the basis of its
gearing ratio. This ratio is calculated as net debt divided by total capital.
Net debt is calculated as total liabilities but excluding provisions, head
lease obligations and preference shares, which for capital risk management
is considered to be capital rather than debt, less cash and short term deposits
and restricted cash. Total capital is calculated as equity, as shown in the
balance sheet, plus preference shares and net debt. Where the Group has a net
cash position, the gearing ratio will be zero.
2018 2017
GBP'000 GBP'000
Non-current liabilities 847,806 830,222
Current liabilities 141,740 158,317
Total borrowings 989,546 988,539
Less: cash and short term deposits 73,450 197,137
Less: restricted cash 14,041 965
-------------- -------------
Net debt 902,055 790,437
-------------- -------------
Equity 295,627 391,838
Preference shares 109,271 108,263
Total capital 1,306,953 1,290,538
-------------- -------------
Gearing ratio 69.02% 61.25%
-------------- -------------
35. Fair value measurement
The following table provides the fair value measurement hierarchy* of the Group's
assets and liabilities.
Total
Fair
Level 1 Level 2 Level 3 Value
As at 31 December 2018 GBP'000 GBP'000 GBP'000 GBP'000
Assets measured at fair value
Investment property - - 1,175,440 1,175,440
Investment property under
construction - - 30,548 30,548
Derivative financial instruments - 22,302 - 22,302
Liabilities measured at fair
value
Derivative financial instruments - 1 - 1
----------- ------------ -------------- -------------
As at 31 December 2017
Assets measured at fair value
Investment property - - 1,159,172 1,159,172
Investment property under
construction - - 28,608 28,608
Derivative financial instruments - 6,204 - 6,204
Liabilities measured at fair
value
Derivative financial instruments - 26 - 26
----------- ------------ -------------- -------------
* Explanation of the fair value hierarchy:
Level 1 - Quoted prices in active markets for identical assets or liabilities
that can be accessed at the balance sheet date.
Level 2 - Use of a model with inputs that are directly or indirectly observable
market data.
Level 3 - Use of a model with inputs that are not based on observable market
data.
The Group's foreign currency derivative financial instruments are call options
and are measured based on spot exchange rates, the yield curves of the respective
currencies as well as the currency basis spreads between the respective currencies.
The Group's interest rate derivative financial instruments comprise swap contracts
and interest rate caps. These contracts are valued using a discounted cash
flow model and where not cash collateralised consideration is given to the
Group's own credit risk.
There have been no transfers between level 1 and level 2 during the year or
the prior year.
36. Operating lease arrangements
The Group earns rental income by leasing its investment properties to tenants
under non-cancellable operating leases, which are discussed in detail in the
Strategic Report and note 13. At the Balance Sheet date the Group had contracted
with tenants for the following future minimum lease payments:-
2018 2017
GBP'000 GBP'000
Within one year 124,107 120,708
In the second year 92,553 101,418
In the third to fifth year
(inclusive) 133,265 150,533
After five years 66,757 34,128
416,682 406,787
-------------- -------------
37. Reconciliation of liabilities arising from
financing activities
Non-cash changes
Year ended 31 December Foreign
2018 2017 Cash flows Fair value exchange Other 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing loans
and borrowings 626,242 (10,588) - 24,282 3,494 643,430
Preference shares 108,263 - - - 1,008 109,271
Convertible preference
shares 198,870 - - - 7,246 206,116
Derivative financial
instruments (6,040) (18,848) 3,066 (480) - (22,302)
927,335 (29,436) 3,066 23,802 11,748 936,515
------------ -------------- ----------- ------------ -------------- -------------
Year ended 31 December 2017 Non-cash changes
Foreign
2016 Cash flows Fair value exchange Other 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing loans
and borrowings 598,708 75,201 - (51,356) 3,689 626,242
Preference shares 106,582 (84) - - 1,765 108,263
Convertible preference
shares 96,997 97,781 - - 4,092 198,870
Derivative financial
instruments (3,711) (3,680) 1,364 (13) - (6,040)
798,576 169,218 1,364 (51,369) 9,546 927,335
------------ -------------- ----------- ------------ -------------- -------------
2018 2017
Cash flows relating to interest bearing
loans and borrowings comprise: GBP'000 GBP'000
Proceeds from long term borrowings 155,628 206,641
Repayment of long term borrowings (153,152) (98,167)
Add: payments to restricted
cash 13,056 -
----------- --------------
(140,096) (98,167)
Loan amortisation (23,279) (29,684)
Bank borrowing costs paid (50,000) (49,475)
Add: Interest paid 47,159 45,886
----------- --------------
Loan origination costs incurred (2,841) (3,589)
(10,588) 75,201
------------ -------------
Other non-cash changes include amortisation of origination costs, movements
in interest accruals, accretion of premiums payable on redemption of preference
and convertible preference shares and the allocation to equity on issue of
convertible preference shares.
38. Acquisitions in the year
Acquisitions in the year
The Group made one corporate acquisition in the year, the purchase of Volga
Logistics Park. The Group purchased the property by acquiring all of the issued
share capital of the corporate vehicles that owned the property. In accordance
with its accounting policy, the Group considered the acquisition assessing
whether an integrated set of activities had been acquired in addition to the
property. It was concluded a business had not been purchased but rather the
acquisition of a group of assets and related liabilities.
Analyses of the consideration payable for the properties and the incidental
assets and liabilities are provided below:
2018
GBP'000
Non-current assets
Investment property (note 11) 30,805
Investment property under construction (note 12) 2,444
Deferred tax assets (note 25a) 1,490
Current assets
Trade and other receivables 642
Cash and short term deposits 1,235
Current liabilities
Trade and other payables (2,621)
-------------
33,995
-------------
Discharged by:
Cash consideration paid 32,958
Acquisition costs 868
Consideration payable 169
33,995
-------------
Acquisitions in prior year
The Group made three corporate acquisitions in the prior period; Gorigo Logistics
Park, Primium Business Centre and Kellerman Business Centre. The Group purchased
the properties by acquiring all of the issued share capital of the corporate
vehicles that owned the properties. In accordance with its accounting policy,
the Group considered each acquisition in turn, and in each case it was concluded
a business had not been purchased but rather the acquisition of a group of
assets and related liabilities.
Analyses of the consideration payable for the properties and the incidental
assets and liabilities are provided below:
Offices
Primium Kellerman Total Gorigo Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Investment property (note 11)
Deferred tax assets (note 25a) 23,280 16,724 40,004 28,589 68,593
- - - 1,482 1,482
Current assets
Trade and other receivables
Cash and short term deposits 187 352 539 225 764
1,542 812 2,354 912 3,266
Current liabilities
Trade and other payables
(1,584) (2,016) (3,600) (1,565) (5,165)
23,425 15,872 39,297 29,643 68,940
-------------- ----------- ------------ -------------- -------------
Discharged by:
Cash consideration paid 68,278
Acquisition costs 662
68,940
-------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UWARRKBAOARR
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