Eastern Property Holdings Limited (EPH) / Eastern Property Holdings Limited (EPH) : Third Quarter 2013 Trading Update . Processed and transmitted by Thomson Reuters ONE. The issuer is solely responsible for the content of this announcement.
Road Town, Tortola, BVI
FINANCIAL HIGHLIGHTS
ASSET UPDATE
Arbat 1:
Arbat 2:
Arbat construction financing:
Petrovsky Fort:
Magistral'naya
Inkonika Parking:
Geneva House:
Berlin House:
Significant financial events and changes for Q3 2013 are as follows:
INCOME
Rental Income
In the nine months ended 30 September 2013, our wholly-owned rental properties generated Gross Rental Income of $5.81 million and Net Rental Income of $5.61 million.
On a Like for Like basis, due to reduced vacancies at Petrovsky Fort and annual indexation of rent at Magistral'naya the Gross Rental Income of the Company is up by 5% ($5.81 million vs $5.56 million in 3q 2012). In fact, until 2013 the staff working for Petrovsky Fort was employed by Valartis and the respective costs were covered by the management fee which was included in the Net Rent calculation. Starting from 2013 those employees are hired by Petrovsky Fort and the respective salary expenses are reflected as Administartive expenses and, therefore, are not included in the Net Rent calculation. Further, the improved operating efficiency at both Petrovsky Fort and Magistral'naya has resulted in a 32% increase in Net Rental Income ($5.61 million vs $4.25 million in the first nine months of 2012).
Interest Income
The Company generated $5.84 million of interest income in the first nine months of 2013 which is approximately at the same level as for the comparable period of 2012. More interest was accrued with respect to construction loans provided by the Company to finance Arbat projects ($3.56 million vs $2.28 million in the nine months of 2012), although interest earned on liquid bond investments decreased due to the sale of the bond portfolio ($0.18 million vs $1.70 million in the nine months of 2012).
Income Taxes
For the first nine months of 2013, the Company recognized an income tax credit of $1.30 million mainly caused by forex exchange loss and intercompany loan interest expense in Russian subsidiaries. In the first nine months of 2012 the Company recognized $0.32 as income tax credit.
EXPENSES
Net Foreign Exchange Loss
RUB weakening against US$ during the first nine months of 2013 resulted in a $7.01 million exchange rate loss. For the same period in 2012 the Company recognized a $2.04 million gain.
BALANCE SHEET
ASSETS
Loans and Receivables
EPH's loans and receivables increased due to both, additional lending to its joint venture projects
and accrual of interest on existing project loans. To the extent that a borrower is partially owned by EPH, loans are eliminated in consolidation. This means that 60% of project financing for the Arbat Projects is classified as investment in the projects, and 40% as lending.
Loans and receivables amounted to $87.79 million as of 30 September 2013, of which $69.27 million is principal, and $18.52 million is accrued interest. As of 31 December 2012, loans and receivables amounted to $76.79 million.
Almost all 2013 lending has been for construction of the Arbat Projects.
Liquid Assets
In 2011-2012 the Company invested funds into individual corporate bonds of high rating and short to medium duration.
For the purpose of the trading updates, cash and traded bonds have been combined and classified
as Liquid Assets.
As of 30 September 2013 all bonds were matured or sold by the Company to finance Arbat construction, therefore, liquid assets fully consist of cash in the amount of US$ 4.17 million. As of 31 December 2012, the Company held $29.52 million of liquid assets, including $19.64 million of bonds.
The $25.36 million reduction in the Company's liquid assets in the first nine months 2013 has been
primarily due to use of cash to fund Arbat construction, payment of the management fees and a part of the accrued performance fees to Valartis and payments under the loan from UniCredit Bank Austria.
Assets Under Development (at cost)
Assets under development have increased from $95.18 million at 31 December 2012 to $101.81 million at 30 September 2013. The $6.63 million increase is the result of increased construction spending and weakening of the RUB against the US$.
LIABILITIES
Loans from Banks and Others (LT & ST)
EPH's third party debt consists of a loan from UniCredit Bank Austria secured by Petrovsky Fort mortgage and a loan from Jilford Ltd. signed in September 2013 for the purpose of financing of Arbat construction.
The outstanding balance of the loan from UniCredit Bank Austria at reporting date was $33.10 million, down $1.35 million from $34.45 million at 31 December 2012. The reduction is due to amortization during the first nine months of 2013.
The loan from Jilford is received through VPL, the Company's 60% joint-venture, therefore only 60% of the loan received is reflected on EPH's balance sheet. As of 30 September 2013 the outstanding loan balance due to Jilford in the Company's balance sheet is US$ 1.71 million.
Significant Q3 2013 Income and Expense Items
Gross Rental Income | 30.09.2013 | 30.09.2012 | Change YoY | Percent Change YoY | |
Petrovsky Fort | 5,083,777 | 4,854,615 | 229,162 | 5% | |
Magistral'naya | 727,459 | 705,824 | 21,635 | 3% | |
Total | 5,811,235 | 5,560,439 | 250,797 | 5% | |
Net Rental Income | Change YoY | Percent Change YoY | |||
Petrovsky Fort | 4,891,562 | 3,644,901 | 1,246,661 | 34% | |
Magistral'naya | 714,666 | 609,252 | 105,414 | 17% | |
Total | 5,606,228 | 4,254,153 | 1,352,075 | 32% | |
Material YoY changes in Income/Expense Items | 30.09.2013 | 30.09.2012 | Change YoY | ||
Interest income | 5,841,181 | 5,859,634 | (18,453) | ||
Net foreign exchange (loss)/ gain | (7,009,730) | 2,038,042 | (9,047,772) | ||
Development property reverse of impairment/ (impairment) | 503,159 | (702,980) | 1,206,139 | ||
Income taxes | 1,299,488 | 324,014 | 975,474 |
Significant Q3 2013 Changes in Financial Position
Assets | 30.09.2013 | 31.12.2012 | Change | |
Loans and receivables (LT & ST) | 87,790,186 | 76,790,296 | 10,999,890 | |
Liquid assets (Cash and bonds) | 4,169,529 | 29,524,768 | (25,355,239) | |
Assets under development | 101,809,927 | 95,179,891 | 6,630,036 | |
Liabilities | ||||
Loans from banks and others (LT & ST) | 34,810,000 | 34,450,000 | 360,000 |