AFI Development PLC

AFI Development Plc - Announcement of Q3 Results

RNS Number : 8170H
AFI Development PLC
20 November 2018
 

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION

IN OR INTO THE RUSSIAN FEDERATION, THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN

 

20 November 2018

 

AFI DEVELOPMENT PLC

("AFI DEVELOPMENT" OR "THE COMPANY")

 

UNAUDITED RESULTS FOR THE NINE MONTHS TO 30 SEPTEMBER 2018
 

Continuous growth strongly supported by contribution from residential segment

AFI Development, a leading real estate company focused on developing property in Russia, today announces its unaudited financial results for the nine months ended 30 September 2018.

9M 2018 financial highlights[1]

·    

Revenue for 9M 2018 increased by 45% year-on-year to US$207.1 million, including proceeds from the sale of trading properties:

 

-    Rental and hotel operating income increased by 10% year-on-year to US$93.9 million

 

-    Contribution from AFIMALL City grew by 8% year-on-year to US$64.7 million (9M 2017: US$59.8 million)

 

-    Sale of residential properties contributed US$112.4 million to total revenue, a 97% increase year-on-year (9M 2017: US$57.0 million), mostly due to revenue recognition from delivery of apartments in AFI Residence Paveletskaya in Q2 2018 and the implementation of IFRS 15[2]

·    

Gross profit increased by 63% year-on-year to US$72.1 million (9M 2017: US$44.2 million) 

·    

Net profit for 9M 2018 amounted to US$96.6 million (including a US$62.3 million valuation gain and a US$11.8 million forex gain), compared to US$0.6 million in 9M 2017

·    

Total gross value of portfolio of properties stood at US$1.35 billion, broadly unchanged since the end of H1 2018 

·    

Cash, cash equivalents and marketable securities as of 30 September 2018 amounted to US$114.5 million

9M 2018 operational highlights

·    

At Odinburg, construction works and pre-sales continued at Building 3 (phase I) and Building 6 (phase II)

·    

-    As of 7 November 2018, the number of signed sale contracts stood at 685 (96% of total) in Building 2, 420 (46% of total) in Building 3 and 186 (83% of total) in Building 6

·    

At AFI Residence Paveletskaya, following the recent completion and delivery of the Phase I apartments to customers, delivery of the Phase II apartments is scheduled for Q1 2019. 503 sale and pre-sale contracts (amounting to 79% of the total number of residential units under sales) have been signed as of 7 November 2018

·    

At Bolshaya Pochtovaya, construction and pre-sales are on track with delivery of Phase I apartments planned for Q1 2019 

 

-    As of 7 November 2018, 191 apartments (47% of Phase I and Phase II combined) pre-sold

·    

The construction and pre-sale of properties at Botanic Garden remain on track

 

-    As of 7 November 2018, 224 apartments (28% of Phase I) pre-sold

·    

AFIMALL City continues to record solid NOI growth, up 13% year-on-year to US$50.3 million in 9M 2018, from US$44.4 million in 9M 2017  

 

Commenting on today's announcement, David Tahan, Chairman of AFI Development, said:

"We are pleased to report that AFI Development has continued to deliver growth in revenue and profits, driven by the performance of our four ongoing residential projects - Odinburg, AFI Residence Paveletskaya, Bolshaya Pochtovaya and Botanic Garden. As we look ahead to the full year, we remain alert the issues posed by a weaker Russian rouble which could impact the value of our property portfolio and the threat of additional US sanctions. However, we believe that with our high-calibre projects, we are well placed to maintain the positive momentum in our performance into the final quarter."

 

9M 2018 Results Conference Call:

AFI Development will hold a conference call for analysts and investors to discuss its 9M 2018 financial results on Wednesday, 21 November 2018.

Details for the conference call are as follows:

 

Date:

Wednesday, 21 November 2018

 

Time:

2pm GMT (5pm Moscow)

 

 

Dial-in Tel:

UK toll free:

0800 358 9473

 

           

US toll-free:

+1 855 85 70686

 

 

Russia toll-free:

8800 500 9867

 

Password:

67397553#

 

 

 

Please dial in 5-10 minutes prior to the start time.

 

Prior to the conference call, the 9M 2018 Investor Presentation of AFI Development will be published on the Company website at http://www.afi-development.com/en/investor-relations/reports-presentations on 21 November 2018 by 10am GMT (1pm Moscow time).

 

- ends -

 

 

For further information, please contact:

 

AFI Development, +7 495 796 9988

Ilya Kutnov, Corporate Affairs/Investments Director (Responsible for arranging the release of this announcement)

 

Citigate Dewe Rogerson, London +44 20 7638 9571

Sandra Novakov         

Lucy Eyles

 

This announcement contains inside information.

 

 

About AFI Development

Established in 2001, AFI Development is one of the leading real estate development companies operating in Russia.

AFI Development is listed on the Main Market of the London Stock Exchange and aims to deliver shareholder value through a commitment to innovation and continuous project development, coupled with the highest standards of design, construction and quality of customer service.

AFI Development focuses on developing and redeveloping high quality commercial and residential real estate assets across Russia, with Moscow being its main market. The Company's existing portfolio comprises commercial projects focused on offices, shopping centres, hotels and mixed-use properties, and residential projects.

AFI Development's strategy is to sell the residential properties it develops and to either lease the commercial properties or sell them for a favourable return.

AFI Development is a leading force in urban regeneration, breathing new life into city squares and neighbourhoods and transforming congested and underdeveloped areas into thriving new communities. The Company's long-term, large-scale regeneration and city infrastructure projects establish the necessary groundwork for the successful launch of commercial and residential properties, providing a strong base for the future.

Legal disclaimer

Some of the information in these materials may contain projections or other forward-looking statements regarding future events, the future financial performance of the Company, its intentions, beliefs or current expectations and those of its officers, directors and employees concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and business. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might" or the negative of such terms or other similar expressions. These statements are only predictions and that actual events or results may differ materially. Unless otherwise required by applicable law, regulation or accounting standard, the Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia and market change in the industries the Company operates in, as well as many other risks specifically related to the Company and its operations.

 

Chairman's statement

In the third quarter of 2018, a weaker rouble increased inflationary expectations, which in turn caused the Russian Central Bank to raise its key lending rate by 25 basis points to 7.5% in September 2018. Furthermore, with some stabilisation in the Russian economy, the threat of new US sanctions remains a risk for consideration by all companies operating in Russia.

AFI Development continues to report growth in revenue and profits, mainly driven by our four ongoing residential projects. Our residential sales contributed $112.4 million in revenue, reflecting both changes in our recognition of revenue now that we report in accordance with IFRS 15 and the delivery of apartments to customers in Phase I of AFI Residence Paveletskaya. Rental and hotel operating income also increased to US$93.9 million for the nine-month period, a 10% year-on-year increase, with AFIMALL City remaining the main contributor.

Our gross profit for 9M 2018 increased 63% year-on-year to US$72.1 million, reflecting stronger residential revenue and higher profitability of our residential projects in Moscow (relative to Odinburg in the Moscow region, which accounted for all of our recognised residential sales revenue in 2017).

We recorded a net profit of US$96.6 million for the nine-month period. This is a significant increase compared to 9M 2017 (US$0.6 million), largely driven by valuation and foreign exchange gains.

We remain cautiously optimistic regarding the market environment for both our residential and commercial projects. We believe that with our high-quality, competitive projects, we are well placed to generate robust revenues and profits in the coming years.

 

Projects update

AFIMALL City

The continued improvement in the performance of AFIMALL City is reflected in the 8% year-on-year increase in revenue to US$64.7 million for the nine-month period, and a 13% year-on-year increase in NOI to US$50.3 million. Occupancy at the end of Q3 was 92%.

 

Odinburg

At the Odinburg residential development, the construction of Building 3 (phase II) has commenced. Building 3 (Phase 1) and Building 6 (Phase II) are under construction and currently being marketed to customers. Building 6 is scheduled for delivery in Q1 2019.

 

As of 7 November 2018, 685 apartments (96% of total) were sold in Building 2, 420 (46% of total) in Building 3 (Phase I) and 161 (83% of total) in Building 6.

 

AFI Residence Paveletskaya

The delivery of Phase I apartments to customers is now complete. Meanwhile, construction work and the marketing of apartments and special units in Phase II continue to plan, with Phase II scheduled for delivery in Q1 2019. As of 7 November 2018, 503 contracts for pre-sales of both apartments and "special units" have been signed (79% of Phase I and Phase II combined).

 

Bolshaya Pochtovaya

During the nine-month period ended 30 September 2018, the construction and marketing of the project progressed according to plan and as of 7 November 2018, 191 apartments (47% of Phase I and Phase II combined) had been pre-sold to customers.

 

Botanic Garden

Construction work and pre-sales are also progressing at Botanic Garden. As of 7 November 2018, 224 apartments (28% of Phase I) have been pre-sold to customers.

 

Aquamarine III Business Centre (Ozerkovskaya III)

In Q1 2018, the Company successfully completed the disposal of Buildings 2 and 4 to one of the leading Russian banks for circa US$135 million. AFI Development currently owns one remaining building in the complex (GBA 18,805 sq.m, including underground parking), which is leased to Deutsche Bank, Brown-Forman and other tenants.

 

Subsequent events

1.   On 14 November 2018, the Company converted its existing US dollar denominated loans, provided by Bank VTB PJSC at the Plaza Spa Kislovodsk and Plaza Spa Zheleznovodsk projects, into euros at a flat interest rate of 4.2% per annum. The three loans (two at Plaza Spa Kislovodsk and one at Plaza Spa Zheleznovodsk) will have a combined principal of approximately EUR39 million, the outstanding dollar denominated interest has been paid at the date of conversion. The main terms of the loans, except for currency and interest rate, remain unchanged.

 

2.   On 19 November 2018, the Board of Directors of AFI Development accepted the resignation of Mr Mark Groysman from the position of Executive Director, effective 1 December 2018. Mr Groysman's services on the Board were planned as an interim measure and his resignation follows a new appointment to the Board. Mr. Groysman will continue to serve as the Chief Executive Officer ('CEO') of AFI RUS LLC. At the same meeting, the Board appointed Mr Avraham Novogrocki to replace Mr Groysman with such appointment being effective from 1 December 2018.

 

Mr Novogrocki previously served on the Company's Board between 2012 and 2016. Mr Novogrocki was, until September 2018, CEO of Africa Israel Investments Ltd, a company listed on the Tel-Aviv Stock Exchange in Israel. Prior to assuming the CEO role at Africa Israel Investments Ltd, Mr Novogrocki served as CEO of its subsidiaries, namely Africa Israel Industries Ltd (from 2008 to 2012) and Packer Steel Industries Ltd (from 2007 to 2012), as well as Deputy CEO and CFO of Africa Israel Industries Ltd. Mr Novogrocki holds an MBA and a BA in Economics and Business Administration from the Bar-Ilan University, Israel.

 

 

 

David Tahan

Chairman of the Board

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOT REVIEWED BY AUDITORS

 

 

SUMMARY OF FINANCIAL RESULTS

 

For the period from 1 January 2018 to 30 September 2018

 

 

 

 

 

 

 

 

 

 

UNAUDITED CONSOLIDATED INCOME STATEMENT

For the period from 1 January 2018 to 30 September 2018

 

 

 

 

 

Unaudited

1/1/18-

Audited

1/1/17-

 

 

30/9/18

30/9/17

 

Note

    US$ '000

US$ '000

 

 

 

 

Revenue

2

207,100

  142,692

 

 

 

 

Other income

 

2,150

       634

 

 

 

 

Operating expenses

4

(44,211)

(40,535)

Cost of sales of trading properties

 

(84,909)

(54,162)

Administrative expenses

3

(4,031)

(4,335)

Other expenses

 

(4,006)

      (2,013)

Total expenses

 

(137,157)

 (101,045)

 

 

 

 

Share of the after tax profit of joint ventures

 

-

        1,957

 

 

 

 

Gross Profit

 

72,093

  44,238

 

 

 

 

Gain on 100% acquisition of previously held interest in a joint venture

 

 

 

-

 

          7,532

Increase / (decrease) in fair value of properties

7,8

62,257

(13,491)

 

 

 

 

Results from operating activities

 

134,350

       38,279

 

 

 

 

Finance income

 

12,830

12,484

Finance costs

 

(26,512)

     (37,980)

Net finance (costs)/income

5

(13,682)

   (25,496)

 

 

 

 

(Loss)/profit before tax

 

120,668

12,783

Tax (expense)/benefit

6

(24,070)

       (12,220)

 

 

 

 

(Loss)/profit for the period

 

96,598

   563

 

 

 

 

(Loss)/profit attributable to:

 

 

 

Owners of the Company

 

96,541

285

Non-controlling interests

 

57

         278

 

 

96,598

   563

 

 

 

 

Earnings per share

 

 

 

Basic and diluted earnings per share (cent)

 

9,21

              0.03

         

 

The unaudited summary of financial results was approved by the Board of Directors on 19 November 2018.

 

 

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 September 2018

 

 

 

Unaudited 30/9/18

Audited

31/12/17

 

Note

US$ '000

US$ '000

Assets

 

 

 

Investment property

7

818,060

818,060

Investment property under development

8

163,240

163,240

Property, plant and equipment

9

74,402

77,633

Long-term loans receivable

 

7,438

1,669

Intangible assets

 

519

204

VAT recoverable

 

              37

              48

Other investments

 

5,075

 

Non-current assets

 

1,068,771

1,060,854

 

 

 

 

Trading properties

10

21,283

10,792

Trading properties under construction

11

276,573

349,735

Other investments

 

13,391

10,515

Inventories

 

1,042

1,318

Short-term loans receivable

 

551

1,090

Trade and other receivables

12

70,256

70,402

Current tax assets

 

3,950

4,114

Cash and cash equivalents

13

101,078

     95,468

Current assets

 

488,124

   543,434

 

 

 

 

Total assets

 

1,556,895

1,604,288

 

 

 

 

Equity

 

 

 

Share capital

 

1,048

1,048

Share premium

 

1,763,409

1,763,409

Translation reserve

 

(360,566)

(301,287)

Capital reserve

 

(19,333)

(19,333)

Retained earnings

 

(562,291)

  (672,719)

Equity attributable to owners of the Company

 

822,267

771,118

Non-controlling interests

 

(31)

      (171)

Total equity

 

822,236

   770,947

 

 

 

 

Liabilities

 

 

 

Long-term loans and borrowings

14

512,753

492,484

Deferred tax liabilities

 

67,439

42,652

Deferred income

 

12,569

     12,641

Non-current liabilities

 

592,761

   547,777

 

 

 

 

Short-term loans and borrowings

14

23,606

86,775

Trade and other payables

15

42,559

65,106

Advances from customers

 

75,613

     123,766

Income tax payable

 

120

9,917

Current liabilities

 

141,898

285,564 

 

 

 

 

Total liabilities

 

734,659

833,341 

 

 

 

 

Total equity and liabilities

 

1,556,895

1,604,288

         

 

 

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

For the period from 1 January 2018 to 30 September 2018

 

 

 

Unaudited 1/1/18-

 

 

30/9/18

 

Note

US$ '000

US$ '000

Cash flows from operating activities

 

 

 

Profit/(loss) for the period

 

96,598

Adjustments for:

 

 

Depreciation

9

709

Net finance costs/(income)

5

12,645

(Increase) / decrease in fair value of properties

7,8

(62,257)

Share of profit in joint ventures

 

-

Gain on 100% acquisition of previously held interest in a joint venture

 

 

-

Tax expense/(benefit)

6

   24,070

 

 

71,765

Change in trade and other receivables

 

11,550

Change in inventories

 

125

Change in trading properties and trading properties under construction

 

 

(27,905)

Change in advances and amounts payable to builders of trading properties under construction

 

 

(12,210)

Change in advances from customers

 

37,703

Change in trade and other payables

 

(24,804)

Change in VAT recoverable

 

5,438

Change in deferred income

 

   1,568

Cash generated from operating activities

 

63,230

Taxes paid

 

(14,797)

     (3,749)

Net cash from operating activities

 

48,433

 47,360

 

 

 

 

Cash flows from investing activities

 

 

Acquisition of subsidiary net of cash acquired

 

-

Proceeds from sale of other investments

 

6,956

Proceeds from sale of property, plant and equipment

 

130

Interest received

 

817

Change in advances and amounts payable to builders

15

(478)

Payments for construction of investment property under development

 

8

 

(1,893)

Payments for the acquisition/renovation of investment property

 

7

 

(518)

Change in VAT recoverable

 

(979)

Acquisition of property, plant and equipment

9

(844)

Acquisition of other investments

 

(21,274)

Acquisition of intangible assets

 

(898)

Proceeds from repayments of loans receivable

 

482

Payments for loans receivable

 

(6,293)

          (1,803)

Net cash from / (used in) investing activities

 

(24,792)

    849  

 

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

For the period from 1 January 2018 to 30 September 2018

 

 

 

 

Unaudited 1/1/18-

 

 

30/9/18

 

Note

US$ '000

Cash flows from financing activities

 

 

Acquisition of non-controlling interests

 

-

Proceeds from loans and borrowings

 

542,467

Repayment of loans and borrowings

 

(548,571)

Interest paid

 

(17,724)

 (28,910)

Net cash used in financing activities

 

(23,828)

4,563

 

 

 

 

Effect of exchange rate fluctuations

 

5,797

 

 

 

Net increase in cash and cash equivalents

 

5,610

Cash and cash equivalents at 1 January

 

95,468

  10,619 

Cash and cash equivalents at 30 September

13

101,078

  63,069 

 

 

 

 

NOTES TO THE UNAUDITED SUMMARY OF FINANCIAL RESULTS

For the period from 1 January 2018 to 30 September 2018

 

1.   SUMMARY OF OPERATION

 

Incorporation and principal activity

 

AFI Development PLC (the "Company") was incorporated in Cyprus on 13 February 2001 as a limited liability company under the name Donkamill Holdings Limited. In April 2007 the Company was transformed into public company and changed its name to AFI Development PLC. The address of the Company's registered office is 165 Spyrou Araouzou Street, Lordos Waterfront Building, 5th floor, Flat/office 505, 3035 Limassol, Cyprus. As of 7 September 2016 the Company is a 64.88% subsidiary of Flotonic Limited, a private holding company registered in Cyprus, 100% owned by Mr Lev Leviev. Prior to that, the Company was a 64.88% subsidiary of Africa Israel Investments Ltd ("Africa-Israel"), which is listed on the Tel Aviv Stock Exchange ("TASE"). The remaining shareholding of "A" shares is held by a custodian bank in exchange for the GDRs issued and listed in the London Stock Exchange ("LSE"). On 5 July 2010 the Company issued by way of a bonus issue 523,847,027 "B" shares, which were admitted to a premium listing on the Official List of the UK Listing Authority and to trading on the main market of LSE. On the same date, the ordinary shares of the Company were designated as "A" shares.

 

This summary of financial results comprises the Company and its subsidiaries (together referred to as the "Group"). The principal activity of the Group is real estate investment and development.

 

The summary of financial results was not audited. The amounts are based on the Group's financial information, which is prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union ("EU") and the Group's accounting policy, while the disclosures and presentation are not in compliance with IFRSs, specifically with IAS 34 "Interim Financial Reporting" and IAS 1 "Presentation of Financial Statements".

 

Exchange rates

The table below shows the exchange rates of Russian Rubles, which is the functional currency of the Russian subsidiaries of the Group, to the US Dollar, which is the presentation currency of the Group:

                                                                                                                                    

                                                                          Russian Rubles        % change         % change

As of:                                                                        for US$1            nine months       year

30 September 2018                                                 65.5906                13.1                13.9

31 December 2017                                                   57.6002                                      (5.0)

30 September 2017                                                  58.0169                                       (4.4)

 

Average rate during:

Nine-month period ended 30 September 2018   61.4358                                       5.3

Nine-month period ended 30 September 2017   58.3344                                     (14.7)

 

 

 

 

2.   REVENUE

 

Unaudited

1/1/18-

30/9/18

Audited

1/1/17-

30/9/17

 

US$ '000

US$ '000

 

 

 

Investment property rental income

70,162

64,133

Sales of trading properties (note 10)

10,914

57,034

Sales of residential - transferred over time* (note 11)

101,514

-

Hotel operation income

23,781

21,374

Non-core activity revenue

729

-

Construction consulting/management fees

          -

        151

 

 207,100

 142,692

 

*The Group has adopted IFRS 15 Revenue from Contracts with Customers from 1 January 2018.

 

 

3.   ADMINISTRATIVE EXPENSES

 

Unaudited

 1/1/18-

30/9/18

Audited

1/1/17-

30/9/17

 

US$ '000

US$ '000

 

 

 

Consultancy fees

487

257

Legal fees

1,143

1,122

Auditors' remuneration

245

466

Valuation expenses

43

60

Directors' remuneration

885

993

Depreciation

81

82

Insurance

113

118

Provision for Doubtful Debts

(283)

40

Donations

40

67

Other administrative expense

1,277

1,130 

 

   4,031

   4,335

 

 

 

 

 

4.   OPERATING EXPENSES

 

 

Unaudited

1/1/18-

30/9/18

Audited

 1/1/17-

30/9/17

 

US$ '000

US$ '000

 

 

 

Maintenance, utility and security expenses

14,980

13,653

Agency and brokerage fees

1,799

1,037

Advertising expenses

5,312

4,121

Salaries and wages

10,769

11,069

Consultancy fees

1,802

716

Depreciation

629

544

Insurance

323

395

Rent

980

1,405

Property and other taxes

7,563

7,545

Other operating expenses

54

        50

 

44,211

  40,535

 

 

5.   FINANCE COST AND FINANCE INCOME

 

Unaudited

1/1/18-

30/9/18

Audited

1/1/17-

30/9/17

 

US$ '000

US$ '000

 

 

 

Interest income

1,018

688

Net foreign exchange gain

11,812

11,796

Finance income

   12,830

   12,484

 

 

 

Interest expense on loans and borrowings

(23,957)

(37,082)

Net change in fair value of financial assets

(1,517)

(355)

Other finance costs

     (1,038)

     (543)

Finance costs

(26,512)

(37,980)

 

 

 

Net finance (costs)/income

(13,682)

(25,496)

 

 

6.   TAX EXPENSE / (BENEFIT)

 

Unaudited

1/1/18-

30/9/18

Audited

1/1/17-

30/9/17

 

US$ '000

US$ '000

Current tax expense

 

 

Current year

       4,363

         2,919

 

 

 

Deferred tax expense/(benefit)

 

 

Origination and reversal of temporary differences

19,707   

9,301 

Total income tax expense/(benefit)

24,070

     12,220

           

 

7.   INVESTMENT PROPERTY

 

Reconciliation of carrying amount

 

Unaudited

30/9/18

Audited

31/12/17

 

US$ '000

US$ '000

 

 

 

Balance 1 January

818,060

915,350

Renovations / additional costs

518

998

Disposals

(903)

(140,026)

Fair value adjustment

50,655

18,218

Effect of movement in foreign exchange rates

(50,270)

23,520

Balance 30 September / 31 December

818,060

818,060

 

 

The fair value adjustment in investment property is mainly related to the weakening of the Russian Rouble to the US Dollar by 13.9% during the nine months of 2018.

 

The Company assessed that the fair value of the properties has not materially changed since 31 December 2017, when a valuation by external appraisers took place, as there were no significant changes in the macroeconomic conditions in Russia. The same applies for investment property under development. See note 8 below.

 

 

8.   INVESTMENT PROPERTY UNDER DEVELOPMENT

 

Unaudited

30/9/18

Audited

31/12/17

 

US$ '000

US$ '000

 

 

 

Balance 1 January

163,240

232,900

Construction costs

1,893

4,865

Transfer to trading properties under construction (note 11)

-

(74,100)

Fair value adjustment

11,602

(6,648)

Effect of movements in foreign exchange rates

(13,495)

  6,223

Balance 30 September / 31 December

163,240

163,240

 

The fair value adjustment in investment property under development is mainly related to the weakening of the Russian Rouble to the US Dollar by 13.9% during the nine months of 2018.

 

The Company assessed that the fair value of the properties has not materially changed since 31 December 2017, when a valuation by external appraisers took place, as there were no significant changes in the macroeconomic conditions in Russia.

 

 

9.   PROPERTY, PLANT AND EQUIPMENT

 

Unaudited

30/9/18

Audited

31/12/17

 

US$ '000

US$ '000

 

 

 

Balance 1 January

77,633

31,215

Effect of acquisition of subsidiary

-

45,580

Depreciation charge

(709)

(846)

Additions

844

484

Disposals

(130)

(137)

Transfer from trading properties

4,278

-

Effect of movements in foreign exchange rates

(7,514)

1,337

Balance 30 September / 31 December

  74,402

  77,633

10. TRADING PROPERTIES

 

Unaudited

30/9/18

Audited

31/12/17

 

US$ '000

US$ '000

 

 

 

Balance 1 January

10,792

6,854

Transfer from trading properties under construction (note 11)

23,054

63,202

Transfer to property, plant and equipment

(4,278)

-

Disposals

(7,206)

(59,747)

Effect of movements in exchange rates

(1,079)

      483

Balance 30 September / 31 December

   21,283

   10,792

 

Trading properties comprise unsold apartments and parking spaces. The transfer from trading properties under construction represents the completion of the construction of a number of flats, offices and parking places of "AFI Residence Paveletskaya" project during the nine months period of 2018, and of "Odinburg" project during the year 2017.

 

The amount recognised to cost of sales of trading properties represents the sale of completed flats or parking places recognised at a point in time. For the year ended 31 December 2017 this amount represents the amount transferred to the income statements upon transferring of the rights to the buyers according to the signed acts of transfer in accordance with the previous accounting policy as per IAS18.

 

 

11. TRADING PROPERTIES UNDER CONSTRUCTION

 

 

Unaudited

30/9/18

Audited

31/12/17

 

US$ '000

US$ '000

 

 

 

Balance 1 January as previously reported

349,735

243,327

Effect of adoption of IFRS 15 as at 1 January 2018*

(59,801)

             -

Restated balance at 1 January

289,934

243,327

Transfer from investment property under development (note 8)

-

74,100

Transfer to trading properties (note 10)

(23,054)

(63,202)

Cost of sale of trading properties

(77,703)

-

Construction costs

106,199

96,481

Impairment

-

(9,548)

Finance cost capitalised

6,615

-

Effect of movements in exchange rates

(25,418)

   8,577

Balance 30 September / 31 December

276,573

349,735

 

*The Group has adopted IFRS 15 Revenue from Contracts with Customers as from 1 January 2018.

 

Trading properties under construction comprise "Odinburg", "AFI Residence Paveletskaya", "Botanic Garden" and "Bolshaya Pochtovaya" projects that involve primarily the construction of residential properties.

 

The amount recognised to cost of sales of trading properties, represents the cost incurred to date for the construction of the apartments and flats which were sold but not yet completed based on the new standard IFRS 15 adopted as from 1 January 2018.

 

 

12. TRADE AND OTHER RECEIVABLES

 

Unaudited

30/9/18

Audited

31/12/17

 

US$ '000

US$ '000

 

 

 

Advances to builders

48,280

29,313

Amounts receivable from related parties

133

109

Trade receivables, net

5,824

3,458

Other receivables

7,431

21,713

VAT recoverable

4,513

9,889

Tax receivables

    4,075

     5,920

 

  70,256

   70,402

 

Trade receivables net

Trade receivables are presented net of an accumulated provision for doubtful debts and unrecognised revenue of US$8,125 thousand (31/12/2017: US$10,522 thousand).

 

 

13. CASH AND CASH EQUIVALENTS

 

Unaudited

30/9/18

Audited

31/12/17

 

US$ '000

US$ '000

 

 

 

Cash and cash equivalents consist of:

 

 

Cash at banks

100,805

95,102

Cash in hand

        273

       366

Cash and cash equivalents as per statement of cash flows:

101,078

  95,468

 

 

14. LOANS AND BORROWINGS

 

Unaudited

30/9/18

Audited

31/12/17

 

US$ '000

US$ '000

 

 

 

Non-current liabilities

 

 

Secured bank loans

 512,753

492,484

 

512,753

492,484

Current liabilities

 

 

Secured bank loans

23,334

86,468

Unsecured loans from other non-related companies

     272

       307

 

23,606

       86,775

 

The following changes to the loans took place during the nine-month period ended 30 September 2018:

 

A new loan facility was acquired by one of the Group's subsidiaries, Bellgate Construction Ltd ("Bellgate"), based on a loan agreement signed on the 28 December 2017. This new loan facility was used to refinance the previous loan from VTB Bank JSC ("VTB") signed on 22 June 2012 with a maturity date in April 2018 and was also used to repay the remainder amount of US$83 million, of Ozerkovskaya III loan which expired in January 2018. Bellgate received the new loan in five tranches, during January and February 2018, in Euros and in Russian Rubles. The blended interest rate on the new loan is circa 5.6% (assuming current EUR/RUR exchange rate and current Russian Central Bank key lending rate). The interest and the principal of the new loan are to be paid quarterly, while the term of the loan is 5 years.

 

In January 2018, the Company's subsidiary MKPK PJSC (the owner of the AFI Residence Paveletskaya Project) received a loan from VTB Bank PJSC in the amount of RUR711 million to refinance the previously incurred costs for the construction of the project. The loan bears floating interest rate of the Russian Central Bank key lending rate + 1.5%. The principal on the loan is payable monthly, while the interest is payable quarterly. The loan was fully repaid in June 2018.

 

 

 

 

15. TRADE AND OTHER PAYABLES

 

Unaudited

30/9/18

Audited

31/12/17

 

US$ '000

US$ '000

 

 

 

Trade payables

7,034

 13,756

Payables to related parties

233

183

Amount payable to builders

17,805

8,510

Provision

6,320

6,830

VAT and other taxes payable

5,515

28,982

Other payables

  5,652

    6,845

 

42,559

  65,106

 

Provision represents the estimated cost of construction of common use areas of the Odinburg project such as hospital and school which is an obligation of the Group to build and make available for use by the residents.

 

 

16. SUBSEQUENT EVENTS

 

On 14 November 2018 the Company converted its existing US dollar denominated loans provided by Bank VTB PJSC at the Plaza Spa Kislovodsk and Plaza Spa Zheleznovodsk projects into euros, at a flat interest rate of 4.2% per annum. The three loans (two at Plaza Spa Kislovodsk and one at Plaza Spa Zheleznovodsk) will have a combined principal of about EUR39 million, the outstanding dollar denominated interest has been paid at the date of conversion. The main terms of the loans, except for currency and interest rate, did not change.

 

On 19 November 2018 the Board of Directors of AFI Development accepted the resignation of Mr Mark Groysman from the position of executive director effective 1 December 2018. Mr Groysman's services on the Board were planned as an interim measure and his resignation follows a new appointment to the Board. Mr. Groysman will continue to serve as the chief executive officer of AFI RUS LLC. At the same meeting, the Board appointed Mr Avraham Novogrocki as a non-executive director to replace Mr Groysman with such appointment being effective as from 1 December 2018.

 

Mr Novogrocki previously served on the Company's Board between 2012 and 2016.  Mr Novogrocki was, until September 2018, CEO of Africa Israel Investments Ltd (a company listed on the Tel-Aviv Stock Exchange, Israel). Prior to assuming the CEO role at Africa Israel Investments Ltd, Mr Novogrocki served as CEO of its subsidiaries, namely Africa Israel Industries Ltd. (from 2008 to 2012) and Packer Steel Industries Ltd. (from 2007 to 2012), as well as Deputy CEO and CFO of Africa Israel Industries Ltd. Mr Novogrocki holds a MBA and a BA in Economics and Business Administration from the Bar-Ilan University, Israel.

 

 

[1] The financial results for 9M 2018 reported in this publication are based on the unaudited summary of financial results prepared by the Company. The results were not reviewed by the auditors.

[2] AFI Development has adopted IFRS 15 Revenue from Contracts with Customers from 1 January 2018. The "sale of residential properties" figure includes the revenue from sales of residential properties transferred over time calculated under IFRS 15.


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