TIDMAFRB TIDMAFID
RNS Number : 3023R
AFI Development PLC
19 August 2010
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION
IN OR INTO THE RUSSIAN FEDERATION, THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN
19 August 2010
AFI DEVELOPMENT PLC
RESULTS FOR THE SIX MONTHS TO 30 JUNE 2010
AFI Development PLC ("AFI Development"/"the Company"), a leading real estate
company focused on developing property in Russia and the CIS, has today
announced its financial results for the quarter ended 30 June 2010.
Financial Highlights:
H1 2010
· Loss before tax for six months to 30 June 2010 was US$58.1 million
compared to profit of US$277.3 million for six months to 30 June 2009.
· Net loss for six months to 30 June 2010 was US$63.0 million compared to
profit of US$215.1 million for six months to 30 June 2009.
· Revenues including net proceeds from the sale of trading properties
increased to US$39.5 million for six months to 30 June 2010 compared to US$29.9
million for six months to 30 June 2009.
· Cash position remains strong with US$133.8 million in cash and cash
equivalents as at 30 June 2010.
· The loss for the period mainly represents a non-cash item resulting from
the valuation performed by Jones Lang LaSalle ("JLL") in May 2010. For the
purposes of its Prospectus for the Admission of B Shares to the Premium Listing,
Jones Lang LaSalle performed a full valuation of the land bank and the hotel
properties that had not been valued since 2008 due to market conditions.
According to this valuation report, the total value of these assets was US$535.4
million compared to US$464 million of their book value. Based on the guiding
accounting principles and the adoption of a conservative approach by the
Company, the Company has decided in its financial statements for the six months
ended 30 June 2010 to reflect the impairments of the assets that were valued
below their book costs in an aggregate amount of circa US$34 million, and not to
reflect the upward movements of more than US$100 million in the remaining
assets.
Q2 2010 Operational Highlights:
· Opening of Mall of Russia is confirmed for the first week of December
2010 with a minimum expected occupancy of 75%. Approximately 58% of the GLA is
now fully pre-let.
· Construction at Ozerkovskaya Embankment (Phase III) has resumed following
suspension due to the global economic recession. Completion is currently
scheduled for 2011.
· Premium Listing: AFI Development received approval for the listing of its
B shares from the UKLA on 30 June 2010. The shares were subsequently admitted
for trading on the main market of the London Stock Exchange under the ticker
AFRB on 5 July 2010.
Management Changes:
· The Company has appointed Mrs. Leviev-Elazarov as the Company's Head of
Marketing, Asset Management and Business Development. Mrs. Leviev-Elazarov
brings a wealth of experience in commercial property management and marketing
and will focus specifically on the Mall of Russia's launch and further lettings.
· Mr. Zeev Klein has been appointed manager of the Mall of Russia and has
been leading the preparations for the opening. Mr. Klein has extensive
experience in shopping mall management in Eastern Europe.
Commenting on today's announcement, Lev Leviev, Chairman of AFI Development,
said:
"This has been a very active six months for AFI Development as we advanced the
construction of our key projects. We particularly look forward to the completion
of the Mall of Russia and its opening in December this year, which will be one
of the major events in the Russian real estate market in 2010 and will
demonstrate the Company's project development and implementation abilities and
professionalism.
Over the last few years we have carefully managed our financial position and the
implementation of our developments to reflect the state of the market. We
believe the positive growth trend in the real estate sector and the wider
Russian economy is now firmly established and will be sustained. As a result of
our decisions in previous years, AFI Development is well positioned with its
positive cashflow and strong capital structure to benefit from this improving
situation. In addition, we continue to selectively resume the development of
suspended projects, which are supported by the financing lenders.
We believe that by applying this approach we will be ready to meet demand at the
right moment with a pipeline of successful new projects. In the first half of
2010 we resumed work at the office complex at Ozerkovskaya Embankment, Phase
III, which is expected to be completed in 2011.
This is the first occasion on which we are reporting our results as a company
with a Premium Listing on the London Stock Exchange, which evidences the
Company's commitment to highest corporate governance practices."
- ends -
For further information, please contact:
AFI Development
Natalia Ivanova +7 495 796 9988
Evgeny Luneev
Citigate Dewe Rogerson, London +44 20 7638 9571
David Westover
Sandra Novakov
Lucie Holloway
Chairman's Statement
In the second quarter of 2010, market conditions improved allowing us to resume
works on a number of projects. Currently, the Company is focusing on the
development of major projects such as the Mall of Russia and the Tverskaya
Zastava shopping centre. These key projects are unique assets, which the
Directors believe will be transformative for their local environments in Moscow.
In July 2010, the opening of the Mall of Russia was confirmed for the first week
of December 2010. Approximately 58% of the GLA is now fully pre-let. The Company
expects approximately 70-80% of the development's gross lettable area to be
leased by the time of the opening. With a total area of 179,930 square metres, a
shopping gallery of 305 stores, a cinema with 1,154 seats, and a supermarket of
1,500 square metres, the Mall of Russia is one of Europe's largest retail
developments in recent years. Confirmed tenants include major international
retailers such as Marks & Spencer, Gap, H&M, Zara, Next, Bodyshop, as well as
X5, Russia's largest retail company.
In the second quarter of 2010 works continued on a number of other key projects
such as the Ozerkovskaya Embankment and Paveletskaya developments.
Concentrating on these projects is intended to ensure a stable cash flow
position for the Company until markets stabilise further. We will consider
reactivating additional projects if conditions continue to improve in the second
half of 2010.
In the first half of 2010, the Company continued to work towards its Premium
Listing on the London Stock Exchange with the necessary corporate actions
required for the Premium Listing being approved at the Company's Annual General
Meeting on 21 May 2010. Following the approval of the prospectus by the UKLA on
30 June 2010, the Company's 'B' shares commenced trading on 5 July 2010 under
the ticker AFRB. The Premium Listing is expected to bring numerous benefits to
our investors, including greater transparency and heightened disclosure, and a
consequent increase in the liquidity of our securities.
Results:
Our results for the period reflect a first revaluation of the land bank
portfolio since 2008, when the Company decided, jointly with its valuation
advisors, that "abnormal uncertainty" caused by "market instability" as
described in RICS guidelines, Note 5, prevented ascribing market value to such
assets.
In May 2010, for the purposes of its Prospectus for the Admission of B Shares to
Premium Listing, JLL performed a full valuation of the land bank and the hotels
properties that had not been valued since 2008 due to market conditions.
According to this valuation report, the total value of these assets was US$535.4
million compared to US$464 million of their book value. Based on the guiding
accounting principles and the adoption of a conservative approach by the
Company, the Company has decided in its financial statements for the six months
ended 30 June 2010 to reflect the impairments of the assets that were valued
below their book costs, in an aggregate amount of circa US$34 million and not to
reflect the upward movements of more than US$100 million in the remaining
assets.
Mr. Leviev, Chairman
Results of Operations for 6 months ended 30 June 2010 and 2009
+----------------------------------------+---------------+-------------+
| | 1/1/10- | 1/1/09- |
+----------------------------------------+---------------+-------------+
| | 30/6/10 | 30/6/09 |
+----------------------------------------+---------------+-------------+
| | US$ '000 | US$ '000 |
+----------------------------------------+---------------+-------------+
| | | |
+----------------------------------------+---------------+-------------+
| Revenue | | |
+----------------------------------------+---------------+-------------+
| Rental income | 21,042 | 17,845 |
+----------------------------------------+---------------+-------------+
| Construction consulting/management | 426 | 416 |
| services | | |
+----------------------------------------+---------------+-------------+
| | 21,468 | 18,261 |
+----------------------------------------+---------------+-------------+
| | | |
+----------------------------------------+---------------+-------------+
| Other income | 30 | 4,341 |
+----------------------------------------+---------------+-------------+
| Operating expenses | (7,778) | (4,036) |
+----------------------------------------+---------------+-------------+
| Administrative expenses | (5,683) | (6,663) |
+----------------------------------------+---------------+-------------+
| Other expenses | (2,190) | (464) |
+----------------------------------------+---------------+-------------+
| | 5,847 | 11,439 |
+----------------------------------------+---------------+-------------+
| | | |
+----------------------------------------+---------------+-------------+
| Profit on disposal of investments in | | 23 |
| subsidiaries | - | |
+----------------------------------------+---------------+-------------+
| | | |
+----------------------------------------+---------------+-------------+
| Valuation (loss)/gain on investment | (40,362) | 262,315 |
| property | | |
+----------------------------------------+---------------+-------------+
| Impairment loss on trading properties | (1,251) | (16,048) |
+----------------------------------------+---------------+-------------+
| Impairment loss on property, plant and | (12,882) | - |
| equipment | | |
+----------------------------------------+---------------+-------------+
| Impairment of prepayment for | (7,511) | |
| investment | | - |
+----------------------------------------+---------------+-------------+
| Net valuation (loss)/gain | (62,006) | 246,267 |
+----------------------------------------+---------------+-------------+
| | | |
+----------------------------------------+---------------+-------------+
| Net proceeds from sale of trading | 18,013 | 11,589 |
| properties | | |
+----------------------------------------+---------------+-------------+
| Carrying value of trading properties | (12,080) | (8,356) |
| sold | | |
+----------------------------------------+---------------+-------------+
| Profit on disposal of trading | 5,933 | 3,233 |
| properties | | |
+----------------------------------------+---------------+-------------+
| | | |
+----------------------------------------+---------------+-------------+
| Results from operating activities | (50,226) | 260,962 |
+----------------------------------------+---------------+-------------+
| | | |
+----------------------------------------+---------------+-------------+
| Finance income | 3,966 | 16,824 |
+----------------------------------------+---------------+-------------+
| Finance costs | (11,829) | (516) |
+----------------------------------------+---------------+-------------+
| Net finance (costs)/income | (7,863) | 16,308 |
+----------------------------------------+---------------+-------------+
| | | |
+----------------------------------------+---------------+-------------+
| (Loss)/profit before income tax | (58,089) | 277,270 |
+----------------------------------------+---------------+-------------+
| Income tax expense | (4,939) | (62,120) |
+----------------------------------------+---------------+-------------+
| | | |
+----------------------------------------+---------------+-------------+
| (Loss)/profit for the period | (63,028) | 215,150 |
+----------------------------------------+---------------+-------------+
| | | |
+----------------------------------------+---------------+-------------+
| Attributable to: | | |
+----------------------------------------+---------------+-------------+
| Owners of the parent | (63,010) | 214,623 |
+----------------------------------------+---------------+-------------+
| Non-controlling interest | (18) | 527 |
+----------------------------------------+---------------+-------------+
| (Loss)/profit for the period | (63,028) | 215,150 |
+----------------------------------------+---------------+-------------+
| | | |
+----------------------------------------+---------------+-------------+
Revenue. Revenue increased by US$3,207 thousand, or 18 per cent, from US$18,261
thousand for the six months ended 30 June 2009 to US$21,468 thousand for the six
months ended 30 June 2010 mainly due to the increase in rental income, mostly
due to the opening of the Aquamarine Hotel in the fourth quarter of 2009.
Other Income. Other income decreased by US$4,311 thousand, or 99 per cent, from
US$4,341 thousand for the six months ended 30 June 2009 to US$30 thousand for
the six months ended 30 June 2010. Other income in 2009 consisted mainly of
income generated from the sale of 50 per cent interest in Crown Investments.
Operating expenses. Operating expenses increased by US$3,742 thousand, or 93 per
cent, from US$4,036 thousand for the six months ended 30 June 2009 to US$7,778
thousand for the six months ended 30 June 2010. This increase was mainly due the
commencement of operation of the Aquamarine Hotel in the fourth quarter of 2009.
Administrative expenses. Administrative expenses decreased by US$980 thousand,
or 15 per cent, from US$6,663 thousand for the six months ended 30 June 2009 to
US$5,683 thousand for the six months ended 30 June 2010. This decrease is
attributable to both a decrease in charity donations and share option expenses
and an increase in professional services expenses (audit, valuation etc).
Net valuation (loss)/gain. Net result of valuation decreased by US$308,273
thousand or 125 per cent, from a gain of US$246,267 thousand for the six months
ended 30 June 2009 to a loss of US$62,006 thousand for the six months ended 30
June 2010. The significant valuation gain for the six months ended 30 June 2009
was mainly due to the implementation of the amendment of International
Accounting Standard 40 "Investment Property". In accordance with the revised IAS
40, which became effective on 1 January 2009, we started disclosing investment
property under development on a fair value basis, which led to a significant
valuation gain recorded in the first six months of 2009.
At the same time, since 31 December 2008, following consultation with Jones Lang
LaSalle ("JLL"), several "land bank" projects have not been valued due to
"abnormal uncertainty" caused by "market instability" as defined in RICS
guidelines Note 5. Due to the stabilization in market conditions in 2010, a
valuation was undertaken by JLL on 31 May 2010. Based on the report prepared by
JLL and the conservative approach adopted by the Company, the Company recorded
impairments on the value of those "land bank" properties where their values
appeared to be below their book costs, leading to an aggregate loss of US$
21,144 thousand.
Additionally, during the six months ended 30 June 2010 the Company recognized an
impairment loss on trading properties of US$1,251 thousand and impairment loss
on property, plant and equipment of US$12,882 thousand, which relate to projects
that were not previously revalued. The impairment loss on property, plant and
equipment relates to the following assets: Westec Four Winds, Kalinina Hotel and
Versailles Hotel.
Profit on disposal of trading properties. Profit on disposal of trading
properties increased by US$2,700 thousand, or 84 per cent, from US$3,233
thousand for the six months ended 30 June 2009 to US$5,933 thousand for the six
months ended 30 June 2010. This significant increase was primarily the result of
the increase in residential sales at Ozerkovskaya and Four Winds. The increase
was affected by both the volume of sales and class of apartments sold in these
developments.
Other expenses. Other expenses increased by US$1,726 thousand, from US$464
thousand for the six months ended 30 June 2009 to US$2,190 thousand for the six
months ended 30 June 2010. This change is mainly due to the fact that land lease
expenses in relation to the Otradnoe project were capitalized in the six months
ended 30 June 2009, but were only expensed in the six months ended 30 June 2010.
Results from operating activities. Results from operating activities decreased
by US$311,188 thousand, or 119 per cent, from a profit of US$260,962 thousand
for the six months ended 30 June 2009 to a loss of US$50,226 thousand for the
six months ended 30 June 2010 mainly due to the accounting treatment of
investment property under development on a fair value resulting from the
amendment of IAS 40, as explained above.
Net finance (costs)/income
The following table sets forth our net finance costs for the six months ended 30
June 2010 and 30 June 2009:
+----------------------------------------------+--------------+--------------+
| | 1/1/10- | 1/1/09- |
| | 30/6/10 | 30/6/09 |
+----------------------------------------------+--------------+--------------+
| | US$ | US$ |
| | '000 | '000 |
+----------------------------------------------+--------------+--------------+
| | | |
+----------------------------------------------+--------------+--------------+
| Interest income | 3,966 | 5,883 |
+----------------------------------------------+--------------+--------------+
| Net change in fair value of financial assets | - | 208 |
+----------------------------------------------+--------------+--------------+
| Net foreign exchange gain | | 10,733 |
| | - | |
+----------------------------------------------+--------------+--------------+
| Finance income | 3,966 | 16,824 |
+----------------------------------------------+--------------+--------------+
| | | |
+----------------------------------------------+--------------+--------------+
| Interest expense on loans and borrowings | (674) | (1,354) |
+----------------------------------------------+--------------+--------------+
| Interest expense on bank loans | (25,517) | (14,456) |
+----------------------------------------------+--------------+--------------+
| Interest capitalised | 22,423 | 15,356 |
+----------------------------------------------+--------------+--------------+
| Net change in fair value of financial assets | (1,119) | - |
+----------------------------------------------+--------------+--------------+
| Other finance costs | (158) | (62) |
+----------------------------------------------+--------------+--------------+
| Net foreign exchange loss | (6,784) | |
| | | - |
+----------------------------------------------+--------------+--------------+
| Finance costs | (11,829) | (516) |
+----------------------------------------------+--------------+--------------+
| | | |
+----------------------------------------------+--------------+--------------+
| Net finance (costs)/income | (7,863) | 16,308 |
+----------------------------------------------+--------------+--------------+
Net finance costs are finance income less finance expenses. Net finance result
decreased by US$24,171 thousand or 148 per cent, from an income of US$16,308
thousand for the six months ended 30 June 2009 to an expense of US$7,863
thousand for the six months ended 30 June 2010. This decrease was principally
due to a US$17,517 thousand decrease in net foreign exchange gain, a US$1,327
thousand increase in fair value loss on financial assets, a US$3,314 thousand
increase in interest expense less interests capitalized and a US$1,917 thousand
decrease in financial income on bank deposits and cash equivalents.
Finance income
Our finance income decreased by US$12,858 thousand, or 76 per cent, from
US$16,824 thousand for the six months ended 30 June 2009 to US$3,966 thousand
for the six months ended 30 June 2010, mainly due to a lower amount of interest
income from bank deposits in the six months ended 30 June 2010 as compared to
the six months ended 30 June 2009 and unfavorable foreign exchange trends.
Finance costs
Finance costs increased by US$11,313 thousand, from US$516 thousand for the six
months ended 30 June 2009 to US$11,829 thousand for the six months ended 30 June
2010, mainly due to an increase in foreign exchange loss of US$6,784 thousand
and in interest expense less interests capitalized of US$3,314 thousand.
Our capitalized interest costs increased by US$7,067 thousand, or 46 per cent,
from US$15,356 thousand for the six months ended 30 June 2009 to US$22,423
thousand for the six months ended 30 June 2010, due to the additional drawdown
of funds for the construction of the Mall of Russia project under the credit
line with VTB Bank.
Net foreign exchange gain / (loss)
Net foreign exchange gain/(loss) decreased by US$17,517 thousand from a gain of
US$10,733 thousand for the six months ended 30 June 2009 to a loss of US$6,784
thousand for the six months ended 30 June 2010. This change can be mainly
explained by the following facts: i) significant part of the gain for the six
months ended 30 June 2009 (US$8,794 thousand) related to account receivable from
Rognerstar (US$154,000 thousand), which was settled in the third quarter of
2009; ii) US$3,101 thousand of the gain for the six months ended 30 June 2009
related to the credit line from VTB (RUR 1,488 million), which was redeemed in
the first quarter of 2010; and (iii) foreign exchange loss received from funds
converted to euro in the beginning of 2010.
Profit before income tax
Profit before income tax decreased by US$335,359 thousand, or 123 per cent, from
a gain of US$277,270 thousand for the six months ended 30 June 2009 to a loss of
US$58,089 thousand for the six months ended 30 June 2010. This decrease mainly
relates to the accounting treatment of investment property under development on
a fair value basis since 1 January 2009, due to the amendment of IAS 40 and
foreign exchange fluctuations.
Income tax
Our income tax expense decreased by US$57,181 thousand, or 92 per cent, from
US$62,120 thousand for the six months ended 30 June 2009 to US$4,939 thousand
for the six months ended 30 June 2010. Our income tax expense consists of a
current tax expense and deferred tax expense. During the six months ended 30
June 2009 and 2010 we incurred the following income tax benefit/ (expenses):
+-------------------------------------------------------------------+--------+--------+
| 1/1/10- 1/1/09- | | |
| 30/6/10 30/6/09 | | |
| US$ US$ | | |
| '000 '000 | | |
| | | |
| Current tax (5,043) (545) | | |
| Deferred tax benefit/(expense) 104 (61,575) | | |
| Total income tax expense (4,939) (62,120) | | |
| | | |
+-------------------------------------------------------------------+--------+--------+
Current tax expense
Our current tax expenses increased by US$4,498 thousand, from US$545 thousand
for the six months ended 30 June 2009 to US$5,043 thousand for the six months
ended 30 June 2010. The reason for this increase was a 77 per cent increase in
residential sales for the six months ended 30 June 2010 compared to the six
months ended 30 June 2009 and a US$3,197 thousand or 18% increase in rental
income. The Cypriot rate of corporate income tax remained unchanged during the
six months ended 30 June 2009 and 2010 and profit on disposal of investments in
subsidiaries is not subject to income tax in Cyprus.
Deferred tax (expense)/benefit
Deferred tax expense decreased by US$61,679 thousand, from a US$61,575 thousand
expense for the six months ended 30 June 2009 to a US$104 thousand benefit for
the six months ended 30 June 2010. A significant amount of the deferred tax
expense for the six months ended 30 June 2009 resulted from the amendment of
International Accounting Standard 40 "Investment Property" and disclosure of
investment property under development on a fair value basis since 1 January
2009.
The corporate income tax rate in the Russian Federation remained unchanged
during the six months ended 30 June 2009 and 2010.
(Loss)/profit for the year
Due to the factors described above, the Company recorded a loss of US$63,028
thousand for the six months ended 30 June 2010, compared to a gain of US$215,150
thousand for the six months ended 30 June 2009.
Liquidity and Capital Resources
Cash Flows
For the 6 months ended 30 June 2010 and 2009
The following table sets out the Company's consolidated cash flows for the six
months ended 30 June 2010 and 2009.
+------------------+----------+----------+
| | For the 6 |
| | months ended 30 |
| | June |
+------------------+---------------------+
| | 2010 | 2009 |
+------------------+----------+----------+
| | (US$ in |
| | thousands) |
+------------------+---------------------+
| Net | 26,417 | (18,130) |
| cash | | |
| from/(used | | |
| in) | | |
| operating | | |
| activities | | |
+------------------+----------+----------+
| Net | (60,432) | (41,213) |
| cash | | |
| (used | | |
| in) | | |
| investing | | |
| activities | | |
+------------------+----------+----------+
| Net | (29,814) | (8,467) |
| cash | | |
| (used | | |
| in) | | |
| financing | | |
| activities | | |
+------------------+----------+----------+
| Effect | (13,215) | (2,954) |
| of | | |
| exchange | | |
| rate | | |
| fluctuations | | |
+------------------+----------+----------+
| Net | (77,044) | (70,764) |
| (decrease) | | |
| in cash | | |
| and cash | | |
| equivalents | | |
+------------------+----------+----------+
| Reclassification | - | (69,238) |
| to other | | |
| financial assets | | |
+------------------+----------+----------+
| Cash | 210,830 | 272,498 |
| and | | |
| cash | | |
| equivalents | | |
| at 1 | | |
| January | | |
+------------------+----------+----------+
| Cash | 133,786 | 132,496 |
| and | | |
| cash | | |
| equivalents | | |
| at 30 June | | |
+------------------+----------+----------+
IFRS requires the Company to identify a property as an investment property or a
trading property at the time it acquires it and the determination, once made,
cannot be changed even if the Company's objectives with respect to such property
change. Generally, AFI Development's strategy is to sell the residential
properties the Company develops and to lease the commercial properties it
develops, subject to continuous reassessment of such properties based on
prevailing market conditions. As a result, the Company has historically
classified all of its commercial properties as investment properties and its
residential properties as trading properties. The effect of this is that, when
the Company sells all or a portion of one of its commercial properties, the
principal cash flow effects of such a sale are reflected in cash from investing
activities, rather than cash from operating activities, even though it has
engaged in substantial development activity in respect of such properties.
Alternatively, if the Company sells all or a portion of one of its residential
properties, the principal cash flow effects of such a sale are reflected in cash
flows from operating activities.
Net cash used in operating activities
Net cash used in operating activities increased by US$44,547 thousand, or 246
per cent, from an outflow of US$18,130 thousand for the six months ended 30 June
2009 to an inflow of US$26,417 thousand for the six months ended 30 June 2010.
This increase was primarily attributable to an increase in cash receipts from
the residential sales at Ozerkovskaya and Four Winds projects for the six months
ended 30 June 2010 as compared to the six months ended 30 June 2009, which was
caused by an increase in the volume of sales, and the commencement of operation
of the Aquamarine Hotel in the fourth quarter of 2009.
Net cash used in investing activities
Outflow from investing activities increased by US$19,219 thousand, or 47 per
cent, from US$41,213 thousand for the six months ended 30 June 2009 to US$60,432
thousand for the six months ended 30 June 2010. The lower outflow in 2009 was
due to a significant inflow of circa US$12,000 thousand of returned advance
payments from Enka Insaat ve Sanaayi A.S. There was no significant change in the
construction spending during the period.
Net cash from financing activities
Outflow from financing activities increased by US$21,347 thousand, or 252 per
cent, from US$8,467 thousand for the six months ended 30 June 2009 to
US$29,814 thousand for the six months ended 30 June 2010. This increase was
mainly due to changes in drawdowns and redemption of credit lines in the
reporting period as compared to the six months ended 30 June 2009. The Company
obtained a credit line of US$54,878 thousand from VTB for the financing of the
Mall of Russia project in the reporting period as opposed to US$30,143 thousand
obtained in the six months ended 30 June 2009 and has redeemed US$49,685
thousand from the VTB credit line as opposed to US$11,897 thousand redeemed
during the six months ended 30 June 2009 under the loan from Citi Bank.
Effect of exchange rate fluctuations
The Company recorded an increase in the negative effect resulting from exchange
rate fluctuations from US$2,954 thousand for the six months ended 30 June 2009
to US$13,215 thousand for the six months ended 30 June 2010, primarily due to
the milder strengthening of the US Dollar against the Rouble in the six months
ended 30 June 2010 by three per cent, compared with its strengthening by seven
per cent in the six months ended 30 June 2009.
Capital resources
During the period under review we met our cash requirements principally through
borrowings. There were no significant movements of loans and borrowings during
the period apart for the following:
Up to 30 June 2010 the Company withdrew RUR 6,378 (31 December 2009: RUR 4,888)
million as part of the non-revolving credit line of a total of RUR 8,448 million
which was obtained from VTB Bank on 28 August 2008. This credit line initially
carried interest of 14.25% (Rouble terms) which increased to 16% (Rouble terms)
on April 2009. The funds drawn under the credit line are being used to finance
the construction of the Mall of Russia project. The credit line is secured by a
pledge over 100% of the shares of Bellgate Constructions Limited, a lien over
75% of the development rights regarding the project, and a mortgage of
commercial spaces when completed. AFI Development's guarantee is one of the
elements of collateral for this credit line. On 26 July 2010 the Company
reached an agreement with VTB Bank which extended the repayment period by two
years to August 2013 and lowered the interest rate to 13.25% (Rouble terms).
A non-revolving credit line which was obtained from VTB Bank for RUR 1,488
million on 1 August 2008 and carried interest of 16% (Rouble terms) was redeemed
on 1 March 2010.
To the view the full financial report, please paste the following URL into the
address bar of your browser:
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