TIDMARO
RNS Number : 5553R
Arricano Real Estate PLC
12 September 2014
12 September 2014
Arricano Real Estate plc
("Arricano" or the "Company" or, together with its subsidiaries,
the "Group")
Interim Results for the 6 months ended 30 June 2014
Arricano is one of the leading real estate developers and
operators of shopping centres in Ukraine. Arricano owns and
operates four shopping centres, which together have 113,800 sqm of
leasable space and has a major interest in Sky Mall, a 68,000 sqm
shopping centre, and has a further four sites under
development.
Highlights
-- Generated recurring revenues of USD 11.4 million (6m 2013: USD 12.1 million).
-- Profit before tax (including benefits from revaluation of the
portfolio) was USD 15.2 million (6 months 2013: loss of USD 3.3
million).
-- Profit before tax (excluding revaluation) was USD 5.4
million, (6 months 2013: USD 1.6 million).
-- As at 30 June 2014, total fair valuation of the Company's
portfolio was USD 247.1 million (31 December 2013: USD287.8
million), which includes significant negative impact from FX
movements.
-- Occupancy rates for 2014 H1 were at the level of 97 per cent,
excluding Phase 2 of South Gallery shopping centre in Crimea, the
occupancy rate of which was at the level of 70 per cent. (2013:
98.3 per cent.)
-- As at 30 June 2014, the Company's borrowings at project level
remain at a conservative level with a loan to value ratio of 25.2
per cent.
Rupert Cottrell, Chairman of Arricano, commented: "Given the
political changes that have taken place and continue to unfold in
Ukraine, these results show a reassuring stability. Visitor numbers
across our shopping centres have remained stable or increased
slightly during the period and we have continued to collect rents
from our retail tenants and progressed our new developments with
Prospect in Kyiv due to open as planned later this month. We
believe the business is well positioned to operate through the
current environment and has the potential to be extremely well
positioned for the longer term."
For further information please contact:
Arricano Real Estate plc Tel: +380 44 569 6708
Mykhailo Merkulov/Oleg Pryimak
Nominated Adviser and Joint Broker:
Smith & Williamson Corporate Finance Tel: +44 (0)20 7131 4000
Limited
Azhic Basirov
Joint Broker:
Whitman Howard Limited Tel: +44 (0)20 7087 4555
Ranald McGregor-Smith
Financial PR
Novella Tel: +44 (0)20 3151 7008
Tim Robertson/Ben Heath
Chairman's Statement
I am pleased to be able to provide Arricano's half year results
for the six months to 30(th) June 2014. Trading during the period
has been resilient given the highly disrupted environment the
Company has operated in.
The Company has worked closely with everyone connected to the
Group to help minimise the impact of political and economic changes
in the region. Currently, the military activity is taking place far
away from any of our shopping and entertainment centres and even
our most affected shopping centre in Crimea is operating close to
normal capacity, albeit under an uncertain regulatory environment
and logistical difficulties.
It is difficult to make any forward looking statements given the
current volatility of the geopolitical situation. However, we have
recorded more visitors to our shopping centres over the period
under review than the comparable period last year and we believe
that the situation will be resolved and, when this happens,
Arricano will be well positioned to take advantage of opportunities
as these arise.
Our commercial objective remains to use the cash generative
completed portfolio to support the addition of further lettable
space and the development of new shopping centre and entertainment
complexes. We have continued to progress our projects on a
conservative basis. Demand from retailers for space in new projects
has been satisfactory in part as a result of other developers
halting or slowing development. Prospect shopping centre, a 30,400
gross leasable area sqm development in Kyiv is due to open on
schedule in September 2014 and has benefited from being one of the
few projects continuing to move forward.
Results
From a trading perspective, revenues during the first half of
the year were slightly lower than the equivalent period last year
reflecting the tougher market conditions together with the
management decision to share some of the risk on currency
fluctuations with retailers by fixing the foreign exchange rate
from March 2014 and over the course of 2014 gradually leveling the
prices together giving retailers more time to adapt. All rents are
USD linked and in the period the Hryvnia has decreased in value
against the USD by over 20%. While our retail customers have been
affected by the market environment, particularly those selling
foreign goods and therefore being more exposed to currency
movements, in the period under review only 14 chain tenants out of
total tenants of around 440 have vacated (excluding the Crimea
shopping centre). Occupancy levels remain at 97% excluding Phase 2
of South Gallery shopping centre in Crimea, the occupancy rate of
which was at the level of 70 per cent, which is very close to the
98.3% occupancy level reported at the last calendar year end. It is
our belief that we have been able to maintain our occupancy levels
through this difficult time with the policy of sharing the impact
of the currency fluctuations, as explained above.
Profit before tax was USD 15.2 million. Profit from operating
activity for the reporting period, excluding the revaluation
effect, was USD 5.4 million, compared to USD 1.6 million for 6
months 2013.
The current political and economic situation in Ukraine led to
the significant devaluation of Hryvnia. This had an impact on the
accounting figures at entities with different functional currencies
and has resulted in considerable foreign exchange translation
losses amounting to USD 53.8 million. These losses are recognized
within other comprehensive income. The foreign exchange losses
recognized through profit and loss account amounted to USD 28.6
million. These movements on exchange rates have a negative impact
of USD 559k on the Company's cash and cash equivalents for the six
months ended 30 June 2014.
The Company's portfolio of assets was externally and
independently valued as at 30 June 2014 by Expandia LLC, part of
the CBRE Affiliate Network. The portfolio was valued at USD 247.1
million and the fair value of investment property included within
the assets held for sale was USD 7.8 million. This compares to the
fair value of investment property of USD 287.8 million as at 31
December 2013.
The movement in the value of the portfolio of investment
property in the last six months reflects the change in valuation
approach to Prospect shopping centre, following reclassification
from property under construction to investment property under
operation and allowance for the increased FX rate that has
influenced the income stream from the assets. The company has
applied fair value adjustments, that have been independently
reviewed, resulting in a revaluation gain of USD 44.7 million and a
foreign exchange loss of USD 90.4 million. This foreign exchange
loss is included in other comprehensive income.
A value of USD 20.7 million is attributed to the Company's
49.97% interest in the holding company of Sky Mall, compared to a
fair value of USD 179.8 million for 100% of Sky Mall as at 30 June
2014. Arricano does not exercise significant influence over the
company which holds the Sky Mall shopping centre and does not have
access to information to measure the fair value of its investment
reliably and therefore, the value of investment is recorded at
cost.
Bank debt as at 30 June 2014 was USD 66.4 million, the majority
of which is secured on individual assets, with interest rates in a
range of 6.73 per cent. - 11.5 per cent. and weighted average rate
of borrowings at a project level of 9.63 per cent. Loans mature
between 2018-2020 and the Company's loan to value ratio is 25 per
cent. The cash and cash equivalents of the Group as at 30 June 2014
amounted to USD 1.6 million.
All loans are denominated in US dollars and all rents are linked
to US dollars. As the Company pays a portion of its operating costs
in the Hryvnia, fluctuations between the US dollar and the Hryvnia
can affect the profitability of the Company.
The Board is not recommending a dividend for this period,
however, it is the Company's intention to make distributions to
shareholders in the future in line with the profitability of the
business.
The Board and Management
In August 2014, the Company was pleased to announce the
appointment of Mykhailo Merkulov as Chief Executive Officer of the
Company, a non-Board appointment. Mykhailo commenced working for
Arricano on 8 September 2014 and Yarema Kovaliv, who has been the
Acting Chief Executive Officer, has taken up a new role of
Executive Advisor to the Board.
Operating review
Arricano has 113,800 sqm of completed assets spread across four
shopping centres across which the average occupancy levels are at
97 per cent, excluding Phase 2 of South Gallery shopping centre in
Crimea, the occupancy rate of which was at the level of 70 per
cent. In addition to the Company's four shopping centres, the
Company also owns title rights for 185,567 sqm of development land
divided into four specific sites which are at varying stages of
development and has an interest in Sky Mall, one of the largest
shopping centres in Kyiv with 68,000 sqm of gross leasable
area.
Arricano Real Estate (LSE:ARO)
Historical Stock Chart
From Jul 2024 to Aug 2024
Arricano Real Estate (LSE:ARO)
Historical Stock Chart
From Aug 2023 to Aug 2024
