As at 30 June 2014 and 31 December 2013, available-for-sale
financial assets are represented by the investment in Assofit
Holdings Limited, in which the Group holds 49.97% of nominal voting
rights without retaining significant influence.
Assofit Holdings Limited (Assofit) is not a publicly listed
entity and, consequently, does not have published price quotations
of its shares. Also, management believes that the range and
variability of fair value estimates for the investment in Assofit
is significant. Thus, management believes that the fair value of
the equity investment in Assofit cannot be measured reliably,
therefore this equity investment is measured as cost less
impairment.
As at 30 June 2014 and 31 December 2013, management assessed
impairment indicators for the investment in Assofit. Given the
deterioration in the Ukrainian business environment and devaluation
of the Ukrainian hryvnia, management estimates that as at 30 June
2014 USD equivalent of the fair value of the major underlying asset
of Assofit, shopping centre Skymall located in Kyiv, declined as
compared to 31 December 2013. At the same time:
-- Historically, Assofit generated strong positive cash flows;
-- Assofit is operating under direction of a receiver appointed
by the court to protect the assets of Assofit. Therefore, potential
transfer of significant assets from the entity is controlled by the
Court appointed receiver;
-- As at 30 June 2014 and 31 December 2013, a significant
portion of liabilities of Assofit is represented by loans payable
by the Ukrainian subsidiary of Assofit, Prizma Beta LLC, to Filgate
Credit Enterprises Limited. In accordance with a final award issued
by the United Nations Commission on International Trade Law
Tribunal on 9 June 2011, these loans together with accrued interest
were to be assigned from Filgate Credit Enterprises Limited to the
entity under joint control of Arricano and Stockman Interhold S.A.,
the majority shareholder of Assofit, for a nominal price of EUR 1
each. On 28 January 2014, the Highest Economic Court of Ukraine
upheld the rulings of the lower instances courts to re-assign the
abovementioned loans payable amounting to USD 120,000 thousand to
Assofit. A subsequent appeal of Filgate Credit Enterprises Limited
to the Supreme Court of Ukraine was not satisfied, thus leaving the
abovementioned decision of the Highest Economic Court of Ukraine
unchanged and in effect. These loans were reassigned to Torsem Co
Limited, jointly owned by two BVI holding companies. As at the date
that these consolidated interim condensed financial statements are
authorised for issuance, Arricano was negotiating the acquisition
of one of the abovementioned BVI holding companies. Arricano has a
right to acquire one of the abovementioned BVI holding companies in
accordance with final award issued by the United Nations Commission
on International Trade Law Tribunal on 9 June 2011. Management
believes this right proves that value of investment into Assofit
significantly exceeds its carrying amount.
Accordingly, management believes that its investment in Assofit
Holdings Limited is not impaired as at 30 June 2014.
5 Prepayments made and other assets
As at 30 June 2014, prepayments made and other assets represent
prepayments made and other assets under an investment agreement and
the associated contract of mandate for the amount of USD 13,675
thousand (unaudited) (31 December 2013: USD 8,894 thousand) in
total (refer to note 8) and other prepaid miscellaneous expenses in
the amount of USD 711 thousand (unaudited) (31 December 2013: USD
1,222 thousand).
6 Loans receivable
Loans receivable are as follows:
30 June
2014 31 December 2013
(unaudited)
(in thousands of USD)
Non-current assets
Long-term loans receivable due from third parties 1,340 1,340
Accrued interest receivable due from third parties 200 179
1,540 1,519
Current assets
Short-term loans receivable due from related parties 31,317 31,917
Accrued interest receivable due from related parties 9,160 8,579
Short-term loans receivable due from third parties 7,050 7,050
Accrued interest receivable due from third parties 1,035 923
48,562 48,469
As at 30 June 2014 and 31 December 2013, the long-term loans
receivable including long-term accrued interest, due from a party
which was a related party of the Group until February 2013 and
subsequent to this date was disposed out of the control of the
ultimate controlling party. As at 30 June 2014 and 31 December
2013, this long-term loan receivable has maturity date on 31
December 2018, is unsecured and bears a 3.2% interest rate that is
fully capitalised and to be repaid together with the principal. As
at 30 June 2014 and 31 December 2013, short-term loans receivable
due from third parties are represented by a loan due from the
abovementioned party which bears a 3.2% interest rate and is
overdue. The management of the Group believes that it will be able
to recover these loans receivable due from the third party due to
the existence of sufficient assets of a short-term nature at the
borrower and, accordingly, this loan receivable is not considered
to be impaired. Should actual collections prove to be less than
management estimates, the Group will be required to record
additional impairment expense in the next reporting period.
In July 2011 the Company granted a loan to Weather Empire
Limited with the purpose of buying 1,077 shares in the Company's
share capital from Retail Real Estate S.A. As at 30 June 2014, the
resulting loan receivable of USD 39,160 thousand (unaudited) (31
December 2013: USD 38,579 thousand), including accrued interest of
USD 9,160 thousand (unaudited) (31 December 2013: USD 8,579
thousand), is classified as short-term with a maturity date on 31
December 2014, is unsecured and bears a 3% fixed interest rate that
is fully capitalised and to be repaid together with the principal.
The Group management exercises significant judgment in presentation
of this loan due within current assets.
In July 2013 the shares of Weather Empire Limited were
transferred to the Company's major shareholders pro rata to their
ownership rights due to non-exercising of the conversion rights by
ELQ Investors II Ltd in accordance with initial contractual terms
and later on or about 12 August 2013 were transferred in full to
Retail Real Estate S.A.(see note 11). Subsequent to this transfer,
settlement of the loan by Weather Empire Limited depends on the
intention and ability of the Company's major shareholder to repay
this loan. Management believes that the Company's major shareholder
will ensure repayment of the loan, therefore the loan is considered
to be recoverable. Should actual collections prove to be less than
management estimates, the Group will be required to record
additional impairment expense in the next reporting period.
Included in short-term loans receivable as at 30 June 2014 is
also a loan due from Dniprovska Prystan PrJSC, a subsidiary of
Assofit Holdings Limited, amounting to USD 449 thousand (unaudited)
(31 December 2013: USD 664 thousand) which is overdue. The Group
has significant influence over the operating activities of
Dniprovska Prystan PrJSC by being a significant creditor of this
company, and thus it is considered to be a related party to the
Group. In 2012 the court ruled to initiate bankruptcy proceedings
against the mentioned related party and as at 30 June 2014 and as
at 31 December 2013, the decision which would declare Dniprovska
Prystan PrJSC insolvent has not yet been made. Management of the
Group believes that it will be able to recover the loan due to the
existence of sufficient assets of a short-term nature in Dniprovska
Prystan PrJSC and, accordingly, the loan is not considered to be
impaired as at 30 June 2014 and 31 December 2013.
As at 30 June 2014, the remaining short-term loans receivable
granted to related parties of USD 868 thousand (unaudited) are due
within one year, unsecured and interest-free (31 December 2013: USD
1,253 thousand).
7 Assets classified as held for sale
Movements in assets classified as held for sale for the six
months ended 30 June 2014 are as follows:
Prepayment for
Land held on investment Property under
leasehold Buildings property construction Other assets Total
(in thousands
of USD)
At 1 January 2014 5,410 423 - - - 5,833
Transfer from
investment
property
(unaudited) 7,945 - 63 855 - 8,863
Transfer from VAT
recoverable - - - - 83 83
Fair value gain
on revaluation
(unaudited) 1,930 - - - - 1,930
Currency
translation
adjustment
(unaudited) (4,205) (136) (8) (99) (4) (4,452)
At 30 June 2014
(unaudited) 11,080 287 55 756 79 12,257
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