TIDMAURR
RNS Number : 0370J
Aurora Russia Limited
24 June 2011
24 June 2011
Aurora Russia Limited ("Aurora Russia" or the "Company")
Results for the twelve months ended 31 March 2011
Aurora Russia implements change and moves forward
-- Board has improved independence - two new independent
non-executive Directors, Gilbert Chalk and Geoffrey Miller have
been appointed. James Cook and John McRoberts have both stepped
down
-- New management contract signed with the manager - lower fee
and new incentives
-- The Manager continues to have discussions with a number of
parties regarding strategic options for the investments
-- Improved transparency - Aurora Russia undertakes to issue
quarterly trading updates
Financial highlights
-- Net asset value per share as at 31 March 2011 of 79.9p per
share (Net asset value GBP89.8m) down from 88.0p per share at 31
March 2010.
-- Cash and cash equivalents as at 31 March 2011 were
GBP6.7m
Portfolio highlights
OSG
-- OSG continued its expansion in Russia and internationally and
it currently operates 42 warehouse facilities in 7 countries
-- Revenues for the year ended 31 March 2011 were GBP14.8
million representing an increase of 31% compared to the prior year
period
-- EBITDA up 24% to GBP2.1m as at 31 March 2011
-- Equity valuation of Aurora Russia's stake in OSG at 31 March
2011 was GBP28.8m, a 12% increase on the previous year
Unistream Bank
-- Unistream's share in the Russia-outbound transfer market is
estimated at 17.4% as at Q1 2011 compared to 18.7% in Q4 2010
-- Revenues for year ended 31 December 2010 were RUR 2.1bn, a
10% decrease from 2009 due to lower commissions being charged as a
result of increased competition in the Russian/CIS market
-- EBITDA remained consistent with the prior year at RUR60m
-- Q1 2011 volume and operating income (net commissions) grew
23.4% and 18.6% year-over-year respectively
-- Equity valuation of Aurora Russia's stake in Unistream at 31
March 2011 was GBP18.7m, a 23% decrease on the previous year
Superstroy
-- Superstroy is the leading DIY company in the Urals Region of
Russia
-- Revenues grew by 17% to RUR6.9 billion in 2010
-- Company was profitable in 2010 with a 3.5% EBITDA margin
-- Equity valuation of Aurora Russia's stake in Superstroy at 31
March 2011 was GBP24.5m, a 40% increase on the previous year
Flexinvest and Kreditmart
-- Flexinvest has begun the development of a credit card product
to be funded by short-term deposits with an aim to launch in Q4
2011
-- After a strategic review, the decision has been taken to exit
from Kreditmart's broker operations to stop its cash burn and as a
result these have been written down to zero
-- As at 31 March 2011, Flexinvest and Kreditmart had GBP17.6
million in net assets down from GBP19.7 million as at 31 March
2010.
-- Equity valuation of Aurora Russia's stake in Kreditmart/
Flexinvest Bank at 31 March 2011 was GBP18.5m, a 17% decrease on
the previous year
Commenting, Dan Koch, Chairman of Aurora Russia, said:
"Growth has now returned to Russia's economy, with GDP likely to
grow by 4.5-5.0% this year. Credit growth is accelerating, in
contrast to many high growth emerging markets. Our portfolio
companies are well positioned to benefit from this improved
environment. I am also encouraged to see that there is renewed
activity in the Russian IPO and M&A market which suggests a
better exit climate for our investments. This year Aurora Russia
welcomed two new non-executive Directors onto the Board and
implemented several important changes to improve transparency and
returns to shareholders."
Enquiries:
Aurora Russia Limited
Dan Koch+44 (0) 207 839 7112
Numis Securities Limited
Nominated Adviser: Hugh Jonathan+44 (0)20 7260 1000
Corporate Broking: Rupert Krefting / Nathan Brown
Financial Dynamics
Ed Gascoigne-Pees+44 (0) 20 7269 7132
Jack Hickey
Chairman's Statement
Introduction
I am pleased to present to you the audited results of Aurora
Russia Limited (the "Company" or "Aurora Russia") for the year
ending 31 March 2011.
Growth has now returned to Russia's economy, with GDP likely to
grow by 4.0-4.5% this year. Credit growth is accelerating, in
contrast to some other high growth emerging markets. This credit
growth, combined with the potential for falling inflation later
this year and subsequent interest rate cuts, forms a good backdrop
for continued growth and consumer demand. Our portfolio companies
are well positioned to benefit from this improved environment I am
also encouraged to see that there is renewed activity in the
Russian IPO and M&A market which suggests a better exit climate
for our investments.
Results
For the 12 months to 31 March 2011, Aurora Russia recorded a
loss of GBP4.7 million or 4.2p per share, based on the audited
consolidated statement of comprehensive income. The net asset value
("NAV") of the Company as at 31 March 2011 was GBP89.8 million or
79.9p per share. Cash and cash equivalents at 31 March 2011 were
GBP6.7 million.
Administration and operating expenses of GBP21.7 million include
Company costs of GBP4.0 million or 24% of the current NAV.
Operating costs of the Company's wholly owned subsidiaries were
GBP15.9 million.
The GBP4.0 million Company costs include costs of approximately
GBP0.6 million incurred in relation to the non-cash accrual of up
to GBP3.0 million for the options that may be issued to the Manager
under the previous incentive arrangements. This arrangement has
been cancelled and transferred to shareholders' reserves at the end
of the current year.
The Annual General Meeting
I would also like to take this opportunity to thank our
shareholders again for their support in the continuation vote at
the AGM on 3 December 2010 and the re-election to the Board of John
Whittle, Alexandr Dumnov and myself
Continuation of the Company
The Directors considered that it was in the best interests of
the shareholders that the life of the Company be continued. The
Directors have always been committed to crystallising value for
shareholders through the sale of the Company's investments over a
sensible period of time and believe that the continuation of the
Company will enable the Company to achieve this in a controlled
manner thereby maximizing shareholder value.
The Board has agreed that it will return all of the net cash
proceeds from realisations of the Company's assets to shareholders,
as long as the discount of the Company's share price is more than
20% of the latest published NAV of the Company. If for a period of
six months immediately preceding the sale of an asset the share
price discount to the NAV per share is less than 20%, then the
Board will have the discretion to make additional investments in
line with the strategy of the Company.
The Manager is focused on realising value from the Company's
investments and is engaged in discussions with a number of parties
regarding strategic options for its investments. The Company will
update shareholders as and when appropriate.
Management Fees and Incentivisation Arrangements
The Board indicated in the circular relating to the AGM that it
has agreed with the Manager to reduce the management fee from 2.0%
to 1.5% of NAV per annum with effect after 31 March 2011 and to put
in place a new incentive structure to better align its interests
with shareholders, replacing the current option programme for the
Manager. The new incentive structure would involve the payment of a
performance fee to the Manager, calculated by reference to a
percentage of the value of any disposals realised by the
Company.
In the event that any follow on investments are made by the
Company following the narrowing of the share price discount to NAV
as described above, it is proposed that the Manager will receive a
performance fee equal to 20% of the value of any amounts realised
on the disposal of such further investments in excess of the
amounts so invested. The 20% performance fee would be subject to a
hurdle rate which is expected to be at 12% per annum (the same as
the hurdle rate for the Manager's incentive arrangements under the
Option Deed).
Composition of the Board
The Directors believe that it is right to strengthen the Board
where possible and the Board has agreed to appoint two new
Independent Directors. I am delighted to welcome Gilbert Chalk and
Geoff Miller to the Board. I believe that their wealth of relevant
experience in the listed funds market will bring a great deal of
value to the Board of Aurora Russia. This year both John McRoberts
and James Cook stepped down from the Board thereby keeping the
board to its current size of seven.
Investment Review
Aurora Russia has invested a total of GBP73.9 million into its
investee companies and has uncommitted funds of GBP3.8 million
remaining in the Company to cover its ongoing expenses.
The Board resolved on 22 June 2011 that Aurora Russia would exit
from Kreditmart as soon as is practicable. The Kreditmart brand has
been written down to zero for the year ended 31 March 2011 (31
March 2010 to be confirmed), due to the fact that it continues to
incur losses, and it is unclear when the mortgage brokerage market
will return to a commercially viable level. It is uncertain at this
stage exactly how we will dispose of the asset or what the cost of
disposal will be, however we do not foresee this cost to be
significant.
The remaining four investments are all in a good position and
are already benefitting from the improvement in the Russian market
and we expect them all to grow in value over the next period: In
summary our investments are
-- 94.5% of OSG, a regional market leader in records
management;
-- 24.3% of SuperStroy, one of the leading DIY retailers in
Russia;
-- 26% of Unistream Bank, a leading Russian money transfer
company;
-- 100% of Fleixinvest Bank which provides retail banking
services; and
Portfolio Valuation
A valuation of the investment portfolio was performed at 31
March 2011, resulting in a decrease in value from GBP92.2 million
to GBP90.5 million. This valuation, recommended by the Valuation
Committee of the Board was prepared by an independent professional
valuation firm and was formally adopted by the Board on 22 June
2011. These valuations are prepared for accounting purposes only
and comply with International Private Equity and Venture Capital
Association ("IPEVCA") guidelines. The valuations of investments
included in the Company's financial statements will not necessarily
reflect the market value that a third party would be prepared to
pay for these businesses.
The current valuation of Aurora Russia's shareholdings reflects
changes to the previous year's valuation performed as at March 2010
as follows:
-- the value of our investment in OSG has increased by GBP0.7
million to GBP28.8 million, an increase of 2.5%;
-- the value of our investment in SuperStroy has increased by
GBP7.0 million to GBP24.5 million, an increase of 40%;
-- the value of the Company's 26% stake in Unistream Bank has
decreased by GBP5.7million to GBP18.7 million, a decrease of 23%;
and
-- the value of Kreditmart and Flexinvest Bank has decreased by
GBP3.7 million to GBP18.5 million, a decrease of 16.7%, which
includes the brand of Kreditmart being written down to zero;
In assessing these changes, one should take into consideration
that over the period there was an approximately 3% unfavourable
movement in the GBP/RUR exchange rate. Therefore the movement of
values may be distorted by currency translation effects and may not
be the best reflection of the performance of an underlying asset
during the reporting period.
Outlook
I continue to hold the view that GDP growth over the next couple
of years in the emerging markets will outperform growth in the
developed world by some margin partly due to the heavy sovereign
and consumer debt burden being carried by developing nations.
Russia has little sovereign or consumer debt and economists expect
GDP to grow at rates of around 4.0-4.5% in the next two years.
Although in recent months inflation has been running high as a
result primarily of the recent increase in the price of oil, I
expect inflation to continue to decrease over the medium term.
Industrial output is forecast to grow at around 5% in 2011 with
investment growing 7%.
Consumer confidence continues to gather pace, with retail sales
expanding at 5-6% y-o-y in the first few months of 2011. While this
is less than the double-digit pre-crisis levels, this is an
indication that growth has become more balanced, with increasing
real disposable income linked to increasing labour productivity.
Increased domestic spending will benefit all of our portfolio
companies. High oil prices will continue to be a boon to the
Russian economy and spur further investment in infrastructure.
As preparations for global events being held in Russia such as
the 2014 Winter Olympics and the 2018 FIFA World Cup gather pace,
many sectors of the Russian economy will grow strongly, with all of
our investee companies standing to gain from these trends.
Dan Collinson Koch
Chairman of the Board
Aurora Russia Limited
23 June 2011
Investment Manager's Report
Overview
Russian GDP grew 4% in 2010 with the IMF predicting 4.8% growth
in 2011. Q1 2011 saw GDP grow 4.1% according to Rosstat estimates.
This shows some deceleration of growth versus 4.5% seen in Q4 2010
and economists believe that the recent rally in oil prices had a
reduced impact on the Russian economy due to an increase in the
social security tax and a strong rouble. The government is now
considering cutting back employer's social security tax,
particularly for mid-size companies which, if and when passed, will
benefit all of Aurora Russia's portfolio investments.
During the last 6 months the manager has focused on working with
its portfolio companies on ensuring they meet 2011 budgets,
updating their long-term financial plans and working closely with
the companies' management on their strategic initiatives. We
continue to explore exit opportunities for all of our
companies.
OSG Records Management
In 2010 and Q1 2011 OSG continued its expansion in Russia and
internationally and it currently operates 42 warehouse facilities
in 7 countries.
OSG's management estimates the entire vended market in Russia at
approximately 3 million boxes and that this represents less than 1%
penetration of outsourced storage based on the volume estimates of
documents stored by businesses and the government in Russia. We
believe that OSG, with its unmatched territorial coverage, is well
positioned to tap into such a vast market opportunity.
OSG's audited accounts for the year ending 31st March, 2011 show
an increase in revenues over the year ending 31st March 2010 of 31%
from GBP11.3 million to GBP14.8 million. EBITDA grew to GBP2.1
million, up 24% year-over-year.
For Q1 2011, OSG reported revenues of GBP4.0 million compared to
GBP3.0 million for the same period in 2010. This year OSG continues
to see a strong rebound in services which grew at 52%
year-over-year in Q1 2011.
The equity valuation of Aurora Russia's stake in OSG at 31
March, 2011 was GBP28.8 million. This is net of the liability
associated with the management options in OSG valued at GBP1.2
million and net of third party debt less cash of GBP3.0
million.
Unistream Bank
According to the Central Bank of Russia ("CBR") the volume of
Russia-outbound transfers in Q1 2011 grew 37% over Q1 2010.
Adjusted for the difference in RUR/USD average rates, Q1 2011
volume grew by approximately 34%. Based on these statistics,
Unistream had approximately 17.4% of the outbound Money Transfer
("MT") market compared to the approximately 18.7% it had in Q4
2010.
Signing up new agent banks with strong distribution capacities
is one of Unistream's strategic priorities in 2011. It has recently
signed 3 major agent banks in Russia: Otkrytie, Uralsib and Bin
Bank, which together expand Unistream's distribution network by
more than 500 locations.
Unistream's loyalty programme, launched in 2010, has become an
increasingly important Customer Relationship Management ("CRM")
tool at Unistream. Cardholders subscribe to a free text messaging
service which informs them of the status of their transfer, while
Unistream benefits from having up-to-date customer contact
information. By the end of May 2011, there were approximately
600,000 such cards distributed, and statistics show that
approximately 80% of those who received a card between August and
October last year used Unistream to transfer money on at least one
occasion by the end of May 2011. Unistream will also begin offering
loyalty cards to the recipients of money transfers.
Unistream's mobile money transfers continue to show strong
growth rates month-over-month with volume reaching RUR 272m in May
2011; this is approximately twice the volume transferred by this
channel in August 2010. Volume transferred through self-operated
QIWI payment terminals reached RUR 89m in May, up from
approximately RUR 20m transferred monthly at the end of 2010.
Unistream's year-end management accounts to 31 December 2010
show that the company transferred RUR119.4 billion in 2010, 2% more
than in 2009. Revenues for the same period were RUR2.1 billion, a
10% decrease compared to 2009 due to lower commissions being
charged as a result of increased competition in the Russian/CIS
market. However, despite the difficult market conditions, Unistream
had similar EBITDA as in 2009; RUR 60m.
Unistream's Q1 2011 volume and operating income (net
commissions) grew 23.4% and 18.6% year-over-year respectively. The
money transfer market has strong seasonality with Q1 volume
typically representing approximately 17% of the total annual
volume.
Although Unistream's recent performance looks encouraging as it
is tracking its budget well both in terms of revenue and EBITDA, it
is still below the expectations on which Unistream was valued last
year. Therefore the equity valuation of Aurora Russia's stake in
Unistream at 31 March, 2011 was marked down to GBP18.7million, a
decrease of 23% on the valuation at 31 March 2010 of GBP24.4
million.
Superstroy
Superstroy is the leading DIY company in the Urals Region of
Russia with 47 stores and a total trade space of approximately 110
thousand m2.
RosBusinessConsulting ("RBC") estimates that the overall DIY
market across Russia grew by 18% in USD terms or 13% in RUR in
2010. SuperStroy showed a 17% sales growth in RUR with
like-for-like growth in sales from the same stores of approximately
11%.
In 2010 the company opened 3 new stores increasing its trade
space by 10%. The company's revenues grew by 17% to RUR6.9 billion
with 11% like-for-like sales growth while new space contributed a
further 6% growth. In 2010 the company was profitable with a 3.5%
EBITDA margin.
Based on the unaudited management accounts, in Q1 2010
Superstroy reported revenues of RUR1.6 billion or 30% higher than
in the same period in 2010.
Recognizing Superstroy's ability to execute on its plans, the
equity valuation of Aurora Russia's stake in Superstroy at 31 March
2011 was marked up to GBP24.5 million, an increase of 40% on the
valuation at 31 March 2010 of GBP17.5 million.
Kreditmart
Kreditmart, a wholly owned subsidiary of Aurora Russia,
distributes mortgages, equity release loans and consumer loans.
Kreditmart was originally established as a distributor of
mortgages. While the Russian market for mortgages was robust with
triple digit growth up to the end of 2008, the mortgage market took
a severe hit in Russia during the financial crisis with new volumes
contracting by 77%. Kreditmart adapted to these adverse market
conditions by shifting its focus to insurance and consumer loans
while downsizing to reduce costs. During 2010 Kreditmart began to
focus on mortgages again as the market improved. The mortgage
market has started to recover, but unfortunately the brokerage
market has not developed at the rate that was anticipated. Having
explored a number of options to get Kreditmart to profitability we
can not see this happening in the near term and therefore have
taken the difficult decision to exit from Kreditmart's broker
operations immediately in order to stop its cash burn.
Kreditmart's broker operations as at 31 March 2011 have been
written down to zero however Kreditmart does hold a small mortgage
portfolio and cash which are included in the valuation of the
combined Flexinvest / Kreditmart business as detailed below.
Flexinvest Bank
As was announced in Aurora Russia's recently published trading
update, Flexinvest Bank has begun the development of a credit card
product to be funded by short-term customer deposits.
The bank is now implementing the card project and has recently
been approved by Mastercard as an issuer of its cards. The main
feature of its future credit card product is its dual use: it can
be used as both a credit card with a limit of RUR50k to RUR200k and
a prepaid card with deposit features for those who require a
savings account with a card to access funds when needed.
Experian-Interfax has helped the bank to develop a scorecard to
be used in underwriting. The management aims to pilot its first
cards in August with the necessary infrastructure and business
processes fully underway by then. In preparation for the sales and
marketing effort due to start in Q4 2011, the new trademark "Flex
Bank" has been created.
Principal assets as at 31 March 2011 include: 1) a mortgage book
net of provisions of approximately GBP7.7 million yielding 11.9%
p.a.; 2) gross cash of GBP2.7 million; 3) investments in highly
liquid fixed income securities of GBP2.6 million; 4) the premium
paid for the banking licence of GBP2.8 million; and 5)
approximately GBP0.7 million as foreclosed properties held for
sale.
The equity valuation of the combined Kreditmart/Flexinvest Bank
business at 31 March 2011 was GBP18.5 million, down 17% on the
valuation at 31 March 2010 of GBP22.2 million.
Conclusion
We are confident that the four companies that will remain in our
portfolio will continue to develop well in the next period, helped
by the improvement in the Russian economy. The financial crisis hit
Russia hard but business has rebounded robustly and we are
confident that the growth in the business and consumer services
sectors in which we have invested will outstrip GDP growth in the
medium term by some margin. We also believe that investor appetite
will be skewed towards the non-resource sector.
Aurora Investment Advisors
June 2011
Directors
Dan Collinson Koch - Non-executive Chairman
Mr Koch retired as Chairman of Deloitte & Touche CIS
(Deloitte,the Firm) in May 2009. He lived and worked in Russia for
11 years having been CEO and Managing Partner and latterly Chairman
of Deloitte during that period. Under Mr Koch's leadership Deloitte
in Russia and the CIS experienced unprecedented success, growing
from a small predominantly audit practice with approximately 150
professionals into a full service, multi functional, multi office
practice with approximately 3,000 professionals.
Mr Koch has over 30 years of public accounting and international
executive experience having been based in Canada prior to his
Russian experience. In Russia Mr Koch had direct overall
responsibility for the Firm's major clients including Norilsk
Nickel, AFK Sistema and MTS.
Grant Cameron - Non-executive Director
Mr Cameron is Managing Director of Investec Asset Management
Guernsey Limited. He is a member of the South African Institute of
Chartered Accountants and the Financial Planners Association of
South Africa. In 1988 Mr Cameron joined KPMG South Africa and was
transferred in 1991 to KPMG's Miami office, where he held the
position of Manager of Financial Services. Mr Cameron moved to
Investec Group in 1996 and was Operations Director of Investec Fund
Managers SA Limited from January 1996 until February 2001. Mr
Cameron acts as a Director of a number of investment funds, and was
previously chairman of the Guernsey Investment Funds Association.
He graduated with a B.Comm in 1987 and a B.Acc in 1989 from the
University of Witwatersrand.
James Cook - Past Non-executive Director
Mr Cook is a Director and joint founder of Aurora Russia
Limited. He is also a Partner and owner of Aurora Investment
Advisors Limited which manages Aurora Russia Limited. In addition,
James has non-executive Directorships at ZAO Forus Bank and ICICI
Bank in Russia. He has over 17 years experience in advising,
founding and managing companies in Russia's consumer finance,
residential mortgage lending and leasing sectors. James was one of
Russia's pioneers in consumer finance in Russia and is credited
with being the Father of Mortgage Lending in Russia. Prior to
setting up Aurora Russia, James served as Chairman and CEO of GE
Money Bank in Russia. Before moving to GE, James was Executive Vice
President of Delta Capital where he worked from 1996 to 2004.
Whilst at Delta Capital, James served as Chairman of the Delta
Financial Services Group. He was the founder, Chairman and CEO of
ZAO DeltaCredit, Russia's first mortgage bank and was co-founder
and Chairman of ZAO DeltaLeasing (now known as Europlan), a major
provider of equipment and automobile fleet leasing in Russia. In
addition, he served as Chairman and CEO of ZAO DeltaBank which he
built into a major provider of VISA credit cards in Russia and
which was later sold to GE and renamed GE Money Bank. James was a
Merit Scholar at Hampden-Sydney College and holds a B.S. in Finance
from Virginia Tech.
John McRoberts - Past Non-executive Director
Mr McRoberts is one of the founders of Aurora Russia Limited.
John is a Director of Aurora Russia Limited and a partner and owner
of Aurora Investment Advisors Limited which manages Aurora Russia
Limited. John has been working in Russia for over 14 years. Prior
to setting up Aurora Russia, he worked as a corporate financier
completing numerous transactions including the sale of Darial TV to
Modern Times Group, the first acquisition of a Russian TV channel
by a foreign strategic buyer, the sale of an outdoor advertising
company to News Corporation and the sale of two property companies
to Raven Russia, the AIM listed property company focusing on
Russian commercial real estate. John first began working in Russia
in 1996 with a petrochemical and petroleum product trading company
advising on upstream acquisitions to secure the source of supply of
their traded products. In 1998, John set up Altium Capital's
corporate finance business (formerly Apax Partners & Co.
Corporate Finance) in Russia and ran the business until 2003.
In December 2003, John accepted the position to set up and lead
the Corporate Finance Advisory business of Deloitte & Touche in
Moscow. John left Deloitte to set up Aurora Russia. John holds an
MBA in Finance from the American Graduate School of International
Management in Arizona and a BSC in Finance from Arizona State
University.
Ben Morgan - Non-executive Director
Mr Morgan is a partner with Carey Olsen in Guernsey in the
Corporate Group. He qualified as a solicitor in 1992 and practised
with the City law firm Norton Rose, during which time he spent time
in Russia, before joining Carey Olsen in 1999. Mr Morgan is a
Director of a number of Guernsey investment funds.
John Whittle - Non-executive Director
Mr Whittle is a Chartered Accountant and holds the IOD Diploma
in Company Direction. After qualifying in 1978 he joined Price
Waterhouse in London before embarking on a career in business
services, predominantly telecoms. He co-led the business turnaround
of Talkland International (now Vodafone Retail) and was directly
responsible for the strategic shift into retail distribution and
its subsequent implementation; he subsequently worked on the GBP20
million private equity acquisition of Ora Telecom. He has served on
the boards of 3 listed companies. He was until May 2009 Finance
Director of Close Fund Services where he successfully initiated a
restructuring of client financial reporting services and was a key
member of the business transition team.
Alexandr Dumnov - Non-executive Director
Mr Dumnov is a Russian national and has considerable experience
working for and advising Russian companies. He also has strong
experience serving on the boards of both UK and Russian companies.
Most recently, Mr Dumnov was a member of the Board of Deloitte
& Touche CIS from 1998 to 2007, after which he became a Non
Executive Director of Trans-Siberian Gold plc, until 2009. He also
served as a Non Executive Director of Siberian Mining and
Metallurgical Alliance from 2003 until May 2010 and is presently a
Non Executive Director of MDM Bank.
Geoff Miller - Non-executive Director
Mr. Miller is an investment professional with over twenty years
experience in the investment company industry, and has also worked
in Russia. Now an Executive Director of Greenwich Loan Income Fund
Limited, a Guernsey-based investment company, he has been an
analyst, fund manager and non-executive director of investment
companies since 1987. He has worked in many other areas of
financial services, having been a director of both private client
wealth manager Brewin Dolphin and asset manager Exeter Asset
Management. In the investment banking arena he was Director,
Research of London-based Bridgewell Securities Limited and Head of
Research Marketing at Russian investment bank Troika Dialog in
Moscow. Mr. Miller now sits on the advisory board of
silkroutefinancial, the first emerging markets focused merchant
banking firm dedicated exclusively to the financial services
sector. Mr Miller is a resident of Guernsey.
Gilbert Chalk - Non-executive Director
Gilbert Chalk is Chairman of Castle Private Equity AG a leading
Private Equity and Venture Capital Fund of Funds that is managed by
LGT Capital Partners and listed on the Zurich Stock Exchange. In
addition he is a Director of Constantine Group Plc, a substantial
Private Group with interests in Logistics, Manufacturing, Property
and Alternative Energy and Vantage Goldfields Limited, a South
African Gold producing company, listed on the ASX. From 2000 to
2010 he was Chairman of the Baring English Growth Fund and its
Investment Committee. The Fund invested in small and mid cap
buy-outs in the UK. Previously he was the Founder and Managing
Director of Hambro European Ventures, subsequently named Duke
Street Capital. He has served as a Council Member of the British
Venture Capital Association and as Chairman of its Taxation
Committee conceived and formulated Venture Capital Trusts. He has
also worked as Head of Corporate Finance at ABSA Bank (UK) and as a
Corporate Finance executive at Hill Samuel Bank and Brandts
Limited. He holds an M.B.A. from Columbia University, New York.
Directors' Report
The Directors of Aurora Russia Limited ('the Company') present
the annual report and audited financial statements of the Company
and the Group for the year ended 31 March 2011.
Background
The Company was incorporated in Guernsey on 22 February 2006 and
commenced activities on 20 March 2006. The Company is a
closed-ended investment company and is registered in Guernsey.
Principal activity
The principal activity of the Company is private equity
investment in Russia in the financial, business and consumer
services sectors with the objective of providing Ordinary
Shareholders with an attractive level of capital growth from
investing in a diversified private equity portfolio.
Listing
The Company is traded on the Alternative Investment Market of
the London Stock Exchange ('AIM'), and has complied with the
relevant provisions of the rules governing the admission to and
operation of a company traded on the AIM.
Substantial shareholdings
The Company has been notified that the following shareholders
had a beneficial interest of 3% or more of the Company's issued
share capital as at 1 April 2011:
Number of Percentage
shares held held
Standard Life Investments 16,853,488 14.98%
Mr Tim James Slesinger
ESQ 15,560,977 13.83%
Metage Capital 8,107,254 7.21%
Scottish Widows 7,832,490 6.96%
Aurora Investment
Advisors 7,310,000 6.50%
South Yorkshire Pension Authority 5,750,000 5.11%
M&G Investment Management 5,300,000 4.71%
UBS Global Asset Management 3,373,994 3.00%
Business review
The Group's risk exposure, management objectives and policies
are disclosed in note 29 to these financial statements.
A review of the business during the year is contained in the
Chairman's Statement.
Details of significant events since the reporting date are
contained in note 33 to the financial statements.
Results and dividends
The results for the year are set out in the attached financial
statements.
The Company has not proposed or declared a dividend for the year
ended 31 March 2011 (2010: GBPnil).
Incorporation
The Company was registered in Guernsey, Channel Islands on 22
February 2006, with registered number 44388.
Directors
The Directors during the year and to date were as follows:
Date of Appointment Date of resignation
Dan Koch - Chairman from 8 11 August
September 2008 2008
Grant Cameron 24 February
2006
James Cook 22 February 17 June 2011
2006
John McRoberts 22 February 22 December
2006 2010
Ben Morgan 24 February
2006
John Whittle 17 January
2008
Alexandr Dumnov 17 June 2010
Geoff Miller 22 June 2011
Gilbert Chalk 22 June 2011
Directors' and other interests
Directors who held office during the year had the following
interests in the shares of the Company as at 1 May 2011:
Number of
ordinary
shares
Dan Koch 850,000
James Cook 299,999
The Directors have interests in the contracts with the Company
as follows:
James Cook is a Director of Aurora Investment Advisors Limited
(the 'Manager') and at the year end he owned 45% of the ordinary
shares and 33.75% of the preference shares of the Manager.
The Company had granted an option to the Manager to subscribe
for Ordinary Shares representing 20% of the issued share capital of
the Company after the exercise of the option provided that certain
performance criteria are met. During the year the share options
were cancelled (refer to note 22 and 26).
John McRoberts and James Cook are shareholders and Directors of
Aurora Russia (Cyprus) Limited, which is Investment Advisor to the
Manager.
Administration agreement: John Whittle was, until 31 May 2009, a
Director of the administrator, Close Fund Services Limited.
Legal services: Ben Morgan is a partner of Carey Olsen in
Guernsey, which provides legal services to the Company.
Annualised
Fees Other compensation Total total
Dan Koch 95,000 - 95,000 95,000
Grant Cameron 20,000 - 20,000 20,000
James Cook - - - -
John McRoberts - - - -
Alexandr Dumnov 15,778 15,778 15,778
John Whittle 28,944 - 28,944 28,944
Ben Morgan 20,000 - 20,000 20,000
Total GBP179,722 GBP0 GBP179,722 GBP179,722
----------------- ----------- ------------------- ----------- -----------
Dan Koch receives remuneration of GBP95,000 per annum. This will
be reduced to GBP50,000 per annum with effect from 1 April
2011.
Alexandr Dumnov, who was appointed on 17 June 2010, receives
remuneration of GBP20,000. It was also resolved by the Remuneration
Committee that John Whittle's remuneration would increase to
GBP30,000 effective on the same date.
There are no service contracts in existence between the Company
and any Director but each of the Directors was appointed by letter
of appointment which sets out the main terms of his
appointment.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Directors'
Report and the financial statements in accordance with applicable
law and regulations.
The Companies (Guernsey) Law, 2008, as amended (the "New Law")
requires the Directors to prepare financial statements for each
financial year. Under that New Law they have elected to prepare the
financial statements in accordance with International Financial
Reporting Standards and applicable law.
The financial statements are required by law to give a true and
fair view of the state of affairs of the Group and Company and of
the profit or loss of the Group and the Company for that
period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and estimates that are reasonable and
prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Group and the Company and to enable them
to ensure that the financial statements comply with The New Law.
They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and
the Company and to prevent and detect fraud and other
irregularities.
Disclosure of information to the auditor
The Directors who held office at the date of this Directors'
report confirm that, so far they are each aware, there is no
relevant audit information of which the Group's Auditor is unaware;
and each Director has taken all the steps that he ought to have
taken as a Director to make himself aware of any relevant audit
information and to establish that the Group's Auditor is aware of
that information.
Going concern
The Company's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chairman's Statement on pages 4 to 5 as well as
the financial position of the Company, its cash flows, liquidity
position and borrowing facilities. In addition, note 29 to the
financial statements include the company's objectives, policies and
processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging
activities; and its exposures to credit risk and liquidity
risk.
The Company has considerable financial resources across
different geographic areas and industries. As a consequence, the
Directors believe that the Company is well placed to manage its
business risks successfully despite the current uncertain economic
outlook.
Having made appropriate enquiries, the Directors have reasonable
expectation that the Group and the Company has adequate resources
to continue in operational existence for the foreseeable future.
For this reason they continue to adopt the going concern basis in
preparing the Group and the Company financial statements.
Auditor
A resolution for the re-appointment of KPMG Channel Islands
Limited will be proposed at the forthcoming annual general
meeting.
By order of the Board,
John Whittle Ben Morgan
Director Director
23 June 2011
Corporate Governance
Combined Code
The Directors' report on corporate governance is detailed on
pages 15 and 16 of these financial statements. As a Company
incorporated in Guernsey, the Company was not for the year under
review required to comply with the Combined Code on Corporate
Governance issued by the Financial Reporting Council (the "Code").
However, it is the Company's policy to comply with best practice on
good corporate governance that is applicable to closed-ended
investment companies which are traded on AIM. The Board believes
that the Company complied throughout the year under review with the
provisions set out in the Code, subject to the explanations of
non-compliance given in the Corporate Governance Report on pages 15
and 16. As the Code has been replaced with the UK Corporate
Governance Code (the "New Code") for accounting periods beginning
on or after 29 June 2010, the Company will as far as is in the
Directors' opinion appropriate comply with the provisions of the
New Code for the financial year ended 31 March 2012.
The Board and Board Committees
All the Directors of the Company are non-executive Directors.
The Board does not feel it is appropriate to appoint a chief
executive or senior independent Director as day-to-day management
of the Company's assets is delegated to the Manager.
The Chairman is Dan Koch. The Directors consider that the
Chairman is independent for the purposes of the New Code. The Board
considers that, with the exception of James Cook, the Directors are
independent of the Manager. Mr James Cook resigned as a director on
17 June 2011.
The full Board meets at least four times a year to consider, as
appropriate, such matters as overall strategy, investment
performance, share price performance, the shareholder profile of
the Company, communications with shareholders, transactional and
other general matters affecting the Company. The Board considers
that it meets sufficiently regularly to discharge its duties
effectively.
During the year the Audit Committee comprised Ben Morgan, Grant
Cameron and John Whittle. The Committee is responsible for ensuring
that the financial performance of the Company is properly reported
on and monitored. The Audit Committee reviews the annual and
interim accounts, results, announcements, internal control systems
and procedures and accounting policies of the Company. It meets a
minimum of twice a year but where appropriate the meetings shall
coincide with key dates in the Company's financial reporting cycle.
John Whittle is the Chairman of the Audit Committee. Alexandr
Dumnov was appointed to the Audit Committee on 17 June 2010.
During the year the Valuation Committee comprised Ben Morgan,
John Whittle, Grant Cameron and Dan Koch. It is responsible for
valuing proposed investments and revaluing investments on an
ongoing basis. It meets at least twice a year. John Whittle is the
Chairman of the Valuation Committee. Alexandr Dumnov was appointed
to the Valuation Committee on 17 June 2010.
The Remuneration Committee comprises Ben Morgan, John Whittle
and Dan Koch. It is responsible for reviewing the performance of
Directors, the scale and structure of remuneration and Directors'
letters of appointment. It meets a minimum of twice a year. Ben
Morgan is the Chairman of the Remuneration Committee.
The number of meetings of the full Board and those committees
attended by each Director from 1 April 2010 up to the date of this
report is set out below.
Valuation Remuneration
Full Board Audit Committee Committee Committee
Held Attended Held Attended Held Attended Held Attended
Dan Koch 12 9 N/A N/A 3 2 3 3
John
McRoberts 8 4 N/A N/A N/A N/A N/A N/A
James Cook 12 9 N/A N/A N/A N/A N/A N/A
Ben Morgan 12 9 2 1 3 2 3 2
Grant
Cameron 12 8 2 1 3 2 N/A N/A
John
Whittle 12 11 2 2 3 3 3 3
Alexandr
Dumnov 9 8 N/A N/A 2 1 N/A N/A
----------- ----- --------- ----- ---------- ----- ---------- ----- ---------
The Board receives information that it considers to be
appropriate to enable it to discharge its duties. Directors usually
receive board papers several days in advance of board meetings and
are able to consider in detail any issues to be discussed at the
relevant meeting.
All the Directors are entitled to have access to independent
professional advice at the Company's expense where they deem it
necessary to discharge their responsibilities as Directors.
The Board has delegated day-to-day management of the Company's
assets to the Manager. All decisions relating to the Company's
investment policy, investment objectives, investment decisions,
dividend policy, gearing, corporate governance procedures and
strategy in general are, however, reserved for the Board. The Board
evaluates the Manager's performance on an annual basis and monitors
the Manager to ensure that the Company's assets are being managed
in accordance with the guidelines set out by the Board.
Performance of Board and proposal for re-election
The performance of each Director will be appraised by the
Remuneration Committee prior to the convening of the Annual General
Meeting for each year. The performance of each Board committee will
be appraised by the Board as a whole. In accordance with the UK
Corporate Governance Code and the Company's articles of association
(the "Articles"), one third, or the number nearest to but not fewer
than one third, of the Directors will retire and stand for
re-election at the annual general meeting each year, provided that
each Director shall retire and stand for re-election at intervals
of no more than three years. Accordingly, Mr Cameron and Advocate
Morgan will retire and, being eligible, offer themselves for
re-election at the forthcoming annual general meeting.
On 22 June 2011 Mr Miller and Mr Chalk, biographies of whom can
be found on page 11, were appointed non-executive directors of the
Company. These appointments were made after extensive research and
consideration of suitable candidates. As they were co-opted by the
Board of Directors and in accordance with the Articles, Mr Miller
and Mr Chalk will retire at the forthcoming annual general meeting
and, being eligible, offer themselves for re-election.
Each Director is appointed subject to the provisions of the
articles of incorporation in relation to retirement as described
above.
The Directors believe that the Board has a balance of skills and
experience which enables it to provide effective strategic
leadership and proper governance of the Company. The Board believes
that each Director's performance continues to be effective and to
demonstrate commitment to the role and therefore supports the
re-election of the Chairman and each of the other Directors per the
articles of association of the Company. Information on the
Directors, including their relevant experience, is set out on pages
10 to 11.
Audit and internal controls
The Board reviewed the effectiveness of the Company's system of
internal controls, including financial, operational and compliance
controls and risk management systems and has put in place
procedures for the review of such controls on an annual basis. Risk
is managed by the Directors rather than eliminated and can only
provide reasonable assurance against material misstatement or
loss.
The Audit Committee meets at least twice a year and considers
reports from the independent auditors, the Manager and the
administrator. The main responsibilities of the Audit Committee
include monitoring the integrity of the Company's financial
statements and appropriateness of its accounting policies,
reviewing the effectiveness of the internal control systems and
making recommendations to the Board regarding the appointment and
independence of the external auditor and the objectivity and
effectiveness of the audit process, with particular regard to the
level of non-audit fees, if any. Shareholders have the opportunity
at each annual general meeting to vote on the election of the
independent auditors for the forthcoming year.
In view of the small number of transactions to date the Company
has not yet considered it necessary to establish an internal audit
function. The Board considers that the systems and procedures put
in place by the Manager and the administrator have been adequate to
safeguard shareholders' interests. The Board annually reviews an
internal controls and risks monitoring report both for the Company
and its subsidiaries. The Board will continue to keep this matter
under review.
Relations with shareholders
The Board welcomes correspondence from shareholders, addressed
to the Company's registered office. All shareholders have the
opportunity to put questions to the Board at the Annual General
Meeting.
The Board believes that sustainable financial performance and
delivering on the objectives of the Company are indispensable
measures in order to build trust with the Company's shareholders.
In order to promote a clear understanding of the Company, its
objectives and financial results, the Board aims to ensure that
information relating to the Company is disclosed in a timely manner
and in a format suitable to the shareholders of the Company.
The Board has also encouraged the Manager to identify a sample
of investors for periodic meetings to encourage communication and
to ensure the concerns of shareholders are addressed.
The Articles of Incorporation state that a Continuation Vote via
an Ordinary resolution will be held proposing the extension of the
life of the Company at the 2015 Annual General Meeting and every 5
years thereafter. The last such Continuation Vote was passed at the
2010 Annual General Meeting.
Independent auditor's report to the members of Aurora Russia
Limited
We have audited the Group and Company financial statements (the
"financial statements") of Aurora Russia Limited (the "Company")
for the year ended 31 March 2011 which comprise the Consolidated
and Company Statements of Comprehensive Income, the Consolidated
and Company Statements of Financial Position, the Consolidated and
Company Statements of Changes in Equity and the Consolidated and
Company Statements of Cash Flows and the related notes. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards as issued by the International Accounting Standards Board
('IASB').
This report is made solely to the Company's members, as a body,
in accordance with section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Respective responsibilities of the Directors and Auditors
As explained more fully in the Statement of Directors'
Responsibilities set out on page 14, the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board's (APB's) Ethical Standards for
Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Group's and Company's circumstances and have
been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the
Board of Directors; and the overall presentation of the financial
statements. In addition, we read all the financial and
non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements. If we become
aware of any apparent material misstatements or inconsistencies we
consider the implications for our report.
Opinion
In our opinion the financial statements:
-- give a true and fair view of the state of the Group's and
Company's affairs as at 31 March 2011 and of Group's and Company's
loss for the year then ended;
-- are in conformity with International Financial Reporting
Standards as issued by the IASB; and
-- comply with the Companies (Guernsey) Law, 2008.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion:
-- the Company has not kept proper accounting records; or
-- the financial statements are not in agreement with the
accounting records; or
-- we have not received all the information and explanations,
which to the best of our knowledge and belief are necessary for the
purpose of our audit."
KPMG Channel Islands Limited
Chartered Accountants
PO Box 20
20 New Street
St Peter Port
Guernsey
GY1 4AN
23 June 2011
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2011
Year Year
ended ended
31 March 31 March
2011 2010
Notes GBP'000 GBP'000
Revenue: 16,952 5,193
---------
- Fees 684 323
- Storage 6,939 1,575
- Warehousing, transport, data processing
and other 7,979 1,420
- Interest on long term mortgages and
other loans 943 1,062
- Loan interest income - 321
- Interest income 220 245
- Dividend income 187 247
--------- ---------
Administration and operating expenses 4 (21,656) (10,066)
Fair value movements on revaluation
of investments 13 1,273 5,629
Exchange losses (548) (8)
Operating (loss)/income (3,979) 748
--------- ---------
Interest expense (585) (95)
(Loss)/profit before income tax (4,564) 653
Income tax (expense)/ credit 5 (119) 3
(Loss)/profit for the year (4,683) 656
========= =========
Other comprehensive income
Foreign currency translation differences
for foreign operations 300 337
Total comprehensive (loss)/income for
the year (4,383) 993
========= =========
(Loss)/profit attributable to:
Owners of the Company 23 (4,676) 665
Non-controlling interest (7) (9)
(Loss)/profit for the year (4,683) 656
========= =========
Total comprehensive (loss)/income attributable
to:
Owners of the Company (4,382) 1,012
Non-controlling interest (1) (19)
Total comprehensive (loss)/income for
the year (4,383) 993
========= =========
Basic and diluted (loss)/earnings per
share 6 (4.16p) 0.80p
========= =========
All items in the above statement derive
from continuing operations.
The accompanying notes on pages 26 to 57 form an integral
part of these financial statements.
Company Statement of Comprehensive Income
For the year ended 31 March 2011
Year Year
ended ended
31 March 31 March
2011 2010
Notes GBP'000 GBP'000
Revenue 210 659
--------- ---------
- Loan interest income - 399
- Interest income 23 13
- Dividend income 187 247
--------- ---------
Administration and operating expenses 4 (3,984) (3,341)
Fair value movements on revaluation
of investments 13 (1,700) 7,656
Exchange losses (4) (146)
Operating (loss)/income before tax (5,478) 4,828
--------- ---------
Income tax (expense)/ credit 5 - -
Profit and total comprehensive (loss)/profit
for the year 23 (5,478) 4,828
========= =========
Basic and diluted (loss)/profit per
share 6 (4.87p) 5.78p
========= =========
All items in the above statement derive
from continuing operations.
The accompanying notes on pages 26 to 57 form an integral
part of these financial statements.
Consolidated Statement of Financial Position
As at 31 March 2011
31 March2011 31 March2010
Notes GBP'000 GBP'000
Non-current assets
Goodwill 7 14,164 14,164
Intangible assets 8 10,793 11,078
Property, plant and equipment 10 8,782 6,444
Investments - at fair value through
profit and loss 13 45,805 43,085
Loans and advances to customers 14 7,787 8,618
Deferred tax asset 5 236 190
87,567 83,579
------------- -------------
Current assets
Trade and other receivables 15 4,404 4,450
Corporate Loans 434 -
Cash and cash equivalents 16 6,739 13,242
Assets classified as held for sale 9 657 845
12,234 18,537
------------- -------------
Total assets 99,801 102,116
============= =============
Non-current liabilities
Finance leases 17 1,777 1,567
Deferred tax liability 5 1,792 1,699
-------------
3,569 3,266
------------- -------------
Current liabilities
Finance leases 17 1,016 719
Tax payable 74 -
Trade and other payables 19 5,297 4,602
6,387 5,321
------------- -------------
Total liabilities 9,956 8,587
============= =============
Equity
Share capital 20 1,125 1,125
Special reserve 21 84,073 84,073
Share options reserve 22 128 2,437
Retained earnings 23 4,015 5,857
Non-controlling interest 673 500
Translation reserve 24 (169) (463)
Total equity 89,845 93,529
============= =============
Total equity and liabilities 99,801 102,116
============= =============
Net asset value per share - Basic 25 79.9p 83.1p
and Diluted
============= =============
The accounts on pages 18 to 57 were approved by the Board of Directors
on 23 June 2011 and signed on its behalf by:
Director Director
The accompanying notes on pages 26 to 57 form an integral
part of these financial statements.
Company Statement of Financial Position
As at 31 March 2011
31 March 31 March
2011 2010
Notes GBP'000 GBP'000
Non-current assets
Investment in subsidiaries - at
fair value through profit and loss 11 47,300 50,300
Investments - at fair value through
profit and loss 13 43,200 41,900
90,500 92,200
----------------- ----------------------
Current assets
Trade and other receivables 15 30 1,171
Cash and cash equivalents 16 3,794 5,704
3,824 6,875
----------------- ----------------------
Total assets 94,324 99,075
================= ======================
Current liabilities
Trade and other payables 19 236 89
Total liabilities 236 89
================= ======================
Equity
Share capital 20 1,125 1,125
Special reserve 21 84,073 84,073
Share options reserve 22 - 2,420
Retained earnings 23 8,890 11,368
Total equity 94,088 98,986
================= ======================
Total equity and liabilities 94,324 99,075
================= ======================
Net asset value per share - Basic
and Diluted 25 83.6p 88.0p
================= ======================
Director Director
Consolidated Statement of Changes in Equity
For the year ended for 31 March 2011
Share
Share Special Options Retained Translation Non-controlling
Capital Reserve Reserve Earnings Reserve Total Interest Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the year 1 April 2009
to 31 March 2010
Balance as at 1 April 2009 750 70,750 1,820 5,320 (810) 77,830 - 77,830
Total comprehensive income
for the year
Profit for the year - - 665 - 665 (9) 656
Other comprehensive income
for the year
Foreign currency translation
gain - - - 347 347 (10) 337
Transactions with owners,
recorded directly in equity
Contributions and
distributions to owners
Issue of ordinary shares 375 13,825 - - - 14,200 - 14,200
Share issue costs on
Placement Shares issued (502) - - - (502) - (502)
Acquisition of subsidiary - - - - - 390 390
Recognition of share-based
payments 22 - 617 - - 617 1 618
Changes in ownership
interests in subsidiaries
that do not result in a loss
of control
Acquisition of
non-controlling interests in
subsidiary 11,23 - - (128) - (128) 128 -
At 31 March 2010 1,125 84,073 2,437 5,857 (463) 93,029 500 93,529
======== ========== ========== ========= ============ ======== ================ ========
For the year 1 April 2010
to 31 March 2011
Balance as at 1 April 2010 1,125 84,073 2,437 5,857 (463) 93,029 500 93,529
Total comprehensive loss for
the year
Loss for the year - - - (4,676) - (4,676) (7) (4,683)
Other comprehensive income
for the year
Foreign currency translation
gain - - - - 294 294 6 300
Transactions with owners,
recorded directly in equity
Recognition of share-based
payments 22 - 691 - - 691 8 699
Cancellation of Share options
in Company 26 - 3,000 3,000 - - - -
Changes in ownership
interests in subsidiaries
that do not result in a loss
of control
Dilution of controlling
interest in subsidiary 11,23 - (166) - (166) 166 -
-
At 31 March 2011 1,125 84,073 128 4,015 (169) 89,172 673 89,845
==================== ====== ========= ============ ======== ================ ========
Company Statement of Changes in Equity
For the year ended 31 March 2011
Share
Share Special Options Retained
Notes Capital Reserve Reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the year 1
April 2009 to 31
March 2010
Balance as at 1
April 2009 750 70,750 1,820 6,540 79,860
Total
comprehensive
profit for the
year
Profit for the
year - - - 4,828 4,828
Transactions
with owners,
recorded
directly in
equity
Contributions
and
distributions to
owners
Issue of
ordinary
shares 375 13,825 - - 14,200
Share issue
costs on
Placement
shares issued - (502) - - (502)
Recognition of
share-based
payments 22 - - 600 - 600
At 31 March 2010 1,125 84,073 2,420 11,368 98,986
======== ======== ======== ========= ========
For the year 1
April 2010 to 31
March 2011
Balance as at 1
April 2010 1,125 84,073 2,420 11,368 98,986
Total
comprehensive
loss for the
year
Loss for the
year - - - (5,478) (5,478)
Transactions
with owners,
recorded
directly in
equity
Recognition of
share-based
payments 22 - - 580 - 580
Cancellation of
share options - - (3,000) 3,000 -
At 31 March 2011 1,125 84,073 - 8,890 94,088
======== ======== ======== ========= ========
The accompanying notes on pages 26 to 57 form an
integral part of these financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 March 2011
Year Year
ended ended
31 March 31 March
Notes 2011 2010
Cash flows from operating activities GBP'000 GBP'000
(Loss)/profit before tax (4,564) 653
Loan interest - (321)
Bank interest (220) (245)
Dividend income (187) (247)
--------- ---------
(4,971) (160)
Adjustments for movements in working
capital:
Decrease/(increase) in operating trade
and other receivables 180 (554)
Increase in operating trade and
other payables 69 1,422
Increase in loans 661 -
Decrease in interbank loans (439) -
Adjust for:
Revaluation of investments 13 (1,273) (5,628)
Recognised share based payments 22 691 617
Depreciation and amortisation 1,701 635
Loss on property, plant and equipment
written off 45 61
Provision for loan losses (257) (370)
Allowance for doubtful debts 25 92
Other interest income (929) (1,061)
Increase in non-current assets held
for sale 246 -
Interest paid - (83)
Taxation paid (156) (62)
Dividend income 187 247
Interest received 1,148 1,404
Exchange gains 548 8
Loss on forex contract closed out - (46)
Loans advanced to customers - 527
Net cash outflow from operating
activities (2,524) (2,951)
--------- ---------
Cash flows from investing activities
Acquisition of subsidiary net of
cash acquired 12 - (567)
Acquisition of investments (bonds) (1,475) (1,098)
Acquisition of intangible assets (81) -
Acquisition of property, plant and
equipment (2,097) (549)
Loans advanced to associated company - (307)
Deposits 123 200
Net cash outflow from investing
activities (3,530) (2,321)
--------- ---------
Cash flows from financing activities
Proceeds from issue of ordinary
share capital - 7,000
Share issue costs 21 - (502)
Net proceeds from borrowing of short
term loans 433 -
Interest income - long term loans (19) -
Financial lease payments - principal (1,003) (284)
Net cash (outflow)/inflow from financing
activities (589) 6,214
--------- ---------
Net (decrease)/increase in cash and
cash equivalents (6,643) 942
--------- ---------
Opening cash and cash equivalents 13,242 12,022
Effect of exchange rate changes 140 278
Closing cash and cash equivalents 16 6,739 13,242
========= =========
The accompanying notes on pages 26 to 57 form an integral
part of these financial statements.
Company Statement of Cash Flows
For the year ended 31 March 2011
Year Year
ended ended
31
March 31 March
Note 2011 2010
GBP'000 GBP'000
Cash flows from operating activities
(Loss)/profit before tax (5,478) 4,828
Loan interest - (399)
Bank interest (23) (13)
Dividend income (187) (247)
-------- -----------
(5,688) 4,169
Adjustments for movements in working
capital:
Decrease/(increase) in operating trade and other
receivables 1,143 (75)
Increase/(decrease) in operating trade and other
payables 147 (39)
Adjust for:
Revaluation of investments 1,700 (7,656)
Recognised share based payments 22 580 600
Exchange losses 4 146
Loss on forex contract closed
out - (46)
Dividend income 187 247
Bank interest received 21 29
Net cash outflow from operating
activities (1,906) (2,625)
-------- -----------
Cash flows from investing activities
Acquisition of subsidiary - (1,985)
Loans advanced to associated company - (307)
Net cash outflow from investing
activities - (2,292)
-------- -----------
Cash flows from financing activities
Proceeds from issue of ordinary
share capital - 7,000
Issue costs 21 - (502)
Net cash inflow from financing
activities - 6,498
-------- -----------
Net (decrease)/increase in cash and cash equivalents (1,906) 1,581
-------- -----------
Opening cash and cash equivalents 5,704 4,123
Effect of foreign exchange movements (4) -
Closing cash and cash equivalents 16 3,794 5,704
======== ===========
Notes to the Financial statements
For the year ended 31 March 2011
1. Reporting entity
Aurora Russia Limited (the 'Company') is a closed-ended
investment fund that was incorporated in Guernsey on 22 February
2006, and was admitted to the Alternative Investment Market of the
London Stock Exchange ('AIM') on 20 March 2006. The Company was
established to acquire interests in small and mid-sized private
companies in Russia, focusing on the financial, business and
consumer services sectors.
The consolidated financial statements of the Company as at and
for the year ended 31 March 2011 comprise the Company and its
subsidiaries (together referred to as the "Group" and individually
as "Group entities").
2. Basis of preparation
2.1 Statement of compliance
The financial statements give a true and fair view and are
prepared in accordance with International Financial Reporting
Standards which comprise standards and interpretations approved by
the International Accounting Standards Board and International
Accounting Standards and Standing Interpretations Committee
interpretations approved by the International Accounting Standards
Committee that remain in effect and applicable legal and regulatory
requirements of Guernsey Law and per ('AIM'). These financial
statements comply with The Companies (Guernsey) Law, 2008, as
amended.
2.2 Basis of Measurement
The consolidated financial statements have been prepared on the
historical cost basis except for the following:
-- derivative financial instruments are measured at fair
value
-- financial instruments at fair value through profit or loss
are measured at fair value
The significant accounting policies adopted are set out in note
3.
2.3 New standards and interpretations adopted during the
year
The following standards, amendments and interpretations are
effective for periods beginning 1 January 2010 but had no impact on
the financial position or performance of the Group:
IFRS 2: Share-based payments (Amendment)
IFRS 5: Non-Current Assets Held for Sale and Discontinued
Operations (Amendment)
IAS1: Presentation of Financial Statements (Revised)
IAS7: Statement of Cash Flows (Revised)
IAS17: Leases (Amendment)
IAS 32 Financial Instruments: Presentation (Amendment)
IAS36: Impairment of Assets (Amendment)
IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments
2.4 New standards and interpretations not yet adopted
Other than those explained in note 2.3, a number of new
standards, amendments to standards and interpretations are not yet
effective for the year ended 31 March 2011, and have not been
applied in preparing these consolidated financial statements. None
of these will have a significant effect on the consolidated
financial statements of the Group:
-- IFRS 9 Financial Instruments- for accounting periods
commencing on or after 1 January 2013
IFRS 9 deals with classification and measurement of financial
assets and its requirements represent a significant change from the
existing requirements in IAS 39 in respect of financial assets:
amortised cost and fair value. Financial assets are measured at
amortised cost when the business model is to hold assets in order
to collect contractual cash flows. All other financial assets are
measured at fair value with changes recognised in profit or loss.
For an investment in an equity instrument that is not held for
trading, an entity may on initial recognition elect to present all
fair value changes from the investment in other comprehensive
income. IFRS 9 will be adopted for the first time for the year
ending 31 March 2014 and will be applied retrospectively, subject
to certain transitional provisions. The company is currently in the
process of evaluating the potential effect of this standard. The
standard is not expected to have a significant impact on the
financial statements since all of the company's financial assets
are designated at fair value through profit and loss.
-- IAS 24 Related Party Transactions (Revised) - for accounting
periods commencing on or after 1 January 2011
The definition of related party has been clarified to simplify
the identification of related party relationships, particularly in
relation to significant influence and joint control. However, the
company has taken advantage of the exemption available to it under
IAS 28 and the standard is not expected to have a significant
impact on the financial statements. This standard will be adopted
retrospectively for the first time for the year ending 31 March
2012.
2.5 Critical accounting judgements and key sources of estimation
uncertainty
The preparation of Financial Statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and the reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making
judgements about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the year in which the
estimate is revised if the revision affects only that year or in
the year of the revision and future years if the revision affects
both current and future years.
The following areas are a key source of estimated uncertainty
for the Group and are included within the relevant accounting
policy note:
-- Investments (see note 3.12.2)
-- Loans and advances to customers (see note 3.12.4)
-- Goodwill (see note 3.2.2)
-- Depreciation of property, plant and equipment (see note
3.15)
-- Intangible assets (see note 3.16)
The preparation of the Group's financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets, liabilities and contingencies at the
time of the Group's financial statements, and revenue and expenses
during the reporting period. Actual results could differ from those
estimated. Significant estimates in the Group's financial
statements include the amounts recorded for the fair value of the
investments. By their nature, these estimates and assumptions are
subject to measurement uncertainty and the effect on the Group's
financial statements of changes in estimates in future periods
could be significant.
2.6 Functional and presentation currencies
The Directors have selected Sterling as the presentation
currency of the Group which is also the functional currency of the
Company as it is the currency its shares are issued in and the
currency in which the Company has received all of its funding. All
information presented in sterling has been rounded to the nearest
thousand unless otherwise stated.
3. Significant Accounting Policies
The accounting policies set out below have been applied
consistently to all periods presented in these financial
statements, and have been applied consistently by Group
entities.
3.1 Accounting for business combinations
The Group has applied the acquisition method for the business
combination disclosed in note 12.
Control is the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities.
In assessing control, the Group takes into consideration potential
voting rights that currently are exercisable. The acquisition date
is the date on which control is transferred to the acquirer.
Judgement is applied in determining the acquisition date and
determining whether control is transferred from one party to
another.
The Group measures goodwill as the fair value of the
consideration transferred including the recognised amount of any
non-controlling interest in the acquiree, less the net recognised
amount (generally fair value) of the identifiable assets acquired
and liabilities assumed, all measured as of the acquisition
date.
Consideration transferred includes the fair values of the assets
transferred, liabilities incurred by the Group to the previous
owners of the acquiree, and equity interests issued by the Group.
Consideration transferred also includes the fair value of any
contingent consideration and share-based payment awards of the
acquiree that are replaced mandatorily in the business combination
(see below). If a business combination results in the termination
of pre-existing relationships between the Group and the acquiree,
then the lower of the termination amount, as contained in the
agreement, and the value of the off-market element is deducted from
the consideration transferred and recognised in other expenses.
When share-based payment awards exchanged (replacement awards)
for awards held by the acquiree's employees (acquiree's awards)
relate to past services, then a part of the market-based measure of
the awards replaced is included in the consideration transferred.
If they require future services, then the difference between the
amount included in consideration transferred and the market-based
measure of the replacement awards is treated as post-combination
compensation cost.
A contingent liability of the acquiree is assumed in a business
combination only if such a liability represents a present
obligation and arises from a past event, and its fair value can be
measured reliably.
The Group measures any non-controlling interest at its
proportionate interest in the identifiable net assets of the
acquiree.
Transaction costs that the Group incurs in connection with a
business combination, such as finder's fees, legal fees, due
diligence fees, and other professional and consulting fees are
expensed as incurred.
3.2 Basis of consolidation
3.2.1 Subsidiaries
The consolidated financial statements incorporate the financial
statements of the Company and any entities controlled by the
Company (the 'Group') as at 31 March each year. Control is achieved
where the Company has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits
from its activities. In assessing control, potential voting rights
that are currently exercisable are taken into account.
On acquisition the assets and liabilities and contingent
liabilities of a subsidiary are measured at their fair values at
the date of acquisition. Any excess of the cost of acquisition over
the fair values of the identifiable net assets acquired is
recognised as goodwill. Any deficiency of the cost of acquisition
below the fair values of the identifiable net assets acquired (i.e.
discount on acquisition) is credited to the profit or loss in the
period of acquisition.
The results of subsidiaries acquired or disposed of during the
period are included in the consolidated statement of comprehensive
income from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
3.2.2 Goodwill
The Group measures goodwill as the fair value of the
consideration transferred including the recognised amount of any
non-controlling interest in the acquiree, less the net recognised
amount (generally fair value) of the identifiable assets acquired
and liabilities assumed, all measured as of the acquisition date.
Goodwill is initially recognised as an asset at cost and is
subsequently measured at cost less any accumulated impairment
losses. Goodwill which is recognised as an asset is reviewed for
impairment at least annually. Any impairment is recognised
immediately in profit or loss and is not subsequently reversed.
3.2.3 Associates
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating
policies. Significant influence is presumed to exist when the Group
holds between 20 and 50 percent of the voting power of another
entity.
The Group has taken advantage of the exemption available to it
under IAS 28, 'Investments in associates' and is accounting for the
investments in Unistream and Grindelia at fair value through profit
or loss, which normally as a result of the size of the stake in
these two companies would potentially qualify as associated
companies and would be required to be equity accounted.
3.3 Accounting for acquisitions of non-controlling interests
The Group early adopted IFRS 3 Business Combinations (2008) and
IAS 27 Consolidated and Separate Financial Statements (2008) for
acquisitions of non-controlling interests occurring in the
financial year starting 1 April 2009. The Group applied IAS 27
(2008) for the acquisition of non-controlling interests as
explained in note 12.
The amendments to IAS 27 required changes in the parent's
ownership interest in a subsidiary after control is obtained that
do not result in a loss of control to be accounted for as
transactions with equity holders in their capacity as equity
holders. As a result no gain or loss on such changes was recognised
in profit or loss. Also, no change in the carrying amounts of
assets (including goodwill) or liabilities was recognised as a
result of such transactions. This approach is consistent with
treating non-controlling interest as a component of equity.
The carrying amounts of the controlling and non-controlling
interest were adjusted to reflect the relative change in their
interests in the subsidiary's net assets. Any differences between
the amount by which the non-controlling interest was adjusted and
the fair value of the consideration paid or received, if any, was
recognised directly in equity and attributed to equity holders of
the parent. The change in accounting policy was applied
prospectively and had no material impact on earnings per share.
3.4 Determination and presentation of operating segments
From 1 April 2009 the Group determined and presented operating
segments based on the information that internally is provided to
the Board of Directors of the Company, who is the Group's chief
operating decision maker. This change in accounting policy in the
prior year was due to the adoption of IFRS 8 Operating Segments.
Previously operating segments were determined and presented in
accordance with IAS 14 Segment Reporting. The new accounting policy
in respect of segment operating disclosures is presented as
follows:
The prior year change in accounting policy only impacted
presentation and disclosure aspects, there was no impact on
earnings per share.
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to
transactions with any of the Group's other components. An operating
segment's operating results are reviewed regularly by the Board of
Directors of the Company to make decisions about resources to be
allocated to the segment and assess its performance, and for which
discrete financial information is available.
3.5 Presentation of financial statements
The Group applied revised IAS 1 Presentation of Financial
Statements (2007), which became effective for years beginning on or
after 1 January 2009 and was applied by the Group from 1 April
2009. As a result, the Group presents in the consolidated statement
of changes in equity all owner changes in equity, whereas all
non-owner changes in equity are presented in the consolidated
statement of comprehensive income.
Since the change in accounting policy in the previous year only
impacted presentation aspects, there was no impact on earnings per
share.
3.6 Foreign currency transactions
Transactions in currencies other than sterling are translated at
the foreign exchange rates ruling at the date of the transactions.
Monetary assets and liabilities denominated in foreign currencies
at the reporting date are translated into sterling at the exchange
rate ruling at that date. Foreign exchange differences arising on
translation are recognised in the profit or loss. Non-monetary
assets and liabilities that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate
at the date of the transaction. Non-monetary assets and liabilities
denominated in foreign currencies that are stated at fair value are
translated into sterling at foreign exchange rates ruling at the
dates the fair value was determined.
On consolidation, the assets and liabilities of the Group's
overseas operations are translated at exchange rates prevailing on
the reporting date. Income and expenses are translated at the
average exchange rates for the period unless exchange rates
fluctuate significantly. Exchange differences arising, if any, are
recognised in other comprehensive income and transferred to the
Group's translation reserve. Such translation differences are
recognised as income or expenses in the period in which the
operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the rate prevailing on the
reporting date.
3.7 Revenue
Revenue from the sale of services is measured at the fair value
of the consideration received or receivable, net of returns,
allowances and trade discounts. Revenue from services rendered is
recognised in the statement of changes of comprehensive income when
it is probable that the economic benefits associated with the
transaction will flow to the Group and the amount of revenue can be
measured reliably. Revenue from services are recognised in the
accounting period in which the services are rendered, by reference
to stage of completion of the specific transaction assessed on the
basis of the actual service provided as a proportion of the total
services to be provided.
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset's net carrying amount.
Brokerage fees received from services provided to the banks are
recognised in the month when the act of service is rendered with
the bank and the loan agreement signed by the client.
Dividend income from investments is recognised when the
Company's right to receive payment has been established, which is
the last date of registration.
3.8 Expenses
All expenses are accounted for on an accruals basis through
profit or loss.
3.9 Set up expenses
The preliminary expenses directly attributable to the issuance
and listing of equity instruments of the Company that would
otherwise have been avoided are deducted from the share premium
account.
3.10 Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the Chief Operating Decision Maker.
The Chief Operating Decision Maker, who is responsible for
allocating resources, assessing performance of the operating
segments and making strategic decisions, has been identified as the
Board of Directors of the Company.
3.11 Taxation
The Company is exempt from Guernsey taxation on income derived
outside Guernsey and bank interest earned in Guernsey under the
Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989, for which it
pays an annual fee of GBP600. With effect from 1 January 2008,
Guernsey abolished the exempt Company regime. As a publicly
available fund, it is eligible to apply for exempt status however,
and liable to the annual exempt fee if it chooses to do so.
The Group is liable to pay tax at a rate of 20% (2010: 20%)
arising on its activities in Russia.
The Group is liable to pay tax at a rate of 10% (2010: 10%)
arising on its activities in Cyprus.
The Group is liable to pay tax at a rate of 19% (2010: 19%)
arising on its activities in Poland.
The Group is liable to pay tax at a rate of 25%, 20%, 20% and
10% arising on its activities in Ukraine, Kazakhstan, Armenia and
Bulgaria respectively.
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in profit
or loss because it excludes items of income and expense that are
taxable or deductible in other years and it further excludes items
that are never taxable or deductible. The Group's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where
the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
A deferred tax asset is recognised to the extent that is
probable that future taxable profits will be available against
which the temporary difference can be utilised. Deferred tax assets
are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be
realised.
3.12 Financial Instruments
Financial assets and financial liabilities are recognised on the
Group's statement of financial position when the Group becomes a
party to the contractual provisions of the instrument, including
unconditional commitments to make investments. The Group offsets
financial assets and liabilities if the Group has a legally
enforceable right to set off the recognised amounts and interests
and intends to settle on a net basis.
3.12.1 Forward exchange contracts
The Group's activities expose it to financial risks of changes
in foreign currency exchange rates. The Group uses forward foreign
exchange contracts to hedge net monetary assets denominated in
foreign currencies, where practicable, other than the Russian
Rouble, and not for speculative purposes. At the reporting date
outstanding forward exchange contracts are measured at their marked
to market price, and are included in the financial statements as
either a derivative asset or liability. Gains or losses arising on
forward foreign exchange contracts are taken to profit or loss.
Hedge accounting is not applied.
3.12.2 Investments
Unquoted investments, including investments in subsidiaries, as
well as loans receivable from associated companies are designated
as fair value through profit and loss. Investments are initially
recognised at cost on a trade date basis. The investments are
subsequently re-measured at fair value, which is determined by the
Directors on the recommendation of the Valuation Committee.
Unrealised gains and losses arising from the revaluation of
investments are taken directly to profit or loss. Investments
deemed to be denominated in a foreign currency are revalued in
Pounds Sterling terms even if there is no revaluation of the
investment in its currency of denomination. Acquisition of
investments is recorded on the trade date or when substantially all
the risks and rewards of ownership transfer to the Group.
Investments are held in Russian Roubles, which the Directors
believe best reflect the underlying nature of the currency exposure
of the investee companies. The investments are translated into
Sterling at period end, which is the functional currency of the
Group and the presentation currency of the consolidated financial
statements. Unrealised gains and losses arising from the
revaluation of investments are taken directly to profit or
loss.
The fair value of the investments is arrived at on the basis of
the recommendation of the Company's Valuation Committee, based on
independent professional advice. Fair value is determined as
follows:
Unquoted securities are valued based on the realisation value
which is estimated by the Valuation Committee with prudence and
good faith. The Valuation Committee will take into account the
guidelines and principles for valuation of Portfolio Companies set
out by the International Private Equity and Venture Capital
Association (IPEVCA), with particular consideration of the
following factors:
-- Fair value is the amount for which an asset could be
exchanged between knowledgeable, willing parties in an arm's length
transaction.
-- The valuation methodology applied uses reasonable assumptions
and estimations and takes account of the nature, facts and
circumstances of the investment and its materiality in the context
of the total portfolio.
-- An appropriate methodology incorporates available information
about all factors that are likely material to affect the fair value
of the investment. The valuation methodologies are
appliedconsistently from period to period, except where a change
would result in a better estimate of fair value. Any changes in
valuation methodologies will be clearly disclosed in the financial
statements.
The most widely used methodologies are listed below (discussed
further in note 11). In assessing which methodology is appropriate,
the Valuation Committee is predisposed towards those methodologies
that draw upon market-based measures of risk and return.
-- Market Approach
-- Income Approach
-- Net Assets Approach
Investments made by the Group are generally considered to be
long term investments and are not intended to be disposed of on a
short term basis. Accordingly valuations do not necessarily
represent the amounts which may eventually be realised from sales
or other disposals of investments. Values of unlisted investments
may differ significantly from the values that would have been used
had a ready market for these assets existed. The fair value of
financial assets traded in active markets are based on quoted
market prices at the reporting date. The quoted market price used
for financial assets held by the group is the current bid
price.
3.12.3 Impairment of financial assets
At each reporting date the Group assesses whether there is
objective evidence that financial assets not carried at fair value
through profit or loss are impaired. Financial assets are impaired
when objective evidence demonstrates that a loss event has occurred
after the initial recognition of the asset, and that the loss event
has an impact on the future cash flows of the asset that can be
estimated reliably.
Objective evidence that financial assets (including equity
securities) are impaired can include default or delinquency by a
borrower, restructuring of a loan or advance by the Group on terms
that the Group would not otherwise consider, indications that a
borrower or issuer will enter bankruptcy, the disappearance of an
active market for a security, or other observable data relating to
a group of assets such as adverse changes in the payment status of
borrowers or issuers in the group, or economic conditions that
correlate with defaults in the group. In addition, for an
investment in an equity security, a significant or prolonged
decline in its fair value below its cost is objective evidence of
impairment.
The Group considers evidence of impairment for loans and
advances at both a specific asset and collective level. All
individually significant loans and advances and held-to-maturity
investment securities are assessed for specific impairment. All
individually significant loans and advances and held-to-maturity
investment securities found not to be specifically impaired are
then collectively assessed for any impairment by grouping together
loans and advances and held-to-maturity investment securities with
similar risk characteristics.
In assessing collective impairment the Group uses statistical
modelling of historical trends of the probability of default,
timing of recoveries and the amount of loss incurred, adjusted for
the management's judgement as to whether current economic and
credit conditions are such that the actual losses are likely to be
greater or less than suggested by historical modelling. Default
rates, loss rates and the expected timing of future recoveries are
regularly benchmarked against actual outcomes to ensure that they
remain appropriate.
Impairment losses on assets carried at amortised cost are
measured as the difference between the carrying amount of the
financial asset and the present value of estimated future cash
flows discounted at the asset's original effective interest rate.
Losses are recognised in profit or loss and reflected in an
allowance account against loans and advances. Interest on the
impaired asset continues to be recognised through the unwinding of
the discount. When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment loss is
reversed through profit or loss.
3.12.4 Loans and advances to customers
Loans granted by the Group are initially recognised at fair
value plus related transaction costs on the date they originated.
Where the fair value of consideration given does not equal the fair
value of the loan, for example where the loan is issued at lower
than market rates, the difference between the fair value of
consideration given and the fair value of the loan is recognised as
a loss on initial recognition of the loan and included in the
consolidated statement of comprehensive income according to the
nature of these losses. Subsequently, loans are carried at
amortised cost. Loans to customers are carried net of any
impairment losses.
All loans are secured against the property of the borrower, with
adequate provisions calculated and managed by the Risk Management
Department.
The Group derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire, or when
it transfers the rights to receive the contractual cash flows on
the financial asset in a transaction in which substantially all the
risks and rewards of ownership of the financial asset are
transferred. Any interest in transferred financial assets that is
created or retained by the Group is recognised as a separate asset
or liability.
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire.
The Group enters into transactions whereby it transfers assets
recognised on its statement of financial position, but retains
either all or substantially all of the risks and rewards of the
transferred assets or a portion of them. If all or substantially
all risks and rewards are retained, then the transferred assets are
not derecognised from the statement of financial position.
Transfers of assets with retention of all or substantially all
risks and rewards include, for example, securities lending and
repurchase transactions.
In transactions in which the Group neither retains nor transfers
substantially all the risks and rewards of ownership of a financial
asset, it derecognises the asset if it does not retain control over
the asset. The rights and obligations retained in the transfer are
recognised separately as assets and liabilities as appropriate. In
transfers in which control over the asset is retained, the Group
continues to recognise the asset to the extent of its continuing
involvement, determined by the extent to which it is exposed to
changes in the value of the transferred asset.
3.12.5 Cash and cash equivalents
Cash held with banks and short term deposits that are held to
maturity are carried at amortised cost. Cash and cash equivalents
consist of cash on hand and short term deposits in banks with an
original maturity of three months or less.
3.12.6 Trade receivables
Trade receivables do not carry any interest and are short-term
in nature. Trade receivables are recognised and carried at the
lower of their original invoiced value and recoverable amount.
Where the time value of money is material, receivables are carried
at amortised cost. Allowance is made when there is objective
evidence that the Group will not be able to recover balances in
full. Balances are written off when the probability of recovery is
assessed as being remote. They are accordingly stated at amortised
cost as reduced by appropriate allowances for estimated
irrecoverable amounts.
3.12.7 Trade payables
Trade payables are not interest bearing and are recognised and
carried at amortised cost less repayments.
3.12.8 Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangement entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities. Financial liabilities and equity instruments are
recorded at the proceeds received, net of issue costs.
The Group initially recognises debt securities issued and
subordinated liabilities on the date that they are originated. All
other financial liabilities (including liabilities designated at
fair value through profit or loss) are recognised initially on the
trade date at which the Group becomes a party to the contractual
provisions of the instrument.
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only
when, the Group has a legal right to offset the amounts and intends
either to settle on a net basis or to realise the asset and settle
the liability simultaneously.
The Group has the following non-derivative financial
liabilities: loans and borrowings, and trade and other
payables.
Such financial liabilities are recognised initially at fair
value plus any directly attributable transaction costs. Subsequent
to initial recognition these financial liabilities are measured at
amortised cost using the effective interest method.
3.13 Earnings per share
The Group presents basic and diluted earnings per share (EPS)
data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the
Group and Company by the weighted average number of ordinary shares
outstanding during the period. Diluted EPS is determined by
adjusting the profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding for
the effects of all dilutive potential ordinary shares, which
comprise share options granted to employees.
3.14 Lease payments
Payments made under operating leases are recognised in profit or
loss on a straight-line basis over the term of the lease.
Minimum lease payments made under finance leases are apportioned
between the finance expense and the reduction of the outstanding
liability. The finance expense is allocated to each period during
the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability. Contingent
lease payments are accounted for by revising the minimum lease
payments over the remaining term of the lease when the lease
adjustment is confirmed.
3.15 Property, plant and equipment
Property, plant and equipment are carried at historical cost
less accumulated depreciation and any recognised impairment loss,
if any. Depreciation is charged on the carrying value of property,
plant and equipment and is designed to write off assets on a
straight line basis over their useful economic lives. The estimated
useful lives for the current and comparative periods are as
follows:
Vehicles:
Trucks (included under Vehicles) 7 years
Cars (included under Vehicles) 5 years
Fixtures & fittings 3-4 years
Warehouse equipment & racks 5 to 20 years
Furniture & equipment:
Office equipment 5 to 10 years
Furniture 5 years
Equipment 3 years
Hardware 2 to 5 years
Cost includes expenditure that is directly attributable to the
acquisition of the asset. The cost of self-constructed assets
includes the cost of materials and direct labour, any other costs
directly attributable to bringing the assets to a working condition
for their intended use, the costs of dismantling and removing the
items and restoring the site on which they are located and
capitalised borrowing costs. Purchased software that is integral to
the functionality of the related equipment is capitalised as part
of that equipment.
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items
(major components) of property, plant and equipment.
The carrying amounts of property, plant and equipment and
intangible assets are reviewed at each reporting date to assess
whether they are recorded in excess of their recoverable amounts,
and where carrying values exceed this estimated recoverable amount,
assets are written down to their recoverable amount.
Gains and losses on disposal of property, plant and equipment
are determined by comparing the proceeds from disposal with the
carrying amount of property, plant and equipment, and are
recognised net within "operating income" in the statement of
comprehensive income.
Impairment is recognised in the respective period and is
included in operating expenses.
After the recognition of an impairment loss the depreciation
charge for property, plant and equipment is adjusted in future
periods to allocate the assets' revised carrying value, less its
residual value (if any), on a systematic basis over its remaining
useful life.
Depreciation methods, useful lives and residual values are
reviewed each financial year -end and adjusted if appropriate.
3.16 Intangible assets
Goodwill
Goodwill that arises upon the acquisition of subsidiaries is
included in intangible assets. For measurement of goodwill at
initial recognition, see note 3.2.2.
Acquisitions of non-controlling interests
Acquisitions of non-controlling interests are accounted for as
transactions with equity holders in their capacity as equity
holders and therefore no goodwill is recognised as a result of such
transactions.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses.
In respect of equity accounted investees, the carrying amount of
goodwill is included in the carrying amount of the investment, and
an impairment loss on such an investment is not allocated to any
asset, including goodwill, that forms part of the carrying amount
of the equity accounted investee.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the
future economic benefits embodied in the specific asset to which it
relates. All other expenditure, including expenditure on internally
generated goodwill and brands, is recognised in profit or loss as
incurred.
Amortisation
Amortisation is calculated over the cost of the asset, or other
amount substituted for cost, less its residual value.
Amortisation is recognised in profit or loss on a straight-line
basis over the estimated useful lives of intangible assets, other
than goodwill, from the date that they are available for use, since
this most closely reflects the expected pattern of consumption of
the future economic benefits embodied in the asset.
The estimated useful lives for the current and comparative
periods are as follows:
Software10 years
Customer base - large customers15 years
Customer base - small customers10 years
Trademark and banking licenceIndefinite
Amortisation methods, useful lives and residual values are
reviewed at each financial year-end and adjusted if
appropriate.
An intangible asset is regarded as having an indefinite useful
life when, based of all relevant factors, there is no foreseeable
limit to the period over which the asset is expected to generate
net cash inflows for the company. Amortisation is not provided for
these intangible assets. Intangible assets with indefinite useful
lives are tested for impairment at each reporting date by
determining the recoverable amount of the assets either
individually or at the cash-generating unit level. Where this
assessment is performed at the cash-generating unit level, the
impairment is determined by assessing the recoverable amount of the
cash-generating unit to which the intangible asset relates. In such
instances, the recoverable amount is determined as the value in use
of the cash-generating unit by estimating the expected future cash
flows in the unit and choosing a suitable discount rate in order to
calculate the present value of those cash flows.
Where the recoverable amount is less than the carrying amount of
the asset or the cash-generating unit, an impairment loss is
recognised in profit or loss.
The useful life of an intangible asset with an indefinite life
is reviewed at each reporting date to determine whether the
indefinite life assessment continues to be supportable. If not, the
change in the useful life assessment is made prospectively.
3.17 Assets held for Sale
Non-current assets, or disposal groups comprising assets and
liabilities, that are expected to be recovered primarily through
sale rather than through continuing use, are classified as held for
sale. This condition is regarded as met only when the sale is
highly probable and the asset (or disposal group) is available for
immediate sale in its present condition. Management must be
committed to the sale, which should be expected to qualify for
recognition as a completed sale within one year from the date of
classification. Immediately before classification as held for sale,
the assets, or components of a disposal group, are remeasured in
accordance with the Group's accounting policies.
Thereafter generally the assets, or disposal group, are measured
at the lower of their carrying amount and fair value less cost to
sell. A non-current asset is not depreciated (or amortised) while
it is classified as held for sale, or while it is part of a
disposal group classified as held for sale. Any impairment loss on
a disposal group first is allocated to goodwill, and then to
remaining assets and liabilities on pro rata basis, except that no
loss is allocated to inventories, financial assets, and deferred
tax assets, which continue to be measured in accordance with the
Group's accounting policies. Impairment losses on initial
classification as held for sale and subsequent gains or losses on
remeasurement are recognised in profit or loss. Gains are not
recognised in excess of any cumulative impairment loss.
3.18 Impairment of tangible and intangible assets excluding
goodwill
At each reporting date, the Group reviews the carrying amounts
of its tangible and intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment
loss. Recoverable amount is the higher of fair value less costs to
sell and value in use. Where an impairment loss subsequently
reverses, the carrying amount of the asset is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset in prior years. Impairment losses and reversals of
impairment losses are recognised immediately in profit or loss.
3.19 Provisions
A provision is recognised in the statement of financial position
when the Group has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation, and
the obligation can be reliably measured. If the effect is material,
provisions are determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific
to the liability.
3.20 Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan
under which an entity pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined
contribution pension plans are recognised as an employee benefit
expense in profit or loss in the periods during which services are
rendered by employees. Prepaid contributions are recognised as an
asset to the extent that a cash refund or a reduction in future
payments is available. Contributions to a defined contribution plan
that are due more than 12 months after the end of the period in
which the employees render the service are discounted to their
present value.
Share based payments
Share options granted to the manager in respect of ongoing
services are conditional upon the achievement of certain
performance conditions.
The share options have been valued by an independent valuer in
the financial statements as at the date the options were granted.
The grant date fair value of options granted to the manager is
recognised as an expense, with a corresponding increase in equity,
over the period that the manager becomes unconditionally entitled
to the options. The resulting value is amortised in the profit or
loss over the expected life of the options. The options may have a
dilutive effect upon the Earnings per Share and the Net Asset Value
of the Group.
The cancellation of share options was accounted for as an
acceleration of vesting, and therefore recognised the amount that
would otherwise have been recognised for services rendered over the
remainder of the vesting period immediately.
3.21 Share capital and equity
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities.
Ordinary shares are classified as equity.
If the company reacquires its own equity instruments, the
consideration paid, including any directly attributable incremental
costs (net of income taxes) on those instruments are deducted from
equity until the shares are cancelled or reissued. No gain or loss
is recognised in profit or loss on the purchase, sale, issue or
cancellation of the company's own equity instruments. Consideration
paid or received shall be recognised directly in equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
3.22 Finance costs
Finance costs comprise interest expense on borrowings, unwinding
of the discount on provisions. Borrowing costs that are not
directly attributable to the acquisition, construction or
production of a qualifying asset are recognised in profit or loss
using the effective interest method. Foreign currency gains and
losses are reported on a net basis.
In respect of borrowing costs relating to qualifying assets for
which the commencement date for capitalisation is on or after 1
April 2009, the Group capitalises borrowing costs directly
attributable to the acquisition, construction or production of a
qualifying asset as part of the cost of that asset.
3.23 Fair Value
The Directors consider the carrying value of all financial
assets and liabilities to approximate their fair value except for
"Loans and advances to customers" which are at a fixed rate. Where
the difference is significant, note disclosure is provided.
4. Administration and operating expenses
The net profit/(loss) for the year/period has been arrived at
after charging the following items of expenditure:
Year ended Year ended
31 March 31 March
2011 2010
GBP'000 GBP'000
Company
Investment management fee 1,980 1,677
Auditors' remuneration 401 37
Directors' remuneration 180 174
Share based payments 580 600
Other operating and administrative
expenses:
- Administration fees 73 94
- Marketing costs 92 98
- Professional fees 280 292
- Other 398 369
----------- -----------
3,984 3,341
=========== ===========
Kreditmart
Auditors' remuneration - 41
Directors' remuneration 77 67
Other operating and administrative
expenses:
- Marketing costs 323 345
- Professional fees 13 10
- Depreciation and amortisation 165 268
- Personnel 1,278 1,428
- Premises expenses 279 445
- Credit losses and LLP (304) (424)
- Other 201 368
----------- -----------
2,032 2,548
=========== ===========
Flexinvest Limited
Auditors' remuneration 56 99
Directors' remuneration 145 149
Other operating and administrative
expenses:
- Marketing costs 30 5
- Professional fees 24 12
- Depreciation and amortisation 61 51
- Personnel 635 431
- Premises expenses 208 168
- Credit losses and LLP 49 49
- Other 187 196
----------- -----------
1,395 1,160
=========== ===========
OSG Records Management (Europe)
Limited
Auditors' remuneration - 28
Directors' remuneration 525 104
Share based payments 118 18
Other operating and administrative
expenses:
- Marketing expenses 216 33
- Professional fees 213 84
- Depreciation and amortisation 1,474 317
- Personnel 5,497 1,242
- Operating lease expenses 3,626 717
- Allowance for doubtful debts 25 92
- Other 2,551 382
----------- -----------
14,245 3,017
----------- -----------
Total for the Group 21,656 10,066
=========== ===========
5 Tax
Group
Year ended Year ended
31 March 31 March
5.1 Income tax expense 2011 2010
GBP'000 GBP'000
Kreditmart
Current tax charge - -
Deferred tax expense* 64 75
----------- -----------
64 75
=========== ===========
Flexinvest Limited
Current tax charge - -
Deferred tax (credit*) (109) (62)
----------- -----------
(109) (62)
=========== ===========
OSG Records Management (Europe)
Limited
Current tax charge 74 29
Deferred tax charge/ (credit*) 90 (45)
----------- -----------
164 (16)
=========== ===========
Deferred tax charge/ (credit): 45 (32)
=========== ===========
Net tax charge/ (credit) to profit
or loss 119 (3)
=========== ===========
Year
ended Year ended
31 March 31 March
2011 2010
GBP'000 GBP'000
* Deferred tax expense
comprises of:
Origination and
reversal of temporary
differences 95 64
Temporary differences
on fair value adjustment (114) (29)
Utilisation of tax
losses 64 (1,145)
Change in unrecognised
deductible temporary
differences - 1,078
------------ -----------
45 (32)
============ ===========
Group and Company
Tax rate reconciliation:
Year Year Year
ended ended ended Year ended
31 March 31 March 31 March 31 March
2011 2011 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Profit/(loss) for
the year (4,564) (5,478) 653 4,828
Aurora Consolidated
profit exempt from
tax 2,478 - (2,806) -
---------- ---------- ------------ -----------
(2,086) (5,478) (2,153) 4,828
Tax at nominal rate
(Cyprus) (15) - 92 -
Tax at nominal rate
(Russia) 447 - (615) -
Tax effect of income and
expenses not deductable in
taxable profit (256) - 49 -
Effect of deferred
tax asset not recognised (295) - 470 -
Foreign currency
differences - - 1 -
---------- ---------- ------------ -----------
(119) - (3) -
========== ========== ============ ===========
5.2 Group deferred tax
assets and liabilities
Group
2011
Year Year
ended ended Year ended
31 March 31 March 31 March
Kreditmart and Flexinvest 2011 2011 2011
Deferred tax
asset/(liability)
comprises: GBP'000 GBP'000 GBP'000
Assets Liabilities Net
Loans to customers 9 - 9
Other assets 45 - 45
Other liabilities 21 (14) 7
Tax loss carry-forwards 175 - 175
250 (14) 236
========== ============ ===========
Year Year
ended ended Year ended
OSG Records Management 31 March 31 March 31 March
(Europe) Limited 2011 2011 2011
Deferred tax
asset/(liability)
comprises: GBP'000 GBP'000 GBP'000
Assets Liabilities Net
Finance leases - (300) (300)
Intangibles - (1,492) (1,492)
- (1,792) (1,792)
========== ============ ===========
Group deferred tax
asset 236
===========
Group deferred tax
liability (1,792)
===========
2010
Year Year
ended ended Year ended
31 March 31 March 31 March
Kreditmart and Flexinvest 2010 2010 2010
Deferred tax
asset/(liability)
comprises: GBP'000 GBP'000 GBP'000
Assets Liabilities Net
Loans to customers 5 - 5
Other assets 48 - 48
Other liabilities 34 (20) 14
Tax loss carry-forwards 123 - 123
210 (20) 190
========== ============ ===========
Year Year
OSG Records Management ended ended Year ended
(Europe) Limited (for 3 31 March 31 March 31 March
month period) 2010 2010 2010
Deferred tax
asset/(liability)
comprises: GBP'000 GBP'000 GBP'000
Assets Liabilities Net
Finance leases - (94) (94)
Intangibles - (1,605) (1,605)
- (1,699) (1,699)
========== ============ ===========
Group deferred tax
asset 190
===========
Group deferred tax
liability (1,699)
===========
5.3 Unrecognised Year ended Year ended
deferred tax 31 March 31 March
assets 2011 2010
GBP'000 GBP'000
Group
Tax losses (295) 470
------------ ------------
(295) 470
============ ============
A deferred tax asset has not been recognised in respect of
the above tax losses because it is not probable that future
taxable profit will be available against which the Group can
utilise the benefits therefrom.
Due to the presence in Russian commercial legislation, and
tax legislation in particular, of provisions allowing more
than one interpretation, and also due to the practice developed
by the tax authorities of making arbitrary judgement of taxpayer
activities, if a particular treatment based on Management's
judgement of the Subsidiary's business activities was to be
challenged by the tax authorities, Kreditmart Finance Limited
("Kreditmart"), Flexinvest Limited ("Flexinvest") and OSG
Records Management (Europe) Limited ("OSGRME") may be assessed
for additional taxes, penalties and interest. Such uncertainty
may relate to valuation of financial instruments, loss and
impairment provisions and market level for deals' pricing.
The Entity believes that it has already made all tax payments,
and therefore no allowance has been made in the financial
statements. Tax years remain open to review by the tax authorities
for three years.
The Group's principal business activities are within the Russian
Federation. Laws and regulations affecting the business environment
in the Russian Federation are subject to rapid changes and
Kreditmart and OSGRME's assets and operations could be at
risk due to negative changes in the political and business
environment.
Earnings/(loss)
6 per share
31 March 31 March 31 March 31 March
2011 2011 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
The calculation
of the basic and
diluted
earnings/(loss)
per share is
based on the
following data:
Profit for the
purposes of basic
and diluted loss
per share being net
profit/(loss)
attributable to
equity holders of
the parent (4,676) (5,478) 665 4,828
============ ============ ============ ============
Weighted average
number of ordinary
shares for the
purpose of basic
and diluted
profit/(loss) per
share (in
thousands): 112,500 112,500 83,491 83,491
Effect of
dilutive
potential
ordinary
shares:
Options - - - -
Weighted average
number of ordinary
shares for the
purpose of diluted
profit/(loss) loss
per share (in
thousands): 112,500 112,500 83,491 83,491
============ ============ ============ ============
Earnings/(loss) per
share - Basic and
Diluted (4.16) (4.87) 0.80 5.78
============ ============ ============ ============
The potential shares as identified in note 26, are anti-dilutive
and as such have not been included in the calculation of
diluted earnings per share for the years ended 31 March 2011
and 31 March 2010.
7 Goodwill
31 March 31 March
2011 2010
Group GBP'000 GBP'000
Cost:
At beginning of
the year 14,164 -
Recognised on
acquisition of OSG
Records Management
(Europe) Limited - 14,164
14,164 14,164
============ ============
No impairment of goodwill on acquisition of OSGRME is necessary
at 31 March 2011 based on the valuation of OSGRME. Refer
to note 11 and 12 for further details in this regard.
In accordance with the valuation at 31 March 2011 performed
in respect of Kreditmart by an independant valuer (see note
11), the goodwill acquired on acquisition was impaired in
full in the year following acquisition. This was as a result
of significant decreases in the Russian mortgage market which
has resulted in the reduction in value of loans.
31 31
Intangible March March
8. assets 2011 2010
GBP'000 GBP'000
Group
Cost:
Opening balance
in respect of FIB
(see note 12) 11,078 2,273
Currency revaluation
- FIB 284 203
Recognised on acquisition
of OSGRME (see note 12) - 8,744
Amortisation of
intangibles in
OSGRME (569) (142)
Closing balance 10,793 11,078
Reconciliation
of intangibles
Banking Internally OSGRME Customer Customer
base base
2011 licence generated Trademark - large - small Total
software
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Group
Cost:
At 1 April 2010 2,476 146 598 7,258 600 11,078
Exchange movements 284 - - - - 284
At 31 March 2011 2,760 146 598 7,258 600 11,362
Amortisation:
At 1 April
2010 - - - - - -
Charge for the
period - (15) - (492) (62) (569)
At 31 March 2011 - (15) - (492) (62) (569)
Carrying
amount:
At 31 March 2011 2,760 131 598 6,766 538 10,793
The valuation of the licence was considered by the Valuation Committee
and an independent reputable valuer (see note 11) and based on
fair market values less costs to sell, it was determined that no
impairment was required.
The fair valuation of the intangibles at acquisition date of OSGRME
was determined by an independent 3rd party using various valuation
methods: the Cost Approach (using historcial costs and consumer
price inflation), and the Income Approach (using the Multiple Excess
Earnings method and Discounted Cash Flow Analysis).
The banking licence and the trademark are both considered by the
Directors to have an indefinite useful life. They are expected
to generate value indefinitely. The banking licence is registered
in Moscow and the OSGRME trademark is registered in Russia, Poland
and Ukraine. Furthermore, there were no impairment indicators identified
by the Directors in respect of the other intangibles that were
subject to amortisation.
Assets 31
classified as March 31 March
9 held for sale 2011 2010
Group GBP'000 GBP'000
Balance at 1
April 2010 845 -
Additions 43 914
Disposals (231) (69)
Balance at 31 March
2011 657 845
Assets classified as held for sale are the property (flat, cottage
and land plot) received after mortgage foreclosure. The assets
are available for immediate sale in their present condition. A
potential buyer has been found for the flat, and Kreditmart expects
to sell the other assets within one year. The assets are recognised
at fair value less costs to sell.
10 Plant and equipment
Fixtures Furniture
Vehicles & &
2011 fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
Group
Cost:
At 1 April 2010 752 4,608 1,958 7,318
Additions 546 2,922 272 3,740
Disposals (75) (171) (298) (544)
Exchange movements (16) (85) (56) (157)
At 31 March 2011 1,207 7,274 1,876 10,357
Depreciation:
At 1 April 2010 (53) (305) (516) (874)
Charge for the period (242) (501) (389) (1,132)
Disposals 48 160 223 431
At 31 March 2011 (247) (646) (682) (1,575)
Carrying amount:
At 31 March 2011 960 6,628 1,194 8,782
2010
Cost:
At 1 April 2009 - 429 1,153 1,582
Additions - Kreditmart
and Flexinvest - - 50 50
At acquisition of
OSGRME (see note
12) 655 3,199 619 4,473
Exchange movements
on additions - - - -
Additions - OSGRME 65 843 162 1,070
Disposals - (204) (92) (297)
Exchange movements 32 341 67 440
At 31 March 2010 752 4,608 1,958 7,318
Depreciation:
At 1 April 2009 - (259) (304) (563)
-
Charge for the period (53) (163) (277) (493)
Disposals - 116 65 181
At 31 March 2010 (53) (305) (516) (874)
Carrying amount:
At 31 March 2010 699 4,303 1,442 6,444
See note 17 for property,plant
and equipment held under finance
leases.
Investment in subsidiaries
- at fair value through
11 profit and loss
31 March 31 March
Company 2011 2010
GBP'000 GBP'000
OSG Records Management
(Europe) Limited
At 1 April 2010, and
1 April 2009 28,100 -
Reclassification for investments
at fair value through
profit or loss - 13,600
Acquisition of subsidiary
as per note 12 - 8,584
Additions - 600
Fair value revaluation 700 5,316
At 31 March 2011,
and 31 March 2010* 28,800 28,100
Kreditmart & Flexinvest
Limited
At 1 April 2010, and
1 April 2009 22,200 16,549
Fair value revaluation
** (3,700) (800)
At 31 March 2011,
and 31 March 2010 18,500 22,200
47,300 50,300
* OSG Records Management (Europe) Limited was treated as an
investment at fair value through profit or loss until a controlling
interest was obtained on 12 January 2010 as per note 12.
** The revaluation calculations performed on Kreditmart included
the value of Flexinvest as at 31 March 2011, and as such,
no revaluation was performed on the individual subsidiary
companies.
The valuation of the subsidiaries and investments at 31 March
2011 and 31 March 2010 was performed by an independant reputable
valuer with the necessary experience in valuing investments
of this nature, and was approved by the Valuation Committee.
Methodologies and assumptions used in valuing investments
and investments in subsidiaries:
1) Market Approach:
The market comparable method indicates the market value of
the ordinary shares of a business by comparing it to publicly
traded companies in similar lines of business. The conditions
and prospects of companies in similar lines of business depend
on common factors such as overall demand for their products
and services. An analysis of the market multiples of companies
engaged in similar businesses yields insight into investor
perceptions and, therefore, the value of the subject company.
In the market approach, recent sales and listings of comparable
assets are gathered and analysed. After identifying and selecting
the comparable publicly traded companies, their business and
financial profiles are analysed for relative similarity. Price
or EV multiples of the publicly traded companies are calculated
and then adjusted for factors such as relative size, growth,
profitability, risk, and return on investment. The adjusted
multiples are then applied to the relevant element of the
subject company's business.
All valuations of unquoted investments and investments in
subsidiaries (collectively referred to as the "portfolio")
were performed using either an enterprise value/revenue or
enterprise value/EBITDA multiple (except for Kreditmart and
Flexinvest where a Net Asset Assets Approach ie a price/book
value approach was used). 20%, by value at year-end, of the
portfolio was valued using a price/book valuation approach
(2010: 24%) with the remaining 80% (2010: 76%) of the portfolio
being valued using an enterprise value/revenue multiple and
enterprise value/EBITDA multiple approach.
The key assumptions in the valuations were as follows:
- Liquidity discount: 15%-20% (31 March 2010: 15%-20%)
2) Income Approach:
The income approach methodology is used as a cross-check for
the Market Approach and indicates the market value of a business
enterprise based on the present value of the cash flows that
the business can be expected to generate in the future. Such
cash flows are discounted at a discount rate that reflects
the time value of money and the risks associated with the
cash flows.
The financial statements of the Group consolidate the results,
assets and liabilities of the subsidiary companies listed
below:
% of
class % of
held class
at held
Name of Class 31 at 31
subsidiary Country of of March March Principal
undertaking incorporation share 2011 2010 activity
OSG Records
Management
(Europe)
Limited Cyprus Ordinary 94.4% 95.5% Financing
Document
storage,
OSG Records data
Management security
Center Limited and records
Liability management
Company* Russia Ordinary 100.0% 100.0% services
OSG Polska
Limited
Liability
Company* Poland Ordinary 100.0% 100.0%
OSG Records
Management
Limited
Liability
Company* Ukraine Ordinary 100.0% 100.0%
OSG Records
Management
Limited
Liability
Company* Kazakhstan Ordinary 100.0% 100.0%
OSG Records
Management
Limited
Liability
Company* Armenia Ordinary 100.0% 100.0%
OSG Records
Management
Limited
Liability
Company* Bulgaria Ordinary 100.0% 100.0%
Kreditmart Consumer
Finance Limited Cyprus Ordinary 100.0% 100.0% finance
Flexinvest Investment
Limited Cyprus Ordinary 100.0% 100.0% holding
Flexinvest Bank
("FIB") Banking and
Limited** Russia Ordinary 100.0% 100.0% finance
* Direct subsidiaries of OSG Records Management (Europe) Limited
and indirect subsidiaries of the Company.
**FIB is held directly by Kreditmart and Flexinvest (see note
12) and is an indirectly held subsidiary of the Company.
Acquisition of
subsidiaries and
non-controlling
12 interests
OSGRME
Fair value
on
acquisition
at 12
January
2010
GBP'000
Non-current
assets
Property, plant
and equipment 4,473
Intangibles 8,744
Current assets
Trade and other
receivables 2,245
Cash and cash equivalents 817
Non-current
liabilities
Loans payable (4,588)
Deferred tax (1,738)
Current
liabilities
Trade and other
payables (2,431)
Current taxation
payable (412)
7,110
Non-controlling
interest (390)
Parent's ownership
interest at acquisition
date 6,720
Goodwill on acquisition 14,164
20,884
Fair value of the
Company's previously
acquired non-controlling
investment in OSGRME: 12,300
Purchase Price 8,584
20,884
Purchase
consideration:
- Issue of 20 million
ordinary shares
in the Company 7,200
- Cash paid on acquisition
of OSGRME 1,206
- Cash paid to terminate previous
OSGRME management share options 178
8,584
Less: non-cash portion
of purchase price (7,200)
Less: Cash received
on acquisition (817)
Net Cash Paid on
acquisition of OSGRME 567
Date of acquisition 12 January
2010
The Company acquired a controlling interest in OSGRME Records
Management (Europe) Limited on 12 January 2010, being the
effective date when all of the conditions relating to the
OSGRME Purchase Agreement dated 17 December 2009 were satisfied.
The OSGRME Investment increased the Company's interest in
OSGRME from approximately 50% to approximately 93.6% (on a
fully diluted basis including the conversion of all convertible
loans at 28 February 2010), with the remaining 6.4 per cent
of the equity owned by current and previous members of management
of OSGRME. The carrying amounts of the assets and liabilities
of the acquiree reflected above equal their fair values.
The amount of the acquiree's loss since the acquisition date
which was included in the Consolidated profit in the prior
year of the Group is GBP161,489.
If the acquisition had been at the beginning of the prior
year, the Consolidated profit would have decreased by GBP265,146
in the prior year.
The Company applied acquisition accounting to account for
its acquisition of OSGRME. Control was obtained in successive
share purchases ("step acquisition"). The fair value of the
Company's previously acquired non-controlling investment in
OSGRME was used in the determination of goodwill.
OSGRME is a leading records and information management service
provider in CEE with a strong market presence in attractive
markets (Russia, Poland, Ukraine, Kazakhstan and Bulgaria),
has a rapidly growing and diverse client base and has shown
resilience in the recent economic downturn. The Directors
therefore are of the opinion that the increased investment
in OSGRME represents a significant opportunity to take control
of a high growth business and thereby increase its ability
to receive a control premium in any future exit. Also the
new investment in OSGRME will strengthen the Company's balance
sheet which, the Directors believe, should facilitate further
growth.
On 30 March 2010, a GBP0.6 million share capital injection
was made by the Company into OSGRME for "racking". 1,822
shares were issued by OSGRME in this regard, which thus
increased the Company's overall holding in OSGRME to approximately
95.52%. In the first quarter of 2011, the option pool was
increased by a further 938 shares, which reduced the Company's
overall holding in OSGRME to approximately 94.41%
The following summarises the effect of changes in the Group's
(parent) ownership interest in OSGRME:
31 March 31 March
2011 2010
GBP'000 GBP'000
Parent's ownership
interest at acquisition
date 10,668 6,720
Effect of parent's (decrease)/increase
in parent's ownership
interest (166) 4,259
Share of comprehensive
income 95 (311)
Parent's ownership
at the the end of
the year 10,597 10,668
Investments - at fair
value through profit
13 and loss
31
March 31 March 31 March 31 March
2011 2011 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Unistream Bank 18,700 18,700 24,400 24,400
Grindelia Holdings 24,500 24,500 17,500 17,500
Quoted investments 2,605 - 1,185 -
Total investments
at fair value through
profit and loss 45,805 43,200 43,085 41,900
Change in fair
value of
investments at
fair value
through profit
and loss
Year ended 31 Year ended 31 Year ended 31 Year ended 31
March 2011 March 2011 March 2010 March 2010
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
OSG Records
Management
(Europe)
Limited (see
note 11) - 700 1,934 4,756
Unistream Bank (5,700) (5,700) (600) (600)
Grindelia
Holdings 7,000 7,000 4,300 4,300
Quoted
investments (27) - (5) -
Kreditmart and
Flexinvest
(see note 11) - (3,700) - (800)
Total
unrealised
gains/(losses) 1,273 (1,700) 5,629 7,656
On the 8 December 2009, the OSG Group was restructured per
a unanimous resolution in writing by the shareholders of Whitebrooks
Investments Limited pursuant to the Whitebrooks' Articles
of Association. Per the resolution, Whitebrooks Investments
Limited redeemed all its issued share capital from its shareholders,
and thereafter transferred the entire issued share capital
of OSG Records Management (Europe) Limited ("OSGRME") to its
shareholders in the same proportion.
The carrying value of the outstanding convertible loans to
OSGRME (formerly Whitebrooks Investments Limited) at 28 February
2010 was converted into ordinary shares of OSGRME.
The OSGRME Investment as detailed in note 11, increased Aurora's
interest in OSG from approximately 50% to approximately 93.6%
(on a fully diluted basis including in both cases the conversion
of all convertible loans outstanding), with the remaining
6.4 per cent of the equity owned by current and previous members
of management of OSG. Furthermore, of the option pool of 6.4
per cent of OSG's shares, approximately 2% of the shares were
held under options by previous employees of OSG. As a result
of the restructuring, these options were terminated and the
share option rights were purchased by the Company for a consideration
of US$288,222 (GBP171,186). This additional 2% (which includes
the conversion of all convertible loans outstanding by the
Company at 28 February 2010) of OSGRME's potential shareholding
acquired, resulted in the Company's overall holding in OSGRME
increasing to approximately 95.4%. The further capital injection
at as detailed in note 12 increased the Company's overall
holding in OSGRME to approximately 95.52%. In the first quarter
of 2011, the option pool was increased by a further 938 shares,
which reduced the Company's overall holding in OSGRME to approximately
94.41%
The Company conducted a Placing of 17.5 million shares at
40 pence per share to satisfy the cash element of the consideration,
enabling the Company to subscribe for the new ordinary OSG
shares and to provide working capital for the Company.
The Company committed to acquire a 26% stake in Unistream
Bank ('Unistream') on 30 November 2006, conditional upon Central
Bank of Russia ('CBR') approval. At 30 June 2007 funds had
been drawn down from this commitment to acquire a 17.7% stake.
The remaining 8.3% stake was acquired on 26 July 2007 once
the CBR had given its approval for the Company to own more
than 20% of a Russian bank.
As a result of the size of the stakes in these two companies,
Unistream (and OSGRME up to 12 January 2010 when a controlling
interest was acquired) could potentially qualify as associated
companies, which would normally require that they be equity
accounted in the books of the Company. However, the Company
has taken advantage of the exemption available to it under
IAS 28, and hence accounts for these as investments at fair
value through profit and loss.
In December 2007 the Company acquired a 24.3% shareholding
in Grindelia Holdings Limited, which owns 99.5% of the retail
chain that operate under the brands "SuperStroy" and "StroyArsenal".
On 30 June 2009, the Company entered into an agreement with
Grindelia Holdings Limited to borrow RUR 5,832,000 on 20 February
2010 for 1 year with an interest rate of 1% per annum. The
Company receives quarterly payments in advance of Grindelia
Holdings Limited declaring a dividend.
The valuation of the investments at 31 March 2011 and 31 March
2010 was performed by an independant reputable valuer with
the necessary experience in valuing investments of this nature,
and was approved by the Valuation Committee. The methods and
assumptions used in determining the valuations of investments
are discussed in note 11.
In the view of the Valuation Committee, the value of the investment
in OSGRME, Unistream Bank, and Grindelia Holdings Limited
as at 31 March 2011 was estimated at GBP28.8 million (31 March
2010: GBP28.1 million), GBP18.7 million (31 March 2010: GBP24.4
million), and GBP24.5 million (31 March 2010: GBP17.5 million)
respectively, resulting in a decrease of the value of total
investments below historical cost in the Company accounts.
Loans and advances
14 to customers
31 March 31 March
Group 2011 2010
GBP'000 GBP'000
Residential mortgages 7,787 8,618
Reconciliation of impairment
loss allowance on loans
to customers:
Balance at beginning
of the year/period 938 1,912
Allowance for
loan losses (268) (974)
670 938
The following table details the carrying value of assets
that are impaired and the ageing of those that are past due
but not impaired:
Financial
Neither assets
past Past that Balance
due due have at 31
nor not been March
2011 impaired impaired impaired 2011
Loans to customers 6,016 674 1,721 8,411
Interest 46 - - 46
Loan loss allowance (37) (4) (629) (670)
6,025 670 1,092 7,787
Financial
Neither assets
past Past that Balance
due due have at 31
nor not been March
2010 impaired impaired impaired 2010
Loans to customers 6,831 332 2,306 9,469
Interest 40 2 45 87
Loan loss allowance (44) (2) (892) (938)
6,827 332 1,459 8,618
The delinquent loans as determined by the Risk Management
Department of Kreditmart and Flexinvest for the portfolio
is as follows: 35 (2010: 26) Accounts comprising 68% (2010:
35%) of the balance of the loan portfolio. For these loans,
a specific allowance was made of GBP630,935 (2010: GBP572,073).
For the non-delinquent loans, a portfolio impairment of 0.6%
(2010: 0.6%) of outstanding value is provided for. See note
25 "Credit Risk" for more in this regard.
The mortgages are secured upon borrowers' private residences,
are repayable in equal monthly instalments and mature between
2014 and 2038 (average maturity of 25.4 years). Interest
is charged at fixed rates at an average annual interest rate
of 11.86% (range between 10.5% and 14.9% depending on each
borrower). Based on maximum exposure (carrying value of the
loans), the collateral pledged in respect of these mortgages
is GBP6,950,293 (2010: GBP8,189,157).
The fair value of the loans to customers were determined
using a market related 15.0% (2010: 14.9%) discount rate
on the loans denominated in Roubles. The loans denominated
in US Dollars were discounted at 13.3% (2010: 13.3%). Based
on these criteria the fair value of the loans were determined
to be GBP6,826,285 (2010:GBP7,482,554).
Trade and other
15 receivables
31
March 31 March 31 March 31 March
2011 2011 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Tax receivable 205 - 211 -
Trade debtors 2,602 - 1,975 -
Less: allowance
for doubtful debts (217) - (213) -
Sundry debtors
and prepayments 1,492 30 2,477 980
VAT receivable 322 - - -
Amount receivable
from related party - - - 191
4,404 30 4,450 1,171
The related party balance is due from Flexinvest Limited
and relates to the due diligence costs of the FIB transaction
and is interest free, unsecured and repayable on demand.
The breakdown of aged trade receivables
in respect of the Group and the Company
is as follows:
31
March 31 March 31 March 31 March
2011 2011 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Current - - 992 -
Receivables <
30 days - - 338 -
Receivables >
30 days - - 136 -
Receivables >
60 days 2,387 - 203 -
Receivables >
90 days 215 - 306 -
2,602 - 1,975 -
Perfoming 2,387 - 1,669 -
Past due 215 - 306 -
Impaired - - - -
2,602 - 1,975 -
16 Cash and cash equivalents
31
March 31 March 31 March 31 March
2011 2011 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Bank balances 1,856 555 6,577 4,685
Fixed Deposits 4,638 3,239 6,167 1,019
Cash on hand 245 - 498 -
Cash and cash equivalents
in statement of
cash flows 6,739 3,794 13,242 5,704
The restricted cash balances for the
current year, which are included in
the above table, total GBP198,913
17 Finance leases
The Group acquires the majority of its vehicles and racking
systems for its warehouses through finance lease contracts.
Such contracts are generally classified as finance leases
because the rental period approximates to the estimated useful
economic life of the assets; and the Group has the right
to purchase the assets outright at the end of the minimum
lease term. The Group have financial lease obligations in
Russia, Poland and Kazakhstan. The average term of these
finance leases are 36 months. The Group presents obligations
under financial leases in its Statement of Financial Position
at present value (less amounts representing finance charges
related to future periods).
The payment schedule of the
present value of minimum lease
payments is as follows:
31
March 31 March 31 March 31 March
Group 2011 2011 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Less Greater Less Greater
than than than than
1 year 1 year 1 year 1 year
Vehicles 199 378 108 237
Fixtures and fittings 766 1,342 582 1,264
Furniture and equipment 51 57 29 66
1,016 1,777 719 1,567
The carrying value of the property, plant and equipment held
under finance leases at 31 March 2011 are:
- Vehicles: GBP809,460
(2010: GBP514,593)
- Fixtures and
fittings: GBP3,465,319
(2010: GBP2,720,363)
- Furniture and equipment: GBP96,290 (2010: GBP113,951)
18 Derivative liabilities
Group and Company
31 March 31 March
2011 2010
GBP'000 GBP'000
Derivative revaluation
reconciliation
Loss realised on
forward exchange
contracts - (46)
Add: forward exchange
liability at 31 March
2011, 31 March 2010 - 46
- -
The Company's policy is to enter into forward foreign currency
contracts on an ad hoc basis, to hedge the Company's exposure
to currency risk. Fair values are calculated by reference
to current forward exchange rates for contracts with similar
maturity profiles. They are initially recognised at fair
value on the date on which the derivative contract is entered
into and subsequently remeasured to their fair value.
Changes in fair values of derivatives and amounts realised
on closure of contracts are included in profit or loss within
(losses)/gains on derivatives.
The Company has a balance of GBPNil (2010: GBPNil) included
in cash and cash equivalents which is held as security by
the counterparty for the forward exchange contracts oustanding
at year end.
Trade and other
19. payables
31
March 31 March 31 March 31 March
2011 2011 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Trade payables - - 380 -
Vat & Social Tax
payable 253 - - -
Expense accruals
and other creditors 3,422 236 2,789 89
Income received
in advance 1,622 - 1,433 -
5,297 236 4,602 89
20 Share capital
31
31 March March
2011 2010
GBP'000 GBP'000
Authorised share
capital:
200,000,000 Ordinary
Shares of 1p each: 2,000 2,000
Issued share capital:
75,000,000 fully
paid Ordinary Shares
of 1p each: 1,125 750
Issued during the
year:
17,500,000 Ordinary
Shares - 175
3,356,596 Ordinary
Shares - 34
16,643,404 Ordinary
Shares - 166
112,500,000 ordinary
shares of 1p each: 1,125 1,125
The Company has one class of
ordinary shares which carry
no right to fixed income.
2 shares were issued on 24
February 2006 for a consideration
of GBP1 each.
74,999,998 shares were issued on
20 March 2006 for a cash
consideration of GBP1 each.
17,500,000 Consideration Shares were
issued on 07 January 2010 at a fair
value of 36p each.
3,356,596 Placement Shares
were issued on 06 January 2010
at 40 p each.
16,643,404 Placement Shares
were issued on 08 January 2010
at 40p each.
The Share Premium balance was
transferred to Special Reserve
(see below).
Shares previously reserved for issue under the share
option scheme and cancelled during the year are detailed
in note 26.
21. Special reserve
The Special reserve is a distributable reserve to be
used for all purposes permitted under Guernsey company
law, including the buy back of shares and the payment
of dividends.
31
31 March March
Group and company 2011 2010
GBP'000 GBP'000
On conversion from
share premium 84,073 70,750
Pemium on issue
of ordinary shares - 13,825
Share issue costs on Placement
of shares - (502)
84,073 84,073
22. Share options reserve
31 31
March 31 March 31 March March
2011 2011 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Balance as at 1
April 2010, and
1 April 2009 2,437 2,420 1,820 1,820
Recognised fair
value of share options
issued during the
year 691 580 617 600
Cancellation of
share options (3,000) (3,000)
Balance as at 31
March 2011, and
31 March 2010 128 - 2,437 2,420
Details of share-based
payments are shown in
note 26.
23. Retained earnings
31 31
March 31 March 31 March March
2011 2011 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Balance as at 1
April 2010, and
1 April 2009 5,857 11,368 5,320 6,540
Net (loss)/ profit
for the year attributable
to owners (4,676) (5,478) 665 4,828
Cancellation of
share options 3,000 3,000 - -
Acquisition of non-controlling
interest in subsidiary - - (128) -
Dilution of controlling
interest in subsidiary (166) - - -
Balance as at 31
March 2010, and
31 March 2009 4,015 8,890 5,857 11,368
Any surplus or deficit arising from net profits or losses
after payment of dividends is taken to this reserve.
24. Translation reserve
The translation reserve comprises all foreign currency differences
arising from the translation of the financial statements of
foreign operations, as well as from the translation of liabilities
that hedge the Company's net investment in a foreign subsidiary.
Movements in the translation reserve are included under "Other
comprehensive income" in the statement of comprehensive income.
Net asset value
25. per share
31
March 31 March 31 March 31 March
2011 2011 2010 2010
Group Company Group Company
Net assets for the purposes
of basic and diluted net asset
value per share attributable
to equity holders of the parent:
(GBP'000) 89,845 94,088 93,529 98,986
Number of ordinary shares for
the purpose of net asset value
per share:(in thousands): 112,500 112,500 112,500 112,500
Net asset value
per share 79.9p 83.6p 83.1p 88.0p
26. Share based payments
Company
Terms
The Management Agreement currently provides that the Company
shall pay to the Manager a semi-annual management fee of an
amount equal to 1% of the net asset value of the Company as
at each valuation date of 31 March and 30 September in each
calendar year, payable in advance following such valuation
date.
Additionally, the Manager currently has an Option to acquire
new shares representing 20% of the share capital of the Company
(on a fully diluted basis, i.e. post the issuance of the Option
Shares), such Option to be exercised at a price of GBP1.00
per share in respect of 18,750,000 Option Shares and at a
price of GBP0.40 per share in respect of 9,375,000 Option
Shares (related to the additional Ordinary Shares issued in
the December 2009 placing), provided that the relevant performance
condition has been satisfied.
In consequence of the change to the management incentives,
the non-cash provision for share based payments amounting
to GBP600,000 per annum ceased to be made, reducing the reported
expenses by this amount in addition to the reduction in management
fees paid, and the historic provisions, totalling GBP2.42
million at 31 March 2010, were cancelled and transferred to
shareholder's reserves during the year. The way this was effectively
achieved was to expense in the current year, the remaining
non-cash provision for share based payments of GBP579,863
up to the grant date value of GBP3 million, and then cancel
and transfer the full GBP3 million share option reserve to
shareholder's reserves through the statement of changes in
equity.
31 March 31 March
Change in the year 2011 2010
Exercise
Number Number price
'000 '000
Options as at 1
April 2010, and
1 April 2009 28,125 18,750 100p
Options granted
during the year - 9,375 40p
Reversal of options
during the year -28,125 -
Options as at 31
March 2011, and
31 March 2010 - 28,125
Exercisable options
at the end of the
year - -
Calculation of the fair value
of equity settled share based
payments
All share based payments were valued during 2010 at the date
of issue using the Monte Carlo model. The key inputs to this
model that drive the option value are:
Share price at grant
of options 100p
Exercise price 100p
Expected volatility 20%
Risk free rate 4.39%
Effective dividend
yield 0%
Based on the above valuation the total
value of the options granted at the
date of grant was GBP3,000,000.
The charge for the year ended 31 March 2011 is GBP579,863
(2010: GBP600,000).
OSGRME
Terms
Under shareholders' approval a maximum of 4500 shares are
available for issue to management of the OSGRME Group. This
is representing a maximum of 5.98% of the OSGRME Group's
equity as of 31 March 2011 (2010: 3324 shares representing
a maximum of 4.48%). From this pool 4500 share options were
actually granted to management of OSGRME as of 31 March 2011(1250
were granted in 2007 and are exercisable at grant date with
a fair value at grant date of $406,998, 1000 were granted
in 2008 with a 5 year vesting period with a fair value at
grant date of $320,521, 1000 were granted in 2009 with a
5 year vesting period with a fair value at grant date of
$186,140 and 1,250 were granted in 2011 with 5 year vesting
period with a fair value at grant date of $406,018).
31 March 31 March
Change in the year 2011 2010
Exercise
Number Number price
Options as at 31
March 2010, acquisition $160
date 3,250 3,250 - $434
Options granted $376
during the year 1,250 - - $493
Options as at 31
March 2011 4,500 3,250
Exercisable options
at the end of the
year 1,250 1,250
The options outstanding at 31 March 2011 had a remaining
contractual life of 5 years
All share based payments were valued at the date of issue
using the Black-Scholes Model. The Directors have estimated
that the hurdle rate will be achieved, and hence the options
will vest, after 5 years. The value of the 3,250 options
that were granted in 2008-2010 will be charged to profit
or loss on a pro rata basis over the course of the 5 years
ending December 2013. The charge arising for the 3 month
ended 31 March 2011 is GBP118,360 (2010: GBP17,661).
27. Interest expense
31 March 31 March
Group 2011 2010
GBP'000 GBP'000
Finance leases 547 83
Other 38 12
585 95
28. Operating leases
Leases as lessee
Non-cancellable operating
lease rentals are payable
as follows:
31 March 31 March
Group 2011 2010
GBP'000 GBP'000
Less than 1 year 4,193 3,199
1 - 5 years 12,127 11,628
More than 5 years 3,657 -
19,977 14,827
The Group leases a number of premises including warehouse
facilities and office buildings under operating leases. The
leases typically run for a period of 1 - 5 years.
29. Financial risk factors
The investment strategy of the Company is to make equity
or equity-related investments in small and mid-sized private
Russian companies focused on the financial, business and
consumer services sectors with the objective to provide investors
with an attractive level of capital growth from investing
in a diversified private equity portfolio. Consistent with
that objective, the Company's financial instruments mainly
comprise of investments in private equity companies. In addition
the Company holds cash and liquid resources as well as having
debtors and creditors that arise directly from its operations.
The main risks arising from the Company's financial instruments
are credit risk, foreign currency risk, market price risk
and interest rate risk.
Capital Management
The capital structure of the Group at year end consists of
cash and cash equivalents and equity attributable to equity
holders of the Company, comprising issued capital, reserves
and retained earnings. The Group has no return on capital
benchmark, but the Board continues to monitor the balance
of the overall capital structure so as to maintain investor
and market confidence. The Group is not subject to any external
capital requirements.
Liquidity risk
Liquidity risk is the risk that the Group will not be able
to meet its financial obligations as they fall due. The Group's
approach to managing liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to
the Group's reputation.
The Group's liabilities are short-term in nature (apart from
the finance leases as per note 17) and are payable in the
normal operating cycle. Refer to the interest rate risk table
in note 29 for the maturity analysis of the Group's liabilities.
Credit risk
The Group is exposed to credit risk in respect of its cash
and cash equivalents, arising from possible default of the
relevant counterparty, with a maximum exposure equal to
the carrying value of those assets. The credit risk on liquid
funds is limited because the counterparties are banks with
high credit-ratings assigned by international credit-rating
agencies. Forward exchange contracts were held in the prior
year with The Royal Bank of Scotland International, a highly
reputable counterparty with a high credit rating. The Group
monitors the placement of cash balances on an ongoing basis.
No financial assets held by the group have had their credit
rating graded by an internationally regarded agency.
Two subsidiaries of the Group, Kreditmart and Flexinvest,
are exposed to credit risk in respect of mortgage loans,
arising from possible default of its customers. The credit
risk is mitigated by the Risk Department, who on a monthly
basis compile a Portfolio Quality report, which analyse
the key trends and highlights any risk areas, as well as
a review of any delinquent and potentially delinquent accounts.
The Risk Department also mitigate the credit risk through
the calculation of the Value at Risk ('VAR') to forecast
the level of estimated losses, calculate the Loan Loss Provisions
('LLP') on a monthly basis based on Central Bank of Russia
Federation instructions and calculate the limits of insurance
responsibilities of Insurance companies that provide the
customers mortgage insurance.
The Financial Departments of OSG Records Management (Europe),
Kreditmart and Flexinvest exercises control over the risk
in the legislation and regulatory arena and assesses its
influence on the Group's activity. This approach allows
the Group to minimize potential losses from the investment
climate fluctuations in the Russian Federation and Eastern
Europe. The geographical concentration of the assets and
liabilities of the Group are set out below:
31 March 2011
Russian United
Federation Kingdom Poland Cyprus Other
ASSETS % % % % %
Long term third
party loans
receivable 100- -- -
Trade and other
receivables 771 13- 9
Cash and cash
equivalents 32 49 2 16 1
31 March 2010
Russian United
Federation Kingdom Poland Cyprus Other
ASSETS %% %% %
Long term third
party loans
receivable 100- -- -
Trade and other
receivables 57 25 13- 5
Cash and cash
equivalents 44 49 15 1
Kreditmart and Flexinvest do not have any Sub-prime customers
due to criteria guidelines which do not allow loans to be
granted to borrowers without income confirmation documents.
The Risk Department of Kreditmart and Flexinvest have determined
that the value of delinquent loans are GBP2,356,868 (2010:
GBP1,837,541). Loan payments are current except for GBP56,883
which is 60 days overdue as at 31 March 2011 (2010: GBP920,911:
60 days overdue) and GBP1,520,760 which is 90 and 120 days
overdue as at 31 March 2011 (2010: GBP574,709: 120 days).
At 31 March 2011, a Loan Impairment Provision in respect
of these loans was raised of GBP630,935 (2010:GBP572,073).
OSG Records Management (Europe) has no loan receivables.
See note 15 for details of the ageing of trade receivables.
The maximum exposure to credit risk for the Group and Company
at the end of the reporting period without taking into account
any collateral held or credit enhancements is the following:
31 31
March March 31 March 31 March
2011 2011 2010 2010
Group Company Group Company
Note GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash
equivalents 16 6,739 3,794 13,242 5,704
Trade and other
receivables 15 4,404 30 4,450 1,171
Corporate Loans 434- - -
Loans to
customers 14 7,787- 8,618 -
19,364 3,824 26,310 6,875
Currency risk
Currency risk is the risk that the value of financial instruments
will fluctuate due to changes in foreign exchange rates. Currency
risk arises when future commercial transactions and recognised
assets and liabilities are denominated in a currency that
is not the Company's reporting currency. The Group is exposed
to foreign exchange risk arising from various currency exposures
primarily with respect to Russian Roubles, Polish Zloty and
the US Dollar. All of the Group's equity investments are denominated
in Russian Roubles. The Group does not hedge its currency
exposure on equity investments but has put in place hedges
on monetary assets to mitigate its US Dollar exposure. The
Group does not use such currency derivatives for speculative
purposes. See note 18 for detail of currency derivative contracts
entered into during the current year and prior year, as well
as those outstanding at year end.
Currency Risk
Table
An analysis of the
Group's net currency
exposure is as follows:
As at 31 March
2011:
Currency of Russian Polish
denomination Sterling US Dollars Roubles Zloty Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total assets 27,287 2,803 65,636 3,055 1,019 99,800
Total
liabilities (1,762) (2) (5,580) (2,163) (448) (9,955)
Net currency
exposure 25,525 2,801 60,056 892 571 89,845
=========
As at 31 March
2010:
Currency of Russian Polish
denomination Sterling US Dollars Roubles Zloty Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total assets 31,753 4,009 63,045 2,284 1,025 102,116
Total
liabilities (1,564) (39) (4,833) (1,581) (570) (8,587)
Net currency
exposure 30,189 3,970 58,212 703 455 93,529
=========
An analysis of the
Company's net currency
exposure is as follows:
As at 31 March
2011:
Currency of Russian
denomination Sterling US Dollars Roubles Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total assets 3,333 - 90,991 - 94,324
Total
liabilities (236) - - - (236)
Net currency
exposure 3,097 - 90,991 - 94,088
=========
As at 31 March
2010:
Currency of Russian
denomination Sterling US Dollars Roubles Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total assets 6,568 - 92,507 - 99,075
Total
liabilities (89) - - - (89)
Net currency
exposure 6,479 - 92,507 - 98,986
=========
Foreign Currency
Sensitivity
The following table details the Group's sensitivity to a 20%
(2010: 20%) strengthening of the Sterling against each of
the relevant foreign exchange currencies. 20% (2010: 20%)
is the sensitivity rate used when reporting foreign currency
risk internally to management and represents management's
assessment of the possible change in foreign exchange rates.
This analysis assumes that all variables, in particular interest
rates remain constant. The analysis is performed on the same
basis for the prior period.
Increase/(decrease) in profit /loss:
31 March 31 March 31 March 31 March
2011 2011 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Group Company Group Company
Russian Rouble (12,011) (18,198) (11,642) (18,501)
US Dollar (560) - (794) -
Polish Zloty (178) - (141) -
Other (114) - (91) -
A 20% (2010: 20%) weakening of the Sterling against each of
the relevant foreign exchange currencies at the year end would
have had the equal but opposite effect, on the basis that
all other variables remain the same.
Market risk
Market price risk arises principally from uncertainty concerning
future values of financial instruments used in the Group's
operations. It represents the potential loss the Group might
suffer through holding interests in unquoted private companies
whose value may fluctuate and which may be difficult to value
and/or to realise. The Company seeks to mitigate such risk
by assessing such risks as part of the due diligence process
related to all potential investments, and by establishing
a clear exit strategy for all potential investments. There
is a rigorous due diligence process before an investment can
be approved which will cover financial, legal and market risks.
Following investment the Company/Manager will always have
Board representation, the investee company is required to
submit regular management information to an agreed standard
and timeliness and the Manager undertakes regular monitoring.
The Board receives and considers the most recent monitoring
report prepared by the Manager at every Board meeting.
Pricing Risk Table
All security investments present a risk of loss of capital,
the maximum risk resulting from instruments is determined
by the fair value of the financial instrument. The following
represents the Group and Company's market pricing exposure
at year end:
At 31 March 2011:
Fair Value % of Net Fair Value % of Net
Note GBP'000 Assets GBP'000 Assets
Group Company
Investments at fair
value through profit &
loss:
- Unlisted Equities 13 & 11 43,200 48.08 90,500 96.19
- Quoted investments 13 & 11 2,605 2.90 - -
At 31 March 2010:
Fair Value % of Net Fair Value % of Net
GBP'000 Assets GBP'000 Assets
Group Company
Investments at fair
value through profit &
loss:
- Unlisted Equities 13 & 11 41,900 43.29 92,200 93.14
- Quoted investments 13 & 11 1,185 1.22 - -
Derivative liabilities
Valuation of financial
instruments
The Group measures fair values using the following fair value
hierarchy that reflects the significance of the inputs used
in making the measurements:
> Level 1: Quoted market price (unadjusted)
in an active market for an identical
instrument.
> Level 2: Valuation techniques based on observable inputs,
either directly (i.e. as prices) or indirectly (i.e. derived
from prices). This category includes instruments valued using:
quoted market prices in active markets for similar instruments;
quoted prices for identical or similar instruments in markets
that are considered less than active; or other valuation
techniques where all significant inputs are directly or indirectly
observable from market data.
> Level 3: Valuation techniques using significant unobservable
inputs. This category includes all instruments where the
valuation technique includes inputs not based on observable
data and the unobservable inputs have a significant effect
on the instrument's valuation. This category includes instruments
that are valued based on quoted prices for similar instruments
where significant unobservable adjustments or assumptions
are required to reflect differences between the instruments.
The table below analyses financial instruments, measured
at fair value at the end of the reporting period, by the
level in the fair value hierarchy into which the fair value
measurement is categorised:
Group
Level Level Level
1 2 3 Total
At 31 March 2011: GBP'000 GBP'000 GBP'000 GBP'000
Investments at fair
value through profit
& loss:
-Unlisted Equities - - 43,200 43,200
- Quoted investments 2,605 - - 2,605
2,605 - 43,200 45,805
Level Level Level
At 31 March 2010: 1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investments at fair
value through profit
& loss:
-Unlisted Equities - - 41,900 41,900
- Quoted investments 1,185 - - 1,185
1,185 - 41,900 43,085
The following table shows a reconciliation from the beginning
balances to the ending balances for fair value measurements
in Level 3 of the fair value hierarchy of the Group:
Level
2011 3
GBP'000
Opening balance 41,900
Total gains or losses
in profit or loss 1,300
Closing balance 43,200
Company
Level Level Level
1 2 3 Total
At 31 March 2011: GBP'000 GBP'000 GBP'000 GBP'000
Investments at fair
value through profit
& loss:
-Unlisted Equities - - 90,500 90,500
- - 90,500 90,500
Level Level Level
At 31 March 2010: 1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investments at fair
value through profit
& loss:
-Unlisted Equities - - 92,200 92,200
- - 92,200 92,200
The following table shows a reconciliation from the beginning
balances to the ending balances for fair value measurements
in Level 3 of the fair value hierarchy of the Company:
Level
2011 3
GBP'000
Opening balance 92,200
Total gains or losses
in profit or loss (1,700)
Closing balance 90,500
Although the Group and Company believes that its estimates
of fair values are appropriate, the use of different methodolgies
or assumptions could lead to different measurements of fair
value. For fair value measurements in Level 3 of the fair
value hierarchy (as per note 11), changing one or more of
the unobservable inputs used for either a conservative and
optimistic approach would have the following effects:
Level 3 investments have been valued in accordance with the
methodologies in Note 11. The value of the investments and
the fair value movements are disclosed in note 13.
Price
sensitivity
The sensitivity analysis below has been determined based on
the exposure to equity price risks as at the reporting date.
At the reporting date, if the valuations had been 20% higher
while all other variables were held constant net profit would
increase by GBP8,269,000 (2010: GBP8,380,000) for the Group
and GBP18,631,000 (2010: GBP18,440,000) for the Company. This
sensitivity rate was determined by the Directors as reasonable
taking market conditions into account.
If the valuation of investments had been 20% (2010: 20%) lower
it would have had the equal but opposite effect, on the basis
that all other variables remain the same.
Interest
rate risk
Interest rate risk is the risk that the fair value
or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates.
The Group is exposed to interest rate risk as a result of
the cash and bank balances that are invested at floating interest
rates. The Group monitors its interest rate exposure regularly
and allocates its cash resources to an appropriate mix of
floating and fixed rate instruments of varying maturities.
The following table details the Group and Company's exposure
to interest rate risk as at period end by the earlier of contractual
maturities or re-pricing:
Group
3
No Less months 1 2 Greater
contractual than to to to than
At 31 March terms of 1 1-3 1 2 5 5
2011: repayment month months year years years years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
Non-interest
bearing 78,104 2,866 2,332 45 343 236 - 83,926
Floating
interest
rate
instruments 64 - - - - - - 64
Fixed
interest
rate
instruments
* 89 1,478 190 5,659 846 233 7,316 15,811
Total 78,257 4,344 2,522 5,705 1,189 469 7,316 99,801
Liabilities
Non-interest
bearing (1,792) (2,383) (2,656) (1,347) - - - (8,178)
Fixed
interest
rate
instruments - - - - (1,095) (682) - (1,777)
Total (1,792) (2,383) (2,656) (1,347) (1,095) (682) - (9,956)
Net Exposure 76,465 1,961 (134) 4,358 94 (213) 7,316 89,845
3
No Less months 1 2 Greater
contractual than to to to than
At 31 March terms of 1 1-3 1 2 5 5
2010: repayment month months year years years years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
Non-interest
bearing 77,156 2,166 1,525 191 569 190 - 81,797
Floating
interest
rate
instruments 4,379 - - - - - - 4,379
Fixed
interest
rate
instruments 682 3,415 1,293 2,192 187 217 7,954 15,940
Total 82,217 5,581 2,818 2,383 756 407 7,954 102,116
Liabilities
Non-interest
bearing (1,699) (2,981) (1,317) (1,023) - - - (7,020)
Fixed
interest
rate
instruments - - - - (824) (743) - (1,567)
Total (1,699) (2,981) (1,317) (1,023) (824) (743) - (8,587)
Net Exposure 80,518 2,600 1,501 1,360 (68) (336) 7,954 93,529
Company
No 3
contractual Less months Greater
At 31 March terms of than 1 1-3 to 1 1 to 2 2 to 5 than 5
2011: repayment month months year years years years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
Non-interest
bearing 90,991 - 30 - - - - 91,021
Floating
interest
rate
instruments 64 - - - - - - 64
Fixed
interest
rate
instruments - - - 3,239 - - - 3,239
Total 91,055 - 30 3,239 - - - 94,324
Liabilities
Non-interest
bearing - (236) - - - - - (236)
Total - (236) - - - - - (236)
Net Exposure 91,055 (236) 30 3,239 - - - 94,088
No 3
contractual Less months Greater
At 31 March terms of than 1 1-3 to 1 1 to 2 2 to 5 than 5
2010: repayment month months year years years years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
Non-interest
bearing 92,607 - 980 - - - - 93,587
Floating
interest
rate
instruments 4,379 - - - - - - 4,379
Fixed
interest
rate
instruments - - - 1,109 - - - 1,109
Total 96,986 - 980 1,109 - - - 99,075
Liabilities
Non-interest
bearing - (89) - - - - - (89)
Total - (89) - - - - - (89)
Net Exposure 96,986 (89) 980 1,109 - - - 98,986
* The Group's fixed interest rate instruments represents cash
accounts placed on deposit by the Company, Kreditmart and
Flexinvest, and OSGRME, and the mortgages granted by Kreditmart
and Flexinvest. The Group does not account for any fixed rate
financial assets and liabilities at fair value through profit
or loss, and the Group does not designate derivatives (forward
exchange contracts) as hedging instruments under a fair value
hedge accounting model. Therefore a change in interest rates
at the reporting date would not affect profit or loss.
The expected maturities of the undiscounted cash flows (including
interest) of the mortgages granted by Kreditmart and Flexinvest
at 31.03.11 and 31.03.10 is presented in the following table
(note: there are no mortgage bonds in OSGRME):
Kreditmart
and
Flexinvest
3
Less months Greater
than 1 1-3 to 1 1 to 2 2 to 5 than 5
month months year years years years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 31 March
2011: 108 217 885 1,097 3,293 21,715 27,315
At 31 March
2010: 120 240 1,079 1,276 3,420 24,846 30,981
Sensitivity
analysis
The sensitivity analysis below has been determined based on
the Group's exposure to interest rates for interest bearing
assets and liabilities at the reporting date and the stipulated
change taking place at the beginning of the financial year
and held constant throughout the reporting period in the case
of instruments that have floating rates.
If interest rates had been 50 basis points higher and all
other variables were held constant, the Group's net profit
for the year ended 31 March 2011 would have increased by GBP319
(2010: GBP21,896) and the Company's by GBP319 (2010: GBP21,896).
If interest rates had been 50 basis points lower it
would have had the equal but opposite effect, on the
basis that all other variables remain the same.
Segmental
30. information
The Board of Directors of the Company decides on the strategic
resource allocations of the Group. The operating segments
of the Group are the business activities that earn revenue
or incur expenses, whose operating results are regularly reviewed
by the Board of Directors of the Company, and for which discrete
financial information is available. The Board of Directors
considers the Group to be made up of 3 segments, which are
reflective of the business activities of the Group and the
information used for internal decision-making:
- Aurora
Russia Limited
(parent
company)
- Kreditmart Finance Limited, Flexinvest Limited and Flexinvest
Bank ("FIB") Limited (subsidiaries)
- OSG Records Management
(Europe) Limited ("OSGRME")
(subsidiary)
The Group is engaged in investment in small and mid-sized
companies in Russia and in one principal geographical area,
being Russia.
Kreditmart Finance Limited, Flexinvest Limited and Flexinvest
Bank ("FIB") Limited (subsidiaries) disburse mortgage and
consumer loans for private clients, place deposits, and render
other services (money transfers, safe boxes). Kreditmart provides
private clients with consultations on mortgage, consumer loans,
vehicle insurance, and other financial services.
The OSG Group consists of seven legal entities: OSG Records
Management (Europe) Ltd (Cyprus), OSG Records Management Center
(Russia), OSG Polska (Poland), OSG Records Management (Ukraine),
OSG Records Management (Armenia), OSG Records Management (Bulgaria)
and OSG Records Management (Kazakhstan). OSG Records Management
(Europe) Ltd (Cyprus) is a parent company for OSG Group which
owns 100% of shares of 6 operating units in Russia (being
the largest operation), Poland, Ukraine, Kazakhstan, Armenia
and Bulgaria. The OSG Group provides records management services
(document storage and other services) through its 100% owned
operating subsidiaries. More than half of sales revenues are
earned through providing document storage services. The remaining
revenues come from the following warehouse services, transportation
of documents; archive services, data processing services and
destruction of documents and tapes. Approximately 70% of the
operating income is derived from Russia, with the bulk of
the remaining portion being derived from Poland.
The main customers of Kreditmart, Flexinvest and FIB are private
clients and the main customers of OSGRME are financial institutions,
telecom and other companies.
The Investment Manager's Report provides more information
on the Company's business and the operations of each investment.
The parent company derives its revenues from its investments
by way of interest and dividends.
31 31 31 31 31 31
March 31 March March March March 31 March March March
2011 2011 2011 2011 2010 2010 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Kreditmart/ Kreditmart/
Flexinvest/ Flexinvest/
Aurora FIB OSGRME Total Aurora FIB OSGRME Total
Revenue 210 1,908 14,839 16,957 659 1,615 2,997 5,271
- Fees - 684 - 684 - 323 - 323
- Storage - - 6,939 6,939 - - 1,575 1,575
- Warehousing,
transport,
data processing
and other - 86 7,893 7,979 - - 1,420 1,420
- Interest
on long
term mortgages
and other
loans - 943 - 943 - 1,062 - 1,062
- Loan interest - 5 - 5 399 - - 399
- Bank interest 23 190 7 220 13 230 2 245
- Dividend
income 187 - - 187 247 - - 247
Administration
and operating
expenses (3,984) (3,200) (12,771) (19,955) (3,341) (3,390) (2,701) (9,432)
Depreciation
and amortisation - (227) (1,474) (1,701) - (318) (317) (635)
Interest
expense - (38) (552) (590) - (12) (161) (173)
Fair value
movements
on revaluation
of investments (1,700) (27) - (1,727) 7,656 (5) - 7,651
- Kreditmart/Flexinvest/FIB (3,700) - - (3,700) (800) - - (800)
- OSGRME 700 - - 700 4,756 - - 4,756
- Unistream (5,700) - - (5,700) (600) - - (600)
- Grindelia
(SuperStroy) 7,000 - - 7,000 4,300 - - 4,300
- Quoted
investments - (27) - (27) - (5) - (5)
Exchange
(losses)/gains (4) (545) 1 (548) (146) 134 4 (8)
Operating
profit/(loss)
before tax (5,478) (2,129) 43 (7,564) 4,828 (1,976) (177) 2,675
Tax - 45 (164) (119) - (13) 16 3
Net segment
profit/(loss) (5,478) (2,084) (121) (7,683) 4,828 (1,989) (162) 2,677
Reconciliation
of segment
profit/(loss)
to consolidated
statement 31 31
of comprehensive March March
income 2011 2010
GBP'000 GBP'000
Total net
segment
income/(loss) (7,683) 2,677
Adjustment
for fair
value movements
on
Kreditmart/Flexinvest/FIB
and OSGRME 3,000 (2,021)
Net (loss)/
profit for
the year
for the
Group (4,683) 656
31 31 31 31
March 31 March March March March 31 March 31 March 31 March
2011 2011 2011 2011 2010 2010 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Kreditmart/ Kreditmart/
Flexinvest/ Flexinvest/
Aurora FIB OSGRME Total Aurora FIB OSGRME Total
Total segments
assets
include:
Investments in
subsidiaries 47,300 - - 47,300 50,300 - - 50,300
Financial
assets
at fair
value through
profit
or loss 43,200 2,605 - 45,805 41,900 1,185 - 43,085
- OSGRME - - - - - - - -
- Unistream 18,700 - - 18,700 24,400 - - 24,400
- Grindelia
(SuperStroy) 24,500 - - 24,500 17,500 - - 17,500
- Quoted
investments - 2,605 - 2,605 - 1,185 - 1,185
Cash and cash
equivalents 3,794 2,718 227 6,739 5,704 5,502 2,036 13,242
Intangible
assets - 2,760 22,198 24,958 - 2,680 - 2,680
Property,
plant and
equipment - 418 8,364 8,782 - 689 5,755 6,444
Assets
classified
as held
for sale - 657 - 657 - 845 - 845
Loans and
advances
to customers - 7,787 - 7,787 - 8,618 - 8,618
Other assets 30 1,430 3,613 5,073 1,171 949 2,711 4,831
Segment
assets 94,324 18,375 34,402 147,101 99,075 20,468 10,502 130,045
Total segment
liabilities (236) (760) (7,469) (8,465) (89) (760) (6,324) (7,173)
Reconciliation
of segment
assets and
liabilities to
consolidated
statement of
financial 31 March 31 March
position 2011 2010
GBP'000 GBP'000
Segment
assets
for reportable
segments 147,101 130,045
Exchange
loss on
translation
of intangibles - (204)
Investment in
subsidiaries (47,300) (50,300)
Goodwill
on acquisition
of OSGRME - 14,164
Fair value adjustment
of Net Assets
on acquisition
of OSGRME - 8,602
Intercompany
debtors - (191)
Total assets
for the
Group 99,801 102,116
Segment
liabilities
for reportable
segments (8,465) (7,173)
Deferred taxation
adjustment on
acquisition
of OSGRME (1,491) (1,605)
Intercompany
creditors - 191
Total
liabilities
for the Group (9,956) (8,587)
31. Related party transactions
The Company has 4 subsidiaries, OSG Records Management (Europe)
Limited, Kreditmart Finance Limited, Flexinvest Limited and
Flexinvest Bank Limited (see note 11 and 12). Details of the
investments in Unistream Bank and Grindelia Holdings are presented
in note 13.
Balances owing between the Company and any subsidiaries which
are related parties have been eliminated on consolidation. This
includes a loan receivable from Flexinvest (see note 15).
The conversion of the loan to equity in respect of OSGRME is
disclosed in notes 11 and 12. Interest received on this loan up to
date of conversion of GBPnil (year ended 31 March 2010: GBP398,574)
is separately disclosed on the face of the statement of
comprehensive income.
Per the Amended and Restated Management Agreement, the
management fee and performance fee payable to Aurora Investment
Advisors Limited ('AIAL') are as follows:
(a) Management fee of an amount equal to I) for all Valuation
Dates up to and including 31 March 2011, 1% of the net asset value
of the Company; and ii) for all Valuation Dates after 31 March
2011, 0.75% of net asset value of the Company;
(b)Performance fee is calculated as follows:
- 2.5% of the value of any disposals realised by the Company
would be payable to the Manager, calculated on the value of assets
of the Company realised up to GBP45 million, i.e. GBP0.40 per share
(the "2.5% Tranche");
- 7.5% of the value of any disposals realised by the Company
would be payable to the Manager, calculated on the value of assets
of the Company realised between GBP45 million and GBP99 million,
i.e. GBP0.40 per share to GBP0.88 per share (NAV) (the "7.5%
Tranche"); and
- 20% of the value of any disposals realised by the Company
would be payable to the Manager, calculated on the value of assets
of the Company realised over GBP99 million, i.e. over GBP0.88 per
share (the "20% Tranche").
such performance fees to decline by 20% per annum from 1 January
2012 in respect of the 2.5% Tranche, and by 20% per annum from 1
January 2013 in respect of each of the 7.5% Tranche and the 20%
Tranche.
The total fees charged, which are at arm's length, to the profit
or loss during the year was GBP1,979,720 (2010: 1,677,216). There
were no outstanding fees at year end.
John McRoberts and James Cook each hold 47.5% of the ordinary
share capital and 36.25% of the non-voting preference share capital
of AIAL at year end. In addition, John McRoberts and James Cook are
both directors of Aurora (II) GP Limited, a wholly owned subsidiary
of AIAL.
The Company pays fees to Close Fund Services Limited ('CFSL')
for its services as administrator. The total charge to profit or
loss during the year was GBP72,500 (2010: GBP93,839),of which
GBPnil (2010: GBP5,000) was outstanding at the year end.
The Directors of the Company and of Kreditmart OOO other than
John McRoberts and James Cook, received fees for their services.
The total charge to the profit or loss during the year was
GBP179,722 (2010: GBP174,279), of which GBPnil (2010: GBP3,330) was
outstanding at the year end. Details of directors' remuneration are
disclosed in the Directors' Report.
32. Contingencies and capital commitments
The Group had no contingencies and capital commitments
outstanding at the reporting date.
33. Events after the reporting date
The Board resolved on 22 June 2011 to withdraw from Kreditmart
as soon as is practicable. The Kreditmart brand has been fair
valued at GBPnil for the year ended 31 March 2011 and has
continually incurred losses. It is uncertain at this stage how the
board intends to dispose of the asset or what the cost of disposal
will be, however they do not foresee this cost to be
significant.
James Cook resigned from the board of directors, effective 17
June 2011.
There were no further material post balance events to
report.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FIMMTMBITMIB
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