TIDMSPDI
RNS Number : 6923K
SPDI Secure Property Dev&Inv PLC
27 June 2014
27 June 2014
SECURE PROPERTY Development & Investment
("SPDI" or "the Company")
Full year results show good operational performance and
continued progress with strategy of portfolio diversification
- $17 million of capital raised to fund growth strategy -
SECURE PROPERTY Development & Investments Ltd (LSE:SPDI), a
South Eastern European focused property and investment company,
today announces its full year results for the year ended 31
December 2013.
Financial highlights:
-- The Company turned to positive EBITDA in 2013 of $0.3 million
(2012: loss of $1.2 million).
-- Net Asset Value increased by 54% to $52.2 million (2012:
$33.9 million).
-- Net Rental Income increased by 33% to $2.8 million (2012:
$2.1 million) as a result of improved occupancy at Terminal
Brovary, the Group's key income producing asset in Kyiv,
Ukraine.
-- Cost stabilisation in operating expenses was generated
through improved operational efficiencies, including continued
streamlining and consolidation of third party advisors, as well as
the initiation and implementation of tendering procedures and other
cost monitoring and internal controls for operating processes. $17
million of capital was raised in 2013, adding momentum to the
Company's recovery and funding its ambitions for growth.
-- Banking debt reduced by 9% to $15 million (2012: 16.4
million).
Operational highlights:
-- Occupancy at Terminal Brovary increased to 100% at the year
end, from 84% as at 31 December 2012, following the signing of new
leases along with a 33% increase in net rental income in comparison
to the prior year.
-- During 2013, the Company finalised the negotiations with the
European Bank for Reconstruction and Development on rescheduling
the amortisation plan of the Brovary construction loan. Signatures
are pending on the final documents.
-- In its push to further improve Corporate Governance, SPDI
attracted Ned Goodman as a senior advisor to its Board. Ned Goodman
is a well-respected and experienced international investor with a
strong track record in both the real estate sector and the South
East Europe markets. He is the founder of the Dundee Group of
Companies in Canada, and President and CEO of the Dundee
Corporation, an independent publicly traded Canadian asset
management company. The appointment has substantially strengthened
the collective experience of our board.
Lambros Anagnostopoulos, Chief Executive Officer of Secure
Property, said: "We made good operational progress during 2013 and
I am particularly pleased to report that we took a significant step
towards diversifying SECURE's portfolio by agreeing terms to
acquire an asset in Romania, our first outside of Ukraine, with an
addition of two assets close to completion.
"European markets now look to be recovering and Eastern Europe
has been growing faster than average, although the ongoing
uncertainty in Ukraine is a cause of serious concern for the future
political stability of the country and its economy.
"However, we are optimistic that 2014 will be seen as the real
turning point in SECURE's evolution; we have worked through
bankruptcy in 2010, a loan default in 2011 and have managed to
stabilise the Company both financially and operationally during the
economic and financial sector crisis between 2012 and 2013, and
overall Eurozone instability. We now have a strategy focused on
growth and diversification, a committed group of shareholders and a
driven management team, so we are confident that we will have a
successful year."
- Ends -
Enquiries:
SECURE PROPERTY Development & Investment plc + 380 44 459 3000
Lambros Anagnostopoulos www.secure-property.eu
Constantinos Bitros
SP Angel Corporate Finance LLP
Tercel Moore +44 (0) 20 3463 2260
Jeff Keating
FTI Consulting +44 (0) 20 3727 1000
Richard Sunderland
Nick Taylor
1. Chairman's Statement
During 2013 the Company continued to pursue its strategy of
consolidating existing assets in Ukraine, while acquiring new ones
elsewhere. While progress was made on both fronts, the management
was frustrated by delays arising from what remains a very cautious
and inefficient business environment in the region. The small loss
the Company recorded in 2013 came largely due to the later than
expected acquisitions of income generating buildings in Romania,
which if accomplished earlier would have increased bottom line
result considerably. These problems came on top of others, notably
the banking crisis in Cyprus early in the year, and the political
problems in Ukraine that flared up as the year closed.
It is thus very much to the credit of the management team that
the impact of these macroeconomic headwinds was contained:
operating expenses remained close to budget, rental income for
Terminal Brovary, which rose by 70% to USD 3,6m was also on budget,
allowing the Company to end the year with a strong balance sheet
and a great deal of acquisitions preparatory work behind it. There
is every indication that 2014 may be as challenging as 2013 as
Ukraine has entered a period of crisis but the Secure Property
Management and Board who are very experienced in dealing with
economic and political turbulence have already taken the steps to
diversify and grow the Company.
Paul Ensor
Chairman
2. Letter to the Shareholders
26 June 2014
Dear Shareholders,
What a difference a year makes. In early 2012, there were real
concerns that Europe was going head-on into a wall, with many
predicting the collapse of the Euro and the Union. However, by late
2013, a combination of a number of events, including the German
elections providing political stability in Europe's largest
economy, Greece producing its first primary surplus in years,
Cyprus weathering a banking crisis (which saw Cypriot banks go bust
and individual depositors losing money for the first time in the EU
history) and the US starting to taper-off its package of economic
stimulus without major consequences, had led to renewed confidence
that the European economy is back on track. There are, of course,
some that do not believe enough has been done or that the risks
have been fully mitigated.
At the same time, Eastern Europe has been growing faster than
average, with Romania leading the pack in terms of both GDP growth
rates and political stability, while a lot of non-European capital
is circling around Southern European countries and Greece is
looking for investment opportunities. All in all, 2013 largely saw
progress being made in the right direction, with the overall
environment substantially ameliorating, but fears remain that the
fire is not totally extinct and that there are outstanding factors
that might cause it to flare up again very quickly. The events of
early February 2014 and the ongoing situation in Ukraine, which is
still at a critical juncture, not only give rise to serious concern
for the future political stability of the country and its economy,
but also serve as a timely reminder of how quickly things can
change.
For our Company, while we continued to make good operational
progress, in terms of implementing our strategy of growth by
acquisitions, 2013 was a year in limbo and no acquisitions were
completed during the year under review. The market's concerns about
lingering risks were reflected in the inability of most financial
institutions in the region to extend new or refinance old loans
combined with a priority for most of the regulatory bodies to
assess the banking sector's capital adequacy that caused a very
illiquid environment which delayed progress. Against this backdrop,
we put a lot of focus on both raising further capital for
investment and sourcing opportunities to invest in undervalued
assets. While we were successful in raising $17 million early in
the year, it took more time to start deploying these funds than we
would have historically expected. However, the efforts made and
many leads generated by the management team laid the foundations
for the Company to make an acquisition in Romania in early 2014 -
SECURE's first outside Ukraine.
In terms of asset management, the Company made good progress at
its key income producing asset, Terminal Brovary, with occupancy
consistently above 95% for the warehouse space and 85% including
the office elements. Close to the end of the year, we rented the
small amount of remaining warehouse space reaching 100% warehouse
occupancy. 2013 is the first year with such high occupancy at
Brovary, and our efforts resulted in a 33% increase in rental
income in comparison to the previous year.
In March 2013 we finalised negotiations with the European Bank
for Reconstruction and Development ("EBRD") on rescheduling the
amortisation plan of the Brovary construction loan. Unfortunately,
this coincided with the Cyprus banking crisis which resulted in the
loan's 'B' Lender soon becoming bankrupt and being unable to
complete the transaction, despite the fact that SPDI and EBRD had
put in effect the new loan as of Q2 2013. In December 2013 we
received the written agreement of the 'B' Lender on the
restructuring and we are now in the process of finalising legal
documents that would eliminate a balance sheet risk factor by
formalising the loan agreement.
In parallel, the Company navigated the Cypriot banking crisis
well, having previously ensured that all its available cash was
kept in non-Cypriot banks before the system collapsed.
Consequently, and despite post-collapse cash transfer restrictions
creating challenges, our cash reserve was safe and we ended the
year with more than $13 million in cash or cash equivalent.
As mentioned above, a key focus of our asset management team was
sourcing acquisitions and a number of interesting opportunities
were identified, mostly in Romania. By the end of the year the
Company had agreed terms to acquire three assets, two of which were
very close to signature.
In March 2014, we were very pleased to sign the Sale and
Purchase Agreement for the acquisition of Innovations Logistics
Park, a fully-let 17,000 sq.m. gross leasable area logistics park
in Bucharest. Its anchor tenant is Nestle which leases more than
60% of the gross leasable area, with the remainder let to locally
managed Romanian businesses. Innovations produces EUR1.3 million of
income per annum and the acquisition is expected to increase the
Company's annual net operating income by over 60%.
The acquisition strengthens SECURE's focus on the logistics
industry, increases our regional logistics exposure and diversifies
our portfolio outside Ukraine for the first time in its history. It
is the first small step towards our ultimate goal of creating a
leading regional company.
The 2013 annual accounts scarcely remind us of the troubles the
Company was in just two years ago when the current management team
took over. Operational revenues have increased in the region of
620% since that time, reaching $3.6 million for the year under
review compared to $2.1 million in 2012 and $0.5 million in 2011.
SPDI is now well placed for continued growth in line with
shareholders' mandate.
Having worked through a bankruptcy in 2010, a loan default in
2011 and managing to stabilise the Company both financially and
operationally against the backdrop of the economic and financial
sector issues between 2010 - 2013 as well as the overall Euro
crisis we are optimistic that 2014 will be seen as the real turning
point in the Company's evolution. With a strategy focused on growth
and diversification, a committed group of shareholders and a driven
management team, SPDI has every right to expect that. We can assure
both our longstanding investors, who have stuck with us through the
difficult times and kept faith in the Company's potential, as well
as the new investors, who share our dream and vision, that we will
do everything it takes to build on the positive steps already taken
and drive hard to reach our ultimate objective.
Best regards,
Lambros G. Anagnostopoulos
Chief Executive Officer
3. Management Report
3.1. Corporate Overview & Financial Performance
In 2013 the Company's management focused on three areas: First,
the generation of various acquisition opportunities which in the
end created a strong pipeline of suitable targets. We entered
negotiations for a number of these during the period, moved into
thorough due diligence on others and, by the year end, were able to
bring three to a position where they are ready for closing subject
to debt and equity capital availability, of which one closed in the
first quarter of 2014, as detailed earlier.
Our second aim was to raise capital and, we were able to raise
almost $17 million during the year, increasing the equity in the
Company's balance sheet by 17%. However, the focus of international
investors on opportunities arising from the distressed environment
in South Europe (mainly Spain and secondarily Greece) proved a
stumbling block in raising further capital for South East Europe.
Availability of debt capital proved more difficult, due to local
banks proving very inflexible and slow in their decision making
processes (with the debacle in Cyprus exasperating this situation
further).
Third, on the operational front, besides maintaining a high
level of service and occupancy in Terminal Brovary, the management
continued its path of addressing various issues on the ground, most
notably the various legal cases brought against the Company by its
ex-administrator in Ukraine who has teamed up with our ex-lawyers.
In terms of financial operations, we were successful in preventing
the Company from being affected by the Cypriot banking crisis and
the foreign exchange ("FX") restrictions in Cyprus and Ukraine. We
also concluded negotiations with EBRD on the restructuring of the
Terminal Brovary construction loan, the terms of which while not
yet officially signed, have been agreed by both parties since Q1
2013.
In parallel with the areas of focus, the Company maintained its
overall lean and strict operations management, decreasing the
annual operating and administrative costs to $3 million and
increasing the Company's net annual rental income by 33% to $2.8
million.
As part of its active cash management, the Company transferred
98% of its total cash balance out of the Cyprus Popular Bank
("CPB") just weeks before it went bust, eliminating almost entirely
the effects of the collapse of the Cypriot economy on the Company.
At the time we had more than $15 million in cash and, as a result
of our premeditative action, the situation in Cyprus resulted in
only a $135,000 loss for the Company, for which we expect to
receive Bank of Cyprus shares during 2014 by way of
compensation.
The temporary capital transfer restrictions imposed by the
Cypriot authorities did not affect the Company's day-to-day
operations. The Company is monitoring the situation closely and
will act accordingly.
The political instability in Ukraine continued and until this is
resolved it is no longer possible to predict the outcome or its
impact on Ukraine's economy.
As Terminal Brovary is on the Kiev outskirts, the premises run
no significant risk from the riots. Our tenants are mostly western
logistics and retail companies, whose operations may be affected
economically, but the end effect depends on the evolution of the
events.
In view of degrading FX conditions in early February, Ukraine
has instigated certain restrictions on FX transactions in response
to the outflow of capital and the devaluation of Hryvnia (in excess
of 40% since the beginning of the crisis) due to shortage of FX
financial reserves and the political uncertainty in the country. In
addition, starting from 1 January 2014, the new convention between
Ukraine and Cyprus was taken into force and all payables from
Ukrainian Companies to their Cypriot counterparts are now subject
to 2% withholding tax.
With the risk of devaluation of the Ukrainian currency being
always very high, most of our tenancy agreements were pegged by
design on the US$. As such no immediate impact is expected with our
net cash availability, being estimated at a monthly average of $
130,000.
In an effort to further streamline its operations, the Company
has proceeded in essentially terminating all the non-Terminal
Brovary related intragroup loans between Cyprus and Ukraine, thus
considerably reducing its capital flows between the holding Company
and its subsidiaries. Furthermore, such flows are now part of an
overall plan to decrease the Ukrainian operation's dependency on
equity support. The termination of these loans will have a
substantial positive impact on the tax payable by the Company.
In the same manner, the Company has progressed with decreasing
the number of its subsidiaries in Ukraine, a long and bureaucratic
process that will be finalized within 2014, thus resulting in lower
administrative costs and increased time efficiency.
In its push to further improve Corporate Governance, SECURE
Property attracted Ned Goodman as a senior advisor to its Board.
Ned Goodman, being a well respected and experienced international
investor with a strong track record in both the real estate sector
and the South East Europe markets, substantially strengthened the
collective experience of our board. He is the founder of the Dundee
Group of Companies in Canada and President and CEO of the Dundee
Corporation, an independent publicly traded Canadian asset
management company.
The Audit Committee's constitution sets out the Board's
responsibility for overseeing the financial reporting and internal
controls of the Company and its subsidiaries and maintaining a
relationship with the external auditor of the group. It also
monitors potential conflicts of interests of directors and senior
managers. The Committee met on a number of occasions during the
year, and in particular engaged with the auditors during the audit
process and engaged with management in the discharge of their
role.
The Remuneration Committee has a responsibility to determine the
policy for the remuneration of the Directors and Executive
Management of the company. The role includes not only basic cash
remuneration, but also bonuses, benefits in kind and non-cash
remuneration. The principal activity of the Committee during the
year was to consider reducing cash outflow from the Company in
relation to Directors' remuneration. The discussions resulted in
the successful implementation of the policy to substitute cash
remuneration in part for share based remuneration. The Remuneration
Committee met on a number of occasions during the year and engaged
with management on remuneration issues.
The Board is ultimately responsible for the Group's financial
reporting, internal control and risk management systems. The
Finance Department prepares detailed budgets and cash flow
projections, which are approved annually by the Board and updated
regularly throughout the year. Ongoing financial control is the
responsibility of the management. A control structure is in place
with defined delegated authorities and signatory rights for both
management decisions and cash payments throughout the Group.
The Company's performance in 2013 showed clearly the hard work
done in the period after the internalization of management.
Compared to 2012, gross rental income increased by 70% to $3.6
million, while operating expenses decreased to $3 million from $3.6
million of 2012. This resulted in an EBITDA of $0.3 million.
3.2. Property Holdings
The Company's portfolio, currently entirely focused on Ukraine,
consists of one income producing property and four development
projects at different stages in the development process.
Terminal Brovary Logistic Park consists of a 49,180 sq.m. Class
A warehouse and associated office space, situated on the junction
of the main Kiev - Moscow highway and the Borispil road. The
facility has been in operation since Q1 2010 and as at the end of
the reporting period was 90% leased (warehouse space was 100%
leased).
Bela Logistic Centre is a 22.4 ha plot in Odessa situated on the
main highway to Kiev. Following the issuance of permits in 2008,
below ground construction for the development of a 103,000 sq.m.
GBA logistic center commenced. Construction was put on hold in 2009
due to the global economic crisis.
Kiyanovskiy Lane consists of four adjacent plots of land,
totaling 0.55 ha earmarked for a residential development, which are
well located, overlooking the scenic Dnipro River, St. Michael's
Spires and historic Podil neighborhood. During 2013, management
held discussions with a number of interested parties with regard to
a possible development of this asset should the market developments
allow for such action.
Tsymlyanskiy Lane is a 0.36 ha plot of land located in the
historic Podil District of Kiev earmarked for the development of a
residential complex.
Balabino project is a 26.38 ha plot of land situated on the
south entrance of Zaporozhye, a city in the south of Ukraine with a
population of 800,000 people. Balabino is zoned for retail and
entertainment development.
In 2013, the Company appointed CBRE Ukraine as its valuer. The
valuations have been carried out by the appraisers on the basis of
Market Value in accordance with the appropriate sections of the
current Practice Statements contained within the Royal Institution
of Chartered Surveyors ("RICS") Valuation - Professional Standards
(2013) (the "Red Book") and is also compliant with the
International Valuation Standards (IVS).
At the year-end, the Company's property assets were valued at
$53.6 million, an increase of 2.3% from the December 2012
valuation. This increase can be attributed mostly to constantly
high Terminal Brovary occupancy, as well as to growth in the
average unit rental revenue. Such valuation need to take into
account the impact of the current political developments in
Ukraine, once the situation stabilizes.
The Net Equity attributable to the shareholders as at 31
December 2013 stood at $52.2 million representing a 520% increase
over the June 2011 ($8.5 million) figure, when the new management
took over. This figure includes also the total capital raised in
2013.
The NAV per share as at 31 December 2013 stood at $1.85; lower
than a year before, due to the new shares issued as a result of the
capital increase, while the discount of the Market Value against
the NAV decreased to 42%.
3.3. Financial and Risk Management
The Group's overall bank debt exposure at the reporting date
consisted of a single $15 million net construction loan to Terminal
Brovary from EBRD. The loan was originally restructured in June
2011 and is again under a restructuring process expected to be
completed in Q3 2014 as the Company has agreed with EBRD to match
cash inflows from the asset with the debt amortization plan.
In October 2013, the Company proceeded with capitalizing the
convertible loan amounting to $1.7 million granted by certain
shareholders a year earlier in order to provide additional working
capital to the Company. The lenders have agreed to convert these
liabilities due to them into new ordinary shares.
Overall, the Group's gearing ratio (debt/equity) at the end of
2013 stands at 29%.
Throughout 2013 the Company continued to preserve liquidity and
optimize its cash flow in a worsening credit environment. By
maintaining a tight cash flow schedule, the Company has been able
to manage its liabilities while making progress towards
implementing its growth strategy.
Most importantly, during the year the Company mitigated the
effects of both the Cyprus financial crisis, by holding the bulk of
its financial assets outside the Cypriot banking system and the
gradual devaluation of the Ukrainian hryvnia, by minimizing the
cash available in Ukraine and transferring all excess cash out of
the country, thus protecting the shareholder's value.
3.4. 2014 and beyond
Going into 2014, the political and economic developments in
Ukraine overshadow all other performance factors for the Company.
While management is doing whatever is needed to avoid any negative
consequences, the need to expedite our regional expansion (and
through it mitigate the Ukrainian risk) is now more pertinent than
ever. On the other hand, the EU situation is ameliorating and the
EU economy is looking at a brighter year, helping the property
markets and our growth efforts.
As such, our focus in 2014 is to grow the Company's balance
sheet with assets in other countries in the South East Europe
region (with priority being placed in Romania and Bulgaria), while
safeguarding our position and income in Ukraine.
4. Regional Economic Developments(1)
4.1 Ukraine
Although Gross Domestic Product continued to decrease in Q3
2013, it is expected to rebound in Q4 2013 closing at -1% for the
whole year. However economic activity is expected to be seriously
hampered in 2014, due to the unfolding political events and the
uncertainty regarding the financing of the current account deficit
of Ukraine.
Over the period from January 2013 to September 2013, the Current
Account balance reduced by 7% year-on-year to $10.2 billion,
because of weak exports, foreign exchange movements that negatively
affected competitiveness and the increase in consumer lending. This
trend stopped temporarily in September-October 2013, when imports
increased by 2.8% year-on-year, predominantly as a result of higher
gas imports. Headline inflation dropped by 0.4% year-on-year in
August 2013, after reaching a plateau in June. The deflation
reflected the continued decline in food prices, which constitute
approximately half of the CPI basket, as well as lower domestic
demand and the reluctance to implement the IMF's measures (a hike
of over 30% in gas prices and a forced devaluation of the
Hryvnia).
(1 Sources: Eurobank Research, NBG Research, National
Statistical Services, National Central Banks, Eurostat, European
Central Bank, International Monetary Fund, Raiffeisen Research,
Bloomberg, World Bank)
As far as interest rates are concerned, the National Bank of
Ukraine (NBU) has kept the rate at around 6%; a decision primarily
driven by the close-to-zero inflationary levels, the deposit growth
in the banking sector, as well as the diminishing cost of funds.
However, real interest rates in the market are on the rise as the
devaluation of the Hryvnia has picked up later in the year.
On the political front, in November 2013, during the Eastern
Partnership Summit in Vilnius, Ukraine failed to sign the
Association Agreement with the EU and instead opted for a closer
relationship with Russia, which caused political turmoil.
4.2 Romania
Romania's preliminary GDP results recorded an unexpected 3.5%
year-on-year increase in 2013, from a sluggish 0.7% in 2012, while
in Q4 2013 readings showed a 5.2% year-on-year increase (vs 4.1% in
Q3 2013).
The Current Account Deficit fell by 0.9% of GDP during the first
11 months of 2013, mainly because the trade deficit narrowed by
2.9% year-on-year to 2.2% of GDP. Exports soared by 9% as a result
of the broadening of Romania's export base, particularly in the
automotive sector (40% of total exports) and in the export of
agricultural products following the recovery from the 2012 drought.
mports remained close to 2012 levels.
The National Bank of Romania continued its cycle of monetary
easing by cutting its rate to 3.5%, with the aggregate cuts since
July 2013 totaling 175 bps. It has also reduced the minimum reserve
requirement ratios on Romanian Leu and FX-denominated debt to 12%
and 18% respectively from 15% and 20%, thus allowing for banks to
build up their reserves.
The significant improvement in inflation and its outlook was the
main reason that allowed the Central Bank to implement its easing
strategy reaching a 16-month low of 1.9% for the first time
ever.
In September 2013, Fitch affirmed the BBB- rating with a stable
outlook for Romania, reflecting the public finance consolidation,
the reduction of external imbalances and the improving GDP, amongst
a number of other factors. Meanwhile, Romania has raised $2 billion
in middle January 2014 from the international markets at a 5%
implying yield on the 10 year maturity, which indicates Romania's
improved external position and its positive prospects.
4.3. Bulgaria
GDP grew by 1.5% year-on-year in Q3 2013 from a slight decline
of -0.2% in Q2 2013, while GDP for the full year was at 0.5%. 2014
is expected to be a better year in terms of economic growth and GDP
may quadruple to 2% as exports increase.
The Current Account Balance reached an unprecedented surplus of
3.1% of GDP during the first eight months of 2013, mostly due to
the contraction of the trade deficit to 3.3% of GDP, making
Bulgaria the best external sector performer in the region. In
August 2013, electricity prices experienced a second cut by an
average of 4.3% as a result of high public discontent (which
followed the one earlier in the year). This, in combination with
lower food prices, made headline inflation reach 1.6% year-on-year
from 4.2% the previous year.
Credit activity continued to be subdued but, deposits grew by
8.9% throughout the year. The stabilization of the Non-Performing
Loans' ratio at around 18% may signify a complete turnaround and
indicate improving credit conditions going forward.
5. Real Estate Market Developments(2)
5.1. Ukraine
Despite a high level of interest in income producing assets from
high net worth individuals, the deterioration of the political
situation in Ukraine in late 2013 led to many deals being put on
hold.
In 2013, the Greater Kiev area saw a 25% year-on-year increase
in the supply of logistics space (+135,500 sq.m. of GLA), with
another 149,100 sq.m. being in the pipeline for 2014. The take-up
soared by 32% year-on-year in 2013 and is just 1.5% lower than the
historic peak of 2008. As a result rental rates are largely
stable.
New office supply decreased by 17% year-on-year in 2013 in Kiev,
(+131,100 sq.m. of GLA), while 180,000 sq.m. are scheduled for
delivery in 2014. With take-up more than doubling (+162,300 sq.m.
in 2013 compared to 2012) and being comparable to the 2008 levels,
the net effect was also stable rental rates. Take up is mostly
supported by FMCG, pharmaceuticals, IT, energy, financial and
agricultural related companies.
In 2013, total retail stock soared by 13% year-on-year and by
51% compared to 2008 and stood at 1,314,910 sq.m. In 2012 and 2013,
premium fashion brands such as Dolce & Gabbana, Versace and Tom
Ford opened their first boutiques in Ukraine. This is going to
impact positively on the logistics sector over the long term, if
not stopped by the political uncertainty. Average monthly rents in
Kiev generally remained stable at $70-90/sq.m., while for prime
properties rental rates reached $160-200/sq.m.
5.2. Romania
The total investment volume is expected to surpass EUR350
million in 2013 from less than EUR300 million in 2012. At the same
time, research by BNP Paribas Real Estate showed increased interest
in European second-tier markets. Romania is included in a list of
10 countries that offer strong growth potential.
Gross industrial take-up activity hit a record level of 145,000
sq.m. in H1 2013. 2013 closed with a total leasing activity of over
250,000 sq.m. recording an increase of 82% year-on-year. The strong
leasing activity, as well as the awaken appetite from investors
caused a drop of 50bps in cap rates to 10% towards the end of the
year, while the headline rental rates remained stable.
Q3 2013 was the best quarter for total leasing activity for the
past two years and represented an increase of 25% or 84,500 sq.m.
from the Q2 2013 total. Overall, the total leasing activity
recorded in 2013 was the highest in Bucharest office market over
the past six years, with approximately 300,000 sq.m. transacted and
30% of the transactions stemming from the IT&C sector. Headline
rents have remained stable at the region of EUR18/sq.m., while cap
rates have gone down to 8% for CBD prime properties.
The modern retail stock in Romania stood at 2.8 million sq.m. in
2013 with more than half located in shopping centers. This figure
is expected to surpass 2.9 million sq.m. in 2014. Two strong trends
have been observed; firstly the increasing sales of online
retailers, which are opening more and more physical stores, and
secondly the strong demand for prime assets that has pushed the
vacancy rates to below 5%.
With no more than 2,800 units being delivered in 2013 the modern
stock remains insufficient to cover long term demand. Bucharest
remained the East Europe city with the lowest levels of post 1989
residential property stock. Should credit conditions and the
capacity of the local lenders (mostly owned by Greek and Austria
banks) allow, the market is poised to pick up quickly. To this day,
the most important driver of demand continues to be the "Prima
Casa" government program, with more than 90,000 loans granted from
2009 to 2013, for approximately EUR4 bn. However, the program's
terms recently changed so as to cover loans only in local currency
(RON) which may affect the market temporarily.
5.3. Bulgaria
The level of construction permits issued was approximately 4%
down in 2013 compared to 2012, while new construction starts
remained at the same levels as the year before.
Total modern stock increased by 9.6% year-on-year to 796,000
sq.m. with shortages being observed in quality logistics space, as
well as in light industrial space. Take up activity in Sofia
remained relatively stable at 78,000 sq.m.
2013 saw only 34,000 sq.m. of class A and B office buildings
being delivered. As a consequence the Sofia office stock increased
only slightly at 1.65 million sq.m. while the pipeline has shrunk
by 40% year-on-year at 163,000 sq.m. Total office absorption for
the whole of 2013 soared by 12.2% year-on-year reaching 108,300
sq.m., supported by the outsourced IT sector that counted up for
52% of take-up. Yields remained stable at 9.5%.
The shopping center stock in Bulgaria experienced a 24%
year-on-year increase, due to the opening of Strand Burgas, the
fifth consecutive shopping center opened during the last 18 months.
At the same time, the vacancy rate in Sofia significantly decreased
from 16.5% in Q3 2013 to 12% in Q4 2013. One of the main reasons
was the increase in occupancy rate to 95% of the Paradise center,
the first lifestyle center in Sofia with more than 200,000 sq.m.
built-up area.
6. Property Assets
6.1. Aisi Brovary - Terminal Brovary Logistic Park
The Brovary Logistic Park consists of a 49,180 sq.m. GLA Class A
warehouse and associated office space. The building has large
facades to Brovary ring road, at the intersection of Brovary ( -95/
-01 highway), and Borispil ring road. It is located 10 km from Kiev
city border and 5 km from Borispol international airport.
The building is divided into six independent sections (each at
least 6,400 sq.m.), with internal clear ceiling of 12m height and
industrial flooring constructed with an anti - dust overlay quartz
finish. The terminal accommodates 90 parking spaces for cars and
trucks, as well as 24 hour security and municipal provided sewage,
water and garbage collection.
As of the end of 2013, the building is 90% leased, reflecting a
100% lease of its warehouse capacity. The majority of the leases,
which have been entered into with large, multinational corporate
tenants, have a duration of three to five year.
6.2. Aisi Bela - Bela Logistic Center
The site consists of a 22.4 ha plot of land with zoning
allowance to construct industrial properties of up to 103,000 sq.m.
GBA, is situated on the main Kiev - Odessa highway, 20km from
Odessa port and in an area of high demand for logistics and
distribution warehousing.
Following the completion of planning and issuance of permits in
2008, construction commenced with column foundation and peripheral
walls for 100,000 sq.m. being completed in 2009. Development was
then put on hold, due to lack of funding and deteriorating market
conditions.
6.3. Kiyanovskiy Lane - Land for Residential Complex
The project consists of 0.55 ha of land located at Kiyanovskiy
Lane, near Kiev city centre. It is destined for the development of
business to luxury residences with beautiful protected views
overlooking the scenic Dnipro River, St. Michaels's Spires and
historic Podil.
The concept design of the project is under review with the
proposed development to include residential apartments (GBA of
circa 21,000 sq.m.) and 100 parking spaces across two levels of
basement.
During 2013 discussions were held with potential developers in
order to prepare the ground for development when the market
conditions improve and the political landscape stabilizes.
6.4. Tsymlyanskiy Lane - Land for Residential Complex
The 0.36 ha plot is located in the historic and rapidly
developing Podil District in Kiev. The Company owns 55% of the
plot, with one local co-invetsor owning the remaining 45%.
In 2009, all necessary documents were submitted to relevant
authorities for approval and issuance of a construction permit. The
plan was to develop circa 10,000 sq.m. GBA of 40 high end
residential units and office spaces on lower floors, as well as 41
parking spaces in three underground levels. Since then, the project
has been frozen.
6.5. Balabino-Land for Retail/Entertainment Development
The site, consisting of 26.38 ha land is situated on the south
entrance of Zaporozhye city, 3 km away from the administrative
border of Zaporozhye. It borders the Kharkov-Simferopol Highway
(which connects eastern Ukraine and Crimea and runs through the two
largest residential districts of the city) as well as another major
artery accessing the city centre.
The site is zoned for retail and entertainment and various
development options are being evaluated as per the market's
needs.
(2. Sources : Jones Lang LaSalle, DTZ Research, CBRE Research,
The Advisers/Knight Frank, Forton International, MBL Research
Property Assets)
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2013
Note 2013 2012
US$ US$
Operational income 2 3.608.668 2.121.072
Valuation gains/(losses) from investment property 2 843.433 3.452.294
----------- -----------
4.452.101 5.573.366
Administration expenses 3 (3.288.004) (3.242.494)
Investment property operating expenses 4 (721.446) (554.281)
Other income, net 5 658.438 524.112
Operating profit 1.101.089 2.300.703
Finance costs, net 6 (1.105.648) (2.155.308)
(Loss) / Profit before tax (4.559) 145.395
Income tax expense 7 (166.972) (83.845)
(Loss) / Profit for the year (171.531) 61.550
Other comprehensive (loss)/income
Exchange difference on translation of foreign
operations (80.292) 6.727
Total comprehensive (loss)/income for the year (251.823) 68.277
(Loss)/ Profit attributable to:
Owners of the parent (185.148) 131.735
Non-controlling interests 13.617 (70.185)
----------- -----------
(171.531) 61.550
----------- -----------
Total comprehensive income attributable to:
Owners of the parent (276.293) 112.880
Non-controlling interests 24.470 (44.603)
----------- -----------
(251.823) 68.277
----------- -----------
Earnings/(losses) per share ($ cent
per share): 1
Basic (loss)/earnings for the year
attributable to ordinary equity owners
of the parent (0,01) 0,01
Diluted (loss)/earnings for the year
attributable to ordinary equity owners
of the parent (0,01) 0,01
Consolidated Statement of Financial Position
For the year ended 31 December 2013
Note 2013 2012
US$ US$
ASSETS
Non--current assets
Investment properties 8b 39.600.000 39.230.000
Investment property under construction 8a 9.000.000 8.353.161
Prepayments made for investments 8c 5.000.000 5.000.000
Property, plant and equipment 142.658 96.331
53.742.658 52.679.492
Current assets
Prepayments and other current assets 4.958.887 5.448.173
Cash and cash equivalents 13.333.497 256.447
------------ ------------
18.292.384 5.704.620
Total assets 72.035.042 58.384.112
EQUITY AND LIABILITIES
Issued share capital 9 5.762.809 5.531.191
Share premium 123.141.051 104.779.503
Foreign currency translation reserve (1.340.671) (1.249.526)
Accumulated losses (75.355.408) (75.170.260)
------------ ------------
Equity attributable to equity holders of the
parent 52.207.781 33.890.908
Non-controlling interests 1.063.265 1.038.795
------------ ------------
Total equity 53.271.046 34.929.703
------------ ------------
Non--current liabilities
Interest bearing borrowings 10 - 1.777.680
Finance lease liabilities 534.264 565.973
Trade and other payables 11 662.599 664.899
Deposits from tenants 435.250 427.918
------------ ------------
1.632.113 3.436.470
Current liabilities
Interest bearing borrowings 10 15.276.622 16.563.976
Trade and other payables 11 1.075.268 2.561.736
Taxes payable 584.102 529.827
Provisions 164.144 334.552
Finance lease liabilities 31.747 27.848
17.131.883 20.017.939
Total liabilities 18.763.996 23.454.409
------------ ------------
Total equity and liabilities 72.035.042 58.384.112
Net Asset Value (NAV) $ per share: 1
Basic NAV attributable to equity holders
of the parent 1,85 3,05
Diluted NAV attributable to equity holders
of the parent 1,62 2,67
On 23 June 2014 the Board of Directors of SECURE PROPERTY
DEVELOPMENT & INVESTMENT PLC authorized these financial
statements for issue, subject to final Board signatures.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2013
Attributable to equity holders of the Parent
------------- -----------------------------------------------------------
Share Share Accumulated Foreign Total Non- Total
capital premium losses, net currency controlling
of translation interests
non-controlling reserve
interest
US$ US$ US$ US$ US$ US$ US$
------------- ------------- ---------------- ------------ ------------ ------------ -----------
Balance - 31
December
2011/ 1
January 2012 5.507.276 102.447.925 (75.301.995) (1.230.671) 31.422.535 1.083.398 32.505.933
------------- ------------- ---------------- ------------ ------------ ------------ -----------
Profit /(Loss)
for
the year - - 131.735 - 131.735 (70.185) 61.550
Issue of share
capital 23.915 2.331.578 - - 2.355.493 - 2.355.493
Foreign
currency
translation
reserve - - - (18.855) (18.855) 25.582 6.727
Balance - 31
December
2012/ 1
January 2013 5.531.191 104.779.503 (75.170.260) (1.249.526) 33.890.908 1.038.795 34.929.703
------------- ------------- ---------------- ------------ ------------ ------------ -----------
(Loss) /
Profit for
the year - - (185.148) - (185.148) 13.617 (171.531)
Issue of share
capital,
net (Note 9) 231.618 18.798.086 - - 19.029.704 - 19.029.704
Transaction costs
attributable to the
increase share capital (436.538) (436.538) (436.538)
Foreign
currency
translation
reserve - - - (91.145) (91.145) 10.853 (80.292)
Balance - 31
December
2013 5.762.809 123.141.051 (75.355.408) (1.340.671) 52.207.781 1.063.265 53.271.046
============= ============= ================ ============ ============ ============ ===========
Companies which do not distribute 70% of their profits after
tax, as defined by the relevant tax law, within two years after the
end of the relevant tax year, will be deemed to have distributed as
dividends 70% of these profits. Special contribution for defence at
20% will be payable on such deemed dividends to the extent that the
shareholders (companies and individuals) are Cyprus tax residents.
The amount of deemed distribution is reduced by any actual
dividends paid out of the profits of the relevant year at any time.
This special contribution for defence is payable on account of the
shareholders.
Consolidated Statement of Cash Flows
For the year ended 31 December 2013
Note 2013 2012
US$ US$
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) before tax and non-controlling
interests (4.559) 145.395
Adjustments for:
Profit/(loss) on revaluation of investment
property 2 (843.433) (3.452.294)
Other non-cash movements 52.618 151.978
Prepayments and other current assets impairment
loss/(reversal) 5 (13.304) (53.264)
Trade and other payables written off 5 (354.299) (614.667)
Depreciation of property, plant and equipment 16.154 11.590
Interest income 6 (132.827) (1.496)
Interest expense 6 1.358.435 1.767.095
Provisions (170.408) -
Effect of foreign exchange difference 6 (268.211) 7.370
----------- -----------
Cash flows used in operations before working
capital changes (359.834) (2.038.293)
Change in prepayments and other current
assets (116.583) (597.968)
Change in trade and other payables 11 (702.841) (465.657)
Change in other taxes and duties (6.144) (139.766)
Increase in deposits from tenants 7.332 364.111
Income tax paid (106.553) (247.180)
----------- -----------
(924.789) (1.086.460)
Net cash flows used in operating activities (1.284.623) (3.124.753)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures on investment property 8 (173.406) (112.393)
Decrease in payables for construction 11 (431.628) (463.592)
Change in VAT recoverable 619.173 418.724
Increase/(Decrease) in financial lease
liabilities (27.810) (86.084)
Changes in property, plant and equipment (62.481) (86.133)
Interest received 6 132.827 1.496
Net cash flows from / (used in) investing
activities 56.675 (327.982)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital /
shareholders advances 9 17.045.000 2.353.864
Proceeds from/(Repayment of) borrowings 10 (1.473.363) 1.729.295
Interest and financial charges paid (1.164.851) (1.128.532)
Net cash flows from / (used in) financing
activities 14.406.786 2.954.627
Effect of foreign exchange rates on cash (101.787) (85)
Net increase/(decrease) in cash at banks 13.077.051 (498.193)
Cash:
At beginning of the year 256.447 754.640
----------- -----------
At end of the year 13.333.498 256.447
=========== ===========
Notes to the Accounts
1. Earnings and net assets per share attributable to equity
holders of the parent
a. Weighted average number of ordinary shares
2013 2012
Issued ordinary shares capital 28.171.833 11.111.975
----------- -----------
Weighted average number of ordinary shares (Basic) 24.790.668 10.157.531
----------- -----------
Diluted weighted average number of ordinary shares 28.765.486 11.724.013
----------- -----------
b. Basic diluted and adjusted earnings per share
Earnings per share 31/12/2013 31/12/2012
US$ US$
----------- -----------
(Loss) / Profit after tax attributable to owners of the parent (185.148) 131.735
----------- -----------
Basic (0,01) 0,01
----------- -----------
Diluted (0,01) 0,01
----------- -----------
c. Net assets per share
Net assets per share 31/12/2013 31/12/2012
US$ US$
----------- -----------
Net assets attributable to equity holders of the parent 52.207.781 33.890.908
----------- -----------
Number of ordinary shares 28.171.833 11.111.975
----------- -----------
Diluted weighted number of ordinary shares 32.196.381 12.699.400
----------- -----------
Basic 1,85 3,05
----------- -----------
Diluted 1,62 2,67
----------- -----------
2. Revenues
Operational income in the amount of US$3.608.668 for the year
ended 31/12/2013 and US$2.121.072 for the year ended 31/12/2012
represents rental income as well as service and utilities charges
generated during the reporting periods by the rental agreements
concluded with tenants of the Terminal Brovary Logistic Park. Net
Warehouse space vacancy rate of the Terminal has gone down to 0% as
at 31/12/2013 (note 8).
2013 2012
US$ US$
---------- ----------
Rental income 2.838.744 1.699.253
---------- ----------
Service charges and utilities income 769.924 421.819
---------- ----------
Net finance result 3.608.668 2.121.072
---------- ----------
Valuation gains/losses from investment property for the
reporting period are presented below :
Project Name Valuation gains/(losses) Valuation gains/(losses)
2013 2012
US$ US$
------------------------- -------------------------
Brovary Logistic Park (88.406) 4.134.923
------------------------- -------------------------
Bela Logistic Center 646.839 211.354
------------------------- -------------------------
Kiyanovskiy Lane (35.000) (576.709)
------------------------- -------------------------
Tsymlyanskiy Lane 40.000 (139.033)
------------------------- -------------------------
Balabino 280.000 (178.241)
------------------------- -------------------------
Total 843.433 3.452.294
------------------------- -------------------------
3. Administration Expenses
2013 2012
US$ US$
---------- ----------
Salaries and Wages 1.011.105 1.379.640
---------- ----------
Directors' remuneration 223.882 194.202
---------- ----------
Legal fees 698.473 467.641
---------- ----------
Advisory fees 647.534 425.605
---------- ----------
Public group expenses 221.659 182.765
---------- ----------
Administration expenses 202.842 371.103
---------- ----------
Audit and Accounting expenses 147.376 162.878
---------- ----------
Taxes and duties 118.979 47.070
---------- ----------
Depreciation 16.154 11.590
---------- ----------
Total Administration Expenses 3.288.004 3.242.494
---------- ----------
Salaries and wages include the remuneration:
a) of the CEO, the CFO, the Group Commercial Director and the
Managing Director Ukraine
b) of personnel employed in Ukraine
Directors' remuneration represents the remuneration of all
non-executive Directors and committee members.
Public group expenses include among others fees paid to the AIM:
LSE stock exchange and the Nominated Advisor of the Company as well
as marketing and other expenses related to the listing of the
Company.
4. Investment property operating expenses
2013 2012
US$ US$
-------- --------
Property management, utilities and other
costs 721.446 554.281
-------- --------
Property management, utilities and other costs include fees paid
to DTZ Consulting Limited Liability Company as per the Maintenance
and Property Management Agreement signed on 20 December 2011 the
Company. It also includes utility expenses, insurance premiums, as
well as various other expenses required for the proper operation of
the Terminal Brovary logistics complex, increased from last year
due to higher occupancy.
5. Other income/ (expenses), net
2013 2012
US$ US$
--------- ---------
Accounts payable written off 524.707 614.667
--------- ---------
Provision on prepayments and other current
assets impairment - reverse 13.304 26.079
--------- ---------
Penalties (83.939) (39.070)
--------- ---------
Other income, net 204.366 (1.700)
--------- ---------
Impairment loss of VAT recoverable - (75.864)
--------- ---------
Total 658.438 524.112
--------- ---------
Accounts payable written off represents the total amount of
creditors' payables written off as a result of negotiations and
settlement during the reorganization of the Group that started in
August 2011.
Provision for prepayments and other current assets impairment -
reverse represents difference between allowances for prepayments
and other current assets estimated previously by the Management and
the amounts which have been finally settled.
Impairment loss for VAT recoverable in 2013 represents the non-
recoverable VAT in Terminal Brovary LLC.
Penalties incurred by the Group were mainly caused as a result
of delayed payments of its liabilities due to negotiations.
Other income net in 2013 includes a provisional income of
US$200.000 for advisory services; one off agency related expenses
for the letting of Terminal Brovary and previous year expense write
offs.
6. Finance (costs), net
2013 2012
US$ US$
------------ ------------
Bank interest expenses (note 10) (1.367.807) (1.180.387)
------------ ------------
Finance charges and commissions (138.879) (433.282)
------------ ------------
Loan restructuring cost - (535.765)
------------ ------------
Foreign exchange (losses) /gains 268.211 (7.370)
------------ ------------
Bank interest income 132.827 1.496
------------ ------------
Net finance result (1.105.648) (2.155.308)
------------ ------------
Bank interest represents interest paid on the borrowings of the
Group as described in note 10.1.
Finance charges and commissions include mainly financial fees
paid to the banks and financial lease interest.
7. Tax
2013 2012
US$ US$
-------- -------
Taxes 166.972 83.845
-------- -------
The income tax rate for the Company's Ukrainian subsidiaries is
19% for the year ended 31/12/2013 and for the Company and its
Cypriot subsidiaries is 12.5% for the year ended 31/12/2013.
The tax on the Group's results differs from the theoretical
amount that would arise using the applicable tax rates as
follows:
2013 2012
US$ US$
---------- ----------
Profit / (loss) before tax (4.559) 145.395
---------- ----------
Tax calculated on applicable rates (570) 14.540
---------- ----------
Allowances for tax losses carry forward - -
---------- ----------
Expenses not recognized for tax purposes 388.027 344.238
---------- ----------
Income/ (loss) on revaluation not subject
to tax 105.429 345.229
---------- ----------
Tax allowances not subject to tax (360.622) (620.180)
---------- ----------
10% additional tax 13.323 18
---------- ----------
Tax effect on tax losses b/f (41.264) -
---------- ----------
Defense Tax 22.649 -
---------- ----------
Total Tax 166.972 83.845
---------- ----------
As from 1 January 2008, deferred tax is not provided in respect
of the revaluation of the investment property and investment
property under construction as the Group is able to control the
timing of the reversal of this temporary difference and the
management has intention not to reverse the temporary difference in
the foreseeable future, the properties are held by subsidiary
companies in Ukraine. The management estimates that the assets will
be realized through a share deal rather than through an asset deal.
Should any subsidiary be disposed of, the gains generated from the
disposal will be exempted from any tax. The respective reversal of
previously accrued Deferred Tax Liabilities has been made in
2008.
8. Investment Property
Investment Property consists of the following assets:
Ø Terminal Brovary Logistic Park consists of a 49.180 sq.m.
Class A warehouse and associated office space, situated on the
junction of the main Kiev - Moscow highway and the Borispil road.
The facility is in operation since Q1 2010 and as at the end of the
reporting period was 100% leased.
Ø Bela Logistic Center is a 22,4Ha plot in Odessa situated on
the main highway to Kiev. Following the issuance of permits in
2008, below ground construction for the development of a 103.000
sq.m. m GBA logistic center commenced. Construction was put on hold
in 2009 following adverse macro-economic developments at the
time.
Ø Kiyanovskiy Lane consists of four adjacent plots of land,
totaling 0,55 Ha earmarked for a residential development,
overlooking the scenic Dnipro River, St. Michael's Spires and
historic Podil neighborhood.
Ø Tsymlyanskiy Lane is a 0,36 Ha plot of land located in the
historic Podil District of Kiev and is destined for the development
of a residential complex. The Company is in the process of renewing
the land lease permits.
Ø Balabino project is a 26,38 ha plot of land situated on the
south entrance of Zaporozhye, a city in the south of Ukraine with a
population of 800.000 people. Balabino is zoned for retail and
entertainment development.
Asset Name Description/ Principal Related Companies Carrying amount Carrying amount
Location activities/ as at as at 31/12/2012
Operations 31/12/2013 US$
US$
Terminal Brovary, Warehouse TERMINAL BROVARY 25.200.000 25.115.000
Brovary Logistic Kiev Oblast AISI BROVARY
Park SL SECURE
LOGISTICS LTD
------------- -------------------- ---------------------- ---------------- ------------------
Bela Logistic Odessa Land and AISI BELA 9.000.000 8.353.161
Center Development
Works
------------- -------------------- ---------------------- ---------------- ------------------
Kiyanovskiy Podil, Land for AISI UKRAINE 7.400.000 7.435.000
Lane Kiev City residential TORGOVIY CENTR
Center development
------------- -------------------- ---------------------- ---------------- ------------------
Tsymlyanskiy Podil, Land for ALMAZ PRES 2.400.000 2.360.000
Lane Kiev City residential UKRAINE
Center development
------------- -------------------- ---------------------- ---------------- ------------------
Balabino Zaporozhye Land for INTERTERMINAL 4.600.000 4.320.000
retail development MERELIUM INVESTMENTS
------------- -------------------- ---------------------- ---------------- ------------------
TOTAL 48.600.000 47.583.161
------------- -------------------- ---------------------- ---------------- ------------------
Carrying amounts of the properties represent fair value
estimates as of 31 December 2013 as provided by CBRE Ukraine, an
external valuer.
a. Investment Property Under Construction
2013 2012
US$ US$
---------- ----------
At 1 January 8.353.161 8.100.000
---------- ----------
Capital expenditures on investment property - 45.050
---------- ----------
Revaluation on investment property 646.839 211.354
---------- ----------
Translation difference - (3.243)
---------- ----------
At 31 December 9.000.000 8.353.161
---------- ----------
As at 31 December 2013 investment property under construction
represents the carrying value of Bela Logistic Center project,
which has reached the +10% construction in late 2008 but it is
stopped since then. The Company's external valuer has appraised the
property's value at US$9.000.000.
b. Investment Property
2013 2012
US$ US$
----------- -----------
At 1 January 39.230.000 35.937.000
----------- -----------
Capital expenditure on investment property 173.406 67.343
----------- -----------
Revaluation gain/(loss) on investment property 196.594 3.240.843
----------- -----------
Translation difference - (15.186)
----------- -----------
At 31 December 39.600.000 39.230.000
----------- -----------
Terminal Brovary, Kiyanovskiy Lane, Tsymlyanskiy Lane and
Balabino village are included in the Investment Property
category.
c. Advances for Investments
31/12/2013 31/12/2012
US$ US$
------------ ------------
Advances for investments 11.840.547 11.840.547
------------ ------------
Impairment provision (cumulative as of (6.840.547) (6.840.547)
the reporting period)
------------ ------------
Total 5.000.000 5.000.000
------------ ------------
The Group has made an advance payment of US$12mil. (representing
principal plus interest) for the acquisition of a project in Podol
(Kiev) in 2007. As of the end of the reporting period the
Management considers that such acquisition will not take place and
as the seller has already defaulted on his credit to the Group, the
Group has commenced legal proceedings for a) collecting the
original US $12mil. payment b) the transfer of the collateral (land
plot of 42 ha in Kiev Oblast) in the Group's name. As a result the
Group has reduced the amount of the receivable to the value of the
collateral as valued by CBRE.
9. Share capital
Number of Shares 31/12/2012 01/02/2013 27/02/2013 18/10/2013 31/12/2013
(as at)
-------------------- -------------- -------------------- -------------------- -------------------- --------------
Increase of Share Increase of Share Increase of Share
Capital Capital Capital
-------------------- -------------- -------------------- -------------------- -------------------- --------------
Authorized
-------------------- -------------- -------------------- -------------------- -------------------- --------------
Ordinary shares of
EUR0,01 each 989.869.935 - - - 989.869.935
-------------------- -------------- -------------------- -------------------- -------------------- --------------
Ordinary shares of
EUR1 each - - - - -
-------------------- -------------- -------------------- -------------------- -------------------- --------------
Ordinary Shares of
EUR0,92 each 1 - - - 1
-------------------- -------------- -------------------- -------------------- -------------------- --------------
Deferred Shares of
EUR0,99 each 4.142.727 - - - 4.142.727
-------------------- -------------- -------------------- -------------------- -------------------- --------------
Total 994.012.663 - - - 994.012.663
==================== ============== ==================== ==================== ==================== ==============
Issued and fully
paid
-------------------- -------------- -------------------- -------------------- -------------------- --------------
Ordinary shares of
EUR0,01 each 11.111.975 14.389.926 178.916 2.491.016 28.171.833
-------------------- -------------- -------------------- -------------------- -------------------- --------------
Ordinary shares of
EUR1 each - - - - -
-------------------- -------------- -------------------- -------------------- -------------------- --------------
Ordinary Shares of
EUR0,92 each 1 - - - 1
-------------------- -------------- -------------------- -------------------- -------------------- --------------
Deferred Shares of
EUR0,99 each 4.142.727 - - - 4.142.727
-------------------- -------------- -------------------- -------------------- -------------------- --------------
Total 15.254.703 14.389.926 178.916 2.491.016 32.314.561
==================== ============== ==================== ==================== ==================== ==============
Value (as at) 31/12/2012 01/02/2013 27/02/2013 18/10/2013 31/12/2013
--------------------- ------------ --------------------- --------------------- --------------------- ------------
Increase of Share Increase of Share Increase of Share
Capital Capital Capital
--------------------- ------------ --------------------- --------------------- --------------------- ------------
Authorized (EUR)
--------------------- ------------ --------------------- --------------------- --------------------- ------------
Ordinary shares of
EUR0,01 each 9.898.699 - - - 9.898.699
--------------------- ------------ --------------------- --------------------- --------------------- ------------
Ordinary shares of
EUR1 each - - - - -
--------------------- ------------ --------------------- --------------------- --------------------- ------------
Ordinary Shares of
EUR0,92 each 0.92 - - - 0.92
--------------------- ------------ --------------------- --------------------- --------------------- ------------
Deferred Shares of
EUR0,99 each 4.101.300 - - 4.101.300
--------------------- ------------ --------------------- --------------------- --------------------- ------------
Total 14.000.000 - - - 14.000.000
===================== ============ ===================== ===================== ===================== ============
Issued and fully
paid ($)
--------------------- ------------ --------------------- --------------------- --------------------- ------------
Ordinary shares of
EUR0,01 each 5.531.191 195.320 2.407 33.891 5.762.809
--------------------- ------------ --------------------- --------------------- --------------------- ------------
Ordinary shares of
EUR1 each - - - - -
--------------------- ------------ --------------------- --------------------- --------------------- ------------
Ordinary Shares of
EUR0,92 each - - - - -
--------------------- ------------ --------------------- --------------------- --------------------- ------------
Deferred Shares of
EUR0,99 each - - - - -
--------------------- ------------ --------------------- --------------------- --------------------- ------------
Total 5.531.191 195.320 2.407 33.891 5.762.809
===================== ============ ===================== ===================== ===================== ============
9.1 Authorized share capital
As at the end of 2013 the authorized share capital of the
Company was 989.869.935 Ordinary Shares of EUR0,01 nominal value
each, 1 Ordinary Share of EUR0,92 nominal value and 4.142.727
Deferred Shares of EUR0,99 nominal value each.
9.2 Issued Share Capital
As at the end of 2012 the issued share capital of the Company
was 11.111.975 Ordinary Shares of EUR0,01 nominal value each, 1
Ordinary Share of EUR0,92 nominal value and 4.142.727 Deferred
Shares of EUR0,99 nominal value each.
Further to the resolutions approved at the AGM of 30 December
2013 the Board has allotted 17.059.858 new ordinary shares arising
from:
Ø 14.568.842 ordinary shares of EUR0,01 each have been allotted
for equity contribution amounting to US$17.045.000.
Ø 2.310.190 ordinary shares of EUR0,01 each have been allotted
to the debt holders of a convertible loan amounting to US$1.700.000
for converting the loan granted to the Company during 2012.
Ø 180.826 ordinary shares of EUR0,01 each have been allotted to
the Directors of the Company who thus converted all their
receivables by the Company until 2012 amounting to GBP 171.783,33.
into equity.
As at the end of the reporting period the issued share capital
of the Company is 28.171.833 Ordinary Shares of EUR0,01 nominal
value each.
9.3 Director's Option scheme
Under the said scheme each of the directors serving at the time,
which is still a Director of the Company is entitled to subscribe
for 2.631 Ordinary Shares exercisable as set out below:
Exercise Price Number of
US$ Shares
--------------- ----------
Exercisable till 1 August 2017 57 1.754
--------------- ----------
Exercisable till 1 August 2017 83 877
--------------- ----------
Director Franz M. Hoerhager Option scheme, 12/10/2007
Under the said scheme, director Franz M. Hoerhager is entitled
to subscribe for 1.829 ordinary shares exercisable as set out
below:
Exercise Price Number of
GBP Shares
--------------- ----------
Exercisable till 1 August 2017 40 1.219
--------------- ----------
Exercisable till 1 August 2017 50 610
--------------- ----------
The above option schemes were approved by the shareholders of
the Company in General Meeting on 31 March 2008. As of the
reporting date the Company has reversed the reserved equity (from
past periods) for the share options in the statement of financial
position as at 31 December 2011 in the amount of US$68.390 as the
options are well out of the money.
9.4 Warrants issued
On 8 August 2011 the Company has issued an amount of Class B
Warrants for an aggregate equivalent to 12,5% of the issued share
capital of the Company at the exercise date. Each Class B Warrant
entitles the holder to receive one Ordinary Share. The Class B
Warrants may be exercised at any time until 31st December 2016,
pursuant to a decision by the AGM of 30/12/2013. The exercise price
of the Class B Warrants will be the nominal value per Ordinary
Share as at the date of exercise. The Class B Warrant Instruments
have anti-dilution protection so that, in the event of further
share issuances by the Company, the number of Ordinary Shares to
which the holder of a Class B Warrant is entitled will be adjusted
so that he receives the same percentage of the issued share capital
of the Company (as nearly as practicable), as would have been the
case had the issuances not occurred. This anti-dilution protection
will lapse on the earlier of (i) the expiration of the Class B
Warrants; and (ii) capital increase(s) undertaken by the Company
generating cumulative gross proceeds in excess of US$100.000.000.
As of the reporting date, the aggregate amount of class B warrant
is 4.024.548.
9.5 Capital Structure as at the end of the reporting period
As at the reporting date the Company's share capital is as
follows:
Number of (as at) 31/12/2013 (as at) 31/12/2012
Ordinary shares of EUR0,01 Listed in AIM 28.171.833 11.111.975
--------------------- ------------------- -------------------
Class B Warrants 4.024.548 1.587.425
--------------------- ------------------- -------------------
Total number of Shares Non-Dilutive Basis 28.171.833 11.111.975
--------------------- ------------------- -------------------
Total number of Shares Full Dilutive Basis 32.196.381 12.699.400
--------------------- ------------------- -------------------
Options 4.460 4.460
------------------- -------------------
10. Borrowings
31/12/2013 31/12/2012
US$ US$
----------- -----------
Principal EBRD loan 14.231.049 15.529.412
----------- -----------
Principal due to related parties - 1.700.000
----------- -----------
Other Borrowing - 175.000
----------- -----------
Restructuring fees and interest payable
to EBRD 785.098 785.098
----------- -----------
Interests accrued on bank loans 32.098 74.466
----------- -----------
Interests due to related parties 228.377 77.680
----------- -----------
Total 15.276.622 18.341.656
----------- -----------
31/12/2012 31/12/2012
US$ US$
----------- -----------
Current portion 15.276.622 16.563.976
----------- -----------
Non - current portion - 1.777.680
----------- -----------
Total 15.276.622 18.341.656
----------- -----------
10.1 EBRD
In March 2013 the Company finalized negotiations with the EBRD
on rescheduling the amortization plan of the Brovary construction
loan. Unfortunately, at that time the Cyprus crisis hit, and the B
Lender (Laiki Bank) soon became bankrupt and unable to approve such
restructuring, despite the fact that SPDI has been observing the
capital repayments under the new agreement with EBRD's consent ever
since. In December 2013 the Company received notice that the B
Lender agreed to the restructuring officially. According to the
signed term sheet with EBRD the repayment of the loan is being
extended to 2022, with a balloon payment of US$3.633.333. The exact
terms of the loan restructuring will be announced upon signing of
the related documents.
Under the current agreement the collaterals accompanying the
existing loan facility are as follows:
1. LLC Terminal Brovary pledged all movable property with the carrying value more than US$25.000.
2. LLC Terminal Brovary pledged its Investment property, Brovary
Logistics Centre that was finished construction in 2010 (note 8),
and all property rights on the center.
3. SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC pledged 100%
corporate rights in SL SECURE Logistics Ltd, a Cyprus Holding
Company for the Shareholder of LLC Terminal Brovary, LLC Aisi
Brovary.
4. SL SECURE Logistics Ltd pledged 99% corporate rights in LLC Aisi Brovary.
5. LLC Aisi Brovary pledged 100% corporate rights in LLC Terminal Brovary.
6. LLC Terminal Brovary pledged all current and reserved
accounts opened by LLC Terminal Brovary in Fido Bank, Ukraine.
7. LLC Aisi Brovary entered into a call and put option agreement
expiring on 30(th) of May 2014 with EBRD, SECURE PROPERTY
DEVELOPMENT & INVESTMENT PLC and LLC Terminal Brovary pursuant
to which following an Event of Default (as described in the
Agreement) EBRD has the right (Call option) to purchase at the Call
Price from LLC Aisi Brovary, 20% of the Participatory Interest of
LLC Terminal Brovary on the relevant Settlement Date. To this date
and even though the loan is in default, EBRD has not served any
notice of exercising the call option and as the discussion for the
restructuring of the loan facility has been finalized, management
estimates that such possibility has low probability to materialize
before signing the restructuring. Furthermore, management is in
discussions with EBRD for the cancellation of the option, as a
result of the loan restructuring itself. Should such call option be
exercised EBRD would have the a put option right, exercisable in
its sole discretion, to sell to LLC Aisi Brovary all but not less
than all of the Participatory Interest, received under the call
option, in the Charter Capital of LLC Terminal Brovary held by EBRD
on the relevant Settlement Date at the Put Price.
8. LLC Terminal Brovary has granted EBRD a second ranking
mortgage in relation to its own and LLC Aisi Brovary's obligations
under the call and put option agreement.
The issued corporate guarantee dated 12 January 2009
guaranteeing all liabilities and fulfilment of conditions under
existing the loan agreement remain in force. The maturity of the
guarantee is equal to the maturity of the loan.
The existing credit agreement with EBRD includes among others
the following requirements for LLC Terminal Brovary and the Group
as a whole:
1. Consolidated total liabilities to audited equity of the
Company, adjusted for deferred tax and independent valuation,
should not exceed 60% over the life of SECURE PROPERTY DEVELOPMENT
& INVESTMENT PLC Guarantee.
2. At all times minimum value of unencumbered assets and cash of
the Company should not be less than US$30.000.000 (based on the
Group consolidated results).
3. At all times Brovary Logistics shall maintain a balance in
the Debt Service Reserve Amount (DSRA) account equal to not less
than the sum of all payments of principal and interest on the Loan
which will be due and payable during the next six months on and
after the Project Completion Date provided, however, that (A) LLC
Terminal Brovary shall deposit not less than 50% of the DSRA before
the end of the Grace Period and (B) the DSRA shall be fully funded
on or before 18th December 2012.
4. LLC Terminal Brovary shall achieve a "CNRI"(Contract Net
Rental Income is the aggregate of monthly lease payments, net of
value added tax, contracted by the Borrower pursuant to the Lease
Agreements as of the relevant testing date and converted into
Dollars at the official exchange rate established by the National
Bank of Ukraine as of such testing date) according to the following
schedule:
(a) on 31(st) December 2013, on 30(th) June 2014 and on 31(st)
December 2014, the CNRI of more than US$200.000.
(b) on 30(th) June 2015, the CNRI of more than US$220.000.
(c) on 31(st) December 2015, the CNRI of more than US$230.000.
(d) from 30(th) June 2016, the CNRI of more than US$250.000.
5. LLC Terminal Brovary shall achieve a "DSCR"(Debt Service
Coverage Ratio is the sum of net income minus operating expenses
plus amortization, divided with the sum of paid principal &
interest and converted into Dollars at the official exchange rate
established by the National Bank of Ukraine as of such testing
date) according to the following schedule:
i. on 31(st) December 2014, the DSCR of more than US$1,10.
ii. on 30(th) June 2015 and on 31(st) December 2015, the DSCR of
more than US$1,15.
iii. from 30(th) June 2016, the DSCR of more than US$1,2.
Part of the above mentioned requirements are expected to be
amended under the restructuring agreement.
10.2 Other Borrowings
The amount represents short term borrowing to repay part of the
UVK settlement amount (note 11). The loan was contracted in
December 2012 and fully repaid by end of January 2013.
11. Trade and other payables
31/12/2013 31/12/2012
US$ US$
----------- -----------
Payables to related parties 793.280 1.057.983
----------- -----------
Guarantee reserve on construction works,
current - 743.018
----------- -----------
Payables for construction, non-current 405.447 414.819
----------- -----------
Payables for construction, current - 24.826
----------- -----------
Payables for services 167.091 351.611
----------- -----------
Provision for reimbursements - 300.000
----------- -----------
Deferred income from tenants 257.151 250.080
----------- -----------
Accruals 114.898 84.298
----------- -----------
Total 1.737.867 3.226.635
----------- -----------
31/12/2013 31/12/2012
US$ US$
----------- -----------
Current portion 1.075.268 2.561.736
----------- -----------
Non - current portion 662.599 664.899
----------- -----------
Total 1.737.867 3.226.635
----------- -----------
The fair values of trade and other payables due within one year
approximate to their carrying amounts as presented above.
Payables for construction represent amounts payable to the
contractor of Bella Logistic Center in Odessa. The settlement was
reached in late 2011 on the basis of maintaining the construction
contract in an inactive state (to be reactivated at the option of
the Group), while upon reactivation of the contract or termination
of it (because of the sale of the asset) the Group would have to
pay an additional UAH5.400.000 payable upon such event occurring.
Since it is uncertain when the latter amount is to be paid it has
been discounted at the current discount rates in Ukraine and is
presented as a non-current liability.
Payables for services represent amounts payable to various
service providers including auditors, legal advisors, consultants
and third party accountants.
Deferred income from tenants represents advances from tenants
which will be used as future rental income & utilities
charges.
12 . Events after the end of the reporting period
A. Innovations Acquisition
On May 23, 2014 the Company announced that it has acquired the
Innovations Logistics Park in Bucharest, Romania, from Myrian Nes
Ltd and Theandrion Estates Ltd. The acquisition is the Group's
first outside of Ukraine and marks the commencement of SECURE's
stated strategy of both growing and diversifying its portfolio
across the economies of South Eastern Europe. Innovations is a
fully-let 17,000 sq.m. gross leasable area logistics park located
in Clinceni in Bucharest, which benefits from being on the
Bucharest ring road, and currently produces EUR1,3 million of
income per annum. The anchor tenant is Nestle which leases more
than 60% of the gross leasable area with the remainder let to
locally managed Romanian businesses. This acquisition is expected
to increase the Company's annual net operating income by over 60%.
The acquisition will strengthen SPDI's focus on the logistics
industry and increases its regional logistics portfolio, which also
includes the fully let Terminal Brovary asset in Kiev, to 67.000
sq.m.
B. Reduction of Capital
On March 20, 2014 following the AGM approval the authorized
share capital of the Company was reduced to EUR9.898.699,35 divided
into 989.869.935 ordinary shares of EUR0,01 each and such reduction
was effected by the cancellation of 1 ordinary share of EUR0,92 and
4.142.727 deferred shares of EUR0,99 each for the purpose of
writing off losses of the Company.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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